TUCOWS INC PA

Previous wording

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 and Euro; Wavelo, and Ting subscriber growth and retention rates; the number of new, renewed and transferred-in domain names we register as our business develops and competes; the effect of a potential generic top level domain (“gTLD”) expansion by the Internet Corporation for Assigned Names and Numbers (“ICANN”) on the number of domains we register and the impact it may have on related revenues; our belief regarding the underlying platform for our domain services; our expectation regarding the trend of sales of domain names; our belief that, by increasing the number of services we offer, we will be able to generate higher revenues; 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 to obtain additional financing to further accelerate the Ting Internet footprint while sustaining liquidity; 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 partnership with an affiliate of Generate TF Holdings, LLC, a Delaware limited liability company ("Generate"); 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:

Current wording

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 and Euro; Wavelo, and Ting subscriber growth and retention rates; the number of new, renewed and transferred-in domain names we register as our business develops and competes; the effect of a potential generic top level domain (“gTLD”) expansion by the Internet Corporation for Assigned Names and Numbers (“ICANN”) on the number of domains we register and the impact it may have on related revenues; our belief regarding the underlying platform for our domain services; our expectation regarding the trend of sales of domain names; our belief that, by increasing the number of services we offer, we will be able to generate higher revenues; 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 to obtain additional financing to further accelerate the Ting Internet footprint while sustaining liquidity; our expectations regarding our unrecognized tax; our expectations regarding cash from operations to fund our business; the timing, implementation and impact of the capital efficiency plan; 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 partnership with an affiliate of Generate TF Holdings, LLC, a Delaware limited liability company ("Generate"); 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:

Previous wording

For the three months ended June 30, 2024 and June 30, 2023, we reported net revenue of $89.4 million and $85.0 million, respectively.

Current wording

For the three months ended September 30, 2024 and September 30, 2023, we reported net revenue of $92.3 million and $87.0 million, respectively.

Previous wording

For the six months ended June 30, 2024 and June 30, 2023, we reported net revenue of $176.9 million and $165.4 million, respectively.

Current wording

For the nine months ended September 30, 2024 and September 30, 2023, we reported net revenue of $269.2 million and $252.4 million, respectively.

Previous wording

As of June 30, 2024, Ting Internet had access to 128,000 owned infrastructure serviceable addresses, 36,000 partner infrastructure serviceable addresses and 48,000 active subscribers under its management; compared to having access to 109,000 owned infrastructure serviceable addresses, 21,000 partner infrastructure serviceable addresses and39,000 active subscribers under its management as of June 30, 2023. These figures exclude any changes in serviceable addresses and accounts attributable to Simply Bits.

Current wording

As of September 30, 2024, Ting Internet had access to 132,000 owned infrastructure serviceable addresses, 41,000 partner infrastructure serviceable addresses and 50,000 active subscribers under its management; compared to having access to 114,000 owned infrastructure serviceable addresses, 25,000 partner infrastructure serviceable addresses and 41,000 active subscribers under its management as of September 30, 2023. These figures exclude any changes in serviceable addresses and accounts attributable to Simply Bits.

Previous wording

On February 7, 2024 Ting committed to the 2024 Ting Restructuring Plan, which aimed to realign the Company's operational structure within the Ting operating segment and reduce Ting's workforce by 13%, or 7% of the Company’s total workforce, to better support strategic objectives. The 2024 Ting Restructuring Plan was designed to streamline operations and reduce operating expenses within the Ting operating segment. Substantially all of the employees impacted by the workforce reduction were notified on February 7, 2024 and have since exited the Company.

Current wording

On February 7, 2024 Ting committed to the February 2024 workforce reduction, which aimed to realign the Company's operational structure within the Ting operating segment and reduce Ting's workforce by 13%, or 7% of the Company’s total workforce, to better support strategic objectives. The February 2024 workforce reduction was designed to streamline operations and reduce operating expenses within the Ting operating segment. Substantially all of the employees impacted by the workforce reduction were notified on February 7, 2024 and have since exited the Company. The Company incurred non-recurring charges of approximately $2.6 million in connection with the workforce reduction, primarily consisting of severance payments, notice pay, employee benefits contributions and outplacement costs.

Previous wording

The Company expects that the 2024 Ting Restructuring Plan will realize personnel and related expense (net of capitalization) savings with the majority of the savings in sales and marketing followed by smaller impacts in direct cost of revenues, general and administrative, and network, other costs. In Fiscal 2024 the realized savings will be partially offset by costs associated with the 2024 Ting Restructuring Plan. During the three months ended March 31, 2024, the Company incurred $2.6 million in costs predominantly consisting of one-time termination benefits, and to a lesser extent, continuation of benefits and outplacement costs ("Note 19 - Restructuring Costs" of the Notes to the Consolidated Financial Statements included in Part I, of this report). These costs are classified as transitional and are excluded in our Adjusted EBITDA. Please see discussion of Adjusted EBITDA as well as the Adjusted EBITDA reconciliation to net income in the Results of Operations section below. The expected savings may also be offset by increased spending related to Ting's continued expansion in existing and new markets, which may require incremental hiring for different roles, teams or markets; potential inflationary increases to salary, wages and other employee related costs that may be evaluated as necessary by management to retain and attract the best talent; or changes to the realization of capital labor impacts to net operating expenses.

