Digi International Q1 2026 Digi International Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Digi International Inc Earnings Call
Speaker #1: Good morning, everyone, and welcome to the Digi International Inc. Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode.
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Speaker #1: pleasure to turn the my call over to the Chief Financial Officer . James Loch . Please go ahead Now it's .
Jamie Loch: Thank you. Good day everyone. It's great to talk to you again, and thanks for joining us today to discuss the earnings results of Digi International. Joining me on today's call is Ron Konezny, our President and CEO. We issued our earnings release after the market closed today. You may obtain a copy of the press release through the Financial Releases section of our Investor Relations website at digi.com. This afternoon, Ron will provide a comment on our performance, and then we'll take your questions. Some of the statements that we make during this call are considered forward-looking and are subject to significant risks and uncertainties. These statements reflect our expectations about future 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.
Jamie Loch: Thank you. Good day everyone. It's great to talk to you again, and thanks for joining us today to discuss the earnings results of Digi International. Joining me on today's call is Ron Konezny, our President and CEO. We issued our earnings release after the market closed today. You may obtain a copy of the press release through the Financial Releases section of our Investor Relations website at digi.com. This afternoon, Ron will provide a comment on our performance, and then we'll take your questions. Some of the statements that we make during this call are considered forward-looking and are subject to significant risks and uncertainties. These statements reflect our expectations about future 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.
Speaker #2: Good day Thank you . everyone . It's to you again and thanks for joining us today to discuss the earnings results of International .
Speaker #2: Digi Joining me on today's call is president and Ronald Konezny . Our CEO . We issued our earnings release market today . You may press copy of the obtain a through the release releases section of our Investor Relations website digi.com at .
Speaker #2: Digi Joining me on today's call is president and Ronald Konezny . Our CEO . We issued our earnings release market today . You may press copy of the obtain a through the release releases section of our Investor Relations website digi.com at great to talk the statements that we make during this call are considered forward looking and are to after the uncertainties .
Speaker #2: These statements reflect our expectations about future and financial performance and only as of today's operating date . We undertake no update obligation to publicly or revise looking these forward statements .
Jamie Loch: 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 most recent Form 10-K, and subsequent reports on file with the SEC. Finally, certain of the financial information disclosed 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 furnished as an exhibit to Form 8-K that can be accessed through the SEC filing sections of our Investor Relations website. Now I'll turn the call over to Ron.
Jamie Loch: 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 most recent Form 10-K, and subsequent reports on file with the SEC. Finally, certain of the financial information disclosed 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 furnished as an exhibit to Form 8-K that can be accessed through the SEC filing sections of our Investor Relations website. Now I'll turn the call over to Ron.
Speaker #2: While we believe the expectations forward looking statements are closed reflected in our reasonable , we assurance such give no expectations will be met or that any of our forward correct will statements looking please additional .
Speaker #2: While we believe the expectations in our forward-looking statements are reasonably reflected, 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 Statements Regarding Forward-Looking Information and Risk Factors sections in our earnings release and our most recent Form 10-K and subsequent reports filed with the SEC.
Speaker #2: Finally , Financial certain of the disclosed information on this call includes non-GAAP measures . The information required to be disclosed about these speak reconciliations to the most comparable GAAP measures , are included in the earnings earnings release also .
Speaker #2: an Exhibit to Form that can be 8-K accessed through the filings SEC , sections of Investor Relations website . release turn the call over to Ron .
Ron Konezny: Thank you, Jamie. Good afternoon, everyone. Digi is off to a strong start in fiscal 2026, and we stepped closer to achieving our $200 million of ARR and adjusted EBITDA goals. Our first fiscal quarter set several new all-time records: $122 million of quarterly revenues, up 18% year-over-year; $157 million of annualized recurring revenue, which is up 31% year-over-year in our fifth consecutive quarter of double-digit growth; $32 million of quarterly adjusted EBITDA, which is up 23% year-over-year. Our 25.8% adjusted EBITDA margin is also a new quarterly record. $36 million of quarterly cash generation. We are encouraged by contributions from all of our product lines and across a variety of vertical industries and applications. This broad-based strength is critical to sustaining double-digit growth rates.
Ron Konezny: Thank you, Jamie. Good afternoon, everyone. Digi is off to a strong start in fiscal 2026, and we stepped closer to achieving our $200 million of ARR and adjusted EBITDA goals. Our first fiscal quarter set several new all-time records: $122 million of quarterly revenues, up 18% year-over-year; $157 million of annualized recurring revenue, which is up 31% year-over-year in our fifth consecutive quarter of double-digit growth; $32 million of quarterly adjusted EBITDA, which is up 23% year-over-year. Our 25.8% adjusted EBITDA margin is also a new quarterly record. $36 million of quarterly cash generation. We are encouraged by contributions from all of our product lines and across a variety of vertical industries and applications. This broad-based strength is critical to sustaining double-digit growth rates.
Speaker #3: Thank you . Good everyone
Speaker #3: is off to Gigi a start in fiscal 2026 . And we stepped Jamie . achieving closer to $200 million of IRR . And is EBITDA goals Our .
Speaker #3: quarter set several new all time records , strong 122 million of quarterly revenues , up 18% year over
Speaker #3: , 157 million of annualized revenue , recurring up 31% year over year . consecutive And quarter of double digit growth . which is 32 million of quarterly adjusted EBITDA , which is up 23% year over year .
Speaker #3: Our 25.8% adjusted EBITDA margin is our quarterly also a new . record 36 million of generation . We cash contributions from all of quarterly product lines across a and variety of vertical industries and applications .
Speaker #3: broad based This critical to strength is digit growth sustaining double . Both of our reporting segments contributed to strong IRR our this quarter , with IoT solutions growing 32% and IoT products and services growing 26% year over year .
Ron Konezny: Both of our reporting segments contributed to our strong ARR growth this quarter, with IoT solutions growing 32% and IoT products and services growing 26% year over year. The integration of Jolt is progressing well. We have combined the SmartSense and Jolt organizations and offerings into SmartSense One. We're seeing strong customer response to this combined platform, and the cross-selling opportunities we envisioned are materializing. On 27 January, we announced the acquisition of Particle, a leading IoT solution provider. Founded in 2012 and inspired in part by our own Digi XBee, Particle has grown into an industrial IoT leader. Particle brings robust, AI-ready, embedded edge devices coupled with wireless services and a cloud-based solution supporting over 240,000 developers across 14,000 companies. This acquisition strengthens our edge-to-cloud capabilities and expands our addressable market in the IoT device management space.
Ron Konezny: Both of our reporting segments contributed to our strong ARR growth this quarter, with IoT solutions growing 32% and IoT products and services growing 26% year over year. The integration of Jolt is progressing well. We have combined the SmartSense and Jolt organizations and offerings into SmartSense One. We're seeing strong customer response to this combined platform, and the cross-selling opportunities we envisioned are materializing. On 27 January, we announced the acquisition of Particle, a leading IoT solution provider. Founded in 2012 and inspired in part by our own Digi XBee, Particle has grown into an industrial IoT leader. Particle brings robust, AI-ready, embedded edge devices coupled with wireless services and a cloud-based solution supporting over 240,000 developers across 14,000 companies. This acquisition strengthens our edge-to-cloud capabilities and expands our addressable market in the IoT device management space.
Speaker #3: integration of The progressing well . We have combined jolt is the smart sense and jolt organizations and offerings smart into one . We're seeing customer response to this combined platform and cross-selling opportunities we strong are envisioned .
Speaker #3: On January 27th , we announced the acquisition of , a Particle leading IoT provider solution founded in sense particle has grown Digi into an industrial leader IoT .
Speaker #3: Particle brings robust AI ready embedded edge devices coupled with wireless services cloud based solution supporting over and a across This 14,000 companies . acquisition edge to cloud capabilities and strengthens our expands our addressable market in the IoT device management .
