Tucows Inc (TCX) 2011 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to Tucows Inc.'s fourth quarter 2011 conference call. Earlier this afternoon, Tucows issued a news release reporting its financial results for the fourth quarter. That news release and the financial statements are available on the Company's Website at tucowsinc.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 as well as at Tucows's Website.

Before we begin, let me remind you that 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 details in the Company's documents filed with the SEC, specifically the most recent report on 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's President and Chief Executive Officer Mr. Elliot Noss. Please go ahead, Mr. Noss.

Thank you, operator. With me is Michael Cooperman, our Chief Financial Officer. Today's call will follow our usual format. I'll begin with a brief overview of the financial and operational highlights for the quarter as well as the year on the whole. Mike will then review our financial results in more detail. And I will return with some concluding comments before opening the call up to questions.

Our continued strong performance in the fourth quarter concluded a year that was indicative of the consistency and reliability in our business as well as our ability to efficiently deliver growth.

Revenue for Q4 was another record, our seventh in a row, at $26.4 million, up 19% from the same quarter of last year. Importantly, we again saw growth generated in each key area of our business. Total revenue for 2011 rose to just over $97 million, also record. Cash provided by operating activities for the quarter was a healthy $2.7 million. And adjusted EBITDA for the year was $7.4 million.

Looking at each of our service groups individually, the fourth quarter saw another record for OpenSRS domain service transactions, which were up 20% year over year to more than $2.1 million. Domain service revenue was also up 20%. Both new registrations and renewal registrations continued to show strong growth, up 17% and 21%, respectively, excluding the impact of the two customers that became registrars earlier in the year. I will add that our renewal rate continues to hold steady at a level well above the industry average.

Total domains under management at the end of the quarter was also a record at $11.8 million, up 16% from a year earlier or, excluding EPAG acquisition, up 13%.

At YummyNames, our domain portfolio group, Q4 was another strong quarter for sales of individual names, which were up 24% year over year and 31% sequentially. In addition, our focus on increasing the average selling price of [brandables and gems] is clearly yielding results. Again, this quarter, we saw another record average selling price and had a good number of individual name sales in excess of $10,000. More importantly, over the past 12 months, the average selling price of individual names has more than doubled.

We are again pleased with the results from our new expiry stream partner, who continues to make bulk purchases at a healthy rate.

During the quarter, we migrated the majority of our owned and operated domain portfolio to the platform of a new parking partner. The positive results here contributed to flat parking revenue, which as I have noted in the past has been in a long-term period of decline.

Our retail services offering Hover had another strong quarter, with revenue up 22% compared to Q4 of 2010. And I will again note that the underlying performance of Hover continues to be masked by the deferral of revenue.

New transactions, which include new domains, transfers, and email accounts, were up 49% year over year and 22% sequentially. Hover renewal rates also remained strong during the quarter. And customer satisfaction, as mentioned by net promoter score, continues to increase.

Hover continued to see strong momentum with inbound transfers. In fact, transfers in outnumbered transfers out by almost five to one in the fourth quarter, boosted by our very public support of the open Internet and our stance against SOPA, the content industry legislation that was chased out of Congress.

As a result, in the late part of Q4 and early part of Q1, we gained significantly more customers than would normally be the case, including a number of high-profile clients, like Wikia, run by Wikipedia Founder Jimmy Wales.

Finally, our closed beta for Ting, our mobile phone offering in the US, ran throughout the fourth quarter. We made a number of refinements to our service based on the input of our beta customers. And on February 1st of this year, we formerly launched Ting to the public. The initial press coverage and response has been encouraging.

I would like to spend a moment sharing how we will talk about Ting for most of 2012. We are in this market for the long haul, viewing mobile as the most important technology trend of the next 10 years. We do not intend to talk about subscriber numbers, ARPU, or margins for at least the next few quarters. We do intend to share some of our experiences in the market to bring color to our experience.

In terms of expectations for 2012, I think we will be disappointed if by the end of the year Ting was not either on track to becoming or was already the Company's second largest service behind domain name registrations.

In summary, the fourth quarter and the year on the whole were periods of strong operational and financial performance. We continue to generate solid cash flow while achieving solid growth with minimal capital investment and minimal impact on our operating costs. All of this sets us up for a great 2012.

I would now like to turn the call over to Mike to review our financial results for the quarter in greater detail. Mike?

