TORONTO, May 11, 2021
/CNW/ - TeraGo Inc.
("TeraGo" or the "Company") (TSX: TGO)
(www.terago.ca), today reported financial and operating
results for the first quarter ended March 31, 2021.
First Quarter 2021 and Recent Operational
Developments
- Chosen by Ducks Unlimited Canada to provide Managed SD-WAN
(Software-Defined Wide Area Networking) services for its operating
locations.
- Selected by Pure Storage as its first Canadian elite managed
service provider partner.
- Closed a $14.7 million private
placement in support of the Company's proposed launch of 5G fixed
wireless services in Canada.
- Expanded product portfolio with managed networking services for
business customers.
- Appointed TeraGo's former Chair of the Board, Matthew Gerber as new Chief Executive
Officer.
- 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 service provider for a
large Canadian healthcare provider.
First Quarter 2021 Financial Highlights
- Total revenue for the first quarter of 2021 decreased 1% to
$10.8 million compared to
$10.9 million in the previous quarter
and decreased from $11.6 million for
the same period in 2020. The year over year decrease in total
revenue was driven by lower connectivity revenue.
- Connectivity revenue for the first quarter of 2021 was
$6.5 million which was consistent
with $6.5 million for the previous
quarter and decreased from $7.3
million for the same period in 2020. The year over year
decrease in connectivity revenue was primarily due to churn
exceeding customer provisioning.
- Cloud and colocation revenue for the first quarter of 2021
decreased 2% to $4.3 million from
$4.4 million for the previous quarter
and was consistent with $4.3 million
for the same period in 2020. The consistent cloud and colocation
revenue was primarily driven by new customer provisioning offset by
customer churn.
- Net loss for the first quarter of 2021 totaled $2.2 million which was consistent with
$2.2 million in the prior quarter and
$2.2 million for the same period in
2020. Net loss was held flat despite the decline in revenues due to
lower operating expenses and finance costs.
- Adjusted EBITDA(1)(2) for the first quarter of 2021
was $3.2 million compared to
$3.7 million in the prior quarter and
decreased from $3.6 million in the
same period in 2020. The decrease was driven primarily by the
decrease in revenue.
Management Commentary
"Our performance the past few months continues to reinforce our
view that we are turning a corner," said TeraGo CEO Matthew Gerber. "We have consistently seen new
bookings surpass churn and have built momentum across every facet
of our business. With the recent financing that bolstered our
balance sheet, we are now equipped to capitalize on growth
opportunities across all fronts. In particular, this investment
gives us the ability to further develop our 5G fixed wireless
business and will facilitate our strategic growth plan of becoming
one of Canada's first 5G fixed
wireless operators. As we approach the second half of this year, we
will continue to enhance our product portfolio, expand
partnerships, and demonstrate our commitment to deliver industry
leading services as evidenced by our strong Net Promoter Score of
74, all of which provide us with a competitive edge."
_________________
|
(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.
|
RESULTS OF OPERATIONS
Comparison of the three months ended March 31, 2021 and 2020
(in
thousands of dollars, except with respect to gross profit margin,
earnings per share, Backlog MRR, and ARPU)
|
|
|
Three months
ended March
31
|
|
|
|
2021
|
2020
|
Financial
|
|
|
|
|
Cloud and Colocation
Revenue
|
$
|
|
4,296
|
4,299
|
Connectivity
Revenue
|
$
|
|
6,533
|
7,318
|
Total
Revenue
|
$
|
|
10,829
|
11,617
|
Cost of
Services1
|
$
|
|
2,514
|
2,259
|
Selling, General,
& Administrative Costs
|
$
|
|
5,904
|
6,187
|
Gross profit
margin1
|
|
|
76.8%
|
80.6%
|
Adjusted EBITDA1,
2
|
$
|
|
3,233
|
3,622
|
Net loss
|
$
|
|
(2,166)
|
(2,203)
|
Basic loss per
share
|
$
|
|
(0.13)
|
(0.13)
|
Diluted loss per
share
|
$
|
|
(0.13)
|
(0.13)
|
Operating
|
|
|
|
|
Backlog
MRR1
|
|
|
|
|
Connectivity
|
$
|
|
131,078
|
89,296
|
Cloud &
Colocation
|
$
|
|
34,518
|
18,225
|
Churn
Rate1
|
|
|
|
|
Connectivity
|
|
|
1.3%
|
1.5%
|
Cloud &
Colocation
|
|
|
1.6%
|
1.0%
|
ARPU1
|
|
|
|
|
Connectivity
|
$
|
|
1,008
|
1,033
|
Cloud &
Colocation
|
$
|
|
3,623
|
3,240
|
(1) See
"Non-IFRS Measures" below.
