Tucows Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Domains: Delivered solid Q2 with revenue, gross margin, and adjusted EBITDA growth. Completed migration of NIXI's 4 million domains to the platform. Building registry services business with new clients like Radix.
• Wavelo: Team's discipline and agility drove growth and profitability. Pipeline consists of large greenfield MVNOs/ISPs and constrained Tier 1/Tier 2 operators. Over 40% of engineers' code written by AI, with adoption expected to increase.
• Ting: Reduced operating expenses by ~60% year-over-year. Sold nonstrategic assets, reset marketing function, and signed major contract with senior living operator. Focus on enterprise and other segments outside residential fiber ISP.

Segment Performance

• Domains: Q2 revenue was $67.6 million, a year-over-year increase of 8%. Gross margin grew 14%, and adjusted EBITDA improved 12% year-over-year to $12.5 million. Wholesale revenue in Q2 was $57.3 million, up 8% year-over-year, with gross margin increasing to $15.7 million from $13.6 million last year. Retail channel saw revenue increase 10% year-over-year to $10.3 million, with gross margin expanding 11% to $5.9 million. Signed contract with Radix for migrating over 10 million domains.
• Wavelo: Q2 marked its best quarter to date. Revenue increased 21% to $12.7 million, gross margin rose 24% to $12.6 million, and adjusted EBITDA grew 37%. Focus on large greenfield MVNOs and ISPs, deprioritizing smaller MVNO and ISP opportunities with pricing pressure.
• Ting: Q2 revenue was $16.4 million, a 13% year-over-year increase. Excluding a noncash lease adjustment, adjusted EBITDA improved by $5.5 million year-over-year. The Enterprise and Other segment in Q2 2025 generated $3.9 million of revenue and $1.3 million in contribution margin, with a $720,000 improvement year-over-year. Signed landmark contract with the third largest U.S. senior living operator.

Guidance

• Year-to-date adjusted EBITDA of $26.2 million is slightly ahead of pace to achieve full year adjusted EBITDA guidance of $47 million.
• $10 million domain Radix migration starting in November to drive margin expansion.
• Ting's pivot to capital-like demand-driven model as a catalyst for continued margin expansion.

Risks

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, as described in the company's SEC filings such as Forms 10-K and 10-Q.

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