TERAGO Reports Fourth Quarter and Full Year 2023 Financial Results

TORONTO, March 6, 2024 /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, 2023.

"I am proud to report my second quarter since becoming CEO on June 12^th, 2023. Our "Value Creation Strategy" accelerated delivery on behalf of customers, employees, shareholders – continued apace in the final quarter of 2023. In our prior earnings release I highlighted improvements across all of our key financial indicators. Today I am pleased to share that in the second half of 2023, we have continued the trend of strengthening these metrics.

Improvements in second half of 2023 as compared to the second half of 2022

• Increased Adjusted EBITDA^1,2 by 8%
• Improved positive cashflow from operations¹ by 96%

In the second half of 2023, we delivered substantial financial wins that have afforded TERAGO the opportunity to reinvest in its transformation. This will drive a reenergizing of our top line. With new sales leadership in place and further growth investments anticipated, it is my intention to drive value as much from top line revenue growth as from cost optimization and careful management of our capital expenditures. TERAGO is extremely well positioned as a nimble, carrier-grade managed service provider of choice with differentiated frequencies, deep capabilities and a delivery track record in emerging growth areas. Smart, profitable growth will be a theme in 2024 and beyond," said Daniel Vucinic, CEO.

Key Developments and Financial Highlights

• Total revenues for the three months ended December 31, 2023, were $6.5 million compared to $6.3 million for the same period in 2022. Total annual revenue in 2023 was $26.1 million compared to $27.6 million in the prior year. The decrease of $1.5 million was the result of the prior year including one month of Cloud and Colocation and post transaction related support services ("Other Revenue").
• Connectivity revenues were $6.5 million and $26.0 million, for the three months and year ended December 31, 2023, respectively. This is an increase of $0.2 million compared to same quarter prior year and $0.1 million compared to prior year annual.
• Adjusted EBITDA^1,2, remained flat at $1.2 million for the three months ended December 31, 2023, compared to the same period in 2022. For the year ended December 31, 2023, Adjusted EBITDA^1,2 decreased 17.1% to $3.4 million compared to $4.1 million for the same period in 2022. The decrease is the result of the prior year including one month of Cloud and Colocation Revenue ($1.4 million), partially offset by a reduction of overall operating expenses in the current year.
• Net loss increased to $3.6 million for the three months ended December 31, 2023, compared to a net loss of $2.4 million for the same period in 2022. Net loss was $13.2 million for the year ended December 31, 2023, compared to a net loss of $11.6 million for the same period in 2022. The increase in net loss was a combination of higher finance costs, lower total revenues, as described above combined with non-recurring costs associated with the staffing and management changes. These were partially offset by a reduction in overall operating expenses year over year.
• Gross Margin remained consistent year over year achieving 73.3% in 2023 compared to 73.1% in the prior year.
• Backlog MRR¹ decreased year over year to $65,363 as of December 31, 2023, from $178,948 for the same period in 2022. The decrease in backlog MRR is the result of onboarding of new customers with improved installation processes yielding much faster installations which reduced the backlog due to installations exceeding new bookings in the year and combined with de-bookings of previously recorded orders due to technical, geographical and customer landlord limitations preventing fulfillment of the orders.
• ARPU¹ for the connectivity business was $1,164 in Q4 2023 up from $1,127 in Q3 2023 and compared to $1,063 for the same period in 2022 due to changes in customer base and product mix and a new pricing strategy implemented in 2023 Q4. ARPU has been increasing every quarter for the past five quarters.

_________________________________________
(1)	See " Non-IFRS Measures"
(2)	See "Adjusted EBITDA" for a reconciliation of net loss to Adjusted EBITDA.

Additional Management Commentary

"The Value Creation Strategy has gained sufficient traction and is already yielding tangible benefits. I expect that TERAGO's efforts will be further buoyed by the addition of a permanent Chief Financial Officer, following the departure of the previous CFO due to personal family reasons after a brief tenure. A search is well underway for a permanent Chief Financial Officer, and I look forward to reacquainting the investor community with TERAGO and the Value Creation Strategy in the second half of 2024 following the integration of this key member of our team.

