Tucows Inc.

Welcome to the 2COWS Second Quarter 2026 Management Commentary. We have pre-recorded 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 and business segment commentary from David Woroch, President and CEO of 2COWS and 2COWS Domains, followed by Ivan Ivanov, Tucao's CFO and Ting's CEO, who will discuss our financial results in detail, and we will finish with closing remarks from David Woroch. In lieu of a live question and answer period following these remarks, shareholders, analysts, and prospective investors are invited to submit questions to Tucao's management. Please submit questions via email to ir at tucaos.com until Thursday, August 13th. Management will either address your questions directly or provide a recorded audio response and transcript that will be posted to the 2Cals website on Wednesday, August 19th 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 six 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, August 6th, 2CAS issued a news release reporting its financial results for the second quarter ended June 30th, 2026. 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, 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 Woroch. Go ahead, Dave.

Thank you, Monica. We've made measurable progress in several of the areas we have identified as priorities for 2026. On improving our balance sheet and streamlining our capital structure, we recently announced an amendment and extension of our syndicated credit facility and the retirement of the preferred equity in Ting. This removes a significant financial overhang for Ting and maintains our credit flexibility. We also reported our second consecutive quarter of positive operating cash flow of $1.9 million for Q2, taking us to $5.5 million year-to-date. Ting had a significant operating improvement this quarter, helping to grow consolidated revenue and gross profit year-over-year and sequentially. Adjusted EBITDA improved from the first quarter but was down slightly year-over-year, primarily from headwinds in our legacy mobile business. Across the organization, we remain focused on disciplined execution, improving cash generation, moving toward a capital light business, and making decisions that support durable value creation. 2Cals Domain's second quarter performance continued to demonstrate the resilience of our mature, cash-generative core business supported by a growing contribution from higher-margin services. Gross margin remained essentially flat year-over-year, while revenue and adjusted EBITDA declined modestly as domains under management decreased to $21.3 million. We expect domain volumes to be stable going forward as the insourcing by the previously discussed customer has mostly wound down. Sequentially, revenue, gross margin and adjusted EBITDA all improved, supported by continued strength in expiry sales and an increased contribution from our registry services business.

Gross margin across wholesale and retail remained consistent.

Operating expenses increased modestly year over year, with the underlying operating results of the business remaining healthy. The durability of Tukau's domains continues to be supported by its broad global reseller and retail customer base, product coverage, and significant operating scale. For Wavelow, second quarter revenue was down from Q2 2025, which was an especially strong quarter by comparison, with a growing boost subscriber base and higher recognition of bundled professional services fees. Gross profit and adjusted EBITDA also declined year-over-year this quarter, driven primarily by incremental personnel costs to provide those bundled professional services relative to the prior year and continued investment in sales and marketing. As we have discussed in prior quarters, Wavelow is investing selectively in go-to-market capacity to support new customer growth. The sales pipeline remains active across telecommunication providers in multiple markets, and we are mindful about supporting a lean but results-focused sales organization. As we've discussed before, the timing of new customer conversion can be uneven, particularly with large telecommunications providers. That is a normal feature of this market, and we remain focused on progressing qualified opportunities while maintaining rigorous operational discipline. Ting delivered the strongest operating improvement of the quarter, with substantial year-over-year gains in revenue, gross profit, and adjusted EBITDA. Internet subscribers under management increased meaningfully from a year ago. The revenue and margin from the larger subscriber base and contracted customer activity in a partner market helped generate positive adjusted EBITDA, which was Ting's first quarter of positive adjusted EBITDA since we began reporting results by business segment. The improvement also reflects continued discipline in managing operating costs. We continue to review individual markets based on their economics, capital requirements, and ability to contribute to long-term value, and we will make adjustments as needed. With respect to Ting's broader strategic process, this continues to be an important priority for management and the Board. Our focus remains on operating the business responsibly, improving its underlying economics, and advancing the path that we believe can create the best opportunity for the business and the most value for shareholders. We expected this process to move more quickly, but there are interdependencies for an efficient transaction that we are solving for, as investors will have seen in last week's 8K filing. Now, we'll hear from our CFO, Ivan Ivanov, who will discuss our financial results in detail.

