Record Quarterly and Annual Revenue Drives Increased Profitability
Digi International® Inc. (NASDAQ: DGII) reported record
revenue of $56.4 million for the fourth fiscal quarter of 2015, compared
with $51.6 million for the fourth fiscal quarter of 2014, an increase of
$4.8 million, or 9.4%. Net income for the fourth fiscal quarter of 2015
was $3.0 million, or $0.12 per diluted share, compared to net income of
$0.4 million, or $0.02 per diluted share, in the prior year comparable
quarter.
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization adjusted for gain from insurance recovery) in the fourth
fiscal quarter of 2015 was $5.6 million, or 9.8% of total revenue,
compared to $2.5 million, or 4.9% of total revenue, in the fourth fiscal
quarter of 2014. See Reconciliation of Net Income to Adjusted EBITDA
later in this earnings release.
"I am very pleased with the revenue and profitability results for our
fourth quarter and full year 2015. Record setting revenue numbers in
both the third and fourth fiscal quarters drove the company towards the
highest annual revenue in Digi history. Even more importantly,
increasing our profitability has been a key focus for the team, and we
were successful in meeting that goal," said Ron Konezny, President and
Chief Executive Officer. "As we start fiscal 2016, we look forward to
maintaining our momentum of revenue and EBITDA growth. We expect to do
this with an unrelenting focus on our core strengths in delivering
mission-critical M2M solutions," continued Mr. Konezny.
Below is a table setting forth certain GAAP and non-GAAP results:
GAAP Results
|
(in thousands, except per share data)
|
|
Q4 2015
|
|
Q4 2014
|
|
YTD 2015
|
|
YTD 2014
|
Total Revenue
|
|
$
|
56,446
|
|
|
$
|
51,612
|
|
|
$
|
212,858
|
|
|
$
|
192,701
|
|
Gross Profit
|
|
$
|
26,682
|
|
|
$
|
23,647
|
|
|
$
|
98,031
|
|
|
$
|
90,484
|
|
Gross Margin
|
|
47.3
|
%
|
|
45.8
|
%
|
|
46.1
|
%
|
|
47.0
|
%
|
Operating Income
|
|
$
|
4,265
|
|
|
$
|
426
|
|
|
$
|
6,417
|
|
|
$
|
125
|
|
Operating Income as % of Total Revenue
|
|
7.6
|
%
|
|
0.8
|
%
|
|
3.0
|
%
|
|
0.1
|
%
|
Net Income
|
|
$
|
2,985
|
|
|
$
|
426
|
|
|
$
|
6,588
|
|
|
$
|
1,751
|
|
Net Income per Diluted Share
|
|
$
|
0.12
|
|
|
$
|
0.02
|
|
|
$
|
0.26
|
|
|
$
|
0.07
|
|
|
Non-GAAP Results*
|
(in thousands, except per share data)
|
|
Q4 2015
|
|
Q4 2014
|
|
YTD 2015
|
|
YTD 2014
|
Adjusted Net Income
|
|
$
|
3,007
|
|
|
$
|
419
|
|
|
$
|
5,455
|
|
|
$
|
216
|
|
Adjusted Net Income per Diluted Share
|
|
$
|
0.12
|
|
|
$
|
0.02
|
|
|
$
|
0.22
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
5,551
|
|
|
$
|
2,547
|
|
|
$
|
12,915
|
|
|
$
|
7,772
|
|
Adjusted EBITDA as % of Total Revenue
|
|
9.8
|
%
|
|
4.9
|
%
|
|
6.1
|
%
|
|
4.0
|
%
|
* A table with a detailed reconciliation to non-GAAP information is
provided at the end of this earnings release.
Business Results for the Three Months Ended
September 30, 2015 and 2014
In an effort to provide further transparency of our financial
information we have expanded our hardware product categories for revenue
reporting. Beginning with the first quarter of fiscal 2016, we will
transition away from reporting revenue in terms of growth and mature
hardware products and will report four product categories: Cellular
routers and gateways, RF, Embedded and Network. We believe this is a
more meaningful presentation and reflects how we are monitoring our
revenue.
