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TUCOWS INC. REPORTS FINANCIAL RESULTS FOR FOURTH QUARTER 2010

February 16, 2011

TORONTO, Feb. 16 /PRNewswire-FirstCall/ – Tucows Inc. (NYSE AMEX:TCX) (TSX:TC), a global
provider of domain names, email and other Internet services, today
reported its financial results for the fourth quarter ended December
31, 2010
. All figures are in U.S. dollars. 

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

  3 Months Ended

Dec. 31, 2010

(unaudited)

3 Months Ended

Dec. 31, 2009

(unaudited)

12 Months Ended

Dec 31, 2010

(unaudited)

12 Months Ended

Dec. 31, 2009

(unaudited)

Net revenues 22,077  20,330  84,579  80,939 
Gain (loss) on change in fair value of forward exchange contracts 298 277 (1,371) 4,180
Other income (16) (46) (116) 4,268
Net income for the period 1,237 1,746 2,117 12,241
Net earnings per common share 0.02 0.03 0.04 0.18
Net cash provided by operating activities 2,341  2,880  6,769  6,466 

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

  Revenue Cost of Revenue
  3 Months Ended

Dec. 31, 2010

(unaudited)

3 Months Ended

Dec 31, 2009

(unaudited)

3 Months Ended

Dec 31, 2010

(unaudited)

3 Months Ended

Dec 31, 2009

(unaudited)

OpenSRS:        
Domain services 17,308 15,211 14,565 12,578
Email services 529 799 104 110
Other services 1,104 1,130 366 410
Total OpenSRS services 18,941 17,140 15,035 13,098
         
YummyNames 1,531 1,521 181 193
Hover 1,172 1,208 398 443
Butterscotch 433 461 9 12
         
Network, other costs - - 1,148 1,248
Network, depreciation and amortization costs - - 313 285
Total revenues/cost of revenue 22,077 20,330 17,084 15,279

“The fourth quarter of 2010 capped off another year of strong financial
performance, highlighted by record revenue and solid cash flow from
operations,” said Elliot Noss, President and CEO of Tucows. “We believe
our performance for the quarter and the year once again underscores the
consistency and reliability in our business.  As we look ahead, the
fundamentals of our business remain strong.  The combination of our
powerful distribution channel and our demonstrated ability to
capitalize on opportunities as our market evolves position us to
reliably generate cash in the context of growth and support our
objective to return capital to shareholders.”  

Net revenue for the fourth quarter of 2010 increased 8.6% to $22.1
million
from $20.3 million for the fourth quarter of 2009. 

Net income for the fourth quarter of 2010 was $1.2 million, or $0.02 per
share, compared with $1.7 million, or $0.03 per share, for the fourth
quarter of 2009.  Net income for the fourth quarter of 2009 benefited
from an income tax recovery of $0.5 million.  

Deferred revenue at the end of the fourth quarter of fiscal 2010 was
$62.6 million, an increase of 11.1% from $56.3 million at the end of
the fourth quarter of fiscal 2009 and an increase of less than 1% from
$62.3 million at the end of the third quarter of 2010. 

Cash and cash equivalents at the end of the fourth quarter of 2010 were
$4.2 million compared with $9.6 million at the end of the fourth
quarter of 2009 and $5.4 million at the end of third quarter of
2010. The decrease in cash and cash equivalents from the third quarter
of 2010 was primarily the result of the use of $2.8 million for the
repurchase of the Company’s shares, $0.5 million for repayment of the
Company’s bank loan and $0.3 million for investment in equipment, which
was partially offset by cash flow from operating activities of $2.3
million

As previously announced, during the fourth quarter, the Company
repurchased 3.9 million of its shares at a purchase price of $0.70 per
share, for a total of $2.8 million, under its modified “Dutch auction”
tender announced on September 7, 2010. In 2010, the Company
repurchased a total of 13.7 million shares for a total of $9.7 million
through both its modified Dutch tender offers and normal course issuer
bids (“Buyback Programs”), representing 20.4% of the Company’s
outstanding shares at the end of 2009.  Since initiating its first
share buyback program in February 2007, the Company has repurchased a
total of 23.2 million shares through its Buyback Programs representing
30.0% of the Company’s total shares outstanding at the end of January
2007
.  

