2023-Q1-TCX-results-Q&A-transcript

Q1 2023 Q&A Transcript

Introduction
Welcome to Tucows’ question and answer dialogue for Q1 2023. Elliot Noss, President and Chief Executive Officer, will be responding to your questions. Today’s commentary includes responses to questions submitted to us following the pre-recorded management remarks regarding the quarter and outlook for the Company.

Go ahead, Elliot.

Opening Remarks
Thank you, Monica. And welcome to our Q&A for our first quarter 2023 financial results. We have a couple small clarifications on TCX; a couple of questions on Ting; and nothing more on Tucows Domains or Wavelo, although I will say that we had positive feedback on both these businesses as investors were able to dig a little deeper on investor day.

Tucows

With Tucows, I have a few questions on the overall business that I’ll address first.
We talked about 2023 guidance for Adjusted EBITDA in our Q4 management remarks and Q&A, and I’d like to reiterate our expectations for each business segment. For Tucows Domains, which achieved $44.8 million in Adjusted EBITDA in 2022, guidance is in the same $45 million range. For Wavelo, which did $3.8 million in Adjusted EBITDA in 2022, we have guidance of $4 to $6 million in EBITDA. For Ting, which had an Adjusted EBITDA loss of $21.6 million in 2022, guidance for 2023 is around a $40 million Adjusted EBITDA loss.

We had a question about the Tucows syndicated debt level of $233 million in Q1 of 2023 that was cited at our investor day, and how that reconciled with the number for the debt cited in our Q1 10-Q. As our CFO Dave Singh noted, our March 31st, 2023, syndicated loan balance for covenant calculation purposes was a net $232.9 million when factoring in letters of credit and cash on hand of up to $5 million.

Ting

Turning to Ting, one of the questions we had coming out of investor day was on the implied cost per pass in the sample build plan we presented. This provides a great opportunity for us to show that dividing passes by capex will simply not yield useful information. We appreciate the question as it gives us a chance to use a real example. There are four major factors that need to be taken into account:

  1. This model has nearly $350 million in installation capex in order to load the network.
  2. There is nearly $130 million in operating losses through the period of that model.
  3. There is capex in partner markets, another $18-and-change million dollars.
  4. The network is not fully built at that point, with roughly $240 million in capital deployed that will go towards future addresses.

We spent most of 2021 in substantive discussions and negotiations with the City regarding our project in Alexandria, Virginia. We spent $10.8 million on build capex in Alexandria, concluding Q1 with only 894 addresses, illustrating that cost per address calculations are impractical at this stage.

We provided additional support for our business assumptions at our recent investor day. We will not be providing projections beyond what we already provide, as the fiber market will be incredibly dynamic for the next five years.

Closing Remarks

It was great seeing many of you earlier this month. We have a unique group of shareholders that are supportive and frank in our communications. The difficulty of helping investors follow the fiber build has so many moving parts, but we are watching companies like Frontier and AT&T struggle with similar challenges. We now have a clear sense of where Ting stands in the industry.

We appreciate all of you and are turning our efforts to the execution phase of this opportunity. Thank you for listening to our Q&A.