TORONTO, Feb. 17, 2021
/CNW/
- TeraGo Inc. ("TeraGo" or the "Company") (TSX:
TGO) (www.terago.ca), today reported financial and
operating results for the fourth quarter and fiscal year ended
December 31, 2020.
Fourth Quarter 2020 and Recent Operational
Developments
- Advanced 5G fixed wireless technical trials and experienced
improved through-put speeds, increasing current results to
approximately 1.5 gigabits per second ("Gbps").
- Selected as the national Managed SD-WAN (Software-Defined Wide
Area Networking) service provider for a large Canadian healthcare
provider.
- Partnered with Mimosa by Airspan to expand and deliver reliable
business-grade broadband internet connections across Canada.
Fourth Quarter 2020 Financial Highlights
- Total revenue for the fourth quarter of 2020 decreased 9.2% to
$10.9 million compared to
$12.0 million for the same period in
2019. The decrease in total revenue was driven by lower
connectivity and cloud and colocation revenue.
- Connectivity revenue for the fourth quarter of 2020 decreased
11.0% to $6.5 million compared to
$7.3 million for the same period in
2019. The decrease in connectivity revenue was primarily due to
churn exceeding customer provisioning.
- Cloud and colocation revenue for the fourth quarter of 2020
decreased 6.4% to $4.4 million
compared to $4.7 million for the same
period in 2019. The decrease in cloud and colocation revenue was
primarily driven by one-time revenue recognized for an early
termination in the prior year period.
- Net loss for the fourth quarter of 2020 totaled $2.2 million compared to net loss of $2.1 million for the same period in 2019. The
higher net loss was primarily driven by the decline in revenue.
- Adjusted EBITDA(1)(2) for the fourth quarter of 2020
decreased 7.5% to $3.7 million
compared to $4.0 million for the same
period in 2019. The decrease was primarily driven by the decrease
in revenue.
Full Year 2020 Financial Highlights
- Total revenue for the full year 2020 decreased 6.2% to
$45.4 million compared to
$48.4 million in 2019. The decrease
in total revenue was driven by lower connectivity and cloud and
colocation revenue.
- Connectivity revenue for the full year 2020 decreased 7.9% to
$28.0 million compared to
$30.4 million in 2019. The decrease
was attributable to churn exceeding customer provisioning.
- Cloud and colocation revenue for the full year 2020 decreased
3.9% to $17.4 million compared to
$18.1 million in 2019. The decrease
in cloud and colocation revenue was primarily driven one-time
revenue recognized for an early termination in the prior year
period.
- Net loss for the full year 2020 totaled $8.3 million compared to net loss of $7.0 million in 2019. The higher net loss was
driven by lower revenue.
- Adjusted EBITDA(1)(2) for the full year 2020
decreased 9.1% to $15.9 million
compared to $17.5 million in 2019.
The decrease was driven primarily by the decrease in revenue.
|
|
|
(1)
Adjusted EBITDA is a Non-GAAP measure. See "Non-IFRS Measures"
below.
|
(2) See
"Adjusted EBITDA" below for a reconciliation of net loss to
Adjusted EBITDA.
|
Management Commentary
"The fourth quarter was a solid finish to what was an eventful
and challenging year," said TeraGo CFO and Interim CEO David Charron. "Even with the strain from the
global pandemic, we delivered strong improvements across all our
KPIs, demonstrating the resiliency of our operating model and the
essential services we provide businesses to keep up with the modern
world. Additionally, our focus on key operational initiatives has
allowed us to stabilize churn and generate strong cash flow, as
well as further increase our leading net promoter score of 62.
"As we look forward into 2021, we believe we are at the cusp of
an inflection point in our business. This belief is supported by
our expanding pipeline of new business, building traction with new
products like our SD-WAN, as well as encouraging results of our 5G
test trials throughout the Greater
Toronto Area. Our 5G team has made several technical
advancements and conducted testing at various distances, resulting
in improved throughput speeds of approximately 1.5 Gbps. We look
forward to further developing our 5G Fixed Wireless Access program,
which will ultimately enable TeraGo to deliver commercial 5G fixed
wireless services in Canada."
