Q2 2023 Tucows Inc Earnings Call Pre Recorded

And that link is also available on the Companys website.

Monica Webb: A Tucows generated transcript of these remarks with relevant links is also available on the company's website. 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 via email at ir@tucows.com until Thursday, 10 August. Management will address your questions directly or in a recorded audio response and transcript that will be posted to the Tucows website on Tuesday, 22 August at approximately 4:00 PM Eastern time. We would also like to advise that the updated Tucows quarterly KPI summary, which provides key metrics for all of our businesses for the last six quarters, as well as for full years 2021, 2022, and 2023 year to date, and also includes historical financial results, is available in the investor section of the website, along with the updated Ting Build scorecard and investor presentation.

In lieu of a live question and answer period. Following these remarks shareholders analysts and prospective investors are invited to submit questions to <unk> management by email at IR at <unk> Dot Com until Thursday August 10.

<unk> will address your questions directly or in our recorded audio response and transcript will be posted to the Tucows website on Tuesday August 20, <unk> at approximately four P M Eastern time.

We would also like to advise that the updated <unk> quarterly Kpis summary, which provides key metrics for all of our businesses for the last six quarters as well as for full year 2021, 2022, and 2023 year to date and also includes historical financial results is available in the investors section of the website.

Along with the updated Kingdom scorecard and Investor presentation.

Additionally, if you would like to watch segment from our May 9th Investor Day. Please E mail IR at <unk> Dot com with your request.

Monica Webb: Additionally, if you would like to watch segments from our 9 May investor day, please email ir@tucows.com with your request. For management's prepared remarks. On Thursday, 3 August, Tucows issued a news release reporting its financial results for Q2 ended 30 June 2023. That news release and the company's financial statements are available on the company's website at tucows.com under the investor section. Please note that the following discussion may include forward-looking statements which, as such, are subject to risks and uncertainties that could cause actual results to differ materially. These risk factors are described in detail in the company's documents filed with the SEC, specifically the most recent reports on the Forms 10-K and 10-Q. The company urges you to read its security filings for a full description of the risk factors applicable for its business.

Now for managements prepared remarks on Thursday August 3rd two <unk> issued a news release reporting its financial results for the second quarter ended June 32023 that news release and the company's financial statements are available on the Companys website at <unk> Dot com under the investors section.

Please note that the following discussion may include forward looking statements, which as such are subject to risks and uncertainties that could cause actual results should differ materially. These risk factors are described in detail in the company's documents filed with the SEC specifically the most recent reports on forms 10-K and 10-Q the company <unk>.

As you to read its security filings for a full description of the risk factors applicable for its business.

I would now like to turn the call over to <unk>, President and Chief Executive Officer Elliott Notch go ahead Elliot Thanks Monica.

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

First half of 2023 has included a number of significant developments for our businesses we have.

Elliot Noss: Thanks, Monica. The H1 2023 has included a number of significant developments for our businesses. Wavelo completed its migration of nearly 7 million Boost subscribers for DISH, as well as the migration of Ting to the platform. Ting also completed a securitization for $239 million in May to fund our fiber business. We hosted our first investor day in early May as well. We also continued to pay down the Tucows debt in Q2. Now we'll hear from the heads of each business as well as from our Chief Financial Officer, Dave Singh, who will cover our financial results in detail. The first speaker is Dave Woroch, Chief Executive Officer, Tucows Domains. Go ahead, Dave.

<unk> completed its migration of nearly 7 million boost subscribers for dish as well as the migration of <unk> to the platform.

<unk> also completed a securitization for $239 million of bank to fund our fiber business. We hosted our first Investor day in early May as well. We also continued to pay down the two cows that in Q2.

Now, we'll hear from the heads of each business as well as from our CFO , Dave <unk>, who will cover our financial results in detail. The first speaker as Dave work Chief Executive Officer <unk> domains go ahead, Dave.

In the second quarter for <unk> continued the recent trend of transactions and domains under management, returning to a stabilized business trajectory with seasonal transaction levels comparable year over year and domains under management stable from last quarter.

David Woroch: Thanks, Elliot. The Q2 for Tucows Domains continued the recent trend of transactions and domains under management returning to a stabilized business trajectory with seasonal transaction levels comparable year over year and domains under management stable from last quarter. Revenue for domain services for Q2 at $60 million was down slightly from $61 million for the same quarter of last year. Gross margin at $17.9 million was down 7% year over year, absent a one-time catch-up accounting adjustment in Q2 2022, which inflated gross margin in that quarter. On a quarter-over-quarter basis, gross margin increased $0.4 million and 2% from Q1. Domain services adjusted EBITDA was $10.6 million in Q2 and down 13% from Q2 of last year. Some notes here on the reduced gross margin.

Revenue for domain services for the second quarter at $60 million was down slightly from $61 million for the same quarter of last year and gross margin at $17 9 million was down 7% year over year.

And the one time catch up accounting adjustment in Q2, 2022, which inflated gross margin in that quarter.

On a quarter over quarter basis, gross margin increased <unk> 4 million and 2% from Q1.

Domain services adjusted EBITDA was $10 6 million in the second quarter and down 13% from Q2 of last year.

