Tucows was able to realize a sliver of a year-over-year revenue growth – 2.8% – thanks to a 71% revenue jump in its Ting Internet division and a smaller 5.3% increase for the same period in its Wavelo software division.
The company earlier this year restructured its businesses into three new groups, with Ting as the ISP, Wavelo focusing on OSS/BSS software and Tucows Domains a wholesale web domain registrar. Tucows Domains revenue was relatively flat for the most recent quarter.
“The change in structure is a success, allowing us important financial flexibility without losing—in fact, in some ways gaining—operational efficiency,” said Elliott Noss, president and CEO of Tucows, during the company’s third quarter earnings call.
That operational efficiency will be of growing importance as Tucows, along with companies in other sectors, proceed deeper into a time of macroeconomic uncertainty. “I would not call it a recession or expansion,” Noss said. “There are factors like interest rates, geopolitical uncertainty, economic inequality and, of course, climate change that will be a drag on the global economy. There are also things happening in the economy, primarily around the continued progress of technology, that are creating significant growth opportunities. When you combine the above with the world entering a period where the impact of demographics will be a headwind for the first time in modern history, you get uncertainty.”
As that uncertainty continues, the Ting portion of Tucows business may be somewhat buoyed by the notion that consumers now view their broadband internet services as essential.
“We continue to have a strong pipeline of orders to installs as addresses become serviceable, including in our mature markets, despite increased competition and economic uncertainty,” Noss stated. “This reinforces our belief that people see internet service as essential, and they view Ting to be superior to other options.”
Third quarter revenue for Ting came in at $11 million, representing more than 70% growth year on year and a 7% sequential increase. The division also delivered a profit of $6.7 million, more than 140% higher than the same quarter last year.
Ting had 32,600 customers at the end of the third quarter, up about 2,300, representing 42.5% growth year-over-year. Ting-owned and Ting Partner serviceable address additions together amounted to 4,800 for the quarter, for a total of 108,500 serviceable addresses. Noss acknowledged that this was a relatively low number of additions due to “a small issue in California that was administrative in nature that will push roughly seven thousand addresses into Q1 of 2023.”
Meanwhile, Ting spent about $23.7 million in capex in the third quarter, a 70% jump year-over-year as the company continues to ramp up its fiber buildout. Increasing capex contributed to an $8 million overall net loss for Tucows during the third quarter.
Ting’s fiber ambitions and its ability to spend more money to realize them got a boost a few months ago in the form of a $200 million equity investment from Generate Capital.
“We’re actively engaged on strategic and operational fronts with their teams preparing for a busy 2023,” Noss said. “Generate’s subsidiary Ubiquity has taken over managing our partner markets in Solana Beach and Encinitas [in California], and we’re seeing new momentum in completing the Encinitas build, creating a nice foothold in San Diego County.”
Regarding progress building out fiber during the quarter, Noss said Ting is continuing microtrenching activity in Culver City, California, and Centennial, Colorado, and also recently started microtrenching in Alexandria, Virginia. “That work will accelerate in Q4 with our first customers expected there in early 2023,” he said of Alexandria.
He said Ting also is reaching into new greenfield areas of its North Carolina fiber footprint and expects to start fiber construction in Colorado Springs during the current quarter with work in Aurora, Colorado following next year.