Digi International Inc. (DGII) Q3 2021 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Digi International Inc. Q3 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jamie Loch, Chief Financial Officer. Please go ahead.

Thank you, Joelle. Good afternoon, everyone, and thank you for joining us today to discuss the fiscal 2021 third quarter results of Digi International. Joining me on today's call is Ron Konezny, our President and CEO. Ron will provide his thoughts on our business, and I will follow with the highlights of our financial performance. Following our prepared remarks, we'll take your questions. We issued our earnings release shortly after the market closed today. [Operator Instructions]. Now I'll turn the call over to Ron.

Thank you, Jamie, and welcome to Digi International's 2021 third fiscal quarter earnings call. Yet another record quarterly revenue, which is up double digit over last year's results and record annualized recurring revenue headline our most recent results. In addition, SmartSense, our IoT solutions leader, had a record quarter building their customer base to over 79,000 subscribers. We also closed our second acquisition of the year in bringing the Ctek team into the Digi family. We generated nearly $21 million in cash, bringing our net cash position to nearly $100 million, positioning us well for further acquisition activity. Our industrial customer base is accelerating their digital transformation. Increasingly, they are looking to compress time, reduce risk and get effective solutions to market. Digi is an ideal partner for those customers and opportunities, which is showing with record bookings and backlog. Our results could have been even better if it were not for widely known electronics and semiconductor supply chain challenges, combined with higher transportation costs and friction that are restraining our growth rates and impacting our margins. We are fighting through these challenges, but expect them to persist into 2022. We will continue to prioritize our customers to meet their critical needs. Now a few comments on each of our business segments. The IoT Products and Services segment grew over 5% year-over-year. All product lines contributed to the growth with the exception of our cellular router business. A new lead will take over this business this quarter, and we expect improved results over time. Recurring revenue of nearly $13 million grew $1 million quarter-over-quarter, driven by enhanced attach rates of our device management software across our cellular-enabled products. Opengear, our console server business had record bookings, which led to a record backlog heading into fiscal Q4. In addition, the team furthered their customer focus with the launch of Lighthouse enterprise automation edition. OEM Solutions had a record quarter and booked a record $60 million in business during the quarter. In addition, the team launched LoRa development kits in partnership with our channel partners. Infrastructure Management continued its year-over-year growth and is integrating Ctek into its business, which will further propel its growth as we attack industrial verticals like water management. Cellular received orders in smart cities signaling the potential return of this vertical's health and contribution. We continue to bundle world-class reliable secure hardware with 24/7 expert support and leading cloud software to offer compelling value propositions. Our customer-centric approach will be our North Star as we launch our enhanced customer and partner portals this quarter to improve the customer experience. SmartSense, our IoT Solutions business added over 3,000 subscribers in the quarter, driven by healthcare and grocery verticals. Customer attach remains strong as a result of our strong customer and service orientation. We ended the quarter with over $23 million in annualized recurring revenue and over 79,000 subscribers. This represents nearly 37% growth in annualized recurring revenue over last year and a 14% increase in our subscriber base. These metrics show we are bringing on new customers at higher average revenue per month than the installed base showing increased value of the offering. The team released their next-generation Bluetooth sensor and added key features and reports to our healthcare and grocery customers. SmartSense 4, the destination platform and consolidation of the cloud and mobile interface now services approximately 30,000 subscribers or 38% of our total customer base. Foodservice continues to be a growth area of focus, and we improve our digital task management and reporting tools to attract this segment. SmartSense, our IoT Solutions brand continues to lead an underpenetrated market that is a multibillion-dollar opportunity. We will not take our leadership position for granted and are investing heavily in both the offering and reducing the time to value for our customers. At the corporate level, we have some notable achievements. We now have over $36 million in annualized recurring revenue across the entire company, demonstrating the growth of IoT solutions and the increasing prominence of software in our IoT products and services business. This is up 28% from last year and $2 million from last quarter. Our supply chain team is working double time to meet our partner and customer commitments, many times at much higher component and freight costs, showing our commitment to customer success. The acquisition pipeline remains robust, and we are active but disciplined in putting our capital use. We have the potential to offer more customer value while building both our profitability and recurring revenue positions. While vaccines have been effective and available, the Delta variant of the COVID pandemic is causing more disruption. I urge everyone to get the vaccine to help themselves and others. I remained odd by the commitment and flexibility of the Digi team. We continue to face unique challenges and rise to the occasion. A heartfelt thank you to my teammates. I will now turn the call over to Jamie for more detail on our financial performance.