Ron Konezny: The combination of Particle with our existing OEM solutions creates compelling opportunities for customers seeking seamless connectivity and device management at scale. Jacuzzi, Goodyear, and Watsco are amongst the over 150 enterprise customers that have accelerated their go-to-market IoT visions with Particle. We are integrating the Particle and OEM solutions teams to further drive embedded-as-a-service globally. Particle brings our IoT product and services reporting segment $20 million in ARR and further balances ARR contributions across Digi's two reporting segments. Particle provides a catalyst for OEM solutions, which is now named Particle by Digi. Digi's comprehensive industrial IoT portfolio, spanning embedded solutions, edge intelligence, and vertical-specific turnkey offerings, resonates across a diverse range of industries and positions us to capitalize on secular trends in AI, edge computing, and industrial automation. Our AI initiatives continue to advance.
Ron Konezny: The combination of Particle with our existing OEM solutions creates compelling opportunities for customers seeking seamless connectivity and device management at scale. Jacuzzi, Goodyear, and Watsco are amongst the over 150 enterprise customers that have accelerated their go-to-market IoT visions with Particle. We are integrating the Particle and OEM solutions teams to further drive embedded-as-a-service globally. Particle brings our IoT product and services reporting segment $20 million in ARR and further balances ARR contributions across Digi's two reporting segments. Particle provides a catalyst for OEM solutions, which is now named Particle by Digi. Digi's comprehensive industrial IoT portfolio, spanning embedded solutions, edge intelligence, and vertical-specific turnkey offerings, resonates across a diverse range of industries and positions us to capitalize on secular trends in AI, edge computing, and industrial automation. Our AI initiatives continue to advance.
Speaker #3: The particle with our existing OEM solutions creates compelling opportunities for customers seeking seamless device management at scale. Jacuzzi and Goodyear in Wasco are a combination amongst the over 150 enterprise customers that have accelerated their go-to-market.
Speaker #3: The particle with our existing OEM solutions creates compelling for customers seeking opportunities seamless device at and management scale . Jacuzzi Goodyear in Wasco are combination amongst the over 150 enterprise customers that have accelerated their go to connectivity IoT visions with particle , we are integrating the and OEM particle to solutions teams further drive embedded as a service globally .
Speaker #3: Particle our product and services reporting IoT segment $20 million in IRR and balances IRR further across contributions two reporting segments provides a . Particle OEM solutions , which named is now Digi Particle by Digi's comprehensive industrial IoT portfolio embedded spanning Edge solutions .
Speaker #3: Intelligence , and Vertical specific offerings resonates across turnkey a of diverse range industries and us to positions secular trends in on , edge AI and computing , industrial automation .
Ron Konezny: Beyond the internal productivity gains we've achieved, we're now actively embedding AI capabilities into our products and customer-facing solutions. DIGI is uniquely positioned to take advantage of the less publicized wave of machine-driven technology advances. Like the wireless and internet advances that preceded it, AI will ultimately benefit machines like it will humans. DIGI's solutions approach aims to accelerate our customers' industrial AI outcomes. Acquisitions remain our top capital deployment priority as we strengthen our balance sheet, and we continue to evaluate additional opportunities. Following our successful integration of Jolt just months ago, Particle demonstrates the strength of our organizational structure and our ability to execute multiple acquisitions while maintaining operational excellence. We remain confident in our goal of achieving $200 million of ARR and $200 million of adjusted EBITDA by the end of fiscal 2028. Strategic acquisitions may accelerate this timeline.
Ron Konezny: Beyond the internal productivity gains we've achieved, we're now actively embedding AI capabilities into our products and customer-facing solutions. DIGI is uniquely positioned to take advantage of the less publicized wave of machine-driven technology advances. Like the wireless and internet advances that preceded it, AI will ultimately benefit machines like it will humans. DIGI's solutions approach aims to accelerate our customers' industrial AI outcomes. Acquisitions remain our top capital deployment priority as we strengthen our balance sheet, and we continue to evaluate additional opportunities. Following our successful integration of Jolt just months ago, Particle demonstrates the strength of our organizational structure and our ability to execute multiple acquisitions while maintaining operational excellence. We remain confident in our goal of achieving $200 million of ARR and $200 million of adjusted EBITDA by the end of fiscal 2028. Strategic acquisitions may accelerate this timeline.
Speaker #3: initiatives continue Our AI to advance beyond the internal productivity gains we've achieved . actively embedding AI capabilities into our We're now and customer facing solutions .
Speaker #3: uniquely positioned to take less Digi's publicized advantage of the wave driven advances machine like wireless and advances AI will ultimately it . internet machines like it will preceded humans solutions approach aims to customers industrial AI outcomes accelerate our .
Speaker #3: remain of the our top capital Acquisitions deployment priority as we balance sheet and we strengthen our continue to evaluate additional opportunities successful integration of jolt months ago .
Speaker #3: Particle following our strength of our organizational our structure ability to multiple and execute while maintaining acquisitions operational . We confident remain in our goal of achieving $200 million of RR and EBITDA excellence end of fiscal 2028 .
Speaker #3: Strategic acquisitions may accelerate this timeline . Jamie Next , will provide comments on our financial
Ron Konezny: Next, Jamie will provide comments on our financial guidance.
Ron Konezny: Next, Jamie will provide comments on our financial guidance.
Jamie Loch: Hi everyone. For fiscal 2026, our guidance reflects both our updated operational outlook combined with the January 2026 acquisition of Particle. We anticipate ARR growth of 23%, revenue growth of 14% to 18%, and adjusted EBITDA growth of 17% to 21%. The impact of Particle and its expected synergies to this guide is approximately $20 million to $22 million in ARR, $13 million to $14 million in revenue, and $1 million to $2 million in adjusted EBITDA. After capturing synergies, we expect Particle to contribute $5 million to our fiscal 2027 adjusted EBITDA. Particle will be integrated into our IoT products and services segment and will not be reported on a standalone basis. For the second fiscal quarter, revenues are estimated to be between $124 million to $128 million. Adjusted EBITDA is expected to be between $31.5 million and $33.0 million.
Jamie Loch: Hi everyone. For fiscal 2026, our guidance reflects both our updated operational outlook combined with the January 2026 acquisition of Particle. We anticipate ARR growth of 23%, revenue growth of 14% to 18%, and adjusted EBITDA growth of 17% to 21%. The impact of Particle and its expected synergies to this guide is approximately $20 million to $22 million in ARR, $13 million to $14 million in revenue, and $1 million to $2 million in adjusted EBITDA. After capturing synergies, we expect Particle to contribute $5 million to our fiscal 2027 adjusted EBITDA. Particle will be integrated into our IoT products and services segment and will not be reported on a standalone basis. For the second fiscal quarter, revenues are estimated to be between $124 million to $128 million. Adjusted EBITDA is expected to be between $31.5 million and $33.0 million.
Speaker #2: Hi
Speaker #2: fiscal guidance everyone . 2026 . reflects both our updated . operational For outlook combined with the January 2026 acquisition of particle . We anticipate IRR growth of 23% , revenue growth of 14 to 18% and adjusted EBITDA of The growth particle and impact of its synergies to expected guide is this 17 to 21% .
Speaker #2: 20 to 22 million in IRR approximately 13 to 14 million in revenue and , 1 to 2 million in adjusted EBITDA capturing we particle to synergies , expect our 5 million to fiscal .
Speaker #2: be particle will integrated into our IoT products and services segment and will not reported on a standalone 2027 adjusted basis . For the second fiscal quarter , revenues are be estimated between 100 and 20 4 million to 128 million , adjusted EBITDA is expected to be between 31.5 million and 33.0 million new for fiscal 26 , we are including expense interest in our adjusted net per diluted share metric , and we have done the income After comparison periods same for income per .
Jamie Loch: New for fiscal 2026, we are including interest expense in our adjusted net income per diluted share metric, and we have done the same for comparison periods. Adjusted net income per diluted share is anticipated to be between $0.56 and $0.59 per diluted share, assuming a weighted average diluted share count of 38.8 million shares. This includes an expected impact from interest of between $0.05 and $0.06 per diluted share. We provide guidance and longer-term targets for adjusted net income per share as well as adjusted EBITDA on a non-GAAP basis. We do not reconcile these items to their most comparable U.S. GAAP measure, as it is not possible to predict without unreasonable efforts numerous items that include but are not limited to the impact of foreign exchange translation, restructuring, interest, and other tax-related events. Given the uncertainty, any of these items could have a significant impact on U.S.
