Tucows Inc reports 35.8% EBITDA decline in 2020 and 7.7% Revenue decline
09.02.2021 • About Tucows Inc (
$TC) • By InTwits
Tucows Inc reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- Tucows Inc has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.7%. At the same time it's a lot of higher than industry average of 5.6%.
- CAPEX is quite volatile: $44m in 2020, $44m in 2019, $28m in 2018, $13m in 2017, $8m in 2016
- The company has potentially unprofitable business model: ROIC is 3.0%
- It operates with high leverage: Net Debt/EBITDA is 3.7x while industry average is 0.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased on 7.7%. Revenue decline showed acceleration in 20Q4 - it was 17.6% YoY. During the last 5 years Revenue growth topped in 2017 at 73.5% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 80.7 pp from -265% to -184% in FY2020.
Gross Margin decreased on 2.4 pp from 29.9% to 27.5% in 2020. SG&A as a % of Revenue increased on 2.1 pp from 15.5% to 17.5% in 2020. During the last 5 years SG&A as a % of Revenue bottomed in 2017 at 13.1% and was growing since that time.
Net Income margin decreased on 2.7 pp from 4.6% to 1.9% in 2020. Net Income margin followed a declining trend at -1.5 pp per annum in 2016-2020.
Investments (CAPEX, working capital and M&A)
In 2020 Tucows Inc had CAPEX/Revenue of 14.3%. The company's CAPEX/Revenue surged on 10.4 pp from 3.9% in 2017 to 14.3% in 2020. For the last three years the average CAPEX/Revenue was 11.8%. Tucows Inc has spent a lot to CAPEX (134% of EBITDA) which didn't stop revenue from falling. CAPEX as a % of Revenue followed a growing trend at 2.9 pp per annum in 2016-2020.
Return on investment
The company operates at low ROIC (3.0%) and ROE (5.8%). ROIC dropped on 12.5 pp from 15.5% to 3.0% in 2020. ROE dropped on 11.9 pp from 17.7% to 5.8% in 2020. ROIC declined at -12.1 pp per annum in 2016-2020. ROE declined at -11.6 pp per annum in the last 5 years.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.7x and Debt / EBITDA is 4.0x. Net Debt / EBITDA jumped on 1.7x from 2.0x to 3.7x in 2020. Debt increased on 6.7% while cash dropped on 59.2%. Net Debt/EBITDA followed a growing trend at 0.8x per annum in the last 5 years.
Tucows Inc has no short term refinancing risk: cash is higher than short term debt (471.9%).
Management team
Tucows Inc's CEO Elliot Noss has spent 19 years with the company. Davinder Singh "Dave" is a the company's CFO. Davinder Singh "Dave" has spent 3 years at the company.
Financial and operational results
FY ended 31.12.2020
Tucows Inc ($TC) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 189.8 | 329.4 | 346.0 | 337.1 | 311.2 | -7.7% |
| Gross Profit | 63.1 | 84.5 | 96.8 | 100.8 | 85.5 | -15.2% |
