TUCOWS : PA/ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

SPECIAL 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; Mobile Services Platform, and fixed Internet access subscriber growth
and retention rates; our belief regarding the underlying platform for our domain
services, our expectation regarding the trend of sales of domain names and
advertising; our expectations regarding portfolio revenue, 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
allowance for doubtful accounts; our expectation regarding fluctuations in
certain expense and cost categories; 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; the impact of the
COVID-19 outbreak on our business, operations and financial performance; 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;

• 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;

   •  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;

• The application of judgment in determining our global provision for income

taxes, deferred tax assets or liabilities or other tax liabilities given

      the ultimate tax determination is uncertain;

   •  Our ability to effectively integrate acquisitions;

• Our ability to monitor, assess and respond to the rapidly changing impacts

      of the COVID-19 pandemic. Our current assessment of expected impacts has
      been included below as part of the Opportunities, Challenges & Risks
      section.

• Our ability to collect anticipated payments from DISH 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 Purchase Agreement;

   •  Pending or new litigation; and

• Factors set forth below in Part II - Other Information under the caption

"Item 1A Risk Factors" in this Quarterly Report on Form 10-Q related to

our Mobile Services Enabler (MSE) platform and business.

• 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, 2019 filed with
      the SEC on March 4, 2020 (the "2019 Annual Report").




                                       26

--------------------------------------------------------------------------------

Table of Contents

As previously disclosed the under the caption "Item 1A Risk Factors" in our 2019
Annual Report, data protection regulations may impose legal obligations on us
that we cannot meet or that conflict with our ICANN contractual requirements.



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 services. We
are organized, managed and report our financial results as two segments, Network
Access Services and Domain Services, which are differentiated primarily by their
services, the markets they serve and the regulatory environments in which they
operate.



Our management regularly reviews our operating results on a consolidated basis,
principally to make decisions about how we utilize our resources and to measure
our consolidated operating performance. To assist us in forecasting growth and
to help us monitor the effectiveness of our operational strategies, our
management regularly reviews revenue for each of our service offerings in order
to gain more depth and understanding of the key business metrics driving our
business. Accordingly, we report Network Access Services and Domain Services
revenue separately

For the three months ended September 30, 2020 and September 30, 2019, we reported revenue of $74.3 million and $88.1 million, respectively.

For the nine months ended September 30, 2020 and September 30, 2019, we reported revenue of $240.4 million and $251.2 million, respectively.

Network Access Services

Network Access Services includes retail mobile services, mobile platform and professional services supporting MVNOs, fixed high-speed Internet access services and other revenues, including billing solutions to small ISPs.

On August 1, 2020, the Company and its wholly owned Subsidiary Ting, Inc.
entered into an Asset Purchase Agreement (the "Purchase Agreement") with DISH
pursuant to which Ting sold substantially all of its retail mobile customer
relationships, and mobile handset and SIM inventory to DISH and granted DISH the
right to use and an option to purchase the Ting brand. The transferred assets
under the Purchase Agreement do not include the technology platforms and related
intellectual property and infrastructure necessary to enable or support the
mobile customers. The Company has retained the assets used to provide Mobile
Services Enabler (MSE) platform and other professional services to DISH, as
discussed below. As at September 30, 2020, the Company had shut down the Roam
Mobility brands and related businesses as a result of lack of demand for
SIM-enabled roaming services due to the current and expected longer term
reduction of business and leisure travel caused by the COVID-19 pandemic.



The Company also derives revenue from the sale of fixed high-speed Internet
access, Ting Internet, in select towns throughout the United States, with
further expansion underway to both new and existing Ting towns. Our primary
sales channel of Ting Internet is through the Ting website. The primary focus of
Ting Internet is to provide reliable Gigabit Internet services to consumer and
business customers. On January 1, 2020, the Company closed its acquisition of
Cedar. Cedar is a telecommunications provider serving multiple markets in the
Western Slope of Colorado and northwestern New Mexico. Cedar has focused the
last several years on building fiber to enterprise, anchor institution, and
residential customers.



Revenues from our retail mobile services, MSE business and Ting Internet are all
generated in the U.S. and are provided on a monthly basis. Ting Internet
services have no fixed contract terms, while our MSE customer agreements have
set contract lengths with the underlying MVNO.



Domain Services



Domain Services includes wholesale and retail domain name registration services,
value added services and portfolio services derived through our OpenSRS, eNom,
Ascio, EPAG and Hover brands. We earn 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; and by
making our portfolio of domain names available for sale or lease. Domain
Services 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. Ascio domain services contracts and EPAG agreements primarily originate
in Europe.



                                       27

--------------------------------------------------------------------------------

Table of Contents

Our primary distribution channel is a global network of approximately 36,000
resellers that operate in over 150 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
generic top-level domain ("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
and positive operating cash flow.



Wholesale, primarily branded as OpenSRS, eNom, EPAG and Ascio, derives revenue
from its domain service and from providing value-added services. The OpenSRS,
eNom, EPAG and Ascio domain services manage 25.0 million domain names under the
Tucows, eNom, EPAG and Ascio ICANN registrar accreditations and for other
registrars under their own accreditations, which has increased by 1.2 million
domain names since September 30, 2019.  The increase is driven by increased
registrations experienced by our brands during COVID-19, as more businesses
established an online presence, offset by the continued erosion of registrations
related to non-core customers from our Enom brand.



Value-Added Services include hosted email which provides email delivery and
webmail access to millions of mailboxes, Internet security services, Internet
hosting, WHOIS privacy, publishing tools and other value-added services. All of
these services are made available to end-users through a network of 36,000 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 advertising revenue or auction sale.



Retail, primarily the Hover and eNom portfolio of websites, including eNom, eNom
Central and Bulkregister, derive revenues from the sale of domain name
registration and email services to individuals and small businesses. Retail also
includes 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.

Portfolio generates revenue by offering names in our domain portfolio for resale through a number of distribution channels including our reseller network.

In the fourth quarter of 2019, the Company disposed of its entire domain portfolio, excluding surname domains used in the Realnames email service. The Company expects portfolio revenue to materially decline in Fiscal 2020 and thereafter.

KEY BUSINESS METRICS AND NON-GAAP MEASURES

We regularly review a number of business metrics, including the following key
metrics and non-GAAP measures, 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:



Adjusted EBITDA



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 exclude
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 in the Results of Operations section below.



                                       28

--------------------------------------------------------------------------------

Table of Contents

Ting Mobile accounts and subscribers under management are no longer reported as
a key performance indicator. This is result of the Purchase Agreement with DISH
in the current period, where the Company sold substantially all of its retail
mobile customer relationships, and mobile handset and SIM inventory to DISH and
granted DISH the right to use and an option to purchase the Ting brand. As part
of the Purchase Agreement, 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 DISH. This has been classified as Other
Income and not considered revenue in the current period.



Ting Internet                                September 30,
                                           2020         2019
                                              (in '000's)

Ting Internet accounts under management 14 10 Ting Internet serviceable addresses (1) 50 34

(1) Defined as premises to which Ting has the capability to provide a customer

      connection in a service area.




                                                           For the Three Months Ended September
Domain Services                                                           30,(1)
                                                              2020                      2019
                                                                        (in 000's)
Total new, renewed and transferred-in domain name
registrations provisioned                                          4,460                     4,227
Domains under management




  (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.




                                                          For the Nine Months Ended September
Domain Services                                                         30,(1)
                                                              2020                   2019
                                                                      (in 000's)
Total new, renewed and transferred-in domain name
registrations provisioned                                        13,963                 13,166
Domains under management




  (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.




Domain Services                                                    September 30,
                                                               2020              2019
                                                                     (in 000's)

Registered using Registrar Accreditation belonging to the Tucows Group

                                                  19,598    

19,491

Registered using Registrar Accreditation belonging to Resellers

                                                          5,429    

4,367

Total domain names under management                               25,027           23,858




                                       29

--------------------------------------------------------------------------------

Table of Contents

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.



Network Access Services



On August 1, 2020, the Company and its wholly owned Subsidiary Ting, Inc.
entered into an Asset Purchase Agreement (the "Purchase Agreement") with DISH
pursuant to which Ting sold substantially all of its retail mobile customer
relationships, and mobile handset and SIM inventory to DISH and granted the
right to use and an option to purchase the Ting brand. Select MNO agreements
previously established to operate the Ting Mobile MVNO business will also be
assigned to DISH as part of this Purchase Agreement. The transferred assets
under the Purchase Agreement do not include the technology platforms and related
intellectual property and infrastructure necessary to enable or support the
mobile customers. The Company will retain assets used to provide MSE services to
DISH, as discussed below.



Contemporaneously with the execution of the Purchase Agreement on August 1,
2020, the Company, through its wholly owned subsidiary Ting, Inc. entered into a
services agreement under which Ting will act as a mobile service enabler ("MSE
Agreement") with DISH in support of DISH's mobile network operations.   Under
the terms of the MSE Agreement, the Company and its affiliates are permitted to
sell mobile service enabler services to other third parties. The identified
risks associated with this pivot from MVNO to MSE have been discussed at length
below in Part II - Other Information under the caption "Item 1A Risk Factors" in
this Quarterly Report on Form 10-Q.



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.

The communications industry continues to compete on the basis of network reach and performance, types of services and devices offered, and price.

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 Domain Services 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 Domain Services 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, we also generate revenue through pay-per-click advertising and the
sale of names from our portfolio of domain names and through the OpenSRS Domain
Expiry Stream. The revenue associated with names sales and advertising has
recently experienced flat to declining trends due to the uncertainty around the
implementation of ICANN's New gTLD Program, lower traffic and advertising yields
in the marketplace, which we expect to continue.



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.



Sales of domain names from our domain portfolio have a negative impact on our
advertising revenue as these names are no longer available for advertising
purposes. In addition, the timing of larger domain names portfolio sales is
unpredictable and may lead to significant quarterly fluctuations in our
Portfolio revenue. In the fourth quarter of 2019, the Company disposed of its
remaining domain portfolio, excluding surname domains used in the Realnames
email service. The Company expects portfolio revenue to materially decline in
Fiscal 2020 and thereafter.





