10-Q 1 dgii-20240630.htm 10-Q dgii-20240630
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2024
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     .
Commission file number: 001-34033
digilogoregistered2a02.jpg
DIGI INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1532464
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
9350 Excelsior Blvd.Suite 700  
HopkinsMinnesota 55343
(Address of principal executive offices) (Zip Code)
(952912-3444
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $.01 per shareDGIIThe Nasdaq Stock Market LLC
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer 
 Accelerated filer 
Non-accelerated filer 
 Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
On August 2, 2024, there were 36,415,184 shares of the registrant's $.01 par value Common Stock outstanding.



INDEX
 Page
 
  
 
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  

i

PART I. FINANCIAL INFORMATION

ITEM 1. UNAUDITED FINANCIAL STATEMENTS

DIGI INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three months ended June 30,Nine months ended June 30,
 2024202320242023
 (in thousands, except per share data)
Revenue:
Product$74,618 $81,714 $230,300 $247,288 
Service30,585 30,522 88,694 85,398 
Total revenue105,203 112,236 318,994 332,686 
Cost of sales:
Cost of product35,846 40,650 111,506 120,480 
Cost of service6,147 6,814 18,954 20,985 
Amortization952 953 2,858 3,009 
Total cost of sales42,945 48,417 133,318 144,474 
Gross profit62,258 63,819 185,676 188,212 
Operating expenses:  
Sales and marketing21,501 20,974 61,688 60,421 
Research and development15,132 14,945 44,809 44,194 
General and administrative12,717 15,424 45,987 46,983 
Total operating expenses49,350 51,343 152,484 151,598 
Operating income12,908 12,476 33,192 36,614 
Other expense, net:  
Interest expense, net(3,234)(6,603)(12,592)(18,967)
Debt issuance cost write off  (9,722) 
Other (expense) income, net(14)15 (72)79 
Total other expense, net(3,248)(6,588)(22,386)(18,888)
Income before income taxes9,660 5,888 10,806 17,726 
Income tax (benefit) provision(42)(839)164 (679)
Net income$9,702 $6,727 $10,642 $18,405 
Net income per common share:  
Basic$0.27 $0.19 $0.29 $0.51 
Diluted$0.26 $0.18 $0.29 $0.50 
Weighted average common shares:
Basic36,375 35,889 36,266 35,761 
Diluted37,026 36,817 36,921 36,838 

The accompanying notes are an integral part of the condensed consolidated financial statements.

1

DIGI INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three months ended June 30,Nine months ended June 30,
2024202320242023
(in thousands)
Net income$9,702 $6,727 $10,642 $18,405 
Other comprehensive (loss) income:
Foreign currency translation adjustment(65)(109)2,283 1,358 
Other comprehensive (loss) income(65)(109)2,283 1,358 
Comprehensive income $9,637 $6,618 $12,925 $19,763 

The accompanying notes are an integral part of the condensed consolidated financial statements.
2

DIGI INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 2024September 30, 2023
 (in thousands, except share data)
ASSETS  
Current assets:  
Cash and cash equivalents$28,337 $31,693 
Accounts receivable, net71,190 55,997 
Inventories56,665 74,396 
Other current assets8,327 4,112 
Total current assets164,519 166,198 
Property, equipment and improvements, net32,714 29,108 
Intangible assets, net258,868 277,084 
Goodwill341,916 341,593 
Operating lease right-of-use assets10,858 12,876 
Deferred tax assets7,857 4,884 
Other non-current assets3,694 3,788 
Total assets$820,426 $835,531 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:  
Current portion of long-term debt$ $15,523 
Accounts payable20,856 17,148 
Accrued compensation12,643 16,427 
Unearned revenue30,468 25,274 
Current portion of operating lease liabilities3,032 3,352 
Income taxes payable1,334 1,116 
Other current liabilities14,020 7,138 
Total current liabilities82,353 85,978 
Income taxes payable2,343 2,308 
Deferred tax liabilities1,815 1,812 
Long-term debt151,618 188,051 
Operating lease liabilities11,945 13,989 
Other non-current liabilities7,298 2,905 
Total liabilities257,372 295,043 
Commitments and Contingencies (See Note 11)
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; 42,881,585 and 42,501,150 shares issued
429 425 
Additional paid-in capital415,483 403,735 
Retained earnings235,487 224,845 
Accumulated other comprehensive loss(24,728)(27,011)
Treasury stock, at cost, 6,474,271 and 6,436,204 shares
(63,617)(61,506)
Total stockholders' equity563,054 540,488 
Total liabilities and stockholders' equity$820,426 $835,531 

The accompanying notes are an integral part of the condensed consolidated financial statements.