Thank you, Dave, and thank you all for joining us today. I will cover consolidated results, then each of the segments, and will close with cash flow and balance sheet. Consolidated net revenue for the second quarter of 26 increased 2% to $100.6 million from $98.5 million in the second quarter of 25 and improved 4% sequentially from $96.7 million in Q1. The year-over-year increase was primarily driven by Think subscriber growth and construction services revenue from our HOA in Laguna Woods Village. Q2 gross profit was $25.8 million, up 17% year-over-year from $22.1 million and up 7% sequentially from $24.1 million in Q1. The year-over-year increase was primarily driven by significant improvement at TING and lower consolidated network expenses, while domains continued to deliver stable gross profit. These gains were partially offset by lower gross profit at Wavelaw. Operating expenses increased year-over-year, and I want to be specific about where. General and admin expenses rose $3.4 million to $13.1 million, driven by increased professional fees across the segments, including higher audit and other services in conjunction with strategic initiatives. Sales and Marketing ROS 0.6 million to 12.6 million and Tech Ops and Development ROS 0.5 million to 4.9 million. Separately, the prior year quarter total expenses included a 1.7 million gain on disposition of Think Inventory held for capital projects with no comparable gain this quarter which is further headwind to the year-over-year comparison. We delivered $12.3 million in adjusted EBITDA this quarter, down 2% from $12.6 million in Q2 of last year, but up 5% sequentially from $11.7 million in Q1. Strong year-over-year performance and sequential improvement at TINC was offset by lower wave low profitability and continued pressure from the legacy mobile business, the resolution of which is a focus in the third quarter. On a GAAP basis, net loss for the quarter was $20.5 million or a loss of $1.84 per share compared with a net loss of $15.6 million or $1.41 per share in Q2 of last year. The year-over-year change primarily reflects higher professional fees, costs related to strategic initiatives work, and the impact of the legacy mobile business, which were partially offset by the improvement acting. On a non-GAAP adjusted basis, net loss was $17.5 million, or a loss of $1.57 per share, compared with an adjusted net loss of $16.3 million or a loss of $1.47 per share in Q2 2025. Let me now walk through the segments. As a reminder, our presentation of segment gross profit reflects amounts net of network expenses aligning external reporting with how we evaluate the businesses. We continue to provide additional segment gross margin and network expense detail in our quarterly KPI summary. Futual revenue for 2,000 domains declined 4% year-over-year to $65 million from $67.6 million, primarily reflecting the tail-end impact of a large reseller transitioning lower-margin domains in-house. which was mostly worked its way through a full year renewal cycle. This contributed to domains under management declining to 21.3 million from 24 million a year ago. Despite the lower revenue and domains volumes, gross profit after network expenses was essentially stable at 19.3 million. Strong expiry sales, a full quarter of domains, new registry customer, and resilient unit economics across the reseller and retail businesses helped offset the volume decline. Wholesale revenue declined 4% to $55.1 million, an impact of the reseller insourcing. Within wholesale, domain services revenue was $48.8 million, compared with $51.6 million in the prior quarter, while value-added services revenue increased 9% to $6.3 million, supported by continued strong expiry sales. Retail revenue was $9.9 million compared with $10.3 million last year. Domains adjusted EBITDA was $11.9 million compared with $12.5 million in Q2 of last year. The decrease was primarily due to higher general and administrative expenses as discussed above. The key takeaway is that the transition of lower margin domain volume had a greater impact on revenue than on gross profit and that, overall, our domain business continues to produce stable recurring margin dollars and remains our largest and most predictable adjusted EBITDA contributor. Turning to wave law, Q2 revenue was $11.8 million, down 7% from $12.7 million in Q2 of last year. The decline reflects less bundled professional services revenue recognized in the current period. Q2 gross profit after network expense was $6.6 million compared with $8.6 million last year and adjusted EBITDA was $2.8 million compared with $5.4 million in Q2 2025. General and admin expenses rose $0.5 million to $1.2 million and sales and marketing rose $0.3 million to $3.1 million as we continue to invest in the go-to-market capacity. Turning to Think, Q2 revenue was $21.6 million, up 32% from $16.4 million in Q2 of last year. Fiverr Internet Services revenue was $17.5 million, supported by subscriber growth, and Think recognized $4.1 million of construction services revenue associated with the Laguna Woods Village HOA. Internet subscribers under management ended the quarter at approximately 60,500, an increase of approximately 8,500 year-over-year. Ting added approximately 3,700 subscribers during Q2, largely from Laguna Woods Village, compared with approximately 400 additions in Q2 of last year. Things Q2 gross profit after network expenses was $2.5 million compared with negative $3.2 million in the prior quarter. The improvement was driven by subscriber growth, construction revenue, and lower network expenses. The prior period also included a $2.7 million non-cash lease accounting adjustment recorded in cost of goods sold. Think adjusted EBITDA improved to positive 1.5 million compared with a loss of 3.7 million in Q2 of last year and a loss of 0.4 million in Q1. The improvement reflects the contribution from a larger subscriber base and construction activity supported by an operating cost base that was broadly stable year-over-year. At the corporate level, Q2 revenue was $2.2 million compared with $1.8 million in Q2 of last year. Corporate gross profit was negative $2.5 million compared with negative $2.6 million in the prior year period. Corporate adjusted EBITDA was negative $3.9 million compared with a negative $1.7 million last year. The year-over-year reduction in profitability was driven by higher professional fees and bigger mobile losses. Mobile profitability continued to be affected by unfavorable per-subscriber economics, the changing mix of customer plans and usage, and, specific to Q2, approximately 1.3 million of incremental long-distance charges associated with an isolated instance of unauthorized traffic. Under a carrier agreement, Foucault was responsible for those charges which were fully recognized in the quarter. The activity was contained and we have implemented additional monitoring and usage controls to prevent recurrence. On cash flow and balance sheet, consolidated cash flow from operating activities was positive 1.9 million in Q2 26 compared with positive 6.6 million in Q2 of last year. For the first six months of 26, cash flow from operating activities was positive, 5.5 million, compared with negative 4.7 million in the first half of 25. Breaking out Q2 operating cash flows, domains, WebLo and corporate generated approximately 6.2 million, while Think used approximately 4.3 million, primarily in interest on its securitization facilities and capex. We ended the quarter with cash and cash equivalents, restricted cash and restricted cash equivalents of $60.2 million, compared with $61.9 million at the end of Q1 and $68.6 million at the end of Q2 of last year. Corporate debt under the syndicated facility was approximately $190.4 million at the quarter end. We remained in compliance with our financial covenants with a leverage ratio of 3.72 times and interest coverage of 3.75 times. But on-site, Inc. also remained in compliance with its securitization requirements. In summary, two calls delivered year-over-year growth in revenue and gross profit, sequential improvement in adjusted EBITDA, and a second consecutive quarter of operating positive cash flow. Domains continued to provide stable gross profit despite lower reported revenue. TIN delivered significant improvement across revenue, gross profit, and adjusted EBITDA, supported by subscriber growth and construction activity. Wavelock continued to invest selectively in future growth while managing through subscriber moderation. These gains were partially offset by higher professional fees and continued pressure from the legacy mobile business, which we are actively working to resolve in the next quarter. With that, thank you, and I will pass it back to Dave for his closing remarks.

