Tucows Inc.

Welcome to 2COW's second quarter 2023 management commentary. We have pre-recorded prepared remarks regarding the quarter and outlook for the company. A 2COW'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 2COW's management via email. at ir2cas.com until Thursday, August 10th. Management will address your questions directly or in a recorded audio response and transcript that will be posted to the 2CAS website on Tuesday, August 22nd at approximately 4 p.m. Eastern Time. We would also like to advise that the updated 2COWS quarterly KPI summary, which provides key metrics for all of our businesses for the last six quarters, as well as for full years 2021, 2022, and 2023 year to date, and also includes historical financial results, is available in the investor section of the website, along with the updated TingBuild scorecard and investor presentation. Additionally, if you would like to watch segments from our May 9th Investor Day, please email ir at 2cas.com with your request. Now for management's prepared remarks. On Thursday, August 3rd, 2CAS issued a news release reporting its financial results for the second quarter ended June 30th, 2023. That news release and the company's financial statements are available on the company's website at 2cas.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. I would now like to turn the call over to 2Cal's President and Chief Executive Officer, Elliot Noss. Go ahead, Elliot.

Thanks, Monica. The first half of 2023 has included a number of significant developments for our businesses. Wavelow completed its migration of nearly 7 million Boost subscribers for DISH, as well as the migration of Ting to the platform. Ting also completed a securitization for $239 million in May to fund our fiber business. We hosted our first investor day in early May as well. We also continued to pay down the two cows debt in Q2. Now we'll hear from the heads of each business, 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. The second quarter for Two Cows Domains continued the recent trend of transactions and domains under management returning to a stabilized business trajectory, with seasonal transaction levels comparable year over year and domains under management stable from last quarter. Revenue for domain services for the second quarter at $60 million was down slightly from $61 million for the same quarter of last year, and gross margin at $17.9 million was down 7% year-over-year, absent a one-time catch-up accounting adjustment in Q2 2022, which inflated gross margin in that quarter. on a quarter-over-quarter basis, gross margin increased 0.4 million and 2% from Q1. Domain services adjusted EBITDA was 10.6 million in the second quarter and down 13% from Q2 of last year. Some notes here on the reduced gross margin. Half of that impact is from the ongoing, weaker aftermarket for domain sales, which I have discussed in recent quarters, and we believe this to be a continuation of a broader industry-wide challenge reflecting the current macroeconomic environment. The balance of the impact is split between factors I've also spoken about previously, deferred revenue and price increases working their way through our accounting. These continue to affect our results in Q2, but I don't expect those impacts to be meaningful beyond this quarter. To put this in context, and as I discussed at our Investor Day in May, our core domain business, excluding both aftermarket and periodic portfolio sales, remains healthy, with build gross margin consistent year over year, in line with transaction levels and expectations. Looking at the channel segments of our business, in our wholesale channel, revenue for Q2 was down 2% from the second quarter of last year and gross margin down 9%. Within the wholesale channel, domain services gross margin was down 5% from the same period last year, while value-added services gross margin was down 16%. Most of the impact on both revenue and margin are due to weaker sales in the aftermarket for domain sales, which I mentioned earlier. In our retail channel, revenue was flat year over year and gross margin, net the one-time accounting adjustment, was up 2% year over year. And our combined overall renewal rate at 79% in Q2 across all 2COWS domains brands remains within our historical range and well above the industry average. As I talked about in the last couple of quarters and shared in more detail on Investor Day, we continue to develop new services to complement our core business and leverage our distribution channels. I look forward to sharing more later this year. But as I mentioned previously, you should not expect to see any contribution to gross margin or impact on operating expenses in 2023. And we'll continue our focus on maintaining margin, including careful management of expenses in support of adjusted EBITDA. Now over to Justin Riley, CEO of WaveLo.