2023 Q3 TCX results financial statements.pdf
Tucows Inc.
Consolidated Balance Sheets
(Dollar amounts in thousands of U.S. dollars)
| (unaudited) | (audited) | |
|---|---|---|
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 110,736 | $ 23,496 |
| Restricted cash | 3,138 | - |
| Accounts receivable | 24,189 | 18,404 |
| Contract asset, net, current portion | 3,310 | 5,159 |
| Inventory | 7,788 | 7,284 |
| Prepaid expenses and deposits | 19,399 | 17,005 |
| Derivative instrument asset, current portion | 186 | 1,903 |
| Deferred costs of fulfillment, current portion | 97,072 | 94,198 |
| Income taxes recoverable | 456 | 2,471 |
| Total current assets | 266,274 | 169,920 |
| Contract asset, net, long-term portion | - | 2,328 |
| Deferred costs of fulfillment, long-term portion | 15,566 | 16,476 |
| Investment | 2,012 | 2,012 |
| Secured notes reserve funds | 8,543 | - |
| Deferred tax asset | 3 | - |
| Property and equipment | 330,874 | 281,495 |
| Right of use operating lease asset | 25,669 | 20,489 |
| Contract costs, long-term portion | 2,439 | 1,827 |
| Intangible assets | 32,101 | 39,790 |
| Goodwill | 130,410 | 130,410 |
| Total assets | $ 813,891 | $ 664,747 |
| Liabilities and Stockholders' Equity | ||
| Current liabilities: | ||
| Accounts payable | $ 11,680 | $ 17,171 |
| Accrued liabilities | 23,096 | 22,653 |
| Customer deposits | 18,740 | 15,783 |
| Derivative instrument liability, current portion | - | 389 |
| Operating lease liability, current portion | 5,284 | 4,642 |
| Deferred revenue, current portion | 128,101 | 122,894 |
| Accreditation fees payable, current portion | 637 | 809 |
| Income taxes payable | 837 | 2,248 |
| Other current liabilities | - | 1,600 |
| Total current liabilities | 188,375 | 188,189 |
| Deferred revenue, long-term portion | 21,653 | 22,237 |
| Accreditation fees payable, long-term portion | - | 142 |
| Operating lease liability, long-term portion | 16,659 | 12,438 |
| Syndicated revolver | 221,911 | 238,930 |
| Notes payable | 222,056 | - |
| Redeemable preferred shares | 107,069 | 90,434 |
| Deferred tax liability | 6,123 | 15,720 |
| Stockholders' equity: | ||
| Common stock - no par value, 250,000,000 shares authorized; 10,879,140 shares issued and outstanding as of September 30, 2023 and 10,817,110 shares issued and outstanding as of December 31, 2022 | 33,592 | 31,868 |
| Additional paid-in capital | 13,237 | 8,106 |
| Retained earnings | (16,924) | 55,899 |
| Accumulated other comprehensive income (loss) | 140 | 784 |
| Total stockholders' equity | 30,045 | 96,657 |
| Total liabilities and stockholders' equity | $ 813,891 | $ 664,747 |
Tucows Inc.
Consolidated Statements of Operations and Comprehensive Income
(Dollar amounts in thousands of U.S. dollars)
| Three months ended September 30, | Nine months ended September 30, | |||
|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |
| (unaudited) | (unaudited) | |||
| Net revenues | $86,971 | $78,050 | $252,379 | $242,233 |
| Cost of revenues: | ||||
| Direct cost of revenues | 50,717 | 48,302 | 150,750 | 147,023 |
| Network, other costs | 7,322 | 4,244 | 20,638 | 13,188 |
| Network, depreciation of property and equipment | 9,138 | 7,136 | 26,331 | 19,620 |
| Network, amortization of intangible assets | 378 | 378 | 1,135 | 1,134 |
| Network, impairment of property and equipment | 2,663 | 3 | 4,679 | 30 |
| Total cost of revenues | 70,218 | 60,063 | 203,533 | 180,995 |
| Gross profit | 16,753 | 17,987 | 48,846 | 61,238 |
| Expenses: | ||||
| Sales and marketing(*) | $17,295 | $13,894 | $49,052 | $39,384 |
| Technical operations and development(*) | 4,818 | 2,983 | 14,214 | 10,212 |
| General and administrative(*) | 9,399 | 7,897 | 25,674 | 22,006 |
| Depreciation of property and equipment | 137 | 149 | 439 | 443 |
| Loss on disposition of property and equipment | (19) | (19) | 461 | 461 |
| Amortization of intangible assets | 2,242 | 2,464 | 6,966 | 7,394 |
| Loss (gain) on currency forward contracts | 29 | - | 52 | - |
| Total expenses | 33,920 | 27,368 | 96,397 | 79,900 |
