• Tucows Reports Financial Results for Fourth Quarter 2021

    Источник: Nasdaq GlobeNewswire / 10 фев 2022 17:05:00   America/New_York

    TORONTO, Feb. 10, 2022 (GLOBE NEWSWIRE) -- Tucows Inc. (NASDAQ:TCX, TSX:TC), a global internet services leader, today reported its financial results for the fourth quarter ended December 31, 2021. All figures are in U.S. dollars.

    Note on the Financial Impact of Tucows’ Sale of Ting Mobile Customer Relationships and Transition to Mobile Services Enabler Platform:

    As previously announced, effective August 1, 2020 most of Tucows’ mobile customers relationships were sold to DISH Networks (“DISH”) as part of Tucows’ transition of its mobile business to a Mobile Services Enabler (MSE) model from a Mobile Virtual Network Operator (MVNO) model, under which DISH became Tucows’ first
    MSE customer. Accordingly, the results of the Mobile Services segment for the full year 2021 reflect operations under the new MSE model for the entire year compared to the year ended 2020 being composed of approximately five months of operations under the new MSE model and approximately seven months of operations under Tucows’ previous MVNO model.

    Under the terms of the earn out arrangement for the Ting customer base acquired by DISH, the income generated by the customer base acquired by DISH is recognized (net of expenses) as “Other Income” under the heading “Gain on Sale of Ting Customer Assets”. As a result, revenue and gross margin for the Mobile Services segment for the 2021 year were impacted by the significantly larger MVNO contribution 2020. Tucows will recognize platform fees for customers owned by DISH under the Ting brand as well as customers under other DISH brands that are added to Tucows’ MSE platform, as Mobile Platform Services revenue under the terms of the MSE Agreement signed with DISH. For more information, see Tucows’ Financial Statements and Management Discussion and Analysis for the third quarter of 2021.

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





    3 Months ended December 3112 Months ended December 31
    2021
    (Unaudited)
    2020
    (Unaudited)
    % Change2021
    (Unaudited)
    2020
    (Unaudited)
    % Change
    Net revenues82,476 70,78416.5%304,337311,202(2.2%)
    Gross Profit24,577 17,42841.0%78,29385,485(8.4%)
    Gain on Sale of Ting Customer Assets, net14,263 6,522(34.6%)20,0307,612163.1%
    Net income(1,967)2,068(195.1%)3,3645,775(41.7%)
    Basic earnings per common share(0.18)0.19(194.1%)0.320.55(42.1%)
    Adjusted EBITDA112,736 12,847(0.9%)48,82150,972(4.2%)
    Net cash provided by operating activities10,542 1,637544.0%29,63736,081(17.9%)
    1. This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table.

    Summary of Revenues, Gross Profit and Adjusted EBITDA
    (In Thousands of US Dollars)

     RevenueGross ProfitAdj. EBITDA1
     3 Months ended
    December 31
    3 Months ended
    December 31
    3 Months ended
    December 31
     2021
    (Unaudited)
    2020
    (Unaudited)
    2021
    (Unaudited)
    2020
    (Unaudited)
    2021
    (Unaudited)
    2020
    (Unaudited)
    Fiber Internet Services:  
    Fiber Internet Services8,5775,0495,771 3,130 (3,564)(835)
           
    Mobile Services:
    Retail Mobile Services2,5231,806753 821   
    Mobile Platform Services5,5421885,393 132   
    Other Professional Services4,4731,9592,692 256   
    Total Mobile Services12,5383,9538,838 1,209 8,597 4,733 
           
    Domain Services:  
    Wholesale      
    Domain Services47,13747,46310,516 10,312   
    Value Added Services5,5185,0974,843 4,257   
    Total Wholesale52,65552,56015,359 14,569   
           
    Retail8,7069,2224,329 4,783   
    Total Domain Services61,36161,78219,688 19,352 11,640 12,132 
    Network Expenses:  
    Network, other costsn/an/a(4,474)(2,681)n/a n/a 
    Network, depreciation and amortization costsn/an/a(5,347)(3,582)n/a n/a 
    Network, impairmentn/an/a101 n/a n/a n/a 
    Total Network expensesn/an/a(9,720)(6,263)n/a n/a 
           