                                       30

--------------------------------------------------------------------------------

  Table of Contents



Critical Accounting Policies



The preparation of our consolidated financial statements in conformity with GAAP
requires us to make estimates and judgements that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. There have been no material changes to the
critical accounting policies and estimates as previously disclosed in Part II,
Item 7 of our 2019 Annual Report other than accounting policies over revenue
recognition for our new MSE agreement. For further information on our critical
accounting policies and estimates, see Note 3 - Recent Accounting
Pronouncements to the consolidated financial statements of the Company in Part
I, Item 1 in this Quarterly Report on Form 10-Q.



Current COVID-19 Response



Our Employees



Tucows is a global business. Our first consideration during the global pandemic
as a result of the disease caused by the COVID-19 outbreak is for the health and
safety of our employees, our customers and their communities, all around the
world. Tucows has long encouraged a culture of remote work even prior to this
global pandemic, and on Sunday March 8, 2020 Tucows' executive leadership
announced that all employees who could conceivably work from home were
encouraged to do so. Tucows is actively and strongly encouraging its workforce
to heed travel and all other emergency advisories, including social distancing
and where appropriate, self-isolation. We expect our work from home policy to
remain in effect until emergency state and governmental declarations where we
have physical offices have ended and we believe the risk of community spread of
the disease has subsided. Given our experience with remote work prior to
COVID-19, we have not and do not expect to have productivity issues while the
overwhelming majority of our office-based workforce is dispersed.



For the small group of employees who are unable work from home during this time,
including our order fulfillment and Fiber installation teams, many of whom work
in the field, they are encouraged to practice social distancing and to continue
to follow hygiene best practices and safety protocols as outlined by the Centers
for Disease Control and Prevention.  At the initial stage of the COVID-19
outbreak, we took steps to cancel and reschedule all in-home installation and
service appointments across our Ting Fiber footprint. Since then, the Ting
Internet team has established an install solution for our employees and
customers that minimizes risks associated with person-to-person contact.



Our Customers



We recognize the important role we play within the Internet space and are
committed to continue providing quality service during the COVID-19 outbreak.
Services like individual and wholesale domain names, email and hosting do not
rely on in-person interaction or the supply chain in the same way physical
products and services do. We are providing uninterrupted services for all
Domains related services, across our OpenSRS, Enom, Ascio, EPAG & Hover brands.

Our new MSE business is without any physical storefronts, and is similarly well-positioned to weather this event.

Our Fiber Internet business does not have bandwidth caps or other such
limitations. Likewise, our networks are built with the capacity to accommodate
future needs. To help our customers remain connected at home during this time,
we upgraded all our lower-tier fiber customers to symmetrical gigabit access at
no charge. Any additional traffic from our customers working from home has not
had and is not expected to have any negative impact on connectivity. As
discussed above, our install solution was implemented in early May 2020. With
this service limitation, new customer acquisition will remain slower than
pre-pandemic levels of growth and installation. Even with an install solution
that minimizes risks, customers may be unwilling to have service personnel visit
their homes or offices.



Our Community

Tucows believes the Internet is essential infrastructure and an immensely powerful tool, especially in times of crises where coordination is essential.

From an early point in the current global crisis, it was clear to us that we
were going to need to do something new and different in how we responded to
COVID-19 related domain registrations. Many of these domains are registered for
good, helpful purposes, such as community organization, dissemination of
healthcare information, and recording people's experiences through this
pandemic. Others, however, purport to sell COVID-19 cures, vaccines, or tests,
none of which are legitimately available on the market at the time of the
registration and many of which pose a significant health risk to the general
public. There are three major components to our COVID-19 activities related to
domain registrations: (i) identification, (ii) assessment for harm, and (iii)
stakeholder engagement. It is important to note that our response to each and
every issue that we find is contextual and dependent on the specific
circumstances. We expect to return to our regular procedures as the pandemic and
corresponding risks subsides. Although this approach vastly increases the burden
on our compliance staff and puts us in the uncomfortable position of having to
assess the level of harm represented by a COVID-related domain and the website
to which it resolves - we feel these circumstances are exceptional and are
determined to do our part.



In order to provide Internet access and assistance to residents of cities and
towns that are part of the Ting Fiber network, we have set up free, fiber-fed,
drive-up Wi-Fi hotspots. These hotspots enable those with no home Internet
access, or insufficient access, to access critical services like online learning
and telehealth services, work remotely, check in on and access vital health,
government and other services and generally access information. These hotspots
will remain in operation as long as they are needed and as long as it is safe
and prudent to do so.

We have not experienced any material resource constraints nor do we foresee requiring any material expenditures to continue to implement our business continuity plans described above.

                                       31

--------------------------------------------------------------------------------

Table of Contents

Current and expected COVID-19 Impacts

Financial & Operational Impacts

Further to the below discussion within this Quarterly Report around the
financial condition and results of operations for the current period financial
results, the current impact from COVID-19 has been limited to the Network Access
segment, primarily impacting Mobile Services. Management continues to assess the
impact on a daily basis and expects continued impact through the fourth quarter
of 2020, should the COVID-19 pandemic persist. On a segment basis, our current
assessment is as follows:

Network Access - Mobile Services:

On August 1, 2020, the Company and its wholly owned Subsidiary Ting, Inc.
entered into an Asset Purchase Agreement (the "Purchase Agreement") with DISH
pursuant to which Ting sold its mobile customer relationships, and mobile
handset and SIM inventory to DISH and granted the right to use and purchase
the Ting brand. Select MNO agreements previously established to operate the Ting
Mobile MVNO business will also be assigned to DISH as part of this Purchase
Agreement. Ting, Inc. only retains a small subset of customers to which it
continues to provide retail mobile services. Consistent with prior periods,
COVID-19 has impacted the demand for our Mobile Services as customer usage
patterns changed, which has had a corresponding negative impact on our revenues.
We do not expect the impact to substantially worsen over the coming months as we
have seen usage stabilize during the current period. Our exposure is also
significantly limited given the above mentioned sale of the majority of our
customer relationships to DISH as part of the purchase agreement in the current
period. Our new MSE platform and professional services businesses are completely
online and do not rely on physical storefronts to attract or service customers'
needs. We are fully prepared to continue providing uninterrupted Mobile related
enablement services to our MVNO customers. We have not and do not expect any
corresponding negative impact on our revenues for these new revenue streams, nor
do we expect the impact to substantially worsen over the coming months.

Network Access - Fiber Internet Services:

As discussed above, upon news of the COVID-19 outbreak, we took the major step
to cancel and reschedule all in-home installation and service appointments
across our Ting Fiber footprint. Since then, the Ting Internet team has
established a smart-install solution. This smart-install solution is faster and
more efficient than our existing process, all while protecting the health and
safety of our employees and customers alike. Although new customer installations
initially slowed near the end of the first quarter of 2020, we are now seeing
returned growth in both subscribers under management as well as serviceable
addresses relative to the prior quarter. Additionally, our existing customer
base and most recent acquisition of Cedar both continue to provide increased
recurring revenue for us to support this business.



Domain Services:



Domain Services are foundational to the functioning of the Internet. As
discussed above, services like individual and wholesale domain names, email and
hosting do not rely on in-person interaction or the supply chain in the same way
physical products and services do. We have not experienced any negative COVID-19
related impacts, either financially or operationally for Domains related
services, across our OpenSRS, Enom, Ascio, EPAG & Hover brands. As more
businesses face the reality of prolonged physical shutdown and move to establish
an online presence, we have seen growth in this segment, primarily driven by
large volume resellers in our OpenSRS brand where total domains under management
increased 591,018 since June 30, 2020. This growth rate in domains under
management was driven by the Pandemic, and may not be sustained in the future as
domain registrations plateau. Our results of operations for the current period
financial results are in line with management's expectation for the period given
product, customer mix and current brand trajectories. We will continue to
monitor the impact but do not foresee any negative financial or operational
impacts associated with this segment.



                                       32

--------------------------------------------------------------------------------

Table of Contents

Liquidity & Financial Resource Impacts

For a complete assessment of our liquidity and covenant positions please
reference the relevant discussions within this Quarterly Report. We have
experienced no significant change to our liquidity position or credit risk as a
result of the financial and operational impacts related to COVID-19, as
discussed above. Our cost or access to funding sources has not changed and is
not reasonably likely to change in the near future as a result of the pandemic.
Our sources and uses of cash have not been materially impacted and there is no
known material uncertainty about our ongoing ability meet covenants or repayment
terms of our credit agreements at this time.

Internal Controls over Financial Reporting

Tucows has long encouraged a culture of remote work even prior to COVID-19. Our
financial reporting systems and our internal controls over financial reporting
and disclosure controls and procedures are already adapted for a remote work
environment. There have been no changes during the current period that, as a
result of COVID-19, would affect our ability to maintain these systems and
controls.

COVID-19 Related Assistance & Support

Currently, Tucows has not received any form of financial or resource related
assistance from any government or local authority. There do exist programs in
the regions in which we operate that are designed to support corporations like
Tucows during this time, primarily in the form employee wage subsidization.
Tucows will continue to review the applicability of these programs but does not
expect to seek any assistance.



Across our businesses, we have been able to defer portions of installment taxes
payable to various Government bodies as payment timelines have been extended in
response to the pandemic.



Accounting Policy Impacts



Given the rapidly changing nature of COVID-19 developments and the current
uncertainty around the length and severity these developments could create,
Tucows does not have sufficient evidence to anticipate a material impairment
with respect to goodwill, intangible assets, long-lived assets, or right of use
assets. We will continue to monitor the impacts closely and as more information
becomes available. We do not foresee any changes in accounting judgements in
relation to COVID-19 that will have a material impact on our financial
statements.



