Tucows Inc.

Welcome to 2COWS Third 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 David Warwick, 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 ir2cows.com until Thursday, November 13th. Management will either address your questions directly or provide a recorded audio response and transcript that will be posted to the 2Cows website on Tuesday, November 25th at approximately 5 p.m. Eastern Time. We would also like to advise that the updated investor presentation and the 2COWS quarterly KPI summary, providing key metrics for all of our businesses for the last seven quarters, as well as for full years 2023, 2024, and 2025 year to date, along with historical financial results, are available in the Investors section of the website. Now for management's prepared remarks. On Thursday, November 6th, 2Cows issued a news release reporting its financial results for the third quarter ended September 30th, 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. Now I would like to turn the call over to 2COW's President and Chief Executive Officer, Elliot Noss. Go ahead, Elliot.

Thank you, Monica. 2COW's top-line growth momentum of the last four fiscal years and year-to-date continues in Q3, with 7% growth year-over-year. Gross profit expanded 9% year-over-year, and adjusted EBITDA increased 53% to $13.3 million in Q3 and to $39.5 million year-to-date. This puts us well on track to meet our full-year adjusted EBITDA guidance of $47 million. Outperformance in both domains and Wavelow drove the upside, along with significantly improved adjusted EBITDA losses from Ting. We paid down a further $2.5 million on our syndicated bank loan. Corporate net debt now stands at 189.6 million, marking a sixth straight quarterly decline and bringing net leverage under three with interest coverage at 4.2 times, comfortably within our covenants. And with that, I'll turn it over to Dave Warrick, CEO of Two Cows Domains.

Thanks, Elliot. 2COW's domains delivered another solid financial quarter in Q3, with revenue, gross margin, and adjusted EBITDA each increasing year over year. The gains continue the year-to-date performance that is lifting our adjusted EBITDA slightly ahead of pace for our 2025 guidance. Revenue for Q3 grew 5% year-over-year, accompanied by a 7% increase in gross margin. Adjusted EBITDA was $12.1 million for the quarter, up 5% from the prior year. bringing year-to-date adjusted EBITDA to $36.2 million. Within our segments, our wholesale business continued its strong growth year-over-year, driven by consistent reseller demand and particularly by higher margin value-added services. Q3 revenue for the wholesale channel rose 5% year-over-year to $58 million compared to $55 million for Q3 of last year. Wholesale gross margin increased 10% to $15.8 million from $14.4 million last year. Within the wholesale channel, Domain Services delivered $10.1 million of gross margin, up 4% from $9.7 million in Q3 2024. Value Added Services had another exceptional quarter, generating $5.7 million in gross margin for a year-over-year gain of 21%, driven by strong sales from our expiry stream. The retail segment posted a modest revenue increase of 2% year-over-year to $9.8 million, and gross margin was flat at $5.5 million. Total domains under management and transaction volumes declined at 9% and 10% year-over-year, respectively, reflecting the impact of one wholesale customer migrating the bulk of its portfolio in-house. We've discussed this transaction over the past two quarters and expect its effects on domains under management to conclude in Q4. with the year-over-year impact on domain transactions continuing through next year when the full annual renewal cycle completes. Importantly, despite this transitional reduction in domains and transactions, which we have experienced from time to time in our 25-year history, our diversified reseller base continues to drive stable and growing gross margin for the business. Net of some atypical registration activity Our renewal rate for Q3 was approximately 74% across all TLDs for the Two Cows Domains brands. And while in the lower end, it remains within our historical range and above the industry average. Also worth noting, a slightly lower renewal rate does translate into more names expiring, which feeds into our expiry stream auction and sales. Turning to our registry services business, we have now been operating the registry platform for Nixie, the National Internet Exchange of India, and registry operator of the .in Country Code TLD for six months. Our partnership is going well, and we have recently started to explore new and interesting initiatives to expand our collaboration with Nixie. Our engagement with Radix remains equally strong, and although the migration has been postponed to early 2026, our teams and systems are ready and fully prepared to onboard and migrate more than 10 million domains across the Radix TLDs when the process starts. As mentioned last quarter, these two partnerships together position the 2CAS registry segment to manage nearly 17 million domains. 2CAS Domains continues to deliver consistent revenue and margin expansion, highlighting our solid fundamentals and strength of our global platform. We're well positioned for Q4 and into 2026. Thanks for listening. And now over to Justin Riley, CEO of Wavelow.

