- Non-GAAP Adjusted Operating EBITDA Income of $1.267 Million, A Record High as a Percentage of Revenue -
- Focused on Increasing the Profitability of Existing Revenue Streams, Increasing the Average Revenue per Customer, and Providing Exceptional Customer Support -
SAN ANTONIO, Texas, March 25, 2024 (GLOBE NEWSWIRE) -- Digerati Technologies, Inc. (OTCQB: DTGI) ("Digerati" or the "Company"), a provider of cloud services specializing in Unified Communications as a Service (“UCaas") solutions for the small to medium-sized business (“SMB”) market, announced today financial results for the three and six months ended January 31, 2024, the Company’s second quarter for its Fiscal Year 2024.
Key Financial Highlights for the Three Months Ended January 31, 2024 (Compared to Three Months Ended January 31, 2023)
- Revenue decreased 5% to $7.565 million compared to $7.941 million.
- Gross profit decreased 1% to $4.905 million compared to $4.973 million.
- Gross margin increased to 64.84% compared to 62.62%.
- Non-GAAP EBITDA from income (“Adjusted EBITDA - Income”) decreased 15% to $0.676 million, excluding all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA - Income of $0.796 million.
- Net loss attributable to Digerati’s common shareholders was $3.556 million, compared to net income attributable to Digerati’s common shareholders of $0.220 million.
- Non-GAAP operating EBITDA (“Adjusted EBITDA - OPCO”) income increased 5% to $1.267 million, excluding corporate expenses, all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA - OPCO of $1.204 million.
Craig K. Clement, Executive Chairman and interim CEO of Digerati, commented, “Calendar year 2023 was all about the continued focus to improve the profitability of our existing revenue streams and the winding down of legacy revenue from previous acquisitions that has not aligned with our profitability objectives. Our team has done a tremendous job in streamlining operations and reducing redundancies, resulting in higher margins and more operational efficiencies. We support approximately 45,000 users, predominantly in Florida, Texas and California, and we believe we have built a strong and valuable platform in which to stack additional and accretive revenue.” Mr. Clement further added that, “Our Sales Team recently attended the Channel Partners Conference in Las Vegas, and we believe the quality and size of new revenue opportunities coming our way is very exciting.”
Antonio Estrada, CFO of Digerati, stated, “Our strategic decision to unwind and not continue unprofitable revenue streams has resulted in a slight decrease in revenue but at higher margins. Going forward our primary focus is to increase our customer base, grow the monthly recurring revenue and associated average revenue per customer while continuing to provide exceptional customer support. We look forward to sharing our progress with our shareholders over the coming months and quarters.”
Three Months ended January 31, 2024, Compared to Three Months ended January 31, 2023
Revenue for the three months ended January 31, 2024, was $7.565 million, a decrease of $0.376 million, or 5%, compared to $7.941 million for the three months ended January 31, 2023. The decrease in cloud-based hosted service revenue was primarily attributable to the decrease in total customers, which resulted from the focus on decommissioning unprofitable revenue streams. The Company’s primary emphasis is to increase its customer base, increasing the monthly recurring revenue and providing exceptional customer support.
Gross profit for the three months ended January 31, 2024, was $4.905 million, a decrease of $0.068 million, or 1%, compared to $4.973 million for the three months ended January 31, 2023, resulting in a gross margin of 64.84%, compared 62.62% for the three months ended January 31, 2023.
Selling, General and Administrative expenses (excluding legal and professional fees, and stock compensation expense) for the three months ended January 31, 2024, decreased by $0.264 million, or 6%, to $4.171 million compared to $4.435 million for the three months ended January 31, 2023.
Operating loss for the three months ended January 31, 2024, was $1.647 million, an increase of $0.082 million, or 5%, compared to $1.565 million for the three months ended January 31, 2023.
Adjusted EBITDA income for the three months ended January 31, 2024, was $0.676 million, a decrease of $0.120 million, or 15%, compared to Adjusted EBITDA - Income of $0.796 million for the three months ended January 31, 2023.
Adjusted EBITDA - OPCO income for the three months ended January 31, 2024, was $1.267 million, excluding corporate expenses, and all non-cash items and one-time transactional expenses, an increase of $0.063 million, or 5%, compared to Adjusted EBITDA - OPCO income of $1.204 million for the three months ended January 31, 2023.
Net loss attributable to Digerati’s common shareholders for the three months ended January 31, 2024, was $3.556 million, compared to net income attributable to Digerati’s common shareholders of $0.220 million, for the three months ended January 31, 2023. The resulting dilutive earnings per share (“EPS”) loss for the three months ended January 31, 2024 was ($0.02), as compared to dilutive EPS loss of ($0.01) for the three months ended January 31, 2023.
On January 31, 2024, Digerati had $0.769 million of cash and cash equivalents.
Six Months ended January 31, 2024, Compared to Six Months ended January 31, 2023
Revenue for the six months ended January 31, 2024, was $15.219 million, a decrease of $0.852 million, or 5%, compared to $16.071 million for the six months ended January 31, 2023.
