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01/10 16:00
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: revenue growth and improved EBITDA contrast with significant risks like workforce reduction, failed equity partner search, and halted market expansion. The lack of a shareholder return plan and high debt leverage further weigh negatively. Despite some financial improvements, the focus on cost-cutting and conservative strategies suggests limited short-term upside. The absence of positive catalysts and high interest expenses contribute to a negative sentiment, likely leading to a stock price decrease of -2% to -8% over the next two weeks.
Total Revenue $92.3 million, up 6.1% from $87 million in Q3 2023, primarily driven by revenue gains from the Ting and Domains businesses.
Tucows Domains Revenue $64.7 million, up 5.9% from $61.1 million in Q3 2023, primarily driven by an expiry option sale.
Ting Revenue $15.3 million, up 19% from $12.9 million in Q3 2023, driven by a 21% increase in subscribers.
Wavelo Revenue $10.1 million, down 9% from $11.1 million in Q3 2023, reflecting churn from DISH's Boost subscribers and the transition to subscriber-based revenues.
Consolidated Gross Profit $22.2 million, up 32.4% from Q3 2023, driven by year-over-year gross margin gains from the Ting and Domains businesses.
Tucows Domains Gross Margin $19.8 million, up 7.8% from $18.4 million in Q3 2023.
Ting Gross Margin $11 million, up 38% from $8 million in Q3 2023, with gross margin as a percentage of revenue increasing to 72%.
Wavelo Gross Margin $10 million, down 4.6% from $10.5 million in Q3 2023.
Total Operating Expenses $32.2 million, down 5% from $33.9 million in Q3 2023, primarily due to a reduction in sales and marketing costs.
Net Loss $22.3 million, or a loss of $2.03 per share, compared to a net loss of $22.8 million or $2.09 per share in Q3 2023.
Adjusted EBITDA $8.7 million, up 94% from $4.5 million in Q3 2023, primarily driven by profitability improvements at Ting and Domains.
Tucows Domains Adjusted EBITDA $11.5 million, up 5.6% from Q3 2023, largely thanks to the expiry auction sale.
Ting Adjusted EBITDA Negative $5.1 million, improved from negative $12.2 million in Q3 2023, reflecting top line growth and continued expense focus.
Wavelo Adjusted EBITDA $3.4 million, down 18.5% from $4.2 million in Q3 2023, due to lower subscriber count.
Cash and Cash Equivalents $75.2 million at the end of Q3 2024, compared to $110.7 million at the end of Q3 2023.
Cash from Operations Negative $4.6 million, improved from negative $6.9 million in Q3 2023.
Capital Expenditures $14.5 million, primarily for Ting Fiber and continued investment in Wavelo and Tucows Domains platforms.
Syndicated Loan Balance $193 million, with a leverage ratio of 3.9x, after repaying a net $2.5 million this quarter.
Ting Subscriber Growth: Ting added 1,400 net new subscribers, growing 21% year-over-year, reaching almost 50,000 subscribers.
Serviceable Addresses: Ting reported over 15% year-over-year growth in completed serviceable addresses, totaling 132,000 for Ting-owned infrastructure and 172,600 across all Ting footprints.
Cost Reduction: Ting laid off over 40% of its workforce, primarily those involved in market expansion, resulting in a reduction of around $22 million in cash operating expenses.
CapEx Reduction: Ting reduced its CapEx spend from over $12 million in Q2 to $8.2 million in Q3, focusing on success-based capital expenditures.
Shift in Focus: Ting will stop all expansion into new markets and focus on existing infrastructure, aiming for adjusted EBITDA breakeven in 2025.
Operational Paradigm Change: Ting is shifting its focus from increasing fiber footprint to optimizing existing serviceable addresses and improving customer metrics.
Ting Workforce Reduction: Tucows laid off over 40% of the Ting workforce, primarily affecting market expansion and new plant construction, to achieve a sustainable cost structure.
Failed Equity Partner Search: The company was unsuccessful in finding a long-term common equity partner for Ting, which limits capital for network expansion.
Market Expansion Halted: Ting will stop all expansion into new markets and adopt a conservative approach to capital deployment, focusing on existing serviceable addresses.
Interest Expense: Ting will incur over $40 million in interest expenses before spending on success-based capital expenditures in 2025.
Subscriber Churn in Wavelo: Wavelo experienced a decrease in revenue and adjusted EBITDA due to churn from DISH's Boost subscribers, impacting overall performance.
Economic Environment for Fiber ISPs: The fiber ISP market is expected to be dynamic in 2025, with increased competition and potential challenges for smaller ISPs.
Legacy System Inefficiencies: Telecom industry inefficiencies due to legacy systems could hinder future growth and profitability, particularly with the advent of 6G and AI.
CapEx Reduction: Ting has reduced capital expenditures significantly, from over $12 million in Q2 to $8.2 million in Q3, indicating a shift in investment strategy.
Debt Leverage: Tucows has a leverage ratio of 3.9x, indicating a significant amount of debt relative to cash and cash equivalents.
Ting Workforce Reduction: Laid off over 40% of the Ting workforce to move to a sustainable cost structure with positive adjusted EBITDA.
Cost Reduction: Removed around $22 million in cash operating expenses, primarily from personnel costs.
Focus on Existing Infrastructure: Shifted focus from market expansion to optimizing existing serviceable addresses.
Adjusted EBITDA Growth: Expect significant adjusted EBITDA growth for Tucows in 2025, with Ting approaching breakeven.
CapEx Strategy: CapEx will focus on success-based investments rather than expansion into new markets.
2025 Adjusted EBITDA: Ting expected to be around adjusted EBITDA breakeven in 2025.
Interest Expense: Ting will incur over $40 million in interest expense before success-based CapEx in 2025.
Cash Position: Ting had nearly $80 million in cash at the end of Q3 2024.
Revenue Growth: Tucows expects to double adjusted EBITDA in 2024 compared to 2023.
Subscriber Growth: Ting added 1,400 net new subscribers in Q3 2024, growing 21% year-over-year.
Shareholder Return Plan: Tucows has not announced any specific share buyback program or dividend program during this earnings call. The focus remains on operational efficiency and cost reduction, particularly in the Ting business, which aims for adjusted EBITDA breakeven in 2025.
The earnings call reveals strong financial performance, including significant revenue growth, improved gross profit, and reduced net loss, alongside operational efficiencies. The positive trajectory is bolstered by strategic initiatives in AI integration and market expansion. While macroeconomic uncertainties and regulatory challenges exist, the company's robust liquidity position and improved financial health mitigate these risks. Despite the lack of a share repurchase program, the overall sentiment remains positive, supported by optimistic guidance and strategic growth plans.
The earnings call summary highlights strong financial performance with a significant increase in adjusted EBITDA and revenue growth. The stock buyback program is a positive indicator for shareholder returns. Despite some risks and vague responses in the Q&A, the partnership with Amazon AWS and the expectation of Ting reaching breakeven are positive factors. Overall, the sentiment leans positive, suggesting a potential stock price increase of 2% to 8% over the next two weeks.
The earnings call presents a mixed picture: revenue growth and improved EBITDA contrast with significant risks like workforce reduction, failed equity partner search, and halted market expansion. The lack of a shareholder return plan and high debt leverage further weigh negatively. Despite some financial improvements, the focus on cost-cutting and conservative strategies suggests limited short-term upside. The absence of positive catalysts and high interest expenses contribute to a negative sentiment, likely leading to a stock price decrease of -2% to -8% over the next two weeks.
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