News

Shares of Internet of Things service provider Digi International (NASDAQ: DGII) 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.

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.