Digi International Boosts Recurring Revenue with Jolt Acquisition

TL;DR

**DGII is making smart moves into high-margin recurring revenue, but watch out for macro headwinds and supply chain risks.**

AI Summary

DIGI INTERNATIONAL INC. (DGII) reported a strong fiscal year ended September 30, 2025, driven by strategic acquisitions and a focus on recurring revenue. The company completed the acquisition of Jolt Software, Inc. in Q4 2025, enhancing its IoT Solutions segment. This segment, which includes SmartSense by Digi and Ventus, now represents approximately 25% of total revenues and boasts an Annualized Recurring Revenue (ARR) of $120 million as of September 30, 2025. The IoT Products & Services segment, which accounted for the majority of sales in fiscal 2025, also saw its ARR reach $32 million by the end of the fiscal year, reflecting a shift towards subscription-based solutions. Overall, 60.2% of consolidated revenue in fiscal 2025 came through distributors, with one distributor representing 13% of consolidated revenue. The company maintains a global workforce of 913 employees and is focused on long-term growth with higher profitability through product alignment and strategic acquisitions.

Why It Matters

Digi International's strategic shift towards subscription-based IoT solutions, highlighted by the Jolt Software acquisition, is crucial for investors seeking stable, higher-margin revenue streams in a competitive market. This move strengthens its position against rivals by offering more comprehensive, integrated solutions in critical sectors like food service and healthcare. For employees, this signals growth and potential for new skill development in software and services. Customers benefit from enhanced offerings like task management and condition monitoring, improving operational efficiency. The broader market sees a continued trend of IoT companies consolidating and expanding their service portfolios, intensifying competition for market share.

Risk Assessment

Risk Level: medium — The company faces medium risk due to its reliance on a global network of contract manufacturers and single-sourced suppliers, primarily in Thailand, Mexico, Taiwan, and Cambodia, making it vulnerable to supply chain disruptions and geopolitical instability. Furthermore, the filing explicitly states, 'Given the current uncertainty in macro-economic conditions, including, but not limited to, potential recessionary conditions, the implementation of tariffs by governments around the world, changing global geopolitical conditions, supply chain disruptions globally and the uncertain status of large project-based customer deployment opportunities, our results during fiscal 2026 may be inconsistent quarter to quarter or with historical results.' This indicates significant exposure to external economic and political factors.

Analyst Insight

Investors should monitor DGII's progress in integrating Jolt Software and expanding its subscription-based revenue, particularly the growth of its IoT Solutions segment's ARR. Given the macroeconomic uncertainties and supply chain risks, consider a 'wait and see' approach for fiscal 2026, looking for consistent quarter-over-quarter performance before making significant investment decisions.

Revenue Breakdown

Key Numbers

• $120M — IoT Solutions Segment Annualized Recurring Revenue (ARR) (As of September 30, 2025, indicating strong recurring revenue growth in this segment.)
• $32M — IoT Products & Services Segment Annualized Recurring Revenue (ARR) (As of September 30, 2025, showing a growing subscription focus in this segment.)
• 25% — IoT Solutions Segment contribution to total revenues (Highlights the increasing importance of the higher-margin IoT Solutions segment to overall revenue.)
• 60.2% — Consolidated revenue from third-party channels (In fiscal 2025, indicating significant reliance on distributors, systems integrators, and VARs.)
• 13% — Consolidated revenue from one distributor customer (For the twelve months ended September 30, 2025, indicating customer concentration risk.)
• $1.01B — Aggregate market value of voting stock held by non-affiliates (As of the last business day of the most recently completed second fiscal quarter, based on a $27.83 closing price.)
• 37,232,593 — Shares of common stock outstanding (As of November 14, 2025.)

Key Players & Entities

• DIGI INTERNATIONAL INC. (company) — Registrant and global provider of IoT connectivity products, services, and solutions
• Jolt Software, Inc. (company) — Acquired by Digi International in Q4 fiscal 2025 to enhance SmartSense by Digi offerings
• Ventus Wireless, LLC (company) — Acquired in November 2021, a leader in Managed Network-as-a-Service solutions
• Nasdaq Global Select Market LLC (regulator) — Exchange where DGII common stock trades
• Arrow Electronics (company) — One of Digi's larger distributors by sales volume
• AT&T (company) — Strategic sales relationship and telecommunications provider
• Verizon (company) — Strategic sales relationship and telecommunications provider
• T-Mobile (company) — Strategic sales relationship and telecommunications provider
• 913 (dollar_amount) — Number of employees globally as of September 30, 2025
• Hopkins, Minnesota (person) — Location of Digi International's World Headquarters