Thanks, Ron, and good afternoon, everyone. Today, I'll start with the key financial highlights that contributed to the results of our third fiscal quarter. Digi continues to set records, and this quarter was no exception, record revenue, record ARR. Digi was able to deliver to our customer at record levels in the face of extremely dynamic global macroeconomic conditions, such as the global supply chain and freight challenges being felt by so many companies as well as the global spread of the Delta variant causing disruption to the path of normalcy. We delivered a record $79.1 million of revenue, which represents 12.4% organic growth over prior year. Gross margins were 53.8% led to an adjusted EBITDA of $11.6 million or 14.6% of revenue. Gross margins, excluding amortization, were 55.2% for the quarter. On a per diluted share basis, our GAAP EPS was $0.09, and our non-GAAP EPS for the quarter was $0.25 per diluted share. Revenue, adjusted EBITDA and adjusted EPS all beat consensus estimates for the quarter, and all were on the high end of the ranges we provided in our guidance. We have reached record highs in overall recurring revenue. Total annual recurring revenue is now $36 million, up nearly 28% from prior year and 6.5% from the prior quarter. Recurring revenue in our Solutions business increased nearly 37% year-over-year and 7% from prior quarter. Recurring revenue in our IoT products and services business increased nearly 13% year-over-year and 4% from prior quarter. Among some of the other financial highlights, Digi continues to generate strong cash flows, an indicator of the value our customers receive from Digi's services and products. We've generated $20.8 million in the third fiscal quarter of 2021 and $40.1 million in operating cash flow year-to-date in fiscal year '21. We maintain our expectation that we will continue to generate positive operating cash for the foreseeable future. We have the - fiscal quarter with $146.9 million in cash, which works out to a net cash positive position of $98.8 million. Our ending debt now stands at $48.1 million. These figures do not consider the treatment of leases, which based on the new accounting standards, will add $19.1 million of what is now classified as debt on the books. We are in compliance with our bank's facilities covenants and expect to remain in compliance. Other balance sheet items of note, our NER position is $41.3 million, down $3.1 million sequentially from our last fiscal quarter with no material changes to reserves. Our ending inventory balance is $47.3 million, down $4.1 million sequentially from our last fiscal quarter end with no material used to our E&O reserves. Current inventory in the channel is $26.4 million, down $1.4 million sequentially. We monitored those levels closely and regularly. If we look into segment performance, IoT products and services revenue increased 5.3% year-over-year in the third fiscal quarter of 2021 to $66.8 million. Gross margins increased 170 basis points to 55.1%. Gross margins, excluding amortization, were 56.1% for the quarter. The year-over-year impact was driven primarily by sales in our console server and embedded product portfolios. That growth was significantly tempered by supply chain and freight challenges as booking for the quarter out for revenue. The increase in margin rate is driven by favorable mix within and among our console server, cellular router, embedded and XP product portfolios, partially offset by increased production and distribution costs due to the global supply chain and freight challenges. Annual recurring revenue increased 13% from prior year to $12.5 million. Operating income decreased $400,000 year-over-year to $6.1 million for the third fiscal quarter, driven partially by increased operating expenses, including items that are added back for adjusted EBITDA purposes but not for segment operating margin. IoT Solutions had another quarter for the record books. The key measurements of the health and performance of our solutions business are sites and ARR. Our site count grew by approximately 3,000 gross site apps, pushing our total site count close to over 79,000. Recurring revenue increased 7.3% sequentially and nearly 37% year-over-year to an annual recurring revenue number of $23.4 million. That's a key contributor to overall revenue growth of 78.6% year-over-year in the third fiscal quarter of 2021 to a record $12.3 million in revenue, delivering a 50.2% gross margin. Gross margins, excluding amortization, were 57.7% for the quarter. We continue to invest to support the growth objectives of IoT solutions. The operating performance for solutions for the quarter improved $1.5 million year-over-year, resulting in a $2.1 million loss compared to the prior year loss of $3.6 million. Now as it relates to forward-looking guidance. As we noted last quarter, we have confidence in our execution and our performance even in the midst of growing supply chain and freight challenges and the ongoing global pandemic. We're providing guidance for our fiscal fourth quarter as follows. The current supply challenges have the potential to impact results, not indicative of customer demand. allocation of certain materials could potentially lead to revenue having a upper limit that is independent of orders. We expect revenue of $75 million to $79 million, providing growth year-over-year of 2.5%. Using our Q3 fiscal '21 diluted share count of approximately 35 million shares, we expect our GAAP EPS to be between $0.07 and $0.09 per diluted share. We expect our adjusted EPS to be between $0.23 and $0.25 per diluted share with adjusted EBITDA to be between $10.9 million and $11.9 million. We believe that our strong balance sheet position combined with the performance we see in our pipeline are leading indicators of the value Digi provides to our customers in helping them to run their missions, particularly during the time of global capital and liquidity concerns. That concludes our prepared remarks. We're now available to take your questions. Joelle, please provide the instructions to our callers.

