|By Business Wire||
|January 23, 2014 04:06 PM EST||
Digi International® Inc. (NASDAQ: DGII, www.digi.com) reported revenue of $47.3 million for the first fiscal quarter of 2014, compared with $47.0 million for the first fiscal quarter of 2013, an increase of $0.3 million, or 0.7%. Net income for the first fiscal quarter of 2014 was $0.7 million, or $0.03 per diluted share, compared to $1.2 million, or $0.05 per diluted share, in the prior year comparable quarter. Revenue for the first fiscal quarter of 2013 included only two months of revenue from CRM services of our Etherios division, which was acquired on October 31, 2012.
First fiscal quarter 2014 revenue and earnings per diluted share were below management’s guidance for the quarter. Revenue and gross margin performance were less than anticipated in both products and services. Product revenue was lower than anticipated primarily due to delays in purchases from certain customers that were expected during the quarter. Service revenue, while posting solid year-over-year growth compared to the first fiscal quarter of 2013, was lower than anticipated primarily due to work interruptions in two customer projects.
“Company revenue did not meet expectations due to some customer push-outs," said Joe Dunsmore, Chairman and Chief Executive Officer. "Growth products and services increased 5.9% over the prior year highlighted by strength in our cellular product line. We remain excited about our long-term prospects in the Internet of Things marketplace."
Business Results for the Three Months Ended December 31, 2013
Product net sales for the first fiscal quarter of 2014 were $42.0 million, compared to product net sales of $43.0 million for the first fiscal quarter of 2013, a decrease of $1.0 million, or 2.4%. Revenue from growth hardware products in the first fiscal quarter of 2014 was $22.1 million, compared to $21.9 million in the first fiscal quarter of 2013, an increase of $0.2 million, or 0.7%. Revenue from mature hardware products was $19.9 million in the first fiscal quarter of 2014, compared to $21.1 million in the first fiscal quarter of 2013, a decrease of $1.2 million, or 5.7%.
Revenue from our service offerings, which are part of our growth portfolio, was $5.3 million in the first quarter of fiscal 2014, compared to $4.0 million in the year ago comparable quarter, an increase of $1.3 million, or 35.1%.
Revenue in North America was $29.4 million in the first fiscal quarter of 2014, compared to $27.0 million in the first fiscal quarter of 2013, an increase of $2.4 million, or 9.0%. Revenue in EMEA (Europe, Middle East and Africa) was $11.6 million in the first fiscal quarter of 2014, compared to $12.0 million in the comparable quarter a year ago, a decrease of $0.4 million, or 3.2%. Revenue in the Asia Pacific region was $5.1 million in the first fiscal quarter of 2014, compared to $6.5 million in the first fiscal quarter of 2013, a decrease of $1.4 million, or 21.9%. Latin American revenue was $1.2 million in the first fiscal quarter of 2014, compared to $1.5 million in the comparable quarter a year ago, a decrease of $0.3 million, or 19.7%.
Gross profit was $22.9 million in the first fiscal quarter of 2014, compared to $24.5 million in the same period of the prior year, a decrease of $1.6 million. The gross margin was 48.4% in the first fiscal quarter of 2014, compared to 52.1% in the first fiscal quarter of 2013. The gross margin was lower in the first fiscal quarter of 2014 than in the comparable period a year ago, primarily due to lower gross margins from services net sales, as well as other unfavorable product mix. The decrease in gross margins from services was primarily related to lower than anticipated CRM services revenue and a resulting underutilization of consulting labor that had been retained for the expected demand for these services.
Total operating expenses in the first fiscal quarter of 2014 were $22.3 million, or 47.1% of revenue, compared to $22.8 million, or 48.6% of revenue, in the first fiscal quarter of 2013. The decrease in operating expenses in the first fiscal quarter of 2014 compared to the same quarter of the prior year primarily is due to cost containment measures that were put in place to achieve targeted expense levels.
Net income was $0.7 million in the first fiscal quarter of 2014, or $0.03 per diluted share, compared to $1.2 million, or $0.05 per diluted share, in the first fiscal quarter of 2013. Net income in the first fiscal quarter of 2014 included a tax benefit of $0.2 million, or $0.01 per diluted share, resulting from the reversal of tax reserves for the expiration of the statutes of limitation for various U.S. jurisdictions. Net income in the first fiscal quarter of 2013 included a tax benefit of $0.1 million, or $0.01 per diluted share, resulting from the reversal of tax reserves for the expiration of the statutes of limitation for various U.S. and foreign jurisdictions.
