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Tucows Inc. reports financial results for second quarter of 2011
Aug 10, 2011 (04:08 PM EDT)


TORONTO, Aug. 10, 2011 /PRNewswire/ - 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 second quarter ended June 30, 2011. All figures are in U.S. dollars. 

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

  3 Months Ended June 30, 2011 (unaudited) 3 Months Ended June 30, 2010 (unaudited) 6 Months Ended June 30, 2011 (unaudited) 6 Months Ended June 30, 2010 (unaudited)
Net revenue 23,046 20,847 45,601 41,292
Net income (loss) for the period 566 (772) 1,294 (203)
Net earnings (loss) per common share 0.01 (0.01) 0.02 0.00
Net cash provided by operating activities 825 1,173 1,587 2,552

Summary of Revenues and Cost of Revenues
(Numbers in Thousands of US Dollars)

  Revenue Cost of Revenue
  3 Months Ended June 30, 2011 (unaudited) 3 Months Ended June 30, 2010 (unaudited) 3 Months Ended June 30, 2011 (unaudited) 3 Months Ended June 30, 2010 (unaudited)
OpenSRS:        
Domain Service 18,220 15,749 15,101 13,090
Email Service 629 581 94 117
Other services 1,238 1,085 400 400
Total OpenSRS services 20,087 17,415 15,595 13,607
         
YummyNames 1,295 1,632 207 254
Hover 1,278 1,111 419 350
Butterscotch 386 689 4 25
         
Network, other costs - - 1,235 1,220
Network, depreciation and amortization costs - - 220 328
Total revenue/cost of revenue 23,046 20,847 17,680 15,784

"Our financial results are once again demonstrative of the consistency and reliability in our business, within the context of growth," said Elliot Noss, President and CEO of Tucows. "Revenue grew by almost 11% year-over-year to a record $23 million and we again generated solid cash flow from operations. The OpenSRS Domain Service was especially strong with year-over-year growth in transaction volumes of 15% to more than 2 million registrations, the second consecutive quarter we have exceeded this threshold.  At the same time, our ability to improve operating efficiencies has enabled us to mitigate the unfavorable impact of the stronger Canadian dollar. With what we believe is the best distribution channel in the Internet economy, we remain well positioned to consistently generate cash flow from operations while launching new services with minimal impact on operating expenses."

Net revenue for the second quarter of 2011 increased 10.6% to $23.0 million from $20.8 million for the second quarter of 2010.

Net income for the second quarter of 2011 was $0.6 million, or $0.01 per share, compared with a loss of $0.8 million, or $0.01 per share, for the second quarter of 2010. As a result of a significant proportion of the Company's expenses being incurred in Canadian dollars, net income was dampened by the strength of the Canadian dollar, which was on average 6% higher relative to U.S. dollar in the second quarter of 2011 compared with the second quarter of 2010. The Company has been able to mitigate some of the impact of the stronger Canadian dollar through its currency hedging strategy, as well as improved operating efficiencies.

Deferred revenue at the end of the second quarter of 2011 was $66.8 million, an increase of 11.3% from $60.0 million at the end of the second quarter of 2010 and an increase of 3.0% from $64.9 million at the end of the first quarter of 2011.

Cash and cash equivalents at the end of the second quarter of 2011 were $4.3 million compared with $4.1 million at the end of the second quarter of 2010 and $4.2 million at the end of first quarter of 2011. Cash flow from operating activities of $0.8 million in the second quarter of 2011 was partially offset by the use of $0.5 million for repayment of the Company's bank loan and $0.2 million for investment in equipment.

Subsequent to the end of the quarter, Tucows announced that it had acquired all the shares of EPAG Domainservices GmbH from QSC AG for approximately US$2.5 Million (€1.5 Million to purchase the shares and the settlement of a working capital adjustment of €0.25 Million) through an all-cash transaction. EPAG, based in Bonn, Germany, is an ICANN-accredited registrar with over 400,000 domains under management and is notable for offering over 200 Top Level Domains (TLDs). Tucows plans to continue serving EPAG customers and resellers via existing EPAG tools and will also integrate EPAG's domain services into its own OpenSRS wholesale domain registration service. This acquisition further strengthens OpenSRS' position as a leader in wholesale domain registration and extends its commitment to providing broad TLD coverage to its resellers. With this acquisition OpenSRS will now manage over 11.5 million domain names and by the end of the year OpenSRS resellers will have access to over 200 TLDs.

