Tucows Inc: Form 10-K for the period ended Dec 31, 2024

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. 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. 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.

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. Certain revenues and expenses are excluded from segment adjusted 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 Information Technology ("IT") shared services.

Ting

Ting and its wholly owned subsidiaries, Cedar and Simply Bits includes the provision of high-speed Internet access services to select towns throughout the United States, with operations focused on serving existing markets. 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 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 of December 31, 2024, Ting Internet had access to 134,000 owned infrastructure serviceable addresses, 45,000 partner infrastructure serviceable addresses and 51,000 active accounts under its management; compared to having access to 121,000 owned infrastructure serviceable addresses, 29,000 partner infrastructure serviceable addresses and 43,000 active accounts under its management as of December 31, 2023. These figures exclude the increase in serviceable addresses and accounts attributable to the Simply Bits acquisition.

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. Wavelo's focus is to provide accessible telecom software to CSPs globally, minimizing network and technical barriers and improving Internet access worldwide. Wavelo's suite of flexible, cloud-based software simplifies the management of mobile and Internet network access, enabling CSPs to better utilize their existing infrastructure, focus on customer experience and scale their businesses faster. Wavelo launched as a proven asset for CSPs, with EchoStar 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. 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. Similarly, Wavelo's revenues from Platypus are largely generated in the U.S., with a small portion earned in Canada and other countries.

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. Tucows Domains generates 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 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.

Our primary distribution channel is a global network of more than 34,000 resellers that operate in 200 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 focus is serving the needs of this network of resellers by providing the broadest portfolio of gTLD and the country code top-level domain options and related services, a white-label platform that facilitates the provisioning and management of domain names, a powerful Application Program Interface, easy-to-use interfaces, comprehensive management and reporting tools, and proactive and attentive customer service. Our services are integral to the solutions that our resellers deliver to their customers. We provide “second tier” support to our resellers by email, chat and phone in the event resellers experience issues or problems with our services. In addition, our Network Operating Center proactively monitors all services and network infrastructure to address deficiencies before customer services are impacted.

We believe that the underlying platforms for our services are among the most mature, reliable and functional reseller-oriented provisioning and management platforms in our industry, and we continue to refine, evolve and improve these services for both resellers and end-users. 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. Together the OpenSRS, eNom, EPAG and Ascio Domain Services manage 24.5 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 0.1 million, or less than 0.2%, since December 31, 2023.

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. 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. Our retail domain services also include our Personal Names Service – based on over 36,000 surname domains – that allows roughly two-thirds of Americans to purchase an email address based on their last name. 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.

Additional information about segments can be found in “Note 20 – Segment Reporting” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Intellectual Property

We believe that we are well positioned in the wholesale domain registration and email markets due in part to our highly-recognized “Tucows”, “OpenSRS”, “Ascio” and “eNom” brands and the respect they confer on us as a defender of end-user rights and reseller-friendly approaches to doing business. We were among the first group of 34 registrars to be accredited by ICANN in 1999, and we remain active in Internet governance issues.

Our success and ability to compete depend on our ability to develop and maintain the proprietary aspects of our brand name and technology. We rely on a combination of trademark, trade secret and copyright laws, as well as contractual restrictions to protect our intellectual property rights.

We have registered the Tucows trademark in the United States, Canada and the European Union and we register additional service marks and trademarks as appropriate and where such protection is available.

We seek to limit disclosure of our intellectual property by requiring all employees and consultants with access to our proprietary information to commit to confidentiality, non-disclosure and work-for-hire agreements. All of our employees are required to sign confidentiality and non-use agreements, which provide that any rights they may have in copyrightable works or patentable technologies accrue to us. Before entering into discussions with potential vendors and partners about our business and technologies, we require them to enter into a non-disclosure agreement. If these discussions result in a license or other business relationship, we also generally require that the agreement containing the parties’ rights and obligations include provisions for the protection of its intellectual property rights.

Customers

Within the Ting segment, customers are a very broad mix of consumers, small businesses and corporations seeking high-speed Internet services. Wavelo offers services to a small number of CSPs focused in the U.S. along with EchoStar, their largest external customer, and Ting, their internal customer, until such time we expand these offerings to other Mobile Virtual Network Operators ("MVNOs") or Mobile Network Operators ("MNOs"). The majority of the customers to whom we provide services as Tucows Domains are generally either web hosts or ISPs. 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, 2024 one customer, EchoStar, accounted for 10.7% of revenue. For the year ended December 31, 2023 one customer, EchoStar, accounted for 10.7% of revenue and for the year ended December 31, 2022 no customer accounted for more than 10% of total revenue.

While our customers are capitalizing on the growth in Internet usage and the demand for new services, they also face significant competition from numerous other service providers with competitive or comparable offerings. This has led customers within our Wavelo and Tucows Domains segments to focus on core competencies, and increasingly seeking to outsource non-core services. Outsourcing enables these customers to better focus on customer acquisition and retention efforts by eliminating the need to own, develop and support non-core applications in-house. In the case of Tucows Domains, this supports our Value-Added Services offerings, and for Wavelo this supports our go-to-market efforts to offer full-service platforms providing a variety of solutions that support CSPs, including subscription and billing management, network orchestration and provisioning, and individual developer tools.

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 Domain services (such as OpenSRS, eNom, Ascio, and Hover) may experience reduced demand during these times. In addition, the first quarter of the fiscal year will often see higher contract liabilities 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.

Competition

Our competitors may be divided into the following groups:

5

We expect to continue to experience significant competition from the competitors identified above and, as our business continues to develop, we expect to encounter competition from other providers. Service providers, Internet portals, web hosting companies, email hosting companies, outsourced application companies, country code registries and major telecommunication firms may broaden their services to include services we offer.

We believe the primary competitive factors in Ting are:

• Providing a superior customer service experience;
• Providing a simple and friendly user experience through more usable web and application interfaces and more fair and transparent pricing;
• Being agnostic on Internet hardware, including network routers; and
• Providing superior technology, speed and reliability with fiber to the home services.

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;
• 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 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.

6

Although we encounter pricing pressure in many markets in which we compete, we believe the effects of that pressure are mitigated by the fact that we deliver a high degree of value to our customers through our business and technical practices. We believe our status as a trusted supplier also allows us to mitigate the effects of this type of competition. We believe that the long-term relationships we have made with many customers results in a sense of certainty that would not be available to those customers through a competitor.

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, 2024, we had approximately 765 full-time employees and 99 contracted employees globally. 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. Approximately 58% of our employees are based in Canada, followed by 27% based in the U.S., and the remaining 15% are spread across countries in Europe and other regions. Of our employees, approximately 243 support our Ting segment, 205 support our Wavelo segment, and approximately 273 support our Tucows Domains segment. The remaining 143 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.

As an organization, Tucows is proud to foster a flexible, remote-first work environment that empowers employees to find a work style that fits their individual circumstances. Some employees perform work in other environments, including fulfillment centers, customers’ homes or businesses to perform service installation, and in the field to build out our network facilities.

February 2024 Workforce Reduction

On February 7, 2024, Ting committed to the February 2024 workforce reduction (the "February 2024 Workforce Reduction") which aimed to realign the Company's operational structure within the Ting operating segment and reduce Ting's workforce by 13%, or 7% of the Company's total workforce, to better support strategic objectives. The February 2024 Workforce Reduction was designed to streamline operations and reduce operating expenses within the Ting operating segment. Substantially all of the employees impacted by the workforce reduction were notified on February 7, 2024 and have since exited the Company. The Company incurred non-recurring changes of approximately $3.2 million in connection with the workforce reduction, primarily consisting of severance payments, notice pay, employee benefits contributions and outplacement costs.

2024 Capital Efficiency Plan

On October 30, 2024, Ting undertook a capital efficiency plan (the “Capital Efficiency Plan”) to reflect the ongoing operational and financial prioritization of the Ting business and to lower the Company's year-over-year operating expenses, and capital outlays, which reduced approximately 42% of Ting's workforce, or 17% of the Company's total workforce. The Company incurred non-recurring charges of approximately $7.7 million in connection with the Capital Efficiency Plan, primarily consisting of severance payments, notice pay, employee benefits contributions, professional services and outplacement costs.

The Company believes that both the February 2024 Workforce Reduction and Capital Efficiency Plan will realize personnel and related expense (net of capitalization) savings with the majority of the savings in sales and marketing, including related network support functions, followed by smaller impacts in technical operations and development, direct cost of revenues, network, general and administrative, and other costs. In the fiscal year ended December 31, 2024 ("Fiscal 2024") the realized savings will be partially offset by costs associated with both plans. These costs referenced above are classified as transitional and are excluded in our Adjusted EBITDA, which is a non-GAAP financial measure. Please see discussion of Adjusted EBITDA as well as the Adjusted EBITDA reconciliation to net income in the Results of Operations section below. The expected savings will also translate into reduced capital expenditures related to growth and expansion of new markets, as Ting shifts focus to complete builds in existing markets.

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. 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 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 alone is not enough without inclusion, equity, and allyship.

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. 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. 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.

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. These volunteer groups connect employees with shared characteristics, life experiences and enable them to engage in activities that advance our culture and foster connectivity.

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. 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. 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. 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. In particular, the FCC imposes significant regulation on licensees of wireless spectrum with respect to how radio spectrum is used by licensees, the nature of the services that licensees may offer and how the services may be offered, and resolution of issues of interference between spectrum bands.

Our Wavelo Segment is less subject to government regulations and commitments because it enables subscription and billing management, network orchestration and provisioning, and individual developer tools. Outside of General Data Protection Regulation (“GDPR”), which creates obligations around the procurement, processing, publication and sharing of personal data, there is limited regulation or commitment to government bodies for software.

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. ICANN is a multi-stakeholder private sector, not-for-profit corporation formed for the express purposes of overseeing a number of Internet related tasks, including management of the DNS, allocation of IP addresses, accreditation of domain name registrars and registries and the definition and coordination of policy development for all of these functions. Tucows, eNom, EPAG and Ascio are each individually accredited by ICANN as domain name registrars and thus our ability to offer domain name registration products is subject to our ongoing relationship with, and accreditation by, ICANN.

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.

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. Notwithstanding the general protections from liability under the CDA, we may nonetheless be forced to defend ourselves from claims of liability covered by the CDA, resulting in an increased cost of doing business.

Digital Millennium Copyright Act (“DMCA”): The DMCA provides recourse for owners of copyrighted material who believe that their rights under U.S. copyright law have been infringed on the Internet. Under the DMCA, we generally are not liable for infringing content posted by third parties. However, if we receive a proper notice from a copyright owner alleging infringement of its protected works by web pages for which we provide hosting services, and we fail to expeditiously remove or disable access to the allegedly infringing material, fail to post and enforce a digital rights management policy or a policy to terminate accounts of repeat infringers, or otherwise fail to meet the requirements of the safe harbor under the DMCA, the owner may seek to impose liability on us.

General Data Protection Regulation: GDPR creates obligations around the procurement, processing, publication and sharing of personal data. Potential fines for violations of certain provisions of GDPR reach as high as 4% of a company’s annual total revenue, potentially including the revenue of its international affiliates. The solutions we develop for GDPR-compliance may not be adequate in the views of regulatory authorities or ICANN, which may cause the loss of WHOIS privacy revenue or increase our costs of developing compliant solutions or subject us to litigation, liability, civil penalties, or loss of market share. 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. Because we operate in a relatively new and rapidly evolving industry and since our industry is characterized by rapid changes in technology and in new and growing illegal activity, these bodies of laws are constantly evolving. As a host of content through our Exact Hosting business, and to a lesser extent as a registrar of domain names services we may be subject to potential liability for illegal activities by our resellers’ customers on their websites. We provide an automated service that enables users to register domain names. We do not monitor or review, nor does our accreditation agreement with ICANN require that we monitor or review, the appropriateness of the domain names we register for our customers or the content of their websites, and we have no control over the activities in which these customers engage. While we have policies in place to terminate domain names or to take other action if presented with evidence of illegal conduct, customers could nonetheless engage in prohibited activities without our knowledge.

Corporate Information

Our principal place of business is located in Canada.

We were incorporated under the laws of the Commonwealth of Pennsylvania in November 1992 under the name Infonautics, Inc. In August 2001, we completed our acquisition of Tucows Inc., a Delaware corporation, and we changed our name from Infonautics, Inc. to Tucows Inc. Our principal executive offices are located at 96 Mowat Avenue, Toronto, Ontario, M6K 3M1 Canada. Our telephone number is (416) 535-0123. We also have offices in Germany, Denmark and the U.S.

We are subject to the filing requirements of the Securities Exchange Act of 1934 (the “Exchange Act”). Therefore, we file annual reports, periodic reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically at www.sec.gov (http://www.sec.gov).

Our website address is tucows.com. We make available through our website, free of charge, copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as amended as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC. The information on the website listed above is not and should not be considered part of this Annual Report and is not incorporated by reference in this document.

Information about our Executive Officers and Key Employees

The following table sets forth the names, ages and titles of persons currently serving as our executive officers and key employees.

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.

Ivan Ivanov has served as our Chief Financial Officer since August 2024. Prior to joining the Company, Mr. Ivanov spent twenty-two years at Verizon and most recently served as Executive Director and business unit CFO, where he led both the consumer and business finance teams. Mr. Ivanov began his career at Verizon on the M&A and Corporate Development team, progressing to a variety of other financial specialties, including cash flow planning, network and IT capital allocation, and commercial finance, where he led Verizon’s fiber deployment program. Mr. Ivanov has a Master of Accounting from Seton Hall University and he is also a graduate of Drexel University with a Bachelor of Arts in Finance.

David Woroch currently serves as our Chief Executive Officer of Tucows Domains Services and has led our Domains business since 2014 and oversees OpenSRS, eNom, Ascio and EPAG (wholesale), Hover (retail) and the premium domain portfolio. Mr. Woroch joined Tucows in March 2000 after thirteen years at IBM and has helped build Tucows’ sales, marketing, business development, product management and technical support capabilities.

Bret Fausett joined Tucows in September 2017 as our Chief Legal Officer. Prior to joining Tucows, Mr. Fausett worked for Uniregistry, where he had served as General Counsel for six years. Prior to Uniregistry, Mr. Fausett worked as outside legal counsel to a number of domain industry related companies.

Justin Reilly joined Tucows in September 2019 and currently serves as our Chief Executive Officer of Wavelo. 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.

Our business faces significant risks. 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. As a result, the following risk factors, as well as other information included or incorporated by reference elsewhere in this Annual Report on Form 10-K, should be considered in evaluating our business and future prospects. The risks described below may not be the only risks we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our business operations. If any of the events or circumstances described in the following risk factors actually occur, our business, financial condition or results of operations could suffer, and the trading price of our common stock could decline.

