10.

Revenue

Significant accounting policy

The Company’s revenues are derived from (a) the provisioning of mobile and fiber Internet services; and from (b) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue. Amounts received in advance of meeting the revenue recognition criteria described below are recorded as deferred revenue. All products are generally sold without the right of return or refund.

Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of

third

parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Nature of goods and services

The following is a description of principal activities – separated by reportable segments – from which the Company generates its revenue. For more detailed information about reportable segments. See note

– Segment reporting for more information.

(a)

Network Access Services

The Company generates Network Access Services revenues primarily through the provisioning of mobile services (“Ting Mobile”). Other sources of revenue include the provisioning of fixed high-speed Internet access (“Ting Internet”) as well as billing solutions to Internet Service Providers (“ISPs”).

Ting wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting mobile contracts are billed based on the actual amount of monthly services utilized by each customer during their billing cycle and charged to customers on a postpaid basis. Voice minutes, text messages and megabytes of data are each billed separately based on a tiered pricing program. The Company recognizes revenue for Ting mobile usage based on the actual amount of monthly services utilized by each customer.

Ting Internet contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Ting Internet contracts are generally prepaid and grant customers with unlimited bandwidth based on a fixed price per month basis. Because consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access. Though the Company does

not

consider the installation of fixed Internet access to be a distinct performance obligation, the fees related to installation are immaterial and therefore revenue is recognized as billed.

Both Ting Mobile and Ting Internet access services are primarily contracted through the Ting website, for

one

month at a time and contain

commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Mobile and Ting Internet customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but

not

billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories and Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

Our Roam Mobility brand also offers standard talk, text and data mobile services. Roam customers prepay for their usage through the Roam Mobility website. When prepayments are received the amount is deferred, and subsequently recognized as the Company satisfies its obligation to provide mobile services. In addition, revenues associated with the sale of SIM cards are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

In those cases, where payment is

not

received at the time of sale, revenue is

not

recognized at contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations.

(b)

Domain Services

Domain registration contracts, which can be purchased for terms of

one

ten

years, provide our resellers and retail registrant customers with the exclusive right to a personalized internet address from which to build an online presence. The Company enters into domain registration contracts in connection with each new, renewed and transferred-in domain registration. At the inception of the contract, the Company charges and collects the registration fee for the entire registration period. Though fees are collected upfront, revenue from domain registrations are recognized ratably over the registration period as domain registration contracts contain a ‘right to access’ license of IP, which is a distinct performance obligation measured over time. The registration period begins once the Company has confirmed that the requested domain name has been appropriately recorded in the registry under contractual performance standards.

Domain related value-added services like digital certifications, WHOIS privacy and hosted email provide our resellers and retail registrant customers tools and additional functionality to be used in conjunction with domain registrations. All domain related value-added services are considered distinct performance obligations which transfer the promised service to the customer over the contracted term. Fees charged to customers for domain related value-added services are collected at the inception of the contract, and revenue is recognized on a straight-line basis over the contracted term, consistent with the satisfaction of the performance obligations.

The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company does

not

recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.

The Company also sells the rights to the Company’s portfolio domains or names acquired through the Company’s domain expiry stream. Revenue generated from sale of domain name contracts, containing a distinct performance obligation to transfer the domain name rights under the Company’s control, is generally recognized once the rights have been transferred and payment has been received in full.

Advertising revenue is derived through domain parking monetization, whereby the Company contracts with

third

-party Internet advertising publishers to direct web traffic from the Company’s domain expiry stream domains and Internet portfolio domains to advertising websites. Compensation from Internet advertising publishers is calculated variably on a cost-per-action basis based on the number of advertising links that have been visited in a given month. Given that the variable consideration is calculated and paid on a monthly basis,

estimation of variable consideration is required.

