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What changed in TUCOWS INC /PA/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TUCOWS INC /PA/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+440 added−582 removedSource: 10-K (2024-04-01) vs 10-K (2023-03-15)

Top changes in TUCOWS INC /PA/'s 2023 10-K

440 paragraphs added · 582 removed · 326 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

41 edited+8 added−16 removed46 unchanged
Biggest changeThe OpenSRS, eNom, EPAG and Ascio domain services manage 24 million domain names under the Tucows, eNom, EPAG and Ascio ICANN registrar accreditations and for other registrars under their own accreditations. Value-added services include hosted email which provides email delivery and webmail access to millions of mailboxes, Internet security services, Internet hosting, WHOIS privacy, publishing tools and other value-added services.
Biggest changeValue-Added Services include hosted email which provides email delivery and webmail access to millions of mailboxes, Internet security services, WHOIS privacy, publishing tools and other value-added services. All of these services are made available to end-users through a network of web hosts, ISPs, and other resellers around the world.
We believe the primary competitive factors in Tucows Domains are: • Providing superior customer service by anticipating the technical requirements and business objectives of resellers and providing them with technical advice to help them understand how our services can be customized to meet their particular needs; 5 Table of Contents • Providing cost savings over in-house solutions by relieving resellers of the expense of acquiring and maintaining hardware and software and the associated administrative burden; • Enabling resellers to better manage their relationships with their end-users; • Facilitating scalability through an infrastructure designed to support millions of transactions across millions of end-users; and • Providing superior technology and infrastructure, consisting of industry-leading software and hardware that allow resellers to provide these services to their customers without having to make substantial investments in their own software or hardware.
We believe the primary competitive factors in Tucows Domains are: • Providing superior customer service by anticipating the technical requirements and business objectives of resellers and providing them with technical advice to help them understand how our services can be customized to meet their particular needs; • Providing cost savings over in-house solutions by relieving resellers of the expense of acquiring and maintaining hardware and software and the associated administrative burden; • Enabling resellers to better manage their relationships with their end-users; 5 Table of Contents • Facilitating scalability through an infrastructure designed to support millions of transactions across millions of end-users; and • Providing superior technology and infrastructure, consisting of industry-leading software and hardware that allow resellers to provide these services to their customers without having to make substantial investments in their own software or hardware.
Tucows Domains Our Tucows Domains segment is subject to regulation ICANN, federal and state laws in the U.S. and the laws of other jurisdictions in which we do business. These include: ICANN: The registration of domain names is governed by ICANN.
Tucows Domains Our Tucows Domains segment is subject to regulation by ICANN, federal and state laws in the U.S. and the laws of other jurisdictions in which we do business. These include: ICANN: The registration of domain names is governed by ICANN.
ITEM 1. BUSINESS Overview Our mission is to provide simple useful services that help people unlock the power of the Internet. We accomplish this by reducing the complexity of our customers’ experience as they access the Internet (at home or on the go) and while using Internet services such as domain name registration, email and other Internet services.
ITEM 1. BUSINESS Overview Our mission is to provide simple useful services that help people unlock the power of the Internet. We accomplish this by reducing the complexity of our customers’ experience as they access the Internet (at home or on the go) and while using Internet services such as domain name registration, email and other Internet related services.
The remaining 210 employees support corporate functions and shared technology services used across the Tucows group. We offer competitive compensation in addition to employee stock options, physical and mental health benefits, learning allowances, future planning programs for employee Registered Retirement Savings Plans ("RRSP/401k") contributions, as well as generous vacation, maternity, paternity and adoption leaves for our employees.
The remaining 172 employees support corporate functions and shared technology services used across the Tucows group. We offer competitive compensation in addition to employee stock options, physical and mental health benefits, learning allowances, future planning programs for employee Registered Retirement Savings Plans ("RRSP/401k") contributions, as well as generous vacation, maternity, paternity and adoption leaves for our employees.
Similarly, Platypus revenues are largely generated in the U.S., with a small portion earned in Canada and other countries. 3 Table of Contents Tucows Domains Tucows Domains includes wholesale and retail domain name registration services, as well as value added services derived through our OpenSRS, eNom, Ascio, EPAG and Hover brands.
Similarly, Wavelo's revenues from Platypus are largely generated in the U.S., with a small portion earned in Canada and other countries. 3 Table of Contents Tucows Domains Tucows Domains includes wholesale and retail domain name registration services, as well as value added services derived through our OpenSRS, eNom, Ascio, EPAG and Hover brands.
In addition, the first quarter of the fiscal year will often see higher billed revenues in regard to domain names due to most renewals occurring on January 1. The demand for Ting and Wavelo services is not impacted by seasonality.
In addition, the first quarter of the fiscal year will often see higher deferred revenues in regard to domain names due to most renewals occurring on January 1. The demand for Ting and Wavelo services is not impacted by seasonality.
The retail segment now includes the sale of the rights to its portfolio of surname domains used in connection with our RealNames email service as well as our Exact Hosting Service, that provides Linux hosting services for individual and small business websites.
The retail segment now includes the sale of the rights to its portfolio of surname domains used in connection with our RealNames email service and our Exact Hosting Service, that provides Linux hosting services for individual and small business websites.
Wavelo offers services to a small number of CSPs focused in the U.S. along with their biggest external customer being DISH and internal customer being Ting, until such time we expand these offerings to other MVNOs or MNOs. The majority of the customers to whom we provide services as Tucows Domains are generally either web hosts or ISPs.
Wavelo offers services to a small number of CSPs focused in the U.S. along with DISH, their largest external customer, and Ting, their internal customer, until such time we expand these offerings to other MVNOs or MNOs. The majority of the customers to whom we provide services as Tucows Domains are generally either web hosts or ISPs.
However, in certain Ting markets we operate in, construction activities associated with adding new serviceable addresses can be impacted by seasonal climate. Competition Our competitors may be divided into the following groups: Ting • U.S. Broadband providers such as AT&T, Comcast, Verizon and CenturyLink, who primarily compete with Ting Internet Services.
However, in certain Ting markets we operate in, construction activities associated with adding new serviceable addresses can be impacted by seasonal climate. Competition Our competitors may be divided into the following groups: Ting • U.S. Broadband providers such as AT&T, Comcast, Verizon and Lumen Technologies, who primarily compete with Ting Internet services.
We earn revenues primarily from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations. In addition, we earn revenues from the sale of retail domain name registration and email services to individuals and small businesses.
Tucows Domains revenues primarily from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations. In addition, we earn revenues from the sale of retail domain name registration and email services to individuals and small businesses.
Additional information about segments can be found in “Note 19 – Segment Reporting” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
Additional information about segments can be found in “Note 21 – Segment Reporting” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
Prior to Uniregistry, Mr. Fausett worked as outside legal counsel to a number of domain industry related companies. Michael Koenig joined Tucows in April 2022 as the Chief Revenue Officer of Wavelo before moving into Tucows' Chief Operating Officer role in October 2022. Prior to joining Tucows, Mr.
Prior to Uniregistry, Mr. Fausett worked as outside legal counsel to a number of domain industry related companies. 8 Table of Contents Michael Koenig joined Tucows in April 2022 as the Chief Revenue Officer of Wavelo before moving into Tucows' Chief Operating Officer role in October 2022. Prior to joining Tucows, Mr.
As the privacy laws and regulations around the world continue to evolve, these changes could adversely affect our business operations in similar ways. 7 Table of Contents Several bodies of law may be deemed to apply to us with respect to various customer activities.
As the privacy laws and regulations around the world continue to evolve, these changes could adversely affect our business operations in similar ways. Several bodies of law may be deemed to apply to us with respect to various customer activities.
The primary focus of this segment is to provide reliable Fiber and Fixed Wireless Internet services to consumer and business customers. Revenues are all generated in the U.S. and are billed on a monthly basis and have no fixed contract terms.
The primary focus of this segment is to provide reliable Gigabit Fiber and Fixed Wireless Internet services to consumer and business customers. Revenues from Ting Internet are all generated in the U.S. and are billed on a monthly basis. Ting Internet services have no fixed contract terms.
As a global Internet and technology company, we have a wide range of employees, including management professionals, technicians, engineers, and call center employees. None of our employees are currently represented by a labor union. We consider our relations with our employees to be good.
As a g lobal Internet and technology company, we have a wide range of employees, including management professionals, technicians, engineers, and call center employees. None of our employees are currently represented by a labor union. We consider our relations with our employees to be good.
Our business model is characterized primarily by non-refundable, up-front payments, which lead to recurring revenue from renewals and positive operating cash flow. Wholesale, primarily branded as OpenSRS, eNom, EPAG and Ascio, derives revenue from its domain registration service and from providing value-added services.
Our business model is characterized primarily by non-refundable, up-front payments, which lead to recurring revenue from renewals and positive operating cash flow. Wholesale, primarily branded as OpenSRS, eNom, EPAG and Ascio, derives revenue from its domain name registration service.
Human Capital Resources Employee Profile At Tucows, we strive to maintain a best-in-class workplace where our employees can proudly bring their whole selves to work. We believe that by creating an intentional, inclusive culture, our people have more opportunities to thrive every day. As of December 31, 2022, we had approximately 1,020 full-time employees and 80 contracted employees globally.
Human Capital Resources Employee Profile At Tucows, we strive to maintain a best-in-class workplace where our employees can proudly bring their whole selves to work. We believe that by creating an intentional, inclusive culture, our people have more opportunities to thrive every day. As of December 31, 2023, we had approximat ely 1,045 full-time employees and 84 contracted employees globally.
As a result, commencing in the first quarter of 2022, our Chief Executive Officer ("CEO"), who is also our chief decision maker, reviews the operating results of Ting, Wavelo and Tucows Domains as three distinct segments in order to make key operating decisions as well as evaluate segment performance.
Our Chief Executive Officer (CEO), who is also our chief operating decision maker, reviews the operating results of Ting, Wavelo and Tucows Domains as three distinct segments in order to make key operating decisions as well as evaluate segment performance.
Name Age Title Elliot Noss 60 President and Chief Executive Officer, Tucows Inc. and Ting Davinder Singh 48 Chief Financial Officer Dave Woroch 60 Chief Executive Officer of Tucows Domains Bret Fausett 59 Chief Legal Officer Michael Koenig 38 Chief Operating Officer Justin Reilly 35 Chief Executive Officer, Wavelo Elliot Noss has served as our President and Chief Executive Officer of Tucows Inc. since May 1999 and Ting since 2022 and served as Vice President of Corporate Services for Tucows Interactive Limited, which was acquired by Tucows in May 1999, from April 1997 to May 1999.
Name Age Title Elliot Noss 61 President and Chief Executive Officer, Tucows Inc. and Ting Davinder Singh 49 Chief Financial Officer Dave Woroch 61 Chief Executive Officer of Tucows Domains Services Bret Fausett 60 Chief Legal Officer and Vice-President, Regulatory Affairs Michael Koenig 39 Chief Operating Officer Justin Reilly 36 Chief Executive Officer, Wavelo Elliot Noss has served as our President and Chief Executive Officer of Tucows Inc. since May 1999 and Ting since 2022 and served as Vice President of Corporate Services for Tucows Interactive Limited, which was acquired by Tucows in May 1999, from April 1997 to May 1999.
Our primary distribution channel is a global network of approximately 35,000 resellers that operate in over 150 countries and who typically provide their customers, the end-users of Internet-based services, with solutions for establishing and maintaining an online presence.
Our primary distribution channel is a global network of more than 35,000 resellers that operate in almost 200 countries and who typically provide their customers, the end-users of Internet-based services, with solutions for establishing and maintaining an online presence.
Wavelo launched as a proven asset for CSPs, with DISH using Wavelo’s Mobile Network Operating System ("MONOS") software to drive additional value within its Digital Operator Platform since 2021. More recently, Ting Internet has also integrated Wavelo’s Internet Service Operating System ("ISOS") and Subscriber Management ("SM") software to enable faster subscriber growth and footprint expansion.
Wavelo launched as a proven asset for CSPs, with DISH using Wavelo’s Mobile Network Operating System ("MONOS") software to drive additional value within its Digital Operator Platform, and Ting integrating Wavelo’s Internet Service Operating System ("ISOS") and Subscriber Management ("SM") software to enable faster subscriber growth and footprint expansion.
Certain revenues and expenses disclosed under the Corporate category are excluded from segment earnings before interest, tax, depreciation and amortization ("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.
Certain revenues and expenses disclosed under the Corporate category are excluded from segment earnings before interest, tax, depreciation and amortization ("EBITDA") results as they are centrally managed and not monitored by or reported to our CEO by segment, including retail mobile services, the 10-year payment stream on transferred legacy Mobile subscribers, eliminations of intercompany transactions, portions of Finance and Human Resources, Legal and Corporate Information Technology ("IT") shared services.
Seasonality During the summer months and certain other times of the year, such as major holidays, Internet usage often declines. As a result, some of our services (such as OpenSRS, eNom, Ascio, and Hover) may experience reduced demand during these times. For example, our experience shows that new domain registrations decline during the summer months and around the year-end holidays.
Seasonality During the summer months and certain other times of the year, such as major holidays, Internet usage often declines. As a result, some of our services (such as OpenSRS, eNom, Ascio, and Hover) may experience reduced demand during these times.
Prior to joining Tucows, Justin was Head of Product & Customer Experience Innovation at Verizon, as well as founder of a number of companies with consumer grade product and machine learning at their core. ITEM 1A. RISK FACTORS Our business faces significant risks.
Prior to joining Tucows, Justin was Head of Product & Customer Experience Innovation at Verizon, as well as a founder of a number of companies with consumer grade product and machine learning at their core.
The Wavelo segment also includes the Platypus brand and platform, our legacy billing solution for internet service providers (each an "ISP" and collectively, "ISPs"), that was previously reported under the Ting segment. Wavelo revenues from MONOS, ISOS, SM and professional services are all generated in the U.S. and our customer agreements have set contract lengths with the underlying CSP.
The Wavelo segment also includes the Platypus brand and platform, our legacy billing solution for ISPs. The revenues from Wavelo's MONOS, ISOS, SM and professional services are all generated in the U.S. and our customer agreements have set contract lengths with the underlying CSP.
As of December 31, 2022, Ting Internet had access to 96,000 owned infrastructure serviceable addresses, 20,000 partner infrastructure serviceable addresses and 35,000 active accounts under its management; compared to having access to 76,000 owned infrastructure serviceable addresses, 15,000 partner infrastructure serviceable addresses and 26,000 active accounts under its management as of December 31, 2021.
As of December 31, 2023, Ting Internet had access to 121,000 owned infrastructure serviceable addresses, 29,000 partner infrastructure serviceable addresses and 43,000 active accounts under its management; compared to having access to 96,000 owned infrastructure serviceable addresses, 19,000 partner infrastructure serviceable addresses and 35,000 active accounts under its management as of December 31, 2022.
