Market Overview

Digi International Reports Third Fiscal Quarter 2018 Results

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Record Quarterly Revenue Driven by Broad Based Growth

Digi International® Inc. (NASDAQ:DGII), a leading global
provider of mission critical Internet of Things ("IoT") products,
services, and solutions, reported revenue of $62.7 million for the third
fiscal quarter of 2018 compared to $45.7 million in the third fiscal
quarter of 2017 and to our guidance range of $56.0 million to $60.0
million.

Net income for the third fiscal quarter of 2018 was $2.6 million, or
$0.09 per diluted share, compared to $1.3 million, or $0.05 per diluted
share in the third fiscal quarter of 2017 and to our guidance range of
$0.02 to $0.06 per diluted share. Our adjusted net income for the third
fiscal quarter of 2018 was $2.8 million, or $0.10 per diluted share,
compared to $2.3 million, or $0.08 per diluted share for the third
fiscal quarter of 2017.

Adjusted EBITDA in the third fiscal quarter of 2018 was $7.3 million, or
$0.26 per diluted share and 11.7% of total revenue, compared to our
guidance range of $6.0 million to $7.0 million, or $0.21 to $0.26 per
diluted share, respectively. In the third fiscal quarter of 2017 our
adjusted EBITDA was $5.6 million, or $0.21 per diluted share and 12.3%
of total revenue. Reconciliations of GAAP and non-GAAP financial
measures, including Adjusted EBITDA, appear at the end of this release.

"We are pleased with our performance during the third fiscal quarter as
many key metrics are going in the right direction. We have momentum in
our IoT Products & Services business with growth from all of our product
categories and good performance from our Accelerated acquisition. We are
building traction in our IoT Solutions business with a growing customer
base and increasing recurring revenues. We look forward to finishing the
fiscal year strong," said Ron Konezny, President and Chief Executive
Officer.

Financial Results

 
GAAP Results
(in thousands, except per share data)   Q3 2018   Q3 2017   YTD 2018   YTD 2017
Total Revenue $ 62,716 $ 45,739 $ 162,704 $ 136,529
Gross Profit $ 29,329 $ 22,485 $ 77,920 $ 65,840
Gross Margin 46.8 % 49.2 % 47.9 % 48.2 %
Operating Income $ 2,037 $ 709 $ 417 $ 4,643
Operating Income as % of Total Revenue 3.2 % 1.6 % 0.3 % 3.4 %
Net Income (Loss) $ 2,621 $ 1,335 $ (2,305 ) $ 5,023
Net Income (Loss) per Diluted Share $ 0.09 $ 0.05 $ (0.09 ) $ 0.19
 
Non-GAAP Results*
(in thousands, except per share data) Q3 2018 Q3 2017 YTD 2018 YTD 2017
Adjusted Net Income $ 2,815 $ 2,276 $ 865 $ 5,869
Adjusted Net Income per Diluted Share $ 0.10 $ 0.08 $ 0.03 $ 0.22
 
Adjusted EBITDA 7,308 5,624 14,937 16,505
Adjusted EBITDA as % of Total Revenue 11.7 % 12.3 % 9.2 % 12.1 %
Adjusted EBITDA per Diluted Share $ 0.26 $ 0.21 $ 0.55 $ 0.61
* A reconciliation of GAAP to non-GAAP financial measures appears at
the end of this release.
 

Business Results for the Three Months Ended
June 30, 2018 and 2017

 
Revenue Detail QTD
(in thousands)   Q3 2018   Q3 2017   Change   % Change
Product $ 51,691 $ 40,660 $ 11,031 27.1%
Services 2,715 2,185 530 24.3%
Solutions   8,310     2,894     5,416   187.1%
Total revenue $ 62,716   $ 45,739   $ 16,977   37.1%
 
North America, primarily United States $ 45,184 $ 30,305 $ 14,879 49.1%
Europe, Middle East and Africa 10,216 9,703 513 5.3%
Asia 5,808 4,508 1,300 28.8%
Latin America   1,508     1,223     285   23.3%
Total revenue $ 62,716   $ 45,739   $ 16,977   37.1%
 

Total revenue increased 37.1% to $62.7 million in the third
fiscal quarter of 2018 from $45.7 million in the third fiscal quarter of
2017.

