Shares of Internet of Things service provider Digi International (DGII 13.74%) jumped as much as 16.2% in trading on Thursday after the company reported fiscal first-quarter 2024 financial results. Shares were volatile in trading but were still up 12.5% at 2:30 p.m. ET.
Digi beats expectations
Volumes were under pressure across the board, which led to a drop on the top line. Revenue fell 3% to $106.1 million in the quarter, and net loss was $3 million, or $0.08 per share. Adjusted earnings per share were $0.48, flat from a year ago.
Analysts were only expecting revenue of $105.8 million and earnings per share of $0.45 in the quarter.
Management also said annualized recurring revenue (ARR) was up 13% in the quarter to $108 million, the first time the company’s ARR has exceeded quarterly revenue.
Growing in the right places
Products and services revenue fell 3% to $82 million as fewer console servers and cellular products were sold. But ARR increased 64% to $23 million in the quarter.
IoT Solutions revenue fell 4% to $24 million but also saw an increase in ARR of 4% to $85 million.
Moving customers to more subscription-based revenue can lead to lower margins short-term, but a more predictable and profitable business long-term. I think that’s what investors are seeing with Digi International today. The business may be smaller than it was a year ago, but it’s growing in the right places.
Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
