Q2 2025 Tucows Inc Earnings Call - Q&A

Monica: Welcome to Tucows Question and Answer Dialogue for Q2 2025. Elliot Noss, President and Chief Executive Officer of Tucows Inc. will be responding to your questions. For your convenience, this audio file is also available as a transcript in the investors section of our website, along with our Q2 2025 financial results and updated reports. I would also like to remind investors that if you would like to receive our quarterly results and Q&A via email, please make the request to ir@tucows.com. Please note that the following discussion may include forward-looking statements, which 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-Q and 10-K.

<unk> to 'twenty twenty-five Elliot Noss, President and Chief Executive Officer of two CASM King will be responding to your questions.

For your convenience. This audio file is also available as a transcript and the investors section of our website along with our Q2 2025 financial results and updated reports.

I would also like to remind investors that if you would like to receive our quarterly results in Q&A via E. Mail. Please make the request to IR at <unk> Dot com.

Please note that the following discussion may include forward looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially. These risk factors are described in detail in the Companys documents filed with the SEC specifically the most recent reports on forms 10-Q and 10-K the company urges you to read its six.

<unk> filings for a full description of the risk factors applicable to its business.

Monica: The company urges you to read its security filings for a full description of the risk factors applicable to its business. Today's commentary includes responses to questions submitted to us following the prerecorded management remarks regarding the quarter and outlook for the company. We are grouping similar questions into categories that we feel are addressing common queries. If your questions reach a certain threshold or volume, we may ask you to schedule a call instead to ensure we can address the full body of your questions. If you feel that the recorded questions and/or any direct email you may receive do not address the full scope of your questions, please let us know. Go ahead, Elliot.

Today's commentary includes responses to questions submitted to us following the prerecorded management remarks regarding the quarter and outlook for the company.

We are grouping similar questions into categories that we feel are addressing common queries.

If your questions reach a certain threshold or volume we may ask you to schedule a call instead of to ensure we can address the full body of your question and as you can feel that theyre recorded questions, Andrew or any direct email you may receive do not address the full scope of your questions. Please let us know.

Go ahead Elliot Thank you Barbara and welcome to our Q&A for our second quarter 2025 financial results. This quarter, we had questions about each of our businesses.

Elliot Noss: Thank you, Monica. Welcome to our Q&A for our Q2 2025 financial results. This quarter, we had questions about each of our businesses. At a TCX level, we continue to prioritize capital allocation flexibility and the ongoing strengthening of our balance sheet. We've had investor questions on the domains business, particularly around the impacts of our recent Tucows Registry contracts with NIXI and Radix. Investors will primarily see the impact of these contracts as increased gross margin in our wholesale segment, supporting the ongoing growth trajectory of our overall domains margin. This differs from our registrar business, where there is a pass-through component of the registry cost that is captured in our revenue. We expect the gross margin contribution from our registry contracts to start in the $low millions per year. Importantly, the registry business, like the rest of our domains businesses, scales efficiently.

T X level, we continue to prioritize capital allocation flexibility.

Ongoing strengthening of our balance sheet.

We've had investor questions on the domain business, particularly around the impact of our recent two cows registry contracts with Nic seat in robotics investors will primarily see the impact of these quadrants as increased gross margin in our wholesale segment.

The ongoing growth trajectory of our overall domain margin. This differs from our registrar business, where there was a pass through component of the registry cost that is captured in our revenue.

We expect the gross margin contribution from our registry contracts to start in the low millions per year importantly, the registry business like the rest of our domains businesses scales efficiently.

As part of the <unk> agreement, we are establishing a local presence in India to meet regulatory and operational requirements. While we do not disclose the economics for competitive reasons. We can reiterate that the terms are consistent with what we typically see from large wholesale customers in terms of timing of contribution.

Elliot Noss: As part of the NIXI agreement, we are establishing a local presence in India to meet regulatory and operational requirements. While we do not disclose the economics for competitive reasons, we can reiterate that the terms are consistent with what we typically see from large wholesale customers. In terms of timing of contribution, the TLDs from NIXI were integrated in late Q2, and the TLDs from Radix are scheduled for integration in late Q4. It's worth noting that domains is a mature industry, where adding new large customers is a key part of offsetting attrition from the events we have referenced in our quarterly remarks. The NIXI and Radix contracts fit exactly into this strategy. Looking ahead, the next round of new gTLDs, the first since 2014, will open for applications in 2026 and are expected to launch in 2027.

