EX-99.(B) 3 c26168exv99wxby.htm PRESS RELEASE exv99wxby
 

EXHIBIT 99B
(DIGI LOGO)
Digi International Reports Second Fiscal Quarter 2008 Results
Strong International Revenue Growth Offsets Weakness in the Americas
(Minneapolis, MN, April 28, 2008) — Digi International® Inc. (NASDAQ: DGII, http://www.digi.com) reported revenue of $43.1 million for the second fiscal quarter of 2008, compared with $42.9 million for the second fiscal quarter of 2007, an increase of $0.2 million, or 0.5%. Revenue in the Americas was $26.5 million in the second fiscal quarter of 2008 compared to $28.8 million in the second fiscal quarter of 2007, a decrease of $2.3 million, or 8.2%. Revenue in Europe was $12.6 million in the second fiscal quarter of 2008 compared to $10.8 million in the comparable quarter a year ago, an increase of $1.8 million, or 17.1%. Revenue in the Asia Pacific region was $4.0 million in the second fiscal quarter of 2008 compared to $3.3 million in the second fiscal quarter of 2007, an increase of $0.7 million, or 22.8%.
“Strong international growth has served to offset the Americas’ weakness,” said Joe Dunsmore, Digi’s Chief Executive Officer. “While the economic slowdown in the U.S. has dampened overall growth, Digi is positioned very well to emerge from it in a strengthened competitive position.”
Revenue from embedded products in the second fiscal quarter of 2008 was $21.7 million, compared to $18.4 million in the second fiscal quarter of 2007, an increase of $3.3 million, or 17.9%. Revenue from non-embedded products was $21.4 million in the second fiscal quarter of 2008, compared to $24.5 million in the second fiscal quarter of 2007, a decrease of $3.1 million, or 12.6%.
The gross profit margin was $23.2 million, or 53.8% for the second fiscal quarter of 2008 compared to $22.5 million, or 52.5% for the second fiscal quarter of 2007, an increase of $0.7 million. The gross profit margin was higher than the comparable quarter a year ago by 1.3 percentage points, primarily due to product and mix changes within both the embedded and non-embedded product groups and a decrease in amortization of purchased and core technology. Amortization of purchased and core technology decreased by $0.2 million in the second fiscal quarter of 2008 compared to

 


 

Digi International Reports Second Fiscal Quarter 2008 Results
the same quarter a year ago, and accounted for a 0.5 percentage point increase in gross profit margin.
Total operating expenses in the second fiscal quarter of 2008 were $19.5 million, or 45.3% of revenue, compared to $17.8 million, or 41.5% of revenue, in the second fiscal quarter of 2007. Operating expenses were higher in the second fiscal quarter of 2008 compared to the comparable quarter a year ago primarily as a result of incremental headcount resulting in increased compensation-related sales and marketing and research and development expenses, as well as increased expenses resulting from continuing investments in the Drop-In Networking initiative and international expansion.
Digi reported operating income of $3.7 million, or 8.5% of net sales, in the second fiscal quarter of 2008 compared to $4.7 million, or 11.0% of net sales, in the second fiscal quarter of 2007.
Net income was $3.1 million in the second fiscal quarter of 2008, or $0.12 per diluted share, compared to $3.6 million in the second fiscal quarter of 2007, or $0.14 per diluted share.
For the six months ended March 31, 2008, Digi reported revenue of $87.6 million compared to revenue of $84.7 million for the six months ended March 31, 2007, an increase of $2.9 million, or 3.5%. Revenue in the Americas was $55.3 million in the first six months of fiscal 2008 compared to $58.4 million in the same period a year ago, a decrease of $3.1 million, or 5.2%. Revenue in Europe was $23.8 million for the first six months of fiscal 2008 compared to $19.6 million in the comparable period a year ago, an increase of $4.2 million, or 21.1%. Revenue in the Asia Pacific region was $8.5 million in the first six months of fiscal 2008 compared to $6.7 million in the first six months of fiscal 2007, an increase of $1.8 million, or 28.3%.
Revenue from embedded products in the first six months of fiscal 2008 was $42.4 million, compared to $35.1 million in the first six months of fiscal 2007, an increase of $7.3 million, or 21.0%. Revenue from non-embedded products was $45.2 million in the first six months of 2008, compared to $49.6 million in the comparable period in 2007, a decrease of $4.4 million, or 8.9%.
For the six months ended March 31, 2008, Digi reported net income of $6.8 million, or $0.26 per diluted share, compared to net income for the six months ended March 31, 2007 of $7.4 million, or $0.28 per diluted share. Net income benefited by $0.5 million, or $0.02 per diluted share, during the first six months of fiscal 2007 as a result of a retroactive benefit from the extension of the research and development credit.
Digi’s cash and cash equivalents and marketable securities balance, including long-term marketable securities, was $100.8 million at March 31, 2008, an increase of $13.2 million over the cash and cash equivalents and marketable securities balance at September 30, 2007, which includes 4.5 million Euros, or approximately $7.0 million,