Some notes here on the reduced gross margin.

Half of that impact is from the ongoing weaker aftermarket for domain shells, which I have discussed in recent quarters and we believe this to be a continuation of a broader industry wide challenge, reflecting the current macroeconomic environment.

David Woroch: Half of that impact is from the ongoing weaker aftermarket for domain sales, which I have discussed in recent quarters, and we believe this to be a continuation of a broader industry-wide challenge reflecting the current macroeconomic environment. The balance of the impact is split between factors I've also spoken about previously. Deferred revenue and price increases working their way through our accounting. These continued to affect our results in Q2, but I don't expect those impacts to be meaningful beyond this quarter. To put this in context, and as I discussed at our investor day in May, our core domain business, excluding both aftermarket and periodic portfolio sales, remains healthy with build gross margin consistent year-over-year, in line with transaction levels and expectations. Looking at the channel segments of our business.

The balance of the impact is split between factors Ive also spoken about previously deferred revenue and price increases working their way through our accounting.

These continued to affect our results in Q2, but I don't expect those impacts to be meaningful beyond this quarter.

To put this in context and as I discussed at our Investor day in May our core domain business, excluding both aftermarket and periodic portfolio sale remains healthy with billed gross margin consistent year over year in line with transaction levels and expectations.

Looking at the channel segments of our business and our wholesale channel revenue for Q2 was down 2% from the second quarter of last year and gross margin down 9%.

David Woroch: In our wholesale channel, revenue for Q2 was down 2% from Q2 of last year, and gross margin down 9%. Within the wholesale channel, domain services gross margin was down 5% from the same period last year, while value-added services gross margin was down 16%. Most of the impact on both revenue and margin are due to weaker sales in the aftermarket for domain sales, which I mentioned earlier. In our retail channel, revenue was flat year-over-year, and gross margin, net the one-time accounting adjustment, was up 2% year-over-year. Our combined overall renewal rate at 79% in Q2 across all Tucows Domains brands remains within our historical range and well above the industry average.

Within the wholesale channel domain services gross margin was down 5% from the same period last year, while value added services gross margin was down 16%.

Most of the impact on both revenue and margin are due to weaker sales in the aftermarket for domain sales, which I mentioned earlier.

In our retail channel revenue was flat year over year and gross margin not the one time accounting adjustment was up 2% year over year.

And our combined overall renewal rate at 79% in Q2 across all <unk> brands remains within our historical range and well above the industry average.

As I talked about in the last couple of quarters and shared in more detail on Investor Day, We continue to develop new services to complement our core business and leverage our distribution channels.

David Woroch: As I talked about in the last couple of quarters and shared in more detail on Investor Day, we continue to develop new services to complement our core business and leverage our distribution channels. I look forward to sharing more later this year. As I mentioned previously, you should not expect to see any contribution to gross margin or impact on operating expenses in 2023, and we'll continue our focus on maintaining margin, including careful management of expenses in support of adjusted EBITDA. Now over to Justin Reilly, CEO of Wavelo.

Look forward to sharing more later this year.

But as I mentioned previously you should not expect to see any contribution to gross margin or impact on operating expenses in 2023.

And we'll continue our focus on maintaining margin, including careful management of expenses in support of adjusted EBITDA.

Now over to Justin Reilly CEO of wavelength, Thanks, Dave waved low rep Q2, with its strongest quarter since inception as migrations continue to move at a rapid pace.

Justin Reilly: Thanks, Dave. Wavelo wrapped Q2 with its strongest quarter since inception as migrations continue to move at a rapid pace. At its peak, we were migrating subscribers at a volume north of 200,000 per night. The fastest telecom migration in my career and the fastest that anyone we can talk to has seen. Remember, the two hardest parts of any customer engagement are migrations and network integrations. This is a key milestone that creates the muscle memory we need for future customers. I'm pleased to share that we finished the migration and closed the quarter with more than 8 million subscribers on the Wavelo platform, nearly doubling where we were at the end of Q1. Wavelo's revenue was $10.8 million in Q2, an increase of 20% from $9 million in Q2 of 2022, and an increase of 47% from $7.3 million last quarter.

At its peak, we were migrating subscribers at a volume north of 200000 per night, the fastest telecom migration in my career and the fastest that any one we can talk to has seen.

Remember the two hardest parts of any customer engagement, our migrations and network integration. This.

This is a key milestone that creates the muscle memory, we need for future customers.

I am pleased to share that we finish the migration and closed the quarter with more than 8 million subscribers on the Weibo platform nearly doubling where we were at the end of Q1.

<unk> revenue was $10 8 million in Q2, an increase of 20% from $9 million in Q2 of 2022, and an increase of 47% from $7 3 million last quarter.

<unk> gross margin increased by 27% to $10 million this quarter from $7 9 million for Q2 2022.

