- Non-GAAP Operating EBITDA of $0.619 Million -
- Gross Profit of $2.225 Million -
- Strong Gross Margin Improvement to 59.3% -
SAN ANTONIO, Texas, June 10, 2021 (GLOBE NEWSWIRE) -- Digerati Technologies, Inc. (OTCQB: DTGI) ("Digerati" or the "Company"), a provider of cloud services specializing in UCaaS (Unified Communications as a Service) solutions for the small to medium-sized business (“SMB”) market, announced today financial results for the three months ended April 30, 2021, the Company’s third quarter for its Fiscal Year 2021.
Key Financial Highlights for the Third Quarter Fiscal Year 2021 (Ended April 30, 2021)
- Revenue increased by 140% to $3.751 million compared to $1.566 million for Q3 FY2020.
- Gross profit increased 177% to $2.225 million compared to $0.802 million for Q3 FY2020.
- Gross margin increased to 59.3% compared to 51.2% for Q3 FY2020.
- Non-GAAP Adjusted EBITDA income improved to $0.321 million, excluding all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA loss of $0.013 million for Q3 FY2020.
- Non-GAAP operating EBITDA (OPCO EBITDA) improved to income of $0.619 million, excluding corporate expenses, compared to a non-GAAP operating EBITDA of $0.207 million for Q3 FY2020.
As previously cited, operating efficiencies, expected cost synergies and consolidation savings from the Nexogy and ActivePBX acquisitions were realized over several months following the closing of the transactions. As a result, all of Digerati’s financial measures have steadily improved over the past two quarters, resulting in an increase in gross margin to 59.3% and non-GAAP operating EBITDA of $0.619 million for the three months ended April 30, 2021. Operating loss for the three months ended April 30, 2021 was $0.588 million.
Arthur L. Smith, Chief Executive Officer of Digerati, commented, “We are extremely pleased with these quarterly results, which annualize to $15.0 million in revenue. Our operating and financial teams have been hard at work on identifying and implementing operating cost efficiencies to improve our margins and EBITDA. We are proud of the results which demonstrated improved margins at every operating level and a boost to our profitability.”
Smith concluded, “Once again our team has shown a strong capability in successfully implementing acquisitions, which further strengthens the support from our financial partner, Post Road Group. We will continue to seek out synergistic, strategic, and accretive acquisitions, as we remain focused on meeting our corporate goal to up-list to either the Nasdaq or NYSE American.”
Three Months ended April 30, 2021 Compared to Three Months ended April 30, 2020
Revenue for the three months ended April 30, 2021 was $3.751 million, an increase of $2.185 million or 140% compared to $1.566 million for the three months ended April 30, 2020. The increase in revenue between periods is primarily attributed to the consolidation of the closed acquisitions of Nexogy and ActivePBX during the period.
The total number of customers increased from 731 for the three months ended April 30, 2020 to 2,612 customers for the three months ended April 30, 2021. Additionally, the average monthly revenue per customer decreased from $714 for the three months ended April 30, 2020 to $479 for the three months ended April 30, 2021. The decrease in average monthly revenue per customer was anticipated and is attributed to the Company’s significant shift in its product mix towards UCaaS services upon acquiring Nexogy and ActivePBX.
Gross profit for the three months ended April 30, 2021 was $2.225 million, resulting in a gross margin of 59.3%, compared to $0.802 million and 51.2% for the three months ended April 30, 2020. The increase in gross margin is primarily due to the addition of high-margin revenue associated with Nexogy’s and ActivePBX’s UCaaS product line.
Selling, General and Administrative expenses (excluding legal and professional fees) for the three months ended April 30, 2021 increased by $0.946 million, or 90%, to $1.993 million compared to $1.047 million for the three months ended April 30, 2020. The increase in SG&A is attributed to the consolidation of the closed acquisitions of Nexogy and ActivePBX.
Operating loss for the three months ended April 30, 2021, was $0.588 million, an increase of $0.116 million or 25%, compared to $0.472 million for the three months ended April 30, 2020.
Adjusted EBITDA income for the three months ended April 30, 2021, was $0.321 million, an improvement of $0.334 million, compared to an adjusted EBITDA loss of $0.013 million for the three months ended April 30, 2020. In accordance with SEC Regulation G, the non-GAAP measurement of Adjusted EBITDA has been reconciled to the nearest GAAP measurement, which can be viewed under the heading “Reconciliation of Net Loss to Adjusted EBITDA” in the financial table included in this press release.
Of note were the following non-cash expenses associated with the three months ended April 30, 2021: Company recognition of stock-based compensation and warrant expense of $0.182 million and depreciation and amortization expense of $0.611 million. Loss on derivative instruments was $10.878 million for the three months ended April 30, 2021.
