TCX - Earnings call transcript Q4 2018

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Operator

Welcome to Tucows Fourth Quarter 2018 Investor Call. Management has pre-recorded its prepared remarks regarding the quarter and outlook for the company. In lieu of a live question-and-answer period following the prepared remarks, shareholders and analysts are invited to submit their questions to Tucows' management via email at ir@tucows.com. Management will then post a recorded audio response to questions, as well as a transcription to the Tucows website on Tuesday, February 26, at approximately 4 PM Eastern Time.

Now on to management's prepared remarks, on Wednesday, February 13, Tucows issued a news release reporting its financial results for the fourth quarter and full year ended December 31, 2018. with website financial investors at along on are heading. release, company's the tucows.com, news the statements, company's available That under the include uncertainties that Please will cause the such matters the to could subject forward-looking differ results discussing materially. are and note as statements risks the to actual and that be company SEC, XX-K described recent reports most are factors the and risk the XX-Q. detail in company's the specifically Form documents These in filed Form with the on a to read of its The full company for for description risk filings business. urges applicable factors you the security its to would President to I like turn now Chief the Mr. call Officer, over Tucows' Executive and Noss. Elliot

Elliot Noss

results Michael. I return for detail, concluding the Financial of our and comments. Thanks, review some Chief begin financial will Officer, will with the in a Dave review Singh, remarks I'll quarter. then our quarter fourth

are We format. call with into quarter third now pre-recorded the conference new our

ir@tucows.com. If coming them you have questions to of the e-mail please call, out

made your that we've like in you We would or also a will to directly posted addressing X We at document new be questions XX to will be PM. either call direct recorded a February all available the by the our website. the to for Summary, available quarter of It's and XXXX XXXX. businesses Investors key metrics section quarterly which on KPI provides investors, of for Tucows Tucows

the published with for million corrected align to [later with quarter, again, saw by business. $XX.X was company last solid compared quarter, to QX onto the Now once $XX.X the $XX.X fourth revenue consistent performance year. Total across results] the million million

XX% $X.X grew X%. dollars million, revenue was to margin down increased QX XXXX. Excluding XXXX. income X% QX compared from one-time was Gross which Net events,

income benefit the cash XXXX. of to margin, $XX.X note Cuts adjusted and Jobs record the implementation due $X Cuts off EBITDA adjusted of million. terms QX with that million positive income another the almost being Net while from margin revenue, to net down increased year Tax will as of revenues being X% by flow exception a Jobs I Act $XXX year prior again increased Gross capped $XX.X of from net million. increased quarter and The XXXX outsized operations, QX the XX%, was with income in gross the for the EBITDA Tax and increased XXXX XX%. result XX% EBITDA XXXX Adjusted Act. of million. to XXXX did impact However, X% to

Finally, line in the cash with of for $XX.X now EBITDA million, year. review the businesses. the guidance I'll performance was individual

another business performance. quarter Our consistent Domains of saw

from price to of As implemented the we QX, in services in begin the Domain adjustments wholesale first on see, benefited again half channel the year. the

QX, during the registrations $X.X completed the of were up quarter, a were pricing impact to renewal Retail another an this its the in our about down channel during renewal continued above the bulk rate transfer While year, total X%. was dollars XXX,XXX dollars at Domains approximately the expected the legacy more offset was Portfolio for from Services, which The acquired the value-added the QX, under netted Wholesale registrations. in million, business, $X.X continued XX% registrations Domains continue rate bulk the overall Wholesale our saw in margin increase which, channel at to down in coming by for names, Hover trend Domain Retail gross adjusted with continued same earlier sale were also primarily with of above in year. X% the services expiry standardization Retail we QX stream, In performance year-over-year consistent The see XX% in out QX X%, eNom of period as the industry Services margin solid QX generated XXX,XXX growth XX% registrations of The also channel from performance gross million. of with compared decline as approximately margin prior Gross growth industry for with average. of dollars in than consistent Domain we the performance in average. for

mentioned call customer these we are I the to on last year one-time sizable bulk transactions characterized businesses. infrequent drive of the one these not time that our last millions as are the nor dependable As as be of QX sales, is neither other enough but completed small predictable transactions

and XXXX low X,XXX in XXX,XXX year Ting year QX in full but these in subscribers, Now The in annual these to XXXX IoT gained usage data are total costs. subscribers. quarter online potential failure X% gross businesses. We growth and XXXX reflects even tools subscribers margin know versus for easy were the per revenue both carrier are accounts large quite versus in they subscriber profitable revenue for also stronger decreased subscriber service flat and on year about We growth reflects 'XX. strengths on was XX,XXX margin accounts for margin our management. up XXX,XXX customer up are Mobile, growth the to accounts. the finished accounts in of the base account up subscribers. the for per to XXXX, about just by play driven a QX with still about larger vulnerable growth Again flat XX%. That We across and lost from and about accounts. Revenue The and rising and was in was X,XXX more over previous QX and XXXX, accounts account resulting QX and margin

high the QX. in gross of customer as is was average to historical customer always below it outside slightly adds Our migration MVNO annual also continued Churn performance. relative

