Financial Data and Key Metrics Changes - Annual Recurring Revenue (ARR) grew 12% year over year to a record $123 million in the quarter, representing 29% of annualized quarterly revenues [6][7] - Free cash flow generation was $26 million, allowing the company to reduce net debt to $45 million after paying down $25 million during the quarter [7][8] - The company expects to be net cash positive by the end of the fiscal year, a quarter earlier than initially planned [8] Business Line Data and Key Metrics Changes - The recurring revenue trends in Products and Services (P&S) increased over 20% in the quarter, driven by improved attach rates of software and services to products [14][15] - The inventory position improved significantly, approaching historical norms, indicating a positive trend in inventory management [8][19] Market Data and Key Metrics Changes - Demand remains steady across most regions, with the exception of the APAC region, where sales have been weaker [24][30] - The company has diversified and optimized its supply chain across geographies and suppliers, enhancing its resilience to macroeconomic changes [9][32] Company Strategy and Development Direction - The company is focused on a solution-oriented approach in the industrial IoT market, emphasizing software and services to enhance product offerings [6][15] - There is a commitment to pursuing solution-oriented acquisitions of scale as the balance sheet improves [8] Management's Comments on Operating Environment and Future Outlook - The management acknowledges a fluid macro environment but expresses confidence in the company's adaptability and resilience [9][30] - The outlook for the remainder of fiscal 2025 assumes current tariff rates and steady demand, with no anticipated drop-off [8][24] Other Important Information - The company is working on extending the Ventus model into its cellular router business, which may impact top-line revenue but contribute positively to ARR [36][39] - Management noted that the software attach rates are improving, although they are still below 50% across the portfolio [25] Q&A Session Summary Question: What operational levers are being used to unlock recurring revenue growth? - The company is focusing on providing complete solutions by attaching software and services to products, which has improved attach rates [15] Question: How is macro volatility affecting customer spending? - Demand remains steady, with some fluidity acknowledged, particularly in the APAC region [24][30] Question: What is the current state of inventory management? - The inventory situation is resolving, with significant reductions noted, and the company is approaching normalized levels [19][31] Question: What are the timelines for closing deals and supply chain management? - Sales cycles have stabilized, with no deterioration observed except in the APAC region [30] Question: How is the company managing tariff exposures? - The outlook incorporates current tariff rates, and the company has options to manage potential impacts from reciprocal tariffs [33][34]

PART I. FINANCIAL INFORMATION [Item 1. Unaudited Financial Statements](index=3&type=section&id=ITEM%201.%20Unaudited%20Financial%20Statements) Unaudited financial statements for the period ended March 31, 2025, show a slight revenue decrease, significant net income growth, and improved operating cash flow, with reduced total liabilities [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2025, total revenue slightly decreased, while operating income and net income significantly increased due to lower costs and expenses Consolidated Statements of Operations Highlights (Three Months Ended March 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $104,503 | $107,702 | -3.0% | | Product Revenue | $71,987 | $78,432 | -8.2% | | Service Revenue | $32,516 | $29,270 | +11.1% | | **Gross Profit** | $64,933 | $62,318 | +4.2% | | **Operating Income** | $13,727 | $8,151 | +68.4% | | **Net Income** | $10,497 | $3,994 | +162.8% | | **Diluted EPS** | $0.28 | $0.11 | +154.5% | Consolidated Statements of Operations Highlights (Six Months Ended March 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $208,369 | $213,791 | -2.5% | | **Gross Profit** | $129,331 | $123,418 | +4.8% | | **Operating Income** | $27,086 | $20,284 | +33.5% | | **Net Income** | $20,580 | $940 | +2089.4% | | **Diluted EPS** | $0.55 | $0.03 | +1733.3% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets slightly decreased, total liabilities significantly reduced due to lower long-term debt, and total stockholders' equity increased Selected Balance Sheet Data (as of March 31, 2025 vs. September 30, 2024) | Account | March 31, 2025 (in thousands) | September 30, 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $26,296 | $27,510 | -$1,214 | | Inventories | $38,601 | $53,357 | -$14,756 | | Total current assets | $134,726 | $154,447 | -$19,721 | | Goodwill | $341,669 | $342,774 | -$1,105 | | **Total assets** | **$781,024** | **$815,075** | **-$34,051** | | Long-term debt | $70,018 | $123,185 | -$53,167 | | **Total liabilities** | **$175,806** | **$234,040** | **-$58,234** | | **Total stockholders' equity** | **$605,218** | **$581,035** | **+$24,183** | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended March 31, 2025, net cash from operations significantly improved, while cash used in financing activities increased, resulting in a slight net decrease in cash Cash Flow Summary (Six Months Ended March 31) | Activity | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $56,005 | $31,727 | | Net cash (used in) provided by investing activities | $(1,135) | $1,425 | | Net cash used in financing activities | $(56,037) | $(42,692) | | **Net decrease in cash and cash equivalents** | **$(1,214)** | **$(7,898)** | | Cash and cash equivalents, end of period | $26,296 | $23,795 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, segment performance, and revenue recognition, highlighting a new credit agreement, growth in IoT Solutions, and remaining performance obligations - On December 7, 2023, Digi entered into a new Credit Agreement with BMO, providing a **$250 million** senior secured revolving credit facility[27](index=27&type=chunk)[28](index=28&type=chunk) - Proceeds from the new credit facility were used to repay all obligations under the prior credit facility, resulting in a **$9.7 million** write-off of remaining debt issuance costs[31](index=31&type=chunk) Segment Revenue (Six Months Ended March 31) | Segment | 2025 (in thousands) | 2024 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | IoT Products & Services | $155,606 | $165,413 | -5.9% | | IoT Solutions | $52,763 | $48,378 | +9.1% | | **Total