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Note 14 - Segment Reporting
 3 Months Ended
Mar. 31, 2026
Notes to Financial Statements  
Segment Reporting [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 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 ("CODM"), 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 income, 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 March 31, 2026

                
                 

Revenue from external customers

 $19,374  $11,084  $64,100  $94,558 

Intersegment revenues (1)

  -  

477

   -  

477

 

Total net revenues

  19,374  

11,561

   64,100  

95,035

 

Less:

                

Cost of revenues

  8,627  326   43,355  52,308 

Network, other costs (2)

  1,157  2,300   1,878  5,335 

Sales and marketing (2)

  5,368  2,444   3,750  11,562 

Technical operations and development (2)

  449  1,843   1,890  4,182 

General and administrative (2)(3)

  4,226  1,027   1,620  6,873 

Other segment items (4)

  (23) 5   (20) (38)

Segment Adjusted EBITDA

 $(430) $3,616  $11,627  $14,813 

 

  

Ting

  

Wavelo

  

Tucows Domains

  

Consolidated Totals

 

For the Three Months Ended March 31, 2025

                
                 

Revenue from external customers

 $16,315  $10,952  $65,255  $92,522 

Intersegment revenues (1)

  -   444   -   444 

Total net revenues

  16,315   11,396   65,255   92,966 

Less:

                

Cost of revenues

  5,837   137   45,040   51,014 

Network, other costs (2)

  896   2,249   1,654   4,800 

Sales and marketing (2)

  4,275   2,327   3,563   10,165 

Technical operations and development (2)

  245   1,694   2,154   4,093 

General and administrative (2)(3)

  4,411   1,013   1,266   6,690 

Other segment items (4)

  1,505   (474)  38   1,069 

Segment Adjusted EBITDA

 $(854) $4,449  $11,540  $15,135 
                 

 

(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) Effective beginning in 2026, Network, other costs, Sales and marketing, Technical operations and development and General and administrative costs presented in segment reporting to the CODM are shown excluding stock‑based compensation expenses for all business units. This presentation reflects a change from prior periods, in which stock‑based compensation expenses was included within each expense category and subsequently adjusted in “Other segment” line items. To ensure comparability, the 2025 segment expense figures have been recast to conform to the 2026 presentation.

(3) Effective beginning in 2026, General and administrative costs presented in segment reporting to the CODM are shown excluding Gains and losses from unrealized foreign currency. This presentation reflects a change from prior periods, in which gains and losses from unrealized foreign currency was included within each expense category and subsequently adjusted in “Other segment” line items. To ensure comparability, the 2025 segment expense figures have been recast to conform to the 2026 presentation.

(4) Other segment items for each reportable segment includes other income, as well as adjustments to add back (deduct) 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 months ended March 31, 2026 and March 31, 2025 (Dollar amounts in thousands of U.S. dollars):

 

Reconciliation of Segment Adjusted EBITDA to Net loss before tax

 

Three Months Ended March 31,

 

(In Thousands of U.S. Dollars)

 

2026

  

2025

 
         

Segment Adjusted EBITDA

 $14,813  $15,135 

Reconciling items:

        

Corporate and other (1)

  (3,146)  (1,464)

Depreciation of property and equipment

  (9,871)  (10,460)

Impairment and loss on disposition of property and equipment

  (1,156)  (204)

Amortization of intangible assets

  (1,103)  (1,205)

Interest expense, net

  (13,865)  (13,613)

Stock-based compensation

  (1,094)  (1,505)

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

  (194)  364 

Acquisition and other costs (2)

  (99)  (15)
         

Net loss before tax

 $(15,715) $(12,967)

 

(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): 

 

  March 31, 2026  December 31, 2025 
         

Canada

 $734  $797 

United States

  274,809   281,158 
  $275,543  $281,955 

 

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

 

  

March 31, 2026

  

December 31, 2025

 
         

Canada

 $557  $695 

United States

  6,640   6,745 
  $7,197  $7,440 

 

Under ASC 326 Financial Instruments - Credit Losses, 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

 
                 

Three Months Ended March 31, 2026

 $1,259  $144  $(20)  1,383 

Twelve months ended December 31, 2025

 $923  $370  $(34)  1,259