DGII

DIGI INTERNATIONAL INC

NASDAQ · TECHNOLOGY · COMPUTER COMMUNICATIONS EQUIPMENT

74.95

+2.15 +2.95%

USD · close Oct 23

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MKT CAP $2.8BP/E 59.5DIV YIELD —FCF YIELD 4.78%REV TTM $506.2M +20.3%NET INCOME $48.7M +14.2%NET DEBT $80.2M52W 35.40 – 85.24SEC XBRL · TTM TO Invalid Date

How DGII rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

77%

of sentences unchanged

Added

new sentences

Dropped

sentences removed

Length

+186

words, now 9,972

New in FY2025

As an example of force majeure, a fire many years ago disrupted the operations at one of our contract manufacturers in Thailand.
Although Opengear has many customers, its business historically has been significantly concentrated on its relationships with a few large customers and focused on data centers.
Likewise, our combined SmartSense by Digi and Jolt offerings service a significant number of large customers in the retail pharmaceutical, medical facility and retail food industries.
Both Ventus and SmartSense by Digi / Jolt produce significant ARR.
As a result, our future revenue opportunities with these customers may be limited, and we may face pricing pressures, which in turn could adversely impact our operating margin and our profitability.
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.
As we work to grow and scale these offerings, these investments have impacted previously and may impact adversely in the future our operating margins and profitability.
Potential new or incremental international tariffs could materially and adversely affect our business and results of operations.
Due to the global reach of our operations, changes in international trade policy could result in an adverse effect on our results of operations, financial condition and cash flows.
Additional or new tariffs imposed by various governments globally have the potential to disrupt existing supply chains and impose additional costs on our business.
Existing and future retaliatory trade actions imposed by other governments, as well as possible price increases we may elect to charge, could make our products more expensive for customers, and, in turn, could make our products less competitive.
Any existing or new, substantial tariff increases on imports within our supply chain or involving countries in which our contract manufacturers are located, should they be implemented and sustained for an extended period of time, could have a significant adverse effect on our business and our supply chain.
The combined SmartSense by Digi / Jolt product line is operated in an emerging market where technology-based solutions such as the monitoring of the condition of perishable goods as well as the completion of employee tasks have not been used historically.
Additional risks that relate to IoT Solutions, include, but are not limited to: • SmartSense by Digi / Jolt offerings are deployed in part to help assure perishable goods are safely preserved and that necessary operating tasks are completed timely.
In each case, there is a potential risk of loss in the event of a malfunction or failure in our offerings. • The SmartSense by Digi / Jolt product line has a limited history with us in a marketplace that is relatively early in its development and has numerous competitors.
There can be no assurance that we will recover our investments in SmartSense by Digi / Jolt or Ventus or that we will realize ongoing and consistent profits from these businesses.
As we continue to direct a substantial portion of our sales and development efforts toward broader based solutions, such as SmartSense by Digi / Jolt, the Digi Remote Manager and Ventus offerings, we expect to store, convey and potentially process significant amounts of data produced by devices.
Issues related to the use of artificial intelligence may result in regulatory or legal action, damage our reputation, or harm our business.
