Exhibit 99.1
TUCOWS REPORTS CONTINUED STRONG RESULTS
FOR FIRST QUARTER FISCAL 2005
– Company Achieves Eleventh Consecutive Quarter of Profitability –
TORONTO – May 4, 2005 – Tucows Inc. (OTCBB: TCOW) today reported strong results for the first quarter of fiscal 2005, ended March 31, 2005.
Highlights for the first quarter included:
• A 16% year-over-year increase in net revenue to $11.8 million, the Company’s second highest quarterly revenue;
• Income from operations of $0.2 million;
• Cash flow from operations of $0.7 million;
• Net income of $0.4 million, the Company’s eleventh consecutive quarter of profitability; and
• A 14% year-over-year increase in deferred revenue to a record $35.8 million.
“Our strong operational performance in the first quarter of fiscal 2005, highlighted by a record number of domain name registration transactions and non-domain Internet services provided an increased contribution to both revenue and gross margin. The result is our second best quarter ever in terms of revenue, our fourteenth consecutive quarter of positive cash flow from operations and our eleventh consecutive quarter of profitability,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “Our continued momentum underscores the success of our approach to the Internet services market. By offering a broad range of services to a specific customer set, we forge strong, deep customer relationships. We believe these relationships are a significant competitive advantage for Tucows and a substantial barrier to entry for potential competitors. Looking ahead, with the fundamentals in place and our business performing well, we are focused on maximizing the revenue and profitability derived through our business model.”
Summary Financial Results
(Numbers in Thousands, Except Per Share Data)
| | Three Months Ended
March 31, 2005 | | Three Months Ended
March 31, 2004 | |
Net Revenue | | 11,802 | | 10,175 | |
Income from Operations | | 214 | | 111 | |
Net Income | | 443 | | 149 | |
Net Income/Share | | 0.01 | | 0.00 | |
Cash Flow from Operations | | 655 | | 567 | |
Net revenue for the first quarter of fiscal 2005 increased 16% to $11.8 million from $10.2 million for the first quarter of fiscal 2004, the result of both a higher number of domain name registrations and a higher contribution from non-domain Internet services. Income from operations for the first quarter was $0.2 million (which included a net loss on the value of foreign exchange forward contracts of $0.1 million). Net income for the first quarter of fiscal 2005 increased to $0.4 million, or $0.01 per share from $0.1 million, or $0.00 per share, for the first quarter of fiscal 2004.
Deferred revenue at the end of the first quarter of fiscal 2005 was $35.8 million, an increase of 14% from $31.4 million at the end of the first quarter of fiscal 2004 and an increase of 8% from $33.3 million at the end of the fourth quarter of fiscal 2004.
Cash and restricted cash at the end of the first quarter of fiscal 2005 was $15.0 million compared to $13.7 million at the end of the first quarter of fiscal 2004 and $14.4 million at the end of the fourth quarter of fiscal 2004. The increase compared to the fourth quarter of fiscal 2004 is primarily the result of positive cash flow from operations for the first quarter of this year of $0.7 million.
Conference Call
Tucows will host a conference call on Wednesday, May 4, 2005, at 5:00 p.m. (ET) to discuss the company’s first quarter fiscal 2005 results. To access the conference call via the Internet go to www.tucowsinc.com, and click on “Investor Relations.”
For those unable to join the conference call at the scheduled time, it will be archived for replay both by telephone and via the Internet beginning approximately one hour following completion of the call. To access the archived conference call by telephone, dial 1-800-408-3053 or 416-695-5800 and enter the pass code 3151037. The telephone replay will be available until Wednesday, May 11, 2005, at midnight. To access the archived conference call via the Internet, go to www.tucowsinc.com and click on “Investor Relations.”
