Digi International Reports Q1 Fiscal 2025 Results with Revenue Decline and Increased Net Income

Digi International Inc. reported its financial results for the first quarter of fiscal 2025, revealing a total revenue of $103.9 million, a decrease of 2.1% compared to $106.1 million in the same period last year. The company's product revenue fell to $72.8 million from $77.3 million, while service revenue increased to $31.1 million from $28.8 million. Despite the decline in overall revenue, Digi achieved a gross profit of $64.4 million, up 5.4% from $61.1 million, resulting in a gross profit margin of 62.0%, an increase of 440 basis points year-over-year.

The company experienced significant changes in its operating income, which rose to $13.4 million from $12.1 million in the prior year. This improvement was attributed to a reduction in the cost of sales, which decreased by 12.3% to $39.5 million, primarily due to lower product costs. Additionally, Digi's net income for the quarter was $10.1 million, a notable recovery from a net loss of $3.1 million in the previous year, translating to a net income per diluted share of $0.27 compared to a loss of $0.08 per share.

In terms of strategic developments, Digi International has focused on enhancing its Annualized Recurring Revenue (ARR), which increased by 11% to $120 million. The growth in ARR was driven by an increase in subscription-based services, particularly in the IoT Solutions segment, which saw revenue rise by 8.2% to $26.0 million. The company continues to emphasize transitioning to complete solutions that include software and service offerings, which are expected to provide more predictable revenue streams.

Operationally, Digi reported a decrease in customer demand for certain products, leading to a decline in one-time sales. However, the company noted a positive trend in recurring revenue, particularly from its SmartSense and Ventus offerings. The total number of shares outstanding as of January 31, 2025, was 36,899,190. The company also reported a decrease in total assets to $796.1 million from $815.1 million, primarily due to a reduction in cash and accounts receivable.

Looking ahead, Digi International anticipates continued challenges related to longer sales cycles and macroeconomic conditions that may impact revenue growth. The company remains committed to its strategic objectives of enhancing customer service and expanding its subscription offerings. Management expressed confidence in the company's ability to generate positive cash flows and maintain sufficient liquidity to support operations and capital expenditures in the coming year.