tcx20191231_10k.htm
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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2020

 

OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from           to          

 

Commission file number 1-32600

 

TUCOWS INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Pennsylvania

23-2707366

(State or Other Jurisdiction of

(I.R.S. Employer

Incorporation or Organization)

Identification No.)

 

96 Mowat Avenue,

Toronto, Ontario M6K 3M1, Canada

(Address of Principal Executive Offices) (Zip Code)

 

(416) 535-0123

(Registrant's Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

TCX

 

NASDAQ

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:  Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T §232.405 of this chapter during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐

Accelerated filer ☒

  

  

Non-accelerated filer ☐

Smaller reporting company 

  

  

 

Emerging Growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  Yes  No ☒

 

As of August 4, 2020, there were 10,567,610 outstanding shares of common stock, no par value, of the registrant.

 

 

 

TUCOWS INC.

Form 10-Q Quarterly Report

INDEX

 

PART I

FINANCIAL INFORMATION

 

 

 

Item 1.

Consolidated Financial Statements

3

  

  

  

  

Consolidated Balance Sheets (unaudited) as of June 30, 2020 and December 31, 2019

3

  

  

  

  

Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three and six months ended June 30, 2020 and 2019

4

  

  

  

  

Consolidated Statements of Cash Flows (unaudited) for the three and six months ended June 30, 2020 and 2019

5

  

  

  

  

Notes to Consolidated Financial Statements (unaudited)

6

  

  

  

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

26

  

  

  

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

48

  

  

  

Item 4.

Controls and Procedures

49

  

  

  

PART II

OTHER INFORMATION

  

  

  

Item 1.

Legal Proceedings

50

  

  

  

Item 1A.

Risk Factors

50

  

  

  

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds 

    51

 

 

 

Item 3.

Defaults Upon Senior Securities

51

  

  

  

Item 4.

Mine Safety Disclosures

51

 

 

 

Item 5.

Other Information

51

  

  

  

Item 6.

Exhibits

51

  

  

  

Signatures

53


TRADEMARKS, TRADE NAMES AND SERVICE MARKS

 

Tucows®, EPAG®, Hover®, OpenSRS®, Platypus®, Ting®, eNom®, Roam®, Roam Mobility®, Bulkregister®, Ascio®, Cedar®, and YummyNames® are registered trademarks of Tucows Inc. or its subsidiaries. Other service marks, trademarks and trade names of Tucows Inc. or its subsidiaries may be used in this Quarterly Report on Form 10-Q (this “Quarterly Report”). All other service marks, trademarks and trade names referred to in this Quarterly Report are the property of their respective owners. Solely for convenience, any trademarks referred to in this Quarterly Report may appear without the ® or TM symbol, but such references are not intended to indicate, in any way, that we or the owner of such trademark, as applicable, will not assert, to the fullest extent under applicable law, our or its rights, or the right of the applicable licensor, to these trademarks.

 

 

 

PART I.    FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Tucows Inc.

Consolidated Balance Sheets

 

(Dollar amounts in thousands of U.S. dollars)

(unaudited)

 

  

June 30,

  

December 31,

 
  

2020

  

2019

 
         

Assets

        
         

Current assets:

        

Cash and cash equivalents

 $8,859  $20,393 

Accounts receivable, net of allowance for doubtful accounts of $214 as of June 30, 2020 and $131 as of December 31, 2019

  7,506   14,564 

Inventory

  965   3,457 

Prepaid expenses and deposits

  16,549   13,478 

Derivative instrument asset, current portion (note 5)

  1,080   731 

Prepaid domain name registry and ancillary services fees, current portion (note 12)

  96,322   91,252 

Assets held-for-sale (note 9)

  9,027   - 

Income taxes recoverable

  1,326   1,800 

Total current assets

  141,634   145,675 
         

Prepaid domain name registry and ancillary services fees, long-term portion (note 12)

  17,902   17,915 

Derivative instrument asset, long-term portion (note 5)

  611   - 

Deferred tax asset

  340   - 

Property and equipment

  101,292   82,121 

Right of use operating lease asset

  11,066   11,335 

Contract costs

  344   1,400 

Intangible assets (note 6)

  52,732   57,654 

Goodwill (note 6)

  116,270   109,818 

Total assets

 $442,191  $425,918 
         
         

Liabilities and Stockholders' Equity

        
         

Current liabilities:

        

Accounts payable

 $6,511  $6,671 

Accrued liabilities

  9,915   9,373 

Customer deposits

  14,468   14,074 

Derivative instrument liability, current portion (note 5)

  561   - 

Liabilities held-for-sale (note 9)

  751   - 

Operating lease liability, current portion (note 13)

  1,506   1,413 

Deferred revenue, current portion (note 11)

  129,072   123,101 

Accreditation fees payable, current portion

  1,018   952 

Income taxes payable

  1,291   1,324 

Total current liabilities

  165,093   156,908 
         

Derivative instrument liability, long-term portion (note 5)

  158   - 

Deferred revenue, long-term portion (note 11)

  26,228   26,202 

Accreditation fees payable, long-term portion

  204   216 

Operating lease liability, long-term portion (note 13)

  9,169   9,424 

Loan payable, long-term portion (note 7)

  113,608   113,503 

Other long-term liability (note 4 (b))

  3,244   - 

Deferred tax liability

  27,113   25,471 
         

Stockholders' equity (note 15)

        

Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding

  -   - 

Common stock - no par value, 250,000,000 shares authorized; 10,570,360 shares issued and outstanding as of June 30, 2020 and 10,585,159 shares issued and outstanding as of December 31, 2019

  18,865   16,633 

Additional paid-in capital

  591   880 

Retained earnings

  77,322   76,208 

Accumulated other comprehensive income (loss) (note 5)

  596   473 

Total stockholders' equity

  97,374   94,194 

Total liabilities and stockholders' equity

 $442,191  $425,918 
         

Contingencies (note 18)

          
         

Subsequent events (note 19)

        

 

See accompanying notes to consolidated financial statements 

 

3

 

 

Tucows Inc.

Consolidated Statements of Operations and Comprehensive Income

 

(Dollar amounts in thousands of U.S. dollars, except per share amounts) 

(unaudited)

 

  

For the Three Months Ended June 30,

  

For the Six Months Ended June 30,

 
  

2020

  

2019

  

2020

 

2019

 
                  
                  

Net revenues (note 11)

 $82,122  $84,117  $166,107   $163,070 
                  

Cost of revenues (note 11)

                 

Cost of revenues

  51,790   54,873   104,978    106,805 

Network expenses

  2,485   2,385   4,901    4,780 

Depreciation of property and equipment

  3,030   2,038   5,907    3,839 

Amortization of intangible assets (note 6)

  326   314   680    488 
Impairment of property and equipment  1,525   -   1,525    - 

Total cost of revenues

  59,156   59,610   117,991    115,912 
                  

Gross profit

  22,966   24,507   48,116    47,158 
                  

Expenses:

                 

Sales and marketing

  9,218   8,856   18,203    17,597 

Technical operations and development

  3,067   2,752   5,818    5,275 

General and administrative

  5,465   4,796   10,206    9,244 

Depreciation of property and equipment

  125   134   238    258 

Amortization of intangible assets (note 6)

  2,504   2,251   5,451    4,117 
Impairment of definite life intangible assets (note 6)  1,431   -   1,431    - 

Loss (gain) on currency forward contracts (note 5)

  (381)  (31)  60    (110)

Total expenses

  21,429   18,758   41,407    36,381 
                  

Income from operations

  1,537   5,749   6,709    10,777 
                  

Other income (expenses):

                 

Interest expense, net

  (846)  (1,314)  (1,996)   (2,286)

Other expense, net

  (85)  -   (172)   - 

Total other income (expenses)

  (931)  (1,314)  (2,168)   (2,286)
                  

Income before provision for income taxes

  606   4,435   4,541    8,491 
                  

Provision for income taxes (note 8)

  449   1,819   1,550    3,076 
                  

Net income for the period

  157   2,616   2,991    5,415 
                  

Other comprehensive income, net of tax

                 

Unrealized income (loss) on hedging activities (note 5)

  1,114   240   (120)   789 

Net amount reclassified to earnings (note 5)

  200   80   243    141 

Other comprehensive income net of tax expense of $398 and $103 for the three months ended June 30, 2020 and June 30, 2019, $32 and $298 for the six months ended June 30, 2020 and June 30, 2019 (note 5)

  1,314   320   123    930 
                  

Comprehensive income, net of tax for the period

 $1,471  $2,936  $3,114   $6,345 
                  
                  

Basic earnings per common share (note 10)

 $0.01  $0.25  $0.28   $0.51 
                  

Shares used in computing basic earnings per common share (note 10)

  10,567,382   10,657,124   10,589,806    10,646,045 
                  

Diluted earnings per common share (note 10)

 $0.01  $0.24  $0.28   $0.50 
                  

Shares used in computing diluted earnings per common share (note 10)

  10,653,527   10,840,005   10,684,304    10,837,456 


See accompanying notes to consolidated financial statements 

 

4

 

 

Tucows Inc.

Consolidated Statements of Cash Flows

 

(Dollar amounts in thousands of U.S. dollars) 

(unaudited)

 

  

For the Three Months Ended June 30,

  

For the Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Cash provided by:

                

Operating activities:

                

Net income for the period

 $157  $2,616  $2,991  $5,415 

Items not involving cash:

                

Depreciation of property and equipment

  3,155   2,172   6,145   4,097 

Impairment of property and equipment

  1,525   -   1,525   22 

Amortization of debt discount and issuance costs

  67   90   134   168 

Amortization of intangible assets

  2,830   2,565   6,131   4,605 

Net amortization contract costs

  95   34   124   53 
Impairment of definite life intangible assets  1,431   -   1,431   - 

Accretion of contingent consideration

  85   -   172   - 
Other  223   -   223   - 

Deferred income taxes (recovery)

  (917)  1,449   (1,107)  1,911 

Excess tax benefits on share-based compensation expense

  (164)  (381)  (344)  (737)

Net Right of use operating assets/Operating lease liability

  291   79   112   49 

Loss on disposal of domain names

  2   2   15   6 

Loss (gain) on change in the fair value of forward contracts

  (436)  (70)  (88)  (188)

Stock-based compensation

  847   685   1,648   1,210 

Change in non-cash operating working capital:

                

Accounts receivable

  401   1,031   2,552   (157)

Inventory

  900   108   1,804   516 

Prepaid expenses and deposits

  (3,247)  (2,524)  (3,222)  (2,914)

Prepaid domain name registry and ancillary services fees

  (2,204)  1,651   (5,057)  (65)

Income taxes recoverable

  294   (1,639)  794   (2,875)

Accounts payable

  (1,521)  (1,170)  250   (384)

Accrued liabilities

  2,165   2,266   334   3,587 

Customer deposits

  336   (808)  394   (521)

Deferred revenue

  2,655   (1,131)  5,997   2,138 

Accreditation fees payable

  (31)  (46)  54   34 

Net cash provided by operating activities

  8,939   6,979   23,012   15,970 
                 

Financing activities:

                

Proceeds received on exercise of stock options

  29   122   46   194 

Payment of tax obligations resulting from net exercise of stock options

  (165)  (185)  (347)  (524)

Repurchase of common stock

  (164)  -   (3,281)  - 

Proceeds received on loan payable

  -   7,431   -   40,371 

Repayment of loan payable

  -   (3)  -   (4,603)

Payment of loan payable costs

  (7)  (434)  (32)  (641)

Net cash (used in) provided by financing activities

  (307)  6,931   (3,614)  34,797 
                 

Investing activities:

                

Additions to property and equipment

  (12,150)  (10,414)  (22,093)  (20,849)
Acquisition of other assets  -   (2,501)  -   (2,501)

Acquisition of Cedar Holdings Group, net of cash of $66 (note 4(b))

  -   -   (8,770)  - 

Acquisition of Ascio Technologies, net of cash of $1 (note 4(a))

  -   -   -   (28,024)
Acquisition of intangible assets  (69)  (27)  (69)  (27)

Net cash used in investing activities

  (12,219)  (12,942)  (30,932)  (51,401)
                 

Increase (decrease) in cash and cash equivalents

  (3,587)  968   (11,534)  (634)
                 

Cash and cash equivalents, beginning of period

  12,446   11,035   20,393   12,637 

Cash and cash equivalents, end of period

 $8,859  $12,003  $8,859  $12,003 
                 
                 
                 

Supplemental cash flow information:

                

Interest paid

 $686  $1,318  $1,840  $2,294 

Income taxes paid, net

 $1,243  $2,046  $2,200  $4,164 

Supplementary disclosure of non-cash investing and financing activities:

                

Property and equipment acquired during the period not yet paid for

 $635  $674  $635  $674 

Fair value of shares issued for acquisition of Cedar Holdings Group

 $-  $-  $2,000  $- 

Fair value of contingent consideration for acquisition of Cedar Holdings Group

 $7  $-  $3,072  $- 

 

See accompanying notes to consolidated financial statements

 

5

 

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

 

1. Organization of the Company:

 

Tucows Inc. (referred to throughout this report as the “Company”, “Tucows”, “we”, “us” or through similar expressions) provides simple useful services that help people unlock the power of the Internet. The Company provides US consumers and small businesses with mobile phone services nationally and high-speed fixed Internet access in selected towns. The Company is also a global distributor of Internet services, including domain name registration, digital certificates, and email. It provides these services primarily through a global Internet-based distribution network of Internet Service Providers, web hosting companies and other providers of Internet services to end-users.

 

 

2. Basis of Presentation:

 

The accompanying unaudited interim consolidated balance sheets, and the related consolidated statements of operations and comprehensive income and cash flows reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the financial position of Tucows and its subsidiaries as at June 30, 2020 and the results of operations and cash flows for the interim periods ended June 30, 2020 and 2019. The results of operations presented in this Quarterly Report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for future periods.

 

The accompanying unaudited interim consolidated financial statements have been prepared by Tucows in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the Company's annual audited consolidated financial statements and accompanying notes have been condensed or omitted. Other than the exception noted below, these interim consolidated financial statements and accompanying notes follow the same accounting policies and methods of application used in the annual financial statements and should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in Tucows' 2019 Annual Report on Form 10-K filed with the SEC on March 4, 2020 (the “2019 Annual Report”). There have been no material changes to our significant accounting policies and estimates during the three and six months ended June 30, 2020 as compared to the significant accounting policies and estimates described in our 2019 Annual Report, except as described in Note 3 – Recent Accounting Pronouncements, and Note 9 - Assets Held-for-sale.

 

 

3. Recent Accounting Pronouncements:

 

Recent Accounting Pronouncements Adopted
 

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU 2018-15”). ASU 2018-15 helps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance on accounting for implementation costs when the cloud computing arrangement does not include a license and is accounted for as a service contract. The amendments in ASU 2018-15 require an entity (customer) in a hosting arrangement to assess which implementation costs to capitalize vs expense as it relates to a service contract.  The amendments also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-15 in the first quarter of 2020 to all implementation costs incurred after the date of adoption. The new guidance did not have a material impact on our consolidated financial statements.

 

6

 

Recent Accounting Pronouncements Not Yet Adopted
 

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional guidance for a limited period of time to ease the potential burden of reference rate reform on financial reporting.  The amendments in ASU 2020-04 apply to contract modifications that replace a reference rate affected by reference rate reform and contemporaneous modifications of other contract terms related to the replacement of the reference rate. The following optional expedients for applying the requirements of certain Topics or Industry Subtopics in the Codification are permitted for contracts that are modified because of reference rate reform and that meet certain scope guidance:

 

 

1.

Modifications of contracts within the scope of Topics 310, Receivables, and 470, Debt, should be accounted for by prospectively adjusting the effective interest rate.
 2.Modifications of contracts within the scope of Topic 842, Leases, should be accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required under those Topics for modifications not accounted for as separate contracts.
 3.

Modifications of contracts do not require an entity to reassess its original conclusion about whether that contract contains an embedded derivative that is clearly and closely related to the economic characteristics and risks of the host contract under Subtopic 815-15, Derivatives and Hedging— Embedded Derivatives

 

The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently charged interest and standby fees associated with its Amended 2019 Credit Facility (as defined below) based on LIBOR, which will need to be amended when an alternative reference rate is chosen, at which time we may adopt some of the practical expedients provided by ASU 2020-04.

 

 

4. Acquisitions:

 

 

(a)

Ascio

 

On March 18, 2019, the Company entered into an Asset Purchase Agreement to purchase all of the equity of Ascio Technologies, Inc. (“Ascio”), a domain registrar business, and all of CSC’s assets related to that business. For more information, see Note 3 - Acquisitions of the 2019 Annual Report. 
 
 

(b)

Cedar

 

In the fourth quarter of 2019, the Company entered into a Stock Purchase Agreement to purchase all of the issued and outstanding shares of Cedar Holdings Group, Incorporated (“Cedar”), a fiber Internet provider business based in Durango, Colorado.  The transaction closed on January 1, 2020, following receipt of all regulatory approvals.  The purchase price was $14.1 million, less an estimated purchase price adjustment of approximately $0.2 million relating to a working capital deficit and assessment of the fair value of contingent consideration, for net purchase consideration of $13.9 million. In addition to $9.0 million cash consideration due at closing, the Company also issued 32,374 ($2.0 million) of Tucows Inc. shares with a two-year restriction period at closing.  Included in the agreement is contingent consideration totaling up to $4.0 million, due on the 24th and 36th month anniversaries of the closing of the transaction dependent upon the achievement of certain milestones as defined in the Share Purchase Agreement. The fair value of the contingent consideration was determined to be $3.1 million using a discount rate of 11.2%. The Company has prepared a preliminary purchase price allocation of the assets acquired and the liabilities assumed of Cedar based on management’s best estimates of fair value.  The final purchase price allocation may vary based on final appraisals, valuations and analyses of the fair value of the acquired assets and assumed liabilities. 

 

The amortization period for the customer relationships and network rights are 7 and 15 years, respectively.

 

7

 
The following table shows the preliminary allocation of the purchase price for Cedar to the acquired identifiable assets and liabilities assumed ( thousands of U.S. dollars):

 

Cash Consideration, including working capital adjustment

 $8,836 

Share-based payment

  2,000 

Fair value of contingent payments

  3,072 

Total estimated purchase price

  13,908 
     

Cash and Cash Equivalents

  66 

Accounts Receivables, net

  47 

Other current assets

  22 

Property and equipment

  4,661 

Right of use operating lease

  18 

Intangible assets, consisting of customer relationships and network rights

  5,390 

Total identifiable assets

  10,204 

Accounts payable and accrued liabilities

  (362)

Deferred tax liability

  (2,373)

Operating lease liability

  (13)

Total liabilities assumed

  (2,748)

Total net assets (liabilities) assumed

  7,456 

Total goodwill

 $6,452 

 

The goodwill related to this acquisition is primarily attributable to synergies expected to arise from the acquisition and is not deductible for tax purposes.

In connection with this acquisition, the Company incurred total acquisition related costs of $0.1 million, of which nil were included in General & Administrative expenses in the consolidated statements of Operations and comprehensive Income for the three and six months ended  June 30, 2020.

The following table presents selected unaudited pro forma information for the Company assuming the acquisition of Cedar had occurred as of January 1, 2019. This pro forma information does not purport to represent what the Company’s actual results would have been if the acquisition had occurred as of the date indicated or what results would be for any future periods.

 

  

Unaudited

  

Unaudited

 
  

For the Three Months Ended June 30,

  

For the Six Months Ended June 30,

 
  

2019

  

2019

 
         

Net revenues

 $85,345  $165,526 

Net income

  2,740   5,440 
         

Basic earnings per common share

  0.26   0.51 

Diluted earnings per common share

 $0.25  $0.50 

 

The amount of revenue recognized since the acquisition date included in the consolidated statements of operations and comprehensive income statement for the three and six months ended June 30, 2020 is $1.2 million and $2.4 million, respectively.

 

The net income recognized since the acquisition date included in the consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2020 is a gain of $0.1 million and a loss of $0.2 million, respectively.

 

8

 
 
5. Derivative Instruments and Hedging Activities:
 
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign exchange rate risk and interest rate risk.
 
Since October 2012, the Company has employed a hedging program with a Canadian chartered bank to limit the potential foreign exchange fluctuations incurred on its future cash flows related to a portion of payroll, taxes, rent and payments to Canadian domain name registry suppliers that are denominated in Canadian dollars and are expected to be paid by its Canadian operating subsidiary. In May 2020, the Company entered into a pay-fixed, receive-variable interest rate swap with a Canadian chartered bank to limit the potential interest rate fluctuations incurred on its future cash flows related to variable interest payments on the Credit facility. The notional value of the interest rate swap was $70 million. 
 
As part of its risk management strategy, the Company also uses derivative instruments to hedge a portion of the foreign exchange risk and interest rate risk associated with these costs. The Company does not use these forward contracts for trading or speculative purposes. The foreign exchange contracts typically mature between one and eighteen months, and the interest rate swap matures in June 2023.

 

The Company has designated certain of these foreign exchange transactions as cash flow hedges of forecasted transactions under ASU 2017- 12, Derivatives and Hedging (Topic 815) (“ASC Topic  815”). For certain contracts, as the critical terms of the hedging instrument, and of the entire hedged forecasted transaction, are the same, in accordance with ASC Topic 815, the Company has been able to conclude that changes in fair value and cash flows attributable to the risk of being hedged are expected to completely offset at inception and on an ongoing basis. The Company has also designated the interest rate swap as a cash flow hedge of expected future interest payments. Accordingly, for the foreign exchange and interest rate swap contracts, unrealized gains or losses on the effective portion of these contracts have been included within other comprehensive income and reclassified to earnings when the hedged transaction is recognized in earnings. Cash flows from hedging activities are classified under the same category as the cash flows from the hedged items in the consolidated statements of cash flows. The fair value of the contracts, as of June 30, 2020 and December 31, 2019, is recorded as derivative instrument assets or liabilities. For certain contracts where the hedged transactions are no longer probable to occur, the loss on the associated forward contract is recognized in earnings.

 

As of June 30, 2020, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $52.1 million, of which $44.2 million met the requirements of ASC Topic 815 and were designated as hedges.

 

As of December 31,  2019, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars wa s $30.5 million, of which $26.1 million met the requirements of ASC Topic 815 and were designated as hedges.
 
As of June 30, 2020, we had the following outstanding forward contracts to trade U.S. dollars in exchange for Canadian dollars:
 
Maturity date (Dollar amounts in thousands of U.S. dollars) Notional amount of U.S. dollars  Weighted average exchange rate of U.S. dollars  Fair value 
             
July - September 2020  10,656   1.3227   (273)
October - December 2020  9,658   1.3227   (247)
January - March 2021  11,124   1.4283   574 
April - June 2021  9,878   1.4283   507 
July - September 2021  10,782   1.4362   611 
  $52,098   1.3888  $1,172 

 

As of June 30, 2020, the notional amount of the Company's interest rate swap designated as a cash flow hedge was $70 million. As of December 31, 2019 the Company had not entered into any interest rate swaps.

 

9

 
Fair value of derivative instruments and effect of derivative instruments on financial performance
 

The effect of these derivative instruments on our consolidated financial statements were as follows (amounts presented do not include any income tax effects).

 

Fair value of derivative instruments in the consolidated balance sheets 
 
Derivatives (Dollar amounts in thousands of U.S. dollars) Balance Sheet Location As of June 30, 2020 Fair Value Asset (Liability)  As of December 31, 2019 Fair Value Asset 
Foreign Currency forward contracts designated as cash flow hedges (net) Derivative instruments $982  $626 
Interest rate swap contract designated as a cash flow hedge (net) Derivative instruments  (200) $- 
Foreign Currency forward contracts not designated as cash flow hedges (net) Derivative instruments  190   105 
Total foreign currency forward contracts (net) Derivative instruments $972  $731 

 

Movement in accumulated other comprehensive income (AOCI) balance for the three months ended June 30, 2020  (Dollar amounts in thousands of U.S. dollars)
 
  

Gains and losses on cash flow hedges

  

Tax impact

  

Total AOCI

 

Opening AOCI balance - March 31, 2020

 $(932) $214  $(718)

Other comprehensive income (loss) before reclassifications

  1,453   (339)  1,114 

Amount reclassified from AOCI

  259   (59)  200 

Other comprehensive income (loss) for the three months ended June 30, 2020

  1,712   (398)  1,314 
             

Ending AOCI Balance - June 30, 2020

 $780  $(184) $596 

 

Movement in accumulated other comprehensive income (AOCI) balance for the six months ended June 30, 2020 (Dollar amounts in thousands of U.S. dollars)

 

  

Gains and losses on cash flow hedges

  

Tax impact

  

Total AOCI

 

Opening AOCI balance - December 31, 2019

 $625  $(152) $473 

Other comprehensive income (loss) before reclassifications

  (162)  42   (120)

Amount reclassified from AOCI

  317   (74)  243 

Other comprehensive income (loss) for the six months ended June 30, 2020

  155   (32)  123 
             

Ending AOCI Balance - June 30, 2020

 $780  $(184) $596 

 

Effects of derivative instruments on income and other comprehensive income (OCI) for the three months ended June 30, 2020 are as follows (Dollar amounts in thousands of U.S. dollars) 
 
Derivatives in Cash Flow Hedging Relationship Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative Location of Gain or (Loss) Reclassified from AOCI into Income Amount of Gain or (Loss) Reclassified from AOCI into Income 
    Operating expenses $(201)
Foreign currency forward contracts for the three months ended June 30, 2020 $1,314 Cost of revenues $(58)
          
Interest rate swap contract for the three months ended June 30, 2020 $- Interest expense, net $- 
          
    Operating expenses $(91)
Foreign currency forward contracts for the three months ended June 30, 2019 $320 Cost of revenues $(15)
          
Interest rate swap contract for the three months ended June 30, 2019 $- Interest expense, net $- 

 

Effects of derivative instruments on income and other comprehensive income (OCI) for the six months ended June 30, 2020 are as follows (Dollar amounts in thousands of U.S. dollars) 

 

Derivatives in Cash Flow Hedging Relationship

 

Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative

 

Location of Gain or (Loss) Reclassified from AOCI into Income

 

Amount of Gain or (Loss) Reclassified from AOCI into Income

 
    

Operating expenses

 $(246)

Foreign currency forward contracts for the six months ended June 30, 2020

 $123 

Cost of revenues

 $(71)
          
Interest rate swap contract for the six months ended June 30, 2020 $- Interest expense, net $- 
          
    

Operating expenses

 $(154)

Foreign currency forward contracts for the six months ended June 30, 2019

 $930 

Cost of revenues

 $(32)
          
Interest rate swap contract for the six months ended June 30, 2019 $- Interest expense, net $- 

 

In addition to the above, for those foreign currency forward contracts not designated as hedges, the Company recorded the following fair value adjustments on settled and outstanding contracts (Dollar amounts in thousands of U.S. dollars):

 

  

Three Months Ended June 30,

     

Six Months Ended June 30,

    

Forward currency contracts not designated as hedges:

 

2020

  

2019

  

2020

  

2019

 
                 

Gain (loss) on settlement

 $(55) $(39) $(148) $(78)
                 

Gain (loss) on change in fair value

 $436  $70  $88  $188 

 

10

 

 
6. Goodwill and Other Intangible Assets
 
Goodwill
 
Goodwill represents the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed in our acquisitions.
 
The Company's Goodwill balance is $116.3 million as of June 30, 2020 and $109.8 million as of December 31, 2019. The Company's goodwill relates 93% ( $107.7 million) to its Domain Services operating segment and 7% ( $8.6 million) to its Network Access Services operating segment.
 
Goodwill is not amortized, but is subject to an annual impairment test, or more frequently if impairment indicators are present. No impairment was recognized during the three and six months ended June 30, 2020 and 2019.
 
Other Intangible Assets:
 
Intangible assets consist of acquired brand, technology, customer relationships, surname domain names, direct navigation domain names and network rights. The Company considers its intangible assets consisting of surname domain names and direct navigation domain names as indefinite life intangible assets. The Company has the exclusive right to these domain names as long as the annual renewal fees are paid to the applicable registry. Renewals occur routinely and at a nominal cost. The indefinite life intangible assets are not amortized but are subject to impairment assessments performed throughout the year. As part of the normal renewal evaluation process during the periods ended June 30, 2020 and June 30, 2019, the Company assessed that certain domain names that were originally acquired in the June 2006 acquisition of Mailbank.com Inc. that were up for renewal, should not be renewed.   
 
Intangible assets, comprising brand, technology, customer relationships and network rights are being amortized on a straight-line basis over periods of two to fifteen years.
 

In June 2020, in light of developments in the economy and the business and leisure travel industries as a result of the novel strain of coronavirus (“COVID-19”) pandemic, the Company decided to discontinue the operation of Roam Mobility. As a consequence of the decision to shut down its Roam Mobility operations, the Company has recorded an impairment loss associated with Roam Mobility customer relationships of $1.4 million, as at June 30, 2020. 

 
In June 2020, the Company committed to a plan to sell its Ting Mobile customer base and reclassified its mobile customer relationships totaling  $2.6 million as held-for-sale assets (Note 9). See Note 19 - Subsequent Events for more information on the Company’s sale of its Ting Mobile customer base.

 

Throughout the second quarter of 2020, the Company purchased several non-exclusive land easements, totaling $0.1 million, which are necessary for the Company to install fiber internet infrastructure in conjunction with its Fiber Internet business.   

 

Acquired intangible assets consist of the following (Dollar amounts in thousands of U.S. dollars):
 
  

Surname domain names

  

Direct navigation domain names

  

Brand

  

Customer relationships

  

Technology

  

Network rights

  

Total

 

Amortization period

 

indefinite life

  

indefinite life

  

7 years

  

3 - 7 years

  

2 - 7 years

  

15 years

     
                             

Balances, March 31, 2020

 $11,162  $1,135  $8,573  $36,469  $1,189  $1,387  $59,915 

Cedar Networks acquisition (Note 4 (b))

  -   -   -   10   -   (195)  (185)

Additions to/(disposals from) domain portfolio, net

  (2)  -   -   -   -   -   (2)
Impairment of definite life intangible asset  -   -   -   (1,431)  -   -   (1,431)
Other  -   -   -   (223)  -   -   (223)
Classified as assets held for-sale  -   -   -   (2,581)  -   -   (2,581)
Acquisition of Network rights                 69   69 

Amortization expense

  -   -   (517)  (1,987)  (305)  (21)  (2,830)

Balances, June 30, 2020

 $11,160  $1,135  $8,056  $30,257  $884  $1,240  $52,732 

 

  Surname domain names  Direct navigation domain names  Brand  Customer relationships  Technology  Network rights  Total 
Amortization period indefinite life  indefinite life  7 years  3 - 7 years  2 - 7 years  15 years     
                             
Balances, December 31, 2019 $11,166  $1,144  $9,091  $34,268  $1,516  $469  $57,654 
Cedar Networks acquisition (Note 4 (b))  -   -   -   4,640   -   750   5,390 
Additions to/(disposals from) domain portfolio, net  (6)  (9)  -   -   -   -   (15)
Impairment of definite life intangible asset  -   -   -   (1,431)  -   -   (1,431)
Other  -   -   -   (223)  -   -   (223)
Classifed as assets held for-sale  -   -   -   (2,581)  -   -   (2,581)
Acquisition of Network rights  -   -   -   -   -   69   69 
Amortization expense  -   -   (1,035)  (4,416)  (632)  (48)  (6,131)
Balances, June 30, 2020 $11,160  $1,135  $8,056  $30,257  $884  $1,240  $52,732 

 

The following table shows the estimated amortization expense for each of the next 5 years, assuming no further additions to acquired intangible assets are made (Dollar amounts in thousands of U.S. dollars):
 
  Year ending 
  December 31, 
Remainder of 2020 $5,202 
2021  11,783 
2022  10,839 
2023  8,811 
2024  2,399 
Thereafter  1,403 
Total $40,437 

 

11

 

 

7. Loan Payable:

 

Amended 2019 Credit Facility

 

On June 14, 2019, the Company and its wholly-owned subsidiaries, Tucows.com Co., Ting Fiber, Inc., Ting Inc., Tucows (Delaware) Inc. and Tucows (Emerald), LLC entered into an Amended and Restated Senior Secured Credit Agreement with Royal Bank of Canada (“RBC”), as administrative agent, and lenders party thereto (collectively with RBC, the “Lenders”) under which the Company has access to an aggregate of up to $240 million in funds, which consists of $180 million guaranteed credit facility and a $60 million accordion facility. The Amended 2019 Credit Facility replaced the Company’s 2017 Amended Credit Facility. On November 27, 2019, the Company entered into Amending Agreement No. 1 to the Amended and Restated Senior Secured Credit Agreement (collectively with the Amended and Restated Senior Secured Credit Agreement, the “Amended 2019 Credit Facility”) to amend certain defined terms in connection with the Cedar acquisition.

 

The Amended 2019 Credit Facility replaced a secured Credit Agreement dated January 20, 2017 with Bank of Montreal, RBC and Bank of Nova Scotia (as amended, the “2017 Amended Credit Facility”).

 

In connection with the Amended 2019 Credit Facility, the Company incurred $0.4 million of fees paid to lenders are debt issuance costs, which have been reflected as a reduction to the carrying amount of the loan payable and will be amortized over the term of the credit facility agreement and $0.1 million have been recorded in General and administrative expenses.

 

The obligations of the Company under the Amended 2019 Credit Agreement are secured by a first priority lien on substantially all of the personal property and assets of the Company and has a four-year term, maturing on June 13, 2023.
 
Credit Facility Terms
 
The Amended 2019 Credit Facility is revolving with interest only payments with no scheduled repayments during the term.

 

The Amended 2019 Credit Facility contains customary representations and warranties, affirmative and negative covenants, and events of default. The Amended 2019 Credit Facility requires that the Company to comply with the following financial covenants: (i) at all times, a Total Funded Debt to Adjusted EBITDA Ratio (as defined in the Amended 2019 Credit Agreement) of 3.50:1; and (ii) with respect to each fiscal quarter, an Interest Coverage Ratio (as defined in the Amended 2019 Credit Agreement) of not less than 3.00:1. Further, the Company’s maximum annual Capital Expenditures cannot exceed 110% of the forecasted capital expenditures of its annual business plan. In addition, share repurchases require the Lenders’ consent if the Company’s Total Funded Debt to Adjusted EBITDA ratio exceeds 2.00:1. During the three and six months ended  June 30, 2020, the Company was in compliance with these covenants. 

 

Borrowings under the Amended 2019 Credit Facility will accrue interest and standby fees based on the Company’s Total Funded Debt to Adjusted EBITDA ratio and the availment type as follows: 
 
  If Total Funded Debt to EBITDA is: 
Availment type or fee Less than 1.00  Greater than or equal to 1.00 and less than 2.00  Greater than or equal to 2.00 and less than 2.50  Greater than or equal to 2.50 
Canadian dollar borrowings based on Bankers’ Acceptance or U.S. dollar borrowings based on LIBOR (Margin)  1.50%  1.85%  2.35%  2.85%
Canadian or U.S. dollar borrowings based on Prime Rate or U.S. dollar borrowings based on Base Rate (Margin)  0.25%  0.60%  1.10%  1.60%
Standby fees  0.30%  0.37%  0.47%  0.57%
 
The following table summarizes the Company’s borrowings under the credit facilities (Dollar amounts in thousands of U.S. dollars): 
 
  

June 30, 2020

  

December 31, 2019

 
         

Revolver

 $114,400  $114,400 

Less: unamortized debt discount and issuance costs

  (792)  (897)

Total loan payable

  113,608   113,503 

Less: loan payable, current portion

  -   - 

Loan payable, long-term portion

 $113,608  $113,503 
 
The following table summarizes our scheduled principal repayments as of June 30, 2020 (Dollar amounts in thousands of U.S. dollars):
 

Remainder of 2020

 $- 

2021

  - 

2022

  - 

2023

  114,400 
  $114,400 
 
Other Credit Facilities
 

Prior to the Company entering into the Amended 2019 Credit Facility and the 2017 Amended Credit Facility, the Company had credit agreements (collectively the “Prior Credit Facilities”) with BMO, which provided the Company with access to a treasury risk management facility and a credit card facility. All remaining credit facilities under the 2017 Amended Credit Facility and the Prior Credit Facilities have been terminated.

 

 
8. Income Taxes:
 

For the three months ended June 30, 2020, we recorded an income tax expense of $0.4 million on income before income taxes of $0.6 million, using an estimated effective tax rate for the fiscal year ending December 31, 2020 (“Fiscal 2020”) adjusted for certain minimum state taxes as well as the inclusion of a $0.1 million tax recovery related to ASU No. 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Our effective tax rate for the three months ended June 30, 2020 is also adversely affected by discrete losses of $3.7 million related to the impairment of Ting TV and Roam Mobility assets, the tax benefit of which has only been partially recognized.  

 

Comparatively, for the three months ended June 30, 2019, the Company recorded an income tax expense of $1.8 million on income before taxes of $4.4 million, using an estimated effective tax rate for the 2019 fiscal year and adjusted for the $0.3 million tax recovery impact related to ASU 2016-09. 

 

For the six months ended June 30, 2020, we recorded an income tax expense of $1.6 million on net income before income taxes of $4.5 million, using an estimated effective tax rate for Fiscal 2020 adjusted for certain minimum state taxes, as well as the inclusion of a $0.2 million tax recovery related to ASU No. 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Our effective tax rate for the six months ended June 30, 2020 is also adversely affected by discrete losses of $3.7 million related to the impairment of Ting TV and Roam Mobility assets, the tax benefit of which has only been partially recognized.  

 

Comparatively, for the six months ended June 30, 2019, the Company recorded an income tax expense of $3.1 million on income before taxes of $8.5 million, using an estimated effective tax rate for the 2019 fiscal year and adjusted for the $0.7 million tax recovery impact related to ASU 2016-09. 

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management considers projected future taxable income, uncertainties related to the industry in which the Company operates, and tax planning strategies in making this assessment.

