DIGI INTERNATIONAL INC Q4 FY2025 earnings call

Key Points - Delivered record Q4 revenue of $114M, up 9% Y/Y. - ARR reached $152M, a 31% Y/Y increase, with 4 consecutive quarters of double-digit ARR growth. - Full year revenue $430M, up 1% Y/Y; adjusted EBITDA $108M, up 11% Y/Y. - Paid off Ventas acquisition debt. - Integration of SmartSense and Jolt is progressing, with cross-selling opportunities emerging. - Leveraging AI in products, exploring edge AI and web app search tools. - Acquisitions remain top capital deployment priority with opportunities in industrial IoT.

In fiscal Q4 2025, Digi reported record quarterly revenue of $114 million, up 9% year over year. The ARR was $152 million, a 31% year-over-year increase, representing approximately 35% of total revenue. For the full fiscal year, revenue was $430 million, up 1% year over year, and adjusted EBITDA was $108 million, an 11% increase year over year. Free cash flow was $105 million, with inventory reduced due to collaboration between product lines and supply chain teams.

Fiscal 2026 - Expect double-digit growth in ARR, revenue, and adjusted EBITDA. ### Long-term - Aim to reach $200 million ARR and $200 million adjusted EBITDA by the end of fiscal 2028, with strategic acquisitions potentially accelerating this timeline.

Risks - Macro uncertainties and government shutdown creating market uncertainty and delays. - Geopolitical conditions causing suppressed normalcy in business decision-making.

Q: Thomas Allen Moll asked about P&S recurring revenue trends, success drivers, and segment potential.

A: Ron Konezny noted progress towards selling solutions, attach rate increase, and expectation of continued growth in FY '26.

Q: Scott Wallace Searle inquired about Jolt revenue contribution, pace of business, vertical demand, and government headwinds.

A: Jamie Loch and Ron Konezny discussed Jolt's ARR at acquisition, macro conditions causing delays, and verticals with accelerating decision-making.

Q: James Fish asked about AI tailwinds with large customers and Europe's status.

A: Ron Konezny mentioned OpenGear as primary AI beneficiary in data centers and Europe as a meaningful but North America-centric contributor.

Q: Josh Nichols asked about margin improvement, attach rates, and data center sales.

A: Jamie Loch and Ron Konezny discussed margin trends, attach rate progress, and data center as a contributor but not dominant.

Q: Anthony Stoss asked about product segment growth and macro confidence.

A: Ron Konezny said cellular routers likely to grow fastest, and macro uncertainty with some verticals investing.

Q: Greg Messinas asked about Jolt acquisition accretion.

A: Jamie Loch said teams are executing well towards integration and synergy goals.