Company Reports Record Revenue of $74.6 Million For 2007
TORONTO, Feb. 7 /CNW/ - Tucows Inc., (AMEX:TCX, TSX:TC) a leading
provider of Internet services to web hosting companies and ISPs worldwide,
today announced its financial results for the fourth quarter and year ended
December 31, 2007. All figures are in U.S. dollars unless otherwise stated.
"In 2007, we achieved record revenue, record adjusted net income,
continued strong cash flow generation from operations, and a record deferred
revenue balance," said Elliot Noss, President and CEO of Tucows. "We did all
of this while lowering our wholesale domain name pricing and rebuilding our
email systems."
Noss continued, "In 2007, we introduced a number of initiatives,
including: the first wholesale premium domain name service, a new hosted email
service and a new advertising partner for our domain portfolio. We are
starting to see the favorable impact of these changes and expect to continue
to experience momentum in our major lines of business."
"Tucows is entering 2008 energized and focused on divesting non-strategic
assets," said Noss. "With this focus and the recent changes we have made in
our business, we believe we will drive growth and increased profitability."Summary Financial Results
(Numbers in Thousands of US Dollars, Except Per Share Data)
-------------------------------------------------------------------------
3 Months 3 Months 12 Months 12 Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
-------------------------------------------------------------------------
Net Revenue $18,240 $17,199 $74,638 $65,029
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EBITDA 801 1,435 8,722 5,813
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Adjusted Net Income 660 1,025 8,919 5,809
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Net Income (loss) (935) 156 2,676 2,160
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Net Income/Share (0.01) 0.00 0.04 0.03
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Cash Flow from
Operations $2,680 $3,898 $8,468 $8,818
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Summary of Revenue and Cost of Revenue
(Numbers in Thousands of US Dollars)
-------------------------------------------------------------------------
Revenue Cost of Revenue
-------------------------------------------------------------------------
Three Months Three Months Three Months Three Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
-------------------------------------------------------------------------
Traditional Domain
Registration $12,574 $11,646 $9,672 $8,373
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Domain Portfolio 830 565 171 115
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Email Services 1,675 2,057 259 306
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Retail 1,528 1,075 513 438
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Other 1,633 1,856 382 352
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Total $18,240 $17,199 $10,997 $9,584
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Note: For a complete comparison of revenue and cost of revenue by quarter
for 2007 and 2006, please see chart preceding the financial statements.Net revenue for the fourth quarter of fiscal 2007 increased 6% to $18.2
million from $17.2 million for the fourth quarter of fiscal 2006.
Adjusted Net Income for the fourth quarter of 2007 was $0.7 million,
compared to $1.0 million for the corresponding quarter of last year. Net loss
for the fourth quarter of 2007 was $0.9 million, or $0.01 per share, compared
with Net income of $0.2 million, or $0.00 per share, for the fourth quarter of
2006.
Adjusted Net Income for the year ended December 31, 2007 increased by 54%
to $8.9 million from $5.8 million for the year ended December 31, 2006. Net
income for the year ended December 31, 2007 was $2.7 million, or $0.04 per
share, compared to $2.2 million, or $0.03 per share for the year ended
December 31, 2006.
Deferred revenue at the end the fourth quarter of fiscal 2007 was $50.6
million, an increase of 12% from $45.1 million at the end of the fourth
quarter of fiscal 2006 and an increase of 2% from $49.8 million at the end of
the third quarter of fiscal 2007.
Cash, short-term investments and restricted cash at the end of the fourth
quarter of fiscal 2007 was $8.1 million compared to $6.2 million at the end of
the third quarter of fiscal 2007 and $7.3 million at the end of the fourth
quarter of fiscal 2006. The increase compared to the end of the third quarter
of fiscal 2007 is primarily the result of the generation of cash flow from
operations of $2.7 million during the fourth quarter of fiscal 2007.
