Tucows Reports Financial Results for the Third Quarter of 2013

- Company Achieves Fourteenth Consecutive Quarter of Record Revenue/Ting Continues Strong Momentum -

TORONTO, Nov. 13, 2013 /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 third quarter ended September 30, 2013. All figures are in U.S. dollars.

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

	3 Months  Ended Sept.  30, 2013 (unaudited)	3 Months  Ended Sept.  30, 2012 (unaudited)	9 Months  Ended Sept.  30, 2013 (unaudited)	9 Months  Ended Sept.  30, 2012 (unaudited)
Net revenue	35,637	29,246	96,795	84,936
Income before provision for income taxes and change in fair value of forward exchange contracts	3,565	1,597	4,944	4,956
Net income	2,593	1,635	3,258	3,995
Net earnings per common share	$0.06	$0.04	$0.08	$0.09
Net cash provided by operating activities	3,664	2,237	7,052	4,321

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

	Revenue		Cost of Revenue
	3 Months Ended  Sept. 30, 2013 (unaudited)	3 Months Ended  Sept. 30, 2012 (unaudited)	3 Months Ended  Sept. 30, 2013 (unaudited)	3 Months Ended  Sept. 30, 2012 (unaudited)
Wholesale
Domain Services	22,003	22,268	18,581	18,645
Value-Added Services	2,606	2,603	484	532
Total Wholesale	24,609	24,871	19,065	19,177
Retail	6,861	2,965	4,543	2,064
Portfolio ^(1)	4,167	1,410	661	205
Network, other costs	-	-	1,193	1,159
Network, depreciation and amortization costs	-	-	176	193
Total revenue/cost of revenue	35,637	29,246	25,638	22,798

(1)  Portfolio revenue includes the net amounts received from the previously announced confidential arrangements related to the
Company's withdrawal of its applications under the ICANN New gTLD Program for .media and .marketing. The Company continues
to be involved in the ICANN new gTLD Program and holds a minority interest in the contested .online, .group, .tech and .store strings.

"Our financial results for the third quarter were once again demonstrative of the consistency and reliability in our business, alongside our ability to generate growth, as we delivered our fourteenth consecutive quarter of record revenue, driven by solid performance across our business," said Elliot Noss, President and Chief Executive Officer, Tucows Inc. "Each of our Wholesale, Hover and Portfolio businesses continue to perform well."

"Ting saw another quarter of tremendous customer growth, adding 11,000 accounts and 16,000 devices during the quarter, to bring these totals to 36,000 accounts and 56,000 devices at the end of September.  Importantly, we are consistently delivering on our commitment to the very highest levels of customer service, while maintaining our low customer acquisition costs and continuing to generate attractive gross margin.  All of this continues to position Ting to achieve breakeven during the fourth quarter this year."

Net revenue for the third quarter of 2013 increased 22% to a record $35.6 million from $29.2 million for the third quarter of 2012.

Net income for the third quarter of 2013 was $2.6 million, or $0.06 per share, compared with $1.6 million, or $0.04 per share, for the third quarter of 2012.  Net income for the third quarter of 2013 included the benefit of the previously announced confidential arrangements related to the Company's withdrawal of its applications under the ICANN New gTLD Program for .media and .marketing.  Net income for the third quarter included a gain on foreign exchange contracts of $28,000 compared with a gain on foreign exchange contracts of $0.6 million in the third quarter of 2012.  Net income for the third quarter of 2013 also included the incremental investment of approximately $1.2 million made during the quarter for the acquisition and support of Ting customers.

Deferred revenue at the end of the third quarter of 2013 was $72.0 million, a decrease of 2% from $73.3 million at the end of the third quarter of 2012 and a decrease of 1% from $73.0 million at the end of the second quarter of 2013.

Cash and cash equivalents at the end of the third quarter of 2013 were $11.5 million compared with $6.5 million at the end of the second quarter of 2013 and $5.0 million at the end of the third quarter of 2012.  The increase in cash and cash equivalents of $5.0 million when compared to the second quarter of 2013 resulted from the generation of $3.7 million in cash flow from operations and the receipt of $2.2 million from the exercise of stock options.  These were partially offset by the use of $0.6 million for principal repayments under the Company's credit facility and investment of $0.2 million in equipment purchases.

Conference Call

Tucows management will host a conference call today, Wednesday, November 13, 2013 at 5:00 p.m. (ET) to discuss the Company's third quarter 2013 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 91095919 followed by the pound key.  The telephone replay will be available until Wednesday, November 20, 2013 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 fourteen million domain names and millions of value-added services through a reseller network of over 13,000 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).

