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What changed in DIGI INTERNATIONAL INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of DIGI INTERNATIONAL INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+219 added−206 removedSource: 10-K (2025-11-21) vs 10-K (2024-11-22)

Top changes in DIGI INTERNATIONAL INC's 2025 10-K

219 paragraphs added · 206 removed · 167 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAmong others, relationships include: AT&T, AWS, Google, Kore, Novotech, NXP, Orange, Qualcomm, Silicon Laboratories, T-Mobile, Telus, Verizon, Vodafone, Westbase and several other cellular carriers worldwide. 2 Table of Contents We have established relationships with equipment vendors in a range of industries such as energy, industrial, retail, transportation, medical, and government that allow these partners to ship our products and services as component parts of their overall solutions.
Biggest changeWe have established relationships with equipment vendors in a range of industries such as energy, industrial, retail, transportation, medical, and government that allow these partners to ship our products and services as component parts of their overall solutions. Our products utilize many of the world’s leading telecommunications companies and Internet service providers, including, among others, AT&T, T-Mobile and Verizon.
Strategy We remain focused on taking steps that we believe will deliver consistent, long-term growth with higher levels of profitability. This includes continuously reviewing and managing the product, service and solution offerings we provide to align with customer interests and meet market demand.
Strategy We remain focused on taking steps that we believe will deliver consistent, long-term growth with higher levels of profitability. This includes continuously reviewing and managing the product, service and solution offerings we provide to align with customer interests and to meet market demand.
Our IoT Solutions are offered under the Ventus and SmartSense by Digi brands. Our patents are applicable to specific technologies and are valid for varying periods of time based on the date of patent application or patent grant in the U.S. and the legal term of patents in the various foreign countries where patent protection is obtained.
Our IoT Solutions are offered under the Ventus, SmartSense by Digi and Jolt brands. Our patents are applicable to specific technologies and are valid for varying periods of time based on the date of patent application or patent grant in the U.S. and the legal term of patents in the various foreign countries where patent protection is obtained.
Embedded System Products – Marketed under the Digi Connect ® , ConnectCore ® and Rabbit brands these are embedded system on modules ("SOMs") and single board computers that are embedded into customer products in a broad range of industries and applications. These products deliver highly integrated computer platforms with scalable performance, flexible wired and wireless connectivity and complete software platforms.
Embedded System Products – Marketed under the Digi Connect ® and ConnectCore ® brands these are embedded system on modules ("SOMs") and single board computers that are embedded into customer products in a broad range of industries and applications. These products deliver highly integrated computer platforms with scalable performance, flexible wired and wireless connectivity and complete software platforms.
Our proprietary rights and technology are protected by a combination of copyrights, patents, trade secrets and trademarks. We have established common law and registered trademark rights on a family of marks for a number of our products. Our IoT Products & Services primarily are sold under the Digi, Rabbit ® , Digi XBee ® , and Opengear ® brands.
Our proprietary rights and technology are protected by a combination of copyrights, patents, trade secrets and trademarks. We have established common law and registered trademark rights on a family of marks for a number of our products. Our IoT Products & Services primarily are sold under the Digi, Digi XBee ® , and Opengear ® brands.
Manufacturing Operations We outsource our manufacturing operations to certain contract manufacturers, which are located primarily in Thailand, Mexico, Taiwan, Cambodia and China. We rely on third party foundries or companies who rely on third party foundries for our semiconductor devices that are Application Specific Integrated Circuits ("ASICs"). These foundries are located primarily in Taiwan.
Manufacturing Operations We outsource our manufacturing operations to certain contract manufacturers, which are located primarily in Thailand, Mexico, Taiwan and Cambodia . We rely on third party foundries or companies who rely on third party foundries for our semiconductor devices that are Application Specific Integrated Circuits ("ASICs"). These foundries are located primarily in Taiwan.
Our IoT Solutions segment consists of our SmartSense by Digi ® business and our Managed Network–as–a-Service (“MNaaS”) business acquired via our November 2021 acquisition of Ventus Wireless, LLC and affiliated entities ("Ventus"). SmartSense by Digi offers wireless temperature and other condition-based monitoring services as well as employee task management services.
Our IoT Solutions segment consists of our SmartSense by Digi ® business and our Managed Network–as–a-Service (“MNaaS”) business acquired via our November 2021 acquisition of Ventus Wireless, LLC and affiliated entities ("Ventus"). SmartSense by Digi offers wireless temperature and other condition-based monitoring services as well as employee task management, label printing and other services.
We provide balanced compensation programs that focus on the following five key elements: • Pay-for-performance - Reward and recognize leading contributors and high potentials; • External market based - Pay levels that are competitive with respect to the labor market in which we compete for talent; • Internal equity - Providing for fair pay relationships within the Company; • Fiscal responsibility - Providing affordable programs that are within our budget; and • Legal compliance - Ensure the organization is legally compliant with all laws applicable to our business.
We provide balanced compensation programs that focus on the following five key elements: • Pay-for-performance - Reward and recognize leading contributors and high potentials; • External market based - Pay levels that are competitive with respect to the labor market in which we compete for talent; • Internal equity - Providing for fair pay relationships within the Company; • Fiscal responsibility - Providing affordable programs that are within our budget; and 4 Table of Contents • Legal compliance - Ensure the organization is legally compliant with all laws applicable to our business.
Lighthouse ® Management Software – Lighthouse is a recurring revenue cloud-based service that provides a secure environment for customers to manage their network devices by providing secure access to remote networks regardless of how they are connected or how a user interacts with the system.
Lighthouse ® Management Software – Lighthouse is a recurring revenue cloud-based service that provides a secure environment for customers to manage their network devices by providing secure access to remote networks regardless of how 5 Table of Contents they are connected or how a user interacts with the system.
While we dedicate significant resources to research and development, many of our competitors are focused on a smaller set of products than us and are likely able to dedicate more resources than us toward the portions of the market in which we compete with them.
While we dedicate significant resources to research and development, many of our 3 Table of Contents competitors are focused on a smaller set of products than us and are likely able to dedicate more resources than us toward the portions of the market in which we compete with them.
Services Digi Remote Manager – Digi Remote Manager is a recurring revenue cloud-based service that provides a secure environment for customers to manage their connected device for the full deployment lifecycle. This service enables customers to activate, monitor, diagnose, reset, update and/or upgrade their mission-critical devices from a single point of command.
Services Digi Remote Manager – Digi Remote Manager is a recurring revenue on-premise service that provides a secure environment for customers to manage their connected device for the full deployment lifecycle. This service enables customers to activate, monitor, diagnose, reset, update and/or upgrade their mission-critical devices from a single point of command.
Professional services include solution planning and implementation services to customers who purchase our products such as site planning, implementation management, application development and customer training. Data plan 5 Table of Contents subscriptions are offered to customers wishing to enable cellular connectivity on our products. Enhanced technical support provides priority, in-depth technical support consultations with our experienced support team.
Professional services include solution planning and implementation services to customers who purchase our products such as site planning, implementation management, application development and customer training. Data plan subscriptions are offered to customers wishing to enable cellular connectivity on our products. Enhanced technical support provides priority, in-depth technical support consultations with our experienced support team.
We believe our intellectual property has significant value and is an important factor in the marketing of our company and products. HUMAN CAPITAL RESOURCES Digi’s workforce consists of 805 employees globally as of September 30, 2024. We believe we have a good working relationship with our employees.
We believe our intellectual property has significant value and is an important factor in the marketing of our company and products. HUMAN CAPITAL RESOURCES Digi’s workforce consists of 913 employees globally as of September 30, 2025. We believe we have a good working relationship with our employees.
Among others, IoT use cases include providing and maintaining secure connectivity and monitoring of operating assets, condition-based monitoring of perishable goods, enabling remote work by employees and automating workflows and operations. Our IoT Products & Services segment represented the majority of our sales in fiscal 2024.
Among others, IoT use cases include providing and maintaining secure connectivity and monitoring of operating assets in a wide-range of different businesses, condition-based monitoring of perishable goods, enabling remote work by employees and automating workflows and operations. Our IoT Products & Services segment represented the majority of our sales in fiscal 2025.
We believe that the Digi and Rabbit brands have established strong identities with our targeted customer base and our customers associate the Digi brand with "reliability" and the Rabbit brand with "ease of integration." We believe that our customers associate Digi XBee with 3 Table of Contents "ease of use." Many of our customers choose us because they are building a very complex system solution and they want the highest level in product reliability and ease of integration and use.
We believe that the Digi brand has established a strong identity with our targeted customer base and our customers associate the Digi brand with "reliability." We believe that our customers associate Digi XBee with "ease of use." Many of our customers choose us because they are building a very complex system solution and they want the highest level in product reliability and ease of integration and use.
Given the current uncertainty in macro-economic conditions, including, but not limited to, potential recessionary conditions, global geopolitical conditions, supply 1 Table of Contents chain disruptions globally and the uncertain status of large project-based customer deployment opportunities, our results during fiscal 2025 may be inconsistent quarter to quarter or with historical results.
Given the current uncertainty in macro-economic conditions, including, but not limited to, potential recessionary conditions, the implementation of tariffs by governments around the world, changing global geopolitical conditions, supply chain disruptions globally and the uncertain status of large project-based customer deployment opportunities, our results during fiscal 2026 may be inconsistent quarter to quarter or with historical results.
Our benefits package provides a balance of protection along with the flexibility to meet the individual health and wellness needs of our employees. 4 Table of Contents PRINCIPAL PRODUCTS AND SERVICES Our primary products and services for each reportable segment are: IoT Products & Services Segment Hardware Products Cellular Products – We provide a range of products that use cellular technology such as Long Term Evolution (“LTE”), LTE Advance Pro and 5 th Generation wireless protocols to communicate with networks.
PRINCIPAL PRODUCTS AND SERVICES Our primary products and services for each reportable segment are: IoT Products & Services Segment Hardware Products Cellular Products – We provide a range of products that use cellular technology such as Long Term Evolution (“LTE”), LTE Advance Pro and 5 th Generation wireless protocols to communicate with networks.
While we expect an ongoing long-term trend of marketplace growth, each of our business segments is susceptible to downturns either because of general macro-economic conditions, the continued development of technology that can make products less competitive or even obsolete and uncertainty or changes in regulatory environments.
The offerings in this segment are primarily offered on a subscription model and provide us with a stable base of higher-margin recurring revenues. 1 Table of Contents While we expect an ongoing long-term trend of marketplace growth, each of our business segments is susceptible to downturns either because of general macro-economic conditions, the continued development of technology that can make products less competitive or even obsolete and uncertainty or changes in regulatory environments.
More recently we have placed greater emphasis on selling subscription-based solutions across this product portfolio. For example, during fiscal 2024 we launched the Digi LifeCycle Assurance subscription solution, and we recently announced the launch of the Digi 360 subscription solution. Our IoT Solutions segment is comprised primarily of our SmartSense by Digi and Ventus offerings.
More recently we have placed greater emphasis on selling subscription-based solutions across this product portfolio. Our IoT Solutions segment is comprised primarily of our SmartSense by Digi and Jolt, as well as Ventus offerings.
We continuously evaluate, modify, and enhance our internal processes and technologies to increase employee engagement, productivity, and efficiency. We are committed to promoting and cultivating an inclusive, diverse culture that welcomes and celebrates everyone without bias. In addition, we actively engage within our communities to foster social equity.
We continuously evaluate, modify, and enhance our internal processes and technologies to increase employee engagement, productivity, and efficiency. We are committed to promoting and cultivating an inclusive culture where everyone is encouraged to grow, lead and thrive. In addition, we actively engage within our communities to help build connection and reinforce our commitment to meaningful impact.
Health and Wellness We are committed to providing a competitive and comprehensive benefits package to our employees.
Health and Wellness We are committed to providing a competitive and comprehensive benefits package to our employees. Our benefits package provides a balance of protection along with the flexibility to meet the individual health and wellness needs of our employees.
IoT Solutions Segment Our IoT Solutions segment is managed with a focus on recurring typically high margin subscription-based revenues. We believe capturing enterprise-level deals should be a driver of growth, leveraging our direct sales model to achieve this. Our offerings provide comprehensive hardware-enabled software solutions. The segment represents nearly 25% of total revenues.
We believe capturing enterprise-level deals should be a driver of growth, leveraging our direct sales model to achieve this. Our offerings provide comprehensive hardware-enabled software solutions. The segment represents approximately 25% of total revenues. As of September 30, 2025 the ARR of this segment was $120 million. We have long-term high organic growth expectations.
These bundled offerings are sold on a subscription basis and allow customers to monitor and manage the performance of our hardware remotely. As of September 30, 2024 the (Annualized Recurring Revenue ("ARR") of this segment was $24 million. Please see "Key Business Metrics" section in Part II, Item 7 for additional details on how ARR is measured.
As of September 30, 2025 the (Annualized Recurring Revenue ("ARR") of this segment was $32 million. Please see "Key Business Metrics" section in Part II, Item 7 for additional details on how ARR is measured. IoT Solutions Segment Our IoT Solutions segment is managed with a focus on recurring typically high margin subscription-based revenues.
The Ventus portfolio includes cellular wireless and fixed line WAN solutions for an array of connectivity applications in banking, healthcare, retail, gaming, hospitality and other sectors. For more in-depth descriptions of our products and services, please refer to the heading "Principal Products and Services" at the end of Part I, Item 1 of this Form 10-K.
For more in-depth descriptions of our products and services, please refer to the heading "Principal Products and Services" at the end of Part I, Item 1 of this Form 10-K. Our corporate website address is www.digi.com.
In addition, acquisitions historically have helped significantly advance our offerings and driven growth and profitability, in both business segments. While our last acquisition was completed in fiscal 2022, we do expect to continue to be active in making further acquisitions.
In addition, acquisitions historically have helped significantly advance our offerings and drive growth and profitability, in both business segments.
Sales Channels A significant portion of our IoT Products & Services segment sales are made through a global network of distributors, systems integrators and value-added resellers ("VARs"). These third parties accounted for 56.7%, 59.9% and 50.0% of our total consolidated revenue in fiscal 2024, 2023 and 2022, respectively. Our IoT Solutions segment does not sell through these channels.
These third parties accounted for 60.2%, 56.7% and 59.9% of our total consolidated revenue in fiscal 2025, 2024 and 2023, respectively. Our IoT Solutions segment typically does not sell through these channels. The remaining 39.8%, 43.3% and 40.1% of our total consolidated revenue in fiscal 2025, 2024 and 2023, respectively is sold through our dedicated sales organization.
We also continue to drive efforts to pair our hardware offerings with our Digi Remote Manager ® device management platform as well as other support services, as shown by the launch of the Digi LifeCycle Assurance subscription solution and the recently announced launch of the Digi 360 subscription solution.
We also continue to drive efforts to pair our hardware offerings with our remote manager device management platforms as well as other support services. These bundled offerings are sold on a subscription basis and allow customers to monitor and manage the performance of hardware they purchase from us remotely.
These solutions focus on the following vertical markets: food service, healthcare (primarily pharmacies and hospitals) and supply chain. Ventus ® is a leader in the provision of MNaaS solutions that simplify the complexity of enterprise-wide area network (“WAN”) connectivity for customers.
Ventus ® is a leader in the provision of MNaaS solutions that simplify the complexity of enterprise-wide area network (“WAN”) connectivity for customers. The Ventus portfolio includes cellular wireless and fixed line WAN solutions for an array of connectivity applications in banking, healthcare, retail, gaming, hospitality and other sectors.
