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Digi International Reports Fiscal 2000 First Quarter Results
MINNEAPOLIS--(BUSINESS WIRE)--Jan. 19, 2000--Digi International(R) Inc. (Nasdaq: DGII) announced today that its net sales for the fiscal first quarter ended December 31, 1999, totaled $40.1 million, in line with Digi's previously announced net revenue range of $39 million to $41 million. Net income for the fiscal first quarter ended December 31, 1999, totaled $1.0 million, or $0.07 per diluted share, versus $0.5 million, or $0.03 per diluted share, in the year-ago period, which was at the high end of Digi's previously announced earnings per share range of $0.03 to $0.07.
"While we were disappointed with the effect of Y2K-related purchasing patterns on overall revenue, the strength of our new Remote Access Server (RAS) products is a validation of our RAS strategy," stated president and CEO, Joseph Dunsmore. "I continue to believe that our new RAS product line will be an engine of future growth for Digi. In addition, we continue to exceed our internal cost control measures and increased cash $4.3 million during the quarter to $39 million."
Income, excluding amortization of intangible assets acquired through business combinations, charges for acquired in-process research and development and related deferred tax benefits, increased 17.5% to $2.9 million, or $0.19 per diluted share, in the fiscal first quarter of 2000, from $2.4 million, or $0.17 per diluted share, in the comparable quarter a year ago.
Gross margin for the period ended December 31, 1999, rose 1.2% to 55.2% from 54.0% for the quarter ended September 30, 1999, and rose 3.7% from 51.5% for the year earlier quarter. The quarter-over-quarter gain is primarily attributable to an increased proportion of sales from higher gross margin server-based communications products.
Sales and marketing expenses decreased approximately $700,000 from the quarter ended September 30, 1999, relative to the quarter ended December 31, 1999, but rose to 19.9% of net sales primarily due to lower revenue. Continuing cost control measures helped reduce sales and marketing expenses as a percentage of net revenue by 3.4% over the comparable quarter last year.
Research and development expenses for the quarter ended December 31, 1999, rose to 16.2% of net sales from 13.1% of net sales for the quarter ended September 30, 1999, and from 12.6% of net sales for the quarter ended December 31, 1998.
Digi's effective income tax rate decreased from 58.7% for the quarter ended September 30, 1999, to 48.0% for the quarter ended December 31, 1999. The effective tax rate exceeds the U.S. statutory income tax rate primarily due to amortization related to the 1998 acquisitions of ITK and Central Data.
Versus the prior quarter, book value per share was down slightly to $8.37, tangible book value per share rose slightly to $5.43, and net cash and marketable securities per share increased $0.24 to $2.54. The increase in days sales outstanding (DSOs) from 53 days for the quarter ended September 30, 1999, to 59 days in the quarter ended December 31, 1999, was in line with Digi's expectations.
About Digi International
Digi International, based in Minneapolis, is a leading worldwide provider of voice and data communications hardware and software that delivers seamless connectivity solutions for open systems, server-based remote access and LAN markets. The company markets its products through a global network of distributors and resellers, system integrators and original equipment manufacturers (OEMs). For more information, visit Digi's Web site at www.digi.com or call 800-344-4273 (U.S.) or 612-912-3444 (international).
Digi, Digi International, and the Digi logo are trademarks or registered trademarks of Digi International Inc. in the United States and other countries. All other brand names and product names are trademarks or registered trademarks of their respective companies.