Earnings before interest, taxes, depreciation and amortization in the first fiscal quarter of 2014 were $2.6 million, or 5.4% of net sales, compared to $3.7 million, or 7.9% of net sales in the first fiscal quarter of 2013.
Digi’s cash and cash equivalents and marketable securities balance, including long-term marketable securities, was $107.8 million at December 31, 2013, an increase of $2.1 million over the comparable balance at September 30, 2013. Please refer to the Condensed Consolidated Statements of Cash Flows that are included in this earnings release for additional cash flow details. At December 31, 2013, Digi’s current ratio was 7.8 to 1 compared to 7.0 to 1 at September 30, 2013.
First Fiscal Quarter 2014 Business Highlights:
- In November 2013, Digi International welcomed Jeff Liebl to the executive leadership team as Chief Marketing Officer. A Silicon Valley veteran, Mr. Liebl brings 20 years of B2B marketing leadership experience and a track record of growing high-technology companies. His diverse industry background includes working with corporations across enterprise networking, wireless telecommunications hardware and software, predictive analytics and cloud-based software as a service.
- Digi/Etherios had a significant presence at Dreamforce, held in San Francisco on November 18 - 21. Organized by Salesforce.com, Dreamforce is the biggest cloud computing event of the year, where 120,000 participants gathered. In addition, Etherios successfully deployed a Twitter-connected Internet of Things web application during the conference. The conference shuttle bus tracker application was incorporated directly in the official Dreamforce Mobile app, which allowed attendees to create customized routes to and from the show, view conference shuttle arrival times, track shuttle locations in real-time, and even interact with the “chatty” shuttles themselves on Twitter. The project showed attendees a real-world example of what’s possible when you make machines more intelligent, connect them to each other and the cloud, and give them a way to communicate.
First Fiscal Quarter 2014 Growth Product Wins
- The Port Authority of Allegheny County will use our TransPort® WR21 cellular router for computer-aided dispatch and automatic vehicle location on transit buses for the greater Pittsburgh area.
- CEIVA Energy offers utility companies a way to engage with their customers by delivering energy information directly into their lives in a meaningful way. Their flagship product, the CEIVA Homeview, has integrated our ZigBee SE into a display that shows energy usage by gathering data from a ZigBee SE meter. CEIVA Homeview’s mobile apps also deliver remote home monitoring and control. This combined with Entryway’s residential demand response system and CEIVA’s award winning Picture Management service deliver an end-to-end solution for utilities.
- LumiGrow, the leading provider of smart horticultural lighting solutions, services 1,200+ commercial and institutional installations and has developed a smart light control system, SmartPar, to optimize plant growth in greenhouses with our XBee-PRO® ZB Zigbee wireless communication modules.
- Leadership in the cell tower monitoring space has created opportunities in adjacent markets including tower obstruction lighting, tower generator power management and monitoring and tower premise security. International Tower Lighting, LLC (www.itl-llc.com) selected the Digi TransPort® WR21 cellular router for their ITL Tower Light Monitoring Systems.
Digi International Product Releases
- Wireless Vehicle Adaptor (WVA) - Digi International launched the Wireless Vehicle Bus Adapter (WVA), a plug-in device that drives the next generation of vehicle telematics by providing easy access to vehicle data via Wi-Fi and web services. The low-cost solution utilizes the technology of the driver’s smart-phone or tablet applications to create a complete Commercial Vehicle Telematics platform. The WVA installs in minutes by connecting directly into the diagnostic port of the vehicle.
- XBee® Wi-Fi Cloud Kit Brings the Internet of Things to Everyone - The XBee Wi-Fi Cloud Kit enables anyone to build, connect and control their own Internet of Things. Built around Digi’s new XBee Wi-Fi module, which wirelessly connects devices to the cloud, the kit integrates with Device Cloud by Etherios™ using a sample internet-based application, and includes a new development board with sensors, actuators, a USB cable and a variety of electronic prototyping parts for creating custom circuits. Recognized as one of the fastest and easiest ways to explore and develop devices and circuits that connect to the Internet of Things, the kit won an Editor’s Choice ribbon at World Maker Faire New York.
