TCX - Earnings call transcript Q2 2024

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Monica Webb

Welcome to Tucows Second Quarter 2024 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 will begin with opening remarks from Elliot Noss, President and CEO of Tucows and Ting, followed by business remarks from Dave Woroch, CEO of Tucows Domains, Justin Reilly, CEO of Wavelo; Elliot Noss on Ting; Ivan Ivanov, Tucows new CFO, who will discuss our financial results in detail and finish with closing remarks from Elliot Noss.

In lieu of a live question-and-answer period following these remarks, shareholders, analysts and prospective investors are invited to submit questions to Tucows management. e-mail until via August questions submit to Thursday, ir@tucows.com XX. Please the directly either that a to Tuesday, address p.m. will approximately or XX, will website at August your posted transcript Management and questions provide X:XX on response recorded be Tucows audio Eastern Time. provides like for which and the for quarters well metrics would last KPI website. also updated full quarterly of financial results the historical in of as XXXX includes year-to-date advise X also to We for and year's the all that Tucows available summary, key businesses XXXX section XXXX, our as is Investors the updated investor and presentation Build available. The Ting are Scorecard also

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

Elliot the Elliot. Noss. and like Tucows Executive I Officer, President turn to to ahead, over now would call Go Chief

Elliot Noss

of grow million, X.X% of year-over-year Ting year-over-year The Domains. second X and continued to and to profit $XX.X came of and lifting. Adjusted from strong revenue performance doing XX.X% increase driven with It's from third adjusted quarter reduction losses and efficiently metrics million. our of and rigor Consolidated for XXXX Gross was controls our cost support consolidated margin. $XX.X revenue, year-over-year quarter its work $X.X quarter XXXX supported the QX gains million. gains and to quarter revenue primarily adjusted Ting solid saw with The year-over-year employ of increased by margin from for increased grew heaviest expansion Wavelo. Starting in with quarter-over-quarter of the to the consecutive around XX% was businesses of net revenue Thanks, Ting's EBITDA. the headline gross by year-over-year Domains EBITDA gross growth results, our the Monica. and reflective for second profit all growth to EBITDA second

balance paying We business syndicated debt. continue In debt. the in the with with investment million deleveraged QX, payments to of $X.X in we further the businesses down

new expertise, many Singh from Tucows capital Verizon's exposure relevant Ivanov fiber to recently business. you strategic As taken over as has Ivan of highly and Dave management including brings exceed, very will Ivan CFO. of lots

We join executive worked an are have both Ivan transition. pleased and to him smooth extremely Dave and create the team, to have

Tucows continue on having his from him in we has next best endeavors his all. to for I'm through significant of wishes and business, and last Under stewardship, navigated us The he the know sidelines. as entire the Tucows my family partner will and cheer it to for over the years. thank want also I X our for impact growth his in sincerely changes Dave Tucows grateful

hear as from remarks we'll heads inaugural in as results in business his our CFO, covering of well each detail. the Ivan Now from as financial

Dave. Domains. Tucows Woroch, Go first speaker The Officer, Chief Executive ahead, Dave is

David Woroch

Thanks, quarter, Tucows Elliot. to Tucows continue Domains to In second EBITDA. and cash, reliably generate grow margin contribute the our adjusted

last results, on under our our transactions rigorous while the for generated efforts cost pleased X% marginally declining margin, Revenue to same year. second was were down for the Domain transaction QX of Verisign. EBITDA up margin up was Domain million these were QX $XX.X last Services in year. adjusted $XX management million, that X.X% numbers up last XXXX. million, for million grow from QX under given for X% Services $XX.X was domain Domains from and quarter, X% Gross the the just quarter up particularly control, from being $XX.X Our from has year-over-year year. quarter We're same also of

for of results $XX our and the for XXXX. million, our slightly was Looking up business down $XX.X at last of X.X% and QX $XX.X to million, gross year, from channel, million margin from from million revenue QX the QX wholesale of compared was segments $XX.X

margin while value-added gross Domain compared was period Services gross down margin QX to in Within the wholesale same the services was up X% year, channel, last X.X%.

