Authorization

Tucows Reports Financial Results for Second Quarter 2019

TORONTO, Aug. 07, 2019 (GLOBE NEWSWIRE) -- Tucows Inc. (NASDAQ:TCX, TSX:TC), a provider of network access, domain names and other Internet services, today reported its financial results for the second quarter ended June 30, 2019. All figures are in U.S. dollars.

A



A



A



Summary Financial Results



(In Thousands of US Dollars, Except Per Share Data)



A



A



A



A



3 Months Ended June 30



6 Months Ended June 30



2019
(Unaudited)



2018
(Unaudited)



% Change



2019
(Unaudited)



2018
(Unaudited)



% Change



Net revenue



84,117



81,087



4%



163,070



176,882



-8%



Net income



2,616



3,608



-28%



5,415



7,352



-26%



Basic Net earnings per common share



0.25



0.34



-26%



0.51



0.69



-26%



Adjusted EBITDA1,2



11,486



11,188



3%



20,917



21,567



-3%



Net cash provided by operating activities



6,979



5,754



21%



15,970



15,327



4%



This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table.



Adjusted EBITDA for the second quarter and first six months of 2019 reflect the impact of the purchase price accounting adjustment related to the fair value write down of deferred revenue from the Ascio acquisition on March 18, 2019, which lowered Adjusted EBITDA by $0.7 million and $0.8 million, respectively.



A



A



A



Summary of Revenues and Gross profit



(In Thousands of US Dollars)



A



A



A



A



Revenue



Gross Profit



A



3 Months ended June 30A



3 Months ended June 30



A



2019
(Unaudited)



2018
(Unaudited)



2019
(Unaudited)



2018
(Unaudited)



Network Access Services:



Mobile Services



20,986



22,411



10,180



A



10,433



A



Other Services



2,644



1,895



1,688



A



605



A



Total Network Access Services



23,630



24,306



11,868



A



11,038



A



A



A



A



A



A



Domain Services:



Wholesale



A



A



A



A



Domain Services



46,485



42,540



8,668



A



6,696



A



Value Added Services



4,775



4,601



4,037



A



3,853



A



Total Wholesale



51,260



47,141



12,705



A



10,549



A



A



A



A



A



A



Retail



8,783



8,477



4,374



A



4,031



A



Portfolio



444



1,163



297



A



968



A



Total Domain Services



60,487



56,781



17,376



A



15,548



A



A



A



A



A



A



Network Expenses:



Network, other costs



-



-



(2,385



)



(2,701



)



Network, depreciation and amortization costs



-



-



(2,352



)



(1,727



)



Total Network expenses



-



-



(4,737



)



(4,428



)



A



A



A



A



A



Total



84,117



81,087



24,507



A



22,158



A



A



A



A



A



A



A



A

a??The second quarter of 2019 was highlighted by year-over-year growth in revenue and gross margin as our domains and Ting Mobile businesses continued to generate strong cash flows to invest in our long-term Ting Internet growth opportunity,a?? said Elliot Noss, President and Chief Executive Officer, Tucows Inc.A a??The second quarter saw continued steady progress at Ting Internet, marked by our best quarter ever in terms of new subscribers, continued expansion in the number of serviceable addresses, and our highest ever level of capital expenditure as we continue to build out the network for the long-term growth of the business.a??Financial ResultsNet revenue for the second quarter of 2019 increased 4% to $84.1 million from $81.1 million for the second quarter of 2018.Net income for the second quarter of 2019 was $2.6 million, or $0.25 per share compared with $3.6 million, or $0.34 per share, for the second quarter of 2018.Adjusted EBITDA1 for the second quarter of 2019 increased 3% to $11.5 million from $11.2 million for the second quarter of 2018.A Adjusted EBITDA for the second quarter 2019 reflects the impact of the purchase price accounting adjustment related to the fair value write down of deferred revenue from the Ascio acquisition, which lowered Adjusted EBITDA by $0.7 million.Cash and cash equivalents at the end of the second quarter of 2019 were $12.0 million compared with $11.0 million at the end of the first quarter of 2019 and $11.2 million at the end of the second quarter of 2018.Notes:1. Adjusted EBITDATucows 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 Companya??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.A Since adjusted EBITDA is a non-GAAP financial performance measure, the Companya??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 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.A Tucows strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure.The Companya??s adjusted EBITDA definition excludes depreciation, amortization of intangible assets, income tax provision, interest expense, interest income, stock-based compensation, asset impairment, gains and losses from unrealized foreign currency transactions and infrequently occurring items, 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 net income to adjusted EBITDA (dollars in thousands):

