TeraGo Reports First Quarter 2022 Financial Results

TORONTO , May 11, 2022 /CNW/ - TeraGo Inc. ("TeraGo" or the "Company") (TSX: TGO, www.terago.ca), today reported financial and operating results for the first quarter and fiscal year ended March 31, 2022.

Key Developments

• 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"). The Divestiture enables TeraGo to focus on its core wireless business and leverage TeraGo's extensive millimeter wave spectrum licenses to grow its mmWave 5G private networks for businesses. The Divestiture subsequently closed on January 31, 2022.
• On February 1, 2022, TeraGo repaid all indebtedness, liabilities and other obligations against its Term Debt Facility totaling $20.0 million, and the Term Debt Facility was terminated. TeraGo was released and discharged from all obligations, claims and demands under and in respect of the Term Debt Facility, other than certain provisions which expressly survive repayment of the obligations.
• On March 22, 2022, TeraGo announced the launch of its first 5G mmWave service to a Multi-Dwelling Unit ("MDU") in Ontario. This multiple gigabit solution will allow TeraGo partners to provide high-speed internet services to previously hard to service buildings and residences.
• TeraGo's Net Promoter Score ("NPS"), a widely utilized industry measurement of customer loyalty and relationships was +69 across Q1 2022 with its connectivity customers, which compares very favourably with other network operators.

Financial Highlights

• TeraGo's first quarter 2022 revenues include one month of cloud and colocation revenues, including certain connectivity revenues associated with the cloud and colocation customers. These revenues were included in the Divesture and will not be part of TeraGo's revenues from February 1, 2022 onward.
• Total connectivity revenues decreased 1.5% quarter over quarter due to the Divestiture, with connectivity revenue totalling $6.4 million for the three months ended March 31, 2022 compared to $6.5 million in the prior quarter. Excluding the impact of the Divestiture on connectivity revenues associated with former cloud and colocation customers, normalized connectivity revenues increased by $0.1 million or 1.7% in the first quarter of 2022 compared to the prior quarter.
• Total revenue decreased 26.9% to $7.9 million for the three months ended March 31, 2022 compared to $10.8 million for the same period in 2021. The decrease in revenue was driven by the Divestiture.
• Net loss for the three months ended March 31, 2022 was $3.1 million compared to a loss of $2.2 million in the same period in 2021. The higher net loss was driven by one-time restructuring expenses and lower gross profit due to the Divestiture.
• Adjusted EBITDA1,2 was $1.1 million for the three months ended March 31, 2022 compared to $3.2 million for the same period in 2021. The decrease was driven by lower gross profit, partially offset with lower salaries and related expenses due to the Divestiture.

Management Commentary

"With the cloud and colocation divestiture in Q1, we took a big step towards our vision for TeraGo as a pure play wireless connectivity company," said TeraGo CEO Matthew Gerber. "Our team is now laser focused on providing the industry's best wireless connectivity services to our business customers. The continued momentum we've been able to build has resulted in quarterly core connectivity revenue growth, and a connectivity business that is now delivering stable, consistent and predictable results. Additionally, we have been successful in executing our short-term milestones, and remain hard at work in continuing to lay the groundwork for offering 5G mmWave connectivity and private networks to capitalize on the growing market opportunity at hand. TeraGo's vision is to be Canada's leading provider of enterprise grade wireless connectivity for business customers and we are moving aggressively towards realizing this vision."

RESULTS OF OPERATIONS

Comparison of the three months and year ended March 31, 2022 and 2021
(In thousands of dollars, except with respect to gross profit margin, earnings per share, Backlog MRR, and ARPU)

Conference Call

Management will host a conference call on Thursday, May 12, 2022, at 9:00 a.m. Eastern Time to discuss these results.

To access the conference call, please dial 888-886-7786 or 416-764-8658, and use conference ID 07140337 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 ended March 31, 2022, 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, May 19, 2022. To listen to the recording, call 877-674-7070 or 416-764-8692 and enter passcode 140337 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 and twelve months ended March 31, 2022. 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 ended March 31, 2022 and 2021.

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.

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