TERAGO Reports First Quarter 2023 Financial Results And Announces Appointment of New CEO

TORONTO, May 10, 2023 /CNW/ - TERAGO Inc. ("TERAGO" or the "Company") (TSX: TGO) (https://terago.ca/), today reported financial and operating results for the first quarter ended March 31, 2023.

Key Developments and Financial Highlights

• Connectivity revenues increased 3.2% from Q4 2022 and 1.6% from same quarter in the prior year period, with connectivity revenue totalling $6.5 million for the three months ended March 31, 2023 compared to $6.3 million in Q4 2022 and $6.4 million in the same quarter in the prior year period. Total revenue decreased 17.7% to $6.5 million for the three months ended March 31, 2023 compared to $7.9 million for the same period in 2022. The decrease in revenue being the result of the Q1 2022 Divestiture¹. Q1 2022 period includes $1.4 million of divested cloud and colocation revenue.
• Net loss for the three months ended March 31, 2023 was $2.5 million compared to a loss of $3.1 million in the same period in 2022. The improved net loss position is the result of higher gross margins in the current period combined with the reduction of operating expenses in the current period compared to the same period in the prior year. The operating expenses decrease being greater in magnitude than the decrease in revenues and gross profit from the same period in prior year.
• Adjusted EBITDA was $0.8 million for the three months ended March 31, 2023 compared to $1.1 million for the same period in 2022. The decrease was as a result of lower revenues and gross profit in the current period and the addback of restructuring and Divestiture costs in the prior year period Adjusted EBITDA calculation.
• Subsequent to the period end, on April 3, 2023, the Company drew down another installment on its debt facility in the amount of CAD $3.0 million (USD $2.3 million) in conjunction with the terms of the credit agreement with CrowdOut Capital LLC. This transaction was approved by the Board of Directors.
• Backlog MRR in the connectivity business increased year over year to $132,929 as of March 31, 2023, compared to $126,631 for the same period in 2022. The increase in backlog MRR was a result of a strong sales performance in signing up new customers, particularly through the Company's channel partners.
• ARPU for the connectivity business was $1,101 in Q1 2023 compared to $1,063 in in the prior quarter and compared to $1,061 for the same period in 2022.

Management Commentary

"Our team was pleased with the results we delivered this past quarter. The trend we have seen with growth in our fixed wireless access line of business continued, and we were able to conclude almost all of the transition activities related to the divestiture we did in 2022. We also continue to see interest in 5G private networks from our business customers and are expecting equipment for these types of deployments to become available later this year." said TERAGO CEO Matthew Gerber. "While we continue to see healthy demand for our products and services as evidenced by our strong bookings and churn performance over the past year, we also recognize that recent overall market conditions are changing and influencing customer decision making, which could potentially impact our business. We will continue to watch these trends closely and make any necessary adjustments if there is an impact."

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¹ 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").

Chief Executive Officer Transition

TERAGO also announced today a transition to a new CEO. Effective June 12, 2023, Daniel Vucinic will be appointed as TERAGO's Chief Executive Officer. With over two decades of experience across senior management roles throughout the technology sector, Daniel brings a wealth of leadership and operational excellence experience. He most recently served as Chief Operating Officer of Centrilogic, a global provider of IT transformation solutions, where he led all operations functions to support customers' end-to-end cloud and digital transformation journeys. Daniel also served in several executive roles at Allstream, a telecommunications company in Canada where he played a pivotal role in business development, customer retention, data solutions, corporate strategy, and operations. Prior to his tenure at Allstream, he held senior leadership positions at Voice, Bell MTS, and AT&T Canada. Daniel holds a Bachelor of Applied Science, Engineering from the University of Toronto.

"I am honoured to accept the role of CEO of TERAGO and am excited to build upon the positive momentum that Matt has developed," said Daniel Vucinic. "I see a tremendous opportunity to accelerate our customer value creation by truly understanding their business strategies and then mapping TERAGO's highly differentiated spectrum assets and carrier-grade connectivity platforms to achieve that strategy. All of this, powered by a highly certified and dedicated team, creates an exceptional foundation as TERAGO embarks on its next phase of its growth delighting customers, employees and shareholders."

Matthew Gerber added: "I am excited about the opportunity to pass the leadership role to Dan. He brings a wealth of relevant operating experience and is the right person to take our company to the next level. Dan and I will be working together in lock step over the next few weeks to ensure a smooth transition for our customers, partners and team members."

RESULTS OF OPERATIONS

Comparison of the three months ended March 31, 2023, and 2022
(In thousands of dollars, except with respect to gross profit margin, earnings per share, Backlog MRR, and ARPU)

(unaudited)	Three months ended March 31
		2023		2022
Financial
Cloud and Colocation Revenue	$	-		1,355
Connectivity Revenue	$	6,498		6,434
Other Revenue	$	11		135
Total Revenue	$	6,509		7,924
Cost of Services^1	$	1,531		2,232
Selling, General, & Administrative Costs	$	4,980		6,121
Gross Profit Margin^1		76.5 %		71.8 %
Adjusted EBITDA ^1,2	$	827		1,113
Net Loss	$	(2,549)		(3,140)
Basic loss per share	$	(0.13)		(0.16)
Diluted loss per share	$	(0.13)		(0.16)
Operating
Backlog MRR^1
Connectivity	$	132,929		126,631
Churn Rate^1
Connectivity		0.9 %		0.7 %
ARPU^1
Connectivity	$	1,101		1,061

(1) See " Non-IFRS Measures"

(2) See "Adjusted EBITDA" for a reconciliation of net loss to Adjusted EBITDA.

Conference Call

Management will host a conference call on Thursday, May 11, 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 28441909 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 Monday, June 12, 2023. To listen to the recording, call 877-674-7070 or 416-764-8692 and enter passcode 441909# 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 months ended March 31, 2023. 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 March 31, 2023, and 2022.

(in thousands of dollars, unaudited)	Three months ended March 31
		2023		2022
Net loss for the period	$	(2,549)		(3,140)
Foreign exchange loss (gain)		30		(5)
Finance costs		644		756
Finance income		(67)		(15)
Impairment loss on divested assets		-		107
Loss from operations		(1,942)		(2,297)
Add:
Depreciation of network assets, property and equipment and amortization of intangible assets		2,479		2,492
Loss on disposal of network assets		8		171
Impairment of other assets and related charges		60		120
Stock-based compensation expense		202		173
Restructuring, acquisition-related, integration and other related costs		20		454
Adjusted EBITDA^1	$	827		1,113

(1) See "Non-IFRS Measures."

*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.

TERAGO Investor Relations, Matt Glover and John Yi, Gateway Group, Inc., Telephone: [phone], Email: [email protected]