- Non-GAAP Operating EBITDA of $0.910 Million -
- Gross Profit of $2.360 Million -
- Strong Gross Margin Improvement to 62.3% -
SAN ANTONIO, Texas, Oct. 27, 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 and twelve months ended July 31, 2021, the Company’s fourth quarter and annual year end for its Fiscal Year 2021.
Key Financial Highlights for the Fourth Quarter Fiscal Year 2021 (Ended July 31, 2021)
- Revenue increased by 142% to $3.787 million compared to $1.567 million for Q4 FY2020.
- Gross profit increased 170% to $2.360 million compared to $0.875 million for Q4 FY2020.
- Gross margin increased to 62.3% compared to 55.8% for Q4 FY2020.
- Non-GAAP Adjusted EBITDA income improved to $0.525 million, excluding all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA income of $0.062 million for Q4 FY2020.
- Non-GAAP operating EBITDA (OPCO EBITDA) improved to income of $0.910 million, excluding corporate expenses, compared to a non-GAAP operating EBITDA of $0.342 million for Q4 FY2020.
Arthur L. Smith, CEO of Digerati, commented, “We enjoyed a very productive and successful fiscal year 2021, highlighted by the closing of our acquisitions of Nexogy and ActivePBX. We accomplished key objectives related to these acquisitions during FY2021 and now have a strong and significant platform in Florida and Texas that serves as a foundation for continued growth. We will remain focused on targeting annual organic growth of 10% that is complemented by accretive acquisitions as we seek to increase our profitability and enhance shareholder value. With an acquisition financing partner, Post Road Group, that shares our vision for strategic acquisitive growth, we will seek to capitalize on the opportunities in a very fragmented market that has created a healthy pipeline of prospective acquisitions.”
Antonio Estrada, CFO of Digerati, stated, “We exited our fiscal year end July 31, 2021 in a much-improved financial position with annual run-rates of $15.148 million in revenue, $2.100 million in Non-GAAP Adjusted EBITDA and $3.640 million in Non-GAAP operating EBITDA. Our team has successfully integrated the acquisitions of Nexogy and ActivePBX and we are now seeing the financial reward. We proved that our operating and financial teams could execute on our acquisition strategy and look forward to replicating this success with additional targeted accretive acquisitions in the future.”
Fiscal Year Ended July 31, 2021 Accomplishments:
- Closed acquisition of Nexogy. Over the years, the Nexogy team has developed a channel sales program that has proven to be effective and resulted in Nexogy’s recognition as one of the fastest growing technology companies in South Florida and nomination by the Miami Minority Chamber of Commerce as “High Tech Company of the Year 2016”.
- Closed acquisition of ActivePBX. Over the years, ActivePBX has placed a strong emphasis on integrating its cloud communication platform with Customer Relationship Management (“CRM”) systems and most recently achieved the ‘Built for NetSuite’ status with its proven ActiveCRM CTI (Computer Telephony Integration) solution. This integration, built for Oracle NetSuite’s SuiteCloud Platform, allows organizations to pass CRM data seamlessly, easily, and conveniently between ActivePBX’s cloud system and Oracle NetSuite.
- As a combined business, Nexogy, ActivePBX, and Digerati’s operating subsidiary, T3 Communications, Inc., serves over 2,600 business customers and approximately 28,000 users. The business model of the combined entities is supported by strong and predictable recurring revenue with high gross margins under contracts with business customers in various industries including banking, healthcare, financial services, legal, insurance, hotels, real estate, staffing, municipalities, food services, and education.
- Closed a $20 million senior secured credit facility with Post Road Group. The Facility enables continued expansion of Digerati’s U.S. operations through organic growth efforts and targeted acquisitions. Post Road Group shares in Digerati’s strategic vision of combining organic growth with accretive acquisitions in building a formidable UCaaS provider for the small and medium-sized business market. With investing expertise in the Technology, Media, and Telecommunications (“TMT”) industries and a culture that aligns with that of the Company, Post Road Group is an ideal financial partner for Digerati during this key phase of its evolution. The initial funding of $14 million from the $20 million multi-draw facility was used to close the Company’s acquisitions of Nexogy, Inc. (Nexogy.com) and ActivePBX (ActivePBX.com), and refinance existing debt. Future draws may be used to fund additional acquisitions within the Company’s robust M&A pipeline of UCaaS providers that meet key financial, technical, and operational criteria, and have excelled at customer service and satisfaction when serving regional businesses. The Facility will support a more streamlined approach to the Company’s acquisition process, accelerating its consolidation strategy in the highly-fragmented UCaaS marketplace.
- Entered a strategic partnership with Sandler Partners to expand access to America’s fastest-growing master agent and distributor of connectivity and cloud services. Nexogy’s UCaaS and CCaaS (Unified Communications as a Service and Contact Center as a Service) platform will allow Sandler to provide its partners with additional fully integrated solutions. Sandler’s more than 8,000 partners, 200 telecom, cloud, and data providers, and extensive network of expert agents will now be able to distribute Nexogy’s fully integrated suite of cloud communication services.
