Digi International Reports Third Fiscal Quarter 2023 Results
- Record quarterly revenue of $112 million, up 8% from the same period last year, reflects strong performance.
- Gross profit margin increased to 56.9%, excluding amortization, reflecting a healthy financial position.
- Net income per diluted share increased to $0.18, up 50% from the previous year, indicating profitability growth.
- Adjusted EPS of $0.50 per diluted share represents an 11% increase, demonstrating sustained financial improvement.
- Annualized Recurring Revenue (ARR) reached $104 million at quarter end, showing a significant increase of 13%.
- None.
Record Quarterly Revenue of
EPS of
Third Fiscal Quarter 2023 Results Compared to Third Fiscal Quarter 2022 Results
-
Revenue was
, an increase of$112 million 8% .
-
Gross profit margin was
56.9% , an increase of 140 basis points. Gross profit margin excluding amortization was57.7% , an increase of 100 basis points.
-
Net income per diluted share was
, up from$0.18 , an increase of$0.12 50% .
-
Adjusted EPS was
per diluted share, an increase of$0.50 11% .
-
Adjusted EBITDA was
, an increase of$24 million 16% .
-
Annualized Recurring Revenue (ARR) was
at quarter end, an increase of$104 million 13% .
Reconciliations of GAAP and non-GAAP financial measures appear at the end of this release.
“Digi posted our tenth consecutive quarter of record revenue,” said Ron Konezny, President and Chief Executive Officer. “Driven by strong Annualized Recurring Revenue (ARR) growth, we achieved the second of our ‘100’ objectives. ARR exceeded
Segment Results
IoT Product & Services
The segment's third fiscal quarter 2023 revenues of
IoT Solutions
The segment's third fiscal quarter 2023 revenues of
Fourth Fiscal Quarter 2023 Guidance
The debate around an imminent recession and the potential severity if one arrives is ongoing. Digi’s broad array of end markets has helped the company weather challenging market conditions in the past. We believe the IIoT market is still in its early stage of adoption with a significant set of greenfield opportunities. Most of the world’s machines are not connected today. Over time, we expect more end markets to deploy IIoT.
For the fourth fiscal quarter of 2023, we expect revenue of
Based on our fiscal fourth quarter guidance combined with year-to-date results, Digi now expects to grow annual revenues at least
We provide earnings guidance on a non-GAAP basis as it is difficult to predict with reasonable certainty various items including but not limited to the impact of foreign exchange translation, interest and certain tax related events. Given the uncertainty, any of these or other items could have a significant impact on
Third Fiscal Quarter 2023 Conference Call Details
As announced on July 11, 2023, Digi will discuss its third fiscal quarter results on a conference call on Thursday, August 3, 2023 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/BI9b85c1468df24fcb826c07a7541ba76e. 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/bt95nnhk.
A replay will be available within approximately two hours after the completion of the call for approximately one year. You may access the replay via webcast through the investor relations section of Digi’s website.
A copy of this earnings release, as well as a shareholder letter relating to our second fiscal quarter results can be accessed through the financial releases page of the investor relations section of Digi's website at www.digi.com.
For more news and information on us, please visit www.digi.com/aboutus/investorrelations.
About Digi International
Digi International (Nasdaq: DGII) is a leading global provider of IoT connectivity products, services and solutions. We help our customers create next-generation connected products and deploy and manage critical communications infrastructures in demanding environments with high levels of security and reliability. Founded in 1985, we’ve helped our customers connect over 100 million things and growing. For more information, visit Digi's website at www.digi.com.
Forward-Looking Statements
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," "anticipate," "intend," "estimate," "target," "may," "will," "expect," "plan," "potential," "project," "should," or "continue," 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, perceived marketplace opportunities 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 the ongoing supply chain and transportation challenges impacting businesses globally, risks related to ongoing inflationary pressures around the world and the monetary policies of governments globally as well as present concerns about a potential recession and 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 arising from the present war in
Presentation of Non-GAAP Financial Measures
This release includes adjusted net income, adjusted net income per diluted share and Adjusted EBITDA, each of which is a non-GAAP measure.
