TeraGo Inc. ($TGO)

Good morning, ladies and gentlemen. Welcome to TeraGo's Fourth Quarter 2025 and Annual 2025 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 2025 Annual Information Form, which is available on www.sedarplus.ca and also consider other uncertainties and potential events. Except as may be required by Canadian securities law, the company does not undertake any obligation to update any forward-looking statements 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.

Thank you, and good morning, everyone, and welcome to our fourth quarter and full year 2025 earnings call. Today, I am here with our VP of Finance, Parveen Mithra, as our CFO, Raj Sapra, is away on personal matters. Now looking back at 2025, our team continues to have a disciplined focus on our customers, operational efficiency and positioning TeraGo to capitalize on rising demand as AI is really reshaping business Internet requirements in terms of increased quality bandwidth, secondary connections and lower latency. In Q4, we strengthened our foundation through financing initiatives, including new term debt and equity capital that enhanced our financial flexibility. We have brought in additional new institutional investors who are confident in our business and recognize the significant value in our assets. We continue to focus on customer differentiation as reliability, visibility being highly responsive and agile, providing full end-to-end managed business continuity accountability becomes super paramount. Our proof points continue to show this with our lower churn and higher average revenue per account, ARPA. In addition to this, we recently announced the appointment of May Daou to the position of Chief Customer Officer, who is accountable to build our customer-first culture, ensuring we serve, maintain and grow with our clients. We maintained disciplined investment in fixed wireless and private 5G and recently launched additional fixed wireless access broadband products to meet growing market demand. As for revenue, macroeconomic pressures continue to extend procurement cycles, which are delaying contract signings. That, combined with our customer segmentation strategy of exiting lower margin and unprofitable customers has impacted revenue in 2025. In parallel, though, we continue to have cost discipline mitigating adjusted EBITDA impact. TeraGo is a critical player in the Canadian communications landscape. We are uniquely positioned by owning 91% of the millimeter wave spectrum, our own national backbone network with 400-plus wireless hubs, covering Canada's 26 million population and passing over 11 million homes. There's really no one else like us. Very recent reports showing Canada's productivity gap with the U.S. continues to steadily widen with relative productivity tumbling by 26% since the turn of the millennium. Canada is at a pivotal moment where productivity needs to dramatically improve, and the most effective approach is to leverage technology. Industry verticals like manufacturing can leverage 5G millimeter wave private networks high bandwidth, performance and ultra-low latency to connect wirelessly to machines, robots through IoT and then feeding all that data into AI, which is very exciting. ISED's recent millimeter wave consultation is proposing to repurpose the lower 26 gigahertz band, which was previously called the 24 gigahertz, for flexible use. A flex use decision would mean that millimeter wave spectrum could be used both for mobile and fixed wireless services as today, it's only for fixed wireless services. Service providers in the U.S. are increasingly leveraging millimeter wave technology to enhance mobile connectivity in densely populated areas such as stadiums, concert arenas and urban centers. The extremely high capacity and ultra-low latency of millimeter wave spectrum makes it ideal for supporting large crowds where conventional mid-band or low-band networks often experience congestion. We are encouraged by the progress ISED made in 2025 5G millimeter wave consultation on the 26 gigahertz and 38 gigahertz bands. With that said, I will turn it over to our VP of Finance. Parveen?