Revenue** | **$208,369** | **$213,791** | **-2.5%** | Revenue by Geography (Six Months Ended March 31) | Region | 2025 (in thousands) | 2024 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | North America | $162,554 | $152,093 | +6.9% | | Europe, Middle East & Africa | $32,999 | $33,875 | -2.6% | | Rest of world | $12,816 | $27,823 | -53.9% | - As of March 31, 2025, the company had approximately **$160.8 million** of remaining performance obligations, with about **$76.2 million** expected to be recognized as revenue over the next 12 months[43](index=43&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2025 revenue decline, offset by IoT Solutions growth, improved gross profit margin, strong net income and Adjusted EBITDA, and increased Annualized Recurring Revenue Q2 2025 Key Metrics vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Consolidated Revenue | $105M | $108M | -3% | | Gross Profit Margin | 62.1% | 57.9% | +420 bps | | Net Income | $10M | $4M | +150% | | Diluted EPS | $0.28 | $0.11 | +155% | | Adjusted EBITDA | $26M | $24M | +8.3% | | ARR (at quarter end) | $123M | $110M | +12% | - The company is experiencing longer than expected sales cycles, which is believed to be related to macroeconomic conditions and may adversely impact results for the remainder of fiscal 2025[73](index=73&type=chunk) [Revenue by Segment](index=21&type=section&id=REVENUE%20BY%20SEGMENT) Q2 2025 saw a revenue decrease in IoT Products & Services due to inventory reduction, while IoT Solutions revenue grew from recurring revenue in SmartSense and Ventus - **IoT Products & Services** revenue decreased by **$5.6 million** in Q2 2025 year-over-year, driven by a **$6.8 million** decline in one-time sales as customers reduce inventory levels, partially offset by **$1.2 million** in recurring revenue growth[78](index=78&type=chunk) - **IoT Solutions** revenue increased by **$2.4 million** in Q2 2025 year-over-year, entirely from growth in recurring revenue from both SmartSense and Ventus[80](index=80&type=chunk) - Total Annualized Recurring Revenue (ARR) grew to **$123 million** as of March 31, 2025, up from **$110 million** a year prior, with IoT Products & Services ARR at **$28 million** and IoT Solutions ARR at **$95 million**[82](index=82&type=chunk) [Cost of Goods Sold and Gross Profit by Segment](index=21&type=section&id=COST%20OF%20GOODS%20SOLD%20AND%20GROSS%20PROFIT%20BY%20SEGMENT) Consolidated gross profit margin improved in Q2 2025, driven by a favorable product mix in IoT Products & Services and higher-margin subscription revenue growth in IoT Solutions Gross Profit Margin by Segment (Three Months Ended March 31) | Segment | 2025 Margin | 2024 Margin | Basis Point Change | | :--- | :--- | :--- | :--- | | IoT Products & Services | 58.9% | 54.0% | +490 bps | | IoT Solutions | 71.4% | 71.0% | +40 bps | | **Total Gross Profit Margin** | **62.1%** | **57.9%** | **+420 bps** | [Operating Expenses](index=22&type=section&id=OPERATING%20EXPENSES) Total operating expenses decreased in Q2 2025, primarily due to the non-recurrence of a significant litigation reserve from the prior year - General and administrative expenses decreased by **25.5%** year-over-year for the three months ended March 31, 2025, falling from **$18.6 million** to **$13.8 million**[88](index=88&type=chunk) - The decrease in operating expenses was mainly due to a **$6.3 million** litigation reserve in Q2 2024 that did not repeat in Q2 2025[88](index=88&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains strong liquidity, with increased operating cash flow and a new $250 million revolving credit facility, sufficient to fund future operations - Cash flow from operating activities increased by **$24.3 million** for the six months ended March 31, 2025, primarily due to a **$19.6 million** increase in net income and favorable changes in net operating assets[107](index=107&type=chunk)[108](index=108&type=chunk) - In December 2023, the company entered a new **$250 million** senior secured revolving credit facility, replacing its prior agreement[105](index=105&type=chunk) Contractual Obligations as of March 31, 2025 | Obligation (in thousands) | Total | Less than 1 year | 1-3 years | 3-5 years | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating leases | $14,867 | $3,489 | $4,724 | $3,729 | $2,925 | | Revolving loan | $71,000 | $0 | $0 | $71,000 | $0 | | **Total** | **$85,867** | **$3,489** | **$4,724** | **$74,729** | **$2,925** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations on variable-rate debt and foreign currency exchange rate changes impacting financial results and equity - **Interest Rate Risk:** The company had **$71.0 million** outstanding under its variable-rate Revolving Loan as of March 31, 2025, where a hypothetical **25 basis point** change in interest rates would change annualized interest expense by **$0.2 million**[112](index=112&type=chunk)[115](index=115&type=chunk) - **Foreign Currency Risk:** A **10%** change in the average exchange rate for the Euro, British Pound, Australian Dollar, and Canadian Dollar against the U.S. Dollar would have resulted in a **0.9%** change in stockholders' equity during the first six months of fiscal 2025[117](index=117&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of the end of the period, the company's disclosure controls and procedures were effective[119](index=119&type=chunk) - No changes occurred during the six months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[120](index=120&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=31&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is subject to various claims and litigation in the normal course of business, with potential material impacts disclosed in Note 11 - In the normal course of business, the company is subject to various claims and litigation with third parties, where the outcome cannot be assured not to materially affect the business[55](index=55&type=chunk)[121](index=121&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=ITEM%201A.%20Risk%20Factors) The company faces risks from rapid technological changes, including AI, potentially rendering products obsolete, and from international tariffs impacting supply chains and costs - The company's industry is characterized by rapidly changing technologies, such as AI, and evolving standards, which could disrupt markets and render products obsolete[123](index=123&type=chunk) - Future success depends on the ability to enhance existing products and introduce new ones to meet changing customer requirements and emerging technologies[124](index=124&type=chunk) - Potential new or incremental international tariffs could materially and adversely affect the business by disrupting supply chains, increasing costs, and making products less competitive[126](index=126&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, 4,057 shares were repurchased at an average price of $34.91, primarily from employee forfeitures for tax withholding on restricted stock units Share Repurchases in Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2025 | 35 | $32.15 | | Feb 2025 | 4,022 | $34.94 | | Mar 2025 | 0 | N/A | | **Total** | **4,057** | **$34.91** | - All shares purchased were forfeited by employees to satisfy tax withholding obligations from the vesting of restricted stock units[127](index=127&type=chunk) [Item 5. Other Information](index=32&type=section&id=ITEM%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 trading plans or other trading arrangements during the quarter ended March 31, 2025 - No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans during the quarter[130](index=130&type=chunk)