up and channel, retail margin year. positively XX.X% million, margins of retail XX.X% outsized for the $X.X be QX from as some both the margins, last The quarter for was than by and have our QX retail in to and dollars revenue gross I up $X.X impacted that Retail in second customers a was higher continued revenue are per movement to of year-over-year. margin million wholesale In percentage previously, transaction. wholesale discussed retail

across Our remains our brands average. renewal range within Tucows at combined rate historical overall and above industry XX% all in QX the Domains

with our business won In their operate that have to closing, .music registry we wanted the to services I continue recently incremental add business. [ in back-end. ] to registry successes We

TLD in end venture joint first Tucows to Orange be general their the our Both also the are expected addition, back-end. TLDs this has year. the of new before Domains which will .locker, on announced Domains of launch availability In operate

product and fulsome facilitates input In to ultimately adoption. we development into other incorporate deliver cycle suite of a progress specific developing, and believe we're addition, and what useful new will the services we continue towards tools that our to reseller

to Reilly, CEO Justin of Wavelo. over Now

Justin Reilly

Thanks, Dave.

businesses. we prepaid for these ago, just of and on the were optimizing DISH that's millions their then, year is the up the subscribers a churn subscribers Since common base to back of platform. Wavelo Looking migration wrapping too higher-quality to managing Boost all in focused

new our to history that launched them onto Wavelo's And enabled Mobile and with Ting from record platform the this a that between to time, allowing focus departure in the configurability customer deliver welcome delight, a of and with Boost standard, recently, coverage flexibility them implementations. prepaid unified not technical the is XG instead postpaid. nationwide on industry line brand Just blurs

Wavelo's QX from XX.X% continue the and QX, down revenues up small in were recurring million transition we XXXX. from revenues. driven towards in onetime less X.X% $XX.X as was by The QX services to in year-over-year work decrease current platform year revenue professional

on noted, to previously as with to DISH. outsized X% focused compared QX, services included on bundled small for as and we XX.X% services annually a higher-value recognition provided Adjusting DISH consistent related services. we professional up to X.X% the mix stable higher-margin to the bundled to quarter-over-quarter was and year-over-year, relatively recognize in services $XX.X subscribers. revenue margin more more As Gross platform reduction platform we've lift the DISH part transition were revenue this, of million, discussion a with provided professional up QX our revenues and the experienced as revenues

Adjusted up EBITDA year-over-year. XX.X% last up was QX from XX.X% and quarter million, $X.X for

CIOs year adjusted from with As into their suite, we EBITDA, allows allow catalog as Boost hiring. latter performance operators the relationship to continue head position expand relief. become prospects digital and catalog their a into DISH, marketing product without to product strategies. On as to expect more they the This go-to-market ability relationship state Last with there with on blocks and pleased growth-related and as month, competitive growth to to core room investment with Wavelo to sharper as building a in base, this for we current product comes choice strategy, from focus go-to-market margin important as flexibility thoughtfully our move gives a replatform componentry we The needing tool, manage the entire to initial like product we landscape of offense and BSS means launched transformation. best-of-breed we us in second navigate defense of move their more blossoms. ramp pressures their an a team rightsize to steady of towards are of the choose half catalog, building their

meet the new where onto has Wavelo modular are From shape, important telecom our as be onboarding to solutions platform. in more cloud provide they telecoms and the that takes the this will customers day strategy all transformation to X, software been

to quarter of logos muscles those Our number And bear investors QX and while to revenues delivery fruit RFPs the being am to well. starting the beyond the ability not early onboarding I'll are efforts go-to-market teams small spent to new scale built Wavelo's and are remind are that quarter-over-quarter. have I our are as closed fundamental leads the efforts in going see increasing the marketing and material, inbound of that ISPs. much our customers. anchor pleased these are

on is refocusing team In MVNOs, tandem, ISPs. -- its our MNOs larger and upmarket efforts sales

before, benefit elongate, ones profitable cycles strategically And for sales has are larger the growth. means the telecoms Wavelo from I've what While as this naturally the most can business more offer. said to positions longer-term it who

and As into We've customer ahead of with have billing discussed for market more built never the or excited meet are out by now Thanks express before, the of be at of now of to and of needs and Many we've telecom doing and provisioning I've during this for managing either we evolving and colored their today landscape expectations. to in were that era convergence in an time to work fixed systems front over to the constructed operators consolidation, listening, not use more needs Wavelo us. yesterday simple tremendous been competition. run tomorrow. well of a opportunity purpose this mobile Elliot. this

