Welcome to Tucows Inc. third quarter 2008 conference call. I would like to advise everyone that this conference call is being recorded. I will now turn the call over to Leona Hobbs. Please go ahead, Leona.

Thank you, operator. Good afternoon and thank you for joining us today. With me is Elliot Noss, our President and Chief Executive Officer and Michael Cooperman, our Chief Financial Officer. Earlier this afternoon, Tucows issued a news release reporting our result for the third quarter of fiscal 2008. The news release and financial statements are available on our website. Please visit tucowsinc.com and click 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 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 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 afternoon and thanks for joining us today. On today's call, I'll provide an overview of our business during our third quarter ended September 30, 2008 and the outlook going forward. Mike will then review the financial results, before returning the call to me for final comments. There were number of highlights during the third quarter. First, I am pleased to report that we grew revenue 13% over the same quarter of last year. This growth was driven primarily by higher revenue from core domain name registration and a strong performance by our domain portfolio services, now known as Yummy Names, as well as growth in retail services. Second, we divested the remainder of our non-core hosting assets, which generated just under a $1 million in cash. Third, we signed our first significant personal names deal with web.com, through which web.com will offer the OpenSRS personal name service through its extensive network of customers, more on this in a few moments. There is an event that occurred subsequent to the end of the quarter that I would like to discuss as well. Last week, we sold our stake in Affiliates, the global registry services business in which we were founding shareholders in 2000. We sold it back to the company for $7.4 million in an all cash transaction. We received $3.2 million on November 7th and are conditionally scheduled to receive the remaining $4.2 million in two equal payments in June and December of 2009. Those last two payments are conditional upon Affiliates having sufficient distributable reserves as that concept is defined in Irish law. As a result of the proceeds generated by this transaction, we've significantly strengthened both the balance sheet and our ability to execute on the share buyback program. Before going any further, I…

Thanks, Elliot. Net revenue for the third quarter of fiscal 2008 grew by just over 13% to $20.1 million, from $17.8 million for the third quarter of last year. Increase was primarily due to the result of higher revenues from our traditional domain registration, domain portfolio and retail services categories, which were offset by lower revenues from our email and content services. Cost of revenues, before network costs, for the third quarter increased by 19%, $4.3 million from $10.3 million, primarily as a result of higher domain registration volume and a higher registration fees we are paying the registries as a result of the price increases they implemented in October last year. These increases were partially offset by a decrease in network costs of $540,000, primarily the result of the lowest support contract in people costs we achieved with the closure and relocation certain of our co-location facilities following the completion of the email migration as well as the lower depreciation we incurred now that certain of our older computer hardware has been fully depreciated. Gross margin for the third quarter was 27% compared to 25% for the same quarter last year. The increase is primarily attributable to the reduction in network cost of roughly $500,000 I mentioned earlier and a shift in the percentage contribution to gross margin we experienced on our service categories as our sales mix changes. Looking at the gross margin contribution by service category, gross margin from domain name registration services for the third quarter decreased to $2.7 million from $3.2 million for the same quarter last year. While domain transaction volumes for the quarter were up on a year-over-year basis as a result of the price reduction we announced when we change to cost plus model in August of last year, our gross margin…

Thanks, Mike. We all know the difficulties in the macro environment right now. Over the lower-term, we believe that our priority should be on generating cash and over time on returning capital to shareholders through share buybacks or through dividends. In the short-term, the economic environment puts a significant premium on cash tempering the above point to some extent. As stated earlier, that our three largest email customers will be leaving over the next couple of quarters. I also stated that we'd generate less cash than we did last year. Obviously, neither of these are good news. Anyone listening to conference calls over the last few weeks knows there are many negative announcements in the broader business environment that makes this no less difficult. On the other hand, there are many positives from this year product launches of Butterscotch, Hover and Storefront. The brand launches of OpenSRS and Yummy Names, smooth email migration and the cost savings that generates for 2009. On top of that there are three things I wish to talk about specifically for 2009. First the OpenSRS domain registration business, we have seen solid and accelerating gains in volumes in this quarter. We have a full pipeline and are seeing continued momentum with customers. We think the data demonstrate that we have strengthened our competitive position. The only cloud there is, is the gross margin decline was greater than we have anticipated. It's now clear to us this is the result of continuing changes in our sales mix rather than increasing pricing pressure. This sets us up in 2009 to focus on additional market segments. You will see some of that with the Storefront launch later this month. You will see a number of additional elements added in 2009 that will drive additional volume. We will take…

(Operator Instructions) Your first question comes from Thanos Moschopoulos from BMO Capital Markets. Please go ahead.

