Good day. Thank you for standing by. Welcome to the Digi International Acquires Jolt Software Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advise that your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Jamie Loch, Chief Financial Officer. Please go ahead, sir. Thank you. Good morning, everyone. It's great to talk to you. Thanks for joining us today to discuss Digi International 's acquisition of Jolt. Joining me on today's call is Ron Konezny, our President and CEO. We issued the Jolt acquisition press release after the market closed yesterday. You may obtain a copy of the press release through the Financial Releases section of our investor relations website at digi.com. This morning, Ron will provide a few comments on the deal, and then we'll take your questions. Some of the statements that we make during this call are considered forward-looking and are subject to significant risks and uncertainties. These statements reflect our expectations about future operating and financial performance and speak only as of today's date. We undertake no obligation to update publicly or revise these forward-looking statements. While we believe the expectations reflected in our forward-looking statements are reasonable, we give no assurance that your expectations will be met or that any of our forward-looking statements will prove to be correct. For additional information, please refer to the Forward Looking Statements section in our press release yesterday and the Risk Factors section of our most recent Form 10-K and subsequent reports on file with the SEC. The press release is also furnished as an exhibit to Form 8-K that can be accessed through the SEC filing section of our investor relations website, which will be filed shortly. Now I'll turn the call over to Ron. Thank you, Jay. Welcome to Digi's investor call focused on the acquisition of Jolt announced yesterday. Jolt is a natural fit to both extend and enhance SmartSense market leadership. Jolt's operational intelligence platform optimizes workflows, adds printing and labeling solutions, and labor scheduling capabilities. Based in Lehi, Utah, just outside Salt Lake City, Jolt's team will work with SmartSense to bring more comprehensive ROI to our customers. SmartSense and Jolt have very little overlap with existing customers. Jolt's leadership in food and beverage will complement SmartSense's leadership in healthcare. We've known Jolt for nearly 10 years and have followed their progress closely. We share cultural values including customer focus, positive energy, outcome orientation, and caring deeply about each other, our work, and the success of our customers. As stated in our press release, Digi paid $145.5 million in cash, net of Jolt's cash and subject to customary adjustments, utilizing our existing line of credit to fund this transaction. Jolt contributes to both of our long-term goals, as it generated over $20 million in annualized recurring revenue, or ARR, as of their fiscal 2025 year-end of January 31st, 2025. Jolt has been growing ARR at a faster rate than Digi's IoT Solutions segment. Based on expected synergies, the combined SmartSense and Jolt business plans to achieve $11 million in incremental annualized adjusted EBITDA by the end of calendar 2026. Lastly, Jolt brings approximately $30 million of net operating loss carryforwards for Digi to utilize, subject to Section 302 analysis. We are thrilled to welcome Jolt to SmartSense and to the Digi family, and we are confident in our joint success. We will now open the line for questions. Thank you. Ladies and gentlemen, if you'd like to ask a question at this time, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, simply press star one one again. Please stand by while we compile the candidate roster. Our first question coming from the line of Jim Fish with Piper Sandler, your line is now open. Hey, guys. Congrats on the deal. I guess I'm just wanting to understand Jolt a little bit more. What makes them different? Who are they mainly competing against? It does seem like there might be some overlap with some of your existing products. Can you just walk through if there is any? Thank you. Yeah, Jolt really grew up based on the founder, Josh Bird, servicing food and beverage. Josh actually owned a Baskin-Robbins prior to and operated prior to starting Jolt Software. His inspiration was really optimizing the workflow for restaurants and franchise owners and operators. They've kind of grown up bottoms up, if you will, and have gone slowly into enterprise customers. They've added then condition monitoring through third-party resources and then added printing, labeling, and labor scheduling. They've been really more focused on that food and beverage segment, where Digi has historically grown up in the condition monitoring area. We have our own condition monitoring solution with sensors, and we've evolved into both enterprise deals, but also into task management. There's some overlap in task management and condition monitoring, but clearly, Jolt's got, I think, a world-class task monitoring, task digitization platform. We've got, we think, a world-class condition monitoring system that will ultimately emerge and prevail. Our existing customer overlap is very, very modest. Jolt would compete against companies