DGII - Earnings call transcript Q4 2021

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Operator

Hank you for standing by. And welcome to the Digi International's Fourth Quarter and Fiscal Year 2021 Year End Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your host, Digi's SVP and CFO, Jamie Loch

James Loch

Thank you. thank XXXX joining XXXX fourth results Digi and discuss today year everyone, of fiscal the quarter International. afternoon, you us for to end Good and fiscal

and is our on and financial I the Konezny, call performance. his with business, today's follow of on will provide me our Joining President highlights CEO. will Ron thoughts Ron our

closed Following release shortly earnings We issued today. our our prepared remarks, we'll take the questions. market your after

We relation website or forward-looking of may update obligation this expectations section believe operating investor assurance statements You correct. date. future undertake will and statements and statements. about our a We no of statements met speak significant no the revise any prove These expectations forward-looking reasonable, or the copy call only to our publicly and risks forward-looking during our reflected digi.com in release to financial at financial are such that obtained be through statements considered are be make performance of subject the expectations will forward-looking of reflect to uncertainties. Some these give as our we today's we are that and

please and XXXX reports in statements the to earnings release with the of our file on today For forward-looking XX-K information, the additional section refer factors subsequent risk section our and SEC.

of the to Relations can information Finally, SEC is earnings certain to financial GAAP included website. be accessed an X-K also a comparable to required The about Investor The section form that includes in disclosed measures, release. this measures. information release in reconciliations filings most through disclosed measures non-GAAP earnings these our including exhibit be call the are

to turn the call Now Ron I will over

Ronald Konezny

of fiscal Internationals Jamie welcome fiscal and and end Thank Digi XXXX earnings call. year you, fourth to quarter

record earlier With we their recurring delivers combination digital jumpstart with growth Adidas. a design, Holdings Digi metrics. initiatives. more and and generation million eclipsed IDT, than technical double new fueled IoT growth of customers of first to the for We year Cardtronics year time, recurring are access gross been combined these year able to induced affordable excitement more finish of records. for Double our this implementation, future accomplish debt to our never network recurring capital, they XX% profitability Revenues and responsive new subscribers raise our accelerate as over with million. pandemic and with $XXX combination sites Digi model has service growth, cash margins Ventus. annual both through revenues. year of accelerating impeccable fueled challenges. revenues, fiscal growth, our the the to better managed generation high to Ventus with unique service leading several Digi addition combined expert like Leveraging uptime, equity and cash is lightning chain the on of potential approximately add $XX positioned of to our supply while has digit with value revenue profitability, all annualized these fighting further distinguished service XXX,XXX the all revenue thrilled successful customers goals, Ventus of a Ventus, revenue. over the by as and recurring acquired and We're

revenue family the supply as to with We further opportunities and Ventus and capture account welcome outstrip demand continues been expansion. chain quarters, to have international excited success as growth, chain and required. R&D our past has to clearly We well challenge opportunities. to biggest all multiple are The as our customer components to as forecasts, well team as cellular cooperation Ventus mapping, the Digi for ability supply secure few our router the

weathered first of arable year. Digi supply the In our half possible. further potential full operating the are to with I'm that of for ensure limit We XXXX. who chain fiscal model. anticipate customer to pressured the supply work costs, and transportation storms ease to our But privileged have this our addition best situation fiscal costs, things material increased met chain labor demands we're costs second could as our half for as seeing signs team

cellular Now a In X% from an each business product on few line. services, by modest and was of IoT last router segments. a in our moderated embedded lines growth infrastructure management drove in revenues This our council server decline year. comments over products and our product increase

new We results. leader experiencing router and positive have we are cellular a already

our propositions lead approach. parts, the to The mass business supply the lines We look some times and resources value mentioned of materials, with deployment in IoT to Record exon deal received us to increased Digi. by engage a an driven technologies and leveraging Chicago have and Year are take recently partners customer talented the lines channel collectively, Award to our Digi field XX for subscribers and forced and over Laura our customer better built IoT decision and cellular Ventus's Transit marketing recurring Authority, lighthouse We in segment as our placed have experiencing customers enhanced can with We XXXX our purchases from registrations for and backlog led server in the We for bookings embedded bill of the this of showing increased quarter components. to and rates engineering the console and end emphasizing IoT healthcare solutions and consistent existing each product role users to with verticals. million. recently software new and direct transit passed infrastructure the our in trust forward designs retail world ARR US renewals. partner This joined nearly increase targets platform product of is added the router service have channel update chain by now challenges portals centric by build and have stimulus further the [indiscernible] and of SmartSense launched work play earlier experience improvements. mountain revenues. our

