- Non-GAAP Operating EBITDA of $0.969 Million -
- Gross Profit of $5.002 Million -
- Strong Gross Margin Improvement to 61.3% -
SAN ANTONIO, Texas, June 21, 2022 (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, 2022, the Company’s third quarter for its Fiscal Year 2022.
Key Financial Highlights for the Third Quarter Fiscal Year 2022 (Ended April 30, 2022)
- Revenue increased by 118% to $8.163 million compared to $3.751 million for Q3 FY2021.
- Gross profit increased 125% to $5.002 million compared to $2.225 million for Q3 FY2021.
- Gross margin increased to 61.3% compared to 59.3% for Q3 FY2021.
- Non-GAAP Adjusted EBITDA income was $0.557 million, excluding all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA income of $0.321 million for Q3 FY2021.
- Non-GAAP operating EBITDA (OPCO EBITDA) improved to income of $0.969 million, excluding corporate expenses, all non-cash items and one-time transactional expenses, compared to a non-GAAP operating EBITDA of $0.619 million for Q3 FY2022.
Arthur L. Smith, CEO of Digerati, commented, “We are extremely pleased with the operating and financial results for our third quarter fiscal year 2022, which include our recent acquisitions of SkyNet Telecom and NextLevel Internet. Our cloud communications and broadband solutions have an expanded footprint in Texas and are now on the west coast in California, serving our target market of small to medium-sized businesses.”
Smith continued, “As we build scale and increase our footprint through the continued implementation of our acquisition strategy, our team delivers on outstanding execution in identifying redundancies and cost savings and integrating operations to improve our efficiencies. Our 3rd quarter financial results do not yet reflect most of the cost synergies from our integration playbook for our most recent acquisitions of Skynet Telecom and NextLevel Internet. We anticipate realizing these synergies in subsequent quarters that we expect will result in improved operating profitability. We continue to prove out our business model year over year and quarter over quarter.”
Antonio Estrada, CFO of Digerati, stated, “All of our financial metrics continue to improve and are trending in the right direction. These are highlighted by our improved revenue, gross margin, adjusted EBITDA and operating EBITDA that have all been boosted by our acquisitions and the subsequent financial improvement due to successful integration. We continue to have our sights set on and remain on a track towards an uplisting to Nasdaq or NYSE American.”
Three Months ended April 30, 2022 Compared to Three Months ended April 30, 2021
Revenue for the three months ended April 30, 2022 was $8.163 million, an increase of $4.412 million or 118% compared to $3.751 million for the three months ended April 30, 2022. The increase in revenue is primarily attributed to the increase in total customers between periods due to the acquisitions of Skynet Telecom in December 2021 and NextLevel Internet in February 2022. Our total number of customers increased from 2,612 for the three months ended April 30, 2021, to 3,963 customers for the three months ended April 30, 2022.
Gross profit for the three months ended April 30, 2022 was $5.002 million, resulting in a gross margin of 61.3%, compared to $2.225 million and 59.3% for the three months ended April 30, 2021.
Selling, General and Administrative expenses (excluding legal and professional fees) for the three months ended April 30, 2022 increased by $2.303 million, or 116%, to $4.296 million compared to $1.993 million for the three months ended April 30, 2021. The increase in SG&A is attributed to the acquisitions of Skynet Telecom in December 2021 and NextLevel Internet in February 2022. As part of the consolidations, the Company absorbed all of the employees responsible for managing the customer base, technical support, sales, customer service, and administration.
Operating loss for the three months ended April 30, 2022 was $1.626 million, an increase of $1.038 million or 177%, compared to $0.588 million for the three months ended April 30, 2021. The increase in operating loss between periods is primarily due to the increase in legal and audit fees of $589,000 associated with the acquisition of NextLevel Internet in February 2022.
Adjusted EBITDA income for the three months ended April 30, 2022 was $0.557 million, compared to an adjusted EBITDA income of $0.321 million for the three months ended April 30, 2021. 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, 2022. Company recognition of stock-based compensation and warrant expense of $0.028 million and depreciation and amortization expense of $1.540 million. Gain on derivative instruments was $6.827 million for the three months ended April 30, 2022.
Non-GAAP operating EBITDA (OPCO EBITDA) for the three months ended April 30, 2022 improved to income of $0.969 million, excluding corporate expenses, and all non-cash items and one-time transactional expenses, compared to a Non-GAAP operating EBITDA (OPCO EBITDA) income of $0.619 million for the three months ended April 30, 2021.
Net income for the three months ended April 30, 2022 was $3.902 million, an improvement of $16.705 million, as compared to a net loss of $12.803 million for the three months ended April 30, 2021. The resulting EPS profit for the three months ended April 30, 2022 was $0.03, as compared to a loss of ($0.09) for the three months ended April 30, 2021. The increase in net income between periods is primarily due to the gain on derivative instruments of $6.827 million.