 


 

Digi International Reports Second Fiscal Quarter 2008 Results
received from the sale of the building in Dortmund, Germany in March 2008. At March 31, 2008, Digi’s current ratio was 7.3 to 1, and the Company had no debt other than capital lease obligations.
Second Fiscal Quarter 2008 Business Highlights:
Digi continues to expand its wireless Drop-in Networking product family, with several announcements:
    Digi extended its line of Drop-in Networking gateways with the launch of the ConnectPort X2 and ConnectPort X4. Gateways connect local area wireless networks such as ZigBee, 802.15.4, and 900 MHz, with IP networks. These IP networks can be Ethernet, Wi-Fi, or public cellular networks. With the previously launched ConnectPort X8, Digi now has basic, cellular cost optimized, and full featured gateways to meet virtually any Drop-in Networking application.
 
    Digi introduced the XBee-PRO ZNet 2.5, an extended-range wireless RF module designed for ZigBee mesh networking. With up to one mile line of sight range, ZigBee mesh networking can now be used for applications where there is a greater distance between nodes like automated meter reading, asset management and remote sensor management.
 
    With the Digi Connect WAN 3G, Digi launched an upgradeable third generation (3G) Wireless WAN router for primary and backup connectivity to remote sites and devices. The Digi Connect® WAN 3G targets simple Ethernet to high-speed cellular requirements and adds a cost optimized, high-speed solution to Digi’s industry leading line of cellular routers.
 
    Digi introduced the Digi Connect® WAN GPRS, a second generation (2G), commercial grade cellular router. It is ideal for applications requiring modem-like connection speeds of up to 40 kbps such as remote asset monitoring, meter reading, vehicle tracking, security and many more.
Other launches included the following:
    Digi introduced the Digi Wi-Point 3G, a PC card based 3G cellular router with integrated Wi-Fi access point. The device works with more cellular PC data cards than any other cellular router; enabling Internet connectivity virtually anywhere a cellular signal is available.
 
    Digi launched the industry’s first flexible Ethernet networking module, the ConnectCore™ 9P 9215. Customers can tailor the interfaces on this module for the specific needs of an application.

 


 

Digi International Reports Second Fiscal Quarter 2008 Results
    Digi introduced the Digi ShowBox, a stand-alone presentation player for tradeshow exhibits, information displays, mobile workforce presentations or any other electronic exhibit.
Revised Guidance
Digi is revising its guidance for fiscal year 2008 as a result of the impact of the economic slowdown in the U.S., primarily due to weakness in revenue generated in North America, and the acquisition of Sarian Systems which was announced today in a concurrent press release. For the full fiscal year, Digi forecasts 2008 revenue to be in a range of $180 million to $192 million, or an increase over fiscal 2007 revenue of 4% to 11%. Fiscal 2008 revenue guidance includes estimated revenue from Sarian Systems from date of acquisition of approximately $6 to $8 million. Digi expects earnings per diluted share for fiscal 2008 to be in a range of $0.38 to $0.52, which includes estimated in-process research and development and other expenses totaling $0.08 to $0.10 associated with the acquisition of Sarian Systems as of April 28, 2008. Fiscal 2008 earnings per diluted share are expected to be in a range of $0.46 to $0.62, excluding estimated in-process research and development and other acquisition-related expenses. Digi anticipates that organic revenue growth rates will return to an estimated range of 10 — 20% when the North American economy returns to normal GDP growth.
Below is a reconciliation of our reported earnings per diluted share guidance to the guidance excluding estimated in-process research and development and other acquisition-related expenses:
Reconciliation of Reported Diluted Earnings per Share Guidance for Fiscal 2008 to
Diluted Earnings per Share, Excluding Estimated In-Process Research and Development and other Acquisition-Related Expenses
                 