We also maintain relationships with many other distributors both domestically and internationally. Strategic Sales Relationships We maintain alliances with other industry leaders to develop and market technology solutions. These include many major communications hardware and software vendors, operating system suppliers, computer hardware manufacturers, enterprise application providers and cellular carriers.
Distributors Our larger distributors, by sales volume, include Arrow Electronics, Avnet, Bressner, Digi-Key, Express Systems, Ingram Micro, MiTac, Mouser Electronics, Synnex and World Wide Technology. We also maintain relationships with many other distributors both domestically and internationally. 2 Table of Contents Strategic Sales Relationships We maintain alliances with other industry leaders to develop and market technology solutions.
Removed
The offerings in this segment are primarily offered on a subscription model and provide us with a stable base of higher-margin recurring revenues.
Added
During the fourth quarter of fiscal 2025 we completed the acquisition of Jolt Software, Inc. to enhance the offerings of SmartSense by Digi. SmartSense by Digi and Jolt ® collectively focus on the following vertical markets: food service, healthcare (primarily pharmacies and hospitals) and supply chain.
Removed
As of September 30, 2024 the ARR of this segment was $92 million. We have long-term high organic growth expectations. Acquisitions and Dispositions Acquisitions Our acquisition of Ventus in fiscal 2022 described above is the only acquisition we have completed during our fiscal years 2022 through 2024.
Added
In the fourth quarter of fiscal 2025 we completed the acquisition of Jolt Software Inc., a Utah based provider of task management, workforce management and labeling solutions used by food retailers, restaurants and other businesses that might also use our SmartSense by Digi condition monitoring solutions.
Removed
The remaining 43.3%, 40.1% and 50.0% of our total consolidated revenue in fiscal 2024, 2023 and 2022, respectively is sold through our dedicated sales organization. Distributors Our larger distributors, by sales volume, include Arrow Electronics, Avnet, Bressner Technology GmbH, Digi-Key, Express Systems & Peripherals, Ingram Micro, Mouser Electronics, Solsta, Symmetry Electronics, Synnex, Tokyo Electron Device and Venco Electrónica S.A.
Added
Acquisitions and Dispositions Acquisitions Our acquisition of Jolt in the fourth quarter of fiscal 2025 described above is the only acquisition we have completed during our fiscal years 2023 through 2025. Sales Channels A significant portion of our IoT Products & Services segment sales are made through a global network of distributors, systems integrators and value-added resellers ("VARs").
Removed
Our products utilize many of the world’s leading telecommunications companies and Internet service providers, including, among others, AT&T, T-Mobile and Verizon. No single customer comprised more than 10% of our consolidated revenue for any of the fiscal years 2024, 2023 or 2022.
Added
These include many major communications hardware and software vendors, operating system suppliers, computer hardware manufacturers, enterprise application providers and cellular carriers. Among others, relationships include: AT&T, AWS, Google, KORE, Novotech, NXP, Orange, Qualcomm, Silicon Laboratories, T-Mobile, Telus, Verizon, Vodafone, Westbase and various other cellular carriers worldwide.
Added
We had one distributor customer of Digi's IoT Products & Services segment that represented 13% of consolidated revenue for the twelve months ended September 30, 2025. No customers represented over 10% of consolidated revenue for the twelve months ended September 30, 2024 or 2023.
Added
Jolt – Jolt provides cloud-based task management, workforce management and labeling solutions that help businesses achieve team accountability, digital food safety compliance, and improved employee performance. Jolt is used by thousands of brands across retail, hospitality, and food service.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

65 edited+16 added−13 removed130 unchanged
Biggest changeOur current and potential competitors have or may develop one or more of the following significant advantages over us in the product areas where they compete with us: • tighter focus on an individual product or product category; • greater financial, technical and marketing resources; • barriers to transition to our products; • higher brand recognition across larger geographic regions; • more comprehensive product features and functionality, including, but not limited to, with respect to product security; • longer-standing cooperative relationships with OEM and end-user customers; • superior customer service capacity and quality; • longer operating history; and • larger customer base. 11 Table of Contents We cannot provide assurance that we will be able to compete successfully with our current and potential competitors.
Biggest changeFurther, there are numerous companies competing with us in various segments of the market for our products, and their products may have advantages over our products in areas such as conformity to existing and emerging industry standards or new regulations, interoperability with other products, management and security capabilities, performance, price, ease of use, scalability, reliability, flexibility, product features and technical support. 11 Table of Contents Our current and potential competitors have or may develop one or more of the following significant advantages over us in the product areas where they compete with us: • tighter focus on an individual product or product category; • greater financial, technical and marketing resources; • barriers to transition to our products; • higher brand recognition across larger geographic regions; • more comprehensive product features and functionality, including, but not limited to, with respect to product security; • longer-standing cooperative relationships with OEM and end-user customers; • superior customer service capacity and quality; • longer operating history; and • larger customer base.
As regulations take effect or evolve it is possible we may encounter issues being fully compliant with these legal standards which could result in material adverse effects on our business. Issues related to the of artificial intelligence may result in regulatory or legal action, damage our reputation, or harm our business.
As regulations take effect or evolve it is possible we may encounter issues being fully compliant with these legal standards which could result in material adverse effects on our business. Issues related to the use of artificial intelligence may result in regulatory or legal action, damage our reputation, or harm our business.
Government and Political Risks Our inability to obtain the appropriate telecommunications carrier certifications or approvals from governmental regulatory bodies as well as reconfiguration of communications protocols such as radio bands could impede our ability to grow revenue in our wireless products.
Government Regulation and Political Risks Our inability to obtain the appropriate telecommunications carrier certifications or approvals from governmental regulatory bodies as well as reconfiguration of communications protocols such as radio bands could impede our ability to grow revenue in our wireless products.
Our ability to grow our business is dependent in part on strategic relationships we develop and maintain with third parties as well as our ability to integrate and assure use of our products and services in coordination with the products and services of certain strategic partners in a commercially acceptable manner.
Strategic Risks Our ability to grow our business is dependent in part on strategic relationships we develop and maintain with third parties as well as our ability to integrate and assure use of our products and services in coordination with the products and services of certain strategic partners in a commercially acceptable manner.
Our operation of any acquired business also involves numerous risks, including but not limited to: • problems combining the acquired operations, technologies, or products; • unanticipated costs; • diversion of management’s attention from our core business; • difficulties integrating businesses in different countries and cultures; • effectively implementing internal control over financial reporting; • adverse effects on existing business relationships with suppliers and customers; • risks associated with entering markets in which we have no or limited prior experience; and • potential loss of key employees, particularly those of the acquired business We cannot assure that we will be able to integrate successfully any businesses, products, technologies, or personnel that we have acquired or that we might acquire in the future.
Our operation of any acquired business also involves numerous risks, including but not limited to: • problems combining the acquired operations, technologies, or products; • unanticipated costs; • diversion of management’s attention from our core business; • difficulties integrating businesses in different countries and cultures; • effectively implementing internal control over financial reporting; • adverse effects on existing business relationships with suppliers and customers; • risks associated with entering markets in which we have no or limited prior experience; and 7 Table of Contents • potential loss of key employees, particularly those of the acquired business We cannot assure that we will be able to integrate successfully any businesses, products, technologies, or personnel that we have acquired or that we might acquire in the future.
There can be no assurance that we will recover our investments in SmartSense by Digi or Ventus or that we will realize ongoing and consistent profits from these businesses.
There can be no assurance that we will recover our investments in SmartSense by Digi / Jolt or Ventus or that we will realize ongoing and consistent profits from these businesses.
In other areas of our business, we offer hosted services and cloud-based platform, software applications, and supporting products and services. We also employ significant human and financial resources to develop and deploy these offerings. As we work to grow and scale these offerings, these investments have impacted previously and may impact adversely in the future our gross margins and profitability.
In other areas of our business, we offer hosted services and cloud-based platform, software applications, and supporting products and services. We also employ significant human and financial resources to develop and deploy these offerings. As we work to grow and scale these offerings, these investments have impacted previously and may impact adversely in the future our operating margins and profitability.
As a result, our future revenue opportunities with these customers may be limited, and we may face pricing pressures, which in turn could adversely impact our gross margin and our profitability. The loss of, reduction in, or pricing discounts associated with orders from key customers may significantly reduce our revenue and harm our business.
As a result, our future revenue opportunities with these customers may be limited, and we may face pricing pressures, which in turn could adversely impact our operating margin and our profitability. The loss of, reduction in, or pricing discounts associated with orders from key customers may significantly reduce our revenue and harm our business.
We have indicated that we would be willing to realize lower levels of gross margins from customers in return for long-term, binding purchase commitments. If this strategy were successful, it could apply downward pressure on our gross margins.
We have indicated that we would be willing to realize lower levels of operating margins from customers in return for long-term, binding purchase commitments. If this strategy were successful, it could apply downward pressure on our operating margins.
In addition, ocean freight delays may occur as a result of labor problems, weather delays, expediting orders for third parties, customs issues, geopolitical tensions, or other events beyond our control. Any extended delay in receipt of the component parts could eliminate anticipated cost savings and have a material adverse effect on our customer relationships and profitability.
In addition, ocean freight delays may 10 Table of Contents occur as a result of labor problems, weather delays, expediting orders for third parties, customs issues, geopolitical tensions, or other events beyond our control. Any extended delay in receipt of the component parts could eliminate anticipated cost savings and have a material adverse effect on our customer relationships and profitability.
Strategic Risks We intend to continue to devote significant resources to our research and development, which, if not successful, could cause a decline in our revenue and harm our business. We intend to continue to devote significant resources to research and development in the coming years to enhance our existing product offerings and develop additional product offerings.
We intend to continue to devote significant resources to our research and development, which, if not successful, could cause a decline in our revenue and harm our business. We intend to continue to devote significant resources to research and development in the coming years to enhance our existing product offerings and develop additional product offerings.
Part of our strategy is to sell software applications and IoT solutions such as SmartSense by Digi, Ventus offerings and hardware bundled with services on a subscription basis. These sales may provide recurring revenues at relatively high gross margins, but these types of offerings are still in the earlier stages of adoption by customers.
Part of our strategy is to sell software applications and IoT solutions such as SmartSense by Digi / Jolt, Ventus offerings and hardware bundled with services on a subscription basis. These sales may provide recurring revenues at relatively high operating margins, but these types of offerings are still in the earlier stages of adoption by customers.
Certain products rely on the current configuration of radio bands by FCC or other governmental regulatory bodies could require the redsign of existing and future products, which could have an adverse impact on our business.
Certain products rely on the current configuration of radio bands by FCC or other governmental regulatory bodies could require the redesign of existing and future products, which could have an adverse impact on our business.
For instance, under Delaware law, we are prohibited from engaging in certain business combinations with interested stockholders for a period of three years after the date of the transaction in which the person became an interested stockholder unless certain requirements are met, and majority stockholder approval is required for certain business combination transactions with interested parties.
For instance, under Delaware law, we are prohibited from engaging in certain business 17 Table of Contents combinations with interested stockholders for a period of three years after the date of the transaction in which the person became an interested stockholder unless certain requirements are met, and majority stockholder approval is required for certain business combination transactions with interested parties.
In addition, in our SmartSense by Digi and Ventus businesses certain customers have outsized deployments relative to other customers. It is possible we will see revenue fluctuations in these businesses based upon the scale of new deployments in different financial periods.
In addition, in our SmartSense by Digi / Jolt and Ventus product lines certain customers have outsized deployments relative to other customers. It is possible we will see revenue fluctuations in these businesses based upon the scale of new deployments in different financial periods.
In each case, there is a potential risk of loss in the event of a malfunction or failure in our offerings. • SmartSense by Digi has a limited history with us in a marketplace that is relatively early in its development and has numerous competitors.
In each case, there is a potential risk of loss in the event of a malfunction or failure in our offerings. • The SmartSense by Digi / Jolt product line has a limited history with us in a marketplace that is relatively early in its development and has numerous competitors.
If such growth does not materialize or our forecasts are not met (including forecasts established at the time of acquisition), our profits could be significantly reduced, and our market value may decline, which 17 Table of Contents could result in an impairment of our goodwill.
If such growth does not materialize or our forecasts are not met (including forecasts established at the time of acquisition), our profits could be significantly reduced, and our market value may decline, which could result in an impairment of our goodwill.
Finally, the introduction of new regulations by governments may also impact the availability, delivery or certain components or our ability 10 Table of Contents to use certain components because of, among other potential reasons, the materials those components may contain or the location of the supplier of the component or certain materials contained in the component.
Finally, the introduction of new regulations by governments may also impact the availability, delivery or certain components or our ability to use certain components because of, among other potential reasons, the materials those components may contain or the location of the supplier of the component or certain materials contained in the component.
As we continue to direct a substantial portion of our sales and development efforts toward broader based solutions, such as SmartSense by Digi, the Digi 9 Table of Contents Remote Manager and Ventus offerings, we expect to store, convey and potentially process significant amounts of data produced by devices.
As we continue to direct a substantial portion of our sales and development efforts toward broader based solutions, such as SmartSense by Digi / Jolt, the Digi Remote Manager and Ventus offerings, we expect to store, convey and potentially process significant amounts of data produced by devices.
If we fail to comply with these regulations, we may not be able to sell our 16 Table of Contents products and services in jurisdictions where these regulations apply or subject us to fines or penalties, which could have a material adverse effect on our revenue and profitability.
If we fail to comply with these regulations, we may not be able to sell our products and services in jurisdictions where these regulations apply or subject us to fines or penalties, which could have a material adverse effect on our revenue and profitability.
Although Accelerated has many customers, its business historically has been highly dependent on its relationship with a single telecommunications carrier customer. We acquired Opengear in fiscal 2019. Although Opengear has many customers, its business historically has been significantly concentrated on its relationships with a few large customers. We acquired Ventus in fiscal 2022.
Although Accelerated has many customers, its business historically has been highly dependent on its relationship with a single telecommunications carrier customer. We acquired Opengear in fiscal 2019. Although Opengear has many customers, its business historically has been significantly concentrated on its relationships with a few large customers and focused on data centers. We acquired Ventus in fiscal 2022.
We are also required to comply with several financial covenants under the Credit Agreement. Our ability to comply with such financial covenants may be affected by events beyond our control, which could result in a default under the Credit Agreement; such default may have a material adverse effect on our business, financial condition, operating results or cash flows.
Our ability to comply with such financial covenants may be affected by events beyond our control, which could result in a default under the Credit Agreement; such default may have a material adverse effect on our business, financial condition, operating results or cash flows.
Delays or lost revenue could be caused by other factors beyond our control, including late deliveries by vendors of components, or force majeure events. As an example of force majeure, a fire in November 2014 disrupted the operations at one of our contract manufacturers in Thailand.
Delays or lost revenue could be caused by other factors beyond our control, including late deliveries by vendors of components, or force majeure events. As an example of force majeure, a fire many years ago disrupted the operations at one of our contract manufacturers in Thailand.
Failure to obtain these approvals, or delays in receiving the approvals, could impact our ability to enter our targeted markets or to compete effectively or at all in these markets and could have an adverse impact on our business and prospects.
Failure to obtain these approvals, or 16 Table of Contents delays in receiving the approvals, could impact our ability to enter our targeted markets or to compete effectively or at all in these markets and could have an adverse impact on our business and prospects.
