Digi International Inc. reports 86.1% Net Income decline in 2018 while 25.7% Revenue growth
11/15/2018 • About Digi International Inc. (
$DGII) • By InTwits
Digi International Inc. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: 6.4% in FY2018, 7.9% in FY2017, 10.7% in FY2016, 8.2% in FY2015, 3.8% in FY2014
- Digi International Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.4%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: $2m in FY2018, $2m in FY2017, $3m in FY2016, $5m in FY2015, $3m in FY2014
- The company has potentially unprofitable business model: ROIC is 0.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Digi International Inc.'s Revenue surged on 25.7%. Revenue growth showed acceleration in FY18Q4 - it increased 45.6% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 7.0 pp from 11.8% to 4.8% in FY2018. During FY2014-FY2018 EBITDA Margin topped in FY2016 at 10.7% and was declining since that time.
Gross Margin showed almost no change in FY2018. During FY2014-FY2018 Gross Margin topped in FY2016 at 49.1% and was declining since that time. SG&A as a % of Revenue increased on 6.0 pp from 26.0% to 32.0% in FY2018. During the last 5 years SG&A as a % of Revenue bottomed in FY2016 at 25.1% and was growing since that time.
Net Income margin decreased on 4.6 pp from 5.2% to 0.57% in FY2018. During the last 5 years Net Income margin topped in FY2016 at 8.2% and was declining since that time.
Investments (CAPEX, working capital and M&A)
In FY2018 Digi International Inc. had CAPEX/Revenue of 0.81%. CAPEX/Revenue decreased slightly on 1.4 pp from 2.2% in FY2015 to 0.81% in FY2018. It's average CAPEX/Revenue for the last three years was 1.0%. CAPEX as a % of Revenue followed a declining trend at -0.32 pp per annum in the last 5 years.
Return on investment
The company operates at low ROIC (0.7%) and ROE (0.4%). ROIC decreased on 2.2 pp from 2.9% to 0.73% in FY2018. ROE decreased on 2.6 pp from 3.0% to 0.40% in FY2018. During FY2014-FY2018 ROIC topped in FY2016 at 6.1% and was declining since that time. During the last 5 years ROE topped in FY2016 at 5.8% and was declining since that time.
Leverage (Debt)
The company has no debt. Cash dropped on 25.8%.
Valuation and dividends
Digi International Inc.'s trades at EV/EBITDA 17.5x and P/E 240.2x.
Management team
Digi International Inc.'s CEO Ronald E Konezny "Ron" is a founder and has spent 4 years with the company.
Financial and operational results
FY ended 09/30/2018
Digi International Inc. ($DGII) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 192.7 | 203.8 | 203.0 | 181.6 | 228.4 | 25.7% |
| Gross Profit | 90.5 | 97.1 | 99.7 | 87.2 | 108.9 | 24.9% |
| SG&A | 60.5 | 55.9 | 50.9 | 47.3 | 73.1 | 54.6% |
| EBITDA | 7.3 | 16.7 | 21.7 | 14.3 | 14.6 | 2.0% |
| Net Income | 1.8 | 6.6 | 16.7 | 9.4 | 1.3 | -86.1% |
Balance Sheet
|
|---|
| Cash | 47.5 | 45.0 | 75.7 | 78.2 | 58.0 | -25.8% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 3.4 | 4.5 | 2.7 | 1.8 | 1.8 | 3.9% |
Ratios
|
|---|
| Revenue growth | -1.4% | 5.8% | -0.4% | -10.5% | 25.7% | |
| EBITDA growth | -52.9% | 130.3% | 29.7% | -34.1% | 2.0% | |
|
|---|
| Gross Margin | 47.0% | 47.6% | 49.1% | 48.0% | 47.7% | -0.3% |
| EBITDA Margin | 3.8% | 8.2% | 10.7% | 7.9% | 6.4% | -1.5% |
| SG&A, % of revenue | 31.4% | 27.4% | 25.1% | 26.0% | 32.0% | 6.0% |
| Net Income Margin | 0.9% | 3.2% | 8.2% | 5.2% | 0.6% | -4.6% |
