Tucows 2013 Q4 Report: Hover grows 20%+ year-over-year

Tucows Inc. (NASDAQ: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, 2013. All figures are in U.S. dollars.

“In the domains component of our business, we continue to see solid performance from both our Wholesale and Portfolio services, while our retail channel, Hover, delivered another quarter of 20%-plus year-over-year top-line growth.”

Summary Financial Results

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

 
                   3 Months        3 Months        12 Months       12 Months 
                 Ended    Dec.   Ended    Dec.   Ended    Dec.   Ended    Dec. 
                  31, 2013        31, 2012        31, 2013        31, 2012 
                  (unaudited)     (unaudited)     (unaudited)     (unaudited) 
Net revenue             33,139          29,791         129,935         114,727 
Income before 
 provision for 
 income taxes 
 and  change 
 in fair value 
 of forward 
 exchange 
 contracts               1,532             789           6,476           5,745 
Net income                 923             429           4,180           4,424 
Net earnings 
 per common 
 share(1)                $0.08           $0.04           $0.40           $0.39 
Net cash 
 provided by 
 operating 
 activities              1,651           2,022           8,703           6,343 

   1. Net earnings per common share reflects the 1-for-4 reverse split of 
      common shares that became effective December 31, 2013.  As a result of 
      the reverse split, 10,900,842 shares and 11,064,045 shares were used in 
      computing net earnings per common share for the 3 months ended December 
      31, 2013 and 2012, respectively, and 10,468,250 shares and 11,458,216 
      shares were used in computing net earnings per common share for the 12 
      months ended December 31, 2013 and 2012, respectively.

Summary of Revenues and Cost of Revenues

(In Thousands of US Dollars)

 
                                                    Cost of         Cost of 
                   Revenue         Revenue          Revenue         Revenue 
                   3 Months        3 Months 
                 Ended    Dec.   Ended    Dec.  3 Months Ended  3 Months Ended 
                  31, 2013        31, 2012       Dec. 31, 2013   Dec. 31, 2012 
                  (unaudited)     (unaudited)     (unaudited)     (unaudited) 
Wholesale 
 Domain 
  Services              21,595          22,391          17,949          18,893 
 Value-Added 
  Services               2,417           2,705             548             456 
Total 
 Wholesale              24,012          25,096          18,497          19,349 

Retail                   8,027           3,628           4,966           2,454 
Portfolio                1,100           1,067             143             201 

Network, other 
 costs                       -               -           1,120           1,296 
Network, 
 depreciation 
 and 
 amortization 
 costs                       -               -             175             187 
Total 
 revenue/cost 
 of revenue             33,139          29,791          24,901          23,487

“Our financial results for the fourth quarter once again underscore not only the consistency and reliability in our business but also our continued ability to generate sustainable growth,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “In the domains component of our business, we continue to see solid performance from both our Wholesale and Portfolio services, while our retail channel, Hover, delivered another quarter of 20%-plus year-over-year top-line growth.”

“For the seventh straight quarter, Ting set new records for net adds, adding more than 12,000 accounts and 18,000 devices. We ended the year with over 48,000 accounts and 74,000 devices and, in January, surpassed the 50,000 accounts and 80,000 devices milestone. Ting continues to be on track to positively contribute to EBITDA for 2014, although our priority will continue to be aggressive investment in customer acquisition and customer satisfaction to ultimately drive even greater long-term value for shareholders.”

Net revenue for the fourth quarter of 2013 increased 11% to $33.1 million from $29.8 million for the fourth quarter of 2012.

Net income for the fourth quarter of 2013 was $0.9 million, or $0.08 per share (based on the number of shares post-reverse split), compared with $0.4 million, or $0.04 per share (based on the number of shares post-reverse split), for the fourth quarter of 2012. Net income for the fourth quarter of 2013 included a loss on foreign exchange contracts of $0.3 million compared with a loss on foreign exchange contracts of $0.1 million in the fourth quarter of 2012. Net income for the fourth quarter of 2013 also included the incremental investment of approximately $1.3 million for the acquisition and support of Ting customers as compared to the fourth quarter of 2012.

Deferred revenue at the end of the fourth quarter of 2013 was $70.0 million, a decrease of 1% from $71.0 million at the end of the fourth quarter of 2012 and a decrease of 3% from $72.0 million at the end of the third quarter of 2013.

Cash and cash equivalents at the end of the fourth quarter of 2013 were $12.4 million compared with $11.5 million at the end of the third quarter of 2013 and $6.4 million at the end of the fourth quarter of 2012. The increase in cash and cash equivalents of $0.9 million when compared to the third quarter of 2013 resulted from the generation of $1.7 million in cash flow from operations, which was 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, February 12, 2014 at 5:00 p.m. (ET) to discuss the Company’s fourth 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 46588159 followed by the pound key. The telephone replay will be available until Wednesday, February 19, 2014 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 (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).