 

In connection with the eNom acquisition in 2017, we acquired deferred tax liabilities primarily composed of prepaid registry fees. As a result, we aligned our tax methodology pertaining to the deductibility of prepaid registry fees for our other subsidiaries. In the first quarter of 2019, we determined that we were in technical violation with respect to the administrative application of the accounting method change relating to the deductibility of prepaid registry fees for these additional subsidiaries. In February 2019, the Company filed an application for relief ("9100 Relief") to correct the issue. In November 2019, the Company was granted 9100 Relief and was given 30 days to file the appropriate forms based on prescribed instructions. The Company filed the forms in December 2019 and now awaits the final IRS response and acceptance of the change in accounting method. Management is of the view that it is more likely than not that the IRS will accept the 9100 Relief and filing of the prescribed forms. As such, no additional tax uncertainties or related interest or penalties have been recorded as at June 30, 2020.

 

The Company recognizes accrued interest and penalties related to income taxes in income tax expense. The Company did not have significant interest and penalties accrued at June 30, 2020 and December 31, 2019, respectively.

 

13

 

 
9. Assets and liabilities held-for-sale:
 

Accounting Policy:

 

When the Company initiates the sale of long-lived assets, it assesses whether the assets meet the criteria to be considered assets held-for-sale. The review is based on whether the following criteria are met:

 

- Management and the Company's board of directors have committed to a plan to sell the asset;

 

- The subject assets are available for immediate sale in their present condition;

 

- The Company is actively locating buyers as well as other initiatives required to complete the sale;

 

- The sale is probable and the transfer is expected to qualify for recognition as a complete sale in one year;

 

- The long-lived asset is being actively marketed for sale at a price that is reasonable in relation to fair value; and

 

- Actions necessary to complete the plan indicate it is unlikely significant changes will be made to the plan or the plan will be withdrawn.

 

Description of asset groups held-for-sale:

 

If all the criteria are met, a long-lived asset or liabilities held for sale is measured at the lower of its carrying amount or fair value less cost to sell, and the Company will cease recording depreciation. Any adjustment to the carrying amount is recorded as an impairment loss. 

 
In June 2020, the Company committed to a plan to sell the Ting Mobile customer base and the Company's mobile inventory. Accordingly, any capitalized costs associated with the Ting Mobile customer base have been presented as a disposal group held for sale at June 30, 2020. The sale of Tucows' mobile customer base was completed on August 1, 2020 pursuant to an asset sale transaction with Dish Wireless L.L.C. (“DISH”). See Note 19 - Subsequent Events for more information on the details on the transaction with DISH. 

 

As at June 30, 2020 the disposal group comprised assets of $9.0 million and liabilities of $0.8 million comprised of the following assets and liabilities:

 

  

June 30, 2020

 
     
Device credits $99 
Accounts receivable  4,554 
Mobile inventory  861 

Capitalized contract costs (net)

  932 

Customer relationship intangible assets (net)

  2,581 

Assets held for sale

 $9,027 
     
     
Accounts payable $594 
Accrued liabilities  157 

Liabilities held for sale

 $751 

No impairment loss was recorded in the consolidated statements of operations and comprehensive income as a result of classifying the aforementioned assets as held for sale during the three and six months ended June 30, 2020.  

 
 
10. Basic and Diluted Earnings per Common Share:

 

The following table reconciles the numerators and denominators of the basic and diluted earnings per common share computation (Dollar amounts in thousands of US dollars, except for share data):
 
  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Numerator for basic and diluted earnings per common share:

                

Net income for the period

 $157  $2,616  $2,991  $5,415 
                 

Denominator for basic and diluted earnings per common share:

                

Basic weighted average number of common shares outstanding

  10,567,382   10,657,124   10,589,806   10,646,045 

Effect of outstanding stock options

  86,145   182,881   94,498   191,411 

Diluted weighted average number of shares outstanding

  10,653,527   10,840,005   10,684,304   10,837,456 
                 

Basic earnings per common share

 $0.01  $0.25  $0.28  $0.51 
                 

Diluted earnings per common share

 $0.01  $0.24  $0.28  $0.50 

 

For the three months ended  June 30, 2020, options to purchase 734,388 common shares were not included in the computation of diluted income per common share because the options’ exercise price was greater than the average market price of the common shares for the period as compared to the three months ended  June 30, 2019, where 260,700 outstanding options were not included in the computation.

 
For the  six months ended  June 30, 2020, options to purchas e 734,388 common shares were not included in the computation of diluted income per common share because the options’ exercise price was greater than the average market price of the common shares for the period as compared to the six months ended  June 30, 2019, where 260,700 outstanding options were not included in the computation.
 

11. Revenue:

 
Significant accounting policy
 
The Company’s revenues are derived from (a) the provisioning of mobile and fiber Internet services; and from (b) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue. Amounts received in advance of meeting the revenue recognition criteria described below are recorded as deferred revenue. All products are generally sold without the right of return or refund.
 
Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.
 
Nature of goods and services

 

The following is a description of principal activities – separated by reportable segments – from which the Company generates its revenue. For more detailed information about reportable segments, see Note 14 – Segment Reporting.
 
 

(a)

Network Access Services 

 

The Company generates Network Access Services revenues primarily through the provisioning of mobile services, Ting Mobile. Other sources of revenue include the provisioning of fixed high-speed Internet access, Ting Internet, as well as billing solutions to Internet Service Providers (“ISPs”).

 

Ting Mobile wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting Mobile contracts are billed based on the actual amount of monthly services utilized by each customer during their billing cycle and charged to customers on a postpaid basis. Voice minutes, text messages and megabytes of data are each billed separately based on a tiered pricing program. The Company recognizes revenue for Ting Mobile usage based on the actual amount of monthly services utilized by each customer.
 
14

 

Ting Internet contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Ting Internet contracts are generally prepaid and grant customers with unlimited bandwidth based on a fixed price per month basis. Because consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access. Though the Company does not consider the installation of fixed Internet access to be a distinct performance obligation, the fees related to installation are immaterial and therefore revenue is recognized as billed.
 
Both Ting Mobile and Ting Internet access services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Mobile and Ting Internet customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories and Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.
 
Our Roam Mobility brands also offers standard talk, text and data mobile services. Roam customers prepay for their usage through the Roam Mobility website. When prepayments are received the amount is deferred, and subsequently recognized as the Company satisfies its obligation to provide mobile services. In addition, revenues associated with the sale of SIM cards are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.
 
In those cases, where payment is not received at the time of sale, revenue is not recognized at contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations.
 
 

(b)

Domain Services

 

Domain registration contracts, which can be purchased for terms of one to ten years, provide our resellers and retail registrant customers with the exclusive right to a personalized internet address from which to build an online presence. The Company enters into domain registration contracts in connection with each new, renewed and transferred-in domain registration. At the inception of the contract, the Company charges and collects the registration fee for the entire registration period. Though fees are collected upfront, revenue from domain registrations are recognized rateably over the registration period as domain registration contracts contain a ‘right to access’ license of IP, which is a distinct performance obligation measured over time. The registration period begins once the Company has confirmed that the requested domain name has been appropriately recorded in the registry under contractual performance standards.

 

Domain related value-added services like digital certifications, WHOIS privacy, website hosting and hosted email provide our resellers and retail registrant customers with tools and additional functionality to be used in conjunction with domain registrations. All domain related value-added services are considered distinct performance obligations which transfer the promised service to the customer over the contracted term. Fees charged to customers for domain related value-added services are collected at the inception of the contract, and revenue is recognized on a straight-line basis over the contracted term, consistent with the satisfaction of the performance obligations.
 
The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.
 
The Company also sells the rights to the Company’s portfolio domains or names acquired through the Company’s domain expiry stream. Revenue generated from sale of domain name contracts, containing a distinct performance obligation to transfer the domain name rights under the Company’s control, is generally recognized once the rights have been transferred and payment has been received in full.
 
Advertising revenue is derived through domain parking monetization, whereby the Company contracts with third-party Internet advertising publishers to direct web traffic from the Company’s domain expiry stream domains and Internet portfolio domains to advertising websites. Compensation from Internet advertising publishers is calculated variably on a cost-per-action basis based on the number of advertising links that have been visited in a given month. Given that the variable consideration is calculated and paid on a monthly basis, no estimation of variable consideration is required.
 
15

 

Disaggregation of Revenue

 

The following is a summary of the Company’s revenue earned from each significant revenue stream (Dollar amounts in thousands of U.S. dollars):

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Network Access Services:

                

Mobile Services

 $17,567  $20,986  $37,715  $41,795 

Other Services

  4,414   2,644   8,722   5,087 

Total Network Access Services

  21,981   23,630   46,437   46,882 
                 

Domain Services:

                

Wholesale

                

Domain Services

  46,206   46,485   92,169   89,076 

Value Added Services

  5,034   4,775   9,741   8,959 

Total Wholesale

  51,240   51,260   101,910   98,035 
                 

Retail

  8,567   8,783   17,017   17,425 

Portfolio

  334   444   743   728 

Total Domain Services

  60,141   60,487   119,670   116,188 
                 
  $82,122  $84,117  $166,107  $163,070 

 

During the  three and six months ended June 30, 2020 and the three and six months ended June 30, 2019 no customer accounted for more than 10% of total revenue and no customer accounted for more than 10% of accounts receivable.

 

The following is a summary of the Company’s cost of revenue from each significant revenue stream (Dollar amounts in thousands of U.S. dollars): 
 
  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Network Access Services:

                

Mobile Services

 $8,660  $10,806  $18,517  $21,549 

Other Services

  1,665   956   3,381   2,025 

Total Network Access Services

  10,325   11,762   21,898   23,574 
                 

Domain Services:

                

Wholesale

                

Domain Services

  36,354   37,817   72,823   72,656 

Value Added Services

  762   738   1,547   1,531 

Total Wholesale

  37,116   38,555   74,370   74,187 
                 

Retail

  4,219   4,409   8,453   8,768 

Portfolio

  130   147   257   276 

Total Domain Services

  41,465   43,111   83,080   83,231 
                 

Network Expenses:

                

Network, other costs

  2,485   2,385   4,901   4,780 

Network, depreciation and amortization costs

  3,356   2,352   6,587   4,327 
Network, impairment  1,525   -   1,525   - 

Total Network Expenses

  7,366   4,737   13,013   9,107 
                 
  $59,156  $59,610  $117,991  $115,912 

 

 
16

 

Contract Balances
 
The following table provides information about contract liabilities (deferred revenue) from contracts with customers. The Company accounts for contract assets and liabilities on a contract-by-contract basis, with each contract presented as either a net contract asset or a net contract liability accordingly.

 

Given that Company’s long-term contracts with customers are billed in advance of service, the Company’s contract liabilities relate to amounts recorded as deferred revenues. The Company does not have material streams of contracted revenue that have not been billed.

 

Deferred revenue primarily relates to the portion of the transaction price received in advance related to the unexpired term of domain name registrations and other domain related value-added services, on both a wholesale and retail basis, net of external commissions.

 

Significant changes in deferred revenue for the six months ended June 30, 2020 were as follows (Dollar amounts in thousands of U.S. dollars): 

 

  June 30, 2020 
     
Balance, beginning of period $149,303 
Deferred revenue  120,647 
Recognized revenue  (114,650)
Balance, end of period $155,300 

 

Remaining Performance Obligations:

 

For mobile and internet access services, where the performance obligation is part of contracts that have an original expected duration of one year or less (typically one month), the Company has elected to apply a practical expedient to not disclose revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied) (Dollar amounts in thousands of US dollars).

 

Although domain registration contracts are deferred over the lives of the individual contracts, which can range from one to ten years, approximately 80 percent of our deferred revenue balance related to domain contracts is expected to be recognized within the next twelve months.

 

Deferred revenue related to Exact hosting contracts is also deferred over the lives of the individual contracts, which are expected to be fully recognized within the next twelve months. In connection with the shutdown of the Roam Mobility operations, all previously deferred revenue associated with the Roam Mobility operations has been recognized as of June 30, 2020. 

 

 
12. Costs to obtain and fulfill a Contract
 
Deferred costs of fulfillment
 
Deferred costs to fulfill contracts generally consist of domain registration costs which have been paid to a domain registry, and are capitalized as Prepaid domain name registry and ancillary services fees. These costs are deferred and amortized over the life of the domain which generally ranges from one to ten years. For the six months ended  June 30, 2020, the Company capitalized $88.2 million and also amortized $83.1 million of contract costs. There was no impairment loss recognized in relation to the costs capitalized during the six months ended  June 30, 2020. Amortization expense of deferred costs is primarily included in cost of revenue. The breakdown of the movement in the prepaid domain name registry and ancillary services fees balance for the six months ended June 30, 2020 is as follows (Dollar amounts in thousands of U.S. dollars). 
 
    June 30, 2020  
         
Balance, beginning of period   $ 109,167  
Deferral of costs     88,194  
Recognized costs     (83,137 )
Balance, end of period   $ 114,224  

 

17

 
 
13. Leases
 
We lease datacenters, corporate offices and fiber-optic cables under operating leases. The Company does not have any leases classified as finance leases.

 

Our leases have remaining lease terms of 1 year to 20 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year.

 

The components of lease expense were as follows (Dollar amounts in thousands of U.S. dollars): 
 
  

For the three months ended

  

For the three months ended

  

For the six months ended

  

For the six months ended

 
  

June 30, 2020

  

June 30, 2019

  

June 30, 2020

  

June 30, 2019

 

Operating Lease Cost (leases with a total term greater than 12 months)

 $527  $826  $1,074  $1,897 

Short-term Lease Cost (leases with a total term of 12 months or less)

  130   279   374   403 

Variable Lease Cost

  145   193   273   364 

Total Lease Cost

 $802  $1,298  $1,721  $2,664 
 
Lease Cost is presented in general and administrative expenses and network expenses within our consolidated statements of operations and comprehensive income.
 
Information related to leases was as follows (Dollar amounts in thousands of U.S. dollars):
 
  

For the three months ended

  

For the three months ended

  

For the six months ended

  

For the six months ended

 

Supplemental cashflow information:

 

June 30, 2020

  

June 30, 2019

  

June 30, 2020

  

June 30, 2019

 

Operating Lease - Operating Cash Flows (Fixed Payments)

 $429  $834  $987  $1,885 

Operating Lease - Operating Cash Flows (Liability Reduction)

 $359  $703  $797  $1,651 

New ROU Assets - Operating Leases

 $36  $41  $911  $4,468 

 

Supplemental balance sheet information related to leases: June 30, 2020  December 31, 2019 
Weighted Average Discount Rate  3.95%  5.20%
Weighted Average Remaining Lease Term 8.51 yrs  8.62 yrs 

 

Maturity of lease liability as of June 30, 2020 (Dollar amounts in thousands of U.S. dollars):

 

  June 30, 2020 
Remaining of 2020 $973 
2021  1,774 
2022  1,695 
2023  1,657 
2024  1,379 
Thereafter  5,068 
Total future lease payments  12,546 
Less imputed interest  1,871 
Total $10,675 

 

Operating lease payments include payments under the non-cancellable term and approximately $0.6 million related to options to extend lease terms that are reasonably certain of being exercised.

 

As of June 30, 2020, we have entered into lease agreements for total payments of$1.1 million that have not yet commenced, and therefore are not included in the lease liability.
 
In March 2020, the Company modified a corporate office lease to defer its April 2020 rent payment to be paid later in four equal installments from September to December 2020. The modification resulted in an increase to the right of use operating lease asset and right of use operating lease liability of $0.3 million and $0.6 million, respectively, which also included the foreign exchange re-measurement of the right of use asset at the date of modification. Foreign exchange revaluation on both the right of use asset and liability is presented in general and administrative expenses within our consolidated statements of operations and comprehensive income.
 
The Company has elected to use the single exchange rate approach when accounting for lease modifications. Under the single exchange rate approach, the entire right of use asset is revalued at the date of modification in the Company’s functional currency provided the re-measurement is not considered a separate contract or if the re-measurement is related to change the lease term or assessment of a lessee option to purchase the underlying asset being exercised.
 
18

 

 
14. Segment Reporting: 

 

(a)  We are organized and managed based on two operating segments which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate and are described as follows:

 

1.     Network Access Services - This segment derives revenue from the sale of mobile phones, telephony services, high speed Internet access, billing solutions to individuals and small businesses primarily through the Ting website. Revenues are generated in the United States. 

 

2.     Domain Services – This segment includes wholesale and retail domain name registration services, value added services and portfolio services. The Company primarily earns revenues from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations; the sale of retail Internet domain name registration and email services to individuals and small businesses; and by making its portfolio of domain names available for sale or lease. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the United States.

 

19

 
The Chief Executive Officer (the “CEO”) is the chief operating decision maker and regularly reviews the operations and performance by segment. The CEO reviews gross profit as (i) a key measure of performance for each segment and (ii) to make decisions about the allocation of resources. Sales and marketing expenses, technical operations and development expenses, general and administrative expenses, depreciation of property and equipment, amortization of intangibles assets, impairment of indefinite life intangible assets, gain on currency forward contracts and other expense net are organized along functional lines and are  not included in the measurement of segment profitability. Total assets and total liabilities are centrally managed and are  not reviewed at the segment level by the CEO. The Company follows the same accounting policies for the segments as those described in Notes 2 – Basis of Presentation, 3 – Recent Accounting Pronouncements, and 11 - Revenue.

 

Information by reportable segments (with the exception of disaggregated revenue, which is discussed in Note 11 – Revenue), which is regularly reported to the chief operating decision maker is as follows (Dollar amounts in thousands of US dollars): 
 
  Network Access Services  Domain Services  Consolidated Totals 
Three Months Ended June 30, 2020            
             
Net Revenues $21,981  $60,141  $82,122 
             
Cost of revenues            
Cost of revenues  10,325   41,465   51,790 
Network expenses  605   1,880   2,485 
Depreciation of property and equipment  2,584   446   3,030 
Amortization of intangible assets  21   305   326 
Impairment of Property Plant and Equipment  1,525   -   1,525 
Total cost of revenues  15,060   44,096   59,156 
Gross Profit  6,921   16,045   22,966 
             
Expenses:            
Sales and marketing          9,218 
Technical operations and development          3,067 
General and administrative          5,465 
Depreciation of property and equipment          125 
Amortization of intangible assets          2,504 
Impairment of definite life intangible assets          1,431 
Loss (gain) on currency forward contracts          (381)
Income from operations          1,537 
Other income (expenses), net          (931)
Income before provision for income taxes         $606 

 

  

Network Access Services

  

Domain Services

  

Consolidated Totals

 

Three Months Ended June 30, 2019

            
             

Net Revenues

 $23,630  $60,487  $84,117 
             

Cost of revenues

            

Cost of revenues

  11,762   43,111   54,873 

Network expenses

  516   1,869   2,385 

Depreciation of property and equipment

  1,656   382   2,038 

Amortization of intangible assets

  12   302   314 

Total cost of revenues

  13,946   45,664   59,610 

Gross Profit

  9,684   14,823   24,507 
             

Expenses:

            

Sales and marketing

          8,856 

Technical operations and development

          2,752 

General and administrative

          4,796 

Depreciation of property and equipment

          134 

Amortization of intangible assets

          2,251 

Loss (gain) on currency forward contracts

          (31)

Income from operations

          5,749 

Other income (expenses), net

          (1,314)

Income before provision for income taxes

         $4,435 

 

20

 
  

Network Access Services

  

Domain Services

  

Consolidated Totals

 

Six Months Ended June 30, 2020

            
             

Net Revenues

 $46,437  $119,670  $166,107 
             

Cost of revenues

            

Cost of revenues

  21,898   83,080   104,978 

Network expenses

  1,143   3,758   4,901 

Depreciation of property and equipment

  4,998   909   5,907 

Amortization of intangible assets

  48   632   680 
Impairment of Property Plant and Equipment  1,525   -   1,525 

Total cost of revenues

  29,612   88,379   117,991 

Gross Profit

  16,825   31,291   48,116 
             

Expenses:

            

Sales and marketing

          18,203 

Technical operations and development

          5,818 

General and administrative

          10,206 

Depreciation of property and equipment

          238 

Amortization of intangible assets

          5,451 
Impairment of definite life intangible assets          1,431 

Loss (gain) on currency forward contracts

          60 

Income from operations

          6,709 

Other income (expenses), net

          (2,168)

Income before provision for income taxes

         $4,541 

 

  

Network Access Services

  

Domain Services

  

Consolidated Totals

 

Six Months Ended June 30, 2019

            
             

Net Revenues

 $46,882  $116,188  $163,070 
             

Cost of revenues

            

Cost of revenues

  23,574   83,231   106,805 

Network expenses

  1,038   3,742   4,780 

Depreciation of property and equipment

  3,109   730   3,839 

Amortization of intangible assets

  23   465   488 

Total cost of revenues

  27,744   88,168   115,912 

Gross Profit

  19,138   28,020   47,158 
             

Expenses:

            

Sales and marketing

          17,597 

Technical operations and development

          5,275 

General and administrative

          9,244 

Depreciation of property and equipment

          258 

Amortization of intangible assets

          4,117 

Loss (gain) on currency forward contracts

          (110)

Income from operations

          10,777 

Other income (expenses), net

          (2,286)

Income before provision for income taxes

         $8,491 

 

21

 

(b)           The following is a summary of the Company’s property and equipment by geographic region (Dollar amounts in thousands of US dollars): 
 
  June 30, 2020  December 31, 2019 
         
Canada $1,112  $2,319 
United States  100,137   79,758 
Europe  43   44 
  $101,292  $82,121 

 

(c)           The following is a summary of the Company’s amortizable intangible assets by geographic region (Dollar amounts in thousands of US dollars): 
 
  June 30, 2020  December 31, 2019 
         
Canada $2,885  $5,207 
United States  37,552   40,137 
  $40,437  $45,344 

 

(d)           The following is a summary of the Company’s deferred tax asset, net of valuation allowance, by geographic region (Dollar amounts in thousands of US dollars): 
 
  June 30, 2020  December 31, 2019 
         
Canada $340  $- 
  $340  $- 

 

(e)           Valuation and qualifying accounts (Dollar amounts in thousands of US dollars):
 
Allowance for doubtful accounts Balance at beginning of period  Charged to costs and expenses  Write-offs during period  Balance at end of period 
                 
Six Months Ended June 30, 2020 $131  $83  $-  $214 
Twelve months ended December 31, 2019 $132  $(1) $-  $131 
 
22

 

 
15. Stockholders' Equity:

 

The following table summarizes stockholders' equity transactions for the three-month period ended June 30, 2020 (Dollar amounts in thousands of U.S. dollars): 

 
                                   

Accumulated

         
                   

Additional

           

other

   

Total

 
   

Common stock

   

paid in

   

Retained

   

comprehensive

   

stockholders'

 
   

Number

   

Amount

   

capital

   

earnings

   

income (loss)

   

equity

 
                                                 

Balances, March 31, 2020

    10,562,774       18,751       -       77,323       (718 )     95,356  
                                                 

Exercise of stock options

    16,922       120       (91 )     -       -       29  

Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration

    (5,836 )     -       (165 )     -       -       (165 )

Repurchase and retirement of shares

    (3,500 )     (6 )     -       (158 )     -       (164 )

Stock-based compensation

    -       -       847       -       -       847  

Net income

    -       -       -       157       -       157  

Other comprehensive income (loss)

    -       -       -       -       1,314       1,314  

Balances, June 30, 2020

    10,570,360     $ 18,865     $ 591     $ 77,322     $ 596     $ 97,374  

 

The following table summarizes stockholders' equity transactions for the six-month period ended June 30, 2020 (Dollar amounts in thousands of U.S. dollars): 

 

                                   

Accumulated

         
                   

Additional

           

other

   

Total

 
   

Common stock

   

paid in

   

Retained

   

comprehensive

   

stockholders'

 
   

Number

   

Amount

   

capital

   

earnings

   

income (loss)

   

equity

 
                                                 

Balances, December 31, 2019

    10,585,159       16,633       880       76,208       473       94,194  
                                                 

Exercise of stock options

    41,935       356       (310 )     -       -       46  

Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration

    (18,870 )     -       (347 )     -       -       (347 )

Acquisition of Cedar Holdings Group

    32,374       2,000       -       -       -       2,000  

Repurchase and retirement of shares

    (70,238 )     (124 )     (1,280 )     (1,877 )     -       (3,281 )

Stock-based compensation

    -       -       1,648       -       -       1,648  

Net income

    -       -       -       2,991       -       2,991  

Other comprehensive income (loss)

    -       -       -       -       123       123  

Balances, June 30, 2020

    10,570,360     $ 18,865     $ 591     $ 77,322     $ 596     $ 97,374  

 

2020 Stock Buyback Program

 

On February 12, 2020, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The $40 million buyback program commenced on February 13, 2020 and is expected to terminate on February 12, 2021. For the three months ended June 30, 2020, the Company repurchased 3,500 shares under this program for total consideration of $0.2 million. For the six months ended June 30, 2020, the Company repurchased 70,238 shares under this program for total consideration of $3.3 million.

 

2019 Stock Buyback Program

 

On February 13, 2019, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The $40 million buyback program commenced on February 14, 2019 and terminated on February 13, 2020. During the three and six months ended June 30, 2019, as well as the six months ended June 30, 2020, the Company did not repurchase any shares under this program.

 

2018 Stock Buyback Program

 

On February 14, 2018, the Company announced that its Board of Directors has approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases were to be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on February 14, 2018 and terminated on February 13, 2019.  During the six months ended June 30, 2019, the Company did not repurchase any shares under this program.

 

23

 

 
16. Share-based Payments:
 

Stock options

 

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The assumptions presented in the table below represent the weighted average of the applicable assumption used to value stock options at their grant date. The Company calculates expected volatility based on historical volatility of the Company's common shares. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on historical exercise experience. The Company evaluated historical exercise behavior when determining the expected term assumptions. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the market price of Tucows Inc. common shares at the date of grant.

 

Details of stock option transactions for the three months ended  June 30, 2020 and  June 30, 2019 are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

 

  

Three Months Ended June 30, 2020

  

Three Months Ended June 30, 2019

 
  

Number of shares

  

Weighted average exercise price per share

  

Number of shares

  

Weighted average exercise price per share

 
                 

Outstanding, beginning of period

  730,037  $50.85   665,156  $44.46 

Granted

  190,025   59.53   144,300   62.12 

Exercised

  (16,922)  9.79   (25,316)  13.26 

Forfeited

  (4,826)  59.15   (8,550)  56.08 

Expired

  (1,036)  58.39   (675)  55.65 

Outstanding, end of period

  897,278   53.41   774,915   48.63 

Options exercisable, end of period

  390,868  $46.20   306,078  $33.97 

 

Details of stock option transactions for the six months ended  June 30, 2020 and  June 30, 2019 are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

 

  

Six Months Ended June 30, 2020

  

Six Months Ended June 30, 2019

 
  

Number of shares

  

Weighted average exercise price per share

  

Number of shares

  

Weighted average exercise price per share

 
                 

Outstanding, beginning of period

  754,497  $49.94   702,337  $43.80 

Granted

  195,525   59.19   144,300   62.12 

Exercised

  (41,935)  16.23   (54,359)  19.34 

Forfeited

  (8,315)  60.23   (15,301)  57.55 

Expired

  (2,494)  59.86   (2,062)  55.65 

Outstanding, end of period

  897,278   53.41   774,915   48.63 

Options exercisable, end of period

  390,868  $46.20   306,078  $33.97 

 

As of June 30, 2020, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were as follows:

 
  Options outstanding  Options exercisable 
Exercise price Number outstanding  Weighted average exercise price per share  Weighted average remaining contractual life (years)  Aggregate intrinsic value  Number exercisable  Weighted average exercise price per share  Weighted average remaining contractual life (years)  Aggregate intrinsic value 
                                 
$10.16 - $19.9562,090  $16.23   1.2  $2,551   62,090  $16.23   1.2  $2,551 
$21.10 - $27.5351,250   24.11   1.4   1,702   51,250   24.11   1.4   1,702 
$35.25 - $37.3514,375   35.89   2.9   308   13,125   35.95   2.9   280 
$46.90 - $47.0015,000   47.30   5.7   150   3,750   47.00   3.7   39 
$51.82 - $58.65340,878   55.52   4.0   640   175,527   55.69   3.8   310 
$60.01 - $64.10413,685   61.71   6.1   -   85,126   63.33   5.3   - 
   897,278  $53.41   4.7  $5,351   390,868  $46.20   3.4  $4,882 
                                 

 

Total unrecognized compensation cost relating to unvested stock options at June 30, 2020, prior to the consideration of expected forfeitures, is approxi mately $8.8 m illion and is expected to be recognized over a weighted average period of 2.6 years.

 

The Company recorded stock-based compensation of  $0.8 million for the three months ended June 30, 2020, and $0.7 million for the three months ended  June 30, 2019, respectively. 
 
The Company recorded stock-based compensation of $1.6 million for the six months ended June 30, 2020, and $1.2 million for the six months ended  June 30, 2019, respectively.
 
The Company has not capitalized any stock-based compensation expense as part of the cost of an asset.
 
24

 

 
 
17. Fair Value Measurement:
 
For financial assets and liabilities recorded in our financial statements at fair value we utilize a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels. Level  1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level  2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level  3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
 
The following table provides a summary of the fair values of the Company’s derivative instruments measured at fair value on a recurring basis as at  June 30, 2020 (Dollar amounts in thousands of U.S. dollars):
 
    June 30, 2020  
    Fair Value Measurement Using     Assets (Liabilities)  
    Level 1     Level 2     Level 3     at Fair value  
                                 
Derivative instrument asset   $ -     $ 1,691     $ -     $ 1,691  
                                 
Derivative instrument liability   $ -     $ (719 )   $ -     $ (719 )
                                 
Total assets (liability)   $ -     $ 972     $ -     $ 972  
 
The following table provides a summary of the fair values of the Company’s derivative instruments measured at fair value on a recurring basis as at December 31, 2019 (Dollar amounts in thousands of U.S. dollars):
 
    December 31, 2019  
    Fair Value Measurement Using     Assets (Liabilities)  
    Level 1     Level 2     Level 3     at Fair value  
                                 
Derivative instrument liability   $ -     $ 731     $ -     $ 731  
                                 
Total liabilities   $ -     $ 731     $ -     $ 731  

 

 
18. Contingencies:

 

From time to time, the Company has legal claims and lawsuits in connection with its ordinary business operations. The Company vigorously defends such claims. While the final outcome with respect to any actions or claims outstanding or pending as of June 30, 2020 cannot be predicted with certainty, management does not believe that the resolution of these claims, individually or in the aggregate, will have a material adverse effect on the Company's financial position.
 
 
19. Subsequent Events:
 

On August 1, 2020, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”), by and between the Company and DISH Wireless L.L.C.(“DISH”). Under the Purchase Agreement and in accordance with the terms and conditions set forth therein, the Company sold to DISH its mobile customer accounts that are marketed and sold under the Ting brand (other than certain customer accounts associated with one network operator) (“Transferred Assets”). Tucows will retain minimum revenue commitments totaling $51.5 million on the Mobile Network Operator (“MNO”) contract associated with the customers excluded from the definition of Transferred Assets. The Company will be able to continue adding customers under the excluded MNO contract working with DISH in order to meet the agreement. 

 

The Purchase Agreement also sets forth certain rights and obligations with respect to intellectual property matters, including the right to use and purchase the name "Ting" and its associated domain name.  

 

Approximately 60 days following the execution of the Purchase Agreement, DISH and the Company will settle the working capital associated with the Transferred Assets and, upon such settlement, DISH will pay to the Company an amount in cash that is generally equal to (i) the accounts receivable related to the Transferred Assets plus (ii) the value of the transferred inventory minus (iii) the accounts payable and accrued liabilities received related to the Transferred Assets.  In addition, for a period of 10 years following the execution of the Purchase Agreement, DISH will pay a monthly fee to the Company generally equal to an amount of net revenue received by DISH in connection with the transferred customer accounts minus certain fees and expenses, as further set forth in the Purchase Agreement. The aggregate purchase price for the Transferred Assets is the working capital payment, the 10-year payment stream and DISH’s assumption of certain liabilities related to the Transferred Assets.

 

Contemporaneously with the execution of the Purchase Agreement on August 1, 2020, the Company, through its wholly owned subsidiary Ting, Inc. entered a services agreement under which Ting will act as a mobile service enabler (“MSE Agreement”) with DISH in support of the DISH’s mobile network operations.  The term of the agreement is four years with an automatic one-year extension upon achievement of certain milestones.  Under the terms of the MSE Agreement, the Company and its affiliates are permitted to sell mobile service enabler services to other third parties.

 

The Company also entered into the Transitional Services Agreement (“TSA”) on August 1, 2020 with DISH, under which the Company will provide certain other services such as customer service, marketing and fulfillment services. DISH has option to terminate services provided under the TSA throughout the term of the agreement, which is for five years effective August 1, 2020.

 

 

25

 

 

ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains, in addition to historical information, forward-looking statements by us with regard to our expectations as to financial results and other aspects of our business that involve risks and uncertainties and may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “should,” “anticipate,” “believe,” “plan,” “estimate,” “expect” and “intend,” and other similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this report include statements regarding, among other things: the competition we expect to encounter as our business develops and competes in a broader range of Internet services; the Company's foreign currency requirements, specifically for the Canadian dollar; Ting mobile, and fixed Internet access subscriber growth and retention rates; our belief regarding the underlying platform for our domain services, our expectation regarding the trend of sales of domain names and advertising; our expectations regarding portfolio revenue, our belief that, by increasing the number of services we offer, we will be able to generate higher revenues; the revenue that our parked page vendor relationships may generate in the future; our expectation regarding litigation; the potential impact of current and pending claims on our business; our valuations of certain deferred tax assets; our expectation to collect our outstanding receivables, net of our allowance for doubtful accounts; our expectation regarding fluctuations in certain expense and cost categories; our expectations regarding our unrecognized tax; our expectations regarding cash from operations to fund our business; the impact of cancellations of or amendments to market development fund programs under which we receive funds, our expectation regarding our ability to manage realized gains/losses from foreign currency contracts; our expectations regarding increased price competition among MVNO; our expectations regarding costs associated with migrating Ting customers using the Sprint platform to an alternative platform upon completion of our contract with Sprint; the impact of the COVID-19 outbreak on our business, operations and financial performance; and general business conditions and economic uncertainty. These statements are based on management’s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Many factors affect our ability to achieve our objectives and to successfully develop and commercialize our services including:

 

 

Changes in the nature of key strategic relationships with our MVNO partners;

 

 

The effects of vigorous competition on a highly penetrated mobile telephony market, including the impact of competition on the price we are able to charge subscribers for services and devices and on the geographic areas served by our MVNO partner wireless networks;

 

 

Our ability to manage any potential increase in subscriber churn or bad debt expense;

 

 

Our ability to continue to generate sufficient working capital to meet our operating requirements;

 

 

 

 

Our ability to service our debt commitments;

 

 

Our ability to maintain a good working relationship with our vendors and customers;

 

 

 

 

The ability of vendors to continue to supply our needs;

 

 

 

 

Actions by our competitors;

 

 

 

 

Our ability to attract and retain qualified personnel in our business;

 

 

 

 

Our ability to effectively manage our business;

 

 

 

 

The effects of any material impairment of our goodwill or other indefinite-lived intangible assets;

 

 

 

 

Our ability to obtain and maintain approvals from regulatory authorities on regulatory issues;

 

  

  

 

Our ability to invest in the build-out of fiber networks into selected towns and cities to provide Internet access services to residential and commercial customers while maintaining the development and sales of our established services;

     

 

Adverse tax consequences such as those related to changes in tax laws or tax rates or their interpretations, including with respect to the impact of the Tax Cuts and Jobs Act of 2017;

     

 

The application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax liabilities given the ultimate tax determination is uncertain;

 

 

 

 

Our ability to effectively integrate acquisitions;

 

 

 

 

Our ability to attract and retain customers by securing access to the latest mobile network technology, and migrating existing customers when necessary;

 

 

 

 

Our ability to migrate existing Sprint customers to one of our MVNO partners, in an efficient and cost-effective manner;

 

 

 

 

Our ability to monitor, assess and respond to the rapidly changing impacts of the COVID-19 pandemic. Our current assessment of expected impacts has been included below as part of the Opportunities, Challenges & Risks section. In the current period, the Company shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to the current and expected longer term reduction of business and leisure travel caused by the COVID-19 pandemic;

 

   
  Our ability to collect anticipated payments from DISH in connection with the 10-year payment stream that is a function of the revenue generated by the transferred subscribers over a 10-year period pursuant to the terms of the Purchase Agreement; 
     
 

Pending or new litigation; and

 

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Factors set forth under the caption “Item 1A Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on March 4, 2020 (the “2019 Annual Report”). 

 

As previously disclosed the under the caption “Item 1A Risk Factors” in our 2019 Annual Report, data protection regulations may impose legal obligations on us that we cannot meet or that conflict with our ICANN contractual requirements.

 

This list of factors that may affect our future performance and financial and competitive position and the accuracy of forward-looking statements is illustrative, but it is by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All forward-looking statements included in this document are based on information available to us as of the date of this document, and we assume no obligation to update these cautionary statements or any forward-looking statements, except as required by law. These statements are not guarantees of future performance.

 

We qualify all the forward-looking statements contained in this Quarterly Report on Form 10-Q by the foregoing cautionary statements.

 

OVERVIEW

 

Our mission is to provide simple useful services that help people unlock the power of the Internet.

 

We accomplish this by reducing the complexity of our customers’ experience as they access the Internet (at home or on the go) and while using Internet services such as domain name registration, email and other Internet services. We are organized, managed and report our financial results as two segments, Network Access Services and Domain Services, which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate.

 

Our management regularly reviews our operating results on a consolidated basis, principally to make decisions about how we utilize our resources and to measure our consolidated operating performance. To assist us in forecasting growth and to help us monitor the effectiveness of our operational strategies, our management regularly reviews revenue for each of our service offerings in order to gain more depth and understanding of the key business metrics driving our business. Accordingly, we report Network Access Services and Domain Services revenue separately

 

For the three months ended June 30, 2020 and June 30, 2019, we reported revenue of $82.1 million and $84.1 million, respectively.  

 

For the six months ended June 30, 2020 and June 30, 2019, we reported revenue of $166.1 million and $163.1 million, respectively.  

 

Network Access Services

 

Network Access Services includes mobile, fixed high-speed Internet access services and other revenues, including, billing solutions to small ISPs.