Justin Reilly: Wavelo's gross margin increased by 27% to $10 million this quarter from $7.9 million for Q2 2022. Adjusted EBITDA for Wavelo was $3.4 million, a decrease of 11.5% from $3.9 million in Q2 2022, and an increase from $0.3 million in Q1. The decrease in adjusted EBITDA year over year was largely due to the contra revenue impact from the unwinding contract asset from the DISH agreement, which, as a reminder, will continue to unwind as contra revenue over the term of the contract, which ends in 2024 and then moves month to month. The non-cash impact of the contract asset change was -$0.7 million this quarter versus +$5.6 million in Q2 last year. Adjusting for these, EBITDA actually grew $5.9 million year over year.

Adjusted EBITDA for wave LOE was $3 4 million a decrease of 11, 5% from $3 9 million in Q2 of 2022, and an increase from zero point $3 million in Q1 the.

The decrease in adjusted EBITDA year over year was largely due to a contra revenue impact from the unwinding contract asset from the dish agreement, which as a reminder, we will continue to unwind as contra revenue over the term of the contract which ends in 2024, and then moves month to month.

The noncash impact of the contract asset change was a negative 0.7 million this quarter versus a positive $5 6 million in Q2 of last year.

Adjusting for these EBITDA actually grew $5 9 million year over year.

To a lesser degree another impact year over year is that we are capitalizing less labor in 2023 versus 2022, given our major push to build the core features of the platform for dish has largely concluded and the team is now more focused on platform maintenance and optimizing operations, which results in <unk>.

Justin Reilly: To a lesser degree, another impact year over year is that we are capitalizing less labor in 2023 versus 2022, given our major push to build the core features of the platform for DISH has largely concluded, and the team is now more focused on platform maintenance and optimizing operations, which result in lower labor capitalization and higher OpEx. We're also pleased to report that Ting Internet's website, ordering, provisioning, and subscriber management have been migrated to the Wavelo platform. The collaboration with Ting created a robust platform for internet service providers, and we're excited to see the impacts to the Ting operation. You can take a look at the interface for customers at ting.com. On the pipeline, we are seeing growing interest in the Wavelo platform, with new potential logos entering the pipeline each month.

Sure labor capitalization and higher Opex.

We're also pleased to report that Ting Internet website ordering provisioning and subscriber management have been migrated to the wavelet platform. The collaboration with team created a robust platform for Internet service providers and we're excited to see the impacts to the Ting operation.

Take a look at the interface for customers at <unk> Dot com on.

On the pipeline, we're seeing growing interest in the wave low platform with new potential logos entering the pipeline. Each month. This is bolstered by tailwind from dissatisfaction with existing providers accelerated cloud transformation and the uptick in infrastructure investment globally, while we entered the market knowing customers were <unk>.

Justin Reilly: This is bolstered by tailwinds from dissatisfaction with existing providers, accelerated cloud transformation, and the uptick in infrastructure investment globally. While we entered the market knowing customers were dissatisfied, we hadn't anticipated seeing these levels of dissatisfaction. We are also seeing a consistent theme of OSS/BSS providers' marketing language being far removed from platform realities. Simply saying cloud native into the void does not make it so. We are educating telecoms on the efficiency and long-term value of moving from large professional services engagements to monthly subscriber fees. Something operators have done in other parts of their stack, such as content management or payments, but haven't yet done so at scale here. Cloud transformation globally remains below 10%.

Satisfied we hadn't anticipated seeing these levels of dissatisfaction.

We are also seeing a consistent theme of Oss BSS providers marketing language being far removed from platform realities simply saying cloud native into the void does not make it so.

Further we are educating telecoms on the efficiency and long term value of moving from large professional services engagements to monthly subscriber fees something operators have done in other parts of their stack, such as content management or payments, but haven't yet done so at scale here.

Good transformation globally remains below 10%. While this takes time the shift is inevitable and I'm encouraged by our go to market teams progress in the first half of the year and pleased with the foundation, we are setting as the industry shifts over the coming years, we are both early and right on time.

Justin Reilly: While this takes time, the shift is inevitable, and I'm encouraged by our go-to-market team's progress in H1, and pleased with the foundation we are setting as the industry shifts over the coming years. We are both early and right on time. Thanks for listening. Now over to Elliot.

Thanks for listening and now over to Elliot.

Justin.

<unk> continued with robust network construction and activation numbers in the second quarter.

Elliot Noss: Thanks, Justin. Ting continued with robust network construction and activation numbers in Q2. Total serviceable addresses for Ting-owned infrastructure came in at 109,300, up 28% year over year, and partner addresses at 21,100, up almost 16% year over year, taking us to 130,400 total serviceable addresses. With the migration to Wavelo, there was a small restating of serviceable address counts, with 839 owned and partner infrastructure addresses removed after reconciling data. Our fiber CapEx was down slightly from previous quarters at USD 21.8 million for Q2. This is not a reflection of the construction completed, where we set records this quarter for network footage, but is due to the mix of construction this quarter being more in lower unit cost areas. We added 1,900 net subscribers in Q2, taking us over 38,600 in total.

Total serviceable addresses for Ting owned infrastructure came in at 109300 up 28% year over year and partner addresses at 21100 up almost 16% year over year, taking us to a 130400 total serviceable.

Dresses with.

With the migration to waive low there was a small restating of serviceable address counts with 839 owned and partner infrastructure addresses removed after reconciling data.