Risk Factor Summary

• We operate in highly competitive and consolidating industries, which may impact our ability to grow and maintain profitability.
• Our service offerings may not be successful if we are unable to maintain existing customer relationships or establish new customer relationships.
• Our service offerings may be limited in their ability to grow their respective businesses and customer base unless we can continue to manage our vendor relationships and supply chain to obtain valuable products and service options to offer to our customers.
• Changes in Internet infrastructure, adoption, and navigation practices could impact our business.
• Investments in new businesses and technologies, as well as divestitures, carry inherent risks that may impact our operations and financial performance.
• The Company's success depends on our ability to adapt to technological advancements and evolving industry trends.
• 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.
• The Company’s success depends on the continued service and availability of key personnel.
• Our ability to accurately forecast construction and marketing costs as well as manage the cost per serviceable address within expected targets will impact our return on investment on the Ting Internet footprint.
• We rely on third-party network operators, data centers, and service providers, and any disruptions to these systems could negatively impact our business.
• Our Ting Internet businesses rely on Network Operators. Failure by a Network Operator to obtain the proper licenses and governmental approvals from regulatory authorities would cause us to be unable to successfully operate those businesses.
• We are subject to minimum purchase commitments with some partner network providers and mobile network operators.
• We are parties to agreements with other unrelated parties for certain business operations and to license third-party technologies. Any claims against these unrelated parties that we rely upon for business operations and/or licensed technology could result in the need to incur substantial costs to replace technology or services which could delay and increase the cost of product and service developments.
• The execution of our Ting restructuring plan, involves risks that could adversely affect our business operations, financial condition, and growth strategy; including risks related to implementation difficulties, operational disruptions, and financial impacts.
• We face cybersecurity risks that could disrupt our business, damage our reputation, and result in financial and legal liabilities.
• Evolving laws and regulations governing intellectual property and internet services may expose us to increased liability and compliance costs.
• Data protection regulations may impose legal obligations on us that we cannot meet or that conflict with our ICANN contractual requirements.
• 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.
• Our indebtedness could adversely affect our ability to raise additional capital to fund our operations, our ability to operate our business, execute our strategy divert our cash flow from operations for debt payments, and prevent us from meeting our debt obligations.
• 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 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. 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.
• The international nature of our businesses and operations expose us to additional risks that could harm our business, operating results, and growth strategy; including risks related to taxation and foreign currencies fluctuations.
• The Company’s subsidiary Ting will require additional financing in order to meet its future financial obligations.
• Rising inflation and interest rates may adversely affect our businesses, financial condition, and operating results.
• Macroeconomic, geopolitical, and market conditions may adversely affect our business, financial condition, and operating results.
• Changes in government regulations may increase compliance costs and impact our business operations.
• We may be subject to unforeseen liabilities or unenforceable customer agreements, which could negatively impact our financial results.
• We are exposed to risks related to online payment fraud, chargebacks, and evolving payment technologies.
• Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our operating results and financial condition.
• We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities. This could discourage the registration or renewal of domain names.
• Changes in ICANN policies, fees, and oversight may impact our domain registration business.
• Our share price may be volatile, and investors may be unable to sell shares at a favorable price.
• We cannot guarantee that our stock repurchase program will be fully consummated or that it will enhance long-term shareholder value.
• Energy consumption from data centers and internet infrastructure may result in higher costs and increased regulatory scrutiny.
• Growing investor and regulatory expectations for ESG (Environmental, Social, and Governance) transparency may require additional disclosures and compliance efforts
• Our business and financial performance could be adversely impacted by climate change, environmental disruptions, and other unforeseen disasters or crises.
• Domain names are valuable assets, and cybersecurity risks could lead to their loss or misattribution of liability to us.

11

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

We operate in highly competitive and consolidating industries, which may impact our ability to grow and maintain profitability.

The markets we serve—Internet services (Ting), wireless communications (Tucows Corporate – Mobile Services), BSS/OSS software (Wavelo), and domain registration (Tucows Domains)—are highly competitive and undergoing significant consolidation. Many of our competitors have greater financial, technical, and marketing resources, enabling them to offer lower prices, broader service bundles, and enhanced purchasing power for equipment, content, and infrastructure. As consolidation increases, larger competitors may further strengthen their cost advantages, making it more difficult for us to attract and retain customers.

To remain competitive, we may need to reduce pricing, increase service offerings, or invest in customer acquisition, which could pressure margins, increase churn, and negatively impact cash flows. Additionally, lower prices could attract less loyal or lower-value customers, further affecting profitability.

In the domain registration industry, regulators are increasingly scrutinizing market consolidation and competitive practices, which could impact our ability to scale through acquisitions, partnerships, or pricing adjustments. Any regulatory action affecting domain pricing, reseller agreements, or distribution channels could constrain growth in our domain business.

Our service offerings may not be successful if we are unable to maintain existing customer relationships or establish new customer relationships.

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. Long-term success is dependent upon our sustained ability to generate sufficient revenue from our customers based on their use of our services and ability to respond to churn by retaining existing customers and adding new customers. With significant investments across our segments, be it in the continued build out of our Fiber Network across the United States, our development of our Wavelo or Domains Platforms, our performance and financial results could be negatively impacted if we are unable to realize the return on these investments by failing to attract customers or retain customers to the services we offer.

Regarding Wavelo specifically, EchoStar 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. 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. Additionally, our revenues are directly tied to the subscriber volumes of EchoStar's MVNO or MNO networks, so our profitability is contingent on the ability of EchoStar 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.

Our service offerings may be limited in their ability to grow their respective businesses and customer base unless we can continue to manage our vendor relationships and supply chain to obtain valuable products and service options to offer to our customers.

To stay competitive, we must offer a range of valuable products and services while effectively managing vendor relationships and supply chains. A critical aspect of this is securing domain name registration options through various TLDs and ccTLDs for our Tucows Domains segment. Our business is particularly vulnerable to fee increases imposed by registries like Verisign, which controls .com domains. Verisign, for instance, charges $10.26 per .com registration, with ICANN imposing an additional $0.18 fee. With Verisign’s contract extended until 2030, it is permitted to increase .com domain prices by up to 7% annually in the last four years of its term. In 2024, Verisign exercised this right, raising .com registration costs by 7%, impacting our cost of revenues. Additionally, in our mobile services segment, we rely on MNOs for network capacity, but with a shrinking retail subscriber base concentrated on a single MNO, our ability to negotiate favorable rates is limited. For our Ting Internet segment, we depend on leased fiber capacity, installation equipment, and third-party network access, and any disruptions in supply or cost increases could affect our ability to scale and maintain profitability. Since we have no control over these pricing adjustments and contract terms, they could significantly impact our financial performance and competitiveness across our core businesses.

Changes in Internet infrastructure, adoption, and navigation practices could impact our business.

Our success depends on the continued expansion and stability of the Internet as a global platform for communication and commerce. Any fundamental shift in Internet usage, governance, or navigation could materially impact our business, financial condition, and growth prospects.

• Ting Internet: The adoption of fiber-optic Internet may be impacted by factors such as consumer reluctance to switch providers, network performance limitations, or the rise of alternative wireless technologies that provide competitive speeds without fixed infrastructure. Any of these could slow fiber adoption, limiting our growth.
• Tucows Domains: The domain registration industry relies on the continued use of the domain name system (DNS) for Internet navigation. Emerging technologies, such as alternative traffic routing systems, keyword-based navigation, or government-controlled Internet frameworks, could reduce reliance on domain names. If widely adopted, these changes could diminish demand for domains and impact our revenue.
• Global Expansion: We expect future Internet growth to come from international markets, where adoption is currently lower. If Internet usage does not expand as expected, or if governments restrict domain registrations, our growth strategy and revenue potential could be adversely affected.

Any major shift in Internet infrastructure, governance, or navigation practices could reduce demand for our services and negatively affect our long-term financial performance.

Investments in new businesses and technologies, as well as divestitures, carry inherent risks that may impact our operations and financial performance.

We continually invest in new businesses, services, and technologies and divest non-core assets, but these strategies may not generate the anticipated benefits and could disrupt ongoing operations. If we fail to integrate acquisitions effectively, realize expected synergies, or achieve target returns, our financial condition and ability to meet obligations could be negatively affected.

We may continue to acquire companies, assets, or technologies to expand services, enhance infrastructure, or address competitive pressures. These transactions carry risks, including:

• Management distraction from core operations,
• Integration challenges with acquired businesses,
• Significant acquisition costs and potential liabilities,
• Loss of key employees,
• Unanticipated regulatory changes, and
• Failure to generate expected financial returns.

For example, under the EchoStar Purchase Agreement, we receive a 10-year payment based on transferred subscriber margins. If subscriber churn exceeds expectations or if EchoStar’s pricing strategies or cost structures reduce profitability, our anticipated income stream may fall short, impacting financial results.

Additionally, we may be unable to identify or complete future acquisitions on favorable terms, and market perception of acquisitions could negatively affect our stock price. There is no assurance that our investments will be successful, and failure to realize anticipated benefits could adversely impact our financial condition and operating results.

The Company's success depends on our ability to adapt to technological advancements and evolving industry trends.

The industries in which we operate are characterized by rapid technological change, evolving customer expectations, and increasing competition from emerging technologies. Failure to anticipate and adapt to these changes could impact our ability to attract and retain customers, maintain competitive pricing, and sustain profitability.

• Ting Internet: Fiber-optic technology currently offers unmatched speed, reliability, and scalability, but future advancements in wireless broadband, 5G, and satellite internet could reduce demand for fiber-based services, particularly in multi-family housing and underserved markets. As we expand our fiber subscribers, we must continuously invest in network performance, scalability, and infrastructure upgrades to remain competitive. Inefficiencies, operational failures, or the inability to accommodate increased traffic demand could erode service quality, damage our reputation, and impact financial performance.
• Wavelo: The wireless communications industry is undergoing rapid transformation, including the adoption of AI-driven automation, network optimization, and customer service enhancements. We must continuously evaluate new technologies, platform integrations, and evolving competitive landscapes to maintain market relevance. Competitors with greater financial resources and economies of scale may offer services at lower prices, impacting our revenue growth and margins.
• Tucows Domains: The domain registration and internet services industry is evolving with AI-powered tools enabling automated domain search, DNS management, and fraud detection. These innovations may reduce demand for traditional domain registration services or allow competitors to optimize pricing and customer acquisition more efficiently. Additionally, emerging e-commerce platforms and AI-generated website builders could disrupt the traditional domain ecosystem, requiring us to adapt or risk losing market share.

Our long-term success depends on continuous investment in technology, infrastructure, and service innovation. Failure to adapt to market changes, integrate emerging technologies, or maintain operational scalability could negatively impact our growth, competitive position, and financial performance.

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 .

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 seven distinct brands, namely “OpenSRS”, “eNom”, “Hover", "EPAG", "Ascio", “Ting”, and "Wavelo". We also believe that maintaining and enhancing the “Tucows” corporate brand and our service brands is critical to expanding our customer base. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brands may become increasingly difficult and expensive. Maintaining and enhancing our brands will depend largely on our ability to be a technology leader providing high quality products and services, which we may not do successfully. To date, we have engaged in relatively little direct brand promotion activities. This enhances the risk that we may not successfully implement brand enhancement efforts in the future.

Additionally, as part of the EchoStar Purchase Agreement executed in the year ending December 31, 2020 ("Fiscal 2020"), the Company granted EchoStar the right to use the name "Ting" and its associated domain name over a 24-month period, after which EchoStar had an option to purchase the brand from the Company. EchoStar has formally refused their option to purchase the Ting brand, however the right to use the name "Ting" by EchoStar was subsequently extended by the Company and now runs month to month. Any actions taken by EchoStar as part of the transactions contemplated by the EchoStar Purchase Agreement may impact the Ting brand's reputation. These actions could range from poor service quality, bad customer experience, privacy concerns, data breaches, and other events that could negatively impact the Ting brand permanently. The Ting brand could then carry negative connotation with consumers and impact our ability to continue to grow our Fiber Internet business under the Ting brand. If any of these events occur, our operational performance and financial results, in particular those of our Fiber Internet business may be adversely affected.

The Company’s success depends on the continued service and availability of key personnel .

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.

RISKS RELATED TO OUR OPERATIONS AND INFRASTRUCTURE

We rely on third-party network operators, data centers, and service providers, and any disruptions to these systems could negatively impact our business.

Our operations depend on the continuous availability and reliability of network infrastructure, data centers, and cloud service providers. Any system failure, service interruption, or infrastructure damage—whether within our own facilities or those of our third-party partners—could result in service disruptions, loss of revenue, reputational harm, and financial liabilities.

• Ting Internet relies on our Fiber Network, as well as third-party Partner Network Providers in certain markets. Damage to network facilities, failure to maintain government authorizations, or non-compliance with regulations by these third parties could disrupt our service and result in financial losses.
• Wavelo depends on data centers, public cloud providers, and key observability service providers to monitor outages and ensure platform availability. Service interruptions could impact billing and provisioning services for clients, affecting customer retention and revenue.
• Tucows Corporate – Mobile Services operates on third-party wireless networks. Failures in their network infrastructure, security breaches, or regulatory non-compliance could lead to subscriber losses, increased costs, or operational challenges. Our Master Services Agreement does not provide indemnification for network outages or disruptions, increasing our exposure to risk.
• Tucows Domains depends on IT and communications systems housed in data centers, some of which are in regions with high seismic activity. System failures due to natural disasters, cyberattacks, sabotage, or financial instability of data center operators could cause prolonged service outages, negatively affecting our brands, revenue, and profitability.

Some of our businesses rely on Network Operators. Failure by a Network Operator to obtain the proper licenses, approvals and or permits from regulatory authorities would cause us to be unable to successfully operate those businesses.

The FCC licenses currently held by our Network Operators and their third-party affiliates to provide wireless services are subject to renewal and revocation. There is no guarantee that their wireless or network licenses will be renewed. The FCC requires all licensee to meet certain requirements, including so-called “build-out” requirements, to retain their licenses. Their failure to comply with certain FCC requirements in a given license area could result in the revocation of their license for that geographic area. This could impact our ability to scale operations, meet customer demand, and achieve projected revenue growth. Additionally, increased regulatory requirements could lead to higher compliance costs and extended buildout timelines.

We are subject to minimum purchase commitments with some partner network providers and mobile network operators.

In certain Ting markets, we operate on third-party-owned internet networks, including municipal and private ("Partner Network Providers"), rather than building our own infrastructure. We pay fees based on minimum purchase commitments, which often increase as network construction expands and new serviceable addresses become available. To maintain profitability in these markets, we must grow our customer base and manage churn to offset these fixed costs.

Additionally, under our Ting Mobile agreement, we have a "take or pay" minimum purchase commitment with our MNO supplier. We are committed to a minimum of $18.5 million in remaining payments through February 16, 2026. Due to the small size of our retained mobile subscriber base, we expect to incur penalties related to underutilization, with $1.3 million accrued as of December 31, 2024. If we fail to grow our mobile customer base or renegotiate these obligations, our cost of revenue may increase, negatively impacting financial results. To date, renegotiation efforts have been largely unsuccessful, with only partial deferrals of penalty escalation. The Company expects to incur penalties throughout the year ending December 31, 2025 ("Fiscal 2025") and thereafter until the contract is complete in early 2026.

We are parties to agreements with other unrelated parties for certain business operations and to license third-party technologies. Any claims against these unrelated parties that we rely upon for business operations and/or licensed technology could result in the need to incur substantial costs to replace technology or services which could delay and increase the cost of product and service developments.

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. We expect our dependence on key suppliers to continue as more advanced technologies and services are developed. 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 execution of our Ting restructuring plans, involves risks that could adversely affect our business operations, financial condition, and growth strategy; including risks related to implementation difficulties, operational disruptions, and financial impacts.

To reflect the ongoing operational prioritizations of the Ting segment and to lower year-over-year operating expenses, we undertook the Ting workforce reductions on February 7, 2024 and October 30, 2024. The 2024 workforce reductions were aimed at streamlining the operations within our Ting segment and reducing capital expenditures. The successful execution of these plans was critical to our efforts to reduce costs, improve efficiency, and align our resources with strategic priorities. However, the implementation of the workforce reductions requires significant management attention and financial resources and is subject to a number of risks that could negatively impact our results of operations, including the following:

• Implementation difficulties and costs: The process of implementing the Capital Efficiency Plan may encounter unforeseen challenges, including delays and higher-than-anticipated expenses. These difficulties could hinder our ability to achieve the anticipated benefits of the Plan, such as cost savings and improved operational efficiencies.
• Operational Disruptions: Changes to our operational structure as part of the Capital Efficiency Plan, such as workforce reductions, may lead to temporary disruptions in our operations. These disruptions could adversely affect our ability to meet customer demands, maintain service quality, and achieve our growth objectives.
• Financial Impacts: The Capital Efficiency Plan has resulted in significant costs related to severance, asset write-downs, and other restructuring charges, which were incurred in the current fiscal period. While these expenditures were necessary to implement the plan and are expected to yield long-term financial benefits, they have negatively impacted our profitability in the short term. There is also a risk that the anticipated efficiencies and cost savings may take longer than expected to materialize or may not fully offset the upfront costs.
• Employee Morale and Retention: The Capital Efficiency Plan may impact employee morale and lead to challenges in retaining key personnel. Maintaining a motivated workforce is crucial to our ongoing success, and any negative effects on employee morale could adversely impact our business operations and financial performance.
• Market and Competitive Pressures: As we restructure our operations, there is a risk that competitors may take advantage of any perceived disruptions or weaknesses, potentially impacting our market position and competitive advantage.
• Reputational Harm: The public perception and reputation of our company could be adversely affected by the execution of significant restructuring plans like the Plan. Public, customer, and investor perceptions of our actions, especially in relation to workforce reductions, service changes, or other visible outcomes of the restructuring, could negatively influence our brand and reputation in the market.
• Impede Growth: The restructuring plans are expected to significantly reduce capital expenditures, which will in turn slow, and in some markets pause, the expansion of the Ting Internet footprint. The resulting reduction in capital spend will result in fewer additions to the Company's Owned Infrastructure Serviceable Addresses, which in turn could lead to fewer net additions to Internet Subscribers Under Management and revenue growth.

