Executive Summary / Key Takeaways

• Tucows Inc. (TCX) is undergoing a significant strategic reorientation, pivoting its Ting fiber internet business to a capital-light, pure-play ISP model while expanding its high-margin Wavelo telecom software and resilient Tucows Domains segments. This shift aims to enhance profitability and reduce debt.
• The company projects consolidated Adjusted EBITDA of $46 million for 2025 (after a one-time $9 million corporate charge), a substantial increase driven by Ting's expected breakeven, Wavelo's continued growth, and Domains' stable performance and registry service expansion.
• Technological differentiation, particularly Wavelo's event-driven platform for telecom modernization and AI augmentation across all segments, is a core driver for efficiency gains, competitive advantage, and future growth opportunities.
• Ting's financial viability remains a key risk, with the business facing a "Return Breach" notice regarding preferred unit payments and the need for additional financing to meet future obligations, despite operational improvements and asset sales.
• Leadership changes, with David Woroch appointed CEO and Ivan Ivanov as Ting's CEO, signal a renewed focus on disciplined execution and maximizing value from the reconfigured business units.

A Legacy Reimagined: Tucows' Strategic Pivot for the Digital Age

Tucows Inc. (TCX), a company with a rich history spanning over three decades, is at a pivotal juncture, strategically reorienting its diverse internet services portfolio to unlock long-term value. Founded in 1992, Tucows initially established its formidable presence through Tucows Domains, launching its OpenSRS platform in early 2000. This segment, celebrating its 25th anniversary in February 2025, has consistently served as a resilient cash generator, providing domain name registration and value-added services through a global reseller network. The company's journey expanded significantly in 2015 with the ambitious investment into fiber infrastructure, giving rise to the Ting segment, aimed at delivering high-speed fixed internet access. More recently, Tucows launched Wavelo in 2022, a high-margin telecom software platform designed to modernize Communication Service Providers (CSPs).

The overarching strategy now centers on maximizing the profitability and capital efficiency of each segment, moving away from capital-intensive network builds in Ting towards a pure-play ISP model, while leveraging Wavelo's scalable software and expanding Tucows Domains' registry services. This strategic evolution is set against a backdrop of significant industry trends: the U.S. fiber market's transition from "hype to hard execution," the generational disruption of AI in telecom software, and a broader capital markets flight to minimize risk. These dynamics underscore the urgency and potential impact of Tucows' strategic shifts.

Technological Edge: Fueling Efficiency and Future Growth

Tucows' competitive positioning is increasingly defined by its technological differentiators and a proactive embrace of AI augmentation across its operations.

At its core, Tucows Domains leverages a mature, reliable, and functional reseller-oriented provisioning and management platform. This proprietary technology, honed over two decades, enables streamlined domain registration, renewal, and management, providing a white-label solution for over 33,000 resellers in nearly 200 countries. This robust infrastructure allows Tucows to offer a broad portfolio of gTLD and country code top-level domain options, coupled with comprehensive management and reporting tools. The tangible benefit for investors is a stable, recurring revenue stream with strong customer loyalty, as evidenced by a consistent 75-76% renewal rate, which remains above the industry average. This technological foundation also supports the expansion into registry services, such as the recent contracts with NIXI and Radix, which are migrating millions of domains onto Tucows' platform, positioning the company as a strong contender for future gTLD opportunities.

Wavelo stands out with its event-driven, cloud-based platform, purpose-built to address the compounding inefficiencies of legacy telecom software. Unlike many competitors whose business models rely on professional services, Wavelo's platform focuses on subscription fees, aligning its success directly with customer subscriber growth and retention. This modern architecture simplifies subscription and billing management, network orchestration, and provisioning, enabling CSPs to better utilize existing infrastructure and scale faster. Wavelo's platform is designed to "delete significant portions of the technology stack" for operators, setting them up to receive the value of "AI-enabled products and services." The company is actively integrating AI, with over 40% of its engineers' code already written by AI, a figure expected to increase as more powerful, Wavelo-specific AI tools are rolled out. This technological advantage allows Wavelo to tackle "impossible things" for its clients, offering a significant competitive edge against older, less agile systems from rivals like Amdocs and Oracle .

For Ting, while the focus shifts from network construction, its fiber-optic network infrastructure remains a critical technological asset. The company is now leveraging AI tools to enhance marketing efficiency, aiming to "lower acquisition costs and improve conversion." Early Q3 2025 metrics show a nearly 40% improvement in Customer Acquisition Cost (CAC) per order in direct marketing, with people costs in marketing cut by over 75%. Door-to-door sales, a crucial tactic in fiber-to-the-home, has seen orders per representative increase by 20% and cost per order reduced by nearly 40% through insourcing and modernization efforts. These AI-driven efficiencies are vital for improving Ting's operational leverage and driving profitability as a pure-play ISP.

Competitive Arena: Differentiated Strategies in a Dynamic Market

Tucows operates in highly competitive markets, each segment facing distinct rivalries and opportunities.