Current wording

The Company expects that both the 2024 workforce reductions and Capital Efficiency Plan will realize personnel and related expense (net of capitalization) savings with the majority of the savings in sales and marketing, including related network support functions, followed by smaller impacts in technical operations and development, direct cost of revenues, network, general and administrative, and other costs. In Fiscal 2024 the realized savings will be partially offset by costs associated with both plans. These costs referenced above are classified as transitional and are excluded in our Adjusted EBITDA. Please see discussion of Adjusted EBITDA as well as the Adjusted EBITDA reconciliation to net income in the Results of Operations section below. The expected savings may also be offset by any continued spending related to Ting's expansion in serviceable markets, which may require incremental hiring for different roles, teams or markets; potential inflationary increases to salary, wages and other employee related costs that may be evaluated as necessary by management to retain and attract the best talent; or changes to the realization of capital labor impacts to net operating expenses.

Previous wording

Wavelo includes the provision of full-service platforms and professional services providing a variety of solutions that support Communication Services providers ("CSPs"), including subscription and billing management, network orchestration and provisioning, and individual developer tools. Wavelo's focus is to provide accessible telecom software to CSPs globally, minimizing network and technical barriers and improving Internet access worldwide. Wavelo's suite of flexible, cloud-based software simplifies the management of mobile and Internet network access, enabling CSPs to better utilize their existing infrastructure, focus on customer experience and scale their businesses faster. Wavelo launched as a proven asset for CSPs, with DISH using Wavelo’s Mobile Network Operating System ("MONOS") software to drive additional value within its Digital Operator Platform, and Ting integrating Wavelo’s Internet Service Operating System ("ISOS") and Subscriber Management ("SM") software to enable faster subscriber growth and footprint expansion. The Wavelo segment also includes the Platypus brand and platform, our legacy billing solution for ISPs. The revenues from Wavelo's MONOS, ISOS, SM and professional services are all generated in the U.S. and our customer agreements have set contract lengths with the underlying CSP. Similarly, Wavelo's revenues from Platypus are largely generated in the U.S., with a small portion earned in Canada and other countries.

Current wording

Wavelo includes the provision of full-service platforms and professional services providing a variety of solutions that support Communication Services providers ("CSPs"), including subscription and billing management, network orchestration and provisioning, and individual developer tools. Wavelo's focus is to provide accessible telecom software to CSPs globally, minimizing network and technical barriers and improving Internet access worldwide. Wavelo's suite of flexible, cloud-based software simplifies the management of mobile and Internet network access, enabling CSPs to better utilize their existing infrastructure, focus on customer experience and scale their businesses faster. Wavelo launched as a proven asset for CSPs, with Echostar using Wavelo’s Mobile Network Operating System ("MONOS") software to drive additional value within its Digital Operator Platform, and Ting integrating Wavelo’s Internet Service Operating System ("ISOS") and Subscriber Management ("SM") software to enable faster subscriber growth and footprint expansion. The Wavelo segment also includes the Platypus brand and platform, our legacy billing solution for ISPs. The revenues from Wavelo's MONOS, ISOS, SM and professional services are all generated in the U.S. and our customer agreements have set contract lengths with the underlying CSP. Similarly, Wavelo's revenues from Platypus are largely generated in the U.S., with a small portion earned in Canada and other countries.

Previous wording

Our primary distribution channel is a global network of more than 35,000 resellers that operate in over 200 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 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.

Current wording

Our primary distribution channel is a global network of almost 35,000 resellers that operate in over 200 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 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.

Previous wording

Wholesale, primarily branded as OpenSRS, eNom, EPAG and Ascio, derives revenue from its domain name registration service. Together the OpenSRS, eNom, EPAG and Ascio Domain Services manage 24.5 million domain names under the Tucows, eNom, EPAG and Ascio ICANN registrar accreditations and for other registrars under their own accreditations. Domains under management have increased by 0.1 million, or less than 1%, since June 30, 2023.

Current wording

Wholesale, primarily branded as OpenSRS, eNom, EPAG and Ascio, derives revenue from its domain name registration service. Together 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. Domains under management have increased by less than 0.1 million, or less than 1%, since September 30, 2023.

Previous wording

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 networks 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.

Current wording

As an ISP, we have invested and expect to continue to invest in selective fiber to the home (“FTTH”) expansion, primarily in existing footprints in the United States. The investments are a reflection of our ongoing efforts to build FTTH networks 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.

Previous wording

Wavelo launched as a proven asset for CSPs, with DISH using Wavelo’s MONOS software to drive additional value within its Digital Operator Platform. More recently, Ting Internet has also integrated Wavelo’s ISOS and SM software to enable faster subscriber growth and footprint expansion. With our external platform and professional services revenues concentrated to one customer in DISH, we are exposed to significant risk if we are unable to maintain this customer relationship or establish new relationships for any of our Platforms in the future. Additionally, our revenues as a platform provider are directly tied to the subscriber volumes of DISH's MVNO or Mobile Network Operator ("MNO") networks, and our profitability is contingent on the ability of DISH to continue to add subscribers, either from organic growth or from migration off legacy systems, onto our platforms.

