Earnings call transcript: Terago’s Q2 2025 results show increased net loss

Terago Inc. (Market cap: $3.5 billion) reported its second-quarter 2025 financial results, revealing a net loss of $4.2 million, an increase from the previous year’s $3.2 million. The company’s revenue fell to $6.34 million from $6.58 million in Q2 2024. According to InvestingPro data, the company has not been profitable over the last twelve months. Despite the challenging financial performance, Terago’s stock remained stable, closing at $1.09, unchanged from its previous close.

Key Takeaways

• Revenue decreased to $6.34 million, down from $6.58 million in the previous year.
• Net loss increased to $4.2 million, compared to $3.2 million last year.
• Stock price remained stable at $1.09 following the earnings announcement.
• Monthly recurring revenue backlog reached $93,000.
• Strategic focus on larger SME clients with multi-site locations.

Company Performance

Terago’s performance in the second quarter of 2025 reflected some challenges, with a notable decline in both revenue and adjusted EBITDA. The company reported a total revenue of $6.34 million, a decrease from $6.58 million in the same quarter last year, contributing to a -2.14% revenue decline over the last twelve months. Adjusted EBITDA also saw a slight decline to $903,000 from $941,000. InvestingPro analysis indicates the company is currently trading below its Fair Value. Despite these setbacks, Terago maintained its focus on strategic initiatives aimed at long-term growth, such as targeting larger SME clients and enhancing its network infrastructure.

Financial Highlights

• Revenue: $6.34 million, down from $6.58 million in Q2 2024.
• Adjusted EBITDA: $903,000, a 4% decrease from $941,000.
• Net Loss: $4.2 million, increased from $3.2 million the previous year.
• Cash and Equivalents: $1.9 million.
• Monthly Recurring Revenue Backlog: $93,000.

Outlook & Guidance

Terago is actively evaluating financing alternatives as its debt matures at the end of Q3 2024. With a debt-to-equity ratio of 0.23 and a current ratio of 2.13, the company expressed confidence in meeting its obligations and highlighted a growing sales pipeline. Management is focusing on profitable customer segments and exploring opportunities in the Canadian SMB market, which accounts for a significant portion of employment and GDP. For deeper insights into Terago’s financial health and detailed metrics, investors can access comprehensive analysis through InvestingPro’s exclusive research reports.

Executive Commentary

• "Terago is a critical player in the Canadian telecom landscape," stated Daniel Businich, CEO, emphasizing the company’s strategic importance.
• Raj Sabra, CFO, assured stakeholders, "We continue to manage our expenses properly," highlighting the company’s financial discipline.
• Sabra further added, "We remain confident in the outcome that supports both our short-term obligations and long-term growth plans."

Risks and Challenges

• Economic uncertainty leading to longer sales cycles.
• Potential refinancing challenges as debt matures in Q3 2024.
• Increased competition in the telecom sector.
• Dependence on the Canadian market, which could be affected by macroeconomic factors.
• Execution risks associated with targeting larger SME clients.

Q&A

During the Q&A session, analysts sought clarity on the company’s churn measurement, which is based on customer accounts rather than revenue dollars. Questions also focused on the ongoing discussions about debt refinancing and the impact of economic uncertainty on sales cycles. Terago’s management reassured analysts of their proactive approach to addressing these challenges.

Full transcript - TeraGo Inc. (TGO) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen. Welcome to Terago’s Second Quarter twenty twenty five 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. I would like to remind everyone that this conference call is being recorded.

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

Daniel Businich, Chief Executive Officer, Terago: Good morning, everyone, and welcome to our second quarter twenty twenty five earnings call. Today, we are pleased to share how we are further accelerating our value creation strategy. In the second quarter, our team continues to have a disciplined focus on key operational and financial metrics, including gross margin, average revenue per account, ARPA, revenue backlog and cost discipline. We are seeing better gross margins, reductions in operating expenditures, superior deal level economics and a more efficient approach to capital investments. Revenue reflected a strategic decision to allow unprofitable customers to churn as part of our disciplined approach to profitability and long term value creation.

At the same time, Terrego’s focus is on the larger end of the SME clients that have multi site locations, which is validated by our continued growth in ARPA. But those larger client deals typically have a longer sales cycle. And in today’s economic uncertainty environment, those larger deals are taking a little longer to close. However, we are encouraged by our growing sales pipeline. Terago is a critical player in the Canadian telecom landscape.

