Tucows Q3 report: revenue goes up, profit goes down

Tucows Inc. (NASDAQ:TCX, TSX:TC) reported its financial results for the third quarter ended September 30, 2019. All figures are in U.S. dollars.

Financial Results

Net revenue for the third quarter of 2019 increased 6% to $88.1 million from $83.5 million for the third quarter of 2018.

Net income for the third quarter of 2019 decreased 21% to $4.2 million, or $0.40 per share from $5.3 million, or $0.50 per share, for the third quarter of 2018.

Adjusted EBITDA1 for the third quarter of 2019 increased 25% to $14.8 million from $11.8 million for the third quarter of 2018. Adjusted EBITDA for the third quarter of 2019 reflects the impact of the purchase price accounting adjustment related to the fair value write down of deferred revenue from the Ascio acquisition, which lowered Adjusted EBITDA by $0.9 million.

Cash and cash equivalents at the end of the third quarter of 2019 were $12.0 million compared with $12.0 million at the end of the second quarter of 2019 and $10.8 million at the end of the third quarter of 2018.

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

3 Months Ended September 30 9 Months Ended September 30
2019
(Unaudited)
2018
(Unaudited)
%
Change
2019
(Unaudited)
2018
(Unaudited)
%
Change
Net revenue 88,129 83,519 6% 251,199 260,401 -4%
Net income 4,205 5,346 -21% 9,620 12,699 -24%
Basic Net earnings per common share 0.40 0.50 -20% 0.90 1.20   -25%
Adjusted EBITDA1,2 14,832 11,858 25% 35,749 33,425 7%
Net cash provided by operating activities 11,215 11,214 0% 27,185 26,541 2%
  1. This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table.
  2. Adjusted EBITDA for the three and first nine months of 2019 reflect the impact of the purchase price accounting adjustment related to the fair value write down of deferred revenue from the Ascio acquisition on March 18, 2019, which lowered Adjusted EBITDA by $0.9 million and $1.9 million, respectively.

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

Revenue Gross Profit
3 Months ended September 30  3 Months ended September 30
2019
(Unaudited)
2018
(Unaudited)
2019
(Unaudited)
2018
(Unaudited)
Network Access Services:
Mobile Services 21,722 22,546 10,551 11,147
Other Services 2,890 2,033 1,954 1,161
Total Network Access Services 24,612 24,579 12,505 12,308
Domain Services:
Wholesale
Domain Services 47,259 45,071 8,922 7,657
Value Added Services 5,154 4,540 4,381 3,733
Total Wholesale 52,413 49,611 13,303 11,390
Retail 8,713 8,731 4,354 4,266
Portfolio 2,391 598 2,211 450
Total Domain Services 63,517 58,940 19,868 16,106
Network Expenses:
Network, other costs (2,254) (2,315)
Network, depreciation and amortization costs (2,545) (1,838)
Total Network expenses (4,799) (4,153)
Total 88,129 83,519 27,574 24,261

“The third quarter was highlighted by solid financial performance, with year-over-year growth in revenue, gross margin and adjusted EBITDA, as we continued to execute on our strategic priorities in each component of the business,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “Our Domains and Ting Mobile businesses continue to generate strong cash flows to support our outsized Ting Internet growth opportunity, where we saw another quarter of steady progress — further expanding both our projected potential serviceable addresses and serviceable addresses completed, while continuing to add new customers.”

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About Konstantinos Zournas

Konstantinos studied Computer Engineering and Computer Science in London and lives in Athens, Greece. He loves domains and building websites. He is online since 1995, learned about html in 1996 and got into domains in 2002. He started the OnlineDomain.com blog in 2012.

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