[Financial Highlights and Executive Summary](index=1&type=section&id=Financial%20Highlights%20and%20Executive%20Summary) Digi International's Q2 2025 revenue decreased 3% to $105M, but profitability improved with gross margin up 420 bps and Adjusted EBITDA up 9% to $26M, alongside 12% ARR growth Q2 Fiscal 2025 Key Financial Metrics (vs. Q2 Fiscal 2024) | Metric | Q2 FY2025 | Q2 FY2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $105M | $107.7M (implied) | -3% | | Gross Profit Margin | 62.1% | 57.9% | +420 bps | | Net Income | $10M | $4M | +150% | | Net Income per Diluted Share | $0.28 | $0.11 | +155% | | Adjusted Net Income per Diluted Share | $0.51 | $0.49 | +4% | | Adjusted EBITDA | $26M | $23.8M | +9% | | Annualized Recurring Revenue (ARR) | $123M | $109.8M (implied) | +12% | - CEO Ron Konezny highlighted that the company's focus on a solution-oriented approach drove **ARR growth** and sustained profitability. Strong cash generation allowed for a **$25 million debt paydown**, accelerating the forecast for achieving **no net debt** to the end of the fiscal year[5](index=5&type=chunk) [Segment Performance and Capital Allocation](index=2&type=section&id=Segment%20Performance%20and%20Capital%20Allocation) IoT Product & Services revenue declined due to inventory reduction, while IoT Solutions revenue grew from recurring sources, with the company prioritizing deleveraging and strategic acquisitions [IoT Product & Services](index=2&type=section&id=IoT%20Product%20%26%20Services) IoT Product & Services revenue decreased to $77.8M due to product sales decline, offset by recurring revenue growth, with ARR up 22% to $28M and gross margin improving 490 bps IoT Product & Services Q2 FY2025 Performance | Metric | Q2 FY2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $77.8M | -$5.6M | | ARR | $28M | +22% | | Gross Profit Margin | 58.9% | +490 bps | - The decline in product revenue was attributed to lower demand as some customers are reducing inventory that was stockpiled when supply chains were stressed[8](index=8&type=chunk) [IoT Solutions](index=2&type=section&id=IoT%20Solutions) IoT Solutions revenue increased by $2.4M to $26.7M, driven entirely by recurring revenue from SmartSense and Ventus, with ARR up 9% to $95M and gross margin increasing 40 bps to 71.4% IoT Solutions Q2 FY2025 Performance | Metric | Q2 FY2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $26.7M | +$2.4M | | ARR | $95M | +9% | | Gross Profit Margin | 71.4% | +40 bps | [Capital Allocation Strategy](index=2&type=section&id=Capital%20Allocation%20Strategy) Digi's capital allocation strategy prioritizes deleveraging, inventory optimization, and disciplined acquisitions, resulting in reduced debt to $70.0M and strong cash flow from operations of $26M in Q2 - The company's top capital priorities are to continue **deleveraging** and seek **acquisitions that add scale and Annualized Recurring Revenue (ARR)**[10](index=10&type=chunk) Balance Sheet and Cash Flow Highlights (Q2 FY2025) | Metric | Value | Note | | :--- | :--- | :--- | | Outstanding Debt | $70.0M | Reduced via payments | | Cash Flow from Operations | $26M | vs. $13M in Q2 FY2024 | | Quarter-End Inventory | $39M | vs. $53M at Sept 30, 2024 | | Interest Expense | $1.3M | vs. $3.7M in Q2 FY2024 | [Fiscal 2025 Guidance](index=3&type=section&id=Third%20Fiscal%20Quarter%202025%20and%20Full-Year%202025%20Guidance) Digi increased its full-year 2025 profit outlook, projecting 5% Adjusted EBITDA growth, while revenue outlook remains flat year-over-year with 10% ARR growth, alongside specific Q3 guidance Updated Full-Year Fiscal 2025 Guidance | Metric | FY2025 Projection | Previous Projection | | :--- | :--- | :--- | | Revenue | Approx. flat YoY | Unchanged | | ARR | +10% YoY | Unchanged | | Adjusted EBITDA | +5% YoY | Approx. flat YoY | Third Fiscal Quarter 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenues | $104M - $108M | | Adjusted EBITDA | $25.0M - $26.5M | | Adjusted Net Income per Share | $0.47 - $0.51 | - The company has a long-term goal to grow ARR and Adjusted EBITDA to **$200 million** within the next 4 years, a timeline that could be accelerated by **strategic acquisitions**[12](index=12&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) This section presents unaudited condensed consolidated financial statements for Q2 2025 and prior periods, including Statements of Operations, Balance Sheets, and Cash Flows [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 revenue decreased slightly to $104.5M from $107.7M, but improved gross profit and lower operating expenses led to net income more than doubling to $10.5M, or $0.28 per diluted share Q2 FY2025 Income Statement Highlights (in thousands) | Line Item | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Revenue | $104,503 | $107,702 | | Gross Profit | $64,933 | $62,318 | | Operating Income | $13,727 | $8,151 | | Net Income | $10,497 | $3,994 | | Diluted EPS | $0.28 | $0.11 | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, Digi's balance sheet showed total assets of $781.0M, with significant reductions in long-term debt to $70.0M and inventories to $38.6M, while total stockholders' equity increased to $605.2M Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $26,296 | $27,510 | | Inventories | $38,601 | $53,357 | | Total Assets | $781,024 | $815,075 | | Long-term debt | $70,018 | $123,185 | | Total liabilities | $175,806 | $234,040 | | Total stockholders' equity | $605,218 | $581,035 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended March 31, 2025, cash from operating activities significantly increased to $56.0M from $31.7M, while net cash used in financing activities was $56.0M, primarily for debt repayment Cash Flow Summary (in thousands) | Activity | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $56,005 | $31,727 | | Net cash (used in) provided by investing activities | $(1,135) | $1,425 | | Net cash used in financing activities | $(56,037) | $(42,692) | [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles GAAP to non-GAAP measures like Adjusted EBITDA and Adjusted Net Income, excluding non-cash or non-recurring items to present core operating performance - The company provides non-GAAP measures like **Adjusted EBITDA** and **Adjusted Net Income** because management believes they are useful for investors to evaluate **core operating results** and compare performance across periods by excluding significant non-cash or non-recurring items[22](index=22&type=chunk)[23](index=23&type=chunk) [Reconciliation of Net Income to Adjusted EBITDA](index=9&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) Q2 2025 GAAP Net Income of $10.5M was reconciled to Adjusted EBITDA of $26.0M, representing a 24.9% margin, an improvement from 22.1% in Q2 2024, with major adjustments for D&A and stock-based compensation Adjusted EBITDA Reconciliation - Q2 (in thousands) | Line Item | Q2 FY2025 | Q2 FY2024 | | :--- | :--- | :--- | | Net income | $10,497 | $3,994 | | Adjustments (Interest, Taxes, D&A, etc.) | $15,518 | $19,831 | | **Adjusted EBITDA** | **$26,015** | **$23,825** | | *As % of total revenue* | *24.9%* | *22.1%* | [Reconciliation of Net Income to Adjusted Net Income](index=9&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20Net%20Income) Q2 2025 GAAP Net Income of $10.5M ($0.28 per share) was adjusted to non-GAAP Adjusted Net Income of $19.0M ($0.51 per share), compared to $17.9M ($0.49 per share) in Q2 2024, with key adjustments for amortization, stock-based compensation, and interest expense Adjusted Net Income Reconciliation - Q2 (in thousands, except per share) | Metric | Q2 FY2025 | Q2 FY2024 | | :--- | :--- | :--- | | Net income | $10,497 | $3,994 | | Net income per diluted share | $0.28 | $0.11 | | **Adjusted net income** | **$18,967** | **$17,948** | | **Adjusted net income per diluted share** | **$0.51** | **$0.49** | [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section provides a standard safe harbor statement, cautioning that forward-looking statements are subject to numerous risks and uncertainties, including economic pressures, supply chain challenges, market competition, geopolitical conflicts, and regulatory changes - The company warns that projections regarding future performance, inventory levels, and acquisitions are subject to **significant risks**. Key risks cited include **global inflation**, **potential recession**, **supply chain disruptions**, **tariffs**, **cybersecurity threats**, and **geopolitical conflicts**[20](index=20&type=chunk)

Group 1 - The article compares Digi International (DGII) and Cisco Systems (CSCO) to determine which stock is more attractive to value investors [1] - DGII has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while CSCO has a Zacks Rank of 3 (Hold) [3] - Value investors analyze various traditional metrics to assess if a company is undervalued, including P/E ratio, P/S ratio, earnings yield, and cash flow per share [4] Group 2 - DGII has a forward P/E ratio of 14.42, while CSCO has a forward P/E of 16.22, suggesting DGII may be undervalued [5] - DGII's PEG ratio is 0.85, compared to CSCO's PEG ratio of 3.18, indicating better expected earnings growth for DGII [5] - DGII's P/B ratio is 1.80, significantly lower than CSCO's P/B of 5.27, further supporting DGII's valuation as more attractive [6] Group 3 - DGII's improving earnings outlook and favorable valuation metrics position it as the superior value option compared to CSCO [7]

Core Viewpoint - Digi International (DGII) is currently viewed as a superior value opportunity compared to Cisco Systems (CSCO) based on various valuation metrics [7]. Valuation Metrics - Both DGII and CSCO hold a Zacks Rank of 2 (Buy), indicating a positive earnings outlook due to favorable analyst estimate revisions [3]. - DGII has a forward P/E ratio of 14.75, while CSCO has a forward P/E of 17.25, suggesting DGII is more attractively priced [5]. - The PEG ratio for DGII is 0.87, indicating better value relative to its expected earnings growth compared to CSCO's PEG ratio of 3.38 [5]. - DGII's P/B ratio is 1.83, significantly lower than CSCO's P/B of 5.59, further supporting DGII's valuation as more favorable [6]. - These metrics contribute to DGII's Value grade of B, while CSCO has a Value grade of D, highlighting the disparity in perceived value between the two stocks [6].

Group 1: Earnings Performance - Digi International reported quarterly earnings of $0.50 per share, matching the Zacks Consensus Estimate and showing an increase from $0.48 per share a year ago [1] - The company had revenues of $103.87 million for the quarter ended December 2024, which was 0.26% below the Zacks Consensus Estimate and a decrease from $106.09 million year-over-year [2] - Over the last four quarters, Digi International has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Group 2: Stock Performance and Outlook - Digi International shares have increased by approximately 0.5% since the beginning of the year, while the S&P 500 has gained 2.7% [3] - The company's current consensus EPS estimate for the upcoming quarter is $0.47 on revenues of $104.53 million, and for the current fiscal year, it is $1.95 on revenues of $424.79 million [7] - The Zacks Rank for Digi International is currently 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Group 3: Industry Context - The Computer - Networking industry, to which Digi International belongs, is currently in the top 30% of over 250 Zacks industries, suggesting a favorable outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor decisions [5]

Core Viewpoint - Digi International Inc. reported its earnings results for Q1 2025, with a conference call held to discuss performance and future expectations [1][3]. Group 1: Earnings Results - The earnings release was issued after the market closed, and it is available on the company's Investor Relations website [3]. - Jamie Loch, CFO, and Ron Konezny, President and CEO, participated in the call to provide insights into the company's performance [3]. Group 2: Forward-Looking Statements - The company made forward-looking statements regarding its future operating and financial performance, which are subject to significant risks and uncertainties [4]. - There is no obligation for the company to update or revise these forward-looking statements, and while expectations are deemed reasonable, there is no assurance they will be met [4].

