Delaware | 1-34033 | 41-1532464 | ||
(State of Incorporation) | (Commission file number) | (I.R.S. Employer Identification No.) | ||
11001 Bren Road East, Minnetonka, Minnesota | 55343 | |||
(Address of principal executive offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
No. | Exhibit | Manner of Filing | |||
99.1 | Furnished Electronically |
DIGI INTERNATIONAL INC. | |||
By: | /s/ Gokul V. Hemmady | ||
Gokul V. Hemmady | |||
Senior Vice President, Chief Financial Officer and Treasurer |
Digi International Reports Third Fiscal Quarter 2018 Results | ||||||
Record Quarterly Revenue Driven by Broad Based Growth |
GAAP Results | ||||||||||||||||
(in thousands, except per share data) | Q3 2018 | Q3 2017 | YTD 2018 | YTD 2017 | ||||||||||||
Total Revenue | $ | 62,716 | $ | 45,739 | $ | 162,704 | $ | 136,529 | ||||||||
Gross Profit | $ | 29,329 | $ | 22,485 | $ | 77,920 | $ | 65,840 | ||||||||
Gross Margin | 46.8 | % | 49.2 | % | 47.9 | % | 48.2 | % | ||||||||
Operating Income | $ | 2,037 | $ | 709 | $ | 417 | $ | 4,643 | ||||||||
Operating Income as % of Total Revenue | 3.2 | % | 1.6 | % | 0.3 | % | 3.4 | % | ||||||||
Net Income (Loss) | $ | 2,621 | $ | 1,335 | $ | (2,305 | ) | $ | 5,023 | |||||||
Net Income (Loss) per Diluted Share | $ | 0.09 | $ | 0.05 | $ | (0.09 | ) | $ | 0.19 |
Non-GAAP Results* | ||||||||||||||||
(in thousands, except per share data) | Q3 2018 | Q3 2017 | YTD 2018 | YTD 2017 | ||||||||||||
Adjusted Net Income | $ | 2,815 | $ | 2,276 | $ | 865 | $ | 5,869 | ||||||||
Adjusted Net Income per Diluted Share | $ | 0.10 | $ | 0.08 | $ | 0.03 | $ | 0.22 | ||||||||
Adjusted EBITDA | 7,308 | 5,624 | 14,937 | 16,505 | ||||||||||||
Adjusted EBITDA as % of Total Revenue | 11.7 | % | 12.3 | % | 9.2 | % | 12.1 | % | ||||||||
Adjusted EBITDA per Diluted Share | $ | 0.26 | $ | 0.21 | $ | 0.55 | $ | 0.61 | ||||||||
* A reconciliation of GAAP to non-GAAP financial measures appears at the end of this release. |
Digi International Reports Third Fiscal Quarter 2018 Results |
Revenue Detail QTD | |||||||||||||||
(in thousands) | Q3 2018 | Q3 2017 | Change | % Change | |||||||||||
Product | $ | 51,691 | $ | 40,660 | $ | 11,031 | 27.1 | % | |||||||
Services | 2,715 | 2,185 | 530 | 24.3 | % | ||||||||||
Solutions | 8,310 | 2,894 | 5,416 | 187.1 | % | ||||||||||
Total revenue | $ | 62,716 | $ | 45,739 | $ | 16,977 | 37.1 | % | |||||||
North America, primarily United States | $ | 45,184 | $ | 30,305 | $ | 14,879 | 49.1 | % | |||||||
Europe, Middle East and Africa | 10,216 | 9,703 | 513 | 5.3 | % | ||||||||||
Asia | 5,808 | 4,508 | 1,300 | 28.8 | % | ||||||||||
Latin America | 1,508 | 1,223 | 285 | 23.3 | % | ||||||||||
Total revenue | $ | 62,716 | $ | 45,739 | $ | 16,977 | 37.1 | % |
Digi International Reports Third Fiscal Quarter 2018 Results |
Revenue Detail YTD | |||||||||||||||
(in thousands) | Q3 2018 | Q3 2017 | Change | % Change | |||||||||||
Product | $ | 137,733 | $ | 125,599 | $ | 12,134 | 9.7 | % | |||||||
Services | 7,378 | 6,054 | 1,324 | 21.9 | % | ||||||||||
Solutions | 17,593 | 4,876 | 12,717 | 260.8 | % | ||||||||||
Total revenue | $ | 162,704 | $ | 136,529 | $ | 26,175 | 19.2 | % | |||||||
North America, primarily United States | $ | 114,175 | $ | 89,678 | $ | 24,497 | 27.3 | % | |||||||
Europe, Middle East and Africa | 29,876 | 29,059 | 817 | 2.8 | % | ||||||||||
