DIGI INTERNATIONAL INC
For the period ended Mar 31, 2025. Filed May 7, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 7, 2025
DGII$63.21+1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-12-31; filed 2025-02-05.
0000854775-25-000006
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0000854775-25-000013
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 92 previous paragraphs and 100 current paragraphs.
59 unchanged; 31 reworded; 6 added; 2 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 9 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
•Gross profit margin was 62.1%, an increase of 420 basis points.
Current report
In addition, like many companies we are monitoring the impact recently announced tariffs by governments around the world may have on our business. Given the fluidity of these announcements and their ability to be changed, the exact impact of tariffs on our future results is not certain.
Current report
•a one-time $2.2 million gain on the sale of assets in the second quarter of fiscal 2024,
Current report
•and a $6.3 million accrual for litigation expense in the second quarter of fiscal 2024.
Current report
•a $2.2 million decrease in proceeds from the sale of intangible assets,
Current report
•and a $3.8 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.
Removed paragraphs (2)
Previous report
•Gross profit margin was 62.0%, an increase of 440 basis points.
Previous report
•and an increase in taxes paid for net share settlement of share-based payment options and awards.
Reworded paragraphs (31)
Previous wording
This report contains forward-looking statements, which are statements based on management’s current expectations and assumptions. These statements often can be identified by the use of forward-looking terminology such as "assume," "believe," "continue," "estimate," "expect," "intend," "may," "plan," "potential," "project," "should," or "will" or the negative thereof or other variations thereon or similar terminology. 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 others, these include risks related to 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, risks related to cybersecurity, risks arising from the present military conflicts 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.
Current wording
This report contains forward-looking statements, which are statements based on management’s current expectations and assumptions. These statements often can be identified by the use of forward-looking terminology such as "assume," "believe," "continue," "estimate," "expect," "intend," "may," "plan," "potential," "project," "should," or "will" or the negative thereof or other variations thereon or similar terminology. 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 others, these include risks related to 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, risks related to cybersecurity, risks arising from the present military conflicts 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.
Previous wording
These and other risks, uncertainties and assumptions identified from time to time in our filings with the United States Securities and Exchange Commission, including without limitation, those set forth in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended September 30, 2024, subsequent filings, as well as this Quarterly Report on Form 10-Q and other filings, could cause our actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. 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.
Current wording
These and other risks, uncertainties and assumptions identified from time to time in our filings with the United States Securities and Exchange Commission, including without limitation, those set forth in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended September 30, 2024, subsequent filings, as well as this Quarterly Report on Form 10-Q and other filings, could cause our actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. 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. 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.
Previous wording
We utilize many financial, operational, and other metrics to evaluate our financial condition and financial performance. Below we highlight the metrics for the first quarter of fiscal 2025 that we feel are most important in these evaluations, with comparisons to the first quarter of fiscal 2024:
Current wording
We utilize many financial, operational, and other metrics to evaluate our financial condition and financial performance. Below we highlight the metrics for the second quarter of fiscal 2025 that we feel are most important in these evaluations, with comparisons to the second quarter of fiscal 2024:
Previous wording
•Consolidated revenue was $104 million, a decrease of 2%.
Current wording
•Consolidated revenue was $105 million, a decrease of 3%.
Previous wording
•Consolidated gross profit was $64 million, an increase of 5%.
Current wording
•Consolidated gross profit was $65 million, an increase of 4%.
Previous wording
•Net income was $10 million, compared to a net loss of $3 million.
Current wording
•Net income was $10 million, compared to $4 million.
Previous wording
•Net income per diluted share was $0.27, compared to a net loss per diluted share of $0.08 (which included a $0.26 impact from the term B debt issuance cost write-off).
Current wording
•Net income per diluted share was $0.28, compared to a net loss per diluted share of $0.11.
Previous wording
•Adjusted net income and adjusted net income per share was $19 million, or $0.50 per diluted share, respectively, compared to $18 million, or $0.48 per diluted share, respectively.
Current wording
•Adjusted net income and adjusted net income per share was $19 million, or $0.51 per diluted share, respectively, compared to $18 million, or $0.49 per diluted share, respectively.
Previous wording
•Adjusted EBITDA was $26 million, or 24.7% of revenue, compared to $23 million or 22.0% of revenue.
Current wording
•Adjusted EBITDA was $26 million, or 24.9% of revenue, compared to $24 million or 22.1% of revenue.
Previous wording
•Annualized Recurring Revenue (ARR) was $120 million at quarter end, an increase of 11%.
Current wording
•Annualized Recurring Revenue (ARR) was $123 million at quarter end, an increase of 12%.