FAQ

Risk Factors

• Customer Concentration [medium — market]: The company relies significantly on third-party channels, with 60.2% of consolidated revenue in fiscal 2025 generated through distributors. A single distributor accounted for 13% of consolidated revenue for the twelve months ended September 30, 2025, indicating a concentration risk.
• Integration of Acquisitions [medium — operational]: The company has recently completed the acquisition of Jolt Software, Inc. to enhance its IoT Solutions segment. Successful integration of acquired businesses and technologies is critical for realizing expected synergies and achieving strategic objectives.
• Competition in IoT Market [medium — market]: The Internet of Things market is highly competitive, with numerous established players and emerging companies. Digi faces competition from companies offering similar connectivity products, services, and solutions, which could impact market share and pricing power.
• Reliance on Technology and Innovation [medium — operational]: The company's success depends on its ability to develop and offer innovative IoT connectivity products and services. Rapid technological advancements and evolving customer needs require continuous investment in research and development.
• Recurring Revenue Shift [low — financial]: While the company is focusing on increasing recurring revenue, the transition from product sales to subscription-based models may impact short-term revenue recognition and profitability metrics until the recurring revenue base is substantial.

Industry Context

Digi International operates in the highly competitive and rapidly evolving Internet of Things (IoT) connectivity market. The industry is characterized by a growing demand for secure, reliable, and scalable solutions across various verticals such as food service, healthcare, and supply chain. Key trends include the increasing adoption of managed services, the shift towards subscription-based revenue models, and the need for robust device management platforms.

Regulatory Implications

As a publicly traded company, Digi International is subject to SEC regulations and Nasdaq listing requirements. Compliance with financial reporting standards (GAAP) and disclosure obligations is paramount. The company's operations may also be impacted by data privacy regulations (e.g., GDPR, CCPA) and cybersecurity standards relevant to IoT devices and services.

What Investors Should Do

1. Monitor the integration and performance of Jolt Software, Inc.
2. Assess the impact of customer concentration risk.
3. Evaluate the progress in shifting towards recurring revenue models.
4. Analyze competitive positioning within the IoT market.

Key Dates

• 2025-09-30: Fiscal Year End — Marks the end of the reporting period for the 10-K filing, with key metrics like ARR reported as of this date.
• 2025-11-14: Shares of Common Stock Outstanding — Provides a snapshot of the company's equity structure as of a recent date.
• 2025-09-30: Acquisition of Jolt Software, Inc. completed — Strengthens the IoT Solutions segment, particularly in vertical markets like food service and healthcare.
• 1985-01-01: Company Incorporated — Establishes the historical foundation of Digi International Inc.
• 1989-01-01: Reorganized as a Delaware Corporation — Occurred in conjunction with the company's initial public offering.

Glossary

IoT

Internet of Things. A network of physical devices, vehicles, home appliances, and other items embedded with electronics, software, sensors, actuators, and connectivity which enables these objects to connect and exchange data. (Core business focus for both of Digi's reportable segments.)

ARR

Annualized Recurring Revenue. A metric used to quantify the predictable revenue a company expects to receive from its customers over a year. (Key indicator of recurring revenue growth, particularly in the IoT Solutions and IoT Products & Services segments.)

OEM

Original Equipment Manufacturer. A company that manufactures products based on a design or specification provided by another company. (The IoT Products & Services segment offers solutions to OEMs for creating and deploying IoT connectivity.)

MNaaS

Managed Network-as-a-Service. A service model where a third-party provider manages a company's network infrastructure. (Represents the Ventus business within the IoT Solutions segment, simplifying WAN connectivity for enterprise customers.)

WAN

Wide Area Network. A telecommunications network that extends over a large geographic area. (Ventus provides MNaaS solutions for enterprise-wide area network connectivity.)

Year-Over-Year Comparison

While specific comparative figures are not detailed in this excerpt, the fiscal year 2025 performance highlights a strategic shift towards recurring revenue, evidenced by the significant ARR in both the IoT Solutions ($120M) and IoT Products & Services ($32M) segments. The acquisition of Jolt Software, Inc. in Q4 2025 indicates continued investment in growth initiatives. The company's reliance on distributors remains substantial, with 60.2% of revenue coming through these channels, a factor that may have been consistent or evolved from the prior year.

