Digi International(US:DGII)2019-08-10 01:45Financial Data and Key Metrics Changes - The company reported record quarterly revenues in its IoT Solutions business, achieving $10.7 million, a 35.5% increase year-over-year [20][26] - Total revenue for the quarter was within the guidance range of $60 million to $64 million, with adjusted EBITDA at $6.1 million, representing 10% of revenue [21][22] - Net income per diluted share was $0.06, also at the high end of the guidance range [22] - Cash position improved to $86.3 million, a 20% increase quarter-over-quarter and 38% from the beginning of the fiscal year [23][28] Business Line Data and Key Metrics Changes - IoT Products & Services revenue decreased by 7.2% year-over-year to $50.5 million, primarily due to the loss of one customer [24] - IoT Solutions segment revenue grew to $10.7 million from $7.7 million year-over-year, marking a record revenue quarter [26] - Gross margins for IoT Products & Services were 45.7%, down from 47.6% in the previous year, while IoT Solutions gross margins improved to 49.5% from 41.3% [25][27] Market Data and Key Metrics Changes - The company added nearly 4,500 new sites in its SmartSense IoT Solutions business, bringing the total to over 61,000 sites [13][20] - The company experienced growth across all verticals, with health services and food service leading the way [14] Company Strategy and Development Direction - The company aims to replicate success in large projects, with a significant purchase order expected to generate over $20 million in revenue [7][36] - There is a focus on combining device and cloud-based software to enhance customer experience and operational efficiency [43][44] - The company is biased towards using capital for acquisitions, particularly those with strong recurring revenue [17][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting revenue and earnings expectations for the fiscal year, anticipating sequential improvement in the fourth quarter [7] - The company is optimistic about the growth potential in its IoT Solutions segment and expects to continue adding new sites [39] - Management acknowledged challenges in the IoT Products & Services segment but is focused on improving gross margins over time [11][25] Other Important Information - The company is debt-free and has reduced inventory levels by $2.2 million [28] - A new Chief Financial Officer, Jamie Loch, joined the company, bringing extensive experience [16] Q&A Session Summary Question: What time frame do you expect to realize the $20 million deal? - The bulk of the project will be deployed in fiscal 2020, with margins above company averages [34] Question: Can you discuss the new product initiatives in your pipeline? - The new project is anchored by one of the newest cellular routers, and the team has combined device and cloud software for better customer service [42][43] Question: How should we think about the IoT Solutions business outlook? - The current fiscal quarter is expected to be slightly lower than the previous one, but the company anticipates adding 3,000 to 4,000 sites [39] Question: What is the appetite for larger acquisitions? - The company is looking for larger opportunities, especially those with strong recurring revenue, as it generates more cash [48] Question: How is the transportation vertical trending? - The transportation vertical is expected to continue declining in the near term, but the company is working on new products to mitigate this [53] Question: What percentage of revenue is from device management and recurring services? - The revenue is a blend of device management and professional services, but exact figures were not provided [63]