Non-GAAP operating EBITDA (OPCO EBITDA) for the three months ended April 30, 2021 improved to income of $0.619 million, excluding corporate expenses, compared to a non-GAAP operating income of $0.207 million for the three months ended April 30, 2020.
Net loss for the three months ended April 30, 2021, was $12.803 million, an increase of $11.696 million, as compared to a net loss of $1.107 million, for the three months ended April 30, 2020. The increase in net loss is due primarily to the additional loss on derivative instruments of $10.878 million, a non-cash expense. The Company anticipates fluctuations in gain or loss to be reflected in future financial results arising with respect to changes in the time value of its derivative financial instruments. The resulting EPS for the three months ended April 30, 2021 was a loss of ($0.09), as compared to a loss of ($0.02) for the three months ended April 30, 2020.
At April 30, 2021, Digerati had $2.125 million of cash.
Use of Non-GAAP Financial Measurements
The Company believes that EBITDA (earnings before interest, taxes, depreciation and amortization) is useful to investors because it is commonly used in the cloud communications industry to evaluate companies on the basis of operating performance and leverage. Adjusted EBITDA provides an adjusted view of EBITDA that takes into account certain significant non-recurring transactions, if any, such as impairment losses and expenses associated with pending acquisitions, which vary significantly between periods and are not recurring in nature, as well as certain recurring non-cash charges such as changes in fair value of the Company’s derivative liabilities and stock-based compensation. The Company also believes that Adjusted EBITDA provides investors with a measure of the Company’s operational and financial progress that corresponds with the measurements used by management as a basis for allocating resources and making other operating decisions. Although the Company uses Adjusted EBITDA as one of several financial measures to assess its operating performance, its use is limited as it excludes certain significant operating expenses. Non-GAAP operating EBITDA (OPCO EBITDA) is useful to investors because it reflects EBITDA for the core operation of the business excluding corporate expenses, non-cash expenses and transactional expenses. EBITDA, Adjusted EBITDA, and Non-GAAP operating EBITDA are not intended to represent cash flows for the periods presented, nor have they been presented as an alternative to operating income or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In accordance with SEC Regulation G, the non-GAAP measurements in this press release have been reconciled to the nearest GAAP measurement, which can be viewed under the heading “Reconciliation of Net Loss to Adjusted EBITDA” in the financial table included in this press release.
About Digerati Technologies, Inc.
Digerati Technologies, Inc. (OTCQB: DTGI) is a provider of cloud services specializing in UCaaS (Unified Communications as a Service) solutions for the business market. Through its operating subsidiaries T3 Communications (T3com.com) and Nexogy (Nexogy.com), the Company is meeting the global needs of businesses seeking simple, flexible, reliable, and cost-effective communication and network solutions including cloud PBX, cloud telephony, cloud WAN, cloud call center, cloud mobile, and the delivery of digital oxygen on its broadband network. Digerati has developed a robust integration platform to fuel mergers and acquisitions in a highly fragmented market as it delivers business solutions on its carrier-grade network and Only in the Cloud™. For more information, please visit www.digerati-inc.com or follow DTGI on LinkedIn, Twitter and Facebook.
Forward-Looking Statements
The information in this news release includes certain forward-looking statements that are based upon assumptions that in the future may prove not to have been accurate and are subject to significant risks and uncertainties, including statements related to the future financial performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements such as revenues that annualize to $15.0 million, our ability to secure synergistic, strategic, and accretive acquisitions, and up-list to either the Nasdaq or NYSE American are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Factors that could cause results to differ include, but are not limited to, a national securities exchange not approving our application, our inability to source suitable acquisition targets, failure to execute growth strategies, lack of product development and related market acceptance, the impact of competitive services and pricing, general economic conditions, and other risks and uncertainties described in the Company's periodic filings with the Securities and Exchange Commission.
