Tucows Inc.

Welcome to 2Cows 4th Quarter 2024 Management Commentary. We have pre-recorded prepared remarks regarding the quarter and outlook for the company. A 2Cows generated transcript of these remarks with relevant links is also available on the company's website. We will begin with opening remarks from Elliot Noss, President and CEO of 2Cows & Ting, followed by business remarks from Dave Warrick, CEO of 2Cows Domains, Justin Riley, CEO of Wavelow, Elliot Noss on Ting, Ivan Ivanov, 2Cows CFO, who will discuss our financial results in detail, and finish with closing remarks from Elliot Noss. In lieu of a live question and answer period following these remarks, shareholders, analysts, and prospective investors are invited to submit questions to 2Cows Management. Please submit questions via email to ir at 2cows.com until Thursday, February 20th. Management will either address your questions directly or provide a recorded audio response and transcript that will be posted to the TUCA's website on Tuesday, March 4th at approximately 5 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 eight quarters, as well as for full years 2022, 2023, and 2024, and also includes historical financial results, is available in the Investors section of the website. The updated TingBuild scorecard and investor presentation are also available. Now for management's prepared remarks. On Thursday, February 13th, 2Cows issued a news release reporting its financial results for the fourth quarter and year ended December 31st, 2024. That news release and the company's financial statements are available on the company's website at 2cows.com under the investor section. Please note, the following discussion may include forward-looking statements, which 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 to its business. I would now like to turn the call over to 2COW's President and Chief Executive Officer, Elliot Noss. Go ahead, Elliot.

Thanks, Monica. We ended the year with strong momentum across all of our businesses. 2024 marked our fourth consecutive year of consolidated revenue growth, 19% year-over-year gross profit expansion, and more than doubling our annual adjusted EBITDA to a touch under $35 million. Excluding Ting, we had adjusted EBITDA of $57.4 million, out the top end of our guidance. The $34.9 million in EBITDA represented a 126% increase from $15.5 million in 2023. Most importantly, we have moved Ting to a sustainable cost structure, which generated slightly positive adjusted EBITDA for the month of December. We repaid a further $2 million on the balance of the syndicated bank loan in Q4, which takes us to $16.5 million paid down in 2024. And as we do every year, we've authorized a buyback program for 2025 for up to $40 million in 2COWS stock. A reminder that we do this whether or not we can foresee using it at the time we do the authorization. I'll now turn the call over to Dave Warwick, CEO of 2COWS Domains.

Thanks, Elliot. As we close out the year, I'm pleased to report that 2COW's domains grew revenue, gross margin, and adjusted EBITDA in each successive quarter of 2024. This follows a similar performance in 2023. February also marks the 25th anniversary of 2COW's domains business from our launch of OpenSRS in early 2000. Today, our core business remains strong and resilient, built over many years and with a long-term strategic view. From the beginning, we prioritized strong customer relationships and disciplined cost management to drive sustainable profitability. We're now building on that solid foundation and taking the greatest assets that this business has, its subject matter expertise and massive distribution channel, and creating exciting future paths for growth. Now turning to the recent quarter, revenue for domain services for Q4 was $65.7 million, up 6% from $61.8 million for the same quarter last year, and up 5% for the full year 2024 compared to 2023. Gross margin was $20.3 million in Q4, up 8% from the same quarter last year, and up 7% for the full year. And domain services adjusted EBITDA was $11.6 million in the fourth quarter, up 8% from Q4 of last year, and up 4% for the full year. Our domains under management held steady and were flat both year-over-year and quarter-over-quarter, while transactions were down just under 1% from Q4 of 2023. Both measures represent solid performance within our industry. And as I've said before, domain registration is a mature business, and revenue growth for us is going to come from adjacent revenue opportunities, like our registry services business, as well as new products we're bringing to market. Looking at the results from the segments of our business and our wholesale channel, revenue for Q4 was $56 million, up 7% compared to $52.5 million for Q4 of last year, and gross margin was $15 million, up 10% from $13.6 million from Q4 of 2023. Within the wholesale channel, domain services gross margin in Q4 of this year was unchanged from last year at $9.9 million. Value-added services gross margin for Q4 of this year was up 36% year-over-year to $5 million, with the increase driven primarily by strong, non-recurring sales from our expiry stream and to a lesser extent from our hosted email service. In our retail channel, revenue for Q4 was $9.6 million, up 3% from $9.3 million in Q4 of last year. Retail gross margin for the fourth quarter was also up 3% year over year. Our combined overall renewal rate at 76% in both Q4 and for the full year across all two cows domains brands remains within our historical range and above the industry average. Our results for Q4 and the full year 2024 show a healthy core business in a mature industry. We'll continue to focus on running that business efficiently. Further to the growth opportunities, earlier this year, in partnership with Amazon's AWS business, we previewed a cloud-based hosting solution designed to meet the needs of the thousands of smaller resellers within our distribution channel. This solution enables digital agencies, web designers and developers, and smaller hosting providers to leverage cloud-based hosting without developing and building out the integration to AWS themselves. and it reduces the barriers to entry in the same way that the OpenSRS platform 25 years ago enabled ISPs and web hosts to register domains for their customers without becoming an accredited registrar. Building on our ongoing success in registry services, we continue to leverage the technology acquired through the UNR acquisition to grow customers and revenue. As a testament to our capabilities, 2CAS Domains was recently selected to be the technical services provider for the .in country code domain, operated by the National Internet Exchange of India. Our teams are closely collaborating and we are establishing a dedicated team in India to support this initiative. As the project progresses, we anticipate migrating approximately 4 million domains onto our platform later this year, expanding our market presence and leadership in registry services. The pricing and margin contribution for this piece of business is typical of a large, high-volume customer. Reflecting on the past 25 years of 2COWS domains, we've achieved many milestones and built a healthy business. I'm proud of how our core business continues to reliably perform. Looking ahead, our focus on new growth initiatives is what excites us most. As the digital landscape evolves, we're where we have always been, at the forefront and ready to deliver solutions for the future of the internet. In the coming quarters, I will share further updates as we progress. But I do note that the growth trajectory does not mean there will be meaningful updates each quarter. Selling through channels is a slow build at the beginning, as product and marketing are perfected. We know good things take time, and we're in this for the long haul. Steady, strategic, and building for what's next. Now, over to Justin Riley, CEO of WaveLow.