Tucows Domains revenues are attributed to the country in which the contract originates, which is primarily in Canada and the U.S. for OpenSRS and eNom brands. Ascio domain services contracts and EPAG agreements primarily originate in Europe.
Tucows Domains revenues are attributed to the country in which the contract originates, which is primarily in Canada and the U.S for OpenSRS and eNom brands whereas it is primarily in European nations for Ascio and EPAG.
Approximately 55% of our employees are based in Canada, followed by 35% based in the U.S., and the remaining 10% are spread across countries in Europe and other regions. Of our employees, approximately 450 support our Ting segment, 180 support our Wavelo segment, and approximately 260 support our Tucows Domains segment.
Approximately 53% of our employees are based in Canada, followed by 36% based in the U.S., and the remaining 11% are spread across countries in Europe and other regions. Of our employees, approximately 523 support our Ting segment, 190 support our Wavelo segment, and approximately 244 support our Tucows Domains segment.
Our product suite is modular by nature, so our platforms can work just as well together as they do independently, and alongside other best-in-class software - to fill specific gaps in operations, network provisioning, subscriber management, or anything in between; and • CSPs are able to select the best of breed software and use it where they please, versus being forced into a traditional BSS/OSS software stack that forces them to use that providers' version of software to have full functionality.
We believe the primary competitive factors in Wavelo are: • Event-based architecture is the foundation to our modern platforms, which means less network bandwidth consumption and less central processing unit ("CPU") utilization, cutting costs and speeding up delivery, enabling new features, functionality and better customer experiences; • Our product suite is modular by nature, so our platforms can work just as well together as they do independently, and alongside other best-in-class software - to fill specific gaps in operations, network provisioning, subscriber management, or anything in between; and • CSPs are able to select the best of breed software and use it where they please, versus being forced into a traditional BSS/OSS software stack that forces them to use that providers' version of software to have full functionality.
To us, inclusion is not a standalone effort; it is intrinsically part of our employee experience, which helps us create a space where our team can proudly and comfortably bring their full selves to work. This principle is found throughout the entire company, and is especially apparent in Tucows’ benchmark-free people philosophy.
To us, inclusion is not a standalone effort; it is intrinsically part of our employee experience, which helps us create a space where our team can proudly and comfortably bring their full selves to work.
Communications Decency Act ("CDA"): The CDA generally protects online service providers, such as Tucows, from liability for certain activities of their customers, such as posting of defamatory or obscene content, unless the online service provider is participating in the unlawful conduct.
Our ability to sell ccTLDs is dependent on our ability to maintain accreditation in good standing with these various international authorities. 7 Table of Contents Communications Decency Act ("CDA"): The CDA generally protects online service providers, such as Tucows, from liability for certain activities of their customers, such as posting of defamatory or obscene content, unless the online service provider is participating in the unlawful conduct.
The licensing, construction, operation, sale and interconnection arrangements of wireless telecommunications systems are regulated by the FCC and, depending on the jurisdiction, international, state and local regulatory agencies.
Tucows Corporate - Mobile Services The FCC and other federal, state and local, as well as international, governmental authorities have jurisdiction over our business. The licensing, construction, operation, sale and interconnection arrangements of wireless telecommunications systems are regulated by the FCC and, depending on the jurisdiction, international, state and local regulatory agencies.
Country Code Top-Level Domain ("ccTLD") Authorities: The regulation of ccTLDs is governed by national regulatory agencies of the country underlying the specific ccTLDs, such as Canada (.ca). Our ability to sell ccTLDs is dependent on our ability to maintain accreditation in good standing with these various international authorities.
Country Code Top-Level Domain ("ccTLD") Authorities: The regulation of ccTLDs is governed by national regulatory agencies of the country underlying the specific ccTLDs, such as Canada (.ca).
These volunteer groups connect employees with shared characteristics, life experiences and enable them to engage in activities that advance our culture and contribute to our success. Diversity and Inclusion As an organization, Tucows believes in the importance of driving meaningful change and impact; from its products to its people, everything is approached with intentionality. Our people philosophy is no different.
People Philosophy & Inclusion As an organization, Tucows believes in the importance of driving meaningful change and impact; from its products to its people, everything is approached with intentionality. Our People Philosophy is no different.
Retail, primarily the Hover and eNom portfolio of websites, including eNom and eNom Central, derive revenues from the sale of domain name registration and email services to individuals and small businesses.
In addition, we also derive revenue by monetizing domain names which are near the end of their lifecycle through expiry auction sale. Retail, primarily the Hover and eNom portfolio of websites, including eNom, and eNom Central, derive revenues from the sale of domain name registration and email services to individuals and small businesses.
A small number of customers are consultants and designers providing our services to their business clients, or retail consumers registering a personal domain name. No customer represented more than 10% of our consolidated revenues in any of the last three fiscal years.
A small number of customers are consultants and designers providing our services to their business clients, or retail consumers registering a personal domain name. During the year ended December 31, 2023 one customer, DISH, accounted for 11% of revenue. For the years ended December 31, 2022 and December 31, 2021 no customer accounted for more than 10% of total revenue.
Compliance with Government Regulations Ting Our Fiber Internet services are also subject to a number of regulations and commitments. The Federal Communications Commission ("FCC") frequently considers imposing new broadband-related regulations such as those relating to an Open Internet. States and localities also consider new broadband-related regulations, including those regarding government-owned broadband networks, net neutrality and connectivity during COVID-19.
The Federal Communications Commission ("FCC") frequently considers imposing new broadband-related regulations such as those relating to an Open Internet. States and localities also consider new broadband-related regulations, including those regarding government-owned broadband networks, net neutrality and connectivity. Additionally, as an ISP, we must implement certain network capabilities to assist law enforcement in conducting surveillance of persons suspected of criminal activity.
We are committed to an Open Internet and do not block, throttle or engage in paid or affiliated prioritization, and have committed not to block, throttle or discriminate against lawful content. Tucows Corporate - Mobile Services The FCC and other federal, state and local, as well as international, governmental authorities have jurisdiction over our business.
From time to time, the FCC considers imposing new regulatory obligations on ISPs. We are committed to an Open Internet and do not block, throttle or engage in paid or affiliated prioritization, and have committed not to block, throttle or discriminate against lawful content.
We are now both organized and managed, and also report our financial results as three segments: Ting, Wavelo and Tucows Domains. The three segments are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate.
We are organized into three operating and reporting segments - Ting, Wavelo, and Tucows Domains. Each segment is differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate. The Ting segment contains the operating results of our retail high speed Internet access operations, including its wholly owned subsidiaries - Cedar and Simply Bits.
These initiatives include daily mindfulness sessions open to all employees, as well as company-wide memberships to mindfulness tools that allow employees to prioritize their well-being whenever they need. The Company also supports eight Employee Resource Groups ("ERGs") focused on 2SLGBTQ+, caregivers, women leadership, Canadian newcomers, neurodiversity, BIPOC, mental health and racial justice and equality.
Tucows has introduced a series of initiatives that prioritize the mental and personal well-being of our employees and destigmatize mental health conversations at work. These initiatives include daily mindfulness sessions open to all employees, as well as company-wide memberships to mindfulness tools that allow employees to prioritize their well-being whenever they need.
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In the prior year, we disclosed three operating and reportable segments: Fiber Internet Services, Domain Services and Mobile Services. During the first quarter of 2022, the Company completed a reorganization of its reporting structure into three operating and reportable segments: Fiber Internet Services, Platform Services and Domain Services.
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The Wavelo segment includes our platform and professional services offerings, as well as the billing solutions to Internet services providers ("ISPs"). Tucows Domains includes wholesale and retail domain name registration services, as well as value added services derived through our OpenSRS, eNom, Ascio, EPAG and Hover brands.
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In the third quarter of 2022, the Company renamed its three operating and reportable segments to reflect their branded names: Ting, Wavelo and Tucows Domains. The change to our reportable operating segments was the result of a shift in our business and management structures that was completed during the first quarter of 2022.
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Together the OpenSRS, eNom, EPAG and Ascio Domain Services manage 24.6 million domain names under the Tucows, eNom, EPAG and Ascio ICANN registrar accreditations and for other registrars under their own accreditations. Domains under management has increased by 0.2 million, or less than 1%, since December 31, 2022.
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The operations supporting what was previously known as our Mobile Services segment have become increasingly operationally distinct between our mobile retail services and our platform services.
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On February 7, 2024, Ting undertook a restructuring plan to reflect the ongoing operational prioritizations of the Ting business and to lower the Company’s year-over-year operating expenses, which impacted 72 employees, approximately 13% of Ting's workforce or 7% of the Company’s total workforce.
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Our management regularly reviews our operating results on a consolidated basis, principally to make decisions about how we utilize our resources and to measure our consolidated operating performance.
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This principle is found throughout the entire company, and is especially apparent in Tucows’ benchmark-free people philosophy and company-wide efforts, such as IDEA (Inclusion, Diversity, Equity and Allyship), which anchors on the belief that diversity without inclusion, equity or allyship is futile.
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To assist us in forecasting growth and to help us monitor the effectiveness of our operational strategies, our management regularly reviews revenue for each of our service offerings in order to gain more depth and understanding of the key business metrics driving our business.
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To support its commitments and ensure real, tangible impact for its teams, the Company has invested in a number of resources, including: Employee Resource Groups ("ERGs") and communities, comprehensive assistance programs for employees and their families, wellness and support tools.
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All of these services are made available to end-users through a network of 35,000 web hosts, ISPs and other resellers around the world. In addition, we also derive revenue by monetizing domain names which are near the end of their lifecycle through expiry auction sale.
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The Company also ensures that its practices evolve to mitigate bias and protect its people, regularly updating policies and reviewing processes, such as hiring practices. Employee Wellness At Tucows, we're committed to fostering a workplace culture that prioritizes the mental and personal well-being of every team member.
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We believe the primary competitive factors in Wavelo are: • Event-based architecture is the foundation to our modern platforms, which means less network bandwidth consumption and less central processing unit ("CPU") utilization, cutting costs and speeding up delivery, enabling new features, functionality and better customer experiences; • Wavelo's product suite can transform CSPs from top to bottom.
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The Company also supports eight ERGs that recognize the shared experiences of our employees. These groups include: 2SLGBTQ+, Black Future, Caregivers, Women’s Leadership, Canadian Newcomers, Neurodiversity, Mental Health, and Equality and Justice.
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As a response to the COVID-19 pandemic, we have established a Fiber Internet install solution for our employees and customers that minimizes risks associated with person-to-person contact.
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These volunteer groups connect employees with shared characteristics, life experiences and enable them to engage in activities that advance our culture and foster connectivity. 6 Table of Contents Compliance with Government Regulations Ting Our Fiber Internet services are also subject to a number of regulations and commitments.
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We have also implemented a vaccination policy requiring those employees who work from a Company office, meet in person with customers or travel by plane or train for business purposes to be fully vaccinated. Employee Wellness Tucows has introduced a series of initiatives that prioritize the mental and personal well-being of our employees and destigmatize mental health conversations at work.
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The Company has invested in resources that build community and foster inclusivity within the organization. 6 Table of Contents Cybersecurity Our industry is vulnerable to cybersecurity risks that are growing in both frequency and complexity.
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Tucows, along with our suppliers, employs systems and network infrastructure that are subject to cyberattacks, which may include theft of assets, unauthorized access to proprietary or sensitive information, destruction or corruption of data, ransomware attacks, or operational disruption.
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A significant cyberattack against our, or our suppliers’, critical network infrastructure and supporting information systems could result in service disruptions, litigation, loss of customers, incurring significant costs, and/or reputational damage. Our Board of Directors (the "Board") has primary oversight responsibility for all aspects of operational risk including cybersecurity.
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As part of its oversight role, the Board regularly reviews management’s risk assessments as well as plans to prevent, detect and respond to ongoing security threats. Our ongoing success depends on protecting our sensitive data, including personal information about our customers and employees. We rely on security awareness training, policies, procedures and IT systems to protect this information.
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Additionally, as an ISP, we must implement certain network capabilities to assist law enforcement in conducting surveillance of persons suspected of criminal activity. From time to time, the FCC considers imposing new regulatory obligations on ISPs.
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Some of the following risks relate principally to our business and the industry and statutory and regulatory environment in which we operate , including those highlighted in this section and summarized below. Other risks relate principally to the securities markets and ownership of our stock.
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As a result, this risk factor summary together with a more comprehensive discussion of risks and uncertainties set forth following this section under the heading “

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

92 edited+44 added−41 removed167 unchanged
Biggest changeAs a result of the closing of the Credit Agreement Amendment, the Company is subject to the following financial covenants at all times, with monthly testing during the Leverage Step Up Period and reverting to quarterly tests thereafter: (i) maximum Total Funded Debt to Adjusted EBITDA Ratio of 4.50:1.00 from March 14, 2023 up to and including September 29, 2023; 4.00:1.00 from September 30, 2023 up to and including December 30, 2023; and 3.75:1.00 thereafter; and (ii) minimum Interest Coverage Ratio of 3.00:1.00.
Biggest changeIn addition, the Company has agreed to comply with the following financial covenants: (1) a leverage ratio by maintaining at all times a Total Funded Debt to Adjusted EBITDA Ratio of not more than (i) 4.50:1:00 at any time from and after the Closing Date to and including December 30, 2023; (ii) 4.25:1:00 from December 31, 2023 to and including March 30, 2024; (iii) 4.00:1.00 from March 31, 2024 to and including June 29, 2024; and (iv) 3.75:1.00 thereafter; and (2) an interest coverage ratio by maintaining as of the end of each rolling four financial quarter period, an Interest Coverage Ratio (as defined in the 2023 Credit Agreement) of not less than 3.00:1.00.
To remain competitive, we may be compelled to reduce the prices for our services or augment our service offerings. Any subsidies or price reductions that we offer in order to remain competitive may reduce our margins and revenues, and may adversely affect our profitability and cash flows.
To remain competitive, we may be compelled to reduce the prices for our services or augment our service offerings. Any subsidies or price reductions that we offer in order to remain competitive may reduce our revenues and margins, and may adversely affect our profitability and cash flows.
To the extent we do not keep pace with technological advances or fail to timely respond to changes in the competitive environment affecting our industry, we could lose market share or experience a decline in revenue, cash flows and net income from our platform and other professional services (both retail and platform related services).
To the extent we do not keep pace with technological advances or fail to respond timely to changes in the competitive environment affecting our industry, we could lose market share or experience a decline in revenue, net income, and cash flows from our platform and other professional services (both retail and platform related services).