We understand that there are material limitations on the use of non-GAAP measures. Non-GAAP measures are not substitutes for GAAP measures, such as net income, for the purpose of analyzing financial performance. The disclosure of these measures does not reflect all charges and gains that were actually recognized by Digi. These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, generally accepted accounting principles and may be different from non-GAAP measures used by other companies or presented by us in prior reports. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. We believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. We believe these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. Additionally, Adjusted EBITDA does not reflect our cash expenditures, the cash requirements for the replacement of depreciated and amortized assets, or changes in or cash requirements for our working capital needs.
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.
Digi International Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) |
|||||||||||||||
|
Three months ended June 30, |
|
Nine months ended June 30, |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue |
$ |
112,236 |
|
|
$ |
103,517 |
|
|
$ |
332,686 |
|
|
$ |
282,487 |
|
Cost of sales |
|
48,417 |
|
|
|
46,091 |
|
|
|
144,474 |
|
|
|
125,196 |
|
Gross profit |
|
63,819 |
|
|
|
57,426 |
|
|
|
188,212 |
|
|
|
157,291 |
|
Operating expenses: |
|
|
|
|
|
|
|
||||||||
Sales and marketing |
|
20,974 |
|
|
|
18,230 |
|
|
|
60,421 |
|
|
|
51,325 |
|
Research and development |
|
14,945 |
|
|
|
13,968 |
|
|
|
44,194 |
|
|
|
41,199 |
|
General and administrative |
|
15,424 |
|
|
|
15,254 |
|
|
|
46,983 |
|
|
|
43,430 |
|
Operating expenses |
|
51,343 |
|
|
|
47,452 |
|
|
|
151,598 |
|
|
|
135,954 |
|
Operating income |
|
12,476 |
|
|
|
9,974 |
|
|
|
36,614 |
|
|
|
21,337 |
|
Other expense, net |
|
(6,588 |
) |
|
|
(5,392 |
) |
|
|
(18,888 |
) |
|
|
(14,716 |
) |
Income before income taxes |
|
5,888 |
|
|
|
4,582 |
|
|
|
17,726 |
|
|
|
6,621 |
|
Income tax (benefit) provision |
|
(839 |
) |
|
|
456 |
|
|
|
(679 |
) |
|
|
(1,539 |
) |
Net income |
$ |
6,727 |
|
|
$ |
4,126 |
|
|
$ |
18,405 |
|
|
$ |
8,160 |
|
|
|
|
|
|
|
|
|
||||||||
Net income per common share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
0.19 |
|
|
$ |
0.12 |
|
|
$ |
0.51 |
|
|
$ |
0.23 |
|
Diluted |
$ |
0.18 |
|
|
$ |
0.12 |
|
|
$ |
0.50 |
|
|
$ |
0.23 |
|
Weighted average common shares: |
|
|
|
|
|
|
|
||||||||
Basic |
|
35,889 |
|
|
|
35,131 |
|
|
|
35,761 |
|
|
|
34,900 |
|
Diluted |
|
36,817 |
|
|
|
35,740 |
|
|
|
36,838 |
|
|
|
35,740 |
|
Digi International Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) |
|||||||
|
June 30,
|
|
September 30,
|
||||
ASSETS |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
29,580 |
|
$ |
34,900 |
||
Accounts receivable, net |
|
47,964 |
|
|
50,450 |
||
Inventories |
|
