TORONTO , May 11, 2022
/CNW/ -
TeraGo Inc. ("TeraGo" or the "Company") (TSX: TGO, www.terago.ca), today
reported financial and operating results for the first quarter and
fiscal year ended March 31, 2022.
Key Developments
- On January 20, 2022, TeraGo
announced it had entered into a definitive agreement to sell its
cloud and colocation business lines to a subsidiary of Hut 8 Mining
Corp. (Nasdaq: HUT) (TSX: HUT) for an aggregate consideration of
Cdn.$30 million in cash (the
"Divestiture"). The Divestiture enables TeraGo to focus on its core
wireless business and leverage TeraGo's extensive millimeter wave
spectrum licenses to grow its mmWave 5G private networks for
businesses. The Divestiture subsequently closed on January 31, 2022.
- On February 1, 2022, TeraGo
repaid all indebtedness, liabilities and other obligations against
its Term Debt Facility totaling $20.0
million, and the Term Debt Facility was terminated. TeraGo
was released and discharged from all obligations, claims and
demands under and in respect of the Term Debt Facility, other than
certain provisions which expressly survive repayment of the
obligations.
- On March 22, 2022, TeraGo
announced the launch of its first 5G mmWave service to a
Multi-Dwelling Unit ("MDU") in Ontario. This multiple gigabit solution will
allow TeraGo partners to provide high-speed internet services to
previously hard to service buildings and residences.
- TeraGo's Net Promoter Score ("NPS"), a widely utilized industry
measurement of customer loyalty and relationships was +69 across Q1
2022 with its connectivity customers, which compares very
favourably with other network operators.
Financial Highlights
- TeraGo's first quarter 2022 revenues include one month of cloud
and colocation revenues, including certain connectivity revenues
associated with the cloud and colocation customers. These revenues
were included in the Divesture and will not be part of TeraGo's
revenues from February 1, 2022
onward.
- Total connectivity revenues decreased 1.5% quarter over quarter
due to the Divestiture, with connectivity revenue totalling
$6.4 million for the three months
ended March 31, 2022 compared to
$6.5 million in the prior quarter.
Excluding the impact of the Divestiture on connectivity revenues
associated with former cloud and colocation customers, normalized
connectivity revenues increased by $0.1
million or 1.7% in the first quarter of 2022 compared to the
prior quarter.
- Total revenue decreased 26.9% to $7.9
million for the three months ended March 31, 2022 compared to $10.8 million for the same period in 2021. The
decrease in revenue was driven by the Divestiture.
- Net loss for the three months ended March 31, 2022 was $3.1
million compared to a loss of $2.2
million in the same period in 2021. The higher net loss was
driven by one-time restructuring expenses and lower gross profit
due to the Divestiture.
- Adjusted EBITDA1,2 was $1.1 million for the three months ended
March 31, 2022 compared to
$3.2 million for the same period in
2021. The decrease was driven by lower gross profit, partially
offset with lower salaries and related expenses due to the
Divestiture.
Management Commentary
"With the cloud and colocation divestiture in Q1, we took a big
step towards our vision for TeraGo as a pure play wireless
connectivity company," said TeraGo CEO Matthew Gerber. "Our team is now laser focused
on providing the industry's best wireless connectivity services to
our business customers. The continued momentum we've been able to
build has resulted in quarterly core connectivity revenue growth,
and a connectivity business that is now delivering stable,
consistent and predictable results. Additionally, we have been
successful in executing our short-term milestones, and remain hard
at work in continuing to lay the groundwork for offering 5G mmWave
connectivity and private networks to capitalize on the growing
market opportunity at hand. TeraGo's vision is to be Canada's leading provider of enterprise grade
wireless connectivity for business customers and we are moving
aggressively towards realizing this vision."
