Tucows.com (TCX) reported its financial results for the third quarter ending September 30, 2012, after the market closed today and also announced a tender offer to re-purchase up to 6.5 Million shares of its own stock at prices ranging from $1.35 to $1.50

Tucows shares closed at $1.12 during trading so it should get a nice pop on the open tomorrow

Net revenue for the third quarter of 2012 increased 17% to a record $29.3 million from $25.1 million for the third quarter of 2011.

Net income for the third quarter of 2012 was $1.6 million, or $0.04 per share, compared with a net loss for the third quarter of 2011 of $1.2 million, or $0.02 per share.

Deferred revenue at the end of the third quarter of 2012 was $73.3 million, an increase of 6% from $68.9 million at the end of the third quarter of 2011 and a decrease of 2% from $74.5 million at the end of the second quarter of 2012.

Cash and cash equivalents at the end of the third quarter of 2012 were $5.0 million compared with $4.5 million at the end of the second quarter of 2012 and $4.7 million from the end of the third quarter of 2011.

During the third quarter of 2012, the Company generated cash flow from operations of $2.2 million compared with $1.6 million for the same quarter of 2011. During the quarter, the Company used $1.6 million for the repurchase of stock under its ongoing normal course issuer bid and invested $0.2 million in equipment purchases.

 

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

	3 Months Ended Sept. 30, 2012 (unaudited)	3 Months Ended Sept. 30, 2011 (unaudited)	9 Months Ended Sept. 30, 2012 (unaudited)	9 Months Ended Sept. 30, 2011 (unaudited)
Net revenue	29,246	25,094	84,936	70,695
Income before provision for income taxes and change in fair value of forward exchange contracts	1,597	1,090	4,956	2,240
Net income for the period	1,635	(1,178)	3,995	115
Net earnings per common share	0.04	(0.02)	$0.09	–
Net cash provided by operating activities	2,237	1,615	4,321	3,202

Summary of Revenues and Cost of Revenues
(In Thousands of US Dollars)

		Revenue		Cost of Revenue
		3 Months Ended Sept. 30, 2012 (unaudited)	3 Months Ended Sept. 30, 2011 (unaudited)	3 Months Ended Sept. 30, 2012 (unaudited)	3 Months Ended Sept. 30, 2011 (unaudited)
Wholesale
Domain Services		22,268	19,698	18,645	16,470
Value-Added Services		2,603	2,609	532	515
Total Wholesale		24,871	22,307	19,177	16,985
Retail		2,965	1,358	2,064	495
Portfolio		1,410	1,429	205	179
Network, other costs		–	–	1,159	1,193
Network, depreciation and amortization costs		–	–	193	183
Total revenue/cost of revenue		29,246	25,094	22,798	19,035

“Our third quarter results once again reflect the consistency and reliability of our business, the leverage inherent in our model, and our ability to deliver growth,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc.

“Revenue for the quarter grew 17% year-over-year to another record and we generated $2.2 million in cash flow from operations, a portion of which we used to repurchase an additional 1.3 million shares under our normal course issuer bid.

In 2012, we have bought back 9.9 million shares and since we began buying back stock, we have now repurchased a total of 33.2 million shares, or almost 45% of outstanding shares.

Our core businesses continue to perform well, allowing us to efficiently invest in new opportunities such as Ting.  As a result, we remain well positioned to continue to deliver growth while returning capital to shareholders over the long term.”

NOTE: Beginning in the first quarter of 2012, Tucows reclassified its revenue streams into three distinct service offerings: Wholesale, Retail and Portfolio¹. The realignment is intended to better reflect the manner in which these revenue streams are generated and assessed by management.

Here are the details of the tender offer:

Tucows announced today a  “modified Dutch auction” tender offer (the “Tender Offer”) to repurchase up to 6,500,000 shares of its common stock, representing approximately 14.7% of Tucows’ outstanding shares, at a price per share not less than $1.35 and not greater than $1.50.

This price range represents a premium of 9.6% to 21.8% to the year-to-date volume-weighted average price of $1.23 per share for the Company’s common stock.

The tender offer is expected to commence the week of November 19, 2012 and will remain open for at least 20 business days.

The Tender Offer will allow shareholders to indicate how many shares and at what price within the Company’s specified range they wish to tender. Based on the number of shares tendered and the prices specified by the tendering shareholders, the Company will determine the lowest price per share within the range that will enable the Company to purchase 6,500,000 of its shares (or a lower amount if the offer is not fully subscribed) that are properly tendered. If shareholders of more than 6,500,000 shares properly tender their shares at or below the determined price per share, Tucows will purchase shares tendered by such shareholders, at the determined price per share, on a pro rata basis. Additionally, if more than 6,500,000 shares are properly tendered, the number of shares to be repurchased by Tucows pursuant to the Tender Offer may, at the discretion of Tucows, be increased by up to 2% of Tucows’ outstanding shares, or approximately 885,000 shares, without amending or extending the tender offer. All shares purchased by the Company in the Tender Offer will be purchased at the same price and will be cancelled. The Company will not purchase stock below a shareholder’s indicated price, and in some cases, the Company may actually purchase shares at a price that is above a shareholder’s indicated price under the terms of the Tender Offer. Tucows management team and Lacuna, LLC, the Company’s largest shareholder, have agreed not to tender any shares in the tender offer.

Tucows expects to fund the share purchases in the Tender Offer through new borrowings under an amended and extended version of its existing credit facilities. The Tender Offer will not be conditioned upon any minimum number of shares being tendered, but will be subject to the completion of the new borrowings and other customary conditions that will be described in the Tender Offer documents. The Tender Offer documents, which will be distributed to shareholders upon commencement of the Tender Offer, will also contain tendering instructions and a complete explanation of the Tender Offer’s terms and conditions.

“We remain confident in the ability of our business to deliver consistency, reliability and growth and believe that the repurchase of our shares at such price levels is an attractive investment and a prudent use of cash and consistent with our strategy to return capital to shareholders,” said Elliot Noss, President and Chief Executive Officer of Tucows Inc.