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
Operator
Operator

[Operator Instructions} Our first question is from Scott Searle from Roth Capital. Your line is now open.

Analyst
Scott Searle

Hey, good afternoon. Thanks for taking my question. Congratulations on the Opengear transaction.

Executive
Ron Konezny

Hey, thanks, Scott.

Analyst
Scott Searle

Hey. First off, on Opengear, could you just provide us a little bit more color with the historic growth rate? And just looking at some of the existing customer base and sales channels do you expect a lot of cross-selling opportunities? I mean, how are your initial thoughts kind of approaching that as we go into 2020? And then I had a couple of follow-ups on guidance.

Executive
Ron Konezny

Yes, great question. They've experienced double-digit growth in the past and we do expect that to continue. You can tell from our guidance, we are being, maybe, a modest at the midpoint here to make sure we are incorporating any acclimation to Digi. We do anticipate the opportunity to do some account mapping. Opengear, as I mentioned earlier, we share a lot of the DNA and have called on similar customers, sometimes with similar offerings, but also with very different offerings. So one of the first exercises is to take our joint sales teams and do some account mapping to see if there's some opportunity that can be unlocked.

Analyst
Scott Searle

Okay. And maybe on the cellular product side of the equation, I'm not sure if you gave a breakup, but you could provide a little bit of color in terms of fourth quarter how that looked? It sounds like it's a little bit softer and I would imagine we would see some acceleration going into 2020. So, your thoughts in general around the cellular products and Accelerated acquisition?

Executive
Ron Konezny

Yeah. The fourth quarter we actually had a good contribution from cellular through the year. And embedded and RF were a bit of the success story. They performed a little better than expected, but we do anticipate in fiscal 2020 that between cellular and our network product offerings that those will have significant contributions. Clearly, the large $20 million projects at its core cellular router. And so that in particular is going to contribute to the success of cellular.

Analyst
Scott Searle

Got you. And lastly, if I could, just looking at the guidance for fiscal 2020 backing out contribution from Opengear and guidance that you've given for the first quarter you've got organic growth of about I think 6% to 10% for the year, but given the flattish guidance in the December quarter, it certainly implies an acceleration in -- over the last three quarters, I think of 7% to 14%. So, could you take us through what gives you the comfort on that front from a visibility standpoint? It sounds like cellular is certainly a key component of that but just help us understand a little bit better why you feel so comfortable with that acceleration in the back half? Thanks.

Executive
Ron Konezny

Yeah. Thanks, Scott. Yeah. Our first fiscal quarter is -- it's not unusual for us to have a slower quarter. Channel tends to want