Davinder Singh - CFO Elliot Noss - President, CEO & Director.

Ralph Garcea - Echelon Wealth Partners Hubert Mak - Cormark Securities Patrick Retzer - Retzer Capital.

Good afternoon, ladies and gentlemen. Welcome to the Tucows Second Quarter 2017 Conference Call. Earlier today, Tucows issued a news release reporting its financial results for the second quarter ended June 30, 2017.

That news release along with the company's financial statements are available on the company's website at tucows.com, under the Investors heading.

Please note that today's call is being broadcast live over the Internet and will be archived for replay, both by telephone and via the Internet, beginning approximately 1 hour following the completion of this call. Details on how to access the replays are available in today's news release.

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

These risk factors are described 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.

Now I would 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 of our Chief Financial Officer, Dave Singh. Today's call will follow our usual format.

I'll begin with an overview of the financial and operational highlights for the second quarter of 2017; Dave will then provide a detailed review of our financial results; and I'll return with some concluding comments before opening the call to questions.

I will begin by noting that the second quarter marked our first full quarter of contribution from the Enom acquisition that we completed on January 20 of this year. All of the numbers we'll present today reflect the consolidated business. However, as I did last quarter, I will break out any numbers that I think will be helpful.

Q2 was highlighted by continued strong performance in all areas of the business, which, combined with the Enom acquisition, generated solid year-over-year growth across all key metrics.

Revenue grew 78% to a record $84 million, driven by the Enom acquisition as well as the continued growth in Ting Mobile, and the second consecutive quarter of above-expectation performance in the incumbent Domains business. Net income for Q2 saw a year-over-year increase of 29% to a record $5.2 million or $0.50 a share.

The adjusted EBITDA grew 50% to $10.3 million from $6.9 million for Q2 last year.

With respect to our Q2 numbers, I will remind you that the required accounting treatment of deferred revenue for the Enom acquisition will have a negative noncash impact on adjusted EBITDA of about $8 million, the vast majority of which will be felt in 2017 and $3.8 million of which impacted the first quarter.

The additional impact on Q2 adjusted EBITDA was $1.6 million. And of course, the Tucows business continues to generate strong cash flows, with cash generated by operating activities for Q2 exceeding $8 million.

Looking at our Domains business, the integration of OpenSRS and Enom continues to go well as we pool people, knowledge, code and technology to ultimately deliver a greater experience to our resellers and synergies to our shareholders.

We continue our efforts to deliver these benefits by 2019, with the caveat that the European Union General Data Protection Regulation, or GDPR, could impact our timing. I will describe this in more detail in a moment.

In our Wholesale Domains business, total registrations for the combined OpenSRS and Enom wholesale businesses for Q2 were approximately $4.5 million, with slightly more than half of that total generated by OpenSRS.

Again, we had another good quarter for registrations in the OpenSRS business, which continued to exceed our expectations for the first half of the year. Notably, average gross margin for OpenSRS transactions was strong and up meaningfully from Q2 of last year.

The combined renewal rate for the OpenSRS and Enom wholesale channels in Q2 trended a little bit lower this quarter to approximately 72%, which reflects the lower renewal rate of the Enom domains as OpenSRS continues to see its historically strong renewal rate well above the industry average.

We are now just over 6 months into operating the Enom business and have had the opportunity participate in a number of industry events and hosting conferences with both brands. Feedback from resellers as well as suppliers and other industry members has been universally positive.

Bringing these 2 businesses together was a logical evolution for both businesses from our perspective, and clearly, that has resonated with our target audience. We are acknowledged for our leadership role in the wholesale domain market and for having the expertise and resources to build something special and continue as a trusted supplier.

Our resellers tell us that they look forward to seeing what we can do with the combined businesses. In fact, a number of resellers have domains on both platforms and they look forward to us simplifying their business operations. In the combined retail channel, Q2 was highlighted by continued year-over-year growth in the incumbent Hover business.

