Tucows reports increase of revenue because of acquisition of Enom and domain business growth

Tucows Inc. (NASDAQ:TCX, TSX:TC), today reported its financial results for the third quarter ended September 30, 2017.

Net revenue for the third quarter of 2017 increased 73% to $85.0 million from $49.1 million for the third quarter of 2016.

Net income for the third quarter of 2017 decreased 27% to $3.4 million, or $0.33 per share, from $4.7 million, or $0.45 per share, for the third quarter of 2016. Adjusted EBITDA1 for the third quarter of 2017 increased 9% to $9.4 million from $8.6 million for the third quarter of 2016. The increase in adjusted EBITDA1 was largely the result of the acquisition of Enom in January 2017 and, to a lesser extent, continued growth in the Company’s incumbent Domains business. Year-over-year growth in adjusted EBITDA1 was negatively impacted by two factors that benefitted the third quarter of 2016. Ting Mobile received a cost decrease from its network suppliers in advance of permanently passing the decrease on to customers. In addition, the Company recorded a reversal of an overachievement bonus accrual of in the third quarter of 2016 that was not repeated in the third quarter of 2017. These one-time occurrences inflated third quarter 2016 adjusted EBITDA1 by more than $0.9 million.

Cash and cash equivalents at the end of the third quarter of 2017 were $12.5 million compared with $15.1 million at the end of the second quarter of 2017 and $10.5 million at the end of the third quarter of 2016.

“This was another strong quarter for both our present and our future,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “As for the present, the third quarter of 2017 was yet another quarter of record revenue at $85 million. For the future, all our business units took steps in the right direction. The integration of our domain name platforms is going well. Ting Mobile continues to grow its customer base and its reputation. Ting Internet is executing well and ramping quickly.”

“I am particularly proud that we can make such meaningful investments in infrastructure, people and customer acquisition without taking a step backwards on topline growth.”

Summary Financial Results

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

	3 Months Ended September 30			9 Months Ended September 30
	2017 (unaudited)	2016 (unaudited)	% Change	2017 (unaudited)	2016 (unaudited)	% Change
Net revenue	85,008	49,064	73%	238,800	141,014	69%
Net income	3,439	4,741	(27%)	11,127	13,250	(16%)
Basic Net earnings per common share	$0.33	$0.45	(27%)	$1.06	$1.26	(16%)
Adjusted EBITDA1, 2	9,368	8,575	9%	26,082	22,798	14%
Net cash provided by operating activities	7,282	5,269	38%	17,816	13,442	33%

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 third quarter and first nine months of 2017 reflect the impact 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 $1.5 million and $7.0 million for the third quarter and first nine months of 2017, respectively.

All figures are in U.S. dollars.

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

	Revenue		Gross Margin
	3 Months Ended September 30		3 Months Ended September 30
	2017 (unaudited)	2016 (unaudited)	2017 (unaudited)	2016 (unaudited)
Network Access Services:
Mobile Services	21,749	18,375	9,383	9,288
Other Services	1,244	878	299	376
Total Network Access Services	22,993	19,253	9,682	9,664
Domain Services:
Wholesale
Domain Services	47,770	22,956	5,476	4,021
Value Added Services	4,401	2,227	3,730	1,764
Total Wholesale	52,171	25,183	9,206	5,785
Retail	8,873	3,721	4,262	1,993
Portfolio	971	907	791	776
Total Domain Services	62,015	29,811	14,259	8,554
Network Expenses:
Network, other costs	–	–	(2,461)	(1,288)
Network, depreciation and amortization costs	–	–	(1,322)	(292)
Total Network Expenses	–	–	(3,783)	(1,580)
Total revenue/gross margin	85,008	49,064	20,158	16,638