[July 23, 2015] |
|
Digi International Reports Third Fiscal Quarter 2015 Results
Digi International® Inc. (NASDAQ:DGII) reported revenue of
$54.5 million for the third fiscal quarter of 2015, compared with $47.9
million for the third fiscal quarter of 2014, an increase of $6.6
million, or 13.9%. Net income for the third fiscal quarter of 2015 was
$2.5 million, or $0.10 per diluted share, compared to net loss of $0.1
million, or $0.00 per diluted share, in the prior year comparable
quarter.
Adjusted net income for the third fiscal quarter of 2015 was $2.1
million, or $0.08 per diluted share, compared to adjusted net loss for
the third fiscal quarter of 2014 of $0.4 million, or $0.01 loss per
diluted share. Adjusted net income for the third fiscal quarter of 2015
excludes a gain from an insurance recovery of $0.3 million, net of tax,
or $0.01 per diluted share, and discrete tax benefits of $0.1 million.
Adjusted net loss for the third quarter of fiscal 2014 excludes discrete
tax benefits of $0.3 million, or $0.01 per diluted share. The
Reconciliation of Net Income (Loss) and Net Income per Diluted Share to
Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted
Share is provided later in this release.
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization adjusted for gain from insurance recovery) in the third
fiscal quarter of 2015 was $4.3 million, or 8.0% of total revenue,
compared to $1.4 million, or 3.0% of total revenue, in the third fiscal
quarter of 2014. See Reconciliation of Net Income (Loss) to Adjusted
EBITDA later in this earnings release.
"The entire Digi team's expertise, energy and commitment are lifting our
business and financial results. We have more work in front of us and I
am confident we are on the right path to higher levels of performance
with a relentless focus on the market, our partners, and our customers,"
said Ron Konezny, President and Chief Executive Officer.
Below is a table setting forth certain GAAP and non-GAAP results:
|
GAAP Results
|
(in thousands, except per share data)
|
|
|
Q3 2015
|
|
|
Q3 2014
|
|
|
YTD 2015
|
|
|
YTD 2014
|
Total Revenue
|
|
|
$
|
54,538
|
|
|
|
$
|
47,885
|
|
|
|
$
|
156,412
|
|
|
|
$
|
141,089
|
|
Gross Profit
|
|
|
$
|
25,349
|
|
|
|
$
|
22,149
|
|
|
|
$
|
71,349
|
|
|
|
$
|
66,837
|
|
Gross Margin
|
|
|
|
46.5
|
%
|
|
|
|
46.3
|
%
|
|
|
|
45.6
|
%
|
|
|
|
47.4
|
%
|
Operating Income (Loss)
|
|
|
$
|
2,830
|
|
|
|
$
|
(280
|
)
|
|
|
$
|
2,152
|
|
|
|
$
|
(301
|
)
|
Operating Income (Loss) as % of Total Revenue
|
|
|
|
5.2
|
%
|
|
|
|
(0.5
|
)%
|
|
|
|
1.4
|
%
|
|
|
|
(0.2
|
)%
|
Net Income (Loss)
|
|
|
$
|
2,496
|
|
|
|
$
|
(101
|
)
|
|
|
$
|
3,603
|
|
|
|
$
|
1,325
|
|
Net Income per Diluted Share
|
|
|
$
|
0.10
|
|
|
|
$
|
-
|
|
|
|
$
|
0.14
|
|
|
|
$
|
0.05
|
|
|
Non-GAAP Results*
|
(in thousands, except per share data)
|
|
|
Q3 2015
|
|
|
Q3 2014
|
|
|
YTD 2015
|
|
|
YTD 2014
|
Adjusted Net Income (Loss)
|
|
|
$
|
2,134
|
|
|
|
$
|
(362
|
)
|
|
|
$
|
2,448
|
|
|
|
$
|
(203
|
)
|
Adjusted Net Income (Loss) per Diluted Share
|
|
|
$
|
0.08
|
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
0.10
|
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
$
|
4,337
|
|
|
|
$
|
1,413
|
|
|
|
$
|
7,364
|
|
|
|
$
|
5,225
|
|
Adjusted EBITDA as % of Total Revenue
|
|
|
|
8.0
|
%
|
|
|
