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

 

 

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About Konstantinos Zournas

Konstantinos studied Computer Engineering and Computer Science in London and lives in Athens, Greece. He works on domain names, websites and software development. Has been online since 1995 & domaining since 2002.

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