Gross profit for the six months ended January 31, 2024, was $10.008 million, a decrease of $0.244 million, or 2%, compared to $10.252 for the six months ended January 31, 2023, resulting in a gross margin of 65.76%, compared to 63.79% for the six months ended January 31, 2023.
Selling, General and Administrative expenses (excluding legal and professional fees, and stock compensation expense) for the six months ended January 31, 2024, decreased by $0.205 million, or 2%, to $8.348 million compared to $8.553 million for the six months ended January 31, 2023.
Operating loss for the six months ended January 31, 2024, was $2.446 million, an increase of $0.481 million or 24%, compared to $1.965 million for the six months ended January 31, 2023.
Adjusted EBITDA income for the six months ended January 31, 2024, was $1.410 million, a decrease of $0.520 million, or 27%, compared to an Adjusted EBITDA - Income of $1.930 million for the six months ended January 31, 2023.
Of note were the following non-cash expenses associated with the six months ended January 31, 2024: Company recognition of stock-based compensation and warrant expense of $0.016 million, depreciation and amortization expense of $1.812 million, and loss on derivative instruments was $0.581 million.
Adjusted EBITDA - OPCO income for the six months ended January 31, 2024, was $2.472 million, excluding corporate expenses, and all non-cash items and one-time transactional expenses, a decrease of $0.123 million, or 5%, compared to Adjusted EBITDA - OPCO income of $2.595 million for the six months ended January 31, 2023.
Net loss attributable to Digerati’s common shareholders for the six months ended January 31, 2024, was $7.641 million, an increase of $2.873 million or 60%, compared to a net loss attributable to Digerati’s common shareholders of $4.768 million, for the six months ended January 31, 2023. The resulting dilutive EPS loss for the six months ended January 31, 2024, was ($0.05), compared to dilutive EPS loss of ($0.03) for the six months ended January 31, 2023.
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 - Income 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 - Income 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 - Income as one of several financial measures to assess its operating performance, its use is limited as it excludes certain significant operating expenses. Adjusted EBITDA - OPCO 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 - Income, and Adjusted EBITDA - OPCO 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 solutions for the SMB market. Through its operating subsidiary Verve Cloud, Inc. (f/k/a T3 Communications, Nexogy, and NextLevel Internet), 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 such as ‘we believe we have built a strong and valuable platform in which to load additional and accretive revenue,’ and ‘our Sales Team recently attended the Channel Partners Conference in Las Vegas and we believe the quality and size of new revenue opportunities coming our way is very exciting.’ Although the Company believes that the expectations reflected in the forward-looking statements, 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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| Reconciliation of Net Loss to Adjusted EBITDA - OPCO and Adjusted EBITDA - Income | ||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||
| Three Months ended January 31, | Six Months ended January 31, | |||||||||||||||||||||||||||||
| 2024 | 2023 | Variances | % | 2024 | 2023 | Variances | % | |||||||||||||||||||||||
| OPERATING REVENUES: | ||||||||||||||||||||||||||||||
| Cloud-based hosted services | $ | 7,565 | $ | 7,941 | $ | (376 | ) | -5 | % | $ | 15,219 | $ | 16,071 | $ | (852 | ) | -5 | % | ||||||||||||
| Total operating revenues | 7,565 | 7,941 | (376 | ) | -5 | % | 15,219 | 16,071 | (852 | ) | -5 | % | ||||||||||||||||||
| Cost of services (exclusive of depreciation and amortization) | 2,660 | 2,968 | (308 | ) | -10 | % | 5,211 | 5,819 | (608 | ) | -10 | % | ||||||||||||||||||
| Selling, general and administrative expense | 4,171 | 4,435 | (264 | ) | -6 | % | 8,348 | 8,553 | (205 | ) | -2 | % | ||||||||||||||||||
| Stock compensation expense | 4 | 23 | (19 | ) | -83 | % | 16 | 46 | (30 | ) | -65 | % | ||||||||||||||||||