Our cellular product category includes cellular routers and all
gateways, and the RF product category includes XBee® modules
as well as other RF Solutions. The embedded product category includes
Digi Connect® and Rabbit® embedded systems on
module and single board computers. The network product category, which
has the highest concentration of mature products, includes console and
serial servers and USB connected products.
Revenue Detail QTD
|
(in thousands)
|
|
Q4 2015
|
|
Q4 2014
|
|
Change
|
|
% Change
|
Cellular routers and gateways
|
|
$
|
16,218
|
|
|
$
|
11,028
|
|
|
$
|
5,190
|
|
|
47.1
|
|
RF
|
|
9,558
|
|
|
|
8,104
|
|
|
1,454
|
|
|
17.9
|
|
Embedded
|
|
13,219
|
|
|
|
13,181
|
|
|
38
|
|
|
0.3
|
|
Network
|
|
13,460
|
|
|
|
14,681
|
|
|
(1,221
|
)
|
|
(8.3
|
)
|
Total product revenue
|
|
52,455
|
|
|
|
46,994
|
|
|
5,461
|
|
|
11.6
|
|
Service
|
|
3,991
|
|
|
|
4,618
|
|
|
(627
|
)
|
|
(13.6
|
)
|
Total revenue
|
|
$
|
56,446
|
|
|
$
|
51,612
|
|
|
$
|
4,834
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
Growth
|
|
$
|
32,395
|
|
|
$
|
25,539
|
|
|
$
|
6,856
|
|
|
26.8
|
|
Mature
|
|
20,060
|
|
|
|
21,455
|
|
|
(1,395
|
)
|
|
(6.5
|
)
|
Total product revenue
|
|
52,455
|
|
|
|
46,994
|
|
|
5,461
|
|
|
11.6
|
|
Service
|
|
3,991
|
|
|
|
4,618
|
|
|
(627
|
)
|
|
(13.6
|
)
|
Total revenue
|
|
$
|
56,446
|
|
|
$
|
51,612
|
|
|
$
|
4,834
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
North America, primarily United States
|
|
$
|
38,892
|
|
|
$
|
31,644
|
|
|
$
|
7,248
|
|
|
22.9
|
|
Europe, Middle East and Africa
|
|
10,924
|
|
|
|
12,356
|
|
|
(1,432
|
)
|
|
(11.6
|
)
|
Asia
|
|
5,699
|
|
|
|
6,014
|
|
|
(315
|
)
|
|
(5.2
|
)
|
Latin America
|
|
931
|
|
|
|
1,598
|
|
|
(667
|
)
|
|
(41.7
|
)
|
Total revenue
|
|
$
|
56,446
|
|
|
$
|
51,612
|
|
|
$
|
4,834
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue grew 9.4% to $56.4 million in the fourth fiscal
quarter of 2015 from $51.6 million in the fourth fiscal quarter of 2014.
-
Product revenue increased by $5.4 million, or 11.6% in the fourth
fiscal quarter of 2015 compared to the prior year's comparable
quarter, driven primarily by cellular router and gateway products and
RF modules, which are part of our growth products.
-
Service revenue decreased by $0.6 million, or 13.6% in the fourth
fiscal quarter of 2015 compared to the prior year's comparable
quarter, primarily in wireless design services.
-
Revenue growth in the quarter was partially offset by a weakening of
the Euro and British Pound, as the foreign currency translation from
local currencies to the U.S. dollar resulted in a decrease of $0.6
million when compared to the same period in the prior fiscal year.
Gross profit was $26.7 million, or 47.3% of revenue in the fourth
fiscal quarter of 2015 compared to $23.6 million, or 45.8% of revenue in
the same period of the prior year, an increase of $3.1 million. The
increase in gross profit was primarily driven by the strong revenue
performance of our hardware products. Hardware product gross margin was
approximately 49% in the fourth fiscal quarters of both fiscal 2015 and
2014. Service gross margin improved from 11.4% in the fourth fiscal
quarter of 2014 to 26.1% in the fourth fiscal quarter of 2015 due to
improved utilization of consulting labor in connection with the
restructuring that took place in the second fiscal quarter of 2015.
