Earnings call transcript: Terago Q4 2024 shows steady growth

Terago, with a market capitalization of $2.19 billion, reported its financial results for the fourth quarter of 2024, showing modest revenue growth and improved cash flow. Despite a net loss, the company demonstrated operational efficiency and a strong position in the Canadian communications market. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, suggesting potential upside opportunity. The earnings call highlighted Terago’s strategic initiatives and future outlook, including potential spectrum flexibility and debt refinancing.

Key Takeaways

• Terago’s Q4 2024 revenue slightly increased to $6.57 million from $6.54 million in 2023.
• Full-year adjusted EBITDA grew by 17% to $4.02 million.
• Cash from operations for the full year surged significantly to $5 million from $523,000 in 2023.
• The company reduced its net loss for Q4 to $3.2 million, improving from $3.6 million in 2023.
• Terago is the largest millimeter wave spectrum owner in Canada, covering 400+ hubs.

Company Performance

Terago’s performance in Q4 2024 reflects steady growth and operational improvements. The company’s revenue for the quarter stood at $6.57 million, a slight increase from the previous year, contributing to an impressive year-over-year revenue growth of 12.82%. Trading at a P/E ratio of 5.43, significantly below industry averages, the stock presents an interesting value proposition. This growth is consistent with its strategic focus on the mid-market and lower enterprise sectors within the Canadian communications industry. Terago’s unique position as a major millimeter wave spectrum owner allows it to target underserved small and medium-sized business markets effectively. For detailed analysis and additional insights, check out the comprehensive Pro Research Report available on InvestingPro.

Financial Highlights

• Revenue: $6.57 million in Q4 2024, up from $6.54 million in Q4 2023.
• Full Year Revenue: $26.16 million for 2024.
• Adjusted EBITDA: $1.2 million in Q4, up from $1.19 million in 2023.
• Full Year Adjusted EBITDA: $4.02 million, a 17% increase from 2023.
• Net Loss Q4: Improved to $3.2 million from $3.6 million in 2023.
• Cash from Operations: $1.6 million in Q4, up from $1.2 million in 2023.

Outlook & Guidance

Looking ahead, Terago is optimistic about its future prospects, supported by its strong financial health score of 2.93 (rated as GOOD by InvestingPro) and robust current ratio of 2.54. The company anticipates a decision on the ICED spectrum in 2025 and is preparing for a potential spectrum auction within the next 12 months. With an Altman Z-Score of 10.34 indicating strong financial stability, Terago is well-positioned to refinance existing debt and expand its sales pipeline in connectivity and managed services.

Executive Commentary

Daniel Businich, CEO of Terago, emphasized the company’s role in driving competition and innovation in the Canadian communications landscape. He noted, "Terrigo is a critical player in the Canadian communications landscape, driving competition, innovation, investments." CFO Raj Sapra highlighted the company’s progress and hinted at upcoming announcements, indicating a positive outlook for future developments.

Risks and Challenges

• Regulatory changes: Potential changes in spectrum allocation could affect Terago’s operations.
• Market competition: Increased competition from larger telecommunications companies could pressure margins.
• Economic conditions: Broader economic uncertainties may impact customer spending and growth.
• Technology shifts: Rapid technological advancements could require additional investments in infrastructure.
• Debt refinancing: Successful refinancing of debt is crucial for maintaining financial stability.

Terago’s Q4 2024 earnings call highlighted its strategic initiatives and competitive strengths. The company remains focused on leveraging its spectrum assets and expanding its market presence while navigating potential risks and challenges in the evolving communications landscape.

Full transcript - Trimantium Growthops Ltd (TGO) Q4 2024:

Conference Operator: Good morning, ladies and gentlemen. Welcome to Terago’s Fourth Quarter twenty twenty four and Annual twenty twenty four Financial Results Conference Call. Currently, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session with prequalified analysts on the call and instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press followed by 0 for operator assistance at any time.

I would like to remind everyone that this conference call is being recorded. Terrigo 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 2024 annual information form, which is available on www.sedarplus.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 Terrigo uses certain non GAAP financial measures to arrive at adjusted results to assess its business and to measure overall performance.

Terrigo 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 Terrigo’s Chief Executive Officer, Daniel Businich. Sir, please proceed.

