2024 Q2 TCX financial statements.pdf
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Tucows Inc.
Consolidated Balance Sheets
(Dollar amounts in thousands of U.S. dollars)
| June 30, 2024 | December 31, 2023 | |
|---|---|---|
| (unaudited) | (audited) | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 39,280 | $ 92,687 |
| Restricted cash | 4,050 | 3,639 |
| Accounts receivable | 17,965 | 22,206 |
| Contract asset, net | 31 | 1,417 |
| Inventory | 5,544 | 6,786 |
| Prepaid expenses and deposits | 21,118 | 17,387 |
| Derivative instrument asset | 184 | 2,277 |
| Deferred costs of fulfillment, current portion | 100,333 | 95,649 |
| Income taxes recoverable | 441 | 709 |
| Total current assets | 188,946 | 242,757 |
| Deferred costs of fulfillment, long-term portion | 15,684 | 15,419 |
| Investments | 2,012 | 2,012 |
| Secured notes reserve funds receivable | 8,868 | 8,652 |
| Property and equipment, net | 354,232 | 339,644 |
| Right of use lease asset | 28,898 | 27,467 |
| Contract costs | 2,461 | 2,581 |
| Intangible assets, net | 26,700 | 29,484 |
| Goodwill | 130,410 | 130,410 |
| Total assets | $ 758,211 | $ 798,426 |
| Liabilities and Stockholders' Equity | ||
| Current liabilities: | ||
| Accounts payable | $ 11,233 | $ 12,676 |
| Accrued liabilities | 33,157 | 35,356 |
| Customer deposits | 18,437 | 19,335 |
| Derivative instrument liability, current portion | 13 | - |
| Operating lease liability, current portion | 5,462 | 5,397 |
| Deferred revenue, current portion | 134,037 | 126,733 |
| Accreditation fees payable | 616 | 609 |
| Income taxes payable | 1,236 | 1,235 |
| Total current liabilities | 204,191 | 201,341 |
| Deferred revenue, long-term portion | 21,537 | 21,350 |
| Operating lease liability, long-term portion | 19,222 | 18,255 |
| Syndicated revolver | 198,632 | 210,354 |
| Notes payable | 224,689 | 222,895 |
| Redeemable preferred units | 120,042 | 111,390 |
| Deferred tax liability | 2,966 | 2,966 |
| Stockholders' deficit: | ||
| Common stock - no par value, 250,000,000 shares authorized; 10,957,269 shares issued and outstanding as of June 30, 2024 and 10,903,405 shares issued and outstanding as of December 31, 2023 | 35,527 | 34,373 |
| Additional paid-in capital | 16,662 | 14,072 |
| Accumulated deficit | (85,386) | (40,298) |
| Accumulated other comprehensive income | 129 | 1,728 |
| Total stockholders' deficit | (33,068) | 9,875 |
| Total liabilities and stockholders' deficit | $ 758,211 | $ 798,426 |
Consolidated Statements of Operations and Comprehensive Income
(Dollar amounts in thousands of U.S. dollars)
| Three months ended June 30, | Six months ended June 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| (unaudited) | (unaudited) | |||
| Net revenues | $89,423 | $84,978 | $176,880 | $165,408 |
| Cost of revenues: | ||||
| Direct cost of revenues | 51,328 | 50,743 | 103,122 | 100,033 |
| Network, other costs | 6,862 | 6,993 | 13,926 | 13,316 |
| Network, depreciation of property and equipment | 10,057 | 8,757 | 19,922 | 17,193 |
| Network, amortization of intangible assets | 366 | 379 | 731 | 757 |
| Network, impairment of property and equipment | - | 74 | 53 | 2,016 |
| Total cost of revenues | 68,613 | 66,946 | 137,754 | 133,315 |
| Gross profit | 20,810 | 18,032 | 39,126 | 32,093 |
| Expenses: | ||||
| Sales and marketing(*) | $14,746 | $16,020 | $33,311 | $31,757 |
| Technical operations and development(*) | 4,522 | 4,581 | 9,538 | 9,396 |
| General and administrative(*) | 9,188 | 8,084 | 19,006 | 16,275 |
| Depreciation of property and equipment | 116 | 150 | 238 | 302 |
| Amortization of intangible assets | 835 | 2,230 | 2,149 | 4,724 |