The <unk> for mixing we're integrated in late Q2, and the <unk> from robotics are scheduled for integration in late Q4.

It's worth noting that debate is a mature industry, we're adding new large customers is a key part of offsetting attrition from the events, we have referenced in our quarterly remarks.

The <unk> and <unk> contracts that exactly into this strategy.

Looking ahead.

Next round of new <unk>. The first since 2014 will open for applications in 2026 and are expected to launch in 2027.

With the Dixie and robotics wins now secured <unk> registry is in an exceptionally strong position to compete for and win additional registry business with these new opportunities.

Elliot Noss: With the NIXI and Radix wins now secured, Tucows Registry is in an exceptionally strong position to compete for and win additional registry business with these new opportunities. As many of you will have read this morning, EchoStar has entered into a transaction with AT&T, selling $23 billion worth of spectrum. This is, of course, subject to regulatory approval and will enable EchoStar to move towards a hybrid MNO model. Ironically, this looks a little bit like our partner networks, as EchoStar is moving to less infrastructure, more cash, and what looks to be an increased focus on growing Boost Mobile. Of course, this news is new, and we do not have any idea whether this is the end or the first of a number of steps. Directionally, though, it looks like a slight positive for Wavelo.

As many of you will have read this morning.

Costar has entered into a transaction with AT&T.

Selling $23 billion worth of spectrum.

This is of course subject to regulatory approval and will enable echostar to move towards a hybrid <unk> model.

Ironically, this looks a little bit like our partner networks as Echostar is moving to less infrastructure more cash and what looks to be an increased focus on growing boost mobile.

Of course this news is new and we do not have any idea whether this is the end of the first of a number of steps directionally.

Directionally, though it looks like a slight positive for Weibo, we look forward to our continued work with the Echostar team as they shift their focus from building infrastructure to operating a mobile carrier.

Elliot Noss: We look forward to our continued work with the EchoStar team as they shift their focus from building infrastructure to operating a mobile carrier. Investors asked about whether there would be further non-core Ting assets to be monetized. We have sold most of the non-core assets that we expect to sell because much of our built fiber plant is pledged inside the ABS. We were really only able to sell fiber plant where we had started to engage in construction, but where we were not yet offering service. It is worth noting that the number of parties engaged in continuing to build fiber-to-the-home networks in the US remains significant. We are probably roughly halfway through the fiberization of the US. Accordingly, there was plenty of interest in acquiring these subs from us, and most importantly for us, bringing fiber-to-the-home to these communities. We had carefully selected these communities.

Investors asked about whether there would be further non core assets to be monetized. We have sold most of the noncore assets that we expect to sell because much of our built fiber plant has pledged inside the ABS we.

We're really only able to sell fiber plant, where we had started to engage in construction.

But where we were not yet offering service.

It's worth noting that the number of parties engaged in continuing to build fiber to the home networks in the U S remains significant we are probably roughly halfway through the fiber ization of the U S.

Accordingly, there was plenty of interest in acquiring these subs from us and most importantly for us bringing fiber to the home to these communities. We are carefully selected these communities, we thought them all to be prime opportunities for the first fiber buildout and we chose buyers that we thought would.

Elliot Noss: We thought them all to be prime opportunities for the first fiber builder, and we chose buyers that we thought would service those communities well. As we have previously noted, in two of those communities, we will remain as the ISP in a partner model. To summarize, there will be a little bit more assets sold, but not a lot. Of course, we also had questions about the Ting balance sheet. It continues to be a priority, and we continue to actively work on it. Thank you for listening to our Q&A. A reminder that if you feel that the recorded answers or any direct email you receive do not address your questions, please follow up with us at ir@tucows.com.

Service those communities well and.

And as we have previously noted in two of those communities, we will remain as the ISP and a partner model. So to summarize there will be a little bit more assets sold but not a lot.

Of course, we also had questions about the balance sheet. It continues to be a priority and we continue to actively work on it.

Thank you for listening to our Q&A and a reminder, that if you feel that the recorded answers or any direct E. Mail you receive do not address your questions. Please follow up with us at IR at <unk> Dot com.