Good morning, ladies and gentlemen. Welcome to TeraGo's Fourth Quarter and Full Year 2022 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 that 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. 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 off 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 Factors section in the annual MD&A for the quarter ended December 31st, 2022, which is available on www.terago.ca. 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 statement as a result of new information. We would also like to remind listeners that TeraGo uses certain non-GAAP financial measures to arrive at adjusted results to assess its business and to measure overall performance. TeraGo 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 TeraGo's Chief Executive Officer, Matthew Gerber. Sir, please proceed.
Thanks, Laura. Good morning, everybody. Welcome to this quarter's conference call. We're glad to be here and are excited to share a summary of what we've achieved this past quarter and this past year with you. As you may have already seen through the press releases we've issued throughout 2022, this past year was a pivotal time in TeraGo's history. I'm planning to dive into some of the milestones we achieved later on this call. Before I do that, I want to address a couple of items relating to our top-line numbers. The one obvious point to note is that the full fiscal year and quarterly results for 2022 were directly impacted by the divestiture of our cloud and colocation business lines. Result, when you compare 2022 figures to 2021, we were down significantly year-over-year when just observing our financial statements in MD&A.
To get an accurate picture of what's happening with our connectivity business, one has to account for divested connectivity revenues and customers. The second point I want to briefly mention was that in the fourth quarter of 2022, we had to take some revenue adjustments for customers that were transitioned to Hut 8 through the divestiture, which were then almost immediately transitioned back to TeraGo. That said, if you look at our business from a pro forma perspective, connectivity revenues for the fourth quarter of 2022 should have been CAD 6.6 million, which is actually an increase year-over-year and quarter-over-quarter. We're extremely pleased to share with you that our core business is healthy and growing when looking at it on a pro forma basis.
As the pro forma figures show, we saw something in 2022 that we have not seen for a very long time as a company, which was a growing connectivity business. When reflecting on how our fixed wireless access business line performed prior to 2022, it's not a great story. From the start of 2013 through the end of 2021, we saw fixed wireless access revenues decline by an average of 7% annually. This is the first time within a nine-year window where we can say that we are turning the corner as we've experienced a halt in revenue shrinking, and instead grew 5% from 2021 - 2022. Based on what we saw last year and are seeing at the start of this year, we're optimistic about our opportunity to deliver another growth year in 2023.
In addition to growing connectivity revenues, we delivered the best connectivity bookings and churn performance since 2012. We exited the year with the strongest backlog ever as a result of our direct and channel sales organizations delivering strong results. One of the key drivers behind this encouraging trajectory is our team and how well we worked together this past year. The strategic decisions made by our management team in hiring the right people for the right positions, paired with our employees' ability to focus, perform, and ultimately execute their roles, has been a catalyst for our growth. This recipe for success has resulted in positive results and high customer satisfaction as we more often than not receive feedback that TeraGo is a top Canadian telecommunications provider to deal with.
The market for fixed wireless access services was also helpful for us this past year and will continue to help us this year. Fixed wireless access services for businesses are once again becoming more accepted as a way for businesses to purchase connections, whether for a primary or secondary path, especially in this new world of SD-WAN, enabling the efficient use of multiple types of connections to a facility. Needless to say, our team is extremely excited and optimistic about what we achieved last year and where we're headed as a company. As you can imagine, we're eager to keep driving the business forward this year and deliver results that we'll be proud to share with you during the course of 2023.
After I hand the call over to Phil, he takes you through our reported results, I want to spend a bit of time going over what we accomplished last year and how those accomplishments are setting us up to deliver sustained long-term results and successes. With that said, I'll turn the call over to Phil to walk us through the financials. Phil, over to you.
Thanks, Matt. Starting in slide five with connectivity revenues. Connectivity revenues totaled CAD 6.3 million in Q4 2022, compared to CAD 6.5 million in Q4 2021.
We had some year-to-date adjustments.
One moment, please. I'll have you on standby.
Laura, are you there?
You're now connected, sir.