Product

Product revenue increased by $11.0 million, or 27.1%, in the third
fiscal quarter of 2018 compared to the third fiscal quarter of 2017.
This included $8.0 million of incremental revenue from Accelerated,
which we acquired in January 2018. We experienced revenue growth in all
of our product categories.

Services

Services revenue increased by $0.5 million, or 24.3%, in the third
fiscal quarter of 2018 compared to the third fiscal quarter of 2017.
This growth was driven by revenues of our Digi Wireless Design Services
group.

Solutions

Solutions revenue increased by $5.4 million, or 187.1%, in the third
fiscal quarter of 2018 compared to the third fiscal quarter of 2017.
This was driven by the growth of our SmartSense by Digi™ business and
includes incremental revenue from TempAlert, which we acquired in
October 2017. As of June 30, 2018, we are now servicing nearly 48,000
sites, which is an increase from about 42,000 sites as of March 31, 2018.

Gross profit was $29.3 million, or 46.8% of revenue in the third
fiscal quarter of 2018 compared to $22.5 million, or 49.2% of revenue
for the third fiscal quarter of 2017. This $6.8 million increase was a
result of increased product gross profit from Accelerated. In addition,
solutions positively impacted gross profit compared to the same period
in the prior fiscal year. Gross margin was negatively impacted by our
manufacturing transition, product and customer mix in both products and
solutions, and increased amortization expense, primarily related to our
acquisitions of TempAlert and Accelerated.

Operating income for the third fiscal quarter of 2018 was $2.0
million, or 3.2% of revenue, as compared to $0.7 million, or 1.6% of
revenue, for the third quarter of fiscal 2017. The increase was
primarily a result of increased gross profit of $6.8 million, partially
offset by an increase of $5.5 million of operating expenses.

Net income was $2.6 million in the third fiscal quarter of 2018,
or $0.09 per diluted share, compared to $1.3 million, or $0.05 per
diluted share, in the third fiscal quarter of 2017.

Adjusted EBITDA in the third fiscal quarter of 2018 was $7.3
million, or 11.7% of total revenue, compared to $5.6 million, or 12.3%
of total revenue, in the third fiscal quarter of 2017. Included in
Adjusted EBITDA for the third fiscal quarter of 2018 is $1.0 million of
Accelerated earn-out expenses.

Business Results for the Nine Months Ended June
30, 2018 and 2017

 
Revenue Detail YTD
(in thousands)   Q3 2018   Q3 2017   Change   % Change
Product $ 137,733 $ 125,599 $ 12,134 9.7%
Services 7,378 6,054 1,324 21.9%
Solutions   17,593     4,876     12,717   260.8%
Total revenue $ 162,704   $ 136,529   $ 26,175   19.2%
 
North America, primarily United States $ 114,175 $ 89,678 $ 24,497 27.3%
Europe, Middle East and Africa 29,876 29,059 817 2.8%
Asia 15,114 14,446 668 4.6%
Latin America   3,539     3,346     193   5.8%
Total revenue $ 162,704   $ 136,529   $ 26,175   19.2%
 

Total revenue increased 19.2% to $162.7 million in the first nine
months of fiscal 2018 from $136.5 million in the first nine months of
fiscal 2017.

Product

Product revenue increased by $12.1 million, or 9.7%, in the first nine
months of fiscal 2018 compared to the first nine months of fiscal 2017.
This increase included $14.2 million of incremental revenue from our
acquisition of Accelerated. We have experienced growth in some of our
product categories in the first nine months of fiscal 2018. This growth
was more than offset by revenue from customer projects experienced in
the first nine months of fiscal 2017 that did not repeat and expected
declines in certain products which are in the mature portion of their
product life cycle.

Services

Services revenue increased by $1.3 million, or 21.9%, in the first nine
months of fiscal 2018 compared to the first nine months of fiscal 2017,
primarily related to increased revenues from our Digi Remote Manager and
Wireless Design services offerings.