Our fiber Capex was down slightly from previous quarters at $21 8 million for Q2. This is not a reflection of the construction completed where we set records this quarter for network footage, but is due to the mix of construction this quarter being more in lower unit cost areas.

We added 900 net subscribers in Q2, taking us over 38600 in total our total subscribers have grown over 27% year over year, and we expect that growth will continue as we had a large number of serviceable addresses become available late in the quarter with a healthy preorder pipeline to.

Elliot Noss: Our total subscribers have grown over 27% year over year. We expect that growth will continue as we had a large number of serviceable addresses become available late in the quarter with a healthy pre-order pipeline to generate new subscriber installs. Gross margin grew by 22% year over year to $7.1 million. Ting's revenue grew 21% year over year to $12.4 million. Construction progress continues in both our owned and partner footprints. Our partner market of Colorado Springs is now live with beta customers, with new installs progressing and an official lighting ceremony in mid-August. We will also add small peripheral markets where appropriate to our regional network footprints, which you'll see in increased total potential serviceable addresses for those footprints. Importantly, there's a lot happening in the partner space. A number of significant pools of capital have now made bold entries.

Generate new subscriber installs.

Gross margin grew by 22% year over year to $7 1 billion King's revenue grew 21% year over year to $12 4 million.

Construction progress continues in both our owned and partner footprints our partner market of Colorado Springs is now live with beta customers with new installs progressing and the official lighting ceremony in mid August .

We will also add small peripheral markets, where appropriate to our regional network footprints, which youll see an increased total potential serviceable addresses for those footprints.

Importantly, there is a lot happening in the partner space a number of significant pools of capital have now made bold entries here I refer to Blackrock with Giga power Meridian, a large French infrastructure, investor and Brookfield with their intrepid networks investment and more.

Elliot Noss: Here I refer to BlackRock with Gigapower, Meridiam, a large French infrastructure investor, and Brookfield with their Intrepid Fiber Networks investment, and more. There are, however, very few ISPs like Ting that view operating an ISP as quite separate from building and financing a network. This imbalance provides opportunity. These infrastructure investors are quite disciplined, so we do not expect this supply-demand imbalance to create bargains. We do, however, believe that it will present opportunities. We expect this to be an important dynamic in the next phase of the coax to fiber transition. Lastly, we migrated Ting ordering, billing, and provisioning, and address and schedule management to the Wavelo platform. In many ways, this is typical of the Tucows playbook of using modern software to elevate the customer experience and to make the lives of both customers and employees who have to service those customers better and more efficient.

There are however, very few Isps like TIG that view operating in ISP as quite separate from building and financing of network.

This imbalance provides opportunity these infrastructure investors are quite disciplined so we do not expect the supply demand imbalance to create bargains. We do however believe that it will present opportunities. We expect this to be an important dynamic in the next phase of the coax or fiber transition.

And lastly, we migrated seeing ordering billing and provisioning and the address and schedule management to the wave low platform in many ways. This is typical of the <unk> playbook of using modern software to elevate the customer experience and to make the lives of both customers and employees.

<unk>, who have to service those customers better and more efficient.

Every element of this new platform will transform our operations delivering an even more seamless and convenient experience. We invite you to see this in action on our website at <unk> Dot com.

Elliot Noss: Every element of this new platform will transform our operations, delivering an even more seamless and convenient experience. We invite you to see this in action on our website at ting.com. We continue to build well, load the network well, and to improve operations. As we look around us, we are starting to see others sweat a bit with the challenges of building a network and operating an ISP. We are clearly now into the execution period of this industry, which is just where we like to be. Now I'd like to turn the call over to Dave Singh for a deeper dive on our financial results.

We continue to build well load the network well and to improve operations as we look around US we are starting to see other sweat a bit with the challenges of building a network and operating in ISP.

We are clearly now into the execution period of this industry, which is just where we like to be.

And now I'd like to turn the call over to Dave Singh for a deeper dive on our financial results. Thanks Elliot total revenue for the second quarter of 2023 increased two 3% to 85 million <unk> dollars $1 million over the second quarter of 2022.

Dave Singh: Thanks, Elliot. Total revenue for Q2 of 2023 increased 2.3% to $85 million, from $83.1 million of Q2 of 2022. Ting had revenue gains of 21% year over year, increasing to $12.4 million in Q2 of 2023 from $10.2 million in Q2 of 2022. Wavelo's revenues also increased 20% to $10.8 million in Q2 of 2023 from $9 million in Q2 of 2022. The gains were offset by a decline of 2% in revenue from Tucows Domains year over year from $61 million in Q1 of 2022 to $60 million in Q1 of 2023, mainly due to a lower contribution from expiry aftermarket sales. There was also a decline in corporate segment revenues of 34% year over year from $2.8 million in Q2 of 2022 to $1.9 million in Q2 of 2023, driven primarily by lower revenues from legacy mobile subscribers and higher intercompany eliminations.

Heng had revenue gains of 21% year over year increase of $12 4 million in Q2 of 2023 from $10 2 million in Q2 of 2022.

Weibo's revenues also increased 20% to $10 8 million in Q2 of 2029.