A



A



A



A



3 months ended June 30



6 months ended June 30



A



2019
(unaudited)



2018
(unaudited)



2019
(unaudited)



2018
(unaudited)



Net income for the period



2,616



A



3,608



5,415



A



7,352



Depreciation of property and equipment



2,172



A



A 1,330



4,097



A



2,562



Amortization of intangible assets



A 2,565



A



A 2,326



4,605



A



4,657



Interest expense, net



A 1,314



A



951



2,286



A



1,847



Provision for income taxes



1,819



A



A 1,228



3,076



A



2,411



Stock-based compensation



685



A



615



1,210



A



1,193



Unrealized loss (gain) on change in fair value of forward contracts



(70



)



46



(188



)



43



Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities



(162



)



282



(490



)



459



Acquisition and transition costs*



547



A



A 802



906



A



1,043



A



A



A



A



A



Adjusted EBITDA



A 11,486



A



A 11,188



20,917



A



21,567



*Acquisition and other costs represents transaction-related expenses, transitional expenses, such as duplicative post-acquisition expenses, primarily related to the Companya??s acquisition of Enom in January 2017 and Ascio in March 2019.A Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.



A

Conference Call
Concurrent with the dissemination of this news release, managementa??s pre-recorded commentary discussing the quarter and outlook for the Company have been posted to the Tucows web site at https://www.tucows.com/investors/financials.A In lieu of a live question and answer period, for the next six days (until Tuesday, August 13), shareholders, analysts and prospective investors can submit questions to Tucowsa?? management at ir@tucows.com. Management will post responses to questions of general interest to the Companya??s web site at https://www.tucows.com/investors/financials/ on Tuesday, August 20 at approximately 4:00 p.m. ET.A All questions will receive a response, however, questions of a more specific nature may be responded to directly.About Tucows
Tucows is a provider of network access, domain names and other Internet services. Ting (https://ting.com) delivers mobile phone service and fixed Internet access with outstanding customer support. OpenSRS (https://opensrs.com), Enom (https://www.enom.com) and Ascio (https://ascio.com) manage a combined 25 million domain names and millions of value-added services through a global reseller network of over 37,000 web hosts and ISPs. Hover (https://hover.com) makes it easy for individuals and small businesses to manage their domain names and email addresses. More information can be found on Tucowsa?? corporate website (https://tucows.com).

A



A



TucowsA Inc.



A



Consolidated Balance Sheets



A



(Dollar amounts in thousands of U.S. dollars)



A



A



A



A



A



A



A



June 30,



A



December 31,



A



A



A2019




A



2018 *



A



A



(unaudited)



A



(unaudited)



A



A



A



A



A



A



Assets



A



A



A



A



A



A



A



A



A



Current assets:



