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Digerati Technologies, Inc. (DTGI)·Q1 2022 Earnings Summary

Executive Summary

  • Q1 FY2022 (quarter ended October 31, 2021) delivered strong YoY growth: revenue rose to $3.78M from $1.55M (+143%), with basic EPS improving to $0.02 from ($0.01); net income benefited from a $4.43M derivative gain, offsetting higher interest and OpEx .
  • Product mix remained highly subscription-led: cloud software and services were $3.70M (98% of total), with product sales $0.07M; customers expanded to 2,658 vs 701 a year ago, reflecting Nexogy and ActivePBX acquisitions .
  • Subsequent 8-K announced the SkyNet Telecom acquisition; management issued preliminary guidance that, on an annualized basis (including SkyNet), subsidiaries are expected to generate ~$18.5M in annual revenue and improve EBITDA and operating income via FY2022 cost synergies .
  • Liquidity remains a key watch item: cash was $1.65M and quarterly operating cash flow $0.03M; management disclosed substantial doubt about going concern absent capital raises or higher revenue, despite compliance with debt covenants .
  • No public earnings call transcript or 8-K 2.02 “results” press release was found for Q1; use 10‑Q for quantitative results and the January 2022 8‑K press release for guidance and strategic updates .

What Went Well and What Went Wrong

What Went Well

  • Revenue growth from customer expansion and acquisitions drove a $1.48M YoY gross margin improvement; operating loss narrowed modestly to ($0.58M) from ($0.63M) YoY .
  • Management highlighted M&A synergies and Texas footprint expansion via SkyNet: “The acquisition of SkyNet will expand our service and support capabilities in the growing Texas market. We also plan to adopt SkyNet’s go-to-market strategy…” — CEO Arthur L. Smith .
  • EPS turned positive (basic $0.02) aided by a $4.43M favorable remeasurement of derivative instruments, partially offset by interest expense and higher OpEx .

What Went Wrong

  • Interest expense rose sharply to $1.51M (vs $0.30M YoY), including $0.94M non-cash accretion from debt discount amortization and $0.36M cash interest, elevating financial burden despite covenant compliance .
  • SG&A and legal/professional fees increased (SG&A +$0.78M; legal +$0.32M YoY), reflecting integration, audits, quality-of-earnings, and due diligence costs tied to acquisitions; depreciation and amortization also climbed (+$0.33M) .
  • Liquidity and going concern: management stated available resources are not sufficient for next 12 months absent financing or revenue uplift, underscoring the need for sustained operating cash generation and capital access .

Financial Results

Headline P&L (YoY comparison)

MetricQ1 2021 (Oct 31, 2020)Q1 2022 (Oct 31, 2021)
Revenue ($USD Millions)$1.55 $3.78
Net Income attributable to shareholders ($USD Millions)$(0.72) $2.42
EPS Basic ($USD)$(0.01) $0.02
Operating Loss ($USD Millions)$(0.63) $(0.58)
Cost of Services ($USD Millions)$0.75 $1.49
SG&A ($USD Millions)$1.01 $1.79
Legal & Professional Fees ($USD Millions)$0.26 $0.57
Depreciation & Amortization ($USD Millions)$0.16 $0.49
Derivative Gain/(Loss) ($USD Millions)$0.18 $4.43
Interest Expense ($USD Millions)$0.30 $1.51

Margins (derived from reported figures)

MetricQ1 2021Q1 2022
Gross Profit ($USD Millions)$0.80 (Rev–CoS) $2.29 (Rev–CoS)
Gross Margin (%)51.8% (0.80/1.55) 60.5% (2.29/3.78)
Net Income Margin (%)(46.4%) (−0.72/1.55) 64.1% (2.42/3.78)

Revenue Breakdown

MetricQ1 2021Q1 2022
Cloud Software & Service ($USD Millions)$1.55 $3.70
Product Revenue ($USD Millions)$0.01 $0.07
Total Operating Revenues ($USD Millions)$1.55 $3.78

KPIs and Cash Flow

KPIQ1 2021Q1 2022
Customers (#)701 2,658
Cash & Cash Equivalents ($USD Millions)$0.45 $1.65
Operating Cash Flow ($USD Millions)$0.09 $0.03

Notes:

  • Prior quarter (Q4 FY2021) quarterly detail not disclosed in filings; the FY2021 10-K provides annual figures, so “vs prior quarter” comparisons are not available from primary sources .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Annual Revenue (subsidiaries, annualized incl. SkyNet)FY2022 (annualized from Q1 base)N/A~$18.5MNew guidance; implies higher scale post-acquisition
Profitability (EBITDA/Operating Income)FY2022N/A“Immediate and positive impact” expected with additional improvements from cost synergies and consolidation savingsNew qualitative guidance

Earnings Call Themes & Trends

(No public earnings call transcript found; themes sourced from 10‑Q/10‑K and press release.)