Hi. Good afternoon. BMO Capital Markets: Hi. Good afternoon.

Hi, Thanos.

Hi, Elliot. To begin with, on your comments regarding the margin in the domain registration business: I am not quiet sure that I understand what you mean by mix. Could you just try more color on that? BMO Capital Markets: Hi, Elliot. To begin with, on your comments regarding the margin in the domain registration business: I am not quiet sure that I understand what you mean by mix. Could you just try more color on that?

Sure. The additional volumes that we're seeing are being driven by a greater contribution from our larger customers. Customers that are at lower prices.

Okay. BMO Capital Markets: Okay.

And so that's just having the effect of driving down the blended number.

Okay. BMO Capital Markets: Okay.

We think that fact provides some openings going forward.

Okay. As far as the ongoing pricing pressure in that market, has it been accelerating in recent weeks given the downturn and perhaps more overall pressure on people to be more aggressive? Or has it been in line with the ongoing decline you've seen over a prolonged period? BMO Capital Markets: Okay. As far as the ongoing pricing pressure in that market, has it been accelerating in recent weeks given the downturn and perhaps more overall pressure on people to be more aggressive? Or has it been in line with the ongoing decline you've seen over a prolonged period?

I think that certainly the fact that vast majority of our customers, like us sell bread and milk, not cars and refrigerators. And so I think that those are things that are a little bit less impacted. There is no question that there is an impact, there is an impact everywhere. I think it's also the case that where we are dealing with services that are relatively quite low margin right now. So we will be surprised if we see a little more pressure; we're not quite seeing that yet.

On the email front, you mentioned how your expectation now is for, I believe it was $4 million in revenue for 2009, is that correct? BMO Capital Markets: On the email front, you mentioned how your expectation now is for, I believe it was $4 million in revenue for 2009, is that correct?

That's right.

Let us say that you develop $6 million run rate currently. Does that mean that we're going to have more of a drop off in the near-term? I know you’re anticipating growth I guess for the $4 million for '09, is that correct? BMO Capital Markets: Let us say that you develop $6 million run rate currently. Does that mean that we're going to have more of a drop off in the near-term? I know you’re anticipating growth I guess for the $4 million for '09, is that correct?

No, you'll see a trend down all through. It really depends on the specific migration plans of the customers, something that is so tough to predict. I said on the call, we expect by the end of Q1 all three companies will be gone. We could stretch it to Q2 as well. You're talking about very big companies, and as you can imagine, everybody's plans are in flux. We have to wait and see what their specific plans are. But you'll see the best way to think about this, is it will drift down through the middle of next year and then start to pick up from there.

I guess another way to rephrase the question is this: the three customers together were they about $2 million run rate or were they more than that? And then just looking at absolute residual revenue as we did the migration over the year and that's how we get to the number for next year. BMO Capital Markets: I guess another way to rephrase the question is this: the three customers together were they about $2 million run rate or were they more than that? And then just looking at absolute residual revenue as we did the migration over the year and that's how we get to the number for next year.

Right. At there peak those three customers were more than a 2 million run rate, closer to three; one of them has been drifting down and we've been backfilling. And the other two we're still seeing full revenue from, so that will be the drop off kind of appear to the trough.

Okay. You mentioned your confidence says these issues are unlike could recover with rest of your basis that just because of the customer type? BMO Capital Markets: Okay. You mentioned your confidence says these issues are unlike could recover with rest of your basis that just because of the customer type?

Yes. It's very much a function of customer type pay, much larger companies and email was a small part of a large strategic relationship for all three.

Can you comment on how the sales cycle is progressing as far as trying to close new business for the email side now that migration is complete? BMO Capital Markets: Can you comment on how the sales cycle is progressing as far as trying to close new business for the email side now that migration is complete?

