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Tucows Reports Continuing Strong Financial Results for Fourth Quarter and Full Year 2018

2018 Highlighted by Record Revenue, Adjusted EBITDA2 and Cash Flow from Operations

TORONTO, Feb. 13, 2019 (GLOBE NEWSWIRE) -- Tucows Inc. (NASDAQ:TCX, TSX:TC), a provider of network access, domain names and other Internet services, today reported its financial results for the fourth quarter ended December 31, 2018. All figures are in U.S. dollars.

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

 3 Months Ended December 3112 Months Ended December 31
% Change2018
% Change
Net revenue85,61290,621-6%346,013329,4215%
Net income14,43611,199-60%17,13522,327-23%
Basic Net earnings per common share10.421.06-60%1.622.12-24%
Adjusted EBITDA2,316,63315,2769%50,05741,35721%
Net cash provided by operating activities10,66814,081-24%37,20931,89617%
  1. Net Income and Earnings Per Share for the fourth quarter and Fiscal 2017 reflected a net positive implementation impact from the Tax Cuts and Jobs Act of 2017 of $5.8 million and $0.55 per share, respectively.
  2. This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table.
  3. Adjusted EBITDA for the fourth quarter and twelve month period of 2017 reflect the impact of the purchase price accounting adjustment related to the fair value write down of deferred revenue from the Enom acquisition which lowered Adjusted EBITDA by $0.8 million and $7.8 million for the fourth quarter and twelve months of 2017, respectively.

Summary of Revenues and Gross profit
(In Thousands of US Dollars)

 RevenueGross profit
 3 Months ended 
December 31 
3 Months ended
December 31
Network Access Services:
Mobile Services22,51123,79511,093 11,094 
Other Services2,3201,5901,429 651 
Total Network Access Services24,83125,38512,522 11,745 
Domain Services:
Domain Services43,39648,3207,752 6,514 
Value Added Services4,1804,3053,438 3,733 
Total Wholesale47,57652,62511,190 10,247 
Retail8,8808,7114,475 4,141 
Portfolio4,3253,9003,900 3,376 
Total Domain Services60,78165,23619,565 17,764 
Network Expenses:
Network, other costs--(2,256)(2,260)
Network, depreciation and amortization costs--(2,100)(1,513)
Total Network expenses--(4,356)(3,773)
Total85,61290,62127,731 25,736 

“The fourth quarter once again saw solid, consistent performance across the business, highlighted by year-over-year gross profit expansion in both Domains and Network Access and 9% growth in adjusted EBITDA,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc.  “The quarter capped off another record year in terms of revenue, gross profit, adjusted EBITDA and cash flow from operations. As importantly, the cash generation of the Domains and Ting Mobile businesses fueled our build-out of the Ting Internet footprint that will drive our next phase of outsized growth.”

“Ting Internet made strong, steady progress throughout the year, growing our serviceable addresses, customers and recurring monthly revenue, adding a sixth town early in the year and readying for the seventh announced just last week. At Ting Mobile, we again delivered strong year-over-year growth in revenue, margin and gross profit. In our Domains business, we made significant progress in the integration of Enom, with more than half of the $5 million in expected EBITDA synergies now realized, as well as the development of the new platform, positioning this business for potential new growth opportunities.”

“All of these achievements position Tucows for an exciting 2019 in each of our businesses and improving growth that will drive long-term value for our shareholders.”

Financial Results

Net revenue for the fourth quarter of 2018 was $85.6 million compared with $90.6 million for the fourth quarter of 2017, with the decrease due primarily to acceleration of revenue related to the bulk transfer of 2.8 million very low margin domain names in the first and third quarters of 2018.  Excluding the impact of these of bulk transfers, net revenue for the fourth quarter of 2018 increased 2% compared to the fourth quarter of 2017.

Net income for the fourth quarter of 2018 was $4.4 million, or $0.42 per share compared with $11.2 million, or $1.06 per share, for the fourth quarter of 2017.  Net income for the fourth quarter of 2017 was positively impacted by the tax related implementation impacts from the Tax Cuts and Jobs Act of 2017 for $5.8 million or $0.55 per share.

