Tucows 2015 Annual Report Download - page 67

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, derives revenue from its Domain Service and from providing Value-
Added Services. The OpenSRS Domain Service manages 13.3 million domain names under the Tucows ICANN registrar
accreditation and for other registrars under their own accreditations. Value-Added Services include hosted email which
provides email delivery and webmail access to millions of mailboxes, Internet security services, publishing tools and
reseller billing services. All of these services are made available to end-users through a network of over 13,000 web hosts,
Internet service providers (“ISPs”), and other resellers around the world. In addition, we also derive revenue from the bulk
sale of domain names and advertising from the OpenSRS Domain Expiry Stream.
Retail, primarily our Hover website, derives 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 advertising revenue from our domain name portfolio and from our advertising-supported
website, tucows.com. We also generate revenue by offering names in our domain portfolio for resale via our reseller
network and other channels. In addition, we generate revenue from the payments for the sale of rights to gTLD strings
under the New gTLD Program.
KEY BUSINESS METRICS
We regularly review a number of business metrics, including the following key metrics 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 sets 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 required 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 and the comparability of our
operating results from period to period.
The Company believes that the provision of this supplemental non-GAAP measure allows investors to
evaluate the operational and financial performance of the Company's core business using the same evaluation measures
that management uses. Adjusted EBITDA is one of the primary measures the Company uses for planning and
budgeting purposes, incentive compensation and to monitor and evaluate our financial and operating results. 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 measure of
discretionary cash available to invest in the growth of the business. 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, differ from GAAP measures with the same captions 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. However, the Company's management compensates for these limitations by providing the relevant disclosure of
the items excluded in the calculation of adjusted EBITDA to net income based on U.S. GAAP, which should be
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