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Note 11 - Revenue
 9 Months Ended
Sep. 30, 2025
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

11. Revenue

 

Significant accounting policy

 

The Company’s revenues are derived from (a) the provisioning of retail fiber Internet services through Ting, (b) the CSP solutions and professional services through Wavelo; and (c) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue through Tucows Domains Services. Certain revenues are disclosed under Corporate and other as they are considered non-core business activities including retail mobile services, Transition Services Agreement ("TSA") revenue and eliminations of intercompany revenue. Amounts received in advance of meeting the revenue recognition criteria described below are recorded as contract liabilities. All products are generally sold without the right of return or refund.

 

Revenue is measured based on the 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 14 – Segment Reporting.

 

 

(a)

Ting

 

The Company generates Ting revenues primarily through the provisioning of fixed high-speed Internet access, Ting Internet.

 

Ting Internet contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network and fixed wireless 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. The Company also rents modems to customers for the duration of the service arrangement. As the non-lease service component is predominant in the arrangement, and as both the modem and internet access services are provided continuously over the same monthly period, the Company has elected the practical expedient in ASC-842-10-15-42A and accounts for the combined modem-and-service arrangement as a single performance obligation. 

 

Ting Internet access services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Internet customers is computed based on the customer’s activation date. In addition, revenue from sale of internet hardware to subscribers is recognized when control transfers, which occurs upon shipment. 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 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)

Wavelo

 

The Company generates Wavelo revenues by providing billing and provisioning platform services to CSPs to whom we also provide other professional services. 

 

Platform service agreements contain both platform services and professional services. Platform services offer a variety of solutions that support CSPs, including subscription and billing management, network orchestration and provisioning, and individual developer tools through a single, cloud-based service. Professional services provided under platform service arrangements can include implementation, training, consulting or software development/modification services. Platform services and professional services are considered to be separate performance obligations.

 

Consideration under platform service arrangements includes both a variable component that changes each month depending on the number of subscribers hosted on the platform, as well as a fixed component of platform payments and credits. 

 

Platform payments and associated credits are allocated between the platform services and professional services performance obligations by estimating the standalone selling price (“SSP”) of each performance obligation.

 

The Company estimates the SSP of professional services based on observable standalone sales. The SSP of platform services is derived using the residual approach by estimating the total contract consideration and subtracting the SSP of professional services. 

 

Each month of providing access to the platform is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided, therefore, the performance obligation consists of a series of distinct service periods. Accordingly, the platform services represent a single promise to provide continuous access (i.e. a stand-ready performance obligation) to the platform. Accordingly, the platform payment revenue allocated to platform services is recognized evenly over the term of the contract. Variable subscriber fees are allocated to the platform services and are recognized as the fees are invoiced.

 

Revenues related to professional services are distinct from the other promises in the contract(s) and are recognized as the related services are performed, on the basis of hours consumed.

 

Other professional services consist of professional service arrangements with platform services customers which are billed based on separate Statement of Work (“SOW”) arrangements for bespoke feature development. Revenues for professional services contracted through separate SOWs are recognized at a point-in-time when the final acceptance criteria have been met. 

 

 

(c)

Tucows Domains

 

Domain registration contracts, which can be purchased for terms of one to 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, website hosting and hosted email provide our resellers and retail registrant customers with 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. The domain expiry stream involves domain names whose registration has expired and as per ICANN regulations are placed into a 40-day grace period. Though the domain names do not belong to the registrant during the 40-day grace period, the Company is restricted from allowing others to register them. The Company monetizes its domain expiry stream both through the sale of names and by allowing advertisers to place parked pages advertisements on the domains. 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, surname domains and direct navigation 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, no 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,

 
  

2025

  

2024

  

2025

  

2024

 

Ting:

                

Fiber Internet Services

 $16,976  $15,310  $49,701  $43,983 
                 

Wavelo:

                

Platform Services

  11,856   10,075   35,908   29,935 

Other professional services

  -   7   -   38 

Total Wavelo

  11,856   10,082   35,908   29,973 
                 

Tucows Domains

                

Wholesale

                

Domain Services

  51,888   49,871   153,448   146,527 

Value Added Services

  6,107   5,175   17,767   14,402 

Total Wholesale

  57,995   55,046   171,215   160,929 
                 

Retail

  9,842   9,669   29,481   28,036 

Total Tucows Domains

  67,837   64,715   200,696   188,965 
                 

Corporate and other:

                

Mobile Services and eliminations

  1,889   2,190   5,325   6,256 
                 
  $98,558  $92,297  $291,630  $269,177 

 

During the three and nine months ended September 30, 2025, one customer within the Wavelo segment accounted for 12% of the Company's total revenue amounting to $11.3 million and $34.4 million, respectively.  During the three and nine months ended September 30, 2024, one customer within the Wavelo segment accounted for 11% of the Company's total revenue amounting to $9.8 million and $29.2 million, respectively.

 

At September 30, 2025, one customer represented 51% of accounts receivables. As of December 31, 2024, one customer represented 56% of total 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,

 
  

2025

  

2024

  

2025

  

2024

 
                 

Ting:

                

Fiber Internet Services

 $6,478  $4,321  $21,021  $14,434 
                 

Wavelo:

                

Platform Services

  88   63   320   727 

Other professional services

  -   -   -   26 

Total Wavelo

  88   63   320   753 
                 

Tucows Domains:

                

Wholesale

                

Domain Services

  41,793   40,180   123,368   117,764 

Value Added Services

  450   509   1,386   1,576 

Total Wholesale

  42,243   40,689   124,754   119,340 
                 

Retail

  4,380   4,216   12,953   12,410 

Total Tucows Domains

  46,623   44,905   137,707   131,750 
                 

Corporate and other:

                

Mobile Services and eliminations

  4,641   3,324   13,012   8,798 
                 

Network Expenses:

                

Network, other costs

  5,694   6,864   16,688   20,790 

Network, depreciation and amortization cost

  10,692   9,780   32,260   29,336 

Network, impairment

  161   852   800   905 

Total Network Expenses

  16,547   17,496   49,748   52,128 
                 
  $74,377  $70,109  $221,808  $207,863 

 

Contract Balances

 

The following table provides information about contract liabilities 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.

 

Some of the Company’s long-term contracts with customers are billed in advance of service, such as domain contracts and some professional service contracts. Consideration received from customers related to performance obligations which have not yet been satisfied are recorded as contract liabilities.

 

Contract liabilities primarily relate 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. 

 

Significant changes in contract liabilities for the nine months ended September 30, 2025 were as follows (Dollar amounts in thousands of U.S. dollars): 

 

  September 30, 2025 
     

Balance, beginning of period

 $156,804 

Contract liabilities

  206,322 

Recognized revenue

  (204,462)

Balance, end of period

 $158,664 

 

Remaining Performance Obligations

 

For retail 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 to performance obligations that are unsatisfied (or partially unsatisfied).

 

Although domain registration contracts are deferred over the lives of the individual contracts, which can range from one to ten years, approximately 80 percent of our contract liabilities balance related to domain contracts is expected to be recognized within the next twelve months.

 

Professional services revenue related to platform services agreement is deferred and recognized as hours are incurred over the contract term. Any revenue for unused professional service hours is recognized as revenue at the end of the contract period.