Financial Data and Key Metrics Changes - In Q1 2025, Annual Recurring Revenue (ARR) reached a record $120 million, an increase of 11% year-over-year and $4 million higher than the previous quarter [10] - ARR now represents 28% of quarterly revenues, highlighting its strategic importance for the company [11] - The company generated $30 million in cash from operations during the quarter and reduced total outstanding debt to below $100 million for the first time since Q4 2021 [13] Business Line Data and Key Metrics Changes - The transition from one-time revenue to recurring revenue is evident, with a 17% year-over-year increase in ARR, while one-time revenue saw a decline of $4.7 million [19][20] - Gross margins improved significantly in Q1, attributed to a favorable product mix, although this level may not be sustainable in Q2 [23][25] Market Data and Key Metrics Changes - Over 70% of revenues are generated from North America, with a strong emphasis on maintaining customer relationships despite tariff uncertainties [31] - There is a positive outlook for infrastructure investment, with potential tailwinds from increased IT budgets and data center refreshes [34] Company Strategy and Development Direction - The company aims to double ARR and adjusted EBITDA to $200 million each over a five-year period, maintaining confidence in achieving these targets [10] - The focus remains on enhancing the balance sheet and pursuing solution-oriented acquisitions as the geopolitical landscape evolves [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating supply chain challenges and emphasized a long-term view of customer relationships over short-term tariff implications [32] - There is a sense of increased confidence in the marketplace, with stable ordering patterns and good demand in sectors such as data centers and medical devices [39][41] Other Important Information - The company is celebrating its 40-year history of resilience and innovation in 2025, which it believes will support its future endeavors [15] Q&A Session Summary Question: Context on product and service trends, particularly ARR and one-time revenue - Management noted a transition from one-time revenue to recurring revenue, indicating that ARR growth will continue to be a focus [20] Question: Guidance for Q2 revenue and EBITDA - Management highlighted that gross margins in Q1 were elevated due to a favorable product mix, which may not be repeated in Q2 [24] Question: Tariff impact on supply chain and demand - Management reassured that they prioritize customer interests and have a geographically diverse manufacturing base to mitigate tariff risks [31] Question: Customer ordering patterns and market strength - Management observed stabilized ordering patterns with good demand in data centers and medical devices, while some sectors remain weaker [39][41] Question: ARR growth and attach rates - Management reported over 50% attach rates on key products, with optimism for continued growth in this area [43]

Revenue Performance - Consolidated revenue for the three months ended December 31, 2024, was $104 million, a decrease of 2% compared to $106 million in the same period of 2023[74] - Total revenue for the three months ended December 31, 2024, was $103.866 million, a decrease of 2.1% from $106.089 million in the same period of 2023[91] - Revenue from IoT Products & Services decreased by $4.2 million to $77.8 million, while IoT Solutions revenue increased by $2.0 million to $26.0 million[75] Profitability - Gross profit increased by 5% to $64 million, resulting in a gross profit margin of 62.0%, an increase of 440 basis points year-over-year[74] - The gross profit margin for IoT Products & Services improved by 510 basis points to 58.6%, while IoT Solutions margin increased by 60 basis points to 72.2%[79] - Net income for the quarter was $10 million, compared to a net loss of $3 million in the prior year, with net income per diluted share of $0.27[74] - Net income for the three months ended December 31, 2024, was $10.083 million, compared to a net loss of $3.054 million in the same period of 2023[91] - Adjusted EBITDA for the three months ended December 31, 2024, was $25.609 million, representing 24.7% of total revenue, compared to $23.306 million or 22.0% of total revenue in 2023[91] Operating Expenses - Operating expenses rose by 4.2% to $51.0 million, primarily due to a $2.9 million increase in labor expenses[82] - Other expense, net, decreased significantly by $13.1 million to $(2.3) million, driven by a reduction in interest expense and the absence of debt issuance cost write-off[84] Cash Flow and Debt - Cash flows from operating activities increased by $11.0 million to $29.719 million for the three months ended December 31, 2024, compared to $18.672 million in 2023[99] - The company entered into a $250 million senior secured revolving credit facility on December 7, 2023, with an additional borrowing capacity of up to $95 million[97] - As of December 31, 2024, the company had $96.0 million outstanding under its Revolving Loan, with a weighted average interest rate of 6.83%[104] - The company expects positive cash flows from operations for the foreseeable future, supported by current cash balances and the ability to borrow under the credit facility[99] Future Outlook - Longer than expected sales cycles are anticipated to adversely impact results for at least the remainder of fiscal 2025 due to macroeconomic conditions[73] - The company continues to focus on transitioning to complete solutions with software and service offerings to drive higher margin revenue[74] Contractual Obligations - The total contractual obligations as of December 31, 2024, amounted to $110.746 million, including $14.746 million in operating leases[101] Foreign Currency Impact - A 10% change in the average exchange rate for major currencies would have resulted in a 0.9% increase or decrease in stockholders' equity due to foreign currency translation[107] Debt Issuance Costs - The company reported a $9.7 million debt issuance cost write-off included in net income for the first quarter of fiscal 2024[100]

