Digi International Q3 Earnings Call Highlights

Digi International delivered record fiscal Q3 2026 results: Revenue rose 29% year over year to $139 million, ARR reached $191 million, adjusted EBITDA increased to $40 million, and operating cash flow climbed 38% to $33 million. The company raised its full-year outlook to $529 million–$533 million in revenue, $146 million–$147.5 million in adjusted EBITDA, $2.67–$2.70 in adjusted EPS, and at least 27% ARR growth. Digi also reaffirmed longer-term targets of $200 million in ARR and adjusted EBITDA by 2028. Demand trends improved, with faster customer decisions and pipeline growth, although sales cycles remain uneven. Digi is embedding its new DANI AI capability into its cloud platform, while continuing acquisitions and integration efforts with net leverage below one times. Digi International NASDAQ: DGII reported record fiscal third-quarter 2026 revenue, annual recurring revenue, adjusted EBITDA margin and operating cash flow, while raising its outlook for the fourth quarter and full fiscal year. Chief Financial Officer Jamie Loch said quarterly revenue reached $139 million, up 29% from a year earlier. Gross margin was 64.8%, while cash flow from operations totaled $33 million, an increase of 38% year over year. The company’s non-GAAP annual recurring revenue, or ARR, rose to a record $191 million, and adjusted EBITDA was $40 million, representing a record 29.1% margin. Get Digi International alerts: Sign Up How Far Will Digi International Run Up After Q3 Report? Loch said Digi continued to see operating leverage, with ARR and profit growth outpacing revenue growth. He also said the company’s cash flow from operations, on an annualized basis, exceeded its year-to-date adjusted EBITDA. Raised Fourth-Quarter and Full-Year Outlook For fiscal fourth quarter 2026, Digi forecast revenue of $138 million to $142 million, adjusted EBITDA of $40 million to $40.15 million, and adjusted earnings per diluted share of $0.75 to $0.78. The guidance assumes a diluted share count of 39.1 million. The company increased its full-year outlook and now expects: Revenue of $529 million to $533 million, representing projected year-over-year growth of 23.5%. Adjusted EBITDA of $146 million to $147.5 million, up 35.5% year over year on an annualized basis. Adjusted diluted EPS of $2.67 to $2.70. ARR growth of at least 27% year over year. Loch said the updated forecast implies annualized recurring revenue of at least $193 million. The company has set a longer-term objective to reach $200 million in ARR and $200 million in adjusted EBITDA by 2028. He said the company was ending the year at roughly $147 million in adjusted EBITDA and was tracking toward those goals. Pipeline Activity and Demand Trends During the question-and-answer session, Loch said customers are making decisions faster than they had in the past, improving Digi’s “days to win” metric. However, he cautioned that decision cycles have not returned to what could be considered normalized levels. He said some opportunities entering the pipeline carry a degree of urgency and are moving through the sales process more quickly. Digi also reported pipeline growth across all stages, from early-stage opportunities through later-stage deals. President and Chief Executive Officer Ron Konezny cited relatively strong purchasing managers’ index readings, AI-related infrastructure activity and emerging supply-chain concerns as factors influencing customer behavior. He said memory supply issues have received significant attention and that supply-chain urgency could be prompting customers to place orders earlier to secure del...