Current wording

Wavelo launched as a proven asset for CSPs, with Echostar using Wavelo’s MONOS software to drive additional value within its Digital Operator Platform. More recently, Ting Internet has also integrated Wavelo’s ISOS and SM software to enable faster subscriber growth and footprint expansion. With our external platform and professional services revenues concentrated to one customer in Echostar, we are exposed to significant risk if we are unable to maintain this customer relationship or establish new relationships for any of our Platforms in the future. Additionally, our revenues as a platform provider are directly tied to the subscriber volumes of Echostar's MVNO or Mobile Network Operator ("MNO") networks, and our profitability is contingent on the ability of Echostar to continue to add subscribers, either from organic growth or from migration off legacy systems, onto our platforms.

Previous wording

The Company is entitled to a long-term payment stream that is a function of the margin generated by the transferred subscribers over the 10-year term of the DISH Purchase Agreement executed in Fiscal 2020. 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. 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. Additionally, as part of the DISH Purchase Agreement, the Company retained a small number of customer accounts associated with one MNO agreement that was not reassigned to DISH at time of sale. We continue to be subject to the minimum revenue commitments previously agreed to with this excluded MNO agreement. The Company is able to continue adding customers under the excluded MNO network in order to meet the commitment. However, with no direct ability to change customer pricing and limited ability to renegotiate contract costs or significant terms, 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. During the three months ended June 30, 2024, the Company has accrued $0.1 million of penalties associated with the minimum commitment shortfall; and $0.2 million of penalties during the six months ended June 30, 2024. The Company expects to incur penalties throughout 2024 and thereafter until the contract expires.

Current wording

The Company is entitled to a long-term payment stream that is a function of the margin generated by the transferred subscribers over the 10-year term of the Echostar Purchase Agreement executed in Fiscal 2020. 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. Additionally, given Echostar 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. Additionally, as part of the Echostar Purchase Agreement, the Company retained a small number of customer accounts associated with one MNO agreement that was not reassigned to Echostar at time of sale. We continue to be subject to the minimum revenue commitments previously agreed to with this excluded MNO agreement. The Company is able to continue adding customers under the excluded MNO network in order to meet the commitment. However, with no direct ability to change customer pricing and limited ability to renegotiate contract costs or significant terms, 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. During the three months ended September 30, 2024, the Company has accrued $0.5 million** **of penalties associated with the minimum commitment shortfall; and $0.7 million of penalties during the nine months ended September 30, 2024. The Company expects to incur penalties throughout 2024 and thereafter until the contract expires.

Previous wording

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 estimates as previously disclosed in Part II, Item 8 of our 2023 Annual Report.

Current wording

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 estimates as previously disclosed in Part II, Item 8 of our 2023 Annual Report as of the reporting date.

Previous wording

Tucows' Platform Services include the following full-service platforms from Wavelo, including MONOS, ISOS, SM and our legacy Platypus ISP Billing software. Under each of these platforms there are a variety of solutions that support CSPs, including subscription and billing management, network orchestration and provisioning, and individual developer tools. Wavelo launched as a proven asset for CSPs, with DISH using Wavelo’s MONOS software to drive additional value within its Digital Operator Platform. More recently, Ting Internet has also integrated Wavelo’s ISOS and SM software to enable faster subscriber growth and footprint expansion. Wavelo's customers are billed monthly, on a postpaid basis. The monthly fees are variable, based on the volume of their subscribers utilizing the platform during a given month, to which minimums may apply. Customers may also be billed fixed platform fees and granted fixed credits as part of the consideration for long-term contracts. Consideration received is allocated to platform services and bundled professional services and recognized as each service obligation is fulfilled. Any fixed fees for Wavelo are recognized into revenue evenly over the service period, while variable usage fees are recognized each month as they are consumed. Professional services revenue is recognized as the hours of professional services granted to the customer are used or expire. When consideration for these platform services is received before the service is delivered, the revenue is initially deferred and recognized only as the Company performs its obligation to provide services. Likewise, if platform services are delivered before the Company has the unconditional right to invoice the customer, revenue is recognized as a Contract asset.

Current wording

Tucows' Platform Services include the following full-service platforms from Wavelo, including MONOS, ISOS, SM and our legacy Platypus ISP Billing software. Under each of these platforms there are a variety of solutions that support CSPs, including subscription and billing management, network orchestration and provisioning, and individual developer tools. Wavelo launched as a proven asset for CSPs, with Echostar using Wavelo’s MONOS software to drive additional value within its Digital Operator Platform. More recently, Ting Internet has also integrated Wavelo’s ISOS and SM software to enable faster subscriber growth and footprint expansion. Wavelo's customers are billed monthly, on a postpaid basis. The monthly fees are variable, based on the volume of their subscribers utilizing the platform during a given month, to which minimums may apply. Customers may also be billed fixed platform fees and granted fixed credits as part of the consideration for long-term contracts. Consideration received is allocated to platform services and bundled professional services and recognized as each service obligation is fulfilled. Any fixed fees for Wavelo are recognized into revenue evenly over the service period, while variable usage fees are recognized each month as they are consumed. Professional services revenue is recognized as the hours of professional services granted to the customer are used or expire. When consideration for these platform services is received before the service is delivered, the revenue is initially deferred and recognized only as the Company performs its obligation to provide services. Likewise, if platform services are delivered before the Company has the unconditional right to invoice the customer, revenue is recognized as a Contract asset.