In terms of actual metrics for Q2, the combined retail businesses generated 400,000 transactions and had a very healthy 84% renewal rate. I will remind you that the acquired Enom retail businesses are mature businesses with high gross margins and lower growth. This will have a dampening effect on most measures of growth in 2018.

Coming back to the GDPR mentioned earlier. These are European Union regulations that are in a phase-in period and will take full effect in May of 2018. These regulations will impact every global Internet business that deals with EU citizens, and Tucows is no exception with millions of domain names registered by EU residents.

At this point, the specific impact on domain name registration, and most particularly public WHOIS, is unclear, and there is a lot of work at both an industry and company level to understand it. What is clear is that there will be material impact.

It will change the delivery of public WHOIS, privacy and proxy services and, at a company level, could impact the timing of some of the Enom integration work. It's impossible to tell right now as we wait to see what comes out of the next ICANN meeting in Abu Dhabi, but we will keep you apprised as this develops. Moving on to the Ting Mobile business.

We continue to work through impact -- the impact of the large base of customers that migrated from RingPlus in Q1. As we shared last call, we would be calling this base through the first half of 2017. This has been complicated, as we have learned that more of the Q1 adds were attributable to the onetime RingPlus closing than we originally believed.

This was due to subtleties in the way people moved between the platforms as RingPlus was closing. This makes looking at the first half in aggregate the easiest way to understand progress. Ting Mobile is currently at 170,000 accounts and 278,000 devices, up significantly from the 151,000 accounts and 245,000 devices we had just 2 quarters ago.

Of the 19,000 additional customers, about half were RingPlus and half were organic growth. We originally talked about 5,500 organic adds last quarter. After digging into the data a little deeper, it appeared the more accurate number would be 5,000 in Q1 and 4,500 and Q2, both significant increases from the 3,000 adds in each of the 2 prior quarters.

And the early part of Q3 looks like it is continuing to see improved gross adds, although we note that this competitive environment continues to get more difficult. Ting Mobile had another outstanding quarter of retention, with monthly churn, not including RingPlus customers, at just 2.19%, down from 2.27% in Q1 and 2.38% in Q2 of 2016.

It was the lowest churn we've seen in our customer base in 2 years. As I said last quarter, I am especially comforted to see such healthy churn just as mobile carriers are aggressively ramping up their promotions and cable operators are rolling out their mobile offerings.

Remember that Ting is probably the easiest postpaid service in the industry to leave. These churn numbers seem to validate our strong belief that people would come to Ting for the savings and stay for the customer experience.

I will remind you that churn historically goes up in Q3 and again in Q4, but with monthly churn numbers of 2.27% in Q1 and 2.19% in Q2, we're starting in a great place. We're also doing some really encouraging work with our customer data, identifying tactics today that could reduce our churn months or years into the future.

For example, looking back over the past year, we measured a significant improvement in survival rate or, said differently, a significant reduction in churn among customers who have [indiscernible] their devices with us. This has us particularly excited about the ramp in iPhone sales in our shop since the Apple deal we mentioned last quarter.

Most of those sales are going to existing customers. It also has us promoting new devices more aggressively to customers that are holding older models or gone long periods without an upgrade. With 278,000 active devices, customer retention starts to rival customer acquisition and its potential impact on the business.

Combined with our increased emphasis on data gathering and analysis, we hope to discern a whole new set of rich strategic opportunities. Now an update on that RingPlus base. Again, we initially migrated over 45,000 accounts. 22,000 of those initially accepted our terms of service, gave us a valid credit card and set up an account.

4,500 had departed even before the end of Q1, leaving us with 18,500. We fully expected many more to leave us in the months to follow, as happens with any involuntary migration. In Q2, about 9,400 more RingPlus customers left, with about 9,100 remaining.

Diving deeper, that trend was 4,100 cancels in April, 3,100 in May and 2,200 in June, and we've seen even fewer RingPlus cancels again in July. It is tough to say when we get to a cohort that behaves like typical Ting customers in lifetime value, but we're quite happy with what we got for the effort expended.

