Tucows Inc.

Welcome to the 2Cals first quarter 2026 management commentary. We have pre-recorded prepared remarks regarding the quarter and outlook for the company. A 2Cals generated transcript of these remarks with relevant links is also available on the company's website. We will begin with opening remarks and business segment commentary from David Warrick, President and CEO of 2Cals and 2Cals Domains, followed by Ivan Ivanov, 2CAS CFO, who will discuss our financial results in detail, and we will finish with closing remarks from David Warwick. In lieu of a live question and answer period following these remarks, shareholders, analysts, and prospective investors are invited to submit questions to 2CAS management. Please submit questions via email to ir.2cas.com until Thursday, May 14th. Management will either address your questions directly or or provide a recorded audio response and transcript that will be posted to the 2Cals website on Wednesday, May 20th at approximately 5 p.m. Eastern Time. We would also like to advise that the updated investor presentation and the 2Cals quarterly KPI summary, which provides key metrics for all of our businesses for the last five quarters, as well as for full years 2024, 2025, and 2026 year-to-date, and also includes historical financial results, is available in the Investors section of the website. Now for management's prepared remarks. On Thursday, May 7th, 2Cows issued a news release reporting its financial results for the first quarter ended March 31st, 2026. 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. Now I would like to turn the call over to TUCA's President and Chief Executive Officer David Warwick. Go ahead, Dave.

Thank you, Monica. 2COWS has always been a company built on durable, recurring revenue, a long-term mindset, and a practical approach to innovation, and that continued to show through in the quarter. Across the business, our teams remain focused on operating well and advancing the work in front of us. Overall, in Q1, we saw continued progress against the priorities in each of our business segments, I'll begin with some high-level comments on the quarter and developments across domains, Wavelow and Ting, and then Ivan will take you through the segment and consolidated financial results in more detail. With 2COW's domains, gross profit and adjusted EBITDA both increased year-over-year, reflecting the consistency of our business model, while revenue was modestly below the prior year period. Our resale channel and customer base continues to support healthy margins and Q1 benefited from a favorable mix of higher margin product sales, customer composition, and prudent expense management. Domain services remained the primary driver of profitability with a healthy, albeit lower, contribution from value-added services. This lower contribution is against a particularly strong prior year comparison with more modest expiry stream sales in the current quarter. Retail continued to perform well and we are pleased to share that we completed the migration of the Radix Registry portfolio in mid-March with the full quarterly benefit expected and our wholesale segment in Q2. More broadly, we remain focused on disciplined execution across the domain's business, including scaling complementary growth areas like registry, while continuing to manage the core business for profitability and cash generation. For Wavelow, Q1 was a solid start to the year. Revenue was modestly ahead of the prior year period, and subscriber levels remained broadly stable year over year. We continue to benefit from the operating foundation we built in 2025, including a disciplined approach to profitability, a more mature go-to-market program, and a product and pipeline strategy that we believe positions us well for future bookings growth. That said, the year-over-year comparison reflects the fact that the prior year period benefited from both a rate card increase and customer subscriber growth, while subscriber levels have since moderated. Consistent with what we said last quarter, Q1 also reflected continued investment in sales and marketing as we work to strengthen pipeline health and support future growth. Those investments weighed on gross profit and adjusted EBITDA year-over-year. Even so, we remain confident in the strategy. We are investing thoughtfully and selectively in go-to-market capacity while maintaining a lean operating model, and we believe that balance continues to position Weiglo well for long-term profitable growth. Ting's Q1 results marked important progress with subscriber growth and revenue both accelerating. Adjusted EBITDA improved by 50% versus Q1 of last year, reflecting the benefits of a growing subscriber base, continued capital discipline and contributions from a senior living community contract. At the same time, Ting's partner footprint continues to expand, supporting a more capital-efficient path to growth. With respect to Ting's strategic process, our priorities remain unchanged. We continue to actively progress work to reach an outcome that best supports long-term value creation. While we are not in a position to provide a substantive update today, this remains a top priority for management and the board. Now we'll hear from our CFO, Ivan Ivanov, who will discuss our financial results in detail.

