Tucows : Q1 2020 Financial Statement

Tucows Inc.

Consolidated Balance Sheets

(Dollar amounts in thousands of U.S. dollars)Assets

Current assets:

Cash and cash equivalents Accounts receivable Inventory

Prepaid expenses and deposits

Derivative instrument asset, current portion

Prepaid domain name registry and ancillary services fees, current portion Income taxes recoverable

Total current assets

March 31,	December 31,
2020	2019
(unaudited)	(unaudited)

$

12,446 $ 20,393

12,480 14,564

2,553 3,457

13,464 13,478

172 731

93,893 91,252

1,460 1,800

136,468

145,675

Derivative instrument asset, long-term portion

Prepaid domain name registry and ancillary services fees, long-term portion Property and equipment

Right of use operating lease asset Contract costs

Intangible assets Goodwill

Total assets

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable Accrued liabilities Customer deposits Derivative instrument liability Operating lease liability, current portion Deferred revenue, current portion Accreditation fees payable, current portion Income taxes payable

Total current liabilities

370

-18,127 17,915

94,289 82,121

11,463 11,335

1,371 1,400

59,915 57,654

115,837 109,818

$

437,840 $ 425,918

$

8,996 $ 6,671

7,838 9,373

14,132 14,074

1,718

1,488 1,413

126,152 123,101

1,045 1,302

-952 1,324

162,671 156,908

Deferred revenue, long-term portion Accreditation fees payable, long-term portion Operating lease liability, long-term portion Loan payable, long-term portion

Other long-term liability Deferred tax liability

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; 10,562,774 shares issued and outstanding as of March 31, 2020 and 10,585,159 shares issued and outstanding as of December 31, 2019

Additional paid-in capital Retained earnings

Accumulated other comprehensive income (loss)

Total stockholders' equity

Total liabilities and stockholders' equity

95,356 94,194

26,493 26,202

208 216

9,293 9,424

113,545 3,152 27,122

113,503 - 25,471

-

-18,751 16,633

- 880

77,323 76,208

(718) 473

$

437,840

$

425,918

Tucows Inc.

Consolidated Statements of Operations and Comprehensive Income (Dollar amounts in thousands of U.S. dollares)

Three months ended March 31,2020 (unaudited)

2019 (unaudited)

Net revenues

Cost of revenues:

Cost of revenues Network expenses (*)

Depreciation of property and equipment Amortization of intangible assets

Total cost of revenues

$

83,985 $ 78,953

53,188 51,932

2,416 2,395

2,877 1,801

354 174

58,835 56,302

Gross profit

Expenses:

Sales and marketing (*)

Technical operations and development (*) General and administrative (*) Depreciation of property and equipment Amortization of intangible assets

Loss (gain) on currency forward contracts

Total expenses

25,150 22,651

8,985 8,741

2,751 2,523

4,741

4,448

113 124

2,947 1,866

441 (79)

19,978 17,623

Income from operations

Other income (expenses):

Interest expense, net Other income, net

Total other income (expenses)

5,172 5,028

(1,150) (972)

(87) (1,237)

- (972)

Income before provision for income taxes

Provision for income taxes

Net income for the period

Other comprehensive income, net of tax

Unrealized income (loss) on hedging activities Net amount reclassified to earnings

Other comprehensive income (loss) net of tax (expense) recovery of $366 and ($194) for the three months ended March 31, 2020 and March 31, 2019

3,935 1,101 2,834

4,056 1,257 2,799

(1,234) 549

43 61

(1,191)

610

Basic earnings per common share

Comprehensive income, net of tax for the period

Shares used in computing basic earnings per common share

$ $

1,643 0.27 10,612,230

$ $

3,409 0.26 10,634,842

Diluted earnings per common share

Shares used in computing diluted earnings per common share

$

0.26 10,713,678

$

0.26 10,835,897

(*) Stock-based compensation has been included in expenses as follows:

Network expenses

Sales and marketing

Technical operations and development General and administrative

$ $ $ $

87 $ 57

370 $ 196

167 $ 117

177 $ 155

Tucows Inc. Three months ended March 31, Consolidated Statements of Cash Flows (Dollar amounts in thousands of U.S. dollars) 2020 (unaudited) 2019 (unaudited) Cash provided by: Operating activities:
Net income for the period $	2,834	$	2,799
Items not involving cash: Depreciation of property and equipment Loss on write off of property and equipment Amortization of debt discount and issuance costs Amortization of intangible assets Net amortization contract costs Accretion of contingent consideration Deferred income taxes (recovery) Excess tax benefits on share-based compensation expense Net Right of use operating assets/Operating lease liability Loss on disposal of domain names	2,990 - 67 3,301 29 87 (190) (180) (179) 13	1,925 22 78 2,040 19 - 462 (356) (30) 4
Loss (gain) on change in the fair value of forward contracts	348	(118)
Stock-based compensation Change in non-cash operating working capital: Accounts receivable Inventory Prepaid expenses and deposits Prepaid domain name registry and ancillary services fees Income taxes recoverable Accounts payable Accrued liabilities Customer deposits Deferred revenue Accreditation fees payable	801 2,151 904 25 (2,853) 500 1,771 (1,831) 58 3,342 85	525 (1,188) 408 (390) (1,716) (1,236) 786 1,321 287 3,269 80
Net cash provided by operating activities 14,073 8,991 Financing activities:
Proceeds received on exercise of stock options Payment of tax obligations resulting from net exercise of stock options Repurchase of common stock Proceeds received on loan payable Repayment of loan payable Payment of loan payable costs	17 (182) (3,117) - - (25)	72 (339) - 32,940 (4,600) (207)
Net cash (used in) provided by financing activities (3,307) 27,866 Investing activities:
Additions to property and equipment Acquisition of Cedar Holdings Group (net of cash of $66) Acquisition of Ascio Technologies (net of cash of $1)	(9,943) (8,770) -	(10,435) - (28,024)
Net cash used in investing activities (18,713) (38,459) (Decrease) increase in cash and cash equivalents (7,947) (1,602) Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period 20,393 12,637 $ 12,446 $ 11,035 Supplemental cash flow information:
Interest paid Income taxes paid, net $ $	1,154 956	$ $	976 2,118
Supplementary disclosure of non-cash investing and financing activities:
Property and equipment acquired during the period not yet paid for Fair value of shares issued for acquisition of Cedar Holdings Group Fair value of contingent consideration for acquisition of Cedar Holdings Group $ $ $	1,102 2,000 3,065	$ $ $	392 - -

Tucows Inc.

Reconciliation of Net income to Adjusted EBITDA (Dollar amounts in thousands of U.S. dollars)Three months ended March 31,2020 (unaudited)

2019 (unaudited)

Net income for the period

Depreciation of property and equipment Amortization of intangible assets Interest expense, net

Accretion of contingent consideration Provision for income taxes Stock-based compensation

Unrealized loss (gain) on change in fair value of forward contracts

Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities

Acquisition and other costs1

$

2,834 $ 2,799

2,990 1,925

3,301 2,040

1,150 972

87 1,101 801

- 1,257 525

348 (118)

(42) (328)

111 359

Adjusted EBITDA

$

12,681

$ 9,431

1Acquisition and other costs represents transaction-related expenses, transitional expenses, such as duplicative post-acquisition expenses, primarily related to our acquisition of eNom in January 2017, Ascio in March 2019 and Cedar in January 2020. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.