- Digi Connect® Tank - In November, Digi International launched Digi Connect Tank, a cost-effective solution for wireless monitoring and control of single remote tanks. The fully integrated, cellular-enabled remote tank-level monitoring solution for single tanks, totes and containers, helps companies manage assets efficiently and cost-effectively through up-to-the-minute tank level and location data. Automated tank data and real-time monitoring and analytics reduce the cost of manual inspections and tighten supply chain.
Reconciliation of Net Income to Earnings Before Interest, Taxes, Depreciation and Amortization
(In thousands of dollars)
|Three months ended December 31,|
% of net
% of net
|Interest income, net||(43||)||(0.1||)%||(52||)||(0.1||)%|
|Income tax provision||76||0.2||%||618||1.3||%|
|Depreciation and amortization||1,849||3.9||%||1,919||4.1||%|
|Earnings before interest, taxes, depreciation and amortization*||$||2,570||5.4||%||$||3,715||7.9||%|
*Percentages presented may not add due to use of rounded numbers.
For the second fiscal quarter of 2014, Digi projects revenue in a range of $45 million to $48 million with a most likely revenue of approximately $46 million. Digi projects net income per diluted share to be in a range of $0.00 to $0.03 for the second fiscal quarter of 2014. For fiscal 2014, Digi now projects annual revenue in a range of $195 million to $205 million with a most likely annual revenue of approximately $198 million. Digi now projects annual net income per diluted share to be in a range of $0.19 to $0.31. This update in annual guidance primarily is driven by a reduction in forecasted product purchases from certain customers. In addition, while we expect services to deliver solid year-over-year growth, Digi now projects this growth to be lower than previously forecasted.
First Fiscal Quarter 2014 Conference Call Details
Digi invites all those interested in hearing management's discussion of its quarter, on Thursday, January 23, 2014 after market close at 5:00 p.m. EST (4:00 p.m. CST), to join the call by dialing (866) 515-2913 and entering passcode 40442045. International participants may access the call by dialing (617) 399-5127 and entering passcode 40442045. 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 59503607 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. The webcast will remain on our website for one week after the live session is completed.
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.
About Digi International
Digi International is the M2M solutions expert, combining products and services as end-to-end solutions to drive business efficiencies. Digi provides 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).
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, anticipated product usage by customers, 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 ongoing shift of our sales efforts to focus more on the delivery of broader based solutions which can be a more complex sales process, has not been a historical sales focus of our company and can involve longer sales cycles than the sale of our legacy hardware 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, 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, 2013 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 earnings before interest, taxes, depreciation and amortization (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, 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 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.
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. We believe that the presentation of EBITDA as a percentage of net sales 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 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.
Digi International Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
|Three months ended December 31,|
|Total net sales||47,322||46,991|
|Cost of sales:|
|Cost of product||20,263||20,126|
|Cost of service||4,151||2,386|
|Total cost of sales||24,414||22,512|
|Sales and marketing||10,219||10,274|
|Research and development||7,257||7,417|
|General and administrative||4,723||5,116|
|Restructuring charges, net||81||—|
|Total operating expenses||22,280||22,807|
|Other income, net:|
|Other income, net||93||124|
|Total other income, net||136||176|
|Income before income taxes||764||1,848|
|Income tax provision||76||618|
|Net income per common share:|
|Weighted average common shares:|
Digi International Inc.
Condensed Consolidated Statements of Comprehensive Income
|Three months ended December 31,|
|Other comprehensive income (loss), net of tax:|
|Foreign currency translation adjustment||343||(289||)|
|Change in net unrealized gain on investments||38||2|
|Less income tax provision||(15||)||(1||)|
|Other comprehensive income (loss), net of tax||366||(288||)|
Digi International Inc.
