Tucows Inc. (NASDAQ:TCX) Q3 2018 Earnings Conference Call Transcript

Nov 07, 2018 • 10:00 am ET

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Tucows Inc. (NASDAQ:TCX) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Welcome to Tucows Third Quarter 2018 Investor Call. Management has prerecorded its prepared remarks regarding the quarter and outlook for the Company. In lieu of the live question-and-answer period following the prepared remarks, shareholders and analysts are invited to submit their questions to Tucows' management via e-mail at ir@tucows.com. Management will then post a recorded audio response to questions as well as a transcription to the Tucows website on Friday, November 16, at approximately 4:00 p.m. Eastern Time.

Now onto management's prepared remarks. On Wednesday, November 7, Tucows issued a news release reporting its financial results for the third quarter ended September 30, 2018. That news release, along with the Company's financial statements and 10-Q, are available on the Company's website at tucows.com under the Investors heading.

(Forward-Looking Cautionary Statements) I would now like to turn the call over to Tucows' President and CEO, Mr. Elliot Noss.

Executive
Elliot Noss

Thanks, Michael. I will begin our remarks with a review of the quarter. Dave Singh, our CFO, will then review the third quarter financial results in detail, and I'll return for some concluding comments.

Before I begin, a few notes on the new format. The approach has had an overwhelmingly positive response. That said, as it was our first time last quarter, we ask for your feedback, and many of you requested that we post the responses to questions sooner after the call than we did last quarter. This quarter, we will take questions until Monday, November 12, and we'll post our responses by the end of the day, Friday, November 16.

Now onto the quarter. Q3 was another solid quarter across the business, once again demonstrating how the consistent performance and cash flow generation of our Domains and Ting Mobile businesses are enabling us to invest in the Ting Internet footprint, setting up for our next phase of outside growth. Total revenue was $83.5 million, which was down marginally from $85 million in the same period of last year but in line with our expectations due to the bulk transfer of 2.7 million domain names, with essentially no gross margin associated with them. As you can see, with gross margin dollars increasing 18% in the same period. Net income for the quarter increased 55% to $5.3 million from $3.4 million, while adjusted EBITDA increased 27% to $11.9 million from $9.4 million.

I'll now review the performance of the individual businesses. Our Domains business saw another quarter of consistent performance. In the wholesale channel, total registrations were approximately 3.8 million, which was essentially unchanged from Q3 of last year, net of the bulk transfer mentioned earlier. Importantly, we are seeing the positive impact of the price increase on wholesale Domain Services gross margin dollars, which were up 40% year-over-year, their highest level ever. Correcting for some onetime events, the normalized number would still be up over 30%. The wholesale renewal rate for Q3 was a very healthy 78%, right in line with recent performance.

Retail domains channel also saw a consistent performance in Q3