Press Release FS 2024 Q3 241107.xlsx
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Tucows Inc.
Consolidated Balance Sheets
(Dollar amounts in thousands of U.S. dollars)
September 30, December 31,
| September 30, 2024 | December 31, 2023 | |
|---|---|---|
| (unaudited) | (audited) | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 75,209 | $ 92,687 |
| Restricted cash | 4,303 | 3,639 |
| Accounts receivable, net of allowance for doubtful accounts of $497 as of September 30, 2024 and $511 as of December 31, 2023 | 18,892 | 22,206 |
| Contract asset, net | - | 1,417 |
| Inventory | 4,812 | 6,786 |
| Prepaid expenses and deposits | 16,453 | 17,387 |
| Derivative instrument asset | 708 | 2,277 |
| Deferred costs of fulfillment, current portion | 100,681 | 95,649 |
| Income taxes recoverable | 524 | 709 |
| Total current assets | 221,582 | 242,757 |
| Deferred costs of fulfillment, long-term portion | 15,548 | 15,419 |
| Investments | 2,012 | 2,012 |
| Secured notes reserve funds | 11,579 | 8,652 |
| Property and equipment, net | 355,689 | 339,644 |
| Right of use lease asset | 33,794 | 27,467 |
| Contract costs | 2,445 | 2,581 |
| Intangible assets, net | 25,968 | 29,484 |
| Goodwill | 130,410 | 130,410 |
| Total assets | $ 799,027 | $ 798,426 |
| Liabilities and Stockholders' Equity | ||
| Current liabilities: | ||
| Accounts payable | $ 9,128 | $ 12,676 |
| Accrued liabilities | 29,859 | 35,356 |
| Customer deposits | 17,187 | 19,335 |
| Operating lease liability, current portion | 5,551 | 5,397 |
| Deferred revenue, current portion | 134,745 | 126,733 |
| Accreditation fees payable | 627 | 609 |
| Income taxes payable | 1,775 | 1,235 |
| Total current liabilities | 198,872 | 201,341 |
| Deferred revenue, long-term portion | 21,284 | 21,350 |
| Operating lease liability, long-term portion | 23,949 | 18,255 |
| Syndicated revolver | 196,261 | 210,354 |
| Notes payable | 286,641 | 222,895 |
| Redeemable preferred units - no par value, 33,333,333 units authorized, 15,243,600 units issued and outstanding as of September 30, 2024 and December 31, 2023 | 122,128 | 111,390 |
| Deferred tax liability | 2,966 | 2,966 |
| Stockholders' deficit: | ||
| Common stock - no par value, 250,000,000 shares authorized; 10,985,238 shares issued and outstanding as of September 30, 2024 and 10,903,405 shares issued and outstanding as of December 31, 2023 | 36,142 | 34,373 |
| Additional paid-in capital | 17,930 | 14,072 |
| Accumulated deficit | (107,683) | (40,298) |
| Accumulated other comprehensive income | 537 | 1,728 |
| Total stockholders' deficit | (53,074) | 9,875 |
| Total liabilities and stockholders' deficit | $ 799,027 | $ 798,426 |
Tucows Inc.
Consolidated Statements of Operations and Comprehensive Loss
(Dollar amounts in thousands of U.S. dollars)
| Three months ended September 30, | Nine months ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| (unaudited) | (unaudited) | |||
| Net revenues | $ 92,297 | $ 86,971 | $ 269,177 | $ 252,379 |
| Cost of revenues: | ||||
| Direct cost of revenues | 52,613 | 50,717 | 155,735 | 150,750 |
| Network, other costs | 6,864 | 7,322 | 20,790 | 20,638 |
| Network, depreciation of property and equipment | 9,414 | 9,138 | 29,336 | 26,331 |
| Network, amortization of intangible assets | 566 | 378 | 1,097 | 1,135 |
| Network, impairment of property and equipment | 852 | 2,663 | 905 | 4,679 |
| Total cost of revenues | 70,109 | 70,218 | 207,863 | 203,533 |
| Gross profit | 22,188 | 16,753 | 61,314 | 48,846 |
| Expenses: | ||||
| Sales and marketing (*) | 15,180 | 17,295 | 48,491 | 49,052 |
| Technical operations and development (*) | 4,615 | 4,818 | 14,153 | 14,214 |
| General and administrative (*) | 11,485 | 9,399 | 30,491 | 25,674 |
| Depreciation of property and equipment | 112 | 137 | 350 | 439 |
| Amortization of intangible assets | 843 | 2,242 | 2,992 | 6,966 |
