Good afternoon, ladies and gentlemen. Welcome to Tucows Fourth Quarter 2016 Conference Call. Earlier today, Tucows issued a news release reporting its financial results for the fourth quarter; that news release and the financial statements are available on the Company's website at tucows.com, under the Investors heading. Please note that today's call is being broadcast live over the Internet and will be archived for replay, both by telephone and via the internet beginning approximately one hour following the completion of this call. Details on how to access the replays are available in today's news release. Before we begin, let me remind you that the matters the Company will be discussing include forward-looking statements and, as such, are subject to risks and uncertainties that could cause the actual results to differ materially. These risk factors are described in detail in the Company's documents filed with the SEC, specifically the most recent reports on the Form 10-K and Form 10-Q. The Company urges you to read its security filings for a full description of the risk factors applicable for its business. I would now like to turn the call over to Tucows President and Chief Executive Officer, Mr. Elliot Noss. Please go ahead Mr. Noss.

Thank you, operator. And thanks, everyone, for joining us today. With me is our Chief Financial Officer, Mike Cooperman. For our today I'll begin with an overview of the financial and operational highlights for the fourth quarter. Mike will then provide a detailed review of our financial results, and I'll return with some closing thoughts before we open things up for questions. The fourth quarter saw another strong financial performances capping off a record year for our Company. Revenue for Q4 grew 9% year-over-year to $48.8 million, and for the year grew 11%, just under $190 million driven by solid growth in both Ting Mobile and Domain Services. Net income for the quarter was $2.8 million or $0.27 a share, before one-time items that Mike will speak about later; it increased 12% year-on-year to $3.5 million or $0.33 a share. For the year, net income grew 41% to $16.1 million or $1.53 a share. And adjusted EBITDA grew 33% to $7.3 million and 44% to $30.1 million for the quarter and year respectively as a result of the significant operating leverage in our business. We also continue to generate strong cash flow from operations which was $9 million and $22 million for the quarter and year respectively. Given our recent acquisition, I'm going to break from our standard format a bit and begin a review of the various businesses with domains starting with our recent transaction. As a quick recap, on January 20, Tucows acquired Enom, a wholesale domain name registrar from the right side group for a purchase price of $83.5 million. The Enom business has approximately 14.5 million domains under management, 28,000 resellers and approximately $15 million in EBITDA which we hope to be able to expand to $20 million over the next 24 months as we realize…

Thanks, Elliot. As Elliot discussed at the outset, the fourth quarter was marked by strong financial results contributed to recruit [ph] performance of each of our key financial metrics for the full year 2016. Revenue grew 9% to $48.8 million from $44.7 million for Q4 of last year, driven by the expansion of the Ting Mobile subscriber base, the incremental contribution of Melbourne IT International wholesale domain reseller channel that we have acquired in April 2016 and growth in the Hover customer base. Costs of revenues before network costs increased 5% to $30.7 million from $29.2 million for Q4 of last year. This is resulted in an increase in gross margin before network cost of 17% to $18.1 million from $15.5 million. As a percentage of revenue gross margin before network costs expanded to 37% from 35%. Looking at gross margin via line of business, gross margin for network access increased by $1.4 million or 18% to $9.2 million from $7.8 million for Q4 of last year with the increase driven entirely by Ting Mobile. As a percentage of revenue, gross margin for network access increased to 49% from 46%. Gross margin for the main services for the fourth quarter increased $1.2 million or 16% to $8.9 million from $7.7 million for the corresponding period last year. As a percentage of revenue, gross margin for domain services expanded to 30% from 28%. Looking at each component of domain services individually, gross margin for the wholesale channel increased by $900,000 or 17% to $6.2 million from $5.3 million with the increase attributable to the incremental contribution from the acquisition of the international wholesale reseller channel for Melbourne IT and the continued benefit of the shift in sales mix to higher margin services. As a percentage of revenue, gross margin increased to…

Thanks Mike. First, a brief comment on our newest board member, Brad Burnham. On January 12 we announced that Brad Burnham was joining our Board of Directors. Brad is a Founding Partner at Union Square Ventures and I've been pursuing Brad to join our board for a number of years. He finally relented. There was a post on the Union Square Ventures blog about his reasons for joining the board, and if you're interested, I suggest you read them. In connection with him joining, Union Square Ventures purchased public stock of Tucows and by that I mean not from the company. They have not filed in relation to that investment nor are they required to. I'm excited to have Brad on the board and his interest in the open internet and the impact the fast reliable internet access can have on society makes him a great fit. With speaking with many of you, the topic you most like to discuss is capital allocation. For us the Enom acquisition represents the largest amount of capital we have ever deployed in one bite. I would like to talk about that and our expectations for 2017. First, 2017 and unfortunately I need to reiterate some accounting that Mike just talked about. Also something I talked about on the call following the transaction, but this deal will make the GAAP numbers for 2017 rather disconnected from the cash generated by the business. Under U.S. GAAP purchase accounting rules, were required to record all assets and liabilities at fair value as of the date of acquisition which in the case of deferred revenue will result in it being recorded a different value than its historical book value. Most notably, this will have the effect of reducing revenue and deferred revenue of the acquired business from…

