DIGI INTERNATIONAL INC

3. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS, NET

Identifiable Intangible Assets, Net

Amortizable identifiable intangible assets, net as of September 30, 2025 and 2024 were comprised of the following (in thousands):

Amortization expense is included in our consolidated statements of operations in cost of sales and general and administrative expense. Amortization expense in cost of sales includes amortization for purchased and core technology and certain patents and trademarks.

Amortization expense for fiscal years 2025, 2024 and 2023 was as follows (in thousands):

Estimated amortization expense for the next five fiscal years is as follows (in thousands):

The changes in the carrying amount of goodwill by reportable segments are (in thousands):

3. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS, NET (CONTINUED)

No goodwill impairment has been recorded in any period presented. Goodwill represents the excess of cost over the fair value of net identifiable assets acquired. Goodwill is quantitatively tested for impairment on an annual basis as of June 30, or more frequently if events or circumstances occur which could indicate impairment. We continue to havetwo reportable and operating segments, our IoT Products & Services segment and our IoT Solutions segment (see Note 4). These two reporting units were included in our fiscal 2025 annual impairment test.

For our quantitative goodwill impairment tests, we determine the estimated fair value of each reporting unit and compare it to the carrying value of the reporting unit, including goodwill. If the carrying amount of a reporting unit is higher than its estimated fair value, then an impairment loss must be recognized for the excess. Fair values for the two reporting units were each estimated on a standalone basis using a weighted combination of the income approach and market approach.

The income approach indicates the fair value of a business based on the value of the cash flows the business or asset can be expected to generate in the future. A commonly used variation of the income approach used to value a business is the discounted cash flow (“DCF”) method. The DCF method is a valuation technique in which the value of a business is estimated on the earnings capacity, or available cash flow, of that business. Earnings capacity represents the earnings available for distribution to stockholders after consideration of the reinvestment required for future growth. Significant judgment is required to estimate the amount and timing of future cash flows for each reporting unit and the relative risk of achieving those cash flows. Key assumptions used in the analysis were related to the determination of discount rates and forecasts of future revenue, margins and earnings before income taxes, depreciation and amortization margins. The market approach indicates the fair value of a business or asset based on a comparison of the business or asset to comparable publicly traded companies or assets and transactions in its industry as well as our prior acquisitions. This approach can be estimated through the guideline company method. This method indicates fair value of a business by comparing it to publicly traded companies in similar lines of business. After identifying and selecting the guideline companies, we make judgments about the comparability of the companies based on size, growth rates, profitability, risk, and return on investment in order to estimate market multiples. These multiples are then applied to the reporting units to estimate a fair value.

Assumptions and estimates to determine fair values under the income and market approaches are complex and often subjective. They can be affected by a variety of factors. These include external factors such as industry and economic trends. They also include internal factors such as changes in our business strategy and our internal forecasts. Changes in circumstances or a potential event could negatively affect the estimated fair values. We will continue to monitor potential impacts to our assumptions, as any changes could potentially affect our cash flows and market capitalization. If our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of one or more of our reporting units, we may be required to record future impairment charges for goodwill.

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. At June 30, 2025, the fair value of goodwill exceeded the carrying value for each reporting units and no impairment was recorded.

4. SEGMENT INFORMATION AND MAJOR CUSTOMERS

We havetwo reportable segments that also serve as our operating segments: (i) IoT Products & Services and (ii) IoT Solutions. This determination was made by considering both qualitative and quantitative information. The qualitative information included, but was not limited to, the following: each segment is led by a single segment manager that reports to the Chief Operating Decision Maker (CODM), the nature of the products and services and customers differ between thetwo segments, discrete financial information is available including revenue and operating income for both segments and the CODM is reviewing both segments’ financial information separately to make decisions about the allocation of resources. IoT Products & Services derives revenue from the sale of products and services that help original equipment manufacturers ("OEMs"), enterprise and government customers create and deploy, secure IoT connectivity solutions. IoT Solutions derives revenue from the sale of software-based services that are enabled through the use of connected devices that utilize cellular communications. Our CEO is our CODM. In the fourth quarter of fiscal 2025, the metric he uses to measure profitability within each of our reportable segments was changed from segment gross profit to operating income.

Summary operating results for each of our segments were as follows (in thousands):

*IoT Products & Services other segment items include cost of sales and operating expenses. IoT Solutions other segment items include cost of sales and operating expenses.