Despite these challenges, we are committed to successfully implementing the Plan and believe that it is a necessary step towards achieving our long-term strategic goals. We are closely monitoring the progress of the restructuring activities and are prepared to take corrective actions as needed to mitigate these risks. However, investors should be aware that the factors described above, among others, could have an adverse impact on our overall financial condition and results of operations.

RISKS RELATED TO CYBERSECURITY, DATA PRIVACY, AND INTELLECTUAL PROPERTY

We face cybersecurity risks that could disrupt our business, damage our reputation, and result in financial and legal liabilities.

As a provider of internet-based services, we collect, store, and process sensitive customer, employee, and business data across our operations. We rely on centralized data processing, online services, and third-party providers, increasing our exposure to cyber threats, data breaches, and unauthorized access. Any compromise of our network security or IT systems could lead to service disruptions, data loss, reputational harm, regulatory penalties, and financial liability.

Cyberattacks, including malware, phishing, ransomware, deepfake fraud, and AI-driven hacking techniques, continue to increase in sophistication, frequency, and impact. Nation-state actors and organized cybercriminal groups are increasingly targeting technology infrastructure providers, and as a company supporting core internet services, we may be at greater risk. AI-driven threats, such as realistic social engineering attacks and domain abuse, may further expose us to fraudulent activity, regulatory scrutiny, and increased compliance costs.

Additionally, supply chain attacks—particularly those targeting open-source software and third-party dependencies—have become more prevalent, increasing the risk of compromised infrastructure and security vulnerabilities. Despite our investments in security controls, fraud detection tools, and risk mitigation strategies, our defensive measures may not be sufficient to prevent or detect all cyber incidents.

A significant security breach, data loss, or service outage could result in legal claims, increased regulatory oversight, financial penalties, loss of customer trust, and damage to our competitive position, all of which could materially affect our business, financial condition, and results of operations.

Evolving laws and regulations governing intellectual property and internet services may expose us to increased liability and compliance costs.

The legal framework surrounding intellectual property, domain registration, and online content liability continues to evolve, and changes in these laws could increase our legal exposure, regulatory burden, and compliance costs.

As a provider of domain registration and hosting services, we do not monitor the appropriateness of domain names or website content created by our customers, nor are we required to do so under our ICANN accreditation. However, we may be subject to legal claims arising from illegal or infringing activities conducted by third parties using domains registered through our platforms. While we maintain policies to address misuse, we cannot prevent all violations, and enforcement efforts may result in legal disputes, reputational harm, or regulatory penalties.

Several laws currently shield internet service providers and domain registrars from liability, including:

• The Communications Decency Act (CDA), which limits liability for user-generated content, except in cases of direct participation in unlawful activity.
• The Digital Millennium Copyright Act (DMCA), which provides safe harbor protections for hosting third-party content, contingent on compliance with takedown requests.
• The Anti-Cybersquatting Consumer Protection Act (ACPA), which governs domain name disputes and limits registrar liability absent bad faith intent to profit.

These protections, however, are subject to judicial interpretation and legislative changes, both in the U.S. and internationally. Some jurisdictions have introduced stricter content liability laws, data localization mandates, and intellectual property protections that may be difficult or costly to comply with. If courts narrow existing legal protections or governments impose new regulatory obligations on domain registrars, we may be required to modify our business practices, enhance compliance programs, or absorb additional operational costs.

Additionally, domain registrars are increasingly facing tort liability for domain disputes, security breaches, and fraudulent registrations. While we implement safeguards against unauthorized transfers, phishing, and domain hijacking, our defenses may not always be effective, and we may be subject to claims that increase our litigation exposure and financial risk.

We maintain general liability insurance, but coverage may be insufficient, disputed, or unavailable for certain claims. Any significant uninsured losses, regulatory penalties, or litigation costs could adversely impact our financial condition and results of operations.

Data protection regulations may impose legal obligations on us that we cannot meet or that conflict with our ICANN contractual requirements.

In 2018, the European Commission adopted the GDPR, which creates obligations around the procurement, processing, publication and sharing of personal data. Potential fines for violations of certain provisions of GDPR reach as high as 4% of a company’s annual total revenue, potentially including the revenue of its international affiliates. The solutions we develop for GDPR-compliance may not be adequate in the views of regulatory authorities or ICANN, which may cause the loss of WHOIS privacy revenue or increase our costs of developing compliant solutions or subject us to litigation, liability, civil penalties, or loss of market share. As the privacy laws and regulations around the world continue to evolve, these changes could adversely affect our business operations in similar ways.

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.

We rely upon copyright, trade secret and trademark law, confidentiality and nondisclosure agreements, invention assignment agreements and work-for-hire agreements to protect our proprietary technology, all of which offer only limited protection. Due to the global nature of our web-based businesses and services, we cannot ensure that our efforts to protect our proprietary information will be adequate to protect against infringement and misappropriation by third parties, particularly in foreign countries where laws or law enforcement practices may not protect proprietary rights as fully as in the U.S. and Canada.

We have licensed, and may in the future license, some of our trademarks and other proprietary rights to others. Third parties may also reproduce or use our intellectual property rights without seeking a license and thus benefit from our technology without paying for it. Third parties could also independently develop technology, processes or other intellectual property that are similar to or superior to those used by us. Actions by licensees, misappropriation of the intellectual property rights or independent development by others of similar or superior technology might diminish the value of our proprietary rights or damage our reputation. The unauthorized reproduction or other misappropriation of our intellectual property rights, including copying the look, feel and functionality of our website could enable third parties to benefit from our technology without us receiving any compensation. The enforcement of our intellectual property rights may depend on our taking legal action against these infringing parties, and we cannot be sure that these actions will be successful.

Defense of claims of infringement of intellectual property or other rights of third parties against us would require the resources of both our time and money. Third parties may assert claims of infringement of patents or other intellectual property rights against us concerning past, current or future technologies. Content obtained from third parties and distributed over the Internet by us may result in liability for defamation, negligence, intellectual property infringement, product or service liability and dissemination of computer viruses or other disruptive problems. We may also be subject to claims from third parties asserting trademark infringement, unfair competition and violation of publicity and privacy rights relating specifically to domains.

As a domain name registrar, we regularly become involved in disputes over registration of domain names. These disputes are typically resolved through the UDRP, ICANN’s administrative process for domain name dispute resolution, or less frequently through litigation under the Anti Cyber Squatting Consumer Protection Act "ACPA", or under general theories of trademark infringement or dilution. The UDRP generally does not impose liability on registrars, and the ACPA provides that registrars may not be held liable for registering or maintaining a domain name absent a showing of bad faith intent to profit or reckless disregard of a court order by the registrars. However, we may face liability if we fail to comply in a timely manner with procedural requirements under these rules. In addition, these processes typically require at least limited involvement by us, and therefore increase our cost of doing business. The volume of domain name registration disputes may increase in the future as the overall number of registered domain names increases.

We have substantial goodwill and other intangible assets, therefore to the extent that any intellectual property is deemed impaired we would be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or intangible assets is determined. Any impairment charges or changes to the estimated amortization periods could have a material adverse effect on our financial results.

Domain names are valuable assets, and cybersecurity risks could lead to their loss or misattribution of liability to us.

Domain names are valuable and critical assets for businesses, serving as digital storefronts and key components of brand identity, customer engagement, and online commerce. As a domain registrar, we facilitate the registration, renewal, and management of domain names on behalf of customers. However, cyber threats such as phishing, social engineering, credential theft, and unauthorized account access create risks that could result in the loss, transfer, or hijacking of valuable domain names.

In the event that we, our systems, or a customer’s account is compromised due to a cyberattack, the affected party may suffer significant reputational and financial harm. A lost or stolen domain name can lead to business disruption, loss of web traffic, loss of value, intellectual property disputes, and potential legal claims. Even if the security breach originates from a customer’s own systems, we may be blamed for failing to prevent the loss or unauthorized transfer of the domain, leading to liability exposure, regulatory scrutiny, or litigation.

Despite implementing security measures such as multi-factor authentication, domain locking, and account monitoring, no system is immune to attack. Additionally, evolving cyber threats—particularly AI-driven fraud, deepfake impersonation, and credential stuffing—may increase the likelihood of domain-related security breaches. If we are held responsible for a domain name loss, whether through direct fault or perceived negligence, our reputation, financial position, and operations could be materially impacted.

RISKS RELATED TO FINANCIAL AND MACROECONOMIC CONDITIONS

Our indebtedness could adversely affect our ability to raise additional capital to fund our operations, our ability to operate our business, execute our strategy divert our cash flow from operations for debt payments, and prevent us from meeting our debt obligations.

The Company’s wholly owned subsidiary, Ting Fiber, LLC, as well as its wholly owned subsidiaries are financed by the 2023 and 2024 Term Notes (as defined in Note 8 – Notes Payable to the Company’s Consolidated Financial Statements) as well as the Unit Purchase Agreement (“UPA”) with Generate (as defined in Note 13 – Redeemable Preferred Units to the Company’s Consolidated Financial Statements).

On May 4, 2023 (the "Closing Date"), Tucows Inc. through its indirect and wholly owned subsidiaries, including Ting Fiber, LLC, entered into a definitive agreement relating to a securitized financing facility related to (i) $168,357,000 of its 5.95% Secured Fiber Revenue Notes, Series 2023-1, Class A-2, (ii) $23,289,000 of its 7.40% Secured Fiber Revenue Notes, Series 2023-1, Class B and (iii) $46,859,000 initial principal amount of 9.95% Secured Fiber Revenue Notes, Series 2023-1, Class (together, the “2023 Term Notes”). On the Closing Date, Ting Issuer LLC, a Delaware limited liability company (the “Issuer”), a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company issued the 2023 Term Notes. The net proceeds from the issuance of the 2023 Term Notes were $220.5 million, after deducting a debt discount of $11.2 million and issuing costs of $6.7 million. As of March 13, 2025, our outstanding 2023 Term Notes was $238.5 million.

On August 20, 2024, Tucows Inc., through its indirect and wholly owned subsidiaries, including Ting Fiber, LLC, entered into a definitive agreement relating to a securitized financing facility related to a privately placed securitization transaction. On August 20, 2024, Ting Issuer LLC, the Issuer, a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company, issued the 2024 Term Notes. The net proceeds from the issuance of the 2024 Term Notes were $61.0 million, after deducting issuance costs of $2.0 million. As of March 13, 2025, our outstanding 2024 Term Notes was $63 million.

The 2023 Term Notes and 2024 Term Notes are secured by certain of the Ting Issuer LLC's, revenue-generating assets, consisting principally of fiber-network related agreements, fiber-network assets and customer contracts (collectively, the “Securitized Assets”) that are owned by certain other limited-purpose, bankruptcy-remote, wholly owned indirect subsidiaries of the Company that act as the Guarantors (collectively with the Issuer, the “Obligor”) under the Base Indenture, dated as of May 4, 2023 (the “Base Indenture”). The 2023 Term Notes and 2024 Term Notes are subject to a series of covenants, restrictions and other investor protections including (i) that the Issuer maintains specified reserve accounts to be used to make required payments in respect of the 2023 Term Notes and 2024 Term Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, (iii) certain indemnification payments, (iv) the guarantors comply with standard bankruptcy-remoteness covenants, including not guaranteeing or being liable for other affiliates debts or liabilities, and (v) covenants relating to recordkeeping, access to information, and similar matters. 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 and changes in government monetary or fiscal policy. Failure to maintain compliance with operating restrictions of our credit facility could result in a default and could have a material adverse effect on our business and results of operation.

As of March 13, 2025,Generate has purchased preferred units under the UPA for an aggregate amount equal to $91.5 million, with a further capital commitment of $108.5 million available to Ting Fiber, LLC through Milestone Fundings (Please see “Note 13– Redeemable preferred units” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report) . 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's or its wholly owned subsidiaries (“Tucows businesses excluding Ting”). In order to continue the planned expansion of the Ting Internet footprint and fund future operating losses, we may need to access Milestone Fundings under the UPA, as well as engage in equity and further debt financing. 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. 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.

On September 22, 2023, the Company and its wholly owned subsidiaries, Tucows.com Co., Ting Inc., Tucows (Delaware) Inc., Wavelo, Inc. and Tucows (Emerald), LLC (each, a “Borrower” and together, the “Borrowers,” collectively with the Company, “Tucows”) and certain other subsidiaries of the Company, as guarantors, entered into a Credit Agreement (the “2023 Credit Agreement”) with Bank of Montreal, as administrative agent (“BMO” or the “Agent”), and the lenders party thereto, to, among other things, provide the Borrowers with a revolving credit facility in an aggregate amount not to exceed $240 million (the “2023 Credit Facility”). The Borrowers may request an increase to the 2023 Credit Facility through new commitments of up to $60 million if the Total Funded Debt to Adjusted EBITDA Ratio (as defined in the 2023 Credit Agreement) is less than 3.75:1.00. The 2023 Credit Facility expires on September 22, 2026, which is the third anniversary of the effective date of the 2023 Credit Facility. The 2023 Credit Facility contains customary representations and warranties, affirmative and negative covenants, and events of default. The 2023 Credit Agreement requires that the Company comply with certain customary non-financial covenants and restrictions. In 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. Tucows businesses excluding Ting are financed by the Company’s 2023 Credit Facility. As of March 13, 2025, our outstanding debt under the 2023 Credit Facility was $195.4 million with remaining committed funds of $44.6 million. 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. 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.

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. The Company does not currently have an effective “universal” shelf registration statement on Form S-3 on file with the SEC, which might delay the Company's ability to complete an equity financing. In addition, even though we may have sufficient cash flow, we may still elect to sell additional equity or debt securities or obtain credit facilities for other reasons. If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. In addition, if we decide to raise funds through debt or convertible debt financings, we may be unable to meet our interest or principal payments. Our inability to generate sufficient cash flow from operations or obtain additional capital or alternative financing on acceptable terms could have a material adverse effect on our business, financial condition and results of operations.

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. 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.

The trailing twelve month debt to Adjusted EBITDA ratio was 3.26:1.00 as of December 31, 2024 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 not more than 3.75:1.00. Our ability to remain in compliance with our operating restrictions, generate cash flow from operations to 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 the 2023 Credit Facility could result in default and could have a material adverse effect on our business.

With respect to the UPA, Ting Fiber, 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 closing of the transaction (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. 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.

With respect to the 2023 and 2024 Term Notes are secured by certain of the Company’s revenue-generating assets, consisting principally the Securitized Assets that are owned by the Obligor under the Base Indenture. The 2023 and 2024 Term Notes are subject to a series of covenants, restrictions and other investor protections including (i) that the Issuer maintains specified reserve accounts to be used to make required payments in respect of the 2023 and 2024 Term Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, (iii) certain indemnification payments, (iv) the guarantors comply with standard bankruptcy-remoteness covenants, including not guaranteeing or being liable for other affiliates debts or liabilities, and (v) covenants relating to recordkeeping, access to information, and similar matters. 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.

Any future indebtedness that we incur may contain similar or more restrictive covenants. Any failure to comply with the restrictions of our debt agreements may result in an event of default under these agreements, which in turn may result in defaults or acceleration of obligations under these agreements and other agreements, giving our lenders the right to terminate any commitments they had made to provide us with further funds and to require us to repay all amounts then outstanding. Any of these events would have a material adverse effect on our business, financial condition, and operating results.

Our preferred unit financing arrangement could impact our financial condition by diverting cash flow to debt payments and limiting our ability to operate effectively. It also imposes operational and financial milestones on our Ting segment, which could restrict access to additional funding.