Whether we are successful in this business model depends on a number of factors, including: • our ability to establish the infrastructure to deploy and evolve our solutions effectively and continuously; • the features and functionality of our offerings relative to competing offerings as well as our ability to market effectively; • our ability to engage in successful strategic relationships with third parties such as telecommunications carriers, component makers and systems integrators; • our ability to meet service assurance commitments required by certain contracts; • competing effectively for market share; and • deploying complete end-to-end solutions that meet the needs of the marketplace generally as well as the particular requirements of our customers more effectively and efficiently than competitive solutions.
Whether we are successful in this business model depends on a number of factors, including: • our ability to establish the infrastructure to deploy and evolve our solutions effectively and continuously; • the features and functionality of our offerings relative to competing offerings as well as our ability to market effectively; • our ability to engage in successful strategic relationships with third parties such as telecommunications carriers, component makers and systems integrators; • our ability to meet service assurance commitments required by certain contracts; • competing effectively for market share; and • deploying complete end-to-end solutions that meet the needs of the marketplace generally as well as the particular requirements of our customers more effectively and efficiently than competitive solutions. 8 Table of Contents Our ability to sustain and grow our business depends in large part on the success of our third-party distributors and resellers.
Unanticipated changes in our tax rates could affect our future results. 14 Table of Contents Our future effective tax rates could be favorably or unfavorably affected by unanticipated changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws or our interpretation of such laws.
Our future effective tax rates could be favorably or unfavorably affected by unanticipated changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws or our interpretation of such laws.
Both Ventus and SmartSense by Digi produce significant ARR. Any disruption or difficulties in any of the industries these businesses serve could have an adverse impact on our business, results of operations (including, but not limited to, ARR), financial condition and prospects. In addition, some larger customers may demand discounts and rebates.
Any disruption or difficulties in any of the industries these businesses serve could have an adverse impact on our business, results of operations (including, but not limited to, ARR), financial condition and prospects. In addition, some larger customers may demand discounts and rebates.
For fiscal 2024, 2023, and 2022, respectively, our research and development expenses were 14.2%, 13.2% and 14.2% of our revenue.
For fiscal 2025, 2024, and 2023, respectively, our research and development expenses were 14.8%, 14.2% and 13.2% of our revenue.
There can be no assurance that the introduction or announcement of new product offerings by us or one or more of our competitors will not cause customers to defer their purchase of our existing products, which could cause our revenue to decline.
There can be no assurance that the introduction or announcement of new technologies into markets where we sell products or the introduction or announcement of product offerings by us or one or 12 Table of Contents more of our competitors will not cause customers to defer their purchase of our existing products, which could cause our revenue to decline.
This could cause significant diversion of management’s attention and out-of-pocket expenses for us. We could also be exposed to litigation as a result of any consummated or unconsummated acquisition. Certain parts of our business are subject to customer concentrations.
This could cause significant diversion of management’s attention and out-of-pocket expenses for us. We could also be exposed to litigation as a result of any consummated or unconsummated acquisition.
As a result, our future prospects depend in part on our ability to acquire or develop and successfully market additional products that address growth markets.
As a result, our future prospects depend in part on our ability to acquire or develop and successfully market additional products that address growth markets. Unanticipated changes in our tax rates could affect our future results.
We cannot predict either the timing or duration of an economic downturn in the economy, should one occur. Any downturn could have a material adverse impact on our business, results of operations, financial condition and prospects. Our gross margins may be subject to decline.
We cannot predict either the timing or duration of an economic downturn in the economy, should one occur. Any downturn could have a material adverse impact on our business, results of operations, financial condition and prospects. Our revenue may be subject to fluctuations based on the level of significant large project-based purchases.
There can be no guarantee in any particular instance that we will be successful in making our products interact with those of other parties in a commercially acceptable manner and, even if we do, we cannot guarantee that the resulting products and services will be marketed effectively or sold via the relationship.
There can be no guarantee in any particular instance that we will be successful in making our products interact with those of other parties in a commercially acceptable manner and, even if we do, we cannot guarantee that the resulting products and services will be marketed effectively or sold via the relationship. 14 Table of Contents The loss of key personnel could prevent us from executing our business strategy.
Our ability to sustain and grow our business depends in large part on the success of our third-party distributors and resellers. A substantial portion of our revenue is generated through sales by third party distributors and resellers. Further, for several years we have been taking steps to expand our relationship with certain distributors who have global reach.
A substantial portion of our revenue is generated through sales by third party distributors and resellers. Further, for several years we have been taking steps to expand our relationship with certain distributors who have global reach.
Certain of our components and other materials used in producing our products are from regions susceptible to natural disasters or other events beyond our control, such as the Covid-19 pandemic that was highly disruptive to businesses during the last few years or the ongoing wars in Ukraine and the Middle East.
Natural disasters, wars and other events beyond our control could impact our supply chain and customers negatively resulting in an adverse impact to our revenue and profitability. 15 Table of Contents Certain of our components and other materials used in producing our products are from regions susceptible to natural disasters or other events beyond our control, such as the Covid-19 pandemic that was highly disruptive to businesses during the last few years or the wars in Ukraine and the Middle East.
Although Ventus has many customers, its business historically has been significantly concentrated on its relationships with fewer than twenty customers and it also serves a significant number of customers in the financial and gaming terminal industries. Likewise, our SmartSense by Digi business services a significant number of large customers in the retail pharmaceutical, medical facility and retail food industries.
Although Ventus has many customers, its business historically has been significantly concentrated on its relationships with fewer than twenty customers and it also serves a significant number of customers in the financial and gaming terminal industries.
In addition, the future introductions or announcements of products by us or one of our competitors embodying new technologies or changes in industry standards or regulations or customer requirements could render our then-existing products obsolete or unmarketable.
Further, demand for products can fluctuate because of changes in technology generally which could also impact our sales of products. In addition, the future introductions or announcements of products by us or one of our competitors embodying new technologies or changes in industry standards or regulations or customer requirements could render our then-existing products obsolete or unmarketable.
Even if we enhance existing products and develop new products, applications and services that are accepted by our target markets, the net revenue from these products, applications and services may not be sufficient to justify our investment in research and development. 12 Table of Contents Many of our products, applications and services have been developed through a combination of internally developed technologies and acquired technologies.
Even if we enhance existing products and develop new products, applications and services that are accepted by our target markets, the net revenue from these products, applications and services may not be sufficient to justify our investment in research and development.
No single customer has represented more than 10% of our revenue in any of the last three fiscal years. However, many of our customers make significant one-time hardware purchases for large projects that are not repeated. As a result, our revenue may be subject to significant fluctuations based on whether we are able to close significant project-based sales opportunities.
Many of our customers make significant one-time hardware purchases for large projects that are not repeated. As a result, our revenue may be subject to significant fluctuations based on whether we are able to close significant project-based sales opportunities.
Also, there can be no assurance that diverting our management’s attention to these businesses will not have a material adverse effect on our other existing businesses, any of which may have a material adverse effect on our results of operations, financial condition and prospects.
Also, there can be no assurance that diverting our management’s attention to these businesses will not have a material adverse effect on our other existing businesses, any of which may have a material adverse effect on our results of operations, financial condition and prospects. 9 Table of Contents Technology and Cybersecurity Risks We are subject to various cybersecurity risks, including risk to our products, solutions, and internal systems.
We are dependent on third parties to manufacture our products which could have adverse impacts on our business if such manufacturers encounter operating restraints or if we do not properly forecast customer demand. We are reliant on third parties to manufacture our products in countries such as Mexico, Thailand, Taiwan and China.
Failure to attract and retain key personnel could result in our failure to execute our business strategy. We are dependent on third parties to manufacture our products which could have adverse impacts on our business if such manufacturers encounter operating restraints or if we do not properly forecast customer demand.
The communications technology industry is characterized by frequent litigation regarding patent and other intellectual property rights. From time to time, we receive notification of a third-party claim that our products allegedly infringe intellectual property rights owned by others.
From time to time, we receive notification of a third-party claim that our products allegedly infringe intellectual property rights owned by others.
Announcements of currently planned or other new or enhanced products may cause customers to defer or stop purchasing our products until these products become available.
From time to time, we or our competitors may announce new or enhanced products that may replace or shorten the life cycles of our existing products. Announcements of currently planned or other new or enhanced products may cause customers to defer or stop purchasing our products until these products become available.
Because of the lengthy sales cycle and the large size of certain customer orders, if orders forecasted for a specific customer are not realized or delayed, our operating results could be materially adversely affected. 6 Table of Contents Acquisitions could disrupt our business and seriously harm our financial condition. We will continue to consider acquisitions of businesses, products or technologies.
Because of the lengthy sales cycle and the large size of certain customer orders, if orders forecasted for a specific customer are not realized or delayed, our operating results could be materially adversely affected. Certain parts of our business are subject to customer concentrations.
Any extended interruption in the supply of any of the key components or the availability of manufacturing services that currently are obtained from limited sources could disrupt our operations and have a material adverse effect on our customer relationships and profitability.
Any extended interruption in the supply of any of the key components or the availability of manufacturing services that currently are obtained from limited sources could disrupt our operations and have a material adverse effect on our customer relationships and profitability. 6 Table of Contents The long and variable sales cycle for certain of our products and services makes it more difficult for us to predict our operating results and manage our business.
In addition, our products operate with and are dependent on products and components across a broad ecosystem. If there is a security vulnerability in one of these components, and if there is a security exploit targeting it, we could face increased costs, reduced revenue, liability claims or damage to our reputation or competitive position.
If there is a security vulnerability in one of these components, and if there is a security exploit targeting it, we could face increased costs, reduced revenue, liability claims or damage to our reputation or competitive position. We also rely on cloud-based technologies for our solutions, as well as our internal systems.
Competition for such personnel is intense, and in the current environment of large numbers of workers leaving their current employment for new opportunities, there can be no assurance that we will be successful in 13 Table of Contents retaining qualified personnel. Failure to attract and retain key personnel could result in our failure to execute our business strategy.
Our business and prospects depend to a significant degree upon the continuing contributions of our executive officers and key technical and other personnel. Competition for such personnel is intense, and in the current environment of large numbers of workers leaving their current employment for new opportunities, there can be no assurance that we will be successful in retaining qualified personnel.
During fiscal 2024, the closing price of our common stock on the Nasdaq Global Select Market ranged from $22.07 to $32.82 per share. Our closing sale price on November 8, 2024 was $25.29 per share.
During fiscal 2025, the closing price of our common stock on the Nasdaq Global Select Market ranged from $23.13 to $38.11 per share. Our closing sale price on November 14, 2025 was $38.38 per share.
If we do not properly forecast customer demands for products any lengthening in lead times or disruptions in service could result in lost revenues and adversely impact our business, results of operation, financial condition and prospects. The loss of key personnel could prevent us from executing our business strategy.
If we do not properly forecast customer demands for products any lengthening in lead times or disruptions in service could result in lost revenues and adversely impact our business, results of operation, financial condition and prospects. Our failure to anticipate or manage product transitions effectively could have a material adverse effect on our revenue and profitability.
Our ability to continue to develop products, applications and services could be partially dependent on finding and acquiring new technologies in the marketplace. Even if we identify new technologies that we believe would be complementary to our internally developed technologies, we may not be successful in obtaining those technologies or integrating them effectively with our existing technologies.
Even if we identify new technologies that we believe would be complementary to our internally developed technologies, we may not be successful in obtaining those technologies or integrating them effectively with our existing technologies. Risks Relating to Our Industry We are dependent on wireless communication networks owned and controlled by others.
Sanctions against and actions of the Russian government resulting from the war in Ukraine may be adverse to suppliers who we rely upon. The conflict in the Middle East may cause shipping disruptions and increased transport costs that could have a material adverse effect on our ability to obtain components from our foreign suppliers and our financial results.
Tensions in the Middle East, in light of ongoing conflicts in the region since the October 7, 2023 attack on Israel may cause shipping disruptions and increased transport costs that could have a material adverse effect on our ability to obtain components from our foreign suppliers and our financial results.
Such competitors may be able to more quickly develop or adapt to new or emerging technologies and changes in customer requirements, changes in regulatory requirements or devote greater resources to the development, promotion and sale of their products. Additionally, it is probable that new competitors or new alliances among existing competitors could emerge and rapidly acquire significant market share.
We cannot provide assurance that we will be able to compete successfully with our current and potential competitors. Such competitors may be able to more quickly develop or adapt to new or emerging technologies and changes in customer requirements, changes in regulatory requirements or devote greater resources to the development, promotion and sale of their products.
Our gross margins may be subject to declines which could decrease our overall profitability and impact our financial performance adversely. Some of the hardware products we sell are approaching the end of their product life cycles. These mature hardware products have sold historically at higher gross margins than our other product and service offerings.
Some of the hardware products we sell are approaching the end of their product life cycles. These mature hardware products have sold historically at higher operating margins than our other product and service offerings. We expect this general trend of declining sales for many of our mature products to continue and the pace of the decline may accelerate.
SmartSense by Digi is operated in an emerging market where technology-based solutions to monitor the condition of perishable goods as well as the completion of employee tasks have not been used historically. Similarly, our Ventus business is operating in an evolving marketplace where the breadth of companies with collections of assets that require connectivity and general monitoring is evolving.
The businesses of our IoT Solutions segment are subject to the risks faced by businesses operating in emerging markets. The combined SmartSense by Digi / Jolt product line is operated in an emerging market where technology-based solutions such as the monitoring of the condition of perishable goods as well as the completion of employee tasks have not been used historically.
Technology and Cybersecurity Risks We are subject to various cybersecurity risks, including risk to our products, solutions, and internal systems. These risks may increase our costs and could damage our brand and reputation. Our products and software may contain unknown security vulnerabilities that could be exploited by bad actors.
These risks may increase our costs and could damage our brand and reputation. Our products and software may contain unknown security vulnerabilities that could be exploited by bad actors. In addition, our products operate with and are dependent on products and components across a broad ecosystem.
The operation of each of these businesses can therefore be subject to significant additional risks that are not necessarily related to our more established products and services. Additional risks that relate to IoT Solutions, include, but are not limited to: • SmartSense by Digi offerings are deployed in part to help assure perishable goods are safely preserved.
Additional risks that relate to IoT Solutions, include, but are not limited to: • SmartSense by Digi / Jolt offerings are deployed in part to help assure perishable goods are safely preserved and that necessary operating tasks are completed timely.
Risks Relating to Our Industry We are dependent on wireless communication networks owned and controlled by others. Our revenue could decline if we are unable to deliver continued access to digital cellular wireless carriers that we depend on to provide sufficient network capacity, reliability and security to our customers.
Our revenue could decline if we are unable to deliver continued access to digital cellular wireless carriers that we depend on to provide sufficient network capacity, reliability and security to our customers. Our financial condition could be impacted if our wireless carriers increase the prices of their services or suffer operational or technical failures.
Our industry is characterized by rapidly changing technologies, evolving industry standards, frequent new product introductions, short product life cycles in certain instances and rapidly changing customer requirements.
Our industry is characterized by rapidly changing technologies, evolving industry standards, frequent new product introductions, short product life cycles in certain instances and rapidly changing customer requirements. One example of new technology that could impact the markets in which we sell products and customer requirements could be the introduction of artificial intelligence features into products or solutions offerings.
If we fail to manage our existing or future sales through distributors and resellers effectively, our business and operating results could be materially and adversely affected. 8 Table of Contents The businesses of our IoT Solutions segment are subject to the risks faced by businesses operating in emerging markets.
