SAN ANTONIO, Dec. 15, 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 ended October 31, 2020, the Company’s first quarter for its Fiscal Year 2021.
Key Financial Highlights for the First Quarter Fiscal Year 2021 (Ended October 31, 2020)
- Revenue, that remained relatively consistent with preceding quarterly periods at $1.552 million, decreased by 2% compared to $1.589 million for Q1 FY2020.
- Gross profit increased 2% to $0.804 million compared to $0.786 million for Q1 FY2020.
- Gross margin increased to 51.8% compared to 49.5% for Q1 FY2020.
- Adjusted EBITDA income improved to $0.058 million, excluding all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA income of $0.043 million for Q1 FY2020.
- Non-GAAP operating EBITDA (OPCO EBITDA) improved to income of $0.242 million, excluding corporate expenses, non-cash items and one-time transactional expenses, compared to non-GAAP operating EBITDA income of $0.193 million for Q1 FY2020.
Subsequent Events to the End of the First Quarter Fiscal Year 2021 (Ended October 31, 2020)
Digerati Technologies closed its Nexogy, Inc. (Nexogy.com) and ActivePBX (ActivePBX.com) acquisitions, more than doubling annual revenue to greater than $14 million. As a combined business, Nexogy, ActivePBX, and Digerati’s operating subsidiary, T3 Communications, Inc., serves over 2,600 business customers and approximately 28,000 users. The business model of the combined entities is supported by strong and predictable recurring revenue with high gross margins under contracts with business customers in various industries including banking, healthcare, financial services, legal, insurance, hotels, real estate, staffing, municipalities, food services, and education. The contribution from the acquisitions of approximately $8 million in annual revenue and $1.5 million in annual EBITDA is expected to have an immediate and positive impact on the Company’s revenue and EBITDA results that will be reported for the first time when Digerati announces financial results for its second fiscal quarter (November 2020 – January 2021). The Company anticipates that additional improvements will be realized during FY2021 from the expected cost synergies and consolidation savings.
Digerati Technologies closed a $20 million credit facility with Post Road Group. The Facility enables continued expansion of Digerati’s U.S. operations through organic growth efforts and targeted acquisitions. The initial funding of $14 million from the $20 million multi-draw facility was used to close the Company’s recently announced acquisitions of Nexogy and ActivePBX, and refinance existing debt. Future draws may be used to fund additional acquisitions within the Company’s robust M&A pipeline of UCaaS providers that meet key financial, technical, and operational criteria, and have excelled at customer service and satisfaction when serving regional businesses. The Facility will support a more streamlined approach to the Company’s acquisition process, accelerating its consolidation strategy in the highly-fragmented UCaaS marketplace.
Arthur L. Smith, Chief Executive Officer of Digerati, commented, “We have demonstrated resiliency throughout the Covid-19 pandemic while remaining focused on closing the Nexogy, ActivePBX and Post Road Group transactions. We are now targeting 5-10% annual revenue growth for calendar 2021 and, for the first time, reported EBITDA results for our operating business segment (OPCO EBITDA) which management believes better reflects the performance of the Company’s core operations.”
Smith, concluded, “Our team is focused on integrating our recent acquisitions, realizing operating efficiencies and eliminating redundant costs. We look forward to streamlining our operations, demonstrating stronger profitability and moving on to the next phase of the Company’s corporate development plan with the primary objective of up-listing to Nasdaq or NYSE American.”
Three Months ended October 31, 2020 Compared to Three Months ended October 31, 2019
Revenue for the three months ended October 31, 2020 was $1.552 million, a decrease of $0.037 million or 2% compared to $1.589 million for the three months ended October 31, 2019. The decrease in revenue between periods is primarily attributed to the decrease in total customers between periods.
The total number of customers decreased from 708 for the three months ended October 31, 2019 to 701 customers for the three months ended October 31, 2020. Additionally, the average monthly revenue per customer decreased from $754 for the three months ended October 31, 2019 to $738 for the three months ended October 31, 2020.
Gross profit for the three months ended October 31, 2020 was $0.804 million, resulting in a gross margin of 51.8%, compared to $0.786 million and 49.5% for the three months ended October 31, 2019. The decrease in cost of services between periods is primarily attributed to the reduction of one of our co-location sites, whereby we consolidated multiple servers with a nationwide provider.
Selling, General and Administrative expenses for the three months ended October 31, 2020 decreased by $0.181 million, or 15%, to $1.011 million compared to $1.192 million for the three months ended October 31, 2019. The decrease in SG&A is attributed to reduction of a few sales partners, customer care and technical support partners.
Operating loss for the three months ended October 31, 2020, was $0.626 million, a decrease of $0.045 million or 7%, compared to $0.671 million for the three months ended October 31, 2019.
Adjusted EBITDA income for the three months ended October 31, 2020, was $0.058 million, an improvement of $0.015 million, compared to income of $0.043 million for the three months ended October 31, 2019.
Non-cash expenses associated with the three months ended October 31, 2020 included Company recognition of stock-based compensation and warrant expense of $0.343 million and depreciation and amortization expense of $0.161 million. Gain on derivative instruments was $0.178 million and non-cash amortization of debt discount was $0.178 Million for the three months ended October 31, 2020.
Non-GAAP operating EBITDA (OPCO EBITDA) improved to income of $0.242 million, excluding corporate expenses, non-cash items and one-time transactional expenses, compared to non-GAAP operating EBITDA income of $0.193 million for Q1 FY2020.
Net loss for the three months ended October 31, 2020, was $0.756 million, a decrease of $0.787 million, or 52%, as compared to $1.521 million, for the three months ended October 31, 2019. The resulting EPS for the three months ended October 31, 2020 was a loss of ($0.01), as compared to a loss of ($0.06) for the three months ended October 31, 2019.
At October 31, 2020, Digerati had $0.446 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 items and one-time 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”).
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 (www.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 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.
The Securities and Exchange Commission (“SEC”) has provided guidance to issuers regarding the use of social media to disclose material non-public information. In this regard, investors and others should note that we announce material financial information on our investor relations company website, www.TheWaypointRefinery.com, in addition to SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media to communicate with the public about our Company, our services and other issues. It is possible that the information we post on social media could be deemed to be material information. Therefore, in light of the SEC’s guidance, we encourage investors, the media, and others interested in our Company to review the information we post on the following U.S. social media channels:
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