On August 8, 2022, Ting Fiber, LLC entered into the UPA with Generate under which Ting Fiber, LLC has committed to issue and sell $60 million of Series A Preferred Units at the Initial Funding, subject to customary closing conditions, and an additional aggregate of $140 million Series A Preferred Units if the Milestones are achieved over a three year period from the date of the Transaction Close. As of March 13, 2025, 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 Series A Preferred Units accrue a preferred return to the holder at a rate of 15% per annum, subject to adjustments based on the value of approved projects under the Equity Capital Contribution Agreement (the “ECC Agreement”). The preferred return on the Series A Preferred Units purchased under the Unit Purchase Agreement may be adjusted down to a floor of 13% or up to a ceiling of 17% per annum based on commitment and contribution amounts under the ECC Agreement. The preferred return accrues daily, and is compounded quarterly. The preferred return accrued during the first two years is not payable unless and until the Series A Preferred Units are redeemed. The preferred return accrued after the second anniversary of the Transaction Close is payable by the Company quarterly. If the Company should redeem the Series A Preferred Units prior to the fourth anniversary of the Transaction Close, the Company is required to pay a make-whole premium.

On May 4, 2023, Ting Fiber, LLC executed the Ting Class C Notes - Redemption Agreement (the "Redemption Agreement") and the Ting Class C Notes – Side Letter (the "Side Letter Agreement") with Generate. Under the terms of the Redemption Agreement, Ting Fiber, LLC redeemed 5,173,067 Series A Preferred Units held by Generate at $6 per unit, totaling a redemption of $31 million. The terms of the redemption were modified by the Side Letter Agreement, which granted a 30% discount on the make-whole premium which amounted to $14.7 million for a total redemption price of $45.7 million inclusive of the make-whole premium. Terms of the Side Letter Agreement also preclude Ting Fiber, LLC from issuing additional Series A Preferred Units for 365 days from the closing of the Redemption Agreement during which time standby fees will be suspended.

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. The failure to access the additional funding or pay the preferred return, could have a material adverse effect on our business. In addition, the Company 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 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.

The international nature of our businesses and operations expose us to additional risks that could harm our business, operating results, and growth strategy; including risks related to taxation and foreign currencies fluctuations.

As a Company with multinational operations. Expansion into international markets is a continued element of our growth strategy. Introducing and marketing our services internationally, developing direct and indirect international sales and support channels and managing foreign personnel and operations all require significant management attention and financial resources. We face a number of risks associated with expanding our businesses internationally that could negatively impact our results of operations, including the following:

• Foreign currency fluctuations and exchange rates: Our operating results are accordingly subject to fluctuations in foreign currency exchange rates, which could adversely affect our future operating results. We attempt to mitigate a portion of these risks through foreign currency hedging, based on our judgment of the appropriate trade-offs among risk, opportunity and expense. We generally use hedging programs to partially hedge our exposure to foreign currency exchange rate fluctuations for Canadian dollars, the currency in which we incur the majority of operating expenses. Although we regularly review our hedging program and make adjustments as necessary based on the judgment factors discussed above, our hedging activities may not offset more than a portion of the adverse financial impact resulting from unfavorable movement in foreign currency exchange rates, which could adversely affect our financial condition or results of operations.
• Potentially adverse tax consequences or an inability to realize tax benefits: Significant judgment is required in determining our provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities, which may have a significant impact on our provision for income taxes. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied, including the Tax Cuts and Job Act of 2017. In addition, governmental tax authorities are increasingly scrutinizing the tax positions of companies. 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.

19

• 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.

The Company’s subsidiary Ting will require additional financing in order to meet its future financial obligations.

Ting incurred a net loss of $121.7 million and $119 million for the year ended December 31, 2024 and the year ended December 31, 2023, respectively. At December 31, 2024, Ting had $61.7 million in cash and cash equivalents, restricted cash and restricted cash equivalents, $1.2 million in accounts receivable, $1.2 million in accounts payable and $15.8 million in accrued liabilities. At December 31, 2024, Ting's long term liabilities included $287.6 million payable on the 2023 and 2024 Term Notes as well as $122.1 million on the Redeemable Preferred Units. Ting incurred an operating cash flow deficit of $49.9 million and $50.4 million for the year ended December 31, 2024 and the year ended December 31, 2023, respectively. Ting has scheduled interest payments of $39.9 million in the twelve months following December 31, 2024.

Ting may not be able to meet its financial obligations over the twelve months following December 31, 2024 without additional financing. Ting has historically relied on the proceeds from its Redeemable Preferred Units as well as its 2023 and 2024 Term Notes to fund its operations and the expansion of the Ting fiber Internet footprint. Ting currently has limited capacity to expand its borrowings under the Base Indenture and it is uncertain whether Ting will be able to access additional Milestone Fundings under the Redeemable Preferred Unit facility. Our ability to obtain additional financing if required will be subject to a number of factors, including market conditions, our operating performance and investor sentiment. If we are unable to raise additional capital when required or on acceptable terms, we may have to further restrict our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained, and which could result in additional dilution to our stockholders. If we do not have sufficient funds to continue operations, Ting could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing some or all of their investment in us.

Should Ting fail to pay the Unsatisfied Preferred Return associated with the Series A Preferred Units for two consecutive quarters, Generate has the option to either (i) require Ting to redeem the Series A Preferred Units at the Redemption Price; or (ii) compel the sale of certain assets of Ting and/or its subsidiaries to Generate with a value equal to the Redemption Price. The Redemption Price is an amount equal to the outstanding Unreturned Series A 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). The Make-Whole Premium is an amount calculated immediately prior to redemption equal to:(i) (A) the Unreturned Series A Capital Balance and Unsatisfied Preferred Return outstanding immediately prior to such redemption plus (B) the cumulative and compounded Preferred Return that would have accrued (at the Preferred Rate as in effect immediately prior to such redemption) on such Unreturned Series A Capital Balance through and including the six-year anniversary of the Effective Date had such Series A Preferred Units not been redeemed, and thereafter applying to such sum a discount rate on a quarterly compounded basis equal to the Applicable Treasury Rate plus 50 basis points, less (ii) the Unreturned Series A Capital Balance and Unsatisfied Preferred Return outstanding immediately prior to such redemption.

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. We continue to monitor economic conditions closely, as well as segment revenues, cash position, cash flow from operations, interest rates and other factors. The Company continues to monitor and assess wage inflation across all our operating segments - Ting, Tucows Domains, and Wavelo, and is managing it against offsets in hiring plans and contractor mix. Our Ting segment is also exposed to inflation through its Fiber Network build and installation costs, and sustained levels of inflation increase the costs of related materials and contracted labor. We continue to assess ways to reduce costs, however there can be no assurance as to the effectiveness of our efforts to mitigate any impact of the adverse economic conditions, and other unknown developments.

We have substantial debt obligations, including credit facilities and term notes. Our ability to service this debt depends on operational cash flows, borrowing capacity, and prevailing interest rates. Rising interest rates or changes in the credit market could increase the cost of debt servicing, limit our ability to access additional financing on favorable terms, or affect our ability to deploy capital for strategic initiatives. In the event of an economic downturn, reductions in IT spending by businesses and consumers could negatively impact demand for domain registrations, website services, and fiber broadband subscriptions, further affecting our financial condition.

In addition, our exposure to interest rate fluctuations relate primarily to our 2023 Credit Facility, entered into on September 22, 2023. The Company's interest rates are based on the Secured Overnight Financing Rate ("SOFR").

Macroeconomic, geopolitical, and market conditions may adversely affect our business, financial condition, and operating results.

Our financial performance is directly and indirectly impacted by global and regional economic conditions, which in turn are influenced by financial market volatility, inflation, interest rates, tariffs, trade disputes, credit availability, and overall consumer and business confidence. Economic uncertainty may result in reduced business investment, delayed spending decisions, or cost-cutting measures by customers, which could negatively impact demand for our domain services, internet infrastructure, and platform offerings. Additionally, weak economic conditions may lead to reduced public-sector spending and shifts in government policies that affect telecommunications infrastructure and internet governance.

Political instability, trade restrictions, and geopolitical conflicts—including the war in Ukraine, ongoing tensions in the Middle East, and the potential expansion of these conflicts—may disrupt supply chains, increase regulatory uncertainty, or impact global financial markets, leading to fluctuations in currency exchange rates, interest rate volatility, and potential restrictions on international business operations. In particular, changes in trade policies, tariffs, and taxation laws could affect our cost structure, cross-border transactions, and market access.

Additionally, prolonged economic downturns or tightening credit conditions may increase our exposure to customer credit risk, impact our receivables collections, and result in higher allowances for doubtful accounts. If these conditions persist, they could have a material adverse effect on our business, financial condition, and results of operations.

RISKS RELATED TO REGULATORY AND LEGAL COMPLIANCE

Changes in government regulations may increase compliance costs and impact our business operations.

Our business is subject to evolving federal, state, and international regulations, which may increase operational costs, restrict market access, or impact future growth.

The FCC grants wireless licenses that are subject to renewal and revocation. If our Network Operator’s license is not renewed or if compliance requirements change, it could disrupt our service offerings. Additionally, various state regulations on billing practices, privacy, and consumer protection could increase compliance costs and make it more difficult to implement national sales and marketing programs

Our Tucows Domains segment operates in a regulatory environment that is increasingly complex and subject to change. Governments worldwide may impose new laws affecting online resellers, content liability, privacy, consumer protection, and cross-border commerce. Changes in tax regulations, content policies, or data security requirements could result in higher compliance costs, increased liability, or restrictions on our ability to provide services

The adoption of new regulations, reinterpretation of existing laws, or removal of legal protections for internet services could hinder market growth, increase costs, or disrupt our operations, potentially impacting our financial condition and results of operations.

We may be subject to unforeseen liabilities or unenforceable customer agreements, which could negatively impact our financial results.

Our Domain Services business operates globally under standard customer agreements that outline the terms of our services and include provisions intended to limit our liability. These agreements are typically executed electronically or deemed accepted through continued use of our services. While this approach aligns with industry practices, courts in certain jurisdictions could challenge the validity or enforceability of these agreements, potentially exposing us to increased legal liability and compliance costs.

Although we maintain general liability insurance, coverage may be insufficient or disputed, and claims may exceed policy limits. Additionally, while we seek indemnifications from technology and content providers, we cannot guarantee their accuracy or adequacy. If we are required to pay claims that are uninsured, underinsured, or not covered by indemnification, our financial condition and operating results could be materially affected.

We are exposed to risks related to online payment fraud, chargebacks, and evolving payment technologies.

Across all our business segments, we are exposed to risks associated with credit card transactions, chargebacks, and online payment fraud, regardless of whether services operate on a postpaid or prepaid basis. A significant portion of our revenue comes from online credit card transactions, where we assume liability for fraudulent and disputed charges under industry rules. If chargeback rates exceed established thresholds, we may face higher processing fees, penalties, or restrictions from payment networks, which could impact our ability to accept credit card payments.

Additionally, in our postpaid businesses, including Tucows Corporate – Mobile Services, Ting and Wavelo, our ability to manage credit risk while acquiring profitable customers is critical. These segments have relatively short operating histories, and we may be unable to accurately predict customer defaults, fraud risks, or collection challenges. Factors such as regulatory changes, competitive pricing strategies, or consumer behavior shifts may further impact our ability to mitigate credit risk and maintain profitability.

If fraud rates rise or credit losses exceed expectations, we may need to implement costly fraud prevention measures, enhance credit risk models, or absorb financial losses, all of which could negatively impact our margins, operational efficiency, and overall financial performance.

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our operating results and financial condition.

We are subject to income and other taxes in a number of jurisdictions and our tax structure is subject to review by both domestic and foreign tax authorities. We must make significant assumptions, judgments and estimates to determine our current provision for income taxes, deferred tax assets and liabilities and any valuation allowance that may be recorded against our deferred tax assets. Although we believe that our estimates are reasonable, the ultimate determination of our tax liability is always subject to review by the applicable tax authorities. Any adverse outcome of such a review could have a negative effect on our operating results and financial condition in the period or periods for which such determination is made. Our current and deferred tax liabilities could be adversely affected by:

• international income tax authorities, including the Canada Revenue Agency and the U.S. Internal Revenue Service, challenging the validity of our arms-length related party transfer pricing policies or the validity of our contemporaneous documentation.
• changes in the valuation of our deferred tax assets; or
• changes in tax laws, regulations, accounting principles or the interpretations of such laws.

We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities. This could discourage the registration or renewal of domain names.

Due to the global nature of the Internet, it is possible that, although our services and the Internet transactions related to them typically originate in the United States, Canada, Denmark and Germany, governments of other states or foreign countries might attempt to regulate our transactions or levy sales, income or other taxes relating to our activities. Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in Internet commerce. New or revised international, federal, state or local tax regulations may subject us or our customers to additional sales, income and other taxes. We cannot predict the effect of current attempts to impose sales, income or other taxes on commerce over the Internet on Tucows or on our customers. New or revised taxes and, in particular, sales taxes, would likely increase the cost of doing business online and decrease the attractiveness of advertising and selling goods and services over the Internet. 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.

Changes in ICANN policies, fees, and oversight may impact our domain registration business.

ICANN oversees the domain name registration system and imposes fees on domain registrar. They operate as a private sector, not-for-profit entity but faces ongoing public, governmental, and industry scrutiny regarding its governance, policies, and decision-making processes. Regulatory bodies, including the U.S. Congress and international authorities, periodically evaluate ICANN’s role, policies, and fee structures, which could lead to structural changes, increased regulation, or shifts in oversight. These changes may introduce uncertainty and potential instability in the domain registration market.

We face several risks related to ICANN’s oversight and evolving policies, including:

• Fee increases which could raise our costs or deter domain registrations.
• Changes to the Registrar Accreditation Agreement that could be disadvantageous or, in extreme cases, prevent us from operating as a registrar.
• Conflicts between ICANN policies and national laws, leading to compliance challenges or operational restrictions in certain jurisdictions.
• Legal or regulatory actions against ICANN, which could impact its authority and introduce uncertainty into the domain name system.
• International regulatory bodies, such as the ITU or the EU, gaining greater influence over domain governance, potentially leading to new taxation, privacy, or competition regulations.

If any of these events occur, they could disrupt the stability of the domain registration market, increase our compliance costs, or reduce our ability to operate efficiently, negatively affecting our wholesale and retail domain businesses.

RISKS RELATED TO CAPITAL MARKETS AND STOCK VOLATILITY

Our share price may be volatile, and investors may be unable to sell shares at a favorable price.

The market price of our common stock has fluctuated and may continue to experience significant volatility, regardless of our financial performance. Investors may be unable to resell their shares at a desired price due to market conditions, reduced trading volume, or negative sentiment toward our stock.

Several factors may contribute to this volatility, including:

• Actual or anticipated variations in our quarterly financial results;
• Service disruptions or outages that impact customer trust and operational performance;
• Seasonal fluctuations in demand for our services and those of our customers;
• Announcements of new technologies or competitive services in our industry;
• Market perceptions of our business strategy, growth initiatives, and execution;
• Stock performance of companies in our sector, particularly those considered comparable to us;
• Analyst ratings, short-seller activity, or media coverage of our company;
• Macroeconomic trends affecting the technology and internet sectors.

The stock market, particularly for internet, technology, and telecom companies, has experienced periods of significant volatility. Broader market trends, economic conditions, or shifts in investor sentiment toward our industry may further impact our stock price, trading volume, and overall market valuation.

We cannot guarantee that our stock repurchase program will be fully consummated or that it will enhance long-term shareholder value.

On February 13, 2025, our Board of Directors approved a stock repurchase program authorizing the Company to buy back up to $40 million of its common stock in the open market. The program commenced on February 14, 2025, and is expected to terminate on February 13, 2026.

While the Company has previously repurchased shares under similar programs, we are under no obligation to repurchase shares under this program, nor are we obligated to complete purchases up to the full authorized amount. The timing, quantity, and pricing of repurchases will depend on market conditions, available liquidity, and other strategic considerations, and the program may be modified, suspended, or discontinued at any time at the discretion of our Board.

Stock repurchase programs can impact our share price and market volatility, but there is no assurance that the repurchase program will enhance the long-term value of our stock or generate returns for shareholders.

RISKS RELATED TO ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG) FACTORS

Energy consumption from data centers and internet infrastructure may result in higher costs and increased regulatory scrutiny.

Our operations rely on data centers, cloud computing resources, and domain registration infrastructure, all of which require significant energy consumption. As governments introduce carbon reduction policies and energy efficiency mandates, we may face higher electricity costs, increased environmental compliance requirements, and potential pressure from investors to adopt more sustainable energy practices. If we are unable to reduce our carbon footprint or comply with future environmental regulations, we could face reputational risks and higher operational costs.