Solutions

Solutions revenue increased by $12.7 million, or 260.8%, in the first
nine months of fiscal 2018 compared to the first nine months of fiscal
2017. This was driven by the growth of our SmartSense by Digi™ business
and includes incremental revenue from TempAlert.

Gross profit was $77.9 million, or 47.9% of revenue in the first
nine months of fiscal 2018 compared to $65.8 million, or 48.2% of
revenue for first nine months of fiscal 2017. This $12.1 million
increase was driven by our acquisition of Accelerated. In addition,
gross profit for this period compared to the same period last year was
positively impacted by solutions. This was partially offset by increased
amortization expense in the first nine months of fiscal 2018 compared to
the first nine months of fiscal 2017.

Operating income for the first nine months of fiscal 2018 was
$0.4 million, or 0.3% of revenue, as compared to $4.6 million, or 3.4%
of revenue, for the first nine months of fiscal 2017. This $4.2 million
decline was a result of increased operating expenses of $16.3 million,
partially offset by the increase in gross profit of $12.1 million.

Net loss was $2.3 million in the first nine months of fiscal
2018, or $0.09 loss per diluted share, compared to net income of $5.0
million, or $0.19 per diluted share, in the first nine months of fiscal
2017.

Adjusted EBITDA in the first nine months of fiscal 2018 was $14.9
million, or 9.2% of total revenue, compared to $16.5 million, or 12.1%
of total revenue, in the first nine months of fiscal 2017.

Balance Sheet, Liquidity and Capital Structure

Digi continues to maintain a strong balance sheet with no debt. As of
June 30, 2018, Digi had:

  • Cash and cash equivalents and marketable securities balance, including
    long-term marketable securities, of $54.7 million, a decrease of $60.3
    million from the end of fiscal 2017. The decrease in cash is related
    directly to the purchase price and other costs associated with the
    TempAlert and Accelerated acquisitions.
  • Current and long-term contingent liabilities of $9.0 million. This
    includes an increase of $1.0 million associated with better than
    expected performance by Accelerated in the third fiscal quarter of
    2018.

Customer Highlights

IoT PRODUCTS & SERVICES

  • A Southeastern US industrial integration company, that provides energy
    solutions to electric utilities, industrial, institutional and
    commercial customers, selected Digi's WR31 router platform for their
    energy management program needs. The solution monitors for power
    outages, generator alarms, and emergency events for end user
    customers. The WR31 was chosen for its reliability, security, and
    digital and analog I/O capabilities. An initial deployment of
    approximately 1,000 WR31's is expected to occur this fiscal year.
  • A transit fleet operator located in the Midwestern US, with annual
    ridership of about 10 million people, has chosen Digi's advanced
    router technology to upgrade their bus fleet of approximately 300
    biodiesel and hybrid-electric vehicles. The operator is upgrading
    their existing 3G Digi routers with the latest Digi WR44R model. The
    WR44R will enable the customer to operate more onboard services over
    cellular, including VOIP dispatch, vehicle location for bus arrival to
    support smartphone apps, camera systems and passenger WiFi.
  • A Scandinavian company has selected Digi's CC6UL SBC to design a
    secure gateway. The CC6UL was selected due to its off-the-shelf ease
    of use, which has allowed the company to shorten project design time
    and go straight to production. In addition, the CC6UL's flexibility
    will allow the customer to use their own version of a Linux operating
    system. We expect the customer to order up to 500 CC6UL units per
    quarter over the next two to three years.

IoT SOLUTIONS

  • HCA Healthcare of Tennessee selected SmartSense to ensure that they
    meet compliance requirements for continuous temperature monitoring of
    prescription drugs and vaccines at over 700 of their pharmacy
    locations throughout the U.S. Deployment began in June with completion
    expected in the fourth fiscal quarter of 2018.
  • ZPower, a leading microbattery manufacturer for hearing aids, medical
    devices and wearable electronics has selected SmartSense to monitor
    humidity and temperature-controlled storage for their inventory of
    rechargeable batteries.
  • A chain that operates over 450 truck stops and convenience stores
    nationwide, has expanded the suite of services they already use from
    SmartSense to also include refrigeration equipment monitoring.
  • A school district in New Mexico has selected SmartSense to monitor
    temperature sensitive foods in their school cafeterias. The SmartSense
    solution will help ensure food safety for over 8,000 students across
    17 sites.

