TUCOWS INC /PA/ (TCX) Risk Factors

ITEM 1A.  RISK FACTORS

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

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RISKS RELATED TO OUR BUSINESS AND INDUSTRY

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

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

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

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

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

EchoStar is Wavelo's main customer and represents the majority of its revenues, until such time as we are able to scale our services to additional customers. As a result, we are exposed to significant risk if we are unable to maintain this customer relationship or establish new relationships with other MNOs or MVNOs. In addition, Wavelo’s revenues are directly tied to the subscriber volumes of EchoStar’s MVNO or MNO networks, and its profitability is contingent on EchoStar’s ability to continue to add and retain subscribers on its platform.

Accordingly, Wavelo’s long-term success depends on its ability to maintain existing customer relationships and broaden its customer base through the acquisition of new customers and expanded adoption of its platforms. If Wavelo is unable to do so, its revenues, operating results, and growth prospects could be materially adversely affected.

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

To stay competitive, we must offer a range of valuable products and services while effectively managing vendor relationships and supply chains. A critical aspect of this is securing domain name registration options through various TLDs and ccTLDs for our Tucows Domains segment. Our business is particularly vulnerable to fee increases imposed by registries like Verisign, which controls .com domains. Verisign, for instance, charges $10.26 per .com registration, with ICANN imposing an additional $0.20 fee. Under Verisign’s registry agreement, which extends through 2030, Verisign may increase .com prices by up to 7% annually during the final four years of the term, allowing for a potential price increase as early as the fourth quarter of 2026. Any such increase would raise our cost of revenues. For our Ting Internet segment, we depend on leased fiber capacity, installation equipment, and third-party network access, and any disruptions in supply or cost increases could affect our ability to scale and maintain profitability.

Adverse conditions in the U.S. and international markets could materially adversely affect our results of operations and financial condition.

Unfavorable economic conditions, including economic slowdowns, volatile inflation rates, rising interest rates, lower employment levels or reduced consumer and business spending, could negatively affect demand for our products and services and increase our operating costs. During periods of economic uncertainty, customers may delay purchasing decisions, reduce usage of our services, downgrade to lower-priced offerings, or experience financial distress, which could adversely impact revenues, margins, and cash flows across our businesses.

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In addition, inflationary pressures and higher interest rates have increased, and may continue to increase, our costs, including labor, energy, network operations, and interest expense. If adverse economic conditions persist or worsen, our cost-reduction efforts may be insufficient to offset these impacts, and our results of operations and financial condition could be materially adversely affected. A severe or prolonged economic downturn could result in a variety of risks to our business, including our ability to raise additional capital when needed on acceptable terms, if at all. Moreover, the uncertainty surrounding government funding debates and debt-ceiling negotiations can negatively affect market conditions, investor sentiment, and the liquidity of small-cap and microcap issuers such as ours. Accordingly, any future federal government shutdown or protracted budget impasse could materially and adversely affect our regulatory compliance, financing options and capabilities, and overall financial condition.

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

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

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

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

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

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

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Our business depends on our strong brands. If we are not able to maintain and enhance our brands, our ability to expand our customer base will be impaired and our business and operating results will be harmed
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In recognition of the evolving nature of the Internet services market and to make it easier to clearly differentiate each service we offer from our competitors, we enhanced our branding by focusing our primary service offerings under seven distinct brands, namely “OpenSRS”, “Enom”, “Hover", "EPAG", "Ascio", “Ting”, and "Wavelo". We also believe that maintaining and enhancing the “Tucows” corporate brand and our service brands is critical to expanding our customer base. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brands may become increasingly difficult and expensive. Maintaining and enhancing our brands will depend largely on our ability to be a technology leader providing high quality products and services, which we may not do successfully. To date, we have engaged in relatively little direct brand promotion activities. This enhances the risk that we may not successfully implement brand enhancement efforts in the future.

Our ability to successfully execute on the strategic process for Ting is critical to addressing its liquidity needs, and failure to do so on a timely basis could have a material adverse effect on the business.