| Loss (gain) on currency forward contracts | - | 29 | - | 52 |
| Total expenses | 32,235 | 33,920 | 96,477 | 96,397 |
| Loss from operations | (10,047) | (17,167) | (35,163) | (47,551) |
| Other income (expenses): | ||||
| Interest expense, net | (13,095) | (10,739) | (37,527) | (29,120) |
| Loss on debt extinguishment | - | - | - | (14,680) |
| Income earned on sale of transferred assets, net | 3,853 | 4,312 | 10,831 | 12,971 |
| Other income (expense), net | 66 | - | 542 | - |
| Total other income (expenses) | (9,176) | (6,427) | (26,154) | (30,829) |
| Loss before provision for income taxes | (19,223) | (23,594) | (61,317) | (78,380) |
| Provision (recovery) for income taxes | 3,074 | (822) | 6,068 | (5,557) |
| Net loss for the period | (22,297) | (22,772) | (67,385) | (72,823) |
| Other comprehensive income (loss), net of tax | ||||
| Unrealized income (loss) on hedging activities | 415 | (483) | (1,015) | 163 |
| Net amount reclassified to earnings | (7) | (181) | (176) | (807) |
| Other comprehensive income (loss) net of tax expense (recovery) of $134 and $(211) for the three months ended September 30, 2024 and September 30, 2023 | 408 | (664) | (1,191) | (644) |
| Comprehensive loss, for the period | $ (21,889) | $ (23,436) | $ (68,576) | $ (73,467) |
| Basic and diluted loss per common share | $ (2.03) | $ (2.09) | $ (6.15) | $ (6.71) |
| Shares used in computing basic and diluted loss per common share | 10,982,820 | 10,874,659 | 10,953,778 | 10,852,079 |
| (*) Stock-based compensation has been included in expenses as follows: | ||||
| Network expenses | $ 139 | $ 137 | $ 391 | $ 423 |
| Sales and marketing | $ 470 | $ 672 | $ 1,528 | $ 1,927 |
| Technical operations and development | $ 216 | $ 224 | $ 638 | $ 671 |
| General and administrative | $ 983 | $ 1,275 | $ 2,826 | $ 3,585 |
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, 2024 | Nine months ended September 30, 2024 | |||
|---|---|---|---|---|---|
| Cash provided by: Operating activities | (unauudited) | (unauudited) | |||
| Cash provided by: Operating activities | Net loss for the period | $ (22,297) | $ (22,772) | $ (67,385) | $ (72,823) |
| Items not involving cash: | |||||
| Depreciation of property and equipment | 9,526 | 9,275 | 29,686 | 26,770 | |
| Impairment of property and equipment | 852 | 2,663 | 905 | 4,679 | |
| Amortization of debt discount and issuance costs | 1,159 | 1,140 | 3,301 | 2,271 | |
| Amortization of intangible assets | 1,209 | 2,620 | 4,089 | 8,101 | |
| Net amortization contract costs | 16 | (255) | 136 | (612) | |
| Deferred income taxes (recovery) | (129) | (3,258) | (350) | (9,381) | |
| Net Right of use expenses/assets/Operating lease liability | (80) | (220) | (479) | (131) | |
| Disposal of domain names | 1 | 3 | 3 | 3 | |
| Accretion of redeemable preferred units | 1,863 | 2,872 | 9,758 | 9,247 | |
| Loss on debt extinguishment | - | - | - | 14,680 | |
| Write off of debt discount and issuance cost | - | 277 | - | 277 | |
| Loss on change in the fair value of forward contracts | - | - | - | 1,624 | |
| Amortization of discontinued cash flow hedge | - | - | - | (1,144) | |
| Stock-based compensation expense | 1,808 | 2,308 | 5,383 | 6,606 | |
| Undistributed earnings of equity method investee | (28) | - | (378) | - | |
| Change in non-cash operating working capital: | |||||
| Accounts receivable | (927) | (677) | 3,314 | (5,785) | |
| Contract asset | 31 | 1,293 | 1,417 | 4,177 | |
| Inventory | 732 | 12 | 1,974 | (504) | |
| Prepaid expenses and deposits | 4,693 | 1,049 | 1,312 | (2,394) | |
| Deferred costs of fulfillment | (212) | 1,520 | (5,161) | (1,964) | |
| Income taxes recoverable | 1,376 | 1,445 | 753 | 589 | |
| Accounts payable | (2,624) | (134) | (4,151) | (5,433) | |
| Accrued liabilities | (749) | (4,000) | (5,593) | 293 | |