Operating expenses were $22.4 million, or 39.7% of revenue in the
fourth fiscal quarter of 2015, compared to $23.2 million, or 45.0% of
revenue, in the same quarter in the prior year. This decrease primarily
resulted from cost control management throughout the organization.
Operating income for the fourth fiscal quarter of 2015 was $4.3
million, or 7.6% of revenue, as compared to an operating income of $0.4
million, or 0.8% of revenue, for the fourth fiscal quarter of 2014.
Operating income increased by $3.9 million due to our strong gross
profit performance and effective management of operating expenses.
Other (loss) income, net decreased by $0.5 million in the fourth
fiscal quarter of 2015 compared to the same quarter in the prior year
primarily due to generating net foreign currency transaction losses in
the fourth fiscal quarter of 2015 compared to net foreign currency
transaction gains in the fourth fiscal quarter of 2014.
Net income was $3.0 million in the fourth fiscal quarter of 2015,
or $0.12 per diluted share, compared to net income of $0.4 million, or
$0.02 per diluted share, in the fourth fiscal quarter of 2014.
Business Results for the Twelve Months Ended
September 30, 2015 and 2014
Revenue Detail YTD
|
(in thousands)
|
|
YTD 2015
|
|
YTD 2014
|
|
Change
|
|
% Change
|
Cellular routers and gateways
|
|
$
|
58,666
|
|
|
$
|
39,215
|
|
|
$
|
19,451
|
|
|
49.6
|
|
RF
|
|
34,373
|
|
|
29,094
|
|
|
5,279
|
|
|
18.1
|
|
Embedded
|
|
51,063
|
|
|
49,681
|
|
|
1,382
|
|
|
2.8
|
|
Network
|
|
51,395
|
|
|
54,856
|
|
|
(3,461
|
)
|
|
(6.3
|
)
|
Total product revenue
|
|
195,497
|
|
|
172,846
|
|
|
22,651
|
|
|
13.1
|
|
Service
|
|
17,361
|
|
|
19,855
|
|
|
(2,494
|
)
|
|
(12.6
|
)
|
Total revenue
|
|
$
|
212,858
|
|
|
$
|
192,701
|
|
|
$
|
20,157
|
|
|
10.5
|
|
|
|
|
|
|
|
|
|
|
Growth
|
|
$
|
116,211
|
|
|
$
|
89,908
|
|
|
$
|
26,303
|
|
|
29.3
|
|
Mature
|
|
79,286
|
|
|
82,938
|
|
|
(3,652
|
)
|
|
(4.4
|
)
|
Total product revenue
|
|
195,497
|
|
|
172,846
|
|
|
22,651
|
|
|
13.1
|
|
Service
|
|
17,361
|
|
|
19,855
|
|
|
(2,494
|
)
|
|
(12.6
|
)
|
Total revenue
|
|
$
|
212,858
|
|
|
$
|
192,701
|
|
|
$
|
20,157
|
|
|
10.5
|
|
|
|
|
|
|
|
|
|
|
North America, primarily United States
|
|
$
|
136,603
|
|
|
$
|
116,421
|
|
|
$
|
20,182
|
|
|
17.3
|
|
Europe, Middle East and Africa
|
|
47,523
|
|
|
47,729
|
|
|
(206
|
)
|
|
(0.4
|
)
|
Asia
|
|
22,907
|
|
|
22,762
|
|
|
145
|
|
|
0.6
|
|
Latin America
|
|
5,825
|
|
|
5,789
|
|
|
36
|
|
|
0.6
|
|
Total revenue
|
|
$
|
212,858
|
|
|
$
|
192,701
|
|
|
$
|
20,157
|
|
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue grew 10.5% to a new annual record of $212.9 million
in fiscal 2015 from $192.7 million in fiscal 2014.
-
Product revenue increased by $22.7 million, or 13.1%, in fiscal 2015
compared to fiscal 2014. This increase was driven primarily by
cellular router and gateway products and RF modules, which are part of
our growth products. Network revenue, which is primarily comprised of
mature products, decreased by $3.5 million, or 6.3%, and was in line
with expectations.
-
Service revenue decreased by $2.5 million, or 12.6%, in fiscal 2015
compared to fiscal 2014 primarily in wireless design services.