 

Our primary mobile service offering, Ting Mobile, is mainly distributed through the Ting website and to a lesser extent certain third-party retail stores and on-line retailers. We generate revenues from the sale of retail telephony services, mobile phone hardware and related accessories to individuals and small businesses through the Ting website. Ting Mobile’s primary focus is providing simple and easy to use services, including simple value pricing, in particular for multi-line accounts, and superior customer care. On August 1, 2020, the Company and its wholly owned Subsidiary Ting, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”)  with DISH pursuant to which Ting sold its mobile customer relationships, and mobile handset and SIM inventory to DISH and granted DISH the right to use and purchase the Ting brand. The transferred assets under the Purchase Agreement do not include the technology platforms and related intellectual property and infrastructure necessary to enable or support the mobile customers. The Company will retain assets used to provide MSE services to DISH, as discussed below. Our Roam Mobility, Zipsim and Always Online Wireless brands (collectively “Roam Mobility brands”) operate as a MVNO on the same nationwide Global System for Mobile communications network as Ting Mobile. Roam Mobility brands cater to international travelers and distribute products through third-party retail stores and product branded websites. As at June 30, 2020, the Company shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to the current and expected longer term reduction of business and leisure travel caused by the COVID-19 pandemic.

 

The Company also derives revenue from the sale of fixed high-speed Internet access, Ting Internet, in select towns throughout the United States, with further expansion underway to both new and existing Ting towns. Our primary sales channel of Ting Internet is through the Ting website. The primary focus of Ting Internet is to provide reliable Gigabit Internet services to consumer and business customers. On January 1, 2020, the Company closed its previously disclosed acquisition of Cedar. Cedar is a telecommunications provider serving multiple markets in the Western Slope of Colorado and northwestern New Mexico. Cedar has focused the last several years on building fiber to enterprise, anchor institution, and residential customers.

 

Revenues from Ting Mobile and Ting Internet are generated in the U.S. and are provided on a monthly basis with no fixed contract term. Revenues from Roam Mobility brands are generated in the U.S. and Canada on a prepaid usage basis with no fixed contract terms.

 

As of June 30, 2020, Ting managed mobile telephony services for approximately 257,000 subscribers and 150,000 accounts. For a discussion of subscribers and how they impacted our financial results, see the Net Revenue discussion below.

 

Domain Services

 

Domain Services includes wholesale and retail domain name registration services, value added services and portfolio services derived through our OpenSRS, eNom, Ascio, EPAG and Hover brands. We earn revenues primarily from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations. In addition, we earn revenues from the sale of retail domain name registration and email services to individuals and small businesses; and by making our portfolio of domain names available for sale or lease. Domain Services revenues are attributed to the country in which the contract originates, mainly the Canadian and the U.S. Ascio domain services contracts, which were acquired by the Company on March 18, 2019, and EPAG primarily originate in Europe.

 

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Our primary distribution channel is a global network of approximately 36,000 resellers that operate in over 150 countries and who typically provide their customers, the end-users of Internet-based services, with solutions for establishing and maintaining an online presence.  Our primary focus is serving the needs of this network of resellers by providing the broadest portfolio of generic top-level domain (“gTLD”) and the country code top-level domain options and related services, a white-label platform that facilitates the provisioning and management of domain names, a powerful Application Program Interface, easy-to-use interfaces, comprehensive management and reporting tools, and proactive and attentive customer service. Our services are integral to the solutions that our resellers deliver to their customers. We provide “second tier” support to our resellers by email, chat and phone in the event resellers experience issues or problems with our services. In addition, our Network Operating Center proactively monitors all services and network infrastructure to address deficiencies before customer services are impacted.

 

We believe that the underlying platforms for our services are among the most mature, reliable and functional reseller-oriented provisioning and management platforms in our industry, and we continue to refine, evolve and improve these services for both resellers and end-users. Our business model is characterized primarily by non-refundable, up-front payments, which lead to recurring revenue and positive operating cash flow.

 

Wholesale, primarily branded as OpenSRS, eNom, EPAG and Ascio, derives revenue from its domain service and from providing value-added services. The OpenSRS, eNom, EPAG and Ascio domain services manage 24.6 million domain names under the Tucows, eNom, EPAG and Ascio ICANN registrar accreditations and for other registrars under their own accreditations, which has decreased by 0.4 million domain names since June 30, 2019.  The decrease is driven by the continued erosion of registrations related to non-core customers from our Enom brand, offset by increased registrations experienced by our other brands during COVID-19, as more businesses established an online presence.

 

Value-Added Services include hosted email which provides email delivery and webmail access to millions of mailboxes, Internet security services, Internet hosting, WHOIS privacy, publishing tools and other value-added services. All of these services are made available to end-users through a network of 36,000 web hosts, ISPs, and other resellers around the world. In addition, we also derive revenue by monetizing domain names which are near the end of their lifecycle through advertising revenue or auction sale.

 

Retail, primarily the Hover and eNom portfolio of websites, including eNom, eNom Central and Bulkregister, derive revenues from the sale of domain name registration and email services to individuals and small businesses. Retail also includes our Personal Names Service – based on over 36,000 surname domains – that allows roughly two-thirds of Americans to purchase an email address based on their last name.

 

Portfolio generates revenue by offering names in our domain portfolio for resale through a number of distribution channels including our reseller network. 

 

In the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio revenue to materially decline in Fiscal 2020 and thereafter.

 

KEY BUSINESS METRICS AND NON-GAAP MEASURES

 

We regularly review a number of business metrics, including the following key metrics and non-GAAP measures, to assist us in evaluating our business, measure the performance of our business model, identify trends impacting our business, determine resource allocations, formulate financial projections and make strategic business decisions. The following tables set forth the key business metrics which we believe are the primary indicators of our performance for the periods presented:

 

Adjusted EBITDA

 

Tucows reports all financial information in accordance with United States generally accepted accounting principles (“GAAP”). Along with this information, to assist financial statement users in an assessment of our historical performance, we typically disclose and discuss a non-GAAP financial measure, adjusted EBITDA, on investor conference calls and related events that exclude certain non-cash and other charges as we believe that the non-GAAP information enhances investors’ overall understanding of our financial performance. Please see discussion of adjusted EBITDA in the Results of Operations section below.

 

Ting Mobile

 

June 30,(1)

 
   

2020

   

2019

 
   

(in '000's)

 

Ting mobile accounts under management

    150       157  

Ting mobile subscribers under management

    257       280  

 

 

(1)

For a discussion of these period-to-period changes in subscribers and devices under management and how they impacted our financial results, see the Net Revenues discussion below.

 

 

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Ting Internet

 

For the Three Months Ended June 30,

 
   

2020

   

2019

 
   

(in '000's)

 

Ting Internet accounts under management

    13       9  

Ting Internet serviceable addresses (1)

    49       34  

 

 

(1)

Defined as premises to which Ting has the capability to provide a customer connection in a service area.

 

Domain Services

 

For the Three Months Ended June 30,(1)

 
   

2020

   

2019

 
   

(in 000's)

 

Total new, renewed and transferred-in domain name registrations provisioned

    4,747       4,377  

Domains under management

               

 

 

(1)

For a discussion of these period-to-period changes in the domains provisioned and domains under management and how they impacted our financial results see the Net Revenues discussion below.

 

Domain Services

 

For the Six Months Ended June 30,(1)

 
   

2020

   

2019

 
   

(in 000's)

 

Total new, renewed and transferred-in domain name registrations provisioned

    9,503       8,939  

Domains under management

               

 

 

(1)

For a discussion of these period-to-period changes in the domains provisioned and domains under management and how they impacted our financial results see the Net Revenues discussion below.

 

 

Domain Services

 

June 30,

 
   

2020

   

2019

 
   

(in 000's)

 

Registered using Registrar Accreditation belonging to the Tucows Group

    19,385       19,852  

Registered using Registrar Accreditation belonging to Resellers

    5,207       5,158  

Total domain names under management

    24,592       25,010  

 

 

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OPPORTUNITIES, CHALLENGES AND RISKS

 

Our revenue is primarily realized in U.S. dollars and a major portion of our operating expenses are paid in Canadian dollars. Fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar may have a material effect on our business, financial condition and results from operations. In particular, we may be adversely affected by a significant weakening of the U.S. dollar against the Canadian dollar on a quarterly and an annual basis. Our policy with respect to foreign currency exposure is to manage our financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some or all of the impact of foreign currency exchange movements by entering into foreign exchange forward contracts to mitigate the exchange risk on a portion of our Canadian dollar exposure. We may not always enter into such forward contracts and such contracts may not always be available and economical for us. Additionally, the forward rates established by the contracts may be less advantageous than the market rate upon settlement.

 

Network Access Services

 

As a MVNO our Ting Mobile service is reliant on our Mobile Network Operators (“MNOs”) providing competitive networks. Our MNOs each continue to invest in network expansion and modernization to improve their competitive positions. Deployment of new and sophisticated technology on a very large-scale entails risks. Should they fail to implement, maintain and expand their network capacity and coverage, adapt to future changes in technologies and continued access to and deployment of adequate spectrum successfully, our ability to provide wireless services to our subscribers, to retain and attract subscribers and to maintain and grow our subscriber revenues could be adversely affected, which would negatively impact our operating margins.

 

Ting Mobile enjoyed rapid growth in its first four years of operation with the growth slowing for the past two years. During the rapid growth phase, we were able to continue to grow gross customer additions and maintain a consistent churn rate, which allowed us to maintain net new customer additions despite the impact of churn on a fast-growing customer base.  We have also been able to supplement organic growth with bulk migrations of customer bases of other MVNOs.   We expect price competition to grow more intense in the industry which could result in increased customer churn or reductions of customer acquisition rates either of which could result in a further slowing growth rate or in certain cases, our ability to maintain growth.

 

On August 1, 2020, the Company and its wholly owned Subsidiary Ting, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”)  with DISH pursuant to which Ting sold its mobile customer relationships, and mobile handset and SIM inventory to DISH and granted the right to use and purchase the Ting brand. Select MNO agreements previously established to operate the Ting Mobile MVNO business will also be assigned to DISH as part of this Purchase Agreement. The transferred assets under the Purchase Agreement do not include the technology platforms and related intellectual property and infrastructure necessary to enable or support the mobile customers. The Company will retain assets used to provide MSE services to DISH, as discussed below.

 

Contemporaneously with the execution of the Purchase Agreement on August 1, 2020, the Company, through its wholly owned subsidiary Ting, Inc. entered into a services agreement under which Ting will act as a mobile service enabler (“MSE Agreement”) with DISH in support of DISH’s mobile network operations.   Under the terms of the MSE Agreement, the Company and its affiliates are permitted to sell mobile service enabler services to other third parties.

 

As an ISP, we have invested and expect to continue to invest in new fiber to the home (“FTTH”) deployments in select markets in the United States. The investments are a reflection of our ongoing efforts to build FTTH network via public-private partnerships in communities we identify as having strong, unmet demand for FTTH services.   Given the significant upfront build and operational investments for these FTTH deployments, there is risk that future technological and regulatory changes as well as competitive responses from incumbent local providers, may result in us not fully recovering these investments.

  

The communications industry continues to compete on the basis of network reach and performance, types of services and devices offered, and price.

 

Domain Services

 

The increased competition in the market for Internet services in recent years, which we expect will continue to intensify in the short and long term, poses a material risk for us. As new registrars are introduced, existing competitors expand service offerings and competitors offer price discounts to gain market share, we face pricing pressure, which can adversely impact our revenues and profitability. To address these risks, we have focused on leveraging the scalability of our infrastructure and our ability to provide proactive and attentive customer service to aggressively compete to attract new customers and to maintain existing customers.

  

Substantially all of our Domain Services revenue is derived from domain name registrations and related value-added services from wholesale and retail customers using our provisioning and management platforms. The market for wholesale registrar services is both price sensitive and competitive and is evolving with the introduction of new gTLDs, particularly for large volume customers, such as large web hosting companies and owners of large portfolios of domain names. We have a relatively limited ability to increase the pricing of domain name registrations without negatively impacting our ability to maintain or grow our customer base. Growth in our Domain Services revenue is dependent upon our ability to continue to attract and retain customers by maintaining consistent domain name registration and value-added service renewal rates and to grow our customer relationships through refining, evolving and improving our provisioning platforms and customer service for both resellers and end-users. In addition, we also generate revenue through pay-per-click advertising and the sale of names from our portfolio of domain names and through the OpenSRS Domain Expiry Stream. The revenue associated with names sales and advertising has recently experienced flat to declining trends due to the uncertainty around the implementation of ICANN’s New gTLD Program, lower traffic and advertising yields in the marketplace, which we expect to continue.

  

From time-to-time certain of our vendors provide us with market development funds to expand or maintain the market position for their services. Any decision by these vendors to cancel or amend these programs for any reason may result in payments in future periods not being commensurate with what we have achieved during past periods.

  

Sales of domain names from our domain portfolio have a negative impact on our advertising revenue as these names are no longer available for advertising purposes. In addition, the timing of larger domain names portfolio sales is unpredictable and may lead to significant quarterly fluctuations in our Portfolio revenue. In the fourth quarter of 2019, the Company disposed of its remaining domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio revenue to materially decline in Fiscal 2020 and thereafter.

  

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Critical Accounting Policies

 

The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. There have been no material changes to the critical accounting policies and estimates as previously disclosed in Part II, Item 7 of our 2019 Annual Report. For further information on our critical accounting policies and estimates, see Note 3 – Recent Accounting Pronouncements to the consolidated financial statements of the Company in Part I, Item 1 in this Quarterly Report on Form 10-Q.

 

Current COVID-19 Response

 

Our Employees

 

Tucows is a global business. Our first consideration during the global pandemic as a result of the disease caused by the COVID-19 outbreak is for the health and safety of our employees, our customers and their communities, all around the world. Tucows has long encouraged a culture of remote work even prior to this global pandemic, and on Sunday March 8, 2020 Tucows’ executive leadership announced that all employees who could conceivably work from home were encouraged to do so. Tucows is actively and strongly encouraging its workforce to heed travel and all other emergency advisories, including social distancing and where appropriate, self-isolation. We expect our work from home policy to remain in effect until emergency state and governmental declarations where we have physical offices have ended and we believe the risk of community spread of the disease has subsided. Given our experience with remote work prior to COVID-19, we have not and do not expect to have productivity issues while the overwhelming majority of our office-based workforce is dispersed.

 

For the small group of employees who are unable work from home during this time, including our order fulfillment and Fiber installation teams, many of whom work in the field, they are encouraged to practice social distancing and to continue to follow hygiene best practices and safety protocols as outlined by the Centers for Disease Control and Prevention.  At the initial stage of the COVID-19 outbreak, we took steps to cancel and reschedule all in-home installation and service appointments across our Ting Fiber footprint. Since then, the Ting Internet team has established an install solution for our employees and customers that minimizes risks associated with person-to-person contact.

 

Our Customers

 

We recognize the important role we play within the Internet space and are committed to continue providing quality service during the COVID-19 outbreak. Services like individual and wholesale domain names, email and hosting do not rely on in-person interaction or the supply chain in the same way physical products and services do. We are providing uninterrupted services for all Domains related services, across our OpenSRS, Enom, Ascio, EPAG & Hover brands.

 

Our Mobile services businesses are both without any physical storefronts, are similarly well-positioned to weather this event. While we have seen a drop in customer usage, we are fully prepared to continue providing uninterrupted services for all Mobile related services, across our brands where demand for such services exists. We are committed to making sure no customer who is in need is without access to core mobile service while we work through this unprecedented situation together. In the current period, the Company shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to the current and expected longer term reduction of business and leisure travel caused by the COVID-19 pandemic. All customers were notified of this shutdown and were appropriately refunded for any active prepaid service they were unable to use as a result of the shutdown. The operational and financial impacts of this shutdown are discussed in more detail below. 

 

Our Fiber Internet business does not have bandwidth caps or other such limitations. Likewise, our networks are built with the capacity to accommodate future needs. To help our customers remain connected at home during this time, we upgraded all our lower-tier fiber customers to symmetrical gigabit access at no charge. Any additional traffic from our customers working from home has not had and is not expected to have any negative impact on connectivity. As discussed above, our install solution was implemented in early May 2020. With this service limitation, new customer acquisition will remain slower than pre-pandemic levels of growth and installation. Even with an install solution that minimizes risks, customers may be unwilling to have service personnel visit their homes or offices. 

 

Our Community

 

Tucows believes the Internet is essential infrastructure and an immensely powerful tool, especially in times of crises where coordination is essential.

 

From an early point in the current global crisis, it was clear to us that we were going to need to do something new and different in how we responded to COVID-19 related domain registrations. Many of these domains are registered for good, helpful purposes, such as community organization, dissemination of healthcare information, and recording people’s experiences through this pandemic. Others, however, purport to sell COVID-19 cures, vaccines, or tests, none of which are legitimately available on the market at the time of the registration and many of which pose a significant health risk to the general public. There are three major components to our COVID-19 activities related to domain registrations: (i) identification, (ii) assessment for harm, and (iii) stakeholder engagement. It is important to note that our response to each and every issue that we find is contextual and dependent on the specific circumstances. We expect to return to our regular procedures as the pandemic and corresponding risks subsides. Although this approach vastly increases the burden on our compliance staff and puts us in the uncomfortable position of having to assess the level of harm represented by a COVID-related domain and the website to which it resolves - we feel these circumstances are exceptional and are determined to do our part.

 

In order to provide Internet access and assistance to residents of cities and towns that are part of the Ting Fiber network, we have set up free, fiber-fed, drive-up Wi-Fi hotspots. These hotspots enable those with no home Internet access, or insufficient access, to access critical services like online learning and telehealth services, work remotely, check in on and access vital health, government and other services and generally access information. These hotspots will remain in operation as long as they are needed and as long as it is safe and prudent to do so.

 

We have not experienced any material resource constraints nor do we foresee requiring any material expenditures to continue to implement our business continuity plans described above.

 

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Current and expected COVID-19 Impacts

 

Financial & Operational Impacts

 

Further to the below discussion within this Quarterly Report around the financial condition and results of operations for the current period financial results, the current impact from COVID-19 has been limited to the Network Access - Mobile Services segment. Management continues to assess the impact on a daily basis and expects continued impact through the third quarter of 2020, should the COVID-19 pandemic persist. On a segment basis, our current assessment is as follows:

 

Network Access – Mobile Services:

 

Both our Mobile Services businesses are completely online and do not rely on physical storefronts to attract or service customers’ needs. While we have seen a drop in customer usage, we are fully prepared to continue providing uninterrupted services for all Mobile related services, across our brands where demand for such services exists. COVID-19 has impacted the demand for our Mobile services as customer usage patterns changed, which has had a corresponding negative impact on our revenues for this segment. We do not expect the impact to substantially worsen over the coming months as we have seen usage stabilize during the current period. 

 

Ting Mobile, our primary post-paid Mobile Services brand is an MVNO operating across the United States. From the onset of the COVID-19 pandemic, we saw a moderate drop in data usage by our customers, with some small uptick in voice and messaging usage. This is a direct result of social distancing measures enacted by state and local authorities across the United States. With our customers staying indoors and working from home, they now rely on an increased use of home Wi-Fi networks rather than mobile data services. This reduced usage stabilized during the second quarter of 2020 and we expect it to only return to pre-pandemic usage levels once social distancing measures are relaxed. Additionally, at the onset of the pandemic, we saw an increased churn rate of low-margin business accounts as their own businesses came to a halt. This has not rebounded through the second quarter of 2020 as many social distancing measures and business closures remain in place across the United States and may continue as such given the increased uncertainty around secondary waves of shutdown as the pandemic progresses. Our core consumer customer base remains intact but have been experiencing minimal levels of both growth and churn. We do not foresee any increased risk of churn or collection risk given our current situation, but realize that collection risk could increase as government stimulus measures expire and impact a customer's ability to pay. Although we maintain minimum purchase guarantees with our MNOs, we do not expect any material shortfalls with respect to reduced usage from COVID-19.

 

Roam Mobility, our niche prepaid Mobile Services brand that provides Mobile Services for people travelling within the United States and Worldwide has accounted for the majority of the negative financial impact caused by COVID-19. The business relies on global travel as a key factor in its success. With travel restrictions and border closures essentially resulting in the halt of business and leisure travel, we saw new revenues for Roam Mobility trend toward zero through the end of the first quarter of 2020. Management monitored the situation closely through the second quarter and took substantial measures to reduce and eliminate any unnecessary costs within that business. Unfortunately, given the continued uncertainty around reopening of borders, easing of travel restrictions and consumers’ level of comfort with business and leisure travel in a post pandemic world, we made the decision to shut down operations of all Roam brands effective June 30, 2020. We will continue to refund active plans for existing customers through to August 31, 2020. The assets associated with Roam are insignificant to the consolidated Company total, with the total current period impairment charge related to the shutdown totaling $1.43 million. 

 

Network Access – Other Services:

 

As discussed above, upon news of the COVID-19 outbreak, we took the major step to cancel and reschedule all in-home installation and service appointments across our Ting Fiber footprint. Since then, the Ting Internet team has established a smart-install solution. This smart-install solution is faster and more efficient than our existing process, all while protecting the health and safety of our employees and customers alike. Although new customer installations initially slowed near the end of the first quarter of 2020, we are now seeing returned growth in both subscribers under management as well as serviceable addresses relative to the prior quarter. Additionally, our existing customer base and most recent acquisition of Cedar both continue to provide increased recurring revenue for us to support this business. 

 

Domain Services:

 

Domain Services are foundational to the functioning of the Internet. As discussed above, services like individual and wholesale domain names, email and hosting do not rely on in-person interaction or the supply chain in the same way physical products and services do. We have not experienced any negative COVID-19 related impacts, either financially or operationally for Domains related services, across our OpenSRS, Enom, Ascio, EPAG & Hover brands. As more businesses face the reality of prolonged physical shutdown and move to establish an online presence, we have seen growth in this segment, primarily driven by large volume resellers in our OpenSRS brand where total domains under management increased 807,000 since March 31, 2020. This growth rate in domains under management was driven by the Pandemic, and may not be sustained in the future as domain registrations plateau. Our results of operations for the current period financial results are in line with management’s expectation for the period given product, customer mix and current brand trajectories. We will continue to monitor the impact but do not foresee any negative financial or operational impacts associated with this segment.

 

32

 

Liquidity & Financial Resource Impacts

 

For a complete assessment of our liquidity and covenant positions please reference the relevant discussions within this Quarterly Report. We have experienced no significant change to our liquidity position or credit risk as a result of the financial and operational impacts related to COVID-19, as discussed above. Our cost or access to funding sources has not changed and is not reasonably likely to change in the near future as a result of the pandemic. Our sources and uses of cash have not been materially impacted and there is no known material uncertainty about our ongoing ability meet covenants or repayment terms of our credit agreements at this time.

 

Internal Controls over Financial Reporting

 

Tucows has long encouraged a culture of remote work even prior to COVID-19. Our financial reporting systems and our internal controls over financial reporting and disclosure controls and procedures are already adapted for a remote work environment. There have been no changes during the current period that, as a result of COVID-19, would affect our ability to maintain these systems and controls.

 

COVID-19 Related Assistance & Support

 

Currently, Tucows has not received any form of financial or resource related assistance from any government or local authority. There do exist programs in the regions in which we operate that are designed to support corporations like Tucows during this time, primarily in the form employee wage subsidization. Tucows will continue to review the applicability of these programs but does not expect to seek any assistance.

 

Across our businesses, we have been able to defer portions of installment taxes payable to various Government bodies as payment timelines have been extended in response to the pandemic.

 

Accounting Policy Impacts

 

Given the rapidly changing nature of COVID-19 developments and the current uncertainty around the length and severity these developments could create, Tucows does not have sufficient evidence to anticipate a material impairment with respect to goodwill, intangible assets, long-lived assets, or right of use assets. We will continue to monitor the impacts closely and as more information becomes available. We do not foresee any changes in accounting judgements in relation to COVID-19 that will have a material impact on our financial statements.

 

33

 

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AS COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 2019

 

NET REVENUES

 

Network Access Services

 

The Company generates Network Access Services revenues primarily through the provisioning of mobile services. Other sources of revenue include the provisioning of fixed high-speed Internet access as well as billing solutions to ISPs.

 

Mobile Services

 

Ting Mobile wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting Mobile contracts are billed based on the actual amount of monthly services utilized by each customer during their billing cycle and charged to customers on a postpaid basis. Voice minutes, text messages and megabytes of data are each billed separately based on a tiered pricing program. The Company recognizes revenue for Ting Mobile usage based on the actual amount of monthly services utilized by each customer.

 

Ting Mobile services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Mobile customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories are recognized when title and risk of loss is transferred to the customer and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

 

Our Roam Mobility brands also offer standard talk, text and data mobile services. Roam customers prepay for their usage through the Roam Mobility website. When prepayments are received the amount is deferred, and subsequently recognized as the Company satisfies its obligation to provide mobile services. In addition, revenues associated with the sale of SIM cards are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue. As at June 30, 2020, the Company shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to the significant reduction in business and leisure travel caused by the COVID-19 pandemic.

 

Other services

 

Other services derive revenues from providing Ting Internet to individuals and small businesses in select cities. In addition, we provide billing, provisioning and customer care software solutions to ISPs through our Platypus billing software. Ting Internet access contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Ting Internet contracts are generally prepaid and grant customers with unlimited bandwidth based on a fixed price per month basis. Since consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access.

 

Ting Internet services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Internet access customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

 

In those cases, where payment is not received at the time of sale, revenue is not recognized until contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations. 

 

34

 

Domain Services

 

Wholesale

 

Domain registration contracts, which can be purchased for terms of one to ten years, provide our resellers and retail registrant customers with the exclusive right to a personalized internet address from which to build an online presence. The Company enters into domain registration contracts in connection with each new, renewed and transferred-in domain registration. At the inception of the contract, the Company charges and collects the registration fee for the entire registration period. Though fees are collected upfront, revenue from domain registrations are recognized rateably over the registration period as domain registration contracts contain a ‘right to access’ license of IP, which is a distinct performance obligation measured over time. The registration period begins once the Company has confirmed that the requested domain name has been appropriately recorded in the registry under contractual performance standards.

 

Historically, our wholesale domain service has constituted the largest portion of our business and encompasses all of our services as an accredited registrar related to the registration, renewal, transfer and management of domain names. In addition, this service fuels other revenue categories as it often is the initial service for which a reseller will engage us, enabling us to follow on with other services and allowing us to add to our portfolio by purchasing names registered through us upon their expiration. Domain services will continue to be the largest portion of our business and will further fuel our ability to sell add-on services.

 

The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.

 

Wholesale – Value-Added Services

 

We derive revenue from domain related value-added services like digital certifications, WHOIS privacy and hosted email and by providing our resellers and retail registrant customers with tools and additional functionality to be used in conjunction with domain registrations. All domain related value-added services are considered distinct performance obligations which transfer the promised service to the customer over the contracted term. Fees charged to customers for domain related value-added services are collected at the inception of the contract, and revenue is recognized on a straight-line basis over the contracted term, consistent with the satisfaction of the performance obligations.

 

We also derive revenue from other value-added services, which primarily consists of Internet hosting services on the OpenSRS and eNom domain expiry streams.

 

Retail

 

We derive revenues from Hover and eNom’s retail properties through the sale of retail domain name registration and email services to individuals and small businesses.

 

Portfolio

 

The Company sells the rights to its portfolio domains or names acquired through the Company’s domain expiry stream. Revenue generated from sale of domain name contracts, containing a distinct performance obligation to transfer the domain name rights under the Company’s control, is generally recognized once the rights have been transferred and payment has been received in full. Domain portfolio names are sold through our premium domain name service, auctions or in negotiated sales. In the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio revenue to materially decline in Fiscal 2020 and thereafter.

 

35

 

The following table presents our net revenues, by revenue source (Dollar amounts in thousands of U.S. dollars):

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Network Access Services:

                               

Mobile Services

  $ 17,567     $ 20,986     $ 37,715     $ 41,795  

Other Services

    4,414       2,644       8,722       5,087  

Total Network Access Services

    21,981       23,630       46,437       46,882  
                                 

Domain Services:

                               

Wholesale

                               

Domain Services

    46,206       46,485       92,169       89,076  

Value Added Services

    5,034       4,775       9,741       8,959  

Total Wholesale

    51,240       51,260       101,910       98,035  
                                 

Retail

    8,567       8,783       17,017       17,425  

Portfolio

    334       444       743       728  

Total Domain Services

    60,141       60,487       119,670       116,188  
                                 
    $ 82,122     $ 84,117     $ 166,107     $ 163,070  

(Decrease) increase over prior period

  $ (1,995 )           $ 3,037          

(Decrease) increase - percentage

    (2 )%             2 %        

 

The following table presents our revenues, by revenue source, as a percentage of total revenues (Dollar amounts in thousands of U.S. dollars):

 

   

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Network Access Services:

                               

Mobile Services

    22 %     25 %     23 %     26 %

Other Services

    5 %     3 %     5 %     3 %

Total Network Access Services

    27 %     28 %     28 %     29 %
                                 

Domain Services:

                               

Wholesale

                               

Domain Services

    56 %     55 %     55 %     55 %

Value Added Services

    6 %     6 %     6 %     5 %

Total Wholesale

    62 %     61 %     61 %     60 %
                                 

Retail

    11 %     10 %     11 %     11 %

Portfolio

    0 %     1 %     0 %     0 %

Total Domain Services

    73 %     72 %     72 %     71 %
                                 
      100 %     100 %     100 %     100 %

 

36

 

Total net revenues for the three months ended June 30, 2020 decreased by $2.0 million, or 2%, to $82.1 million from $84.1 million when compared to the three months ended June 30, 2019.  The three-month decrease in revenue was primarily driven by $3.4 million of reduced revenues attributable to our Mobile Services brands Ting Mobile and Roam Mobility that were impacted by loss of mobile subscribers and reduced usage related to COVID-19 when compared to the three months ended June 30, 2019. Additionally, further decreases in domain name services revenue of $0.3 million, related to a continued erosion in Wholesale domain registrations by non-core customers primarily from our existing Domain Services brands. These decreases were offset by Fiber access revenues which increased $1.8 million, driven by our recent first quarter acquisition of Cedar as well as through the expansion of our existing Ting Internet footprint. 

 

Total net revenues for the six months ended June 30, 2020 increased by $3.0 million, or 2%, to $166.1 million from $163.1 million when compared to the six months ended June 30, 2019.  The six-month increase in revenue was primarily driven by Fiber access revenues which increased $3.6 million driven by our recent first quarter acquisition of Cedar as well as through the expansion of our existing Ting Internet footprint. Additionally, further increases of $3.5 million in revenues largely attributable to our prior year acquisition of Ascio. Ascio revenues, which now represent a full two quarters of earned revenue compared to the stub period of attributable revenue during the six months ended June 30, 2019. These increases were offset by Mobile Services revenue which decreased by $3.6 million due to a decrease in mobile subscribers and reduced usage related to COVID-19 as described above.

 

Deferred revenue from domain name registrations and other Internet services at June 30, 2020 increased by $6.0 million to $155.3 million from $149.3 million at December 31, 2019 primarily due to current period billings for domain name registration and service renewals.

 

During the three and six months ended June 30, 2020, no customer accounted for more than 10% of total revenue. For the three and six months ended June 30, 2019, no customer accounted for more than 10% of total revenue. As at June 30, 2020 and December 31, 2019, no customer accounted for more than 10% of accounts receivable. Though a significant portion of the Company’s domain services revenues are prepaid by our customers, where the Company does collect receivables, significant management judgment is required at the time revenue is recorded to assess whether the collection of the resulting receivables is reasonably assured. On an ongoing basis, we assess the ability of our customers to make required payments. Based on this assessment, we expect the carrying amount of our outstanding receivables, net of allowance for doubtful accounts, to be fully collected.

 

Network Access Services

 

Mobile Services

 

Net revenues from mobile phone equipment and services for the three months ended June 30, 2020 decreased by $3.4 million or 16% to $17.6 million as compared to the three months ended June 30, 2019. This decrease reflects a decline in mobile service revenue, which decreased by $4.0 million compared to June 30, 2019, to $15.5 million. Ting Mobile accounts for $2.9 million of this decrease, followed by Roam Mobility at $1.1 million of the total decrease. The decline in service revenues is a result of the decline in mobile subscribers and reduced usage related to the COVID-19 pandemic. As at June 30, 2020, the Company shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to lack of business and leisure travel caused by the pandemic. Revenues from the sale of mobile hardware and related accessories increased by $0.6 million compared to June 30, 2019, to $2.0 million. The increase in device revenue was primarily driven by strong sales and refreshed product mix for devices compared to the three months ended June 30, 2019.  

 

Net revenues from mobile phone equipment and services for the six months ended June 30, 2020 decreased by $4.1 million or 10% to $37.7 million as compared to the six months ended June 30, 2019. This decrease reflects a decline in mobile service revenue, which decreased by $4.8 million compared to June 30, 2019, to $34.1 million. Ting Mobile accounts for $3.4 million of this decrease, followed by Roam Mobility at $1.4 million of the total decrease. The decline in service revenues is a result of the decline in mobile subscribers and reduced usage related to the COVID-19 pandemic. Revenues from the sale of mobile hardware and related accessories increased by $0.7 million compared to June 30, 2019, to $3.6 million. The increase in device revenue was primarily driven by strong sales and refreshed product mix for devices compared to the six months ended June 30, 2019.  

 

As of June 30, 2020, Ting Mobile, our post-paid Mobile Services brand had 150,000 mobile accounts and 257,000 subscribers under its management compared to 157,000 accounts and 280,000 subscribers under its management as of June 30, 2019. 

 

Other Services

 

Other revenues from Ting Internet and billing solutions generated $4.4 million in revenue during the three months ended June 30, 2020, up $1.8 million or 69% compared to the three months ended June 30, 2019. This growth is driven by the recent first quarter acquisition of Cedar. Cedar contributed $1.2 million of the increase in revenue during the current period, with $0.6 million related to the continued expansion of our Ting Internet footprint in existing Ting towns throughout the United States.

 

Other revenues from Ting Internet and billing solutions generated $8.7 million in revenue during the six months ended June 30, 2020, up $3.6 million or 71% compared to the six months ended June 30, 2019. This growth is driven by the recent first quarter acquisition of Cedar. Cedar contributed $2.4 million of the increase in revenue during the current period, with $1.2 million related to the continued expansion of our Ting Internet footprint in existing Ting towns throughout the United States.

 

As of June 30, 2020, Ting Internet had access to 49,000 serviceable addresses and 13,000 active accounts under its management compared to having access to 34,000 serviceable addresses and 9,000 active accounts under its management as of June 30, 2019. These figures include the increase in serviceable addresses and accounts attributable to the prior quarter Cedar acquisition. 

 

37

 

Domain Services

 

Wholesale

 

During the three months ended June 30, 2020, Wholesale domain services revenue decreased by $0.3 million or 1% to $46.2 million, when compared to the three months ended June 30, 2019. The three-month decrease was primarily driven by a $1.2 million decrease in Wholesale domain revenue, driven by a decline in domain registrations by non-core customers from our eNom and Ascio brands. This decrease on eNom and Ascio was offset by increased Wholesale domain revenues of $0.9 million from our other domain services brands, namely OpenSRS and EPAG. This offsetting increase is a result of increased domains under management for these brands associated with an uptick in registrations during the second quarter of 2020 in connection with COVID-19. As more businesses establish an online presence during this time, we have seen growth from large volume resellers across these brands. This has had a marginal impact on revenue in the current period but will have a carryforward impact in subsequent periods as revenues are recognized from previously deferred billings. 

 

During the six months ended June 30, 2020, Wholesale domain services revenue increased by $3.1 million or 3% to $92.2 million, when compared to the six months ended June 30, 2019. The six-month increase was primarily driven by a $5.0 million increase in revenue related to the prior year acquisition of Ascio. Ascio revenues now represent a full two quarters of earned revenue compared to the stub period of attributable revenue during the six months ended June 30, 2019. Additionally, we saw a further increase in Wholesale domain revenues of $1.2 million from our other domain services brands, namely OpenSRS and EPAG due to the increased registrations as a result of COVID-19 discussed above. These increases were offset by a decrease of $3.1 million in Wholesale domain revenues related to our eNom brand, driven by continued decline in domain registrations by non-core customers relative to the six months ended June 30, 2019. 

 

Total domains that were managed under the OpenSRS, eNom, EPAG, and Ascio domain services decreased by 0.4 million domain names to 24.6 million as of June 30, 2020, when compared to 25.0 million at June 30, 2019. The decrease is a driven by the continued erosion of registrations related to non-core customers from our eNom brand. All increases discussed above related to our other Wholesale domain brands have not increased at a rate equal to the erosion experienced by eNom, thus resulting in a net decrease in total domains under management for the period in comparison.  

 

During the three months ended June 30, 2020, value-added services increased by $0.2 million to $5.0 million compared to the three months ended June 30, 2019. The three-month increases were primarily driven by an increase in expiry revenue of $0.5 million, offset by a decrease in hosting revenue of $0.1 million and decrease in Digital Certificates, Email and Other revenues of $0.1 million.

 

During the six months ended June 30, 2020, value-added services increased by $0.7 million to $9.7 million compared to the six months ended June 30, 2019. The six-month increases were primarily driven by an increase in expiry revenue of $1.2 million, offset by a decrease in hosting revenue of $0.3 million and decrease in Digital Certificates revenue of $0.1 million.

 

Retail

 

Net revenues from retail for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, decreased by less than $0.2 million to $8.6 million. Revenue decreased as a result of a shrinking eNom customer base, driven by non-core customers.

 

Net revenues from retail for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, decreased by less than $0.4 million to $17.0 million. Revenue decreased as a result of a shrinking eNom customer base, driven by non-core customers.

 

Portfolio

 

Net revenues from portfolio for the three months ended June 30, 2020, decreased by $0.1 million to $0.3 million, as compared to the three months ended June 30, 2019, due to lower proceeds from individual portfolio sales compared to the three months ended June 30, 2019. In the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio revenue to materially decline in Fiscal 2020 and thereafter.

 

Net revenues from portfolio for the six months ended June 30, 2020 were flat as compared to the six months ended June 30, 2019. In the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio revenue to materially decline in Fiscal 2020 and thereafter.