Thanks, Dan. Let's move to Slide 4 of our Q4 and fiscal year 2025 financial results presentation for an overview of our KPIs. Our average revenue per customer, or ARPA, in our Connectivity business increased by 4.4% to $1,265 in Q4 2025 compared to $1,212 for the same prior year period. The continued improvement in ARPA levels is driven by favorable shifts in our customer base and product mix. Our churn was 0.7% compared to 0.8% for the same period last year. Customer churn continues to improve, reflecting our ongoing execution of our strategy to enhance customer engagement with a focus on mid-market and large-scale customers as well as implementation of enhanced renewal and retention programs. Now turning to Slide 5 to go through our broader Q4 and fiscal year 2025 financial highlights. Total revenue of Q4 2025 was $6.2 million as compared to $6.57 million for the same prior year period. For the fiscal year 2025, total revenue was $25.36 million, down from $26.16 million in the same prior fiscal year. The decrease was primarily driven by a combination of decreased bookings, delays in installations associated with multi-site deployments and a reduction in onetime revenues. In addition, management continued initiatives to optimize the customer base by discontinuing service for unprofitable accounts. The overall decrease was partially offset by revenue from new customers in the current period. Adjusted EBITDA was $885,000 in Q4 2025 compared to $1.2 million for the same prior year period. For the fiscal year 2025, adjusted EBITDA was $3.79 million compared to $4.02 million in the same prior year fiscal. The decrease reflects the early mentioned revenue pressures, partially offset by disciplined cost management and continued operational efficiencies across the business. Net loss for Q4 2025 was $4.9 million compared to a net loss of $3.2 million in the same prior year period. For the fiscal 2025, net loss was $16.8 million compared to $13.3 million in the same prior year fiscal. The increase in the net loss was primarily driven by higher finance costs associated with the company's increased debt following the financing completed during the year as well as noncash impacts, including the accounting adjustment related to the sale and leaseback transaction. While adjusted EBITDA declined year-over-year, the more moderate decrease to revenue reflects the company's ongoing focus on cost discipline and operational efficiency. Moving now to Slide 6. With respect to the balance sheet, the company ended the fourth quarter of 2025 with $12.6 million in cash and cash equivalents. In fiscal 2025, the company generated $2.9 million in cash from operations as compared to $5.0 million in the same prior year period. With that said, I would like to turn the call back to Dan.

Thanks, Parveen. Our client-centric strategy is enhancing value for our customers, and we remain focused on delivering long-term value for our shareholders. 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] And our first question will come from David McFadgen from Cormark.

So a couple of questions. So when you look at the ARPA is definitely trending in the right direction, churn is trending in the right direction. But yet the revenue is down. I know you guys have been churning off some unprofitable accounts. So I was just kind of wondering, do you have an idea of what quarter you think you might cycle through all of this and then revenue would be on an upward trajectory?

Yes, it's a great question. Thank you, David. So yes, we did have lower bookings, partly because of the macroeconomics that we talked about. And as you mentioned, the unprofitable customers. We also -- since we are also focusing on larger multi-site customers, some of those larger multi-site customers were taking longer to install mostly because, as you can imagine, different sites have different contract end dates with their incumbent carrier. So we have to kind of wait until those contracts are near expiration before installing. And then there's some onetime revenue impact in there. But going forward, we are seeing momentum in sales funnel, and we are seeing more clients engaging with us. But it does take a little bit of time to not only get those bookings and install that revenue to really start billing. So by the time you kind of put those two things together, to answer your question more directly, you probably see more of a potential revenue increase towards later this year.

Okay. And then I was wondering if you could give us an update on sort of the timing about when ISED is actually going to finally make a decision on whether the 24 gig spectrum will be reclassified for mobile use.

Yes. So as you're aware, ISED did put out the consultation in March and had remarks returned by the end of June. And part of their consultation is proposing exactly what you said, our 24 gigahertz and 38 gigahertz to be deemed for flexible use. I know that they are working diligently on the decision. Unofficially, they can't say exactly when that decision is going to come out, but we're sort of predicting unofficially, of course, that one year from when the consultation fully closed in June of last year brings it to kind of summer of this year. So we're cautiously optimistic that hopefully it comes out around this time or at least within this year. We do note that the Industry Minister is quite busy in today's environment. But again, we're optimistic that ISED will launch the decision this year and then the subsequent auction rules and timing as part of that decision.

At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Vucinic for closing remarks.

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

Thank you for joining us today for TeraGo's Fourth Quarter 2025 and Annual 2025 Earnings Call. You may now disconnect.