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Tucows Inc. (NASDAQ: TCX) reported its financial results for the second quarter ended June 30, 2022. All figures are in U.S. dollars.
“We had a strong second quarter, with revenue and gross profit up 11% and 21% year over year respectively, driven by strong growth in each of our Ting Internet Services (“Ting”) and Wavelo Platform Services (“Wavelo”) businesses, and another quarter of consistent performance from our Tucows Domain Services (“Tucows Domains”) business,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc.
“Adjusted EBITDA increased 5% in Q2 of 2022 compared to Q2 of 2021. The increase was fueled by growth in Wavelo, but offset by the continued Ting investment, from the acceleration of our build and operations of the Ting fiber network. We again achieved a new record for trailing 12-month capital expenditure for the Ting opportunity.”
Financial Results
Net revenue for the second quarter of 2022 increased 11% to $83.1 million from $75.1 million for the second quarter of 2021. The increase was the result of growth in revenue from each of Ting Internet Services and Wavelo Platform Services businesses.
Gross profit for the second quarter of 2022 increased 21% to $22.1 million from $18.2 million for the second quarter of 2021. The increase was the result of the same factors as net revenue.
Net loss for the second quarter of 2022 was $3.1 million, or a loss of $0.29 per share, compared with net income of $1.8 million, or $0.17 per share, for the second quarter of 2021 with the loss being the result of accelerated build of our Ting Internet Services fiber network and ramp up of operations, higher depreciation and interest expenses.
Adjusted EBITDA1 for the second quarter of 2022 increased 5% to $11.7 million from $11.2 million for the second quarter of 2021. The modest increase in adjusted EBITDA1 was mainly fueled by growth in Wavelo, which was offset by the ongoing investment in Ting, which was expected as we continue to accelerate the build of our Ting Internet Services fiber network and ramp up operations.
Cash and cash equivalents at the end of the second quarter of 2022 were $6.5 million compared with $6.2 million at the end of the first quarter of 2022 and $7.3 million at the end of the second quarter of 2021.
Summary Financial Results
(In Thousands of US Dollars, Except Per Share Data)
|
3 Months ended June 30 |
6 Months Ended June 30 |
|||||
|
2022 (Unaudited) |
2021 (Unaudited) |
% Change |
2022 (Unaudited) |
2021 (Unaudited) |
% Change |
|
|
Net Revenues |
83,084 |
75,093 |
10.6 % |
164,183 |
145,968 |
12.5 % |
|
Gross Profit |
22,053 |
18,239 |
20.9 % |
43,251 |
35,692 |
21.2 % |
|
Gain on Sale of Ting Customer Assets, net1 |
4,520 |
4,808 |
(6.0 %) |
9,272 |
10,203 |
(9.1 %) |
|
Net income |
(3,125) |
1,807 |
(272.9 %) |
(6,145) |
3,956 |
(255.3 %) |
|
Basic earnings per common share |
(0.29) |
0.17 |
(270.6 %) |
(0.57) |
0.37 |
(254.1 %) |
|
Adjusted EBITDA1 |
11,700 |
11,158 |
4.9 % |
23,012 |
23,881 |
(3.6 %) |
|
Net cash provided by operating activities |
12,576 |
3,518 |
257.5 % |
17,983 |
17,604 |
2.2 % |
|
1. This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table. |
Summary of Revenues, Gross Profit and Adjusted EBITDA
(In Thousands of US Dollars)
|
Revenue |
Gross Profit |
Adj. EBITDA1 |
||||
|
3 Months ended June 30 |
3 Months ended June 30 |
3 Months ended June 30 |
||||
|
2022 (Unaudited) |
2021 (Unaudited) |
2022 (Unaudited) |
2021 (Unaudited) |
2022 (Unaudited) |
2021 (Unaudited) |
|
|
Ting Internet Services: |
||||||
|
Fiber Internet Services |
10,221 |
5,548 |
5,804 |
2,542 |
(6,185) |
(4,590) |
|
Wavelo Platform Services: |
||||||
|
Platform Services |
7,970 |
2,734 |
7,768 |
2,621 |
||
|
Other Professional Services |
1,000 |
– |
144 |
– |
||
|
Total Wavelo Platform Services |
8,970 |
2,734 |
7,912 |
2,621 |
3,872 |
724 |
|
Tucows Domain Services: |
||||||
|
Wholesale |
||||||
|
Domain Services |
46,979 |
47,883 |
10,041 |
10,176 |
||
|
Value Added Services |
5,597 |
5,482 |
4,954 |
4,899 |
||
|
Total Wholesale |
52,576 |
53,365 |
14,995 |
15,075 |
||
|
Retail |
8,487 |
8,897 |
4,968 |
4,400 |
||
|
Total Tucows Domain Services |
61,063 |
62,262 |
19,963 |
19,475 |
12,107 |
12,122 |
|
Corporate: |
||||||
|
Mobile Services and Eliminations |
2,830 |
4,549 |
105 |
1,322 |
1,906 |
2,902 |
|
Network Expenses: |
||||||
|
Network, other costs |
n/a |
n/a |
(4,764) |
(3,612) |
n/a |
n/a |
|
Network, depreciation of property and equipment |
n/a |
n/a |
(6,589) |
(4,084) |
n/a |
n/a |
|
Network, amortization of intangible assets |
n/a |
n/a |
(378) |
(24) |
n/a |
n/a |
|
Network, impairment of property and equipment |
n/a |
n/a |
– |
(1) |
n/a |
n/a |
|
Total Network expenses |
n/a |
n/a |
(11,731) |
(7,721) |
n/a |
n/a |
|
Total |
83,084 |
75,093 |
22,053 |
18,239 |
n/a |
n/a |
Change in Reporting Segments
During the first quarter of 2022, Tucows completed a reorganization into three businesses: Fiber Internet Services (“Ting”), Platform Services (“Wavelo”) and Domain Services (“Tucows Domains”). Previously, we disclosed the three operating and reportable segments: Fiber Internet Services, Mobile Services and Domain Services. The previously named Mobile Services segment was renamed the Platform Services segment, and no longer includes the 10-year payment stream on transferred legacy subscribers earned as part of the DISH Purchase Agreement as well as the retail sale of mobile phones, retail telephony services and transition services, which are now part of the financial results reported under the Corporate category. The renamed Platform Services segment includes Platform and Professional Services offerings (now branded as Wavelo), as well as the billing solutions to Internet services providers (“ISPs”) that was previously reported under the Fiber Internet Services segment. The Fiber Internet Services segment now includes only the retail high speed Internet access operations, excluding the billing solutions moved to the new Platform Services segment. The offerings included in the Domain Services segment are unchanged. The Corporate category includes the aforementioned mobile services, as well as eliminations of intercompany transactions, portions of Finance and Human Resources that are centrally managed, Legal and Corporate IT. Prior period comparable results have been restated to reflect the changes in reporting segments. A quarterly summary of the Company’s restated segment revenue, gross margin and EBITDA for 2021 and annual 2020 can be found in the “KPI Summary Q2 2022” supplementary disclosure, posted on https://tucows.com/investors/financials/.