Tensions in the Middle East, in light of ongoing conflicts in the region since the October 7, 2023 attack on Israel may cause shipping disruptions and increased transport costs that could have a material adverse effect on our ability to obtain components from our foreign suppliers and our financial results.
Our dependence on new product development, rapid technological change, competitors’ product introductions and enhancements, and regulatory changes make us susceptible to potential fluctuations in demand or loss of market share for our products.
One example of new technology that could impact the markets in which we sell products and customer requirements could be the introduction of artificial intelligence features into products or solutions offerings.
The introduction of products and enhancements embodying new technologies, whether via competitors’ products or just changes in markets where we sell products because of other changes in technology more generally, can disrupt one or more markets in which we compete.
In addition, the emergence of new or changed industry standards or regulations impacting our industry can also cause demand for our products to fluctuate or render our products obsolete or unmarketable.
This could be impacted not only by the features we offer in our products, but also by our ability to operate efficiently relative to those with whom we compete.
For instance, if competitors with more resources than us are able to deploy efficiency enhancements into their operations more quickly than us (whether via significant investments in artificial intelligence or otherwise) they may be better positioned than us to more quickly enhance existing products or introduce new products that meet customer requirements or market demands.
Further, demand for products can fluctuate because of changes in technology generally which could also impact our sales of products.
There can be no assurance that the introduction or announcement of new technologies into markets where we sell products or the introduction or announcement of product offerings by us or one or more of our competitors will not cause customers to defer their purchase of our existing products, which could cause our revenue to decline.
Many of our customers make significant one-time hardware purchases for large projects that are not repeated.
In addition, in our SmartSense by Digi / Jolt and Ventus product lines certain customers have outsized deployments relative to other customers.
Our operating margins may be subject to decline.
Our operating margins may be subject to declines which could decrease our overall profitability and impact our financial performance adversely.
These mature hardware products have sold historically at higher operating margins than our other product and service offerings.
We have indicated that we would be willing to realize lower levels of operating margins from customers in return for long-term, binding purchase commitments.
If this strategy were successful, it could apply downward pressure on our operating margins.
Part of our strategy is to sell software applications and IoT solutions such as SmartSense by Digi / Jolt, Ventus offerings and hardware bundled with services on a subscription basis.
These sales may provide recurring revenues at relatively high operating margins, but these types of offerings are still in the earlier stages of adoption by customers.
Our operating margins therefore may be subject to decline unless we can implement cost reduction initiatives effectively to offset the impact of these factors.
Strategic Risks Our ability to grow our business is dependent in part on strategic relationships we develop and maintain with third parties as well as our ability to integrate and assure use of our products and services in coordination with the products and services of certain strategic partners in a commercially acceptable manner.
We intend to continue to devote significant resources to our research and development, which, if not successful, could cause a decline in our revenue and harm our business.

