Tucows Inc. reports financial results for the third quarter of 2009
Summary Financial Results
(Numbers in Thousands of US Dollars, Except Per Share Data)
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__ 3 Months Ended__ 3 Months Ended__ 9 Months Ended__ 9 Months Ended
__ Sept. 30, 2009__ Sept. 30, 2008__ Sept. 30, 2009__ Sept. 30, 2008
__ (unaudited)__ (unaudited)__ (unaudited)__ (unaudited)
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Net Revenue__ 20,496__ 20,147__ 60,610__ 59,309
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Net Income
(Loss)__ 5,051__ (71)__ 10,495__ 1,056
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Net Income
(Loss)/Share__ 0.07__ (0.00)__ 0.15__ 0.01
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Cash Flow from
Operations__ 82__ (102)__ 3,586__ 2,595
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Summary of Revenue and Cost of Revenue before Network Costs
(Numbers in Thousands of US Dollars)
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Revenue__ Cost of Revenue
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__ 3 Months Ended__ 3 Months Ended__ 9 Months Ended__ 9 Months Ended
__ Sept. 30, 2009__ Sept. 30, 2008__ Sept. 30, 2009__ Sept. 30, 2008
__ (unaudited)__ (unaudited)__ (unaudited)__ (unaudited)
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OpenSRS:
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Domain Services
(Traditional
Domain
Registration)__ 15,098__ 13,680__ 12,326__ 11,016
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Email Services__ 842__ 1,517__ 103__ 162
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Other Services__ 1,109__ 1,104__ 412__ 403
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Total OpenSRS
Services__ 17,049__ 16,309__ 12,841__ 11,581
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YummyNames (Domain
Portfolio Services)__ 1,782__ 1,265__ 218__ 183
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Hover (Retail
Services)__ 1,204__ 2,071__ 493__ 558
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Butterscotch
(Content Services)__ 461__ 502__ 26__ 5
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Total__ 20,496__ 20,147__ 13,578__ 12,327
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"Throughout 2009, we have consistently delivered solid financial results, driven by the strong performance of our OpenSRS wholesale business, the initiatives we have undertaken to improve other components of our business, and the success of our efforts to improve our cost structure," said Elliot Noss, President and CEO of Tucows. "Fundamentally, our business is strong and we are performing very well operationally. Amidst a weakening Internet services environment, our strong competitive position, supported by continuing improvements to our OpenSRS platform, has enabled us to grow new registrations in excess of industry performance. All of this continues to position us well for the remainder of 2009 and beyond."
Net revenue for the third quarter of 2009 was $20.5 million compared with $20.1 million for the third quarter of 2008.
Net income for the third quarter of 2009 was $5.1 million, or $0.07 per share, compared with a net loss of $71,000, or less than $0.01 per share, for the third quarter of 2008. Net income for the third quarter of 2009 benefitted from other income of $1.9 million generated by receipt of the third and final payment related to the sale of the Company's equity stake in Afilias, as well as a gain on foreign exchange of $1.9 million (inclusive of a mark-to-market gain of $1.9 million) compared to a loss on foreign exchange of $0.7 million (inclusive of a mark-to-market loss of $0.5 million) for the third quarter of 2008. In addition, because the Company is no longer subject to state taxes in certain jurisdictions, it has amended its tax rate payable in connection with its deferred tax liability resulting in an income tax recovery of $0.4 million in the third quarter of 2009.
Deferred revenue at the end of the third quarter of fiscal 2009 was $56.5 million, an increase of 4% from $54.4 million at the end of the third quarter of fiscal 2008 and a slight decrease from $56.9 million at the end of the second quarter of fiscal 2009.
Cash and cash equivalents at the end of the third quarter of fiscal 2009 were $8.2 million compared with $2.7 million at the end of the third quarter of fiscal 2008 and $7.4 million at the end of the second quarter of fiscal 2009. This increase in cash compared with the second quarter of 2009 is primarily the result of the receipt of the $2.0 million payment related to the sale of the Company's equity stake in Afilias last year, which was partially offset by the repayment of $479,000 of the Company's bank loan and the use of $570,000 for the repurchase of shares under the Company's second modified "Dutch auction" tender offer, which concluded in July of this year. Cash flow from operations for the quarter was $82,000 and was impacted by a change in non-cash working capital related to the timing of payables and receivables of $1.5 million, the result of the receipt of $0.5 million in receivables shortly after quarter end and the payment of $1.0 million in certain payables to comply with changes in the Company's relationships with certain suppliers.