Tucows  Inc.
Consolidated Balance Sheets
(Dollar amounts in U.S. dollars)
						September 30,			December 31,
						2013			2012
						(unaudited)			(unaudited)
Assets
Current assets:
	Cash and cash equivalents					$	11,549,948		$	6,415,679
	Accounts receivable						4,869,466			4,413,265
	Inventory						338,110			587,104
	Prepaid expenses and deposits						4,241,402			5,081,408
	Derivative instrument asset, current portion						258,188			412,944
	Prepaid domain name registry and ancillary services fees, current portion						45,801,683			45,170,167
	Deferred tax asset, current portion						672,175			-
	Income taxes recoverable						311,470			1,730,631
		Total current assets					68,042,442			63,811,198
Derivative instrument asset, long-term portion							208,221			31,838
Prepaid domain name registry and ancillary services fees, long-term portion							12,031,926			12,318,723
Property and equipment							1,833,258			1,352,144
Deferred tax asset, long-term portion							5,417,075			5,970,462
Intangible assets							15,630,479			16,415,651
Goodwill							18,873,127			18,873,127
		Total assets				$	122,036,528		$	118,773,143
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable					$	2,631,198		$	1,928,459
	Accrued liabilities						3,187,213			2,522,229
	Customer deposits						4,072,325			4,955,671
	Derivative instrument liability, current portion						310,865			-
	Loan payable, current portion						6,900,000			3,700,000
	Deferred revenue, current portion						56,188,897			54,997,887
	Accreditation fees payable, current portion						497,404			512,847
	Deferred tax liability, current portion						-			914,429
	Income taxes payable						923,280			1,255,108
		Total current liabilities					74,711,182			70,786,630
Deferred revenue, long-term portion							15,801,411			16,002,464
Accreditation fees payable, long-term portion							137,117			145,592
Deferred rent, long-term portion							71,898			54,150
Deferred tax liability, long-term portion							5,158,000			5,234,100
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; 43,576,861 shares issued and outstanding as of September 30, 2013 and 44,322,159 shares issued and outstanding as of December 31, 2012						11,797,362			10,084,417
	Additional paid-in capital						28,520,120			33,931,529
	Deficit						(14,252,274)			(17,509,843)
	Accumulated other comprehensive income (loss)						91,712			44,104
		Total stockholders' equity					26,156,920			26,550,207
Total liabilities and stockholders' equity						$	122,036,528		$	118,773,143

 

				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 September 30,				Nine months ended September 30,
				2013		2012		2013		2012
				(unaudited)				(unaudited)
Net revenues			$	35,637,085	$	29,246,069	$	96,795,464	$	84,935,989
Cost of revenues:
	Cost of revenues			24,268,961		21,446,084		69,354,366		60,833,420
	Network expenses (*)			1,192,450		1,158,885		3,716,471		3,629,639
	Depreciation of property and equipment			164,283		157,203		452,711		460,259
	Amortization of intangible assets			11,970		35,910		83,790		107,730
		Total cost of revenues		25,637,664		22,798,082		73,607,338		65,031,048
Gross profit				9,999,421		6,447,987		23,188,126		19,904,941
Expenses:
	Sales and marketing (*)			2,998,419		2,037,338		8,792,091		6,287,702
	Technical operations and development (*)			1,215,327		1,010,949		3,097,294		3,229,669
	General and administrative (*) (note 1)			1,869,668		1,486,323		5,266,997		5,018,178
	Depreciation of property and equipment			52,972		46,981		158,833		139,918
	Amortization of intangible assets			219,030		219,030		657,090		657,090
	Loss (gain) on currency forward contracts (note 1)			(28,068)		(615,245)		353,209		(793,516)
		Total expenses		6,327,348		4,185,376		18,325,514		14,539,041
Income from operations				3,672,073		2,262,611		4,862,612		5,365,900
Other income (expenses):
	Interest expense, net			(78,966)		(50,228)		(271,756)		(145,710)
	Other income			-		-		-		529,711
		Total other income (expenses)		(78,966)		(50,228)		(271,756)		384,001
Income before provision for income taxes				3,593,107		2,212,383		4,590,856		5,749,901
Provision for income taxes				999,747		577,383		1,333,287		1,755,284
Net income				2,593,360		1,635,000		3,257,569		3,994,617
Other comprehensiveinc, net of tax of $257,505 for the three months ended September 30, 2013 and $24,800 for the nine months ended September 30, 2013				494,334		-		47,608		-
Comprehensive income (loss) for the period			$	3,087,694	$	1,635,000	$	3,305,177	$	3,994,617
Basic earnings per common share			$	0.06	$	0.04	$	0.08	$	0.09
Shares used in computing basic earnings per common share				43,183,583		45,094,678		41,289,876		43,362,261
Diluted earnings per common share			$	0.06	$	0.03	$	0.07	$	0.08
Shares used in computing diluted earnings per common share				45,639,900		48,411,429		44,749,232		49,603,870
(*) Stock-based compensation has been included in expenses as follows:
	Network expenses		$	8,755	$	5,979	$	22,813	$	18,354
	Sales and marketing		$	32,681	$	24,116	$	93,000	$	67,047
	Technical operations and development		$	21,549	$	15,600	$	57,166	$	43,490
	General and administrative		$	99,801	$	120,676	$	155,904	$	163,041