                                       33

--------------------------------------------------------------------------------

Table of Contents

RESULTS OF OPERATIONS FOR THE three and nine months ended September 30, 2020 AS COMPARED TO THE three and nine months ended September 30, 2019

NET REVENUES



Network Access Services



The Company generates Network Access Services revenues primarily through the
provisioning of retail mobile services, mobile platform and professional
services supporting MVNOs, fixed high-speed Internet access services and other
revenues, including billing solutions to small ISPs.

Mobile Services - Retail Mobile Services

             Ting Mobile wireless usage contracts grant customers access to
standard talk, text and data mobile services. Ting Mobile contracts are billed
based on the actual amount of monthly services utilized by each customer during
their billing cycle and charged to customers on a postpaid basis. Voice minutes,
text messages and megabytes of data are each billed separately based on a tiered
pricing program. The Company recognizes revenue for Ting Mobile usage based on
the actual amount of monthly services utilized by each customer. On August 1,
2020, the Company and its wholly owned Subsidiary Ting, Inc. entered into an
Asset Purchase Agreement (the "Purchase Agreement") with DISH pursuant to which
Ting sold substantially all of its retail mobile customer relationships, and
mobile handset and SIM inventory to DISH and granted the right to use and option
to purchase the Ting brand. Select MNO agreements previously established to
operate the Ting Mobile MVNO business will also be assigned to DISH as part of
this Purchase Agreement. Ting, Inc. only retains a small subset of customers to
which it continues to provide retail mobile services. All future revenues
associated with Retail Mobile Services stream will only be for this subset of
customers retained by Ting, Inc.



             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.



As part of the DISH Purchase Agreement, 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 DISH, over a period of 10
years. This has been classified as Other Income and not considered revenue in
the current period

Mobile Services - Mobile Platform Services

Tucows' MSE platform provides network access, provisioning and
billing services for MVNOs. These platform fees are billed to our MVNO customers
monthly, on a postpaid basis. The fees are based on the volume of their
subscribers utilizing the platform during a given month. The Company recognizes
revenue over this new revenue stream as the Company satisfies its obligations to
provide MSE services on a monthly basis. For any bundled professional services
where collection is collected before the service period as part of MSE Platform
Revenues, the professional services revenue is initially deferred and recognized
only as the Company performs its obligation to provide professional services.

Mobile Services - Other Professional Services

           This revenue stream includes any other professional services,
including transitional services, earned in connection with Tucows' new MSE
business. These are billed to our customers monthly at set and established rates
for services provided in period. The Company recognizes revenue over this new
revenue stream as the Company satisfies its obligations to provide professional
services.



Fiber Internet Services



Fiber Internet Services derive revenues from providing Ting Internet to
individuals and small businesses in select cities. In addition, we provide
billing, provisioning and customer care software solutions to ISPs through our
Platypus billing software. Ting Internet access contracts provide customers
Internet access at their home or business through the installation and use of
our fiber optic network. Ting Internet contracts are generally prepaid and grant
customers with unlimited bandwidth based on a fixed price per month basis. Since
consideration is collected before the service period, revenue is initially
deferred and recognized as the Company performs its obligation to provide
Internet access.



Ting Internet 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
Internet access 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 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, revenue is
not recognized until contract inception unless the collection of the related
accounts receivable is reasonably assured. 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.



                                       34

--------------------------------------------------------------------------------

  Table of Contents



Domain Services



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 rateably 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. Domain services 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 Internet hosting services on the OpenSRS and eNom domain expiry streams.

Retail

We derive revenues from Hover and eNom's retail properties through the sale of retail domain name registration and email services to individuals and small businesses.

Portfolio



The Company sells the rights to its portfolio domains or names acquired through
the Company's domain expiry stream. Revenue generated from sale of domain name
contracts, containing a distinct performance obligation to transfer the domain
name rights under the Company's control, is generally recognized once the rights
have been transferred and payment has been received in full. Domain portfolio
names are sold through our premium domain name service, auctions or in
negotiated sales. In the fourth quarter of 2019, the Company disposed of its
entire domain portfolio, excluding surname domains used in the Realnames email
service. The Company expects portfolio revenue to materially decline in Fiscal
2020 and thereafter.



                                       35

--------------------------------------------------------------------------------

Table of Contents

The following table presents our net revenues, by revenue source (Dollar amounts in thousands of U.S. dollars):

(Dollar amounts in thousands of U.S. For the Three Months Ended

     For the Nine Months Ended September
dollars)                                           September 30,                                30,
                                            2020                   2019             2020                   2019

Network Access Services:
Mobile Services
Retail mobile services                  $      7,019           $     21,722     $     44,734           $     63,516
Mobile platform services                         376                      -              376                      -
Other professional services                    1,457                      -            1,457                      -
Total Mobile                                   8,852                 21,722           46,567                 63,516

Fiber Internet Services                        4,657                  2,890           13,379                  7,977
Total Network Access Services                 13,509                 24,612           59,946                 71,493

Domain Services:
Wholesale
Domain Services                               47,261                 47,259          139,430                136,336
Value Added Services                           4,674                  5,154           14,415                 14,113
Total Wholesale                               51,935                 52,413          153,845                150,449

Retail                                         8,652                  8,713           25,669                 26,138
Portfolio                                        215                  2,391              958                  3,119
Total Domain Services                         60,802                 63,517          180,472                179,706

                                        $     74,311           $     88,129     $    240,418           $    251,199
(Decrease) increase over prior period   $    (13,818 )                          $    (10,781 )
(Decrease) increase - percentage                 (16 )%                                   (4 )%

The following table presents our revenues, by revenue source, as a percentage of total revenues (Dollar amounts in thousands of U.S. dollars):

                                          For the Three Months Ended September 30,           For the Nine Months Ended September 30,
                                              2020                        2019                  2020                        2019

Network Access Services:
Mobile Services
Retail mobile services                                  9 %                        25 %                  19 %                        25 %
Mobile platform services                                1 %                         0 %                   0 %                         0 %
Other professional services                             2 %                         0 %                   1 %                         0 %
Total Mobile                                           12 %                        25 %                  20 %                        25 %

Fiber Internet Services                                 6 %                         3 %                   6 %                         3 %
Total Network Access Services                          18 %                        28 %                  26 %                        28 %


Domain Services:
Wholesale
Domain Services                                        64 %                        53 %                  57 %                        55 %
Value Added Services                                    6 %                         6 %                   6 %                         6 %
Total Wholesale                                        70 %                        59 %                  63 %                        61 %

Retail                                                 12 %                        10 %                  11 %                        10 %
Portfolio                                               0 %                         3 %                   0 %                         1 %
Total Domain Services                                  82 %                        72 %                  74 %                        72 %

                                                      100 %                       100 %                 100 %                       100 %




                                       36

--------------------------------------------------------------------------------

Table of Contents

Total net revenues for the three months ended September 30, 2020 decreased
by $13.8 million, or 16%, to $74.3 million from $88.1 million when compared to
the three months ended September 30, 2019.  The three-month decrease in revenue
was primarily driven by $12.9 million of reduced revenues attributable to our
Mobile Services streams that were impacted by both the sale of the majority of
the customer base of Ting Mobile to DISH Wireless on August 1, 2020 and the
shutdown of Roam Mobility brands impacted by loss of mobile subscribers and
reduced usage related to COVID-19 when compared to the three months ended
September 30, 2019. As part of the DISH Purchase Agreement, 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 DISH over
the 10 year term of the agreement. This has been classified as Other Income and
not considered revenue in the current period. Additionally, further decreases in
domain name services revenue of $2.7 million, driven by the fact that the three
months ended September 30, 2019 included a large one-time Portfolio sale as we
began to ramp up the disposition of our domains portfolio, which culminated in
the fourth quarter of 2019. These decreases were offset by Fiber Internet
services revenues which increased $1.8 million, driven by our recent first
quarter acquisition of Cedar as well as through the expansion of our existing
Ting Internet footprint.



Total net revenues for the nine months ended September 30, 2020 decreased by
$10.8 million, or 4%, to $240.4 million from $251.2 million when compared to the
nine months ended September 30, 2019.  The nine-month decrease in revenue was
primarily driven $16.9 million of reduced revenues attributable to our Mobile
Services streams. As discussed above and echoed in prior periods, this decrease
is result of a decline in mobile subscribers and reduced usage related to
COVID-19 since the onset of the pandemic. The nine months ended September 30,
2019 were not characterized by this same reduced usage seen during the pandemic.
Outside of the impacts of the pandemic year over year, the most recent decisions
to shut down the Roam Mobility brands (in the second quarter of 2020) and to
enter into the Purchase Agreement with DISH (current period) to sell the
customer relationships of Ting Mobile have directly resulted in the decrease in
revenue for the nine months ended September 30, 2020. As part of the DISH
Purchase Agreement, 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 DISH. This has been classified as Other Income and
not considered revenue in the current period. These decreases were offset by
increased Fiber Internet services revenues which increased $5.4 million, driven
by our recent first quarter acquisition of Cedar as well as through the
expansion of our existing Ting Internet footprint. Smaller increases from
Domains Services of $0.8 million also helped offset any revenue decreases in
period, which was driven by an overall increase in domains under management
relative to the nine months ended September 30, 2019.

Deferred revenue from domain name registrations and other Internet services at September 30, 2020 increased by $4.9 million to $154.2 million from $149.3 million at December 31, 2019 primarily due to current period billings for domain name registration and service renewals.

During the three and nine months ended September 30, 2020, no customer accounted
for more than 10% of total revenue. For the three and nine months ended
September 30, 2019, no customer accounted for more than 10% of total revenue. As
at September 30, 2020, DISH accounted for 46% of total accounts receivable and
at December 31, 2019 no customer accounted for more than 10% of accounts
receivable. Though a significant portion of the Company's domain services
revenues are prepaid by our customers, where the Company does collect
receivables, significant 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. Based on this assessment, we expect the carrying
amount of our outstanding receivables, net of allowance for doubtful accounts,
to be fully collected.