_________________________
|
1
|
Adjusted EBITDA is a
Non-GAAP measure. See "Definitions – Key Performance Indicator,
IFRS, Additional GAAP and Non-GAAP Measures.
|
2
|
See "Adjusted EBITDA"
for a reconciliation of net loss to Adjusted EBITDA
|
RESULTS OF OPERATIONS
Comparison of the three months and year ended March 31, 2022 and 2021
(In
thousands of dollars, except with respect to gross profit margin,
earnings per share, Backlog MRR, and ARPU)
|
|
|
Three months
ended
March
31
|
|
|
|
2022
|
2021
|
Financial
|
|
|
|
|
Cloud and Colocation Revenue *
|
$
|
|
1,355
|
4,103
*
|
Connectivity Revenue *
|
$
|
|
6,434
|
6,726
*
|
Other Revenue
|
$
|
|
135
|
-
|
Total Revenue
|
$
|
|
7,924
|
10,829
|
Cost of Services1
|
$
|
|
2,232
|
2,514
|
Selling, General, & Administrative Costs
|
$
|
|
5,497
|
5,904
|
Gross profit margin
|
|
|
71.8%
|
76.8%
|
Adjusted EBITDA 1,2
|
$
|
|
1,113
|
3,233
|
Net
loss
|
$
|
|
(3,140)
|
(2,166)
|
Basic loss per share
|
$
|
|
(0.16)
|
(0.13)
|
Diluted loss per share
|
$
|
|
(0.16)
|
(0.13)
|
Operating
|
|
|
|
|
Backlog MRR1
|
|
|
|
|
Connectivity
|
$
|
|
126,631
|
131,078
|
Churn Rate1
|
|
|
|
|
Connectivity
|
|
|
0.7%
|
1.3%
|
ARPU1*
|
|
|
|
|
Connectivity
|
$
|
|
1,061
|
1,039
*
|
|
*The three months ended
March 2021 comparative numbers for Cloud and Colocation Revenue,
Connectivity Revenue, and ARPU have changed to
conform with the presentation of revenue stream allocations for Q1
2022.
(1) See "Non-IFRS
Measures" below.
|
(2) See "Adjusted
EBITDA" below for a reconciliation of net loss to Adjusted
EBITDA.
|
Conference Call
Management will host a conference call on Thursday, May 12, 2022, at 9:00 a.m. Eastern Time to discuss these
results.
To access the conference call, please dial 888-886-7786 or
416-764-8658, and use conference ID 07140337 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. The Financial Statements and
Management's Discussion & Analysis for the quarter ended
March 31, 2022, along with a
presentation in connection with the conference call will be made
available on the Company's website at
https://terago.ca/company/investor-relations/.
An archived recording of the conference call will be available
until Thursday, May 19, 2022. To
listen to the recording, call 877-674-7070 or 416-764-8692 and
enter passcode 140337 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 and twelve months ended March 31, 2022. 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
EBITDA1 for the three months ended March 31, 2022 and 2021.
(in thousands of
dollars)
|
|
Three months
ended
March
31
|
|
|
2022
|
2021
|
Net earnings (loss)
for the period
|
$
|
(3,140)
|
(2,166)
|
Foreign exchange loss
(gain)
|
|
(5)
|
(21)
|
Finance
costs
|
|
756
|
1,003
|
Finance
income
|
|
(15)
|
(12)
|
Impairment loss on
disposal
|
|
107
|
-
|
Earnings (loss) from
operations
|
|
(2,297)
|
(1,196)
|
Add:
|
|
|
|
Depreciation of network assets, property and equipment
and
amortization of intangible assets
|
|
2,492
|
3,607
|
Loss on disposal of network assets and leases
|
|
171
|
6
|
Impairment of assets and related charges
|
|
120
|
157
|
Stock-based compensation expense (recovery)
|
|
173
|
229
|
Restructuring, acquisition-related, integration costs and
other
|
|
454
|
430
|
Adjusted EBITDA
1
|
$
|
1,113
|
3,233
|
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.
About TeraGo
TeraGo provides wireless connectivity and
private 5G wireless networking services to businesses operating
across Canada. The Company holds
2120 MHz of exclusive spectrum licenses in the 24 GHz and 38 GHz
spectrum bands, which it utilizes to provide secure and
reliable enterprise grade networking and connectivity services.
TeraGo serves over 1,800 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 quarter
ended March 31, 2022 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.