Thanks, Dave, and thank you all for joining us today. Consolidated net revenue for the first quarter of 26 increased 2% to $96.7 million from $94.6 million for the first quarter of 25, driven by strong revenue gains from ThinkFiber. i'll walk through each business following the consolidated results but to break out the q1 revenue contributions domains weblo and corporate combined drove 77.2 million and think contributed 19.4 million Q1 gross profit was $24.1 million, up 2.5% year-over-year, supported by margin expansion from domains and TINC, moderated network costs, and partially offset by headwinds from the legacy mobile business, which are recognized in our corporate segment. Breaking out Q1 gross profit by business, 22.4 million came in from domains, WaveLaw and corporate, and 1.7 million from Thing. Operating expenses in Q1 were 28.4 million, up 11% year-over-year, primarily from higher sales and marketing spend in Thing and WaveLaw. We delivered 11.7 million in adjusted EBITDA this quarter, down 15% year-over-year from 13.7 million, primarily due to gross margin decreases in our corporate segment, as well as investment in Wavelaw's go-to-market efforts. Of Q1 adjusted EBITDA, 12.1 million came from domains Wavelaw and corporate combined, and a negative 0.4 million for TINC. On a GAAP basis, net loss for the quarter was $18.1 million or $1.63 loss per share, an increase from a net loss of $15.1 million or $1.37 per share for Q1 of last year. On a non-GAAP adjusted basis, net loss for Q126 was $16.9 million, or a loss of $1.51 per share, compared to an adjusted net loss of $14.9 million, or $1.35 loss per share, in Q125, with the year-over-year changes primarily attributable to professional fees and legacy mobile obligations. Let me now walk through the segments. As a reminder, beginning in Q3 2025, we revised our presentation of gross profit in our press release to reflect amounts net of network expenses, aligning external reporting with how we manage the business. However, we continue to provide investors with gross margin and network expenses broken out by business in our KPI summary, and I will address factors in each business impacting gross margin. Let me first start with two cows domains. Q1 revenue for 2,000 domains declined 2% year-over-year to $64.1 million from $65.3 million, while gross profit grew by 2% in Q1 to $18.6 million from $18.3 million in Q1 2025 after network expenses. Gross profit performance was supported by a favorable mix of high margin product sales. Domains adjusted EBITDA was 11.6 million for the quarter, up modestly from the prior year on the back of margin expansion and prudent expense management. Within domains, Q126 wholesale revenue declined 3% to $54.3 million from $55.9 million in Q125, reflecting the tail end of the impact from a large customer moving low margin domains in-house. At the same time, wholesale gross margin net of network expenses rose 1% in Q1 26 over the last year due to a favorable mix of higher margin product sales. Within the wholesale channel, domain services gross margin generated 10 million in Q126 for a year-over-year gain of 4%. Value-added services was down 5% year-over-year to 5.1 million in Q126 from moderated expiry sales. In Q126, retail revenue increased 5% year-over-year to 9.8 million and retail gross margin increased 8% to 5.6 million in Q1 of this year. Turning to WaveLaw, Q1 revenue was $11.6 million with a slight increase year-over-year. Q1 gross profit was $7 million down from $7.8 million in Q1 2025 and WaveLaw's adjusted EBITDA was $3.6 million down year-over-year from $4.4 million. But the gross profit and adjusted EBITDA year-over-year reductions were primarily due to continued investment in WaveLaw sales and marketing, which began in Q2 of last year. It is also worth noting the prior year comparison. In 2025, WaveLaw benefited from both a rate card increase and subscriber growth. The rate contribution has now leveled off, so we're comparing against a stronger base. Turning to Think Internet, Q126 revenue was $19.4 million, up 19% year-over-year, driven primarily by construction revenue associated with Think's contract with a senior living community, as well as continued subscriber growth. As a reminder, construction services revenue is generated from the design, construction, and installation of fiber optic network infrastructure under a specific customer agreement with revenue recognized over time as control of the infrastructure transfers to the customer. For services requiring installation, revenue is recognized once the customer service is activated. Things Q1 gross profit was 1.7 million, up from a negligible amount in Q1 2025. Adjusted EBITDA improved to a loss of 0.4 million versus a loss of 0.8 million in the prior year period, continuing the momentum in Things' path towards profitability. At the corporate level, Q1 26 revenue was flat year-over-year at 1.6 million. Q1 gross profit was negative 3.2 million compared to a negative 2.6 million in Q1 of last year. Corporate adjusted EBITDA for Q1 was negative 3.1 million from a negative 1.5 million in Q1 25. The reduced profitability in the quarter was primarily impacted by mobile contract obligations and lower revenue on the legacy mobile business. As a reminder, profitability from our remaining legacy mobile arrangements continues to be challenged on both the revenue and cost side. Under the ECOSTAR agreement, our long-term payment stream depends on the margin generated by the subscriber base transferred in 2020, so returns could be pressured if subscriber churn is higher than expected or if pricing and cost dynamics reduce underlying profitability. Separately, while penalties under our remaining MVNO agreement ended with the completion of the contract term in January of this year, we are now on a month-to-month contract basis with an option to renew. Let me now move to cash flow and balance sheet. Consolidated cash flow from operating activities for Q1 26 was 3.5 million compared with a negative 11.3 million in Q1 of last year, making a return to positive operating cash flow trajectory established in Q2 and Q3 of last year. If we break out cash flow from operations for Q126, domains, Wavelength and Corporate combined generated 7.2 million and TINC generated a 3.7 million outflow, mainly from the ABS interest paid. On capital expenditures, we invested 3.6 million into TINC in Q1 26 and 1.9 million in domains and WebLock combined. We ended Q1 with cash and restricted cash of 34.6 million for TINC and cash of 27.4 million excluding TINC. We continue to prioritize disciplined capital allocation and maintaining liquidity across the organization. Corporate net debt excluding TINC was 162.2 million as of quarter rent, net of deferred financing costs, and importantly, we remained in compliance with our covenants under the TCX syndicated facility. For Q126, the leverage ratio was 3.29 times and interest coverage was 4.12 times, both onsite. Things net debt stands at 417.8 million and consists of both ABS notes and preferred shares. In summary, 2CALS delivered a solid first quarter in 2026 with consolidated net revenue growing, margin expansion in both domains and TINC, and a return to positive operating cash flow. Domains continues to be the reliable cash generating engine of the business, while TINC's trajectory is increasingly improving with adjusted EBITDA reflecting the unit economics of a maturing fiber business moving steadily towards breakeven. WaveLaw is investing deliberately in go-to-market to position itself for the next phase of growth. And 2Cals ended the quarter with improved cash position year-over-year while remaining in full covenant compliance. And we're working to address the headwinds from legacy mobile obligations as well as the ongoing strategic initiative work for Think. With that, thank you, and I'll pass it back to Dave for his closing remarks.