Thanks, Elliot. Net revenue for the fourth quarter of 2011 -- of 2010 (sic), excuse me, increased by $4.3 million or 19% to $26.4 million from $22.1 million for the fourth quarter of last year. This increase was the result of growth in each of the components of our business.

Cost of revenues before network costs were $18.5 million, an increase of $2.9 million or 19% from $15.6 million for the same quarter of the previous year. Gross margin before network costs for the quarter increased $1.4 million or 22% to $7.9 million from $6.5 million from the fourth quarter of 2010. On a percentage basis, gross margin was up marginally at 30% compared with 29% for the fourth quarter of 2010.

Gross margin from OpenSRS, which includes domain name services, email services, and other wholesale services, increased by $900,000 or 22% to $4.8 million from $3.9 million from the same quarter last year, the increase being generated by strong growth in domains and email. As a percentage of revenue, gross margin from OpenSRS remained essentially flat at 21% when compared to the fourth quarter of 2010.

Gross margin from domain name services increased by $652,000 or 24% to $3.4 million and reflects both higher transaction volumes from existing customers, the contribution of the EPAG acquisition that we completed during the third quarter, and the impact of the launch of the XXX registry.

Gross margin from email services increased by $188,000 or 42% to $612,000, primarily as a result of higher volumes that our email customers are experiencing as well as the impact of the lower pricing we have been able to negotiate with one of our third-party suppliers.

Gross margins from YummyNames increased by $115,000 or 9% to $1.5 million from $1.4 million for the same period of 2010. The increase primarily reflects the timing of portfolio domain name sales as well as higher expiry stream sales following our move to a new partner. On a percentage basis, gross margin for YummyNames was slightly higher at 89% compared with 88% for the same quarter last year.

Gross margin for Hover increased $110,000 or 14% to $884,000 from $774,000 for the fourth quarter of 2010, primarily due to the continuing success we have been having in attracting and retaining customers through our marketing and branding initiatives. As we've discussed on past calls, the simplified Hover pricing model that we implemented as part of our marketing initiatives has had a small impact on gross margin as a percentage of revenue, which fell to 62% from 66% in the same quarter a year earlier.

Gross margin for Butterscotch increased $328,000 or 76% to $752,000 from $424,000 for the fourth quarter of 2010. The increase was the result of specific marketing initiatives undertaken by one of our vendors. These initiatives may not be recurring. The increase was partially offset by lower contributions from corporate video initiatives as well as from our author resource center and display advertising from the tucows.com desktop software libraries. On a percentage basis, Butterscotch's gross margin was up slightly to 99% from 98%.

Turning to costs, network costs for the quarter decreased $138,000 or 9% to $1.3 million from $1.5 million for the fourth quarter of 2010, primarily the result of the efficiencies we have achieved in operating and managing our collocation facilities as well as the decreased commitment we have needed to make in capital expenditures on network equipment.

Total operating expenses for the fourth quarter increased $177,000 or 5% to $3.9 million from $3.8 million for the same period of 2010. As a percentage of revenue, total operating expenses decreased to 15% from 18%. The increase total operating expenses primarily resulted from an increase in payroll-related costs of some $400,000 when compared to the fourth quarter of 2010 and mainly reflect annual increases and the addition of EPAG in 2011.

This increase was partially offset by recording a gain on foreign exchange of $168,000 and a decrease in amortization of $142,000 when compared to the fourth quarter of 2010.

I will note that, during the quarter, as part of our efforts to improve our disclosure, we reassessed how we have been disclosing the impact of maturing currency exchange contracts and concluded that a clearer and more transparent presentation would be to offset any impact maturing contracts have against the gain or loss on currency-forward contracts line, rather than the G&A line. The result of this reclassification is that the aggregate impact of the forward contracts is presented on one line, and the trend in our G&A expenses can now be tracked without having to make an adjustment for ForEx impacts.

Total operating expenses as a percentage of revenue fell by 3% to 15% when compared to the fourth quarter of 2010.

Net income for the fourth quarter of 2011 was $6.1 million, or $0.11 per share, compared with net income of $1.2 million, or $0.02 per share for the fourth quarter of 2010. Included in net income per share for the fourth quarter of 2011 is a tax benefit of $0.06 per share related to the release of deferred tax asset valuation allowances.

Cash and cash equivalents at the end of 2011 were $6.4 million, up by $1.7 million from $4.7 million at the end of the third quarter of 2011 and up by $2.2 million from $4.2 million at the end of 2010. The increase compared to the end of the third quarter was the result of cash flow generated by operating activities of $2.7 million. This was partially offset by our repaying $710,000 of our credit facility with the Bank of Montreal and our investing $221,000 in purchasing property and equipment.