[Operator Instructions] We have a question from the line of Harsh Kumar with Piper Sandler.

Great job on the quarter, particularly growing the ARR number. It's really impressive and executing well in the supply constrained environment. That actually is what I wanted to ask the first question on. Last quarter, it was eye-opening how much the freight costs were and how much pressure they put on the margin. I was curious, Ron or Jamie, if you could give us an idea of what your normalized gross margin if this was a normal world, and you didn't have freight cost, how much were your margins? And how much revenue did you potentially leave behind because of supply pressure this quarter?

Harsh, it's a really good question and nice to hear your voice. We're like a lot of companies, we're struggling to get components. And then when we do, there's - oftentimes, we have to pay more for those components. And then there's just still a lot of friction in the supply chain in terms of freight and transportation, both higher cost but also challenges with labor, whether that be at ports or sometimes the contract manufacturers. So the way we think about it is it probably cost us a percentage point or two on the gross margin side. And if you look at our inventory, inventory is down about 10%, and that kind of gives you a feel down about $5 million. We've been pretty flat up until this quarter. So you can see we're really struggling to keep up with the demand, and that can kind of give you a point of view for the current quarter as well as, as we did last quarter, we baked these supply chain challenges into our guidance. And so we're not expecting to get the relief. We think we're leaving at least $5 million of revenue on the table in the current quarter of Q4 because we're just not able to get all of the components our customers need.

So my next question was the economy is reopening. You guys have been putting up numbers that are above your long-term model. I was curious, I'm going to push you a little bit here and ask maybe you're managing very well through this. So when can we expect the model to sort of change on a permanent basis because you've been performing so well and operating about model in these tough times?

No. It's - I wish I knew the exact answer. When we look at our supplier base, we look at certainly our friends and competitors, I think we're going to be fighting these supply chain issues well into 2022. I think it starts improving as we get into 2022. And our best guess is there's a potential for mid-2022 for there to be a "normalized environment." Now we've got a lot of factors that flow into that algorithm, what's going to happen with COVID? And are we going to see additional variants like the land variant that start causing problems? Are we going to see stimulus have even more pressure on the supply chain? So there's a lot of assumptions baked into that statement, but we think we're going to have to fight through this for the next few quarters here, but then we'll start seeing improvement in 2022. It might not be until mid-2022 until you "normalize." But we're going to be working hard every day to accelerate that.

That's fair, Ron. And my last question, I'll get back in the queue is, maybe you could paint for us a picture of your SmartSense competitive landscape. I know you are the big guys, but maybe you could paint for us a picture of how big you are relative to the others? And if there's anybody even remotely closed that you feel like can compete with you, we would love to get educated on that front?

Yes. We - Harsh, we still think we're the leader, although it's an early market. And so we don't want to take that leadership position for granted. We think we've distanced ourselves quite a bit from our competitors when we do benchmark ourselves against competitors. We still see generally smaller, younger companies that are 5,000, 10,000 sites in size and probably a little bit more focused on specific verticals. But we - again, we can't take that for granted. We got to continue to invest in our system and our customer success and expand into different additional markets. So we still think we've got a great leadership position, but we're not going to take that for granted.

And Ron, if I could ask you on another front, that was the hardware side. Is there anybody that has the kind of like enterprise software and cloud capabilities that you offer on the SmartSense with respect to managing that temperature chain?