Elliot Noss

new to in subscribers Thanks, XX,XXX us added Justin. subscribers, and over In year-over-year X,XXX Ting total. net growing QX, taking XX.X%

year-over-year QX, completed addresses to We taking also infrastructure. serviceable serviceable for XXX,XXX XX.X% had addresses Ting-owned us a growth in of

for Ting and as XX% markets Our to XXX,XXX year-over-year $XX.X margin across expected. grew brings XX% Revenue we totaling expanding builds as their to to continuing This XX.X% $X.X footprints. QX ramp on serviceable year-over-year partner see million, year-over-year. addresses all growth up addresses million to for margins us with grew QX gross are

$X notably, this reduced pace of and And change recognition to continue. by marketing to adjusted reductions of Most million more full return not for result year-over-year. this we in trend expect spend Ting's to primarily a normalized quarter a down the loss QX, seeing nearly levels. million do for $X.X EBITDA headcount of It's continue, may while was

my last to the mentioned to continue forward business quarter, I the is on path As profitability. moving focus

and footprint prudently to our our expand market will We invest continue share. to

We while margins. customer maintain cost to long-term renowned rates, be capitalization all disciplined our experience time, working on And controls, construction and the churn and economics business. same at the low will the resolving continue Ting's to improving of

of newer of second is but being markets us added. are only specifics, at more a Fiber the over now while or planning city continues short Our Raleigh million such management City, a from and year MDUs on relates as deployment are construction approaches -- to for resuming our Sandpoint densely construction with reduced construction, practices opportunistic than new built construction on Alexandria right is to parts to active is be in and it Denver a judicious QX mostly when after just not also Culver regions quarter and others the in spend XXXX lower city. populated QX the consensus where with worked historic hiatus get This we CapEx are as and $XX reflects happening neighborhoods ago. it that traffic capital and

of While of we industry have important Ting, to capitalization further share the number a there specific were events. nothing on

seen in well see May deployments Frontier -- ALLO, sustained did as Ting interest in to reinforces successful securitization and transition, product of instruments for fiber inevitability This a We that securitization for we've $XXX and our fiber the profitability financial recognizes our market since continue the the coax instrument the participate. structured financings XXXX, Ziply, U.S. priced. view and others, markets ABS million similar they of to among view low-risk to all long-term

the acquire fiber a and discussions Stonepeak acquire an between joint to headlines early and with month, to aligns infrastructure to inevitability and with that and first transaction. now between heard in embrace Lumos. T-Mobile In providers joint seen do between T-Mobile venture owners services ABS a Back heft partnerships, fiber Metronet, providers. joint between of like to platform venture reinforce convergence the EQT provider and the structure the financial in about fiber established bringing the Frontier together we've The view for on and the other the coax KKR venture we're and provider our seamlessly integrates service to on This capitalize operational the the both of X. last also that T-Mobile trend to And Wavelo that fixed transition. a mobile need Ting transactions April, partnerships we seeing of fiber was is

new CFO, our from Ivan our Tucows, Now results in Ivanov, discuss we'll financial hear who will detail.

