Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-32600 TUCOWS INC. (Exact Name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of (I.R.S. Employer Inc ...

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Exact Name of Registrant as Specified in Its Charter) Commission file number 001-32600 Pennsylvania (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (State or Oth ...

Tucows Inc. (NASDAQ:TCX) Q4, 2020 Earnings Conference Call February 9, 2021 5:00 PM ET Company Participants Monica Webb - Head of Market Development & Strategic Partnerships Elliot Noss - President & Chief Executive Officer Dave Singh - Chief Financial Officer Conference Call Participants Monica Webb Welcome to Tucows’ Fourth Quarter 2020 Management Commentary. We have pre-recorded prepared remarks regarding the quarter and outlook for the Company. A Tucows-generated transcript of these remarks, with releva ...

Financial Data and Key Metrics Changes - The company expects the contribution from the mobile business in 2021 to exceed that of 2020, with the second half of the year anticipated to be larger than the first half [4] - The third quarter Gain on Sale number included a one-time $3.5 million non-cash write-down, which was netted from the $4.6 million gross Gain on Sale, indicating that this number is not representative of future quarters [10] - The company continues to be comfortable with its 2020 EBITDA guidance of $50 million [11] Business Line Data and Key Metrics Changes - The Mobile Services Enabler business model is expected to have healthy gross margins due to its fixed cost nature, with little variable cost [6] - Other professional services revenue will vary over time due to one-off or special projects, and does not correlate directly to the health of the strategic mobile business [7] - The third quarter contribution of Mobile Services was as expected, with the transition to the MSE model anticipated to be neutral to slightly negative on financial performance for the year [11] Market Data and Key Metrics Changes - The company is expanding its fiber footprint in California, with Culver City being the third town in California and the twelfth in the U.S., bringing 23,000 serviceable addresses [19] - The transition from coax to fiber is expected to be crucial for the company over the next five years, with a $100 million investment made prior to the pandemic [15] Company Strategy and Development Direction - The company is focused on scaling its MSE platform to support DISH and migrating Boost customers, while also looking for opportunities in the global transition from 4G to 5G [21] - The company plans to increase CapEx significantly in 2021 to support growth and is not capital-constrained, but rather focused on scaling the organization [18] - The company aims to provide guidance on the number of homes passed for the Internet business in the next quarter [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges in 2021 regarding investor understanding due to the complexity of the transaction but prioritizes cash-generating outcomes [5] - The company is optimistic about the future, stating that 2021 will be a year of focused effort and execution [22] Other Important Information - The company has launched new pricing for Ting Mobile, enhancing its competitive position in the market [12][13] - The company is utilizing microtrenching in Culver City to build faster and with less disruption compared to traditional methods [19] Q&A Session Summary Question: What is the expected impact of the shift to the MSE model on financial performance? - Management expects the impact to be neutral to slightly negative for the year, but remains comfortable with the EBITDA guidance [11] Question: How will the gross margins for various revenue streams be affected? - The mobile business is expected to have stable gross margins due to its fixed cost structure [6] Question: What are the plans for the Ting Internet business? - The company plans to provide guidance on growth and CapEx for the Internet business in the next quarter, with a focus on scaling and deployment [14][18]

