Digi International Reports Second Fiscal Quarter 2024 Results

Revenue of $108M, Record End of Quarter ARR of $110M
Cash Flow From Operations was $13 Million

(Minneapolis, MN, May 1, 2024) - Digi International® Inc. (Nasdaq: DGII), a leading global provider of business and mission critical Internet of Things ("IoT") products, services and solutions, today announced its financial results for its second fiscal quarter ended March 31, 2024.

Second Fiscal Quarter 2024 Results Compared to Second Fiscal Quarter 2023 Results

  • Revenue was $108 million, a decrease of 3%.
  • Gross profit margin was 57.9%, an increase of 130 basis points.
  • Net income was $4 million, compared to $6 million.
  • Net income per diluted share was $0.11, compared to $0.16.
  • Adjusted net income per diluted share was $0.49, flat year over year.
  • Adjusted EBITDA was $24 million, flat year over year.
  • Annualized Recurring Revenue (ARR) was $110 million at quarter end, an increase of 11%.

Les réconciliations des mesures financières GAAP et non-GAAP figurent à la fin de ce communiqué.

“Value added solutions for our customers, which directly correlate to our growth in ARR, is evident in our results. The diversity of Digi’s customer base and solutions, combined with strong operating discipline, inventory optimization, and improved debt structure generated nearly twice the operating cash flow, and have cut our interest payments nearly in half from last year,” stated Ron Konezny, President and CEO. “We remain steadfast in our commitment to enabling our customers meet their critical objectives through our solutions and services.”

Faits saillants financiers supplémentaires

  • We made payments towards our new revolving credit facility, reducing our net outstanding debt to $172 million at quarter end and debt net of cash and cash equivalents to $148 million.
  • We had $3.7 million of interest expense in the second quarter of fiscal 2024, compared to $6.4 million a year ago. The decrease was driven by decreased debt outstanding and a reduction of our effective interest rate.
  • Cash flow from operations was $13 million in the second quarter of fiscal 2024, compared to $7 million a year ago, driven primarily by year over year changes in inventory.
  • Net inventory ended the quarter at $62 million, compared to $74 million at September 30, 2023, reflecting continued efforts to manage inventory levels.
  • We accrued an approximate $6 million liability in the quarter for pending litigation.

Résultats sectoriels

IoT Produits et services

The segment's second fiscal quarter 2024 revenue of $83 million decreased $2.5 million for the three months ended March 31, 2024, as compared to the same period in the prior fiscal year. This decrease consisted of an approximate $4.6 million decrease in product sales volume, with no material impact from pricing, from our Console Server and Cellular product lines that was partially offset by growth in OEM and $2.1 million in service revenue growth. ARR as of the end of the second fiscal quarter was $23 million, an increase of 35% from the prior fiscal year. This increase primarily was due to growth in the subscription base for Console Server services, complemented by growth in other business lines. Gross profit margin decreased 90 basis points to 54.0% of revenue for the second fiscal quarter of 2024, driven primarily by decreased volume as well as mix of lower gross profit products across Console Server and Cellular products. Operating income was $13 million, a decrease of 1%, primarily due to the decrease in revenue.

IoT Solutions

The segment's second fiscal quarter 2024 revenue of $24 million decreased $0.9 million for the three months ended March 31, 2024, as compared to the same period in the prior fiscal year, consisting of a $0.9 million increase in recurring revenue offset by a $1.0 million decrease in one time services volume and a $0.8 million decrease in hardware sales. ARR as of the end of the second fiscal quarter was $87 million, an increase of 6% from the prior fiscal year primarily driven by growth in SmartSense. Gross profit margins increased 860 basis points to 71.0% in the second fiscal quarter of 2024. This increase was the result of growth in higher margin ARR subscription revenues. Operating loss was $4.7 million, compared to an operating loss of $0.8 million a year ago driven by the above referenced litigation reserve.

Stratégie d'allocation du capital

We intend to deleverage the company while seeking optimal inventory levels as our supply chain continues to normalize. Our inventory position has declined but remains elevated. We believe this investment will deliver working capital benefits for Digi in future quarters.

Acquisitions remain a top capital priority for Digi. We will be disciplined in our approach and act when we believe an opportunity is appropriate to execute in the context of prevailing market conditions. We are evolving and monitoring our acquisition pipeline, and we intend to focus more on scale and ARR.

