Tucows Reports Strong Third Quarter Fiscal 2006 Results

Company Reports Strong Growth in Revenue and Profitability

TORONTO, Canada – November 6, 2006 – TTucows Inc. (AMEX:TCX, TSX:TC), a leading provider of Internet services to web hosting companies, ISPs and other service providers worldwide, today reported its financial results for the third quarter of fiscal 2006 ended September 30, 2006.

Highlights for the third quarter included:

• A 40% year-over-year increase in net revenue to a record $16.9 million;
• Net income of $1.9 million;
• A 41% increase in adjusted EBITDA to $1.5 million;
• A 20% year-over-year increase in deferred revenue to a record $44.7 million; and
• Acquisition of the Kiko calendaring service.

“Our financial results for the third quarter of fiscal 2006 show increased momentum in our business driven by growth in all our service offerings,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “Operationally this quarter, we completed the bulk of integration of Net Identity and acquired the Kiko calendaring service, further evidence of our commitment to having the best hosted email service in the world. In addition, we continued to invest in strengthening our operations. This will allow us to better capitalize on the significant leverage inherent in our business model.”

Summary Financial Results
(Numbers in Thousands of US Dollars, Except Per Share Data)

¹Includes other income of $1.9 million related to contingent consideration associated with the sale in 2002 of patents acquired through the reverse takeover of Infonautics in 2001.

Net revenue for the third quarter of fiscal 2006 increased 40% to $16.9 million from $12.1 million for the third quarter of fiscal 2005. The increase was the result of growth across all aspects of the Company’s business.

Net income for the third quarter of fiscal 2006 was $1.9 million, or $0.03 per share, compared with $0.8 million, or $0.01 per share, for the third quarter of fiscal 2005. Adjusted EBITDA for the third quarter of fiscal 2006 increased 41% to $1.5 million, or 9.0% of net revenue, from $1.1 million, or 8.9% of net revenue, for the corresponding quarter of last year.

Deferred revenue at the end the third quarter of fiscal 2006 was $44.7 million, an increase of 20% from $37.3 million at the end of the third quarter of fiscal 2005 and an increase of 4% from $43.2 million at the end of the second quarter of fiscal 2006.

Cash, short-term investments and restricted cash at the end of the third quarter of fiscal 2006 decreased to $3.8 million from $7.0 million at the end of the second quarter of fiscal 2006 and $18.4 million at the end of the third quarter of fiscal 2005. The decrease compared to the end of the second quarter of fiscal 2006 is primarily the result of cash payments of $2.1 million to repay one of two promissory notes associated with the acquisition of Mailbank.com Inc. (Net Identity) and investments of $0.8 million in property and equipment, mostly for Internet services infrastructure.

EBITDA and Adjusted EBITDA

To assist financial statement users in their assessment of the Company’s historical performance and to project its future earnings and cash flows, the Company has included earnings before interest, taxes, depreciation and amortization (EBITDA). EBITDA is presented because it is an important supplemental measure of performance frequently used by securities analysts, investors and other interested parties in the evaluation of companies. Other companies may calculate EBITDA differently. EBITDA is not a measurement of financial performance under generally accepted accounting principles (GAAP) and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of operating performance or any other measures of performance derived in accordance with (GAAP). Because EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business. See the Consolidated Statements of Cash Flows included in the attached financial statements.

Adjusted EBITDA represents EBITDA plus the additional adjustments described in the table below. Adjusted EBITDA is presented because it better represents ongoing business performance than EBITDA. The adjustments reflect the material amount of cash collected by the Company for domain registrations and other Internet services paid for the full term at the time of activation and deferred, net of prepaid fees. In addition, adjusted EBITDA reflects earnings and expenses considered as non-representative of ongoing business for the reasons specified below. Adjusted EBITDA is one of the primary measures the Company uses for planning and budgeting purposes and to monitor and evaluate Tucows’ financial and operating results. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of operating performance or any other measures of performance derived in accordance with generally accepted accounting principles. See the Consolidated Statements of Cash Flows included in the attached financial statements.

Conference Call

Tucows will host a conference call today, Monday, November 6 2006, at 5:00 p.m. (ET) to discuss the Company’s third quarter fiscal 2006 results. To access the conference call via the Internet go to www.tucowsinc.com, and click on “Investor Relations.”

For those unable to join the conference call at the scheduled time, it will be archived for replay both by telephone and via the Internet beginning approximately one hour following completion of the call. To access the archived conference call by telephone, dial 1-800-408-3053 or 416-695-5800 and enter the pass code 3202095 followed by the pound key. The telephone replay will be available until Monday, November 13, 2006, at midnight. To access the archived conference call via the Internet, go to www.tucowsinc.com and click on “Investor Relations.”

