Tucows will be reporting Q3 financial results on November 3rd after market close. We are expecting another strong quarter from Tucows including steady results from Domains and solid growth from Ting Internet. Management will also release a pre-recorded audio commentary and transcript discussing the quarter and its outlook.

For Q3, we are expecting:

• Revenue of $82.6M (+9% YoY)

  • $61.1M from Tucows Domains (+1% YoY)

  • $11.7M from Ting Internet (+76% YoY)

  • $7.8M from Wavelo (-8% YoY due to lumpiness)

  • $2.0M from Tucows Corporate

• Adjusted EBITDA of $8.4M (-31% YoY due to fiber burn)

  • $11.6M from Tucows Domains (19% margin)

  • -$5.3M from Ting Internet (-45% margin)

  • $1.2M from Wavelo (15% margin)

  • $0.9M from Tucows Corporate

Aside from the financial results, we are looking for continued excellent operating metrics from Ting Internet including capex, addresses passed, and subscribers. Ting Internet’s capex should scale upward in Q3 based on regular seasonality, the capital injection from Generate Capital, and the Alexandria and Aurora builds. This should flow through to addresses passed and subscribers, which we expect to also show solid growth.

Our Thoughts: We continue to believe TC stock remains extremely cheap based on the historical value of domains businesses. We remind readers that Newfold completed two acquisitions over the past few years at 10x EBITDA, which would make Tucows Domains worth $55.00/share. Assuming Wavelo and Corporate add another $10.00-20.00/share, investors are getting the fiber business for free. Furthermore, we continue to believe the Tucows management team will replicate its success in capital allocation through its two new businesses. We are maintaining our BUY rating and our C$150.00/share target price based on a sum-of-the-parts valuation.