like Zenput, that's a part of now CrunchTime, which is owned by a PE firm, and another company called Logile. These are companies that focus on task management. We compete more against condition monitoring companies like Senso Scientific, which is now a part of a larger company, and other companies like that. We both compete against generally smaller private companies. The customer overlap is very modest, and in many cases, our customers are asking for the other company's solutions to complement an existing implementation. We're excited to really cross-sell against each other's customers and focus our innovation on the things that really we're both founded on and do best. Got it. Jamie, for you, can you just help us where the annualized $11 million in added synergies is coming from? Just a little bit of understanding around the business model. Is it completely 100% subscription, or is there some hardware product revenue associated here? Just trying to understand essentially like the gross margin kind of level for this part in terms of the IoT Solutions segment impact. Yeah, Jim. When talking about synergies on a forward-looking basis, it's a combination of both top-line and cost-saving synergies. Clearly, we would expect to see more of the synergy come from the top line, but there is some natural overlap on the cost side that we would expect to work its way through the model over that period of time. The focus really will be on growth. The focus will be on accelerating that growth, but there will be some overlap on the cost side. Calendarize that to a run rate number that would be achieved by the end of 2026, because as we talk about, you know, really overlapping those sales forces, focusing on the cross-selling nature and bringing these two solutions together will really be the focus. From a revenue perspective, there is some one-time revenue, but I would say it's pretty immaterial to the overall outlook of the business. The primary focus is going to be on that ARR side, where as we've discussed, their ARR number is growing at a rate faster than what we've seen in our solutions business so far. The one-time is pretty immaterial in nature. Thanks, guys. Thank you. Thanks, Jim. Our next question coming from the line of Tommy Moll with Stephens Inc., your line is now open. Morning again. Thank you for taking my question. Morning, Tommy. Ron, just to stick on the $11 million annualized adjusted EBITDA that you framed for us, is it safe to assume that to hit that number, you're embedding a double-digit ARR growth rate? It sounds like that's how fast the business has been growing, but I just want to try to understand the art of the possible here going forward. Yeah, you're absolutely spot on, Tommy. We think the combined company is going to be growing at double digits. That's what Jolt's been able to achieve, and we think the combined business can sustain that. Okay. You've referenced the overlap or the adjacency in the offering here with SmartSense. How do you envision integrating the two sales organizations and going to market, or do you run them independently and just have each one cross-sell the other? No, we're going to be really combining the two organizations pretty effectively. You know, we want to leverage the best of each company's practices. Jolt's done a really, really nice job of that cadence with SMB, and Digi's done a really nice job with the enterprise. What we are probably going to do is have a vertical focus, which SmartSense has had, and apply that to the Jolt go-to-market team that's been a little less vertical focused, a little more territory-focused. We think that combined organization is capable of delivering consistent double-digit ARR growth. Maybe one for Jamie here, just on the updated guidance. Jamie, my assumption would be that the update is purely reflective of the acquired revenue and earnings, but I just want to make sure there's not also some operational update that you're embedding today. Yeah, Tommy, you're right. The update to the guidance is purely based on the addition of Jolt. There is no operational update that we've provided to guidance from our earnings call. Okay. That's what I expected you would say. Jamie, as we all look at what those numbers imply for the current run rate of Jolt, it's going to be a little tricky because it's partial quarter, and we don't know the seasonality across the quarters. Is there anything you would go ahead and call out for us now as we all just look at what's implied for what you just acquired? I think that's, Tommy, I think when you take a look at it, you can really see, again, you're dealing with a partial quarter. The run rate on ARR is in excess of $20 million. You can see the impact that we're seeing coming down to the bottom, and then you can kind of visualize how that impact this quarter has over a period of time to annualize to an $11 million number by the end of calendar 2026. You can kind of visualize, you know, from an adjusted EBITDA rate how that's going to manifest itself through the P&L. If you say starting with FQ4 for us right now, going all the way through to FQ1 of 2027, kind of how that would ramp up at a rate perspective. Again, the one-time revenue is pretty immaterial. You can see from an ARR perspective and then mapping that out