TORONTO, March 6,
2024 /CNW/ -
TERAGO Inc. ("TERAGO" or the "Company") (TSX: TGO), https://terago.ca/),
today reported financial and operating results for the fourth
quarter and fiscal year ended December 31, 2023.
"I am proud to report my second quarter since becoming CEO on
June 12th, 2023. Our
"Value Creation Strategy" accelerated delivery on behalf of
customers, employees, shareholders – continued apace in the final
quarter of 2023. In our prior earnings release I highlighted
improvements across all of our key financial indicators. Today I am
pleased to share that in the second half of 2023, we have continued
the trend of strengthening these metrics.
Improvements in second half of 2023 as compared to the second
half of 2022
- Increased Adjusted EBITDA1,2 by 8%
- Improved positive cashflow from operations1 by
96%
In the second half of 2023, we delivered substantial financial
wins that have afforded TERAGO the opportunity to reinvest in its
transformation. This will drive a reenergizing of our top line.
With new sales leadership in place and further growth investments
anticipated, it is my intention to drive value as much from top
line revenue growth as from cost optimization and careful
management of our capital expenditures. TERAGO is extremely well
positioned as a nimble, carrier-grade managed service provider of
choice with differentiated frequencies, deep capabilities and a
delivery track record in emerging growth areas. Smart, profitable
growth will be a theme in 2024 and beyond," said Daniel Vucinic, CEO.
Key Developments and Financial Highlights
- Total revenues for the three months ended December 31, 2023, were $6.5 million compared to $6.3 million for the same period in 2022. Total
annual revenue in 2023 was $26.1
million compared to $27.6
million in the prior year. The decrease of $1.5 million was the result of the prior year
including one month of Cloud and Colocation and post transaction
related support services ("Other Revenue").
- Connectivity revenues were $6.5
million and $26.0 million, for
the three months and year ended December 31,
2023, respectively. This is an increase of $0.2 million compared to same quarter prior year
and $0.1 million compared to prior
year annual.
- Adjusted EBITDA1,2, remained flat at $1.2 million for the three months ended
December 31, 2023, compared to the
same period in 2022. For the year ended December 31, 2023, Adjusted EBITDA1,2
decreased 17.1% to $3.4 million
compared to $4.1 million for the same
period in 2022. The decrease is the result of the prior year
including one month of Cloud and Colocation Revenue ($1.4 million), partially offset by a reduction of
overall operating expenses in the current year.
- Net loss increased to $3.6
million for the three months ended December 31, 2023, compared to a net loss of
$2.4 million for the same period in
2022. Net loss was $13.2 million for
the year ended December 31, 2023,
compared to a net loss of $11.6
million for the same period in 2022. The increase in net
loss was a combination of higher finance costs, lower total
revenues, as described above combined with non-recurring costs
associated with the staffing and management changes. These were
partially offset by a reduction in overall operating expenses year
over year.
- Gross Margin remained consistent year over year achieving 73.3%
in 2023 compared to 73.1% in the prior year.
- Backlog MRR1 decreased year over year to
$65,363 as of December 31, 2023, from $178,948 for the same period in 2022. The
decrease in backlog MRR is the result of onboarding of new
customers with improved installation processes yielding much faster
installations which reduced the backlog due to installations
exceeding new bookings in the year and combined with de-bookings of
previously recorded orders due to technical, geographical and
customer landlord limitations preventing fulfillment of the
orders.
- ARPU1 for the connectivity business was $1,164 in Q4 2023 up from $1,127 in Q3 2023 and compared to $1,063 for the same period in 2022 due to changes
in customer base and product mix and a new pricing strategy
implemented in 2023 Q4. ARPU has been increasing every quarter for
the past five quarters.
_________________________________________
|
(1)
|
See " Non-IFRS
Measures"
|
(2)
|
See "Adjusted EBITDA"
for a reconciliation of net loss to Adjusted EBITDA.
|
Additional Management Commentary
"The Value Creation Strategy has gained sufficient traction and
is already yielding tangible benefits. I expect that TERAGO's
efforts will be further buoyed by the addition of a permanent Chief
Financial Officer, following the departure of the previous CFO due
to personal family reasons after a brief tenure. A search is well
underway for a permanent Chief Financial Officer, and I look
forward to reacquainting the investor community with TERAGO and the
Value Creation Strategy in the second half of 2024 following the
integration of this key member of our team.
