The impact of registry deals will be more visible in profits than in revenue.
Tucows (NASDAQ: TCX) has published answers to analysts’ questions about its recent earnings. Some investors asked about the financial impact recent Tucows Registry wins, such as NIXI (.IN) and Radix, will have on the business.
Here’s what the company stated:
…Investors will primarily see the impact of these contracts as increased gross margin in our wholesale segment, supporting the ongoing growth trajectory of our overall Domains margin. This differs from our registrar business where there is a pass-through component of the registry cost that is captured in our revenue.
We expect the gross margin contribution from our registry contacts to start in the low millions per year. Importantly, the registry business, like the rest of our domains businesses, scales efficiently. As part of the NIXI agreement, we are establishing a local presence in India to meet regulatory and operational requirements. While we do not disclose the economics for competitive reasons, we can reiterate that the terms are consistent with what we typically see from large wholesale customers. In terms of timing of contribution, the TLDs from NIXI were integrated in late Q2, and the TLDs from Radix are scheduled for integration in late Q4.
The registry side of the business is indeed very different from the registrar side that Tucows investors are familiar with.
I’m not sure how much Tucows is charging its clients for registry services, but for an order of magnitude, we’re talking closer to $1 per domain than $10-$20 it gets on the registrar side.
However, on the registry side, once it covers its technical and administrative costs, it all falls to the bottom line. On the domain side, the majority of the revenue is paid to the registry that manages the domain. When it collects $11.50 for a .com domain from Enterprise-level Enom customers, it has to pay $10.26 of that to Verisign.
That’s what Tucows means when it says you’ll see a more significant impact on margin than on revenue.
Tucows also discussed how winning clients is key to offsetting attrition in the business:
It’s worth noting that Domains is a mature industry, where adding new large customers is a key part of offsetting attrition from the events we have referenced in our quarterly remarks. The NIXI and Radix contracts fit exactly into this strategy.
Looking ahead, the next round of new gTLDs–the first since 2014–will open for applications in 2026 and are expected to launch in 2027. With the NIXI and Radix wins now secured, Tucows Registry is in an exceptionally strong position to compete for—and win—additional registry business with these new opportunities.
Source: https://domainnamewire.com/
