TeraGo Announces Record Revenue with Growth of 26% in Fiscal 2007



    Growth driven by new customer additions and expansion into 13 new markets

    TORONTO, March 4 /CNW/ - TeraGo Inc. (TSX: TGO) today announced financial
and operating results for the fourth quarter and fiscal year ended
December 31, 2007.

    
    2007 Highlights

    -   Revenue for 2007 was $25.1 million, an increase of 26% over 2006
    -   ARPU(*) for 2007 was $594 compared to $568 in 2006, an increase of 5%
    -   3,777 customer locations in service as at year end 2007, an increase
        of 24% over 2006
    -   Average monthly churn rate(*) for 2007 of 0.92% compared to 1.08% in
        2006, a 17% improvement
    -   Closed initial public offering (IPO) for gross proceeds of
        $50 million and completed TSX listing in June 2007
    -   Company is debt-free after retiring US $9.35 million of short- and
        long-term debt following the IPO
    -   Expanded service offering to 13 new markets during the year
    -   Expanded sales & marketing and customer support teams
    

    "In 2007, TeraGo delivered on some very important objectives that have
set the stage for our continued growth. The funds raised through our IPO have
enabled us to increase our national footprint to 40 markets across Canada and
expand our sales and support teams," said Bryan Boyd, President and CEO,
TeraGo Networks Inc. "We had a strong finish to the year, establishing a
record in the fourth quarter for new customer additions and increasing our
ARPU."
    Mr. Boyd continued: "We continue to see a tremendous opportunity in the
broadband market. Our priority for 2008 is execution. We will continue to
expand into areas in need of high performance broadband technology and build
our customer concentration in existing markets. We expect our EBITDA to begin
to increase in the third and fourth quarters of 2008 as we start to leverage
our investment in headcount and as our revenue continues to grow."

    
    Key Financial & Operation Highlights

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

                                   Three months                 Year
                                Ended December 31         Ended December 31
                                 2007         2006         2007         2006
                           ------------------------  ------------------------
                           (Unaudited)  (Unaudited)    (Audited)    (Audited)
    Financial
    Revenue                   $ 6,815      $ 5,535      $25,120      $19,917
    Gross profit margin %       74.6%        82.0%        76.7%        80.6%
    EBITDA(*)                  $    8       $  922       $1,474       $3,693
    Income (loss) from
     operations               $(2,099)     $(1,171)     $(5,440)     $(2,177)
    Net loss                  $(1,730)     $(1,168)     $(5,486)     $(2,169)
    Loss per share            $ (0.15)     $ (0.18)     $ (0.62)     $ (0.36)

    Operating Metrics
    Churn rate(*)               0.87%        1.10%        0.92%        1.08%
    Customer locations
     in service                 3,777        3,046        3,777        3,046
    ARPU(*)                    $  600       $  589       $  594       $  568
    Number of employees           165          120          165          120

    (*) See Non-GAAP Measures below
    

    Fiscal 2007 Results of Operations

    TeraGo's total revenue was $25.1 million for the year ended December 31,
2007, an increase of $5.2 million or 26% compared with $19.9 million of
revenue in 2006. The increase in revenue is primarily the result of a greater
number of customer locations in service, and existing customers upgrading
their Internet and data connections and/or adding additional service
locations. Service revenues, which are recurring in nature, comprised 98% of
total revenues in 2007, while installation revenue represented 2%.
    Total customer locations in service reached 3,777 at December 31, 2007,
an increase of 731 net new locations or 24% compared to 3,046 customer
locations in service at the end of 2006.
    Average monthly revenue per customer location, or ARPU, was $594 in
fiscal 2007, an increase of 5% from $568 in 2006. 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 for the year was 0.92% in 2007, compared
to 1.08% in 2006. Management believes the improvement is largely the result of
the Company's continued investment in its network and customer support groups.
    Gross profit was $19.3 million in 2007, representing 76.7% of revenues,
compared to $16.1 million or 80.6% of revenue in 2006. Margins in 2007 were
impacted primarily by network expansion in existing and new markets, and by an
increase in the Company's customer support team.
    Sales, general and administrative expenses were $17.9 million in 2007, an
increase of 44% compared to $12.4 million for the previous year. The increase
in SG&A is primarily driven by increases in salaries and compensation-related
expenses, as the total number of employees increased from 120 to 165 during
the year. Direct sales personnel increased to 45 at year-end from 30 as at the
end of 2006. In the short-term, management expects the Company's SG&A expenses
to continue to increase as additional personnel are added in support of the
Company's growth initiatives.
    EBITDA was $1.5 million in 2007 compared to $3.7 million in 2006. The
decline in EBITDA was due to investment in new markets and associated sales
and operations personnel to accelerate and support future customer growth.
Management plans to aggressively grow its customer base in existing markets
and expand its wireless broadband network into new geographic markets, which
is expected to impact EBITDA in the short-term. Management expects EBITDA to
increase starting in the third and fourth quarters of 2008.
    Net loss was $(5.5) million or $(0.62) per share in 2007 compared to a
net loss of $(2.2) million or $(0.36) per share in 2006.

    Q4 2007 Results

    Total revenue for the three-month period ended December 31, 2007 was
$6.8 million, an increase of 23% compared to $5.5 million of revenues
generated in the fourth quarter of 2006. Gross margin was $5.1 million in Q4
2007, representing 74.6% of revenues, compared to $4.5 million or 82.0% of
revenues in the comparable period of 2006. SG&A expenses increased 38% to
$5.1 million in the fourth quarter, compared to $3.7 million in Q4 2006.
EBITDA was $8,000 in Q4 2007 compared to $0.9 million a year earlier.
    As of December 31, 2007, the Company had cash and cash equivalents and
short-term investments of $30.6 million and no long-term debt. The Company
anticipates incurring additional capital expenditures for the purchase and
installation of network and customer premise equipment. The Company plans to
expand its network coverage into new Canadian markets and into strategic
centers around existing markets. The Company also intends to expand its
product portfolio and invest in its sales and marketing, and support
organization. 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 March 3, 2008, TeraGo had 7,549,116 Common Shares, 3,633,474
Class A Non-voting Shares and two Class B Shares outstanding.

    Other Developments

    TeraGo Wins Best Investor Relations for an IPO

    On February 8, 2008, TeraGo received an award for best investor relations
for an IPO at the prestigious IR Magazine Canada Awards 2008.

    TeraGo Announces Hiring of Jim Nikopoulos as General Counsel

    On November 5, 2007, Jim Nikopoulos joined TeraGo as the Company's first
General Counsel. Jim was formerly a partner at Davies Ward Phillips &
Vineberg LLP, a major Canadian business law firm, where he practiced in the
areas of mergers and acquisitions, corporate finance and securities, and
general corporate and commercial law.

    Conference Call and Webcast

    Management will host a conference call on Tuesday, March 4, 2008, at
10:00 a.m. EST to discuss these results. To access the conference call, please
dial 416-644-3419 or 1-800-731-5319. A replay of the conference call will be
available until Tuesday, March 11, 2008 at midnight EST. To access the replay,
call 416-640-1917 or 1-877-289-8525, followed by passcode 21264127 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 audited annual financial statements for the twelve months ended
December 31, 2007, and the notes thereto, and our Management Discussion and
Analysis for the year ended December 31, 2007, 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 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 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 this document 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 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 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 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 3,700 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; Gerry O'Reilly, Chief Financial
Officer, Telephone: (905) 707-0788, E-mail: gerry.oreilly@terago.ca

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