Good day everyone, and welcome to Digi International Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press *11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press *11 again. Please note, this conference is being recorded. Now it's my pleasure to turn the call over to the Chief Financial Officer, Jamie Loch. Please go ahead. Thank you. Good day everyone. It's great to talk to you again, and thanks for joining us today to discuss the earnings results of Digi International. Joining me on today's call is Ron Konezny, our President and CEO. We issued our earnings release after the market closed today. You may obtain a copy of the press release through the Financial Releases section of our investor relations website at digi.com. This afternoon, Ron will provide a comment on our performance, 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 such 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 earnings release today and the Risk Factor section of our most recent Form 10-K and subsequent reports on file with the SEC. Finally, certain of the financial information disclosed on this call includes non-GAAP measures. The information required to be disclosed about these measures, including reconciliations to the most comparable GAAP measures, are included in the earnings release. The earnings release is also furnished as an exhibit to Form 8-K that can be accessed through the SEC filing sections of our investor relations website. Now I'll turn the call over to Ron. Thank you, Jamie. Good afternoon everyone. Digi is off to a strong start in fiscal 2026, and we stepped closer to achieving our $200 million of ARR and adjusted EBITDA goals. Our first fiscal quarter set several new all-time records: $122 million of quarterly revenues, up 18% year-over-year. $157 million of annualized recurring revenue, which is up 31% year-over-year in our fifth consecutive quarter of double-digit growth. $32 million of quarterly adjusted EBITDA, which is up 23% year-over-year. Our 25.8% adjusted EBITDA margin is also a new quarterly record. $36 million of quarterly cash generation. We are encouraged by contributions from all of our product lines and across a variety of vertical industries and applications. This broad-based strength is critical to sustaining double-digit growth rates. Both of our platform segments contributed to our strong ARR growth this quarter, with IoT solutions growing 32% and IoT products and services growing 26% year-over-year. The integration of Jolt is progressing well. We have combined the SmartSense and Jolt organizations and offerings into SmartSense One. We're seeing strong customer response to this combined platform, and the cross-selling opportunities we envisioned are materializing. On January 27th, we announced the acquisition of Particle, a leading IoT solution provider. Founded in 2012 and inspired in part by our own Digi XBee, Particle has grown into an industrial IoT leader. Particle brings robust, AI-ready, embedded edge devices coupled with wireless services and a cloud-based solution supporting over 240,000 developers across 14,000 companies. This acquisition strengthens our edge-to-cloud capabilities and expands our addressable market in the IoT device management space. The combination of Particle with our existing OEM solutions creates compelling opportunities for customers seeking seamless connectivity and device management at scale. Jacuzzi, Goodyear, and Watsco are among the over 150 enterprise customers that have accelerated their go-to-market IoT visions with Particle. We are integrating the Particle and OEM solutions teams to further drive embedded-as-a-service globally. Particle brings our IoT product and services reporting segment $20 million in ARR and further balances ARR contributions across Digi's two reporting segments. Particle provides a catalyst for OEM solutions, which is now named Particle by Digi. Digi's comprehensive industrial IoT portfolio, spanning embedded solutions, edge intelligence, and vertical-specific turnkey offerings, resonates across a diverse range of industries and positions us to capitalize on secular trends in AI, edge computing, and industrial automation. Our AI initiatives continue to advance. Beyond the internal productivity gains we've achieved, we're now actively embedding AI capabilities into our products and customer-facing solutions. Digi is uniquely positioned to take advantage of the less publicized wave of machine-driven technology advances. Like the wireless and internet advances that preceded it, AI will ultimately benefit machines like it will humans. Digi's solutions approach aims to accelerate our customers' industrial AI outcomes. Acquisitions remain our top capital deployment priority as we strengthen our balance sheet and we continue to evaluate additional opportunities. Following our successful integration of Jolt just months ago, Particle demonstrates the strength of our organizational structure and our ability to execute multiple acquisitions while maintaining operational excellence. We remain confident in our goal of achieving $200 million of ARR and $200 million