TeraGo’s Q1 2025: A Strategic Shift to Profitability Amid Regulatory Tailwinds

TeraGo Inc. (TSX:TGO) has quietly positioned itself at the crossroads of Canada’s connectivity revolution. While its Q1 2025 earnings showed a modest 0.9% revenue decline to $6.41 million, the story beneath the surface is far more compelling. A 10.9% surge in Adjusted EBITDA to $1.03 million, alongside a 11.3% rise in ARPA and a 103.6% leap in Backlog MRR, signals a deliberate pivot toward profitability—and investors are missing the bigger picture.

Operational Discipline: The Path to Profitability

TeraGo’s results reflect a ruthless focus on margin improvement. Despite a net loss of C$3.54 million (unchanged from Q1 2024), the company has slashed costs where it counts. The Adjusted EBITDA margin expanded from 14.4% to 16.1%, driven by disciplined cost management and a strategic shift toward high-value customers.

The Average Revenue Per Account (ARPA) for connectivity services climbed to $1,229, up from $1,104 in Q2 2023, as TeraGo abandoned low-margin clients in favor of multi-location enterprise contracts. While churn rose to 1.2% from 0.8% in Q4 2024—a red flag—the company insists this is a calculated move to prune unprofitable accounts. The result? A leaner customer base with higher lifetime value.

Regulatory Tailwinds: mmWave Spectrum’s Hidden Value

TeraGo’s crown jewel is its dominance in mmWave spectrum, which now accounts for 91% of Canada’s total holdings in key bands (26, 28, and 38 GHz). Recent regulatory clarity from Canada’s Innovation, Science and Economic Development (ISED) has unlocked its potential.

The March 2025 consultation repurposing parts of the 26 GHz band for flexible use aligns perfectly with TeraGo’s Fixed Wireless Access and 5G private networks. This spectrum is critical for ultra-low-latency applications—think smart factories, autonomous vehicles, and remote healthcare—sectors where Canada’s industrial and tech sectors are booming.

With $96.4 million in Backlog MRR (up from $48.3 million in Q1 2024), TeraGo has a pipeline of unprovisioned contracts that could supercharge revenue growth. This metric, though non-GAAP, is a leading indicator of future profitability. Every dollar in Backlog MRR represents a customer contract already signed but not yet activated—proof that demand for TeraGo’s services is surging.

Why the GAAP Loss Doesn’t Tell the Full Story

Critics will point to TeraGo’s persistent GAAP loss of C$0.18 per share, but this misses the structural shift. The company is investing aggressively in its 5G Fixed Wireless Access program, with spectrum and infrastructure costs front-loaded. Meanwhile, its focus on high-margin enterprise customers (e.g., multi-location retailers, logistics firms) is creating a flywheel effect: higher ARPA, lower churn (when measured by profitable accounts), and a backlog that’s doubling annually.

The stock’s current price of C$1.17—near its 52-week low—reflects investor skepticism about its ability to execute. But this is a classic contrarian opportunity. TeraGo’s Backlog MRR growth and mmWave tailwinds position it to dominate Canada’s $4.7 billion enterprise connectivity market, where demand for low-latency, high-capacity services is exploding.

Conclusion: A Turnaround Catalyst Ignored by the Market

TeraGo isn’t just surviving—it’s redefining Canada’s connectivity landscape. The Q1 results confirm a strategic realignment:
1. Operational discipline is driving margin expansion.
2. Regulatory tailwinds are unlocking mmWave’s value.
3. Backlog MRR signals a revenue pipeline primed to explode.

At a valuation of just 1.7x 2024 revenue (vs. industry averages of 2-3x), TeraGo is trading as if it’s a relic of the dial-up era. But with enterprise 5G spending expected to hit C$2.1 billion by 2027, this stock is a buy for investors willing to look past short-term losses and see the connectivity revolution ahead.

Action Item: Buy TeraGo (TGO) at current levels and hold for the next 18 months. The catalysts are in place—execution will follow.

This analysis is for informational purposes only and should not be construed as financial advice.