TORONTO, Nov. 7, 2024 /PRNewswire/ – Tucows Inc. (NASDAQ: TCX) (TSX: TC), a global internet services leader, today reported its financial results for the third quarter ended September 30, 2024. All figures are in U.S. dollars.
“Tucows finished the third quarter of 2024 with strong year-over-year growth of revenue, gross profit and adjusted EBITDA. We have focused on generating revenue and margin gains, and as importantly, we have implemented cost controls across all of our businesses, said Elliot Noss, Tucows President and CEO. In our Ting business, we recently undertook a second reduction in workforce as part of a capital efficiency plan and operational pivot towards maximizing penetration and contribution of existing network footprints. We also continued to deleverage the business with payments on the syndicated debt using cash flow from Wavelo and Tucows Domains.”
Financial Results
Consolidated net revenue for the third quarter of 2024 increased 6.1% to $92.3 million from $87.0 million for the third quarter of 2023, driven primarily by year-over-year revenue gains from Ting and Domains.
Gross profit for the third quarter of 2024 increased 32.4% to $22.2 million from $16.8 million from the third quarter of 2023. The increase in gross profit was driven primarily by large gross margin gains from Ting, as well as gains from Domains. The increase continues to be partially offset by network depreciation from the Ting network.
Net loss for the third quarter of 2024 was $22.3 million, or a loss of $2.03 per share, compared with net loss of $22.8 million, or $2.09 per share, for the third quarter of 2023. The decreased loss was primarily driven by increases in revenue and gross profit, as well as by a decrease in operating expenses.
Adjusted EBITDA1 for the third quarter of 2024 increased 94.3% to $8.7 million from $4.5 million for the third quarter of 2023. The year-over-year increase was primarily due to growth of revenues from Domains and Ting, and cost management in the Ting business.
Cash equivalents, restricted cash and restricted cash equivalents at the end of the third quarter of 2024 were $91.1 million compared with $52.2 million at the end of the second quarter of 2024 and $122.4 million at the end of the third quarter of 2023.
Summary Financial Results
(In Thousands of US Dollars, Except Per Share Data)
3 Months ended September 30
9 Months ended September 30
2024 (unaudited)
2023 (unaudited)
% Change
2024 (unaudited)
2023 (unaudited)
% Change
Net Revenues
92,297
86,971
6 %
269,177
252,379
7 %
Gross Profit
22,188
16,753
32 %
61,314
48,846
26 %
Income Earned on Sale of Transferred Assets, net
3,853
4,312
(11 %)
10,831
12,971
(16) %
Net Income (Loss)
(22,297)
(22,772)
2 %
(67,385)
(72,823)
7 %
Basic earnings (Loss) per common share
(2.03)
(2.09)
3 %
(6.15)
(6.71)
8 %
Adjusted EBITDA¹
8,688
4,472
94 %
22,068
12,897
71 %
Net cash provided by (used in) operating activities
(4,564)
(6,936)
34 %
(14,950)
(13,774)
(9) %
1. This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table.
Summary of Revenues, Gross Profit and Adjusted EBITDA
(In Thousands of US Dollars)
Revenue
Gross Margin
Adj. EBITDA¹
3 Months ended
September 30
3 Months ended
September 30
3 Months ended
September 30
2024
(unaudited)
2023
(unaudited)
2024
(unaudited)
2023
(unaudited)
2024
(unaudited)
2023
(unaudited)
Ting Internet Services:
Fiber Internet Services
15,310
12,855
10,989
7,986
(5,070)
(12,176)
Wavelo Platform Services:
Platform Services
10,075
10,697
10,012
10,355
Other Professional Services
7
377
7
149
Total Wavelo Platform
Services
10,082
11,074
10,019
10,504
3,429
4,207
Tucows Domain Services:
Wholesale
Domain Services
49,871
47,657
9,691
9,597
Value Added Services
5,175
4,252
4,666
3,715
Total Wholesale
55,046
51,909
14,357
13,312
Retail
9,669
9,179
5,453
5,063
Total Tucows Domain
Services
64,715
61,088
19,810
18,375
11,529
10,913
Corporate:
Mobile Services and Eliminations
2,190
1,954
(1,134)
(611)
(1,200)
1,528
Network Expenses:
Network, other costs
n/a
n/a
(6,864)
(7,322)
n/a
n/a
Network, depreciation of property and equipment
n/a
n/a
(9,414)
(9,138)
n/a
n/a
Network, amortization of intangible assets
n/a
n/a
(366)
(378)
n/a
n/a
Network, impairment
n/a
n/a
(852)
(2,663)
n/a
n/a
Total Network Expenses
n/a
n/a
(17,496)
(19,501)
n/a
n/a
Total
92,297
86,971
22,188
16,753
8,688
4,472
1 This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table.
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 discloses and discusses a non-GAAP financial measure, adjusted EBITDA, in press releases and 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 certain 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, impairment and loss on disposition of property and equipment, amortization of intangible assets, income tax provision, interest expense (net), accretion of contingent consideration, stock-based compensation, asset impairment, gains and losses from unrealized foreign currency transactions, loss on debt extinguishment and costs that are not indicative of on-going performance (profitability), including acquisition and transition 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 income before provision for income taxes to Adjusted EBITDA (dollars in thousands):
3 Months ended September 30
9 Months ended September 30
2024
(unaudited)
2023
(unaudited)
2024
(unaudited)
2023
(unaudited)
Net income (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 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 transition costs*
1,618
121
5,438
1,067
Adjusted EBITDA
$8,688
$4,472
$22,068
$12,897
* Acquisition 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.
Management Commentary
Concurrent with the dissemination of its quarterly financial results news release at 5:05 p.m. ET on Thursday, November 7, 2024, management’s pre-recorded audio commentary (and transcript), discussing the quarter and outlook for the Company will be posted to the Tucows website at http://www.tucows.com/investors/financials.
Following management’s prepared commentary, for the subsequent seven days, until Thursday, November 14, 2024, shareholders, analysts and prospective investors can submit questions to Tucows’ management at ir@tucows.com. Management will post responses to questions in an audio recording and transcript to the Company’s website at http://www.tucows.com/investors/financials, on Tuesday, November 26, 2024, at approximately 4 p.m. ET. All questions will receive a response, however, questions of a more specific nature may be responded to directly.
About Tucows
Tucows helps connect more people to the benefit of internet access through communications service technology, domain services, and fiber-optic internet infrastructure. Ting (https://ting.com) delivers fixed fiber Internet access with outstanding customer support. Wavelo (https://wavelo.com) is a telecommunications software suite for service providers that simplifies the management of mobile and internet network access; provisioning, billing and subscription; developer tools; and more. Tucows Domains (https://tucowsdomains.com) manages approximately 25 million domain names and millions of value-added services through a global reseller network of over 35,000 web hosts and ISPs. Hover (https://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 (https://tucows.com).
Tucows, Ting, Wavelo, and Hover are registered trademarks of Tucows Inc. or its subsidiaries.
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 expectations regarding our ability to realize synergies from the Enom acquisition and our expectation for growth of Ting Internet. 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.
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SOURCE Tucows Inc.
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