What changed in this filing

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Item 1. Business

2020-11-25 compared with 2019-11-27 · 129 added, 80 removed, 88 unchanged (70% of the section changed)

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We are a leading global provider of business and mission-critical Internet of Things ("IoT") connectivity products, services and solutions.

We help our customers create next-generation connected products and solutions to deploy, monitor and manage critical communications infrastructures and compliance standards in demanding environments with high levels of security and reliability.

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 operating segments under applicable accounting standards:

(i) IoT Products & Services segment;

and (ii) IoT Solutions segment.

(i) IoT Products & Services;

and (ii) IoT Solutions.

Our IoT Products & Services segment offers products and services that help original equipment manufacturers ("OEMs"), enterprise and government customers create and deploy, secure IoT connectivity solutions.

From embedded and wireless modules to console servers, enterprise and industrial routers, we provide customers with a wide variety of communication sub-assemblies and finished products to meet their IoT communication requirements.

In addition, the IoT Products & Services segment provides our customers with a device management platform and other professional services to enable customers to capture and manage data from devices they connect to networks.

From embedded and wireless modules to console servers as well as enterprise and industrial routers, we provide a wide variety of communication sub-assemblies and finished products to meet our customers' IoT communication requirements.

In addition, this segment provides our customers with a device management platform and other professional services to enable customers to capture and manage data from devices connected to networks.

Our IoT Solutions segment offers wireless temperature and other condition-based monitoring services as well as employee task management services.

These solutions are focused on the following vertical markets:

food service, retail, healthcare (primarily pharmacies), transportation/logistics and education.

food service, healthcare (primarily pharmacies) and supply chain.

These solutions are marketed as SmartSense by Digi ® .

We have formed, expanded and enhanced the IoT Solutions segment through four acquisitions.

We formed, expanded and enhanced the IoT Solutions segment primarily through four acquisitions.

For more in-depth descriptions of our products and services, please refer to the heading "Principal Products and Services" at the end of Part I, Item 1 of this Form 10-K.

Our corporate website address is www.digi.com.

In the "Company - Investor Relations" section of our website, we make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our proxy statement and any amendments to these reports available free of charge as soon as reasonably practicable after these reports are filed with or furnished to the United States Securities and Exchange Commission ("SEC").

In the "Company - Investor Relations" section of our website, we make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our proxy statement and any amendments to these reports available free of charge as soon as reasonably practicable after these reports are filed with or furnished to the United States Securities and Exchange Commission ("SEC").

Information on our website is not incorporated by reference into this report or any other report we file with or furnish to the SEC.

Impact of COVID-19 and Global Economic Downturn on Our Business

As is the case with many businesses, the ongoing pandemic and related global economic downturn creates significant uncertainty regarding the nearer term outlook for the markets where we provide products and services.

The pandemic and the economic downturn it triggered represents a fluid situation that presents a wide range of potential impacts on our own business and those of our customers, vendors and other business partners.

As our products and services serve companies across a broad range of industries, in some instances we have seen demand increase while in others we have observed declines as a result of the societal impacts of the pandemic.

At present, the duration and severity of the pandemic and the resulting economic downturn remain unclear.

Present State of Our Operations

During fiscal 2020 (which ended on September 30, 2020), we took steps to lower our operating expenses as a result of the pandemic.

We continue to monitor the impacts of COVID-19 on our operations closely and could increase or take further steps to decrease expenses as we believe circumstances warrant.

Since the start of the pandemic there have not been any material changes to our assets on our balance sheet and, at present, we do not expect there to be material changes.

During the second, third and fourth fiscal quarters of 2020, we reviewed the potential impacts of the COVID-19 pandemic on goodwill and intangible assets and determined there to be no material impact at that time.

We also reviewed the potential impacts on future risks to the business as it relates to collections, returns and other business related items.

No significant changes to these reserves have been made.

Potential Impacts on Our Supply Chain

To date, travel restrictions and border closures have only had minor impacts on our ability to obtain inventory or manufacture or deliver products or services to our customers.

The impacts we have experienced have primarily impacted our IoT Solutions segment.

We continue to monitor restrictions and border closures closely so we are positioned to mitigate the negative impacts of any future restrictions or closures.

It is possible, however, that future restrictions or closures could negatively harm our business.

Travel restrictions impacting people so far have not materially restrained our ability to assist our customers with on-site installation activities or product troubleshooting.

At present, we do not expect impacts on personal travel to be material to our business operations or financial results.

