Digi International targets double-digit ARR, revenue, and EBITDA growth for 2026 amid integration of Jolt

Earnings Call Insights: Digi International Inc. (DGII) Q4 2025

MANAGEMENT VIEW

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President and CEO Ronald Konezny highlighted a record quarterly revenue of $114 million, marking a 9% year-over-year increase and signaling a return to top-line growth. Konezny reported, "We reported a record $152 million of ARR with the inclusion of Jolt Software acquired in August of this year, which represents a 31% year-over-year increase. This marks our fourth consecutive quarter of double-digit ARR growth." He further stated that ARR now accounts for approximately 35% of total revenue, reflecting the company’s transition toward multiyear solution subscriptions.

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Konezny emphasized the successful integration of SmartSense and Jolt, noting, "We have a clear vision of the combined platform, and we have integrated the teams." He also cited diversity across product lines and industries as fueling resilience and relevance, while pointing to emerging opportunities in artificial intelligence and edge computing.

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Konezny stated, "Acquisitions remain our top capital deployment priority, and we are tracking a number of opportunities in the industrial IoT space."

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CFO James Loch stated, "At the time of the acquisition, we had indicated Jolt had done over $20 million of ARR. The Jolt deal was closed midway through August. So you could sort of envision based on that ARR with 1.5 months, what the revenue contribution would have been like based on what we had disclosed at the time of acquisition."

OUTLOOK

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Konezny stated, "In fiscal 2026, we expect double-digit growth for all 3 of our key metrics: ARR, revenue and adjusted EBITDA." He reinforced a long-term goal of $200 million of ARR and $200 million in adjusted EBITDA by the end of fiscal 2028, mentioning, "Additional strategic acquisitions aligned with these metrics may accelerate this time line."

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Management noted deliberate guidance after integrating SmartSense and Jolt, with a focus on moving toward larger enterprise sales and incorporating synergies from the combined teams. Jolt contributed over $20 million in annualized recurring revenue, now embedded in fiscal 2026 outlook.

FINANCIAL RESULTS

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Digi reported $114 million in quarterly revenue, a record high, and $152 million in ARR, up 31% year-over-year. Full fiscal year revenue reached $430 million, up 1% year-over-year, with $108 million in adjusted EBITDA, representing an 11% increase. Free cash flow for the year was $105 million, with a yield of 8%. Management stated, "We paid off all the debt from the Ventus acquisition as promised."

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Integration of SmartSense and Jolt has begun to yield cross-selling opportunities. Inventory was reduced, aiding strong cash conversion.

Q&A

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Thomas Moll, Stephens: Asked about recurring revenue growth and field execution. Konezny responded that the company is getting closer to 100% solution attachment, citing team and channel partner efforts, and expects this progress to continue in FY '26.

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Moll asked about recurring revenue trends, Jolt’s contribution, and data center growth. Konezny explained the guidance incorporates SmartSense and Jolt synergies, with a shift toward enterprise sales and ongoing data center contributions to one-time revenue.

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Scott Searle, ROTH Capital: Inquired about Jolt breakout and macro environment. CFO Loch said Jolt’s ARR at acquisition was over $20 million, with its revenue contribution reflected in Q4 and fiscal 2026. Loch noted some verticals are accelerating decision-making, but government shutdown uncertainty remains a drag on normalcy.

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Searle asked about AI at the edge and M&A. Konezny described AI in industrial IoT as a long-term journey, with initial internal productivity gains and future customer-facing product enhancements. He reiterated a strong pipeline for M&A activities.

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Caden Dahl, Piper Sandler: Asked about AI infrastructure tailwinds and Europe’s performance. Konezny cited data centers as the primary beneficiary for the Opengear business, with Europe being a "country-by-country opportunity" but North America growing faster.

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Josh Nichols, B. Riley: Focused on margin improvement and attach rates. Loch indicated that as ARR continues to expand, gross margins are expected to move up sequentially. Konezny projected that most devices would reach 100% attach rates by fiscal 2028.

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Anthony Stoss, Craig-Hallum: Asked about fastest-growing product segments. Konezny predicted cellular routers would grow fastest on a percentage basis, with infrastructure management as the smallest segment.

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Gregory Mesniaeff, Kingswood Capital Partners: Requested an update on Jolt acquisition accretion. Loch said, "We had also indicated that by the end of calendar '26, we would be at an $11 million run rate EBITDA through the acquisition... thus far, we're tracking well, both in terms of how we are focused on our integration with our people as well as being able to obtain both the top and bottom line synergies."

SENTIMENT ANALYSIS

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Analysts asked probing questions about recurring revenue growth, integration synergies, AI opportunities, and macro uncertainties. Tone was constructive, with some focus on clarity around guidance, integration, and product line performance.

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Management demonstrated confidence, repeatedly referencing the company’s vision, growth milestones, and ability to execute. Phrases such as "We are confident in our long-term goal" and "we're excited about our playbook and our ability to execute" reflected a positive, forward-looking sentiment. The tone during prepared remarks was assertive, while responses in Q&A were detailed and transparent.

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Compared to the previous quarter, analysts remained constructive but with increased interest in integration outcomes and organic versus acquisitive growth. Management’s tone was consistent with prior calls but reflected heightened optimism following the Jolt acquisition and record performance.

QUARTER-OVER-QUARTER COMPARISON

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The current quarter featured record revenue and ARR, with explicit acknowledgment of the Jolt acquisition’s impact and ongoing integration. Guidance language shifted to emphasize double-digit growth targets for ARR, revenue, and EBITDA in fiscal 2026, compared to last quarter’s emphasis on recurring revenue outpacing top-line growth.

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Strategic focus shifted toward combining product lines and leveraging synergies from recent acquisitions. Analysts focused more on integration details, recurring revenue, and product segment growth, compared to last quarter’s focus on supply chain, tariffs, and geographic performance.

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Management’s confidence increased, citing progress on debt payoff and integration milestones. Analysts’ tone was slightly more optimistic but still pressed for clarity on organic versus acquired growth.

RISKS AND CONCERNS

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Management identified macroeconomic uncertainty, particularly related to government shutdowns, as a driver of elongated sales cycles and market unpredictability. Loch stated, "the current shutdown in the government adds to just uncertainty, I would say we're less impacted by, say, pure government shutdown and more just by the continued uncertainty that it drives on the marketplace."

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Integration of SmartSense and Jolt was noted as a work in progress, with management emphasizing deliberate guidance to account for synergies and ongoing customer base integration. Konezny acknowledged, "there's also obviously some integration we're working through with the teams, with the solutions, with the customer base as well."

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Other risks mentioned include the pace of AI infrastructure investment and sector-specific uncertainties, such as European growth and the potential for overinvestment in AI-related projects.

FINAL TAKEAWAY

Digi International closed fiscal 2025 with record revenue and ARR, buoyed by the integration of Jolt and SmartSense and a strategic focus on recurring revenue. The company projects double-digit growth for ARR, revenue, and adjusted EBITDA in fiscal 2026, with a clear path toward its $200 million targets by 2028. Management continues to prioritize acquisitions and operational integration while acknowledging macroeconomic uncertainties and integration challenges as ongoing risks.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/dgii/earnings/transcripts]

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