 

 

COST OF REVENUES

 

Network Access Services

 

Mobile Services

 

Cost of revenues for mobile services includes the costs of provisioning mobile services, which is primarily our customers' voice, messaging, data usage provided by our Network Operators, and the costs of providing mobile phone hardware, which is the cost of mobile phone devices and SIM cards sold to our customers, order fulfillment related expenses, and inventory write-downs.

 

Other Services

Cost of revenues for other services primarily includes the costs for provisioning high speed Internet access, which is comprised of network access fees and software licenses and the costs of providing hardware. Hardware costs are comprised of network routers sold to our customers, order fulfillment related expenses, inventory write-downs and fees paid to third-party service providers primarily for printing services in connection with billing services to ISPs.

 

38

 

Domain Services

 

Wholesale

 

Domain Service

 

Cost of revenues for domain registrations represents the amortization of registry and accreditation fees on a basis consistent with the recognition of revenues from our customers, namely rateably over the term of provision of the service. Registry fees, the primary component of cost of revenues, are paid in full when the domain is registered, and are initially recorded as prepaid domain registry fees. This accounting treatment reasonably approximates a recognition pattern that corresponds with the provision of the services during the period. Market development funds that do not represent a payment for distinct goods or services provided by the Company, and thus do not meet the criteria for revenue recognition under ASU 2014-09, are reflected as cost of goods sold and are recognized as earned.

 

Value-Added Services

 

Costs of revenues for value-added services include licensing and royalty costs related to the provisioning of certain components of related to hosted email and fees paid to third-party hosting services. Fees payable for trust certificates are amortized on a basis consistent with the provision of service, generally one year, while email hosting fees and monthly printing fees are included in cost of revenues in the month they are incurred.

 

Retail

 

Costs of revenues for our provision and management of Internet services through our retail sites, Hover.com and the eNom branded sites, include the amortization of registry fees on a basis consistent with the recognition of revenues from our customers, namely rateably over the term of provision of the service. Registry fees, the primary component of cost of revenues, are paid in full when the domain is registered, and are recorded as prepaid domain registry fees.

 

Portfolio

 

Costs of revenues for our portfolio represent the amortization of registry fees for domains added to our portfolio over the renewal period, which is generally one year, the value attributed under intangible assets to any domain name sold and any impairment charges that may arise from our assessment of our domain name intangible assets. Payments for domain registrations are payable for the full term of service at the time of activation of service and are recorded as prepaid domain registry fees and are expensed rateably over the renewal term.

 

39

 

Network expenses

 

Network expenses include personnel and related expenses, depreciation and amortization, communication costs, equipment maintenance, stock-based compensation and employee and related costs directly associated with the management and maintenance of our network. Communication costs include bandwidth, co-location and provisioning costs we incur to support the supply of all our services.

 

The following table presents our cost of revenues, by revenue source:

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Network Access Services:

                               

Mobile Services

  $ 8,660     $ 10,806     $ 18,517     $ 21,549  

Other Services

    1,665       956       3,381       2,025  

Total Network Access Services

    10,325       11,762       21,898       23,574  
                                 

Domain Services:

                               

Wholesale

                               

Domain Services

    36,354       37,817       72,823       72,656  

Value Added Services

    762       738       1,547       1,531  

Total Wholesale

    37,116       38,555       74,370       74,187  
                                 

Retail

    4,219       4,409       8,453       8,768  

Portfolio

    130       147       257       276  

Total Domain Services

    41,465       43,111       83,080       83,231  
                                 

Network Expenses:

                               

Network, other costs

    2,485       2,385       4,901       4,780  

Network, depreciation and amortization costs

    3,356       2,352       6,587       4,327  

Network, impairment

    1,525       -       1,525       -  
      7,366       4,737       13,013       9,107  
                                 
    $ 59,156     $ 59,610     $ 117,991     $ 115,912  

(Decrease) increase over prior period

  $ (454 )           $ 2,079          

(Decrease) increase - percentage

    -1 %             2 %        

 

The following table presents our cost of revenues, as a percentage of total cost of revenues for the periods presented:

 

   

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Network Access Services:

                               

Mobile Services

    15 %     18 %     16 %     18 %

Other Services

    3 %     2 %     3 %     2 %

Total Network Access Services

    18 %     20 %     19 %     20 %
                                 

Domain Services:

                               

Wholesale

                               

Domain Services

    64 %     64 %     63 %     63 %

Value Added Services

    1 %     1 %     1 %     1 %

Total Wholesale

    65 %     65 %     64 %     64 %
                                 

Retail

    7 %     7 %     7 %     8 %

Portfolio

    0 %     0 %     0 %     0 %

Total Domain Services

    72 %     72 %     71 %     72 %
                                 

Network Expenses:

                               

Network, other costs

    4 %     4 %     4 %     4 %

Network, depreciation and amortization costs

    6 %     4 %     6 %     4 %
      10 %     8 %     10 %     8 %
                                 
      100 %     100 %     100 %     100 %

 

Total cost of revenues for the three months ended June 30, 2020, decreased by $0.4 million, or 1%, to $59.2 million from $59.6 million in the three months ended June 30, 2019. The three-month decrease was driven by $2.1 million of reduced costs attributable to our Mobile Services brands. As discussed above in the Net Revenue section, Ting Mobile and Roam Mobility were impacted by loss of mobile subscribers and reduced usage related to COVID-19 when compared to the three months ended June 30, 2019. Additionally, further decreases in domain name services costs of $1.6 million, related to continued erosion in Wholesale and Retail domain registrations by non-core customer primarily from our existing Domain Services brands, namely eNom. These decreases were offset by increased network expenses from continued Fiber network expansion as well as a $1.5 million impairment related to Ting TV, a product under development for Ting Fiber that was discontinued. Additional increases in Fiber access costs of $0.7 million, driven by both our recent first quarter acquisition of Cedar as well as through the expansion of our existing Ting Internet footprint. 

 

Total cost of revenues for the six months ended June 30, 2020, increased by $2.1 million, or 2%, to $118.0 million from $115.9 million in the six months ended June 30, 2019. The six-month increase was driven by increased network expenses from continued Fiber network expansion as well as a $1.5 million impairment related to Ting TV, a product under development for Ting Fiber that was discontinued. Additional increases in Fiber access costs of $1.4 million, driven by both our recent first quarter acquisition of Cedar as well as through the expansion of our existing Ting Internet footprint. These increases were offset by $3.0 million of reduced costs attributable to our Mobile Services brands. As discussed above in the Net Revenue section, Ting Mobile and Roam Mobility were impacted by loss of mobile subscribers and reduced usage related to COVID-19 when compared to the three months ended June 30, 2019. Additionally, there were further decreases in domain name services costs of $0.2 million, related to continued erosion in Wholesale and Retail domain registrations by non-core customers primarily from our existing Domain Services brands, namely eNom.

 

Prepaid domain registration and other Internet services fees as of June 30, 2020 increased by $5.0 million, or 5%, to $114.2 million from $109.2 million at December 31, 2019 primarily due to current period domain name registration and annual service renewals.

 

40

 

Network Access Services

 

Mobile Services

 

Cost of revenues from mobile phone equipment and services for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019, decreased by $2.1 million or 20% to $8.7 million. This decrease reflects a decline in mobile service costs, which decreased by $3.0 million compared to June 30, 2019, to $6.1 million. Ting Mobile accounts for $2.4 million of this decrease, followed by Roam Mobility at $0.6 million of the total decrease. The decline in service costs of $2.4 million for Ting Mobile was primarily driven by a decline in mobile subscribers and reduced usage related to the COVID-19 pandemic; which attributed to a decrease in costs of $1.7 million. Additionally, the decline in Ting Mobile service costs included reduced minimum commitment charges with network operators, which decreased by $0.7 million as compared to the three months ended June 30, 2019. The decline in service costs of $0.6 million attributable to Roam Mobility was entirely related to COVID-19 and related shut-down costs. As at June 30, 2020, the Company shut down the Roam Mobility brands and related businesses as a result of lack of demand for SIM-enabled roaming services due to lack of business and leisure travel caused by the pandemic. Costs from the sale of mobile hardware and related accessories increased by $0.9 million compared to June 30, 2019, to $2.5 million. The increase in device costs was primarily driven by strong sales and refreshed product mix for devices compared to the three months ended June 30, 2019. A portion of this increase is related to Roam Mobility, attributable to an increase of $0.2 million in device costs. This is a result of write-off of SIM card inventory upon shut down of the Roam Mobility brands on June 30, 2020. 

 

Cost of revenues from mobile phone equipment and services for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, decreased by $3.0 million or 14% to $18.5 million. The decrease reflects a decline in mobile service costs, which decreased by $4.0 million compared to June 30, 2019, to $14.1 million. Ting Mobile accounts for $3.0 million of this decrease, followed by Roam Mobility at $1.0 million of the total decrease. The decline in service costs of $3.0 million for Ting Mobile was primarily driven by a decline in minimum commitment charges with network operators, which decreased by $1.7 million as compared to the six months ended June 30, 2019. Additionally, the remaining decline in Ting Mobile service costs was driven by a decline in mobile subscribers and reduced usage related to the COVID-19 pandemic. This was attributable to a decrease in costs of $1.3 million. The decline in service costs of $1.0 attributable to Roam Mobility was entirely related to COVID-19 and related shut-down costs. Costs from the sale of the mobile hardware and related accessories increased by $1.0 million compared to June 30, 2019, to $4.4 million. The increase in device costs was primarily driven by strong sales and refreshed product mix for devices compared to the six months ended June 30, 2019. A portion of this increase is related to Roam Mobility, attributable to an increase of $0.2 million in device costs. This is a result of write-off of SIM card inventory upon shut down of the Roam Mobility brands on June 30, 2020. 

 

Other Services

 

During the three months ended June 30, 2020, costs related to provisioning high speed Internet access and billing solutions increased $0.7 million or 70%, to $1.7 million as compared to $1.0 million during three months ended June 30, 2019. The increase in costs were primarily driven by increased direct costs and bandwidth costs related to the continued expansion of the Ting Fiber network, for both existing towns and cities as well as those acquired via the Cedar acquisition.

 

During the six months ended June 30, 2020, costs related to provisioning high speed Internet access and billing solutions increased $1.4 million or 70%, to $3.4 million as compared to $2.0 million during six months ended June 30, 2019. The increase in costs were primarily driven by increased direct costs and bandwidth costs related to the continued expansion of the Ting Fiber network, for both existing towns and cities as well as those acquired via the Cedar acquisition.

 

Domain Services

 

Wholesale

 

Domain Service

 

Costs for Wholesale domain services for the three months ended June 30, 2020 decreased by $1.4 million to $36.4 million, when compared to the three months ended June 30, 2019. This was primarily driven by a $2.0 million decrease in wholesale domain services costs driven by the erosion in registrations by non-core customers for our eNom and Ascio brands. This decrease on eNom and Ascio was offset by increased Wholesale domain service costs of $0.5 million from our other domain services brands, namely OpenSRS and EPAG. This offsetting increase is a result of increased domains under management for these brands associated with an uptick in registrations during the second quarter of 2020 in connection with COVID-19. As more businesses establish an online presence during this time, we have seen growth from large volume resellers across these brands. This has had a marginal impact on costs in the current period and will have a carryforward impact in subsequent periods as costs are recognized from previously deferred billed costs. 

 

Costs for Wholesale domain services for the six months ended June 30, 2020 increased by $0.1 million to $72.8 million, when compared to the six months ended June 30, 2019. This was primarily driven by a $3.5 million decrease in wholesale domain services costs driven by the erosion in registrations by non-core customers for our eNom brand. This decrease on eNom was offset by increased Wholesale domain service costs of $3.7 million from our other domain services brands, namely OpenSRS, EPAG and Ascio. The offsetting increase is largely a result of the prior year acquisition of Ascio, where Ascio costs now represent a full two quarters compared to the stub period of attributable costs during the six months ended June 30, 2019. To a lesser extent any residual increase was a result of increased domains under management for OpenSRS as a result of COVID-19 impacts discussed above. 

 

Value-Added Services

 

Costs for wholesale value-added services for the three months ended June 30, 2020 remained flat at $0.8 million, when compared to the three months ended June 30, 2019.

 

Costs for wholesale value-added services for the six months ended June 30, 2020 remained flat at $1.5 million, when compared to the six months ended June 30, 2019.

 

Retail

 

Costs for retail for the three months ended June 30, 2020 decreased by $0.2  million, to $4.2 million as compared to the three months ended June 30, 2019. The decrease was a result of an overall declining volume of transactions related to the eNom retail brands.

 

Costs for retail for the six months ended June 30, 2020 decreased by $0.3 million, to $8.5 million as compared to the six months ended June 30, 2019. The decrease was a result of an overall declining volume of transactions related to the eNom retail brands.

 

Portfolio

 

Costs for portfolio for the three months ended June 30, 2020 remained flat at $0.1 million when compared to the three months ended June 30, 2019. In the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio cost of revenue to materially decline in Fiscal 2020.

 

Costs for portfolio for the six months ended June 30, 2020 remained flat at $0.3 million when compared to the six months ended June 30, 2019. In the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio cost of revenue to materially decline in Fiscal 2020.

 

Network Expenses

 

Network costs for the three months ended June 30, 2020 increased by $2.7 million to $7.4 million when compared to the three months ended June 30, 2019. The three-month increase was driven by depreciation as a result of the expansion of the Company’s increased network infrastructure associated with the continuing expansion of the Ting Fiber footprint as well as a $1.5 million impairment related to Ting TV, a product under development for Ting Fiber that was discontinued in the current period.

 

Network costs for the six months ended June 30, 2020 increased by $3.9 million to $13.0 million when compared to the six months ended June 30, 2019. The six-month increase was driven by depreciation as a result of the expansion of the Company’s increased network infrastructure associated with the continuing expansion of the Ting Fiber footprint as well as a $1.5 million impairment related to Ting TV, a product under development for Ting Fiber that was discontinued in the current period.

 

41

 

SALES AND MARKETING

 

Sales and marketing expenses consist primarily of personnel costs. These costs include commissions and related expenses of our sales, product management, public relations, call center, support and marketing personnel. Other sales and marketing expenses include customer acquisition costs, advertising and other promotional costs.

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Sales and marketing

  $ 9,218     $ 8,856     $ 18,203     $ 17,597  

Increase over prior period

  $ 362             $ 606          

Increase - percentage

    4

%

            3

%

       

Percentage of net revenues

    11

%

    11

%

    11

%

    11

%

 

Sales and marketing expenses for the three months ended June 30, 2020 increased by $0.4 million, or 4%, to $9.2 million as compared to the three months ended June 30, 2019.  This three-month increase primarily related to a $0.7 million increase in people costs driven by both the acquisition of Cedar in the first quarter of 2020 , which attributed to this increase $0.4 million of additional costs, as well as an incremental $0.3 million related to an expanded Product Management personnel across our Ting Mobile & Internet teams. Stock-based compensation expenses also increased $0.1 million to attract and retain labor. The overall increase in sales and marketing expense was partially offset by a decrease in other marketing related expenses of $0.4 million. 

 

Sales and marketing expenses for the six months ended June 30, 2020 increased by $0.6 million, or 3%, to $18.2 million as compared to the six months ended June 30, 2019. This six-month increase primarily related to a $1.4 million increase in people costs driven by the acquisition of Cedar in the first quarter of 2020, inclusion of a full two quarters of people costs related to workforce acquired in the Ascio acquisition on March 18, 2019, as well as expanded Product Management personnel as discussed above. Stock-based compensation expenses also increased $0.3 million in 2020 to attract and retain labor. The overall increase in sales and marketing expense was partially offset by a decrease in other marketing and travel related expenses of $0.9 million and $0.2 million, respectively.

 

TECHNICAL OPERATIONS AND DEVELOPMENT

 

Technical operations and development expenses consist primarily of personnel costs and related expenses required to support the development of new or enhanced service offerings and the maintenance and upgrading of existing infrastructure. This includes expenses incurred in the research, design and development of technology that we use to register domain names, network access services, email, retail, domain portfolio and other Internet services, as well as to distribute our digital content services. Editorial costs relating to the rating and review of the software content libraries are included in the costs of product development. All technical operations and development costs are expensed as incurred.

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Technical operations and development

  $ 3,067     $ 2,752     $ 5,818     $ 5,275  

Increase over prior period

  $ 315             $ 543          

Increase - percentage

    11

%

            10

%

       

Percentage of net revenues

    4

%

    3

%

    4

%

    3

%

 

Technical operations and development expenses for the three months ended June 30, 2020 increased by $0.3 million, or 11% , to $3.1 million when compared to the three months ended June 30, 2019.  The increase in costs relates primarily to increased salaries and benefits driven by an expanding workforce and wage inflation focused on our shared services and engineering teams, as well as increased spending related to our cloud migration activities. 

 

Technical operations and development expenses for the six months ended June 30, 2020 increased by $0.5 million, or 10%, to $5.8 million when compared to the six months ended June 30, 2019.  The increase in costs relates primarily to increased salaries and benefits driven by an expanding workforce and wage inflation focused on our shared services and engineering teams, as well as increased spending related to our cloud migration activities. Additionally, the six months ended June 30, 2020 reflected a full two quarters of people costs related to the workforce acquired in the Ascio acquisition on March 18, 2019, as compared to a stub period of costs in the six months ended June 30, 2019. 

 

GENERAL AND ADMINISTRATIVE

 

General and administrative expenses consist primarily of compensation and related costs for managerial and administrative personnel, fees for professional services, public listing expenses, rent, foreign exchange and other general corporate expenses.

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

General and administrative

  $ 5,465     $ 4,796     $ 10,206     $ 9,244  

Increase over prior period

  $ 669             $ 962          

Increase - percentage

    14

%

            10

%

       

Percentage of net revenues

    7

%

    6

%

    6

%

    6

%

 

General and administrative expenses for the three months ended June 30, 2020 increased by $0.7  million, or 14% to $5.5 million as compared to the three months ended June 30, 2019.  The increase was primarily driven by an increase in people costs of $0.4 million, an increase in foreign exchange expense of $0.6 million, and an increase in professional fees in connection with the Purchase Agreement with Dish of $0.1 million. These increases in general and administrative expenses was offset by a decrease in facility and transitional costs related to Ascio and eNom of $0.2 million and $0.2 million, respectively.

 

General and administrative expenses for the six months ended June 30, 2020 increased by $1.0 million, or 10%, to $10.2 million as compared to the six months ended June 30, 2019.  The increase was primarily driven by an increase in people costs of $0.7 million and an increase in foreign exchange expense of $0.9 million. The increase in general and administrative expenses was offset by a decrease in facility and transitional costs related to Ascio and eNom of $0.3 million and $0.3 million, respectively

 

42

 

DEPRECIATION OF PROPERTY AND EQUIPMENT

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Depreciation of property and equipment

  $ 125     $ 134     $ 238     $ 258  

Decrease over prior period

  $ (9 )           $ (20 )        

Decrease - percentage

    (7

)%

            (8

)%

       

Percentage of net revenues

    0

%

    0

%

    0

%

    0

%

  

Depreciation costs remained flat for the three months ended June 30, 2020 at $0.1 million when compared to the three months ended June 30, 2019.

 

Depreciation costs remained flat for the six months ended June 30, 2020 at $0.2 million when compared to the six months ended June 30, 2019.

 

LOSS ON DISPOSAL OF PROPERTY AND EQUIPMENT

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Loss on disposition of property and equipment

  $ -     $ -     $ -     $ -  

Decrease over prior period

  $ -             $ -          

Decrease - percentage

    N/A               N/A          

Percentage of net revenues

    -

%

    -

%

    -

%

    -

%

 

There were no losses on disposal costs during the three months ended June 30, 2020 and June 30, 2019.

 

There were no losses on disposal costs during the six months ended June 30, 2020 and June 30, 2019.

 

AMORTIZATION OF INTANGIBLE ASSETS

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Amortization of intangible assets

  $ 2,504     $ 2,251     $ 5,451     $ 4,117  

Increase over prior period

  $ 253             $ 1,334          

Increase - percentage

    11

%

            32

%

       

Percentage of net revenues

    3

%

    3

%

    3

%

    3

%

 

Amortization of intangible assets for the three months ended June 30, 2020 increased by $0.3 million to $2.5 million as compared to the three months ended June 30, 2019. The increase is driven by a $0.3 million increase in amortization related to FreedomPop customer acquisition that closed in July 2019. Network rights, brand and customer relationships acquired in connection with the following acquisitions are amortized on a straight-line basis over a range of two to seven years: eNom in January 2017, Roam Mobility brands in September 2017, Ascio in March 2019, FreedomPop in July 2019, and Cedar in January 2020. As discussed above, the balance of the Roam Mobility brands was fully impaired as at June 30, 2020 as part of shut down of the Roam brands. This is reflected below in the impairment of definite life intangible assets of $1.4 million. 

 

Amortization of intangible assets for the six months ended June 30, 2020 increased $1.3 million to $5.5 million as compared to the six months ended June 30, 2019. The increase is driven by a full two quarters of amortization related to the acquisition of Ascio of $0.4 million, amortization of $0.3 million related to the prior quarter acquisition of Cedar and $0.6 million in amortization related to FreedomPop customer acquisition that closed in July 2019. Network rights, brand and customer relationships acquired in connection with the following acquisitions are amortized on a straight-line basis over a range of two to seven years: eNom in January 2017, Roam Mobility brands in September of 2017, Ascio in March of 2019, FreedomPop in July 2019, and Cedar in January 2020. As discussed above, the balance of the Roam Mobility brands was fully impaired as at June 30, 2020 as part of shut down of the Roam brands. This is reflected below in the impairment of definite life intangible assets of $1.4 million. 

 

IMPAIRMENT OF DEFINITE LIFE INTANGIBLE ASSETS

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Impairment of definite life intangible assets

  $ 1,431     $ -     $ 1,431     $ -  

Increase over prior period

  $ 1,431             $ 1,431          

Increase - percentage

    N/A

%

            N/A

%

       

Percentage of net revenues

    2

%

    -

%

    1

%

    -

%

 

               Impairment of definite life intangible assets for the three and six months ended June 30, 2020 increased by $1.4 million as compared to the three and six months ended June 30, 2019. The increase is driven by the write-off of customer relationships acquired in connection with our Roam Mobility Brands. As discussed above, Roam Mobility saw a decline in mobile subscribers and reduced usage related to the COVID-19 pandemic. As at June 30, 2020, the Company decided to shut down the Roam Mobility brands and related business as a result of this lack of demand for SIM-enabled roaming services due to the continued decrease of both business and leisure travel caused by the pandemic. As part of that shut down, the associated customer relationships previously acquired were written off in period. 

 

LOSS (GAIN) ON CURRENCY FORWARD CONTRACTS

 

Although our functional currency is the U.S. dollar, a major portion of our fixed expenses are incurred in Canadian dollars. Our goal with regard to foreign currency exposure is, to the extent possible, to achieve operational cost certainty, manage financial exposure to certain foreign exchange fluctuations and to neutralize some of the impact of foreign currency exchange movements. Accordingly, we enter into foreign exchange contracts to mitigate the exchange rate risk on portions of our Canadian dollar exposure.

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Loss (gain) on currency forward contracts

  $ (381 )   $ (31 )   $ 60     $ (110 )

Decrease over prior period

  $ (350 )           $ 170          

Decrease - percentage

    1,129

%

            155

%

       

Percentage of net revenues

    0

%

    0

%

    0

%

    0

%

 

The Company recorded a net gain of $0.4 million on the change in fair value of outstanding contracts as well as realized on matured contracts during the three months ended June 30, 2020. 

 

The Company recorded a net loss of $0.1 million on the change in fair value of outstanding contracts as well as realized on matured contracts during the six months ended June 30, 2020. 

 

At June 30, 2020, our balance sheet reflects a derivative instrument asset of $1.7 million and a liability of $0.7 million as a result of our existing foreign exchange contracts. Until their respective maturity dates, these contracts will fluctuate in value in line with movements in the Canadian dollar relative to the U.S. dollar. 

 

43

 

OTHER INCOME (EXPENSES)

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Other income (expense), net

  $ (931 )   $ (1,314 )   $ (2,168 )   $ (2,286 )

Increase over prior period

  $ 383             $ 118          

Increase - percentage

    (29

)%

            (5

)%

       

Percentage of net revenues

    1

%

    2

%

    1

%

    1

%

 

Other expenses during the three months ended June 30, 2020 decreased by $0.4 million when compared to the three months ended June 30, 2019. This was primarily due to lower interest incurred on our credit facility with the majority of the borrowings on the credit facility to support the build-out of the Ting Fiber network. Other expense consists primarily of the interest we incur in connection with our Amended 2019 Credit Facility. The interest incurred primarily relates to our loan balances obtained to fund the acquisition of eNom, Ascio and Cedar and funding for expenditures associated with the Company’s Fiber to the Home program. 

 

Other expenses during the six months ended June 30, 2020 decreased by $0.1 million when compared to the six months ended June 30, 2019. This was primarily due to lower interest incurred on our credit facility with the majority of the borrowings on the credit facility to support the build-out of the Ting Fiber network. Other expense consists primarily of the interest we incur in connection with our Amended 2019 Credit Facility. The interest incurred primarily relates to our loan balances obtained to fund the acquisition of eNom, Ascio and Cedar and funding for expenditures associated with the Company’s Fiber to the Home program. 

 

INCOME TAXES

 

The following table presents our provision for income taxes for the periods presented:

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Provision for income taxes

  $ 449     $ 1,819     $ 1,550     $ 3,076  

Decrease in provision over prior period

  $ (1,370 )           $ (1,526 )        

Decrease - percentage

    (75

)%

            (50

)%

       

Effective tax rate

    74

%

    41

%

    34

%

    36

%

 

We operate in various tax jurisdictions, and accordingly, our income is subject to varying rates of tax. Losses incurred in one jurisdiction cannot be used to offset income taxes payable in another jurisdiction. Our ability to use income tax loss carry forwards and future income tax deductions is dependent upon our operations in the tax jurisdictions in which such losses or deductions arise. Income taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement carrying values and tax base of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

For the three months ended June 30, 2020, we recorded an income tax expense of $0.4 million on income before income taxes of $0.6 million, using an estimated effective tax rate for Fiscal 2020 adjusted for certain minimum state taxes as well as the inclusion of a $0.1 million tax recovery related to ASU 2016-09, which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Our effective tax rate for the three months ended June 30, 2020 is also adversely affected by discrete losses of $3.7 million related to Ting TV and Roam Mobility the tax benefit of which has only been partially recognized. Comparatively, for the three months ended June 30, 2019, we recorded an income tax expense of $1.8 million on income before taxes of $4.4 million, using an estimated effective tax rate for the 2019 fiscal year and reflecting the $0.4 million tax recovery impact related to ASU 2016-09.

 

For the six months ended June 30, 2020, we recorded an income tax expense of $1.6 million on income before income taxes of $4.5 million, using an estimated effective tax rate for Fiscal 2020 adjusted for certain minimum state taxes as well as the inclusion of a $0.2 million tax recovery related to ASU 2016-09, which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Our effective tax rate for the six months ended June 30, 2020 is also adversely affected by discrete losses of $3.7 million related to Ting TV and Roam Mobility the tax benefit of which has only been partially recognized. Comparatively, for the six months ended June 30, 2019, we recorded an income tax expense of $3.1 million on income before taxes of $8.5 million, using an estimated effective tax rate for the 2019 fiscal year and reflecting the $0.7 million tax recovery impact related to ASU 2016-09.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management projected future taxable income, uncertainties related to the industry in which the Company operates, and tax planning strategies in making this assessment.

 

We recognize accrued interest and penalties related to income taxes in income tax expense. We did not have significant interest and penalties accrued at June 30, 2020 and December 31, 2019, respectively. 

 

ADJUSTED EBITDA

 

We believe that the provision of this supplemental non-GAAP measure allows investors to evaluate the operational and financial performance of our core business using similar evaluation measures to those used by management. We use adjusted EBITDA to measure our performance and prepare our budgets. Since adjusted EBITDA is a non-GAAP financial performance measure, our calculation of adjusted EBITDA may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. Because adjusted EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a liquidity measure. See the Consolidated Statements of Cash Flows included in the attached financial statements. Non-GAAP financial measures do not reflect a comprehensive system of accounting and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies and/or analysts and may differ from period to period. We endeavor to compensate for these limitations by providing the relevant disclosure of the items excluded in the calculation of adjusted EBITDA to net income based on GAAP, which should be considered when evaluating the Company's results. Tucows strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure.

 

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Our adjusted EBITDA definition excludes depreciation, amortization of intangible assets, income tax provision, interest expense (net), accretion of contingent consideration, stock-based compensation, asset impairment, gains and losses from unrealized foreign currency transactions and infrequently occurring items. Gains and losses from unrealized foreign currency transactions removes the unrealized effect of the change in the mark-to-market values on outstanding unhedged foreign currency contracts, as well as the unrealized effect from the translation of monetary accounts denominated in non-U.S. dollars to U.S. dollars.

 

The following table reconciles net income to adjusted EBITDA:

 

Reconciliation of Net income to Adjusted EBITDA

 

Three Months Ended June 30,

   

Six Months Ended June 30,

 

(In Thousands of US Dollars)

 

2020

   

2019

   

2020

   

2019

 

(unaudited)

 

(unaudited)

   

(unaudited)

   

(unaudited)

   

(unaudited)

 
                                 

Net income for the period

  $ 157     $ 2,616     $ 2,991     $ 5,415  

Depreciation of property and equipment

    3,155       2,172       6,145       4,097  
Impairment of property and equipment     1,525       -       1,525       -  

Amortization of intangible assets

    2,830       2,565       6,131       4,605  
Impairment of definite life intangible assets     1,431       -       1,431       -  

Interest expense, net

    846       1,314       1,996       2,286  

Accretion of contingent consideration

    85       -       172       -  

Provision for income taxes

    449       1,819       1,550       3,076  

Stock-based compensation

    847       685       1,648       1,210  

Unrealized loss (gain) on change in fair value of forward contracts

    (436 )     (70 )     (88 )     (188 )

Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities

    441       (162 )     399       (490 )

Acquisition and other costs1

    845       547       956       906  
                                 

Adjusted EBITDA

  $ 12,175     $ 11,486     $ 24,856     $ 20,917  

 

1Acquisition and other costs represents transaction-related expenses, transitional expenses, such as duplicative post-acquisition expenses, primarily related to our acquisition of eNom in January 2017, Ascio in March 2019, Cedar in January 2020, the shut-down of Roam Mobility in June of 2020 and the costs associated with various DISH agreements executed in August of 2020. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.

  

Adjusted EBITDA increased by $0.7 million, or 6% to $12.2 million for the three months ended June 30, 2020 when compared to the three months ended June 30, 2019. The increase in adjusted EBITDA from period-to-period was primarily driven by an increased contribution from Ting Fiber. The overall increase in EBITDA was partially offset by decreased contribution from the erosion of wholesale and retail registrations from our eNom brand as well as lower contribution from Ting Mobile and Roam Mobility, related to a decreasing subscriber base and lower usage related to COVID-19.

 

Adjusted EBITDA increased by $4.0 million, or 19% to $24.9 million for the six months ended June 30, 2020 when compared to the six months ended June 30, 2019. The increase in adjusted EBITDA from period-to-period was primarily driven by an increased contribution from Ascio, which is the result of increased operating cost synergies realized during the first two quarters of 2020, as well as an increased contribution from Ting Fiber. The overall increase in EBITDA was partially offset by decreased contribution from the erosion of wholesale and retail registrations from our eNom brand as well as lower contribution from Ting Mobile and Roam Mobility, related to a decreasing subscriber base and lower usage related to COVID-19.

 

OTHER COMPREHENSIVE INCOME (LOSS)

 

To mitigate the impact of the change in fair value of our foreign exchange contracts on our financial results, in October 2012 we begun applying hedge accounting for the majority of the contracts we need to meet our Canadian dollar requirements on a prospective basis.

 

The following table presents other comprehensive income for the periods presented:

 

(Dollar amounts in thousands of U.S. dollars)

 

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Other comprehensive income (loss)

  $ 1,314     $ 320     $ 123     $ 930  

Increase over prior period

  $ 994             $ (807 )        

Increase - percentage

    311

%

            (87

)%

       

Percentage of net revenues

    2

%

    0

%

    0

%

    1

%

 

The impact of the fair value adjustments on outstanding hedged contracts for the three months ended June 30, 2020 was a gain in OCI of  $1.1 million as compared to a gain of  $0.2 million for the three months ended June 30, 2019.

 

The net amount reclassified to earnings during the three months ended June 30, 2020 was a loss of $0.2 million compared to a loss of $0.1  million during the three months ended June 30, 2019.

 

 

The impact of the fair value adjustments on outstanding hedged contracts for the six months ended June 30, 2020 was a loss in OCI of $0.1 million as compared to a gain of $0.8 million for the six months ended June 30, 2019.

 

The net amount reclassified to earnings during the six months ended June 30, 2020 was a loss of $0.2 million compared to a loss of $0.1 million during the six months ended June 30, 2019.

 

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LIQUIDITY AND CAPITAL RESOURCES

 

As of June 30, 2020, our cash and cash equivalents balance decreased $11.5 million when compared to December 31, 2019. Our principal uses of cash were $22.1 million for the continued investment in property and equipment, $8.8 million for the Acquisition of Cedar, $3.3 million in stock repurchases, and $0.4 million of other costs, including tax payment associated with stock option exercises and loan payable costs. These uses of cash were offset by cash provided by operating activities of $23.0 million. 

 

Amended 2019 Credit Facility

 

On June 14, 2019, the Company and its wholly-owned subsidiaries, Tucows.com Co., Ting Fiber, Inc., Ting Inc., Tucows (Delaware) Inc. and Tucows (Emerald), LLC, entered into an Amended and Restated Senior Secured Credit Agreement with RBC, as administrative agent, and lenders party thereto (collectively with RBC, the “Lenders”) under which the Company has access to an aggregate of up to $240 million in funds, inclusive of a $60 million accordion facility. The Amended 2019 Credit Facility replaced a secured Credit Agreement dated January 20, 2017 with Bank of Montreal, RBC and Bank of Nova Scotia (as amended, the “2017 Amended Credit Facility”).

 

On November 27, 2019, the Company entered into Amending Agreement No. 1 to the Amended and Restated Senior Secured Credit Agreement (collectively with the Amended and Restated Senior Secured Credit Agreement, the “Amended 2019 Credit Facility”) to amend certain defined terms in connection with the Cedar acquisition.

 

In connection with the Amended 2019 Credit Facility, the Company incurred an additional $0.3 million of fees paid to lenders and $0.2 million of legal fees related to the debt issuance. Of these fees, $0.4 million are debt issuance costs, which have been reflected as a reduction to the carrying amount of the loan payable and will be amortized over the term of the credit facility agreement and $0.1 million have been recorded in General and administrative expenses.

 

The obligations of the Company under the Amended 2019 Credit Agreement are secured by a first priority lien on substantially all of the personal property and assets of the Company and has a four-year term.

 

Other Credit Facilities

 

Prior to the Company entering into the Amended 2019 Credit Facility and the 2017 Amended Credit Facility, the Company had credit agreements (collectively the “Prior Credit Facilities”) with BMO, which provided the Company with continued access to a treasury risk management facility and a credit card facility. All remaining credit facilities under the 2017 Amended Credit Facility and the Prior Credit Facilities have been terminated.

 

The treasury risk management facility under the Prior Credit Facilities provides for a $3.5 million settlement risk line to assist the Company with hedging Canadian dollar exposure through foreign exchange forward contracts and/or currency options. Under the terms of the Prior Credit Facilities, the Company may enter into such agreements at market rates with terms not to exceed 18 months. As of June 30, 2020, the Company held contracts in the amount of $52.1 million to trade U.S. dollars in exchange for Canadian dollars.

 

46

 

Cash Flow from Operating Activities

Net cash inflows from operating activities during the six months ended June 30, 2020 was $23.0 million, an increase of 44% when compared to the six months ended June 30, 2019.

Net income, after adjusting for non-cash charges, during the six months ended June 30, 2020 was $19.1 million, an increase of 15% when compared to the prior year. Net income included non-cash charges and recoveries of $19.1 million such as depreciation, amortization, stock-based compensation, deferred income taxes, excess tax benefits on stock-based compensation, other income, unrealized gains on currency forward contracts, and disposal of domain names. In addition, changes in our working capital provided $3.9 million.  Positive contributions of $12.2 million from movements in deferred revenue, accounts receivable, accounts payable, accrued liabilities, inventory, accreditation fees payable, customer deposits, and income taxes recoverable were offset by $8.3 million utilized in changes from prepaid domain name fees, and prepaid expenses and deposits.

 

Cash Flow from Financing Activities

 

Net cash outflows from financing activities during the six months ended June 30, 2020 totaled $3.6 million as compared to cash inflows of $34.8 million during the six months ended June 30, 2019. Total cash outflows of $3.6 million were driven by $3.3 million related to the stock repurchases, in addition to a $0.4 million outflow for the payment of tax obligations resulting from the net exercise of stock options and loan payable costs. These cash outflows were offset by minor cash inflows related to the proceeds received on exercise of stock options.

 

Cash Flow from Investing Activities

 

Investing activities during the six months ended June 30, 2020 used net cash of $30.9 million as compared to using $51.4 million during the six months ended June 30, 2019. Cash outflows of $8.8 million related to the acquisition of Cedar, in addition to $22.1 million invested in property and equipment, primarily to support the continued expansion of our fiber footprint. The Company continues to invest in our existing Ting Towns of Centennial, CO, Charlottesville, VA, Fuquay-Varina, NC, Holly Springs, NC, and Sandpoint, ID as well ramping construction in Roaring Fork, CO, Rolesville, NC, and Wake Forest, NC, as we seek to extend both our current network and expand to new towns. We expect our capital expenditures on building and expanding our fiber network to continue to increase during Fiscal 2020. 

 

Based on our operations, we believe that our cash flow from operations will be adequate to meet our anticipated requirements for working capital, capital expenditures and our loan repayments for at least the next 12 months.

