- Digi International reported a solid Q3 2024 amid a transitioning mix toward recurring revenue, led by ARR growth and margin expansion. Annualized recurring revenue (ARR) reached a record $113 million at quarter-end, up 9% year-over-year, representing 27% of quarterly revenues. This ARR trajectory supports greater visibility and profitability, underscored by record gross margins and adjusted EBITDA margins in the period.
- Reported revenue of $105.203 million with gross profit of $57.039 million and gross margin of 54.2%. Operating income was $12.908 million with an operating margin of 12.3%, while net income was $9.702 million (EPS $0.27 basic, $0.26 diluted). These results occurred in a quarter where management emphasized stability in sales cycles and continued progress on software attach and ARR expansion.
- Digi closed a debt-reduction phase that materially strengthens the balance sheet: inventory reduction of $5 million, cash generation of about $25 million, and debt paydown of $20 million in the quarter, bringing cumulative debt reduction to roughly $200 million over the last ~three years. Interest expense declined about 43% vs. year-ago comparative period, freeing cash for acquisition capacity and strategic investments. The company continues to pursue disciplined M&A and strategic partnerships to scale Industrial IoT capabilities.
- Management commentary highlighted stabilized sales cycles, ongoing improvements in attach rates for software, and a targeted expansion of ARR through the combination of Digi’s IoT products/services with Ventus and Opengear offerings. The partnership with Atsign signals an emphasis on security and integrated solutions without sacrificing the “lead with ARR” strategy. Overall, the growth thesis centers on higher ARR mix, improved profitability, and a more robust balance sheet to fund future acquisitions and product initiatives.