Investor and regulatory expectations for ESG (Environmental, Social, and Governance) transparency may require additional disclosures and compliance efforts.

Institutional investors, regulatory agencies, and industry stakeholders are increasingly focused on ESG performance and corporate sustainability disclosures. We may be required to implement new reporting frameworks, publish ESG-related data, or enhance corporate governance structures to meet investor expectations and regulatory requirements in the U.S., the U.K., Canada, and Europe. In addition, stakeholder expectations are not uniform, and both opponents and proponents of various ESG-related matters have increasingly resulted in a range of activism to advocate for their positions, including Anti-ESG positions. We could also be criticized by ESG detractors for the scope or nature of our ESG policies and practices. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could impact our access to capital markets, investor sentiment, and corporate reputation.

Our business and financial performance could be adversely impacted by climate change, environmental disruptions, and other unforeseen disasters or crises.

Our business operations, financial condition, and results of operations could be negatively affected, directly or indirectly, by extreme weather events, environmental disasters, public health crises, and other large-scale disruptions. These events are inherently unpredictable and may impact us directly, by causing physical damage to infrastructure, disrupting service delivery, or increasing operational costs, or indirectly, by affecting customer demand, supply chain stability, or broader economic conditions.

As climate-related risks continue to evolve, our fiber network infrastructure, data centers, and operational facilities may be exposed to hurricanes, wildfires, floods, and other extreme weather events. Damage to physical assets may disrupt network services, increase maintenance and repair costs, and contribute to customer churn, which could impact revenue. Additionally, the cost of insurance, regulatory compliance, and infrastructure hardening may increase over time, potentially affecting our capital expenditure planning and overall profitability.

Our ability to mitigate the impact of such events depends on the effectiveness of our business continuity planning, network resilience strategies, and disaster recovery measures. However, unanticipated disruptions or insufficient preparedness by local, national, or international emergency responders, supply chain partners, or other key stakeholders could exacerbate the financial and operational consequences of such events.

Risk Management and Strategy

Our business heavily relies on various IT and application systems, which contain proprietary and confidential information about our operations, employees, customers, and our customers' customers, including personally identifiable information. These systems are connected to and/or accessed from the Internet and, as a result, are susceptible to cyber-attacks. We recognize the critical importance of maintaining the safety and security of our systems and data and have a holistic process for overseeing and managing cybersecurity and related risks. Our process is supported by both management and our Board of Directors. Organizationally, our businesses are structured as three operating and reportable segments: Ting, Wavelo and Tucows Domains. These segments are decentralized; management and cybersecurity resources are organized both at the parent company level and within each decentralized segment. Each segment has dedicated liaisons for cybersecurity, compliance, and risk management activities.

We maintain and continue to expand our investment in the development of our information security management system (“ISMS”). Our ISMS leverages a risk-based approach and is informed by industry standard guidance, including the National Institute of Standards and Technology ("NIST”) Cybersecurity Framework (“CSF”) and the International Organization for Standardization (“ISO”) 27001 Information Security Management System Requirements. A material cyber-attack on Company systems, distribution partners and their key operating systems, or any other third-party partners or vendors and their key operating systems may interrupt the ability to operate the Company's business, damage the Company's reputation, or result in monetary damages. The development of the ISMS is focused on the protections of the confidentiality, integrity, and availability of the Company’s information system infrastructure as well as the data in the Company’s care, custody and control. The Company engages third parties to evaluate certain aspects of the ISMS, provide threat intelligence, and perform vulnerability assessments and other services as needed.

The Company follows an established process to identify and evaluate risks from cybersecurity threats that may arise internally or through the introduction of third parties to the ISMS. This evaluation is part of the Company's risk management process. The process may include, but is not limited to, evaluating the third party's cybersecurity maturity and/or imposing certain contractual conditions.

Operationally, the Company maintains Security and Network Operations Centers, which provide 24/7 coverage and support of on-call cybersecurity and network professionals to triage and respond to immediate cybersecurity threats and outages. The Company also assesses cybersecurity risks on a quarterly basis and ranks them according to their risk profile. These risks are communicated to management and to the Board of Directors as part of the normal course of operations.

Cybersecurity incidents are responded to in accordance with the Company’s established Cybersecurity Incident Response Plan (“IRP”). In the event of an incident, we follow our IRP, which includes evaluation of the severity of the incident based on factors such as the number of assets affected, the extent of the incident, the likelihood of inappropriate data exposure, operational impact and/or reliability impact. Dependent upon the severity of an incident, the incident is escalated to the senior leadership, including the CEO and senior leadership. Senior leadership then determines whether, based on various factors, the incident requires immediate escalation to the Board of Directors and to third-party incident response organizations and notification to functional areas, such as legal and finance, as well as senior leadership and the Board, and external entities, as appropriate and required. We maintain relationships with third-party Digital Forensics and Incident Response (“DFIR”) service providers to strengthen our incident response capabilities in the event that we determine the need to augment our effort during an incident and to provide us additional assurance that our responses to complex incidents or highly sophisticated threat actors have been effective and complete.

Although the risks from cyber threats have not materially affected our business strategy, results of operations, or financial condition to date, they may in the future and we continue to closely monitor cyber risk. For a detailed description of the risks related to cybersecurity, see Item 1A. “Risk Factors.” of this Annual Report, which should be read in conjunction with this Item 1C.

Board Governance and Management

The Board of Directors oversees management’s processes for identifying and mitigating risks, including cybersecurity risks, to help align our risk exposure with our strategic objectives. Senior leadership manages our overall information security strategy, policy, security engineering, operations and cyber threat detection and response. The corporate information security function is responsible for managing and continually enhancing our information security posture and information security infrastructure with the ultimate goal of preventing cybersecurity incidents and reducing their severity to the extent feasible, while simultaneously increasing our resilience in an effort to minimize the business impact should an incident occur.

Senior leadership, including our CEO, who also has relevant experience in cybersecurity matters, regularly brief the Board of Directors on our cybersecurity and information security initiatives, and the Board of Directors is apprised of cybersecurity incidents deemed to have a material business impact.

Our principal administrative, engineering, marketing and sales office is located in Toronto, Canada, 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, Canada office supports all of our segments. Leased satellite offices across the U.S. support the Ting segment, while European offices support Tucows Domains.

The Company has acquired real property in Centennial, Colorado where it has constructed an office, warehouse and data center to support our local logistical operations and our North American colocation needs. This property primarily supports the Ting segment.

Currently, substantially all of our computer and communications hardware is located at our facilities or at server hosting facilities in Toronto, Ontario; San Jose, California; Centennial, Colorado; Ashburn, Virginia; Charlottesville, Virginia; Durango, Colorado; and Moncure, North Carolina.

Recent Sales of Unregistered Securities

None.

We are involved in various investigations, claims and lawsuits arising in the normal conduct of our business, none of which, individually or in aggregate in our opinion, will materially harm our business. We cannot assure you that we will prevail in any litigation. Regardless of the outcome, any litigation may require us to incur significant litigation expense and may result in significant diversion of management attention.

In addition, pursuant to Item 103(c)(3)(iii) of Regulation S-K under the Exchange Act, the Company is required to disclose certain information about environmental proceedings to which governmental authority is a party if the Company reasonably believes such proceedings may result in monetary sanctions, exclusive of interest and costs, above a stated threshold. The Company has elected to apply a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required.

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. 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. The Wavelo segment includes our platform and professional services offerings, as well as the billing solutions to Internet services providers ("ISPs") (branded as Platypus). 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.

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 decisions and evaluate segment performance. 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. The exclusions include: 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.

For the years ended December 31, 2024, 2023 and 2022, we reported revenue of $362 million, $339 million and $321 million, respectively.

Ting

Ting and its wholly owned subsidiaries, Cedar and Simply Bits, includes the provision of high-speed Internet access services to select towns throughout the United States, with operations focused on serving existing markets. 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 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 of December 31, 2024, Ting Internet had access to 134,000 owned infrastructure serviceable addresses, 45,000 partner infrastructure serviceable addresses and 51,000 active accounts under its management; compared to having access to 121,000 owned infrastructure serviceable addresses, 29,000 partner infrastructure serviceable addresses and 43,000 active accounts under its management as of December 31, 2023. These figures exclude the increase in serviceable addresses and accounts attributable to the Simply Bits acquisition.

On February 7, 2024 Ting committed to the February 2024 workforce reduction, which aimed to realign the Company's operational structure within the Ting operating segment and reduce Ting's workforce by 13%, or 7% of the Company’s total workforce, to better support strategic objectives. The February 2024 workforce reduction was designed to streamline operations and reduce operating expenses within the Ting operating segment. Substantially all of the employees impacted by the workforce reduction were notified on February 7, 2024 and have since exited the Company. The Company incurred non-recurring charges of approximately $3.2 million in connection with the workforce reduction, primarily consisting of severance payments, notice pay, employee benefits contributions and outplacement costs.

On October 30, 2024, Ting undertook a capital efficiency plan (the “Capital Efficiency Plan”) to reflect the ongoing operational and financial prioritization of the Ting business and to lower the Company's year-over-year operating expenses and capital outlays, which impacted approximately 42% of Ting's workforce or 17% of the Company's total workforce. The Company incurred non-recurring charges of approximately $7.7 million in connection with the Capital Efficiency Plan, primarily consisting of severance payments, notice pay, employee benefits contributions and outplacement costs.

The Company expects that both the 2024 workforce reductions and Capital Efficiency Plan will realize personnel and related expense (net of capitalization) savings with the majority of the savings in sales and marketing, including related network support functions, followed by smaller impacts in technical operations and development, direct cost of revenues, network, general and administrative, and other costs. In Fiscal 2024 the realized savings will be partially offset by costs associated with both plans. These costs referenced above are classified as transitional and are excluded in our Adjusted EBITDA, which is a non-GAAP financial measure. Please see discussion of Adjusted EBITDA as well as the Adjusted EBITDA reconciliation to net income in the Results of Operations section below.

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. Wavelo's focus is to provide accessible telecom software to CSPs globally, minimizing network and technical barriers and improving internet access worldwide. Wavelo's suite of flexible, cloud-based software simplifies the management of mobile and internet network access, enabling CSPs to better utilize their existing infrastructure, focus on customer experience and scale their businesses faster. Wavelo launched as a proven asset for CSPs, with EchoStar 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. 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. Similarly, Wavelo's revenues from Platypus are largely generated in the U.S., with a small portion earned in Canada and other countries.

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. 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. 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.

Our primary distribution channel is a global network of more than34,000 resellers that operate in 200 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 focus is serving the needs of this network of resellers by providing the broadest portfolio of gTLD and the country code top-level domain options and related services, a white-label platform that facilitates the provisioning and management of domain names, a powerful Application Program Interface, easy-to-use interfaces, comprehensive management and reporting tools, and proactive and attentive customer service. Our services are integral to the solutions that our resellers deliver to their customers. We provide “second tier” support to our resellers by email, chat and phone in the event resellers experience issues or problems with our services. In addition, our Network Operating Center proactively monitors all services and network infrastructure to address deficiencies before customer services are impacted.

We believe that the underlying platforms for our services are among the most mature, reliable and functional reseller-oriented provisioning and management platforms in our industry, and we continue to refine, evolve and improve these services for both resellers and end-users. 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. Together the OpenSRS, eNom, EPAG and Ascio Domain Services manage 24.5 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 0.1 million, or less than 1%, since December 31, 2023.

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. 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. Our retail domain services also include our Personal Names Service – based on over 34,000surname domains – that allows roughly two-thirds of Americans to purchase an email address based on their last name. 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.

KEY BUSINESS METRICS AND NON-GAAP FINANCIAL MEASURES

We regularly review a number of business metrics, including the following key metrics and non-GAAP financial 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. The following tables set forth the key business metrics which we believe are the primary indicators of our performance for the periods presented:

(1) Defined as premises to which Ting has the capability to provide a customer connection in a service area.

(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.

Tucows reports all financial information in accordance with United States generally accepted accounting principles (“GAAP”). Along with this information, to assist financial statement users in an assessment of our historical performance, we typically disclose and discuss a non-GAAP financial measure, Adjusted EBITDA, on investor conference calls and related events that excludes certain non-cash and other charges as we believe that the non-GAAP information enhances investors’ overall understanding of our financial performance. Please see discussion of Adjusted EBITDA as well as the Adjusted EBITDA reconciliation to net income in the Results of Operations section below.

OPPORTUNITIES, CHALLENGES AND RISKS

Our revenue is primarily realized in U.S. dollars and a major portion of our operating expenses are paid in Canadian dollars. Fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar may have a material effect on our business, financial condition and results from operations. In particular, we may be adversely affected by a significant weakening of the U.S. dollar against the Canadian dollar on a quarterly and an annual basis. Our policy with respect to foreign currency exposure is to manage our financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some or all of the impact of foreign currency exchange movements by entering into foreign exchange forward contracts to mitigate the exchange risk on a portion of our Canadian dollar exposure. We may not always enter into such forward contracts and such contracts may not always be available and economical for us. Additionally, the forward rates established by the contracts may be less advantageous than the market rate upon settlement.

Ting

As an ISP, we have invested and expect to continue to invest in new fiber to the home (“FTTH”) deployments in select markets in the United States. The investments are a reflection of our ongoing efforts to build FTTH network via public-private partnerships in communities we identify as having strong, unmet demand for FTTH services. Given the significant upfront build and operational investments for these FTTH deployments, there is risk that future technological and regulatory changes as well as competitive responses from incumbent local providers, may result in us not fully recovering these investments.

Wavelo

Wavelo launched as a proven asset for CSPs, with EchoStar using Wavelo’s MONOS software to drive additional value within its Digital Operator Platform. More recently, Ting Internet has also integrated Wavelo’s ISOS and SM software to enable faster subscriber growth and footprint expansion. With our external platform and professional services revenues concentrated to one customer in EchoStar, we are exposed to significant risk if we are unable to maintain this customer relationship or establish new relationships for any of our Platforms in the future. Additionally, our revenues as a platform provider are directly tied to the subscriber volumes of EchoStar's MVNO or MNO networks, and our profitability is contingent on the ability of EchoStar to continue to add subscribers, either from organic growth or from migration off legacy systems, onto our platforms.

Domain Services

The increased competition in the market for Internet services in recent years, which we expect will continue to intensify in the short and long term, poses a material risk for us. As new registrars are introduced, existing competitors expand service offerings and competitors offer price discounts to gain market share, we face pricing pressure, which can adversely impact our revenues and profitability. To address these risks, we have focused on leveraging the scalability of our infrastructure and our ability to provide proactive and attentive customer service to aggressively compete to attract new customers and to maintain existing customers.

Substantially all of our Tucows Domains revenue is derived from domain name registrations and related value-added services from wholesale and retail customers using our provisioning and management platforms. The market for wholesale registrar services is both price sensitive and competitive and is evolving with the introduction of new gTLDs, particularly for large volume customers, such as large web hosting companies and owners of large portfolios of domain names. We have a relatively limited ability to increase the pricing of domain name registrations without negatively impacting our ability to maintain or grow our customer base. Growth in our Tucows Domains revenue is dependent upon our ability to continue to attract and retain customers by maintaining consistent domain name registration and value-added service renewal rates and to grow our customer relationships through refining, evolving and improving our provisioning platforms and customer service for both resellers and end-users. In addition, Tucows Domains also generate revenues through the sale of names from our portfolio of domain names and through the OpenSRS, eNom, and Ascio Domain Expiry Streams.

From time-to-time certain of our vendors provide us with market development funds to expand or maintain the market position for their services. 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.

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 EchoStar Purchase Agreement executed in Fiscal 2020. This consideration structure may not prove to be successful or profitable in the long-term to us if the existing subscriber base churns at an above average rate. Additionally, given EchoStar controls the revenues and costs incurred associated with the acquired subscribers, there could arise a situation where profitability for the subscriber base is diminished either by lower price points or cost inflation. Additionally, as part of the EchoStar Purchase Agreement, the Company retained a small number of customer accounts associated with one MNO agreement that was not reassigned to EchoStar at time of sale. We continue to be subject to the minimum revenue commitments previously agreed to with this excluded MNO agreement. The Company is able to continue adding customers under the excluded MNO network in order to meet the commitment. However, with no direct ability to change customer pricing and limited ability to renegotiate contract costs or significant terms, the Company may be unable to meet the minimum commitments with this MNO partner and 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. During the twelve months ended December 31, 2024, the Company has accrue d $1.3 million of penalties associated with the minimum commitment shortfall. The Company expects to incur penalties throughout 2025 and thereafter until the contract is complete.