Ivan Ivanov

for X.X% Ting from professional XXXX up XX% services last year. Thank million million $XX million transition the quarter X%, same second $XX.X Domains decreased fees $XX.X X.X% in revenue QX of with $XX.X $XX.X the a million With XX.X% the of before for in XXXX the $XX compared XX% second respect X% to Wavelo's down primarily quarter in to from reduction to Domains increased increasing Corporate $XX.X you, quarter to business Starting grew Tucows year. Gross to million XXXX. QX $XX.X to increasing versus year. compared XX% XXXX. second to million before to revenue margin from to XXXX. million an last million for revenue increased business, basis. Elliot. a gross Total million the the increased million, up the each subscriber revenue. profit to Breaking $XX.X was margin $XX.X revenue to $X.X prior quarter million revenue revenues QX reflecting in from $X year. to in increased costs Tucows efficiency as million business, network million year-over-year level, profit At was gross in costs X.X% by $XX.X prior gross network year-over-year,

a year-over-year of remained revenue, percentage Tucows unchanged margin gross for XX%. As Domains at

Wavelo's million $XX $XX.X increased modestly in from this million QX gross XXXX. margin quarter to

gross gross for million efficiency from DISH was increased The base. in margin percentage migrated $X.X last the the As of from fully QX year-over-year million for $X.X increased from period XX.X% margin a XX%, up same year. to subscriber the for revenue, year. prior Wavelo XX% reflects margin Ting

depreciation for for As of largely a XXXX, of were million, $XX.X gross XX% same expenses margin year, second network QX in revenue, quarter XX% from from fiber was expanding in QX of Ting higher our percentage year. period million last the up for up reflecting last $XX.X the assets. of Network

contract decreased reduction in in the result fees costs a of $XX.X relationships, million intangible expenses and was costs million X.X% operating in primarily million related customer The The XXXX. stock-based from brand million to Total Enom operating marketing offset foreign and $X.X million QX overall $XX.X increased compensation. exchange from from efficient and by and partially amortized spend $X.X expenses. assets the from in is marketing primarily professional expense professional decrease $X.X a and more sales reduction reduction fully services,

period to of As portfolio-wide to a of operating for management as last a improved XX% largely revenue, year, percentage initiatives. cost result expenses compared XX% the same

a $X.X a loss $XX.X of continued reported of of the XXXX. of loss fiber from and lower for quarter Domains debt million, million the per a net increases for in offset the The The decreased our and net costs We from reduced by for from loss per EBITDA second taxes and loss was prior resulting extinguishment quarter $X.XX second the compared XX% Ting million $X.XX income result primarily of expanding driven was and operating XXXX interest Wavelo. $XX.X loss year-over-year year. loss onetime of by million is expense increased partially with from XXXX, decreased reductions, $X.X primarily a or network. up share QX depreciation network for OpEx Adjusted net share or QX

is driven following XX% year. amongst year. from from Adjusted legacy year. EBITDA QX the million, The QX million, million the of negative was units last negative up total QX of Tucows as in adjusted million our $X.X had this of of primarily quarter, adjusted $X.X The X% Wavelo contribution key EBITDA lower is in up reduction EBITDA Domains with decrease last for from was EBITDA breakdown Ting this $X.X And $XX.X million in finally, in million from was Adjusted year. compared corporate million in follows: business for by of workforce mobile QX $X.X a last base. $XX.X down XXXX, $X.X category QX for

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

transaction of million, the as XXXX. as $XX.X we million cash restricted ABS classified to addition part in In $XX.X have

reminder, $X as trust of sit from of the As remaining restricted $X.X to Ting. account for the the million notes. will and The of is securitized it reflects back the million and assets, duration interest $XX.X a a the noteholders distributed collections cash third remaining in million the coming ABS funds to cash, to with fees monthly parties

in I we interest quarter. will income note generate also $X.X million that this

in the with million preferred we as general shares from buildout loss Wavelo $XX in continued number last our in extinguishment property in a quarter, that and obligation. assets in Ting of operating the the reflects lower used cash capital the cash QX $X.X $X.X in debt year, of result primarily cash in year reduce [ operations platform. Note last negative compared We had for primarily from Ting the of QX million actual the of on with flow QX includes to network onetime XXXX paid million and improvement During cash ] equipment, invested a for the fiber a negative continued interest. this and quarter in statement addition investment capitalized to

million, the the quarter covenant factoring of repayments ratio We quarter of our balance ratio. leverage consecutive calculation we a in on quarterly As expect This cash the credit $X.X of and leverage repaid net June on loan X.XXx. a balance net and fifth million this have XX, when of continue. is letters reduced XXXX, million purposes the was to which loan of syndicated $XXX.X resulted up for a to in $X.X hand

for and my from of million second up And of $XXX back at quarter I'll the Finally, turn it That million, slightly first concludes to remarks. XXXX of $XXX $XXX Elliot. now QX million revenue the also for XXXX. the end from up deferred was quarter