| Legal and professional fees | 1,190 | 1,074 | 116 | 11 | % | 2,163 | 1,630 | 533 | 33 | % | ||||||||||||||||||||
| Bad debt | 58 | 40 | 18 | 45 | % | 115 | 69 | 46 | 67 | % | ||||||||||||||||||||
| Depreciation and amortization expense | 1,129 | 966 | 163 | 17 | % | 1,812 | 1,919 | (107 | ) | -6 | % | |||||||||||||||||||
| Total operating expenses | 9,212 | 9,506 | (294 | ) | -3 | % | 17,665 | 18,036 | (371 | ) | -2 | % | ||||||||||||||||||
| OPERATING LOSS | (1,647 | ) | (1,565 | ) | (82 | ) | 5 | % | (2,446 | ) | (1,965 | ) | (481 | ) | 24 | % | ||||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||||||||||||||||
| Gain (loss) on derivative instruments | 31 | 3,849 | (3,818 | ) | -99 | % | (581 | ) | 773 | (1,354 | ) | -175 | % | |||||||||||||||||
| Loss on extinguishment of debt | (99 | ) | - | (99 | ) | (99 | ) | - | (99 | ) | ||||||||||||||||||||
| Other income (expense) | (51 | ) | 10 | (61 | ) | -610 | % | (51 | ) | 456 | (507 | ) | -111 | % | ||||||||||||||||
| Interest expense | (2,223 | ) | (2,371 | ) | 148 | -6 | % | (5,264 | ) | (4,436 | ) | (828 | ) | 19 | % | |||||||||||||||
| Income tax expense | (35 | ) | (27 | ) | (8 | ) | 30 | % | (63 | ) | (77 | ) | 14 | -18 | % | |||||||||||||||
| Total other income (expense) | (2,377 | ) | 1,461 | (3,838 | ) | -263 | % | (6,058 | ) | (3,284 | ) | (2,774 | ) | 84 | % | |||||||||||||||
| NET LOSS | (4,024 | ) | (104 | ) | (3,920 | ) | 3769 | % | (8,504 | ) | (5,249 | ) | (3,255 | ) | 62 | % | ||||||||||||||
| Less: Net loss attributable to the noncontrolling interests | 468 | 328 | 140 | 43 | % | 863 | 489 | 374 | 76 | % | ||||||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS | $ | (3,556 | ) | $ | 224 | $ | (3,780 | ) | -1688 | % | $ | (7,641 | ) | $ | (4,760 | ) | $ | (2,881 | ) | 61 | % | |||||||||
| Deemed dividend on Series A Convertible preferred stock | - | (4 | ) | 4 | -100 | % | - | (8 | ) | 8 | -100 | % | ||||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI'S COMMON SHAREHOLDERS | $ | (3,556 | ) | $ | 220 | $ | (3,776 | ) | -1716 | % | $ | (7,641 | ) | $ | (4,768 | ) | $ | (2,873 | ) | 60 | % | |||||||||
| Reconciliation of Net Income (Loss) to Adjusted EBITDA - OPCO, Net of Non-Cash Expenses & Transactional Costs. | ||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS, as reported | $ | (3,556 | ) | $ | 224 | $ | (3,780 | ) | -1688 | % | $ | (7,641 | ) | $ | (4,760 | ) | $ | (2,881 | ) | 61 | % | |||||||||
| EXCLUDING NON-CASH ITEMS TRANSACTIONAL COSTS & CORP EXP | ||||||||||||||||||||||||||||||
| ADJUSTMENTS: | ||||||||||||||||||||||||||||||
| Stock compensation & warrant expense | 4 | 23 | (19 | ) | -83 | % | 16 | 46 | (30 | ) | -65 | % | ||||||||||||||||||
| Corp Expenses (Net of stock compensation, Legal fees & Transactional cost) | 591 | 408 | 183 | 45 | % | 1,062 | 665 | 397 | 60 | % | ||||||||||||||||||||
| Legal, professional fees & transactional costs | 1,190 | 1,372 | (182 | ) | -13 | % | 2,028 | 1,930 | 98 | 5 | % | |||||||||||||||||||
| Depreciation and amortization expense | 1,129 | 966 | 163 | 17 | % | 1,812 | 1,919 | (107 | ) | -6 | % | |||||||||||||||||||
| OTHER ADJUSTMENTS | ||||||||||||||||||||||||||||||
| Gain (loss) on derivative instruments | (31 | ) | (3,849 | ) | 3,818 | -99 | % | 581 | (773 | ) | 1,354 | -175 | % | |||||||||||||||||
| Loss on derivative instruments | 99 | - | 99 | 99 | - | 99 | ||||||||||||||||||||||||
| Other income (expense) | 51 | (10 | ) | 61 | -610 | % | 51 | (456 | ) | 507 | -111 | % | ||||||||||||||||||
| Interest expense | 2,223 | 2,371 | (148 | ) | -6 | % | 5,264 | 4,436 | 828 | 19 | % | |||||||||||||||||||
| Income tax expense | 35 | 27 | 8 | 30 | % | 63 | 77 | (14 | ) | -18 | % | |||||||||||||||||||
| Less: Net loss attributable to the noncontrolling interests | (468 | ) | (328 | ) | (140 | ) | 43 | % | (863 | ) | (489 | ) | (374 | ) | 76 | % | ||||||||||||||
| ADJUSTED EBITDA - OPCO | $ | 1,267 | $ | 1,204 | $ | 63 | 5 | % | $ | 2,472 | $ | 2,595 | $ | (123 | ) | -5 | % | |||||||||||||
| ADD-BACKS Expenses | ||||||||||||||||||||||||||||||
| Corp Expenses (Net of stock compensation, Legal fees & Transactional cost) | 591 | 408 | 183 | 45 | % | 1,062 | 665 | 397 | 60 | % | ||||||||||||||||||||
| ADJUSTED EBITDA - INCOME | $ | 676 | $ | 796 | $ | (120 | ) | -15 | % | $ | 1,410 | $ | 1,930 | $ | (520 | ) | -27 | % | ||||||||||||