3

DIGI INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Nine months ended June 30,
 20242023
 (in thousands)
Operating activities:  
Net income$10,642 $18,405 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation of property, equipment and improvements5,977 4,997 
Amortization18,925 20,449 
Write-off of debt issuance costs9,722  
Stock-based compensation10,093 9,852 
Deferred income tax benefit(2,970)(6,495)
Litigation accrual6,253  
Other(1,817)21 
Changes in operating assets and liabilities(168)(19,425)
Net cash provided by operating activities56,657 27,804 
Investing activities:  
Purchase of property, equipment, improvements and certain other intangible assets(1,282)(3,842)
Proceeds from sale of property, equipment, improvements and certain other intangible assets2,229  
Net cash provided by (used in) investing activities947 (3,842)
Financing activities:  
Proceeds from long-term debt214,062  
Payments on long-term debt(276,225)(29,375)
Proceeds from stock option plan transactions952 2,616 
Proceeds from employee stock purchase plan transactions2,061 1,689 
Taxes paid for net share settlement of share-based payment options and awards(3,466)(3,850)
Net cash used in financing activities(62,616)(28,920)
Effect of exchange rate changes on cash and cash equivalents1,656 (362)
Net decrease in cash and cash equivalents(3,356)(5,320)
Cash and cash equivalents, beginning of period31,693 34,900 
Cash and cash equivalents, end of period$28,337 $29,580 
Supplemental disclosures of cash flow information:
Interest paid$11,780 $20,519 
Income taxes paid, net4,559 4,666 
Supplemental schedule of non-cash investing and financing activities:
Transfer of inventory to property, equipment and improvements(8,354)(3,175)
Accrual for purchase of property, equipment, improvements and certain other intangible assets$(128)$(157)

The accompanying notes are an integral part of the condensed consolidated financial statements.


4

DIGI INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Accumulated
AdditionalOtherTotal
Common StockTreasury StockPaid-InRetainedComprehensiveStockholders'
(in thousands)SharesPar ValueSharesValueCapitalEarnings(Loss) IncomeEquity
Balances, March 31, 202342,325 $423 6,464 $(61,446)$394,036 $211,753 $(24,587)$520,179 
Net income— — — — — 6,727 — 6,727 
Other comprehensive loss— — — — — — (109)(109)
Employee stock purchase plan issuances— — (18)173 347 — — 520 
Taxes paid for net share settlement of share-based payment awards— — 6 (197)— — — (197)
Issuance of stock under stock award plans83 1 — — 943 — — 944 
Stock-based compensation expense— — — — 3,519 — — 3,519 
Balances, June 30, 202342,408 $424 6,452 $(61,470)$398,845 $218,480 $(24,696)$531,583 
Balances, September 30, 202241,950 $420 6,413 $(58,172)$385,244 $200,075 $(26,054)$501,513 
Net income— — — — — 18,405 — 18,405 
Other comprehensive income— — — — — — 1,358 1,358 
Employee stock purchase plan issuances— — (58)553 1,137 — — 1,690 
Taxes paid for net share settlement of share-based payment awards— — 97 (3,851)— — — (3,851)
Issuance of stock under stock award plans458 4 — — 2,612 — — 2,616 
Stock-based compensation expense— — — — 9,852 — — 9,852 
Balances, June 30, 202342,408 $424 6,452 $(61,470)$398,845 $218,480 $(24,696)$531,583 
Balances, March 31, 202442,854 $429 6,492 $(63,683)$411,759 $225,785 $(24,663)$549,627 
Net income— — — — — 9,702 — 9,702 
Other comprehensive loss— — — — — — (65)(65)
Employee stock purchase plan issuances— — (25)242 327 — — 569 
Taxes paid for net share settlement of share-based payment options and awards— — 7 (176)(505)— — (681)
Issuance of stock under stock award plans28  — — 388 — — 388 
Stock-based compensation expense— — — — 3,514 — — 3,514 
Balances, June 30, 202442,882 $429 6,474 $(63,617)$415,483 $235,487 $(24,728)$563,054 
Balances, September 30, 202342,501 $425 6,436 $(61,506)$403,735 $224,845 $(27,011)$540,488 
Net income— — — — — 10,642 — 10,642 
Other comprehensive income— — — — — — 2,283 2,283 
Employee stock purchase plan issuances— — (75)733 948 — — 1,681 
Taxes paid for net share settlement of share-based payment awards— — 113 (2,844)(622)— — (3,466)
Issuance of stock under stock award plans381 4 — — 1,329 — — 1,333 
Stock-based compensation expense— — — — 10,093 — — 10,093 
Balances, June 30, 202442,882 $429 6,474 $(63,617)$415,483 $235,487 $(24,728)$563,054 

