TORONTO, May 8, 2023
/CNW/ - Tucows Inc. (NASDAQ: TCX) (TSX: TC), a global internet
services leader, today reported its financial results for the first
quarter ended March 31, 2023. All
figures are in U.S. dollars.
"Our first quarter results show the resilience of the Tucows
businesses in the face of macroeconomic uncertainty over the last
year, as well as the active role we're taking in managing our
operations for efficiency and long-term growth, said Elliot Noss, Tucows President and CEO. Our Ting
business saw a 21% increase in revenue year over year, and just
closed on $239 million in new
funding. Wavelo has accelerated subscriber migration, and saw a 63%
increase in revenue from last quarter. Our Tucows Domains business
has seen domains under management and transactions stabilize
post-pandemic, and we expect revenues and margin to similarly
return to incremental growth as we realize the benefits of foreign
exchange related price increases in the second half of 2022. And
we've used cash flow from Wavelo and Tucows Domains to reduce our
syndicated debt this quarter."
Financial Results
Consolidated net revenue for the first quarter of 2023 decreased
0.8% to $80.4 million from
$81.1 million for the first quarter
of 2022. The growth in Ting and Wavelo revenues was offset
primarily by a decrease in revenues in Tucows Domains. Although
domains under management and transactions have stabilized post
pandemic, there was a lower contribution from Expiry aftermarket
sales in our Domains business.
Gross profit for the first quarter of 2023 decreased 34% to
$14.1 million from $21.2 million for the first quarter of 2022. The
decrease in Gross profit was driven primarily by increased network
depreciation and impairment costs, as well as lower margin from our
Domains business related to the lower Expiry aftermarket sales and
prior year's elevated pandemic related results and the impact of
the foreign exchange related price increases not being fully
realized yet. The decrease in Gross profit was partially offset by
growth in the gross margin for both Ting and Wavelo.
Net loss for the first quarter of 2023 was $19.1 million, or a loss of $1.77 per share, compared with net loss of
$3.0 million, or $0.28 per share, for the first quarter of 2022,
with the loss being the result of accelerated build of our Ting
Fiber Network and scaling up of operations, network depreciation,
higher stock based compensation, and higher interest expenses.
Adjusted EBITDA1 for the first quarter of 2023
decreased 73% to $3.0 million from
$11.3 million for the first quarter
of 2022. The decrease in adjusted EBITDA1 was primarily
related to expected and reduced contributions from Ting and Wavelo,
which have both made significant investments over the past year to
support future growth. To a lesser extent the adjusted EBITDA
decrease is also related to lower contribution from Expiry
aftermarket sales in our Domains business.
Cash and cash equivalents at the end of the first quarter of
2023 were $11.8 million compared with
$23.5 million at the end of the
fourth quarter of 2022 and $6.2
million at the end of the first quarter of 2022.
Summary Financial Results
(In
Thousands of US Dollars, Except Per Share Data)
|
3 Months ended March
31
|
2023
(Unaudited)
|
2022
(Unaudited)
|
% Change
|
Net
Revenues
|
80,430
|
81,099
|
(0.8) %
|
Gross
Profit
|
14,061
|
21,198
|
(34) %
|
Income Earned on
Sale of Transferred Assets, net
|
4,370
|
4,752
|
(8.0) %
|
Net Income
(Loss)
|
(19,083)
|
(3,020)
|
(532) %
|
Basic earnings
(Loss) per common share
|
(1.77)
|
(0.28)
|
(532) %
|
Adjusted
EBITDA1
|
3,030
|
11,311
|
(73) %
|
Net cash by (used
in) operating activities
|
(5,251)
|
5,407
|
(197) %
|
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
March
31
|
3 Months
ended
March
31
|
3 Months
ended
March
31
|
|
2023
(Unaudited)
|
2022
(Unaudited)
|
2023
(Unaudited)
|
2022
(Unaudited)
|
2023
(Unaudited)
|
2022
(Unaudited)
|
Ting:
|
Fiber Internet
Services
|
11,853
|
9,788
|
7,868
|
5,750
|
(9,273)
|
(4,321)
|
Wavelo:
|
Platform
Services
|
6,498
|
6,097
|
6,164
