Elliot Noss - President and Chief Executive Officer Michael Cooperman - Chief Financial Officer.

Hubert Mak - Cormark Securities Patrick Retzer - Retzer Capital.

Good afternoon ladies and gentlemen. Welcome to Tucows Fourth Quarter 2014 Conference Call. Earlier this afternoon, 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 Web site 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 that the Company will be discussing include forward-looking statements and as such are subject to 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 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, Michael Cooperman. As per our usual format, I’ll begin today’s call with an overview of the financial and operational highlights for the quarter. Mike will then review our financial results for the quarter in detail.

And I’ll return with some closing thoughts before opening the call to questions. The fourth quarter marked a solid finish to a strong year as we continue to benefit from the growing contribution of Ting Mobile alongside the consistent performance of our Domain Services business.

Consolidated revenue for the quarter grew 17% year-over-year to 38.8 million bringing the total for the year to just over 147.7 million up 14% and another record.

As I discussed last call, the growing contribution from Ting Mobile is having a significant impact on our gross margins which for the year expanded to 26% in 2004 from 21% in 2003 excluding our portfolio group.

Net earnings per share for the quarter has doubled year-over-year to $0.16 from $0.08 in Q4 last year taking our total for all of 2014 to $0.57 up from $0.40 in 2013. Finally, adjusted EBITDA came in slightly above our guidance at just over $15 million.

Ting Mobile finished the year strong with our best months ever for customer ads and perhaps more importantly a few exciting pieces of news to set us up for a promising 2015. First the ads, we added just over 11,000 accounts and 17,000 devices in Q4, 43% of those in December.

In 2014 we added 47,000 accounts and 73,000 devices, almost exactly doubling our totals to 94,000 active accounts and 147,000 active devices. Those net ads include churn that remains in the range 2% to 2.5% monthly.

We’ve been able to continue to grow gross ads and maintain the consistent churn rate allowing us to maintain net ads despite the impact of churn on a fast growing base. Now the news, first in late November just in time for the holiday season Consumer Reports announced the results of its annual survey of U.S. cell phone providers.

Ting was not only included for the first time but thanks to our customers, we received the highest overall rating in the history of the survey. It is a wonderful return on the effort we’ve invested in our customer experience and it has generated interest and trust that we simply could not buy with any amount of marketing dollars.

Second, we announced in December that we will soon be offering service on a GSM network in addition to the service we currently offer on the Sprint network. While this does give Ting customers a choice of two networks for the best possible coverage. It is even more significant for its impact on device portability and choice.

Until now, only about 10% of existing phones could come to Ting. When we launched the GSM service, over 80% of phones will be able to come to Ting for just $9 investment in Ting’s new SIM card.

For those wanting to bring a device of their own this just makes the total savings calculation that much more favorable, for those who wanting to buy a new device it greatly expands the options. Along with an announcement we made just today that Sprint has now enabled unlocked iPhone 6 and 6 Plus to come to Ting.

This means we will forevermore support the latest iPhones and any other new hero devices on both CDMA and GSM networks. Choosing Ting no longer means sacrificing on the latest greatest devices.

Finally we will be the only provider not including rumored ones that enables customers to have access to CDMA and GSM devices on one account sharing voice, data and text across both of those networks. The last piece of news was that Ting officially entered into the business of offering fixed Internet access via fiber to the home.

We did so initially with the announcement in December that we acquired a majority stake in Blue Ridge Internet, an independent Internet service provider in Charlottesville, Virginia.

We followed that up with an announcement in January that Westminster, Maryland a city that is building out its own fiber network had chosen Ting to be the network operator and the first service provider on that network. In both markets we’ll be offering upload and download speeds of up to a gigabit per second.

That’s what Charlottesville and Westminster on par with pioneering the U.S. cities like Chattanooga, Tennessee and Lafitte, Louisiana along with world leading cities like Seoul, Stockholm and Tokyo.

And in both markets we’ll be offering the same interfaces of support that have driven our extremely high level of customer satisfaction and our success in mobile. In Charlottesville we will build and own the fiber network ourselves.

In Westminster the city will build and own the fiber network and we will operate that network and offer the service including in home set up, interfaces, billing and ongoing support. The first approach obviously requires more significant investment and effort but then we own the network.

The second is quite an elegant to our current relationship with the mobile networks putting us in a simpler role of a front end partner. These first two initiatives will give us a great opportunity to evaluate each model building and owning a network and operating on someone else’s whether the publicly or privately owned.

And we’ll continue to consider opportunities in each kind. You’ve likely noticed that in our earnings release and on today’s call we’ve begun referring to the existing Ting MVNO business as Ting Mobile.