Previous wording
In recent periods, we have experienced longer than expected sales cycles with respect to many contracts and projects of potential significance. We believe this is related to macroeconomic conditions and are uncertain as to when and to what degree sales cycles will return to more normal conditions, but expect this to adversely impact our results for at least the remainder of fiscal 2025.
Current wording
In recent periods, we have experienced longer than expected sales cycles with respect to many contracts and projects of potential significance. We believe this is related to macroeconomic conditions and are uncertain as to when and to what degree sales cycles will return to more normal conditions, but expect this may adversely impact our results for at least the remainder of fiscal 2025.
Previous wording
IoT Products & Services revenue decreased $4.2 million for the three months ended December 31, 2024, as compared to the same period in the prior fiscal year. The decrease consisted of a $4.7 million decline in one-time sales, with no material impact from pricing. This was driven by lower demand for some products, as some customers bled down inventory stockpiled from when supply chains were stressed. This decrease was partially offset by $0.5 million of recurring revenue growth.
Current wording
IoT Products & Services revenue decreased $5.6 million for the three months ended March 31, 2025, as compared to the same period in the prior fiscal year. The decrease consisted of a $6.8 million decline in one-time sales, with no material impact from pricing. This was driven by lower demand for some products, as some customers are bleeding down inventory stockpiled from when supply chains were stressed, partially offset by increased demand for some products from new project-based customer initiatives. This decrease was partially offset by $1.2 million of recurring revenue growth.
Previous wording
IoT Solutions revenue increased $2.0 million for the three months ended December 31, 2024, as compared to the same period in the prior fiscal year. The increase consisted of a $2.1 million increase in recurring revenue, , driven by growth in both SmartSense and Ventus, partially offset by a $0.1 million decrease in one-time sales.
Current wording
IoT Solutions revenue increased $4.4 million for the six months ended March 31, 2025, as compared to the same period in the prior fiscal year. The increase consisted of a $4.5 million increase in recurring revenue, driven by growth in both SmartSense and Ventus, partially offset by a $0.1 million decrease in one-time sales.
Previous wording
ARR was $120 million as of December 31, 2024, compared to $108 million as of December 31, 2023. IoT Products & Services ARR was $27 million as of December 31, 2024, compared to $23 million as of December 31, 2023. This increase was due to growth in the subscription base across extended warranty offerings and remote management platforms. IoT Solutions ARR was $93 million as of December 31, 2024, compared to $85 million as of December 31, 2023, driven by growth in both SmartSense and Ventus.
Current wording
ARR was $123 million as of March 31, 2025, compared to $110 million as of March 31, 2024. IoT Products & Services ARR was $28 million as of March 31, 2025, compared to $23 million as of March 31, 2024. This increase was due to growth in the subscription base across remote management platforms and extended warranty offerings. IoT Solutions ARR was $95 million as of March 31, 2025, compared to $87 million as of March 31, 2024, driven by growth in both SmartSense and Ventus.
Previous wording
IoT Products & Services gross profit margin increased 510 basis points for the three months ended December 31, 2024 as compared to the same period in the prior fiscal year. This increase was driven by a favorable margin mix among product sales partially offset by an increase in inventory related adjustments.
Current wording
IoT Products & Services gross profit margin increased 490 basis points for the three months ended March 31, 2025 as compared to the same period in the prior fiscal year. This increase was driven by a favorable margin mix among product sales partially offset by an increase in inventory related adjustments.
Previous wording
The IoT Solutions gross profit margin increased 60 basis points for the three months ended December 31, 2024 as compared to the same period in the prior fiscal year. This increase was the result of growth in higher margin ARR subscription revenues.
Current wording
The IoT Solutions gross profit margin increased 40 basis points for the three months ended March 31, 2025 as compared to the same period in the prior fiscal year. This increase was the result of growth in higher margin ARR subscription revenues.
Previous wording
The $2.1 million increase in operating expenses for the three months ended December 31, 2024, as compared to the same period in the prior fiscal year was due to a $2.9 million increase in labor expenses and a $0.8 million decrease in non-labor expenses.
Current wording
The $3.0 million decrease in operating expenses for the three months ended March 31, 2025, as compared to the same period in the prior fiscal year was due to a $6.3 million litigation reserve increase in the second fiscal quarter of fiscal 2024 that did not reoccur, partially offset by a $2.1 million gain on the sale of an intangible asset in the second fiscal quarter of fiscal 2024 that did not reoccur and a $1.2 million increase in non-labor expenses. The $0.9 million decrease in operating expenses for the six months ended March 31, 2025, as compared to the same period in the prior fiscal year was due to a $6.3 million litigation reserve increase in the second fiscal quarter of fiscal 2024 that did not reoccur, partially offset by a $2.1 million gain on the sale of an intangible asset in the second fiscal quarter of fiscal 2024 that did not reoccur and a $2.9 million increase in labor expenses and a $0.4 million increase in non-labor expenses.
