Elliot Noss - President & CEO Mike Cooperman - CFO.

Hubert Mak - Cormark Securities Patrick Retzer - Retzer Capital Matt Miller - Bayview Asset Management.

Good afternoon, ladies and gentlemen. Welcome to Tucows Third Quarter 2016 Conference Call. Earlier today, Tucows issued a news release reporting its financial results for the third quarter; that news release and the financial statements are available on the Company's website at tucows.com, under the Investors heading.

Please note that today's call is being broadcast live over the Internet and will be archived for replay, both by telephone and via the internet beginning approximately one hour following the completion of this call. Details on how to access the replays are available in today's news release.

Before we begin, let me remind you that the matters the Company will be discussing include forward-looking statements and, as such, are subject to risks and uncertainties that could cause the actual results to differ materially.

These risk factors are described in detail in the Company's documents filed with the SEC, specifically the most recent reports on the Form 10-K and Form 10-Q. The Company urges you to read its security filings for a full description of the risk factors applicable for its business.

I would now like to turn the call over to Tucows President and Chief Executive Officer, Mr. Elliot Noss. Please go ahead Mr. Noss..

Thank you, operator. And thanks, everyone, for joining us today. With me is our Chief Financial Officer, Mike Cooperman. Today's call will follow our usual format. I'll begin with an overview of the financial and operational highlights for the third quarter.

Mike will then provide a detailed review of our financial results, and I'll return with some closing thoughts before we open things up for questions. The third quarter again saw record performances across each of our key financial metrics.

Continued growth in both Ting Mobile and Domain Services drove a year-over-year increase in overall revenue of 11% to just shy of $50 million. Net income and adjusted EBITDA were up 50% and 48% respectively, as a result of the significant operating leverage in our business.

Ting Mobile added over 3,000 accounts and 8,000 devices in Q3 to bring our total to 147,000 accounts and 235,000 devices. I'm pleased to see a couple of quarters in a row now where our devices per count have risen above our typical 1.6 ratio.

That is void of it by a few large customers but it is primarily driven by accounts that are coming in at or growing to the two to five device range. We've always said that families should see the greatest savings from our pricing plan with low lying fees and full usage, and the greatest benefit from our administrative features.

This increase in devices per account seems like evidence that our message is getting through and that families are starting to discover these benefits for themselves. This positively impact the value of each subscriber and we will wait a bit more to see if we want to more permanently move any of our other key variables. Churn was 2.8% in Q3.

We are seeing some successes with efforts intended to reduce churn and at the same time, the base continues to get slightly more challenging with the mix between carriers. We expect churn to rise again a bit in Q4 and then drop in Q1 and Q2. We continue to bottle 2.5%.

After the recent price decrease and reductions in cost, we are still slightly above the 45% to 50% gross margin target. We expect this will come down as we see more data usage at higher levels. This may take a quarter or two to sort out and we will continue to watch it and keep you posted.

We are of course thrilled to have more competitive data pricing in an increasingly data hungry world. We are not surprised that our price decrease has not had much impact yet on our gross account adds. Our new pricing was necessary more than newsworthy.

As we continued to share our challenges brand awareness and we do expect that as we grow awareness, the price decrease will contribute positively to conversion. I've talked on prior calls about some of our key strategic directions with respect to gross adds and I want to give you an update on these.

First, retail; as I said, we've seen a modest contribution from our distribution at Kroger and Staples locations but it has not given us a material lift. These partnerships offer presence but not a lot of push. We will continue to work these opportunities and others.

Now that we have experience, they are easier to execute and do give us a bit of mainstream exposure and credibility but we do not expect to invest much more there or get much more there. Our second strategic focus is affiliate relationships; the challenge there is simply finding scale.

Most of the large national affinity groups have exclusivity with a major carrier, the largest private organizations and enterprises tend to push their employees to the carriers that they use at an enterprise level. So we need to work around the edges and grow through smaller partnerships.

We are doing that and we are finding wins but just like our direct response efforts through bloggers, podcasters, social media and other channels, we expect affiliates to be an efficient slowly growing contributor to our acquisition program rather than a step change.

