Good afternoon, ladies and gentlemen. Welcome to the Tucows third quarter fiscal 2006 financial results conference call. Please note that today’s presentation will be archived for replay both by telephone and via the Internet, beginning approximately one hour following the completion of the call. To access the archived conference all by telephone, dial 416-695-5800, or 1-800-408-3053, and enter the passcode 3202095, followed by pound. The telephone replay will be available until November 13, 2006, at midnight. To access the archived conference call via the Internet, go to www.tucowsinc.com, and click on investor relations. I would now like to turn the call over to Ms. Leona Hobbs, Manager of Communications, Tucows Incorporated. This call is being recorded Monday, November 6, 2006. Please go ahead, Ms. Hobbs.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us for today’s call. With me is Elliot Noss, Tucows' President and Chief Executive Officer, and Michael Cooperman, our Chief Financial Officer. My name is Leona Hobbs and I am the recently appointed Communications Manager here at Tucows. Before we get started, I would like to thank Hilda Kelly for her work supporting the investor relations efforts of the company. Hilda will continue in her capacity as Elliot’s executive assistant. I look forward to supporting our shareholder community moving forward. Today, following market close, Tucows issued a news release reporting the company’s results for the third quarter of fiscal 2006, ended September 30, 2006. The news release is available on our website by clicking on About Tucows, then Investor Relations, and finally on Quarterly Financials. You can also contact me directly for a copy of the news release by telephone at 416-538-5450, or by e-mail at ir@tucows.com, and I will send it to you. If you would like to receive future news releases by e-mail, please also let me know. Before we begin today, I would like to point out that the matters we will be discussing include forward-looking statements, and as such are subject to risks and uncertainties that could cause actual results to differ materially. These risk factors are described in detail in our documents filed with the SEC. Specifically, the most recent reports on Form 10-K and 10-Q. We urge you to read our securities filings for our full description of the risk factors applicable to our business. I would now like to turn the call over to Elliot.

Thank you, Leona. Good afternoon, and thanks for joining us today. As is usual, today’s call will follow a similar format. I will begin with an overview of the highlights for the third quarter. Mike will then provide a detailed review of our financial results for the quarter and the year-to-date, and finally, I will return to review our success in achieving the objectives we laid out for the company at this time last year. Let me begin with our financial highlights for the quarter. The third quarter was another strong quarter financially for Tucows, with results that are indicative of increased momentum in our business. We delivered another quarter of record revenue of $16.9 million, a 40% increase over the same quarter of last year, and our 15th consecutive quarter of revenue growth, adjusting for the one-time accounting transaction in the third quarter of 2004. Adjusted EBITDA, which you will recall excludes items that are not ongoing in nature, grew 41% to $1.5 million. Net income was $1.9 million, boosted by a significant windfall that I will discuss more in a few moments. Net deferred revenue, or deferred revenue less prepaid registry fees, grew almost 15% compared to the same point last year, and 3% from the second quarter of the year. Advertising revenue was $1.3 million this quarter, and I note that while much of that growth was driven by the contribution of direct navigation, we are also seeing the continued return to form or our content business. The important thing is that this is a 20% increase quarter over quarter, and a 78% increase year over year in what is an extremely high margin revenue stream. In past quarters, when looking at the contribution from domain registration versus other Internet services, we have included revenue from Domain…

Thanks, Elliot. The third quarter of fiscal 2006 was another strong quarter for Tucows, driven by growth across all areas of our business. We recorded our 15th consecutive quarter of record revenue, generated solid growth in adjusted EBITDA, and saw continued growth in our deferred revenue balance. Net revenue for the third quarter increased 40% to $16.9 million, from $12.1 million for the same quarter last year. Net revenue from domain name and other Internet services increased by $4.2 million, or 37% to $15.6 million, from $11.3 million to the third quarter of last year. As Elliot mentioned earlier, following the absorption of NetIdentity into Domain Direct, we now feel that the proportion of revenue earned by Domain Direct from other Internet services warrants its inclusion as part of other Internet services rather than as part of domain names, as we have done in previous quarters. This reclassification resulted in revenue contribution from other Internet services increasing to 25.5% of total revenue, up 10 percentage points from 15.5% for the third quarter of last year. Revenue from domain names, which now excludes Domain Direct, while up 19% on an absolute basis, accounted for just 66.8% of revenue, down 12 percentage points from 78.5% for the third quarter of last year. The shift in revenue mix from domain names to other Internet service revenues was primarily the result of the contribution of the hosted e-mail assets we acquired from Critical Path in January of this year. To allow for comparison of the disclosure we made last quarter, I will also provide the numbers using the previous calculation. Revenue from domain names for the third quarter, including Domain Direct, grew 19% on an absolute basis and accounted for 73.1% of total revenue, down 13 percentage points from 86% for the third quarter…