The following table provides a reconciliation of segment operating income to consolidated income before taxes:

*Total other expense, net primarily includes interest expense, net in the fiscal years ended September 30, 2025 and 2023 and interest expense, net and debt issuance cost write off in the fiscal year ended September 30, 2024.

4. SEGMENT INFORMATION AND MAJOR CUSTOMERS (CONTINUED)

Total expended for property, plant and equipment was as follows (in thousands):

• Excluded from this amount is $7.8 million, $12.3 million and $3.9 million of transfers of inventory to property plant and equipment for subscriber assets for the year ended September 30, 2025, 2024 and 2023, respectively.

Total assets for each of our segments were as follows (in thousands):

*Unallocated consists of cash and cash equivalents.

Net property, equipment and improvements by geographic location were as follows (in thousands):

Our U.S. export sales represented 20.5%,28.7% and 27.2% of revenue for the fiscal years ended September 30, 2025, 2024 and 2023, respectively.

5. SELECTED BALANCE SHEET DATA

The following table shows selected balance sheet data (in thousands):

6. INDEBTEDNESS

On December 7, 2023, Digi entered into a credit agreement (the “Credit Agreement”) with BMO Bank N.A. (“BMO”), as administrative and collateral agent, BMO Capital Markets Corp., BofA Securities, Inc. and MUFG Bank, Ltd., as joint lead arrangers and joint bookrunners, and the several banks and other financial institutions or entities from time to time party thereto as lenders (the “Lenders”). The Credit Agreement provides Digi with a senior secured credit facility (the “2023 Credit Facility”). The 2023 Credit Facility includes a $250 million senior secured revolving credit facility (the “Revolving Loan”), with an uncommitted accordion feature that provides for additional borrowing capacity of up to the greater of $95 million or one hundred percent of trailing twelve month adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA"). The 2023 Credit Facility also contains a $10 million letter of credit sublimit and $10 million swingline sub-facility. Digi may use the proceeds of the 2023 Credit Facility in the future for general corporate purposes.

Digi borrowed a total of $215 million under the 2023 Credit Facility to repay all obligations and to pay related fees and expenses under the Third Amended and Restated Credit Agreement dated as of December 22, 2021 (the “2021 Credit Facility”), by and among Digi, as the borrower, BMO, as administrative agent and collateral agent, BMO Capital Markets Corp., as sole lead arranger and bookrunner, and the other lenders from time-to-time party thereto. The 2021 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.

Borrowings under the 2023 Credit Facility bear interest at a rate per annum equal to Term SOFR with a floor of 0.00% for an interest period of one, three, or six months as selected by Digi, reset at the end of the selected interest period (or a replacement benchmark rate if Term SOFR is no longer available) plus the applicable margin or a base rate plus the applicable margin. The base rate is determined by reference to the highest of BMO’s prime rate, the rate determined by BMO to be the average rate of Federal funds in the secondary market plus 0.50%, or one-month SOFR plus 1.00%. The applicable margin for loans under the 2023 Credit Facility is in a range of 1.75% to 2.75% for Term SOFR loans and 0.75% to 1.75% for base rate loans, depending on Digi’s total net leverage ratio. All borrowings from October through February 13, 2025 were made at Term SOFR for a one-month interest election period plus an applicable margin of 2.25%. All borrowings in the period after that date were made at Term SOFR for a six-month interest election period plus an applicable margin of 1.75%. Our weighted average interest rate for our 2023 Credit Facility was 6.00% as of September 30, 2025.

In addition to paying interest on the outstanding principal, Digi is required to pay a commitment fee on the unutilized commitments under the 2023 Credit Facility. The commitment fee is between 0.20% and 0.35% depending on Digi’s total net leverage ratio. Our weighted average Revolving Loan commitment fee was 0.20% as of September 30, 2025. The Credit Facility is secured by substantially all of the property of Digi and its domestic subsidiaries.

The debt issuance costs and remaining balance under the 2021 Credit Facility totaling $9.7 million at December 7, 2023 were written off and included in other expenses upon the entry into the Credit Agreement. Digi incurred an additional $1.3 million in debt issuance costs upon entry into the Credit Agreement, with this amount amortized over the term of the Credit Agreement and reported in interest expense.

The Revolving Loan is due in a lump sum payment at maturity December 7, 2028, if any amounts are drawn. The fair value of the Revolving Loan approximated carrying value at September 30, 2025.

Digi made payments against the Revolving Loan of $114.3 million and $91.1 million in twelve months ended September 30, 2025 and 2024, respectively.

