Q3 2025 Tucows Inc Earnings Call - Q&A
<unk> for Q3 of 2025 de Boor, President and Chief Executive Officer of two two caster means we'll 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 Q3 2025 financial results and updated report I would.
Speaker #1: We have prerecorded prepared remarks regarding the quarter and outlook for the company. TUCOWS generated transcript of these remarks with relevant links is also available on the company's website.
Speaker #1: TUCOWS Question and Answer Dialogue for Welcome to Dave Warrick, President and Chief Executive Officer of TUCOWS and TUCOWS Domains. He will be responding to your questions.
Also like to remind investors that if you would like to receive our quarterly results in Q&A via E. Mail. Please make a request to IR at <unk> Dot com.
Speaker #1: We will begin with opening remarks from Elliot Nosse, President and CEO of Tucows Inc. TING, followed by business remarks from David Warrick, CEO of Tucows Domains, Justin Riley, CEO of Wavelo, and Elliot Nosse on TING. Ivan Ivanov, Tucows CFO, will discuss our financial results in detail, and we will finish with closing remarks from Elliot Nosse.
Speaker #1: For your convenience, this audio file is also available as a transcript in the investor section of our website, along with our Q3 2025 Financial Results and updated reports.
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 the forms 10-Q and 10-K the company urge you to read it.
Speaker #1: 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.
Speaker #1: 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.
Filings for a full description of the risk factors applicable to 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.
Speaker #1: In lieu of a live question and answer period following these remarks, shareholders, analysts, and prospective investors are invited to submit questions to questions via email to ir@tucows.com until TUCOWS management.
Speaker #1: 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 urge you to read the company's security filings for a full description of the risk factors applicable to its business.
Speaker #1: Thursday, November 13th. Please submit questions by Management, who will either address your questions directly or provide a recorded audio response and transcript that will be posted to the Tucows website on Tuesday, November 25th, at approximately 5:00 PM Eastern Time.
If your questions reach a certain threshold or volume we may ask you to schedule, calling step to ensure we can address the full body of your question and.
Speaker #1: Today's commentary includes responses to questions submitted to us following the prerecorded management remarks regarding the quarter and outlook. 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.
And if you feel that the recorded questions <unk> any direct email you may receive do not address the full scope of your question. Please let us know.
Speaker #1: We would also like to advise that the updated investor presentation and the TUCOWS quarterly KPI summary providing key metrics for all of our businesses for the last seven quarters as well as for full years 2023, 2024, and 2025 year to date along with historical financial results, are available in the investor section of the website.
Go ahead, Dave.
Thank you Monica and thank you to everyone joining us today.
This is my first Q&A and the role of CEO and I want to start by saying how honored I am to lead this team and to continue building on this foundation to countless laid over many years as you saw in our Q3 results announcement for.
Speaker #1: And 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.
Speaker #1: Management's prepared remarks. Now for on Thursday, November 6th, Tucows issued a news release reporting its financial results for the third quarter ended September 30th, 2025.
Speaker #1: Go ahead,
Speaker #1: Dave. Thank you,
Speaker #2: Monica. And thank you to everyone joining us today. This is my first Q&A in the role of CEO, and I want to start by saying how honored I am to lead this team and to continue building on the foundation TUCAS has laid over many years.
And a meaningful quarter, both in terms of business progress and leadership transition.
Naturally many of your questions. This quarter are focused on our strategic direction going forward and the ongoing thing process.
Speaker #1: 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 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-K and 10-Q, the company urges you to read its security filings for a full description of the risk factors applicable to its business.
Im looking forward to addressing those today and sharing how we're thinking about the road ahead across domains way below and <unk> as a whole.
Speaker #2: As you saw in our Q3 results and announcements, it's been a meaningful quarter, both in terms of business progress and leadership transition. Naturally, many of your questions this quarter are focused on our strategic direction going forward and the ongoing TING process.
A few investors have asked for further detail on the <unk> process, including when they could expect a resolution.
The activity surrounding <unk> remains ongoing and is expected is complex while it remains a critical priority for us we anticipate that reaching a resolution could take a couple of quarters with full divestiture likely taking a few quarters beyond that at this stage, we are not able to comment on valuation.
Speaker #2: Addressing those today, I'm looking forward to how we're thinking about the road ahead across domains, Pueblo, and TUCAS as a whole. A few investors have asked for further detail on the TING process, including when they could expect a resolution.