If we fail to manage our existing or future sales through distributors and resellers effectively, our business and operating results could be materially and adversely affected. Potential new or incremental international tariffs could materially and adversely affect our business and results of operations.
Our failure to complete one or a series of significant sales opportunities in a particular fiscal period could have a material adverse effect on our revenue for that period. Some of our products are sold into mature markets, which could limit our ability to continue to generate revenue from these products.
Our failure to complete one or a series of significant sales opportunities in a particular fiscal period could have a material adverse effect on our revenue for that period. Our operating margins may be subject to decline. Our operating margins may be subject to declines which could decrease our overall profitability and impact our financial performance adversely.
The Prior Credit Facility consisted of a $350 million term loan B secured loan and a $35 million revolving credit facility that included a $10 million letter of credit subfacility and $10 million swingline subfacility. 15 Table of Contents If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments on the Loan, we will be in default.
The Prior Credit Facility consisted of a $350 million term loan B secured loan and a $35 million revolving credit facility that included a $10 million letter of credit subfacility and $10 million swingline subfacility.
The introduction of products and enhancements embodying new technologies that can disrupt one or more markets in which we compete and the emergence of new industry standards or regulations impacting our industry can render existing products obsolete or unmarketable.
The introduction of products and enhancements embodying new technologies, whether via competitors’ products or just changes in markets where we sell products because of other changes in technology more generally, can disrupt one or more markets in which we compete.
Furthermore, delays in payment and/or extended payment terms from larger customers could have a disproportionate and material negative impact on our cash flows and working capital to support our business operations. 7 Table of Contents From time to time, we are subject to claims and litigation regarding intellectual property rights or other claims pertaining to our business, which could seriously harm us and require us to incur significant costs.
From time to time, we are subject to claims and litigation regarding intellectual property rights or other claims pertaining to our business, which could seriously harm us and require us to incur significant costs. The communications technology industry is characterized by frequent litigation regarding patent and other intellectual property rights.
Our dependence on new product development and the rapid technological change that characterizes our industry make us susceptible to loss of market share resulting from competitors’ product introductions and enhancements, service capabilities and similar risks as well as from regulatory changes.
Additionally, it is probable that new competitors or new alliances among existing competitors could emerge and rapidly acquire significant market share. Our dependence on new product development, rapid technological change, competitors’ product introductions and enhancements, and regulatory changes make us susceptible to potential fluctuations in demand or loss of market share for our products.
As such, their sales growth is not necessarily predictable or assured. Our gross margins therefore may be subject to decline unless we can implement cost reduction initiatives effectively to offset the impact of these factors. Our revenue may be subject to fluctuations based on the level of significant large project-based purchases.
Our operating margins therefore may be subject to decline unless we can implement cost reduction initiatives effectively to offset the impact of these factors. 13 Table of Contents Some of our products are sold into mature markets, which could limit our ability to continue to generate revenue from these products.
Removed
The long and variable sales cycle for certain of our products and services makes it more difficult for us to predict our operating results and manage our business.
Added
Likewise, our combined SmartSense by Digi and Jolt offerings service a significant number of large customers in the retail pharmaceutical, medical facility and retail food industries. Both Ventus and SmartSense by Digi / Jolt produce significant ARR.
Removed
Our sales and operations globally face risks related to health epidemics or pandemics that could disrupt our operations and adversely impact our sales and operating results.
Added
Furthermore, delays in payment and/or extended payment terms from larger customers could have a disproportionate and material negative impact on our cash flows and working capital to support our business operations. We had one distributor customer of Digi's IoT Products & Services segment that represented 13% of consolidated revenue for the twelve months ended September 30, 2025.
Removed
Our business operations and financial results could be adversely affected by the effects of a widespread outbreak of contagious disease or other material adverse widespread public health development, such as the outbreak of the Covid-19 respiratory illness caused by a novel coronavirus first identified in Wuhan, Hubei Province, China in 2019.
Added
No customers represented over 10% of consolidated revenue for the twelve months ended September 30, 2024 or 2023. Acquisitions could disrupt our business and seriously harm our financial condition. We will continue to consider acquisitions of businesses, products or technologies.
Removed
These effects could include the absence of one or more key employees or significant numbers or employees generally, disruptions or restrictions on our ability to maintain operations at one or more of our facilities, disruptions or restrictions to travel that is important to our operations, adverse impacts on our ability to distribute or deliver our products or services as well as temporary disruptions, restrictions or closures of the facilities of our suppliers or customers and their contract manufacturers.
Added
Due to the global reach of our operations, changes in international trade policy could result in an adverse effect on our results of operations, financial condition and cash flows. Additional or new tariffs imposed by various governments globally have the potential to disrupt existing supply chains and impose additional costs on our business.
Removed
Any of the above absences, disruptions or restrictions could impact our sales and operating results negatively. If these absences, disruptions or restrictions are significant and material it is possible our business continuity could be jeopardized.
Added
Existing and future retaliatory trade actions imposed by other governments, as well as possible price increases we may elect to charge, could make our products more expensive for customers, and, in turn, could make our products less competitive.
Removed
Depending on the location of any such disruption or restriction, there may not be a solution that will be easy to implement in a timely manner or without significant expense.
Added
Any existing or new, substantial tariff increases on imports within our supply chain or involving countries in which our contract manufacturers are located, should they be implemented and sustained for an extended period of time, could have a significant adverse effect on our business and our supply chain.
Removed
In addition, any significant outbreak of contagious diseases could materially and adversely affect the economies and financial markets of many countries or the entire world, resulting in an economic downturn that could affect demand for our products, likely impact our operating results and restrain our access to capital from lenders or other sources.
Added
Similarly, our Ventus business is operating in an evolving marketplace where the breadth of companies with collections of assets that require connectivity and general monitoring is evolving. The operation of each of these businesses can therefore be subject to significant additional risks that are not necessarily related to our more established products and services.
Removed
We also rely on cloud-based technologies for our solutions, as well as our internal systems.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeHowever, there can be no assurance that our controls and procedures will be sufficient, and that we will not be materially affected in the future. While we have customary insurance coverage in place designed to address certain cybersecurity risks, such insurance coverage may be insufficient to cover all insured losses or all types of claims that may arise.
Biggest changeWhile we have customary insurance coverage in place designed to address certain cybersecurity risks, 18 Table of Contents such insurance coverage may be insufficient to cover all insured losses or all types of claims that may arise.
Our Chief Information Officer, who reports to the Chief Executive Officer, has over twenty years of experience in IT, including IT security. In addition, one of our Board members, Hatem Naguib, is the President and Chief Executive Officer of Barracuda, a cybersecurity solutions provider, and brings expertise in IT security. 18 Table of Contents
Our Chief Information Officer, who reports to the Chief Executive Officer, has over twenty years of experience in IT, including IT security. In addition, a member of our board of directors, Hatem Naguib, recently retired from his role as President and Chief Executive Officer of Barracuda, a cybersecurity solutions provider, and brings expertise in IT security.
We have implemented information security policies and standards across the company. We provide ongoing cybersecurity training for employees and conduct employee phishing tests. We maintain business continuity, disaster recovery, and incident management plans. We conduct tabletop exercises and penetration testing. We use third-party security tools that help prevent, identify, investigate and resolve vulnerabilities in our systems and products.
We have implemented information technology and product security policies and standards across the company. We provide ongoing cybersecurity training for employees and conduct employee phishing tests. We maintain business continuity, disaster recovery, and incident management plans. We conduct tabletop exercises and penetration testing.
Certain Ventus offerings are PCI DSS 4.0 compliant, which requires auditing by an external auditor. We also have processes to oversee and identify cybersecurity threat risks associated with our use of new third-party service providers, including those who have access to our customer and employee data or our systems.
We also have processes to oversee and identify cybersecurity threat risks associated with our use of new third-party service providers, including those who have access to our customer and employee data or our systems.
Added
We use third-party security tools that help prevent, identify, investigate and resolve vulnerabilities in our systems and products. Certain Ventus offerings are PCI DSS 4.0 compliant, and SmartSense and Jolt have achieved SOC 2 Type II attestation. These certifications require independent audits by external auditors. We are actively pursuing similar certifications for other product lines.
Added
However, there can be no assurance that our controls and procedures will be sufficient, and that we will not be materially affected in the future.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES The following table contains a listing of our property locations that were material to us as of September 30, 2024: Location of Property Use of Facility Segment Approximate Square Footage Ownership or Lease Expiration Date Hopkins, MN (World headquarters) Research & development, sales, sales support, marketing and administration IoT Products & Services 59,497 January 2032 Eden Prairie, MN Manufacturing and warehousing IoT Products & Services 58,000 Owned Sandy, UT Sales, technical support, research & development, administration, manufacturing and warehousing IoT Products & Services 35,466 December 2030 Norwalk, CT Sales, sales support, technical support, research & development, administration, manufacturing and warehousing IoT Solutions 14,115 July 2027 Boston, MA Research & development, sales, sales support and marketing IoT Solutions 13,302 August 2026 Queensland, Australia Research & development IoT Products & Services 12,422 November 2026 Mishawaka, IN Sales, technical support and administration IoT Solutions 7,829 August 2026 Edison, NJ Administration IoT Products & Services 6,223 March 2025 In addition to the above locations, we have various other locations throughout the world that are not deemed to be material.
Biggest changePROPERTIES The following table contains a listing of our property locations that were material to us as of September 30, 2025: Location of Property Use of Facility Segment Approximate Square Footage Ownership or Lease Expiration Date Hopkins, MN (World headquarters) Research & development, sales, sales support, marketing and administration IoT Products & Services 59,497 January 2032 Eden Prairie, MN Manufacturing and warehousing IoT Products & Services 58,000 Owned Sandy, UT Sales, technical support, research & development, administration, manufacturing and warehousing IoT Products & Services 35,466 December 2030 Lehi, UT Sales, sales support, technical support, research & development, administration, manufacturing and warehousing IoT Solutions 26,364 March 2026 Norwalk, CT Sales, sales support, technical support, research & development, administration, manufacturing and warehousing IoT Solutions 14,115 July 2027 Boston, MA Research & development, sales, sales support and marketing IoT Solutions 13,302 August 2026 Queensland, Australia Research & development IoT Products & Services 12,422 November 2026 Mishawaka, IN Sales, technical support and administration IoT Solutions 7,829 August 2026 In addition to the above locations, we have various other locations throughout the world that are not deemed to be material.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONSOLIDATED RESULTS OF OPERATIONS The following table sets forth selected information derived from our consolidated statements of operations, expressed as a percentage of revenue and as a percentage of change from year-to-year for the years indicated: Year ended September 30, % Increase (decrease) 2024 2023 2024 compared to 2023 Revenue 100.0 100.0 — Cost of sales 41.1 43.3 (2.2) Gross profit 58.9 56.7 2.2 Operating expenses 47.6 45.4 2.2 Operating income 11.3 11.3 — Other expense, net (5.9) (5.7) (0.2) Income before income taxes 5.4 5.6 (0.2) Income tax expense 0.1 — 0.1 Net income 5.3 % 5.6 % (0.3) REVENUE BY SEGMENT Year ended September 30, ($ in thousands) 2024 2023 % Increase (decrease) Revenue IoT Products & Services $ 324,444 76.5 % $ 345,680 77.7 % (6.1) IoT Solutions 99,602 23.5 99,169 22.3 0.4 Total revenue $ 424,046 100.0 % $ 444,849 100.0 % (4.7) IoT Products & Services IoT Products & Services revenue decreased 6.1% for fiscal 2024, as compared to fiscal 2023.
Biggest change($ in thousands) 2025 2024 (decr.) Revenue $ 430,221 100.0 % $ 424,046 100.0 % 1.5 % Cost of sales 159,544 37.1 174,140 41.1 (8.4) Gross profit 270,677 62.9 249,906 58.9 8.3 Operating expenses 214,387 49.8 201,817 47.6 6.2 Operating income 56,290 13.1 48,089 11.3 17.1 Other expense, net (6,373) (1.5) (25,231) (5.9) (74.7) Income before income taxes 49,917 11.6 22,858 5.4 118.4 Income tax expense 9,113 2.1 353 0.1 NM Net income $ 40,804 9.5 % $ 22,505 5.3 % 81.3 NM means not meaningful REVENUE BY SEGMENT Year ended September 30, ($ in thousands) 2025 2024 % Increase (decrease) Revenue IoT Products & Services $ 317,883 73.9 % $ 324,444 76.5 % (2.0) IoT Solutions 112,338 26.1 99,602 23.5 12.8 Total revenue $ 430,221 100.0 % $ 424,046 100.0 % 1.5 IoT Products & Services IoT Products & Services revenue decreased 2.0% for fiscal 2025, as compared to fiscal 2024.
We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this report because that disclosure was already included in our Annual Report on Form 10-K for fiscal 2023, filed with the SEC on November 22, 2023.
We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this report because that disclosure was already included in our Annual Report on Form 10-K for fiscal 2024, filed with the SEC on November 22, 2023.
In fiscal 2024, our key operating objectives included: • continuing to transition to complete solutions with software and service offerings included with our products, as this drives ARR, which provides more predictable and higher margin revenues; and • delivering a higher level of services across our businesses.
In fiscal 2025, our key operating objectives included: • continuing to transition to complete solutions with software and service offerings included with our products, as this drives ARR, which provides more predictable and higher margin revenues; and • delivering a higher level of services across our businesses.
Companies on September 30, 2019 to September 30, 2024, the last day of fiscal 2024, with the total cumulative return for the Nasdaq U.S. Benchmark TR Index (the "U.S. Benchmark Index") and the Nasdaq Telecommunications Index (the "Peer Index") over the same period.
Companies on September 30, 2019 to September 30, 2025, the last day of fiscal 2025, with the total cumulative return for the Nasdaq U.S. Benchmark TR Index (the "U.S. Benchmark Index") and the Nasdaq Telecommunications Index (the "Peer Index") over the same period.
You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and result of operations for fiscal 2022 compared to fiscal 2023.
You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and result of operations for fiscal 2023 compared to fiscal 2024.
Issuer Repurchases of Equity Securities The following table presents the information with respect to purchases made by or on behalf of Digi International Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during the fourth quarter of fiscal 2024: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program July 1, 2024 - July 31, 2024 91 $ 23.35 — $ — August 1, 2024 - August 31, 2024 1,907 $ 27.12 — $ — September 1, 2024 - September 30, 2024 64 $ 27.70 — $ — Total 2,062 $ 26.97 — $ — (1) All shares reported were forfeited by employees in connection with the satisfaction of tax withholding obligations related to the vesting of restricted stock units. 20 Table of Contents Performance Evaluation The graph below compares the total cumulative stockholders’ return on our common stock for the period from the close of the Nasdaq - U.S.
Issuer Repurchases of Equity Securities The following table presents the information with respect to purchases made by or on behalf of Digi International Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during the fourth quarter of fiscal 2025: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program July 1, 2025 - July 31, 2025 — $ — — $ — August 1, 2025 - August 31, 2025 3,988 $ 33.30 — $ — September 1, 2025 - September 30, 2025 — $ — — $ — Total 3,988 $ 33.30 — $ — (1) All shares reported were forfeited by employees in connection with the satisfaction of tax withholding obligations related to the vesting of restricted stock units. 20 Table of Contents Performance Evaluation The graph below compares the total cumulative stockholders’ return on our common stock for the period from the close of the Nasdaq - U.S.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Stock Listing Our common stock is listed under the symbol DGII on the Nasdaq Global Select Market tier of the Nasdaq. On November 8, 2024 there were 95 stockholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Stock Listing Our common stock is listed under the symbol DGII on the Nasdaq Global Select Market tier of the Nasdaq. On November 14, 2025 there were 94 stockholders of record.