Previous wording

Although we still provide mobile telephony services to a small subset of customers retained through the Ting Mobile brand as part of the DISH Purchase Agreement executed in Fiscal 2020, this revenue stream no longer represents the Company's strategic focus going forward. Instead, we have transitioned towards being a platform provider for CSPs globally via Wavelo. Retail telephony services and transition services revenues are excluded from segment EBITDA results as they are centrally managed and not monitored by or reported to our CEO by segment.

Current wording

Although we still provide mobile telephony services to a small subset of customers retained through the Ting Mobile brand as part of the Echostar Purchase Agreement executed in Fiscal 2020, this revenue stream no longer represents the Company's strategic focus going forward. Instead, we have transitioned towards being a platform provider for CSPs globally via Wavelo. Retail telephony services and transition services revenues are excluded from segment EBITDA results as they are centrally managed and not monitored by or reported to our CEO by segment.

Previous wording

These mobile services revenue streams also include transitional services provided to DISH. These are billed monthly at set and established rates for services provided in period and include the provision of sales, marketing, order fulfillment, and data analytics related to the legacy customer base sold to DISH. The Company recognizes revenue as the Company satisfies its obligations to provide transitional services.

Current wording

These mobile services revenue streams also include transitional services provided to Echostar. These are billed monthly at set and established rates for services provided in period and include the provision of sales, marketing, order fulfillment, and data analytics related to the legacy customer base sold to Echostar. The Company recognizes revenue as the Company satisfies its obligations to provide transitional services.

Previous wording

As a form of consideration for the sale of the customer relationships, the Company receives a payout on the margin associated with the legacy customer base sold to DISH, over a period of 10 years. This has been classified as Other Income and not considered revenue in the current period.

Current wording

As a form of consideration for the sale of the customer relationships, the Company receives a payout on the margin associated with the legacy customer base sold to Echostar, over a period of 10 years. This has been classified as Other Income and not considered revenue in the current period.

Previous wording

Total net revenues for the three months ended June 30, 2024, increased by $4.4 million or 5%, to $89.4 million when compared to the three months ended June 30, 2023. The three-month increase in net revenue was driven by Tucows Domains, Ting, and Mobile Services and eliminations partially offset by a decline in Wavelo. The Tucows Domains segment increased $2.4 million primarily driven by strong domain transactions through the current period and pricing increases consistent with higher registry costs. The Ting segment increased $2.2 million in the current period as a result of subscriber growth from the continued buildout of our Fiber network across the United States. Mobile Services and eliminations increased by $0.1 million attributable to decreased intercompany revenues partially offset by decreased telephony services and decreased transitional services revenues. The Wavelo segment decreased $0.3 million in the current period primarily from the reduction in one-time professional services rendered in the current period.

Current wording

Total net revenues for the three months ended September 30, 2024, increased by $5.3 million or 6%, to $92.3 million when compared to the three months ended September 30, 2023. The three-month increase in net revenue was driven by Tucows Domains, Ting, and Mobile Services and eliminations; partially offset by a decline in revenues from Wavelo. The Tucows Domains segment increased $3.6 million primarily driven by increased domains under management, pricing increases, and strong expiry auction revenue performance. The Ting segment increased $2.5 million in the current period as a result of subscriber growth from the continued buildout of our Fiber network across the United States. Mobile Services and eliminations increased by $0.2 million attributable to decreased intercompany revenues partially offset by decreased telephony services and decreased transitional services revenues. The Wavelo segment decreased $1.0 million in the current period primarily from the reduction of both platform and other professional services revenues with customers in the current period.

Previous wording

Total net revenues for the six months ended June 30, 2024, increased by $11.5 million or 7%, to $176.9 million when compared to the six months ended June 30, 2023. The six-month increase in net revenue was driven by Tucows Domains, Ting, Wavelo, and Mobile Services and eliminations. Consistent with the above discussion, the Tucows Domains segment increased $5.1 million primarily driven by strong domain transactions and pricing adjustments through the current period. The Ting segment increased by $4.4 million in the current period as a result of subscriber growth from the continued buildout of our Fiber network across the United States. The Wavelo segment increased $1.8 million in the current period as a result of the complete DISH Boost Mobile subscriber base leveraging our platform, compared to the prior period where subscriber migrations were just completing at the end of June 30, 2023. Mobile Services and eliminations increased by $0.2 million attributable to decreased intercompany revenues partially offset by decreased telephony services, and decreased transitional services revenues.

Current wording

Total net revenues for the nine months ended September 30, 2024, increased by $16.8 million or 7%, to $269.2 million when compared to the nine months ended September 30, 2023. The nine-month increase in net revenue was driven by higher revenue across all operations. Consistent with the above discussion, the Tucows Domains segment increased $8.7 million primarily driven by increased domains under management and pricing increases through the current period. The Ting segment increased by $6.9 million in the current period as a result of subscriber growth from the continued buildout of our Fiber network across the United States. The Wavelo segment increased $0.8 million in the current period as a result of the complete Boost Mobile subscriber base migration onto our platform, compared to the prior period where subscriber migrations were only complete at the end of June 30, 2023; offset by a decrease in other professional services revenues. Mobile Services and eliminations increased by $0.4 million attributable to decreased intercompany revenues partially offset by decreased telephony services, and decreased transitional services revenues.

