Mr. Elliot Noss reports
TUCOWS INC. REPORTS CONTINUING STRONG FINANCIAL RESULTS FOR FIRST QUARTER OF 2012
Tucows Inc. has released its financial results for the first quarter ended March 31,
2012. All figures are in U.S. dollars.
FINANCIAL RESULTS SUMMARY
(Numbers in thousands of U.S. dollars, except per share data)
Three months ended
March 31, 2012 March 31, 2011
(unaudited) (unaudited)
Net revenue 27,537 22,555
Income before provision for income taxes
and change in fair value of forward exchange contracts $ 1,950 $ 512
Net income for the period $ 1,664 $ 728
Net earnings per common share $ 0.04 $ 0.01
Net cash provided by operating activities $ 2,081 $ 763
"The first quarter of 2012 was a solid Tucows quarter -- growth across
all areas of our business, strong cash generation from operations,
consistency and reliability," said Elliot Noss, president and chief
executive officer, Tucows. "We generated growth in revenue and
gross margin far in excess of the growth in operating expenses,
demonstrating the leverage in our business. We think that consistent
growth and continued leverage will serve us well throughout 2012."
Net revenue for the first quarter of 2012 increased 22 per cent to a record
$27.5-million from $22.6-million for the first quarter of 2011, and was
driven by growth in each of the company's three service offerings.
Net income for the first quarter of 2012 was $1.7-million, or four cents per
share, compared with net income for the first quarter of 2011 of $700,000, or one cent per share. Net income for the first quarter of 2012
benefited from other income of $500,000 resulting from the sale of
certain intangible assets with no book value.
Deferred revenue at the end of the first quarter of 2012 was $73-million, an increase of 12 per cent from $64.9-million at the end of the first
quarter of 2011, and $69.2-million from the end of the fourth quarter of 2011.
Cash and cash equivalents at the end of the first quarter of 2012 were
$6.4-million, compared with $4.2-million at the end of the first quarter
of 2011, and relatively unchanged from the end of the fourth quarter of
2011. During the first quarter of 2012, the company generated cash
flow from operations of $2.1-million, as well as $500,000 in cash
proceeds from the aforementioned sale of intangible assets. In
addition, the company utilized $4-million from its credit facility to
partially finance the $5.9-million cost of the share repurchases under the
modified Dutch auction tender completed in January of this year. The
company also used $500,000 for principal repayments under
its credit facility and invested $200,000 in equipment purchases.
(1)Service 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 e-mail, 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 on Tuesday, May 8,
2012, at 5 p.m. EDT, to discuss the company's first quarter 2012
results. Participants can access the conference call on-line.
For those unable to participate in the conference call at the scheduled
time, it will be archived for replay both by telephone and on-line, 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 74551438
followed by the pound key. The telephone replay will be available
until Tuesday, May 15, 2012, at midnight. To access the archived
conference call as an MP3 on-line, visit the company's website.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in U.S. dollars)
Three months ended March 31,
2012 2011
Net revenues $ 27,537,306 $ 22,555,207
Cost of revenues:
Cost of revenues 19,267,125 15,695,140
Network expenses (*) 1,256,890 1,262,828
Depreciation of property and equipment 147,418 236,681
Amortization of intangible assets 35,910 19,290
Total cost of revenues 20,707,343 17,213,939
Gross profit 6,829,963 5,341,268
Expenses:
Sales and marketing (*) 2,184,635 2,024,703
Technical operations and development (*) 1,113,145 1,199,236
General and administrative (*) (Note 1) 1,783,453 1,563,774
Depreciation of property and equipment 47,415 46,187
Amortization of intangible assets 219,030 306,990
Loss (gain) on currency
forward contracts (Note 1) (562,109) (354,144)
Total expenses 4,785,569 4,786,746
Income from operations 2,044,394 554,522
Oher income (expenses):
Interest (expense) income, net (40,969) (11,540)
Other income 508,800 323,329
Total other income (expenses) 467,831 311,789
Income before provision for income taxes 2,512,225 866,311
Provision for income taxes 848,606 138,365
Net income and comprehensive
income for the period $ 1,663,619 $ 727,946
Basic earnings per common share $ 0.04 $ 0.01
Shares used in computing basic
earnings per common share 46,221,465 53,437,672
Diluted earnings per
common share $ 0.03 $ 0.01
Shares used in computing diluted
earnings per common share 48,954,451 55,747,952
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 $500,000 for the three months
ended March 31, 2011, has 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 -- $6,046, $6,013
Sales and marketing -- $22,782, $25,333
Technical operations and development -- $12,843, $15,708
General and administrative -- $20,794, $27,277
We seek Safe Harbor.
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