News

TORONTO, September 27, 2017 — Tucows (NASDAQ: TCX, TSX: TC) today announced that it has acquired Roam Mobility from Otono Networks. Roam is a Mobile Virtual Network Operator (MVNO) operating on the same nationwide GSM network as Ting Mobile.

“When we look at other services in this space, we tend to admire the ones that have solved a specific problem for a specific target. Roam has done a beautiful job for Canadians who travel to the United States,” explained Elliot Noss, President and Chief Executive Officer of Tucows. “With their rate plans, user experience, messaging and even SIM card distribution, they have established themselves as the obvious choice there.”

The acquisition includes three Roam brands that will each continue to operate independently alongside Ting within Tucows’ mobile network access group. There will be no changes for either Roam or Ting customers. The three brands and their specific focus areas are:

  • Roam Mobility, offering prepaid roaming replacement plans to travellers visiting the United States for a few days or a few weeks, as well as Snowbird plans for Canadians spending the winter in the United States.
  • ZIP SIM, backed by a quick, automatic activation process and straightforward rates, helping international business travelers get quickly connected when visiting the United States.
  • AlwaysOnline Wireless, powering short-term, on-demand LTE data plans for hotspots, tablets, and iPad with Apple SIM. As one of the first consumer eSIM-enabled providers on the planet, AOW has had innovation at its core from the beginning and its global roaming footprint has helped it connect customers in over 90 countries including the United States, Canada and the U.K.

Noss added, “We get well-positioned brands, smart product features and a lot of knowledge and skill. Meanwhile, these brands join a business that is investing every day in growth.”

Tucows also adds two new international wireless carrier partners to its existing relationships in the United States, enabling support for global data on iPad with Apple SIM.

Revenue from the Roam businesses will start contributing to Tucows financials toward the end of September. However, it is not expected to have a material impact on overall company performance.

“We are thrilled to have found a home for our consumer brands that shares our commitment to customer experience and our passion for building great products,” said Emir Aboulhosn, Chief Executive Officer of Otono. “As we now accelerate our shift and increase our focus towards innovation for eSIM enablement and orchestration, we are also excited to begin building new capabilities for Tucows and Ting.”

Tucows will also be partnering with Otono for eSIM enablement and will utilize the Otono Platform in the near future to bring greater device support to Ting. eSIM allows mobile users to more easily choose mobile networks and switch between networks on their tablets and wearables. Otono is at the leading edge of this shift from traditional SIM cards to eSIM. Ting expects to announce more details on eSIM support in the coming months.

About Tucows
Tucows, Inc. is a provider of network access, domain names and other Internet services. Ting (https://ting.com) delivers mobile phone service and fixed Internet access with outstanding customer support. OpenSRS (http://opensrs.com) and Enom (http://www.enom.com) manage a combined 29 million domain names and millions of value-added services through a global reseller network of over 40,000 web hosts and ISPs. Hover (http://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 (http://tucows.com).

About Otono
Otono Networks, Inc. is a leader in eSIM enablement and orchestration solutions for any device or mobile operator worldwide. The comprehensive cloud-based Otono Platform is the leading platform for anyone deploying eSIM-based devices to their network. It is able to seamlessly integrate with any existing mobile architecture to remove the complexities of eSIM implementation. Otono can provide the necessary middleware to complete integration and launch eSIM-enabled devices with significantly reduced risk, time to market and without major changes to existing networks. For more information about Otono, visit otono.com.

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. 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.

Contact:
Lawrence Chamberlain
(416) 519-4196
lawrence.chamberlain@loderockadvisors.com

Tucows (which owns the Enom, OpenSRS, and Hover brands) finds racism and its proponents detestable. We are proud to be a diverse company based in the most diverse city in the world. As well, Charlottesville, Virginia is home to a Tucows office and many of our employees there. We have all been shaken and deeply saddened by recent events.

