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Tucows Inc. reports financial results for the fourth quarter of 2009
Feb 16, 2010 (03:02 PM EST)


TORONTO, Feb. 16 /PRNewswire-FirstCall/ - Tucows Inc. (NYSE AMEX:TCX, TSX:TC), a global provider of domain names, email and other Internet services, today reported its financial results for the fourth quarter and the year ended December 31, 2009. All figures are in U.S. dollars.

                          Summary Financial Results
         (Numbers in Thousands of US Dollars, Except Per Share Data)

    -------------------------------------------------------------------------
                             3 Months     3 Months    12 Months    12 Months
                                Ended        Ended        Ended        Ended
                              Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,
                                 2009         2008         2009         2008
                           (unaudited)  (unaudited)  (unaudited)  (unaudited)
    -------------------------------------------------------------------------
    Net Revenue                20,330       19,159       80,939       78,468
    -------------------------------------------------------------------------
    Net Income (Loss)           1,746        1,019       12,241        2,075
    -------------------------------------------------------------------------
    Net Income (Loss)/Share      0.03         0.01         0.18         0.03
    -------------------------------------------------------------------------
    Cash Flow from
     Operations                 2,880         (229)       6,466        2,361
    -------------------------------------------------------------------------


         Summary of Revenue and Cost of Revenue before Network Costs
                     (Numbers in Thousands of US Dollars)

    -------------------------------------------------------------------------
                                    Revenue               Cost of Revenue
    -------------------------------------------------------------------------
                             3 Months     3 Months     3 Months     3 Months
                                Ended        Ended        Ended        Ended
                              Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,
                                 2009         2008         2009         2008
                           (unaudited)  (unaudited)  (unaudited)  (unaudited)
    -------------------------------------------------------------------------
    OpenSRS:
    -------------------------------------------------------------------------
    Domain Services
     (Traditional Domain
     Registration)             15,211       14,138       12,578       11,398
    -------------------------------------------------------------------------
    Email Services                799        1,122          110           95
    -------------------------------------------------------------------------
    Other Services              1,130        1,137          410          403
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total OpenSRS Services     17,140       16,397       13,098       11,896
    -------------------------------------------------------------------------

    YummyNames (Domain
     Portfolio Services)        1,521          854          193          174
    -------------------------------------------------------------------------
    Hover (Retail Services)     1,208        1,436          443          571
    -------------------------------------------------------------------------
    Butterscotch (Content
     Services)                    461          472           12           14
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total                      20,330       19,159       13,746       12,655
    -------------------------------------------------------------------------

"The fourth quarter saw the continued solid financial performance we delivered throughout 2009," said Elliot Noss, President and CEO of Tucows. "The consistently strong performance of our OpenSRS wholesale business combined with the work we have undertaken to revitalize other parts of our business contributed to record revenue of $81 million amidst a very challenging economic environment. We are confident that 2010 will bring continued top-line growth complemented by continued operational efficiency."

"At the same time, we remain committed to returning value to our shareholders. Over the last thirteen months we have repurchased more than 17% of Tucows' outstanding shares."

Net revenue for the fourth quarter of 2009 increased 6.1% to $20.3 million from $19.2 million for the fourth quarter of 2008.

Net income for the fourth quarter of 2009 was $1.7 million, or $0.03 per share, compared with $1.0 million, or $0.01 per share, for the fourth quarter of 2008. Net income for the fourth quarter of 2009 benefitted from a gain on foreign exchange of $0.5 million (inclusive of a mark-to-market gain of $0.3 million) compared to a loss on foreign exchange of $2.2 million (inclusive of a mark-to-market loss of $1.4 million) for the fourth quarter of 2008. Net income for the fourth quarter of 2009 also benefited from an income tax recovery of $0.5 million. Net income for the fourth quarter of 2008 included other income of $3.2 million generated by the sale of the Company's equity position in Afilias.

Deferred revenue at the end of the fourth quarter of fiscal 2009 was $56.3 million, an increase of 4% from $54.2 million at the end of the fourth quarter of fiscal 2008 and a slight decrease from $56.5 million at the end of the third quarter of fiscal 2009.

