TORONTO , March 15,
2023 /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, 2022.
Key Developments and Financial Highlights
- Annual connectivity revenues were $25.9
million in 2022. When normalizing for divestiture
transferred customers, annual connectivity revenue increased by
approximately $1.4 million or 5% over
2021, halting a nine-year period of declining fixed wireless access
revenues.
- In the fourth quarter of 2022, the Company had to take some
revenue adjustments for customers that were transitioned to Hut 8,
which then subsequently got transitioned back to TERAGO. On a pro
forma basis, connectivity revenues for the quarter ended
December 31, 2022, were $6.6 million which is an increase both year over
year and quarter over quarter.
- The Company experienced the highest connectivity bookings and
lowest churn since 2012 and exited the year with the strongest
backlog, as a result of the Company's direct and channel sales
organizations delivering robust results.
- For the year ended December 31,
2022, churn was at 0.8% compared to 1.1% in the prior year
as the Company continues to execute on its strategy of providing
superior service and support versus its competitors.
- Net loss for the three months ended December 31, 2022, was $2.4 million compared to a loss of $9.0 million in the same period in 2021.The
higher net loss in the prior year was driven by a $4.5 million impairment loss on cloud and
colocation assets and liabilities that were classified as held for
sale as at December 31, 2021, and a
$1.6 million impairment loss on
intangible assets. Net loss was $11.6
million for the year ended December
31, 2022, compared to a net loss of $15.2 million for the same period in 2021.
Furthermore, the 2021 net loss was bolstered by $0.8 million in government grants under the CEWS
and CERS programs as a result of the COVID-19 pandemic. Such
programs were not available to the Company in 2022.
Management Commentary
"When normalizing for the impact of the divesture this past
year, the pro forma results we achieved in the fourth quarter and
full year 2022 are very encouraging," said TERAGO CEO Matthew Gerber. "This past fiscal year marks a
turning point in a nine-year period during which we experienced an
average decline in connectivity revenues of 7% annually. In 2022 we
halted this decline and delivered connectivity revenue growth of 5%
from 2021 to 2022. Thanks to the performance of our team, we
experienced the best connectivity bookings and churn since 2012,
and exited the year with the strongest connectivity backlog ever as
a result of our direct and channel sales organizations delivering
robust results. Our team's ability to execute has set us up well
for continued success in 2023."
Fourth Quarter 2022 Connectivity Financial Highlights
- Connectivity revenues for the quarter ended December 31, 2022, were $6.3 million, compared to $6.5 million in the same quarter in the prior
year. On a pro forma basis, when accounting for revenue adjustments
related to the divestiture, Connectivity revenues for the quarter
ended December 31, 2022 were
$6.6 million which is an increase
both year over year and quarter over quarter.
- Connectivity backlog MRR was $178,948 as at December
31, 2022, compared to $110,481
as at December 31, 2021. The increase
in backlog was a result of a strong sales performance in signing up
new customers, particularly through the Company's channel
partners.
- Connectivity ARPU was $1,063 as
of December 31, 2022, compared to
$1,043 for the same period in
December 31, 2021. The increase in
ARPU was a result of the Company's ongoing focus to attract
mid-market and large scale, predominantly multi-location
customers.
- Connectivity churn was 0.9% as of December 31, 2022, compared to 0.7% for the same
period in 2021.
Full Year 2022 Connectivity Financial Highlights
- Connectivity revenue for the full year 2022 decreased 1.5% to
$25.9 million compared to
$26.3 million in 2021. The decrease
was a result of the divested customers, otherwise, as stated above
revenue would have increased, year over year by 5%.
- Connectivity ARPU for the full year 2022 was $1,085 compared to $1,035 in 2021. The increase in ARPU was a result
of the Company's ongoing focus to attract mid-market and large
scale, predominantly multi-location customers.
- Connectivity churn was 0.8% for the full year 2022 compared to
1.1% in 2021. The decrease in churn was driven by the Company's
ability to execute on its strategy of providing superior service
and support versus its competitors.
Full Year 2022 Financial Highlights
- Total revenue for the full year 2022 decreased to $27.6 million compared to $43.3 million in 2021. The decrease in total
revenue was the result of the divestiture.
- Net loss for the full year 2022 totaled $11.6 million compared to net loss of
$15.2 million in 2021. The lower net
loss was the result of lower overall costs following the
divestiture.
- Adjusted EBITDA (1)(2) for the full year 2022 was
$4.1 million compared to $12.0 million in 2021. The lower adjusted EBITDA
was driven by the impact of the divestiture.
