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Toronto, Canada - (Cheap Web Hosting Directory) - August 9, 2007 - Domain registrar and Internet services firm, Tucows Inc., has reported continued strong financial results for the second quarter of its fiscal 2007, including record revenue, adjusted net income and continued strong cash flow generation.

Elliot Noss, President and CEO of Tucows commented, ”We delivered solid financial performance in the second quarter, which benefited from the sale of a block of 2,500 domain names from our portfolio. Consolidation in the domain name industry, the ramp-up in the sales cycle for our new email service and disappointing Google ad revenues resulted in weaker year-over-year revenue growth than we would have liked. Our overriding objective is to drive strong long-term growth and we have recently taken several steps in this regard, including the recent launch of our new email platform, the launch of our Premium Domains service and subsequent to quarter end, the acquisition of ItsYourDomain. Most importantly, this morning we announced our decision to make a significant investment in our business. We introduced a new cost-plus domain pricing structure and a reduction in our domain name pricing. Given the above, our expectation is that cash flow from operations will be in excess of $10 million for 2007. We are confident that these steps strengthen our position to capitalize on the significant long-term opportunities in the domain name and email markets.”

Revenue - Net revenue for the second quarter of fiscal 2007 increased 33% to $20.8 million from $15.7 million for the second quarter of fiscal 2006. The increase was primarily the result of an atypically large sale of approximately 2,500 domain names from the Company’s portfolio of domain names for $3.0 million and revenue growth across all areas of the business. Adjusted Net Income - Adjusted net income for the second quarter of fiscal 2007 increased to $4.7 million from $1.8 million for the corresponding quarter of last year. Net Income - Net income for the second quarter of fiscal 2007 increased to $3.2 million, or $0.04 per share from $0.2 million, or $0.00 per share, for the second quarter of fiscal 2006.

Included in net income for the second quarter of fiscal 2007 is an unrealized gain in the change in the fair value of forward contracts of $0.9 million compared with a gain on foreign exchange of $0.4 million for the corresponding quarter of fiscal 2006. Deferred Revenue - Deferred revenue at the end the second quarter of fiscal 2007 was $49.0 million, an increase of 13% from $43.2 million at the end of the second quarter of fiscal 2006 and an increase of 2% from $48.0 million at the end of the first quarter of fiscal 2007. Cash - Cash, cash equivalents and restricted cash at the end of the second quarter of fiscal 2007 were $6.2 million compared to $6.6 million at the end of the first quarter of fiscal 2007 and $7.0 million at the end of the second quarter of fiscal 2006. The decrease compared to the end of the first quarter of fiscal 2007 resulted primarily from the repurchase of 1.1 million of the Company’s shares at a cost of $1.1 million during the second quarter under its previously announced stock buyback program and our investing $1.7 million in property and equipment related to our hosted email environment. This decrease was partially offset by the generation of cash flow from operations of $2.4 million during the second quarter of fiscal 2007.

Subsequent Events - On July 25, 2007, Tucows acquired Innerwise Inc. (ItsYourDomain.com), a privately held, ICANN-accredited registrar with more than 700,000 domains under management and offering domain services through a worldwide wholesale network of over 2,500 affiliates. Tucows paid $10.8 million in cash for IYD with the opportunity for IYD to realize an additional $1.1 million based on specific targets. The acquisition was funded from working capital and a bank loan for $9.6 million.

Recently, Tucows redesigned its website, to enhance overall user experience, placing solutions, community and search, at the forefront. Features of the new site include:

• Enhancement for overall user experience, easier to find information about how to do things, software and services to help them do it, and community information to help make decisions.
• Solutions to common problems are on the homepage and profiled throughout the site.

Greg Weir, Director of Content Services commented, ”We’ve completely overhauled our extensive editorial content. By providing Solutions to challenges and encouraging the community to contribute comments, rankings, reviews and their own Solutions, we’re creating a tremendous resource to help people get things done on the Internet and with technology.”

Tucows has content distribution arrangements with AOL, Microsoft’s Windows Marketplace and others. Software developers wanting to reach the Tucows global user base have new opportunities to advertise and sponsor placements on the site. Tucows continues to support software developers of all sizes with its self-service author resource center at http://author.tucows.com.

Tucows Inc. provides Internet services and download libraries through a global distribution network of 6,000 service providers. The distribution network primarily consists of web hosting companies, ISPs (Internet Service Providers) and other Internet related service companies. The companies use Tucows’ provisioned services to offer solutions to customer: enterprises, small and medium businesses and consumers. Tucows is an accredited registrar with ICANN (the Internet Corporation for Assigned Names and Numbers) and earns most of its revenue from domain name registration services plus hosted email, spam and virus protection, blogware, website building tools, the Platypus Billing System and digital certificates.

To learn more about Tucows, please visit: www.tucowsinc.com.

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