Fiscal 2018 Guidance

For the fourth fiscal quarter of 2018, Digi projects revenue to be in a
range of $60 million to $64 million. EPS is projected to be in a range
of $0.05 per diluted share to $0.10 per diluted share. Adjusted EBITDA
is projected to be between $6.5 million and $7.5 million and adjusted
EBITDA per share is projected to be in a range of $0.24 to $0.27 per
diluted share.

For the full fiscal year 2018, Digi projects revenue to be in a range of
$223 million to $227 million. EPS is projected to be in a range of $0.04
loss per diluted share to $0.01 per diluted share. Adjusted EBITDA is
projected to be in a range of $21 million and $22 million and adjusted
EBITDA per share is projected to be in the range of $0.79 to $0.82 per
diluted share.

Third Fiscal Quarter 2018 Conference Call
Details

As announced on July 6, 2018, Digi will discuss its third fiscal quarter
results on a conference call on Thursday, July 26, 2018 after market
close at 5:00 p.m. ET (4:00 p.m. CT). The call will be hosted by Ron
Konezny, President and Chief Executive Officer and Gokul Hemmady, Chief
Financial Officer.

Digi invites all those interested in hearing management's discussion of
its quarter to access a live webcast of the conference call through the
investor relations section of Digi's website at www.digi.com.
Participants may also join the call directly by dialing (855) 638-5675
and entering passcode 8885086. International participants may access the
call by dialing (262) 912-4765 and entering passcode 8885086. A replay
will be available within approximately three hours after the completion
of the call, and for one week following the call, by dialing (855)
859-2056 for domestic participants or (404) 537-3406 for international
participants and entering access code 8885086 when prompted. A replay of
the webcast will be available for one week through Digi's website.

A copy of this earnings release can be accessed through the financial
releases page of the investor relations section of Digi's website at www.digi.com.

For more news and information on us, please visit www.digi.com/aboutus/investorrelations.

About Digi International

Digi International (NASDAQ:DGII) is a leading global provider of
Internet of Things ("IoT") products, services and solutions. We help our
customers create next-generation connected products and deploy and
manage critical communications infrastructures in demanding environments
with high levels of security and reliability. Founded in 1985, we've
helped our customers connect over 100 million things, and growing. For
more information, visit Digi's website at www.digi.com,
or call 877–912–3444 (U.S.) or 952–912–3444 (International).

Forward-Looking Statements

This press release contains forward-looking statements that are based
on management's current expectations and assumptions.
These
statements often can be identified by the use of forward-looking
terminology such as "anticipate," "believe," "estimate," "looking
forward," "may," "will," "expect," "plan," "project," "should," or
"continue" or the negative thereof or other variations thereon or
similar terminology.
Among other items, these statements relate
to expectations of the business environment in which the company
operates, projections of future performance, perceived marketplace
opportunities and statements regarding our mission and vision.
Such
statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions.
Among others, these include
risks related to the highly competitive market in which our company
operates, rapid changes in technologies that may displace products sold
by us, declining prices of networking products, our reliance on
distributors and other third parties to sell our products, delays in
product development efforts, uncertainty in user acceptance of our
products, the ability to integrate our products and services with those
of other parties in a commercially accepted manner, potential
liabilities that can arise if any of our products have design or
manufacturing defects, our ability to defend or settle satisfactorily
any litigation, uncertainty in global economic conditions and economic
conditions within particular regions of the world which could negatively
affect product demand and the financial solvency of customers and
suppliers, the impact of natural disasters and other events beyond our
control that could negatively impact our supply chain and customers,
potential unintended consequences associated with restructuring or other
similar business initiatives that may impact our ability to retain
important employees, the ability to achieve the anticipated benefits and
synergies associated with acquisitions or divestitures, and changes in
our level of revenue or profitability which can fluctuate for many
reasons beyond our control.
These and other risks, uncertainties
and assumptions identified from time to time in our filings with the
United States Securities and Exchange Commission, including without
limitation, our annual report on Form 10-K for the year ended September
30, 2017 and subsequent quarterly reports on Form 10-Q and other
filings, could cause the company's future results to differ materially
from those expressed in any forward-looking statements made by us or on
our behalf.
Many of such factors are beyond our ability to
control or predict.
These forward-looking statements speak only
as of the date for which they are made.
We disclaim any intent or
obligation to update any forward-looking statements, whether as a result
of new information, future events or otherwise.

