What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-11-21 compared with 2024-11-22 · 133 added, 115 removed, 660 unchanged (27% of the section changed)

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Stock-based compensation expense — — — — 13,286 — — 13,286

Balances, September 30, 2022 41,950 420 6,413 ( 58,172 ) 385,244 200,075 ( 26,054 ) 501,513

Balance on September 30, 2023 42,501 425 6,436 ( 61,506 ) 403,735 224,845 ( 27,011 ) 540,488

Net income — — — — — 22,505 — 22,505

Other comprehensive loss — — — — — — ( 957 ) ( 957 )

Other comprehensive income — — — — — — 3,267 3,267

Employee stock purchase issuances — — ( 102 ) 998 1,209 — — 2,207

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Net income — — — — — 40,804 — 40,804

Other comprehensive income — — — — — — 3,267 3,267

Other comprehensive loss — — — — — — ( 50 ) ( 50 )

Employee stock purchase issuances — — ( 92 ) 972 1,313 — — 2,285

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All intercompany accounts and transactions have been eliminated in consolidation.

Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year presentation.

Accounting Estimates

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Purchased proven technology, license agreements, covenants not to compete and other identifiable intangible assets are recorded at fair value when acquired in a business acquisition, or at cost when not purchased in a business acquisition.

All other identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives of three years to 20.5 years.

All identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives of three years to 20.5 years.

Useful lives for identifiable intangible assets are estimated at the time of acquisition based on the periods of time from which we expect to derive benefits from the identifiable intangible assets.

Amortization of purchased and core technology is included in cost of sales in the Consolidated Statements of Operations.

Amortization of all other acquired identifiable intangible assets is charged to operating expenses as a component of general and administrative expense.

Amortization of all other acquired identifiable intangible assets is charged to operating expenses as a component of general and administrative expense or research and development.

Identifiable intangible assets are reviewed for impairment whenever events or circumstances indicate that undiscounted expected future cash flows are not sufficient to recover the carrying value amount.

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our IoT Products & Services segment and our IoT Solutions segment (see Note 4 to the consolidated financial statements).

Our IoT Products & Services business is structured to include four reporting units under the IoT Products & Services segment:

Cellular Routers, Console Servers, OEM Solutions and Infrastructure Management.

Following our acquisition of Ventus in the first fiscal quarter of 2022, IoT Solutions is comprised of two reporting units:

Ventus and SmartSense by Digi.

We have six reporting units that have been tested individually for impairment.

We have two reporting units that have been tested individually for impairment.

Our goodwill impairment tests as of June 30, 2025, June 30,2024 and June 30, 2023 indicated no impairment (see Note 3 ).

During the fourth quarter of fiscal 2025, we assessed various qualitative factors to determine whether or not an additional goodwill impairment assessment was required as of September 30, 2025, and we concluded that no additional impairment assessment was required.

Contingent Consideration

We measure our contingent consideration liabilities recognized in connection with business combinations at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy as defined in ASC 820 "Fair Value Measurement." We used a probability-weighted discounted cash flow approach as a valuation technique to

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

determine the fair value of the contingent consideration on the acquisition date.

At each subsequent reporting period, the fair value is re-measured with the change in fair value recognized in general and administrative expense in our Consolidated Statements of Operations.

Amounts, if any, paid to the seller in excess of the amount recorded on the acquisition date will be classified as cash flows used in operating activities.

Payments to the seller not exceeding the acquisition-date fair value of the contingent consideration will be classified as cash flows used in financing activities.

In general, we warrant our hardware products to be free from defects in material and workmanship under normal use and service.

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These estimates are based upon historical warranty incidents and are evaluated on an ongoing basis to ensure the adequacy of the warranty accrual.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

We also warrant our software or firmware incorporated into our products generally for a period of one year and offer to provide a bug fix or software patch within a reasonable period.