Through the last few quarters we have learned better what winners look like and use that learning to try and find more. We will continue to grind here.

The third strategic focus is strengthening our sales capability from direct response drivers of traffic and calls to an optimized purchase path to sales processes and people to close deals on the phone.

We have made progress there and as we've begun to have more confidence in both, our tracking and our performance, we have started to look more aggressively for sources of potential new customers.

Closers that includes simply increasing our advertising spend and familiar platforms like Ad Words and Twitter where we can test landing pages, special offers, phone tactics, lead capture tactics, retargeting and more.

Slightly further out, we're experimenting with targeting and digital display campaigns that model prospects against our current customers. And in the next couple of weeks, we're going to test an entirely new direct response vehicle that we think can also give us some of the bigger, broader awareness we need. We've produced a Ting infomercial.

This is a full half hour program in the traditional infomercial format, it is heavily focused on a Sensex [ph] spirited customer testimonials leveraging Ting's biggest asset, its reputation.

As with other infomercials, it is not in the voice that we usually use to talk with our customers but it does a wonderful job of illustrating how Ting treats customers better and costs them less, and we are hopeful that it will be very appealing to an audience that is less technical. And as I have said politely less than our current base.

We will be running at a lower weights during late night and early morning hours for a couple of weeks in November. If we like the traffic and call that generates, we will look to scale in the New Year.

This is a slightly larger bet than we've made in the past, I think mid-six figures but given the size of the business and the size of the opportunity, we feel it's well worth it is tiny relative to media spend in the category.

So to recap, the Ting Mobile business remains strong with low cost per acquisition and growing base, margins slightly over 50% and monthly churns that should average out to around 2.5% for the year. We would like to grow that base even faster. On Ting Internet, Q3 was primarily about expanding supply to meet demand.

In Charlottesville, where both our network and our customer base continue to grow, we have doubled our install team. This allows us to handle more installs every day and has helped to produce continual months of record new customer install.

It also allows us to extend the network quality more quickly to the neighborhoods with the most pre-orders and to housing developments and multi-dwelling units that want to offer gigabit space to the residents. It also provides golden learning for future markets.

Our network in Charlottesville now passes over 10,000 potential customers and we will continue to expand aggressively through 2017. In Westminster where the city is building the network, the next wave of construction is underway. So I've said we're only at about 300 serviceable addresses right now in Westminster.

The city projects another 2,700 addresses finished by this time next year. We announced into Q2 two that we're ready to begin construction in Holly Springs starting with the neighborhood of Holly Glib [ph] where we received the most preorders. In Q3, three we were on the ground boring, plowing and blowing five through that that neighborhood.

We expect to light up the first customers by the end of the year and get to around ten thousand serviceable dresses throughout Holly Springs by the end of twenty seven. In Q three we also introduced Centennial Colorado as the fifth thing down with over thirty thousand residences and over one hundred thousand people.

It will be our largest sing town to date ability stream we impressed with how quickly Centennial games consensus and makes decisions and how willing it embraces private partnerships to get things done. We have already started taking preorders and they have begun construction on their core fiber network.

We hope to be able to begin our construction in Q2 2017 or so and start lighting up customers sometime in the summer. I'm confident Centennial will be a great partner with a great community of savvy-forward thinking residents and businesses. Cent [ph] is also still working on the buildout of their core fiber network.

Pre-orders there continue to be strong, we hope to start lining up the first customers there in mid-2017 as well. We do not expect to announce any additional towns between now and the end of the year, with the five current projects we will be in execution phase for a bit.

We continue to work the pipeline but we have plenty of building to do with the markets we've announced. Meanwhile, altogether and in the state, these five towns will represent about 85,000 serviceable addresses, and 50 adoption after five years an average margin of $1,000 a year for customer.

You have a business right there that would surpass the current Ting Mobile and build gross margin. Finally, I would like to add just a word on Google Fiber; although by now I'm sure I've spoken to just about everyone listening to this call about this, at least once or twice.

Google has built one of the largest and most successful company in the world with unparalleled achievements in advanced computer science and organizational scaling. They have astonishing aspirations to cure highway traffic and death, among other things.

