Web.com Q4 2006 Earnings Call Transcript

TRANSCRIPT SPONSOR

Web.com, Inc. (WWWW)
Q4 2006 Earnings Call
March 13, 2007 9:30 am ET

Executives

Peter Delgrosso - Senior Vice President of Corporate Communications
Jeffrey M. Stibel - Chief Executive Officer, Director
Gonzalo Troncoso - Chief Financial Officer, Executive Vice President

Analysts

Colby Synesael - Merriman Curhan Ford
Stanley Cohen - Atrium Advisors

Presentation

Operator

Good day, everyone, and welcome to today’s Web.com fourth quarter conference call. Just a reminder, this call is being recorded. At this time, I would like to turn the conference over to Mr. Peter Delgrosso, Senior VP of Corporate Communications. Please go ahead, sir.

Peter Delgrosso

Thank you, Lisa. Hello and welcome to Web.com's fourth quarter and fiscal 2006 earnings call. On the call this morning are Jeff Stibel, President and CEO; and Gonzalo Troncoso, CFO. Following prepared statements, we will open the call up to questions.

As a reminder to those of you who would like to listen to this call in the future, a webcast replay will be available at www.web.com, under the Investor Relations section.

During this conference call, we may make projections and other forward-looking statements. The company believes that its estimates and expectations are reasonable and are based on reasonable assumptions. However, risks and uncertainties related to future events could cause actual results to differ or differ materially from the expectations. For a full disclosure of the risks and uncertainties associated with the company’s business, please refer to today’s press release and the company’s recent filings with the SEC, including its annual report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K. The company does not intend to update and assumes no obligation to update any forward-looking statements.

This presentation may contain information, such as the financial measure “adjusted net income from continuing operations”, that is deemed to be a non-GAAP financial measure. A reconciliation of this measure to the most directly comparable GAAP measure is contained in the company’s press release issued this morning. The press release further describes management’s reasons for utilizing the non-GAAP financial measure and limitations on the use of this measure.

Now I will turn the call over to Jeff Stibel, President and CEO of Web.com. Jeff.

TRANSCRIPT SPONSOR

Tucows Inc. (AMEX: TCX) is the largest Internet services provider for hosting companies and ISPs. Through 7,000 partners globally we provide millions of email boxes and manage over five million domains. Tucows remains one of the most popular download sites on the Internet. Tucows Inc. makes the Internet easier and more effective by reducing business complexity for our B2B and B2C customers as they acquire and deliver services to millions of Internet users around the world. View our SEC filings, news releases, and learn more about our company and services. To sponsor a Seeking Alpha transcript click here.

Jeffrey M. Stibel

Good morning and thank you for joining us. 2006 marked an important transition in the company’s history. Through a lot of hard work and determination, we were able to organically grow revenues and subscribers while significantly reducing subscriber acquisition costs as we continually kept an eye on cost controls and efficient spending. I am very proud of the entire Web.com family of 285 employees. We have taken a major step and it is directly due to their efforts.

As a reminder, 2006 was the first full year under new management and the first time we reported a full fiscal year on a calendar basis. At a macro level, we are encouraged with what we have been able to accomplish, but by no means content. We made the necessary steps to get the business in order and began to demonstrate our capacity to grow, something that we intend to exploit further in 2007. We still feel that we are in the early innings.

During 2006, we proved that this company is able to grow. We grew subscribers both through acquisition and more importantly, organically. For the year, the company grew its total subscriber base by just over 18,000, taking it from approximately 137,000 in December 2005 to approximately 155,000 in December 2006.

In our business, we focus every day on creating efficiencies, specifically across our technology infrastructure. It is clear that the more efficient we become in maintaining and serving our customers, the better the cost savings. To that end, we recently began to move our subscribers to a new hosting and e-mail platform that incorporates best-of-breed technology utilizing Microsoft Server platform to efficiently power our customers’ websites and provide operational benefits. Microsoft is our platform of choice and will assist us in realizing savings and efficiencies moving forward.

In addition, throughout 2006 and in particular in Q4 of 2006, we have also been focused on consolidating our server footprint. The result to date has been roughly a 30% reduction. While this has resulted in some churn, as reflected in our higher churn totals quarter over quarter, we have started down the path of increased cost savings. This is the early part of a long-term project that we expect will result in millions of dollars of savings annually.