Elliot Noss

Thanks, Ivan.

quarters, summer the about next There the those say is I obvious do others. NVIDIA. example quarter For person stocks cash to last are been my The the note, strongly truly about generate story. deal are that and the that free held where is X And sustain In of kinds to the markets companies lot of flow. in to believe flow. or but free XXXX few a I've hear sell are fiber, there not companies. last belief talking and And I concept story of talked among only can that light cash the capital public goal are EQT T-Mobile EBITDA,

I data views. lots of of announced, confirming want This to financings demonstrates spreads. capital additional and additional as still mentioned is our quarter, with home numerous all as and that holders points as as a looking possible risk capital that with with narrowing deploy The all ABS possible. This demand for there little loads much

I in dollars in the sponsor, the financial a while the as T-Mobile their with T-Mobile buying T-Mobile letting in side, deal stake biggest KKR see addition partner Metronet. ISP yet keeping see And again, network at take space the We on deal. EQT existing work now with to all mentioned, risk. We a their

of the We Crown the of towers will financialized way to -- networks financialization same Castle financialization kick eventually off class. turn in that be at deal. that Towers the started with century. the Who of with the asset Since high of better their GigaPower were incredibly fiber became home AT&T how multiples. towers been to AT&T as than an trade fiber at talking are now the networks spin-off continued seeing fiber about financialization we've XXXX, the the

and fiber So capital, we've construction having about X components: where each as been years, are we? talking For ISP. footprint

continue the financialization see, of in This themselves. leaves networks have the of seen ISP. to we the will we capital the With the output see construction, and deals

the risk but of business little to more is infrastructure you less ISP structured Well, when X capital-light, pieces? business interest capital. operating generally prefer long-term an it So pools other what They to of that is returns. it cash-generative is untether the a happens traditional strongly and

Whatever about TCX to and and business, have quarter, priority. but the path greatly this will of choose financial Apple the share this In comes the we quarter, Berkshire nothing formal was I Annual Ting take, this market, holding. largest it now fact the long-term the terms backdrop. When of last by Hathaway to it to broader remains resolution I informed top Meeting their talked be that the

the now market seeing free quarter, now capitalization. on This in we number in what with and of accounting longer When massive had billion their the CapEx of $XXX stories, billion, Alphabet, cash they small it the They stake we flow. share free Microsoft, But they X trade at of but and spent looks combined trading largest at of for a we is are in Meta look half. a a a are greater total Apple cash of market cumulative was on years They net the at income massive look past announced Amazon, an There seeing. stocks that no alone. $XXX flow, bubble. are cut net greater it amazing concentration like the they of These income. when multiples

is Buffett saw. We Warren what expect this

forward XX, at transcript Q&A ir@tucows.com and and for on stop. our clearly that Time. Tuesday, now on free be It way know to please returning written your generated has Eastern XXXX. And is And like We think your the look X:XX that the we not it to response feels audio It posted years capital-light forever, that trade they capital is to or approximately to public we How approach. that, the exploring in p.m. send recorded and one Tucows by always markets detail. to buybacks the this right areas used unlikely future cannot Stein's to call last with shareholders been questions dividends addresses XX, something to greater the in you that August website how in been behave in businesses clear. in and I be will Again, have capital cash of If or August they it's so. questions the interest need structure consist XX invoke look law. of to companies the go

Thank you.

Tucows (TCX) 8 Aug 242024 Q2 Earnings call transcript