 

We may need additional funds or seek other financing arrangements to facilitate more rapid expansion, develop new or enhance existing products or services, respond to competitive pressures or acquire or invest in complementary businesses, technologies, services or products. We may also evaluate potential acquisitions of other businesses, products and technologies. We currently have no commitments or agreements regarding the acquisition of other businesses. If additional financing is required, we may need additional equity or debt financing and any additional financing may be dilutive to existing investors. We may not be able to raise funds on acceptable terms, or at all.

 

Off Balance Sheet Arrangements

 

As of June 30, 2020 we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

 

Contractual Obligations

 

In our Annual Report on Form 10-K for the year ended December 31, 2019, we disclosed our contractual obligations. As of June 30, 2020, other than the items mentioned above, there have been no other material changes to those contractual obligations outside the ordinary course of business.

 

47

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We develop products in Canada and sell these services in North America and Europe. Our sales are primarily made in U.S. dollars, while a major portion of expenses are incurred in Canadian dollars. Our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Our interest income is sensitive to changes in the general level of Canadian and U.S. interest rates, particularly since the majority of our investments are in short-term instruments. Based on the nature of our short-term investments, we have concluded that there is no material interest rate risk exposure as of June 30, 2020. We are also subject to market risk exposure related to changes in interest rates under our Amended 2019 Credit Facility. 

 

In an effort to mitigate a portion of our market risk exposure the Company has entered into a pay-fixed, receive-variable interest rate swap with a Canadian chartered bank to limit the potential interest rate fluctuations incurred on its future cash flows related to variable interest payments on the Amended 2019 Credit facility. The notional value of the swap was $70 million. 

 

We do not expect that any changes in interest rates will be material; however, fluctuations in interest rates are beyond our control. We will continue to monitor and assess the risks associated with interest expense exposure and may take additional actions in the future to mitigate these risks.

 

Although our functional currency is the U.S. dollar, a substantial portion of our fixed expenses are incurred in Canadian dollars. Our policy with respect to foreign currency exposure is to manage financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some of the impact of foreign currency exchange movements. Exchange rates are, however, subject to significant and rapid fluctuations, and therefore we cannot predict the prospective impact of exchange rate fluctuations on our business, results of operations and financial condition. Accordingly, we have entered into foreign exchange forward contracts to mitigate the exchange rate risk on portions of our Canadian dollar exposure.
 

As of June 30, 2020, we had the following outstanding foreign exchange forward contracts to trade U.S. dollars in exchange for Canada dollars:

 

Maturity date (Dollar amounts in thousands of U.S. dollars)

 

Notional amount of U.S. dollars

   

Weighted average exchange rate of U.S. dollars

   

Fair value

 
                         
July - September 2020     10,656       1.3227       (273 )

October - December 2020

    9,658       1.3227       (247 )

January - March 2021

    11,124       1.4283       574  

April - June 2021

    9,878       1.4283       507  

July - September 2021

    10,782       1.4362       611  
    $ 52,098       1.3888     $ 1,172  

 

As of June 30, 2020, the Company had $52.1 million of outstanding foreign exchange forward contracts which will convert to $72.4 million Canadian dollars. Of these contracts, $44.2 million met the requirements for hedge accounting. As of December 31, 2019, the Company held contracts in the amount of $30.5 million to trade U.S. dollars in exchange for $40.5 million Canadian dollars. Of these contracts, $26.1 million met the requirements for hedge accounting.

 

We have performed a sensitivity analysis model for foreign exchange exposure over the three months ended June 30, 2020. The analysis used a modeling technique that compares the U.S. dollar equivalent of all expenses incurred in Canadian dollars, at the actual exchange rate, to a hypothetical 10% adverse movement in the foreign currency exchange rates against the U.S. dollar, with all other variables held constant. Foreign currency exchange rates used were based on the market rates in effect during the three months ended June 30, 2020. The sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would result in a decrease in net income for the three months ended June 30, 2020 of approximately $1.0 million, before the effects of hedging. Fluctuations of exchange rates are beyond our control. We will continue to monitor and assess the risk associated with these exposures and may take additional actions in the future to hedge or mitigate these risks.

 

Credit Risk

 

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents, marketable securities, foreign exchange contracts and accounts receivable. Our cash, cash equivalents and short-term investments are in high-quality securities placed with major banks and financial institutions whom we have evaluated as highly creditworthy and commercial paper. Similarly, we enter into our foreign exchange contracts with major banks and financial institutions. With respect to accounts receivable, we perform ongoing evaluations of our customers, generally granting uncollateralized credit terms to our customers, and maintaining an allowance for doubtful accounts based on historical experience and our expectation of future losses.

 

Interest rate risk

 

Our exposure to interest rate fluctuations relate primarily to our Amended 2019 Credit Facility.

 

As of June 30, 2020, we had an outstanding balance of $114.4 million on the Amended 2019 Credit Facility.  The Amended 2019 Credit Facility bears a base interest rate based on borrowing elections by the Company and the Company’s total Funded Debt to EBITDA plus LIBOR. In addition, as discussed above, the Company entered into a pay-fixed, receive-variable interest rate swap to limit the potential interest rate fluctuations incurred on its future cash flows related to variable interest payments on the Amended 2019 Credit facility. As of June 30, 2020, the notional amount of the Company's interest rate swap designated as a cash flow hedge was $70 million. As of June 30, 2020, an adverse change of one percent on the interest rate would have the effect of increasing our annual interest payment on Amended 2019 Credit Facility by approximately $0.4 million, assuming that the loan balance as of June 30, 2020 is outstanding for the entire period.

 

48

 

Item 4. Controls and Procedures

 

(a)    Evaluation of Disclosure Controls and Procedures

 

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this report, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this quarterly report, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2020 our disclosure controls and procedures were effective at the reasonable assurance level. Management’s assessment of disclosure controls and procedures excluded consideration of Cedar’s internal control over financial reporting. Cedar was acquired during the first quarter of 2020, and the exclusion is consistent with guidance provided by the SEC staff that an assessment of a recently acquired business may be omitted from management’s report on internal control over financial reporting for up to one year from the date of acquisition, subject to specified conditions. Cedar’s total assets were approximately $17.1 million as June 30, 2020; its revenues during the three and six months ended June 30, 2020 were approximately $1.2 million and $2.4 million, respectively.

 

(b)    Changes in Internal Control over Financial Reporting

 

There were no changes made in our internal controls over financial reporting during the three months ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As a result of our acquisition of Cedar, we are in the process of evaluating Cedar’s internal controls to determine the extent to which modifications to Cedar’s internal controls would be appropriate.

 

49

 

PART II.

OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are involved in various investigations, claims and lawsuits arising in the normal conduct of our business, none of which, individually or in the aggregate, in our opinion, will materially harm our business. We cannot assure that we will prevail in any litigation. Regardless of the outcome, any litigation may require us to incur significant litigation expense and may result in significant diversion of our attention.

 

Item 1A. Risk Factors

 

The following risk factors are provided to update the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. The risks described in this Quarterly Report and in our Annual Report on Form 10-K and other Quarterly Reports are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition or operating results.

 

Health epidemics, including the recent COVID-19 pandemic, have had, and could in the future have, an adverse impact on our business, operations and financial results, and the markets and communities in which we and our employees, Mobile Network Operators (“MNOs”), vendors and customers operate.

 

Our business, operations and financial results could be adversely affected by health epidemics, including the recent COVID-19 pandemic, impacting the markets and communities in which we and our employees, MNOs, vendors and customers operate. In December 2019, a disease referred to as COVID-19 was reported and has since spread to many countries worldwide, including the United States and Canada.

 

The ongoing global COVID-19 pandemic has adversely impacted, and may continue to adversely impact, many aspects of our business. With respect to our Network Access business segment, Roam Mobility, our niche prepaid Mobile Services brand that relies on global travel as a key factor in its success, has accounted for the majority of the negative financial impact caused by COVID-19. Ting Mobile, our primary post-paid Mobile Services brand, has experienced a drop in customer data usage and an increased churn rate of low-margin business accounts. We do not know when Ting Mobile customer data usage and business account churn rates will return to pre-pandemic levels, if ever, and continued declines and increases, respectively, could harm our Network Access business. Also within our Network Access business segment, although we have implemented certain smart, reduced-risk installs for our Ting Fiber customers, we do not expect new customer installations to return to pre-pandemic levels in the near term. A continued decline in new customer growth and installations could harm our Network Access business.

 

In response to the COVID-19 pandemic, many state, local, and foreign governments have put in place, and others in the future may put in place, quarantines, executive orders, shelter-in-place orders, and similar government orders and restrictions in order to control the spread of the disease. Such orders or restrictions, or the perception that such orders or restrictions could occur, have resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions, and cancellation or postponement of events, among other effects, that could negatively impact productivity and disrupt our operations and those of our MNOs, vendors and customers. We continue to implement a work-from-home policy for substantially all of our employees, and we may take further actions that alter our operations as may be required by federal, state, or local authorities, or which we determine are in our best interests. While most of our operations can be performed remotely, there is no guarantee that we will be as effective while working remotely because our team is dispersed, many employees may have additional personal needs to attend to (such as looking after children as a result of school closures or family who become sick), and employees may become sick themselves and be unable to work. Decreased effectiveness of our team could adversely affect our results due to our inability to meet in person with vendors and service providers, longer time periods to provide services related to domain registrations, longer time to respond to Network Access customer service issues, extended timelines for Network Access customer installations and repairs, or other decreases in productivity that could harm our business.

 

The global impact of COVID-19 continues to rapidly evolve, and we will continue to monitor the situation closely. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, operations, financial results or the global economy as a whole. While the spread of COVID-19 may eventually be contained or mitigated, there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or that the global economy will recover, either of which could seriously harm our business.

 

Risk associated with contingent consideration in the Asset Purchase Agreement with Dish Wireless LLC

 

On August 1, 2020, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Dish Wireless LLC (“DISH”), whereby it sold certain assets of Ting Inc. its wholly owned subsidiary, primarily its customer relationships and inventory. In addition, the Company will be entitled to a 10-year payment stream that is a function of the revenue generated by the transferred subscribers over the 10-year period.   Subscribers are able to accept offers, plans or pricing from DISH.   This consideration structure may not prove to be successful or profitable in the long-term to us if the existing subscriber base churns at an above average rate upon acquisition by DISH. Additionally, given DISH controls the revenues and costs incurred associated with the acquired subscribers, there could arise a situation where profitability for the subscriber base is diminished either by lower price points or cost inflation. If any of these events occur, our operational performance and financial results may be adversely affected.

 

Risk associated with sharing the Ting brand with Dish Wireless LLC

 

Included in the Purchase Agreement, the Company grants the purchaser the right to use the name "Ting" and its associated domain name. DISH will use the Ting brand to provision Ting Mobile services, provided by DISH. Contemporaneously, the Company will continue to use the Ting brand with Ting Fiber, the Company's existing Fiber Internet service. This could cause a misassociation in the minds of consumers and the market who could associate either Company as the single service provider of both services. Additionally, any actions taken by DISH as part of the transactions contemplated by the Purchase Agreement may impact the Ting brand and by extension - the Ting brand's reputation. These actions could range from poor service quality, bad customer experience, privacy concerns, data breaches, and other events that could negatively impact the Ting brand permanently. The Ting brand could then carry negative connotation with consumers and impact our ability to continue to grow our Fiber Internet business under the Ting brand. If any of these events occur, our operational performance and financial results, in particular those of our Fiber Internet business may be adversely affected.

 

Risk that we are unable to meet our minimum commitments with MNO partners for remaining contracts not assigned to DISH 

 

As part of the transactions contemplated by the Purchase agreement, we will reassign MNO partner contracts currently used to facilitate the Ting Mobile MVNO business (other than a contract associated with one network operator). The Company will retain customer accounts associated with the excluded MNO provider, and the minimum revenue commitments under the excluded MNO contract. The Company will be able to continue adding customers under the excluded MNO contract working with DISH in order to meet the commitment. However, with no direct relationship with the subscriber, the Company may be unable to meet the minimum commitments with this MNO partner and could incur significant and recurring penalties until such a time that the contract is complete. These penalties would negatively impact our operational performance and financial results if enforced by the MNO.

 

50

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

(Dollar amounts in thousands of U.S. dollars, except per share amounts)

 

 

Period

 

Total Number of Shares Repurchased

   

Average Price Paid per share

   

Total Number of Shares repurchased as part of a publicly announced program(1)

   

Approximate Dollar value of shares that may yet be purchased under the program

 
April 1-30, 2020     3,500     $ 46.87       70,238     $ 36,719  
May 1-31, 2020     -     $ -       -     $ 36,719  
June 1-30, 2020     -     $ -       -     $ 36,719  

 

(1) On February 12, 2020, the Company announced that its Board has approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases are to be made exclusively through the facilities of the NASDAQ Capital Market. The $40 million buyback program commenced on February 12, 2020 and is expected to terminate on February 12, 2021. During the three months ended June 30, 2020, the Company repurchased and cancelled 3,500 shares under the terms of this program for a total of $0.2 million. During the six months ended June 30, 2020, the Company repurchased and cancelled 70,238 shares under the terms of this program for a total of $3.3 million.

 

Item 3.  Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

51

 

Item 6. Exhibits

 

 

No.

  

Description

     

3.1.1

  

Fourth Amended and Restated Articles of Incorporation of Tucows Inc. (Incorporated by reference to Exhibit 3.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on November 29, 2007).

3.1.2

  

Articles of Amendment to Fourth Amended and Restated Articles of Incorporation of Tucows Inc. (Incorporated by reference to Exhibit 3.1 filed with Tucows’ Current Report on Form 8-K, as filed with the SEC on January 3, 2014).

3.2

  

Second Amended and Restated Bylaws of Tucows Inc. (Incorporated by reference to Exhibit 3.2 filed with Tucows’ Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC on March 29, 2007).

3.3

  

Amendment No. 1 to Second Amended and Restated Bylaws of Tucows Inc. (Incorporated by Reference to Exhibit 3.3 filed with Tucows’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2012).

31.1

  

Chief Executive Officer's Rule 13a-14(a)/15d-14(a) Certification *

31.2

  

Chief Financial Officer's Rule 13a-14(a)/15d-14(a) Certification *

32.1

  

Chief Executive Officer's Section 1350 Certification †

32.2

  

Chief Financial Officer's Section 1350 Certification †

101.INS

  

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH

  

Inline XBRL Taxonomy Extension Schema Document

101.CAL

  

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

  

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

  

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

  

Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

*

Management or compensatory contract.

#

Filed herewith.

Furnished herewith.

 

52

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: August 6, 2020

TUCOWS INC.

  

  

  

By:

/s/ ELLIOT NOSS

  

  

Elliot Noss

  

  

President and Chief Executive Officer

  

  

  

  

By:

/s/ DAVINDER SINGH

  

  

Davinder Singh

Chief Financial Officer

  

  

(Principal Financial and Accounting Officer)

 

53

 

ex_160902.htm

Exhibit 31.1

 

Rule 13a-14(a)/15d-14(a) Certification

 

I, Elliot Noss, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Tucows Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

 

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date August 6,

2020

/s/ Elliot Noss

 

Elliot Noss

 

President and Chief Executive Officer

 

 
ex_160903.htm

 Exhibit 31.2

 

Rule 13a-14(a)/15d-14(a) Certification

 

I, Davinder Singh, certify that: 

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Tucows Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

 

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

     

Date August 6,

2020

/s/ Davinder Singh

 

Davinder Singh

 

Chief Financial Officer

 

 

 
ex_160904.htm

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

 

In connection with the Quarterly Report of Tucows Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elliot Noss, President and Chief Executive Officer of the Company, hereby certify, to my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

Date: August 6, 2020

  

/s/ Elliot Noss

  

  

  

Elliot Noss

  

  

  

President and Chief Executive Officer

 

 

 

 

 

 
ex_160905.htm

Exhibit 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

 

In connection with the Quarterly Report of Tucows Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Davinder Singh, Chief Financial Officer of the Company, hereby certify, to my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

(3)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

 

(4)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

Date: August 6, 2020

  

/s/ Davinder Singh

  

  

  

Davinder Singh

  

  

  

Chief Financial Officer

  

 

 
v3.20.2
Document And Entity Information - shares
6 Months Ended
Jun. 30, 2020
Aug. 04, 2020
Document Information [Line Items]    
Entity Central Index Key 0000909494  
Entity Registrant Name TUCOWS INC /PA/  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2020  
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
Document Transition Report false  
Entity File Number 1-32600  
Entity Incorporation, State or Country Code PA  
Entity Tax Identification Number 23-2707366  
Entity Address, Address Line One 96 Mowat Avenue  
Entity Address, City or Town Toronto  
Entity Address, State or Province ON  
Entity Address, Postal Zip Code M6K 3M1  
City Area Code 416  
Local Phone Number 535-0123  
Title of 12(b) Security Common Stock  
Trading Symbol TCX  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   10,567,610
v3.20.2
Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 8,859 $ 20,393
Accounts receivable, net of allowance for doubtful accounts of $214 as of June 30, 2020 and $131 as of December 31, 2019 7,506 14,564
Inventory 965 3,457
Prepaid expenses and deposits 16,549 13,478
Derivative instrument asset, current portion (note 5) 1,080 731
Prepaid domain name registry and ancillary services fees, current portion (note 12) 96,322 91,252
Assets held-for-sale (note 9) 9,027 0
Income taxes recoverable 1,326 1,800
Total current assets 141,634 145,675
Prepaid domain name registry and ancillary services fees, long-term portion (note 12) 17,902 17,915
Derivative instrument asset, long-term portion (note 5) 611 0
Deferred tax asset 340 0
Property and equipment 101,292 82,121
Right of use operating lease asset 11,066 11,335
Contract costs 344 1,400
Intangible assets (note 6) 52,732 57,654
Goodwill (note 6) 116,270 109,818
Total assets 442,191 425,918
Current liabilities:    
Accounts payable 6,511 6,671
Accrued liabilities 9,915 9,373
Customer deposits 14,468 14,074
Derivative instrument liability, current portion (note 5) 561 0
Liabilities held-for-sale (note 9) 751 0
Operating lease liability, current portion (note 13) 1,506 1,413
Deferred revenue, current portion (note 11) 129,072 123,101
Accreditation fees payable, current portion 1,018 952
Income taxes payable 1,291 1,324
Total current liabilities 165,093 156,908
Derivative instrument liability, long-term portion (note 5) 158 0
Deferred revenue, long-term portion (note 11) 26,228 26,202
Accreditation fees payable, long-term portion 204 216
Operating lease liability, long-term portion (note 13) 9,169 9,424
Loan payable, long-term portion (note 7) 113,608 113,503
Other long-term liability (note 4 (b)) 3,244 0
Deferred tax liability 27,113 25,471
Stockholders' equity (note 15)    
Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding 0 0
Common stock - no par value, 250,000,000 shares authorized; 10,570,360 shares issued and outstanding as of June 30, 2020 and 10,585,159 shares issued and outstanding as of December 31, 2019 18,865 16,633
Additional paid-in capital 591 880
Retained earnings 77,322 76,208
Accumulated other comprehensive income (loss) (note 5) 596 473
Total stockholders' equity 97,374 94,194
Total liabilities and stockholders' equity 442,191 425,918
Contingencies (note 18)
v3.20.2
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)
$ / shares in Thousands, $ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Accounts receivable, allowance for doubtful accounts $ 214 $ 131
Preferred stock, no par value (in dollars per share) $ 0 $ 0
Preferred stock, shares authorized (in shares) 1,250,000 1,250,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Common stock, no par value (in dollars per share) $ 0 $ 0
Common stock, shares authorized (in shares) 250,000,000 250,000,000
Common stock, shares issued (in shares) 10,570,360 10,585,159
Common stock, shares outstanding (in shares) 10,570,360 10,585,159
v3.20.2
Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Net revenues (note 11) $ 82,122 $ 84,117 $ 166,107 $ 163,070
Cost of revenues (note 11)        
Cost of revenues 51,790 54,873 104,978 106,805
Network expenses 2,485 2,385 4,901 4,780
Depreciation of property and equipment 3,030 2,038 5,907 3,839
Amortization of intangible assets (note 6) 326 314 680 488
Impairment of Property Plant and Equipment 1,525 0 1,525 0
Total cost of revenues 59,156 59,610 117,991 115,912
Gross profit 22,966 24,507 48,116 47,158
Expenses:        
Sales and marketing 9,218 8,856 18,203 17,597
Technical operations and development 3,067 2,752 5,818 5,275
General and administrative 5,465 4,796 10,206 9,244
Depreciation of property and equipment 125 134 238 258
Amortization of intangible assets (note 6) 2,504 2,251 5,451 4,117
Impairment of definite life intangible assets 1,431 0 1,431 0
Loss (gain) on currency forward contracts (note 5) (381) (31) 60 (110)
Total expenses 21,429 18,758 41,407 36,381
Income from operations 1,537 5,749 6,709 10,777
Other income (expenses):        
Interest expense, net (846) (1,314) (1,996) (2,286)
Other expense, net (85) 0 (172) 0
Total other income (expenses) (931) (1,314) (2,168) (2,286)
Income before provision for income taxes 606 4,435 4,541 8,491
Provision for income taxes (note 8) 449 1,819 1,550 3,076
Net income for the period 157 2,616 2,991 5,415
Other comprehensive income, net of tax        
Unrealized income (loss) on hedging activities (note 5) 1,114 240 (120) 789
Net amount reclassified to earnings (note 5) 200 80 243 141
Other comprehensive income net of tax expense of $398 and $103 for the three months ended June 30, 2020 and June 30, 2019, $32 and $298 for the six months ended June 30, 2020 and June 30, 2019 (note 5) 1,314 320 123 930
Comprehensive income, net of tax for the period $ 1,471 $ 2,936 $ 3,114 $ 6,345
Basic earnings per common share (note 10) (in dollars per share) $ 0.01 $ 0.25 $ 0.28 $ 0.51
Shares used in computing basic earnings per common share (note 10) (in shares) 10,567,382 10,657,124 10,589,806 10,646,045
Diluted earnings per common share (note 10) (in dollars per share) $ 0.01 $ 0.24 $ 0.28 $ 0.50
Shares used in computing diluted earnings per common share (note 10) (in shares) 10,653,527 10,840,005 10,684,304 10,837,456
v3.20.2
Consolidated Statements of Operations and Comprehensive Income (Unaudited) (Parentheticals) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Other comprehensive income (loss), tax $ 398 $ 103 $ 32 $ 298
v3.20.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 18 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Operating activities:          
Net income for the period $ 157 $ 2,616 $ 2,991 $ 5,415 $ 2,991
Items not involving cash:          
Depreciation of property and equipment 3,155 2,172 6,145 4,097  
Impairment of property and equipment 1,525 0 1,525 22  
Amortization of debt discount and issuance costs 67 90 134 168  
Amortization of intangible assets 2,830 2,565 6,131 4,605  
Net amortization contract costs 95 34 124 53  
Impairment of Intangible Assets, Finite-lived 1,431 0 1,431 0  
Accretion of contingent consideration 85 0 172 0  
Other 223 0 223 0  
Deferred income taxes (recovery) (917) 1,449 (1,107) 1,911  
Excess tax benefits on share-based compensation expense (164) (381) (344) (737)  
Net Right of use operating assets/Operating lease liability 291 79 112 49  
Loss on disposal of domain names 2 2 15 6  
Loss (gain) on change in the fair value of forward contracts (436) (70) (88) (188)  
Stock-based compensation 847 685 1,648 1,210  
Change in non-cash operating working capital:          
Accounts receivable 401 1,031 2,552 (157)  
Inventory 900 108 1,804 516  
Prepaid expenses and deposits (3,247) (2,524) (3,222) (2,914)  
Prepaid domain name registry and ancillary services fees (2,204) 1,651 (5,057) (65)  
Income taxes recoverable 294 (1,639) 794 (2,875)  
Accounts payable (1,521) (1,170) 250 (384)  
Accrued liabilities 2,165 2,266 334 3,587  
Customer deposits 336 (808) 394 (521)  
Deferred revenue 2,655 (1,131) 5,997 2,138  
Accreditation fees payable (31) (46) 54 34  
Net cash provided by operating activities 8,939 6,979 23,012 15,970  
Financing activities:          
Proceeds received on exercise of stock options 29 122 46 194  
Payment of tax obligations resulting from net exercise of stock options (165) (185) (347) (524)  
Repurchase of common stock (164) 0 (3,281) 0  
Proceeds received on loan payable 0 7,431 0 40,371  
Repayment of loan payable 0 (3) 0 (4,603)  
Payment of loan payable costs (7) (434) (32) (641)  
Net cash (used in) provided by financing activities (307) 6,931 (3,614) 34,797  
Investing activities:          
Additions to property and equipment (12,150) (10,414) (22,093) (20,849)  
Acquisition of other assets 0 (2,501) 0 (2,501)  
Acquisition of intangible assets (69) (27) (69) (27)  
Net cash used in investing activities (12,219) (12,942) (30,932) (51,401)  
Increase (decrease) in cash and cash equivalents (3,587) 968 (11,534) (634)  
Cash and cash equivalents, beginning of period 12,446 11,035 20,393 12,637 12,637
Cash and cash equivalents, end of period 8,859 12,003 8,859 12,003 $ 8,859
Supplemental cash flow information:          
Interest paid 686 1,318 1,840 2,294  
Income taxes paid, net 1,243 2,046 2,200 4,164  
Supplementary disclosure of non-cash investing and financing activities:          
Property and equipment acquired during the period not yet paid for 635 674 635 674  
Fair value of shares issued for acquisition of Cedar Holdings Group 0 0 2,000 0  
Fair value of contingent consideration for acquisition of Cedar Holdings Group 7 0 3,072 0  
Cedar Holdings Group, Incorporated [Member]          
Investing activities:          
Acquisition of Cedar Holdings Group, net of cash of $66 (note 4(b)) 0 0 (8,770) 0  
Ascio Technologies, Inc. [Member]          
Investing activities:          
Acquisition of Cedar Holdings Group, net of cash of $66 (note 4(b)) $ 0 $ 0 $ 0 $ (28,024)  
v3.20.2
Note 1 - Organization of the Company
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Organization of the Company:

 

Tucows Inc. (referred to throughout this report as the “Company”, “Tucows”, “we”, “us” or through similar expressions) provides simple useful services that help people unlock the power of the Internet. The Company provides US consumers and small businesses with mobile phone services nationally and high-speed fixed Internet access in selected towns. The Company is also a global distributor of Internet services, including domain name registration, digital certificates, and email. It provides these services primarily through a global Internet-based distribution network of Internet Service Providers, web hosting companies and other providers of Internet services to end-users.

 

v3.20.2
Note 2 - Basis of Presentation
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Basis of Accounting [Text Block]

2. Basis of Presentation:

 

The accompanying unaudited interim consolidated balance sheets, and the related consolidated statements of operations and comprehensive income and cash flows reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the financial position of Tucows and its subsidiaries as at June 30, 2020 and the results of operations and cash flows for the interim periods ended June 30, 2020 and 2019. The results of operations presented in this Quarterly Report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for future periods.

 

The accompanying unaudited interim consolidated financial statements have been prepared by Tucows in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the Company's annual audited consolidated financial statements and accompanying notes have been condensed or omitted. Other than the exception noted below, these interim consolidated financial statements and accompanying notes follow the same accounting policies and methods of application used in the annual financial statements and should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in Tucows' 2019 Annual Report on Form 10-K filed with the SEC on March 4, 2020 (the “2019 Annual Report”). There have been no material changes to our significant accounting policies and estimates during the three and six months ended June 30, 2020 as compared to the significant accounting policies and estimates described in our 2019 Annual Report, except as described in Note 3 – Recent Accounting Pronouncements, and Note 9 - Assets Held-for-sale.

 

v3.20.2
Note 3 - Recent Accounting Pronouncements
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Accounting Standards Update and Change in Accounting Principle [Text Block]

3. Recent Accounting Pronouncements:

 

Recent Accounting Pronouncements Adopted
 

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU 2018-15”). ASU 2018-15 helps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance on accounting for implementation costs when the cloud computing arrangement does not include a license and is accounted for as a service contract. The amendments in ASU 2018-15 require an entity (customer) in a hosting arrangement to assess which implementation costs to capitalize vs expense as it relates to a service contract.  The amendments also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-15 in the first quarter of 2020 to all implementation costs incurred after the date of adoption. The new guidance did not have a material impact on our consolidated financial statements.

 

 

Recent Accounting Pronouncements Not Yet Adopted
 

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional guidance for a limited period of time to ease the potential burden of reference rate reform on financial reporting.  The amendments in ASU 2020-04 apply to contract modifications that replace a reference rate affected by reference rate reform and contemporaneous modifications of other contract terms related to the replacement of the reference rate. The following optional expedients for applying the requirements of certain Topics or Industry Subtopics in the Codification are permitted for contracts that are modified because of reference rate reform and that meet certain scope guidance:

 

 

1.

Modifications of contracts within the scope of Topics 310, Receivables, and 470, Debt, should be accounted for by prospectively adjusting the effective interest rate.
 2.Modifications of contracts within the scope of Topic 842, Leases, should be accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required under those Topics for modifications not accounted for as separate contracts.
 3.

Modifications of contracts do not require an entity to reassess its original conclusion about whether that contract contains an embedded derivative that is clearly and closely related to the economic characteristics and risks of the host contract under Subtopic 815-15, Derivatives and Hedging— Embedded Derivatives

 

The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently charged interest and standby fees associated with its Amended 2019 Credit Facility (as defined below) based on LIBOR, which will need to be amended when an alternative reference rate is chosen, at which time we may adopt some of the practical expedients provided by ASU 2020-04.

 

v3.20.2
Note 4 - Acquisitions
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Business Combination Disclosure [Text Block]

4. Acquisitions:

 

 

(a)

Ascio

 

On March 18, 2019, the Company entered into an Asset Purchase Agreement to purchase all of the equity of Ascio Technologies, Inc. (“Ascio”), a domain registrar business, and all of CSC’s assets related to that business. For more information, see Note 3 - Acquisitions of the 2019 Annual Report. 
 
 

(b)

Cedar

 

In the fourth quarter of 2019, the Company entered into a Stock Purchase Agreement to purchase all of the issued and outstanding shares of Cedar Holdings Group, Incorporated (“Cedar”), a fiber Internet provider business based in Durango, Colorado.  The transaction closed on January 1, 2020, following receipt of all regulatory approvals.  The purchase price was $14.1 million, less an estimated purchase price adjustment of approximately $0.2 million relating to a working capital deficit and assessment of the fair value of contingent consideration, for net purchase consideration of $13.9 million. In addition to $9.0 million cash consideration due at closing, the Company also issued 32,374 ($2.0 million) of Tucows Inc. shares with a two-year restriction period at closing.  Included in the agreement is contingent consideration totaling up to $4.0 million, due on the 24th and 36th month anniversaries of the closing of the transaction dependent upon the achievement of certain milestones as defined in the Share Purchase Agreement. The fair value of the contingent consideration was determined to be $3.1 million using a discount rate of 11.2%. The Company has prepared a preliminary purchase price allocation of the assets acquired and the liabilities assumed of Cedar based on management’s best estimates of fair value.  The final purchase price allocation may vary based on final appraisals, valuations and analyses of the fair value of the acquired assets and assumed liabilities. 

 

The amortization period for the customer relationships and network rights are 7 and 15 years, respectively.

 

The following table shows the preliminary allocation of the purchase price for Cedar to the acquired identifiable assets and liabilities assumed ( thousands of U.S. dollars):

 

Cash Consideration, including working capital adjustment

 $8,836 

Share-based payment

  2,000 

Fair value of contingent payments

  3,072 

Total estimated purchase price

  13,908 
     

Cash and Cash Equivalents

  66 

Accounts Receivables, net

  47 

Other current assets

  22 

Property and equipment

  4,661 

Right of use operating lease

  18 

Intangible assets, consisting of customer relationships and network rights

  5,390 

Total identifiable assets

  10,204 

Accounts payable and accrued liabilities

  (362)

Deferred tax liability

  (2,373)

Operating lease liability

  (13)

Total liabilities assumed

  (2,748)

Total net assets (liabilities) assumed

  7,456 

Total goodwill

 $6,452 

 

The goodwill related to this acquisition is primarily attributable to synergies expected to arise from the acquisition and is not deductible for tax purposes.

In connection with this acquisition, the Company incurred total acquisition related costs of $0.1 million, of which nil were included in General & Administrative expenses in the consolidated statements of Operations and comprehensive Income for the three and six months ended  June 30, 2020.

The following table presents selected unaudited pro forma information for the Company assuming the acquisition of Cedar had occurred as of January 1, 2019. This pro forma information does not purport to represent what the Company’s actual results would have been if the acquisition had occurred as of the date indicated or what results would be for any future periods.

 

  

Unaudited

  

Unaudited

 
  

For the Three Months Ended June 30,

  

For the Six Months Ended June 30,

 
  

2019

  

2019

 
         

Net revenues

 $85,345  $165,526 

Net income

  2,740   5,440 
         

Basic earnings per common share

  0.26   0.51 

Diluted earnings per common share

 $0.25  $0.50 

 

The amount of revenue recognized since the acquisition date included in the consolidated statements of operations and comprehensive income statement for the three and six months ended June 30, 2020 is $1.2 million and $2.4 million, respectively.

 

The net income recognized since the acquisition date included in the consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2020 is a gain of $0.1 million and a loss of $0.2 million, respectively.

 

v3.20.2
Note 5 - Derivative Instruments and Hedging Activities
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
5. Derivative Instruments and Hedging Activities:
 
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign exchange rate risk and interest rate risk.
 
Since October 2012, the Company has employed a hedging program with a Canadian chartered bank to limit the potential foreign exchange fluctuations incurred on its future cash flows related to a portion of payroll, taxes, rent and payments to Canadian domain name registry suppliers that are denominated in Canadian dollars and are expected to be paid by its Canadian operating subsidiary. In May 2020, the Company entered into a pay-fixed, receive-variable interest rate swap with a Canadian chartered bank to limit the potential interest rate fluctuations incurred on its future cash flows related to variable interest payments on the Credit facility. The notional value of the interest rate swap was $70 million. 
 
As part of its risk management strategy, the Company also uses derivative instruments to hedge a portion of the foreign exchange risk and interest rate risk associated with these costs. The Company does not use these forward contracts for trading or speculative purposes. The foreign exchange contracts typically mature between one and eighteen months, and the interest rate swap matures in June 2023.

 

The Company has designated certain of these foreign exchange transactions as cash flow hedges of forecasted transactions under ASU 2017- 12, Derivatives and Hedging (Topic 815) (“ASC Topic  815”). For certain contracts, as the critical terms of the hedging instrument, and of the entire hedged forecasted transaction, are the same, in accordance with ASC Topic 815, the Company has been able to conclude that changes in fair value and cash flows attributable to the risk of being hedged are expected to completely offset at inception and on an ongoing basis. The Company has also designated the interest rate swap as a cash flow hedge of expected future interest payments. Accordingly, for the foreign exchange and interest rate swap contracts, unrealized gains or losses on the effective portion of these contracts have been included within other comprehensive income and reclassified to earnings when the hedged transaction is recognized in earnings. Cash flows from hedging activities are classified under the same category as the cash flows from the hedged items in the consolidated statements of cash flows. The fair value of the contracts, as of June 30, 2020 and December 31, 2019, is recorded as derivative instrument assets or liabilities. For certain contracts where the hedged transactions are no longer probable to occur, the loss on the associated forward contract is recognized in earnings.

 

As of June 30, 2020, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $52.1 million, of which $44.2 million met the requirements of ASC Topic 815 and were designated as hedges.

 

As of December 31,  2019, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars wa s $30.5 million, of which $26.1 million met the requirements of ASC Topic 815 and were designated as hedges.
 
As of June 30, 2020, we had the following outstanding forward contracts to trade U.S. dollars in exchange for Canadian dollars:
 
Maturity date (Dollar amounts in thousands of U.S. dollars) Notional amount of U.S. dollars  Weighted average exchange rate of U.S. dollars  Fair value 
             
July - September 2020  10,656   1.3227   (273)
October - December 2020  9,658   1.3227   (247)
January - March 2021  11,124   1.4283   574 
April - June 2021  9,878   1.4283   507 
July - September 2021  10,782   1.4362   611 
  $52,098   1.3888  $1,172 

 

As of June 30, 2020, the notional amount of the Company's interest rate swap designated as a cash flow hedge was $70 million. As of December 31, 2019 the Company had not entered into any interest rate swaps.

 

Fair value of derivative instruments and effect of derivative instruments on financial performance
 

The effect of these derivative instruments on our consolidated financial statements were as follows (amounts presented do not include any income tax effects).