EBITDA and Adjusted Net Income
To assist financial statement users in their assessment of the Company's
historical performance and to project its future earnings and cash flows, the
Company has included earnings before interest, taxes, depreciation and
amortization (EBITDA). EBITDA is presented because it is an important
supplemental measure of performance frequently used by securities analysts,
investors and other interested parties in the evaluation of companies. Other
companies may calculate EBITDA differently. EBITDA is not a measurement of
financial performance under generally accepted accounting principles (GAAP)
and should not be considered as an alternative to cash flow from operating
activities or as a measure of liquidity or an alternative to Net Income as
indicators of operating performance or any other measures of performance
derived in accordance with (GAAP). Because EBITDA is calculated before
recurring cash charges, including interest expense and taxes, and is not
adjusted for capital expenditures or other recurring cash requirements of the
business, it should not be considered as a measure of discretionary cash
available to invest in the growth of the business. See the Consolidated
Statements of Cash Flows included in the attached financial statements. As a
non-GAAP performance measure, EBITDA, has certain material limitations as
follows:- It does not include interest expense. Because the Company has
borrowed money to finance some of its operations, interest is a
necessary part of the Company's costs and ability to generate
revenue. Therefore, any measure that excludes interest has material
limitations;
- It does not include depreciation and amortization expense. Because
the Company must utilize capital assets in order to generate
revenues, depreciation and amortization expense is a necessary and
ongoing part of the Company's costs. Therefore, any measure that
excludes depreciation and amortization expense has material
limitations; and,
- It does not include taxes. Because the payment of taxes is a
necessary and ongoing part of the Company's operations, any measure
that excludes taxes has material limitations.Management compensates for these limitations by considering the economic
effect of the excluded expense items independently as well as in connection
with its analysis of net earnings.
Adjusted Net Income represents EBITDA plus the additional adjustments
described in the table below. The adjustments reflect the material amount of
cash collected by the Company for domain registrations and other Internet
services paid for the full term at the time of activation, with the revenue
deferred, net of prepaid fees. In addition, adjusted Net Income reflects
earnings and expenses considered as non-representative of ongoing business for
the reasons specified below. Each of the items being adjusted for may create
certain material limitations in the use of Adjusted Net Income as a non-GAAP
financial measure. Adjusted Net Income is one of the primary measures the
Company uses for planning and budgeting purposes, incentive compensation and
to monitor and evaluate Tucows' financial and operating results. Adjusted Net
Income is not a measurement of financial performance under GAAP and should not
be considered as an alternative to cash flow from operating activities or as a
measure of liquidity or an alternative to net income as indicators of
operating performance or any other measures of performance derived in
accordance with generally accepted accounting principles. See the Consolidated
Statements of Cash Flows included in the attached financial statements.
This release may contain forward-looking statements, relating to the
Company's operations or to the environment in which it operates, which are
based on Tucows Inc.'s operations, estimates, forecasts and projections. These
statements are not guarantees of future performance and are subject to
important risks, uncertainties and assumptions concerning future conditions
that may ultimately prove to be inaccurate or differ materially from actual
future events or results. A number of important factors could cause actual
outcomes and results to differ materially from those expressed in these
forward-looking statements. Consequently, investors should not place undue
reliance on these forward-looking statements, which are based on Tucows Inc.'s
current expectations, estimates, projections, beliefs and assumptions. These
forward-looking statements speak only as of the date of this presentation and
are based upon the information available to Tucows Inc. at this time. Tucows
Inc. disclaims any intention or obligation to update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise.
Conference Call
Tucows will host a conference call today, Thursday, February 7, at
5:00 ET to discuss the Company's fourth quarter and year ended December 31,
2007 results. To access the conference call via the internet go to
about.tucows.com and click on "Investors."
For those unable to participate in the conference call at the scheduled
time, it will be archived for replay both by telephone and via the Internet
beginning approximately one hour following completion of the call. To access
the archived conference call by telephone, dial 416-640-1917 or 1-877-289-8525
and enter the pass code 21261362 followed by the pound key. The telephone
replay will be available until Thursday, February 14, 2008 at midnight. To
access the archived conference call via the Internet, go to
http://about.tucows.com and click on "Investors."
About Tucows
Tucows provides Internet services for hosting companies and ISPs. Through
our global network of over 9,000 service providers we provide millions of
email boxes and manage over eight million domains. Tucows is an accredited
registrar with ICANN (the Internet Corporation for Assigned Names and
Numbers). Tucows.com remains one of the most popular software download sites
on the Internet. For more information please visit: http://about.tucows.com.Tucows Inc.