Cash and cash equivalents at the end of the fourth quarter of fiscal 2009 were $9.6 million compared with $5.4 million at the end of the fourth quarter of fiscal 2008 and $8.2 million at the end of the third quarter of fiscal 2009. The increase in cash compared with the second quarter of 2009 is primarily the result of cash flow from operations for the fourth quarter of $2.9 million, which was partially offset by the repayment of $479,000 of the Company's bank loan and the use of $534,000 for the repurchase of shares under the Company's modified "Dutch auction" tender offer, which concluded in October 2009.

Conference Call

Tucows will host a conference call today, Tuesday, February 16, 2010 at 5:00 p.m. ET to discuss the Company's fourth quarter fiscal 2009 results. To access the conference call via the Internet, go to http://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 416-849-0833 or 1-800-642-1687 and enter the pass code 53582860. The telephone replay will be available until Tuesday, February 23, 2010 at midnight. To access the archived conference call as an MP3 via the Internet, go to http://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 10,000 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 http://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)

                                                 December 31,    December 31,
                                                     2009            2008
                                                -------------- --------------
                                                  (unaudited)     (unaudited)

    Assets

    Current assets:
      Cash and cash equivalents                 $   9,632,394  $   5,427,467
      Accounts receivable                           2,822,045      3,200,362
      Prepaid expenses and deposits                 2,498,922      2,274,043
      Derivative instrument assets, current
       portion                                      2,107,825              -
      Prepaid domain name registry and
       ancillary services fees, current portion    31,596,236     29,212,610
      Deferred tax asset, current portion                   -        590,000
      Income taxes recoverable                        674,000              -
                                                -------------- --------------
        Total current assets                       49,331,422     40,704,482

    Derivative instrument assets, long-term
     portion                                           96,845              -
    Prepaid domain name registry and ancillary
     services fees, long-term portion              12,126,515     11,855,971
    Property and equipment                          1,986,768      3,072,958
    Deferred financing charges                         41,000         78,500
    Deferred tax asset, long-term portion           3,907,476      2,410,000
    Intangible assets                              18,656,353     20,206,996
    Goodwill                                       17,990,807     17,990,807
    Investment                                              -        200,000
                                                -------------- --------------
      Total assets                              $ 104,137,186  $  96,519,714
                                                -------------- --------------
                                                -------------- --------------


    Liabilities and Stockholders' Equity

    Current liabilities:
      Accounts payable                          $   1,547,863  $   1,633,830
      Accrued liabilities                           1,889,980      2,000,146
      Customer deposits                             3,624,317      3,319,241
      Derivative instrument liabilities                     -      1,974,919
      Loan payable, current portion                 3,220,125      2,624,242
      Deferred revenue, current portion            40,211,766     37,985,821
      Deferred tax liability, current portion         907,476              -
      Accreditation fees payable, current
       portion                                        530,656        510,548
                                                -------------- --------------
        Total current liabilities                  51,932,183     50,048,747

    Deferred revenue, long-term portion            16,098,812     16,201,804
    Accreditation fees payable, long-term
     portion                                          169,620        187,374
    Loan payable, long-term portion                         -      3,235,125
    Deferred tax liability, long-term portion       4,840,000      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; 67,068,253 shares
       issued and outstanding as of December 31,
       2009 and 73,073,782 shares issued and
       outstanding as of December 31, 2008         14,030,384     15,198,358
      Additional paid-in capital                   47,287,351     48,714,676
      Deficit                                     (30,221,164)   (42,462,370)
                                                -------------- --------------
        Total stockholders' equity                 31,096,571     21,450,664
                                                -------------- --------------
    Total liabilities and stockholders' equity  $ 104,137,186  $  96,519,714
                                                -------------- --------------
                                                -------------- --------------


                                 Tucows  Inc.
                    Consolidated Statements of Operations
                       (Dollar amounts in U.S. dollars)

                              Three months ended           Year ended
                                 December 31,              December 31,
                              2009         2008         2009         2008
                         ------------ ------------ -----------  ------------
                                 (unaudited)               (unaudited)

