Tucows Inc. reports financial results for the first quarter of 2009



    
    - Eight-Year High in New Registrations Contributes to Strong Growth in
    Revenue and Profitability -
    

    TORONTO, May 13 /CNW/ - Tucows Inc., (AMEX:  TCX, TSX:TC) a global provider
of domain names, email and other Internet services, today reported its
financial results for the first quarter of 2009 ended March 31, 2009. All
figures are in U.S. dollars.
    "During the first quarter of 2009, we saw continued strength in domain
registrations through our OpenSRS wholesale services business, marked by the
highest number of new registrations since the second quarter of 2000 and
strong year-over-year growth in renewal transactions," said Elliot Noss,
President and CEO of Tucows. "In our YummyNames branded domain portfolio
business, we completed a $1 million bulk domain name sale and executed an
arrangement with the buyer committing them to ongoing domain purchases over
the next 12 to 18 months. The contributions from these businesses in the first
quarter resulted in strong revenue growth, profitability and solid cash flow
from operations."

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

    -------------------------------------------------------------------------
                                                      3 Months     3 Months
                                                       Ended        Ended
                                                      Mar. 31,     Mar. 31,
                                                        2009         2008
                                                     (unaudited)  (unaudited)
    -------------------------------------------------------------------------
    Net Revenue                                         $20,091      $18,711
    -------------------------------------------------------------------------
    Net Income (Loss)                                       964       (1,082)
    -------------------------------------------------------------------------
    Net Income (Loss)/Share                                0.01        (0.01)
    -------------------------------------------------------------------------
    Cash Flow from Operations                               913          117
    -------------------------------------------------------------------------



                   Summary of Revenue and Cost of Revenue
                     (Numbers in Thousands of US Dollars)

    -------------------------------------------------------------------------
                                   Revenue               Cost of Revenue
    -------------------------------------------------------------------------
                            3 Months     3 Months     3 Months     3 Months
                             Ended        Ended        Ended        Ended
                            Mar. 31,     Mar. 31,     Mar. 31,     Mar. 31,
                              2009         2008         2009         2008
                           (unaudited)  (unaudited)  (unaudited)  (unaudited)
    -------------------------------------------------------------------------
    Traditional Domain
     Registration Services    $14,156      $12,871      $11,355       $9,936
    -------------------------------------------------------------------------
    Domain Portfolio Services   1,911          905          185          178
    -------------------------------------------------------------------------
    Email Services              1,122        1,575          180          107
    -------------------------------------------------------------------------
    Retail Services             1,301        1,641          513          567
    -------------------------------------------------------------------------
    Other Services              1,601        1,719          396          412
    -------------------------------------------------------------------------
    Total                     $20,091      $18,711      $12,629      $11,200
    -------------------------------------------------------------------------
    

    Net revenue for the first quarter of 2009 increased 7.4% to $20.1 million
from $18.7 million for the first quarter of 2008. The increase was primarily
the result of growth in both new registrations and renewals from our domain
registration service, as well as higher domain portfolio sales.
    Net income for the first quarter of 2009 was $1.0 million, or $0.01 per
share, compared with a net loss of $1.1 million, or $0.01 per share, for the
first quarter of 2008. Net income for the first quarter included a loss on
foreign exchange of $0.7 million, inclusive of a mark to market gain of $0.1
million, compared to a loss on foreign exchange of $0.1 million, inclusive of
a mark to market loss of $0.3 million in the first quarter 2008.
    Deferred revenue at the end the first quarter of fiscal 2009 was $56.7
million, an increase of 5.7% from $53.6 million at the end of the first
quarter of fiscal 2008 and an increase of 4.5% from $54.2 million at the end
of the fourth quarter of fiscal 2008.
    Cash and cash equivalents at the end of the first quarter of fiscal 2009
was $4.0 million compared with $7.5 million at the end of the first quarter of
fiscal 2008 and $5.4 million at the end of the fourth quarter of fiscal 2008.
This decrease in cash compared with the fourth quarter of 2008 is primarily
the result of the Company's repurchase of its shares valued at $1.8 million
(including the Company's modified Dutch auction tender offer) and the
repayment of $479,000 of the Company's bank loan. This was partially offset by
the generation of cash from operations of $913,000.