Condensed Consolidated Balance Sheets
|Cash and cash equivalents||$||50,470||$||41,320|
|Accounts receivable, net||23,788||26,829|
|Deferred tax assets||3,499||3,174|
|Total current assets||160,727||149,304|
|Marketable securities, long-term||9,983||17,389|
|Property, equipment and improvements, net||13,866||13,910|
|Identifiable intangible assets, net||9,050||9,728|
|Deferred tax assets||5,954||5,832|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Total current liabilities||20,699||21,290|
|Income taxes payable||3,625||3,903|
|Deferred tax liabilities||376||415|
|Other noncurrent liabilities||114||79|
|Total stockholders’ equity||278,928||274,266|
|Total liabilities and stockholders’ equity||$||303,742||$||299,953|
Digi International Inc.
Condensed Consolidated Statements of Cash Flows
Three months ended
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation of property, equipment and improvements||897||848|
|Amortization of identifiable intangible assets||952||1,071|
|Excess tax benefits from stock-based compensation||(20||)||(28||)|
|Deferred income tax benefit||(506||)||(542||)|
|Bad debt/product return provision||22||221|
|Restructuring charges, net||81||—|
|Changes in operating assets and liabilities (net of acquisition)||(3,805||)||(1,755||)|
|Net cash (used in) provided by operating activities||(337||)||2,288|
|Purchase of marketable securities||—||(9,873||)|
|Proceeds from maturities of marketable securities||7,109||17,473|
|Acquisition of business, net of cash acquired||—||(12,919||)|
Purchase of property, equipment, improvements and certain
other intangible assets
|Net cash provided by (used in) investing activities||6,134||(6,746||)|
|Excess tax benefits from stock-based compensation||20||28|
|Proceeds from stock option plan transactions||2,813||169|
|Proceeds from employee stock purchase plan transactions||296||248|
|Purchases of common stock||—||(4,226||)|
|Net cash provided by (used in) financing activities||3,129||(3,781||)|
|Effect of exchange rate changes on cash and cash equivalents||224||3|
|Net increase (decrease) in cash and cash equivalents||9,150||(8,236||)|
|Cash and cash equivalents, beginning of period||41,320||60,246|
|Cash and cash equivalents, end of period||$||50,470||$||52,010|
|Supplemental schedule of non-cash investing activities:|
|Issuance of common stock for business acquisition||$||—||$||6,804|
In his General Session at 17th Cloud Expo, Bruce Swann, Senior Product Marketing Manager for Adobe Campaign, explored the key ingredients of cross-channel marketing in a digital world. Learn how the Adobe Marketing Cloud can help marketers embrace opportunities for personalized, relevant and real-time customer engagement across offline (direct mail, point of sale, call center) and digital (email, website, SMS, mobile apps, social networks, connected objects).
Nov. 29, 2015 11:45 AM EST Reads: 319
The buzz continues for cloud, data analytics and the Internet of Things (IoT) and their collective impact across all industries. But a new conversation is emerging - how do companies use industry disruption and technology enablers to lead in markets undergoing change, uncertainty and ambiguity? Organizations of all sizes need to evolve and transform, often under massive pressure, as industry lines blur and merge and traditional business models are assaulted and turned upside down. In this new da...
Nov. 29, 2015 11:30 AM EST Reads: 268
In recent years, at least 40% of companies using cloud applications have experienced data loss. One of the best prevention against cloud data loss is backing up your cloud data. In his General Session at 17th Cloud Expo, Sam McIntyre, Partner Enablement Specialist at eFolder, presented how organizations can use eFolder Cloudfinder to automate backups of cloud application data. He also demonstrated how easy it is to search and restore cloud application data using Cloudfinder.
Nov. 29, 2015 10:00 AM EST Reads: 198
The Internet of Everything is re-shaping technology trends–moving away from “request/response” architecture to an “always-on” Streaming Web where data is in constant motion and secure, reliable communication is an absolute necessity. As more and more THINGS go online, the challenges that developers will need to address will only increase exponentially. In his session at @ThingsExpo, Todd Greene, Founder & CEO of PubNub, exploreed the current state of IoT connectivity and review key trends and t...
Nov. 29, 2015 09:45 AM EST Reads: 449
Two weeks ago (November 3-5), I attended the Cloud Expo Silicon Valley as a speaker, where I presented on the security and privacy due diligence requirements for cloud solutions. Cloud security is a topical issue for every CIO, CISO, and technology buyer. Decision-makers are always looking for insights on how to mitigate the security risks of implementing and using cloud solutions. Based on the presentation topics covered at the conference, as well as the general discussions heard between sessi...