    Total82,47670,78424,577 17,428 n/a n/a 


    “Tucows delivered another quarter of solid financial performance, highlighted by year-over-year increases in net revenue and gross profit of 17% and 41%, respectively, driven by growth in the Ting Fiber Internet customer base and the significantly higher contribution of our Mobile Services Enabler platform a year after its launch,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc.“ Adjusted EBITDA decreased slightly by 0.9% year-over-year as we continued to invest in the Ting Fiber Internet opportunity, with the fourth quarter seeing another record for capital expenditure on our Fiber network.”

    “The fourth quarter concluded a year of both solid financial results and strategic achievements across the Company. Tucows Domain Services posted a record year for both gross margin and adjusted EBITDA as that business reached a new, higher steady state level following the pandemic related growth of 2020. The first full year of our Mobile Services Enabler business, recently rebranded as our Communication Service Provider software platform, Wavelo, was very much in line with our expectations, as we focused on supporting the success of our first customer, DISH. 2021 also saw significant progress on the accelerated build of the Ting Fiber Internet network, with a 61% increase in capital expenditure, 48% increase in the number of serviceable addresses, and a more than 66% expansion of our subscriber base. All of this positions Tucows to continue to ramp investment of the consistent, strong cash flows generated by Tucows Domain Services and the Wavelo CSP Platform in the outsized Ting Fiber Internet opportunity.”

    Financial Results
      
    Net revenue for the fourth quarter of 2021 increased 17% to $82.5 million from $70.8 million for the fourth quarter of 2020. The increase was the result of growth in revenue from the Fiber Internet Services business and both the Mobile Platform Services and Other Professional Services components of the Mobile Services Enabler business.

    Gross profit for the fourth quarter of 2021 increased 41% to $24.6 million from $17.4 million for the fourth quarter of 2020. The increase was driven by the same factors as net revenue.

    Net loss for the fourth quarter of 2021 was $2.0 million, or a loss of $0.18 per share, compared with net income of $2.1 million, or $0.19 per share, for the fourth quarter of 2020 with the loss driven by a higher effective tax rate.

    Adjusted EBITDA1 for the fourth quarter of 2021 decreased 0.9% to $12.7 million from $12.8 million for the fourth quarter of 2020. The modest decline in adjusted EBITDA1 reflects the continued investment in Fiber Internet Services.

    Cash and cash equivalents at the end of the fourth quarter of 2021 were $9.1 million compared with $5.5 million at the end of the third quarter of 2021 and $8.3 million at the end of the fourth quarter of 2020.

    Notes:

    1. Adjusted EBITDA

    Tucows reports all financial information required in accordance with United States generally accepted accounting principles (GAAP). Along with this information, to assist financial statement users in an assessment of our historical performance, the Company typically discloses and discusses a non-GAAP financial measure, adjusted EBITDA, in press releases and on investor conference calls and related events that exclude certain non-cash and other charges as the Company believes that the non-GAAP information enhances investors' overall understanding of our financial performance.

    The Company believes that the provision of this supplemental non-GAAP measure allows investors to evaluate the operational and financial performance of the Company’s core business using similar evaluation measures to those used by management. The Company uses adjusted EBITDA to measure its performance and prepare its budgets. Since adjusted EBITDA is a non-GAAP financial performance measure, the Company’s calculation of adjusted EBITDA may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. Because adjusted EBITDA is calculated before certain recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a liquidity measure. Non-GAAP financial measures do not reflect a comprehensive system of accounting and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies and/or analysts and may differ from period to period. The Company endeavors to compensate for these limitations by providing the relevant disclosure of the items excluded in the calculation of adjusted EBITDA to net income based on U.S. GAAP, which should be considered when evaluating the Company's results. Tucows strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure.