Given Ting’s ongoing capital requirements, we have commenced a process to review strategic alternatives for the Ting business. This process is intended to address Ting’s liquidity needs and long-term sustainability and may include a range of potential outcomes, such as a sale, recapitalization, restructuring, partnership, or other strategic transaction.

There can be no assurance that the process to review strategic alternatives will result in any transaction or outcome, that any transaction pursued will be completed on acceptable terms, or that it will be completed on a timeline sufficient to address Ting’s liquidity needs, or will fully discharge Ting’s obligations. The availability, timing, and terms of any strategic transaction will depend on numerous factors, including market conditions, investor interest, Ting’s operating performance, and broader economic and industry conditions, which are outside of our control.

If the process does not result in a successful transaction, or if it is delayed or abandoned, Ting may be required to pursue other measures to address its liquidity needs, including more significant reductions in operating expenses, deferral or abandonment of strategic initiatives, raising capital on unfavorable terms, or pursuing restructuring, bankruptcy or insolvency alternatives. Any such actions could materially and adversely affect Ting’s business, financial condition, and results of operations and could result in a loss of some or all of our investment in Ting.

In addition, this process may divert management’s attention, create uncertainty among employees, customers, suppliers, and investors, create and increase volatility in the trading price of our securities. Litigation, including securities class action litigation, or other regulatory actions and investigations often follows certain significant business transactions, such as the announcement of any strategic transaction, or the announcement of negative events. We may be exposed to such litigation even if no wrongdoing occurred. Litigation is usually expensive and also diverts management’s attention. These effects could persist regardless of whether a transaction is ultimately completed and could have a material adverse effect on our consolidated business, financial condition, and results of operations.

Ting’s ability to continue as a going concern depends on significant changes to its operations or additional sources of liquidity.

Ting has incurred recurring operating losses and negative cash flows and has historically relied on external financing, including redeemable preferred units and term notes, to fund its operations. Based on current forecasts, Ting’s existing cash resources are expected to be insufficient to fund operations and meet its financial obligations beyond the second quarter of the year ending December 31, 2026 ("Fiscal 2026"), under a business-as-usual scenario. The Return Breach related to the Series A Preferred Units, as well as current market conditions, may significantly impact Ting’s ability to raise any additional financing at acceptable rates, or at all. Further details on the Return Breach are described in "Note 13. Redeemable Preferred Units" of the Notes to the Consolidated Financial Statements.

Management has initiated a process to review strategic alternatives, as detailed in the above risk factor, and is addressing Ting’s liquidity needs by reducing operating costs and restructuring operations. Ting’s ability to continue as a going concern is dependent, in part, on the success of this strategic review process. However, there can be no assurance that these plans will be successfully implemented on a timely basis, or at all, or that they will generate sufficient liquidity to enable Ting to continue operations.

If Ting is unable to execute these plans or obtain additional funding when needed, it may be required to significantly curtail operations, pursue financing on unfavorable terms, or seek protection under bankruptcy or insolvency laws. Any such outcomes could materially and adversely affect our consolidated results of operations and the value of our investment in Ting, which could in turn affect the price of our common stock, our relationship with third parties with whom we do business and our ability to raise additional capital.

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If the Company is required to wind down or substantially reduce operations at Ting, it may incur costs, which could adversely affect the Company’s financial condition and results of operations.

If Ting’s strategic review process does not result in a transaction or other outcome that addresses Ting’s liquidity needs and long-term sustainability, the Company may determine that it is necessary to wind down, restructure, or more substantially reduce operations at Ting. Any such actions could require the Company to provide financial and operational support to facilitate an orderly transition and could result in significant costs being incurred.

In connection with a wind-down or significant reduction in operations, Ting may incur costs related to employee severance, retention and termination benefits, contract termination or exit costs, professional and advisory fees and other restructuring-related expenses.