In regards to the current issue around the Daily Stormer website, Tucows was never the webhost nor the registrar for the domain. Tucows provides a domain privacy service for millions of domains belonging to our wholesale domain resellers and to other registrars. The domain in question was transferred to one of our registrar partners and the privacy service was automatically applied.

Like Google, and GoDaddy before them, we felt this domain clearly violated our privacy service terms of service by inciting violence, and removed the privacy protection from the domain.

We are also monitoring our systems for incoming transfer requests for the Daily Stormer domain so that we can give our resellers the opportunity to deny those requests.

Domain names are gateways to speech and we take our responsibilities towards free speech and expression extremely seriously. Incitement to violence is not protected speech and the Daily Stormer regularly conducts such incitement, which is why we no longer provide it with any service.

The process of balancing free speech and the ugly opinions that people share is neither easy nor pleasant. Every day we receive many, many complaints about the content on any number of the 24 million domains on our platform. Let us be exceptionally clear: we find the content of many of these pages patently abhorrent and evidence of the worst that humanity can stoop to. Nevertheless, there are legal mechanisms and processes in place for dealing with issues of free speech and we consider it our responsibility to follow them.

We have and will act in what we call “exigent circumstances” where there is an imminent threat of violence or crime. GoDaddy responded to the Daily Stormer appropriately under these circumstances. However, these circumstances aside, we have found that the clearest path forward, to protect freedom of speech and expression, is to act where we have evidence that due-process has been observed. When such is provided to us, we act on it.

– Quarter Highlighted by Solid Year-Over-Year Growth Across All Key Financial Metrics and Record EPS –

TORONTO, August 8, 2017 – Tucows Inc. (NASDAQ:TCX, TSX:TC), a provider of network access, domain names and other Internet services, today reported its financial results for the second quarter ended June 30, 2017. All figures are in U.S. dollars.

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

3 Months Ended June 30 6 Months Ended June 30
2017
(unaudited)
2016
(unaudited)
% Change 2017
(unaudited)
2016
(unaudited)
% Change
Net revenue 84,223 47,204 78% 153,791 91,950 67%
Net income 5,241 4,071 29% 7,688 8,509 (10%)
Basic Net earnings per common share 0.50 0.39 28% 0.73 0.80 (9%)
Adjusted EBITDA1 10,340 6,905 50% 16,536 14,222 16%
Net cash provided by operating activities 8,132 2,558 218% 10,534 8,173 29%

1. This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table. In the second quarter of 2016, Tucows revised its definition of Adjusted EBITDA as detailed in the description below and the table reconciling Adjusted EBITDA to GAAP net income.
2. Adjusted EBITDA for the second quarter and first six months of 2017 reflect the impact effect 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 $1.6 million and $5.5 million for the second quarter and first six months of 2017, respectively.

 

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

Revenue Gross Margin
3 Months Ended June 30 3 Months Ended June 30
2017
(unaudited)
2016
(unaudited)
2017
(unaudited)
2016
(unaudited)
Network Access Services:
Mobile Services 20,379 17,805 9,677 8,425
Other Services 1,087 964 121 493
Total Network Access Services 21,466 18,769 9,798 8,918
Domain Services:
Wholesale
Domain Services 48,550 21,666 6,101 4,028
Value Added Services 5,576 2,308 4,981 1,849
Total Wholesale 54,126 23,974 11,082 5,877
Retail 7,663 3,576 3,115 1,913
Portfolio 968 885 783 704
Total Domain Services 62,757 28,435 14,980 8,494
Network Expenses:
Network, other costs (2,261) (1,405)
Network, depreciation and amortization costs (1,170) (362)
Total Network Expenses (3,431) (1,767)
Total revenue/gross margin 84,223 47,204 21,347 15,645

“The second quarter of 2017 saw continued strong performance across all areas of the business our first full quarter following the Enom acquisition in January, which combined to drive year-over-year growth in revenue of 78% to a record $84 million, record earnings per share of $0.50 and cash flow from operations of more than $8.1 million,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc.

