- Non-GAAP Adjusted EBITDA - OPCO(1) of $0.784 Million -
SAN ANTONIO, June 17, 2024 (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 and nine months ended April 30, 2024, the Company's third quarter for its Fiscal Year 2024.
Key Financial Highlights for the Three Months Ended April 30, 2024 (Compared to Three Months Ended April 30, 2023)
- Revenue decreased 5% to $7.430 million compared to $7.837 million.
- Gross profit decreased 9% to $4.518 million compared to $4.958 million.
- Gross margin decreased to 60.8% compared to 63.3%.
- Non-GAAP EBITDA from income, as adjusted ("Adjusted EBITDA - Income")(1), decreased 42% to $0.358 million, excluding all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA - Income of $0.621 million.
- Net loss attributable to Digerati's common shareholders increased 102% to $4.529 million, compared to a net loss attributable to Digerati's common shareholders of $2.244 million.
- Non-GAAP EBITDA from operations, as adjusted ("Adjusted EBITDA - OPCO"), decreased 22% to $0.784 million, excluding corporate expenses, all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA - OPCO of $0.999 million.
Craig K. Clement, Executive Chairman and interim CEO of Digerati, commented, "Although it was a challenging quarter for the Company, our operations remain strong as we continue to operate a platform with a solid base of nearly 4,500 active customers and approximately 50,000 business users. Going forward, our primary focus is to increase our customer base and related recurring revenue while continuing to build the Verve brand with an emphasis on exceptional customer support."
Three Months ended April 30, 2024, Compared to Three Months ended April 30, 2023
Revenue for the three months ended April 30, 2024, was $7.430 million, a decrease of $0.407 million, or 5%, compared to $7.837 million for the three months ended April 30, 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. Going forward, the Company's primary emphasis is to increase its customer base, growing the monthly recurring revenue and providing exceptional customer support.
Gross profit for the three months ended April 30, 2024, was $4.518 million, a decrease of $0.440 million, or 9%, compared to $4.958 million for the three months ended April 30, 2023, resulting in a gross margin of 60.8% for the three months ended April 30, 2024, compared 63.3% for the three months ended April 30, 2023.
Selling, General and Administrative expenses (excluding legal, professional fees and stock-based compensation) for the three months ended April 30, 2024, decreased by $0.232 million, or 5%, to $4.067 million compared to $4.299 million for the three months ended April 30, 2023.
Operating loss for the three months ended April 30, 2024, was $1.171 million, an increase of $0.096 million, or 9%, compared to $1.075 million for the three months ended April 30, 2023.
Adjusted EBITDA - Income for the three months ended April 30, 2024, was $0.358 million, a decrease of $0.263 million, or 42%, compared to an Adjusted EBITDA - Income of $0.621 million for the three months ended April 30, 2023.
Adjusted EBITDA - OPCO for the three months ended April 30, 2024, was $0.784 million, excluding corporate expenses, all non-cash items and one-time transactional expenses, a decrease of $0.215 million, or 22%, compared to a Adjusted EBITDA - OPCO of $0.999 million for the three months ended April 30, 2023.
Net loss attributable to Digerati's common shareholders for the three months ended April 30, 2024, was $4.529 million, an increase of $2.285 million, or 102%, compared to a net loss attributable to Digerati's common shareholders of $2.244 million for the three months ended April 30, 2023. The resulting earnings per share ("EPS") loss for the three months ended April 30, 2024, was ($0.03), per share, as compared to EPS loss of ($0.01), per share, for the three months ended April 30, 2023.
On April 30, 2024, Digerati had $0.969 million of cash and cash equivalents.
Nine Months ended April 30, 2024, Compared to Nine Months ended April 30, 2023
Revenue for the nine months ended April 30, 2024, was $22.649 million, a decrease of $1.259 million, or 5%, compared to $23.908 million for the nine months ended April 30, 2023.
Gross profit for the nine months ended April 30, 2024, was $14.526 million, a decrease of $0.684 million, or 4%, compared to $15.210 million for the nine months ended April 30, 2023, resulting in a gross margin of 64.1% for the nine months ended April 30, 2024, compared to 63.6% for the nine months ended April 30, 2023.
Selling, General and Administrative expenses (excluding legal, professional fees and stock-based compensation) for the nine months ended April 30, 2024, decreased by $0.437 million, or 3%, to $12.415 million compared to $12.852 million for the nine months ended April 30, 2023.
Operating loss for the nine months ended April 30, 2024, was $3.617 million, an increase of $0.577 million, or 19%, compared to $3.040 million for the nine months ended April 30, 2023.
