Good morning, ladies and gentlemen. Welcome to Tucows' Fourth Quarter 2017 Conference Call. Earlier today, Tucows issued a news release reporting its financial results for the fourth quarter ended December 31, 2017. That news release, along with the company's 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 1 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 and detailed in the company's documents filed with the SEC, specifically the most recent reports on the Form 10-K and the 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, Dave Singh. A couple of things before I move on to our usual format. First, as many but not all of you on the call know, I had a double hip replacement very recently and in still -- and I'm still in the early stages of recovery. In fact, this call is my only formal act in the last 4 weeks, and I'll be continuing to convalesce for at least the next couple. Next, again, as many of you know, we were the target of a short seller attack this quarter. Of course, it took place shortly before my surgery was scheduled. We will respond to one substantive issue in that report when I discuss our Domains business shortly, but I would like to start by thanking many of you on the call and many of you not on the call. In both cases, the surgery and the short report, I was blown away by the level of support, we as a company and I as a person, received from you all. And I was reminded of something that I'd never forget but can never be reminded of too often. This business is not built to be hot or cold. It is predictable and maybe a little boring. From domains to mobile to Internet, we acquire subscribers at relatively low costs and get our return over years of subscription revenues. We invest the cash we generate in potential growth businesses. The growth in the share price has simply reflected the growth in earnings and will continue to do so over the long term. Any imaginable customer loss or litigation can be absorbed. Likewise, there is no employee, including me, that we can't afford…

Thanks, Elliot. Total revenue for the fourth quarter of 2017 grew 86% to a record $90.6 million from $48.8 million for the same period in 2016. The increase was mainly due to the acquisition of Enom in January 2017 and to a lesser extent, the contribution of the larger Ting Mobile subscriber base and growth in our incumbent Domains business. To frame the impact of Enom across our numbers, our total revenues for the year were $329 million, of which $111 million related to Enom since the day of acquisition. Cost of revenues before network costs increased 99% to $61.2 million from $30.7 million for the fourth quarter of 2016, with the increase driven by our growth in revenue as I just discussed. Gross profit before network costs increased 63% to $29.5 million from $18.1 million. As I've discussed on prior calls this year, our gross margin in 2017 was negatively impacted by the acquisition of the Enom business, the accounting of which required amortizing into revenue deferred revenue that was recorded at fair value at the acquisition. The impact of this accounting, which can be calculated by referencing our 8-K filing from April 3 lowered our overall gross profit as well as our disclosed adjusted EBITDA by roughly $0.8 million in the fourth quarter and a total of $7.8 million for all of 2017. And again, the fourth quarter included a one-off portfolio sale, which as Elliot discussed we'd make from time to time and which have a very high margin. As a percentage of revenue, gross margin before network costs for the fourth quarter was 33% compared with 37% for Q4 2016. I'll now review gross margin for each of our Domain Services and Network Access businesses. For Domain Services, gross margin for the fourth quarter increased 103%…

Thank you, Dave. Recovering from a double hip replacement naturally has me thinking more long term than I might otherwise, and that is probably just right for this year. For 2018, we are providing guidance of $54 million in cash EBITDA and CapEx in the $30 million range. This number compares to the $50 million for 2017, representing 8% EBITDA growth. There are a few comments I would like to make to help frame that estimate. First, this caps off a 6-year period since the launch of Ting Mobile that has seen adjusted EBITDA grow more than fivefold. That's a compounded annual growth rate of more than 40%. As we look to the year ahead, 2018 will be a bridge from the considerable gains in the last 5 years to the next phase of significant growth. 2018 will likely be the last full year that we will be investing in Ting Internet on an operating basis. That investment will shrink a bit, from around $5 million in 2017 to roughly $3.5 million in 2018. The inflection point for that number now looks to be some time in Q1 or Q2 of 2019. Those of you who have been listening for a while might note that, that's maybe 90, 120 days later than we had talked about for a while. That delay is completely attributable to the delay in launching construction in Centennial and Sandpoint. It is also worth noting that the range of tax changes will positively impact pre-CapEx free cash flow and make an already efficient cash model even more so. Next, as noted last quarter, Tucows is now deep in a period of making what I referred to as generational investments. These are primarily engineering work that need to be redone in 10 to 20-year increments, much of…

[Operator Instructions]. And our first question comes from the line of Thanos Moschopoulos with BMO.