|
3.0
|
%
|
|
|
|
4.7
|
%
|
|
|
|
3.7
|
%
|
|
* 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 June 30, 2015 and 2014
|
|
Revenue Detail QTD
|
(in thousands)
|
|
|
Q3 2015
|
|
|
Q3 2014
|
|
|
Change
|
|
|
% Change
|
Growth hardware
|
|
|
$
|
27,590
|
|
|
$
|
21,751
|
|
|
$
|
5,839
|
|
|
|
26.8
|
|
Mature hardware
|
|
|
|
22,411
|
|
|
|
21,552
|
|
|
|
859
|
|
|
|
4.0
|
|
Total product revenue
|
|
|
|
50,001
|
|
|
|
43,303
|
|
|
|
6,698
|
|
|
|
15.5
|
|
Service
|
|
|
|
4,537
|
|
|
|
4,582
|
|
|
|
(45
|
)
|
|
|
(1.0
|
)
|
Total revenue
|
|
|
$
|
54,538
|
|
|
$
|
47,885
|
|
|
$
|
6,653
|
|
|
|
13.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America, primarily United States
|
|
|
$
|
34,610
|
|
|
$
|
27,988
|
|
|
$
|
6,622
|
|
|
|
23.7
|
|
Europe, Middle East and Africa
|
|
|
|
12,985
|
|
|
|
11,833
|
|
|
|
1,152
|
|
|
|
9.7
|
|
Asia
|
|
|
|
6,091
|
|
|
|
6,679
|
|
|
|
(588
|
)
|
|
|
(8.8
|
)
|
Latin America
|
|
|
|
852
|
|
|
|
1,385
|
|
|
|
(533
|
)
|
|
|
(38.5
|
)
|
Total revenue
|
|
|
$
|
54,538
|
|
|
$
|
47,885
|
|
|
$
|
6,653
|
|
|
|
13.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue grew 13.9% to $54.5 million in the third fiscal
quarter of 2015 from $47.9 million in the third fiscal quarter of 2014.
-
Product revenue increased by $6.7 million, or 15.5%, in the third
fiscal quarter of 2015 compared to the prior year's comparable
quarter, driven primarily by cellular router and gateway products and
embedded modules.
-
Service revenue decreased approximately 1.0% in the third fiscal
quarter of 2015 compared to the prior year's comparable quarter.
-
Revenue growth in the quarter was partially offset by a weakening of
the Euro and British Pound, as the impact of this foreign currency
translation was $1.1 million when compared to the same period in the
prior fiscal year.
Gross profit was $25.3 million, or 46.5% of revenue, in the third
fiscal quarter of 2015 compared to $22.1 million, or 46.3% of revenue,
in the same period of the prior year, an increase of $3.2 million. The
increase in gross profit was driven by the revenue performance of our
hardware products. Gross profit on service revenue also increased in the
third fiscal quarter of 2015 compared to the year ago quarter as a
result of the restructuring that took place in the second fiscal quarter
of 2015.
-
Hardware product gross margin was 48.5% in the third fiscal quarter of
2015 compared to 50.1% in the same quarter in the prior year.
Generally our growth products have a lower gross margin than mature
products. Since the mix of our hardware products is becoming
increasingly weighted toward growth products, our gross margin has
decreased relative to the third quarter of 2014. Growth hardware
products were 55.2% of total product revenue in the third fiscal
quarter of 2015 compared to 50.2% of total product revenue in the
comparable year ago quarter. Strong sales of mature hardware products
in the third fiscal quarter of 2015 mitigated the decrease in gross
margin compared to the year ago quarter.
-
Service gross margin for the third fiscal quarter of 2015 was 23.7%
compared to 9.5% in the same quarter in the prior year. This is a
direct result of improved utilization of consulting labor in
connection with the restructuring that took place in the second fiscal
quarter of 2015.
Operating expenses were $22.5 million, or 41.3% of revenue, in
the third fiscal quarter of 2015, compared to $22.4 million, or 46.8% of
revenue, in the same quarter in the prior year.
Operating income for the third fiscal quarter of 2015 was $2.8
million, or 5.2% of revenue, as compared to an operating loss of $0.3
million, or 0.5% of revenue, for the third fiscal quarter of 2014. The
$3.1 million increase in operating income resulted almost entirely from
the increase in gross profit.
Other income (loss), net increased by $0.5 million in the third
fiscal quarter of 2015 compared to the same quarter in the prior year,
and included approximately $0.4 million of gain from an insurance
recovery related to the replacement of our capital equipment destroyed
in the November 2014 fire at our subcontract manufacturer's location.
Other income (loss), net also includes foreign currency transaction net
gains (losses) and interest income, net. All insurance proceeds
resulting from the fire have been received.
Net income was $2.5 million in the third fiscal quarter of 2015,
or $0.10 per diluted share, compared to a net loss of $0.1 million, or
$0.00 per diluted share, in the third fiscal quarter of 2014.
-
Net income in the third fiscal quarter of 2015 included a gain from an
insurance recovery of $0.3 million, net of tax, or $0.01 per diluted
share, and discrete tax benefits of $0.1 million.
-
Net loss in the third fiscal quarter of 2014 included a discrete tax
benefit of $0.3 million, or $0.01 per diluted share, resulting from
the reassessment of certain state research and development tax credits
and our ability to realize these credits in the future.
Adjusted net income, including the items listed above, was $2.1 million
in the third fiscal quarter of 2015, or $0.08 per diluted share,
compared to adjusted net loss, including the item listed above, which
was $0.4 million in the third fiscal quarter of 2014, or $0.01 loss per
diluted share. Please refer to the Reconciliation of Net Income (Loss)
and Net Income per Diluted Share to Adjusted Net Income (Loss) and
Adjusted Net Income (Loss) per Diluted Share later in this earnings
release.
|
Business Results for the Nine Months
Ended June 30, 2015 and 2014
|
|
Revenue Detail YTD
|
(in thousands)
|
|
|
Q3 2015
|
|
|
Q3 2014
|
|
|
Change
|
|
|
% Change
|
Growth hardware
|
|
|
$
|
83,816
|
|
|
$
|
64,369
|
|
|
$
|
19,447
|
|
|
|
30.2
|
|
Mature hardware
|
|
|
|
59,226
|
|
|
|
61,483
|
|
|
|
(2,257
|
)
|
|
|
(3.7
|
)
|
Total product revenue
|
|
|
|
143,042
|
|
|
|
125,852
|
|
|
|
17,190
|
|
|
|
13.7
|
|
Service
|
|
|
|
13,370
|
|
|
|
15,237
|
|
|
|
(1,867
|
)
|
|
|
(12.3
|
)
|
Total revenue
|
|
|
$
|
156,412
|
|
|
$
|
141,089
|
|
|
$
|
15,323
|
|
|
|
10.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America, primarily United States
|
|
|
$
|
97,711
|
|
|
$
|
84,777
|
|
|
$
|
12,934
|
|
|
|
15.3
|
|
Europe, Middle East and Africa
|
|
|
|
36,599
|
|
|
|
35,373
|
|
|
|
1,226
|
|
|
|
3.5
|
|
Asia
|
|
|
|
17,208
|
|
|
|
16,748
|
|
|
|
460
|
|
|
|
2.7
|
|
Latin America
|
|
|
|
4,894
|
|
|
|
4,191
|
|
|
|
703
|
|
|
|
16.8
|
|
Total revenue
|
|
|
$
|
156,412
|
|
|
$
|
141,089
|
|
|
$
|
15,323
|
|
|
|
10.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue grew 10.9% to $156.4 million in the first nine
months of fiscal 2015 from $141.1 million in the first nine months of
fiscal 2014.
-
Product revenue increased by $17.2 million, or 13.7%, in the first
nine months of fiscal 2015 compared to the prior year's comparable
period, driven primarily by cellular router and gateway products and
RF modules.
-
Service revenue decreased by $1.9 million, or 12.3%, in the first nine
months of fiscal 2015 compared to the prior year's comparable period
as a result of completing fewer contracts.
-
Total revenue in the first nine months of 2015 was partially offset by
a weakening of the Euro and British Pound. The impact of this foreign
currency translation was $2.6 million when compared to the same period
in the prior fiscal year.
Operating income for the first nine months of fiscal 2015 was
$2.2 million, or 1.4% of revenue, as compared to an operating loss of
$0.3 million, or 0.2% of revenue, for the first nine months of fiscal
2014. Operating income increased by $2.5 million and resulted from an
increase in gross profit of $4.5 million offset by an increase in
operating expenses of $2.0 million. Operating income for the first nine
months of fiscal 2015 included restructuring expenses of $0.5 million
for our India and Etherios operations as discussed in our earnings
release for the second fiscal quarter of 2015.
Net income was $3.6 million in the first nine months of fiscal
2015, or $0.14 per diluted share, compared to $1.3 million of net
income, or $0.05 per diluted share, in the first nine months of fiscal
2014. Adjusted net income was $2.4 million in the first nine months of
2015, or $0.10 per diluted share, compared to an adjusted net loss of
$0.2 million in the first nine months of 2014, or $0.01 loss per diluted
share.
Adjusted EBITDA in the first nine months of fiscal 2015 was $7.4
million, or 4.7% of total revenue, compared to $5.2 million, or 3.7% of
total revenue, in the first nine months of 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 $100.8 million at June
30, 2015, an increase of $8.8 million over the comparable balance at
September 30, 2014 and an increase of $8.3 million over the balance at
March 31, 2015. Please refer to the Condensed Consolidated Statements
of Cash Flows for more information.
-
We had no debt on the balance sheet as of June 30, 2015.
-
At June 30, 2015, our current ratio was 7.5 to 1 compared to 6.8 to 1
at September 30, 2014.
Customer Highlights
Key customer successes during the quarter include:
-
Furuno Electric Co. Ltd. (Tokyo: 6814), a leading provider of marine
communications and navigation equipment, has selected Digi's
components and design services for its recently announced NavNet
TZtouch2 advanced marine navigation systems. Furuno will use Digi's
ConnectCore® 6, the world's first surface-mount multi-chip
module with built-in wireless connectivity, for its Next-Generation
Marine Navigation Systems.
-
A leading concessionaire of self-serve vended luggage carts,
electronic lockers, commercial strollers and massage chairs, has
selected the Digi TransPort® WR11 for 4G LTE connectivity
at major US airports after extensive lab and field testing.
-
TurboChef Technologies, Inc. pioneers the world of rapid cooking by
designing rapid-cook ovens that are versatile, user-friendly, and save
energy. TurboChef will now use Digi's XBee® WiFi and Digi
Device Cloud to monitor and remotely manage ovens for leading
franchise convenience stores and quick serve restaurants. With XBee
and Device Cloud, TurboChef can remotely monitor fault codes to
maximize equipment up time. This connectivity also enables TurboChef
to remotely update firmware and end customer menu items. In the past,
customers, such as franchises with more than 2,000 ovens installed,
had to send memory modules to all locations for each menu update.
-
An independent state agency that designs and constructs bridges and
highways and provides varied mass transit services has selected the
Digi TransPort® WR44 as the router that will be used in an
upgrade of the CAD/AVL system in more than 150 of its buses.
-
Grupo Unión is a solution provider in the engineering and distribution
services industry with 30 years of experience in electricity,
telecommunications, defense, security and automation. Headquartered in
Colombia, Grupo Unión also has locations in Chile, Ecuador, Peru,
Panamá and Mexico. Grupo Unión has optimized telecommunications
networks for remote measurement systems in Colombia using Digi's
XBee-PRO® 900HP. With an installation of more than 7,000
XBee modules, Grupo Unión has solved key issues in Colombia like loss
of energy, demand management, energy efficiency and smart grid
optimization.
-
An organization that manufactures utility grade, revenue class
submeters for commercial, industrial, and residential markets selected
the Digi XBee® 900HP to extend the range of its commercial
and residential electric metering system.
-
A domestic energy delivery company that serves more than five million
metered customers has selected the Digi TransPort® WR44 as
part of their Intelligent Grid Solution. The WR44 will also enable the
solution to migrate from 3G to 4G LTE.
-
A leading transportation and shipping provider selected Digi's
USB-Async Edgeport products to enable scanning and tracking technology
for packages in their logistics facilities.
Non-GAAP Financial Measures
|
Reconciliation of Net Income (Loss) and Net Income per Diluted
Share
|
to Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per
Diluted Share
|
(In thousands of dollars, except per share amounts)
|
|
|
|
|
Three months ended June 30,
|
|
|
Nine months ended June 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
Net income (loss) and net income per common share, diluted
|
|
|
$
|
2,496
|
|
|
|
$
|
0.10
|
|
|
|
$
|
(101
|
)
|
|
$
|
-
|
|
|
|
$
|
3,603
|
|
|
|
$
|
0.14
|
|
|
|
$
|
1,325
|
|
|
|
$
|
0.05
|
|
Restructuring reserve, net of taxes
|
|
|
|
(6
|
)
|
|
|
|
NM
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
331
|
|
|
|
|
0.01
|
|
|
|
|
53
|
|
|
|
|
NM
|
|
Gain from insurance recovery, net of taxes
|
|
|
|
(251
|
)
|
|
|
|
(0.01
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
(894
|
)
|
|
|
|
(0.04
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
Discrete tax benefits (1)
|
|
|
|
(105
|
)
|
|
|
|
NM
|
|
|
|
|
(261
|
)
|
|
|
(0.01
|
)
|
|
|
|
(592
|
)
|
|
|
|
(0.02
|
)
|
|
|
|
(1,581
|
)
|
|
|
|
(0.06
|
)
|
Adjusted net income (loss) and adjusted net income (loss) per
diluted share (2)
|
|
|
$
|
2,134
|
|
|
|
$
|
0.08
|
|
|
|
$
|
(362
|
)
|
|
$
|
(0.01
|
)
|
|
|
$
|
2,448
|
|
|
|
$
|
0.10
|
|
|
|
$
|
(203
|
)
|
|
|
$
|
(0.01
|
)
|
Diluted weighted average common shares (3)
|
|
|
|
|
|
|
25,710
|
|
|
|
|
|
|
25,274
|
|
|
|
|
|
|
|
25,085
|
|
|
|
|
|
|
|
25,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM means Not Meaningful
|
(1)
|
|
Discrete tax 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.
|
(3)
|
|
For the three and nine months ended June 30, 2014, diluted weighted
average common shares were the same as basic common shares as there
were net losses in both of those periods.
|
|
|
|
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA
|
(In thousands of dollars)
|
|
|
|
|
Three months ended June 30,
|
|
|
Nine months ended June 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
total
|
|
|
|
|
|
total
|
|
|
|
|
|
total
|
|
|
|
|
|
total
|
|
|
|
|
|
|
revenue
|
|
|
|
|
|
revenue
|
|
|
|
|
|
revenue
|
|
|
|
|
|
revenue
|
Total revenue
|
|
|
$
|
54,538
|
|
|
|
100.0
|
%
|
|
|
$
|
47,885
|
|
|
|
100.0
|
%
|
|
|
$
|
156,412
|
|
|
|
100.0
|
%
|
|
|
$
|
141,089
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
$
|
2,496
|
|
|
|
|
|
|
$
|
(101
|
)
|
|
|
|
|
|
$
|
3,603
|
|
|
|
|
|
|
$
|
1,325
|
|
|
|
|
Gain from insurance recovery
|
|
|
|
(386
|
)
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
(1,375
|
)
|
|
|
|
|
|
|
-
|
|
|
|
|
Interest income, net
|
|
|
|
(42
|
)
|
|
|
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
(134
|
)
|
|
|
|
|
|
|
(127
|
)
|
|
|
|
Income tax provision (benefit)
|
|
|
|
795
|
|
|
|
|
|
|
|
(213
|
)
|
|
|
|
|
|
|
814
|
|
|
|
|
|
|
|
(1,454
|
)
|
|
|
|
Depreciation and amortization
|
|
|
|
1,474
|
|
|
|
|
|
|
|
1,762
|
|
|
|
|
|
|
|
4,456
|
|
|
|
|
|
|
|
5,481
|
|
|
|
|
Adjusted EBITDA
|
|
|
$
|
4,337
|
|
|
|
8.0
|
%
|
|
|
$
|
1,413
|
|
|
|
3.0
|
%
|
|
|
$
|
7,364
|
|
|
|
4.7
|
%
|
|
|
$
|
5,225
|
|
|
|
3.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guidance
For the fourth fiscal quarter of 2015, we project revenue in a range of
$53 million to $56 million. We project net income per diluted share to
be in a range of $0.04 to $0.08 for the fourth fiscal quarter of 2015.
For the full fiscal year 2015, we project revenue of $209 million to
$212 million and net income per diluted share to be in a range of $0.18
to $0.22. Previously we projected revenue in a range of $203 million to
$210 million and net income per diluted share in a range of $0.07 to
$0.15.
Third Fiscal Quarter 2015 Conference Call
Details
As announced on July 9, 2015, Digi will discuss its third quarter
results on a conference call on Thursday, July 23, 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.
Digi invites all those interested in hearing management's discussion of
its quarter to join the call by dialing (855) 638-5675 and entering
passcode 82182132. International participants may access the call by
dialing (262) 912-4765 and entering passcode 82182132. 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 82182132 when prompted. Participants may also
access a live webcast of the conference call through the investor
relations section of Digi's website at www.digi.com.
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," "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, including 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, 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 (loss) and adjusted net
income (loss) per diluted share, respectively, and adjusted EBITDA,
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 (loss), 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 (loss)
and net income (loss) per diluted share, respectively, exclusive of such
items as reversals of tax reserves and discrete tax benefits,
restructuring, and income from insurance proceeds 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. Adjusted EBITDA is also
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
|
|
|
Nine months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware product
|
|
|
$
|
50,001
|
|
|
|
$
|
43,303
|
|
|
|
$
|
143,042
|
|
|
$
|
125,852
|
|
Service
|
|
|
|
4,537
|
|
|
|
|
4,582
|
|
|
|
|
13,370
|
|
|
|
15,237
|
|
Total revenue
|
|
|
|
54,538
|
|
|
|
|
47,885
|
|
|
|
|
156,412
|
|
|
|
141,089
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of hardware product
|
|
|
|
25,729
|
|
|
|
|
21,587
|
|
|
|
|
74,339
|
|
|
|
61,862
|
|
Cost of service
|
|
|
|
3,460
|
|
|
|
|
4,149
|
|
|
|
|
10,724
|
|
|
|
12,390
|
|
Total cost of sales
|
|
|
|
29,189
|
|
|
|
|
25,736
|
|
|
|
|
85,063
|
|
|
|
74,252
|
|
Gross profit
|
|
|
|
25,349
|
|
|
|
|
22,149
|
|
|
|
|
71,349
|
|
|
|
66,837
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
|
9,434
|
|
|
|
|
9,859
|
|
|
|
|
30,525
|
|
|
|
30,477
|
|
Research and development
|
|
|
|
8,374
|
|
|
|
|
7,253
|
|
|
|
|
23,715
|
|
|
|
21,921
|
|
General and administrative
|
|
|
|
4,720
|
|
|
|
|
5,317
|
|
|
|
|
14,448
|
|
|
|
14,659
|
|
Restructuring charges, net
|
|
|
|
(9
|
)
|
|
|
|
-
|
|
|
|
|
509
|
|
|
|
81
|
|
Total operating expenses
|
|
|
|
22,519
|
|
|
|
|
22,429
|
|
|
|
|
69,197
|
|
|
|
67,138
|
|
Operating income (loss)
|
|
|
|
2,830
|
|
|
|
|
(280
|
)
|
|
|
|
2,152
|
|
|
|
(301
|
)
|
Other income (loss), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
|
42
|
|
|
|
|
35
|
|
|
|
|
134
|
|
|
|
127
|
|
Other income (loss), net
|
|
|
|
419
|
|
|
|
|
(69
|
)
|
|
|
|
2,131
|
|
|
|
45
|
|
Total other income (loss), net
|
|
|
|
461
|
|
|
|
|
(34
|
)
|
|
|
|
2,265
|
|
|
|
172
|
|
Income (loss) before income taxes
|
|
|
|
3,291
|
|
|
|
|
(314
|
)
|
|
|
|
4,417
|
|
|
|
(129
|
)
|
Income tax provision (benefit)
|
|
|
|
795
|
|
|
|
|
(213
|
)
|
|
|
|
814
|
|
|
|
(1,454
|
)
|
Net income (loss)
|
|
|
$
|
2,496
|
|
|
|
$
|
(101
|
)
|
|
|
$
|
3,603
|
|
|
$
|
1,325
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.10
|
|
|
|
$
|
-
|
|
|
|
$
|
0.15
|
|
|
$
|
0.05
|
|
Diluted
|
|
|
$
|
0.10
|
|
|
|
$
|
-
|
|
|
|
$
|
0.14
|
|
|
$
|
0.05
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
24,938
|
|
|
|
|
25,274
|
|
|
|
|
24,525
|
|
|
|
25,545
|
|
Diluted
|
|
|
|
25,710
|
|
|
|
|
25,274
|
|
|
|
|
25,085
|
|
|
|
25,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digi International Inc.
|
Condensed Consolidated Statements of Comprehensive Income (Loss)
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
Net income (loss)
|
|
|
$
|
2,496
|
|
|
|
$
|
(101
|
)
|
|
|
$
|
3,603
|
|
|
|
$
|
1,325
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
1,571
|
|
|
|
|
384
|
|
|
|
|
(4,158
|
)
|
|
|
|
546
|
|
Change in net unrealized gain (loss) on investments
|
|
|
|
4
|
|
|
|
|
(2
|
)
|
|
|
|
(2
|
)
|
|
|
|
62
|
|
Less income tax (provision) benefit
|
|
|
|
(1
|
)
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
(24
|
)
|
Reclassification of realized loss on investments included
in net income (1)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
1
|
|
|
|
|
-
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
1,574
|
|
|
|
|
383
|
|
|
|
|
(4,158
|
)
|
|
|
|
584
|
|
Comprehensive income (loss)
|
|
|
$
|
4,070
|
|
|
|
$
|
282
|
|
|
|
$
|
(555
|
)
|
|
|
$
|
1,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Recorded in Other income (loss), net on our Condensed
Consolidated Statement of Operations.
|
|
|
Digi International Inc.
|
Condensed Consolidated Balance Sheets
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
|
2015
|
|
|
2014
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
53,755
|
|
|
$
|
47,490
|
Marketable securities
|
|
|
|
|
37,527
|
|
|
|
32,898
|
Accounts receivable, net
|
|
|
|
|
24,415
|
|
|
|
28,576
|
Inventories
|
|
|
|
|
34,690
|
|
|
|
31,247
|
Deferred tax assets
|
|
|
|
|
3,072
|
|
|
|
3,221
|
Other
|
|
|
|
|
2,912
|
|
|
|
4,249
|
Total current assets
|
|
|
|
|
156,371
|
|
|
|
147,681
|
Marketable securities, long-term
|
|
|
|
|
9,471
|
|
|
|
11,541
|
Property, equipment and improvements, net
|
|
|
|
|
14,628
|
|
|
|
13,231
|
Identifiable intangible assets, net
|
|
|
|
|
4,789
|
|
|
|
6,785
|
Goodwill
|
|
|
|
|
102,497
|
|
|
|
103,398
|
Deferred tax assets
|
|
|
|
|
5,708
|
|
|
|
7,383
|
Other
|
|
|
|
|
293
|
|
|
|
440
|
Total assets
|
|
|
|
$
|
293,757
|
|
|
$
|
290,459
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
7,048
|
|
|
$
|
10,451
|
Accrued compensation
|
|
|
|
|
10,464
|
|
|
|
8,133
|
Other
|
|
|
|
|
3,372
|
|
|
|
3,170
|
Total current liabilities
|
|
|
|
|
20,884
|
|
|
|
21,754
|
Income taxes payable
|
|
|
|
|
1,401
|
|
|
|
2,724
|
Deferred tax liabilities
|
|
|
|
|
151
|
|
|
|
272
|
Other noncurrent liabilities
|
|
|
|
|
678
|
|
|
|
411
|
Total liabilities
|
|
|
|
|
23,114
|
|
|
|
25,161
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
|
|
270,643
|
|
|
|
265,298
|
Total liabilities and stockholders' equity
|
|
|
|
$
|
293,757
|
|
|
$
|
290,459
|
|
|
|
|
|
|
|
|
|
|
|
Digi International Inc.
|
Condensed Consolidated Statements of Cash Flows
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
Nine months ended June 30,
|
|
|
|
2015
|
|
|
2014
|
Operating activities:
|
|
|
|
|
|
|
Net income
|
|
|
$
|
3,603
|
|
|
|
$
|
1,325
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
Depreciation of property, equipment and improvements
|
|
|
|
2,170
|
|
|
|
|
2,694
|
|
Amortization of identifiable intangible assets
|
|
|
|
2,286
|
|
|
|
|
2,787
|
|
Stock-based compensation
|
|
|
|
3,262
|
|
|
|
|
3,160
|
|
Excess tax benefits from stock-based compensation
|
|
|
|
-
|
|
|
|
|
(44
|
)
|
Deferred income tax provision (benefit)
|
|
|
|
1,729
|
|
|
|
|
(2,033
|
)
|
Gain on insurance settlement related to property and equipment
|
|
|
|
(1,375
|
)
|
|
|
|
-
|
|
Bad debt/product return provision
|
|
|
|
198
|
|
|
|
|
(196
|
)
|
Inventory obsolescence
|
|
|
|
842
|
|
|
|
|
610
|
|
Restructuring charges, net
|
|
|
|
509
|
|
|
|
|
81
|
|
Other
|
|
|
|
(81
|
)
|
|
|
|
(24
|
)
|
Changes in operating assets and liabilities
|
|
|
|
(4,147
|
)
|
|
|
|
(5,815
|
)
|
Net cash provided by operating activities
|
|
|
|
8,996
|
|
|
|
|
2,545
|
|
Investing activities:
|
|
|
|
|
|
|
Purchase of marketable securities
|
|
|
|
(31,054
|
)
|
|
|
|
(15,574
|
)
|
Proceeds from maturities of marketable securities
|
|
|
|
28,494
|
|
|
|
|
35,364
|
|
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
|
|
|
|
(3,888
|
)
|
|
|
|
(2,719
|
)
|
Net cash (used in) provided by investing activities
|
|
|
|
(5,003
|
)
|
|
|
|
17,071
|
|
Financing activities:
|
|
|
|
|
|
|
Excess tax benefits from stock-based compensation
|
|
|
|
-
|
|
|
|
|
44
|
|
Proceeds from stock option plan transactions
|
|
|
|
6,332
|
|
|
|
|
3,336
|
|
Proceeds from employee stock purchase plan transactions
|
|
|
|
708
|
|
|
|
|
770
|
|
Purchases of common stock
|
|
|
|
(2,339
|
)
|
|
|
|
(9,651
|
)
|
Net cash provided by (used in) financing activities
|
|
|
|
4,701
|
|
|
|
|
(5,501
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
(2,429
|
)
|
|
|
|
482
|
|
Net increase in cash and cash equivalents
|
|
|
|
6,265
|
|
|
|
|
14,597
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
47,490
|
|
|
|
|
41,320
|
|
Cash and cash equivalents, end of period
|
|
|
$
|
53,755
|
|
|
|
$
|
55,917
|
|
|
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20150723006423/en/
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