Jamie Loch: New for fiscal 2026, we are including interest expense in our adjusted net income per diluted share metric, and we have done the same for comparison periods. Adjusted net income per diluted share is anticipated to be between $0.56 and $0.59 per diluted share, assuming a weighted average diluted share count of 38.8 million shares. This includes an expected impact from interest of between $0.05 and $0.06 per diluted share. We provide guidance and longer-term targets for adjusted net income per share as well as adjusted EBITDA on a non-GAAP basis. We do not reconcile these items to their most comparable U.S. GAAP measure, as it is not possible to predict without unreasonable efforts numerous items that include but are not limited to the impact of foreign exchange translation, restructuring, interest, and other tax-related events. Given the uncertainty, any of these items could have a significant impact on U.S.
Speaker #2: Adjusted net is anticipated to be $0.56 to $0.59 per diluted share, assuming a weighted average diluted share count of 38.8 million shares.
Speaker #2: This expected interest of includes an between 5 and $0.06 per diluted share . We provide guidance and longer term adjusted net per income well as adjusted EBITDA .
Speaker #2: On a non-GAAP basis targets for US GAAP comparable as it is not predict items to without unreasonable measure possible to share , as efforts , numerous items that include , but are not limited the impact of foreign exchange , we do , translation , restructuring interest and other tax related events .
Speaker #2: the Given uncertainty , any of items could these have a significant impact US GAAP results . With that , I will turn back over to our on operator to take your the call
Jamie Loch: GAAP results. With that, I will turn the call back over to our operator to take your questions.
Jamie Loch: GAAP results. With that, I will turn the call back over to our operator to take your questions.
Operator: As a reminder, to ask questions, simply press *11 to get in the queue and wait for your name to be announced. To withdraw your question, press *11 again. Our first question comes from the line of Tommy Moll with Stephens. Please proceed.
Operator: As a reminder, to ask questions, simply press *11 to get in the queue and wait for your name to be announced. To withdraw your question, press *11 again. Our first question comes from the line of Tommy Moll with Stephens. Please proceed.
Speaker #1: ask a reminder to
Speaker #1: question , simply As a press star one one to get in the queue and for your wait name to be announced . withdraw To your question , press one star one again .
Speaker #1: Our comes from the line of Tommy questions Moll with first question Stephens . Please proceed .
[Analyst] (Stephens Inc.): Good afternoon, and thanks for taking my questions.
Tommy Moll: Good afternoon, and thanks for taking my questions.
Speaker #4: Good taking and thanks for afternoon questions .
Ron Konezny: Good afternoon, Tommy.
Ron Konezny: Good afternoon, Tommy.
[Analyst] (Stephens Inc.): Ron, my first question is on the demand environment. Can you make any general comment to update us, and then if you could go one layer deeper and make a specific comment around data centers, what you're seeing there, that'd be appreciated. Thank you.
Tommy Moll: Ron, my first question is on the demand environment. Can you make any general comment to update us, and then if you could go one layer deeper and make a specific comment around data centers, what you're seeing there, that'd be appreciated. Thank you.
Speaker #3: afternoon .
Speaker #3: Tommy Good
Speaker #4: my demand the
Speaker #4: Environment... Ron, any general comments to update or make for us? And then, if you could go one layer deeper, my first question is a specific comment around centers—what you're seeing there, that'd be appreciated.
Ron Konezny: Yeah, as we've talked in the past, we've got the good fortune of applying our technologies to a wide range of verticals. At any given time, there are certainly some verticals that are stronger and some that are maybe not as strong. We're seeing a lot of success in mass transit and utility segments. We're also seeing a lot of success in retail digital signage. We also are seeing some success in data center as well, in particular their Opengear product line.
Ron Konezny: Yeah, as we've talked in the past, we've got the good fortune of applying our technologies to a wide range of verticals. At any given time, there are certainly some verticals that are stronger and some that are maybe not as strong. We're seeing a lot of success in mass transit and utility segments. We're also seeing a lot of success in retail digital signage. We also are seeing some success in data center as well, in particular their Opengear product line.
Speaker #4: Thank .
Speaker #3: Yeah . As we've talked in the data
Speaker #3: we've got the good you fortune of our applying past , a wide range of technologies to verticals . So at certainly some time , there are verticals that any given are and some that stronger are maybe not as strong .
Speaker #3: And we're are of success in mass transit and utility segment . We're also of seeing a lot success in retail , signage . We digital are seeing some success in data well , and centers as particularly our Opengear line .
[Analyst] (Stephens Inc.): Maybe just benchmarking versus when we spoke a quarter ago, do you get a sense things feel a little bit better, a little bit worse, about the same? Just any general comment would help.
Tommy Moll: Maybe just benchmarking versus when we spoke a quarter ago, do you get a sense things feel a little bit better, a little bit worse, about the same? Just any general comment would help.
Speaker #4: just versus when benchmarking we spoke ago . a quarter Do you get bit feel a little a bit worse , about the better , a little Just any general comment would
Speaker #4: just versus when benchmarking we spoke ago . a quarter Do you get bit feel a little a bit worse , about the better , a little Just any general comment would same .
Speaker #4: just versus when benchmarking we spoke ago . a quarter Do you get bit feel a little a bit worse , about the better , a little Just any general comment would
Ron Konezny: Yeah, I think they're improving and increasing. I think we're all worried about how long the AI infrastructure buildout will sustain, but for now, it's been improving.
Ron Konezny: Yeah, I think they're improving and increasing. I think we're all worried about how long the AI infrastructure buildout will sustain, but for now, it's been improving.
Speaker #3: Yeah , I think they're
Speaker #3: I think they're things improving and help . increasing . I think we're all worried they're about , you know , long the AI build out how will sustain .
Speaker #3: Infrastructure. But for now, it's been improving.
Speaker #3: infrastructure But for now it's it's been improving .
[Analyst] (Stephens Inc.): Follow-up for you, Ron, on Particle, specifically around the sales synergy opportunity. You mentioned, I think, in the press release originally, the opportunity to pull sales through your existing team and your channel. That's relatively straightforward. I'm mostly interested in how, from an end-user standpoint, this technology intersects with your current offering. You mentioned the OEM business a number of times in the press release. Maybe that's a lead-in to your answer.
Tommy Moll: Follow-up for you, Ron, on Particle, specifically around the sales synergy opportunity. You mentioned, I think, in the press release originally, the opportunity to pull sales through your existing team and your channel. That's relatively straightforward. I'm mostly interested in how, from an end-user standpoint, this technology intersects with your current offering. You mentioned the OEM business a number of times in the press release. Maybe that's a lead-in to your answer.
Speaker #4: Ron , on up for you , particle . Specifically around synergy sales the opportunity you mentioned , I think in the press release originally the opportunity to pull Maybe sales through your existing product team and your channel .
Speaker #4: That's relatively straightforward . I'm mostly interested in end user from an standpoint , this technology with your current offering . You mentioned business and number of times in the press how that's that's a lead in to your answer intersects .
Ron Konezny: Yeah, I think to date, most of our solution approach has been, I'd say, on the IT side, where we're providing a completely enclosed device with software services. Connectivity examples would be the Opengear solution, cellular routers, in addition to SmartSense and Ventus. This really marks a foray into Embedded-as-a-Service, where a lot of times we're now going into an engineering department, and we're embedding that IoT solution inside of our customers' machines, whether they be spas or whether they be in the ag or industrial field. And that's an area that is newer for, I think, both the industry as well as for Digi. And so leveraging this as the catalyst to really get OEM solutions more in line with both the company's objectives of ARR and contributing at a relative scale has been really important for us.
Ron Konezny: Yeah, I think to date, most of our solution approach has been, I'd say, on the IT side, where we're providing a completely enclosed device with software services. Connectivity examples would be the Opengear solution, cellular routers, in addition to SmartSense and Ventus. This really marks a foray into Embedded-as-a-Service, where a lot of times we're now going into an engineering department, and we're embedding that IoT solution inside of our customers' machines, whether they be spas or whether they be in the ag or industrial field. And that's an area that is newer for, I think, both the industry as well as for Digi. And so leveraging this as the catalyst to really get OEM solutions more in line with both the company's objectives of ARR and contributing at a relative scale has been really important for us.
