Good afternoon, ladies and gentlemen. Welcome to Tucows First Quarter 2017 Conference Call. Earlier today, Tucows issued a news release reporting its financial results for the first 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 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. Let us start today by noting that for the first time, we will have Dave Singh as our Chief Financial Officer. And I want to take the opportunity in this forum to thank Mike Cooperman for his 18 years of long service. Mike is still with us and I know that you investors will join me in thanking him. And let's all be gentle with Dave. Thanks. For our call today, I'll begin with an overview of the financial operational highlights for the first quarter. Dave 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. This will be the first quarter that includes the Enom business in our results. I will pull out or highlight those results where it is helpful. The first quarter saw strong results in all business units. Revenue for Q1 grew 56% (sic) [55%] year-over-year to $69.6 million. Without Enom, revenue grew 11%, driven by organic growth in Ting Mobile and strong organic growth in OpenSRS, which is not something I've opened with in a long time. Net income for the first quarter of 2017 decreased to $2.4 million or $0.23 a share from $4.4 million or $0.42 per share for the first quarter of 2016. Adjusted EBITDA for the first quarter of 2017 decreased to $6.2 million from $7.3 million for the first quarter of 2016. When I spoke with you after the Enom announcement, and again for the Q4 call, I noted that the accounting for both Enom and RingPlus would make Q1 tough to read. I noted that in relation to the Enom acquisition, there would be a deferred revenue impact of roughly $8 million in 2017. We…

Thanks, Elliot. As Elliot discussed, Q1 saw our financial performance achieve strong revenue growth alongside an overall solid financial performance. In looking at our results for the quarter, I would remind you that Enom's operations have only contributed to our results since January 20, 2017. Second quarter will be the first time our results reflect the full quarter of contribution from Enom. Revenue grew at 56% to $69.6 million, from $44.7 million for the first quarter of last year, driven by the acquisition of Enom, the larger Ting Mobile subscriber base and the incremental contribution of the Melbourne IT international wholesale domain reseller channel, which we acquired in the second quarter of last year. Cost of revenues, before network costs, increased 70% to $48.9 million from $28.7 million for Q1 of last year, driven primarily from the revenue drivers noted above. And this resulted in an increase in gross margin before network costs of 27% to $20.3 million from $15.9 million. I would note for you that as a percentage of revenue gross margin was impacted by the Enom acquisition and contracted to 29% from 36%. Please remember that, as Elliot mentioned in his comments, that domain gross margins this year will be negatively impacted by our amortizing into revenue -- deferred revenue that was recorded at fair value at the acquisition. The impact of this accounting, which can be cap rated by referencing our 8-K filing from April 3, will lower our overall disclosed adjusted EBITDA and gross margin by approximately 10% or $8 million. The majority of this impact will be reflected in our 2017 results. I would now like to give you bit more color on the gross margin drivers. Starting with Domain Services, for the first quarter gross margins increased 47% to $11.6 million from $7.9…

Thanks, Dave. 2017 has started off strongly. While there is a lot of accounting noise this quarter, and I expect to spend much of my time in the next 90 days explaining it to our investors, the financial results were strong. And most importantly, our businesses are executing well. The Enom integration has gone very well this quarter, with the heaviest lifting on the operational integration and on converging their data behind us; with pleasant surprises on the people side and most importantly, with the business itself comfortably meeting expectations and holding some interesting opportunities that we had not counted on. In Ting Mobile, we've continued the trends of increasing core net adds with continued improvement in both gross adds and churn. We have sorted through a number of tactics that will hopefully continue to bear fruit. We were also able to successfully digest the RingPlus customer base and have it perform roughly in line with what we hoped for. And after 5 years, we are now one of the very few MVNOs to have a direct relationship with Apple to sell the iPhone, a real tribute to how you're seen in the market. With the OpenSRS business, we had our strongest quarter for organic growth in the last number of years. While we are not counting on this continuing at quite this pace, it is nice to be able to talk about this business, one that we have a long industry in and take great pride in and see strong organic growth. With all of this extra work and burden, and with a number of extra costs, we are able to reiterate our guidance of $42 million, which is the $50 million, less $8 million of the impact from deferred revenue, that I've discussed on previous calls. And with that, I will open the call to questions. Operator?

[Operator Instructions] Your first question comes from the line of Hubert Mak with Cormark Securities. Please go ahead. Your line is open.

The first question is really just on the accounting adjustment. So I just want to clarify, I guess there was an $8 million revenue adjustment for the accounting. So it basically would have been under, I guess, adjusted probably, so it would've been $8 million higher. So does that mean next year at the same time, from a GAAP purpose, it would be $8 million higher?

