TeraGo Inc.

Good morning, ladies and gentlemen. Welcome to Tarago's Key2 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session with pre-qualified 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 star followed by zero for the operator assistance at any time. I would like to remind everyone this conference is being recorded. Terriga 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 risk set forth in the risk factors section in each of the annual MD&A for the year ended December 31, 2020, and the Q2 2021 MD&A, which are available on www.cdr.com. Except as may be required by Canadian security laws, 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 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 Mr. Matthew Gerber, CEO of Terrigo. Please go ahead.

Thanks very much, operator. Good morning, everybody, and a big thanks to all of you for joining our Q2 2021 earnings call. After the market closed yesterday, we issued a press release announcing our results for the second quarter ended June 30th, 2021. The press release, financial statements, and MD&A are currently available on CDAR, as well as on our company website, along with the slide deck that we'll use for this call. Our team is encouraged by what we achieved this past quarter, and I'm pleased to be able to share those achievements with you today. What you'll hear from us today is that we've continued to focus on executing our growth strategy, and as a result, witnessed successes in adding new customers, delivering additional managed services to our existing customer base, and acquiring our new customers via both our direct sales team and our expanding channel partner network. We were also able to once again achieve a stellar net promoter score of 79, which provides further evidence that our team delivers a level of service that none of our competition can match. In addition to customer and partner wins, we were also successful in bolstering and securing our balance sheet. We completed an equity raised early in the quarter and closed the quarter with an extended credit agreement, which provides us with ample capital to continue operating the business and execute our growth strategies. These successes again translated into us booking more business and customer churn this past quarter. As we mentioned on Les Gore's earnings call, we expected the momentum we were seeing with improving sales and reducing churn would eventually translate into revenue growth, and we finally did see that top-line growth in Q2. While our team is encouraged by this positive momentum, we also realize that we need to sustain this trend if growth is going to continue for the long term. As you can imagine, all of us are intensely focused on execution and driving the business forward in order to build on the successes we saw in Q2. So before I dive deeper into the more detailed updates, I'd like to pass the call to Dave to discuss our financials and key performance indicators for the second quarter. Dave, over to you.

Thanks, Matt. I'll kick things off by starting on slide seven with backlog monthly recurring revenue, or MRR, in our connectivity business. And as of June 30th, 2021, backlog MRR increased to 127,000 from 87,000 in Q2 last year. The significant increase in backlog MRR was driven primarily by higher sales volume compared to the prior year period. Cloud and co-location backlog MRR for the second quarter of 2021 decreased to 15,000 from 19,000 in the same year-ago period. The decrease in backlog MRR was driven by the timing of sales bookings and increased provisioning activities in the quarter. Taking a look at average revenue per customer, or RP, In our connectivity business, RP for the second quarter of 2021 decreased slightly to $1,032 compared to $10.59 in the same period last year. The slight decrease in RP due to the customer contract renewals at lower rates. I'm pleased to report that our cloud and colocation RP for the second quarter of 2021 increased to $3,722 from $3,108 in the same period last year. The increase in RPs due to new customer acquisitions, upgrades from existing customers, and some churn of lower RP customers. Now looking at our third key operating metric churn for the second quarter of 2021, churn in the connectivity business was 1.4%, which compares favorably to the 1.7% in Q2 of last year. If you recall, we saw an elevated level of customer churn in the prior year period due to some customer closures and restructuring related to the COVID-19 pandemic. Churn in our cloud and co-location business was steady at 1.1% in the second quarter of 2021, consistent with the result in Q2 of last year. Moving on to revenue on slide eight, you can see that our total revenue in the second quarter slightly increased to 10.9 million compared to 10.8 million from the prior quarter, but declined 6% from the 11.6 million in Q2 of last year. Connectivity revenue in the quarter decreased slightly to 6.6 million from 6.7 million in the prior quarter and decreased 11% from 7.4 million in Q2 of 2020. The declines in both periods were attributable to churn exceeding customer provisioning. Cloud and co-location revenue increased to 4.3 million compared to 4.1 million in the prior quarter and increased from 4.2 million in Q2 of 2020. The growth in both periods was driven by new customer acquisition and upgrades from existing customers. Turning now to EBITDA on slide 9, in the second quarter of 2021, our adjusted EBITDA slightly increased to $3.4 million from $3.2 million in the prior quarter, a decrease from $4.8 million in the same period in 2020. The reduction in EBITDA was driven primarily by a decrease in revenue, higher cost of services due to the mix of services sold, and a smaller amount of government grants received. Moving down the income statement, net loss for the second quarter of 2021 decreased from 1.8 million from 2.2 million in the prior quarter, but increased from 0.7 million in the same period last year. Turning to our cash flow on slide 10, in the second quarter, we generated 2.2 million in cash from operating activities while capital expenditures were 2.2 million or 20.6% of total revenue, driven primarily by success of CapEx in both the connectivity and the cloud and COLA businesses. On the balance sheet in Q2, we significantly improved our liquidity with the closing of a $14.7 million private placement, as well as an extension to our existing credit facility. The proceeds from the private placement will support the ongoing execution of our strategic plan, and a portion of the proceeds will be used to repay our term debt in Q2. In total, we repaid $5.25 million towards our long-term debt, which reduced our total debt outstanding to $22 million at quarter end. The credit agreement has been extended to June 2023. The ongoing quarterly payments have been reduced the $562,500 per quarter down from $750,000 per quarter. The net effect of these changes was quarter-end cash balance of $9.9 million, which was up from $5.9 million at year-end December 31st. Our improved cash position and access to the revolving facility provide us with ample working capital to execute on our near-term clients. With that said, I'd like to turn the call back to Matt, who will provide an update on our encouraging trends that we're seeing in addition to our multi-pronged growth strategy.