Presentation of Non-GAAP Financial Measures

This release includes adjusted net income, adjusted net income per
diluted share, adjusted EBITDA and adjusted EBITDA per diluted share,
each of which is a non-GAAP measure.

We understand that there are material limitations on the use of
non-GAAP measures.
Non-GAAP measures are not substitutes for GAAP
measures, such as net income, for the purpose of analyzing financial
performance.
The disclosure of these measures does not reflect
all charges and gains that were actually recognized by the company.
These
non-GAAP measures are not in accordance with, or an alternative for
measures prepared in accordance with, generally accepted accounting
principles and may be different from non-GAAP measures used by other
companies or presented by us in prior reports.
In addition, these
non-GAAP measures are not based on any comprehensive set of accounting
rules or principles.
We believe that non-GAAP measures have
limitations in that they do not reflect all of the amounts associated
with our results of operations as determined in accordance with GAAP and
that these measures should only be used to evaluate our results of
operations in conjunction with the corresponding GAAP measures.
Additionally,
Adjusted EBITDA does not reflect our cash expenditures, the cash
requirements for the replacement of depreciated and amortized assets, or
changes in or cash requirements for our working capital needs.

We believe that providing historical and adjusted income and income
per diluted share, respectively, exclusive of such items as reversals of
tax reserves, discrete tax benefits and restructuring permits investors
to compare results with prior periods that did not include these items.

Management uses the aforementioned non-GAAP measures to monitor and
evaluate ongoing operating results and trends and to gain an
understanding of our comparative operating performance.
In
addition, certain of our stockholders have expressed an interest in
seeing financial performance measures exclusive of the impact of matters
such as the impact of decisions related to taxes and restructuring,
which while important, are not central to the core operations of our
business.
Additionally, management believes that the presentation
of adjusted EBITDA and adjusted EBITDA per diluted share and as a
percentage of revenue is useful because it provides a reliable and
consistent approach to measuring our performance from year to year and
in assessing our performance against that of other companies.
We
believe this information helps compare operating results and corporate
performance exclusive of the impact of our capital structure and the
method by which assets were acquired.
Adjusted EBITDA is used as
an internal metric for executive compensation, as well as incentive
compensation for the broader employee base, and it is monitored
quarterly for these purposes.

For more information, visit Digi's website at www.digi.com,
or call 877-912-3444 (U.S.) or 952-912-3444 (International).

   

Digi International Inc.
Condensed Consolidated
Statements of Operations

(In thousands, except per
share amounts)

(Unaudited)

 

Three months ended
June 30,

Nine months ended
June 30,

2018   2017 2018   2017
Revenue:
Product $ 51,691 $ 40,660 $ 137,733 $ 125,599
Services and solutions   11,025     5,079     24,971     10,930  
Total revenue 62,716 45,739 162,704 136,529
Cost of sales:
Cost of product 26,639 20,195 68,929 63,930
Cost of services and solutions 6,007 2,550 13,737 5,727
Amortization of intangibles   741     509     2,118     1,032  
Total cost of sales   33,387     23,254     84,784     70,689  
Gross profit 29,329 22,485 77,920 65,840
Operating expenses:
Sales and marketing 11,595 8,504 32,530 25,557
Research and development 8,205 7,420 24,573 21,304
General and administrative 7,302 3,337 20,210 11,821
Restructuring charges, net   190     2,515     190     2,515  
Total operating expenses   27,292     21,776     77,503     61,197  
Operating income 2,037 709 417 4,643
Other income (expense), net:
Interest income, net 92 153 331 389
Other income (expense), net   535     (221 )   (37 )   210  
Total other income (expense), net   627     (68 )   294     599  
Income before income taxes 2,664 641 711 5,242
Income tax provision (benefit)   43     (694 )   3,016     219  
Net income (loss) $ 2,621   $ 1,335   $ (2,305 ) $ 5,023  
 
