Digi International(DGII) - 2022 Q4 - Annual Report

Financial Performance - Consolidated revenue for fiscal 2022 was $388 million, an increase of 26% compared to fiscal 2021[184] - Net income for fiscal 2022 was $19 million, an increase of 87% from $10 million in fiscal 2021[184] - Annualized Recurring Revenue (ARR) exceeded $94 million at year-end, representing a 149% increase[185] - Consolidated operating income rose to $38 million, a 263% increase from $11 million in the previous year[184] - Diluted earnings per share increased to $0.54, up 74% from $0.31 in fiscal 2021[184] - Adjusted EBITDA for fiscal 2022 was $79.4 million, representing 20.5% of total revenue, compared to $48.3 million or 15.6% in fiscal 2021[209] - Net income for fiscal 2022 was $19.4 million, or $0.54 per diluted share, compared to $10.4 million, or $0.31 per diluted share in fiscal 2021[212] - Total revenue for fiscal 2022 was $388.2 million, up from $308.6 million in fiscal 2021[209] Revenue Growth - The acquisition of Ventus was completed for approximately $350 million, contributing significantly to revenue growth in the IoT Solutions segment[186] - IoT Solutions revenue increased by 103.7% for fiscal 2022, primarily due to additional recurring revenue from the Ventus acquisition[193] - IoT Products & Services revenue grew by 12.7%, attributed to increased sales of console server and cellular products[191] - The company anticipates continued growth in the IoT market, with a focus on expanding subscription and cloud monitoring services[187] Expenses and Costs - Total operating expenses increased by $21.9 million to $178.1 million in fiscal 2022, representing a 14.1% increase from fiscal 2021[199] - Sales and marketing expenses rose to $70.4 million, accounting for 18.1% of total revenue, up from 20.1% in the previous year[199] - Research and development expenses increased by 18.2% to $55.1 million, while general and administrative expenses surged by 43.3% to $58.5 million[199] - Interest expense increased significantly by 1,312.3% to $(19.7) million due to refinancing of the revolving loan[201] Cash Flow and Investments - Cash flows from operating activities decreased by $20.0 million, while cash flows used in investing activities decreased by $328.2 million[218] - Operating activities generated $37,740 in fiscal 2022, a decrease of 34.7% from $57,723 in fiscal 2021[219] - Investing activities resulted in a net outflow of $(349,528) in fiscal 2022, compared to $(21,365) in fiscal 2021[219] - Financing activities provided $192,782 in fiscal 2022, a significant increase from $62,242 in fiscal 2021[219] - The net increase in cash and cash equivalents was $(117,532) in fiscal 2022, contrasting with an increase of $98,303 in fiscal 2021[219] - There was a $41.4 million increase in inventory during the period, compared to a decrease of $13.6 million in fiscal 2021[219] - The company recorded an increase of $328.4 million used for acquisitions, primarily related to the acquisition of Ventus in November 2021[222] Foreign Operations and Currency Risk - The company had approximately $85.8 million in revenue related to foreign customers in fiscal 2022, with $0.8 million denominated in foreign currencies[228] - A 10.0% change in average exchange rates for the Euro, British Pound, Canadian Dollar, Indian Rupee, and Australian Dollar would have resulted in a 1.2% increase or decrease in stockholders' equity at September 30, 2022[258] - The average exchange rate for the Euro decreased by 7.5% from 1.1951 in 2021 to 1.1057 in 2022[260] - The average exchange rate for the British Pound decreased by 10.5% from 1.2718 in 2021 to 1.1377 in 2022[260] - The average exchange rate for the Canadian Dollar decreased by 1.8% from 0.7911 in 2021 to 0.7768 in 2022[260] - The company has not implemented a formal hedging strategy to manage foreign currency risk[257] Tax and Audit Matters - The effective income tax benefit rates were (4.1)% for fiscal 2022, compared to (15.2)% in fiscal 2021[202] - The company believes that liabilities for uncertain tax positions are properly stated and routinely monitors potential impacts[253] - No critical audit matters were identified during the current period audit of the financial statements[268] - The audit firm has served as the Company's auditor since 2016[269] - The accompanying notes are integral to the consolidated financial statements[271] Liabilities and Obligations - The total contractual obligations as of September 30, 2022, amounted to $355,149, with $38,113 due within one year[233] - As of September 30, 2022, the company had $250.0 million outstanding under its Term Loan and $0.0 million under its Revolving Loan[256] - Borrowings under the Term Loan Facility bear interest at a rate equal to LIBOR plus 5.00% or a base rate plus 4.00%, with a floor of 0.50%[256] - A 25 basis point change in interest rates would increase or decrease the company's interest expense by $0.6 million[256] - Goodwill for the SmartSense reporting unit was $49.5 million, with fair values exceeding carrying values by less than 10% as of June 30, 2022[249] - The total market capitalization was $852.0 million as of June 30, 2022, indicating a range of control premiums of (5.6)% to 7.9%[251]