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Digi International Reports 6.6% Increase in Revenue for First Fiscal Quarter 2008 Over First Fiscal Quarter 2007

(Minneapolis, MN, January 23, 2008) - Digi International® Inc. (NASDAQ: DGII, http://www.digi.com) reported revenue of $44.6 million for the first fiscal quarter of 2008, compared with $41.8 million for the first fiscal quarter of 2007, an increase of $2.8 million, or 6.6%.

Revenue from embedded products in the first quarter of fiscal 2008 was $20.7 million compared to $16.6 million in the first quarter of fiscal 2007, an increase of $4.1 million, or 24.5%. Revenue from non-embedded products was $23.9 million in the first quarter of fiscal 2008 compared to $25.2 million in the first quarter of fiscal 2007, a decrease of $1.3 million, or 5.2%.

The gross profit margin, as a percentage of net sales, was 53.6% in the first fiscal quarter of 2008 compared to 52.6% in the first fiscal quarter of 2007. Gross profit was higher than the comparable quarter a year ago by 8.5%, primarily due to product and mix changes within both the embedded and non-embedded product groups, as well as licensing revenue.

Total operating expenses in the first fiscal quarter of 2008 were $19.3 million, compared to $17.7 million in the first fiscal quarter of 2007. Operating expenses were higher in the first fiscal quarter of 2008 compared to the comparable quarter a year ago primarily as a result of incremental headcount due to overall growth, resulting in increased compensation-related sales and marketing and research and development expenses. The increased expenses in the first quarter of fiscal 2008 compared to the same period in the prior year resulted from the Drop-In Networking initiative, launched in June 2007 as well as increased international expenses.

Digi reported operating income of $4.6 million, or 10.3% of net sales, in the first fiscal quarter of 2008 compared to $4.3 million, or 10.3% of net sales, in the first fiscal quarter of 2007. Operating income in the first quarter of fiscal 2008 increased by $0.3 million, or 6.8%, compared to the first quarter of fiscal 2007.

Net income was $3.7 million in the first fiscal quarter of 2008, or $0.14 per diluted share, compared to $3.8 million, or $0.15 per diluted share in the comparable quarter of the prior year. The first quarter of fiscal 2007 net income benefited $0.5 million, or $0.02 per diluted share, as a result of a retroactive benefit from the extension of the research and development credit.

Digi's cash and cash equivalents and marketable securities balance, including long-term marketable securities, was $90.9 million at December 31, 2007, an increase of $3.3 million over the cash and cash equivalents and marketable securities balance at the end of fiscal 2007, or September 30, 2007. At December 31, 2007, Digi's current ratio was 9.2 to 1, and the Company had no debt other than capital lease obligations.

"As we have stated in the past, our fiscal first quarter generally produces modest results," said Joe Dunsmore, Digi's Chief Executive Officer. " Our non-embedded revenue decreased compared to the same quarter in the prior fiscal year primarily due to mature product line decreases. However, we experienced an increase in embedded product revenue, an overall improvement in gross profit margins and a modest growth in operating income."

First Fiscal Quarter 2008 Business Highlights:

  • Digi's Rabbit® brand introduced the RCM4300 RabbitCore featuring Megabyte Code Support™. The RCM4300 series enables a new generation of applications that use more memory for data and code. The on-board mass storage provides even more performance and easier design than any other alternative in its price range.
  • Digi introduced the XBee Wall Router, a ZigBee router used to expand a ZigBee network's range. By plugging into standard power sockets, XBee wall routers are easy-to-install building blocks for self-healing ZigBee networks. These Zigbee networks often provide local device connectivity in end-to-end wireless Drop-in Networks.
  • Digi introduced the Multipoint XPress™ Ethernet Bridge (XEB) for wirelessly connecting multiple Ethernet devices in a single Drop-in Network when Wi-Fi range is insufficient, when an Ethernet cable is impractical or too costly to install, or when industrial grade, highly resilient wireless connectivity is needed. The Multipoint XEB makes it easy to connect equipment like industrial programmable logic controllers (PLCs), electronic LED signs, security cameras, Internet kiosks, and other Ethernet-enabled devices wirelessly, securely, and cost effectively.
  • Digi introduced the Digi DialServ to allow devices with built-in telephone modems to participate in wireless Drop-in Networks. Combined with a Digi cellular router or gateway, the Digi DialServ extends the life of existing remote equipment by reducing monthly phone charges and speeding transaction times.
  • Digi continued to enhance the latest line of Rabbit® brand core modules with the RCM4300 RabbitCore featuring Megabyte Code Support™. The RCM4300 series enables a new generation of applications that require large amounts of memory for data and code.

Digi projects no change in its annual revenue guidance of $197 million to $207 million, and no change in its annual earnings per diluted share guidance of $0.69 to $0.87.

First Fiscal Quarter 2008 Conference Call Details
Digi invites all those interested in hearing management's discussion of its quarter, on Wednesday, January 23, 2008 at 5:00 pm EDT (4:00 pm CT), to join the call by dialing (800) 954-0620. International participants may access the call by dialing (212) 231-2901. A replay will be available two hours after the completion of the call, and for one week following the call, by dialing (800) 633-8284 for domestic participants or (402) 977-9140 for international participants and entering access code 21372251 when prompted. Participants may also access a live webcast of the conference call through the investor relations section of Digi's website, www.digi.com.

About Digi International
Digi International, based in Minneapolis, is the leader in device networking for business. Digi develops reliable products and technologies that enable companies to connect and securely manage local or remote electronic devices over the network or via the web.

Forward-looking Statements
This press release contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which generally can be identified by the use of forward-looking terminology such as "anticipate," "believe," "target," "estimate," "may," "will," "expect," "plan," "project," "should," or "continue" or the negative thereof or other variations thereon or similar terminology. Such statements are based on information available to management as of the time of such statements and relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market and statements regarding the Company's mission and vision. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, including risks related to the highly competitive market in which the Company operates, rapid changes in technologies that may displace products sold by the Company, declining prices of networking products, the Company's reliance on distributors, delays in the Company's product development efforts, uncertainty in consumer acceptance of the Company's products, and changes in the Company's level of revenue or profitability. These and other risks, uncertainties and assumptions identified from time to time in the Company's filings with the Securities and Exchange Commission, including without limitation, its annual report on Form 10-K for the year ended September 30, 2007 and its quarterly reports on Form 10-Q, could cause the Company's future results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. Many of such factors are beyond the Company's ability to control or predict. These forward-looking statements speak only as of the date for which they are made. The Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Digi International Inc.
Condensed Consolidated Statement of Operations

Digi International Inc.
Condensed Consolidated Balance Sheet

Digi International Inc.
Condensed Consolidated Statement of Cash Flows

Investor Contacts:
S. (Kris) Krishnan
Digi International
952-912-3125
Email: S. (Kris) Krishnan

Tom Caden
Dian Griesel Inc.
212-825-3210
Email: Tom Caden

For more information, visit Digi's Web site at www.digi.com, or call 877-912-3444 (U.S.) or 952-912-3444 (International).

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