This is Bill stepping in for Thanos. A quick question here, could you tell us a little more about the increase in portfolio revenues for the quarter?

Sure. So anybody and certainly, Thanos has been on the book for a long, long time, we'll know that we would often have larger one-off portfolio sales that would probably -- I want to say there wasn't another one in '17, I don't think there was one in '16, but it's not an irregular event, and in this case, it was part of a few different moving pieces in the portfolio business. We connected this to some of our Expiry Stream relationships, and it's something that depending on price, we may do again next year, we may not. What would I call it? It's irregular regular.

Okay, sounds good. What about roam revenues for the quarter? I'm not sure if I missed that or if you broke it out.

No, we didn't break it out. And the primary reason is -- first of all, it's a relatively small number. And second of all, we're going to take that kind of historical brand, and we're going to do some interesting things, we think, in prepay. So until we've kind of decided how we're going to present that first of all, to the world as a business offering and then second of all, to investors in terms of presenting the financials, we didn't think it made a lot of sense to break that out.

Got it. Okay, makes sense. What about -- there has been some talk about some of the major carriers in the U.S. potentially raising prices for unlimited plans. Is that going to affect Ting Mobile in any way that you can see?

I think that, that at the inverse of when they are aggressively lowering them that it will affect us. We think all of that does affect us around the margins, and we live in the margins. We live in the details, so we love to hear about potential price increases. I will note that we do expect some of the -- we expect probably some of that from the Big 4, but we don't -- we aren't necessarily counting on much of that. And I say that because we think that there will be increased competition from the MSOs this year, although it'll probably be at discounts to the big carriers as opposed to anything extremely aggressive. But importantly, the big carriers do continue to use their flanker brands quite aggressively. And so that kind of mitigates some of those potential increases.

Got you. All right. And one last one, just any thoughts on the effective tax rate going forward?

Yes, we're going to -- there's a lot of moving parts there, and like a lot of companies, we have global operations. And so that's going to settle down. I'd say, I think there's a lot of long-term planning. What feels comfortable is when you combine what's going on with the new tax rates, with our increasing CapEx, you're going to see that effective tax rate come down. Dave will probably kick me, but longer term, we expect that to get sub-20%, I'd say.

[Operator Instructions]. Our next question comes from the line of Ralph Garcea with Echelon.

Elliot, all the best for a speedy recovery. I wouldn't wish that on my worst enemies.

Well, it beats the chronic pain that precedes it, so it's you know.

That's true. Just a few questions if I may. On the GDPR, I mean what sort of expenses have you incurred to date to get set up for that? And then do they sort of tail off through the second half of the year? Or do you have to sort of maintain a certain development or moderating level from an expense side on making sure you comply to all the new regulations?

Sure. So I would -- first of all, it's more one-time than continuing. You kind of roll the changes into the platform, and then you operate them. Second, we've tried as much as possible to dovetail the work we're doing with the new platform work. So think of an example of that, for instance, you now have to come up with a new means of developing and managing a customer profile. Well, we were going to do some of that work for the new platform anyway, so we're trying to leverage as much of this GDPR work as much as possible. Third, I have a deep allergy to allocation, so I'm not having people track their time. We're not kind of being granular in measurement here. Where it really impacts us is in slowing down some of the other work we might be doing. So if I have to swag it, it's probably somewhere between a couple of $100,000 and certainly, sub-$400,000 or $500,000 in total cost to do this. Maybe it is more if I counted all the grain of sand on the beach, but at the end of the day, I think the real impact will be an extra 60 days before we can do some of the platform migrations around Enom that we would have otherwise liked or taking away from introducing some other feature or element that might have saved this something, so it's that kind of impact.

Okay. And then on the marketing spend that you sort of shut off in Q4, that $500,000 or so, are you going to gradually roll it out in programs through the rest of the year? Or how should we look at that from a marketing spend through 2018?