[Operator Instructions] Your first question is from Hubert Mak from Cormark.

Firstly, I just want to clarify some of the numbers that you throw, in terms of guidance I heard $50 million is -- that's combined run rate for '17 and I guess the $8 million in EBITDA reduction is related to Enom to go from a pro forma to --

That's right, that would be that that non-cash deferred revenue catch up and then start to realize, that's right.

Okay, and included in that is $4 million to $5 million in operating -- I guess investment for the fixed internet?

That's right, correct.

Okay. And just related to that, are you guys able to provide what the protected amortization coming from the Enom?

It's -- Mike will correct me if I'm wrong, but you know it was a share purchase; so there was a little bit -- I don't know if you talked about -- there was a little bit of NOL benefit but -- well, we can't talk about that yet, so none of you heard that. That's going to -- it's probably going to have to wait Hubert for the final audit.

Okay, I understand. And just on the mobile, I heard that you toppled the RingPlus which you're gaining substantial base here and I think a lot of them were free as you mentioned on the call. So what is your strategy here in moving some of these to potentially panning and how do I think about that in terms of like what you're -- any idea of what's in conversion?

You know, so it's very difficult to tell what the end numbers will be like. They were certainly -- of that 80,000 customers, the significant majority -- most of those customers took advantage of the free offering. There were still a solid number of customers well into the five figures who were paying something every month. Now it's a little bit more of a pay as you go service and the plans were all over the place; so we're looking at the usage. But I would say two things; first, this allows us to leverage some of the things we do very well. So particularly there our ability to provide a quick solution to both RingPlus and Sprint in terms of platform, our ability to get the website where it will need to be to receive these people comfortably, our ability to deal with challenges on the communication and social side to sort of all of that customer experience stuff that we do so well. In addition, this will really, really put a lot of work on customer service. So we're going to be sorting through these customers. I think I'm comfortable saying I'm -- you know, it's very difficult to say what we will expect but if we get at the end of the day, you know, it's a year from now and there is an extra 5000, 6000, 7000 regular Ting customers will be quite happy with the approach.

Okay.

So you heard that as a hope, not a guidance.

Right, I understand. In terms of the infomercial, it sounds like that is a key driver here, all these key initiatives that you guys are focused on here and facing your commentary you suggested that we're seeing moderate sort of impact here like -- is this the key initiative or is there anything else that you guys are working on that could potentially reaccelerate the growth and in terms of self-adds [ph] or at least the net adds and how do I think about that here?

Well first, you know the first thing I'd say is, it's the first tick up in a number of quarters; so I want to look at that positive and see it as that. Second, there is a couple of reasons why I wanted to call out the infomercial in particular. First of all, it is -- it's kind of uniquely expensive with lot of things in this world you can test them very rigorously at $5,000, $10,000, $15,000 or $20,000. You know, the infomercial required a bit of a step up, I've talked about the spends there as being in the mid six figures to really fully tested. So you know, I wanted to call it out for spend purposes. And second, it's something that people can see -- you know, it's visual. I would not want a shareholder of ours to have trouble sleeping one night and the first they heard about the infomercial was having a pop up at 2:00 in the morning as they are watching TV, so I wanted to share all of it with you. It also is uniquely scalable, you know what -- I mentioned in the prepared remarks; television uniquely -- you're able to turn the dial and as you've heard me lament about our customer acquisition processes for years, you know, the CAC has always been fantastic but it wasn't inherently scalable. So you know, I think that for all of those reasons I've been calling out the infomercial particularly. But there are a number of other things we are playing around with and you know, Hubert, it could be a series of small wins, so we'll see, but we feel good.

Okay, great. And then on the fixed internet, aside, are the end-markets you guys are entering like it -- is there some sort of auto -- how many markets you might be -- new markets you're entering in this year? And also what is the CapEx expenditure for this year?

Yes, thank you. You know, I thought about -- as you can appreciate Hubert, this -- first of all, this this call just the prepared remarks were longer than they typically are by about a third and you know, I was cutting and hoping some of this stuff would come up on questions. You know, there I think you will expect to see CapEx in the $30 million, $35 million range. As you saw last year, we'll be updating that on a regular basis so that you can -- we'll be sharing it with you as we go along because this is construction, things happen. You know, we think we're going to be a little bit better predicting this year than last year but let's see, because this is still is a relatively new business for us. And in terms of number of markets, I think that we're very, very focused on the markets we've announced right now; there is -- as I said on the call, there is nothing imminent but I think you will still see a couple few markets this year and the exact number will really depend on two things; one, watching some cities come out of the other end of their process; and two, how well we do with running multiple builds and multiple installed teams and multiple marketing efforts across markets as we're now taking on for the first time; so we're going to scale up a bit there.

Okay, so related to that terms and your capacity in terms of -- on the fixed internet you are looking at currently [indiscernible] markets exactly. Like whatever current markets you have -- like is your capacity sort of 100% in terms of how you can roll out?

What would I say, I think every quarter two things happen we're at capacity and we expand capacity. This is a business that's going to be ramping up really for the next couple of few years. So there is really -- there is almost not a day in this business where we're not at capacity and that we're not working on expanding capacity at the same time. You know, if I took anything as points on a line whether it was people working on that business and head office, whether it was number of crew doing installs, number of crews during construction; all of those numbers would be up and to the right.

Okay. And I just want to clarify in terms of CapEx can you just repeat what that number was for either annually or quarterly, what was that number?

Sure. That was in 2017, I think we'll see something in the $30 million to $35 million range.

Okay, so that's quite -- that's up quite significantly here from '16 as Pegasus [ph] really in terms of construction done, right?

Hubert, can you repeat that?

So this $30 million to $35 million CapEx spending for the fixed internet?

That's right.

Yes, so that's a lot -- terrific increase from last year, right or from '16?

Yes, I think you're going to see -- you know, I think the part of that Hubert is that some of the Holly Springs construction which we thought through a little bit of a rosy lens might have been in Q3 and Q4 last year is actually going to be in Q1 and Q2 this year. So you could see like a chunk swing like that too.

Okay, I understand. I just wanted to clarify that. Okay, thanks a lot.

That's great, thanks.

The next question is from Patrick Retzer from Retzer Capital Management.

Good afternoon. I wanted to clarify the Enom acquisition; my numbers are you paid $83.5 million for the business and it's got annualized revenue of about $155 million, is that right?

I think that's about right. We are looking at -- so it's like do I go backwards or do I go forward, the three -- you know, I've got three quarters audited but that's not far, that's about right.

Okay. And then for the first full year you expect $15 million in EBITDA from that business and after all the synergies are achieved $20 million a year in EBITDA?

Yes, I probably should call that cash contribution because I'm -- you know, I'm not allocating with that but yes --

Okay, so you paid --

By those much -- by those limits.

Okay. So you paid about 4.2, 4.3 times ultimate cash contribution?

Yes, I kind of -- yes, so you heard me on the last call -- well, I don't know if you were on it but on the call right after the -- the announcement, I kind of look at -- I like to look at very simply the sub-90 delivering about 20, that kind of thing.

Okay. And by virtue of that transaction you're now the second largest domain name registrar in the world?

That's right. Well, you know it was always a little bit of back and forth around those positions but now it's very comfortably, you know us and number two behind GoDaddy with a pretty large gap back to number three.

Okay. And then either on Twitter or on your Web site, you posted a video of who new to the U.S. technology of blowing fiber which is faster my, more efficient and disturbs the surface of the property less?

Yes, that's right. It's something that our guys picked up on some of their travels in Asia. And you know, we were -- we worked with our contractor in the Holly Springs to practice with that and the thing that probably was most positive to come out of that is that really when -- you know, when we were on your street, getting your street ready for fiber you noticed much less than would have historically or traditionally been the case. So we had a very good response from the people of Holly Springs, just in terms of not upsetting them too much which often when people are laying conduit laying infrastructure, there tends to be a lot of issues and here there is not very much gap between -- we're doing the construction work and we'd love to have you as a customer. So we think that's pretty positive and we were pretty aggressive on social as well in dealing with anybody who did have a question or an issue.

Okay. But that doesn't lead the reduced share cost per install or [indiscernible]?

No, it absolutely does. Again that's a play -- as a variable we're very focused on, you won't see me moving my numbers that I provide on a regular basis for some period of time because I don't want to be doing that every quarter but -- but that absolutely impact -- you know, what used to take a number of human beings laying fiber in an open trench or a ditch is now done by machine in seconds. So there absolutely is a real cost savings to it.

Okay, great. And then with regard to new markets and 2017, I know the previous caller and you discussed this but I don't -- I mean do you have an estimate of either serviceable addresses or number of markets you will announce in 2017?

I don't because there is a real variability for it. Last year was the first year we were announcing multiple markets and I found that I don't know that it helped. So I think what you can look at -- you know, you can take the CapEx spend, you can divide it by the cost per bills that we put out which is think about that in the $1,200 to $1,500 range and you can get to the number of serviceable addresses we're projecting, then you can look at the markets that we're in and you can kind of lay them out of the map and you can fill in however many additional cities you want for the rest of the addresses.

Okay.

But you will see that we've got lots of meat on the bone, you know that $30 million, $35 million, we're just -- you know, we're not quite finishing the place as we are.

Great. So it is -- in terms of the markets, are they showing more or the same amount of interests in fiber or less interest, how would you characterize them?

I think the interest rates remains consistently strong. I do think that a lot of municipal processes are kind of waiting a little bit to see what happens with some of the infrastructure program or infrastructure tax plan. There is a lot of regulatory uncertainty right now, for some that's causing them to maybe try and accelerate, for others that maybe they are a little -- you know, sitting back a little more but the native interest is just as strong as it's ever been and continues to get stronger as people need for fast reliable Internet over fiber increases.

Okay. So you won't be wanted for lack of opportunity, I mean going soon?

No, that's not -- that's not a variable I'm worried about.

Okay. Well, keep up the good work guys, thanks.

[Operator Instructions] The next question is from Jeff Osher from Harvest Capital.

Thanks for taking my question. Just on the -- Elliott, as we look at the $8 million of purchase accounting EBITDA that kind of goes into that black hole, was that included in the $50 million? In other words, is it going to be 42 for GAAP purposes, 50 --

Yes, it's 42 for GAAP purposes. You know, they just change that approach as Mike has talked about endlessly, last year around deferred revenue. So you know, look that treatment in our business in particular where there is the right of refund on a domain name is a little bit harsh but that treatment with an acquisition combined with purchase accounting rule is especially harsh. So I just --

No, no, I just want to make sure -- no, no, I agree. I just wanted to make sure -- I wasn't sure if the 8 was included in the 50, so 42 per GAAP --

No, no, no, I like the clarification but I was more going to explaining why I -- you know, even kind of give you both numbers. But you know, we always do run the business for cash and so I was like you guys to be following in the same way we're playing.

It makes a lot of sense. And then the $30 million to $35 million, that's a CapEx; so when we reconcile -- if we think about the $30.6 million of organic EBITDA in '16 where you grew contribution EBITDA annually was up about $10 million plus, the implied contribution is less than $5 million and nominal dollars in '17; organic contribution, right, if we exclude the $15 million, give or take of Enom cash expected contribution; is any of that explanation due to the $30 million to $35 million of CapEx also being -- is there an OpEx load in that $30 million to $35 million or is that true capital expense -- is that apples to oranges?

No, that's CapEx.

Okay.

And really, you know, I just call out two things. I'd call out that we do have a little bit greater investment in the Internet business this year and 50 is such a round number. You know, 51 implies a precision that nobody in [indiscernible] should have.

Elliot, the $4 million -- well maybe helpful of investments in fixed Internet that you kind of outlined for 2017; what would be the equivalent for 2016?

That was -- I want to say high to mid-three, high-three but in 2016 -- so that number does include some of the peripheral businesses that we picked up in the BRI acquisition a few years back in Charlottesville. And some of those businesses we've really been paying a little bit less attention to, so some of that investment more so then will be the case in '17 comes from a bit of a decline in those businesses.

Got it, got it. And so should two more just quick ones, so it sounds like when we think about free cash for '17 and may be a bit of anomaly where free cash is -- you know, when we factor in the incremental interest expense from the line in tax effect, pre-tax, you know free cash flow, it will be down materially in 2017 but premised on the investments you're making, obviously there is a pretty defined return on the CapEx you've delineated previously but we should think about free cash being in the single digits in 2017?

Well, so I'd say two things. One, I assume you're talking about free cash post CapEx.

Yes, maybe my -- yes, that's right.

And so the second -- what's very important here is there is a real wild card around what tax is going to be like. So that's both in terms of our tax planning and what the tax treatment of infrastructure is going to be like. So I'm not even thinking about that number until I see kind of what comes out of the other end of some of the --

No, I think that's fair, that's fair. But if we apply a 37% tax rate give or take, then -- and again, I think you've explained why given the expected returns. Last one for me, the million dollars of Enom one-time expense, was that G&A?

Yes.

All of it? Okay, so that was a cash expense and the accrued liability jump; I assume that's just merit increases and bonuses and things like that?

Yes, that would be -- no, that's all in the million.

No, no, I'm sorry the accrued liability on the balance sheet was up $1 million or $2 million; you know, it's up $2.6 million sequentially?

Yes, I would -- yes, that is a bucket of things, certainly in the earlier parts of the year you start building accruals rather than them winding down towards the end of the year.

No, but I'm talking about sequentially, it was up $2.6 million so that wouldn't have factored in accruals that were expensed earlier in the year?

I want to take a look at it Jeff.

Okay, good enough, good enough. We can follow-up offline. Thank you guys for taking my questions and nice work.

Thank you very much.

The next question is from Hubert Mak from Cormark.

I just want to clarify -- on terms of the fixed Internet, are we still looking for breakeven here operationally for 2018? I think that was the initial target that you had said?

Yes, that's right. Well what I said more specifically was towards the end of 2018, so not necessarily in 2018. And that was -- if you remember Hubert, that was the way I kind of flagged it for the Ting Mobile business as well. You know, what I'm looking at there is less about what is the calendar year result and more -- what is -- you know, when does it move from costing money to generating money.

Right. So you're looking for an exit where you -- 2018 where you're going to have breakeven and it start contributing positive to -- positively on EBITDA line in next Q1 '19. I guess is that the -- that's the thinking, right?

It might be -- so again, you know I'm going to be -- late '18 is kind of what I'm thinking but I'm not going to be precise between late '18 and early '19.

Sure, I understand.

And as you know, as we get more visibility and get closer to it we'll keep honing you in on it.

Right. Okay, thank you.

The next question is from [indiscernible].

Hi Elliot, thank you for taking my questions. I'd like to circle back for a moment. I'd like to circle back on RingPlus if I could; just to identify -- if I'm understanding the facts correctly. I believe that RingPlus is having current clients automatically migrate to Ting to sign up unless they opt out. Is that correct or I am misunderstanding the process?

It's close. So I think there is three comments I want to make there. First, this impending closure -- the Sprint shutting them down; I want to think it came out Friday. Michael, is that right?

Friday, yes.

Friday, yes, so that came out Friday. So customers knew about this. We started kind of mobilizing Saturday, so -- but between Friday and the time we eventually do migrate that base, you know, there is people who are finding new suppliers. We certainly have had a number of ports in that are awaiting approval. So that's going on, so whatever -- from the 80,000 there is going to be some number that are going to move before we do anything; so that's kind of the first point. The second point is then that base will all kind of come over to us. So yes, that's correct, mitigated by the first point. And now the third point is -- but only the people who agree to our terms of service give us a valid credit card and sign up for Ting account; and you know, as you know that means really picking a username and a password and providing the address set around the credit card, right. Only people who take those positive steps will come over. Does that makes sense?

And I guess what I'm trying to understand is, if there is conservatism or if there is something I'm missing; 5,000, 8,000 converts out of a large base seems like a very low number, percentage-wise.

No, but remember surely the vast majority of those customers are taking advantage of their free service. So those are people for whom Ting was -- too many of whom Ting was too expensive at $23 a device. And when I say too expensive, I don't mean couldn't afford as much as didn't want to pay, right. So there is certainly some quality in there but the vast majority of those customers were on the free service not paying anything any month.

And then switching gears to Virginia, I noticed that Ting Internet has made a statement alongside Google and Netflix. I'm wondering what impact there may or may not be with Charlottesville in terms of regulatory dynamics?

You know, it's tough to -- I don't -- Charlottesville in particular, you know, I don't think there is going to be any impact on the ground in the city in terms of our relationship with the municipal government. I will also tell you that I believe at least what I was seeing trending was that some of those issues in Virginia were going to be fairly and effectively dealt with. So I think there might be a good news outcome in some of those efforts as well.

Yes, thank you very much.

And specifically, you know, we were -- I should note because I know this is inside baseball for a lot of people. We joined with others in objecting to legislation which would have limited cities and towns in the State of Virginia from trying to take steps to be more involved in their cities getting fiber.

Sure, thank you very much.

That was our last question. At this time I will turn the call back over to the presenters.

Thank you very much and we will look forward to speaking -- being with you all next quarter.

This concludes today's conference call. You may now disconnect.