83,605 |
|
|
73,223 |
||
Income taxes receivable |
|
2,751 |
|
|
3,764 |
||
Other current assets |
|
3,454 |
|
|
3,871 |
||
Total current assets |
|
167,354 |
|
|
166,208 |
||
Non-current assets |
|
672,706 |
|
|
687,687 |
||
Total assets |
$ |
840,060 |
|
$ |
853,895 |
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Current portion of long-term debt |
$ |
15,523 |
|
$ |
15,523 |
||
Accounts payable |
|
21,503 |
|
|
32,373 |
||
Other current liabilities |
|
51,993 |
|
|
48,611 |
||
Total current liabilities |
|
89,019 |
|
|
96,507 |
||
Long-term debt |
|
194,556 |
|
|
222,448 |
||
Other non-current liabilities |
|
24,902 |
|
|
33,427 |
||
Non-current liabilities |
|
219,458 |
|
|
255,875 |
||
Total liabilities |
|
308,477 |
|
|
352,382 |
||
Total stockholders’ equity |
|
531,583 |
|
|
501,513 |
||
Total liabilities and stockholders’ equity |
$ |
840,060 |
|
$ |
853,895 |
Digi International Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) |
|||||||
|
Nine months ended June 30, |
||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
|
(Restated) (1) |
||||
Net cash provided by operating activities |
$ |
27,804 |
|
|
$ |
31,216 |
|
Net cash used in investing activities |
|
(3,842 |
) |
|
|
(351,771 |
) |
Net cash (used in) provided by financing activities |
|
(28,920 |
) |
|
|
208,551 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
(362 |
) |
|
|
1,087 |
|
Net decrease in cash and cash equivalents |
|
(5,320 |
) |
|
|
(110,917 |
) |
Cash and cash equivalents, beginning of period |
|
34,900 |
|
|
|
152,432 |
|
Cash and cash equivalents, end of period |
$ |
29,580 |
|
|
$ |
41,515 |
|
(1) We have restated the condensed consolidated statement of cash flows for the nine months ended June 30, 2022. We corrected |
|||||||
Non-GAAP Financial Measures |
|||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||
TABLE 1 |
|||||||||||||||||||||||||||
Reconciliation of Net Income to Adjusted EBITDA (In thousands) |
|||||||||||||||||||||||||||
|
Three months ended June 30, |
|
Nine months ended June 30, |
||||||||||||||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||||||||||||||
|
|
|
% of total revenue |
|
|
|
% of total revenue |
|
|
|
% of total revenue |
|
|
|
% of total revenue |
||||||||||||
Total revenue |
$ |
112,236 |
|
|
100.0 |
% |
|
$ |
103,517 |
|
100.0 |
% |
|
$ |
332,686 |
|
|
100.0 |
% |
|
$ |
282,487 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net income |
$ |
6,727 |
|
|
|
|
$ |
4,126 |
|
|
|
$ |
18,405 |
|
|
|
|
$ |
8,160 |
|
|
|
|||||
Interest expense, net |
|
6,603 |
|
|
|
|
|
5,296 |
|
|
|
|
18,967 |
|
|
|
|
|
14,657 |
|
|
|
|||||
Income tax expense (benefit) |
|
(839 |
) |
|
|
|
|
456 |
|
|
|
|
(679 |
) |
|
|
|
|
(1,539 |
) |
|
|
|||||
Depreciation and amortization |
|
8,005 |
|
|
|
|
|
8,747 |
|
|
|
|
23,963 |
|
|
|
|
|
25,393 |
|
|
|
|||||
Stock-based compensation |
|
3,519 |
|
|
|
|
|
2,143 |
|
|
|
|
9,852 |
|
|
|
|
|