    The Company’s adjusted EBITDA definition excludes depreciation, impairment and loss on disposition of property and equipment, amortization of intangible assets, income tax provision, interest expense (net), accretion of contingent consideration, stock-based compensation, asset impairment, gains and losses from unrealized foreign currency transactions and costs that are one-time in nature and not indicative of on-going performance (profitability), including acquisition and transition costs. Gains and losses from unrealized foreign currency transactions removes the unrealized effect of the change in the mark-to-market values on outstanding unhedged foreign currency contracts, as well as the unrealized effect from the translation of monetary accounts denominated in non-U.S. dollars to U.S. dollars.

    The following table reconciles adjusted EBITDA to income before provision for income taxes (dollars in thousands):

      3 months ended December 3112 months ended December 31
      2021
    (Unaudited)
    2020
    (Unaudited)
    2021
    (Unaudited)
    2020
    (Unaudited)
    Adjusted EBITDA12,736 12,847 48,82150,972 
    Depreciation of property and equipment5,254 3,377 17,98612,632 
    Impairment and loss on disposition of property and equipment(100)(17)4351,621 
    Amortization of intangible assets2,756 2,644 10,00711,420 
    Impairment of definite life intangible assets- - -1,431 
    Disposal of Ting Mobile customer assets- - -3,513 
    Interest expense, net1,509 855 4,6173,611 
    Accretion of contingent consideration98 86 383344 
    Stock-based compensation1,235 1,054 4,5923,718 
    Unrealized loss (gain) on change in fair value of forward contracts- (237)606(500)
    Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities39 (19)219461 
    Acquisition and transition costs*671 441 2,7061,961 
         
    Income before provision for income taxes1,274 4,663 7,27010,760 
    *Acquisition and other costs represent transaction-related expenses, transitional expenses, such as redundant post-acquisition expenses, primarily related to our acquisitions Cedar in January 2020 and Simply Bits in November 2021 and disposition of certain Ting Mobile assets in August 2020. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.


    Management Commentary

    At 6:00 p.m. ET today, Thursday February 10, management’s pre-recorded audio commentary (and transcript) discussing the quarter and outlook for the Company will be posted to the Tucows website at http://www.tucows.com/investors/financials. Prior to reading/listening to management’s commentary on the quarter, interested parties are invited to watch a business background reporting update video by Tucows’ President and Chief Executive Officer, Elliot Noss, which was posted at 5:05 p.m. ET today, Thursday, February 10, on the Investors, videos, decks and reports page of the Investors section of the Company’s web site: https://www.tucows.com/investors/investor-videos/.

    In lieu of a live question and answer period, for the subsequent eight days, until Friday, February 18, shareholders, analysts and prospective investors can submit questions to Tucows’ management at ir@tucows.com. Management will post responses to questions of general interest (audio recording and transcript) to the Company’s website at http://www.tucows.com/investors/financials/ on Thursday, March 3, at approximately 4 pm ET. All questions will receive a response, however, questions of a more specific nature may be responded to directly.

    About Tucows

    Tucows helps connect more people to the benefit of internet access through communications service technology, domain services, and fiber-optic internet infrastructure. Ting (https://ting.com/internet) delivers fixed fiber Internet access with outstanding customer support. Wavelo (https://wavelo.com) is a telecommunications software suite for service providers that simplifies the management of mobile and internet network access, provisioning, billing and subscription, developer tools, and more. OpenSRS (https://opensrs.com), Enom (https://www.enom.com) and Ascio (https://ascio.com) combined manage approximately 25 million domain names and millions of value-added services through a global reseller network of over 35,000 web hosts and ISPs. Hover (https://hover.com) makes it easy for individuals and small businesses to manage their domain names and email addresses. More information can be found on Tucows’ corporate website (https://tucows.com).


