2013 Financial and Operational Highlights
-- Continued increase in annual revenue of
$51.4 millionin 2013, up 5% over 2012; -- Q4 2013 revenue of $12.9 millionincreased 3% over Q4 2012; -- EBITDA was $16.5 millionfor the full year 2013, compared to $15.3 millionin 2012, an increase of 8%. -- Q4 2013 EBITDA of $3.0 milliondeclined 23% from the same period in 2012, principally due to $1.3 millionrelated to a costs incurred for a departing executive and related recruiting expenses for a replacement, cost of services and costs related to the Vancouverdata centre purchase; -- Gross profit margin for the full year and Q4 2013 were 78.0% and 77.0% respectively, compared to 77.6% and 77.9% for the same periods in 2012; -- Net earnings for 2013 decreased 11% to $4.3 millioncompared to $4.9 millionin 2012; Net loss for Q4 2013 was $0.7 millioncompared to net earnings of $3.2 millionfor the same period in 2012. This was principally due to $1.3 millionrelated to costs incurred for a departing executive and related recruiting expenses for a replacement, cost of services and costs related to the Vancouverdata centre purchase in the Q4 2013, combined with an income tax recovery of $2.5 millionrecorded in Q4 2012; -- Basic and diluted earnings per share of $0.38and $0.36, respectively, for the full year compared to $0.43and $0.41, respectively, in 2012; Q4 2013 basic and diluted loss per share were $0.06and $0.06respectively, compared to $0.29and $0.27, respectively, for the same period in 2012; -- Ended the year with 6,453 net access customer locations in service compared to 6,575 at the end of 2012; -- Net access customer locations decreased by 80 in Q4 2013, compared to an increase of 73 of the same period in 2012, primarily due to increased competition in higher capacity services; -- Average revenue per access customer location ("ARPU") for the full year and Q4 2013 was $625and $621, respectively, compared to $622and $625, respectively, in 2012; -- Average monthly unit churn rate for 2013 and Q4 2013 increased to 1.28% and 1.50% respectively, compared to 1.05% and 0.86% for the same periods in 2012. This was primarily due to increased competition in higher capacity services and a large low ARPU multisite (41 sites) customer cancellation that occurred in Q4 2013. Excluding this cancellation, the churn rates for 2013 and Q4 2013 would have been approximately 1.23% and 1.28% respectively; -- Ended 2013 with $2.6 millionof cash, cash equivalents and short-term investments and access to the $19.6 millionundrawn portion of the Company's $41.8 millioncredit facilities; -- Data centre services generated $1.6 millionin revenue in 2013. The integration of Data Centers Canada ("DCC") with the company's core business is progressing as planned and data centre services will continue to contribute to the Company's growth.
2013 Key Developments
April 2013, TeraGosecured additional credit facilities with RBC of $27.0 millionon terms substantially consistent with the existing term debt. The total debt facility stands at $41.8 million, of which $19.6 millionremains undrawn. -- On May 31, 2013, the Company completed its share purchase transaction to acquire DCC which supports the strategy to offer complementary services. Purchase price adjustments resulted in final consideration paid of $9.1 million, net of cash acquired. -- As part of its strategy to expand its data centre services to major Canadian urban centres, on December 23, 2013, TeraGoacquired all the assets and assumed the lease of a 5,058 square feet data centre facility, with options to expand, in Vancouver, British Columbiathat will serve the greater Vancouverarea. The facility, which provides data centre solutions, including colocation and disaster recovery to businesses, enterprises, public sector and technology service providers. -- Michael Martin, Richard Brekka, Jim Sanger, Nicole Germanand Jim Nikopouloswere appointed to the Company's Board of Directors. -- TeraGo'sranking on the Branham Top 250 Canadian Technology Companies improved for the sixth consecutive year to 84th; it was ranked as one of the top 10 Canadian Wireless Solutions Companies for 2013; and was selected as one of Canada'stop employers for young people for 2013 by Mediacorp Canada Inc.for the second consecutive year.
