TeraGo Inc. (TGO) Earnings Call Transcript & Summary

Thanks, and good morning, everyone. Welcome to the earnings call for our third quarter of 2026. The third quarter gave us yet another stretch of disciplined execution, and it mirrors a strategy we have stuck with consistently across the past several quarters. We have intentionally concentrated TERAGO on mid-market enterprise customers, especially larger multi-location organizations that prize a high-touch managed service model. That concentration is evident in our results. Average revenue per account, ARPA, has kept climbing over the past couple of years as we bring in larger customers and expand our share of wallet among the existing customers we already serve. Profitability is trending the right way too. Our adjusted EBITDA is up compared to last year, and margins are widening — that shows the cost control we've instilled across the company. We're bringing larger customers online, and our sales pipeline is presenting bigger opportunities. What really distinguishes TERAGO for those customers is the responsiveness of our team. We pair fixed wireless services delivered over spectrum we own and license with access from third-party carriers, and our staff design solutions that are highly resilient and redundant — the kind enterprise clients rely on. Through this managed, white-glove model, clients get genuine carrier and technology diversity, and everything is supported by robust service level commitments along with round-the-clock availability of our Canadian technical specialists. On top of that, we've remained disciplined regarding the customers we take on. We continue to shift away from accounts with lower margins that aren't profitable and just don't match this profile, so that our capacity across the network, our resources, and our sales focus are directed toward customers offering the greatest value over the long term. How our business expands is shaped by that strategy. When multi-location customers are bigger, that translates into larger deployments across multiple sites, and while those take longer to install, they bring commitments spanning multiple years plus a steady stream of recurring revenue once service begins. Revenue in the near term mirrors that transition, including the accounts we decided to exit as well as when those deployments occur. In our view, that is the correct trade-off for a revenue base that is more durable and of higher quality. Now, on spectrum — a key pillar of our long-term strategy. TERAGO holds more millimeter wave spectrum than anyone else in Canada, with a nationwide portfolio that reaches the biggest metro areas across the country. The regulatory picture has become clear. ISED's framework is settled. The auction is set for January 2028 — only the date has moved. What counts more is what's taking shape in the market itself. Verizon's CEO, on that company's latest earnings call, described a technological breakthrough: they are putting their previously underused millimeter wave spectrum to work and have converted it into a competitive, differentiated edge. Over fixed wireless they now deliver fiber-like speeds, aimed first at multi-dwelling units. He added that this makes their network more efficient. That frees up C-band capacity. The network gains additional capacity and runway from it. Their spectrum positioning shifts considerably as a result. Qualcomm also recently shared how they are unlocking millimeter wave high capacity for non-terrestrial networks, aiming to bring satellite communications more tightly into mainstream mobile architecture. Supporting a persistent agentic AI experience matters a lot, and that experience is what's pushing uplink demand higher. It's the same high-capacity, secure connectivity focused on the metro that TERAGO has delivered to Canadian enterprises for years, and that's why we think millimeter wave is increasingly viewed as a strategic band. For TERAGO, this is significant. Beyond simply possessing the spectrum, we've got it fully built out and are actively delivering service to enterprise clients who depend on connectivity of that type. We think the worth of the position we occupy grows clearer as a larger share of the market comes to appreciate what millimeter wave is capable of. That brings me to the shift that lies before us and what it signifies for TERAGO. Being an incumbent licensee, TERAGO will convert its current fixed wireless spectrum into flexible use licenses under the framework set by ISED. Through that transition, our spectrum gains a stable, long-term foundation, the variety of applications it can serve is broadened, and the market opportunity ahead of us is thereby enlarged. The auction itself is also significant to us. Our view is that this creates a clear, market-based benchmark for what millimeter wave spectrum is worth, and we anticipate that it will draw additional carriers plus fresh investment into the millimeter wave ecosystem surrounding the spectrum we hold. It is flexible use licensing that gives that position its strategic character. It broadens the range of applications our spectrum can serve, among them mobility, private 5G networks, fixed satellite, and advanced fixed wireless access, which enlarges the addressable market. Looking ahead to 2027, our priorities are tightly focused. The first is to turn our pipeline of larger opportunities into signed business and get those customers into service rapidly, since doing so is what converts our strategy into recurring revenue. Next, we intend to continue expanding alongside mid-market enterprise clients—the segment where our service approach performs best—while operating with the identical cost rigor that has widened our margins. Also, we will get ready for our spectrum's shift to flexible use and the auction coming in early 2028, ensuring we are positioned to go after the opportunities that creates; having said that, I'll hand things over to Raj Sapra, our CFO. Raj?