        
    Tucows Inc.
    Consolidated Balance Sheets
    (Dollar amounts in thousands of U.S. dollars)
        
     December 31,
     December 31,
      2021  2020
     (unaudited)(unaudited)
        
    Assets   
        
    Current assets:   
    Cash and cash equivalents$9 105 $8 311
    Accounts receivable 14 579  15 540
    Contract asset, current portion 778  -
    Inventory 3 277  1 875
    Prepaid expenses and deposits 20 986  16 845
    Derivative instrument asset, current portion 299  3 860
    Deferred costs of fulfillment, current portion 94 506  93 467
    Income taxes recoverable 3 474  1 302
    Total current assets 147 004  141 200
        
    Deferred costs of fulfillment, long-term portion 18 205  17 599
    Derivative instrument asset, long-term portion 278  -
    Property and equipment 172 662  117 530
    Right of use operating lease asset 17 515  11 238
    Contract costs 1 079  362
    Deferred tax asset 22  226
    Intangible assets 50 409  47 444
    Goodwill 130 410  116 304
    Investment 2 012  -
    Total assets$539 596 $451 903
        
        
    Liabilities and Stockholders' Equity   
        
    Current liabilities:   
    Accounts payable$10 016 $6 329
    Accrued liabilities 15 240  10 235
    Customer deposits 16 974  15 402
    Derivative instrument liability, current portion 125  99
    Operating lease liability, current portion 3 150  1 761
    Deferred revenue, current portion 124 116  127 336
    Accreditation fees payable, current portion 882  940
    Income taxes payable 102  863
    Other liabilities, current portion 3 078  -
    Total current liabilities 173 683  162 965
        
    Derivative instrument liability, long-term portion -  114
    Deferred revenue, long-term portion 23 677  24 909
    Accreditation fees payable, long-term portion 170  195
    Operating lease liability, long-term portion 11 853  9 179
    Loan payable, long-term portion 190 748  121 733
    Other long-term liability 1 804  3 416
    Deferred tax liability 22 569  24 694
        
    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; 10,747,417 shares issued and outstanding as of December 31, 2021 and 10,612,414 shares issued and outstanding as of December 31, 2020 28 515  20 798
    Additional paid-in capital 2 764  1 458
    Retained earnings 83 470  80 106
    Accumulated other comprehensive income (loss) 343  2 336
    Total stockholders' equity 115 092  104 698
    Total liabilities and stockholders' equity$539 596 $451 903
        

     


             
      Tucows Inc.
      Consolidated Statements of Operations and Comprehensive Income
      (Dollar amounts in thousands of U.S. dollars)
             
             
       Three months ended December 31,   Twelve months ended December 31,
      2021  2020  2021  2020 
       (unaudited)  (unaudited)
             
    Net revenues$82 476 $70 784 $304 337 $311 202 
             
    Cost of revenues:        
    Direct cost of revenues 48 179  47 093  193 039  200 401 
    Network expenses (*) 4 474  2 681  14 769  10 194 
    Depreciation of property and equipment 5 108  3 252  17 452  12 144 
    Amortization of intangible assets 239  330  583  1 340 
    Impairment of property and equipment (101) -  201  1 638 
    Total cost of revenues 57 899  53 356  226 044  225 717 
             
    Gross profit 24 577  17 428  78 293  85 485 
             
    Expenses:        
    Sales and marketing (*)$11 892 $7 753 $39 471 $34 274 
    Technical operations and development (*) 4 266  3 447  14 310  12 427 
    General and administrative (*) 7 138  5 194  22 370  20 268 
    Depreciation of property and equipment 150  125  534  488 
    Loss on disposition of property and equipment -  (17) 234  (17)
    Amortization of intangible assets 2 515  2 314  9 424  10 080 
    Impairment of definite life intangible assets -  -  -  1 431 
    Loss (gain) on currency forward contracts -  (284) (277) (383)
    Total expenses 25 961  18 532  86 066  78 568 
             
    Income from operations (1 384) (1 104) (7 773) 6 917 
             
    Other income (expenses):        
    Interest expense, net (1 509) (855) (4 617) (3 611)
    Gain on sale of Ting Customer Assets, net 4 263  6 522  20 030  7 612 
    Other expense, net (96) 100  (370) (158)
    Total other income (expenses) 2 658  5 767  15 043  3 843 
             
