Good morning, ladies and gentlemen, and welcome to TERAGO's second quarter 2023 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. 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 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 of 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 both the 2022 annual MD&A, as well as the MD&A for the 6 months ended June 30th, 2023, which is available on www.sedar.com, that's www.sedar.com, and 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 the 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, Daniel Vucinic. Sir, please proceed.
Good morning, everyone, and welcome to our Q2 2023 earnings call. This is my first earnings call as TERAGO CEO, and I am pleased to be here with you all. As I enter my near 2-month anniversary as CEO, I become more and more excited after each passing day as a result of the amazing team members here and the immense amount of potential we can capitalize on. I come to TERAGO with over 25 years of telecom experience at various companies, driving enterprise value creation through organic and inorganic growth and operational excellence. I've been on the side of the smaller competitor, driving innovation, competition, and differentiated customer experience, all of which are applicable to TERAGO today. Additionally, I've had the privilege to hold senior positions in all departments, including product, sales, technology, customer experience, and operations, enabling a holistic understanding of the telecom landscape.
My prior tenure has provided me with the experience, business insights, and learnings that I will leverage here at TERAGO. Starting from day one on the job, I've hit the ground running. After a meticulous initial assessment of the business and much collaboration with the executive team and employees, TERAGO will be implementing a shareholder value strategy, which is a pivot from TERAGO's former corporate plan and a step towards a new and refined direction. The prior game plan for the company was one of focused top-line revenue growth, which resulted in inflated OpEx and CapEx figures. In our assessment, we found that there was a lack of strategic focus and concentration, as our old selves were trying to be everything to everyone in every market and every customer segment. The numbers don't lie, as this was clearly reflected in relatively lower cash flow and Adjusted EBITDA margins.
Our shareholder value strategy is still in the works of being memorialized, but we have a pretty good sense of the trajectory, as our end goal is to drive shareholder value creation. One of the vital subsets to our strategy is what we call smart growth, which is positioning fixed wireless as a premium product in the right place, at the right price, and with the right customer segment. This, combined with the optimization of operational expenses and stronger returns on capital investments, will ensure revenue and Adjusted EBITDA growth, ultimately leading us towards a path to bottom-line profitability and positive cash flow. Of course, lastly, we want to be sure to capitalize on TERAGO's unique and robust wireless spectrum for both fixed wireless and 5G private networks.
Our organization has a competitive advantage relative to our peers, thanks to these assets, and it is part of our revamped strategy to make sure we maximize the full value. That said, as I'm sure you could have guessed, this plan is a long-term one and not something that can happen overnight. Our team will remain laser-focused in manifesting our refined plan, but it will take some time. Taking a step back, prior management was predominantly focused on the divestiture, which was completed successfully. However, with TERAGO ready for its next phase within its corporate timeline, the board of directors felt that now is the time for new leadership with a proven track record to grow this business, combined with a more operational mindset. I look forward to updating you all in the near future as our shareholder value strategy unfolds. Phil, over to you.
Thanks, Dan. Starting with slide five, with connectivity revenues. Connectivity revenues totaled CAD 6.5 million in Q2 2023, compared to CAD 6.6 million for the same period in the prior year. The year-over-year decrease being the result of the churn of customers that were associated with the 2022 divestiture transaction. When comparing the current quarter revenues to the immediately prior quarter, Q1 2023, our revenue was flat, as provisioning and onboarding of new customers was on par with customer churn. Moving to slide six, for a look at our connectivity KPIs for the second quarter of 2023 and the prior four quarters.
Our backlog of monthly recurring revenue, or MRR, in our connectivity business, decreased year-over-year to $85,471 as of June 30th, 2023, compared to $133,436 for the same period in 2022. The decrease in backlog MRR is a result of lower bookings year-over-year, combined with debookings of previously signed orders, resulting from technical, geographical, and customer landlord limitations preventing fulfillment of the orders, all of these factors being beyond the control of TeraGo. Next, our average revenue per customer, or ARPU, for our connectivity business, was $1,104 in Q2 2023, compared to $1,101 in Q1 2023, and compared to $1,118 in the same period in 2022.
ARPU at the end of Q2 2022, was a historic high point due to the customer and product mix in effect at that time. TeraGo continues to be successful in expanding its customer base to larger, multi-location customers. However, some of these recent orders have been a large volume of our lower revenue products, resulting in a year-over-year ARPU decrease. Despite the year-over-year decline in ARPU, the metric has been increasing in each of the last three consecutive quarters. Finally, connectivity churn was 1.2%, compared to 0.9% in the prior quarter and 0.9% for the same period last year.
The increase in churn in the current quarter was largely the result of a single multi-location customer, who was at the end of their contract term and required by their foreign parent company to switch to a fiber-based connectivity solution. We continue to focus on mid-market and large-scale customers, and have begun implementing new strategies and policies and procedures to more proactively engage with existing customers, increasing our contract renewals, customer retention, and long-term revenue. Turning to slide seven, to go through our broader Q2 2023 financial highlights. Total revenues for Q2 2023 were $6.5 million, compared to $6.7 million for the same period in 2022. The difference again being the result of the divestiture transaction and completion of the corresponding transaction services agreement.