“We continue to execute well on each of our strategic initiatives. Our domains team made great progress on the integration of Enom toward significant future synergies and, in fact, exceeded our expectations year to date on organic growth. Our Ting Mobile business continued to add customers on the core base and saw the lowest monthly churn from our core base in two years. Ting Internet continued its steady climb in Charlottesville, ramped significantly in both Westminster, Maryland and Holly Springs, North Carolina  and, most importantly, took meaningful operational steps toward scalability far beyond our existing Ting Towns.”

Financial Results

Net revenue for the second quarter of 2017 increased 78% to $84.2 million from $47.2 million for the second quarter of 2016.

Net income for the second quarter of 2017 increased 29% to 5.2 million, or $0.50 per share, from $4.1 million, or $0.39 per share, for the second quarter of 2016. Adjusted EBITDA1 for the second quarter of 2017 increased 50% to $10.3 million from $6.9 million for the second quarter of 2016.  The increase in EBITDA was largely driven by the acquisition of Enom and to a lesser extent growth in the Company’s Ting Mobile and incumbent Domains business.

Cash and cash equivalents at the end of the second quarter of 2017  were $15.1 million compared with $15.0 million at the end of the first quarter of 2017 and $5.9 million at the end of the second quarter of 2016.

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 disclose and discuss a non-GAAP financial measure, adjusted EBITDA, 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 June 30 3 Months Ended June 30*
2017
(unaudited)
2016
(unaudited)
2017
(unaudited)
2016
(unaudited)
Net income for the period 5,241 4,071 7,688 8,509
Depreciation of property and equipment 879 428 1,636 848
Amortization of intangible assets 2,064 288 3,825 357
Impairment of intangible assets 4 25
Interest expense, net 970 121 1,838 167
Provision for income taxes 1,083 2,078 958 3,983
Stock-based compensation 313 190 631 390
Unrealized loss (gain) on change in fair value of forward contracts (20) (29) (38) (272)
Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities (317) (246) (511) 215
Acquisition and transition costs** 127 509
Adjusted EBITDA 10,340 6,905 16,536 14,222
*Adjusted EBITDA amounts presented herein for the six months ended June 30, 2016 have been recast to reflect adjusted EBITDA definitional changes described in the Company’s Form 10-Q Quarterly Report for the three months ended September 30, 2016.

**Acquisition and other costs represents transaction-related expenses, transitional expenses, such as duplicative post-acquisition expenses, 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.

During 2016, the Company identified an immaterial error that affects the classification of certain marketing program costs. Prior to the third quarter of fiscal 2016, the Company recorded the cost for certain marketing credits as Sales and marketing expense which should have been recorded as a reduction in Net revenue. The discussion presented here correctly reflect these marketing credits as a reduction in Net Revenues for all current and comparative periods. This resulted in a decrease in Net Revenues, and a corresponding decrease in Sales and marketing expenses of $0.3 million for the three months ended June 30, 2016 and $1.1 million for the six months ended June 30, 2016.

Conference Call

Tucows management will host a conference call today, Tuesday, August 8, 2017 at 5:00 p.m. (ET) to discuss the Company’s second quarter 2017 results. Participants can access the conference call by dialing 1-888-231-8191 or 647-427-7450 or via the Internet at http://www.tucows.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 1-855-859-2056 and enter the passcode 59387346 followed by the pound key. The telephone replay will be available until Tuesday, August 15, 2017 at midnight. To access the archived conference call as an MP3 via the Internet, go to http://www.tucows.com/investors.

About Tucows

Tucows is a provider of network access, domain names and other Internet services. Ting (https://ting.com) delivers mobile phone service and fixed Internet access with outstanding customer support. OpenSRS (http://opensrs.com) and Enom (http://www.enom.com) manage a combined 29 million domain names and millions of value-added services through a global reseller network of over 40,000 web hosts and ISPs. Hover (http://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 (http://tucows.com).

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 manage realized gains/losses from foreign currency contracts. 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.

Contact:

Lawrence Chamberlain
(416) 519-4196
lawrence.chamberlain@loderockadvisors.com

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