Sure. So two things there. First of all, a big chunk of that $500,000 was not the shut off but the experiments with the infomercial from the previous year, when we were doing year-over-year period comparison. We've already ramped it back up, and we were very careful to identify what level of experimentation would be statistically significant, and we did no more than that level of experimentation. So we've already ramped it back up, and you'll start to see things go to probably more historical level. You might even see us take it up a bit because I'll refer back to my remarks more explicitly, we did see that there are -- there is a little more benefit than we were attributing. And that gives Michael and his team the ability to maybe get more aggressive around a couple of opportunities. So we might take that up a bit, but I'm certainly not putting a number against that.

And I know you don't like giving guidance on subscribers, but on the mobile side, can you get to 200,000 subscribers over the next 3 to 5 years organically? Or just continue to steal sort of these guys that are moving to the family plans and some of the...

Yes, I'm comfortable saying -- I mean, I'll be disappointed if we don't get to 200,000 in 3 to 5 years. I think it's just -- it continues to be tough work. I think we continue to get a little bit better at it all the time. And you keep pounding into the line, and then you're going to break something. And so I continue to be positive there.

Okay. And then just trying to understand the irregularly regular business. When you set up these portfolios, I mean, are you actively shopping or there's someone that comes to you and says, "I want XYZ.com or whatever this basket of portfolios"?

Right, right. So when it's portfolios as opposed to individual names, then it does tend to be people looking to deploy capital. Domains are an asset class. They are an extremely obscure class with a small pool of investors, but it's an asset class that performs like any other. You have people who sort of pay attention to different elements of the asset class and who deploy capital for different reasons. In our case, we're very plugged in the industry. It's known where we are when somebody wants to deploy capital or somebody wants something else from us. There may be some portfolio transactions that go along with that. So I think that -- what would I describe it as, you close the seven-figure deals irregularly, but you discuss them constantly.

Okay. And then on seasonality, you're through sort of the year anniversary on Enom. How should we look at sort of Q1 over Q4 now as you sort of -- as an apples-to-apples comparison year-over-year on the quarter?

Yes, Q1, it's always been the case and it's just historically because we launched in Q1. If you go back and look over 10 years, 15 years, you'll see pretty consistently, Q1 ticks up, and then you kind of take a little bit of a step down in 2, 3, 4, and they tend to be relatively even. We could probably talk offline, and I can give you some good historical benchmarks for that.

Okay. And lastly, just on CapEx. You mentioned $30 million or so for this year. My guess is that's just on the rollout of your current basket of city, the 5 cities. If you look to 2019, I mean, should that -- should we expect that to stay $30 million, you're going to be adding 2 or 3 cities? You haven't really mentioned any new rollouts.

Yes. So I think there's two things -- well, first, let me deal with the CapEx question in particular. Yes, that is CapEx for fiber, that's really the only CapEx we're talking about. We have very low maintenance CapEx in the rest of the business, so I've never historically discussed it. And I think you'll remember I started last year talking about $30 million, learned hard lessons, and we spent under $11 million on fiber. I think this year's $30 million is going to be a lot more accurate than last year's $30 million, that I'm comfortable to say. The second point I want to make is we're learning about our ability to handle scope and scale. So moving as we've done currently from building in two markets, Charlottesville and Holly Springs, to now building actively in four markets, that is a pretty big pick-up. The pipeline is as full as ever. There are a lot of interesting opportunities. We're also starting to see the evolution of contiguous opportunity. So that might be a 200-home greenfield build outside the city limits of Charlottesville, where if you're a builder in Charlottesville, you're now actively courting us to make sure that we're wiring up your new homes for Ting service, and you'll see things like that. And of course, you start to get interest in some of the contiguous areas of other places that we are, so we're starting to see some of those opportunities and there continues to be lots in the pipeline. I know we haven't announced anything new, but what I'm very comfortable saying is we have no shortage of opportunity.

And our next question comes from the line of Patrick Retzer with Retzer Capital.

Elliot, best wishes on your continued recovery.

Thanks, Pat.

You guys have done a wonderful job of continuing to grow that mobile business in a relatively flat mature market. What about your strategy or philosophy do you attribute that to?