Net loss increased to CAD 4 million in Q2 2023, compared to a net loss of CAD 3.1 million in the same period last year. The increased net loss being the result of both lower revenues and higher salary and operating costs as a result of the CEO change that took place in Q2 2023. Adjusted EBITDA was CAD 0.5 million in Q2 2023, compared to CAD 1.0 million for the same period last year. The decrease was a result of lower revenues and gross profit compared to the prior year, combined with higher SG&A net of restructuring costs. However, Adjusted EBITDA in the prior quarter was CAD 0.8 million, which we feel is the more accurate benchmark, since the prior year comparable quarter contained both costs and revenues associated with the divestiture transaction service agreements. Turning now to slide eight.
Capital expenditures totaled $1.5 million, or 23% of our revenue. CapEx expenditure continues to be predominantly success-based spend associated with the onboarding of new customers. Turning to the balance sheet, we ended Q2 2023 with $4.8 million in cash and $0.2 million in short-term investments, for a combined position of approximately $5 million, despite severance and related costs paid as a result of the CEO transition. The company continues to focus on cash management, although the quarter did lack revenue and EBITDA growth, the company is ahead of its own internally budgeted cash balance. The company is fully compliant with the covenants under its long-term debt facility.
With Dan now at the helm and the activation of our shareholder value strategy, we've continued to downward optimize our cost structure, our headcount, our salary costs, net of the CEO transition, compared to the prior quarter and the same three and six-month periods in the prior year. With that said, I'd like to turn the call back over to Dan.
Thanks, Phil. The current results are the results, but there is significant potential to create more value with customers, shareholders, and employees, leveraging our unique assets in fixed wireless and private 5G. With respect to 5G, TeraGo plans to leverage our millimeter wave assets for customers that require ultra-low latency and higher data consumption, as well as leveraging the mid-band spectrum through ISED non-competitive local licensing process to drive the power of 5G networks to really fuel the industry as it relates to innovation and significantly improving productivity, quality, safety, and cost savings for our customers. In conclusion, as I've shared already, this is a long-term manifestation of the shareholder value strategy. We are still a ways to go, but we are hyper-focused in ensuring that we will get to our goal of generating revenue and EBITDA growth in our business, optimizing operational expenses, and mitigating churn.
All in all, I'm very excited for the times ahead, and I appreciate your continued support for our organization. That wraps up the prepared remarks for us today, and we can now open up the call for questions. Operator, over to you.
Thank you very much. We are now opening the floor for questions. If you have any questions, please press star one on your phone keypad now. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For any participants using speaker equipment, it may be necessary to pick up your handset before you press the keys. Please pause a moment whilst we poll for any questions. Thank you. Your first question is coming from Sid Dilawari of Cormark Securities. Sid, please proceed.
Hey, guys. Thanks for taking my question. Firstly, just on the backlog MRR decline, you know, you flagged a few external factors that resulted in lower bookings and debookings. Can you help us sort of unpack that and maybe just also elaborate a little bit on if there's any potential in the near term to recoup some of this lost revenue in subsequent quarters?
Yes, thanks for your question, Sid. Appreciate it. Yeah, in terms of the backlog, none of this had resulted in revenue yet. As we book an order, it sits in our backlog, becomes revenue once we've provisioned. The decrease year-over-year, again, part of it is obviously as we off-board new customers, brings the balance down. Our bookings have been lower than they were a year ago. Then with in the case of the, the debooks, there won't be an opportunity to try and re-up that customer. Say, the, the reason for the debook was due to technical issues, whether it be geography, could be the customer landlord, therefore, making the deal economics not work, then other technical challenges that just can't be overcome for that customer or potential customer.
Sorry. When you say geography, does that mean it's not serviceable where they're located, or?
No, it's because our equipment requires a clear line of sight, so it simply means we couldn't get a line of sight from the hub to the customer's location.
Okay. Then just secondly, on the SG&A expense, you know, it continues to creep up, and this quarter was 94% off your top line, you know, versus 78% last year. Can you talk about what's leading to that ongoing spike in SG&A, and when can we sort of start to see that stabilize a little bit more and see some of your gross margin dollars flowing more into EBITDA?
Sure. Yeah, the Q2, we have a large expenses related to the CEO change, had we netted all of those costs out, then our SG&A would have been flat or slightly below where it was in Q1. That trend is continuing forward. We've had some natural attrition at the company. We have chosen not to backfill those roles as we continue to optimize the headcount of the company back to what's appropriate for the current level of activity.
Okay. I guess, on a normalized basis, this should be around somewhere where it was last year going forward?
Lower.
Okay. Okay, that's really helpful. Then just one last one for me. You know, just on the ARPU decline, it was, it was marginal. You know, you obviously highlighted last Q2 being sort of the peak in terms of ARPU. Should we be expecting to sort of see ARPU stabilize in the current range or the Q1 2023 range going forward?
Yes. Where we are now, we've had three straight quarters of growth. It was just down compared to where we were a year ago. Q4, Q1, and then Q2 of this year have all been trending upwards, and we certainly expect it to stay within that range, if not to continue to slightly increase upward.
Okay. Okay, that's helpful. That's all for me. Thanks, guys.
Yeah. Thanks, Sid.
Thank you very much. Just a reminder there, if anyone has any remaining questions, please press star one on your phone keypad now. Okay, we don't appear to have any further questions in the queue, and that concludes our question- and- answer session, and that concludes today's conference call. Thank you very much, everybody, for your participation. You may disconnect your phone lines at this time, and have a wonderful day.