I will note for you that, in anticipation of the release of Ting, we began to invest in phone inventory during the fourth quarter and, as of the end of 2011, had just over $200,000 of phone inventory on hand.

Deferred revenue at the end of 2011 was $69.2 million, an increase of 11% from $62.6 million at the end of 2010 and up just slightly from the end of the third quarter of 2011.

In summary, our financial performance for the fourth quarter was very much indicative of our strong performance for the year overall and continued to reflect the leverage in our business model. We continue to grow our top line, deliver solid cash flows from operations while prudently managing costs, all of which are indicative of an underlying health of our business and position us well for the future.

I would now like to turn the call back to Elliot. Elliot?

Thanks, Mike. We've always been committed to transparency. And as part of our ongoing effort to help you track our performance, at the end of Q1, we will be making some adjustments to the way we report our results. These changes will bring our reporting more in line with where our business has evolved to in 2012.

Butterscotch has become a less important contributor to our overall business and will no longer be broken out separately but will instead be part of a broader content number along with much of our direct navigation revenue. We also recognize that a lot of the expiry stream revenue is more rightly attributed to the OpenSRS business.

Finally, on that Q1 call, we'll be sharing how Ting will be covered in the numbers as the business ramps up. We are also considering the adoption of hedge accounting for forward-exchange contracts that qualify for this treatment to offset the mark-to-market movements that often result in significant earnings volatility.

Ultimately, the Tucows story is a simply one. And we believe these changes will help you follow our Company better.

Before I open the call to questions, a few words about our most recent buyback. As I've discussed many times, Tucows is a publicly traded company that consistently generates cash while achieving growth without requiring much capital. We are committed to returning capital to shareholders over the long term.

Based on our continued confidence in our business and the attractiveness of our shares, in December, we initiated our sixth modified Dutch tender auction. Under the tender, which was completed in January, we repurchased 7.6 million shares or 14% of our total shares outstanding prior to the tender.

Since initiating our first share buyback program in February of 2007, we have repurchased a total of 3.8 million shares or just over 40% of shares outstanding.

2011 was another solid year of financial performance. However, it was also a year in which we launched more new services than in any other year in our history, while at the same time making important improvement to our existing services.

As a result, we enter 2012 with significant momentum. We believe we have the best distribution channel in the Internet economy. And leveraging this channel as we are through the continued introduction of new services, such as Ting, will support our continued growth and diversification beyond domain registration.

Our ability to do this in an efficient manner with little capital investment or impact on operating expenses will support both our ability to consistently generate cash and our commitment to returning capital to shareholders over the long term.

And with that, I'd like to open the call to questions. Operator?

(Operator Instructions). Your first question comes from the line of Alex Grassino from Laurentian Securities. Your line is open.

Good afternoon, gentlemen. Nice quarter.

Hi, Alex. Thanks.

In terms of Ting, can you just give us some of the lessons you might've learned off of the beta that you ran, or were there any -- ?

-- Sure. Sure. Yes, there were -- I mean, what we really want to do, whether it's Ting or the rest of our business, is really let the market teach us. There were a couple things that we were very much able to take away.

There were, of course, all sorts of [nits] that got worked out and presentation of certain ideas and certain ways. But, I think two big ones that I'll call out, a first was that there is a real resonance for Ting with small businesses. And that was something that I've talked about a little bit in the past. I think I might've mentioned it on the last call. But, it's something we're very clearly -- we didn't appreciate how underserved that niche might've been.

And so, we've done some things, for instance, in the way that we're presenting and allowing multiple phones. We've taken sort of the easy presentation of a number of devices in a bucket up from six to 20 as an example. And we'll go past that. But, that's just in the presentation, so that small business opportunity.

I think the second large one was what I like to jokingly call moms ride free. So, what you had was -- and again, I think I touched on this last call, but I want to go a little further with it -- is really an appreciation by some -- I'll call them smarter, more sophisticated customers, which is just the kind of customer that we think Ting should appeal to that, if they added a parent and got their parent a cell phone, often a feature phone, the lowest least-expensive phone they could get from us, that essentially they would only have to pay the $6 fee to keep the device alive because it would be rare that the parent's usage would actually drive them up into an additional bucket.

