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Note 14 - Segment Reporting
 9 Months Ended
Sep. 30, 2025
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

14. 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 11 – 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 U.S. dollars): 

 

  

Ting

  

Wavelo

  

Tucows Domains

  

Consolidated Totals

 

For the Three Months Ended September 30, 2025

                
                 

Revenue from external customers

 $16,976  $11,408  $67,837  $96,221 

Intersegment revenues (1)

  -  

448

   -  

448

 

Total net revenues

  16,976  

11,856

   67,837  

96,669

 

Less:

                

Cost of revenues (2)

 

5,613

  

88

  

46,623

  

52,324

 

Network, other costs (2)

 

2,297

  

2,258

  

1,819

  

6,374

 

Sales and marketing

 

5,030

  

2,475

  

3,869

  

11,374

 

Technical operations and development

 

510

  

2,181

  

1,893

  

4,584

 

General and administrative

 

4,510

  

1,177

  

1,289

  

6,976

 

Other segment items (3)

 

(102

) 

(608

) 

247

  

(463

)

Segment Adjusted EBITDA

 $(882) $4,285  $12,097  $15,500 

 

  

Ting

  

Wavelo

  

Tucows Domains

  

Consolidated Totals

 

For the Three Months Ended September 30, 2024

                
                 

Revenue from external customers

 $15,310  $10,010  $64,715  $90,035 

Intersegment revenues (1)

  -   72   -   72 

Total net revenues

  15,310   10,082   64,715   90,107 

Less:

                

Cost of revenues (2)

  2,639   63   44,905   47,607 

Network, other costs (2)

  4,053   2,690   1,710   8,453 

Sales and marketing

  8,590   2,278   3,488   14,356 

Technical operations and development

  922   1,675   1,718   4,315 

General and administrative

  4,401   963   1,540   6,904 

Other segment items (3)

  (225)  (1,016)  (175)  (1,416)

Segment Adjusted EBITDA

 $(5,070) $3,429  $11,529  $9,888 
                 

 

  

Ting

  

Wavelo

  

Tucows Domains

  

Consolidated Totals

 

For the Nine Months Ended September 30, 2025

                
                 

Revenue from external customers

 $49,701  $34,588  $200,696  $284,985 

Intersegment revenues (1)

  -   1,320   -   1,320 

Total net revenues

  49,701   35,908   200,696   286,305 

Less:

                

Cost of revenues (2)

  17,972   320   137,707   155,999 

Network, other costs (2)

  6,946   6,890   5,478   19,314 

Sales and marketing

  14,424   7,612   11,261   33,297 

Technical operations and development

  1,483   5,706   5,954   13,143 

General and administrative

  14,460   3,107   4,296   21,863 

Other segment items (3)

  (197)  (1,821)  (180)  (2,198)

Segment Adjusted EBITDA

 $(5,387) $14,094  $36,180  $44,887 

 

  

Ting

  

Wavelo

  

Tucows Domains

  

Consolidated Totals

 

For the Nine Months Ended September 30, 2024

                
                 

Revenue from external customers

 $43,983  $29,755  $188,965  $262,703 

Intersegment revenues (1)

  -   218   -   218 

Total net revenues

  43,983   29,973   188,965   262,921 

Less:

                

Cost of revenues (2)

  8,905   753   131,750   141,408 

Network, other costs (2)

  12,677   7,719   5,311   25,707 

Sales and marketing

  30,442   5,830   10,228   46,500 

Technical operations and development

  2,594   4,967   5,313   12,874 

General and administrative

  13,563   2,754   4,423   20,740 

Other segment items (3)

  (3,149)  (2,177)  (817)  (6,143)

Segment Adjusted EBITDA

 $(21,049) $10,127  $32,757  $21,835 

 

(1) Intercompany revenues earned for provision of services on the Internet Service Operating System ("ISOS") and Subscriber Management ("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 Condensed 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 nine months ended September 30, 2025 and September 30, 2024

 

Reconciliation of Segment Adjusted EBITDA to Net loss before tax

 

Three Months Ended September 30,

  

Nine Months Ended September 30,

 

(In Thousands of U.S. Dollars)

 

2025

  

2024

  

2025

  

2024

 
                 

Segment Adjusted EBITDA

 $15,500  $9,888  $44,887  $21,835 

Reconciling items:

                

Corporate and other (1)

  (2,231)  (1,200)  (5,370)  233 

Depreciation of property and equipment

  (10,405)  (9,526)  (31,404)  (29,686)

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

  (6,920)  (852)  (5,771)  (905)

Amortization of intangible assets

  (1,072)  (1,209)  (3,393)  (4,089)

Interest expense, net

  (13,901)  (13,095)  (41,135)  (37,527)

Stock-based compensation

  (1,387)  (1,808)  (4,278)  (5,383)

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

  164   197   601   (357)

Acquisition and other costs (2)

  (311)  (1,618)  (1,039)  (5,438)
                 

Net loss before tax

 $(20,563) $(19,223) $(46,902) $(61,317)

(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 U.S. dollars): 

 

  September 30, 2025  December 31, 2024 
         

Canada

 $804  $897 

United States

  287,152   330,148 

Europe

  4   4 
  $287,960  $331,049 

 

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

 

  

September 30, 2025

  

December 31, 2024

 
         

Canada

 $833  $1,258 

United States

  7,882   11,225 
  $8,715  $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 U.S. dollars):

 

Expected credit losses

 

Balance at beginning of period

  

Increase in ECL provision

  

Write-offs during period

  

Balance at end of the period

 
                 

Nine months ended September 30, 2025

 $923  $161  $(39)  1,045 

Twelve months ended December 31, 2024

 $511  $412  $-   923