| Loss from operations | (17,167) | (9,381) | (47,551) | (18,662) |
| Other income (expenses): | ||||
| Interest expense, net | (10,739) | (4,337) | (29,120) | (8,555) |
| Loss on debt extinguishment | - | - | (14,680) | - |
| Income earned on sale of transferred assets, net | 4,312 | 4,737 | 12,971 | 14,009 |
| Other expense, net | - | (27) | - | (128) |
| Total other income (expenses) | (6,427) | 373 | (30,829) | 5,326 |
| Loss before provision for income taxes | (23,594) | (9,008) | (78,380) | (13,336) |
| Provision for income taxes | (822) | (1,027) | (5,557) | 790 |
| Loss for the period | (22,772) | (7,981) | (72,823) | (14,126) |
| Other comprehensive income, net of tax | ||||
| Unrealized income (loss) on hedging activity | (483) | (1,674) | 163 | (510) |
| Net amount reclassified to earnings | (181) | (100) | (807) | (109) |
| Other comprehensive income (loss) net of tax expense (recovery) of ($211) and ($566) for the three months ended September 30, 2023 and September 30, 2022, ($204) and ($197) for the nine months ended September 30, 2023 and September 30, 2022 (note 4) | (664) | (1,774) | (644) | (619) |
| Comprehensive loss, net of tax for the period | $(23,436) | $(9,755) | $(73,467) | $(14,745) |
| Basic and diluted earnings per common share | $(2.09) | $(0.74) | $(6.71) | $(1.31) |
| Shares used in computing basic and diluted earnings per common share | 10,874,659 | 10,779,348 | 10,852,079 | 10,766,657 |
| Diluted earnings per common share | $(2.09) | $(0.74) | $(6.71) | $(1.31) |
| Shares used in computing diluted earnings per common share | 10,874,659 | 10,779,348 | 10,852,079 | 10,766,657 |
| (*) Stock-based compensation has been included in expenses as follows | ||||
| Network expenses | $137 | $97 | $423 | $302 |
| Sales and marketing | $672 | $405 | $1,927 | $1,129 |
| Technical operations and development | $224 | $137 | $671 | $407 |
| General and administrative | $1,275 | $928 | $3,585 | $2,558 |
Tucows Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in thousands of U.S. dollars)
| Cash provided by: Operating activities: | Three months ended September 30, | Nine months ended September 30, | ||
|---|---|---|---|---|
| Cash provided by: Operating activities: | 2023 | 2022 | 2023 | 2022 |
| Cash provided by: Operating activities: | (unaudited) | (unaudited) | ||
| Loss for the period | $ (22,772) | $ (7,981) | $ (72,823) | $ (14,126) |
| Items not involving cash: | ||||
| Depreciation of property and equipment | 9,275 | 7,285 | 26,770 | 20,063 |
| Impairment of property and equipment | 2,663 | 3 | 4,679 | 30 |
| Amortization of debt discount and issuance costs | 1,140 | 215 | 2,271 | 482 |
| Amortization of intangible assets | 2,620 | 2,842 | 8,101 | 8,528 |
| Net amortization contract costs | (255) | (136) | (612) | (608) |
| Accretion of contingent consideration | - | 50 | - | 198 |
| Deferred income taxes (recovery) | (3,258) | (1,658) | (9,381) | (3,397) |
| Excess tax benefits on share-based compensation expense | - | (103) | - | (158) |
| Net Right of use operating assets/Operating lease liability | (220) | (715) | (317) | (771) |
| Loss on disposal of domain names | 3 | - | 3 | 2 |
| Accretion of redeemable preferred shares | 2,872 | 1,250 | 9,247 | 1,250 |
| Loss on Debt Extriglement | - | - | 14,680 | - |
| Write off of debt discount and issuance cost | 277 | - | 277 | - |
| Loss (gain) on change in the fair value of forward contracts | - | (135) | 1,624 | (135) |
| Amortization of discontinued cash flow hedge | - | (254) | (1,144) | (254) |
| Stock-based compensation | 2,308 | 1,569 | 6,606 | 4,396 |
| Change in non-cash operating working capital: | ||||
| Accounts receivable | (677) | (1,192) | (5,785) | (139) |
| Contract asset | 1,293 | 892 | 4,177 | (7,284) |
| Inventory | 12 | (1,092) | (504) | (2,611) |
| Prepaid expenses and deposits | 1,049 | 684 | (2,394) | 2,359 |
| Deferred costs of fulfillment | 1,520 | 1,915 | (1,964) | 785 |
| Income takes recoverable | 1,445 | 859 | 589 | 2,426 |