We have taken steps to restrain and monitor our operating expenses and therefore do not expect and such impacts to materially change the relationship between our costs and revenues.

Proactive Efforts to Mitigate the Negative Impacts of COVID-19

Like most companies, we have taken a range of actions with respect to how we operate to assure we comply with government restrictions and guidelines as well as best practices to protect the health and well-being of our employees and our ability to continue operating our business effectively.

To date, we have been able to operate our business effectively using these measures and to maintain all internal controls as documented and posted.

We also have not experienced challenges in maintaining business continuity and do not expect to incur material expenditures to do so.

However, the impacts of the pandemic and efforts to mitigate the same have remained unpredictable and it remains possible that challenges may arise in the future.

Industry and Marketplace Conditions

Current Market Conditions and Status of Our Business

We believe the IoT industry is in the midst of a long-term expansion as many industries are undergoing a digital transformation within their business that drives demand for IoT capabilities across a broad spectrum of services.

IoT use cases include automating workflows, condition-based monitoring and asset tracking.

The performance of our IoT Products & Services segment in fiscal 2019, which is the significant majority of our sales, experienced growth.

This growth was driven primarily by our acquisition of Accelerated Concepts, Inc.

("Accelerated") in the second quarter of fiscal 2018, new product introductions and large customer deployments.

We believe the IoT industry is in the midst of a multi-year expansion as many industries are undergoing a digital transformation within their business that drives demand for IoT capabilities across a broad spectrum of services.

Among others, Iot use cases include automating workflows, condition-based monitoring and asset tracking.

Our IoT Products & Services segment represented the significant majority of our sales in fiscal 2020.

This segment sells both wired and wireless products that are either embedded into the products of OEMs or as stand-alone products.

These offerings allow our customers to connect a wide range of assets to networks.

The growth of this segment was not universal across all products.

For instance, the segment has a number of products that are in the mature phase of their life cycle and have been experiencing sales declines for several years.

While we expect an ongoing trend of marketplace growth, it is susceptible to downturns either because of general economic conditions, the continued development of technology that can make products less competitive or even obsolete and uncertainty or changes in regulatory environments.

Sales of many of our products are also subject to large project-based customer deployments.

As such, if we are unable to identify and commence new deployments with equal or greater significance than completed projects, our growth from period to period may be inconsistent and this segment may contract in any given period.

Our IoT Solutions segment continued to experience significant growth in fiscal 2019 as we continue to integrate the acquisitions we have made in this segment and offer more comprehensive task management monitoring solutions to our customers.

In September 2019, we launched a new SmartSense IoT Platform.

This new platform integrates the platforms from the acquisitions and provides redesigned multi-sensor monitoring and reporting that affords users enhanced equipment management abilities with an asset-versus-sensor focus.

The growth of this segment was driven primarily by our acquisition of Opengear, Inc.

("Opengear") in the first quarter of fiscal 2020.

We believe the COVID-19 pandemic has impacted the results of this segment in a couple of material ways.

First, the segment historically has many products that are subject to large project-based customer deployments.

When the pandemic started during our second fiscal quarter, certain opportunities that were in our sales opportunity pipeline were deferred or delayed, often indefinitely.

Second, given the breadth of customers and industries that use our products from this segment, the pandemic presented certain new sales opportunities from customers whose own businesses encountered increased demand for our products, which bolstered our results.

The segment has a number of products that are in the mature phase of their life cycle and have been experiencing sales declines for several years.

While we expect an ongoing long-term trend of marketplace growth, the segment is susceptible to downturns either because of general macro-economic conditions, the continued development of technology that can make products less competitive or even obsolete and uncertainty or changes in regulatory environments.

Given the current uncertainty in macro-economic conditions driven by the ongoing pandemic, including, but not limited to, the uncertain status of large project-based customer deployment opportunities, this segment's results during fiscal 2021 may be inconsistent.

Our IoT Solutions segment contracted in fiscal 2020 as a result of the COVID-19 pandemic and the resulting economic and operational uncertainty it created for many customers and potential customers.

The contraction was, not surprisingly, most pronounced in our second and third quarter of fiscal 2020 as customers and potential customers were focused on adjusting the way they conduct day to day operations due to the pandemic.

We did see some improvement in new sales in the fourth quarter of fiscal 2020.

While we are cautiously optimistic this trend will continue during fiscal 2021, the outlook remains uncertain as the pandemic remains ongoing and macro-economic conditions remain uncertain.

During fiscal 2020 we continued to consolidate the product offering from the four acquisitions that make up this segment as we worked to transition customers to a new SmartSense IoT Platform launched in September 2019.