Conference Call
Tucows will host a conference call today, Wednesday, November 11, 2009 at 5:00 p.m. ET to discuss the Company's third quarter fiscal 2009 results. To access the conference call via the Internet, go to tucowsinc.com/investors.
For those unable to participate in the conference call at the scheduled time, it will be archived for replay both by telephone and via the Internet beginning approximately one hour following completion of the call. To access the archived conference call by telephone, dial 416-640-1917 or 1-877-289-8525 and enter the pass code 4171862 followed by the pound key. The telephone replay will be available until Wednesday, November 18, 2009 at midnight. To access the archived conference call as an MP3 via the Internet, go to tucowsinc.com/investors.
About Tucows
Tucows is a global Internet services company. OpenSRS manages over 9 million domain names and millions of email boxes through a reseller network of over 9,000 web hosts and ISPs. Hover is the easiest way for individuals and small businesses to manage their domain names and email addresses. YummyNames owns premium domain names that generate revenue through advertising or resale. Butterscotch.com is an online video network building on the foundation of Tucows.com. More information can be found at tucowsinc.com.
This news release contains, in addition to historical information, forward-looking statements related to such matters as our business, including the price per share at which Tucows will purchase shares and the level of under subscription. Such statements are based on management's current expectations and are subject to a number of uncertainties and risks, which could cause actual results to differ materially from those described in the forward-looking statements. Information about 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 included in this document are based on information available to Tucows as of the date of this document, and except to the extent Tucows may be required to update such information under any applicable securities laws, Tucows assumes no obligation to update such forward-looking statements. TUCOWS is a registered trademark of Tucows Inc. or its subsidiaries. All other trademarks and service marks are the properties of their respective owners.
Tucows Inc.
Consolidated Balance Sheets
(Dollar amounts in U.S. dollars)
__ September 30,__ December 31,
__ 2009__ 2008
------------ ------------
(unaudited)__ (unaudited)
Assets
Current assets:
Cash and cash equivalents__ $8,154,455__ $5,427,467
Accounts receivable__ 3,929,882__ 3,200,362
Prepaid expenses and deposits__ 2,743,505__ 2,274,043
Derivative instrument assets__ 1,927,475__ -
Prepaid domain name registry and ancillary
services fees, current portion__ 31,513,882__ 29,212,610
Deferred tax asset, current portion__ 590,000__ 590,000
------------ ------------
Total current assets__ 48,859,199__ 40,704,482
Prepaid domain name registry and ancillary
services fees, long-term portion__ 12,143,175__ 11,855,971
Property and equipment__ 2,148,509__ 3,072,958
Deferred financing charges__ 49,300__ 78,500
Deferred tax asset, long-term portion__ 2,410,000__ 2,410,000
Intangible assets__ 19,041,083__ 20,206,996
Goodwill__ 17,990,807__ 17,990,807
Investment__ -__ 200,000
------------ ------------
Total assets__ $102,642,073__ $ 96,519,714
------------ ------------
------------ ------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable__ $1,373,068__ $1,633,830
Accrued liabilities__ 1,888,427__ 2,000,146
Customer deposits__ 3,764,320__ 3,319,241
Derivative instrument liabilities__ -__ 1,974,919
Loan payable, current portion__ 3,698,685__ 2,624,242
Deferred revenue, current portion__ 40,303,458__ 37,985,821
Accreditation fees payable, current portion__ 508,180__ 510,548
------------ ------------
Total current liabilities__ 51,536,138__ 50,048,747
Deferred revenue, long-term portion__ 16,198,501__ 16,201,804
Accreditation fees payable, long-term portion__ 187,285__ 187,374
Loan payable, long-term portion__ -__ 3,235,125
Deferred tax liability, long-term portion__ 4,899,000__ 5,396,000
Stockholders' equity:
Preferred stock - no par value, 1,250,000
shares authorized; none issued and outstanding__ -__ -
Common stock - no par value, 250,000,000 shares
authorized; 67,865,096 shares issued and
outstanding as of September 30, 2009 and
73,073,782 shares issued and outstanding as of
December 31, 2008__ 14,187,313__ 15,198,358
Additional paid-in capital__ 47,601,377__ 48,714,676
Deficit__ (31,967,541)__ (42,462,370)
------------ ------------
Total stockholders' equity__ 29,821,149__ 21,450,664
------------ ------------
Total liabilities and stockholders' equity__ $102,642,073__ $ 96,519,714
------------ ------------
------------ ------------
Tucows Inc.