    Income before provision for income taxes 1 274  4 663  7 270  10 760 
             
    Provision for income taxes 3 241  2 595  3 906  4 985 
    Net income before redeemable non-controlling interest (1 967) 2 068  3 364  5 775 
             
    Redeemable non-controlling interest -  -  -  - 
             
    Net income attributable to redeemable non-controlling interest -  -  -  - 
    Net income for the period (1 967) 2 068  3 364  5 775 
             
    Other comprehensive income, net of tax        
    Unrealized income (loss) on hedging activities 458  1 044  572  1 653 
    Net amount reclassified to earnings 174  (79) (2 565) 210 
    Other comprehensive income net of tax expense (recovery) of $(235) and $398 for the three months ended June 30, 2021 and June 30, 2020, $(375) and $32 for the six months ended June 30, 2021 and June 30, 2020 632  965  (1 993) 1 863 
             
    Comprehensive income, net of tax for the period$(1 335)$3 033 $1 371 $7 638 
             
    Basic earnings per common share$(0,18)$0,19 $0,32 $0,55 
             
    Shares used in computing basic earnings per common share 10 717 349  10 605 451  10 662 337  10 590 684 
             
    Diluted earnings per common share$(0,18)$0,19 $0,31 $0,54 
             
    Shares used in computing diluted earnings per common share 10 883 860  10 745 710  10 817 468  10 692 281 
             
             
             
    (*) Stock-based compensation has been included in expenses as follows:        
    Network expenses$131 $139 $531 $472 
    Sales and marketing$444 $475 $1 941 $1 678 
    Technical operations and development$214 $198 $824 $756 
    General and administrative$446 $242 $1 296 $812 

     




         Tucows Inc.
         Consolidated Statements of Cash Flows
         (Dollar amounts in thousands of U.S. dollars)
             
       Three months ended December 31,   Twelve months ended December 31, 
      2021  2020  2021  2020 
    Cash provided by:  (unaudited)
      (unaudited)
    Operating activities:        
    Net income for the period$(1 967)$2 068 $3 364 $5 775 
    Items not involving cash:        
    Depreciation of property and equipment 5 258  3 377  17 986  12 632 
    Impairment of property and equipment (101) -  201  1 638 
    Amortization of debt discount and issuance costs 98  67  300  269 
    Amortization of intangible assets 2 754  2 644  10 007  11 420 
    Net amortization contract costs (273) (3) (717) 106 
    Impairment of definite life intangible assets -  -  -  1 431 
    Other -  -  -  223 
    Accretion of contingent consideration 96  86  383  344 
    Deferred income taxes (recovery) 40  (3 012) (1 328) (3 939)
    Excess tax benefits on share-based compensation expense (686) (353) (1 554) (861)
    Net Right of use operating assets/Operating lease liability (55) (44) (2 204) 205 
    Loss on disposal of domain names -  2  1  17 
    Loss (gain) on change in the fair value of forward contracts -  (237) 606  (500)
    Disposal of Ting Mobile customer assets -  -  -  3 513 
    Stock-based compensation 1 235  1 054  4 592  3 718 
    Change in non-cash operating working capital:        
    Accounts receivable 868  (2 951) 1 586  (281)
    Contract asset 2 005  -  (778) - 
    Inventory 449  (736) (787) 945 
    Prepaid expenses and deposits (2 100) (3 142) (3 974) (3 459)
    Deferred costs of fulfillment 485  2 174  (1 645) (1 899)
    Income taxes recoverable 1 108  2 589  (1 394) 908 
    Accounts payable 1 779  (1 664) 4 068  (902)
    Accrued liabilities 2 918  710  4 859  376 
    Customer deposits 908  1 030  645  1 493 
    Deferred revenue (4 237) (1 985) (4 495) 2 942 
    Accreditation fees payable (38) (40) (83) (33)
    Net cash provided by operating activities 10 542  1 634  29 637  36 081 
             
