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Note 20 - Segment Reporting | 12 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Segment Reporting Disclosure [Text Block] | 20. Segment Reporting: Reportable operating segments: We are organized and managed based on three reportable segments which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate. No operating segments have been aggregated to determine our reportable segments. Our reportable operating segments and their principal activities consist of the following: 1. Ting - This segment derives revenue from the retail high speed Internet access to individuals and small businesses primarily through the Ting website. Revenues are generated in the United States. 2. Wavelo – This segment derives revenue from platform and other professional services related to communication service providers, including Mobile Network Operators and Internet Service Providers, and are primarily generated in the United States. 3. Tucows Domains – This segment includes wholesale and retail domain name registration services, value added services and portfolio services. The Company primarily earns revenues from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations; the sale of retail Internet domain name registration and email services to individuals and small businesses. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada and the United States. Our segmented results include shared services allocations to the operating segments, including a profit margin, for Finance, Human Resources and other technical services. In addition, Wavelo charges Ting a subscriber based monthly charge service rendered. Financial impacts from these allocations and cross segment charges are eliminated as part of the consolidation. Key measure of segment performance: The CEO, as the chief operating decision maker, regularly reviews the operations and performance by segment. The CEO reviews Segment Adjusted EBITDA (as defined below) as (i) a key measure of performance for each segment and (ii) to make decisions about the allocation of resources. Depreciation of property and equipment, amortization of intangible assets, impairment of indefinite life intangible assets, gain on currency forward contracts and other expense net are organized along functional lines and are not included in the measurement of segment profitability. Total assets and total liabilities are centrally managed and are not reviewed at the segment level by the CEO. Our key measure of segment performance is Segment Adjusted EBITDA. We calculate this as segment revenue together with recurring income earned on sale of transferred assets, less cost of revenue, network expenses and certain operating expenses attributable to each segment, such as sales and marketing, technical operations and development, general and administration expenses. Segment Adjusted EBITDA excludes unrealized gains (losses) on foreign exchange, stock-based compensation and transactions that are not indicative of on-going performance, including acquisition and transition costs. Certain revenues and expenses are excluded from segment Adjusted EBITDA results as they are centrally managed and not monitored by or reported to our CEO by segment, including mobile retail services, eliminations of intercompany transactions, portions of Finance and Human Resources that are centrally managed, Legal and Corporate IT. The Company believes that Adjusted EBITDA is an important indicator of the operational strength and performance of its segments, by identifying those items that are not directly a reflection of each segment’s performance or indicative of ongoing operational and profitability trends. The CODM uses Adjusted EBITDA to evaluate the overall recurring profitability of each operating segment after accounting for overhead costs. Adjusted EBITDA is evaluated by the CODM by comparing current period to historical and forecasted results and is used to inform strategic decisions over segment profitability, operational efficiency, pricing strategies, cost optimization, customer churn, competitor benchmarking and cash flow. Information by reportable segments (with the exception of disaggregated revenue, which is discussed in “Note 10– Revenue”), which is regularly reported to the chief operating decision maker, and the reconciliations thereof to our income before taxes, are set out in the following tables (Dollar amounts in thousands of US dollars):