Going forward, Ting will be a brand that is shared across multiple services and you’re going to hear us refer to Ting Mobile, Ting Internet and when we’re talking down the road about our fixed -- at some point down the road of our Pay TV service that will be Ting TV.

So Ting Mobile welcomes to new siblings and looks forward to helping change the market that could use some changing. Again Ting Mobile finished the year with 94,000 active accounts and 147,000 active devices.

Customers spend about $35 a month on their phone bills, gross margins are still in the range of 45% to 50%, we spend under $100 to acquire a customer, we’re now adding about 18,000 new customers on a gross basis each quarter and continue to churn between 2% and 2.5% of our base each month.

As I stated at the outset our domains business continues to deliver steady performance. Broadly speaking, total revenue and margin for both Q4 and full year 2014 are essentially flat with contribution rising as we continue to effectively manage costs.

Hover, our retail service had another great year growing its customer base by 13% and its revenue by 25%. New gTLDs continue to steal share from the incumbent GiDs. We added 44 new strings to our domains offering in Q4.

OpenSRS our Wholesale service saw 1,700 resellers register at least one new gTLD by the end of Q4, up from 1,375 at the end of Q3 and 1,000 at the end of Q2.

Hover still earns much more than its fair share of new gTLD registrations, having successfully positioned itself, as a source for these new extensions and effectively featured them in its search results. For the entire industry, registrations of new gTLDs increased from 11% of total ComNet and new gTLD registrations in Q3 to 13% in Q4.

On OpenSRS that metric remained flat at 6% in both Q3 and Q4. On Hover, registrations of new gTLDs rose from 21% of total ComNet and new gTLD registrations in Q3 to 24% in Q4. We remind you that some of the most easily anticipated new gTLDs will launch in the next two quarters.

We look forward to seeing how those affects the domain name industry and our businesses in particular. I would now like to turn the call over to Mike to review our financial results for the quarter in greater detail.

Mike?.

Thanks Elliot. Revenue for the fourth quarter grew 17% to 38.8 million from 33.1 million for the same period last year and took the revenue for the year to a record 147.7 million up 14% from 129.9 million for 2013. Cost of revenues before network costs were 26.8 million, up 3.2 million or 14% from 23.6 million.

Gross margin before network costs increased by 2.4 million or 26% to 12 million from 9.5 million and as a percentage of net revenue increased to 31% from 29 % compared to the fourth quarter of last year.

Looking at gross margin performance of each of our two major components of our business, Domain Services gross margin declined marginally to 7.6 million a decrease of 210% or 3% on Q4 of last year.

The small decrease in Domain Services gross margin was largely due to the factors we've discussed on prior calls namely lower sales of domains, a much general softness in the secondary domain name market, and the impact of loss of one large email platform customers add on our email gross margin.

As percentage of revenue, gross margin for Wholesale Services was 22% down slightly from 23% from Q4 of the prior year. Network Access which in Q4 consisted entirely of the contribution of Ting Mobile increased by 2.7 million or 151% to 4.4 million reflecting the significant growth in the Ting Mobile customer base relative to Q4 of last year.

Gross margin for Ting Mobile as a percentage of revenue was 40% compared with 31% for Q4 of last year. The increase is largely due to the much larger Ting Mobile customer base and results largely -- from the much large contribution services related to that from devices which as we've discussed in previous quarters are service engineered costs.

Breaking the main services down into these various revenue streams gross margin for the wholesale components of Domain Services decreased by 211,000 or 4% to 5.3 million and the portfolio services component decreased by 280,000 or 29% to 676,000 when compared to last year for the reasons I have just mentioned.

Gross margin for Retail Services increased by 282,000 or 22% to 1.6 million from 1.3 million from the fourth quarter of last year as Hover continues to be successful in adding customers and growing sales to existing customers. As a percentage of revenue, gross margin for retail services was relatively unchanged at 57%.

Turning to costs, network expenses for the fourth quarter of 2014 were essentially unchanged from the same period last year at 1.3 million. Total operating expenses for the quarter was 7.8 million up 900,000 or 13% from 6.9 million for the fourth quarter of last year. The increase is primarily the result of two factors.

First, we continue to invest in workforce marketing and other costs primarily relating to the acquisition and supporting global customers. Second, professional fees increased by 338,000 to 522,000 when compared to the fourth quarter of last year primarily as a result of additional source compliance work that we’ve undertaken for the first time.

Beginning with the year ended December 31, 2014, we are required under Section 404 of the Sarbanes-Oxley to have our evaluation of the effectiveness of our internal control of the financial reporting audited.