    FY 2008 - Estimated Range  
    for EPS Guidance  
    Low     High  
Reported diluted earnings per share anticipated for fiscal 2008
  $ 0.38     $ 0.52  
 
               
Estimated impact of in-process research and development and other acquisition-related expenses
    0.08       0.10  
 
           
Diluted earnings per share anticipated for fiscal 2008, excluding the impact of estimated in-process research and development and other acquisition-related expenses
  $ 0.46     $ 0.62  
 
           
Second Fiscal Quarter 2008 and Sarian Acquisition Conference Call Details
Digi invites all those interested in hearing management’s discussion of its quarter and the Sarian acquisition, on Monday, April 28, 2008 after market close at 5:00 p.m. EDT (4:00 p.m. CT), to join the call by dialing (800) 237-9752 and entering passcode 17264102. International participants may access the call by dialing (617) 847-8706 and entering passcode 17264102. A replay will be available two hours after the completion of the call, and for one week following the call, by dialing (888) 286-8010 for domestic participants or (617) 801-6888 for international participants and entering access code 44427522 when prompted. Participants may also access a live webcast of the conference call through the investor relations section of Digi’s website, www.digi.com.

 


 

Digi International Reports Second Fiscal Quarter 2008 Results
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 Company’s 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 Company’s reliance on distributors, delays in the Company’s product development efforts, uncertainty in consumer acceptance of the Company’s products, continued or increasing weakness in North America and developing weakness in other regions due to changes in economic conditions, and changes in the Company’s level of revenue or profitability. These and other risks, uncertainties and assumptions identified from time to time in the Company’s 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 Company’s 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 Company’s 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.
     
Digi International Contact
  Investors Contact
S. (Kris) Krishnan
  Erika Moran / Tom Caden
(952) 912-3125
  The Investor Relations Group
s_krishnan@digi.com
  New York, NY
212-825-3210

 


 

Digi International Reports Second Fiscal Quarter 2008 Results
Digi International Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
                                 
    Three months ended March 31,     Six months ended March 31,  
    2008     2007     2008     2007  
Net sales
  $ 43,070     $ 42,855     $ 87,644     $ 84,666  
Cost of sales (exclusive of amortization of purchased and core technology shown separately below)
    18,986       19,215       38,529       37,865  
Amortization of purchased and core technology
    907       1,129       2,043       2,277  
 
                       
Gross profit
    23,177       22,511       47,072       44,524  
 
                               
Operating expenses:
                               
Sales and marketing
    9,034       8,427       17,720       16,585  
Research and development
    6,529       6,068       13,118       12,040  
General and administrative
    3,364       2,644       6,717       5,555  
Intangibles amortization
    596       658       1,265       1,325  
 
                       
Total operating expenses
    19,523       17,797       38,820       35,505  
 
                       
 
                               
Operating income
    3,654       4,714       8,252       9,019  
Other income, net
    1,008       759       2,048       1,530  
 
                       
Income before income taxes
    4,662       5,473       10,300       10,549  
Income tax provision
    1,565       1,876       3,533       3,150  
 
                       
 
                               
Net income
  $ 3,097     $ 3,597     $ 6,767     $ 7,399  
 
                       
 
                               
Net income per common share, basic
  $ 0.12     $ 0.14     $ 0.26     $ 0.29  
 
                       
 
                               
Net income per common share, diluted
  $ 0.12     $ 0.14     $ 0.26     $ 0.28  
 
                       
 
                               
Weighted average common shares, basic
    25,714       25,186       25,666       25,131  
 