$9 million in Q2 of 2022 gains.

Gains were offset by a decline of 2% in revenue from 2000 <unk> year over year from $61 million in Q1, 'twenty two 6 million in Q1 2020.

Mainly due to a lower contribution from expiring after market sales.

There was also a decline in corporate segment revenues of 34% year over year from $2 8 million in Q2 of 2022 to $1 9 million in Q2, 2027, primarily by lower revenues from legacy mobile subscribers and higher intercompany eliminations.

Gross profit for network costs for the second quarter increased one 2% year over year to $34 2 million compared to $3 8 million.

Dave Singh: Gross profit before network costs for Q2 increased 1.2% year-over-year to $34.2 million from $33.8 million. As a percentage of revenue, gross profit before network costs this quarter remained flat compared to prior year at 20%. Breaking down gross profit by business, Tucows Domains gross profit for Q2 of 2023 decreased 10.2% from Q2 of last year to $17.9 million from $20 million. As a percentage of revenue, gross margin for Tucows Domains was down to 30% for Q2 of 2023 compared to 33% in Q2 of 2022, mainly a result of weak expiry aftermarket revenues. Also, we're still seeing the impact of the euro devaluation to the US dollar in 2022, which increased our cost of buying domains in US dollars that were sold to customers in euros.

As a percentage of revenue gross profit before network costs. This quarter remained flat compared to prior year at 40%.

Breaking down gross profit by business 2000 remains gross profit for the second quarter of 2023 decreased 10, 2% from Q2 of last year to $17 $9 million $20 million.

As a percentage of revenue gross margin for 2000 was down to 30% for Q2 of 2020 compared to 32% in Q2 of 2022, mainly a result of weak expiry aftermarket revenues, but also we're still seeing the impact of the euro devaluation to the U S. Dollar in 2022, which increased our cost of buying domains in U S dollars thresholds.

Customers in euros, the price increases we implemented in the latter half of 2022 will take a few quarters of names are renewed at higher prices and the effect close through the deferral process.

Dave Singh: The price increases we implemented in the latter half of 2022 will take a few quarters as names are renewed at the higher prices and the effect flows through the deferral process. Wavelo's gross profit increased by 27% to $10 million this quarter from $7.9 million for Q2 2022. As a percentage of revenue, gross margin for Wavelo was a robust 92.5% this quarter, which is up from 88.2% in Q2 of last year. Ting gross profit for Q2 increased 22% year-over-year to $7.1 million from $5.8 million for the same period of last year. As a percentage of revenue, gross margin for Ting was at 57% in Q2 2023, unchanged from Q2 of last year. Network expenses for Q2 increased 38% to $16.2 million from $11.7 million for the same period of last year.

Wavelength gross profit increased by 27% to $10 million this quarter from $7 9 million for Q2 2022.

As a percentage of revenue gross margin for waiver was a robust 92, 5% this quarter, which is up from 88, 2% in Q2 of last year.

<unk> gross profit for Q2 increased to 22% year over year to $7 1 million from $5 8 million for the same period of last year.

As a percentage of revenue gross margin for Ting was a 57% in the second quarter of 2022 unchanged from Q2 of last year.

Network expenses for Q2 increased 38% to $16 2 million from $11 7 million for the same period of last year. The increase continues to be driven by higher depreciation our expanding fiber network assets up 32% year over year.

Dave Singh: The increase continues to be driven by higher depreciation, our expanding fiber network assets up 33% year over year. Total operating expenses for Q2 2023 increased 17.5% to $31.1 million from $26.5 million for the same period last year. The increase is primarily the result of the following. People costs were up $3.2 million with increased workforce costs to support business expansion related to the growth of Ting and Wavelo. Sales and marketing expenses increased by $0.8 million year over year, mainly driven by increased investments in the Ting Internet business expansion. Facility and third-party contracting and support costs were up $0.2 million, while stock-based compensation increased $0.6 million year over year, mainly from subsidiary grants in Ting and Wavelo. Finally, loss on disposition of property and equipment and amortization of intangible assets are down $0.3 million from Q2 of 2022.

Total operating expenses for the second quarter of 2023 increased 17, 5% to $31 1 million from $26 4 million the same period last year.

The increase was primarily the result of the falling people costs were up $3 $2 million within Chris workforce cost to support business sequentially related to the growth of Ting and wavelength.

Sales and marketing expenses increased by <unk> 8 million year over year, mainly driven by increased investments in the business expansion.

Facility and third party contracting and support costs were up $2 million, while stock based compensation increased <unk> 6 million year over year, mainly from subsidiary grants and Tang and Wang level, and finally loss on disposition of property and equipment and amortization of intangible assets are down considerably from Q2 of 2022.

As a percentage of revenue operating expense increased to 37% for Q2 of this year.

Dave Singh: As a percentage of revenue, operating expenses increased to 37% for Q2 of this year from 32% for the same period last year. We reported a net loss for Q2 2023 of $31 million or a loss of $2.86 per share, compared with a net loss of $3 million or $0.29 per share for Q2 2022. We had a non-recurring accretion of redeemable preferred shares and an associated one-time loss of $14.7 million on debt extinguishment resulting from the early redemption of a portion of Generate's preferred shares. The remainder of the net loss is the result of the acceleration of the construction of Ting's fiber networks and scaling up of the associated operations, network depreciation, higher stock-based compensation, and higher interest expenses.