Among others, these include risks related to ongoing and varying inflationary and deflationary pressures around the world and the monetary policies of governments globally as well as present and ongoing concerns about a potential recession, the ability of companies like us to operate a global business in such conditions as well as negative effects on product demand and the financial solvency of customers and suppliers in such conditions, risks related to ongoing supply chain challenges that continue to impact businesses globally, risks related to cybersecurity, risks arising from the present wars in Ukraine and the Middle East, the highly competitive market in which our company operates, rapid changes in technologies that may displace products sold by us, declining prices of networking products, our reliance on distributors and other third parties to sell our products, the potential for significant purchase orders to be canceled or changed, delays in product development efforts, uncertainty in user acceptance of our products, the ability to integrate our products and services with those of other parties in a commercially accepted manner, potential liabilities that can arise if any of our products have design or manufacturing defects, our ability to integrate and realize the expected benefits of acquisitions, our ability to defend or settle satisfactorily any litigation, the impact of natural disasters and other events beyond our control that could negatively impact our supply chain and customers, potential unintended consequences associated with restructuring, reorganizations or other similar business initiatives that may impact our ability to retain important employees or otherwise impact our operations in unintended and adverse ways, and changes in our level of revenue or profitability which can fluctuate for many reasons beyond our control.
Among others, these include risks related to our ability to realize synergies and operating benefits from acquisitions, like our recent acquisition of Jolt completed in August 2025, ongoing and varying inflationary and deflationary pressures around the world and the monetary and trade policies of governments globally as well as present and ongoing concerns about a potential recession, the potential for longer than expected sales cycles, the ability of companies like us to operate a global business in such conditions as well as negative effects on product demand and the financial solvency of customers and suppliers in such conditions, risks related to ongoing supply chain challenges that continue to impact businesses globally, regulatory risks that include, but are not limited to, the potential expansion of tariffs and potential changes to regulations impacting the functionality or compliance of our products, risks related to cybersecurity, data breaches and data privacy, risks arising from military conflicts such as those in Ukraine and the Middle East, the highly competitive market in which we operate, rapid changes in technologies that may displace products sold by us, declining prices of networking products, our reliance on distributors and other third parties to sell our products, the potential for significant purchase orders to be canceled or changed, delays in product development efforts, uncertainty in user acceptance of our products, the ability to integrate our products and services with those of other parties in a commercially accepted manner, potential liabilities that can arise if any of our products have design or manufacturing defects, our ability to integrate and realize the expected benefits of acquisitions, our ability to defend or settle satisfactorily any litigation, the impact of natural disasters and other events beyond our control that could negatively impact our supply chain and customers, potential unintended consequences associated with restructuring, reorganizations or other similar business initiatives that may impact our ability to retain important employees or otherwise impact our operations in unintended and adverse ways, and changes in our level of revenue or profitability which can fluctuate for many reasons beyond our control.
During fiscal 2024 we delivered on these objectives by increasing ARR by 9% from the end of fiscal 2023 to the end of fiscal 2024. This included an increase of 9% in our Products and Services business segment and 10% in our Solutions business segment.
During fiscal 2025 we delivered on these objectives by increasing ARR by 31% from the end of fiscal 2024 to the end of fiscal 2025. This included an increase of 33% in our Products and Services business segment and 30% in our Solutions business segment. Our acquisition of Jolt completed in August 2025 was a significant contributor to this increase.
Among other items, these statements relate to expectations of the business environment in which Digi operates, projections of future performance, inventory levels, perceived marketplace opportunities, debt repayments, attributions of potential acquisitions and statements regarding our mission and vision. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions.
Among other items, these statements relate to expectations of the business environment in which Digi operates, projections of future performance, including but not limited to expectations regarding the Company’s profitability and net cash position, inventory levels, supply chain normalization, perceived marketplace opportunities, debt repayments, attributions of potential acquisitions and statements regarding our mission and vision.
In addition, to the above macro conditions, we believe the following trends will continue to impact our business in fiscal 2025 and beyond: • We believe the market for Industrial IoT products and services is in the midst of a long-term expansion across a broad range of industries and solutions. • As recurring revenue from subscription and cloud monitoring services becomes a greater portion of our overall revenue, delivering at higher gross margins rates than one-time revenue, we expect gross margin rates to expand. 23 Table of Contents ITEM 7.
Key trends regarding our existing business We believe the following trends will continue to impact our business in fiscal 2026 and beyond: • We believe the market for Industrial IoT products and services is in the midst of a long-term expansion across a broad range of industries and solutions. • As recurring revenue from subscription and cloud monitoring services becomes a greater portion of our overall revenue, delivering at higher operating margins rates than one-time revenue, we expect operating margin rates to expand. • Technology infrastructure necessary to support the deployment of artificial intelligence and other innovations has seen a significant increase in spending on datacenters and other related infrastructure and we have been and expect to be a beneficiary of this ongoing trend.
Many of such factors are beyond our ability to control or predict. These forward-looking statements speak only as of the date for which they are made. We disclaim any intent or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. 22 Table of Contents ITEM 7.
Many of such factors are beyond our ability to control or predict. These forward-looking statements speak only as of the date for which they are made.
The decrease consisted of a $24.7 million decline in product sales volume, with no material impact from pricing. The decrease was driven by lower demand for some products, as some customers bled down inventory stockpiled from when supply chains were stressed, as well as certain prior year project-based sales not reoccurring.
The decrease consisted of a $11.5 million decline in one-time sales, with no material impact from pricing. This was driven by lower demand for some products,in part attributable to some customers reducing inventory stockpiled from when supply chains were stressed.
IoT Products & Services ARR was $24 million as of September 30, 2024, compared to $22 million as of September 30, 2023. This increase was due to growth in the subscription base across remote management platforms and extended warranty offerings.
This increase was due to growth in the subscription base across remote management platforms and extended warranty offerings, as attach rates increased. IoT Solutions ARR was $120 million as of September 30, 2025, compared to $92 million as of September 30, 2024, driven primarily by the acquisition of Jolt, as well as growth in both SmartSense and Ventus.
Below we highlight the metrics for fiscal 2024 that we feel are most important in these evaluations, with comparisons to fiscal 2023: • Revenue was $424 million, a decrease of 5%. • Gross profit margin was 58.9%, an increase of 220 basis points. • Net income was $23 million, compared to $25 million. • Net income per diluted share was $0.61, compared to $0.67. • Adjusted net income per diluted share was $1.99 , flat year over year. • Adjusted EBITDA was $98 million, an increase of 2%. • ARR was over $116 million at the end of the fiscal year, an increase of 9%.
Below we highlight the metrics for fiscal 2025 that we believe are most important in these evaluations, with comparisons to fiscal 2024: • Consolidated revenue was $430 million, an increase of 1%. • Consolidated gross profit was $271 million an increase of 8%. • Consolidated gross profit margin was 62.9%, an increase of 400 basis points. • Consolidated operating income was $56 million an increase of 17%. • Consolidated operating margin was 13.1%, an increase of 180 basis points. • Net income was $41 million, an increase of 81%. • Net income per diluted share was $1.08, an increase of 77%. • Adjusted net income was $79 million, an increase of 8%. • Adjusted net income per diluted share was $2.10, an increase of 6%. • Adjusted EBITDA was $108 million, or 25.2% of revenue, compared to $98 million or 23.1% of revenue, an increase of 11%. • ARR was over $152 million at the end of the fiscal year, an increase of 31%.
Monetary and fiscal policies have fluctuated in different parts of the world to deal with both inflationary and deflationary pressures. These situations could all lead to potential adverse impacts on a wide range of businesses and could impact the businesses of our vendors and customers in ways that could impact our sales.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Monetary and fiscal policies continue to fluctuate globally in response to inflationary and deflationary pressures. These situations could all lead to potential adverse impacts on a wide range of businesses and could affect the businesses of our vendors and customers in ways that could harm our business.
For instance, many Western governments have imposed a range of trade restrictions on Chinese products and components that if expanded could lead to disruptions in our business. Due to the war in Ukraine, sanctions remain imposed on trade with Russia and Belarus which has the potential to disrupt the supply of raw materials needed to make components.
Due to the war in Ukraine, sanctions remain imposed on trade with Russia and Belarus which has the potential to disrupt the supply of raw materials needed to make components. Political tensions between China and other nations have intensified, which could lead to similar issues.
Key trends regarding our existing business There are a number of circumstances globally that we are monitoring for potential impacts on our business. Global economic conditions and political tensions have the ability to cause business disruptions.
In addition to the above trends, there are a number of macro circumstances globally that we continue to monitor for potential impacts on our business. These include evolving international trade policies, global economic conditions, and political tensions that may have the potential to disrupt our business or those of our vendors or customers.
FY19 FY20 FY21 FY22 FY23 FY24 Digi International Inc. $ 100.00 $ 114.76 $ 154.70 $ 254.04 $ 225.04 $ 202.13 Nasdaq U.S.
FY20 FY21 FY22 FY23 FY24 FY25 Digi International Inc. $ 100.00 $ 134.80 $ 221.37 $ 196.10 $ 176.14 $ 233.27 Nasdaq U.S.
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Benchmark TR Index $ 100.00 $ 115.46 $ 152.43 $ 124.98 $ 156.73 $ 204.31 Nasdaq Telecommunications Index $ 100.00 $ 103.19 $ 113.71 $ 82.61 $ 100.78 $ 125.05 ITEM 6. [RESERVED] 21 Table of Contents ITEM 7.
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Benchmark TR Index $ 100.00 $ 132.02 $ 108.25 $ 135.74 $ 176.95 $ 209.01 Nasdaq Telecommunications Index $ 100.00 $ 110.20 $ 80.06 $ 97.67 $ 121.18 $ 146.36 ITEM 6. [RESERVED] 21 Table of Contents ITEM 7.
Removed
Political tensions between China and other nations have become more heightened which could lead to similar issues. And the ongoing war in the Middle East has led to disruptions in shipping and could cause other issues such as an increase in the price of oil which could impact transport costs.
Added
Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions.
Removed
With respect to supply chain, conditions continued to improve during fiscal 2024, but we still experience shortages of some important components. These supply chain shortages led to component purchases at levels that were higher than historical trends to assure we could meet customer demand. This drove higher levels of inventory, which in recent quarters has normalized.
Added
Except to the extent required by law, we do not undertake, and expressly disclaim any intent or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. 22 Table of Contents ITEM 7.
Removed
In addition, because of supply chain shortages in prior years customers of some of our products stockpiled inventory to assure a steady supply was readily available for their needs. In turn, these same customers have now slowed purchases as they work through those stockpiles. We expect the effects on demand to impact future sales of some products during fiscal 2025.
Added
Tariffs imposed by various governments globally have the potential to disrupt existing supply chains and impose additional costs on our business.
Removed
The decline was partially offset by $3.5 million of service revenue growth. IoT Solutions IoT Solutions revenue increased 0.4% for fiscal 2024, as compared to fiscal 2023. The increase consisted of a $5.6 million increase in recurring revenue offset by a $3.2 million decrease in one time services volume and a $2.0 million decrease in hardware sales.
Added
For instance, escalations in the trade conflict with China could lead to export restrictions on critical components and technologies and higher tariffs that , if implemented, could impact our supply chain and product costs. 23 Table of Contents ITEM 7.
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These results reflect some customers reducing the scope of their operations and others electing to make new deployments by obtaining hardware under a subscription contract versus purchasing hardware and obtaining only services under subscription. ARR ARR was $116 million as of September 30, 2024, compared to $106 million as of September 30, 2023.
Added
Additionally, while a ceasefire agreement recently eased some geopolitical risk in the Middle East, the region remains volatile, which could all lead to disruptions in shipping routes and elevated oil prices that could impact our transportation costs.
Removed
IoT Solutions ARR was $92 million as of September 30, 2024, compared to $84 million as of September 30, 2023, driven by growth in both SmartSense and Ventus. 24 Table of Contents
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CONSOLIDATED RESULTS OF OPERATIONS The following table sets forth selected information derived from our consolidated statements of operations: Year ended September 30, % incr.
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This decrease was partially offset by increased demand for some products from new project-based customer initiatives, including among others, significant demand from data center build outs. The decrease also was partially offset by $4.9 million of recurring revenue growth across our offerings. IoT Solutions IoT Solutions revenue increased 12.8% for fiscal 2025, as compared to fiscal 2024.
Added
The increase consisted of a $11.2 million increase in recurring revenue, driven by growth in both SmartSense ® and Ventus and the addition of Jolt. There was also a $1.5 million increase in one-time sales driven by growth in both SmartSense and Ventus and the addition of Jolt. 24 Table of Contents ITEM 7.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ARR ARR was $152 million as of September 30, 2025, compared to $116 million as of September 30, 2024. IoT Products & Services ARR was $32 million as of September 30, 2025, compared to $24 million as of September 30, 2024.
Added
COST OF GOODS SOLD AND GROSS PROFIT Year ended September 30, % Increase (decrease) ($ in thousands) 2025 2024 Cost of sales $ 159,544 37.1 % $ 174,140 41.1 % (8.4) Gross profit 270,677 62.9 % 249,906 58.9 % 8.3 Gross profit margin of 62.9% increased 400 basis points for fiscal 2025 as compared to the prior fiscal year.
Added
This increase was the result of favorable margin mix within product sales and a higher proportion of volume from recurring revenue, which has a higher margin.
Added
OPERATING EXPENSES Below are our operating expenses and operating expenses as a percentage of total revenue: Year ended September 30, ($ in thousands) 2025 2024 $ increase (decrease) % Increase (decrease) Operating Expenses Sales and marketing $ 91,834 21.3 % $ 83,278 19.7 % $ 8,556 10.3 % Research and development 63,659 14.8 60,289 14.2 3,370 5.6 General and administrative 58,894 13.7 58,250 13.7 644 1.1 Total operating expenses $ 214,387 49.8 % $ 201,817 47.6 % $ 12,570 6.2 % The $12.6 million increase in operating expenses in fiscal 2025 from fiscal 2024 was due to a $11.8 million increase in labor expense, a $4.6 million increase in non-labor expense and a $1.9 million decrease in gains on the sale of intangible assets, partially offset by a $5.7 million litigation reserve increase in fiscal 2024 that did not reoccur.
Added
These variances include the incremental operating expenses from the Jolt acquisition. 25 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

27 edited+7 added−5 removed42 unchanged
Biggest changeMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OTHER EXPENSE, NET Year ended September 30, ($ in thousands) 2024 2023 $ increase (decrease) % Increase (decrease) Other expense, net Interest expense, net $ (15,415) (3.7) % $ (25,236) (5.7) % $ 9,821 (38.9) % Debt issuance cost write off (9,722) (2.3) — — (9,722) NM Other expense, net (94) — 59 — (153) NM Total other expense, net $ (25,231) (6.0) % $ (25,177) (5.7) % $ (54) 0.2 % The $0.1 million increase in other expense in fiscal 2024 from fiscal 2023 was driven by the $9.7 million debt issuance cost expense realized upon the extinguishment of our prior credit facility partially offset by a decrease in our average debt outstanding and our effective interest rate on debt(see Note 6 to the condensed consolidated financial statements).