|  | Year Ended December 31, 2024 |
|  | Ting |  |  | Wavelo |  |  | Tucows Domain |  |  | Total Reportable Segments |
Revenue from external customers |  | $ | 59,732 |  |  | $ | 39,003 |  |  | $ | 254,639 |  |  | $ | 353,374 |
Intersegment revenue(1) |  |  | - |  |  |  | 858 |  |  |  | - |  |  |  | 858 |
Total net revenues |  |  | 59,732 |  |  |  | 39,861 |  |  |  | 254,639 |  |  |  | 354,232 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenue |  |  | 11,162 |  |  |  | 1,273 |  |  |  | 177,083 |  |  |  | 189,518 |
Network, other cost(2) |  |  | 16,918 |  |  |  | 9,710 |  |  |  | 6,974 |  |  |  | 33,602 |
Sales and marketing |  |  | 35,502 |  |  |  | 7,585 |  |  |  | 13,776 |  |  |  | 56,863 |
Technical operations and development |  |  | 3,230 |  |  |  | 6,826 |  |  |  | 7,106 |  |  |  | 17,162 |
General and administrative |  |  | 16,550 |  |  |  | 3,395 |  |  |  | 5,686 |  |  |  | 25,631 |
Other segment items(3) |  |  | (1,113 | ) |  |  | (2,734 | ) |  |  | (376 | ) |  |  | (4,223 | )
Segment Adjusted EBITDA |  | $ | (22,517 | ) |  | $ | 13,806 |  |  | $ | 44,390 |  |  | $ | 35,679 |
|  | Year Ended December 31, 2023 |
|  | Ting |  |  | Wavelo |  |  | Tucows Domain |  |  | Total Reportable Segments |
Revenue from external customers |  | $ | 50,937 |  |  | $ | 35,979 |  |  | $ | 242,097 |  |  | $ | 329,013 |
Intersegment revenue(1) |  |  | - |  |  |  | 2,691 |  |  |  | - |  |  |  | 2,691 |
Total net revenues |  |  | 50,937 |  |  |  | 38,670 |  |  |  | 242,097 |  |  |  | 331,704 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenue |  |  | 12,727 |  |  |  | 2,626 |  |  |  | 169,414 |  |  |  | 184,767 |
Network, other cost(2) |  |  | 17,872 |  |  |  | 9,649 |  |  |  | 6,123 |  |  |  | 33,644 |
Sales and marketing |  |  | 44,823 |  |  |  | 7,012 |  |  |  | 13,586 |  |  |  | 65,421 |
Technical operations and development |  |  | 3,792 |  |  |  | 8,124 |  |  |  | 6,371 |  |  |  | 18,287 |
General and administrative |  |  | 16,567 |  |  |  | 3,080 |  |  |  | 4,576 |  |  |  | 24,223 |
Other segment items(3) |  |  | (693 | ) |  |  | (2,394 | ) |  |  | (596 | ) |  |  | (3,683 | )
Segment Adjusted EBITDA |  | $ | (44,151 | ) |  | $ | 10,573 |  |  | $ | 42,623 |  |  | $ | 9,045 |
|  | Year Ended December 31, 2022 |
|  | Ting |  |  | Wavelo |  |  | Tucows Domain |  |  | Total Reportable Segments |
Revenue from external customers |  | $ | 42,425 |  |  | $ | 23,632 |  |  | $ | 243,158 |  |  | $ | 309,215 |
Intersegment revenue(1) |  |  | - |  |  |  | 712 |  |  |  | - |  |  |  | 712 |
Total net revenues |  |  | 42,425 |  |  |  | 24,344 |  |  |  | 243,158 |  |  |  | 309,927 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenue |  |  | 17,004 |  |  |  | 2,926 |  |  |  | 166,890 |  |  |  | 186,820 |
Network, other cost(2) |  |  | 5,107 |  |  |  | 4,245 |  |  |  | 5,876 |  |  |  | 15,228 |
Sales and marketing |  |  | 30,543 |  |  |  | 5,758 |  |  |  | 14,580 |  |  |  | 50,881 |
Technical operations and development |  |  | 1,187 |  |  |  | 4,132 |  |  |  | 7,079 |  |  |  | 12,398 |
General and administrative |  |  | 10,610 |  |  |  | 3,922 |  |  |  | 5,304 |  |  |  | 19,836 |
Other segment items(3) |  |  | (469 | ) |  |  | (514 | ) |  |  | (1,405 | ) |  |  | (2,388 | )
Segment Adjusted EBITDA |  | $ | (21,557 | ) |  | $ | 3,875 |  |  | $ | 44,834 |  |  | $ | 27,152 |
(1) Intercompany revenues earned for provision of services on the ISOS and SM platforms between Wavelo and Ting are included in Wavelo's segment revenues for purposes of segment analysis, but are ultimately eliminated upon consolidation. (2) Network Costs in segment reports provided to the CODM include certain construction expenses for Ting, which are reported as Direct Costs of Revenue in the Consolidated Statements of Operations and Comprehensive Loss. (3) Other segment items for each reportable segment includes other income, as well as adjustments to add back (deduct): gains and losses from unrealized foreign currency, stock-based compensation expense and acquisition and transition costs, which are included in other line items but are excluded from our definition of Segment Adjusted EBITDA. The following table reconciles Segment Adjusted EBITDA for the period to Net loss before tax for the years ended December 31, 2024, 2023 and 2022.
