- Non-GAAP Adjusted Operating EBITDA of $4.774 Million -
- Gross Profit of $20.337 Million -
- Strong Gross Margin Improvement to 64.3% -
SAN ANTONIO, Nov. 27, 2023 (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 twelve months ended July 31, 2023, the Company's Fiscal Year 2023.
Key Financial Highlights for the Twelve Months Ended July 31, 2023 (Compared to the Twelve Months Ended July 31, 2022)
- Revenue increased by 31% to $31.623 million compared to $24.154 million.
- Gross profit increased 37% to $20.337 million compared to $14.808 million.
- Gross margin increased to 64.3% compared to 61.3%.
- Non-GAAP Adjusted EBITDA income increased by 50% to $3.245 million, excluding all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA income of $2.167 million.
- Net loss attributable to Digerati's common shareholders increased by 3% to $8.299 million, compared to a Net Loss attributable to Digerati's common shareholders of $8.032 million.
- Non-GAAP operating EBITDA ("Non-GAAP Adjusted EBITDA - OPCO) income increased 34% to $4.774 million, excluding corporate expenses, all non-cash items, and one-time transactional expenses, compared to a Non-GAAP Adjusted EBITDA - OPCO of $3.552 million.
Craig K. Clement, Executive Chairman and interim CEO of Digerati, commented, "The strength of our financial performance for our fiscal year ended July 31, 2023, validates the successful integration and streamlining of operations of our previous acquisitions. We continue to experience improved gross margins and improved operating efficiencies which have led to increased Adjusted EBITDA at the OPCO level to $4.774 million. We now serve nearly 4,700 business customers and approximately 50,000 users, predominantly in Florida, Texas, and California."
Clement continued, "We have worked diligently during the fiscal year to stabilize and simplify our platform by consolidating our subsidiaries into a single operating entity known as Verve Cloud, Inc. The successful combination of systems, processes, and people, supported by our highly experienced leadership team, has created a solid foundation for both organic and inorganic growth."
Antonio Estrada, CFO of Digerati, stated, "While we are proud of our financial metrics and performance, it should be noted that our operating and net losses for our 2023 fiscal year included $2.551 million of one-time, non-recurring costs incurred from the since terminated transaction with Minority Equal Opportunity Acquisition Corp. We are escalating our activities with respect to seeking new strategic partners and complementary relationships. We look forward to sharing our progress with shareholders over the coming months and quarters."
Twelve Months ended July 31, 2023, Compared to Twelve Months ended July 31, 2022
Revenue for the twelve months ended July 31, 2023, was $31.623 million, an increase of $7.469 million or 31% compared to $24.154 million for the twelve months ended July 31, 2022. The increase in cloud software and service revenue is primarily attributed to the increase in total customers between periods due to the acquisitions of Skynet in December 2021 and NextLevel Internet in February 2022.
Gross profit for the twelve months ended July 31, 2023, was $20.337 million, an increase of $5.529 million or 37%, resulting in a gross margin of 64.3%, compared to gross profit of $14.808 million and a gross margin of 61.3% for the twelve months ended July 31, 2022. The increase in gross margin is primarily due to the addition of high-margin revenue associated with NextLevel Internet's UCaaS product line and the acquisition of Skynet in December 2021.
Selling, general and administrative expenses (excluding legal and professional fees) for the twelve months ended July 31, 2023, increased by $4.744 million, or 39%, to $16.954 million compared to $12.210 million for the twelve months ended July 31, 2022. The increase in SG&A (excluding legal and professional fees) is attributed to the acquisitions of Skynet and NextLevel Internet during Fiscal Year 2022. As part of the consolidation, the Company absorbed all Skynet and NextLevel Internet employees responsible for managing the respective customer bases, technical support, sales, customer service, and administration.
Operating loss for the twelve months ended July 31, 2023, was $5.055 million, an increase of $1.379 million or 38%, compared to $3.676 million for the twelve months ended July 31, 2022.
Non-GAAP Adjusted EBITDA income for the twelve months ended July 31, 2023, was $3.245 million, an increase of $1.078 million or 50%, compared to a Non-GAAP Adjusted EBITDA income of $2.167 million for the twelve months ended July 31, 2022. 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, 2023. Company recognition of stock-based compensation and warrant expense of $0.881 million and depreciation and amortization expense of $3.909 million. Loss on derivative instruments was $6.526 million for the twelve months ended July 31, 2023.
Non-GAAP Adjusted EBITDA (OPCO) income for the twelve months ended July 31, 2023, was $4.774 million, excluding corporate expenses, and all non-cash items and one-time transactional expenses, an increase of $1.222 million or 34%, compared to a non-GAAP Adjusted EBITDA (OPCO) income of $3.552 million for the twelve months ended July 31, 2022.
Net loss attributable to Digerati's common shareholders for the twelve months ended July 31, 2023, was $8.299 million, an increase of $0.267 million or 3%, compared to a net loss attributable to Digerati's common shareholders of $8.032 million, for the twelve months ended July 31, 2022. The resulting earnings per share ("EPS") loss for the twelve months ended July 31, 2023, was ($0.05), as compared to EPS loss of ($0.05) for the twelve months ended July 31, 2022.
