(Minneapolis, MN, April 21, 2011) – Digi International® Inc. (NASDAQ: DGII, www.digi.com) reported revenue of $49.7 million for the second quarter of fiscal 2011, compared with $45.1 million for the second quarter of fiscal 2010, an increase of $4.6 million, or 10.3%. Net income was $2.2 million, or $0.09 per diluted share, in the second quarter of fiscal 2011 compared to $1.7 million, or $0.07 per diluted share, in the year ago comparable quarter, an increase of $0.5 million, or 32.7%. Financial highlights for the second quarter of fiscal 2011 include:
- Revenue of $49.7 million in the second quarter of fiscal 2011 grew by 10.3% compared to the second quarter of fiscal 2010 and by 2.9% compared to the first quarter of fiscal 2011.
- North American revenue increased by $3.2 million, or 12.1%, in the second quarter of fiscal 2011 compared to the year ago comparable quarter, and increased sequentially from the first quarter of fiscal 2011 by $2.0 million, or 7.1%. Revenue in all other geographic regions increased by $1.4 million, or 7.7%, in the second quarter of fiscal 2011 compared to the year ago comparable quarter, and decreased sequentially from the first quarter of fiscal 2011 by $0.6 million, or 2.9%.
- Operating income was $3.7 million, or 7.4% of net sales in the second quarter of fiscal 2011 compared to $2.2 million, or 4.9% of net sales in the second quarter of fiscal 2010.
“I’m very pleased with our strong financial performance this quarter,” said Joe Dunsmore, Digi’s Chief Executive Officer. “More importantly, we are continuing to see large lead customers accelerating their deployment of our wireless M2M solutions across our targeted vertical markets. Our sales pipeline is ramping, with increased visibility including large purchase orders from customers in the fleet management and medical device verticals. As a result, I am optimistic as we move into the second half of our fiscal year that our revenue and profitability momentum will continue.”
Business Results for the Three Months Ended March 31, 2011
Revenue from embedded products in the second quarter of fiscal 2011 was $22.4 million compared to $20.2 million in the second quarter of fiscal 2010, an increase of $2.2 million, or 10.9%. Revenue from non-embedded products was $27.3 million in the second quarter of fiscal 2011 compared to $24.9 million in the second quarter of fiscal 2010, an increase of $2.4 million, or 9.8%.
Revenue in North America was $29.7 million in the second quarter of fiscal 2011, compared to $26.5 million in the second quarter of fiscal 2010, an increase of $3.2 million, or 12.1 %. Revenue in EMEA (Europe, Middle East and Africa) was $12.0 million in the second quarter of fiscal 2011, compared to $12.3 million in the comparable quarter a year ago, a decrease of $0.3 million, or 2.6%. Revenue in the Asia countries was $6.8 million in the second quarter of fiscal 2011, compared to $5.3 million in the second quarter of fiscal 2010, an increase of $1.5 million, or 28.7%. Latin American revenue was $1.2 million in the second quarter of fiscal 2011, compared to $1.0 million in the comparable quarter a year ago.
Gross profit was $25.7 million in the second quarter of fiscal 2011 compared to $22.7 million in the same period of the prior year, an increase of $3.0 million, or 12.8%. The gross margin was 51.6% in the second quarter of fiscal 2011 compared to 50.5% in the second quarter of fiscal 2010. The gross margin was higher in the second quarter of fiscal 2011 than in the comparable period a year ago primarily due to favorable product mix, product cost reductions, and reduced amortization of purchased and core technology.
Total operating expenses in the second quarter of fiscal 2011 were $22.0 million, or 44.2% of revenue, compared to $20.6 million, or 45.6% of revenue, in the second quarter of fiscal 2010. The increase in operating expenses in the second quarter of fiscal 2011 compared to the same quarter of the prior year is primarily due to increased investment in the iDigi® platform and the full reinstatement for fiscal 2011 of the incentive compensation program which had been only partially reinstated in fiscal 2010. Operating expenses in the second quarter of fiscal 2010 benefited by $0.4 million, or 0.8% of revenue, due to a reduction of the restructuring reserve because expenses associated with the plan were less than expected.
Digi reported operating income of $3.7 million, or 7.4% of net sales, in the second quarter of fiscal 2011 compared to $2.2 million, or 4.9% of net sales, in the second quarter of fiscal 2010.
Net income was $2.2 million in the second quarter of fiscal 2011, or $0.09 per diluted share, compared to $1.7 million, or $0.07 per diluted share, in the second quarter of fiscal 2010. Net income benefited by $0.2 million, net of taxes, or $0.01 per diluted share, during the second quarter of fiscal 2010 as a result of a reduction of the restructuring reserve.
Business Results for the Six Months Ended March 31, 2011
For the six months ended March 31, 2011, Digi reported revenue of $98.1 million compared to revenue of $88.0 million for the six months ended March 31, 2010, an increase of $10.1 million or 11.4%. Revenue from embedded products for the first six months of fiscal 2011 was $43.5 million compared to $38.2 million in the first six months of fiscal 2010, an increase of $5.3 million or 13.7%. Revenue from non-embedded products was $54.6 million in the first six months of fiscal 2011 compared to $49.8 million in the first six months of fiscal 2010, an increase of $4.8 million or 9.6%. Net sales in the first six months of fiscal 2011 were unfavorably impacted by foreign currency translation of $0.4 million when compared to the same period in the prior fiscal year.