Thanks, Ivan. Q2 showed stable operating results and improvement in several key areas. Revenue and gross profit increased both year over year and sequentially. Adjusted EBITDA improved from the first quarter, and we generated positive operating cash flow for the second consecutive quarter. Ting delivered the most significant operating improvement. Subscriber growth, construction activity, and continued cost discipline drove substantial gains in revenue, gross profit, and adjusted EBITDA. For the first time since we began reporting the businesses as separate segments, Ting generated positive quarterly adjusted EBITDA. Domains continue to demonstrate the resilience of a cash-generative business and a scaled, highly efficient operation. Gross profit remains stable and performance improves sequentially, with strong expiry sales and an increased contribution from registry services, which is helping to reinforce the value of expanding higher margin and complementary products around the core business. Wavelow's results reflected subscriber moderation and continued go-to-market investment. We remain confident in the product and the market opportunity. The priority is converting a qualified pipeline into recurring revenue while maintaining the lean and disciplined operating model that has defined Wavelow from the start. However, further investment is contingent on demonstrated execution and measurable progress in pipeline conversion. On the corporate segment and its related guidance, I want to provide important context. Corporate results continue to reflect higher professional fees and challenging economics of the remaining mobile business. We have deferred making a commitment to a new mobile contract while the TING strategic process has been underway in order to preserve maximum flexibility across possible outcomes. We expect the professional fees and ongoing mobile obligations to remain headwinds to the corporate results. However, we are now actively seeking a resolution to the mobile economics. I said at the beginning of the year that 2026 would be a year of transition. We are resetting how we operate, how we allocate capital, and how we manage the portfolio. The transactions we completed last week are the first tangible steps in that larger transformation. We retired all outstanding Series A preferred units in Ting Fiber, removing an obligation with a value of approximately $150 million, including cumulative dividends. The retirement removes a compounding obligation with defined consideration. We amended our syndicated credit facility, extending the maturity of all but one lender commitments from September 2027 to July 2029, with key pricing and financial covenants substantially unchanged. We also acquired the Ting-owned data center, used primarily by domains and wave law, protecting critical infrastructure and placing the asset outside the potential outcomes of the Ting process. Together, these actions remove a significant financial overhang, extend our financing, and preserve strategic paths for the business. That gives management and the board greater flexibility to make decisions based on long-term value rather than near-term structural constraints. These are meaningful actions, but they are not the completion of the work. Our objective is to build a simpler, more focused, and more capital-efficient Two Cows. A portfolio of businesses with strong recurring revenue and scalable economics. Lean operating models with clear accountability for margins, cash generation, and returns on investment capital. And a disciplined approach to capital allocation that balances investment, deleveraging, and long-term value creation. The next phase is execution. We need to convert operating performance into sustainable free cash flow, continue simplifying the portfolio, improve the economics of the businesses we retain, and remain disciplined about where we invest. That is how we intend to deliver value to shareholders, not through a single transaction, but through a series of deliberate actions that improve the quality, flexibility, and cash-generating capacity of 2Cals over time. Simpler, more focused, and with more financial rigor. Thank you 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 ir at 2cas.com by August 13th and look for our recorded Q&A audio response and transcript to this call to be posted to the 2CAS website on Wednesday, August 19th at approximately 5 p.m. Eastern Time.