Good afternoon, ladies and gentlemen. Welcome to the Tucows Inc., Second Quarter Fiscal 2007 Results Conference Call. Please note that today's call will be archived for replay both by telephone and via the Internet, beginning approximately 1 hour following completion of the call. To access the archived conference call by telephone, dial 416-640-1917 or 1877-289-8525 and enter the pass code 212-40-796. The telephone replay will be available until Tuesday August 14, 2007 at mid-night. To access the archived conference call via the internet, go to www.about.tucows.com. I would now like to turn the call over to Leona Hobbs, Director of Communications for Tucows Inc. This call is being recorded Tuesday August 7, 2007. Please go ahead, Ms. Hobbs.

Thank you, operator. Good morning, 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. Earlier this morning, Tucows issued a news release reporting the company's results for the second quarter of fiscal 2007 ended June 30th, 2007. The news release and other information for investors are available by going to about.tucows.com and clicking on Investors. 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 subjected 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 a 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 morning, and thanks for joining us today. Before I begin, I would like to note that the primary reason for having the call this morning is that I will be leaving here for the airport to go to the RBC Capital Markets North American Technology Conference in San Francisco where I will be participating in a panel on online content in Internet domains tomorrow. Today's call will follow our usual format. I'll begin with an overview of the highlights of the second quarter. Mike will then provide a detailed review of our financial results. And, I'll close the call by bringing together a number of the data points from the second quarter and discussing them in the context of our fiscal 2007 results. Let me begin by briefly running through the financial results for the quarter. The second quarter was marked by continued strong financial performance but with some unique elements. Revenue grew 33% year-over-year to a record $20.8 million. Adjusted net income grew to $4.7 million, also a record. Net income was $3.2 million our 20th consecutive quarter of profitability. Cash flow from operations was $2.4 million, our 22nd consecutive quarter of positive cash flow from operations. And net deferred revenue or deferred revenue less prepaid registry fees increased to 11% compared to the end of the second quarter last year. I will note that our results from the second quarter included the contribution of the sale of a block of 25 00 domain names, from our portfolio in June for $3 million. I will also note that we achieved these results despite the fact that the second quarter was the first time since competition in which we saw a year-over-year quarterly decrease in new domain registrations. Now to be clear, this is not total…

Thanks Elliot. To reiterate Elliot's comments earlier in the call, the second quarter of fiscal 2007 was highlighted by continued strong financial performance as we delivered recoded revenues, recoded adjusted net income, strong cash flow from operations and continued growth in our deferred revenue balance. Net revenues for the second quarter increased 33% to 20.8 million from 15.7 million for the corresponding quarter of last year. Net revenue from domain name and other internet services increased by $5 million or 34%, to $19.6 million from $14.6 million. Revenue from domain registrations was up 16% to $12.3 million and accounted for 59% of total revenue compared to 67% for the second quarter of last year. Revenue from other internet services including the sale of domain names increased by 80% to $7.3 million compared to the second quarter of last year, largely as a result of the $3 million in revenue generated by the sale of the 2,500 names in June. Revenue from other internet services accounted for 35% of total revenue, up from 26% of total revenue for the second quarter of last year. Again, this increase was largely driven by the sale of the 2,500 domain names. I would note that while we do expect to make such sales from our portfolio of names periodically, we do not anticipate that they will be of this magnitude, either in terms of the number of names or the value of the transaction. Revenue from advertising and other content sources for the second quarter increased 16% to $1.2 million from $1.1 million for the same quarter of last year. The growth in advertising and other content revenue was driven by our direct navigation business, which increased to 496,000 from 174,000 in the second quarter of last year. This increase was partially offset by…

Thanks, Mike. I would like to talk about the unique elements of the quarter and tie them together. I noted earlier, that we sold a of 2500 domain names for $3 million. The names sold were almost exclusively from our expired portfolio, not our surnames or premium portfolios. And there were names with smooth financial not semantic value. The transaction itself was probably not a typical domain name transaction for us. While we will be selling domain names on a regular basis, both from our expired portfolio and our premium portfolio, going forward this particular transaction was a typical, both in terms of the number of names 2500 and in terms of the value $3 million. We expect typical transactions to include fewer names, most often only one name and to be less than $3 million in value. However, when we look ahead, we do not think the $3 million in domain name sales in a year will be a typical. That may be a bit high, when thinking about next year, or it may not, that may be the average over the next two years. It will probably be the average over the next three years, and it will certainly be the average over the next five years. It is still very early days in this market and we would be learning every quarter as we move forward. The next point that I'd note about this quarter, is that organic growth outside of that domain name transaction was lower than we'd have liked. This was primarily attributable to three factors, one that was expected and two that were disappointing. First, the lower number of new domain transactions that I discussed in detail earlier, disappointing. Second, we had just launched our new email platform and the sale cycle as noted…

Ladies and gentlemen, we will now conduct a question-and-answer session. (Operator Instructions). One moment please for your first question. Your first question comes from Thanos Moschopoulos of BMO Capital Market. Please go ahead.