 

Fair value of derivative instruments in the consolidated balance sheets 
 
Derivatives (Dollar amounts in thousands of U.S. dollars) Balance Sheet Location As of June 30, 2020 Fair Value Asset (Liability)  As of December 31, 2019 Fair Value Asset 
Foreign Currency forward contracts designated as cash flow hedges (net) Derivative instruments $982  $626 
Interest rate swap contract designated as a cash flow hedge (net) Derivative instruments  (200) $- 
Foreign Currency forward contracts not designated as cash flow hedges (net) Derivative instruments  190   105 
Total foreign currency forward contracts (net) Derivative instruments $972  $731 

 

Movement in accumulated other comprehensive income (AOCI) balance for the three months ended June 30, 2020  (Dollar amounts in thousands of U.S. dollars)
 
  

Gains and losses on cash flow hedges

  

Tax impact

  

Total AOCI

 

Opening AOCI balance - March 31, 2020

 $(932) $214  $(718)

Other comprehensive income (loss) before reclassifications

  1,453   (339)  1,114 

Amount reclassified from AOCI

  259   (59)  200 

Other comprehensive income (loss) for the three months ended June 30, 2020

  1,712   (398)  1,314 
             

Ending AOCI Balance - June 30, 2020

 $780  $(184) $596 

 

Movement in accumulated other comprehensive income (AOCI) balance for the six months ended June 30, 2020 (Dollar amounts in thousands of U.S. dollars)

 

  

Gains and losses on cash flow hedges

  

Tax impact

  

Total AOCI

 

Opening AOCI balance - December 31, 2019

 $625  $(152) $473 

Other comprehensive income (loss) before reclassifications

  (162)  42   (120)

Amount reclassified from AOCI

  317   (74)  243 

Other comprehensive income (loss) for the six months ended June 30, 2020

  155   (32)  123 
             

Ending AOCI Balance - June 30, 2020

 $780  $(184) $596 

 

Effects of derivative instruments on income and other comprehensive income (OCI) for the three months ended June 30, 2020 are as follows (Dollar amounts in thousands of U.S. dollars) 
 
Derivatives in Cash Flow Hedging Relationship Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative Location of Gain or (Loss) Reclassified from AOCI into Income Amount of Gain or (Loss) Reclassified from AOCI into Income 
    Operating expenses $(201)
Foreign currency forward contracts for the three months ended June 30, 2020 $1,314 Cost of revenues $(58)
          
Interest rate swap contract for the three months ended June 30, 2020 $- Interest expense, net $- 
          
    Operating expenses $(91)
Foreign currency forward contracts for the three months ended June 30, 2019 $320 Cost of revenues $(15)
          
Interest rate swap contract for the three months ended June 30, 2019 $- Interest expense, net $- 

 

Effects of derivative instruments on income and other comprehensive income (OCI) for the six months ended June 30, 2020 are as follows (Dollar amounts in thousands of U.S. dollars) 

 

Derivatives in Cash Flow Hedging Relationship

 

Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative

 

Location of Gain or (Loss) Reclassified from AOCI into Income

 

Amount of Gain or (Loss) Reclassified from AOCI into Income

 
    

Operating expenses

 $(246)

Foreign currency forward contracts for the six months ended June 30, 2020

 $123 

Cost of revenues

 $(71)
          
Interest rate swap contract for the six months ended June 30, 2020 $- Interest expense, net $- 
          
    

Operating expenses

 $(154)

Foreign currency forward contracts for the six months ended June 30, 2019

 $930 

Cost of revenues

 $(32)
          
Interest rate swap contract for the six months ended June 30, 2019 $- Interest expense, net $- 

 

In addition to the above, for those foreign currency forward contracts not designated as hedges, the Company recorded the following fair value adjustments on settled and outstanding contracts (Dollar amounts in thousands of U.S. dollars):

 

  

Three Months Ended June 30,

     

Six Months Ended June 30,

    

Forward currency contracts not designated as hedges:

 

2020

  

2019

  

2020

  

2019

 
                 

Gain (loss) on settlement

 $(55) $(39) $(148) $(78)
                 

Gain (loss) on change in fair value

 $436  $70  $88  $188 

 

 

v3.20.2
Note 6 - Goodwill and Other Intangible Assets
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]
6. Goodwill and Other Intangible Assets
 
Goodwill
 
Goodwill represents the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed in our acquisitions.
 
The Company's Goodwill balance is $116.3 million as of June 30, 2020 and $109.8 million as of December 31, 2019. The Company's goodwill relates 93% ( $107.7 million) to its Domain Services operating segment and 7% ( $8.6 million) to its Network Access Services operating segment.
 
Goodwill is not amortized, but is subject to an annual impairment test, or more frequently if impairment indicators are present. No impairment was recognized during the three and six months ended June 30, 2020 and 2019.
 
Other Intangible Assets:
 
Intangible assets consist of acquired brand, technology, customer relationships, surname domain names, direct navigation domain names and network rights. The Company considers its intangible assets consisting of surname domain names and direct navigation domain names as indefinite life intangible assets. The Company has the exclusive right to these domain names as long as the annual renewal fees are paid to the applicable registry. Renewals occur routinely and at a nominal cost. The indefinite life intangible assets are not amortized but are subject to impairment assessments performed throughout the year. As part of the normal renewal evaluation process during the periods ended June 30, 2020 and June 30, 2019, the Company assessed that certain domain names that were originally acquired in the June 2006 acquisition of Mailbank.com Inc. that were up for renewal, should not be renewed.   
 
Intangible assets, comprising brand, technology, customer relationships and network rights are being amortized on a straight-line basis over periods of two to fifteen years.
 

In June 2020, in light of developments in the economy and the business and leisure travel industries as a result of the novel strain of coronavirus (“COVID-19”) pandemic, the Company decided to discontinue the operation of Roam Mobility. As a consequence of the decision to shut down its Roam Mobility operations, the Company has recorded an impairment loss associated with Roam Mobility customer relationships of $1.4 million, as at June 30, 2020. 

 
In June 2020, the Company committed to a plan to sell its Ting Mobile customer base and reclassified its mobile customer relationships totaling  $2.6 million as held-for-sale assets (Note 9). See Note 19 - Subsequent Events for more information on the Company’s sale of its Ting Mobile customer base.

 

Throughout the second quarter of 2020, the Company purchased several non-exclusive land easements, totaling $0.1 million, which are necessary for the Company to install fiber internet infrastructure in conjunction with its Fiber Internet business.   

 

Acquired intangible assets consist of the following (Dollar amounts in thousands of U.S. dollars):
 
  

Surname domain names

  

Direct navigation domain names

  

Brand

  

Customer relationships

  

Technology

  

Network rights

  

Total

 

Amortization period

 

indefinite life

  

indefinite life

  

7 years

  

3 - 7 years

  

2 - 7 years

  

15 years

     
                             

Balances, March 31, 2020

 $11,162  $1,135  $8,573  $36,469  $1,189  $1,387  $59,915 

Cedar Networks acquisition (Note 4 (b))

  -   -   -   10   -   (195)  (185)

Additions to/(disposals from) domain portfolio, net

  (2)  -   -   -   -   -   (2)
Impairment of definite life intangible asset  -   -   -   (1,431)  -   -   (1,431)
Other  -   -   -   (223)  -   -   (223)
Classified as assets held for-sale  -   -   -   (2,581)  -   -   (2,581)
Acquisition of Network rights                 69   69 

Amortization expense

  -   -   (517)  (1,987)  (305)  (21)  (2,830)

Balances, June 30, 2020

 $11,160  $1,135  $8,056  $30,257  $884  $1,240  $52,732 

 

  Surname domain names  Direct navigation domain names  Brand  Customer relationships  Technology  Network rights  Total 
Amortization period indefinite life  indefinite life  7 years  3 - 7 years  2 - 7 years  15 years     
                             
Balances, December 31, 2019 $11,166  $1,144  $9,091  $34,268  $1,516  $469  $57,654 
Cedar Networks acquisition (Note 4 (b))  -   -   -   4,640   -   750   5,390 
Additions to/(disposals from) domain portfolio, net  (6)  (9)  -   -   -   -   (15)
Impairment of definite life intangible asset  -   -   -   (1,431)  -   -   (1,431)
Other  -   -   -   (223)  -   -   (223)
Classifed as assets held for-sale  -   -   -   (2,581)  -   -   (2,581)
Acquisition of Network rights  -   -   -   -   -   69   69 
Amortization expense  -   -   (1,035)  (4,416)  (632)  (48)  (6,131)
Balances, June 30, 2020 $11,160  $1,135  $8,056  $30,257  $884  $1,240  $52,732 

 

The following table shows the estimated amortization expense for each of the next 5 years, assuming no further additions to acquired intangible assets are made (Dollar amounts in thousands of U.S. dollars):
 
  Year ending 
  December 31, 
Remainder of 2020 $5,202 
2021  11,783 
2022  10,839 
2023  8,811 
2024  2,399 
Thereafter  1,403 
Total $40,437 

 

 

v3.20.2
Note 7 - Loan Payable
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Debt Disclosure [Text Block]

7. Loan Payable:

 

Amended 2019 Credit Facility

 

On June 14, 2019, the Company and its wholly-owned subsidiaries, Tucows.com Co., Ting Fiber, Inc., Ting Inc., Tucows (Delaware) Inc. and Tucows (Emerald), LLC entered into an Amended and Restated Senior Secured Credit Agreement with Royal Bank of Canada (“RBC”), as administrative agent, and lenders party thereto (collectively with RBC, the “Lenders”) under which the Company has access to an aggregate of up to $240 million in funds, which consists of $180 million guaranteed credit facility and a $60 million accordion facility. The Amended 2019 Credit Facility replaced the Company’s 2017 Amended Credit Facility. On November 27, 2019, the Company entered into Amending Agreement No. 1 to the Amended and Restated Senior Secured Credit Agreement (collectively with the Amended and Restated Senior Secured Credit Agreement, the “Amended 2019 Credit Facility”) to amend certain defined terms in connection with the Cedar acquisition.

 

The Amended 2019 Credit Facility replaced a secured Credit Agreement dated January 20, 2017 with Bank of Montreal, RBC and Bank of Nova Scotia (as amended, the “2017 Amended Credit Facility”).

 

In connection with the Amended 2019 Credit Facility, the Company incurred $0.4 million of fees paid to lenders are debt issuance costs, which have been reflected as a reduction to the carrying amount of the loan payable and will be amortized over the term of the credit facility agreement and $0.1 million have been recorded in General and administrative expenses.

 

The obligations of the Company under the Amended 2019 Credit Agreement are secured by a first priority lien on substantially all of the personal property and assets of the Company and has a four-year term, maturing on June 13, 2023.
 
Credit Facility Terms
 
The Amended 2019 Credit Facility is revolving with interest only payments with no scheduled repayments during the term.

 

The Amended 2019 Credit Facility contains customary representations and warranties, affirmative and negative covenants, and events of default. The Amended 2019 Credit Facility requires that the Company to comply with the following financial covenants: (i) at all times, a Total Funded Debt to Adjusted EBITDA Ratio (as defined in the Amended 2019 Credit Agreement) of 3.50:1; and (ii) with respect to each fiscal quarter, an Interest Coverage Ratio (as defined in the Amended 2019 Credit Agreement) of not less than 3.00:1. Further, the Company’s maximum annual Capital Expenditures cannot exceed 110% of the forecasted capital expenditures of its annual business plan. In addition, share repurchases require the Lenders’ consent if the Company’s Total Funded Debt to Adjusted EBITDA ratio exceeds 2.00:1. During the three and six months ended  June 30, 2020, the Company was in compliance with these covenants. 

 

Borrowings under the Amended 2019 Credit Facility will accrue interest and standby fees based on the Company’s Total Funded Debt to Adjusted EBITDA ratio and the availment type as follows: 
 
  If Total Funded Debt to EBITDA is: 
Availment type or fee Less than 1.00  Greater than or equal to 1.00 and less than 2.00  Greater than or equal to 2.00 and less than 2.50  Greater than or equal to 2.50 
Canadian dollar borrowings based on Bankers’ Acceptance or U.S. dollar borrowings based on LIBOR (Margin)  1.50%  1.85%  2.35%  2.85%
Canadian or U.S. dollar borrowings based on Prime Rate or U.S. dollar borrowings based on Base Rate (Margin)  0.25%  0.60%  1.10%  1.60%
Standby fees  0.30%  0.37%  0.47%  0.57%
 

 

The following table summarizes the Company’s borrowings under the credit facilities (Dollar amounts in thousands of U.S. dollars): 
 
  

June 30, 2020

  

December 31, 2019

 
         

Revolver

 $114,400  $114,400 

Less: unamortized debt discount and issuance costs

  (792)  (897)

Total loan payable

  113,608   113,503 

Less: loan payable, current portion

  -   - 

Loan payable, long-term portion

 $113,608  $113,503 
 
The following table summarizes our scheduled principal repayments as of June 30, 2020 (Dollar amounts in thousands of U.S. dollars):
 

Remainder of 2020

 $- 

2021

  - 

2022

  - 

2023

  114,400 
  $114,400 
 
Other Credit Facilities
 

Prior to the Company entering into the Amended 2019 Credit Facility and the 2017 Amended Credit Facility, the Company had credit agreements (collectively the “Prior Credit Facilities”) with BMO, which provided the Company with access to a treasury risk management facility and a credit card facility. All remaining credit facilities under the 2017 Amended Credit Facility and the Prior Credit Facilities have been terminated.

 

v3.20.2
Note 8 - Income Taxes
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
8. Income Taxes:
 

For the three months ended June 30, 2020, we recorded an income tax expense of $0.4 million on income before income taxes of $0.6 million, using an estimated effective tax rate for the fiscal year ending December 31, 2020 (“Fiscal 2020”) adjusted for certain minimum state taxes as well as the inclusion of a $0.1 million tax recovery related to ASU No. 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Our effective tax rate for the three months ended June 30, 2020 is also adversely affected by discrete losses of $3.7 million related to the impairment of Ting TV and Roam Mobility assets, the tax benefit of which has only been partially recognized.  

 

Comparatively, for the three months ended June 30, 2019, the Company recorded an income tax expense of $1.8 million on income before taxes of $4.4 million, using an estimated effective tax rate for the 2019 fiscal year and adjusted for the $0.3 million tax recovery impact related to ASU 2016-09. 

 

For the six months ended June 30, 2020, we recorded an income tax expense of $1.6 million on net income before income taxes of $4.5 million, using an estimated effective tax rate for Fiscal 2020 adjusted for certain minimum state taxes, as well as the inclusion of a $0.2 million tax recovery related to ASU No. 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense. Our effective tax rate for the six months ended June 30, 2020 is also adversely affected by discrete losses of $3.7 million related to the impairment of Ting TV and Roam Mobility assets, the tax benefit of which has only been partially recognized.  

 

Comparatively, for the six months ended June 30, 2019, the Company recorded an income tax expense of $3.1 million on income before taxes of $8.5 million, using an estimated effective tax rate for the 2019 fiscal year and adjusted for the $0.7 million tax recovery impact related to ASU 2016-09. 

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management considers projected future taxable income, uncertainties related to the industry in which the Company operates, and tax planning strategies in making this assessment.

 

In connection with the eNom acquisition in 2017, we acquired deferred tax liabilities primarily composed of prepaid registry fees. As a result, we aligned our tax methodology pertaining to the deductibility of prepaid registry fees for our other subsidiaries. In the first quarter of 2019, we determined that we were in technical violation with respect to the administrative application of the accounting method change relating to the deductibility of prepaid registry fees for these additional subsidiaries. In February 2019, the Company filed an application for relief ("9100 Relief") to correct the issue. In November 2019, the Company was granted 9100 Relief and was given 30 days to file the appropriate forms based on prescribed instructions. The Company filed the forms in December 2019 and now awaits the final IRS response and acceptance of the change in accounting method. Management is of the view that it is more likely than not that the IRS will accept the 9100 Relief and filing of the prescribed forms. As such, no additional tax uncertainties or related interest or penalties have been recorded as at June 30, 2020.

 

The Company recognizes accrued interest and penalties related to income taxes in income tax expense. The Company did not have significant interest and penalties accrued at June 30, 2020 and December 31, 2019, respectively.

 

 

v3.20.2
Note 9 - Assets and Liabilities Held-for-Sale
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]
9. Assets and liabilities held-for-sale:
 

Accounting Policy:

 

When the Company initiates the sale of long-lived assets, it assesses whether the assets meet the criteria to be considered assets held-for-sale. The review is based on whether the following criteria are met:

 

- Management and the Company's board of directors have committed to a plan to sell the asset;

 

- The subject assets are available for immediate sale in their present condition;

 

- The Company is actively locating buyers as well as other initiatives required to complete the sale;

 

- The sale is probable and the transfer is expected to qualify for recognition as a complete sale in one year;

 

- The long-lived asset is being actively marketed for sale at a price that is reasonable in relation to fair value; and

 

- Actions necessary to complete the plan indicate it is unlikely significant changes will be made to the plan or the plan will be withdrawn.

 

Description of asset groups held-for-sale:

 

If all the criteria are met, a long-lived asset or liabilities held for sale is measured at the lower of its carrying amount or fair value less cost to sell, and the Company will cease recording depreciation. Any adjustment to the carrying amount is recorded as an impairment loss. 

 
In June 2020, the Company committed to a plan to sell the Ting Mobile customer base and the Company's mobile inventory. Accordingly, any capitalized costs associated with the Ting Mobile customer base have been presented as a disposal group held for sale at June 30, 2020. The sale of Tucows' mobile customer base was completed on August 1, 2020 pursuant to an asset sale transaction with Dish Wireless L.L.C. (“DISH”). See Note 19 - Subsequent Events for more information on the details on the transaction with DISH. 

 

As at June 30, 2020 the disposal group comprised assets of $9.0 million and liabilities of $0.8 million comprised of the following assets and liabilities:

 

  

June 30, 2020

 
     
Device credits $99 
Accounts receivable  4,554 
Mobile inventory  861 

Capitalized contract costs (net)

  932 

Customer relationship intangible assets (net)

  2,581 

Assets held for sale

 $9,027 
     
     
Accounts payable $594 
Accrued liabilities  157 

Liabilities held for sale

 $751 

No impairment loss was recorded in the consolidated statements of operations and comprehensive income as a result of classifying the aforementioned assets as held for sale during the three and six months ended June 30, 2020.  

 
v3.20.2
Note 10 - Basic and Diluted Earnings Per Common Share
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Earnings Per Share [Text Block]
10. Basic and Diluted Earnings per Common Share:

 

The following table reconciles the numerators and denominators of the basic and diluted earnings per common share computation (Dollar amounts in thousands of US dollars, except for share data):
 
  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Numerator for basic and diluted earnings per common share:

                

Net income for the period

 $157  $2,616  $2,991  $5,415 
                 

Denominator for basic and diluted earnings per common share:

                

Basic weighted average number of common shares outstanding

  10,567,382   10,657,124   10,589,806   10,646,045 

Effect of outstanding stock options

  86,145   182,881   94,498   191,411 

Diluted weighted average number of shares outstanding

  10,653,527   10,840,005   10,684,304   10,837,456 
                 

Basic earnings per common share

 $0.01  $0.25  $0.28  $0.51 
                 

Diluted earnings per common share

 $0.01  $0.24  $0.28  $0.50 

 

For the three months ended  June 30, 2020, options to purchase 734,388 common shares were not included in the computation of diluted income per common share because the options’ exercise price was greater than the average market price of the common shares for the period as compared to the three months ended  June 30, 2019, where 260,700 outstanding options were not included in the computation.

 
For the  six months ended  June 30, 2020, options to purchas e 734,388 common shares were not included in the computation of diluted income per common share because the options’ exercise price was greater than the average market price of the common shares for the period as compared to the six months ended  June 30, 2019, where 260,700 outstanding options were not included in the computation.
v3.20.2
Note 11 - Revenue
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

11. Revenue:

 
Significant accounting policy
 
The Company’s revenues are derived from (a) the provisioning of mobile and fiber Internet services; and from (b) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue. Amounts received in advance of meeting the revenue recognition criteria described below are recorded as deferred revenue. All products are generally sold without the right of return or refund.
 
Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.
 
Nature of goods and services

 

The following is a description of principal activities – separated by reportable segments – from which the Company generates its revenue. For more detailed information about reportable segments, see Note 14 – Segment Reporting.
 
 

(a)

Network Access Services 

 

The Company generates Network Access Services revenues primarily through the provisioning of mobile services, Ting Mobile. Other sources of revenue include the provisioning of fixed high-speed Internet access, Ting Internet, as well as billing solutions to Internet Service Providers (“ISPs”).

 

Ting Mobile wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting Mobile contracts are billed based on the actual amount of monthly services utilized by each customer during their billing cycle and charged to customers on a postpaid basis. Voice minutes, text messages and megabytes of data are each billed separately based on a tiered pricing program. The Company recognizes revenue for Ting Mobile usage based on the actual amount of monthly services utilized by each customer.
 

 

Ting Internet contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Ting Internet contracts are generally prepaid and grant customers with unlimited bandwidth based on a fixed price per month basis. Because consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access. Though the Company does not consider the installation of fixed Internet access to be a distinct performance obligation, the fees related to installation are immaterial and therefore revenue is recognized as billed.
 
Both Ting Mobile and Ting Internet access services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Mobile and Ting Internet customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories and Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.
 
Our Roam Mobility brands also offers standard talk, text and data mobile services. Roam customers prepay for their usage through the Roam Mobility website. When prepayments are received the amount is deferred, and subsequently recognized as the Company satisfies its obligation to provide mobile services. In addition, revenues associated with the sale of SIM cards are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.
 
In those cases, where payment is not received at the time of sale, revenue is not recognized at contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations.
 
 

(b)

Domain Services

 

Domain registration contracts, which can be purchased for terms of one to ten years, provide our resellers and retail registrant customers with the exclusive right to a personalized internet address from which to build an online presence. The Company enters into domain registration contracts in connection with each new, renewed and transferred-in domain registration. At the inception of the contract, the Company charges and collects the registration fee for the entire registration period. Though fees are collected upfront, revenue from domain registrations are recognized rateably over the registration period as domain registration contracts contain a ‘right to access’ license of IP, which is a distinct performance obligation measured over time. The registration period begins once the Company has confirmed that the requested domain name has been appropriately recorded in the registry under contractual performance standards.

 

Domain related value-added services like digital certifications, WHOIS privacy, website hosting and hosted email provide our resellers and retail registrant customers with tools and additional functionality to be used in conjunction with domain registrations. All domain related value-added services are considered distinct performance obligations which transfer the promised service to the customer over the contracted term. Fees charged to customers for domain related value-added services are collected at the inception of the contract, and revenue is recognized on a straight-line basis over the contracted term, consistent with the satisfaction of the performance obligations.
 
The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.
 
The Company also sells the rights to the Company’s portfolio domains or names acquired through the Company’s domain expiry stream. Revenue generated from sale of domain name contracts, containing a distinct performance obligation to transfer the domain name rights under the Company’s control, is generally recognized once the rights have been transferred and payment has been received in full.
 
Advertising revenue is derived through domain parking monetization, whereby the Company contracts with third-party Internet advertising publishers to direct web traffic from the Company’s domain expiry stream domains and Internet portfolio domains to advertising websites. Compensation from Internet advertising publishers is calculated variably on a cost-per-action basis based on the number of advertising links that have been visited in a given month. Given that the variable consideration is calculated and paid on a monthly basis, no estimation of variable consideration is required.
 

 

Disaggregation of Revenue

 

The following is a summary of the Company’s revenue earned from each significant revenue stream (Dollar amounts in thousands of U.S. dollars):

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Network Access Services:

                

Mobile Services

 $17,567  $20,986  $37,715  $41,795 

Other Services

  4,414   2,644   8,722   5,087 

Total Network Access Services

  21,981   23,630   46,437   46,882 
                 

Domain Services:

                

Wholesale

                

Domain Services

  46,206   46,485   92,169   89,076 

Value Added Services

  5,034   4,775   9,741   8,959 

Total Wholesale

  51,240   51,260   101,910   98,035 
                 

Retail

  8,567   8,783   17,017   17,425 

Portfolio

  334   444   743   728 

Total Domain Services

  60,141   60,487   119,670   116,188 
                 
  $82,122  $84,117  $166,107  $163,070 

 

During the  three and six months ended June 30, 2020 and the three and six months ended June 30, 2019 no customer accounted for more than 10% of total revenue and no customer accounted for more than 10% of accounts receivable.

 

The following is a summary of the Company’s cost of revenue from each significant revenue stream (Dollar amounts in thousands of U.S. dollars): 
 
  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Network Access Services:

                

Mobile Services

 $8,660  $10,806  $18,517  $21,549 

Other Services

  1,665   956   3,381   2,025 

Total Network Access Services

  10,325   11,762   21,898   23,574 
                 

Domain Services:

                

Wholesale

                

Domain Services

  36,354   37,817   72,823   72,656 

Value Added Services

  762   738   1,547   1,531 

Total Wholesale

  37,116   38,555   74,370   74,187 
                 

Retail

  4,219   4,409   8,453   8,768 

Portfolio

  130   147   257   276 

Total Domain Services

  41,465   43,111   83,080   83,231 
                 

Network Expenses:

                

Network, other costs

  2,485   2,385   4,901   4,780 

Network, depreciation and amortization costs

  3,356   2,352   6,587   4,327 
Network, impairment  1,525   -   1,525   - 

Total Network Expenses

  7,366   4,737   13,013   9,107 
                 
  $59,156  $59,610  $117,991  $115,912 

 

 

 

Contract Balances
 
The following table provides information about contract liabilities (deferred revenue) from contracts with customers. The Company accounts for contract assets and liabilities on a contract-by-contract basis, with each contract presented as either a net contract asset or a net contract liability accordingly.

 

Given that Company’s long-term contracts with customers are billed in advance of service, the Company’s contract liabilities relate to amounts recorded as deferred revenues. The Company does not have material streams of contracted revenue that have not been billed.

 

Deferred revenue primarily relates to the portion of the transaction price received in advance related to the unexpired term of domain name registrations and other domain related value-added services, on both a wholesale and retail basis, net of external commissions.

 

Significant changes in deferred revenue for the six months ended June 30, 2020 were as follows (Dollar amounts in thousands of U.S. dollars): 

 

  June 30, 2020 
     
Balance, beginning of period $149,303 
Deferred revenue  120,647 
Recognized revenue  (114,650)
Balance, end of period $155,300 

 

Remaining Performance Obligations:

 

For mobile and internet access services, where the performance obligation is part of contracts that have an original expected duration of one year or less (typically one month), the Company has elected to apply a practical expedient to not disclose revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied) (Dollar amounts in thousands of US dollars).

 

Although domain registration contracts are deferred over the lives of the individual contracts, which can range from one to ten years, approximately 80 percent of our deferred revenue balance related to domain contracts is expected to be recognized within the next twelve months.

 

Deferred revenue related to Exact hosting contracts is also deferred over the lives of the individual contracts, which are expected to be fully recognized within the next twelve months. In connection with the shutdown of the Roam Mobility operations, all previously deferred revenue associated with the Roam Mobility operations has been recognized as of June 30, 2020. 

 

v3.20.2
Note 12 - Costs to Obtain and Fulfill a Contract
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Capitalized Contract Costs [Text Block]
12. Costs to obtain and fulfill a Contract
 
Deferred costs of fulfillment
 
Deferred costs to fulfill contracts generally consist of domain registration costs which have been paid to a domain registry, and are capitalized as Prepaid domain name registry and ancillary services fees. These costs are deferred and amortized over the life of the domain which generally ranges from one to ten years. For the six months ended  June 30, 2020, the Company capitalized $88.2 million and also amortized $83.1 million of contract costs. There was no impairment loss recognized in relation to the costs capitalized during the six months ended  June 30, 2020. Amortization expense of deferred costs is primarily included in cost of revenue. The breakdown of the movement in the prepaid domain name registry and ancillary services fees balance for the six months ended June 30, 2020 is as follows (Dollar amounts in thousands of U.S. dollars). 
 
    June 30, 2020  
         
Balance, beginning of period   $ 109,167  
Deferral of costs     88,194  
Recognized costs     (83,137 )
Balance, end of period   $ 114,224  

 

v3.20.2
Note 13 - Leases
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]
13. Leases
 
We lease datacenters, corporate offices and fiber-optic cables under operating leases. The Company does not have any leases classified as finance leases.

 

Our leases have remaining lease terms of 1 year to 20 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year.

 

The components of lease expense were as follows (Dollar amounts in thousands of U.S. dollars): 
 
  

For the three months ended

  

For the three months ended

  

For the six months ended

  

For the six months ended

 
  

June 30, 2020

  

June 30, 2019

  

June 30, 2020

  

June 30, 2019

 

Operating Lease Cost (leases with a total term greater than 12 months)

 $527  $826  $1,074  $1,897 

Short-term Lease Cost (leases with a total term of 12 months or less)

  130   279   374   403 

Variable Lease Cost

  145   193   273   364 

Total Lease Cost

 $802  $1,298  $1,721  $2,664 
 
Lease Cost is presented in general and administrative expenses and network expenses within our consolidated statements of operations and comprehensive income.
 
Information related to leases was as follows (Dollar amounts in thousands of U.S. dollars):
 
  

For the three months ended

  

For the three months ended

  

For the six months ended

  

For the six months ended

 

Supplemental cashflow information:

 

June 30, 2020

  

June 30, 2019

  

June 30, 2020

  

June 30, 2019

 

Operating Lease - Operating Cash Flows (Fixed Payments)

 $429  $834  $987  $1,885 

Operating Lease - Operating Cash Flows (Liability Reduction)

 $359  $703  $797  $1,651 

New ROU Assets - Operating Leases

 $36  $41  $911  $4,468 

 

Supplemental balance sheet information related to leases: June 30, 2020  December 31, 2019 
Weighted Average Discount Rate  3.95%  5.20%
Weighted Average Remaining Lease Term 8.51 yrs  8.62 yrs 

 

Maturity of lease liability as of June 30, 2020 (Dollar amounts in thousands of U.S. dollars):

 

  June 30, 2020 
Remaining of 2020 $973 
2021  1,774 
2022  1,695 
2023  1,657 
2024  1,379 
Thereafter  5,068 
Total future lease payments  12,546 
Less imputed interest  1,871 
Total $10,675 

 

Operating lease payments include payments under the non-cancellable term and approximately $0.6 million related to options to extend lease terms that are reasonably certain of being exercised.

 

As of June 30, 2020, we have entered into lease agreements for total payments of$1.1 million that have not yet commenced, and therefore are not included in the lease liability.
 
In March 2020, the Company modified a corporate office lease to defer its April 2020 rent payment to be paid later in four equal installments from September to December 2020. The modification resulted in an increase to the right of use operating lease asset and right of use operating lease liability of $0.3 million and $0.6 million, respectively, which also included the foreign exchange re-measurement of the right of use asset at the date of modification. Foreign exchange revaluation on both the right of use asset and liability is presented in general and administrative expenses within our consolidated statements of operations and comprehensive income.
 
The Company has elected to use the single exchange rate approach when accounting for lease modifications. Under the single exchange rate approach, the entire right of use asset is revalued at the date of modification in the Company’s functional currency provided the re-measurement is not considered a separate contract or if the re-measurement is related to change the lease term or assessment of a lessee option to purchase the underlying asset being exercised.
 

 

v3.20.2
Note 14 - Segment Reporting
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]
14. Segment Reporting: 

 

(a)  We are organized and managed based on two operating segments which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate and are described as follows:

 

1.     Network Access Services - This segment derives revenue from the sale of mobile phones, telephony services, high speed Internet access, billing solutions to individuals and small businesses primarily through the Ting website. Revenues are generated in the United States. 

 

2.     Domain Services – This segment includes wholesale and retail domain name registration services, value added services and portfolio services. The Company primarily earns revenues from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations; the sale of retail Internet domain name registration and email services to individuals and small businesses; and by making its portfolio of domain names available for sale or lease. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the United States.

 

The Chief Executive Officer (the “CEO”) is the chief operating decision maker and regularly reviews the operations and performance by segment. The CEO reviews gross profit as (i) a key measure of performance for each segment and (ii) to make decisions about the allocation of resources. Sales and marketing expenses, technical operations and development expenses, general and administrative expenses, depreciation of property and equipment, amortization of intangibles assets, impairment of indefinite life intangible assets, gain on currency forward contracts and other expense net are organized along functional lines and are  not included in the measurement of segment profitability. Total assets and total liabilities are centrally managed and are  not reviewed at the segment level by the CEO. The Company follows the same accounting policies for the segments as those described in Notes 2 – Basis of Presentation, 3 – Recent Accounting Pronouncements, and 11 - Revenue.

 

Information by reportable segments (with the exception of disaggregated revenue, which is discussed in Note 11 – Revenue), which is regularly reported to the chief operating decision maker is as follows (Dollar amounts in thousands of US dollars): 
 
  Network Access Services  Domain Services  Consolidated Totals 
Three Months Ended June 30, 2020            
             
Net Revenues $21,981  $60,141  $82,122 
             
Cost of revenues            
Cost of revenues  10,325   41,465   51,790 
Network expenses  605   1,880   2,485 
Depreciation of property and equipment  2,584   446   3,030 
Amortization of intangible assets  21   305   326 
Impairment of Property Plant and Equipment  1,525   -   1,525 
Total cost of revenues  15,060   44,096   59,156 
Gross Profit  6,921   16,045   22,966 
             
Expenses:            
Sales and marketing          9,218 
Technical operations and development          3,067 
General and administrative          5,465 
Depreciation of property and equipment          125 
Amortization of intangible assets          2,504 
Impairment of definite life intangible assets          1,431 
Loss (gain) on currency forward contracts          (381)
Income from operations          1,537 
Other income (expenses), net          (931)
Income before provision for income taxes         $606 

 

  

Network Access Services

  

Domain Services

  

Consolidated Totals

 

Three Months Ended June 30, 2019

            
             

Net Revenues

 $23,630  $60,487  $84,117 
             

Cost of revenues

            

Cost of revenues

  11,762   43,111   54,873 

Network expenses

  516   1,869   2,385 

Depreciation of property and equipment

  1,656   382   2,038 

Amortization of intangible assets

  12   302   314 

Total cost of revenues

  13,946   45,664   59,610 

Gross Profit

  9,684   14,823   24,507 
             

Expenses:

            

Sales and marketing

          8,856 

Technical operations and development

          2,752 

General and administrative

          4,796 

Depreciation of property and equipment

          134 

Amortization of intangible assets

          2,251 

Loss (gain) on currency forward contracts

          (31)

Income from operations

          5,749 

Other income (expenses), net

          (1,314)

Income before provision for income taxes

         $4,435 

 

  

Network Access Services

  

Domain Services

  

Consolidated Totals

 

Six Months Ended June 30, 2020

            
             

Net Revenues

 $46,437  $119,670  $166,107 
             

Cost of revenues

            

Cost of revenues

  21,898   83,080   104,978 

Network expenses

  1,143   3,758   4,901 

Depreciation of property and equipment

  4,998   909   5,907 

Amortization of intangible assets

  48   632   680 
Impairment of Property Plant and Equipment  1,525   -   1,525 

Total cost of revenues

  29,612   88,379   117,991 

Gross Profit

  16,825   31,291   48,116 
             

Expenses:

            

Sales and marketing

          18,203 

Technical operations and development

          5,818 

General and administrative

          10,206 

Depreciation of property and equipment

          238 

Amortization of intangible assets

          5,451 
Impairment of definite life intangible assets          1,431 

Loss (gain) on currency forward contracts

          60 

Income from operations

          6,709 

Other income (expenses), net

          (2,168)

Income before provision for income taxes

         $4,541 

 

  

Network Access Services

  

Domain Services

  

Consolidated Totals

 

Six Months Ended June 30, 2019

            
             

Net Revenues

 $46,882  $116,188  $163,070 
             

Cost of revenues

            

Cost of revenues

  23,574   83,231   106,805 

Network expenses

  1,038   3,742   4,780 

Depreciation of property and equipment

  3,109   730   3,839 

Amortization of intangible assets

  23   465   488 

Total cost of revenues

  27,744   88,168   115,912 

Gross Profit

  19,138   28,020   47,158 
             

Expenses:

            

Sales and marketing

          17,597 

Technical operations and development

          5,275 

General and administrative

          9,244 

Depreciation of property and equipment

          258 

Amortization of intangible assets

          4,117 

Loss (gain) on currency forward contracts

          (110)

Income from operations

          10,777 

Other income (expenses), net

          (2,286)

Income before provision for income taxes

         $8,491 

 

 

(b)           The following is a summary of the Company’s property and equipment by geographic region (Dollar amounts in thousands of US dollars): 
 
  June 30, 2020  December 31, 2019 
         
Canada $1,112  $2,319 
United States  100,137   79,758 
Europe  43   44 
  $101,292  $82,121 

 

(c)           The following is a summary of the Company’s amortizable intangible assets by geographic region (Dollar amounts in thousands of US dollars): 
 
  June 30, 2020  December 31, 2019 
         
Canada $2,885  $5,207 
United States  37,552   40,137 
  $40,437  $45,344 

 

(d)           The following is a summary of the Company’s deferred tax asset, net of valuation allowance, by geographic region (Dollar amounts in thousands of US dollars): 
 
  June 30, 2020  December 31, 2019 
         
Canada $340  $- 
  $340  $- 

 

(e)           Valuation and qualifying accounts (Dollar amounts in thousands of US dollars):
 
Allowance for doubtful accounts Balance at beginning of period  Charged to costs and expenses  Write-offs during period  Balance at end of period 
                 
Six Months Ended June 30, 2020 $131  $83  $-  $214 
Twelve months ended December 31, 2019 $132  $(1) $-  $131 
 

 

v3.20.2
Note 15 - Stockholders' Equity
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
15. Stockholders' Equity:

 

The following table summarizes stockholders' equity transactions for the three-month period ended June 30, 2020 (Dollar amounts in thousands of U.S. dollars): 

 
                                   

Accumulated

         
                   

Additional

           

other

   

Total

 
   

Common stock

   

paid in

   

Retained

   

comprehensive

   

stockholders'

 
   

Number

   

Amount

   

capital

   

earnings

   

income (loss)

   

equity

 
                                                 

Balances, March 31, 2020

    10,562,774       18,751       -       77,323       (718 )     95,356  
                                                 

Exercise of stock options

    16,922       120       (91 )     -       -       29  

Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration

    (5,836 )     -       (165 )     -       -       (165 )

Repurchase and retirement of shares

    (3,500 )     (6 )     -       (158 )     -       (164 )

Stock-based compensation

    -       -       847       -       -       847  

Net income

    -       -       -       157       -       157  

Other comprehensive income (loss)

    -       -       -       -       1,314       1,314  

Balances, June 30, 2020

    10,570,360     $ 18,865     $ 591     $ 77,322     $ 596     $ 97,374  

 

The following table summarizes stockholders' equity transactions for the six-month period ended June 30, 2020 (Dollar amounts in thousands of U.S. dollars): 

 

                                   

Accumulated

         
                   

Additional

           

other

   

Total

 
   

Common stock

   

paid in

   

Retained

   

comprehensive

   

stockholders'

 
   

Number

   

Amount

   

capital

   

earnings

   

income (loss)

   

equity

 
                                                 

Balances, December 31, 2019

    10,585,159       16,633       880       76,208       473       94,194  
                                                 

Exercise of stock options

    41,935       356       (310 )     -       -       46  

Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration

    (18,870 )     -       (347 )     -       -       (347 )

Acquisition of Cedar Holdings Group

    32,374       2,000       -       -       -       2,000  

Repurchase and retirement of shares

    (70,238 )     (124 )     (1,280 )     (1,877 )     -       (3,281 )

Stock-based compensation

    -       -       1,648       -       -       1,648  

Net income

    -       -       -       2,991       -       2,991  

Other comprehensive income (loss)

    -       -       -       -       123       123  

Balances, June 30, 2020

    10,570,360     $ 18,865     $ 591     $ 77,322     $ 596     $ 97,374  

 

2020 Stock Buyback Program

 

On February 12, 2020, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The $40 million buyback program commenced on February 13, 2020 and is expected to terminate on February 12, 2021. For the three months ended June 30, 2020, the Company repurchased 3,500 shares under this program for total consideration of $0.2 million. For the six months ended June 30, 2020, the Company repurchased 70,238 shares under this program for total consideration of $3.3 million.