Asia | 15,114 | 14,446 | 668 | 4.6 | % | ||||||||||
Latin America | 3,539 | 3,346 | 193 | 5.8 | % | ||||||||||
Total revenue | $ | 162,704 | $ | 136,529 | $ | 26,175 | 19.2 | % |
Digi International Reports Third Fiscal Quarter 2018 Results |
• | Cash and cash equivalents and marketable securities balance, including long-term marketable securities, of $54.7 million, a decrease of $60.3 million from the end of fiscal 2017. The decrease in cash is related directly to the purchase price and other costs associated with the TempAlert and Accelerated acquisitions. |
• | Current and long-term contingent liabilities of $9.0 million. This includes an increase of $1.0 million associated with better than expected performance by Accelerated in the third fiscal quarter of 2018. |
• | A Southeastern US industrial integration company, that provides energy solutions to electric utilities, industrial, institutional and commercial customers, selected Digi’s WR31 router platform for their energy management program needs. The solution monitors for power outages, generator alarms, and emergency events for end user customers. The WR31 was chosen for its reliability, security, and digital and analog I/O capabilities. An initial deployment of approximately 1,000 WR31’s is expected to occur this fiscal year. |
• | A transit fleet operator located in the Midwestern US, with annual ridership of about 10 million people, has chosen Digi’s advanced router technology to upgrade their bus fleet of approximately 300 biodiesel and hybrid-electric vehicles. The operator is upgrading their existing 3G Digi routers with the latest Digi WR44R model. The WR44R will enable the customer to operate more onboard services over cellular, including VOIP dispatch, vehicle location for bus arrival to support smartphone apps, camera systems and passenger WiFi. |
• | A Scandinavian company has selected Digi’s CC6UL SBC to design a secure gateway. The CC6UL was selected due to its off-the-shelf ease of use, which has allowed the company to shorten project design time and go straight to production. In addition, the CC6UL’s flexibility will allow the customer to use their own version of a Linux operating system. We expect the customer to order up to 500 CC6UL units per quarter over the next two to three years. |
• | HCA Healthcare of Tennessee selected SmartSense to ensure that they meet compliance requirements for continuous temperature monitoring of prescription drugs and vaccines at over 700 of their pharmacy locations throughout the U.S. Deployment began in June with completion expected in the fourth fiscal quarter of 2018. |
• | ZPower, a leading microbattery manufacturer for hearing aids, medical devices and wearable electronics has selected SmartSense to monitor humidity and temperature-controlled storage for their inventory of rechargeable batteries. |
• | A chain that operates over 450 truck stops and convenience stores nationwide, has expanded the suite of services they already use from SmartSense to also include refrigeration equipment monitoring. |
• | A school district in New Mexico has selected SmartSense to monitor temperature sensitive foods in their school cafeterias. The SmartSense solution will help ensure food safety for over 8,000 students across 17 sites. |