Like any business, they prioritize among their opportunities based on fit with their core competencies, competitive landscape, and potential return on investment. Having just spent a quarter digging in the dirt in Holly Springs North Carolina. It does not surprise me that building fiber networks would not be Google's highest priority.

It is messy and unpredictable. It does not perfectly match their skills. We also think that they have been clear that they too are not abandoning the work but are taking time to learn its complexities. As for us, we don't mind getting dirty. Billing, provisioning, customer service and process innovation are the keys to this business.

Those match our core competencies well. Google will also in parallel be pushing advances in cutting edge wireless technologies. We think wireless has an important place in the total connectivity toolkit but we are looking at the fiber business a ground level and we like what we see.

Specifically spending $2,500 to $3,000 per customer and recurring margin of about $1,000 year. We continue to feel good about those numbers and this investment.

Our domain services business continued its track record of steady performance in the third quarter with year-over-year growth bolstered by the incremental contribution of the international wholesale-reseller channel of Melbourne IT which we acquired in April of this year.

Total registrations for Q3 were up 7% year-over-year with strong growth in open SRS renewals and the addition of the Melbourne IT names. The number of new transactions was more or less flat year-over-year as growth in open SRS and the contribution of the Melbourne IT channel were offset by the impact of a single reseller.

Our renewal rate was consistent with its historical range at a healthy 74%. In aggregate, total domains under management increased 10% versus a year ago to $14.8 million. I will note that Q3 is one of our strongest quarters recently for gross margin as we continue to benefit from the shift in mix to higher margin products.

In terms of new GTLDs, Q3 saw a notable add with the launch of duck shock [ph] towards the end of September. The strength of the launch push the number of new GTLD registrations as a percentage of all com-net and new GTLD registrations during the quarter upto about 8% above our historical rate of around 5%.

As noted last quarter, top blog will go live this quarter and launch schedule for November 21. In terms of reseller participation around new GTLDs, the number of resellers with at least one new registration increased by 14% year-over-year and 8% sequentially to nearly 2,900.

With the addition of primarily North American and Western European resellers from Melbourne IT, the percentage of new registrations coming from resellers outside North America and Western Europe was slightly down to 23% percent.

It is worth calling out that the acquisition and migration of customers from Melbourne IT and the shutdown of their platform has now been smoothly and successfully completed. This bodes well in a mature market which can present tactical opportunities for a scale player that provide excellent cash-on-cash returns.

Our retail business, Hover, also delivered another quarter of steady strong performance. Revenue and gross margin once again processed strong year-over-year growth with gross margin up 11%. The Hover customer base also showed strong year-over-year growth, up 16% from the end of Q3 last year and 4% from the end of Q2 this year.

Our renewal rate held steady at 81%, well above the industry average. I'd now like to turn the call over to Mike to review our financial results for the quarter in greater detail.

Mike?.

Thanks, Elliot. As Elliot discussed, Q3 saw our financial performance achieve records in terms of revenue, net income, earnings per share and adjusted EBITDA.

Revenue grew 11% to $49.1 million from $44.3 million to Q3 of last year, driven by both the larger Ting Mobile subscriber base and the incremental contribution of Melbourne IT International, also the main reseller channel which we acquired in the second quarter of this year.

Custom revenues before natural costs increased 7% to $30.8 million and $28.7 million for Q3 of last year. This is resulted in the increase in gross before network cost of 17% to $18.2 million or $15.6 million which as a percentage of revenue expanded to 37% from 35%.

Looking at gross margin for network access increased by $2.5 million or 36% to $9.6 million from $7.1 million for the third quarter of last year with the increase driven entirely by Ting Mobile. As a percentage of revenue, gross margin for network access increased to 50% or 44%.

Gross margin for the main services for the third quarter increased 2% to $8.6 million from $8.4 million for the corresponding period last year. As a percentage of revenue, gross margin for the main services contracted slightly to 29% from 30%.

Looking at each component of the main services individually, gross margin for the wholesale channel increased 4% to $5.8 million from $5.6 million with the increase attributable to the incremental contribution from the acquisition of the international wholesale reseller channel for Melbourne IT.

