Tucows, Inc. :TCX-US: Earnings Analysis: Q4, 2016 By the Numbers : February 15, 2017

Tucows, Inc. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of Tucows, Inc. – Web.com Group, Inc., Bridgeline Digital, Inc., Yahoo! Inc. and VeriSign, Inc. (WEB-US, BLIN-US, YHOO-US and VRSN-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 48.80 million, Net Earnings of USD 2.82 million.
  • Gross margins widened from 31.05% to 32.69% compared to the same period last year, operating (EBITDA) margins now 12.79% from 11.95%.
  • Year-on-year change in operating cash flow of 542.27% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from 10.52% to 11.04%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 48.8 49.06 47.47 45.61 45.03
Revenue Growth (%YOY) 8.38 10.13 10.67 12.71 16.05
Earnings (mil) 2.82 4.74 4.07 4.44 3.1
Earnings Growth (%YOY) -9 50.07 78.15 56.61 66.49
Net Margin (%) 5.77 9.66 8.58 9.73 6.87
EPS 0.26 0.45 0.38 0.41 0.28
Return on Equity (%) 28.71 54.24 50.03 57.16 41.23
Return on Assets (%) 7.44 13.14 11.68 13.27 9.38

Access our Ratings and Scores for Tucows, Inc.

Market Share Versus Profits

Revenues History
Earnings History

TCX-US‘s change in revenue this period compared to the same period last year of 8.38% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that TCX-US is holding onto its market share. Also, for comparison purposes, revenues changed by -0.53% and earnings by -40.59% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 31.05% to 32.69%, while operating margins improved from 11.95% to 12.79% over this period. For comparison, gross margins were 33.08% and EBITDA margins 16.76% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

TCX-US‘s change in operating cash flow of 542.27% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from 10.88% to 11.10% and pretax margins widened from 10.52% to 11.04%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Tucows, Inc.

Company Profile

Tucows, Inc. is an Internet services company, which engages in the provision of domain names, email, and other services. It operates through the Domain Services and Network Access Services segments. The Domain Services segment includes wholesale and retail domain name registration services; value added services; and portfolio services. The Network Access Services sells retail mobile phones and services to individuals and small businesses through the Ting website. It also offers services under four brands: OpenSRS, YummyNames, Hover, and Ting. The company was founded in 1993 and is headquartered in Toronto, Canada.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of TCX-US.