Maybe a cleaner way to think about it is that it's, that $8 million revaluation of deferred revenue balances washes out overwhelmingly. Kind of 90-something-percent of it washes out in a year, so you don't see that impact going forward. In other words, the growth in 2018 will be as if that never happened.

Okay. And then on the adjusted EBITDA, I may have gotten the numbers mixed up because in the press release you talked about $1.4 million in the quarter related to accounting adjustment, and then I think I heard on the conference call here, just, you talk about $4.8 million. So can you just kind of clarify, how I would look at the adjusted EBITDA, compared to the $15 million that you have talked about?

Yes. So first -- well, let me start by saying Hubert, and then I'll go into my explanation. I want to note that I dropped a video in editing, I probably try and get it up over the next couple days. So there will be something that you and investors will be able to go and look at, that hopefully provides a more detailed explanation. Next, to your specific question, the one -- the total impact of deferred revenue, not on adjusted EBITDA, but the total impact of deferred revenue sort of on the balance sheet, is $4.8 million. Now $1.4 million of that comes from purchase accounting, which the SEC allows us to connect to adjusted EBITDA. The other $3.4 million is a resetting of the deferred revenue balances, which as of May of 2016, the SEC does not like, related to adjusted EBITDA. So you'll see us talk about those numbers differently. So of the $8 million that comes from the changes in deferred revenue balances due to accounting policies in relation to the transaction, $1.4 million of that we -- it's okay for us to connect to adjusted EBITDA and $6.6 million of that, we should not connect to adjusted EBITDA. So that totals to $8 million and that's kind of the $50 million going to $42 million. I won't even ask you if that made sense, because I doubt it did. I'll ask you to maybe digest it, listen to me say it again on the transcript or on the recording and watch the video. And I apologize for this being so complicated. Believe me, it's not my choice.

Okay, that's fair enough. And then just on the mobile side. I just want to also clarify, the number you'd put on -- so in terms of net adds, that -- is that excluding the RingPlus potential migration? Or does that just -- specifically on the Ting Mobile side?

So the 5,500 net is the number you'd compare to last quarter's 4,000 and change and then the -- I think it was 4,000 something, 4,000 something, 3,000 something. So that 5,500 is kind of the organic. The RingPlus is that combined number we gave. And I do want to reiterate, that there is a chunk -- if you compare that to sort of the 5,000 to 7,000 we'd hoped for, you'd compared the still -- whatever it is -- 13,000 and change that are around. We do expect there to be significantly more churn, and we're seeing that in the first few weeks as that continues to burn down. We do expect to see more churn. So that will impact the Q2 numbers as well. And we're going to continue to make it nice and easy to see, here's what's organic and here what's RingPlus.

Okay, so last quarter, I think I heard that the potential migration is 80,000, if I'm correct. And I think in the press release you talked about 20,000 moved over. So there's 60,000 that still hasn't moved over at this point?

No. We were told by the parties that there were 80,000 accounts. It turned out that probably something like 35,000 of them were dormant or were people moving things from one plan to another or just were irrelevant. So then, when Sprint did the migration to our platform, they moved 45,000 accounts onto our platform. Before we let them manage those accounts on our platform, they had to come in, agree to our terms of service, they either had to just immediately port out, go somewhere else and port out, or agree to our terms of service, give us a valid credit card and set up an account, which is kind of just, set it up with name, rank and serial number. So 45,000 were migrated to our platform, 22,000 and change went through that three step process.

Okay, and then as of today, you're saying that there's still 14,000 that's within your system.

That's right. And then we broke out again I'd have to go back to the script, how many have actually paid us something and how many are still working through their credit. Off the top of my head, I want to say that's like 88 and yes. So I mean you can jump in, Michael.

Yes, about 9,000, let's say, have already paid a little something on their credit card and 5,000 are still enjoying credits.

Okay, which is why you're suggesting that sort of the 5,000 to 7,000 is where you think that..

It's 8,500, 9,000 have paid something, we'd love, we could technically call them customers, at that point, they've paid something. But when we think about that 5,000 to 7,000, we think about that as typical Ting customer. So we're hopeful that, that's what the numbers look like.

Okay, and then in terms of the sales strategy, it sounds like some things have worked here in the quarter. Like, how do I think about any additional changes in strategy? Like as far as I can remember, you talked about infomercials, that being the key one, and I think that was relaunched I believe in the quarter. Can you sort of talk about how that is working out here and then, post quarter, and any additional changes potentially on the sales strategy?

