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Note 13 - Segment Reporting
 6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

13. Segment Reporting 

 

Reportable operating segments

 

We are organized and managed based on three operating 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 providing retail high speed Internet access services to individuals and small businesses. 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, including a profit margin, for Finance, Human Resources and other technical services, to the operating units. In addition, Wavelo charges Ting a subscriber based monthly charge for services 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) key measures 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): 

 

  

Ting

  

Wavelo

  

Tucows Domains

  

Consolidated Totals

 

For the Three Months Ended June 30, 2025

                
                 

Revenue from external customers

 $16,410  $12,228  $67,604  $96,242 

Intersegment revenues (1)

  -   428   -   428 

Total net revenues

  16,410   12,656   67,604   96,670 

Less:

                

Cost of revenues

  7,835   95   46,044   53,974 

Network, other costs (2)

  2,338   2,381   2,005   6,724 

Sales and marketing

  4,809   2,811   3,829   11,449 

Technical operations and development

  513   1,831   1,907   4,251 

General and administrative

  4,736   913   1,627   7,276 

Other segment items (3)

  (170)  (735)  (351)  (1,256)

Segment Adjusted EBITDA

 $(3,651) $5,360  $12,543  $14,252 
                 

 

  

Ting

  

Wavelo

  

Tucows Domains

  

Consolidated Totals

 

For the Three Months Ended June 30, 2024

                
                 

Revenue from external customers

 $14,571  $10,221  $62,368  $87,160 

Intersegment revenues (1)

  -   280   -   280 

Total net revenues

  14,571   10,501   62,368   87,440 

Less:

                

Cost of revenues

  3,052   339   43,499   46,890 

Network, other costs (2)

  3,967   2,534   1,730   8,231 

Sales and marketing

  8,928   1,881   3,372   14,181 

Technical operations and development

  853   1,466   1,741   4,060 

General and administrative

  4,518   902   1,251   6,671 

Other segment items (3)

  (305)  (532)  (442)  (1,279)

Segment Adjusted EBITDA

 $(6,442) $3,911  $11,217  $8,686 
                 

 

  

Ting

  

Wavelo

  

Tucows Domains

  

Consolidated Totals

 

For the Six Months Ended June 30, 2025

                
                 

Revenue from external customers

 $32,725  $23,180  $132,859  $188,764 

Intersegment revenues (1)

  -   872   -   872 

Total net revenues

  32,725   24,052   132,859   189,636 

Less:

                

Cost of revenues

  12,358   232   91,084   103,674 

Network, other costs (2)

  4,650   4,632   3,659   12,941 

Sales and marketing

  9,394   5,137   7,392   21,923 

Technical operations and development

  973   3,525   4,061   8,559 

General and administrative

  9,950   1,930   3,007   14,887 

Other segment items (3)

  (95)  (1,213)  (427)  (1,735)

Segment Adjusted EBITDA

 $(4,505) $9,809  $24,083  $29,387 

 

  

Ting

  

Wavelo

  

Tucows Domains

  

Consolidated Totals

 

For the Six Months Ended June 30, 2024

                
                 

Revenue from external customers

 $28,673  $19,336  $124,250  $172,259 

Intersegment revenues (1)

  -   555   -   555 

Total net revenues

  28,673   19,891   124,250   172,814 

Less:

                

Cost of revenues

  6,268   690   86,845   93,803 

Network, other costs (2)

  8,623   5,029   3,601   17,253 

Sales and marketing

  21,852   3,552   6,740   32,144 

Technical operations and development

  1,672   3,292   3,595   8,559 

General and administrative

  9,162   1,791   2,883   13,836 

Other segment items (3)

  (2,925)  (1,161)  (642)  (4,728)

Segment Adjusted EBITDA

 $(15,979) $6,698  $21,228  $11,947 

 

(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 three and six months ended June 30, 2025 and June 30, 2024

 

Reconciliation of Segment Adjusted EBITDA to Net loss before tax

 

Three Months Ended June 30,

  

Six Months Ended June 30,

 

(In Thousands of US Dollars)

 

2025

  

2024

  

2025

  

2024

 
                 

Segment Adjusted EBITDA

 $14,252  $8,686  $29,387  $11,947 

Reconciling items:

                

Corporate and other (1)

  (1,675)  492   (3,139)  1,433 

Depreciation of property and equipment

  (10,539)  (10,173)  (20,999)  (20,160)

Impairment and loss (gain) on disposition of property and equipment

  1,353   -   1,149   (53)

Amortization of intangible assets

  (1,115)  (1,201)  (2,321)  (2,880)

Interest expense, net

  (13,621)  (12,553)  (27,234)  (24,432)

Stock-based compensation

  (1,386)  (1,702)  (2,891)  (3,575)

Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities

  72   (164)  437   (554)

Acquisition and other costs (2)

  (713)  (769)  (728)  (3,820)
                 

Net loss before tax

 $(13,372) $(17,384) $(26,339) $(42,094)

(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): 

 

  June 30, 2025  December 31, 2024 
         

Canada

 $859  $897 

United States

  304,468   330,148 

Europe

  4   4 
  $305,331  $331,049 

 

(c)           The following is a summary of the Company’s amortizable intangible assets by geographic region (Dollar amounts in thousands of US dollars): 

 

  

June 30, 2025

  

December 31, 2024

 
         

Canada

 $971  $1,258 

United States

  8,651   11,225 
  $9,622  $12,483 

 

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 ("ECL") (Dollar amounts in thousands of US dollars):

 

Expected credit losses

 

Balance at beginning of period

  

Increase in ECL provision

  

Write-offs during period

  

Balance at end of the period

 
                 

Six Months Ended June 30, 2025

 $923  $232  $(27)  1,128 

Twelve months ended December 31, 2024

 $511  $412  $-   923