Digi International Inc.

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 is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Jamie Locke, Chief Financial Officer. Please go ahead.

Thank you, Joelle. Good afternoon, everyone, and thank you for joining us today to discuss the fiscal year 2021 third quarter results of Digi International. Joining me on today's call is Ron Knozny, 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'll take your questions. We issued our earnings release shortly after the market closed today. You may obtain a copy through the financial releases section of our investor relations website at digi.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 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 section of our 2020 Form 10-K and subsequent reports on file with the SEC. Finally, certain of the financial information on this call includes non-GAAP measures. The information required to be disclosed about these measures, including reconciliations to the most comparable GAAP measures, are included in the earnings release. The earnings release is also an exhibit to a form 8K that can be accessed through the SEC filing section of our investor relations website. Now I'll turn the call over to Ron.

Thank you, Jamie, and welcome to Digi International's 2021 third fiscal quarter earnings call. Yet another record quarterly revenue, which is up double digit over last year's results and record annualized recurring revenue headline our most recent results. In addition, SmartSense, our IoT solutions leader, had a record quarter building their customer base to over 79,000 subscribers. We also closed our second acquisition of the year in bringing the C-Tech team into the Digi family. We generated nearly $21 million in cash, bringing our net cash position to nearly $100 million, positioning us well for further acquisition activity. Our industrial customer base is accelerating their digital transformation. Increasingly, they are looking to compress time, reduce risk, and get effective solutions to market. DIGI is an ideal partner for those customers and opportunities, which is showing with record bookings and backlog. Our results could have been even better if it were not for widely known electronics and semiconductor supply chain challenges combined with higher transportation costs and friction that are restraining our growth rates and impacting our margins. We are fighting through these challenges, but expect them to persist into 2022. We will continue to prioritize our customers to meet their critical needs. Now, a few comments on each of our business segments. The IoT products and services segment grew over 5% year over year. All product lines contribute to the growth, with the exception of our cellular router business. A new leader will take over this business this quarter, and we expect improved results over time. Recurring revenue of nearly $13 million grew $1 million quarter over quarter, driven by enhanced attach rates of our device management software across our cellular enabled products. OpenGear, our console server business, had record bookings, which led to a record backlog heading into fiscal Q4. In addition, the team furthered their customer focus with the launch of Lighthouse Enterprise Automation Edition. OEM Solutions had a record quarter and booked a record $60 million in business during the quarter. In addition, the team launched LoRa development kits in partnership with our channel partners. Infrastructure management continued its year-over-year growth. and is integrating SeaTek into its business, which will further propel its growth as we attack industrial verticals like water management. Cellular received orders in smart cities, signaling the potential return of this vertical's health and contribution. We continue to bundle world-class, reliable, secure hardware with 24 by 7 expert support and leading cloud software to offer compelling value propositions. Our customer-centric approach will be our north star as we launch our enhanced customer and partner portals this quarter, to improve the customer experience. SmartSense, our IoT solutions business, added over 3,000 subscribers in the quarter, driven by healthcare and grocery verticals. Customer retention remains strong as a result of our strong customer and service orientation. We entered the quarter with over $23 million in annualized recurring revenue and over 79,000 subscribers. This represents nearly 37% growth in annualized recurring revenue over last year. and a 14% increase in our subscriber base. These metrics show we're bringing on new customers at higher average revenue per month than the installed base showing increased value of the offering. The team released their next generation Bluetooth sensor and added key features and reports to our healthcare and grocery customers. SmartSense 4, the destination platform and consolidation of the cloud and mobile interface now services approximately 30,000 subscribers or 38% of our total customer base. Food service continues to be a growth area of focus, and we improve our digital task management and reporting tools to attract this segment. SmartSense, our IoT solutions brand, continues to lead an underpenetrated market that is a multibillion-dollar opportunity. We will not take our leadership position for granted and are investing heavily in both the offering and reducing the time to value for our customers. At the corporate level, we had some notable achievements. We now have over $36 million in annualized recurring revenue across the entire company, demonstrating the growth of IoT solutions and the increasing prominence of software in our IoT products and services business. This is up 28% from last year and $2 million from last quarter. Our supply chain team is working double time to meet our partner and customer commitments, many times at much higher component and freight costs, showing our commitment to customer success. The acquisition pipeline remains robust, and we are active but disciplined in putting our capital to use. We have the potential to offer more customer value while building both our profitability and recurring revenue positions. While vaccines have been effective and available, the Delta variant of the COVID pandemic is causing more disruption. I urge everyone to get the vaccine to help themselves and others. I remained awed by the commitment and flexibility of the DIGI team. We continue to face unique challenges and rise to the occasion. A heartfelt thank you to my teammates. I will now turn the call over to Jamie for more detail on our financial performance.