Network Access Services



Mobile Services



Net revenues from Mobile Services for the three months ended September 30, 2020
decreased by $12.8 million or 59% to $8.9 million as compared to the three
months ended September 30, 2019. This decrease is driven by a decline in Retail
Mobile Services revenue, which decreased by $14.7 million compared to September
30, 2019, to $7.0 million. Ting Mobile accounts for $13.9 million of this
decrease (of which $0.8 million is reduced device revenues and $13.1 million
relates to service revenues), followed by Roam Mobility at $0.8 million of the
total decrease. The decline in Retail Mobile Services revenue is driven by the
sale of the Ting customer base on August 1, 2020 to DISH and the shutdown of
Roam Mobility last quarter. In addition to these changes, subscriber churn and
reduced usage related to the COVID-19 pandemic also resulted in lower revenues
relative to the three months ended September 30, 2019. This decrease is offset
by an increase in Mobile Platform services revenues by $0.4 million and Other
Professional Services revenues by $1.5 million, both a result of the new MSE
business created as a result of the DISH purchase agreement. The current period
only reflects one month of retail mobile services revenue (July 2020) at the
existing subscriber base of Ting Mobile. Subsequent to the sale to DISH, the
Retail Mobile Services revenue relates to a small subset of customers retained
by the Company. The consideration for the sale of the subscriber base to DISH is
captured as Other Income in the current period and described below.



Net revenues from Mobile Services for the nine months ended September 30, 2020
decreased by $16.9 million or 27% to $46.6 million as compared to the nine
months ended September 30, 2019. This decrease is driven by a decline in Retail
Mobile Services revenue, which decreased by $18.8 million compared to September
30, 2019, to $44.7 million. Ting Mobile accounts for $16.6 million of this
decrease (of which $0.1 million is reduced device revenues and $16.5 million
relates to service revenues), followed by Roam Mobility at $2.2 million of the
total decrease. The decline in Retail Mobile Services revenue is driven by the
sale of the Ting customer base on August 1, 2020 to DISH and the shutdown of
Roam Mobility last quarter. In addition to these changes, continued subscriber
churn and reduced usage related to the COVID-19 pandemic for two full quarters
in 2020 also resulted in lower revenues relative to the nine months ended
September 30, 2019. This decrease is offset by an increase in Mobile Platform
services revenues by $0.4 million and Other Professional Services revenues by
$1.5 million, both a result of the new MSE business created as a result of the
DISH purchase agreement in period. The current period only reflects seven months
of retail mobile services revenue at the existing subscriber base of Ting
Mobile, versus a complete nine-month period in 2019. Subsequent to the sale to
DISH, the Retail Mobile Services revenue relates to a small subset of customers
retained by the Company. The consideration for the sale of the subscriber base
to DISH is captured as Other Income in the current period and described below.



Fiber Internet Services



Revenues from Ting Internet and billing solutions generated $4.7 million in
revenue during the three months ended September 30, 2020, up $1.8 million or 62%
compared to the three months ended September 30, 2019. This growth is driven by
the recent first quarter acquisition of Cedar. Cedar contributed $1.1 million of
the increase in revenue during the current period, with $0.7 million related to
the continued expansion of our Ting Internet footprint in existing Ting towns
throughout the United States.



Revenues from Ting Internet and billing solutions generated $13.4 million in
revenue during the nine months ended September 30, 2020, up $5.4 million or 68%
compared to the nine months ended September 30, 2019. This growth is driven by
the recent first quarter acquisition of Cedar. Cedar contributed $3.5 million of
the increase in revenue during the current period, with $1.9 million related to
the continued expansion of our Ting Internet footprint in existing Ting towns
throughout the United States.

As of September 30, 2020, Ting Internet had access to 50,000 serviceable addresses and 14,000 active accounts under its management compared to having access to 34,000 serviceable addresses and 10,000 active accounts under its management as of September 30, 2019. These figures include the increase in serviceable addresses and accounts attributable to the prior quarter Cedar acquisition.

                                       37

--------------------------------------------------------------------------------

  Table of Contents



Domain Services



Wholesale



During the three months ended September 30, 2020, Wholesale domain services
revenue remained flat at $47.3 million, when compared to the three months ended
September 30, 2019. Increases from Wholesale domain registration of $1.8 million
from OpenSRS and EPAG brands driven by COVID-19 registration growth were offset
by decreases of $1.8 million from Enom and Ascio brands, both of which have seen
a decline in registrations by non-core customers relative to the three months
ended September 30, 2019.



During the nine months ended September 30, 2020, Wholesale domain services
revenue increased by $3.1 million or 2% to $139.4 million, when compared to the
nine months ended September 30, 2019. The nine-month increase was primarily
driven by a $4.6 million increase in revenue related to the prior year
acquisition of Ascio. Ascio revenues now represent a full three quarters of
earned revenue compared to the stub period of attributable revenue during the
nine months ended September 30, 2019. Additionally, we saw a further increase in
Wholesale domain revenues of $3.0 million from our other domain services brands,
namely OpenSRS and EPAG due to the increase in domains under management for
these brands associated with an uptick in registrations during the third quarter
of 2020 in connection with COVID-19. As more businesses establish an online
presence during this time, we have seen growth from large volume resellers
across these brands. This has had a marginal impact on revenue in the current
period but will have a carryforward impact in subsequent periods as revenues are
recognized from previously deferred billings. These increases were offset by a
decrease of $4.5 million in Wholesale domain revenues related to our eNom brand,
driven by continued decline in domain registrations by non-core customers
relative to the nine months ended September 30, 2019.



Total domains that were managed under the OpenSRS, eNom, EPAG, and Ascio domain
services increased by 1.2 million domain names to 25.0 million as of September
30, 2020, when compared to 23.9 million at September 30, 2019. The increase is a
driven by the continued growth in registrations through 2020 as a result of
the COVID-19 pandemic.



During the three months ended September 30, 2020, value-added services decreased
by $0.5 million to $4.7 million compared to the three months ended September 30,
2019. The three-month decreases were primarily driven by a decrease in expiry
revenue of $0.2 million, a decrease in hosting revenues of $0.2 million and
other small decreases in Digital Certificates, Email and Other revenues of $0.1
million.



During the nine months ended September 30, 2020, value-added services
increased by $0.3 million to $14.4 million compared to the nine months ended
September 30, 2019. The nine-month increases were primarily driven by an
increase in expiry revenue of $1.0 million, a decrease in hosting revenues of
$0.4 million, a decrease in Digital Certificates revenues of $0.2 million, and
other small decreases in Email and Other revenues of $0.1 million.



Retail

Net revenues from retail for the three months ended September 30, 2020, as compared to the three months ended September 30, 2019, remained relatively flat at $8.7 million.

Net revenues from retail for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019, decreased by less than $0.4 million to $25.7 million. Revenue decreased as a result of a shrinking eNom customer base, driven by non-core customers.

Portfolio



Net revenues from portfolio for the three months ended September 30, 2020,
decreased by $2.2 million to $0.2 million, as compared to the three months
ended September 30, 2019. This decrease is due to lower proceeds from individual
portfolio sales compared to the three months ended September 30, 2019, which
included a large one-time portfolio sale as the Company began to ramp up selling
its remaining portfolio. By the fourth quarter of 2019, the Company disposed of
its entire domain portfolio, excluding surname domains used in the Realnames
email service. The Company expects portfolio revenue to materially decline in
Fiscal 2020 and thereafter.



Net revenues from portfolio for the nine months ended September 30,
2020 similarly decreased by $2.1 million to $1.0 million, as compared to the
nine months ended September 30, 2019. Consistent with the above discussion, the
third quarter of 2019 included a significant one-time portfolio sale as the
Company began to ramp up selling its remaining portfolio. By the fourth quarter
of 2019, the Company disposed of its entire domain portfolio, excluding surname
domains used in the Realnames email service. The Company expects portfolio
revenue to materially decline in Fiscal 2020 and thereafter.





COST OF REVENUES



Network Access Services

Mobile Services - Retail Mobile Services

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 Network Operator, 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.



                                       38

--------------------------------------------------------------------------------

Table of Contents

Mobile Services - Mobile Platform Services

Cost of revenues, if any, to provide the MSE Platform services including network access, provisioning and billing services for MVNOs.

Mobile Services - Other Professional Services

Cost of revenues to provide professional services, including transitional
services, to our MVNO 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 MVNO customers, this cost reflects that group of resources.



Fiber Internet Services



Cost of revenues primarily includes the costs for provisioning high speed
Internet access, which is comprised of network access fees and software licenses
and the costs of providing hardware. Hardware costs are comprised of network
routers sold to our customers, order fulfillment related expenses, inventory
write-downs and fees paid to third-party service providers primarily for
printing services in connection with billing services to ISPs.



Domain Services



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 rateably 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 of related to 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 rateably 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.



Portfolio



Costs of revenues for our 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. Payments for domain registrations are payable for the full
term of service at the time of activation of service and are recorded as prepaid
domain registry fees and are expensed rateably over the renewal term.



Network expenses

Network expenses include personnel and related expenses, depreciation and amortization, communication costs, equipment maintenance, stock-based compensation and employee and related costs directly associated with the management and maintenance of our network. Communication costs include bandwidth, co-location and provisioning costs we incur to support the supply of all our services.