Summary Revenue and Cost of Revenue
(Dollar amounts in U.S.$000's)
(unaudited)
3 Months 3 Months 3 Months 3 Months Year
Ended Ended Ended Ended Ended
Mar 31, Jun 30, Sep 30, Dec 31, Dec 31,
2007 2007 2007 2007 2007
-------------------------------------------------
Revenues
Traditional Domain
Registration $11,901 $12,274 $12,332 $12,574 $49,081
Premium Domain Revenue 637 3,606 538 830 5,611
Messaging 2,133 1,881 1,771 1,675 7,460
Retail 1,207 1,208 1,462 1,528 5,405
Other 1,893 1,846 1,709 1,633 7,081
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TOTAL - Revenues $17,771 $20,815 $17,812 $18,240 $74,638
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Cost of revenues
Traditional Domain
Registration $8,731 $9,110 $9,159 $9,672 $36,672
Premium Domain Revenue 100 158 161 171 590
Messaging 247 253 197 259 956
Retail 405 417 441 513 1,776
Other 366 369 373 382 1,490
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TOTAL - Cost of
revenues $9,849 $10,307 $10,331 $10,997 $41,484
-------------------------------------------------
3 Months 3 Months 3 Months 3 Months Year
Ended Ended Ended Ended Ended
Mar 31, Jun 30, Sep 30, Dec 31, Dec 31,
2006 2006 2006 2006 2006
-------------------------------------------------
Revenues
Traditional Domain
Registration $10,667 $10,559 $11,272 $11,646 $44,144
Premium Domain Revenue 55 236 538 565 1,394
Messaging 1,907 2,067 2,151 2,057 8,182
Retail 948 936 1,043 1,075 4,002
Other 1,710 1,881 1,860 1,856 7,307
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TOTAL - Revenues $15,287 $15,679 $16,864 $17,199 $65,029
-------------------------------------------------
Cost of revenues
Traditional Domain
Registration $7,673 $7,492 $8,034 $8,373 $31,572
Premium Domain Revenue 2 17 36 115 170
Messaging 255 311 307 306 1,179
Retail 332 353 476 438 1,599
Other 345 347 345 352 1,389
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TOTAL - Cost of revenues $8,607 $8,520 $9,198 $9,584 $35,909
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Tucows Inc.
Consolidated Balance Sheets
(Dollar amounts in U.S. dollars)
(unaudited)
December 31, December 31,
2007 2006
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 8,093,476 $ 6,256,392
Restricted cash - 1,019,423
Accounts receivable 3,422,180 2,969,997
Prepaid expenses and deposits 3,132,129 2,394,627
Prepaid domain name registry and other
Internet services fees, current portion 25,473,465 22,168,558
Cash held in escrow 1,070,632 -
Deferred tax asset, current portion 2,000,000 1,000,000
------------- -------------
Total current assets 43,191,882 35,808,997
Prepaid domain name registry and other
Internet services fees, long-term portion 10,765,862 9,511,341
Property and equipment 4,963,311 5,647,532
Deferred financing charges 128,200 -
Deferred tax asset, long-term portion 1,000,000 2,000,000
Intangible assets 22,150,738 18,554,436
Goodwill 17,490,807 12,094,817
Investment 353,737 353,737
Cash held in escrow - 694,579
------------- -------------
Total assets $100,044,537 $ 84,665,439
------------- -------------
------------- -------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,689,346 $ 2,867,814
Accrued liabilities 3,289,087 2,567,012
Customer deposits 3,267,784 3,144,119
Promissory note payable, current portion 6,000,000 -
Loan payable, current portion 1,914,242 -
Deferred revenue, current portion 35,465,584 31,658,081
Accreditation fees payable, current portion 483,090 847,325
------------- -------------
Total current liabilities 53,109,133 41,084,351
Deferred revenue, long-term portion 15,147,644 13,478,525
Accreditation fees payable, long-term portion 181,345 163,988
Promissory note payable, long-term portion - 6,000,000
Loan payable, long-term portion 6,859,366 -
Deferred tax liability 5,396,000 5,396,000
Stockholders' equity:
Preferred stock - no par value,
1,250,000 shares authorized; none issued
and outstanding - -
Common stock - no par value, 250,000,000 shares
authorized; 73,888,542 shares issued and
outstanding at December 31, 2007 and
75,978,502 shares issued and outstanding at
December 31, 2006 15,350,915 15,395,381
Additional paid-in capital 48,537,313 50,359,906
Deficit (44,537,179) (47,212,712)
------------- -------------
Total stockholders' equity 19,351,049 18,542,575
------------- -------------
Total liabilities and stockholders' equity $100,044,537 $ 84,665,439
------------- -------------
------------- -------------
Tucows Inc.