This new platform integrates the platforms from the acquisitions and provides redesigned multi-sensor monitoring and reporting that affords user enhanced equipment management abilities with an asset-versus-sensor focus.

The new platform is capable of further incorporating data from multiple sensor types into a single monitoring and reporting platform, to deliver real-time and detailed information on critical business assets and equipment.

We continue to take significant steps intended to deliver consistent long-term growth with higher levels of profitability.

We remain focused on taking steps that we believe will deliver consistent, long-term growth with higher levels of profitability.

IoT Products & Services Segment

Our IoT Products & Services segment is being managed with an expectation for modest revenue and profitability growth.

We recently have focused more attention on pairing our hardware offerings with our Digi Remote Manager® device management platform as well as other support services.

Following the conclusion of fiscal 2020, we reorganized this business to align our product management and sales personnel along specific product lines (see Note 19 to our Consolidated Financial Statements).

We believe this reorganization will bring greater market focus to the product lines.

We also continue to drive efforts to pair our hardware offerings with our Digi Remote Manager ® device management platform as well as other support services.

These bundled offerings allow customers to monitor and manage the performance of our hardware remotely.

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This business helps customers monitor temperature and other conditions important to preserve the quality of perishable or other sensitive inventories and tracks the completion of employee tasks.

Our efforts have created a market-leading, high-growth hardware enabled service business with significant recurring revenue potential.

Our efforts have created a market-leading, high-growth hardware enabled service business with a significant recurring revenue base.

At present, this marketplace primarily is served by smaller companies that lack the infrastructure to provide hardware-enabled implementation services to customers in as effective and efficient a manner as we are able to do because of our long-standing history as an IoT hardware provider.

We now serve over 63,000 customer sites for many leading brands in the following vertical markets:

food service, retail, healthcare (primarily pharmacies), transportation/logistics and education.

As of September 30, 2020, we served over 70,000 customer sites for many leading brands in the following vertical markets:

food service, healthcare (primarily pharmacies) and supply chain.

We entered these markets aggressively as they share similar needs for continuous monitoring and asset tracking for compliance and regulatory purposes.

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Acquisitions and Dispositions

Since fiscal 2015, we have acquired four businesses that form the basis of our IoT Solutions segment and one business that is included in our IoT Products and Services segment.

Since 2015, we have acquired four businesses that form the basis of our IoT Solutions segment.

Since 2018, we have acquired two businesses that are included in our IoT Products & Services segment.

In October 2015, we acquired Ontario-based Bluenica Corporation ("Bluenica").

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In January 2018, we acquired Tampa-based Accelerated, a provider of secure, enterprise-grade, cellular (LTE) networking equipment and backup connectivity applications.

This acquisition expanded our IoT Products and Services segment by enhancing our existing cellular product lines and extended our market reach with a line of commercial routers and network appliance products.

In November 2019, we announced that we entered into an agreement to acquire New Jersey-based Opengear, Inc., a provider of secure IT infrastructure products and software.

This acquisition provides products that are complementary to our IoT Products and Services segment.

In October 2015, we sold our Etherios CRM consulting services business to West Monroe Partners, LLC.

We sold Etherios as part of a strategy to focus on providing highly reliable machine connectivity solutions for business and mission-critical application environments.

These are the only acquisitions and dispositions we have completed in the past five years.

We will continue to evaluate strategic opportunities to acquire businesses as they arise and may seek to divest businesses or assets we no longer consider appropriate to our long-term strategy.

This acquisition expanded our IoT Products & Services segment by enhancing our existing cellular product lines and extended our market reach with a line of commercial routers and network appliance products.

In December 2019, we acquired New Jersey-based Opengear, Inc., a provider of secure IT infrastructure products and software.

This acquisition provides products that are complementary to our IoT Products & Services segment.

Sales Channels

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We also complete sales of both IoT Products & Services and IoT Solutions through our own dedicated sales organization to OEMs, large enterprise customers and other end user customers which accounted for 62.5%, 53.9% and 48.7% of our total consolidated revenue in fiscal 2020, 2019 and 2018, respectively.

Our larger distributors, by sales volume, include Anewtech Systems, Arrow Electronics, Atlantik Elektronik GmbH, Avnet, Digi-Key, Express Systems & Peripherals, Ingram Micro, Miel, Mouser Electronics, Sapply, Solid State Supplies, Symmetry Electronics, Synnex, Tech Data and Tokyo Electron Device.