    Financing activities:        
    Proceeds received on exercise of stock options 1 974  307  4 818  985 
    Payment of tax obligations resulting from net exercise of stock options -  (77) (387) (556)
    Repurchase of common stock -  -  -  (3 281)
    Proceeds received on loan payable 41 000  8 000  69 000  8 000 
    Payment of loan payable costs (296) -  (296) (32)
    Net cash (used in) provided by financing activities 42 678  8 230  73 136  5 116 
             
    Investing activities:        
    Proceeds on disposal of property and equipment 510  -  510  - 
    Additions to property and equipment (23 082) (11 708) (73 175) (44 437)
    Acquisition of Cedar Holdings Group, net of cash of $66 -  -  -  (8 770)
    Acquisition of Simply Bits, net of cash of $801 (24 028) -  (24 028) - 
    Acquisition of Uniregistry (2 499) -  (2 499) - 
    Acquisition of intangible assets (551) -  (774) (72)
    Investment in securities -  -  (2 012) - 
    Net cash used in investing activities (49 651) (11 708) (101 979) (53 279)
             
    (Decrease) increase in cash and cash equivalents 3 570  (1 844) 794  (12 082)
             
    Cash and cash equivalents, beginning of period 5 535  10 155  8 311  20 393 
    Cash and cash equivalents, end of period$9 105 $8 311 $9 105 $8 311 
             
    Supplemental cash flow information:        
    Interest paid$1 429 $813 $4 485 $3 573 
    Income taxes paid, net$2 771 $3 477 $8 828 $8 926 
             
    Supplementary disclosure of non-cash investing and financing activities:        
    Property and equipment acquired during the period not yet paid for$99 $1 129 $99 $1 129 
    Fair value of shares issues for acquisition of Cedar Holdings Group - $- $- $2 000 
    Fair value of contingent consideration for acquisition of Cedar Holdings Group - $- $- $3 072 

     


             
    Reconciliation of Adjusted EBITDA to Income before Provision for Income Taxes
    (In Thousands of U.S. Dollars)  Three months ended December 31,
     Twelve months ended December 31,
         
    (unaudited) 2021 (unaudited) 2020 (unaudited) 2021 (unaudited) 2020 (unaudited)
              
    Adjusted EBITDA $12 736  $12 847  $48 821 50 972 
    Depreciation of property and equipment 5 254  3 377  17 986  12 632 
    Impairment and loss on disposition of property and equipment (100) (17) 435  1 621 
    Amortization of intangible assets 2 756  2 644  10 007  11 420 
    Impairment of indefinite life intangible assets -  -  -  1 431 
    Write-down on disposal of Ting Mobile assets -  -  -  3 513 
    Interest expense, net 1 509  855  4 617  3 611 
    Accretion of contingent consideration 98  86  383  344 
    Stock-based compensation 1 235  1 054  4 592  3 718 
    Unrealized loss (gain) on change in fair value of forward contracts  -  (237 606  (500
    Unrealized loss (gain) on foreign exchange revaluation of foreign denominated
    monetary assets and liabilities
      39  (19 219   461 
    Acquisition and other costs1 671   441  2 706   1 961 
             
     Income before provision for income taxes$1 274 $4 663 $7 270
     $10 760
     
             
    1Acquisition and other costs represent transaction-related expenses, transitional expenses, such as redundant post-acquisition expenses, primarily related to our acquisitions Cedar in January 2020 and Simply Bits in November 2021 and disposition of certain Ting Mobile assets in August 2020. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.    

    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, including, without limitation, our expectations regarding our ability to realize synergies from the Enom acquisition and our expectation for growth of Ting Internet. 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 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, Ting, Wavelo, OpenSRS, Enom, Ascio and Hover are registered trademarks of Tucows Inc. or its subsidiaries.

    Contact:
    Lawrence Chamberlain
    (416) 519-4196
    lawrence.chamberlain@loderockadvisors.com  


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