Adjusted EBITDA - Income for the nine months ended April 30, 2024, was $1.768 million, a decrease of $0.481 million, or 21%, compared to Adjusted EBITDA - Income of $2.249 million for the nine months ended April 30, 2023.
Adjusted EBITDA - OPCO for the nine months ended April 30, 2024, was $3.256 million, excluding corporate expenses, all non-cash items and one-time transactional expenses, a decrease of $0.036 million, or 1%, compared to Adjusted EBITDA - OPCO of $3.292 million for the nine months ended April 30, 2023.
Net loss attributable to Digerati's common shareholders for the nine months ended April 30, 2024, was $12.170 million, an increase of $5.158 million, or 74%, compared to a net loss attributable to Digerati's common shareholders of $7.012 million for the nine months ended April 30, 2023. The resulting EPS loss for the nine months ended April 30, 2024, was ($0.07), per share, as compared to EPS loss of ($0.05), per share, for the nine months ended April 30, 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 (Unified Communications as a Service) solutions for the small to medium-sized business market. Through its operating subsidiary Verve Cloud, Inc., 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, X 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 'our primary focus is to increase our customer base and related recurring revenue'. Although the Company believes 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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Investors
ClearThink
Brian Loper
bloper@clearthink.capital
(602) 785-4120
(1) See "Use of Non-GAAP Financial Measurements" and "Reconciliation of Net Loss to Adjusted EBITDA" below for details on the Company's use of non-GAAP financial measures, how these measures are calculated, and the reason the Company believes this information is useful to readers.
| Reconciliation of Net Income (Loss) to Adjusted EBITDA | |||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||
| Three Months ended April 30, | Nine Months ended April 30, | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | Variances | % | 2024 | 2023 | Variances | % | ||||||||||||||||||||||||||
| OPERATING REVENUES: | |||||||||||||||||||||||||||||||||
| Cloud-based hosted services | $ | 7,430 | $ | 7,837 | $ | (407 | ) | -5 | % | $ | 22,649 | $ | 23,908 | $ | (1,259 | ) | -5 | % | |||||||||||||||
| Total operating revenues | 7,430 | 7,837 | (407 | ) | -5 | % | 22,649 | 23,908 | (1,259 | ) | -5 | % | |||||||||||||||||||||
| Cost of services (exclusive of depreciation and amortization) | 2,912 | 2,879 | 33 | 1 | % | 8,123 | 8,698 | (575 | ) | -7 | % | ||||||||||||||||||||||
| Selling, general and administrative expense | 4,067 | 4,299 | (232 | ) | -5 | % | 12,415 | 12,852 | (437 | ) | -3 | % | |||||||||||||||||||||
| Stock compensation expense | - | 23 | (23 | ) | -100 | % | 16 | 69 | (53 | ) | -77 | % | |||||||||||||||||||||
| Legal and professional fees | 621 | 681 | (60 | ) | -9 | % | 2,784 | 2,311 | 473 | 20 | % | ||||||||||||||||||||||
| Bad debt | 93 | 37 | 56 | 151 | % | 208 | 106 | 102 | 96 | % | |||||||||||||||||||||||
| Depreciation and amortization expense | 908 | 993 | (85 | ) | -9 | % | 2,720 | 2,912 | (192 | ) | -7 | % | |||||||||||||||||||||
| Total operating expenses | 8,601 | 8,912 | (311 | ) | -3 | % | 26,266 | 26,948 | (682 | ) | -3 | % | |||||||||||||||||||||
| OPERATING LOSS | (1,171 | ) | (1,075 | ) | (96 | ) | 9 | % | (3,617 | ) | (3,040 | ) | (577 | ) | 19 | % | |||||||||||||||||
| OTHER INCOME (EXPENSE): | |||||||||||||||||||||||||||||||||
| Gain (loss) on derivative instruments | (467 | ) | 2,120 | (2,587 | ) | -122 | % | (1,048 | ) | 2,893 | (3,941 | ) | -136 | % | |||||||||||||||||||