Thanks, Mike. On our third quarter call last year, our first following a secondary equity offer we completed earlier that summer, I discussed a number of key objectives for the company that we had shared with investors in the road show. The first was to continue to diversify the business. Clearly we have been successful in this regard, as the contribution to gross margin from Internet services other than domain names has increased to 58% for the third quarter of this year, from 41% for the same quarter last year. I will note that this is not because of poor performance in our domain games business. On last year’s call, I stated that we expected to build gross margin from our domain registration business to grow between 8% and 12% per year before the contribution of the expired domain name segment of that business. We exceeded this target. The second objective was to effectively deploy some of the cash balance that we had built up. Since January of this year, we have spent $17.1 million to complete three acquisitions, the host and messaging assets of Critical Path, NetIdentity, and Kiko -- each of which, as I have described previously, will be a significant contributor in its own way to our business going forward. At the same time, as I discussed at the beginning of the call, we have spent some of that cash this year improving key areas of our operations to position us to really capitalize on the leverage inherent in the business in 2007. The third objective was to have operating expenses grow at half the rate of billed gross margin. Well, we fell short on this objective. As I discussed earlier, we think it was for the right reasons. With that said, we cannot ignore the fact…

(Operator Instructions) Our first question is from Thanos Moschopoulos, BMO Capital Markets. Please go ahead.

Starting off with a financial question, could you quantify the transitional costs in the quarter? Is it just the $176,000 for severance?

Yes. Thanos, that $176,000 was not a transitional related cost. That was a cost related to severances that we had to pay for other purposes. We had no transitional costs in the quarter.

Okay, then we should consider everything as being fully integrated now from a cost perspective?

Yes, that is right. I mean, I think if we wanted to be cute about it, Thanos, we could have classified some things as transitional costs, but I must tell you that feels inappropriate to me. I think we are playing it as it lays.

You did not speak much about Critical Path in your prepared remarks. Could you give us an update on how that is progressing there, as far as new customer acquisition?

Sure. You know, I think that business continues to do as we had hoped it would. I referenced a slightly greater level of operational complexity still inherent in that system, and that probably has slowed down the ramp-up, but that business has improved quarter over quarter, and continues to. It really is the case that you have heard me talk about a couple times, probably more than you care to remember, about there really being an inflection point in the way service providers are having to deal with e-mail. That is really playing itself out. I am down at ISPCON later on this week, starting tomorrow, and already, we are expecting e-mail to be the thing that is most talked about. When I referenced earlier an increase in spam, the two things about that that I really want to call out are, first of all, that that is Internet wide. Discussions inside the technical community are really identifying what I would call an unprecedented level of increase. Second, that has just got to be incredibly difficult for service providers still trying to in-source around this stuff.

And that is a function of the hardware solutions not really being up to task?

Well, it is less about the hardware solutions. Most of the people who are trying to do it themselves are therefore forced to play the cat-and-mouse game with spammers themselves, and that just becomes incredibly resource intensive.

Okay. Just a question on some of the metrics that Mike usually provides, as far as total domains under management at quarter end, and amount of transactions processed in the quarter?

We processed 1.2 million new, renewed and transmitting domain names during the quarter, and our domains under management increased to 5.7 million, compared to September ’05. They increased to 5.7 million. That does not include the names we manage for other registrars.

Yes, and I always have to point out that Q3 is the slowest quarter of the year. We were pleased with that quarter and the domain registration.

With a 15% increase in the billed gross margin, it seems like you are getting some good, continued growth there.

Yes.

