TERAGO Reports Second Quarter 2023 Financial Results

TORONTO, Aug. 9, 2023 /CNW/ - TERAGO Inc. ("TERAGO" or the "Company") (TSX: TGO) (https://terago.ca/), today reported financial and operating results for the second quarter ended June 30, 2023.

Key Developments and Financial Highlights

• Total revenues for the three months ended June 30, 2023 were $6.5 million, the same level achieved in Q1 2023, but down $0.2 million (3%) from the $6.7 million earned in the same period in 2022, as a result of the 2022 divestiture transaction and the completion of the corresponding transaction services agreement.
• Connectivity revenues were $6.5 million in Q2 2023, flat from Q1 2023, and decreased $0.1 million (1.5%) from the same quarter in the prior year, as a result of customers transferred in the divestiture transaction.
• Net loss for the three months ended June 30, 2023 was $4.0 million compared to a loss of $3.1 million in the same period in 2022. The increased net loss position is the result of lower revenues and gross profit ($0.2 million)in the current quarter compared to the same quarter in 2022 as well as, higher restructuring related costs in the current period, as a result of the CEO change, partially offset with a reduction of total operating expenses in the current period compared to the same period in the prior year.
• Adjusted EBITDA was $0.5 million for the three months ended June 30, 2023 compared to $1.0 million for the same period in 2022. The decrease was as a result of lower revenues and gross profit compared to the prior year combined, and higher SG&A expenses, net of restructuring costs, in Q2 2023 compared to Q2 2022.
• Backlog MRR in the connectivity business decreased year over year to $85,471 as of June 30, 2023, compared to $133,436 for the same period in 2022. The decrease in backlog MRR is the result of lower bookings year over year, combined with de-bookings of orders that could not be fulfilled due to issues outside of the Company's control such as technical, geographical and customer landlord limitations preventing fulfillment of the orders.
• ARPU for the connectivity business was $1,104 in Q2 2023 compared to $1,101 in in the prior quarter and compared to $1,118 for the same period in 2022 as a result of changes in customer and product mix.

Management Commentary

"With just under two months of being at the helm as CEO, I have taken a calculative and meticulous approach in assessing the prior operational processes within our organization and have decided to make enhancements where needed and required," said TERAGO CEO Daniel Vucinic. "As a first step towards executing this game plan, our team has commenced the development of a new, long-term plan to drive up Shareholder Value through a Smart Growth Strategy that includes optimizing operational expenses and improving returns on capital investments to drive not only higher revenues but also improved adjusted EBITDA and cashflows. TERAGO truly has a compelling value proposition that is backed by the robust set of premium wireless products within our connectivity business and our coveted spectrum assets. Our premium products offer business grade fibre like performance and are not subject to cable cuts as they are technology and carrier diverse. I am pleased by the early progress our team has made so far in our journey towards manifesting our 'Smart Growth Strategy' and look forward to a new era for our organization."

RESULTS OF OPERATIONS

Comparison of the three months ended June 30, 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 June 30
		2023		2022
Financial
Cloud and Colocation Revenue	$	-		-
Connectivity Revenue	$	6,509		6,625
Other Revenue	$	7		106
Total Revenue	$	6,516		6,731
Cost of Services^1	$	1,822		1,828
Selling, General, & Administrative Costs	$	6,112		5,259
Gross Profit Margin^1		72.0 %		72.8 %
Adjusted EBITDA ^1,2	$	500		1,019
Net Loss	$	(3,988)		(3,112)
Basic loss per share	$	(0.20)		(0.16)
Diluted loss per share	$	(0.20)		(0.16)
Operating
Backlog MRR^1
Connectivity	$	85,471		133,436
Churn Rate^1
Connectivity		1.2 %		0.9 %
ARPU^1
Connectivity	$	1,104		1,118

^{(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, August 10, 2023, 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 604443 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, August 24, 2023. To listen to the recording, call 877-481-4010 or 919-882-2331 and enter passcode 48714# 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 EBITDA¹,² for the three months ended June 30 2023 and 2022.

(in thousands of dollars, unaudited)	Three months ended June 30
		2023		2022
Net loss for the period	$	(3,988)		(3,112)
Foreign exchange loss (gain)		(18)		39
Finance costs		834		508
Finance income		(42)		(32)
Impairment loss on divested assets		-		-
Loss from operations		(3,214)		(2,597)
Add/(deduct):
Depreciation of network assets, property and equipment and amortization        of intangible assets		2,470		2,502
Loss on disposal of network assets		20		-
Impairment of other assets and related charges		79		254
Stock-based compensation expense		(32)		171
Restructuring, acquisition-related, integration and other related costs		1177		689
Adjusted EBITDA^1	$	500		1,019

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 year ended December 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]