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Canada’s TeraGo reports revenue loss of 11%

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Company’s price per share has decreased from a 52-week high of CAD$13.06 in June 2019 to CAD$7.98 at the last market closing.

Networking and infrastructure solutions provider TeraGo (TSX: TGO) has reported its full-year (FY) 2019 results with an overall decrease in revenue of 11%.

The Ontario-based services provider cashed in CAD$48.4 million last year, down from CAD$54.3 million in 2018.

Connectivity revenue for 2019 decreased by 13% to CAD$30.4 million compared to $35.0 million the previous year.

The operator, which has a market capitalisation of CAD$132.69 million, explained that the decrease in connectivity revenue was “primarily due to higher churn and certain customers renewing long-term contracts at lower current market rates”.

In the cloud and colocation segment, the Canadian firm reported a revenue decrease of 6% for 2019 to CAD$18.1 million compared to CAD$19.3 million in 2018.

Similarly to the connectivity revenue explanation, the company said the decrease in cloud and colocation revenue was primarily due to customer churn in the second half of 2018 resulting in lower revenue entering 2019.

Net loss for 2019 totalled CAD$7 million compared to net loss of CAD$4.8 million in 2018. TeraGo said the increase in net loss was driven by the adoption of IFRS 16.

“With the adoption of IFRS 16, the company now recognises all leases on its balance sheet with a right-of-use asset and a corresponding lease liability,” TeraGo said in a statement.

“This resulted in higher depreciation and finance costs that exceed the beneficial impact of lower cost of sales and operating costs for previously recognised operating leases. The net result was a higher net loss in 2019.”

Elsewhere, the business’ adjusted EBITDA for 2019 increased 35% to CAD$17.5 million compared to CAD$13 million in 2018. The increase in adjusted EBITDA was driven primarily by the adoption of the mentioned IFRS 16 standard that resulted in the reclassification of certain operating lease expenses to finance costs and depreciation, which are excluded from the calculation of adjusted EBITDA.

Tony Ciciretto, President and CEO of TeraGo, said: "As our financial and operational results for 2019 demonstrate, we executed on our plan to manage costs, generate strong Adjusted EBITDA(1) and cash flow, while realizing key milestones on our 5G fixed wireless growth strategy.

"We also continue to innovate our product portfolio with the recent launch of TeraGo Internet 50/10 and SD-WAN. These new products will allow our customers to leverage state-of-the-art technology for a more reliable and flexible internet connectivity along with a more centralized and advanced networking solution.

“Our technical trials with Nokia equipment for 5G business network solutions, in the Greater Toronto Area, is on schedule and we look forward to the launching of customer trials in the second quarter. We remain laser-focused on extracting the value out of our 24 and 38 GHz spectrum assets and believe we have a significant time-to-market advantage to be one of the first Canadian carriers to launch 5G fixed wireless services."

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