Speaker #1: Now I would like to turn the call over to TUCOWS President and Chief Executive Officer Elliot Nosse. Go ahead,
Speaker #1: Elliot. Thank you,
Speaker #2: Monica. TUCOWS top line growth momentum of the last four fiscal years and year to date continues in Q3. With 7% growth year over year, gross profit expanded 9% year over year, and adjusted EBITDA increased 53% to 13.3 million in Q3 and to 39.5 million year to date.
Speaker #2: The activity surrounding TING remains ongoing and, as expected, is complex. While it remains a critical priority for us, we anticipate that reaching a resolution could take a couple of quarters, with full divestiture likely taking a few quarters beyond that.
Until the process is complete and final terms are in place, we'll continue to keep investors informed of any material developments as they occur another shareholder asks that with Ting and transition.
Should we think about the growth outlook for domains and wavelength I understand the increased interest in our core businesses as we focus on resolving tick and I can assure investors. We are looking at multiple paths to maximize shareholder value with a clear eyed view, we will be providing 2026 guidance for each of our businesses.
Speaker #2: At this stage, we are not able to comment on valuations until the process is complete and final terms are in place. We'll continue to keep investors informed of any material developments as they occur.
Speaker #2: This puts us well on track to meet our full-year adjusted EBITDA guidance of $47 million. Outperformance in both domains and Wavelo drove the upside, along with significantly improved adjusted EBITDA losses from TING.
Speaker #2: Another shareholder asks that with TING in transition, how should we think about the growth outlook for domains and Pueblo? I understand the increased interest in our core businesses as we focus on resolving TING, and I can assure investors we are looking at multiple paths to maximize shareholder value with a clear-eyed view.
Speaker #2: We paid down a further $2.5 million on our syndicated bank loan. Corporate net debt now stands at $189.6 million, marking a sixth straight quarterly decline and bringing net leverage under three, with interest coverage at 4.2 times.
And our Q4 earnings update in early February and that will include visibility into how we're thinking about growth in both segments.
There was also a question about my employment contract as the new President and CEO. The contract is a four year fixed term employment agreement to structure and term ensures predictability continuity and alignment for both <unk> shareholders and meet the full contract will be disclosed in our 10-K.
Speaker #2: We will provide guidance for each of our businesses and our Q4 earnings update in early February. This will include visibility into how we're thinking about growth in both segments.
Speaker #2: Comfortably within our covenants, and with that, I'll turn it over to Dave Warrick, CEO of TUCOWS
Speaker #2: Domains. Thanks,
Speaker #3: Elliot. TUCOWS Domains delivered another solid financial quarter in Q3. With revenue, gross margin, and adjusted EBITDA, each increasing year over year. The gains continue the year to date performance that is lifting our adjusted EBITDA slightly ahead of pace for our 2025 guidance.
Speaker #2: There was also a question about my employment contract as the new President and CEO. The contract is a four-year fixed-term employment agreement. The structure and term ensures predictability, continuity, and alignment for both TUCAS shareholders and me.
To be filed in March 2026.
We had one investor asked about my strategic vision as the new CEO and another asked about our near term priorities I'll start by saying that my focus is clear completing the team process remains our top priority the outcome of that process will directly shape, our flexibility to reinvest in domains and waved LOE and <unk>.
Speaker #2: The full contract will be disclosed in our 10-K to be filed in March 2026. We had one investor ask about my strategic vision as the new CEO and another ask about our near-term priorities.
Speaker #3: Q3 grew 5% year over year, accompanied by a 7% increase in gross margin. Adjusted EBITDA was $12.1 million for the quarter, up 5% from the prior year, bringing year-to-date adjusted EBITDA to $36.2 million.
<unk> the next phase of our growth strategy at the same time, we're actively preparing for what comes next.
Speaker #2: I'll start by saying that my focus is clear. Completing the TING process remains our top priority. The outcome of that process will directly shape our flexibility to reinvest in domains and Pueblo, and will guide the next phase of our growth strategy.
Evaluating reinvestment opportunities. So we're ready to move with focus and speed. Once the time is right operationally, we're staying disciplined driving efficiency continuing to deleverage and building on our momentum across revenue margin and adjusted EBITDA are bored with broad representation.
Speaker #3: Within our segments, our wholesale business continued its strong growth year over year, driven by consistent reseller demand and particularly by higher margin value-added services.
