Tucows Q2 report: revenue drops because of bulk transfer of 2.65 million Namecheap domains

Tucows Inc. (NASDAQ:TCX, TSX:TC) reported its financial results for the second quarter ended June 30, 2018. All figures are in U.S. dollars.

“The second quarter once again saw solid performances from each of our businesses,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “The domains business delivered consistent results outside of the expected in quarter impact of the transfer of 2.65 million very low margin names in the first quarter of this year. Ting Mobile delivered increases in year-over-year revenue and margin as we work towards the next phase of customer growth. Finally, Ting Internet continued its steady progress from network builds and expansions across the footprint to serviceable addresses, to subscriber activations, to dependable recurring monthly revenue.”

Financial Results

Net revenue for the second quarter of 2018 was $81.1 million compared to $84.2 million for the second quarter of 2017, with the decrease due primarily to the bulk transfer of 2.65 million very low margin domain names during the first quarter of 2018, which was partially offset by the continued growth of Ting Mobile.

Net income for the second quarter of 2018 was $3.6 million, or $0.34 per share, down from $5.2 million, or $0.50 per share, for the second quarter of 2017. Net income for the second quarter of 2018 includes acquisition and transaction costs of $0.8 million related to geographic headcount and operational alignments.

Adjusted EBITDA1 for the second quarter of 2018 increased 8% to $11.2 million from $10.4 million for the second quarter of 2017.

Cash and cash equivalents at the end of the second quarter of 2018 was $11.2 million compared with $16.6 million at the end of the first quarter of 2018 and $15.1 million at the end of the second quarter of 2017.

Summary Financial Results

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

3 Months Ended June 30 6 Months Ended June 30
2018
(Unaudited)
2017
(Unaudited)
% Change 2018
(Unaudited)
2017
(Unaudited)
% Change
Net revenue 81,087 84,223 -4% 176,882 153,791 15%
Net income 3,608 5,242 -31% 7,352 7,686 -4%
Basic Net earnings per common share 0.34 0.50 -32% 0.69 0.73 -5%
Adjusted EBITDA1 11,188 10,374 8% 21,567 16,711 29%
Net cash provided by operating activities 5,754 8,131 -29% 15,327 10,534 46%

1. This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table.

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

Revenue Gross Margin
3 Months ended June 30 3 Months ended June 30
2018
(Unaudited)
2017
(Unaudited)
2018
(Unaudited)
2017
(Unaudited)
Network Access Services:
Mobile Services 22,411 20,379 10,433 9,677
Other Services 1,895 1,248 605 302
Total Network Access Services 24,306 21,627 11,038 9,979
Domain Services:
Wholesale
Domain Services 42,540 48,550 6,696 6,101
Value Added Services 4,601 5,415 3,853 4,800
Total Wholesale 47,141 53,965 10,549 10,901
Retail 8,477 7,663 4,031 3,115
Portfolio 1,163 968 968 783
Total Domain Services 56,781 62,596 15,548 14,799
Network Expenses:
Network, other costs (2,701) (2,261)
Network, depreciation and amortization costs (1,727) (1,169)
Total Network expenses (4,428) (3,430)
Total revenue/gross margin 81,087 84,223 22,158 21,348

 

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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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