TeraGo Inc. (TGO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to TeraGo's Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded. TeraGo would like to remind listeners that the company's remarks and answers to your questions today may contain forward-looking statements that are based upon management's current expectations. All such statements are made pursuant to the safe harbor provisions of and are intended to be forward-looking statements under applicable Canadian securities legislation. When relying on forward-looking statements to make decisions with respect to the company you should carefully consider the risks set forth in the Risk Factors section in the 2023 annual MD&A, which is available on www.sedar.com, and also consider other uncertainties and potential events. Except as may be required by Canadian securities laws, the company does not undertake any obligation to update any forward-looking statement as a result of new information. We would also like to remind listeners that TeraGo uses certain non-GAAP financial measures to arrive at adjusted results to assess its business and to measure overall performance. TeraGo believes that these financial measures provide readers with a better understanding of how management views the company's overall performance. I will now turn the conference over to Terago's Chief Executive Officer, Daniel Vucinic. Sir, please proceed.

Good morning, everyone, and welcome to our second quarter 2024 earnings call. Today, we are pleased to share how we are further accelerating our value creation strategy. This marks my first 4 quarters of my tenure as CEO. Revenue gross margin continued to increase, combined with optimized operating expenses, driving adjusted EBITDA growth. Our smart growth strategy includes a disciplined approach to capital expenditure, substantially improving profitability. The improvements during these 4 quarters compared to the prior 4 quarters have resulted in increased cumulative adjusted EBITDA by $706,000, cumulative positive cash flow generated from operations of $4.2 million and decreased use of debt facility by $7.6 million. From a current operating metrics perspective, our sales pipeline and sales bookings are starting to grow. Churn bookings are significantly lower as a result of our churn strategy initiatives around client engagement, value creation, and proactive contract renewals. In addition to the strong financials reported, ISED's announcement in May 2024 ensures TeraGo retains and renews its millimeter wave spectrum licenses. This decision provides certainty and clarity on our licenses, allowing TeraGo to continue to drive competition, innovation, and increased investments in its next-generation wireless connectivity offerings for Canadian businesses. Our comprehensive strategy is enhancing value for our clients, employees and shareholders, delivering exceptional results. As we move forward, our primary focus will be on accelerating revenue growth. As Canadian businesses demand and alternative managed service provider who focuses on customer experience, carrier diversity and being agile and nimble. TeraGo's revived narrative is getting positive reception from the investor community as the business progresses. Now I'm going to pass over to our CFO, Raj Sapra.

Thank you, Dan. Good morning, everyone. Turning to Slide 4 of our Q2 2024 financial results presentation, which is available on our website. for a look at our key performance indicators for the second quarter of 2024. Our average revenue per customer, or ARPU, as Dan said, for our connectivity business was $1,200 in Q2 2024, an 8.7% increase compared to $1,104 for the same period in 2023. ARPU levels continue to improve as a result of smart profitable growth, coupled with changes in customer base and product mix. Our churn was 1% compared to 1.2% for the same period last year. Customer churn continues to reduce due to our continuing execution of the company's strategy to focus on mid-market and large-scale customers as well as implementing new strategies for customer renewals and retention. Turning to Slide 5 to go through our broader Q2 2024 financial highlights. Total revenue for the quarter was $6.6 million as compared to $6.5 million from the same period in 2023. The increase in revenue is a result of increase in sales bookings and lower customer churn as compared to the same period in 2023. Adjusted EBITDA was $0.9 million in the second quarter, an 88% increase compared to $0.5 million from the same period in 2023. The company continues to strive for profitable growth and driving efficiencies in the business. Since the beginning of Q3 of last year, as a result of these initiatives, the company has increased the cumulative adjusted EBITDA by $706,000 as compared to the 4 quarters prior to that period. Net loss for Q2 2024 was $3.2 million, a 25% decrease compared to a net loss of $4 million for the same period in 2023. The company's efforts over the past 4 quarters to optimize its cost structure by reducing costs and operating the business efficiently has resulted in lower salary and operating expenses, with a partial offset of higher interest costs on the debt facility for the second quarter of 2024 as compared to the second quarter of last year. Turning now to Slide 6 to the balance sheet. We ended the second quarter of 2024 with $3.6 million in cash and cash equivalents and short-term investments. In the second quarter of 2024, we generated $0.8 million or $800,000 in cash flow from operations for the business as compared to $1.2 million of cash outflow in the same period in 2023. Since the beginning of Q3 of last year, with a focus on managing the operations effectively, the company has generated a cumulative increase in cash flow from business operations of $4.2 million as compared to the 4 quarters prior to that period. With that said, I would like to turn the call back over to Dan. Dan?

Thanks, Raj. Our value creation strategy continues to build significant momentum in the business combined with ISED's spectrum decisions uniquely positions TeraGo to drive innovation and increase investments in its next-generation offerings for our business. That wraps up the prepared remarks for us today, and we can now open up the call for questions. Operator, back to you.

[Operator Instructions] We have reached the end of the question-and-answer session, and I will now turn the call over to Daniel for any closing remarks.

Thanks again, everyone, for joining us on our call today. I'd like to thank our customers and shareholders who continue to support the company. and would also like to thank everyone at TeraGo who continues to do an outstanding job. We look forward to providing an update on our progress on our next quarterly earnings call. Operator?

Thank you. This does conclude today's conference, and you may disconnect your lines at this time. Thank you for your participation.