-
Total revenue in fiscal 2015 was impacted negatively by $3.2 million
when compared to the prior fiscal year due to foreign currency
translation. Specifically, a weakening of the Euro and British Pound
produced this result.
Operating income for fiscal 2015 was $6.4 million, or 3.0% of
revenue, as compared to an operating income of $0.1 million, for fiscal
2014. Operating income increased by $6.3 million and resulted from an
increase in gross profit of $7.6 million, partially offset by an
increase in operating expenses of $1.3 million. Operating income for
fiscal 2015 included restructuring expenses of $0.5 million for our
India and Etherios CRM operations as discussed in our earnings release
for the second fiscal quarter of 2015.
Net income was $6.6 million in fiscal 2015, or $0.26 per diluted
share, compared to $1.8 million of net income, or $0.07 per diluted
share, in fiscal 2014. Adjusted net income was $5.5 million in fiscal
2015, or $0.22 per diluted share, compared to adjusted net income of
$0.2 million in fiscal 2014, or $0.01 per diluted share.
Adjusted EBITDA in fiscal 2015 was $12.9 million, or 6.1% of
total revenue, compared to $7.8 million, or 4.0% of total revenue, in
fiscal 2014.
Please refer to the tables later in this earnings release that provide
reconciliations from GAAP to non-GAAP information.
Balance Sheet, Liquidity and Capital Structure
We continue to maintain a strong balance sheet, highlighted by:
-
Our cash and cash equivalents and marketable securities balance,
including long-term marketable securities, was $105.8 million at
September 30, 2015, an increase of $13.9 million over the comparable
balance at September 30, 2014 and an increase of $5.0 million over the
balance at June 30, 2015. Please refer to the Condensed Consolidated
Statements of Cash Flows for more information.
-
We had no debt on the balance sheet as of September 30, 2015.
-
At September 30, 2015, our current ratio was 6.9 to 1 compared to 6.8
to 1 at September 30, 2014.
Corporate Transactions
As previously announced, Digi acquired bluenica on October 5, 2015, a
St. Catherines, Ontario-based company focused on temperature monitoring
of perishable goods in the food industry.
Also as previously announced, Digi completed the sale of its wholly
owned subsidiary, Etherios, Inc., to West Monroe Partners, LLC on
October 23, 2015. Digi sold Etherios for $9 million. At the closing of
the transaction, the Company received $4 million in cash (less estimated
transaction costs of $1.1 million). An additional $3 million is due on
the first anniversary of closing and an additional $2 million is due on
the second anniversary of the closing. For more information, please
refer to the press release dated October 26, 2015. In addition,
unaudited pro forma financial statements are included in an 8-K that was
filed today.
Both of the above transactions are considered subsequent events and have
no impact on our reported fourth fiscal quarter and full year 2015
financial results.
Customer Highlights
-
Honeywell Sensing & Productivity Solutions (S&PS), a global leader
providing custom engineered sensors, switches and controls, and
productivity solutions built around their high performance data
collection solutions including rugged mobile computers, voice-enabled
software, barcode scanners, workflow printing, and RFID, has
established a strategic relationship with Digi to use our Wireless
Vehicle Adapter (WVA) for secure and reliable wireless communications
between their Dolphin CT50 and the vehicle bus of class 5-8 commercial
trucks for their Transportation Solutions. The Dolphin CT50 is
Honeywell’s most advanced enterprise-ready 4G/LTE handheld computer.
-
AgriDry, a leader in the grain bin monitoring market whose products
are used globally, selected our ConnectPort® X4 cellular gateways for
remote monitoring and management of remotely distributed grain bins.
-
FLIR Systems, Inc. designs, develops, manufactures, markets and
distributes technologies that enhance perception and awareness,
including professional thermal cameras used to monitor and track the
eco-friendliness of residential and commercial buildings. FLIR’s new
T1K/T1020 camera is a high-end infrared camera that captures both
still images and video footage using our ConnectCore® 6.
-
The North Indiana Commuter Transportation District (NICTD) has
selected Digi TransPort® WR44 R cellular routers for installation of
WiFi on South Shore train cars for a pilot. We expect NICTD will equip
the rest of the fleet of 87 commuter rail cars, as phase two of the
project.