Conference Call
Tucows management will host a conference call today, Wednesday, February
16, 2011
, at 5:00 p.m. (ET) to discuss the fourth quarter fiscal 2010
results. Participants can access the conference call via the Internet
at http://tucowsinc.com/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
416-849-0833 or 1-800-642-1687 and enter the pass code 43292662
followed by the pound key.  The telephone replay will be available
until Wednesday, February 23, 2011 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 ten
million domain names and millions of email boxes through a reseller
network of over 11,000 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 or resale. Butterscotch.com is an online video
network building on the foundation of Tucows.com. More information can
be found at http://tucowsinc.com

This release includes forward-looking statements as that term is defined
in the U.S. Private Securities Litigation Reform Act of 1995.  In
particular, this release includes forward looking statements regarding
our expectations as to our financial results, our future growth and our
ability to generate cash and return capital to shareholders.  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 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.  

TUCOWS is a registered trademark of Tucows Inc. or its subsidiaries. All
other trademarks and service marks are the properties of their
respective owners.

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

         
    December 31,   December 31,
    2010   2009
    (unaudited)   (unaudited)
         
Assets        
         
Current assets:        
  Cash and cash equivalents   $ 4,205,729   $ 9,632,394
  Accounts receivable   3,021,995   2,822,045
  Prepaid expenses and deposits   2,363,876   2,498,922
  Derivative instrument asset, current portion   833,960   2,107,825
  Prepaid domain name registry and ancillary services fees, current
portion
  37,016,871   31,596,236
  Income taxes recoverable   620,000   674,000
    Total current assets   48,062,431   49,331,422
         
Derivative instrument asset, long-term portion   -   96,845
Prepaid domain name registry and ancillary services fees, long-term
portion
  12,820,479   12,126,515
Property and equipment   1,552,349   1,986,768
Deferred financing charges   15,600   41,000
Deferred tax asset, long-term portion   4,155,600   3,907,476
Intangible assets   16,883,401   18,656,353
Goodwill   17,990,807   17,990,807
    Total assets   $ 101,480,667   $ 104,137,186
         
         
Liabilities and Stockholders‘ Equity        
         
Current liabilities:        
  Accounts payable   $ 1,664,006   $ 1,547,863
  Accrued liabilities   1,346,436   1,889,980
  Customer deposits   3,960,312   3,624,317
  Loan payable, current portion   1,305,883   3,220,125
  Deferred revenue, current portion   45,832,374   40,211,766
  Accreditation fees payable, current portion   547,810   530,656
  Deferred tax liability, current portion   1,155,600   907,476
    Total current liabilities   55,812,421   51,932,183
         
Deferred revenue, long-term portion   16,738,429   16,098,812
Accreditation fees payable, long-term portion   168,580   169,620
Deferred tax liability, long-term portion   4,840,000   4,840,000
         
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; 53,448,591
shares issued and outstanding as of December 30, 2010 and 67,080,353
shares issued and outstanding as of December 31, 2009
  11,324,866   14,030,384
  Additional paid-in capital   40,700,587   47,287,351
  Deficit   (28,104,216)   (30,221,164)
    Total stockholders’ equity   23,921,237   31,096,571
Total liabilities and stockholders’ equity   $ 101,480,667   $ 104,137,186

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

                 
      Three months ended December 31,       Year ended December 31,  
    2010   2009   2010   2009
      (unaudited)       (unaudited)  
                 
Net revenues $ 22,077,286 $ 20,329,540 $ 84,578,505 $ 80,939,212
                 
Cost of revenues:                
  Cost of revenues (*)   15,623,360   13,745,834   58,494,849   53,187,917
  Network expenses   1,148,073   1,247,958   4,648,899   4,748,189
  Depreciation of property and equipment   238,000   256,357   1,032,368   1,673,191
  Amortization of intangible assets   74,802   29,199   299,208   116,796
    Total cost of revenues   17,084,235   15,279,348   64,475,324   59,726,093
                 
Gross profit   4,993,051   5,050,192   20,103,181   21,213,119
                 
Expenses:                
  Sales and marketing (*)   1,737,526   1,550,937   7,217,754   5,812,007
  Technical operations and development (*)   1,091,180   1,128,879   4,577,898   4,550,704
  General and administrative (*)   830,012   950,749   2,879,825   5,558,921
  Depreciation of property and equipment   43,285   35,915   170,844   266,251
  Loss on disposition of property and equipment     524     40,893
  Amortization of intangible assets   360,540   360,540   1,442,160   1,442,160
  Loss (gain) on change in fair value of forward exchange contracts   (298,321)   (277,195)   1,370,710   (4,179,589)
    Total expenses   3,764,222   3,750,349   17,659,191   13,491,347
                 
Income from operations   1,228,829   1,299,843   2,443,990   7,721,772
                 
Other (expenses) income:                
  Interest (expense) income, net   (16,385)   (46,471)   (116,197)   (225,140)
  Other income   -   -   -   4,493,190
    Total other (expenses) income   (16,385)   (46,471)   (116,197)   4,268,050
                 