| Loss(gain) on currency forward contracts | - | 68 | - | 23 |
| Total expenses | 29,407 | 31,133 | 64,242 | 62,477 |
| Income from operations | (8,597) | (13,101) | (25,116) | (30,384) |
| Other income (expenses): | ||||
| Interest expense, net | (12,553) | (10,501) | (24,432) | (18,381) |
| Loss on debt extinguishment | - | (14,680) | - | (14,680) |
| Income earned on sale of transferred assets, net | 3,357 | 4,289 | 6,978 | 8,659 |
| Other income (expense), net | 409 | - | 476 | - |
| Total other income (expenses) | (8,787) | (20,892) | (16,978) | (24,402) |
| Loss before provision for income taxes | (17,384) | (33,993) | (42,094) | (54,786) |
| Provision for income taxes | 1,220 | (3,025) | 2,994 | (4,735) |
| Net loss for the period | (18,604) | (30,968) | (45,088) | (50,051) |
| Other comprehensive income, net of tax | ||||
| Unrealized income(loss) on hedging activities | (304) | 578 | (1,430) | 646 |
| Net amount reclassified to earnings | - | (390) | (169) | (626) |
| Other comprehensive income net of tax expense(recovery) | (304) | 188 | (1,599) | 20 |
| Comprehensive loss, net of tax for the period | $(18,908) | $(30,780) | $(46,687) | $(50,031) |
| Basic and diluted loss per common share | $(1.70) | $(2.86) | $(4.12) | $(4.63) |
| Shares used in computing basic and diluted loss per common share | 10,954,596 | 10,836,652 | 10,939,098 | 10,821,608 |
| (*) Stock-based compensation has been included in expenses as follows: | ||||
| Network expenses | $133 | $118 | $252 | $286 |
| Sales and marketing | $519 | $648 | $1,059 | $1,255 |
| Technical operations and development | $208 | $142 | $422 | $446 |
| General and administrative | $842 | $1,144 | $1,842 | $2,311 |
Consolidated Statements of Cash Flows
(Dollar amounts in thousands of U.S. dollars)
Three months ended June 30, Six months ended June 30,
| Three months ended June 30, | Six months ended June 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| (unaudited) | (unaudited) | |||
| Cash provided by: | ||||
| Operating activities: | ||||
| Net loss for the period | $ (18,604) | $ (30,968) | $ (45,088) | $ (50,051) |
| Items not involving cash: | ||||
| Depreciation of property and equipment | 10,173 | 8,907 | 20,160 | 17,495 |
| Impairment of property and equipment | - | 74 | 53 | 2,016 |
| Amortization of debt discount and issuance costs | 1,075 | 893 | 2,142 | 1,131 |
| Amortization of intangible assets | 1,201 | 2,609 | 2,880 | 5,481 |
| Net amortization contract costs | 157 | (208) | 120 | (357) |
| Deferred income taxes (recovery) | 94 | (3,413) | 479 | (6,123) |
| Excess tax benefits on pre-based compensation expense | -11 | - | - | (1) |
| Net Right of use operating equity/Operating lease liability | (136) | (15) | (399) | (97) |
| Disposal of domain names | - | - | 2 | - |
| Accretion of redeemable preferred units | 4,140 | 3,338 | 7,895 | 6,375 |
| Loss on debt extinguishment | - | 14,680 | - | 14,680 |
| Loss on change in the fair value of forward contracts | - | 879 | - | 1,624 |
| Amortization of discontinued cash flow hedge | - | (572) | - | (1,144) |
| Stock based compensation expense | 1,702 | 2,052 | 3,575 | 4,298 |
| Undistributed earnings of equity method investee | (350) | - | (350) | - |
| Change in non-cash operating working capital: | ||||
| Accounts receivable | 1,718 | 661 | 4,241 | (5,108) |
| Contract assets | 93 | 693 | 1,386 | 2,884 |
| Inventory | 551 | (1,261) | 1,242 | (516) |
| Prepaid expenses and deposits | (4,626) | (2,117) | (3,381) | (3,443) |
| Deferred costs of fulfillment | 70 | 472 | (4,949) | (3,484) |
| Income taxes recoverable | (898) | (1,374) | (633) | (856) |