of adjusted EBITDA by the end of fiscal 2028. Strategic acquisitions may accelerate this timeline. Next, Jamie will provide comments on our financial guidance. Hi everyone. For fiscal 2026, our guidance reflects both our updated operational outlook combined with the January 2026 acquisition of Particle. We anticipate ARR growth of 23%, revenue growth of 14%-18%, and adjusted EBITDA growth of 17%-21%. The impact of Particle and its expected synergies to this guide is approximately $20 million-$22 million in ARR, $13 million-$14 million in revenue, and $1 million-$2 million in adjusted EBITDA. After capturing synergies, we expect Particle to contribute $5 million to our fiscal 2027 adjusted EBITDA. Particle will be integrated into our IoT products and services segment and will not be reported on a standalone basis. For the second fiscal quarter, revenues are estimated to be between $124 million-$128 million. Adjusted EBITDA is expected to be between $31.5 million and $33.0 million. New for fiscal 2026, we are including interest expense in our adjusted net income per diluted share metric, and we have done the same for comparison periods. Adjusted net income per diluted share is anticipated to be between $0.56-$0.59 per diluted share, assuming a weighted average diluted share count of 38.8 million shares. This includes an expected impact from interest of between $0.05-$0.06 per diluted share. We provide guidance and longer-term targets for adjusted net income per share as well as adjusted EBITDA on a non-GAAP basis. We do not reconcile these items to their most comparable U.S. GAAP measure, as it is not possible to predict without unreasonable efforts numerous items that include but are not limited to the impact of foreign exchange translation, restructuring, interest, and other tax-related events. Given the uncertainty, any of these items could have a significant impact on U.S. GAAP results. With that, I will turn the call back over to our operator to take your questions. As a reminder, to ask questions, simply press *11 to get in the queue and wait for your name to be announced. To withdraw your question, press *11 again. Our first question comes from the line of Tommy Moll with Stephens. Please proceed. Good afternoon, and thanks for taking my questions. Good afternoon, Tommy. Ron, my first question is on the demand environment. Can you make any general comment to update us, and then if you could go one layer deeper and make a specific comment around data centers, what you're seeing there, that'd be appreciated. Thank you. Yeah, as we've talked in the past, we've got the good fortune of applying our technologies to a wide range of verticals. At any given time, there are certainly some verticals that are stronger and some that are maybe not as strong. We're seeing a lot of success in mass transit and utility segments. We're also seeing a lot of success in retail digital signage. We also are seeing some success in data center as well, in particular their Opengear product line. Maybe just benchmarking versus when we spoke a quarter ago, do you get a sense things feel a little bit better, a little bit worse, about the same? Just any general comment would help. Yeah, I think they're improving and increasing. I think we're all worried about how long the AI infrastructure buildout will sustain, but for now, it's been improving. Follow-up for you, Ron, on Particle, specifically around the sales synergy opportunity. You mentioned, I think, in the press release originally, the opportunity to pull sales through your existing team and your channel. That's relatively straightforward. I'm mostly interested in how, from an end-user standpoint, this technology intersects with your current offering. You mentioned the OEM business a number of times in the press release. Maybe that's a lead-in to your answer. Yeah, I think to date, most of our solution approach has been, I'd say, on the IT side, where we're providing a completely enclosed device with software services connectivity. Examples would be the OpenGear solution, cellular routers, in addition to Smartsense and Ventus. This really marks a foray into embedded-as-a-service, where a lot of times we're now going into an engineering department, and we're embedding that IoT solution inside of our customers' machines, whether they be spas or whether they be in the ag or industrial field. That's an area that is newer for, I think, both the industry as well as for Digi. So leveraging this as the catalyst to really get OEM solutions more in line with both the company's objectives of ARR and contributing at a relative scale has been really important for us. What does that as-a-service component look like, where it's an OEM relationship? So the device is used in the field by someone else that you don't have a direct relationship. How do you close the loop there with the as-a-service? Yeah, we absolutely do have a direct relationship with the end user. In the end users, the OEM, we may not have it with the final consumer, if you will. But it's very important that we're in touch with, whether it's Goodyear or Jacuzzi or