-
OC Transpo provides comprehensive transit services to nearly one
million people in Ottawa with a fleet of over 900 buses and three
trains. OC Transpo has selected Digi’s TransPort® WR44 R cellular
routers for its onboard video system. This will allow live video feed
during emergencies and offload recorded video from daily routes.
-
Cool Creek Energy and Rocky Mountain Energy offers fuel and lubricant
products for a wide range of industries including agriculture, rail,
forestry, residential, mining and construction. The organization, a
regional distributor for all Mobil products, has selected Digi Connect
Tank, a fully integrated cellular-enabled remote access tank level
sensor, to reduce truck rolls, improve operational efficiencies, and
ensure customers' diesel tanks are always full.
New Product Introductions
Accelerating the pace of new product innovation is a key component of
Digi’s strategy for profitable growth. In the fiscal fourth quarter, we
introduced several new products, including new variants of the ARM-based
ConnectCore® 6 System on Module (SOM), which were driven by specific
customers’ deployment requirements. In conjunction with one of our
global distributors, DigiKey Electronics, we also introduced new XBee
developer kits for the OEM and maker markets.
Non-GAAP Financial Measures
Reconciliation of Net Income and Net Income per Diluted Share
|
to Adjusted Net Income and Adjusted Net Income per Diluted Share
|
(In thousands of dollars, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Twelve months ended September 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net income and net income per common share, diluted
|
|
$
|
2,985
|
|
|
$
|
0.12
|
|
|
$
|
426
|
|
|
$
|
0.02
|
|
|
$
|
6,588
|
|
|
$
|
0.26
|
|
|
$
|
1,751
|
|
|
$
|
0.07
|
|
Restructuring reserve, net of taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
331
|
|
|
0.01
|
|
|
53
|
|
|
NM
|
|
Gain from insurance recovery, net of taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(894
|
)
|
|
(0.04
|
)
|
|
—
|
|
|
—
|
|
Discrete tax provision (benefits) (1)
|
|
22
|
|
|
NM
|
|
|
(7
|
)
|
|
NM
|
|
|
(570
|
)
|
|
(0.02
|
)
|
|
(1,588
|
)
|
|
(0.06
|
)
|
Adjusted net income and adjusted net income per diluted share (2)
|
|
$
|
3,007
|
|
|
$
|
0.12
|
|
|
$
|
419
|
|
|
$
|
0.02
|
|
|
$
|
5,455
|
|
|
$
|
0.22
|
|
|
$
|
216
|
|
|
$
|
0.01
|
|
Diluted weighted average common shares
|
|
|
|
25,846
|
|
|
|
|
24,988
|
|
|
|
|
25,227
|
|
|
|
25,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM means Not Meaningful
|
|
(1)
|
|
Discrete tax provision (benefits) include extended research and
development tax credits and expiration of statute of limitations in
various tax jurisdictions, re-measurement and reversal of certain
tax reserves as a result of a federal income tax audit, and
adjustment of state rate on net deferred tax assets.
|
|
|
|
|
|
|
|
(2)
|
|
Earnings per share presented are calculated by line item and certain
amounts may not add due to use of rounded numbers.
|
|
|
|
|
|
Reconciliation of Net Income to Adjusted EBITDA
|
(In thousands of dollars)
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Twelve months ended September 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
% of
|
|
|
|
% of
|
|
|
|
% of
|
|
|
|
% of
|
|
|
|
|
total
|
|
|
|
total
|
|
|
|
total
|
|
|
|
total
|
|
|
|
|
revenue
|
|
|
|
revenue
|
|
|
|
revenue
|
|
|
|
revenue
|
Total revenue
|
|
$
|
56,446
|
|
|
100.0
|
%
|
|
$
|
51,612
|
|
|
100.0
|
%
|
|
$
|
212,858
|
|
|
100.0
|
%
|
|
$
|
192,701
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,985
|
|
|
|
|
$
|
426
|
|
|
|
|
$
|
6,588
|
|
|
|
|
$
|
1,751
|
|
|
|
Gain from insurance recovery
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(1,375
|
)
|
|
|
|
—
|
|
|
|
Interest income, net
|
|
(80
|
)
|
|
|
|
(44
|
)
|
|
|
|
(214
|
)
|
|
|
|
(171
|
)
|
|
|
Income tax provision (benefit)
|
|
1,243
|
|
|
|
|
500
|
|
|
|
|
2,057
|
|
|
|
|
(954
|
)
|
|
|
Depreciation and amortization
|
|
1,403
|
|
|
|
|
1,665
|
|
|
|
|
5,859
|
|
|
|
|
7,146
|
|
|
|
Adjusted EBITDA
|
|
$
|
5,551
|
|
|
9.8
|
%
|
|
$
|
2,547
|
|
|
4.9
|
%
|
|
$
|
12,915
|
|
|
6.1
|
%
|
|
$
|
7,772
|
|
|
4.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2016 Guidance
For the first fiscal quarter of 2016, we project revenue from continuing
operations to be in the range of $49 million to $52 million, an increase
of 4% to 10%. We project net income per diluted share from continuing
operations to be in the range of $0.05 to $0.09 for the first fiscal
quarter of 2016.
For the full fiscal year 2016, Digi projects revenue from continuing
operations to be in a range of $209 million to $223 million, an increase
of 3% to 10%. Digi projects net income per diluted share from continuing
operations to be in a range of $0.28 to $0.44.
We anticipate net income from discontinued operations for the fiscal
year of approximately $4 million, net of tax, or $0.16 per diluted
share. This is entirely comprised of our projected gain from the sale of
Etherios CRM of approximately $4 million net of tax, or $0.16 per
diluted share. This gain will be included in discontinued operations in
the first fiscal quarter. We do not expect any financial impact from
discontinued operations in the subsequent three quarters.
Fourth Fiscal Quarter and Full Year 2015
Conference Call Details
As announced on October 8, 2015, Digi will discuss its fourth fiscal
quarter and full year results on a conference call on Thursday, October
29, 2015 after market close at 5:00 p.m. EDT (4:00 p.m. CDT). The call
will be hosted by Ron Konezny, President and Chief Executive Officer and
Mike Goergen, Chief Financial Officer.
We invite all those interested in hearing management's discussion of its
quarter and full year 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 57371834. International participants may access
the call by dialing (262) 912-4765 and entering passcode 57371834. 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 57371834 when
prompted. A replay of the webcast will be available 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 Digi International Inc., please visit www.digi.com/aboutus/investorrelations.
About Digi International
Digi International (NASDAQ: DGII) is your mission-critical M2M solutions
expert, providing the industry's broadest range of wireless products, a
cloud computing platform tailored for devices, and development services
to help customers get to market fast with wireless devices and
applications. Digi's entire solution set is tailored to allow any device
to communicate with any application, anywhere in the world. 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, 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, 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, 2014 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 EBITDA, each of which is a non-GAAP measures.
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. 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, we understand that
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 net
income per diluted share, respectively, exclusive of such items as
reversals of tax reserves and discrete tax benefits, restructuring, and
gain from insurance recovery permits investors to compare results with
prior periods that did not include these items. Management uses
the aforementioned non-GAAP measure 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 matters such as the impact of
decisions related to taxes and restructuring, which while important, are
not central to the core operations of our business. Additionally,
management believes 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. EBITDA is used as an
internal metric for executive compensation, as well as incentive
compensation for the rest of the employee base, and it is monitored
quarterly for these purposes.
