e8vk
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 23, 2008
Date of report (date of earliest event reported)
Digi International Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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0-17972
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41-1532464 |
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(State of Incorporation)
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(Commission file number)
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(I.R.S. Employer Identification No.) |
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11001 Bren Road East, Minnetonka, Minnesota
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55343 |
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(Address of principal executive offices)
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(Zip Code) |
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Telephone Number: (952) 912-3444
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(Registrants telephone number, including area code)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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TABLE OF CONTENTS
Item 2.02 Results of Operations and Financial Condition.
On January 23, 2008, Digi International Inc. (the Company) reported its financial results
for the first quarter of fiscal 2008. See the Companys press release dated January 23, 2008,
which is furnished as Exhibit 99 and incorporated by reference in this Current Report on Form 8-K.
NON-GAAP FINANCIAL MEASURES
Certain
information the Company intends to disclose on the conference call
scheduled for 5:00 p.m. Eastern Time on January 23, 2008
includes non-GAAP Financial Measures. Specifically,
in the conference call, management will provide information about the Companys
earnings before taxes, depreciation and amortization as a percentage of net sales. A reconciliation of this measure to the most directly comparable GAAP
financial measure is included below.
Management understands that there are material limitations to the use of non-GAAP measures.
The use of EBTDA does not reflect the Companys cash expenditures, the cash requirements for the
replacement of depreciated and amortized assets, or changes in or cash requirements for the
Companys working capital needs. Additionally, measures of EBTDA, including EBTDA as a percentage
of net sales, may be calculated differently from company to company, limiting its usefulness as a
comparative measure. Management nevertheless believes that the presentation of EBTDA as a
percentage of net sales is useful to investors because it provides a reliable and consistent
approach to measuring the Companys performance from year to year and in assessing the Companys
performance against other companies. Management believes that such information helps investors
compare operating results and corporate performance exclusive of the impact of the Companys
capital structure and the method by which assets were acquired. Management believes that EBTDA as
a percentage of net sales is not only useful for the Company in measuring and monitoring internal
performance, but it is also widely used by analysts and investors to assess the Companys
performance. The Company uses EBTDA as a percentage of net sales as a key performance indicator of
how the Company is performing compared to prior periods and compared to the Companys operating
plan. Furthermore, the Companys incentive compensation plans use EBTDA to measure operating
performance, which is a factor that the most employees have the ability to influence.
Reconciliation of Income before Income Taxes to Earnings before Taxes, Depreciation and Amortization
(In thousands of dollars and as a percent of Net Sales)
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For the three months |
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For the three |
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ended December 31, |
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% of net |
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months ended |
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% of net |
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2007 |
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sales |
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December 31, 2006 |
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sales |
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Net sales |
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$ |
44,574 |
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100.0 |
% |
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$ |
41,811 |
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100.0 |
% |
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Income before income taxes |
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$ |
5,638 |
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12.6 |
% |
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$ |
5,076 |
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12.1 |
% |
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Depreciation and amortization |
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2,497 |
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5.6 |
% |
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2,592 |
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6.2 |
% |
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Earnings before taxes,
depreciation, and
amortization |
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$ |
8,135 |
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18.3 |
% |
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$ |
7,668 |
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18.3 |
% |
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2
Item 9.01 Financial Statements and Exhibits.
The following Exhibit is furnished herewith:
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99 |
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Press Release dated January 23, 2008, announcing financial results for the
first quarter of fiscal 2008. |
3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned duly authorized.
Date: January 23, 2008
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DIGI INTERNATIONAL INC.
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By: |
/s/ Subramanian Krishnan
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Subramanian Krishnan |
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Senior Vice President, Chief Financial Officer and
Treasurer |
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4
EXHIBIT INDEX
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No. |
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Exhibit |
Manner of Filing |
99
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Press Release dated January 23, 2008, announcing
financial results for the first quarter of
fiscal 2008.