Thanks Ivan. Let me close with this. Q1 was a solid start to 2026. We saw continued progress across the business, revenue and gross profit grew, and we returned to positive operating cash flow, a meaningful swing from the same quarter last year, and continued execution against the priorities we laid out at the start of the year. Domains continues to demonstrate what a well-run, durable platform business looks like. Disciplined expenses, healthy margins, and consistent cash generation. The Radix registry migration is now complete, and we expect the full benefit to show in Q2. Ting's trajectory continues to improve. Subscriber growth accelerated, gross profit turned meaningfully positive, and adjusted EBITDA losses were cut in half year over year. That reflects both the underlying unit economics of a maturing fibre network and the capital efficiency measures we've been deliberate about executing. Wavelow is in an investment phase and we're being intentional about it. The spend is in go-to-market, it's in support of future bookings and we remain confident in the strategy. The year-over-year comparison will continue to reflect that investment and you should expect that to normalize as we convert pipeline to growth. The Ting's strategic process remains a top priority, and we understand investors are looking for greater clarity. While we are not in a position to say more today, I want to be clear. We are actively working toward an outcome that creates long-term value for shareholders. We are hopeful for a good outcome and will share a more meaningful update as soon as it is appropriate to do so. The area that weighed most on Q1, and I want to be direct about this, was the corporate segment, specifically mobile obligations and professional fees. Those headwinds were real, but represent costs that are not expected to recur indefinitely and that we're working to eliminate. What I can tell you is that the financial position we're in, positive operating cash flow, covenant compliance, improved year-over-year liquidity, gives us the ability to navigate this period from a position of stability. My priorities for the rest of 2026 have not changed. generate free cash flow, improve capital flexibility, and continue to hold ourselves accountable to the principles I outlined last quarter. Simpler, more focused, more disciplined. That is the company we are building, and Q1 is a step in that direction. Thank you all for your continued support, and we look forward to updating you on our progress.

If you have any questions about the quarter or today's commentary, please send them to ir2cas.com by May 14th and look for our recorded Q&A audio response and transcript to this call to be posted to the 2CAS website on Wednesday, May 20th at approximately 5 p.m. Eastern Time.