Tucows Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Overall Performance: Ended 2024 with strong momentum; 4th consecutive year of consolidated revenue growth; 19% year-over-year gross profit expansion; Adjusted EBITDA more than doubled to touch under $35 million; Ting moved to a sustainable cost structure with slightly positive Adjusted EBITDA in December; repaid $2.0 million on the syndicated bank loan in Q4; authorized a $40 million stock buyback program for 2025.
• Tucows Domains: Grew revenue, gross margin, and Adjusted EBITDA in successive quarters of 2024; core business strong; partnered with AWS for a cloud-based hosting solution; selected as technical services provider for the .IN country code domain, anticipating migration of ~4 million domains; celebrated 25th anniversary of OpenSRS.
• Wavelo: Best year yet in 2024 with growth in revenue, gross margin, Adjusted EBITDA, and new customer logos; added 3 new customers; expects to grow top-line more in 2025 with Adjusted EBITDA guidance of $13 million; positioned well in the SaaS industry's flight to quality.
• Ting: Q4 2024 revenue up 14% year-over-year; subscribers up 17%; gross margin up 40%; focus on penetration and ARPU; rebuilding marketing function; insourced door-to-door function; progress made on capital efficiency.

Segment Performance

• Tucows Domains: Q4 revenue was $65.7 million, up 6% year-over-year from $61.8 million; full-year 2024 revenue up 5% year-over-year. Gross margin was $20.3 million in Q4, up 8% year-over-year; full-year up 7%. Adjusted EBITDA was $11.6 million in Q4, up 8% year-over-year; full-year up 4%. Wholesale channel Q4 revenue was $56 million, up 7% year-over-year; Retail channel Q4 revenue was $9.6 million, up 3% year-over-year.
• Wavelo: Fiscal 2024 revenue was $39.9 million, up from $38.7 million in 2023; gross margin was $38.6 million, up from $36 million last year; Adjusted EBITDA was $13.8 million, well outperforming guidance. Q4 2024 revenue was $9.9 million, up 3.6% year-over-year; gross margin was $9.4 million, up 1.7% year-over-year; Adjusted EBITDA was $3.7 million, up 41.3% year-over-year.
• Ting: Q4 2024 revenue was $15.7 million, up 14% year-over-year; subscribers grew 17% to 50,700; gross margin was $11.0 million, up 40% year-over-year; Adjusted EBITDA loss was $1.5 million in Q4, improved from a $12.3 million loss in Q4 2023.

Guidance

• Consolidated Adjusted EBITDA: Guidance for 2025 is in and around $56 million, up 75% over 2024, before a one-time $9 million charge in the Corporate segment.
• Tucows Domains: Core business to continue performing efficiently; new growth initiatives like cloud hosting solution and registry services expansion.
• Wavelo: Expect to grow top-line more in 2025 with Adjusted EBITDA guidance of $13 million.
• Ting: Aim to improve from a $22 million EBITDA loss to break even in 2025.

Risks

• Forward-looking Statements: Subject to risks and uncertainties where actual results may differ materially from forward-looking statements.
• Market and Industry: Flight to quality in SaaS industry; generational disruption of AI in telecom; lack of common equity cheques in fiber and enterprise software; impact of Magnificent 7 stocks shifting to industrial-like free cash flow characteristics.

Question and Answer

Q: How to submit questions to Tucows' management?

A: Submit questions via email to ir@tucows.com until Thursday, February 20th. Management will either address questions directly or provide a recorded audio response and transcript posted to the Tucows website on Tuesday, March 4th at approximately 5 PM Eastern time.