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Digi International Reports First Fiscal Quarter 2021 Results
Record Fiscal First Quarter Revenue of
Over 5,000 Subscribers Added to IoT Solutions
Debt Pay Down of
First Fiscal Quarter 2021 Results Compared to First Fiscal Quarter 2020 Results
-
Revenue increased to
$73.1 million compared to$62.3 million , an increase of$10.8 million , or 17.4%. -
Net loss per diluted share decreased to (
$0.01 ) compared to net income per diluted share of$0.01 . Net loss for the first quarter of fiscal 2021 includes an earn-out adjustment of$5.8 million , or$0.19 per fully diluted common share. -
Adjusted EPS increased to
$0.32 per diluted share compared to$0.15 per diluted share, or 113.3%. -
Adjusted EBITDA increased to
$13.0 million compared to$6.7 million , an increase of$6.3 million , or 94.8%.
Reconciliations of GAAP and non-GAAP financial measures appear at the end of this release.
"Our fiscal 2021 is off to a strong start, highlighting our model of recurring revenue, growth and profitability," said
Segment Results
IoT Product & Services
The segment's first fiscal quarter 2021 revenues of
IoT Solutions
The segment's first fiscal quarter 2021 revenues of
First Fiscal Quarter 2021 Conference Call Details
As announced on
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 3469742. International participants may access the call by dialing (262) 912-4765 and entering passcode 3469742. 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 3469742 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
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 COVID-19 pandemic and efforts to mitigate the same, risks related to the economic downturn that commenced during the COVID-19 pandemic and the ability of companies like us to operate a global business in such conditions, 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, 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, the ability to achieve the anticipated benefits and synergies associated with 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
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.
For more information, visit Digi's website at www.digi.com, or call 877-912-3444 (
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Condensed Consolidated Statements of Operations |
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|
(In thousands, except per share amounts) |
|||||||||
|
(Unaudited) |
|||||||||
|
|
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|
|
Three months ended |
||||||||
|
|
2020 |
|
|
2019 |
|
||||
|
Revenue |
$ |
73,146 |
|
|
|
$ |
62,317 |
|
|
|
Cost of sales |
32,127 |
|
|
|
31,853 |
|
|
||
|
Gross profit |
41,019 |
|
|
|
30,464 |
|
|
||
|
Operating expenses: |
|
|
|
||||||
|
Sales and marketing |
14,924 |
|
|
|
12,061 |
|
|
||
|
Research and development |
11,093 |
|
|
|
10,331 |
|
|
||
|
General and administrative |
14,415 |
|
|
|
8,555 |
|
|
||
|
Restructuring charge |
733 |
|
|
|
— |
|
|
||
|
Operating expenses |
41,165 |
|
|
|
30,947 |
|
|
||
|
Operating loss |
(146 |
) |
|
|
(483 |
) |
|
||
|
Other expense, net |
(594 |
) |
|
|
(437 |
) |
|
||
|
Loss before income taxes |
(740 |
) |
|
|
(920 |
) |
|
||
|
Income tax benefit |
(433 |
) |
|
|
(1,128 |
) |
|
||
|
Net (loss) income |
$ |
(307 |
) |
|
|
$ |
208 |
|
|
|
|
|
|
|
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|
Net (loss) income per common share: |
|
|
|
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|
Basic |
$ |
(0.01 |
) |
|
|
$ |
0.01 |
|
|
|
Diluted |
$ |
(0.01 |
) |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
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|
Weighted average common shares: |
|
|
|
||||||
|
Basic |
29,374 |
|
|
|
28,467 |
|
|
||
|
Diluted |
29,374 |
|
|
|
29,614 |
|
|
||
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|
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Condensed Consolidated Balance Sheets |
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(In thousands) |
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(Unaudited) |
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ASSETS |
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Current assets: |
|
|
|
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Cash and cash equivalents |
$ |
49,263 |
|
|
$ |
54,129 |
|
|
Accounts receivable, net |
52,500 |
|
|
59,227 |
|
||
|
Inventories |
54,757 |
|
|
51,568 |
|
||
|
Other current assets |
10,742 |
|
|
5,134 |
|
||
|
Total current assets |
167,262 |
|
|
170,058 |
|
||
|
Other non-current assets |
361,526 |
|
|
358,624 |
|
||
|
Total assets |
$ |
528,788 |
|
|
$ |
528,682 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
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|
||||
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Current liabilities: |
|
|
|
||||
|
Accounts payable |
$ |
22,472 |
|
|
$ |
28,067 |
|
|
Other current liabilities |
45,015 |
|
|
33,163 |
|
||
|
Total current liabilities |
67,487 |
|
|
61,230 |
|
||
|
Other non-current liabilities |
83,659 |
|
|
95,952 |
|
||
|
Total liabilities |
151,146 |
|
|
157,182 |
|
||
|
Total stockholders’ equity |
