TORONTO ,
"This marks my first full quarter since becoming CEO on
- Increased levels of Adjusted EBITDA
- Increased EBITDA margin
- Positive cashflow from operations
- Reduction in overall cash consumption compared to prior quarters
- Anticipated further strengthening of financial metrics in coming quarters
"These initial improvements result from the implementation of specific actions to support our Value Creation Strategy including right sizing our workforce and optimizing capital in a prudent and efficient manner. We anticipate further proof points in the coming quarters as we implement dynamic pricing, increase our customer engagement and proactivity with customer renewals, reenergize our revenue generation engine, drive further efficiencies, and invest in our inherent leadership position in the exciting and emerging area of 5G Private Networks."
Key Developments and Financial Highlights
- Total revenues for the three months ended
September 30, 2023 were$6.5 million versus the$6.6 million earned in the same period in 2022. This result meant effectively flat revenues as the 2022 period included divestiture support services of approximately$0.1 million in revenues that were non-recurring in Q3 2023. Connectivity revenues were$6.5 million in Q3 2023, flat from Q2 2022 and Q2 2023. - Adjusted EBITDA was
$0.9 million for the three months endedSeptember 30, 2023 compared to$0.6 million for the same period in 2022. The increase was a result of lower overall SG&A costs. Adjusted EBITDA margin improved from 9.2% in Q3 2022 to 14.1% in Q3 2023. - Net loss for the three months ended
September 30, 2023 was$3.1 million compared to a loss of$2.9 million in the same period in 2022. The increased net loss position is the result of both lower revenues ($0.1 million ) and higher interest costs as a result of the CrowdOut debt financing facility ($0.8 million ), partially offset by a decrease in total operating expenses ($0.7 million ) in the current year vs the prior year. - Backlog MRR decreased year over year to
$75,963 as ofSeptember 30, 2023 , from$138,893 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 due to technical, geographical and customer landlord limitations preventing fulfillment of the orders. - ARPU for the connectivity business was
$1,127 in Q3 2023 compared to$1,104 in in the prior quarter and compared to$1,099 for the same period in 2022 as a result of changes in customer profile and product mix. ARPU is at its highest level in the last 8 quarters. - The Company did not require any additional financing or draws from its operating facility during Q3 2023. Per
TERAGO's Consolidated Statement of Cash Flows, the cash generated from operating activities was$0.8 million in Q3 2023 compared to cash consumed of$0.2 million in the same period in 2022. Total cash consumption in the quarter was$1.9 million , compared to$2.4 million in the same quarter of 2022.
Additional Management Commentary
"With major tailwinds propelling our private network strategy,
RESULTS OF OPERATIONS
Comparison of the three months ended
(In thousands of dollars, except with respect to gross profit margin, earnings per share, Backlog MRR, and ARPU)
(unaudited) | Three months ended | |||
2023 | 2022 | |||
Financial | ||||
Cloud and Colocation Revenue | $ | - | - | |
Connectivity Revenue | $ | 6,491 | 6,516 | |
Other Revenue | $ | - | 116 | |
Total Revenue | $ | 6,491 | 6,632 | |
Cost of Services1 | $ | 1,794 | 1,799 | |
Selling, General, & Administrative Costs | $ | 4,142 | 4,826 | |
Gross Profit Margin1 | 72.4 % | 72.9 % | ||
Adjusted EBITDA 1,2 | $ | 918 | 610 | |
Net Loss | $ | (3,087) | (2,913) | |
Basic loss per share | $ | (0.16) | (0.15) | |
Diluted loss per share | $ | (0.16) | (0.15) | |
Operating | ||||
Backlog MRR1 | ||||
Connectivity | $ | 75,963 | 133,893 | |
Churn Rate1 | ||||
Connectivity | 1.3 % | 0.7 % | ||
ARPU1 | ||||
Connectivity | $ | 1,127 | 1,099 | |
(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
To access the conference call, please dial 888-506-0062 or 973-528-0011 and use conference ID 282818 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
(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
The table below reconciles net loss to Adjusted EBITDA1,2 for the three months ended
(in thousands of dollars, unaudited) | Three months ended | |||
2023 | 2022 | |||
Net loss for the period | $ | (3,087) | (2,913) | |
Foreign exchange loss (gain) | (29) | 4 | ||
Finance costs | 1,075 | 334 | ||
Finance income | (65) | (38) | ||
Impairment loss on divested assets | - | - | ||
Loss from operations | (2,106) | (2,613) | ||
Add/(deduct): | ||||
Depreciation of network assets, property and equipment and amortization of intangible assets | 2,551 | 2,562 | ||
Loss on disposal of network assets | 16 | - | ||
Impairment of other assets and related charges | 94 | 58 | ||
Stock-based compensation expense | 193 | 229 | ||
Restructuring, acquisition-related, integration and other related costs | 170 | 374 | ||
Adjusted EBITDA1 | $ | 918 | 610 | |
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.
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.
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.
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