Conference Call

Tucows management will host a conference call today, Wednesday, August 10, 2011, at 5:00 p.m. (ET) to discuss it's the Company's second quarter 2011 results. Participants can access the conference call via the Internet at 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 1-855-859-2056 and enter the pass code 87493993 followed by the pound key. The telephone replay will be available until Wednesday, August 17, 2011 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 eleven million domain names and millions of email boxes through a reseller network of over 12,000 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 Downloads.  More information can be found at http://tucowsinc.com

This release includes forward-looking statements as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995. In particular, this release includes forward looking statements regarding our expectations as to our financial results, our future growth and our ability to generate cash and return capital to shareholders. 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 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.

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)  
 
 
 
 
 
 
 
 
         
 
 
 
 
June 30,
2011
 
 
December 31,
2010
    (unaudited)   (unaudited)
         
Assets        
         
Current assets:        
  Cash and cash equivalents   $ 4,348,256   $ 4,205,729
  Accounts receivable   4,150,559   3,021,995
  Prepaid expenses and deposits   3,587,525   2,363,876
  Derivative instrument asset, current portion   533,852   833,960
  Prepaid domain name registry and ancillary services fees, current portion   40,818,212   37,016,871
  Income taxes recoverable   460,000   620,000
     Total current assets   53,898,404   48,062,431
         
Prepaid domain name registry and ancillary services fees, long-term portion   12,768,720   12,820,479
Property and equipment   1,295,658   1,552,349
Deferred financing charges   7,500   15,600
Deferred tax asset, long-term portion   4,245,000   4,155,600
Intangible assets   16,251,850   16,883,401
Goodwill   17,990,807   17,990,807
     Total assets   $ 106,457,939   $ 101,480,667
         
         
Liabilities and Stockholders' Equity        
         
Current liabilities:        
  Accounts payable   $ 1,689,950   $ 1,664,006
  Accrued liabilities   1,699,617   1,346,436
  Customer deposits   3,702,609   3,960,312
  Derivative instrument liability current portion   5,753   -
  Loan payable, current portion   348,762   1,305,883
  Deferred revenue, current portion   50,121,286   45,832,374
  Accreditation fees payable, current portion   574,637   547,810
  Deferred tax liability, current portion   1,245,000   1,155,600
     Total current liabilities   59,387,614   55,812,421
         
Deferred revenue, long-term portion   16,706,784   16,738,429
Accreditation fees payable, long-term portion   163,545   168,580
Deferred rent, long-term portion   13,964   -
Deferred tax liability, long-term portion   4,840,000   4,840,000
         
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; 53,455,391 shares issued and outstanding as of June 30, 2011 and 53,448,591 shares issued and outstanding as of December 31, 2010   11,331,134   11,324,866
  Additional paid-in capital   40,825,509   40,700,587
  Deficit   (26,810,611)   (28,104,216)
     Total stockholders' equity   25,346,032   23,921,237
Total liabilities and stockholders' equity   $ 106,457,939   $ 101,480,667

      Tucows  Inc.       Tucows  Inc.  
      Consolidated Statements of Operations       Consolidated Statements of Operations  
      (Dollar amounts in U.S. dollars)       (Dollar amounts in U.S. dollars)  
                 
      Three months ended June 30,       Six months ended June 30,  
    2011   2010   2011   2010
      (unaudited)       (unaudited)  
                 
Net revenues $ 23,045,923 $ 20,846,598 $ 45,601,130 $ 41,291,751
                 
Cost of revenues:                
  Cost of revenues (*)   16,224,936   14,236,414   31,920,076   27,967,964
  Network expenses   1,235,498   1,219,572   2,498,326   2,412,896
  Depreciation of property and equipment   213,089   253,057   449,770   563,115
  Amortization of intangible assets   6,430   74,802   25,720   149,604
     Total cost of revenues   17,679,953   15,783,845   34,893,892   31,093,579
                 
Gross profit   5,365,970   5,062,753   10,707,238   10,198,172
                 
Expenses:                
  Sales and marketing (*)   1,771,971   1,786,893   3,796,674   3,649,229
  Technical operations and development (*)   1,231,593   1,189,937   2,430,829   2,432,950
  General and administrative (*)   1,133,387   600,776   2,230,313   1,416,356
  Depreciation of property and equipment   45,495   43,431   91,682   87,320
  Amortization of intangible assets   277,750   360,540   584,740   721,080
  Loss on change in fair value of forward exchange contracts   193,157   1,924,985   305,861   1,811,012
     Total expenses   4,653,353   5,906,562   9,440,099   10,117,947
                 
