Tucows Inc. (NASDAQ: TCX) (TSX: TC) reported its financial results for the fourth quarter ended December 31, 2022. All figures are in U.S. dollars.
“Our fourth quarter results show Tucows weathering macroeconomic uncertainty and capital constraints with each business unit performing consistent with its stage of business growth and guidance expectations. We proceed to administer our businesses for the long run; investing in each as appropriate to position them to generate stable, recurring revenues, meet future opportunities, and be operationally resilient,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “We’re pleased with the progress of the nascent Wavelo business, the expansion trajectory of Ting, as evidenced by 12 months over 12 months revenue and margin growth, and the steadiness of our flagship Domains business.”
Financial Results
Net revenue for the fourth quarter of 2022 decreased 4.3% to $79 million from $82.5 million for the fourth quarter of 2021. The decrease was primarily the results of reduced one-time skilled services revenues and in addition to a revenue recognition impact related to the DISH agreement, each impacting Wavelo revenues that offset the expansion of revenue from Ting.
Gross profit for the fourth quarter of 2022 decreased 30.8% to $17.0 million from $24.6 million for the fourth quarter of 2021. The decrease in Gross profit was driven by lower one-time high margin skilled services and a revenue recognition impact related to the DISH agreement in Wavelo in addition to increased network depreciation expenses. The decrease in Gross profit was partially offset by growth in Ting’s gross margin.
Net loss for the fourth quarter of 2022 was $13.4 million, or a lack of $1.25 per share, compared with net lack of $2.0 million, or $0.18 per share, for the fourth quarter of 2021 with the loss being the results of accelerated construct of our Ting Web Services fiber network and ramp up of operations, lower Wavelo contribution, higher effective tax rate in addition to higher interest and stock based compensation expenses and better depreciation.
Adjusted EBITDA1 for the fourth quarter of 2022 decreased 47% to $6.7 million from $12.7 million for the fourth quarter of 2021. The decrease in adjusted EBITDA1 was primarily related to reduced contributions from Wavelo and Ting, which have each made significant investments to support future growth and lower Wavelo gross profit. To a lesser extent the decrease in adjusted EBITDA1 contributions also related to the normalization of renewal rates in Tucows Domains to pre-COVID levels.
Money and money equivalents at the top of the fourth quarter of 2022 were $23.5 million compared with $30.5 million at the top of the third quarter of 2022 and $9.1 million at the top of the fourth quarter of 2021.
Tucows Inc. (NASDAQ: TCX, TSX: TC) announced that its Board of Directors has approved a stock buyback program to repurchase, every so often if and as appropriate, as much as $40 million of its common stock within the open market.
The brand new $40 million buyback program will begin February 10, 2023 and can terminate on or before February 9, 2024. Purchases for the brand new buyback program can be made exclusively through the facilities of the Nasdaq Capital Market. The previously announced $40 million buyback program, which commenced February 11, 2022, has been terminated.
Summary Financial Results
(In Hundreds of US Dollars, Except Per Share Data)
|
3 Months ended December 31 |
12 Months Ended December 31 |
|||||
|
2022 (Unaudited) |
2021 (Unaudited) |
% Change |
2022 (Unaudited) |
2021 (Unaudited) |
% Change |
|
|
Net Revenues |
78,909 |
82,476 |
(4.3) % |
321,142 |
304,337 |
5.5 % |
|
Gross Profit |
17,010 |
24,577 |
(30.8) % |
78,248 |
78,293 |
(0.1) % |
|
Income Earned on Sale of Transferred Assets, net |
4,498 |
4,263 |
5.5 % |
18,507 |
20,030 |
(7.6) % |
|
Net income |
(13,445) |
(1,967) |
(583.5) % |
(27,571) |
3,364 |
(919.6) % |
|
Basic earnings per common share |
(1.25) |
(0.18) |
(594.4) % |
(2.56) |
0.32 |
(900.0) % |
|
Adjusted EBITDA1 |
6,700 |
12,734 |
(47.4) % |
37,590 |
48,821 |
(23.0) % |
|
Net money provided by operating activities |
2,901 |
10,542 |
(72.5) % |
19,876 |
29,637 |
(32.9) % |
|
1. This Non-GAAP financial measure is described below and reconciled to GAAP net income within the accompanying table. |
Summary of Revenues, Gross Profit and Adjusted EBITDA
(In Hundreds of US Dollars)
|
Revenue |
Gross Profit |
Adj. EBITDA1 |
||||
|
3 Months ended December 31 |
3 Months ended December 31 |
3 Months ended December 31 |
||||
|
2022 (Unaudited) |
2021 (Unaudited) |
2022 (Unaudited) |
2021 (Unaudited) |
2022 (Unaudited) |
2021 (Unaudited) |
|
|
Ting: |
||||||
|
Fiber Web Services |
11,470 |
8,306 |
7,211 |
5,518 |
(6,011) |
(4,771) |
|
Wavelo: |
||||||
|
Platform Services |
4,479 |
5,814 |
3,807 |
5,649 |
||
|
Other Skilled Services |
– |
3,750 |
– |
2,945 |
||
|
Total Wavelo Platform Services |
4,479 |
9,564 |
3,807 |
8,594 |
(1,142) |
5,939 |
|
Tucows Domains: |
||||||
|
Wholesale |
||||||
|
Domain Services |
46,742 |
47,136 |
9,577 |
10,516 |
||
|
Value Added Services |
4,583 |
5,518 |
3,981 |
4,839 |
||
|
Total Wholesale |
51,325 |
52,654 |
13,558 |
15,355 |
||
|
Retail |
8,943 |
8,706 |
4,844 |
4,330 |
||
|
Total Tucows Domains |
60,268 |
61,360 |
18,402 |
19,685 |
10,568 |
10,974 |
|
Tucows Corporate: |
||||||
|
Central Administration, Mobile Services and Eliminations |
2,692 |
3,246 |
244 |
500 |
3,285 |
592 |
|
Network Expenses: |
||||||
|
Network, other costs |
n/a |
n/a |
(4,245) |
(4,474) |
n/a |
n/a |
|
Network, depreciation of property and equipment |
n/a |
n/a |
(7,969) |
(5,108) |
n/a |
n/a |
|
Network, amortization of intangible assets |
n/a |
n/a |
(378) |
(239) |
n/a |
n/a |
|
Network, impairment of property and equipment |
n/a |
n/a |
(62) |
101 |
n/a |
n/a |
|
Total Network expenses |
n/a |
n/a |
(12,654) |
(9,720) |
n/a |
n/a |
|
Total |
78,909 |
82,476 |
17,010 |
24,577 |
6,700 |
12,734 |
|
1. This Non-GAAP financial measure is described below and reconciled to GAAP net income within the accompanying table. |