We are uniquely positioned by owning 91% of the millimeter wave spectrum. We own our own national backbone network with 400 plus wireless hubs, covering 26,000,000 population of Canada and passing 11,000,000 homes. There really is no one else like us. Being the largest millimeter wave spectrum owners, Tergo continues to work closely with ICED to drive competition, investment and innovation. Millimeter wave spectrum is becoming increasingly important as demand for high capacity, low latency connectivity continues to rise.

ISID’s recent millimeter wave consultation is proposing to repurpose the lower 26 gigahertz, previously called 24 gigahertz for flexible use. A flexible use decision would mean that millimeter wave spectrum can be used for both mobility business as well as the fixed wireless business. As per ISET, spectrum is a critical input for wireless service providers. Flexible use millimeter wave spectrum will enable providers to increase network capacity, address growing traffic demands and enabling new applications such as ultra reliable low latency services and advanced automations across industries. Canada is at a pivotal moment where productivity continues to lag behind other similarly economically developed countries.

And the current trade war certainly adds significant pressure to this. Canada’s SMB market is a critical economic engine for Canada as accounts for 88% of the employment in Canada and just over 50% of the GDP. Millimeter wave spectrum in a five gs private wireless network offers significant opportunity for industry verticals like manufacturing to automate operations and leverage robotics. This requires high levels of bandwidth, high network performance, ultra low latency and a robust and secure network. We are encouraged by the progress ICESat has made in the second quarter, accepting all respondents’ remarks to its millimeter wave consultation, and we look forward

Raj Sabra, Chief Financial Officer, Terago: to their decision on millimeter wave spectrum, including next steps towards a future auction. With that said, I’ll turn it over to our CFO, Raj Sabra. Raj? Thanks, Dan. Good morning, everyone.

Turning to Slide four of our Q2 twenty twenty five financial results presentation for a look at our KPIs. Our average revenue per customer account or ARPA for our connectivity business was $12.28 dollars in Q2 twenty twenty five, a 2.3% increase compared to $1,200 for the same period in 2024. ARPA levels continue to improve as a result of changes in customer base and product mix. Our churn was 0.9% compared to 1% for the same period last year. The company continues to review, modify and improve its customer experience practices to increase customer engagement, focus on mid market and large scale customers, as well as implementing new strategies for customer renewals and retentions.

Turning to Slide five to go through our broader Q2 twenty twenty five financial highlights. Total revenues for Q2 twenty twenty five was $6,340,000 as compared to $6,580,000 from same period in 2024. The decrease, as Dan alluded earlier, was primarily driven by increased churn stemming from our continued initiatives to optimize the customer base by discontinuing service to unprofitable accounts. This was partially offset by an increase in revenue from new customers in the current period. As noted in our MD and A, the company has a strong backlog of approximately $93,000 in monthly recurring revenue or MRR, which equates to an annual recurring revenue of $1,100,000 the majority of which we expect to be provisioned within the current fiscal year contributing positively to the company’s revenue going forward.

Adjusted EBITDA was $903,000 in Q2 twenty twenty five, a decrease of 4% compared to $941,000 from the same period in 2024. The company continues to strive for profitable revenue and driving efficiencies in the business. Net loss for Q2 twenty twenty five of $4,200,000 compared to a net loss of $3,200,000 for the same period in 2024. Turning now to Slide six, turning to the balance sheet, we ended the 2025 with $1,900,000 in cash and cash equivalents and short term investments. The company received additional US2 million dollars in April as a result of the second amendment to the credit agreement, was announced on March 31.

In the 2025, we generated approximately $1,270,000 in cash from operations, comprising of approximately $640,000 from business operations and $630,000 from positive working capital movements as compared to in Q2 twenty twenty four, all of $800,000 of cash from operations was generated through business operations. Subsequent to the quarter end, as we noted in our MD and A and the press release in the MD and A and the financial statements, the company finalized the sale and leaseback of its nine telecommunications towers for expected gross proceeds of $1,700,000 Three of the tower sites closed on July 31, with the remaining six sites are expected to close by the August. As part of the transaction, the company entered into a tower space license agreement with a ten year term, allowing continued access to the tower sites for the operation of its telecommunications equipment and service our customers. With the upcoming maturity of our debt, we are actively evaluating a range of financing alternatives to ensure we meet our obligations and position the business for long term growth. We believe our strong fundamentals, disciplined execution and the strategic value of our Spectrum Holdings give us the flexibility to pursue the path that delivers the best outcome for our stakeholders.

We are engaged in constructive discussions and remain confident in our ability to execute. With that said, I would like to turn the call back over to Dan. Dan?