| Gain (loss) on extinguishment of debt | (816 | ) | 55 | (871 | ) | -1584 | % | (915 | ) | 55 | (970 | ) | -1764 | % | |||||||||||||||||||
| Other income (expense) | 88 | (1 | ) | 89 | -8900 | % | 37 | 455 | (418 | ) | -92 | % | |||||||||||||||||||||
| Interest expense | (2,920 | ) | (3,701 | ) | 781 | -21 | % | (8,184 | ) | (8,137 | ) | (47 | ) | 1 | % | ||||||||||||||||||
| Income tax expense | (46 | ) | (51 | ) | 5 | -10 | % | (109 | ) | (128 | ) | 19 | -15 | % | |||||||||||||||||||
| Total other expense | (4,161 | ) | (1,578 | ) | (2,583 | ) | 164 | % | (10,219 | ) | (4,862 | ) | (5,357 | ) | 110 | % | |||||||||||||||||
| NET LOSS | (5,332 | ) | (2,653 | ) | (2,679 | ) | 101 | % | (13,836 | ) | (7,902 | ) | (5,934 | ) | 75 | % | |||||||||||||||||
| Less: Net loss attributable to the noncontrolling interests | 803 | 409 | 394 | 96 | % | 1,666 | 898 | 768 | 86 | % | |||||||||||||||||||||||
| NET LOSS ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS | $ | (4,529 | ) | $ | (2,244 | ) | $ | (2,285 | ) | 102 | % | $ | (12,170 | ) | $ | (7,004 | ) | $ | (5,166 | ) | 74 | % | |||||||||||
| Deemed dividend on Series A Convertible preferred stock | - | - | - | - | (8 | ) | 8 | -100 | % | ||||||||||||||||||||||||
| NET LOSS ATTRIBUTABLE TO DIGERATI'S COMMON SHAREHOLDERS | $ | (4,529 | ) | $ | (2,244 | ) | $ | (2,285 | ) | 102 | % | $ | (12,170 | ) | $ | (7,012 | ) | $ | (5,158 | ) | 74 | % | |||||||||||
| Reconciliation of Net Income (Loss) to Adjusted EBITDA - OPCO and Adjusted EBITDA - Income | |||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||
| NET LOSS ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS, as reported | $ | (4,529 | ) | $ | (2,244 | ) | $ | (2,285 | ) | 102 | % | $ | (12,170 | ) | $ | (7,004 | ) | $ | (5,166 | ) | 74 | % | |||||||||||
| EXCLUDING NON-CASH ITEMS TRANSACTIONAL COSTS & CORP EXP | |||||||||||||||||||||||||||||||||
| ADJUSTMENTS: | |||||||||||||||||||||||||||||||||
| Stock compensation & warrant expense | - | 23 | (23 | ) | -100 | % | 16 | 69 | (53 | ) | -77 | % | |||||||||||||||||||||
| Corp Expenses (Net of stock compensation, Legal fees & Transactional cost) | 426 | 378 | 48 | 13 | % | 1,488 | 1,043 | 445 | 43 | % | |||||||||||||||||||||||
| Legal, professional fees & transactional costs | 621 | 680 | (59 | ) | -9 | % | 2,649 | 2,308 | 341 | 15 | % | ||||||||||||||||||||||
| Depreciation and amortization expense | 908 | 993 | (85 | ) | -9 | % | 2,720 | 2,912 | (192 | ) | -7 | % | |||||||||||||||||||||
| OTHER ADJUSTMENTS | |||||||||||||||||||||||||||||||||
| Loss (gain) on derivative instruments | 467 | (2,120 | ) | 2,587 | -122 | % | 1,048 | (2,893 | ) | 3,941 | -136 | % | |||||||||||||||||||||
| Loss (gain) on extinguishment of debt | 816 | (55 | ) | 871 | -1584 | % | 915 | (55 | ) | 970 | -1764 | % | |||||||||||||||||||||
| Other (income) expense | (88 | ) | 1 | (89 | ) | -8900 | % | (37 | ) | (455 | ) | 418 | -92 | % | |||||||||||||||||||
| Interest expense | 2,920 | 3,701 | (781 | ) | -21 | % | 8,184 | 8,137 | 47 | 1 | % | ||||||||||||||||||||||
| Income tax expense | 46 | 51 | (5 | ) | -10 | % | 109 | 128 | (19 | ) | -15 | % | |||||||||||||||||||||
| Less: Net loss attributable to the noncontrolling interests | (803 | ) | (409 | ) | (394 | ) | 96 | % | (1,666 | ) | (898 | ) | (768 | ) | 86 | % | |||||||||||||||||
| ADJUSTED EBITDA - OPCO | $ | 784 | $ | 999 | $ | (215 | ) | -22 | % | $ | 3,256 | $ | 3,292 | $ | (36 | ) | -1 | % | |||||||||||||||
| ADD-BACKS Expenses | |||||||||||||||||||||||||||||||||
| Corp Expenses (Net of stock compensation, Legal fees & Transactional cost) | 426 | 378 | 48 | 13 | % | 1,488 | 1,043 | 445 | 43 | % | |||||||||||||||||||||||
| ADJUSTED EBITDA - INCOME (LOSS) | $ | 358 | $ | 621 | $ | (263 | ) | -42 | % | $ | 1,768 | $ | 2,249 | $ | (481 | ) | -21 | % | |||||||||||||||
