TCX - Earnings call transcript Q1 2022

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Monica Webb

Welcome to Tucows' First Quarter 2022 Management Commentary.

We have prerecorded prepared remarks regarding the quarter and outlook for the company. A Tucows-generated transcript of these remarks with relevant links is also available on the company's website. We urge those listening to, or reading this commentary, to first watch the video we posted in the investors section of our website, on the videos, decks and reports page. The video discusses our transition from reporting business segments to reporting separate businesses, which begins in the first quarter of 2022. level how high our best provides results. also context to on follow It a following their question-and-answer analysts lieu ir@tucows.com, live In of XX. period management email investors invited until May Tucows’ and are these to to submit questions via at prospective shareholders, remarks, your or Eastern XX May will transcript X recorded PM and in at audio on address Management will Tucows be website a response Time. that posted questions directly, to the approximately and Summary, the would last key which also as KPI is like with Ting XXXX Build XXXX, financial Tucows' results available services, in We our five Internet Scorecard and the the years and well the provides that for for updated Investor of updated of of advise includes along as now Presentation. all Investors for fiber website, metrics full Quarterly financial results, and to historical section summaries businesses quarters, the

risk and its Forms on its These you description security urges filed May that reporting with the reports SEC, applicable first XX-Q. subject section. risk may statements, issued March the to the that read prepared detail at the recent risks for note Tucows news release results the and on a statements a On company’s the materially. actual the documents the under company's tucows.com, discussion for website filings XX, Please uncertainties the results and the The full which, factors financial release include Thursday, could are to news as quarter are business. XXXX. in for such, following financial That available Now to differ cause remarks. of in company's are described forward-looking XX, management’s Investors ended its XX-K specifically for company factors most

customer we Finally, historical for also unchanged. addition solutions, on under in to ISP Both starting the or been Tucows Tucows as which legacy no Wavelo have mobile category, the the base Ting, last sold unchanged, longer expenses. Tucows and included as the retail are say quarter, our administrative business. Corporate managed Tucows to moved largely includes report is well Ting Domains DISH as now this mobile is in our Wavelo separate will centrally Wavelo. a Corporate. of these businesses tail from call, discussed Domains billing retail

so, Chief posted For Noss. additional we in those turn Go not to detail rationale you would Elliot that ahead, to like perspective over the video I have Executive on encourage watch Officer done February to the for the this call President Elliot. and and change. now Tucows for I

Elliot Noss

in them our it starting Singh of the results. call, with change time, financial in dispense and Dave each better. of Thanks, and, their own interest in available his of these we're to as This know in start my also review will Monica. the remarks. with the in is With this business readily Also, this information CFO, detail refreshing you to cover our of heads inviting remarks, hear of the deliver remarks format to to investors, reporting get let businesses segments, them I'm on to these our disclosures, going overall the

we essentially but are thorough, commentaries efficient appreciate be with our efforts continuing feedback. We to of and, We will each hope repeating our shareholders course, these open other. are to

Domains. with Executive start Tucows Officer, Woroch, Chief will We David

David Woroch

been as business just with inception its since And the in registration wholesale service. domain for XXXX, the Tucows to don't its early Domains know those launch company name preparing was Elliot. Thanks who I've me,

for companies business web name domain the hosting ISPs. revolutionized completely and offering unique Our

it for years. the years, business Over been been the ensuing of XX five involved in and have all domain I've aspects our last running

Services from of QX that I am the I to from for the margin year performance will slightly. the however, underscored another that that note, this repeated for a with benefited quarter margin that once was services of solid for quarter the Turning to consistency again period not gross time essentially Domain of unchanged domain recent happens same report last quarter, first most the to pleased time business. from year. was delivered last gross registry down year, rebate, which Revenue

X%. Excluding to expenses line this gross Services majority dollar-based stronger the the dollar, with compensation margin Canadian this which impact EBITDA, year. adjusted that last rebate, of was net result of rebate, of the was decrease increases mainly operating in QX due Domain of costs. the of vast Canadian decreased The