As the ultimate parent and shared service provider to Ting for certain business functions, the Company may incur costs primarily related to employee severance and termination benefits, contract termination or exit costs, and professional service and advisory fees associated with services provided at the corporate level. In addition, the Company may incur costs to settle certain obligations under commercial agreements, leases, vendor contracts and other commitments of Ting where it has acted as guarantor to those agreements. Any such costs incurred at the Company level could reduce liquidity available at the Company and limit its ability to deploy capital to other businesses or strategic initiatives.

RISKS RELATED TO OUR OPERATIONS AND INFRASTRUCTURE

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

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

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

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

Additionally, under our Ting Mobile agreement, we have a "take or pay" minimum purchase commitment with our MNO supplier. Due to the small size of our retained mobile subscriber base, we have incurred penalties related to underutilization from limited growth in the mobile subscriber base, with $3.9 million accrued as of December 31, 2025. The Company incurred these penalties throughout the year ending December 31, 2025 ("Fiscal 2025") and thereafter until the initial term of the contract and contractual minimums was complete in January 2026. The contract will automatically continue month-to-month thereafter, with no expected penalties in the month-to-month arrangement. Should we continue to be bound by any minimum purchase commitments in excess of our customer-based usage, our cost of revenue may increase, negatively impacting financial results.

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Slower-than-expected subscriber growth and ongoing operating losses could impair Ting’s ability to meet its financial and operational obligations and limit its access to additional financing.

Ting has incurred recurring operating losses and negative operating cash flows and continues to require substantial capital to fund its operations. Ting’s ability to meet its financing commitments, including scheduled interest and principal payments under its term notes and obligations under its redeemable preferred units, depends in part on achieving subscriber growth and operating performance.

Ting’s recent subscriber growth has been below internal forecasts, and there can be no assurance that subscriber growth will improve or meet expectations in future periods. Lower-than-expected net additions to Ting’s subscriber base would reduce recurring revenue and cash flow, increase pressure on liquidity, and impair Ting’s ability to fund operations and service its debt.

In addition, Ting has a cost structure that includes significant fixed and semi-fixed expenses related to network operations, personnel, and customer support. If Ting is unable to scale revenues sufficiently to absorb these costs, or if cost-reduction initiatives are delayed or less effective than anticipated, operating losses may increase, further constraining liquidity and limiting Ting’s financial flexibility. These factors could materially and adversely affect Ting’s business, financial condition, and results of operations.

RISKS RELATED TO CYBERSECURITY, DATA PRIVACY, AND INTELLECTUAL PROPERTY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Disputes involving intellectual property rights, domain name ownership, or cybersecurity incidents could be costly and adversely affect our business and results of operations.

We rely on intellectual property laws and contractual protections, including confidentiality and invention assignment agreements, to protect our proprietary technology and other intellectual property. These protections provide only limited safeguards, particularly in foreign jurisdictions, and disputes or litigation involving intellectual property or other rights of third parties may be costly and time-consuming, divert management attention, and result in damages, loss of rights, or restrictions on our ability to operate our business.

As a domain name registrar, we are regularly involved in disputes relating to the registration, ownership, and use of domain names, including proceedings under ICANN’s Uniform Domain Name Dispute Resolution Policy or litigation under the Anti-Cybersquatting Consumer Protection Act. While registrars are generally afforded certain protections, failure to comply with applicable requirements or court orders could result in liability and increased operating costs.

Domain names are valuable digital assets, and cyber threats such as phishing, credential theft, unauthorized account access, and other evolving attack methods create risks of domain loss, transfer, or hijacking. If our systems or those of our customers are compromised, we may face reputational harm, legal claims, regulatory scrutiny, or litigation, even where the breach originates from a customer’s systems. Despite implementing security measures, no system is immune to attack, and any impairment of intellectual property or related intangible assets could require us to record significant charges that could materially adversely affect our financial condition and results of operations.