|
5,912
|
|
|
Other Professional
Services
|
802
|
750
|
110
|
(26)
|
|
|
Total Wavelo Platform
Services
|
7,300
|
6,847
|
6,274
|
5,886
|
335
|
2,047
|
Tucows
Domains:
|
Wholesale
|
|
|
|
|
|
|
Domain
Services
|
46,293
|
46,836
|
9,291
|
10,439
|
|
|
Value Added
Services
|
4,531
|
5,649
|
3,925
|
4.993
|
|
|
Total
Wholesale
|
50,824
|
52,485
|
13,216
|
15,432
|
|
|
|
|
|
|
|
|
|
Retail
|
8,418
|
9,061
|
4,305
|
4,302
|
|
|
Total Tucows
Domains
|
59,242
|
61,546
|
17,521
|
19,734
|
10,338
|
11,774
|
Tucows
Corporate:
|
Central Administration,
Mobile Services and Eliminations
|
2,035
|
2,918
|
(523)
|
308
|
1,630
|
1,811
|
Network
Expenses:
|
Network, other
costs
|
n/a
|
n/a
|
(6,323)
|
(4,180)
|
n/a
|
n/a
|
Network, depreciation
of property and equipment
|
n/a
|
n/a
|
(8,436)
|
(5,895)
|
n/a
|
n/a
|
Network, amortization
of intangible assets
|
n/a
|
n/a
|
(378)
|
(378)
|
n/a
|
n/a
|
Network, impairment of
property and equipment
|
n/a
|
n/a
|
(1,942)
|
(27)
|
n/a
|
n/a
|
Total Network
expenses
|
n/a
|
n/a
|
(17,079)
|
(10,480)
|
n/a
|
n/a
|
|
|
|
|
|
|
|
Total
|
80,430
|
81,099
|
14,061
|
21,198
|
3,030
|
11,311
|
1. This Non-GAAP
financial measure is described below and reconciled to GAAP net
income in the accompanying table.
|
Notes:
1. Adjusted EBITDA
Tucows reports all financial information required in accordance
with United States generally
accepted accounting principles (GAAP). Along with this information,
to assist financial statement users in an assessment of our
historical performance, the Company typically discloses and
discusses a non-GAAP financial measure, adjusted EBITDA, in press
releases and on investor conference calls and related events that
exclude certain non-cash and other charges as the Company believes
that the non-GAAP information enhances investors' overall
understanding of our financial performance.
The Company believes that the provision of this supplemental
non-GAAP measure allows investors to evaluate the operational and
financial performance of the Company's core business using similar
evaluation measures to those used by management. The Company uses
adjusted EBITDA to measure its performance and prepare its budgets.
Since adjusted EBITDA is a non-GAAP financial performance measure,
the Company's calculation of adjusted EBITDA may not be comparable
to other similarly titled measures of other companies; and should
not be considered in isolation, as a substitute for, or superior to
measures of financial performance prepared in accordance with GAAP.
Because adjusted EBITDA is calculated before certain 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 liquidity measure.
Non-GAAP financial measures do not reflect a comprehensive system
of accounting and may differ from non-GAAP financial measures with
the same or similar captions that are used by other companies
and/or analysts and may differ from period to period. The Company
endeavors to compensate for these limitations by providing the
relevant disclosure of the items excluded in the calculation of
adjusted EBITDA to net income based on U.S. GAAP, which should be
considered when evaluating the Company's results. Tucows strongly
encourages investors to review its financial information in its
entirety and not to rely on a single financial measure.
The Company's adjusted EBITDA definition excludes depreciation,
impairment and loss on disposition of property and equipment,
amortization of intangible assets, income tax provision, interest
expense (net), accretion of contingent consideration, stock-based
compensation, asset impairment, gains and losses from unrealized
foreign currency transactions and costs that are not indicative of
on-going performance (profitability), including acquisition and
transition costs. Gains and losses from unrealized foreign currency
transactions removes the unrealized effect of the change in the
mark-to-market values on outstanding unhedged foreign currency
contracts, as well as the unrealized effect from the translation of
monetary accounts denominated in non-U.S. dollars to U.S.
dollars.
The following table reconciles income before provision for
income taxes to Adjusted EBITDA (dollars in thousands):
|
3 months ended March
31
|
|
2023
(Unaudited)
|
2022
(Unaudited)
|
Net income (Loss)
for the period
|
(19,083)
|
(3,020)
|
Less:
|
|
|
Provision for income
taxes
|
(1,710)
|
1,078
|
Depreciation of
property and equipment
|
8,588
|
6,043
|
Impairment and loss on
disposition of property and equipment
|
1,942
|
412
|
Amortization of
intangible assets
|
2,872
|
2,843
|
Interest expense,
net
|
7,880
|
1,796
|
Accretion of contingent
consideration
|
-
|
98
|
Stock-based
compensation
|
2,246
|
1,391
|
Unrealized loss (gain)
on foreign exchange revaluation of foreign denominated monetary
assets and liabilities
|
40
|
53
|
Acquisition and
transition costs*
|
255
|
617
|
|
|
|
Adjusted
EBITDA
|
3,030
|
11,311
|
* Acquisition and other costs represent transaction-related
expenses, transitional expenses, such as redundant post-acquisition
expenses, primarily related to our acquisitions, including Simply
Bits in November 2021. Expenses
include severance or transitional costs associated with department,
operational or overall company restructuring efforts, including
geographic alignments.
Management Commentary
Concurrent with the dissemination of its quarterly financial
results news release at 5:05 p.m. ET on
Monday, May 8, 2023, management's pre-recorded audio
commentary (and transcript), discussing the quarter and outlook for
the Company will be posted to the Tucows website
at http://www.tucows.com/investors/financials.
Following management's prepared commentary, for the subsequent
seven days, until Monday, May 15,
2023, shareholders, analysts and prospective investors can
submit questions to Tucows' management at ir@tucows.com. Management
will post responses to questions in an audio recording and
transcript to the Company's website
at http://www.tucows.com/investors/financials, on Tuesday, May 30, 2023, at approximately
4 p.m. ET. All questions will receive
a response, however, questions of a more specific nature may be
responded to directly.
About Tucows
Tucows helps connect more people to the benefit of internet
access through communications service technology, domain services,
and fiber-optic internet infrastructure. Ting (https://ting.com)
delivers fixed fiber Internet access with outstanding customer
support. Wavelo (https://wavelo.com) is a telecommunications
software suite for service providers that simplifies the management
of mobile and internet network access; provisioning, billing and
subscription; developer tools; and more. Tucows Domains
(https://tucowsdomains.com) manages approximately 24 million domain
names and millions of value-added services through a global
reseller network of over 35,000 web hosts and ISPs. Hover
(https://hover.com) makes it easy for individuals and small
businesses to manage their domain names and email addresses. More
information can be found on Tucows' corporate website
(https://tucows.com).
Tucows, Ting, Wavelo, and Hover are registered trademarks of
Tucows Inc. or its subsidiaries.
This release includes forward-looking statements as that term
is defined in the U.S. Private Securities Litigation Reform Act of
1995, including statements regarding our expectations regarding our
future financial results and, including, without limitation, our
expectations regarding our ability to realize synergies from the
Enom acquisition and our expectation for growth of Ting Internet.
These statements are based on management's current expectations and
are subject to a number of uncertainties and risks that could cause
actual results to differ materially from those described in the
forward-looking statements. Information about other potential
factors that could affect Tucows' business, results of operations
and financial condition is included in the Risk Factors sections of
Tucows' filings with the Securities and Exchange Commission. All
forward-looking statements should be evaluated with the
understanding of their inherent uncertainty. All forward-looking
statements are based on information available to Tucows as of the
date they are made. Tucows assumes no obligation to update any
forward-looking statements, except as may be required by
law.
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SOURCE Tucows Inc.