| SG&A | 32.2 | 43.0 | 50.8 | 52.1 | 54.5 | 4.6% |
| EBITDA | 27.8 | 39.2 | 44.3 | 51.7 | 33.2 | -35.8% |
| EBIT | 25.0 | | | | | |
| Tax | 9.0 | | | | | |
| Net Income | 16.1 | 22.3 | 17.1 | 15.4 | 5.8 | -62.5% |
| Stock Based Compensation | 1.7 | | | | | |
Balance Sheet
|
|---|
| Cash | 15.1 | 18.0 | 12.6 | 20.4 | 8.3 | -59.2% |
| Accounts Receivable | 10.9 | | | | | |
| Inventory | 1.2 | | | | | |
| Accounts Payable | 4.8 | | | | | |
| Short Term Debt | 2.2 | 18.3 | 18.4 | 1.4 | 1.8 | 24.6% |
| Long Term Debt | 8.0 | 58.6 | 46.2 | 122.9 | 130.9 | 6.5% |
Cash flow
|
|---|
| Capex | 7.9 | 12.9 | 27.9 | 44.1 | 44.4 | 0.8% |
Ratios
|
|---|
| Revenue growth | 10.6% | 73.5% | 5.0% | -2.6% | -7.7% | |
| EBITDA growth | 41.4% | 40.9% | 13.0% | 16.7% | -35.8% | |
|
|---|
| Gross Margin | 33.2% | 25.7% | 28.0% | 29.9% | 27.5% | -2.4% |
| EBITDA Margin | 14.7% | 11.9% | 12.8% | 15.3% | 10.7% | -4.7% |
| EBIT Margin | 13.2% | | | | |
| SG&A, % of revenue | 16.9% | 13.1% | 14.7% | 15.5% | 17.5% | 2.1% |
| SBC, % of revenue | 0.9% | | | | |
| Net Income Margin | 8.5% | 6.8% | 5.0% | 4.6% | 1.9% | -2.7% |
| CAPEX, % of revenue | 4.2% | 3.9% | 8.1% | 13.1% | 14.3% | 1.2% |
|
|---|
| ROIC | 58.3% | 25.6% | 18.0% | 15.5% | 3.0% | -12.5% |
| ROE | 50.1% | 45.6% | 24.5% | 17.7% | 5.8% | -11.9% |
| Net Debt/EBITDA | -0.2x | 1.5x | 1.2x | 2.0x | 3.7x | 1.7x |
People
|
|---|
| Insider ownership | 8.4% | | | | | |
| Employees | 375 | | | | | |
| Revenue/Employee, th. $ | 506 | | | | | |
Tucows Inc ($TC) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 84 | 82 | 74 | 71 | | 6.4% | -2.4% | -15.7% | -17.6% |
| EBITDA | 12 | 10 | 8 | 5 | | 19.3% | -15.4% | -47.0% | -65.6% |
| Net Income | 3 | 0 | 1 | 2 | | 1.3% | -94.0% | -83.0% | -64.2% |
Balance Sheet
|
|---|
| Cash | 12 | 9 | 10 | 8 | | 12.8% | -26.2% | -15.3% | -59.2% |
| Short Term Debt | 1 | 2 | 2 | 2 | | -94.4% | 0.7% | 16.7% | 24.6% |
| Long Term Debt | 123 | 123 | 123 | 131 | | 57.9% | 12.2% | 8.1% | 6.5% |
Ratios
|
|---|
| Gross Margin | 29.9% | 29.8% | 26.8% | 24.6% | | 1.3% | 0.7% | -4.5% | -5.7% |
| EBITDA Margin | 14.3% | 11.7% | 10.3% | 7.7% | | 1.6% | -1.8% | -6.1% | -10.8% |
| Net Income Margin | 3.4% | 0.2% | 1.0% | 2.9% | | -0.2% | -2.9% | -3.8% | -3.8% |
Peers in Communications
Below we provide Tucows Inc benchmarking against other companies in Communications industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Armada Data Corp ($ARD) | - | 5.9% | 23.4% | -2.3% | 13.7% |
| Vecima Networks Inc ($VCM) | - | -34.1% | 9.3% | 8.9% | 13.4% |
| iSIGN Media Solutions Inc ($ISD) | - | 70.9% | -90.9% | 38.5% | 10.1% |
| Uniserve Communications Corp ($USS) | - | 12.5% | 24.1% | 39.0% | 0.9% |
| EXFO Inc ($EXF) | - | 4.6% | 10.8% | 6.4% | -7.4% |
