Tucows Q2 revenue goes up to $84 million with the help of eNom

Tucows Inc. (NASDAQ:TCX, TSX:TC), today reported its financial results for the second quarter ended June 30, 2017. All figures are in U.S. dollars.

Revenue went up compared to Q2 2016 after the Enom acquisition from Rightside.

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

	3 Months Ended June 30			6 Months Ended June 30
	2017 (unaudited)	2016 (unaudited)	% Change	2017 (unaudited)	2016 (unaudited)	% Change
Net revenue	84,223	47,204	78%	153,791	91,950	67%
Net income	5,241	4,071	29%	7,688	8,509	(10%)
Basic Net earnings per common share	0.50	0.39	28%	0.73	0.80	(9%)
Adjusted EBITDA1	10,340	6,905	50%	16,536	14,222	16%
Net cash provided by operating activities	8,132	2,558	218%	10,534	8,173	29%

1. This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table. In the second quarter of 2016, Tucows revised its definition of Adjusted EBITDA as detailed in the description below and the table reconciling Adjusted EBITDA to GAAP net income.
2. Adjusted EBITDA for the second quarter and first six months of 2017 reflect the impact effect of the purchase price accounting adjustment related to the fair value write down of deferred revenue from the Enom acquisition which lowered Adjusted EBITDA by $1.6 million and $5.5 million for the second quarter and first six months of 2017, respectively.

 

Summary of Revenues and Gross Margin
(In Thousands of US Dollars)

	Revenue		Gross Margin
	3 Months Ended June 30		3 Months Ended June 30
	2017 (unaudited)	2016 (unaudited)	2017 (unaudited)	2016 (unaudited)
Network Access Services:
Mobile Services	20,379	17,805	9,677	8,425
Other Services	1,087	964	121	493
Total Network Access Services	21,466	18,769	9,798	8,918
Domain Services:
Wholesale
Domain Services	48,550	21,666	6,101	4,028
Value Added Services	5,576	2,308	4,981	1,849
Total Wholesale	54,126	23,974	11,082	5,877
Retail	7,663	3,576	3,115	1,913
Portfolio	968	885	783	704
Total Domain Services	62,757	28,435	14,980	8,494
Network Expenses:
Network, other costs	–	–	(2,261)	(1,405)
Network, depreciation and amortization costs	–	–	(1,170)	(362)
Total Network Expenses	–	–	(3,431)	(1,767)
Total revenue/gross margin	84,223	47,204	21,347	15,645

“The second quarter of 2017 saw continued strong performance across all areas of the business our first full quarter following the Enom acquisition in January, which combined to drive year-over-year growth in revenue of 78% to a record $84 million, record earnings per share of $0.50 and cash flow from operations of more than $8.1 million,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc.

“We continue to execute well on each of our strategic initiatives. Our domains team made great progress on the integration of Enom toward significant future synergies and, in fact, exceeded our expectations year to date on organic growth. Our Ting Mobile business continued to add customers on the core base and saw the lowest monthly churn from our core base in two years. Ting Internet continued its steady climb in Charlottesville, ramped significantly in both Westminster, Maryland and Holly Springs, North Carolina  and, most importantly, took meaningful operational steps toward scalability far beyond our existing Ting Towns.”

Financial Results

Net revenue for the second quarter of 2017 increased 78% to $84.2 million from $47.2 million for the second quarter of 2016.

Net income for the second quarter of 2017 increased 29% to 5.2 million, or $0.50 per share, from $4.1 million, or $0.39 per share, for the second quarter of 2016. Adjusted EBITDA1 for the second quarter of 2017 increased 50% to $10.3 million from $6.9 million for the second quarter of 2016.  The increase in EBITDA was largely driven by the acquisition of Enom and to a lesser extent growth in the Company’s Ting Mobile and incumbent Domains business.

Cash and cash equivalents at the end of the second quarter of 2017  were $15.1 million compared with $15.0 million at the end of the first quarter of 2017 and $5.9 million at the end of the second quarter of 2016.