About Tucows
Tucows Inc. is a leading provider of wholesale Internet services and back office solutions to a global network of more than 6,000 web hosting companies, ISPs and other service providers. As the largest ICANN-accredited wholesale domain name registrar, Tucows offers a suite of complementary Internet services including domain name registration and management, digital certificates, email services and web publishing services. Tucows’ back office products, including billing, provisioning and customer care solutions, enable service providers to automate and enhance their service offerings. Tucows also distributes software and other digital content through its global network of affiliates offering more than 40,000 software titles. For more information, please visit: www.tucowsinc.com
Contact:
Hilda Kelly
Investor Relations Resource
Tucows Inc.
416-538-5493
ir@tucows.com
This news release contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding the continued growth and success of Tucows’ business, the ability to further develop and achieve commercial success for the company’s business strategy and the deployment of the company’s resources. Such 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. More information about potential factors that could affect Tucows is included in the Risk Factors sections of Tucows’ filings with the Securities and Exchange Commission. All forward-looking statements included in this document are based on information available to Tucows as of the date of this document, and Tucows assumes no obligation to update such forward-looking statements.
TUCOWS is a registered trademark of Tucows Inc. or its subsidiaries. All other trademarks and service marks are the properties of their respective owners.
Tucows Inc.
Consolidated Balance Sheets
(Dollar amounts in U.S. dollars)
| | March 31,
2005 | | December 31,
2004 | |
| | (unaudited) | | | |
| | | | | |
Assets | | | | | |
| | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 15,007,050 | | $ | 13,914,988 | |
Restricted cash | | — | | 460,398 | |
Accounts receivable | | 1,262,679 | | 1,111,082 | |
Prepaid expenses and deposits | | 1,721,738 | | 2,156,702 | |
Prepaid domain name registry and ancillary fees, current portion | | 17,082,065 | | 15,601,786 | |
Deferred tax asset, current portion | | 1,000,000 | | 1,000,000 | |
Total current assets | | 36,073,532 | | 34,244,956 | |
| | | | | |
Prepaid domain name registry and ancillary fees, long-term portion | | 6,993,852 | | 6,471,916 | |
Property and equipment | | 976,272 | | 1,017,237 | |
Deferred tax asset, long-term portion | | 2,000,000 | | 2,000,000 | |
Intangible assets | | 1,183,200 | | 1,242,240 | |
Goodwill | | 964,467 | | 964,467 | |
Investment | | 353,737 | | 353,737 | |
Cash held in escrow | | 1,013,366 | | 1,009,650 | |
Total assets | | $ | 49,558,426 | | $ | 47,304,203 | |
| | | | | |
Liabilities and Stockholders’ Equity | | | | | |
| | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 1,526,505 | | $ | 1,483,543 | |
Accrued liabilities | | 1,677,947 | | 2,688,738 | |
Customer deposits | | 2,169,135 | | 2,247,262 | |
Deferred revenue, current portion | | 25,493,236 | | 23,648,381 | |
Accreditation fees payable, current portion | | 303,891 | | 144,483 | |
Total current liabilities | | 31,170,714 | | 30,212,407 | |
| | | | | |
Deferred revenue, long-term portion | | 10,263,233 | | 9,602,599 | |
Accreditation fees payable, long-term portion | | 43,265 | | 31,816 | |
| | | | | |
Stockholders’ equity: | | | | | |
Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding | | — | | — | |
Common stock - no par value, 250,000,000 shares authorized; 67,297,465 shares issued and outstanding at March 31, 2005 and 66,817,250 shares issued and outstanding at December 31, 2004 | | 9,722,300 | | 9,541,277 | |
Additional paid-in capital | | 50,061,866 | | 50,061,866 | |
Deficit | | (51,702,952 | ) | (52,145,762 | ) |
Total stockholders’ equity | | 8,081,214 | | 7,457,381 | |
Total liabilities and stockholders’ equity | | $ | 49,558,426 | | $ | 47,304,203 | |
Tucows Inc.
