Digi International Inc.

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, CFO. Please go ahead.

Thank you. Good day, everyone. It's great to talk to you again, and thanks for joining us today to discuss the earnings results of Digi International. Joining me on today's call is Ron Konezny, our president and CEO. We issued our earnings release after the market closed today. You may obtain a copy of the press release through the financial releases section of our investor relations website at digi.com. This afternoon, 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 statement section in our earnings release today and the risk factor section of our most recent 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 furnished as an exhibit to form 8K that can be accessed through the SEC filing sections of our investor relations website. Now, I'll turn the call over to Ron.

Thank you, Jamie. Good afternoon, everyone. Before we take questions, a few highlights from our 2025 fiscal first quarter. We begin the second year of our five-year journey to double ARR and adjusted EBIT at $200 million each and remain as confident as ever we will achieve these targets. In our first fiscal quarter, ARR reached another record at $120 million, an increase of 11% over last year and $4 million higher than last quarter. Strong performance in both of our reporting segments drove this performance. ARR now represents a record 28% of our quarterly revenues. ARR is the top strategic priority to benefit our customers, distributors, employees, and shareholders. As an industrial IoT solution provider, Digi solves some of the toughest and most valuable remote connectivity challenges. Our customers rely on our best-in-class software and service, complementing our reliable, secure, award-winning edge intelligence. Digi's solutions produce a compelling ROI and faster outcomes for our customers. As ARR grows, it will have an increasing impact on our profitability, enabling our second long-term objective. We continue to enhance Digi's balance sheet. We total outstanding debt below $100 million for the first time since our fiscal fourth quarter of 2021. We generated $30 million in cash from operations in the quarter and further reduced our inventory balances. We expect strong free cash flow generation this year, with all debt expected to be retired by the end of calendar 2025. As our balance sheet improves, we are even better positioned to pursue solution-oriented acquisitions of scale. In a rapidly evolving geopolitical environment that has a myriad of outcomes for global businesses, we remain steadfast in putting our customers' best interests first, just as we did while navigating the supply chain challenges coming out of the COVID pandemic. Despite the speed of change and the fluidity of tariff policies, Digi is confident in our ability to leverage our geographically diverse manufacturers. In 2025, we celebrate our 40-year history of resilience, innovation, and adaption. And we rely on this to deliver for our customers for decades to come. Operator, I will now hand the call back for Q&A.