We ended costs with year and interest management approximately are Rising the in account to growth. SmartSense strong and consolidation the over to strong subscribers powering increase which or of continued value ensure XX,XXX resources from subscribers digitization we of XX,XXX interface in and million fiscal total for X, continual a customer cloud success fuel destination year. services the ARR add additional of pipeline over retention. XX% grew XX opportunities our labor mobile and experience invested now XX% last We customer base. and

service, prioritizing transportation. opportunity The our to remain and is We positioned has well Greenfield customers innovation opportunity We care multibillion to value expand and and to add we focused health look significant more and are increase market dollar share. leadership implementations. key verticals growth food and as position capture our SmartSense our

completed, are our be our marks to XXXX capital and to heads open, acquisition stage Ventus and confidence team have the With growth. acquisition ability our offerings of my of acquisition tenure of we will down integration leverage newest the execution. leveraged in debt affordable acquisition year and ninth we nearly this similar of we and to Ventus collective XXXX seven the finance

will of model. eyes will cash target significant revenues. like XX% Digi XX% We granted. margins not set in high our ARR by on anything our adjusted digit XX% have will our margins. double but for operating we take combined And exceed gross EBITDA capital proven growth, model will The and new experience, we generate

pandemic continues, the team team, the I'm utmost be health of safety the Digi and leading to As happy importance. is our so

Jamie over While evolve, now to conditions stakeholders confident turn no resilience on will financial our call will Digi's how commitment I one the will detail performance. our knows for waver. I'm to and not more

James Loch

up in I'll per Gross EPS XX.X% of diluted share XX% basis, excluding Digi GAAP XX.X% start Growth $XX.X million [ph] with went to were share That XX% our represents set highlights XX. our plans is growth quarter up performance and the that a Thanks, XX the On ARR, for year, EBITDA the and financial million Ron. that year growth records revenue. diluted $X.XX or nearly continues for year in results for of our to Today was million revenue a was And $XX fourth $X.XX. X.X% our total to were and fourth quarter. million our And delivered million revenue non $X.XX. or We of EBITDA margins That which over with $XXX $XX.X XXX.X XXXX. for prior quarter which is and adjusted twice in just increase everyone. our the over and for the of margins quarter fiscal for in per end adjusted cash. the fiscal revenue for XX% the again, to XX.X% or fiscal fiscal for to you XXXX good million in over the annual EPS year. amortization an GAAP EPS contributed in of up XX%. year nearly afternoon key fiscal brings growth GAAP

quarter diluted to guidance. highlights, estimates the cash we exception. no per other of year. prior this beat EPS over goes in the is all and quarter, Revenue consensus consistently XX% adjusted EBITDA EPS Among all high $X.XX end ranges share, strong and from on Digi adjusted for in Our up the were provided adjusted our the has financial generated

$XXX.X operating cash for We the $XX.X which that future. cash value them is their - from type million This and cash expectation with ended added cash consistent to helping quarter our a of With in positive strong the we'll with and position of received cash net of $XXX.X the foreseeable fourth million our continue indicator customers of generate flow down year maintain fiscal to We on generation yearend. the XXXX. of of that in have we positive as missions million cash a Digi fiscal deliver went

the fiscal with accounting which do on deposition classified the million treatment classified leases at that what and the new as of $XX standard as long not million Our consider million. debt end books the These of $XX.X was figures of term. QX is on based of now $XX.X ending

and move finalizing syndication subsequent work year. provide of syndication the that deposition our outstanding retired we to at details our is facility fiscal the we the will up quarter of acquisition more once of acquisition complete. end was will benches and that credit replaced The the that [PH] As debt on the as

the in our debt the retirement structure and finalized, compliance provide We compliance an update. covenants are with new both [indiscernible] remained facilities of as in we is through

million $X.X items, our to quarter reserves. up end $XX.X sequentially the ARR with is material from our balance sheet million, changes no fiscal On last our position ending