Nov. 29, 2015 09:15 AM EST Reads: 341
We all know that data growth is exploding and storage budgets are shrinking. Instead of showing you charts on about how much data there is, in his General Session at 17th Cloud Expo, Scott Cleland, Senior Director of Product Marketing at HGST, showed how to capture all of your data in one place. After you have your data under control, you can then analyze it in one place, saving time and resources.
Nov. 29, 2015 08:45 AM EST Reads: 212
With all the incredible momentum behind the Internet of Things (IoT) industry, it is easy to forget that not a single CEO wakes up and wonders if “my IoT is broken.” What they wonder is if they are making the right decisions to do all they can to increase revenue, decrease costs, and improve customer experience – effectively the same challenges they have always had in growing their business. The exciting thing about the IoT industry is now these decisions can be better, faster, and smarter. Now ...
Nov. 29, 2015 08:00 AM EST Reads: 267
The cloud. Like a comic book superhero, there seems to be no problem it can’t fix or cost it can’t slash. Yet making the transition is not always easy and production environments are still largely on premise. Taking some practical and sensible steps to reduce risk can also help provide a basis for a successful cloud transition. A plethora of surveys from the likes of IDG and Gartner show that more than 70 percent of enterprises have deployed at least one or more cloud application or workload. Y...
Nov. 29, 2015 07:00 AM EST Reads: 496
Continuous processes around the development and deployment of applications are both impacted by -- and a benefit to -- the Internet of Things trend. To help better understand the relationship between DevOps and a plethora of new end-devices and data please welcome Gary Gruver, consultant, author and a former IT executive who has led many large-scale IT transformation projects, and John Jeremiah, Technology Evangelist at Hewlett Packard Enterprise (HPE), on Twitter at @j_jeremiah. The discussion...
Nov. 29, 2015 06:45 AM EST Reads: 741
Too often with compelling new technologies market participants become overly enamored with that attractiveness of the technology and neglect underlying business drivers. This tendency, what some call the “newest shiny object syndrome” is understandable given that virtually all of us are heavily engaged in technology. But it is also mistaken. Without concrete business cases driving its deployment, IoT, like many other technologies before it, will fade into obscurity.
Nov. 29, 2015 06:00 AM EST Reads: 375
Discussions of cloud computing have evolved in recent years from a focus on specific types of cloud, to a world of hybrid cloud, and to a world dominated by the APIs that make today's multi-cloud environments and hybrid clouds possible. In this Power Panel at 17th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists addressed the importance of customers being able to use the specific technologies they need, through environments and ecosystems that expose their APIs to make true ...
Nov. 29, 2015 06:00 AM EST Reads: 553
Microservices are a very exciting architectural approach that many organizations are looking to as a way to accelerate innovation. Microservices promise to allow teams to move away from monolithic "ball of mud" systems, but the reality is that, in the vast majority of organizations, different projects and technologies will continue to be developed at different speeds. How to handle the dependencies between these disparate systems with different iteration cycles? Consider the "canoncial problem"...
Nov. 29, 2015 05:00 AM EST Reads: 460
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound...
Nov. 29, 2015 04:30 AM EST Reads: 484
Container technology is shaping the future of DevOps and it’s also changing the way organizations think about application development. With the rise of mobile applications in the enterprise, businesses are abandoning year-long development cycles and embracing technologies that enable rapid development and continuous deployment of apps. In his session at DevOps Summit, Kurt Collins, Developer Evangelist at Built.io, examined how Docker has evolved into a highly effective tool for application del...
Nov. 29, 2015 04:00 AM EST Reads: 376
PubNub has announced the release of BLOCKS, a set of customizable microservices that give developers a simple way to add code and deploy features for realtime apps.PubNub BLOCKS executes business logic directly on the data streaming through PubNub’s network without splitting it off to an intermediary server controlled by the customer. This revolutionary approach streamlines app development, reduces endpoint-to-endpoint latency, and allows apps to better leverage the enormous scalability of PubNu...
Nov. 29, 2015 03:00 AM EST Reads: 338