While are the business last for year, performance the settling very of the and as XXXX. line QX in of pre-pandemic the levels domains financial XXXX back elevated overall after expected, now business, with Transactions levels total was much at in in

the these industry signs dotcom QX XX% quarter pandemic are the of and million has VeriSign, the registry, dotnet week, are seeing XX.X for commenting growth and last year-over-year. trends. the down new registrations that of results operator the at their that were subsided We attributed the component to that announced

above gross under here, QX, overall that In renewal note which revenue rate up levels. XX%, will the well health just I we of for X% at industry business the wholesale channel, back Tucows of also margin indicator was pre-pandemic an the our as remained view down Importantly, of combined shy year-over-year, X%. just for the with QX to

of gross benefit X%. margin the last rebate numbers, the was year's to Excluding up

gross revenue to the of Services from last was rebate. was margin in wholesale year's primarily benefit QX Domain the while quarter year, channel, X%, the down last Within due unchanged

to of XX% their our was Enom channel rebate, component we XXXX. from to decreased gross QX QX also domain transition margin generated of opportunity the within X% number strong. channel, with decreased gross domains and revenue year-over-year. last growth, again retail wholesale Channel of services unchanged for was continues sales continue In business our once our a Channel. Once retail by stream Tucows margin Excluding customers brands. The value-added the of market and margin solid in Retail up margin increases of both revenue gross again, last impacted name secondary the the XX% to gross from our performance segments, business with taken QX more by where year the registrar of the compared to be Domains and parent The Tucows expiry be year. Along connect Wholesale the and to the closely have the realignment the driven

business something It's business we domain in and name. decades all proud registration reflects of more the largest our For properties, registration Tucows largest second anchored two rich success been each domain are our the decades, wholesale of Tucows see the has registrar the coming than brand world's synonymous the stronger will of two with of and you with the that with building months, by heritage overall. In connection registration. a Tucows domain

Now over to report to Reilly Justin on Wavelo.

Justin Reilly

solving be hello the product Justin the delivering I investors. and TCX tenure I'm largest Dave, core at joined solution telecoms. remarks where startup in Wavelo September Tucows Reilly, and is falls to issue for a fragmented, leading problem grail: low-NPS first of Wavelo, holy XXXX for The into of called solves market the is my you one world's the a Thanks, time. humans. excited I'm a what following big, to unattended, CEO

Product hiring sales the of new to the launched on running, earlier Wavelo with a ground is, a It brought management billion, the executive of transform the subscription of hit work has development and That telecom not at of Neil advantages XX% putting also with core organized Experience; already experience team thrilled Hanno the effort DISH we is for to work trending I'm feature work to of but and formidable to made operating majority Chief and new for a happy in Leslie, Head early from. revenues customer Joshua meaningful the with address The and course, The digital and their and the work, leadership platform January, get is the their of Revenue You've is on only Currently the management, resources into through head platforms. as being People. of at principles Koenig, start Karaka is to market year. business, business, with around helm this and from transformation. no accelerating Finance; telecom DISH with come progress be and now phase $XXX launching base Ting this $X.X Vice much pipeline Director happy XXXX with operating After experience It early telecom snapped Revenue launching significant named in of wrong, platform is And funding name and Wavelo's conditions $X.X The team. from the the customer a as low Michael subsidiary the we've strong went times. and the Don't humans this fees subscribers was anchor Wavelo Liem, platform. people TCX software. of and Officer; $X.X wholly-owned in Professional million, Technology their its importantly, to given developing President of two no structure but round is with gives MSE company from own nil we operational customers. includes for Wavelo was migrated billing Officer; brand abysmal, of software additional the our McGillivray, to And under move to last audacious platform of and the million up of Chief million many Chief Tom customers: us Shah, Customer connected north Bondi, financials. more satisfaction formerly services Platform customer telecom QX cloud use heard a launched formally the out telecom, right last Officer; away, me there these is to business. Elliot year, our QX to year-over-year. the two Internet. worldwide. team Tucows, software

strategic are As DISH. quarters, few the work mentioned last some completing one-time, we for over

the that their professional services launch. support at in XG are work as, We we DISH end tail of

subscriber our many This in for Ting success. Going much from forward, what Boost you look our as will all and aligns years most coming beyond predictable sticky, are smaller focus revenue in importantly, revenue we subscription-based interested like Domains I the has engine. base that subscribers success with migration. the DISH proven a understand is growth will Tucows very customer's our Mobile and, on market.

quarterly we As recommend consulting earnings DISH's always, and guidance. reports

first the of will major of native the Las in world's is fundraising an save not to that with partner about obsessive metros covered, ask the Vegas, in have it. one as of now Vegas startup on the market first, QX I a XX XG for operate the mobile XXXX for We mobile I the DISH's Wavelo disrupt June can an support to track to DISH's carriers efficiency, and tell as this bullish focus XG and couldn't is ISPs you from smaller I venture-backed on we looking to mission integrate growth, XX% are having to a legacy better run launch, in cities, report. their time business are native network. live one and, know population they excited XXX worry US impressively, year. about network, However, Having Both over with me allows We're the note alternative item OSS/BSS to DISH new Las are providers. and value. platforms to and the their in before,

and company, Internet. at the have We Mobile than There And and software would customers it in learning with to created from Ting home Ting and encourage look at a choice, has best and it Elliot. this time there. are you confident been may telecom to interested have know about never white for no that TCX. have more questions we the a any are happy we I paper script. better I you in posted to better are both proved we now the lastly, many and Thanks website start waveIo.com forward visit also Wavelo. I to you read over listening, our for we of

