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DIGI INTERNATIONAL INC (DGII)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 delivered record revenue of $114.3M (+9% YoY) and record ARR of $152M (+31% YoY), with adjusted EPS of $0.56; GAAP diluted EPS was $0.26 .
  • Results beat Wall Street on revenue and adjusted EPS; revenue +3.2% vs consensus and adjusted EPS +10% vs consensus; Q1 FY26 guidance is broadly in line (revenue $114–$118M, adj EPS $0.53–$0.57) .
  • IoT Solutions accelerated (Q4 revenue $32M, ARR $120M) helped by the August Jolt acquisition; IoT Products & Services grew to $82M with rising attach rates and favorable mix .
  • Management reiterated a multi‑year plan to reach $200M ARR and $200M adjusted EBITDA by FY2028 and outlined AI-at-the-edge product initiatives as longer-term catalysts .

What Went Well and What Went Wrong

What Went Well

  • Record quarterly revenue of $114.3M and ARR of $152M; adjusted EBITDA rose to $29.2M (25.6% margin), reflecting mix and subscription growth .
  • IoT Solutions momentum: Q4 revenue $32M (+23% YoY) and ARR $120M (+30% YoY), with Jolt integration driving recurring growth and early cross‑sell opportunities .
  • CEO on strategic progress: “ARR… now represents approximately 35% of total revenue… the integration of Jolt Software with SmartSense is generating favorable market acceptance” .

What Went Wrong

  • GAAP profitability softened: operating margin down 170 bps YoY to 12.5% and GAAP diluted EPS down 19% YoY to $0.26; Q4 GAAP net income fell to $10.0M (‑16% YoY) .
  • IoT Solutions Q4 operating margin fell to 5.6% (‑640 bps YoY) due to higher depreciation from subscriber asset deployments and inventory-related expenses .
  • Net debt rose post Jolt deal: year‑end debt $159.2M and cash $21.9M (net debt ~$137.3M), reversing prior quarters’ deleveraging trend; management intends to continue deleveraging .

Financial Results

MetricQ4 2024Q2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$105.1 $104.5 $107.5 $114.3
Diluted EPS ($USD)$0.32 $0.28 $0.27 $0.26
Adjusted EPS ($USD)$0.52 $0.51 $0.53 $0.56
Gross Profit Margin %n/a62.1% 63.5% 63.9%
Adjusted EBITDA ($USD Millions)$26.3 $26.0 $27.6 $29.2
ARR ($USD Millions)n/a$123 $126 $152

Segment breakdown:

Segment MetricQ2 2025Q3 2025Q4 2025
IoT Products & Services Revenue ($USD Millions)$77.8 $80.0 $82.0
IoT Solutions Revenue ($USD Millions)$26.7 $27.5 $32.0
IoT Products & Services ARR ($USD Millions)$28 $30 $32
IoT Solutions ARR ($USD Millions)$95 $96 $120
IoT Products & Services Operating Margin %n/an/a15.2%
IoT Solutions Operating Margin %n/an/a5.6%

KPIs:

KPIQ2 2025Q3 2025Q4 2025
Cash from Operations ($USD Millions)$26 $24 $28
Inventory ($USD Millions, quarter-end)$38.6 $35.4 $38.9
Outstanding Debt ($USD Millions)$70.0 $40.1 $159.2
Cash & Equivalents ($USD Millions)$26.3 $20.1 $21.9
Net Debt ($USD Millions)$43.7 $20.0 $137.3
Weighted Avg Diluted Shares (Millions)37.52 37.65 37.96

Estimate comparisons (S&P Global):