PART I FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The consolidated financial statements present Tucows Inc.'s financial position, operations, and cash flows, reflecting strategic acquisitions and asset sales [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$444.9 million** by September 30, 2020, driven by property and goodwill growth, while cash decreased Consolidated Balance Sheet Highlights (in thousands of U.S. dollars) | Account | Sep 30, 2020 | Dec 31, 2019 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $10,155 | $20,393 | ($10,238) | | Property and equipment | $109,767 | $82,121 | $27,646 | | Goodwill | $116,270 | $109,818 | $6,452 | | **Total Assets** | **$444,923** | **$425,918** | **$18,005** | | **Liabilities & Equity** | | | | | Deferred revenue, current portion | $128,569 | $123,101 | $5,468 | | Loan payable | $113,672 | $113,503 | $169 | | **Total Liabilities** | **$344,542** | **$331,724** | **$12,818** | | **Total Stockholders' Equity** | **$100,381** | **$94,194** | **$6,187** | [Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Net revenues and income declined in Q3 and YTD 2020, primarily due to the Ting Mobile asset sale and Roam Mobility shutdown Key Performance Indicators (in thousands of U.S. dollars, except per share data) | Metric | Q3 2020 | Q3 2019 | YTD 2020 | YTD 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $74,311 | $88,129 | $240,418 | $251,199 | | Gross Profit | $19,941 | $27,574 | $68,057 | $74,732 | | Income from Operations | $1,312 | $8,601 | $8,021 | $19,378 | | Net Income | $716 | $4,205 | $3,707 | $9,620 | | Diluted EPS | $0.07 | $0.39 | $0.35 | $0.89 | - A gain of **$1.09 million** was recognized on the sale of Ting customer assets during the third quarter of 2020[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased to **$34.4 million**, but significant investing activities led to a **$10.2 million** net decrease in cash Cash Flow Summary for the Nine Months Ended Sep 30 (in thousands of U.S. dollars) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,444 | $27,185 | | Net cash used in investing activities | ($41,568) | ($62,747) | | Net cash (used in) provided by financing activities | ($3,114) | $34,914 | | **Increase (decrease) in cash** | **($10,238)** | **($648)** | - Key investing activities in 2020 included **$32.7 million** for property and equipment additions and **$8.8 million** (net of cash) for the acquisition of Cedar Holdings Group[17](index=17&type=chunk) - Financing activities in 2020 included **$3.3 million** for the repurchase of common stock, compared to **$5.0 million** in the same period of 2019[16](index=16&type=chunk) [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail key accounting policies, the Cedar acquisition, Ting Mobile asset sale, Roam Mobility discontinuation, and revenue disaggregation by segment - On January 1, 2020, the company acquired Cedar Holdings Group, a fiber Internet provider, for a net purchase consideration of **$13.9 million**, including **$9.0 million** in cash, **$2.0 million** in stock, and **$3.1 million** in contingent consideration. The acquisition resulted in **$6.5 million** of goodwill[27](index=27&type=chunk)[29](index=29&type=chunk) - On August 1, 2020, the company sold its Ting Mobile customer accounts to DISH Wireless L.L.C. In return, Tucows will receive a monthly fee for 10 years based on the net revenue from these customers. This resulted in a Q3 2020 gain of **$1.09 million**[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - In June 2020, the company discontinued its Roam Mobility operations due to the impact of the COVID-19 pandemic on travel, resulting in an impairment loss of **$1.4 million** on customer relationship intangible assets for the nine months ended Sep 30, 2020[48](index=48&type=chunk) Disaggregation of Revenue for Nine Months Ended Sep 30 (in thousands of U.S. dollars) | Segment/Service | 2020 | 2019 | | :--- | :--- | :--- | | **Network Access Services** | | | | Retail mobile services | $44,734 | $63,516 | | Mobile platform services | $376 | $0 | | Other professional services | $1,457 | $0 | | Fiber Internet Services | $13,379 | $7,977 | | **Total Network Access** | **$59,946** | **$71,493** | | **Domain Services** | | | | Wholesale | $153,845 | $150,449 | | Retail | $25,669 | $26,138 | | Portfolio | $958 | $3,119 | | **Total Domain Services** | **$180,472** | **$179,706** | | **Total Net Revenues** | **$240,418** | **$251,199** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the strategic pivot in Network Access, revenue impacts from asset sales, growth in Domain Services, and liquidity outlook [Overview and Key Business Metrics](index=41&type=section&id=Overview%20and%20Key%20Business%20Metrics) The company's two segments, Network Access and Domain Services, saw a strategic shift