About Tucows

Tucows Inc. (AMEX:TCX, TSX:TC) provides Internet services and download libraries through a global distribution network of 6,000 service providers. This distribution network primarily consists of web hosting companies, ISPs (Internet Service Providers) and other Internet related service companies. These companies use Tucows’ provisioned services to offer solutions to their customers: 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. For more information, please visit: www.tucowsinc.com

Contact:
Leona Hobbs

Manager, Communications
Tucows Inc.
416-538-5450
ir@tucows.com

TUCOWS is a registered trademark of Tucows Inc. or its subsidiaries. All other trademarks and service marks are the properties of their respective owners.

Tucows Inc. Consolidated Balance Sheets (Dollar amounts in U.S. dollars) (unaudited)
		September 30, 2006		December 31, 2005
		(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	3,546,933	$	17,348,088
Short-term investments		-		1,771,569
Restricted cash		262,834		60,000
Interest receivable		-		39,574
Accounts receivable		5,757,226		1,439,329
Prepaid expenses and deposits		2,297,150		1,999,820
Prepaid domain name registry and other Internet services fees, current portion		21,777,022		18,175,988
Cash held in escrow		-		-
Deferred tax asset, current portion		1,000,000		1,000,000
Total current assets		34,641,165		41,834,368
Prepaid domain name registry and other Internet services fees, long-term portion		9,330,713		7,701,939
Deferred acquisition costs		-		46,034
Property and equipment		5,698,689		1,542,671
Deferred tax asset, long-term portion		2,000,000		2,000,000
Intangible assets		18,851,277		1,006,080
Goodwill		11,977,086		1,951,067
Investment		353,737		353,737
Cash held in escrow		801,725		621,412
Total assets	$	83,654,392	$	57,057,308
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,595,011	$	1,655,195
Accrued liabilities		3,227,884		1,417,035
Customer deposits		2,851,428		2,276,637
Deferred revenue, current portion		31,522,474		26,790,166
Accreditation fees payable, current portion		504,966		651,811
Total current liabilities		40,701,763		32,790,844
Deferred revenue, long-term portion		13,213,970		11,079,537
Accreditation fees payable, long-term portion		152,197		94,785
Promissory note payable		6,000,000		-
Deferred tax liability		5,396,000		-
Stockholders’ equity:
Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding		-		-
Common stock - no par value, 250,000,000 shares authorized; 75,732,220 shares issued and outstanding at September 30, 2006 and 71,945,303 shares issued and outstanding at December 31, 2005		15,287,732		12,403,422
Additional paid-in capital		50,271,866		50,061,866
Deficit		(47,369,136)		(49,373,146)
Total stockholders’ equity		18,190,462		13,092,142
Total liabilities and stockholders’ equity	$	$83,654,392	$	57,057,308

Tucows Inc. Consolidated Statements of Operations (Dollar amounts in U.S. dollars) (unaudited)
	Three months ended September 30,				Nine months ended September 30,
	2006		2005		2006		2005
Net revenues	$	16,864,320	$	12,054,796	$	47,830,296	$	35,858,640
Cost of revenues:
Cost of revenues (*)		10,464,829		7,676,713		30,458,945		22,484,530
Depreciation of property and equipment		695,624		113,539		1,889,799		319,619
Amortization of intangible assets		66,550		19,290		143,628		57,870
Total cost of revenues		11,227,003		7,809,542		32,492,372		22,862,019
Gross profit		5,637,317		4,245,254		15,337,924		12,996,621
Operating expenses:
Sales and marketing (*)		1,706,951		1,150,674		4,738,397		3,669,185
Technical operations and development (*)		1,924,435		1,468,624		6,335,874		4,147,467
General and administrative (*)		1,698,012		820,860		4,265,529		3,358,347
Depreciation of property and equipment		43,025		99,883		125,116		412,546
Amortization of intangible assets		230,291		39,750		436,175		119,250
Total operating expenses		5,602,714		3,579,791		15,901,091		11,706,795
Income (loss) from operations		34,603		665,463		(563,167)		1,289,826
Other income (expenses):
Interest income (expenses), net		(70,297)		122,755		135,256		296,859
Other income		1,873,420		-		2,347,026		-
Total other income		1,803,123		122,755		2,482,282		296,859
Income before provision for income taxes		1,837,726		788,218		1,919,115		1,586,685
Recovery of income taxes		(96,895)		-		(84,895)		(151,975)
Net income for the period	$	1,934,621	$	788,218	$	2,004,010	$	1,738,660
Basic earnings per share	$	0.03	$	0.01	$	0.03	$	0.03
Shares used in computing basic earnings per common share		75,706,078		69,602,723		73,418,358		68,126,691
Diluted earnings per share	$	0.02	$	0.01	$	0.03	$	0.02
Shares used in computing diluted earnings per common share		78,214,560		73,145,627		75,852,576		72,243,523
(*) Stock-based compensation has been included in operating expenses as follows:
Cost of revenues	$	2,200	$	-	$	7,700	$	-
Sales and marketing	$	23,200	$	-	$	79,200	$	-
Technical operations and development	$	14,800	$	-	$	50,800	$	-
General and administrative	$	21,300	$	-	$	72,300	$	-