One final thought on Ting Mobile and the increasingly competitive mobile landscape. It now seems clear that there will be more [indiscernible] casualties in the mold of RingPlus. Customers of these services can be a challenge, as they've often grown accustomed to unsustainable pricing models.

But those pricing models, by definition, will get tougher to find. What is appealing about these customers is that they have picked up their heads and looked beyond the major carriers. This is the first crucial step to discovering Ting.

As I've said before, we are well positioned as the credible, sustainable alternative to major carrier plans and major carrier experiences. Whether it is through so deals with the outgoing MVNOs themselves or campaigns directed to their customers, I'm hopeful more of these losses could be our gains.

Meanwhile, Ting Internet continues its steady progress. Charlottesville is really only limited by how many customers we can install in a week, Westminster by how quickly the town can expand the network and Holly Springs by how quickly we ourselves can expand the network.

In both Centennial, Colorado, and Sandpoint, Idaho, we're finally in the early stages of network planning and deployment, and the pipeline remains solid.

While Charlottesville continued its steady growth in Q2, the combination of Westminster and Holly Springs, both at earlier stages, more than doubled in customers, recurring revenue and, most importantly, operational capacity.

Since we launched this service, our efforts have been much less about building demand for our services and much more about building capacity to serve the demand.

This capacity includes install teams and processes, network expansion, network equipment and operations, pull permits, trenching technologies, customer support teams, industry knowledge in the form of senior hires, and of course, a pipeline of potential new Ting talents.

It also includes city and incumbent relations, digital divide projects and dealing with the additional complexities of business and enterprise customers. And the theme over and over again is finding efficiency and scalability through systems and processes.

Particularly when you are a challenger, and one that is eager to please as we are, it is tempting to so solve a problem for one customer or one town that is not necessarily repeatable for others. So we are forcing ourselves to operate with 3 active towns like we would with 30.

Of course, all within the context of viewing these as hyper-local businesses. In terms of demand, people simply seem to want the product we're offering at the price we are offering it. We are doing a great job integrating ourselves into these communities and demonstrating that we are a different kind of provider.

There are also so many external forces moving in our favor, Internet activities will continue to demand faster, more reliable access; wireless technologies will enhance the value of our fixed networks; and customers will continue to assert their power and look beyond incumbents to smarter, more innovative, more attentive service providers.

Our current early small sample size NPS numbers are simply too high to report. We continue to expect 20% adoption among serviceable addresses in a year and 50% in 5 years.

These take rates, and with all the operational improvements I've mentioned, will be paying about $2,500 to $3,000 per customer, and those customers will be worth about $1,000 a year in margin. We're in active conversations with some viable prospects to be new Ting towns. I note that these discussions are always necessarily quiet until they are not.

I'd now like to turn the call over to Dave to review our financial results for the quarter in greater detail.

Dave?.

Thanks, Elliot. As Elliot noted at the outset, Q2 saw continuing strong performance in all areas of our business that was reflected in solid growth across all key financial metrics for the period. I will note here that our results for Q2 reflect a full quarter of contribution from the Enom acquisition, which we completed in January 20 of this year.

Total revenues for the second quarter grew 78% to $84 million from $47.3 million for the same period last year, driven by the acquisition of Enom, the larger Ting Mobile subscriber base and, to a lesser extent, the incremental contribution of the Melbourne IT international wholesale domain reseller channel, which we acquired in the second quarter of last year.

Cost of revenues before network costs increased 98% to $58.8 million from $29.7 million for Q2 of last year, driven primarily by the top line growth in the areas of the business I just mentioned. Gross margin before network cost increased 43% to $24.8 million from $17.4 million.

I will remind you that all of our gross margins throughout this year will be negatively impacted by the acquisition of the Enom business, the accounting of which required amortizing into revenue -- deferred revenue that was recorded at fair value at the time of acquisition.

The impact of this accounting, which can be calculated by referencing our 8-K filing from April 3, will lower our overall gross margin and disclosed adjusted EBITDA by approximately 10% or roughly $8 million, the majority of which will be reflected in our 2017 results.