Biggest changeOTHER EXPENSE, NET Year ended September 30, ($ in thousands) 2025 2024 $ increase (decrease) % Increase (decrease) Other expense, net Interest expense, net $ (6,319) (1.5) % $ (15,415) (3.7) % $ 9,096 (59.0) % Debt issuance cost write off — — (9,722) (2.3) 9,722 (100.0) Other expense, net (54) — (94) — 40 (42.6) Total other expense, net $ (6,373) (1.5) % $ (25,231) (6.0) % $ 18,858 (74.7) % The $18.9 million decrease in other expense in fiscal 2025 from fiscal 2024 was driven by a write-off of debt issuance costs in 2024 and a reduction in interest expense due to a decrease in average debt outstanding and our effective interest rate (see Note 6 to the condensed consolidated financial statements for additional information).
Subscription and Support Services Revenue Our SmartSense by Digi ® and Ventus subscription revenue is based on contracts with at least an annual term and is recorded on a monthly basis. These subscriptions are generally in a range from one to five years, and may contain an evergreen renewal provision.
Subscription and Support Services Revenue Our SmartSense by Digi ® , including Jolt, and Ventus subscription revenue is based on contracts with at least an annual term and is recorded on a monthly basis. These subscriptions are generally in a range from one to five years, and may contain an evergreen renewal provision.
(2) For the twelve months ended September 30, 2024 and September 30, 2023, discrete tax benefits include excess tax benefits recognized on stock compensation and expiring statute of limitations. (3) Adjusted net income per diluted share may not add due to the use of rounded numbers.
(2) For the twelve months ended September 30, 2025 and September 30, 2024, discrete tax benefits include excess tax benefits recognized on stock compensation and expiring statute of limitations. (3) Adjusted net income per diluted share may not add due to the use of rounded numbers.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS other revenue is recognized over the subscription term of the contract. We have made an accounting policy election to exclude from the measurement of our revenues any sales or similar taxes we collect from customers.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS shipped and all other revenue is recognized over the subscription term of the contract. We have made an accounting policy election to exclude from the measurement of our revenues any sales or similar taxes we collect from customers.
In these instances, all revenue derived from the above obligations is recognized over the subscription term of the contract. If the customer purchases the equipment out-right, that portion of the revenue is recognized at the stand-alone selling price at the time the equipment is shipped and all 31 Table of Contents ITEM 7.
In these instances, all revenue derived from the above obligations is recognized over the subscription term of the contract. If the customer purchases the equipment out-right, that portion of the revenue is recognized at the stand-alone selling price at the time the equipment is 31 Table of Contents ITEM 7.
Our hardware products may be combined with our Digi Remote Manager PaaS offering as well as other support services in an individual contract. Our SmartSense by Digi revenues typically are derived from contracts with multiple performance obligations.
Our hardware products may be combined with our Digi Remote Manager PaaS offering as well as other support services in an individual contract. Our SmartSense by Digi and Jolt revenues typically are derived from contracts with multiple performance obligations.
If the carrying amount of a reporting unit is higher than its estimated fair value, an impairment loss must be recognized for the excess. We have two reportable segments, our IoT Products & Services segment and our IoT Solutions segment (see Note 4 to the consolidated financial statements).
If the carrying amount of a reporting unit is higher than its estimated fair value, an impairment loss must be recognized for the excess. We have two reportable segments, our IoT Products & Services segment and our IoT Solutions segment (see Note 4 to the consolidated financial statements). Each of our two reporting units have been tested individually for impairment.
The table above does not include our possible payments for uncertain tax positions. Our reserve for uncertain tax positions, including accrued interest and penalties, was $3.6 million as of September 30, 2024.
The table above does not include our possible payments for uncertain tax positions. Our reserve for uncertain tax positions, including accrued interest and penalties, was $4.3 million as of September 30, 2025.
During 2024, 2023 and 2022, we had approximately $121.6 million, $121.1 million and $85.8 million, respectively, of revenue related to foreign customers including export sales, of which $0.4 million, $0.8 million and $0.8 million, respectively, were denominated in foreign currencies, predominantly the Canadian Dollar.
During 2025, 2024 and 2023, we had approximately $88.3 million, $121.6 million and $121.1 million, respectively, of revenue related to foreign customers including export sales, of which $0.2 million, $0.4 million and $0.8 million, respectively, were denominated in foreign currencies, predominantly the Canadian Dollar.
Each of our six reporting units have been tested individually for impairment. The fair value of each reporting unit is determined using a weighted combination of an income and market approach. A discounted cash flow (“DCF”) method is utilized for the income approach.
The fair value of each reporting unit is determined using a weighted combination of an income and market approach. A discounted cash flow (“DCF”) method is utilized for the income approach.
Cash flows used in investing activities decreased $4.3 million as a result of: • a $2.2 million increase in proceeds from the sale of property, equipment, improvements and certain other intangible assets • and a $2.1 million decrease in purchases of property, equipment, improvements and certain other intangible assets.
Cash flows used in investing activities decreased $148.3 million as a result of: • $145.7 million used in the acquisition of Jolt, net of the $2.8 million cash assumed, • a $2.2 million decrease in proceeds from the sale of property, equipment, improvements and certain other intangible assets • and a $0.4 million increase in purchases of property, equipment, improvements and certain other intangible assets.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Reconciliation of Net Income and Net Income per Diluted Share to Adjusted Net Income and Adjusted Net Income per Diluted Share (In thousands, except per share amounts) Year ended September 30, 2024 2023 Net income and net income per diluted share $ 22,505 $ 0.61 $ 24,770 $ 0.67 Amortization 24,552 0.66 25,226 0.68 Stock-based compensation expense 13,159 0.36 13,286 0.36 Other non-operating expense, net 94 — (59) — Acquisition expense, net (127) — 940 0.03 Litigation accrual 5,700 0.15 — — Changes in fair value of contingent consideration (2,111) (0.06) — — Restructuring charge 430 0.01 141 — Interest expense, net 15,415 0.42 25,236 0.68 Debt issuance cost write off 9,722 0.26 — — Tax effect from above net income adjustments (1) (17,005) (0.45) (18,488) (0.50) Discrete tax expenses (2) 1,212 0.03 2,490 0.07 Adjusted net income and adjusted net income per diluted share (3) $ 73,546 $ 1.99 $ 73,542 $ 1.99 Diluted weighted average common shares 36,984 36,869 (1) The tax effect from the above adjustments assumes an estimated effective tax rate of 18.0% for fiscal 2024 and 2023 based on adjusted net income.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Reconciliation of Net Income and Net Income per Diluted Share to Adjusted Net Income and Adjusted Net Income per Diluted Share (In thousands, except per share amounts) Year ended September 30, 2025 2024 Net income and net income per diluted share $ 40,804 $ 1.08 $ 22,505 $ 0.61 Amortization 22,141 0.59 24,552 0.66 Stock-based compensation expense 15,363 0.41 13,159 0.36 Other non-operating expense, net 54 — 94 — Acquisition expense, net 2,251 0.06 (127) — Litigation accrual — — 5,700 0.15 Changes in fair value of contingent consideration (181) — (2,111) (0.06) Restructuring charge 774 0.02 430 0.01 Interest expense, net 6,319 0.17 15,415 0.42 Debt issuance cost write off — — 9,722 0.26 Tax effect from above net income adjustments (1) (8,160) (0.23) (17,005) (0.45) Discrete tax expenses (2) (121) — 1,212 0.03 Adjusted net income and adjusted net income per diluted share (3) $ 79,244 $ 2.10 $ 73,546 $ 1.99 Diluted weighted average common shares 37,739 36,984 (1) The tax effect from the above adjustments assumes an estimated effective tax rate of 18.0% for fiscal 2025 and 2024 based on adjusted net income.
Below are reconciliations from GAAP to Non-GAAP information that we feel is important to our business: Reconciliation of Net Income to Adjusted EBITDA (In thousands) Year ended September 30, 2024 2023 % of total revenue % of total revenue Total revenue $ 424,046 100.0 % $ 444,849 100.0 % Net income 22,505 5.3 % $ 24,770 5.6 % Interest expense, net 15,415 25,236 Debt issuance cost write off 9,722 — Income tax expense 353 148 Depreciation and amortization 33,064 31,979 Stock-based compensation expense 13,159 13,286 Litigation accrual 5,700 — Changes in fair value of contingent consideration (2,111) — Restructuring charge 430 141 Acquisition expense, net (127) 940 Adjusted EBITDA $ 98,110 23.1 % $ 96,500 21.7 % 27 Table of Contents ITEM 7.
Below are reconciliations from GAAP to Non-GAAP information that we believe is important to our business: Reconciliation of Net Income to Adjusted EBITDA (In thousands) Year ended September 30, 2025 2024 % of total revenue % of total revenue Total revenue $ 430,221 100.0 % $ 424,046 100.0 % Net income 40,804 9.5 % $ 22,505 5.3 % Interest expense, net 6,319 15,415 Debt issuance cost write off — 9,722 Income tax expense 9,113 353 Depreciation and amortization 33,976 33,064 Stock-based compensation expense 15,363 13,159 Litigation accrual — 5,700 Changes in fair value of contingent consideration (181) (2,111) Restructuring charge 774 430 Acquisition expense, net 2,251 (127) Adjusted EBITDA $ 108,419 25.2 % $ 98,110 23.1 % 27 Table of Contents ITEM 7.
We believe ARR is an indicator of the scale of our subscription revenue business and is less subject to seasonality and contract term changes than other metrics. 26 Table of Contents ITEM 7.
Because ARR does not have a consistent definition, it is unlikely to be compared to the similarly titled measurements of other companies. We believe ARR is an indicator of the scale of our subscription revenue business and is less subject to seasonality and contract term changes than other metrics. 26 Table of Contents ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTRACTUAL OBLIGATIONS The following summarizes our contractual obligations at September 30, 2024: Payments due by fiscal period ($ in thousands) Total Less than 1 year 1-3 years 3-5 years Thereafter Operating leases $ 16,768 $ 3,791 $ 5,375 $ 3,737 $ 3,865 Revolving loan 124,300 — — 124,300 — Total $ 141,068 $ 3,791 $ 5,375 $ 128,037 $ 3,865 The operating lease agreements included above primarily relate to office space.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTRACTUAL OBLIGATIONS The following summarizes our contractual obligations at September 30, 2025: Payments due by fiscal period ($ in thousands) Total Less than 1 year 1-3 years 3-5 years Thereafter Operating leases $ 13,459 $ 3,741 $ 4,013 $ 3,720 $ 1,985 Revolving loan 160,000 — — 160,000 — Total $ 173,459 $ 3,741 $ 4,013 $ 163,720 $ 1,985 The operating lease agreements included above primarily relate to office space.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As follows, our consolidated statements of cash flows for the years ended September 30, 2024 and 2023 is summarized: Year ended September 30, ($ in thousands) 2024 2023 Operating activities $ 83,092 $ 36,751 Investing activities 3 (4,345) Financing activities (89,048) (34,500) Effect of exchange rate changes on cash and cash equivalents 1,770 (1,113) Net decrease in cash and cash equivalents $ (4,183) $ (3,207) Cash flows from operating activities increased $46.3 million as a result of: • a $11.7 million increase in net operating assets for fiscal 2024 compared to a $21.7 million decrease in fiscal 2023, • a $9.7 million debt issuance cost write-off included in net income in fiscal 2024, • a $5.7 million litigation accrual included in net income in fiscal 2024.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As follows, our consolidated statements of cash flows for the years ended September 30, 2025 and 2024 is summarized: Year ended September 30, ($ in thousands) 2025 2024 Operating activities $ 107,959 $ 83,092 Investing activities (148,332) 3 Financing activities 34,624 (89,048) Effect of exchange rate changes on cash and cash equivalents 141 1,770 Net decrease in cash and cash equivalents $ (5,608) $ (4,183) Cash flows from operating activities increased $24.9 million as a result of: • a $18.3 million increase in net income in fiscal 2025, • a $24.2 million increase in net operating assets for fiscal 2025 compared to a $11.7 million increase in fiscal 2024, • a $5.1 million increase in deferred income tax benefits, • a $2.2 million increase in stock-based compensation, • and a $2.2 million increase in gains from the sale of assets in fiscal 2024.
These include our overall profitability, the geographical mix of income before taxes and related statutory tax rate in each jurisdiction, and discrete events, such as settlement of audits (see Note 10 to our consolidated financial statements). KEY BUSINESS METRICS ARR, represents the annualized monthly value of all billable subscription contracts, measured at the end of any fiscal period.
Our effective tax rate will vary based on a variety of factors. These include our overall profitability, the geographical mix of income before taxes and related statutory tax rate in each jurisdiction, and discrete events, such as settlement of audits (see Note 10 to our consolidated financial statements).
For additional information regarding the terms of our Credit Facility, including the Revolving Loan and its subfacilities, see Note 6 to our condensed consolidated financial statements. The Credit Agreement replaced our prior credit agreement that consisted of a $350 million term loan B secured loan and a $35 million revolving credit facility.
For additional information regarding the terms of our Credit Facility, including the Revolving Loan and its subfacilities, see Note 6 to our condensed consolidated financial statements. We expect positive cash flows from operations.
Subscriptions primarily include contracts for term-based equipment usage, the delivery of data insights, extended warranty coverage or customer service coverage. ARR excludes one-time items such as non-bundled hardware sales, professional services and wireless design services. Contracts with known, future expiration dates are included in ARR through their expiration date as long as collection is deemed likely.
KEY BUSINESS METRICS ARR, represents the annualized monthly value of all billable subscription contracts, measured at the end of any fiscal period. Subscriptions primarily include contracts for term-based equipment usage, the delivery of data insights, extended warranty coverage or customer service coverage. ARR excludes one-time items such as non-bundled hardware sales, professional services and wireless design services.
These were partially offset by: • net proceeds of $214.1 million from the issuance of a new credit facility • and a $0.7 million decrease in taxes paid for net share settlement of share-based payment options and awards. 29 Table of Contents ITEM 7.
These were partially offset by: • net proceeds of $214.1 million from the issuance of a new credit facility in the first quarter of fiscal 2024 compared to $150.0 million from a draw on the credit facility in the fourth quarter of 2025, • and a $3.3 million increase in taxes paid to satisfy tax withholding obligations of holders of options to purchase common shares and restricted stock unit awards in connections with net share settlements. 29 Table of Contents ITEM 7.
Cash flows from financing activities decreased $54.5 million as a result of: • debt payments of $304.7 million in fiscal 2024, including $213.6 million to retire our prior credit facility, and payments of $91.1 million against our new credit facility, compared to debt payments of $36.4 million in fiscal 2023. • and a $1.0 million decrease in proceeds from stock option plan transactions.
Cash flows from financing activities increased $123.7 million as a result of: • debt payments of $114.3 million in the fiscal 2025, compared to debt payments of $304.7 million in fiscal 2024 • and a $0.5 million increase in proceeds from stock option exercises and employee stock purchase plan transactions.
ARR should be viewed independently of revenue and deferred revenue and is not intended to replace or forecast either item. We use ARR to manage and assess the growth of our subscription revenue business. Because ARR does not have a consistent definition, it is unlikely to be compared to the similarly titled measurements of other companies.
Contracts with known, future expiration dates are included in ARR through their expiration date as long as collection is deemed likely. ARR should be viewed independently of revenue and deferred revenue and is not intended to replace or forecast either item. We use ARR to manage and assess the growth of our subscription revenue business.