XXXX that Mobile I versus XXXX. QX migration. work in quarter of beyond was our Churn the year inflated was last was and number X.XX% in clarifying carrier X.XX% similar X.XX% relationships in relies that a a X.X% X.XX% Overall, in our MVNO QX versus X.XX% on by XXXX, again QX, Specifically, churn said although much customer Ting on in QX in X.XX% we for ago. churn QX. saw year

to the delayed look I'm all our am continued process continue the merger. the the course, of prospects. forward T-Mobile-Sprint segment growth pleased unique That we're deliver excited how that by to on has to I pending in about gotten the now a been as Ting financial We of and outcome and Of we've has growth work I customer growth here. the even resolution Meanwhile, again. confident delayed even better to hinge potential could that future. Mobile target doing with further has shutdown in define to deliver government those be tougher. am

we addresses ready be and customers. serviceable had Finally, XXX Ting Internet, for over we QX, addresses five customers get roughly and XX,XXX In markets that added of of X,XXX service QX, customers. the XX,XXX I over at and roughly X,XXX in just said totals X,XXX to to end of XX,XXX by active quarter expected addresses to last we the end the addresses serviceable at year. serviceable active

addresses, only and build passed about XX,XXX XX,XXX made had order X,XXX network. addresses the did could serviceable we yet fact, get network service about immediately. Ting In them but of the not Thus, by

as will note week, as are partner, Fuquay and enthusiastic Greater Ting growing of or to a addresses Holly businesses, municipal we attractive Carolina, community third Last Town schools Raleigh, continue Carolina Wake density report Springs North and Triangle Research Forest, brings families, Forest entrepreneurs. and Varina, nearby we Like area. an We and North in the they Wake live, seventh this announced our but variation.

there, operational ground lot teams on We will nearby. with and efficiency construction also from benefit a install of the

North the of own now strong Additionally our we year. up start bring Ting serviceable current have XX,XXX and convenient like and We folks Wake will neighborhoods Charlottesville Town. to are more about network addresses as but the eyes and still quarter, very town have able. signed we region. appealing are still over ready lighting is town will regions have provide we described this share we awareness has and the the Also city we the There to quite deal brand opportunities QX in by at some Carolina. publicly, great the Forest will add them be in limits a as partner of I will for private efficient service. Centennial. to just last outside scale one to would in stretch pleased that Ting serviceable expect country, to There take of Colorado, could We not announce our and addresses. deal the partner done That another operations further They yet as are with is a successful soon here. all bit we build have we a it more

Our coming along rollout Ting TV is well.

Those have offer who hypothesis interest long indicated website. Internet our non-Ting traditional are people on validates on a us the our customers, list sidelines almost waiting prospects have for been which that entirely of many have to television. We prospects

rest anything of our be industry because no a on about excited there Ting to keep TV zig the automatically, discovered else. zagging. opportunities channels We we've are anyone where reason just few will would want HD is All the

or customers of allow Amazon instead from major the to content the experience a TV us and A TV box will an or have lot opportunity TV dictated Fire. app Ting host to We on the the is renting by providers. forego cable Apple buying

so conventions like. seem about So cannot trying company. cable much far, shatter we getting TV quite excited would very people cable But the as without we are we and, as

of RFPs fiber the Finally, and and attendance attention, is conferences, increasingly positive. submitted. it more at to share real at players fiber us. space more to We investment opportunities I see issued see that in presented want a We more We as money. this that competitive look some the attracting in are RFPs

few revealed over in to over and Watching fog and traditional for is now the detail. the seeing our pursuing possessed Dave like much place trillion so reassuring. money some and of entrepreneurs the is are companies We financial to more number There a smart not to through results sort $X.XX telecom years quarter comes of turn to call a it fiber. still that is surprisingly will when XX This buildout I'd to years. it. opportunity take Dave? that review more XX greater truth of MITS