Speaker #2: At the same time, we're actively preparing for what comes next. We're evaluating reinvestment opportunities so we're ready to move with focus and speed once the time is right.
Speaker #3: Q3 revenue for the wholesale channel rose 5% year over year, to 58 million, compared to 55 million for Q3 of last year. Wholesale gross margin increased 10% to 15.8 million, from 14.4 million last year.
One of our cap table and with highly relevant skills to the tasks at hand are deeply engaged with leadership and transforming <unk>. There is much work to do and I am grateful to have a deep bench and our board our leadership and our teams to drive and support that effort I look forward to sharing more about our plans in the upcoming.
Speaker #2: Operationally, we're staying disciplined, driving efficiency, continuing to deleverage, and building on our momentum across revenue, margin, and adjusted EBITDA. Our board, with broad representation of our cap table and with highly relevant skills to the tasks at hand, are deeply engaged with leadership in transforming TUCAS.
Speaker #3: Within the wholesale channel, domain services delivered $10.1 million of gross margin, up 4% from $9.7 million in Q3 2024. Value-added services had another exceptional quarter, generating $5.7 million in gross margin, for a year-over-year gain of 21%, driven by strong sales from our expiry stream.
Quarters.
You for listening to our Q&A for Q3, if you feel that the recorded answers or any direct E. Mail you received do not address your questions. Please follow up with us at IR at <unk> Dot com.
Speaker #2: do, and I'm grateful to have a There is much work to deep bench in our board, our leadership, and our teams to drive and support that effort.
Speaker #2: I look forward to sharing more about our plans in the upcoming
Speaker #1: Thank you for listening to our Q&A for Tucows Inc.
Speaker #1: Q3. If you feel that the recorded quarters. answers or any direct email you received do not address your questions, please follow up with us at IR@tucows.com.
Speaker #3: The retail segment posted a modest revenue increase of 2% year over year, to $9.8 million, and gross margin was flat at $5.5 million. Total domains under management and transaction volumes declined by 9% and 10% year over year, respectively, reflecting the impact of one wholesale customer migrating the bulk of its portfolio in-house.
Speaker #3: We've discussed this transaction over the past two quarters and expect its effects on domains under management to conclude in Q4. With the year-over-year impact on domain transactions continuing through next year, when the full annual renewal cycle completes.
Speaker #3: Importantly, despite this transitional reduction in domains and transactions, which we have experienced from time to time in our 25-year history, our diversified reseller base continues to drive stable and growing gross margin for the business.
Speaker #3: Net of some atypical registration activity, our renewal rate for Q3 was approximately 74% across all TLDs for the TUCOWS domains brands. And while in the lower end, it remains within our historical range and above the industry average.
Speaker #3: noting, a slightly lower renewal rate Also worth does translate into more names expiring, which feeds into our expiry stream auction and sales. Turning to our registry services business, we have now been operating the registry platform for Nixie for National Internet Exchange of India and registry operator of the .in country code TLD for six months.
Speaker #3: Our partnership is going well, and we have recently started to explore new and interesting initiatives to expand our collaboration with Nixie. Our engagement with Radix remains equally strong, and although the migration has been postponed to early 2026, our teams and systems are ready and fully prepared to onboard and migrate more than 10 million domains across the Radix TLDs when the process starts.
Speaker #3: Last quarter, these two partnerships, as mentioned together, position Tucows nearly 17 million in the registry segment to manage domains. Tucows Domains continues to deliver consistent revenue and margin expansion, highlighting our solid fundamentals and the strength of our global platform.
Speaker #3: We're well positioned for Q4 and into 2026. Thanks for listening, and now over to Justin Riley, CEO of Wavelo.
Speaker #2: Thanks, Dave. Q3 was another strong quarter for Wavelo, delivering double-digit year-over-year growth in revenue, gross margin, and adjusted EBITDA. Wavelo's revenue was $11.9 million in Q3, an almost 18% increase from Q3 2024, and a 6% decrease from last quarter.
Speaker #2: Gross margin was $11.8 million this quarter, a 17.5% increase from Q3 2024, and a 6% decrease from last quarter. Adjusted EBITDA for Q3 was $4.3 million, a 25% increase year over year, and a decrease of 20% quarter over quarter.
Speaker #2: The year-over-year growth reflects continued subscriber growth within the existing customer base, as well as the new EchoStar rate card introduced as part of the four-year renewal at the start of 2025.