Watsco, that we're contacting and staying in touch with them to make sure they're accomplishing their business objectives. But it's very similar to our Ventus offering, where it's provided as a service. It includes the edge device software, the connectivity, a cloud platform that gives you the insights into both the Digi equipment, in this case, Particle, as well as the customer's end device. And that end device is really critical to understand its performance, any conditions that might affect its performance, and in some cases, even perform software updates on that OEM's device. Thank you, Ron. I appreciate it, and I'll turn it back. Thank you. Our next question is from James Fish with Piper Sandler. Please proceed. Hey, guys. Maybe just sticking on Particle here. I think it strategically makes sense. It aligns with what you guys have been doing for many years now. But maybe just walk us through what makes Particle different, and how should we think about you guys managing this for push behind growing the business as opposed to more or less managing the profitability? In other words, is it going to be trying to accelerate the growth of the business given your reach and your customer base, or is it going to be growing EBITDA more so? Yeah, what's attracted us to Particle, who we've known for several years now, with Stratus, is they were born this way. They were born as a service. And the processes, the way you go to market, the way you price your offering, the culture of the company is, I think, sometimes harder to appreciate that combination of things. And we're looking forward to bringing that culture inside of OEM solutions, where traditionally we've been providing more just the device and let the customer arrange for connectivity and cloud services. And so we don't underestimate that combination of things and the impact it can have. You saw this with the Ventus acquisition. You've seen it with the combination of Smartsense acquisitions that have led to that company today. So that's very, very important. And we're looking forward to leveraging the combined company to really do profitable growth. Our game is not growth at all costs. It's profitable growth. We want to scale the business. When you get to $20 million of ARR, that's when you can really start thinking about that scale profitably. Before then, you're a little bit more in growth mode, and you're making pretty big investments on the product, on the go-to-market. As you start maturing and figure out what wins and what doesn't win, you can be much more selective on resources. We want to grow the business. Don't get me wrong. It's imperative we grow. But I think Digi's mantra is really profitable growth. And so the crux of it is, is there a way to think about the growth rate of Particle moving forward and how much overlap with existing products? And to layer on here, Jamie, can you just help me here on the guide? It's prior guide was about $484 million on the revenue piece at the midpoint. And with Particle adding about $13 million-$14 million, that would take us 498 or so. But midpoint is only $499 million. So it's not really much of a raise despite the upside here in fiscal Q1. So can you just walk me through why it's pretty much just raising at this point on Particle as opposed to some of the strength you saw in Q1? Was there any pull-in of demand, or are you guys just being kind of prudent around the rest of the year organically? Yeah, it's a good question, Jim. As a rule, we have not increased an annual guide after the first fiscal quarter from a combination of things. 90 days, you get some timing elements where you have some items that time out to the positive or to the negative historically. And we think it's a little bit more responsible to give yourself at least a mid-year point before traditionally we would do an operational raise. In this instance, there is an impact on the operating performance. If you look at the guide, the guide does have a slight uptick on operational performance, so it's not just on Particle when you look at it. There's about a 4-point lift in the guide, and about 3 of those points are Particle. But to your point, 1 quarter in, we think there's a reason to be prudent. Our historical practice is we don't adjust total year after the first quarter. So it's kind of a combination of those two things. Thanks, guys. Thank you. Our next question comes from the line of Josh Nichols with B. Riley. Please proceed. Yeah, thanks for taking my question. Great to see another strong quarter for AR growth and cash flow generation. On the gross margin front, it's continued to charge upwards as you've been ramping revenue. Just in terms of directionally, what should we expect? I know Particle is mostly AR business, but when we think about gross margins for the remainder of the year, is that going to continue to tick up from what we saw in the first quarter? Yeah, Josh, this is Jamie. I do think we're in that space where it's a combination of, as ARR continues to grow at a rate that is at least on pace with revenue, you'll continue to see some margin expansion. Historically, we've