Release Date: March 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tucows Inc (NASDAQ:TCX) successfully renewed the Wavelow and EcoStar contract, reflecting a strong relationship and providing more certainty for both parties.
• The company has a well-above industry average ARPU due to offering a single SKU, which simplifies customer experience.
• Tucows Inc (NASDAQ:TCX) has a strategic plan to deepen the relationship between ISPs and customers, aiming for increased customer loyalty and business.
• The company is confident in the value of Ting's common equity, citing favorable performance metrics such as above-average ARPU, lower churn, and higher penetration.
• Tucows Inc (NASDAQ:TCX) sees market inefficiencies as opportunities and plans to capitalize on them, indicating a proactive approach to market challenges.

Negative Points

• The company faces significant net debt of approximately $410 million, which is a critical factor in evaluating the value of common equity.
• There is uncertainty regarding the speed of partner market development in Memphis and Colorado Springs, which could impact future growth.
• The decision to cease construction of new addresses may limit future expansion opportunities and asset growth.
• Tucows Inc (NASDAQ:TCX) acknowledges that market inefficiencies are affecting the stock price, suggesting potential undervaluation issues.
• The company relies heavily on the performance of its fiber business, which could be risky if market conditions change or if competition increases.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with TCX.

Q: Can you provide more details on the recent Wavelow and EcoStar contract renewal and its impact on adjusted EBITDA? A: Eliot Noss, President and CEO, explained that the contract renewal involved minor adjustments to reflect current realities, providing more certainty for Tucows and allowing EcoStar to capture more upside. This renewal underscores a strong relationship between the parties and is expected to have a positive impact on adjusted EBITDA.

Q: Why does Tucows offer only a single SKU for its fiber services, and how does this affect ARPU? A: Eliot Noss stated that offering a single SKU helps maintain a well-above industry average ARPU by avoiding customer confusion. Multiple SKUs in a utility like fiber are unnecessary and complicate the checkout process, similar to outdated telecom practices.

Q: What is the timeline for building out partner markets in Memphis and Colorado Springs? A: Eliot Noss mentioned that the build-out in Memphis and Colorado Springs will occur evenly over the next 4 to 5 years, based on current partner plans.

Q: Why does Tucows believe Ting's common equity has value despite its impact on stock price? A: Eliot Noss explained that despite the short-term stock price impact, Tucows believes in the long-term value of Ting's common equity. The net debt is approximately $410 million, and the current market benchmarks suggest a conservative valuation floor, indicating potential value above industry averages.

Q: How does Tucows plan to grow ARPA and deepen customer relationships? A: Eliot Noss highlighted that the company aims to deepen relationships by becoming a trusted technology partner. For 2025, the focus will be on mobile offerings, with more ambitious plans for 2026 and beyond.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.