Disaggregation of Revenue

The following is a summary of the Company’s revenue earned from each significant revenue stream (Dollar amounts in thousands of U.S. dollars):

	Three months ended September 30,				Nine months ended September 30,
	2018		2017*		2018		2017*

Network Access Services:
Mobile Services	$	22,546	$	21,749	$	66,829	$	60,090
Other Services		2,033		1,442		5,664		3,978
Total Network Access Services		24,579		23,191		72,493		64,068

Domain Services:
Wholesale
Domain Services		45,070		47,770		146,038		135,413
Value Added Services		4,541		4,203		13,576		13,526
Total Wholesale		49,611		51,973		159,614		148,939

Retail		8,731		8,873		25,644		22,937
Portfolio		598		971		2,650		2,856
Total Domain Services		58,940		61,817		187,908		174,732

	$	83,519	$	85,008	$	260,401	$	238,800

During the

three

and

nine

months ended

September 30, 2018,

customer accounted for more than

10%

of total revenue. During the

three

and

nine

months ended

September 30, 2017,

customer accounted for more than

10%

of revenue. As at

September 30, 2018

and

December 31, 2017,

customer accounted for more than

10%

of accounts receivable.

The following is a summary of the Company’s cost of revenue from each significant revenue stream (Dollar amounts in thousands of U.S. dollars):

	Three months ended September 30,				Nine months ended September 30,
	2018		2017*		2018		2017*

Network Access Services:
Mobile Services	$	11,399	$	12,365	$	34,643	$	32,634
Other Services		872		595		3,103		2,366
Total Network Access Services		12,271		12,960		37,746		35,000

Domain Services:
Wholesale
Domain Services		37,414		42,293		124,572		119,207
Value Added Services		807		687		2,412		1,878
Total Wholesale		38,221		42,980		126,984		121,085

Retail		4,465		4,611		13,320		12,776
Portfolio		148		180		528		627
Total Domain Services		42,834		47,771		140,832		134,488

Network Expenses:
Network, other costs		2,315		2,461		7,590		7,064
Network, depreciation and amortization costs		1,838		1,322		5,195		3,463
		4,153		3,783		12,785		10,527

	$	59,258	$	64,514	$	191,363	$	180,015

Contract Balances

The following table provides information about contract liabilities (deferred revenue) from contracts with customers. The Company accounts for contract assets and liabilities on a contract-by-contract basis, with each contract presented as either a net contract asset or a net contract liability accordingly.

Given that Company’s long-term contracts with customers are billed in advance of service, the Company’s contract liabilities relate to amounts recorded as deferred revenues. The Company does

not

have material streams of contracted revenue that have

not

been billed.

Deferred revenue primarily relates to the portion of the transaction price received in advance related to the unexpired term of domain name registrations and other domain related value-added services, on both a wholesale and retail basis, net of external commissions.

The opening balance of deferred revenue was

$160.6

million as of

January 1, 2018.

Significant changes in deferred revenue were as follows (Dollar amounts in thousands of U.S. dollars):

	Three months ended September 30, 2018			Nine months ended September 30, 2018

Balance, beginning of period	$	152,052		$	160,582
Deferred revenue		54,181			170,904
Recognized revenue 1		(57,741	)		(182,994	)
Balance, end of period	$	148,492		$	148,492

As a result of the bulk transfers of

2.65

million domain names to Namecheap on

January 5, 2018

and

0.24

million domain names to Namecheap on

September 25, 2018,

recognized revenue for the

three

and

nine

months ended

September 30, 2018

includes

$1.7

million and

$16.3

million, respectively, related to previously deferred revenue, a portion of which would have otherwise been recognized after

September 30, 2018.

Remaining Performance Obligations:

As the Company fulfills its performance obligations, the following table includes revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied) as at

September 30, 2018 (

Dollar amounts in thousands of U.S. dollars):

For mobile and internet access services, where the performance obligation is part of contracts that have an original expected duration of

one

year or less (typically

one

month), the Company has elected to apply a practical expedient to

not

disclose revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied) (Dollar amounts in thousands of US dollars).

	September 30, 2018

Remainder of 2018	$	48,701
2019		76,153
2020		10,331
2021		5,040
2022		3,244
Thereafter		4,760

Total	$	148,229