"In addition, we noted with great interest the consultation launched by Innovation, Science and Economic Development Canada with respect to license renewals impacting our 38 GHz and 24GHz bands, as well as the preliminary consultation launched on changes to our 24 GHz band.  Like any wireless business, spectrum is our lifeblood. Reasonable long-term visibility and our ability to put our spectrum to work in a way that fosters a growing, competitive and knowledge-based economy is absolutely critical for us to be able to invest in our diverse and innovative service offerings. We remain fully engaged in this important process.", said Daniel Vucinic.

RESULTS OF OPERATIONS

Comparison of the three months and year ended December 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 December 31					Year ended December 31
		2023		2022		2023		2022
Financial
Cloud and Colocation Revenue	$	-		-		-		1,355
Connectivity Revenue	$	6,536		6,285		26,034		25,860
Other Revenue	$	-		50		18		407
Total Revenue	$	6,536		6,335		26,052		27,622
Cost of Services^1	$	1,801		1,578		6,948		7,437
Selling, General, & Administrative Costs	$	4,577		3,980		18,430		19,188
Gross Profit Margin^1		72.4 %		75.1 %		73.3 %		73.1 %
Adjusted EBITDA ^1,2	$	1,190		1,164		3,435		4,077
Net Loss	$	(3,561)		(2,406)		(13,185)		(11,571)
Basic loss per share	$	(0.18)		(0.12)		(0.67)		(0.61)
Diluted loss per share	$	(0.18)		(0.12)		(0.67)		(0.61)
Operating
Backlog MRR^1
Connectivity	$	65,363		178,948		65,363		178,948
Churn Rate^1
Connectivity		1.0 %		0.9 %		1.1 %		0.8 %
ARPU^1
Connectivity	$	1,164		1,063		1,125		1,085

(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, March 7, 2024, at 10:00 AM ET to discuss these results.

To access the conference call, please dial 888-506-0062 or 973-528-0011 and use conference ID 572559 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 Thursday, March 21, 2024. To listen to the recording, call 877-481-4010 or 919-882-2331 and enter passcode 50012# 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 and year ended December 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 EBITDA for the three months and year ended December 31 2023 and 2022.

(in thousands of dollars, unaudited)	Three months ended December 31						Year ended December 31
		2023		2022			2023	2022
Net loss for the period	$	(3,561)		(2,406)		$	(13,185)	(11,571)
Foreign exchange loss		24		45			7	83
Finance costs		1,154		491			3,707	2,089
Finance income		(35)		(38)			(209)	(123)
Impairment loss on divested assets		-		-			-	107
Loss from operations		(2,418)		(1,908)			(9,680)	(9,415)
Add/(deduct):
Depreciation of network assets, property and equipment and amortization of intangible assets		2,474		2,529			9,974	10,085
Loss on disposal of network assets		39		-			83	171
Impairment of other assets and related charges		64		147			297	750
Stock-based compensation expense		227		115			590	688
Restructuring, acquisition-related, integration and other related costs		804		281			2,171	1,798
Adjusted EBITDA^1	$	1,190		1,164		$	3,435	4,077

*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.

Cash from Operations – The term "Cash from Operations" refers to the "Cash from Operating Activities" as shown on the "Consolidated Statement of Cash Flows" in the Company's Consolidated Financial Statements.

Overall Cash Consumption - The term "Overall Cash Consumption" refers to the "Net change in cash and cash equivalents during the period" as shown on the "Consolidated Statement of Cash Flows" in the Company's Consolidated Financial Statements.

About TERAGO
TERAGO provides managed wireless and wireline connectivity and private 5G wireless networking services to businesses operating across Canada. As Canada's biggest mmWave spectrum holders, the Company possesses exclusive spectrum licenses in the 24 GHz and 38 GHz spectrum bands, which it utilizes to provide secure, dedicated SLA guaranteed enterprise grade performance that is technology diverse from buried cables ensuring high availability connectivity services. TERAGO serves over 1,900 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 year ended December 31, 2023 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.

Daniel Vucinic, Chief Executive Officer, Email: [email protected]