For the same period last year.

We reported a net loss for the second quarter of 2023 of $31 million or a loss of $2 86 per share with a net loss of $3 million or 29 cents per share for the second quarter of 2022.

We had a nonrecurring and accretion of redeemable preferred shares and an associated onetime loss of $14 7 million on debt extinguishment, resulting from the early redemption of a portion of generates preferred shares.

The net loss is the result of the acceleration of the construction of <unk> fiber networks and scaling up of the associated operations network depreciation higher stock based compensation and higher interest expenses.

Note our tax expense reflects our geographic mix with taxes payable in Canada on a legacy <unk> business.

Dave Singh: Note, our tax expense reflects our geographic mix with taxes payable in Canada and our legacy domains business. Adjusted EBITDA for Q2 was $5.4 million, down 54% from $11.7 million for Q2 2022. That total breaks down amongst our three businesses as follows. Adjusted EBITDA for Tucows Domains was $10.6 million, down 12.6% from Q2 of last year, reflecting the weaker expiry stream aftermarket. Adjusted EBITDA for Wavelo was $3.4 million, a decrease of 11.5% from $3.9 million last year. I want to remind investors that this quarter, Wavelo again recognized revenue on bundled professional services included as part of the platform services provided to DISH. This recognition occurs either as the bundled hours are used or expire annually near the anniversary date of the DISH contract. We had a similarly lumpy recognition in Q2 of 2022 and 2021.

Adjusted EBITDA for Q2 was $5 4 million down 54% from 11 concerned win for Q2 2022.

Total breaks down amongst all three businesses are false.

Adjusted EBITDA for 2000 demands was $10 6 million down 12, 6% from Q2 of last year, reflecting the weaker expiry stream aftermarket.

Adjusted EBITDA for waiver was $3 4 million a decrease of 11, 5% from $2 9 million last year.

To remind investors that this quarter wave low again recognize revenue on bundled professional services include as part of the platform services provider to dish. This recognition occurs either as a bundle hours are used or expire annually. The anniversary date of the dish contract.

But similarly lumpy recognition in Q2 of 2022 and 2021 the decrease in adjusted EBITDA is primarily due to the contract asset related revenue recognition impacts related to the reassessment of fixed payments on the disagreement as a reminder, the contract asset and associated revenue recognition varies based on the estimated relative mix of variable and fixed.

Dave Singh: The decrease in adjusted EBITDA is primarily due to the contract asset-related revenue recognition impact related to the reassessment of fixed payments in the DISH agreement. As a reminder, the contract asset and associated revenue recognition varies based on the estimated relative mix of variable and fixed payments. The non-cash impact on the contract asset change was -$0.7 million this quarter versus +$5.6 million last year. Adjusting for these, EBITDA actually grew $5.9 million year over year. As of 30 June 2023, the contract asset balance is $4.6 million, and it will unwind as the contract revenue over the term of the contract, which is up for renewal in Q3 2024. Adjusted EBITDA for Ting was -$10.3 million, compared with -$6.2 million in Q2 2022, as we continue to accelerate our fiber network expansion.

Payments are.

The noncash impact on the contract asset change was a negative <unk> 7 million this quarter versus a positive $5 6 million last year.

Adjusting for these EBITDA actually grew $5 9 million year over year.

As of June 32023, our contract asset balances of $4 6 million and it will unwind of the Contra revenue over the term of the contract which is up for renewal in Q3 of 2024.

Adjusted EBITDA for <unk> was negative $10 2 million compared with negative $6 2 million in Q2 2022.

As we continue to accelerate our fiber network expansion.

And finally, the corporate category had adjusted EBITDA of $1 7 million this quarter down from $1 9 million in Q2 last year with the decrease primarily driven by a lower contribution from our legacy mobile base.

Dave Singh: Finally, the corporate category had adjusted EBITDA of $1.7 million this quarter, down from $1.9 million in Q2 last year, with the decrease primarily driven by a lower contribution from the legacy mobile base. Turning to our balance sheet, cash and cash equivalents at the end of Q2 were $147.9 million, compared with $11.8 million at the end of Q1 2023, and $6.5 million at the end of Q2 2022. In addition to the $147.9 million, we have $11.7 million classified as restricted cash as part of the asset-backed securities, or ABS, transaction this quarter. Of the $11.7 million, $8.4 million will sit in the trust account for the duration of the ABS notes.

Turning to our balance sheet cash and cash equivalents at the end of Q2 or $147 9 million, coupled with $11 8 million at the end of the first quarter of 2023 and $6 5 million at the end of the second quarter of 2022. In addition to the $147 9 million, we had $11 7 million classified as restricted cash.

The asset backed securities or ABS transaction this quarter.

The $11 7 million $8 4 million will sit in a trust account for the duration of the ABS notes.

The remaining $3 3 million reflect the cash collections from the securitized assets and get distributed amongst interested to the noteholders fees to third parties and then with the remaining funds coming back to tick.