Income (loss) from operations   712,617   (843,809)   1,267,139   80,225
                 
Other income (expenses):                
  Interest (expense) income, net   (8,657)   (33,727)   (20,197)   (72,895)
  Other income   51,648   -   374,977   -
     Total other income (expenses)   42,991   (33,727)   354,780   (72,895)
                 
Income before provision for income taxes   755,608   (877,536)   1,621,919   7,330
                 
Provision for income taxes   189,949   (105,758)   328,314   210,242
Net income (loss) for the period $ 565,659 $ (771,778) $ 1,293,605 $ (202,912)
                 
                 
Basic earnings (loss) per common share $ 0.01 $ (0.01) $ 0.02 $ -
                 
Shares used in computing basic earnings (loss) per common share   53,444,841   59,193,180   53,441,276   60,223,815
                 
Diluted earnings (loss) per common share $ 0.01 $ (0.01) $ 0.02 $ -
                 
Shares used in computing diluted earnings (loss) per common share   55,796,435   59,193,180   55,784,998   60,223,815
                 
                 
(*) Stock-based compensation has been included in expenses as follows:                
     Network expenses $ 5,349 $ 5,574 $ 11,362 $ 9,202
     Sales and marketing $ 19,127 $ 25,545 $ 44,460 $ 41,231
     Technical operations and development $ 11,394 $ 18,264 $ 27,102 $ 32,845
     General and administrative $ 17,529 $ 51,890 $ 44,806 $ 74,624

 
 
 
 
 
 
 
 
  Tucows  Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in U.S. dollars)  
 
 
 
 
 
 
 
  Tucows  Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in U.S. dollars)  
 
 
                 
      Three months ended June 30,       Six months ended June 30,  
    2011   2010   2011   2010
Cash provided by (used in):     (unaudited)       (unaudited)  
Operating activities:                
  Net income (loss) for the period $ 565,659 $ (771,778) $ 1,293,605 $ (202,912)
  Items not involving cash:                
    Depreciation of property and equipment   258,584   296,488   541,452   650,435
    Amortization of deferred financing charges   3,700   6,700   8,100   14,100
    Amortization of intangible assets   284,180   435,342   610,460   870,684
    Deferred rent   7,019     13,964  
    Disposal of domain names   7,896   4,434   21,091   12,006
    Unrealized loss in the fair value of forward contracts   193,157   1,924,985   305,861   1,811,012
    Stock-based compensation   53,399   101,273   127,730   157,902
  Changes in non-cash operating working capital:                
    Accounts receivable   104,241   311,895   (1,128,564)   (563,605)
    Prepaid expenses and deposits   (702,002)   (66,785)   (1,223,649)   (428,487)
    Prepaid fees for domain name registry and ancillary services fees   (1,749,343)   (815,103)   (3,749,582)   (3,430,672)
    Income taxes recoverable   25,000   (24,000)   160,000   292,000
    Accounts payable   (50,074)   (385,999)   203,823   (199,430)
    Accrued liabilities   65,095   94,120   381,567   (32,684)
    Customer deposits   (166,270)   (433,559)   (257,703)   (162,760)
    Deferred revenue   1,938,868   531,558   4,257,267   3,736,151
    Accreditation fees payable   (14,391)   (36,080)   21,792   28,317
  Net cash provided by operating activities   824,718   1,173,491   1,587,214   2,552,057
                 
Financing activities:                
  Proceeds received on exercise of stock options     10,308   3,460   14,809
  Repurchase of common stock     (1,702,520)     (6,914,792)
  Repayment of loan payable   (478,560)   (478,560)   (957,121)   (957,121)
  Net cash used in financing activities   (478,560)   (2,170,772)   (953,661)   (7,857,104)
                 
Investing activities:                
  Additions to property and equipment   (162,068)   (116,947)   (491,026)   (259,679)
  Net cash used in investing activities   (162,068)   (116,947)   (491,026)   (259,679)
                 
Increase (decrease) in cash and cash equivalents   184,090   (1,114,228)   142,527   (5,564,726)
                 
Cash and cash equivalents, beginning of period   4,164,166   5,181,896   4,205,729   9,632,394
Cash and cash equivalents, end of period $ 4,348,256 $ 4,067,668 $ 4,348,256 $ 4,067,668
                 
Supplemental cash flow information:                
  Interest paid $ 8,718 $ 33,521 $ 20,307 $ 72,797
                 
Supplementary disclosure of non-cash investing activity:                
  Property and equipment acquired during the period not yet paid for $ 67,068 $ 6,687 $ 67,068 $ 6,687

SOURCE Tucows Inc.