Q3 2021 Digi International Inc Earnings Call
As Vince Tese Press Star Zero, I would now like to hand, the conference over to your Speaker today, Jamie Loch Chief Financial Officer. Please go ahead.
Thank you joelle.
I mean, everyone and thank you for joining us today to discuss the fiscal 2021 third quarter results for Digi International.
Joining me on today's call as well.
And CEO, Ron will provide his thoughts on our business and I will follow with the highlights of our financial performance. Following our prepared remarks, we'll take your questions.
We issued our earnings release shortly after the market closed today, you may obtain a copy through the financial releases section of our Investor Relations website at Digi Dot com.
Some other statements that we made during this call are considered forward looking and are subject to significant risks and uncertainties. These statements reflect our expectations about the operating and financial performance and speak only as of today's date.
We undertake no obligation to update publicly or revise these forward looking statements.
While we believe the expectations reflected in our forward looking statements are reasonable we give no assurance such expectations will be met or that any of our forward looking statements will prove to be correct.
For additional information please refer to the forward looking statements section in our earnings release today and the risk factors section of our 2020 form 10-K, and subsequent reports on file with the SEC.
Finally, certain of the financial information on this call includes non-GAAP measures the information required to be disclosed about these measures, including reconciliations to the most comparable GAAP measures are included in the earnings release.
The earnings release is also an exhibit to a form 8-K that can be accessed through the SEC filing section of our Investor Relations website web site.
Now I'll turn the call over to Ron.
Thank you, Jamie and welcome to Digi International Inc, 2021, third fiscal quarter earnings call yet another record quarterly revenue, which is up double digit over last year's results and record annualized recurring revenue headline or most recent results in.
In addition, smart sensor Iot solutions leader had a record quarter of building their customer base to over 79000 subscribers. We also closed our second acquisition of the year and bringing the <unk> team into the Digi family.
We generated nearly $21 million in cash, bringing our net cash position to nearly $100 million positioning us well for future further acquisition activity.
Our industrial customer base is accelerating their digital transformation increasingly they are looking to compress time reduce risk and get effective solutions to market.
Did she is an ideal partner for those customers and opportunities, which is showing with record bookings and backlog.
Our results could have been even better if it were not for widely known electronics and semiconductor supply chain challenges combined with higher transportation costs and friction that are restraining our growth rates and impacting our margins.
We are fighting through these challenges, but expect them to persist into 2022.
We will continue to prioritize our customers to meet their critical needs.
Now a few comments on each of our business segments.
The Iot products and services segment grew over 5% year over year, all product lines contributed to the growth with the exception of our cellular router business, our newly or will take over this business this quarter and we expect improved results over time.
Recurring revenue of nearly $13 million grew $1 million quarter over quarter, driven by enhanced attach rates of our device management software across our cellular enabled products.
And gear, our console server business had record bookings, which led to a record backlog heading into fiscal Q4. In addition, the team further their customer focus with the launch of lighthouse enterprise automation edition.
OEM solutions had a record quarter and booked a record $60 million in business. During the quarter. In addition, the team launched Laura development kits in partnership with our channel partners.
Infrastructure management continued its year over year growth and is integrating <unk> into its business, which will further propel its growth as we attack industrial verticals like water management.
Cellular received orders in smart cities signaling the potential return of this verticals health and contribution.
We continue to bundle world class reliable secure hardware with 24 by 7 expert support and leading cloud software to offer compelling value propositions, our customer centric approach will be our north star as we launch our enhanced customer and partner portals this quarter to improve the customer experience.
Smart sense.
Our Iot solutions business added over 3000 subscribers in the quarter, driven by healthcare and grocery verticals.
Customer retention remains strong as a result of our strong customer and service orientation.
We ended the quarter for over $23 million in annualized recurring revenue and over 79000 subscribers. This this represents nearly 37% growth.
And annualized recurring revenue over last year, and a 14% increase in our subscriber base. These.
These metrics show, we are bringing on new customers at higher.
