Tucows, Inc. - Ordinary Shares (TCX) 8 Aug 24 2024 Q2 Earnings call transcript

In the second quarter of 2024, Tucows reported a solid financial performance, with key growth metrics such as revenue, gross margin, and adjusted EBITDA all experiencing year-over-year and quarter-over-quarter increases. This marks the third consecutive quarter of growth for the company, reflecting its strategic focus on efficient revenue growth and cost controls.

Strategic Business Expansion and Financial Highlights

The company's consolidated net revenue for Q2 2024 was $89.4 million, up 5.2% year-over-year. Gross profit grew by 15.4% to $20.8 million, with Ting contributing significantly to the growth. Adjusted EBITDA for the quarter increased by 70% to $9.2 million, driven primarily by Ting's reduction of adjusted EBITDA losses and gains from Domains and Wavelo. Tucows also continued to deleverage its business, reducing its syndicated debt by $6.5 million in Q2.

Operational Updates from Business Units

Tucows Domains, a significant contributor to the company's revenue, reported a 4% increase in revenue for Q2 to $62.4 million, with gross margin up 5.2% to $18.9 million. Dave Woroch, CEO of Tucows Domains, highlighted the company's focus on growing margin while controlling costs, particularly in the context of declining domain transaction numbers for Verisign.

Wavelo, Tucows' telecommunications business, reported revenues of $10.5 million, up 11.8% from Q1 and down 2.3% from Q2 2023. Justin Reilly, CEO of Wavelo, discussed the company's strategic shift towards recurring platform revenues and the optimization of its base for higher-value subscribers. Adjusted EBITDA for Wavelo was $3.9 million, up 40.3% from the previous quarter.

Ting, Tucows' fiber internet business, added 2,100 net new subscribers in Q2, taking the total to over 40,000. Elliot Noss, CEO of Ting, highlighted the company's focus on expanding its footprint and market share, while maintaining its renowned customer experience and low churn rates.

Financial and Market Insights

Ivan Ivanov, Tucows' new CFO, provided a detailed analysis of the company's financial results for Q2 2024. Total revenue for the quarter increased by 5.2% to $89.4 million, with significant contributions from Ting and Domains. Gross profit before network costs increased by 11.3% to $38.1 million, reflecting the company's focus on improving efficiency and reducing costs. Operating expenses decreased by 5.5% to $29.4 million, primarily due to cost management initiatives.

Market Trends and Outlook

Elliot Noss, CEO of Tucows, shared his observations on the market trends in the fiber internet industry. He noted the increasing interest in securitization instruments for fiber deployments and the trend towards partnerships between infrastructure owners and service providers. These trends, according to Noss, underscore the inevitability of the U.S. coax to fiber transition and the potential for fiber providers to generate significant returns.

Investor Relations and Future Outlook

Tucows invited shareholders, analysts, and prospective investors to submit questions to the company's management team by August 15, 2024. Management will provide recorded audio responses and transcripts on August 27, 2024, at approximately 4:00 p.m. Eastern Time. The company also announced that the updated Tucows quarterly KPI summary, Ting Build Scorecard, and investor presentation are available on its website.

Conclusion

Tucows' solid financial performance in Q2 2024, along with its strategic initiatives and insights into market trends, paint a positive picture for the company's future growth prospects. The company's focus on revenue growth, cost controls, and strategic investments is well-aligned with the evolving landscape of the fiber internet industry. With a solid financial foundation and a clear vision for the future, Tucows is well-positioned to capitalize on the opportunities in the market and deliver value to its shareholders.