Digi made early payments against the term loan under the 2021 Credit Facility of $18.9 million in the twelve months ended September 30, 2023.

On August 18, 2025 Digi drew $150.0 million on the Revolving Loan to fund the acquisition of Jolt (see Note 2 for additional information)

6. INDEBTEDNESS (CONTINUED)

The following table is a summary of our long-term indebtedness (in thousands):

Covenants and Security Interest

The Credit Agreement requires Digi to maintain a minimum interest coverage ratio of 3.00 to 1.00 and a total net leverage ratio not to exceed 3.00 to 1.00, with certain exceptions for a covenant holiday of up to 3.50 to 1.00 after certain material acquisitions. The total net leverage ratio is defined as the ratio of Digi’s consolidated total funded indebtedness minus unrestricted cash as of such date up to a maximum amount not to exceed $50 million, to consolidated EBITDA for such period. The Credit Agreement also contains other customary affirmative and negative covenants, including covenants that restrict the ability of Digi and its subsidiaries to incur additional indebtedness, dispose of significant assets, make certain investments, including any acquisitions other than permitted acquisitions, make certain restricted payments, enter into sale and leaseback transactions or grant additional liens on its assets, subject to certain limitations. Amounts borrowed under the 2023 Credit Facility are secured by substantially all of our assets.

7. PRODUCT WARRANTY OBLIGATION

The following table summarizes the activity associated with the product warranty accrual (in thousands) and is listed on our consolidated balance sheets within other current liabilities:

8. LEASES

All of our leases are operating leases and primarily consist of leases for office space. For any lease with an initial term in excess of twelve months, the related lease assets and lease liabilities are recognized on our consolidated balance sheets as either operating or financing leases at the inception of an agreement where it is determined that a lease exists. We have lease agreements that contain both lease and non-lease components. We have elected to combine lease and non-lease components for all classes of assets. Leases with an initial term of twelve months or less are not recorded on our consolidated balance sheets. Instead we recognize lease expense for these leases on a straight-line basis over the lease term.

Operating lease assets represent the right to use an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments. These assets and liabilities are recognized based on the present value of future payments over the lease term at the commencement date. We generally use a collateralized incremental borrowing rate based on information available at the commencement date, including the lease term, in determining the present value of future payments. When determining our right-of-use asset, we generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised.

Our leases typically require payment of real estate taxes and common area maintenance and insurance. These components comprise the majority of our variable lease cost and are excluded from the present value of our lease obligations. Fixed payments may contain predetermined fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.

The following table shows the supplemental balance sheet information related to our leases (in thousands):

The following were the components of our lease cost which is recorded in both cost of goods sold and selling, general and administrative expense (in thousands):

The following table presents supplemental information related to operating leases (in thousands):

8. LEASES (CONTINUED)

The table below reconciles the undiscounted cash flows for each of the first five years as well as all the remaining years to the operating lease liabilities recorded on the Consolidated Balance Sheet as of September 30, 2025 (in thousands):

9. REVENUE

Revenue Disaggregation

The following table summarizes our revenue by geographic location of our customers:

The following table summarizes our revenue by the timing of revenue recognition:

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.

9. REVENUE (CONTINUED)

Contract Balances

Contract Related Assets

Our contract related assets consist of subscriber assets. Subscriber assets are equipment that we provide to customers pursuant to subscription-based contracts. In these cases, we retain the ownership of the equipment a customer uses and charge the customer subscription fees to receive our end-to-end solutions. The total net book value of subscriber assets of $22.9 million and $23.6 million as of September 30, 2025 and September 30, 2024, respectively, are included in property, equipment and improvements, net. Depreciation expense for these subscriber assets was $8.6 million and $5.3 million for the twelve months ended September 30, 2025 and 2024, respectively. We depreciate the cost of this equipment over its useful life and include these expenses in cost of sales.

Contract Assets

Contract assets at Digi consist of products and services that have been fulfilled, but for which revenue has not yet been recognized. Our contract asset balances were immaterial as of September 30, 2025 and September 30, 2024.

Contract Liabilities

The timing of revenue recognition may differ from the timing of invoicing to customers. Customers are invoiced for subscription services on a monthly, quarterly or annual basis. Contract liabilities consist of unearned revenue related to annual or multi-year contracts for subscription services and related implementation fees, as well as product sales that have been invoiced, but not yet fulfilled.