We also maintain relationships with many other distributors in the U.S., Canada, Europe, Asia Pacific and Latin America.

Our larger distributors, by sales volume, include Arrow Electronics, Avnet, Bressner Technology GmbH, Digi-Key, Express Systems & Peripherals, Ingram Micro, Mouser Electronics, Solid State Supplies, Symmetry Electronics, Synnex, Tech Data, Tokyo Electron Device and Venco Electrónica S.A.

We also maintain relationships with many other distributors both domestically and internationally.

Strategic Sales Relationships

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Among others, relationships include:

AT&T, Bell Mobility, NXP, Orange, Rogers, Silicon Laboratories, Sprint, Telus, Telit, T-Mobile, Verizon, Vodafone and several other cellular carriers worldwide.

AT&T, NXP, Orange, Rogers, Silicon Laboratories, T-Mobile, Telus, Telit, T-Mobile, Verizon, Vodafone and several other cellular carriers worldwide.

We have established relationships with equipment vendors in a range of industries such as energy, industrial, retail, transportation, medical, and government that allow these partners to ship our products and services as component parts of their overall solutions.

Our products are used by many of the world’s leading telecommunications companies and Internet service providers, including AT&T, Sprint and Verizon.

Our products are used by many of the world’s leading telecommunications companies and Internet service providers, including AT&T, T-Mobile and Verizon.

No single customer comprised more than 10% of our consolidated revenue for any of the years ended September 30, 2020, 2019 or 2018.

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While no competitor offers a comparable range of products and services, various companies do compete with us with respect to one or more of our products or solutions.

With respect to many of our product and service offerings, we face competition from companies who dedicate more resources and attention to that particular offering than we are able to do given the breadth of our

As the marketplace for IoT connectivity products and solutions continues to grow, we expect to encounter increased competition.

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We also outsource printed circuit board production.

By outsourcing our operations to these manufacturers, we can leverage the manufacturing strength of our vendors and allow us to focus on new product introductions.

By outsourcing our operations to these manufacturers, we can leverage the manufacturing strength of our vendors, which allows us to focus on new product introductions.

In addition, it allows us to reduce our fixed costs, maintain production flexibility and optimize our profits.

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In general, our business is not considered to be highly seasonal, although our first fiscal quarter revenue is often less than other quarters due to holidays and fewer shipping days.

Working Capital

We fund our business operations through a combination of cash and cash equivalents, marketable securities and cash generated from operations.

We believe that our current financial resources, cash generated from operations and our capacity for debt and/or equity financing will be sufficient to fund our business operations for the next twelve months and beyond.

Research & Development and Intellectual Property Rights

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We have established common law and registered trademark rights on a family of marks for a number of our products.

Our IoT Products and Services primarily are sold under the Digi, Rabbit ® and Digi XBee ® brands.

Our IoT Products & Services primarily are sold under the Digi ® , Rabbit ® and Digi XBee ® brands.

We believe that the Digi ® and Rabbit ® brands have established strong identities with our targeted customer base and our customers associate the Digi ® brand with "reliability" and the Rabbit ® brand with "ease of integration." We believe that our customers associate Digi XBee ® with "ease of use." Many of our customers choose us because they are building a very complex system solution and they want the highest level in product reliability and ease of integration and use.

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We believe our intellectual property has significant value and is an important factor in the marketing of our company and products.

Backlog as of September 30, 2019 and 2018 was $39.8 million and $34.4 million, respectively.

The majority of the backlog at September 30, 2019 is expected to be shipped in fiscal 2020.

Backlog as of any particular date is not necessarily indicative of our future sales trends.

We had 543 employees on September 30, 2019.

HUMAN CAPITAL RESOURCES

Digi International’s workforce consists of approximately 656 employees globally as of September 30, 2020.

We consider our relationship with our employees to be good.

As employees of Digi we are all expected to uphold the following core values that drive our culture:

• Accountability

• Respect and open communication

These core values define the way we do business in our everyday actions and choices.

We strive to create a respectful work environment characterized by mutual trust and the absence of intimidation, oppression, discrimination and exploitation.

Successful execution of our strategy is dependent on attracting, developing and retaining key employees and members of our management team.

The skills, experience and industry knowledge of our employees significantly benefit our operations and performance.

We continuously evaluate, modify, and enhance our internal processes and technologies to increase employee engagement, productivity, and efficiency.

We are committed to promoting and cultivating an inclusive and diverse culture that welcomes and celebrates everyone without bias.

