Digi International Inc.

Hello, thank you for standing by and welcome to the fiscal third quarter 2022 DIGI International 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'll need to press star 1 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jamie Locke, Chief Financial Officer.

Please go ahead. Thank you. Hello, everyone. Good day. It's great getting to talk to you again. Thanks for joining us on today's call to discuss the earnings results of Digi International. Joining me on today's call is Ron Knezny, our president and CEO. We issued our earnings release before the market opened this morning. We've also posted a shareholder letter and a supplemental presentation this morning. You may obtain a copy of the press release, shareholder letter, and supplemental presentation through the financial releases section of our investor relations website at digi.com. This morning, Ron will provide a comment on our performance, and then we'll take your questions. 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 statements 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 measure, 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. Good morning, everyone. I hope everyone gets a chance to review our 2022 fiscal third quarter shareholder letter. Before we jump into Q&A, a few comments on the quarter. I'm incredibly proud of the Digi team who have performed exceptionally well in challenging conditions. Demand for our leading industrial Internet of Things offerings remains robust, with another strong quarter of bookings leading to increased backlog. It is particularly rewarding to achieve the first of three 100 objectives we covered last quarter by exceeding 100 million in quarterly revenues for the first time in the company's history. Access to critical components remains our biggest challenge. Highlights from the quarter. We set new quarterly records in revenue, annualized recurring revenue, adjusted EBITDA, and adjusted earnings per share. We grew 31% year over year. Gross margin increased 170 basis points from last year. Annualized recurring revenue now exceeds $92 million as of the end of the quarter, up over $2 million from last quarter. Adjusted EBITDA was up 82% year-over-year. We paid down $20 million of debt in the quarter. Adjusted EPS increased 80% from last year. Details of our fiscal fourth quarter guidance have been provided in our press release and in our shareholder letter published earlier this morning showing our continued confidence. At this time, I'd like to turn the call back to the operator for our questions and answer session. Thank you, operator.