Good afternoon, ladies and gentlemen. Welcome to Tucows’ First Quarter 2018 Conference Call. Earlier today, Tucows issued a news release reporting its financial results for the first quarter ended March 31, 2018. 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 on 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 the risks and uncertainties that could cause 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 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. I’ll begin with an overview of the financial operational highlights for the first quarter of 2018. Dave will then provide a detailed review of our financial results, and I’ll return with some concluding comments, before opening the call up to questions. The first quarter was a solid start to 2018 with strong year-over-year growth across each of our key financial metrics. Revenue grew 38% to $96 million and net income increased 53% to $3.7 million or $0.35 a share. Adjusted EBITDA increased 64% to $10.4 million and cash flow from operations increased to $9.6 million. And I will note here for comparative purposes, Q1 of last year includes the contribution of the Enom acquisition from January 20 onward, so for 70 days, compared to 90 days this year. With respect to adjusted EBITDA, there is now only the typical impact of deferred revenue. Looking at each of our businesses, our Domains business continued its stronger performance. As I noted on our last call, with Enom now having been included in our results for essentially a full year, beginning this quarter, we are reporting the Domains business metrics on a combined basis. I will also note that at the beginning of the quarter, as discussed on our last call, we completed the bulk transfer of 2.7 million domain names, related to Namecheap and accelerated the recognition of $14.6 million in revenue associated with this name – with these names. And I further note, that was with very little gross margin. In our wholesale Domain’s channel, total registrations for the combined OpenSRS and our Enom businesses were $4.4 million. So right in line with performance over the last four quarters, taking into account…

Thanks, Elliot. Total revenue for the first quarter of 2018 grew 38% year-over-year to a record $95.8 million from $69.6 million for the same period last year. The increase was primarily the result of the domains business, which increased $19.9 million and benefiting from an additional 20 days of contribution from the Enom in Q1 of this year, compared to last year as well as the accelerated revenue recognition of $14.6 million related to a bulk transfer of nearly $2.7 million Namecheap domain names during the first quarter of 2018. I should note that as Elliot mentioned, that the accelerate revenue recognized also generated $14.5 million of accelerated cost of goods sold. In addition, the larger Ting Mobile subscriber base and contribution from the raw mobility asset acquisition in the third quarter of 2017, contributed to the overall revenue growth. Cost of revenues before network costs increased 39% to $73.2 million from $52.6 million for the first quarter of last year, with the increase driven by our growth in revenue. Gross profit before network costs increased 32% to $26.8 million from $20.3 million. As a percentage of revenue, gross margin before network costs for the first quarter was 28%, down slightly from 29% for Q1 of last year. The year-over-year gross margin percentage was positively impacted by the Q1 2017 required accounting treatment for deferred revenue under the Enom acquisition, which has now been almost fully realized. This positive year-over-year change was offset by the margin dilution associated with the bulk transfer, revenue and cost acceleration noted previously. I’ll now review gross margin for each of our Domain Services and Network Access businesses. For Domain Services, gross margin for the first quarter increased 35% to $15.4 million from a $11.4 million for Q1 2017. As a percentage of revenue, gross…

Thanks, Dave. I have the opportunity to be at Omaha last week for the Berkshire Hathaway AGM. One cannot walk away from this event without thinking about simplicity, cash on cash returns, betting on people, long-term thinking and most importantly, compounding. That feels very consistent with our view of 2018 as a bridge year, as a year where we’re engaged in generation of work to set us up for the next number of years. In both the Domains business and the mobile business, we are at pivot points. In mobile, after seven years of successfully running the same playbook, we’ve identified a clear need to reposition the service and set it up for the next phase of growth. Doing so, on top of a loyal, satisfied customer base makes that work easier. I will talk more about this next quarter. With the Domains business, I want to show a longer view. Since the launch of the Ting telecom businesses, we’ve been talking with investors about the Domains business using adjectives like consistent, reliable and low to moderate growth. We’ve positioned it as a business that provides a platform for these other lines of business to grow from, both in terms of capital and competency. And it may be time to return to some of our dreams. When we created the wholesale Domains business, as a dawn of the new millennium in January of 200, our dream was to create the greatest distribution channel on the Internet. In many respects, we were successful. We have loyal, long term channel partners all over the globe. They represented some of the most successful Internet services retailers in the world, through three generations of Internet services retail. From .com boom COS like Lycos and Yahoo, through first generation web hosts like the Endurance group,…

[Operator Instructions] Your first question comes from James Barnby with DKAM. Your line is open.

Hey there Elliot and Dave.

Hi, James.

Hi, James.

I’m just wondering if you could talk through the synergies from the Enom acquisition, where we are with that and is it kind of going according to your plan?