RESULTS OF OPERATIONS
Comparison of the three months and year ended December 31, 2022, and 2021
(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
|
|
|
2022
|
|
2021
|
|
|
2022
|
|
2021
|
Financial
|
|
|
|
|
|
|
|
|
|
Cloud and Colocation
Revenue
|
$
|
-
|
|
4,160
|
|
|
1,355
|
|
16,956
|
Connectivity
Revenue
|
$
|
6,285
|
|
6,535
|
|
|
25,860
|
|
26,347
|
Other
Revenue
|
$
|
50
|
|
-
|
|
|
407
|
|
-
|
Total
Revenue
|
$
|
6,335
|
|
10,695
|
|
|
27,622
|
|
43,303
|
Cost of
Services1
|
$
|
1,578
|
|
3,103
|
|
|
7,437
|
|
11,141
|
Selling, General,
& Administrative Costs
|
$
|
3,980
|
|
5,805
|
|
|
19,188
|
|
22,800
|
Gross profit
margin1
|
$
|
75.1 %
|
|
71.0 %
|
|
|
73.1 %
|
|
74.3 %
|
Adjusted
EBITDA1,2
|
$
|
1,164
|
|
2,330
|
|
|
4,077
|
|
12,048
|
Net loss
|
$
|
(2,406)
|
|
(8,955)
|
|
|
(11,571)
|
|
(15,172)
|
Basic loss per
share
|
$
|
(0.12)
|
|
(0.46)
|
|
|
(0.61)
|
|
(0.81)
|
Diluted loss per
share
|
$
|
(0.12)
|
|
(0.46)
|
|
|
(0.61)
|
|
(0.81)
|
Operating
|
|
|
|
|
|
|
|
|
|
Backlog
MRR1
|
|
|
|
|
|
|
|
|
|
Connectivity
|
$
|
178,948
|
|
110,481
|
|
|
178,948
|
|
110,481
|
Churn1
|
|
|
|
|
|
|
|
|
|
Connectivity
|
|
0.9 %
|
|
0.7 %
|
|
|
0.8 %
|
|
1.1 %
|
ARPU1
|
|
|
|
|
|
|
|
|
|
Connectivity
|
$
|
1,063
|
|
1,043
|
|
|
1,085
|
|
1,035
|
|
(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.
|
|
______________________________
|
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, March 16, 2023, 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 38929673 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, April 16, 2023. To
listen to the recording, call 877-674-7070 or 416-764-8692 and
enter passcode 929673 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 December 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.
The table below reconciles net loss to Adjusted
EBITDA1 for the three months and year ended
December 31, 2022, and 2021.
(in thousands of
dollars)
|
|
Three months
ended.
December
31
|
|
Year
ended.
December
31
|
|
|
|
|
2022
|
2021
|
|
2022
|
2021
|
|
Net loss for the
period
|
$
|
(2,406)
|
(8,955)
|
$
|
(11,575)
|
(15,172)
|
|
Foreign exchange loss
(gain)
|
|
45
|
(8)
|
|
83
|
(29)
|
|
Finance
costs
|
|
491
|
915
|
|
2,115
|
3,896
|
|
Finance
income
|
|
(38)
|
(7)
|
|
(123)
|
(44)
|
|
Loss on divestiture of
assets
|
|
-
|
4,527
|
|
-
|
4,527
|
|
Impairment loss on
brand
|
|
-
|
1,630
|
|
-
|
1,630
|
|
Impairment loss on
divested assets
|
|
-
|
-
|
|
107
|
-
|
|
Impairment on network
assets, property, equipment, and intangibles assets*
|
|
156
|
-
|
|
327
|
510
|
|
Loss from
operations
|
|
(1,752)
|
(1,898)
|
|
(9,088)
|
(4,682)
|
|
Add:
|
|
|
|
|
|
|
|
Depreciation of
network assets, property and equipment and amortization of
intangible assets*
|
|
2,529
|
3,685
|
|
10,085
|
14,554
|
|
Loss on disposal of
network assets
|
|
-
|
116
|
|
171
|
285
|
|
Impairment of Assets
and Related Charges
|
|
(9)
|
188
|
|
399
|
496
|
|
Stock-based
compensation expense (recovery)
|
|
115
|
(470)
|
|
688
|
164
|
|
Restructuring,
acquisition-related, integration costs and other
|
|
281
|
710
|
|
1,798
|
1,742
|
|
Adjusted
EBITDA1
|
$
|
1,164
|
2,330
|
$
|
3,748
|
12,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*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.
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.