In Tucows Domains, the company competes with industry giants like GoDaddy Inc. (GDDY) and VeriSign Inc. (VRSN). GoDaddy, with its broad platform for small businesses, emphasizes aggressive marketing and wide accessibility, while VeriSign dominates the registry for .com and .net domains, focusing on secure infrastructure. Tucows Domains differentiates itself by offering a more specialized, high-touch approach, particularly through its wholesale channel, providing tailored solutions and white-label services to ISPs and web hosts. While GoDaddy might lead in overall market share and aggressive marketing, Tucows' deep expertise in DNS and its robust registry platform, as demonstrated by the Radix contract, positions it as a preferred infrastructure provider for large registries. Its combined renewal rate of 75% in Q2 2025, above the industry average, underscores its customer retention strength despite competitive pricing pressures.

Wavelo competes in the telecom software market against established players like Amdocs (DOX) and Oracle (ORCL), which often rely on legacy systems and professional services. Wavelo's core competitive advantage lies in its modern, event-driven, cloud-native platform, which contrasts sharply with the "three and four decades old" systems of its competitors. This technological superiority allows Wavelo to offer greater flexibility, scalability, and efficiency, particularly for large greenfield MVNOs/ISPs and Tier 1 and Tier 2 fixed/mobile operators. While these larger deals have elongated sales cycles, Wavelo's platform is "uniquely positioned to help solve enterprise-grade problems at scale," a critical differentiator as the industry moves towards mobile-fixed convergence and cloudification. Wavelo's focus on subscription-based revenue, rather than one-time professional services, aligns its incentives with customer success, a model that management believes will "win in the long run."

Ting operates in the highly competitive fiber internet market, facing incumbents like AT&T Inc. (T) and Verizon Communications Inc. (VZ), as well as numerous smaller fiber ISPs. Ting's strategy has shifted from direct network construction to a pure-play ISP model, focusing on loading existing owned infrastructure and expanding through partner-led builds. This pivot is validated by broader industry trends where major players like KKR (KKR), BlackRock (BLK), and EQT (EQT) are "leaning into separating infrastructure construction for provision of services." Ting distinguishes itself with "churn well below industry norms" and "penetration in many markets exceeds what others target long term." Its converged fiber-mobile product, which uses mobile to drive fiber, offers a unique customer experience, with Ting customers with mobile churning 30% to 40% less. While larger competitors benefit from scale and extensive network reach, Ting's localized, customer-centric approach and superior service quality provide a strong competitive moat in its target markets.

Financial Performance and Liquidity: A Transformative Journey

Tucows' recent financial performance reflects the ongoing strategic reorientation, particularly the significant transformation within Ting. For the three months ended September 30, 2025, consolidated net revenues increased by 7% year-over-year to $98.6 million, and for the nine months ended September 30, 2025, they rose by 8% to $291.6 million. This growth was broad-based, with contributions from all three segments. Consolidated gross profit increased by 9% year-over-year in Q3 2025, reaching $24.2 million. Adjusted EBITDA saw a substantial increase of 53% to $13.3 million for the three months ended September 30, 2025, and a 105% increase to $44.9 million for the nine months ended September 30, 2025, highlighting improved operational efficiency.

Segment-Specific Financials:

• Ting: Net revenues for the three months ended September 30, 2025, grew 11% to $17.0 million, and for the nine months, increased 13% to $49.7 million. This growth was driven by subscriber additions, which reached 52,000 active subscribers by September 30, 2025, up from 50,000 a year prior. Segment Adjusted EBITDA improved dramatically, turning positive to $0.9 million in Q3 2025 from a loss of $5.1 million in Q3 2024. This turnaround is a direct result of cost reductions from the February 2024 workforce reduction and the October 2024 Capital Efficiency Plan, which removed approximately $22 million in cash operating expenses.
• Wavelo: This segment delivered its best quarter to date in Q2 2025, with net revenues increasing 20.5% year-over-year to $12.7 million. For the three months ended September 30, 2025, net revenues grew 18% to $11.9 million, and for the nine months, increased 20% to $35.9 million. Segment Adjusted EBITDA for Q3 2025 was $4.3 million, up 25% from $3.4 million in Q3 2024. This growth is fueled by existing customer subscriber expansion and a new rate card with EchoStar . Wavelo's gross margin as a percentage of revenue has consistently been high, reaching 99% in Q3 2024.
• Tucows Domains: Net revenues for the three months ended September 30, 2025, increased 5% to $67.8 million, and for the nine months, grew 6% to $200.7 million. This was primarily driven by passthrough pricing increases and strong expiry auction revenue performance. Segment Adjusted EBITDA for Q3 2025 was $12.1 million, up 5% from $11.5 million in Q3 2024. Domains under management, however, decreased by 2.3 million to 22.29 million as of September 30, 2025, compared to September 30, 2024, reflecting the impact of a reseller moving a portion of its portfolio in-house.