For the six months ended March 31, 2011, Digi reported net income of $4.6 million, or $0.18 per diluted share, compared to net income for the six months ended March 31, 2010 of $2.9 million, or $0.12 per diluted share. Net income for the first six months of fiscal 2011 benefited by $0.6 million, or $0.02 per diluted share, resulting from a reversal of tax reserves for various jurisdictions’ tax matters and the enactment of legislation extending the research and development credit that allowed Digi to record tax credits earned during the last three quarters of fiscal 2010 in the first quarter of fiscal 2011. Net income benefited by $0.2 million, net of taxes, or $0.01 per diluted share, during the first six months of fiscal 2010 as a result of a reduction of the restructuring reserve.
Digi’s cash and cash equivalents and marketable securities balance, including long-term marketable securities, was $95.9 million at March 31, 2011, an increase of $4.3 million from December 31, 2010. Please refer to the Condensed Consolidated Statements of Cash Flows which are included in this earnings release for additional cash flow details. At March 31, 2011, Digi’s current ratio was 6.8 to 1 compared to 6.5 to 1 at December 31, 2010.
Second Fiscal Quarter 2011 Business Highlights:
Smart Grid Related Announcements
- Calico Energy Services, a market leader in smart grid data management solutions and services for utilities and power providers, and Digi announced the availability of an integrated smart grid technology solution for energy and demand management. The solution is built upon the Digi X-Grid™, which provides device connectivity infrastructure, and Calico Energy’s EIS™ platform, which provides a complete utility energy management solution coupled with residential and commercial load control.
- Building on its Itron partnership and Digi X-Grid offering, Digi introduced “Smart Grid Now” bundles that make it easy and cost effective for utilities to conduct energy management pilot programs and offer a broad range of new energy efficiency services to their customers. Ready-to-go pilot programs include Google PowerMeter, iPhone and Android applications, Itron ERT meter connectivity, Smart Energy meter and thermostat control and other innovative solutions for Smart Grid deployments. With Itron ERT meter connectivity these bundles are equally effective in areas with Advanced Meter Reading (AMR) or Advanced Metering Infrastructure (AMI) networks in place.
- Showing increasing penetration in the Europe energy market, Digi and Green Energy Options announced at the E-World Energy and Water Exhibition that they are planning to develop a real-time, web-based energy management system for the European utility market. The new system is based on the iDigi Device Cloud and Digi X-Grid offering.
- In the rapidly evolving electric car infrastructure market, Digi announced a relationship with one of the market leaders. Better Place is using its Digi TransPort® 6410 high-speed cellular router to connect electric vehicle docking stations to the Better Place electric car network around the world. This enhances energy-demand management by allowing utilities to minimize charging requirements during peak electricity consumption hours.
- Digi announced that Lessoil is using the ConnectPort X4 wireless gateway, XBee ZigBee environmental sensors and iDigi Device Cloud to wirelessly connect its energy conservation systems. Lessoil provides energy conservation services and maintenance to multi-family property owners in the Northeast.
Key Wireless Announcements and Partnerships
- Digi extended its partnership with Freescale Semiconductor and extended the ConnectCore i.MX product family with its new iDigi-enabled wireless module, the ConnectCore™ Wi-i.MX53. The new module enables wired and wireless networking of multimedia products requiring high-end processing power and high-definition video display capabilities. It connects to the iDigi Device Cloud out of the box, allowing customers to easily develop cloud-connected wireless multimedia devices.
- Further deepening the relationship with Freescale Semiconductor to include wireless design services, Digi announced that Spectrum Design Solutions, Digi’s wireless design subsidiary, will offer custom design support for companies developing wireless products with Freescale’s advanced i.MX53 application processor. From a custom baseboard development around the module to a full chip down design, Spectrum helps customers get new products to market quickly using Freescale’s popular i.MX technology.
- • Digi introduced the XPress™ Crypto Module, the industry’s first cryptographic embedded module for developing wireless and wired devices that meet stringent federal cryptography standards required for many government, financial and other regulated industries.
Fiscal 2011 Guidance
For the third fiscal quarter of 2011, Digi projects revenue in a range of $51 million to $56 million. Digi projects net income per diluted share in a range of $0.11 to $0.16 cents.
For the full fiscal year 2011, Digi projects revenue in a range of $200 million to $212 million, which is an increase of $5 million at the lower end of the range from the guidance previously provided. Digi anticipates that the most likely full-year revenue will be approximately $206 million. Digi projects annual net income per diluted share to be in a range of $0.40 to $0.52, which is an increase of $0.12 at the lower end of the range from the guidance previously provided. The projected annual net income per diluted share of $0.40 to $0.52 is an increase of 11.1% to 44.4% over net income per diluted share for fiscal 2010.
Second Fiscal Quarter 2011 Conference Call Details
Digi invites all those interested in hearing management’s discussion of its quarter, on Thursday, April 21, 2011 after market closeat 5:00 p.m. EDT (4:00 p.m. CDT), to join the call by dialing (866) 770-7125 and entering passcode 17696382. International participants may access the call by dialing (617) 213-8066 and entering passcode 17696382. A replay will be available two hours after the completion of the call, and for one week following the call, by dialing (888) 286-8010 for domestic participants or (617) 801-6888 for international participants and entering access code 99981013 when prompted. Participants may also access a live webcast of the conference call through the investor relations section of Digi’s website, www.digi.com.