Speaker #2: As a reminder, we typically see higher revenue recognition in Q2 each year from the expiry of bundled professional services that are included annually as part of our platform services agreement with EchoStar.
Speaker #2: This quarter, we experienced a seasonal slowdown as we delivered professional services against those bundled hours ahead of their annual expiry. Looking ahead, we expect to continue recognizing revenue from these services on a more regular basis, which should reduce the historical seasonality in our quarterly results.
Speaker #2: As we navigate the back half of the year, we expect to continue to benefit from the tailwinds experienced year to date, but with a slight ramp in investment, particularly in sales and marketing, as we invest to acquire customers, build pipeline health, and drive bookings conversion.
Speaker #2: meaningfully in Q3, driven in large part by our early network of systems integrator partnerships, which are now beginning to Top of the funnel activity increased deliver qualified tier one and tier two introductions.
Speaker #2: This reflects increasing market recognition of Wavelo's differentiated modular architecture and the appetite for credible alternatives to platforms. While operators' sentiment towards legacy BSS and OSS remains cautious, with procurement cycles lengthening and some operators postponing modernization decisions by a few quarters, the volume of RFI and RFP activities continues to rise, particularly around legacy replacement programs with a clear AI focus.
Speaker #2: Telecoms are signaling fatigue, with both the inflexibility of large incumbents and the instability of small niche vendors. Wavelo's combination of simplicity, scalability, and enterprise-grade platform positions us well in this gap.
Speaker #2: We have maintained discipline in qualifying out smaller, lower-value opportunities to concentrate resources on transformational accounts that align with our long-term vision. As our systems integrator channel matures, we expect to see the dual benefit of expanded distribution and more efficient delivery capacity, which is a key lever in our ability to balance growth and profitability in the years to come.
Speaker #2: Thanks for listening, and
Speaker #2: now over to Elliott. Thanks,
Speaker #1: Strong year-over-year growth, and a Justin. The team delivered another quarter of meaningful improvement in adjusted EBITDA. A key contributor this quarter was the beginning of revenue from a large senior living community we're expanding into.
Speaker #1: Revenue hit $17 million in Q3, an 11% increase year over year. Third-quarter gross margin declined to $10.5 million, down from $11 million in Q3 of last year.
Speaker #1: This is primarily from team revenues increasing in partner markets over owned markets, as our partner markets builds accelerate, and partner markets have costs associated with network leases that impact margin.
Speaker #1: Teams adjusted EBITDA also continues to trend in a positive direction, with a small loss of $880,000 in Q3, down from $5.1 million in Q3 of 2024.
Speaker #1: In Q3 2025, our enterprise and other team segment, which includes enterprise, bulk, fixed wireless, and the remaining cedar footprint, delivered 3.6 million in revenue and $926,000 in contribution margin, results were led by continued strength in enterprise and bulk, where revenue grew 28% year over year.
Speaker #1: Year to date, the segment has generated $11.3 million in revenue and $3.2 million in contribution margin, highlighting the consistency and profitability of this part of the business.
Speaker #1: We have continued to divest of non-strategic assets, which this quarter includes the southern part of our cedar footprint in Colorado. A reminder that these are markets where we no longer have the capital to build and network construction inventory we no longer intend to use.
Speaker #1: In Q3, we generated $8.5 million from these divestitures. Year to date in 2025, the company has generated gross proceeds of $20.8 million on these divestitures, and the net book value of assets at the time of the sales was $15 million, resulting in a gain of 5.8 million.
Speaker #1: The sale of these network footprints naturally brings down our reported subscriber and serviceable address numbers, and you'll see that reflected in the Q3 KPI summary.
Speaker #1: Now, we'll hear from our CFO, Ivan Ivanov, who will discuss our financial results in detail.
Speaker #2: Elliott, and thank you all for joining us today. The third quarter extended the year's trajectory of steady top-line growth and expanding profitability.
Speaker #2: At the consolidated level, revenue was $98.6 million, up 7% year over year. Gross profit was $24.2 million, up 9%. And adjusted EBITDA increased $53% to $13.3 million.
Speaker #2: Year to date, adjusted EBITDA totaled $39.5 million, putting us well along the path towards our full-year target. On a GAAP basis, net loss for the quarter was $23 million, and adjusted net loss was $15.8 million, reflecting both the step up in operating performance and the impact of the non-cash items I’ll detail in a moment.
Speaker #2: Beginning this quarter, we revised our presentation of segment gross profit in our press amounts net of network release to reflect expenses, aligning external reporting with how we manage the business.