Liquidity and Capital Resources:
As of September 30, 2025, cash and cash equivalents stood at $54.1 million, with an additional $16.7 million in restricted cash and secured notes reserve funds. Corporate net debt was $190.3 million in Q2 2025, showing a consistent decline over five quarters, with a net leverage of 3.14x and interest coverage at 3.99x, comfortably within covenants. Capital expenditures have been significantly reduced, with Q2 2025 CapEx at $3.5 million, consistent with Ting's shift to partner markets. The company has also actively divested non-strategic assets, generating over $15 million in proceeds from asset sales in Q2 2025 alone.

However, Ting's financial obligations remain a critical area. As of September 30, 2025, Ting carried $290.6 million in asset-backed securitized notes and $131.8 million in redeemable preferred units. A significant concern is the "Return Breach" notice received from Generate TF Holdings, LLC, on October 1, 2025, regarding $9.50 million in missed preferred return payments. Failure to cure this by November 30, 2025, could grant Generate the option to convert preferred units into common units or compel asset sales. Ting incurred an operating cash flow deficit of $7 million in Q3 2025 and faces $20.60 million in scheduled interest payments over the next twelve months, indicating a potential need for additional financing.

Outlook and Strategic Initiatives: A Focused Path Forward

Tucows' management has provided a clear outlook for 2025, projecting consolidated Adjusted EBITDA of $46 million after a one-time $9 million charge in the Corporate segment related to winding down the Verizon MVNO agreement. This charge is strategically viewed as a significant marketing tool for Ting's customer acquisition.

Ting's outlook is for Adjusted EBITDA to reach breakeven in 2025, a remarkable improvement from a $22 million loss in 2024. This is predicated on a "sustainable cost structure" achieved through aggressive workforce reductions and a pivot to a "capital-light demand-driven model." The focus is now squarely on increasing "penetration, churn and ARPU" within its existing 132,000 owned serviceable addresses and over 40,000 partner addresses, with an additional 500,000 partner addresses expected from Colorado Springs and Memphis. Capital expenditures are expected to become "near exclusively success-based," moving away from new organic builds.

Wavelo is guided to achieve $13 million in Adjusted EBITDA for 2025. This reflects continued investment in its sales and marketing teams to drive top-line growth from existing and new customers, while maintaining its high-margin profile. The company is strategically targeting larger Tier 1 and Tier 2 CSPs, leveraging its platform's ability to solve complex enterprise-grade problems and capitalize on the industry's need for modernization.

Tucows Domains is projected to contribute $44 million in Adjusted EBITDA for 2025. Despite potential headwinds from general Google search trends and the impact of a 2023 customer acquisition, management expects the "resilient business" to grow, driven by "registry wins that will manifest in the later part of the year," such as the Radix migration. The company plans to "front load some spend" against these opportunities, further solidifying its position as a leading registry services provider.

Risks and Challenges

While the strategic reorientation presents significant opportunities, several risks could impact Tucows' trajectory. Ting's financial viability remains a primary concern. Slower-than-expected subscriber growth could impair its ability to meet financial obligations and limit access to additional financing. The "Return Breach" notice from Generate TF Holdings, LLC, highlights the immediate liquidity pressure, and if not cured, could lead to asset sales or conversion of preferred units, potentially diluting common stockholders. Ting's ability to secure additional financing, if required, is uncertain and subject to market conditions and operating performance.

Wavelo's customer concentration with EchoStar (SATS) poses a risk; while the partnership was renewed, its profitability is tied to EchoStar's subscriber volumes. Any inability to maintain this relationship or establish new ones could significantly impact Wavelo's revenue and profitability.

Tucows Domains faces ongoing competitive pressure and pricing sensitivity in the domain registration market. While the company has a strong competitive moat, its ability to increase pricing is limited, and growth is dependent on attracting and retaining customers and expanding value-added and registry services.

Furthermore, foreign currency fluctuations (particularly between the U.S. and Canadian dollars) and interest rate risk on its syndicated credit facility could impact financial results. The discontinuation of the Affordable Connectivity Program (ACP) in the U.S. could also affect the broader internet access market, though its direct impact on Ting is expected to be immaterial.

Conclusion

Tucows Inc. is undergoing a profound transformation, shedding its capital-intensive past to emerge as a more focused, efficient, and technologically advanced internet services provider. The strategic pivot of Ting to a pure-play ISP, coupled with the scalable growth of Wavelo and the enduring resilience of Tucows Domains, forms a compelling investment thesis centered on enhanced profitability and disciplined capital allocation. The company's proactive integration of AI across its operations, from marketing to software development, is a critical technological differentiator that promises to drive efficiency gains and competitive advantages in a rapidly evolving digital landscape.

While the financial challenges at Ting, particularly regarding its preferred unit obligations and the need for additional financing, present a notable risk, the broader strategic reorientation and the strong performance of Wavelo and Tucows Domains offer a clear path to improved financial health. The new leadership team, with David Woroch at the helm of Tucows and Ivan Ivanov leading Ting, is poised to execute on these strategic imperatives. Investors should closely monitor Ting's progress towards breakeven, Wavelo's continued expansion into larger enterprise clients, and Tucows Domains' successful integration of new registry contracts, as these will be key indicators of the company's ability to unlock long-term value through focused execution and technological leadership.