Digi International Inc.

Good day and thank you for standing by. Welcome to DIGI International's first fiscal quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star then 0. I would like to hand the conference over to your host today, Jamie Locke, Chief Financial Officer. Please go ahead.

This is the fiscal 2022 first quarter results of Digi International. Joining me on today's call is Ron Konesny, 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 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 2021 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'll turn the call over to Ron.

Thank you, Jamie, and welcome to Digi International's 2022 First Fiscal Quarter Earnings Call. Digi's mission is to transform our customers' business by connecting their people and machines. Our industrial IoT solutions are used in business and mission-critical applications that are secure, scale in numbers and across geographies, reliable, and easy to implement and manage. Paired with our expert support and backed by a vibrant, growing, profitable company with decades of experience, Digi helps tens of thousands of customers around the world. We are committed to ever-increasing value by pairing software and services with our award-winning products. We have gotten off to a fast start in our commitment to set another record year. With the acquisition of Ventus on November 1st, we are reporting two months of their results in combination with SmartSense within the IoT solutions business segment. We set several new records, including over $84 million in quarterly revenue, up 15% from last year, 17 million in quarterly adjusted EBITDA, up 31% from last year. Over 20% adjusted EBITDA margins, up 240 basis points from last year. Over 270,000 subscribers power over 88 million in annualized recurring revenues, up 170% from last year. In addition, strong bookings added to our quarter billion dollar backlog. Digi is benefiting from continued acceleration of digital transformation throughout the industrial economy. We believe this trend will be sustained for the foreseeable future and that Digi can play an increasing role in our customer success. The continued pandemic and its impact on our supply chain remains our biggest challenge. Customer demand continues to outstrip our ability to access components and provide product to satisfy our order book. We expect these conditions to persist through the first half of 2022 with the potential for improvement thereafter. We are working feverishly to obtain parts, ensure our suppliers are safe and at capacity, secure freight services, keep our supply chain team safe and healthy, and work with our customers to transition to new designs and or SKUs when appropriate. Now, a few comments on each of our two business segments. In our IoT products and service business segment, OEM solutions and cellular solutions product lines drove a 6% increase in revenues from last year. Growth was moderated by a decline in our infrastructure product line. All product lines would have been up year over year with a more conducive supply chain environment. Record bookings across all product lines has created a record backlog and provides strong visibility into future periods. Annualized recurring revenue is up 2% from last year at $14 million, and we are investing in both software and sales as the potential for growth is evident. Cellular Solutions received the CES 2022 Innovation Award and the 2021 IoT Evolution and IoT Excellence Award. In addition, console servers received the 2021 TMC Cloud Computing Backup and Disaster Recovery Award. These awards provide excellent validation of Digi's offerings. OEM Solutions now has 27 customers with over $1 million in reoccurring annual revenues, up from eight in fiscal 2020. Reoccurring revenues are those derived from design wins with customers that result in repeat orders each year. We expect supply chain challenges to constrain our potential in our fiscal second quarter and are planning for gradual relief to improve our customer delivery lead times and financial results in the second half of our fiscal year. We believe rising commodity and transportation costs could help bring supply and demand into better balance. The IoT Solutions business segment added over 190,000 subscribers in the quarter driven primarily by the Ventus acquisition. We continue to see strong demand for the offerings of both SmartSense as well as Ventus' managed network as a service. We are approaching $75 million in annualized recurring revenue, up nearly 290% from last year. With the addition of Ventus, IoT Solutions now is a significant contributor to adjusted EBITDA. SmartSense 4, the destination consolidation of the cloud and mobile interface, now services over 60% of our total customer base, and we are on track to complete the migration by the end of our fiscal year. Ventus added new customers and expanded business with existing customers to fuel double-digit growth and recurring revenues. We are heads down integrating the Ventus team, systems, and processes into the Digi family. It's been a great start, and we are confident in our ability to grow high-quality recurring revenues faster than our top-line growth. We are making additional investments in go-to-market resources to capture additional market share. We are ahead of schedule on all of our projections provided in last quarter's earnings call. The new Digi model has hit an inflection point. It is here now. We are growing at top line double digits. Gross margins are moving towards 60 percent. Adjusted EBITDA margins have exceeded 20 percent. Annualized recurrent revenue exceeds 20 percent of our revenues. And we are well on our way of exceeding 90 million in annualized recurrent revenue by the end of our fiscal year. Unfortunately, the pandemic has extended with the Omicron variant making its way through many countries. We continue to emphasize both the safe mental and physical health of our employees. We are embracing remote and office work. We are allowing for more work and personal life balance and communicating more and better than ever before. I'm very grateful to be presenting the results of our team's great efforts that are squarely focused on our customers' needs. I will now turn the call over to Jamie for more detail on our financial performance.