                                       39

--------------------------------------------------------------------------------

Table of Contents

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

(Dollar amounts in thousands of U.S. For the Three Months Ended

       For the Nine Months Ended
dollars)                                          September 30,                         September 30,
                                            2020                 2019             2020                 2019

Network Access Services:
Mobile Services
Retail mobile services                  $      3,440         $     11,171     $     21,957         $     32,721
Mobile platform services                           -                    -                -                    -
Other professional services                    1,267                    -            1,267                    -
Total Mobile                                   4,707               11,171           23,224               32,721

Fiber Internet Services                        1,682                  936            5,063                2,960
Total Network Access Services                  6,389               12,107           28,287               35,681

Domain Services:
Wholesale
Domain Services                               36,812               38,337          109,635              110,993
Value Added Services                             724                  773            2,271                2,306
Total Wholesale                               37,536               39,110          111,906              113,299

Retail                                         4,298                4,359           12,751               13,126
Portfolio                                        107                  180              364                  455
Total Domain Services                         41,941               43,649          125,021              126,880

Network Expenses:
Network, other costs                           2,612                2,254            7,513                7,034
Network, depreciation and
amortization costs                             3,315                2,545            9,902                6,872
Network, impairment                              113                    -            1,638                    -
                                               6,040                4,799           19,053               13,906

                                        $     54,370         $     60,555     $    172,361         $    176,467
(Decrease) increase over prior period   $     (6,185 )                        $     (4,106 )
(Decrease) increase - percentage                 -10 %                                  -2 %

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

                                          For the Three Months Ended September 30,           For the Nine Months Ended September 30,
                                              2020                        2019                  2020                        2019

Network Access Services:
Mobile Services
Retail mobile services                                  6 %                        18 %                  13 %                        19 %
Mobile platform services                                0 %                         0 %                   0 %                         0 %
Other professional services                             2 %                         0 %                   1 %                         0 %
Total Mobile                                            8 %                        18 %                  14 %                        19 %

Fiber Internet Services                                 3 %                         2 %                   3 %                         2 %
Total Network Access Services                          11 %                        20 %                  17 %                        21 %

Domain Services:
Wholesale
Domain Services                                        69 %                        64 %                  64 %                        63 %
Value Added Services                                    1 %                         1 %                   1 %                         1 %
Total Wholesale                                        70 %                        65 %                  65 %                        64 %

Retail                                                  8 %                         7 %                   7 %                         7 %
Portfolio                                               0 %                         0 %                   0 %                         0 %
Total Domain Services                                  78 %                        72 %                  72 %                        71 %

Network Expenses:
Network, other costs                                    5 %                         4 %                   4 %                         4 %
Network, depreciation and
amortization costs                                      6 %                         4 %                   6 %                         4 %
Network, impairment                                     0 %                         0 %                   1 %                         0 %
                                                       11 %                         8 %                  11 %                         8 %

                                                      100 %                       100 %                 100 %                       100 %




                                       40

--------------------------------------------------------------------------------

Table of Contents

Total cost of revenues for the three months ended September 30, 2020, decreased
by $6.2 million, or 10%, to $54.4 million from $60.6 million in the three months
ended September 30, 2019. The three-month decrease was driven by $6.5 million of
reduced costs attributable to our Mobile Services brands. As discussed above in
the Net Revenue section, Ting Mobile and Roam Mobility were impacted both by the
loss of mobile subscribers and reduced usage related to COVID-19 when compared
to the three months ended September 30, 2019. as well as the fact that
substantially all of the customer relationships associated with Ting Mobile were
sold to DISH in the current period and that Roam Mobility was shutdown in the
prior quarter. Both these contribute to the three months ended September 30,
2020 having significantly lower costs. Additionally, further decreases in domain
name services costs of $1.7 million, related to continued erosion in Wholesale
and Retail domain registrations by non-core customer primarily from our existing
Domain Services brands, namely eNom. These decreases were offset by increased
network expenses from continued Fiber network expansion of $0.5 million as well
as increased Fiber access costs of $1.4 million, driven by both our recent first
quarter acquisition of Cedar as well as through the expansion of our existing
Ting Internet footprint.



Total cost of revenues for the nine months ended September 30, 2020,
decreased by $4.1 million, or 2%, to $172.4 million from $176.5 million in the
nine months ended September 30, 2019. The nine-month decrease was driven by $9.5
million of reduced costs attributable to our Mobile Services brands. Consistent
with above, the nine months ended September 30, 2020, results now include two
full quarters impacted from loss of mobile subscribers and reduced usage related
to COVID-19, in addition to the 2020 results including the sale of Ting Mobile
customers and the shutdown of Roam Mobility. Both of these contribute
to the nine months ended September 30, 2020 having significantly lower costs.
Additionally, further decreases in domain name services of $1.9 million, related
to continued erosion in Wholesale and Retail domain registrations by non-core
customers primarily from our existing Domain Services brands, namely eNom. These
decreases were offset by increased network expenses from continued Fiber network
expansion of $1.2 million, a $1.5 million impairment related to Ting TV, a
product under development for Ting Fiber that was discontinued; as well as
increased Fiber access costs of $4.1 million, driven by both our recent first
quarter acquisition of Cedar as well as through the expansion of our existing
Ting Internet footprint.



Prepaid domain registration and other Internet services fees as of September 30,
2020 increased by $4.0 million, or 4%, to $113.2 million from $109.2 million at
December 31, 2019 primarily due to current period domain name registration and
annual service renewals.



Network Access Services



Mobile Services



Cost of revenues from Mobile Services for the three months ended September 30,
2020, as compared to the three months ended September 30, 2019, decreased by
$6.5 million or 58% to $4.7 million. This is driven by a decrease in Retail
Mobile Services costs of $7.7 million, of which $7.1 million relates to Ting
Mobile (of which $0.9 million is reduced device costs and $6.2 million relates
to service costs) and $0.6 million relates to Roam Mobility. Consistent with the
above discussion around net revenues, the driving factors for these decreases
from the three months ended September 30, 2019 are related to the sale of
substantially all of the Ting Mobile customer base in the current period and the
shutdown of Roam Mobility in the prior period. Residual Retail Mobile Services
costs is also impacted by the ongoing COVID-19 pandemic, characterized by
a decline in mobile subscribers and reduced usage which translates into lower
costs. The decline also included reduced minimum commitment charges with network
operators which decreased by $1.6 million as compared to the three months
ended September 30, 2019. This decrease is offset by an increase of $1.3 million
related to costs associated with Other Professional Services provided to MVNOs.



Cost of revenues from Mobile Services for the nine months ended September 30,
2020, as compared to the nine months ended September 30, 2019, decreased by $9.5
million or 29% to $23.2 million. This is driven by a decrease in Retail Mobile
Services costs of $10.8 million, of which $9.4 million relates to Ting Mobile
(of which $0.1 million is reduced device costs and $9.3 million relates to
service costs) and $1.4 million relates to Roam Mobility. Consistent with the
above discussion around net revenues, the driving factors for these decreases
from the nine months ended September 30, 2020 are related to the sale of
substantially all of the Ting Mobile customer base in the current period and the
shutdown of Roam Mobility in the prior period. Residual Retail Mobile Services
costs is also impacted by six months of the COVID-19 pandemic, characterized by
a decline in mobile subscribers and reduced usage which translates into lower
year-to-date costs. The decline also included reduced minimum commitment charges
with network operators which decreased by $2.6 million compared to the nine
months ended September 30, 2019. This decrease is offset by an increase of $1.3
million related to costs associated with Other Professional Services provided to
MVNOs.



Fiber Internet Services



During the three months ended September 30, 2020, costs related to provisioning
high speed Internet access and billing solutions increased $0.8 million or 89%,
to $1.7 million as compared to $0.9 million during three months ended September
30, 2019. The increase in costs were primarily driven by increased direct costs
and bandwidth costs related to the continued expansion of the Ting Fiber
network, for both existing towns and cities as well as those acquired via the
Cedar acquisition.



During the nine months ended September 30, 2020, costs related to provisioning
high speed Internet access and billing solutions increased $2.1 million or 70%,
to $5.1 million as compared to $3.0 million during nine months ended September
30, 2019. The increase in costs were primarily driven by increased direct costs
and bandwidth costs related to the continued expansion of the Ting Fiber
network, for both existing towns and cities as well as those acquired via the
Cedar acquisition.



                                       41

--------------------------------------------------------------------------------

  Table of Contents



Domain Services



Wholesale



Costs for Wholesale domain services for the three months ended September 30,
2020 decreased by $1.5 million to $36.8 million, when compared to the three
months ended September 30, 2019. This was primarily driven by a $2.5 million
decrease in wholesale domain services costs driven by the erosion in
registrations by non-core customers for our eNom and Ascio brands. This decrease
on eNom and Ascio was offset by increased Wholesale domain service costs of
$1.0 million from our other domain services brands, namely OpenSRS and EPAG.
This offsetting increase is a result of increased domains under management for
these brands associated with an uptick in registrations during the third quarter
of 2020 in connection with COVID-19. As more businesses establish an online
presence during this time, we have seen growth from large volume resellers
across these brands. This has had a marginal impact on costs in the current
period and will have a carryforward impact in subsequent periods as costs are
recognized from previously deferred billed costs.



Costs for Wholesale domain services for the nine months ended September 30, 2020
decreased by $1.4 million to $109.6 million, when compared to the nine months
ended September 30, 2019. This was primarily driven by a $5.1 million decrease
in wholesale domain services costs driven by the erosion in registrations by
non-core customers for our eNom brand. This decrease on eNom was offset by
increased Wholesale domain service costs of $3.8 million from our other domain
services brands, namely OpenSRS, EPAG and Ascio. The offsetting increase is
largely a result of the prior year acquisition of Ascio, where Ascio costs now
represent a full three quarters compared to the stub period of attributable
costs during the nine months ended September 30, 2019. To a lesser extent any
residual increase was a result of increased domains under management for OpenSRS
as a result of COVID-19 impacts discussed above.



Costs for wholesale value-added services for the three months ended September
30, 2020 remained flat at $0.7 million, when compared to the three months ended
September 30, 2019.

Costs for wholesale value-added services for the nine months ended September 30, 2020 remained flat at $2.3 million, when compared to the nine months ended September 30, 2019.

Retail



Costs for retail for the three months ended September 30, 2020 decreased by $0.1
million, to $4.3 million as compared to the three months ended September 30,
2019. The decrease was a result of an overall declining volume of transactions
related to the eNom retail brands.

Costs for retail for the nine months ended September 30, 2020 decreased by $0.3 million, to $12.8 million as compared to the nine months ended September 30, 2019. The decrease was a result of an overall declining volume of transactions related to the eNom retail brands.

