Digi shares soar on earnings, outlook for 2020

Ron Konezny

Despite being off slightly in early trading Tuesday, shares of Digi International have risen 25 percent since Friday, after the company announced record fiscal 2019 performance and a bright outlook for next year.

Digi shares, which began the year under $10.50 per share, closed Monday at $18.22 per share on three-times normal volume, before backing off to $18 per share. Up nearly 75 percent for the year, Digi, valued at more than $500 million, is one of the five-best best-performing Minnesota public companies this year.

The company, under turnaround-driving CEO Ron Konezy since 2015, has achieved its highest price since the tech-bubble days of 20 years ago. Only this time, the underlying performance is driving interest in the Hopkins-based wireless company that provides "internet of things" products and services.

"Both business segments contributed to a record fiscal 2019," Konezny said last week. "Digi is well-positioned to build on that momentum in fiscal 2020.

Investors apparently also like the prospects for Digi's biggest acquisition ever, announced this month, a $140 million cash acquisition of an IT infrastructure company called Opengear, whose customers include Target, Best Buy and Netflix, and which Digi predicted will add to 2020 earnings.

Digi's earnings increased from $1.6 million in 2018 to $10 million in 2019, or 35 cents per share, on revenue that increased 7 percent to $215.3 million.

Digi executives told analysts and investors that the company expects operating earnings to be in the range of $45 to $50 million next year, nearly double those of 2019. About $15 million of the increase is expected from OpenGear.

This is the sixth and largest acquisition by Digi under Konezny, who said that past success in acquiring and integrating other companies was critical to winning Opengear. And Opengear leans more toward commercial products than Digi's traditional orientation toward industrial equipment.

Konezny, since 2015, has led a sometimes-painful restructuring of Digi; now adding people and revenue.

The company makes and sells routers and other devices that connect equipment such as solar arrays, agricultural and factory equipment to the internet. It is getting faster growth from software solutions and services that help monitor, adjust and maintain equipment in a timely way that helps end-user companies monitor performance and replace parts before they expire.