Tucows Inc.

Welcome to 2Cows First Quarter 2025 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, 2COW's CFO, who will discuss our financial results in detail, and we will 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 2COW's management. Please submit questions via email to ir at 2cas.com until Thursday, May 15th. Management will either address your questions directly or provide a recorded audio response and transcript that will be posted to the 2CAS website on Tuesday, May 27th at approximately 5 p.m. Eastern Time. We would also like to advise that the updated 2CAS Quarterly KPI Summary, which provides key metrics for all of our businesses for the last five quarters, as well as for full years 2023, 2024, and 2025 year-to-date, and also includes historical financial results, is available in the Investors section of the website. The updated investor presentation is also available. we have stopped producing the Ting build scorecard following our winding down of new market construction and direct investors to the quarterly KPI summary for relevant Ting data. Now for management's prepared remarks. On Thursday, May 8th, 2Cows issued a news release reporting its financial results for the first quarter and in March 31st, 2025. 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, 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 Tuca's President and Chief Executive Officer, Elliot Noss. Go ahead, Elliot.

Following four consecutive years of consolidated revenue growth, we continued the momentum in Q1 with an 8% year-over-year increase in revenue. Gross profit grew 29% year-over-year and adjusted EBITDA more than doubled, driven by substantial operational efficiencies and early gains from the 2024 Ting restructuring initiative. We also continue deleveraging with a Q1 $2.5 million repayment on the balance of the syndicated bank loan. We're in a rare time and place where the macroeconomic environment in terms of both the global economy and the impact of AI might be more impactful and important than any specific business context. This is a time for thoughtful execution and choices of direction. I'll now turn over to Dave Warrick, CEO of 2Cows Domains.

Thanks, Elliot. 2Cows Domains continued to grow revenue, gross margin, and adjusted EBITDA in the first quarter. building on our performance in 2024. Domain services saw strong year-over-year growth in Q1, with revenue rising 6% to $65.3 million from $61.9 million in Q1 of last year. Gross margin increased 9% to $20.2 million, outpacing revenue growth and reflecting continued margin expansion and solid underlying performance. Adjusted EBITDA grew 15% to $11.5 million from $10 million in Q1 of last year, highlighting improved operating efficiency. Domains under management declined 2% and total transactions fell 6% year-over-year, primarily due to one large customer transitioning their domain operations in-house, a regular occurrence in our business. Historically, we consistently offset this through new customer wins and growth within our base, and we're seeing more of our resellers incorporate AI into their customer solutions, an exciting development. Net of that customer, our core business remains solid, with domains under management slightly increasing and transaction volumes holding steady compared to last year, while both revenue and gross margin continue to grow. Moving forward, our growing registry business will also add incrementally to the core business. Our wholesale channel delivered solid performance in Q1 with revenue rising 6% year over year to 55.9 million from 52.9 million for Q1 of last year. Gross margin increased 10% to 15 million from 13.7 million last year, reflecting our continued margin expansion. Within the wholesale channel, domain services delivered a stable and modestly higher gross margin of $9.6 million, while value-added services delivered a standout performance with a 30% year-over-year increase in gross margin to $5.4 million, driven primarily by strong high-margin sales from our expiry stream. Our retail channel continued its steady growth in Q1, with revenue increasing 4% year-over-year to $9.3 million. Gross margin expanded 6% to $5.2 million, reflecting a healthy contribution and higher margins in the retail segment. The overall combined renewal rate for the Two Cows Domains brands is up to 76.5% for Q1 and remains above the industry average. And further to my comments earlier this year, I have just returned from India where I spent time with Nixie, the registry operator for the .incctld and our team there. Our office is operational and we have onboarded the team that are dedicating to supporting our partnership with Nixie. We are making great progress and expect to have their TLD operational on our platform by the end of the month. We're also looking ahead to 2026, when ICANN's anticipated new round of GTLDs, the first in a decade, will open up new opportunities to grow our registry business. The application period runs from Q2 to Q3 in 2026. Our Q1 results reinforce the strength and resilience of our core operations, and that momentum is carried into Q2. Five weeks into the quarter, performance remains solid and consistent with the steady growth we've delivered over the past year. While we anticipate adjusted EBITDA growth to normalize to single digits in the coming quarters, our focus remains on driving top line growth, expanding margins, and maintaining disciplined cost management. Now, over to Justin Riley, CEO of Wavelow.