in mobile and growth in fiber internet and domains - The company is organized into two segments: Network Access Services and Domain Services[142](index=142&type=chunk) - On August 1, 2020, the company sold substantially all of its retail mobile customer relationships to DISH, pivoting its mobile strategy towards a Mobile Services Enabler (MSE) platform[145](index=145&type=chunk) Key Business Metrics Growth (YoY) | Metric | Sep 30, 2020 | Sep 30, 2019 | Change | | :--- | :--- | :--- | :--- | | Ting Internet accounts (in '000s) | 14 | 10 | +40% | | Ting Internet serviceable addresses (in '000s) | 50 | 34 | +47% | | Total domains under management (in '000s) | 25,027 | 23,858 | +4.9% | [Opportunities, Challenges and Risks (including COVID-19)](index=44&type=section&id=Opportunities%2C%20Challenges%20and%20Risks%20(including%20COVID-19)) Key risks include foreign exchange and competition, while COVID-19 had mixed impacts, leading to Roam Mobility shutdown but boosting domain services - The company faces significant foreign exchange risk as revenues are primarily in USD while a major portion of operating expenses are in CAD[166](index=166&type=chunk) - The COVID-19 pandemic had a mixed impact. It led to the shutdown of the Roam Mobility brand due to reduced travel, but spurred growth in the Domain Services segment as businesses increased their online presence[147](index=147&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - The company has transitioned to a remote work model for most employees and implemented safety protocols for field teams, expecting no major productivity issues or material expenditures for business continuity[176](index=176&type=chunk)[177](index=177&type=chunk)[184](index=184&type=chunk) - Management does not anticipate material impairments to goodwill, intangible assets, or other long-lived assets due to COVID-19 at this time[193](index=193&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) Q3 2020 net revenues declined **16%** due to mobile service changes, partially offset by fiber internet growth, impacting operating income and Adjusted EBITDA Net Revenue Change by Service (Q3 2020 vs Q3 2019, in millions) | Service Area | Q3 2020 Revenue | Q3 2019 Revenue | Change | | :--- | :--- | :--- | :--- | | Mobile Services | $8.9 | $21.7 | ($12.8) | | Fiber Internet Services | $4.7 | $2.9 | $1.8 | | Domain Services | $60.8 | $63.5 | ($2.7) | | **Total** | **$74.3** | **$88.1** | **($13.8)** | - The decrease in Mobile Services revenue was driven by the sale of the Ting Mobile customer base to DISH on August 1, 2020, and the shutdown of Roam Mobility[214](index=214&type=chunk)[218](index=218&type=chunk) - Fiber Internet revenue grew **62%** YoY in Q3, driven by the Cedar acquisition (**$1.1 million** contribution) and organic expansion (**$0.7 million**)[220](index=220&type=chunk) Reconciliation of Net Income to Adjusted EBITDA (Q3 2020 vs Q3 2019, in thousands) | Metric | Q3 2020 | Q3 2019 | | :--- | :--- | :--- | | Net income | $716 | $4,205 | | Adjustments (Depreciation, Amortization, Taxes, Interest, etc.) | $12,554 | $10,627 | | **Adjusted EBITDA** | **$13,270** | **$14,832** | - The decrease in Q3 Adjusted EBITDA was primarily due to a lower contribution from outsized Portfolio sales that occurred in Q3 2019, partially offset by growth from wholesale domains and Ting Fiber[298](index=298&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) Cash decreased to **$10.2 million** due to significant investing activities, primarily fiber network expansion and acquisitions, despite strong operating cash flow - Cash decreased by **$10.2 million** during the first nine months of 2020, ending at **$10.2 million**[305](index=305&type=chunk) - Cash from operations was strong at **$34.4 million** for the nine-month period[312](index=312&type=chunk) - Major uses of cash included **$32.7 million** for capital expenditures, primarily for the Ting Fiber network build-out, and **$8.8 million** for the Cedar acquisition[315](index=315&type=chunk) - The company has an outstanding balance of **$114.4 million** on its **$240 million** Amended 2019 Credit Facility[306](index=306&type=chunk)[329](index=329&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages foreign currency and interest rate risks through hedging instruments, with a hypothetical 10% CAD/USD adverse movement impacting net income by **$3.3 million** - The company uses foreign exchange forward contracts to mitigate risk from Canadian dollar expenses. As of Sep 30, 2020, it held contracts with a notional value of **$41.4 million**[323](index=323&type=chunk)[324](index=324&type=chunk) - To manage interest rate risk on its credit facility, the company entered into a pay-fixed, receive-variable interest rate swap with a notional value of **$70 million**[321](index=321&type=chunk) - A sensitivity analysis indicates a hypothetical **10%** adverse movement in the CAD/USD exchange rate would decrease net income by approximately **$3.3 million** for the nine-month period, before hedging[325](index=325&type=chunk) [Item 4. Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of September 30, 2020, excluding the recently acquired Cedar business, with no material changes to internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2020[330](index=330&type=chunk) - The evaluation of internal controls excluded Cedar, which was acquired in Q1 2020. Cedar's total assets were **$15.5 million** and its nine-month revenues were **$3.5 million**[330](index=330&type=chunk) - No material changes were made to internal controls over financial reporting during the third quarter of 2020[331](index=331&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=67&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal matters arising from normal business operations, none of which are expected to be materially harmful - The company is involved in various legal matters arising from normal business operations, none of which are expected to be materially harmful[332](index=332&type=chunk) [Item 1A. Risk Factors](index=67&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors include COVID-19 impacts, contingent payments from the DISH asset sale, brand confusion, and customer concentration in the new MSE business - The COVID-19 pandemic has adversely impacted the business, particularly the Network Access segment, through the shutdown of Roam Mobility and reduced usage/increased churn for Ting Mobile[334](index=334&type=chunk)[335](index=335&type=chunk) - A new risk is that the 10-year payment stream from DISH is contingent on the profitability of the transferred subscriber base, which is now controlled by DISH[338](index=338&type=chunk) - Sharing the 'Ting' brand with DISH (for mobile) while Tucows uses it for fiber internet could cause consumer confusion and reputational risk[339](index=339&type=chunk)[340](index=340&type=chunk) - The new MSE business is initially **100%** concentrated with one customer, DISH, creating significant dependency risk[341](index=341&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company's **$40 million** stock buyback program saw **$3.3 million** in repurchases for the nine months ended September 30, 2020, with **$36.7 million** remaining - The company did not repurchase any shares during the three months ended September 30, 2020[343](index=343&type=chunk) - For the nine months ended September 30, 2020, the company repurchased **70,238 shares** for a total of **$3.3 million** under its **$40 million** buyback program[344](index=344&type=chunk) - As of September 30, 2020, **$36.7 million** remained authorized for repurchase under the current program[343](index=343&type=chunk) [Item 3. Defaults Upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - None[345](index=345&type=chunk) [Item 4. Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company's operations - Not applicable[346](index=346&type=chunk) [Item 5. Other Information](index=69&type=section&id=Item%205.%20Other%20Information) No other material information was reported - None[347](index=347&type=chunk) [Item 6. Exhibits](index=69&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including key agreements with DISH and various certifications - Key exhibits filed include the Asset Purchase Agreement and the Mobile Virtual Network Enabler (MVNE) Master Services Agreement with DISH WIRELESS L.L.C., both dated August 1, 2020[352](index=352&type=chunk)

Investor presentation 1 08.06.2020 Nasdaq (TCX) | TSX (TC) Safe Harbor Statement information, future events or otherwise. 2 | --- | --- | |-------------------------------------------------------------------------------------------------|-------| | | | | This presentation may contain forward-looking statements, relating to the Company's | | | operations or to the environment in which it operates, which are based on Tucows Inc.'s | | | operations, estimates, forecasts and projections. These statements are not ...