Dave Singh: The remaining $3.3 million reflect the cash collections from the securitized assets get distributed monthly as interest to the note holders, fees to third parties, then with the remaining funds coming back to Ting. During the quarter, we had -$1.6 million in cash from operations, compared with +$12.6 million in Q2 last year, with the decrease driven by the larger operating investment for Ting Fiber. We invested $22.2 million in property and equipment, primarily for the accelerated build-out of the Ting Fiber Internet network, in addition to the continued investment in the Wavelo platform. Note, that number reflects the actual cash paid for capital assets in the quarter on a cash flow statement. As mentioned earlier, we issued our first-ever set of asset-backed securities this quarter for the Ting business.

During the quarter, we had a negative $1 6 million in cash from operations compared with positive $12 6 million in Q2 last year with the decrease driven by the larger operating investments for Ting fiber.

We invested $22 2 million in property and equipment, primarily for the accelerated buildout of the Ting fiber Internet network. In addition to the continued investment in the Weibo platform.

Note that number reflects the actual cash pay for cap losses in the quarter on a cash flow statement.

As mentioned earlier, we issued our first set of asset backed securities. This quarter for the Ting business. The notes were issued with a value of 235 million with net proceeds of $225 million after taking into account the OID or original issue discount and issuance costs.

Dave Singh: The notes were issued with a value of $238.5 million, with net proceeds of $220.5 million after taking into account the OID, or original issue discount, and issuance costs. The notes carry a blended coupon rate of 6.88%, and after taking into account the OID, an effective rate of 8.2%. The notes are secured against most of the fiber assets, including certain customer relationships with Ting. Interest of approximately $1.4 million is paid monthly, with monthly covenant tests of annualized revenue versus interest expense. In Q2, we drew another $5 million on the preferred financing, but after receiving the proceeds from the Ting securitization in early May, we repaid $31 million on the preferred financing, which resulted in a loss of $14.7 million on the early debt extinguishment. I remind that cash interest payments on the preferred debt are deferred for the first 2 years.

The notes carry a blended coupon rate of six 8% and after taking into account the already an effective rate of eight 2%.

<unk> secured against most of the fiber assets, including certain customer relationships a thing.

Interest of approximately $100 million paid monthly with monthly covenant test of annualized revenue versus interest expense.

In Q2 would you another $5 million on the preferred financing, but after receiving the proceeds from the <unk> securitization in early May we repaid $31 million in preferred financing, which resulted in the loss of $14 7 million on the early debt extinguishment I.

As a reminder, cash interest payments from the preferred that are deferred for the first two years.

I also wanted to note that on June 30 of 2020 through syndicated loan balance for covenant calculation purposes wasn't that $224 3 million when factoring in letters of credit and cash on hand at up to $5 million, resulting in a leverage ratio of $4 107 times, we repaid $7 million on the facility this quarter and I expect to continue quarterly repayments this year.

Dave Singh: I also wanted to note that on 30 June 2023, syndicated loan balance for covenant calculation purposes was about $224.3 million, when factoring in letters of credit and cash on hand of up to $5 million, resulting in a leverage ratio of 4.17 times. We repaid $7 million on the facility this quarter and expect to continue quarterly repayments this year. Finally, deferred revenue at the end of Q2 was $151 million, unchanged from Q1 2023, and up slightly from $150.1 million for Q2 last year, primarily reflecting the stabilization of Domains revenue now that the pandemic impacts have normalized. That concludes my remarks. I'll now turn it back to Elliot.

Finally deferred revenue at the end of Q2 was $151 million unchanged from the first quarter of 2023 and up slightly from $151 million for the second quarter of last year.

Finally, reflecting the stabilization of domains revenue now that the pandemic impacts of normalized concludes.

Concludes my remarks, and I'll now turn it back to Elliot.

Thanks, Dave.

To start now.

Now halfway through the year I would like to reiterate our consolidated adjusted EBITDA guidance of $14 million to $16 million.

Elliot Noss: Thanks, Dave. To start, now halfway through the year, I would like to reiterate our consolidated adjusted EBITDA guidance of $14 to 16 million. It looks like Tucows Domains will be a little light due to weakness in the secondary market, and Wavelo will be a bit stronger due to effective cost control. Last quarter, I talked about our successful ABS process and the importance of us having sourced the vast majority of the capital necessary for this cycle. I also shared that we have retained Goldman Sachs and Bank Street to explore further opportunities for our capital structure. That investigation led to us maintaining the status quo for now. The opportunities available were more structured than we were looking for. We are happily in a position of strength and will instead focus on execution.

It looks like <unk> domains will be a little light due to weakness in the secondary market and wave low will be a bit stronger due to effective cost control.

Last quarter I talked about our successful ABS process and the importance of us having source the vast majority of the capital necessary for this cycle.

Also shared that we had retained Goldman Sachs and Bank Street to explore further opportunities for our capital structure.

That investigation led to us maintaining the status quo for now.

The opportunity is available where more structured that we were looking for we are happily in a position of strength and will instead focus on execution.