6,402 |
|
|
|
|||||
Restructuring charge |
|
95 |
|
|
|
|
|
105 |
|
|
|
|
141 |
|
|
|
|
|
214 |
|
|
|
|||||
Acquisition expense |
|
222 |
|
|
|
|
|
175 |
|
|
|
|
910 |
|
|
|
|
|
4,256 |
|
|
|
|||||
Adjusted EBITDA |
$ |
24,332 |
|
|
21.7 |
% |
|
$ |
21,048 |
|
20.3 |
% |
|
$ |
71,559 |
|
|
21.5 |
% |
|
$ |
57,543 |
|
|
20.4 |
% |
|
TABLE 2 |
|||||||||||||||||||||||||||||||
Reconciliation of Net Income and Net Income per Diluted Share to Adjusted Net Income and Adjusted Net Income per Diluted Share (In thousands, except per share amounts) |
|||||||||||||||||||||||||||||||
|
Three months ended June 30, |
|
Nine months ended June 30, |
||||||||||||||||||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||||||||||||||||||
Net income and net income per diluted share |
$ |
6,727 |
|
|
$ |
0.18 |
|
|
$ |
4,126 |
|
|
$ |
0.12 |
|
|
$ |
18,405 |
|
|
$ |
0.50 |
|
|
$ |
8,160 |
|
|
$ |
0.23 |
|
Amortization |
|
6,252 |
|
|
|
0.17 |
|
|
|
7,046 |
|
|
|
0.20 |
|
|
|
18,966 |
|
|
|
0.51 |
|
|
|
20,400 |
|
|
|
0.57 |
|
Stock-based compensation |
|
3,519 |
|
|
|
0.10 |
|
|
|
2,143 |
|
|
|
0.06 |
|
|
|
9,852 |
|
|
|
0.27 |
|
|
|
6,402 |
|
|
|
0.18 |
|
Other non-operating income |
|
(15 |
) |
|
|
— |
|
|
|
96 |
|
|
|
— |
|
|
|
(79 |
) |
|
|
— |
|
|
|
59 |
|
|
|
— |
|
Acquisition expense |
|
222 |
|
|
|
0.01 |
|
|
|
175 |
|
|
|
— |
|
|
|
910 |
|
|
|
0.02 |
|
|
|
4,256 |
|
|
|
0.12 |
|
Restructuring charge |
|
95 |
|
|
|
— |
|
|
|
105 |
|
|
|
— |
|
|
|
141 |
|
|
|
— |
|
|
|
214 |
|
|
|
0.01 |
|
Interest expense, net |
|
6,603 |
|
|
|
0.18 |
|
|
|
5,296 |
|
|
|
0.15 |
|
|
|
18,967 |
|
|
|
0.51 |
|
|
|
14,657 |
|
|
|
0.40 |
|
Tax effect from the above adjustments (1) |
|
(6,025 |
) |
|
|
(0.17 |
) |
|
|
(2,497 |
) |
|
|
(0.07 |
) |
|
|
(15,520 |
) |
|
|
(0.41 |
) |
|
|
(8,263 |
) |
|
|
(0.23 |
) |
Discrete tax expenses (benefits) (2) |
|
1,125 |
|
|
|
0.03 |
|
|
|
(556 |
) |
|
|
(0.02 |
) |
|
|
2,874 |
|
|
|
0.08 |
|
|
|
(2,746 |
) |
|
|
(0.07 |
) |
Adjusted net income and adjusted net income per diluted share (3) |
$ |
18,503 |
|
|
$ |
0.50 |
|
|
$ |
15,934 |
|
|
$ |
0.45 |
|
|
$ |
54,516 |
|
|
$ |
1.48 |
|
|
$ |
43,139 |
|
|
$ |
1.21 |
|
Diluted weighted average common shares |
|
|
|
36,817 |
|
|
|
|
|
35,740 |
|
|
|
|
|
36,838 |
|
|
|
|
|
35,740 |
|
(1) |
The tax effect from the above adjustments assumes an estimated effective tax rate of |
(2) |
For the three and nine months ended June 30, 2023 and 2022 discrete tax expenses (benefits) primarily are a result of changes in excess tax benefits recognized on stock compensation. |
(3) |
Adjusted net income per diluted share may not add due to the use of rounded numbers. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230803986946/en/
Investor Contact:
Rob Bennett
Investor Relations
Digi International
952-912-3524
Email: rob.bennett@digi.com
Source: Digi International Inc.
FAQ
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