[First Fiscal Quarter 2025 Highlights](index=1&type=section&id=First%20Fiscal%20Quarter%202025%20Highlights) Digi International reported strong Q1 FY25 financial results with increased net income and ARR, despite a challenging industrial economy, driven by IoT solutions and strong cash generation [Q1 FY25 Financial Summary](index=1&type=section&id=Q1%20FY25%20Financial%20Summary) Digi International reported Q1 FY25 revenue of $104 million, a 2% decrease year-over-year, but achieved a net income of $10 million compared to a net loss of $3 million in Q1 FY24. Gross profit margin significantly increased by 440 basis points to 62.0%, and Adjusted EBITDA grew by 10% to $26 million. Annualized Recurring Revenue (ARR) reached a record $120 million at quarter-end, an increase of 11% | Metric | Q1 FY25 | Q1 FY24 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | | Revenue | $104M | $106M | -2% | | Gross Profit Margin | 62.0% | 57.6% | +440 bps | | Net Income (Loss) | $10M | ($3M) | N/A | | Net Income (Loss) per Diluted Share | $0.27 | ($0.08) | N/A | | Adjusted Net Income per Diluted Share | $0.50 | $0.48 | +4.2% | | Adjusted EBITDA | $26M | $23.6M | +10% | | Annualized Recurring Revenue (ARR) | $120M | $108.1M | +11% | [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Ron Konezny highlighted a strong start to fiscal 2025 despite a weak industrial economy, attributing success to a focus on IoT solutions that deliver ROI and drove double-digit year-over-year ARR growth. He noted strong cash generation, which enabled a reduction in debt and strengthened the balance sheet, and emphasized the company's adaptability, resilience, innovation, and commitment to service over its 40-year history - Digi is off to a great start in Q1 FY25, despite a weak industrial economy, driven by a focus on IoT solutions that deliver ROI and **double-digit year-over-year ARR growth**[4](index=4&type=chunk) - Strong cash generation in a capital-light business model enabled a reduction in debt balance, strengthening the balance sheet[4](index=4&type=chunk) - The company celebrates its 40th anniversary, with adaptability, resilience, innovation, and commitment to service being critical to its past and future success[4](index=4&type=chunk) [Detailed Financial Performance](index=2&type=section&id=Detailed%20Financial%20Performance) The company's financial performance shows mixed segment results with strong ARR growth, alongside strategic capital allocation focused on debt reduction and inventory optimization [Segment Results](index=2&type=section&id=Segment%20Results) The IoT Product & Services segment experienced a revenue decrease primarily due to lower one-time sales but saw a 17% increase in ARR. Conversely, the IoT Solutions segment achieved revenue growth driven by a significant increase in recurring revenue from SmartSense and Ventus, with its ARR growing 9%. Both segments reported improved gross profit margins [IoT Product & Services](index=2&type=section&id=IoT%20Product%20%26%20Services) The IoT Product & Services segment experienced a revenue decline due to lower one-time sales but achieved significant ARR growth and improved gross profit margins | Metric | Q1 FY25 | Q1 FY24 | Change | | :-------------------- | :------ | :------ | :----- | | Revenue | $77.8M | $82.0M | -$4.2M | | One-time Sales Decline | N/A | N/A | -$4.7M | | Recurring Revenue Growth | N/A | N/A | +$0.5M | | ARR (quarter end) | $27M | $23.1M | +17% | | Gross Profit Margin | 58.6% | 53.5% | +510 bps | - Revenue decrease driven by lower demand for some products as customers reduced inventory stockpiled from stressed supply chains[7](index=7&type=chunk) - ARR growth was due to an increase in the subscription base across extended warranty offerings and remote management platforms[7](index=7&type=chunk) [IoT Solutions](index=2&type=section&id=IoT%20Solutions) The IoT Solutions segment reported revenue and ARR growth, driven by strong platform performance and an increase in higher-margin subscription revenues | Metric | Q1 FY25 | Q1 FY24 | Change | | :-------------------- | :------ | :------ | :----- | | Revenue | $26.0M | $24.0M | +$2.0M | | Recurring Revenue Increase | N/A | N/A | +$2.1M | | One-time Sales Decrease | N/A | N/A | -$0.1M | | ARR (quarter end) | $93M | $85.3M | +9% | | Gross Profit Margin | 72.2% | 71.6% | +60 bps | - Revenue and ARR growth were driven by strong performance in both SmartSense and Ventus platforms[8](index=8&type=chunk) - Gross profit margin increase was a result of growth in higher-margin ARR subscription revenues[8](index=8&type=chunk) [Capital Allocation and Balance Sheet](index=2&type=section&id=Capital%20Allocation%20and%20Balance%20Sheet) Digi International is prioritizing deleveraging the company and optimizing inventory levels as its supply chain normalizes. The company reduced its outstanding debt to $95.0 million, resulting in a net debt of $69.1 million. Cash flow from operations significantly increased to $30 million, and interest expense decreased due to lower debt and effective interest rates. Acquisitions remain a top capital priority, with a focus on scale and ARR - Intends to deleverage the company while seeking optimal inventory levels as the supply chain normalizes[9](index=9&type=chunk) - Acquisitions remain a top capital priority, with a disciplined approach focusing on scale and **Annualized Recurring Revenue (ARR)**[9](index=9&type=chunk) | Metric | Q1 FY25 (Dec 31, 2024) | Q1 FY24 (Dec 31, 2023) | Change | | :-------------------------------- | :--------------------- | :--------------------- | :----- | | Outstanding Debt | $95.0M | $123.2M | -$28.2M | | Cash and Cash Equivalents | $25.9M | $31.5M | -$5.6M | | Debt Net of Cash and Cash Equivalents | $69.1M | $91.7M | -$22.6M | | Interest Expense | $2.3M | $5.7M | -$3.4M | | Cash Flow from Operations | $30M | $19M | +$11M | | Inventory (quarter end) | $50M | $53M (Sep 30, 2024) | -$3M | [Outlook and Guidance](index=3&type=section&id=Outlook%20and%20Guidance) Digi maintains its FY25 outlook with projected ARR growth, flat revenue and Adjusted EBITDA, while acknowledging macroeconomic uncertainties and outlining forward-looking statement risks [Q2 FY25 and Full-Year FY25 Guidance](index=3&type=section&id=Q2%20FY25%20and%20Full-Year%20FY25%20Guidance) Digi's outlook for fiscal 2025 remains unchanged, projecting approximately 10% ARR growth, while revenue and Adjusted EBITDA are expected to be flat year-over-year. For the second fiscal quarter, revenues are estimated between $102 million and $106 million, Adjusted EBITDA