Earnings call transcript: Tucows Inc. Q2 2025 reveals strategic asset sales

Tucows Inc. (TCX) reported its Q2 2025 earnings, highlighting strategic asset sales and new registry contracts. The company’s stock remained stable at $25.94, reflecting no change in the market following the announcement. Tucows emphasized strengthening its balance sheet and maintaining capital allocation flexibility, while preparing for new generic top-level domain (GTLD) opportunities.

Key Takeaways

• Tucows is halfway through its U.S. fiber network development.
• New registry contracts with Nixie and Radix are expected to boost future growth.
• The company is strategically selling select non-core fiber assets.

Company Performance

Tucows continues to focus on strengthening its balance sheet and enhancing capital allocation flexibility. The company is strategically selling non-core fiber assets and has made significant progress in its U.S. fiber network development, which is now approximately 50% complete. These efforts are part of a broader strategy to position the company for future growth opportunities, particularly in the domain registry space.

Financial Highlights

• Revenue: No specific figures provided.
• Earnings per share: No specific figures provided.
• Gross margin contribution from new registry contracts expected in low millions.

Outlook & Guidance

Tucows anticipates new GTLD opportunities in 2026-2027, aiming to capitalize on its strong positioning in the domain registry market. The company is also focusing on maintaining flexibility in capital allocation and monitoring strategic shifts with its partner, EchoStar.

Executive Commentary

Elliot Noss, CEO of Tucows, emphasized the importance of adding new large customers to offset attrition and highlighted the progress made in fiber network development. "We are probably roughly halfway through the fiberization of the U.S.," Noss stated, underscoring the company’s commitment to expanding its infrastructure.

Risks and Challenges

• Customer attrition in the domains industry could impact growth.
• Market saturation in the fiber network sector may limit expansion opportunities.
• Macroeconomic pressures could affect asset sales and capital allocation strategies.

Q&A

During the earnings call, investors focused on domain registry contracts, non-core asset sales, and the Ting balance sheet. Questions also addressed the EchoStar transaction, reflecting investor interest in Tucows’ strategic partnerships and financial health.

Full transcript - Tucows Inc. (TC) Q2 2025:

Monica, Moderator/Operator, Tucows: Welcome to Tucows’ question and answer dialogue for Q2 twenty twenty five. Elliot Noss, President and Chief Executive Officer of Tucows and Ting, will be responding to your questions. For your convenience, this audio file is also available as a transcript in the Investors section of our website along with our Q2 twenty twenty five financial results and updated reports. I would also like to remind investors that if you would like to receive our quarterly results and Q and A via email, please make the request to irtucals dot com. Please note that 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 Q and 10 ks. The company urges you to read its security filings for a full description of the risk factors applicable to its business. Today’s commentary includes responses to questions submitted to us following the pre recorded management remarks regarding the quarter and outlook for the company. We are grouping similar questions into categories that we feel are addressing common queries. If your questions reach a certain threshold or volume, we may ask you to schedule a call instead to ensure we can address the full body of your questions.

And if you feel that the recorded questions and or any direct email you may receive do not address the full scope of your questions, please let us know. Go ahead, Elliot.

Elliot Noss, President and Chief Executive Officer, Tucows and Ting: Thank you, Monica, and welcome to our Q and A for our second quarter twenty twenty five financial results. This quarter, we had questions about each of our businesses. At a TCX level, we continue to prioritize capital allocation flexibility and the ongoing strengthening of our balance sheet. We’ve had investor questions on the domains business, particularly around the impacts of our recent Tucows registry contracts with Nixie and Radix. Investors will primarily see the impact of these contracts as increased gross margin in our wholesale segment, supporting the ongoing growth trajectory of our overall domains margin.

This differs from our registrar business where there is a pass through component of the registry cost that is captured in our revenue. We expect the gross margin contribution from our registry contracts to start in the low millions per year. Importantly, the registry business like the rest of our domains businesses scales efficiently. As part of the Nixie agreement, we are establishing a local presence in India to meet regulatory and operational requirements. While we do not disclose the economics for competitive reasons, we can reiterate that the terms are consistent with what we typically see from large wholesale customers.

In terms of timing of contribution, the TLDs from Nixie were integrated in late Q2 and the TLDs from Radix are scheduled for integration in late Q4. It’s worth noting that domains is a mature industry. We’re adding new large customers is a key part of offsetting attrition from the events we have referenced in our quarterly remarks. The Nixie and Radix contracts fit exactly into this strategy. Looking ahead, the next round of new GTLDs, the first since 2014 will open for applications in 2026 and are expected to launch in 2027.

With the Nixie and Radix wins now secured, Tucows registry is in an exceptionally strong position to compete for and win additional registry business with these new opportunities. As many of you will have read this morning, EchoStar has entered into a transaction with AT and T selling $23,000,000,000 worth of spectrum. This is of course subject to regulatory approval and will enable EchoStar to move towards a hybrid m and o model. Ironically, this looks a little bit like our partner networks as EchoStar is moving to less infrastructure, more cash and what looks to be an increased focus on growing Boost Mobile. Of course, this news is new and we do not have any idea whether this is the end or the first of a number of steps.

Directionally though, it looks like a slight positive for Wavellow. We look forward to our continued work with the EchoStar team as they shift their focus from building infrastructure to operating a mobile carrier. Investors asked about whether there would be further non core Ting assets to be monetized. We have sold most of the non core assets that we expect to sell because much of our built fiber plant is pledged inside the ABS. We were really only able to sell fiber plant where we had started to engage in construction, but where we were not yet offering service.

It’s worth noting that the number of parties engaged in continuing to build fiber to the home networks in The US remains significant. We are probably roughly halfway through the fiberization of The US. Accordingly, there was plenty of interest in acquiring these stubs from us. And most importantly for us, bringing fiber to the home to these communities. We had carefully selected these communities.

We thought them all to be prime opportunities for the first fiber builder. And we chose buyers that we thought would service those communities well. And as we have previously noted, in two of those communities, we will remain as the ISP in a partner model. So to summarize, there will be a little bit more assets sold, but not a lot. Of course, we also had questions about the Ting balance sheet.

It continues to be a priority and we continue to actively work on it. Thank you for listening to our Q and A. And a reminder that if you feel that the recorded answers or any direct email you receive do not address your questions, Please follow-up with us at irtucows.com.

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