    Net revenues         $ 20,329,540 $ 19,159,149 $ 80,939,212 $ 78,467,880

    Cost of revenues:
      Cost of
       revenues(*)       14,993,792   13,819,760   57,936,106   54,614,036
      Depreciation of
       property and
       equipment              256,357      472,311    1,673,191    2,909,853
      Amortization of
       intangible assets       29,199       29,199      116,796      163,796
                         ------------ ------------ ------------ ------------
        Total cost of
         revenues          15,279,348   14,321,270   59,726,093   57,687,685
                         ------------ ------------ ------------ ------------

    Gross profit            5,050,192    4,837,879   21,213,119   20,780,195

    Expenses:
      Sales and
       marketing (*)      1,550,937    1,536,504    5,812,007    6,668,884
      Technical operations
       and development (*)1,128,879    1,505,596    4,550,704    6,172,428
      General and
       administrative (*)   950,749    2,003,748    5,558,921    6,809,601
      Depreciation of
       property and equipment  35,915       86,428      266,251      263,745
      Loss on disposition of
       property and equipment     524            -       40,893      498,529
      Amortization of
       intangible assets      360,540      360,540    1,442,160    1,483,195
      (Gain)/loss in fair
       value of forward
       exchange contracts    (277,195)   1,419,555   (4,179,589)   1,974,919
                         ------------ ------------ ------------ ------------
        Total expenses      3,750,349    6,912,371   13,491,347   23,871,301
                         ------------ ------------ ------------ ------------

    Income from operations  1,299,843   (2,074,492)   7,721,772   (3,091,106)

    Other income
     (expenses):
      Interest income
       (expense), net         (46,471)    (116,647)    (225,140)    (583,911)
      Other income                  -    3,239,950    4,493,190    5,870,960
                         ------------ ------------ ------------ ------------
        Total other income
         (expenses)           (46,471)   3,123,303    4,268,050    5,287,049
                         ------------ ------------ ------------ ------------

    Income before
     provision for income
     taxes                  1,253,372    1,048,811   11,989,822    2,195,943

    Income tax (recovery)
     expense                 (493,005)      30,000     (251,384)     121,134
                         ------------ ------------ ------------ ------------
    Net income for the
     period              $  1,746,377 $  1,018,811 $ 12,241,206 $  2,074,809
                         ------------ ------------ ------------ ------------
                         ------------ ------------ ------------ ------------

    Basic earnings
     (loss) per common
     share               $       0.03 $       0.01 $       0.18 $       0.03
                         ------------ ------------ ------------ ------------
                         ------------ ------------ ------------ ------------

    Shares used in
     computing basic
     earnings per common
     share                 67,076,782   73,559,276   69,145,001   73,817,347
                         ------------ ------------ ------------ ------------
                         ------------ ------------ ------------ ------------

    Diluted earnings
     (loss) per common
     share                $      0.03  $      0.01  $      0.17  $      0.03
                         ------------ ------------ ------------ ------------
                         ------------ ------------ ------------ ------------

    Shares used in
     computing diluted
     earnings per common
     share                 68,860,034   72,274,490   70,356,013   74,830,217
                         ------------ ------------ ------------ ------------
                         ------------ ------------ ------------ ------------


    (*) Stock-based
     compensation has
     been included in
     expenses as follows:
      Cost of revenues   $      3,730 $      5,100 $     15,957 $     19,700
      Sales and
       marketing         $     16,018 $     15,700 $     58,782 $     64,200
      Technical
       operations and
       development       $     15,186 $     10,900 $     49,302 $     52,700
      General and
       administrative    $     28,579 $     22,600 $    171,220 $    151,200



                                 Tucows  Inc.
                    Consolidated Statements of Cash Flows
                       (Dollar amounts in U.S. dollars)

                              Three months ended           Year ended
                                 December 31,              December 31,
                              2009         2008         2009         2008
                         ------------ ------------ -----------  ------------
                                 (unaudited)               (unaudited)