                       
 
                               
Weighted average common shares, diluted
    26,312       25,959       26,479       25,976  
 
                       

 


 

Digi International Reports Second Fiscal Quarter 2008 Results
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
                 
    March 31, 2008     September 30, 2007  
ASSETS
               
 
               
Current assets:
               
Cash and cash equivalents
  $ 27,135     $ 18,375  
Marketable securities
    58,020       67,111  
Accounts receivable, net
    25,344       21,022  
Inventories
    26,804       26,130  
Other
    4,769       4,961  
 
           
Total current assets
    142,072       137,599  
 
               
Marketable securities, long-term
    15,682       2,081  
Property, equipment and improvements, net
    15,472       19,987  
Identifiable intangible assets, net
    21,032       24,214  
Goodwill
    67,320       66,817  
Restricted cash — non-current
    421        
Other
    1,041       1,128  
 
           
 
               
Total assets
  $ 263,040     $ 251,826  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
 
               
Current liabilities:
               
Capital lease obligations, current portion
  $ 380     $ 379  
Accounts payable
    8,929       6,554  
Accrued compensation
    5,545       7,080  
Other accrued expenses
    4,101       4,727  
Income taxes payable
    468       3,156  
 
           
Total current liabilities
    19,423       21,896  
 
               
Capital lease obligations, net of current portion
    179       358  
Net deferred tax liabilities
    4,648       6,667  
Income taxes payable — long-term
    3,990        
Deferred gain on building sale — leaseback
    1,194        
      -
 
               
Total liabilities
    29,434       28,921  
 
               
Total stockholders’ equity
    233,606       222,905  
 
           
 
               
Total liabilities and stockholders’ equity
  $ 263,040     $ 251,826  
 
           

 


 

Digi International Reports Second Fiscal Quarter 2008 Results
Digi International Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
                 
    Three months ended     Six months ended  
    March 31, 2008     March 31, 2008  
Operating activities:
               
Net income
  $ 3,097     $ 6,767  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation of property, equipment and improvements
    692       1,293  
Amortization of identifiable intangible assets and other assets
    1,603       3,499  
Gain on sale of property, equipment and improvements
    (120 )     (120 )
Excess tax benefits from stock-based compensation
    (36 )     (165 )
Stock-based compensation
    904       1,776  
Deferred income taxes
    (685 )     (1,920 )
Other
    (10 )     152  
Changes in operating assets and liabilities:
               
Accounts receivable
    (4,216 )     (3,549 )
Inventories
    (132 )     (752 )
Other assets
    (67 )     237  
Accounts payable and accrued expenses
    5,127       978  
Income taxes payable
    (1,281 )     697  
 
           
 
               
Net cash provided by operating activities
    4,876       8,893  
 
           
 
               
Investing activities:
               
Purchase of held-to-maturity marketable securities
    (27,855 )     (51,691 )
Proceeds from maturities of held-to-maturity marketable securities
    27,262       47,181  
Contingent purchase price payments related to business acquisitions
          (1,315 )
Increase in restricted cash — non-current
    (392 )     (392 )
Proceeds from the sale of property, equipment, improvements
    6,954       6,954  
Purchase of property, equipment, improvements and certain other intangible assets
    (731 )     (1,908 )
 
           
 
               
Net cash provided by (used in) investing activities
    5,238       (1,171 )
 
           
 
               
Financing activities:
               
 
               
Payments on capital lease obligations and long-term debt
    (86 )     (188 )
Excess tax benefits from stock-based compensation
    36       165  
Proceeds from stock option plan transactions
    412       1,636  
Proceeds from employee stock purchase plan transactions
          348  
 
           
 
               
Net cash provided by financing activities
    362       1,961  
 
               
Effect of exchange rate changes on cash and cash equivalents
    (1,119 )     (923 )
 
           
 
               
Net increase in cash and cash equivalents
    9,357       8,760  
 
               
Cash and cash equivalents, beginning of period
    17,778       18,375  
 
           
 
               
Cash and cash equivalents, end of period
  $ 27,135     $ 27,135