Adjusted EBITDA1 for the fourth quarter of 2018 increased 9% to $16.6 million from $15.3 million for the fourth quarter of 2017. 

Cash and cash equivalents at the end of the fourth quarter of 2018 were $12.6 million compared with $10.8 million at the end of the third quarter of 2018 and $18.0 million at the end of the fourth quarter of 2017.


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 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, amortization of intangible assets, income tax provision, interest expense, interest income, stock-based compensation, asset impairment, gains and losses from unrealized foreign currency transactions and infrequently occurring items, including acquisition and transitions 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 net income to adjusted EBITDA (dollars in thousands):

 3 months ended December 3112 months ended December 31
Net income for the period 4,436 11,199 17,13522,327 
Depreciation of property and equipment  1,716  1,114 5,7223,727 
Amortization of intangible assets  2,290  2,330 9,2438,400 
Impairment of intangible assets-110 -111 
Interest expense, net  926865 3,6873,567 
Provision for income taxes5,239  (1,032)9,0201,748 
Stock-based compensation670623 2,5741,457 
Unrealized loss (gain) on change in fair value of forward contracts20154 20718 
Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities752(45)943(804)
Acquisition and transition costs*403  58  1,526806 
Adjusted EBITDA  16,633  15,276 50,05741,357 
*Acquisition and other costs represents transaction-related expenses, transitional expenses, such as duplicative post-acquisition expenses, primarily related to our acquisition of Enom in January 2017.  Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.

Conference Call
Concurrent with the dissemination of this news release, management’s pre-recorded remarks discussing the quarter and outlook for the Company have been posted to the Tucows web site at  In lieu of a live question and answer period, for the next five days (until Monday, February 18), shareholders, analysts and prospective investors can submit questions to Tucows’ management at Management will post responses to questions of general interest to the Company’s web site at on Tuesday, February 26 at approximately 4:00 p.m. ET.  All questions will receive a response, however, questions of a more specific nature may be responded to directly.

About Tucows
Tucows is a provider of network access, domain names and other Internet services. Ting ( delivers mobile phone service and fixed Internet access with outstanding customer support. OpenSRS ( and Enom ( manage a combined 23 million domain names and millions of value-added services through a global reseller network of over 37,000 web hosts and ISPs. Hover ( 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 (

 Tucows  Inc. 
 Consolidated Balance Sheets 
 (Dollar amounts in thousands of U.S. dollars) 
  December 31, December 31, 
   2018  2017* 
  (unaudited) (unaudited) 
Current assets:     
Cash and cash equivalents $  12,637  $  18,049 
Accounts receivable  10,837   12,376 
Inventory  3,775   2,944 
Prepaid expenses and deposits  15,472   14,186 
Prepaid domain name registry and ancillary services fees, current portion  87,782   103,302 
Income taxes recoverable  1,423   3,004 
Total current assets  131,926   153,861 
Prepaid domain name registry and ancillary services fees, long-term portion  18,745   23,701 
Property and equipment  48,065   24,620 
Contract costs  1,390   - 
Intangible assets  49,395   58,414 
Goodwill  90,054   90,054 
Total assets $  339,575  $  350,650 
Liabilities and Stockholders' Equity     
Current liabilities:     
Accounts payable $  8,445  $  7,026 
Accrued liabilities  5,899   6,412 
Customer deposits  11,919   15,255 
Derivative instrument liability  1,276   - 
Deferred rent, current portion  21   21 
Loan payable, current portion  18,400   18,290 
Deferred revenue, current portion  116,734   129,155 
Accreditation fees payable, current portion  985   1,175 
Income taxes payable  1,668   1,226 
Total current liabilities  165,347   178,560 
Deferred revenue, long-term portion  26,960   31,427 
Accreditation fees payable, long-term portion  250   289 
Deferred rent, long-term portion  116   130 
Loan payable, long-term portion  46,201   58,634 
Deferred Gain  -   429 
Deferred tax liability  20,925   19,834 
Redeemable non-controlling interest  -   1,136 
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; 10,627,988 shares issued and outstanding as of December 31, 2018 and 10,583,879 shares issued and outstanding as of December 31, 2017  15,823   15,368 
Additional paid-in capital  3,953   2,167 
Retained earnings  60,810   42,676 
Accumulated other comprehensive income  (810)  - 
Total stockholders' equity  79,776   60,211 
Total liabilities and stockholders' equity $  339,575  $  350,650 
*The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated.  


