TORONTO, March 23, 2022 /CNW/
- TeraGo Inc. ("TeraGo" or the "Company") (TSX: TGO) (www.terago.ca), today
reported financial and operating results for the fourth quarter and
fiscal year ended December 31, 2021.
Fourth Quarter 2021 and Recent Operational
Developments
- Completed strategic divestiture of cloud and colocation
business lines to a subsidiary of Hut 8 Mining Corp. for aggregate
cash consideration of Cdn.$30
million.
- Partnered with IKIN to jointly develop innovative solutions
that combine 5G mmWave with IKIN's holographic technologies for
Canadian enterprises.
- Selected Intracom Telecom, a global telecommunication systems
and solutions vendor, for the supply of its leading wireless
solutions, WiBAS™ G5 evo-BS and WiBAS™ G5 Connect+, operating at 24
GHz frequency band.
- Partnered with McMaster University
to jointly build and deploy the first university-based 5G
millimeter wave private network for research.
Fourth Quarter 2021 Connectivity Financial Highlights
- Connectivity revenues stabilized quarter over quarter, with
connectivity revenue totaling $6.5
million for the three months ended December 31, 2021, compared to $6.5 million in the prior quarter. The
stabilization of connectivity revenues was driven by favourable
customer churn results, and provisioning of new customers.
- Connectivity backlog MRR was $110,000 as of December
31, 2021, compared to $130,000
as of December 31, 2020. The decrease
in backlog MRR was driven by the timing of sales bookings and
customer provisioning.
- Connectivity ARPU was $1,043 as
of December 31, 2021, compared to
$1,057 for the same period in 2020.
The decrease in ARPU was driven by customer renewals at lower
rates.
- Connectivity churn was 0.7% as of December 31, 2021, compared to 1.4% for the same
period in 2020. The decline in churn was driven by the Company's
retention initiative to upgrade and retain its customers with new
service offerings.
Full Year 2021 Connectivity Financial Highlights
- Connectivity revenue for the full year 2021 decreased 8.7% to
$26.3 million compared to
$28.8 million in 2020. The decrease
in connectivity revenue was attributable to churn exceeding
customer provisioning.
- Connectivity ARPU for the full year 2021 was $1,035 compared to $1,061 in 2020. The decrease in ARPU was driven
by customer renewals at lower rates.
- Connectivity churn for the full year 2021 was 1.1% compared to
1.5% for the same period in 2020. The decline in churn was driven
by the Company's retention initiative to upgrade and retain its
customers with new service offerings.
Full Year 2021 Financial Highlights
- Total revenue for the full year 2021 decreased 4.6% to
$43.3 million compared to
$45.4 million in 2020. The decrease
in total revenue was driven by lower connectivity revenue.
- Net loss for the full year 2021 totaled $15.2 million compared to net loss of
$8.3 million in 2020. The higher net
loss was driven by an impairment loss on cloud and colocation
assets held for sale, an impairment loss on intangible assets, and
a decline in total revenue.
- Adjusted EBITDA(1)(2) for the full year 2021 was
$12.0 million compared to
$15.9 million in 2020. The lower
adjusted EBITDA was driven primarily by a decline in gross profit,
one-time operating expenses and lower government grants.
Management Commentary
"The past quarter and extending into the start of this year was
a pivotal period for TeraGo as we made encouraging operational
progress in our connectivity business and repositioned our company
to better capitalize on the growing 5G industry tailwinds," said
TeraGo CEO Matthew Gerber. "The
divestiture of the cloud and colocation lines of business coupled
with an hitting an inflection point with our connectivity revenues
is a great strategic step for our team. We can now focus
exclusively on making progress towards launching our mmWave based
5G private networks, and we are confident we'll be able to
capitalize on our near- and long-term milestones in our efforts to
become Canada's leading provider
of millimeter wave 5G private networks."