"In addition, we noted with great interest the consultation
launched by Innovation, Science and Economic Development Canada
with respect to license renewals impacting our 38 GHz and 24GHz
bands, as well as the preliminary consultation launched on changes
to our 24 GHz band. Like any wireless business, spectrum is
our lifeblood. Reasonable long-term visibility and our ability to
put our spectrum to work in a way that fosters a growing,
competitive and knowledge-based economy is absolutely critical for
us to be able to invest in our diverse and innovative service
offerings. We remain fully engaged in this important process.",
said Daniel Vucinic.
RESULTS OF OPERATIONS
Comparison of the three months and year ended December 31, 2023 and 2022
(In
thousands of dollars, except with respect to gross profit margin,
earnings per share, Backlog MRR, and ARPU)
(unaudited)
|
Three months
ended
December 31
|
|
Year ended
December 31
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
Financial
|
|
|
|
|
|
|
|
|
Cloud and Colocation
Revenue
|
$
|
-
|
|
-
|
|
-
|
|
1,355
|
Connectivity
Revenue
|
$
|
6,536
|
|
6,285
|
|
26,034
|
|
25,860
|
Other
Revenue
|
$
|
-
|
|
50
|
|
18
|
|
407
|
Total
Revenue
|
$
|
6,536
|
|
6,335
|
|
26,052
|
|
27,622
|
Cost of
Services1
|
$
|
1,801
|
|
1,578
|
|
6,948
|
|
7,437
|
Selling, General, &
Administrative Costs
|
$
|
4,577
|
|
3,980
|
|
18,430
|
|
19,188
|
Gross Profit
Margin1
|
|
72.4 %
|
|
75.1 %
|
|
73.3 %
|
|
73.1 %
|
Adjusted EBITDA
1,2
|
$
|
1,190
|
|
1,164
|
|
3,435
|
|
4,077
|
Net Loss
|
$
|
(3,561)
|
|
(2,406)
|
|
(13,185)
|
|
(11,571)
|
Basic loss per
share
|
$
|
(0.18)
|
|
(0.12)
|
|
(0.67)
|
|
(0.61)
|
Diluted loss per
share
|
$
|
(0.18)
|
|
(0.12)
|
|
(0.67)
|
|
(0.61)
|
Operating
|
|
|
|
|
|
|
|
|
Backlog
MRR1
|
|
|
|
|
|
|
|
|
Connectivity
|
$
|
65,363
|
|
178,948
|
|
65,363
|
|
178,948
|
Churn
Rate1
|
|
|
|
|
|
|
|
|
Connectivity
|
|
1.0 %
|
|
0.9 %
|
|
1.1 %
|
|
0.8 %
|
ARPU1
|
|
|
|
|
|
|
|
|
Connectivity
|
$
|
1,164
|
|
1,063
|
|
1,125
|
|
1,085
|
(1)
|
See " Non-IFRS
Measures"
|
(2)
|
See "Adjusted EBITDA"
for a reconciliation of net loss to Adjusted EBITDA.
|
Conference Call
Management will host a conference call on Thursday, March 7, 2024, at 10:00 AM ET to discuss these results.
To access the conference call, please dial 888-506-0062 or
973-528-0011 and use conference ID 572559 if applicable. Please
call the conference telephone number 15 minutes prior to the start
time so that you are in the queue for an operator to assist in
registering and patching you through.
An archived recording of the conference call will be available
through Thursday, March 21, 2024. To
listen to the recording, call 877-481-4010 or 919-882-2331 and
enter passcode 50012# if applicable.
(1) Non-IFRS Measures
This press release contains references to "Cost of Services",
"Gross Profit Margin", "Adjusted EBITDA", "Backlog MRR", "ARPU",
and "churn" which are not measures prescribed by International
Financial Reporting Standards (IFRS).
Cost of Services consists of expenses related to delivering
service to customers and servicing the operations of our networks.
These expenses include costs for the lease of intercity facilities
to connect our cities, internet transit and peering costs paid to
other carriers, network real estate lease expense, spectrum lease
expenses and lease and utility expenses for the data centres and
salaries and related costs of staff directly associated with the
cost of services.
Gross Profit Margin % consists of gross profit margin divided by
revenue where gross profit margin is revenue less cost of
services.