Consolidated Statements of Operations
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended December 31, Year ended December 31,
2007 2006 2007 2006
------------- ------------- ------------- -------------
Net revenues $ 18,240,184 $ 17,199,194 $ 74,638,196 $ 65,029,490
Cost of revenues:
Cost of
revenues(*) 13,040,271 11,076,018 48,742,915 41,534,963
Depreciation of
property and
equipment 947,274 865,937 3,738,324 2,755,736
Amortization of
intangible assets 92,700 63,540 302,832 207,168
------------- ------------- ------------- -------------
Total cost of
revenues 14,080,245 12,005,495 52,784,071 44,497,867
------------- ------------- ------------- -------------
Gross profit 4,159,939 5,193,699 21,854,125 20,531,623
Expenses:
Sales and
marketing(*) 1,808,801 1,247,510 6,345,999 5,985,907
Technical
operations and
development(*) 1,422,012 1,816,264 6,710,841 8,152,138
General and
administrative(*) 1,168,285 1,624,594 4,735,132 5,890,123
Depreciation of
property and
equipment 64,994 98,015 263,101 223,131
Amortization of
intangible assets 396,041 233,301 1,174,864 669,476
------------- ------------- ------------- -------------
Total expenses 4,860,133 5,019,684 19,229,937 20,920,775
------------- ------------- ------------- -------------
Income (loss) from
operations (700,194) 174,015 2,624,188 (389,152)
Other income
(expenses):
Interest income
(expense), net (222,531) (24,731) (516,853) 110,525
Other income, net - - 619,014 2,347,026
------------- ------------- ------------- -------------
Total other
income (expense) (222,531) (24,731) 102,161 2,457,551
------------- ------------- ------------- -------------
Income before
provision for
income taxes (922,725) 149,284 2,726,349 2,068,399
Provision for
income taxes 12,000 (7,140) 50,816 (92,035)
------------- ------------- ------------- -------------
Net income (loss)
for the period $ (934,725) $ 156,424 $ 2,675,533 $ 2,160,434
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic earnings
per common share $ (0.01) $ 0.00 $ 0.04 $ 0.03
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Shares used in
computing basic
earnings per
common share 73,805,296 75,856,208 74,361,470 74,032,830
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted earnings
per common share $ (0.01) $ 0.00 $ 0.03 $ 0.03
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Shares used in
computing diluted
earnings per
common share 75,990,226 78,186,255 77,046,519 76,489,381
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(*)Stock-based
compensation has
been included in
expenses as
follows:
Cost of
revenues $ 4,000 $ 2,000 $ 15,000 $ 9,700
Sales and
marketing $ 19,100 $ 14,100 $ 80,200 $ 64,900
Technical
operations
and
development $ 16,500 $ 19,400 $ 78,800 $ 91,700
General and
administra-
tive $ 29,500 $ 52,540 $ 147,600 $ 131,740
Tucows Inc.
Reconciliation of EBITDA and Adjusted Net Income
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended December 31, Year ended December 31,
2007 2006 2007 2006
------------- ------------- ------------- -------------
Net income (loss)
for the period $ (934,725) $ 156,424 $ 2,675,533 $ 2,160,434
Depreciation of
property and
equipment 1,012,268 963,952 4,001,425 2,978,867
Amortization of
intangible assets 488,741 296,841 1,477,696 876,644
Interest income
(expense), net 222,531 24,731 516,853 (110,525)
Provision for
income taxes 12,000 (7,140) 50,816 (92,035)
------------- ------------- ------------- -------------
EBITDA 800,815 1,434,808 8,722,323 5,813,385
------------- ------------- ------------- -------------
Adjustments to
EBITDA(1)
Change in prepaid
domain name
registry and
other Internet
services fees (1,010,927) (572,163) (4,559,427) (5,801,972)
Change in
deferred revenue 765,306 400,162 5,476,621 7,102,935
Dividend income - - (619,014) -
Transitional costs 105,209 - 349,545 1,278,842
Other income - - - (2,347,026)
Reversal of
contingencies - (237,500) (451,249) (237,500)
------------- ------------- ------------- -------------
Subtotal Adjustments
to EBITDA (140,412) (409,501) 196,476 (4,721)
------------- ------------- ------------- -------------
Adjusted Net
Income $ 660,403 $ 1,025,307 $ 8,918,799 $ 5,808,664
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(1) Adjustments to EBITDA
We define Adjusted EBITDA as net income adjusted for depreciation,
amortization, interest, taxes and further adjusted for certain cash and
non-cash charges.
The net amount of cash we collected for domain registrations and other
Internet services paid for the full term at the time of activation and
deferred amounted to $917,194 for the year ended December 31, 2007
compared to $1,300,963 for the year ended December 31, 2006.
