Tucows Reports Continuing Strong Financial Results for Second Quarter of 2012

- Company Achieves Ninth Consecutive Quarter of Record Revenue -

TORONTO, Aug. 13, 2012 /CNW/ - Tucows Inc. (NYSE AMEX:TCX) (TSX:TC), a global provider of domain names and other Internet services, today reported its financial results for the second quarter ended June 30, 2012. All figures are in U.S. dollars. 

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

	3 Months Ended  June 30, 2012  (unaudited)	3 Months Ended  June 30, 2011  (unaudited)	6 Months Ended  June 30, 2012  (unaudited)	6 Months Ended  June 30, 2011  (unaudited)
Net revenue	28,153	23,046	55,690	45,601
Income before provision for income taxes and change   in fair value of forward exchange contracts	1,409	638	3,359	1,151
Net income for the period	696	566	2,360	1,294
Net earnings per common share	0.02	0.01	0.05	0.02
Net cash provided by operating activities	4	825	2,084	1,587

Summary of Revenues and Cost of Revenues
(In Thousands of US Dollars)

	Revenue		Cost of Revenue
	3 Months Ended  June 30, 2012  (unaudited)	3 Months Ended  June 30, 2011  (unaudited)	3 Months Ended  June 30, 2012  (unaudited)	3 Months Ended  June 30, 2011  (unaudited)
Wholesale
Domain Service	21,668	18,220	18,011	15,101
Value-Added Services	2,589	2,208	537	507
Total Wholesale	24,257	20,428	18,548	15,608
Retail	2,298	1,278	1,357	419
Portfolio	1,598	1,340	216	198
Network, other costs	-		1,214	1,235
Network, depreciation and amortization costs	-		192	220
Total revenue/cost of revenue	28,153	23,046	21,526	17,680

NOTE: Beginning in the first quarter of 2012, Tucows reclassified its revenue streams into three distinct service offerings: Wholesale, Retail and Portfolio¹. The realignment is intended to better reflect the manner in which these revenue streams are generated and assessed by management.

"The second quarter was our ninth consecutive quarter of record revenue, up 22% year-over-year," said Elliot Noss, President and Chief Executive Officer, Tucows Inc. "Our strong performance was driven by meaningful growth in each of our three service categories. Wholesale continues to benefit from new service introductions and customer wins. Retail continues to grow as a result of our relentless focus on customer experience. Our Portfolio is providing predictable revenue streams with strong inventory sales."

Mr. Noss continued, "With this kind of consistency in our performance and leverage in our business model, plus promising new opportunities on the horizon like gTLDs and Ting, Tucows is well positioned to deliver continued growth and to return capital to shareholders over the long term."

Net revenue for the second quarter of 2012 increased 22% to a record $28.2 million from $23.0 million for the second quarter of 2011 and was driven by growth in each of the Company's three service categories.

Net income for the second quarter of 2012 was $0.7 million, or $0.02 per share, compared with net income for the second quarter of 2011 of $0.6 million, or $0.01 per share.

Deferred revenue at the end of the second quarter of 2012 was $74.5 million, an increase of 12% from $66.8 million at the end of the second quarter of 2011 and an increase of 2% from $73.0 at the end of the first quarter of 2012.

Cash and cash equivalents at the end of the second quarter of 2012 were $4.5 million compared with $6.4 million at the end of the first quarter of 2012 and relatively unchanged from the end of the second quarter of 2011.  During the second quarter of 2012, the Company generated cash flow from operations of $4,000 compared with $825,000 for the same quarter of 2011. Cash flow from operations during the second quarter of 2012 was impacted by the Company investing $1.1 million in applications to own and operate six new gTLD registries under ICANN's new gTLD program. In addition, the Company used $1.6 million for the repurchase of stock under its ongoing normal course issuer bid, $0.3 million for principal repayments under its credit facility and invested $0.2 million in equipment purchases.

¹Service Offerings:  Wholesale, primarily branded as OpenSRS, is composed of revenue generated by the OpenSRS Domain Service and Other Value-Added Services, including hosted email, SSL and other trust certificates, bulk sale of domain names and advertising from the OpenSRS Domain Expiry Stream, web publishing tools, mobile phone services, third-party marketing funds, and billing software for ISPs.  Retail is primarily composed of services to individuals and small businesses, including Hover, which generates revenue from the sale of domain name registration and email, and Ting, which generates revenue from mobile phone services. Portfolio includes revenue generated by the resale of names from the domain name portfolio and advertising revenue from the Company's domain name portfolio and two large advertising-supported websites.