Average revenue per month than the installed base showing increased value of the offering.
The team released their next generation Bluetooth sensor and added key features and reports for our healthcare and grocery customers.
Smart sense for the destination platform in consolidation of the cloud and mobile interface now services, approximately 30000 subscribers or 38% of our total customer base.
Foodservice continues to be a growth area of focus and we improve.
Our digital cash management and reporting tools to attract this segment.
Smart Smart sensor Iot solutions brand continues to lead an underpenetrated market that is a multibillion dollar opportunity we will not take our leadership position for granted and are investing heavily in both the offering and reducing the time to value for our customers.
At the corporate level, we had some notable achievements, we now have over $36 million in annualized recurring revenue across the entire company demonstrating the growth of Iot solutions and the increasing prominence of software and our Iot products and services business. This is up 28% from last year and $2 million from last quarter.
Our supply chain team is working double time to meet our partner and customer commitments. Many times at much higher component and freight costs, showing our commitment to customer success.
The acquisition pipeline remains robust and we are active but disciplined in putting our capital to use.
Have the potential to offer more customer value, while building, both our profitability and recurring revenue positions.
While vaccines have been effective and available the delta variant of the Covid pandemic is causing more disruption urge everyone to get the vaccine to help themselves and others.
I remained odd by the commitment and flexibility of the Digi team, we continue to face unique challenges and rice vacation a heartfelt. Thank you to my teammates.
I will now turn the call over to Jamie for more detail on our financial performance.
Thanks, Ron and good afternoon, everyone.
Today I'll start with the key financial highlights that contributed to the results of our third fiscal quarter.
<unk> continues to set records in this quarter was no exception record revenue record <unk>.
<unk> was able to deliver to our customer at record levels in the face of extremely dynamic global macroeconomic conditions, such as the global supply chain and free challenges being felt by so many companies as well as the global spread of the Delta variant, causing disruption to the path to normalcy.
We delivered a record $79.1 million of revenue, which represents 4.4% organic growth over prior year.
Gross margins were 53, 8% up to an adjusted EBITDA of $11.6 million or 14, 6% of revenue.
Gross margins, excluding amortization was <unk> 55, 2% for the quarter.
On a per diluted share basis, our GAAP EPS was <unk> 90, <unk> and our non-GAAP EPS for the quarter was 25 per diluted share.
Revenue adjusted EBITDA and adjusted EPS, All beat consensus estimates for the quarter and all were up for high end of the ranges we provided in our guidance.
We have reached record highs and overall recurring revenue total annual recurring revenue was about $36 million up nearly 28% from prior year and 6.5% from the prior quarter.
Current revenue in our solutions business increased nearly 37% year over year and 7% from prior quarter where free.
Net revenue at our Iot products and services business increased nearly 13% year over year and 4% from prior quarter.
Although some of the other financial highlights Digi continues to generate strong cash flows and indicator of the value our customers receive from digi and products, we've generated $28 million in the third fiscal quarter of 2021, and $42.1 million in operating cash flow year to date in fiscal year 'twenty 1.
We maintain our expectation that we will continue to generate positive operating cash for the foreseeable future.
We have for fiscal quarter with $146.9 million in cash, which works out to a net cash positive position $98.8 million.
Our ending debt now stands at $48.1 million. These figures do not consider the treatment of leases, which based on the new accounting standards will at $19.1 million or where it is now classified as debt on the books.
We are in compliance with our bank facilities covenants and expect to remain in compliance.
Other balance sheet items of note our <unk>, our position is $41.3 million down $3.1 million sequentially from our last fiscal quarter with no material changes to reserves.
Our ending inventory balance was $47.3 million down $4.1 million sequentially from our last fiscal quarter end with no material used towards reserves.
Current inventory in the channel was $26.4 million down $1.4 million sequentially, we model under those levels closely and regularly.
If we look and look into segment performance LG products and services revenue increased 5.3% year over year in the third fiscal quarter of 2021 to $66.8 million.
