TUCOWS INC /PA/ (TCX)·Q2 2024 Earnings Summary

Executive Summary

• Consolidated revenue grew 5.2% year over year to $89.4M, gross profit rose 15.4% to $20.8M, and adjusted EBITDA increased 70% to $9.2M, driven by Ting subscriber growth, margin expansion, and cost controls across Ting, Wavelo, and Domains .
• Net loss improved year over year to $(18.6)M (−$1.70 EPS) from $(31.0)M (−$2.86 EPS), reflecting the absence of a prior-year debt extinguishment charge and lower Ting operating loss; interest expense and network depreciation remained headwinds .
• Ting reduced adjusted EBITDA loss to $(6.4)M from $(10.3)M y/y and expanded gross margin to 67%; Domains and Wavelo posted steady margin and EBITDA gains, while corporate contribution declined versus last year .
• Management emphasized deleveraging (net syndicated debt leverage ratio at 3.17x; $6.5M repaid in Q2) and capital discipline, with fiber CapEx reduced to just over $12M in Q2 from >$18M in Q1 .
• No formal quantitative guidance was provided for Q2; narrative points focus on margin expansion, deleveraging, and capital-efficient growth as near-term stock reaction catalysts .

What Went Well and What Went Wrong

What Went Well

• “We finished the second quarter of 2024 with strong year-over-year growth of consolidated revenue, gross profit and adjusted EBITDA, driven by a solid quarter from Ting with robust subscriber growth, gross margin increases and a lower operating loss” — Elliot Noss .
• Adjusted EBITDA up 70% y/y to $9.2M on improved Ting performance and cost management in Ting, Wavelo, and Domains; Domains EBITDA rose to $11.2M and Wavelo to $3.9M .
• Ting gross margin grew 39% y/y to $9.8M, with adjusted EBITDA loss reduced by nearly $4M y/y, aided by headcount reductions and normalized marketing spend .

What Went Wrong

• Continued net loss of $(18.6)M reflects higher interest expense and elevated network depreciation tied to fiber expansion .
• Cash and restricted balances fell to $52.2M from $79.4M in Q1 and $159.6M in Q2 2023; cash from operations was $(4.7)M in Q2 .
• Corporate adjusted EBITDA declined to $0.5M vs $1.7M in Q2 2023 due to lower contribution from the legacy mobile base .

Financial Results

Segment revenue

Segment gross margin

Segment adjusted EBITDA

KPIs

Guidance Changes

No formal quantitative guidance ranges were provided for Q2 across revenue, margins, OpEx, OI&E, tax rate, or segment specifics; management reiterated focus on deleveraging, cost control, and margin expansion .

Earnings Call Themes & Trends

Management Commentary

• Elliot Noss: “We… continued to deleverage the business with payments on the syndicated debt using cash flow from Wavelo and Tucows Domains.” .
• Elliot Noss (Ting): “Ting's adjusted EBITDA loss was reduced to $6.4 million… primarily a result of a full quarter of recognition for the reductions in headcount and seeing marketing spend return to more normalized levels.” .
• Ivan Ivanov (CFO): “Operating expenses decreased 5.5%… to $29.4 million… as a percentage of revenue, operating expenses improved to 33% compared to 37%… largely as a result of portfolio-wide cost management initiatives.” .
• David Woroch (Domains): “Revenue for Domain Services for Q2 was $62.4 million… Gross margin was $18.9 million… Domain Services adjusted EBITDA was $11.2 million… we recently won… [.music]… Orange Domains… [.locker].” .
• Justin Reilly (Wavelo): “Adjusted EBITDA for Q2 was $3.9 million, up 40.3% from last quarter… we launched product catalog… enabling modular adoption without full replatforming.” .

Q&A Highlights

• No live Q&A was conducted; management invited written questions post-call (Aug 8–15) with responses to be posted on Aug 27, 2024 .
• Areas likely clarified through the follow-up process include Ting capitalization and ABS market dynamics, margin trajectory, and Wavelo’s go-to-market investments; formal Q&A transcript was scheduled but not part of the Q2 prepared remarks .

Estimates Context

• Wall Street consensus via S&P Global for Q2 2024 revenue and EPS was unavailable at time of analysis due to access limits, so we cannot present an estimates comparison (“Values retrieved from S&P Global” unavailable).

Key Takeaways for Investors

• Strong operating momentum: revenue +5.2% y/y, gross profit +15.4% y/y, and adjusted EBITDA +70% y/y underscore execution, with Ting the largest swing factor in margin improvement .
• Ting’s trajectory is improving: adjusted EBITDA loss narrowed by nearly $4M y/y; gross margin at 67% signals efficiency gains from headcount and marketing normalization; fiber CapEx discipline supports path to breakeven over time .
• Wavelo’s high-margin SaaS profile provides durability: 97% gross margin and rising adjusted EBITDA with measured S&M spend; modular product catalog may accelerate customer onboarding and upsell .
• Domains remains the cash engine: consistent renewal rates (76%), stable revenue/margin, and new registry services (.music, .locker) add optionality for adjacency growth .
• Balance sheet strategy: deleveraging with $6.5M Q2 repayment and leverage ratio of 3.17x reduces risk; continued ABS market receptivity is a supportive backdrop for fiber financing .
• Watch for capital markets updates and post-quarter actions (e.g., Ting’s subsequent $63M ABS): these are potential catalysts for sentiment and valuation as the company pursues capital-efficient growth .
• With no formal Q2 guidance, focus near term on execution metrics: Ting subscriber adds, gross margin expansion, OpEx intensity, and cash generation from Domains/Wavelo as key drivers of estimate revisions and stock reaction .