Third Fiscal Quarter 2024 and Full-Year 2024 Guidance

Digi remains steadfast in achieving our new long term strategic goals of doubling ARR and Adjusted EBITDA to $200 million within the next five years. Digi’s resilient execution in a large and growing Industrial Internet of Things market has stayed consistent. Our outlook on ARR growth for fiscal 2024 remains unchanged at 5%. While pleased with our first half results, we find our customers are more cautious on second half demand than we previously expected. This is demonstrated through longer than expected sales cycles which lowers our top line expectations. The softer top line expectations combined with tight expense controls slightly lowers our Adjusted EBITDA ranges to 0 to 5%, with revenue projection to be down 5% year over year. The macroeconomic conditions have us uncertain as to when, and to what degree, sales cycles will return to more normal conditions.

For the third fiscal quarter, revenues are estimated to be $103 million to $107 million. Adjusted EBITDA is estimated to be between $24.0 million and $25.5 million. Adjusted net income per share is anticipated to be between $0.47 and $0.51 per diluted share, assuming a weighted average diluted share count of 37.5 million shares.

We provide guidance or longer-term targets for Adjusted net income per share as well as Adjusted EBITDA targets on a non-GAAP basis. We do not reconcile these items to their most similar U.S. GAAP measure as it is difficult to predict without unreasonable efforts numerous items that include but are not limited to the impact of foreign exchange translation, restructuring, interest and certain tax related events. Given the uncertainty, any of these items could have a significant impact on U.S. GAAP results.

Second Fiscal Quarter 2024 Conference Call Details

As announced on April 8, 2024, Digi will discuss its second fiscal quarter results on a conference call on Thursday, May 2, 2024 at 10:00 a.m. ET (9:00 a.m. CT). The call will be hosted by Ron Konezny, President and Chief Executive Officer and Jamie Loch, Chief Financial Officer.

Participants may register for the conference call at: https://register.vevent.com/register/BI2bbfe01f2107469d85ced9c48f92b3e4. Once registration is completed, participants will be provided a dial-in number and passcode to access the call. All participants are asked to dial-in 15 minutes prior to the start time.

Participants may access a live webcast of the conference call through the investor relations section of Digi’s website, https://digi.gcs-web.com/ or the hosting website at: https://edge.media-server.com/mmc/p/9x9odirn/.

Une rediffusion sera disponible dans un délai d'environ deux heures après la fin de l'appel pendant environ un an. Vous pouvez accéder à la rediffusion via la section des relations avec les investisseurs du site Web de Digi.

Une copie de ce communiqué de presse sur les résultats peut être consultée sur la page des communiqués financiers de la section des relations avec les investisseurs du site Web de Digi à l'adresse www.digi.com.

Pour plus de nouvelles et d'informations sur nous, veuillez consulter le site www.digi.com/aboutus/investorrelations.

À propos de Digi International

Digi International (Nasdaq : DGII) est l'un des principaux fournisseurs mondiaux de produits, services et solutions de connectivité IoT . Nous aidons nos clients à créer des produits connectés de nouvelle génération et à déployer et gérer des infrastructures de communication critiques dans des environnements exigeants avec des niveaux élevés de sécurité et de fiabilité. Fondée en 1985, la société a aidé ses clients à connecter plus de 100 millions de choses et ne cesse de croître. Pour plus d'informations, visitez le site Web de Digi à l'adresse www.digi.com.

