Digi International Revenues Increase to $26.3 Million for Quarter

11/10/2003 - Digi International® Inc. (NASDAQ: DGII) reported fourth fiscal quarter 2003 revenue of $26.3 million, compared to $25.1 million in the fourth fiscal quarter of 2002. Revenue for the quarter was slightly above the upper end of management’s recently updated guidance of $26.0 - $26.2 million.

Revenue from Digi Connectware products was $18.3 million for the fiscal fourth quarter of 2003. Device Networking products, which include NetSilicon and the Device Server product lines, contributed $8.0 million for the quarter.

Digi reported net income of $1.8 million for the fourth fiscal quarter of 2003, or $0.09 per diluted share, compared to a net loss of $4.4 million, or $0.20 per diluted share, during the fourth fiscal quarter of 2002. Earnings per diluted share exceeded the upper end of management's recently updated guidance of $0.07 - $0.08.

Digi completed the 2003 fiscal year with revenues of $102.9 million, compared to revenues of $101.5 million in fiscal year 2002. As previously announced, Digi adopted Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” (SFAS 142), effective October 1, 2002. Digi recorded a non-cash goodwill impairment charge of $43.9 million. The charge is reported as a cumulative effect of a change in accounting principle. Including the impact of SFAS 142, Digi recorded a GAAP net loss of $37.3 million, or $1.76 per diluted share in fiscal 2003, compared to a net loss of $12.8 million, or $0.65 per diluted share in fiscal 2002. Digi reported income before the cumulative effect of the accounting change of $6.6 million, or $0.31 per diluted share. Income before the cumulative effect of the accounting change for fiscal year 2003 exceeded management’s recently updated guidance of $0.28 to $0.30.

Gross margin in the fiscal fourth quarter of 2003 was 59.1% compared to 55.9% in the fiscal fourth quarter of 2002. Gross margin for fiscal year 2003 was 59.6%, compared to 54.7% from the previous year. The increase in 2003 is due to the introduction and expansion of higher margin networking connectivity products in both the Connectware and Device Networking segments. Certain of the Company’s mature products that generate high margins also continued to perform well in fiscal 2003.

Total operating expenses in the fiscal fourth quarter of 2003 were $14.0 million compared to $20.6 million in the fiscal fourth quarter of 2002. Operating expenses for the full fiscal year 2003 totaled $55.6 million, compared to $77.3 million in fiscal year 2002. The decrease in 2003 operating expenses is primarily due to restructuring activities that took place at the end of fiscal 2002, in addition to cost controls that have been in place throughout fiscal 2003. The cost saving measures undertaken at the end of fiscal 2002, combined with the continuing cost controls that were in place in fiscal 2003 resulted in savings of $11.7 million in sales and marketing, research and development, general and administrative expenses, and intangibles amortization in 2003.

Digi’s cash and cash equivalents and marketable securities balance at the end of the quarter was $57.6 million, an increase of $3.1 million from the end of the prior quarter. The increase is primarily a result of cash generated from operations of $6.8 million, offset partially by net cash used in financing activities of $3.5 million to pay down long-term debt in its European operations and partially replace it with lower-interest, short-term borrowing. Days sales outstanding (DSO) was at 32 days for fiscal 2003, compared to 33 days for fiscal 2002. Digi’s cash per share, defined as cash and cash equivalents and marketable securities divided by September 30, 2003 shares outstanding of 20,242,491, was $2.85. Tangible book value per share was $4.06.

"The Digi team put together four quarters of positive operating income and operating cash flow in fiscal 2003," said Joe Dunsmore, Chairman, President and CEO of Digi.

The fiscal 2003 highlights:

First Quarter and Fiscal 2004 Guidance
Digi expects first quarter 2004 revenue to be in the range of $25 to $26 million and anticipates earnings per diluted share to be in the range of $0.04 to $0.06. For the full fiscal year 2004, Digi forecasts revenue to increase over fiscal year 2003 revenue by 2% to 7%. Digi expects earnings per diluted share for fiscal 2004 to be $0.26 to $0.32. Fiscal year 2003 earnings per diluted share includes $0.09 relating to the tax benefits of net operating loss carryforwards recorded in fiscal 2003. Earnings per diluted share for fiscal 2004 are expected to increase by 18% to 45% over fiscal 2003 earnings per diluted share before the cumulative effect of the accounting change related to the adoption of SFAS 142 and the tax benefits of the net operating loss carryforwards.

Fourth Quarter and Fiscal 2003 Conference Call Details
Digi invites all those interested in hearing management's discussion of the quarter and year end to attend our fourth fiscal quarter 2003 conference call, scheduled for Thursday, November 6, 2003, at 4:00 p.m. CT, either by phone or on the Web. Participants can access the call directly at 888-489-9488. International participants may access the call by dialing 212-346-0135. A replay will be available for one week following the call by dialing 402-977-9140 and entering the following access code when prompted: 21164531. Participants may also access a live web cast of the conference call through the investor relations section of Digi's Web site, www.digi.com.

About Digi International
Digi International, based in Minneapolis, is the leader in Connectware and makes device networking easy by developing products and technologies that are cost effective and easy to use. Digi markets its products through a global network of distributors and resellers, systems integrators and original equipment manufacturers (OEMs). For more information, visit Digi's web site at www.digi.com, or call 800-344-4273 (U.S.) or 952-912-3444 (International).

Digi, Digi International, and the Digi logo are trademarks or registered trademarks of Digi International Inc. in the United States and other countries.

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 reports on Form 10-K for the year ended September 30, 2002 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.

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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