our million over $XX.X and XXX channel to fiscal portfolio. quarter We regularly. X% our Our year quarter in over in fiscal $X.X driven Income the XX.X%. sequentially partially year, to the impact If segment is changes over our increased revenue ENO IoT material inventory our from console points $XX.X year ending services sequentially down ‘XX million, gross Year $X.X quarter. prior equal the products year levels $XX.X server margins performance, revenue million no million the for sales fourth in with an year down decreased and the purposes, into inventory animal favorable expenses, EBITDA revenue to and closely primarily year offset points reserves. not million move record operating increased Current to balances increase product million product costs customer attributable for to by increased challenges. last inventory driven margin over in margins an monitor full fourth adjusted million, $X.X to decreased This clock within $X.X product I by operating ’XX, and product quarter is to over to XXXX, fiscal from that channel partially of $XX.X was Operating primarily basis driven portfolios. driven and achieved in items purposes. the increased mix. X.X% year. in amount year previously of products a global and Gross The mentioned. income XX.X% the expenses supply all segment IoT year $X by increases including increased distribution basis nearly product partially services chain production by nearly due rate for by to increased due income million are operating back for annual portfolios increase added $XXX.X but year million Operating mix XXX and fiscal

margins gross decrease prior driven solutions X.X% over time services XXX million nearly time increased in XX.X% and $XX. $X one revenue subscription increase margins XXXX revenue partially year quarter, million revenue, fourth slight XX% fiscal products gross year to and to $X.X operating by points of increased the IoT Operating by $XX.X. by revenue. decreased income subscription over in The partially offset In of ARR a increased $X.X fiscal revenue. driven XX to both increased revenue year to year from XXXX X quarter one billion for to expenses. year basis solutions and year the Our loss The in the RG $XX.X the by revenue for was basis over and million. grew to in fiscal full increase in million fourth driven was increased year $XX.X. year points

invest We prior million support key of year continue the year in health loss ARR. $XX.X solutions to a The our million. business, solutions objectives fiscal solutions. compared the our full the the operating for The and for improved of IoT performance $X.X resulting and to $X.X measurements million over loss growth to year, of performance sites year

in and revenue Our X.X% approximately XX,XXX. X% over year number of [indiscernible] fiscal by cycle sites Recurring grew XXXX, total pushing sequentially in just an [ph] million. $XX.X year our recurring annual over increased XX,XXX net revenue to

supply midst execution constraints. ongoing with in confidence the As forward and it break of and Even relates our the to have performance. coupled we in chain pandemic trade guidance, looking our

challenges We at believe will the present, of results At of these our least supply challenges the for adversely impact first during expect fiscal the XXXX. we chain second half will half fiscal XXXX. improve current do

of of guidance over As QX see. challenges, of Using Were share those XX%. following expect growth fully count shares, $XX to to which the customers, our fiscal XX.X as is end quarter million, These fiscal XXXX. expected demonstrated $XX of of for we million providing the chain of in demand revenue to not XX first indicative well providing bookings diluted of we approximately the year record part highlight impacts year that XX% overall from a continue remarks. are by supply we are and

EPS $X.XX to per GAAP $X.XX loss be We gain a share. our between expect to a of of diluted

significant specific months diluted fiscal $X.XX adjusted XX, financial XX%. challenges impacts be our annual would EBITDA We with chain through In we of expect supply guidance and eliminates between two our forward XX, any in XX. Digis however, Ventus. these revenues X positive XX.X of and providing per Ventus. to in $X.XX forward to acquisition do highlight include going because of acquisition Please to part be acquisition adjusted the EPS numbers looking note, to on between want large model we grow the million. from share, expect of The between

the through gross will the current We expect adjusted have at at leading our value revenue balance and rates them are our time between and least and holding $XX their of see performance margin million. We pipeline fiscal will grow XX% chain to And believe an we Digi liquidity capital even that deliver during see supply profitability level EPS EBITDA missions, annual on we helping of our strong global faster adjusted a We concerns. of the sheet of position firm and indicators provide our combined with XX%. we in at recurring end the particularly challenges. XXXX, expect customers

our us. caller? please bottle now you for to transform we available questions. provide excited the That to take going our XXXX bring are is concludes to and to your is instructions excited We Could way remarks. our prepared going are for fiscal Ventus We're that

Operator

first line Instructions] from of of [Operator Our the comes Kumar Harsh Sandler. Piper question

Your is line open.