As a result, gross margin for network cost for Q2 of this year contracted to 29% from 37%. I will now walk through the gross margin for each of the Domain Services and Network Access businesses. Starting with Domain Services, gross margin from the second quarter increased 76% to $15 million from $8.5 million for the corresponding period last year.

As a percentage of revenue, gross margin for Domain Services decreased to 24% from 30% for the reason I just discussed.

Drilling down into the various components of Domain Services individually, gross margin for the wholesale channel increased 89% to $11.1 million from $5.9 million in Q2 of last year, with the increase attributable to the incremental contribution from the acquisition of Enom and, to a lesser extent, the acquisition of Melbourne IT reseller channel I mentioned a moment ago.

As a percent of revenue, gross margin decreased to 21% from 25%. Gross margin for retail services increased 62% to $3.1 million from $1.9 million for the second quarter last year. As a percentage of revenue, gross margin from retail services decreased to 41% from 54%.

Gross margin for portfolio services increased 11% to $0.8 million from $0.7 million for the corresponding period last year. As a percent of revenue, portfolio gross margin ticked up slightly to 81% from 80%.

Moving to the Network Access business, gross margin for the second quarter of this year increased 16% to $9.8 million from $8.9 million for the same period last year, with the increase driven primarily by the growth in Ting Mobile, offset by continuing ramp in Ting Internet investments ahead of revenues.

As a percentage of revenue, gross margin for Network Access decreased slightly to 46% from 48%. Turning to costs, network expenses for the second quarter of 2017 increased 89% to $3.4 million from $1.8 million for the same period last year.

The increase was due to additional Enom network expenses and increased amortization associated with the Enom technology assets. Total operating expenses for the second quarter of this year increased 50% to $14.3 million up from $9.5 million for the same period last year. The majority of the increase is due to the additional Enom operational expenses.

However, I would highlight the following additional changes not resulting from the Enom acquisition, workforce and third-party workforce-related expenses increased by $0.6 million, primary the result of the continued growth in our Ting Mobile and Internet customer base.

Marketing expenses increased by $300,000 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; facility costs and stock-based compensation increased by $0.4 million.

From a foreign exchange perspective, we had a $0.3 million unrealized gain in Q2 2017 as compared to a $0.2 million unrealized gain in the same quarter of last year, which represents a year-over-year reduction of $0.1 million in expenses.

In addition, we had a $0.2 million decrease in expense from the realized foreign exchange losses in Q2 2016 that did not repeat in Q2 2017. And finally, depreciation and amortization, excluding Enom, increased by $0.1 million, primarily related to investment in Ting and fiber.

As a percentage of revenue, total operating expenses decreased to 17% from 20% for Q2 of last year. Net income for the second quarter of this year increased 29% to $5.2 million or $0.50 per share from $4.1 million or $0.39 per share for the same period last year.

Adjusted EBITDA for the second quarter increased 50% to $10.3 million from $6.9 million for the corresponding period last year. The increase was driven to a large extent by the contribution of Enom but also reflects the $1.6 million negative acquisition impact related to Enom for the purchase price accounting adjustments mentioned earlier.

This brings the impact of the purchase price accounting adjustments for the year to $5.5 million. The year-over-year increase in adjusted EBITDA also reflects the growth in our incumbent domains and Ting Mobile businesses. Turning to our balance sheet and cash flows.

Cash and cash equivalents at the end of the second quarter this year were $15.1 million, up very slightly from $15 million at the end of first -- of the first quarter of this year and up from $5.9 million at the end of the second quarter a year ago.

During the quarter, we generated cash flow from operations of $8.1 million, which was, for the most part, offset by the use of $4.6 million for repayment of our loans and an additional $2.9 million invested in property and equipment primarily for the continued build of our Ting Internet footprint.

Deferred revenue at the end of the second quarter 2017 was $165 million, up significantly when compared to $77 million at the end of the second quarter a year ago and down slightly from $166 million at the end of the first quarter of 2017.

