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TMCNet:  Digerati Technologies Reports First Quarter FY2020 Results

[December 16, 2019]

Digerati Technologies Reports First Quarter FY2020 Results

- Revenue Increased to $1.6 Million Driven by Organic Growth -
- 59% Improvement in Adjusted EBITDA -

SAN ANTONIO, Dec. 16, 2019 (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, 2019, the Company’s first quarter for FY2020.

Key Financial Highlights for the First Quarter of Fiscal Year 2020 (Ended October 31, 2019)

  • Revenue increased to $1.589 million compared to $1.522 for the first quarter of FY2018, driven by organic growth.
  • Gross profit increased to $786,000 compared to $765,000 for the first quarter of FY2019.
  • Gross margin remained consistent at 50% compared to 50% for the first quarter of FY2019.
  • Adjusted EBITDA loss of $23,000, excluding all non-cash items and one-time transactional expenses, improved by 59% compared to an Adjusted EBITDA loss of $57,000 for the first quarter of FY2019.
  • Average monthly revenue per customer (ARPU) was $754.
  • Net customer count increased to 708.

Digerati participates in high-growth segments of the telecommunication industry that are driven by demand from enterprise customers, specifically SMBs.  The Company continues to emphasize its UCaaS/cloud communication business that is experiencing significant growth as businesses migrate from legacy phone systems to cloud-based telephony systems.  Other services offered to its business market include leading-edge network and business continuity solutions like SD WAN and a LTE mobile broadband service that guarantees up-time during network outages.  Approximately 95% of Digerati’s revenue is contracted monthly recurring revenue.

In addition to executing on its organic growth, the Company is continuing its disciplined approach to acquiring cloud communication service providers that have excelled at serving regional markets in the U.S. With a solid operational base in Texas and Florida, Digerati is well positioned to execute on this key initiative and increase its market share in the second and fourth largest state economies in the U.S. The Company recently provided an update on its planned acquisition of Nexogy, Inc. that combined with Digerati’s current operations, will result in a cloud communications provider producing $12.7 million in annual revenue and serving over 24,000 business users in Florida and Texas.   

Chief Executive Officer Arthur L. Smith, commented, “We are pleased with the consistency of the operational foundation we have built and the organic growth during our first quarter.  The increased production of positive cash flow from our operating subsidiaries and upward trend in Adjusted EBITDA on a consolidated basis is also a noted achievement as we continue to work on securing and integrating our next series of acquisitions in 2020. Our historical trends and successful integration of two acquisitions to date has clearly validated our business model.”

Chief Financial Officer Antonio Estrada, Jr., stated, “The operational scale we have achieved, which will be further enhanced by the Nexogy transaction, is an important milestone for our business model.  We expect this to result in an improved return on investment (ROI), as the scale we haveachieved allows us to derive increased EBITDA from follow-on acquisitions.”




Three Months ended October 31, 2019 Compared to Three Months ended October 31, 2018

Revenue for the first quarter ended October 31, 2019 was $1.589 million, an increase of $67,000 or approximately 4% compared to $1.522 million for the first quarter ended October 31, 2018.  This increase in cloud software and service revenue was attributable to the increase in total customers in the Company’s Texas market.   

Our total number of customers increased from 640  at the end of the three months ended October 31, 2018 to 708 customers at the end of the three months ended October 31, 2019.

Gross profit for the three months ending October 31, 2019 was $0.786 million, resulting in a gross margin of 50%, compared to $0.765 million and 50% for the three months ending October 31, 2018.

Selling, General and Administrative expenses for the three months ended October 31, 2019 increased by $0.305 million, or 34%, to $1.192 million from the three months ended October 31, 2018. The increase in SG&A expenses between periods is primarily attributed to stock-based compensation for management and key employees.

Adjusted EBITDA for the three months ended October 31, 2019, was a loss of $0.023 million, an improvement of $0.034 million, compared to a loss of $0.057 million for the same period in 2018.

Operating loss for the three months ended October 31, 2019, was  $0.671 million compared to  $0.413 million for the same period in 2018.

Of note, the following non-cash expenses associated with the three months ended October 31, 2019, were  Company recognition of stock-based compensation expense of $445,000 and depreciation and amortization expense of $163,000 for the three months ended October 31, 2019. Loss on derivative instruments was $465,000 and interest expense was $424,000 for the three months ended October 31, 2019.

Net loss for the three months ended October 31, 2019, was $1.521 million as compared to  $0.914 million, for the same period in 2018. The resulting EPS for the three months period ended October 31, 2019 was a loss of ($0.06), as compared to a loss of ($0.07) for the same period in 2018.

At October 31, 2019, Digerati had $0.469 million of cash.

Further details about the Company’s Q1 for FY2020 financial results are available in its report on Form 10Q, which will be available in the investor relations 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 business market. Through its 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.

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 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.

Investors:
IR@digerati-inc.com

The Eversull Group
Jack Eversull
jack@eversullgroup.com
(972) 571-1624

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