This press release contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which generally can be identified by the use of forward-looking terminology such as "anticipate," "believe," target," "estimate," 'may," "will," "expect," "plan," "project," "should," or "continue" or the negative thereof or other variations thereon or similar terminology. Such statements are based on information available to management as of the time of such statements and relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market and statements regarding the Company's mission and vision. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, including risks related to the highly competitive market in which the Company operates; rapid changes in technologies that may displace products sold by the Company, declining prices of networking products, the Company's reliance on distributors, delays in the Company's product development efforts, uncertainty in consumer acceptance of the Company's products, and changes in the Company's level of revenue or profitability. These and other risks, uncertainties and assumptions identified from time to time in the Company's filings with the Securities and Exchange Commission, including without limitation, its annual reports on Form 10-K and its quarterly reports on Form 10-Q, could cause the Company's future results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. Many of such factors are beyond the Company's ability to control or predict. These forward-looking statements speak only as of the date for which they are made. The Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. -0-
DIGI INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(unaudited)
Three months ended December 31,
-------------------------------------
1999 1998
------------------- -----------------
Net sales $ 40,140,205 $ 51,395,021
Cost of sales 17,965,228 24,904,313
------------------- -----------------
Gross margin 22,174,977 26,490,708
Operating expenses:
Sales and marketing 7,994,988 11,974,080
Research and development 6,494,124 6,476,216
General and administrative 6,190,939 6,414,486
------------------- -----------------
Total operating expenses 20,680,051 24,864,782
Operating income 1,494,926 1,625,926
Other income (expense), net 461,825 (209,786)
------------------- -----------------
Income before income taxes 1,956,751 1,416,140
Provision for income taxes 939,240 941,595
------------------- -----------------
Net income $ 1,017,511 $ 474,545
============ =========
Net income per
common share, basic $ 0.07 $ 0.03
======= ======
Net income per common share,
assuming dilution $ 0.07 $ 0.03
======= ======
Weighted average
common shares, basic 14,967,793 14,572,022
------------------- -----------------
Weighted average
common shares,
assuming dilution 15,337,788 14,701,519
------------------- -----------------
----------------------------------------------------------------------
Net income and net income per diluted share excluding
acquisition-related amortization of intangible assets,
and related deferred tax benefit.
----------------------------------------------------------
(unaudited)
Three months ended December 31
----------------------------------
1999 1998
------------------- --------------
Net income $ 1,017,511 $ 474,545
Amortization of acquisition-related
intangible assets 2,457,608 2,571,078
Deferred tax benefit (596,700) (596,700)
------------------- --------------
Net income excluding
acquisition-related amortization
of intangible assets and
related deferred tax benefit $ 2,878,419 $ 2,448,923
=================== ==============
Net income per diluted share,
excluding acquisition-related
amortization on intangible assets
and related deferred tax benefit $ 0.19 $ 0.17
=================== ==============
Weighted average common shares,
assuming dilution 15,337,788 14,701,519
------------------- --------------
DIGI INTERNATIONAL INC.
CONDENSED BALANCE SHEET DATA
AS OF DECEMBER 31, 1999, AND SEPTEMBER 30, 1999
As of
---------------------------------------
December 31, 1999 September 30, 1999
------------------- -------------------
(unaudited)
ASSETS
Current assets:
Cash and marketable securities $ 39,025,065 $ 34,678,029
Accounts receivable, net 30,160,668 33,955,669
Inventories 22,288,232 22,446,667
Other 5,497,950 5,394,346
------------------- -------------------
Total current assets 96,971,915 96,474,711
Property, equipment and
improvements, net 29,191,497 30,242,877
Intangible assets, net 45,132,628 47,804,611
Other assets 2,066,525 1,807,829
------------------- -------------------
Total assets $ 173,362,565 $ 176,330,028
=================== ===================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Borrowing's under line
of credit agreement $ 4,518,654 $ 4,759,095
Current portion of
long-term debt 304,525 330,028
Accounts payable
and accrued expenses 28,639,369 31,439,492
------------------- -------------------
Total current assets 33,462,548 36,528,615
Long-term liabilities 11,505,310 12,637,051
------------------- -------------------
Total liabilities 44,967,858 49,165,666
Total stockholders' equity 128,394,707 127,164,362
------------------- -------------------
Total liabilities and
stockholders' equity $ 173,362,565 $ 176,330,028
=================== ===================
CONTACT: Digi International Inc., Minneapolis
S. (Kris) Krishnan, 612-912-3125
s_krishnan@digi.com
or
Don De Laria, 612-912-3126
don_delaria@digi.com