Elliot Noss

Thanks, Justin.

on to Fiber. Ting Moving

shared in our additions, the and the new news In of taking We continued three us largest had net XX,XXX date. rapid growth X,XXX in markets our quarter to QX, total. subscriber we to first

QX typical X,XXX, Partner to taking and were were XX,XXX effect. by total Both Ting-owned Ting us serviceable both for address serviceable additions weather total impacted addresses. the Our

due weather $XX to Our to over million. fiber in CapEx moderated just QX

to be CapEx and expect construction back increasing to in We spend QX. pace

and from When initial announced early planned This that would existing XXX,XXX Utilities. in sizable being expansion that XXX,XXX combined land with three our to quarter, addresses network we We into April, a for a new the the city-wide potential by fiber community we addresses our our This Colorado footprint. network tenant yet, network that announced with over Colorado anchor be in we addresses. XXXX. and will us in Southwest serviceable on also Aurora, owned Centennial. Ting In hope Colorado be markets. will In footprint utility built January, be biggest serviceable that announced markets, of Colorado, in adjoin expanding our Springs market XXX,XXX would addresses, first to Ting takes over our the

franchise, expected addresses the where and is with city. over moving increasing, fantastic investors may the XX,XXX of accomplishment. with thanks markets the unique first final disclosure franchise the and and built the be with we opportunities initiatives our of competition of for end This to permit related about, and a been a is view and announcement the first specifically addresses in Aurora, for Alexandria, the are at addresses was negotiations we footprint. we quarter's in and Alexandria year, the the thriving were mature have a earlier new that process, the space broadband QX. of city quickly in negotiation partner like announced. as in have growth stages In experiencing densification. is talking of execution Amazon's regional ISP already crews finalists construction a With the the this and, is to Ting undertaking some look a in We formal versus Ting HQX, look start Alexandria, XXX,XXX is XXX,XXX serviceable and emerged I in this costs growth another all at to a a with of one quarter deploy. will building are fiber ready our Virginia, to with have operating forward filed bid Also results, a this of noticed

are around, unprofitable First, the long or until XX we XX is have business. the we five-year cash operated up city local a city-level us. period, in facilities roughly generating into With of growth a will finding the cash until to plateaus. a most Telecom engage the disclosure. of roughly And handle few youngest any generate to be threshold workforce where startup cash, grows we among first of all mark, we that and the after installs; build the months a standing we it in generation very we inherently a years, specific pass are fiber and have will costs. we are other town, in Once new local course, marketing; In for even then customers. couple it

than for ARPU we that, Beyond look from will growth more from customer growth.

a of defining our addresses market are age where two I market exceeds we years. disclosure, the things. on will average this as purposes, disclosure one For first in two mature focus the In quarter looking at

markets into potential QX over in $X.X from of First, the cash generation from generated gives quarter. growth QX business. powerful investors XXXX small million the This grew XX% cash to to a window the nearly this XXXX by

address to see age loss years, growth we at grow over Looking those markets, average XX% under by with $X.X the million. two EBITDA over

the as years, three grow, than build these with growing the the from gains markets. both loss we our launches, four will ramp our numbers to markets and mature faster from pace next For up growth

and mature, newer see the flow. powerfully trend will we start reverse cash markets those to As

Thus, operate customer and them cost service. each the the and There to buckets. costs, in management, therefore remember costs simple leverage looking CapEx. cost national is And it comparing to leverage by of covered marketing construction this build HR, a able construction two one a of spend service, With are these costs. in number at to operate. Second, national it when lens serviceable efficiency level is see A track will level. that as are is expense the most financial the and lenses. customers. two are we costs decades. of see build for cost leverage at and per the a buckets and to of market, efficiency to finance, them costs, construction in At we we when addresses. Think have the construction positive product city cost customer. With the components Thus, produced. side, on latter costs simple things for of produce installation address costs, we view for marketing and remember, to lens level, to per leverage comparing as looking national at national costs like required national of both is A and years The these overhead national customer the through costs we to

