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 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:

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; 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

Our Chief Executive Officer (CEO), who is also our chief operating decision maker, reviews the operating results of Ting, Wavelo and Tucows Domains as three distinct segments in order to make key operating decisions as well as evaluate segment performance. Certain revenues and expenses disclosed under the Corporate category are excluded from segment earnings before interest, tax, depreciation and amortization ("EBITDA") results as they are centrally managed and not monitored by or reported to our CEO by segment, including retail mobile services, the 10-year payment stream on transferred legacy Mobile subscribers, eliminations of intercompany transactions, portions of Finance and Human Resources, Legal and Corporate Information Technology ("IT") shared services.

Current wording

Our Chief Executive Officer ("CEO"), who is also our chief operating decision maker, regularly reviews the operating results of Ting, Wavelo and Tucows Domains as three distinct segments in order to make key operating decisions as well as evaluate segment performance. Certain revenues and expenses disclosed under the Corporate category are excluded from segment adjusted earnings before interest, tax, depreciation and amortization ("Segment Adjusted EBITDA") results as they are centrally managed and not monitored by or reported to our CEO by segment, including mobile retail services, eliminations of intercompany transactions, portions of Finance and Human Resources that are centrally managed, Legal and Corporate Information Technology ("IT") shared services.

Previous 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.

Current wording

For the three months ended March 31, 2025 and March 31, 2024, we reported net revenue of $94.6 million and $87.5 million, respectively.

Previous 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.

Current wording

As of March 31, 2025, Ting Internet had access to 133,000 owned infrastructure serviceable addresses, 54,000 partner infrastructure serviceable addresses and 52,000 active subscribers under its management; compared to having access to 124,000 owned infrastructure serviceable addresses, 33,000 partner infrastructure serviceable addresses and 46,000 active subscribers under its management as of March 31, 2024. These figures exclude any changes in serviceable addresses and accounts attributable to Simply Bits.

Previous 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.

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 $3.2 million in the first quarter of fiscal 2024 in connection with the workforce reduction, primarily consisting of severance payments, notice pay, employee benefits contributions and outplacement costs.

Previous wording

On October 30, 2024, Ting undertook a capital efficiency plan (the “Capital Efficiency Plan”) to reflect the ongoing operational and financial prioritization of the Ting business and to lower the Company's year-over-year operating expenses, which impacted approximately 42% of Ting's workforce or 17% of the Company's total workforce. The Company estimates that it will incur non-recurring charges of approximately $7.4 million in connection with the Plan, primarily consisting of severance payments, notice pay, employee benefits contributions and outplacement costs. The Company expects that the implementation of the headcount reductions and majority of the charges associated with the Capital Efficiency Plan and cash payments will be incurred in the fourth quarter of fiscal 2024.

Current wording

On October 30, 2024, Ting undertook the 2024 Capital Efficiency Plan to reflect the ongoing operational and financial prioritization of the Ting business and to lower the Company's year-over-year operating expenses, which impacted approximately 42% of Ting's workforce or 17% of the Company's total workforce. The Company incurred non-recurring charges of approximately $7.7 million in the fourth quarter of fiscal 2024 in connection with the 2024 Capital Efficiency Plan, primarily consisting of severance payments, notice pay, employee benefits contributions and outplacement costs.

Previous 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.

Current wording

The February 2024 Workforce Reduction and 2024 Capital Efficiency Plan realized 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 the prior fiscal year ended December 31, 2024 ("Fiscal 2024") the realized savings were partially offset by costs associated with both plans. These costs referenced above were classified as transitional and were excluded in our Adjusted EBITDA, which is a non-GAAP financial measure. Please see discussion of Adjusted EBITDA as well as the Adjusted EBITDA reconciliation to net income in the Results of Operations section below. The 2024 Capital Efficiency Plan has also translated into reduced capital expenditures related to growth and expansion of new markets, as Ting shifted focus to completing builds in existing markets.

Previous 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.

Current wording

Our primary distribution channel is a global network of almost 35,000 resellers that operate in almost 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 24.6 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.