The accompanying notes are an integral part of the condensed consolidated financial statements.
5


DIGI INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The unaudited condensed consolidated financial statements of Digi International Inc. ("we," "us," "our," "Digi" or "the Company") have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission applicable to interim financial statements. While these financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. These financial statements should be read in conjunction with the financial statement disclosures in Part I, Item 1 of our Annual Report on Form 10-K for the year ended September 30, 2023. We use the same accounting policies in preparing quarterly and annual financial statements. The quarterly results of operations are not necessarily indicative of the results to be expected for the full year.
2. EARNINGS PER SHARE
The following table is a reconciliation of the numerators and denominators in the net income per common share calculations (in thousands, except per common share data):
 Three months ended June 30,Nine months ended June 30,
 2024202320242023
Numerator:  
Net income$9,702 $6,727 $10,642 $18,405 
Denominator:  
Denominator for basic net income per common share — weighted average shares outstanding36,375 35,889 36,266 35,761 
Effect of dilutive securities:  
Stock options and restricted stock units651 928 655 1,077 
Denominator for diluted net income per common share — adjusted weighted average shares37,026 36,817 36,921 36,838 
Net income per common share, basic$0.27 $0.19 $0.29 $0.51 
Net income per common share, diluted$0.26 $0.18 $0.29 $0.50 
Digi excludes certain stock options and restricted stock unit awards that would have an anti-dilutive effect on our diluted net income per share calculation. For the three months ended June 30, 2024 and 2023, 646,564 and 599,957 shares outstanding were excluded, respectively. For the nine months ended June 30, 2024 and 2023, 710,370 and 477,521 shares outstanding were excluded, respectively.
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3. SELECTED BALANCE SHEET DATA
The following table shows selected balance sheet data (in thousands):
June 30,
2024
September 30,
2023
Accounts receivable, net:
Accounts receivable$76,501 $61,880 
Less allowance for credit losses1,457 1,693 
Less reserve for future credit returns and pricing adjustments3,854 4,190 
Accounts receivable, net$71,190 $55,997 
Inventories:
Raw materials$21,509 $29,974 
Work in process22 66 
Finished goods35,134 44,356 
Inventories$56,665 $74,396 
4. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Amortizable intangible assets were (in thousands):
 June 30, 2024September 30, 2023
Gross
carrying
amount
Accum.
amort.
NetGross
carrying
amount
Accum.
amort.
Net
Purchased and core technology$85,018 $(62,678)$22,340 $85,032 $(59,833)$25,199 
License agreements112 (112) 112 (112) 
Patents and trademarks40,180 (21,495)18,685 39,957 (19,888)20,069 
Customer relationships309,213 (91,370)217,843 309,196 (77,380)231,816 
Non-compete agreements600 (600) 600 (600) 
Order backlog1,000 (1,000) 1,000 (1,000) 
Total$436,123 $(177,255)$258,868 $435,897 $(158,813)$277,084 

Amortization expense for intangible assets was $6.1 million and $6.3 million for the three months ended June 30, 2024 and 2023, respectively. Amortization expense for intangible assets was $18.4 million and $19.0 million for the nine months ended June 30, 2024 and 2023, respectively. Amortization expense is recorded on our condensed consolidated statements of operations within cost of sales and in general and administrative expense.
Estimated amortization expense related to intangible assets for the remainder of fiscal 2024 and the five succeeding fiscal years is (in thousands):
2024 (three months)$6,995 
202521,786 
202621,554 
202720,593 
202820,411 
202918,355 
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4. GOODWILL AND OTHER INTANGIBLE ASSETS, NET (CONTINUED)
The changes in the carrying amount of goodwill by reportable segments are (in thousands):
 Nine months ended June 30, 2024
 IoT
Products & Services
IoT
Solutions
Total
Balance on September 30, 2023$173,957 $167,636 $341,593 
Foreign currency translation adjustment400 (77)323 
Balance on June 30, 2024$174,357 $167,559 $341,916 
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 have two reportable segments, IoT Products & Services and IoT Solutions (see Note 6). Our IoT Products & Services segment is structured to include four reporting units for goodwill testing purposes: Cellular Routers, Console Servers, OEM Solutions and Infrastructure Management. Following our acquisition of Ventus in November 2021, we have two reporting units within IoT Solutions: SmartSense and Ventus. Each of these reporting units was tested individually for impairment during our annual impairment test completed as of the end of the third fiscal quarter of fiscal 2024.