Incidentally, are you seeing a lot of growth from the new top-level domains, or has that not really been the source of growth that had been hoped?

If you are talking about EU and Moby --

Yes.

EU, I think I did talk about this briefly on the previous call. There is certainly a lot in the press the covered this. That was a little disappointing because the process was one that really exposed them to people who were gaming the system. So people who were playing it straight like us really did not do that well. With Moby, we were reasonably pleased. We think there has been some pretty good initial traction there, and now that one is really going to be a function of usage. I think that as companies start to do more on a mobile platform, we will see if that works or not. We had some small pleasant surprises in the CTLB space as well.

Thank you. The next question is from Justin Kew, Desjardin Securities. Please go ahead.

Good evening, guys. Elliot, the first question is the Kiko acquisition. What was the cost on this?

$258,100 -- that is inclusive of e-bay’s fee, $100 above the next highest bid.

In terms of the cap-ex, to Michael, in terms of cap-ex for next quarter, you are saying it is an additional $1 million above what you were planning? Is that how I heard it correctly?

Justin, what I was referring to there is last quarter, we indicated that we would be approximately between $2.25 million and $2.75 million over what we spent in 2005. This $1 million is an incremental $1 million to that.

Okay, so for ’06, so what you are saying then is $3.25 million to $3.75 million?

Above ’05.

Above what we stated -- in other words, it is about $5.1 million.

Right.

What is the $1 million for in terms of -- and is it just a one-time, or is this an ongoing expenditure? Obviously spam, like you said, it is insidious and it is here to stay. How do you see this as --

Well, I think there are a couple of other factors that are really exacerbating that for us right now. We are still maintaining multiple platforms for both e-mail and anti-spam. That is something that, come early next year, simply will not be the case. When we are having to deal with, you know, when I say capacity issues, when we are having to deal with this onslaught, we are having to deal with it across multiple systems. From our perspective, they are not systems that are as efficient as they should be. We could take the low road and let customer experience degrade, because we know that we are going to be in a happy place shortly, but we do not think that is the right way to approach it and so we are overspending and we are over-provisioning, because we think that investing in those customer relationships is just worth doing.

So you do see it as a one-time, you are going to get it out of the way and then the levels, and obviously the infrastructure is taken up a level?

Well, as I put it a little differently, we think that the battle with spam is going to be ongoing, and I think I would be naïve to say it is one time, we will not have to worry about it again. The specific expenses that we have both this quarter and next at a cap-ex level are pretty unique to our current operating environment. That is something that is less efficient than we would like it to be. When I say that, we are kind of well down the road to dealing with that, but we are forced to make things work as they are right now. We are pretty comfortable saying that this 2006 number is in all likelihood going to be north of the 2007 number. Certainly as I sit here right now, I would be surprised to quite surprised if it was this high next year.

Michael, just in terms of segmented revenues, I understand moving around, but I did not catch all the numbers, so on an apples-to-apples basis, could you give me the percentages for domain naming, auxiliary advertising, and other then?

You want me just to repeat those numbers for you?

Yes, or the percentages.

It was 25.5% of total revenue for other Internet services, including Domain Direct. It was --

So the rest is domain, 74.5%.

It is 66.8% of revenue was for domain names, and for advertising and other, that was 7.6%.

This is on apples-to-apples with last year? Sorry, last quarter.

Yes. Every time I referenced a number from last year, it was on an apples-to-apples basis.

Going forward, maybe we can talk about this offline, but just kind of maybe historically, just so that we can back-flow it in our model so that we have going forward, when we get new numbers, at least they match up.

Sure.

Okay, and that is all for me. Thank you.

I hope, Justin, you understood the reason for the reclassification.

No, no, absolutely. This is part of the -- this is absolutely the right thing to do.

Thank you. The next question is from Steven Newman, Newman Financial. Please go ahead.

My question is a little bit more specific in nature, and I am just kind of wondering, has there been a shift from the Tucows auctions to building up the parked portfolio? If that is the case, what are some of the names that are driving that growth?

You said Tucows' options? Or auctions, you said?

Yes, sir.