between $24.0 million and $25.5 million, and Adjusted net income per share between $0.46 and $0.50. The company aims to grow ARR and Adjusted EBITDA to $200 million within the next four years, with strategic acquisitions potentially accelerating this timeline - Annualized Recurring Revenue (ARR) is the top priority, with a goal to grow ARR and Adjusted EBITDA to **$200 million within the next four years**, potentially accelerated by strategic acquisitions[11](index=11&type=chunk) - The current dynamic political landscape and continued macroeconomic headwinds, particularly in industrial markets, introduce uncertainty, but demand for Digi's solutions remains strong due to meaningful ROI for customers[12](index=12&type=chunk) | Metric | Full-Year FY25 Guidance | Q2 FY25 Guidance | | :----------------------------- | :---------------------- | :--------------- | | ARR Growth | ~10% YoY | N/A | | Revenue | Flat YoY | $102M - $106M | | Adjusted EBITDA | Flat YoY | $24.0M - $25.5M | | Adjusted Net Income per Diluted Share | N/A | $0.46 - $0.50 | [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section contains cautionary forward-looking statements based on management's current expectations and assumptions, which are subject to various risks, uncertainties, and assumptions. These include global economic pressures, potential recession, ongoing supply chain challenges, regulatory risks (e.g., tariffs), cybersecurity, intense market competition, rapid technological changes, reliance on distributors, potential order cancellations, delays in product development, and the ability to integrate acquisitions. The company disclaims any obligation to update these statements - Statements are based on management's current expectations and assumptions, involving certain risks, uncertainties, and assumptions[20](index=20&type=chunk) - Key risks include ongoing inflationary/deflationary pressures, potential recession, supply chain challenges, regulatory risks (tariffs), cybersecurity, military conflicts, competitive markets, rapid technological changes, and integration of acquisitions[20](index=20&type=chunk) - The company disclaims any intent or obligation to update any forward-looking statements[20](index=20&type=chunk) [Company Information](index=3&type=section&id=Company%20Information) Digi International, a leading IoT connectivity provider, announced details for its Q1 FY25 conference call and provided investor contact information [About Digi International](index=3&type=section&id=About%20Digi%20International) Digi International (Nasdaq: DGII) is a leading global provider of IoT connectivity products, services, and solutions. The company assists customers in creating next-generation connected products and deploying/managing critical communications infrastructures in demanding environments, emphasizing high levels of security and reliability. Founded in 1985, Digi has connected over 100 million devices - Digi International is a leading global provider of IoT connectivity products, services, and solutions[19](index=19&type=chunk) - Helps customers create next-generation connected products and deploy/manage critical communications infrastructures with high security and reliability[19](index=19&type=chunk) - Founded in 1985, the company has connected over **100 million things**[19](index=19&type=chunk) [Q1 FY25 Conference Call Details](index=3&type=section&id=Q1%20FY25%20Conference%20Call%20Details) Digi International will host a conference call on Wednesday, February 5, 2025, at 5:00 p.m. ET (4:00 p.m. CT) to discuss its first fiscal quarter and full fiscal 2024 results. The call will be hosted by President and CEO Ron Konezny and CFO Jamie Loch. Participants can register online or access a live webcast, with a replay available for approximately one year - Conference call to discuss Q1 FY25 results on **February 5, 2025, at 5:00 p.m. ET (4:00 p.m. CT)**[15](index=15&type=chunk) - Hosted by Ron Konezny (President and CEO) and Jamie Loch (Chief Financial Officer)[15](index=15&type=chunk) - Registration and live webcast details are provided, with a replay available for approximately one year[16](index=16&type=chunk)[17](index=17&type=chunk) [Investor Relations Contact](index=6&type=section&id=Investor%20Relations%20Contact) For investor inquiries, please contact Rob Bennett, Investor Relations at Digi International, via phone at 952-912-3524 or email at rob.bennett@digi.com - Investor contact: Rob Bennett, Investor Relations, Digi International[26](index=26&type=chunk) - Contact details: Phone: **952-912-3524**, Email: **rob.bennett@digi.com**[26](index=26&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the use and limitations of non-GAAP financial measures and provides detailed reconciliations to their GAAP equivalents [Explanation of Non-GAAP Measures](index=5&type=section&id=Explanation%20of%20Non-GAAP%20Measures) This section clarifies that adjusted net income, adjusted net income per diluted share, and Adjusted EBITDA are non-GAAP measures, which are not substitutes for GAAP measures and have material limitations. However, management uses these measures to monitor and evaluate ongoing operating results and trends, and to provide investors with a view of core operating performance by excluding significant non-cash or non-recurring items such as amortization, stock-based compensation, and acquisition-related expenses - Adjusted net income, adjusted net income per diluted share, and Adjusted EBITDA are non-GAAP measures, not substitutes for GAAP measures, and have material limitations[22](index=22&type=chunk)[23](index=23&type=chunk) - Management uses these non-GAAP measures to monitor and evaluate ongoing operating results and trends, and to understand comparative operating performance[24](index=24&type=chunk) - These measures exclude items like reversals of tax reserves, restructuring charges, intangible amortization, stock-based compensation, and acquisition-related expenses to provide insight into core operations[24](index=24&type=chunk) [Non-GAAP Reconciliations](index=9&type=section&id=Non-GAAP%20Reconciliations) Detailed tables are provided to reconcile net income (loss) to Adjusted EBITDA and to reconcile net income (loss) and net income (loss) per diluted share to adjusted net income and adjusted net income per diluted share for the three months ended