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 affect the estimated fair values negatively. 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 within either of our segments, we may be required to record future impairment charges for goodwill.
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 reporting unit and $118.6 million of goodwill for the Ventus reporting unit. 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%.
5. 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 “Credit Facility”). The 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 Credit Facility also contains a $10 million letter of credit sublimit and $10 million swingline sub-facility. Digi may use the proceeds of the Credit Facility in the future for general corporate purposes.
Digi borrowed a total of $215 million under the 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 “Prior 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 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.
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5. INDEBTEDNESS (CONTINUED)
Borrowings under the 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 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 in the period were made at Term SOFR for a one-month interest election period plus an applicable margin of 2.50%. Our weighted average interest rate for our Credit Facility was 7.93% as of June 30, 2024.
In addition to paying interest on the outstanding principal, Digi is required to pay a commitment fee on the unutilized commitments under the 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 0.25% as of June 30, 2024. 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 Prior 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 June 30, 2024.
The following table is a summary of our long-term indebtedness at June 30, 2024 and September 30, 2023 (in thousands):
Balance on June 30, 2024Balance on September 30, 2023
Revolving Loan$152,800 $— 
Term loan 213,625 
Total loans152,800 213,625 
Less unamortized issuance costs(1,182)(10,051)
Less current maturities of long-term debt (15,523)
Total long-term debt, net of current portion$151,618 $188,051 