Tucows Inc. Reconciliation of EBITDA and Adjusted EBITDA (Dollar amounts in U.S. dollars) (unaudited)
	Three months ended September 30,				Nine months ended September 30,
	2006		2005		2006		2005
Net income for the period	$	1,934,621	$	788,218	$	2,004,010	$	1,738,660
Depreciation of property and equipment		738,649		213,422		2,014,915		732,165
Amortization of intangible assets		296,841		59,040		579,803		177,120
Interest income, net		70,297		(122,755)		(135,256)		(296,859)
Provision for (recovery of) income taxes		(96,895)		-		(84,895)		(151,975)
EBITDA		2,943,513		937,925		4,378,577		2,199,111
Adjustments to EBITDA (1)
Change in prepaid fees for domain name registry and other Internet services fees		(1,058,139)		(535,643)		(5,229,809)		(3,373,252)
Change in deferred revenue		1,506,423		674,016		6,702,773		4,068,481
Transitional costs		-		-		1,278,842		-
Other income		(1,873,420)		-		(2,347,026)		-
Subtotal Adjustments to EBITDA		(1,425,136)		138,373		404,780		695,229
Adjusted EBITDA	$	1,518,377	$	1,076,298	$	4,783,357	$	2,894,340
(1) Adjustments to EBITDA
We define Adjusted EBITDA as net income adjusted for depreciation, amortization, interest, taxes and further adjusted for certain cash and non-cash charges. For the nine months ended September 30, 2006, we incurred $1,278,842 of transitional costs in connection with our acquisition of the Hosted Messaging assets of Critical Path. In addition, during the nine months ended September 30, 2006, we received $2,347,026 in connection with settlements related to patents we acquired in the merger with Infonautics in 2001. The net amount of cash we collected for domain registrations and other Internet services paid for the full term at the time of activation and deferred, amounted to $1,472,964 for the nine months ended September 30, 2006 compared to $695,229 for the nine months ended September 30, 2005.

Tucows Inc. Consolidated Statements of Cash Flows (Dollar amounts in U.S. dollars) (unaudited)
	Three months ended September 30,				Nine months ended September 30,
	2006		2005		2006		2005
Cash provided by (used in):
Operating activities:
Net income for the period	$	1,934,621	$	788,218	$	2,004,010	$	1,738,660
Items not involving cash:
Depreciation of property and equipment		738,649		213,422		2,014,915		732,165
Amortization of intangible assets		296,841		59,040		579,803		177,120
Unrealized change in the fair value of forward exchange contracts		145,177		(290,177)		(50,725)		(182,549)
Stock-based compensation		61,500		-		210,000		-
Change in non-cash operating working capital:
Interest receivable		5,027		(115,739)		39,574		(115,739)
Accounts receivable		(2,100,231)		(91,828)		(4,262,944)		(251,805)
Prepaid expenses and deposits		388,487		240,682		367,608		651,485
Prepaid fees for domain name registry and other Internet services fees		(1,058,139)		(535,643)		(5,229,809)		(3,373,252)
Accounts payable		(2,213,494)		292,579		857,048		231,866
Accrued liabilities		135,838		(269,556)		1,202,952		(944,895)
Customer deposits		6,534		31,497		574,791		(77,372)
Deferred revenue		1,506,423		674,016		6,702,773		4,068,481
Accreditation fees payable		19,402		(204,296)		(89,434)		268,056
Cash (used in) provided by operating activities		(133,365)		792,215		4,920,562		2,922,221
Financing activities:
Proceeds received on exercise of stock options		43,550		65,177		98,960		251,616
Net proceeds received on issuance of common stock, net of issue costs		-		2,024,025		-		1,574,675
Repayment of promissory note payable		(2,122,930)		-		(2,122,930)		-
Cash (used in) provided by financing activities		(2,079,380)		2,089,202		(2,023,970)		1,826,291
Investing activities:
Additions to property and equipment		(787,824)		(301,604)		(4,079,249)		(1,127,681)
Decrease (increase) in investment in short-term investments		-		-		1,771,569		(7,771,453)
Decrease (increase) in restricted cash - being margin security against forward exchange contracts		159,623		(300,000)		(202,835)		160,398
Acquisition of Mailbank.com Inc., net of cash acquired		(655,830)		-		(6,486,732)		-
Acquisition of Hosted Messaging Assets, net of cash acquired		(1,037,303)		-		(7,456,788)		-
Acquisition of Boardtown Corporation, net of cash acquired		(22,700)		-		(22,700)		-
(Decrease) increase in cash held in escrow		1,563,999		(2,320)		(221,012)		390,568
Cash (used in) investing activities		(780,035)		(603,924)		(16,697,747)		(8,348,168)
(Decrease) in cash and cash equivalents		(2,992,780)		2,277,493		(13,801,155)		(3,599,656)
Cash and cash equivalents, beginning of period		6,539,713		8,037,839		17,348,088		13,914,988
Cash and cash equivalents, end of period	$	3,546,933	$	10,315,332	$	3,546,933	$	10,315,332