seen sort of in that 10-15 basis point expansion sequentially. I think we're going to continue to see that. The variability that you would have from that would be, in any particular 90-day window, you could have product mix that could swing that up a tick or down a tick. But if you look at it over a longer range, it's reasonable that gross margins will continue to tick up, all else constant, just as your ARR continues to be a bigger percentage of your revenue. Thanks. Appreciate the context for that. And then I think someone touched on it before, but maybe looking at a little different angle. I mean, you've already executed well in Q1, and you have the guidance with Particle for fiscal 2Q. That implies a relatively wide guidance range for the top line for the fiscal second half. I'm just wondering if you could provide a little bit more granularity on what are the puts and takes between what would get you to that higher end versus the lower end of the growth guidance range for this year? Yeah, so we are seeing strengths in certain verticals. It's a chaotic time out there in the marketplace between tariffs and prices for commodities. We also, I think, are battling our way through the highly publicized memory challenges that AI expansion has created. We feel confident we can fight through those, but those are some risks out there. There remain a tremendous number of upsides, including the Jolt acquisition, the Particle acquisition, further strength in adding additional data center customers, especially with NeoCloud and AI. Our cellular router segment, as predicted, has started off the year as our fastest growing product line. So continued strength. They've got some new products coming out next quarter. So there's a lot of upside, but there are definitely risks there. And as Jamie said, we have traditionally used that midpoint to update annual guidance. With the Particle acquisition, it just makes sense to at least provide an update. We do expect after FQ2 to do an additional update as we know more information and obviously have another quarter in the books. Sounds good. I think that's fair. Appreciate it. I'll hop back in the queue. Thanks, Josh. Thank you. Our next question is from Scott Searle with Roth. Please proceed. Hey, good afternoon. Thanks for taking the questions. Nice job on the quarter. I hope that you, your families, your team, and communities are doing well during some unprecedented events. Maybe just to dive in, Jamie, I just wanted to clarify, in terms of how you're treating interest now in your guidance, that you are now adjusting that $0.04-$0.05 is related to interest expense. So all things normalized in terms of where street and consensus numbers are for the first quarter would be $0.04-$0.05. Higher would be the apple comparison. Then maybe just to dive in on the competitive landscape front on the gateways, Ron, it seems like the dynamics in that market has recovered. I think you're largely through getting higher attach rates on that front. I wonder if you could talk about some of the dynamics for growth there and what you're seeing in terms of the competitive landscape from, I'll call it, a little bit of a faltering Cradlepoint, as well as some of the Chinese competitors being pushed out and some of the dynamics moving that business right now? Hey, Scott. This is Jamie. I'll take the first part of that question. On the adjusted EPS, consensus and our prior estimate did not include interest. The new metric now includes interest. And if you refer back to our press release, the impact of interest on the quarter was $0.06. So if you were to compare apples to apples, you would be looking at $0.06 of impact to the current number that is because of interest baked into it. On the go forward for FQ2, what we indicated in that adjusted EPS guide is that the impact of interest embedded in that number is about $0.05-$0.06. So the FQ1 impact of interest was $0.06, and that's embedded in the number that we reported out now at $0.56. Does that make sense? Yeah, it does. Thank you. Okay. Yeah, Scott, on the competitive landscape, we're really excited about the momentum building in our cellular router and Ventus business segments. We've got some unique offerings, some new products coming out. We've got a great team with a great culture. We're really optimistic that the momentum can continue. We can't take it for granted. You mentioned one thing that's in particular. There's certain segments that are very, very concerned about having Chinese-originated parts, especially radios. They will literally open up a device and look to make sure that there's no Chinese-manufactured radios in particular. So those are segments where our products really can play well. In addition to the rest of the world that doesn't have as much concern as some U.S.