| Accounts payable | (334) | 791 | (5,433) | 6,949 |
| Accrued liabilities | (4,000) | (491) | 393 | 393 |
| Customer deposits | (708) | (2,528) | 2,957 | (2,201) |
| Deferred revenue | (1,216) | (3,050) | 4,623 | (666) |
| Accreditation Fees Payable | 27 | (28) | (314) | (97) |
| Net cash provided by operating activities | (6,936) | (1,008) | (13,774) | 16,975 |
| Financing activities: | ||||
| Proceeds received on exercise of stock options | - | 237 | - | 808 |
| Proceeds from issuance of notes payable | - | - | 227,258 | - |
| Redeemable preferred shares redemption | - | 60,000 | (45,718) | 60,000 |
| Proceeds from redeemable preferred shares | - | - | 35,000 | - |
| Deferred notes payable financing costs | 70 | - | (6,675) | - |
| Deferred preferred financing costs | - | (754) | 145 | (754) |
| Contingent payments for acquisitions | - | (754) | (1,600) | (3,125) |
| Proceeds received on syndicated revolver | 52,382 | 12,600 | 52,382 | 48,300 |
| Repayment of syndicated revolver | (58,852) | - | (68,652) | - |
| Deferred syndicate revolver issued | (1,238) | (403) | (1,554) | (668) |
| Net cash (used in) provided by financing activities | (7,638) | 71,680 | 190,586 | 104,561 |
| Investing activities: | ||||
| Additions to property and equipment | (22,572) | (46,676) | (77,476) | (100,018) |
| Acquisition of intangible assets | (32) | - | (415) | (117) |
| Net cash used in investing activities | (22,604) | (46,676) | (77,891) | (100,135) |
| (Decrease) increase in cash and cash equivalents | (37,178) | 23,996 | 98,921 | 21,401 |
| Cash and cash equivalents, restricted cash, and restricted cash equivalents beginning of period | 159,595 | 6,510 | 23,496 | 9,105 |
| Cash and cash equivalents, restricted cash, and restricted cash equivalents end of period | $ 122,417 | $ 30,506 | $ 122,417 | $ 30,506 |
| Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents within the interim consolidated balance sheets to the amounts shown in the interim consolidated statements of cash flows above: | ||||
| Cash and cash equivalents | 110,736 | 30,506 | 110,736 | 30,506 |
| Restricted cash included in funds held for trustee | 3,138 | - | 3,138 | - |
| Restricted cash included in secured notes reserve funds | 8,543 | - | 8,543 | - |
| Total Cash and cash equivalents, restricted cash, and restricted cash equivalents end of period | 122,417 | 30,506 | 122,417 | 30,506 |
| Supplemental cash flow information: | ||||
| Interest paid | $ 5,483 | $ 3,005 | $ 15,810 | $ 6,891 |
| Income taxes paid, net | $ 1,367 | $ 472 | $ 3,342 | $ 2,759 |
| Supplementary disclosure of non-cash investing and financing activities: | ||||
| Property and equipment acquired during the period not yet paid for | $ 74 | $ 1,671 | $ 74 | $ 1,671 |
Reconciliation of Income before Provision for Income Taxes to Adjusted EBITDA (In Thousands of U.S. Dollars)
| (In Thousands of U.S. Dollars) | Three months ended September 30, | Nine months ended September 30, | ||
|---|---|---|---|---|
| (unaudited) | 2023(unaudited) | 2022(unaudited) | 2023(unaudited) | 2022(unaudited) |
| Net Loss for the Period | $ (22,772) | $ (7,981) | $ (72,823) | $ (14,126) |
| Less: | ||||
| Provision for income taxes | (822) | (1,027) | (5,557) | 790 |
| Depreciation of property and equipment | 9,275 | 7,285 | 26,770 | 20,063 |
| Impairment and loss on disposition of property and equipment | 2,663 | (16) | 4,679 | 491 |
| Amortization of intangible assets | 2,620 | 2,842 | 8,101 | 8,528 |
| Interest expense, net | 10,739 | 4,337 | 29,120 | 8,555 |
| Loss on debt extinguishment | - | - | 14,680 | - |
| Accretion of contingent consideration | - | 50 | - | 198 |
| Stock-based compensation | 2,308 | 1,569 | 6,606 | 4,396 |
| Unrealized loss(gain)on foreign exchange revaluation of foreign denominated monetary assets and liabilities | 340 | 348 | 254 | 446 |
| Acquisition and other costs1 | 121 | 472 | 1,067 | 1,549 |
| Adjusted EBITDA | $ 4,472 | $ 7,879 | $ 12,897 | $ 30,890 |
1Acquisition 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.