Our contract liabilities were $48.2 million and $36.8 million at September 30, 2025 and 2024, respectively.

Of the $36.8 million and $27.9 million balances as of September 30, 2024 and 2023, Digi recognized $29.7 million and $20.0 million as revenue in the twelve months ended September 30, 2025 and 2024, respectively.

Remaining Performance Obligation

As of September 30, 2025, we had approximately $203.5 million of remaining performance obligations on contracts with an original duration of one year or more. We expect to recognize revenue on approximately $97.3 million of remaining performance obligations over the next 12 months. Revenue from the remaining performance obligations we expect to recognize over a range oftwo tofive years.

10. INCOME TAXES

The components of income before income taxes are (in thousands):

The components of the income tax expense are (in thousands):

Net deferred tax liability consists of (in thousands):

As of September 30, 2025, we had $2.8 million of tax carryforwards (net of reserves) related to state research and development tax credits. We also had $38.7 million of US federal net operating losses, $37.3 million of State net operating losses, U.S. foreign tax credits of $0.1 million and foreign tax credits of $0.1 million. The increase in net operating losses is primarily from the acquisition of Jolt. Digi is currently analyzing the impacts of section 382 on the utilization of these net operating losses. The majority of our state research and development tax credits have a 15-year carryforward period. The majority of our non-U.S. net operating losses and tax credit carryforwards have an unlimited carryforward period. Our non-U.S. tax credit carryforwards will expire in 2034. Our valuation allowance for certain U.S. and foreign attributes was $3.2 million and $3.3 million at September 30, 2025 and September 30, 2024, respectively. The decrease in valuation allowance is primarily the result of reduction in reserves against R&D credits. The deferred tax assets realized could vary if there are differences in the timing or amount of future reversals of existing deferred tax liabilities or changes in the amounts of future taxable income. If future taxable income projections are not realized, an additional valuation allowance may be required. This would be reflected as income tax expense at the time that any such change in future taxable income is determined.

The reconciliation of the statutory federal income tax amount to our income tax benefit is (in thousands):

A reconciliation of the beginning and ending amount of unrecognized tax benefits is (in thousands):

The total amount of unrecognized tax benefits ("UTB") at September 30, 2025 that, if recognized, would affect our effective tax rate was $4.1 million. We expect that it is reasonably possible that the total amounts of UTB will decrease by approximately $0.1 million over the next 12 months due to the expiration of various statutes of limitations. Of the $4.3 million of UTB, $3.0 million is included in non-current income taxes payable and $1.3 million is included with non-current deferred tax assets on the consolidated balance sheets at September 30, 2025.

We recognize interest and penalties related to income tax matters in income tax expense. During fiscal 2025 and 2024, there were insignificant amounts of interest and penalties related to income tax matters in income tax expense. We accrued $0.1 million in interest and penalties related to unrecognized tax benefits as of September 30, 2025 and 2024. These accrued interest and penalties are included in our non-current income taxes payable on our consolidated balance sheets.

We operate in multiple tax jurisdictions both in the U.S. and outside of the U.S. and face audits from various tax authorities regarding transfer pricing, tax credits, and other matters. Accordingly we must determine the appropriate allocation of income to each of these jurisdictions. This determination requires us to make several estimates and assumptions. Tax audits associated with the allocation of this income, and other complex issues, may require an extended period of time to resolve and may result in adjustments to our income tax balances in those years that are material to our consolidated balance sheets and results of operations.

We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to state and local or non-U.S. income tax examinations by tax authorities for years before fiscal year 2021.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the U.S., which contains a broad range of tax reform provisions affecting businesses. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. This legislation had no material impact to our consolidated financial statements for the fiscal year ended September 30, 2025.

At September 30, 2025, the majority of undistributed foreign earnings were taxed under the one time transition tax and the global intangible low-taxed income ("GILTI") provision of the Tax Cuts and Jobs Act of 2017. Additionally, the previously un-taxed accumulated undistributed foreign earnings from prior fiscal years are still permanently reinvested and, as such, we have not accrued additional U.S. tax. It is our position that the earnings of our foreign subsidiaries are to be reinvested indefinitely to fund current operations and provide for future international expansion opportunities and only repatriate earnings to the extent that U.S. taxes have already been recorded. As of September 30, 2025, we are permanently reinvested with respect to previously non-taxed accumulated earnings in all jurisdictions.

