Ting just achieved its best quarter for new subscribers over the last seven quarters, CEO Elliot Noss announced during earnings. The Tucows ISP business added 2,600 net subscribers in the third quarter of this year, bringing Ting to 41,000 customers in total.
“Our total subscribers have grown over 26% year over year, and we expect that growth to continue as our construction steadily progresses and we continue to have a strong pre-order pipeline for installations,” said Noss, who is also CEO of Ting's parent company, Tucows.
Tucows in 2022 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. Noss said third quarter results show “continued strong growth” for Wavelo and Ting and “a steady state” for Tucows Domains, which saw a decrease in revenue during the second quarter this year.
On the Ting side, Noss said fiber capex was down from previous quarters at $17.3 million during the third quarter. “This is primarily because we are transitioning to a new microtrenching vendor in Alexandria, leading to a small gap in construction while we onboard the new vendor,” he said, noting that Ting resumed construction there in Q4.
Total serviceable addresses for Tucows’s Ting-owned infrastructure came in at 114,500 — up 28% year over year.
Ting’s partner addresses now sit at 25,400, a near 36% increase year over year, bringing the ISP to a total of 139,900 partner addresses. Noss said he is “particularly pleased to see addresses in Colorado Springs starting to become available,” where Ting was the first tenant for Colorado Springs Utilities’ city-wide open access fiber network.
Ting will continue to look for “tenant opportunities" in the industry, having partnered with cities, utilities and multiple commercial providers before. Noss said these types of partnerships (“given the right terms”) are attractive as they allow Ting to operate as an ISP without shouldering the capital requirements and complexities of building in new markets.
The ISP announced new partnerships last week with Blue Suede Networks and Vibranium Network in Memphis, Tennessee. This will be Ting’s largest partner market to date that will serve up to 315,000 addresses, with Ting operating as the exclusive residential and small business ISP for the first five years.
“As the partner segment matures, we are seeing more and more partnership opportunities but are taking a more pragmatic approach to sharing risks and expectations of partner build performance,” Noss said.
Wavelo performance
Justin Reilly, CEO of Wavelo, noted that in the third quarter Wavelo saw its strongest quarter of adjusted EBITDA since the business’ launch.
Wavelo’s revenue was $11.1 million in the most recent quarter, an increase of 174% from $4 million in Q3 of 2022. Wavelo also saw an increase of 3% from $10.8 million in the second quarter of this year, when Noss called it Tucow’s “standout business.”
However, Reilly noted this week that Wavelo experiences “outsized revenue recognition annually in Q2 related to bundled professional services included as part of the platform services provided to Dish as well as the contra-revenue impact from the unwinding contract asset from the Dish agreement.”
Dish, one of Wavelo's first customers, uses Wavelo's Mobile Network Operating System (MONOS) for its wireless network.
“Adjusting from these lumpy and non-cash impacts, revenue and gross margin actually grew $0.9 million and $1.1 million, respectively, quarter over quarter,” he added.
While Reilly said he is happy with where the Wavelo pipeline is today, he added that generally, SaaS purchase decisions are “sitting longer in the pipeline than they have in the past.”
“When it comes to telecom and provisioning, that is even more true,” Reilly said. “If providers are going to replace provisioning, it’s going to take both time and investment, and if a business is in cost-cutting mode, as many are right now, it becomes less of a priority versus quick operating wins.”
That said, Wavelo will look to grow its pipeline through advertising dollars over the next few quarters, while staying “well below the industry average for go-to-market spend.”
Tucows Q3 financials
In the third quarter of 2023, Tucows reported net revenue of $87.0 million, reflecting an 11.4% increase compared to the same period in 2022. This growth was primarily driven by higher revenues from Ting and Wavelo, although it was partially offset by a decrease in revenue from Tucows Corporate.
Tucows Domains revenues experienced a slight increase as the business returned to a post-pandemic normalized trajectory.
Gross profit for the third quarter decreased by 6.7% to $16.8 million, down from $18.0 million in the third quarter of 2022. This decrease was primarily attributed to expected higher network depreciation and expenses related to the expansion of the Ting network footprint. There was an impairment of certain Ting network assets totaling $2.7 million.
The decrease in profit was partially mitigated by strong growth in Wavelo and Ting.
Tucows in Q3 saw a net loss of $23.5 million. This is a jump from the net loss of $8.0 million reported in the third quarter of 2022. Tucows claimed the heightened loss can be attributed to various factors, including ongoing investments in the Ting Fiber network expansion, higher network depreciation, impairment of some Ting network assets and higher interest rates.
Adjusted EBITDA for the third quarter of 2023 also decreased by 43.2% to $4.5 million, primarily due to planned investments in Ting's operating capacity and expanding customer base.
Noss said the company is “making growth investments and directing cash flow to set up the Company for a long runway of growth while also managing our debt,” including a recent banking credit agreement for the Tucows syndicated debt that gave the company “improved terms and provides further stability and capital for growth.”
Tucows continued to pay down the balance on its syndicated debt in the third quarter using cash flow from Wavelo and Tucows Domains.