Harsh Kumar

Ron. Hey, And Yes. Hi, Jamie.

impact any impact margins of of give willing maybe the you these two in you've how you if And cost congratulations curious on also because demand us do would of supply solid First past like Ventus left COVID I something about I constrain to a the you've is supply of two be in begin congratulations and or on deal. from factors. the done if talked an results. wanted of revenues strong call, as behind would your much and challenges to with basically things. performance seen which all, have the kind lot kind you also be

Ronald Konezny

really voice. product that other confidence visibility ensuring willing to the with business fortune of us some quarters Harsh. Yes, bookings tremendous multiple scenarios, and there. And and demand had thanks. hear Good your our us with We've bookings. in help good commit their to to that unlike showing worth to gets customers are

increased bit shortfalls little the over have over over revenue a quarters. the Our the

not we tick tick like emphasize able quarters not June to are deferred that million were want last. If revenues up. it quarter, about current I the recognize probably that And we the quarter. from that up in X you quarter, these is was recall, a able last felt guidance to yet probably was It in another

does more Harsh for ‘XX a anticipate we signs FY Our of change supply impactful But situation chain first half. do the see easing.

know, it's you As environment. really dynamic a

closely the components margin a as careful well. suppliers had understand So we've very, it's very change we've to just transportation to not things good perspective, our quickly. discipline. price cost And you at to And work can have increases. From as the with pricing know, been

see two margins, gross we've pretty As effectively those those can balance from able you to Harsh.

Harsh Kumar

of Is more, seem about had most talking folded, grow standpoint? Ventus or up could, help Maybe one curious that you about excited under with how acquired and excited was just it. qualitative your for I going cross the a and selling? I potential Digi just think Ron, you Fantastic, you're guys by the under you it? Are to your we excited a vendors about color Are fold us pretty umbrella. itself? think Is you us lot to what should we the from about? two addition if set

Ronald Konezny

question. Yes, Harsh. great

growing First digits. Ventus double all, has been of

rate So good volumes they've got continuing. a in growth standalone of And on very terms do that we basis. their anticipate

But targets together, account have R&D We together. our to common opportunities course, we some supply grow perspective. some also, both several of a are doing units, an synergies, perspective opportunities exploring some and with collaborate mapping and business from to where growth chain other

even an stronger we're internally supplement with growth to to excited go have So their market. collaborating and standalone

Harsh Kumar

in more I I'll then Ron, get had queue. one back and Great.

on business declined Your IoT sequential a solutions, basis. business, the

cited might secondly, like business. you're that that I kind honestly back went seeing to and should is things that if time from which of million, all up, kind good impacted with, that. could, one about reopening things and you versed how swinging like opening of favor of So have we feel and status curious of you're you are frying and really that everything around of in be X.X about then moving retail, XX.X talk what well among world was but sort things actually I was seems effectively some curious the to And that now first food? you the restaurants growth

Ronald Konezny

for thanks. we subscribers and the we revenue want revenue. of Yes, contribute time recurring that as good they last line on annualized XXXX solutions the as are is from good fight bottom really audience, the out a seeing than easing revenue strong deal And even analyze from segment really while and easing, businesses, to signs facing But they're get of dollars another recurring quarter seeing that to are providing some is proposition rising pipeline of top most occurred making revenue our in line that point their us on didn't has the looking yet restrictions And are back easy impacting Harsh, subscribers get have. are that that million been unilaterally more eclipsing revenue those grow that they're sure would one the value that's food that service we're digit that added seeing them all and that eight focus the efficient opportunities we so There's IoT remind the and service. will - mark that We to an to have There one others. another in we have the quarters. added way. labor deployments metrics subscriber We which key not really time one couple we've But into an your that most enterprise seen in push we XX,XXX customers. that possible existing there's team. the but costs the the been

it's excited So largely are portion and our market opening addressable still Greenfield. of that about we up