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 24.3 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 decreased slightly by 0.4 million since March 31, 2024.

Previous wording

Retail, primarily the Hover and eNom portfolio of websites, including eNom, and eNom Central, derive revenues from the sale of domain name registration and email services to individuals and small businesses. Our retail domain services also include our Personal Names Service – based on over 36,000 surname domains – which allows roughly two-thirds of Americans to purchase an email address based on their last name. The retail segment now includes the sale of the rights to its portfolio of surname domains used in connection with our RealNames email service and our Exact Hosting Service, that provides Linux hosting services for individuals and small businesses.

Current wording

Retail, primarily the Hover and eNom portfolio of websites, including eNom, and eNom Central, derive revenues from the sale of domain name registration and email services to individuals and small businesses. Our retail domain services also include our Personal Names Service – based on over 34,000 surname domains – which allows roughly two-thirds of Americans to purchase an email address based on their last name. The retail segment now includes the sale of the rights to its portfolio of surname domains used in connection with our RealNames email service and our Exact Hosting Service, that provides Linux hosting services for individuals and small businesses.

Previous wording

Tucows reports all financial information in accordance with U.S. 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 excludes 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 as well as the Adjusted EBITDA reconciliation to net income in the Results of Operations section below.

Current wording

Tucows reports all financial information in accordance with U.S. 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 excludes certain non-cash and other charges as we believe that the non-GAAP information enhances investors’ overall understanding of our financial performance, but should not be considered in isolation from or as a replacement for the most directly comparable GAAP financial measures. Please see discussion of Adjusted EBITDA as well as the Adjusted EBITDA reconciliation to net income in the Results of Operations section below.

Previous 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.

Current wording

As an ISP, we have invested and expect to continue to invest in selective 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.

Previous 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.

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 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 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.

Current wording

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 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.

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 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.

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 the fiscal year ended December 31, 2020 (“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 March 31, 2025, the Company has accrued $1.3 million** **of penalties associated with the minimum commitment shortfall. The Company expects to incur penalties throughout 2025 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 as of the reporting date.

Current wording

The preparation of our consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience, available market information, as applicable, and on various other assumptions that are believed to be reasonable under the circumstances at the time they are made. Under different assumptions or conditions, the actual results will differ, potentially materially, from those previously estimated. Many of the conditions impacting these assumptions and estimates are outside of the Company's control. Management evaluates its estimates on an on-going basis. There have been no material changes to the critical accounting estimates as previously disclosed in Part II, Item 8 of our 2024 Annual Report as of the reporting date.

Previous wording

RESULTS OF OPERATIONS FOR THE three and nine months ended September 30, 2024 AS COMPARED TO THE three and nine months ended September 30, 2023

Current wording

RESULTS OF OPERATIONS FOR THE three months ended March 31, 2025 AS COMPARED TO THE three months ended March 31, 2024

Previous wording

This revenue stream includes any other professional services earned in connection with the Wavelo business from the provision of standalone technology services development work. These are billed to our customers monthly at set and established rates for services provided in period. The Company recognizes revenue as the Company satisfies its obligations to provide professional services.

Current wording

This revenue stream includes any other professional services earned in connection with the Wavelo business from the provision of standalone technology services development work. These are billed based on separate Statement of Work arrangements for bespoke feature development. The Company recognizes revenue at the point-in-time when the final acceptance criteria have been met.

Previous 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.

Current wording

Total net revenues for the three months ended March 31, 2025, increased by $7.1 million or 8%, to $94.6 million when compared to the three months ended March 31, 2024. The increase in net revenue was driven by Tucows Domains, Ting, and Wavelo; partially offset by a decline in revenues from Mobile Services and eliminations. The Tucows Domains segment increased $3.4 million primarily driven by pricing increases and strong expiry auction revenue performance. The Ting segment increased $2.2 million in the current period as a result of subscriber growth on our Fiber network across the United States. The Wavelo segment increased $2.0 million in the current period primarily driven by increased revenues from both existing and new customers. Mobile Services and eliminations decreased by $0.4 million attributable to decreased telephony services and decreased transitional services revenues, as well as a slight increase in intercompany revenues.

