Digi International Inc.

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 Koneczny, 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. DIGI is off to a strong start in fiscal 2026, and we've stepped closer to achieving our $200 million of ARR and adjusted EBITDA goals. Our first fiscal quarter set several new all-time records. $122 million of quarterly revenues up 18% year-over-year. $157 million of annualized recurring revenue, which is up 31% year-over-year, and our fifth consecutive quarter of double-digit growth. $32 million of quarterly adjusted EBITDA, which is up 23% year-over-year. Our 25.8% adjusted EBITDA margin is also a new quarterly record. 36 million of quarterly cash generation. We are encouraged by contributions from all of our product lines and across a variety of vertical industries and applications. This broad-based strength is critical to sustaining double-digit growth rates. Both of our reporting segments contributed to our strong ARR growth this quarter, with IoT solutions growing 32% and IoT products and services growing 26% year-over-year. The integration of Jolt is progressing well. We have combined the SmartSense and Jolt organizations and offerings into SmartSense One. We're seeing strong customer response to this combined platform and the cross-selling opportunities we envisioned are materializing. On January 27th, we announced the acquisition of Particle, a leading IoT solution provider founded in 2012 and inspired in part by our own DigiXB Particle has grown into an industrial IoT leader. Particle brings robust AI-ready embedded edge devices coupled with wireless services and a cloud-based solution supporting over 240,000 developers across 14,000 companies. This acquisition strengthens our edge-to-cloud capabilities and expands our addressable market in the IoT device management space. The combination of Particle with our existing OEM solutions creates compelling opportunities for customers seeking seamless connectivity and device management at scale. Jacuzzi, Goodyear, and Wasco are amongst the over 150 enterprise customers that have accelerated their go-to-market IoT visions with Particle. We are integrating the Particle and OEM Solutions teams to further drive embedded as a service globally. Particle brings our IoT product and services reporting segment $20 million in ARR and further balances ARR contributions across Digi's two reporting segments. Particle provides a catalyst for OEM solutions, which is now named Particle by Digi. Digi's comprehensive industrial IoT portfolio spanning embedded solutions, edge intelligence, and vertical specific turnkey offerings resonates across a diverse range of industries and positions us to capitalize on secular trends in AI, edge computing, and industrial automation. our AI initiatives continue to advance. Beyond the internal productivity gains we've achieved, we're now actively embedding AI capabilities into our products and customer-facing solutions. Digi is uniquely positioned to take advantage of the less publicized wave of machine-driven technology advances. Like the wireless and internet advances that preceded it, AI will ultimately benefit machines like it will humans. Digi Solutions' approach aims to accelerate our customers' industrial AI outcomes. Acquisitions remain our top capital deployment priority as we strengthen our balance sheet and we continue to evaluate additional opportunities. Following our successful integration of Jolt just months ago, Particle demonstrates the strength of our organizational structure and our ability to execute multiple acquisitions while maintaining operational excellence. We remain confident in our goal of achieving $200 million of ARR and $200 million of adjusted EBITDA by the end of fiscal 2028. Strategic acquisitions may accelerate this timeline. Next, Jamie will provide comments on our financial guidance.

Hi, everyone. For fiscal 2026, our guidance reflects both our updated operational outlook combined with the January 2026 acquisition of particles. We anticipate ARR growth of 23%, revenue growth of 14% to 18%, and adjusted EBITDA growth of 17% to 21%. The impact of Particle and its expected synergies to this guide is approximately $20 to $22 million in ARR, $13 to $14 million in revenue, and $1 to $2 million in adjusted EBITDA. After capturing synergies, we expect Particle to contribute $5 million to our fiscal 2027 adjusted EBITDA. Particle will be integrated into our IoT products and services segment and will not be reported on a standalone basis. For the second fiscal quarter, revenues are estimated to be between $124 million to $128 million. Adjusted EBITDA is expected to be between $31.5 million and $33.0 million. New for fiscal 26, we are including interest expense in our adjusted net income per diluted share metric. and we have done the same for comparison periods. Adjusted net income per diluted share is anticipated to be between $0.56 and $0.59 per diluted share, assuming a weighted average diluted share count of 38.8 million shares. This includes an expected impact from interest of between $0.05 and $0.06 per diluted share. We provide guidance and longer-term targets for adjusted net income per share as well as adjusted EBITDA on a non-GAAP basis. We do not reconcile these items to the most comparable U.S. GAAP measure as it is not possible to predict without unreasonable efforts numerous items that include but are not limited to the impact of foreign exchange translation, restructuring, interest, and other tax-related events. Given the uncertainty, any of these items could have a significant impact on U.S. GAAP results. With that, I will turn the call back over to our operator to take your questions.