Daniel Businich, Chief Executive Officer, Terago: Good morning, everyone, and welcome to our fourth quarter and full year twenty twenty four earnings call. Today, we are pleased to share how we are further accelerating our value creation strategy. Looking back at 2024, we continue to see a clear affirmation that Terrigo is delivering on our Smart Growth strategy and operational enhancements. We are seeing better gross margins, reductions in operating expenditures, superior deal level economics and a more efficient approach to capital expenditures, specifically a 16.9% rise in adjusted EBITDA, 18% reduction in customer churn, a 5.2% growth in average revenue per account, $4,500,000 increase in cash flows from operations, all of this by spending also $1,500,000 less in CapEx as we continue to focus growth on existing assets. Cerrogo is a critical player in the Canadian communications landscape, driving competition, innovation, investments.

We are uniquely focused on mid market and lower enterprise sized businesses, leveraging our national carrier grade wireless and fiber networks. In addition to this, Terrigo owns 91% of all the millimeter wave spectrum, and we leverage it across 400 plus hubs. Those 400 plus hubs cover 9,600,000,000 megahertz population in 15 of the largest metropolitan communities, which have a population greater than 26,000,000 and we passed by 11,000,000 homes. Plus, we have 70 network to network interconnections with all the major carriers. Truly, there was really no one else like Terago in Canada.

Businesses depend on Terago’s premium white glove service. Our agility, responsiveness combined with our highly reliable, redundant and secure connectivity network. Being the largest millimeter wave spectrum owners, Terago continues to work closely with ICED to continue to drive competition, investments and innovation. We have been working with ICED to ensure our spectrum licenses continue to be renewed and currently responding to ICED’s latest consultation that it is proposing repurposing the lower 26 gigahertz band, previously known as the 24 gigahertz, for flexible use. A flex use decision would mean that millimeter wave spectrum can be used for both fixed and mobile.

Today, it’s only allowed for fixed use. As an example, other countries that have previously deemed millimeter wave for flex use are significantly leveraging it to grow residential and business revenues as it’s quick to install, no construction costs, higher speeds and higher performance. This opens up a huge market potential for Terago as well as for Canada. We have many exciting initiatives on the go. So with that said, I will turn it over to our CFO, Raj Sapra.

Raj? Thanks, Dan. Welcome, everyone.

Raj Sapra, Chief Financial Officer, Terago: Turning to Slide four of our financial results presentation for a look at our KPIs. Our average revenue per customer or ARPA for our connectivity business was $12.12 dollars in Q4 of twenty twenty four, a 4.1% increase compared to $11.64 dollars for the same period in 2023. ARPA levels continue to improve as a result of smart profitable growth coupled with changes in customer base and our product mix. Our churn was 0.8% compared to 0.9% for the same period last year. Customer churn continues to reduce due to continued execution of the company’s strategy to increase customer engagement focus on mid market and large scale customers, as well as implementing new strategies for customer renewals and retention.

Turning to Slide five to go through our broader Q4 twenty twenty four and 2024 financial highlights. Total revenue for Q4 twenty twenty four was $6,570,000 as compared to $6,540,000 from same period in 2023. Total revenues for for fiscal twenty twenty four was $26,160,000 as compared to twenty six point zero five million dollars The marginal increase in revenue is a result of increase in sales bookings and lower customer churn as compared to the same periods in 2023. At the end of twenty twenty four, our backlog was approximately $112,000 monthly recurring revenue as compared to $65,000 at the end of twenty twenty three, which is a massive improvement and this backlog will fuel our revenues for 2025. Adjusted EBITDA was $1,201,000 in Q4 twenty twenty four as compared to $1,190,000 from the same period in 2023.

As Dan mentioned, our adjusted EBITDA at the end of twenty twenty four saw a rise of approximately 17% and was $4,016,000 as compared to $3,425,000 from the same period in 2023. The company continues to strive for profitable growth and driving efficiencies in the business and managing our cost base. Net loss for Q4 twenty twenty four was $3,200,000 compared to a net loss of $3,600,000 for the same period in 2023. Net loss for 2024 was $13,200,000 as compared to a net loss of $13,100,000 for the same period in 2023. Turning now to Slide six, turning to the balance sheet, we ended the fourth quarter of twenty twenty four with $4,400,000 in cash and cash equivalents and short term investments.

