Tucows Inc.
Q3 2020 Earnings Call Transcript

Published: 17 Nov 2020

[Monica Webb:]

Welcome to Tucows’ combined question and answer dialog for Q3 2020. Elliot Noss, President and Chief Executive Officer, will be responding to your questions. For your convenience, this audio file is also available as a transcript in the investors section of our website, along with our Q3 2020 Financial Results and updated reports. Please note that the following discussion may include forward-looking statements, which, as such, are subject to risks and uncertainties that could cause actual results to differ materially. These risk factors are described in detail in the company's documents filed with the SEC, specifically the most recent reports on the Forms 10-Q and 10-K. The company urges you to read its securities filings for a full description of the risk factors applicable for its business.

[A - Elliot Noss:]

Post-Boost migration, this business should become relatively easy to model. The bad news is, that prior to that it will be very choppy, as the expenses related to scaling the platform will be rolling in consistently, but the biggest contributor to revenue, the Boost customers, will not be present until after the migration. I am sympathetic to our investor’s plight, but the best advice I have in the short term is to refer you back to our view that we expect the contribution from the mobile business in 2021 to exceed that of 2020. And you can infer from the above that the second half of the year will be clearly larger than the first half. When we were evaluating this transaction, one of the elements we considered was the challenge it would create in 2021 in terms of investor understanding. We chose to prioritize the best cash generating outcomes over simplicity in comprehension. We know this will probably lead to a few more phone calls and a little more confusion, but our investors have demonstrated to us time and again, that they have the capacity to sort through things like this. We had a question around the gross margins for the various revenue streams from our new Mobile Services Enabler business model going forward. For the Mobile business, as I noted previously, this revenue stream consists of a fee per subscriber from DISH paid on a regular basis. As this is essentially a fixed cost business, with very little variable cost, gross margin is very healthy and we expect that to be relatively stable over time. Other professional services, is primarily the revenue stream derived from the Transition Services Agreement, under which, in the near-term, we will continue to service Ting Mobile customers, but on DISH’s behalf. The advice from the call was to look at it a bit like device revenue, with a bit more margin. Other professional services revenues will encompass one-off or special projects, and so will have some margin variation over time. And again, the TSA revenue stream doesn’t correlate to the real health of the strategic mobile business, which will be driven by the MSE platform revenue in the long term.