Tucows Inc. Reports Continuing Strong Financial Results for Fourth Quarter of 2011

- Company Reports 7th Consecutive Quarter of Record Revenue -

TORONTO, Feb. 15, 2012 /CNW/ - 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 ended December 31, 2011. All figures are in U.S. dollars. 

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

	3 Months Ended   December 31,   2011 (unaudited)	3 Months Ended   December 31,   2010 (unaudited)	12 Months Ended   December 31,   2011 (unaudited)	12 Months Ended   December 31,   2010 (unaudited)
Net revenue	26,370	22,077	97,065	84,579
Income before provision for income taxes   and change in fair value of forward exchange contracts	1,745	611	3,986	1,455
Net income (loss) for the period	6,055	1,237	6,170	2,117
Net earnings (loss) per common share*	0.11	0.02	0.12	0.04
Net cash provided by operating activities	2,683	2,341	5,885	6,769

* 2011 results include a tax benefit of $0.06 per share related to the release of deferred tax asset valuation allowances.

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

	Revenue		Cost of Revenue
	3 Months Ended December 31,   2011 (unaudited)	3 Months Ended December 31,   2010 (unaudited)	3 Months Ended December 31,   2011 (unaudited)	3 Months Ended December 31,   2010 (unaudited)
OpenSRS:
Domain Service	20,743	17,308	17,347	14,565
Email Service	653	529	41	104
Other services	1,136	1,104	385	366
Total OpenSRS services	22,532	18,941	17,773	15,035
YummyNames	1,648	1,531	182	181
Hover	1,432	1,172	548	398
Butterscotch	759	433	6	9
Network, other costs	-	-	1,146	1,148
Network, depreciation and amortization costs	-	-	177	313
Total revenue/cost of revenue	26,370	22,077	19,833	17,084

"Our strong performance in the fourth quarter, highlighted by 19% year-over-year revenue growth to a record $26.4 million - our seventh consecutive quarter of record revenue - and solid cash flow from operations, concluded a year that was indicative of the consistency and reliability of our business, as well as our ability to efficiently deliver growth," said Elliot Noss, President and Chief Executive Officer, Tucows Inc.  "As a result, we also delivered our best year ever in terms of revenue at just over $97 million.  Looking ahead, this efficiency, combined with what we believe is the best distribution channel in the Internet economy, firmly positions us to continue to consistently generate cash flow, while introducing new services with minimal capital investment or impact on operating expenses. Ting, our recently launched US mobile phone service, is a testament to our capabilities in this regard."

Net revenue for the fourth quarter of 2011 increased 19% to a record $26.4 million from $22.1 million for the fourth quarter of 2010 and was driven by growth in each of the Company's business groups.

Net income for the fourth quarter of 2011 was $6.1 million, or $0.11 per share, compared with net income for the fourth quarter of 2010 of $1.2 million, or $0.02 per share. Net income per share for the fourth quarter of 2011 includes a tax benefit of $0.06 per share related to the release of deferred tax asset valuation allowances during that quarter.

Deferred revenue at the end of the fourth quarter of 2011 was $69.2 million, an increase of 11% from $62.6 million at the end of the fourth quarter of 2010 and relatively unchanged from the end of the third quarter of 2011.

Cash and cash equivalents at the end of the fourth quarter of 2011 were $6.4 million compared with $4.2 million at the end of the fourth quarter of 2010 and $4.7 million at the end of the third quarter of 2011.  The increase from the end of third quarter of 2011 is primarily the result of cash flow from operations for the fourth quarter of 2011 of $2.7 million, which was partially offset by the use of $0.7 million for repayment of the Company's credit facility and $0.2 million for investment in equipment.

As previously announced, subsequent to the end of the fourth quarter the Company completed the repurchase of 7.6 million of its shares at a purchase price of $0.77 per share for a total of $5.8 million under its modified "Dutch auction" tender announced on December 15, 2011.  Since initiating its first share buyback program in February 2007, the Company has repurchased a total of 30.8 million shares through its buyback programs, representing 40.5% of the Company's total shares outstanding at the end of January 2007.

Conference Call

Tucows management will host a conference call today, Wednesday, February 15, 2012 at 5:00 p.m. (ET) to discuss the Company's fourth quarter 2011 results. Participants can access the conference call via the Internet at www.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 48872391 followed by the pound key.  The telephone replay will be available until Wednesday, February 22, 2012 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 (http://opensrs.com) manages over eleven million domain names and millions of email boxes through a reseller network of over 12,000 web hosts and ISPs. Hover (http://hover.com) is the easiest way for individuals and small businesses to manage their domain names and email addresses. Ting.com (https://ting.com) is a mobile phone service provider dedicated to bringing clarity and control to US mobile phone users. YummyNames (http://yummynames.com) owns premium domain names that generate revenue through advertising or resale. More information can be found on Tucows' corporate website (http://tucows.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, the consistency of our business and our ability to generate cash. 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, OpenSRS, Hover, and YummyNames are registered trademarks of Tucows Inc. or its subsidiaries.