Conference Call

Tucows management will host a conference call today, Monday, August 13, 2012 at 5:00 p.m. (ET) to discuss the Company's second quarter 2012 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 99525100 followed by the pound key.  The telephone replay will be available until Monday, August 20, 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 twelve million domain names and millions of value-added services 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 and operates 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 and the impact of our consistent growth and leverage. 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, Ting, and YummyNames are registered trademarks of Tucows Inc. or its subsidiaries.

Tucows  Inc.
Consolidated Balance Sheets
(Dollar amounts in U.S. dollars)
					June 30,				December 31,
					2012				2011
					(unaudited)				(unaudited)
Assets
Current assets:
	Cash and cash equivalents				$	4,511,561			$	6,408,209
	Accounts receivable					4,917,015				3,880,184
	Prepaid expenses and deposits					5,853,373				3,961,905
	Derivative instrument asset, current portion					97,718				-
	Prepaid domain name registry and ancillary services fees, current portion					47,001,530				43,209,033
	Income taxes recoverable					634,661				867,093
	Total current assets					63,015,858				58,326,424
Derivative instrument asset, long-term portion						-				87,023
Prepaid domain name registry and ancillary services fees, long-term portion						13,105,851				12,600,154
Property and equipment						1,330,274				1,437,564
Deferred financing charges						100				2,300
Deferred tax asset, long-term portion						6,743,137				6,880,377
Intangible assets						16,953,335				17,482,590
Goodwill						18,873,127				18,873,127
	Total assets				$	120,021,682			$	115,689,559
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable				$	1,547,897			$	1,051,115
	Accrued liabilities					2,498,804				2,081,968
	Customer deposits					4,268,497				4,202,899
	Derivative instrument liability, current portion					340,835				781,027
	Loan payable, current portion					4,000,000				850,000
	Deferred revenue, current portion					57,441,960				52,683,546
	Accreditation fees payable, current portion					585,155				555,869
	Deferred tax liability, current portion					903,510				880,008
	Income taxes payable					166,407				158,258
	Total current liabilities					71,753,065				63,244,690
Derivative instrument liability, long-term portion						-				5,479
Deferred revenue, long-term portion						17,018,389				16,492,155
Accreditation fees payable, long-term portion						151,954				156,061
Deferred rent, long-term portion						39,687				26,487
Deferred tax liability, long-term portion						5,289,900				5,345,700
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; 45,484,997 shares issued and outstanding as of June 30, 2012 and 53,497,584 shares issued and outstanding as of December 31, 2011					10,233,628				11,358,959
	Additional paid-in capital					35,109,427				40,994,013
	Deficit					(19,574,368)				(21,933,985)
	Total stockholders' equity					25,768,687				30,418,987
Total liabilities and stockholders' equity					$	120,021,682			$	115,689,559

Tucows  Inc.
Consolidated Statements of Operations
(Dollar amounts in U.S. dollars)
							Three months ended June 30,										Six months ended June 30,
							2012					2011					2012					2011
							(unaudited)										(unaudited)
Net revenues							$		28,152,614					23,045,923			$		55,689,920			$		45,601,130
Cost of revenues:
	Cost of revenues								20,120,211					16,224,936					39,387,336					31,920,076
	Network expenses (*)								1,213,864					1,235,498					2,470,754					2,498,326
	Depreciation of property and equipment								155,638					213,089					303,056					449,770
	Amortization of intangible assets								35,910					6,430					71,820					25,720
	Total cost of revenues								21,525,623					17,679,953					42,232,966					34,893,892
Gross profit									6,626,991					5,365,970					13,456,954					10,707,238
Expenses:
	Sales and marketing (*)								2,065,729					1,771,971					4,250,364					3,796,674
	Technical operations and development (*)								1,105,575					1,231,593					2,218,720					2,430,829
	General and administrative (*) (note 1)								1,748,402					1,443,773					3,531,855					3,007,547
	Depreciation of property and equipment								45,522					45,495					92,937					91,682
	Amortization of intangible assets								219,030					277,750					438,060					584,740
	Loss (gain) on currency forward contracts (note 1)								383,838					(117,229)					(178,271)					(471,373)
	Total expenses								5,568,096					4,653,353					10,353,665					9,440,099
Income from operations									1,058,895					712,617					3,103,289					1,267,139
Other income (expenses):
	Interest (expense) income, net								(54,513)					(8,657)					(95,482)					(20,197)
	Other income								20,911					51,648					529,711					374,977
	Total other income (expenses)								(33,602)					42,991					434,229					354,780
Income before provision for income taxes									1,025,293					755,608					3,537,518					1,621,919
Provision for income taxes									329,295					189,949					1,177,901					328,314
Net income and comprehensive income for the period							$		695,998			$		565,659			$		2,359,617			$		1,293,605
Basic earnings per common share							$		0.02			$		0.01			$		0.05			$		0.02
Shares used in computing basic earnings per common share									45,912,459					53,444,841					47,003,016					53,441,276
Diluted earnings per common share							$		0.01			$		0.01			$		0.05			$		0.02
Shares used in computing diluted earnings per common share									49,449,430					55,796,435					50,203,163					55,784,998
(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 June 30, 2011 and a gain of $0.8 million for the six months ended June 30, 2011, has been reclassified from "General and administrative expense" to "Loss (gain) on currency forward contracts" respectively. 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						$		6,329			$		5,349			$		12,375			$		11,362
	Sales and marketing						$		20,149			$		19,127			$		42,931			$		44,460
	Technical operations and development						$		15,047			$		11,394			$		27,890			$		27,102
	General and administrative						$		21,571			$		17,529			$		42,365			$		44,805