| |
|---|
| Median (6 companies) | 2.3% | 5.9% | 10.8% | 23.7% | 5.5% |
|---|
| Tucows Inc ($TC) | - | 73.5% | 5.0% | -2.6% | -7.7% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| EXFO Inc ($EXF) | 62.6% | 61.2% | 61.0% | 58.6% | 56.9% |
| Vecima Networks Inc ($VCM) | 57.0% | 51.8% | 53.6% | 52.8% | 54.2% |
| Uniserve Communications Corp ($USS) | 50.2% | 48.9% | 44.4% | 36.9% | 34.2% |
| Plaintree Systems Inc ($NPT) | 11.5% | 11.6% | 27.6% | 28.4% | 22.2% |
| iSIGN Media Solutions Inc ($ISD) | 12.7% | 25.7% | -84.0% | 19.9% | 20.1% |
| |
|---|
| Median (5 companies) | 44.6% | 42.4% | 45.2% | 36.9% | 34.2% |
|---|
| Tucows Inc ($TC) | 33.2% | 25.7% | 28.0% | 29.9% | 27.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Vecima Networks Inc ($VCM) | 30.3% | 21.6% | 15.6% | 5.9% | 17.0% |
| Plaintree Systems Inc ($NPT) | -4.4% | -3.8% | 15.7% | 16.3% | 7.3% |
| Armada Data Corp ($ARD) | 19.2% | 14.7% | 14.2% | -0.1% | 6.3% |
| EXFO Inc ($EXF) | 8.9% | 6.5% | 4.2% | 6.6% | 5.0% |
| Uniserve Communications Corp ($USS) | -8.7% | 2.9% | -28.9% | -14.9% | -6.3% |
| |
|---|
| Median (6 companies) | 6.8% | 2.9% | 4.2% | 2.9% | 5.6% |
|---|
| Tucows Inc ($TC) | 14.7% | 11.9% | 12.8% | 15.3% | 10.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| EXFO Inc ($EXF) | 1.9% | 2.9% | 3.9% | 2.6% | 2.9% |
| Uniserve Communications Corp ($USS) | 3.7% | 2.4% | 9.8% | 0.6% | 1.5% |
| Vecima Networks Inc ($VCM) | 4.8% | 2.2% | 2.3% | 22.3% | 1.2% |
| Armada Data Corp ($ARD) | 0.2% | 0.3% | 0.2% | 0.4% | 0.3% |
| Plaintree Systems Inc ($NPT) | 2.2% | 1.9% | 2.0% | 3.2% | 0.1% |
| |
|---|
| Median (6 companies) | 2.6% | 1.9% | 2.0% | 2.9% | 0.7% |
|---|
| Tucows Inc ($TC) | 4.2% | 3.9% | 8.1% | 13.1% | 14.3% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Armada Data Corp ($ARD) | 68.1% | 48.3% | 52.5% | -1.0% | 12.5% |
| Plaintree Systems Inc ($NPT) | -44.7% | -174.1% | 269.1% | 72.4% | 2.7% |
| Vecima Networks Inc ($VCM) | 19.3% | 5.1% | 1.8% | -3.6% | 0.1% |
| EXFO Inc ($EXF) | 9.1% | 4.6% | -2.2% | 2.4% | -1.1% |
| Uniserve Communications Corp ($USS) | - | - | -652.3% | -243.8% | -155.8% |
| |
|---|
| Median (6 companies) | 0.1% | 4.6% | 1.8% | -1.0% | 0.1% |
|---|
| Tucows Inc ($TC) | 58.3% | 25.6% | 18.0% | 15.5% | 3.0% |
Top companies by Net Debt / EBITDA
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| EXFO Inc ($EXF) | -2.1x | -2.4x | 0.6x | -0.3x | 1.1x |
| Plaintree Systems Inc ($NPT) | - | - | 0.9x | 0.3x | 0.9x |
| Vecima Networks Inc ($VCM) | -0.6x | -0.1x | -0.7x | -3.6x | -0.7x |
| Armada Data Corp ($ARD) | 0.1x | -0.8x | -0.9x | - | -0.7x |
| |
|---|
| Median (4 companies) | 1.6x | -0.5x | -0.1x | -0.3x | 0.1x |
|---|
| Tucows Inc ($TC) | -0.2x | 1.5x | 1.2x | 2.0x | 3.7x |