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Material differences between the historical trends used to determine estimated reserves and actual credit returns and pricing adjustments could result in a material change to our consolidated results of operations or financial position.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Equipment revenue from SmartSense by Digi and Ventus within our IoT Solutions segment is recognized upon shipment of the equipment to a customer.

Equipment revenue from SmartSense by Digi, including Jolt, and Ventus within our IoT Solutions segment is recognized upon shipment of the equipment to a customer.

Installation service charges from these sales are recorded when the product is installed.

Subscription and Support Services Revenue

Our SmartSense by Digi and Ventus subscription revenue is recorded on a monthly basis.

Our SmartSense by Digi, including Jolt, and Ventus subscription revenue is recorded on a monthly basis.

These subscriptions are generally in a range from one year to five years , and may contain an evergreen renewal provision.

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These revenues are included in our IoT Products & Services segment.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Digi Support Services revenues are recognized over the life of the support contract and included in our IoT Products & Services segment.

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We recognize the effect of income tax positions only if those positions are more likely than not of being sustained.

Recognized income tax

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

positions are measured at the largest amount that is greater than 50% likely of being realized.

Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized.

Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

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Gains and losses on foreign currency exchange transactions, as well as translation gains or losses on transactions denominated in currencies other than an entity’s functional currency, are reflected in the statement of operations.

During fiscal 2024, 2023 and 2022 there were net transaction (losses) gains of $( 0.1 ) million, $ 0.0 million and $ 0.1 million, respectively that were recorded in other income, net.

During fiscal 2025, 2024 and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2023 there were net transaction (losses) gains of $( 0.1 ) million, $( 0.1 ) million and $ 0.0 million, respectively that were recorded in other income, net.

We manage our net asset or net liability position for U.S.

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Net income per common share, diluted $ 1.08 $ 0.61 $ 0.67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Because their effect would be anti-dilutive at period end, certain potentially dilutive shares related to stock options to purchase common shares were excluded in the above computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of our common shares.

For the years ended September 30, 2025, 2024 and 2023, such excluded stock options were 208,603 , 678,697 and 395,190 , respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Business Combinations

Our acquisitions are accounted for under ASC 805, Business Combinations.

Accordingly, the assets and liabilities of acquired companies are included in the Consolidated Balance Sheets from the acquisition date, adjusted to reflect their fair value.

Intangible assets are measured and recognized at fair value and amortized over their estimated useful lives.

We recognize goodwill equal to the difference between the purchase price and identifiable assets and liabilities.

Acquisition-related costs are recognized as incurred.

We estimate the fair value of acquired assets and liabilities as of the acquisition date utilizing either a cost or income approach.

These methodologies utilize future estimates including, but not limited to, revenues attributable to customer relationships, tax rates, discount rates, royalty rates, obsolescence rates and income tax rates.

The valuation of tangible and intangible assets and liabilities resulting from an acquisition is subject to management review and may change materially between the preliminary allocation and end of the purchase price allocation period of one year.

Customer relationships are valued using the multi-period excess earnings method.

The multi-period excess earnings method estimates the discounted net earnings attributable to the customer relationships that were acquired after considering items such as possible customer attrition.

Estimated useful lives were determined based on the length and trend of projected cash flows.

The length of the projected cash flow period was determined based on the expected attrition of the customer relationships, which is based on our historical experience and future expectations for renewing and extending similar customer relationships.

Technology and trade names are valued using the relief from royalty method to estimate the cost savings that will accrue to the Company, which would otherwise have to pay royalties or license fees on revenue earned by using the asset.

The useful lives of the assets were determined based on management’s estimate of the period of time the technology or name will be in use.

Adopted Accounting Standards

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This ASU requires entities to disclose, on an annual and interim basis, significant segment expenses that are regularly reviewed by the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss.

This amendment is effective for our fiscal year ending September 30, 2025 and interim periods within our fiscal year ending September 30, 2026.

The Company adopted annual requirements under ASU 2023-07 on July 1, 2025 which has been incorporated into Note 4 .