Consolidated Statements of Operations
(Dollar amounts in U.S. dollars)
(unaudited)
| | Three months ended March 31, | |
| | 2005 | | 2004 | |
| | | | | |
Net revenues | | $ | 11,801,706 | | $ | 10,174,909 | |
Cost of revenues | | 7,221,205 | | 6,445,415 | |
Gross profit | | 4,580,501 | | 3,729,494 | |
| | | | | |
Operating expenses: | | | | | |
Sales and marketing (*) | | 1,352,454 | | 1,220,534 | |
Technical operations and development | | 1,322,785 | | 1,011,422 | |
General and administrative (*) | | 1,390,762 | | 1,073,072 | |
Depreciation of property and equipment | | 241,873 | | 312,986 | |
Amortization of intangible assets | | 59,040 | | — | |
Total operating expenses | | 4,366,914 | | 3,618,014 | |
| | | | | |
Income from operations | | 213,587 | | 111,480 | |
| | | | | |
Other income: | | | | | |
Interest income, net | | 77,248 | | 37,633 | |
Total other income | | 77,248 | | 37,633 | |
| | | | | |
Income before provision for income taxes | | 290,835 | | 149,113 | |
| | | | | |
Provision for (recovery of) income taxes | | (151,975 | ) | — | |
| | | | | |
Net income for the period | | $ | 442,810 | | $ | 149,113 | |
| | | | | |
Basic and diluted earnings per share | | $ | 0.01 | | $ | 0.00 | |
| | | | | |
Shares used in computing basic earnings per common share | | 66,883,487 | | 64,690,887 | |
| | | | | |
Shares used in computing diluted earnings per common share | | 71,604,368 | | 66,989,744 | |
(*) Stock-based compensation has been included in operating expenses as follows: | | | | | |
Sales and marketing | | $ | — | | $ | 16,834 | |
General and administrative | | $ | — | | $ | 3,759 | |
Tucows Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in U.S. dollars)
(unaudited)
| | Three months ended March 31, | |
| | 2005 | | 2004 | |
| | | | | |
Cash provided by (used in): | | | | | |
Operating activities: | | | | | |
Net income for the period | | $ | 442,810 | | $ | 149,113 | |
Items not involving cash: | | | | | |
Depreciation of property and equipment | | 241,873 | | 312,986 | |
Amortization of intangible assets | | 59,040 | | — | |
Loss on change in the fair value of forward contracts | | 107,628 | | 18,885 | |
Stock-based compensation | | — | | 20,593 | |
Change in non-cash operating working capital: | | | | | |
Accounts receivable | | (151,597 | ) | (62,668 | ) |
Prepaid expenses and deposits | | 327,336 | | 35,120 | |
Prepaid domain name registry fees | | (2,002,215 | ) | (2,037,012 | ) |
Accounts payable | | 42,962 | | (375,449 | ) |
Accrued liabilities | | (1,010,791 | ) | (255,421 | ) |
Customer deposits | | (78,127 | ) | (46,881 | ) |
Deferred revenue | | 2,505,489 | | 2,807,463 | |
Accreditation fees payable | | 170,857 | | — | |
| | | | | |
Cash provided by operating activities | | 655,265 | | 566,729 | |
| | | | | |
Financing activities: | | | | | |
Proceeds received on exercise of stock options | | 181,023 | | 153,062 | |
| | | | | |
Cash provided by financing activities | | 181,023 | | 153,062 | |
| | | | | |
Investing activities: | | | | | |
Additions to property and equipment | | (200,908 | ) | (108,144 | ) |
Decrease in restricted cash - being margin security against forward exchange contracts | | 460,398 | | 132,500 | |
Increase in cash held in escrow | | (3,716 | ) | — | |
| | | | | |
Cash provided by investing activities | | 255,774 | | 24,356 | |
| | | | | |
Increase in cash and cash equivalents | | 1,092,062 | | 744,147 | |
| | | | | |
Cash and cash equivalents, beginning of period | | 13,914,988 | | 12,912,811 | |
| | | | | |
Cash and cash equivalents, end of period | | $ | 15,007,050 | | $ | 13,656,958 | |