Income before provision for income taxes   1,212,444   1,253,372   2,327,793   11,989,822
                 
(Recovery of) provision for income taxes   (24,260)   (493,005)   210,845   (251,384)
Net income for the period $ 1,236,704 $ 1,746,377 $ 2,116,948 $ 12,241,206
                 
                 
Basic earnings per common share $ 0.02 $ 0.03 $ 0.04 $ 0.18
                 
Shares used in computing basic earnings per common share   54,203,289   67,076,782   57,982,248   69,145,001
                 
Diluted earnings per common share $ 0.02 $ 0.03 $ 0.04 $ 0.17
                 
Shares used in computing diluted earnings per common share   56,294,238   68,860,034   59,955,788   70,356,013
                 
                 
(*) Stock-based compensation has been included in expenses as follows:                
    Cost of revenues $ 6,647 $ 3,730 $ 22,406 $ 15,957
    Sales and marketing $ 24,711 $ 16,018 $ 96,300 $ 58,782
    Technical operations and development $ 19,109 $ 15,186 $ 71,012 $ 49,302
    General and administrative $ 35,847 $ 28,579 $ 210,284 $ 171,220

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

                 
      Three months ended December 31,       Year ended December 31,  
    2010   2009   2010   2009
Cash provided by (used in):     (unaudited)       (unaudited)  
Operating activities:                
  Net income for the period $ 1,236,704 $ 1,746,377   2,116,948 $ 12,241,206
  Items not involving cash:                
    Depreciation of property and equipment   281,285   292,272   1,203,212   1,939,442
    Loss on disposition of property and equipment     524     40,893
    Amortization of deferred financing charges   5,300   8,300   25,400   37,500
    Amortization of intangible assets   435,342   389,739   1,741,368   1,558,956
    Gain on disposal of investment in Afilias         (3,890,395)
    Reduction in deferred tax liability     (59,000)     (556,000)
    Disposal of domain names   14,494   2,866   31,584   5,462
    Unrealized (gain) loss in the fair value of forward contracts   (298,321)   (277,195)   1,370,710   (4,179,589)
    Stock-based compensation   86,314   63,513   400,002   295,261
  Changes in non-cash operating working capital:                
    Accounts receivable   310,282   1,107,837   (199,950)   378,317
    Prepaid expenses and deposits   73,690   244,583   135,046   (224,879)
    Prepaid fees for domain name registry and ancillary services fees   (328,041)   (65,694)   (6,114,599)   (2,654,170)
    Income taxes recoverable   (73,000)   (674,000)   54,000   (674,000)
    Accounts payable   408,414   424,977   (35,210)   (172,583)
    Accrued liabilities   (307,613)   1,553   (571,930)   (110,166)
    Customer deposits   257,848   (140,003)   335,995   305,076
    Deferred revenue   236,335   (191,381)   6,260,225   2,122,953
    Accreditation fees payable   2,232   4,811   16,114   2,354
  Net cash provided by operating activities   2,341,265   2,880,079   6,768,915   6,465,638
                 
Financing activities:                
  Proceeds received on exercise of stock options       14,809   25,422
  Repurchase of common stock   (2,792,301)   (534,467)   (9,707,093)   (2,915,981)
  Repayment of loan payable   (478,560)   (478,560)   (1,914,242)   (2,639,242)
  Net cash used in financing activities   (3,270,861)   (1,013,027)   (11,606,526)   (5,529,801)
                 
Investing activities:                
  Cost of domain names acquired     (7,875)     (13,775)
  Additions to property and equipment   (296,264)   (381,238)   (589,054)   (807,530)
  Proceeds on disposal of investment in Afilias         4,090,395
  Net cash (used in) provided by investing activities   (296,264)   (389,113)   (589,054)   3,269,090
                 
Increase (decrease) in cash and cash equivalents   (1,225,860)   1,477,939   (5,426,665)   4,204,927
                 
Cash and cash equivalents, beginning of period   5,431,589   8,154,455   9,632,394   5,427,467
Cash and cash equivalents, end of period $ 4,205,729 $ 9,632,394   4,205,729 $ 9,632,394
                 
Supplemental cash flow information:                
  Interest paid $ 16,444 $ 46,604   116,242 $ 227,616
                 
Supplementary disclosure of non-cash investing activity:                
  Property and equipment acquired during the period not yet paid for $ 273,333 $ 93,594   273,333 $ 93,594

SOURCE Tucows Inc.


Source: newswire



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