Sure. So again, I would refer to just to use the words a little bit differently, I would say that the infomercial is a larger strategy as opposed to a key strategy, because it's all important. But we call out those larger ones, because we're spending more money on them and we want to let you follow along more easily. So there's no change in strategy. With the infomercial, we did a second round of testing. There was plenty we liked, and plenty we could see that we could still work on. So it's not there yet, It may not get there. It's not there yet, but there's still plenty of encouraging signs in there. And so we're going to go to the next round of testing. And I'll let you know exactly when that's going to be, either on the next call I'll tell you how that went, or I'll let you know when it's going to be. And then, and I would note there was one other relatively speaking larger effort, which was something of a mixed media effort geared toward seniors, and that really didn't bear fruit. But it's the kind of, sort of bets, we're trying to make. And then, we're always talking about on the call, where we did see some reasonable traction, is in a bunch of the little things. So think about this as just doing a bunch of little things, a little bit better. I've talked a couple times on the call about sort of rebuilding some folks on the people side in marketing. And we're just seeing some of that take hold. So I don't think it's anything complicated, I just think it's a little more and a little better people doing a little more and a little better.

Okay, and then just on the iPhone, any preliminary thoughts in terms of how that might that impact your subscriber growth here going forward?

It's tough to tell, because,- so, anytime you make things easier, that should have a bit of an impact. But it's tough to tell how much of a burden going to the Apple Store was instead of buying from us on the website. I'm somebody who uses an iPhone with a Ting SIM in the U.S. and I really dislike not having visual voice mail. So it will be nice to have that now. I'm looking forward to that carrier pack dropping. Should that impact? Yes, I think that should have a little impact. And then we'll see. There's a bunch of those little things in there, like the financing alternative, we'll see, we rolled out some financing alternatives that didn't really have much impact. Maybe with the iPhone, in particular, it will.

Okay, and then just a couple other quick questions here. Just on the network expense, I noticed it looks like it's doubled, Is that really just coming from Enom, additional Enom expenses?

Yes. On the network side, that's right. And I should note, I do want to call out, that is a bit [outsized]. That is one of the areas where we've noted that there was real room for efficiency. So as we move forward on the platform integration project, that's a place where you will see a pretty nice savings realized. But again, that savings in particular, you're probably talking 8 quarters out.

Okay, and then on the CapEx, it came in around $3.5 million for the quarter.

Yes.

So are you guys still thinking about $30 million to $35 million in terms of CapEx?

Yes, I, so I'd say 2 things, Good catch. I didn't call that out and I didn't update it. The primary reason, Hubert, is, we've been so inundated on the data side this quarter that, that work just couldn't get done. So I'm pretty comfortable saying, it'll be less than $30 million, $35 million, and the primary reason is because governments, municipal governments are just a little slower than we might expect. We have to build up our expertise at estimating their timelines. And I think we kind of had a little bit of happy years maybe in a couple cases and that'll slow down the spending. But I'm going to give you some more detail on that next quarter.

Your next question comes from the line of Patrick Retzer with Retzer Capital. Please go ahead. Your line is open.

So you reiterated the guidance for $42 million in EBITDA, that's after the $8 million reduction by the noncash acquisition-related expenses. The adjusted EBITDA, after that adjustment this quarter, was $6.2 million. Right?

Yes.

So you're essentially saying you'll have $35.8 million of adjusted EBITDA over the next 3 quarters?

Your math is impeccable, Pat, as always. Yes. Now, while that might seem like a ramp that's an aggressive ramp, I will note for you that the significant majority, $4.8 million of $8 million of the impact from deferred revenue was in the first quarter. So you not only have sort of the business growing underneath, as the rest of the year plays out, you also have succeedingly smaller impacts from the deferred revenue. And those impacts in total in the next three quarters are still only about two thirds of what the impact is in this first quarter. The other thing is, I don't -- I want to be clear on the language. This is -- the $8 million is impact on the deferred revenue balances on the balance sheet, It is noncash, but it's not an expense per se in the same way. When you use the phrase, transaction expense, I didn't want anybody to get in their heads that it was deal costs or anything along those lines.

Okay. And I believe in the previous quarter's conference call, you said you expected to perhaps, announce two to three new fiber markets this year. Do you still think that'll happen?

I'm going to say -- you say, do I think that'll happen? If I had to make a best guess, I think two to three would be about right. But again, I'll stress, we've got lots of work to do, it's what we have on our plate. And I'm quite fine if we don't announce anything. And there's lots of action out there, and so it could even be 3, 4, 5.

Okay. With Google backing away from new fiber markets are -- do you find Ting is in a better position when you talk to municipalities about using an already-existing backbone, if it exists, or permitting, things like that?

I think that will play out over time. There are certainly -- what would I say -- markets that had, had some conversation with Google who have been in contact with us. But at the end of the day, it's such a big market, and Google had such big halo, that I don't know that, that will necessarily have a material impact. It's not, in any way, like Boy, we're pleased that Google Fiber is limited now to the 11 markets they're in and not expanding further. We really believe that in the case of fiber to the home, a high tide rises all boats and we would love to see more players in the space, not less.

