Digi International(DGII) - 2024 Q4 - Annual Report

Financial Performance - Revenue for fiscal 2024 was $424 million, a decrease of 5% compared to fiscal 2023[182] - Net income for fiscal 2024 was $23 million, down from $25 million in fiscal 2023[182] - Total revenue for fiscal 2024 was $424.046 million, a decrease of 4.7% from $444.849 million in fiscal 2023[204] - Net income for fiscal 2024 was $22.505 million, representing 5.3% of total revenue, compared to $24.770 million or 5.6% in fiscal 2023[204] - Adjusted EBITDA for fiscal 2024 was $98.110 million, which is 23.1% of total revenue, up from $96.500 million or 21.7% in fiscal 2023[204] Revenue Breakdown - Annual Recurring Revenue (ARR) grew by 9% to over $116 million at the end of fiscal 2024[183] - IoT Products & Services revenue decreased by 6.1% to $324.4 million, driven by lower demand and inventory adjustments[188] - IoT Solutions revenue increased by 0.4% to $99.6 million, with a $5.6 million increase in recurring revenue[189] Profitability Metrics - Gross profit margin increased by 220 basis points to 58.9% in fiscal 2024[182] - The gross profit for IoT Solutions increased by 820 basis points to 73.0% due to higher margin subscription revenues[193] Operating Expenses and Cash Flow - Total operating expenses were $201.8 million, a slight decrease of 0.1% from fiscal 2023[194] - Cash flows from operating activities increased by $46.3 million to $83.092 million in fiscal 2024, driven by various factors including a $9.7 million debt issuance cost write-off[214] Debt and Financing - The company entered into a new credit agreement providing a $250 million senior secured revolving credit facility, replacing a prior $350 million term loan[210] - Debt payments in fiscal 2024 totaled $304.7 million, including $213.6 million to retire the prior credit facility[217] Tax and Reserves - The company reported an effective income tax rate of 1.5% for fiscal 2024, compared to 0.6% in fiscal 2023[197] - The company’s reserve for uncertain tax positions was $3.6 million as of September 30, 2024[221] Foreign Revenue and Currency Exposure - Revenue from foreign customers for fiscal years 2024, 2023, and 2022 was approximately $121.6 million, $121.1 million, and $85.8 million, respectively, with only $0.4 million, $0.8 million, and $0.8 million denominated in foreign currencies[223] - The average exchange rate for the Euro increased by 4.0% from 2023 to 2024, while the British Pound increased by 8.5%[245] - The company has not implemented a formal hedging strategy to manage foreign currency transaction risk, despite exposure to foreign currency translation risk[244] - A 10.0% change in the average exchange rate for major currencies would have resulted in an immaterial impact on fiscal 2024 annual revenue and a 1.0% change in stockholders' equity[245] Goodwill and Impairment - The company reported a total of $32.7 million of goodwill for the Cellular Routers unit, $57.1 million for Console Servers, $64.2 million for OEM Solutions, $20.4 million for Infrastructure Management, $48.9 million for SmartSense by Digi, and $118.6 million for Ventus, with no impairment recorded as of June 30, 2024[240] - The goodwill balance was $341.9 million as of June 30, 2024, allocated as follows: $32.7 million for Cellular Routers, $48.9 million for Smart Sense, and $118.6 million for Ventus[255] - The evaluation of goodwill for impairment involves significant estimates related to discount rates and forecasts of future revenue growth rates, gross margins, and EBITDA margins[255] - The audit identified goodwill for the Cellular Routers, Smart Sense, and Ventus reporting units as a critical audit matter due to the significant judgments made by management[256] Audit and Internal Controls - The financial statements for the year ended September 30, 2024, were presented fairly in all material respects in conformity with U.S. GAAP[250] - The Company received an unqualified opinion on its internal control over financial reporting as of September 30, 2024[251] - The audit was conducted in accordance with PCAOB standards to ensure reasonable assurance that the financial statements are free of material misstatement[253]