Adjusted EBITDA - The Company believes that Adjusted EBITDA is
useful additional information to management, the Board and
investors as it provides an indication of the operational results
generated by its business activities prior to taking into
consideration how those activities are financed and taxed and also
prior to taking into consideration asset depreciation and
amortization and it excludes items that could affect the
comparability of our operational results and could potentially
alter the trends analysis in business performance. Excluding these
items does not necessarily imply they are non-recurring, infrequent
or unusual. Adjusted EBITDA is also used by some investors and
analysts for the purpose of valuing a company. The Company
calculates Adjusted EBITDA as earnings before deducting interest,
taxes, depreciation and amortization, foreign exchange gain or
loss, finance costs, finance income, gain or loss on disposal of
network assets, property and equipment, impairment of property,
plant, & equipment and intangible assets, stock-based
compensation and restructuring, acquisition-related and integration
costs. Investors are cautioned that Adjusted EBITDA should not be
construed as an alternative to operating earnings (losses), or net
earnings (losses) determined in accordance with IFRS as an
indicator of our financial performance or as a measure of our
liquidity and cash flows. Adjusted EBITDA does not take into
account the impact of working capital changes, capital
expenditures, debt principal reductions and other sources and uses
of cash, which are disclosed in the consolidated statements of cash
flows.
A reconciliation of net loss to Adjusted
EBITDA is found
below and in the MD&A
for the three months and year ended December 31, 2023. Adjusted EBITDA does not have
any standardized meaning under IFRS/GAAP. TERAGO's method of
calculating Adjusted EBITDA may differ from other issuers and,
accordingly, Adjusted EBITDA may not be comparable to similar
measures presented by other issuers.
The table below reconciles net loss to Adjusted EBITDA for
the three months and year ended December
31 2023 and 2022.
(in thousands of
dollars, unaudited)
|
Three months
ended
December 31
|
|
|
Year ended
December 31
|
|
|
2023
|
|
2022
|
|
|
2023
|
2022
|
Net loss for the
period
|
$
|
(3,561)
|
|
(2,406)
|
|
$
|
(13,185)
|
(11,571)
|
Foreign exchange
loss
|
|
24
|
|
45
|
|
|
7
|
83
|
Finance
costs
|
|
1,154
|
|
491
|
|
|
3,707
|
2,089
|
Finance
income
|
|
(35)
|
|
(38)
|
|
|
(209)
|
(123)
|
Impairment loss on
divested assets
|
|
-
|
|
-
|
|
|
-
|
107
|
Loss from
operations
|
|
(2,418)
|
|
(1,908)
|
|
|
(9,680)
|
(9,415)
|
Add/(deduct):
|
|
|
|
|
|
|
|
|
Depreciation of network
assets, property and equipment
and amortization of intangible assets
|
|
2,474
|
|
2,529
|
|
|
9,974
|
10,085
|
Loss on disposal of
network assets
|
|
39
|
|
-
|
|
|
83
|
171
|
Impairment of other
assets and related charges
|
|
64
|
|
147
|
|
|
297
|
750
|
Stock-based
compensation expense
|
|
227
|
|
115
|
|
|
590
|
688
|
Restructuring,
acquisition-related, integration and other
related costs
|
|
804
|
|
281
|
|
|
2,171
|
1,798
|
Adjusted
EBITDA1
|
$
|
1,190
|
|
1,164
|
|
$
|
3,435
|
4,077
|
*Prior year figures
have been adjusted to conform with current year
presentation.
|
Backlog MRR - The term "Backlog MRR" is a measure
of contracted monthly recurring revenue (MRR) from customers that
have not yet been provisioned. The Company believes backlog MRR is
useful additional information as it provides an indication of
future revenue. Backlog MRR is not a recognized measure under IFRS
and may not translate into future revenue, and accordingly,
investors are cautioned in using it. The Company calculates backlog
MRR by summing the MRR of new customer contracts and upgrades that
are signed but not yet provisioned, as at the end of the period.
TERAGO's method of calculating backlog MRR may differ from
other issuers and, accordingly, backlog MRR may not be comparable
to similar measures presented by other issuers.
ARPU - The term "ARPU" refers to the Company's average
revenue per customer per month in the period. The Company believes
that ARPU is useful supplemental information as it provides an
indication of our revenue from an individual customer on a per
month basis. ARPU is not a recognized measure under IFRS and,
accordingly, investors are cautioned that ARPU should not be
construed as an alternative to revenue determined in accordance
with IFRS as an indicator of our financial performance. The Company
calculates ARPU by dividing our total revenue before revenue from
early terminations by the number of customers in service during the
period and we express ARPU as a rate per month.