Net income (loss) per common share:
Basic $ 0.10   $ 0.05   $ (0.09 ) $ 0.19  
Diluted $ 0.09   $ 0.05   $ (0.09 ) $ 0.19  
Weighted average common shares:
Basic   27,177     26,522     27,002     26,390  
Diluted   27,764     26,956     27,002     27,110  
 
   

Digi International Inc.
Condensed Consolidated
Statements of Comprehensive (Loss) Income

(In
thousands)

(Unaudited)

 
Three months ended
June 30,
Nine months ended
June 30,
2018   2017 2018   2017
Net income (loss) $ 2,621   $ 1,335   $ (2,305 ) $ 5,023  
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment (3,116 ) 2,535 (1,058 ) 57
Change in net unrealized (loss) gain on investments (1 ) 8 (41 ) (2 )
Less income tax benefit (provision) 1 (3 ) 9 1
Reclassification of realized loss on investments included in net
income (1)
31
Less income tax benefit (2)           (8 )    
Other comprehensive (loss) income, net of tax   (3,116 )   2,540     (1,067 )   56  
Comprehensive (loss) income $ (495 ) $ 3,875   $ (3,372 ) $ 5,079  

(1) Recorded in Other income (expense), net on our Condensed
Consolidated Statements of Operations.
(2) Recorded in Income
tax provision (benefit) in our Condensed Consolidated Statements
of Operations.

 
   

Digi International Inc.
Condensed Consolidated
Balance Sheets

(In thousands)
(Unaudited)

 

    June 30,    
2018

September 30,
2017

ASSETS
Current assets:
Cash and cash equivalents $ 47,694 $ 78,222
Marketable securities 4,763 32,015
Accounts receivable, net 48,246 28,855
Inventories 41,782 30,238
Receivable from sale of business 1,998
Other   3,554   3,032
Total current assets 146,039 174,360
Marketable securities, long-term 2,243 4,753
Property, equipment and improvements, net 11,474 12,801
Identifiable intangible assets, net 41,778 11,800
Goodwill 154,565 131,995
Deferred tax assets 3,665 9,211
Other   462   269
Total assets $ 360,226 $ 345,189
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,849 $ 6,240
Accrued compensation 6,245 4,325
Accrued warranty 1,295 987
Accrued professional fees 1,019 928
Unearned revenue 3,710 1,343
Contingent consideration on acquired businesses 4,440 388
Accrued restructuring 666 1,656
Other   2,270   2,113
Total current liabilities 30,494 17,980
Income taxes payable 699 877
Deferred tax liabilities 422 534
Contingent consideration on acquired businesses 4,581 6,000
Other non-current liabilities   608   654
Total liabilities 36,804 26,045
 
Total stockholders' equity   323,422   319,144
Total liabilities and stockholders' equity $ 360,226 $ 345,189
 
 

Digi International Inc.
Condensed Consolidated
Statements of Cash Flows

(In thousands)
(Unaudited)