Tucows  Inc.
Consolidated Balance Sheets
(Dollar amounts in U.S. dollars)
							December 31,					December 31,
							2011					2010
							(unaudited)					(unaudited)
Assets
Current assets:
	Cash and cash equivalents					$	6,408,209				$	4,205,729
	Accounts receivable						3,880,184					3,021,995
	Inventory						205,597					-
	Prepaid expenses and deposits						3,756,308					2,363,876
	Derivative instrument asset, current portion						-					833,960
	Prepaid domain name registry and ancillary services fees, current portion						43,209,033					37,016,871
	Income taxes recoverable						867,093					620,000
		Total current assets					58,326,424					48,062,431
Derivative instrument asset, long-term portion							87,023					-
Prepaid domain name registry and ancillary services fees, long-term portion							12,600,154					12,820,479
Property and equipment							1,437,564					1,552,349
Deferred financing charges							2,300					15,600
Deferred tax asset, long-term portion							6,880,377					4,155,600
Intangible assets							17,482,590					16,883,401
Goodwill							18,873,127					17,990,807
		Total assets				$	115,689,559				$	101,480,667
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable					$	1,051,115				$	1,664,006
	Accrued liabilities						2,081,968					1,346,436
	Customer deposits						4,202,899					3,960,312
	Derivative instrument liability, current portion						781,027					-
	Loan payable, current portion						850,000					1,305,883
	Deferred revenue, current portion						52,683,546					45,832,374
	Accreditation fees payable, current portion						555,869					547,810
	Deferred tax liability, current portion						880,008					1,155,600
	Income taxes payable						158,258					-
		Total current liabilities					63,244,690					55,812,421
Derivative instrument liability, long-term portion							5,479					-
Deferred revenue, long-term portion							16,492,155					16,738,429
Accreditation fees payable, long-term portion							156,061					168,580
Deferred rent, long-term portion							26,487					-
Deferred tax liability, long-term portion							5,345,700					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; 53,497,584 shares issued and outstanding as of December 31, 2011 and 53,448,591 shares issued and outstanding as of December 31, 2010						11,358,959					11,324,866
	Additional paid-in capital						40,994,013					40,700,587
	Deficit						(21,933,985)					(28,104,216)
		Total stockholders' equity					30,418,987					23,921,237
Total liabilities and stockholders' equity						$	115,689,559				$	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 December 31,									Year ended December 31,
						2011				2010					2011				2010
					(unaudited)									(unaudited)
Net revenues					$	26,369,781			$	22,077,286				$	97,064,967			$	84,578,505
Cost of revenues:
	Cost of revenues (*)					18,509,663				15,623,360					68,088,387				58,494,849
	Network expenses					1,145,655				1,148,073					4,837,650				4,648,899
	Depreciation of property and equipment					141,494				238,000					750,455				1,032,368
	Amortization of intangible assets					35,910				74,802					85,590				299,208
		Total cost of revenues				19,832,722				17,084,235					73,762,082				64,475,324
Gross profit						6,537,059				4,993,051					23,302,885				20,103,181
Expenses:
	Sales and marketing (*)					1,778,922				1,737,526					7,442,681				7,217,754
	Technical operations and development (*)					1,216,446				1,091,180					4,868,228				4,577,898
	General and administrative (*) (note 1)					1,477,153				1,132,954					6,096,596				5,123,074
	Depreciation of property and equipment					46,449				43,285					187,005				170,844
	Loss on disposition of property and equipment					42,165				-					42,165				-
	Amortization of intangible assets					219,030				360,540					1,004,950				1,442,160
	Loss (gain) on currency forward contracts (note 1)					(838,954)				(601,263)					535,223				(872,539)
		Total expenses				3,941,211				3,764,222					20,176,848				17,659,191
Income from operations						2,595,848				1,228,829					3,126,037				2,443,990
Other income (expenses):
	Interest (expense) income, net					(11,489)				(16,385)					(50,404)				(116,197)
	Other income					-				-					374,977				-
		Total other income (expenses)				(11,489)				(16,385)					324,573				(116,197)
Income before provision for income taxes						2,584,359				1,212,444					3,450,610				2,327,793
Provision for (recovery of) income taxes						(3,470,527)				(24,260)					(2,719,621)				210,845
Net income for the year					$	6,054,886			$	1,236,704				$	6,170,231			$	2,116,948
Basic earnings per common share					$	0.11			$	0.02				$	0.12			$	0.04
Shares used in computing basic earnings per common share						53,483,508				54,203,289					53,454,675				57,982,248
Diluted earnings per common share					$	0.11			$	0.02				$	0.11			$	0.04
Shares used in computing diluted earnings per common share						55,780,131				56,294,238					55,749,433				59,955,788
(Note 1) The Company accounts for the fair value of currency forward contracts within the consolidated Balance Sheet as a derivative financial asset or liability and the corresponding change in fair value is recorded in the consolidated Statement of Operations.  In prior periods, the Company recorded the realized gain or loss upon settlement of the currency forward contracts in "General and administrative expenses" and recorded the unrealized gain or loss in "Loss (gain) on change in fair value of forward contracts".  The Company has determined that both of these amounts are more appropriately classified in expenses as "Loss (gain) on currency forward contracts" and as a result a gain of $0.3 million for the three months ended December 31, 2010 and a gain of $2.2 million for the year ended December 31, 2010 have been reclassified from "General and administrative expense" to "Loss (gain) on currency forward contracts". As a result of this reclassification, there was no change to previously reported net income (loss), income from operations, net revenues, gross profit, reported cash flows or the amounts recorded in the consolidated Balance Sheets.
(*) Stock-based compensation has been included in expenses as follows:
	Network expenses				$	5,802			$	6,647				$	22,972			$	22,406
	Sales and marketing				$	24,088			$	24,711				$	91,244			$	96,300
	Technical operations and development				$	11,862			$	19,109				$	51,984			$	71,012
	General and administrative				$	20,588			$	35,847				$	144,757			$	210,284