Okay, I see. The auctions business for us, and I have talked a little bit about this on previous calls, we really do not see that as a big part of the mix in the secondary market going forward. We are really focused on two things with expiring names. One is to capture the expiring names of value for the purposes of in the short-term, generating parking revenue, but more importantly in the long term, making them available to what I call strategic buyers. In other words, businesses, often small businesses, who want to put those names to use. From our perspective, when a name falls into our auction state, you know, it is available at Tucows auctions, that means that somebody has seen value, that the folks on our end who try and pick out at the names that have value have missed. We kind of jokingly refer to that internally as a mistake. Does that make sense?

Yes, absolutely. Is there a timeframe for when the names that you guys have been withholding will be open for sale to small businesses?

Yes, I think we would all like that to be as soon as possible. We are really pretty heads-down focused on a bunch of the e-mail stuff, but it should be very, very late this year or early next year.

One last question -- what would you say is the quantity that you guys are currently holding and what would you say would be the average sale price per name?

Average sale price, your guess is as good as mine. Quantity, we are certainly getting up into the low- to mid-five-figures. With average sale price, one of the really interesting things in this industry, and it is one we have obviously had a lot of visibility to over the years, not just in our role as registrar. We are a supplier to a lot of the big players in the industry, on the secondary market side. Nobody has really kind of tried to do what we are doing, really what I call kind of connecting strategic demand with supply. There is clearly an inverse relationship between price and turnover. In other words, the lower price you want to put on your names, the higher your turnover is going to be. The goal really is to find that sweet spot that is maximizing total revenue. Right now, there are some sources, huge inventories, that are available to the public, but the average small business has no idea where to find them. We are not only, Steven, going to be selling names from our inventory. We also plan to expose some of these other large inventories out there on the Internet to our, you know, the demand that comes in through our wholesale channel.

If I am understanding correctly, you guys are looking at building out a complete, composite domain marketplace to compete with an Afternic, or a [C-do], or another reseller of domain names?

No, not to compete with them at all, because it is my view that what they are doing is different and more focused on what I would call industry insiders. What we are doing, we have tens of millions of who-is look-ups a month. That is latent demand for domain names. Those people overwhelmingly want a name for their business. They are not concerned with whether it is in the primary market or the secondary market. The way that we view it, really what we are doing is connecting that demand that is sitting there right now with some of the supply. By the way, the [C-do] and the Afternics, et cetera, generally the players in the market are quite thrilled to expose their inventories to some additional demand. We look at those folks as partners.

(Operator Instructions) Our next question is from David Jackson, SeekingAlpha.com. Please go ahead.

Thank you. Just a quick question on the expired domain name business. Could you put a percentage number on currently what percentage of your revenues that accounts for, both in terms of as you are selling off domain names, and then also monetizing them through domain parking?

It is in the single digits right now. It is in the -- I am going to go off the top of my head and say kind of in the low- to mid-single digits. Obviously it is very high at a margin level, David, much like the Internet advertising business, which is why we classify that there. The growth is, as I talked about on the call, very, very aggressive still. One of the things that we had a chance to kind of look back on, now that we are late in the year, we are planning for 2007. We have looked back now to when we were in a similar place in 2005, how we estimated what we would do in this space in 2006. We knew we had an offering. We knew it was launching. Obviously we did not have a lot of data for it. There really is a pretty high fulcrum around this stuff. It is tough to know how high trees are going to grow.

Could you then give some kind of sense of what proportion of your gross margin dollars it accounts for?

On a gross margin level, boy, it is still going to be single-digits. It is still going to be single-digits. It is small and growing, would be the best way for me to describe it. You know, if you wanted to kind of get a ballpark sense of it, David, that number is now lumped in with our Internet advertising number. You could look at where we have been historically around the Internet advertising business, which is doing fine, back that out, and you would have a sense of the parked pages contribution, which you could then compare to gross margin or revenue. Are you following what I am saying there?

Yes, totally. If I may, another couple of questions. You have this big cap-ex investment coming up in the e-mail system. How are you thinking about the return that you are looking for on that investment? How are you thinking you are going to monetize that investment in terms of whether you are going to charge increased fees, whether it is just going to increase the number of customers you have? How should we think about the return you will get on that investment?

I think there is a couple things there. First of all, I need to call out that when you are saying investment in the e-mail system, that really is kind of the end-to-end e-mail system, including anti-spam. To a great extent, a lot of the unplanned expenditures are relating to that anti-spam side, and building out capacity in the very near-term. It is also the case that we had a platform before with CP. We are still maintaining again two separate platforms, two separate e-mail defense systems, two separate anti-spam systems, and we always had a view of what the end-state looks like. While we are getting from point A to point B, we have to keep those existing pieces running. I think when you talk about return, it is really going to come from two places. One, increased capacity; two, increased reliability. It is amazing. We started to go much deeper in terms of engaging with e-mail customers. A lot of people feel that some of the bells and whistles that you are seeing in some of the newer e-mail platforms are what are driving customers’ behavior, but it is all about a lights-out e-mail service. There is nothing fancy here. This is not about pop-up Google maps on the mouse-over in the e-mail, as I have referred to in the past. It is really just about making it very easy, and when I say easy, remember, David, that I am talking about from a service provider perspective, so that means easy to move their customers over, easy to transition them to a different webmail interface, things like that. Does that make sense?

Yes. Have you got optimistic enough projections about your customer growth in this business to financially justify -- It is a pretty big number going --

I can say without hesitation, yes. There are two things about it. This is one of those types of services that if you are not doing it efficiently, you have to keep throwing money at it, and if you are doing it efficiently, it is very, very leverage-able. This is about getting it right, not getting it big. The other side -- that is on the supply side, David. On the demand side, there is more business out there than we expected there would be, and we were pretty optimistic in the way we looked at it.

Great. One last question, just a financial question, if I may. In your cash flow statement, you discussed that your accounts receivable did not fall partly because of the patent payment, where the payment was delayed but has now come in, and that you were expecting the accounts receivable to come down. Also, you were expecting accounts payable also to move. What are your expectations for next quarter in terms of how those lines actually move and impact your cash flow statement?

Obviously, the quarter is not over yet, so we can only surmise as to direction. I think that, from an accounts receivable perspective, it will be reasonably flattish, outside of that kind of issue --

Yes, that is kind of flat back to the second quarter.

Yes. On the accounts payable and accrual side, generally there are some expenditures that you have to pay just before the year-end, that we will obviously pay, and we may use a little bit of money in there. But bear in mind that I do not think the amount of money we will use will be anything close to the amount of money that we will generate from the $1.9 million having already been paid.

Okay, great, because you had a net cash out-flow because you kind of accelerated accounts payable during the quarter.

Yes.

So you are not expecting a swing-back next quarter?

You mean back to a position where we generate cash from those two items? Absolutely.

Yes.

No, we definitely are expecting a swing-back to generation of some cash from a combination of receivables and payables.

What about payables on its own? Obviously with receivables, you have that really big swing from the patent payment.

That is what I mean. On payables on its own, we may use some monies, but not a significant amount.

Okay. Great, thank you very much.

Thank you. Our next question is from Warren [Derilak], Raymond James. Please go ahead.

Just a question, you talked earlier about stock performance the last year has basically been flat. You talked about ’07, trying to get out and tell the story more to analysts, investors, et cetera, which is always good. Aside from that, specifically speaking, you also mentioned enhancing shareholder value wherever you could possibly see doing it, et cetera. What avenues could you elaborate on? Where could that occur? We are starting to look at what catalyst could actually start moving the stock price of, short of just obviously increased revenue and bottom-line earnings improving. What other avenues maybe that you have shared in the past with us, or ideas you have in mind today?

I think that the range of options there is pretty well-known. Frankly, Warren, you probably know them better than I do. The one thing that I really always like to avoid is the C-word -- catalyst. I really think that this is a business that is focused on generating cash and generating more cash next month than last month, and next year than last year. I think if we keep doing that, then the combination of that cash generation and the ability that gives us, then there is whole range of things we could look at. I love when folks like yourself have any suggestions for me in that regard. I do not know if you want to make them on the call. Maybe an e-mail afterwards is better, but I am happy to talk about it.

Fair enough. Thank you.

Thank you. There are no further questions registered at this time. I would now like to turn the meeting back over to Mr. Noss. Please go ahead, sir.

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

The conference has now ended. Please disconnect your lines at this time. Thank you for your participation, and have a great day.