 

2019 Stock Buyback Program

 

On February 13, 2019, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The $40 million buyback program commenced on February 14, 2019 and terminated on February 13, 2020. During the three and six months ended June 30, 2019, as well as the six months ended June 30, 2020, the Company did not repurchase any shares under this program.

 

2018 Stock Buyback Program

 

On February 14, 2018, the Company announced that its Board of Directors has approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases were to be made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on February 14, 2018 and terminated on February 13, 2019.  During the six months ended June 30, 2019, the Company did not repurchase any shares under this program.

 

 

v3.20.2
Note 16 - Share-based Payments
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Share-based Payment Arrangement [Text Block]
16. Share-based Payments:
 

Stock options

 

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The assumptions presented in the table below represent the weighted average of the applicable assumption used to value stock options at their grant date. The Company calculates expected volatility based on historical volatility of the Company's common shares. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on historical exercise experience. The Company evaluated historical exercise behavior when determining the expected term assumptions. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the market price of Tucows Inc. common shares at the date of grant.

 

Details of stock option transactions for the three months ended  June 30, 2020 and  June 30, 2019 are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

 

  

Three Months Ended June 30, 2020

  

Three Months Ended June 30, 2019

 
  

Number of shares

  

Weighted average exercise price per share

  

Number of shares

  

Weighted average exercise price per share

 
                 

Outstanding, beginning of period

  730,037  $50.85   665,156  $44.46 

Granted

  190,025   59.53   144,300   62.12 

Exercised

  (16,922)  9.79   (25,316)  13.26 

Forfeited

  (4,826)  59.15   (8,550)  56.08 

Expired

  (1,036)  58.39   (675)  55.65 

Outstanding, end of period

  897,278   53.41   774,915   48.63 

Options exercisable, end of period

  390,868  $46.20   306,078  $33.97 

 

Details of stock option transactions for the six months ended  June 30, 2020 and  June 30, 2019 are as follows (Dollar amounts in thousands of U.S. dollars, except per share amounts):

 

  

Six Months Ended June 30, 2020

  

Six Months Ended June 30, 2019

 
  

Number of shares

  

Weighted average exercise price per share

  

Number of shares

  

Weighted average exercise price per share

 
                 

Outstanding, beginning of period

  754,497  $49.94   702,337  $43.80 

Granted

  195,525   59.19   144,300   62.12 

Exercised

  (41,935)  16.23   (54,359)  19.34 

Forfeited

  (8,315)  60.23   (15,301)  57.55 

Expired

  (2,494)  59.86   (2,062)  55.65 

Outstanding, end of period

  897,278   53.41   774,915   48.63 

Options exercisable, end of period

  390,868  $46.20   306,078  $33.97 

 

As of June 30, 2020, the exercise prices, weighted average remaining contractual life of outstanding options and intrinsic values were as follows:

 
  Options outstanding  Options exercisable 
Exercise price Number outstanding  Weighted average exercise price per share  Weighted average remaining contractual life (years)  Aggregate intrinsic value  Number exercisable  Weighted average exercise price per share  Weighted average remaining contractual life (years)  Aggregate intrinsic value 
                                 
$10.16 - $19.9562,090  $16.23   1.2  $2,551   62,090  $16.23   1.2  $2,551 
$21.10 - $27.5351,250   24.11   1.4   1,702   51,250   24.11   1.4   1,702 
$35.25 - $37.3514,375   35.89   2.9   308   13,125   35.95   2.9   280 
$46.90 - $47.0015,000   47.30   5.7   150   3,750   47.00   3.7   39 
$51.82 - $58.65340,878   55.52   4.0   640   175,527   55.69   3.8   310 
$60.01 - $64.10413,685   61.71   6.1   -   85,126   63.33   5.3   - 
   897,278  $53.41   4.7  $5,351   390,868  $46.20   3.4  $4,882 
                                 

 

Total unrecognized compensation cost relating to unvested stock options at June 30, 2020, prior to the consideration of expected forfeitures, is approxi mately $8.8 m illion and is expected to be recognized over a weighted average period of 2.6 years.

 

The Company recorded stock-based compensation of  $0.8 million for the three months ended June 30, 2020, and $0.7 million for the three months ended  June 30, 2019, respectively. 
 
The Company recorded stock-based compensation of $1.6 million for the six months ended June 30, 2020, and $1.2 million for the six months ended  June 30, 2019, respectively.
 
The Company has not capitalized any stock-based compensation expense as part of the cost of an asset.
 

 

v3.20.2
Note 17 - Fair Value Measurement
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Fair Value Disclosures [Text Block]
17. Fair Value Measurement:
 
For financial assets and liabilities recorded in our financial statements at fair value we utilize a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels. Level  1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level  2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level  3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
 
The following table provides a summary of the fair values of the Company’s derivative instruments measured at fair value on a recurring basis as at  June 30, 2020 (Dollar amounts in thousands of U.S. dollars):
 
    June 30, 2020  
    Fair Value Measurement Using     Assets (Liabilities)  
    Level 1     Level 2     Level 3     at Fair value  
                                 
Derivative instrument asset   $ -     $ 1,691     $ -     $ 1,691  
                                 
Derivative instrument liability   $ -     $ (719 )   $ -     $ (719 )
                                 
Total assets (liability)   $ -     $ 972     $ -     $ 972  
 
The following table provides a summary of the fair values of the Company’s derivative instruments measured at fair value on a recurring basis as at December 31, 2019 (Dollar amounts in thousands of U.S. dollars):
 
    December 31, 2019  
    Fair Value Measurement Using     Assets (Liabilities)  
    Level 1     Level 2     Level 3     at Fair value  
                                 
Derivative instrument liability   $ -     $ 731     $ -     $ 731  
                                 
Total liabilities   $ -     $ 731     $ -     $ 731  

 

v3.20.2
Note 18 - Contingencies
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]
18. Contingencies:

 

From time to time, the Company has legal claims and lawsuits in connection with its ordinary business operations. The Company vigorously defends such claims. While the final outcome with respect to any actions or claims outstanding or pending as of June 30, 2020 cannot be predicted with certainty, management does not believe that the resolution of these claims, individually or in the aggregate, will have a material adverse effect on the Company's financial position.
 
v3.20.2
Note 19 - Subsequent Events
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Subsequent Events [Text Block]
19. Subsequent Events:
 

On August 1, 2020, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”), by and between the Company and DISH Wireless L.L.C.(“DISH”). Under the Purchase Agreement and in accordance with the terms and conditions set forth therein, the Company sold to DISH its mobile customer accounts that are marketed and sold under the Ting brand (other than certain customer accounts associated with one network operator) (“Transferred Assets”). Tucows will retain minimum revenue commitments totaling $51.5 million on the Mobile Network Operator (“MNO”) contract associated with the customers excluded from the definition of Transferred Assets. The Company will be able to continue adding customers under the excluded MNO contract working with DISH in order to meet the agreement. 

 

The Purchase Agreement also sets forth certain rights and obligations with respect to intellectual property matters, including the right to use and purchase the name "Ting" and its associated domain name.  

 

Approximately 60 days following the execution of the Purchase Agreement, DISH and the Company will settle the working capital associated with the Transferred Assets and, upon such settlement, DISH will pay to the Company an amount in cash that is generally equal to (i) the accounts receivable related to the Transferred Assets plus (ii) the value of the transferred inventory minus (iii) the accounts payable and accrued liabilities received related to the Transferred Assets.  In addition, for a period of 10 years following the execution of the Purchase Agreement, DISH will pay a monthly fee to the Company generally equal to an amount of net revenue received by DISH in connection with the transferred customer accounts minus certain fees and expenses, as further set forth in the Purchase Agreement. The aggregate purchase price for the Transferred Assets is the working capital payment, the 10-year payment stream and DISH’s assumption of certain liabilities related to the Transferred Assets.

 

Contemporaneously with the execution of the Purchase Agreement on August 1, 2020, the Company, through its wholly owned subsidiary Ting, Inc. entered a services agreement under which Ting will act as a mobile service enabler (“MSE Agreement”) with DISH in support of the DISH’s mobile network operations.  The term of the agreement is four years with an automatic one-year extension upon achievement of certain milestones.  Under the terms of the MSE Agreement, the Company and its affiliates are permitted to sell mobile service enabler services to other third parties.

 

The Company also entered into the Transitional Services Agreement (“TSA”) on August 1, 2020 with DISH, under which the Company will provide certain other services such as customer service, marketing and fulfillment services. DISH has option to terminate services provided under the TSA throughout the term of the agreement, which is for five years effective August 1, 2020.

 

 

v3.20.2
Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
New Accounting Pronouncements, Policy [Policy Text Block]
Recent Accounting Pronouncements Adopted
 

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU 2018-15”). ASU 2018-15 helps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance on accounting for implementation costs when the cloud computing arrangement does not include a license and is accounted for as a service contract. The amendments in ASU 2018-15 require an entity (customer) in a hosting arrangement to assess which implementation costs to capitalize vs expense as it relates to a service contract.  The amendments also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-15 in the first quarter of 2020 to all implementation costs incurred after the date of adoption. The new guidance did not have a material impact on our consolidated financial statements.

 

 

Recent Accounting Pronouncements Not Yet Adopted
 

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional guidance for a limited period of time to ease the potential burden of reference rate reform on financial reporting.  The amendments in ASU 2020-04 apply to contract modifications that replace a reference rate affected by reference rate reform and contemporaneous modifications of other contract terms related to the replacement of the reference rate. The following optional expedients for applying the requirements of certain Topics or Industry Subtopics in the Codification are permitted for contracts that are modified because of reference rate reform and that meet certain scope guidance:

 

 

1.

Modifications of contracts within the scope of Topics 310, Receivables, and 470, Debt, should be accounted for by prospectively adjusting the effective interest rate.
 2.Modifications of contracts within the scope of Topic 842, Leases, should be accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required under those Topics for modifications not accounted for as separate contracts.
 3.

Modifications of contracts do not require an entity to reassess its original conclusion about whether that contract contains an embedded derivative that is clearly and closely related to the economic characteristics and risks of the host contract under Subtopic 815-15, Derivatives and Hedging— Embedded Derivatives

 

The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently charged interest and standby fees associated with its Amended 2019 Credit Facility (as defined below) based on LIBOR, which will need to be amended when an alternative reference rate is chosen, at which time we may adopt some of the practical expedients provided by ASU 2020-04.

v3.20.2
Note 4 - Acquisitions (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Cash Consideration, including working capital adjustment

 $8,836 

Share-based payment

  2,000 

Fair value of contingent payments

  3,072 

Total estimated purchase price

  13,908 
     

Cash and Cash Equivalents

  66 

Accounts Receivables, net

  47 

Other current assets

  22 

Property and equipment

  4,661 

Right of use operating lease

  18 

Intangible assets, consisting of customer relationships and network rights

  5,390 

Total identifiable assets

  10,204 

Accounts payable and accrued liabilities

  (362)

Deferred tax liability

  (2,373)

Operating lease liability

  (13)

Total liabilities assumed

  (2,748)

Total net assets (liabilities) assumed

  7,456 

Total goodwill

 $6,452 
Business Acquisition, Pro Forma Information [Table Text Block]
  

Unaudited

  

Unaudited

 
  

For the Three Months Ended June 30,

  

For the Six Months Ended June 30,

 
  

2019

  

2019

 
         

Net revenues

 $85,345  $165,526 

Net income

  2,740   5,440 
         

Basic earnings per common share

  0.26   0.51 

Diluted earnings per common share

 $0.25  $0.50 
v3.20.2
Note 5 - Derivative Instruments and Hedging Activities (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Derivative Instruments [Table Text Block]
Maturity date (Dollar amounts in thousands of U.S. dollars) Notional amount of U.S. dollars  Weighted average exchange rate of U.S. dollars  Fair value 
             
July - September 2020  10,656   1.3227   (273)
October - December 2020  9,658   1.3227   (247)
January - March 2021  11,124   1.4283   574 
April - June 2021  9,878   1.4283   507 
July - September 2021  10,782   1.4362   611 
  $52,098   1.3888  $1,172 
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]
Derivatives (Dollar amounts in thousands of U.S. dollars) Balance Sheet Location As of June 30, 2020 Fair Value Asset (Liability)  As of December 31, 2019 Fair Value Asset 
Foreign Currency forward contracts designated as cash flow hedges (net) Derivative instruments $982  $626 
Interest rate swap contract designated as a cash flow hedge (net) Derivative instruments  (200) $- 
Foreign Currency forward contracts not designated as cash flow hedges (net) Derivative instruments  190   105 
Total foreign currency forward contracts (net) Derivative instruments $972  $731 
Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]
  

Gains and losses on cash flow hedges

  

Tax impact

  

Total AOCI

 

Opening AOCI balance - March 31, 2020

 $(932) $214  $(718)

Other comprehensive income (loss) before reclassifications

  1,453   (339)  1,114 

Amount reclassified from AOCI

  259   (59)  200 

Other comprehensive income (loss) for the three months ended June 30, 2020

  1,712   (398)  1,314 
             

Ending AOCI Balance - June 30, 2020

 $780  $(184) $596 
  

Gains and losses on cash flow hedges

  

Tax impact

  

Total AOCI

 

Opening AOCI balance - December 31, 2019

 $625  $(152) $473 

Other comprehensive income (loss) before reclassifications

  (162)  42   (120)

Amount reclassified from AOCI

  317   (74)  243 

Other comprehensive income (loss) for the six months ended June 30, 2020

  155   (32)  123 
             

Ending AOCI Balance - June 30, 2020

 $780  $(184) $596 
Derivative Instruments, Gain (Loss) [Table Text Block]
Derivatives in Cash Flow Hedging Relationship Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative Location of Gain or (Loss) Reclassified from AOCI into Income Amount of Gain or (Loss) Reclassified from AOCI into Income 
    Operating expenses $(201)
Foreign currency forward contracts for the three months ended June 30, 2020 $1,314 Cost of revenues $(58)
          
Interest rate swap contract for the three months ended June 30, 2020 $- Interest expense, net $- 
          
    Operating expenses $(91)
Foreign currency forward contracts for the three months ended June 30, 2019 $320 Cost of revenues $(15)
          
Interest rate swap contract for the three months ended June 30, 2019 $- Interest expense, net $- 

Derivatives in Cash Flow Hedging Relationship

 

Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative

 

Location of Gain or (Loss) Reclassified from AOCI into Income

 

Amount of Gain or (Loss) Reclassified from AOCI into Income

 
    

Operating expenses

 $(246)

Foreign currency forward contracts for the six months ended June 30, 2020

 $123 

Cost of revenues

 $(71)
          
Interest rate swap contract for the six months ended June 30, 2020 $- Interest expense, net $- 
          
    

Operating expenses

 $(154)

Foreign currency forward contracts for the six months ended June 30, 2019

 $930 

Cost of revenues

 $(32)
          
Interest rate swap contract for the six months ended June 30, 2019 $- Interest expense, net $- 
Derivatives Not Designated as Hedging Instruments [Table Text Block]
  

Three Months Ended June 30,

     

Six Months Ended June 30,

    

Forward currency contracts not designated as hedges:

 

2020

  

2019

  

2020

  

2019

 
                 

Gain (loss) on settlement

 $(55) $(39) $(148) $(78)
                 

Gain (loss) on change in fair value

 $436  $70  $88  $188 
v3.20.2
Note 6 - Goodwill and Other Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Intangible Assets and Goodwill [Table Text Block]
  

Surname domain names

  

Direct navigation domain names

  

Brand

  

Customer relationships

  

Technology

  

Network rights

  

Total

 

Amortization period

 

indefinite life

  

indefinite life

  

7 years

  

3 - 7 years

  

2 - 7 years

  

15 years

     
                             

Balances, March 31, 2020

 $11,162  $1,135  $8,573  $36,469  $1,189  $1,387  $59,915 

Cedar Networks acquisition (Note 4 (b))

  -   -   -   10   -   (195)  (185)

Additions to/(disposals from) domain portfolio, net

  (2)  -   -   -   -   -   (2)
Impairment of definite life intangible asset  -   -   -   (1,431)  -   -   (1,431)
Other  -   -   -   (223)  -   -   (223)
Classified as assets held for-sale  -   -   -   (2,581)  -   -   (2,581)
Acquisition of Network rights                 69   69 

Amortization expense

  -   -   (517)  (1,987)  (305)  (21)  (2,830)

Balances, June 30, 2020

 $11,160  $1,135  $8,056  $30,257  $884  $1,240  $52,732 
  Surname domain names  Direct navigation domain names  Brand  Customer relationships  Technology  Network rights  Total 
Amortization period indefinite life  indefinite life  7 years  3 - 7 years  2 - 7 years  15 years     
                             
Balances, December 31, 2019 $11,166  $1,144  $9,091  $34,268  $1,516  $469  $57,654 
Cedar Networks acquisition (Note 4 (b))  -   -   -   4,640   -   750   5,390 
Additions to/(disposals from) domain portfolio, net  (6)  (9)  -   -   -   -   (15)
Impairment of definite life intangible asset  -   -   -   (1,431)  -   -   (1,431)
Other  -   -   -   (223)  -   -   (223)
Classifed as assets held for-sale  -   -   -   (2,581)  -   -   (2,581)
Acquisition of Network rights  -   -   -   -   -   69   69 
Amortization expense  -   -   (1,035)  (4,416)  (632)  (48)  (6,131)
Balances, June 30, 2020 $11,160  $1,135  $8,056  $30,257  $884  $1,240  $52,732 
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]
  Year ending 
  December 31, 
Remainder of 2020 $5,202 
2021  11,783 
2022  10,839 
2023  8,811 
2024  2,399 
Thereafter  1,403 
Total $40,437 
v3.20.2
Note 7 - Loan Payable (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Standby Fees Based on Total Funded Debt to EBITDA Ratio [Table Text Block]
  If Total Funded Debt to EBITDA is: 
Availment type or fee Less than 1.00  Greater than or equal to 1.00 and less than 2.00  Greater than or equal to 2.00 and less than 2.50  Greater than or equal to 2.50 
Canadian dollar borrowings based on Bankers’ Acceptance or U.S. dollar borrowings based on LIBOR (Margin)  1.50%  1.85%  2.35%  2.85%
Canadian or U.S. dollar borrowings based on Prime Rate or U.S. dollar borrowings based on Base Rate (Margin)  0.25%  0.60%  1.10%  1.60%
Standby fees  0.30%  0.37%  0.47%  0.57%
Schedule of Debt [Table Text Block]
  

June 30, 2020

  

December 31, 2019

 
         

Revolver

 $114,400  $114,400 

Less: unamortized debt discount and issuance costs

  (792)  (897)

Total loan payable

  113,608   113,503 

Less: loan payable, current portion

  -   - 

Loan payable, long-term portion

 $113,608  $113,503 
Schedule of Maturities of Long-term Debt [Table Text Block]

Remainder of 2020

 $- 

2021

  - 

2022

  - 

2023

  114,400 
  $114,400 
v3.20.2
Note 9 - Assets and Liabilities Held-for-Sale (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Disposal Groups, Including Discontinued Operations [Table Text Block]
  

June 30, 2020

 
     
Device credits $99 
Accounts receivable  4,554 
Mobile inventory  861 

Capitalized contract costs (net)

  932 

Customer relationship intangible assets (net)

  2,581 

Assets held for sale

 $9,027 
     
     
Accounts payable $594 
Accrued liabilities  157 

Liabilities held for sale

 $751 
v3.20.2
Note 10 - Basic and Diluted Earnings Per Common Share (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Numerator for basic and diluted earnings per common share:

                

Net income for the period

 $157  $2,616  $2,991  $5,415 
                 

Denominator for basic and diluted earnings per common share:

                

Basic weighted average number of common shares outstanding

  10,567,382   10,657,124   10,589,806   10,646,045 

Effect of outstanding stock options

  86,145   182,881   94,498   191,411 

Diluted weighted average number of shares outstanding

  10,653,527   10,840,005   10,684,304   10,837,456 
                 

Basic earnings per common share

 $0.01  $0.25  $0.28  $0.51 
                 

Diluted earnings per common share

 $0.01  $0.24  $0.28  $0.50 
v3.20.2
Note 11 - Revenue (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Disaggregation of Revenue [Table Text Block]
  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Network Access Services:

                

Mobile Services

 $17,567  $20,986  $37,715  $41,795 

Other Services

  4,414   2,644   8,722   5,087 

Total Network Access Services

  21,981   23,630   46,437   46,882 
                 

Domain Services:

                

Wholesale

                

Domain Services

  46,206   46,485   92,169   89,076 

Value Added Services

  5,034   4,775   9,741   8,959 

Total Wholesale

  51,240   51,260   101,910   98,035 
                 

Retail

  8,567   8,783   17,017   17,425 

Portfolio

  334   444   743   728 

Total Domain Services

  60,141   60,487   119,670   116,188 
                 
  $82,122  $84,117  $166,107  $163,070 
Schedule of Cost of Revenues by Revenue Stream [Table Text Block]
  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Network Access Services:

                

Mobile Services

 $8,660  $10,806  $18,517  $21,549 

Other Services

  1,665   956   3,381   2,025 

Total Network Access Services

  10,325   11,762   21,898   23,574 
                 

Domain Services:

                

Wholesale

                

Domain Services

  36,354   37,817   72,823   72,656 

Value Added Services

  762   738   1,547   1,531 

Total Wholesale

  37,116   38,555   74,370   74,187 
                 

Retail

  4,219   4,409   8,453   8,768 

Portfolio

  130   147   257   276 

Total Domain Services

  41,465   43,111   83,080   83,231 
                 

Network Expenses:

                

Network, other costs

  2,485   2,385   4,901   4,780 

Network, depreciation and amortization costs

  3,356   2,352   6,587   4,327 
Network, impairment  1,525   -   1,525   - 

Total Network Expenses

  7,366   4,737   13,013   9,107 
                 
  $59,156  $59,610  $117,991  $115,912 
Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]
  June 30, 2020 
     
Balance, beginning of period $149,303 
Deferred revenue  120,647 
Recognized revenue  (114,650)
Balance, end of period $155,300 
v3.20.2
Note 12 - Costs to Obtain and Fulfill a Contract (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Capitalized Contract Cost [Table Text Block]
    June 30, 2020  
         
Balance, beginning of period   $ 109,167  
Deferral of costs     88,194  
Recognized costs     (83,137 )
Balance, end of period   $ 114,224  
v3.20.2
Note 13 - Leases (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Lease, Cost [Table Text Block]
  

For the three months ended

  

For the three months ended

  

For the six months ended

  

For the six months ended

 
  

June 30, 2020

  

June 30, 2019

  

June 30, 2020

  

June 30, 2019

 

Operating Lease Cost (leases with a total term greater than 12 months)

 $527  $826  $1,074  $1,897 

Short-term Lease Cost (leases with a total term of 12 months or less)

  130   279   374   403 

Variable Lease Cost

  145   193   273   364 

Total Lease Cost

 $802  $1,298  $1,721  $2,664 
  

For the three months ended

  

For the three months ended

  

For the six months ended

  

For the six months ended

 

Supplemental cashflow information:

 

June 30, 2020

  

June 30, 2019

  

June 30, 2020

  

June 30, 2019

 

Operating Lease - Operating Cash Flows (Fixed Payments)

 $429  $834  $987  $1,885 

Operating Lease - Operating Cash Flows (Liability Reduction)

 $359  $703  $797  $1,651 

New ROU Assets - Operating Leases

 $36  $41  $911  $4,468 
Supplemental balance sheet information related to leases: June 30, 2020  December 31, 2019 
Weighted Average Discount Rate  3.95%  5.20%
Weighted Average Remaining Lease Term 8.51 yrs  8.62 yrs 
Lessee, Operating Lease, Liability, Maturity [Table Text Block]
  June 30, 2020 
Remaining of 2020 $973 
2021  1,774 
2022  1,695 
2023  1,657 
2024  1,379 
Thereafter  5,068 
Total future lease payments  12,546 
Less imputed interest  1,871 
Total $10,675 
v3.20.2
Note 14 - Segment Reporting (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Condensed Income Statement [Table Text Block]
  Network Access Services  Domain Services  Consolidated Totals 
Three Months Ended June 30, 2020            
             
Net Revenues $21,981  $60,141  $82,122 
             
Cost of revenues            
Cost of revenues  10,325   41,465   51,790 
Network expenses  605   1,880   2,485 
Depreciation of property and equipment  2,584   446   3,030 
Amortization of intangible assets  21   305   326 
Impairment of Property Plant and Equipment  1,525   -   1,525 
Total cost of revenues  15,060   44,096   59,156 
Gross Profit  6,921   16,045   22,966 
             
Expenses:            
Sales and marketing          9,218 
Technical operations and development          3,067 
General and administrative          5,465 
Depreciation of property and equipment          125 
Amortization of intangible assets          2,504 
Impairment of definite life intangible assets          1,431 
Loss (gain) on currency forward contracts          (381)
Income from operations          1,537 
Other income (expenses), net          (931)
Income before provision for income taxes         $606 
  

Network Access Services

  

Domain Services

  

Consolidated Totals

 

Three Months Ended June 30, 2019

            
             

Net Revenues

 $23,630  $60,487  $84,117 
             

Cost of revenues

            

Cost of revenues

  11,762   43,111   54,873 

Network expenses

  516   1,869   2,385 

Depreciation of property and equipment

  1,656   382   2,038 

Amortization of intangible assets

  12   302   314 

Total cost of revenues

  13,946   45,664   59,610 

Gross Profit

  9,684   14,823   24,507 
             

Expenses:

            

Sales and marketing

          8,856 

Technical operations and development

          2,752 

General and administrative

          4,796 

Depreciation of property and equipment

          134 

Amortization of intangible assets

          2,251 

Loss (gain) on currency forward contracts

          (31)

Income from operations

          5,749 

Other income (expenses), net

          (1,314)

Income before provision for income taxes

         $4,435 
  

Network Access Services

  

Domain Services

  

Consolidated Totals

 

Six Months Ended June 30, 2020

            
             

Net Revenues

 $46,437  $119,670  $166,107 
             

Cost of revenues

            

Cost of revenues

  21,898   83,080   104,978 

Network expenses

  1,143   3,758   4,901 

Depreciation of property and equipment

  4,998   909   5,907 

Amortization of intangible assets

  48   632   680 
Impairment of Property Plant and Equipment  1,525   -   1,525 

Total cost of revenues

  29,612   88,379   117,991 

Gross Profit

  16,825   31,291   48,116 
             

Expenses:

            

Sales and marketing

          18,203 

Technical operations and development

          5,818 

General and administrative

          10,206 

Depreciation of property and equipment

          238 

Amortization of intangible assets

          5,451 
Impairment of definite life intangible assets          1,431 

Loss (gain) on currency forward contracts

          60 

Income from operations

          6,709 

Other income (expenses), net

          (2,168)

Income before provision for income taxes

         $4,541 
  

Network Access Services

  

Domain Services

  

Consolidated Totals

 

Six Months Ended June 30, 2019

            
             

Net Revenues

 $46,882  $116,188  $163,070 
             

Cost of revenues

            

Cost of revenues

  23,574   83,231   106,805 

Network expenses

  1,038   3,742   4,780 

Depreciation of property and equipment

  3,109   730   3,839 

Amortization of intangible assets

  23   465   488 

Total cost of revenues

  27,744   88,168   115,912 

Gross Profit

  19,138   28,020   47,158 
             

Expenses:

            

Sales and marketing

          17,597 

Technical operations and development

          5,275 

General and administrative

          9,244 

Depreciation of property and equipment

          258 

Amortization of intangible assets

          4,117 

Loss (gain) on currency forward contracts

          (110)

Income from operations

          10,777 

Other income (expenses), net

          (2,286)

Income before provision for income taxes

         $8,491 
Schedule of Property Plant and Equipment by Geographic Region [Table Text Block]
  June 30, 2020  December 31, 2019 
         
Canada $1,112  $2,319 
United States  100,137   79,758 
Europe  43   44 
  $101,292  $82,121 
Schedule of Acquired Intangible Assets by Major Class [Table Text Block]
  June 30, 2020  December 31, 2019 
         
Canada $2,885  $5,207 
United States  37,552   40,137 
  $40,437  $45,344 
Schedule of Deferred Tax Asset Net By Geographic Region [Table Text Block]
  June 30, 2020  December 31, 2019 
         
Canada $340  $- 
  $340  $- 
Financing Receivable, Allowance for Credit Loss [Table Text Block]
Allowance for doubtful accounts Balance at beginning of period  Charged to costs and expenses  Write-offs during period  Balance at end of period 
                 
Six Months Ended June 30, 2020 $131  $83  $-  $214 
Twelve months ended December 31, 2019 $132  $(1) $-  $131 
v3.20.2
Note 15 - Stockholders' Equity (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Stockholders Equity [Table Text Block]
                                   

Accumulated

         
                   

Additional

           

other

   

Total

 
   

Common stock

   

paid in

   

Retained

   

comprehensive

   

stockholders'

 
   

Number

   

Amount

   

capital

   

earnings

   

income (loss)

   

equity

 
                                                 

Balances, March 31, 2020

    10,562,774       18,751       -       77,323       (718 )     95,356  
                                                 

Exercise of stock options

    16,922       120       (91 )     -       -       29  

Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration

    (5,836 )     -       (165 )     -       -       (165 )

Repurchase and retirement of shares

    (3,500 )     (6 )     -       (158 )     -       (164 )

Stock-based compensation

    -       -       847       -       -       847  

Net income

    -       -       -       157       -       157  

Other comprehensive income (loss)

    -       -       -       -       1,314       1,314  

Balances, June 30, 2020

    10,570,360     $ 18,865     $ 591     $ 77,322     $ 596     $ 97,374  
                                   

Accumulated

         
                   

Additional

           

other

   

Total

 
   

Common stock

   

paid in

   

Retained

   

comprehensive

   

stockholders'

 
   

Number

   

Amount

   

capital

   

earnings

   

income (loss)

   

equity

 
                                                 

Balances, December 31, 2019

    10,585,159       16,633       880       76,208       473       94,194  
                                                 

Exercise of stock options

    41,935       356       (310 )     -       -       46  

Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration

    (18,870 )     -       (347 )     -       -       (347 )

Acquisition of Cedar Holdings Group

    32,374       2,000       -       -       -       2,000  

Repurchase and retirement of shares

    (70,238 )     (124 )     (1,280 )     (1,877 )     -       (3,281 )

Stock-based compensation

    -       -       1,648       -       -       1,648  

Net income

    -       -       -       2,991       -       2,991  

Other comprehensive income (loss)

    -       -       -       -       123       123  

Balances, June 30, 2020

    10,570,360     $ 18,865     $ 591     $ 77,322     $ 596     $ 97,374  
v3.20.2
Note 16 - Share-based Payments (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Share-based Payment Arrangement, Option, Activity [Table Text Block]
  

Three Months Ended June 30, 2020

  

Three Months Ended June 30, 2019

 
  

Number of shares

  

Weighted average exercise price per share

  

Number of shares

  

Weighted average exercise price per share

 
                 

Outstanding, beginning of period

  730,037  $50.85   665,156  $44.46 

Granted

  190,025   59.53   144,300   62.12 

Exercised

  (16,922)  9.79   (25,316)  13.26 

Forfeited

  (4,826)  59.15   (8,550)  56.08 

Expired

  (1,036)  58.39   (675)  55.65 

Outstanding, end of period

  897,278   53.41   774,915   48.63 

Options exercisable, end of period

  390,868  $46.20   306,078  $33.97 
  

Six Months Ended June 30, 2020

  

Six Months Ended June 30, 2019

 
  

Number of shares

  

Weighted average exercise price per share

  

Number of shares

  

Weighted average exercise price per share

 
                 

Outstanding, beginning of period

  754,497  $49.94   702,337  $43.80 

Granted

  195,525   59.19   144,300   62.12 

Exercised

  (41,935)  16.23   (54,359)  19.34 

Forfeited

  (8,315)  60.23   (15,301)  57.55 

Expired

  (2,494)  59.86   (2,062)  55.65 

Outstanding, end of period

  897,278   53.41   774,915   48.63 

Options exercisable, end of period

  390,868  $46.20   306,078  $33.97 
Share-based Payment Arrangement, Option, Exercise Price Range [Table Text Block]
  Options outstanding  Options exercisable 
Exercise price Number outstanding  Weighted average exercise price per share  Weighted average remaining contractual life (years)  Aggregate intrinsic value  Number exercisable  Weighted average exercise price per share  Weighted average remaining contractual life (years)  Aggregate intrinsic value 
                                 
$10.16 - $19.9562,090  $16.23   1.2  $2,551   62,090  $16.23   1.2  $2,551 
$21.10 - $27.5351,250   24.11   1.4   1,702   51,250   24.11   1.4   1,702 
$35.25 - $37.3514,375   35.89   2.9   308   13,125   35.95   2.9   280 
$46.90 - $47.0015,000   47.30   5.7   150   3,750   47.00   3.7   39 
$51.82 - $58.65340,878   55.52   4.0   640   175,527   55.69   3.8   310 
$60.01 - $64.10413,685   61.71   6.1   -   85,126   63.33   5.3   - 
   897,278  $53.41   4.7  $5,351   390,868  $46.20   3.4  $4,882 
                                 
v3.20.2
Note 17 - Fair Value Measurement (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]
    June 30, 2020  
    Fair Value Measurement Using     Assets (Liabilities)  
    Level 1     Level 2     Level 3     at Fair value  
                                 
Derivative instrument asset   $ -     $ 1,691     $ -     $ 1,691  
                                 
Derivative instrument liability   $ -     $ (719 )   $ -     $ (719 )
                                 
Total assets (liability)   $ -     $ 972     $ -     $ 972  
    December 31, 2019  
    Fair Value Measurement Using     Assets (Liabilities)  
    Level 1     Level 2     Level 3     at Fair value  
                                 