Previous wording

Deferred revenue at June 30, 2024, increased by $7.5 million to $155.6 million from $148.1 million at December 31, 2023. This was driven by Tucows Domains as a result of the increase in current period billings for domain name registrations and service renewals, characteristic of the seasonal renewal pattern we see during the beginning of a Fiscal Year as well as the increase in domain names under management through the current period.

Current wording

Deferred revenue at September 30, 2024, increased by $7.9 million to $156.0 million from $148.1 million at December 31, 2023. This was driven by Tucows Domains as a result of the increase in current period billings for domain name registrations and service renewals, characteristic of the seasonal renewal pattern we see during the beginning of a Fiscal Year as well as the increase in pricing and domain names under management through the current period. This was furthered by a smaller increase from Wavelo as a result of the contract liability associated with select customer contracts.

Previous wording

During both the three and six months ended June 30, 2024, a customer, DISH, within our Wavelo segment accounted for 12% and 11% of total net revenues, respectively. DISH also accounted for 12% and 10% of total net revenue during the three and six months ended June 30, 2023, respectively. As of June 30, 2024, DISH also represented for 47% of total accounts receivable. At December 31, 2023 DISH represented 59% 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, 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. Our allowance for doubtful accounts was $0.4 million as of June 30, 2024 and $0.5 million as of December 31, 2023, respectively. Based on this assessment, we expect the carrying amount of our outstanding receivables, net of allowance for doubtful accounts, to be fully collected.

Current wording

During both the three and nine months ended September 30, 2024, a customer, Echostar, within our Wavelo segment accounted for 11% and 11% of total net revenues, respectively. Echostar also accounted for 14% and 11% of total net revenue during the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, Echostar also represented for 47% of total accounts receivable. At December 31, 2023 Echostar represented 39% 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, 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. Our allowance for doubtful accounts was $0.5 million as of September 30, 2024 and $0.5 million as of December 31, 2023, respectively. Based on this assessment, we expect the carrying amount of our outstanding receivables, net of allowance for doubtful accounts, to be fully collected.

Previous wording

Ting generated $14.6 million in net revenue during the three months ended June 30, 2024, up $2.2 million or 17% compared to the three months ended June 30, 2023. This growth is driven by subscriber growth across our Fiber network relative to the three months ended June 30, 2023, as well as the continued expansion of our Ting Internet footprint to new Ting towns throughout the United States.

Current wording

Ting generated $15.3 million in net revenue during the three months ended September 30, 2024, up $2.5 million or 19% compared to the three months ended September 30, 2023. This growth is driven by subscriber growth across our Fiber network relative to the three months ended September 30, 2023, as well as the continued expansion of our Ting Internet footprint to new Ting towns throughout the United States.

Previous wording

Ting generated $28.7 million in net revenue during the six months ended June 30, 2024, up $4.4 million or 18% compared to the six months ended June 30, 2023. This growth is driven by subscriber growth across our Fiber network relative to the six months ended June 30, 2023, as well as the continued expansion of our Ting Internet footprint to new Ting towns throughout the United States.

Current wording

Ting generated $44.0 million in net revenue during the nine months ended September 30, 2024, up $6.9 million or 19% compared to the nine months ended September 30, 2023. This growth is driven by subscriber growth across our Fiber network relative to the nine months ended September 30, 2023, as well as the continued expansion of our Ting Internet footprint to new Ting towns throughout the United States.

Previous wording

As of June 30, 2024, Ting Internet had access to 128,000 owned infrastructure serviceable addresses, 36,000 partner infrastructure serviceable addresses and 48,000 active subscribers under its management; compared to having access to 109,000 owned infrastructure serviceable addresses, 21,000 partner infrastructure serviceable addresses and 39,000 active subscribers under its management as of June 30, 2023. These figures exclude any changes in serviceable addresses and subscribers attributable to Simply Bits.

Current wording

As of September 30, 2024, Ting Internet had access to 132,000 owned infrastructure serviceable addresses, 41,000 partner infrastructure serviceable addresses and 50,000 active subscribers under its management; compared to having access to 114,000 owned infrastructure serviceable addresses, 25,000 partner infrastructure serviceable addresses and 41,000 active subscribers under its management as of September 30, 2023. These figures exclude any changes in serviceable addresses and subscribers attributable to Simply Bits.

Previous wording

Net revenues from Wavelo Platform Services for the three months ended June 30, 2024, increased by $0.2 million or 1%, to $10.5 million as compared to the three months ended June 30, 2023. This is driven by lower amortization of the contract asset with DISH. The Company expects the contract asset to continue to amortize against revenue through the remainder of the contract as we continue to fulfill the performance obligations. Intercompany revenues earned for provision of services on the ISOS and SM platforms between Wavelo and Ting are included in Wavelo's segment revenues for purposes of segment analysis, but are ultimately eliminated upon consolidation. The elimination impact is presented below in Tucows Corporate - Mobile Services and Eliminations.

Current wording

Net revenues from Wavelo Platform Services for the three months ended September 30, 2024, decreased by $0.6 million or 6%, to $10.1 million as compared to the three months ended September 30, 2023. This is driven by lower platform revenues from our CSP customers in the current period. Ting saw a reduction in flat fee platform fees, while Echostar experienced some churn to subscribers under management since the three months ended September 30, 2023 which negatively impacted Wavelo's current period revenues. Intercompany revenues earned for provision of services on the ISOS and SM platforms between Wavelo and Ting are included in Wavelo's segment revenues for purposes of segment analysis, but are ultimately eliminated upon consolidation. The elimination impact is presented below in Tucows Corporate - Mobile Services and Eliminations.