Consolidated Statements of Operations
(Dollar amounts in U.S. dollars)
Three months ended__ Nine months ended
September 30,__ September 30,
2009__ 2008__ 2009__ 2008
------------ ------------ ------------ ------------
(unaudited)__ (unaudited)
Net revenues__ $ 20,496,129__ $ 20,147,195__ $ 60,609,673__ $ 59,308,731
Cost of revenues:
Cost of
revenues(*)__ 14,770,868__ 13,981,247__ 42,942,314__ 40,794,276
Depreciation of
property and
equipment__ 475,445__ 795,445__ 1,416,834__ 2,437,542
Amortization of
intangible
assets__ 29,199__ 29,199__ 87,597__ 134,597
------------ ------------ ------------ ------------
Total cost of
revenues__ 15,275,512__ 14,805,891__ 44,446,745__ 43,366,415
------------ ------------ ------------ ------------
Gross profit__ 5,220,617__ 5,341,304__ 16,162,928__ 15,942,316
Expenses:
Sales and
marketing(*)__ 1,568,727__ 1,705,512__ 4,261,070__ 5,132,380
Technical operations
and development(*) 1,142,331__ 1,527,237__ 3,421,825__ 4,666,832
General and
administrative(*)__ 1,145,951__ 1,714,563__ 4,608,173__ 4,805,853
Depreciation of
property and
equipment__ 64,704__ 57,386__ 230,336__ 177,317
Loss on disposition
of property and
equipment__ 40,369__ 498,529__ 40,369__ 498,529
Amortization of
intangible assets__ 360,540__ 360,540__ 1,081,620__ 1,122,655
(Gain) / loss in
fair value of
forward exchange
contracts__ (1,878,230)__ 525,571__ (3,902,394)__ 555,364
------------ ------------ ------------ ------------
Total expenses__ 2 ,444,392__ 6,389,338__ 9,740,999__ 16,958,930
------------ ------------ ------------ ------------
Income from
operations__ 2,776,225__ (1,048,034)__ 6,421,929__ (1,016,614)
Other income
(expenses):
Interest income
(expense), net__ (52,887)__ (90,859)__ (178,669)__ (467,264)
Other income__ 1,880,000__ 1,098,245__ 4,493,190__ 2,631,010
------------ ------------ ------------ ------------
Total other income
(expenses)__ 1,827,113__ 1,007,386__ 4,314,521__ 2,163,746
------------ ------------ ------------ ------------
Income before
provision for
income taxes__ 4,603,338__ (40,648)__ 10,736,450__ 1,147,132
Income tax
(recovery)
expense__ (447,455)__ 30,000__ 241,621__ 91,134
------------ ------------ ------------ ------------
Net income (loss)
for the period__ $5,050,793__ $(70,648)__ $ 10,494,829__ $1,055,998
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic earnings
(loss) per
common share__ $0.07__ $(0.00)__ $0.15__ $0.01
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Shares used in
computing basic
earnings per
common share__ 68,008,871__ 73,923,542__ 69,841,981__ 73,903,998
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted earnings
(loss) per
common share__ $0.07__ $(0.00)__ $0.15__ $0.01
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Shares used in
computing diluted
earnings per
common share__ 68,874,517__ 74,817,244__ 70,156,521__ 75,245,047
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
(*)Stock-based
compensation has
been included in
expenses as
follows:
Cost of
revenues__ $3,860__ $5,500__ $12,227__ $14,600
Sales and
marketing__ $12,807__ $17,200__ $42,764__ $48,500
Technical
operations and
development__ $12,395__ $13,100__ $34,116__ $41,800
General and
administrative__ $70,748__ $52,500__ $142,641__ $128,600
Tucows Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in U.S. dollars)
__ Three months ended__ Nine months ended
__ September 30,__ September 30,
2009__ 2008__ 2009__ 2008
------------ ------------ ------------ ------------
(unaudited)__ (unaudited)
Cash provided by
(used in):
Operating activities:
Net income (loss)