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RISKS RELATED TO FINANCIAL AND MACROECONOMIC CONDITIONS

The assertion of a Return Breach under Ting’s Unit Purchase Agreement could, if Generate exercises its contractual rights, adversely affect Ting’s liquidity and capital structure.

Ting entered into a Series A Preferred Unit Purchase Agreement (the “Unit Purchase Agreement”) with Generate on August 8, 2022, and closed the transaction contemplated thereby on August 11, 2022. As of December 31, 2025, the balance of the Series A Preferred Units was $137.3 million, excluding deferred financing costs.

As described in “Note 13. Redeemable Preferred Units” of the Notes to the Consolidated Financial Statements, on December 1, 2025, Ting received written notice from Generate asserting that a Return Breach and a Trigger Event had occurred under the Unit Purchase Agreement based on Ting’s failure to pay the quarterly preferred return for two consecutive quarters. Generate reserved its rights to pursue remedies available under the LLC Agreement and applicable law, including the ability to make Redemption Request.

The occurrence of the Return Breach and Trigger Event do not create an immediate liquidity requirement for Ting, unless Generate makes a Redemption Request. If Ting did receive a Redemption Request from Generate, the redemption price of an estimated $204.9 million would become due under the Unit Purchase Agreement. The redemption price under such a request includes the original issue price, any unsatisfied preferred return, as well as a make-whole premium.

To date, Generate has not exercised any of the remedies available to them or made a Redemption Request. Management has engaged with Generate in proactive and collaborative discussions as part process to review strategic alternatives for Ting. However, there can be no assurances that Generate will not exercise its remedies under the Unit Purchase Agreement. Should Generate make any such request, Ting does not have sufficient cash or liquid assets to pay the redemption price. In such circumstances, Ting may be required to pursue significant operational restructuring, seek additional financing on unfavorable terms, or pursue bankruptcy or insolvency alternatives, any of which could have a material adverse effect on Ting's business, financial condition, and results of operations.

The rights asserted by Generate in connection with the Return Breach relate solely to Ting Fiber, LLC and its subsidiaries. Under the LLC Agreement, Generate’s remedies are limited to the equity interests and assets of Ting Fiber, LLC and its subsidiaries and do not extend to Tucows Inc. or its other subsidiaries. In addition, Generate’s rights are subordinate to the rights of secured noteholders under Ting’s asset-backed securitization facilities and do not affect the Company’s securitized debt structure or the collateral securing those facilities.

Our significant indebtedness and financing arrangements could adversely affect our ability to operate our business, pursue strategic initiatives, and meet our financial obligations.

We have significant indebtedness and financing obligations, including securitized debt, redeemable preferred units, and a revolving credit facility, which may limit our ability to raise additional capital, invest in our businesses, pursue strategic opportunities, or respond to changing market conditions. A substantial portion of our cash flow may be required to service debt and preferred returns, reducing funds available for operations and growth initiatives.

Our debt and financing arrangements contain financial and operational covenants and restrictions, including limitations on additional indebtedness, distributions, asset sales, investments, and other transactions. Our ability to comply with these covenants depends on our future operating performance and financial condition, which are subject to economic, competitive, and business factors beyond our control. Failure to maintain compliance with these covenants could result in defaults, acceleration of obligations, restricted access to liquidity, increased borrowing costs, or the loss of access to committed financing.

The agreements governing our credit facility impose significant operating and financial restrictions on us and our subsidiaries. These restrictions, subject in certain cases to customary baskets, exceptions, and ratio tests, may limit our subsidiaries’ ability to engage in certain transactions, including incurring additional indebtedness, issuing equity, paying dividends, repurchasing stock, making investments, selling assets, or engaging in mergers, acquisitions, or other strategic transactions. As of December 31, 2025, our trailing twelve-month total debt to Adjusted EBITDA ratio for the businesses subject to the credit facility was 3.12:1.00, and our ability to remain in compliance with applicable financial covenants will depend on future operating performance and cash flows.

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In addition, certain of our financing arrangements, including redeemable preferred unit financings at Ting Fiber, LLC, impose operational and financial milestones and restrictions that affect the timing and availability of additional funding. Ting has historically relied on proceeds from redeemable preferred units and term notes to fund operations and network expansion, and its ability to access additional financing depends on generating sufficient cash flow and meeting other requirements and conditions. There can be no assurance that these conditions will be achieved. There can be no assurance that these milestones will be achieved. In light of the Return Breach, it is unlikely that Ting will be able to secure additional financing on acceptable terms, or at all.

In any situation where we seek to obtain additional debt or equity financing, we may be unable to do so on favorable terms, or at all, when needed. Future financing may be costly, impose additional restrictions, or result in dilution to existing stockholders. If we are unable to generate sufficient cash flow from operations or obtain additional capital or alternative financing on acceptable terms, our business, financial condition, results of operations, and stockholder value could be materially and adversely affected.

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

We operate and conduct business in multiple countries, including Canada, and our international operations require significant management attention and financial resources. Our results of operations may be affected by risks associated with operating across different jurisdictions, including foreign currency exposure, changes in tax laws, and compliance with varying legal and regulatory requirements.

We are also subject to foreign currency exposure. A significant portion of our operating costs is denominated in Canadian dollars. While we use foreign currency hedging instruments to mitigate a portion of our exposure, these hedging arrangements may not fully offset the impact of unfavorable currency movements. In particular, a sharp appreciation of the Canadian dollar relative to the U.S. dollar, increases in the cost of renewing hedging instruments, or limitations on the availability or effectiveness of such hedges could increase our operating costs and adversely affect our results of operations.

Taxation risks: We are subject to income taxes and other taxes in multiple jurisdictions, and our effective tax rate and tax liabilities may be affected by changes in tax laws, regulations, treaties, or interpretations thereof, including the adoption of new U.S. or international tax legislation. In addition, increased scrutiny by tax authorities or changes in enforcement practices could result in additional tax liabilities, penalties, or interest, which could adversely affect our business, financial condition, or results of operations.

In addition, operating internationally exposes us to challenges related to managing geographically dispersed operations, complying with foreign laws and regulations (including data protection and privacy requirements), protecting intellectual property, competing with international and local competitors, accessing sufficiently qualified labor pools, and integrating acquisitions in foreign markets. Any of these factors could limit our ability to successfully execute our growth strategy and could have a material adverse effect on our business, financial condition, or results of operations.

Rising inflation and interest rates may adversely affect our businesses, financial condition, and operating results.

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

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

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

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

There is inherent risk, based on the complex relationships among the U.S. and the countries in which we conduct our business, that political, diplomatic, and national security factors can lead to global trade restrictions and changes in trade policies and export regulations that may adversely affect our business and operations. Our financial performance is directly and indirectly impacted by global and regional economic conditions, which in turn are influenced by financial market volatility, inflation, fluctuating interest rates, tariffs, sanctions, trade disputes, barriers and restrictions, credit availability, and overall consumer and business confidence. The current international trade and regulatory environment is subject to significant ongoing uncertainty. Trade disputes, tariffs, restrictions and other political tensions between the United States and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns. The ultimate impact of current or future tariffs and trade restrictions remains uncertain.

Economic uncertainty may result in reduced business investment, delayed spending decisions, or cost-cutting measures by customers, which could negatively impact demand for our domain services, internet infrastructure, and platform offerings. Additionally, weak economic conditions may lead to reduced public-sector spending and shifts in government policies that affect telecommunications infrastructure and internet governance.

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

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

RISKS RELATED TO REGULATORY AND LEGAL COMPLIANCE

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

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

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

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

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

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

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

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

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

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

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

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

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

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RISKS RELATED TO CAPITAL MARKETS

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

On February 12, 2026, our Board of Directors approved a stock repurchase program authorizing the Company to buy back up to $40 million of its common stock in the open market. The program commenced on February 13, 2026, and is expected to terminate on or before February 12, 2027.

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

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

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

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

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

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

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

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

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