On April 30, 2022 Digerati had $2.384 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), Nexogy (Nexogy.com), SkyNet Telecom (Skynettelecom.net) and NextLevel Internet (nextlevelinternet.com), the Company is meeting the global needs of small 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 and 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 realizing cost synergies in subsequent quarters that we expect will result in improved operating profitability, remaining on a track towards an uplisting to Nasdaq or NYSE American, and we continue to prove out our business model year over year and quarter over quarter, 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
| Reconciliation of Net Income (Loss) to Adjusted EBITDA | |||||||||||||||||||
| 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, | ||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| OPERATING REVENUES: | |||||||||||||||||||
| Cloud software and service revenue | $ | 8,163 | $ | 3,751 | $ | 15,959 | $ | 8,629 | |||||||||||
| Total operating revenues | 8,163 | 3,751 | 15,959 | 8,629 | |||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||
| Cost of services (exclusive of depreciation and amortization) | 3,161 | 1,526 | 6,203 | 3,708 | |||||||||||||||
| Selling, general and administrative expense | 4,296 | 1,993 | 8,211 | 4,969 | |||||||||||||||
| Legal and professional fees | 756 | 204 | 2,505 | 717 | |||||||||||||||
| Bad debt | 36 | 5 | 51 | 9 | |||||||||||||||
| Depreciation and amortization expense | 1,540 | 611 | 2,514 | 1,204 | |||||||||||||||
| Total operating expenses | 9,789 | 4,339 | 19,484 | 10,607 | |||||||||||||||
| OPERATING LOSS | (1,626 | ) | (588 | ) | (3,525 | ) | (1,978 | ) | |||||||||||
| OTHER INCOME (EXPENSE): | |||||||||||||||||||
| Gain (loss) on derivative instruments | 6,827 | (10,878 | ) | 7,835 | (10,860 | ) | |||||||||||||
| Loss on extinguishment of debt | - | - | (5,480 | ) | - | ||||||||||||||
| Gain on settlement of debt | - | 150 | - | 347 | |||||||||||||||
| Income tax benefit (expense) | (167 | ) | (63 | ) | (285 | ) | (122 | ) | |||||||||||
| Other income (expense) | 2 | - | - | - | |||||||||||||||
| Interest expense | (1,676 | ) | (1,577 | ) | (4,563 | ) | (3,079 | ) | |||||||||||
| Total other income (expense) | 4,986 | (12,368 | ) | (2,493 | ) | (13,714 | ) | ||||||||||||
| NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST | 3,360 | (12,956 | ) | (6,018 | ) | (15,692 | ) | ||||||||||||
| Less: Net loss attributable to the noncontrolling interests | 546 | 158 | 1,306 | 223 | |||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS | 3,906 | (12,798 | ) | (4,712 | ) | (15,469 | ) | ||||||||||||
| Deemed dividend on Series A Convertible preferred stock | (4 | ) | (5 | ) | (14 | ) | (15 | ) | |||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI'S COMMON SHAREHOLDERS | $ | 3,902 | $ | (12,803 | ) | $ | (4,726 | ) | $ | (15,484 | ) | ||||||||
| INCOME (LOSS) PER COMMON SHARE - BASIC | $ | 0.03 | $ | (0.09 | ) | $ | (0.03 | ) | $ | (0.12 | ) | ||||||||
| LOSS PER COMMON SHARE - DILUTED | $ | (0.01 | ) | $ | (0.09 | ) | $ | (0.03 | ) | $ | (0.12 | ) | |||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC | 139,751,107 | 136,719,871 | 139,285,833 | 126,524,312 | |||||||||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED | 254,167,793 | 136,719,871 | 139,285,833 | 126,524,312 | |||||||||||||||
| See notes to consolidated unaudited financial statements | |||||||||||||||||||
| Reconciliation of Net Income (Loss) to Adjusted EBITDA - OPCO, Net of Non-cash expenses & Transactional Costs. | |||||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS, as reported | $ | 3,906 | $ | (12,798 | ) | $ | (4,712 | ) | $ | (15,469 | ) | ||||||||
| EXCLUDING NON-CASH ITEMS TRANSACTIONAL COSTS & CORP EXP | |||||||||||||||||||
| ADJUSTMENTS: | |||||||||||||||||||
| Stock compensation & warrant expense | 28 | 183 | 75 | 906 | |||||||||||||||
| Corp Expenses (Net of stock compensation & Transactional cost) | 412 | 298 | 1,169 | 682 | |||||||||||||||
| Legal and professional fees - transactional costs | 579 | 110 | 1,968 | 488 | |||||||||||||||
| Depreciation and amortization expense | 1,540 | 611 | 2,514 | 1,204 | |||||||||||||||
| Bad Debt | 36 | 5 | 51 | 9 | |||||||||||||||
| OTHER ADJUSTMENTS | |||||||||||||||||||
| Gain (loss) on derivative instruments | (6,827 | ) | 10,878 | (7,835 | ) | 10,860 | |||||||||||||
| Loss on extinguishment of debt | - | - | 5,480 | - | |||||||||||||||
| Gain (loss) on settlement of debt | - | (150 | ) | - | (347 | ) | |||||||||||||
| Other income (expense) | (2 | ) | - | - | - | ||||||||||||||
| Interest expense | 1,676 | 1,577 | 4,563 | 3,079 | |||||||||||||||
| Income tax | 167 | 63 | 285 | 122 | |||||||||||||||
| Less: Net loss attributable to the noncontrolling interest | (546 | ) | (158 | ) | (1,306 | ) | (223 | ) | |||||||||||
| ADJUSTED EBITDA - OPCO | $ | 969 | $ | 619 | $ | 2,252 | $ | 1,311 | |||||||||||
| ADD-BACKS Expenses | |||||||||||||||||||
| Corp Expenses net of stock compensation & Transactional cost | 412 | 298 | 1,169 | 682 | |||||||||||||||
| ADJUSTED EBITDA - INCOME | $ | 557 | $ | 321 | $ | 1,083 | $ | 629 | |||||||||||