Key Financial Figures

• $27.83 — .01 billion based on a closing price of $27.83 per common share as reported on the Nas
• $32 million — ing Revenue ("ARR") of this segment was $32 million. Please see "Key Business Metrics" sect
• $120 million — er 30, 2025 the ARR of this segment was $120 million. We have long-term high organic growth

Filing Documents

• dgii-20250930.htm (10-K) — 1799KB
• dgii-ex21_2025930x10xk.htm (EX-21) — 10KB
• dgii-ex23_2025930x10xk.htm (EX-23) — 2KB
• dgii-ex24_2025930x10xk.htm (EX-24) — 22KB
• dgii-ex31a_2025930x10k.htm (EX-31.A) — 10KB
• dgii-ex31b_2025930x10k.htm (EX-31.B) — 8KB
• dgii-ex32_2025930x10k.htm (EX-32) — 9KB
• dgii-20250930_g1.jpg (GRAPHIC) — 8KB
• dgii-20250930_g2.jpg (GRAPHIC) — 91KB
• 0000854775-25-000026.txt ( ) — 9994KB
• dgii-20250930.xsd (EX-101.SCH) — 55KB
• dgii-20250930_cal.xml (EX-101.CAL) — 95KB
• dgii-20250930_def.xml (EX-101.DEF) — 375KB
• dgii-20250930_lab.xml (EX-101.LAB) — 856KB
• dgii-20250930_pre.xml (EX-101.PRE) — 631KB
• dgii-20250930_htm.xml (XML) — 1431KB

Risk Factors

ITEM 1A. Risk Factors 6

Unresolved Staff Comments

ITEM 1B. Unresolved Staff Comments 18

Cybersecurity

ITEM 1C. Cybersecurity 18

Properties

ITEM 2. Properties 19

Legal Proceedings

ITEM 3. Legal Proceedings 19

Mine Safety Disclosures

ITEM 4. Mine Safety Disclosures 19 PART II.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 20

[Reserved]

ITEM 6. [Reserved] 21

Management's Discussion and Analysis of Financial Condition and Results of Operations

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 22

Quantitative and Qualitative Disclosures About Market Risk

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 34

Financial Statements and Supplementary Data

ITEM 8. Financial Statements and Supplementary Data 35

Changes in and Disagreements with Accountants On Accounting and Financial Disclosure

ITEM 9. Changes in and Disagreements with Accountants On Accounting and Financial Disclosure 68

Controls and Procedures

ITEM 9A. Controls and Procedures 68

Other Information

ITEM 9B. Other Information 70 PART III.

Directors, Executive Officers and Corporate Governance

ITEM 10. Directors, Executive Officers and Corporate Governance 70

Executive Compensation

ITEM 11. Executive Compensation 71

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 71

Certain Relationships and Related Transactions, and Director Independence

ITEM 13. Certain Relationships and Related Transactions, and Director Independence 71

Principal Accounting Fees and Services

ITEM 14. Principal Accounting Fees and Services 71 PART IV.

Exhibits and Financial Statement Schedules

ITEM 15. Exhibits and Financial Statement Schedules 72

Form 10-K Summary

ITEM 16. Form 10-K Summary 74 i Table of Contents PART I.

BUSINESS

ITEM 1. BUSINESS General Background and Product Offerings Digi International Inc. ("Digi ," "we," "our," or "us") was incorporated in 1985 as a Minnesota corporation. We reorganized as a Delaware corporation in 1989 in conjunction with our initial public offering. Our common stock trades on the Nasdaq Global Select Market tier of the Nasdaq Stock Market LLC (the "Nasdaq") under the symbol DGII. Our World Headquarters is located at 9350 Excelsior Blvd., Suite 700, Hopkins, Minnesota 55343. The telephone number at our World Headquarters is (952) 912-3444. We are a leading global provider of business and mission-critical Internet of Things ("IoT") connectivity products, services and solutions. We help our customers deploy, monitor and manage critical communications infrastructures that deliver important information in demanding environments with high levels of security and reliability. We have two reportable segments under applicable accounting standards: (i) IoT Products & Services; and (ii) IoT Solutions. Our IoT Products & Services segment offers products and services that help original equipment manufacturers ("OEMs") as well as enterprise and government customers create and deploy secure IoT connectivity solutions. These include embedded and wireless modules, console servers, enterprise and industrial routers as well as other infrastructure management equipment to meet our customers' IoT communication requirements. In addition, this segment provides our customers with device management platform services, as well as other professional services to enable customers to capture and manage data from devices connected to networks. Our IoT Solutions segment consists of our SmartSense by Digi business and our Managed Network–as–a-Service ("MNaaS") business acquired via our November 2021 acquisition of Ventus Wireless, LLC and affiliated entities ("Ventus"). SmartSense by Digi offers wireless temperature and other condition-based monitoring services as well as employee

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View this 10-K filing on SEC EDGAR