Yes. There's a lot of companies that will do one piece of it. They might do the software piece and then rely on third parties for hardware or the inverse that people that provide hardware but then partner with other companies for the software piece. We think we're unique, Harsh, and that we have the complete suite under our design authority, which provides incredible security for our customers, but allows us to innovate and react more quickly across the entire stack. So we think that's a unique attribute and advantage for SmartSense.

Our next question is from Mike Walkley with Canaccord.

Great. Thanks for taking my question. Hope everybody is doing well on the call. Ron, I just want to dig into the cellular router gateway business. Cradlepoint has been part of Ericsson for quite some time. Sierra Wireless has some senior management shakeup. And it sounds like you're putting some new leadership in front of a lot of your business there. Has there been any change in competitive dynamics that you think could benefit Digi? Or maybe just how do you feel about your overall positioning within that line of your business?

Yes, Mike, it's - first of all, good to hear your voice, and I hope everybody is safe and healthy with you. And Mike, this is an area we feel like we've got an opportunity to do better. We think we've underperformed to some extent. We've got some real strength in the industrial side and with smart cities, and we're seeing some really nice improvement in mass transit in those areas. But there's so much more potential we have. We've decided to put some new leadership in place. And the competitive dynamics haven't changed that much really. The - but we do think there's a really important role that Digi can play, and we're not getting our fair share.

And then I know it's tricky with all the supply constraints. But if you look at your demand for either Ron or Jamie, do you think your demand supports more double-digit year-over-year growth and its supply that's kind of leading to the single-digit growth? And Jamie, just you guys continue to put up impressive cash from operations in your quarters. Is there any opportunity maybe to use that strong balance sheet to build up inventory to maybe put you ahead of your competitors in terms of these tough supply constraints?

Yes. Why don't we - well, Jamie and I will kind of tag team this one. First, we did grow double digit this last quarter with over 12% growth. And so we think that's the type of performance we're capable of delivering on a sustained basis. And certainly, as you look to next quarter, we are absolutely supply chain constrained. We have record bookings, record backlog. And one of the questions we oftentimes ask ourselves and get asked, are we seeing double or triple bookings. That's not the case. We're seeing people commit to longer time periods than they have in the past because they recognize the challenges with lead times and inventory. But this is a solid business with well-known customers. And we are using our balance sheet to our advantage in taking inventory positions in particular on critical components. The challenge is really the allocation. We are only allocated so much of certain critical components. And a device may have over 100 components, if we're missing one, of course, we can't complete that solution for our customers. So the fight is almost exclusively around getting that allocation of critical components to meet our needs. So we absolutely think we're capable of consistent double-digit growth. We are absolutely supply chain constrained, and we are prioritizing our customers first. We are paying more for components when they're available. We're bearing the cost of increased transportation and freight. But it is a component availability challenge. I'll let Jamie answer the cash question.

No, I think - Mike, I think we'd be interested in willing. You're right. We continue to generate strong operating cash. That trend has continued on for an extended period of time. So I think we've got a good chance there. I think we'd absolutely be interested and willing to utilize that cash into adding into the inventory balances, but that allocation is really kind of tamping our ability to do that.

I know it's a difficult supply environment out there, and you guys seem to be navigating better than others. Last question for me, and I'll pass it on. Ron, I'm just interested on the IoT Solutions business. Just what are you seeing in the restaurant industry? I know it's been a hard-hit industry. And hopefully, they stay reopened the harder to call it the Delta variant, but it's also an extremely understaffed industry. So maybe improving your pipeline, at least of longer-term opportunities, just given how short staffed these restaurants are and your services could certainly help that out.

Yes, Mike, you've hit the nail on the head. As we've reopened and hopefully, we won't go backwards for either too long or at all in some cases. But listen, I think as a society, we are trending toward eating out more and more, and I don't think that's going to stop. To your point, we've got not only he labor challenges, but also the increased business that a lot of our customers are seeing by both servicing and dining as well as takeout. So a lot of us has probably witnessed a full restaurant, but then a small cart with takeout orders. So the ability to automate routine tasks, the ability to understand performance has never been more critical. So tons of interest in demand, and we're seeing people entertaining - accelerate the digital transformation efforts and relying more on third parties than trying to do things themselves. And so that really portends well for the SmartSense offering and taking advantage of that particular market segment.

Our next question comes from Anthony Stoss with Craig-Hallum.