The following factors may contribute to this volatility: actual or anticipated variations in our quarterly operating results; interruptions in our services; seasonality of the markets and businesses of our customers; announcements of new technologies or new services by our company or our competitors; our ability to accurately select appropriate business models and strategies; the operating and stock price performance of other companies that investors may view as comparable to us; analyst or short-seller reports; news relating to our company or industry as a whole; and news relating to trends in our markets.
The following factors may contribute to this volatility: actual or anticipated variations in our quarterly operating results; interruptions in our services; seasonality of the markets and businesses of our customers; announcements of new technologies or new services by our company or by our competitors; our ability to accurately select appropriate business models and strategies; the operating and stock price performance of other companies that investors may view as comparable to us; analyst or short-seller reports; news relating to our company or our industry as a whole; and news relating to trends in our markets.
Due to their size and bargaining power, they may obtain discounts for facilities, equipment, devices, content, and services, potentially placing us at a competitive disadvantage. As consolidation in these industries creates even larger competitors, our competitors’ purchasing and cost structure advantages may increase further, hampering our efforts to attract and retain customers.
Due to our competitors' size and bargaining power, they may obtain discounts for facilities, equipment, devices, content, and services, potentially placing us at a competitive disadvantage. As consolidation in these industries creates even larger competitors, our competitors’ purchasing and cost structure advantages may increase further, hampering our efforts to attract and retain customers.
Congress may refuse to recognize ICANN’s authority or support its policies, which could create instability in the domain registration system; - some of ICANN’s policies and practices, and the policies and practices adopted by registries and registrars, could be found to conflict with the laws of one or more jurisdictions; - ICANN may lose any one of the several claims pending against it in both the U.S. and international courts, in which case its credibility may suffer and its policies may be discredited; - the terms of the Registrar Accreditation Agreement (the “RAA”), under which we are accredited as a registrar, could change in ways that are disadvantageous to us or under certain circumstances could be terminated by ICANN preventing us from operating our Registrar, or ICANN could adopt unilateral changes to the RAA that are unfavorable to us, that are inconsistent with our current or future plans, or that affect our competitive position; - ICANN and, under their registry agreements, VeriSign and other registries may impose increased fees received for each ICANN accredited registrar and/or domain name registration managed by those registries; - ICANN or any registries may implement policy changes that would impact our ability to run our current business practices throughout the various stages of the lifecycle of a domain name; and 17 Table of Contents - international regulatory or governing bodies, such as the International Telecommunications Union or the European Union, may gain increased influence over the management and regulation of the domain registration system, leading to increased regulation in areas such as taxation and privacy. - If any of these events occur, they could create instability in the domain registration system.
Congress may refuse to recognize ICANN’s authority or support its policies, which could create instability in the domain registration system; - some of ICANN’s policies and practices, and the policies and practices adopted by registries and registrars, could be found to conflict with the laws of one or more jurisdictions; - ICANN may lose any one of the several claims pending against it in both the U.S. and international courts, in which case its credibility may suffer and its policies may be discredited; - the terms of the Registrar Accreditation Agreement (the “RAA”), under which we are accredited as a registrar, could change in ways that are disadvantageous to us or under certain circumstances could be terminated by ICANN preventing us from operating our Registrar, or ICANN could adopt unilateral changes to the RAA that are unfavorable to us, that are inconsistent with our current or future plans, or that affect our competitive position; - ICANN and, under their registry agreements, VeriSign and other registries may impose increased fees received for each ICANN accredited registrar and/or domain name registration managed by those registries; - ICANN or any registries may implement policy changes that would impact our ability to run our current business practices throughout the various stages of the lifecycle of a domain name; and - international regulatory or governing bodies, such as the International Telecommunications Union or the European Union, may gain increased influence over the management and regulation of the domain registration system, leading to increased regulation in areas such as taxation and privacy. - If any of these events occur, they could create instability in the domain registration system.
Additionally, our revenues are directly tied to the subscriber volumes of DISH's MVNO or MNO networks, so our profitability is contingent on the ability of DISH to continue to add subscribers onto our platform. If any of these events occur, our operational performance and financial results may be adversely affected.
Additionally, our revenues are directly tied to the subscriber volumes of DISH's MVNO or MNO networks, so our profitability is contingent on the ability of DISH to continue to add and retain subscribers onto our platform. If any of these events occur, our operational performance and financial results may be adversely affected.
Across all three of our business segments, regardless if those services operate on a postpaid or prepaid basis, we are exposed to the risks associated with credit card and other online payment technologies, chargebacks and fraud associated with these payment types. A substantial majority of our revenue originates from online credit card transactions.
Across all of our business segments, regardless if those services operate on a postpaid or prepaid basis, we are exposed to the risks associated with credit card and other online payment technologies, chargebacks and fraud associated with these payment types. A substantial majority of our revenue originates from online credit card transactions.
In particular, we need to obtain MNO network capacity for our Mobile Services, fiber optic cable, installation equipment, ONT and router inventory, third party network capacity for our Ting segments, as well as a multitude of domain name registration options in the form of TLDs/ccTLDs for our Tucows Domains segment.
In particular, we need to obtain MNO network capacity for our mobile services; fiber optic cable, installation equipment, ONT and router inventory, and third party network capacity for our Ting segment; as well as a multitude of domain name registration options in the form of TLDs/ccTLDs for our Tucows Domains segment.
Any of these events would have a material adverse effect on our business, financial condition, and operating results. Our preferred share unit financing arrangement could adversely affect our financial condition, our ability to operate our business, divert our cash flow from operations for debt payments, and prevent us from meeting our debt obligations.
Any of these events would have a material adverse effect on our business, financial condition, and operating results. Our preferred unit financing arrangement could adversely affect our financial condition, our ability to operate our business, divert our cash flow from operations for debt payments, and prevent us from meeting our debt obligations.
Maintaining our existing customer relationships and being able to establish new relationships is critical to our success across our segments, regardless if that customer is an end consumer wanting Gigabit Fiber or Fixed Wireless internet service to their home, a telecommunication provider, or a leading global domain reseller.
Maintaining our existing customer relationships and being able to establish new relationships is critical to our success across all our segments, regardless if that customer is an end consumer wanting Gigabit Fiber or Fixed Wireless Internet service to their home, a telecommunication provider, or a leading global domain reseller.
Across all three of our business segments, we have entered into agreements with third parties for licensing of certain technologies, the day-to-day execution of certain services, the development and maintenance of certain systems necessary for the operation of our businesses and for network equipment, handsets, devices and other equipment where appropriate.
Across all of our business segments, we have entered into agreements with third parties for licensing of certain technologies, the day-to-day execution of certain services, the development and maintenance of certain systems necessary for the operation of our businesses and for network equipment, handsets, devices and other equipment where appropriate.
Our preferred share financing agreement imposes predetermined operational and financial drawdown milestones on our Ting segment, which may prevent us from obtaining additional financing under such preferred unit financing arrangement. In addition, the Company may need additional financing to further accelerate the expansion of the Ting Internet footprint.
Our preferred unit financing agreement imposes predetermined operational and financial drawdown milestones on our Ting segment, which may prevent us from obtaining additional financing under such preferred unit financing arrangement. In addition, the Company may need additional financing to further accelerate the expansion of the Ting Internet footprint.
If U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, and our business, financial condition or results of operations may be adversely impacted. 15 Table of Contents - Management, communication and integration problems resulting from cultural differences and geographic dispersion. - Compliance with foreign laws, accreditation and regulatory requirements in relation to provision of services, protection of intellectual property and third-party data in foreign jurisdictions. - Competition from companies with international operations, including large international competitors and entrenched local companies. - To the extent we choose to make acquisitions to enable our international expansion efforts, the identification of suitable acquisition targets in the markets into which we want to expand. - Political and economic instability in some international markets - Sufficiently qualified labor pools in various international markets - We may not succeed in our efforts to continue to expand our international presence as a result of the factors described above or other factors that may have an adverse impact on our overall financial condition and results of operations.
If the U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, and our business, financial condition or results of operations may be adversely impacted. - Management, communication and integration problems resulting from cultural differences and geographic dispersion. - Compliance with foreign laws, accreditation and regulatory requirements in relation to provision of services, protection of intellectual property and third-party data in foreign jurisdictions. - Competition from companies with international operations, including large international competitors and entrenched local companies. - To the extent we choose to make acquisitions to enable our international expansion efforts, the identification of suitable acquisition targets in the markets into which we want to expand. - Political and economic instability in some international markets. - Sufficiently qualified labor pools in various international markets. - We may not succeed in our efforts to continue to expand our international presence as a result of the factors described above or other factors that may have an adverse impact on our overall financial condition and results of operations.
With respect to the UPA, Ting, LLC is obligated to redeem Generate's equity interests for an amount equal to the outstanding capital balance plus the unsatisfied preferred return (and pay a make-whole premium if the redemption of the preferred shares occurs within the four years following the Transaction Close), upon certain conditions, including a material breach of any Tucows' credit agreement that is not cured, the failure to pay the preferred return in two consecutive quarters following the second anniversary of the Transaction Close, and the six year anniversary of the Transaction Close.
With respect to the UPA, Ting LLC is obligated to redeem Generate's equity interests for an amount equal to the outstanding capital balance plus the unsatisfied preferred return (and pay a make-whole premium if the redemption of the preferred units occurs within the four years following the Transaction Close), upon certain conditions, including a material breach of any Tucows' credit agreement that is not cured, the failure to pay the preferred return in two consecutive quarters following the second anniversary of the Transaction Close, and the six year anniversary of the Transaction Close.
Wavelo also depends on key observability service providers that integrate with our platforms to be operating in order to alert us of an outage or issue without client's billing or provisioning services.
Wavelo also depends on key observability service providers that integrate with our platforms to be operating in order to alert us of an outage or issue with our client's billing or provisioning services.
To be successful as we continue to build out the Ting Fiber network in communities across the U.S. and bring customers onto the network we must ensure that our network infrastructure performs well and is reliable. The greater the user traffic and the greater the complexity of our services, the more computing power we will need.
To be successful as we continue to build out the Ting Internet network in communities across the U.S. and bring customers onto the network, we must ensure that our network infrastructure performs well and is reliable. The greater the user traffic and the greater the complexity of our services, the more computing power we will need.
We have previously been the target of attempted attacks and must monitor and develop our systems to protect this data from misappropriation.
We have previously been the target of attacks and must monitor and develop our systems to protect this data from misappropriation.
They may use their significant market power and greater resources to introduce additional products and service features (or lower prices) that we are unable to offer at similar cost or price to the customer. This may impact our ability to win over significant market share from these competitors.
Our competitors may use their market power and resources to introduce additional products and service features (or lower prices) that we are unable to offer at similar cost or price to the customer. This may impact our ability to win over significant market share from these competitors.
We have and expect to continue to acquire companies, assets or the rights to technologies in the future in order to develop new services or enhance existing services, to enhance our operating infrastructure, to fund expansion, to respond to competitive pressures or to acquire complementary businesses across all four of the segments we serve.
We have and expect to continue to acquire companies, assets or the rights to technologies in the future in order to develop new services, enhance existing services, enhance our operating infrastructure, to fund expansion, to respond to competitive pressures or to acquire complementary businesses across all of our segments.
Our ability to achieve the Milestones to access the additional funding under the UPA will depend on our future performance, which will be affected by a range of economic, competitive and business factors as well as changes in government monetary or fiscal policy.
Our ability to achieve the Milestones to access the additional funding under the UPA will depend on our future performance, which will be affected by a range of economic, competitive and business factors and changes in government monetary or fiscal policy.
In addition, in order to further accelerate the expansion of the Ting Internet footprint, the Company will seek additional financing, which may include an equity or debt issuance, a partnership or collaborating arrangement with another third party.
In addition, if in order to further accelerate the expansion of the Ting Internet footprint, the Company may seek additional financing, which may include an equity or debt issuance, a partnership or collaborating arrangement with another third party.
In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2022, we have concluded that there is a material weakness relating to our internal control over financial reporting.
In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2023, we have concluded that there is a material weakness relating to our internal control over financial reporting.
Despite these precautions, we cannot be assured that our indemnity and dispute resolution policies will be sufficient to protect us against claims asserted by various third parties, including claims of trademark infringement and unfair competition. 18 Table of Contents New laws or regulations concerning domains and registrars may be adopted at any time.
Despite these precautions, we cannot be assured that our indemnity and dispute resolution policies will be sufficient to protect us against claims asserted by various third parties, including claims of trademark infringement and unfair competition. New laws or regulations concerning domains and registrars may be adopted at any time.
With all our majority of our revenues concentrated with one customer, we are exposed to significant risk if we are unable to maintain this customer relationship or establish new relationships with other MVNOs in the future.
With the majority of our revenues concentrated with one customer, we are exposed to significant risk if we are unable to maintain this customer relationship or establish new relationships with other MNOs or MVNOs in the future.
The occurrence of a natural disaster, a decision to close a facility without adequate notice or other unanticipated problems at our data centers could result in lengthy interruptions in our service. We are parties to agreements with other unrelated parties for certain business operations and to license third-party technologies.
The occurrence of a natural disaster, a decision to close a facility without adequate notice or other unanticipated problems at our data centers could result in lengthy interruptions in our service. 11 Table of Contents We are parties to agreements with other unrelated parties for certain business operations and to license third-party technologies.
The adverse impact of such occurrences also could be increased to the extent that there is a lack of preparedness on the part of international, national or regional emergency responders or on the part of other organizations and businesses that we deal with, particularly those that we depend upon but have no control over.
The adverse impact of such occurrences also could be increased to the extent that there is a lack of preparedness on the part of international, national or regional emergency responders or on the part of other organizations and businesses that we deal with, particularly those that we depend upon but have no control over. 21 Table of Contents
The occurrence of a natural disaster, a decision to close a facility without adequate notice or other unanticipated problems at our data centers could result in lengthy interruptions in our service. In our Wavelo segment, the availability of our platform services is reliant on data centers and public cloud providers such as AWS, to continue to operate.
The occurrence of a natural disaster, a decision to close a facility without adequate notice or other unanticipated problems at our data centers could result in lengthy interruptions in our service. In our Wavelo segment, the availability of our platform services is reliant on data centers and public cloud providers, to continue to operate.
As a result of this material weakness, management has determined that our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2022.
As a result of this material weakness, management has determined that our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2023.
Our brands compete with incumbent service providers and their affiliate brands. Most of our competitors have substantially greater financial, technical, personnel and marketing resources and a larger market share than we do in all of our segments, and we may not be able to compete successfully against them.
Our brands compete with incumbent service providers and their affiliate brands. Across all our segments, most of our competitors have greater financial, technical, personnel and marketing resources and a larger market share than we do, and we may not be able to compete successfully against them.
These events could also disrupt or suspend portions of our domain registration solution, which would result in reduced revenue. Data protection regulations may impose legal obligations on us that we cannot meet or that conflict with our ICANN contractual requirements .
These events could also disrupt or suspend portions of our domain registration solution, which would result in reduced revenue. 18 Table of Contents Data protection regulations may impose legal obligations on us that we cannot meet or that conflict with our ICANN contractual requirements .
We cannot guarantee that this program will be fully consummated or that such program will enhance the long-term value of our share price. 20 Table of Contents GENERAL RISK FACTORS Economic, political, and market conditions may adversely affect our businesses, financial condition, and operating results .
We cannot guarantee that this program will be fully consummated or that such program will enhance the long-term value of our share price. GENERAL RISK FACTORS Economic, political, and market conditions may adversely affect our businesses, financial condition, and operating results .
We may not be able to secure additional financing on favorable terms, or at all, at the time when we need that funding, and if not available, could have a material adverse effect on our business. Moreover, any additional financing may be dilutive to existing investors.
We may not be able to secure additional financing on favorable terms, or at all, at the time when that funding is needed, and if not available, could have a material adverse effect on our business. Moreover, any additional financing may be dilutive to existing investors.
As a result of the financial strength and benefits of scale enjoyed by some of our competitors, they may be able to offer services at lower prices than we can, thereby adversely affecting our revenues, growth and profitability. 11 Table of Contents In our Tucows Domains segment, the Internet and e-commerce are characterized by rapid technological change.
As a result of the financial strength and benefits of scale enjoyed by some of our competitors, they may be able to offer their services at lower prices than we can, thereby adversely affecting our revenues, growth and profitability. In our Tucows Domains segment, the Internet and e-commerce are characterized by rapid technological change.
For example, Verisign, the registry for .com, presently charges a $8.97 fee for each .com registration and ICANN currently charges a $0.18 fee for each .com domain name registered in the gTLDs that fall within its purview. We have no control over these agencies and cannot predict when they may increase their respective fees.
For example, Verisign, the registry for .com, presently charges a $9.59 fee for each .com registration and ICANN currently charges a $0.18 fee for each .com domain name registered in the gTLDs that fall within its purview. We have no control over these agencies and cannot predict when they may increase their respective fees.
However, it’s possible that another medium that’s either better or more economically/easily deployed could be developed in the longer term, or wireless could be improved enough to supplant the need for fiber in certain types of installations, like multi-family units, that would impact Ting Fiber’s ability to grow.
However, it’s possible that another medium, that’s better or more economically/easily deployed, could be developed in the longer term, or wireless could be improved enough to supplant the need for fiber in certain types of installations, like multi-family units, that would impact Ting’s ability to grow.
In order to continue the planned expansion of the Ting Internet footprint and fund future operating losses, we will need to access Milestone financing through the UPA as well as engage in equity and further debt financing.
In order to continue the planned expansion of the Ting Internet footprint and fund future operating losses, we will need to access Milestone Fundings under the UPA, as well as engage in equity and further debt financing.
Lower prices may also make our services more accessible to new, lower-value customers with less disposable income available to spend on our services. In addition, if prices decline, customers without long-term contracts may change their service providers more frequently, thereby increasing our churn and resulting in higher acquisition costs to replace those customers.
Any subsidies or price reductions may also make our services more accessible to new, lower-value customers with less disposable income available to spend on our services. In addition, if prices decline, customers without long-term contracts may change their service providers more frequently, thereby increasing our churn and resulting in higher acquisition costs to replace those customers.
Any of the foregoing or other factors could harm our ability to achieve anticipated levels of profitability from acquired businesses or to realize other anticipated benefits of acquisitions or return of capital on our investments.
Any of the foregoing or other factors could harm our ability to achieve anticipated levels of profitability from the acquired technology or business or to realize other anticipated benefits of acquisitions or return of capital on our investments.
In addition, such changes in laws could increase our costs of doing business, subject our business to increased liability or prevent us from delivering our services over the Internet, thereby harming our business and results of operations. 19 Table of Contents Our Fiber Internet businesses rely on Network Operators.
In addition, such changes in laws could increase our costs of doing business, subject our business to increased liability or prevent us from delivering our services over the Internet, thereby harming our business and results of operations. Our Ting Internet businesses rely on Network Operators.
In recognition of the evolving nature of the internet services market and to make it easier to clearly differentiate each service we offer from our competitors, we enhanced our branding by focusing our primary service offerings under six distinct brands namely “OpenSRS”, “eNom”, “Hover", "EPAG", "Ascio" and “Ting”.
In recognition of the evolving nature of the Internet services market and to mak e it easier to clearly differentiate each service we offer from our competitors, we enhanced our branding by focusing our primary service offerings under seven distinct brands namely “OpenSRS”, “eNom”, “Hover", "EPAG", "Ascio", “Ting”, and "Wavelo".
Regarding Wavelo, DISH is our main customer and represents majority of our revenues until such time that we are able to scale our services to other customers interested in our enablement services.
Regarding Wavelo, DISH is our main customer and represents the majority of our revenues until such time that we are able to scale our services to other customers.
Cost increases, loss of traffic or failure to accommodate new technologies or changing business requirements could harm our operating results and financial condition. In our Wavelo segment, the U.S. wireless communications industry is experiencing rapid growth of new technologies, products and services.
Cost increases, loss of traffic or failure to accommodate new technologies or changing business requirements could harm our operating results and financial condition. 10 Table of Contents In our Wavelo segment, the U.S. wireless communications industry is experiencing rapid growth of new technologies, products and services, like adoption of artificial intelligence.
In light of the material weakness identified, we performed additional analysis and other post-closing procedures to ensure that our consolidated financial statements were prepared in accordance with GAAP and accurately reflected our financial position and results of its operations as of and for the year ended December 31, 2022.
In light of the material weakness identified, we performed additional analysis and other post-closing procedures to ensure that our consolidated financial statements accurately reflected our financial position and results of its operations as of and for the year ended December 31, 2023.
On February 9, 2023, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The $40 million buyback program commenced on February 10, 2023 and is expected to terminate on February 9, 2024.
On February 22, 2024, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. The $40 million buyback program commenced on February 23, 2024 and is expected to terminate on February 22, 2025.
Additionally, as part of the DISH Purchase Agreement executed in the year ending December 31, 2020 ("Fiscal 2020"), the Company granted DISH the right to use the name "Ting" and its associated domain name over a 24-month period which was then subsequently extended until the end of 2023, after which DISH has an option to purchase the brand from the Company.
Additionally, as part of the DISH Purchase Agreement executed in the year ending December 31, 2020 ("Fiscal 2020"), the Company granted DISH the right to use the name "Ting" and its associated domain name over a 24-month period, after which DISH had an option to purchase the brand from the Company.
The success of all of our segments depends on the continued development, acceptance and widespread access to the Internet, and its existing domain system and infrastructure as a foundational resource for communication and commerce. 10 Table of Contents In our Ting segment, a number of factors could prevent the continued growth and acceptance of symmetrical gigabit Internet infrastructure and service as a medium for faster Internet communication, including (a) the unwillingness of companies and customers to shift their purchasing from traditional ISP vendors to alternative vendors like Ting Fiber; (b) Fiber infrastructure may not be able to support the demands placed on it, and its performance and reliability may decline as usage grows; or (c) where the development of alternative, wireless technologies (such as 5G) that could provide a similar or reasonably acceptable Internet speed and service without a fixed connection/physical network.
In our Ting segment, a number of factors could prevent the continued growth and acceptance of symmetrical gigabit Internet infrastructure and service as a medium for faster Internet communication, including (a) the unwillingness of companies and customers to shift their purchasing from traditional ISP vendors to alternative vendors like Ting Internet; (b) Fiber infrastructure may not be able to support the demands placed on it, and its performance and reliability may decline as usage grows; or (c) where the development of alternative, wireless technologies could provide a similar or reasonably acceptable Internet speed and service without a fixed connection/physical network.
A cyber squatter is generally defined in the ACPA as one who registers a domain that is identical or similar to another party’s trademark, or the name of another living person, with the bad faith intent to profit from use of the domain.
This law seeks to curtail a practice commonly known in the domain registration industry as cybersquatting. A cyber squatter is generally defined in the ACPA as one who registers a domain that is identical or similar to another party’s trademark, or the name of another living person, with the bad faith intent to profit from use of the domain.
Factors such as the availability of credit, changes in laws (including laws relating to taxation), trade barriers, currency exchange rates and controls, and national and international political circumstances (including wars, terrorist acts or security operations) could have a material adverse effect on our business and investments, which could reduce our revenue, profitability and value of our assets.
Factors such as the availability of credit, changes in laws (including laws relating to taxation), trade barriers, currency exchange rates and controls, and national and international political circumstances including armed conflicts, wars, terrorist acts or security operations, and other geopolitical conflicts, such as the ongoing conflicts between Russia and Ukraine, Hamas and Israel, and the possible expansion of such conflict in surrounding areas could have a material adverse effect on our business and investments, which could reduce our revenue, profitability and value of our assets.
This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially and adversely impact our business and financial condition. The Company’s success depends on the continued service and availability of key personnel .
This failure could negatively affect the market price and trading liquidity of our common stock, negatively affect our ability to raise financing, and cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially and adversely impact our business and financial condition.
The Company pays a fee to Partner Network Providers in exchange for the use of the Internet network. Fees are commonly subject to minimum purchase commitments which can vary in their structure, but often increase as the Internet network is constructed and Ting is provided access to more serviceable addresses.
Fees are commonly subject to minimum purchase commitments which can vary in their structure, but often increase as the Internet network is constructed and Ting is provided access to more serviceable addresses.
Much of the Company’s future success depends on the continued availability and service of key personnel, including its Chief Executive Officer, executive team and other highly skilled employees. Experienced personnel in the technology industry are in high demand and competition for their talents is intense.
Much of the Company’s future success depends on the continued availability and service of key personnel, including its Chief Executive Officer, executive team and other highly skilled employees. Experienced personnel in the technology industry are in high demand and competition for their talents is intense. We may not be able to retain our key employees or replace them when necessary.
This could incur significant and recurring penalties until such a time that the contract is complete. These penalties would negatively impact our operational performance and financial results if enforced by the MNO.
Failing to meet the minimum commitments could cause our retail mobile services to incur significant, and recurring, penalties until such a time that the contract is complete. These penalties would negatively impact our operational performance and financial results if enforced by the MNO.
The amendment confirms that Verisign will operate the .com registry until 2024 and permits Verisign to pursue with ICANN an up to 7 percent increase in the prices for .com domain names, in each of the last four years of the six-year term of the .com Registry Agreement.
The amendment confirms that Verisign will operate the .com registry until 2024 and permits Verisign to pursue with ICANN an up to 7 percent increase in the prices for .com domain names, in each of the last four years of the six-year term of the .com Registry Agreement.The changes also affirm that Verisign may not vertically integrate or operate as a registrar in the .com top level domain.
These restrictions, subject in certain cases to customary baskets, exceptions, and incurrence-based ratio tests, may limit our or our subsidiaries' ability to engage in some transactions, including the following: incurring additional indebtedness and issuing stock; paying dividends, share repurchases or making other restricted payments or investments; selling assets, properties, or licenses that we have or in the future may procure; creating liens on assets; engaging in mergers, acquisitions, business combinations, or other transactions. 14 Table of Contents Excluding-Ting’s trailing twelve month debt to adjusted EBITDA ratio was 3.978:1.00 as of December 31, 2022.
These restrictions, subject in certain cases to customary baskets, exceptions, and incurrence-based ratio tests, may limit our subsidiaries' ability to engage in some transactions, including the following: incurring additional indebtedness and issuing stock; paying dividends, share repurchases or making other restricted payments or investments; selling assets, properties, or licenses that we have or in the future may procure; creating liens on assets; engaging in mergers, acquisitions, business combinations, or other transactions.
Due to the fact that all of our services are Internet based, the amount of data we store for our users on our servers (including personal information) has been increasing. We make extensive use of online services and centralized data processing, including through third-party service providers.
Due to the fact that all of our services are Internet based, the amount of data we store for our users on our servers (including personal information) naturally increases. We make extensive use of online services and centralized data processing, including through third-party service providers. The secure maintenance and transmission of customer information is an important element of our operations.
If we experience difficulties with regard to these arrangements or are unable to negotiate on commercially reasonable terms or at all with future vendors, it could result in additional expense, loss of customers and revenue, interruption of our services or a delay in the roll-out of new technology and services for our customers. 12 Table of Contents Our systems face security risks, and any compromise of the security of these systems could disrupt our business, damage our reputation and result in the disclosure of confidential information, legal liability for damages and loss of customers.
If we experience difficulties with regard to these arrangements or are unable to negotiate on commercially reasonable terms or at all with future vendors, it could result in additional expense, loss of customers and revenue, interruption of our services or a delay in the roll-out of new technology and services for our customers.
The terms of the LLC Agreement with Generate prohibit Tucows from funding the operations or capital investments in Ting, LLC with funds generated by its subsidiaries outside of Ting, LLC or its wholly owned subsidiaries (“Excluding-Ting”).
The terms of Ting Fiber, LLC'S amended and restated limited liability company agreement (the "LLC Agreement") with Generate prohibit Tucows from funding the operations or capital investments in Ting Fiber, LLC with funds generated by its subsidiaries outside of Ting Fiber, LLC or its wholly owned subsidiaries (“Tucows businesses excluding Ting”).
These restrictions could limit our ability to react to changes in our operating environment or the economy. Triggering the make-whole provision could have a material adverse effect on our business. Any future indebtedness that we incur may contain similar or more restrictive covenants.
These restrictions could limit our ability to react to changes in our operating environment or the economy. Triggering the make-whole provision could have a material adverse effect on our business.
We are subject to minimum purchase commitments with some partner network providers In some Ting markets, our Ting segment operates Internet networks owned by third parties, such as municipalities or private entities (“Partner Network Providers”), rather than owning and constructing the Internet network ourselves.
In some Ting markets, our Ting segment operates Internet networks owned by third parties, such as municipalities or private entities (“Partner Network Providers”), rather than owning and constructing the Internet network ourselves. The Company pays a fee to Partner Network Providers in exchange for the use of the Internet network.
Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Implementation of new technology related to the control system may result in misstatements due to errors that are not detected and corrected during testing. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
New taxes could also create significant increases in internal costs necessary to capture data, and collect and remit taxes. Any of these events could have an adverse effect on our business and results of operations.
New taxes could also create significant increases in internal costs necessary to capture data, and collect and remit taxes. Any of these events could have an adverse effect on our business and operating results. 17 Table of Contents The Company’s success depends on the continued service and availability of key personnel .
We may not be able to retain our key employees or replace them when necessary. 16 Table of Contents Our business depends on our strong brands. If we are not able to maintain and enhance our brands, our ability to expand our customer base will be impaired and our business and operating results will be harmed .