I would like to take a moment and explain why this consolidation is important. Historically speaking, Interland had over two dozen independent hosting platforms. This bloated infrastructure had millions in excess costs. For current shareholders, this inefficiency presents an untapped opportunity for cost savings. Our goal is to take advantage of this opportunity as we believe there are considerable savings. We will increase our migration efforts and server consolidation going forward to decrease costs.

This will have two effects on the company. The first is higher short-term churn as we consolidate and migrate to one platform. While it is our intention to minimize customer impact, it is clear that as we consolidate and migrate, churn will increase in the short-term.

The second, which we believe will more than offset churn, is an end result of millions of dollars in annual cost savings. As I mentioned, we have already begun the process and expect to realize these material savings toward the end of 2007. For this reason, we intend to give investors added visibility into our subscriber line during 2007 as we disclose not only our net subscriber additions but our gross numbers as well. This metric really gives you a good understanding of what we are achieving, absent any short-term churn.

In the fourth quarter, we added approximately 18,000 gross sales units. Roughly a year ago, for comparison in the November 2005 quarter, we added around 8,000 gross units for the quarter. With a 129% year-over-year growth rate, it is crystal clear that our growth engine is well-tuned.

During the fourth quarter, we also added over 3,000 net new Web.com subscribers, all through organic means. It is important to note that we were able to achieve this growth efficiently at an $88 subscriber acquisition cost, $1 less than the third quarter and on the extreme low-end of our range.

We are laser-focused on growing subscribers organically as it fuels our business model and affords us opportunities to drive incremental revenues.

Based on our subscriber growth model and favorable customer acquisition and customer economics, we anticipate increasing our marketing spend to take advantage of these conditions. While this will impact our path to profitability short-term, we are adamant that it is the right approach. We are not taking a short-term view of this business, but rather a long-term view that favors consistent and profitable growth. We have already begun this effort.

As a result, we expect SAC to increase in the short-term as we test new media. It should normalize over time. This is because when you initially increase spend, SAC spikes in the beginning as new media is tested and normalizes over the media spend cycle, as you have seen throughout 2006. As a company that is rooted in achieving significant growth that drives top-line revenues, the last thing that we will do is stunt growth by taking a short-term view.

The company has also launched a price optimization strategy to increase ARPU, or average revenue per user, and revenues over time and we are happy to announce ARPU grew sequentially by 4% in the fourth quarter. We typically bring new users in at a lower price point and it is our goal to raise prices to more optimal levels over time. We achieve this through offering introductory prices and subsequent increases and upselling our customers to value-added services, such as perfect privacy, e-commerce, marketing services and design packages.

To that end, we were able to raise ARPU from $24.78 in the third quarter to $25.77 in the fourth quarter. This roughly 4% increase is a telling metric that demonstrates the power of our model.

On the partnership front, we made progress throughout the year. Speaking specifically about the fourth quarter, our retail channel added two new well-known brands as our retail product was picked up by Best Buy and more recently Target. To date, we have a retail presence at approximately a dozen retailers across thousands of retail locations in the U.S., including OfficeMax, Office Depot, Amazon.com and Fry’s, to name a few.

During the fourth quarter, we forged relationships with several like-minded companies, including a deal with LegalZoom, for various legal services geared for small businesses and entrepreneurs, and PR Web, for press release distribution. Both partners share the same small business customer base and are quite complementary. These companies’ services are logical web service add-ons for our base and afford us with a high ARPU product to sell. In LegalZoom’s case, they will also co-market our websites and web services into their base.

More recently, we were able to sign a new partnership with YP.com, an online directory provider with a large customer base that fits well within our target demographics. At a high level, the deal allows the companies to cross-market websites, directory listings and web services to small businesses nationwide. YP has over 100,000 customers and has done a great job growing their base. This is yet another case of Web.com partnering with a complementary company to jointly market services intended to drive value for our small business customers. YP’s CEO Dan Coury has done a great job since taking over and we are eager to make our partnership strong.

During the fourth quarter, we continued our efforts to monetize our strong patent and intellectual property position, and currently have ongoing discussions with several hosting and non-hosting companies regarding licensing our innovations. In addition, we continue to be awarded patents and recently received our twentieth. We continue to feel strongly that our patents and intellectual property are one of the most valuable assets our company has and needs to be treated properly to be accretive, rather than combative.

Looking ahead to 2007, we anticipate continuing our efforts along this initiative and look to transform this business line into a revenue generator for the company.