Previous wording

Net revenues from Wavelo Platform Services for the six months ended June 30, 2024, increased by $3.1 million or 18%, to $19.9 million as compared to the six months ended June 30, 2023. This is driven from increased MONOS platform revenues earned from a full six months of fully loaded revenues from the completed migration of DISH's Boost Mobile subscribers at the end of June 30, 2023. The increased platform fees in the current period are partially offset by a reduction of revenues related to the amortization of the contract asset with DISH. The Company expects the contract asset to continue to amortize against revenue through the remainder of the contract as we continue to fulfill the performance obligations. Intercompany revenues earned for provision of services on the ISOS and SM platforms between Wavelo and Ting are included in Wavelo's segment revenues for purposes of segment analysis, but are ultimately eliminated upon consolidation. The elimination impact is presented below in Tucows Corporate - Mobile Services and Eliminations.

Current wording

Net revenues from Wavelo Platform Services for the nine months ended September 30, 2024, increased by $2.4 million or 9%, to $29.9 million as compared to the nine months ended September 30, 2023. This is driven from increased MONOS platform revenues earned from a full nine months of fully loaded revenues from the completed migration of Echostar's Boost Mobile subscribers at the end of June 30, 2023. The increased platform fees from Echostar in the current period are partially offset by a reduction of revenues from Ting, as discussed above. Intercompany revenues earned for provision of services on the ISOS and SM platforms between Wavelo and Ting are included in Wavelo's segment revenues for purposes of segment analysis, but are ultimately eliminated upon consolidation. The elimination impact is presented below in Tucows Corporate - Mobile Services and Eliminations.

Previous wording

Net revenues from Other Professional Services for the three months ended June 30, 2024, decreased by $0.4 million or 100%, to nil as compared to the three months ended June 30, 2023. These revenues related to the provision of standalone technology services development work for our CSP customers and are non-recurring and often one-time in nature, and expectantly can fluctuate period over period. These revenues depend on the volume (if any) and scope of standalone technology services development work our customers engage us to perform. In the current period, we performed less standalone professional services for our customers.

Current wording

Net revenues from Other Professional Services for the three months ended September 30, 2024, decreased by $0.4 million or 98% as compared to the three months ended September 30, 2023. These revenues related to the provision of standalone technology services development work for our CSP customers and are non-recurring and often one-time in nature, and expectantly can fluctuate period over period. These revenues depend on the volume (if any) and scope of standalone technology services development work our customers engage us to perform. In the current period, we performed less standalone professional services for our customers.

Previous wording

Net revenues from Other Professional Services for the six months ended June 30, 2024, decreased by $1.2 million or 100%, to nil as compared to the six months ended June 30, 2023. These revenues related to the provision of standalone technology services development work for our CSP customers and are non-recurring and often one-time in nature, and expectantly can fluctuate period over period. These revenues depend on the volume (if any) and scope of standalone technology services development work our customers engage us to perform. In the current period, we performed less standalone professional services for our customers.

Current wording

Net revenues from Other Professional Services for the nine months ended September 30, 2024, decreased by $1.6 million or 98% as compared to the nine months ended September 30, 2023. These revenues related to the provision of standalone technology services development work for our CSP customers and are non-recurring and often one-time in nature, and expectantly can fluctuate period over period. These revenues depend on the volume (if any) and scope of standalone technology services development work our customers engage us to perform. In the current period, we performed less standalone professional services for our customers.

Previous wording

During the three months ended June 30, 2024, Wholesale domain services net revenue increased by $1.7 million or 4%, to $49 million as compared to the three months ended June 30, 2023. Increases from Wholesale domain registrations were driven from strong domain transactions through the current period and various price increases since June 30, 2023.

Current wording

During the three months ended September 30, 2024, Wholesale domain services net revenue increased by $2.2 million or 5%, to $50 million as compared to the three months ended September 30, 2023. Increases from Wholesale domain registrations were driven from slight increase in domains under management through the current period and various price increases since September 30, 2023.

Previous wording

During the six months ended June 30, 2024, Wholesale domain services net revenue increased by $3.6 million or 4%, to $96.7 million as compared to the six months ended June 30, 2023. Increases from Wholesale domain registrations were driven from strong domain transactions through the current period and various price increases since June 30, 2023.

Current wording

During the nine months ended September 30, 2024, Wholesale domain services net revenue increased by $5.8 million or 4%, to $146.5 million as compared to the nine months ended September 30, 2023. Increases from Wholesale domain registrations were driven from slight increase in domains under management through the current period and various price increases since September 30, 2023.

Previous wording

As of June 30, 2024, together, the OpenSRS, eNom, EPAG, and Ascio Domain Services manage 24.5 million domain names under the Tucows, eNom, EPAG and Ascio ICANN registrar accreditations and for other registrars under their own accreditations. Domains under management has increased 0.1 million, or less than 1%, since June 30, 2023.

Current wording

As of September 30, 2024 together, 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. Domains under management has increased by less than 0.1 million, or less than 1%, since September 30, 2023.