how that probably adds into the forward look. Okay. Last one for Ron on Jolt. Is this purely a software offering, Ron, or is it more like Digi where in the recurring revenue context, it's going to be more a bundle of the hardware/software service altogether? Yeah, as Jamie Loch mentioned, you know, Jolt is really a software company and provides some hardware solutions based on some third-party solutions combined with a few things they've done on their own. They have not traditionally done a lot of what we would call OpEx or asset deals. That is going to be an element we are going to consider, especially on the printing side, where that's a really key capability some of our customers have been asking for in food and beverage. That is going to be an element we are going to try to exploit and take advantage of inside the SmartSense business model. Would that potentially be what most excites you about how you can accelerate the growth here, or is it more of the sales organization? It sounds like you may have some tweaks in mind about their go-to-market. If you had to really just isolate one thing that you're most excited to really drive change and accelerate growth around, what would that be? Yeah, I mean, listen, I think we're creating a clear market leader here. You know, well over 200 employees between the two businesses. You've got two businesses that can really focus on what they're best in class at, with SmartSense on the healthcare side with condition monitoring, applying to all their customers, and Jolt on the food and beverage side with world-class operational intelligence and workflow automation. That combination is really thrilling. There are opportunities that, quite frankly, both companies were engaged in separately that combined make us a much more comprehensive solution. A lot of our customers, Tommy, are looking for one provider to be a more comprehensive provider versus bolting together point solutions. We have an opportunity to really better meet that customer need as a combined force than separate. Thank you, Ron. I look forward to watching the progress. That's all from me. Thanks, Tommy. Thank you. Our next question coming from the line of Josh Nichols with B. Riley Securities. Your line is now open. Yeah, thanks for taking my question. One, just on the margin profile, fair to assume, since this is largely SaaS business that is comparable to the recurring ARR/PCE business, where you're looking at stuff where gross margins are likely 80%+ and significantly higher than your corporate average. Two, any comment you can make just about like the average customer relationship at Jolt in terms of the churn, net retention, overall how those things are typically trending? Yeah, Josh, it's Jamie. Thanks for the question. I do think the financial profile of Jolt mirrors really the financial profile of our solutions business, both in terms of growth profile, gross margins, and adjusted EBITDA margins. When you're dealing with a company that's a little bit smaller in scale, I think you could see coming out of the gate maybe an adjusted EBITDA margin that would be reflective of a company that's got a little bit smaller scale, a little bit higher growth as they're focused on in terms of percent. I do think the financial profile really mirrors what we've seen here at Digi, both in terms of top-line growth as well as gross margin profile. I think you're spot on, and I think that that mirrors up well with us. From a retention perspective, we've not been at the spot where we've really disclosed either gross or net retention, but I would say from an ARR perspective, again, that overall profile really mirrors what Digi has seen in terms of churn over the period of time. With an SMB profile that Jolt has, you can see a little bit smaller, again, soft churn, maybe where you've got a location closure. From an overall basis, a lot of those metrics really line up well. To Ron's point, when you're talking about the mirroring of the solutions from a condition monitoring and a task management, the financial profiles also line up very well. There's a lot of similarities there that really line up with the solution side of the business. A lot of commonality. Yeah, we do think there's some positive synergies on the customer success side. I'd say the SmartSense's customer success organization is a little bit more mature than Jolt's. I think there's going to be some added value there to potentially even improve retention further. Thanks. Last question for me, just as a quick follow-up. You mentioned the financial profile is pretty comparable. I think the IoT Solutions segment is probably doing 20% or so EBITDA margin on a segment level. Obviously already profitable, but in terms of that, you think that that's comparable to where Jolt is today. In addition to that, do you think that there's an additional $11 million of revenue and cost synergy that would bump that up from the $4 million- $6 million EBITDA run rate that it's kind of running at today? Is that correct? Before Jamie comments, I just wanted to emphasize the very first thing we think about is the acceleration of growth. As growth accelerates and you gain scale, you get really good efficiencies and you start to really improve the profitability. The growth is going to be our primary