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 Credit Facility are secured by substantially all of our assets.
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6. SEGMENT INFORMATION
In the third quarter of fiscal 2024, we restructured our management structure to appoint a single segment manager over IoT Products & Services and a single manager over IoT Solutions. As a result we have two operating segments. These two operating segments also serve as our reportable segments: IoT Products & Services and IoT Solutions. Each operating segment is now led by a single segment manager. 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 Chief Operating Decision Maker ("CODM"). The measures the CODM uses to measure profitability within each of our reportable segments is segment gross profit.
Summary operating results for each of our segments were (in thousands):
Three months ended June 30,Nine months ended June 30,
2024202320242023
Revenue
IoT Products & Services$80,003 $87,358 $245,416 $257,593 
IoT Solutions25,200 24,878 73,578 75,093 
Total revenue$105,203 $112,236 $318,994 $332,686 
Gross Profit
IoT Products & Services Operating Segments Gross Profit$43,501 $47,229 $132,421 $140,367 
IoT Solutions Operating Segments Gross Profit18,757 16,590 53,255 47,845 
Total gross profit$62,258 $63,819 $185,676 $188,212 
Total depreciation and amortization expense was (in thousands):
Three months ended June 30,Nine months ended June 30,
2024202320242023
IoT Products & Services$3,111 $3,108 $9,316 $9,446 
IoT Solutions5,187 4,896 15,098 14,516 
Total depreciation and amortization$8,298 $8,004 $24,414 $23,962 
Total expended for property, plant and equipment was (in thousands):
Nine months ended June 30,
20242023
IoT Products & Services$581 $362 
IoT Solutions*475 3,291 
Total expended for property, plant and equipment$1,056 $3,653 
* Excluded from these amounts are $8,354 and $3,175 of transfers of inventory to property plant and equipment for subscriber assets for the nine months ended June 30, 2024 and 2023, respectively.
Total assets for each of our segments were (in thousands):
June 30,
2024
September 30,
2023
IoT Products & Services$389,469 $384,018 
IoT Solutions402,620 419,820 
Unallocated*28,337 31,693 
Total assets$820,426 $835,531 
*Unallocated consists of cash and cash equivalents.
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7. REVENUE
Revenue Disaggregation
The following table summarizes our revenue by geographic location of our customers (in thousands):
Three months ended June 30,Nine months ended June 30,
2024202320242023
North America, primarily the United States$72,908 $82,953 $225,001 $244,227 
Europe, Middle East & Africa15,123 16,352 48,998 52,643 
Rest of world17,172 12,931 44,995 35,816 
Total revenue$105,203 $112,236 $318,994 $332,686 
The following table summarizes our revenue by the timing of revenue recognition (in thousands):
Three months ended June 30,Nine months ended June 30,
2024202320242023
Transferred at a point in time$77,096 $86,393 $237,064 $258,967 
Transferred over time28,107 25,843 81,930 73,719 
Total revenue$105,203 $112,236 $318,994 $332,686 
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 $18.5 million and $16.6 million as of June 30, 2024 and September 30, 2023, respectively, are included in property, equipment and improvements, net. Depreciation expense for these subscriber assets, which is included in cost of sales, was $1.4 million and $1.0 million for the three months ended June 30, 2024 and 2023, respectively. Depreciation expense for these subscriber assets, which is included in cost of sales, was $3.5 million and $2.8 million for the nine months ended June 30, 2024 and 2023, respectively. We depreciate the cost of this equipment over its useful life.
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 June 30, 2024 and September 30, 2023.
Contract Liabilities
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. 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.
Our contract liabilities were $37.5 million and $26.5 million at June 30, 2024 and 2023, respectively.
There were contract liability balances of $38.0 million and $25.7 million as of March 31, 2024 and 2023, respectively. Of these balances, Digi recognized $7.7 million and $6.7 million as revenue in the three months ended June 30, 2024 and 2023, respectively. There were contract liability balances of $27.9 million and $21.6 million balances as of September 30, 2023 and 2022, respectively. Digi recognized $17.6 million and $18.9 million as revenue in the nine months ended June 30, 2024 and 2023, respectively.
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7. REVENUE (CONTINUED)
Remaining Performance Obligation
As of June 30, 2024, we had approximately $161.2 million of remaining performance obligations on contracts with an original duration of one year or more. We expect to recognize revenue on approximately $72.1 million of remaining performance obligations over the next 12 months. We expect to recognize revenue from the remaining performance obligations over a range of two to five years.
8. INCOME TAXES
Our income tax expense was $0.2 million for the nine months ended June 30, 2024. Included in this was a net tax benefit of $0.7 million discretely related to the nine months ended June 30, 2024. This liability was the result of book stock compensation in excess of recognized tax benefits.
Our effective tax rate will vary based on a variety of factors. These factors include our overall profitability, the geographical mix of income before taxes and related statutory tax rate in each jurisdiction, and tax items discretely related to the period, such as tax impacts of stock compensation, as there are no open audits during the period. We may record other benefits or expenses in the future that are specific to a particular quarter such as expiration of statutes of limitation, the completion of tax audits, or legislation that is enacted in both U.S. and foreign jurisdictions.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is (in thousands):
Unrecognized tax benefits as of September 30, 2023$3,162 
Decreases related to:
Expiration of statute of limitations(32)
Unrecognized tax benefits as of June 30, 2024$3,130 
The total amount of unrecognized tax benefits at June 30, 2024 that, if recognized, would affect our effective tax rate was $3.0 million, after considering the impact of interest and deferred benefit items. We expect that the total amount of unrecognized tax benefits will decrease by approximately $0.4 million over the next 12 months.
9. PRODUCT WARRANTY OBLIGATION
The following tables summarize the activity associated with the product warranty accrual (in thousands) and is included on our condensed consolidated balance sheets within other current liabilities:
Three months ended June 30,
20242023
Balance at beginning of period$774 $836 
Warranties accrued171 135 
Settlement made(141)(117)
Balance at end of period$804 $854 
Nine months ended June 30,
20242023
Balance at beginning of period$772 $886 
Warranties accrued341 303 
Settlement made(309)(335)
Balance at end of period$804 $854 
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10. 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 12 months, the related lease assets and lease liabilities are recognized on the condensed 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 expected term of 12 months or less are not recorded on the condensed 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 assets, 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):
Balance Sheet LocationJune 30, 2024September 30, 2023
Assets
Operating leasesOperating lease right-of-use assets$10,858 $12,876 
Total lease assets$10,858 $12,876 
Liabilities
Operating leasesCurrent portion of operating lease liabilities$3,032 $3,352 
Operating leasesOperating lease liabilities11,945 13,989 
Total lease liabilities$14,977 $17,341 
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):
Three months ended June 30,Nine months ended June 30,
2024202320242023
Operating lease cost$757 $907 $2,578 $2,678 
Variable lease cost310 361 943 1,013 
Short-term lease cost30 26 85 69 
Total lease cost$1,097 $1,294 $3,606 $3,760 
At June 30, 2024, the weighted average remaining lease term of our operating leases was 6.0 years and the weighted average discount rate for these leases was 4.9%.
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10. 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 condensed consolidated balance sheet as of June 30, 2024 (in thousands):
Fiscal yearAmount
2024 (three months)$1,082 
20253,713 
20263,262 
20272,058 
20281,897 
20291,840 
Thereafter3,865 
Total future undiscounted lease payments17,717 
Less imputed interest(2,740)
Total reported lease liability$14,977 
11. COMMITMENTS AND CONTINGENCIES
We lease certain of our buildings and equipment under non-cancelable lease agreements. Please refer to Note 10 to our condensed consolidated financial statements for additional information.
As previously disclosed, Data Logger Solutions, LLC ("Data Loggers") brought suit in Delaware Superior Court against us and our subsidiary Digi SmartSense, LLC on October 23, 2020. The suit alleges that Data Loggers has not been paid certain commissions it believes it is owed and will 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 claims it is 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 entitles Data Loggers to interest on this award pursuant to a statutory calculation. Each party has filed post-trial motions with respect to the jury’s verdict and a hearing on these motions was held on June 28, 2024. Our motions seek to have the case retried or to remit the award of damages. The plaintiffs are seeking to expand the award of damages for attorney’s fees and additional interest. While these post-trial motions are pending, each party’s right to appeal is stayed and remains in place. Pursuant to ASC 450 we have accrued a $6.3 million liability with respect to this case. The accrual reflects a reasonable estimate of probable loss based on information currently available to us. The ultimate loss, if any, to Digi could be materially different from the amount we have accrued and we cannot predict or estimate the duration or ultimate outcome of this matter.
In addition to the matter 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.
12. STOCK-BASED COMPENSATION
Stock-based awards granted in the first fiscal quarter of 2024 and 2023 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.
As of June 30, 2024, there were approximately 1,920,325 shares available for future grants under the 2021 Plan.
Cash received from the exercise of stock options was $1.3 million and $2.6 million for the nine months ended June 30, 2024 and 2023, respectively.