Hi, good morning.

Hi, Thanos.

Hi, Elliot. Just want to go a bit deeper on the decline in new domain registrations this quarter, should we think of that as being entirely attributable to the M&A activity among your customer base, or does that reflect in addition to that underlying issues in the industry which is why we are seeing the pricing reduction that you are now pursuing?

Well. I think that there are a couple of things, first, certainly if the cases have declined in new transactions lines up well with the pricing reduction, but it was something that we have been talking about, sort of, preceding that data coming in. I noted and I want to make sure that I stress, in Q1 new transactions were actually up, and up in exactly the way that I have expected them to be historically. So right now, if there is one quarter's worth of data you ask specifically was it completely attributed to the M&A? No, that certainly was an important contribution, but we saw that impacting across customer segments. We segment our customers by size pretty deeply. And what we saw in new transaction performance was pretty consistent across segments. It's also worth noting that there was not a congruent increase in transfer out activities, which means it does not appear from the data that we are losing customers. So, right now what we are looking at is a quarter where new transactions declined across the base that was not marked by customer loss. So we think that there was just some price competition that was impacting our channel broadly and this is just a great step to try since it's one of a couple steps, but this is a great first step to try and sort of take advantage or to try and respond to.

Okay, so the renewal rate was pretty much consistent with prior quarters?

The renewal rate, and most importantly when you are looking at sort of the customer issue transfer out.

Okay, I don't know if this is question you can answer, but how should we think about the magnitude of the margin impact from the reduction in pricing. As you mentioned, the majority of your transactions were getting lower pricing to begin with anyway, so how do you really think about the incremental impact from the new pricing structure?

We are not going to put a hard number out there. I will give you a couple of thoughts on it. Let me be clear, it's a very expensive choice to make. When you are looking at what I've called historically for any business the tyranny of the spread sheet, this is one of those decisions that you face where you have to decide whether and how deeply you want to cannibalize yourself. And one of the things that I am really pleased about is that organizationally, on an Executive level or a Director level, everybody was stepping up to making this decision. It's a very hard decision to make. It can have real impacts. I think that one of the reasons that it's tough to quantify with great specificity Thanos is because we hope that it has two impacts. We hope that yet stocks some of that, flow of new registrations as it allows our customers to get out there and be a little more competitive. In addition, we hope that it starts to provide some opportunities for us to win some business from some of our competition. One of the things that we have heard regularly and it's a very interesting comment is we would love to do business with you guys, we prefer to do business with you guys relative to our existing supplier, but you are just a bit too expensive. So, there is no two mitigating factors that we hope to be able to have some impacts on that price reduction and how much it costs us. But be clear, it is expensive.

Okay regarding the email revenue you alluded to the fact that might be down in the next quarter to and subsequent to that we should start seeing an increase as we get further in the sale cycles. But why should we expect to see a decrease, is that also being affected by the M&A activity?

No. I think that that's just much more about the tail end of some of that previous email experience. You have a couple of factors there like customers who are rightly frustrated and are deciding what they should do. And until we get them migrated on to the new platform, they can't see their brave new world. It's very hard to go to a customer who's confidence is shaken and say hey here's this solution to the problem, trust me. So there might be a little bit there and there is also to a smaller extent when I say to a smaller extent in one or two customer situations, working out through some of the critical pass [tubs]. If you remember when we made that transaction we noted that it was kind of 80/20 service provider to enterprise. We would have been shocked if we worked through some of that enterprise stuff, because we are not a supplier to enterprise we'll always do our best, but we are not necessarily a supplier.

Okay, and then as far as the sequential weakness in the advertising revenue, was that entirely attributable to the lower Google Ad Spend yields or was part of that lost revenue from the three million names that you sold?

Certainly, there is a little bit of each, right I would say that the Google yields had a greater impact then the names that we sold. So both of those things contribute, as of the fact the Q2 is worse than Q1 generally. Right, remember Q1 and to all those closely followed by Q4 were the two best quarters for advertising in particular, once kind of a Memorial day and Victorian day and people actually start to go outside and just consume less web pages

Okay.

Get a little bit of seasonality in there too.

Okay, and my final question regarding the acquisition. Is it just the 300,000 in conditional costs, we should expect to see or will there be other one time costs, next quarter from this?

Thanos, there will be some deal related costs for example things like professional fees and the cost of evaluation and so on and I would estimate those to be more or less $100,000 to $150,000.

Okay, and so all that will be expensed along with the 300?

That will be on top of the 300.

Yeah, yeah, okay but all expensed in working capitalized rates.

Yes those will be capitalized.

Okay I will pass the line, thank you.

Thanks, Thanos.

(Operator Instruction) Mr. Noss, there are no further questions at this time. Please continue.

Thank you, operator. Thanks to all, who are there and we look forward to speaking to you again next quarter. Thank you.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. You may now disconnect your lines.