Previous 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.

Current wording

Deferred revenue at March 31, 2025, increased by $5.5 million to $162.3 million from $156.8 million at December 31, 2024. 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 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 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.

Current wording

During both the three months ended March 31, 2025 and March 31, 2024, a customer, EchoStar, within our Wavelo segment accounted for 12% and 10.5% of total net revenues. As of March 31, 2025, EchoStar also represented for 55% of total accounts receivable. As of December 31, 2024 EchoStar represented 56% 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 $1.0 million as of March 31, 2025 and $0.9 million as of December 31, 2024, 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 $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.

Current wording

Ting generated $16.3 million in net revenue during the three months ended March 31, 2025, up $2.2 million or 16% compared to the three months ended March 31, 2024. This growth is driven by subscriber growth across our Fiber network relative to the three months ended March 31, 2024, as well as the continued expansion of our Ting Internet footprint to new Ting towns throughout the United States.

Previous 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.

Current wording

As of March 31, 2025, Ting Internet had access to 133,000 owned infrastructure serviceable addresses, 54,000 partner infrastructure serviceable addresses and 52,000 active subscribers under its management; compared to having access to 124,000 owned infrastructure serviceable addresses, 33,000 partner infrastructure serviceable addresses and 46,000 active subscribers under its management as of March 31, 2024. These figures exclude any changes in serviceable addresses and accounts attributable to the Simply Bits acquisition.

Previous 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.

Current wording

Net revenues from Wavelo Platform Services for the three months ended March 31, 2025, increased by $2.0 million or 22%, to $11.4 million as compared to the three months ended March 31, 2024. The increase in net revenue is driven by incremental revenues from existing customers, EchoStar following contract renewal, Ting, as well as new customers. 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 Corporate and all other - Mobile Services and Eliminations.

Previous 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.

Current wording

Net revenues from Other Professional Services for the three months ended March 31, 2025 decreased from less than $0.1M in the three months ended March 31, 2024 to NIL million in the current period. 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 no standalone professional services for our customers.

Previous 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.

Current wording

During the three months ended March 31, 2025, Wholesale domain services net revenue increased by $1.8 million or 4%, to $50 million as compared to the three months ended March 31, 2024. Increases from Wholesale domain registrations were driven by various price increases since March 31, 2024.

Previous 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.

Current wording

As of March 31, 2025 together, the OpenSRS, eNom, EPAG, and Ascio Domain Services manage 24.3 million domain names under the Tucows, eNom, EPAG and Ascio ICANN registrar accreditations and for other registrars under their own accreditations. Domains under management was down slightly by 0.4 million domain names compared to March 31, 2024.

Previous 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.

Current wording

During the three months ended March 31, 2025, value-added services net revenue increased by $1.2 million or 26%, to $5.9 million as compared to the three months ended March 31, 2024. The increase in value-added service revenue was driven by strong expiry auction sales in the current period.

Previous 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.

Current wording

During the three months ended March 31, 2025, retail domain services net revenue increased by $0.3 million or 3%, to $9.3 million as compared to the three months ended March 31, 2024. This was driven by price increases across domain name registrations and RealNames products in the current period, partially offset by a decrease in portfolio sales.

Previous 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.

Current wording

Net revenues from Mobile Services and eliminations for the three months ended March 31, 2025 decreased by $0.5 million or 24%, to $1.6 million as compared to the three months ended March 31, 2024. This was driven 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 March 31, 2024. 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. Furthermore, there was an increase in intercompany corporate eliminations of $0.2 million, primarily a result of increased revenues associated with ISOS and SM platforms billing between Wavelo and Ting.

Previous 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.