However, as Ting significantly growing basis. grows, these are an two buckets on absolute

scale is. are We building a to much currently than levels it greater business to

of Thus, see that This create larger a you We KPI as basis. also context QX to at the will passed work loss get reporting added buckets categories, and into note both to we metric data allow and evaluate various follow issues hoping as to We aggressively have were footprint. key here. Ting this in are the well comments relative are network end lags construction. addresses reporting absolute you XXXX spend Summary, point provide serviceable progress. into hope addresses, We the and how passed where a progress translated better some addresses. lets while you a Investors the is generated. providing are our center metric that on we visibility retired on now to footprint our grow for will CapEx the due CapEx build only start We experiencing address disclosure growth in see with these in overall to primarily as lighting welcome them significant

like Singh, call hopefully in our financial industry, our less line is results the with Dave We I'd to are and confusing. the greater for CFO, now quarter now review the to detail. more to over reverting to that disclosure Dave? in turn

Dave Singh

Thanks, Elliot.

have periods segments changes to periods Services less services the offset X% prior million the than revenue from Services, Tucows the Platform reflect to with for revenues of in quarter from been before to The results first the growth transition the that note quick due Total respectively, XXXX. increased comparable. make and made this growth essentially XX% million $XX.X increased Revenue $XX.X QX for a year, XXX%, by recast reporting strong directly Cost Ting was mentioned, we revenue category. Platform just in for DISH, being XX% driven the were in begin, the of year. increase of up unchanged the the $XX.X of costs I $XX.X quarter high-margin Corporate million to from Internet first partially Services XXXX both expected by last for for Fiber quarter which and was million Domains of the as part with the from revenues. from revenue increase decline Services network which, the to same QX Before now Elliot period increase to last are

cost of the Internet costs increase from XX% due first of before network Gross costs XX%. profit million, As Services. both XX% before contributions to higher margin revenues the quarter the network and a percentage increased to revenue, mainly from Platform of $XX.X Services for year-over-year decreased million with $XX.X to Fiber

As percentage quarter first to gross costs XX%. $XX.X from $XX.X margin Breaking from Services' margin XX% increased XXXX the of margin a X% down million of network for business, Domain to by last from million. QX gross revenue, before year gross decreased

for XX%. by was being percentage the increase by increased the As underlying driven revenues QX Domain generated of $X.X gross entirety Platform of Mobile revenue, $X.X margin million XX% ten-fold million for operator from platform. XXXX, compared gross nearly a to Services' with the with margin Services

compared and from quarter Services to million Internet subscriber Platform are As Services margin to Services' last same prepared the number year. with $X.X for XX% last variability QX cause revenue for $X.X million will are factors drivers increased in for QX incurred that detailed remind Fiber of remarks. is that margin from XX% XXXX Internet Fiber of gross by year-over-year was a second cost that to These year. revenue, XXX% a I period in gross percentage you impacted quarter prior generated gross being quarter. will margin of some for my

the of and contracting intangible related driven and support Facility increased third-party and to of lastly, and on by $X.X Simply including compensation the Fiber. this of loss as foreign and, increased increase expenses equipment incursion inclusion in to Marketing increased by XX%. for gross million, Platform past costs, of XX% revenue million first expenses percentage depreciation investments $X Fiber lesser Total to stock-based related million. to revenue, card and assets from And this this increase the including Internet for for $X.X support of timing quarter. growing were the increase an including The Professional $XX.X Amortization revenue following. labor workforce is $X.X assets assets were with UNR is the the business Ting support increased the of by year. from million. driven Ting and full our of increased expanded to increase last increased our quarter to million $XX.X network. of continued result The Bits, support by was Services year. by build, October to team million, business development in relative including the last for the margin fees the due regulatory Other in Network development business, Ting and for to Fiber costs expenses increased activity. travel related of delivery Fiber increased for to credit quarter, and field workforce both a the engineering the expansion which the impacts Bits. utilization of increased up primarily the property As Simply well million, primarily $X.X $X.X quarterly increased impairment the driven operating as Services and market costs XX% The network our Internet joined Internet fees primarily to first million the mainly and of XXXX. $X.X million acquisition the November, of million same $XX QX to up to extent, People costs $X.X same million related were higher as expenses network. its XX% Simply of million Bits exchange well up XXXX costs $X.X team primarily a period growth, from period

as did of re-measurements million qualify are $X.X currency forward QX resulting in million. contracts we for compared hedge any have that loss mark-to-market last Specifically, accounting year, a gain of we holding currently contracts for our any such $X.X not a of not in do not to year-over-year

of experienced the In year-over-year and on monetary of loss addition, foreign million which of in first a a quarter million revaluation $X.X of liabilities $X.X compared loss we the decreasing denominated to had assets $X.X expenses quarter of our basis. impact the this XXXX, a million on

