TORONTO, Aug. 9, 2022
/CNW/ - Tucows Inc. (NASDAQ: TCX) (TSX: TC), a global internet
services leader, today reported its financial results for the
second quarter ended June 30, 2022.
All figures are in U.S. dollars.
"We had a strong second quarter, with revenue and gross profit
up 11% and 21% year over year respectively, driven by strong growth
in each of our Ting Internet Services ("Ting") and Wavelo Platform
Services ("Wavelo") businesses, and another quarter of consistent
performance from our Tucows Domain Services ("Tucows Domains")
business," said Elliot Noss,
President and Chief Executive Officer, Tucows Inc. "Adjusted EBITDA
increased 5% in Q2 of 2022 compared to Q2 of 2021. The increase was
fueled by growth in Wavelo, but offset by the continued Ting
investment, from the acceleration of our build and operations of
the Ting fiber network. We again achieved a new record for trailing
12-month capital expenditure for the Ting opportunity."
Financial Results
Net revenue for the second quarter of 2022 increased 11% to
$83.1 million from $75.1 million for the second quarter of 2021. The
increase was the result of growth in revenue from each of Ting
Internet Services and Wavelo Platform Services businesses.
Gross profit for the second quarter of 2022 increased 21% to
$22.1 million from $18.2 million for the second quarter of 2021. The
increase was the result of the same factors as net revenue.
Net loss for the second quarter of 2022 was $3.1 million, or a loss of $0.29 per share, compared with net income of
$1.8 million, or $0.17 per share, for the second quarter of 2021
with the loss being the result of accelerated build of our Ting
Internet Services fiber network and ramp up of operations, higher
depreciation and interest expenses.
Adjusted EBITDA1 for the second quarter of 2022
increased 5% to $11.7 million from
$11.2 million for the second quarter
of 2021. The modest increase in adjusted EBITDA1 was
mainly fueled by growth in Wavelo, which was offset by the ongoing
investment in Ting, which was expected as we continue to accelerate
the build of our Ting Internet Services fiber network and ramp up
operations.
Cash and cash equivalents at the end of the second quarter of
2022 were $6.5 million compared with
$6.2 million at the end of the first
quarter of 2022 and $7.3 million at
the end of the second quarter of 2021.
Summary Financial Results
(In
Thousands of US Dollars, Except Per Share Data)
|
3 Months ended June
30
|
6 Months Ended June
30
|
2022
(Unaudited)
|
2021
(Unaudited)
|
% Change
|
2022
(Unaudited)
|
2021
(Unaudited)
|
% Change
|
Net
Revenues
|
83,084
|
75,093
|
10.6 %
|
164,183
|
145,968
|
12.5 %
|
Gross
Profit
|
22,053
|
18,239
|
20.9 %
|
43,251
|
35,692
|
21.2 %
|
Gain on Sale of Ting
Customer Assets, net1
|
4,520
|
4,808
|
(6.0 %)
|
9,272
|
10,203
|
(9.1 %)
|
Net
income
|
(3,125)
|
1,807
|
(272.9 %)
|
(6,145)
|
3,956
|
(255.3 %)
|
Basic earnings per
common share
|
(0.29)
|
0.17
|
(270.6 %)
|
(0.57)
|
0.37
|
(254.1 %)
|
Adjusted
EBITDA1
|
11,700
|
11,158
|
4.9 %
|
23,012
|
23,881
|
(3.6 %)
|
Net cash provided by
operating activities
|
12,576
|
3,518
|
257.5 %
|
17,983
|
17,604
|
2.2 %
|
1. This Non-GAAP
financial measure is described below and reconciled to GAAP net
income in the accompanying table.
|
Summary of Revenues, Gross Profit and Adjusted
EBITDA
(In Thousands of US Dollars)
|
Revenue
|
Gross
Profit
|
Adj.