Previous wording
Other expense, net, decreased $13.1 million for the three months ended December 31, 2024, as compared to the same period in the prior fiscal year. This decrease 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 5 to the condensed consolidated financial statements for additional information).
Current wording
Other expense, net, decreased $2.4 million for the three months ended March 31, 2025, as compared to the same period in the prior fiscal year. Other expense, net, decreased $15.5 million for the six months ended March 31, 2025, as compared to the same period in the prior fiscal year. These decreases were 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 5 to the condensed consolidated financial statements for additional information).
Previous wording
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Current wording
Reconciliation of Net Income to Adjusted EBITDA
Previous wording
Reconciliation of Net Income (Loss) and Net Income (Loss) per Diluted Share to
Current wording
Reconciliation of Net Income and Net Income per Diluted Share to
Previous wording
(2)For the three months ended December 31, 2024 and 2023, discrete tax benefits are a result of changes in excess tax benefits recognized on stock compensation.
Current wording
(2)For the three andsix months ended March 31, 2025 and 2024, discrete tax benefits are a result of changes in excess tax benefits recognized on stock compensation.
Previous wording
Our condensed consolidated statements of cash flows for the three months ended December 31, 2024 and 2023 are summarized as follows:
Current wording
Our condensed consolidated statements of cash flows for the six months ended March 31, 2025 and 2024 are summarized as follows:
Previous wording
Cash flows from operating activities increased $11.0 million as a result of:
Current wording
Cash flows from operating activities increased $24.3 million as a result of:
Previous wording
•a $13.1 million increase in net income in the first quarter of fiscal 2025,
Current wording
•a $19.6 million increase in net income in the first half of fiscal 2025,
Previous wording
•a $7.0 million decrease in net operating assets for the first quarter of fiscal 2025 compared to a $0.4 million decrease in the first quarter of fiscal 2024,
Current wording
•a $11.5 million decrease in net operating assets for the first six months of fiscal 2025 compared to a $4.6 million increase in the first six months of fiscal 2024,
Previous wording
•and a $0.5 million decrease in deferred income tax benefit for the first quarter of fiscal 2025 compared to a $0.3 million decrease in the first quarter of fiscal 2024.
Current wording
•and a $0.4 million increase in deferred income tax benefit for the first six months of fiscal 2025 compared to a $1.9 million increase in the first six months of fiscal 2024.
Previous wording
Cash flows used in investing activities decreased $0.3 million as a result of:
Current wording
Cash flows used in investing activities decreased $2.6 million as a result of:
Previous wording
•a $0.3 million decrease in purchases of property, equipment, improvements and certain other intangible assets.
Current wording
•and a $0.3 million increase in purchases of property, equipment, improvements and certain other intangible assets.
Previous wording
Cash flows used in financing activities increased $10.2 million as a result of:
Current wording
Cash flows used in financing activities increased $13.3 million as a result of:
Previous wording
•debt payments of $28.3 million in the first quarter of fiscal 2025, compared to debt payments of $233.0 million in the first quarter of fiscal 2024
Current wording
•debt payments of $53.3 million in the first half of fiscal 2025, compared to debt payments of $256.0 million in the first half of fiscal 2024
Previous wording
•and an increase in proceeds from stock option plan transactions and employee stock purchase plan transactions.
Current wording
•and a $1.7 million increase in proceeds from stock option exercises and employee stock purchase plan transactions.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
IoT Products & Services revenue decreased $9.8 million for the six months ended March 31, 2025, as compared to the same period in the prior fiscal year. 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, as some customers are bleeding down inventory stockpiled from when supply chains were stressed, partially offset by increased demand for some products from new project-based customer initiatives. This decrease was partially offset by $1.7 million of recurring revenue growth.
Current report — wording carried from elsewhere
IoT Solutions revenue increased $2.4 million for the three months ended March 31, 2025, as compared to the same period in the prior fiscal year. The increase consisted of a $2.4 million increase in recurring revenue, driven by growth in both SmartSense and Ventus.
Current report — wording carried from elsewhere
IoT Products & Services gross profit margin increased 500 basis points for the six months ended March 31, 2025 as compared to the same period in the prior fiscal year. This increase was driven by a favorable margin mix among product sales partially offset by an increase in inventory related adjustments.
Current report — wording carried from elsewhere
The IoT Solutions gross profit margin increased 50 basis points for the six months ended March 31, 2025 as compared to the same period in the prior fiscal year. This increase was the result of growth in higher margin ARR subscription revenues.