    Tucows  Inc.   
    Consolidated Statements of Operations   
    (Dollar amounts in thousands of U.S. dollars)   
Three months ended December 31, 
Year ended December 31, 
  2018  20171  2018  20171 
   (unaudited)   (unaudited) 
Net revenues$  85,612 $  90,621 $  346,013 $  329,421 
Cost of revenues:        
Cost of revenues   53,525    61,112    232,103    230,600 
Network expenses (*)   2,256    2,260    9,846    9,324 
Depreciation of property and equipment   1,601    1,014    5,298    3,142 
Amortization of intangible assets   499    499    1,996    1,834 
Total cost of revenues 57,881  64,885  249,243  244,900 
Gross profit 27,731  25,736  96,770  84,521 
Sales and marketing (*)   8,434    7,372    33,063    29,423 
Technical operations and development (*)   2,091    1,855    8,748    7,258 
General and administrative (*)   4,804    3,468    17,710    13,594 
Depreciation of property and equipment   115    100    424    585 
Amortization of intangible assets   1,791    1,831    7,247    6,566 
Impairment of indefinite life intangible assets -  110  -  111 
Loss (gain) on currency forward contracts   232    17    254    (98)
Total expenses 17,467  14,753  67,446  57,439 
Income from operations 10,264  10,983  29,324  27,082 
Other income (expenses):        
Interest expense, net (926) (865) (3,687) (3,567)
Other income, net 337  49  518  560 
Total other income (expenses) (589) (816) (3,169) (3,007)
Income before provision for income taxes 9,675  10,167  26,155  24,075 
Provision for income taxes 5,239  (1,032) 9,020  1,748 
Net income before redeemable non-controlling interest 4,436  11,199  17,135  22,327 
Redeemable non-controlling interest -    (75)   (26)   (387)
Net income attributable to redeemable non-controlling interest -  75  26  387 
Net income for the period 4,436  11,199  17,135  22,327 
Other comprehensive income, net of tax        
Unrealized income (loss) on hedging activities (910) (88) (1,022) 550 
Net amount reclassified to earnings 136  (234) 212  (650)
Other comprehensive income (loss) net of tax of $ 241 and $ 183 for the three months ended December 31, 2018 and  December 31, 2017, $ 259 and $ - for the year ended December 31, 2018 and  December 31, 2017 (774) (322) (810) (100)
Comprehensive income, net of tax for the period $ 3,662  $ 10,877  $ 16,325  $ 22,227 
Basic earnings per common share$0.42 $1.06 $1.62 $2.12 
Shares used in computing basic earnings per common share 10,621,181  10,580,429  10,604,722  10,537,356 
Diluted earnings per common share$0.41 $1.04 $1.59 $2.07 
Shares used in computing diluted earnings per common share 10,791,940  10,802,817  10,794,170  10,793,622 
(*) Stock-based compensation has been included in expenses as follows:        
Network expenses$70 $50 $223 $110 
Sales and marketing$286 $255 $1,025 $573 
Technical operations and development$135 $145 $636 $360 
General and administrative$179 $173 $690 $414 
1The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated. 