So, from that perspective, you're paying $6. You're keeping your parents there. You can manage and track their usage, deal with their problems, which as a good geek you are probably doing anyway. And there's a real resonance there. So, it's again that just something that emerged up from the customer set that was great learning. And it's fantastic from our perspective.

Great. And just I guess more technical question in terms of inventory, you have any sort of conceptual ideas where you want to keep inventory levels for your phones?

I think the short answer is as low as possible. We're putting a fair bit of effort -- the two places we're putting a lot of our focus outside of, of course, the marketing and distribution, which is the most important thing -- is really building some excellence around managing the inventory. And the second is really being pristine around the customer experience.

With inventory in particular, I don't want to give you a days in inventory because I think even our targets are going to be different phone to phone and are going to be different quarter to quarter. And in fact, I think that the channel for the [cyclical] distribution of phones is really going to evolve a lot over the next 24 months. But, we've modeled this out. And we're pretty comfortable that we'd love to have the problem of having to carry huge inventory because it would be a sign of real, real success.

I see. And just one last quick one. I haven't heard anything on GoMobi for a little while. Can you maybe give us a bit of an update there?

Sure. GoMobi is continued to grow. It's -- we're happy, reasonably happy with adoption. Everybody, whether it's our partner on the supply side or some of our customers would love to see that stuff ramp up quicker. We're still positive about it, and we're still seeing growth there, just not enough that it would warrant sort of materially talking about on the call.

Okay. Perfect. Thanks. I'll pass the line.

Thanks, Alex.

Your next question comes from the line of Thanos Moschopoulos from BMO Capital Markets. Your line is open.

Hi, good afternoon.

Hi, Thanos.

Hi, Elliot. To clarify a comment you made earlier, you said that you expect Ting to become your second largest piece of business as we head towards the end of next year. Are you talking about from a revenue perspective or from a margin contribution perspective?

Well, I think it would be as a goal, as an aspirational goal. It would be both. And there, just to be clear, too, we're talking about outside of domain registration. So, I'm comparing it to things like SSL and email.

Okay. Okay. And then on the YummyNames business, you've had some consistent revenue there over the past few quarters. Did we get to a point, though, where you start to work through a lot of the asset base that you have and we have to start worrying about that revenue sort of starting to tail off, or is that just constantly being replenished from the expiry stream?

Yes, no, there is no worry in sight there. I'll tell you the way we think about it internally is as if we have infinite inventory. And I don't mean that literally, but I do mean that the -- we are adding names through the expiry stream faster than we're selling them, which means that we don't have to think about the problem of depletion yet.

So, we're really focused -- and you heard me making some comments on this -- on maximizing total revenue. And you've heard me talking about price inelasticity in the past. So, that's not -- doesn't mean just hit every bid you get. You will not maximize your revenue by doing that. So, we're really constantly tweaking that and really just trying to sort of tick up on the total revenue.

But, I guess bottom line is we're seeing the domain transactions growing at a very, very healthy pace. So, similarly, I mean, your asset base is presumably growing at that pace as well.

Yes, we're comfortable that we can continue along on the pace we're going.

Yes. Okay. Now, you've kept OpEx pretty flat in recent quarters. Now that we've had sort of an uptick in your growth and in your margin contribution, might you start to invest a little bit to capture some of the opportunities in front of you, maybe accelerate your traction in Ting and so forth, or should we think about OpEx being pretty consistent going forward?

You always heard me talk about -- or in fact, I really -- I haven't talked in the last maybe a few quarters. But, you've heard me talk for years about sort of looking to spend no more than $0.50 of every additional $1 generated in OpEx. And that's billed gross margin dollar. We're always looking for opportunities to take advantage. And I think this is no different as some of these opportunities present themselves, as a little bit more growth presents itself, we're going to embrace it. We're not averse to that at all.

Okay. And it sounds -- you made the comment that, as you got towards quarter end, you had sort of a benefit from maybe some of the boycotting of other registrars that was happening out there. Has some of that momentum continued into the quarter, or should we think about that -- go ahead.

Well, what I said was we benefitted from our support of the open Internet -- .

-- Okay -- .

-- Just to be clear. But, that -- really that was primarily through the last week of December and the first couple weeks in January. So, it did carry on into the first quarter. But, it's -- now, it's business as usual

Right. Okay.

I mean, we have a bunch of new customers. And of course, as they come over, they bring over maybe their domain portfolios. They speak to their friends, etc. One of the great ways to track Hover is just looking at Twitter and watching mentions about Hover or hover.com or hash-tag Hover. You really get a great flavor for the ground swell and support and real customer appreciation for Hover there.