|
(2) See
"Adjusted EBITDA" below for a reconciliation of net loss to
Adjusted EBITDA.
|
First Quarter 2021 Operating Highlights
Backlog Monthly Recurring Revenue (MRR)(1)
- Connectivity backlog MRR was $131,078 as of March 31,
2021, compared to $89,296 as
of March 31, 2020. The increase in
backlog MRR was 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 $34,518 as of March 31,
2021 compared to $18,225 as of
March 31, 2020. The increase in
backlog MRR was driven higher sales volume compared to the prior
year.
Average Revenue per User (ARPU)(1)
- For the three months ended March 31,
2021 connectivity ARPU was $1,008 compared to $1,033 for the same period in 2020. The slight
decrease in ARPU was due to customer contract renewals at lower
rates.
- For the three months ended March 31,
2021 cloud and colocation ARPU was $3,623 compared to $3,240 for the same period in 2020. The increase
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 March 31,
2021, connectivity churn was 1.3% compared to 1.5% for the
same period in 2020. The decrease was due to ongoing customer
retention initiatives and the increasing mix of mid-market and
enterprise customers in the Company's customer base.
- For the three months ended March 31,
2021, cloud and colocation churn was 1.6% compared to 1.0%
for the same period in 2020. Churn in the three months ended
March 31, 2021 increased due to a
higher churn of low ARPU small business customers.
(1)
See "Non-IFRS Measures" below.
|
Conference Call
Management will host a conference call on Wednesday, May 12, 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 March 31,
2021, 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 May 19, 2021. To listen to the
recording, call 416-621-4642 or 800-585-8367 and enter passcode
3895674.
(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 ended March 31, 2021. 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 March 31, 2021 and
2020.
(in thousands
of dollars)
|
|
|
Three months
ended March
31
|
|
|
|
2021
|
2020
|
Net earnings
(loss) for the period
|
$
|
|
(2,166)
|
(2,203)
|
Foreign exchange loss
(gain)
|
|
|
(21)
|
121
|
Finance
costs
|
|
|
1,003
|
1,516
|
Finance
income
|
|
|
(12)
|
(55)
|
Earnings (loss)
from operations
|
|
|
(1,196)
|
(621)
|
Add:
|
|
|
|
|
Depreciation of
network assets, property and equipment and amortization of
intangible assets
|
|
|
3,607
|
3,792
|
Loss on disposal of
network assets
|
|
|
6
|
45
|
Impairment of Assets
and Related Charges
|
|
|
157
|
68
|
Stock-based
Compensation Expense (Recovery)
|
|
|
229
|
347
|
Restructuring,
acquisition-related, integration costs and other
|
|
|
430
|
(9)
|
Adjusted
EBITDA
|
$
|
|
3,233
|
3,622
|
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, facilitate strategic growth plan of
becoming one of Canada's first 5G
fixed wireless operators, being equipped to capitalize on growth
opportunities, turning a corner on financial performance, enhancing
product portfolio, expanding partnerships and Net Promoter
Score 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, 2020 and the MD&A of
the Company for the three months ended March
31, 2021, each 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 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.