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Investing.com -- Shares of Digi International (NASDAQ: NASDAQ:DGII) surged 17.5% following the company’s release of its first quarter financial results, which surpassed Wall Street’s earnings per share (EPS) expectations. The IoT solutions provider reported a first quarter EPS of $0.50, $0.05 higher than the analyst estimate of $0.45. However, revenue was slightly below the consensus estimate of $104.08 million, coming in at $104 million.
Despite a 2% decrease in revenue compared to the first quarter of the previous year, Digi International experienced several positive financial shifts. The company’s gross profit margin improved significantly, rising by 440 basis points to 62.0%. Net income also turned around, from a net loss of $3 million to a profit of $10 million. Additionally, the adjusted net income per diluted share increased from $0.48 to $0.50, and the adjusted EBITDA saw a 10% rise to $26 million.
The company’s Annualized Recurring Revenue (ARR) grew by 11% to $120 million at the end of the quarter, indicating a strong year-over-year performance. This growth was attributed to the company’s strategic focus on delivering Internet of Things (IoT) solutions that provide a return on investment, which has driven double-digit ARR growth.
Digi International’s President and CEO, Ron Konezny, highlighted the company’s robust start to the fiscal year and emphasized the importance of their adaptable and resilient business model in the face of a challenging industrial economy. The company also made significant strides in reducing its debt, with a net debt of $69.1 million after accounting for cash and cash equivalents.
Looking ahead, Digi International expects second-quarter EPS to be between $0.46 and $0.50, aligning with the consensus estimate of $0.48. The company has set a goal to grow its ARR to $200 million within the next four years, with strategic acquisitions potentially accelerating this timeline.
Piper analyst James E. Fish commented on the company’s performance, stating, "We see a stronger IT-spending backdrop, including around datacenter refresh, as creating a favorable backdrop for Digi in 2025." This suggests that the broader market dynamics could be favorable for Digi’s business moving forward.
Investors appear to be responding positively to Digi International’s ability to generate cash and manage its debt effectively, even as it navigates a complex macroeconomic environment and maintains a cautious outlook for the fiscal year 2025.
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