Derivative instrument liability   $ -     $ 731     $ -     $ 731  
                                 
Total liabilities   $ -     $ 731     $ -     $ 731  
v3.20.2
Note 4 - Acquisitions (Details Textual) - Cedar Holdings Group, Incorporated [Member]
$ in Thousands
3 Months Ended 6 Months Ended 18 Months Ended
Jan. 01, 2020
USD ($)
shares
Jun. 30, 2020
USD ($)
Jun. 30, 2020
USD ($)
Jun. 30, 2020
USD ($)
Business Combination, Consideration Transferred, Total $ 14,100      
Business Combination, Consideration Transferred, Estimated Price Adjustments 200      
Business Combination, Consideration Transferred, Net of Price Adjustments 13,900   $ 13,908  
Payments to Acquire Businesses, Gross $ 9,000      
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares) | shares 32,374      
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable $ 2,000   2,000  
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High 4,000      
Business Combination, Contingent Consideration, Liability, Total $ 3,100      
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual   $ 1,200 2,400  
Business Combination, Pro Forma Information, Earnings or Loss of Acquiree since Acquisition Date, Actual   $ 100 200  
General and Administrative Expense [Member]        
Business Combination, Acquisition Related Costs     $ 100 $ 0
Customer Relationships [Member]        
Finite-Lived Intangible Asset, Useful Life (Year) 7 years      
Network Rights [Member]        
Finite-Lived Intangible Asset, Useful Life (Year) 15 years      
Measurement Input, Discount Rate [Member]        
Business Combination, Contingent Consideration, Liability, Measurement Input 0.112      
v3.20.2
Note 4 - Acquisitions - Preliminary Purchase Consideration (Details) - USD ($)
$ in Thousands
6 Months Ended
Jan. 01, 2020
Jun. 30, 2020
Dec. 31, 2019
Goodwill, Ending Balance   $ 116,270 $ 109,818
Cedar Holdings Group, Incorporated [Member]      
Cash Consideration, including working capital adjustment   8,836  
Share-based payment $ 2,000 2,000  
Fair value of contingent payments   3,072  
Total estimated purchase price $ 13,900 13,908  
Cash and Cash Equivalents   66  
Accounts Receivables, net   47  
Other current assets   22  
Property and equipment   4,661  
Right of use operating lease   18  
Intangible assets, consisting of customer relationships and network rights   5,390  
Total identifiable assets   10,204  
Accounts payable and accrued liabilities   (362)  
Deferred tax liability   (2,373)  
Operating lease liability   (13)  
Total liabilities assumed   (2,748)  
Total net assets (liabilities) assumed   7,456  
Goodwill, Ending Balance   $ 6,452  
v3.20.2
Note 4 - Acquisitions - Pro Forma Information (Details) - Cedar Holdings Group, Incorporated [Member] - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2019
Net revenues $ 85,345 $ 165,526
Net income $ 2,740 $ 5,440
Basic earnings per common share (in dollars per share) $ 0.26 $ 0.51
Diluted earnings per common share (in dollars per share) $ 0.25 $ 0.50
v3.20.2
Note 5 - Derivative Instruments and Hedging Activities (Details Textual) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2020
Jun. 30, 2020
May 31, 2020
Dec. 31, 2019
Interest Rate Swap [Member]        
Derivative, Notional Amount     $ 70.0  
Forward Contracts [Member]        
Derivative, Notional Amount   $ 52.1   $ 30.5
Forward Contracts [Member] | Designated as Hedging Instrument [Member]        
Derivative, Notional Amount   $ 44.2   $ 26.1
Forward Contracts [Member] | Minimum [Member]        
Derivative, Term of Contract (Month) 1 month      
Forward Contracts [Member] | Maximum [Member]        
Derivative, Term of Contract (Month) 18 months      
v3.20.2
Note 5 - Derivative Instruments and Hedging Activities - Foreign Currency Forward Contracts (Details)
$ in Thousands
Jun. 30, 2020
USD ($)
Foreign Exchange Forward 1 [Member]  
Notional amount of U.S. dollars $ 10,656
Weighted average exchange rate of U.S. dollars 1.3227
Interest rate swap contract designated as a cash flow hedge (net) $ (273)
Foreign Exchange Forward 2 [Member]  
Notional amount of U.S. dollars $ 9,658
Weighted average exchange rate of U.S. dollars 1.3227
Interest rate swap contract designated as a cash flow hedge (net) $ (247)
Foreign Exchange Forward 3 [Member]  
Notional amount of U.S. dollars $ 11,124
Weighted average exchange rate of U.S. dollars 1.4283
Foreign Currency forward contracts designated as cash flow hedges (net) $ 574
Foreign Exchange Forward 4 [Member]  
Notional amount of U.S. dollars $ 9,878
Weighted average exchange rate of U.S. dollars 1.4283
Foreign Currency forward contracts designated as cash flow hedges (net) $ 507
Foreign Exchange Forward 5 [Member]  
Notional amount of U.S. dollars $ 10,782
Weighted average exchange rate of U.S. dollars 1.4362
Foreign Currency forward contracts designated as cash flow hedges (net) $ 611
Foreign Exchange Forward 6 [Member]  
Notional amount of U.S. dollars $ 52,098
Weighted average exchange rate of U.S. dollars 1.3888
Foreign Currency forward contracts designated as cash flow hedges (net) $ 1,172
v3.20.2
Note 5 - Derivative Instruments and Hedging Activities - Fair Value of Derivative Instruments in the Consolidated Balance Sheets (Details) - Derivative Instruments [Member] - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Foreign Currency forward contracts designated as cash flow hedges (net) $ 972 $ 731
Interest rate swap contract designated as a cash flow hedge (net) (200) 0
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member]    
Foreign Currency forward contracts designated as cash flow hedges (net) 982 626
Not Designated as Hedging Instrument [Member]    
Foreign Currency forward contracts designated as cash flow hedges (net) $ 190 $ 105
v3.20.2
Note 5 - Derivative Instruments and Hedging Activities - Movement in AOCI Balance (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
AOCI balance, Gains and losses on cash flow hedges $ (932)   $ 625  
AOCI balance, Tax impact 214   (152)  
AOCI balance (718)   473  
Other comprehensive income (loss) before reclassifications, Gains and losses on cash flow hedges 1,453   (162)  
Other comprehensive income (loss) before reclassifications, Tax impact (339)   42  
Other comprehensive income (loss) before reclassifications 1,114 $ 240 (120) $ 789
Amount reclassified from AOCI, Gains and losses on cash flow hedges 259   317  
Amount reclassified from AOCI, Tax impact (59)   (74)  
Amount reclassified from AOCI 200 $ 80 243 $ 141
Other comprehensive income (loss), Gains and losses on cash flow hedges 1,712   155  
Other comprehensive income (loss), Tax impact (398)   (32)  
Other comprehensive income (loss) 1,314   123  
AOCI balance, Gains and losses on cash flow hedges 780   780  
AOCI balance, Tax impact (184)   (184)  
AOCI balance $ 596   $ 596  
v3.20.2
Note 5 - Derivative Instruments and Hedging Activities - Effects of Derivative Instruments on Income and Other Comprehensive Income (OCI) (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Operating Expense [Member]        
Amount of Gain or (Loss) Recognized in OCI, Net of Tax, on Derivative (Effective Portion)
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (201) (91) (246) (154)
Cost of Sales [Member]        
Amount of Gain or (Loss) Recognized in OCI, Net of Tax, on Derivative (Effective Portion) 1,314 320 123 930
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (58) (15) (71) (32)
Interest Expense [Member]        
Amount of Gain or (Loss) Recognized in OCI, Net of Tax, on Derivative (Effective Portion) 0 0 0 0
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) $ 0 $ 0 $ 0 $ 0
v3.20.2
Note 5 - Derivative Instruments and Hedging Activities - Fair Value Adjustments of Forward Currency Forward Contracts Not Designated as Hedges (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Gain (loss) on settlement $ 381 $ 31 $ (60) $ 110
Foreign Exchange Forward [Member] | Not Designated as Hedging Instrument [Member]        
Gain (loss) on settlement   (39) (148) (78)
Gain (loss) on change in fair value   $ 70 $ 88 $ 188
Foreign Exchange Forward [Member] | Not Designated as Hedging Instrument [Member] | Maximum [Member]        
Gain (loss) on settlement (55)      
Gain (loss) on change in fair value $ 436      
v3.20.2
Note 6 - Goodwill and Other Intangible Assets (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Goodwill, Ending Balance $ 116,270   $ 116,270   $ 109,818
Goodwill, Impairment Loss 0 $ 0 0 $ 0  
Impairment of Intangible Assets, Finite-lived 1,431 $ 0 1,431 $ 0  
Acquisition of Non-exclusive Land Easement 100        
Disposal Group, Held-for-sale, Not Discontinued Operations [Member] | Ting Mobile [Member]          
Disposal Group, Including Discontinued Operation, Intangible Assets, Current 2,581   $ 2,581    
Minimum [Member]          
Finite-Lived Intangible Asset, Useful Life (Year)     2 years    
Maximum [Member]          
Finite-Lived Intangible Asset, Useful Life (Year)     15 years    
Domain Services Operating Segment [Member]          
Goodwill, Ending Balance $ 107,700   $ 107,700    
Goodwill Percentage Related to Operating Segments 93.00%   93.00%    
Network Access Services [Member]          
Goodwill, Ending Balance $ 8,600   $ 8,600    
Goodwill Percentage Related to Operating Segments 7.00%   7.00%    
v3.20.2
Note 6 - Goodwill and Other Intangible Assets - Acquired Intangible Assets by Major Class (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Balances $ 59,915   $ 57,654  
Cedar Networks acquisition (Note 4 (b)) (185)      
Additions to/(disposals from) domain portfolio, net (2) $ (2) (15) $ (6)
Impairment of definite life intangible asset (1,431) 0 (1,431) 0
Other (223)   (223)  
Classified as assets held for-sale (2,581)   (2,581)  
Acquisition of Network rights 69   69  
Amortization expense (2,830) $ (2,565) (6,131) $ (4,605)
Balances 52,732   52,732  
Cedar Networks acquisition (Note 4 (b))     5,390  
Brand [Member]        
Balances 8,573   9,091  
Cedar Networks acquisition (Note 4 (b)) 0      
Additions to/(disposals from) domain portfolio, net 0   0  
Impairment of definite life intangible asset 0   0  
Other 0   0  
Classified as assets held for-sale 0   0  
Acquisition of Network rights   0  
Amortization expense (517)   (1,035)  
Balances 8,056   8,056  
Cedar Networks acquisition (Note 4 (b))     0  
Customer Relationships [Member]        
Balances 36,469   34,268  
Cedar Networks acquisition (Note 4 (b)) 10      
Additions to/(disposals from) domain portfolio, net 0   0  
Impairment of definite life intangible asset (1,431)   (1,431)  
Other (223)   (223)  
Classified as assets held for-sale (2,581)   (2,581)  
Acquisition of Network rights   0  
Amortization expense (1,987)   (4,416)  
Balances 30,257   30,257  
Cedar Networks acquisition (Note 4 (b))     4,640  
Technology-Based Intangible Assets [Member]        
Balances 1,189   1,516  
Cedar Networks acquisition (Note 4 (b)) 0      
Additions to/(disposals from) domain portfolio, net 0   0  
Impairment of definite life intangible asset 0   0  
Other 0   0  
Classified as assets held for-sale 0   0  
Acquisition of Network rights   0  
Amortization expense (305)   (632)  
Balances 884   884  
Cedar Networks acquisition (Note 4 (b))     0  
Network Rights [Member]        
Balances 1,387   469  
Cedar Networks acquisition (Note 4 (b)) (195)      
Additions to/(disposals from) domain portfolio, net 0   0  
Impairment of definite life intangible asset 0   0  
Other 0   0  
Classified as assets held for-sale 0   0  
Acquisition of Network rights 69   69  
Amortization expense (21)   (48)  
Balances 1,240   1,240  
Cedar Networks acquisition (Note 4 (b))     750  
Surname Domain Names [Member]        
Balances 11,162   11,166  
Cedar Networks acquisition (Note 4 (b)) 0      
Additions to/(disposals from) domain portfolio, net (2)   (6)  
Impairment of definite life intangible asset 0   0  
Other 0   0  
Classified as assets held for-sale 0   0  
Acquisition of Network rights   0  
Amortization expense 0   0  
Balances 11,160   11,160  
Cedar Networks acquisition (Note 4 (b))     0  
Direct Navigation Domain Names [Member]        
Balances 1,135   1,144  
Cedar Networks acquisition (Note 4 (b)) 0      
Additions to/(disposals from) domain portfolio, net 0   (9)  
Impairment of definite life intangible asset 0   0  
Other 0   0  
Classified as assets held for-sale 0   0  
Acquisition of Network rights   0  
Amortization expense 0   0  
Balances $ 1,135   1,135  
Cedar Networks acquisition (Note 4 (b))     $ 0  
v3.20.2
Note 6 - Goodwill and Other Intangible Assets - Estimated Future Amortization Expense of Intangible Assets (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Remainder of 2020 $ 5,202  
2021 11,783  
2022 10,839  
2023 8,811  
2024 2,399  
Thereafter 1,403  
Total $ 40,437 $ 45,344
v3.20.2
Note 7 - Loan Payable (Details Textual)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 14, 2019
USD ($)
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Payments of Financing Costs, Total   $ 7 $ 434 $ 32 $ 641
Royal Bank, Bank of Montreal, Bank of Nova Scotia, HSBC and CIBC [Member]          
Line of Credit Facility, Maximum Borrowing Capacity $ 240,000        
Debt Issuance Costs, Gross $ 400        
Debt Instrument, Term (Year) 4 years        
Maximum Total Funded Debt to EBITDA Ratio   3.50   3.50  
Minimum Fixed Charge Coverage Ratio   3   3  
Percentage of Forecasted Capital Expenditures, Threshold for Annual Capital Expenditures   110.00%   110.00%  
Total Funded Debt to EBITDA Ratio   2   2  
Royal Bank, Bank of Montreal, Bank of Nova Scotia, HSBC and CIBC [Member] | General and Administrative Expense [Member]          
Payments of Financing Costs, Total $ 100        
Royal Bank, Bank of Montreal, Bank of Nova Scotia, HSBC and CIBC [Member] | Guaranteed Credit Facility [Member]          
Line of Credit Facility, Maximum Borrowing Capacity 180,000        
Royal Bank, Bank of Montreal, Bank of Nova Scotia, HSBC and CIBC [Member] | Accordion Facility [Member]          
Line of Credit Facility, Maximum Borrowing Capacity $ 60,000        
v3.20.2
Note 7 - Loan Payable - Schedule of Standby Fees Based on Total Funded Debt to EBITDA Ratio (Details)
6 Months Ended
Jun. 30, 2020
Debt to EBITDA is Less Than 1 [Member]  
Standby fees 0.30%
Debt to EBITDA is Greater Than or Equal to 1 and Less Than 2 [Member]  
Standby fees 0.37%
Debt to EBITDA is Greater Than or Equal to 2 and Less Than 2.50 [Member]  
Standby fees 0.47%
Debt to EBITDA is Greater Than or Equal to 2.50 [Member]  
Standby fees 0.57%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Less Than 1 [Member]  
Basis Spread on Variable Rate 1.50%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Greater Than or Equal to 1 and Less Than 2 [Member]  
Basis Spread on Variable Rate 1.85%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Greater Than or Equal to 2 and Less Than 2.50 [Member]  
Basis Spread on Variable Rate 2.35%
Bank of Montreal and Royal Bank of Canada [Member] | London Interbank Offered Rate (LIBOR) [Member] | Debt to EBITDA is Greater Than or Equal to 2.50 [Member]  
Basis Spread on Variable Rate 2.85%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Less Than 1 [Member]  
Basis Spread on Variable Rate 0.25%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Greater Than or Equal to 1 and Less Than 2 [Member]  
Basis Spread on Variable Rate 0.60%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Greater Than or Equal to 2 and Less Than 2.50 [Member]  
Basis Spread on Variable Rate 1.10%
Bank of Montreal and Royal Bank of Canada [Member] | Base Rate [Member] | Debt to EBITDA is Greater Than or Equal to 2.50 [Member]  
Basis Spread on Variable Rate 1.60%
v3.20.2
Note 7 - Loan Payable - Schedule of Loans Payable (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Loans payable $ 113,608 $ 113,503
Less: unamortized debt discount and issuance costs (792) (897)
Less: loan payable, current portion 0 0
Loan payable, long-term portion 113,608 113,503
Revolver Facility [Member]    
Loans payable $ 114,400 $ 114,400
v3.20.2
Note 7 - Loan Payable - Principal Repayments (Details)
$ in Thousands
Jun. 30, 2020
USD ($)
Remainder of 2020 $ 0
2021 0
2022 0
2023 114,400
Long-term Debt $ 114,400
v3.20.2
Note 8 - Income Taxes (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Income Tax Expense (Benefit), Total $ 449 $ 1,819 $ 1,550 $ 3,076
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Noncontrolling Interest, Total 600 4,400 4,500 8,500
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Impairment Losses, Amount 3,700   3,700  
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total 0 0 0 0
Accounting Standards Update 2016-09 [Member]        
Income Tax Expense (Benefit), Total $ 100 $ 300 $ 200 $ 700
v3.20.2
Note 9 - Assets and Liabilities Held-for-Sale (Details Textual) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Disposal Group, Including Discontinued Operation, Assets, Current, Total $ 9,027 $ 0
Disposal Group, Including Discontinued Operation, Liabilities, Current, Total $ 751 $ 0
v3.20.2
Note 9 - Assets and Liabilities Held-for-Sale - Schedule for Disposal (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Assets held for sale $ 9,027 $ 0
Liabilities held for sale 751 $ 0
Disposal Group, Held-for-sale, Not Discontinued Operations [Member] | Ting Mobile [Member]    
Device credits 99  
Accounts receivable 4,554  
Mobile inventory 861  
Capitalized contract costs (net) 932  
Disposal Group, Including Discontinued Operation, Intangible Assets, Current 2,581  
Assets held for sale 9,027  
Accounts payable 594  
Accrued liabilities 157  
Liabilities held for sale $ 751  
v3.20.2
Note 10 - Basic and Diluted Earnings Per Common Share (Details Textual) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Share-based Payment Arrangement, Option [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) 734,388 260,700 734,388 260,700
v3.20.2
Note 10 - Basic and Diluted Earnings Per Common Share - Earnings Per Common Share - Summary of Basic and Diluted Earnings Per Common Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended 18 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Net income for the period $ 157 $ 2,616 $ 2,991 $ 5,415 $ 2,991
Shares used in computing basic earnings per common share (note 10) (in shares) 10,567,382 10,657,124 10,589,806 10,646,045  
Effect of outstanding stock options (in shares) 86,145 182,881 94,498 191,411  
Shares used in computing diluted earnings per common share (note 10) (in shares) 10,653,527 10,840,005 10,684,304 10,837,456  
Basic earnings per common share (note 10) (in dollars per share) $ 0.01 $ 0.25 $ 0.28 $ 0.51  
Diluted earnings per common share (note 10) (in dollars per share) $ 0.01 $ 0.24 $ 0.28 $ 0.50  
v3.20.2
Note 11 - Revenue 1 (Details Textual)
Pure in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Customer Concentration Risk [Member] | Revenue Benchmark [Member]        
Number of Customers 0 0 0 0
Customer Concentration Risk [Member] | Accounts Receivable [Member]        
Number of Customers     0  
Minimum [Member]        
Domain Services, Purchased Term (Year)     1 year  
Finite-Lived Intangible Asset, Useful Life (Year)     2 years  
Minimum [Member] | Active Domain Name Contracts [Member]        
Finite-Lived Intangible Asset, Useful Life (Year)     1 year  
Maximum [Member]        
Domain Services, Purchased Term (Year)     10 years  
Finite-Lived Intangible Asset, Useful Life (Year)     15 years  
Maximum [Member] | Active Domain Name Contracts [Member]        
Finite-Lived Intangible Asset, Useful Life (Year)     10 years  
v3.20.2
Note 11 - Revenue 2 (Details Textual) - Domain Registration Contracts [Member] - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01
Jun. 30, 2020
Revenue, Remaining Performance Obligation, Percentage 80.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Month) 12 months
v3.20.2
Note 11 - Revenue - Disaggregation of Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Net Revenues $ 82,122 $ 84,117 $ 166,107 $ 163,070
Network Access Services [Member]        
Net Revenues 21,981 23,630 [1] 46,437 [1] 46,882 [1]
Domain Name Services [Member]        
Net Revenues 60,141 60,487 [1] 119,670 [1] 116,188 [1]
Domain Name Services [Member] | Wholesale [Member]        
Net Revenues 51,240 51,260 [1] 101,910 [1] 98,035 [1]
Domain Name Services [Member] | Retail Services [Member]        
Net Revenues 8,567 8,783 [1] 17,017 [1] 17,425 [1]
Domain Name Services [Member] | Portfolio [Member]        
Net Revenues 334 444 [1] 743 [1] 728 [1]
Mobile Services [Member] | Network Access Services [Member]        
Net Revenues 17,567 20,986 [1] 37,715 [1] 41,795 [1]
Other Services [Member] | Network Access Services [Member]        
Net Revenues 4,414 2,644 [1] 8,722 [1] 5,087 [1]
Domain Services [Member] | Domain Name Services [Member] | Wholesale [Member]        
Net Revenues 46,206 46,485 [1] 92,169 [1] 89,076 [1]
Value Added Services [Member] | Domain Name Services [Member] | Wholesale [Member]        
Net Revenues $ 5,034 $ 4,775 [1] $ 9,741 [1] $ 8,959 [1]
[1] As a result of the bulk transfers of 2.89 million domain names to Namecheap throughout 2018, recognized revenue for the year ended December 31, 2018 includes $16.9 million, related to previously deferred revenue, a portion of which would have otherwise been recognized after December 31, 2018.
v3.20.2
Note 11 - Revenue - Cost of Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Network, other costs $ 2,485 $ 2,385 $ 4,901 $ 4,780
Impairment of Property Plant and Equipment 1,525 0 1,525 0
Cost of revenue 59,156 59,610 117,991 115,912
Network Expenses [Member]        
Network, other costs 2,485 2,385 4,901 4,780
Network, depreciation and amortization costs 3,356 2,352 6,587 4,327
Impairment of Property Plant and Equipment 1,525 0 1,525 0
Cost of revenue 7,366 4,737 13,013 9,107
Network Access Services [Member]        
Cost of revenue 10,325 11,762 21,898 23,574
Network, other costs 605 516 1,143 1,038
Impairment of Property Plant and Equipment 1,525   1,525  
Cost of revenue 15,060 13,946 29,612 27,744
Network Access Services [Member] | Mobile Services [Member]        
Cost of revenue 8,660 10,806 18,517 21,549
Network Access Services [Member] | Other Services [Member]        
Cost of revenue 1,665 956 3,381 2,025
Domain Name Services [Member]        
Cost of revenue 41,465 43,111 83,080 83,231
Network, other costs 1,880 1,869 3,758 3,742
Impairment of Property Plant and Equipment 0   0  
Cost of revenue 44,096 45,664 88,379 88,168
Domain Name Services [Member] | Wholesale [Member]        
Cost of revenue 37,116 38,555 74,370 74,187
Domain Name Services [Member] | Retail Services [Member]        
Cost of revenue 4,219 4,409 8,453 8,768
Domain Name Services [Member] | Portfolio [Member]        
Cost of revenue 130 147 257 276
Domain Name Services [Member] | Domain Services [Member] | Wholesale [Member]        
Cost of revenue 36,354 37,817 72,823 72,656
Domain Name Services [Member] | Value Added Services [Member] | Wholesale [Member]        
Cost of revenue $ 762 $ 738 $ 1,547 $ 1,531
v3.20.2
Note 11 - Revenue - Contract Balances (Details)
$ in Thousands
6 Months Ended
Jun. 30, 2020
USD ($)
Balance, beginning of period $ 149,303
Deferred revenue 120,647
Recognized revenue (114,650)
Balance, end of period $ 155,300
v3.20.2
Note 12 - Costs to Obtain and Fulfill a Contract (Details Textual) - Deferred Costs of Acquisition [Member]
$ in Thousands
6 Months Ended
Jun. 30, 2020
USD ($)
Increase (Decrease) in Capitalized Costs $ 88,200
Capitalized Contract Cost, Amortization 83,100
Capitalized Contract Cost, Impairment Loss $ 0
Minimum [Member]  
Capitalized Contract Cost, Amortization Period (Year) 1 year
Maximum [Member]  
Capitalized Contract Cost, Amortization Period (Year) 10 years
v3.20.2
Note 12 - Costs to Obtain and Fulfill a Contract - Capitalized Contract Costs Activity (Details) - Deferred Costs of Acquisition [Member]
$ in Thousands
6 Months Ended
Jun. 30, 2020
USD ($)
Balance $ 109,167
Deferral of costs 88,194
Recognized costs (83,137)
Balance $ 114,224
v3.20.2
Note 13 - Leases (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 4 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2020
Jun. 30, 2019
Lessee, Operating Lease, Renewal Term (Year) 5 years   5 years 5 years  
Lessee, Operating Lease, Option to Terminate Term (Year)       1 year  
Lessee, Operating Lease, Option to Extend, Amount       $ 600  
Lessee, Operating Lease, Lease Not yet Commenced, Future Minimum Payments Due $ 1,100   $ 1,100 1,100  
Increase (Decrease) in Operating Lease, Right-of-Use Asset $ 36 $ 41   $ 911 $ 4,468
Corporate Office Lease [Member]          
Increase (Decrease) in Operating Lease, Right-of-Use Asset     300    
Increase (Decrease) in Operating Lease Liability     $ 600    
Minimum [Member]          
Lessee, Operating Lease, Remaining Lease Term (Year) 1 year   1 year 1 year  
Maximum [Member]          
Lessee, Operating Lease, Remaining Lease Term (Year) 20 years   20 years 20 years  
v3.20.2
Note 13 - Leases - Components of Lease Expense and Other Lease Information (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Operating Lease Cost (leases with a total term greater than 12 months) $ 527 $ 826 $ 1,074 $ 1,897  
Short-term Lease Cost (leases with a total term of 12 months or less) 130 279 374 403  
Variable Lease Cost 145 193 273 364  
Total Lease Cost 802 1,298 1,721 2,664  
Operating Lease - Operating Cash Flows (Fixed Payments) 429 834 987 1,885  
Operating Lease - Operating Cash Flows (Liability Reduction) 359 703 797 1,651  
New ROU Assets - Operating Leases $ 36 $ 41 $ 911 $ 4,468  
Weighted Average Discount Rate 3.95%   3.95%   5.20%
Weighted Average Remaining Lease Term (Year) 8 years 6 months 3 days   8 years 6 months 3 days   8 years 7 months 13 days
v3.20.2
Note 13 - Leases - Future Minimum Lease Payments (Details)
$ in Thousands
Jun. 30, 2020
USD ($)
Remaining of 2020 $ 973
2021 1,774
2022 1,695
2023 1,657
2024 1,379
Thereafter 5,068
Total future lease payments 12,546
Less imputed interest 1,871
Total $ 10,675
v3.20.2
Note 14 - Segment Reporting (Details Textual)
6 Months Ended
Jun. 30, 2020
Number of Operating Segments 2
v3.20.2
Note 14 - Segment Reporting - Information by Reportable Segments (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Net Revenues $ 82,122 $ 84,117 $ 166,107 $ 163,070
Cost of revenues 51,790 54,873 104,978 106,805
Network expenses 2,485 2,385 4,901 4,780
Depreciation of property and equipment 3,030 2,038 5,907 3,839
Amortization of intangible assets 326 314 680 488
Impairment of Property Plant and Equipment 1,525 0 1,525 0
Total cost of revenues 59,156 59,610 117,991 115,912
Gross Profit 22,966 24,507 48,116 47,158
Sales and marketing 9,218 8,856 18,203 17,597
Technical operations and development 3,067 2,752 5,818 5,275
General and administrative 5,465 4,796 10,206 9,244
Depreciation of property and equipment 125 134 238 258
Amortization of intangible assets 2,504 2,251 5,451 4,117
Impairment of Intangible Assets, Finite-lived 1,431 0 1,431 0
Loss (gain) on currency forward contracts (381) (31) 60 (110)
Income from operations 1,537 5,749 6,709 10,777
Other income (expenses), net (931) (1,314) (2,168) (2,286)
Income before provision for income taxes 606 4,435 4,541 8,491
Impairment of definite life intangible assets 1,431 0 1,431 0
Network Access Services [Member]        
Net Revenues 21,981 23,630 [1] 46,437 [1] 46,882 [1]
Cost of revenues 10,325 11,762 21,898 23,574
Network expenses 605 516 1,143 1,038
Depreciation of property and equipment 2,584 1,656 4,998 3,109
Amortization of intangible assets 21 12 48 23
Impairment of Property Plant and Equipment 1,525   1,525  
Total cost of revenues 15,060 13,946 29,612 27,744
Gross Profit 6,921 9,684 16,825 19,138
Domain Name Services [Member]        
Net Revenues 60,141 60,487 [1] 119,670 [1] 116,188 [1]
Cost of revenues 41,465 43,111 83,080 83,231
Network expenses 1,880 1,869 3,758 3,742
Depreciation of property and equipment 446 382 909 730
Amortization of intangible assets 305 302 632 465
Impairment of Property Plant and Equipment 0   0  
Total cost of revenues 44,096 45,664 88,379 88,168
Gross Profit $ 16,045 $ 14,823 $ 31,291 $ 28,020
[1] As a result of the bulk transfers of 2.89 million domain names to Namecheap throughout 2018, recognized revenue for the year ended December 31, 2018 includes $16.9 million, related to previously deferred revenue, a portion of which would have otherwise been recognized after December 31, 2018.
v3.20.2
Note 14 - Segment Reporting - Summary of Property and Equipment by Geographic Region (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Property and equipment $ 101,292 $ 82,121
CANADA    
Property and equipment 1,112 2,319
UNITED STATES    
Property and equipment 100,137 79,758
Europe [Member]    
Property and equipment $ 43 $ 44
v3.20.2
Note 14 - Segment Reporting - Summary of Amortizable Intangible Assets by Geographic Region (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Amortizable intangible assets $ 40,437 $ 45,344
CANADA    
Amortizable intangible assets 2,885 5,207
UNITED STATES    
Amortizable intangible assets $ 37,552 $ 40,137
v3.20.2
Note 14 - Segment Reporting - Summary of Deferred Tax Asset, Net of Valuation Allowance (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
CANADA    
Deferred tax assets $ 340 $ 0
v3.20.2
Note 14 - Segment Reporting - Summary of Valuation and Qualifying Accounts (Details) - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Balance at beginning of period $ 131 $ 132
Charged to costs and expenses 83 (1)
Write-offs during period 0 0
Balance at end of period $ 214 $ 131
v3.20.2
Note 15 - Stockholders' Equity (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 18 Months Ended
Jun. 30, 2020
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Feb. 12, 2020
Feb. 13, 2019
Feb. 14, 2018
Stock Repurchased and Retired During Period, Value $ 164     $ 3,281      
Stock Buyback Program 2020 [Member]              
Stock Repurchase Program, Authorized Amount         $ 40,000    
Stock Repurchased and Retired During Period, Shares (in shares) 3,500 70,238          
Stock Repurchased and Retired During Period, Value $ 200 $ 3,300          
Stock Buyback Program 2019 [Member]              
Stock Repurchase Program, Authorized Amount           $ 40,000  
Stock Repurchased and Retired During Period, Shares (in shares)     0        
Stock Buyback Program 2018 [Member]              
Stock Repurchase Program, Authorized Amount             $ 40,000
Stock Repurchased and Retired During Period, Shares (in shares)     0        
v3.20.2
Note 15 - Stockholders' Equity - Stockholders' Equity Transactions (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 18 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Balances $ 95,356   $ 94,194 $ 94,194 $ 94,194
Exercise of stock options (in shares) 16,922,000 25,316,000 41,935,000 54,359,000  
Exercise of stock options $ 29       46
Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration (165)       (347)
Repurchase and retirement of shares (164)       (3,281)
Stock-based compensation 847       1,648
Net income 157 $ 2,616 $ 2,991 $ 5,415 2,991
Other comprehensive income (loss) 1,314 $ 320 123 $ 930 123
Balances $ 97,374   $ 97,374   97,374
Acquisition of Cedar Holdings Group         $ 2,000
Common Stock [Member]          
Balances (in shares) 10,562,774     10,585,159 10,585,159
Balances $ 18,751     $ 16,633 $ 16,633
Exercise of stock options (in shares) 16,922       41,935
Exercise of stock options $ 120       $ 356
Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration (in shares) (5,836)       (18,870)
Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration $ 0       $ 0
Repurchase and retirement of shares (in shares) (3,500)       (70,238)
Repurchase and retirement of shares $ (6)       $ (124)
Stock-based compensation 0       0
Other comprehensive income (loss) $ 0       $ 0
Balances (in shares) 10,570,360   10,570,360   10,570,360
Balances $ 18,865   $ 18,865   $ 18,865
Acquisition of Cedar Holdings Group (in shares)         32,374
Acquisition of Cedar Holdings Group         $ 2,000
Additional Paid-in Capital [Member]          
Balances 0     880 880
Exercise of stock options (91)       (310)
Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration (165)       (347)
Repurchase and retirement of shares 0       (1,280)
Stock-based compensation 847       1,648
Other comprehensive income (loss) 0       0
Balances 591   591   591
Acquisition of Cedar Holdings Group         0
Retained Earnings [Member]          
Balances 77,323     76,208 76,208
Exercise of stock options 0       0
Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration 0       0
Repurchase and retirement of shares (158)       (1,877)
Stock-based compensation 0       0
Net income 157       2,991
Other comprehensive income (loss) 0       0
Balances 77,322   77,322   77,322
Acquisition of Cedar Holdings Group         0
AOCI Attributable to Parent [Member]          
Balances (718)     $ 473 473
Exercise of stock options 0       0
Shares deducted from exercise of stock options for payment of withholding taxes and exercise consideration 0       0
Repurchase and retirement of shares 0       0
Stock-based compensation 0       0
Other comprehensive income (loss) 1,314       123
Balances $ 596   $ 596   596
Acquisition of Cedar Holdings Group         $ 0
v3.20.2
Note 16 - Share-based Payments (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount $ 8,800   $ 8,800  
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)     2 years 7 months 6 days  
Share-based Payment Arrangement, Expense $ 800 $ 700 $ 1,600 $ 1,200
Share-based Payment Arrangement, Amount Capitalized     $ 0 $ 0
v3.20.2
Note 16 - Share-based Payments - Stock Option Transactions (Details) - $ / shares
shares in Thousands
3 Months Ended 6 Months Ended 18 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Outstanding, Number of shares (in shares) 730,037 665,156 754,497 702,337 702,337
Outstanding, Weighted average exercise price per share (in dollars per share) $ 50.85 $ 44.46 $ 49.94 $ 43.80 $ 43.80
Granted, Number of shares (in shares) 190,025 144,300 195,525 144,300  
Granted, Weighted average exercise price per share (in dollars per share) $ 59.53 $ 62.12 $ 59.19 $ 62.12  
Exercised, Number of shares (in shares) (16,922) (25,316) (41,935) (54,359)  
Exercised, Weighted average exercise price per share (in dollars per share) $ 9.79 $ 13.26 $ 16.23 $ 19.34  
Forfeited, Number of shares (in shares) (4,826) (8,550) (8,315) (15,301)  
Forfeited, Weighted average exercise price per share (in dollars per share) $ 59.15 $ 56.08 $ 60.23 $ 57.55  
Expired, Number of shares (in shares) (1,036) (675) (2,494) (2,062)  
Expired, Weighted average exercise price per share (in dollars per share) $ 58.39 $ 55.65 $ 59.86 $ 55.65  
Outstanding, Number of shares (in shares) 897,278 774,915 897,278 774,915 897,278
Outstanding, Weighted average exercise price per share (in dollars per share) $ 53.41 $ 48.63 $ 53.41 $ 48.63 $ 53.41
Options exercisable, Number of shares (in shares) 390,868 306,078 390,868 306,078 390,868
Options exercisable, Weighted average exercise price per share (in dollars per share) $ 46.20 $ 33.97 $ 46.20 $ 33.97 $ 46.20
v3.20.2
Note 16 - Stock Option Plans - Summary of Exercise Prices, Weighted Average Remaining Contractual Life and Intrinsic Values of Outstanding Options (Details)
$ / shares in Units, $ in Thousands
6 Months Ended
Jun. 30, 2020
USD ($)
$ / shares
shares
Number outstanding (in shares) | shares 897,278
Weighted average exercise price per share, options outstanding (in dollars per share) $ 53.41
Weighted average remaining contractual life, options outstanding (Year) 4 years 8 months 12 days
Aggregate intrinsic value, options outstanding | $ $ 5,351
Number exercisable (in shares) | shares 390,868
Weighted average exercise price per share, options exercisable (in dollars per share) $ 46.20
Weighted average remaining contractual life, options exercisable (Year) 3 years 4 months 24 days
Aggregate intrinsic value, options exercisable | $ $ 4,882
Exercise Price Range 01 [Member]  
Exercise price - lower limit (in dollars per share) $ 10.16
Exercise price - upper limit (in dollars per share) $ 19.95
Number outstanding (in shares) | shares 62,090
Weighted average exercise price per share, options outstanding (in dollars per share) $ 16.23
Weighted average remaining contractual life, options outstanding (Year) 1 year 2 months 12 days
Aggregate intrinsic value, options outstanding | $ $ 2,551
Number exercisable (in shares) | shares 62,090
Weighted average exercise price per share, options exercisable (in dollars per share) $ 16.23
Weighted average remaining contractual life, options exercisable (Year) 1 year 2 months 12 days
Aggregate intrinsic value, options exercisable | $ $ 2,551
Exercise Price Range 02 [Member]  
Exercise price - lower limit (in dollars per share) $ 21.10
Exercise price - upper limit (in dollars per share) $ 27.53
Number outstanding (in shares) | shares 51,250
Weighted average exercise price per share, options outstanding (in dollars per share) $ 24.11
Weighted average remaining contractual life, options outstanding (Year) 1 year 4 months 24 days
Aggregate intrinsic value, options outstanding | $ $ 1,702
Number exercisable (in shares) | shares 51,250
Weighted average exercise price per share, options exercisable (in dollars per share) $ 24.11
Weighted average remaining contractual life, options exercisable (Year) 1 year 4 months 24 days
Aggregate intrinsic value, options exercisable | $ $ 1,702
Exercise Price Range 03 [Member]  
Exercise price - lower limit (in dollars per share) $ 35.25
Exercise price - upper limit (in dollars per share) $ 37.35
Number outstanding (in shares) | shares 14,375
Weighted average exercise price per share, options outstanding (in dollars per share) $ 35.89
Weighted average remaining contractual life, options outstanding (Year) 2 years 10 months 24 days
Aggregate intrinsic value, options outstanding | $ $ 308
Number exercisable (in shares) | shares 13,125
Weighted average exercise price per share, options exercisable (in dollars per share) $ 35.95
Weighted average remaining contractual life, options exercisable (Year) 2 years 10 months 24 days
Aggregate intrinsic value, options exercisable | $ $ 280
Exercise Price Range 04 [Member]  
Exercise price - lower limit (in dollars per share) $ 46.90
Exercise price - upper limit (in dollars per share) $ 47.00
Number outstanding (in shares) | shares 15,000
Weighted average exercise price per share, options outstanding (in dollars per share) $ 47.30
Weighted average remaining contractual life, options outstanding (Year) 5 years 8 months 12 days
Aggregate intrinsic value, options outstanding | $ $ 150
Number exercisable (in shares) | shares 3,750
Weighted average exercise price per share, options exercisable (in dollars per share) $ 47.00
Weighted average remaining contractual life, options exercisable (Year) 3 years 8 months 12 days
Aggregate intrinsic value, options exercisable | $ $ 39
Exercise Price Range 05 [Member]  
Exercise price - lower limit (in dollars per share) $ 51.82
Exercise price - upper limit (in dollars per share) $ 58.65
Number outstanding (in shares) | shares 340,878
Weighted average exercise price per share, options outstanding (in dollars per share) $ 55.52
Weighted average remaining contractual life, options outstanding (Year) 4 years
Aggregate intrinsic value, options outstanding | $ $ 640
Number exercisable (in shares) | shares 175,527
Weighted average exercise price per share, options exercisable (in dollars per share) $ 55.69
Weighted average remaining contractual life, options exercisable (Year) 3 years 9 months 18 days
Aggregate intrinsic value, options exercisable | $ $ 310
Exercise Price Range 06 [Member]  
Exercise price - lower limit (in dollars per share) $ 60.01
Exercise price - upper limit (in dollars per share) $ 64.10
Number outstanding (in shares) | shares 413,685
Weighted average exercise price per share, options outstanding (in dollars per share) $ 61.71
Weighted average remaining contractual life, options outstanding (Year) 6 years 1 month 6 days
Aggregate intrinsic value, options outstanding | $ $ 0
Number exercisable (in shares) | shares 85,126
Weighted average exercise price per share, options exercisable (in dollars per share) $ 63.33
Weighted average remaining contractual life, options exercisable (Year) 5 years 3 months 18 days
Aggregate intrinsic value, options exercisable | $ $ 0
v3.20.2
Note 17 - Fair Value Measurement - Summary of the Fair Values of the Company's Derivative Instrument Assets and Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Derivative instrument asset $ 1,080 $ 731
Derivative instrument liability (561) 0
Fair Value, Recurring [Member]    
Derivative instrument asset 1,691 731
Derivative instrument liability (719)  
Total assets (liability) 972  
Total assets   731
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]    
Derivative instrument asset 0 0
Derivative instrument liability 0  
Total assets (liability) 0  
Total assets   0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]    
Derivative instrument asset 1,691 731
Derivative instrument liability (719)  
Total assets (liability) 972  
Total assets   731
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]    
Derivative instrument asset 0 0
Derivative instrument liability 0  
Total assets (liability) $ 0  
Total assets   $ 0
v3.20.2
Note 19 - Subsequent Events (Details Textual)
$ in Millions
Aug. 01, 2020
USD ($)
Subsequent Event [Member] | DISH [Member]  
Revenue Commitment $ 51.5