Digerati Technologies Reports 116% Revenue Growth to $8.2 Million for Fourth Quarter FY2022 Resulting in $32.8 Million Annual Revenue Run-Rate
11/01/2022 - 09:10 AM
- FY2022 Non-GAAP Operating EBITDA of $3.6 Million - - FY2022 Gross Profit of $14.8 Million - - FY2022 Gross Margin Improvement to 61.3% -
SAN ANTONIO, Nov. 01, 2022 (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 twelve months ended July 31, 2022, the Company’s fourth quarter and annual year end for its Fiscal Year 2022.
Key Financial Highlights for the Fiscal Year 2022 (Ended July 31, 2022)
Revenue increased by 95% to $24.2 million compared to $12.4 million for FY2021. Gross profit increased 103% to $14.8 million compared to $7.3 million for FY2021. Gross margin improved 270 basis points to 61.3% compared to 58.6% for FY2021. Non-GAAP Adjusted EBITDA income increased by 90% to $2.2 million for FY2022, excluding all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA income of $1.1 million for FY2021. Non-GAAP Operating EBITDA (OPCO EBITDA) income increased by 64% to $3.6 million , excluding corporate expenses, compared to a non-GAAP operating EBITDA of $2.2 million for FY2021. Key Financial Highlights for the Fourth Quarter Fiscal Year 2022 (Ended July 31, 2022)
Revenue increased by 116% to $8.2 million compared to $3.8 million for Q4 FY2021. Gross profit increased 114% to $5.1 million compared to $2.4 million for Q4 FY2021. Gross margin remained strong at 61.6% compared to 62.3% for Q4 FY2021. Non-GAAP Adjusted EBITDA income decreased by 40% to $0.3 million for Q4 FY2022, excluding all non-cash items and one-time transactional expenses, compared to Adjusted EBITDA income of $0.5 million for Q4 FY2021. Non-GAAP Operating EBITDA (OPCO EBITDA) income increased by 44% to $1.3 million , excluding corporate expenses, compared to a non-GAAP operating EBITDA of $0.9 million for Q4 FY2021. Arthur L. Smith, CEO of Digerati, commented, “Our fiscal year 2022 was highly successful as we closed two additional acquisitions, SkyNet Telecom and NextLevel Internet, and continued to execute on our acquisition playbook that improves operating efficiencies through integration while growing organically as demonstrated by our 4% increase in annualized revenue on a sequential quarterly basis. Our accomplishments over the past few years in building a significant UCaaS platform in Florida, Texas and California generating $32.8 million in annualized revenue and $5.3 million in annualized non-GAAP operating EBITDA has proven that our consolidation strategy works.”
Mr. Smith continued, “We are thrilled to have announced on September 6th our signing of a definitive business combination agreement with Minority Equality Opportunities Acquisition Inc. that will take us into the next chapter of our corporate development plan with a listing on NASDAQ. We believe that a NASDAQ listing is the final ingredient needed for the acceleration of our acquisition strategy in our highly fragmented industry. We will continue to work diligently on closing this key transaction and achieving a significant milestone for our Company.”
Antonio Estrada, CFO of Digerati, stated, “Due to our successful integration of acquisitions, we exited fiscal year end July 31, 2022 in a great financial position with annual run-rates of $32.8 million in revenue and $5.3 million in non-GAAP Operating EBITDA. Our team is successfully integrating the acquisitions of SkyNet Telecom and NextLevel Internet and we are now seeing the financial reward. We have proven that our operating and financial teams can execute on our acquisition strategy and believe our planned move to NASDAQ will greatly enhance our abilities to replicate this success with accretive acquisitions in the future.”
Accomplishments for the Fiscal Year ended July 31, 2022 include:
Closed acquisition of SkyNet Telecom, a leading provider of cloud communication and broadband solutions tailored for businesses. The acquisition of SkyNet expanded the Company’s footprint in Texas and increased its customer base by over 215% to 737 business customers in the Lone Star State. Closed acquisition of NextLevel Internet, a leading provider of cloud communication and broadband solutions tailored for the SMB market. The acquisition of NextLevel expanded the Company’s growing nationwide footprint and added a strong West Coast presence with nearly 1,000 SMB clients in California. As a combined business, Digerati’s operating subsidiaries serve over 4,000 business customers and 45,000 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, hotel, real estate, staffing, restaurant, education and municipalities. Three Months ended July 31, 2022, Compared to Three Months ended July 31, 2021
Revenue for the three months ended July 31, 2022 was $8.2 million , an increase of $4.4 million or 116% compared to $3.8 million for the three months ended July 31, 2021. The increase in revenue between periods is primarily attributed to the consolidation of the acquisitions of SkyNet Telecom and NextLevel Internet during the period. The total number of customers increased from 2,655 for the three months ended July 31, 2021, to 4,023 customers for the three months ended July 31, 2022.