Recently Issued Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), “Disaggregation of Income Statement Expenses,” which improves disclosures about a company’s expenses and provides more detailed information about the types of expenses in commonly presented expense captions.

This amendment is effective for our fiscal year ending September 30, 2028 and interim periods within our fiscal year ending September 30, 2029.

We are currently assessing the impact of this guidance on our disclosures.

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740), “Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness of income tax disclosures.

This amendment is effective for our fiscal year ending September 30, 2028 and interim periods within our fiscal year ending September 30, 2029.

We are currently assessing the impact of this guidance on our disclosures.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal 2025 Acquisition

Acquisition of Ventus

On November 1, 2021, we acquired Ventus for approximately $ 350 million in cash.

The acquisition was funded through a combination of cash on hand and debt financing under a $ 350 million credit facility committed by BMO Harris Bank N.A.

For tax purposes, this acquisition was treated as an asset acquisition.

We believe this is a complementary acquisition for us as it significantly enhances our IoT Solutions segment by enhancing Digi's service portfolio and immediately extends the company's market reach with a Managed Network-as-a-Service ("MNaaS") solutions offering.

On August 18, 2025, we acquired Jolt for approximately $ 148.5 million in cash.

The acquisition was funded through a combination of cash on hand and debt financing under a draw of $ 150 million from our existing credit facility committed by BMO Harris Bank N.A.

For tax purposes, this acquisition is treated as a stock acquisition.

The goodwill therefore is not deductible except for the $ 11.0 million in carryover tax basis goodwill.

We believe this is a complementary acquisition for us as it significantly enhances our IoT Solutions segment by enhancing Digi's SmartSense service portfolio.

Costs directly related to the acquisition of $ 1.9 million incurred in fiscal 2025 were charged to operations and are included in general and administrative expense in our consolidated statements of operations.

These acquisition costs include legal, accounting, valuation and investment banking fees.

The following table summarizes the fair values of Ventus assets acquired and liabilities assumed as of the acquisition date (in thousands):

The following table summarizes the fair values of Jolt assets acquired and liabilities assumed as of the acquisition date (in thousands):

Cash $ 148,487

Fair value of net tangible assets acquired $ 20,365

Fair value of net tangible liabilities acquired* $ ( 4,694 )

Deferred tax assets from net operating loss carryforwards and other tax attributes 13,798

Identifiable intangible assets:

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Trademarks 4,500

Deferred tax liability on identifiable intangible assets ( 30,326 )

Goodwill 50,209

Total $ 148,487

The consolidated balance sheet as of September 30, 2022 reflected the final allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition.

The fair value of customer relationships was calculated using the excess earnings method, while purchased and core technology and patents were valued using the relief from royalty method.

These methodologies utilize future estimates including revenues attributable to customer relationships, tax rates, discount rates, royalty rates and obsolescence rates.

The final purchase price allocation includes an adjustment made in the fourth fiscal quarter of 2022 to reflect an update from our preliminary purchase price allocation to the valuation of the net tangible assets acquired and goodwill resulting from the acquisition.

Included in the fair value of net tangible assets acquired was $ 0.9 million of right-of-use asset included in other non-current assets and $ 0.9 million of lease liability included in other current liabilities and other non-current liabilities associated with Ventus’ operating leases.

*Includes $2.8 million in cash assumed in acquisition.

The consolidated balance sheet as of September 30, 2025 reflected the preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition.

Purchase price allocations may be subject to future adjustments for the net assets, including intangible assets, acquired working capital balances and income tax assets and liabilities within the one-year measurement period.

The fair value of customer relationships was calculated using the multi-period excess earnings method, while purchased and core technology and trademarks were valued using the relief from royalty method.

These methodologies utilize forecasts of future revenues and earnings before income taxes, depreciation and amortization, attrition rates, tax rates, discount rates, royalty rates and obsolescence rates.

The goodwill of $ 50.2 million arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of Jolt and Digi.