Okay. So near existing markets that you're in now, specifically, Holly Springs, there's been chatter that perhaps Ting fiber will expand out to neighboring communities, which I would think would be a great way to get incremental high gross margin growth around each of your markets. Do you anticipate that happening?

I don't know where you hear those rumors, Pat. What I would say is, I think with any fiber build, there tends to be some fiber envy in contiguous areas. And I'd be surprised if in general, when we're in a fiber footprint, we wouldn't be expanding in some direction outside of it, as we have completed the build in that market.

That would be really efficient growth, wouldn't it? Versus coming in cold?

It would be. You would get -- so where the efficiency would come from there would be in leveraging the -- really two things, the staff that are on the ground in that city and some of the brand awareness and just sort of word-of-mouth that you'll build up and reputation from being already in the area.

Okay. And then in terms of where you plan to be with regard to Holly Springs and Charlottesville by the end of this year, will you have fiber passing most of the relevant addresses by then?

Well, I think that in this quarter, frankly, relatively speaking, for probably the first time, the most time and the most in the last six quarters, there was so much going on outside of the fiber business that I didn't update it around a bunch of those details. And I do plan on spending more time, probably significantly more time on fiber next quarter. So I'll update on that and a bunch of other things.

You're next question comes from the line of Ralph Garcia with Echelon Wealth Partners. Please go ahead. Your line is open.

Just some quick ones here. Just to clarify something you said earlier on the Enom side; did you say it would take eight quarters to get their margins to where your domain business is?

No, it will take 8 quarters to get from -- to get the extra $5 million or so, in cost synergies that we expect. So that will strictly be about building the new platform, building a new platform, and migrating their existing book of business onto it and thereby reducing a bunch of costs. Most of those costs will come from data center footprints and commercial software licenses that we'll avoid.

So on the margin side, I mean, you should get to similar margins hopefully within the next two or three quarters?

So first of all, we'll be learning. The businesses had different approaches to data and so we're rationalizing some of that stuff. But we generally think of their businesses on the wholesale side, their business as being slightly lower margin, slightly lower renewal rate, and kind of a longer-tail profile customer.

Okay. And then just on the OpenSRS side, I mean what -- was there anything in particularly that drove the growth this quarter? And do you see that continuing sort of through the rest of this year?

So it was pleasantly surprising, the growth there, I think it exceeded even some of the folks working on it who were quite optimistic. I think it came generally from some of the larger customers, who were just engaging in successful activities. It wasn't any one customer. But that growth, the outsized portion of that growth, was concentrated in between five and 10 customers and there's enough there that I'm hopeful, so I'm not going to quite take up my expectations on that business. But I'll certainly be pushing it a little more. And we'll see if some of those people can keep it up.

Okay. And then if we use that, go on to, move into the Ting Internet side, if we use that 20% penetration in year 1, are you still comfortable with that and sort of modeling 17,000 subs or so, by the end of this calendar year?

No, what you've done there is you've applied 20% to the 85,000. The 85,000 is a complete footprint build for the 5 cities that we've have announced. We haven't even put a shovel in the ground in Centennial and Sandpoint. We won't be, we'll, I'll be updating in some detail across the other 3 markets. But that's not, those are different things. And again, I want to reiterate just for people listening, less so for you, [Ralph], when I put out that 85,000 number, it was to help people understand that even with the 5 markets that we've announced today, there was a lot of meat on the bone, so the purpose of putting out that number. I will, again, start to update a little bit more next quarter on the serviceable addresses, et cetera. And we continue to be comfortable with that 20% first year take rate number.

Okay, that's fair. And then just tying onto Pat's previous question. I mean, if you do move into contiguous cities and you add automation and some of the stuff you've learned on the trench digging side, can you get the cost down to $2,000 to $2,500 per home? Or what sort of leverage can you get off of some of those builds?

Yes, so you hear the grinding is really incremental. I think that one of the things, and I don't know this, but I wouldn't be surprised if one of the things that discouraged Google was the, you can't -- a home costs to build what it costs to build. There are some savings, but they are smaller. I think that, that's a number that we're consistently looking at. We have found some neat ways to save money on a per home basis. We find that experience is helping us. But -- and I do want to, when I talk about that $2,500 to $3,000, that's a lit home, so at 50%. So we think about $1,000 to $1,400, plus the install to build a home. You're not going to get that $1,000 down to $500. And if you're in a geography, the range there is because of the different costs in each geography. If you're in a geography where it's costing you $1,200 and you can get down into the lower $1,100s or into the high $1,000s, you're doing fantastic. So we're always looking for ways there, and we're finding those ways, but they are grinding for sure.

There are no further questions. I will turn the call back over to the presenters.

Thank you, operator. And thank you all for joining us. I look forward to speaking with you all again next quarter.

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