For the three and twelve months ended December 31, 2007, we incurred
$105,209 and $349,545 of transitional costs in connection with our
acquisition of Innerwise Inc., respectively
For the year ended December 31, 2006, we incurred $1.3 million of
transitional costs in connection with our acquisition of the Hosted
Messaging assets of Critical Path. In addition, during the year ended
December 31, 2006, we received $2.3 million in connection with
settlements related to patents we acquired in the merger with Infonautics
in 2001.
Tucows Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in U.S. dollars)
(unaudited)
Three months ended December 31, Year ended December 31,
2007 2006 2007 2006
Cash provided by
(used in):
Operating
activities:
Net income for
the period $ (934,725) $ 156,424 $ 2,675,533 $ 2,160,434
Items not
involving cash:
Depreciation
of property
and equipment 1,012,268 963,952 4,001,425 2,978,867
Amortization of
intangible
assets 488,741 296,841 1,477,696 876,644
Unrealized change
in the fair
value of forward
exchange
contracts 666,861 625,487 (497,253) 574,762
Stock-based
compensation 69,100 88,040 321,600 298,040
Change in non-cash
operating working
capital:
Interest receivable - - - 39,574
Accounts
receivable 549,770 2,787,229 (425,959) (1,475,715)
Prepaid expenses
and deposits (323,705) (225,711) (485,374) 141,897
Prepaid fees for
domain name
registry and
other Internet
services fees (1,010,927) (572,163) (4,559,427) (5,801,972)
Deferred
financing
charges 14,400 - (128,200) -
Accounts payable 839,356 (111,467) (67,268) 745,581
Accrued
liabilities 250,812 (1,158,124) 902,001 44,828
Customer
deposits 289,225 292,691 123,665 867,482
Deferred revenue 765,306 400,162 5,476,621 7,102,935
Accreditation
fees payable 3,405 354,150 (346,878) 264,716
------------- ------------- ------------- -------------
Cash provided by
operating
activities 2,679,887 3,897,511 8,468,182 8,818,073
------------- ------------- ------------- -------------
Financing activities:
Proceeds received
on exercise of
stock options 54,040 107,648 258,295 206,608
Repurchase of shares - - (2,446,955) -
Repayment of promissory
note payable - - - (2,122,930)
Proceeds received on
loan payable, net
of repayments (478,561) - 8,773,608 -
------------- ------------- ------------- -------------
Cash provided by
(used in) financing
activities (424,521) 107,648 6,584,948 (1,916,322)
------------- ------------- ------------- -------------
Investing activities:
Cost of domain
names acquired (5,573) - (23,998) -
Additions to
property and
equipment (315,037) (528,525) (3,408,403) (4,607,774)
Decrease in
investment in
short-term
investments - - - 1,771,569
Decrease (increase)
in restricted cash
- being margin
security against
forward exchange
contracts 255,000 (756,588) 1,019,423 (959,423)
Acquisition of
Mailbank.com Inc.,
net of cash acquired - - - (6,486,732)
Acquisition of Hosted
Messaging Assets
from Critical Path
Inc., net of
cash acquired - (95,532) (90,050) (7,552,320)
Acquisition of
Boardtown Corporation,
net of cash acquired - (22,200) (4,900) (44,900)
Acquisition of
Innerwise Inc., net
of cash acquired - - (10,332,065) -
(Increase) decrease
in cash held
in escrow (12,012) 107,145 (376,053) (113,867)
------------- ------------- ------------- -------------
Cash used in
investing
activities (77,622) (1,295,700) (13,216,046) (17,993,447)
------------- ------------- ------------- -------------
Increase (decrease)
in cash and
cash equivalents 2,177,744 2,709,459 1,837,084 (11,091,696)
Cash and cash
equivalents,
beginning of
period 5,915,732 3,546,933 6,256,392 17,348,088
------------- ------------- ------------- -------------
Cash and cash
equivalents,
end of period $ 8,093,476 $ 6,256,392 $ 8,093,476 $ 6,256,392
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Supplemental cash
flow information:
Interest paid $ 299,895 $ 105,000 $ 784,263 $ 254,502
Supplementary
disclosure of
non-cash investing
activity:
Capital assets
acquired during
the period not
yet paid for $ 273,070 $ 384,270 $ 273,070 $ 384,270
Loan taken on
the acquisition
of Innerwise
Inc. $ 9,571,209 $ - $ 9,571,209 $ -
For further information: Leona Hobbs, Director, Communications, Tucows
Inc., (416) 538-5450, ir@tucows.com; Charles Messman, President, MKR Group,
(323) 468-2300, tcx@mkr-group.com
