- Non-GAAP Operating EBITDA of $0.447 Million, Net of Corporate Expenses -
- Adjusted EBITDA of $0.247 Million -
- Strong Gross Margin Improvement to 56.9% -
SAN ANTONIO, March 17, 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 January 31, 2021, the Company’s second quarter for its Fiscal Year 2021.
Key Financial Highlights for the Second Quarter Fiscal Year 2021 (Ended January 31, 2021)
- Revenue increased by 114% to $3.326 million compared to $1.557 million for Q2 FY2020.
- Gross profit increased 142% to $1.892 million compared to $0.781 million for Q2 FY2020.
- Gross margin increased to 56.9% compared to 50.2% for Q1 FY2020.
- Adjusted EBITDA income improved to $0.247 million, excluding all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA loss of $0.081 million for Q2 FY2020.
- Non-GAAP operating EBITDA (OPCO EBITDA) improved to income of $0.447 million, excluding corporate expenses, compared to a non-GAAP operating income of $0.159 million for Q2 FY2020.
Of note, Digerati closed its acquisitions of Nexogy, Inc. and ActivePBX on November 17, 2020, so a full period of 90 operating days is not reflected in its financial results for the three months ended January 31, 2021, the Company’s second quarter for its Fiscal Year 2021. The first full quarter with financial results including Nexogy and ActivePBX will be reported in the Company’s SEC’s Form 10Q for its third fiscal quarter ending April 30, 2021.
While initial operating efficiency improvements from expected cost synergies and consolidation savings have been implemented resulting in an increase in gross margin to 56.9% and non-GAAP operating EBITDA of $0.447 million, additional improvements are expected to be realized throughout the remainder of FY2021.
Arthur L. Smith, Chief Executive Officer of Digerati, commented, “We are very pleased with these quarterly results, which annualize to $13.3 million in revenue, despite us closing the acquisitions 17 days into the quarter. As we have done with past acquisitions, our team is working vigorously on implementing operating cost efficiencies to improve our margins and EBITDA. Additional synergies and strategic growth initiatives will evolve over the remainder of our FY2021, as we continue to target organic revenue growth and boost our profitability.”
Smith, concluded, “In addition, we have a solid pipeline of potential UCaaS provider acquisition targets in various stages of development. With the support of our financial partner, Post Road Group, we will continue to work on securing accretive acquisitions as we remain focused on meeting our corporate goal to up-list to either the Nasdaq or NYSE American.”
Three Months ended January 31, 2021 Compared to Three Months ended January 31, 2020
Revenue for the three months ended January 31, 2021 was $3.326 million, an increase of $1.769 million or 114% compared to $1.557 million for the three months ended January 31, 2020. The increase in revenue between periods is primarily attributed to the inclusion of the closed acquisitions of Nexogy and ActivePBX during the period.
The total number of customers increased from 705 for the three months ended January 31, 2020 to 2,583 customers for the three months ended January 31, 2021. Additionally, the average monthly revenue per customer decreased from $731 for the three months ended January 31, 2020 to $485 for the three months ended January 31, 2021. The decrease in average monthly revenue per customer 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 January 31, 2021 was $1.892 million, resulting in a gross margin of 56.9%, compared to $0.781 million and 50.2% for the three months ended January 31, 2020. The increase in gross margin is primarily due to the addition of high-margin revenues associated with Nexogy’s and ActivePBX’s UCaaS product line.
Selling, General and Administrative expenses for the three months ended January 31, 2021 increased by $0.847 million, or 76%, to $1.965 million compared to $1.118 million for the three months ended January 31, 2020. The increase in SG&A is attributed to the inclusion of the closed acquisitions of Nexogy and ActivePBX during the period.
Operating loss for the three months ended January 31, 2021, was $0.764 million, an increase of $0.065 million or 9%, compared to $0.699 million for the three months ended January 31, 2020.
Adjusted EBITDA income for the three months ended January 31, 2021, was $0.247 million, an improvement of $0.328 million, compared to a loss of $0.081 million for the three months ended January 31, 2020.
Of note were the following non-cash expenses associated with the three months ended January 31, 2021: Company recognition of stock-based compensation and warrant expense of $0.381 million and depreciation and amortization expense of $0.432 million. Loss on derivative instruments was $0.160 million and non-cash interest expense was $1.202 Million for the three months ended January 31, 2021.
Non-GAAP operating EBITDA (OPCO EBITDA) for the three months ended January 31, 2021 improved to income of $0.447 million, excluding corporate expenses, compared to a non-GAAP operating income of $0.159 million for the three months ended January 31, 2021.
Net loss for the three months ended January 31, 2021, was $1.955 million, an increase of $1.498 million, or 328%, as compared to $0.457 million, for the three months ended January 31, 2020. The resulting EPS for the three months ended January 31, 2021 was a loss of ($0.02), as compared to a loss of ($0.01) for the three months ended January 31, 2020.
At January 31, 2021, Digerati had $1.875 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. A multi-year recipient of Deloitte’s Fast500 and Fast50 Awards for one of the fastest growing technology companies in North America, Digerati has become an expert at successfully merging and managing subsidiary operations since 2015. 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.