MetricQ2 2025Q3 2025Q4 2025
Revenue Actual ($M)104.5107.5114.3
Revenue Consensus ($M)104.1*106.2*110.7*
Surprise ($M / %)+0.4 / +0.4%*+1.3 / +1.2%*+3.6 / +3.2%*
Primary EPS Actual ($)0.510.530.56
Primary EPS Consensus ($)0.48*0.50*0.51*
Surprise ($ / %)+0.03 / +6%*+0.03 / +6%*+0.05 / +10%*
EBITDA Actual ($M, SPGI)21.96*23.29*23.09*
EBITDA Consensus ($M, SPGI)24.13*25.84*26.97*
Surprise ($M / %)-2.17 / -9%*-2.55 / -10%*-3.88 / -14%*
Note: SPGI “EBITDA” may differ from company “Adjusted EBITDA,” which was $26.0M (Q2), $27.6M (Q3), $29.2M (Q4) .
Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q4 2025$106–$110 (Aug 6 PR) $108.5–$112.5 (Aug 18 Jolt PR) Raised
Adjusted EBITDA ($M)Q4 2025$25.5–$27.0 (Aug 6 PR) $26.0–$27.5 (Aug 18 Jolt PR) Raised
Adjusted EPS ($)Q4 2025$0.47–$0.51 (Aug 6 PR) $0.48–$0.52 (Aug 18 Jolt PR) Raised
Actuals vs GuidanceQ4 2025n/aRevenue $114.3; Adj EBITDA $29.2; Adj EPS $0.56 Beat all ranges
Revenue ($M)Q1 FY26n/a$114–$118 New
Adjusted EBITDA ($M)Q1 FY26n/a$28.5–$30.0 New
Adjusted EPS ($)Q1 FY26n/a$0.53–$0.57 (WADSO 38.4M) New
ARR Growth (%)FY26n/a~10% New
Revenue Growth (%)FY26n/a10–15% New
Adjusted EBITDA Growth (%)FY26n/a15–20% New
Long-term TargetsFY2028Prior commentaryARR and Adj EBITDA to $200M within ~3 years Reiterated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
AI/technology initiativesEmphasis on ROI and solutions; macro/tariff adaptability; rising ARR Exploring AI in products (search in apps, tiny language models at the edge) to enhance customer ROI Increasing focus
Supply chain & inventoryInventory normalization; continued management (Q2: $39M; Q3: $35M) Q4 inventory $38.9M; strong collaboration drove inventory down earlier; ongoing optimization Stable/improving
Tariffs/macro/geopoliticsOngoing uncertainty; agile response; profit outlook raised despite macro Government shutdown uncertainty elongates decisions; diversified vertical demand offsets softness Mixed
Product performance & attach ratesRising attach rates; ARR growth in P&S Attach rates approaching 100% in many lines; further improvement expected by FY2028 Improving
Data center tailwindsNoted demand projects; Opengear presence in data centers Opengear primary beneficiary; pacing driven by power/space constraints; utilities also invest Positive but paced
Regional trends (Europe)Global footprint, primarily North America 70%+ North America; 15–20% Europe; North America likely grows faster Stable
M&A & integrationAcquisition pipeline; focus on ARR and scale Jolt integrated; cross-selling underway; targeted accretion and EBITDA run-rate by end CY2026 Executing

Management Commentary

  • Strategic progress: “ARR… now represents approximately 35% of total revenue… the integration of Jolt Software with SmartSense is generating favorable market acceptance” .
  • AI vision: “Integrating AI as a search tool within our web applications and exploring the use of tiny language models at the edge… can enhance customer experience and unlock additional ROI” .
  • Capital allocation: “Acquisitions remain our top capital deployment priority… we expect double‑digit growth for ARR, revenue, and adjusted EBITDA in fiscal 2026” .
  • Long-term targets: “We are confident in our long-term goal of reaching $200 million of ARR and $200 million in adjusted EBITDA by the end of fiscal 2028” .

Q&A Highlights

  • Recurring revenue execution: Attach rates trending toward 100% with partner/channel embrace; continued progress expected in FY2026 .
  • Jolt dynamics & guidance: Jolt brought >$20M ARR; integration moves SmartSense toward enterprise sales; Q1 FY26 guidance deliberately incorporates synergies and one‑time revenue lift from data centers .
  • Macro uncertainty: Government shutdown adds uncertainty, extending cycles; some verticals accelerating decisions (utilities, data centers, medical) while others soften (residential solar) .
  • AI at the edge: Vision for autonomous edge decisions using domain‑specific tiny language models to reduce human intervention and improve response times .
  • Segment growth outlook: Cellular routers expected fastest growing; infrastructure management remains smallest; Opengear benefits from data center expansion .

Estimates Context

  • Q4 2025 results beat Wall Street consensus: revenue $114.3M vs $110.7M (+3.2%); Primary EPS $0.56 vs $0.51 (+10%)*.
  • Q2 and Q3 also modest beats on revenue and EPS; EBITDA (SPGI definition) lagged consensus while company Adjusted EBITDA beat and expanded each quarter, highlighting definitional differences*.
  • Q1 FY26 guidance (revenue $114–$118M; adj EPS $0.53–$0.57; adj EBITDA $28.5–$30.0) brackets consensus (revenue ~$115.9M; EPS ~$0.55; EBITDA ~$29.6).
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Solid fundamental beat in Q4 on revenue and adjusted EPS, with subscription mix rising (ARR 35% of revenue) and sequential EBITDA expansion—supportive for near-term sentiment .
  • Jolt integration is progressing; Solutions ARR and revenue acceleration suggest durable recurring growth, though near-term Solutions margins reflect higher depreciation and inventory costs .
  • Post-acquisition leverage increased; management will prioritize deleveraging, but M&A remains a top strategic lever to accelerate ARR and EBITDA targets .
  • AI-at-the-edge roadmap is a medium‑term catalyst for differentiation across verticals; Opengear should benefit most from data center expansion, albeit paced by infrastructure constraints .
  • Guidance implies steady execution into Q1 FY26 and FY26 with double‑digit top-line growth; estimate revisions likely skew positive for revenue/EPS, while EBITDA models should reconcile adjusted vs SPGI definitions*.
  • Watch mix dynamics (recurring vs one‑time), attach-rate progress, and Solutions margin trajectory as key drivers of multiple expansion .
  • Near-term trading: Bias to upside if the market prioritizes ARR growth and adj EPS beats; potential volatility around macro headlines and any updates to M&A/leverage path .