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Filed
Electronically |
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exv99
Exhibit
99
Digi International Reports 6.6% Increase in Revenue
for First Fiscal Quarter 2008 Over First Fiscal Quarter 2007
(Minneapolis, MN, January 23, 2008) Digi International® Inc. (NASDAQ: DGII, http://www.digi.com)
reported revenue of $44.6 million for the first fiscal quarter of 2008, compared with $41.8 million
for the first fiscal quarter of 2007, an increase of $2.8 million, or 6.6%.
Revenue from embedded products in the first quarter of fiscal 2008 was $20.7 million compared to
$16.6 million in the first quarter of fiscal 2007, an increase of $4.1 million, or 24.5%. Revenue
from non-embedded products was $23.9 million in the first quarter of fiscal 2008 compared to $25.2
million in the first quarter of fiscal 2007, a decrease of $1.3 million, or 5.2%.
The gross profit margin, as a percentage of net sales, was 53.6% in the first fiscal quarter of
2008 compared to 52.6% in the first fiscal quarter of 2007. Gross profit was higher than the
comparable quarter a year ago by 8.5%, primarily due to product and mix changes within both the
embedded and non-embedded product groups, as well as licensing revenue.
Total operating expenses in the first fiscal quarter of 2008 were $19.3 million, compared to $17.7
million in the first fiscal quarter of 2007. Operating expenses were higher in the first fiscal
quarter of 2008 compared to the comparable quarter a year ago primarily as a result of incremental
headcount due to overall growth, resulting in increased compensation-related sales and marketing
and research and development expenses. The increased expenses in the first quarter of fiscal 2008
compared to the same period in the prior year resulted from the Drop-In Networking initiative,
launched in June 2007 as well as increased international expenses.
Digi reported operating income of $4.6 million, or 10.3% of net sales, in the first fiscal quarter
of 2008 compared to $4.3 million, or 10.3% of net sales, in the first fiscal quarter of 2007.
Operating income in the first quarter of fiscal 2008 increased by $0.3 million, or 6.8%, compared
to the first quarter of fiscal 2007.
Net income was $3.7 million in the first fiscal quarter of 2008, or $0.14 per diluted share,
compared to $3.8 million, or $0.15 per diluted share in the comparable quarter of the prior year.
The first quarter of fiscal 2007 net income benefited $0.5 million, or $0.02 per
1
Digi International Reports Fiscal First Quarter 2008 Results
diluted share, as a result of a retroactive benefit from the extension of the research and
development credit.
Digis cash and cash equivalents and marketable securities balance, including long-term marketable
securities, was $90.9 million at December 31, 2007, an increase of $3.3 million over the cash and
cash equivalents and marketable securities balance at the end of fiscal 2007, or September 30,
2007. At December 31, 2007, Digis current ratio was 9.2 to 1, and the Company had no debt other
than capital lease obligations.
As we have stated in the past, our fiscal first quarter generally produces modest results, said
Joe Dunsmore, Digis Chief Executive Officer. Our non-embedded revenue decreased compared to the
same quarter in the prior fiscal year primarily due to mature product line decreases. However, we
experienced an increase in embedded product revenue, an overall improvement in gross profit
margins and a modest growth in operating income.
First Fiscal Quarter 2008 Business Highlights:
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Digi was named by Forbes as one of Americas 200 Best Small Companies, ranking
seventh overall in five-year average EPS growth and 152nd overall. Approximately
2,400 other small public companies, whose revenues were between $5 million and $750
million, with share prices above $5.00, were considered for the honor. |
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Digis Rabbit® brand introduced the RCM4300 RabbitCore featuring Megabyte
Code Support. The RCM4300 series enables a new generation of applications that use more
memory for data and code. The on-board mass storage provides even more performance and
easier design than any other alternative in its price range. |
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Digi introduced the XBee Wall Router, a ZigBee router used to expand a ZigBee networks
range. By plugging into standard power sockets, XBee wall routers are easy-to-install
building blocks for self-healing ZigBee networks. These Zigbee networks often provide
local device connectivity in end-to-end wireless Drop-in Networks. |
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Digi introduced the Multipoint XPress Ethernet Bridge (XEB) for wirelessly connecting
multiple Ethernet devices in a single Drop-in Network when Wi-Fi range is insufficient,
when an Ethernet cable is impractical or too costly to install, or when industrial grade,
highly resilient wireless connectivity is needed. The Multipoint XEB makes it easy to
connect equipment like industrial programmable logic controllers (PLCs), electronic LED
signs, security cameras, Internet kiosks, and other Ethernet-enabled devices wirelessly,
securely, and cost effectively. |
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Digi introduced the Digi DialServ to allow devices with built-in telephone modems to
participate in wireless Drop-in Networks. Combined with a Digi cellular router
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2
Digi International Reports Fiscal First Quarter 2008 Results
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or gateway, the Digi DialServ extends the life of existing remote equipment by reducing
monthly phone charges and speeding transaction times. |
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Digi continued to enhance the latest line of Rabbit® brand core modules with the RCM4300
RabbitCore featuring Megabyte Code Support. The RCM4300 series enables a new generation
of applications that require large amounts of memory for data and code. |
Digi projects no change in its annual revenue guidance of $197 million to $207 million, and no
change in its annual earnings per diluted share guidance of $0.69 to $0.87.