Déclarations prospectives

This press release contains forward-looking statements that are based on management’s current expectations and assumptions. These statements often can be identified by the use of forward-looking terminology such as "assume," "believe," "continue," "estimate," "expect," "intend," "may," "plan," "potential," "project," "should," or "will" or the negative thereof or other variations thereon or similar terminology. Among other items, these statements relate to expectations of the business environment in which Digi operates, projections of future performance, inventory levels, perceived marketplace opportunities, interest expense savings and statements regarding our mission and vision. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions. Among others, these include risks related to ongoing and varying inflationary and deflationary pressures around the world and the monetary policies of governments globally as well as present concerns about a potential recession, the ability of companies like us to operate a global business in such conditions as well as negative effects on product demand and the financial solvency of customers and suppliers in such conditions, risks related to ongoing supply chain challenges that continue to impact businesses globally, risks related to cybersecurity, risks arising from the present wars in Ukraine and the Middle East, the highly competitive market in which our company operates, rapid changes in technologies that may displace products sold by us, declining prices of networking products, our reliance on distributors and other third parties to sell our products, the potential for significant purchase orders to be canceled or changed, delays in product development efforts, uncertainty in user acceptance of our products, the ability to integrate our products and services with those of other parties in a commercially accepted manner, potential liabilities that can arise if any of our products have design or manufacturing defects, our ability to integrate and realize the expected benefits of acquisitions, our ability to defend or settle satisfactorily any litigation, the impact of natural disasters and other events beyond our control that could negatively impact our supply chain and customers, potential unintended consequences associated with restructuring, reorganizations or other similar business initiatives that may impact our ability to retain important employees or otherwise impact our operations in unintended and adverse ways, and changes in our level of revenue or profitability which can fluctuate for many reasons beyond our control. These and other risks, uncertainties and assumptions identified from time to time in our filings with the United States Securities and Exchange Commission, including without limitation, those set forth in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended September 30, 2023, subsequent filings on Form 10-Q and other filings, could cause our actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. Many of such factors are beyond our ability to control or predict. These forward-looking statements speak only as of the date for which they are made. We disclaim any intent or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Présentation des mesures financières non conformes aux PCGR

Le présent communiqué comprend le bénéfice net ajusté, le bénéfice net ajusté par action diluée et l'EBITDA ajusté, qui constituent chacun une mesure non conforme aux PCGR.

Nous comprenons que l'utilisation de mesures non conformes aux PCGR est soumise à des restrictions importantes. Les mesures non-GAAP ne sont pas des substituts aux mesures GAAP, telles que le revenu net, dans le but d'analyser la performance financière. La publication de ces mesures ne reflète pas toutes les charges et tous les gains qui ont été effectivement reconnus par Digi. Ces mesures non-GAAP ne sont pas en accord avec, ou une alternative pour les mesures préparées conformément aux principes comptables généralement acceptés et peuvent être différentes des mesures non-GAAP utilisées par d'autres sociétés ou présentées par nous dans des rapports précédents. En outre, ces mesures non-GAAP ne sont pas basées sur un ensemble complet de règles ou de principes comptables. Nous pensons que les mesures non-GAAP ont des limites dans la mesure où elles ne reflètent pas tous les montants associés à nos résultats d'exploitation tels que déterminés conformément aux GAAP. Nous pensons que ces mesures doivent uniquement être utilisées pour évaluer nos résultats d'exploitation en conjonction avec les mesures GAAP correspondantes. En outre, l'EBITDA ajusté ne reflète pas nos dépenses de trésorerie, les besoins de trésorerie pour le remplacement des actifs amortis, ni les changements ou les besoins de trésorerie pour nos besoins en fonds de roulement.

We believe that providing historical and adjusted net income and adjusted net income per diluted share, respectively, exclusive of such items as reversals of tax reserves, discrete tax benefits, restructuring charges and reversals, intangible amortization, stock-based compensation, other non-operating income/expense, changes in fair value of contingent consideration, acquisition-related expenses and interest expense related to acquisitions permits investors to compare results with prior periods that did not include these items. Management uses the aforementioned non-GAAP measures to monitor and evaluate ongoing operating results and trends and to gain an understanding of our comparative operating performance. In addition, certain of our stockholders have expressed an interest in seeing financial performance measures exclusive of the impact of these matters, which while important, are not central to the core operations of our business. Management believes that Adjusted EBITDA, defined as EBITDA adjusted for stock-based compensation expense, acquisition-related expenses, restructuring charges and reversals, and changes in fair value of contingent consideration, is useful to investors to evaluate our core operating results and financial performance because it excludes items that are significant non-cash or non-recurring items reflected in the Condensed Consolidated Statements of Operations. We believe that the presentation of Adjusted EBITDA as a percentage of revenue is useful because it provides a reliable and consistent approach to measuring our performance from year to year and in assessing our performance against that of other companies. We believe this information helps compare operating results and corporate performance exclusive of the impact of our capital structure and the method by which assets were acquired.

Contact pour les investisseurs :

Rob Bennett
Relations avec les investisseurs
Digi International
Courriel : rob.bennett@digi.com

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