| Accounts payable | (1,845) | (4,943) | (1,527) | (5,099) |
| Accrued liabilities | (185) | 5,220 | (4,844) | 4,294 |
| Customer deposits | 657 | 3,322 | (898) | 3,665 |
| Deferred revenue | 467 | (464) | 7,491 | 5,839 |
| Accreditation Fees Payable | (71) | (52) | 7 | (341) |
| Net cash provided by (used in) operating activities | (4,708) | (1,587) | (10,386) | (6,838) |
| Financing activities: | ||||
| Proceeds from issuance of notes payable | - | 227,258 | - | 227,258 |
| Redeemable preferred units redemption | - | (45,718) | - | (45,718) |
| Proceeds from redeemable preferred units | - | 5,000 | - | 35,000 |
| Deferred notes payable financing costs | - | (6,745) | - | (6,745) |
| Deferred preferred financing costs | - | - | - | 145 |
| Contingent payments for acquisitions | - | - | - | (1,600) |
| Repayment of dividend received | (6,500) | (7,000) | (12,000) | (9,800) |
| Payment of syndicated revolver costs | (19) | (11) | (19) | (316) |
| Net cash provided by (used in) financing activities | (6,519) | 172,784 | (12,019) | 198,224 |
| Investing activities: | ||||
| Additions to property and equipment | (15,957) | (23,158) | (30,277) | (54,904) |
| Acquisition of intangible assets | (2) | (217) | 98 | (383) |
| Net cash used in investing activities | (15,959) | (23,375) | (30,179) | (55,287) |
| (Decrease) increase in cash and cash equivalents | (27,186) | 147,821 | (52,584) | 136,099 |
| Cash and cash equivalents, restricted cash, and restricted cash equivalents beginning of period | 79,384 | 11,773 | 104,978 | 23,496 |
| Cash and cash equivalents, restricted cash, and restricted cash equivalents end of period | $ 52,198 | $ 159,594 | $ 52,394 | $ 159,595 |
| Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents | ||||
| Cash and cash equivalents | 39,280 | 147,864 | 39,280 | 147,864 |
| Restricted cash included in funds held for trustee | 4,050 | 3,361 | 4,050 | 3,361 |
| Restricted cash included in secured notes reserve funds receivable | 8,868 | 8,370 | 8,868 | 8,370 |
| Total Cash and cash equivalents, restricted cash, and restricted cash | 52,198 | 159,595 | 52,198 | 159,595 |
| Supplemental cash flow information: | ||||
| Interest paid | $ 8,495 | $ 6,442 | $ 17,504 | $ 10,327 |
| Income taxes paid, net | $ 2,132 | $ 1,474 | $ 2,827 | $ 1,975 |
| Supplementary disclosure of non-cash investing and financing activities: | ||||
| Property and equipment acquired during the period not yet paid for | $ 5,251 | $ 2,638 | $ 5,251 | $ 2,638 |
(In Thousands of U.S. Dollars)
(unaudited)
| (In Thousands of U.S. Dollars) (unaudited) | Three months ended June 30, | Six months ended June 30, | ||
|---|---|---|---|---|
| (In Thousands of U.S. Dollars) (unaudited) | 2024(unaudited) | 2023(unaudited) | 2024(unaudited) | 2023(unaudited) |
| Net Loss for the period | $ (18,604) | $ (30,968) | $ (45,088) | $ (50,051) |
| Less: | ||||
| Provision (recovery) for income taxes | 1,220 | (3,025) | 2,994 | (4,735) |
| Depreciation of property and equipment | 10,173 | 8,907 | 20,160 | 17,495 |
| Impairment and loss on disposition of property and equipment | - | 74 | 53 | 2,016 |
| Amortization of intangible assets | 1,201 | 2,609 | 2,880 | 5,481 |
| Interest expense, net | 12,553 | 10,501 | 24,432 | 18,381 |
| Loss on debt extinguishment | - | 14,680 | - | 14,680 |
| Stock-based compensation | 1,702 | 2,052 | 3,575 | 4,298 |
| Unrealized loss(gain)on foreign exchange revaluation of foreign denominated monetary assets and liabilities | 164 | (126) | 554 | (84) |
| Acquisition and other costs 1 | 769 | 691 | 3,820 | 944 |
| Adjusted EBITDA | $ 9,178 | $ 5,395 | $ 13,380 | $ 8,425 |