TeraGo Inc.

Good morning, ladies and gentlemen. Welcome to Tarago's third quarter 2021 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 pre-qualified analysts on the call, and instructions will be provided at the time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at end time. I would like to remind everyone that this conference call is being recorded. Terago 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 factor section in the annual MD&A for the quarter ended September 30, 2021, which is available on www.cedar.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 statements as a result of new information. We would also like to remind listeners that Tarago uses certain non-governmental measures to arrive at adjusted results, to assess its business, and to measure overall performance. Tarago 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 Tarago's Chief Executive Officer, Matthew Gervers. Sir, please proceed.

Thanks, Patricia. Good morning, everybody. I hope your day is off to a great start, and thanks for joining our Q3 2021 earnings call. Before I get started, I want to let you know that joining me on this call is Andy Ramsey, our VP of Finance and Interim CFO, and Blake Wetzel, our CRO and COO. Andy will take you through the financial summary after I do the introduction, and Blake is on to help to possibly help me answer some of the questions you may have later on. After the market closed yesterday, we issued a press release announcing our results for the third quarter ended September 30th, 2021. The press release, financial statements, and MDMA are currently available on CDAR, as well as on our company website, along with the slide deck that we'll use for this call. We're really excited about what we can share with you today, especially the progress we're making towards launching our millimeter wave 5G private network services. Our operating results for the quarter were, for the most part, on par with what we expected. During the quarter, we continued to see a shift in our client base towards mid-market and small enterprise customers. As part of the shift in our focus, we continued to see churn in our legacy connectivity small customer base while we grew overall sales to the mid-market small enterprise customers, including expanding sales of multiple products into our targeted base of customers. As we focus on the mid-market and small enterprise, we remain intensely committed to competing on our ability to provide exceptional service levels to our customers. As we mentioned on prior calls, our ability to provide an unparalleled level of service in this industry is one of the primary reasons our mid-market and small enterprise customers do business with us and continue to expand relationships. The best evidence of our capabilities to provide this exceptional service level continues to be our Net Promoter Score, or NPS. Our NPS for the past quarter was 66, and it's averaged 71 over the past 12 months. This compares to our competition that sees NPS scores in the single digits and in some cases in the negatives. Credit for these achievements in customer service goes to our amazing team, the Terrigal employees, who are the lifeblood of this company. That said, we made some fundamental changes to our executive team this past quarter. We now have new faces at our senior leadership team table for our connectivity and cloud and co-location business lines. along with new faces for our finance, legal, and human resources functions. With these changes comes new thinking and a fresh perspective on how we can continue to improve our organization's services capabilities. Andy Ramsey, our VP of Finance and RMCFO, who you'll hear from in a bit, is a prime example of these recent changes that are going to benefit all of us. Lastly, we're also reaping the benefits of strengthening our balance sheet earlier this year, as a new capital provided us with the funds necessary to advance our millimeter-wave 5G private networking strategy. I know that this is something that many of our shareholders are looking for an update on, so I'll be sharing more details around this after Andy gives you an update on our financial performance for the quarter. With that, I will pass the floor over to Andy for a review of how the financials look for Q3. Andy, over to you.

Thanks, Matt. I'll start on slide five with a look at our KPIs for the quarter. Backlog monthly recurring revenue, or MRR, in our connectivity business for Q3 2021 decreased to 103,000 from 113,000 in Q3 last year. The decrease was driven by lower sales volume compared to the prior year period. Cloud and co-location backlog MRR in Q3 2021 increased to 39,000 from 32,000 in the same period last year. The increase was driven by the timing of sales bookings and provisioning activities. Taking a look at our average revenue per customer, or ARPU, in our connectivity business, ARPU for the third quarter of 2021 decreased slightly to 1,026 compared to 1,056 in the same period last year. The decrease was due to customer contract renewals at lower rates. Our cloud and co-location ARPU in Q3 2021 increased 14% to 3,785 from 3,323 in the same period last year. The increase was due to customer upgrades and cross-selling activities, as well as the churn of lower ARPU customers. Now looking at our third key operating metric churn. For the third quarter of 2021 churn in our connectivity business was 0.9%, which compared to 1.4% in Q3 of last year. The decrease in churn was driven by a focused effort on improving our account management framework and offering compelling renewal options to our customers. Churn in our cloud and co-location business was 1.1% compared to 0.9% for the same period in 2020. The slight increase was due to the timing of customer contract renewals. Moving on to revenues on slide six, you can see that our total revenue in the third quarter was consistent with the prior quarter at $10.9 million, but declined 3.5% from $11.3 million in Q3 last year. The year-over-year decrease was driven by lower revenues in our connectivity business. Connectivity revenue in the quarter decreased to 6.5 million from 6.6 million in the prior quarter and decreased 8.5% from 7.1 million in the same period last year. The decrease in both periods was driven by churn exceeding customer provisioning. Cloud and co-location revenue increased to 4.4 million compared to 4.3 million in the prior quarter and grew 4.8% from 4.2 million last year. The growth in both periods was driven by new customer acquisition and upgrades from our existing customers. Turning now to EBITDA on slide seven. In the third quarter of 2021, our adjusted EBITDA decreased to 3.1 million from 3.8 million in the prior year period. The decrease was driven by decline in revenue and higher cost of services due to the mix of services sold. Moving down the income statement, net loss for the third quarter of 2021 decreased to 2.3 million compared to 3.2 million in the same period last year. The decrease was driven by lower SG&A expenses due to executive restructuring costs incurred in the prior year and lower stock-based compensation in the current period. Turning to our cash flow on slide eight, in the third quarter, we generated 2.6 million in cash from operating activities, while capital expenditures were 1.5 million or 13.7% of our total revenue. CapEx was driven by customer provisioning activities and network infrastructure upgrades. Turning to the balance sheet, we ended Q3 2021 with 6.7 million in cash, which was down from 7.6 million in the same period last year. With that said, I'd like to turn the call back over to Matt, who will provide an update on the encouraging trends we're seeing in the business. Matt?