Portfolio



Costs for portfolio for the three months ended September 30, 2020 remained flat
at $0.1 million when compared to the three months ended September 30, 2019. In
the fourth quarter of 2019, the Company disposed of its entire domain portfolio,
excluding surname domains used in the Realnames email service. The Company
expects portfolio cost of revenue to materially decline in Fiscal 2020.



Costs for portfolio for the nine months ended September 30, 2020 remained flat
at $0.4 million when compared to the nine months ended September 30, 2019. In
the fourth quarter of 2019, the Company disposed of its entire domain portfolio,
excluding surname domains used in the Realnames email service. The Company
expects portfolio cost of revenue to materially decline in Fiscal 2020.



Network Expenses



Network costs for the three months ended September 30, 2020 increased
by $1.2 million to $6.0 million when compared to the three months ended
September 30, 2019. The three-month increase was driven by depreciation as a
result of the expansion of the Company's increased network infrastructure
associated with the continuing expansion of the Ting Fiber footprint, inclusive
of $0.2 million related to the Cedar acquisition.



Network costs for the nine months ended September 30, 2020 increased by $5.2
million to $19.1 million when compared to the nine months ended September 30,
2019. The nine-month increase was driven by depreciation as a result of the
expansion of the Company's increased network infrastructure associated with the
continuing expansion of the Ting Fiber footprint, inclusive of $0.5 million
related to the Cedar acquisition. In addition to these Fiber network increases,
the second quarter of 2020 included a $1.5 million impairment related to Ting
TV, a product under development for Ting Fiber.



                                       42

--------------------------------------------------------------------------------

  Table of Contents



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 For the Three Months Ended September

        For the Nine Months Ended
U.S. dollars)                                         30,                                September 30,
                                          2020                    2019             2020                 2019
Sales and marketing                   $      8,318            $      8,769     $     26,521         $     26,366
Decrease over prior period            $       (451 )                           $        155
Decrease - percentage                           (5 )%                                     1 %
Percentage of net revenues                      11 %                    10 %             11 %                 10 %




Sales and marketing expenses for the three months ended September 30, 2020
decreased by $0.5 million, or 5%, to $8.3 million as compared to the three
months ended September 30, 2019.  This three-month decrease primarily related to
a decrease in other marketing related expenses of $0.8 million and travel
related expenses of $0.2 million. The decrease in marketing related expenses
were focused in Mobile Services due to the sale of the Ting Mobile customer base
to DISH in the current period and shutdown of Roam Mobility in the prior
quarter. The overall decrease in sales and marketing expense was partially
offset by a $0.5 million increase in people costs driven by the acquisition of
Cedar in the first quarter of 2020. Stock-based compensation expenses also
increased $0.1 million to attract and retain labor.



Sales and marketing expenses for the nine months ended September 30, 2020
increased by $0.2 million, or 1%, to $26.5 million as compared to the nine
months ended September 30, 2019. This nine-month increase primarily related to a
$1.8 million increase in people costs driven by the acquisition of Cedar in the
first quarter of 2020 and inclusion of a full three quarters of people costs
related to workforce acquired in the Ascio acquisition on March 18,
2019. Stock-based compensation expenses also increased $0.3 million in 2020 to
attract and retain labor. The overall increase in sales sales and marketing
expense was partially offset by decreases in other marketing related expenses of
$1.6 million and travel related expenses of $0.4 million. The decrease in the
marketing related expenses were focused in Mobile Services due to the sale of
the Ting Mobile customer base to DISH in the current period and shutdown of Roam
Mobility in the prior quarter.

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, network access
services, email, retail, domain portfolio and other Internet services, as well
as to distribute our digital content services. All technical operations and
development costs are expensed as incurred.

(Dollar amounts in thousands of For the Three Months Ended

     For the Nine Months Ended
U.S. dollars)                                   September 30,                         September 30,
                                          2020                 2019             2020                 2019
Technical operations and
development                           $      3,162         $      2,876     $      8,980         $      8,151
Increase over prior period            $        286                          $        829
Increase - percentage                           10 %                                  10 %
Percentage of net revenues                       4 %                  3 %              4 %                  3 %




Technical operations and development expenses for the three months
ended September 30, 2020 increased by $0.3 million, or 10%, to $3.2 million when
compared to the three months ended September 30, 2019.  The increase in costs
relates primarily to increased salaries and benefits driven by an expanding
workforce and wage inflation focused on our shared services and engineering
teams.



Technical operations and development expenses for the nine months ended
September 30, 2020 increased by $0.8 million, or 10%, to $9.0 million when
compared to the nine months ended September 30, 2019.  The increase in costs
relates primarily to increased salaries and benefits driven by an expanding
workforce and wage inflation focused on our shared services and engineering
teams, as well as increased spending related to contract and outsourcing spends
to aid in platform development efforts across our business lines. Additionally,
the nine months ended September 30, 2020 reflected a full three quarters of
people costs related to the workforce acquired in the Ascio acquisition on March
18, 2019, as compared to a stub period of costs in the nine months ended
September 30, 2019.



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 For the Three Months Ended

    For the Nine Months Ended
U.S. dollars)                                   September 30,                         September 30,
                                          2020                 2019             2020                 2019
General and administrative            $      4,868         $      4,574     $     15,074         $     13,818
Increase over prior period            $        294                          $      1,256
Increase - percentage                            6 %                                   9 %
Percentage of net revenues                       7 %                  5 %              6 %                  6 %




General and administrative expenses for the three months ended September 30,
2020 increased by $0.3 million, or 6% to $4.9 million as compared to the three
months ended September 30, 2019.  The increase was primarily driven by an
increase in people costs of $0.3 million and an increase in professional fees of
$0.3 million in connection with the sale of the Ting Mobile customer
relationships to DISH. These increases in general and administrative expenses
were offset by a decrease in both credit card fees and bad debts associated with
the Mobile Services business, in the amounts of $0.2 million and $0.1 million,
respectively.



                                       43

--------------------------------------------------------------------------------

Table of Contents

General and administrative expenses for the nine months ended September 30, 2020
increased by $1.3 million, or 9%, to $15.1 million as compared to the nine
months ended September 30, 2019.  The increase was primarily driven by an
increase in people costs of $1.0 million, an increase in foreign exchange
expense of $1.0 million, and an increase in professional fees of $0.4 million in
connection with the sale of the Ting Mobile customer relationships to DISH.
These increases in general and administrative expenses were offset by a decrease
in facility and transitional costs related to Ascio and eNom of $0.3 million and
$0.4 million, respectively as well as decreases in both credit card fees and bad
debts associated with the Mobile Services business, in the amounts of $0.3
million and $0.1 million, respectively.

DEPRECIATION OF PROPERTY AND EQUIPMENT

(Dollar amounts in thousands of
U.S. dollars)                           For the Three Months Ended 

September 30, For the Nine Months Ended September 30,

                                            2020                        2019                  2020                     2019
Depreciation of property and
equipment                             $             125           $             117     $            363         $            375
Increase over prior period            $               8                                 $            (12 )
Increase - percentage                                 7 %                                             (3 )%
Percentage of net revenues                            0 %                         0 %                  0 %                      0 %

Depreciation costs remained flat for the three months ended September 30, 2020 at $0.1 million when compared to the three months ended September 30, 2019.

Depreciation costs remained flat for the nine months ended September 30, 2020 at $0.4 million when compared to the nine months ended September 30, 2019.

LOSS ON DISPOSAL OF PROPERTY AND EQUIPMENT

(Dollar amounts in thousands of For the Three Months Ended September

      For the Nine Months Ended September
U.S. dollars)                                          30,                                       30,
                                          2020                    2019              2020                    2019
Loss on disposition of property and
equipment                             $           -           $          73     $           -           $          73
Decrease over prior period            $         (73 )                           $         (73 )
Decrease - percentage                          (100 )                                    (100 )
Percentage of net revenues                        - %                     0 %               - %                     0 %




Loss on the disposal of property and equipment for the three months ended
September 30, 2020 decreased by $0.1 million as compared to the three months
ended September 30, 2019. The decrease was a result of the three months ended
September 30, 2019 including equipment disposal from the former Kirkland office.

Loss on the disposal of property and equipment for the nine months ended September 30, 2020 decreased by $0.1 million as compared to the nine months ended September 30, 2019. The decrease was a result of the nine months ended September 30, 2019 including equipment disposal from the former Kirkland office.

AMORTIZATION OF INTANGIBLE ASSETS

(Dollar amounts in thousands of For the Three Months Ended September

        For the Nine Months Ended
U.S. dollars)                                         30,                                September 30,
                                          2020                    2019             2020                 2019
Amortization of intangible assets     $      2,315            $      2,544     $      7,766         $      6,661
Decrease over prior period            $       (229 )                           $      1,105
Decrease - percentage                           (9 )%                                    17 %
Percentage of net revenues                       3 %                     3 %              3 %                  3 %




Amortization of intangible assets for the three months ended September 30, 2020
decreased by $0.2 million to $2.3 million as compared to the three months ended
September 30, 2019. The decrease is driven by write-off of Mobile Services
related intangible assets in connection with the both the sale of the Ting
Mobile customer base in the current period and the shutdown of Roam Mobility in
the prior quarter. The write off of the Ting Mobile customer base offsets Other
Income earned in period from the margin associated with the legacy customer
base. These decreases in amortization expense of $0.4 million, was offset by
increased amortization related to the first quarter acquisition of Cedar in the
amount of $0.2 million. 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 2019, and Cedar in January 2020.



Amortization of intangible assets for the nine months ended September 30, 2020
increased $1.1 million to $7.8 million as compared to the nine months ended
September 30, 2019. The increase is driven by a full three quarters of
amortization related to the acquisition of Ascio of $0.4 million, amortization
of $0.5 million related to the prior quarter acquisition of Cedar and
$0.2 million in amortization related to FreedomPop customer acquisition that
closed in July 2019. 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, and Cedar in January 2020. As discussed above, the balance of the Roam
Mobility brands was fully impaired as at June 30, 2020 as part of shutdown of
the Roam brands. This is reflected below in the impairment of definite life
intangible assets of $1.4 million. The write off of the Ting Mobile customer
base offsets Other Income earned in period from the margin associated with the
legacy customer base.