An in-depth assessment of the risk factors impacting our businesses has been discussed at length above in Part I under the caption "Item 1A Risk Factors" in this Annual Report.

Critical Accounting Estimates

The following is a discussion of our critical accounting estimates. Critical accounting estimates are defined as those that are both important to the portrayal of our financial condition and results of operations and are reflective of significant judgments and uncertainties made by management that may result in materially different results under different assumptions and conditions. “Note 2 – Significant Accounting Policies” in the Notes to the Consolidated Financial Statements for Fiscal 2024 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience, available market information as applicable, and on various other assumptions that are believed to be reasonable under the circumstances at the time they are made. Under different assumptions or conditions, the actual results will differ, potentially materially, from those previously estimated. Many of the conditions impacting these assumptions and estimates are outside of the Company’s control. Management evaluates its estimates on an on-going basis.

Acquired customer relationships

For acquired customer relationships, the Company estimates the fair value based on the income approach. The income approach is a valuation technique that calculates the fair value of an intangible asset based on the present value of future cash flows expected to be generated over the remaining useful life of the asset. This valuation involves significant subjectivity and estimation uncertainty, including assumptions related to future revenues attributable to acquired customer relationships, attrition rates and discount rates.

Loss contingencies

We are sometimes subject to claims, suits, regulatory and government investigations, and other proceedings involving competition, intellectual property, privacy, tax and related compliance, labor and employment, commercial disputes, and other matters. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated.

We evaluate, on a regular basis, developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments and changes to our disclosures as appropriate. Significant judgment is required to determine both the likelihood and the estimated amount of a loss related to such matters. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material.

Impairment of Goodwill and intangibles

Any changes to our key assumptions about our businesses and our prospects, or changes in market conditions, could cause the fair value of our operating segments to fall below their carrying values, resulting in a potential impairment charge. 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.

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.

Impairment of Property and equipment

The Company assesses its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. When such indicators exist, management estimates the recoverability of the asset group based on the undiscounted future cash flows expected to be generated. If the carrying amount exceeds the estimated recoverable amount, an impairment loss is recognized for the excess of the carrying amount over the fair value of the asset group. We concluded that there were indications of impairment under the qualitative approach during Fiscal 2024 as a result of the decisions resulting from the Capital Efficiency Plan from October 2024. This resulted in an impairment charge of $17.7 million in Fiscal 2024 for both Ting assets under construction and computer equipment.

Management’s estimates are based on historical experience, available market information as applicable, third-party analysis, and various other assumptions that are believed to be reasonable under the circumstances at the time they are made. Given the subjectivity involved, changes in assumptions or market conditions could result in materially different outcomes.

Changes in estimates

There were no material changes to our critical accounting estimates during Fiscal 2024.

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. Amounts received in advance of meeting the revenue recognition criteria described below are recorded as contract liabilities. All products are generally sold without the right of return or refund.

Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Nature of goods and services

The following is a description of principal activities – separated by reportable segments – from which the Company generates its revenue. For more detailed information about reportable segments. 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 operations focused on serving existing markets. 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 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 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. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations.

(b) Wavelo

Platform Services

Tucows' Platform Services include the following full-service platforms from Wavelo, including MONOS, ISOS, SM and our legacy Platypus ISP Billing software. 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'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. 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. 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.

Other Professional Services

This revenue stream includes any other professional services earned from Wavelo's performance of standalone technology services development work. These are billed to our customers monthly at established rates for services provided in period. The Company recognizes professional services revenue as the Company satisfies its obligations to provide professional services.

(c) Tucows Domains

Wholesale - Domain Services

Domain registration contracts, which can be purchased for terms of one to ten years, provide our resellers and retail registrant customers with the exclusive right to a personalized internet address from which to build an online presence. The Company enters into domain registration contracts in connection with each new, renewed and transferred-in domain registration. At the inception of the contract, the Company charges and collects the registration fee for the entire registration period. Though fees are collected upfront, revenue from domain registrations are recognized ratably over the registration period as domain registration contracts contain a ‘right to access’ license of IP, which is a distinct performance obligation measured over time. 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.

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. 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. Tucows Domains will continue to be the largest portion of our business and will further fuel our ability to sell add-on services.

The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. 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. Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.

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. 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. The retail segment now includes the sale of the rights to its portfolio of surname domains used in connection with our RealNames email and Linux hosting services for websites through our Exact Hosting brand.

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.

(d) Corporate and all other - Mobile services and eliminations

Although we still provide mobile telephony services to a small subset of customers retained through the Ting Mobile brand as part of the EchoStar Purchase Agreement executed in Fiscal 2020; this revenue stream no longer represents the Company's strategic focus going forward. Instead we have transitioned towards being a platform provider for CSPs globally via our Wavelo segment. Effective January 1, 2022 we 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.

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. 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 EchoStar. 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 EchoStar. The Company recognizes revenue as the Company satisfies its obligations to provide transitional services.

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 EchoStar, over a period of 10 years. This has been classified as Other Income and not considered revenue in the current period.

Valuation of Goodwill, Intangible Assets and Long-Lived Assets

The excess of the purchase price over the fair values of the identifiable assets and liabilities from our acquisitions is recorded as goodwill. At December 31, 2024, we had $130.4 million in goodwill related to our acquisitions and $24.8 million in intangible assets comprised of $12.3 million of indefinite life intangibles and $12.5 million of finite life intangible assets. 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. As described above, we report our financial results as three operating segments, Ting, Wavelo and Tucows Domains. The goodwill balance is built up of $107.7 million (83%) related to Tucows Domains and $22.7 million (17%) related to Ting. Of our goodwill balance, $90.3 million is not deductible for tax purposes. The intangible asset balance is built up of $17.4 million (70%) related to Tucows Domains and $7.4 million (30%) related to Ting.

We account for goodwill and indefinite life intangible assets in accordance with the Financial Accounting Standards Board (“FASB”)'s authoritative guidance, which requires that goodwill and indefinite life intangible assets are not amortized, but are subject to an annual impairment test. We complete our impairment test on an annual basis, during the fourth quarter of our fiscal year, or more frequently, if changes in facts and circumstances indicate that impairment indicators are present.

Our indefinite life intangible assets consist of surname domain names and direct navigation domain names. In order to maintain our rights to these domain names, we pay annual renewal fees to the applicable domain name registries. Over the course of time, we sometimes decide not to renew certain under-performing domain names and incur an impairment charge associated with such non-renewal. There was no impairment recorded on indefinite-life intangible assets during 2024, 2023 and 2022.

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. We use an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable. During Fiscal 2024, 2023 and 2022, property and equipment with net book values of $19.1 million, $4.8 million, and $0.1 million, respectively, were written off and included in impairment of property and equipment in the consolidated statements of comprehensive income (loss). $17.7 million of the impairment losses incurred in 2024 related to the announced Capital Efficiency Plan, both specific assets under construction projects no longer planned to be completed and the capital inventory to be used in those projects were assessed as an impairment loss. The full cost of the identified assets under construction impacted was recorded as an impairment loss as well as the difference between carrying value and liquidation value of capital inventory. The remaining $1.4 million impairment charges relate to specific network assets that were identified through routine inspections as being damaged and no longer in use. During Fiscal 2024, 2023 and 2022 there was no impairment recorded on definite-life intangible assets.

We performed a qualitative assessment to determine whether there were events or circumstances which would lead to a determination, whether it is more likely than not, that goodwill and indefinite life intangible assets have been impaired. In performing the qualitative testing, we made an evaluation of the impact of various factors to the expected future cash flows attributable to our reporting units and to the assumed discount rate which would be used to present value those cash flows. Consideration was given to 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. 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 determination of acquisition date fair values requires us to make significant estimates and assumptions regarding projected revenues, costs, earnings before interest, taxes, depreciation and amortization, attrition rates and discount rates. Changes to these assumptions may result in material differences depending on the size of the acquisition completed.

Any changes to our key assumptions about our businesses and our prospects, or changes in market conditions, could cause the fair value of our operating segments to fall below its carrying value, resulting in a potential impairment charge. 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. A goodwill or intangible asset impairment charge could have a material effect on our consolidated financial statements because of the significance of goodwill and intangible assets to our consolidated balance sheet. 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 2024, 2023 or 2022.

Accounting for Income Taxes

We operate in various tax jurisdictions, and accordingly, our income is subject to varying tax rates. Losses incurred in one jurisdiction cannot be used to offset taxable income in another jurisdiction. Our ability to use income tax loss carryforwards and future income tax deductions is dependent upon our operations in the tax jurisdictions in which such losses or deductions arise. Significant judgment is required in determining our provision for income taxes and evaluating our uncertain tax positions.

We account for income taxes under the asset and liability method, which recognizes the deferred tax assets or liabilities for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of our assets and liabilities. Valuation allowances are established to reduce deferred tax assets when it is more likely than not that the benefit from the deferred tax assets will not be realized. In assessing the need for valuation allowance, historical and future levels of income, expectations and risks associated with estimates of future taxable income and tax planning strategies are considered. As of December 31, 2024, the valuation allowance of $51.7 million was recorded, which we are not expected to realize on a more than likely than not basis.

We apply a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if on the weight of available evidence, it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit that is more than 50% likely to be realized upon settlement. As of December 31, 2024, we did not recognize any uncertain tax provisions within the provision for income taxes.

See "Note 9 – Income Taxes" to the Consolidated Financial Statements for further information regarding income taxes included in Part II, Item 8 of this Annual Report.

Recently Issued Accounting Standards

See “Note 2 – Significant Accounting Policies” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for information regarding recently issued accounting standards.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2024 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2023

For additional information on our financial condition as of December 31, 2023 and results of operations, liquidity and capital resources for the year ended December 31, 2023 as compared to the year ended December 31, 2022, refer to Part II, “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on 10-K for the year ended December 31, 2023 which was filed with the United States Securities and Exchange Commission on April 1, 2024.

NET REVENUES

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. 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 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 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. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations.

Platform Services

Tucows' Platform Services include the following full-service platforms from Wavelo, including MONOS, ISOS, SM and our legacy Platypus ISP Billing software. 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 EchoStar using Wavelo’s MONOS software to drive additional value within its Digital Operator Platform. 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. 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. 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.

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.

Tucows Domains

Wholesale - Domain Services

Domain registration contracts, which can be purchased for terms of one to ten years, provide our resellers and retail registrant customers with the exclusive right to a personalized internet address from which to build an online presence. The Company enters into domain registration contracts in connection with each new, renewed and transferred-in domain registration. At the inception of the contract, the Company charges and collects the registration fee for the entire registration period. Though fees are collected upfront, revenue from domain registrations are recognized ratably over the registration period as domain registration contracts contain a ‘right to access’ license of IP, which is a distinct performance obligation measured over time. 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.

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. 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. We expect Domain services will continue to be the largest portion of our business and will continue to enable us to sell add-on services.

The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. 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. Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.

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. 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. 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 Linux hosting services for websites through our Exact Hosting brand.

Corporate and all other - Mobile services and eliminations

Although we still provide mobile telephony services to a small subset of customers retained through the Ting Mobile brand as part of the EchoStar Purchase Agreement executed in Fiscal 2020; this revenue stream no longer represents the Company's strategic focus going forward. Instead we have transitioned towards being a Wavelo provider for CSPs globally.

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. 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 EchoStar. 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 EchoStar. The Company recognizes revenue as the Company satisfies its obligations to provide transitional services.

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 EchoStar, over a period of 10 years. This has been classified as Other Income and not considered revenue in Fiscal 2023 or 2024.

The following table presents our net revenues, by revenue source:

(Dollar amounts in thousands of U.S. dollars)

37

The following table presents our net revenues, by revenue source, as a percentage of total net revenues:

Total net revenues for Fiscal 2024 increased by $23.0 million, or 7%, to $362.3 million compared the year ended December 31, 2023 ("Fiscal 2023"). The increase in net revenue was driven by higher revenues across all operations. The Domains segment increased $12.5 million in the current period primarily driven by pricing increases through the current period and strong performance in the Expiry stream. The Ting segment increased $8.8 million in the current period as a result of subscriber growth from the continued buildout of our Fiber network across the United States. The Wavelo segment increased $1.2 million in the current period as a result of the complete Boost Mobile subscriber base migration onto our platform, compared to the prior period where subscriber migrations were only complete at the end of June 30, 2023; offset by a decrease in other professional services revenues. Mobile Services and eliminations increased by $0.4 million attributable to decreased intercompany revenues partially offset by decreased Mobile services revenues.

Contract liabilities at December 31, 2024 increased by $8.7 million to $156.8 million from $148.1 million at December 31, 2023. The increase was driven primarily by Tucows Domains, which accounted for $7.4 million of the increase as a result of the increase in pricing and domain name transactions through the current period. This was furthered by a smaller $1.2 million increase from Wavelo as a result of the contract liability associated with select customer contracts.

A customer, EchoStar, within our Wavelo segment accounted for 10.7% of total net revenue during the year ended December 31, 2024 and 10.7% of total net revenue during the year ended December 31, 2023. EchoStar accounted for 56% of total accounts receivable at December 31, 2024 and 59% of total accounts receivable at December 31, 2023. 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. Our expected credit losses were $0.9 million and $0.5 million as at December 31, 2024 and at December 31, 2023, respectively. Based on this assessment, we expect the carrying amount of our outstanding receivables, net of expected credit losses, to be fully collected.

Ting

Ting generated $59.7 million in net revenue during Fiscal 2024, which increased by $8.8 million or 17% compared to Fiscal 2023. This growth is driven by continued subscriber growth across the markets we serve, as well as the continued expansion of our Ting Internet footprint to new Ting towns throughout the United States.

As of December 31, 2024, Ting Internet had access to 134,000 owned infrastructure serviceable addresses, 45,000 partner infrastructure serviceable addresses and 51,000 active accounts under its management; compared to having access to 121,000 owned infrastructure serviceable addresses, 29,000 partner infrastructure serviceable addresses and 43,000 active accounts under its management as of December 31, 2023. These figures exclude the increase in serviceable addresses and accounts attributable to the Simply Bits acquisition.

Platform Services

Wavelo's Platform services generated $39.8 million in net revenue during Fiscal 2024, which increased by $2.7 million or 7% compared to Fiscal 2023. The increase in Fiscal 2024 net revenue is driven primarily by increased platform revenues earned from a full twelve months of fully loaded revenues from the completed migration of EchoStar's Boost Mobile subscriber base at the end of June 30, 2023. The increased platform fees from EchoStar in the current period are partially offset by a reduction of revenues from Ting flat fee platform fees. Intercompany revenues earned for provision of services on the ISOS and SM platforms between Wavelo and Ting are included in Wavelo's segment revenues for purposes of segment analysis, but are ultimately eliminated upon consolidation. The elimination impact is presented below in Corporate and all other - Mobile services and eliminations.

Other Professional Services

During Fiscal 2024, Wavelo's Other Professional Services net revenue decreased by $1.6 million or 100% compared to Fiscal 2023, to less than $0.1 million. These revenues are related to the provision of standalone technology services development for our CSP customers and are non-recurring in nature, and expectantly can fluctuate period over period. These revenues depend on the volume (if any) and scope of standalone technology services development work our customers engage us to perform. In the current period, we performed limited standalone professional services for our customers.

Tucows Domains

Wholesale - Domain Services

Wholesale Tucows Domains generated $197.1 million in net revenue during Fiscal 2024, which increased by $8.1 million or 4% compared to Fiscal 2023. The increase from Wholesale domain services was driven primarily by increased domain name transactions and various price increases since Fiscal 2023.

Together the OpenSRS, eNom, EPAG and Ascio Domain Services manage 24.5 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 0.1 million domain names, or less than 1%, since December 31, 2023.

