N@N

TeraGo Announces Record EBITDA of $1.2 million in the Second Quarter of 2009

^{Published on 2009-08-12 03:33:17, Last Modified on 2009-08-12 03:33:26 - Market Wire}
 

 Company delivers record revenue in the second quarter TORONTO, Aug. 12 /CNW/ - TeraGo Inc. (TSX: TGO) today announced financial and operating results for the second quarter ended June 30, 2009. Financial and Operational Highlights - Total revenue for the quarter was $8.6 million, an increase of 13% over the second quarter of 2008. - EBITDA(*) was $1.2 million in the second quarter of 2009, an improvement of $2.0 million compared to $(720) thousand a year earlier. EBITDA was the highest in Company history, and represented the fourth consecutive quarter of sequential improvement. - ARPU(*) for Q2 2009 was $614 compared to $604 in the second quarter of 2008, an increase of 2%. - Added 198 gross customer locations, despite the challenging economic environment. - Average monthly churn rate for the three months ended June 30, 2009 declined to 1.35% compared to 1.43% for the first quarter of 2009. Churn for the three months ended June 30, 2008 was 0.94%. - Approximately 79% of new customers signed contracts with terms of three years or more in Q2 2009, compared to 75% in Q2 2008. - Ended the quarter with 4,600 customer locations in service, an increase of 9% compared to 4,213 customer locations in service as at June 30, 2008. - Business plan remains fully funded with $8.9 million of cash, cash equivalents and short term investments as at June 30, 2009, a decrease of $1.0 million from March 31, 2009 compared to a decrease of $4.0 million for the same period in 2008. - TeraGo was selected by a new Advanced Wireless Services ("AWS") wireless entrant to provide wireless backhaul services. The value of this initial contract is not considered material to the Company in 2009. The Company is investing to further develop and pursue additional opportunities with this provider and other new wireless entrants. "In the second quarter we accomplished our primary objectives of growing revenue, improving EBITDA, and preserving our cash resources," said Bryan Boyd, President and CEO, TeraGo Inc. "I believe our success on all these counts during a time of economic difficulty demonstrates the strength of our business model and positions us well to further accelerate growth when a broader recovery is underway." Key Financial & Operational Highlights (All financial results are in thousands, except gross margin, loss per share and operating metrics) Three months ended June 30 2009 2008 --------------------------- (Unaudited) (Unaudited) Financial Revenue $8,645 $7,636 Gross profit margin 74.5% 74.9% EBITDA(*) $1,246 $(720) Income (loss) from operations $(1,343) $(3,053) Net loss $(1,287) $(2,864) Loss per share $(0.12) $(0.26) Operating Churn rate(*) 1.35% 0.94% Customer locations in service 4,600 4,213 ARPU(*) $614 $604 Number of employees 163 189 (*) See Non-GAAP Measures below Second Quarter 2009 Results of Operations TeraGo's total revenue for the three-month period ended June 30, 2009 was $8.6 million, an increase of $1.0 million or 13% compared with $7.6 million of revenue in Q2 2008. The increase in revenue was 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 is primarily recurring in nature, comprised 98% of total revenue in the second quarter, while installation and one-time revenue represented 2%. Total customer locations in service reached 4,600 at June 30, 2009, an increase of 387 net new locations or 9% compared to 4,213 customer locations in service one year earlier. Gross customer locations added during the second quarter of 2009 totaled 198, despite the challenging economic environment, compared to 360 for the same period last year. Average monthly revenue per customer location, or ARPU, was $614 in the second quarter of 2009, an increase of 2% from $604 in Q2 2008. The increase in ARPU was driven primarily by existing customers upgrading the capacity of their services and an increase in the number of new customers requiring higher capacity services. The average monthly churn rate was 1.35% for the second quarter of 2009, compared to 0.94% for the same period in 2008, and 1.43% in Q1 2009. Given the challenging economic environment, there is still a risk of churn remaining at current levels or even increasing in future periods. The Company will continue to monitor customer credit worthiness and churn levels closely . Gross profit was $6.4 million in the second quarter of 2009, representing 74.5% of revenues, compared to $5.7 million or 74.9% of revenue in Q2 2008. The small variance in gross profit margin was primarily the result of ongoing network expansion and upgrade activities in existing markets, and by an increase in the size of 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 $5.2 million in Q2 2009, a decrease of 20% compared to $6.6 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 27 direct sales personnel, three fewer than at the end of the prior quarter. The Company is currently recruiting to replace some of the open sales positions and further growth of the sales team will be dependent on the economic environment. EBITDA was $1.2 million in the second quarter of 2009, a record for the Company, and an increase of nearly $2.0 million compared to $(0.7) million in Q2 2008. EBITDA in Q2 2009 represents a sequential improvement of $0.3 million compared to $0.9 million of EBITDA in Q1 2009. Ongoing EBITDA improvement is in line with management's expectation as the Company focuses on prudent cost management while continuing to grow revenue. Net loss was $(1.3) million or $(0.12) per share in Q2 2009 compared to a net loss of $(2.9) million or $(0.26) per share a year earlier. As of June 30, 2009, TeraGo had cash and cash equivalents and short-term investments of $8.9 million, compared to $9.8 million at March 31, 2009. The Company had no debt outstanding as of June 30, 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 second quarter of 2009 was $1.0 million compared to $4.0 million for the same period in 2008 and $2.9 million in the first quarter of 2009. 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 June 30, 2009, TeraGo had 7,505,491 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 12, 2009, at 9:00 a.m. EDT to discuss these results. To access the conference call, please dial 416-644-3424 or 1-800-595-8550. A replay of the conference call will be available until Wednesday, August 19, 2009 at midnight EDT. To access the replay, call 416-640-1917 or 1-877-289-8525, followed by passcode 21311828 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 and six month periods ended June 30, 2009, and the notes thereto, and its Management Discussion and Analysis for the same periods, have been 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 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. Forward-Looking Statements 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 4,600 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: 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 ]