Speaker #2: The change does not affect consolidated revenue, gross profit, or adjusted EBITDA. This quarter also includes a $10.9 million non-cash impairment related to revalued inventory and warehouse lease right-of-use assets at TINC.
Speaker #2: This charge is excluded from adjusted EBITDA and has no impact on cash. It was part of our ongoing effort to streamline the asset base as TINC completes its pivot to a capitalized ISP model.
Speaker #2: Also consistent with what we'd signaled last quarter, we continue to recycle non-strategic assets and recognize the approximately $4 million of gains on asset sales this quarter.
Speaker #2: Last quarter, we noted that an additional transaction would be recognized in Q3, and it flowed through as expected. Moving on to segments' performance, Tucows Domains delivered another solid quarter of earnings, with revenue of $67.8 million and segment-adjusted EBITDA of $12.1 million.
Speaker #2: Wholesale and retail both contributed, with value-added services including the expiry stream remaining a notable margin driver. We recorded another strong quarter, with $11.9 million in revenue and adjusted EBITDA of $4.3 million, both up double digits year over year.
Speaker #2: Importantly, Way Below continues to pair growth with operating discipline, producing gross margins of 99.3% of revenue this quarter. The team's top-line momentum continues with revenue of $17 million, up 11% year over year.
Speaker #2: TINC reported gross profit of $10.5 million, and adjusted EBITDA improved to a loss of $0.9 million, a year over.
Operator: Welcome to Tucows Question and Answer Dialogue for Q3 2025. Dave Warrick, President and Chief Executive Officer of Tucows and Tucows Domains, will be responding to your questions. For your convenience, this audio file is also available as a transcript in the Investor section of our website, along with our Q3 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 10Q and 10K.
Operator: 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, Dave.
<unk> 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.
Dave Woroch: Thank you, Monica, and thank you to everyone joining us today. This is my first Q&A in the role of CEO, and I want to start by saying how honored I am to lead this team and to continue building on the foundation Tucows has laid over many years. As you saw in our Q3 results and announcements, it's been a meaningful quarter, both in terms of business progress and leadership transition. Naturally, many of your questions this quarter are focused on our strategic direction going forward and the ongoing Ting process. I'm looking forward to addressing those today and sharing how we're thinking about the road ahead across Domains, Fiber, and Tucows as a whole. A few investors have asked for further detail on the Ting process, including when they could expect a resolution. The activity surrounding Ting remains ongoing and, as expected, is complex.
Dave Woroch: While it remains a critical priority for us, we anticipate that reaching a resolution could take a couple of quarters, with full divestiture likely taking a few quarters beyond that. At this stage, we are not able to comment on valuations until the process is complete and final terms are in place. We'll continue to keep investors informed of any material developments as they occur. Another shareholder asks that with Ting in transition, how should we think about the growth outlook for Domains and Pueblo? I understand the increased interest in our core businesses as we focus on resolving Ting, and I can assure investors we are looking at multiple paths to maximize shareholder value with a clear-eyed view.
Dave Woroch: We will be providing 2026 guidance for each of our businesses in our Q4 earnings update in early February, and that will include visibility into how we're thinking about growth in both segments. There was also a question about my employment contract as the new President and CEO. The contract is a four-year fixed-term employment agreement. The structure and term ensures predictability, continuity, and alignment for both Tucows shareholders and me. The full contract will be disclosed in our 10K to be filed in March 2026. We had one investor ask about my strategic vision as the new CEO, and another asked about our near-term priorities. I'll start by saying that my focus is clear. Completing the Ting process remains our top priority. The outcome of that process will directly shape our flexibility to reinvest in Domains and Fiber, and will guide the next phase of our growth strategy.
Dave Woroch: At the same time, we're actively preparing for what comes next. We're evaluating reinvestment opportunities, so we're ready to move with focus and speed once the time is right. Operationally, we're staying disciplined, driving efficiency, continuing to deleverage, and building on our momentum across revenue, margin, and adjusted EBITDA. Our board, with broad representation of our cap table and with highly relevant skills to the tasks at hand, is deeply engaged with leadership in transforming Tucows. There is much work to do, and I'm grateful to have a deep bench in our board, our leadership, and our teams to drive and support that effort. I look forward to sharing more about our plans in the upcoming quarters.
Operator: Thank you for listening to our Q&A for Q3. 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.