Digi International Inc. (NASDAQ:DGII) Q4 2019 Earnings Conference Call - Final Transcript

Nov 14, 2019 • 05:00 pm ET

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Digi International Inc. (NASDAQ:DGII) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Executive
Ron Konezny

to optimize their inventory and so they're being careful with restocking orders. There's not of course as many selling and installation days. So that first fiscal quarter does tend to be a slower one for us. We did see quite frankly a little bit of revenue that we would have ordinarily seen in this quarter that actually got accelerated into the previous quarter, which helped us exceed the guidance we had previously set in fiscal Q4. But between the large project we talked about, our strong bookings that we have seen to-date and some higher visibility from larger accounts that gives us a little more confidence than what we have seen in the past, where it just didn't have quite as much visibility.

Analyst
Scott Searle

Great. Thanks and congrats on Opengear again.

Executive
Ron Konezny

Thank you, Scott.

Operator
Operator

Thank you. Our next question is from Anthony Stoss from Craig-Hallum. Your line is now open.

Analyst
Anthony Stoss

Good afternoon, Ron and Jamie. And my congrats as well on the acquisition. Ron or Jamie, maybe you can provide a little bit more info on Opengear such as their average gross margins, average sales side? How many 10% customers they may have? And then Ron, your comments kind of alluding to potential other smart city type of deals. Is it your partners in this first $20 million win that are drawing you into others? And anything you'd like to elaborate on there would be helpful? Thanks.

Executive
Ron Konezny

Great. Thanks, Tony. Yeah, the Opengear business it has a lot of similarities to Digi's infrastructure management or network business. So they have margins that are higher than Digi's combined margins in that products and services similar to the margins that we have experienced in the network and infrastructure management business. They do service 75 of the top Fortune 100 companies, but they do have four large direct customers that represent combined something close to 20% of their business. But they do a lot of business through channel partners Ingram micro and SYNNEX in particular. So they do have a distributed book of business. They do have a relatively narrow product set. They have a very good focus and have established themselves both branding, as well as performance within that product set. And what's happened to them recently as well is they've expanded beyond being more of a North American provider into EMEA and APAC.

So across the board we think they've got good growth rates, good margins, good EBITDA margins that will help lift the overall performance of product and services. And as I mentioned before, you anticipate some cross-selling opportunities. On the smart city question, these are -- is a problem that many cities face. Cities approach it in different ways. We think we have partnered with some great companies to offer one of the leading implementations. We've got this great reference point. We've got a pipeline that's built. These projects do take some time, especially projects that require some type of government funding. There's a bit of a lead time with