Release Date: November 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tucows Inc (TCX, Financial) has shifted focus from building new fiber homes to increasing penetration in existing footprints, which is expected to enhance value through improved penetration rates, ARPU, and net margins.
- The company has achieved a take rate of 50% for addresses over five years old, indicating strong market penetration in mature areas.
- Current ARPU is approximately $93, and the company is just beginning to explore value-added services, suggesting potential for future revenue growth.
- Tucows Inc (TCX) has successfully managed installation costs, with a typical installation cost fully loaded between $900 and $1000, which is competitive in the industry.
- The company has a strategic focus on leveraging its existing ISP operation footprint and partnerships, which is expected to create better long-term value for shareholders.
Negative Points
- Tucows Inc (TCX) has a higher cost per pass than some competitors due to construction choices, which could impact overall cost efficiency.
- The company faced challenges in raising capital, particularly in securing common equity, which has affected its ability to expand network construction.
- There is a significant difference between past addresses and serviceable addresses, primarily due to right of entry issues, which could limit immediate service expansion.
- The exploration of strategic and partnership options for Ting did not yield a capital partner for continued network expansion, indicating potential limitations in growth opportunities.
- The current capital climate has led to the elimination of new construction, which may restrict future growth and expansion in new markets.
Q & A Highlights
Q: Can you elaborate on the shift from building more fiber homes to increasing penetration in existing footprints?
A: Elliot Noss, President & CEO, explained that the shift allows Tucows to focus on maximizing the value of existing fiber homes by increasing penetration rates, ARPU, and net margins. This strategic move is driven by the current availability and cost of capital, rather than a lack of new market opportunities.
Q: What are the financial implications of ending new home construction?
A: Elliot Noss noted that Tucows has spent approximately $385 million in CapEx over the past decade, with a cost per pass address of over $1,700 and a cost per serviceable address of about $2,235. The company expects these costs to decrease as they gain additional rights of entry.
Q: How does the company view the value of a subscriber on a partner network compared to an organic network?
A: Elliot Noss stated that a partner subscriber is worth about a third of an organic network subscriber. The benefits include a significant reduction in capital requirements and the ability to scale ISP operations with national-level resources.
Q: Why didn't the exploration of strategic and partnership options for Ting yield a capital partner for network expansion?
A: Elliot Noss mentioned that the company sought common equity, but the available capital was mostly in the form of debt or preferred equity, which did not make economic sense. The decision was made to focus on existing ISP operations and partnerships for long-term shareholder value.
Q: What is the current ARPU and churn rate for Tucows?
A: The current ARPU is approximately $93, excluding enterprise and fixed wireless customers. The churn rate is between 0.65% and 0.8% per month, depending on seasonality.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
