Tucows, Inc. Q4 FY2023 earnings call

• Tucows 2023 Adjusted EBITDA outside of Ting was $59.6 million and with Ting was $15.5 million, at the higher end of annual guidance. Consolidated revenue grew 10% year-over-year. Operating cash flow was $9 million in Q4, up from $2.9 million last year. Repaid $11.5 million on non-Ting syndicated loan. Authorized a $40 million stock buyback program.
• Tucows Domains grew revenue and gross margin quarter-over-quarter, rolled out new products for resellers, and renewed rate was within historical range. Developed new billing/provisioning service and automation tools for resellers.
• Wavelo had strong growth, added new customers, and focused on building pipeline and efficiency. Sales & Marketing team is small but efficient.
• Ting had strong construction in Q4, addressed workforce reduction and business reprioritization, announced new organic build in Thornton, Colorado.

Tucows Domains

• Fourth quarter revenue for Domain Services was $61.8 million, up 2.5% from $60.3 million in the same quarter last year. Gross margin was $18.9 million, up 2.5% year-over-year. Adjusted EBITDA was $10.8 million, up 2% from Q4 last year. Transactions were up 2%, and domains under management were slightly up year-over-year. Overall renewal rate was 76.5% in Q4.

Wavelo

• 2023 revenue was $38.7 million, with a 50%+ compound annual growth rate over two years. Gross margin was $36 million, up from $21.4 million in 2022. Adjusted EBITDA was $10.6 million, outperforming upgraded guidance of $4-6 million. Q4 revenue was $9.5 million, up 113% year-over-year. Added three new customers since last report.

Ting

• Q4 had 27% year-over-year growth in completed serviceable addresses for Ting-owned infrastructure, reaching 121,300. Partner markets had 54% growth in addresses, totaling 150,700 serviceable addresses. Revenue grew 21% to $13.8 million. Gross margin was 57%, down from 63% last year. Adjusted EBITDA was negative $12.4 million. Workforce reduced by 72 employees, and activity in Mesa, Arizona was ceased.

• Tucows Domains Adjusted EBITDA guidance for 2024: $43 million.
• Wavelo guidance for 2024: $8 million to $10 million.
• Corporate segment guidance for 2024: $2 million to $4 million, total $53 million to $57 million. Refining Ting's guidance, aiming to reduce EBITDA loss, with focus on turning new offerings into contributors for Tucows Domains, generating new customer pipeline for Wavelo, and cleaning up balance sheet and loading network for Ting.

• Macro-economic environment impacts. - Financing challenges of Ting business. - Market competition affecting margins and growth. - Inconsistent delivery in partner markets impacting Ting's operations.

Q: Submit questions to ir@tucows.com until February 29.

A: Management will either address questions directly or provide a recorded audio response and transcript posted to Tucows website on March 12th at approximately 4 p.m. Eastern time