A



A



A



A



Cash and cash equivalents



$



A 12,003



A



A



$



A 12,637



A



A



Accounts receivable



A



11,588



A



A



A



10,837



A



A



Inventory



A



3,259



A



A



A



3,775



A



A



Prepaid expenses and deposits



A



19,455



A



A



A



15,472



A



A



Derivative instrument asset, current portion



A



140



A



A



A



-



A



A



Prepaid domain name registry and ancillary services fees, current portion



A



97,788



A



A



A



87,782



A



A



Other assets



A



2,501



A



A



A



-



A



A



Income taxes recoverable



A



3,208



A



A



A



1,423



A



A



Total current assets



A



149,942



A



A



A



131,926



A



A



A



A



A



A



A



Prepaid domain name registry and ancillary services fees, long-term portion



A



18,060



A



A



A



18,745



A



A



Property and equipment



A



64,010



A



A



A



48,065



A



A



Right of use operating lease asset



A



11,395



A



A



A



-



A



A



Contract costs



A



1,337



A



A



A



1,390



A



A



Intangible assets



A



59,451



A



A



A



49,395



A



A



Goodwill



A



110,093



A



A



A



90,054



A



A



Total assets



$



A 414,288



A



A



$



A 339,575



A



A



A



A



A



A



A



A



A



A



A



A



Liabilities and Stockholders' Equity



A



A



A



A



A



A



A



A



A



Current liabilities:



A



A



A



A



Accounts payable



$



A 7,590



A



A



$



A 8,445



A



A



Accrued liabilities



A



10,789



A



A



A



5,899



A



A



Customer deposits



A



13,526



A



A



A



11,919



A



A



Derivative instrument liability



A



-



A



A



A



1,276



A



A



Deferred rent, current portion



A



-



A



A



A



21



A



A



Operating lease liability, current portion



A



1,496



A



A



A



-



A



A



Loan payable, current portion



A



-



A



A



A



18,400



A



A



Deferred revenue, current portion



A



130,499



A



A



A



116,734



A



A



Accreditation fees payable, current portion



A



1,038



A



A



A



985



A



A



Income taxes payable



A



797



A



A



A



1,668



A



A



Total current liabilities



A



165,735



A



A



A



165,347



A



A



A



A



A



A



A



Deferred revenue, long-term portion



A



26,720



A



A



A



26,960



A



A



Accreditation fees payable, long-term portion



A



231



A



A



A



250



A



A



Deferred rent, long-term portion



A



-



A



A



A



116



A



A



Operating lease liability, long-term portion



A



9,482



A



A



A



-



A



A



Loan payable, long-term portion



A



99,901



A



A



A



46,201



A



A



Deferred Gain



A



-



A



A



A



-



A



A



Deferred tax liability



A



25,218



A



A



A



20,925



A



A



A



A



A



A



A



Redeemable non-controlling interest



A



-



A



A



A



-



A



A



A



A



A



A



A



Stockholders' equity:



A



A



A



A



Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding



A



-



A



A



A



-



A



A



Common stock - no par value, 250,000,000 shares authorized; 10,663,462 shares issued and outstanding as of June 30, 2019 and 10,627,988 shares issued and outstanding as of December 31, 2018



A



16,461



A



A



A



15,823



A



A



Additional paid-in capital



A



4,195



A



A



A



3,953



A



A



Retained earnings



A



66,225



A



A



A



60,810



A



A



Accumulated other comprehensive income (loss)



A



120



A



A



A



(810



)



A



Total stockholders' equity



A



87,001



A



A



A



79,776



A



A



Total liabilities and stockholders' equity



$



A 414,288



A



A



$



A 339,575



A



A



A



A



A



A



A



*The Company has initially applied ASC 2016-02 (Topic 842) using the modified retrospective method. Under this method, the comparative information is not restated.



A



A



A



A



A




TucowsA Inc.




Consolidated Statements of Operations and Comprehensive Income




(Dollar amounts in thousands of U.S. dollars)




A



A



A



A



A



A



A



A



A



A



A



A



A



Three months ended June 30,




A



Six months ended June 30,




A



A2019



A



A2018 *




A



A2019



A



A2018 *




A



(unaudited)



A



(unaudited)



A



A



A



A



A



A



A



A



A



A



A



A



Net revenues



$



A 84,117



A



A



$



A 81,087



A



A



$



A 163,070



A



A



$



A 176,882



A



A



A



A



A



A



A



A



A



A



A



A



A



Cost of revenues:



