Tucows shows good revenue growth and lukewarm earnings growth

  On November 9 Tucows,an internet software company, released it's third quarter report.Revenue grew almost as fast as this new train goes;it showed a 70 % increase over Q3 2016.Even net income grew by almost 35%.But adjusted EBITDA grew by only about 2% for the quarter.
          9 Month Performance
      Revenues grew strongly for 9 months also -from $141 million to $239 million.Tucows seems to be following the example of Amazon and Shopify;first increase revenues and the earnings will come later.As net income dropped to $11 million from $13 million.More importantly adjusted EBITDA grew by about 15% to $26 million.It is on track to hit $36 to $38 million adjusted EBITDA for 2017 but some improvements  might send it into the $40 -$45 million range.As revenues have grown like a speeding train ,earnings have not kept pace. So adjusted EBITDA will be only slightly larger than that of 2016.However this compares favourably with Kinaxis which will have only $25 million and Shopify which has negative adjusted EBITDA.On the other hand net cash flow has grown by almost 40% for Q3 and for 9 months.So Tucows has the cash necessary to make changes and this blog has some suggestions.                                                                It would be wise for investors not to take this the wrong way as this software company is one of the most profitable technology companies on the Canadian scene. Most do not make any profit.For example, the share price has increased by $4 per share or 5% in the last month.               
                The Software and Hardware Dilemma
     Tucows makes most of it's revenues from software,in particular, from Domaine names and network services.The smallest segment is from Ting Mobile and Ting Internet this is the hardware side.This blog has proposed a number of acquisitions to feed into the Ting products.Most recently DCM and TEL both of which have telephony products.The problem is that the margin on hardware is not as great as on software.But it is clear that TC has a lot of equity available to make acquisitions both on the hardware and software side.There are only 10 million shares outstanding and it has a market capitalization of about $750 million.Tucows is due for a sizeable acquisition and a secondary equity issue.     

use Blogdaleupsome for analysis of Cdn. tech stocks ;use Blogdaleupsome for technical analysis