    Tucows  Inc.   
    Consolidated Statements of Cash Flows   
     (Dollar amounts in thousands of U.S. dollars)   
Three months ended December 31, 
Year ended December 31, 
  2018  2017* 2018  2017*
Cash provided by: (unaudited)   (unaudited) 
Operating activities:        
 Net income for the period  $ 4,436 $11,199  $ 17,135 $22,327 
Items not involving cash:        
Depreciation of property and equipment 1,716  1,114  5,722  3,727 
Loss on write off of property and equipment -  -  -  17 
Amortization of debt discount and issuance costs 70  69  281  273 
Amortization of intangible assets 2,290  2,330  9,243  8,400 
Net amortization contract costs (7) -  14  - 
Impairment of indefinite life intangible asset -  110  -  111 
Deferred income taxes (recovery) 1,899  (326) 1,038  (3,337)
Excess tax benefits on share-based compensation expense (165) (181) (697) (2,796)
Amortization of deferred rent (5) -  (14) 6 
Loss on disposal of domain names 271  266  341  291 
Other income (258) (129) (429) (515)
Loss (gain) on change in the fair value of forward contracts 194  54  207  17 
Stock-based compensation 670  623  2,574  1,457 
Change in non-cash operating working capital:        
Accounts receivable 692  1,340  1,539  1,010 
Inventory (635) 5  (831) (1,733)
Prepaid expenses and deposits (918) 527  (1,286) (1,642)
Prepaid domain name registry and ancillary services fees 4,699  3,460  20,476  4,030 
Income taxes recoverable 2,398  (2,241) 2,691  (426)
Accounts payable (877) 856  171  (3,826)
Accrued liabilities (978) (2,269) (513) (1,275)
Customer deposits 34  (78) (3,336) 1,085 
Deferred revenue (4,798) (2,610) (16,888) 4,933 
Accreditation fees payable (60) (38) (229) (238)
Net cash provided by operating activities 10,668  14,081  37,209  31,896 
Financing activities:        
Proceeds received on exercise of stock options 50  48  112  222 
Payment of tax obligations resulting from net exercise of stock options (41) (23) (445) (1,462)
Proceeds received on loan payable 4,500  -  7,000  86,998 
Repayment of loan payable (4,384) (4,572) (19,596) (19,976)
Payment of loan payable costs -  -  (8) (620)
Net cash (used in) provided by financing activities 125  (4,547) (12,937) 65,162 
Investing activities:        
Additions to property and equipment (8,480) (3,474) (27,919) (12,935)
Acquisition of a portion of the minority interest in Ting Virginia, LLC -  -  (1,200) (2,000)
Acquisition of Enom Incorporated, net of cash -  -  -  (76,237)
Acquisition of intangible assets (451) (558) (565) (2,942)
Net cash used in investing activities (8,931) (4,032) (29,684) (94,114)
(Decrease) increase in cash and cash equivalents 1,862  5,502  (5,412) 2,944 
Cash and cash equivalents, beginning of period   10,775    12,547    18,049    15,105 
Cash and cash equivalents, end of period$12,637 $18,049 $12,637 $18,049 
Supplemental cash flow information:        
Interest paid$931  $ 871 $3,712  $ 3,587 
Income taxes paid, net$1,742  $ 1,502 $7,112  $ 7,815 
Supplementary disclosure of non-cash investing and financing activities:        
Property and equipment acquired during the period not yet paid for$1,462 $214 $1,462 $214 
*The Company has initially applied ASC 2014-09 (Topic 606) using the modified retrospective method. Under this method, the comparative information is not restated. 


Reconciliation of Net income to Adjusted EBITDA         
(In Thousands of US Dollars)          
   Three months ended December 31, Year ended December 31, 
   2018 (unaudited) 2017 (unaudited) 2018 (unaudited) 2017 (unaudited) 
Net income for the period $  4,436$  11,199  $   17,135$  22,327  
Depreciation of property and equipment    1,716   1,114    5,722   3,727  
Amortization of intangible assets    2,290   2,330    9,243   8,400  
Impairment of intangible assets   -    110    -    111  
Interest expense, net   926   865    3,687   3,567  
Provision for income taxes    5,239   (1,032)   9,020   1,748  
Stock-based compensation   670   623    2,574   1,457  
Unrealized loss (gain) on change in fair value of forward contracts   201   54    207   18  
Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities   752   (45)   943   (804) 
Acquisition and other costs1   403   58    1,526   806  
Adjusted EBITDA$  16,633$  15,276 $  50,057$  41,357  
1Acquisition and other costs represents transaction-related expenses, transitional expenses, such as duplicative post-acquisition expenses, primarily related to our acquisition of eNom in January 2017. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.

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 expectation 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.


Tucows, Ting, OpenSRS, Enom and Hover are registered trademarks of Tucows Inc. or its subsidiaries.

Lawrence Chamberlain
Loderock Advisors
(416) 519-4196


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