Company delivers significant sequential improvement in EBITDA in Q1
TORONTO, May 6 /CNW/ - TeraGo Inc. (TSX: TGO) today announced financial
and operating results for the first quarter ended March 31, 2009.
Financial and Operational Highlights
- Total revenue for the quarter was $8.6 million, an increase of 21%
over the first quarter of 2008. Service revenues, the majority of
which are recurring in nature, comprised 97% of total revenue.
- EBITDA(*) was $932 thousand in the first quarter of 2009, compared to
$(221) thousand a year earlier.
- Second consecutive quarter of positive EBITDA following EBITDA of $597
thousand in Q4 2008.
- Added 266 gross customer locations, compared to 283 a year earlier,
representing 95% of prior year levels despite a challenging economy.
- Ended the quarter with 4,590 customer locations in service as at
March 31, 2009, an increase of 16% compared to 3,971 customer
locations in service as at March 31, 2008.
- Approximately 83% of new customers signed contracts with terms of
three years or more in Q1 2009, compared to 70% in Q1 2008.
- Average monthly churn rate(*) for Q1 2009 was 1.43% compared to 0.76%
in the first quarter of 2008.
- ARPU(*) for Q1 2009 was $609 compared to $603 in the first quarter of
2008, an increase of 1%.
- An Industry Canada decision released in March, 2009, resulted in the
granting of a five-year extension to the initial term of the 24 and 38
GHz licences held by the Company. In the decision, the Department
waived its proposed annual licensing fee during the extension period.
- The Company completed the implementation of a National Multiprotocol
Label Switching (MPLS) backbone network. In subsequent quarters, the
Company expects to realize benefits in terms of improved operation
efficiencies and service levels for customers as a result of this
"We delivered material sequential improvement in EBITDA for the third
consecutive quarter, positive EBITDA for the second consecutive quarter, and
maintained a double digit revenue growth rate despite the ongoing challenges
in the broader economy," said Bryan Boyd, President and CEO, TeraGo Inc. "Our
priority in 2009 will be to continue to increase EBITDA as we balance growth
with prudent management of our cash resources."
Key Financial & Operational Highlights
(All financial results are in thousands, except gross margin, loss per
share and operating metrics)
Three months ended March 31
Revenue $8,621 $7,138
Gross profit margin 73.5% 75.3%
EBITDA(*) $932 $(221)
Income (loss) from operations $(1,633) $(2,452)
Net loss $(1,556) $(2,124)
Loss per share $(0.14) $(0.19)
Churn rate(*) 1.43% 0.76%
Customer locations in service 4,590 3,971
ARPU(*) $609 $603
Number of employees 168 175
(*) See Non-GAAP Measures below
First Quarter 2009 Results of Operations
TeraGo's total revenue for the three-month period ended March 31, 2009
was $8.6 million, an increase of $1.5 million or 21% compared with $7.1
million of revenue in Q1 2008. 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 revenues, which are primarily recurring in nature,
comprised 97% of total revenues in the first quarter, while installation and
one-time revenue represented 3%.
Total customer locations in service reached 4,590 at March 31, 2009, an
increase of 619 net new locations or 16% compared to 3,971 customer locations
in service one year earlier. Gross customer locations added during the first
quarter of 2009 totaled 266 compared to 283 for the same period last year
representing 95% of prior year levels despite a challenging economy.
Average monthly revenue per customer location, or ARPU, was $609 in the
first quarter of 2009, an increase of 1% from $603 in Q1 2008. 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 1.43% for the three
months ended March 31, 2009, compared to 0.76% for the same period in 2008. A
significant portion of the increase is due to increased collection and
bankruptcy issues, and to more customers closing locations and ending
projects. Given the challenging economic environment, there is a significant
risk of churn remaining at current levels or increasing in future periods. The
Company will continue to monitor customer credit worthiness and churn levels
Gross profit was $6.3 million in the first quarter of 2009, representing
73.5% of revenues, compared to $5.4 million or 75.3% of revenue in Q1 2008.
Margins were impacted primarily by ongoing network expansion and upgrade
activities in existing markets, and by an increase in the Company's customer
support team. TeraGo's costs of service are largely fixed and the Company
expects that these fixed costs will be leveraged as the business scales.
Sales, general and administrative expenses were $5.4 million in Q1 2009,
a decrease of 3% compared to $5.6 million a year earlier. The decrease was
primarily a result of the continued benefit of the cost cutting initiatives
that were carried out in the fourth quarter of 2008 as well as a continued
focus on cost management. The Company ended the quarter with 30 direct sales
personnel, compared to 35 at December 31, 2008. The Company is currently
recruiting to return to replace open sales positions and further growth of the
sales team will be dependent on the economic environment.
EBITDA was $0.9 million in the first quarter of 2009, compared to $(0.2)
million in Q1 2008. EBITDA in Q1 2009 represents a sequential improvement of
$0.3 million compared to $0.6 million in Q4 2008. Ongoing EBITDA improvement
is in line with management's expectation as the Company focused on prudent
cost management while continuing to grow revenue.
Net loss was $(1.6) million or $(0.14) per share in Q1 2009 compared to a
net loss of $(2.1) million or $(0.19) per share a year earlier.
As of March 31, 2009, TeraGo had cash and cash equivalents and short-term
investments of $9.8 million, compared to $12.7 million at December 31, 2008.
The Company had no debt outstanding as of March 31, 2009. As a result of the
actions taken by management to accelerate EBITDA improvement and preserve
capital, the decrease in cash and cash equivalents and short-term investments
in the first quarter of 2009 was $2.9 million compared to $4.6 million for the
same period in 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 May 1, 2009, TeraGo had 7,492,632 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, May 6, 2009, at
10:00 a.m. EDT to discuss these results. To access the conference call, please
dial 416-644-3429 or 1-800-589-8577. A replay of the conference call will be
available until Wednesday, May 13, 2009 at midnight EDT. To access the replay,
call 416-640-1917 or 1-877-289-8525, followed by passcode 21305091 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
TeraGo's unaudited interim financial statements for the three months
ended March 31, 2009, and the notes thereto, and its Management Discussion and
Analysis for the same period, have been filed on SEDAR at www.sedar.com.
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 during 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 and
churn rate are not recognized measures under GAAP and, accordingly, investors
are cautioned in using it. Our 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.
This news release includes certain forward-looking statements that are
made as of the date hereof and 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 laws. 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 2008 Annual MD&A and 2008
Annual Information Form that can be found on SEDAR at www.sedar.com and other
uncertainties and potential events. Except as may be required by applicable
Canadian securities laws, we do not intend, and disclaim 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.
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 42 major markets across Canada, serving more than 4,500 customer
locations. TeraGo Networks is a wholly owned subsidiary of TeraGo Inc. (TSX:
TGO). More information about TeraGo is available at www.terago.ca.
For further information:
For further information: Bryan Boyd, President and CEO, Telephone: (905)
707-0788, E-mail: email@example.com; Jeff Codispodi, The Equicom Group,
Telephone: (416) 815-0700 ext 261, E-mail: firstname.lastname@example.org