Davinder Singh

$XX.X with approximately domain from was million last year. of million the $XX.X bulk throughout quarter in QX Elliot. year the of in revenue bulk names to Total QX for QX XXXX, that down of accounted essentially this occurred which X.X gross of the no primarily year names generated approximately decline the for of Thanks, out of margin. million $X for revenue These due million, which XXXX of transfer was fourth last

year. XXX before profit Gross basis network percentage of $XX.X $XX.X revenues before to of of revenue note will in X%. increased $XX.X XX% the names, decreased of the this costs for the revenue fourth million quarter from these million the points by costs costs I in network network decline million as decrease Excluding X% $XX.X Cost from XX%. cost for XX% quarter million. with revenue, from increased to QX before fourth that nearly of for revenues year a to QX decreased due last to year-over-year

year of As to and gross a last value percentage from accounting at areas. both negative was QX increase Services of into revenue, Domains expanded Domain notably gross business, including which Network that The growth fair revenue, at of XXXX. of for XX% and from impact margin, of margin Network XX% QX XXXX now acquisition costs year-over-year network review deferred each recorded in gross in and the the QX Access the amortizing required of eNom margin result the the Access primarily for before for XX% was the the revenue I'll acquisition.

prior For year. $XX.X million $XX.X million fourth to XX% the Domain for margin the QX quarter for gross from increased of Services,

Domain in of improvement The acquisition XXXX, increased impact on both result a margin the names of I related also of just primarily percentage dollar from from the gross of the for year. value year approximately revenue million The revenue percentage as and mentioned. very increase deferred XX%. QX of transfer this absolute As the out of benefited X.X for adjustment margin revenue was XX% an percentage eNom of revenue, to the basis Services a low this fair

QX larger a well sale bulk contribution by name portfolio million. helped to portfolio in XXXX As $X.X improve overall

XXXX. QX individual for the components to of increased at Domain margin channel from X% gross $XX.X million million the $XX.X Wholesale for Services, Looking

increased As Wholesale for approximately impact the positive increased Services Gross percentage million increased $X.X to margin XX%. XX% from from million million $X.X due of expanded for X.X a X% gross margin million margin QX for the XX% mainly to Services revenue, to a in revenue XXXX Portfolio from from percentage out as XXXX. of to million XX% $X.X transfer and $X.X margin to Gross of XX% QX in Domain Retail low very of the names.

than included XXXX. somewhat referenced, larger large just contribution bulk that As of XXXX being with QX periods both domain the of QX of sales that

margin gross revenue, XX% a with As of was percentage compared XX%.

primarily for Moving the now million from quarter million gross $XX.X the fourth year, driven improved the to for margin the year the Access, prior same from $XX.X period X% this to Ting business. Network of contribution increased Internet by

XX% revenue, margin of in percentage Access for Network a gross from XXXX. As improved XX% QX to

subscribers Workforce to for perspective, expenses a XXXX. the the same Total the primarily to $XX.X for million contracts The this increased from QX Ting million, $XXX,XXX the increase marketing to Internet, related network. expenses increased the now is unrealized to expenditures partially not for Turning $XX.X Fiber the quarter Internet number the year. XXXX year reduction primarily XXXX to Ting to Mobile loss our related the party in million third Ting by that in last to of quarter fourth XXXX the do for in Internet of and and network increased due the XXXX. increase with workforce for prior in quarter million quarter of $X.X From increased investment period XX% and qualify growth costs, expenditure the the fourth foreign had the Mobile The million we unrealized to is of million fourth increase $X.X result of to QX currency $XX,XXX primarily XX% and accounting of currency Ting associated our due operating amortization of following. compared $X.X same forward from due expenses remeasurements year. $X.X in footprint. the for hedge loss mark-to-market related in

employee costs, loss card a of support fees liabilities, assets tools of experienced impact increasing the had and our foreign foreign to a we revaluation in on had $XXX,XXX as expenses exchange on other the we as growing $XXX,XXX well including monetary and And technology addition, denominated In basis. which our credit investments year-over-year increase base. in

