TeraGo Inc.

Good morning, ladies and gentlemen. Welcome to Tarago's first quarter 2025 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 three 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 any time. I would like to remind everyone that this conference call is being recorded. TerraGo 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 litigation. 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.cdrplus.ca, and also consider other uncertainties and potential events. Except as may be required by Canadian security 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 Tarago uses certain non-GAAP financial measures to arrive at adjusted results to assess this business and to measure overall performance. Perigo 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 Perigo's Chief Executive Officer, Daniel Bucinich. Sir, please proceed.

Thank you, and good morning, everyone. Welcome to our first quarter 2025 earnings call. Today, we are pleased to share how we are further accelerating our value creation strategy. In the first quarter, our team continues to have a disciplined focus on profitability and efficiency. Significant growth continued in our adjusted EBITDA, R-plus average revenue per account, and revenue backlog. This combined with our improved cost control affirms that Carago is delivering on our smart growth strategy and operational enhancements. We are seeing better growth margins, reductions in operating expenditures, superior deal-level economics, and a more efficient approach to capital investments. Being the largest millimeter-wave spectrum owners, Terrigal continues to work closely with ICED to drive competition, investment, and innovation. We are in the middle of ICED's latest consultation that is proposing to repurpose the lower 26 gigahertz band, previously called 24 gigahertz, for flexible use and also proposing the framework for a millimeter wave option. A flex-use decision would mean that millimeter wave spectrum can be used for both mobile and fixed wireless services. As Pry said, spectrum is a critical input for wireless service providers. The release of additional spectrum for flex use will enable providers to increase network capacity, addressing growth, growing traffic demands, and supporting the provision of 5G wireless technologies. Furthermore, preparations are underway for 6G wireless technology. 6G is expected to build upon the capabilities of 5G, enabling new applications such as ultra-reliable low latency and beds automation across industries. The development and deployment of millimeter-wave 5G and 6G technologies will position Canada to become a global center for innovation and will bring the country to the forefront of digital adoption. Millimeter-wave spectrum in a 5G private wireless network offers a 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. I am encouraged by all the progress ISET is making in positioning millimeter wave spectrum in the Canadian connectivity ecosystem and for providing greater clarity and longer-term certainty. Canada is at a pivotal moment where productivity continues to lag behind other similar 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 because it accounts for 88% of the employment and just over 50% of the GDP. This is a focus segment for Terrigal, and it is a neglected segment by the large service operators. Terrigal is a critical player in the Canadian communications landscape. We are uniquely conditioned by owning 91% of the millimeter wave spectrum. We have our own national backbone network with 400 plus wireless hubs covering 26 million population and passing 11 million homes. There is no one like us. With that said, I'll turn it over to our CFO, Raj Vapra.

Raj? Thanks, Ken. Welcome, everyone. Turning to slide four of our Q1 financial results for a look at our KPIs As Dan already mentioned, our average revenue per customer account, or ARPA, for our connectivity business continues to increase and improve, was $1,229 in Q1 of 2025, a 6.1% increase compared to $1,158 for Q1 in 2024. Marco levels continue to increase as a result of smart, profitable growth coupled with changes in customer base and product mix. Our churn was 1.2% compared to 0.8% for the same period last year, a little bit higher. The increase was primarily driven by management's continued initiatives to optimize the customer base by discontinuing service to unprofitable accounts, partially offset by increase in revenue from new customers which were deployed in the current year period. 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 retention. Turning to slide five, to go through our broader Q1 financials, total revenue for Q1 was 6.41 million as compared to 6.47 million from same period in 2024. The marginal decrease, as I've already indicated, was primarily driven by churn, where we look at unprofitable accounts, and if it doesn't make sense for the business, we discontinue services on those accounts. This was obviously partially offset by provisioning numbers. which resulted in some increase in the revenue for the current year. As noted in the MD&A, the company has a strong backlog of approximately $96,000 in monthly recurring revenue, which is equal to almost $1.2 million of annual revenue, the majority of which we expect to be provisioned within the current fiscal year, contributing positively to the company's revenue for 2025. Adjusted EBITDA towards an increase of almost 11% compared to Q1 of 2024 at $1,032,000 versus $930,000 for the same period in Q1 2024. The company continues to strive for profitable growth and driving efficiencies in the business, looking and managing costs on a daily basis. Net loss for Q1 was similar to the net loss in Q1 of 2024. Turning to the balance sheet, we ended the first quarter of 2025 with $2.1 million in cash and cash equivalents and short-term investments. The company received additional $2 million in U.S. in April as a result of the Second Amendment to the Credit Agreement, which was announced on March 31st. The amendment also allowed the company to look at some of its non-core assets and to be able to monetize those assets, and the company is continuing to work towards that, expecting some capital inflow through those non-current assets in Q2-Q3. In the first quarter of 2025, we generated approximately $1 million in cash from operations, where almost all of it was attributable to cash generated from business operations. As compared to in Q1, 2024, 1.5 million of cash from operations was generated, but only half a million was from business operations and a million was from working capital movements. Regarding our current debt facility, we are confident in securing a refinancing solution, positioning the company for sustained growth and success. and driving the shareholder value. With that said, I would like to turn the call back over to Dan.