A



A



A



A



A



A



A



A



A



A



A



Cost of revenues



A



A 54,873



A



A



A



A 54,501



A



A



A



A 106,805



A



A



A



A 123,473



A



Network expenses (*)



A



A 2,385



A



A



A



A 2,701



A



A



A



A 4,780



A



A



A



A 5,275



A



Depreciation of property and equipment



A



A 2,038



A



A



A



A 1,228



A



A



A



A 3,839



A



A



A



A 2,359



A



Amortization of intangible assets



A



A 314



A



A



A



A 499



A



A



A



A 488



A



A



A



A 998



A



Total cost of revenues



A



59,610



A



A



A



58,929



A



A



A



115,912



A



A



A



132,105



A



A



A



A



A



A



A



A



A



A



A



A



A



Gross profit



A



24,507



A



A



A



22,158



A



A



A



47,158



A



A



A



44,777



A



A



A



A



A



A



A



A



A



A



A



A



A



Expenses:



A



A



A



A



A



A



A



A



A



A



A



Sales and marketing (*)



A



A 8,856



A



A



A



A 7,852



A



A



A



A 17,597



A



A



A



A 16,217



A



Technical operations and development (*)



A



A 2,752



A



A



A



A 2,355



A



A



A



A 5,275



A



A



A



A 4,450



A



General and administrative (*)



A



A 4,796



A



A



A



A 4,256



A



A



A



A 9,244



A



A



A



A 8,786



A



Depreciation of property and equipment



A



A 134



A



A



A



A 102



A



A



A



A 258



A



A



A



A 203



A



Amortization of intangible assets



A



A 2,251



A



A



A



A 1,827



A



A



A



A 4,117



A



A



A



A 3,659



A



Loss (gain) on currency forward contracts



A



A (31



)



A



A



A 52



A



A



A



A (110



)



A



A



A 49



A



Total expenses



A



18,758



A



A



A



16,444



A



A



A



36,381



A



A



A



33,364



A



A



A



A



A



A



A



A



A



A



A



A



A



Income from operations



A



5,749



A



A



A



5,714



A



A



A



10,777



A



A



A



11,413



A



A



A



A



A



A



A



A



A



A



A



A



A



Other income (expenses):



A



A



A



A



A



A



A



A



A



A



A



Interest expense, net



A



(1,314



)



A



A



(951



)



A



A



(2,286



)



A



A



(1,847



)



Other income, net



A



-



A



A



A



73



A



A



A



-



A



A



A



197



A



Total other income (expenses)



A



(1,314



)



A



A



(878



)



A



A



(2,286



)



A



A



(1,650



)



A



A



A



A



A



A



A



A



A



A



A



A



Income before provision for income taxes



A



4,435



A



A



A



4,836



A



A



A



8,491



A



A



A



9,763



A



A



A



A



A



A



A



A



A



A



A



A



A



Provision for income taxes



A



1,819



A



A



A



1,228



A



A



A



3,076



A



A



A



2,411



A



Net income before redeemable non-controlling interest



A



2,616



A



A



A



3,608



A



A



A



5,415



A



A



A



7,352



A



A



A



A



A



A



A



A



A



A



A



A



A



Redeemable non-controlling interest



A



-



A



A



A



A -A



A



A



A



-



A



A



A



A (26



)



A



A



A



A



A



A



A



A



A



A



A



A



Net income attributable to redeemable non-controlling interest



A



-



A



A



A



-



A



A



A



-



A



A



A



26



A



Net income for the period



A



2,616



A



A



A



3,608



A



A



A



5,415



A



A



A



7,352



A



A



A



A



A



A



A



A



A



A



A



A



A



Other comprehensive income, net of tax



A



A



A



A



A



A



A



A



A



A



A



Unrealized income (loss) on hedging activities



A



240



A



A



A



(273



)



A



A



789



A



A



A



(256



)