                                       44

--------------------------------------------------------------------------------

Table of Contents

IMPAIRMENT OF DEFINITE LIFE INTANGIBLE ASSETS

(Dollar amounts in thousands of                                                      For the Nine Months Ended September
U.S. dollars)                         For the Three Months Ended September 30,                       30,
                                           2020                       2019              2020                    2019
Impairment of definite life
intangible assets                     $            -             $            -     $       1,431           $           -
Decrease over prior period            $            -                                $       1,431
Decrease - percentage                            N/A %                                        N/A %
Percentage of net revenues                         - %                        - %               1 %                     - %




               There was no impairment of definite life intangible assets 

for

the three months ended September 30, 2020 and the three months ended September 30, 2019.

Impairment of definite life intangible assets for the nine months ended
September 30, 2020 increased by $1.4 million as compared to the nine months
ended September 30, 2019. The increase is driven by the write-off of customer
relationships acquired in connection with our Roam Mobility Brands. As discussed
above, Roam Mobility saw a decline in mobile subscribers and reduced usage
related to the COVID-19 pandemic. As at June 30, 2020, the Company decided to
shut down the Roam Mobility brands and related business as a result of this lack
of demand for SIM-enabled roaming services due to the continued decrease of both
business and leisure travel caused by the pandemic. As part of that shut down,
the associated customer relationships previously acquired were written off in
period.

LOSS (GAIN) ON CURRENCY FORWARD CONTRACTS

Although our functional currency is the U.S. dollar, a major portion of our
fixed expenses are incurred in Canadian dollars. Our goal with regard to foreign
currency exposure is, to the extent possible, to achieve operational cost
certainty, manage financial exposure to certain foreign exchange fluctuations
and to neutralize some of the impact of foreign currency exchange movements.
Accordingly, we enter into foreign exchange contracts to mitigate the exchange
rate risk on portions of our Canadian dollar exposure.

(Dollar amounts in thousands of For the Three Months Ended September U.S. dollars)

                                          30,                  

For the Nine Months Ended September 30,

                                          2020                    2019                2020                        2019
Loss (gain) on currency forward
contracts                             $        (159 )         $          20     $             (99 )         $             (90 )
Decrease over prior period            $        (179 )                           $              (9 )
Decrease - percentage                           895 %                                          10 %
Percentage of net revenues                        0 %                     0 %                   0 %                         0 %




The Company recorded a net gain of $0.2 million on the change in fair value of
outstanding contracts as well as realized on matured contracts during the three
months ended September 30, 2020, compared to a loss of less than $0.1 million
during the three months ended September 30, 2019.



The Company recorded a net gain of $0.1 million on the change in fair value of
outstanding contracts as well as realized on matured contracts during the nine
months ended September 30, 2020, compared to a gain of less than $0.1 million
during the nine months ended September 30, 2019.



At September 30, 2020, our balance sheet reflects a derivative instrument asset
of $2.4 million and a liability of $0.2 million as a result of our existing
foreign exchange contracts. Until their respective maturity dates, these
contracts will fluctuate in value in line with movements in the Canadian dollar
relative to the U.S. dollar.



                                       45

--------------------------------------------------------------------------------

  Table of Contents



OTHER INCOME (EXPENSES)



(Dollar amounts in thousands of                                                    For the Nine Months Ended September
U.S. dollars)                         For the Three Months Ended September 30,                     30,
                                            2020                      2019             2020                   2019
Other income (expense), net           $             244           $     (1,263 )   $     (1,924 )         $     (3,549 )
Increase over prior period            $           1,507                            $      1,625
Increase - percentage                              (119 )%                                  (46 )%
Percentage of net revenues                            0 %                    1 %              1 %                    1 %




Other Income during the three months ended September 30, 2020 increased by $1.5
million when compared to the three months ended September 30, 2019. This
was primarily due to the $1.1 million increase due to the gain on sale of Ting
Customer Assets to DISH in the current period. This gain represented the net
effect of income earned from the legacy customer base of $4.6 million offset by
the write off of Mobile assets totaling $3.5 million. In addition to this,
another contributing factor in the increase was lower interest incurred on our
credit facility with the majority of the borrowings on the credit facility to
support the build-out of the Ting Fiber network. Other expense consists
primarily of the interest we incur in connection with our Amended 2019 Credit
Facility. The interest incurred primarily relates to our loan balances obtained
to fund the acquisition of eNom, Ascio and Cedar and funding for expenditures
associated with the Company's Fiber to the Home program.



Other Income during the nine months ended September 30, 2020 increased by
$1.6 million when compared to the nine months ended September 30, 2019. This
was primarily due to the $1.1 million increase due to the gain on sale of Ting
Customer Assets to DISH in the current period. This gain represented the net
effect of income earned from the legacy customer base of $4.6 million offset by
the write off of Mobile assets totaling $3.5 million. In addition to this,
another contributing factor in the increase was lower interest incurred on our
credit facility with the majority of the borrowings on the credit facility to
support the build-out of the Ting Fiber network. Other expense consists
primarily of the interest we incur in connection with our Amended 2019 Credit
Facility. The interest incurred primarily relates to our loan balances obtained
to fund the acquisition of eNom, Ascio and Cedar and funding for expenditures
associated with the Company's Fiber to the Home program.



INCOME TAXES

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

(Dollar amounts in thousands of
U.S. dollars)                         For the Three Months Ended September 

30, For the Nine Months Ended September 30,

                                          2020                     2019                2020                     2019
Provision for income taxes            $        840           $           3,133     $      2,390           $           6,209
Decrease in provision over prior
period                                $     (2,293 )                               $     (3,819 )
Decrease - percentage                          (73 )%                                       (62 )%
Effective tax rate                              54 %                        43 %             39 %                        39 %




We operate in various tax jurisdictions, and accordingly, our income is subject
to varying rates of tax. Losses incurred in one jurisdiction cannot be used to
offset income taxes payable in another jurisdiction. Our ability to use income
tax loss carry forwards and future income tax deductions is dependent upon our
operations in the tax jurisdictions in which such losses or deductions arise.
Income taxes are computed using the asset and liability method, under which
deferred tax assets and liabilities are determined based on the difference
between the financial statement carrying values and tax base of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.



For the three months ended September 30, 2020, we recorded a income tax expense
of $0.8 million on income before income taxes of $1.6 million, using an
estimated effective tax rate for Fiscal 2020 adjusted for certain minimum state
taxes as well as the inclusion of a nil tax expense related to ASU 2016-09,
which requires all excess tax benefits and tax deficiencies related to employee
share-based payments to be recognized through income tax expense. Our effective
tax rate for the three months ended September 30, 2020 is also adversely
impacted by discrete adjustments resulting from finalization of prior period tax
filings and a change in geographical mix of income. Comparatively, for the three
months ended September 30, 2019, we recorded an income tax expense
of $3.1 million on income before taxes of $7.3 million, using an estimated
effective tax rate for the 2019 fiscal year and reflecting the $0.1 million tax
recovery impact related to ASU 2016-09.



For the nine months ended September 30, 2020, we recorded an income tax expense
of $2.4 million on income before income taxes of $6.1 million, using an
estimated effective tax rate for Fiscal 2020 adjusted for certain minimum state
taxes as well as the inclusion of a $0.2 million tax recovery related to ASU
2016-09, which requires all excess tax benefits and tax deficiencies related to
employee share-based payments to be recognized through income tax expense. Our
effective tax rate for the nine months ended September 30, 2020 is also
adversely impacted by discrete adjustments resulting from finalization of prior
period tax filings and a change in the geographical mix of income.
Comparatively, for the nine months ended September 30, 2019, we recorded an
income tax expense of $6.2 million on income before taxes of $15.8 million,
using an estimated effective tax rate for the 2019 fiscal year and reflecting
the $0.8 million tax recovery impact related to ASU 2016-09.



In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the years in which
those temporary differences become deductible. Management projected future
taxable income, uncertainties related to the industry in which the Company
operates, and tax planning strategies in making this assessment.

We recognize accrued interest and penalties related to income taxes in income tax expense. We did not have significant interest and penalties accrued at September 30, 2020 and December 31, 2019, respectively.

                                       46

--------------------------------------------------------------------------------

  Table of Contents



ADJUSTED EBITDA



We believe that the provision of this supplemental non-GAAP 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 performance 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. See the Consolidated Statements of Cash
Flows included in the attached financial statements. 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 depreciation, amortization of intangible
assets, income tax provision, interest expense (net), accretion of contingent
consideration, stock-based compensation, asset impairment, loss on the disposal
of Ting Mobile customer assets, gains and losses from unrealized foreign
currency transactions and infrequently occurring items, 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 unhedged foreign currency contracts, 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:

Reconciliation of Net income to
Adjusted EBITDA                           Three Months Ended September 30,           Nine Months Ended September 30,
(In Thousands of US Dollars)                 2020                  2019                2020                  2019
(unaudited)                               (unaudited)           (unaudited)         (unaudited)           (unaudited)

Net income for the period               $           716       $         4,205     $         3,707       $         9,620
Depreciation of property and
equipment                                         3,110                 2,348               9,255                 6,445
Impairment of property and equipment                113                     -               1,638                     -
Loss on disposition of property and                   -                    73                   -                    73

equipment

Amortization of intangible assets                 2,645                 2,858               8,776                 7,463
Impairment of definite life
intangible assets                                     -                     -               1,431                     -
Write-down on disposal of Ting Mobile
customer assets                                   3,513                     -               3,513                     -
Interest expense, net                               760                 1,263               2,756                 3,549
Accretion of contingent consideration                86                     -                 258                     -
Provision for income taxes                          840                 3,133               2,390                 6,209
Stock-based compensation                          1,016                   830               2,664                 2,040
Unrealized loss (gain) on change in
fair value of forward contracts                    (175 )                 (16 )              (263 )                (204 )
Unrealized loss (gain) on foreign
exchange revaluation of foreign
denominated monetary assets and
liabilities                                          81                    88                 479                  (402 )
Acquisition and other costs1                        565                    50               1,520                   956

Adjusted EBITDA                         $        13,270       $        14,832     $        38,124       $        35,749




1Acquisition and other costs represents transaction-related expenses,
transitional expenses, such as duplicative post-acquisition expenses, primarily
related to our acquisition of Ascio in March 2019, Cedar in January 2020, and
the disposition of certain Ting Mobile assets in August 2020. Expenses
include severance or transitional costs associated with department, operational
or overall company restructuring efforts, including geographic alignments.




