TORONTO — Despite strong growth in cloud and data centre service revenue, TeraGo Inc. posted a net loss of $0.4 million for the three months ended June 30, 2016, partially due to a decline in network and voice revenues, the company reported on Thursday as it released its Q2 2016 financial results.
The company’s cloud and data centre revenue grew 15.2% to $4.4 million in the second quarter of 2016, compared to $3.9 million for the same period in 2015. TeraGo attributed the increase to greater adoption of cloud services from new and existing customers as well as the acquisitions of Ottawa-based BoxFabric in September 2015 and AirVM’s hosting business in May 2016.
For the six months ended June 30, cloud and data centre revenue increased 86.7% to $8.9 million compared to $4.8 million for the same period in 2015. This increase was driven by the factors already mentioned, as well as the acquisition of RackForce Networks in March 2015, TeraGo said in a news release announcing its Q2 results.
TeraGo’s network and voice revenue decreased by approximately 8% to hit $10.3 million in Q2 2016, compared to $11.3 million in the second quarter of 2015. For the six months ended June 30, network and voice revenue was $20.8 million, compared to $22.6 million in 2015, a drop of roughly 7.8%.
TeraGo said its network and voice revenues were impacted by a variety of factors, including: regional economic difficulties; the company moving away from maintaining its lowest-value customers; certain customers renewing long-term contracts at lower current market rates; and lower usage revenues as certain customers have shifted to unlimited usages plans. However, Q2 2016 also saw a strong reduction in monthly recurring network business revenue churn, as compared to the last two quarters, driven by numerous initiatives the company implemented over the last six months that are now beginning to show results, TeraGo said.
Overall, total revenue decreased 2.2% to $14.8 million for the second quarter of 2016, compared to $15.1 million for the same period in 2015. However, for the six-month period ended June 30, 2016, total revenue actually increased 8.7% to $29.7 million, compared to $27.3 million for the same six-month period in 2015.
The company’s adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 8.1% to $4.9 million for the second quarter of 2016, compared to $4.5 million for Q2 2015. The increase is due primarily to synergies related to TeraGo’s acquisition of RackForce and reductions in personnel costs obtained from the company’s restructuring efforts in prior periods, TeraGo said. For the six months ended June 30, adjusted EBITDA increased 16.4% to $9.6 million in 2016, compared to $8.2 million for the same six-month period in 2015.
As noted above, TeraGo reported a net loss of $0.4 million for the second quarter of 2016, which is an improvement over the company’s net loss of $2.2 million for the same period in 2015. TeraGo said the decrease in net loss was primarily driven by $1.2 million less restructuring, acquisition-related and integration costs and $0.3 million less finance costs. In addition, for the six months ended June 30, 2016, the company’s net loss was $1.2 million, compared to a net loss of $2.2 million for the same period in 2015.
Among the company’s activities in the second quarter of 2016, TeraGo announced the launch of the Microsoft Azure Pack solution at its data centre located in Kelowna, B.C. TeraGo added the Azure-based managed Infrastructure as a Service (IaaS) and Disaster Recovery as a Service (DRaaS) to its suite of cloud solutions.
“We continue to enjoy success in growing our cloud services business and remain focused on providing a comprehensive suite of services to our customers as evidenced by our launch of Microsoft Azure Pack and the acquisition of the (AirVM) Hosting Business in the quarter,” Stewart Lyons, president and CEO of TeraGo, said in the company’s news release.
The full details of TeraGo’s second quarter results for 2016 can be accessed by clicking here.