RESULTS OF OPERATIONS
Comparison of the three months ended December 31, 2020 and 2019
(in
thousands of dollars, except with respect to gross profit margin,
earnings per share, Backlog MRR, and ARPU)
|
|
Three months
ended
December
31
|
|
Year
ended
December
31
|
|
|
2020
|
2019
|
|
2020
|
2019
|
Financial
|
|
|
|
|
|
|
Cloud and Colocation
Revenue
|
$
|
4,382
|
4,706
|
|
17,427
|
18,064
|
Connectivity
Revenue
|
$
|
6,522
|
7,291
|
|
28,021
|
30,373
|
Total
Revenue
|
$
|
10,904
|
11,997
|
|
45,448
|
48,437
|
Cost of
Services1
|
$
|
2,723
|
2,704
|
|
9,816
|
9,647
|
Selling, General,
& Administrative Costs
|
$
|
5,651
|
6,628
|
|
24,194
|
25,825
|
Gross profit
margin1
|
|
75.0%
|
77.5%
|
|
78.4%
|
80.1%
|
Adjusted EBITDA1,
2
|
$
|
3,695
|
4,006
|
|
15,920
|
17,477
|
Net loss
|
$
|
(2,221)
|
(2,120)
|
|
(8,259)
|
(6,994)
|
Basic loss per
share
|
$
|
(0.13)
|
(0.13)
|
|
(0.49)
|
(0.43)
|
Diluted loss per
share
|
$
|
(0.13)
|
(0.13)
|
|
(0.49)
|
(0.43)
|
Operating
|
|
|
|
|
|
|
Backlog
MRR1
|
|
|
|
|
|
|
Connectivity
|
$
|
129,676
|
92,096
|
|
129,676
|
92,096
|
Cloud &
Colocation
|
$
|
56,437
|
18,615
|
|
56,437
|
18,615
|
Churn
Rate1
|
|
|
|
|
|
|
Connectivity
|
|
1.4%
|
1.4%
|
|
1.5%
|
1.4%
|
Cloud &
Colocation
|
|
1.0%
|
0.9%
|
|
1.0%
|
1.3%
|
ARPU1
|
|
|
|
|
|
|
Connectivity
|
$
|
1,025
|
1,019
|
|
1,032
|
1,022
|
Cloud &
Colocation
|
$
|
3,582
|
3,393
|
|
3,386
|
3,262
|
(1) See "Non-IFRS
Measures" below.
|
(2) See "Adjusted
EBITDA" below for a reconciliation of net loss to Adjusted
EBITDA.
|
Fourth Quarter and Full Year Operating Highlights
Backlog Monthly Recurring Revenue (MRR)(1)
- Connectivity backlog MRR was $129,676 as of December
31, 2020, compared to $92,096
as of December 31, 2019. The increase
in backlog MRR is driven primarily by higher sales volume from both
the direct sales team and the channel team compared to the prior
year period.
- Cloud and colocation backlog MRR was $56,437 as of December 31,
2020 compared to $18,615 as of
December 31, 2019. The increase in
backlog MRR is driven higher sales volume compared to the prior
year.
Average Revenue per User (ARPU)(1)
- For the three months ended December 31,
2020 connectivity ARPU was $1,025 compared to $1,019 for the same period in 2019. For the year
ended December 31, 2020 connectivity
ARPU was $1,032 compared to
$1,022 for the same period in 2019.
The increase in connectivity ARPU for the fourth quarter and full
year of 2020 was due to the Company's focus on acquiring and
retaining mid-market business customers.
- For the three months ended December 31,
2020 cloud and colocation ARPU was $3,582 compared to $3,393 for the same period in 2019. For the year
ended December 31, 2020 cloud &
colocation ARPU was $3,386 compared
to $3,262 for the same period in
2019. The increase in cloud and colocation ARPU for the fourth
quarter and full year of 2020 was due to customer upgrades and
cross-selling activities as well as the churn of lower ARPU
customers.