| CAPEX, % of revenue | 1.8% | 2.2% | 1.3% | 1.0% | 0.8% | -0.2% |
|
|---|
| ROIC | 0.0% | 4.1% | 6.1% | 2.9% | 0.7% | -2.2% |
| ROE | 0.6% | 2.4% | 5.8% | 3.0% | 0.4% | -2.6% |
| Net Debt/EBITDA | -6.5x | -2.7x | -3.5x | -5.5x | -4.0x | 1.5x |
Digi International Inc. ($DGII) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 45 | 55 | 63 | 66 | | -0.5% | 19.6% | 37.1% | 45.6% |
| EBITDA | 0 | 4 | 5 | 5 | | -86.7% | 44.7% | 127.9% | -8.2% |
| Net Income | -4 | -0 | 3 | 4 | | -290.4% | -109.5% | 96.3% | -16.9% |
Balance Sheet
|
|---|
| Cash | 46 | 52 | 48 | 58 | | -43.8% | -27.1% | -48.2% | -25.8% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 48.8% | 49.2% | 46.8% | 47.2% | | 1.4% | 1.2% | -2.4% | -1.1% |
| EBITDA Margin | 1.0% | 7.7% | 8.5% | 7.9% | | -6.6% | 1.3% | 3.4% | -4.6% |
| Net Income Margin | -10.0% | -0.2% | 4.2% | 5.5% | | -15.2% | -3.1% | 1.3% | -4.1% |
Peers in Communications Equipment
Below you can find Digi International Inc. benchmarking vs. other companies in Communications Equipment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ribbon Communications Inc. ($RBBN) | | | | 30.6% | 75.2% |
| Extreme Networks, Inc. ($EXTR) | | 6.4% | -4.4% | 13.2% | 64.4% |
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | -0.4% | 7.6% | 5.6% | 2.8% |
|---|
| Digi International Inc. ($DGII) | | 5.8% | -0.4% | -10.5% | 25.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% |
| Radware Ltd. ($RDWR) | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% |
| Radcom Ltd. ($RDCM) | 63.2% | 76.8% | 69.6% | 71.8% | 74.0% |
| Casa Systems, Inc. ($CASA) | | 70.8% | 69.1% | 73.4% | 73.4% |
| NetScout Systems, Inc. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 41.4% | 41.3% | 43.7% | 41.0% | 40.5% |
|---|
| Digi International Inc. ($DGII) | 47.0% | 47.6% | 49.1% | 48.0% | 47.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
| Ubiquiti Networks, Inc. ($UBNT) | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% |
| Ituran Location and Control Ltd. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.6% | 4.7% | 5.5% | 6.0% | 4.6% |
|---|
| Digi International Inc. ($DGII) | 3.8% | 8.2% | 10.7% | 7.9% | 6.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Resonant Inc. ($RESN) | | | 132.5% | 124.8% | 245.2% |
| ViaSat, Inc. ($VSAT) | 22.8% | 26.5% | 26.7% | 33.0% | 32.1% |
| Applied Optoelectronics, Inc. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.3% | 2.3% | 2.0% | 1.9% | 1.7% |
|---|
| Digi International Inc. ($DGII) | 1.8% | 2.2% | 1.3% | 1.0% | 0.8% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% |
| Ubiquiti Networks, Inc. ($UBNT) | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% |
| Motorola Solutions, Inc. ($MSI) | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% |
| Ituran Location and Control Ltd. ($ITRN) | 50.9% | 46.8% | 50.1% | 48.5% | 35.1% |
| Casa Systems, Inc. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 2.1% | 2.0% | 2.2% | 2.1% | 0.3% |
|---|
| Digi International Inc. ($DGII) | 0.0% | 4.1% | 6.1% | 2.9% | 0.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Extreme Networks, Inc. ($EXTR) | | | -2.2x | -1.5x | 7.1x |
| ViaSat, Inc. ($VSAT) | 3.4x | 2.5x | 3.2x | 2.5x | 5.8x |
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.7x | -0.6x | -0.8x | -0.6x | 0.2x |
|---|
| Digi International Inc. ($DGII) | -6.5x | -2.7x | -3.5x | -5.5x | -4.0x |
