TECH - Digerati Technologies (DTGI) - Scores A Decent Quarter
In line Q4. Total company revenues increased 141.7% to $3.787 million, in line with our $3.775 million estimate. Revenues benefited from the year earlier acquisitions of Nexogy and ActivePBX and the significant increase in customers from 728 to 2,655 at year end. Adj. EBITDA of $748,000 was above our $375,000 estimate. The Q4 result variances are highlighted in this report. Current focus, reduce expenses. The company is taking measures to reduce cash expenses, which include stock compensation for members of management. In addition, the company is focused on increasing recurring revenue, predominately through the use of its value-added resellers and channel partners. Lowering financial assessment. As of July 31, the company had $1.5 million in cash and total liabilities of $33.3 million, which includes $16.8 million of a non cash warrant liability. Management believes that it does not have sufficient funding for its operations and corporate expenses over the next 12 months, with cash expenses running roughly $700,000 per month. The company has the ability to draw additional loans in increments of $1 million, for a total of $6 million, on its credit agreement with Post Road. The company has been successful in raising additional equity in the past. Given the tightening timetable for the company's need for capital, however, we are lowering our financial assessment from 2.0 to 1.5, which is below average. Maintaining our fiscal 2022 estimates. We believe that the company's core fundamentals are on track to deliver favorable revenue and cash flow growth. As such, we are maintaining our estimates at this time. Favorable risk/reward. We are maintaining our Outperform rating for speculative investors that may be willing to accept the prospect of a dilutive equity raise or less than favorable financing terms. Near current levels, the DTGI shares trade at 2.1 times Enterprise Value to our fiscal 2022 revenue estimate, well below its peer group. We have lowered our price target from $0.23 to $0.17 to reflect the prospect of a dilutive equity offering or less favorable financing terms. Read More >>