of share, QX loss The XX% million, As from Services $XX.X period year. $XX.X $XX.X taxes down well of down higher $X.XX for from XX% operations million income as XX%. or Canada same the with $XX.X mix, geographic a Adjusted with percentage internet domains reflects share, the ramp three down net payable EBITDA revenue, interest expense $X.XX a for million. businesses Domain or driven increased of QX operating for $X.X million, was for reported from We legacy our to predominantly and expenses loss network QX depreciation $X business. net of XXXX per was accelerated Note of expenses. million, in and ongoing on of by last XXXX. EBITDA million, total follows. as for Fiber build our was our per compared our net XX% breaks tax our year-over-year as amongst That Adjusted

finally, for accelerated million adjusted compared Adjusted positive Services negative Services the million EBITDA the decline outsized last a earn-out to XXXX, in was $X.X sale higher Internet Fiber as business. with $X.X QX Mobile category And this required to in compared and As $X.X had customers decline the Corporate relates with with the negative million primarily of support the year by, larger Ting an driven the from of million for EBITDA to of EBITDA with compared reflecting negative Dave lower million was expected, costs DISH. mentioned rebate Adjusted million $X.X expansion significant loss last that the of with QX $X.X QX a in $X.X Platform year. portion XXXX. earlier,

retained. the As customers churn, lower continue transitions mobile from services margins to lower subscribers and contribution

Turning the compared the end were and end quarter the at and at $X.X our end of to the XXXX. million, fourth sheet, of cash equivalents $X.X XXXX the $X.X of cash at QX of of million quarter million balance first with

due During the cash last from collections expenses, primarily decrease business. to increased contract AR of this compared and QX with operations $X.X quarter, a we generated timing with $XX.X in million the of year, in quarter Platform the prepaid the being asset recognition Services million in

cash more also cash via loan, exercise $XX.X the These options. a $X.X million million well added down We stock on of sources as draw our to from as further of were than of our by offset the investment build Wavelo of the primarily platform. Ting build-out as million the the network for well equipment, accelerated of $XX.X continued in and Internet property Fiber as

quarter down Elliot. from at last of quarter it Finally, to $XXX year. the end the at turn my end first deferred but year of X% now million revenue concludes $XXX X% back fourth up last million, the I'll of at remarks. the of QX was million That $XXX from

Elliot Noss

both the realized, value the Right being is is as Wavelo Thanks, the between difference gap is and created Dave. I between the in have TCX been thinking a stock for value and huge about now, there and realized. a when Ting, price. value when lot reflected created value

For better Wavelo, a and of TCX investors existing it get is who learn a TCX level, telecom is. segment. software investors a to idea fully is new yet no even And investors financial have purely have telecom Existing will ongoing it, the and DISH migrations revenue look completed investors appreciate like. can substantially really sense until or understand what subscription are difficult for Wavelo to at

can of US multi-generational opportunity, terms both a in and long-term in coax-to-fiber is how in For is unique, transition a the Ting, terms returns it deployed, while be investment. the the much of capital

by for We A realized. a realized a challenge to it until is reason. value hidden are public platforms created, fantastic ripe. time are are a being the with backed virtually financials for but private-equity become it as The some not see competing of company returns they alone and ton is

of and Domains investors aughts into get targets. Mobile. offering teens, short-term The before. the have years generating market. In copied We But our squeezed we and advantages Ting such the by Ting early that a move clearly to the of our podcasts, a cupboard, by starting significantly. in incumbents, mousetrap. not by was the was vine on the held acquisition competitors We satisfaction. competitors was were gains late moved were term had and Mobile in acquisition yet the opportunities ripening not big did and being was here Ting course, we into to making Many solid saw we and by found with being Tucows on vehicles better and some off long came cash had of choices and, the its until businesses, meanwhile, generated early the it two very while been customer vine better customer stock had had best-in-the-world choices. then clearly until found winning as cash Domains Mobile, acquisition

it repeats, rhyme. never Now, history does but

it the with before, Both forward time. look We have you. send to and and to to take been value in PM exploring our of X Again, advantage the like, areas for the through Tucows gap we you here call live and and approximately website that Q&A to May benefit know at posted realization to please before. how your both benefit the and this We look recorded greater Eastern May questions of Thank and know have of that, our here on looks to Friday, transcript ir@tucows.com to detail. I experience. and having Wednesday, be And been we response it. value interest what between written questions XX, audio creation by your investors XX,

Tucows (TCX) 9 May 222022 Q1 Earnings call transcript