    Cash provided by
     (used in):
    Operating activities:
    Net income for the
     period              $  1,746,377 $  1,018,811 $ 12,241,206 $  2,074,809
    Items not involving
     cash:
      Depreciation of
       property and
       equipment              292,272      558,739    1,939,442    3,173,598
      Loss on disposition
       of property and
       equipment                  524            -       40,893      498,529
      Amortization of
       deferred financing
       charges                  8,300       11,300       37,500       49,700
      Amortization of
       intangible assets      389,739      389,739    1,558,956    1,646,991
      Reduction of
       deferred tax
       liability              (59,000)           -     (556,000)           -
      Gain on sale of
       customer relationships       -      (49,546)           -   (2,091,995)
      Disposal of domain
       names                    2,866        5,030        5,462        5,030
      Unrealized (gain)/loss
       in the fair value of
       forward contracts     (277,195)   1,419,555   (4,179,589)   1,974,919
      Stock-based
       compensation            63,513       54,300      295,261      287,800
      Gain on disposal of
       investment in Afilias        -   (3,090,404)  (3,890,395)  (3,090,404)
    Change in non-cash
     operating working
      capital:
      Accounts receivable   1,107,837      456,205      378,317      221,818
      Prepaid expenses and
       deposits               244,583      321,694     (224,879)     858,086
      Prepaid fees for
       domain name registry
       and ancillary
       services fees          (65,694)    (346,502)  (2,654,170)  (4,829,254)
      Income taxes
       receivable/payable    (674,000)           -     (674,000)           -
      Accounts payable        424,977     (557,655)    (172,583)    (789,425)
      Accrued liabilities       1,553     (420,176)    (110,166)  (1,288,941)
      Customer deposits      (140,003)     200,149      305,076       51,457
      Deferred revenue       (191,381)    (193,558)   2,122,953    3,574,397
      Accreditation fees
       payable                  4,811       (6,878)       2,354       33,487
                         ------------ ------------ ------------ ------------
    Net cash provided by
     (used in) operating
     activities             2,880,079     (229,197)   6,465,638    2,360,602
                         ------------ ------------ ------------ ------------

    Financing activities:
      Proceeds received on
       exercise of stock
       options                      -            -       25,422        9,450
      Repurchase of
       common stock          (534,467)    (272,444)  (2,915,981)    (272,444)
      Repayment of loan
       payable               (478,560)    (478,560)  (2,639,242)  (8,914,241)
                         ------------ ------------ ------------ ------------
      Net cash used in
       financing
       activities          (1,013,027)    (751,004)  (5,529,801)  (9,177,235)
                         ------------ ------------ ------------ ------------

    Investing activities:
      Cost of domain names
       acquired                (7,875)      (4,705)     (13,775)      (8,944)
      Additions to
       property and
       equipment             (381,238)    (191,140)    (807,530)  (2,113,904)
      Proceeds on
       disposition of
       property and
       equipment                    -            -            -       66,039
      Acquisition of
       Innerwise Inc.,
       net of cash acquired         -     (500,000)           -     (500,000)
      Proceeds on disposal
       of investment in Afilias     -    3,244,141    4,090,395    3,244,141
      Sale of customer
       relationships                -       49,546            -    2,392,660
      Decrease in cash
       held in escrow               -    1,088,793            -    1,070,632
                         ------------ ------------ ------------ ------------
      Net cash provided by
       (used in) investing
       activities            (389,113)   3,686,635    3,269,090    4,150,624
                         ------------ ------------ ------------ ------------

    Increase (decrease)
     in cash and cash
     equivalents            1,477,939    2,706,434    4,204,927   (2,666,009)

    Cash and cash
     equivalents,
     beginning of period    8,154,455    2,721,033    5,427,467    8,093,476
                         ------------ ------------ ------------ ------------
    Cash and cash
     equivalents, end of
     period              $  9,632,394 $  5,427,467 $  9,632,394 $  5,427,467
                         ------------ ------------ ------------ ------------
                         ------------ ------------ ------------ ------------

    Supplemental cash
     flow information:
      Interest paid      $     46,604 $    78,431  $   227,616  $    630,729

    Supplementary
     disclosure of
     non-cash investing
     activity:

      Property and
       equipment
       acquired during
       the period not
       yet paid for      $     93,594 $      6,979 $    93,594  $      6,979

SOURCE Tucows Inc.