The increase from the second quarter of last year primarily reflects the additional deferred revenue from the Enom acquisition. I'll now turn the call back to Elliot.

Elliot?.

Thanks, Dave. Around 3 years ago, when we first shared our broad plans to pursue a fiber-to-the-home strategy, we talked about a simple hypothesis for the future of telecom.

Fixed networks would always outperform mobile networks, therefore, people would use fixed networks when they could and mobile networks when they have to, and that the availability of fixed networks would naturally increase. Over the last 3 years, we have seen that trend develop and evolve.

This quarter, we saw in particular a number of independent data points that really suggest we're starting to see the next phase of telecom. We saw acquisitions by both fixed and mobile incumbents in areas including fiber and fixed spectrum. We saw fixed incumbents commenting upon how competitive and difficult the mobile business was.

We saw device announcements that include preparedness for the heterogeneous world that the transition to 5G now looks like. We can now see that the transition to 5G over the next couple of years will drive all of these trends significantly, and what comes out the other side will look very different than where we are now.

We'll see the addition to the mix of additional spectrum in bands like 600 megahertz, 2 gigahertz and 3.5 gigahertz, each with robust equipment ecosystems that do not exist today but will 24 to 36 months from now, each with business approaches that are likely to be different from those we see today.

Luckily for us, Ting Mobile is small enough and nimble enough in this market to be able to continue to find growth in a market that is not growing and is becoming increasingly competitive, all while building out confidence, back office and fiber miles that set us up to be in a great position to take advantage of the next phase in telecom.

To conclude, all segments of our business continue to perform well, and that performance was evident in our Q2 financial results. We're executing on the strategic initiatives that will drive our growth for the future -- for the longer term and enable us to further take advantage of the significant leverage in our business.

Our domains team is making great progress on the integration of Enom as we look ahead to the significant future synergies that our expanded scale will generate. The Ting Mobile business continues to add customers and satisfy those we have, as demonstrated in even lower churn.

And Ting Internet continues to ramp as we take meaningful operational steps toward scalability far beyond our existing Ting towns.

With the first half 2017 financials under our belt, we remain on track toward our guidance of $42 million, or $50 million less the $8 million impact from the deferred revenue accounting for the Enom transition -- transaction. I say this as much as formal reiteration of guidance as a reminder of the adjusted $42 million number.

As is often the case here, the near term looks bright and the long term looks even brighter. And with that, I'd like to open the call to questions.

Operator?.

[Operator Instructions]. Our first question is from Ralph Garcea from the Echelon Wealth Partners..

If you look at the difference in the renewal rates between your Enom business and OpenSRS, I mean, what are the main differences on why they're so much better on your end versus Enom? And how many quarters, I guess, can you get sort of those renewal rates on par or better from the Enom side?.

Well, I don't know that you'll ever see those rates start to dovetail. The primary reason for the difference in rates -- well, there's 2, but the biggest component is the different nature of customers.

So one of the things that I talked about, if you'll remember on the last couple of calls and in connection with the transaction, the Enom business has more traditional web-hosting companies in North America and Western Europe, whereas, on the OpenSRS side, we've done very well in those next-generation web-hosting companies and in parts of the developing world.

And we really see a lot of the sort of difference in those customers' performance manifest in different renewal rates. And so that's not going to change, because what'll happen, really, over time is we'll just move everybody to a new platform. We're not going to call them one customers or the other.

We might maintain the brand, but we're kind of looking at them on par. If you were to go back in time, 5 years, 8 years ago, you would have still seen a differential in renewal rates between the 2 businesses. Not quite as large, but at that point, it was because we had more of the larger customers who sort of valued the deeper customer relationship.

And the Enom platform did a better job of getting the customers as they were sort of coming out of the gate and getting started. Their onboarding process was better, and a couple elements of their platform just made it that, that smaller, longer-tailed customer was there.

And there also tended to be a couple few point difference in renewal rate that would be driven by that. So because it's about the type of customer, it's not just some sort of kind of widget in the machine that we can kind of get in and tinker with and change.