Results of our Fiscal 2024 Annual Impairment Test As of June 30, 2024, we had a total of $32.7 million of goodwill for the Cellular Routers reporting unit, $57.1 million of goodwill for the Console Servers reporting unit, $64.2 million of goodwill for the OEM Solutions reporting unit, $20.4 million of goodwill for the Infrastructure Management reporting unit, $48.9 million of goodwill for the SmartSense by Digi reporting unit and $118.6 million of goodwill for the Ventus reporting unit.
Results of our Fiscal 2025 Annual Impairment Test As of June 30, 2025, we had a total of $175.5 million of goodwill for the IoT Products & Services reporting unit and $167.6 million of goodwill for the IoT Solutions reporting unit.
This increase was driven by increased recurring revenue at high margin rates and by a reduction in inventory adjustments and reduced inflationary pressures, partially offset by decreased product volume. IoT Solutions The IoT Solutions gross profit margin increased 820 basis points for fiscal 2024 as compared to the prior fiscal year.
This increase was the result of favorable margin mix partially offset by an increase in operating expenses and increased inventory-related expenses. IoT Solutions IoT Solutions operating income increased 670 basis points for fiscal 2025, as compared to fiscal 2024.
INCOME TAXES Our effective income tax expense (benefit) rates were 1.5%, 0.6% and (4.1)% for fiscal 2024, 2023 and 2022, respectively. Our effective tax rate will vary based on a variety of factors.
INCOME TAXES Our effective income tax expense (benefit) rates were 18.3%, 1.5% and 0.6% for fiscal 2025, 2024 and 2023, respectively. The increase from fiscal 2024 to 2025 was a result of an increase in pre-tax earnings, on-time tax effects of the Jolt acquisition completed in the fourth fiscal quarter of 2025 and a change in the tax credits estimate.
These increases were partially offset by: • a $2.3 million decrease in net income in fiscal 2024 • and a $2.2 million increase in gains from the sale of assets in fiscal 2024.
These increases were partially offset by: • a $9.7 million debt issuance cost write-off included in net income in fiscal 2024 and • a $5.7 million litigation accrual included in net income in fiscal 2024.
At June 30, 2024, the fair value of goodwill exceeded the carrying value for all six reporting units and no impairment was recorded. Ventus fair value exceeded carrying values by less than 10%. 32
At June 30, 2025, the fair value of goodwill exceeded the carrying value for each reporting units and no impairment was recorded. 32 Table of Contents ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS COMBINATIONS Our acquisitions are accounted for under ASC ("Accounting Standards Codification") 805, Business Combinations.
Removed
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS COST OF GOODS SOLD AND GROSS PROFIT BY SEGMENT Below are our segments' cost of goods sold and gross profit as a percentage of their respective total revenue: Year ended September 30, Basis point increase (decrease) ($ in thousands) 2024 2023 Cost of Goods Sold IoT Products & Services $ 147,243 45.4 % $ 157,722 45.6 % (20) IoT Solutions 26,897 27.0 % 34,924 35.2 % (820) Total cost of goods sold $ 174,140 41.1 % $ 192,646 43.3 % (220) Year ended September 30, Basis point increase (decrease) ($ in thousands) 2024 2023 Gross Profit IoT Products & Services $ 177,201 54.6 % $ 187,958 54.4 % 20 IoT Solutions 72,705 73.0 % 64,245 64.8 % 820 Total gross profit $ 249,906 58.9 % $ 252,203 56.7 % 220 IoT Product & Services IoT Products & Services gross profit margin increased 20 basis points for fiscal 2024 as compared to the prior fiscal year.
Added
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATING INCOME Year ended September 30, Basis point increase (decrease) ($ in thousands) 2025 2024 Operating Income IoT Products & Services $ 46,918 14.8 % $ 46,482 14.3 % 50 IoT Solutions 9,372 8.3 % 1,607 1.6 % 670 Total operating income $ 56,290 13.1 % $ 48,089 11.3 % 180 IoT Products & Services IoT Products & Services operating income increased 50 basis points for fiscal 2025, as compared to fiscal 2024.
Removed
This increase was the result of growth in higher margin ARR subscription revenues, favorable mix within one time volume and a reduction in inventory adjustments.
Added
This increase was the result of favorable margin mix and a $5.7 million decrease in litigation reserves partially offset by increases in other operating expenses.
Removed
OPERATING EXPENSES Below are our operating expenses and operating expenses as a percentage of total revenue: Year ended September 30, ($ in thousands) 2024 2023 $ increase (decrease) % Increase (decrease) Operating Expenses Sales and marketing $ 83,278 19.7 % $ 81,681 18.3 % $ 1,597 2.0 % Research and development 60,289 14.2 58,648 13.2 1,641 2.8 General and administrative 58,250 13.7 61,779 13.9 (3,529) (5.7) Total operating expenses $ 201,817 47.6 % $ 202,108 45.4 % $ (291) (0.1) % The $0.3 million decrease in operating expenses in fiscal 2024 from fiscal 2023 was the result of a $3.9 decrease in non-labor expense and a $2.1 million gain on the sale of an intangible asset, partially offset by a $5.7 million increase to litigation reserves. 25 Table of Contents ITEM 7.
Added
Accordingly, the assets and liabilities of acquired companies are included in the Consolidated Balance Sheets from the acquisition date, adjusted to reflect their fair value. Intangible assets are measured and recognized at fair value and amortized over their estimated useful lives. Customer relationships are valued using the multi-period excess earnings method.
Removed
The $35 million revolving credit facility included a $10 million letter of credit subfacility and $10 million swingline subfacility. We expect positive cash flows from operations.
Added
The multi-period excess earnings method estimates the discounted net earnings attributable to the customer relationships that were acquired after considering items such as possible customer attrition. Estimated useful lives were determined based on the length and trend of projected cash flows.
Removed
Our IoT Products & Services business is structured to include four reporting units under the IoT Products & Services segment, each with a reporting manager: Cellular Routers, Console Servers, OEM Solutions and Infrastructure Management. Following our acquisition of Ventus in the first fiscal quarter of 2022, IoT Solutions is comprised of two reporting units; Ventus and SmartSense by Digi.
Added
The length of the projected cash flow period was determined based on the expected attrition of the customer relationships, which is based on our historical experience and future expectations for renewing and extending similar customer relationships.
Added
Technology and trade names are valued using the relief from royalty method to estimate the cost savings that will accrue to the Company, which would otherwise have to pay royalties or license fees on revenue earned by using the asset.
Added
The useful lives of the assets were determined based on management’s estimate of the period of time the technology or name will be in use. 33

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

22 edited+7 added−10 removed13 unchanged
Biggest changeHow the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the discount rates and forecasts of revenue growth rate, future gross margins, EBITDA margins, revenue multiples within the Cellular Routers reporting unit and EBITDA multiples within the Ventus reporting unit used by management to estimate the fair value of the Cellular Routers, Smart Sense and Ventus reporting units included the following, among others: • We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the Cellular Routers, Smart Sense, and Ventus reporting units, such as controls related to management’s selection of the discount rates and forecasts of revenue growth rate, gross margins, EBITDA margins, revenue multiples within the Cellular Routers reporting unit, and EBITDA multiples within the Ventus reporting unit. • We evaluated management’s ability to accurately forecast revenue growth rate, gross margins and EBITDA margins by comparing actual results to management’s historical forecasts. • We evaluated the reasonableness of management’s revenue growth rate, gross margin and EBITDA margin forecasts by comparing the forecasts to: ◦ Historical revenue growth rate, gross margins and EBITDA margins. ◦ Forecasted information included in Company press releases as well as in industry reports for the Company and certain of its peer companies. • With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rates by: ◦ Testing the source information underlying the determination of the discount rates and the mathematical accuracy of the calculations. ◦ Developing a range of independent estimates and comparing those to the discount rates selected by management. • With the assistance of our fair value specialists, we evaluated the revenue multiples within the Cellular Routers reporting unit and EBITDA multiples within the Ventus reporting unit, including testing the underlying source information and mathematical accuracy of the calculations, and comparing the multiples selected by management to its guideline companies. /s/ Deloitte & Touche LLP Minneapolis, Minnesota November 22, 2024 We have served as the Company’s auditor since 2022. 36 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Digi International Inc.
Biggest changeThis required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate and forecasts of future revenue growth rates, gross margins, EBITDA margins within the IoT Solutions reporting unit. 36 Table of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the discount rate and forecasts of revenue growth rates, future gross margins, and EBITDA margins within the IoT Solutions reporting unit used by management to estimate the fair value of the reporting unit included the following, among others: • We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the IoT Solutions reporting unit, such as controls related to management’s selection of the discount rate and forecasts of revenue growth rates, gross margins, and EBITDA margins within the IoT Solutions reporting unit. • We evaluated management’s ability to accurately forecast the revenue growth rates, gross margins and EBITDA margins by comparing actual results to management’s historical forecasts. • We evaluated the reasonableness of management’s revenue growth rates, gross margin and EBITDA margin forecasts by comparing the forecasts to: ◦ Historical revenue growth rates, gross margins and EBITDA margins. ◦ Forecasted information included in Company press releases as well as in industry reports for the Company and certain of its peer companies. • With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by: ◦ Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculations. ◦ Developing a range of independent estimates and comparing those to the discount rate selected by management.
The Company used a combination of the income approach and market approach to estimate fair value, which requires management to make significant estimates and assumptions, specifically related to discount rates and forecasts of future revenue growth rate, gross margins and earnings before income taxes, depreciation, and amortization (“EBITDA”) margins used in the income approach.
The Company used a combination of the income approach and market approach to estimate fair value, which requires management to make significant estimates and assumptions, specifically related to discount rate and forecasts of future revenue growth rates, gross margins and earnings before income taxes, depreciation, and amortization (“EBITDA”) margins used in the income approach.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (CONTINUED) DIGI INTERNATIONAL INC.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (CONTINUED) DIGI INTERNATIONAL INC.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (CONTINUED) DIGI INTERNATIONAL INC.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (CONTINUED) DIGI INTERNATIONAL INC.
CREDIT RISK We have some exposure to credit risk related to our accounts receivable portfolio. Exposure to credit risk is controlled through regular monitoring of customer financial status, credit limits and collaboration with sales management on customer contacts to facilitate payment. 33 Table of Contents ITEM 8.
CREDIT RISK We have some exposure to credit risk related to our accounts receivable portfolio. Exposure to credit risk is controlled through regular monitoring of customer financial status, credit limits and collaboration with sales management on customer contacts to facilitate payment. 34 Table of Contents ITEM 8.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 22, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 21, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.
Based on the balance sheet position for both the Revolving Loan at September 30, 2024, the annualized effect of a 25-basis point change in interest rates would increase or decrease our interest expense by $0.3 million. For additional information, see Note 6 to our consolidated financial statements.
Based on the balance sheet position for both the Revolving Loan at September 30, 2025, the annualized effect of a 25-basis point change in interest rates would increase or decrease our interest expense by $0.4 million. For additional information, see Note 6 to our consolidated financial statements.
Dollar would have resulted in an immaterial increase or decrease in fiscal 2024 annual revenue and a 1.0% increase or decrease in stockholders' equity at September 30, 2024. The above analysis does not take into consideration any pricing adjustments we may make in response to changes in the exchange rates.
Dollar would have resulted in an immaterial increase or decrease in fiscal 2025 annual revenue and a 0.9% increase or decrease in stockholders' equity at September 30, 2025. The above analysis does not take into consideration any pricing adjustments we may make in response to changes in the exchange rates.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Report of Independent Registered Public Accounting Firm (PCAOB ID 34) 35 Report of Independent Registered Public Accounting Firm (PCAOB ID 248) 37 Consolidated Statements of Operations 38 Consolidated Statements of Comprehensive Income 39 Consolidated Balance Sheets 40 Consolidated Statements of Cash Flows 41 Consolidated Statements of Stockholders' Equity 42 Notes to the Consolidated Financial Statements 43 34 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Digi International Inc.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Report of Independent Registered Public Accounting Firm (PCAOB ID 34) 36 Consolidated Statements of Operations 39 Consolidated Statements of Comprehensive Income 40 Consolidated Balance Sheets 41 Consolidated Statements of Cash Flows 42 Consolidated Statements of Stockholders' Equity 43 Notes to the Consolidated Financial Statements 44 35 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Digi International Inc.
We do not use derivative financial instruments to hedge against interest rate risk because the majority of our investments mature in less than one year. We are exposed to market risks related to fluctuations in interest rates on amounts borrowed under the Credit Facility. As of September 30, 2024, we had $124.3 million outstanding under our Credit Facility.
We do not use derivative financial instruments to hedge against interest rate risk because the majority of our investments mature in less than one year. We are exposed to market risks related to fluctuations in interest rates on amounts borrowed under the Credit Facility. As of September 30, 2025, we had $160.0 million outstanding under our Credit Facility.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024, and the results of its operations and its cash flows for the year ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2025, in conformity with accounting principles generally accepted in the United States of America.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
Critical Audit Matter The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year ended September 30, 2024 2023 2022 (in thousands) Net income $ 22,505 $ 24,770 $ 19,383 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment 3,267 (957) (3,308) Other comprehensive income (loss), net of tax 3,267 (957) (3,308) Comprehensive income $ 25,772 $ 23,813 $ 16,075 The accompanying notes are an integral part of the consolidated financial statements. 39 Table of Contents ITEM 8.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year ended September 30, 2025 2024 2023 (in thousands) Net income $ 40,804 $ 22,505 $ 24,770 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment (50) 3,267 (957) Other comprehensive (loss) income, net of tax (50) 3,267 (957) Comprehensive income $ 40,754 $ 25,772 $ 23,813 The accompanying notes are an integral part of the consolidated financial statements. 40 Table of Contents ITEM 8.
The table below compares the average monthly exchange rates of the Euro, British Pound Canadian Dollar and Australian Dollar: Fiscal year ended September 30, % increase 2024 2023 (decrease) Euro 1.1111 1.0679 4.0 % British Pound 1.3221 1.2183 8.5 % Canadian Dollar 0.7381 0.7380 — % Australian Dollar 0.6773 0.6423 5.4 % A 10.0% change from the 2024 average exchange rate for the Euro, British Pound, Canadian Dollar and Australian Dollar to the U.S.
The table below compares the average monthly exchange rates of the Euro, British Pound Canadian Dollar and Australian Dollar: Fiscal year ended September 30, % increase 2025 2024 (decrease) Euro 1.0580 1.1111 (4.8) % British Pound 1.3061 1.3221 (1.2) % Canadian Dollar 0.7149 0.7381 (3.1) % Australian Dollar 0.6437 0.6773 (5.0) % A 10.0% change from the 2025 average exchange rate for the Euro, British Pound, Canadian Dollar and Australian Dollar to the U.S.
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Digi International Inc. and subsidiaries (the "Company") as of September 30, 2024, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for the year ended September 30, 2024, and the related notes and the schedule listed in the Table of Contents at Item 15 (collectively referred to as the "financial statements").
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Digi International Inc. and subsidiaries (the "Company") as of September 30, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended September 30, 2025, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements”).
CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended September 30, 2024 2023 2022 Operating activities: (in thousands) Net income $ 22,505 $ 24,770 $ 19,383 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, equipment and improvements 8,511 6,753 6,644 Amortization 25,106 27,203 30,928 Write-off of debt issuance costs 9,722 — — Stock-based compensation expense 13,159 13,286 8,578 Deferred income tax provision (11,761) (12,739) (3,387) Change in fair value of contingent consideration — — (6,200) Litigation accrual 5,700 — — Other, net (1,540) (806) (188) Changes in operating assets and liabilities (net of acquisitions): Accounts receivable (13,641) (5,558) (114) Inventories 8,786 (5,062) (34,468) Other assets (107) (1,214) (545) Income taxes 2,281 4,088 (1,305) Accounts payable 6,448 (15,503) 7,281 Accrued expenses 7,923 1,533 11,133 Net cash provided by operating activities 83,092 36,751 37,740 Investing activities: Acquisition of businesses, net of cash acquired — — (347,554) Purchase of property, equipment, improvements and certain other intangible assets (2,226) (4,345) (1,974) Proceeds from sales of intangibles 2,229 — — Net cash provided by (used in) investing activities 3 (4,345) (349,528) Financing activities: Proceeds from long-term debt 214,062 — 350,000 Payments of debt issuance costs — — (13,443) Payments on long-term debt (304,725) (36,375) (148,118) Proceeds from stock option plan transactions 2,978 3,926 9,505 Proceeds from employee stock purchase plan transactions 2,206 2,263 1,500 Taxes paid for net share settlement of share-based payment awards (3,569) (4,314) (6,662) Net cash (used in) provided by financing activities (89,048) (34,500) 192,782 Effect of exchange rate changes on cash and cash equivalents 1,770 (1,113) 1,474 Net decrease in cash and cash equivalents (4,183) (3,207) (117,532) Cash and cash equivalents, beginning of period 31,693 34,900 152,432 Cash and cash equivalents, end of period $ 27,510 $ 31,693 $ 34,900 Supplemental disclosures of cash flow information: Interest paid $ 14,763 $ 26,351 $ 14,209 Income taxes paid, net $ 7,306 $ 8,693 $ 4,333 Supplemental schedule of non-cash investing and financing activities: Accrual for property, equipment, improvements and certain other intangibles assets $ (164) $ (277) $ (191) Transfer of inventory to property, equipment and improvements $ (12,252) $ (3,889) $ (6,237) The accompanying notes are an integral part of the consolidated financial statements. 41 Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended September 30, 2025 2024 2023 Operating activities: (in thousands) Net income $ 40,804 $ 22,505 $ 24,770 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, equipment and improvements 11,836 8,511 6,753 Amortization 22,409 25,106 27,203 Write-off of debt issuance costs — 9,722 — Stock-based compensation expense 15,363 13,159 13,286 Deferred income tax provision (6,662) (11,761) (12,739) Litigation accrual — 5,700 — Other, net 42 (1,540) (806) Changes in operating assets and liabilities (net of acquisitions): Accounts receivable 7,542 (13,641) (5,558) Inventories 8,228 8,786 (5,062) Other assets 2,592 (107) (1,214) Income taxes (3,294) 2,281 4,088 Accounts payable 9,615 6,448 (15,503) Accrued expenses (516) 7,923 1,533 Net cash provided by operating activities 107,959 83,092 36,751 Investing activities: Acquisition of businesses, net of cash acquired (145,702) — — Purchase of property, equipment, improvements and certain other intangible assets (2,630) (2,226) (4,345) Proceeds from sales of intangibles — 2,229 — Net cash (used in) provided by investing activities (148,332) 3 (4,345) Financing activities: Proceeds from long-term debt 150,000 214,062 — Payments on long-term debt (114,300) (304,725) (36,375) Proceeds from stock option plan transactions 3,525 2,978 3,926 Proceeds from employee stock purchase plan transactions 2,285 2,206 2,263 Taxes paid for net share settlement of share-based payment awards (6,886) (3,569) (4,314) Net cash provided by (used in) financing activities 34,624 (89,048) (34,500) Effect of exchange rate changes on cash and cash equivalents 141 1,770 (1,113) Net decrease in cash and cash equivalents (5,608) (4,183) (3,207) Cash and cash equivalents, beginning of period 27,510 31,693 34,900 Cash and cash equivalents, end of period $ 21,902 $ 27,510 $ 31,693 Supplemental disclosures of cash flow information: Interest paid $ 6,404 $ 14,763 $ 26,351 Income taxes paid, net $ 18,421 $ 7,306 $ 8,693 Supplemental schedule of non-cash investing and financing activities: Accrual for property, equipment, improvements and certain other intangibles assets $ (793) $ (164) $ (277) Transfer of inventory to property, equipment and improvements $ (7,793) $ (12,252) $ (3,889) The accompanying notes are an integral part of the consolidated financial statements. 42 Table of Contents
Goodwill — Cellular Routers, Smart Sense, and Ventus Reporting Units — Refer to Notes 1 and 3 to the financial statements The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.
Goodwill — IoT Solutions — Refer to Notes 1 and 3 to the financial statements Critical Audit Matter Description The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.
CONSOLIDATED STATEMENTS OF OPERATIONS Year ended September 30, 2024 2023 2022 (in thousands, except per common share data) Revenue: Product $ 304,540 $ 331,162 $ 290,170 Service 119,506 113,687 98,055 Total revenue 424,046 444,849 388,225 Cost of sales: Cost of product 144,790 161,451 140,615 Cost of service 25,537 27,233 26,027 Amortization 3,813 3,962 5,297 Total cost of sales 174,140 192,646 171,939 Gross profit 249,906 252,203 216,286 Operating expenses: Sales and marketing 83,278 81,681 70,366 Research and development 60,289 58,648 55,098 General and administrative 58,250 61,779 58,802 Change in fair value of contingent consideration — — (6,200) Total operating expenses 201,817 202,108 178,066 Operating income 48,089 50,095 38,220 Other expense, net: Interest expense, net (15,415) (25,236) (19,690) Debt issuance cost write off (9,722) — — Other (expense) income, net (94) 59 98 Total other expense, net (25,231) (25,177) (19,592) Income before income taxes 22,858 24,918 18,628 Income tax expense (benefit) 353 148 (755) Net income $ 22,505 $ 24,770 $ 19,383 Net income per common share: Basic $ 0.62 $ 0.69 $ 0.55 Diluted net income per common share: Diluted $ 0.61 $ 0.67 $ 0.54 Weighted average common shares: Basic 36,316 35,820 35,031 Diluted 36,984 36,869 35,995 The accompanying notes are an integral part of the consolidated financial statements. 38 Table of Contents ITEM 8.
CONSOLIDATED STATEMENTS OF OPERATIONS Year ended September 30, 2025 2024 2023 (in thousands, except per common share data) Revenue: Product $ 296,584 $ 304,540 $ 331,162 Service 133,637 119,506 113,687 Total revenue 430,221 424,046 444,849 Cost of sales: Cost of product 128,028 144,790 161,451 Cost of service 27,583 25,537 27,233 Amortization 3,933 3,813 3,962 Total cost of sales 159,544 174,140 192,646 Gross profit 270,677 249,906 252,203 Operating expenses: Sales and marketing 91,834 83,278 81,681 Research and development 63,659 60,289 58,648 General and administrative 58,894 58,250 61,779 Total operating expenses 214,387 201,817 202,108 Operating income 56,290 48,089 50,095 Other expense, net: Interest expense, net (6,319) (15,415) (25,236) Debt issuance cost write off — (9,722) — Other (expense) income, net (54) (94) 59 Total other expense, net (6,373) (25,231) (25,177) Income before income taxes 49,917 22,858 24,918 Income tax expense 9,113 353 148 Net income $ 40,804 $ 22,505 $ 24,770 Net income per common share: Basic $ 1.10 $ 0.62 $ 0.69 Diluted net income per common share: Diluted $ 1.08 $ 0.61 $ 0.67 Weighted average common shares: Basic 36,959 36,316 35,820 Diluted 37,739 36,984 36,869 The accompanying notes are an integral part of the consolidated financial statements. 39 Table of Contents ITEM 8.
We identified goodwill for the Cellular Routers, Smart Sense, and Ventus reporting units as a critical audit matter because of the significant judgments made by management to estimate the fair value of these reporting units.
We identified goodwill for the IoT Solutions reporting unit as a critical audit matter because of the significant judgments made by management to estimate the fair value of this reporting unit.
CONSOLIDATED BALANCE SHEETS As of September 30, 2024 2023 (in thousands, except share data) ASSETS Current assets: Cash and cash equivalents $ 27,510 $ 31,693 Accounts receivable, net 69,640 55,997 Inventories 53,357 74,396 Prepaid expenses and other current assets 3,940 4,112 Total current assets 154,447 166,198 Property, equipment and improvements, net 34,915 29,108 Identifiable intangible assets, net 252,909 277,084 Goodwill 342,774 341,593 Deferred tax assets 16,141 4,884 Operating lease right-of-use assets 10,207 12,876 Other non-current assets 3,682 3,788 Total assets $ 815,075 $ 835,531 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt $ — $ 15,523 Accounts payable 23,759 17,148 Income taxes payable 2,549 1,116 Accrued compensation 13,995 16,427 Unearned revenue 30,556 25,274 Current portion of operating lease liabilities 2,973 3,352 Other current liabilities 15,505 7,138 Total current liabilities 89,337 85,978 Income taxes payable 2,749 2,308 Deferred tax liabilities 1,308 1,812 Long-term debt 123,185 188,051 Operating lease liabilities 11,228 13,989 Other non-current liabilities 6,233 2,905 Total liabilities 234,040 295,043 Commitments and Contingencies (see Note 13 ) Stockholders’ equity: Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding — — Common stock, $.01 par value; 60,000,000 shares authorized; 42,996,725 and 42,501,150 shares issued 430 425 Additional paid-in capital 420,413 403,735 Retained earnings 247,350 224,845 Accumulated other comprehensive loss (23,744) (27,011) Treasury stock, at cost, 6,449,364 and 6,436,204 shares (63,414) (61,506) Total stockholders’ equity 581,035 540,488 Total liabilities and stockholders’ equity $ 815,075 $ 835,531 The accompanying notes are an integral part of the consolidated financial statements. 40 Table of Contents ITEM 8.
CONSOLIDATED BALANCE SHEETS As of September 30, 2025 2024 (in thousands, except share data) ASSETS Current assets: Cash and cash equivalents $ 21,902 $ 27,510 Accounts receivable, net 63,453 69,640 Inventories 38,911 53,357 Income taxes receivable 1,875 173 Prepaid expenses and other current assets 4,558 3,767 Total current assets 130,699 154,447 Property, equipment and improvements, net 34,022 34,915 Identifiable intangible assets, net 350,688 252,909 Goodwill 392,872 342,774 Deferred tax assets 5,131 16,141 Operating lease right-of-use assets 8,430 10,207 Other non-current assets 804 3,682 Total assets $ 922,646 $ 815,075 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable 35,871 23,759 Income taxes payable 522 2,549 Accrued compensation 16,261 13,995 Unearned revenue 40,671 30,556 Current portion of operating lease liabilities 3,361 2,973 Other current liabilities 11,124 15,505 Total current liabilities 107,810 89,337 Income taxes payable 3,261 2,749 Deferred tax liabilities 164 1,308 Long-term debt 159,152 123,185 Operating lease liabilities 8,671 11,228 Other non-current liabilities 7,511 6,233 Total liabilities 286,569 234,040 Commitments and Contingencies (see Note 13 ) Stockholders’ equity: Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding — — Common stock, $.01 par value; 60,000,000 shares authorized; 43,641,997 and 42,996,725 shares issued 436 430 Additional paid-in capital 437,391 420,413 Retained earnings 288,154 247,350 Accumulated other comprehensive loss (23,794) (23,744) Treasury stock, at cost, 6,471,074 and 6,449,364 shares (66,110) (63,414) Total stockholders’ equity 636,077 581,035 Total liabilities and stockholders’ equity $ 922,646 $ 815,075 The accompanying notes are an integral part of the consolidated financial statements. 41 Table of Contents ITEM 8.
This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing 35 Table of Contents audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rates and forecasts of future revenue growth rate, gross margins, EBITDA margins and revenue multiples within the Cellular Routers reporting unit and EBITDA multiples within Ventus reporting unit.
This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of this asset.
Removed
The determination of the fair value using the market approach requires management to make significant estimates and assumptions related to revenue multiples within the Cellular Routers reporting unit and EBITDA multiples within the Ventus reporting unit. Changes in these assumptions could have a significant impact on the fair value.
Added
Changes in these assumptions could have a significant impact on the fair value. The goodwill balance was $343.1 million as of June 30, 2025, of which $167.6 million was allocated to the IoT Solutions reporting unit.
Removed
The goodwill balance was $341.9 million as of June 30, 2024, of which $32.7 million, $48.9 million, and $118.6 million was allocated to the Cellular Routers, Smart Sense, and Ventus reporting units, respectively.
Added
Acquisitions – Jolt Software, Inc. – Customer Relationship Intangible Asset – Refer to Note 1 and Note 2 to the financial statements Critical Audit Matter Description The Company completed the acquisition of Jolt Software, Inc. (“Jolt”) for $148.5 million on August 18, 2025. The Company accounted for the acquisition under the acquisition method of accounting for business combinations.
Removed
Opinion on the financial statements We have audited the accompanying consolidated balance sheet of Digi International Inc.
Added
Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including a customer relationship intangible asset of $99 million. Management estimated the fair value of the customer relationship intangible asset using the multi-period excess earnings method, which is a specific discounted cash flow method.
Removed
(a Delaware corporation) and subsidiaries (the “Company”) as of September 30, 2022 (not presented herein), the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the year then ended, and the related notes and consolidated financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).
Added
The fair value determination of the intangible asset required management to make significant estimates and assumptions related to the selection of the discount rate and attrition rate, and the determination of future cash flows including revenue growth rates and EBITDA margins.
Removed
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Added
We identified the fair value determination of the customer relationship intangible asset of Jolt as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of this asset.
Removed
Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit.
Added
Specific assumptions that required a high degree of judgment included the selection of the discount rate and attrition rate, and the determination of future cash flows including revenue growth rates and EBITDA margins. 37 Table of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the selection of the discount rate and attrition rate, and the determination of future cash flows including revenue growth rates and EBITDA margins included the following, among others: • We tested the effectiveness of controls over the valuation of the customer relationship, including management’s controls over the selection of the discount rate and attrition rate, and the determination of future cash flows including revenue growth rates and EBITDA margins. • With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodologies, attrition rate and discount rate by: ◦ Testing the source information underlying the determination of the attrition rate and discount rate and testing the mathematical accuracy of the calculations. ◦ Obtaining an understanding of the methodology used in determining the fair value of customer relationship and determining whether the methodology is acceptable in accordance with applicable accounting and valuation standards. ◦ Developing a range of independent estimates and comparing those to the discount rate selected by management. • We tested management’s determination of future cash flows including revenue growth rates and EBITDA margins by comparing the forecasts to: ◦ Historical revenue growth rates and EBITDA margins of Jolt. ◦ Forecasted information included in industry reports for the Company and certain of its peer companies. • We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit. /s/ Deloitte & Touche LLP Minneapolis, Minnesota November 21, 2025 We have served as the Company’s auditor since 2022. 38 Table of Contents ITEM 8.
Removed
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB.
Added
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (CONTINUED) DIGI INTERNATIONAL INC.
Removed
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Removed
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
Removed
We believe that our audit provides a reasonable basis for our opinion. /s/ GRANT THORNTON LLP We served as the Company’s auditor from 2016 to 2022. Cincinnati, Ohio November 23, 2022 37 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (CONTINUED) DIGI INTERNATIONAL INC.

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