As far as the stock price goes, despite the company repurchasing 9.7m shares (for almost $7m), so far this year, TCX has been "dead money" in 2010. I sensed alot of optimism in the CC, so I am not too upset, but couldn't they offer a dividend and open up the stock to other potential investors looking for income? There is propably $2.5t stuck in money market funds right now earning nothing. When they state, "We also believe that returning capital to shareholders is the most appropriate use of our capital", it shouldn't exclusively mean buying back shares. (And if they are doing the buyback just to offset some future dilution from stock options, then they are being somewhat dishonest about this whole thing.
With so much repurchase they should be making money at this point. I think the repurchase is an effective way of increasing ESOP value but provides nothing for the common investor. If you look through the statement they are not paying attention to their costs.
For six months 2009 vs 2010 sales up less than 5% while expenses are up. Just marketing costs are up to 3.64M from 2.69M. That is .95M more for 1.17M more in sales. General and Administrative costs are up over 2M from last year. If you just take those lines Tucows is paying 3M more for 1.17M in sales or for simplification 2.56x sales as expense.
I am really unhappy with Tucows management. They blew almost 20M in the past 5 years on poor acquisitions and execution and spent most of the time blaming the market for the poor share price. They want to buy back enough stock to go private since this seems to be ending up a cash cow for employees and not investors. I've held this for over 5 years (disclosure).
Forward currency contract gains aren't profit. That is unless they are getting into another new business they don't understand.
I haven't held this stock for even a year, but looking over the past 5 years, I can understand your displeasure with this as an investment. In fairness to TwoCows management, I do think they have a valid point in citing the stronger Canadian dollar as a major factor in the rise in operating expenses. (The "loonie" was quite a bit stronger this year over last). And they do seem to have gotten over "M&A" as a way to grow their business. Their margins aren't great, but the revenue is pretty repeatable and the business isn't capital intensive. (Which is why I feel they should rebrand themselves as a dividend paying stock).