So I think that we knew what we were getting when we signed up, and we're quite fine with that..

Okay.

And then on the Ting Mobile side, I mean, what sort of marketing campaigns do you anticipate within like 6 to 12 months? Do you sort of rerun the -- some of the TV sports or the late night TV spots that you were doing? Or did you have to change the campaign at all? Are you happy with sort of some of the results after a couple of quarters?.

I would say we continue to tinker with all of it. So we've had some successes with a couple different tactics I -- that I don't want to go into specifically but that were new to the marketing mix.

And I think where we're really getting more and more comfortable with is that it is a lot of little things, and then it's each thing a little bit better over time. So we're really doing what we like to do, which is put our heads down and grind.

I wish I had a big dramatic "here's a couple thousand per quarter" addition that we could point to, but there isn't.

I really think, in terms of customer acquisition tactics, the things that may be emerging, and we'll see if the traffic yields any outcomes, but some of this sort of smaller MVNO or less focused MVNOs who sort of talk with us about taking over customer bases because there is more, certainly, message traffic than there's been.

I stressed with PTel that this was not likely repeatable. With RingPlus, I said, well, maybe every now and then but not often, and I don't want you guys to get to thinking it happens every year.

We'll see now, because it's certainly the case that it looks like that stepping up of competitive pressures in a market that has stopped growing is squeezing some of the weaker hands.

And specifically, when you were talking about the -- in the TV spots, we are tinkering with those again, and we're likely to trial the next potentially in some different time slots..

The same ad? Or are you going to rework the ad? Or what's the strategy?.

No, I think we're okay with the coffee. We're -- we want to see some other things with it..

Okay.

And then just on the Apple front, can you quantify, percentage-wise or however you feel comfortable, on how many of the net adds this quarter were on the Apple side?.

So I'm going to go way off the top of my head, therefore could well be wrong, but it's, I'd say, 2 things. One, we tend to be a roughly 50-50, maybe slight edge to iPhone versus Android in our base. And we've seen that tick up a couple of points as we've introduced Apple. Not -- it's not fundamentally changing the distribution.

What it is changing is some of the stuff we talked about last quarter, that customer experience, and it's giving us another weapon, just sort of another lever to play with..

Okay. And then just on the Internet side. You keep quoting that 20% penetration at year-end.

I mean, do we model that as -- at the end of -- by the end of 2018 you hope to have 20% of the homes passed? Or I mean, what milestones should we work towards in trying to model that?.

Well, I think that to try and be specific, and I really do appreciate that -- for you and anybody trying to model, that we made the Internet business more challenging than we'd like. I think until we start really providing you with specific numbers around serviceable addresses, it's going to be higher to model that stuff.

But what you can think about at this point is when we're talking about that 20% number, we're typically seeing the bulk of that in preorder. And we have -- outside of Charlottesville, we still don't even have a single market where we've been somewhere for a year, with the exception of the Westminster trial phase.

Now Westminster Phase 1 is -- been a few months, and we've been into it with preorder. In that trial phase, which has been around now for well over a year, it was only 300 homes and some of them were retirement communities. We didn't quite have the full complement on the ground. We are, I want to say, 28 points there.

And I think the only reason I'm sharing that number is because it was shared publicly by the city in some of their reports, and so some people have become aware of that number.

So I do think, Ralph, we're -- what we want to do, as we keep reiterating, is let you know that what we're seeing is consistent with what we hope to see, and we do expect that it's not going to be too terribly long before we start sharing some hard data..

And that was our last question at this time. I will turn the call back over to Elliot Noss for closing comments. I'm sorry, we do have a question that just came in from Patrick Retzer from Retzer Capital..

Congratulations. It sounds like you hit the ball out of the park all the way around, so thank you for that. Looking at the fiber business, you've been real quiet for quite a while now on announcing new towns.

And I understand you're dealing with politicians, that you're laying out for the infrastructure internally, nailing down processes and efficiencies. But I'm just wondering if we should expect to hear of any new markets between now and year-end..