EBITDA1
|
|
3 Months
ended
June
30
|
3 Months
ended
June
30
|
3 Months
ended
June
30
|
|
2022
(Unaudited)
|
2021
(Unaudited)
|
2022
(Unaudited)
|
2021
(Unaudited)
|
2022
(Unaudited)
|
2021
(Unaudited)
|
Ting Internet
Services:
|
|
|
Fiber Internet
Services
|
10,221
|
5,548
|
5,804
|
2,542
|
(6,185)
|
(4,590)
|
|
|
|
|
|
|
|
Wavelo Platform
Services:
|
Platform
Services
|
7,970
|
2,734
|
7,768
|
2,621
|
|
|
Other Professional
Services
|
1,000
|
-
|
144
|
-
|
|
|
Total Wavelo Platform
Services
|
8,970
|
2,734
|
7,912
|
2,621
|
3,872
|
724
|
|
|
|
|
|
|
|
Tucows Domain
Services:
|
|
|
Wholesale
|
|
|
|
|
|
|
Domain
Services
|
46,979
|
47,883
|
10,041
|
10,176
|
|
|
Value Added
Services
|
5,597
|
5,482
|
4,954
|
4,899
|
|
|
Total
Wholesale
|
52,576
|
53,365
|
14,995
|
15,075
|
|
|
|
|
|
|
|
|
|
Retail
|
8,487
|
8,897
|
4,968
|
4,400
|
|
|
Total Tucows Domain
Services
|
61,063
|
62,262
|
19,963
|
19,475
|
12,107
|
12,122
|
Corporate:
|
|
|
Mobile Services and
Eliminations
|
2,830
|
4,549
|
105
|
1,322
|
1,906
|
2,902
|
Network
Expenses:
|
|
|
Network, other
costs
|
n/a
|
n/a
|
(4,764)
|
(3,612)
|
n/a
|
n/a
|
Network, depreciation
of property and equipment
|
n/a
|
n/a
|
(6,589)
|
(4,084)
|
n/a
|
n/a
|
Network, amortization
of intangible assets
|
n/a
|
n/a
|
(378)
|
(24)
|
n/a
|
n/a
|
Network, impairment of
property and equipment
|
n/a
|
n/a
|
-
|
(1)
|
n/a
|
n/a
|
Total Network
expenses
|
n/a
|
n/a
|
(11,731)
|
(7,721)
|
n/a
|
n/a
|
|
|
|
|
|
|
|
Total
|
83,084
|
75,093
|
22,053
|
18,239
|
n/a
|
n/a
|
Change in Reporting Segments
During the first quarter of 2022, Tucows completed a
reorganization into three businesses: Fiber Internet Services
("Ting"), Platform Services ("Wavelo") and Domain Services ("Tucows
Domains"). Previously, we disclosed the three operating and
reportable segments: Fiber Internet Services, Mobile Services and
Domain Services. The previously named Mobile Services segment was
renamed the Platform Services segment, and no longer includes the
10-year payment stream on transferred legacy subscribers earned as
part of the DISH Purchase Agreement as well as the retail sale of
mobile phones, retail telephony services and transition services,
which are now part of the financial results reported under the
Corporate category. The renamed Platform Services segment includes
Platform and Professional Services offerings (now branded as
Wavelo), as well as the billing solutions to Internet services
providers ("ISPs") that was previously reported under the Fiber
Internet Services segment. The Fiber Internet Services segment now
includes only the retail high speed Internet access operations,
excluding the billing solutions moved to the new Platform Services
segment. The offerings included in the Domain Services segment are
unchanged. The Corporate category includes the aforementioned
mobile services, as well as eliminations of intercompany
transactions, portions of Finance and Human Resources that are
centrally managed, Legal and Corporate IT. Prior period comparable
results have been restated to reflect the changes in reporting
segments. A quarterly summary of the Company's restated segment
revenue, gross margin and EBITDA for 2021 and annual 2020 can be
found in the "KPI Summary Q2 2022" supplementary disclosure, posted
on https://tucows.com/investors/financials/.
Notes:
1. Adjusted EBITDA
Tucows reports all financial information required in accordance
with United States generally
accepted accounting principles (GAAP). Along with this information,
to assist financial statement users in an assessment of our
historical performance, the Company typically discloses and
discusses a non-GAAP financial measure, adjusted EBITDA, in press
releases and on investor conference calls and related events that
exclude certain non-cash and other charges as the Company believes
that the non-GAAP information enhances investors' overall
understanding of our financial performance.
The Company believes that the provision of this supplemental
non-GAAP measure allows investors to evaluate the operational and
financial performance of the Company's core business using similar
evaluation measures to those used by management. The Company uses
adjusted EBITDA to measure its performance and prepare its budgets.
Since adjusted EBITDA is a non-GAAP financial performance measure,
the Company's calculation of adjusted EBITDA may not be comparable
to other similarly titled measures of other companies; and should
not be considered in isolation, as a substitute for, or superior to
measures of financial performance prepared in accordance with GAAP.
Because adjusted EBITDA is calculated before certain recurring cash
charges, including interest expense and taxes, and is not adjusted
for capital expenditures or other recurring cash requirements of
the business, it should not be considered as a liquidity measure.
Non-GAAP financial measures do not reflect a comprehensive system
of accounting and may differ from non-GAAP financial measures with
the same or similar captions that are used by other companies
and/or analysts and may differ from period to period. The Company
endeavors to compensate for these limitations by providing the
relevant disclosure of the items excluded in the calculation of
adjusted EBITDA to net income based on U.S. GAAP, which should be
considered when evaluating the Company's results. Tucows strongly
encourages investors to review its financial information in its
entirety and not to rely on a single financial measure.