Churn(1)
- For the three months ended December 31,
2020, connectivity churn was 1.4% compared to 1.4% for the
same period in 2019. The Company's customer retention initiatives
have stabilized churn. For the year ended December 31, 2020 connectivity churn was 1.5%
compared to 1.4% for the same period in 2019. The increase is due
to elevated churn experienced in the second quarter of 2020 that
was associated with the onset of the COVID-19 pandemic.
- For the three months ended December 31,
2020, cloud and colocation churn was 1.0% compared to 0.9%
for the same period in 2019. Churn in the three months ended 2020
remained at a consistent level due to ongoing customer retention
initiatives. For the year ended December 31,
2020 cloud and colocation churn was 1.0% compared to 1.3%
for the same period in 2019. The decrease was driven by ongoing
customer retention initiatives.
(1)
|
See "Non-IFRS
Measures" below.
|
Conference Call
Management will host a conference call on Thursday, February 18, 2021, at 9:00 a.m. Eastern Time to discuss these
results.
To access the conference call, please dial 647-427-2311 or
866-521-4909. 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 and fiscal year ended December
31, 2020, 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 February 25, 2021. To listen to
the recording, call 416-621-4642 or 800-585-8367 and enter passcode
9046047.
(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 December 31,
2020. 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 ended December 31,
2020 and 2019.
(in thousands
of dollars)
|
|
Three months
ended
December
31
|
|
Year
ended
December
31
|
|
|
2020
|
2019
|
|
2020
|
2019
|
Net earnings
(loss) for the period
|
$
|
(2,221)
|
(2,120)
|
$
|
(8,259)
|
(6,994)
|
Foreign exchange loss
(gain)
|
|
2
|
28
|
|
210
|
69
|
Finance
costs
|
|
1,115
|
1,090
|
|
4,777
|
4,769
|
Finance
income
|
|
(9)
|
(82)
|
|
(99)
|
(166)
|
Earnings (loss)
from operations
|
|
(1,113)
|
(1,084)
|
|
(3,371)
|
(2,322)
|
Add:
|
|
|
|
|
|
|
Depreciation of
network assets, property and
|
|
3,643
|
3,748
|
|
14,809
|
15,287
|
equipment and
amortization of intangible assets
|
Loss on disposal of
network assets
|
|
77
|
93
|
|
198
|
296
|
Impairment of Assets
and Related Charges
|
|
654
|
625
|
|
1,139
|
808
|
Stock-based
Compensation Expense (Recovery)
|
|
276
|
341
|
|
1,515
|
1,984
|
Restructuring,
acquisition-related, integration costs and other
|
|
158
|
283
|
|
1,630
|
1,424
|
Adjusted
EBITDA
|
$
|
3,695
|
4,006
|
$
|
15,920
|
17,477
|
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 owns a national spectrum
portfolio of exclusive 24 GHz and 38 GHz wide-area spectrum
licenses including 2,120 MHz of spectrum across Canada's 6 largest cities. TeraGo provides
businesses across Canada with
cloud, colocation and connectivity services. TeraGo manages over
3,000 cloud workloads, operates five data centres in the
Greater Toronto Area, the
Greater Vancouver Area, and
Kelowna, and owns and manages its
own IP network. The Company serves business customers in major
markets across Canada including
Toronto, Montreal, Calgary, Edmonton, Vancouver, Ottawa and Winnipeg. For more information about TeraGo,
please visit www.terago.ca.
Forward-Looking Statements
This news release includes certain forward-looking statements
that are made as of the date hereof. Such forward-looking
statements may include but are not limited to statements regarding
further developing our 5G Fixed Wireless Access program, enablement
for TeraGo to deliver commercial 5G fixed wireless services in
Canada, building traction with
SD-WAN, executing against the backlog in Q4, increasing the
net promoter score, the 5G fixed wireless trials being conducted by
the Company and TeraGo's ability to mitigate the risks and negative
impacts of the current COVID-19 pandemic. 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" section in the annual MD&A of the
Company for the year ended December 31,
2020 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 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 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.