Okay. Thank you, Laura. My apologies to everyone. Connection issues. I'll return to the start of my comments. Starting on slide five, the connectivity revenues. Connectivity revenues totaled CAD 6.3 million in Q4 2022, compared to CAD 6.5 million in Q4 of 2021. However, as Matt had mentioned, we had some year-to-date adjustments of approximately CAD 0.3 million in Q4 2022 from customers that were initially transitioned to Hut 8 and included in our wholesale agreement with Hut 8, and then subsequently transferred back to TeraGo, reducing the amounts recorded under the wholesale agreement. From a pro forma perspective, revenues for both for the fourth quarter of 2022 would have been CAD 6.6 million, an increase both year-over-year and quarter-over-quarter.
Moving to slide six, we look at our connectivity KPIs for Q4 of 2022 and each of the prior four quarters. Our backlog of monthly recurring revenue or MRR in our connectivity business increased to CAD 178,940 as of December 31st, 2022, compared to CAD 138,893 in the prior quarter and CAD 110,481 for the same period in 2021. The increase in backlog MRR was the result of continued strong sales performance in signing up new customers, particularly through our channel partners. Next, our average revenue per customer, or ARPU, for the connectivity business was CAD 1,063 in Q4 of 2022, compared to CAD 1,043 the same period in 2021.
The increase in year-over-year ARPU is the result of an ongoing focus to attract mid-market and large-scale customers. Connectivity churn was 0.9% compared to 0.7% for the same period last year. While churn has slightly increased from the same quarter in the prior year, the overall churn rate for 2022 was 0.8% compared to 1.1% in 2021. We will continue to focus our service and support activities on our customer retention and keeping churn low. Turning to slide seven, we present our broader full year 2022 annual financial highlights. Total revenue decreased to CAD 27.6 million for 2022 compared to CAD 43.3 million for 2021. The decrease in revenue was entirely driven by the divestiture transaction of the cloud and colocation business.
Connectivity revenue alone for 2022 was CAD 25.9 million, compared to CAD 26.3 million in 2021. However, when normalizing for the approximately CAD 2 million in cloud and colocation connectivity-related revenues that were transitioned to Hut 8 as part of the divestiture, pro forma revenue for 2022 would have been CAD 27.9 million, an increase of 5% over 2021. Net loss decreased to CAD 11.6 million in 2022, compared to a net loss of CAD 15.2 million in 2021. The lower net loss is a result of the divestiture transaction and impairment losses associated with that transaction that were recorded in 2021. Adjusted EBITDA was CAD 4.1 million in 2022, compared to CAD 12 million for the same period last year. The decrease being the result of the divestiture transaction. Turning now to slide eight.
Capital expenditures totaled CAD 1.5 million or 24.2% of our revenue in the quarter. CapEx expenditure continues to be predominantly success-based spend associated with the onboarding of new customers and is not always a direct correlation to revenue due to the lengthening of supply chains and the time lag between purchasing the equipment and the installation at the customer site, to begin recognizing revenue. Turning to the balance sheet, we ended the fourth quarter of 2022 with CAD 6.2 million in cash and CAD 1.2 million in short-term investments. Additionally, at the end of the fourth quarter of 2022, we still had access to $15 million available to draw from our debt facility.
With that said, I would like to turn the call back over to Matt, who will provide an update on the encouraging trends we're seeing in this business. Matt, over to you.
Thanks, Phil. As I mentioned at the start of the call, I wanna spend a few minutes now talking about what our team accomplished and then move on to what we'll focus on this year. The first major accomplishment for the year was the successful divestiture of the cloud and the colocation lines of business to Hut 8. Not only was the initial divestiture successful, we've worked throughout the year to separate those two lines of business from what was a highly integrated company. The work associated with the Hut 8 transition services agreement is now complete, and the Master Services Agreement work is nearing completion. We expect to be fully separated from Hut 8 by the end of this current quarter. The next major accomplishment we achieved was a complete rebuilding of our finance team.
On point with my earlier remarks of having the right people in the right positions, in May of 2022, we brought Phil on as our CFO. Over the course of the year, Phil has completely reengineered our finance organization, including hiring a new director of finance and a new controller. Almost immediately after Phil joined, we started a debt financing campaign, which is one of our key priorities for last year. After vetting through multiple financing proposals, we selected CrowdOut Capital to provide a $20 million debt financing. Working with CrowdOut gives us the ability to continue financing our fixed wireless access business line growth, along with the anticipated growth for 5G mmW ave private networks as the market further materializes. Speaking of growth, another major accomplishment for 2022 was the signing of our largest ever fixed wireless access customer deal.