Thanks, Dan. Good morning, everyone. As we review our financial results, let’s turn to slide four of the Q3 presentation for a look at our KPIs. Average revenue per customer, or ARPA, rose 4.6% to CAD 1,298 in Q3 2026, up from CAD 1,241 in the same period last year. That ongoing ARPA growth shows our continued emphasis on bringing in mid-market and larger enterprise customers, especially multi-location organizations, as Dan mentioned, while also growing wallet share among existing customers through our high-touch service model. Churn for the quarter came in slightly higher at 1.1%, versus 1% a year earlier, and remained flat at 1% across the first nine months of the year; we keep strengthening our customer experience programs and service delivery, with the goal of managing churn over time. Backlog MRR stood at CAD 71,131 on September 30, 2026, compared with CAD 95,832 a year ago. That decline reflects higher installation volumes as we keep bringing customers into service and turning backlog into recurring revenue. Now to slide five for our Q3 2026 financial highlights. Total revenue in Q3 2026 was CAD 6.2 million, compared with CAD 6.4 million in the same period last year. The drop stems mainly from the lingering effect of lower bookings in 2025 as they roll off in 2026, along with our continued work to optimize the customer base by exiting unprofitable accounts, which is reflected in the ARPA increase. Revenue from new customers partly offset those impacts. Adjusted EBITDA in Q3 2026 grew 3.9% to CAD 1.01 million, versus CAD 971,000 in the same period last year; for the first nine months, Adjusted EBITDA rose to CAD 3 million, or 3.1%. The gain came from lower operating expenses and sustained discipline in cost management and cost optimizations. Net loss in Q3 2026 was CAD 3.7 million, compared with a net loss of CAD 4.06 million in the same period last year, an improvement of roughly 9%. Year-to-date, net loss improved to CAD 10.7 million from CAD 11.9 million. On to slide six. Cash generated from operating activities during the quarter was CAD 1.7 million, up 49% from CAD 1.1 million in the same period last year. On the balance sheet, the company finished the third quarter of 2026 with CAD 5.1 million in cash and cash equivalents. With that, I’ll hand the call back to Dan. Dan?

Okay, thank you, Raj. Before we take questions from the line, there's one last point I want to leave with investors. What we're saying today is fairly straightforward. By concentrating on bigger enterprise customers with multiple locations and by building better-quality business that brings in durable recurring revenue, we end up with a sturdier base for profitable growth. The market is coming to appreciate more and more what millimeter wave is capable of. With flexible use licensing coming before the auction that is set to take place in early 2028, we think the worth of our spectrum, along with the network and the operating experience supporting it, will become clearer to see. Our customer strategy, our network and our spectrum all strengthen each other. We believe this will generate long-term value for our shareholders; that concludes the prepared remarks for today, and now we can take your questions. Operator?

Oh, excellent. Thank you. Yeah, just a few questions. Perhaps building on what you said regarding Qualcomm, I was under the impression they were still kind of trying it out and it hadn't yet been demonstrated that millimeter wave could be used for satellite to cell communication, though maybe I'm mistaken. Could you perhaps give a bit more detail about that?

Yeah. Qualcomm has put out information on its own, dating back to Mobile World Congress earlier this year and in later press releases too, that they've taken the millimeter wave spectrum and opened it up between non-terrestrial and terrestrial networks, and how it moves so the experience is seamless, tested at their facilities and laboratories, and they keep working on it to bring it toward more mainstream production; that piece isn't mainstream production yet, but that's where they've made those public announcements.

Okay, all right. So perhaps regarding the revenue line, in earlier quarters I believe you said you expected revenue to level off year over year during the back half of this year, and I just want to check whether that remains true.

Yes. As you can see over the last few quarters, revenue has been, let's say, fairly flat or stabilized, because as a monthly recurring revenue business, going from negative revenue previously and turning that around takes time to churn out those unprofitable customers and also to sign those enterprise customers, which take a bit longer; so those installs take a bit longer, but right now we feel we're kind of at that cusp of-

Yeah,

as we mentioned, we're turning that corner near the close of this year and heading into 2027. So revenue ought to rise as we move ahead.

Right, so looking at 2026, our bookings for the year to date are running well above where they were a year ago, and that gives us net bookings that are clearly positive. As deployment keeps going, our view is that in Q2 and Q3 we're sort of reaching the low point at current levels, and from there it will move onto an upward path. That's what we expect to see next. Yeah.

All right. Then perhaps regarding ARPA — clearly it keeps rising quarter over quarter and looks pretty strong. So I suppose the question is whether you'd expect that upward trend to carry on through the coming few quarters?