The Company's adjusted EBITDA definition excludes depreciation,
impairment and loss on disposition of property and equipment,
amortization of intangible assets, income tax provision, interest
expense (net), accretion of contingent consideration, stock-based
compensation, asset impairment, gains and losses from unrealized
foreign currency transactions and costs that are one-time in nature
and not indicative of on-going performance (profitability),
including acquisition and transition costs. Gains and losses from
unrealized foreign currency transactions removes the unrealized
effect of the change in the mark-to-market values on outstanding
unhedged foreign currency contracts, as well as the unrealized
effect from the translation of monetary accounts denominated in
non-U.S. dollars to U.S. dollars.
The following table reconciles adjusted EBITDA to income before
provision for income taxes (dollars in thousands):
|
3 months ended June
30
|
6 months ended June
30
|
|
2022
(Unaudited)
|
2021
(Unaudited)
|
2022
(Unaudited)
|
2021
(Unaudited)
|
Adjusted
EBITDA
|
11,700
|
11,158
|
23,012
|
23,881
|
Depreciation of
property and equipment
|
6,735
|
4,211
|
12,778
|
7,970
|
Impairment and loss on
disposition of property and equipment
|
95
|
6
|
507
|
66
|
Amortization of
intangible assets
|
2,843
|
2,346
|
5,686
|
4,965
|
Interest expense,
net
|
2,422
|
1,003
|
4,217
|
1,939
|
Accretion of contingent
consideration
|
50
|
95
|
148
|
191
|
Stock-based
compensation
|
1,436
|
1,209
|
2,828
|
2,231
|
Unrealized loss (gain)
on change in fair value of forward contracts
|
-
|
191
|
-
|
357
|
Unrealized loss (gain)
on foreign exchange revaluation of foreign denominated monetary
assets and liabilities
|
46
|
42
|
100
|
106
|
Acquisition and
transition costs*
|
460
|
367
|
1,076
|
1,136
|
|
|
|
|
|
Income before
provision for income taxes
|
(2,387)
|
1,688
|
(4,328)
|
4,920
|
* Acquisition and other costs represent transaction-related
expenses, transitional expenses, such as redundant post-acquisition
expenses, primarily related to our acquisitions, including Simply
Bits in November 2021. Expenses
include severance or transitional costs associated with department,
operational or overall company restructuring efforts, including
geographic alignments.
Management Commentary
Concurrent with the dissemination of its quarterly financial
results news release at 5:05 p.m. ET on Tuesday, August 9, 2022, management's
pre-recorded audio commentary (and transcript), discussing the
quarter and outlook for the Company, will be posted to the Tucows
website at http://www.tucows.com/investors/financials.
Following management's prepared commentary, until Tuesday, August 16, shareholders, analysts and
prospective investors can submit questions to Tucows' management at
ir@tucows.com. Management will post responses to questions in an
audio recording and transcript to the Company's website
at http://www.tucows.com/investors/financials, on Wednesday, August 31, 2022, at approximately
4 pm ET. All questions will receive a
response, however, questions of a more specific nature may be
responded to directly.
About Tucows
Tucows helps connect more people to the benefit of internet
access through communications service technology, domain services,
and fiber-optic internet infrastructure. Ting (https://ting.com)
delivers fixed fiber Internet access with outstanding customer
support. Wavelo (http://wavelo.com) is a telecommunications
software suite for service providers that simplifies the management
of mobile and internet network access; provisioning, billing and
subscription; developer tools; and more. Tucows Domains
(https://tucowsdomains.com) manages approximately 25 million domain
names and millions of value-added services through a global
reseller network of over 35,000 web hosts and ISPs. More
information can be found on Tucows' corporate website
(https://tucows.com).
Tucows, Ting, Wavelo, and Hover are registered trademarks of
Tucows Inc. or its subsidiaries.
This release includes forward-looking statements as that term
is defined in the U.S. Private Securities Litigation Reform Act of
1995, including statements regarding our expectations regarding our
future financial results and, including, without limitation, our
expectations regarding our ability to realize synergies from the
Enom acquisition and our expectation for growth of Ting Internet.
These statements are based on management's current expectations and
are subject to a number of uncertainties and risks that could cause
actual results to differ materially from those described in the
forward-looking statements. Information about other potential
factors that could affect Tucows' business, results of operations
and financial condition is included in the Risk Factors sections of
Tucows' filings with the Securities and Exchange Commission. All
forward-looking statements should be evaluated with the
understanding of their inherent uncertainty. All forward-looking
statements are based on information available to Tucows as of the
date they are made. Tucows assumes no obligation to update any
forward-looking statements, except as may be required by
law.
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SOURCE Tucows Inc.