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12. STOCK-BASED COMPENSATION (CONTINUED)
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. When employees make this election, we retain a portion of shares issuable under the award. Tax withholding obligations are otherwise fulfilled by the employee paying cash to us for the withholding. During the nine months ended June 30, 2024 and 2023, our employees forfeited 112,827 shares and 97,171 shares, respectively, in order to satisfy withholding tax obligations of $2.8 million and $3.9 million, respectively.
We sponsor an Employee Stock Purchase Plan as amended and restated as of December 10, 2019, October 29, 2013, December 4, 2009 and November 27, 2006 (the "ESPP"), covering all domestic employees with at least 90 days of continuous service and who are customarily employed at least 20 hours per week. The ESPP 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 ESPP, ratified by our stockholders on January 29, 2020, increased the total number of shares that may be purchased under the ESPP to 3,425,000. ESPP contributions by employees were $1.7 million for the nine months ended June 30, 2024 and 2023. Pursuant to the ESPP, 74,760 and 58,081 common shares were issued to employees during the nine months ended June 30, 2024 and 2023, respectively. Shares are issued under the ESPP from treasury stock. As of June 30, 2024, 395,467 common shares were available for future issuances under the ESPP.
The following table shows stock-based compensation expense that is included in the consolidated results of operations (in thousands):
Three months ended June 30,Nine months ended June 30,
2024202320242023
Cost of sales$173 $160 $529 $463 
Sales and marketing1,218 1,089 3,594 3,012 
Research and development517 469 1,448 1,386 
General and administrative1,606 1,801 4,522 4,991 
Stock-based compensation before income taxes3,514 3,519 10,093 9,852 
Income tax benefit(724)(760)(2,138)(2,096)
Stock-based compensation after income taxes$2,790 $2,759 $7,955 $7,756 
Stock Options
The following table summarizes our stock option activity (in thousands, except per common share amounts):
Options OutstandingWeighted Average Exercise PriceWeighted Average Contractual Term (in years)Aggregate Intrinsic Value (1)
Balance on September 30, 20231,553 $18.52
Granted87 24.59
Exercised(91)28.43
Forfeited / Canceled(39)27.61
Balance on June 30, 20241,510 $18.743.3$7,659 
Exercisable on June 30, 20241,160 $17.192.9$7,220 
(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, based on our closing stock price of $22.93 as of June 30, 2024, which would have been received by the option holders had all option holders exercised their options as of that date.