As a percentage of revenue, gross margin decreased to 23% from 24%. Gross margin for retail services increased 11% to $2 million from $1.8 million for the third quarter of last year. As a percentage of revenue, gross margin for retail services was down slightly to 54% from 56%.

Gross margin for portfolio services was $776,000 compared with $1.1 million for Q3 of last year. As a reminder, in Q3 of last year our portfolio group benefited from our resolving minority interest in the duck store new GTLD registry through a confidential private auction.

As a percentage of revenue, gross margin for Q3 of this year was down slightly to 86% from 87%. Turning to costs, networks expenses for the third quarter of 2016 decreased 9% to $1.3 million from $1.4 million in the same period last year. Total operating expenses for the quarter were up 8% to $9.4 million from $8.7 million for Q3 of last year.

The increase is primarily due to the following incremental cost in support of our network access initiatives. Marketing expenses increased by $0.5 million year-over-year, primarily for the acquisition and ongoing support of Ting Mobile and Ting Internet customers.

Credit card processing fees, primarily to support the growth of Ting Mobile and Ting Internet, public listing and stock-based compensation increased by $300,000 and depreciation and amortization increased by $300,000, primary the result of our acquisition of the international reseller channel of Melbourne IT in April of this year.

These increases were partially offset by the following; workforce related expenses decreased by $100,000 primarily the result of our decision to reverse the $300,000 overall achievement, almost program provision which we no longer believe will be payable.

And a certain of our forward exchange contracts do not comply with requirements of hedge accounting, the impact of the mark-to-market revaluation on outstanding contracts resulted in an unrealized net gain for the quarter of $20,000 compared to an unrealized net loss of $100,000 for Q3 of last year.

In addition, the impact of the fair value adjustment on matured contracts resulted in $43,000 realized loss upon settlement of currency forward contracts for the quarter, compared to realized loss of $300,000 for Q3 of last year. As a percentage of revenue, total operating expenses were down slightly to 19% from 20% a year ago.

Net income for the third quarter increased 50% to a record $4.7 million or $0.45 per share from $3.2 million or $0.29 per share for the same period last year.

Turning to EBITDA, as a reminder and as discussed in the earnings release, last quarter we modified the definition for adjusted EBITDA in response to clarification guidance regarding non-GAAP measures issued by the SEC in May of this year.

The SEC guidance indicated that adjusted earnings for deferred revenue may not be consistent with disclosure rules. Accordingly we have revised our definition of adjusted EBITDA to eliminate the adjustment for the effective net deferred revenue to reflect net revenue on an earned basis.

For those of you wishing to compute our adjusted EBITDA in our prior definitions, this can be done with reference to our disclosure financials and our MD&A. Adjusted EBITDA using this new definition for the third quarter increased 48% to $8.6 million from $5.8 million for the corresponding period last year.

Turning to our balance sheet; cash and cash equivalents at the end of the third quarter of 2016 was $10.5 million, up from $5.9 million at the end of the second quarter of this year.

Increase compared to the end of the second quarter was primarily the result of generating $5 million in cash flow from operations, as well as an increase in the amount outstanding debt on our bank line of $1.9 million.

The increase was partially offset by our further investment of $2.1 million in property and equipment, primarily for the continued buildout of the Ting Internet footprint.

I would also note for you that in August, we successfully negotiated with the syndicate composed to the Bank of Montreal and Royal Bank to replace our previous $14 million credit facility with a five year secured credit agreement with $16 million, with an additional $15 million available through accordion [ph] feature.

A larger facility has been established to support any additional share repurchases, acquisitions or capital expenditures we may incur, or building out our team fiber internet footprint, as well as for general working capital and general corporate requirements.

As of the end of the third quarter, the amount standing on the new facility was $10.5 million, net of debt issuance cost of $0.5 million, up from $9.1 million at the end of the second quarter and up from $3.5 million at the end of the third quarter of last year.

The increase compared to Q3 of last year is largely the result of our using $6 million to fund the acquisition of the Melbourne IT wholesale demand reseller channel and our borrowing $2 million or funding the buildout cost of our Ting Internet footprint.