Okay. That's it for me. I'll pass the line. Thank you.

Great. Thanks, Thanos.

Your next question comes from the line of Jim Kennedy from Marathon Capital Management. Your line is open.

Hi, Elliot.

Hey, Jim.

Congratulations on a great quarter.

Thank you.

Couple housekeeping issues. With the buyback, shares outstanding at this point, are we kind of in that 47 million range?

I want to say 46 million, but Mike's going to correct me.

No, 46 million is right.

Okay. So, okay. So, we're at 46 million. All right. Very good. Secondly, I missed the context of your mark-to-market comment earlier. What were you referring to that you were going to mark to market starting next quarter?

We're going to -- we're considering it. And what that would do would be to take the sort of the lumpiness out of the way we report, take that big correction for currency and sort of blend it in with the rest of the accounts. So, it's a lot less of a big bite going down the gullet might be the best way to put it.

So, what are you not marking to market now that you would mark to market at that point?

It's just a different presentation of the same contracts. So, we're doing nothing different. We would do nothing different in the way we hold contracts or hedge currencies, nothing different in our strategy or our tactics. It's just simply the presentation. And to take this mark-to-market approach is more work and more expense. And you know that I always look very carefully at every expense, Jim. And so -- .

-- Got it -- .

-- There's been a constant dialogue. And the tradeoff is, is this bit of extra effort and extra spend worth the cleanliness in the presentation? And we've got a little bit of a better handle on the work, and we've beaten up our suppliers a little bit more. So, we're looking at it a little more closely.

Okay. Good. Next question, are you seeing any traction whatsoever in the expansion of the high-level domain name yet, or are we still in the kind of warming up, waiting for the first inning there?

Well, I think this is more like they're introducing the opening lineups than quite the first inning. So, things are continuing apace. I repeat what I always say, which you've heard me say to you for years. No revenue until 2013 at the earliest. But, it was announced very recently that there's now 100 applications in the queue. Applications will be coming in until April 12th. And we will be, I'd say, surprised if there's not the full 1,000 or 1,000 plus in there by April 12th.

And sort of towards the end of April around May 1st, there is what those of us in the industry are calling the reveal, which is when ICANN will turn over all the cards and let us know who's bid on what and where there's contention and where there's not. So, this is continuing exactly as it should, but again, no acceleration in the potential for revenue.

Is the thought there on ICANN's part that, if I did win something -- let's suppose I'm the only person that wanted a name -- .

-- Yes -- .

-- That I would be able to start my business immediately, or there is some sort of additional process I'd have to go through?

No, there's significant additional process that will take it through the rest of 2012. And that's really -- those are the processes that you might've seen some of the opponents to the new gTLD program claim weren't in existence. And so, this is a period where there's a significant amount of time and rules built around, for instance, intellectual property challenges to a string or governments have an ability to challenge around a string. There's room for what's called community objection. There are a few different heads of objections there and different processes that will run their course through the rest of 2012.

Gotcha. Okay. And final question, could you drill down just a little bit on the Ting marketing strategy in terms of kind of who you think your target market is at this point and how you're attempting to reach out to them, be it through social media or whatever? And I would assume, as you learn more over the next few months or year, that strategy might change as your subscriber base grows or your potential subscriber base grows.

Yes, I'm going to deal with the last part first. We're always -- we're in an industry, and we're as a company (inaudible) trying things and then doubling down where there's success, learning from what we're doing. And one of the things we think that's beautifully built into our business is the ability to experiment very inexpensively. And that allows us to do some of that learning in the market.

So, when you talk (inaudible), I really love to talk about sophisticated customer. And you've heard me use touchstones like Zipcar or ING before. Customers who appreciate a different way of doing things, what we think is a better and less expensive way of doing things, it's really built around the customer.

And in terms of how we reach them, we're going to use initially at a retail level one of the same approaches (inaudible) success before us -- .

-- Elliot, I don't know if it's my phone or not, but you're breaking up. It's probably me. Why don't you -- I'm going to hang up (inaudible) -- .

-- No, is this better?

That's better.

Okay. So, what we're going to be doing at a retail level is we'll be using a lot of the tactics that have been successful with us with Hover. And that's including going into the podcasters who've we've been very successful with, other online marketing approaches. We're going to use some of our [page] portfolio to try and promote Hover.

