Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tucows Inc (NASDAQ:TCX) reported strong year-over-year growth in revenue, gross profit, and adjusted EBITA, reflecting a focus on profitable growth.

• Tucows Domains delivered its seventh consecutive quarter of revenue growth, with a 6% increase in Q3 2024 compared to the same quarter last year.

• The company successfully reduced operating expenses by 5%, primarily due to decreased marketing spend and fully amortized intangible assets.

• Ting's gross margin increased by 38% year-over-year, driven by a healthy increase in subscribers and cost reductions.

• Tucows Inc (NASDAQ:TCX) has nearly $80 million in cash on hand, providing a strong financial position to support future operations and investments.

Negative Points

• Tucows Inc (NASDAQ:TCX) laid off over 40% of the Ting workforce, indicating significant restructuring and potential challenges in market expansion.

• The company was unsuccessful in securing a long-term common equity partner for the Ting business, impacting its ability to expand its network.

• Wavelo's revenue decreased by 9% year-over-year, reflecting churn from Echostar's boost subscribers and a transition to subscriber-based revenues.

• Ting reported an adjusted EBITA loss of $5 million, although this was an improvement from the previous year.

• The company faces $40 million in annual interest expenses, which could impact its financial flexibility and growth potential.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with TCX.

Q: Can you elaborate on the recent workforce reduction at Ting and its impact on the business? A: Elliot Noss, President and CEO, explained that the company laid off over 40% of the Ting workforce, primarily those involved in market expansion and new plant construction. This move was aimed at achieving a sustainable cost structure and removing around $22 million in cash operating expenses, mainly from people costs. The focus will now be on existing markets and success-based capital expenditure.

Q: How did Tucows Domains perform in the third quarter, and what are the key drivers of growth? A: David Woroch, CEO of Tucows Domains, reported the seventh consecutive quarter of revenue growth, with a 6% increase year-over-year to $64.7 million. The growth was driven by strong reseller relationships and value-added services, with a notable 26% increase in gross margin from these services.

Q: What were the main factors affecting Wavelo's financial performance this quarter? A: Justin Reilly, CEO of Wavelo, noted a 9% decrease in revenue year-over-year, primarily due to churn from Echostar's boost subscribers and a transition to subscriber-based revenues. Despite this, the company is focusing on larger prospects and expects growth in the sales funnel with a newly hired go-to-market team.