Before I turn the call over to Gonzalo, I would like to add some color around why our net income and adjusted net income from continuing operations declined quarter over quarter. During the fourth quarter, our increased legal expenses and accrual for annual employee bonuses impacted these two financial metrics.

During the fourth quarter, we spent over $1 million on the legal line. This roughly $400,000 increase in quarterly legal spend was a result of more time spent resolving legacy legal matters and preparing for key cases in 2007. We have said numerous times that as we dispose of these legacy legal matters, it positively impacts the bottom line long-term.

While legal costs were higher quarter over quarter, we did have some results to point to in two cases in particular.

In early 2007, we achieved a legal victory in our case against Pair Networks, in which we were able to declassify a class action suit. This means that the maximum amount that the plaintiffs can claim has been reduced from more than $50 million down to about $4,500.

On January 13, 2007, the company settled with a former insurance carrier regarding a legacy legal case dating back to 2000. After deducting the company’s fees, the company received a net payment of approximately $3.6 million, which will be recorded on the company’s financial statements and will positively affect net income in the first quarter.

The second event that impacted net income and adjusted net income from continuing operations was the accrual of employee bonuses. During the fourth quarter, the company accrued approximately $600,000 in employee bonuses for the first time in 2006. Our team has done a tremendous job transforming Interland into Web.com and they deserve to be rewarded. The last time the company paid bonuses was approximately 16 months ago. We have achieved a lot since then, as a direct result of our passionate and goal-oriented team.

With that said, I will now turn it over to Gonzalo Troncoso, our Chief Financial Officer, for more detail on the numbers. Gonzalo.

Gonzalo Troncoso

Thank you, Jeff. Revenues totaled $12.5 million for the fourth quarter, up from $12.3 million in the third quarter. This growth was the result of our continued success in adding new units, coupled with a significant increase in ARPU. Direct sales and marketing continued to drive the bulk of the growth. However, we have seen a marked improvement in the results of our retail channels. It is important to note that the success of the retail channel will be maximized in terms of revenue by the second year of the customer’s life. We are building a future revenue stream here.

Net loss for the quarter was $2 million, or $0.13 per share, compared to a loss of $600,000 or $0.04 per share in the third quarter.

Adjusted net income from continuing operations, which excludes discontinued operations, interest, income taxes, depreciation and amortization of intangibles, and stock-based compensation, came in at a negative $800,000 for the fourth quarter, compared to $100,000 in the third quarter.

I would like to reiterate a few items that affected net income and consequently adjusted net income from continuing operations.

First of all, we spent over $1 million in legal expenses, or about $400,000 more than in the third quarter. Additionally, we accrued about $600,000 in annual bonuses, which we decided to accrue as we experienced sustainable and consistent growth.

What is important to note here is that the fundamental cost structure of the company has not changed from the previous quarters, and it is expected to improve as we move forward with our consolidation efforts and implement further operating efficiencies.

For the fourth quarter, Web.com added over 3,000 net new subscribers, which brought our total count to approximately 155,000. From an annual perspective, we were able to grow net new subscribers by 13% and gross subscribers by 129%.

SAC, or subscriber acquisition costs, was approximately flat quarter over quarter, and again at historically low levels. Our subscriber acquisition cost was $88 compared to the third quarter, where it was $89. We expect SAC to increase over time, back to within previous ranges as we spend more in advertising.

ARPU, or average revenue per user, was $25.77 for the fourth quarter, a significant increase over the $24.78 reported in the third quarter. I am extremely encouraged by this improvement and the compounding effect it has on our financials.

Churn was 2.9% for the fourth quarter, up from 2.6% last quarter. This increase in churn was fully expected. As unit sales increase, the percentage of customers in the earlier stages of their lifetime increases, and as we have indicated before, the earlier stage is subject to higher churn rates. After that, churn normalizes as the customer matures.

In addition, we expect to see higher churn rates as we intensify our migration efforts, which are expected to generate significant cost savings.

It is important to note again that in 2007, we anticipate ramping up marketing spend in order to take advantage of profitable customer economics. We have already increased spending in the first quarter of 2007.

If you think about our fourth quarter metrics, 2.9% churn rate and $25.77 ARPU, it translates to a total lifetime value of approximately $900 over 34 months. I think it is easy to see that investing $90, $100 or even $200 to acquire an account that is expected to bring $900 of lifetime value is a solid financial decision, particularly in a business with very low margins, upwards of 80%.

