Tucows Inc.

Welcome to 2-Cal's fourth quarter 2022 management commentary. We have pre-recorded prepared remarks regarding the quarter and outlook for the company. A 2-Cal's generated transcript of these remarks, with relevant links, is also available on the company's website. In lieu of a live question and answer period following these remarks, shareholders, analysts, and prospective investors are invited to submit questions to 2Cals Management via email at ir.2cals.com until Thursday, February 16th. Management will address your questions directly or in a recorded audio response and transcript that will be posted to the 2Cals website on Tuesday, February 28th at approximately 4 p.m. Eastern Time. We would also like to advise that the updated 2Cals quarterly KPI summary, which provides key metrics for all of our businesses for the last eight quarters, as well as for full years 2020, 2021, and 2022, and also includes historical financial results, is available in the investor section of the website, along with the updated Ting Build scorecard and investor presentation. Now for management's prepared remarks. On Thursday, February 9th, 2Cows issued a news release reporting its financial results for the fourth quarter ended December 31st, 2022. That news release and the company's financial statements are available on the company's website at 2cows.com under the Investors section. Please note that the following discussion may include forward-looking statements which, as such, are subject to risks and uncertainties that could cause actual results to differ materially. These risk factors are described in detail in the company's documents filed with the SEC, specifically the most recent reports on the Forms 10-K and 10-Q. The company urges you to read its security filings for a full description of the risk factors applicable for its business. Finally, as discussed previously, starting in Q1 of 2022, we started reporting as separate businesses, Ting, Wavelow, and Two Cows Domains, in addition to Two Cows Corporate. As a reminder, we have a video available for additional detail and rationale for the change on the Two Cows website. I would now like to turn the call over to Two Cows President and Chief Executive Officer, Elliot Noss. Go ahead, Elliot.

Thanks, Monica. The last quarter of the year is always an important time to reflect on the past year's performance, challenges, and lessons learned, and channel that into the work for the following year. 2022 was both productive and challenging as we restructured 2COWS into separate businesses at the start of the year. This has successfully provided the financial flexibility we hoped for, allowing Ting to access infrastructure capital without impacting the rest of the business, which I now refer to as XTing. We did okay with the provisioning of shared services across the businesses, but more importantly, learned how to operate a holding company. We have also dealt with increasing costs of capital and economic uncertainty, and a world restarting life post-pandemic. And in times like these, as I've said before, it's important to focus on what you can control. So that's what we've done. Now for 2023, we have more exciting growth plans in each of the three businesses than we have had for years. But for the first part of the year, work continues on the long-term funding of the business. More on that in the close. I'm pleased to report that we finished 2022 with total adjusted EBITDA of $59.1 million for XTing, beating guidance of $53 to $56 million. We had an EBITDA loss of $21.7 million for Ting, comfortably inside the guidance of a $20 to $25 million loss. The year is notable for the base it established for each business. 2COW's domains is towards the end of a years-long integration of multiple platforms and is poised to be able to do new things. WaveLo has finally commenced the migration of Boost customers in earnest and is now poised to take advantage of the revolution coming to telecom. And Ting is now built to scale and is able to turn to refined execution. You will now hear directly from the heads of each business in these remarks, as well as from our CFO, Dave Singh, who will cover our financial results in detail. The first speaker is Dave Warwick, Chief Executive Officer, Two Cows Domains. Go ahead, Dave.

Thanks, Elliot. Two Cows Domains finished the year with another quarter that was in line with our expectations, as both the domain industry and our business continue to normalize at pre-pandemic levels, albeit within a broader challenging environment. For 2022, adjusted EBITDA was $44.8 million and consistent with our guidance of $45 million. Revenue for domain services for the fourth quarter was $60.3 million, down 2% from the same quarter of last year, while gross margin was $18.4 million, down 7%. Domain services adjusted EBITDA was $10.6 million in the fourth quarter and down 4% from Q4 of last year. The results reflect the normalization of transactions to pre-COVID levels that we have discussed on previous calls. The decline in domain transactions has slowed sequentially, and it appears that our channel has worked through the demand that was pulled forward by the pandemic, and we may be starting to move back to a path of modest growth. Our results also reflect the tail end of the impact of the Euro devaluation to the US dollar, which escalated in 2022 through the end of Q3 and has since recovered some. We did implement two price increases in the second half of 2022 that addressed the cost of us buying domains in US dollars when selling to customers in Euros. This is expected to help our margins in 2023. Additionally, our careful management of expenses, both for efficiency and in support of adjusted EBITDA, is ongoing. With results now available for the full year of 2022, I would like to share our view of the health of the business over a multi-year timeframe that normalizes for the pre- and post-COVID periods. When looking at our results comparing 2022 with 2019, the last full year before COVID, Domain transactions are up 2% and gross margin, absent a domain portfolio sale in 2019 as we were divesting of that business, is up almost 6% over that period, even with the post-COVID business slowdown. This is consistent with our track record of operating a mature business as efficiently as possible. Our focus continues to be on growing gross margin in excessive transactions, leveraging all available options from product mix to pricing. Looking at the channel segments of our business and our wholesale channel, revenue for Q4 was down 3% from the fourth quarter of last year and gross margin down 12%. Within the wholesale channel, domain services gross margin was down 9% from the same period last year, while value-added services gross margin was down 18% due to reduced demand in the aftermarket for domain sales. In our retail channel, revenue increased 3%, while gross margin was up 12% year-over-year. And our combined overall renewal rate, at 80% in Q4 across all Two Cows Domains brands, was consistent with Q3 and remains well above the industry average. And finally, a topic I wanted to pick up on again, and one I know many of you are interested in, the initiatives that we are exploring to bring new and complementary services to our core business and distribution channels. Having been with the business for over two decades, I am very familiar with our efforts in the 2000s and early 2010s to launch value-added services. And we did achieve some success with email, SSL certificates, and aftermarket domain sales. More recently, our focus from 2016 through 2022 was on acquisitions and the related integration to provide our business with scale. Now with our platform integration work nearing completion, our sites are turned again to how, leveraging the capabilities we already have, we can generate incremental revenue and gross margin for the domains business. A domain name is the foundation of a web presence. We understand that our resellers spend and invest significantly more in the services to develop that web presence and that we do not facilitate that development currently. For the last year, we have been quietly exploring how we might bring additional value to the older parts of our channel through hosting automation and payments. In 2023, we will be looking for product market fit and do not expect to see a material contribution, but we are excited to get back to thinking about how to best leverage the unique distribution channel we possess. And importantly, consistent with our vigilance on operational costs, the development of these initiatives is being done within our current operating cost structure. So now, being able to find creative ways to streamline the business operationally and develop new services for our distribution channels to provide incremental revenue for the business is something I'm really excited about bringing to bear. Now, over to Justin Riley, CEO of WaveLoan.