Tucows Q4 2012 report: net revenue increased 13%

Tucows Inc. (NYSE AMEX:TCX, TSX:TC), a global provider of domain names and other Internet services, today, February 13, 2013, reported its financial results for the fourth quarter ended December 31, 2012. The company achieved an eleventh consecutive quarter of record revenue and generated strong cash flow from operations. All figures are in U.S. dollars.

Net revenue for the fourth quarter of 2012 increased 13% to a record $29.8 million from $26.4 million for the fourth quarter of 2011.

Deferred revenue at the end of the fourth quarter of 2012 was $71.0 million, an increase of 3% from $69.2 million at the end of the fourth quarter of 2011 and a decrease of 3% from $73.3 million at the end of the third quarter of 2012.

Here is the complete press release:

TORONTO, February 13, 2013 – Tucows Inc. (NYSE AMEX:TCX, TSX:TC), a global provider of domain names and other Internet services, today reported its financial results for the fourth quarter ended December 31, 2012. All figures are in U.S. dollars.

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.

“Our performance in the fourth quarter and for the year underscores the consistency and reliability in our business, as well as our ability to deliver growth,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “All facets of our operations continue to perform well, although our results for the quarter were dampened by the timing of Portfolio revenues and vendor marketing programs. Moreover, our ability to generate cash enabled us to continue to deliver on our stated objective to return capital to shareholders, repurchasing an additional 14.1 million shares, or 26.3% of shares outstanding, since the beginning of 2012. In addition, our launch of Ting was a great example of our ability to introduce new services that have the opportunity generate meaningful growth with little capital expenditure or impact on ongoing costs.”

“As we look ahead to 2013, our core businesses will continue to grow and Ting is on track to contribute to EBITDA in the coming years. Despite a modest upfront investment and very little incremental ongoing expenses, we already consider Ting to be a success. We continue to experience efficient customer acquisition costs and attractive gross margins. While we have kept our expectations modest, we’ve been pleasantly surprised by the reception and momentum Ting has experienced in the market.”

“We continue to benefit from the efficiency in our business and remain well positioned to continue to deliver consistent, reliable performance, generate growth and build value for our shareholders.”

Net revenue for the fourth quarter of 2012 increased 13% to a record $29.8 million from $26.4 million for the fourth quarter of 2011.

Net income and comprehensive income for the fourth quarter of 2012 was $0.5 million, or $0.01 per share, compared with $6.1 million, or $0.11 per share, for the fourth quarter of 2011, which included the recovery of $3.5 million in income taxes and the benefit of a gain on foreign exchange contracts of $0.8 million compared with a loss on foreign exchange contracts of $0.1 million in the fourth quarter of 2012. In addition, net income for the fourth quarter of 2012 was impacted by the timing of both vendor marketing programs and domain sales from inventory, which dampened the contribution from the Portfolio component of business.

Deferred revenue at the end of the fourth quarter of 2012 was $71.0 million, an increase of 3% from $69.2 million at the end of the fourth quarter of 2011 and a decrease of 3% from $73.3 million at the end of the third quarter of 2012.

Cash and cash equivalents at the end of the fourth quarter of 2012 were $6.4 million compared with $5.0 million at the end of the third quarter of 2012 and $6.4 million from the end of the fourth quarter of 2011. During the fourth quarter of 2012, the Company generated cash flow from operations of $2.0 million compared with $2.7 million for the same quarter of 2011. During the quarter, the Company used $0.3 million for principal repayments under its credit facility and invested $0.3 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.

As previously announced, subsequent to the end of the fourth quarter the Company completed the repurchase of 4.1 million of its shares at a purchase price of $1.50 per share for a total of $6.2 million under its modified “Dutch auction” tender announced on November 13, 2012. Since initiating its first share buyback program in February 2007, the Company has repurchased a total of 37.3 million shares through its buyback programs, representing 49% of the Company’s total shares outstanding at the end of December 2006.

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 is a registered trademark of Tucows Inc. or its subsidiaries. All other trademarks and service marks are the properties of their respective owners.

For further information:
Lawrence Chamberlain
TMX Equicom for Tucows Inc.
(416) 815-0700 ext. 257
lchamberlain@equicomgroup.com