Speaker #3: Yeah , I think to date , most of our approach has been , on the I'd say , on the IT we're side where completely providing a enclosed device with software services , connectivity be the Opengear cellular solution , routers addition to Smartsense and Ventus .
Speaker #3: This really a foray into embedded as a service where a lot of marks times we're now an going into engineering department and we're that embedding IoT solution inside of our customer's whether they machines , be spas or whether they be in the egg or industrial field .
Speaker #3: And that's an that is newer and for , I both think , the industry as well as for Digi . And so leveraging this as the catalyst to really get OEM solutions area more in line the with both company's objectives of RR and contributing at a relative scale , has been really important for us
[Analyst] (Stephens Inc.): What does that as-a-service component look like where it's an OEM relationship? So the device is used in the field by someone else that you don't have a direct relationship. How do you close the loop there with the as-a-service?
Tommy Moll: What does that as-a-service component look like where it's an OEM relationship? So the device is used in the field by someone else that you don't have a direct relationship. How do you close the loop there with the as-a-service?
Speaker #4: that as component a service look like ,
Speaker #4: where it's an OEM relationship . So the device is in the used by else that you don't have a direct . relationship . How do What does you close the loop there with the as a service someone ?
Ron Konezny: Yeah, we absolutely do have a direct relationship with the end user. In the end users, the OEM, we may not have it with the final consumer, if you will. But it's very important that we're in touch with, whether it's Goodyear, Jacuzzi, or Watsco, that we're contacting and staying in touch with them to make sure they're accomplishing their business objectives. But it's very similar to our Ventus offering, where it's provided as a service. It includes the edge device software, the connectivity, a cloud platform that gives you the insights into both the Digi equipment, in this case, Particle, as well as the customer's end device. And that end device is really critical to understand its performance, any conditions that might affect its performance, and in some cases, even perform software updates on that OEM's device.
Ron Konezny: Yeah, we absolutely do have a direct relationship with the end user. In the end users, the OEM, we may not have it with the final consumer, if you will. But it's very important that we're in touch with, whether it's Goodyear, Jacuzzi, or Watsco, that we're contacting and staying in touch with them to make sure they're accomplishing their business objectives. But it's very similar to our Ventus offering, where it's provided as a service. It includes the edge device software, the connectivity, a cloud platform that gives you the insights into both the Digi equipment, in this case, Particle, as well as the customer's end device. And that end device is really critical to understand its performance, any conditions that might affect its performance, and in some cases, even perform software updates on that OEM's device.
Speaker #3: objectives . it's But very similar to to our Ventas offering , where it's provided as a service . It includes the edge device software , connectivity , a cloud platform that gives you the insight into both the equipment , in this case as the end device .
Speaker #3: And that end device is really critical to customers as well understand . . performance Any It's conditions that might affect its performance and in some cases , even perform updates on that OEM device software
[Analyst] (Stephens Inc.): Thank you, Ron. I appreciate it, and I'll turn it back.
Tommy Moll: Thank you, Ron. I appreciate it, and I'll turn it back.
Speaker #4: Thank you Ron it . And I'll turn it I appreciate back
Operator: Thank you. Our next question is from James Fish with Piper Sandler. Please proceed.
Operator: Thank you. Our next question is from James Fish with Piper Sandler. Please proceed.
Speaker #4: .
Speaker #1: Thank you . Our next question is from James Fish with Piper Sandler . Please proceed .
James Fish: Hey, guys. Maybe just sticking on Particle here. I think it strategically makes sense. It aligns with what you guys have been doing for many years now. But maybe just walk us through what makes Particle different, and how should we think about you guys managing this for push behind growing the business as opposed to more or less managing the profitability? In other words, is it going to be trying to accelerate the growth of the business given your reach and your customer base, or is it going to be growing EBITDA more so?
James Fish: Hey, guys. Maybe just sticking on Particle here. I think it strategically makes sense. It aligns with what you guys have been doing for many years now. But maybe just walk us through what makes Particle different, and how should we think about you guys managing this for push behind growing the business as opposed to more or less managing the profitability? In other words, is it going to be trying to accelerate the growth of the business given your reach and your customer base, or is it going to be growing EBITDA more so?
Speaker #5: , guys , Hey maybe just sticking on particle here . . strategically makes sense . It aligns with what you guys have been doing for for many years now , but maybe just us through what particle makes different .
Speaker #5: Should—and how—should we think about you guys managing this for a push behind growing the business as opposed to more or less managing the profitability?
Speaker #5: In other words , is it going to be trying to accelerate the growth of the business given your reach and your customer base , or is it going to be , you know , growth , growing EBITDA more so
Ron Konezny: Yeah, what's attracted us to Particle, who we've known for several years now, with Tachyon, is they were born this way. They were born as a service. And the processes, the way you go to market, the way you price your offering, the culture of the company is, I think, sometimes harder to appreciate that combination of things. And we're looking forward to bringing that culture inside of OEM solutions, where traditionally we've been providing more just the device and let the customer arrange for connectivity and cloud services. And so we don't underestimate that combination of things and the impact it can have. You saw this with the Ventus acquisition. You've seen it with the combination of SmartSense acquisitions that have led to that company today. So that's very, very important. And we're looking forward to leveraging the combined company to really do profitable growth.
Ron Konezny: Yeah, what's attracted us to Particle, who we've known for several years now, with Tachyon, is they were born this way. They were born as a service. And the processes, the way you go to market, the way you price your offering, the culture of the company is, I think, sometimes harder to appreciate that combination of things. And we're looking forward to bringing that culture inside of OEM solutions, where traditionally we've been providing more just the device and let the customer arrange for connectivity and cloud services. And so we don't underestimate that combination of things and the impact it can have. You saw this with the Ventus acquisition. You've seen it with the combination of SmartSense acquisitions that have led to that company today. So that's very, very important. And we're looking forward to leveraging the combined company to really do profitable growth.
Speaker #5: , yeah . What's
Speaker #3: attract us to particle known who we've for several years now track to us is , you know , they were born this way .
Speaker #3: They with were born as a service and the processes , the the way you go to market , way you the price your offering , the culture of the company is , is , I think , sometimes harder to appreciate that combination of things .
Speaker #3: And looking forward to that culture inside of OEM solutions where traditionally we've been providing more just the device and let the customer arrange for connectivity and cloud services .
Speaker #3: And so we don't underestimate that things combination of and the impact it can have . You saw this with with the acquisition . You've seen it with the combination of smart acquisitions that have led to to that company today .
Speaker #3: So that's important . And we're looking forward leveraging to the combined company to really do profitable growth . very , very growth at game is is Our not all cost .
Ron Konezny: Our game is not growth at all costs. It's profitable growth. We want to scale the business. And when you get to $20 million of ARR, that's when you can really start thinking about that scale profitably. Before then, you're a little bit more in growth mode, and you're making pretty big investments on the product, on the go-to-market. And as you start maturing and figure out what wins and what doesn't win, you can be much more selective on resources. So we want to grow the business. Don't get me wrong. It's imperative we grow. But I think DIGI's mantra is really profitable growth.
Ron Konezny: Our game is not growth at all costs. It's profitable growth. We want to scale the business. And when you get to $20 million of ARR, that's when you can really start thinking about that scale profitably. Before then, you're a little bit more in growth mode, and you're making pretty big investments on the product, on the go-to-market. And as you start maturing and figure out what wins and what doesn't win, you can be much more selective on resources. So we want to grow the business. Don't get me wrong. It's imperative we grow. But I think DIGI's mantra is really profitable growth.
Speaker #3: It's profitable growth. We want to scale the business. And when you get to $20 million of ARR, that's when you can really start thinking about doing that profitably.
Speaker #3: then about , you're a little bit more in growth mode Before making pretty big investments to and you're on the the go to product , on .
