10/27/2021 | Press release | Distributed by Public on 10/27/2021 09:52
SAN ANTONIO, TX (GlobeNewswire) - October 27, 2021 - 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.
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."
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.
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.
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.
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.
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
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Brian Loper
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(347) 413-4234
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
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.
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)