In Q4 of last year, we signed a large retail customer with 262 sites in Ontario, for which we will be providing fixed wireless access services. This three-year deal totals just under CAD 35,000 of monthly recurring revenue and represents a type of customer that we continue to have increasing successes with. In early 2022, we started rolling out a point-to-multipoint technology from INTRACOM, which is something we previously discussed in our earnings calls, and was also a key goal for us when we started 2022. As a reminder, this technology allows us to provide service in a much denser footprint for costs similar to our legacy point-to-point technology. We saw a good uptake of point-to-multipoint deals last year, and the product offering continues to grow as a % of our product mix.
As we continue to achieve successes with our fixed wireless access business, we'll also remain vigilant about the constantly evolving market for 5G MMw ave private networks. Our focus is on monitoring how this market ecosystem is evolving, watching for the equipment offered by suppliers that will enable us to offer these private network services, and stepping into this market where we can provide highly differentiated solutions for our customers. A major milestone towards this end was the execution of our partnership with McMaster University for the installation of a private network at McMaster's new Manufacturing Research Institute, or MMRI, which Prime Minister Trudeau recently visited. As of a week ago, TeraGo deployed Canada's first 5G mmW ave private network dedicated to Industry 4.0 data research at McMaster.
Over the next three years, this private network will allow research to test and develop new advanced manufacturing technologies that can leverage the high bandwidth, ultra-low latency capabilities of 5G mmW ave networks. 5G mmW ave networks will enable the industry to lower costs, improve efficiencies, and increase worker safety by incorporating innovations in augmented reality, high-speed vision systems, massive industrial IoT deployments, and autonomous vehicles. Although it was a bit later than we were hoping for, we also finally saw the announcement from Qualcomm on support for standalone millimeter wave chipsets. Qualcomm's latest firmware updates for its millimeter wave modems will enable user devices that can be deployed on 5G mmW ave standalone networks. 5G mmW ave standalone networks will deliver the sub 10-ms ultra-low latency capabilities required to support such innovations as augmented reality, robotics, and autonomous vehicles.
TeraGo maintains close relationships with numerous device vendors and expects the first devices incorporating 5G mmW ave standalone capability to be delivered in late Q2 or early Q3 of this year. According to market analysis, the worldwide market for mmWave 5G is projected to experience significant growth, increasing from $2.5 billion in 2022 to $4.9 billion by 2027, with a compound annual growth rate of 14.7%. Industry 4.0 data applications, together with low latency use cases powered by mmW ave private 5G networks are predicted to occupy the largest market share and compound annual growth rate for this period. We feel good about what we've accomplished in this area this past year, as it has positioned us well for when this market starts accelerating.
In addition to the achievements I just took you through, we also reached several key financial milestones. When looking at the data from the past nine-year period, 2022 was a window where we saw the largest year for connectivity bookings, the best year for connectivity churn, a stop in the shrinkage of recurring revenues mid-year, growth in recurring revenues in the latter half of the year, and overall connectivity revenue growth. Suffice it to say that it was a very positive year for us, and our team is positioned well to continue on our successes in 2023. Looking ahead, we'll be putting an intense focus on ensuring we're converting our growing backlog into top line revenues, as this is key to maintaining our growth.
We plan to do this in the face of a more challenging environment with costs as like all other companies, we're feeling the impacts of inflationary pressures, and we're also feeling the effects of continued challenges with the supply chain for our radios and other supporting communications equipment. We'll also continue to invest in and expand our fixed wireless access network, which includes plans to either upgrade or install new hub sites across Canada in areas where, due to our success with acquiring new customers, our existing hub or tower sites are approaching capacity limits. This also means installing more point-to-multipoint equipment at those locations, which allows us to serve more customers per hub site with a similar level of investment to what point-to-point service costs. Lastly, we intend to remain laser-focused and push forward with our 5G mmWave private network marketing efforts.