Digi International Reports Third Fiscal Quarter 2018 Results |
Digi International Reports Third Fiscal Quarter 2018 Results |
Gokul Hemmady | ||
Senior Vice President, Chief Financial Officer and Treasurer | ||
Digi International | ||
952-912-3737 | ||
Email: gokul.hemmady@digi.com | ||
Digi International Reports Third Fiscal Quarter 2018 Results |
Three months ended June 30, | Nine months ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue: | |||||||||||||||
Product | $ | 51,691 | $ | 40,660 | $ | 137,733 | $ | 125,599 | |||||||
Services and solutions | 11,025 | 5,079 | 24,971 | 10,930 | |||||||||||
Total revenue | 62,716 | 45,739 | 162,704 | 136,529 | |||||||||||
Cost of sales: | |||||||||||||||
Cost of product | 26,639 | 20,195 | 68,929 | 63,930 | |||||||||||
Cost of services and solutions | 6,007 | 2,550 | 13,737 | 5,727 | |||||||||||
Amortization of intangibles | 741 | 509 | 2,118 | 1,032 | |||||||||||
Total cost of sales | 33,387 | 23,254 | 84,784 | 70,689 | |||||||||||
Gross profit | 29,329 | 22,485 | 77,920 | 65,840 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 11,595 | 8,504 | 32,530 | 25,557 | |||||||||||
Research and development | 8,205 | 7,420 | 24,573 | 21,304 | |||||||||||
General and administrative | 7,302 | 3,337 | 20,210 | 11,821 | |||||||||||
Restructuring charges, net | 190 | 2,515 | 190 | 2,515 | |||||||||||
Total operating expenses | 27,292 | 21,776 | 77,503 | 61,197 | |||||||||||
Operating income | 2,037 | 709 | 417 | 4,643 | |||||||||||
Other income (expense), net: | |||||||||||||||
Interest income, net | 92 | 153 | 331 | 389 | |||||||||||
Other income (expense), net | 535 | (221 | ) | (37 | ) | 210 | |||||||||
Total other income (expense), net | 627 | (68 | ) | 294 | 599 | ||||||||||
Income before income taxes | 2,664 | 641 | 711 | 5,242 | |||||||||||
Income tax provision (benefit) | 43 | (694 | ) | 3,016 | 219 | ||||||||||
Net income (loss) | $ | 2,621 | $ | 1,335 | $ | (2,305 | ) | $ | 5,023 | ||||||
Net income (loss) per common share: | |||||||||||||||
Basic | $ | 0.10 | $ | 0.05 | $ | (0.09 | ) | $ | 0.19 | ||||||
Diluted | $ | 0.09 | $ | 0.05 | $ | (0.09 | ) | $ | 0.19 | ||||||
Weighted average common shares: | |||||||||||||||
Basic | 27,177 | 26,522 | 27,002 | 26,390 | |||||||||||
Diluted | 27,764 | 26,956 | 27,002 | 27,110 |
Digi International Reports Third Fiscal Quarter 2018 Results |
Three months ended June 30, | Nine months ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income (loss) | $ | 2,621 | $ | 1,335 | $ | (2,305 | ) | $ | 5,023 | ||||||
Other comprehensive (loss) income, net of tax: | |||||||||||||||
Foreign currency translation adjustment | (3,116 | ) | 2,535 | (1,058 | ) | 57 | |||||||||
Change in net unrealized (loss) gain on investments | (1 | ) | 8 | (41 | ) | (2 | ) | ||||||||
Less income tax benefit (provision) | 1 | (3 | ) | 9 | 1 | ||||||||||
Reclassification of realized loss on investments included in net income (1) | — | — | 31 | — | |||||||||||
Less income tax benefit (2) | — | — | (8 | ) | — | ||||||||||
Other comprehensive (loss) income, net of tax | (3,116 | ) | 2,540 | (1,067 | ) | 56 | |||||||||
Comprehensive (loss) income | $ | (495 | ) | $ | 3,875 | $ | (3,372 | ) | $ | 5,079 |
Digi International Reports Third Fiscal Quarter 2018 Results |