and 7 more.

Gone since FY2024

As an example of force majeure, a fire in November 2014 disrupted the operations at one of our contract manufacturers in Thailand.
Although Opengear has many customers, its business historically has been significantly concentrated on its relationships with a few large customers.
Likewise, our SmartSense by Digi business services a significant number of large customers in the retail pharmaceutical, medical facility and retail food industries.
Both Ventus and SmartSense by Digi produce significant ARR.
As a result, our future revenue opportunities with these customers may be limited, and we may face pricing pressures, which in turn could adversely impact our gross margin and our profitability.
As we work to grow and scale these offerings, these investments have impacted previously and may impact adversely in the future our gross margins and profitability.
SmartSense by Digi is operated in an emerging market where technology-based solutions to monitor the condition of perishable goods as well as the completion of employee tasks have not been used historically.
Additional risks that relate to IoT Solutions, include, but are not limited to: • SmartSense by Digi offerings are deployed in part to help assure perishable goods are safely preserved.
In each case, there is a potential risk of loss in the event of a malfunction or failure in our offerings. • SmartSense by Digi has a limited history with us in a marketplace that is relatively early in its development and has numerous competitors.
There can be no assurance that we will recover our investments in SmartSense by Digi or Ventus or that we will realize ongoing and consistent profits from these businesses.
Our sales and operations globally face risks related to health epidemics or pandemics that could disrupt our operations and adversely impact our sales and operating results.
Our business operations and financial results could be adversely affected by the effects of a widespread outbreak of contagious disease or other material adverse widespread public health development, such as the outbreak of the Covid-19 respiratory illness caused by a novel coronavirus first identified in Wuhan, Hubei Province, China in 2019.
These effects could include the absence of one or more key employees or significant numbers or employees generally, disruptions or restrictions on our ability to maintain operations at one or more of our facilities, disruptions or restrictions to travel that is important to our operations, adverse impacts on our ability to distribute or deliver our products or services as well as temporary disruptions, restrictions or closures of the facilities of our suppliers or customers and their contract manufacturers.
Any of the above absences, disruptions or restrictions could impact our sales and operating results negatively.
If these absences, disruptions or restrictions are significant and material it is possible our business continuity could be jeopardized.
Depending on the location of any such disruption or restriction, there may not be a solution that will be easy to implement in a timely manner or without significant expense.
In addition, any significant outbreak of contagious diseases could materially and adversely affect the economies and financial markets of many countries or the entire world, resulting in an economic downturn that could affect demand for our products, likely impact our operating results and restrain our access to capital from lenders or other sources.
As we continue to direct a substantial portion of our sales and development efforts toward broader based solutions, such as SmartSense by Digi, the Digi Remote Manager and Ventus offerings, we expect to store, convey and potentially process significant amounts of data produced by devices.
Issues related to the of artificial intelligence may result in regulatory or legal action, damage our reputation, or harm our business.
The conflict in the Middle East may cause shipping disruptions and increased transport costs that could have a material adverse effect on our ability to obtain components from our foreign suppliers and our financial results.
Our dependence on new product development and the rapid technological change that characterizes our industry make us susceptible to loss of market share resulting from competitors’ product introductions and enhancements, service capabilities and similar risks as well as from regulatory changes.
The introduction of products and enhancements embodying new technologies that can disrupt one or more markets in which we compete and the emergence of new industry standards or regulations impacting our industry can render existing products obsolete or unmarketable.
There can be no assurance that the introduction or announcement of new product offerings by us or one or more of our competitors will not cause customers to defer their purchase of our existing products, which could cause our revenue to decline.
Strategic Risks We intend to continue to devote significant resources to our research and development, which, if not successful, could cause a decline in our revenue and harm our business.
For fiscal 2024, 2023, and 2022, respectively, our research and development expenses were 14.2%, 13.2% and 14.2% of our revenue.
Our ability to grow our business is dependent in part on strategic relationships we develop and maintain with third parties as well as our ability to integrate and assure use of our products and services in coordination with the products and services of certain strategic partners in a commercially acceptable manner.
Our gross margins may be subject to decline.
Our gross margins may be subject to declines which could decrease our overall profitability and impact our financial performance adversely.
These mature hardware products have sold historically at higher gross margins than our other product and service offerings.
We have indicated that we would be willing to realize lower levels of gross margins from customers in return for long-term, binding purchase commitments.
If this strategy were successful, it could apply downward pressure on our gross margins.
Part of our strategy is to sell software applications and IoT solutions such as SmartSense by Digi, Ventus offerings and hardware bundled with services on a subscription basis.
These sales may provide recurring revenues at relatively high gross margins, but these types of offerings are still in the earlier stages of adoption by customers.
Our gross margins therefore may be subject to decline unless we can implement cost reduction initiatives effectively to offset the impact of these factors.
No single customer has represented more than 10% of our revenue in any of the last three fiscal years.
However, many of our customers make significant one-time hardware purchases for large projects that are not repeated.
In addition, in our SmartSense by Digi and Ventus businesses certain customers have outsized deployments relative to other customers.
Certain of our components and other materials used in producing our products are from regions susceptible to natural disasters or other events beyond our control, such as the Covid-19 pandemic that was highly disruptive to businesses during the last few years or the ongoing wars in Ukraine and the Middle East.
Government and Political Risks Our inability to obtain the appropriate telecommunications carrier certifications or approvals from governmental regulatory bodies as well as reconfiguration of communications protocols such as radio bands could impede our ability to grow revenue in our wireless products.
Certain products rely on the current configuration of radio bands by FCC or other governmental regulatory bodies could require the redsign of existing and future products, which could have an adverse impact on our business.

and 2 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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