And on -- and of course, they're all buttressed by really the smart use of social media to reinforce the successes there. And then on the wholesale side, we're going to see in this quarter the start of experimentation, both in terms of using bigger partners for lead generation and smaller partners who have really, really tight customer touch in order to have a more direct relationship.

So, you're going to see for those very small IT integrators, we think they could have a huge role in putting Ting in the hands of their customers. And I think when I talked earlier in the call about sharing some of our in-market learning for the next few quarters, those are the kind of stories you're going to hear me talking about.

Gotcha. Okay. All righty. Very good. Thanks a lot.

Thanks, Jim.

Your next question comes from the line of Aram Fuchs from Fertilemind Capital. Your line is open.

Yes, it's actually a follow up to that. The big expense for the American wireless providers has always been the marketing, averaging hundreds of dollars per sub, acquired sub. And you mentioned that you have some big customers in the domain space and many little small IT integrators. So, it seems difficult to understand how these guys would be able to help you. Can you detail that more often -- detail that in greater specificity? That'd be helpful.

Let me try it like this. I think you'll see a number of our large partners are really broader than Webhosting companies at this point. They have a full suite of services that they offer to small businesses and individuals. And a lot of them have developed a fairly high level of expertise in cross selling and upselling.

So, think of Ting as some -- an additional service that they'll be offering, both in their purchase paths and in their control panels as well as in outbound emails to their customers.

And if I recall correctly, Aram, I think you're a Hover customer. You might start to see some of that this month.

I am a Hover customer. And I am one of those that transferred some domains in, in recent months.

So, you might see -- if you're in a test group -- in fact, reach out to me offline. I'll put you in a test group. You'll see some of that. You'll start to see some of that in Hover this month. And when I say that you'll see, what you'll see in Hover, it's what some of our other larger partners are going to be doing. Do you want to dig in a little before I go onto the small IT integrators?

No. Go onto those.

Okay. Good. So, and with the small guys, they're people who have these fantastically tight relationships with businesses that have typically less than 100 employees. They are dealing with everything from the desktop through to the domain registration to the Website. And in a lot of cases, what they've told us is they're actually dealing with the cell phones for their customers anyway. They're just not part of the economic equation today. So, they're the ones who have to call AT&T and deal with AT&T's customer service.

So, for them, the prospect of being able to -- two things, one, get compensated for what they're already doing; two, be able to provide their customers most importantly with less expensive higher level of service that they have way more control over, they the IT integrator have way more control over, they're thrilled.

So, those are the two types of relationships. And you know with anything that we do, it's a very, very heterogeneous group. So, it's not like there will be only two. But, I want to use those two touchstones to sort of talk it through at this point.

Right. And then the economics of the deal with bandwidth and minutes and things like that.

Yes.

Give us the parameters of the contract. How -- these pricing models tend to change quarterly. There's move here to move to unlimited bandwidth in data sometimes and then caps in others. And I'm just curious if -- previously, one of the MVNOs was public and didn't have a good experience. How does that contract -- how does your contract differ than the first generation of MVNOs?

Well, I think that Sprint, like I've talked about a few times in this call, has learned from their experience in market. And we're -- we have a lot of -- when I say flexibility, we're buying network from them. I think that there's probably two or three things that I would note there. First, we built the whole billing and provisioning system. We built the whole rating engine. I think we did that because of where we've come from as a business and what our other business experiences were.

But, that's unique. Most MVNOs don't do that. And by not doing that, they would have a lot more constraint around their flexibility. And they would change their own economics. So, by doing that, we really do turn Sprint into a pure network, [a dumb pipe].

I think the second thing is I've been in this industry a long time. And network prices only go one way in my experience. So, we're not worried about price shocks in terms of our costs being increased at some point.

And I think the third thing is that I'm very comfortable and every action has been that Sprint has been a great partner. And really, they think we're bringing something a little different to the market from what they've seen in the past. And the early press reaction, as you've seen it, Aram, has only reinforced that.

I mean, the fact that when AT&T -- when there's an article now talking about AT&T's allowing for bundling of data plans, in other words, for people to share data buckets, and we're already referenced as kind of the only supplier in the market doing that, that's with us being in the market two weeks. So, I think that's really reinforcing the kind of the three or four or five big differences that we've brought are really being recognized.

Great. Thanks for your time.

Thanks, Aram.

And there are no further questions at this time. I turn the call back to the presenters.

Thank you. And I look forward to you all joining us next quarter. Thank you, operator.

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