We are certainly informed by our view that we are operating in a unique macro environment, one with huge opportunities and significant risks. This is a good time to focus on execution and be conservative.

Elliot Noss: We are certainly informed by our view that we are operating in a unique macro environment, one with huge opportunities and significant risks. This is a good time to focus on execution and be conservative. We are also informed by what we described earlier, a number of larger partner markets needing tenants, which do not require the massive capital that organic markets do. For clarity, I'm not signaling a massive change in our approach or our strategy. Rather, I'm identifying some current market opportunities that our strategy might allow us to take advantage of. For TCX, our three businesses are all in a better place than just a year ago. Domains continues to generate cash as it always has, with progress on some upside opportunities. Wavelo has moved to now solidly generating cash, and we only expect that trend to continue.

We are also informed by what we described earlier a number of larger partner markets, leading tenants, which do not require the massive capital that organic markets do for clarity.

Not signaling a massive change in our approach or our strategy rather of identifying some current market opportunities that our strategy might allow us to take advantage of.

For Gtx, our three businesses are all at a better place than just a year ago.

Domains continues to generate cash as it always has with progress on some upside opportunities.

<unk> has moved to now solidly generating cash and we only expect that trend to continue.

Fortunately <unk> is now at or near the low point of loss on an operating basis, and we can start to grind towards operating cash flow positive.

Elliot Noss: Importantly, Ting is now at or near the low point of loss on an operating basis, and we can start to grind towards operating cash flow positive. At its simplest, we've gone from Domains having to generate cash sufficient to invest in two businesses, one of which is extremely capital intensive, to those two businesses becoming cash flow positive in one case and self-funded in the other. This means de-leveraging. It means executing. We also believe there is a fair bit of dislocation in financial markets right now. This is true in both public and private markets as assets start to revalue following the end of free money and the unwinding of a number of structural elements of the last decade plus. We are glad to be where we are this year while this takes place, rather than where we were a year ago.

At its simplest we've gone from domains, having to generate cash sufficient to invested two businesses one of which is extremely capital intensive to those two businesses, becoming cash flow positive in one case.

Self funded and the other this means deleveraging it means executing.

We also believe there is a fair bit of dislocation in financial markets right now.

This is true in both public and private markets as assets start to revalue. Following the end of free money and the unwinding of a number of structural elements of the last decade plus.

We are glad to be where we are this year. While this takes place rather than where we were a year ago.

What I say next applies to all three of our businesses. It is important while focusing on execution that we do not lose sight of the big picture.

Elliot Noss: What I say next applies to all three of our businesses. It is important, while focusing on execution, that we do not lose sight of the big picture. All of the massive opportunities, whether they be in AI or otherwise, many of the challenges, make technology both more important and more complex for people. Our businesses need to understand how they can help people take advantage of these massive opportunities and help them navigate the challenges that the increasing role of technology brings, directly, as in the case of Ting, or through partners, in the case of Tucows Domains, or Wavelo. We are at an interesting time. There is so much technological change, in most respects, people do not have a trusted partner to help them make the most of it. Technology in 2023 is like health or happiness.

All of the massive opportunities whether they be in AI or otherwise and many of the challenges make technology, both more important and more complex for people.

Our businesses need to understand how they can help people take advantage of these massive opportunities and help them navigate the challenges that the increasing role of technology Briggs directly as in the case of Teng or through partners to the case of <unk> domains are wavelengths.

We're at an interesting time, there is so much technological change and in most respects people do not have a trusted partner to help them make the most of it.

Technology in 2023 is like health or happiness. It is fundamental to our existence and we are often left without knowing where to turn to be supported.

Elliot Noss: It is fundamental to our existence, we are often left without knowing where to turn to be supported. That role, the role that used to be fulfilled in the early internet by dial-up ISPs, has most certainly not been taken up by incumbent telecom. The incumbents are simply not in relationship with their customers. They are not trusted nor liked. Many of Tucows Domains customers are. Ting is. Wavelo gives incumbents a chance to be. We all thought the change ushered in by technology in the last couple of decades was massive. We are only at the beginning, all of the TCX businesses are right in the middle of that change. With that, I look forward to your written questions and exploring areas that interest you in greater detail. Again, please send your questions to ir@tucows.com by Thursday, August 10th.

That role the role that used to be fulfilled in the early internet by Dialup Isps as most certainly not been taken up by incumbent Telecom. The incumbents are simply not in relationship with their customers. They are not trusted nor linked.

Many of <unk> customers are seeing is wave low gives incumbents have chance to be.

We all thought the change ushered in by technology in the last couple of decades was massive.

We are only at the beginning.

And all of the <unk> businesses are right in the middle of that change.

And with that I look forward to your written questions and exploring areas with interest you in greater detail again. Please send your questions to IR at <unk> Dot Com by Thursday August 10, and look for a recorded Q&A audio response and transcript to this call to be posted to the <unk> website on Tuesday August 20.

Elliot Noss: Look for our recorded Q&A audio response and transcript to this call to be posted to the Tucows website on Tuesday, 22 August at approximately 4:00 PM Eastern Time. Thank you.

At approximately four PM eastern time, thank you.