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Digi International (DGII) Amends Credit Facility to Boost Liquidity

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IoT connectivity solutions provider Digi International Inc. DGII has amended its credit facility to augment its liquidity and improve financial flexibility. The modified credit agreement is likely to provide the means to undertake strategic investments to spur long-term growth of the company.

The amended credit facility increases Digi International’s borrowing capacity from $150 million to $200 million. The modified credit agreement with BMO Harris Bank N.A. as a collateral agent also offers an opportunity to increase the credit facility by an additional $75 million. Digi International intends to utilize the modified debt facility to meet its working capital requirements and for general corporate purposes.

The improvement in the credit facility is part of the measures undertaken by the company to boost its operating metrics amid the coronavirus-induced adversities. The pandemic and related global economic downturn has triggered uncertainty regarding the near-term outlook with significant impact across its customers, vendors and other business partners.

In addition, Digi International recently announced a secondary offering of 3.5 million shares at $19.50 per share. The company also granted underwriters an option to purchase an additional 0.5 million shares to cover any over-allotments. The company expects to generate gross proceeds of about $68.3 million from the transaction, bulk of which would be utilized to fortify its working capital needs.

Notably, the IoT Solutions segment of the company contracted in fiscal 2020 owing to the virus outbreak and was the most hit in the fiscal second and third quarter as customers found it hard to adjust to the lockdown restrictions. Although there was slight improvement in sales in the fiscal fourth quarter, the company remains cautiously optimistic about whether this trend will continue in fiscal 2021. The company is currently taking various steps to reduce operating expenses and improve its liquidity amid the uncertain macroeconomic environment.

The stock has gained 144.9% in the past year compared with the industry’s rise of 42.8%. Whether the improved liquidity measures would help the company to fuel its growth engine remains to be seen.



Digi International carries a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include Extreme Networks, Inc. EXTR, NETGEAR, Inc. NTGR and NetScout Systems, Inc. NTCT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Extreme Networks delivered a positive earnings surprise of 55.4%, on average, in the trailing four quarters.

NETGEAR delivered a positive earnings surprise of 59.5%, on average, in the trailing four quarters.

NetScout has a long-term earnings growth expectation of 5%. It delivered a positive earnings surprise of 16.3%, on average, in the trailing four quarters.

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Digi International Inc. (DGII) : Free Stock Analysis Report

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