Adjusted EBITDA decreased by $1.5 million, or 10% to $13.3 million for the three
months ended September 30, 2020 when compared to the three months ended
September 30, 2019. The decrease in adjusted EBITDA from period-to-period was
primarily driven by a decreased contribution from outsized Portfolio sales in
the third quarter of 2019 as the Company ramped up disposition of the remaining
portfolio. The decrease is also impacted by lower contribution from the erosion
of wholesale and retail registrations from our eNom brand. The overall decrease
in EBITDA was partially offset by an increased contribution from wholesale
domain registrations from our OpenSRS, Ascio and EPAG brands and from Ting
Fiber.



Adjusted EBITDA increased by $2.4 million, or 7% to $38.1 million for the nine
months ended September 30, 2020 when compared to the nine months ended September
30, 2019. The increase in adjusted EBITDA from period-to-period was primarily
driven by an increased contribution from wholesale domain registrations from our
OpenSRS and EPAG brands who have seen an increase in domains under management
over the course of the COVID-19 pandemic as more businesses move online. The
increase is also impacted by increased contribution from Ascio due to the full
three quarters of contribution in 2020 relative to the stub period in 2019 due
to acquisition timing. Additionally, the acquisition of Cedar and continued
expansion of the Ting Fiber network has seen increased contribution from Fiber
year-over-year. The overall increase in EBIDTA was partially offset by lower
contribution from the erosion of wholesale and retail registrations from our
eNom brand as well as Mobile Services due to the sale of Ting Mobile customer
relationships to DISH as well as the shutdown of Roam Mobility.



                                       47

--------------------------------------------------------------------------------

Table of Contents

OTHER COMPREHENSIVE INCOME (LOSS)

To mitigate the impact of the change in fair value of our foreign exchange contracts on our financial results, in October 2012 we begun applying hedge accounting for the majority of the contracts we need to meet our Canadian dollar requirements on a prospective basis.

The following table presents other comprehensive income for the periods presented:

(Dollar amounts in thousands of
U.S. dollars)                           For the Three Months Ended September 30,              For the Nine Months Ended September 30,
                                          2020                            2019                   2020                        2019
Other comprehensive income
(loss)                             $              775              $             (149 )    $             898           $             781
Increase over prior period         $              924                                      $             117
Increase - percentage                            (620 )%                                                  15 %
Percentage of net revenues                          1 %                            (0 )%                   0 %                         0 %

The impact of the fair value adjustments on outstanding hedged contracts for the three months ended September 30, 2020 was a gain in OCI of $0.7 million as compared to a loss of $0.2 million for the three months ended September 30, 2019.

The net amount reclassified to earnings during the three months ended September
30, 2020 was a loss of  less than $0.1million compared to a gain of less than
$0.1 million during the three months ended September 30, 2019.



The impact of the fair value adjustments on outstanding hedged contracts for
the nine months ended September 30, 2020 was a gain in OCI of $0.9 million as
compared to a gain of $0.6 million for the nine months ended September 30, 2019.



The net amount reclassified to earnings during the nine months ended September
30, 2020 was a loss of $0.3 million compared to a gain of $0.2 million during
the nine months ended September 30, 2019.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2020, our cash and cash equivalents balance
decreased $10.2 million when compared to December 31, 2019. Our principal uses
of cash were $32.7 million for the continued investment in property and
equipment, $8.8 million for the Acquisition of Cedar, $3.3 million in stock
repurchases, and $0.5 million of other costs, including tax payment associated
with stock option exercises and loan payable costs. These uses of cash were
offset by cash provided by operating activities of $34.4 million and $0.7
million of proceeds received on exercise of stock options.

Amended 2019 Credit Facility

On June 14, 2019, the Company and its wholly-owned subsidiaries, Tucows.com Co.,
Ting Fiber, Inc., Ting Inc., Tucows (Delaware) Inc. and Tucows (Emerald), LLC,
entered into an Amended and Restated Senior Secured Credit Agreement with RBC,
as administrative agent, and lenders party thereto (collectively with RBC, the
"Lenders") under which the Company has access to an aggregate of up to $240
million in funds, inclusive of a $60 million accordion facility. The Amended
2019 Credit Facility replaced a secured Credit Agreement dated January 20, 2017
with Bank of Montreal, RBC and Bank of Nova Scotia (as amended, the "2017
Amended Credit Facility").



On November 27, 2019, the Company entered into Amending Agreement No. 1 to the
Amended and Restated Senior Secured Credit Agreement (collectively with the
Amended and Restated Senior Secured Credit Agreement, the "Amended 2019 Credit
Facility") to amend certain defined terms in connection with the Cedar
acquisition.



In connection with the Amended 2019 Credit Facility, the Company incurred an
additional $0.3 million of fees paid to lenders and $0.2 million of legal fees
related to the debt issuance. Of these fees, $0.4 million are debt issuance
costs, which have been reflected as a reduction to the carrying amount of the
loan payable and will be amortized over the term of the credit facility
agreement and $0.1 million have been recorded in general and administrative
expenses.

The obligations of the Company under the Amended 2019 Credit Agreement are secured by a first priority lien on substantially all of the personal property and assets of the Company and has a four-year term.

Other Credit Facilities



Prior to the Company entering into the Amended 2019 Credit Facility and the 2017
Amended Credit Facility, the Company had credit agreements (collectively the
"Prior Credit Facilities") with BMO, which provided the Company with continued
access to a treasury risk management facility and a credit card facility. All
remaining credit facilities under the 2017 Amended Credit Facility and the Prior
Credit Facilities have been terminated.



The treasury risk management facility under the Prior Credit Facilities provides
for a $3.5 million settlement risk line to assist the Company with hedging
Canadian dollar exposure through foreign exchange forward contracts and/or
currency options. Under the terms of the Prior Credit Facilities, the Company
may enter into such agreements at market rates with terms not to exceed
18 months. As of September 30, 2020, the Company held contracts in the amount of
$41.4 million to trade U.S. dollars in exchange for Canadian dollars.



                                       48

--------------------------------------------------------------------------------

Table of Contents

Cash Flow from Operating Activities

Net cash inflows from operating activities during the nine months ended September 30, 2020 was $34.4 million, an increase of 26% when compared to the nine months ended September 30, 2019.

Net income, after adjusting for non-cash charges, during the nine months ended
September 30, 2020 was $30.3 million, an increase of 13% when compared to the
prior year. Net income included non-cash charges and recoveries of $26.6 million
such as depreciation, amortization, stock-based compensation, write-down on
disposal of Ting Mobile customer assets, impairment of definite life intangible
assets, loss on impairment of property and equipment, deferred income taxes,
excess tax benefits on stock-based compensation, unrealized gains on currency
forward contracts, and disposal of domain names. In addition, changes in our
working capital provided $4.1 million.  Positive contributions of $10.5 million
from movements in deferred revenue, accounts receivable, accounts
payable, inventory, accreditation fees payable, and customer deposits were
offset by $6.4 million utilized in changes from prepaid domain name fees,
prepaid expenses and deposits, income taxes recoverable, and accrued
liabilities.

Cash Flow from Financing Activities

Net cash outflows from financing activities during the nine months ended
September 30, 2020 totaled $3.1 million as compared to cash inflows of $34.9
million during the nine months ended September 30, 2019. Total cash outflows of
$3.8 million were driven by $3.3 million related to the stock repurchases, in
addition to a $0.5 million outflow for the payment of tax obligations resulting
from the net exercise of stock options and loan payable costs. These cash
outflows were offset by cash inflows related to the proceeds received on
exercise of stock options of $0.7 million.

Cash Flow from Investing Activities

Investing activities during the nine months ended September 30, 2020 used net
cash of $41.6 million as compared to using $62.7 million during the nine months
ended September 30, 2019. Cash outflows of $8.8 million related to the
acquisition of Cedar, in addition to $32.7 million invested in property and
equipment, primarily to support the continued expansion of our fiber footprint.
The Company continues to invest in our existing Ting Towns of Centennial, CO,
Charlottesville, VA, Fuquay-Varina, NC, Holly Springs, NC, and Sandpoint, ID as
well ramping construction in Roaring Fork, CO, Rolesville, NC, and Wake Forest,
NC, as we seek to extend both our current network and expand to new towns. We
expect our capital expenditures on building and expanding our fiber network to
continue to increase during Fiscal 2020.

Based on our operations, we believe that our cash flow from operations will be adequate to meet our anticipated requirements for working capital, capital expenditures and our loan repayments for at least the next 12 months.

We may need additional funds or seek other financing arrangements to facilitate
more rapid expansion, develop new or enhance existing products or services,
respond to competitive pressures or acquire or invest in complementary
businesses, technologies, services or products. We may also evaluate potential
acquisitions of other businesses, products and technologies. We currently have
no commitments or agreements regarding the acquisition of other businesses. If
additional financing is required, we may need additional equity or debt
financing and any additional financing may be dilutive to existing investors. We
may not be able to raise funds on acceptable terms, or at all.

Off Balance Sheet Arrangements

As of September 30, 2020 we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Contractual Obligations

In our Annual Report on Form 10-K for the year ended December 31, 2019, we disclosed our contractual obligations. As of September 30, 2020, other than the items mentioned above, there have been no other material changes to those contractual obligations outside the ordinary course of business.

                                       49

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses