On August 7, 2024, Digi International Inc (DGII, Financial) released its 8-K filing for the third fiscal quarter of 2024, revealing a mixed performance. The company, a Minnesota-based provider of business and mission-critical Internet of Things (IoT) connectivity products and services, operates through two segments: IoT Products and Services and IoT Solutions. The majority of its revenue is generated from the IoT Products & Services segment, with significant contributions from its operations in the United States, Europe, the Middle East, Africa, and other regions.
Performance Overview
Digi International Inc (DGII, Financial) reported revenue of $105 million for Q3 2024, a 6% decrease compared to the same period last year. Despite the revenue decline, the company achieved a gross profit margin of 59.2%, up by 230 basis points. Net income rose to $10 million from $7 million, translating to a net income per diluted share of $0.26, compared to $0.18 in the previous year. Adjusted net income per diluted share remained flat at $0.50 year over year, aligning with annual estimates.
Segment Performance
The IoT Products and Services segment saw a revenue decline of $7.4 million, primarily due to a $7.9 million decrease in one-time sales. However, recurring revenue grew by $0.5 million, contributing to an ARR of $23 million, a 5% increase from the prior year. The segment's gross profit margin improved by 30 basis points to 54.4%, driven by reduced inventory adjustments and lower inflationary pressures.
Conversely, the IoT Solutions segment experienced a slight revenue increase of $0.3 million, with a $1.7 million rise in recurring revenue offsetting declines in hardware sales and one-time services. The segment's ARR reached $90 million, a 10% increase, bolstered by growth in SmartSense. Gross profit margins surged by 770 basis points to 74.4%, reflecting higher-margin ARR subscription revenues.
Financial Achievements and Metrics
Digi International Inc (DGII, Financial) reported a record end-of-quarter ARR of $113 million, a 9% increase. Adjusted EBITDA rose by 2% to $25 million, demonstrating strong operating discipline. The company also made significant payments against its revolving credit facility, reducing net outstanding debt to $152 million and debt net of cash and cash equivalents to $123 million. Interest expenses decreased to $3.2 million from $6.6 million, driven by lower debt and reduced effective interest rates.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Revenue | $105 million | $112 million |
| Gross Profit Margin | 59.2% | 56.9% |
| Net Income | $10 million | $7 million |
| Net Income per Diluted Share | $0.26 | $0.18 |
| Adjusted Net Income per Diluted Share | $0.50 | $0.50 |
| Adjusted EBITDA | $25 million | $24.5 million |
| ARR | $113 million | $104 million |
Cash Flow and Inventory Management
Cash flow from operations was robust at $25 million, up from $18 million in the previous year, driven by changes in inventory. Net inventory levels decreased to $57 million from $74 million as of September 30, 2023, reflecting ongoing efforts to manage inventory efficiently.
Commentary and Outlook
“Digi continues to execute on its top priority, providing valuable IoT solutions. This focus propelled ARR to a record $113M which drove record gross margins. Strong operating discipline helped notch record A-EBITDA margins and strong cash generation,” stated Ron Konezny, President and CEO.
Looking ahead, Digi International Inc (DGII, Financial) remains committed to its long-term strategic goals of doubling ARR and Adjusted EBITDA to $200 million within the next five years. For the fourth fiscal quarter, the company projects revenues between $102 million and $106 million, with Adjusted EBITDA estimated to be between $24.5 million and $26.0 million. Adjusted net income per share is anticipated to range from $0.48 to $0.52 per diluted share.
For more detailed insights and the full earnings report, visit the 8-K filing.
Explore the complete 8-K earnings release (here) from Digi International Inc for further details.