First Fiscal Quarter 2008 Conference Call Details
Digi invites all those interested in hearing managements discussion of its quarter, on Wednesday,
January 23, 2008 at 5:00 pm EDT (4:00 pm CT), to join the call by dialing (800) 954-0620.
International participants may access the call by dialing (212) 231-2901. A replay will be
available two hours after the completion of the call, and for one week following the call, by
dialing (800) 633-8284 for domestic participants or (402) 977-9140 for international participants
and entering access code 21372251 when prompted. Participants may also access a live webcast of the
conference call through the investor relations section of Digis website, www.digi.com.
About Digi International
Digi International, based in Minneapolis, is the leader in device networking for business. Digi
develops reliable products and technologies that enable companies to connect and securely manage
local or remote electronic devices over the network or via the web.
Forward-looking Statements
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 Companys 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 Companys reliance on distributors, delays in the Companys product
development efforts, uncertainty in consumer acceptance of the Companys products, and changes in
the Companys level
3
Digi International Reports Fiscal First Quarter 2008 Results
of revenue or profitability. These and other risks, uncertainties and assumptions identified from
time to time in the Companys filings with the Securities and Exchange Commission, including
without limitation, its annual report on Form 10-K for the year ended September 30, 2007 and its
quarterly reports on Form 10-Q, could cause the Companys 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 Companys 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.
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Digi International Contact
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Investors Contact |
S. (Kris) Krishnan
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Erika Moran / Tom Caden |
(952) 912-3125
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The Investor Relations Group |
s_krishnan@digi.com
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New York, NY |
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212-825-3210 |
4
Digi International Reports Fiscal First Quarter 2008 Results
Digi International Inc.
Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
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Three months ended |
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December 31, 2007 |
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December 31, 2006 |
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Net sales |
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$ |
44,574 |
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$ |
41,811 |
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Cost of sales (exclusive of amortization of
purchased
and core technology shown separately below) |
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19,543 |
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18,650 |
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Amortization of purchased and core technology |
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1,136 |
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1,148 |
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Gross profit |
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23,895 |
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22,013 |
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Operating expenses: |
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Sales and marketing |
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8,686 |
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8,158 |
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Research and development |
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6,589 |
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5,972 |
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General and administrative |
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3,353 |
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2,911 |
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Intangibles amortization |
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669 |
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667 |
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Total operating expenses |
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19,297 |
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17,708 |
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Operating income |
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4,598 |
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4,305 |
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Interest income (expense): |
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Interest income |
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1,054 |
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796 |
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Interest expense |
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(14 |
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(25 |
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Total interest income (expense) |
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1,040 |
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771 |
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Income before income taxes |
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5,638 |
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5,076 |
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Income tax provision |
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1,968 |
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1,274 |
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Net income |
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$ |
3,670 |
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$ |
3,802 |
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Net income per common share, basic |
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$ |
0.14 |
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$ |
0.15 |
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Net income per common share, diluted |
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$ |
0.14 |
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$ |
0.15 |
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Weighted average common shares, basic |
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25,619 |
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25,078 |
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Weighted average common shares, diluted |
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26,593 |
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25,983 |
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5
Digi International Reports Fiscal First Quarter 2008 Results
Digi International Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
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December 31, 2007 |
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September 30, 2007 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
17,778 |
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$ |
18,375 |
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Marketable securities |
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68,863 |
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67,111 |
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Accounts receivable, net |
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20,525 |
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21,022 |
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Inventories |
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26,647 |
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26,130 |
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Other |
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4,732 |
