DGII Filings — Digi International Inc. - FilingSpy
DGII
Digi International Inc.
A maker of industrial Internet-of-Things hardware and software, Digi International builds cellular routers, embedded modules, and connectivity gear used by businesses to link and monitor machines and facilities — managed through platforms like Digi Remote Manager and its SmartSense, Jolt, and Ventus offerings. It started in 1985 as DigiBoard, founded by engineer John Schinas to help early PCs handle multiple terminals. Its clever serial boards famously powered many of the bulletin-board systems that defined the pre-internet era. The company is headquartered in Hopkins, Minnesota.
ARR reached $191M, up 52%, as the Particle and Jolt acquisitions reshaped the revenue base and product sales sustained their return to growth.
Annualized crossed $190 million for the first time. rose 29% to $138.7 million and widened 1.4 points to 64.8% as the Particle and Jolt acquisitions layered high-margin subscriptions onto an organic recovery in product sales. The company is now larger, more recurring, and carrying $108.1 million in to fund it.
Key takeaways
Annualized reached $191 million, up 52% , driven by the acquisitions of Particle and Jolt Software and organic subscription growth across remote management and support services.
Consolidated rose 29% to $138.7 million, with IoT Solutions up 41.5% primarily from the Jolt acquisition and IoT Products & Services up 24.7% as product sales sustained the return to growth that began in Q1.
widened 1.4 points to 64.8%, the highest quarterly level in the company's reported history, mainly because prior-year -related costs did not repeat.
Section summaries
Management's Discussion and Analysis
Revenue rose 29% to $139M with gross margin up 130 bps, driven by organic growth and acquisitions of Jolt and Particle.
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Consolidated grew 29% to $138.7M, with IoT Products & Services up 24.7% and IoT Solutions up 41.5%, the latter primarily from the Jolt acquisition.
expanded 130 to 64.8% mainly due to the absence of prior-year heightened -related costs.
rose 53.4% to $22.9 million, with IoT Solutions margin improving 5.7 points as operating expenses grew more slowly than .
was $32.5 million, up 41.5% , while ended the quarter at $108.1 million — up from $40.1 million a year ago — reflecting draws on the to fund the Particle acquisition.
The weighted-average interest rate on the fell to 4.95% as of June 30, 2026, down from 6.10% a year earlier, reducing sensitivity.
What changed
The multi-year customer digestion cycle that had weighed on IoT Products & Services product is now resolved: product sales returned to growth in Q1 FY2026 and sustained that growth through Q2 and Q3, with the up 24.7% this quarter.
The IoT Solutions trajectory flagged in prior quarters — whether it could sustain elevated levels as acquisitions integrated — held firm: consolidated gross margin reached a new high of 64.8%, and IoT Solutions improved 5.7 points on expense efficiencies.
The pace of debt reduction reversed as expected: rose to $108.1 million from $40.1 million a year ago, as the company drew on its to fund the Particle acquisition, though of $32.5 million this quarter continues to support deleveraging.
The Ventus risk flagged in FY2024 and FY2025 filings was not mentioned in this quarter's risk factors or MD&A, suggesting no deterioration in the reporting unit's fair value relative to its carrying value.
International tariff risks, flagged as a watch item in Q2 and Q3 FY2025, are now explicitly listed among the most material risk factors, alongside single-source supplier dependencies in Mexico, Thailand, Taiwan, Cambodia, and China.
What to watch
Whether IoT Products & Services , which more than doubled to $57 million after the Particle acquisition, sustains that run rate or moderates as the acquisition annualizes in Q4 FY2026.
The trajectory of consolidated now that it has reached 64.8% — whether acquisition-related and cost structures begin to moderate the margin as Jolt and Particle are fully integrated.
The pace of debt reduction from $108.1 million under the , given the weighted-average interest rate has fallen to 4.95% and is running above $30 million per quarter.
Whether the single-source supplier dependencies and international tariff risks newly emphasized in the risk factors begin to disrupt supply chains or raise costs, potentially pressuring the IoT Products & Services margin recovery.
rose 53.4% to $22.9M, with IoT Solutions margin improving 570 on operating expense efficiencies as volume grew faster than costs.
reached $191M, up 52% , driven by the Particle and Jolt acquisitions and organic subscription growth across remote management and support services.
increased $30.5M to $110.4M for the nine-month period, while investing outflows rose $48.4M primarily for the Particle acquisition.
The company drew $34M on its $250M to fund the Particle deal and expects positive operating cash flows to support liquidity and deleveraging.
The disclosure set forth in Note 12 to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.
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The disclosure set forth in Note 12 to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.
Supply-chain dependencies, international operations, and AI-driven cybersecurity threats are the most material risks highlighted.
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Single-source suppliers and third-party manufacturers in Mexico, Thailand, Taiwan, Cambodia, and China expose the company to disruptions from component shortages, labor issues, and events.
International sales and foreign offices in over a dozen countries create risks from tariffs, geopolitical tensions, FCPA/UKBA compliance, and evolving data-localization laws.
AI tools are accelerating vulnerability discovery and exploit development, materially changing the threat environment for the company's networked hardware and software products.
A legacy population of devices cannot be fully remediated through software updates, and reliance on for patches adds supply-chain risk as AI speeds up exploitation.
Cloud-based management platforms concentrate risk, where a single security incident could simultaneously affect multiple enterprise customers, with potential damages exceeding insurance coverage.