Thanks, Dave. Q3 was another strong quarter for Wavelow, delivering double-digit year-over-year growth in revenue, gross margin, and adjusted EBITDA. Wavelow's revenue was $11.9 million in Q3, an almost 18% increase from Q3 2024 and a 6% decrease from last quarter. Gross margin was $11.8 million this quarter, a 17.5% increase from Q3 2024 and a 6% decrease from last quarter. Adjusted EBITDA for Q3 was $4.3 million, a 25% increase year-over-year and a decrease of 20% quarter-over-quarter. The year-over-year growth reflects continued subscriber growth within the existing customer base, as well as the new EchoStar rate card introduced as part of the four-year renewal at the start of 2025. As a reminder, we typically see higher revenue recognition in Q2 each year from the expiry of bundled professional services that are included annually as part of our platform services agreement with EchoStar. This quarter, we experienced a seasonal slowdown as we delivered professional services against those bundled hours ahead of their annual expiry. Looking ahead, we expect to continue recognizing revenue from these services on a more regular basis, which should reduce the historical seasonality and our quarterly results. As we navigate the back half of the year, we expect to continue to benefit from the tailwinds experienced year to date, but with a slight ramp in investment, particularly in sales and marketing, as we invest to acquire customers, build pipeline health, and drive bookings conversion. Top-of-the-funnel activity increased meaningfully in Q3, driven in large part by our early network of systems integrator partnerships, which are now beginning to deliver qualified Tier 1 and Tier 2 introductions. This reflects increasing market recognition of Wavelow's differentiated, modular architecture and the appetite for credible alternatives to legacy BSS and OSS platforms. While operator sentiment remains cautious, with procurement cycles lengthening and some operators punting modernization decisions out a few quarters. The volume of RFI and RFP activities continues to rise, particularly around legacy replacement programs with a clear AI focus. Telecoms are signaling fatigue with both the inflexibility of large incumbents and the instability of small niche vendors. Wavelow's combination of simplicity, scalability, and enterprise-grade platform positions us well in this gap. We have maintained discipline in qualifying out smaller, lower-value opportunities to concentrate resources on transformational accounts that align with our long-term vision. As our systems integrator channel matures, we expect to see the dual benefit of expanded distribution and more efficient delivery capacity, which is a key lever in our ability to balance growth and profitability in years to come. Thanks for listening, and now over to Elliot. Thanks, Justin.

Ting delivered another quarter of strong year-over-year growth and a meaningful improvement in adjusted EBITDA. A key contributor this quarter was the beginning of revenue from a large senior living community we're expanding into. Revenue hit 17 million in Q3, an 11% increase year over year. Third quarter gross margin declined to 10.5 million from 11 million in Q3 of last year. This is primarily from Ting revenues increasing in partner markets over owned markets. As our partner markets builds accelerate, and partner markets have costs associated with network leases that impact margin. Ting's adjusted EBITDA also continues to trend in a positive direction with a small loss of $880,000 in Q3, down from $5.1 million in Q3 of 2024. In Q3 2025, our enterprise and other TING segment, which includes enterprise, bulk, fixed wireless, and the remaining CDER footprint, delivered $3.6 million in revenue and $926,000 in contribution margin. Results were led by continued strength in enterprise and bulk, where revenue grew 28% year over year. Year to date, the segment has generated $11.3 million in revenue and $3.2 million in contribution margin, highlighting the consistency and profitability of this part of the business. We have continued to divest of non-strategic assets, which this quarter includes the southern part of our Cedar footprint in Colorado. A reminder that these are markets where we no longer have the capital to build and network construction inventory we no longer intend to use. In Q3, we generated $8.5 million from these divestitures. Year-to-date in 2025, the company has generated gross proceeds of $20.8 million on these divestitures, and the net book value of assets at the time of the sales was $15 million, resulting in a gain of $5.8 million. The sale of these network footprints naturally brings down our reported subscriber and serviceable address numbers, and you'll see that reflected in the Q3 KPI summary. Now, we'll hear from our CFO, Ivan Ivanov, who will discuss our financial results in detail.