-based customers, we can offer more price-competitive offerings. The big push, as you mentioned, is really becoming more of a solution provider, of which the device is a critical component. But it's the combination of device connectivity, device management, cloud-based platforms, APIs that allow you greater insight and control of that entire solution. And it really helps with what we continually see as an overburdened set of IT resources at our customers. Great. And Ron, maybe just to follow up on that, I guess that's kind of where Particle couples in as well in terms of some edge compute, edge AI capabilities. I'm wondering if you could talk about how do you see that market opportunity expanding in terms of processing requirements at the edge and how you're positioned to capitalize and deliver on that? Thanks. Yeah, some nice complementary technologies that we're bringing together with OEM and Particle. OEM's got very strong Connect Core business, which is powered by NXP and STMicro. Tachyon brings on DragonBoard and a Qualcomm chipset, so we've broadened our offering there. On the radio side, Particle brings in LTE Cat 1bis, which further extends the portfolio on our wireless side. Digi's global reach and channel can really help propagate more and more Particle kits out there. Those dev kits get in the hands of corporate makers. Some of those grow up to be bushes and trees. And so we think we can amplify what's been a proven playbook for Particle. And in combination with that, we are having really nice conversations with Digi enterprise customers that are looking for a more complete solution set from companies like Digi. And so that combination of leveraging our really long-tenured enterprise relationships with amplifying the kit process, we think that combination is going to help with growth. Great. Thanks so much. I'll get back in the queue. Thank you. Our next question is from Anthony Stoss with Craig-Hallum. Please proceed. Hey, guys. Nice execution. Ron, I wanted to follow up on your comments on the memory pricing. I'm just curious if any of the device customers of yours are pulling in their horns already or if this is a few quarters out. I'm sure guys are still getting most of what they need right now, but I'm just curious what you think the impact when it would be. And then the second question is just an update on the Jolt synergies. I think you guys are looking for about $11 million in incremental EBITDA. I'm just curious where you stand out of the gate. Thanks. Yeah, I'll handle the memory piece. Jamie can comment on your second question, Tony. Nice to hear from you. Memory, for those of you that have been around for a while, is a highly volatile business. What goes up can go down and vice versa. The AI push is putting a pressure on DDR4, DDR5 memory, as well as the eMMC. So they're very specific memory components that are mainly in our newer products. Our legacy products are using older technology. We don't see as much pressure. Our number one objective is to make sure we have our supply allocations. And so we fight very hard to make sure we've got the parts available to us. Pricing then becomes a secondary topic. And memory is a portion of our devices' price. We can usually absorb and handle certain amounts of variation. One of the challenges in the market is that in some cases, you may issue a PO, and that PO actually is accepted with a condition that price may be subject to change. So some of it's the fear of the unknown: is our price going to change in the future. But we do feel like, for the most part, we can handle those price increases. We're, as you know, emphasizing the software and services portion of our relationship. We don't want to put that at risk, playing games on the product side. And so we think we can navigate it. And we're going, in many cases, to alternate providers and having our engineering teams qualify those parts just to make sure we have more than one source of memory. It will be a lot of work as we fight through the AI demand and how stable and how long-running that'll be. I'll let Jamie comment on the Jolt piece. Yeah, Tony. Good to hear from you. Both when you break down the synergy and the integration efforts at Jolt, kind of think of it as field integration and then support services and home office integration. Both of those, I think, are proceeding right on target. The field teams have really done a great job being in the same space, understanding the offerings, collaborating, working through both their pipelines as well as a unified front with customers. In the support services, we are right on track in terms of integrating things like finance, HR, all the way from payroll to benefits and all the minutiae of detail. Right now, it's tracking. When we do an acquisition, we've got a timeline that lays out all the integration activities. So far, everything is right on time and nothing that would change our outlook going forward. Very good. Thanks to the other guys. Thank you, Tony. Thank you again. Ladies and gentlemen, if you do have a question, simply press star 11 to get in the queue. As I see no further questions, I will pass it back to Ron Konezny for closing comments. Thank you. Our team's dedication to our customer success and our ability to adapt and evolve is inspiring. Thank you for joining this update on Digi, and have a good night. For participating in today's program, you may now disconnect.