Deferred revenue at the end of the third quarter of 2016 was $78.4, up 5% from $74.4 million at the end of the same quarter a year ago, and up 2% from $76.6 million at the end of the second quarter to this year. The increase relative to Q3 of last year primarily reflects the additional deferred revenue from Melbourne IT, also the main acquisition.

I'd now like to turn the call back over to Elliot.

Elliot?.

Thanks, Mike. As we look for the remainder of the year, with nine months of solid financial performance in the books, we are reiterating our existing adjusted EBITDA guidance of $30 million for 2016. A couple of notes, first, we now expect CapEx for Ting Internet to come in it less than $10 million for the year.

There is nothing negative in this lowered number. Simply learning about the nature and pace of fiber deployments. We will apply this learning to 2017 and beyond. In addition, when we laid out our guidance for the year. We share what we expected to spend, roughly $2.5 in 2016 on Ting Internet at an operating level.

At this point, we think this number will more likely come in at $3.5 million to $4 million. Again, we continue to grow and learn and are very happy with the spend. In fact 2016 has really been a year of learning for us. In the domains business, we have learned great lessons in efficiency and profitability in a more mature platform business.

In Ting Mobile, we have learned many lessons through a good hard look across our customer acquisition method. In Ting Internet, we have learned the nuts and bolts of operating a fiber channel. We have learned how to work city opportunities through a pipeline.

We have learned how to start a build in a new market dealing with everything; from design to staffing. We have done it all while spending wisely.

Most importantly, we have learned that Ting Internet plays to our organizational strengths of strong back office, excellent customer service, attention to detail, and sense of community and building long-term win-win partnerships with communities in the same way we have historically done so with customers, employees and investors.

All in all, Q3 was another quarter of solid performance for Tucows. Growth in both Ting Mobile and domain services combined with a significant leverage in our business model continue to drive growth and profitability to support our investments in Ting Internet and our work in allocating capital more generally.

Our shareholders have continually praised us for our capital allocation and for years we've shared with them that we were simply running the business employing time tested principles. As we look towards 2017 and beyond, we expect to be deploying capital towards fiber and other significant opportunities on a greater scale than in the past.

We feel that the combination of operating opportunities and capital deployment opportunities that sit in front of us really play to our strengths and bode well for our ability to provide outsized returns for years to come. And with that, I'd like to open the call to questions.

Operator?.

[Operator Instructions] We do not have any questions at this time. Mr. Noss, I will try to call over to you. Pardon me, we do now have a question from Mr. Hubert Mark from Cormark Securities. Your line is open..

I'm missed on the call here, I just want to be clear in terms of the G&A, it came down sequentially and I think I heard a reversal, I guess sequentially quarter-by-quarter can you guys sort of talk to that?.

Yes, so we have -- there is a part of the call that's kind of overachievement. So we've got regular compensation, then we've got bonus and then for some outsized performance, we have some overachievement targets as well. We had originally approved some of them across the year '15 to '16.

We went back and forth on some of the targets here, and when we looked at what we had put some of it against and very specifically, don't mind sharing that was some that we had put against growth ads for Ting Mobile -- maybe it's was a good whack of money, it was about $320,000..

Okay. So even with that it looks like the G&A came down sequentially, what else cost of decline -- is there anything else that….

I'm looking at the furrow on Mike and I think what I'll say Hubert is he is going to dig into it and get back to you..

Okay, that's fair.

And then in terms of sales and marketing, correct me if I'm wrong but I think I heard that -- it looks there is some investment here in the sales here and I think I heard in a mid-six, did you figure -- can you sort of again, clarify what type of investments these are when did they come through in the -- I guess these are over next two quarters or a is there like a one-time thing?.

No, you see, just about all of that at the start in Q3 and that's for the infomercial that I've referenced, so there is a chunk of that that's production costs. And then there is another piece of that, that media buys sufficient to allow us to test the success. And then if that's successful which will be a great and happy outcome.