RESULTS OF OPERATIONS
Comparison of the three months and year ended December 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
December
31
|
|
Year
ended
December
31
|
|
|
2021
|
2020
|
|
2021
|
2020
|
Financial
|
|
|
|
|
|
|
Cloud and Colocation
Revenue
|
$
|
4,160
|
4,177
*
|
|
16,956
|
16,666
*
|
Connectivity
Revenue
|
$
|
6,535
|
6,727
*
|
|
26,347
|
28,782
*
|
Total
Revenue
|
$
|
10,695
|
10,904
|
|
43,303
|
45,448
|
Cost of
Services1
|
$
|
3,103
|
2,723
|
|
11,141
|
9,816
|
Selling, General,
& Administrative Costs
|
$
|
5,805
|
6,629
|
|
22,800
|
24,194
|
Gross profit
margin1
|
|
71.0%
|
75.0%
|
|
74.3%
|
78.4%
|
Adjusted
EBITDA1, 2
|
$
|
2,330
|
3,695
|
|
12,048
|
15,920
|
Net loss
|
$
|
(8,955)
|
(2,221)
|
|
(15,172)
|
(8,259)
|
Basic loss per
share
|
$
|
(0.46)
|
(0.13)
|
|
(0.81)
|
(0.49)
|
Diluted loss per
share
|
$
|
(0.46)
|
(0.13)
|
|
(0.81)
|
(0.49)
|
Operating
|
|
|
|
|
|
|
Backlog
MRR1
|
|
|
|
|
|
|
Connectivity
|
$
|
110,481
|
129,676
|
|
110,481
|
129,676
|
Cloud &
Colocation
|
$
|
32,882
|
56,437
|
|
32,882
|
56,437
|
Churn
Rate1
|
|
|
|
|
|
|
Connectivity
|
|
0.7%
|
1.4%
|
|
1.1%
|
1.5%
|
Cloud &
Colocation
|
|
1.5%
|
1.0%
|
|
1.3%
|
1.0%
|
ARPU1
|
|
|
|
|
|
|
Connectivity
|
$
|
1,043
|
1,057
*
|
|
1,035
|
1,061
*
|
Cloud &
Colocation
|
$
|
3,634
|
3,416
*
|
|
3,650
|
3,237
*
|
*The three months and
year ended 2021 comparative numbers for Cloud and Colocation
Revenue, Connectivity Revenue, and ARPU have changed to conform
with the presentation of revenue stream allocations effective Q2
2021.
|
(1) See "Non-IFRS
Measures" below.
|
(2) See "Adjusted
EBITDA" below for a reconciliation of net loss to Adjusted
EBITDA.
|
Conference Call
Management will host a conference call on Thursday, March 24, 2022, at 9:00 a.m. Eastern Time to discuss these
results.
To access the conference call, please dial 866-521-4909 or
647-427-2311, and use conference ID 6448389 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. The Financial Statements and
Management's Discussion & Analysis for the quarter and full
year ended December 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 Thursday, March 31, 2022. To
listen to the recording, call 800-585-8367 or 416-621-4642 and
enter passcode 6448389 if applicable.
_____________________________
|
3 See
"Definitions – Key Performance Indicators, IFRS, Additional GAAP
and Non-GAAP Measures"
|
4 See "Adjusted
EBITDA" for a reconciliation of net loss to Adjusted
EBITDA
|
(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 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
EBITDA1 for the three months and full year ended
December 31, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands
of dollars)
|
|
Three months
ended
December
31
|
|
Year
ended
December
31
|
|
|
|
2021
|
2020
|
|
2021
|
2020
|
|
Net loss for the
period
|
$
|
(8,955)
|
(2,221)
|
$
|
(15,172)
|
(8,259)
|
|
Foreign exchange loss
(gain)
|
|
(8)
|
2
|
|
(29)
|
210
|
|
Finance
costs
|
|
915
|
1,115
|
|
3,896
|
4,777
|
|
Finance
income
|
|
(7)
|
(9)
|
|
(44)
|
(99)
|
|
Impairment loss on
assets on held for sale
|
|
4,527
|
-
|
|
4,527
|
-
|
|
Impairment on
intangible assets
|
|
1,630
|
-
|
|
1,630
|
-
|
|
Loss from
operations
|
|
(1,898)
|
(1,113)
|
|
(5,192)
|
(3,371)
|
|
Add:
|
|
|
|
|
|
|
|
Depreciation of
network assets, property and
equipment and amortization of intangible assets
|
|
3,685
|
3,643
|
|
14,554
|
14,809
|
|
Loss on disposal of
network assets
|
|
116
|
77
|
|
285
|
198
|
|
Impairment of Assets
and Related Charges
|
|
188
|
654
|
|
496
|
1,139
|
|
Stock-based
compensation expense (recovery)
|
|
(470)
|
276
|
|
164
|
1,515
|
|
Restructuring,
acquisition-related, integration costs and other
|
|
710
|
158
|
|
1,742
|
1,630
|
|
Adjusted
EBITDA1
|
$
|
2,330
|
3,695
|
$
|
12,048
|
15,920
|
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. The
completion of the proposed transaction with Hut 8 is subject to
certain terms and conditions which TeraGo believes to be
customary. Such terms and conditions may not be satisfied or
obtained in accordance with their terms, in which case the proposed
transaction could be modified or terminated, as applicable. Other
forward-looking statements may include but are not limited to
statements regarding the timing for closing of the proposed
transaction, as well as 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,
2021 and the MD&A of the Company for the three and full
year ended December 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 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.