Tucows, Inc. (NASDAQ:TCX) Q2 2020 Earnings Conference Call August 5, 2020 8:00 PM ET Company Participants Monica Webb - Head, Market Development and Strategic Partnerships Elliot Noss - President and Chief Executive Officer Dave Singh - Chief Financial Officer Conference Call Participants Monica Webb Welcome to Tucows’ Second Quarter 2020 Management Commentary. We have pre-recorded prepared remarks regarding the quarter and outlook for the company. A transcript of these remarks is also available on the comp ...

PART I FINANCIAL INFORMATION [Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Tucows Inc.'s unaudited interim consolidated financial statements as of June 30, 2020, and for the three and six-month periods then ended Consolidated Balance Sheet Highlights (in thousands of U.S. dollars) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$442,191** | **$425,918** | | Total Current Assets | $141,634 | $145,675 | | Goodwill | $116,270 | $109,818 | | **Total Liabilities** | **$344,817** | **$331,724** | | Total Current Liabilities | $165,093 | $156,908 | | Loan payable, long-term portion | $113,608 | $113,503 | | **Total Stockholders' Equity** | **$97,374** | **$94,194** | Consolidated Statement of Operations Highlights (in thousands of U.S. dollars) | Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $82,122 | $84,117 | $166,107 | $163,070 | | Gross Profit | $22,966 | $24,507 | $48,116 | $47,158 | | Income from Operations | $1,537 | $5,749 | $6,709 | $10,777 | | Net Income | $157 | $2,616 | $2,991 | $5,415 | Consolidated Statement of Cash Flows Highlights (in thousands of U.S. dollars) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,012 | $15,970 | | Net cash used in investing activities | ($30,932) | ($51,401) | | Net cash (used in) provided by financing activities | ($3,614) | $34,797 | | **Net (decrease) in cash and cash equivalents** | **($11,534)** | **($634)** | [Note 4: Acquisitions](index=9&type=section&id=Note%204.%20Acquisitions) On January 1, 2020, the company acquired Cedar Holdings Group, a fiber Internet provider, for a net purchase consideration of $13.9 million, adding $6.5 million in goodwill Cedar Acquisition Purchase Price Allocation (in thousands of U.S. dollars) | Component | Amount | | :--- | :--- | | Cash Consideration | $8,836 | | Share-based payment | $2,000 | | Fair value of contingent payments | $3,072 | | **Total estimated purchase price** | **$13,908** | | Total net assets assumed | $7,456 | | **Total goodwill** | **$6,452** | - The acquisition of Cedar contributed **$2.4 million** in revenue and a net loss of **$0.2 million** for the six months ended June 30, 2020[35](index=35&type=chunk)[36](index=36&type=chunk) [Note 6: Goodwill and Other Intangible Assets](index=14&type=section&id=Note%206.%20Goodwill%20and%20Other%20Intangible%20Assets) As of June 30, 2020, Goodwill stood at $116.3 million, with 93% allocated to Domain Services, and a $1.4 million impairment loss was recorded for Roam Mobility customer relationships - Goodwill balance was **$116.3 million** as of June 30, 2020, up from **$109.8 million** at year-end 2019, with no impairment recognized during the period[47](index=47&type=chunk) - Due to the impact of COVID-19 on the travel industry, the company decided to discontinue its Roam Mobility operations, resulting in a **$1.4 million** impairment loss on associated customer relationships[50](index=50&type=chunk) - In June 2020, the company committed to a plan to sell its Ting Mobile customer base, reclassifying mobile customer relationships valued at **$2.6 million** as assets held-for-sale[51](index=51&type=chunk) [Note 9: Assets and liabilities held-for-sale](index=19&type=section&id=Note%209.%20Assets%20and%20liabilities%20held-for-sale) In June 2020, the company reclassified $9.0 million in assets and $0.8 million in liabilities as held-for-sale due to the planned sale of its Ting Mobile customer base, which was completed on August 1, 2020 Assets and Liabilities Held-for-Sale as of June 30, 2020 (in thousands of U.S. dollars) | Category | Amount | | :--- | :--- | | **Assets held for sale** | **$9,027** | | Accounts receivable | $4,554 | | Customer relationship intangible assets (net) | $2,581 | | Other assets | $1,892 | | **Liabilities held for sale** | **$751** | - No impairment loss was recorded as a result of classifying these assets as held-for-sale[75](index=75&type=chunk) [Note 11: Revenue](index=20&type=section&id=Note%2011.