Just following up, Ron, on all the comments related to component shortages and trying to get allocations and your comment about it continuing until the middle of 2022. I know you're only guiding for September, but it seems to me and help me if I'm wrong that you're probably in the similar revenue range through maybe the June quarter of next year? Or any light that you could channel that would be helpful. And then maybe, Ron, I'd love to hear a little bit more about the Ctek acquisition, the rationale, kind of the gross margin profile, motors, anything you'd be willing to share there as well?

Yes. Tony, really good to hear your name and voice. And listen, the supply chain challenges are so dynamic. It's extremely difficult to project and predict. I can't complement our supply chain team enough for how well they've performed in a very difficult environment. And last quarter's results, I think, are one measure of that performance. In addition to our frontline workers staying safe and healthy and working in shifts and wearing mask and they're going through a lot more than a lot of the rest of the Digi team. But with all that said and done, we do feel like this will improve. It will improve gradually. We think it starts really at the turn of the year. So we're going to be fighting, I think, Tony, to hold serve through this year here, but I do think things improve in 2022. It's not an open the flood gates probably. It's probably more gradual. So I think you can expect a sequential improvement from us throughout our fiscal 2022. But it will be short of our overall demand. So we're going to be working very hard with our customers to meet their needs and make sure that we do everything with possible to configure our devices and solutions to accommodate the supply chain. On the Ctek question, we're very excited to have the Ctek team join us. They add a really key element to our value proposition. Digi for a long time, has done a great job of remote management and monitoring. And what Ctek does is it makes that extra step into control. And so a lot of our devices will tell you, for example, the level of water in a particular environment. But then don't have that extra ability to actually say, open a gate or turn on a pump. And so the Ctek technology really pushes us beyond monitoring into control. So we're really excited to bring the Ctek team into our family and not only take advantage of their technology but expose their offerings to our channel partners and really expand on what's been a great success they've had with a limited set of resources and focus on customers and really broaden that appeal.

Our next question comes from Jaeson Schmidt with Lake Street.

Thank you for taking my questions. Just curious, just given the well-known challenges out there in the supply chain, have you seen any timetable for designs or programs from your customers just getting pushed indefinitely.

It's interesting, Jaeson. And first, great to hear your voice and hope everybody is safe and healthy in your world. Our customers that are working with us have obviously the option to stay with us or to consider other alternatives. The challenge when you look at other alternatives is the picture is not any rosier. So their best choice is to work with us and to help unlock the best allocation possible. And vice versa for us to really focus on making sure their business is hitting their objectives and ultimately they're not line down in any kind of application. So the demand we're seeing is they're willing to commit as they have not been in the past, took longer time periods of their demand allocation rather than, say, booking twice as much in a certain period. So to date, we've been able to work with our customers to help promote and advocate for their quantity needs and likewise for us to help meet their needs as best we can.

Okay. And then looking at the IoT Solutions business, just given the dynamics out there, is the goal still to add kind of three to four sites per quarter? Or does that need to be down shifted slightly, just given everything?

No. No, you're absolutely right. We added about 3,000 sites last quarter, so that's rate in our wheelhouse, and we're determined to continue that progress. As I mentioned in my scripted comments that we really saw not only adding the subscribers but adding them at a higher value. And so you're seeing that recurring revenue stream grow faster than our subscriber base, which is a real healthy environment. That means we're adding more value and delivering more capabilities to our customers. So Jaeson, that's still an accurate understanding is that we want to average in that range on a per quarter basis.

Our next question comes from Scott Searle with ROTH Capital.

Good afternoon, thanks for taking my questions. Ron, Jamie, I apologize. I got on the call a little bit late. So I just wanted to clarify a couple of things and then I had a couple of follow-ups. First, I thought I heard the number just in terms of supply chain issues, capping about $5 million off the September quarter. I believe it was a September quarter. Just wanted to clarify that. Wondering if you gave a number for the June quarter in terms of what I clipped related to supply constraints. And it sounds like you had a record book-to-bill. I don't know if you gave an absolute number for that book-to-bill number?

Scott, thanks for joining. I know that it's tough for balancing all these different earnings calls. So thank you for joining. And to clarify, yes, we said at least $5 million in the current quarter, the September quarter, that we feel like we're not able to capture inside of that guidance we provided. On the previous quarter, we characterized our challenges as - in relation to our inventory position. Inventory position went down about 10% or $5 million. So that gives you a feel because we've been generally holding the inventory pretty flat. That shows you a little bit about what we had a challenge delivering last quarter. And so that gives you a feel for some of our challenges delivering on all of the opportunity. We haven't provided a book-to-bill ratio. We did have record bookings, and we've got a triple-digit backlog, Scott. So that gives you a little context on the kind of demand we're seeing and some of the challenges we're having keeping up with it.