There will be some flow-through on both, revenues and expenses but I will kind of walk you through in Q4 if we need to. But for your purposes now, in Q3 you'll see another couple of few hundred thousand dollars in sales and marketing expense and thus attributable to the infomercial..

Okay.

And then not just on the cash flow statement, I know this quarter seems like you've guys didn't repurchase any common stock here; can you maybe just give us some color as to how you do you guys kind of think through that like you guys, obviously you guys have a debt capacity, are you guys holding that back on potentially CapEx plan for next year? Can you just give us some color in terms of how you guys are thinking over there?.

Sure. No it's tactical as always, if you go back and look at that chart.

You'll see remember that we have time between -- the time of the call till the end of the calendar quarter and you'll see a pretty big run up early there and that's just caused us to kind of pull in our claws a little bit and we're always trying to leave space for people to accumulate, we're always trying to -- sort of be shareholder friendly in the way we roll it out, as well as being tactical around it.

So there is no -- there is not much to read into it other than just the way that tape ran through the quarter..

Okay.

And then on the Ting Internet, you indicated you're not adding any sales but can you talk '17 -- I think last time you talked about six cities you're going to go into -- can you give some idea for '17? And how the CapEx might actually pan out for that year?.

No surprise, I'm going to speak to both of those two things, specifically on next quarter's call. I think it's comfortable to say at this point -- you're going to see CapEx rise pretty significantly year-over-year; and Hubert, that's -- we could do that just putting money in the ground [indiscernible].

So there is a lot of boring and digging to be done simply in those markets. So will see the increase pretty significantly. And in terms of the pipeline, I think we're learning that cities take a long time to come through on one hand and on the other, that -- when you're doing as a noble build, there is a lot of work involved.

And so what I was trying to do a little bit when I was laying out simply the number of addresses that you see in these markets is to say look, there is a lot here, there is a business here already that by no means means we're not going to be adding markets in 2017, I fully expect us to but it's to say that's probably not the most important variable to track.

And as always, we'll keep you well in the loop as we go along..

Okay, and then on a Ting Mobile. Actually you guys have put in the initiatives in place over the past quarter or several quarters here. And by the sound of it, it sounds like it's taken a little bit slower to take hold here; and it sounds like you guys are pushing towards a new initiatives here.

Are these initiatives in place like these increasing assets, like the new phone tactics, are they already in place or is it something us rolling out in Q4? And can you sort of talk to -- given we're basically one month -- can you guys talk to Q4, how you're seeing the pan out, do you see it in terms of the net adds? And how do I think about also next year; if you can -- if people talk to that?.

Yes. Next year I would say I'll talk about that next quarter. To give you a little bit more detail there, I think that what we're seeing in the -- in the steady state business, what I was trying to do in describing in detail lot of the initiatives that I talked about for the last few quarters, to say; hey.

Look in the first couple of buckets the first bucket doesn't look like there's anything that's going to change the game for us, in the second bucket, you know what? We found some things that do work, now we've got to figure out how and if we can scale those things. And in the third bucket. A lot of that work had to be put in place.

So both -- I think I talked last quarter about the cultural transformation you need for an organization needs to kind of do sales more successfully. We put the pieces in place, over the last two or three quarters that have allowed us to do something like this infomercial.

So we just kind of started from a standing start, and contracted for a grand something like this. You'd be -- you'd be generating need into a much less efficient back end. So we had to do some real hard work and that work has been done. We expect it to continue to refine and improve, as we get more and more practice with it like any muscle.

But that work has been done. And then in terms of the infomercial itself. We've seen a near final version now and it'll start running about a week or so.

I'm hoping that you are neither in the markets where it's running humored or up late enough to watch it, but beyond that this is now, this is moving to execution phase or we're kind of in market with it. .

Okay, great, thanks I will pass by..

Your next question comes from Patrick Retzer from Retzer Capital. Your line is open..

Hi, congratulations on another very good quarter..

Thank you..

I wanted to just -- your ramp number some metrics for the fiber towns that you're already in, I think you said you will have a total of 85,000 serviceable addresses. .

Yes, five of the currently announced towns are built out, that adds up to about 85,000 addresses. .

