Tucows Inc. (NASDAQ: TCX) (TSX: TC) reported its financial results for the third quarter ended September 30, 2023. All figures are in U.S. dollars.
“On a year over year basis, our third quarter results show continued strong growth of Wavelo and Ting, and a return to steady state for Tucows Domains. Completing a full quarter with the migrated Boost subscriber base gave Wavelo a significant boost year over year, including increases in revenue of 174%; gross margin of 176%; and adjusted EBITDA of 566%. Ting also showed strong year over year growth with an increase of 17% for revenue and 20% for gross margin,” said Elliot Noss, Tucows President and CEO. “The important story is about capital allocation. We are making growth investments and directing cash flow to set up the Company for a long runway of growth while also managing our debt. We recently signed a new banking credit agreement for the Tucows syndicated debt that gave us improved terms and provides further stability and capital for growth, and we continued to pay down the balance on the syndicated debt this quarter using cash flow from Wavelo and Tucows Domains.”
Consolidated net revenue for the third quarter of 2023 increased 11.4% to $87.0 million from $78.1 million for the third quarter of 2022. The growth in Ting and Wavelo revenues was offset by a decrease in revenue in Tucows Corporate. Domains revenues were up slightly, as the business returned to a post-pandemic normalized trajectory.
Gross profit for the third quarter of 2023 decreased 6.7% to $16.8 million from $18.0 million from the third quarter of 2022. The decrease in Gross profit was driven primarily by expected increased network depreciation and network expenses as the Ting network footprint expands, as well as the impairment of certain Ting network assets totalling $2.7 million. The decrease in Gross profit was partially offset by strong growth in gross margin for Wavelo, as well as for Ting.
Net loss for the third quarter of 2023 was $23.5 million, or a loss of $2.16 per share, compared with net loss of $8.0 million, or $0.74 per share, for the third quarter of 2022. The increased loss is primarily the result of costs from the continued investment in the Ting Fiber network expansion, network depreciation, impairment of certain Ting network assets, higher interest expenses resulting from the new Ting asset-backed security (ABS) facility and overall higher interest rates, and higher stock based compensation.
Adjusted EBITDA1 for the third quarter of 2023 decreased 43.2% to $4.5 million from $7.9 million for the third quarter of 2022. The decrease in adjusted EBITDA1 was primarily related to planned investments in Ting’s operating capacity and growing customer base. Cash equivalents, restricted cash and restricted cash equivalents at the end of the third quarter of 2023 were $122.4 million compared with $159.6 million at the end of the second quarter of 2023 and $30.5 million at the end of the third quarter of 2022.