Our business depends on our strong brands. If we are not able to maintain and enhance our brands, our ability to expand our customer base will be impaired and our business and operating results will be harmed .
If any of these events occur, our operational performance and financial results, in particular those of our Fiber Internet business may be adversely affected.
If any of these events occur, our operational performance and financial results, in particular those of our Fiber Internet business may be adversely affected. We are subject to minimum purchase commitments with some partner network providers.
The secure maintenance and transmission of customer information is an important element of our operations. From time to time, concerns have been expressed about whether our services compromise the privacy of our users and others.
From time to time, concerns have been expressed about whether our services compromise the privacy of our users and others.
Our ability to achieve the Milestones to access the additional funding, as well as to generate cash flow from operations to make the payments in respect of the preferred return, will depend on our future performance, which will be affected by a range of economic, competitive and business factors as well as changes in government monetary or fiscal policy.
Our ability to remain in compliance with our operating restrictions, generate cash flow from operations to maintain reserve account, make principal, interest payments on our debt will depend on our future performance, which will be affected by a range of economic, competitive and business factors as well as changes in government monetary or fiscal policy.
Failure to maintain compliance with the operating restrictions of our credit facility could result in default and could have a material adverse effect on our business.O n March 14, 2023 th e Company entered into the Credit Agreement Amendment with its existing syndicate of lenders.
Failure to maintain compliance with the operating restrictions of the 2023 Credit Facility could result in default and could have a material adverse effect on our business.
New and existing laws may cover issues such as: - pricing controls; - the creation of additional generic top-level domains and country code domains; - consumer protection; - cross-border domain registrations; - trademark, copyright and patent infringement; - domain dispute resolution; and - the nature or content of domains and domain registration.
New and existing laws may cover issues such as: - pricing controls; - the creation of additional generic top-level domains and country code domains; - consumer protection; - cross-border domain registrations; - trademark, copyright and patent infringement; - domain dispute resolution; and - the nature or content of domains and domain registration. 19 Table of Contents An example of legislation passed in response to novel intellectual property concerns created by the Internet is the ACPA enacted by the United States government in November 1999.
Investors may be unable to resell their common stock following periods of volatility because of the market’s adverse reaction to this volatility.
Our share price has varied recently and the price of our common stock may decrease in the future, regardless of our operating performance. Investors may be unable to resell their common stock following periods of volatility because of the market’s adverse reaction to this volatility.
The changes also affirm that Verisign may not vertically integrate or operate as a registrar in the .com top level domain. Verisign acted on this ability to raise pricing during the year ended December 31, 2022 ("Fiscal 2022"), increasing our cost of .com registrations by 6.9 percent, relative to the prior year.
Verisign acted on this ability to raise pricing during the year ended December 31, 2023 ("Fiscal 2023"), increasing our cost of .com registrations by 6.9 percent, relative to the prior year.
(1) As defined in Note 13 - "Redeemable preferred shares" of the Company's Consolidated Financial Statements. Our debt agreements impose significant operating and financial restrictions on us and our subsidiaries, which may prevent us from capitalizing on business opportunities across the Company. Breaching these agreements could have a materially adverse impact on the Company.
Our debt agreements impose significant operating and financial restrictions on us and our subsidiaries, which may prevent us from capitalizing on business opportunities across the Company. Breaching these agreements could have a materially adverse impact on the Company. The agreements governing our current 2023 Credit Facility impose significant operating and financial restrictions on Tucows businesses excluding Ting.
Our financing partner Generate may not grant permission for Ting, LLC to engage in further debt or equity financing. Failure to access the additional funding, could have a material adverse effect on our business. Excluding-Ting is financed by the Company’s credit facility.
Our financing partner, Generate, may not grant permission for Ting Fiber, LLC to engage in further debt or equity financings. Failure to access the additional funding, could have a material adverse effect on our business. In addition, the terms of the LLC Agreement restrict distribution from Ting Fiber, LLC's net cash flow without Generate's consent.
Disputes concerning the ownership or rights to use intellectual property and litigation involving other rights of third parties could be costly and time-consuming to litigate, may distract management from operating the business, and may result in us paying significant damage awards, losing significant rights and our ability to operate all or a portion of our business .
Any major compromise of our data or network security, failure to prevent or mitigate the loss of our services or customer information and delays in detecting any such compromise or loss could disrupt our operations, impact our reputation and subscribers' willingness to purchase our services and subject us to additional costs and liabilities, including litigation, which could be material. 12 Table of Contents Disputes concerning the ownership or rights to use intellectual property and litigation involving other rights of third parties could be costly and time-consuming to litigate, may distract management from operating the business, and may result in us paying significant damage awards, losing significant rights and our ability to operate all or a portion of our business .
As of March 13, 2023, our outstanding debt under our credit facility was $239.7 million with remaining committed funds of $0.3 million. Absent sufficient cash flows from operations, Excluding-Ting may need to engage in equity or debt financings to secure additional funds to meet our operating and capital needs.
Absent sufficient cash flows from operations, Tucows businesses excluding Ting may need to engage in equity or debt financings to secure additional funds to meet our operating and capital needs.
In our Retail Mobile Services, the fact that we now retain control over such a small subset of our historical subscriber base and that all of those customers are fixed to one MNO network could hinder our ability in the future to negotiate favorable rates and access to the mobile services mentioned above.
In our retail mobile services, we retain control over such a small subset of our historical subscriber base all of which are fixed to one MNO network which could hinder our ability to negotiate favorable rates and access to the mobile services mentioned above in the future. 9 Table of Contents In our Tucows Domains segment, each registry typically imposes a fee in association with the registration of each domain name and any increases in fees could adversely impact our business.
If after this period DISH opts to purchase the Ting brand from the Company, we will need to rebrand our Ting Fiber Internet business. However, DISH has formally refused their option to purchase the Ting brand. Any actions taken by DISH as part of the transactions contemplated by the DISH Purchase Agreement may impact the Ting brand's reputation.
DISH has formally refused their option to purchase the Ting brand, however the right to use the name "Ting" by DISH was subsequently extended by the Company until the end of Fiscal 2024. Any actions taken by DISH as part of the transactions contemplated by the DISH Purchase Agreement may impact the Ting brand's reputation.
In any situation where the Company is seeking such debt or equity financing, it may not be able to secure additional debt or equity financing on favorable terms, or at all, at the time when we need that funding.
The covenants and restrictions on the 2023 Credit Facility may prevent the Tucows businesses excluding Ting from accessing the remaining committed funds if additional financing is required. 14 Table of Contents In any situation where the Company is seeking such debt or equity financing, it may not be able to secure additional debt or equity financing on favorable terms, or at all, at the time when funding is needed.
Our covenants under the Company’s credit facility required us to maintain a debt to adjusted EBITDA ratio of 4.00:1.00 until September 29, 2023.
The trailing twelve month debt to Adjusted EBITDA ratio was 3.42:1.00as of December 31, 2023 for the Tucows businesses excluding Ting. Our covenants under the Company’s 2023 Credit Facility required us to maintain a debt to Adjusted EBITDA ratio of 4.25:1.00 until March 30, 2024.
The Company’s wholly owned subsidiary, Ting LLC as well as Ting LLC’s wholly owned subsidiaries are financed by Generate through the Unit Purchase Agreement (“UPA”). As of March 13, 2023 our outstanding preferred units purchased under the UPA was $117.5 million, with a further capital commitment of $82.5 million available to Ting, LLC through Milestone Fundings (1) .
As ofApril 1, 2024, our outstanding preferred units purchased under the UPA was $91.5 million, with a further capital commitment of $108.5 million available to Ting LLC through Milestone Fundings.
The Company does not use the interest rate swap for trading or speculative purposes. The interest rate swap contract matures in June 2023. Rising inflation and interest rates may adversely affect our businesses, financial condition, and operating results . The Company continues to operate in a challenging macro environment as inflation and interest rates continue to rise globally.
Rising inflation and interest rates may adversely affect our businesses, financial condition, and operating results . The Company continues to operate in a challenging macro environment as inflation and interest rates continue to rise globally. The impact of these issues on our business will vary by geographic market and operating segment.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCurrently, substantially all of our computer and communications hardware is located at our facilities or at server hosting facilities in Toronto, Ontario, California, Centennial, Colorado, Ashburn, Virginia, Charlottesville, Virginia, Durango, Colorado and Moncure, North Carolina. 21 Table of Contents Recent Sales of Unregistered Securities None.
Biggest changeCurrently, substantially all of our computer and communications hardware is located at our facilities or at server hosting facilitie s in Toronto, Ontario; San Jose, California; Centennial, Colorado; Ashburn, Virginia; Charlottesville, Virginia; Durango, Colorado; and Moncure, North Carolina. Recent Sales of Unregistered Securities None.
ITEM 2. PROPERTIES Our principal administrative, engineering, marketing and sales office is located in Toronto, Ontario, and consists of approximately 28,000 square feet. We lease satellite offices in various cities across the U.S. as well as internationally in Germany and Denmark. The Toronto, Ontario office supports all of our segments.
ITEM 2. PROPERTIES Our principal administrative, engineering, marketing and sales office is located in Toronto, Ontario, and consists of approximately 27,000 square feet. We lease satellite offices in various cities across the U.S. as well as internationally in Germany and Denmark. The Toronto, Ontario office supports all of our segments.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeYear Ended December 31, 2022 2021 2020 Common stock repurchased on the open market or through tender offer Number of shares - - 70,238 Aggregate market value of shares (in thousands) $ - $ - $ 3,281 Average price per share $ - $ - $ 46.70 Common stock received in connection with share-based compensation Number of shares 3,053 45,824 48,013 Aggregate market value of shares (in thousands) $ 197 $ 3,669 $ 2,957 Average price per share $ 64.67 $ 80.07 $ 61.58 23 Table of Contents STOCK PERFORMANCE GRAPH The following graph and table compares the Company's stock performance to three stock indices over a five-year period assuming a $100 investment was made on the last day of fiscal year 2017. 24 Table of Contents I TEM 6.
Biggest changeYear Ended December 31, 2023 2022 2021 Common stock received in connection with share-based compensation Number of shares - 3,053 45,824 Aggregate market value of shares (in thousands) $ - $ 197 $ 3,669 Average price per share $ - $ 64.67 $ 80.07 24 Table of Contents STOCK PERFORMANCE GRAPH The following graph and table compares the Company's stock performance to three stock indices over a five-year period assuming a $100 investment was made on the last day of fiscal year 2018. 25 Table of Contents I TEM 6.
We have not declared or paid any cash dividends on our common stock during the fiscal years ended December 31, 2022 and December 31, 2021, and we do not intend to do so in the immediate future, but we may decide to do so in the future depending on ongoing market conditions.
We have not declared or paid any cash dividends on our common stock during the fiscal years ended December 31, 2023 and December 31, 2022 , and we do not intend to do so in the immediate future, but we may decide to do so in the future depending on ongoing market conditions.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers 2023 Stock Buyback Program: On February 9, 2023, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers 2024 Stock Buyback Program: On February 22, 2024, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market.
The $40 million buyback program commenced on February 10, 2023 and is expected to terminate on February 9, 2024. 2022 Stock Buyback Program: On February 10, 2022, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market.
The $40 million buyback program commenced on February 23, 2024 and is expected to terminate on February 22, 2025. 2023 Stock Buyback Program: On February 9, 2023, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market.
The $40 million buyback program commenced on February 10, 2021 and terminated on February 9, 2022. The Company repurchased no shares under this program. Net Exercise of Stock Options: Our current equity-based compensation plans include provisions that allow for the “net exercise” of stock options by all plan participants.
The $40 million buyback program commenced on February 11, 2023 and terminated on February 9, 2022. The Company did not repurchase shares under this program. Net Exercise of Stock Options: Our current equity-based compensation plans include provisions that allow for the “net exercise” of stock options by all plan participants.
The $40 million buyback program commenced on February 11, 2023 and terminated on February 9, 2022. The Company repurchased no shares under this program. 2021 Stock Buyback Program: On February 9, 2021, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market.
The $40 million buyback program commenced on February 10, 2023 and terminated on February 9, 2024. The Company did not repurchase shares under this program. 2022 Stock Buyback Program: On February 10, 2022, the Company announced that its Board had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market.
As of March 13, 2023, Tucows had 74 shareholders of record.
As of April 1, 2024, Tucows had 74 shareholders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAs a result of the closing of the Credit Agreement Amendment, the Company is subject to the following financial covenants at all times, with monthly testing during the Leverage Step Up Period and reverting to quarterly tests thereafter: (i) maximum Total Funded Debt to Adjusted EBITDA Ratio of 4.50:1.00 from March 14, 2023 up to and including September 29, 2023; 4.00:1.00 from September 30, 2023 up to and including December 30, 2023; and 3.75:1.00 thereafter; and (ii) minimum Interest Coverage Ratio of 3.00:1.00.
Biggest changeIn addition, the Company has agreed to comply with the following financial covenants: (1) a leverage ratio by maintaining at all times a Total Funded Debt to Adjusted EBITDA Ratio of not more than (i) 4.50:1:00 at any time from and after the Closing Date to and including December 30, 2023; (ii) 4.25:1:00 from December 31, 2023 to and including March 30, 2024; (iii) 4.00:1.00 from March 31, 2024 to and including June 29, 2024; and (iv) 3.75:1.00 thereafter; and (2) an interest coverage ratio by maintaining as of the end of each rolling four financial quarter period, an Interest Coverage Ratio (as defined in the 2023 Credit Agreement) of not less than 3.00:1.00.
KEY BUSINESS METRICS AND NON-GAAP MEASURES We regularly review a number of business metrics, including the following key metrics and non-GAAP measures, to assist us in evaluating our business, measure the performance of our business model, identify trends impacting our business, determine resource allocations, formulate financial projections and make strategic business decisions.
KEY BUSINESS METRICS AND NON-GAAP MEASURES We regularly review a number of business metrics, including the following key metrics and non-GAAP measure, to assist us in evaluating our business, measure the performance of our business model, identify trends impacting our business, determine resource allocations, formulate financial projections and make strategic business decisions.
In addition, changes in our organizational structure or how our management allocates resources and assesses performance, could result in a change in our operating segments, requiring a reallocation and updated impairment analysis of goodwill and indefinite life intangible assets.
In addition, changes in our organizational structure or how our management allocates resources and assesses performance, could result in a change in our operating segments, requiring a reallocation and updated impairment analysis of goodwill and indefinite life intangible assets.
The Company's billing cycle for all Ting Internet customers is computed based on the customer's activation date. Since consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access within each reporting period.
The Company's billing cycle for all Ting Internet customers is computed based on the customer's activation date. Since consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access within each reporting period.