Okay. And then using -- you still stick by your estimate of about a 50% penetration rate after five years and a $1000 of gross profit per subscriber..

Yes, we're not seeing any data that's taking us a way from those..

Okay. So just on, the -- we're looking at when the companies reach that point, gross profit of $42.5 million a year. .

That the math based on those assumptions, I mean I was laying it out like that to say; hey look there's a lot there and you can look at that up against where we are right now and saying mobile. And it's pretty good. .

I mean and to put that in perspective, your gross profit for the first nine months of the year for their entire company was $46.6 million. .

Yes, remember just to sort of moderate things a little bit. That is a 2021 number, five years right. But yes what you said is correct. .

Okay, great. And then Google's sort of pulling back on that fibered business, I would think that puts tenure a stronger position when they're talking to a new potential market, have you seen that or do you expect that. .

And we haven't seen it yet. But we've been kind of working the things there in the pipeline. So what we haven't seen yet is one of the cities that Google explicitly pulled back from, reaching out to us but I would note Pat, that I really when people talk about them pulling away or pulling back.

I really think it's more accurate to describe them as taking stock and recognizing, that they're in I want to say it's their business not mine; So don't quote me, I want to see the 11 market that they're staying in and that we're looking at five markets and saying; wow this is plenty for us to really sort of refine our game here and I think they're looking at the markets they're in and saying the same thing.

It's an operationally complex business and I looked at their announcement in some ways sort of a positive reinforcement of our view that this was complicated operationally and that the right thing to do was kind of get okay, and then good and then great.

So, we felt whatever really smart people like they have at Google kind of see something through the same lens as we do, we're quite happy with that. .

Okay. All right, keep up the good work. .

Thanks, Pat..

The next question comes from Matt Miller from Bayview Asset Management. Your line is open..

Hello, everyone thanks for taking my questions. I wonder if you could comment on what concerns if any you have from an infomercial approach to brand editing. .

What would I say not none. So if so when and -- so I think the way that we experienced it when we first considered it. And really throughout the process is that the response was more emotional than rational.

So I think that there is it's a very, very different voice, which is what I tried to call out in the script there than we usually talk to our customers, we usually talk to our customers more conversationally, we usually talk to them in a little more sophisticated way.

We have to respect that there's a lot of great product that is moved in a lot of high volume through these channels, and I think we I don't mean you and I, I mean we internally here. And I think that probably what gave us -- I mean when you see it and happy to let you, when you see it, it certainly is an infomercial.

There's no -- it's clear that that's what it is, but I will also tell you that the biggest Body of topic in there is customer testimonials, and those are completely consistent with the way that we approach our communication. And had completely consistent with everything that we would have wished and hoped our customers would say of us.

So I think that what sometimes you serve a dish that you might not eat regularly and it serves you well. .

Great appreciate that. I wonder you said you had some things that you thought kind of early on were reducing churn could you expand on that. .

Sure, there are with reducing churn that's really about grinding. There's good work is being done and on boarding, there's good work that's being done in starting to get out ahead of the more predicted with people device needs, things like that. So it really is -- really kind of in the details programs and processes. .

And just a couple questions on competition if I might.

Wonder what you're seeing or think about some of the potential changes in pricing around mobile data, that have been out there and then secondly I think there's some new potential and the MSO competition coming in perhaps next year, with some of the large players on the cable side, can you talk to each of those..

Yes. So we didn't really see a lot of what I would call aggressive competition with more recent moves. We think it's more what sort of moving piles around than anything else. What I'm talking about now kind of incumbent's moves, they tend to be focused on each other and they don't really tend to materially affect people's cell phone bills.

With respect to the sort of the entrance of the MSO cable companies, into the mobile space, I flagged I want to say, a quarter or two ago that will be the next big competitive change in this industry. And I would -- it would be my conjecture just like anybody else is.

I think if you want to understand what we're looking for we think more or what they offer is like the existing experience and the lower the price, the more concerned we are and the more sort of promoting Wi-Fi first or calling and the less competitive the price; the less worry we are; and those are two variables that will be watching most closely. .

