Digi International Inc (DGII) Q4 2024 Earnings Report

Digi International reported a solid Q4 2024 with revenue of $105.1 million, down 6.3% year-over-year, yet achieving a resilient gross margin of 61.1% and operating margin of 14.2%. Annual recurring revenue (ARR) rose 9% YoY to $116 million, now representing over 27% of total revenue, underscoring Digi’s strategic shift from one-time transactional sales to multi-year solutions. The company delivered GAAP net income of $11.9 million and GAAP diluted EPS of -$0.29 for the quarter, with cash flow from operations of $26.4 million and free cash flow of $25.5 million, supporting a deleveraging trajectory. Management emphasized ARR as the core profitability driver and signaled that gross margins of 60%+ are sustainable as ARR increases, aided by a flat expense structure. Looking ahead, Digi guides to flat revenue and flat adjusted EBITDA for fiscal 2025, with a goal of net debt-free by the end of calendar year 2025 and long-range targets of $200 million in ARR and $200 million in adjusted EBITDA over five years. The company also highlighted supply chain normalization, diversification of manufacturing geography to mitigate tariff risk, and ongoing M&A exploration as meaningful growth levers.