Tucows Inc EBITDA dropped on 35.8% and Revenue decreased on 7.7%
02/09/2021 • About Tucows Inc (
$TCX) • By InTwits
Tucows Inc reported 2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- 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 5.5%.
- 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%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Tucows Inc'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. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 4.7 pp from 15.3% to 10.7% in 2020.
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 2016-2020 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 the last 5 years.
Investments (CAPEX, working capital and M&A)
Tucows Inc's CAPEX/Revenue was 14.3% in 2020. Tucows Inc showed fast CAPEX/Revenue growth of 10.4 pp from 3.9% in 2017 to 14.3% in 2020. It's average CAPEX/Revenue for the last three years 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 stuck to a growing trend at 2.9 pp per annum in the last 5 years.
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 followed a declining trend at -12.1 pp per annum in the last 5 years. ROE followed a declining trend 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 surged 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 grew 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%).
Valuation and dividends
Tucows Inc's trades at EV/EBITDA 28.0x and P/E 139.2x.
Management team
Tucows Inc's CEO Elliot Noss has spent 19 years with the company. Tucows Inc's CFO is Davinder Singh "Dave". Davinder Singh "Dave" has 3 years tenure at the company.
Financial and operational results
FY ended 12/31/2020
Tucows Inc ($TCX) 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 ($TCX) 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.
