Our management's discussion and analysis should be read in conjunction with our
Annual Report on Form 10-K for the fiscal year ended
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Form 10-Q contains certain statements that are "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995, and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-Looking Statements
This discussion contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements, other than
statements of historical fact are forward-looking statements. Words such as
"assume," "believe," "anticipate," "intend," "estimate," "target," "may,"
"will," "expect," "plan," "potential," "project," "should," or "continue" or the
negative thereof or other expressions, which are predictions of or indicate
future events and trends and which do not relate to historical matters, identify
forward-looking statements. Among other items, these statements relate to
expectations of the business environment in which Digi operates, projections of
future performance, perceived marketplace opportunities and statements regarding
our mission and vision. Such statements are not guarantees of future performance
and involve certain risks, uncertainties and assumptions. Among others, these
include risks related to the ongoing COVID-19 pandemic and efforts to mitigate
the same, risks related to the global economic downturn that commenced during
the COVID-19 pandemic and the ability of companies like us to operate a global
business in such conditions, risks arising from the present war in
These and other risks, uncertainties and assumptions identified from time to
time in our filings with the
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations
are based upon our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in
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A description of our critical accounting policies and estimates was provided in
the Management's Discussion and Analysis of Financial Condition and Results of
Operations section of our Annual Report on Form 10-K for the fiscal year ended
OVERVIEW
We are a leading global provider of business and mission-critical IoT connectivity products, services and solutions. Our business is comprised of two reporting segments: IoT Products & Services and IoT Solutions. Our IoT Products & Services segment offers products and services that help original equipment manufacturers ("OEMs"), enterprise and government customers create and deploy, secure IoT connectivity solutions. From embedded and wireless modules to console servers as well as enterprise and industrial routers, we provide a wide variety of communication sub-assemblies and finished products to meet our customers' IoT communication requirements. In addition, this segment provides our customers with a device management platform and other professional services to enable customers to capture and manage data from devices connected to networks. In the past this segment has benefited from significant one-time project based deployments. During the pandemic we saw a decrease in proposals for such projects. Recently we have seen some resumption of opportunities to make these project based sales, most notably in the areas mass transit and smart cities. While there is no assurance we will be chosen for any such deployments, we view this renewed activity as a positive development for this segment. Demand generally has been strong for many products in this segment during fiscal 2022 and has driven record sales bookings and backlogs that we are constrained to meet at present because of supply chain challenges.
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Our IoT Solutions segment primarily consists of our SmartSense by Digi® and Ventus operating segments. SmartSense offers wireless temperature and other condition-based monitoring services as well as employee task management services. These solutions are focused on the following vertical markets: food service, healthcare (primarily pharmacies and hospitals) and supply chain. We initially formed, expanded and enhanced our SmartSense by Digi business through four acquisitions. Our recent acquisition of Ventus makes us a leader in the provision of Managed Network-as-a-Service ("MNaaS") solutions that simplify the complexity of enterprise wide area network ("WAN") connectivity for our customers and provides us with a significant base of high margin subscription based recurring revenue. Ventus's portfolio includes cellular wireless and fixed line WAN solutions for an array of connectivity applications in banking, healthcare, retail, gaming, hospitality and other sectors. Given our belief in the potential of this segment, we intend to make targeted investments in this segment designed to enhance its performance over time.
We compete for customers on the basis of existing and planned product features, service and software application capabilities, company reputation, brand recognition, technical support, alliance relationships, quality and reliability, product development capabilities, price and availability.
In fiscal 2022, our key operating objectives include:
•continued growth of our SmartSense by Digi® and Ventus businesses that are the base of our IoT Solutions segment;
•delivering growth within our IoT Products & Services segment through new product introductions; and
•integration of our recently acquired Ventus business.
We utilize many financial, operational, and other metrics to evaluate our financial condition and financial performance. Below we highlight the metrics for the second quarter of fiscal 2022 that we feel are most important in these evaluations, with comparisons to the second quarter of fiscal 2021:
•Consolidated revenue was
•Consolidated gross profit was
•Consolidated operating income was
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
•Net income was
•Diluted earnings per share was
•Adjusted EBITDA was
•Adjusted net income and adjusted net income per share was
Recent Events Impacting Second Quarter Results
Acquisition of Ventus
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