In addition, revenues associated with the sale of Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.
In addition, revenues associated with the sale of Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. 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, as is the case for service requiring installation, then revenue is not recognized until a customer's service is activated.
In those cases, where payment is not received at the time of sale, as is the case for service requiring installation, then revenue is not recognized until a customer's service is activated.
Customers may also be billed fixed platform fees and granted fixed credits as part of the consideration for long-term contracts. Consideration received is allocated to platform services and bundled professional services and recognized as each service obligation is fulfilled.
Customers may also be billed fixed platform fees and granted fixed credits as part of the consideration for long-term contracts. Consideration received is allocated to platform services and bundled professional services and recognized as each service obligation is fulfilled.
Any fixed fees for Wavelo are recognized into revenue evenly over the service period, while variable usage fees are recognized each month as they are consumed. Professional services revenue is recognized as the hours of professional services granted to the customer are used or expire.
Any fixed fees for Wavelo are recognized into revenue evenly over the service period, while variable usage fees are recognized each month as they are consumed. Professional services revenue is recognized as the hours of professional services granted to the customer are used or expire.
When consideration for these platform services is received before the service is delivered, the revenue is initially deferred and recognized only as the Company performs its obligation to provide services. Likewise, if platform services are delivered before the Company has the unconditional right to invoice the customer, revenue is recognized as a Contract Asset.
When consideration for these platform services is received before the service is delivered, the revenue is initially deferred and recognized only as the Company performs its obligation to provide services. Likewise, if platform services are delivered before the Company has the unconditional right to invoice the customer, revenue is recognized as a Contract Asset.
In addition, this service fuels other revenue categories as it often is the initial service for which a reseller will engage us, enabling us to follow on with other services and allowing us to add to our portfolio by purchasing names registered through us upon their expiration.
In addition, this service fuels other revenue categories as it often is the initial service for which a reseller will engage us, enabling us to follow on with other services and allowing us to add to our portfolio by purchasing names registered through us upon their expiration.
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.
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.
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.
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.
We also derive revenue from other value-added services, which primarily consists of proceeds from the OpenSRS, eNom and Ascio domain expiry streams. Retail We derive revenues mainly from Hover and eNom’s retail properties through the sale of retail domain name registration and email services to individuals and small businesses.
We also derive revenue from other value-added services, which primarily consists of proceeds from the OpenSRS, eNom and Ascio domain expiry streams. Retail We derive revenues mainly from Hover and eNom’s retail properties through the sale of retail domain name registration and email services to individuals and small businesses.
Ting Mobile wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting Mobile contracts are billed based on the customer's selected rate plan, which can either be usage based or an unlimited plan. All rate plan options are charged to customers on a postpaid, monthly basis at the end of their billing cycle.
Ting Mobile wireless usage contracts grant customers access to standard talk, text and data mobile services. Ting Mobile contracts are billed based on the customer's selected rate plan, which can either be usage based or an unlimited plan. All rate plan options are charged to customers on a postpaid, monthly basis at the end of their billing cycle.
All future revenues associated with Retail Mobile Services stream will only be for this subset of customers retained by the Company, as mentioned above. Ting Mobile 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.
All future revenues associated with retail mobile services stream will only be for this subset of customers retained by the Company, as mentioned above. Ting Mobile 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 Mobile customers is computed based on the customer's activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period.
The Company's billing cycle for all Ting Mobile customers is computed based on the customer's activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period.
In addition, revenues associated with the sale of wireless devices and accessories are recognized when title and risk of loss is transferred to the customer and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue These Mobile Services revenue streams also includes transitional services provided to DISH.
In addition, revenues associated with the sale of wireless devices and accessories are recognized when title and risk of loss is transferred to the customer and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue. These mobile services revenue streams also includes transitional services provided to DISH.
Though a significant portion of the Company’s domain services revenues are prepaid by our customers, where the Company does collect receivables, significant management judgment is required at the time revenue is recorded to assess whether the collection of the resulting receivables is reasonably assured. On an ongoing basis, we assess the ability of our customers to make required payments.
Though a significant portion of the Company’s domain services revenues are prepaid by our customers, where the Company does collect receivables, management judgment is required at the time revenue is recorded to assess whether the collection of the resulting receivables is reasonably assured. On an ongoing basis, we assess the ability of our customers to make required payments.
Hardware costs include the cost of equipment sold to end customers, including routers, ONTs, and IPTV products, and any inventory adjustments on this inventory.
Hardware costs include the cost of equipment sold to end customers, including routers, ONTs, and IPTV products, and any adjustments on this inventory.
Wholesale - Value-Added Services Costs of revenues for value-added services include licensing and royalty costs related to the provisioning of certain components of related to hosted email and fees paid to third-party hosting services.
Wholesale - Value-Added Services Costs of revenues for value-added services include licensing and royalty costs related to the provisioning of certain components for hosted email and fees paid to third-party hosting services.
COST OF REVENUES Ting Cost of revenues primarily includes the costs for provisioning high speed Internet access for Ting and its subsidiaries - Cedar, and Simply Bits, which is comprised of network access fees paid to third-parties to use their network, leased circuit costs to directly support enterprise customers, the personnel and related expenses (net of capitalization) related to the physical planning, design, construction and build out of the physical Fiber network and as well as personnel and related expenses (net of capitalization) related to the installation, repair, maintenance and overall field service delivery of the Fiber business.
COST OF REVENUES Ting Cost of revenues primarily includes the costs for provisioning high speed Internet access for Ting and its subsidiaries - Cedar, and Simply Bits, which is comprised of network access fees paid to third-parties to use their network, leased circuit costs to directly support enterprise customers, the personnel and related expenses (net of capitalization) for the physical planning, design, construction and build out of the physical Fiber network, and as well as personnel and related expenses (net of capitalization) for the installation, activation, repair, maintenance and overall field service delivery of the Ting business.
Where these retail mobile services revenues were previously disclosed as part of a Mobile Services segment in the prior year, effective January 1, 2022 we have decided to exclude retail telephony services and transition services revenues from segment EBITDA results as they are no longer centrally managed and not monitored by or reported to our CEO by segment.
Where these retail mobile services revenues were previously disclosed as part of a Mobile Services segment in the prior year, effective January 1, 2022 we have decided to exclude retail telephony services and transition services revenues from segment Adjusted EBITDA results as they are no longer centrally managed and not monitored by or reported to our CEO by segment.
More recently, Ting has also integrated Wavelo’s ISOS and SM software to enable faster subscriber growth and footprint expansion. Wavelo's customers are billed monthly, on a postpaid basis. The monthly fees are variable, based on the volume of their subscribers utilizing the platform during a given month, to which minimums may apply.
More recently, Ting Internet has also integrated Wavelo’s ISOS and SM software to enable faster subscriber growth and footprint expansion. Wavelo's customers are billed monthly, on a postpaid basis. The monthly fees are variable, based on the volume of their subscribers utilizing the platform during a given month, to which minimums may apply.
These are billed monthly at set and established rates for services provided in period and include the provision of sales, marketing, customer support, order fulfillment, and data analytics related to the legacy customer base sold to DISH. The Company recognizes revenue as the Company satisfies its obligations to provide transitional services.
These are billed monthly at set and established rates for services provided in period and include the provision of sales, marketing, order fulfillment, and data analytics related to the legacy customer base sold to DISH. The Company recognizes revenue as the Company satisfies its obligations to provide transitional services.
These are billed monthly at set and established rates for services provided in period and include the provision of sales, marketing, customer support, order fulfillment, and data analytics related to the legacy customer base sold to DISH. The Company recognizes costs as the Company satisfies its obligations to provide professional services.
These are billed monthly at established rates for services provided in period and include the provision of sales, marketing, customer support, order fulfillment, and data analytics related to the legacy customer base sold to DISH. The Company recognizes costs as the Company satisfies its obligations to provide professional services.
Net income included non-cash charges and recoveries of $42.4 million such as depreciation, amortization, stock-based compensation, loss (gain) on change in fair value of currency forward contracts, net right of use operating asset or liability, accretion of contingent consideration, amortization of debt discount and issuance costs, impairment of property and equipment, loss on disposal of domain names, net amortization of contract costs, excess tax benefits on stock-based compensation, accretion of redeemable preferred shares, and deferred income taxes (recovery).
Net income included non-cash charges and recoveries of $42.4 million such as depreciation, amortization, stock-based compensation, loss (gain) on change in fair value of currency forward contracts, net right of use operating asset or liability, accretion of contingent consideration, amortization of debt discount and issuance costs, impairment of property and equipment, loss on disposal of domain names, net amortization of contract costs, excess tax benefits on stock-based compensation, accretion of redeemable preferred units, and deferred income taxes (recovery).
Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers. 32 Table of Contents Wholesale – Value-Added Services We derive revenue from domain related value-added services like digital certifications, WHOIS privacy and hosted email and by providing our resellers and retail registrant customers with tools and additional functionality to be used in conjunction with domain registrations.
Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers. 33 Table of Contents Wholesale – Value-Added Services We derive revenue from domain related value-added services like digital certifications, WHOIS privacy and hosted email and by providing our resellers and retail registrant customers with tools and additional functionality to be used in conjunction with domain registrations.
Cash Flow from Financing Activities Year ended December 31, 2022 Net cash inflows from financing activities during Fiscal 2022 totaled $132.0 million as compared to cash inflows of $73.1 million during Fiscal 2021.
Year ended December 31, 2022 Net cash inflows from financing activities during Fiscal 2022 totaled $132.0 million as compared to cash inflows of $73.1 million during Fiscal 2021.
See “Note 20 – Segment Reporting” of the Notes to the Consolidated Financial Statements included in this report for more information. (a) Ting Ting and its subsidiaries - Cedar, and Simply Bits includes the provision of high-speed Internet access services to select towns throughout the United States, with further expansion underway to both new and existing markets.
See “Note 21 – Segment Reporting” of the Notes to the Consolidated Financial Statements included in this report for more information. (a) Ting Ting and its subsidiaries - Cedar, and Simply Bits, includes the provision of high-speed Internet access services to select towns throughout the United States, with further expansion underway to both new and existing markets.
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. 29 Table of Contents Historically, our wholesale domain service has constituted the largest portion of our business and encompasses all of our services as an accredited registrar related to the registration, renewal, transfer and management of domain names.
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. 30 Table of Contents Historically, our wholesale domain service has constituted the largest portion of our business and encompasses all of our services as an accredited registrar related to the registration, renewal, transfer and management of domain names.
Other costs include field vehicle expenses, small sundry equipment and supplies consumed in building the Fiber network. 35 Table of Contents Wavelo Platform Services Cost of revenues to provide the new MONOS, ISOS and SM platforms, as well as our legacy Platypus ISP Billing software services including network access, provisioning and billing services for CSPs.
Other costs include field vehicle expenses, and small sundry equipment and supplies consumed in building the Fiber network. 36 Table of Contents Wavelo Platform Services Cost of revenues to provide the new MONOS, ISOS and SM platforms, as well as our legacy Platypus ISP Billing software services including network access, provisioning and billing services for CSPs.
Similarly, Platypus revenues are largely generated in the U.S., with a small portion earned in Canada and other countries. Domain Services Tucows Domains includes wholesale and retail domain name registration services, as well as value added services derived through our OpenSRS, eNom, Ascio, EPAG and Hover brands.
Similarly, Wavelo's revenues from Platypus are largely generated in the U.S., with a small portion earned in Canada and other countries. Domain Services Tucows Domains includes wholesale and retail domain name registration services, as well as value added services derived through our OpenSRS, eNom, Ascio, EPAG and Hover brands.
Value-Added Services include hosted email which provides email delivery and webmail access to millions of mailboxes, Internet security services, WHOIS privacy, publishing tools and other value-added services. All of these services are made available to end-users through a network of 35,000 web hosts, ISPs, and other resellers around the world.
Value-Added Services include hosted email which provides email delivery and webmail access to millions of mailboxes, Internet security services, WHOIS privacy, publishing tools and other value-added services. All of these services are made available to end-users through a network of web hosts, ISPs, and other resellers around the world.
The communications industry continues to compete on the basis of network reach and performance, types of services and devices offered, and price. Wavelo Wavelo launched as a proven asset for CSPs, with DISH using Wavelo’s MONOS software to drive additional value within its Digital Operator Platform since 2021.
The communications industry continues to compete on the basis of network reach and performance, types of services and devices offered, and price. Wavelo Wavelo launched as a proven asset for CSPs, with DISH using Wavelo’s MONOS software to drive additional value within its Digital Operator Platform.
The analysis was consistent with the approach we utilized in our analysis performed in prior years. In connection with business acquisitions that we have completed, we identify and estimate the fair value of net assets acquired, including certain identifiable intangible assets (other than goodwill) and liabilities assumed.
The analysis was consistent with the approach we utilized in prior years. In connection with business acquisitions that we have completed, we identify and estimate the fair value of net assets acquired, including certain identifiable intangible assets (other than goodwill) and liabilities assumed.
The second step is to measure the tax benefit that is more than 50% likely to be realized upon settlement. As at December 31, 2022, we did not recognize any uncertain tax provisions within the provision for income taxes.
The second step is to measure the tax benefit that is more than 50% likely to be realized upon settlement. As at December 31, 2023, we did not recognize any uncertain tax provisions within the provision for income taxes.
Total cash inflows were driven by $87.5 million of proceeds from redeemable preferred shares issued to Generate, $48.3 million of proceeds received from drawdown of the Amended Credit Facility, as well as $1.1 million from proceeds received on the exercise of stock options.
Total cash inflows were driven by $87.5 million of proceeds from redeemable preferred units issued to Generate, $48.3 million of proceeds received from drawdown of the Amended Credit Facility, as well as $1.1 million from proceeds received on the exercise of stock options.
These cash inflows were partially offset by $3.1 million for contingency consideration related to the acquisition of Cedar and Simply Bits, $1.0 million related to deferred preferred share financing costs for Ting, and $0.7 million related to the payment of loan payable costs.
These cash inflows were partially offset by $3.1 million for contingency consideration related to the acquisition of Cedar and Simply Bits, $1.0 million related to deferred preferred unit financing costs for Ting, and $0.7 million related to the payment of loan payable costs.
We earn revenues primarily from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations. In addition, we earn revenues from the sale of retail domain name registration and email services to individuals and small businesses.
Tucows Domains revenues primarily from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations. In addition, we earn revenues from the sale of retail domain name registration and email services to individuals and small businesses.
Any decision by these vendors to cancel or amend these programs for any reason may result in payments in future periods not being commensurate with what we have achieved during past periods. 27 Table of Contents Other opportunities, challenges and risks The Company is entitled to a long-term payment stream that is a function of the margin generated by the transferred Ting Mobile subscribers over the 10-year term of the DISH Purchase Agreement executed in Fiscal 2020.