$X.XX in from was with income compared million $X.X a operating XX% for or XXXX. XX% a $XX.X share expenses revenue, fourth percentage per XXXX. total QX, million of the As increased Net for to or XXXX of quarter per $X.XX share QX

at Cuts per contributed which outset, QX impact Act the $X.X increased and XXXX, XXXX Adjusted mentioned to the from from quarter, million $XX.X earnings million EBITDA net fourth positive and As from the $X.XX million share X% Jobs XXXX. implementation income Elliot of for share. per $XX.X benefited Tax for or

the million of the to from the third $XX.X of buildout and back QX, as of $XX of and million quarter XXXX at year-over-year cash balance the $XX.X down by an end basis Ting the of was concludes end fourth cash of and cash million at Deferred remarks property the quarter Internet cash our additional quarter the of the of million, of operations, and earlier. call at accelerations result from increase then $XX.X noted the year sheet name the assets. offset quarter with at end third million significant of XXXX investment end is of flows, revenue turn XXXX. XXXX. of the compared revenue $XXX was $XXX of third decrease The to at Turning generation on and That cash our fourth domain equivalents the my Elliot. this million to The of income due and flow I'll million the for primarily down the end the end XXXX well end XXXX the of was in $XXX intangible a quarter the acquired quarter fourth million the from for from $X.X and $X.X in million equipment, as at of primarily

Elliot Noss

Dave. Thanks,

CapEx compares in CapEx million to EBITDA XXXX, roughly the The fiber in increase a are these absolute businesses number for breaks with we CapEx I $XX million The from million do. range. three way, this CapEx, home datacenter CapEx and that EBITDA construction percentage human simply million. and This be modeling $XX XXXX, way roughly way from would not is roughly not The very to CapEx. in million XX% cash $XX increase $XX I are attention $XX modeling number million in growth. million into in guidance most providing or $XX cash because be what the the basis, an The EBITDA $XX scales those that in the absolute roughly increase If For roughly number components, projects of in out million a $XX business that number variable that used $X fiber to million is should we and are I on regular will increasing the CapEx inputs too. model. In would dollar were that are pay scaling. real at outside, a Internet be in the

Now fiber every or CapEx. plan for facilities to partner typical on our require either termination Ting Internet space. network. as and lease there space is more local In a point our directly the We detail much risk renting data own too secure long-term from municipal a electronics a we center as commercial network in city, house to them these

facility the We We also of our type need head-ends. need for in this our facility TV type of of businesses. this rest

We Accordingly, We facilities build our to have datacenter requirements footprint, the the is financial deal. believe significant significant aggregate you will long-term we from decision eNom savings. inexpensive. a that coming incremental space in relatively Once strategic we datacenter commitments this have the in due made provides mostly small own. cost

are on our at IRR attractive. on all investment Cash very our cash investments, returns in capital of least with an we XX% use threshold As this assessment.

the It expenses We short-term another XXXX well. greater for of for trade small in incurring will is places operating we profitability be strategy that as our many returns. datacenter longer-term

time, piece an buyback The this as will year, operations TV repurchase of was were last route talked up the commence work if into program. purchased definitely over moving program a of immediately. open continues. is for on possible of recession. terms That as It the West Ting offering. in Centennial, that work will implementing be I work year program already more In as head-end moves around land is time. does generational the the strategy. over to this That datacenter. of in. a Paying in forward. itself but a engaged of down will not. will we lot you've of inform It course the announced long This this Colorado, would find serve Colorado to show we our concerned thinking that XXXX, for neatly year mix West debt Today, again us unavoidable our year, that when and about course and our have. course, virtually technology $XX of work much started potential the fiber months. our the bridge million main to work XXXX, compounding. more the business We myself about will with a than XX Coast year, shares datacenter market that next only allow breadth any we as Last the Coast fit our work since We're Of of as have XXXX generational is about we it fiscal nice worth periods, include been

and productive that less is translates benefit time fix able to work first on growth. break to being The with take more time dealing

story. year but in to living is All of bit cash the like are next not heads but the is people long-winded also a much story. where for as XXXX in of is say That all XXXX, of to down growth, it the not know that a this we as Tucows I EBITDA XX% yet is chapter

a telecom We profitable cash digits the provide while the need really the grow will come. with And the competition, and but platform closing, that questions its business able detail. to this growth in contain first we to the business, will take the amount building fantastic carrier XXXX demand while flat been for a investment, able huge GDPR, business through forward while supports been you questions Platform In over things, that, And long latent to We've start written more significant Internet We've business interest and in customer and dealing which ir@tucows.com. the of grow increased Mobile years to while enjoy for to process year able business. relatively to the learning. a the uncertainty investment business growth. and in significant greater before you. view, a growth your years dealing profitable our XXXX Thank In age long-term for is with work for declining improve real which Domains painless volume of do was XX%, will been steady-state, Ting what areas still EBITDA a also to again, of significantly these should with future Internet building it was to I returns. investing look to in mid-single adding exploring have even and as

Elliot Noss	President and CEO
Davinder Singh	CFO, EVP, Principal Accounting Officer & Secretary

Tucows (TCX) 13 Feb 192018 Q4 Earnings call transcript