Thank you, Elliot, and thank you all for joining us today. The third quarter extended the year's trajectory of steady top-line growth and expanding profitability. At the consolidated level, revenue was 98.6 million, up 7% year-over-year, gross profit was 24.2 million, up 9%, and adjusted EBITDA increased 53% to 13.3 million. Year-to-date adjusted EBITDA totaled $39.5 million, putting us well along the path towards our full-year target. On a gap basis, net loss for the quarter was $23 million and adjusted net loss was $15.8 million, reflecting both the step-up in operating performance and the impact of the non-cash items I'll detail in a moment. Beginning this quarter, we revised our presentation of segment gross profit in our press release to reflect amounts net of network expenses, aligning external reporting with how we manage the business. The change does not affect consolidated revenue, gross profit, or adjusted EBITDA. This quarter also includes a $10.9 million non-cash impairment related to revalued inventory and warehouse these right-of-use assets at TINC. This charge is excluded from adjusted EBITDA and has no impact on cash. It was part of our ongoing effort to streamline the asset base as TINC completes its pivot to a capital-light ISP model. Also consistent with what we signaled last quarter, we continued to recycle non-strategic assets and recognized approximately $4 million of gains on asset sales this quarter. Last quarter, we noted an additional transaction would be recognized in Q3 and it flowed through as expected. Moving on to segments performance. Tukau's domains delivered another solid quarter of earnings with revenue of $67.8 million and segment-adjusted EBITDA of $12.1 million. Wholesale and retail both contributed, with value-added services, including the XPRI stream, remaining a notable margin driver. Wavelo recorded another strong quarter with revenue of $11.9 million and adjusted EBITDA of $4.3 million, both up double digits year-over-year. Importantly, Wavelo continues to pair growth with operating discipline, producing gross margins at 99.3% of revenue this quarter. Think's top-line momentum continued with revenue of $17 million, up 11% year-over-year. Think reported gross profit of $10.5 million and adjusted EBITDA improved to a loss of $0.9 million, a year-over-year improvement of more than $4 million. As we called out in the release, a higher partner-address mix weighted on near-term gross margin consistent with a capital-light, demand-led strategy. On cash flow and balance sheet, cash and restricted cash ended the quarter at $70.8 million, up from $68.6 million in Q2, Net cash provided by operating activities was $1.5 million for the quarter and net cash used by operating activities of $3.2 million year-to-date, reflecting normal working capital seasonality and the timing of certain cash expenses. We continue to be disciplined with capital allocation, including cash conservation. The partner mix shift at Think reduces capital intensity, and we are recycling capital through the sale of non-strategic assets, as noted earlier. Further, as of September 30th, 25, Think elected to defer the preferred return to generate for the past two quarters. In accordance with the terms of the agreement, the deferred amount plus interest has been treated as payment in kind or PIC of 9.5 million and added to the outstanding balance of the redeemable preferred units. With 39.5 million of adjusted EBITDA generated through Q3, we are well on track to achieve our full-year adjusted EBITDA guidance of 47 million. Organizational-wide execution, cost discipline, and adoption of AI are the key levers. In summary, Q3 shows continued momentum of top-line growth, expanding adjusted EBITDA, and disciplined capital management. We will stay focused on execution and capital efficiency as we close out the year. I will now hand it back to Elliot, but before I do, I would like to thank Elliot for his leadership, mentorship, and friendship throughout my relatively short tenure at Took House. We will continue to work together as we manage the Ting process, and I also look forward to working with Dave. Thank you.

Thank you, Ivan. First, I noted last quarter that we were evaluating strategic paths for Ting, and I will share that we are formally involved in a process for the Ting business. We believe that the sale of Ting will strengthen 2Cows in the long term by enabling it to focus on its domain and wave low businesses, even though 2Cows does not expect to realize significant profit, if any, from the sale of Ting, given its asset-based debt and preferred share obligations. We expect to have a clear sense of direction by the end of the year and will, of course, share information as appropriate. With that shared, I will now turn to personal news. Over the last five to 10 years or so, my time has been spent more and more on Ting and less and less with the rest of the business. In Justin and Dave, we have two excellent CEOs. And now with Ivan, we are doing an even better job of providing the shared services that come out of TCX. While I will remain with the Ting business through the end of the process and hopefully thereafter, I will be stepping back after nearly 30 years. And as of today, I will no longer be the CEO of Toucan. Dave Warwick will step into that role. And I know that with Dave, Justin and Ivan, I am leaving things in great hands. I will remain on the board and I'm a large investor. I am blessed and proud. We created the world's first edge network with the original software libraries. We created wholesale domain registration out of whole cloth, which fundamentally changed the way domain names were distributed. We led a wave of innovation in U.S. mobile, introducing innovations that T-Mobile repeatedly copied and called Un-Carrier. We started and continue to be key players in the wave of partner, or as those who want to misname them say, open access networks in the U.S. And through it all, we did it in a way that treated all stakeholders, employees, partners, customers, as well as investors like humans. I've been blessed with thousands of proud moments. Looking back on nearly 30 years, proudest ones are the little ones. The employee that I have never met making a point of telling me how much they enjoyed their job and how the work environment was unlike any they had experienced. It was the customer stomping me on a beach in the Caribbean while wearing a t-shirt to tell me how fantastic their customer experience was. It was investors telling us how straightforward we were in our communications. It was the partner letting me know they chose us because of how we treated them. At the end of the day, this is all culture, and culture is simply people manifesting relationships. I've always fundamentally believed that most people are simply hoping for the opportunity to do their best work, and my goal was always to create a culture that left them. That trust can be taken advantage of, but overwhelmingly it is not. And I am confident that this culture will continue. As for me, I will remain on the board and connected to both domains and Wavelift. In closing, I want to thank all of those investors and others who have supported 2Cows and me over the years. With many of you, we have had long relationships with the common bond of TCX stock. For this group in particular, I want to be clear that the work is not done. The management team and the board look forward to doing that work. And with that, please ask your questions of my successors.

And if you do have questions, please send them to irat2cas.com by November 13th and look for our recorded Q&A audio response and transcript to this call to be posted to the 2CAS website on Tuesday, November 25th at approximately 5 p.m. Eastern Time. Thank you.