 
Nine months ended June 30,
2018   2017
Operating activities:
Net (loss) income $ (2,305 ) $ 5,023
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Depreciation of property, equipment and improvements 2,140 2,187
Amortization of identifiable intangible assets 6,866 1,842
Stock-based compensation 3,598 3,502
Excess tax benefits from stock-based compensation (326 )
Deferred income tax provision 2,551 (648 )
Change in fair value of contingent consideration 332 (1,330 )
Bad debt/product return provision 404 338
Inventory obsolescence 1,550 1,030
Restructuring charges 190 2,515
Other (65 ) 138
Changes in operating assets and liabilities (net of acquisitions)   (24,105 )   (14,729 )
Net cash used in operating activities   (8,844 )   (458 )
Investing activities:
Purchase of marketable securities (33,469 )
Proceeds from maturities and sales of marketable securities 29,752 76,149
Proceeds from sale of Etherios 2,000 3,000
Acquisition of businesses, net of cash acquired (56,588 ) (30,111 )
Purchase of property, equipment, improvements and certain other
identifiable intangible assets
  (963 )   (1,577 )
Net cash (used in) provided by investing activities   (25,799 )   13,992  
Financing activities:
Acquisition earn-out payments (518 )
Excess tax benefits from stock-based compensation 326
Proceeds from stock option plan transactions 3,871 3,264
Proceeds from employee stock purchase plan transactions 892 686
Purchases of common stock   (730 )   (922 )
Net cash provided by financing activities 4,033 2,836
Effect of exchange rate changes on cash and cash equivalents   82     (45 )
Net (decrease) increase in cash and cash equivalents (30,528 ) 16,325
Cash and cash equivalents, beginning of period   78,222     75,727  
Cash and cash equivalents, end of period $ 47,694   $ 92,052  
 
Supplemental schedule of non-cash investing and financing activities:
Liability related to acquisition of business $ (2,300 ) $ (1,310 )
 

Non-GAAP Financial Measures

TABLE 1

   

Reconciliation of Net Income (Loss) and Net Income (Loss) per
Diluted Share to Adjusted Net Income and Adjusted Net Income per
Diluted Share

(In thousands of dollars, except per share
amounts)

 
Three months ended June 30, Nine months ended June 30,
2018   2017 2018  

2017

Net income (loss) and net income (loss) per diluted share $ 2,621   $ 0.09 $ 1,335   $ 0.05 $ (2,305 )   $ (0.09 ) $ 5,023   $ 0.19
Restructuring reserve 190 0.01 2,515 0.09 190 0.01 2,515 0.09
Tax effect from restructuring reserve (67 ) (880 ) (0.03 ) (47 ) (880 ) (0.03 )
Discrete tax expense (benefits) (1)   71         (694 )   (0.03 )   3,027     0.11     (789 )   (0.03 )
Adjusted net income and adjusted net income per diluted share (2) $ 2,815   $ 0.10   $ 2,276   $ 0.08   $ 865   $ 0.03   $ 5,869   $ 0.22  
Diluted weighted average common shares   27,764     26,956     27,002     27,110  

(1) Discrete tax expense (benefits) includes one-time adjustments
for the re-measurement of deferred tax assets and adoption of ASU
2016-09 relating to the accounting for the tax effects of stock
compensation. This was partially offset by reversals of tax
reserves due to the expiration of statutes of limitation and
certain tax credits in the U.S.
(2) Adjusted net income per
diluted share may not add due to the use of rounded numbers.

 

TABLE 2

   

Reconciliation of Net Income (Loss) to Adjusted EBITDA
(In
thousands of dollars)

 
Three months ended June 30, Nine months ended June 30,
2018   2017 2018   2017
 

% of
total
revenue

 

% of
total
revenue

 

% of
total
revenue

 

% of
total
revenue

Total revenue $ 62,716   100.0% $ 45,739   100.0% $ 162,704   100.0% $ 136,529   100.0%
 
Net income (loss) $ 2,621 $ 1,335 $ (2,305 ) $ 5,023
Interest income, net (92 ) (153 ) (331 ) (389 )
Income tax provision 43 (694 ) 3,016 219
Depreciation and amortization 3,313 1,639 9,006 4,029
Stock-based compensation 1,220 1,174 3,598 3,502
Restructuring charges, net 190 2,515 190 2,515
Acquisition expense   13     (192 )   1,763     1,606  
Adjusted EBITDA $ 7,308   11.7% $ 5,624   12.3% $ 14,937   9.2% $ 16,505   12.1%
Adjusted EBITDA per diluted share $ 0.26   $ 0.21   $ 0.55   $ 0.61  
Diluted weighted average common shares   27,764     26,956     27,002     27,110  
 

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