Digi International (DGII) has reported 37.72 percent plunge in profit for the quarter ended Mar. 31, 2017. The company has earned $1.33 million, or $0.05 a share in the quarter, compared with $2.14 million, or $0.08 a share for the same period last year. On the other hand, adjusted net income for the quarter stood at $1.34 million, or $0.05 a share compared with $2.29 million or $0.09 a share, a year ago. 

Revenue during the quarter dropped 9.06 percent to $45.62 million from $50.16 million in the previous year period. Gross margin for the quarter contracted 131 basis points over the previous year period to 48.01 percent. Total expenses were 96.69 percent of quarterly revenues, up from 92.72 percent for the same period last year. That has resulted in a contraction of 397 basis points in operating margin to 3.31 percent.

Operating income for the quarter was $1.51 million, compared with $3.65 million in the previous year period.

However, the adjusted EBITDA for the quarter stood at $2.76 million compared with $4.58 million in the prior year period. At the same time, adjusted EBITDA margin contracted 309 basis points in the quarter to 6.05 percent from 9.14 percent in the last year period.

"We generated significant growth in our service offerings led by our Digi Smart Solutions group," said Digi's chief executive officer and President, Ronald E. Konezny. "Our performance in our service business, however, was more than offset by softness across our product business. Our products business is continuing to transition from a custom provider to fewer offerings with broader applications. Although our results did not meet our expectations this quarter, we remain confident in our strategy and our growth prospects."

For the third-quarter, Digi International projects revenue to be in the range of $44 million to $47 million. The company forecasts diluted earnings per share to be in the range of $0.03 to $0.06. 

For financial year 2017, Digi International projects revenue to be in the range of $182 million to $189 million. The company forecasts diluted earnings per share to be in the range of $0.24 to $0.30.

The company has spent $4.41 million cash to meet investing activities during the first half as against cash inflow of $4.23 million in the last year period

Cash flow from financing activities was $2.94 million for the first six months, down 54.57 percent or $3.52 million, when compared with the last year period.

Cash and cash equivalents stood at $71.90 million as on Mar. 31, 2017, up 6.88 percent or $4.62 million from $67.27 million on Mar. 31, 2016.

Working capital decreases marginally
Digi International has witnessed a decline in the working capital over the last year. It stood at $151.80 million as at Mar. 31, 2017, down 2.85 percent or $4.45 million from $156.25 million on Mar. 31, 2016. Current ratio was at 7.97 as on Mar. 31, 2017, down from 8.56 on Mar. 31, 2016.

Cash conversion cycle (CCC) has decreased to 80 days for the quarter from 128 days for the last year period. Days sales outstanding went up to 56 days for the quarter compared with 54 days for the same period last year.

Days inventory outstanding has decreased to 58 days for the quarter compared with 100 days for the previous year period. At the same time, days payable outstanding went up to 34 days for the quarter from 25 for the same period last year.