Current wording

Total cost of revenues for the three months ended March 31, 2025, increased by $1.9 million or 3%, to $71.1 million from $69.1 million in the three months ended March 31, 2024. The three-month increase in cost of revenues was driven by increases across Tucows Domains, Mobile Service and eliminations, and Ting of $1.7 million, $1.4 million, and $0.4 million, respectively. The increase in Tucows Domains of $1.7 million was primarily a result of cost increases through the current period. The increase in Mobile Services and eliminations of $1.4 million was primarily a result of higher mobile telephony services costs due to MNO penalties and plan mix changes 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 across Network Expenses and Wavelo of $1.4 million and $0.2 million, respectively. The decrease in Network Expenses of $1.4 million was primarily driven by decreased people and software costs following the execution of the 2024 Capital Efficiency Plan in October 2024. The decrease in Wavelo of $0.2 million was driven by the absence of contract fulfillment costs associated with select customer contracts.

Previous wording

Deferred costs of fulfillment as of September 30, 2024, increased by $5.1 million, or 5%, to $116 million from $111.1 million at December 31, 2023. This was primarily driven by Tucows Domains with an increase of $5.8 million, from 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 and registry cost increases through the current period, consistent with the increase in deferred revenues discussed above. This increase was partially offset by Wavelo, with a decrease of $0.7 million, primarily related to the completion of Other Professional Services where the deferred costs to fulfill those services were amortized into costs of revenues in the prior period.

Current wording

Deferred costs of fulfillment as of March 31, 2025, increased by $4.0 million, or 3%, to $121 million from $117.0 million at December 31, 2024. This was driven by Tucows Domains with an increase of $4.0 million from 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 registry costs through the current period, consistent with the increase in deferred revenues discussed above.

Previous wording

During the three months ended September 30, 2024, costs related to provisioning high speed Internet access for Ting and its subsidiaries - Cedar and Simply Bits, decreased by $0.6 million or 12%, to $4.3 million as compared to three months ended September 30, 2023. This was driven by a reduction in headcount following the February 2024 Ting workforce reduction. This was partially offset by the subscriber growth across our Fiber network driving an increase in costs of revenues.

Current wording

During the three months ended March 31, 2025, costs related to provisioning high speed Internet access for Ting and its subsidiaries - Cedar and Simply Bits, increased by $0.4 million or 7%, to $5.8 million as compared to three months ended March 31, 2024. Consistent with the discussion above in the Net Revenue section, the subscriber growth across our Fiber network drove an increase in costs of revenue.

Previous wording

Cost of revenues from Wavelo Platform Services for the three months ended September 30, 2024 decreased by $0.3 million or 82% to $0.1 million as compared to the three months ended September 30, 2023. This was driven by the absence of the amortization of previously capitalized costs incurred to fulfill the Echostar Master Services Agreement ("MSA") over the term of the agreement, as the agreement ended in July 2024.

Current wording

Cost of revenues from Wavelo Platform Services for the three months ended March 31, 2025 decreased by $0.2 million or 65% to $0.1 million as compared to the three months ended March 31, 2024. This was driven by the absence of the amortization of previously capitalized costs incurred to fulfill the EchoStar Master Services Agreement ("MSA") over the term of the agreement, as the agreement ended in July 2024.

Previous wording

Cost of revenues from Other Professional Services for the three months ended September 30, 2024, decreased by $0.2 million or 100%, to nil as compared to $0.2 million for the three months ended September 30, 2023. Costs of revenues to provide other professional services change depending on the nature and scope of work we are engaged to perform for our customers for select statements of work. These cost of 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. The decrease is aligned to the decrease in Net Revenues discussed above.

Current wording

Cost of revenues from Other Professional Services for the three months ended March 31, 2025 decreased from less than $0.1 million for the three months ended March 31, 2024 to NIL million in the current period. Costs of revenues to provide other professional services change depending on the nature and scope of work we are engaged to perform for our customers for select statements of work. These cost of 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 no standalone professional services for our customers. The decrease is aligned to the decrease in Net Revenues discussed above.

Previous wording

Costs for Wholesale domain services for the three months ended September 30, 2024, increased by $2.1 million or 6%, to $40.2 million, as compared to $38.1 million to the three months ended September 30, 2023. Increases from Wholesale domain registrations were primarily driven from a slight increase in domains under management through the current period and various registry gTLD cost increases since September 30, 2023. The increase is aligned to the increase in Net Revenues discussed above.