Gross margins increased 170 basis points to 55, 1%.
Gross margins, excluding amortization were 56, 1% for the coal for.
The year over year impact was driven primarily by sales in our console server and embedded product portfolios.
That growth was significantly tempered by supply chain and free challenges as bookings for the quarter out for revenue.
The increase in margin rate is driven by favorable mix within the N. Among our console server cellular router embedded an XP product portfolios, partially offset by increased production and distribution costs due to the global supply chain and free channels.
Annual recurring revenue increased 13% from prior year to $12.5 million operating income decreased 400000 year over year to $6.1 million for the third fiscal quarter, driven partially by increased operating expenses, including items that are added back for adjusted EBITDA for this.
But not for segment operating margin.
Iot solutions had another quarter for the record books.
The key measurements of the health and performance of our solutions business, our sites and <unk>.
Our site count grew by approximately 3000 growth site at pushing our total site count just over 79000.
Recurring revenue increased 7.3% sequentially and nearly 37% year over year to an annual recurring revenue number of $23 for it.
That's a key contributor to overall revenue growth of $78.6 year over year in the third fiscal quarter of 2021 to a record $12.3 million in revenue delivering a 52% gross margin.
Gross margins, excluding amortization was 57, 7% for the quarter.
We continue to invest to support the growth objectives of Iot solutions. The operating performance for solutions for the quarter improved $1.5 million year over year, resulting in a $2.1 million loss compared to the prior year loss of $3.6 billion.
Now as it is.
The forward looking guidance as we noted last quarter, we have confidence in our execution and our performance even in the midst of growing supply chain and free challenges and the ongoing global pandemic.
We are providing guidance for our fiscal fourth quarter as follows the current supply challenges have the potential to impact results.
Non indicative of customer demand.
Allocation of certain materials could potentially lead to revenue, having an upper limit that is independent of orders.
We expect revenue of 75% to $79 million, providing growth year over year of 2.5%.
Using our Q3 fiscal 'twenty, 1 diluted share count of approximately 35 million shares we expect our GAAP EPS to be between 7 and 9 per diluted share.
We expect our adjusted EPS to be between $23.25 per diluted share with adjusted EBITDA to be between $10.9 and 11.9.
We believe that our strong balance sheet position combined with the performance we've seen in our pipeline are leading indicators of the value Digi provides for our customers and helping them to run their missions for.
<unk> during a time of global capital and liquidity concerns.
That concludes our prepared remarks, we're now available to take your questions Joelle. Please provide the instructions to our callers.
Thank you and as a reminder to ask a question simply press star 1 on your telephone to withdraw your question press the pound or hash key.
We have a question from the line of harsh Kumar with Piper Sandler.
Yeah, Hey, guys, great job on the quarter, particularly growing IRR number and it's really impressive and executing well and the spike in share an environment that actually is what I wanted to ask the first question on last quarter. It was eye opening how much the freight cost were and how much pressure that put on the margin I was curious.
John or Jamie if you could.
Give us an idea of what your normalized gross margin. If this was a normal ones and you didn't have freight costs, how much volume margins and how much revenue did you potentially need behind because of supply pressure this quarter.
Harsh it's a really good question and nice to hear your voice.
We were like a lot of companies were struggling to get components and then when we do there is oftentimes we have to pay more for those components and then.
And then there's just still a lot of friction in the supply chain in terms of freight and transportation both growth higher cost, but also challenges with labor, whether they'd be at ports or sometimes a contract manufacturer. So.
The way, we think about it is it probably cost us a percentage point or 2.
On the gross margin side.
And if you look at our inventory inventories down about 10% and that kind of gives you a feel down about $5 million, we've been pretty flat up until this quarter. So you can see we're really struggling to keep up with.
The demand and that could kind of give you a point of view for for the current quarter as well as as we did last quarter. We bake these supply chain challenges into our guidance. So we're not expecting to get the relief. We think we're leaving at least $5 million of revenue on the table in the current quarter FQ4 because we're just not able to get all of the components of our cash.