The goodwill from this transaction is all included in the IoT Solutions segment.

The weighted average useful life for all the identifiable intangibles listed above is estimated to be 15.8 years.

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The identifiable intangible assets are amortized using the straight-line method which reflects the pattern in which the assets are expected to be consumed.

The fiscal 2022 consolidated results include $ 54.3 million in revenue contributed by the acquired Ventus business.

It is impracticable to quantify the amount of Ventus contribution to our consolidated net income due to the business structure management uses for reporting and allocating expenses to segments.

Jolt's contribution to revenue and operating income during the fiscal year ending September 30, 2025 was not material.

In addition, Digi’s net revenue and operating income for the years ended September 30, 2025 and 2024 would not have been materially different from reported results had the acquisition occurred on October 1, 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACQUISITIONS (CONTINUED)

The following consolidated pro forma information is presented as if the acquisition had occurred on October 1, 2020 (in thousands):

Year ended September 30,

Net sales $ 393,290 $ 360,820

Net income (loss) $ 14,274 $ ( 2,701 )

Pro forma net income has been adjusted to include interest expense related to debt incurred as a result of the acquisition, amortization on the fair value of the intangibles acquired and remove any costs incurred with the sale transaction.

Net income for the year ended September 30, 2021 was adjusted to include acquisition-related costs of $ 3.1 million.

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS, NET

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2023 $ 25,226

2022 $ 27,195

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

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2030 $ 26,009

2027 $ 21,579

2028 $ 20,410

2029 $ 18,355

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS, NET (CONTINUED)

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

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Balance on September 30, 2024 $ 175,093 $ 167,681 $ 342,774

Acquisition — 50,209 50,209

Foreign currency translation adjustment 173 ( 284 ) ( 111 )

Balance on September 30, 2025 $ 175,266 $ 217,606 $ 392,872

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS, NET (CONTINUED)

No goodwill impairment has been recorded in any period presented.

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We continue to have two reportable and operating segments, our IoT Products & Services segment and our IoT Solutions segment (see Note 4 ).

Our IoT Products & Services business is structured to include four reporting units under the IoT Products & Services segment:

Cellular Routers, Console Servers, OEM Solutions and Infrastructure Management.

Following our acquisition of Ventus, IoT Solutions is comprised of two reporting units.

All six reporting units were included in our fiscal 2022, 2023 and 2024 annual impairment tests.

These two reporting units were included in our fiscal 2025 annual impairment test.

For our quantitative goodwill impairment tests, we determine the estimated fair value of each reporting unit and compare it to the carrying value of the reporting unit, including goodwill.

If the carrying amount of a reporting unit is higher than its estimated fair value, then an impairment loss must be recognized for the excess.

Fair values for the six reporting units were each estimated on a standalone basis using a weighted combination of the income approach and market approach.

Fair values for the two reporting units were each estimated on a standalone basis using a weighted combination of the income approach and market approach.

The income approach indicates the fair value of a business based on the value of the cash flows the business or asset can be expected to generate in the future.

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Significant judgment is required to estimate the amount and timing of future cash flows for each reporting unit and the relative risk of achieving those cash flows.

Key assumptions used in the analysis were related to the determination of discount rates and forecasts of future gross margins and earnings before income taxes, depreciation and amortization margins.

Key assumptions used in the analysis were related to the determination of discount rates and forecasts of future revenue, margins and earnings before income taxes, depreciation and amortization margins.

The market approach indicates the fair value of a business or asset based on a comparison of the business or asset to comparable publicly traded companies or assets and transactions in its industry as well as our prior acquisitions.

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If our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of one or more of our reporting units, we may be required to record future impairment charges for goodwill.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS, NET (CONTINUED)

Results of our Fiscal 2025 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 by Digi 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%.

