Mr. Tony Ciciretto reports

TERAGO REPORTS 2017 FIRST QUARTER FINANCIAL RESULTS

TeraGo Inc. has released financial and operating results for the quarter ended March 31, 2017.

"Our goal is to deliver value to our customers, in order to deliver value to our shareholders," commented Tony Ciciretto, president and chief executive officer of TeraGo. "We are executing our strategic plan with a relentless focus on our six growth imperatives: enhancing our offering, enhancing our go-to-market effectiveness, improving customer experience, focus on talent, simplifying systems and leveraging assets -- all with a clear objective of achieving sustainable profitable growth."

Mr. Ciciretto added: "TeraGo will focus on providing businesses across Canada with enterprise-class infrastructure solutions, purpose built for their size and needs. We are making key investments in our product portfolio, customer experience, and marketing and sales areas to support our growth imperatives."

Financial highlights:

• Total revenue decreased 4.4 per cent to $14.3-million for the three months ended March 31, 2017, compared with $14.9-million for the same period in 2016. The decrease in revenue is primarily driven by lower connectivity revenue, partially offset by growth in cloud and co-location revenue. Cloud and co-location revenue increased 8.5 per cent to $4.8-million compared with $4.4-million for the same period in 2016. The increase was driven by greater provisioning of cloud services from new and existing customers, as well as from the acquisition of the hosting business in the second quarter of 2016. The percentage of revenues from cloud and co-location of the company's total revenue has increased to 33.7 per cent compared with 29.7 per cent in first quarter 2016.
• Net loss was $1.1-million for the three months ended March 31, 2017, compared with a net loss of $800,000 for the same period in 2016. The increase in net loss was primarily driven by increased restructuring, acquisition-related and integration costs, and the decline of connectivity revenue, partially offset by lower depreciation and amortization and lower finance costs.
• Adjusted EBITDA (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, stock-based compensation and restructuring, and acquisition-related and integration costs) (1) decreased 20.7 per cent to $3.7-million for the three months ended March 31, 2017, compared with $4.7-million for the same period in 2016. The decrease was primarily driven by the reduction of connectivity revenue, an increase in sales force head count, and marketing costs related to TeraGo's strategic priorities and growth initiatives, partially offset by the growth of cloud and co-location revenue.

(1) A non-international financial reporting standard measure.

Conference call

Management will host a conference call May 12, 2017, at 9 a.m. ET, to discuss these results.

To access the conference call, please dial 647-427-2311 or 1-866-521-4909. The unaudited financial statements for the three months ended March 31, 2017, and management's discussion and analysis for the same period have been filed on SEDAR. Alternatively, these documents, along with a presentation in connection with the conference call, can be accessed on-line at the TeraGo website.

An archived recording of the conference call will be available until May 19, 2017. To listen to the recording, call 416-621-4642 or 1-800-585-8367 and enter passcode 15747379.

About TeraGo Inc.

TeraGo provides businesses across Canada and internationally with cloud, co-location and connectivity services. TeraGo manages over 3,000 cloud workloads, nine data centres in the Greater Toronto Area, the Greater Vancouver Area, Ottawa, Kelowna, Winnipeg, St. Louis and Newport, United Kingdom, and owns and manages its own Internet protocol network. The company serves approximately 4,000 business customers in 46 major markets across Canada, including Toronto, Montreal, Calgary, Edmonton, Vancouver and Winnipeg. TeraGo Networks is a competitive local exchange carrier (CLEC) and is recognized as a Canadian telecommunications employer of choice for 2016.

                    RESULTS OF OPERATIONS
                  (in thousands of dollars, 
  except with respect to gross profit margin and earnings per share)

                                          Three months ended March 31,
                                                 2017            2016
Financial
Cloud and co-location revenue                 $ 4,812         $ 4,435
Connectivity revenue                            9,465          10,494
                                              -------         -------
Total revenue                                  14,277          14,929
Cost of services                                3,483           3,469
Gross profit margin                              75.6%           76.8%
Adjusted EBITDA                                 3,711           4,676
Net (loss)                                     (1,055)           (820)
Basic (loss) per share                          (0.07)          (0.06)
Diluted (loss) per share                        (0.07)          (0.06)

Executive management changes

Effective Feb. 1, 2017, Ron Perrotta joined the company as vice-president, marketing and strategy.

Effective March 16, 2017, Joe Prodan (chief financial officer) was no longer with the company.

We seek Safe Harbor.