Perfect. Very helpful. And if I could, on the gross margin front, you did a great job this quarter given the constraints that are out there. And it seems like it's implied in terms of your guidance back into the numbers, it's going to be another decent quarter from a gross margin standpoint. It looks like it's in the flattish range, give or take. I'm wondering if you could provide a little bit of color in terms of some of that, I'm sure, is mixed because it sounds like Opengear was very strong in the quarter, and I think cellular routers and gateways as well. How is pricing holding up in that area? Are you able to pass on some of these incremental costs on to the customers now to continue to protect that going forward? And then I had a macro question.

Yes, Scott, it's a really good question. One of the comments we made earlier was due to the increased cost of both components as well as freight, we're leaving probably 100 to 200 basis points of gross margin on the table here. And that's reflected in our performance in the June quarter and also the guide for the current September quarter. So that gives you a feel for the kind of costs we're absorbing. And to date, we have done some modest price increases, but we've been very, very careful to not disrupt our customers' businesses and really taking a longer view on this. There certainly are challenges that we have to address with certain product lines. But generally speaking, we've been very disciplined on the price side and not on increasing price unduly on our customers.

And lastly, if I could, I was wondering if you could provide some color just around some of the demand characteristics that are out there. There's a lot of technology shifts going on in terms of 4G to 5G migration, the adoption of CBRS frequencies, deployment to private network. So I was wondering if you could give us a little bit of color in terms of what you're seeing maybe on the 5G front, CBRS demand in private networks or any of the verticals where you've had some big wins in the past areas such as Smart Cities.

Thanks, Scott. Listen, our world is in the industrial world. So our customer base tends to move a little bit more deliberately than other segments out there. If you look at 5G versus 4G, right now, there's not a ton of performance improvement, and there's a lot of times some coverage challenges when you talk about a multisite, multi-geo deployment. So 5G is an important thing. It's going to eventually be a much bigger part of our business. To date, it hasn't been a huge part of our business. 4G, it does the job and it's available more ubiquitously. CBRS is an important part as well, and we are working with particular partners on both CBRS and in private network deployments. I would say we're more in the pilot stage at this point, Scott, in terms of its impact on our financial performance and some of those yet to come. Again, this is a more deliberate, more disciplined sector of our economy. And so it tends not to boom and bust like some other pieces. But with all that said done, very, very important, but it's important to the MNOs, the carriers that's important to us.

We have a question from the line of Harsh Kumar with Piper Sandler.

I was curious if you could talk about your acquisition strategy. What do you look for when you're looking for an acquisition? How do you determine what you want to pay? And what's the most likable thing about a target that you go for?

Yes. Thanks, Harsh. The acquisitions we've done this year, Ctek and prior to that Haxiot have been indicative of one end of the barbell. These are our small acquisitions. They had a key technology or capability that we think we can scale inside the Digi ecosystem and inside of our organizational structure, which is really tucking them into an existing leader of a product line. The other end of the barbell, which was part of our strategy to raise money earlier this year is larger, more transformative acquisitions. We are very disciplined. Our EPA Midwest, nature doesn't allow us to get too crazy. And so we are spending equal amounts of time on that side of things. And on the bigger side, we're looking for opportunities that are accretive that are also dramatically improving our recurring revenue position. And so those are the kind of attributes we look for. Almost everything we look for is going to have a wireless and particular cellular thread to it and that unlocks the ability to have this recurring value and subscription-oriented business model. So those are the priorities for us, Harsh.

Thank you. And this concludes our Q&A session. I would like to turn it back to Ron Konezny for his final remarks.

Thank you, and thank you to everyone that joined our call today. We're proud of our results and confident in our future. Record demand for Digi's offerings combined with COVID and supply chain challenges have made our customer focus even more imperative. We will be holding virtual investor meetings at the Canaccord Growth Conference on August 11 and the Colliers Investor Conference on September 9. In the meantime, staying safe and healthy.

Thank you. And this concludes today's conference call. Thank you for your participation. And you may now disconnect.