TUCOWS INC /PA/ (TCX)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains, in addition to historical information, forward-looking statements by us with regard to our expectations as to financial results and other aspects of our business that involve risks and uncertainties and may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “should,” “anticipate,” “believe,” “plan,” “estimate,” “expect,” and “intend,” and other similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this report include statements regarding, among other things, the competition we expect to encounter as our business develops and competes in a broader range of Internet services, the Company's foreign currency requirements, specifically for the Canadian dollar and Euro; Wavelo, and Ting subscriber growth and retention rates; the number of new, renewed and transferred-in domain names we register as our business develops and competes; the effect of a potential generic top level domain (“gTLD”) expansion by the Internet Corporation for Assigned Names and Numbers (“ICANN”) on the number of domains we register and the impact it may have on related revenues; our belief regarding the underlying platform for our domain services; our expectation regarding the trend of sales of domain names; our belief that, by increasing the number of services we offer, we will be able to generate higher revenues; our expectation regarding litigation; the potential impact of current and pending claims on our business; our valuations of certain deferred tax assets; our expectation to collect our outstanding receivables, net of our credit losses; our expectation regarding fluctuations in certain expense and cost categories; our expectations regarding liquidity and capital requirements of the Ting Internet business, as well as the outcome of any process to access strategic alternatives for this business; our expectations regarding the evaluation of our strategic alternatives for Ting; our expectations regarding our unrecognized tax; our expectations regarding cash from operations to fund our business; the impact of cancellations of or amendments to market development fund programs under which we receive funds; our expectation regarding our ability to manage realized gains/losses from foreign currency contracts; our partnership with an affiliate of Generate (as defined below); and general business conditions and economic uncertainty. These statements are based on management’s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Many factors affect our ability to achieve our objectives and to successfully develop and commercialize our services including:

•Our ability to continue to generate sufficient working capital to meet our operating requirements;

•Our ability to service our debt commitments and preferred unit commitments;

•Our ability to maintain a good working relationship with our vendors and customers;

•The ability of vendors to continue to supply our needs;

•Actions by our competitors;

•Our ability to attract and retain qualified personnel in our business and address operational efficiencies;

•Our ability to effectively manage our business;

•The effects of any material impairment of our goodwill or other indefinite-lived intangible assets;

•Our ability to obtain and maintain approvals from regulatory authorities on regulatory issues;

•Our ability to invest in the build-out of fiber networks into selected towns and cities to provide Internet access services to residential and commercial customers while maintaining the development and sales of our established services;

•Adverse tax consequences such as those related to changes in tax laws or tax rates or their interpretations, including with respect to the impact of the Tax Cuts and Jobs Act of 2017 and, the Organization for Economic Cooperation and Development ("OECD") model global minimum tax rules;

•Our ability to effectively respond or comply with new data protection regulations and any conflicts that may arise between such regulations and our ICANN contractual requirements;

•The application of business judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax liabilities given that the ultimate tax determination is uncertain;

•Our ability to effectively integrate acquisitions;

•Our ability to effectively manage any impact of the Generate Exit Transaction;

•Our ability to monitor, assess and respond to changing geopolitical and economic environments including rising inflation and interest rates, tariffs and trade disputes, and geopolitical conflict;

•Our ability to collect anticipated payments from EchoStar in connection with the 10-year payment stream that is a function of the margin generated by the transferred subscribers over a 10-year period pursuant to the terms of the Asset Purchase Agreement dated August 1, 2020 between the Company and DISH Wireless LLC ("EchoStar", DISH's post-merger parent) (the “EchoStar Purchase Agreement”);

•Our ability to maintain compliance with the operational and financial covenants of the 2023 and 2024 Notes as defined in "Note 8. Notes Payable" of the Notes to the Condensed Consolidated Financial Statements included in Part I, of this Quarterly Report, which provides the Company with financing to invest in the expansion of fiber networks;

•Our ability to maintain the safety and security of our systems and data;

•Our ability to successfully identify and implement any potential strategic alternatives for Ting;

•Pending or new litigation; and

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Table of Contents

•Factors set forth under the caption “Item 1A Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC on March 12, 2026 (the “2025 Annual Report”) and in "Item 1A Risk Factors" in Part II of this Quarterly Report.

This list of factors that may affect our future performance and financial and competitive position and the accuracy of forward-looking statements is illustrative, but it is by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All forward-looking statements included in this document are based on information available to us as of the date of this document, and we assume no obligation to update these cautionary statements or any forward-looking statements, except as required by law. These statements are not guarantees of future performance.

We qualify all the forward-looking statements contained in this Quarterly Report on Form 10-Q by the foregoing cautionary statements.

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, regularly 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 disclosed under

the Corporate category are excluded from segment adjusted earnings before interest, tax, depreciation and amortization ("Segment Adjusted 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.

For the three months ended June 30, 2026 and June 30, 2025, we reported net revenue of $100.6 million and $98.5 million, respectively.