So I will say, if you made me guess whether there would be new markets announced between now and year-end, my guess would be yes. There's lots of dialogue, there's lots of action.

I did want to call out very specifically in the script that sometimes these things are just subject to confidentiality, and sometimes you have city processes where cities themselves have to be very deliberate in who they talk to, when they talk to them and how they talk to them.

And so I think we've always got to be respectful of cities in their processes. And as you can imagine, these things, any discussion about core infrastructure, like fiber, will be politicized and necessarily, and I think just by its existence.

I don't think it's a right or a left, or a red or a blue issue, but I do think that it is very impactful at a municipal level. And so you just we have to be a little careful, that's all. But yes, I would not be surprised with an announcement or 2 before the year ends, and I won't be disappointed if there's not..

Okay.

And then sounds like -- based on your comments, the metrics you talked about the fact that you're even deeper into all of your current markets, it sounds like you're as confident as ever of the promise of that business?.

Yes. I mean, for obvious reasons, the deeper we get into it at this point, the better and more certain we can feel about the 20% in the first year. The 50% over 5, again, all we have is the historical precedents to go by. There, we really -- we've got to put our heads down and do our work. And as time goes along, we'll get closer and closer to that.

But there's -- well, we continue to be encouraged, which is why you see me talking about capacity and not demand..

Okay.

And toward the end of your comments, you talked about some pretty dramatic changes coming, I think, in mobile over the next 24 to 36 months?.

Yes..

I mean, I would think, given Ting's history and being able to react to changing marketplaces, et cetera, that you probably feel like you come out of that even in a better stronger, larger market share place.

Is that correct?.

What I'm very confident in is our ability to be quite adaptive, quite flexible and I almost want to use the word adventurous. And I say that because, look, we're -- we've spent the bulk of our professional lives in deep Internet-centric markets.

Telecom tends to be a little bigger, a little slower, a more -- a little more ponderous, a little more conservative. I think there's going be a lot of change at this next transition point, and I think that, that serves us well. It's kind of the more variables you throw into the mix or the more sort of pivot points, I think, the better served we are.

Sometimes some of you have heard me say, talking about competing in the hypercompetitive, tiny-margin domain registration world and then moving into telecom, it was like moving from altitude to sea level with richer oxygen.

And I think that if and as, what, the speed of competition and the speed of the need for adaptation to market picks up, I think that serves us. I think it plays to our strengths and I think it plays away from some others. Now of course, we have a real weakness there, which is that we're small.

The incumbents who are slow in pondering have a real advantage in that they're big. But that big will also tie them not only to practices but to -- practices in terms of business processes, but also to particular approaches to the market.

We are -- because we're an MVNO, the bad news about being asset-light in this market, so we're not tied to anything. So we really get to deal with this change as it lands, and we're pretty excited about that..

There are no further questions at this time. I will turn the call back -- we have a question from Hubert Mak from Cormark Securities..

Sorry, I actually joined late, so I apologize if I ask questions you already answered. But I guess, first of all, the Ting Mobile, I think you're seeing increasing competitive environment here.

Can you talk about sort of what flexibility you have in terms of reaccelerating the sub adds going forward? Like whether -- how much more room you've got for comm pricing or what other strategy? I'm just trying to get a feel of like what's the competitive environment like right now for you guys..

Yes. I don't think you'll see us sort of pull a price lever competitively. I think that one of the things we've talked about in the past is where we could probably have the most impact on prices is in data, but that's where our costs are the worst. And so there's probably not a lot we can do there.

And so what you'll see us doing is doing things sort of more tactically all the way across. So that's at that marketing level, at that churn level. Putting iPhones in the mix gives us a little bit more in terms of levers around equipment and things we can do there.

We've added financing recently and have a pretty significant portion of our customers picking that up. And so it's really -- it's like the marketing. I'll expand that thought. It's a bunch of little things. So we don't think there's a silver bullet. We do feel good about kind of doing that 95%, 100% over of a couple of quarters.