For more information, visit our Web site 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
|
|
Twelve months ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenue:
|
|
|
|
|
|
|
|
|
Hardware product
|
|
$
|
52,455
|
|
|
$
|
46,994
|
|
|
$
|
195,497
|
|
|
$
|
172,846
|
|
Service
|
|
3,991
|
|
|
4,618
|
|
|
17,361
|
|
|
19,855
|
|
Total revenue
|
|
56,446
|
|
|
51,612
|
|
|
212,858
|
|
|
192,701
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
Cost of hardware product
|
|
26,816
|
|
|
23,875
|
|
|
101,155
|
|
|
85,737
|
|
Cost of service
|
|
2,948
|
|
|
4,090
|
|
|
13,672
|
|
|
16,480
|
|
Total cost of sales
|
|
29,764
|
|
|
27,965
|
|
|
114,827
|
|
|
102,217
|
|
Gross profit
|
|
26,682
|
|
|
23,647
|
|
|
98,031
|
|
|
90,484
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
9,019
|
|
|
10,099
|
|
|
39,544
|
|
|
40,576
|
|
Research and development
|
|
8,332
|
|
|
7,868
|
|
|
32,047
|
|
|
29,789
|
|
General and administrative
|
|
5,066
|
|
|
5,254
|
|
|
19,514
|
|
|
19,913
|
|
Restructuring charges, net
|
|
—
|
|
|
—
|
|
|
509
|
|
|
81
|
|
Total operating expenses
|
|
22,417
|
|
|
23,221
|
|
|
91,614
|
|
|
90,359
|
|
Operating income
|
|
4,265
|
|
|
426
|
|
|
6,417
|
|
|
125
|
|
Other (loss) income, net:
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
80
|
|
|
44
|
|
|
214
|
|
|
171
|
|
Other (loss) income, net
|
|
(117
|
)
|
|
456
|
|
|
2,014
|
|
|
501
|
|
Total other (loss) income, net
|
|
(37
|
)
|
|
500
|
|
|
2,228
|
|
|
672
|
|
Income before income taxes
|
|
4,228
|
|
|
926
|
|
|
8,645
|
|
|
797
|
|
Income tax provision (benefit)
|
|
1,243
|
|
|
500
|
|
|
2,057
|
|
|
(954
|
)
|
Net income
|
|
$
|
2,985
|
|
|
$
|
426
|
|
|
$
|
6,588
|
|
|
$
|
1,751
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.12
|
|
|
$
|
0.02
|
|
|
$
|
0.27
|
|
|
$
|
0.07
|
|
Diluted
|
|
$
|
0.12
|
|
|
$
|
0.02
|
|
|
$
|
0.26
|
|
|
$
|
0.07
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
24,998
|
|
|
24,715
|
|
|
24,645
|
|
|
25,345
|
|
Diluted
|
|
25,846
|
|
|
24,988
|
|
|
25,227
|
|
|
25,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digi International Inc.
|
Condensed Consolidated Statements of Comprehensive Income (Loss)
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
Three months ended
|
|
Twelve months ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net income
|
|
$
|
2,985
|
|
|
$
|
426
|
|
|
$
|
6,588
|
|
|
$
|
1,751
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
(165
|
)
|
|
(3,259
|
)
|
|
(4,323
|
)
|
|
(2,713
|
)
|
Change in net unrealized (loss) gain on investments
|
|
(19
|
)
|
|
(19
|
)
|
|
(21
|
)
|
|
43
|
|
Less income tax benefit (provision)
|
|
6
|
|
|
7
|
|
|
7
|
|
|
(17
|
)
|
Reclassification of realized loss on investments included in net
income (1)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Other comprehensive loss, net of tax
|
|
(178
|
)
|
|
(3,271
|
)
|
|
(4,336
|
)
|
|
(2,687
|
)
|
Comprehensive income (loss)
|
|
$
|
2,807
|
|
|
$
|
(2,845
|
)
|
|
$
|
2,252
|
|
|
$
|
(936
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Recorded in Other (loss) income, net on our Condensed Consolidated
Statements of Operations.
Digi International Inc.