As of June 30, 2025, we had a total of $ 175.5 million of goodwill for the IoT Products & Services reporting unit and $ 167.6 million of goodwill for the IoT Solutions reporting unit.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT INFORMATION AND MAJOR CUSTOMERS

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The qualitative information included, but was not limited to, the following:

each segment is led by a single segment manager that reports to the Chief Operating Decision Maker (CODM), the nature of the products and services and customers differ between the two segments, discrete financial information is available through gross profit for both segments and the CODM is reviewing both segments’ financial information separately to make decisions about the allocation of resources.

each segment is led by a single segment manager that reports to the Chief Operating Decision Maker (CODM), the nature of the products and services and customers differ between the two segments, discrete financial information is available including revenue and operating income for both segments and the CODM is reviewing both segments’ financial information separately to make decisions about the allocation of resources.

IoT Products & Services derives revenue from the sale of products and services that help original equipment manufacturers ("OEMs"), enterprise and government customers create and deploy, secure IoT connectivity solutions.

IoT Solutions derives revenue from the sale of software-based services that are enabled through the use of connected devices that utilize cellular communications.

Our CEO is our CODM and the metric he uses to measure profitability within each of our reportable segments is segment gross profit.

Our CEO is our CODM.

In the fourth quarter of fiscal 2025, the metric he uses to measure profitability within each of our reportable segments was changed from segment gross profit to operating income.

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

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Total revenue $ 430,221 $ 424,046 $ 444,849

IoT Products & Services $ 177,201 $ 187,958 $ 160,117

IoT Solutions 72,705 64,245 56,169

Total gross profit $ 249,906 $ 252,203 $ 216,286

Depreciation and amortization

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Total depreciation and amortization $ 33,975 $ 33,061 $ 31,976

Other segment items*

IoT Products & Services $ 258,803 $ 265,516 $ 281,979

IoT Solutions 81,153 77,380 80,799

Total other segment items $ 339,956 $ 342,896 $ 362,778

Operating income (loss)

IoT Products & Services $ 46,918 $ 46,482 $ 51,157

IoT Solutions 9,372 1,607 ( 1,062 )

Total operating income $ 56,290 $ 48,089 $ 50,095

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

IoT Solutions other segment items include cost of sales and operating expenses.

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

Year ended September 30,

2025 2024 2023

Total segment operating income $ 56,290 $ 48,089 $ 50,095

Total other expense, net ( 6,373 ) ( 25,231 ) ( 25,177 )

Income before income taxes $ 49,917 $ 22,858 $ 24,918

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT INFORMATION AND MAJOR CUSTOMERS (CONTINUED)

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT INFORMATION AND MAJOR CUSTOMERS (CONTINUED)

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

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IoT Solutions 562,290 410,567

Segment assets $ 900,744 $ 787,565

Unallocated* 21,902 27,510

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United States $ 33,563 $ 34,416

International, primarily Europe 499 477

International 459 499

Total net property, equipment and improvements $ 34,022 $ 34,915

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

No single customer exceeded 10% of revenue or accounts receivable for any of the periods presented.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SELECTED BALANCE SHEET DATA

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On November 1, 2021, we entered into a second amended and restated credit agreement with BMO Harris Bank N.A.

This agreement provides us with a senior secured credit facility (the "2021 Credit Facility") consisting of a $ 350 million term loan B secured loan (the “Term Loan Facility”) and a $ 35 million revolving credit facility (the “Revolving Loan Facility”) with an uncommitted option to increase incremental loans under the 2021 Credit Facility, subject to an incremental cap.

The Revolving Loan Facility includes a $ 10 million letter of credit subfacility and $ 10 million swingline subfacility.

Digi may use proceeds of the Revolving Loan Facility in the future for general corporate purposes.

This loan replaced our syndicated senior secured credit agreement with BMO that was entered into on March 15, 2021 and replaced the remaining balance of our revolver with this new term loan.

This prior agreement provided us with committed credit facilities ("Prior Credit Facility") consisting of a $ 200 million revolving loan.

The debt issuance costs and remaining balance under the Prior Credit Facility totaled $ 2.3 million at November 1, 2021.

Of this amount $ 1.9 million was written off and included in interest expense upon the entry into the new amendment and $ 0.4 million is being amortized over the term of the amended loan and reported in interest expense.

Digi incurred an additional $ 11.7 million and $ 1.7 million in debt issuance costs relating to the November 1, 2021 and December 22, 2021 amendments, respectively.

These amounts are being amortized over the term of the amended loan and reported in interest expense.

On December 22, 2021, Digi entered into a third amended and restated credit agreement with BMO.

Digi refinanced the Term Loan Facility and Revolving Loan Facility under its existing credit agreement entered into on November 1, 2021, but did not receive any additional proceeds from nor modify the amounts of any facilities or subfacilities contained within that credit agreement.

On December 7, 2023, Digi entered into a credit agreement (the “Credit Agreement”) with BMO Bank N.A.

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The applicable margin for loans under the 2023 Credit Facility is in a range of 1.75 % to 2.75 % for Term SOFR loans and 0.75 % to 1.75 % for base rate loans, depending on Digi’s total net leverage ratio.

All borrowings from October through May were made at Term SOFR for a one-month interest election period plus an applicable margin of 2.50 %.

All borrowings from June through September were made at Term SOFR for a one-month interest election period plus an applicable margin of 2.25 %.

All borrowings from October through February 13, 2025 were made at Term SOFR for a one-month interest election period plus an applicable margin of 2.25 %.

All borrowings in the period after that date were made at Term SOFR for a six-month interest election period plus an applicable margin of 1.75 %.

Our weighted average interest rate for our 2023 Credit Facility was 6.00 % as of September 30, 2025.

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The Credit Facility is secured by substantially all of the property of Digi and its domestic subsidiaries.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INDEBTEDNESS (CONTINUED)

The debt issuance costs and remaining balance under the 2021 Credit Facility totaling $ 9.7 million at December 7, 2023 were written off and included in other expenses upon the entry into the Credit Agreement.

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The fair value of the Revolving Loan approximated carrying value at September 30, 2025.

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

Digi made early payments against the term loan under the 2021 Credit Facility of $ 18.9 million and $ 100.0 million in twelve months ended September 30, 2023 and 2022, respectively.

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INDEBTEDNESS (CONTINUED)

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

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Total revenue $ 430,221 $ 424,046 $ 444,849

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE (CONTINUED)

Contract Balances

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We depreciate the cost of this equipment over its useful life and include these expenses in cost of sales.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE (CONTINUED)

Contract Assets

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Income before income taxes $ 49,917 $ 22,858 $ 24,918

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INCOME TAXES (CONTINUED)

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

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Income tax (benefit) expense $ 9,113 $ 353 $ 148

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INCOME TAXES (CONTINUED)

Net deferred tax liability consists of (in thousands):

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Tax credit carryforwards 4,488 3,531

Net operating loss carryforwards 9,840 323

Valuation allowance ( 3,217 ) ( 3,317 )

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As of September 30, 2025, we had $ 2.8 million of tax carryforwards (net of reserves) related to state research and development tax credits.

We also had $ 0.2 million of State net operating losses, non-U.S.

net operating losses of $ 0.2 million, U.S.

We also had $ 38.7 million of US federal net operating losses, $ 37.3 million of State net operating losses, U.S.

foreign tax credits of $ 0.1 million and foreign tax credits of $ 0.1 million.

The increase in net operating losses is primarily from the acquisition of Jolt.

Digi is currently analyzing the impacts of section 382 on the utilization of these net operating losses.

The majority of our state research and development tax credits have a 15-year carryforward period.

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Our valuation allowance for certain U.S.

and foreign attributes was $ 3.3 million at September 30, 2024 and September 30, 2023.

and foreign attributes was $ 3.2 million and $ 3.3 million at September 30, 2025 and September 30, 2024, respectively.

The decrease in valuation allowance is primarily the result of reduction in reserves against R&D credits.