Daniel Businich, Chief Executive Officer, Terago: Thanks, Raj. Our comprehensive strategy is enhancing value for our clients, employees and shareholders. Terago is uniquely positioned to drive innovation and increase investments in its next generation offerings for businesses. That wraps up the prepared remarks for us today, and we can now open up the call for questions. Operator, back to you.

Conference Operator: Certainly. Ladies and gentlemen, the floor is now open for questions. And the first question this morning is coming from David McFadden from Cormark Securities. David, your line is live. Please go ahead.

David McFadden, Analyst, Cormark Securities: Okay. Thank you. Yes, a couple of questions. So you said that the churn was up, but when you look at the presentation, churn was actually down. So yes, I was just wondering if you could provide some additional color on that because you’re saying churn was up and that caused revenue to decline, but churn looks like it was actually down.

Daniel Businich, Chief Executive Officer, Terago: Yes. So we measure churn by customer accounts opposed to dollars of churn. So this is where you’ve seen some of that churn in dollars decrease the revenue, but from a number of customers and so forth is what we report on. So this is where you’re seeing that little bit of difference between the two.

Raj Sabra, Chief Financial Officer, Terago: Yes. And then the other thing is, as we noted in our remarks, any unprofitable customers, when their term is ending, we are obviously looking to apply strategies in terms of price increases and stuff. And if they we basically, if they don’t want to continue, it’s costing us money. So we have let that churn happen versus in the prior year and the prior periods, there were some early termination fees as well as of the revenue as well. So but the churn is specifically on your customer churn, not

Daniel Businich, Chief Executive Officer, Terago: the dollars. Number of accounts. Yes.

David McFadden, Analyst, Cormark Securities: Okay. And then but if you’re turning away unprofitable customers, wouldn’t that be positive for EBITDA?

Raj Sabra, Chief Financial Officer, Terago: Well, it is. If you look at the revenue from last year in terms of dollars, how much it is down versus there’s a minimal impact on the EBITDA compared to the last year. There is some impact, but if you compare, I think the revenue is down 3.5% from a total dollars perspective, but the only impact on the EBITDA is like 37,000 We continue to manage our expenses properly. And some customers with churn were very low profitability as well. So and we consider them as unprofitable to run the business.

David McFadden, Analyst, Cormark Securities: Okay. And so you talked about it being longer to close some new sales. Is that just a reflection of the economy? Or are there other factors at play?

Daniel Businich, Chief Executive Officer, Terago: A combination. So we continue to go up customer segment and really work with clients and larger deals, larger opportunities. And those generally have a longer sales cycle in general. But yes, the uncertainty in the economy has not made those deals go away, but they are taking a little bit longer to close or some of them on pause and so forth, because I think everyone’s trying to understand what impact this economy may or may not have on their industry. So before they make some additional investments, they’re just trying to really understand their impact to their business.

So but we continue to work with those clients and feel good about the growing pipeline and that those bigger deals will come.

David McFadden, Analyst, Cormark Securities: Okay. And then just so when you reported Q1, you’re pretty confident on refinancing the debt. So now you’re reporting Q2. So do you expect to have a resolution here before September? I mean, we don’t have a lot of time, right?

Raj Sabra, Chief Financial Officer, Terago: Yes. Look, I mean, our objective is to address the maturity in a timely manner in a way that optimizes our capital structure. We’ll update the market when it’s appropriate. But what I can say is we remain confident in the outcome that supports both our short term obligations and long term growth plans. We are in consultation, we are looking at a variety of financing alternatives and we feel very good about it.

David McFadden, Analyst, Cormark Securities: Okay. So when does the current debt mature again?

Raj Sabra, Chief Financial Officer, Terago: Sorry, can you repeat that? 09/29/2020 Yes, at ’20 the end of Q3, yes.

David McFadden, Analyst, Cormark Securities: Okay. All right. That’s it for me. Thanks, guys.

Raj Sabra, Chief Financial Officer, Terago: Okay. Thank you.

Conference Operator: Thank you. There are no further questions in queue at this time, and this does conclude our question and answer session. I would now like to turn the call back over to Mr. Vysenik for his closing remarks.

Daniel Businich, Chief Executive Officer, Terago: Thanks again, everyone, for joining our call today. I’d like to thank our customers, shareholders who continue to support the company and also a huge thank you to Terago who continue to do an outstanding job, and we look forward to providing updates on our progress on our next earnings call. Operator?

Conference Operator: Thank you for joining today’s Terago’s second quarter twenty twenty five earnings call. You may now disconnect.

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