| Customer deposits | (1,250) | (708) | (2,148) | 2,957 | |
| Deferred revenue | 455 | (1,216) | 7,946 | 4,623 | |
| Accreditation fees payable | 11 | 27 | 18 | (314) | |
| Net cash provided by (used in) operating activities | (4,564) | (6,936) | (14,950) | (13,774) | |
| Financing activities: | |||||
| Proceeds from issuance of notes payable | 62,991 | - | 62,991 | 227,258 | |
| Redeemable preferred units redemption | - | - | - | (45,718) | |
| Proceeds from redeemable preferred units | - | - | - | 35,000 | |
| Deferred notes payable financing costs | (2,011) | 70 | (2,011) | (6,675) | |
| Deferred preferred financing costs | - | - | - | 145 | |
| Contingent payments for acquisitions | - | - | - | (1,600) | |
| Proceeds received on syndicated revolver | - | 52,382 | - | 52,382 | |
| Repayment of syndicated revolver | (2,500) | (58,852) | (14,500) | (68,652) | |
| Payment of syndicated revolver costs | (29) | (1,238) | (48) | (1,554) | |
| Net cash provided by (used in) financing activities | 58,451 | (7,638) | 46,432 | 190,586 | |
| Investing activities: | |||||
| Additions to property and equipment | (14,516) | (22,572) | (44,793) | (77,476) | |
| Acquisition of intangible assets | (478) | (32) | (576) | (415) | |
| Net cash provided by (used in) investing activities | (14,994) | (22,604) | (45,369) | (77,891) | |
| Increase (decrease) in cash and cash equivalents restricted cash, and restricted cash equivalent | 38,893 | (37,178) | (13,887) | 98,921 | |
| Cash and cash equivalents, restricted cash, and restricted cash equivalents beginning of period | 52,198 | 159,595 | 104,978 | 23,496 | |
| Cash and cash equivalents, restricted cash, and restricted cash equivalents end of period | $ 91,091 | $ 122,417 | $ 91,091 | $ 122,417 | |
| 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 | 75,209 | 110,736 | 75,209 | 110,736 | |
| Restricted cash included in funds held for trustee | 4,303 | 3,138 | 4,303 | 3,138 | |
| Restricted cash included in secured notes reserve funds receivable | 11,579 | 8,543 | 11,579 | 8,543 | |
| Total Cash and cash equivalents, restricted cash, and restricted cash equivalents end of period | 91,091 | 122,417 | 91,091 | 122,417 | |
| Supplemental cash flow information: | |||||
| Interest paid | $ 11,352 | $ 5,483 | $ 28,856 | $ 15,810 | |
| Income taxes paid, net | $ 2,451 | $ 1,367 | $ 5,278 | $ 3,342 | |
| Supplementary disclosure of non-cash investing and financing activities: | |||||
| Property and equipment acquired during the period not yet paid for | $ 5,907 | $ 74 | $ 5,907 | $ 74 |
Reconciliation of Loss before Provision for Income Taxes to Adjusted EBITDA (In Thousands of U.S. Dollars)
| (In Thousands of U.S. Dollars) (unaudited) | Three months ended September 30, | Nine months ended September 30, | ||
|---|---|---|---|---|
| (In Thousands of U.S. Dollars) (unaudited) | 2024 (unaudited) | 2023 (unaudited) | 2024 (unaudited) | 2023 (unaudited) |
| Net Loss for the period | $ (22,297) | $ (22,772) | $ (67,385) | $ (72,823) |
| Less: | ||||
| Provision (recovery) for income taxes | 3,074 | (822) | 6,068 | (5,557) |
| Depreciation of property and equipment | 9,526 | 9,275 | 29,686 | 26,770 |
| Impairment and loss on disposition of property and equipment | 852 | 2,663 | 905 | 4,679 |
| Amortization of intangible assets | 1,209 | 2,620 | 4,089 | 8,101 |
| Interest expense, net | 13,095 | 10,739 | 37,527 | 29,120 |
| Loss on debt extinguishment | - | - | - | 14,680 |
| Stock-based compensation | 1,808 | 2,308 | 5,383 | 6,606 |
| Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities | (197) | 340 | 357 | 254 |
| Acquisition and other costs¹ | 1,618 | 121 | 5,438 | 1,067 |
| Adjusted EBITDA | $ 8,688 | $ 4,472 | $ 22,068 | $ 12,897 |
1Acquisition and other costs represent transaction‐related expenses and transitional expenses. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.