Yes. So first, all is moving nicely to plan. I’ll always – I have been caveating that for probably the last three quarters with GDPR is a bit of a black hole that certainly causes a bit of slowdown. We’ve tried to leverage as much of that as possible. So that shouldn’t be a big deal. We’re still pointing to seeing the dollars synergies, while the work goes on, sometime kind of middle of the next year or so. And where you really see the synergies is when we can take advantage of reducing the data center footprint getting away from some of the licensed software on the old Enom platform and then a couple of others kind of operating angles like that. So the work goes for a fairly long period of time before we start to see those dollars drop.

So in terms of kind of what you outlined for dollar synergies, have you realized about half of it, or are you halfway through? Or are you further along with that?

No, I’d say the vast majority of the $5 million is still to come.

Okay.

We’ve been talking really about that since the time of acquisition as – almost all of that will come as we are really able to kind of shut down the older platforms.

Right. So kind of end of this year, or early next year is when…

I kind of say middle of the next year. Again, you got the GDPR work, which we really have to see what happens when it gets in the market. I’ll remind everyone on the call starting May 25 you will not be able to look up the ownership of a domain name with nearly either the ease or details that you could before. So if you’re wondering about any get those lookups in.

Okay. Thank you. Just related to that as well, the sales and marketing was a little higher than I had projected. And I think Dave mentioned something, but I didn’t catch it, so I was wondering if you could just give any color on the increase in the sales and marketing expenses there?

You said quarter-over-quarter, now?

Yes, yes.

So what you might have seen quarter-over-quarter, if you remember back to last quarter, we went through that pullback in the Ting Mobile marketing, where we wanted to get a better read objectively on attributed versus unattributed and what the knock-on effects of the advertising was. So in the quarter-over-quarter comparisons, that will stick out a bit. If you compare that number sort up to previous quarters, you go over a longer timeframe, you should see a – I mean, there’s always going to be a little bit of movement around there depending on the programs and where and when we are running them. But you should see relative smoothness. Anything else Dave?

And just to reiterate that our sales and marketing number includes our customer service costs. Yes, so those are up year-over-year from Q1 of last year.

Right. And were there any costs related to the bulk transfer included in just kind of your general expenses?

Sure. There is some solid professional fees in there for sure.

Professional fees being technical.

Professional fees being legal.

Okay. Sorry, where is that captured under?

That’s under G&A.

G&A, okay, perfect.

I never like doing too much of that, it’s a onetime event. So we’re really pulling that out.

Okay. That’s helpful. With the Fuquay-Varina, we are happy to see that expansion and I imagine it must be a lot easier to expand to neighboring communities than starting a brand-new Ting town in a brand-new state. And I was just wondering what the likelihood of seeing this kind of dynamic occurring with other Ting towns.

So I think you’ll see some of it with just about every footprint, or if I was thinking of let’s say, three years from now, five years from now, I think you’ll see it more often than you won’t. Sandpoint, right from our initial discussions with Sandpoint we were talking about, we’re talking with some of the surrounding towns. In fact a lot of those dialogues were right at the beginning – were concurrent. With Charlottesville, we’ve already done some work sort of out side of city limits, if you’re in a place like that, now it’s a new housing development is going up. They are in touch with us, before we know about it. So I think you see that kind of – that spilling into contiguous areas. It will take different forms in different markets, but I think it will be more the rule than the exception.

Right. Okay. That’s helpful. Last question if I may…

Again, sometimes towns – a whole town like it is here, sometimes it just contiguous neighborhood, et cetera.

Got you. Okay, that’s helpful. Last question, just on the subscriber count for Ting Mobile. I kind of understood how you are redefining it. If I was defining it under the old way, would the Ting subscribers go from 172 down to 171? Like it was a net subtraction, correct?

Yes. We’re still – it was an equally poor quarter in that regard.

Right. Okay. I understand that. Okay. Well thank you very much and talk to you again soon.

That’s great. Thanks very much.

Your next question comes from the line of Patrick Retzer with Retzer Capital Management. Your line is open.

Good afternoon, gentlemen. Thanks for another good quarter.

Thank you.

So I believe it was in your 10-K, I saw that you own 38,000 surnames over in the Domain business?

Yes.

I mean, it seems to me that that’s likely pretty valuable hidden asset. Can you talk about what the value of that is? What those trade at and versus what it might be on the balance sheet?

