– 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, TX (GlobeNewswire) – November 1, 2022 – 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 $0.5million 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:  Company recognition of stock-based compensation and warrant expense of $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: 

Company gain of $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) is a provider of cloud services specializing in UCaaS (Unified  Communications as a Service) solutions for the business market. Through its operating subsidiaries NextLevel  Internet (NextLevelinternet.com), T3 Communications (T3com.com), Nexogy (Nexogy.com), and SkyNet  Telecom (Skynettelecom.net), the Company is meeting the global needs of 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 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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Investors 
ClearThink
Brian Loper 
bloper@clearthink.capital 
(602) 785-4120

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