Tucows Q2 2021 results: revenue drops because of Ting Mobile sale

Tucows Q2 2021 results: revenue drops because of Ting Mobile sale

Tucows Inc. (NASDAQ:TCX, TSX:TC) Domain Name Services and other Internet services, today reported its financial results for the second quarter ended June 30, 2021. All figures are in U.S. dollars.

Note on the Financial Impact of Tucows’ Sale of Ting Mobile Customer Relationships and Transition to Mobile Services Enabler Platform:

As previously announced, effective August 1, 2020 most of Tucows’ mobile customers relationships were sold to DISH Networks (“DISH”) as part of Tucows’ transition of its mobile business to a Mobile Services Enabler (MSE) model from a Mobile Virtual Network Operator (MVNO) model, under which DISH became Tucows’ first MSE customer. Accordingly, the results of the Mobile Services segment for the second quarter of 2021 reflects operations under the new MSE model with prior periods being composed entirely of operations under Tucows’ previous MVNO model.

Under the terms of the earn out arrangement for the Ting customer base acquired by DISH, the income generated by the customer base acquired by Dish are recognized (net of expenses) as “Other Income” under the heading “Gain on Sale of Ting Customer Assets”. As a result, revenue and gross margin for the Mobile Services segment for the second quarter of 2021 are lower than those for the second quarter of 2020. Tucows will recognize fees per subscriber for customers owned by DISH under the Ting brand as well as customers under DISH’s Boost brand that are added to Tucows’ MSE platform, as Mobile Platform Services revenue under the terms of the MSE Agreement signed with DISH. For more information, see Tucows’ Financial Statements and Management Discussion and Analysis for the second quarter of 2021.

Summary Financial Results
(In Thousands of US Dollars, Except Per Share Data)

3 Months ended June 30 6 Months ended June 30
2021
(Unaudited)
2020
(Unaudited)
% Change 2021
(Unaudited)
2020
(Unaudited)
% Change
Net revenue 75,093 82,122 (8.6%) 145,968 166,107 (12.1%)
Gross Profit 18,239 22,966 (20.6%) 35,692 48,116 (25.8%)
Gain on Sale of Ting Customer Assets1 4,808 n/a 10,203 n/a
Net income 1,807 157 1,051% 3,956 2,991 32.3%
Basic Net earnings per common share 0.17 0.01 1,600% 0.37 0.28 31.8%
Adjusted EBITDA1 11,158 12,175 (8.4%) 23,881 24,856 (3.9%)
Net cash provided by operating activities 3,518 8,939 (60.6%) 17,604 23,012 (23.5%)
  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 Profit Adj. EBITDA1
3 Months ended
June 30
3 Months ended
June 30
3 Months ended
June 30
2021
(Unaudited)
2020
(Unaudited)
2021
(Unaudited)
2020
(Unaudited)
2021
(Unaudited)
2020
(Unaudited)
Fiber Internet Services:
Fiber Internet Services 5,825 4,414 2,799 2,749 (3,320) (1,071)
Mobile Services:
Retail Mobile Services 2,548 17,567 1,061 8,907
Mobile Platform Services 2,457 2,364
Other Professional Services 2,001 261
Total Mobile Services 7,006 17,567 3,686 8,907 5,284 3,868
Domain Services:
Wholesale
Domain Services 47,883 46,206 10,176 9,852
Value Added Services 5,482 4,741 4,899 4,008
Total Wholesale 53,365 50,947 15,075 13,860
Retail 8,897 9,194 4,400 4,816
Total Domain Services 62,262 60,141 19,475 18,676 12,750 12,351
Network Expenses:
Network, other costs n/a n/a 3,612 2,485 n/a n/a
Network, depreciation and amortization costs n/a n/a 4,108 3,356 n/a n/a
Network, impairment n/a n/a 1 1,525 n/a n/a
Total Network expenses n/a n/a 7,721 7,366 n/a n/a
Total 75,093 82,122 18,239 22,966 n/a n/a

“The second quarter marked another solid financial performance for Tucows with revenue and gross margin from our Domains Services and Fiber Internet Services businesses increasing 5% and 4%, respectively, year-over-year,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “On top of its continued consistency, our Domain Services business is benefitting from the growth in domains under management generated by the pandemic impact last year, as well as our focus on maximizing gross margin. Our Mobile Services business continues to move forward in line with our expectations. And Ting Internet once again saw record performance across key build metrics, including by far our largest capital expenditure and passed address additions in a quarter, as growth in the subscriber base gained further momentum, with net additions up 47% from Q1 and more than triple that of Q2 of last year.”

Financial Results

Net revenue for the second quarter of 2021 was $75.1 million compared with $82.1 million for the second quarter of 2020. The majority of the decrease was the result of the absence of Ting Mobile MVNO revenue in the second quarter of 2021 following the Company’s sale of its Ting Mobile customer relationships to DISH during the third quarter of 2020 and the related earn out being recognized as Other Income. Excluding the Mobile Services business, net revenue for the combined Domains Services and Ting Internet businesses for the second quarter of 2021 increased 5% from the second quarter of 2020.

Gross profit for the second quarter of 2021 was $18.2 million compared with $23.0 million for the second quarter of 2020. The decrease in gross profit is attributable to the same factors as the decrease in revenue. Excluding the Mobile Services business, gross margin for the combined Domains Services and Ting Internet businesses for the second quarter of 2021 increased 4% from the second quarter of 2020.

Net income for the second quarter of 2021 was $1.8 million, or $0.17 per share, compared with $0.2 million, or $0.01 per share, for the second quarter of 2020.

Adjusted EBITDA1 for the second quarter of 2021 was $11.2 million compared with $12.2 million for the second quarter of 2020. Adjusted EBITDA1 is impacted by the continued investment in Ting Fiber.

Cash and cash equivalents at the end of the second quarter of 2021 were $7.3 million compared with $8.3 million at the end of the first quarter of 2021 and $8.9 million at the end of the second quarter of 2020.

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Original article: Tucows Q2 2021 results: revenue drops because of Ting Mobile sale

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