IF you look at the first half of 2017 relative to the second half of 2016, it's over a 50% pop in gross adds. We feel good about that. That's outside of RingPlus. So as we start to maybe see more of those types of opportunities, we can look at those as sort of accretive on top of the growth picking up a bit.

And then, of course, part of that is the churn, where, again, we think we're just getting smarter at the data level and we're digging in more. And so it's just work. I really, really don't think there's a silver bullet in any of this..

Okay. And then on the domain business, can you just talk about integration? I just want to make sure. I think, on your press release, you talk about moving ahead -- coming in ahead here.

So are we still targeting for the $15 million this year in terms of contribution?.

Yes, yes. Nothing changing there. I do. It's a great opportunity to remind that the bulk of the acquisition benefits come from retiring the platform and a lot of the data center kind of lockout density that is associated with the Enom platform. And those things don't come until right at the end of the integration work.

So we're kind of where we are until we're not. But what's important is, because it's a big body of work, that the work is tracking well as it is..

Okay. And then just lastly for me. Just on the CapEx here for Ting Internet. I looked at your financials, didn't look -- came in around $3 million in the quarter here.

So are we still targeting below the $30 million to $35 million? And then what's the reason for sort of the slower ramp in terms of CapEx? And then, a side to that, you have a history of buybacks [indiscernible] share buybacks.

Can you just kind of talk about sort of how you think about going forward? Like given that you guys haven't really bought back shares in the sort of last couple of quarters? And so how do I think about that against sort of your CapEx spend?.

Yes. So first of all, I'll do the second one first, they're independent. And as I always say, we're looking at that each quarter.

It's a -- what, the trading has been interesting, and I think I wouldn't be giving away any secrets to say that of -- sort of the longer the chart stays flatter, the more we continue to sort of do what we do, the greater the propensity for buyback. I think that's pretty straightforward.

In terms of CapEx, the big things that really have sort of taken that number way down, especially, I mean, thinking now at this point of having even thought $30 million, $35 million back in that kind of October, November time frame, it's really us learning the cadence that cities work at.

So in that number, we had Holly Springs starting, I want to say, 4, 5 months ahead of when it actually started. That of course pushed back some of the customer adoption as well, because you can't sell what you don't have.

We also had both Centennial and Sandpoint being further along, kind of now we would've seen both of those as being kind of in construction in the second half of the year. And it looks like we're doing good work in both places, but I don't know if we're going to get a shovel in the ground this year in either place.

So what I'll tell you -- I mean, the best thing I can tell you, Hubert, is we're learning and we're trying to be more accurate. We will be more accurate every year that goes along, and we're trying to be -- kind of to give people pretty good visibility as we're going through. I'd like to be spending more money..

Okay, and then just to follow up on that, then.

Are we still targeting for breakeven late 2018? Or has that been pushed out?.

I want to hold it until I see some of the numbers, because -- I'm not, what -- I'm -- I haven't rolled a bunch of the elements in that forward to really give you a good answer. And it is a really -- it's very much a multivariate analysis..

Okay. And then so just one more.

Any idea when you would actually hit the 85,000 addressable addresses in terms of network completion? Like is it 3 years, 4 years?.

I think we'll get to -- when we get to 85,000 addresses, it will probably have addresses from some other markets in it before we finish those markets..

Okay, right.

So okay, in that context, any idea? Like is it like 2 years out, 3 years out? Any sort of time frame you can [indiscernible] about that?.

Yes, I mean, you should -- look, in general, if you want to use Holly Springs as an example, we're going to build where we're going to build in Holly Springs, certainly, within 24 months. And so you're going to see that in sort of a roll from there. In Charlottesville, it's a little bit different because we bought an existing network.

It didn't have the same sort of planned and staged rollout. In fact, one of the things that we spent a lot of work on in the last couple of months is kind of a re-auditing of the Charlottesville network to kind of refit it and make sure that it was set to accept all the growth that it could..

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

Are you sure, operator? I was just kidding. Thank you very much for joining us, and we look forward to having you all again next quarter..

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