%20Revenue) The company generates revenue from Network Access Services and Domain Services, with total revenue of $166.1 million for the six months ended June 30, 2020 Disaggregation of Revenue (in thousands of U.S. dollars) | Revenue Stream | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | **Network Access Services** | **$21,981** | **$23,630** | **$46,437** | **$46,882** | | Mobile Services | $17,567 | $20,986 | $37,715 | $41,795 | | Other Services (Fiber) | $4,414 | $2,644 | $8,722 | $5,087 | | **Domain Services** | **$60,141** | **$60,487** | **$119,670** | **$116,188** | | Wholesale | $51,240 | $51,260 | $101,910 | $98,035 | | Retail | $8,567 | $8,783 | $17,017 | $17,425 | | Portfolio | $334 | $444 | $743 | $728 | | **Total Net Revenues** | **$82,122** | **$84,117** | **$166,107** | **$163,070** | [Note 14: Segment Reporting](index=26&type=section&id=Note%2014.%20Segment%20Reporting) The company operates in Network Access Services and Domain Services segments, generating $48.1 million in consolidated gross profit on $166.1 million in revenue for the six months ended June 30, 2020 Segment Performance - Six Months Ended June 30, 2020 (in thousands of U.S. dollars) | Segment | Net Revenues | Gross Profit | | :--- | :--- | :--- | | Network Access Services | $46,437 | $16,825 | | Domain Services | $119,670 | $31,291 | | **Consolidated Total** | **$166,107** | **$48,116** | Segment Performance - Six Months Ended June 30, 2019 (in thousands of U.S. dollars) | Segment | Net Revenues | Gross Profit | | :--- | :--- | :--- | | Network Access Services | $46,882 | $19,138 | | Domain Services | $116,188 | $28,020 | | **Consolidated Total** | **$163,070** | **$47,158** | [Note 19: Subsequent Events](index=34&type=section&id=Note%2019.%20Subsequent%20Events) On August 1, 2020, Tucows sold its Ting Mobile customer accounts to DISH Wireless L.L.C., including a 10-year payment stream and a concurrent Mobile Service Enabler agreement - On August 1, 2020, Tucows sold its Ting Mobile customer accounts to DISH Wireless L.L.C[132](index=132&type=chunk) - The purchase price includes a working capital payment and a **10-year payment stream** based on net revenue from the transferred customer accounts[134](index=134&type=chunk) - Tucows entered into a services agreement to act as a mobile service enabler (MSE) for DISH, retaining the technology platforms and intellectual property necessary for these services[135](index=135&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting a 2% increase in H1 2020 revenue to **$166.1 million**, driven by Domain Services and Fiber growth, offset by Mobile Services declines due to COVID-19, with Adjusted EBITDA increasing **19%** to **$24.9 million** [Overview & Key Business Metrics](index=37&type=section&id=Overview%20%26%20Key%20Business%20Metrics) The company operates Network Access Services and Domain Services segments, with Ting Mobile managing 257,000 subscribers and Ting Internet growing to 13,000 accounts as of June 30, 2020 Ting Mobile Metrics (in '000s) | Metric | June 30, 2020 | June 30, 2019 | | :--- | :--- | :--- | | Accounts under management | 150 | 157 | | Subscribers under management | 257 | 280 | Ting Internet Metrics (in '000s) | Metric | Q2 2020 | Q2 2019 | | :--- | :--- | :--- | | Accounts under management | 13 | 9 | | Serviceable addresses | 49 | 34 | Domain Services Metrics (in '000s) | Metric | H1 2020 | H1 2019 | | :--- | :--- | :--- | | Total new, renewed & transferred-in registrations | 9,503 | 8,939 | | Total domains under management (at June 30) | 24,592 | 25,010 | [COVID-19 Response and Impact](index=41&type=section&id=COVID-19%20Response%20and%20Impact) The COVID-19 pandemic significantly impacted the Network Access segment, leading to the shutdown of Roam Mobility with a **$1.43 million** impairment charge, while Domain Services experienced growth - The company shut