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 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, successful execution of growth strategies, product development and 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 January 31, | Six months ended January 31, | |||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||
| OPERATING REVENUES: | ||||||||||||||||||||
| Cloud software and service revenue | $ | 3,326 | $ | 1,557 | $ | 4,878 | $ | 3,146 | ||||||||||||
| Total operating revenues | 3,326 | 1,557 | 4,878 | 3,146 | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||
| Cost of services (exclusive of depreciation and amortization) | 1,434 | 776 | 2,182 | 1,579 | ||||||||||||||||
| Selling, general and administrative expense | 1,965 | 1,118 | 2,976 | 2,310 | ||||||||||||||||
| Legal and professional fees | 255 | 208 | 513 | 310 | ||||||||||||||||
| Bad debt | 4 | 1 | 4 | 1 | ||||||||||||||||
| Depreciation and amortization expense | 432 | 153 | 593 | 316 | ||||||||||||||||
| Total operating expenses | 4,090 | 2,256 | 6,268 | 4,516 | ||||||||||||||||
| OPERATING LOSS | (764 | ) | (699 | ) | (1,390 | ) | (1,370 | ) | ||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||||||
| Gain (loss) on derivative instruments | (160 | ) | 783 | 18 | 318 | |||||||||||||||
| Gain (loss) on settlement of debt | 197 | - | 197 | - | ||||||||||||||||
| Income tax benefit (expense) | (51 | ) | (7 | ) | (59 | ) | 32 | |||||||||||||
| Interest expense | (1,202 | ) | (578 | ) | (1,502 | ) | (1,002 | ) | ||||||||||||
| Total other income (expense) | (1,216 | ) | 198 | (1,346 | ) | (652 | ) | |||||||||||||
| NET LOSS INCLUDING NONCONTROLLING INTEREST | (1,980 | ) | (501 | ) | (2,736 | ) | (2,022 | ) | ||||||||||||
| Less: Net loss attributable to the noncontrolling interests | 30 | 44 | 65 | 57 | ||||||||||||||||
| NET LOSS ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS | (1,950 | ) | (457 | ) | (2,671 | ) | (1,965 | ) | ||||||||||||
| Deemed dividend on Series A Convertible preferred stock | (5 | ) | - | (10 | ) | - | ||||||||||||||
| NET LOSS ATTRIBUTABLE TO DIGERATI'S COMMON SHAREHOLDERS | $ | (1,955 | ) | $ | (457 | ) | $ | (2,681 | ) | $ | (1,965 | ) | ||||||||
| LOSS PER COMMON SHARE - BASIC | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.06 | ) | ||||||||
| LOSS PER COMMON SHARE - DILUTED | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.06 | ) | ||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC | 122,706,601 | 38,118,032 | 121,578,716 | 31,598,490 | ||||||||||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED | 122,706,601 | 38,118,032 | 121,578,716 | 31,598,490 | ||||||||||||||||
| See notes to consolidated unaudited financial statements | ||||||||||||||||||||
| Reconciliation of Net Income (Loss) to Adjusted EBITDA - OPCO, Net of Non-cash expenses & Transactional Costs. | ||||||||||||||||||||
| SHAREHOLDERS, as reported | $ | (1,950 | ) | $ | (457 | ) | $ | (2,671 | ) | $ | (1,965 | ) | ||||||||
| EXCLUDING NON-CASH ITEMS TRANSACTIONAL COSTS & CORP EXP | ||||||||||||||||||||
| ADJUSTMENTS: | ||||||||||||||||||||
| Stock compensation & warrant expense | 381 | 323 | 724 | 834 | ||||||||||||||||
| Corp Expenses net of stock compensation & Transactional cost | 200 | 240 | 384 | 390 | ||||||||||||||||
| Legal and professional fees - transactional costs | 198 | 142 | 378 | 182 | ||||||||||||||||
| Depreciation and amortization expense | 432 | 153 | 593 | 316 | ||||||||||||||||
| Loss on derivative instruments | 160 | (783 | ) | (18 | ) | (318 | ) | |||||||||||||
| Interest expense - debt discount | - | - | - | - | ||||||||||||||||
| OTHER ADJUSTMENTS | ||||||||||||||||||||
| Interest expense | 1,202 | 578 | 1,502 | 1,002 | ||||||||||||||||
| Income tax | 51 | 7 | 59 | (32 | ) | |||||||||||||||
| Less: Net loss attributable to the noncontrolling interest | (30 | ) | (44 | ) | (65 | ) | (57 | ) | ||||||||||||
| Gain (loss) on settlement of debt | (197 | ) | - | (197 | ) | - | ||||||||||||||
| ADJUSTED EBITDA - OPCO | $ | 447 | $ | 159 | $ | 689 | $ | 352 | ||||||||||||
| ADD-BACKS Expenses | ||||||||||||||||||||
| Corp Expenses net of stock compensation & Transactional cost | 200 | 240 | - | 384 | - | 390 | ||||||||||||||
| ADJUSTED EBITDA - Income (Loss) | $ | 247 | $ | (81 | ) | $ | - | $ | 305 | $ | - | $ | (38 | ) | ||||||