I think that what we've -- I'm going to put it best like this, we're decidedly simple. Our pricing is clear. There is no confusion. There is an excellent customer experience, and I think that, that is understood, appreciated and wins with an important segment of the market. Somebody told me a great story the other day, somebody who knows us and would be predisposed to using Ting, but they were tempted by the amazing unlimited offer of a competitor that looked like it was going to be just a little bit more than we charged but was unlimited, so they didn't have to worry about it. And then they described to me the experience of getting on the phone and -- with this large carrier, getting on the phone with us. And in the first case, they kept going through additional charge after additional -- is that going to be it? Is that all I'm going to see on my bill? Well, there's this, what's that, how will this be, and it's just thing after thing after thing. And they described beautifully the experience, the emotional experience of getting off of those two phone calls. And I think, Pat, that's why we have, by far, the highest level of customer satisfaction, and therefore, incredibly high kind of word-of-mouth referral. I do wish we were as good at communicating that message as we are at delivering that at a service level. It's tough. I think we all live in a world today, where we see form meeting substance more than it used to. We're substance, and so that's just hard work.

Okay. So on the fiber side, you're actively building in 4 markets, which is a new high level of activity, and it sounds like in 2018, we shouldn't be surprised if maybe you'll announce 1 or 2 or 3 new markets as well as build out from current markets into surrounding communities?

I think that's right. I think you're seeing -- the way that I'm really encouraging people to think about this is not through the lens of number of cities but through the lens of serviceable addresses. So you heard me take that number from 16,000 to 40,000. If we go from 16,000 to 40,000 this year, we've done our job. We add 24,000, then next year, we add a larger number than that. The next year, we add a larger number than that. And we keep hitting our take rate goals, the rest takes care of itself. It's a beautiful machine once you get it rolling.

Okay. And you reiterated the take rates you expect, the cost per serviceable address and the gross profit per customer, right?

That's right. And we'll constantly be updating on all of those. I really want to stress that we feel that we're -- we know about the 20% now, and we're learning about the 50%, and we continue to kind of have that be our view.

Okay. And then the new tax law, other than lower corporate rates, are there any other substantial benefits to Tucows? Can you maybe write off your fiber installation costs or anything like that?

Yes. So just think about it as the fiber CapEx more generally because sort of what becomes CapEx and what becomes OpEx are complicated in fiber. But we now are able to write off 100% of our fiber CapEx and obviously, for us who is taking that number up, that's pretty attractive. So in fact, sort of longer term, that CapEx issue may have as much or more of an impact than the rates.

Right. And then you talked about an inflection point you're going to hit in about a year, and I haven't finished my first cup of coffee yet. So I'm wondering if you'd mind going over that once more?

Sure, much like those of us -- and I know this is true for you, Pat, who have been in this story for a long time, who have been investors for a long time, will remember there was an inflection point with Ting Mobile, when we went from investing in that business to that business contributing. And when that happens, it's just the rest of the business moves from headwind to tailwind, and that starts to happen for the Internet business, kind of through the end of '18 and into '19. We've talked about that for a while, and it's one of those things -- look, I've been doing this a long time, people really do look at what is the number you delivered as opposed to what are they expecting going forward, but it's much more of a recognition when they actually see that number than when you talk about this coming. But that inflection point is important because once the Internet business starts to contribute, then it contributes and just ramps from there.

So in about a year, you think the fiber business will be net cash flow positive over and above CapEx?

It's not over and above all expenses, that's now at a city level. So remember, I talked about those different levels of expense, but that business is then -- it's starting to contribute at that point. And again, I did -- I've talked about that for a while as being kind of toward it will be Q4 '18, Q1 '19. That's probably moved 90 days or so because of the Centennial and Sandpoint delays in construction that we talked about through '17. And remember, those were really just delays in getting started, not construction delays. We're very happy once we put shovel in dirt, stuff rolls. So that's really where we kind of see that and what it means.

There are no further questions at this time. I'll turn the call back over to you.

Thank you, operator, and we look forward to hearing from you all again -- speaking with you all again next quarter. And again, I do appreciate your indulgence around questions over the next couple of weeks. Thank you.

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