December 31, 2024, and 2023, outlining the specific adjustments made Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | | Three months ended December 31, | | :-------------------------------- | :------------------------------ | :------------------------------ | | | **2024** | **2023** | | Total revenue | $103,866 | $106,089 | | Net income (loss) | $10,083 | $(3,054) | | Interest expense, net | 2,294 | 5,661 | | Debt issuance cost write-off | — | 9,722 | | Income tax provision (benefit) | 1,013 | (222) | | Depreciation and amortization | 8,500 | 8,051 | | Stock-based compensation expense | 3,560 | 3,106 | | Restructuring charge | 159 | 103 | | Acquisition expense, net | — | (61) | | **Adjusted EBITDA** | **$25,609** | **$23,306** | Reconciliation of Net Income (Loss) and Net Income (Loss) per Diluted Share to Adjusted Net Income and Adjusted Net Income per Diluted Share (in thousands, except per share amounts) | | | 2024 | | | 2023 | | | :------------------------------------------------------ | :------ | :----- | :------ | :------ | :----- | :------ | | Net income (loss) and net income (loss) per diluted share | $10,083 | $0.27 | $(3,054) | $(0.08) | | Amortization | 5,765 | 0.15 | 6,238 | 0.17 | | Stock-based compensation expense | 3,560 | 0.09 | 3,106 | 0.08 | | Other non-operating (income) expense | (31) | — | 26 | — | | Acquisition expense, net | — | — | (61) | — | | Restructuring charge | 159 | — | 103 | — | | Interest expense, net | 2,294 | 0.06 | 5,661 | 0.15 | | Debt issuance cost write-off | — | — | 9,722 | 0.26 | | (1) Tax effect from the above adjustments | (2,736) | (0.07) | (3,913) | (0.11) | | (2) Discrete tax benefits | (362) | (0.01) | (182) | — | | **Adjusted net income and adjusted net income per diluted share** | **$18,732** | **$0.50** | **$17,646** | **$0.48** | | Diluted weighted average common shares | | 37,483 | | 36,715 | [Condensed Consolidated Financial Statements](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated statements of operations, balance sheets, and cash flows for the specified periods [Statements of Operations](index=7&type=section&id=Statements%20of%20Operations) The unaudited condensed consolidated statements of operations for the three months ended December 31, 2024, and 2023, show a shift from a net loss to a net income. Revenue decreased slightly, but gross profit increased due to lower cost of sales. Operating expenses rose, but a significant reduction in other expenses (including a prior year debt issuance cost write-off) contributed to the positive income before taxes Condensed Consolidated Statements of Operations (In thousands, except per share amounts) | | Three months ended December 31, | | :-------------------------------- | :------------------------------ | :------------------------------ | | | **2024** | **2023** | | Revenue | $103,866 | $106,089 | | Cost of sales | 39,468 | 44,989 | | Gross profit | 64,398 | 61,100 | | Operating expenses: | | | | Sales and marketing | 21,757 | 19,647 | | Research and development | 15,027 | 14,633 | | General and administrative | 14,255 | 14,687 | | Total Operating expenses | 51,039 | 48,967 | | Operating income | 13,359 | 12,133 | | Other expense, net | (2,263) | (15,409) | | Income (loss) before income taxes | 11,096 | (3,276) | | Income tax provision (benefit) | 1,013 | (222) | | Net income (loss) | $10,083 | $(3,054) | | Net income (loss) per common share: | | | | Basic | $0.27 | $(0.08) | | Diluted | $0.27 | $(0.08) | | Weighted average common shares: | | | | Basic | 36,680 | 36,129 | | Diluted | 37,483 | 36,129 | [Balance Sheets](index=8&type=section&id=Balance%20Sheets) The unaudited condensed consolidated balance sheets show a decrease in total assets from $815.075 million at September 30, 2024, to $796.113 million at December 31, 2024. This was primarily driven by reductions in accounts receivable, inventories, and long-term debt. Total liabilities decreased significantly from $234.040 million to $205.438 million, while total stockholders' equity increased Condensed Consolidated Balance Sheets (In thousands) | | December 31, 2024 | September 30, 2024 | | :-------------------------------- | :------------------ | :------------------- | | **ASSETS** | | | | Current assets: | | | | Cash and cash equivalents | $25,935 | $27,510 | | Accounts receivable, net | 64,928 | 69,640 | | Inventories | 50,184 | 53,357 | | Prepaid expenses and other current assets | 4,827 | 3,940 | | Total current assets | 145,874 | 154,447 | | Non-current assets | 650,239 | 660,628 | | **Total assets** | **$796,113** | **$815,075** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Current liabilities: | | | | Accounts payable | 27,049 | 23,759 | | Other current liabilities | 63,290 | 65,578 | | Total current liabilities | 90,339 | 89,337 | | Long-term debt | 94,952 | 123,185 | | Other non-current liabilities | 20,147 | 21,518 | | Total Non-current liabilities | 115,099 | 144,703 | | **Total liabilities** | **205,438** | **234,040** | | **Total stockholders' equity** | **590,675** | **581,035** | | **Total liabilities and stockholders' equity** | **$796,113** | **$815,075** | [Statements of Cash Flows](index=8&type=section&id=Statements%20of%20Cash%20Flows) The unaudited condensed consolidated statements of cash flows show a significant increase in net cash provided by operating activities, rising from $18.672 million in Q1 FY24 to $29.719 million in Q1 FY25, primarily driven by changes in accounts receivable and inventory. Net cash used in financing activities also increased, mainly due to debt repayments, resulting in a net decrease in cash and cash equivalents for the quarter Condensed Consolidated Statements of Cash Flows (In thousands) | | Three months ended December 31, | | :------------------------------------------ | :------------------------------ | :------------------------------ | | | **2024** | **2023** | | Net cash provided by operating activities | $29,719 | $18,672 | | Net cash used in investing activities | (577) | (292) | | Net cash used in financing activities | (30,540) | (20,376) | | Effect of exchange rate changes on cash and cash equivalents | (177) | 1,851 | | Net decrease in cash and cash equivalents | (1,575) | (145) | | Cash and cash equivalents, beginning of period | 27,510 | 31,693 | | Cash and cash equivalents, end of period | $25,935 | $31,548 |