    Conference Call

    Tucows will host a conference call today, Wednesday, May 13, 2009 at 5:00
p.m. ET to discuss the Company's first quarter fiscal 2009 results. To access
the conference call via the Internet go to http://tucowsinc.com/investors and
click on "Financials."
    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 21303435 followed by the pound key. The telephone
replay will be available until Wednesday, May 20, 2009 at midnight. To access
the archived conference call as an MP3 via the Internet, go to
http://tucowsinc.com/investors.

    About Tucows

    Tucows is a global Internet services company. OpenSRS manages over 8
million domain names and millions of email boxes through a reseller network of
over 9,000 web hosts and ISPs. Hover is the easiest way for individuals and
small businesses to manage their domain names and email addresses. YummyNames
owns premium domain names that generate revenue through advertising and
resale. Butterscotch.com is an online video network building on the foundation
of Tucows.com. More information can be found at http://tucowsinc.com.


    
                                 Tucows Inc.
                         Consolidated Balance Sheets
                       (Dollar amounts in U.S. dollars)

                                                   March 31,     December 31,
                                                     2009           2008
                                                -------------- --------------
                                                  (unaudited)    (unaudited)

    Assets

    Current assets:
      Cash and cash equivalents                  $  4,002,743   $  5,427,467
      Accounts receivable                           3,717,355      3,200,362
      Prepaid expenses and deposits                 2,852,611      2,274,043
      Prepaid domain name registry and other
       Internet services fees, current portion     31,016,360     29,212,610
      Deferred tax asset, current portion             590,000        590,000
                                                -------------- --------------
        Total current assets                       42,179,069     40,704,482

    Prepaid domain name registry and other
     Internet services fees, long-term portion     12,177,620     11,855,971
    Property and equipment                          2,571,889      3,072,958
    Deferred financing charges                         68,100         78,500
    Deferred tax asset, long-term portion           2,410,000      2,410,000
    Intangible assets                              19,822,184     20,206,996
    Goodwill                                       17,990,807     17,990,807
    Investment                                        200,000        200,000
                                                -------------- --------------
      Total assets                               $ 97,419,669   $ 96,519,714
                                                -------------- --------------
                                                -------------- --------------

    Liabilities and Stockholders' Equity

    Current liabilities:
      Accounts payable                           $  1,448,814   $  1,633,830
      Accrued liabilities                           2,130,796      2,000,146
      Customer deposits                             3,009,739      3,319,241
      Derivative instrument liability               1,889,576      1,974,919
      Loan payable, current portion                 2,624,242      2,624,242
      Deferred revenue, current portion            40,129,171     37,985,821
      Accreditation fees payable, current portion     585,514        510,548
      Income taxes payable                             83,305              -
                                                -------------- --------------
        Total current liabilities                  51,901,157     50,048,747

    Deferred revenue, long-term portion            16,521,830     16,201,804
    Accreditation fees payable, long-term portion     191,015        187,374
    Loan payable, long-term portion                 2,756,564      3,235,125
    Deferred tax liability, long-term portion       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; 66,888,092 shares
       issued and outstanding at March 31, 2009
       and 73,073,782 shares issued and
       outstanding at December 31, 2008            14,361,220     15,198,358
      Additional paid-in capital                   47,789,835     48,714,676
      Deficit                                     (41,497,952)   (42,462,370)
                                                -------------- --------------
        Total stockholders' equity                 20,653,103     21,450,664
                                                -------------- --------------
    Total liabilities and stockholders' equity   $ 97,419,669   $ 96,519,714
                                                -------------- --------------
                                                -------------- --------------


                                 Tucows Inc.
                    Consolidated Statements of Operations
                       (Dollar amounts in U.S. dollars)

                                                 Three months ended March 31,
                                                     2009           2008
                                                -------------- --------------
                                                         (unaudited)

    Net revenues                                 $ 20,091,424   $ 18,711,207

    Cost of revenues:
      Cost of revenues ((*))                       13,785,398     13,149,932
      Depreciation of property and equipment          452,709        825,837
      Amortization of intangible assets                29,199         73,457
                                                -------------- --------------
        Total cost of revenues                     14,267,306     14,049,226
                                                -------------- --------------