Previous wording

During the three months ended June 30, 2024, value-added services net revenue decreased by $0.2 million or 4%, to $4.5 million as compared to the three months ended June 30, 2023. The decrease in value-added service revenue was driven by lower digital certifications and email revenues, partially offset by strong expiry sales and the inclusion of our storefront operations through the current period.

Current wording

During the three months ended September 30, 2024, value-added services net revenue decreased by $0.9 million or 21%, to $5.2 million as compared to the three months ended September 30, 2023. The decrease in value-added service revenue was driven by lower digital certifications and email revenues, partially offset by strong expiry sales and the inclusion of our storefront operations through the current period.

Previous wording

During the six months ended June 30, 2024, value-added services net revenue decreased by $0.1 million or 1%, to $9.2 million as compared to the six months ended June 30, 2023. The decrease in value-added service revenue was driven by lower digital certifications and email revenues, partially offset by strong expiry sales and the inclusion of our storefront operations through the current period.

Current wording

During the nine months ended September 30, 2024, value-added services net revenue decreased by $1.0 million or 7%, to $14.4 million as compared to the nine months ended September 30, 2023. The decrease in value-added service revenue was driven by lower digital certifications and email revenues, partially offset by strong expiry sales and the inclusion of our storefront operations through the current period.

Previous wording

During the three months ended June 30, 2024, retail domain services net revenue increased by $0.9 million or 11%, to $9.3 million as compared to the three months ended June 30, 2023. This was driven by increases across domain name registrations, domain name portfolio sales, and Exact Hosting revenues in the current period.

Current wording

During the three months ended September 30, 2024, retail domain services net revenue increased by $0.5 million or 5%, to $9.7 million as compared to the three months ended September 30, 2023. This was driven by price increases across domain name registrations, and strong Exact Hosting revenues in the current period.

Previous wording

During the six months ended June 30, 2024, retail domain services net revenue increased by $1.6 million or 10%, to $18.4 million as compared to the six months ended June 30, 2023. This was driven by increases across domain name registrations, domain name portfolio sales, and Exact Hosting revenues in the current period.

Current wording

During the nine months ended September 30, 2024, retail domain services net revenue increased by $1.9 million or 7%, to $28.0 million as compared to the nine months ended September 30, 2023. This was driven by a large transition of domain names from wholesale to retail, price increases across domain name registrations, strong domain name portfolio sales, and strong Exact Hosting revenues in the current period.

Previous wording

Net revenues from Mobile Services and eliminations for the three months ended June 30, 2024 increased by $0.1 million or 5%, to $2.0 million as compared to the three months ended June 30, 2023. This was driven by lower intercompany corporate eliminations of $0.4 million, primarily a result of decreased revenues associated with ISOS and SM platforms billing between Wavelo and Ting. This was partially offset by decreased revenues of $0.3 million associated with the mobile telephony services and device revenues from the small group of customers retained by the Company as part of the DISH Purchase Agreement primarily a result of organic subscriber churn experienced relative to the three months ended June 30, 2023. This was also furthered by decreased transitional services of $0.1 million, from a decreased level of dedicated support services provided to DISH in connection with the legacy Ting Mobile customer base.

Current wording

Net revenues from Mobile Services and eliminations for the three months ended September 30, 2024 increased by $0.2 million or 10%, to $2.2 million as compared to the three months ended September 30, 2023. This was driven by lower intercompany corporate eliminations of $0.4 million, primarily a result of decreased revenues associated with ISOS and SM platforms billing between Wavelo and Ting. This was partially offset by decreased revenues of $0.2 million associated with the mobile telephony services and device revenues from the small group of customers retained by the Company as part of the Echostar Purchase Agreement primarily a result of organic subscriber churn and plan mix shifting towards lower price point rate plans compared to the three months ended September 30, 2023. This was also furthered by decreased transitional services of $0.1 million, from a decreased level of dedicated support services provided to Echostar in connection with the legacy Ting Mobile customer base.

Previous wording

Net revenues from Mobile Services and eliminations for thesix months ended June 30, 2024 increased by than $0.2 million or 5%, to $4.1 million as compared to thesix months ended June 30, 2023. This was driven by lower intercompany corporate eliminations of $0.9 million, primarily a result of decreased revenues associated with ISOS and SM platforms billing between Wavelo and Ting. This was partially offset by decreased revenues of $0.5 million associated with the mobile telephony services and device revenues from the small group of customers retained by the Company as part of the DISH Purchase Agreement primarily a result of organic subscriber churn experienced relative to thesix months ended June 30, 2023. This was also furthered by decreased transitional services of $0.2 million, from a decreased level of dedicated support services provided to DISH in connection with the legacy Ting Mobile customer base.

Current wording

Net revenues from Mobile Services and eliminations for thenine months ended September 30, 2024 increased by $0.4 million or 7%, to $6.3 million as compared to thenine months ended September 30, 2023. This was driven by lower intercompany corporate eliminations of $1.3 million, primarily a result of decreased revenues associated with ISOS and SM platforms billing between Wavelo and Ting. This was partially offset by decreased revenues of $0.9 million associated with the mobile telephony services and device revenues from the small group of customers retained by the Company as part of the Echostar Purchase Agreement primarily a result of organic subscriber churn and plan mix shifting towards lower price point rate plans compared to thenine months ended September 30, 2023. This was also furthered by decreased transitional services of $0.3 million, from a decreased level of dedicated support services provided to Echostar in connection with the legacy Ting Mobile customer base.