For us knee.
Hey, I appreciate it that was a pretty clear. So my next question was.
Economies reopening.
You guys have been putting up numbers that are above your long term model I was curious I'm going to push you a little bit here and ask maybe.
You're managing very well to this so when can we expect.
The model to sort of change on a permanent basis, because <unk> been performing so on an operating above model in these tough times.
I wish I knew the exact answer when we book.
At our supplier base, we look at certainly our friends and competitors I think we're going to be fighting these supply chain issues well into 2022.
I think it starts improving as we get into 2022 and our best guess is there is a potential for mid 2022 for there to be.
Quote unquote normalized environment now we've got a lot of factors that.
Flow into that algorithm, what's going to happen with Covid and how are we going to see an additional variance like the lambda variant that share causing problems.
Are we going to see stimulus have even more pressure on the supply chain. So so theres a lot of assumptions baked into that statement, but but we think we're going to have to fight through this for the next few quarters here, but that we'll start seeing improvement in 2022, it might not be until mid 2022 until you.
Normalized but.
But we're going to be working hard every day to accelerate net.
That's fair Ron and my last question I'll get back in the queue.
Maybe you could paint for US a picture of your smart change competitive landscape I know you are the big guys, but.
Maybe you could paint for US a picture of how big you are relative to the others and if there's anybody even remotely close that you feel like can compete with you we would love to.
Educated on that front.
Yeah harsh we still think we're the leader although its an.
Early market and so we don't want to take that leadership position for granted we think we're we've distanced ourselves quite a bit from our competitors. When we when we do benchmark ourselves against competitors, we still see generally.
Mahler younger companies that.
Our 510000 sites in size and probably a little bit more focused on specific verticals.
But again, we can't take that for Rand, we ought to continue to invest in our system and our in our customer success.
And expand into additional markets. So we still think we've got a great leadership position, but we're not going to we're not going to take that for granted.
And Ron if I could ask you. Another fund that was for hardware side is there anybody that has the kind of like enterprise software and cloud capabilities to offer on the on the smartphones with respect to managing that.
Net temperature chain.
Yes, there's a lot of companies that we will do 1 piece of it they might do the software piece and then rely on third parties for hardware.
For the inverse that people that provide hardware, but then partner with other companies for the software piece, we think we're unique harsh and that we.
Has a complete suite under our design authority, which provides incredible security for our customers, but allows us to innovate and react more quickly across the entire stack. So we think that's a unique attribute and advantaged for smartphones.
Guys. Thank you so much.
Our next question is from Mike Walkley with kind of court.
Great. Thanks for taking my question, how companies doing well on the call.
Ron just wanted to dig into the cellular router gateway business creative points spend part of Ericsson for quite some time, yes, Sierra wireless has some senior management shakeup that sounds like you're putting some new leadership in front of a lot of your business. There has there been any change in competitive dynamics that you think could benefit digi or maybe just how do you feel about your overall positioning within that.
That line of your business.
Yeah, Mike It's first of all good to hear your voice and I hope everybody is safe and healthy with you and.
And Mike. This is an area, we feel like we've got an opportunity to do better.
We think we've underperformed to some extent, we've got some real strength in the industrial side and with smart cities and we're seeing some.
Really nice improvement in mass transit in those areas, but there is so much more potential we have we have decided to put some new leadership in place.
And the competitive dynamics haven't changed that much really the the book.
But we do think there is a really important role that digi can play and we're not getting our fair share.
That's it that's helpful and then.
I know it's a.
It's tricky with all the supply constraints.
But if you look at your demand for either Ron or Jamie do you think your demand supports more double digit year over year growth and its supply that's kind of leading to the single digit growth and Jamie just you guys continue to put up impressive cash from operations in your quarters is there any opportunity maybe to use that strong balance sheet to buildup.
Inventory to maybe put you ahead of your competitors in terms of these tough supplier constraints.
Yes.
Jamie I'll kind of tag team. This 1.
