TeraGo Announces Record Quarterly Revenue with Year over Year Growth of 26% in the Second Quarter of 2008



    Growth driven by record net customer additions

    TORONTO, Aug. 6 /CNW/ - TeraGo Inc. (TSX: TGO) today announced financial
and operating results for the second quarter ended June 30, 2008.

    
    Second Quarter 2008 Highlights

    -   Total revenue for the quarter was $7.6 million, an increase of 26%
        over the second quarter of 2007
    -   242 net customer locations added in the quarter, an increase of 32%
        over the second quarter of 2007
    -   Average monthly churn rate(*) for the quarter was flat at 0.94%
        compared to the second quarter of 2007
    -   ARPU(*) for the quarter was $604 compared to $589 in the second
        quarter of 2007, an increase of 3%
    -   4,213 customer locations in service as at June 30, 2008, an increase
        of 23% from a year earlier
    

    "Our pattern of consistent growth demonstrates the strength of demand for
our wireless broadband services across the country," said Bryan Boyd,
President and CEO, TeraGo Inc. "The investments we have made in both our
network and our sales and operations teams are yielding positive results as
reflected in our record operational performance, in particular, a 25%
sequential acceleration of net customer additions in the quarter. While
challenges lie ahead, I expect improved EBITDA performance beginning in the
third quarter of this year as we continue to grow our subscriber base."

    
    Key Financial & Operational Highlights

    (All financial results are in thousands, except ARPU and loss per share)

                                                  Three months ended June 30
                                                            2008        2007
                                                  ---------------------------
                                                      (Unaudited) (Unaudited)
    Financial
    Revenue                                              $ 7,636     $ 6,076
    Gross profit margin                                       75%         77%
    EBITDA(*)                                            $  (720)    $   446
    Income (loss) from operations                        $(3,053)    $  (783)
    Net loss                                             $(2,864)    $(1,367)
    Loss per share                                       $ (0.26)    $ (0.21)

    Operating
    Churn rate(*)                                           0.94%       0.94%
    Customer locations in service                          4,213       3,419
    ARPU(*)                                              $   604     $   589
    Number of employees                                      189         129

    (*) See Non-GAAP Measures below
    

    Results of Operations

    TeraGo's total revenue for the three-month period ended June 30, 2008 was
$7.6 million, an increase of 26% compared to $6.1 million of revenue generated
in the second quarter of 2007. The increase in revenue is primarily the result
of a greater number of customer locations in service, as well as existing
customers upgrading their Internet and data connections and adding additional
service locations. Service revenue, which are recurring in nature, comprised
98% of total revenue in the quarter, while installation revenue represented
2%.
    Total customer locations in service reached 4,213 at June 30, 2008, an
increase of 794 net new locations or 23% compared to 3,419 customer locations
in service one year earlier. Net customer locations added during the second
quarter of 2008 totaled 242, the highest of any quarter in Company history.
    Average monthly revenue per customer location, or ARPU, was $604 in the
second quarter of 2008, an increase of 3% from $589 in the second quarter of
2007. The increase in ARPU was driven primarily by existing customers
upgrading the capacity of their services in addition to an increase in the
number of new customers requiring higher capacity services.
    The average monthly churn rate was 0.94% for the three months ended
June 30, 2008, unchanged from a year earlier. This continued strong
performance in monthly churn is largely the result of the Company's ongoing
investment in its network and customer support groups.
    Gross profit was $5.7 million in the quarter, representing 75% of
revenue, compared to $4.7 million or 77% of revenue in the comparable period
of 2007. Gross profit margins in the quarter were impacted primarily by
network expansion and upgrade activities and by an increase in the Company's
customer support team. The Company's costs of service are largely fixed and
will be leveraged as the business scales.
    Sales, general and administrative (SG&A) expenses were $6.6 million in
the quarter, an increase of 53% compared to $4.3 million for the same quarter
in the previous year. The increase in SG&A is primarily driven by higher
salaries and compensation-related expenses, as the Company added personnel to
accelerate its acquisition of new customers and support its growing base of
subscribers. Direct sales personnel stood at 46 as at June 30, 2008, three
fewer than at the end of the prior quarter, due to normal sales force
management activities. Management expects to increase the number of direct
sales personnel to 50 by the end of 2008. In addition, management expects to
leverage the investments already made in personnel and does not expect to
increase headcount at the same rate.
    In line with management expectations, EBITDA was $(0.7) million in the
quarter compared to $0.4 million a year earlier due to TeraGo's strategic
decision to invest in market expansion and associated sales and operations
personnel to accelerate and support customer growth. As indicated in the
previous quarter, second quarter EBITDA was impacted by expenses incurred to
aggressively grow the Company's customer base in existing markets and expand
its wireless broadband network into new geographic markets. In the second
quarter of 2008, the Company achieved its highest quarterly net customer
locations added in its history. Management expects EBITDA to improve in the
third quarter of 2008 as we leverage our investment in headcount and increase
our revenue.
    Net loss was $(2.9) million or $(0.26) per share in the second quarter of
2008 compared to a net loss of $(1.4) million or $(0.21) per share in the same
period in 2007.
    As of June 30, 2008, TeraGo had cash and cash equivalents and short-term
investments of $20.9 million compared to $24.9 million at March 31, 2008. The
Company had no debt outstanding as of June 30, 2008. Management believes that
the Company's current cash and short-term investments and its anticipated cash
flow from operations will be sufficient to meet working capital and capital
expenditure requirements for the foreseeable future.
    As of August 5, 2008, TeraGo had 7,515,473 Common Shares, 3,633,474
Class A Non-voting Shares and two Class B Shares outstanding.