|
Condensed Consolidated Balance Sheets
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
September 30,
|
|
|
2015
|
|
2014
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
45,018
|
|
|
$
|
47,490
|
Marketable securities
|
|
47,191
|
|
|
32,898
|
Accounts receivable, net
|
|
29,205
|
|
|
28,576
|
Inventories
|
|
31,877
|
|
|
31,247
|
Deferred tax assets
|
|
3,379
|
|
|
3,221
|
Other
|
|
3,515
|
|
|
4,249
|
Total current assets
|
|
160,185
|
|
|
147,681
|
Marketable securities, long-term
|
|
13,626
|
|
|
11,541
|
Property, equipment and improvements, net
|
|
14,357
|
|
|
13,231
|
Identifiable intangible assets, net
|
|
4,179
|
|
|
6,785
|
Goodwill
|
|
102,097
|
|
|
103,398
|
Deferred tax assets
|
|
5,666
|
|
|
7,383
|
Other
|
|
250
|
|
|
440
|
Total assets
|
|
$
|
300,360
|
|
|
$
|
290,459
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
6,723
|
|
|
$
|
10,451
|
Income taxes payable
|
|
828
|
|
|
—
|
Accrued compensation
|
|
11,502
|
|
|
8,133
|
Other
|
|
4,136
|
|
|
3,170
|
Total current liabilities
|
|
23,189
|
|
|
21,754
|
Income taxes payable
|
|
1,546
|
|
|
2,724
|
Deferred tax liabilities
|
|
135
|
|
|
272
|
Other noncurrent liabilities
|
|
552
|
|
|
411
|
Total liabilities
|
|
25,422
|
|
|
25,161
|
|
|
|
|
|
Total stockholders’ equity
|
|
274,938
|
|
|
265,298
|
Total liabilities and stockholders’ equity
|
|
$
|
300,360
|
|
|
$
|
290,459
|
|
|
|
|
|
|
|
|
Digi International Inc.
|
Condensed Consolidated Statements of Cash Flows
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
Twelve months ended September 30,
|
|
|
2015
|
|
2014
|
Operating activities:
|
|
|
|
|
Net income
|
|
$
|
6,588
|
|
|
$
|
1,751
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation of property, equipment and improvements
|
|
2,949
|
|
|
3,557
|
|
Amortization of identifiable intangible assets
|
|
2,910
|
|
|
3,589
|
|
Stock-based compensation
|
|
4,301
|
|
|
4,330
|
|
Excess tax benefits from stock-based compensation
|
|
—
|
|
|
(44
|
)
|
Deferred income tax provision (benefit)
|
|
(769
|
)
|
|
(2,783
|
)
|
Gain on insurance settlement related to property and equipment
|
|
(1,375
|
)
|
|
—
|
|
Bad debt/product return provision
|
|
357
|
|
|
98
|
|
Inventory obsolescence
|
|
1,284
|
|
|
860
|
|
Restructuring charges, net
|
|
509
|
|
|
81
|
|
Other
|
|
87
|
|
|
3
|
|
Changes in operating assets and liabilities
|
|
(2,767
|
)
|
|
(9,633
|
)
|
Net cash provided by operating activities
|
|
14,074
|
|
|
1,809
|
|
Investing activities:
|
|
|
|
|
Purchase of marketable securities
|
|
(54,427
|
)
|
|
(27,420
|
)
|
Proceeds from maturities of marketable securities
|
|
38,028
|
|
|
47,420
|
|
Proceeds from insurance settlement related to property and equipment
|
|
1,400
|
|
|
—
|
|
Proceeds from sale of property and equipment
|
|
45
|
|
|
—
|
|
Purchase of property, equipment, improvements and certain other
intangible assets
|
|
(4,500
|
)
|
|
(3,421
|
)
|
Net cash (used in) provided by investing activities
|
|
(19,454
|
)
|
|
16,579
|
|
Financing activities:
|
|
|
|
|
Excess tax benefits from stock-based compensation
|
|
—
|
|
|
44
|
|
Proceeds from stock option plan transactions
|
|
6,559
|
|
|
3,689
|
|
Proceeds from employee stock purchase plan transactions
|
|
925
|
|
|
1,009
|
|
Purchases of common stock
|
|
(2,339
|
)
|
|
(15,702
|
)
|
Net cash provided by (used in) financing activities
|
|
5,145
|
|
|
(10,960
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(2,237
|
)
|
|
(1,258
|
)
|
Net (decrease) increase in cash and cash equivalents
|
|
(2,472
|
)
|
|
6,170
|
|
Cash and cash equivalents, beginning of period
|
|
47,490
|
|
|
41,320
|
|
Cash and cash equivalents, end of period
|
|
$
|
45,018
|
|
|
$
|
47,490
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20151029006647/en/
Copyright Business Wire 2015