In the fourth quarter of twenty twenty four, we generated $1,600,000 in cash from operations for the business as compared to $1,200,000 of cash from operations in the same period in 2023. In the fiscal twenty twenty four, we generated $5,000,000 in cash from operations for the business as compared to $523,000 in the same period in 2023, which is a massive improvement and goes to show that management’s really focused on running the business optimally and efficiently. Regarding our current debt facility,

Daniel Businich, Chief Executive Officer, Terago: we are confident in securing a refinancing solution, positioning the company for sustained growth and success, so stay tuned. With that said, I would like to turn the call back over to Dan. Dan? Thanks, Raj. Our comprehensive strategy is enhancing value for our clients, employees and shareholders.

Terrigo is uniquely positioned to drive innovation and increase investments in our next generation offerings for businesses. That wraps up the prepared remarks for us today. And now we can open up the call for questions. So operator, back to you.

Conference Operator: Thank you. Ladies and gentlemen, the floor is now open for questions. And your first question this morning is

David, Analyst: A couple of questions. So just start off with the iCED news that you talked about previously. Any idea when iCED will actually make a final decision on this lower 26 or which includes the 24 gig spectrum as to whether they will allow it to be used for mobile use or not?

Daniel Businich, Chief Executive Officer, Terago: Yes. Good morning, David. So I’ll take that question. So from an ICED perspective, so they put out this consultation earlier this month in March and we have all of us have sixty days to respond and then there is a short thirty days after that to respond to the responses. So that takes you into June of this year.

And then it’s hard to predict in terms of how long ISED will take to make that decision. But it could be as early as three months or potentially up to six months. But I see a decision happening in 2025. And that’s for a couple of reasons. One is Canada is way behind the other countries.

We’re still stuck in paperwork here, whereas The U. S, Europe and Asia have already deemed these frequencies as flex used as five gs, three gs PP standard and they are fully leveraging that to improve productivity, competition and everything else. So Canada definitely is behind and needs to pick up the pace. At the same time, moving to an auction, which could be twelve months from the decision, that too obviously brings revenue to Canada as well. So multiple benefits for ICED to try and accelerate and get this out the door sooner rather than later.

David, Analyst: Okay. So just moving on then to the debt, just wondering how that’s going in terms of your discussions or negotiations on the renewing and restructuring of debt?

Raj Sapra, Chief Financial Officer, Terago: We continue to make progress there. And I think we would have some announcements coming up, but we are confident that this would be refinanced and resolved well before the maturity date of the debt.

David, Analyst: Okay. So something maybe announced between now and when you report your next quarter, would that be reasonable?

Raj Sapra, Chief Financial Officer, Terago: I mean, you can say yes, yes.

David, Analyst: Okay, great. And then just on the sales pipeline, I know you gave the MRR, but I was wondering if you can give us any other metrics or just kind of outlook on the sales pipeline, just getting an idea on the potential for increased growth on the connectivity side? Thank you.

Daniel Businich, Chief Executive Officer, Terago: Yes. So our pipeline now compared to previous is growing significantly because we have been as you can see on the ARPA that have been going up the customer segment and multi site. So the environment now is pretty ripe out there where our big giant telcos have been doing significant reductions. And they’ve always struggled to provide great service for the, call it, the SMB market. And now even so, it’s even more tough for them to deliver that type of service.

So that pipeline has been growing for us from a connectivity, managed services, security perspective. In addition to that, on our five gs private wireless networks, that pipeline is also significantly growing as Canada continues to lag in productivity compared to the other top 38 economically developed countries. And with everything going on with the trade wars and so forth, it’s even putting more pressure on Canada to figure out ways to be more productive. So we have our pipeline to help those companies to really improve their productivity, automations and efficiencies so that they can be more competitive not only domestically, but in international markets as well.

David, Analyst: Okay. Okay. All right. Thanks, guys.

Daniel Businich, Chief Executive Officer, Terago: Perfect. Thank you, David.

Raj Sapra, Chief Financial Officer, Terago: Thank you.

Conference Operator: Thank you. And at this time, this concludes our question and answer session. I’d now like to turn the call back over to Mr. Fusinik for closing remarks.

Daniel Businich, Chief Executive Officer, Terago: 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 also a huge thank you to Terrego and all our employees for doing an outstanding job. So we look forward to providing an update on our progress on our next quarterly earnings call. Operator?

Conference Operator: Thank you for joining us today for Terago’s fourth quarter twenty twenty four and annual twenty twenty four earnings call. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.