Wholesale - Value Added Services

Wholesale value-added services generated $19.9 million in net revenue during Fiscal 2024, which increased by $2.2 million or 12% compared to Fiscal 2023. The increase in value-added service revenue was driven by strong expiry sales and the inclusion of our storefront operations through the current period, partially offset by lower Digital Certificate revenues.

Retail

Retail domain services generated $37.6 million in net revenue during Fiscal 2024, which increased by $2.2 million or 6% compared to Fiscal 2023. The increase in retail revenue was driven by a large transition of domain names from wholesale to retail, price increases across domain name registrations, strong domain name portfolio sales, and strong Exact Hosting revenues in the current period.

Corporate and all other - Mobile services and eliminations

Mobile Services and eliminations generated $8.0 million in net revenue during Fiscal 2024, which increased by $0.4 million or 5% compared to Fiscal 2023. The increase was driven primarily by lower intercompany corporate eliminations of $1.8 million, primarily as a result of decreased revenues associated with inter segment billing between Wavelo and Ting. This was partially offset by decreased revenues of $0.9 million associated with the mobile services and device revenues from the small group of customers retained by the Company as part of the EchoStar Purchase Agreement. This decrease was primarily a result of the organic subscriber churn and plan mix shifting towards lower price point rate plans compared to Fiscal 2023. This was also furthered by decreased transitional services of $0.5 million from a decreased level of dedicated support services provided to EchoStar in connection with the legacy Ting Mobile customer base.

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. Hardware costs include the cost of equipment sold to end customers, including routers, ONTs, and IPTV products, and any adjustments on this inventory. Other costs include field vehicle expenses, and small sundry equipment and supplies consumed in building the Fiber network.

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. This includes the amortization of any capitalized contract fulfillment costs over the period consistent with the pattern of transferring network access, provisioning and billing services to which the cost relates. Additionally, this includes any fees paid to third-party service providers primarily for printing services in connection with the Platypus ISP Billing software.

Other Professional Services

Cost of revenues to provide standalone technology services development work to our CSP customers to help support their businesses. This includes any personnel and contractor fees for any client service resources retained by the Company. Only a subset of the Company's employee base provides professional services to our customers. This cost reflects that group of resources.

Tucows Domains

Wholesale - Domain Services

Cost of revenues for domain registrations represents the amortization of registry and accreditation fees on a basis consistent with the recognition of revenues from our customers, namely ratably over the term of provision of the service. Registry fees, the primary component of cost of revenues, are paid in full when the domain is registered, and are initially recorded as prepaid domain registry fees. This accounting treatment reasonably approximates a recognition pattern that corresponds with the provision of the services during the period. 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.

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. Fees payable for trust certificates are amortized on a basis consistent with the provision of service, generally one year, while email hosting fees and monthly printing fees are included in cost of revenues in the month they are incurred.

Retail

Costs of revenues for our provision and management of Internet services through our retail sites, Hover.com and the eNom branded sites, include the amortization of registry fees on a basis consistent with the recognition of revenues from our customers, namely ratably over the term of provision of the service. Registry fees, the primary component of cost of revenues, are paid in full when the domain is registered, and are recorded as prepaid domain registry fees and are expensed ratably over the renewal term. Costs of revenues for our surname portfolio represent the amortization of registry fees for domains added to our portfolio over the renewal period, which is generally one year, the value attributed under intangible assets to any domain name sold and any impairment charges that may arise from our assessment of our domain name intangible assets.

Corporate and all other - Mobile services and eliminations

Cost of revenues for retail mobile services includes the costs of provisioning mobile services, which is primarily our customers' voice, messaging, data usage provided by our MNO partner, and the costs of providing mobile phone hardware, which is the cost of mobile phone devices and SIM cards sold to our customers, order fulfillment related expenses, and inventory write-downs. 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 EchoStar. 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 EchoStar. The Company recognizes costs as the Company satisfies its obligations to provide professional services.

Network expenses

Network expenses include personnel and related expenses related to platform and network site reliability engineering, network operations centers, IT infrastructure and supply chain teams that support our various business segments. It also includes the depreciation and any impairment charges of property and equipment related to our networks and platforms, amortization of any intangible assets related to our networks and platforms, communication and productivity tool costs, and equipment maintenance costs. Communication and productivity tool costs include collaboration, customer support, bandwidth, co-location and provisioning costs we incur to support the supply of all our services, across our segments.

The following table presents our cost of revenues, by revenue source:

(Dollar amounts in thousands of U.S. dollars)

41

The following table presents our cost of revenues, as a percentage of total cost of revenues for the periods presented:

Total cost of revenues for Fiscal 2024 increased by $6.5 million, or 2%, to $279.2 million, from $272.7 million in Fiscal 2023. The increase in cost of revenues was driven by increases across Tucows Domains and mobile service and eliminations by $7.7 million and $2.6 million, respectively. The increase in Tucows Domains of $7.7 million was a result of an increase in domain name transactions and registry side cost increases through the current period. The increase in mobile services and eliminations of $2.6 million was primarily a result of higher mobile telephony services costs due to MNO minimum purchase commitments and plan mix changes in the current period. These increases were partially offset by decreases across Ting, Wavelo, and Network Expenses of $1.4 million, $1.4 million, and $0.9 million, respectively. The decrease in Ting of $1.4 million was primarily a result of decreased costs and savings from the Capital Efficiency Plan executed in October 2024. The decrease in Wavelo of $1.4 million was primarily driven by Other Professional Services, consistent with limited standalone technology development work and revenues in the current period. The decrease in Network Expenses of $0.9 million was primarily due to a decrease in impairment charges within the Ting segment compared to Fiscal 2023, as well as decreased costs and savings from the Capital Efficiency Plan; partially offset by an increase in depreciation costs.

Deferred costs of fulfillment as of December 31, 2024 increased by $5.9 million, or 5%, to $117.0 million from $111.1 million at December 31, 2023. This increase was driven by Tucows Domains with an increase of $6.5 million as a result of increased domain name transactions and registry cost increases through the current period, consistent with the increase in contract liabilities discussed above. This increase was partially offset by Wavelo, with a decrease of $0.6 million related to the prior year which included Other Professional Services where the deferred costs to fulfill those services were amortized into costs of revenues.

Ting

In Fiscal 2024, costs related to provisioning high speed Internet access for Ting and its subsidiaries, Cedar and Simply Bits, decreased by $1.4 million, or 7%, to $18.8 million as compared to $20.2 million during Fiscal 2023. The decrease is primarily driven by decreased personnel costs and savings from the Capital Efficiency Plan executed in October 2024.

Platform Services

Cost of revenues from Wavelo Platform Services for Fiscal 2024 decreased by $0.1 million, or 8%, to $1.2 million from $1.3 million in Fiscal 2023. This was driven by the complete amortization of previously capitalized costs incurred to fulfill the EchoStar Master Services Agreement ("MSA") over the initial term of the agreement, which ended in July 2024.

Other Professional Services

Cost of revenues from Other Professional Services for Fiscal 2024 decreased by $1.3 million, or 100%, to less than $0.1 million as compared to $1.3 million in Fiscal 2023. Cost of revenues to provide other professional services change depending on the nature and scope of work we are engaged to perform for our customers for select statements of work. The cost of revenues depend on the volume (if any) and scope of standalone technology services development work our customers engage us to perform. In the current period, we performed limited standalone professional services for our customers. The decrease is aligned to the decrease in Net Revenues discussed above.

Domain Services

Wholesale - Domain Services

Costs for Wholesale domain services for Fiscal 2024 increased by $7.7 million, or 5%, to $158.4 million as compared to $150.7 million in Fiscal 2023. Increases from Wholesale domain services were primarily driven by increased domain name transactions and various registry gTLD cost increases since Fiscal 2023. The increase is aligned to the increase in Net Revenues discussed above.

Wholesale - Value Added Services

Costs for wholesale value-added services for Fiscal 2024 decreased by $0.1 million, or 5%, to $2.1 million as compared to $2.2 million in Fiscal 2023. The decrease was driven by decreased costs related to the Digital Certificate revenue stream, and was partially offset by the inclusion of our storefront operations, consistent with the Net Revenues discussion above.

Retail

Costs for retail domain services for Fiscal 2024 increased by $0.1 million, or less than 1%, to $16.6 million as compared to $16.5 million in Fiscal 2023.

Corporate and all other - Mobile services and eliminations

Cost of revenues from Mobile Services and Eliminations for Fiscal 2024 increased by $2.5 million, or 26%, to $12.6 million as compared to $10.1 million in Fiscal 2023. The increase is driven by increased costs associated with mobile services from the small group of customers retained by the Company as part of the EchoStar Purchase Agreement due to MNO minimum purchase commitments and plan mix changes towards unlimited plans. The Company accrued $1.3 million in penalties associated with the MNO minimum commitment shortfall in Fiscal 2024, as compared to $0.3 million in Fiscal 2023. The company expects to continue to incur penalties in Fiscal 2025 and thereafter should limited subscriber growth persist. This was partially offset by a decrease in transitional services costs provided to EchoStar in connection with the legacy Ting Mobile customer base, consistent with the above discussion around net revenues.

Network Expenses

Network costs for Fiscal 2024 decreased by $0.9 million, or 1% to $69.5 million as compared to $70.4 million in Fiscal 2023. The current period decrease was primarily driven by decreased normal course network impairment charges of $3.4 million for Ting cable plant, asset under construction and capital inventory compared to Fiscal 2023. The current period decrease was furthered by a decrease in network costs of $1.5 million driven by savings related to the Capital Efficiency Plan, executed in October 2024. This was offset by increased network depreciation of $4.0 million, consisting of $3.1 million in incremental depreciation from Ting's expansion of our Ting Internet footprint to new Ting towns throughout the United States, $0.8 million in incremental depreciation of Wavelo's platform assets, and $0.1 million in incremental depreciation related to Tucows Domains and Corporate.

SALES AND MARKETING

Sales and marketing expenses consist primarily of personnel costs. These costs include commissions and related expenses of our sales, product management, public relations, call center, support and marketing personnel. Other sales and marketing expenses include customer acquisition costs, advertising and other promotional costs.

(Dollar amounts in thousands of U.S. dollars)

Sales and marketing expenses for Fiscal 2024 decreased by $8.4 million, or 12%, to $59.4 million as compared to Fiscal 2023. The decrease was primarily driven by reduced marketing and customer acquisition related spend from Ting, as the segment looked to measure and optimize channel spending. These savings were furthered by reduced personnel costs following the Capital Efficiency Plan.

Excluding movements in exchange rates, we expect sales and marketing expenses for Fiscal 2025 to decrease in absolute dollars, with lower personnel costs through the year due to lower headcount and as we adjust our marketing programs to optimize channel spending.

TECHNICAL OPERATIONS AND DEVELOPMENT

Technical operations and development expenses consist primarily of personnel costs and related expenses required to support the development of new or enhanced service offerings and the maintenance and upgrading of existing infrastructure. This includes expenses incurred in the research, design and development of technology that we use to register domain names, provide Wavelo's platform services, provide Ting's Internet Services, email, retail, domain portfolio and other Internet services. All technical operations and development costs are expensed as incurred.

(Dollar amounts in thousands of U.S. dollars)

Technical operations and development expenses for Fiscal 2024 decreased by $0.6 million, or 3%, to $18.6 million as compared to Fiscal 2023. The decrease was primarily driven by reduced contracted services spending for tools, systems, and labor to support the technical operations and development of our systems and platforms, lower network connectivity and co-location costs. These decreases were partially offset by savings in personnel costs following the Capital Efficiency Plan.

Excluding movements in exchange rates, we expect technical operations and development expenses for Fiscal 2025, in absolute dollars, to increase when compared to Fiscal 2024 to support the ongoing growth in our operations.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of compensation and related costs for managerial and administrative personnel, fees for professional services, public listing expenses, rent, foreign exchange and other general corporate expenses.

(Dollar amounts in thousands of U.S. dollars)

General and administrative expenses for Fiscal 2024 increased by $3.7 million, or 11%, to $37.1 million as compared to Fiscal 2023. The increase was primarily driven by increased professional fees incurred in the current period and increased spending on tooling and software to support general and administrative functions. The increase was furthered by slight increases in credit card processing fees and bad debt expense as teams re-assess provisions against collectability. These increases were partially offset by some savings relating to the Capital Efficiency Plan.

Excluding movements in exchange rates, we expect general and administrative expenses for Fiscal 2025, in absolute dollars, to increase when compared to Fiscal 2024 largely to support the growth of our business.

IMPAIRMENT AND RESTRUCTURING

(Dollar amounts in thousands of U.S. dollars)

During the year ended December 31, 2024, as part of the October 2024 Capital Efficiency Plan, the Company recorded an impairment loss of $17.7 million related to Assets Under Construction and Capital Inventory. These assets were deemed no longer necessary for future operations following the implementation of the Capital Efficiency Plan, which included the decision to cease new market expansions in select Ting markets. This impairment loss was accounted for under ASC 420 - Exit or Disposal Cost Obligations.

During the year ended December 31, 2024, the Company also incurred $11.0 million in one-time costs related to both the February 2024 Workforce Reduction and October 2024 Capital Efficiency Plan restructurings, which were both accounted for under ASC 420 - Exit or Disposal Cost Obligations. These costs associated with the Workforce Reduction and Capital Efficiency Plan predominantly consisted of termination benefits for the terminated employees associated with the restructuring, continuation of benefits, outplacement costs, and professional services.

DEPRECIATION OF PROPERTY AND EQUIPMENT

(Dollar amounts in thousands of U.S. dollars)

Depreciation costs for Fiscal 2024 decreased by less than $0.1 million to $0.5 million as compared to Fiscal 2023. The slight decrease was due to lower additions to property and equipment in Fiscal 2024 while additions from prior years became fully depreciated.

AMORTIZATION OF INTANGIBLE ASSETS

(Dollar amounts in thousands of U.S. dollars)

Amortization of intangible assets for Fiscal 2024 decreased by $5.5 million, or 59%, to $3.8 million as compared to Fiscal 2023. This decrease in amortization was a driven by the completed amortization of customer relationships associated with the Company's Fiscal 2017 acquisition of eNom. The amortization of the related assets was completed in January 2024.

Network rights, brand and customer relationships acquired in connection with the following acquisitions are amortized on a straight-line basis over a range of two to seven years: eNom in January 2017, Ascio in March of 2019, Cedar in January 2020 and Simply Bits in November 2021.

OTHER INCOME (EXPENSES)

(Dollar amounts in thousands of U.S. dollars)

45

Other income (expense) increased by $2.6 million when compared to Fiscal 2023. The increase was primarily driven by the absence of loss on debt extinguishment, related to the make-whole premium paid to Generate following the redemption of Series A Preferred Units in the three months ended September 30, 2023. The increase was furthered by a slight increase in other income due to the inclusion of Orange Domains joint venture and sublease rental income received in the current period. The increase was partially offset by higher net interest expense as a result of the inclusion of interest associated with the 2023 and 2024 Term Notes, an increase due to the absence of interest rate swap contracts in the current period, and lower interest expense capitalization associated with Fiber network assets under construction; partially offset by reduction in interest related to the Credit Facility for the Tucows businesses excluding Ting and the inclusion of interest income following the execution of Ting's 2023 and 2024 Term Notes. Income earned on sale of Transferred Assets to EchoStar decreased as a result of legacy customers naturally churning, as expected.

INCOME TAXES

The following table presents our provision for income taxes for the periods presented:

(Dollar amounts in thousands of U.S. dollars)

Income taxes increased by $14.8 million and the effective tax rate decreased from 7% to (8%) when compared to the year ended December 31, 2023. The change in effective tax rate is primarily due an increase in valuation allowance on net operating losses, which exceeded the impact of existing reversible temporary differences when compared to the same period in the prior year.

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.

ADJUSTED EBITDA

We believe that the provision of this supplemental non-GAAP financial measure allows investors to evaluate the operational and financial performance of our core business using similar evaluation measures to those used by management. We use Adjusted EBITDA to measure our performance and prepare our budgets. Since Adjusted EBITDA is a non-GAAP financial measure, our calculation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. 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. Non-GAAP financial measures do not reflect a comprehensive system of accounting and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies and/or analysts and may differ from period to period. We endeavor to compensate for these limitations by providing the relevant disclosure of the items excluded in the calculation of Adjusted EBITDA to net income based on GAAP, which should be considered when evaluating the Company's results. Tucows strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure.