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12. STOCK-BASED COMPENSATION (CONTINUED)
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 the nine months ended June 30, 2024 and 2023 was $2.6 million and $4.1 million, respectively.
The following table 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:
Nine months ended June 30,
20242023
Weighted average per option grant date fair value$12.44$19.88
Assumptions used for option grants:
Risk free interest rate
4.48% - 4.68%
3.50% - 3.98%
Expected term6.00 years6.00 years
Expected volatility
46% - 47%
46%
Weighted average volatility46%46%
Expected dividend yield
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 June 30, 2024, the total unrecognized compensation cost related to non-vested stock options was $3.5 million and the related weighted average period over which it is expected to be recognized is approximately 1.4 years.
Non-vested Stock Units
The following table presents a summary of our non-vested restricted stock units and performance stock units as of June 30, 2024 and changes during the nine months then ended (in thousands, except per common share amounts):
RSUsPSUs
Number of AwardsWeighted Average Grant Date Fair ValueNumber of AwardsWeighted Average Grant Date Fair Value
Nonvested on September 30, 2023846 $30.56 135 $37.72 
Granted343 24.98 135 24.81 
Vested(280)25.13 (30)37.11 
Canceled(44)30.13 (17)28.94 
Nonvested on June 30, 2024865 $30.11 223 $30.65 
As of June 30, 2024, the total unrecognized compensation cost related to non-vested restricted stock units and performance stock units was $20.0 million and $0.5 million, respectively. The related weighted average period over which these costs are expected to be recognized was approximately 1.9 years and 0.1 years, respectively.
16

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our management's discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as well as our subsequent reports on Form 10-Q and Form 8-K and any amendments to these reports.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Form 10-Q contains certain statements that are "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995, and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-Looking Statements
This discussion contains forward-looking statements that are 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, interest expense savings 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 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.
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, 2023, subsequent filings, as well as this filing 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.
CRITICAL ACCOUNTING ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, the disclosure of contingent assets and liabilities and the values of purchased assets and assumed liabilities in acquisitions. We base our estimates on historical experience and various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
A description of our critical accounting estimates was provided in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

OVERVIEW
We are a leading global provider of business and mission-critical IoT connectivity products, services and solutions. Our business is comprised of two reporting segments: IoT Products & Services and IoT Solutions.
In fiscal 2024, our key operating objectives include:
continuing to transition to complete solutions with software and service offerings included with our products, as this drives Annualized Recurring Revenue ("ARR"), which provides more predictable and higher margin revenue; and
delivering a higher level of customer service across our businesses.
We utilize many financial, operational, and other metrics to evaluate our financial condition and financial performance. Below we highlight the metrics for the third quarter of fiscal 2024 that we feel are most important in these evaluations, with comparisons to the third quarter of fiscal 2023:
Consolidated revenue was $105 million, a decrease of 6%.
Consolidated gross profit was $62 million, a decrease of 2%.
Gross profit margin was 59.2%, an increase of 230 basis points.
Net income was $10 million, compared to net income of $7 million.
Net income per diluted share was $0.26, compared to $0.18.
Adjusted net income and adjusted net income per share was $18.5 million, or $0.50 per diluted share, compared to $18.5 million, or $0.50 per diluted share.
Adjusted EBITDA was $25 million, or 23.5% of revenue, compared to $24 million or 21.7% of revenue.
ARR was $113 million at quarter end, an increase of 9%.
In recent periods, we have experienced longer than expected sales cycles with respect to many contracts and projects of potential significance. We believe this is related to macroeconomic conditions and are uncertain as to when and to what degree sales cycles will return to more normal conditions, but expect this to adversely impact our results for at least the remainder of fiscal 2024.
CONSOLIDATED RESULTS OF OPERATIONS
The following table sets forth selected information derived from our interim condensed consolidated statements of operations:
Three months ended June 30,% incr.Nine months ended June 30,% incr.
($ in thousands)20242023(decr.)20242023(decr.)
Revenue$105,203 100.0 %$112,236 100.0 %(6.3)%$318,994 100.0 %$332,686 100.0 %(4.1)%
Cost of sales42,945 40.8 48,417 43.1 (11.3)133,318 41.8 144,474 43.4 (7.7)
Gross profit62,258 59.2 63,819 56.9 (2.4)185,676 58.2 188,212 56.6 (1.3)
Operating expenses49,350 46.9 51,343 45.7 (3.9)152,484 47.8 151,598 45.6 0.6 
Operating income12,908 12.3 12,476 11.2 3.5 33,192 10.4 36,614 11.0 (9.3)
Other expense, net(3,248)(3.1)(6,588)(5.9)(50.7)(22,386)(7.0)(18,888)(5.7)18.5 
Income before income taxes9,660 9.2 5,888 5.3 64.1 10,806 3.4 17,7265.3 (39.0)
Income tax expense (benefit)(42)— (839)(0.7)NM164 0.1 (679)(0.2)NM
Net income$9,702 9.2 %$6,727 6.0 %44.2 $10,642 3.3 %$18,405 5.5 %(42.2)%
NM means not meaningful