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Investors
The Eversull Group
Jack Eversull
jack@theeversullgroup.com
(972) 571-1624
ClearThink
Brian Loper
bloper@clearthink.capital
(347) 413-4234
| DIGERATI TECHNOLOGIES, INC. AND SUBSIDIARIES | |||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||
| (In thousands, except per share amounts, unaudited) | |||||||||||||||||||
| Three months ended April 30, | Nine months ended April 30, | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| OPERATING REVENUES: | |||||||||||||||||||
| Cloud software and service revenue | $ | 3,751 | $ | 1,566 | $ | 8,629 | $ | 4,712 | |||||||||||
| Total operating revenues | 3,751 | 1,566 | 8,629 | 4,712 | |||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||
| Cost of services (exclusive of depreciation and amortization) | 1,526 | 764 | 3,708 | 2,343 | |||||||||||||||
| Selling, general and administrative expense | 1,993 | 1,047 | 4,969 | 3,357 | |||||||||||||||
| Legal and professional fees | 204 | 98 | 717 | 408 | |||||||||||||||
| Bad debt | 5 | (19 | ) | 9 | (19 | ) | |||||||||||||
| Depreciation and amortization expense | 611 | 148 | 1,204 | 465 | |||||||||||||||
| Total operating expenses | 4,339 | 2,038 | 10,607 | 6,554 | |||||||||||||||
| OPERATING LOSS | (588 | ) | (472 | ) | (1,978 | ) | (1,842 | ) | |||||||||||
| OTHER INCOME (EXPENSE): | |||||||||||||||||||
| Gain (loss) on derivative instruments | (10,878 | ) | (249 | ) | (10,860 | ) | 69 | ||||||||||||
| Gain (loss) on settlement of debt | 150 | 134 | 347 | 134 | |||||||||||||||
| Income tax benefit (expense) | (63 | ) | (10 | ) | (122 | ) | 22 | ||||||||||||
| Interest expense | (1,577 | ) | (511 | ) | (3,079 | ) | (1,513 | ) | |||||||||||
| Total other income (expense) | (12,368 | ) | (636 | ) | (13,714 | ) | (1,288 | ) | |||||||||||
| NET LOSS INCLUDING NONCONTROLLING INTEREST | (12,956 | ) | (1,108 | ) | (15,692 | ) | (3,130 | ) | |||||||||||
| Less: Net loss attributable to the noncontrolling interests | 158 | 1 | 223 | 58 | |||||||||||||||
| NET LOSS ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS | (12,798 | ) | (1,107 | ) | (15,469 | ) | (3,072 | ) | |||||||||||
| Deemed dividend on Series A Convertible preferred stock | (5 | ) | - | (15 | ) | - | |||||||||||||
| NET LOSS ATTRIBUTABLE TO DIGERATI'S COMMON SHAREHOLDERS | $ | (12,803 | ) | $ | (1,107 | ) | $ | (15,484 | ) | $ | (3,072 | ) | |||||||
| LOSS PER COMMON SHARE - BASIC | $ | (0.09 | ) | $ | (0.02 | ) | $ | (0.12 | ) | $ | (0.07 | ) | |||||||
| LOSS PER COMMON SHARE - DILUTED | $ | (0.09 | ) | $ | (0.02 | ) | $ | (0.12 | ) | $ | (0.07 | ) | |||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC | 136,719,871 | 61,624,640 | 126,524,312 | 41,445,900 | |||||||||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED | 136,719,871 | 61,624,640 | 126,524,312 | 41,445,900 | |||||||||||||||
| See notes to consolidated unaudited financial statements | |||||||||||||||||||
| Reconciliation of Net Income (Loss) to Adjusted EBITDA - OPCO, Net of Non-cash expenses & Transactional Costs. | |||||||||||||||||||
| NET LOSS ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS, as reported | $ | (12,798 | ) | $ | (1,107 | ) | $ | (15,469 | ) | $ | (3,072 | ) | |||||||
| EXCLUDING NON-CASH ITEMS TRANSACTIONAL COSTS & CORP EXP | |||||||||||||||||||
| ADJUSTMENTS: | |||||||||||||||||||
| Stock compensation & warrant expense | 182 | 298 | 906 | 1,132 | |||||||||||||||
| Corp Expenses net of stock compensation & Transactional cost | 298 | 220 | 682 | 610 | |||||||||||||||
| Legal and professional fees - transactional costs | 110 | 32 | 488 | 214 | |||||||||||||||
| Depreciation and amortization expense | 611 | 148 | 1,204 | 465 | |||||||||||||||
| Loss on derivative instruments | 10,878 | 249 | 10,860 | (69 | ) | ||||||||||||||
| Bad Debt | 5 | (19 | ) | 9 | (19 | ) | |||||||||||||
| OTHER ADJUSTMENTS | |||||||||||||||||||
| Interest expense | 1,577 | 511 | 3,079 | 1,513 | |||||||||||||||
| Income tax | 63 | 10 | 122 | (22 | ) | ||||||||||||||
| Less: Net loss attributable to the noncontrolling interest | (158 | ) | (1 | ) | (223 | ) | (58 | ) | |||||||||||
| Gain (loss) on settlement of debt | (150 | ) | (134 | ) | (347 | ) | (134 | ) | |||||||||||
| ADJUSTED EBITDA - OPCO | $ | 619 | $ | 207 | $ | 1,311 | $ | 560 | |||||||||||
| ADD-BACKS Expenses | |||||||||||||||||||
| Corp Expenses net of stock compensation & Transactional cost | 298 | 220 | 682 | 610 | |||||||||||||||
| ADJUSTED EBITDA - Income (Loss) | $ | 321 | $ | (13 | ) | $ | 629 | (50 | ) | ||||||||||