TERAGO's method of calculating ARPU has changed from the
Company's past disclosures to exclude revenue from early
termination fees, where ARPU was previously calculated as revenue
divided by the number of customers in service during the period.
TERAGO's method may differ from other issuers, and
accordingly, ARPU may not be comparable to similar measures
presented by other issuers.
Churn - The term "churn" or "churn rate" is a measure,
expressed as a percentage, of customer cancellations in a
particular month. The Company calculates churn by dividing the
number of customer cancellations during a month by the total number
of customers at the end of the month before cancellations. The
information is presented as the average monthly churn rate during
the period. The Company believes that the churn rate is useful
supplemental information as it provides an indication of future
revenue decline and is a measure of how well the business is able
to renew and keep existing customers on their existing service
offerings. Churn and churn rate are not recognized measures under
IFRS and, accordingly, investors are cautioned in using it.
TERAGO's method of calculating churn and churn rate may differ from
other issuers and, accordingly, churn may not be comparable to
similar measures presented by other issuers.
Cash from Operations – The term "Cash from Operations" refers to
the "Cash from Operating Activities" as shown on the "Consolidated
Statement of Cash Flows" in the Company's Consolidated Financial
Statements.
Overall Cash Consumption - The term "Overall Cash Consumption"
refers to the "Net change in cash and cash equivalents during the
period" as shown on the "Consolidated Statement of Cash Flows" in
the Company's Consolidated Financial Statements.
About TERAGO
TERAGO provides managed wireless and
wireline connectivity and private 5G wireless networking services
to businesses operating across Canada. As Canada's biggest mmWave spectrum holders, the
Company possesses exclusive spectrum licenses in the 24 GHz and 38
GHz spectrum bands, which it utilizes to provide secure, dedicated
SLA guaranteed enterprise grade performance that is technology
diverse from buried cables ensuring high availability connectivity
services. TERAGO serves over 1,900 Canadian and Global businesses
operating in major markets across Canada, including Toronto, Montreal, Calgary, Edmonton, Vancouver, Ottawa and Winnipeg, and has been providing wireless
services since 1999. For more information about TERAGO, please
visit www.terago.ca.
Forward-Looking Statements
This news release includes
certain forward-looking statements. By their nature,
forward-looking statements are subject to numerous risks and
uncertainties, some of which are beyond TERAGO's control.
Forward-looking statements may include but are not limited to
statements regarding the further developing our 5G Fixed Wireless
Access program, consistently executing across all fronts of the
business, success in providing Canadian enterprises with managed
services and the 5G fixed wireless trials being conducted by the
Company. All such statements constitute "forward-looking
information" as defined under, applicable Canadian securities laws.
Any statements contained herein that are not statements of
historical facts constitute forward-looking information. The
forward-looking statements reflect the Company's views with respect
to future events and is subject to risks, uncertainties and
assumptions, including those risks set forth in the "Risk Factors"
sections in the annual MD&A of the Company for the year ended
December 31, 2023 available on
www.sedar.com under the Company's corporate profile. Factors that
could cause actual results or events to differ materially include
the inability to consistently achieve sales growth across all lines
of TERAGO's business including managed services, inability to
complete successful 5G technical trials, the impacts and
restrictions caused by the COVID-19 pandemic are prolonged which
may further delay customer trials and/or cause a negative impact on
future financial results of the Company, TERAGO's Pandemic Response
Plan may not mitigate all impacts of COVID-19, the results of the
5G trials not being satisfactory to TERAGO or any of its technology
partners, regulatory requirements may delay or inhibit the trial,
the economic viability of any potential services that may result
from the trial, the ability for TERAGO to further finance and
support any new market opportunities that may present itself, and
industry competitors who may have superior technology or are
quicker to take advantage of 5G technology. Accordingly, readers
should not place undue reliance on forward-looking statements as
several factors could cause actual future results, conditions,
actions or events to differ materially from the targets,
expectations, estimates or intentions expressed with the
forward-looking statements. Except as may be required by applicable
Canadian securities laws, TERAGO does not intend, and disclaims any
obligation, to update or revise any forward-looking statements
whether in words, oral or written as a result of new information,
future events or otherwise.
SOURCE TeraGo Inc.