down its Roam Mobility brands effective June 30, 2020, due to a lack of demand caused by the halt in business and leisure travel, leading to a **$1.43 million** impairment charge[183](index=183&type=chunk)[191](index=191&type=chunk) - Ting Mobile experienced a moderate drop in data usage and increased churn from low-margin business accounts as customers worked from home and businesses halted operations[190](index=190&type=chunk) - The Domain Services segment saw growth, with total domains under management in the OpenSRS brand increasing by **807,000** since March 31, 2020, as more businesses established an online presence[193](index=193&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Net revenues decreased 2% YoY to $82.1 million in Q2 2020, while H1 2020 revenues increased 2% to $166.1 million, with Adjusted EBITDA for Q2 2020 rising 6% to $12.2 million Net Revenue Change Analysis (Q2 2020 vs Q2 2019) | Category | Change (in millions) | Reason | | :--- | :--- | :--- | | Mobile Services | ($3.4) | Reduced subscribers and usage (COVID-19) | | Fiber (Other Services) | $1.8 | Acquisition of Cedar and organic growth | | Domain Services | ($0.3) | Decline in some brands offset by growth in others | | **Total Net Revenue** | **($2.0)** | | - Cost of revenues for Q2 2020 included a **$1.5 million** impairment charge related to Ting TV, a product under development for Ting Fiber that was discontinued[245](index=245&type=chunk)[260](index=260&type=chunk) - Amortization of intangible assets increased in H1 2020 by **$1.3 million**, primarily due to the acquisitions of Ascio, Cedar, and FreedomPop customer relationships[280](index=280&type=chunk) - An impairment of definite life intangible assets of **$1.4 million** was recorded in Q2 2020 due to the write-off of Roam Mobility customer relationships upon the shutdown of the business[281](index=281&type=chunk) [Adjusted EBITDA](index=57&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA for Q2 2020 increased by 6% to $12.2 million, and for H1 2020, it grew 19% to $24.9 million, driven by Ting Fiber and Ascio acquisition synergies Reconciliation of Net Income to Adjusted EBITDA (in thousands of U.S. dollars) | Line Item | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Net income | $157 | $2,616 | $2,991 | $5,415 | | Depreciation & Amortization | $7,510 | $4,737 | $13,707 | $8,702 | | Impairment of definite life intangible assets | $1,431 | - | $1,431 | - | | Interest expense, net | $846 | $1,314 | $1,996 | $2,286 | | Provision for income taxes | $449 | $1,819 | $1,550 | $3,076 | | Stock-based compensation | $847 | $685 | $1,648 | $1,210 | | Other adjustments | $850 | $315 | $1,263 | $228 | | **Adjusted EBITDA** | **$12,175** | **$11,486** | **$24,856** | **$20,917** | [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2020, the company's cash balance was $8.9 million, a decrease of $11.5 million from year-end 2019, primarily due to capital expenditures and acquisitions, partially offset by operating cash flow - Cash from operating activities for H1 2020 was **$23.0 million**, a **44%** increase from H1 2019[310](index=310&type=chunk) - Investing activities used **$30.9 million** in H1 2020, including **$22.1 million** for property and equipment and **$8.8 million** for the Cedar acquisition[313](index=313&type=chunk) - The company has an outstanding balance of **$114.4 million** on its Amended 2019 Credit Facility as of June 30, 2020[329](index=329&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to foreign currency and interest rate risks, which it mitigates using foreign exchange forward contracts and an interest rate swap with a notional value of $70 million - The company uses foreign exchange forward contracts to hedge its Canadian dollar expense exposure, holding contracts with a notional amount of **$52.1 million** as of June 30, 2020[322](index=322&type=chunk)[323](index=323&type=chunk) - To manage interest rate risk on its credit facility, the company entered into a pay-fixed, receive-variable interest rate swap with a notional value of **$70 million**[320](index=320&type=chunk) - A sensitivity analysis indicated that a hypothetical **10%** adverse movement in the USD/CAD exchange rate would decrease net income by approximately **$1.0 million** for the quarter, before hedging effects[326](index=326&type=chunk) [Controls and Procedures](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, excluding the recently acquired Cedar, with no material changes to internal controls during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2020[330](index=330&type=chunk) - The assessment of disclosure controls excluded Cedar, which was acquired in Q1 2020[330](index=330&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[332](index=332&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=62&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal claims and lawsuits arising from the normal course of business, none of which are expected to have a material adverse effect - The company is involved in various investigations, claims, and lawsuits from normal business operations, none of which are expected to be individually or in the aggregate materially harmful[333](index=333&type=chunk) [Risk Factors](index=62&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, focusing on the adverse impacts of the COVID-19 pandemic and risks associated with the recent asset sale to DISH, including contingent consideration and brand sharing - The COVID-19 pandemic has adversely impacted business, leading to the shutdown of the Roam Mobility brand and reduced customer usage and increased churn for Ting Mobile[336](index=336&type=chunk) - **Contingent Consideration Risk:** The **10-year payment stream** from DISH is dependent on the revenue generated by transferred subscribers, which could be diminished by churn or lower profitability under DISH's control[339](index=339&type=chunk) - **Brand Sharing Risk:** Sharing the 'Ting' brand with DISH for mobile services while Tucows uses it for fiber could cause consumer confusion and reputational damage to the Ting Fiber business[340](index=340&type=chunk) - **MNO Commitment Risk:** Tucows retains an MNO contract not assigned to DISH and must meet its minimum revenue commitments, which may be challenging without a direct relationship with subscribers[341](index=341&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Under its $40 million stock buyback program, the company repurchased 3,500 shares for $0.2 million during Q2 2020, with approximately $36.7 million remaining available Share Repurchase Activity (Q2 2020) | Period | Total Shares Repurchased | Average Price Paid per share | Dollar value of shares that may yet be purchased | | :--- | :--- | :--- | :--- | | April 2020 | 3,500 | $46.87 | $36,719,000 | | May 2020 | - | - | $36,719,000 | | June 2020 | - | - | $36,719,000 | [Defaults Upon Senior Securities](index=64&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None [Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable [Other Information](index=64&type=section&id=Item%205.%20Other%20Information) None [Exhibits](index=64&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including articles of incorporation, bylaws, and various certifications required by the SEC, as well as XBRL data files

Investor presentation 05.07.2020 Nasdaq (TCX) | TSX (TC) Safe Harbor Statement information, future events or otherwise. | --- | --- | |-------------------------------------------------------------------------------------------------|-------| | | | | This presentation may contain forward-looking statements, relating to the Company's | | | operations or to the environment in which it operates, which are based on Tucows Inc.'s | | | operations, estimates, forecasts and projections. These statements are not gua ...

Tucows Inc. (NASDAQ:TCX) Q1 2020 Earnings Conference Call May 7, 2020 5:00 PM ET Company Participants Monica Webb – Head of Market Development and Strategic Partnerships Elliot Noss – President and Chief Executive Officer Dave Singh – Chief Financial Officer Conference Call Participants Monica Webb Welcome to Tucows’ First Quarter 2020 Management Commentary. We have pre-recorded prepared remarks regarding the quarter and outlook for the Company. A transcript of the management commentary is also available on ...