June 30, 2018 | September 30, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 47,694 | $ | 78,222 | |||
Marketable securities | 4,763 | 32,015 | |||||
Accounts receivable, net | 48,246 | 28,855 | |||||
Inventories | 41,782 | 30,238 | |||||
Receivable from sale of business | — | 1,998 | |||||
Other | 3,554 | 3,032 | |||||
Total current assets | 146,039 | 174,360 | |||||
Marketable securities, long-term | 2,243 | 4,753 | |||||
Property, equipment and improvements, net | 11,474 | 12,801 | |||||
Identifiable intangible assets, net | 41,778 | 11,800 | |||||
Goodwill | 154,565 | 131,995 | |||||
Deferred tax assets | 3,665 | 9,211 | |||||
Other | 462 | 269 | |||||
Total assets | $ | 360,226 | $ | 345,189 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 10,849 | $ | 6,240 | |||
Accrued compensation | 6,245 | 4,325 | |||||
Accrued warranty | 1,295 | 987 | |||||
Accrued professional fees | 1,019 | 928 | |||||
Unearned revenue | 3,710 | 1,343 | |||||
Contingent consideration on acquired businesses | 4,440 | 388 | |||||
Accrued restructuring | 666 | 1,656 | |||||
Other | 2,270 | 2,113 | |||||
Total current liabilities | 30,494 | 17,980 | |||||
Income taxes payable | 699 | 877 | |||||
Deferred tax liabilities | 422 | 534 | |||||
Contingent consideration on acquired businesses | 4,581 | 6,000 | |||||
Other non-current liabilities | 608 | 654 | |||||
Total liabilities | 36,804 | 26,045 | |||||
Total stockholders’ equity | 323,422 | 319,144 | |||||
Total liabilities and stockholders’ equity | $ | 360,226 | $ | 345,189 |
Digi International Reports Third Fiscal Quarter 2018 Results |
Nine months ended June 30, | |||||||
2018 | 2017 | ||||||
Operating activities: | |||||||
Net (loss) income | $ | (2,305 | ) | $ | 5,023 | ||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | |||||||
Depreciation of property, equipment and improvements | 2,140 | 2,187 | |||||
Amortization of identifiable intangible assets | 6,866 | 1,842 | |||||
Stock-based compensation | 3,598 | 3,502 | |||||
Excess tax benefits from stock-based compensation | — | (326 | ) | ||||
Deferred income tax provision | 2,551 | (648 | ) | ||||
Change in fair value of contingent consideration | 332 | (1,330 | ) | ||||
Bad debt/product return provision | 404 | 338 | |||||
Inventory obsolescence | 1,550 | 1,030 | |||||
Restructuring charges | 190 | 2,515 | |||||
Other | (65 | ) | 138 | ||||
Changes in operating assets and liabilities (net of acquisitions) | (24,105 | ) | (14,729 | ) | |||
Net cash used in operating activities | (8,844 | ) | (458 | ) | |||
Investing activities: | |||||||
Purchase of marketable securities | — | (33,469 | ) | ||||
Proceeds from maturities and sales of marketable securities | 29,752 | 76,149 | |||||
Proceeds from sale of Etherios | 2,000 | 3,000 | |||||
Acquisition of businesses, net of cash acquired | (56,588 | ) | (30,111 | ) | |||
Purchase of property, equipment, improvements and certain other identifiable intangible assets | (963 | ) | (1,577 | ) | |||
Net cash (used in) provided by investing activities | (25,799 | ) | 13,992 | ||||
Financing activities: | |||||||
Acquisition earn-out payments | — | (518 | ) | ||||
Excess tax benefits from stock-based compensation | — | 326 | |||||
Proceeds from stock option plan transactions | 3,871 | 3,264 | |||||
Proceeds from employee stock purchase plan transactions | 892 | 686 | |||||
