Fourth Quarter Gross Margin Improved to 56% –
– Positive Adjusted EBITDA Achieved in Fourth Quarter –
SAN ANTONIO, Texas, Oct. 30, 2020 (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 and twelve months ended July 31, 2020, the Company’s fourth quarter and Fiscal Year 2020 respectively.
Key Financial Highlights for Fiscal Year 2020 (Ended July 31, 2020)
- Revenue increased to $6.279 million compared to $6.040 million for FY2019, driven by organic growth.
- Gross profit increased to $3.244 million compared to $2.912 million for FY2019.
- Gross margin increased to 52% compared to 48% for FY2019.
- Adjusted EBITDA improved to a loss of $2,000, excluding all non-cash items and one-time transactional expenses, compared to an Adjusted EBITDA loss of $500,000 for FY2019.
- Average monthly revenue per customer (ARPU) was $711.
- Net customer count increased to 728.
Key Financial Highlights for Fourth Quarter 2020 (Ended July 31, 2020)
- Revenue increased to $1.567 million compared to $1.547 million for fourth quarter 2019, driven by organic growth.
- Gross profit increased to $0.875 million compared to $0.741 million for fourth quarter 2019.
- Gross margin increased to 56% compared to 48% for fourth quarter 2019.
- Adjusted EBITDA improved to $48,000, excluding all non-cash items and one-time transactional expenses, compared to an Adjusted EBITDA loss of $76,000 for fourth quarter 2019.
During the fourth quarter and subsequently, the Company continued to make progress in moving its proposed transactions consisting of its acquisition of Nexogy, Inc., its fourth acquisition, and financing transaction (a $20 million senior secured multi-draw credit facility) towards a closing. The Company has completed the required quality of earnings audits on both of its acquisition targets, as well as for its operating subsidiary, T3 Communications, Inc. In addition, the Company received approval on its assignment of assets and change in control application with the Federal Communications Commission on its fourth acquisition.
Arthur L. Smith, Chief Executive Officer of Digerati, commented, “Our base business continues to perform well, as demonstrated by the organic growth and improvement in gross margin. More specifically, our fourth quarter ended July 31, 2020 results continue to demonstrate a positive trend towards profitability with our gross margin increasing to 56%, our operating loss improving by 61% to an operating loss of $270,000, and our Adjusted EBITDA improving by 163% to $48,000.”
Smith, concluded, “We are well-positioned to combine our existing business and operational foundation with planned and future acquisitions as we look to continue our dual strategy of organic and acquisitive growth. We look forward to completing our next series of transactions and moving on to the next phase of the Company’s corporate development plan with the primary objective of up-listing to Nasdaq or the NYSE American.”
Chief Financial Officer Antonio Estrada, Jr., stated, “We are proud to have achieved these results during the past year as our industry experiences an accelerated adoption of UCaaS service offerings created by the need for businesses to implement teleworking environments. This supports our business model and the fact that we are providing the right communication solutions for the small to medium-sized business market that are highly useful to users during challenging and disruptive times.”
Fiscal Year Ended July 31, 2020 Compared to Fiscal Year Ended July 31, 2019
Revenue for the fiscal year ended July 31, 2020 was $6.279 million, an increase of $0.239 million or approximately 4% compared to $6.040 million for the fiscal year ended July 31, 2019. This increase in UCaaS and service revenue was attributable to the increase in total customers between periods.
The total number of customers increased from 702 for the fiscal year ended July 31, 2019 to 728 customers for the fiscal year ended July 31, 2020.
Gross profit for the fiscal year ended July 31, 2020 was $3.244 million, resulting in a gross margin of 52%, compared to $2.912 million and 48% for the fiscal year ended July 31, 2019.
Selling, General and Administrative expenses for the fiscal year ended July 31, 2020 decreased by $0.102 million, or 2%, to $4.106 million compared to $4.208 for the fiscal year ended July 31, 2019.
Adjusted EBITDA for the fiscal year ended July 31, 2020, was a loss of $.002 million, an improvement of $0.498 million, compared to a loss of $0.500 million for the same period in FY2019.
Operating loss for the fiscal year ended July 31, 2020, was $2.112 million compared to $2.361 million for the same period in FY2019.
Of note, the non-cash expenses associated with the fiscal year ended July 31, 2020 were Company recognition of stock-based compensation and warrant expense of $1.127 million and depreciation and amortization expense of $0.613 million. Loss on derivative instruments was $0.263 million and non-cash interest expense was $1.306 million for the fiscal year ended July 31, 2020.
Net loss for the fiscal year ended July 31, 2020, was $3.396 million as compared to $4.549 million, for the same period in FY2019. The resulting EPS for the fiscal year ended July 31, 2020 was a loss of ($0.06), as compared to a loss of ($0.27) for the same period in FY2019.
At July 31, 2020, Digerati had $0.685 million of cash.
Further details about the Company’s Q4 and FY2020 financial results are available in its report on Form 10K, which will be available in the Financials section of the Company’s website at www.digerati-inc.com.
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. EBITDA and Adjusted 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”).
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 small to medium-sized business market. Through its operating subsidiary T3 Communications (www.T3com.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 mobile, Internet broadband, SD-WAN, SIP trunking, and customized VoIP services, all delivered on its carrier-grade network and Only in the Cloud™. For more information about Digerati Technologies, please visit www.digerati-inc.com.
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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