Gross profit for the three months ended July 31, 2022 was $5.1 million , resulting in a gross margin of 61.6% , compared to $2.4 million and 62.3% for the three months ended July 31, 2021. The slight decrease in gross margin is primarily due to the addition of slightly lower-margin revenue associated with SkyNet Telecom’s and NextLevel Internet’s broadband services.
Selling, General and Administrative expenses (excluding legal and professional fees) for the three months ended July 31, 2022 increased by $2.4 million , or 114% , to $4.5 million compared to $2.1 million for the three months ended July 31, 2021. The increase in SG&A is attributed to the consolidation of the acquisitions of SkyNet Telecom and NextLevel Internet.
Operating loss for the three months ended July 31, 2022 was $0.15 million , a decrease of $0.27 million or 64% , compared to $0.42 million for the three months ended July 31, 2021.
Adjusted EBITDA income for the three months ended July 31, 2022 was $0.3 million , compared to an adjusted EBITDA income of $0.5 million for the three months ended July 31, 2021. 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, 2022: $0.15 million and depreciation and amortization expense of $0.40 million . Gain on derivative instruments was $1.65 million for the three months ended July 31, 2022.
Non-GAAP operating EBITDA (OPCO EBITDA) for the three months ended July 31, 2022 improved to income of $1.3 million , excluding corporate expenses, compared to a non-GAAP operating income of $0.9 million for the three months ended July 31, 2021.
Net loss for the three months ended July 31, 2022 was $3.3 million , an increase of $2.1 million as compared to a net loss of $1.2 million for the three months ended July 31, 2021. The resulting EPS for the three months ended July 31, 2022 was a loss of ($0.02) as compared to a loss of ($0.01) for the three months ended July 31, 2021.
At July 31, 2022, Digerati had $1.5 million of cash.
Twelve Months ended July 31, 2022, Compared to Twelve Months ended July 31, 2021
Revenue for the twelve months ended July 31, 2022 was $24.2 million , an increase of $11.7 million or 95% compared to $12.4 million for the twelve months ended July 31, 2021. The increase in revenue between periods is primarily attributed to the consolidation of the acquisitions of SkyNet Telecom and NextLevel Internet during the period. The total number of customers increased from 2,655 for the twelve months ended July 31, 2021, to 4,023 customers for the twelve months ended July 31, 2022.
Gross profit for the twelve months ended July 31, 2022 was $14.8 million , resulting in a gross margin of 61.3% , compared to $7.3 million and 58.6% for the twelve months ended July 31, 2021. The increase in gross margin is primarily due to the addition of high-margin revenue associated with SkyNet Telecom’s and NextLevel Internet’s UCaaS product line.
Selling, General and Administrative expenses (excluding legal and professional fees) for the twelve months ended July 31, 2022 increased by $5.4 million , or 77% , to $12.4 million compared to $7.0 million for the twelve months ended July 31, 2021. The increase in SG&A is attributed to the consolidation of the acquisitions of SkyNet Telecom and NextLevel Internet.
Operating loss for the twelve months ended July 31, 2022 was $3.7 million , an increase of $1.3 million or 53% , compared to $2.4 million for the twelve months ended July 31, 2021.
Adjusted EBITDA income for the twelve months ended July 31, 2022 was $2.17 million , an improvement of $1.03 million , compared to adjusted EBITDA income of $1.14 million for the twelve months ended July 31, 2021. 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, 2022: $6.2 million on derivative instruments, loss of $5.5 million on settlement of debt and $6.0 million of interest expense.
Non-GAAP operating EBITDA (OPCO EBITDA) for the twelve months ended July 31, 2022 improved to income of $3.6 million , excluding corporate expenses, compared to a non-GAAP operating income of $2.2 million for the twelve months ended July 31, 2021.
Net loss for the twelve months ended July 31, 2022 was $8.0 million , a decrease of $8.7 million as compared to a net loss of $16.7 million for the twelve months ended July 31, 2021. The resulting EPS for the twelve months ended July 31, 2022 was a loss of ($0.05) as compared to a loss of ($0.13) for the twelve months ended July 31, 2021.
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 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.
About Digerati Technologies, Inc.
Digerati Technologies, Inc. (OTCQB: DTGI
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 a Nasdaq listing being the final ingredient needed for the acceleration of our acquisition strategy, annualized revenues of $32.8 million , annualized non-GAAP Operating EBITDA of $5.3 million , our abilities to replicate success with accretive acquisitions in the future, and an up-list to Nasdaq 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, a national securities exchange not approving Minority Equality Opportunities Acquisition Inc.’s (MEOA’s) initial listing application, the amount of redemption requests made by MEOA’s public shareholders, 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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Reconciliation of Net Income (Loss) to Adjusted EBITDA DIGERATI TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Three months ended July 31, For the Years ended July 31, 2022 2021 2022 2021 OPERATING REVENUES: Cloud software and service revenue $ 8,195 $ 3,787 $ 24,154 $ 12,416 Total operating revenues 8,195 3,787 24,154 12,416 OPERATING EXPENSES: Cost of services (exclusive of depreciation and amortization) 3,143 1,427 9,346 5,135 Selling, general and administrative expense 4,448 2,050 12,434 7,019 Legal and professional fees 306 177 3,036 894 Bad debt 47 8 98 17 Depreciation and amortization expense 402 545 2,916 1,749 Total operating expenses 8,346 4,207 27,830 14,814 OPERATING LOSS (151 ) (420 ) (3,676 ) (2,398 ) OTHER INCOME (EXPENSE): Gain (loss) on derivative instruments (1,649 ) 925 6,186 (9,935 ) Gain (loss) on settlement of debt (1 ) 213 (5,481 ) 560 Income tax benefit (expense) (134 ) (61 ) (419 ) (183 ) Other income (expense) 26 (294 ) 26 (294 ) Interest expense (1,427 ) (1,686 ) (5,990 ) (4,765 ) Total other income (expense) (3,185 ) (903 ) (5,678 ) (14,617 ) NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST (3,336 ) (1,323 ) (9,354 ) (17,015 ) Less: Net loss attributable to the noncontrolling interests 35 109 1,341 332 NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS (3,301 ) (1,214 ) (8,013 ) (16,683 ) Deemed dividend on Series A Convertible preferred stock (5 ) (5 ) (19 ) (20 ) NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI'S COMMON SHAREHOLDERS $ (3,306 ) $ (1,219 ) $ (8,032 ) $ (16,703 ) INCOME (LOSS) PER COMMON SHARE - BASIC $ (0.02 ) $ (0.01 ) $ (0.05 ) $ (0.13 ) LOSS PER COMMON SHARE - DILUTED $ (0.02 ) $ (0.01 ) $ (0.05 ) $ (0.13 ) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC 140,512,215 137,950,308 139,594,358 129,411,947 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED 140,512,215 137,950,308 139,594,358 129,411,947 See notes to consolidated unaudited financial statements Reconciliation of Net Income (Loss) to Adjusted EBITDA - OPCO, Net of Non-cash expenses & Transactional Costs. NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI'S SHAREHOLDERS, as reported $ (3,301 ) $ (1,214 ) $ (8,013 ) $ (16,683 ) EXCLUDING NON-CASH ITEMS TRANSACTIONAL COSTS & CORP EXP ADJUSTMENTS: Stock compensation & warrant expense 148 66 224 972 Corp Expenses (Net of stock compensation, Legal fees & Transactional cost) 1,052 384 1,385 1,066 Legal and professional fees & transactional costs (115 ) 326 2,703 815 Depreciation and amortization expense 402 545 2,916 1,749 OTHER ADJUSTMENTS Gain (loss) on derivative instruments 1,649 (925 ) (6,186 ) 9,935 Gain (loss) on settlement of debt 1 (213 ) 5,481 (560 ) Other income (expense) (26 ) 294 (26 ) 294 Interest expense 1,427 1,686 5,990 4,765 Income tax 134 61 419 183 Less: Net loss attributable to the noncontrolling interest (35 ) (109 ) (1,341 ) (332 ) ADJUSTED EBITDA - OPCO $ 1,336 $ 902 $ 3,552 $ 2,204 ADD-BACKS Expenses Corp Expenses (Net of stock compensation, Legal fees & Transactional cost) 1,052 384 1,385 1,066 ADJUSTED EBITDA - INCOME $ 284 $ 517 $ 2,167 $ 1,138