Tucows Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in U.S. dollars)
								Three months ended June 30,										Six months ended June 30,
								2012					2011					2012					2011
Cash provided by (used in):								(unaudited)										(unaudited)
Operating activities:
	Net income for the period							$		695,998			$		565,659			$		2,359,617			$		1,293,605
	Items not involving cash:
		Depreciation of property and equipment								201,160					258,584					395,993					541,452
		Amortization of deferred financing charges								700					3,700					2,200					8,100
		Amortization of intangible assets								254,940					284,180					509,880					610,460
		Deferred income taxes								(107,146)					-					104,942					-
		Deferred rent								5,931					7,019					13,200					13,964
		Acquisition of domain names								-					-					(3,664)					-
		Disposal of domain names								7,301					7,896					23,039					21,091
		Gain on disposition of intangible assets								-					-					(508,800)					-
		(Gain) loss on currency forward contracts								245,477					193,157					(456,366)					305,861
		Stock-based compensation								63,096					53,399					125,561					127,730
	Changes in non-cash operating working capital:
		Accounts receivable								(22,102)					104,241					(1,036,831)					(1,128,564)
		Prepaid expenses and deposits								(783,370)					(702,002)					(1,891,468)					(1,223,649)
		Prepaid fees for domain name registry and ancillary services fees								(1,378,771)					(1,749,343)					(4,298,194)					(3,749,582)
		Income taxes recoverable/payable								(378,492)					25,000					240,581					160,000
		Accounts payable								(308,892)					(50,074)					605,077					203,823
		Accrued liabilities								255,254					65,095					524,165					381,567
		Customer deposits								(191,402)					(166,270)					65,598					(257,703)
		Deferred revenue								1,460,816					1,938,868					5,284,648					4,257,267
		Accreditation fees payable								(16,775)					(14,391)					25,179					21,792
	Net cash provided by operating activities									3,723					824,718					2,084,357					1,587,214
Financing activities:
	Proceeds received on exercise of stock options									219,000					-					349,712					3,460
	Repurchase of common stock									(1,591,743)					-					(7,485,190)					-
	Proceeds received on loan payable									-					-					4,000,000					-
	Repayment of loan payable									(311,667)					(478,560)					(850,000)					(957,121)
	Net cash used in financing activities									(1,684,410)					(478,560)					(3,985,478)					(953,661)
Investing activities:
	Additions to property and equipment									(174,054)					(162,068)					(504,327)					(491,026)
	Proceeds on disposition of intangible assets									-					-					508,800					-
	Net cash provided by (used in) investing activities									(174,054)					(162,068)					4,473					(491,026)
(Decrease) increase in cash and cash equivalents										(1,854,741)					184,090					(1,896,648)					142,527
Cash and cash equivalents, beginning of period										6,366,302					4,164,166					6,408,209					4,205,729
Cash and cash equivalents, end of period								$		4,511,561			$		4,348,256			$		4,511,561			$		4,348,256
Supplemental cash flow information:
	Interest paid							$		54,655			$		8,718			$		95,831			$		20,307
Supplementary disclosure of non-cash investing activity:
	Property and equipment acquired during the period not yet paid for							$		42,343			$		67,068			$		42,343			$		67,068

 

 

 

 

SOURCE: Tucows Inc.

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