While we expect that our annual audit fees will increase as a result of the internal control orders, we do expect that it will decline substantially from this year’s level. As a percentage of revenue total operating expenses decreased to 20% from 21% for the fourth quarter of last year.

Net income for the fourth quarter of 2014 was 1.9 million or $0.16 per share compared with 923,000 or $0.08 per share for the fourth quarter of last year. As Elliot mentioned this took our EPS for 2014 to $0.57 per share from $0.40 per share for the prior year.

Cash and cash equivalents at the end of the fourth quarter were 8.3 million compared with 13.6 million at the end of the third quarter of this year and 12.4 million at the end of the fourth quarter of last year. During the quarter we generated cash from operations of 2.8 million as well as $200,000 from the proceeds of the exercise of stock options.

We also invested 8.2 million in the previously announced auction and registry fee capital costs of the .online gTLD joint venture, as well as in escrow accounts that were established to fund our acquisition of 70% of the regional Internet service provider in Virginia that we announced last month.

Deferred revenue at the end of the fourth quarter was 71.1 million which was up 2% from 70 million at the end of the fourth quarter of 2013 and down 3% from 73 million for the third quarter of 2014. And with that I’d now like to turn the call back to Elliot.

Elliot?.

Thanks Mike. During Q4 and into Q1 we implemented our eighth Dutch tender auction in as many years. Given the performance in the stock between the announcement of the tender on last quarter’s conference call and the time the tender closed we really have no idea what to expect in terms of results.

When you have no expectations you can neither be especially pleased nor disappointed. In the end we are always happy to be able to deploy more than $3 million to our equity at prices that are attractive. As many of you have seen in our news release today we are reinstating our open market buyback program commencing February 16th.

It’s the same plan we undertake each year with the higher $20 million value in the last two years simply reflecting the growth in our market capitalization and the higher volume of trading. I’d now like to provide an update on .online.

On our last call we announced that our joint venture with Radix and NameCheap won the auction to operate the registry for the new .online gTLD and as Mike discussed during Q4 we made our initial capital investment in that venture. Our arrangement with our partners was originally discussed in the early part of 2013.

The auction took place more than a year and half later in November of 2014. And as the three parties discussed operating plans for the registry going forward, it became clear that for each of us our businesses have gone in different directions. One of the partners have sold their registrar business and with now much more focus on the registry side.

We of course are much further down the road with our telecom business than we were in spring of 2013. Accordingly all parties on the financial arrangement that ended plans for the joint venture return to the original capital contributions and created a go forward set of marketing arrangements.

These arrangements will result in a positive financial contribution for us some of which will be realized in the first quarter of 2015 and some over the remaining term of the arrangement.

We continue to look forward to the .online launch likely some time it the second quarter of this year and continue to think it can be the first real challenger to the existing gTLDs. As I discussed at the onset of the call we finished the year above the top end of our guidance of 14.5 million to 15 million in adjusted EBITDA.

As we look out to 2015 we expect to see continued strong performance from Ting Mobile which will become the largest contributor to and drive the bulk of growth in adjusted EBITDA. We also expect to see contributions to growth from both wholesale and retail domains with portfolios flat to slightly down.

We will be investing some money in the growth of Ting Internet. All in, we expect EBITDA to be in the $20 million range which is a fine outcome balancing growth in the business in short-term with creating greater opportunities for growth in the long-term. And with that I’d like to open the call to questions.

Operator?.

[Operator Instructions]. The first question is from Hubert Mak with Cormark Securities..

I guess first question I think just really sort of your guidance here 20 million EBITDA range.

Does that include the acquisition as well that's expected to be completed I think I guess this month?.

Well it will certainly include the results of the acquisition post closing. I think you want to think about that relatively neutrally so even potentially slightly negative. The acquisition BRI itself was a profitable company, but we're willing to be growing it and we're going to be investing in that through.

So it's not something where you'll see any contribution that's really material from that perspective and it could even likely cost a little bit of money in 2015. Certainly we see this as a profitable venture in any sort of a longer timeframe..

And obviously you guys haven’t closed your acquisition, but can you provide any sort of metrics at all like financial metrics or would you be putting this out after it closes?.

No I mean it's a small business Hubert, I think the reason that we release the detail we did with it was because it was the start of a whole new line of business and we wanted to use that as a catalyst to have that dialog with our shareholders.

But there's not really much in there, the first thing you'll see from Ting Internet will be metrics around rollout and bills and packages and marketing and customer sign-up and things like that..

And can you sort of go over again, I missed it but in terms of the online gTLD I couldn’t quite make out what you're saying in terms of the parties I think were outsider?.