Previous wording

These mobile services costs also include the personnel and related costs of transitional services provided to DISH. These are billed monthly at set and established rates for services provided in period and include the provision of sales, marketing, order fulfillment, and data analytics related to the legacy customer base sold to DISH. The Company recognizes costs as the Company satisfies its obligations to provide professional services.

Current wording

These mobile services costs also include the personnel and related costs of transitional services provided to Echostar. These are billed monthly at set and established rates for services provided in period and include the provision of sales, marketing, order fulfillment, and data analytics related to the legacy customer base sold to Echostar. The Company recognizes costs as the Company satisfies its obligations to provide professional services.

Previous wording

Total cost of revenues for the three months ended June 30, 2024, increased by $1.7 million or 2%, to $68.6 million from $66.9 million in the three months ended June 30, 2023. The three-month increase in cost of revenues was driven by increases across Tucows Domains, Network Expenses, and Mobile Service and eliminations by $1.5 million, $1.1 million, and $0.1 million, respectively. The increase in Tucows Domains of $1.5 million was primarily a result of strong domain transactions through the current period. Network Expenses increase of $1.1 million is primarily a result of incremental depreciation associated with the continuing expansion of the Ting Internet network and development of Wavelo's platform assets. The increase in Mobile Services and eliminations of $0.1 million was a primarily a result of higher mobile telephony services costs due to plan mix changes in the current period. These increases were partially offset by a decrease in both Ting and Wavelo of $0.6 million and $0.4 million, respectively. The decrease in Ting of $0.3 million was primarily driven by the reduction in headcount following the 2024 Tings Restructuring Plan. The decrease in Wavelo of $0.4 million was primarily driven by Other Professional Services, consistent with less standalone technology development work and revenues in the current period.

Current wording

Total cost of revenues for the three months ended September 30, 2024, decreased by $0.1 million or 0%, to $70.1 million from $70.2 million in the three months ended September 30, 2023. The three-month decrease in cost of revenues was driven by decreases across Network Expenses, Ting, and Wavelo of $2.0 million, $0.5 million, and $0.5 million, respectively. The decrease in Network Expenses of $2.0 million was primarily due to a decrease in impairment charges within the Ting segment compared to the three months ended September 30, 2023. The decrease in Ting of $0.5 million was primarily a result of savings from Ting's workforce reduction. The decrease in Wavelo of $0.5 million was driven by the absence of deferred contract amortization which was completed in July 2024. These decreases were offset by increases across Tucows Domains and Mobile Service and eliminations of $2.2 million and $0.8 million, respectively. The increase in Tucows Domains of $2.2 million was primarily a result of an increase in domains under management and cost increases through the current period. The increase in Mobile Services and eliminations of $0.8 million was primarily a result of higher mobile telephony services costs due to plan mix changes in the current period and MNO penalties.

Previous wording

Total cost of revenues for the six months ended June 30, 2024, increased by $4.5 million or 3%, to $137.8 million from $133.3 million in the six months ended June 30, 2023. The six-month increase in cost of revenues was driven by increases across Tucows Domains, Network Expenses, Ting, and Mobile Service and eliminations by $3.1 million, $1.4 million, $0.8 million, and $0.3 million, respectively. The increase in Tucows Domains of $3.1 million was primarily a result of strong domain transactions through the current period. Network Expenses increase of $1.4 million is primarily a result of incremental depreciation associated with the continuing expansion of the Ting Internet network and development of Wavelo's platform assets, partially offset by the absence of impairment charges within the Ting segment. The increase in Ting of $0.8 million was primarily driven by the costs of revenues associated with growth in active subscribers. The increase in Mobile Services and eliminations of $0.2 million was a primarily a result of higher mobile telephony services costs due to plan mix changes in the current period. These increases were partially offset by a decrease in Wavelo of $0.7 million primarily driven by Other Professional Services, consistent with less standalone technology development work and revenues in the current period.

Current wording

Total cost of revenues for the nine months ended September 30, 2024, increased by $4.4 million or 2%, to $207.9 million from $203.5 million in the nine months ended September 30, 2023. The nine-month increase in cost of revenues was driven by increases across Tucows Domains, Mobile Service and eliminations, and Ting of $5.3 million, $1.0 million, and $0.2 million, respectively. The increase in Tucows Domains of $5.3 million was primarily a result of an increase in registry costs and domains under management through the current period. The increase in Mobile Services and eliminations of $1.0 million was primarily a result of higher mobile telephony services costs due to plan mix changes and MNO penalties in the current period. The increase in Ting of $0.2 million was primarily driven by the costs of revenues associated with growth in active subscribers. These increases were partially offset by decreases in Wavelo and Network Expenses of $1.5 million and $0.7 million, respectively. The decrease in Wavelo of $1.5 million was primarily driven by Other Professional Services, consistent with less standalone technology development work and revenues in the current period. The decrease in Network Expenses of $0.7 million is primarily due to the absence of impairment charges within the Ting segment, offset by incremental depreciation associated with the continuing expansion of the Ting Internet network and development of Wavelo's platform assets.