Current wording

Costs for Wholesale domain services for the three months ended March 31, 2025, increased by $1.7 million or 4%, to $40.4 million, as compared to $38.7 million for the three months ended March 31, 2024. Increases from Wholesale domain registrations were primarily driven by various registry gTLD cost increases since March 31, 2024. The increase is aligned to the increase in Net Revenues discussed above.

Previous wording

Cost of revenues from Mobile Services and Eliminations for the three months ended September 30, 2024, increased by $0.8 million or 29%, to $3.3 million as compared to the three months ended September 30, 2023. The increase is driven by increased costs associated with mobile telephony services from the small group of customers retained by the Company as part of the Echostar Purchase Agreement due to plan mix changes towards unlimited plans. The Company accrued $0.5 million in penalties associated with the MNO minimum commitment shortfall in the three months ended September 30, 2024, as compared to $0.1 million in the three months ended September 30, 2023. The company expects to continue to incur penalties through the end of Fiscal 2024 and thereafter should limited subscriber growth persist. This was partially offset by a decrease in transitional services costs provided to Echostar in connection with the legacy Ting Mobile customer base, consistent with the above discussion around net revenues.

Current wording

Cost of revenues from Mobile Services and Eliminations for the three months ended March 31, 2025, increased by $1.4 million or 52%, to $4.1 million as compared to the three months ended March 31, 2024. The increase is primarily driven by increased costs associated with mobile telephony services from the small group of customers retained by the Company as part of the EchoStar Purchase Agreement due to plan mix changes towards unlimited plans. The Company accrued$1.3 million in penalties associated with the MNO minimum commitment shortfall in the three months ended March 31, 2025, as compared to $0.2 million in the three months ended March 31, 2024. The company expects to continue to incur penalties through the end of Fiscal 2025 and thereafter should limited subscriber growth persist. The increase on cost of revenues was partially offset by a decrease in transitional services costs provided to EchoStar in connection with the legacy Ting Mobile customer base, consistent with the above discussion around net revenues.

Previous wording

Sales and marketing expenses for the three months ended September 30, 2024, decreased by $2.1 million or 12%, to $15.2 million as compared to the three months ended September 30, 2023. The decrease was primarily driven by Ting's reduced marketing spend resulting in lower media placements and other customer acquisition related costs through the current period.

Current wording

Technical operations and development expenses for the three months ended March 31, 2025, decreased by $0.6 million, or 12%, to $4.4 million when compared to the three months ended March 31, 2024. The decrease was primarily driven by reduced personnel costs following the 2024 Capital Efficiency Plan.

Previous wording

General and administrative expenses for the three months ended September 30, 2024, increased by $2.1 million or 22%, to $11.5 million as compared to the three months ended September 30, 2023. The increase is driven by additional professional services fees incurred in the current period as well as increased personnel costs from hiring additional personnel and salary increases for existing leadership and administrative teams. These increases were furthered by increased spending on tooling and software to support general and administrative functions, and partially offset by a favorable foreign exchange impact in the current period.

Current wording

General and administrative expenses for the three months ended March 31, 2025, decreased by $0.6 million or -6%, to $9.2 million as compared to the three months ended March 31, 2024. The decrease was primarily driven by reduced personnel costs following the 2024 Capital Efficiency Plan, favorable foreign exchange impact in the current period, and reduced professional services fees. These decreases were partially offset by increased facilities expenses.

Previous wording

Amortization of intangible assets for the three months ended September 30, 2024, decreased by $1.4 million or 62% to $0.8 million as compared to the three months ended September 30, 2023. The decrease was driven in part by the completed amortization of brand and customer relationships associated with the Company's Fiscal 2017 acquisition of eNom in the current year.

Current wording

Amortization of intangible assets for the three months ended March 31, 2025, decreased by $0.5 million or 36% to $0.8 million as compared to the three months ended March 31, 2024. The decrease was driven in part by the completed amortization of brand and customer relationships associated with the Company's Fiscal 2017 acquisition of eNom. The amortization of the related assets was completed in January 2024.