First we did grow double digit this last quarter with with over 12% growth and so we think that's the type of performance, we're capable of delivering on a sustained basis.
And certainly as you look to next quarter.
Absolutely supply chain constrained, we have record bookings record backlog.
And.
1 other questions, we often times, we ask ourselves and get asked are we seeing double or triple bookings. That's not the case, we're seeing people commit to longer time periods than they have in the past because they recognize the challenges with lead times and inventory.
This is solid business with well known customers and we are using our balance sheet to our advantage in taking inventory positions in particular on critical components that.
Challenge is really the allocation we are only allocated so much of certain critical components in a device may have over 100 components that were missing 1 of course, we can't complete that solution for our customers. So the fight is almost exclusively around getting that allocation of critical components to meet our needs. So we absolutely think.
We're capable of consistent double digit growth.
We're absolutely can supply chain constrained and we are prioritizing our customers first we are paying more for components when they're available we're bearing the cost of increased transportation and freight but it is it is a component availability challenge I'll, let Jeremy answer the cash question.
I think.
Mike I think we'd be interested and willing youre right. We continue to generate strong operating cash.
That trend has continued on for for an extended period of time. So I think we've got a good cadence there I think we would absolutely be interested and willing to.
To utilize that cash into adding into the inventory balances, but that allocation is really.
Okay, that's hampering our ability to do that.
Okay. Thanks.
Difficult supply environment out there and you guys seem to be better than other last question for me I'll pass it on just interested on the Iot solutions business. Just what are you seeing in the restaurant industry I know, it's been a hard hit industries.
Hopefully they stay reopened the hard to call it to Delta variant, but it's also an extremely understaffed industry. So is it maybe improving a pipeline at least as longer term opportunities just given how short staffed.
These restaurants are in your services could certainly help that out.
And Mike you hit the nail on the head as we.
Reopened in.
Hopefully, we won't go backwards for either too long or at all in some cases, but.
But listen I think as a society we.
We are are are trending towards eating out more and more and I don't think that's going to stop.
To your point, we've got not only a huge labor challenges but.
But also the increased business that a lot of our customers who are seeing by both servicing and dining as well as take out. So a lot of us has probably witnessed a full restaurant, but then a small cart with takeout orders. So so the ability to automate routine tasks the ability to understand performance has never been more critical so tons of <unk>.
And demand and we're seeing people and if anything accelerate their digital transformation efforts and relying more on third parties than trying to do things themselves.
And so and that really portends, well for the smart sensor offering and taking advantage of that particular market segment.
Okay.
That's why I hope everybody stays healthy.
Thanks, Mike Thanks, Mike.
Thank you. Our next question comes from Anthony Stoss with Craig Hallum.
Hey, Ron and Jamie.
Just following up on all the comments related to component shortages in China.
Good allocations and your comment about it continuing until the middle of 2022, I know you're only guiding for September but it seems to me and help me if I'm wrong that you are probably in the simple a revenue range through may.
Maybe the June quarter of next year or any light that you can try on and that would be helpful. And then maybe Ron I'd love to hear more about the <unk> acquisition. The rationale kind of the gross margin profile motto revs anything you'd be willing to share there as well thanks.
Yeah, Hey, Tony good to hear your name and voice in.
Listen at the supply chain challenges are so dynamic it's extremely difficult to project and predict.
I can't complement our supply chain team enough for how well they've performed in a very difficult environment and last quarter's results. I think are 1 measure of that performance. In addition to our frontline workers, staying safe and healthy and working in shifts and wearing masks.
They're going through a lot more than that a lot of the rest of the of the digi team, but with all that said and done we do feel like this will improve it will improve gradual gradually we think it starts it really at the turn of the year. So we're going to be fighting I think Tony to hold serve through this year here.
But I do think things improve in 2022, it's not an open the floodgates, probably it's probably more gradual so I think you can expect.
Sequential approval improvement from us throughout the our fiscal 2022.