					Tucows  Inc.									Tucows  Inc.
					Consolidated Statements of Cash Flows									Consolidated Statements of Cash Flows
					(Dollar amounts in U.S. dollars)									(Dollar amounts in U.S. dollars)
					Three months ended December 31,									Year ended December 31,
						2011				2010					2011				2010
Cash provided by (used in):					(unaudited)									(unaudited)
Operating activities:
Net income for the period					$	6,054,886			$	1,236,704				$	6,170,231			$	2,116,948
Items not involving cash:
	Depreciation of property and equipment					187,943				281,285					937,460				1,203,212
	Loss on write off of property and equipment					42,165				-					42,165				-
	Amortization of deferred financing charges					2,200				5,300					13,300				25,400
	Amortization of intangible assets					254,940				435,342					1,090,540				1,741,368
	Deferred income taxes (recovery)					(3,028,269)				-					(3,046,669)				-
	Deferred rent					7,213				-					26,487				-
	Disposal of domain names					4,164				14,494					34,071				31,584
	(Gain) loss on change in fair value of forward exchange contracts					(924,661)				(298,321)					1,533,443				1,370,710
	Stock-based compensation					62,339				86,314					310,956				400,002
Changes in non-cash operating working capital:
	Accounts receivable					409,278				310,282					(270,594)				(199,950)
	Inventory					(205,597)				-					(205,597)				-
	Prepaid expenses and deposits					67				73,690					(923,909)				135,046
	Prepaid fees for domain name registry and ancillary services fees					(109,892)				(328,041)					(4,855,039)				(6,114,599)
	Income taxes recoverable					(579,682)				(73,000)					(261,215)				54,000
	Accounts payable					(276,156)				408,414					(611,532)				(35,210)
	Accrued liabilities					254,361				(307,613)					515,931				(571,930)
	Customer deposits					299,335				257,848					209,984				335,995
	Deferred revenue					238,245				236,335					5,179,716				6,260,225
	Accreditation fees payable					(10,058)				2,232					(4,460)				16,114
Net cash provided by operating activities						2,682,821				2,341,265					5,885,269				6,768,915
Financing activities:
	Proceeds received on exercise of stock options					17,201				-					31,346				14,809
	Repurchase of common stock					(18,442)				(2,792,301)					(18,442)				(9,707,093)
	Proceeds received on Short Swing Sale					3,659				-					3,659				-
	Repayment of loan payable					(709,722)				(478,560)					(455,883)				(1,914,242)
	Net cash used in financing activities					(707,304)				(3,270,861)					(439,320)				(11,606,526)
Investing activities:
	Additions to property and equipment					(221,073)				(296,264)					(851,008)				(589,054)
	Acquisition of EPAG Domainservices GMBH, net of cash acquired					-				-					(2,392,461)				-
	Net cash used in investing activities					(221,073)				(296,264)					(3,243,469)				(589,054)
Increase (decrease) in cash and cash equivalents						1,754,444				(1,225,860)					2,202,480				(5,426,665)
Cash and cash equivalents, beginning of year						4,653,765				5,431,589					4,205,729				9,632,394
Cash and cash equivalents, end of year					$	6,408,209			$	4,205,729				$	6,408,209			$	4,205,729
Supplemental cash flow information:
	Interest paid				$	13,969			$	16,444				$	53,166			$	116,242
Supplementary disclosure of non-cash investing activity:
	Property and equipment acquired during the period not yet paid for				$	257,967			$	273,333				$	257,967			$	273,333

 

Lawrence Chamberlain
TMX Equicom for Tucows Inc.
[phone] ext. 257
[email protected]