Accelerated Execution of M&A Strategy
Digerati Technologies, Inc., a provider of cloud services specializing in UCaaS (Unified Communications as a Service) solutions for the small to medium-sized business (“SMB”) market, announced its strategic initiatives and outlook for FY2020 ended July 31, 2020. Management continues to be focused on driving long-term sales and revenue growth, profitability, and enhancing shareholder value.
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The Company’s plan to successfully meet its corporate goals and objectives includes:
- A continued focus on its core UCaaS/cloud communication business, which operates in a segment of the telecommunication industry that continues to experience significant growth as businesses migrate from legacy phone systems to cloud-based telephony systems.
- Continued enhancements to its broadband product portfolio that include an emphasis on marketing leading-edge network and business continuity solutions like SD-WAN (Software Defined Wide-Area Network), and its 4g LTE mobile data solution. The Company anticipates that these data centric solutions in demand by the business market will lead to an increase in average revenue per customer (ARPU).
- Continued emphasis on its recurring revenue business model and building on its solid operational and financial foundation of $6.4 million in annualized revenue to improve cash-flow profitability.
- Acceleration of its M&A activities targeting local and/or regional UCaaS/cloud telephony providers, which have excelled in their market with that “local” touch when serving their business customers. The Company will continue with its disciplined approach of future acquisitions and only acquire industry peers that meet key operational, technical, and financial criteria.
- A continued focus on the U.S. market of SMBs, which remains a high-growth market as businesses migrate from legacy phone systems to cloud-based communication solutions.
- A continued emphasis on Channel Management and the Company’s Agent/Channel Partner sales strategy that includes enabling Value Added Resellers (“VAR”) to offer cloud and session-based communication services to the enterprise market, primarily the SMB.
- Continued enhancement of its infrastructure and back office systems to streamline operations and automate processes for efficiency, all which support both its organic and acquisition growth model.
- Continued implementation of a total “pre” and “post” sales support model for building a world-class service delivery and help desk organization.
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During FY2019, Digerati integrated two acquisitions that created a solid foundation for continued growth and for achieving its corporate objectives. The Company’s business, that operates as T3 Communications, Inc. (www.T3com.com) in Texas and Florida, serves over 700 business customers and 10,000 users across a broad range of industries including banking, healthcare, financial services, automotive, legal, real estate, staffing, and government.
On September 24, 2019, the Company announced that it had entered into a definitive agreement to acquire Nexogy, Inc. (“Nexogy”), a leading “white label” provider of cloud communication and broadband solutions tailored for businesses based in Miami, Florida and serving over 1,500 SMB accounts and 14,000 users. On a trailing twelve months (TTM) pro forma basis, the combination of T3 and Nexogy will generate $12.7 million in annual revenue, while the consolidation of telecom infrastructure and integration of cloud PBX platforms and back-office systems is expected to produce cost savings and EBITDA improvements.
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Digerati is participating in two high-growth areas driven by demand from the enterprise market. The global market for UCaaS solutions is forecasted to reach $96 billion in value by 2023, while revenue from SD-WAN (cloud WAN) service providers is growing at 70% annually and is estimated to reach $8.05 billion worldwide by 2021. Approximately 95% of Digerati’s revenue is contracted monthly recurring revenue.
Arthur L. Smith, CEO of Digerati, stated, “We successfully delivered on execution of our plan during FY2019 and integrated two acquisitions during the same year that clearly validated our business model. We will not deviate from our stated business plan and strategic initiatives that have remained consistent over the past two fiscal years. We will raise the bar for growth and profitability, as we work towards accelerating our M&A strategy now that we have achieved an operational scale that allows us to derive increased EBITDA from follow-on acquisitions and improve our return on investment (ROI).”
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