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TMCNet:  Digerati Technologies Reports Third Quarter FY2020 Results

[June 10, 2020]

Digerati Technologies Reports Third Quarter FY2020 Results

- Organic Revenue Growth of 5% -
- Gross Margin Improved to 51% -

SAN ANTONIO, Texas, June 10, 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 April 30, 2020, the Company’s third quarter for FY2020.

Key Financial Highlights for the Third Quarter of Fiscal Year 2020 (Ended April 30, 2020)

  • Revenue increased to $1.566 million compared to $1.485 for the third quarter of FY2019, driven by organic growth.
  • Gross profit increased to $802,000 compared to $715,000 for the third quarter of FY2019.
  • Gross margin increased to 51% compared to 48% for the third quarter of FY2019.
  • Adjusted EBITDA improved to a loss of $13,000, excluding all non-cash items and one-time transactional expenses, compared to an Adjusted EBITDA loss of $117,000 for the third quarter of FY2019.
  • Average monthly revenue per customer (ARPU) was $715.
  • Net customer count increased to 731 compared to 688 for the third quarter of FY2019.

During the third quarter, the Company secured FCC approval of its acquisition of Nexogy, Inc. and entered into a Letter of Intent (LOI) on its 4th acquisition. The combined business (Nexogy and fourth (4th) acquisition) will triple the Company’s business user base and in the aggregate total over $14 million in annual revenue with improved EBITDA from further consolidation savings derived from the additional acquisitions. The Company  reported during the quarter that it plans to close these transactions under a larger and lower cost financing facility.    It has continued to work closely with its lenders during the COVID-19 Pandemic to establish funding availability beyond what is required for the current transactions, thus allowing for acceleration of its acquisition strategy in the future. The Company and Nexogy have extended the outside date for closing the transaction to June 30, 2020. The Company’s fourth (4th) acquisition under LOI has also been extended.

Chief Executive Officer Arthur L. Smith, commented, “It is exciting to management that even during the midst of the Covid-19 Pandemic, we produced positive financial results.  We were pleased to have provided business continuity solutions to our customers during this time of accelerated adoption of UCaaS service offerings created by the need for businesses to implement teleworking environments.  During the quarter, we also launched TeamsConnect that integrates Microsoft Teams® into our UCaaS service. This reveals and affirms that we are providing the proper communication solutions for the small to medium-sized business market, that are highly useful to customers during challenging and disruptive times.”

Chief Financial Officer Antonio Estrada, Jr., stated, “We are most pleased to have achieved these results during the third quarter, especially when the country has been going through a very difficult time. Despite the ongoing external challenges like the Pandemic, we continually look for and take actions toward improving our financial picture as relating to our income statement and our balance sheet. Among other things, we strive to deliver good old fashion customer service and reliable, cost-effective telecom products that small to medium-sized businesses need to excel in their market segments. As always, we will continue to report these financially-targeted activities to our shareholders as they materialize.”

Three Months ended April 30, 2020 Compared to Three Months ended April 30, 2019

Revenue for the third quarter ended April 30, 2020 was $1.566 million, an increase of $81,000 or approximately 5% compared to $1.485 million for the third qarter ended April 30, 2019. This increase in UCaaS and service revenue was attributable to the increase in total customers between periods.      




The total number of customers increased from 688 at the end of the three months ended April 30, 2019 to 731 customers at the end of the three months ended April 30, 2020.

Gross profit for the three months ending April 30, 2020 was $0.802 million, resulting in a gross margin of 51%, compared to $0.715 million and 48% for the three months ending April 30,  2019.

Selling, General and Administrative expenses for the three months ended April 30, 2020 decreased by $0.170 million, or 13%, to $1.145 million compared to $1.315 for the three months ended April 30, 2019.

Adjusted EBITDA for the three months ended April 30, 2020, was a loss of $0.013 million, an improvement of $0.104 million, compared to a loss of $0.117 million for the same period in FY2019.

Operating loss for the three months ended April 30, 2020, was $0.472 million compared to $0.767 million for the same period in FY2019.

Of note, the following non-cash expenses associated with the three months ended April 30, 2020, were  Company recognition of stock-based compensation and warrant expense of $298,000 and depreciation and amortization expense of $148,000. Loss on derivative instruments was $249,000 and non-cash interest expense was $394,000 for the three months ended April 30, 2020.

Net loss for the three months ended April 30, 2020, was $1.107 million as compared to $0.223 million, for the same period in FY2019. The resulting EPS for the three months period ended April 30, 2020 was a loss of ($0.02), as compared to a loss of ($0.01) for the same period in FY2019.

At January 31, 2020, Digerati had $0.445 million of cash.

Further details about the Company’s Q3 for FY2020 financial results are available in its report on Form 10Q, which will be available in the Financials 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.

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 the website of our investor relations company,  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:

Facebook: Digerati Technologies, Inc.
Twitter: @DIGERATI_IR
LinkedIn: Digerati Technologies, Inc.

The Waypoint Refinery, LLC
(973) 303-9649
www.thewaypointrefinery.com

Investors:
IR@digerati-inc.com 

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

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