Thanks, Raj. Our comprehensive strategy is enhancing value for our clients, employees, and shareholders. Cerego is uniquely positioned to drive innovation, increase investments, and its next-generation offerings for businesses. That does wrap up the prepared remarks for us today, and we'll turn it back to you, operator, for questions, please.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from David McFadden with Cormark Securities.

Hi. Yeah, a couple questions. So I'm just looking at the results in Q1-25 and then just compared with Q4-24. there was, you know, very small but slight decline on the revenue in these guidelines. I noticed the churns up a little bit. So I was just wondering what's happened since the fourth quarter just caused that slight decline?

So just looking at the EBITDA, specifically as you would see, you know, there is some seasonality in terms of the expenses. So, you know, Q4, Q3, EBITDA would usually be higher than Q1 and Q2 because, as we noted in our MD&A, I mean, there are a lot of front-loaded costs in terms of CPP, EI, employee taxes, which impact the cost base in the first two quarters. And it's pretty consistent, I think, on a yearly basis going back, that the Q4 EBITDA is always higher. You know, last year, Q1 was $930,000 with higher revenues This year it is more than a million dollars with lower revenues slightly. But you can see the delta in the COGS where, yes, we lost some of the revenue, but it was actually negative cash flow for us. So that is the reason. So you'll obviously see as the year progresses, the EBITDA will continue to increase.

Okay, and then... When you look at the churn, you know, the churn's up a little bit in the quarter. Is that solely just, you know, you guys not renewing low margin or unprofitable accounts, or are there some other factors that play there?

Well, I mean, you know, I'll give some financial angle and then can talk about the business here. But, you know, it's not that you don't want to renew them. You know, obviously, you know, we attest. If it's unprofitable, they've come for expiry as a term, we want to give them new pricing, and if it doesn't work and these are smaller clients, and we basically just said, look, we can't service you because our cost is very high, so we let them go. And some of that impact was partially offset by deployments, and we'll see continued deployment of the backlog through the rest of the year. But, you know, our delivery team, our customer experience team is laser-focused, zoned in, hands-on deck in terms of customer experience. And, you know, we continue to win larger clients, Dan.

Yeah, so just a reminder to everyone that the churn percentage is based on customers and not dollars. And most of that was our smaller customers, as Raja said, as customers. We're really going upscale in terms of customer segment, and that's why you see our price going up. So a combination of where customers are unprofitable, and unprofitable means they could be in a part of our hub location, real estate, carrier cogs, the whole bit. So we're constantly looking at how do we drive more margin out of this business. And again, a number of smaller customers had exited that were unprofitable.

Yeah. Okay. And then lastly, can you give us an update on your negotiations on renewing, refinancing your debt?

Yeah, we continue to have conversations, you know, in terms of negotiations. You know, we should expect to announce something to the market, you know, by, you know, before the Q2 announcements of the results. I mean, that would be the target. And, you know, they are fairly advanced. You know, we are not that concerned in terms of not being able to have some sort of a renewal or an extension. You know, we are quite confident with that. You know, and then in terms of additional capital in the business, As we noted in the amendment, and the amendment did have a schedule which did have a list of, you know, 12 hours. We are in advanced negotiations in terms of trying to monetize them, and we expect to announce something in the next 60 days as well.

So that's where we are. Okay. Okay, that's it. That's from me. Thank you much.

Yeah. Thank you.

At this time, this concludes our question and answer session. I'd now like to turn the call back to Mr. Bucinich for closing remarks.

Thanks again, everyone, for joining us on our call today. I'd like to thank our customers, shareholders who continue to support the company. I'd also like to thank everyone at Terrigal who continues to do an outstanding job. We look forward to providing an update on our progress on our next quarter to the earnings call. Operator.

Thank you for joining us today for TerraGo's first quarter 2025 earnings call. You may now disconnect.