Our cash and investment position stood at $21.1 million at the end of the fourth quarter, down from $24.4 million at the end of the third quarter. This $3.3 million reduction in cash was mostly due to a $2.2 million total reduction in total liabitilies, $500,000 in capital expenses, and other changes in working capital. This balance does not include the $3.6 million we received in the first quarter for the settlement with the insurance carrier. We continue to feel strongly that at current levels, we have adequate cash resources to maintain and grow our business.

Finally, an update on our NOL, or net operating losses. As of December 31, 2006, Web.com had approximately $320 million in NOL carry-forwards, a tremendous long-term asset that we are very careful to protect. On March 7, 2007, the Board of Directors voted to terminate the shareholder rights plan early. The termination of the rights plan is effective today, March 13, 2007.

As many of you know, in July 2006, the company announced that the Board of Directors approved a plan designed to protect this asset. NOLs provide tax breaks that companies can leverage against taxable net income. By adopting the rights agreement, the Board acted in the best interest of the shareholders as the rights agreement protected the company’s ability to carry forward its NOLs. The plan lasted roughly seven months and achieved its goal of protecting our NOLs.

Currently, there is enough of a buffer in our shareholders ownership composition that the Board felt it was reasonable to lift it at this time. Moving forward, this plan may be considered again if we enter a similar situation with our NOLs being at risk, due to the change of ownership provision of Section 382 of the tax code.

I would now like to turn the call back over to Jeff for his final comments. Jeff.

Jeffrey M. Stibel

Thank you very much, Gonzalo. 2006 was clearly an important year for the company. The progress we made has provided us with considerable momentum heading into 2007. The two themes that I see for the company moving forward are quite simply growth and consolidation. We plan on spending more on customer acquisition and have already begun to do so in the first quarter of this year. We also intend to streamline operations further through server consolidation and migrating customers to our new hosting and e-mail platforms, which we calculate will result in millions of dollars in cost-savings.

I would like to reiterate a few points that Gonzalo made so we are all on the same page. By terminating the rights plan early, this means that investors are clear to purchase Web.com stock at any level. Previously under the plan, investors would have essentially needed to seek board approval over 4.9%. This is no longer the case.

One final update before the question-and-answer segment; yesterday, we received word that the court in the FTC versus WebSource Media litigation had approved the receiver’s final report, thereby clearing the way for the receivership to be lifted from WebSource Media. As a reminder, Web.com purchased WebSource Media in May of 2006 and subsequently wrote off the acquisition after WebSource Media was sued by the FTC and placed under receivership. The company has been under the control of the court-appointed receiver since that point and it continues to be subject to the FTC suit.

As a result of the receivership being lifted, WebSource Media is now technically under Web.com's immediate control. We will continue to segregate this business and believe it has little inherent value, which is why we wrote off the asset in the second quarter of 2006. Moving forward, we expect to establish a management agreement with a subsidiary and continue to take a very conservative approach with the business.

We are now ready to answer questions from the financial community. Operator, are there any questions in the queue?

Question-and-Answer Session

Operator

(Operator Instructions)

Our first question comes from Colby Synesael from Merriman. Please go ahead.

Colby Synesael - Merriman Curhan Ford

Thank you for taking my question. So when I listen to what you guys just talked about, it sounds like you guys are expecting a higher subscriber acquisition cost, you are expecting churn to go up, and you are expecting to spend a significant amount of money for server consolidation. I was wondering what this is going to do to your cash balance and if you can give us a little bit more context in terms of how much these things are all going to actually cost in terms of actual dollars.

Jeffrey M. Stibel

Sure, and I will start and then I will turn it over to Gonzalo for some of the details. With regard to server consolidation, we do not expect to spend significant amounts. We expect to save significant amounts.

Colby Synesael - Merriman Curhan Ford

You expect to save -- sorry to interrupt, but it sounds like you expect to save over the long-term, but in order to actually move this process along, you are going to be spending money over the next quarter to actually make that happen. I was wondering what that cost is going to be.

Jeffrey M. Stibel

That cost should be more than offset by the savings incrementally.

Gonzalo Troncoso

And most of that cost is actually utilization of existing resources. There is very little added cost to the migration efforts.

Colby Synesael - Merriman Curhan Ford

Okay, and what about in terms of the subscriber acquisition cost? Gonzalo, in your comments you mentioned you would be comfortable spending up to $200. Is that where you think that is actually going to go? And in terms of churn, that has obviously continued to go up over the past few quarters. When do you guys actually get concerned that that number is beyond what you guys were expecting?