In addition, we look to actively engage within our communities to foster and attain social equity.

Compensation Philosophy

Our compensation philosophy creates the framework and building blocks for our rewards strategy.

We have a pay-for-performance culture that ties compensation to the performance of the individual and the company.

We provide balanced compensation programs that focus on the following five key elements:

• Pay-for-performance - Reward and recognize leading contributors and high potentials;

• External market based - Pay levels that are competitive with respect to the labor market in which we compete for talent;

• Internal equity - Providing for fair pay relationships within the Company;

• Fiscal responsibility - Providing affordable programs that are within our budget;

• Legal compliance - Ensure the organization is legally compliant in all states and countries in which we operate.

Health and Wellness

We are committed to providing a competitive and comprehensive benefits package to our employees.

Our benefits package provides a balance of protection along with the flexibility to meet the individual health and wellness needs of our employees.

PRINCIPAL PRODUCTS AND SERVICES

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Hardware Products

Cellular routers and gateways - Cellular routers provide connectivity for devices over a cellular data network.

They can be used as a cost effective alternative to landlines for primary or backup connectivity for remote locations and devices.

These products have been certified by the major wireless providers in North America and abroad.

Cellular gateway products enable devices or groups of devices to be networked in locations where there is no existing network or where access to a network is prohibited.

All of our cellular products can be augmented with services from our Digi Remote Manager ® platform that provides secure management of devices across remote networks.

Cellular Remote Management - Our cellular remote management products provide cellular router technology and device management solutions for business continuity and out-of-band management.

These products are used for failover backup or as the primary connection over and LTE cellular network.

Remote management devices have embedded LTE/3G cellular modem providing fast and reliable cellular connections without additional equipment.

All connections are encrypted for security.

Radio Frequency (RF) - Our RF products are small box gateway or module products that utilize a variety of wireless protocols for PC-to-device or device-to-device connectivity.

These products often are used in locations where deploying a wired network is not possible either because of cost, disruption or impracticality.

By supporting Digi XBee ® , ZigBee, Wi-Fi and other radio frequency ("RF") technologies, we can meet most customer application requirements.

Our RF products can be connected into the Digi Remote Manager ® for remote management, application connectivity and customization via RF gateways that have cellular connectivity.

Embedded - Our Connect, Rabbit ® and ARM-based embedded systems on module, and single board computers are designed and developed with small footprints, low power consumption and software.

This makes them a popular choice for manufacturers of medical, transportation and industrial devices.

Single board computer products and customer products that include cellular connectivity can be connected directly to the Digi Remote Manager ® or other similar platforms, enabling remote management and remote application connectivity.

Network - Our network products consist of console servers, serial servers and Universal Serial Bus (USB) solutions.

Our console servers provide a secure remote graphical access to computer systems and network equipment that can communicate with virtually any server or device.

Our serial servers (also known as device servers and terminal servers) provide secure, reliable and flexible serial-to-Ethernet integration of most devices into wired Ethernet networks.

Our USB solutions include USB-to-serial converters that offer instant Input/Output (I/O) expansion for peripheral device connectivity.

We also offer USB over Internet Protocol (IP) products that connect USB and serial devices on a wired or wireless Local Area Network (LAN), while eliminating the need for locally-attached host PCs.

In addition, we also offer multiport USB hubs that offer a simple solution for adding switched USB ports to a PC or server.

Digi Remote Manager ® - Digi Remote Manager ® is a recurring revenue service that provides a centralized remote device management solution.

Digi Remote Manager ® provides a secure environment for customers to aggregate their interaction with a large number of disparate devices and connect them to enterprise applications.

It allows customers to meet service level commitments and stay compliant with Payment Card Industry Data Security Standard ("PCI DSS") standards and also allows customers to monitor, diagnose and fix remote devices without sending a technician on site.

Digi Wireless Design Services - Our Digi Wireless Design Services provide customers turn-key wireless networking product development, testing, and certification for a wide range of wireless technology platforms and applications.

Digi Support Services - Our Digi Support Services provide various levels of technical support to customers with programming and implementation challenges related to Digi products.

We offer base support up to our highest level of professional support, which includes implementation planning, application development, on-site support, installation and customer training.

These support services help minimize design risk and ensure optimal performance.

Cellular Products – We provide a range of products that use cellular technology such as Long Term Evolution (“LTE”) and LTE Advance Pro to communicate with networks.

These products provide a cost-effective alternative to landlines for primary or backup connectivity.