|  | Year ended December 31, |
Reconciliation of Net loss to Segment Adjusted EBITDA |  | 2024 |  |  | 2023 |  |  | 2022 |
(In Thousands of US Dollars) |  |  |  |  |  |  |  |  |  |  |  |
Segment Adjusted EBITDA |  | $ | 35,679 |  |  | $ | 9,045 |  |  | $ | 27,152 |
Reconciling items: |  |  |  |  |  |  |  |  |  |  |  |
Corporate and other(1) |  |  | (762 | ) |  |  | 6,406 |  |  |  | 10,438 |
Depreciation of property and equipment |  |  | (40,323 | ) |  |  | (36,431 | ) |  |  | (28,187 | )
Impairment and loss on disposition of property & equipment |  |  | (19,167 | ) |  |  | (4,822 | ) |  |  | (553 | )
Amortization of intangible assets |  |  | (5,297 | ) |  |  | (10,829 | ) |  |  | (11,394 | )
Interest expense, net |  |  | (51,275 | ) |  |  | (41,771 | ) |  |  | (14,456 | )
Loss on debt extinguishment |  |  | - |  |  |  | (14,680 | ) |  |  | - |
Accretion of contingent liability |  |  | - |  |  |  | - |  |  |  | (248 | )
Stock-based compensation |  |  | (7,021 | ) |  |  | (8,134 | ) |  |  | (7,599 | )
Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities |  |  | 167 |  |  |  | 62 |  |  |  | (281 | )
Acquisition and other costs(2) |  |  | (13,875 | ) |  |  | (1,916 | ) |  |  | (2,660 | )
Net loss before tax |  | $ | (101,874 | ) |  | $ | (103,070 | ) |  | $ | (27,788 | )
(1) Items that are centrally managed and not monitored by or reported to our CEO by segment, including retail mobile services, eliminations of intercompany transactions, portions of Finance and Human Resources that are centrally managed, Legal and Corporate IT. (2) Acquisition and other costs represent transaction-related expenses and transitional expenses. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments. Revenue from sources outside of Canada and The United States of America comprises less than 10% of our total operating revenue. (b) The following is a summary of the Company’s property and equipment by geographic region (Dollar amounts in thousands of US dollars):
|  | December 31, 2024 |  |  | December 31, 2023 |
Canada |  | $ | 897 |  |  | $ | 943 |
United States |  |  | 330,148 |  |  |  | 338,696 |
Europe |  |  | 4 |  |  |  | 5 |
|  | $ | 331,049 |  |  | $ | 339,644 |
(c) The following is a summary of the Company’s amortizable intangible assets by geographic region (Dollar amounts in thousands of US dollars):
|  | December 31, 2024 |  |  | December 31, 2023 |
Canada |  | $ | 1,258 |  |  | $ | 1,864 |
United States |  |  | 11,225 |  |  |  | 15,341 |
|  | $ | 12,483 |  |  | $ | 17,205 |
Under ASC 326, the Company assesses the adequacy of its allowance for expected credit losses based on historical loss experience, current economic conditions and reasonable forecasts. Our evaluation considers the short-term nature of our receivables and the high credit quality of our customer base, which mitigates significant credit risk exposure. (d) The following table summarizes our expected credit losses (Dollar amounts in thousands of US dollars):
Expected credit losses |  | Balance at beginning of period |  |  | Charged to costs and expenses |  |  | Write-offs during period |  |  | Balance at end of period |
Year Ended December 31, 2024 |  | $ | 511 |  |  | $ | 412 |  |  | $ | - |  |  | $ | 923 |
Year Ended December 31, 2023 |  | $ | 693 |  |  | $ | - |  |  | $ | (182 | ) |  | $ | 511 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 48 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482785/280-10-55-48 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards 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