TORONTO, Nov. 9, 2022
/CNW/ - TERAGO
Inc. ("TERAGO" or the "Company") (TSX: TGO)
(https://terago.ca/), today reported financial and
operating results for the third quarter and fiscal year ended
September 30, 2022.
Key Developments and Financial Highlights
- On September 29, 2022, the
Company announced a USD $20 million
debt financing facility with CrowdOut Capital LLC.
- Accounting for one-time in period impacts from outage credits
in Q3 2022, gross connectivity revenues increased by 2.5% to
$6.7M the three months ended
September 30,2022 compared to
$6.5M for the same period in
2021.
- Total revenue decreased to $6.6
million for the three months ended September 30, 2022, compared to $10.9 million for the same period in 2021. The
decrease in revenue was driven by the divestiture of the cloud and
colocation lines of business in January of this year (the
"Divestiture").
- Net loss for the three months ended September 30, 2022, was $2.9 million compared to a loss of $2.3 million in the same period in 2021. The
higher net loss was driven by one-time restructuring costs,
non-recurring financing costs and transaction expenses related to
the Divestiture.
- Adjusted EBITDA[1],[2] was $0.6 million for the three months ended
September 30, 2022, compared to
$3.1 million for the same period in
2021. The decrease driven by the impact of the Divestiture
transaction, the non-recurring credits given this quarter, along
with other non-recurring in period charges.
- Customer churn decreased quarter on quarter to 0.7% in Q3 2022
from 0.9% in Q2 2022.
- TeraGo's Net Promoter Score ("NPS"), a widely utilized industry
measurement of customer loyalty and relationships was +44 across Q3
2022 with its connectivity customers, which compares very
favourably with other network operators. NPS score would have been
+58 if not for the impact of carrier outages.
Management Commentary
"Our performance this quarter clearly shows that we are
demonstrating continued customer and revenue growth, and confirms
to us that our pure play wireless connectivity strategy is
working," said TERAGO CEO Matthew
Gerber. "As we focus on expanding our enterprise customer
base, we again saw bookings exceed churn, an uptick in backlog, and
an overall decrease in churn, all of which are momentum indicators
that support our growth trajectory. Additionally, we continued to
advance our 5G private networks agenda and began preparing for our
first installation which we plan to complete over the coming
months. With ample working capital and momentum, we look forward to
converting these positive indicators into tangible results."
_________________________
|
[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 September 30, 2022, and 2021
(In
thousands of dollars, except with respect to gross profit margin,
earnings per share, Backlog MRR, and ARPU)
|
|
|
Three months
ended September
30
|
Nine months
ended September
30
|
|
|
|
|
|
|
2022
|
2021
|
2022
|
2021
|
|
Financial
|
|
|
|
|
|
|
|
Cloud and
Colocation Revenue *
|
$
|
|
-
|
4,369
|
1,355
*
|
12,796
*
|
|
Connectivity
Revenue *
|
$
|
|
6,516
|
6,507
|
19,575
*
|
19,812
*
|
|
Other
Revenue
|
$
|
|
116
|
-
|
357
|
-
|
|
Total
Revenue
|
$
|
|
6,632
|
10,876
|
21,287
|
32,608
|
|
Cost of
Services1
|
$
|
|
1,799
|
2,841
|
5,859
|
8,038
|
|
Selling, General,
& Administrative Costs
|
$
|
|
4,884
|
5,714
|
15,379
|
16,995
|
|
Gross profit
margin
|
|
|
72.9 %
|
73.9 %
|
72.5 %
|
75.3 %
|
|
Adjusted EBITDA
1,2
|
$
|
|
610
|
3,116
|
2,742
|
9,718
|
|
Net loss
|
$
|
|
(2,913)
|
(2,255)
|
(9,165)
|
(6,217)
|
|
Basic loss per
share
|
$
|
|
(0.15)
|
(0.11)
|
(0.47)
|
(0.34)
|
|
Diluted loss per
share
|
$
|
|
(0.15)
|
(0.11)
|
(0.47)
|
(0.34)
|
|
Operating
|
|
|
|
|
|
|
|
Backlog
MRR1
|
|
|
|
|
|
|
|
Connectivity
|
$
|
|
138,893
|
102,911
|
138,893
|
102,911
|
|
Churn
Rate1
|
|
|
|
|
|
|
|
Connectivity
|
|
|
0.7 %
|
0.9 %
|
0.8 %
|
1.2 %
|
|
ARPU1*
|
|
|
|
|
|
|
|
Connectivity
|
$
|
|
1,099
|
1,026
|
1,092
*
|
1,032
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*The three and nine months ended September 30, 2021, comparative numbers for Cloud
and Colocation Revenue, Connectivity Revenue, and ARPU have changed
to conform with the presentation of revenue stream allocations for
Q3 2022.
(1) See
"Definitions – Key Performance Indicators, IFRS, Additional GAAP
and Non-GAAP Measures"
|
(2) See
"Adjusted EBITDA" for a reconciliation of net loss to Adjusted
EBITDA.
|
|
Conference Call
Management will host a conference call on Thursday, November 10, 2022, at 10:00 AM ET to discuss these results.
To access the conference call, please dial 888-886-7786 or
416-764-8658, and use conference ID 33521061 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 Sunday, December 11, 2022. To
listen to the recording, call 877-674-7070 or 416-764-8692 and
enter passcode 521061 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 September 30, 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.
______________________
|
1 See "Definitions –
Key Performance Indicators, IFRS, Additional GAAP and Non-GAAP
Measures"
|
2 See "Adjusted EBITDA"
for a reconciliation of net loss to Adjusted EBITDA
|
|
The table below reconciles net loss to Adjusted
EBITDA1 for the three months ended
September 30, 2022, and 2021.
(in thousands of
dollars)
(unaudited)
|
|
Three months
ended
September
30
|
Nine months
ended
September
30
|
|
|
2022
|
2021
|
2022
|
2021
|
Net earnings (loss)
for the period
|
$
|
(2,913)
|
(2,255)
|
(9,165)
|
(6,217)
|
Foreign exchange loss
(gain)
|
|
4
|
19
|
38
|
(21)
|
Finance
costs
|
|
334
|
929
|
1,598
|
2,981
|
Finance
income
|
|
(38)
|
(13)
|
(85)
|
(37)
|
Impairment loss on held
for sale assets
|
|
-
|
-
|
107
|
-
|
Earnings (loss) from
operations
|
|
(2,613)
|
(1,320)
|
(7,507)
|
(3,294)
|
Add:
|
|
|
|
|
|
Depreciation of
network assets, property and equipment and
amortization of intangible assets
|
|
2,562
|
3,641
|
7,556
|
10,869
|
Loss on disposal of
network assets and leases
|
|
-
|
46
|
171
|
169
|
Impairment of assets
and related charges
|
|
58
|
81
|
432
|
308
|
Stock-based
compensation expense (recovery)
|
|
229
|
155
|
573
|
634
|
Restructuring,
acquisition-related, integration costs and other
|
|
374
|
513
|
1,517
|
1,032
|
Adjusted EBITDA
1
|
$
|
610
|
3,116
|
2,742
|
9,718
|
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.