focus. We're certainly going to be efficient along the way, but the key is growing. Jolt's been very, very growth-oriented, smaller company, private funding to emphasize the growth. As we combine the companies, we want to maintain that growth and then get them to a more mature financial profile as well. Yeah. Josh, this is Jamie. I think that, you know, again, when you look at the impact that we've had on guidance and then carry that through to a run rate adjusted EBITDA number of $11 million by the end of calendar 2026, I think you can see how, as those synergies are obtained, both in terms of the top-line synergies as well as any cost synergies that we'd be profiling, that growth is going to provide, let's call it, adjusted EBITDA rate improvement over that period of time. That lines up well, again, with Digi's model that as we continue to grow, you're seeing a lot of that fall down into the bottom line in terms of rate. I think you would see the same thing here. Jolt immediately gets to take advantage of some of Digi's scale as it navigates through. Where there will be a little bit of cost synergy, you'll be able to see how that does come down to the bottom line and continue to enhance that adjusted EBITDA rate performance over that period of time. You'll see that as it kind of scales up. You can see from the adjustment in guidance there's no change in operational. Then carry that forward into the end of calendar 2026, where we're projecting a run rate EBITDA performance of $11 million, how we see that falling down to the bottom line in terms of that enhanced performance. Got it. Thank you. Thanks, Josh. Thank you. As a reminder, to ask a question, please press star one one on your touch-tone telephone. Our next question is coming from the line of Scott Searle with ROTH Capital Partners. You now have an open line. Hey, good morning. Thanks for taking the questions. Congrats on the acquisition. Hey, Ron, maybe to start from a combined company standpoint now, when you look at the competitive landscape, you ran down the list of competitors. Who has the same sort of comprehensive suite that you'll now have with Jolt? Does this materially change the landscape for you? Second, from a cross-selling opportunity standpoint, when you look at the existing SMB base for Jolt, how much of that is immediately addressable with SmartSense opportunities and vice versa, you know, taking Jolt into your existing SmartSense installed base? Yeah, good questions. We think, obviously, the combination of Jolt and SmartSense creates an even stronger and more comprehensive leader. I do want to emphasize restaurant technology and healthcare technology is a very broad area that has a lot of room for growth, both within our capabilities, but outside of them as well. We don't take that for granted. We think we've got a great platform. We think there's even opportunities to go further, to be quite honest. We remain active. I think this does materially change the landscape. Where companies may have looked for two different providers, they may now look to one. We may be changing that narrative quite a bit with this combined portfolio of offerings because there's going to be fewer and fewer companies that can provide this comprehensive solution set in both healthcare as well as food and logistics settings. We think this is a bit of a game changer, but we also acknowledge that there is even further to go to meet customers' needs that span into inventory and other areas that we don't cover right now. Maybe just two quick follow-ups. Jamie, the cost of capital on the acquisition, I'm just kind of wondering what you guys are paying from an interest rate standpoint. Just start with that. Yeah. Scott, we took advantage of our existing credit facility to be able to execute on that in the 8K when we were releasing that based on the leverage profile that we have. We expect a markup on the borrowing to be at a SOFR rate plus about 250 basis points. 225 basis points on the markup and 25 basis points for commitment. Gotcha. Helpful. Thank you. Lastly, Ron, look, not that the ink is dry in the deal yet, but in terms of your existing management capacity and debt capacity to pursue other M&A opportunities, are you guys on the sideline for a little bit here as you digest this, or are you guys still active on that front and looking? Thank you. Good question. We remain active. Our leverage position we feel is both modest, but you can see now between the Opengear and Ventus acquisitions, you can see our both propensity and capability to rapidly de-lever. We remain active, and we continue to look for solutions that can really enhance our customers' ROI and contribute to our long-term goals of both ARR and adjusted EBITDA contributions. Great, thanks so much, and congrats again. Thank you. Thanks, Scott. Thank you. I am showing no further questions in the Q&A queue at this time. I will now turn the call back over to Mr. Ron Konezny for any closing remarks. Thanks again for joining this special investor call. We welcome the Jolt team to both SmartSense and Digi. Looking forward to giving you an update on our progress here as we finish our fiscal 2025. Have a great day, everyone. This concludes today's conference call. Thank you for your participation. You may now disconnect.