Speaker #3: then about , you're a little bit more in growth mode Before making pretty big investments to and you're on the the go to product , on market And as you start maturing and figure out what wins and what doesn't win , you can be much more selective resources .
Speaker #3: So on on we want to grow the business . Don't get me wrong , we're it's imperative we grow . But but I think digi's mantra is really profitable growth .
James Fish: And so the crux of it is, is there a way to think about the growth rate of Particle moving forward and how much overlap with existing products? And to layer on here, Jamie, can you just help me here on the guide? Prior guide was about $484 on the revenue piece at the midpoint. And with Particle adding about $13 to 14 million, that would take us $498 or so. But midpoint is only $499. So it's not really much of a raise despite the upside here in fiscal Q1. So can you just walk me through why it's pretty much just raising at this point on Particle as opposed to some of the strength you saw in Q1? Was there any pull-in of demand, or are you guys just being kind of prudent around the rest of the year organically?
James Fish: And so the crux of it is, is there a way to think about the growth rate of Particle moving forward and how much overlap with existing products? And to layer on here, Jamie, can you just help me here on the guide? Prior guide was about $484 on the revenue piece at the midpoint. And with Particle adding about $13 to 14 million, that would take us $498 or so. But midpoint is only $499. So it's not really much of a raise despite the upside here in fiscal Q1. So can you just walk me through why it's pretty much just raising at this point on Particle as opposed to some of the strength you saw in Q1? Was there any pull-in of demand, or are you guys just being kind of prudent around the rest of the year organically?
Speaker #5: so the crux of And , is there a way to think about the growth rate of particle moving forward and how much overlap with existing products , and to layer on here ?
Speaker #5: Jamie, just help—can you help me here on the guide? As the prior guide was about $44 million on the revenue piece at the midpoint, and with Particle adding about $13 to $14 million, that would put us, you know, at $49 to $58 or so.
Speaker #5: But midpoint is only 4.99 , so it's not really much of a raise the . Despite upside here Q1 . fiscal So , so can you just walk through why it's pretty much just raising at this point on me particle as opposed to some of the strengths Q1 , any was there you saw in pull pull in of demand , or you guys just kind of prudent around the rest of the year organically
Speaker #5: being it's a good ?
Jamie Loch: Yeah, it's a good question, Jim. As a rule, we have not increased an annual guide after the first fiscal quarter from a combination of things. 90 days, you get some timing elements where you have some items that time out to the positive or to the negative historically. And we think it's a little bit more responsible to give yourself at least a mid-year point before traditionally we would do an operational raise. In this instance, there is an impact on the operating performance. If you look at the guide, the guide does have a slight uptick on operational performance. So it's not just on Particle when you look at it. There's about a 4-point lift in the guide, and about 3 of those points are Particle. But to your point, 1 quarter in, we think there's a reason to be prudent.
Jamie Loch: Yeah, it's a good question, Jim. As a rule, we have not increased an annual guide after the first fiscal quarter from a combination of things. 90 days, you get some timing elements where you have some items that time out to the positive or to the negative historically. And we think it's a little bit more responsible to give yourself at least a mid-year point before traditionally we would do an operational raise. In this instance, there is an impact on the operating performance. If you look at the guide, the guide does have a slight uptick on operational performance. So it's not just on Particle when you look at it. There's about a 4-point lift in the guide, and about 3 of those points are Particle. But to your point, 1 quarter in, we think there's a reason to be prudent.
Speaker #2: question , Jim , as Yeah , a rule , we have not annual after the first fiscal guide quarter from a combination of things , you know , 90 days , you get some timing elements where you have some items increased an time out to the the negative .
Speaker #2: positive or to Historically , and we think it's a little bit more responsible to give yourself at mid-year least a point before traditionally , we would do an operational raise , and this instance there is an impact on the performance .
Speaker #2: If you look at operating the guide, the guide does have an uptick on operational performance. So it's not just on a slight particle.
Speaker #2: When you look at it , there's four point about a lift in the guide in about three of those points are particle . But to your one quarter in we think there's point reason prudent .
Jamie Loch: Our historical practice is we don't adjust total year after the Q1. So it's kind of a combination of those two things.
Jamie Loch: Our historical practice is we don't adjust total year after the Q1. So it's kind of a combination of those two things.
Speaker #2: Our practices . We historical don't adjust to be year after the first quarter . So it's kind of a total two things combination of those
James Fish: Thanks, guys.
James Fish: Thanks, guys.
Operator: Thank you. Our next question comes from the line of Josh Nichols with B. Riley. Please proceed.
Operator: Thank you. Our next question comes from the line of Josh Nichols with B. Riley. Please proceed.
Speaker #5: Thanks , guys a
Speaker #5: .
Speaker #1: Thank you. Our next question comes from the line of Josh Nichols with B. Riley. Please proceed.
[Analyst] (Stephens Inc.): Yeah, thanks for taking my question. Great to see another strong quarter for AR growth and cash flow generation. On the gross margin front, it's continued to charge upwards as you've been ramping revenue. Just in terms of directions, what should we expect? I know Particle is mostly AR business. But when we think about gross margins for the remainder of the year, is that going to continue to tick up from what we saw in the first quarter?
Josh Nichols: Yeah, thanks for taking my question. Great to see another strong quarter for AR growth and cash flow generation. On the gross margin front, it's continued to charge upwards as you've been ramping revenue. Just in terms of directions, what should we expect? I know Particle is mostly AR business. But when we think about gross margins for the remainder of the year, is that going to continue to tick up from what we saw in the first quarter?
Speaker #6: Yeah. Thanks for the question. Great to see another strong take on my forecast for AR growth, flow generation, gross, and cash on the front.
Speaker #6: You know , it's continued to to charge upwards as you've been ramping revenue . Just in terms of directions . What should we expect ?
Speaker #6: know I particles mostly AR business but when we think about gross margins for the remainder of the year , is that going to continue to tick up from what we saw in the first quarter ?
Jamie Loch: Yeah, Josh, this is Jamie. I do think we're in that space where it's a combination of, as ARR continues to grow at a rate that is at least on pace with revenue, you'll continue to see some margin expansion. Historically, we've seen sort of in that 10 to 15 basis point expansion sequentially. I think we're going to continue to see that. The variability that you would have from that would be in any particular 90-day window, you could have product mix that could swing that up a tick or down a tick. But if you look at it over a longer range, it's reasonable that gross margins will continue to tick up, all else constant, just as your ARR continues to be a bigger percentage of your revenue.
Jamie Loch: Yeah, Josh, this is Jamie. I do think we're in that space where it's a combination of, as ARR continues to grow at a rate that is at least on pace with revenue, you'll continue to see some margin expansion. Historically, we've seen sort of in that 10 to 15 basis point expansion sequentially. I think we're going to continue to see that. The variability that you would have from that would be in any particular 90-day window, you could have product mix that could swing that up a tick or down a tick. But if you look at it over a longer range, it's reasonable that gross margins will continue to tick up, all else constant, just as your ARR continues to be a bigger percentage of your revenue.
Speaker #2: Yeah, Josh, this is Jamie. I do think we're in a space where it's that combination of ARR growing at a rate that continues to be at least on pace with revenue, as we continue to see some margin expansion.
Speaker #2: Historically , we've seen sort of in that 10 to 15 basis point expansion sequentially . I think we're going continue to see that to the variability that you would have from that would be in any particular 90 day window , you could have product that could mix swing that up a or down a tick .
Speaker #2: But if you look at it over a longer range , it's reasonable . That gross margins will continue to tick up . All else constant .
Speaker #2: Just AR continues to be a bigger percentage of your revenue .
[Analyst] (Stephens Inc.): Thanks. Appreciate the context for that. And then I think someone touched on it before, but maybe looking at a little different angle. I mean, you've already executed well in Q1, and you have the guidance with Particle for fiscal Q2. That implies a relatively wide guidance range for the top line for the fiscal second half. I'm just wondering if you could provide a little bit more granularity on what are the puts and takes between what would get you to that higher end versus the lower end of the growth guidance range for this year?