    Conference Call and Webcast

    Management will host a conference call on Wednesday, August 6, 2008, at
9:00 a.m. EDT to discuss these results. To access the conference call, please
dial 416-644-3426 or 1-800-594-3615. A replay of the conference call will be
available until Wednesday, August 12, 2008 at midnight EDT. To access the
replay, call 416- 640-1917 or 1-877- 289-8525, followed by passcode 21278862
followed by the number sign. The call will also be accessible via webcast at
www.terago.ca or at www.newswire.ca. An archived replay of the webcast will be
available for one year.
    TeraGo's unaudited interim financial statements for the three months
ended June 30, 2008, and the notes thereto, and its Management Discussion and
Analysis for the same period, will be filed on SEDAR at www.sedar.com.

    Non-GAAP Measures

    The term "EBITDA" refers to income before deducting interest, taxes, and
amortization. EBITDA is a term commonly used to evaluate operating results. We
believe that EBITDA is useful supplemental information as it provides an
indication of the operational results generated by our business activities
prior to taking into consideration how those activities are financed and taxed
and also prior to taking into consideration asset amortization. We also
exclude foreign exchange gain or loss, gain or loss in network asset disposals
and stock option expense from our calculation of EBITDA. EBITDA is not a
recognized measure under GAAP and, accordingly, investors are cautioned that
EBITDA should not be construed as an alternative to operating income or net
income determined in accordance with GAAP as an indicator of our financial
performance or as a measure of our liquidity and cash flows. 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. Our method of
calculating EBITDA may differ from other issuers and, accordingly, EBITDA may
not be comparable to similar measures presented by other issuers.
    The term "ARPU" refers to our average revenue per customer location. We
believe that ARPU is useful supplemental information as it provides an
indication of our revenue from an individual customer location on a per month
basis. ARPU is not a recognized measure under GAAP and, accordingly, investors
are cautioned that ARPU should not be construed as an alternative to revenue
determined in accordance with GAAP as an indicator of our financial
performance. We calculate ARPU by dividing our service revenue by the average
number of customer locations in service during the period and we express ARPU
as a rate per month. Our method of calculating ARPU may differ from other
issuers and, accordingly, ARPU may not be comparable to similar measures
presented by other issuers.
    The term "churn" or "churn rate" is a measure, expressed as a percentage,
of customer locations terminated in a particular month. Churn represents the
number of customer locations disconnected per month as a percentage of total
number of customer locations in service at the end of the month. We calculate
it by dividing the number of customer locations disconnected during a period
by the total number of customer locations in service during the period. Churn
is not a recognized measure under GAAP and, accordingly, investors are
cautioned in using it. Our method of calculating churn may differ from other
issuers and, accordingly, churn may not be comparable to similar measures
presented by other issuers.

    Forward-Looking Statements

    This news release includes certain forward-looking statements that are
based upon current expectations, which involve risks and uncertainties
associated with our business and the economic environment in which the
business operates. All such statements are made pursuant to the 'safe harbour'
provisions of, and are intended to be forward-looking statements under,
applicable Canadian securities legislation. Any statements contained herein
that are not statements of historical facts may be deemed to be
forward-looking statements. For example, the words anticipate, believe, plan,
estimate, expect, intend, should, may, could, objective and similar
expressions are intended to identify forward-looking statements. By their
nature, forward-looking statements require us to make assumptions and are
subject to inherent risks and uncertainties. We caution readers of this news
release not to place undue reliance on our forward-looking statements as a
number of factors could cause actual results, conditions, actions or events to
differ materially from the targets, expectations, estimates or intentions
expressed with the forward-looking statements. When relying on forward-looking
statements to make decisions with respect to the Company, investors and others
should carefully consider the risks set forth in the 2007 Annual MD&A and 2007
Annual Information Form that can be found on SEDAR www.sedar.com and other
uncertainties and potential events. We do not intend, and disclaim any
obligation to update or revise any forward-looking statements whether words or
written as a result of new information, future events or otherwise.

    About TeraGo Networks

    TeraGo Networks Inc. has been providing businesses in Canada with
carrier-grade wireless broadband and data communications services since 2001.
The national broadband service provider owns and manages its wireless IP
network in 40 major markets across Canada, serving more than 4,000 customer
locations. TeraGo Networks is a wholly owned subsidiary of TeraGo Inc.
(TSX: TGO). More information about TeraGo is available at www.terago.ca.

    %SEDAR: 00025345E




For further information:

For further information: Bryan Boyd, President and CEO, Telephone: (905)
707-0788, E-mail: bryan.boyd@terago.ca; Jeff Codispodi, The Equicom Group,
Telephone: (416) 815-0700 ext 261, E-mail: jcodispodi@equicomgroup.com

Organization Profile

TERAGO INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890