- Fiscal fourth quarter revenue of $65.0 million
- Fiscal fourth quarter GAAP EPS of $0.08
- The Company introduces its fiscal 2020 guidance
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 the fiscal fourth quarter and full fiscal
year ended September 30, 2019.
"Both business segments contributed to a record fiscal 2019,"
said Ron Konezny, President and Chief Executive Officer. "Digi is
well-positioned to build on that momentum in fiscal 2020, and we
are excited to announce our agreement to add Opengear, Inc. to the
Digi family."
Fiscal Fourth Quarter 2019
Results
- Revenue decreased 0.2% to $65.0 million compared to the same
period in the prior fiscal year. Net income decreased to $2.3
million, compared to net income of $3.3 million in the fiscal
fourth quarter of 2018. Diluted earnings per share (EPS) decreased
to $0.08, compared to $0.12 for the fiscal fourth quarter of 2018.
Adjusted EPS decreased to $0.18, compared to $0.22 for the fiscal
fourth quarter of 2018. Adjusted EBITDA increased 3.3% to $7.6
million as compared to the same period in the prior fiscal
year.
Full Fiscal Year 2019
Results
- Revenues increased 12.0% to $254.2 million from the same period
in the prior fiscal year. Net income increased to $10.0 million,
compared to net income of $1.6 million for fiscal 2018. Diluted EPS
increased to $0.35 compared to $0.06 for fiscal 2018. Adjusted EPS
increased to $0.65, compared to $0.61 in fiscal 2018. Adjusted
EBITDA increased 12.9% to $26.5 million as compared to the same
period in the prior fiscal year.
Reconciliations of GAAP and non-GAAP financial measures appear
at the end of this release. In the fiscal fourth quarter of 2019,
we expanded our definition of adjusted EPS to further exclude the
effects of amortization of intangible assets, stock-based
compensation expense, adjustments to estimates of contingent
consideration liabilities, acquisition-related expenditures, and
other non-operating income/expense. We believe the expansion of
adjusted EPS to exclude the effects of these items provides
investors with a better understanding of the financial performance
of the Company, future prospects of our core business activities
and better benchmarking of our performance externally against our
competitors. Further, this non-GAAP metric is a measure used by
management for the purposes of evaluating performance and
establishing internal budgets. Adjusted EPS for prior periods have
been conformed to match the current period presentation.
Segment Results
IoT Product & Services
Fiscal fourth quarter 2019 revenues of $55.5 million decreased
1.7% from the same period in the prior fiscal year primarily due to
lower sales of our cellular and network product offerings. Gross
profit increased 0.6 percentage points to 47.9% for the fiscal
fourth quarter of 2019 due to favorable product mix.
Full fiscal year 2019 revenues of $215.3 million increased 6.8%
from the previous year due to incremental revenue of $5.4 million
from Accelerated Concepts, Inc. and increased sales of our embedded
and RF product offerings, partially offset by lower sales of our
network product offerings. Gross profit decreased 1.9 percentage
points to 46.7% for fiscal 2019 due to unfavorable product mix.
IoT Solutions
Fiscal fourth quarter 2019 revenues of $9.5 million increased
9.1% from the same period in the prior fiscal year due to an
increase in recurring subscription revenue. We are serving over
63,000 sites as of September 30, 2019, compared to 54,000 sites a
year ago and 61,000 sites as of June 30, 2019. Gross profit
decreased 2.5 percentage points to 42.7% due to increased
implementation costs.
Full fiscal year 2019 revenues of $38.9 million increased 53.3%
from the previous year primarily due to new customer deployments
and additional product purchases from existing customers. Gross
profit increased 3.6 percentage points to 47.6% due to improved
product pricing and increased recurring revenue.
Fiscal 2020 Guidance
For the fiscal first quarter of 2020, Digi projects revenue to
be in a range of $58 million to $62 million. Adjusted EBITDA is
projected to be in a range of $5 million and $6 million. Diluted
EPS is projected to be in a range of ($0.02) to $0.02 per diluted
share. Adjusted EPS is projected to be in a range of $0.10 to $0.14
per diluted share.
For the full fiscal year 2020, Digi projects revenue to be in a
range of $310 million to $325 million, which includes approximately
$45 million of revenue from nine months of results from our pending
acquisition of Opengear, Inc. Adjusted EBITDA is projected to be in
a range of $45 million to $50 million, which includes approximately
$15 million of Adjusted EBITDA from our pending acquisition of
Opengear, Inc. Diluted EPS is projected to be in a range of $0.70
to $0.83 per diluted share. Adjusted EPS is projected to be in a
range of $1.14 to $1.27 per diluted share.