377,642 |
|
|
371,500 |
|
||
|
Total liabilities and stockholders’ equity |
$ |
528,788 |
|
|
$ |
528,682 |
|
|
|
|||||||||
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Condensed Consolidated Statements of Cash Flows |
|||||||||
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(In thousands) |
|||||||||
|
(Unaudited) |
|||||||||
|
|
|||||||||
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|
Three months ended |
||||||||
|
|
2020 |
|
|
2019 |
|
||||
|
Net cash provided by (used in) operating activities |
$ |
8,312 |
|
|
|
$ |
(22,067 |
) |
|
|
Net cash used in investing activities |
(777 |
) |
|
|
(136,294 |
) |
|
||
|
Net cash (used in) provided by financing activities |
(12,793 |
) |
|
|
112,869 |
|
|
||
|
Effect of exchange rate changes on cash and cash equivalents |
392 |
|
|
|
1,772 |
|
|
||
|
Net decrease in cash and cash equivalents |
(4,866 |
) |
|
|
(43,720 |
) |
|
||
|
Cash and cash equivalents, beginning of period |
54,129 |
|
|
|
92,792 |
|
|
||
|
Cash and cash equivalents, end of period |
$ |
49,263 |
|
|
|
$ |
49,072 |
|
|
|
Non-GAAP Financial Measures |
|||||||||||||||
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TABLE 1 |
|||||||||||||||
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Reconciliation of Net (Loss) Income to Adjusted EBITDA |
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(In thousands) |
|||||||||||||||
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|
|||||||||||||||
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Three months ended |
||||||||||||||
|
|
2020 |
|
2019 |
||||||||||||
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|
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|
% of total
|
|
|
|
% of total
|
||||||||
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Total revenue |
$ |
73,146 |
|
|
|
100.0 |
% |
|
$ |
62,317 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
||||||||
|
Net (loss) income |
$ |
(307 |
) |
|
|
|
|
$ |
208 |
|
|
|
|
||
|
Interest expense, net |
402 |
|
|
|
|
|
201 |
|
|
|
|
||||
|
Income tax benefit |
(433 |
) |
|
|
|
|
(1,128 |
) |
|
|
|
||||
|
Depreciation and amortization |
5,050 |
|
|
|
|
|
3,617 |
|
|
|
|
||||
|
Stock-based compensation |
1,745 |
|
|
|
|
|
1,600 |
|
|
|
|
||||
|
Changes in fair value of contingent consideration |
5,772 |
|
|
|
|
|
259 |
|
|
|
|
||||
|
Restructuring charge |
733 |
|
|
|
|
|
— |
|
|
|
|
||||
|
Acquisition expense |
15 |
|
|
|
|
|
1,906 |
|
|
|
|
||||
|
Adjusted EBITDA(1) |
$ |
12,977 |
|
|
|
17.7 |
% |
|
$ |
6,663 |
|
|
|
10.7 |
% |
|
(1) |
Beginning in fiscal 2021, Adjusted EBITDA now excludes changes in fair value of contingent consideration. The prior year presentation has been adjusted to conform to the current year presentation. |
|
TABLE 2 |
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Reconciliation of Net (Loss) Income and Net (Loss) Income per Diluted Share to |
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Adjusted Net Income and Adjusted Net Income per Diluted Share |
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|
(In thousands, except per share amounts) |
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|||||||||||||||||||
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|
Three months ended |
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|
|
2020 |
|
|
|
2019 |
|
|
||||||||||||
|
Net (loss) income and net (loss) income per diluted share |
$ |
(307 |
) |
|
|
$ |
(0.01 |
) |
|
|
$ |
208 |
|
|
|
$ |
0.01 |
|
|
|
Amortization |
3,961 |
|
|
|
0.13 |
|
|
|
2,448 |
|
|
|
0.08 |
|
|
||||
|
Stock-based compensation |
1,745 |
|
|
|
0.06 |
|
|
|
1,600 |
|
|
|
0.05 |
|
|
||||
|
Other non-operating expense |
192 |
|
|
|
0.01 |
|
|
|
236 |
|
|
|
0.01 |
|
|
||||
|
Acquisition expense |
15 |
|
|
|
— |
|
|
|
1,906 |
|
|
|
0.06 |
|
|
||||
|
Changes in fair value of contingent consideration |
5,772 |
|
|
|
0.19 |
|
|
|
259 |
|
|
|
0.01 |
|
|
||||
|
Restructuring charge |
733 |
|
|
|
0.02 |
|
|
|
— |
|
|
|
— |
|
|
||||
|
Interest expense related to acquisition |
402 |
|
|
|
0.01 |
|
|
|
416 |
|
|
|
0.01 |
|
|
||||
|
Tax effect from the above adjustments (1) |
(2,355 |
) |
|
|
(0.08 |
) |
|
|
(1,618 |
) |
|
|
(0.05 |
) |
|
||||
|
Discrete tax benefits (2) |
(252 |
) |
|
|
(0.01 |
) |
|
|
(959 |
) |
|
|
(0.03 |
) |
|
||||
|
Adjusted net income and adjusted net income per diluted share (3) |
$ |
9,906 |
|
|
|
$ |
0.32 |
|
|
|
$ |
4,496 |
|
|
|
$ |
0.15 |
|
|
|
Diluted weighted average common shares (4) |
|
|
30,532 |
|
|
|
|
29,614 |
|
||||||||||
|
(1) |
The tax effect from the above adjustments assumes an estimated effective tax rate of 18.0% for fiscal 2021 and 20.2% for fiscal 2020 based on adjusted net income. |
|
(2) |
For the three months ended |
|
(3) |
Adjusted net income per diluted share may not add due to the use of rounded numbers. |
|
(4) |
Diluted weighted average common shares for the three months ended |
View source version on businesswire.com: https://www.businesswire.com/news/home/20210203005900/en/
Investor Contact:
Senior Vice President, Chief Financial Officer and Treasurer
952-912-3737
Email: jamie.loch@digi.com
Source: