Digi International Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Q4 2020 Digi International Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference may be recorded. Should you require any further assistance, please press star 0. I would now like to hand the conference over to your host, CFO, Jamie Lott.

Thank you, Lateef. Good afternoon, everyone, and thank you for joining us today to discuss the fiscal 2020 fourth quarter results of Digi International. Joining me on today's call is Ron Konezny, our president 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 will 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.com. 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. 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 statement section in our earnings release today and the risk factor sections of our 2019 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 an exhibit to a form 8K that can be accessed through the SEC filing section of our investor relations website. Now I will turn the call over to Ron.

Thank you, Jamie, and welcome to Digi International's 2024 fiscal quarter and end of fiscal year earnings call. We are pleased with both the finish to a record fiscal year and the excitement on our future potential. Our team achieved several new annual records, revenues, Profitability, cash generation, subscribers, and annualized recurring revenue. We were able to accomplish all of these goals under the unprecedented heavy cloud of the pandemic. DIGI's value proposition of remote, automated, zero-touch, and intelligently connected offerings has strengthened, setting the stage for new records in the future. Consistent with our commentary from last quarter's earnings call, our fourth fiscal quarter performance demonstrated growth from the previous quarter, and double digit growth year over year. We maintain our new model of over 50% gross margins, over 15% adjusted EBITDA margins, paid down $15 million in debt, leveraging strong cash collections and exceeded 70,000 subscribers in SmartSense, our solutions business segment. Inspired by the success of both SmartSense and OpenGear, Digi has implemented the new organizational structure to bring focus to our key product lines. Kevin Riley and Gary Marks continue to lead those respective organizations, and we have implemented new leaders in cellular routers with Mike Uland, OEM solutions, our embedded product line with Steve Ericson, infrastructure management with Brian Kirkendall, and technology services with Tracy Roberts. These changes were implemented at the beginning of the fiscal year, and we've already seen the benefits of this structure. Each leader and their team are keyed in on their marketplace, customers, Competitors and have incentives aligned to their performance. Now, a few comments on each of our business segments. Once again, our console server product line, which includes OpenGear, drove an over 10% increase in IoT products and services revenues from last year. Similarly, this growth was moderated by a modest decline in our other products and services offerings as the pandemic continued to impact some of our customers during the quarter. We continue to make investments in innovation, We achieved over $60 million in new product revenue in fiscal year 2020, which is up over 50% from fiscal 2019. We launched a greatly improved digital remote manager. Our XP tools received the 2020 Electronics Industry Engineering Development Design Tool of the Year award. We launched our first CBRS offerings. and we are prototyping our 5G Wi-Fi 6 cellular router offerings for introduction in fiscal 2021. Our new lineup of NetOps console servers which combine the capability of a smart out-of-band console server with the flexibility of NetOps automation is gaining traction and opening up new market segments. We're implementing new customer and partner portals to support their success, ease deal registration, and Simplify both purchases and renewals. We are expanding our go-to-market teams in all of our product lines with additional hiring and marketing and sales. IoT products and services operates in the physical world. The team is delivering strong results at a time that makes it difficult to connect with new customers and introduce new products. Our customers often have limited access to labs and other tools and environments due to their company's restrictions. Through virtual tools, we are reinventing our marketing and sales skills while positioning ourselves for in-person travel and meetings. We are seeing the payoff with increased product evaluation, higher take rates, and our remote management software, and building pipelines and win rates. SmartSense IoT solutions added over 1,200 subscribers in the quarter, driven by healthcare and retail verticals. Retention remains high, but we did lose about 450 subscribers through the pandemic-induced business failures. We ended the fiscal year with over 70,000 subscribers, powering nearly 18 million in annualized recurring revenue. Newly signed agreements with Schwann's, two regional grocery chains, expansion of existing pharmacy business, and expansion of a large restaurant customer give us visibility to over 75,000 subscribers and 20 million in annualized recurring revenue we implemented over the next few quarters. SmartSense 4, the destination, consolidation, of the cloud and mobile interface now services over 6,000 sites, and we have officially retired one of four legacy sites fresh temp. We are on a path for all sites to be SmartSense 4.0 by the end of 2021. With strong bookings and a strong pipeline established, we are targeting adding 3,000 to 4,000 sites per quarter throughout fiscal 21. The SmartSense team achieved success by focusing on key markets, Relentless innovation, collaboration, and a steadfast commitment to our customer success. The market remains in the early innings of its maturity, and we're establishing a leadership position that could lead to years of growth. At the corporate level, we continue to progress Digi's efficiency and effectiveness. Software, services, and subscription will define our customer value and success. We now have over $30 million in annualized recurring revenue across the entire company. Our diversified supply chain continues to perform well and showing increased resilience. We've implemented cloud-based tools to replace on-premise capital and labor-intensive tools. We remain on the offense regarding acquisitions. Deal market activity increased significantly from earlier in the year. We continue to pursue opportunities in both our IoT products and services and IoT solutions business segments. Absent significant acquisitions, we will continue to bolster our balance sheet and net debt position. I continue to be humbled and impressed by the Digi team and their adaptability, stamina, and commitment to our customers and our success in what is now an eight-month battle with the coronavirus. We do not expect an easing of conditions in the near term, but I feel confident in our team, our supply chain, our tools, and our offerings. While I look forward to more in-person collaboration, our team is, can, and will persevere this pandemic. I will now turn the call over to Jamie for more detail on our financial performance.