Fourth Fiscal Quarter and Year-End 2019
Conference Call Details
As announced on October 15, 2019, Digi will discuss its fiscal
fourth quarter and year-end 2019 results on a conference call on
Thursday, November 14, 2019 after market close at 5:00 p.m. ET
(4:00 p.m. CT). The call will be hosted by Ron Konezny, President
and Chief Executive Officer and Jamie Loch, Chief Financial
Officer.
Digi invites all those interested in hearing management's
discussion of its quarter to access a live webcast of the
conference call through the investor relations section of Digi's
website at www.digi.com. Participants may also join the call
directly by dialing (855) 638-5675 and entering passcode 8869735.
International participants may access the call by dialing (262)
912-4765 and entering passcode 8869735. A replay will be available
within approximately three hours after the completion of the call,
and for one week following the call, by dialing (855) 859-2056 for
domestic participants or (404) 537-3406 for international
participants and entering access code 8869735 when prompted. A
replay of the webcast will be available for one week through Digi's
website.
A copy of this earnings release 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 Internet of Things ("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, or call
877–912–3444 (U.S.) or 952–912–3444 (International).
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 "anticipate," "believe," "estimate," "looking
forward," "may," "will," "expect," "plan," "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 the company
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 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 defend or settle satisfactorily any litigation,
uncertainty in global economic conditions and economic conditions
within particular regions of the world which could negatively
affect product demand and the financial solvency of customers and
suppliers, 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 or other similar business initiatives that may impact
our ability to retain important employees, our ability to close the
pending acquisition of Opengear, Inc. that was recently announced,
the ability to achieve the anticipated benefits and synergies
associated with the pending acquisition or other acquisitions or
divestitures, 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, our annual report on Form
10-K for the year ended September 30, 2018 and subsequent quarterly
reports on Form 10-Q and other filings, could cause the company's
future 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.
Presentation of Non-GAAP Financial
Measures
This release includes adjusted net income, adjusted net income
per diluted share and adjusted earnings before interest, taxes and
amortization ("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 the
company. 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 and that 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,
adjustments to estimates of contingent consideration, and
acquisition-related expenses 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 recoveries,
and gains from the disposition of our former corporate headquarters
is useful to investors to evaluate the Company’s core operating
results and financial performance because it excludes items that
are significant non-cash or non-recurring expenses 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.
For more information, visit Digi's website at www.digi.com, or
call 877-912-3444 (U.S.) or 952-912-3444 (International).
Digi International
Inc.
Condensed Consolidated
Statements of Operations
(In thousands, except per
share amounts)
(Unaudited)
Three months ended
Fiscal year ended
September 30,
September 30,
2018
2018
2019
(as adjusted)*
2019
(as adjusted)*
Revenue
$
64,960
$
65,118
$
254,203
$
226,893
Cost of sales
34,365
34,505
135,168
117,839
Gross profit
30,595
30,613
119,035
109,054
Operating expenses
28,487
29,074
108,963
106,272
Operating income
2,108
1,539
10,072
2,782
Other income, net
479
174
1,073
468
Income before income taxes
2,587
1,713
11,145
3,250
Income tax expense (benefit)
301
(1,627
)
1,187
1,619
Net income
$
2,286
$
3,340
$
9,958
$
1,631
Net income per common share:
Basic
$
0.08
$
0.12
$
0.36
$
0.06
Diluted
$
0.08
$
0.12
$
0.35
$
0.06
Weighted average common shares:
Basic
28,172
27,323
27,905
27,083
Diluted
28,916
28,160
28,554
27,652
*Prior period information has been restated for the adoption of
ASU No. 2014-09, “Revenue from Contracts with Customers (Topic
606)”, which we adopted on October 1, 2018.
Digi International
Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
September 30,
September 30, 2018
2019
(as adjusted)*
ASSETS
Current assets:
Cash and cash equivalents
$
92,792
$
58,014
Marketable securities
—
4,736
Accounts receivable, net
56,417
49,819
Inventories
39,764
41,644
Other current assets
3,574
2,613
Assets held for sale
—
5,220
Total current assets
192,547
162,046
Other non-current assets
206,151
210,100
Total assets
$
398,698
$
372,146
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
21,183
$
12,911
Other current liabilities
23,275
22,662
Total current liabilities
44,458
35,573
Other non-current liabilities
5,262
6,080
Total liabilities
49,720
41,653
Total stockholders’ equity
348,978
330,493
Total liabilities and stockholders’
equity
$
398,698
$
372,146
*Prior period information has been restated for the adoption of
ASU No. 2014-09, “Revenue from Contracts with Customers (Topic
606)”, which we adopted on October 1, 2018.
Digi International
Inc.