Harsh Kumar

again. Great guys, congrats

Ronald Konezny

Harsh. Thanks,

Operator

from ROTH next comes Capital. Instructions] line Our question [Operator Searle of Scott the of

open. is line Your

Scott Searle

the if around Thanks I that at ‘XX double through afternoon. congratulations XX% done. deal to But gross I it's around the to good Ventus. on if you've margins the covered and terms know a growing my maybe couple a Ventus Jamie, color entices in The Hey, Ventus. building seeing taking digits of I kind be late. XX% earlier. as been employees call ‘ I'd Ron apologize I fiscal wondering of performed? you're and details this into been churn what minutes there but questions. kind was in the growth hopped the you of got on for walk rate, some what can of help assumption getting curious from some

Ronald Konezny

fantastic growth Yes, double mentioned to in of thanks, that we really retention our to the some lot been an and it's because on, Yes, continuing Scott. your like new customers one there's is digit we that course, we've, over And rates providing customers for their growth target. sign valuable really that That And as retention. at services customers rate, recurring their we're they common. a we would you're piece, of opportunities have has looking pace. focused share XX% accelerate most a revenue of assumptions, earlier, we're to that

a And do customers if that provides on incredible mentality they have cost. higher total So they service quality, Ventus but the view only could lower their is not that significant what and this a own. oriented

of ‘XX we're growth quite to it's expect for expectations a rate whole we So excited. so that XX include Ventus, not The year. But do really months continue.

just last quarter. really that We at of these expect is you hold also growth that help to model only we rate, approaching you'll many conversion to that adjusted Which, the EBITDA demonstrated financial from adjusted margins rates, of in XX%. to but improve double margins shows excess to cash going a see margins contribution EBITDA that levels well start in EBITDA, not adjusted And really, And and how you companies margins, have tick excess new up gross XX%. that seen digit growing normal targeting really got, we're is of this XX%. XX%,

been able latest the to that a of really, is Ventus. So, help construct really we've healthy model with this

Scott Searle

sequential, more the could seeing bit. Ron, the tick sequential adjust you. contribution, To Ventus terms of companies in you from you if down of up like I in I outlook of for gateway wondering components follow what console was had kind kind through little the key router in the and Once a the standpoint, you're wish little challenging terms guys that's than clearly dig could bit I a But wondering the if articulating from business, grouping on supply And specific the you some of you there that. areas are maybe more other. that together are and things chain. I'm know, if are headwinds, others? I Thanks.

Ronald Konezny

a Yes, the to our remind services I of the want question. our, typically We're our audience quarter centric very is product period. that group. Scot, it’s good softest FTX and channel fiscal and

last we year's so at million. over tick And you if look XX did a core,

the seeing. what than chain It's been group. so unfortunately, implies And been is pretty embedded that we've supply supply growth chain And what constraint our slower has mainly on constraint. guidance our focused

had components its existing transition more to available. has team with We've work shortages. component to to Our products are some had

and growth expected is that So the team. imbedded improvements, in that that our lower supply especially by We than year, expect and really chain guidance the midpoint year. efforts and better you'll do between that organic the easing rate throughout our of the see on concentrated

see modest you in year of that point. And so center that you it you of growth course see year, the in over add context rate Ventus, put organic if in the and

Scott Searle

seeing front constraints that pretty actually time. impact that Got you. And this you're in like at not really that And on line point Console and well that just doing of to component they're business? seem clarify, Gateway

Ronald Konezny

facing working And in fantastic side been we've are component immediate our there. has as new console an we our And just and the been chain servers job, of leader positive supply so through those group, done those Yes, place. a been router fantastic has doing it's management Scott rates. a of team impact

been, infrastructure as management well. Our delivering been team has has

because next to having get the is the revenue in recognize it's they But quarter. that Scott to to we're couldn't OEM solutions the - able were had of fair quarter be all revenue the of still deferred want. the chain concentration, gets release, components So really more supply largely more not we where you the there

Scott Searle

Perfect. Congratulations, much. Thanks guys. so

Ronald Konezny

Thanks, Scott.

Operator

like to you Thank back I'd call for turn the remarks, time, closing sir. this over at Konezny to Ron

Ronald Konezny

everyone We partners conference customers, healthy Latif. next you our earnings really Craig you, the in appreciate our and Digi annual team, XX select our Thank and Alpha today investors and XXth XXth our November I call to the joined XX. week, tech is Roth that and participating thank to on on call. November look next forward safe Hallum capital Stay annual our virtual conference the

Operator

This call. conference today's concludes participating. for Thank you

You may now disconnect.

Digi International (DGII) 11 Nov 212021 Q4 Earnings call transcript