Sure, essentially we reached an agreement to one of the three joint venture partners is going to take over the whole thing. The other two of us are going to continue to be involved as marketing partners, but we're going to step back from ownership or capital contribution.

So really we're falling back to our much more traditional registrar role and they're going to focus on what they're doing and we're going to focus on what we're doing, primarily again around telecom for growth..

And then I think you didn’t split, exactly the amount that you guys invested for this online domain?.

And the good news is that you don't have to worry about it..

That's true.

But is that -- as to what you're saying is that is that going to come back to you?.

Yes, yes..

So like still wherever you invested in a quarter that's just going to come back in whole?.

Exactly..

And then just maybe a question on the domain here, how do you see that unfolding from a top-line perspective? I think I heard you say that you're looking for flat sort of in the domain here for '15, how do you see that though -- do you think that the new gTLDs would help at all or?.

Yes. I think they're helping already, but there is slower growth across the industry especially in the developed markets U.S., Western Europe which is where the bulk of everybody's business is. I'm not sure you're completely foreign domicile; some new gTLDs has kind of helped make up for some of that, as the outside growth in the developing world.

I think for that business again you're going to kind of see it'd be flat or have a small level of growth and we'll continue to be efficient with it. And it continues to generate good cash and cash contribution and we've good healthy business for us..

And then on the mobile business you guys added about 11,000 or a little over 11,000 sub for the quarters here. Obviously the back half for last year certainly was more aggressive pricing from other telecom players here and just following them it sounds like they're going to continue on here in the '15.

You threw out the economics in terms of your business here where your margin within that 45%, 50% and sort of pricing here.

As you move into '15 your subs at 11,000 and you guys were at probably 12,000 even in the quarter before, like did you see your sub staying at this level in terms of net adds while you maintain those economics or you think that you may need to change these sort of pricing structure and maybe also impacting margins here going forward? And then as well along that business there the other question would be you have your GSM availability coming here in February obviously that will impact your subs base most likely in positively.

Can you maybe in that context sort of give us a sort of guidance of what kind of subs are you being conservative here? Like what you think will be conservative numbers here and what do you think could be potential to you?.

Yes, so I think we are very much we were trying to message there it seems as if we're at a pretty consistent level of that we've been in that kind of 11, 12 and change range, I want to say for five quarters now and might be four but might be five. And really what you’re seeing is a combination of the factors that you’ve identified.

There is this headwind of increased price competition and frankly there is just a headwind of consistent churn on a growing base and then we have the tailwinds around the great customer experience, the strong order and performance in referral program, the scrappy marketing we do, the new opportunities that we uncover every quarter.

And so those things are countervailing at this point. One of the lines that might have been buried in there was December was a record month December I think the quarter and December were both records for gross adds. So we continue to put more pockets in the net than we ever had before.

And I think that that’s for past we think that there is a couple very interesting bits with GSM coming, the great buzz we’ve gotten around and credibility around Consumer Reports and there is also bit of halo with the stuff that’s going on with same Internet, we’re in more discussions now.

So I think we’re very much in a wait and see mode but our best guess right now is the progress has been pretty consistent we think it will stay that way. We’re always heads up around increased competition but there is no surprise there that’s really what we’ve always said was likely to happen in this market..

And then maybe just further to that, if you’re assuming you net adds is probably around 11,000-12,000, based on what you highlighted specific statistics where you’re suggesting 80% of devices now can be moved over.

Wouldn't that be a big potential opportunity here or what is causing you to sort of hold on to serve optimism here?.

So you don’t know what you don’t know. And I think that there, what’s causing me to hold back would probably be that increased price competition, I want to respect that. So I don’t want it to be getting ahead of ourselves there.

I think that I also know again small point this call had a lot of fairly midi items in it, you can go down to the Apple Store today please do and go buy an unlocked iPhone that’s compatible with Sprint and we’ll put a SIM in your hand and you can use an iPhone 6 or 6 Plus today. We think that that’s great, that could be big.

Now when I say that with very small percentage of our devices are actually at that high end of the market but what’s also true in Apple the pool player at that end of the market. So, we want to see what kind of contribution we can get there and I mean hearing to Consumer Reports it is fantastic thing, there's a lot of credibility around that.

So I think with all of this we just got our heads down and we’re grinding and we want to see what happens with the GSM launch which will certainly be well before the end of this quarter..

And when do you expect that to be available?.

Well, before the end of this quarter..

And then maybe not sure you have the stats, but I think your sort of 11,000 quarterly subs like what is the percentage of those accounts are bringing over the owned devices versus buying? Do you have an idea?.