On July 31, 2023, Digerati had $0.924 million in 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. Non-GAAP Adjusted EBITDA income provides an adjusted view of EBITDA that considers 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 Non-GAAP 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 Non-GAAP 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. Non-GAAP 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, Non-GAAP Adjusted EBITDA income, and Non-GAAP 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 (Unified Communications as a Service) solutions for the business 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. Although the Company believes that the expectations reflected in the forward-looking statements such as 'The successful combination of systems, processes, and people, supported by our highly experienced leadership team, has created a solid foundation for both organic and inorganic growth," 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 strategic relationships, 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
ClearThink
Brian Loper
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(602) 785-4120
| Reconciliation of Net Loss to Adjusted EBITDA | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||
| Year ended July 31, | ||||||||||||||||||
| 2023 | 2022 | Variances | % | |||||||||||||||
| OPERATING REVENUES: | ||||||||||||||||||
| Cloud-based hosted services | $ | 31,623 | $ | 24,154 | $ | 7,469 | 31 | % | ||||||||||
| Total operating revenues | 31,623 | 24,154 | 7,469 | 31 | % | |||||||||||||
| Cost of services (exclusive of depreciation and amortization) | 11,286 | 9,346 | 1,940 | 21 | % | |||||||||||||
| Selling, general and administrative expense | 16,954 | 12,210 | 4,744 | 39 | % | |||||||||||||
| Stock compensation expense | 881 | 224 | 657 | 293 | % | |||||||||||||
| Legal and professional fees | 3,533 | 3,036 | 497 | 16 | % | |||||||||||||
| Bad debt | 115 | 98 | 17 | 17 | % | |||||||||||||
| Depreciation and amortization expense | 3,909 | 2,916 | 993 | 34 | % | |||||||||||||
| Total operating expenses | 36,678 | 27,830 | 8,848 | 32 | % | |||||||||||||
| OPERATING LOSS | (5,055 | ) | (3,676 | ) | (1,379 | ) | 38 | % | ||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||||
| Gain (loss) on derivative instruments | 6,526 | 6,186 | 340 | 5 | % | |||||||||||||
| Gain (loss) on extinguishment of debt | 55 | (5,481 | ) | 5,536 | -101 | % | ||||||||||||
| Other income (expense) | 465 | 26 | 439 | 1688 | % | |||||||||||||
| Interest expense | (11,328 | ) | (5,990 | ) | (5,338 | ) | 89 | % | ||||||||||
| Income tax expense | (192 | ) | (419 | ) | 227 | -54 | % | |||||||||||
| Total other income (expense) | (4,474 | ) | (5,678 | ) | 1,204 | -21 | % | |||||||||||
| NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST | (9,529 | ) | (9,354 | ) | (175 | ) | 2 | % | ||||||||||
| Less: Net loss attributable to the noncontrolling interests | 1,238 | 1,341 | (103 | ) | -8 | % | ||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS | $ | (8,291 | ) | $ | (8,013 | ) | $ | (278 | ) | 3 | % | |||||||
| Deemed dividend on Series A Convertible preferred stock | (8 | ) | (19 | ) | 11 | -58 | % | |||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI'S COMMON SHAREHOLDERS | $ | (8,299 | ) | $ | (8,032 | ) | $ | (267 | ) | 3 | % | |||||||
| 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 | $ | (8,291 | ) | $ | (8,013 | ) | $ | (278 | ) | 3 | % | |||||||
| EXCLUDING NON-CASH ITEMS TRANSACTIONAL COSTS & CORP EXP | ||||||||||||||||||
| ADJUSTMENTS: | ||||||||||||||||||
| Stock compensation & warrant expense | 881 | 224 | 657 | 293 | % | |||||||||||||
| Corp Expenses (Net of stock compensation, Legal fees & Transactional cost) | 1,529 | 1,385 | 144 | 10 | % | |||||||||||||
| Legal, professional fees & transactional costs | 3,510 | 2,703 | 807 | 30 | % | |||||||||||||
| Depreciation and amortization expense | 3,909 | 2,916 | 993 | 34 | % | |||||||||||||
| OTHER ADJUSTMENTS | - | |||||||||||||||||
| Gain (loss) on derivative instruments | (6,526 | ) | (6,186 | ) | (340 | ) | 5 | % | ||||||||||
| Gain (loss) on extinguishment of debt | (55 | ) | 5,481 | (5,536 | ) | -101 | % | |||||||||||
| Other income (expense) | (465 | ) | (26 | ) | (439 | ) | 1688 | % | ||||||||||
| Interest expense | 11,328 | 5,990 | 5,338 | 89 | % | |||||||||||||
| Income tax expense | 192 | 419 | (227 | ) | -54 | % | ||||||||||||
| Less: Net loss attributable to the noncontrolling interests | (1,238 | ) | (1,341 | ) | 103 | -8 | % | |||||||||||
| ADJUSTED EBITDA - OPCO | $ | 4,774 | $ | 3,552 | $ | 1,222 | 34 | % | ||||||||||
| ADD-BACKS Expenses | ||||||||||||||||||
| Corp Expenses (Net of stock compensation, Legal fees & Transactional cost) | 1,529 | 1,385 | 144 | 10 | % | |||||||||||||
| ADJUSTED EBITDA - INCOME | $ | 3,245 | $ | 2,167 | $ | 1,078 | 50 | % | ||||||||||
| Year ended July 31, | ||||||||||||||||||
| Other Key Metrics | 2023 | 2022 | Variances | % | ||||||||||||||
| Total Customers | 4,671 | 4,023 | 648 | 16 | % | |||||||||||||