Josh Nichols: Thanks. Appreciate the context for that. And then I think someone touched on it before, but maybe looking at a little different angle. I mean, you've already executed well in Q1, and you have the guidance with Particle for fiscal Q2. That implies a relatively wide guidance range for the top line for the fiscal second half. I'm just wondering if you could provide a little bit more granularity on what are the puts and takes between what would get you to that higher end versus the lower end of the growth guidance range for this year?
Speaker #6: Appreciate the Thanks . context for that . And then I think someone touched on it before , but maybe looking at a little different angle .
Speaker #6: I mean , you've already , you know , executed well in Q1 and you have the guidance with particle for for fiscal two .
Speaker #6: A. It implies, like, there’s that relatively wide guidance range for the top of the line for fiscal second half. I’m just wondering if you could provide a little bit more granularity on what are the puts and takes between what would get you to the higher end versus the low end of that growth guidance range for this year?
Ron Konezny: Yeah, so we are seeing strengths in certain verticals. It's a chaotic time out there in the marketplace between tariffs and prices for commodities. We also, I think, are battling our way through the highly publicized memory challenges that AI expansion has created. We feel confident we can fight through those, but those are some risks out there. There remain a tremendous number of upsides, including the Jolt acquisition, the Particle acquisition, further strength in adding additional data center customers, especially with NeoCloud and AI. Our cellular router segment, as predicted, has started off the year as our fastest growing product line. So continued strength. They've got some new products coming out next quarter. So there's a lot of upside, but there are definitely our risks there. And as Jamie said, we have traditionally used that midpoint to update annual guidance.
Ron Konezny: Yeah, so we are seeing strengths in certain verticals. It's a chaotic time out there in the marketplace between tariffs and prices for commodities. We also, I think, are battling our way through the highly publicized memory challenges that AI expansion has created. We feel confident we can fight through those, but those are some risks out there. There remain a tremendous number of upsides, including the Jolt acquisition, the Particle acquisition, further strength in adding additional data center customers, especially with NeoCloud and AI. Our cellular router segment, as predicted, has started off the year as our fastest growing product line. So continued strength. They've got some new products coming out next quarter. So there's a lot of upside, but there are definitely our risks there. And as Jamie said, we have traditionally used that midpoint to update annual guidance.
Speaker #3: Yeah. So we have strengths in seeing certain verticals. It's a chaotic time out there in the marketplace between tariffs and prices for commodities.
Speaker #3: We also I think are battling our way through , you know , the highly publicized memory challenges that AI expansion has created . We feel confident we can fight through those , but those are some there .
Speaker #3: risks out There remain a tremendous number of upsides , including the jolt acquisition , the particle acquisition further strength in adding additional data center customers , especially with Nio clouds and AI .
Speaker #3: Our cellular router segment , as predicted , has started off the year as growing our fastest product line , so continued new strength .
Speaker #3: got some They've products coming out next quarter , so upside , there's a lot of but there are definitely risks there . And as Jamie said , we we we have traditionally used that midpoint to update annual guidance with the particle acquisition .
Ron Konezny: With the Particle acquisition, it just makes sense to at least provide an update. We do expect after Q2 to do an additional update as we know more information and obviously have another quarter in the books.
Ron Konezny: With the Particle acquisition, it just makes sense to at least provide an update. We do expect after Q2 to do an additional update as we know more information and obviously have another quarter in the books.
Speaker #3: It just makes sense to at least provide an update . We do expect after fc2 to do an additional update , as we more information and obviously have another quarter in know the books .
[Analyst] (Stephens Inc.): Sounds good. I think that's fair. Appreciate it. I'll have that come to Q.
Josh Nichols: Sounds good. I think that's fair. Appreciate it. I'll have that come to Q.
Speaker #6: Sounds good. I think that's fair. Appreciate it. I'll hop back in the queue.
Jamie Loch: Thanks, Josh.
Jamie Loch: Thanks, Josh.
Operator: Thank you. Our next question is from Scott Searle with Roth MKM. Please proceed.
Operator: Thank you. Our next question is from Scott Searle with Roth MKM. Please proceed.
Speaker #2: Thanks . Josh .
Speaker #1: Thank you . Our next question is from Scott Cearley with Roth . Please proceed .
Scott Searle: Hey, good afternoon. Thanks for taking the questions. Nice job on the quarter. I hope that you, your families, your team, and communities are doing well during some unprecedented events. Maybe just to dive in, Jamie, I just wanted to clarify, in terms of how you're treating interest now in your guidance, that you are now adjusting that $0.04 to $0.05 is related to interest expense. So all things normalized in terms of where street and consensus numbers are for Q1 be $0.04 to $0.05 higher would be the apples-to-apples comparison. And then maybe just to dive in on the competitive landscape front on the gateways, Ron, it seems like the dynamics in that market has recovered. I think you're largely through getting higher attach rates on that front.
Scott Searle: Hey, good afternoon. Thanks for taking the questions. Nice job on the quarter. I hope that you, your families, your team, and communities are doing well during some unprecedented events. Maybe just to dive in, Jamie, I just wanted to clarify, in terms of how you're treating interest now in your guidance, that you are now adjusting that $0.04 to $0.05 is related to interest expense. So all things normalized in terms of where street and consensus numbers are for Q1 be $0.04 to $0.05 higher would be the apples-to-apples comparison. And then maybe just to dive in on the competitive landscape front on the gateways, Ron, it seems like the dynamics in that market has recovered. I think you're largely through getting higher attach rates on that front.
Speaker #7: Good Thanks for taking the afternoon . questions . Nice job on the quarter , and I hope that you , your families , your team and communities are doing well during some unprecedented events , maybe just to dive in .
Speaker #7: Jamie, I just wanted to clarify, in terms of how you're treating interest now in your guidance, that your adjusting that now to $0.04 to $0.05 is related to interest expense.
Speaker #7: So all things normalized in terms of where street and consensus numbers are for the first quarter be 4 to $0.05 higher would be the APT comparison .
Speaker #7: And then maybe just to in on the dive competitive landscape front on the gateways . Ron , it seems like the dynamics in that market recovered .
Speaker #7: I think you're largely through getting higher attach front . I is wonder if you could talk about some of the dynamics for growth there and what you're seeing in terms of the competitive landscape from , I'll call it a little bit of a faltering point , as well as cradle some of the Chinese competitors being pushed out in some of the dynamics , moving that business right now
Scott Searle: I wonder if you could talk about some of the dynamics for growth there and what you're seeing in terms of the competitive landscape from, I'll call it, a little bit of a faltering Cradlepoint, as well as some of the Chinese competitors being pushed out and some of the dynamics moving that business right now.
Scott Searle: I wonder if you could talk about some of the dynamics for growth there and what you're seeing in terms of the competitive landscape from, I'll call it, a little bit of a faltering Cradlepoint, as well as some of the Chinese competitors being pushed out and some of the dynamics moving that business right now.
Jamie Loch: Hey, Scott. This is Jamie. I'll take the first part of that question. On the adjusted EPS, consensus and our prior estimate did not include interest. The new metric now includes interest. And if you refer back to our press release, the impact of interest on the quarter was $0.06. So if you were to compare apples to apples, you would be looking at $0.06 of impact to the current number that is because of interest baked into it. On the go forward for FQ2, what we indicated in that adjusted EPS guide is that the impact of interest embedded in that number is about $0.05 to $0.06. So the FQ1 impact of interest was $0.06, and that's embedded in the number that we reported out now at $0.56. Does that make sense?
Jamie Loch: Hey, Scott. This is Jamie. I'll take the first part of that question. On the adjusted EPS, consensus and our prior estimate did not include interest. The new metric now includes interest. And if you refer back to our press release, the impact of interest on the quarter was $0.06. So if you were to compare apples to apples, you would be looking at $0.06 of impact to the current number that is because of interest baked into it. On the go forward for FQ2, what we indicated in that adjusted EPS guide is that the impact of interest embedded in that number is about $0.05 to $0.06. So the FQ1 impact of interest was $0.06, and that's embedded in the number that we reported out now at $0.56. Does that make sense?
Speaker #7: .
Speaker #2: Scott , this Hey , is Jamie . I'll take the first part of that question on the adjusted EPs consensus , and our prior estimate did not include The interest .
Speaker #2: new metric now includes interest . And if you refer back to our
Speaker #2: impact of interest on the quarter was $0.06 . So if you were to compare apples to apples , you would be $0.06 of looking at impact to the number current that is because of into it Baked on interest .
Speaker #2: Forward for the go Q2, what we indicated in adjusted EPS rates on that is that the impact of interest embedded in that number is $0.05 to $0.06.
Speaker #2: about So the fq1 impact of interest was six . And that's embedded in the number that we reported out now at $0.56 . If that .
Speaker #2: Does that make sense ?
Scott Searle: Yeah, it does. Thank you.
Scott Searle: Yeah, it does. Thank you.
Jamie Loch: Okay.
Jamie Loch: Okay.
Speaker #7: Yeah it does . Thank you .
Ron Konezny: Yeah, Scott, on the competitive landscape, we're really excited about the momentum building in our cellular router and Ventus business segments. We've got some unique offerings, some new products coming out. We've got a great team with a great culture. And we're really optimistic that the momentum can continue. We can't take it for granted. You mentioned one thing that's in particular. There's certain segments that are very, very concerned about having Chinese-originated parts, especially radios. They will literally open up a device and look to make sure that there's no Chinese-manufactured radios in particular. And so those are segments where our products really can play well. In addition to rest of the world that doesn't have as much concern as some US-based customers, we can offer more price-competitive offerings.
Ron Konezny: Yeah, Scott, on the competitive landscape, we're really excited about the momentum building in our cellular router and Ventus business segments. We've got some unique offerings, some new products coming out. We've got a great team with a great culture. And we're really optimistic that the momentum can continue. We can't take it for granted. You mentioned one thing that's in particular. There's certain segments that are very, very concerned about having Chinese-originated parts, especially radios. They will literally open up a device and look to make sure that there's no Chinese-manufactured radios in particular. And so those are segments where our products really can play well. In addition to rest of the world that doesn't have as much concern as some US-based customers, we can offer more price-competitive offerings.
Speaker #2: Okay .
Speaker #3: Yeah . It's got on the competitive landscape . We're really excited about the momentum building in our cellular router . Aventis business segments .
Speaker #3: We've got some unique offerings , some new products coming . We've got a great team with a great culture and and we're really optimistic that the momentum continue .
Speaker #3: We can for granted . You mentioned one thing that's in particular . There's certain segments that are very , very concerned about having Chinese originated parts , especially radios .
Speaker #3: They will literally open up a device and look to make sure that there's no Chinese manufactured radios in particular . And so those are where our segments products really can play well addition to rest of the world .
Speaker #3: That doesn't have as some concern as . We can price competitive offer more In . The big push , as you mentioned , is , is really becoming more of a solution provider , of which the device is a critical component , but it's the combination of device connectivity , device management , cloud based platforms , APIs that allow you greater insight and control of that entire solution .
Ron Konezny: The big push, as you mentioned, is really becoming more of a solution provider, of which the device is a critical component. But it's the combination of device connectivity, device management, cloud-based platforms, APIs that allow you greater insight and control of that entire solution. And it really helps with what we continually see as an overburdened set of IT resources at our customers.
Ron Konezny: The big push, as you mentioned, is really becoming more of a solution provider, of which the device is a critical component. But it's the combination of device connectivity, device management, cloud-based platforms, APIs that allow you greater insight and control of that entire solution. And it really helps with what we continually see as an overburdened set of IT resources at our customers.
Speaker #3: And it really helps with what we continually see as an overburdened set of IT resources that our customers .
Scott Searle: Great. And Ron, maybe just to follow up on that, I guess that's kind of where Particle couples in as well in terms of some edge compute, edge AI capabilities. I'm wondering if you could talk about how do you see that market opportunity expanding in terms of processing requirements at the edge and how you're positioned to capitalize and deliver on that. Thanks.
Scott Searle: Great. And Ron, maybe just to follow up on that, I guess that's kind of where Particle couples in as well in terms of some edge compute, edge AI capabilities. I'm wondering if you could talk about how do you see that market opportunity expanding in terms of processing requirements at the edge and how you're positioned to capitalize and deliver on that. Thanks.
Speaker #7: Great . And , Ron , just to follow up on that , I guess that's kind of where particle couples in as well , in terms of some edge compute edge capabilities .
Speaker #7: AI I'm wondering if you could talk about see how you that market opportunity expanding in terms of processing requirements at the edge , and how you're positioned to capitalize and deliver on Thanks that ?
Ron Konezny: Yeah, some nice complementary technologies that we're bringing together with OEM and Particle. OEM has got very strong ConnectCore business, which is powered by NXP and STMicro. Tachyon brings on Dragonwing and the Qualcomm chipset. So we've broadened our offering there. On the radio side, Particle brings in LTE Cat 1bis, which further extends the portfolio on our wireless side. Digi's global reach and channel can really help propagate more and more Particle kits out there. Those dev kits get in the hands of corporate makers. Some of those grow up to be bushes and trees. And so we think we can amplify what's been a proven playbook for Particle. And in combination with that, we are having really nice conversations with Digi enterprise customers that are looking for a more complete solution set from companies like Digi.
Ron Konezny: Yeah, some nice complementary technologies that we're bringing together with OEM and Particle. OEM has got very strong ConnectCore business, which is powered by NXP and STMicro. Tachyon brings on Dragonwing and the Qualcomm chipset. So we've broadened our offering there. On the radio side, Particle brings in LTE Cat 1bis, which further extends the portfolio on our wireless side. Digi's global reach and channel can really help propagate more and more Particle kits out there. Those dev kits get in the hands of corporate makers. Some of those grow up to be bushes and trees. And so we think we can amplify what's been a proven playbook for Particle. And in combination with that, we are having really nice conversations with Digi enterprise customers that are looking for a more complete solution set from companies like Digi.
Speaker #3: some
Speaker #3: Nice. Yeah, complementary technologies that we're bringing together with OEM and particle OEMs have a very strong ConnectCore business, which is powered by EXP and STMicro.
Speaker #3: Tachyon brings on Dragon Wing and the Qualcomm chipsets . So we broaden our offering there on the radio side , particle brings in LTE cat one biz , extends the which further portfolio on our wireless side global , Digi's reach and channel can really help propagate more and more particle there .
Speaker #3: dev Those kits get in the hands of corporate makers . Some of those grow to be bushes and trees . And so we think we can amplify what's been Playbook proven .
Speaker #3: For Particle. And in combination with that, we are having really nice conversations with Digi Enterprise. Our customers are looking for a more complete solution set from companies like Digi.
Ron Konezny: And so that combination of leveraging our really long-tenured enterprise relationships with amplifying the kit process, we think that combination is going to help with growth.
Ron Konezny: And so that combination of leveraging our really long-tenured enterprise relationships with amplifying the kit process, we think that combination is going to help with growth.
Speaker #3: And so, a combination of leveraging our really long-tenured enterprise relationships with amplifying the kit process—we think that combination is going to help with growth.
Scott Searle: Great. Thanks so much. I'll get back into Q.
Scott Searle: Great. Thanks so much. I'll get back into Q.
Speaker #7: Great. Thanks so much. I'll get back in the queue.
Operator: Thank you. Our next question is from Anthony Stoss with Craig-Hallum. Please proceed.
Operator: Thank you. Our next question is from Anthony Stoss with Craig-Hallum. Please proceed.
Speaker #1: Thank you . Our next question is from Anthony Stoss with Craig-hallum . Please proceed .
Anthony Stoss: Hey, guys. Nice execution. Ron, I wanted to follow up on your comments on the memory pricing. I'm just curious if any of the device customers of yours are pulling in their horns already or if this is a few quarters out. I'm sure guys are still getting most of what they need right now, but I'm just curious what you think the impact when it would be. And then the second question is just an update on the Jolt synergies. I think you guys are looking for about $11 million in incremental EBITDA. I'm just curious where you stand out of the gate. Thanks.
Anthony Stoss: Hey, guys. Nice execution. Ron, I wanted to follow up on your comments on the memory pricing. I'm just curious if any of the device customers of yours are pulling in their horns already or if this is a few quarters out. I'm sure guys are still getting most of what they need right now, but I'm just curious what you think the impact when it would be. And then the second question is just an update on the Jolt synergies. I think you guys are looking for about $11 million in incremental EBITDA. I'm just curious where you stand out of the gate. Thanks.
Speaker #8: Hey guys . Nice execution . Ron , I wanted to follow up on your comments on the memory pricing . I'm just curious if any of the device customers of yours are pulling in their horns already , or if this is a few quarters out .
Speaker #8: I'm sure guys are still getting most of what they need right now , but I'm just curious what you think impact the when it would be .
Speaker #8: And then the second question is just update on on the jolt synergies . I think you guys are looking for about an EBITDA .
Speaker #8: Just, I’m curious where you stand out of the gate. Thanks.
Ron Konezny: Yeah, I'll handle the memory piece. Jamie can comment on your second question, Tony. Nice to hear from you. Memory, for those of you that have been around for a while, is a highly volatile business. What goes up can go down and vice versa. The AI push is putting a pressure on DDR4, DDR5 memory, as well as the eMMC. So they're very specific memory components that are mainly in our newer products. Our legacy products are using older technology. We don't see as much pressure. Our number one objective is to make sure we have our supply allocations. And so we fight very hard to make sure we've got the parts available to us. Pricing then becomes a secondary topic. And memory is a portion of our devices' price. We can usually absorb and handle certain amounts of variation.
Ron Konezny: Yeah, I'll handle the memory piece. Jamie can comment on your second question, Tony. Nice to hear from you. Memory, for those of you that have been around for a while, is a highly volatile business. What goes up can go down and vice versa. The AI push is putting a pressure on DDR4, DDR5 memory, as well as the eMMC. So they're very specific memory components that are mainly in our newer products. Our legacy products are using older technology. We don't see as much pressure. Our number one objective is to make sure we have our supply allocations. And so we fight very hard to make sure we've got the parts available to us. Pricing then becomes a secondary topic. And memory is a portion of our devices' price. We can usually absorb and handle certain amounts of variation.
Speaker #3: Yeah , I'll can comment memory piece . Jamie handle the on your second question . Tony , nice to hear from you . Memory .
Speaker #3: For those of you that have been around for a while , is a highly volatile business . What goes up can go down and vice versa .
Speaker #3: AI push is The putting a pressure on DD for DDR , Ddr4 , Ddr5 memory , as well as eMMC . So they're very specific memory components that are mainly in our newer products .
Speaker #3: Our legacy products are using older technology . We don't see as much pressure . Our number one objective is to make sure we have our supply allocations .
Speaker #3: And so we we fight very hard to make sure got we've the parts available to us . Then Pricing . becomes a secondary topic and memory is a portion of our devices price .
Speaker #3: We can usually absorb and handle certain amounts of variation. One of the challenges in the market is that, in some cases, you may issue a PO, and that PO actually is accepted with a condition that price is subject to change.
Ron Konezny: One of the challenges in the market is that in some cases, you may issue a PO, and that PO actually is accepted with a condition that price may be subject to change. So some of it's the fear of the unknown - is our price going to change in the future. But we do feel like, for the most part, we can handle those price increases. We're, as you know, emphasizing the software and services portion of our relationship. We don't want to put that at risk playing games on the product side. And so we think we can navigate it. And we're going, in many cases, to alternate providers and having our engineering teams qualify those parts just to make sure we have more than one source of memory.
Ron Konezny: One of the challenges in the market is that in some cases, you may issue a PO, and that PO actually is accepted with a condition that price may be subject to change. So some of it's the fear of the unknown - is our price going to change in the future. But we do feel like, for the most part, we can handle those price increases. We're, as you know, emphasizing the software and services portion of our relationship. We don't want to put that at risk playing games on the product side. And so we think we can navigate it. And we're going, in many cases, to alternate providers and having our engineering teams qualify those parts just to make sure we have more than one source of memory.
Speaker #3: may be So . So some of it's the fear of the unknown is our price is going to change in the future . But we do feel for the most part , we like can handle those price increases .
Speaker #3: We're , as you know , emphasizing software and the services portion of our relationship . We don't want to put that at risk .
Speaker #3: Playing games on the product side, and so we think we can navigate it, and we're going in many cases to alternate providers and having our engineering teams qualify those parts just to make sure we have more than one source of memory.
Ron Konezny: But it will be a lot of work as we fight through the AI demand and how stable and how long-running that'll be. I'll let Jamie Loch comment on the Jolt piece.
Ron Konezny: But it will be a lot of work as we fight through the AI demand and how stable and how long-running that'll be. I'll let Jamie Loch comment on the Jolt piece.
Speaker #3: But but it will be a lot of work as we fight through the AI demand and how stable and running that how long will be .
Jamie Loch: Yeah, Tony, good to hear from you. Both when you break down the synergy and the integration efforts at Jolt, kind of think of it as field integration and then support services and home office integration. Both of those, I think, are proceeding right on target. The field teams have really done a great job being in the same space, understanding the offerings, collaborating, working through both their pipelines as well as a unified front with customers. And in the support services, we are right on track in terms of integrating things like finance, HR, all the way from payroll to benefits, and all the minutiae of detail. So right now, it's tracking. When we do an acquisition, we've got a timeline that lays out all the integration activities. And so far, everything is right on time and nothing that would change our outlook going forward.
Jamie Loch: Yeah, Tony, good to hear from you. Both when you break down the synergy and the integration efforts at Jolt, kind of think of it as field integration and then support services and home office integration. Both of those, I think, are proceeding right on target. The field teams have really done a great job being in the same space, understanding the offerings, collaborating, working through both their pipelines as well as a unified front with customers. And in the support services, we are right on track in terms of integrating things like finance, HR, all the way from payroll to benefits, and all the minutiae of detail. So right now, it's tracking. When we do an acquisition, we've got a timeline that lays out all the integration activities. And so far, everything is right on time and nothing that would change our outlook going forward.
Speaker #3: Jamie , comment on the jolt piece .
Speaker #2: Yeah . Tony , good to hear from you . Well , when you when you break down the synergy and integration the efforts at jolt to kind of think of it as field integration and then support services and home office integration .
Speaker #2: Both of those , I think are proceeding right on . The the field teams have really done a great job being space , in the same understanding the offerings , collaborating , working through both their pipelines as well as a front with customers unified and in the support services .
Speaker #2: We are right on track in terms of integrating things like finance , HR all the way from payroll to benefits and all the the all minutia of details .
Speaker #2: now So right it's tracking . When we do an we've got a acquisition , timeline that lays out all the integration And so far everything activities .
Speaker #2: It is right on time. And nothing that would change our outlook going forward.
Anthony Stoss: Very good. Thanks to the other guys.
Anthony Stoss: Very good. Thanks to the other guys.
Ron Konezny: Thank you, Tony.
Ron Konezny: Thank you, Tony.
Speaker #8: Very good . Thanks for the color guys .
Operator: Thank you again. Ladies and gentlemen, if you do have a question, simply press star 11 to get in the queue. As I see no further questions, I will pass it back to Ron Konezny for closing comments.
Operator: Thank you again. Ladies and gentlemen, if you do have a question, simply press star 11 to get in the queue. As I see no further questions, I will pass it back to Ron Konezny for closing comments.
Speaker #3: Tony Thank you .
Speaker #1: Thank you again ladies and gentlemen . If you do have a question , simply press star one one to get in the queue .
Speaker #1: As I see no further questions, I will pass it back to Ronald Konezny for closing comments.
Ron Konezny: Thank you. Our team's dedication to our customer success and our ability to adapt and evolve is inspiring. Thank you for joining this update on DIGI, and have a good night.
Ron Konezny: Thank you. Our team's dedication to our customer success and our ability to adapt and evolve is inspiring. Thank you for joining this update on DIGI, and have a good night.
Speaker #3: Thank you. Our dedication to our customers' success and our ability to adapt and inspiringly evolve as— Thank you for joining this update on Digi, and have a good night.
Operator: For participating in today's program, you may now disconnect.
Operator: For participating in today's program, you may now disconnect.
