2023 Q1 TCX financial statements.pdf

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

March 31, 2023 December 31, 2022
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 11,773 $ 23,496
Accounts receivable 24,173 18,404
Contract asset, current portion 5,172 5,159
Inventory 6,539 7,284
Prepaid expenses and deposits 18,331 17,005
Derivative instrument asset, current portion 1,249 1,903
Deferred costs of fulfillment, current portion 98,258 94,198
Income taxes recoverable 2,206 2,471
Total current assets 167,701 169,920
Contract asset, long-term portion 124 2,328
Deferred costs of fulfillment, long-term portion 16,372 16,476
Investments 2,012 2,012
Deferred tax asset 8 -
Property and equipment 303,791 281,495
Right of use operating lease asset 22,191 20,489
Contract costs 1,976 1,827
Intangible assets 37,084 39,790
Goodwill 130,410 130,410
Total assets $ 681,669 $ 664,747
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 16,639 $ 17,171
Accrued liabilities 22,032 22,653
Customer deposits 16,126 15,783
Derivative instrument liability, current portion 129 389
Operating lease liability, current portion 5,040 4,642
Deferred revenue, current portion 128,977 122,894
Accreditation fees payable, current portion 662 809
Income taxes payable 2,515 2,248
Other current liabilities - 1,600
Total current liabilities 192,120 188,189
Deferred revenue, long-term portion 22,457 22,237
Accreditation fees payable, long-term portion - 142
Operating lease liability, long-term portion 13,660 12,438
Loan payable 236,025 238,930
Redeemable preferred shares 124,804 90,434
Deferred tax liability 12,951 15,720
Stockholders' equity:
Common stock - no par value, 250,000,000 shares authorized; 10,817,452 shares issued and outstanding as of March 31, 2023 and 10,817,110 shares issued and outstanding as of December 31, 2022
Additional paid-in capital 32,461 31,868
Retained earnings 9,759 8,106
Accumulated other comprehensive income (loss) 36,816 55,899
Total stockholders' equity 616 784
Total liabilities and stockholders' equity $ 681,669 $ 664,747

Tucows Inc.
Consolidated Statements of Operations and Comprehensive Income
(Dollar amounts in thousands of U.S. dollars)

Three months ended March 31,
2023 2022
(unaudited)
Net revenues $80,430 $81,099
Cost of revenues:
Direct cost of revenues 49,290 49,421
Network, other costs 6,323 4,180
Network, depreciation of property and equipment 8,436 5,895
Network, amortization of intangible assets 378 378
Network, impairment of property and equipment 1,942 27
Total cost of revenues 66,369 59,901
Gross profit 14,061 21,198
Expenses:
Sales and marketing(*) $15,737 $11,987
Technical operations and development(*) 4,815 3,765
General and administrative(*) 8,146 7,296
Depreciation of property and equipment 152 148
Loss on disposition of property and equipment - 385
Amortization of intangible assets 2,494 2,465
Total expenses 31,344 26,046
Loss from operations (17,283) (4,848)
Other income (expenses):
Interest expense, net (7,880) (1,796)
Income Earned on Sale of Transferred Assets, net 4,370 4,752
Other expense, net - (50)
Total other income (expenses) (3,510) 2,906
Loss before provision for income taxes (20,793) (1,942)
Provision for income taxes (1,710) 1,078
Net income for the period (19,083) (3,020)
Other comprehensive income, net of tax
Unrealized income (loss) on hedging activities 68 968
Net amount reclassified to earnings (236) 66
Other comprehensive income net of tax expense (recovery) of ($52)
and $329 for the three months ended March 31, 2023 and March 31, 2022 (168) 1,034
Comprehensive loss, net of tax for the period $(19,251) $(1,986)
Basic loss per common share $(1.77) $(0.28)
Shares used in computing basic earnings per common share 10,806,321 10,754,758
Diluted loss per common share $(1.77) $(0.28)
Shares used in computing diluted earnings per common share 10,806,321 10,754,758
(*) Stock-based compensation has been included in expenses as follows:
Network expenses $169 $110
Sales and marketing $607 $375
Technical operations and development $304 $118
General and administrative $1,166 $788

Tucows Inc. Consolidated Statements of Cash Flows
(Dollar amounts in thousands of U.S. dollars)
Three months ended March 31,

Three months ended March 31,
2023 2022
(unaudited)
Cash provided by:
Operating activities:
Net income for the period $ (19,083) $ (3,020)
Items not involving cash:
Depreciation of property and equipment 8,588 6,043
Impairment of property and equipment 1,942 27
Amortization of debt discount and issuance costs 238 120
Amortization of intangible assets 2,872 2,843
Net amortization contract costs (149) (227)
Accretion of contingent consideration - 98
Deferred income taxes (recovery) (2,710) (686)
Excess tax benefits on share-based compensation expense (1) (52)
Net Right of use operating assets/Operating lease liability (82) 59
Loss on disposal of domain names - 2
Accretion of redeemable preferred shares 3,037 -
Loss (gain) on change in the fair value of forward contracts 745 -
Amortization of discontinued cash flow hedge from Accumulated other income (572) -
Stock-based compensation 2,246 1,391
Change in non-cash operating working capital:
Accounts receivable (5,769) (1,812)
Contract asset 2,191 (2,505)
Inventory 745 (281)
Prepaid expenses and deposits (1,326) (2,235)
Deferred costs of fulfillment (3,956) (1,949)
Income taxes recoverable 518 482
Accounts payable (156) 2,267
Accrued liabilities (926) 1,111
Customer deposits 343 (623)
Deferred revenue 6,303 4,368
Accreditation Fees Payable (289) (14)
Net cash provided by operating activities (5,251) 5,407
Financing activities:
Proceeds received on exercise of stock options - 515
Proceeds from redeemable preferred shares 30,000 -
Deferred Preferred Financing Costs 145 -
Contingent consideration for acquisitions (1,600) (2,000)
Proceeds received on loan payable - 16,500
Payment of loan payable costs (2,800) -
Payment of loan payable costs (305) (177)
Net cash (used in) provided by financing activities 25,440 14,838
Investing activities:
Additions to property and equipment (31,746) (23,054)
Acquisition of intangible assets (166) (95)
Net cash used in investing activities (31,912) (23,149)
(Decrease) increase in cash and cash equivalents (11,723) (2,904)
Cash and cash equivalents, beginning of period 23,496 9,105
Cash and cash equivalents, end of period $ 11,773 $ 6,201
Supplemental cash flow information:
Interest paid $ 3,885 $ 1,683
Income taxes paid, net $ 501 $ 896
Supplementary disclosure of non-cash investing and financing activities:
Property and equipment acquired during the period not yet paid for $ 1,581 $ 1,909
Reconciliation of Income before Provision for Income Taxes to Adjusted EBITDA (In Thousands of U.S. Dollars) (unaudited) Three months ended March 31,
Reconciliation of Income before Provision for Income Taxes to Adjusted EBITDA (In Thousands of U.S. Dollars) (unaudited) 2023 (unaudited) 2022 (unaudited)
Net 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 other costs¹ 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.