for the period__ $5,050,793__ $(70,648)__ $10,494,829__ $ 1,055,998
Items not involving
cash:
Depreciation of
property and
equipment__ 540,149__ 852,831__ 1,647,170__ 2,614,859
Loss on disposition
of property and
equipment__ 40,369__ 498,529__ 40,369__ 498,529
Amortization of
deferred financing
charges__ 9,100__ 12,200__ 29,200__ 38,400
Amortization of
intangible assets__ 389,739__ 389,739__ 1,169,217__ 1,257,252
Gain on disposal
of investment in
Afilias__ (1,880,000)__ -__ (3,890,395)__ -
Gain on sale of
customer
relationships__ -__ (921,384)__ -__ (2,042,449)
Reduction of
deferred tax
liability__ (497,000)__ -__ (497,000)__ -
Disposal of
domain names__ 649__ 4,705__ 2,596__ 4,705
Unrealized
(gain)/loss in the
fair value of
forward contracts__ (1,878,230)__ 525,571__ (3,902,394)__ 555,364
Stock-based
compensation__ 99,810__ 88,300__ 231,748__ 233,500
Change in non-cash
operating working
capital:
Accounts receivable__ (465,454)__ (518,310)__ (729,520)__ (234,387)
Prepaid expenses
and deposits__ 419,761__ 641,629__ (469,462)__ 536,392
Prepaid fees for
domain name registry
and ancillary services
fees__ 33,425__ (775,955)__ (2,588,476)__ (4,482,752)
Accounts payable__ (977,967)__ (480,839)__ (597,560)__ (231,770)
Accrued liabilities__ (115,362)__ (177,701)__ (111,719)__ (868,765)
Customer deposits__ 592,612__ (167,691)__ 445,079__ (148,692)
Deferred revenue__ (398,657)__ (9,699)__ 2,314,334__ 3,767,955
Accreditation fees
payable__ (46,762)__ 6,245__ (2,457)__ 40,365
Income taxes payable__ (835,398)__ -__ -__ -
------------ ------------ ------------ ------------
Net cash provided by
(used in) operating
activities__ 81,577__ (102,478)__ 3,585,559__ 2,594,504
------------ ------------ ------------ ------------
Financing activities:
Proceeds received
on exercise of
stock options__ -__ -__ 25,422__ 9,450
Repurchase of common
stock__ (570,335)__ -__ (2,381,514)__ -
Repayment of loan
payable__ (478,561)__ (478,561)__ (2,160,682)__ (8,435,681)
------------ ------------ ------------ ------------
Net cash used in
financing
activities__ (1,048,896)__ (478,561)__ (4,516,774)__ (8,426,231)
------------ ------------ ------------ ------------
Investing activities:
Cost of domain
names acquired__ -__ -__ (5,900)__ (8,944)
Additions to property
and equipment__ (281,282)__ (627,024)__ (426,292)__ (1,922,764)
Sale of customer
relationships__ -__ 921,384__ -__ 2,343,114
Proceeds on
disposition of
property and
equipment__ -__ 66,039__ -__ 66,039
Proceeds on disposal
of investment in
Afilias__ 1,980,000__ -__ 4,090,395__ -
Decrease in cash
held in escrow__ -__ (5,396)__ -__ (18,161)
------------ ------------ ------------ ------------
Net cash provided
by investing
activities__ 1,698,718__ 355,003__ 3,658,203__ 459,284
------------ ------------ ------------ ------------
Increase (decrease)
in cash and cash
equivalents__ 731,399__ (226,036)__ 2,726,988__ (5,372,443)
Cash and cash
equivalents,
beginning of period__ 7,423,056__ 2,947,069__ 5,427,467__ 8,093,476
------------ ------------ ------------ ------------
Cash and cash
equivalents, end of
period__ $8,154,455__ $2,721,033__ $8,154,455__ $2,721,033
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Supplemental cash
flow information:
Interest paid__ $52,983__ $100,060__ $181,012__ $552,298
Supplementary
disclosure of
non-cash investing
activity:
Property and
equipment acquired
during the period
not yet paid for__ $343,777__ $117,733__ $343,777__ $117,733
SOURCE: Tucows Inc.
Originally published by Tucows Inc..
(c) 2009 PRNewswire. Provided by ProQuest LLC. All rights Reserved.
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