- As a result of its acquisition of ActivePBX, the Company achieved the “Built for NetSuite” status for its operating subsidiary, T3 Communications, Inc. The SuiteApp, built for Oracle NetSuite’s SuiteCloud Platform, allows organizations to seamlessly, easily, and conveniently pass CRM data between the company’s cloud PBX and Oracle NetSuite, thus increasing productivity, reducing data entry time, and improving information accuracy across multiple agent touchpoints.
- Improved balance sheet.
- Reduced potential equity dilution.
Three Months ended July 31, 2021 Compared to Three Months ended July 31, 2020
Revenue for the three months ended July 31, 2021 was $3.787 million, an increase of $2.220 million or 142% compared to $1.567 million for the three months ended July 31, 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 July 31, 2020 to 2,655 customers for the three months ended July 31, 2021.
Gross profit for the three months ended July 31, 2021 was $2.360 million, resulting in a gross margin of 62.3%, compared to $0.875 million and 55.8% for the three months ended July 31, 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 July 31, 2021 increased by $1.301 million, or 174%, to $2.050 million compared to $0.749 million for the three months ended July 31, 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 July 31, 2021, was $0.420 million, an increase of $0.150 million or 56%, compared to $0.270 million for the three months ended July 31, 2020.
Adjusted EBITDA income for the three months ended July 31, 2021, was $0.525 million, an improvement of $0.463 million, compared to an adjusted EBITDA income of $0.062 million for the three months ended July 31, 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 July 31, 2021: Company recognition of stock-based compensation and warrant expense of $0.066 million and depreciation and amortization expense of $0.545 million. Gain on derivative instruments was $0.925 million for the three months ended July 31, 2021.
Non-GAAP operating EBITDA (OPCO EBITDA) for the three months ended July 31, 2021 improved to income of $0.910 million, excluding corporate expenses, compared to a non-GAAP operating income of $0.342 million for the three months ended July 31, 2020.
Net loss for the three months ended July 31, 2021, was $1.219 million, an increase of $0.895 million, as compared to a net loss of $0.324 million, for the three months ended July 31, 2020. The resulting EPS for the three months ended July 31, 2021 was a loss of ($0.01), as compared to a loss of ($0.00) for the three months ended July 31, 2020.
At July 31, 2021, Digerati had $1.489 million of cash.
Twelve Months ended July 31, 2021 Compared to Twelve Months ended July 31, 2020
Revenue for the twelve months ended July 31, 2021 was $12.416 million, an increase of $6.137 million or 98% compared to $6.279 million for the twelve months ended July 31, 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 July 31, 2020 to 2,655 customers for the twelve months ended July 31, 2021.
Gross profit for the twelve months ended July 31, 2021 was $7.281 million, resulting in a gross margin of 58.6%, compared to $3.244 million and 51.7% for the twelve months ended July 31, 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 twelve months ended July 31, 2021 increased by $2.913 million, or 71%, to $7.019 million compared to $4.106 million for the twelve months ended July 31, 2020. The increase in SG&A is attributed to the consolidation of the closed acquisitions of Nexogy and ActivePBX.
Operating loss for the twelve months ended July 31, 2021, was $2.398 million, an increase of $0.286 million or 14%, compared to $2.112 million for the twelve months ended July 31, 2020.
Adjusted EBITDA income for the twelve months ended July 31, 2021, was $1.155 million, an improvement of $1.162 million, compared to an adjusted EBITDA loss of $0.007 million for the twelve months ended July 31, 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 twelve months ended July 31, 2021: Company recognition of stock-based compensation and warrant expense of $0.972 million and depreciation and amortization expense of $1.749 million. Loss on derivative instruments was $9.935 million for the twelve months ended July 31, 2021.
Non-GAAP operating EBITDA (OPCO EBITDA) for the twelve months ended July 31, 2021 improved to income of $2.221 million, excluding corporate expenses, compared to a non-GAAP operating income of $0.883 million for the twelve months ended July 31, 2020.
Net loss for the twelve months ended July 31, 2021, was $16.703 million, an increase of $13.307 million, as compared to a net loss of $3.396 million, for the twelve months ended July 31, 2020. The increase in net loss is due primarily to the additional loss on derivative instruments of $10.198 million, a non-cash expense. The resulting EPS for the twelve months ended July 31, 2021 was a loss of ($0.13), as compared to a loss of ($0.06) for the twelve months ended July 31, 2020.
