Mr. Daniel Vucinic reports

TERAGO REPORTS FOURTH QUARTER AND FULL YEAR 2023 FINANCIAL RESULTS

TeraGo Inc. today released its financial and operating results for the fourth quarter and fiscal year ended Dec. 31, 2023.

"I am proud to report my second quarter since becoming CEO on June 12, 2023. Our 'value creation strategy' accelerated delivery on behalf of customers, employees, shareholders -- continued apace in the final quarter of 2023. In our prior earnings release I highlighted improvements across all of our key financial indicators. Today I am pleased to share that in the second half of 2023, we have continued the trend of strengthening these metrics."

Improvements in second half of 2023 as compared with the second half of 2022:

• Increased adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) by 8 per cent;
• Improved positive cash flow from operations by 96 per cent.

"In the second half of 2023, we delivered substantial financial wins that have afforded TeraGo the opportunity to reinvest in its transformation. This will drive a re-energizing of our top line. With new sales leadership in place and further growth investments anticipated, it is my intention to drive value as much from top-line revenue growth as from cost optimization and careful management of our capital expenditures. TeraGo is extremely well positioned as a nimble, carrier-grade managed service provider of choice with differentiated frequencies, deep capabilities and a delivery track record in emerging growth areas. Smart, profitable growth will be a theme in 2024 and beyond," said Daniel Vucinic, chief executive officer.

Key developments and financial highlights

• Total revenues for the three months ended Dec. 31, 2023, were $6.5-million compared with $6.3-million for the same period in 2022. Total annual revenue in 2023 was $26.1-million compared with $27.6-million in the prior year. The decrease of $1.5-million was the result of the prior year including one month of cloud and co-location and posttransaction-related support services (other revenue).
• Connectivity revenues were $6.5-million and $26.0-million for the three months and year ended Dec. 31, 2023, respectively. This is an increase of $200,000 compared with same quarter prior year and $100,000 compared with prior year annual.
• Adjusted EBITDA remained flat at $1.2-million for the three months ended Dec. 31, 2023, compared with the same period in 2022. For the year ended Dec. 31, 2023, adjusted EBITDA decreased 17.1 per cent to $3.4-million compared with $4.1-million for the same period in 2022. The decrease is the result of the prior year including one month of cloud and co-location revenue ($1.4-million), partially offset by a reduction of overall operating expenses in the current year.
• Net loss increased to $3.6-million for the three months ended Dec. 31, 2023, compared with a net loss of $2.4-million for the same period in 2022. Net loss was $13.2-million for the year ended Dec. 31, 2023, compared with a net loss of $11.6-million for the same period in 2022. The increase in net loss was a combination of higher finance costs, lower total revenues, as described herein combined with non-recurring costs associated with the staffing and management changes. These were partially offset by a reduction in overall operating expenses year over year.
• Gross margin remained consistent year over year achieving 73.3 per cent in 2023 compared with 73.1 per cent in the prior year.
• Backlog MRR decreased year over year to $65,363 as of Dec. 31, 2023, from $178,948 for the same period in 2022. The decrease in backlog MRR is the result of on-boarding of new customers with improved installation processes yielding much faster installations which reduced the backlog due to installations exceeding new bookings in the year and combined with debookings of previously recorded orders due to technical, geographical and customer landlord limitations preventing fulfilment of the orders.
• ARPU (average revenue per user) for the connectivity business was $1,164 in Q4 2023 up from $1,127 in Q3 2023 and compared with $1,063 for the same period in 2022 due to changes in customer base and product mix and a new pricing strategy implemented in 2023 Q4. ARPU has been increasing every quarter for the past five quarters.

Additional management commentary

"The value creation strategy has gained sufficient traction and is already yielding tangible benefits. I expect that TeraGo's efforts will be further buoyed by the addition of a permanent chief financial officer, following the departure of the previous CFO due to personal family reasons after a brief tenure. A search is well under way for a permanent chief financial officer, and I look forward to reacquainting the investor community with TeraGo and the value creation strategy in the second half of 2024 following the integration of this key member of our team.

"In addition, we noted with great interest the consultation launched by Innovation, Science and Economic Development Canada with respect to licenCe renewals impacting our 38 GHz and 24 GHz bands, as well as the preliminary consultation launched on changes to our 24 GHz band. Like any wireless business, spectrum is our lifeblood. Reasonable long-term visibility and our ability to put our spectrum to work in a way that fosters a growing, competitive and knowledge-based economy is absolutely critical for us to be able to invest in our diverse and innovative service offerings. We remain fully engaged in this important process," said Mr. Vucinic.

Results of operations

Comparison of the three months and year ended Dec. 31, 2023, and 2022

Conference call

Management will host a conference call on Thursday, March 7, 2024, at 10 a.m. ET to discuss these results.

To access the conference call, please dial 888-506-0062 or 973-528-0011 and use conference ID 572559 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.

An archived recording of the conference call will be available through Thursday, March 21, 2024. To listen to the recording, call 877-481-4010 or 919-882-2331 and enter pass code 50012 followed by the pound key if applicable.

About TeraGo Inc.

TeraGo provides managed network and security services to businesses across Canada ensuring highly secure, reliable and redundant connectivity, including private 5G wireless networks, fixed wireless access, and fibre and cable wireline network connectivity. As Canada's biggest millimetre-wave-spectrum holders, the company possesses exclusive spectrum licences in the 24-gigahertz and 38-gigahertz spectrum bands, which it utilizes to provide secure and dedicated SLA-guaranteed (service-level agreement), enterprise-grade performance that is technology diverse from buried cables ensuring high-availability connectivity services. TeraGo serves over 1,900 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.

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