It will be short of our overall demand. So we're going to be working very hard with our customers to meet their needs and make sure that we do everything with possible too to configure our devices and solutions to to accommodate the supply chain.
On the <unk> question, we're very excited to have the <unk> team join us they add a really key element to our value proposition Digi for a long time has done a great job of remote management and.
And and monitoring and what what C. Tech does is it makes that extra step into control.
And so a lot of our devices will tell you for example, the level of water in a particular environment, but then don't have that extra ability to actually say open up gauge or turn on the pump and so the C Tech technology really pushes us beyond monitoring into into control. So we're excited to bring.
The <unk> team into our family and not only take advantage of their technology vice versa expose their offerings to our channel partners and really expand on what's been a great success, they've had with a limited set of resources and.
And focus on customers and really broaden that appeal.
Great.
Stay safe guys.
Thanks, Tony.
Our next question comes from Jason Smith with Lake Street.
Hey, guys. Thanks for taking my questions. Just curious just given the well known challenges out there in the supply chain, if you've seen any timetable for designs for programs from your customers just getting pushed indefinitely.
You know it's interesting Jason first great to hear your voice and hope everybody is safe and healthy in your world.
Our customers that are working with us.
We have obviously the option to stay with us or to consider other alternatives. The challenge when you look at other alternatives as the picture is not any rosier. So their best choice is to work with us and to Hell.
Help unlock the best allocation possible and vice versa for us to really focus on making sure their businesses hitting their objectives and ultimately that does not lined down and any kind of application. So so the demand. We're seeing is they are willing to commit as they have not been in the past to longer time periods.
Their demand allocation, rather than say booking twice as much in a certain period. So to date, we've been able to work with our customers to help promote and advocate for there.
Their quantity needs and likewise for us to help meet their needs as best we can.
Okay, and then looking at that Iot solutions business, just given the dynamics out there in the Gulf spill to add kind of 3 to 4 sites per quarter or does that need to be down shifted slightly just given everything.
No no youre absolutely right. We added about 3000 sites last quarter. So that's right in our wheelhouse and.
We're determined to continue that that progress as I mentioned in my.
My scripted comments that we really saw it not only adding new subscribers, but adding them at a higher value and so youre seeing that recurring revenue stream grow faster than our subscriber base, which is a real healthy environment that means we're adding more value and delivering more capabilities for our customers. So.
Jason Thats still an accurate understanding is that we want to average in that range on a per quarter basis.
Okay perfect. Thanks, a lot.
Yeah.
Thank you. Our next question comes from Scott <unk> with.
Roth capital.
Hey, good afternoon. Thanks for taking my questions, Hey, Ron Jamie I apologize I got on the call a little bit late so I just wanted to clarify a couple of things and then I had a couple of follow ups first I thought I heard the number just in terms of supply chain issues are.
Capping about $5 million after September quarter, I believe it was the September quarter, just wanted to clarify that wondering if you gave a number for the June quarter in terms of workout clip for related to supply constraints.
And it sounds like you had a record book to Bill I don't know if you gave an absolute number for that book to Bill number.
Hey, Scott Thanks for joining I know that it's tough for balancing all of these different earnings calls so thank you for joining in.
Clarify, yes, we said at least $5 million in the current quarter. The September quarter that we feel like we're not able to capture inside of that guidance. We provided on the previous quarter. We characterized our challenges as in relation to our inventory position inventory position went down about 10% or $5 million. So that gives you a feel because we've been generally.
For the inventory pretty flat that shows you a little bit about what we had a challenge delivering last quarter.
And.
And so that gives you a feel for some of our challenges delivering on all of the opportunity. We havent provided a book to Bill ratio, we did have record record bookings.
And we've got a triple digit backlog.
Scott So that gives you a little context on the current demand, we're seeing and some of the challenges, we're having keeping up with it perfect very helpful and if I could on the gross margin for you did a great job this quarter given the constraints that are out there and it seems like it's implied in terms of your guidance back into the numbers, it's going to be another decent quarter from a gross margin standpoint.