Events subsequent to
TeraGo'sBoard of Directors appointed Stewart Lyons, President and CEO and a member of the Board of Directors effective January 16, 2014. Mr. Lyons replaces Charles Allen, who has served as Interim President and CEO since the November 2013departure of Bryan Boyd. -- Joe Prodanwas appointed Chief Financial Officer effective February 4, 2014. Bosco Chan, who served as Interim CFO since the May 2013departure of Scott Browne, will continue as Vice President, Finance. -- Ian Thorburnwas appointed Vice President, Legal effective January 13, 2014. The position has been vacant since Jim Nikopoulosleft the company in September 2013. -- In February 2014, the Company received notice that a new wireless entrant customer may be disconnecting their services during 2014. -- The Company announced that it has established a fibre-optic core in Western Canadathrough the acquisition of fibre facilities in downtown Vancouver, British Columbia. This fibre connects the Company's Vancouverdata centre facility with several buildings, ensuring secure broadband connectivity between customer locations and the data centre. Key Financial & Operational Highlights (All financial results are in thousands, except gross profit margin, earnings per share and operating metrics) Three months ended Year ended December 31 December 31 2013 2012 2013 2012 ------------------------------------------- Financial Revenue $ 12,909 $ 12,567 $ 51,426 $ 49,168Gross profit margin 77.0% 77.9% 78.0% 77.6% EBITDA(i) $ 3,043 $ 3,967 $ 16,506 $ 15,272Earnings (loss) from operations $ (327) $ 924 $ 4,174 $ 3,120Net earnings (loss) $ (734) $ 3,245 $ 4,309 $ 4,857Basic earnings (loss) per share $ (0.06) $ 0.29 $ 0.38 $ 0.43Diluted earnings (loss) per share $ (0.06) $ 0.27 $ 0.36 $ 0.41Operating Churn rate(i) 1.50% 0.86% 1.28% 1.05% Customer locations in service 6,453 6,575 6,453 6,575 ARPU(i) $ 621 $ 625 $ 625 $ 622Number of employees 191 189 191 189
(i) See Key Performance Indicators, Additional GAAP and Non-GAAP Measures below
Financial results for DCC are included from the date of acquisition,
The table below reconciles net earnings to EBITDA for the three months and year ended
(in thousands of dollars) Three months Year ended ended Dec 31 December 31 ------------------- ------------------ ------------------- ------------------ 2013 2012 2013 2012 --------- --------- --------- -------- Net earnings (loss) for the period
$ (734) $ 3,245 $ 4,309 $ 4,857Foreign exchange loss (gain) 34 11 63 (14) Finance costs 352 197 1,126 828 Finance income (5) (9) (36) (31) Income tax( recovery) expense 26 (2,520) (1,288) (2,520) --------- --------- --------- -------- Earnings (loss) from operations (327) 924 4,174 3,120 Add: Depreciation of network assets, property and equipment and amortization of intangible assets 3,240 2,821 12,279 10,674 Loss on disposal of network assets 121 106 202 276 Stock-based compensation expense (recovery) 9 116 (149) 1,202 --------- --------- --------- -------- EBITDA 3,043 3,967 16,506 15,272 Special Charges - 438 - 699 --------- --------- --------- -------- EBITDA excluding special charges $ 3,043 $ 4,405 $ 16,506 $ 15,971--------- --------- --------- -------- --------- --------- --------- --------
2013 Results of Operations
Total revenue for the year ended
713 new access customer additions in 2013 (1,118 in 2012) resulted in a decrease of 122 net access customer locations as compared to 2012. Net access customer locations decreased by 80 in Q4 2013, compared to an increase of 73 of the same period in 2012. Both the annual and quarterly declines were primarily due to increased competition in higher capacity services. The year ended with 6,453 customer locations in service compared to 6,575 at the end of 2012.
The average monthly churn rate in 2013 was 1.28% compared to 1.05% in 2012. The fourth quarter 2013 average monthly churn rate was 1.50%, compared to 0.86% for the same period in 2012. The average monthly churn rates for both the year and fourth quarter increased primarily due to increased competition in higher capacity services and a large low multisite (41 sites) customer with low ARPU (
Average monthly revenue per access customer location, or ARPU, increased to
The gross profit margin for 2013 remained strong at 78.0% compared to 77.6% for 2012. The increase is primarily due to savings recognized from telecommunication and maintenance costs partially offset by annual increases in property access costs and spectrum costs. Fourth quarter gross profit margin was 77.0% compared to 77.9% for the same period in 2012. The decrease is primarily due to an increase in property access costs and spectrum costs.
