Digi International Inc.

Good day and thank you for standing by. Welcome to the Fiscal Second Quarter 2022 Digi International, Inc. 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'll 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 now like to hand the conference over to your host today, Jamie Locke. Please go ahead.

Thanks, Michelle. Good afternoon, everyone. It's great to talk to you again, and thank you for joining us today to discuss the fiscal 2022 second 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. We've provided a supplemental presentation of our earnings details for your benefit. Following our prepared remarks, we'll take your questions. We issued our earnings release shortly after the market closed today. We also have prepared a supplemental investor presentation highlighting our performance through our second fiscal quarter. You may obtain a copy of both the press release and the supplemental presentation 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 section 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 measure, are included in the earnings release. The earnings release is also an exhibit to a Form 8-K 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, everyone, to DIGI's 2022 second fiscal quarter earnings call. New this quarter is a supplemental presentation posted on the investor relations portion of Digi's website. Our team delivered outstanding performance in an incredibly challenging environment, resulting in several all-time records at Digi. The ongoing COVID pandemic, war in Ukraine, ongoing inflation, recent rises in interest rates, and the battle for talent have not prevented us from reaching our objectives, but are limiting our full potential. We had the highest revenue for any quarter in the company's history of nearly $95 million, an increase of 23% from last year. We are laser-focused on delivering enhanced customer value through our hardware-enabled software, services, and subscription offerings. Our progress is best measured by high-margin, annualized recurring revenue, which reached an all-time high of nearly $90 million. Through a careful balance of pricing optimization and smart supply chain management, we delivered year-over-year gross margin growth in an environment where macro headwinds challenge margin preservation. We also set new quarterly records for profitability that's measured in adjusted EBITDA and adjusted EPS. Our results were broad-based. Strong revenue growth and profitability expansion occurred in both our products and services segment and our solution segment. In our IoT products and services segment, growth was driven by strength in OpenGear's console server business, which is seeing record demand in both data center and edge deployments. We are investing in device and cloud software to further automate key IT requirements. In addition, we've seen growth in our cellular solutions business, driven by the return of smart city and mass transit opportunities, as well as retail and point of sale connectivity. Improved gross margins show the great teamwork and execution of our business leaders as we carefully manage cost and price increases while meeting customer delivery dates. Annualized recurring revenue growth was driven by increased adoption of device management and service offerings. In our IoT solution segment, we doubled the size of this group from last year, driven primarily by the addition of Ventus. We added nearly 10,000 sites in the quarter driven by healthcare, lottery and gaming, and retail point of sale verticals. Improved gross margins and solutions was materially increased from last year driven by the addition of Ventus and their annualized recurring revenue contribution. We are making a targeted investment in this segment to accelerate the transition and growth of ARR. There remains a multi-billion dollar market opportunity with the vast majority of it under-penetrated and our offering and team is well positioned to extend our leadership. Demand for industrial IoT remains strong and robust. And Digi is a market leader given our business model and mission-critical combination of reliability, security, scalability, and ease of use and management. Demand is growing rapidly, notwithstanding the global supply chain constraints. Driven by record bookings, we now have a record backlog. I want to briefly cover our opportunity strategy and how we've been able to execute as a team. We see opportunities in niche markets within the immense industrial IoT market. most of which is Greenfield. We're leveraging decades of product excellence to drive higher profit sales in software and service-based IoT applications. The digital transformation in the industrial world is being accelerated by the COVID pandemic and a challenging labor environment. Ultimately, this means better value and lasting relationships with our customers, stickier revenue, and an improved financial model. Digi's offerings are easy to deploy and manage, and deliver results in the most harsh and demanding environments. We started on this journey seven years ago with almost no annualized recurring revenue. Through great work by our team, complemented by thoughtful acquisitions, our annualized recurring revenue model delivers more predictable results each quarter and offers higher gross and operating margins than one-time sales of products. Shareholders have been rewarded, and we believe that will continue. Digi's new model is intact and sustainable. We see double-digit annualized recurring revenue and top-line growth, expanding growth and adjusting to margins. We plan to de-lever the balance sheet with free cash flow after prioritizing business and inventory needs to support our customers. And the integration of Ventus is progressing. Our acquisition thesis is being reinforced both internally and externally. We will prudently invest in our people, systems, and processes to become more efficient in order to deliver an optimal, customer experience. Our confidence is growing to reach our targets of $100 million in quarterly revenue, $100 million in annualized recurring revenue, and $100 million in annualized adjusted EBITDA. I will now turn the call over to Jamie for more detail on our financial performance.