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. Gains and losses from unrealized foreign currency transactions removes the unrealized effect of the change in the mark-to-market values on outstanding foreign currency contracts not designated in accounting hedges, as well as the unrealized effect from the translation of monetary accounts denominated in non-U.S. dollars to U.S. dollars.

The following table reconciles net income to Adjusted EBITDA:

(In Thousands of US Dollars)

1 Acquisition and other costs represent transaction-related expenses, transitional expenses, such as redundant post-acquisition expenses. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.

Segment Adjusted EBITDA for the year ended December 31, 2024 increased by $19.4 million, or 125% to $34.9 million when compared to the year ended December 31, 2023. The increase in segment Adjusted EBITDA from period-to-period was primarily driven by increases in Ting, Wavelo, and Tucows Domains. Ting contribution, which excludes the restructuring impact of the February 2024 workforce reduction and 2024 Capital Efficiency Plan, increased $21.6 million, primarily driven by subscriber growth across the markets we serve as well, the reduction in spend across sales and marketing activities, and reduced personnel costs due to the execution of the Capital Efficiency Plan. The Wavelo contribution increased $3.2 million primarily driven by increased platform revenues earned from the increased level of EchoStar subscribers on the platform throughout Fiscal 2024, compared to prior year where migrations of EchoStar subscribers were still occurring. Tucows Domains contributions increased by $1.8 million from strong wholesale, expiry, and portfolio sales through the current period, as well as the inclusion of Orange Domains joint venture. These increases in segment Adjusted EBITDA were partially offset by decreases across Mobile Services and eliminations. Mobile Services and eliminations contributions decreased $7.2 million primarily from the decrease in income earned on sale of Transferred Assets to EchoStar, increasing MNO minimum purchase obligations, as well as increased professional services fees; partially offset by reduced personnel costs due to the execution of the Capital Efficiency Plan.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2024, our cash and cash equivalents balance decreased $35.8 million, our funds held by trustee balance increased by $1.0 million, and our secured notes reserve funds balance increased by $3.1 million, respectively, when compared to December 31, 2023. The decrease in our cash balance was primarily driven by $56.5 million for the continued investment in property and equipment primarily driven by Ting Internet expansion and both Wavelo and Domains platforms, $19.7 million from cash used in operating activities, $16.5 million related to the repayment of the 2023 Credit Facility, $2.0 million related to deferred notes payable financing costs, and $0.6 million related to the acquisition of intangible assets. These uses of cash were partially offset by $63.0 million proceeds from the issuance of additional notes payable for Ting Internet (as defined in "Note 8 - Notes Payable") and $0.5 million from proceeds on disposal of property and equipment.

2024 Ting Securitized Financing Facility

On August 20, 2024, the Company through its wholly owned subsidiaries, including Ting, entered into a definitive agreement relating to a securitized financing facility related to a privately placed securitized transaction. On the closing date, Ting issued (i) $55,000,000 of its 5.63% Secured Fiber Revenue Notes, Series 2024-1, Class A-2 (the “2024 Class A-2 Notes”), (ii) $8,000,000 of its 6.85% Secured Fiber Revenue Notes, Series 2024-1, Class B (the “2024 Class B Notes”) and (iii) $16,000,000 initial principal amount of 9.15% Secured Fiber Revenue Notes, Series 2024-1, Class C (the “2024 Class C Notes” and together with the 2024 Class A-2 Notes and the 2024 Class B Notes, the “2024 Term Notes”).

The offering was exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). Subject to certain limitations, the 2024 Notes are secured by certain of the Company’s revenue-generating assets, consisting principally of the Securitized Assets, that are owned by certain other limited-purpose, bankruptcy-remote, wholly owned indirect subsidiaries of the Company (collectively, the “Securitization Entities”) that act as guarantors under the Base Indenture.

The 2024 Term Notes were issued under the Base Indenture, dated as of May 4, 2023 (as supplemented by the Base Indenture Supplement No. 1, dated as of November 10, 2023), by and between the Issuer, the asset parties party thereto and Citibank, N.A., as trustee (in such capacity, the “Indenture Trustee”) and securities intermediary and a series supplement to the Base Indenture dated as of the Closing Date (the “Series 2024-1 Supplement”), by and among the Issuer, the asset parties party thereto and the Indenture Trustee. The Base Indenture and the Series 2024-1 Supplement will allow the Issuer to issue additional series of notes in the future, subject to certain conditions set forth therein.

Interest payments on the 2024 Term Notes are payable on a monthly basis. The legal final maturity date of the 2024 Term Notes is in August of 2054, but, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment date of the 2024 Term Notes will be in August 2029. If the Issuer has not repaid or refinanced the 2024 Term Notes prior to the anticipated repayment date, additional interest will accrue on the 2024 Term Notes in an amount equal to the greater of (A) 5.00% per annum and (B) a per annum interest rate equal to the excess, if any, by which the sum of the following exceeds the original interest rate of such 2024 Term Note (i) the yield to maturity (adjusted to a “mortgage equivalent basis” pursuant to the standards and practices of the Securities Industry and Financial Markets Association) on such anticipated repayment date of the United States Treasury Security having a term closest to 10 years, plus (ii) 5.00%, plus (iii) (x) for the 2024 Class A-2 Notes, 2.00%, (y) for the 2024 Class B Notes, 3.25% and (z) for the 2024 Class C Notes, 7.00%. Please see the discussion in the Material Cash Requirements section below.

2023 Credit Facility

On September 22, 2023, the Borrowers and certain other subsidiaries of the Company, as guarantors, entered into the 2023 Credit Agreement with Bank of Montreal, as administrative agent (“BMO” or the “Agent”), and the lenders party thereto, to, among other things, provide the Borrowers with the 2023 Credit Facility in an aggregate amount not to exceed $240 million. The Borrowers may request an increase to the 2023 Credit Facility through new commitments of up to $60M if the Total Funded Debt to Adjusted EBITDA Ratio (as defined in the 2023 Credit Agreement) is less than 3.75:1.00. The Credit Facility expires on September 22, 2026, which is the third anniversary of the effective date of the 2023 Credit Facility.

The 2023 Credit Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default. The 2023 Credit Agreement requires that the Company comply with certain customary non-financial covenants and restrictions. In 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. As at December 31, 2024, the Company's leverage ratio was 3.26:1.00 and Interest Coverage Ratio was 3.50:1.00.

Third Amended 2019 Credit Facility

In connection with entering into the 2023 Credit Agreement, on September 22, 2023, the Company paid off the principal balance, including accrued interest thereon, of the revolving loans outstanding under the Third Amended and Restated Credit Agreement (the “RBC Credit Agreement”), dated as of August 8, 2022, as amended, by and among the Company, certain subsidiaries of the Company as borrowers, certain other subsidiaries of the Company as guarantors, Royal Bank of Canada, as administrative agent (“RBC”), and the lenders party thereto, pursuant to which Tucows’ prior credit facility that provided the Borrowers with a $240 million revolving credit facility (the "2019 Credit Facility"). The RBC Credit Agreement automatically terminated upon the receipt by RBC of certain backstop letters of credit to be delivered by BMO.

During Fiscal 2024, the Company made net repayments of $16.5 million towards the 2023 Credit Facility and the previous facility. The Company ended December 31, 2024 with a remaining principal balance of $195.4 million, for which the required repayment is due in 2026.

As of December 31, 2024, the Company held contracts in the amount of $29.4 million with BMO to trade U.S. dollars in exchange for Canadian dollars under an uncommitted treasury risk management facility which assists the Company with hedging Canadian dollar exposures. Please see the discussion in the Material Cash Requirements section below.

Cash Flow from Operating Activities

Year ended December 31, 2024

Net cash inflows (outflows) from operating activities were ($19.7) million, a decrease of (310%) when compared to the prior year. After adjusting for non-cash charges, the Company reported a net loss of ($23.7) million during Fiscal 2024, a decrease of (38%) when compared to the prior year. Net income included non-cash charges and recoveries of $86.1 million including depreciation, impairment of property and equipment, accretion of redeemable preferred units, stock-based compensation, amortization of intangible assets, amortization of debt discount and issuance costs, deferred income taxes (recovery), loss (gain) on disposal of assets, net amortization of contract costs, loss on disposal of domain names, undistributed earnings of equity method investee, and net right of use operating asset or liability. In addition, changes in our working capital contributed to a net cash inflow of $4.0 million. Positive contributions of $16.4 million from movements in contract liabilities, inventory, accrued liabilities, contract asset, accounts receivable, prepaid expenses and deposits, and accreditation fees payable, were partially offset by utilized cash of $12.5 million from the changes in deferred costs of fulfillment, accounts payable, customer deposits, and income taxes recoverable.

Cash Flow from Financing Activities

Year ended December 31, 2024

Net cash inflows from financing activities during Fiscal 2024 totaled $44.5 million as compared to cash inflows of $178.8 million during Fiscal 2023 . Total cash inflows were driven by $63.0 million of proceeds from the issuance of notes payable and less than $0.1 million from proceeds received on exercise of stock options. These cash inflows were partially offset by $16.5 million related to the repayment of the syndicate revolver, $2.0 million from deferred notes payable financing costs, and less than $0.1 million related to the syndicate revolver issued.

Cash Flow from Investing Activities

Year ended December 31, 2024

Investing activities during the Fiscal 2024 used net cash of $56.5 million as compared to using $92.6 million during Fiscal 2023. Total cash outflows were driven by $56.5 million related to the investment in property and equipment, primarily to support the continued expansion of our Ting Internet Fiber network footprints in Colorado, North Carolina, California, and Virginia as we seek to extend both our current network and expand to new markets, as well as $0.6 million for the acquisition of other intangible assets. These cash outflows were partially offset by $0.5 million of proceeds on disposal of property and equipment.

Material Cash Requirements

At December 31, 2024, the Company's cash and cash equivalents, restricted cash and secured notes reserve funds balances totaled $73.2 million, of which $61.7 million belonged to Ting and $11.5 million belonged to the other Tucows businesses.

In our 2023 Annual Report, we disclosed our material cash requirements of both the Ting segment and Tucows businesses excluding Ting. As of December 31, 2024, aside from the items mentioned below, there have been no other material changes to our material cash requirements outside the ordinary course of business.

Ting

As of December 31, 2024, the balance owing on the Unit Purchase Agreement was $122.2 million ("Note 13 - Redeemable preferred units" of the Notes to the Consolidated Financial Statements included in Part I, of this report). On May 4, 2023, Tucows, through its indirect and wholly owned subsidiaries, including Ting Fiber, LLC entered into a definitive agreement relating to a securitized financing facility where Ting Issuer LLC, a Delaware limited liability company, issued the 2023 Term Notes for a total value of $238.5 million and 2024 Term Notes for a total value of $63.0 million ("Note 7 - Notes Payable" of the Notes to the Consolidated Financial Statements included in Part I, of this report). The combination of these agreements is expected to fund Ting operations through Fiscal 2025.

Ting committed to workforce reductions on February 7, 2024 and October 30, 2024, which aimed to reduce Ting’s workforce by 13% and 42%, respectively. Both plans were designed to lower year-over-year operating expenses by streamlining operations, reducing capital activities and reducing operating expenses within the Ting operating segment.

Ting incurred a net loss of $121.7 million and $120.1 million for the year ended December 31, 2024 and the year ended December 31, 2023, respectively. At December 31, 2024, Ting had $45.4 million in unrestricted cash and cash equivalents, $1.2 million in accounts receivable, $1.2 million in accounts payable and $15.8 million in accrued liabilities. At December 31, 2024, Ting’s long-term liabilities included $287.6 million payable on the 2023 and 2024 Term Notes, as well as $122.2 million on the Redeemable Preferred Units. Ting incurred an operating cash flow deficit of $49.9 million and $41.7 million for the year ended December 31, 2024 and the year ended December 31, 2023, respectively. Ting has scheduled interest payments of $39.2 million in the twelve months following December 31, 2024.

Ting may not be able to meet its financial obligations over the twelve months following December 31, 2024 without additional financing. Ting has historically relied on the proceeds from its Redeemable Preferred Units as well as its 2023 and 2024 Term Notes to fund its operations and the expansion of the Ting Fiber Internet footprint. Ting currently has limited capacity to expand its borrowings under the Base Indenture and it is uncertain whether Ting will be able to access additional Milestone Funding under the Redeemable Preferred Unit facility. Our ability to obtain additional financing if required will be subject to a number of factors, including market conditions, our operating performance and investor sentiment. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly restrict our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained, and which could result in additional dilution to our stockholders. If we do not have sufficient funds to continue operations, Ting could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing some or all of their investment in us.

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. As of December 31, 2024, the Company’s 2023 Credit Facility had an outstanding balance of $195.4 million. Tucows businesses excluding Ting make principal repayments from time to time.

For Fiscal 2025, 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.

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. 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.

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. Our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Our interest income is sensitive to changes in the general level of Canadian and U.S. interest rates, particularly since the majority of our investments are in short-term instruments. 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, 2024.

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. 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. 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. Exchange rates are, however, subject to significant and rapid fluctuations, and therefore we cannot predict the prospective impact of exchange rate fluctuations on our business, results of operations and financial condition. Accordingly, we have entered into foreign exchange forward contracts to mitigate the exchange rate risk on portions of our Canadian dollar exposure.

As of December 31, 2024, we had the following outstanding foreign exchange forward contracts to trade U.S. dollars in exchange for Canada dollars:

As of December 31, 2024, the Company had $29.4 million of outstanding foreign exchange forward contracts which will convert to CDN $40.3 million. Of these contracts, $29.4 million met the requirements for hedge accounting.

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. Of these contracts, $61.4 million met the requirements for hedge accounting.

We have performed a sensitivity analysis model for foreign exchange exposure during the year ended December 31, 2024. The analysis used a modeling technique that compares the U.S. dollar equivalent of all expenses incurred in Canadian dollars, at the actual exchange rate, to a hypothetical 10% adverse movement in the foreign currency exchange rates against the U.S. dollar, with all other variables held constant. Foreign currency exchange rates used were based on the market rates in effect during the year ended December 31, 2024. The sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would result in a decrease in net income for the year ended December 31, 2024 of approximately $6.4 million, before the effects of hedging. 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.

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. 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 expected credit losses based on historical experience and our expectation of future losses.

Interest rate risk

Our exposure to interest rate fluctuations relate primarily to the 2023 Credit Agreement.

As of December 31, 2024, we had an outstanding balance of $195.4 million on the 2023 Credit Facility. 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). As of December 31, 2024, 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 $2.0 million, assuming that the loan balance as of December 31, 2024 is outstanding for the entire period.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this report, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this annual report, our chief executive officer and chief financial officer concluded that, as of December 31, 2024, our disclosure controls and procedures were effective.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America
• Provide reasonable assurance that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, such as resource constraints, human error, lack of knowledge or awareness and the possibility of intentional circumvention of these controls, internal control over financial reporting may not prevent or detect misstatements. Furthermore, the design of any control system is based, in part, upon assumptions about the likelihood of future events, for which assumptions may ultimately prove to be incorrect. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, our management used the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the results of our evaluation, management has determined that our internal control over financial reporting was effective as of December 31, 2024.

Remediation of Material Weaknesses in Internal Control Over Financial Reporting

The material weaknesses that were previously disclosed as of December 31, 2023 were remediated as of December 31, 2024. See “Item 9A. Controls and Procedures - Management's Annual Report on Internal Control over Financial Reporting” and “Item 9A. Controls and Procedures - Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting” contained in the Company's report on Form 10K for the fiscal year ended December 31, 2023 and “Item 4. Controls and Procedures” contained in the Company's subsequent quarterly reports on Form 10-Q during 2024, for disclosure of information about the material weaknesses that were reported as a result of the Company's annual assessment as of December 31, 2023 and the remediation plan for those material weaknesses. As disclosed in the quarterly reports on Form 10-Q for the first three quarters of 2024, the Company has monitored the controls necessary to remediate the material weaknesses. Affected controls have been addressed and additional compensating controls added, as appropriate, to address the material weaknesses. As of December 31, 2024, such controls were successfully tested and the material weaknesses were remediated. The Company continues to refine its control environment on an ongoing basis.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the fiscal year ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, other than continued monitoring of the controls implemented to remediate the material weaknesses disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.