Tucows saw softer demand for expired domains in Q4

Revenue from expired domains dropped last quarter.

Tucows (NASDAQ: TCX) released Q4 2022 earnings last week and included some data about selling expired domains.

The company’s earnings reports are typically dull from a domain name perspective. Tucows Domains is a nice, consistent cash cow that doesn’t move dramatically from quarter to quarter.

In Q4 2022, Tucows Domains generated $60.3 million of revenue, down slightly from $61.4 million in the same quarter of 2021.

Inside Tucows Domains, the Value Added Services line took the biggest hit, dropping nearly $1 million with an 18% reduction in gross margin. Inside that line item is an interesting tidbit.

In a pre-recorded investor call, Tucows Domains CEO Dave Woroch stated:

Within the Wholesale channel, Domain Services’ gross margin was down 9% from the same period last year, while Value-Added Services’ gross margin was down 18%, due to reduced demand in the after-market for domain sales.

Tucows used to own a portfolio of domain names that it sold in the aftermarket. It sold what was left of its actively managed portfolio in 2019. It still holds a portfolio of surname domain names that it uses for its RealNames email service, but it rarely sells those domains.

So what is the aftermarket for Tucows? Well, it generates a nice cash flow from expired domain auctions. It auctions most of its expired inventory through GoDaddy auctions.

I reached out to Tucows to confirm that it saw a drop in revenue from expired domains in Q4, and the company confirmed this was what Woroch was referring to. The company has previously credited a strong expired domain market for an increase in revenue in the Value Added Services line item.

It would seem that the poor economic finish to the year might have made a dent in expired domain auction prices. But I imagine it didn’t seem like that to domain investors trying to win auctions.

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