Gonzalo Troncoso

It is just a matter of mathematics. The lifetime value of a customer is determined by the inverse of churn, so 2.9% means 34 months of lifetime value and ARPU of $25, so what we have to do is what percentage of the total lifetime value will the SAC be? Now, if you look at our churn 3% range, if you are selling a lot more, mathematically your churn will show higher because you have more customers in the early life stages. That does not mean your churn or your economics have changed. It is just because you have so many more units that are now in the first 90 days of lifetime value that your total weighted churn looks higher, but that does not mean the economics have changed.

Jeffrey M. Stibel

And with regard to SAC, just so there is no misunderstanding, we spent $88 in Q4 so the likelihood of us spending $200 in future quarters is very low. I think what Gonzalo was speaking to was the economics of this business on a gross margin basis, saying that if you had spent even that much, which would be at a very high-end of any range, bordering on absurd when you are spending $88 now, it would still be economical over the long-term. That is by no means aimed at giving guidance that we are going to be more than doubling our SAC.

Colby Synesael - Merriman Curhan Ford

Okay, so more specifically, where do you get uncomfortable with churn? What is the number where you get uncomfortable?

Gonzalo Troncoso

It really depends on the level of intensity on new sales. If you look at the first three months of churn, you have most of the churn happen after that time. After six months, very little churn happens. So if you want to grow a base, you have to be willing to live with that short-term churn.

It really depends on the math. If you think about the compounding effect of sales, if you sell $1 every month, you get $78 of revenue over a 12-month period. So you are going to have a front-loaded cost investment on the SAC side and you are going to have the churn, just because you have more people who are now in the first, second and third month of their lifetime.

I will say that I will get concerned when the compounding, when the total churn amount, when the early life churn is greater than what we are seeing today and when the lifetime churn increases. We have not seen that happen.

Jeffrey M. Stibel

To reiterate that, because that is a truly important point, when you think of churn in a subscription-based business, it is really a function of two curves. You have your early-life curve and your late-life curve. What happens, and this is typical across ISPs, other telcos, cell phone service, as well as hosting, what you have is you have an initial churn event and it is typically within the first three to four months. And then thereafter, you have very low churn as the user has adopted your service.

So the way that we look at this as we are building this business is we look at those two curves and we make sure that those two curves have not fundamentally changed. That is where we would get concerned.

The fact that we are bringing more people in new in the early life which happens to have a higher churn rate does not scare us by any means. It is if those two curves start changing over time.

Gonzalo Troncoso

This is just an approximation and not a right number, but if you think about churn, the first couple of months, you are losing something in the range of 7% to 8% of your customers. In the 12 to 14 months, your churn is down to something in the range of 1% -- 1%, 1.5%. I am not disclosing any additional numbers but that is what you normally will see on the recurring revenue business -- a dramatic difference in the first three, then six, and then in the 12-month range, it goes down to 1%, 1.5%.

Colby Synesael - Merriman Curhan Ford

And then just my final question and then I will turn it over to other people in the Q&A; I thought on the third quarter conference call that you guys had indicated that both revenue and net adds were expected to go up in the fourth quarter. Revenue certainly went up but it looks like your net adds were below that in the third quarter. I was wondering what had changed.

Jeffrey M. Stibel

No, both revenues and net adds grew. We grew revenues from 12.3 to 12.5 this quarter, and we grew subscribers from 152,000 to 155,000.

Colby Synesael - Merriman Curhan Ford

Right, I understand that your net adds were positive. I thought actual net adds were actually going to be higher than what they were in the third quarter. I guess I have that wrong.

Jeffrey M. Stibel

Yes, that is not what we were implying.

Colby Synesael - Merriman Curhan Ford

Okay. Thank you.

Operator

(Operator Instructions)

And Colby Synesael has a follow-up question. Please go ahead, sir.

Colby Synesael - Merriman Curhan Ford

Okay, so if no one is going to ask questions, I have a few more. In terms of the litigation expense, that was obviously $1 million this quarter, $600,000 last quarter. How much could we expect that to be in 2007? Is that going to substantially go down in 2007 or should we expect similar costs?

