2023-Q3-TCX-results-press-release

Tucows Reports Financial Results for Third Quarter 2023

TORONTO, November 2, 2023 – Tucows Inc. (NASDAQ:TCX, TSX:TC), a global internet services leader, today reported its financial results for the third quarter ended September 30, 2023. All figures are in U.S. dollars.

“On a year over year basis, our third quarter results show continued strong growth of Wavelo and Ting, and a return to steady state for Tucows Domains. Completing a full quarter with the migrated Boost subscriber base gave Wavelo a significant boost year over year, including increases in revenue of 174%; gross margin of 176%; and adjusted EBITDA of 566%. Ting also showed strong year over year growth with an increase of 17% for revenue and 20% for gross margin,” said Elliot Noss, Tucows President and CEO. “The important story is about capital allocation. We are making growth investments and directing cash flow to set up the Company for a long runway of growth while also managing our debt. We recently signed a new banking credit agreement for the Tucows syndicated debt that gave us improved terms and provides further stability and capital for growth, and we continued to pay down the balance on the syndicated debt this quarter using cash flow from Wavelo and Tucows Domains.”

Financial Results

Consolidated net revenue for the third quarter of 2023 increased 11.4% to $87.0 million from $78.1 million for the third quarter of 2022. The growth in Ting and Wavelo revenues was offset by a decrease in revenue in Tucows Corporate. Domains revenues were up slightly, as the business returned to a post-pandemic normalized trajectory.

Gross profit for the third quarter of 2023 decreased 6.7% to $16.8 million from $18.0 million from the third quarter of 2022. The decrease in Gross profit was driven primarily by expected increased network depreciation and network expenses as the Ting network footprint expands, as well as the impairment of certain Ting network assets totaling $2.7 million. The decrease in Gross profit was partially offset by strong growth in gross margin for Wavelo, as well as for Ting.

Net loss for the third quarter of 2023 was $23.5 million, or a loss of $2.16 per share, compared with net loss of $8.0 million, or $0.74 per share, for the third quarter of 2022. The increased loss is primarily the result of costs from the continued investment in the Ting Fiber network expansion, network depreciation, impairment of certain Ting network assets, higher interest expenses resulting from the new Ting asset-backed security (ABS) facility and overall higher interest rates, and higher stock-based compensation.

Adjusted EBITDA for the third quarter of 2023 decreased 43.2% to $4.5 million from $7.9 million for the third quarter of 2022. The decrease in adjusted EBITDA was primarily related to planned investments in Ting’s operating capacity and growing customer base. Cash equivalents, restricted cash, and restricted cash equivalents at the end of the third quarter of 2023 were $122.4 million compared with $159.6 million at the end of the second quarter of 2023 and $30.5 million at the end of the third quarter of 2022.

Summary Financial Results (In Thousands of US Dollars, Except Per Share Data)

Summary of Revenues, Gross Profit and Adjusted EBITDA (In Thousands of US Dollars)

1. Adjusted EBITDA

Tucows reports all financial information required in accordance with United States generally accepted accounting principles (GAAP). Along with this information, to assist financial statement users in an assessment of our historical performance, the Company typically discloses and discusses a non-GAAP financial measure, adjusted EBITDA, in press releases and on investor conference calls and related events that exclude certain non-cash and other charges as the Company believes that the non-GAAP information enhances investors' overall understanding of our financial performance.

The Company believes that the provision of this supplemental non-GAAP measure allows investors to evaluate the operational and financial performance of the Company’s core business using similar evaluation measures to those used by management. The Company uses adjusted EBITDA to measure its performance and prepare its budgets. Since adjusted EBITDA is a non-GAAP financial performance measure, the Company’s calculation of adjusted EBITDA may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. Because adjusted EBITDA is calculated before certain recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a liquidity measure. Non-GAAP financial measures do not reflect a comprehensive system of accounting and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies and/or analysts and may differ from period to period. The Company endeavors to compensate for these limitations by providing the relevant disclosure of the items excluded in the calculation of adjusted EBITDA to net income based on U.S. GAAP, which should be considered when evaluating the Company's results. Tucows strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure.

Management Commentary

Concurrent with the dissemination of its quarterly financial results news release at 5:05 p.m. ET on Thursday, November 2, 2023, management’s pre-recorded audio commentary (and transcript), discussing the quarter and outlook for the Company will be posted to the Tucows website at Tucows Financials.

About Tucows

Tucows helps connect more people to the benefit of internet access through communications service technology, domain services, and fiber-optic internet infrastructure. Ting delivers fixed fiber Internet access with outstanding customer support. Wavelo is a telecommunications software suite for service providers that simplifies the management of mobile and internet network access; provisioning, billing and subscription; developer tools; and more. Tucows Domains manages approximately 25 million domain names and millions of value-added services through a global reseller network of over 35,000 web hosts and ISPs. Hover makes it easy for individuals and small businesses to manage their domain names and email addresses. More information can be found on Tucows’ corporate website (https://tucows.com).

Tucows, Ting, Wavelo, and Hover are registered trademarks of Tucows Inc. or its subsidiaries.