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
REVENUE BY SEGMENT
Three months ended June 30,% incr.Nine months ended June 30,% incr.
($ in thousands)20242023(decr.)20242023(decr.)
Revenue
IoT Products & Services$80,003 76.0 %$87,358 77.8 %(8.4)%$245,416 76.9 %$257,593 77.4 %(4.7)%
IoT Solutions25,200 24.0 24,878 22.2 1.3 73,578 23.1 75,093 22.6 (2.0)
Total revenue$105,203 100.0 %$112,236 100.0 %(6.3)%$318,994 100.0 %$332,686 100.0 %(4.1)%
IoT Products & Services
IoT Products & Services revenue decreased $7.4 million for the three months ended June 30, 2024, as compared to the same period in the prior fiscal year. The decrease consisted of a $7.9 million decline in one-time sales, with no material impact from pricing, partially offset by $0.5 million of recurring revenue growth.

IoT Products & Services revenue decreased $12.2 million for the nine months ended June 30, 2024, as compared to the same period in the prior fiscal year. The decrease consisted of a $15.1 million decline in product sales volume, with no material impact from pricing, partially offset by $2.9 million of service revenue growth.
IoT Solutions
IoT Solutions revenue increased $0.3 million for the three months ended June 30, 2024, as compared to the same period in the prior fiscal year. The increase consisted of a $1.7 million rise in recurring revenue, partially offset by a $0.8 million decrease in hardware sales and a $0.6 million decrease in one time services volume.

IoT Solutions revenue decreased $1.5 million for the nine months ended June 30, 2024, as compared to the same period in the prior fiscal year. The decrease consisted of a $2.9 million decline in one time services volume and a $1.9 million decrease in hardware sales offset by a $3.3 million increase in recurring revenue.
ARR
ARR was $113 million as of June 30, 2024, compared to $104 million as of June 30, 2023. IoT Products & Services ARR was $23 million as of June 30, 2024, compared to $22 million as of June 30, 2023. This increase was due to growth in the subscription base across extended warranty offerings and remote management platforms. IoT Solutions ARR was $90 million as of June 30, 2024, compared to $82 million as of June 30, 2023, driven by growth in SmartSense.
COST OF GOODS SOLD AND GROSS PROFIT BY SEGMENT
Below are our segments' cost of goods sold and gross profit as a percentage of their respective total revenue:
Three months ended June 30,Basis point
($ in thousands)20242023inc. (decr.)
Cost of Goods Sold
IoT Products & Services$36,502 45.6 %$40,129 45.9 %(30)
IoT Solutions6,443 25.6 8,288 33.3 (770)
Total cost of goods sold$42,945 40.8 %$48,417 43.1 %(230)
Gross Profit
IoT Products & Services Operating Segments Gross Profit$43,501 54.4 %$47,229 54.1 %30
IoT Solutions Operating Segments Gross Profit18,757 74.4 16,590 66.7 770
Total gross profit$62,258 59.2 %$63,819 56.9 %230
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Nine months ended June 30,Basis point
($ in thousands)20242023inc. (decr.)
Cost of Goods Sold
IoT Products & Services$112,995 46.0 %$117,226 45.5 %50
IoT Solutions20,323 27.6 %27,248 36.3 %(870)
Total cost of goods sold$133,318 41.8 %$144,474 43.4 %(160)
Gross Profit
IoT Products & Services Operating Segments Gross Profit$132,421 54.0 %$140,367 54.5 %(50)
IoT Solutions Operating Segments Gross Profit53,255 72.4 %47,845