    Gross profit                                    5,824,118      4,661,981

    Expenses:
      Sales and marketing ((*))                     1,353,176      1,696,132
      Technical operations and development ((*))    1,104,139      1,565,854
      General and administrative ((*))              1,869,896      1,539,432
      Depreciation of property and equipment           86,405         61,070
      Amortization of intangible assets               360,540        385,161
      (Gain) / loss in fair value of forward
       exchange contracts                             (85,343)       255,433
                                                -------------- --------------
        Total expenses                              4,688,813      5,503,082
                                                -------------- --------------

    Income (loss) from operations                   1,135,305       (841,101)

    Other income (expenses):
      Interest income (expense), net                  (63,462)      (209,984)
                                                -------------- --------------
        Total other income (expenses)                 (63,462)      (209,984)
                                                -------------- --------------

    Income (loss) before provision for income
     taxes                                          1,071,843     (1,051,085)

    Provision for income taxes                        107,425         31,134
                                                -------------- --------------
    Net income (loss) for the period             $    964,418   $ (1,082,219)
                                                -------------- --------------
                                                -------------- --------------

    Basic earnings (loss) per common share       $       0.01   $      (0.01)
                                                -------------- --------------
                                                -------------- --------------

    Shares used in computing basic earnings
     (loss) per common share                       72,655,213     73,888,542
                                                -------------- --------------
                                                -------------- --------------

    Diluted earnings (loss) per common share     $       0.01   $      (0.01)
                                                -------------- --------------
                                                -------------- --------------

    Shares used in computing diluted earnings
     (loss) per common share                       72,657,604     73,888,542
                                                -------------- --------------
                                                -------------- --------------

    ((*))   Stock-based compensation has been included in expenses as follows:
          Cost of revenues                       $      5,000   $      4,300
          Sales and marketing                    $     14,900   $     18,300
          Technical operations and development   $     10,600   $     20,700
          General and administrative             $     18,700   $     28,900



                    Consolidated Statements of Cash Flows
                       (Dollar amounts in U.S. dollars)

                                                 Three months ended March 31,
                                                     2009           2008
                                                -------------- --------------
                                                         (unaudited)
    Cash provided by (used in):
    Operating activities:
      Net income (loss) or the period            $    964,418   $ (1,082,219)
      Items not involving cash:
        Depreciation of property and equipment        539,114        886,907
        Amortization of deferred financing charges     10,400         13,500
        Amortization of intangible assets             389,739        458,618
        Disposal of domain names                          973              -
        Unrealized (gain)/loss in the fair value
         of forward contracts                         (85,343)       255,433
        Stock-based compensation                       49,200         72,200
      Change in non-cash operating working capital:
        Accounts receivable                          (516,993)       (66,120)
        Prepaid expenses and deposits                (578,568)       139,689
        Prepaid fees for domain name registry and
         other Internet services fees              (2,125,399)    (2,530,601)
        Accounts payable                             (180,821)      (433,827)
        Accrued liabilities                           128,773       (529,247)
        Customer deposits                            (309,502)      (100,590)
        Deferred revenue                            2,463,376      2,978,934
        Accreditation fees payable                     78,607         56,816
        Income taxes payable                           85,182         (2,591)
                                                -------------- --------------

      Net cash provided by operating activities       913,156        116,902
                                                -------------- --------------

    Financing activities:
      Repurchase of shares                         (1,811,179)             -
      Repayment of loan payable                      (478,561)      (478,560)
                                                -------------- --------------

      Net cash used in financing activities        (2,289,740)      (478,560)
                                                -------------- --------------

    Investing activities:
      Cost of domain names acquired                    (5,900)        (6,420)
      Additions to property and equipment             (42,240)      (211,531)
      Decrease in cash held in escrow                       -         (7,399)
                                                -------------- --------------

      Net cash used in investing activities           (48,140)      (225,350)
                                                -------------- --------------

    Decrease in cash and cash equivalents          (1,424,724)      (587,008)

    Cash and cash equivalents, beginning of
     period                                         5,427,467      8,093,476
                                                -------------- --------------

    Cash and cash equivalents, end of period     $  4,002,743   $  7,506,468
                                                -------------- --------------
                                                -------------- --------------

    Supplemental cash flow information:
      Interest paid                              $     65,521   $    259,337

    Supplementary disclosure of non-cash
     investing activity:
      Property and equipment acquired during the
       period not yet paid for                   $      2,784   $    764,972
    





For further information:

For further information: Lawrence Chamberlain, The Equicom Group for
Tucows Inc., (416) 815-0700 ext. 257, lchamberlain@equicomgroup.com

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