Although we have no current need to repatriate historical foreign earnings that have not been taxed in the U.S., if we change our assertion from indefinitely reinvesting undistributed foreign earnings, we would have to accrue applicable taxes. The amount of any taxes and the application of any tax credits would be determined based on the income tax laws at the time of such repatriation. Under current tax law, we estimate the unrecognized tax liability to be immaterial.

11. STOCK-BASED COMPENSATION

Stock-based awards granted in 2025 were granted under the Digi International Inc. 2021 Omnibus Incentive Plan (as amended and restated, the "2021 Plan"). Shares subject to awards under the 2021 Plan or any prior plans that are forfeited, canceled, returned to us for failure to satisfy vesting requirements, settled in cash or otherwise terminated without payment also will be available for grant under the 2021 Plan. The authority to grant options under the 2021 Plan and set other terms and conditions rests with the Compensation Committee of the Board of Directors.

The 2021 Plan authorizes the issuance of up to 3,500,000 common shares in connection with awards of stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based full value awards or other stock-based awards. Eligible participants include our employees, our affiliates, non-employee directors of our Company and any consultant or advisor who is a natural person and provides services to us or our affiliates. Options that have been granted under the 2021 Plan typically vest over afour-year period and will expire if unexercised after seven years from the date of grant. Restricted stock unit awards ("RSUs") that have been granted to directors typically vest inone year. RSUs that have been granted to executives and employees typically vest in January over afour-year period. Performance stock unit awards ("PSUs") that have been granted to an executive will vest based on achievement of a cumulative adjusted earnings per share metric measured over athree-year period. Share-based compensation expenses recorded for this performance award is reevaluated at each reporting period based on the probability of achievement of the goal. The Amended Plan is scheduled to expire on January 28, 2032. Options under the Amended Plan can be granted as either incentive stock options or non-statutory stock options. The exercise price of options and the grant date price of RSUs and PSUs is determined by our Compensation Committee but will not be less than the fair market value of our common stock based on the closing price as of the date of grant. Upon exercise of options or settlement of vested RSUs or PSUs, we issue new shares of stock. As of September 30, 2025, there were approximately 3,356,219 shares available for future grants under the Amended Plan.

Stock-based awards granted in 2024 were granted under the 2021 Plan before amendments were made to increase the number of authorized shares. There were no other material changes to the plan made in the amendments.

Cash received from the exercise of stock options was $3.5 million, $3.0 million and $3.9 million for the years ended September 30, 2025, 2024 and 2023, respectively. Our stock option plans allow the net exercise of options. Shares with a value of $3.2 million, $0.7 million and $0.2 million were forfeited to satisfy tax withholding for the years ended September 30, 2025, 2024 and 2023, respectively.

Our equity plans and corresponding forms of award agreements generally have provisions allowing employees to elect to satisfy tax withholding obligations through the delivery of shares, having us retain a portion of shares issuable under the award or paying cash to us for the withholding. During fiscal 2025, 2024 and 2023 our employees forfeited 113,504,114,889 and 106,012 shares, respectively in order to satisfy $3.7 million, $2.9 million and $4.1 million, respectively, of withholding tax obligations related to stock-based compensation, pursuant to terms of awards under our board and shareholder-approved compensation plans.

We sponsor an Employee Stock Purchase Plan, as amended and restated as of December 10, 2019 (the "Purchase Plan"), covering all domestic employees with at least 90 days of continuous service and who are customarily employed at least 20 hours per week. The Purchase Plan allows eligible participants the right to purchase common stock on a quarterly basis at the lower of 85% of the market price at the beginning or end of each three-month offering period. The most recent amendments to the Purchase Plan, ratified by our stockholders on January 29, 2020, increased the total number of shares to 3,425,000 that may be purchased under the plan. Employee contributions to the Purchase Plan were $2.3 million, $2.2 million and $2.3 million in fiscal 2025, 2024 and 2023, respectively. Pursuant to the Purchase Plan,91,794,101,730, and 82,621 shares of common stock were issued to employees during fiscal 2025, 2024 and 2023, respectively. Shares are issued under the Purchase Plan from treasury stock. As of September 30, 2025,276,703 shares of common stock were available for future issuances under the Purchase Plan.

Stock-based compensation expense is included in the consolidated results of operations as (in thousands):

Stock Options

Below is a summary of our stock options as of September 30, 2025 and changes during the twelve months then ended (in thousands, except per common share amounts):

(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, based on our closing stock price of $36.46 as of September 30, 2025, which would have been received by the option holders had all option holders exercised their options as of that date.

