SAN ANTONIO, TX (GlobeNewswire) – March 9, 2020 – 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 January 31, 2020, the Company’s second quarter for FY2020. 

Key Financial Highlights for the Second Quarter of Fiscal Year 2020 (Ended January 31, 2020) 

  • Revenue increased to $1.557 million compared to $1.486 for the second quarter of FY2019, driven by organic growth. 
  • Gross profit increased to $781,000 compared to $691,000 for the second quarter of FY2019. 
  • Gross margin increased to 50% compared to 47% for the second quarter of FY2019. 
  • Adjusted EBITDA improved to a loss of $81,000, excluding all non-cash items and one-time transactional expenses, compared to an Adjusted EBITDA loss of $86,000 for the second quarter of FY2019. 
  • Average monthly revenue per customer (ARPU) was $731. 
  • Net customer count increased to 705 compared to 673 for the second quarter of FY2019. 

Subsequent events reported in its quarterly report include the Company’s FCC approval of its acquisition of Nexogy, Inc. and a Letter of Intent (LOI) on its fourth (4th) acquisition that it plans to close simultaneously with the Nexogy transaction. 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 acquisition. The Company previously reported that it plans to close these transactions under a larger and lower cost financing facility with funding availability for future acquisitions that will facilitate the Company’s acceleration of its acquisition efforts. 

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. 

With a highly fragmented market littered with regional/local UCaaS providers, the Company will continue its disciplined approach to acquiring cloud communication service providers that have focused and 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. 

Chief Executive Officer, Arthur L. Smith, commented, “The consistency of our results and improvement on key financial metrics continues to validate our plan. We are very well positioned to scale and capitalize on the market 

opportunity created by underserved small to medium-sized businesses and a healthy pipeline of acquisition targets that meet our stringent criteria. We look forward to providing more information and updates on our next series of acquisitions in the near future.” 

Chief Financial Officer, Antonio Estrada, Jr., stated, “We are pleased to have achieved thresholds that attract a lower cost capital and larger financing facilities to assist us with streamlining the acquisition process in the future. As indicated, ROI and EBITDA improvements derived from acquisitions are exponential at this stage of our business plan when acquired targets are layered on the operational foundation we have built over the last two years.” 

Three Months ended January 31, 2020 Compared to Three Months ended January 31, 2019 

Revenue for the second quarter ended January 31, 2020 was $1.557 million, an increase of $71,000 or approximately 5% compared to $1.486 million for the second quarter ended January 31, 2019. This increase in cloud software and service revenue was attributable to the increase in total customers in the Company’s Texas market. 

The total number of customers increased from 673 at the end of the three months ended January 31, 2019 to 705 customers at the end of the three months ended January 31, 2020. 

Gross profit for the three months ending January 31, 2020 was $0.781 million, resulting in a gross margin of 50%, compared to $0.691 million and 47% for the three months ending January 31, 2019. 

Selling, General and Administrative expenses for the three months ended January 31, 2020 increased by $0.185 million, or 20%, to $1.118 million compared to $0.933 for the three months ended January 31, 2019. 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 January 31, 2020, was a loss of $0.081 million, an improvement of $0.005 million, compared to a loss of $0.086 million for the same period in FY2019. 

Operating loss for the three months ended January 31, 2020, was $0.699 million compared to $0.496 million for the same period in FY2019. 

Of note, the following non-cash expenses associated with the three months ended January 31, 2020, were Company recognition of stock-based compensation and warrant expense of $323,000 and depreciation and amortization expense of $153,000. Gain on derivative instruments was $783,000 and non-cash interest expense was $434,000 for the three months ended January 31, 2020. 

Net loss for the three months ended January 31, 2020, was $0.501 million as compared to $2.53 million, for the same period in FY2019. The resulting EPS for the three months period ended January 31, 2020 was a loss of ($0.01), as compared to a loss of ($0.17) for the same period in FY2019. 

At January 31, 2020, Digerati had $0.376 million of cash. 

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 (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 CloudTM. For more information about Digerati Technologies, please visit 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 

Twitter @DIGERATI_IR