Purchases of common stock | (730 | ) | (922 | ) | |||
Net cash provided by financing activities | 4,033 | 2,836 | |||||
Effect of exchange rate changes on cash and cash equivalents | 82 | (45 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (30,528 | ) | 16,325 | ||||
Cash and cash equivalents, beginning of period | 78,222 | 75,727 | |||||
Cash and cash equivalents, end of period | $ | 47,694 | $ | 92,052 | |||
Supplemental schedule of non-cash investing and financing activities: | |||||||
Liability related to acquisition of business | $ | (2,300 | ) | $ | (1,310 | ) |
Digi International Reports Third Fiscal Quarter 2018 Results |
Three months ended June 30, | Nine months ended June 30, | ||||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||||||
Net income (loss) and net income (loss) per diluted share | $ | 2,621 | $ | 0.09 | $ | 1,335 | $ | 0.05 | $ | (2,305 | ) | $ | (0.09 | ) | $ | 5,023 | $ | 0.19 | |||||||||||||
Restructuring reserve | 190 | 0.01 | 2,515 | 0.09 | 190 | 0.01 | 2,515 | 0.09 | |||||||||||||||||||||||
Tax effect from restructuring reserve | (67 | ) | — | (880 | ) | (0.03 | ) | (47 | ) | — | (880 | ) | (0.03 | ) | |||||||||||||||||
Discrete tax expense (benefits) (1) | 71 | — | (694 | ) | (0.03 | ) | 3,027 | 0.11 | (789 | ) | (0.03 | ) | |||||||||||||||||||
Adjusted net income and adjusted net income per diluted share (2) | $ | 2,815 | $ | 0.10 | $ | 2,276 | $ | 0.08 | $ | 865 | $ | 0.03 | $ | 5,869 | $ | 0.22 | |||||||||||||||
Diluted weighted average common shares | 27,764 | 26,956 | 27,002 | 27,110 |
(1) | Discrete tax expense (benefits) includes one-time adjustments for the re-measurement of deferred tax assets and adoption of ASU 2016-09 relating to the accounting for the tax effects of stock compensation. This was partially offset by reversals of tax reserves due to the expiration of statutes of limitation and certain tax credits in the U.S. |
(2) | Adjusted net income per diluted share may not add due to the use of rounded numbers. |
Three months ended June 30, | Nine months ended June 30, | ||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
% of total revenue | % of total revenue | % of total revenue | % of total revenue | ||||||||||||||||||||||||
Total revenue | $ | 62,716 | 100.0 | % | $ | 45,739 | 100.0 | % | $ | 162,704 | 100.0 | % | $ | 136,529 | 100.0 | % | |||||||||||
Net income (loss) | $ | 2,621 | $ | 1,335 | $ | (2,305 | ) | $ | 5,023 | ||||||||||||||||||
Interest income, net | (92 | ) | (153 | ) | (331 | ) | (389 | ) | |||||||||||||||||||
Income tax provision | 43 | (694 | ) | 3,016 | 219 | ||||||||||||||||||||||
Depreciation and amortization | 3,313 | 1,639 | 9,006 | 4,029 | |||||||||||||||||||||||
Stock-based compensation | 1,220 | 1,174 | 3,598 | 3,502 | |||||||||||||||||||||||
Restructuring charges, net | 190 | 2,515 | 190 | 2,515 | |||||||||||||||||||||||
Acquisition expense | 13 | (192 | ) | 1,763 | 1,606 | ||||||||||||||||||||||
Adjusted EBITDA | $ | 7,308 | 11.7 | % | $ | 5,624 | 12.3 | % | $ | 14,937 | 9.2 | % | $ | 16,505 | 12.1 | % | |||||||||||
Adjusted EBITDA per diluted share | $ | 0.26 | $ | 0.21 | $ | 0.55 | $ | 0.61 | |||||||||||||||||||
Diluted weighted average common shares | 27,764 | 26,956 | 27,002 | 27,110 |
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