85%, 86% now might even be a point or two higher than that. Again it depends whether you're talking about December that trend has always been the most recent number I saw was 88%. Now remember that that number does include SIMs and does include a new device, if you bought a Nexus at the Google Play Store that is included in that number.

So there are some new devices that are in that number too. But they're just not devices you source through us..

And then lastly you guys have pretty good cash balance and you got some money coming back here. And obviously you put in a share buyback 20 million here.

What is the priority here in terms of like use of cash as you guys are looking to roll or push into this fixed payment services? How do we think about that? Like you have obviously service from cash, do both at the same time, what’s the priority?.

Yes, I think today is very much both. And there is two reasons for that. One as I mentioned on the seeing Internet call that we do when we announced that deal. We’re really going to spend a period of time now focusing on execution in these two markets, we want to learn lessons.

So we never say never but it’s unlikely that we’re going to announce a third deal in the next month or two or three.

And so I don’t see that, so we’ll be investing in these markets, these markets have the hard work right now and Charlottesville is operational, it’s the real day-to-day work of integration with a new business that isn’t very capital intensive, it's very work intensive, it's very process intensive, it's very people intensive.

I think we're happy to spend absolutely as much as we need to bring fiber into Charlottesville as fast as we can and Westminster doesn’t have the same capital requirements.

So I think it's definitely a bulk as we can put as much money as we'd like into Charlottesville, have plenty of money to continue to buy back stock and still have lots of room to play with..

And then just to follow on that.

What kind of CapEx do you think it needs for fiscal '15? Do you have an amount that you can?.

What I want to do I think is on the next call include some thoughts around the CapEx around fiber in that number. So I think in the rest of the business in the run-rate business not much has changed, you can go look at previous years and you'll be able to figure out what the CapEx is.

We continue to get bigger, spend a little more we continue to get more efficient around the way we actually put sort of boxes and banners on the street we continue to benefit from Moore's law, so you won't see much change in the run-rate business.

And on probably next call is when I'll want to give some sense of what we'll spend on Fiber in these markets in '15, but not going to be $10 million and therefore it's going to be much less than that. And therefore it's going to be well within what we're sitting with..

[Operator Instructions]. The next question is from Patrick Retzer with Retzer Capital..

Most of my questions were asked by the previous gentlemen. I still have one.

You said about 80% of all smartphones can now run on one or the other of your networks once the GSM network is up and running?.

That's right..

The 20% that come out, are those certain devices across all carriers or are those certain carriers devices or?.

You think about it more of certain carrier devices. Some carriers cut very particular deals with cell phone suppliers to do a particular phone, particular build it will not carry multiple radios. And that's just for the marketing advantage, that practice I think goes back to the old Motorola RAZR days if I'm not mistaken.

I think today, the cell phone manufacturers really are the one carrying the brand much more than any carrier is, but still that practice is still around..

So you see the 80% growing over time but not necessarily to 100?.

When you're going from 10 to 80, you're not worried about [marketing] at that point..

That is the best way to put it..

Fair enough. Okay that's all I had, I also wanted to mention I love the buyback I think that's your most effective way of enhancing shareholder value outside of the organic growth of course..

The next question is from Hubert Mak with Cormark Securities..

Just one follow-up.

In terms with this GSM availability and also the CME offer currently here, how are you guys going to be selling this like -- are you guys providing your consumers the choice as how guys going to market like you guys introduced one seller for the other because obviously in previous quarters you've suggested that Sprint has led into the network and….

Well because I haven't suggest that, what I said is the challenges in network have been pretty public and I don’t know if you saw there was a core metric study that just came out where Sprint actually had some very good results recently around network.

And we continue to be big fans of the Sprint build-out and we never said the fact that they have the largest treasure throughout the spectrum. I think the best way to answer is we're not putting what I would describe it as; it's not now choose your network it's really driven by device. So what device you have, what device would you want.

And that's really what sort of pushes people down the road. We don’t think that's going to be overwhelmingly one way or the other I don’t want you to think the 10, 80 is going to drive that because there is a lot of really good secondary market value in the Sprint devices.

So I think it’s going to be something that we’re going to probably learn usability lessons like we always do as we go into it, but we don’t want to confront people with network other than where it’s clearly sort of sensible from a coverage perspective based on their locations..

And the economics is similar under both?.

Yes, you’re saying that in terms of costs?.

In terms of the gross margin profile..

They're similar, yes..

There are no further questions at this time. I will turn the call back over to Elliot Noss for closing remarks..

Thank you all and we look forward to seeing you again next quarter. Thank you, operator..

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