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. The Company 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 annual run-rates of $15.148 million in revenue, $2.100 million in Non-GAAP Adjusted EBITDA and $3.640 million in Non-GAAP operating EBITDA and our ability to secure synergistic, strategic, and accretive acquisitions, 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, 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 July 31, | For the Years ended July 31, | ||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| OPERATING REVENUES: | |||||||||||||||||
| Cloud software and service revenue | $ | 3,787 | $ | 1,567 | $ | 12,416 | $ | 6,279 | |||||||||
| Total operating revenues | 3,787 | 1,567 | 12,416 | 6,279 | |||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||
| Cost of services (exclusive of depreciation and amortization) | 1,427 | 692 | 5,135 | 3,035 | |||||||||||||
| Selling, general and administrative expense | 2,050 | 749 | 7,019 | 4,106 | |||||||||||||
| Legal and professional fees | 177 | 234 | 894 | 642 | |||||||||||||
| Bad debt | 8 | 14 | 17 | (5 | ) | ||||||||||||
| Depreciation and amortization expense | 545 | 148 | 1,749 | 613 | |||||||||||||
| Total operating expenses | 4,207 | 1,837 | 14,814 | 8,391 | |||||||||||||
| OPERATING LOSS | (420 | ) | (270 | ) | (2,398 | ) | (2,112 | ) | |||||||||
| OTHER INCOME (EXPENSE): | |||||||||||||||||
| Gain (loss) on derivative instruments | 925 | 194 | (9,935 | ) | 263 | ||||||||||||
| Gain (loss) on settlement of debt | 213 | (5 | ) | 560 | 129 | ||||||||||||
| Income tax benefit (expense) | (61 | ) | 11 | (183 | ) | 33 | |||||||||||
| Other income (expense) | (294 | ) | 116 | (294 | ) | 116 | |||||||||||
| Interest expense | (1,686 | ) | (340 | ) | (4,765 | ) | (1,853 | ) | |||||||||
| Total other income (expense) | (903 | ) | (24 | ) | (14,617 | ) | (1,312 | ) | |||||||||
| NET LOSS INCLUDING NONCONTROLLING INTEREST | (1,323 | ) | (294 | ) | (17,015 | ) | (3,424 | ) | |||||||||
| Less: Net loss attributable to the noncontrolling interests | 109 | (11 | ) | 332 | 47 | ||||||||||||
| NET LOSS ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS | (1,214 | ) | (305 | ) | (16,683 | ) | (3,377 | ) | |||||||||
| Deemed dividend on Series A Convertible preferred stock | (5 | ) | (19 | ) | (20 | ) | (19 | ) | |||||||||
| NET LOSS ATTRIBUTABLE TO DIGERATI'S COMMON SHAREHOLDERS | $ | (1,219 | ) | $ | (324 | ) | $ | (16,703 | ) | $ | (3,396 | ) | |||||
| LOSS PER COMMON SHARE - BASIC | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.13 | ) | $ | (0.06 | ) | |||||
| LOSS PER COMMON SHARE - DILUTED | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.13 | ) | $ | (0.06 | ) | |||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC | 137,950,308 | 90,792,574 | 129,411,947 | 53,883,966 | |||||||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED | 137,950,308 | 90,792,574 | 129,411,947 | 53,883,966 | |||||||||||||
| 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 | $ | (1,214 | ) | $ | (305 | ) | $ | (16,683 | ) | $ | (3,377 | ) | |||||
| EXCLUDING NON-CASH ITEMS TRANSACTIONAL COSTS & CORP EXP | |||||||||||||||||
| ADJUSTMENTS: | |||||||||||||||||
| Stock compensation & warrant expense | 66 | (5 | ) | 972 | 1,127 | ||||||||||||
| Corp Expenses net of stock compensation & Transactional cost | 384 | 280 | 1,066 | 890 | |||||||||||||
| Legal and professional fees - transactional costs | 326 | 175 | 815 | 370 | |||||||||||||
| Depreciation and amortization expense | 545 | 148 | 1,749 | 613 | |||||||||||||
| Loss on derivative instruments | (925 | ) | (194 | ) | 9,935 | (263 | ) | ||||||||||
| Bad Debt | 8 | 14 | 17 | (5 | ) | ||||||||||||
| OTHER ADJUSTMENTS | |||||||||||||||||
| Other income (expense) | 294 | (116 | ) | 294 | (116 | ) | |||||||||||
| Interest expense | 1,686 | 340 | 4,765 | 1,853 | |||||||||||||
| Income tax | 61 | (11 | ) | 183 | (33 | ) | |||||||||||
| Less: Net loss attributable to the noncontrolling interest | (109 | ) | 11 | (332 | ) | (47 | ) | ||||||||||
| Gain (loss) on settlement of debt | (213 | ) | 5 | (560 | ) | (129 | ) | ||||||||||
| ADJUSTED EBITDA - OPCO | $ | 910 | $ | 342 | $ | 2,221 | $ | 883 | |||||||||
| ADD-BACKS Expenses | |||||||||||||||||
| Corp Expenses net of stock compensation & Transactional cost | 384 | 280 | 1,066 | 890 | |||||||||||||
| ADJUSTED EBITDA - Income (Loss) | $ | 525 | $ | 62 | $ | 1,155 | $ | (7 | ) | ||||||||