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4,961 |
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Total current assets |
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138,545 |
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137,599 |
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Marketable securities, long-term |
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4,246 |
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2,081 |
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Property, equipment and improvements, net |
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20,727 |
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19,987 |
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Identifiable intangible assets, net |
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22,416 |
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24,214 |
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Goodwill |
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66,995 |
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66,817 |
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Other |
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920 |
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1,128 |
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Total assets |
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$ |
253,849 |
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$ |
251,826 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Capital lease obligations, current portion |
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$ |
381 |
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$ |
379 |
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Accounts payable |
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5,299 |
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6,554 |
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Accrued compensation |
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4,133 |
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7,080 |
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Other accrued expenses |
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3,610 |
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4,727 |
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Income taxes payable |
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1,623 |
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|
3,156 |
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Total current liabilities |
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15,046 |
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21,896 |
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Capital lease obligations, net of current portion |
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263 |
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358 |
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Net deferred tax liabilities |
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5,421 |
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6,667 |
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Income taxes payable long-term |
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3,464 |
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Total liabilities |
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24,194 |
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28,921 |
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Total stockholders equity |
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229,655 |
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222,905 |
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Total liabilities and stockholders equity |
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$ |
253,849 |
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$ |
251,826 |
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6
Digi International Reports Fiscal First Quarter 2008 Results
Digi International Inc.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
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Three months ended December 31, |
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2007 |
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2006 |
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Operating activities: |
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Net income |
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$ |
3,670 |
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$ |
3,802 |
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Adjustments to reconcile net income to
net cash provided by (used in) operating activities: |
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Depreciation of property, equipment and improvements |
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|
601 |
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|
|
645 |
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Amortization of identifiable intangible assets and other assets |
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1,896 |
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|
1,947 |
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Excess tax benefits from stock-based compensation |
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(129 |
) |
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|
(60 |
) |
Stock-based compensation |
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|
872 |
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|
|
765 |
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Deferred income taxes |
|
|
(1,095 |
) |
|
|
78 |
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Other |
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|
162 |
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|
|
289 |
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Changes in operating assets and liabilities: |
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|
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|
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Accounts receivable |
|
|
667 |
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|
|
657 |
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Inventories |
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(620 |
) |
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(2,930 |
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Other assets |
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304 |
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(776 |
) |
Accounts payable and accrued expenses |
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|
(4,149 |
) |
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|
(2,444 |
) |
Income taxes payable |
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|
1,838 |
|
|
|
1,179 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
4,017 |
|
|
|
3,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Purchase of held-to-maturity marketable securities |
|
|
(23,836 |
) |
|
|
(16,941 |
) |
Proceeds from maturities of held-to-maturity marketable securities |
|
|
19,918 |
|
|
|
20,143 |
|
Contingent purchase price payments related to business acquisitions |
|
|
(1,315 |
) |
|
|
(781 |
) |
Purchase of property, equipment, improvements and certain
other intangible assets |
|
|
(1,176 |
) |
|
|
(688 |
) |
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(6,409 |
) |
|
|
1,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on capital lease obligations and long-term debt |
|
|
(102 |
) |
|
|
(103 |
) |
Excess tax benefits from stock-based compensation |
|
|
129 |
|
|
|
60 |
|
Proceeds from stock option plan transactions |
|
|
1,224 |
|
|
|
515 |
|
Proceeds from employee stock purchase plan transactions |
|
|
348 |
|
|
|
191 |
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
1,599 |
|
|
|
663 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
196 |
|
|
|
246 |
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(597 |
) |
|
|
5,794 |
|
Cash and cash equivalents, beginning of period |
|
|
18,375 |
|
|
|
15,674 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
17,778 |
|
|
$ |
21,468 |
|
|
|
|
|
|
|
|
7