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 2022)Trend
M&A consolidation strategyFY2021: Nexogy and ActivePBX acquisitions drove revenue/customer growth; plan to continue acquiring UCaaS providers SkyNet acquired; Texas footprint expanded; adopting SkyNet’s GTM in secondary/tertiary markets Intensifying
Customer growth & product mixQ3 FY2021 revenue $3.75M; cloud services dominate; customers 701 → 2,655 YoY within FY2021 Q1 FY2022 cloud services $3.70M; customers 2,658; subscriptions remain >95% of revenue Sustained mix, larger base
Synergies/Cost savingsFY2021: integration costs; margin improved $4.04M YoY SkyNet expected to add EBITDA/Op income; further FY2022 cost synergies and consolidation savings Positive narrative
Liquidity/Going concernFY2021 & Q3 FY2021: substantial doubt absent financing; cash needs; covenant compliance Q1 FY2022 reiterates substantial doubt; monthly cash expenses ~$0.7M; needs ~$80K/month working capital; covenants met Ongoing risk
Debt & covenantsFY2021: Post Road facility; covenant thresholds disclosed Covenants met (liquidity $1.5M; EBITDA min; leverage cap; capex cap) Stable compliance
Regulatory & FCCNo specific issues; standard compliance FCC compliance & permits highlighted in SkyNet APA; seller in good standing Neutral

Management Commentary

  • “SkyNet fit our disciplined M &A plan and business model perfectly with its identical technology stack and strong and predictable recurring revenue with high gross margins under contracts with business customers.” — Arthur L. Smith, CEO .
  • “We are excited for our team and the increased opportunities this business combination brings to our customers… Our portfolio of products is enhanced tremendously going forward.” — Paul Golibart, President of SkyNet .
  • On liquidity actions: “We are currently taking initiatives to reduce our overall cash deficiencies… certain members of our executive management team have taken a significant portion of their compensation in common stock…” .
  • Going concern: “Management believes that available resources… will not be sufficient to fund the Company’s operations, debt service and corporate expenses over the next 12 months” without additional capital or revenue .

Q&A Highlights

No public earnings call or transcript was found for Q1 FY2022; no analyst Q&A available from primary sources [functions.ListDocuments result: 0 for transcripts].

Estimates Context

Consensus estimates from S&P Global for Q1 FY2022 were unavailable at time of retrieval due to provider limits; we therefore cannot provide “vs estimates” comparisons. Values retrieved from S&P Global.

Where estimates are needed for internal models, consider building from company guidance (~$18.5M annualized revenue post-SkyNet) and the subscription-heavy mix, but note absence of published Wall Street consensus for this microcap OTC name .

Key Takeaways for Investors

  • Revenue scale-up is real and subscription-led: YoY revenue +143% with gross margin expansion to ~60.5%; customer count nearly quadrupled, driven by recent acquisitions .
  • Reported profitability depends heavily on non-operating derivative gains; operating loss persists and interest expense rose materially, highlighting leverage costs despite covenant compliance .
  • Strategic catalyst: SkyNet acquisition broadens Texas presence and management sees immediate EBITDA/Op income uplift plus FY2022 synergies — key medium-term margin driver .
  • Liquidity remains the primary risk: cash $1.65M with modest operating cash generation; management warns of substantial doubt absent cap raises or higher revenue — monitor financing actions and cash burn .
  • No earnings call or consensus estimates available; near-term stock narrative likely anchored on integration updates, synergy realization, and any capital markets activity [functions.ListDocuments transcripts: 0].
  • For trading: watch follow-on disclosures on SkyNet integration, debt covenant headroom, and any 8-Ks on financing or operational milestones; subscription revenue visibility supports downside protection if churn stays low .
  • Medium-term thesis: consolidation in fragmented UCaaS SMB markets can drive scale and margin — execution on integration and disciplined financing terms will determine value realization .