- Acquisition of Opengear, Inc. completed in
December - Total revenue of $62.3 million - exceeds
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 its fiscal first quarter ended December 31,
2019.
"We are excited to welcome Opengear, Inc. to the Digi family,"
said Ron Konezny, President and Chief Executive Officer. "Our
fiscal 2020 is off to a strong start, highlighting our focus on
profitable growth."
Fiscal First Quarter 2020
Results
- Revenue of $62.3 million was flat compared to the fiscal first
quarter of 2019.
- Net income decreased to $0.2 million compared to net income of
$4.7 million for the fiscal first quarter of 2019.
- Net income per diluted share decreased to $0.01 per share
compared to $0.17 for the fiscal first quarter of 2019.
- Adjusted EPS of $0.15 was flat compared to the fiscal first
quarter of 2019.
- Adjusted EBITDA increased 3.9% to $6.4 million compared to the
fiscal first quarter of 2019.
Reconciliations of GAAP and non-GAAP financial measures appear
at the end of this release.
Segment Results
IoT Product & Services
The segment's fiscal first quarter 2020 revenues of $54.6
million increased 2.5% from the same period in the prior fiscal
year. This increase is primarily attributed to the incremental
revenue associated with our acquisition of Opengear, Inc.
("Opengear'") on December 13, 2019, increased sales from our
cellular products and growth in our services revenue. This was
partially offset by lower sales of our other traditional product
offerings. Gross profit margin increased 1.2 percentage points to
48.8% of revenues for the fiscal first quarter of 2020 due
primarily to the acquisition of Opengear, which has a higher gross
margin profile, and improved service margins, partially offset by
unfavorable product mix.
IoT Solutions
The segment's fiscal first quarter 2020 revenues of $7.7 million
decreased 14.6% from the same period in the prior fiscal year due
primarily to fiscal first quarter 2019 purchases from existing
customers that did not reoccur in the fiscal first quarter of 2020.
We served nearly 67,000 sites as of December 31, 2019, compared to
54,000 sites a year ago and 63,000 sites as of September 30, 2019.
Gross profit margin increased 0.5 percentage points to 49.5% of
revenues due to favorable product mix and an increase in recurring
subscription revenue.
Fiscal 2020 Guidance
For the second fiscal quarter of 2020, Digi projects revenue to
be in a range of $72 million to $78 million. Adjusted EBITDA is
projected to be in a range of $11 million to $13 million. Diluted
EPS is projected to be in a range of $0.07 to $0.11 per diluted
share. Adjusted EPS is projected to be in a range of $0.29 to $0.33
per diluted share.
For the full fiscal 2020, we are not updating our annual
revenue, Adjusted EBITDA, or Adjusted EPS ranges. These ranges
remain as $310 million to $325 million for revenue, $45 million to
$50 million for Adjusted EBITDA, and $1.14 to $1.27 per diluted
share for Adjusted EPS. We are updating our diluted EPS range,
which is now projected to be in a range of $0.31 to $0.41 per
diluted share. This range is being adjusted to reflect the
anticipated impacts of interest expense on our debt and
amortization associated with the intangible assets created from the
Opengear acquisition.
First Fiscal Quarter 2020 Conference
Call Details
As announced on January 7, 2020, Digi will discuss its fiscal
first quarter 2020 results on a conference call on Thursday,
January 30, 2020 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 9536759.
International participants may access the call by dialing (262)
912-4765 and entering passcode 9536759. 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 9536759 when prompted.
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 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," "continue," "could,"
"may," "project," "should," "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 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, the ability to achieve the anticipated
benefits and synergies associated with acquisitions or divestitures
(including, but not limited to, our recently announced acquisition
of Opengear), 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, 2019 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 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,
acquisition-related expenses, and interest expense from
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 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 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.