Our team plans to have use cases running on the McMaster network this year, which will be a showcase for us with prospective customers, and you'll certainly hear much more about that on the coming earnings calls. Additionally, we're discussing and entering into private network go-to-market partnership efforts with several key globally recognized integrators. As part of these efforts, we're also talking to customers and are positioned to add incremental private network customers this year as the market continues to develop. That concludes my comments, and let me turn the floor back over to Laura. Laura, back to you.
Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the number one on your touchtone phone. If you would like to withdraw your request, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from the line of Matthew Lee from Canaccord. Please go ahead.
Hi, guys. Thanks for taking my question. I just kind of wanted to start by discussing the adjustment. Excluding one-time impacts, revenue in the quarter was around CAD 6.6 million. Is that the baseline we should be modeling off of for 2023?
Phil, you wanna take that?
Yeah. Thanks, Matt, for the question. Yeah, that is the, essentially the, our baseline run rate exactly into 2023.
Okay, thanks. You know, maybe switching to backlog, continues to grow to record highs. I understand the demand is very robust, but is it maybe time to consider expanding the workforce to capture some of this revenue faster?
Hi, Matt. Yes, absolutely. We have done that already. We've hired a handful of people that, we've implemented what we call a drain the backlog program. Backlog is starting to come down already, so we're provisioning at a higher rate now.
Okay, great. Just maybe finally, you know, on the 5G side, any update in terms of rollout or early thoughts on service and quality? Is it kind of what you were expecting or is there any kind of change to your estimate in terms of how you expect that to roll out?
Great question. One of the things we're doing at McMaster is we are doing a lot of testing, and we're doing testing for throughput and coverage, and engineers are having a lot of fun poking around in corners there to see where we can actually get coverage. I think it's a little early for us to say whether or not the deployment is meeting expectations. I think it's something we should, we should check in on next quarter.
Okay, thanks a lot, guys.
Thank you. Your next question comes from the line of David McFadgen from Cormark Securities. Please go ahead.
Hi, guys. A couple of questions. When I look at the connectivity revenue in the fourth quarter, you know, if we adjust or look at it on a pro forma basis, CAD 6.6 or CAD 6.5. Should we, I know you don't like to provide guidance, but do you think it's reasonable to assume that the connectivity revenue is gonna grow in that low single-digit range in 2023?
I think, Dave, we're hesitant to provide any specific guidance, Phil, you can chime in here. When you look at the inputs to what would drive growth next year, we're still feeling very positive about those inputs. Bookings remain strong, backlog remains strong. We don't see any fall off in interest in fixed wireless access. The market is telling us that interest is actually going up. At this point, as Phil mentioned, it's a good baseline for us, and we think we should be able to maintain positive momentum if things continue to be as strong as we're seeing them with the leading indicators.
Okay. Just on the churn, I noticed, it just ticked up, you know, not a lot, a little bit in the fourth quarter if we compare it to the prior quarter, if we compare it to Q3 2022. I was just wondering, is there anything noticeable that drove that up? Or it's just kinda bounces around.
Most of our churn is lumpy. Occasionally we see a lump when we have a bigger customer that churns off or we reprice. A lot of our churn these days is repricing as well. There's nothing we can point to that indicates it's the higher number as a trend or an anomaly. We happen to have a convergence of a few big events that past quarter.
Okay. Just on the idea of, you know, the private networks, 5G private networks, do you think that, like, are you close to announcing a new, commercial customer, or you think you'll be announcing one in 2023?
Our goal is to. We're gated by equipment availability. You know, I mentioned earlier that we had last year been expecting, based on what we were being told by Qualcomm and other suppliers, that equipment would be available to us at the end of the year or early in the first quarter. You know, we were somewhat concerned that that slipped, now we're seeing that equipment availability in the second quarter or in the first part of the third quarter. We're, I won't make any predictions at this point, given some of the slips we've seen. We're engaged with customers. There are customers that are interested. We wanna see how McMaster develops and see how the network performs there.
If things come together the way we're currently seeing them come together, our goal is to add customers at the latter half of this year.
Okay. All right. Okay. That's it for me. Thank you.
Thanks, Dave.
Thank you. At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Gerber for any closing remarks.
I don't have anything additionally other than thanks everybody, and have a good rest of your day.
Thank you, sir. Thank you for joining us today for TeraGo's third quarter 2022 earnings call. You may now disconnect. Have a lovely day.