Any decision by these vendors to cancel or amend these programs for any reason may result in payments in future periods not being commensurate with what we have achieved during past periods. 28 Table of Contents Other opportunities, challenges and risks The Company is entitled to a long-term payment stream that is a function of the margin generated by the transferred subscribers over the 10-year term of the DISH Purchase Agreement executed in Fiscal 2020.
A reconciliation of the federal statutory income tax rate to our effective tax rate is set forth in “Note 9 – Income Taxes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. 42 Table of Contents ADJUSTED EBITDA We believe that the provision of this supplemental non-GAAP measure allows investors to evaluate the operational and financial performance of our core business using similar evaluation measures to those used by management.
A reconciliation of the federal statutory income tax rate to our effective tax rate is set forth in “Note 10 – Income Taxes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. 43 Table of Contents ADJUSTED EBITDA We believe that the provision of this supplemental non-GAAP measure allows investors to evaluate the operational and financial performance of our core business using similar evaluation measures to those used by management.
There was no further impairment of goodwill or intangible assets, both definite and indefinite life, as a result of the annual impairment tests completed during the fourth quarters of 2022, 2021 or 2020. Accounting for Income Taxes We operate in various tax jurisdictions, and accordingly, our income is subject to varying rates of tax.
There was no impairment of goodwill or intangible assets, both definite and indefinite life, as a result of the annual impairment tests completed during the fourth quarters of 2023, 2022 or 2021. Accounting for Income Taxes We operate in various tax jurisdictions, and accordingly, our income is subject to varying rates of tax.
There was no impairment recorded on indefinite-life intangible assets during 2022, 2021 and 2020. 30 Table of Contents With regard to long-lived assets comprised of property and equipment and finite life intangible assets, we continually evaluate whether events or circumstances have occurred that indicate the remaining estimated useful lives of our definite-life intangible assets may warrant revision or whether the carrying amount of such assets may not be recoverable and exceed their fair value.
There was no impairment recorded on indefinite-life intangible assets during 2023, 2022 and 2021. 31 Table of Contents With regard to long-lived assets comprised of property and equipment and finite life intangible assets, we continually evaluate whether events or circumstances have occurred that indicate the remaining estimated useful lives of our definite-life intangible assets may warrant revision or whether the carrying amount of such assets may not be recoverable and exceed their fair value.
Included in the costs of provisioning mobile services is any penalties associated with the minimum commitments with our MNO partner. These Mobile Services costs also include the personnel and related costs of transitional services provided to DISH.
Included in the costs of provisioning mobile services are any penalties associated with the minimum commitments with our MNO partner. These mobile services costs also include the personnel and related costs of transitional services provided to DISH.
Excluding movements in exchange rates, we expect general and administrative expenses for Fiscal 2023, in absolute dollars, to increase when compared to Fiscal 2022 largely to support the growth of our business.
Excluding movements in exchange rates, we expect general and administrative expenses for Fiscal 2024, in absolute dollars, to increase when compared to Fiscal 2023 largely to support the growth of our business.
For information about geographic areas, see “Note 20– Segment Reporting” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
For information about geographic areas, see “Note 21 – Segment Reporting” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
Market development funds that do not represent a payment for distinct goods or services provided by the Company, and thus do not meet the criteria for revenue recognition under Accounting Standard Update ("ASU") 2014-09, are reflected as cost of goods sold and are recognized as earned.
Market development funds that do not represent a payment for distinct goods or services provided by the Company, and thus do not meet the criteria for revenue recognition under ASU 2014-09, are reflected as cost of goods sold and are recognized as earned.
See Note 9 to the Consolidated Financial Statements for further information regarding income taxes included in Part II, Item 8 of this Annual Report.
See "Note 10 - Income Taxes" to the Consolidated Financial Statements for further information regarding income taxes included in Part II, Item 8 of this Annual Report.
Under each of these platforms there are a variety of solutions that support CSPs, including subscription and billing management, network orchestration and provisioning, and individual developer tools. Wavelo launches as a proven asset for CSPs, with DISH using Wavelo’s MONOS software to drive additional value within its Digital Operator Platform since 2021.
Under each of these platforms there are a variety of solutions that support CSPs, including subscription and billing management, network orchestration and provisioning, and individual developer tools. Wavelo launched as a proven asset for CSPs, with DISH using Wavelo’s MONOS software to drive additional value within its Digital Operator Platform.
These figures exclude the increase in serviceable addresses and accounts attributable to the Simply Bits acquisition. 25 Table of Contents Wavelo Wavelo includes the provision of full-service platforms and professional services providing a variety of solutions that support CSPs, including subscription and billing management, network orchestration and provisioning, and individual developer tools.
These figures exclude the increase in serviceable addresses and accounts attributable to the Simply Bits acquisition. 26 Table of Contents Wavelo Wavelo includes the provision of full-service platforms and professional services providing a variety of solutions that support Communication Services providers ("CSPs"), including subscription and billing management, network orchestration and provisioning, and individual developer tools.
Losses incurred in one jurisdiction cannot be used to offset income taxes payable in another jurisdiction. Our ability to use income tax loss carry forwards and future income tax deductions is dependent upon our operations in the tax jurisdictions in which such losses or deductions arise.
Losses incurred in one jurisdiction cannot be used to offset taxable income in another jurisdiction. Our ability to use income tax loss carry forwards and future income tax deductions is dependent upon our operations in the tax jurisdictions in which such losses or deductions arise.
These are billed monthly at set and established rates for services provided in period and include the provision of sales, marketing, customer support, order fulfillment, and data analytics related to the legacy customer base sold to DISH. The Company recognizes revenue as the Company satisfies its obligations to provide transitional services.
These are billed monthly at established rates for services provided in period, including: the provision of sales, marketing, order fulfillment, and data analytics related to the legacy customer base sold to DISH. The Company recognizes revenue as the Company satisfies its obligations to provide transitional services.
Changes in estimates There were no material changes to our critical accounting estimates during Fiscal 2022. 28 Table of Contents Revenue Recognition Policy The Company’s revenues are derived from (a) the provisioning of retail fiber Internet services in our Ting segment, (b) the provisioning of CSP focused platform services and professional services in our Wavelo segment; and from (c) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue in our Tucows Domains segment.
Changes in estimates There were no material changes to our critical accounting estimates during Fiscal 2023. 29 Table of Contents SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition Policy The Company’s revenues are derived from (a) the provisioning of retail fiber Internet services in our Ting segment, (b) the provisioning of CSP focused platform and professional services in our Wavelo segment; and from (c) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue in our Tucows Domains segment.
Impairment of Goodwill and intangibles We evaluate factors such as macro-economic, industry and market conditions including the capital markets, the competitive environment, in addition to other internal factors including changes to our market capitalization, cash inflows, obligations and access to capital of our segments. We concluded that there were no indications of impairment under the qualitative approach.
We evaluate factors such as macro-economic, industry and market conditions including the capital markets, the competitive environment, in addition to other internal factors including changes to our market capitalization, cash inflows, obligations and access to capital of our segments. We concluded that there were no indications of impairment under the qualitative approach during Fiscal 2023.
As a form of consideration for the sale of the customer relationships, the Company receives a payout on the margin associated with the legacy customer base sold to DISH, over a period of 10 years. This has been classified as Other Income and not considered revenue in the current period.
As a form of consideration for the sale of the customer relationships, the Company receives a payout on the margin associated with the legacy customer base sold to DISH, over a period of 10 years. This has been classified as Other Income and not considered revenue in Fiscal 2022 or 2023.
Redemptions under the Unit Purchase Agreement are expected to be funded by growth in future cash flows, equity financing as well as alternative debt financing. Excluding-Ting Excluding-Ting's acquisitions and capital investments have been funded by the Company's operating income and the Company's existing Amended Credit Agreement.
Redemptions under the Unit Purchase Agreement are expected to be funded by growth in future cash flows, equity financing as well as alternative debt financing. Tucows Businesses Excluding Ting Tucows businesses excluding Ting, acquisitions and capital investments have been funded by the Company's operating income and the Company's existing 2023 Credit Agreement.
Our primary sales channel is through the Ting website. The primary focus of this segment is to provide reliable Gigabit Fiber and Fixed Wireless Internet services to consumer and business customers. Revenues are all generated in the U.S., have no fixed contract terms and are billed on a monthly basis, with unlimited bandwidth based on a fixed price.
The primary focus of this segment is to provide reliable Gigabit Fiber and Fixed Wireless Internet services to consumer and business customers. Revenues are all generated in the U.S., have no fixed contract terms and are billed on a monthly basis, with unlimited bandwidth based on a fixed price.
For Fiscal 2023, the Company plans to fund Excluding-Ting's cash requirements solely through operating income, while making discretionary loan repayments to create greater operating flexibility and access to additional financing. 55 Table of Contents In the long-term, Excluding-Ting may seek additional financing to accelerate the growth of our Wavelo business, repurchase shares or future acquisitions.
For Fiscal 2024, the Company plans to fund the cash requirements of Tucows businesses excluding Ting solely through operating income, while making discretionary loan repayments to create greater operating flexibility and access to additional financing. 48 Table of Contents In the long-term, Tucows businesses excluding Ting may seek additional financing to accelerate the growth of our Wavelo business, repurchase shares or future acquisitions.
Our adjusted EBITDA definition excludes depreciation, amortization of intangible assets, income tax provisions, interest expense (net), accretion of contingent consideration, stock-based compensation, asset impairment, gains and losses from unrealized foreign currency transactions and costs that are one-time in nature and not indicative of on-going performance (profitability), including acquisition and transition costs.
Our Adjusted EBITDA definition excludes provision for income tax, depreciation, amortization of intangible assets, asset impairment, interest expense (net), loss on debt extinguishment, accretion of contingent liabilities, stock-based compensation, gains and losses from unrealized foreign currency transactions and costs that are one-time in nature and not indicative of on-going performance (profitability), including acquisition and transition costs.
“Note 2 – Significant Accounting Policies” of the Notes to the Consolidated Financial Statements for Fiscal 2022 included in Part II, Item 8 of this Annual Report, includes further information on the significant accounting policies and methods used in the preparation of our consolidated financial statements. The preparation of the consolidated financial statements in accordance with U.S.
“Note 2 – Significant Accounting Policies” in the Notes to the Consolidated Financial Statements for Fiscal 2023 included in Part II, Item 8 of this Annual Report, includes further information on the significant accounting policies and methods used in the preparation of our consolidated financial statements.
The Wavelo segment also includes the Platypus brand and platform, our legacy billing solution for ISPs, that was previously reported under the Ting segment. Wavelo revenues from MONOS, ISOS, SM and professional services are all generated in the U.S. and our customer agreements have set contract lengths with the underlying CSP.
The Wavelo segment also includes the Platypus brand and platform, our legacy billing solution for ISPs. The revenues from Wavelo's MONOS, ISOS, SM and professional services are all generated in the U.S. and our customer agreements have set contract lengths with the underlying CSP.
Other Professional Services This revenue stream includes any other professional services earned in connection with the Wavelo business from the provision of standalone technology services development work. These are billed to our customers monthly at set and established rates for services provided in period.
Other Professional Services This revenue stream includes any other professional services earned in connection with the Wavelo business from the provision of standalone technology services development work. These are billed to our customers monthly at set and established rates for services provided in period. The Company recognizes revenue as the Company satisfies its obligations to provide professional services.
Our primary distribution channel is a global network of approximately 35,000 resellers that operate in over 150 countries and who typically provide their customers, the end-users of Internet-based services, with solutions for establishing and maintaining an online presence.
Our primary distribution channel is a global network of more than 35,000 resellers that operate in almost 200 countries and who typically provide their customers, the end-users of Internet-based services, with solutions for establishing and maintaining an online presence.
The increase was a result of Fiscal 2022 including a disposal of minor internal use software related to Tucows Domains for which the Company no longer expects to realize the initial use and intended benefit that it initially did when those development costs were initially capitalized.
The decrease was a result of Fiscal 2022 including a disposal of minor internal use software related to Tucows Domains for which the Company no longer expects to realize the initial use and intended benefit that it initially did when those development costs were initially capitalized. No such disposals exist during the current period.
At December 31, 2021, we had $130.4 million in goodwill related to our acquisitions and $50.4 million in intangible assets comprised of indefinite life intangibles of $12.3 million and finite life intangible assets of $38.1 million. As described above, we report our financial results as three operating segments, Ting, Wavelo and Tucows Domains.
At December 31, 2022, we had $130.4 million in goodwill related to our acquisitions and $39.8 million in intangible assets comprised of $12.3 million of indefinite life intangibles and $27.5 million of finite life intangible assets. As described above, we report our financial results as three operating segments, Ting, Wavelo and Tucows Domains.
Utilized cash of $18.5 million from the changes in the contract asset from DISH, inventory, accounts receivable, deferred revenue, customer deposits and accreditation fees payable were offset by positive contributions of $23.5 million from movements in accrued liabilities, accounts payable, prepaid expenses and deposits, income taxes recoverable, and deferred costs of fulfillment.
Positive contributions of $22.7 million from movements in accrued liabilities, contract asset, customer deposits, deferred revenue, income taxes recoverable, and inventory, were partially offset by utilized cash of $10.2 million from the changes in accounts payable, accounts receivable, deferred costs of fulfillment, prepaid expenses and deposits, and accreditation fees payable.
Because adjusted EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a liquidity measure. See the Consolidated Statements of Cash Flows included in the attached financial statements.
Because Adjusted EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a liquidity measure. For liquidity measures, see the Consolidated Statements of Cash Flows included in Part II, Item 8 of this Annual Report.
The Company's credit facility expires on September 30, 2024 and the Company will be required to refinance the Amended Credit Agreement once it becomes due .
The Company's 2023 Credit Facility expires on September 30, 2026 and the Company will be required to refinance the 2023 Credit Facility once it becomes due.
Net income, after adjusting for non-cash charges, during Fiscal 2020 was $36.0 million, a decrease of 6% when compared to the prior year.
Net income, after adjusting for non-cash charges, during Fiscal 2021 was $31.6 million, a decrease of 12% when compared to the prior year.
DEPRECIATION OF PROPERTY AND EQUIPMENT (Dollar amounts in thousands of U.S. dollars) Year ended December 31, 2022 2021 Depreciation of property and equipment $ 598 $ 534 Increase over prior period $ 64 Increase - percentage 12 % Percentage of net revenues 0 % 0 % Depreciation costs for Fiscal 2022 increased by less than $0.1 million to $0.6 million as compared to Fiscal 2021.