The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. The total intrinsic value of all options exercised during each of the twelve months ended September 30, 2025, 2024 and 2023 was $10.1 million, $5.6 million and $5.2 million, respectively.

The table below shows the weighted average fair value, which was determined based upon the fair value of each option on the grant date utilizing the Black-Scholes option-pricing model and the related assumptions:

The fair value of each option award granted during the periods presented was estimated using the Black-Scholes option valuation model that uses the assumptions noted in the above table. Expected volatilities are based on the historical volatility of our stock. We use historical data to estimate option exercise and employee termination information within the valuation model. The expected term of options granted is derived from the vesting period and historical information and represents the period of time that options granted are expected to be outstanding. The risk-free rate used is the zero-coupon U.S. Treasury bond rate in effect at the time of the grant whose maturity equals the expected term of the option.

As of September 30, 2025, the total unrecognized compensation cost related to non-vested stock-based compensation arrangements was $1.8 million. The related weighted average period over which this cost is expected to be recognized was approximately 1.5 years.

As of September 30, 2025, the weighted average exercise price and remaining life of the stock options were (in thousands, except remaining life and exercise price):

The total grant date fair value of shares vested was $2.5 million, $3.0 million and $4.5 million in each of fiscal 2025, 2024 and 2023, respectively.

Non-vested Stock Units

The following table presents a summary of our non-vested restricted stock units as of September 30, 2025 and changes during the twelve months then ended (in thousands, except per common share amounts):

As of September 30, 2025, the total unrecognized compensation cost related to non-vested restricted stock units and performance stock units was $20.4 million and $0.0 million, respectively. The related weighted average period over which these costs are expected to be recognized was approximately 1.8 years and 0.0 years, respectively.

12. EMPLOYEE BENEFIT PLANS

We currently have a savings and profit sharing plan pursuant to Section 401(k) of the Internal Revenue Code, whereby eligible employees may contribute up to 25% of their pre-tax earnings subject to certain limits under law.

We provide a match of 100% on the first 3% of each employee’s bi-weekly contribution and a 50% match on the next 2% of each employee’s bi-weekly contribution. We provided matching contributions of $3.8 million for fiscal 2025, $3.7 million for fiscal 2024 and $3.4 million for fiscal 2023. In addition, we may make contributions to the plan at the discretion of the Board of Directors.

13. COMMITMENTS ANDCONTINGENCIES

Leases

We lease certain of our buildings and equipment under noncancelable lease agreements. Please refer to Note 8 to our consolidated financial statements for additional information.

Litigation

In October, 2024 we settled the lawsuit brought on October 23, 2020 by Data Logger Solutions, LLC ("Data Loggers") in Delaware Superior Court against us and our subsidiary Digi SmartSense, LLC for a payment of $5.7 million and a mutual release of all claims associated with the facts that led to the lawsuit. The suit alleged that Data Loggers has not been paid certain commissions it believed it was owed and would continue to be owed under a Reseller Agreement between Data Loggers and TempAlert. SmartSense is the successor of interest of TempAlert and terminated the Reseller Agreement in 2019. Data Loggers claimed it was entitled to actual, speculative and punitive damages in connection with its allegations. In March 2024, a jury found Digi liable for breach of contract and awarded Data Loggers damages of approximately $11.6 million. Delaware law also entitled Data Loggers to seek interest on this award pursuant to a statutory calculation. Each party filed post-trial motions with respect to the jury’s verdict and a hearing on those motions was held on June 28, 2024. Our motions sought to have the case retried or to remit the award of damages. The plaintiffs sought to expand the award of damages for attorney’s fees and interest. The Court granted our motion, remitted the damages award to a pre-interest amount of $5.0 million, and denied Data Loggers’ motion. Court rules permitted Data Loggers to accept the remitted amount or proceed to a new trial on the issue of damages. Following the court’s ruling the parties negotiated the final settlement in lieu of further legal proceedings. Pursuant to ASC 450 we previously made an accrual of $6.2 million for this matter. In the fourth fiscal quarter of 2024, we reversed part of this accrual to reflect the settlement amount of $5.7 million and this amount was paid in the first quarter of fiscal 2025.

In addition to the matters discussed above, in the normal course of business, we are presently, and expect in the future to be, subject to various claims and litigation with third parties such as non-practicing intellectual property entities as well as customers, vendors and/or employees. There can be no assurance that any claims by third parties, if proven to have merit, will not materially adversely affect our business, liquidity or financial condition.