SG&A (Salaries and related costs - Other, and Other operating items) expenses remained consistent, totalling
2013 EBITDA increased to
Income tax recovery
In the second quarter of 2013, management reviewed the tax implications as a result of the acquisition and subsequent amalgamation of DCC. A tax benefit of
Net earnings (loss)
At year end 2013, the Company had cash, cash equivalents and short-term investments of
Conference Call and Webcast
Management will host a conference call on
Key Performance Indicators, Additional GAAP and Non-GAAP Measures
The term "EBITDA" refers to earnings before deducting interest, taxes, depreciation and amortization. EBITDA is a term commonly used to evaluate operating results. We believe that EBITDA is useful additional information to management, the Board and Investors as it provides an indication of the operational results generated by our business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration asset depreciation and amortization. We also exclude foreign exchange gain or loss, finance costs, finance income, gain or loss on disposal of network assets, property and equipment and stock-based compensation from our calculation of EBITDA. Investors are cautioned that EBITDA should not be construed as an alternative to operating earnings or net earnings determined in accordance with IFRS as an indicator of our financial performance or as a measure of our liquidity and cash flows. EBITDA does not take into account the impact of working capital changes, capital expenditures, debt principal reductions and other sources and uses of cash, which are disclosed in the consolidated statements of cash flows. Our method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to similar measures presented by other issuers.
Key Performance Indicators
The term "ARPU" refers to our average revenue per access customer location. We believe that ARPU is useful supplemental information as it provides an indication of our revenue from an individual customer location on a per month basis. ARPU is not a recognized measure under IFRS and, accordingly, investors are cautioned that ARPU should not be construed as an alternative to revenue determined in accordance with IFRS as an indicator of our financial performance. We calculate ARPU by dividing our service revenue by the average number of customer locations in service during the period and we express ARPU as a rate per month. Our method of calculating ARPU may differ from other issuers and, accordingly, ARPU may not be comparable to similar measures presented by other issuers.
The term "churn" or "churn rate" is a measure, expressed as a percentage, of customer locations terminated in a particular month. Churn represents the number of customer locations disconnected per month as a percentage of total number of customer locations in service during the month. The Company calculates churn by dividing the number of customer locations disconnected during a period by the total number of customer locations in service during the period. Churn and churn rate are not recognized measures under IFRS and, accordingly, investors are cautioned in using it.
Additional GAAP Measures
Earnings (loss) from operations
Earnings (loss) from operations exclude foreign exchange gain (loss), income taxes, finance costs and finance income. We include earnings (loss) from operations as an additional GAAP measure in our consolidated statement of earnings. We consider earnings (loss) from operations to be representative of the activities that would normally be regarded as operating for the Company. We believe this measure provides relevant information that can be used to assess the consolidated performance of the Company and therefore, provides meaningful information to investors.
This news release includes certain forward-looking statements that are made as of the date hereof and that are based upon current expectations, which involve risks and uncertainties associated with our business and the economic environment in which the business operates. All such statements are made pursuant to the 'safe harbour' provisions of, and are intended to be forward-looking statements under, applicable Canadian securities laws. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. For example, the words anticipate, believe, plan, estimate, expect, intend, should, may, could, objective and similar expressions are intended to identify forward-looking statements. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. We caution readers of this news release not to place undue reliance on our forward-looking statements as a number of factors could cause actual results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed with the forward-looking statements. When relying on forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the risks set forth in the 2013 MD&A and 2013 Annual Information Form that can be found on SEDAR at www.sedar.com and other uncertainties and potential events. Except as may be required by applicable Canadian securities laws, we do not intend, and disclaim any obligation to update or revise any forward-looking statements whether in words, oral or written as a result of new information, future events or otherwise.
FOR FURTHER INFORMATION PLEASE CONTACT:
TeraGo Inc. Stewart LyonsPresident and CEO 1-877-982-3688 IR@terago.ca TeraGo Inc. Joe ProdanChief Financial Officer 1-877-982-3688 IR@terago.cawww.terago.ca LHA Jody Burfening 212-838-3777 LHA Carolyn Capaccio 212-838-3777 email@example.com Source: TeraGo Inc.