DEPRECIATION OF PROPERTY AND EQUIPMENT (Dollar amounts in thousands of U.S. dollars) Year ended December 31, 2023 2022 Depreciation of property and equipment $ 567 $ 598 Decrease over prior period $ (31 ) Decrease - percentage (5 )% Percentage of net revenues - % - % Depreciation costs for Fiscal 2023 decreased by less than $0.1 million to $0.6 million as compared to Fiscal 2022.
INCOME TAXES The following table presents our provision for income taxes for the periods presented: (Dollar amounts in thousands of U.S. dollars) Year ended December 31, 2022 2021 Provision for income taxes $ (217 ) $ 3,906 Decrease in provision over prior period $ (4,123 ) Decrease - percentage (106 )% Effective tax rate 1 % 54 % Income taxes decreased by $4.1 million and the effective tax rate decreased from 54% to 1% when compared to the year ended December 31, 2021.
INCOME TAXES The following table presents our provision for income taxes for the periods presented: (Dollar amounts in thousands of U.S. dollars) Year ended December 31, 2023 2022 Provision for income taxes $ (6,873 ) $ (217 ) Decrease in provision over prior period $ (6,656 ) Decrease - percentage 3,067 % Effective tax rate 7 % 1 % Income taxes decreased by $6.6 million and the effective tax rate increased from 1% to 7% when compared to the year ended December 31, 2022.
At December 31, 2022, we had $130.4 million in goodwill related to our acquisitions and $39.8 million in intangible assets comprised of indefinite life intangibles of $12.3 million and finite life intangible assets of $27.5 million.
At December 31, 2023, we had $130.4 million in goodwill related to our acquisitions and $29.5 million in intangible assets comprised of $12.3 million of indefinite life intangibles and $17.2 million of finite life intangible assets.
The Company is able to continue adding customers under the excluded MNO network.
The Company is able to continue adding customers under the excluded MNO network in order to meet the commitment.
Ting In Fiscal 2022, costs related to provisioning high speed Internet access for Ting and its subsidiaries - Cedar, and Simply Bits increased $5.0 million, or 42%, to $17.0 million as compared to $12.0 million during Fiscal 2021.
Ting In Fiscal 2023, costs related to provisioning high speed Internet access for Ting and its subsidiaries - Cedar, and Simply Bits, increased $3.2 million, or 19%, to $20.2 million as compared to $17.0 million during Fiscal 2022.
Excluding movements in exchange rates, we expect sales and marketing expenses for Fiscal 2023 to increase in absolute dollars, as we adjust our marketing programs and sales and customer support personnel costs to facilitate the continued expansion of Ting and ramp-up of Wavelo's go-to-market efforts.
Excluding movements in exchange rates, we expect sales and marketing expenses for Fiscal 2024 to increase in absolute dollars, as we adjust our marketing programs and sales and customer support personnel costs to facilitate the continued expansion of our operations.
LOSS (GAIN) ON DISPOSAL OF PROPERTY AND EQUIPMENT (Dollar amounts in thousands of U.S. dollars) Year ended December 31, 2022 2021 Loss on disposition of property and equipment $ 461 $ 234 Increase over prior period $ 227 Increase - percentage 97 Percentage of net revenues 0 % 0 % Loss on disposal of property and equipment increased by $0.2 million to $0.5 million as compared to Fiscal 2021.
LOSS (GAIN) ON DISPOSAL OF PROPERTY AND EQUIPMENT (Dollar amounts in thousands of U.S. dollars) Year ended December 31, 2023 2022 Loss on disposition of property and equipment $ - $ 461 Decrease over prior period $ (461 ) Decrease - percentage (100 )% Percentage of net revenues - % - % Loss on disposal of property and equipment decreased by $0.5 million to nil as compared to Fiscal 2022.
Other Professional Services Cost of revenues from Other Professional Services for Fiscal 2021 increased by $0.8 million, when compared to Fiscal 2020. Costs incurred represent the personnel and related expenses of employees and contractors providing professional services to DISH.
Other Professional Services Cost of revenues from Other Professional Services for Fiscal 2023 decreased by $0.3 million to $1.3 million, when compared to Fiscal 2022. Costs incurred represent the personnel and related expenses of employees and contractors providing professional services to DISH.
Together the OpenSRS, eNom, EPAG and Ascio Domain Services manage 25.2 million domain names under the Tucows, eNom, EPAG and Ascio ICANN registrar accreditations and for other registrars under their own accreditations. Domains under management has decreased by 0.2 million domain names since December 31, 2020.
Together the OpenSRS, eNom, EPAG and Ascio Domain Services manage 24.6 million domain names under the Tucows, eNom, EPAG and Ascio ICANN registrar accreditations and for other registrars under their own accreditations. Domains under management has increased by 0.2 million, or less than 1%, since December 31, 2022.
(Dollar amounts in thousands of U.S. dollars) Year ended December 31, 2022 2021 Sales and marketing $ 53,937 $ 39,471 Increase over prior period $ 14,466 Increase - percentage 37 % Percentage of net revenues 17 % 13 % Sales and marketing expenses for Fiscal 2022 increased by $14.5 million, or 37%, to $53.9 million when compared to Fiscal 2021.
(Dollar amounts in thousands of U.S. dollars) Year ended December 31, 2023 2022 Sales and marketing $ 67,806 $ 53,937 Increase over prior period $ 13,869 Increase - percentage 26 % Percentage of net revenues 20 % 17 % Sales and marketing expenses for Fiscal 2023 increased by $13.9 million, or 26%, to $67.8 million when compared to Fiscal 2022.
Ting Internet For the year ended December 31, 2022 2021 2020 (in '000's) Ting Internet accounts under management 35 26 15 Ting Internet owned infrastructure serviceable addresses (1) 96 76 49 Ting Internet partner infrastructure serviceable addresses (1) 20 15 10 (1) Defined as premises to which Ting has the capability to provide a customer connection in a service area. 26 Table of Contents Tucows Domains As of December 31, 2022 2021 2020 Total new, renewed and transferred-in domain name registrations provisioned (1) 21,774 22,530 23,032 Domains under management: Registered using Registrar Accreditation belonging to the Tucows Group 17,921 18,909 19,685 Registered using Registrar Accreditation belonging to Resellers 6,469 6,254 5,692 Total domain names under management 24,390 25,163 25,377 (1) For a discussion of these period-to-period changes in the domains provisioned and domains under management and how they impacted our financial results see the Net Revenues discussion below.
The following tables set forth the key business metrics which we believe are the primary indicators of our performance for the periods presented: Ting Internet For the year ended December 31, 2023 2022 2021 (in '000's) Ting Internet accounts under management 43 35 26 Ting Internet owned infrastructure serviceable addresses (1) 121 96 76 Ting Internet partner infrastructure serviceable addresses (1) 29 19 15 (1) Defined as premises to which Ting has the capability to provide a customer connection in a service area. 27 Table of Contents Tucows Domains As of December 31, 2023 2022 2021 Total new, renewed and transferred-in domain name registrations provisioned (1) 22,031 21,774 22,530 Domains under management: Registered using Registrar Accreditation belonging to the Tucows Group 17,565 17,921 18,909 Registered using Registrar Accreditation belonging to Resellers 6,995 6,469 6,254 Total domain names under management 24,560 24,390 25,163 (1) For a discussion of these period-to-period changes in the domains provisioned and domains under management and how they impacted our financial results see the Net Revenues discussion below.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThere can be no assurances that the above projected exchange rate decrease will materialize. Fluctuations of exchange rates are beyond our control. We will continue to monitor and assess the risk associated with these exposures and may take additional actions in the future to hedge or mitigate these risks.
Biggest changeWe will continue to monitor and assess the risk associated with these exposures and may take additional actions in the future to hedge or mitigate these risks. Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents, marketable securities, foreign exchange contracts and accounts receivable.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We develop products in Canada and sell these services in North America and Europe. Our sales are primarily made in U.S. dollars, while a major portion of expenses are incurred in Canadian dollars.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We develop products in Canada and sell these services in North America and Europe. Our sales are primarily made in U.S. dollars, while a major portion of our expenses are incurred in Canadian dollars.
The Amended Credit Agreement added SOFR Loans as a form of advance available under the Credit Facility to replace LIBOR rate advances, and such SOFR loans may bear interest based on Adjusted Daily Simple SOFR (defined to be the applicable SOFR rate published by the Federal Reserve Bank of New York plus 0.10% per annum subject to a floor of zero) or Adjusted Term SOFR (defined to be the applicable SOFR rate published by CME Group Benchmark Administration Limited plus 0.10% for one-month, 0.15% for three-months, and 0.25% for six-months per annum).
The 2023 Credit Agreement added SOFR Loans as a form of advance available under the 2023 Credit Facility to replace LIBOR Rate Advances, and such SOFR Loans may bear interest based on Adjusted Daily Simple SOFR (defined to be the applicable SOFR rate published by the Federal Reserve Bank of New York plus 0.10% per annum subject to a floor of zero) or Adjusted Term SOFR (defined to be the applicable SOFR rate published by CME Group Benchmark Administration Limited plus 0.10% for one-month, 0.15% for three-months, and 0.25% for six-months per annum).
Foreign currency exchange rates used were based on the market rates in effect during the year ended December 31, 2022. The sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would result in a decrease in pre-tax net income for the year ended December 31, 2022 of approximately$5.9 million.
Foreign currency exchange rates used were based on the market rates in effect during the year ended December 31, 2023. The sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would result in a decrease in pre-tax net income for the year ended December 31, 2023 of approximately$6.8 million, before the effects of hedging.
We have performed a sensitivity analysis model for foreign exchange exposure over the year ended December 31, 2022.
We have performed a sensitivity analysis model for foreign exchange exposure during the year ended December 31, 2023.
As of December 31, 2022, an adverse change of one percent on the interest rate would have the effect of increasing our annual interest payment on the Amended Credit Agreement by approximately $1.7 million, assuming that the loan balance as of December 31, 2022 is outstanding for the entire period.
As of December 31, 2023, an adverse change of 100 bps on the interest rate would have the effect of increasing our annual interest payment on the 2023 Credit Agreement by approximately $2.1 million, assuming that the loan balance as of December 31, 2023 is outstanding for the entire period.
Of these contracts, $49.7 million met the requirements for hedge accounting. As of December 31, 2021, the Company had $25.2 million of outstanding foreign exchange forward contracts which will convert to CDN $32.0 million. Of these contracts, $25.2 million met the requirements for hedge accounting.
Of these contracts, $61.4 million met the requirements for hedge accounting. As of December 31, 2022, the Company had $49.7 million of outstanding foreign exchange forward contracts which will convert to CDN $67.0 million. Of these contracts, $49.7 million met the requirements for hedge accounting.
Based on the nature of our short-term investments, we have concluded that there is no material interest rate risk exposure as of December 31, 2022. We are also subject to market risk exposure related to changes in interest rates under our Third Amended 2019 Credit Facility.
Based on the nature of our short-term investments, we have concluded that there is no material interest rate risk exposure as of December 31, 2023. We are also subject to market risk exposure related to changes in interest rates under our 2023 Credit Agreement. Changes in interest rates will impact our borrowing cost.
Similarly, we enter into our foreign exchange contracts with major banks and financial institutions. With respect to accounts receivable, we perform ongoing evaluations of our customers, generally granting uncollateralized credit terms to our customers, and maintaining an allowance for doubtful accounts based on historical experience and our expectation of future losses.
With respect to accounts receivable, we perform ongoing evaluations of our customers, generally granting uncollateralized credit terms to our customers, and maintaining an allowance for doubtful accounts based on historical experience and our expectation of future losses.
Interest rate risk Our exposure to interest rate fluctuations relate primarily to our Amended Credit Agreement. 56 Table of Contents As of December 31, 2022, we had an outstanding balance of $239.7 m illion on the Amended Credit Agreement.
Interest rate risk Our exposure to interest rate fluctuations relate primarily to the 2023 Credit Agreement. 49 Table of Contents As of December 31, 2023, we had an outstanding balance of $211.9 million on the 2023 Credit Facility.
Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents, marketable securities, foreign exchange contracts and accounts receivable. Our cash, cash equivalents and short-term investments are in high-quality securities placed with major banks and financial institutions whom we have evaluated as highly creditworthy, and commercial paper.
Our cash, cash equivalents and short-term investments are in high-quality securities placed with major banks and financial institutions whom we have evaluated as highly creditworthy, and commercial paper. Similarly, we enter into our foreign exchange contracts with major banks and financial institutions.
Although our functional currency is the U.S. dollar, a substantial portion of our fixed expenses are incurred in Canadian dollars. Our policy with respect to foreign currency exposure is to manage financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some of the impact of foreign currency exchange movements.
Our policy with respect to foreign currency exposure is to manage financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some of the impact of foreign currency exchange movements.
As of December 31, 2022, we had the following outstanding foreign exchange forward contracts to trade U.S. dollars in exchange for Canada dollars: Maturity date (Dollar amounts in thousands of U.S. dollars) Notional amount of U.S. dollars Weighted average exchange rate of U.S. dollars Fair value January - March 2023 15,132 1.3283 (270 ) April - June 2023 13,074 1.3385 (119 ) July - September 2023 11,332 1.3633 113 October - December 2023 10,150 1.3744 192 $ 49,688 1.3484 $ (84 ) As of December 31, 2022, the Company had $49.7 million of outstanding foreign exchange forward contracts which will convert to CDN $67.0 million.
As of December 31, 2023, we had the following outstanding foreign exchange forward contracts to trade U.S. dollars in exchange for Canada dollars: Maturity date (Dollar amounts in thousands of U.S. dollars) Notional amount of U.S. dollars Weighted average exchange rate of U.S. dollars Fair value January - March 2024 16,840 1.3664 592 April - June 2024 13,840 1.3678 507 July - September 2024 16,974 1.3697 652 October - December 2024 13,795 1.3686 526 $ 61,449 1.3681 $ 2,277 As of December 31, 2023, the Company had $61.4 million of outstanding foreign exchange forward contracts which will convert to CDN $84.1 million.
We do not expect that any changes in interest rates will be material; however, fluctuations in interest rates are beyond our control. We will continue to monitor and assess the risks associated with interest expense exposure and may take additional actions in the future to mitigate these risks.
However, fluctuations in interest rates are beyond our control. We will continue to monitor and assess the risks associated with interest expense exposure and may act in the future to mitigate these risks. Although our functional currency is the U.S. dollar, a substantial portion of our fixed expenses are incurred in Canadian dollars.
Removed
In May 2020, the Company entered into a pay-fixed, receive-variable interest rate swap with a Canadian chartered bank to limit the potential interest rate fluctuations incurred on its future cash flows related to the variable interest payments on the Credit facility.
Removed
The notional value of the interest rate swap was $70 million as of December 31, 2022, consistent with December 31, 2021. The Company does not use the interest rate swap for trading or speculative purposes. The interest rate swap contract matures in June 2023.

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