 

				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 September 30,				Nine months ended September 30,
				2013		2012		2013		2012
Cash provided by:				(unaudited)				(unaudited)
Operating activities:
	Net income for the period		$	2,593,360	$	1,635,000	$	3,257,569	$	3,994,617
	Items not involving cash:
		Depreciation of property and equipment		217,255		204,184		611,544		600,177
		Amortization of deferred financing charges		-		100		-		2,300
		Amortization of intangible assets		231,000		254,940		740,880		764,820
		Deferred income taxes (recovery)		(99,786)		228,169		(78,103)		333,111
		Excess tax benefits on share-based compensation expense		(1,056,014)				(1,056,014)
		Deferred rent		7,872		8,258		17,748		21,458
		Acquisition of domain names		-		-		-		(3,664)
		Disposal of domain names		8,923		15,142		44,292		38,181
		Gain on disposition of intangible assets		-		-		-		(508,800)
		(Gain) loss on change in the fair value of forward contracts		(204,341)		(698,781)		361,646		(1,155,147)
		Stock-based compensation		162,786		166,371		328,883		291,932
	Changes in non-cash operating working capital:
		Accounts receivable		758,089		90,239		(456,201)		(946,592)
		Inventory		(150,686)		-		248,994		-
		Prepaid expenses and deposits		543,111		636,756		840,006		(1,254,712)
		Prepaid fees for domain name registry and ancillary services fees		1,038,268		905,807		(344,719)		(3,392,387)
		Income taxes recoverable/payable		980,969		226,304		1,087,333		466,885
		Accounts payable		92,473		43,173		700,194		648,250
		Accrued liabilities		163,300		(279,427)		664,984		244,738
		Customer deposits		(595,776)		(2,781)		(883,346)		62,817
		Deferred revenue		(986,779)		(1,144,779)		989,957		4,139,869
		Accreditation fees payable		(39,835)		(51,839)		(23,918)		(26,660)
	Net cash provided by operating activities			3,664,189		2,236,836		7,051,729		4,321,193
Financing activities:
	Proceeds received on exercise of stock options			1,136,061		14,186		1,454,255		363,898
	Excess tax benefits on share-based compensation expense			1,056,014				1,056,014
	Repurchase of common stock			-		(1,630,643)		(6,537,616)		(9,115,833)
	Proceeds received on loan payable			-		-		5,200,000		4,000,000
	Repayment of loan payable			(600,000)		-		(2,000,000)		(850,000)
	Net cash used in financing activities			1,592,075		(1,616,457)		(827,347)		(5,601,935)
Investing activities:
	Additions to property and equipment			(171,442)		(162,207)		(1,090,113)		(666,534)
	Proceeds on disposition of intangible assets			-		-		-		508,800
	Net cash provided by (used in) investing activities			(171,442)		(162,207)		(1,090,113)		(157,734)
Increase (decrease) in cash and cash equivalents				5,084,822		458,172		5,134,269		(1,438,476)
Cash and cash equivalents, beginning of period				6,465,126		4,511,561		6,415,679		6,408,209
Cash and cash equivalents, end of period			$	11,549,948	$	4,969,733	$	11,549,948	$	4,969,733
Supplemental cash flow information:
	Interest paid		$	92,610	$	50,511	$	289,483	$	146,342
Supplementary disclosure of non-cash investing activity:
	Property and equipment acquired during the period not yet paid for		$	99,060	$	167,998	$	99,060	$	167,998

 

This release includes forward-looking statements as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995 including statements regarding our expectations regarding our future financial results and, in particular, our expectations for Ting and its impact on our financial performance. 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, including the acceptance of Ting in the market.  Information about other 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.

SOURCE: Tucows Inc.

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