The deferred tax assets realized could vary if there are differences in the timing or amount of future reversals of existing deferred tax liabilities or changes in the amounts of future taxable income.

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State taxes, net of federal benefits 601 401 636

Transaction costs — — 2

Employee stock purchase plan 141 159 165

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ASU 2016-09 excess stock compensation ( 673 ) ( 47 ) ( 1,678 )

Contingent consideration — — ( 1,239 )

Changes from provision to return 1,123 ( 791 ) 181

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income tax examinations by tax authorities for years before fiscal year 2021.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the U.S., which contains a broad range of tax reform provisions affecting businesses.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

This legislation had no material impact to our consolidated financial statements for the fiscal year ended September 30, 2025.

At September 30, 2025, the majority of undistributed foreign earnings were taxed under the one time transition tax and the global intangible low-taxed income ("GILTI") provision of the Tax Cuts and Jobs Act of 2017.

3 unchanged sentences

As of September 30, 2025, we are permanently reinvested with respect to previously non-taxed accumulated earnings in all jurisdictions.

Undistributed foreign earnings remain indefinitely reinvested in foreign operations.

If we change our assertion from indefinitely reinvesting undistributed foreign earnings, we would have to accrue applicable taxes.

Although we have no current need to repatriate historical foreign earnings that have not been taxed in the U.S., if we change our assertion from indefinitely reinvesting undistributed foreign earnings, we would have to accrue applicable taxes.

The amount of any taxes and the application of any tax credits would be determined based on the income tax laws at the time of such repatriation.

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As of September 30, 2025, there were approximately 3,356,219 shares available for future grants under the Amended Plan.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION (CONTINUED)

Stock-based awards granted in 2024 were granted under the 2021 Plan before amendments were made to increase the number of authorized shares.

There were no other material changes to the plan made in the amendments.

Cash received from the exercise of stock options was $ 3.0 million, $ 3.9 million and $ 9.5 million for the year ended September 30, 2024, 2023 and 2022, respectively.

Cash received from the exercise of stock options was $ 3.5 million, $ 3.0 million and $ 3.9 million for the years ended September 30, 2025, 2024 and 2023, respectively.

Our stock option plans allow the net exercise of options.

Shares with a value of $ 0.7 million, $ 0.2 million and $ 4.3 million were forfeited to satisfy tax withholding for the year ended September 30, 2024, 2023 and 2022, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION (CONTINUED)

Shares with a value of $ 3.2 million, $ 0.7 million and $ 0.2 million were forfeited to satisfy tax withholding for the years ended September 30, 2025, 2024 and 2023, respectively.

Our equity plans and corresponding forms of award agreements generally have provisions allowing employees to elect to satisfy tax withholding obligations through the delivery of shares, having us retain a portion of shares issuable under the award or paying cash to us for the withholding.

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Stock-based compensation after income taxes $ 12,071 $ 10,376 $ 10,446

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION (CONTINUED)

Stock Options

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The total intrinsic value of all options exercised during each of the twelve months ended September 30, 2025, 2024 and 2023 was $ 10.1 million, $ 5.6 million and $ 5.2 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION (CONTINUED)

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

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The related weighted average period over which this cost is expected to be recognized was approximately 1.5 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION (CONTINUED)

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

18 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION (CONTINUED)

Non-vested Stock Units

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Pursuant to ASC 450 we previously made an accrual of $ 6.2 million for this matter.

We have now reversed part of this accrual in the fourth fiscal quarter to reflect the settlement amount of $ 5.7 million.

In the fourth fiscal quarter of 2024, we reversed part of this accrual to reflect the settlement amount of $ 5.7 million and this amount was paid in the first quarter of fiscal 2025.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In addition to the matters discussed above, in the normal course of business, we are presently, and expect in the future to be, subject to various claims and litigation with third parties such as non-practicing intellectual property entities as well as customers, vendors and/or employees.

2 unchanged sentences

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 8. Financial Statements and Supplementary Data