Like it's in the flattish range give or take.
I'm wondering if you could provide a little bit of color in terms of some of that I'm sure is mix because it sounds like open gear was very strong in the quarter and I think cellular routers and gateways as well how is pricing holding up in that area are able to pass on some of these incremental costs onto the customers now to continue to protect that going forward and then I had a macro question.
Yes, Scott it's a really good question 1 other the comments we made earlier was due to the increased cost of both components as well as freight we're leaving probably 100 to 200 basis points of gross margin on the table here.
And that's reflected in our performance in the June quarter and also the guide for <unk>.
The current September quarter. So that gives you a feel for the kind of costs were absorbing and to date, we have done some modest price increases, but we've been very very careful to not.
Disrupt our customers businesses and really taking a longer view on this.
There certainly are challenges that we have to address with certain product lines, but generally speaking we've been very very disciplined on the price side and not.
Non increasing price unduly on our customers.
Got you and lastly, if I could I was wondering if you could provide some color just around some of the demand characteristics that are out there. There's a lot of technology shifts going on in terms of <unk> migration the adoption of the <unk> frequencies deployment for private networks. I was wondering if you could give us a little bit of color in terms of what youre seeing maybe on the <unk> front Crs.
And private networks for any of the verticals, where you've had some big wins in the past areas such as smart cities. Thanks nice quarter.
Yeah, Hey, Thanks, Scott listen to our World is in the industrial World So our cash.
Customer base tends to move a little bit more deliberately than than other segments out. There. If you look at <unk> versus <unk> right now there's not a ton of performance improvement and there is a lot of times and coverage challenges. When you talk about a multi site multi geo deployment. So <unk> is an important thing.
Going to eventually be a much bigger part of our business to date it hasn't been a huge part of our business for <unk> as it does the job and it's available more ubiquitously.
<unk> is an important part as well and we are working with particular partners on both <unk> and private network deployments I would say we're more in the pilot stage.
At this point Scott in terms of its impact on our financial performance and some of those yet to come again. This is a more deliberate or disciplined.
Our economy, and so it tends not to boom and bust like some other pieces, but but with all that said done very very important but it's important to the M. N O is the carriers, it's important to us.
Great. Thank you.
Thank you we have a question from the line of harsh Kumar with Piper Sandler.
Yeah, Hey, guys I was curious if you could talk about your acquisition strategy. What do you look for when you are looking for an acquisition how do you determine.
What you want to pay in and what's the most likeable thing about a target that you go for it.
Yes, thanks harsh that the acquisitions, we've done this year seatac and prior to that has yet had been indicative of 1 end of the barbell. These are small acquisitions, they add a key technology or capability that we think we can scale the digi system and inside of our organizational structure, which is really talking them in.
To an existing.
Leader of a product line. The other end of the barbell, which was part of our strategy to raise money earlier this year as larger more transformative acquisitions.
Acquisitions.
We are very disciplined our upper Midwest the nature.
It doesn't allow us to get too crazy and so we are spending equal amounts of time on that side of things on the bigger side. We're looking for opportunities that are accretive that are also dramatically improving our recurring revenue position and so those are the kind of attributes we look for.
Almost everything we look for is gonna have a wireless in particular cellular threat.
<unk> threat to it and that unlocks the ability to have this recurring value and subscription oriented business model.
So those are the priorities for us harsh.
Got it understood. Thanks, guys.
Thank you and this concludes our Q&A session I would like to turn it back to Ron <unk> for his final remarks.
Thank you and thank you for everyone that joined our call today for <unk>.
Part of our results and confident in our future.
Record demand for Digi offerings, combined with Covid and supply chain challenges have made our customer focus even more imperative.
Holding virtual investor meetings at the Canaccord growth conference on August 11th.
In the Colliers Investor Conference on September 9 and the.
Meantime, staying safe and healthy.
Thank you and this concludes today's conference call. Thank you for your participation and you may now disconnect.
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