So there’s a few things there. First and most importantly, those are – like with all the domain names, but the surnames as well, they relatively be liquid. So, I don’t like to make too big of a fuss about them. I will say that they have been consistently performing. We have a few go to realnames.com, we have a service where we offer personalized e-mail addresses. It’s been around for over a decade. The customers there love it, and it’s one of those things where I’ve never been able to figure out, why it doesn’t sort of blow off the shelves. Everybody that I know that gets a personal e-mail address, so pat@retzer.com or net, loved it. They get it for their families et cetera et cetera. One day, I’d love to see something big happened there. But I’m always reticent, to sort of – over the years, I’ve been reticent, I’ve been trying to point too much to kind of off balance sheet value, because I always rather under-promise and over-deliver. So having it sort of not and contributing every once in a while is a preferred by me, when we do solid surname, which is rare but occasional, that it tends to be solid mid five figuring up sale. And I think the last point I’d make, I mean, there’s been years of amortization coming out of it, but it’s probably that stuff is still on the balance sheet in the $12 million range or so, Dave? $11 million, I wasn’t bad, that’s not bad. I got pretty close there without having looked at that number for a long time. Thanks.

Okay. So there I’m going to bet there you’re balance sheet for about $300 per and they trade in a $40,000, $50,000, $60,000 range, occasionally?

I can’t argue with that Pat. But again, they trade very many of [Audio Dip].

So congratulations on the Fuquay-Varina sign up. Now looking at the map, there is about 10 or 12 other cities, municipalities within 5 or 10 miles of Holly Springs. And following up on the previous caller, should we be expecting that each of your current cities sort of become a locus from what you branch out into neighboring municipalities and just continue to grow?

Yes, I think that – I repeat parts of that answer. I mean, I do think that will be more of the ruling an exception. I do want to be clear that we are not opportunity constrained here. I would describe that, as we are building as effectively as we can. And I didn’t say as fast as we can, because we really do try and get that right as we are doing it. I can connect that back to my compounding comments. It takes a little bit longer to do it all well as fast as possible. So we really do try and only take on what we can handle organizationally and not overstretch ourselves. But the early opportunities are there and every time something like this happens, you can be sure that there is another town close by say one of us.

Okay. Well, great. So I mean, you have the ability to grow that business as fast as you determine it’s prudent? Is that correct?

I am not opportunity constrained. I mean, I don’t want to create – I think, there is a lot of moving parts to this business and being operationally constrained is a real constraint. I mean, it’s a real substantive constraint and I think that you’re going to see us consistently increasing the number of serviceable addresses that we deliver every quarter and every year. I would love that to be the case year-over-year for years. But whether that increase is from 16 to 40, whether it’s like $24,000 like it is this year. Does that go up next year, is it 30, is it 40, is it 50? That pace will be dictated as we go along. And I’m sure there will be some discontinuity in it too, in the sense that there will be an opportunity or two that’s outsized that might have a little bit of a step functions there. But generally speaking, it’s just keep increasing that number, just keep the crank turning.

Okay. And then I believe in the last call, you said the fiber business in and of itself would be cash flow positive in – from today, what’s less than a year from now, is there in?

It will start to be around that time. And again, I am going to give more visibility every quarter as we get closer and I guess, the only other caveat there is that’s on a sort of a direct expense or city level. That’s not considering there Toronto or the head office expenses. Kind of, I like to think about those businesses as the sum of a series of small businesses. Charlottesville is a fiber business and Holly Springs is a fiber business. Do we combine Fuquay-Varina and Holly Springs, been thinking about it, probably. But each of those is kind of their own business and they each of their own idiosyncrasies, their own operating characteristic, their own competitive landscapes et cetera.

So you talked about long-term. You’ve got two cash cow business in the fiber, which within a year is likely to turn into a cash generator. When you lean back in your chair and think about that, you’ve been masterful at allocating capital, where you think the opportunity is will be to utilize all that free cash flow?

I’m going to be – I don’t think we are going to be laying fiber for the foreseeable future. There is so much opportunity we think in this space, that’s – we are not going to tap out for while.

And then in the Domains business, just speculating a bit, you talked about those new requirements that everybody needs to get have the speed on. Do you think that will limit the competitive field? And perhaps give you some pricing power?

Well, I think that anytime you increase the regulatory complexity, you raise the barrier to entry. But it would be a mistake to ever consider that the domain name businesses is not a competitive business and one more you could ever sort of count on being able to just have pricing freedom. It’s an incredibly competitive business, even with our significantly large customer base, by far the largest in wholesale. Boy, there is still two, three, four other small competitors who are very, very confident in that we respect and wouldn’t consider taking any of the [Audio Dip] either competitively or at the customer level.

Well, thanks, Elliot. You can continue to be the master of the understatement and sorry, about the raptors, but thanks for another great quarter.

There are no further questions at this time. I’ll now turn the call back over to Mr. Noss.

Thank you, operator. Thanks to everyone listening. We look forward to speaking with you all next quarter.