For the six months ended June 30, 2026 and June 30, 2025, we reported net revenue of $197.2 million and $193.1 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 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 and have no fixed contract terms, aside from certain bespoke contracts with business customers.

As of June 30, 2026, Ting Internet had access to 126,000 owned infrastructure serviceable addresses, 137,000 partner infrastructure serviceable addresses and 60,500 active subscribers under its management; compared to having access to 132,000 owned infrastructure serviceable addresses, 66,000 partner infrastructure serviceable addresses and 52,000 active subscribers under its management as of June 30, 2025. These figures exclude any changes in serviceable addresses and accounts attributable to Simply Bits.

On July 27, 2026, the Company, Ting and certain of its affiliated entities, the “Ting Entities,” entered into a series of related, definitive agreements (collectively, the "Generate Exit Transaction") with Generate TF Holdings, LLC (“Generate”) and certain of its affiliated entities (the “Generate Entities”). See "Note 22. Subsequent Events” in the Notes to the Condensed Consolidated Financial Statements included in Part I, of this Quarterly Report for further information. The Generate Exit Transaction resolved the conditions disclosed with respect to Ting, including the accrued and unpaid preferred return and the Return Breach and corresponding Trigger Event asserted by Generate and described in the Company's Current Report on Form 8-K filed on December 5, 2025 and the items discussed above in “Note 19. Redeemable Preferred Units” of the Notes to the Condensed Consolidated Financial Statements included in Part I, of this Quarterly Report. As a result of the Generate Exit Transaction, Generate ceased to be a preferred member of Ting, waived and released all rights, powers and preferences associated with the Series A Preferred Units (including all redemption, mandatory-redemption, conversion and call rights), and withdrew all outstanding notices, including the notice asserting a Return Breach and Trigger Event. The parties also exchanged mutual releases.

Wavelo

Wavelo includes the provision of full-service platforms and professional services providing a variety of solutions that support 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

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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Our mission is to provide simple useful services that help people unlock the power of the Internet.

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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 billing solutions to 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 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 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 IT shared services.

For the years ended December 31, 2025, 2024 and 2023, we reported revenue of $390 million, $362 million and $339 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. Generally, Ting internet services have no fixed contract terms, aside from certain non-standard bespoke with business customers.

As of December 31, 2025, Ting Internet had access to 126,000 owned infrastructure serviceable addresses, 109,000 partner infrastructure serviceable addresses and 54,000 active accounts under its management; compared to having access to 134,000 owned infrastructure serviceable addresses, 45,000 partner infrastructure serviceable addresses and 51,000 active accounts under its management as of December 31, 2024. These figures exclude any changes in serviceable addresses and accounts attributable to the Simply Bits acquisition

On February 7, 2024 Ting committed to a workforce reduction (the "February 2024 Workforce Reduction"), as defined in "Note 21. Restructuring Costs" to the Consolidated Financial Statements, 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 the first quarter of Fiscal 2024, 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 the 2024 Capital Efficiency Plan, as defined in "Note 21. Restructuring Costs" to the Consolidated Financial Statements, 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 the fourth quarter of Fiscal 2024 in connection with the 2024 Capital Efficiency Plan, primarily consisting of severance payments, notice pay, employee benefits contributions, and outplacement costs.

The February 2024 Workforce Reduction and 2024 Capital Efficiency Plan realized 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 were partially offset by costs associated with both plans. These costs referenced above are classified as transitional and were excluded in our Adjusted EBITDA, which is a non-United States Generally Accepted Accounting Principles ("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 2024 Capital Efficiency Plan has also translated into reduced capital expenditures related to growth and expansion of new markets, as Ting shifted to focus on completing builds in existing markets.

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The Company announced on November 6, 2025 that it commenced a process to review strategic alternatives for the Ting business, to address its ongoing liquidity requirements. The process is ongoing and the outcome and timing of this process are uncertain and may materially affect future revenues, operating costs and capital expenditures. If the strategic process does not result in a successful transaction, or if it is delayed or abandoned, Ting would be required to implement significant operational changes to preserve liquidity and continue as a going concern, which could include more substantial reductions in operating expenses, changes in market expansion plans, asset sales, or other restructuring actions. As a result, Ting’s future revenue growth, cost structure and overall financial performance may differ materially from current results and expectations.

Wavelo

Wavelo includes the provision of full-service platforms and professional services providing a variety of solutions that support 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 MONOS software to drive additional value within its Digital Operator Platform and Ting integrating Wavelo’s ISOS and 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 platforms 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 32,000 resellers that operate in approximately 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 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 21.5 million domain names under the Tucows, Enom, EPAG and Ascio ICANN registrar accreditations and for other registrars under their own accreditations. Domains under management have decreased by 3.0 million, or 12%, since December 31, 2024.

Value-Added Services include hosted email which provides email delivery and webmail access to millions of mailboxes, Internet security services, WHOIS privacy 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.

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Retail, primarily Hover, derives 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 34,000 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.

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

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