Right. And my last two if I might get two there on the fiber business.

What do you think is the biggest hurdle or hurdles to achieving that 50% penetration target in five years from your perspective, and then secondly what might be the biggest hurdle at this point to adding to that fiber city pipeline, or closing what's in there and then that'll be it for me, thank you..

I'll do the second one first. With the pipeline, I guess the short answer is we don't really see much in the way of hurdles, the limiting factor there is our ability to want to sort of increase the breath of what we take on or the surface area of attack, we're really treating it very seriously.

We want to be great at it and we think to rush it would be a mistake. So there are there is -- there is it's not hurdles that we see there is just sort of us keeping ourselves in check. In terms of hurdles around penetration, I think there is two that I would call out.

One internal one external, the external we really haven't yet seen, we haven't seen I won't say yet as if it's an eventuality but we do expect it, a strong competitive response from competitors in our markets, we think a part of that is because it's early days, the first and most likely place we would see that would be Charlottesville.

I think it's an expectation, we certainly have of bring it on attitude, but we do respect the competition and we well understand that that's going to be something that we would be -- we would minimize it to our churn. So, I think we -- that's kind of its unknown and it's certainly a hurdle. The internal hurdle that I reference.

Is we really do think that what we're trying to do on a marketing level is a bit unique? When I talk about hyper local marketing on a national scale. How do you go into a location the size of Holly Springs, or Sam point or Santino and really achieve national brand scale in that small footprint.

It takes new and innovative thinking and approaches and techniques and we're really just at the beginning of that, I've got real confidence in the folks that are handling it. I think people are thinking about the problem in the right way and I think it's like a lot of other things, it's going to take experience and practice and learning..

Correct. Thank you, I appreciate it..

[Operator Instructions] Your next question comes from Daniel Asoski [ph] from Asoski Capital. Your line is open. .

Gentlemen, thank you so much for hosting this call..

Thanks, happy to have you..

Once again, great execution. Really just one question at this point is could you do an excellent job relaying the story and then your thoughts on capital allocation.

Really curious about your thoughts regarding 5G risks and potential tech-up lessons risk when it comes to the fiber business; and along that lines when you think about tech ups for associated competitive risk, what are your key concerns if you were a prioritize them, regarding the fiber business. It's really two questions. Thank you. .

I guess we'll plug our own videos, we've got a couple newer investor videos, and so I've encouraged folks to go to the Tucows investor site or the investor section of the Tucows websites in one of the -- I talked about some of this -- talk about it Wireless more generally because we could be talking about 5G.

[ph] we could be talking about three to five we could be talking about a millimeter wave, which is what web company Google bought a few others are doing, at the end of the day we are very comfortable that fiber is the best, fastest, most reliable medium or for internet access.

We think that there is the fact that it's light over glass, really puts us bumping up against some of the limits that physics provide and that 5G. In the longer term, I think most people who talk about it know that we're still three to five years away from a standard for 5G. So I don't mind saying that we think 5G.

provides more opportunity than it does a threat in that, when you project out a few years. The thing -- that 5G will need the most is to get on a fiber backbone as quickly as possible, the one thing that we are unmistakable truth is that in tin towns, we will have by far the richest and deepest fiber network.

Meaning if you want to have a great 5G coverage in the same town you need to speak to us about back call, and I think I can say that no we're in the back call business, you should model that in four years; I could say that because we're talking about 5G. which again is three to five years away.

So, we're not worried when it comes to five or about tech ups lessons. And then when you talk about sort of what are we most worried about, I think that that it will be by far it's executing around these opportunities; don't take on too much too fast, but take on enough that we're continually challenging ourselves.

I talked just in the previous set of questions about competitive response from some of the existing competitors, that's something again that we take very seriously. And I think that the one of the things that we don't worry about is whether the demand for better, faster, cheaper, more reliable internet access, will continue to increase significantly.

I hope that gets at it for you..

That is perfect, thank you so much..

Thank you..

We have no further questions at this time. Mr. Noss, I will turn the call over to you..

Thank you all for joining us, and we look forward to being with you again next quarter. Thank you, operator..

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