Tucows, Inc 2026 Q2 Earnings Call

Welcome to the Tucows second quarter 2026 management commentary. We have pre-recorded remarks regarding the quarter and outlook for the company. A Tucows-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 Tucows and Tucows Domains, followed by Ivan Ivanov, Tucows CFO and Ting 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 Tucows management. Please submit questions via email to ir@tucows.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 Tucows website on Wednesday, August 19th at approximately 5:00 P.M. Eastern Time. We would also like to advise that the updated investor presentation and the Tucows 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. On Thursday, August 6th, Tucows 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 tucows.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 Tucows 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. Tucows Domains' 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 Tucows Domains continues to be supported by its broad global reseller and retail customer base, product coverage, and significant operating scale. For Wavelo, 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, Wavelo 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 8-K 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 we'll close with cash flow and balance sheet. Consolidated net revenue for the second quarter of 2026 increased 2% to $100.6 million from $98.5 million in the second quarter of 2025, and improved 4% sequentially from $96.7 million in Q1. The year-over-year increase was primarily driven by Ting 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 Wavelo.

Operating expenses increased year-over-year. I want to be specific about where. General and admin expenses rose $3.4 million, or 36%, 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 rose $0.6 million to $12.6 million, and tech ops and development rose $0.5 million to $4.9 million. Separately, the prior year quarter total expenses included a $1.7 million gain on disposition of Ting 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 Ting was offset by lower Wavelo 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 at Ting. 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. Q2 revenue for Tucows 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 has 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 Wavelo, 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 Ting, Q2 revenue was $21.6 million, up 32% from $16.4 million in Q2 of last year. Fiber Internet services revenue was $17.5 million, supported by subscriber growth, and Ting 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.