Yes. So I think that the challenge there is that we compete. First of all, I would say okay or fine, we've got a reasonable pipeline. We've got things that are coming out to the other ends of the pipeline. The challenge there is that we compete with the non-consumption. And as the economy gets worse often for us when you're competing with doing yourselves, it feels to the customer like it will cost them a lit bit more money going forward. So that's certainly a bit of a drag.

Okay. And then on the Butterscotch side, you said no significant startup cost associated with that? BMO Capital Markets: Okay. And then on the Butterscotch side, you said no significant startup cost associated with that?

There is a few extra people.

Right. BMO Capital Markets: Right.

But not much beyond that. And I'd love you kind of dig in and give your feedback.

Okay. Elliot, that's fine for now. Thanks. BMO Capital Markets: Okay. Elliot, that's fine for now. Thanks.

Thanks.

Your next question comes from Alex Grassino from Laurentian Bank Securities. Please go ahead.

Hi, gentlemen. Could you give me a little bit more color on where you see CapEx going forward, is it jumped up to 600,000 this quarter, do you expect that to revert back down?

Yes. CapEx, next year will be more in the $1.5 million to $2 million range.

Chances are about. Yes, so okay. And a general idea where do you see gross margin as a whole going in 2009?

That's a tough one to answer because it's going to be very much determined by the mix and I don't think that I or Mike has really drilled down on that. It could be, for instance, a positive. If blended gross margin is going down, if the reason that is going down is because we are having a significant growth in domain name transaction business.

Okay. Perfect. In terms of exploring divestiture of non-core assets, are you more or less finished now? Or are you still sort of looking at refining, what do you have at this point?

Yes, I think the big stuff has pretty much occurred. If we were speaking six months ago or 12 months ago, I might have talked about more potential for a large domain name portfolio sale, for instance.

Okay.

That market has really been negatively impacted.

Okay. Perfect. That's all I have for now. Thanks.

Thanks.

Your next question comes from David Shore from Research Capital. Please go ahead.

Thanks. Could you talk more about the other premium domain market and what you are seeing there and what you think that business will look like over the next year or so?

Sure. We are definitely seeing softness in those long-tail direct navigation portfolio type names. We are not really seeing the same kind of softness around the brandable items; those are obviously much smaller number of transactions and they are much bigger price tags. You look out in the market what I'd call the wholesale market there, those are professionals who are trading with each other. There might be a bit of softness because for those professionals their purses get filled with a lot of that parking revenue, the direct name revenue that what we see from marketers, for instance the Yummy Names launch and some of the follow-on discussions, there is value and for them they are looking at the value of a generic or semi-generic; a brandable name relative to what search traffic costs or relative to very, very large advertising budgets. So we don't think that through '09 we'll see a negative impact around valuations, in those categories. In fact, we think it's such an early stage in that market that if we do a good job of reaching market, as in bringing the midst to the market, we think we can see continued growth there nicely.

Okay. Thanks. That's it for me. Research Capital: Okay. Thanks. That's it for me.

Thanks.

(Operator Instructions) Your next question comes from Aram Fuchs from Fertilemind. Please go ahead.

Hi, this is Aram Fuchs, Fertilemind Capital. You've been at the premium domain business for a while. I was wondering if you can talk about which channels are working well to attract the end user, the marketers you talk about. Are they the auctions or some relationship with agencies? If you can give us that landscape that would be great. Fertilemind Capital: Hi, this is Aram Fuchs, Fertilemind Capital. You've been at the premium domain business for a while. I was wondering if you can talk about which channels are working well to attract the end user, the marketers you talk about. Are they the auctions or some relationship with agencies? If you can give us that landscape that would be great.

Sure. Right now, the auctions are not great. They were probably better 12, 18, 24 months ago. And I am sure as things come back a bit, they may get a little bit more useful. The thing that yields the most in terms of direct leads or sales right now is actually the network of brokers that are out there to maintain contacts sort of broadly across the industry. Those are the relationships which probably will contribute the most this quarter. When it comes to the agencies, that's really just hard work at this point. So that's the sweet man who runs that group; people you met just going and giving seminars and talks appear in conference speaking and doing sessions for people. And so that's really just bringing in buyers in ones and twos.

Great. Thanks for your time. Fertilemind Capital: Great. Thanks for your time.

Thanks.

There are no further questions at this time. Please continue.

Thank you, operator. We look forward to speaking to all again next quarter.

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