Jeffrey M. Stibel

That will substantially go down over time as we start to resolve these lawsuits. To clarify, we just resolved two recently as of January. We have two other major cases that we are hoping to resolve in 2007, and a substantial portion, the vast majority of that portion of the legal fees has to do with the ongoing litigation. So it is reasonable to assume that as these cases get resolved, you will see a significant reduction.

Colby Synesael - Merriman Curhan Ford

And that is going to be in 2007 that we are seeing that reduction?

Jeffrey M. Stibel

That will be in 2007, correct.

Colby Synesael - Merriman Curhan Ford

And then, in terms of operating efficiencies beyond the server consolidation, are there any other areas that you did not touch upon in 2006 that you think you guys could improve in 2007?

Jeffrey M. Stibel

No, but that said, when you look at the server consolidation and migration, it touches upon a number of different pieces of our business because the fact that you have excess servers, excess capacity and excess software and products means essentially that you need excess resources to manage those, as well as excess bandwidth costs, excess licensing, et cetera. So this is a multi-million savings opportunity and a very large and ambitious project that we are undertaking.

Colby Synesael - Merriman Curhan Ford

Okay, and then from a housekeeping perspective, can you just remind me, I think you mentioned on the call, what was cash at the end of the quarter? And then, what was your other revenue for the quarter as well?

Gonzalo Troncoso

Total cash at the end of the quarter was --

Jeffrey M. Stibel

It was approximately $21 million.

Gonzalo Troncoso

$21.1 million, yes.

Colby Synesael - Merriman Curhan Ford

Okay, and what was other revenue?

Gonzalo Troncoso

That is not disclosed on this.

Jeffrey M. Stibel

It will come out within the next couple of days on the K.

Colby Synesael - Merriman Curhan Ford

Well, what revenue number did you use to divide by subscribers to get to your ARPU?

Gonzalo Troncoso

It is the hosting revenue.

Colby Synesael - Merriman Curhan Ford

What was the hosting revenue?

Jeffrey M. Stibel

Breaking it out -- there is not reason why we can’t break it out -- the other revenue, non-hosting revenue was about $625,000.

Colby Synesael - Merriman Curhan Ford

Thank you very much.

Operator

We will take our next question from Stanley Cohen with Atrium Advisors. Please go ahead, sir.

Stanley Cohen - Atrium Advisors

You mentioned someplace in the call about the success of the retail channel product and how it will not affect revenue for another year, but can you give us some metrics on the sell-through over there so that we can get an idea of future such revenue?

Jeffrey M. Stibel

Sure. Good question, Stanley. We are not breaking it out specifically for a couple of reasons. One, it does not have a material impact on revenues right now and two, we continue to see it grow. But what we have seen over the last couple of quarters is the growth accelerate on three fronts. One, the number of stores that have picked up the product offering. We just announced that Target and Best Buy picked us up. Two, the penetration within stores, so the number of stores that have picked it up and then are distributing it nationwide. And then three, finally the number of people who are actually purchasing this product and signing up for our service.

Again, this will have a revenue impact in the second year of the life of that subscriber and we are very encouraged by it and think it is an exciting development for us.

Stanley Cohen - Atrium Advisors

Also, have we yet to see the revenue impact from the Microsoft Exchange product?

Jeffrey M. Stibel

Yes, that would be correct. That launched very recently and we just started marketing that, so that will impact 2007, not 2006.

Stanley Cohen - Atrium Advisors

And have you aggressively started upselling it yet, or is that to come also?

Jeffrey M. Stibel

We are moving towards upselling that right now.

Stanley Cohen - Atrium Advisors

Thanks a lot.

Operator

(Operator Instructions)

It appears there are no further questions at this time. I would like to turn the conference back over to our speakers for any additional or closing remarks.

Jeffrey M. Stibel

Great. Thank you all for listening to our third quarter earnings conference call. Please feel free to contact us if you have any additional questions. Good day.

Operator

That concludes today’s teleconference. Thank you for your participation and have a good day. You may now disconnect.

TRANSCRIPT SPONSOR Tucows Inc. (AMEX: TCX) is the largest Internet services provider for hosting companies and ISPs. Through 7,000 partners globally we provide millions of email boxes and manage over five million domains. Tucows remains one of the most popular download sites on the Internet. Tucows Inc. makes the Internet easier and more effective by reducing business complexity for our B2B and B2C customers as they acquire and deliver services to millions of Internet users around the world. View our SEC filings, news releases, and learn more about our company and services. To sponsor a Seeking Alpha transcript click here.

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