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Fiscal years ended September
30,
2018
2019
(as adjusted)*
Net cash provided by (used in) operating
activities
28,964
(2,778
)
Net cash provided by (used in) investing
activities
5,511
(23,337
)
Net cash provided by financing
activities
1,113
5,827
Effect of exchange rate changes on cash
and cash equivalents
(810
)
80
Net increase (decrease) in cash and cash
equivalents
34,778
(20,208
)
Cash and cash equivalents, beginning of
period
58,014
78,222
Cash and cash equivalents, end of
period
$
92,792
$
58,014
*Prior period information has been restated for the adoption of
ASU No. 2014-09, “Revenue from Contracts with Customers (Topic
606)”, which we adopted on October 1, 2018.
Non-GAAP Financial
Measures
TABLE 1
Reconciliation of Net Income
to Adjusted EBITDA
(In thousands)
Three months ended September
30,
Fiscal years ended September
30,
2018
2018
2019
(as adjusted)*
2019
(as adjusted)*
% of total
% of total
% of total
% of total
revenue
revenue
revenue
revenue
Total revenue
$
64,960
100.0
%
$
65,118
100.0
%
$
254,203
100.0
%
$
226,893
100.0
%
Net income
$
2,286
$
3,340
$
9,958
$
1,631
Interest income, net
(168
)
(89
)
(631
)
(420
)
Income tax expense (benefit)
301
(1,627
)
1,187
1,619
Depreciation and amortization
3,384
3,478
13,396
12,784
Stock-based compensation
1,475
1,256
5,655
4,854
Gain on sale of building
—
—
(4,396
)
—
Restructuring charge (reversal)
—
111
(87
)
301
Acquisition expense
345
907
1,390
2,670
Adjusted EBITDA
$
7,623
11.7
%
$
7,376
11.3
%
$
26,472
10.4
%
$
23,439
10.3
%
*Prior period information has been restated for the adoption of
ASU No. 2014-09, “Revenue from Contracts with Customers (Topic
606)”, which we adopted on October 1, 2018.
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 September
30,
Fiscal years ended September
30,
2018
2018
2019
(as adjusted)*
2019
(as adjusted)*
Net income and net income per diluted
share
$
2,286
$
0.08
$
3,340
$
0.12
$
9,958
$
0.35
$
1,631
$
0.06
Amortization
2,149
0.07
2,569
0.09
8,818
0.31
9,435
0.34
Stock-based compensation
1,475
0.05
1,256
0.04
5,655
0.20
4,854
0.18
Other non-operating income
(311
)
(0.01
)
(85
)
—
(442
)
(0.02
)
(48
)
—
Acquisition expense
345
0.01
907
0.03
1,390
0.05
2,670
0.10
Acquisition earn-out adjustments
3
—
1,044
0.04
1,191
0.04
1,376
0.05
Restructuring charge
—
—
111
—
(87
)
—
301
0.01
Gain on sale of building
—
—
—
—
(4,396
)
(0.15
)
—
—
Tax effect from restructuring reversal and
gain on sale of building
(859
)
(0.03
)
(1,555
)
(0.06
)
(2,844
)
(0.10
)
(4,982
)
(0.18
)
Discrete tax expense (benefits) (1)
31
—
(1,489
)
(0.05
)
(549
)
(0.02
)
1,538
0.06
Adjusted net income and adjusted net
income per diluted share (2)
$
5,119
$
0.18
$
6,098
$
0.22
$
18,694
$
0.65
$
16,775
$
0.61
Diluted weighted average common shares
28,916
28,160
28,554
27,652
*Prior period information has been restated for the adoption of
ASU No. 2014-09, “Revenue from Contracts with Customers (Topic
606)”, which we adopted on October 1, 2018.
(1)
For the three and twelve months ended September 30, 2019,
discrete tax expense primarily includes reversals of tax reserves
due to the expiration of statutes of limitation. For the three and
twelve months ended September 30, 2018, discrete tax (benefit)
expense primarily includes one-time adjustments for the
re-measurement of deferred tax assets and the impact of ASU 2016-09
relating to the accounting for the tax effects of stock
compensation. This was partially offset by net tax benefits for the
release of a valuation allowance against U.S. federal capital loss
carryforward related to the expected gains tax in fiscal 2019 as a
result of the sale of our Corporate Headquarters building in
October 2019 and reversals of tax reserves due to the expiration of
statutes of limitation and certain domestic tax credits.
(2)
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/20191114005843/en/
James J. Loch Senior Vice President, Chief Financial Officer and
Treasurer Digi International 952-912-3737 Email:
jamie.loch@digi.com
Digi (NASDAQ:DGII)
Historical Stock Chart
From Mar 2024 to Apr 2024
Digi (NASDAQ:DGII)
Historical Stock Chart
From Apr 2023 to Apr 2024