They are trusted by global leaders in agricultural, energy medical, lighting, transportation and other industrial markets and include:

• Cellular routers that help enterprise, government and Original Equipment Manufacturers ("OEM") customers with their mission-critical wireless connectivity needs in challenging environments.

• Cellular modules that help OEM customers embed cellular communications abilities into their products so they can deploy and manage intelligent and secure cellular connected products.

These modules help OEMs to get their products to market faster and with lower development costs and risks so they can focus on their core competencies instead of on wireless connectivity design.

• Console servers that can be managed by software to provide secure, remote access to network equipment in data centers and at edge locations.

These products primarily are used by IT organizations in large enterprises to maximize the availability of services to their customers and employees, and provide business continuity in the event of a network failure.

This improves efficiency and reduces the risk of costly outages.

Radio-Frequency (“RF”) Products – These products which are marketed primarily under the Digi XBee ® brand include embedded wireless modules as well as off-the-shelf gateways, modems and adapters.

They are used by customers across a broad range of industries.

These products offer a wide selection of both standards-based and proprietary wireless protocols including Zigbee, Cellular, Sub-1 GHz, WiFi and Bluetooth to meet diverse application requirements of customers.

Embedded System Products – Marketed under the Digi Connect, ConnectCore ® and Rabbit ® brands these are embedded system on modules ("SOMs") and single board computers that are embedded into customer products in a broad range of industries and applications.

These products deliver highly integrated computer platforms with scalable performance, flexible wired and wireless connectivity and complete software platforms.

These products are designed and developed with compact form-factors, low power consumption and long product lifecycles.

The latest ConnectCore ® products support advanced multi-core processing, security, multimedia, human-machine interface ("HMI") and other emerging technologies like machine learning.

Infrastructure Management Products – These products include serial and Universal Serial Bus (USB) solutions.

Our serial servers (also known as device servers and terminal servers) provide secure and reliable serial port-to-Ethernet integration of most devices into wired Ethernet networks.

This means that they are capable of converting data received over TCP/IP networks such as the internet and back;

thereby eliminating the need for each device to have a physical connection to a computer.

We also offer multiple USB solutions whose primary functions are to connect multiple USB devices, allowing them to work over a wired or wireless network without each device needing to plug into its own host computer.

Digi Remote Manager ® - Digi Remote Manager ® is a recurring revenue cloud-based service that provides a secure environment for customers to manage their connected device deployment.

This allows customers to activate, monitor and diagnose a large number of mission-critical devices from a single point of command.

Through a "single pane of glass," network managers can edit configurations, update firmware, and schedule and automate tasks from their desktop, tablet or phone.

Wireless Design Services - Our Digi Wireless Design Services provide customers turn-key wireless networking product development, testing, and certification for a wide range of wireless technology platforms and applications.

Technical Services - Our Technical Services provide professional services, data plan subscriptions and enhanced technical support offers to customers.

Professional services include solution planning and implementation services to customers who purchase our products such as site planning, implementation management, application development and customer training.

Data plan subscriptions are offered to customers wishing to enable cellular connectivity on our products.

Enhanced technical support provides priority, in-depth technical support consultations with our experienced support team.

These services ensure customers get to market quickly, minimize risk, and ensure customer success with their Digi solution.

IoT Solutions Segment

SmartSense by Digi ™ - Our SmartSense by Digi ™ is an end-to-end, cost-effective system that uses sensors, gateways and cloud based applications to enable customers in food service, retail, healthcare (primarily pharmacies), transportation/logistics and education to (i) monitor wirelessly the temperature of food and other perishable or sensitive goods, (ii) monitor facilities or pharmacies by tracking the completion of operating tasks by employees, and (iii) have visibility in the supply chain to product temperature through an end-to-end system for quality control and incident management.

While our sales model varies across our different product options and customer verticals within this segment, generally customers receive hardware up-front, including gateways and sensors, and pay a monthly subscription for monitoring sensor data.

SmartSense by Digi ® - Our SmartSense by Digi ® is an end-to-end, cost-effective system that uses sensors, gateways and cloud based applications to enable customers in food service (e.g.

groceries, schools and restaurants), healthcare (primarily pharmacies) and transportation/logistics to:

(i) monitor wirelessly the temperature of food and other perishable or sensitive goods, (ii) monitor facilities or pharmacies by tracking the completion of operating tasks by employees, and (iii) have visibility in the supply chain to product temperature through an end-to-end system for quality control and incident management.

Typically, customers receive hardware up-front, including gateways and sensors, and pay a monthly subscription for monitoring sensor data.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business