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 December
31,
2019
2018
Revenue
$
62,317
$
62,313
Cost of sales
31,853
32,530
Gross profit
30,464
29,783
Operating expenses:
Sales and marketing
12,061
11,657
Research and development
10,331
9,518
General and administrative
8,555
3,117
Restructuring reversal
—
(67
)
Operating expenses
30,947
24,225
Operating (loss) income
(483
)
5,558
Other (expense) income, net
(437
)
164
(Loss) income before income taxes
(920
)
5,722
Income tax (benefit) expense
(1,128
)
1,040
Net income
$
208
$
4,682
Net income per common share:
Basic
$
0.01
$
0.17
Diluted
$
0.01
$
0.17
Weighted average common shares:
Basic
28,467
27,513
Diluted
29,614
28,075
Digi International Inc.
Condensed Consolidated Balance Sheets (In thousands)
(Unaudited)
December 31, 2019
September 30, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
49,072
$
92,792
Accounts receivable, net
81,097
56,417
Inventories
47,380
39,764
Other current assets
7,486
3,574
Total current assets
185,035
192,547
Other non-current assets
375,869
206,151
Total assets
$
560,904
$
398,698
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
23,165
$
21,183
Other current liabilities
38,360
23,275
Total current liabilities
61,525
44,458
Other non-current liabilities
143,064
5,262
Total liabilities
204,589
49,720
Total stockholders’ equity
356,315
348,978
Total liabilities and stockholders’
equity
$
560,904
$
398,698
Digi International Inc.
Condensed Consolidated Statements of Cash Flows (In
thousands) (Unaudited)
Three months ended December
31,
2019
2018
Net cash (used in) provided by operating
activities
$
(22,067
)
$
6,111
Net cash (used in) provided by investing
activities
(136,294
)
8,763
Net cash provided by (used in) financing
activities
112,869
(174
)
Effect of exchange rate changes on cash
and cash equivalents
1,772
(492
)
Net (decrease) increase in cash and cash
equivalents
(43,720
)
14,208
Cash and cash equivalents, beginning of
period
92,792
58,014
Cash and cash equivalents, end of
period
$
49,072
$
72,222
Non-GAAP Financial
Measures
TABLE 1
Reconciliation of Net Income
to Adjusted EBITDA (In thousands)
Three months ended December
31,
2019
2018
% of total revenue
% of total revenue
Total revenue
$
62,317
100.0
%
$
62,313
100.0
%
Net income
$
208
$
4,682
Interest expense (income), net
201
(116
)
Income tax (benefit) expense
(1,128
)
1,040
Depreciation and amortization
3,617
3,673
Stock-based compensation
1,600
1,414
Gain on sale of building
—
(4,396
)
Restructuring reversal
—
(67
)
Acquisition expense
1,906
(69
)
Adjusted EBITDA
$
6,404
10.3
%
$
6,161
9.9
%
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 December
31,
2019
2018
Net income and net income per diluted
share
$
208
$
0.01
$
4,682
$
0.17
Amortization
2,448
0.08
2,540
0.09
Stock-based compensation
1,600
0.05
1,414
0.05
Other non-operating income
236
0.01
(48
)
—
Acquisition expense
1,906
0.06
(69
)
—
Acquisition earn-out adjustments
259
0.01
243
0.01
Restructuring charge
—
—
(67
)
—
Interest expense related to
acquisition
416
0.01
—
—
Gain on sale of building
—
—
(4,396
)
(0.16
)
Tax effect from the above adjustments
(1,610
)
(0.05
)
90
—
Discrete tax benefits (1)
(959
)
(0.03
)
(106
)
0.00
Adjusted net income and adjusted net
income per diluted share (2)
$
4,504
$
0.15
$
4,283
$
0.15
Diluted weighted average common shares
29,614
28,075
(1) For the three months ended December
31, 2019, discrete tax benefits primarily include excess tax
benefits recognized on stock compensation and an adjustment of our
state deferred tax rate due to the Opengear acquisition. For the
three months ended December 31, 2018, discrete tax benefits are a
result of expiring statute of limitations of uncertain tax benefits
as well as excess tax benefits recognized on stock compensation.
(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/20200130005780/en/
Investor Contact: James J. Loch Senior Vice President,
Chief Financial Officer and Treasurer Digi International
952-912-3737 Email: jamie.loch@digi.com
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