Net amount reclassified to earnings



A



80



A



A



A



13



A



A



A



141



A



A



A



13



A



Other comprehensive income (loss) net of tax (expense) recovery of ($103) and $84 for the three months ended June 30, 2019 and June 30, 2018, ($298) and $78 for the six months ended June 30, 2019 and June 30, 2018



A



320



A



A



A



(260



)



A



A



930



A



A



A



(243



)



A



A



A



A



A



A



A



A



A



A



A



A



Comprehensive income, net of tax for the period



A$



2,936



A



A



A$



3,348



A



A



A$



6,345



A



A



A$



7,109



A



A



A



A



A



A



A



A



A



A



A



A



A



Basic earnings per common share



$



0.25



A



A



$



0.34



A



A



$



0.51



A



A



$



0.69



A



A



A



A



A



A



A



A



A



A



A



A



A



Shares used in computing basic earnings per common share



A



10,657,124



A



A



A



10,597,228



A



A



A



10,646,045



A



A



A



10,592,994



A



A



A



A



A



A



A



A



A



A



A



A



A



Diluted earnings per common share



$



0.24



A



A



$



0.33



A



A



$



0.50



A



A



$



0.68



A



A



A



A



A



A



A



A



A



A



A



A



A



Shares used in computing diluted earnings per common share



A



10,840,005



A



A



A



10,803,007



A



A



A



10,837,456



A



A



A



10,797,017



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



A



(*) Stock-based compensation has been included in expenses as follows:



A



A



A



A



A



A



A



A



A



A



A



Network expenses



$



72



A



A



$



28



A



A



$



129



A



A



$



84



A



Sales and marketing



$



297



A



A



$



245



A



A



$



494



A



A



$



432



A



Technical operations and development



$



132



A



A



$



174



A



A



$



249



A



A



$



351



A



General and administrative



$



183



A



A



$



168



A



A



$



338



A



A



$



327



A



A



A



A



A



A



A



A



A



A



A



A



A



*The Company has initially applied ASC 2016-02 (Topic 842) using the modified retrospective method. Under this method, the comparative information is not restated.



A



A



A



A



A



A



A

A

TucowsA Inc.



Consolidated Statements of Cash Flows



(Dollar amounts in thousands of U.S. dollars)



A



A



A



A



A



A



A



A



A



A



A



A



A



Three months ended June 30,




A



Six months ended June 30,




A



A2019



A



A2018 *




A



A2019



A



A2018 *




A



A



A



A



A



A



A



A



Cash provided by:



(unaudited)



A



(unaudited)



Operating activities:



A



A



A



A



A



A



A



A



A



A



A



Net income for the periodA



A$



2,616



A



A



$



3,608



A



A



A$



5,415



A



A



$



7,352



A



Items not involving cash:



A



A



A



A



A



A



A



A



A



A



A



Depreciation of property and equipment



A



2,172



A



A



A



1,330



A



A



A



4,097



A



A



A



2,562



A



Loss on write off of property and equipment



A



-



A



A



A



-



A



A



A



22



A



A



A



-



A



Amortization of debt discount and issuance costs



A



90



A



A



A



69



A



A



A



168



A



A



A



139



A



Amortization of intangible assets



A



2,565



A



A



A



2,326



A



A



A



4,605



A



A



A



4,657



A



Net amortization contract costs



A



34



A



A



A



25



A



A



A



53



A



A



A



50



A



Deferred income taxes (recovery)



A



1,449



A



A



A



(445



)



A



A



1,911



A



A



A



(492



)



Excess tax benefits on share-based compensation expense



A



(381



)



A



A



(197



)



A



A



(737



)



A



A



(341



)



Amortization of deferred rent



A



-



A



A



A



(4



)



A



A



-



A



A



A



(4



)



Net Right of use operating assets/Operating lease liability



A



79



A



A



A



-



A



A



A



49



A



A



A



-



A



Loss on disposal of domain names



A



2



A



A



A



28



A



A



A



6



A



A



A



65



A



Other income



A



-



A


See also:
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