Digi International Inc.
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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 task management, label printing and other services. During the fourth quarter of fiscal 2025 we completed the acquisition of Jolt Software, Inc. to enhance the offerings of SmartSense by Digi. SmartSense by Digi and Jolt® collectively focus on the following vertical markets: food service, healthcare (primarily pharmacies and hospitals) and supply chain. Ventus® is a leader in the provision of MNaaS solutions that simplify the complexity of enterprise-wide area network (“WAN”) connectivity for customers. The Ventus portfolio includes cellular wireless and fixed line WAN solutions for an array of connectivity applications in banking, healthcare, retail, gaming, hospitality and other sectors.
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 report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our annual proxy statement and any amendments to these reports available free of charge as soon as reasonably practicable after they 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.
Industry and Marketplace Conditions
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 providing and maintaining secure connectivity and monitoring of operating assets in a wide-range of different businesses, condition-based monitoring of perishable goods, enabling remote work by employees and automating workflows and operations.
Our IoT Products & Services segment represented the majority of our sales in fiscal 2025. This segment sells both wired and wireless products that either are embedded into the products of OEMs or serve as stand-alone products. These offerings allow our customers to connect a wide range of assets to networks. Historically the revenues from this segment have been based on one-time product sales. More recently we have placed greater emphasis on selling subscription-based solutions across this product portfolio.
Our IoT Solutions segment is comprised primarily of our SmartSense by Digi and Jolt, as well as Ventus offerings. The offerings in this segment are primarily offered on a subscription model and provide us with a stable base of higher-margin recurring revenues.
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While we expect an ongoing long-term trend of marketplace growth, each of our business segments 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, 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.
Strategy
We remain focused on taking steps that we believe will deliver consistent, long-term growth with higher levels of profitability. This includes continuously reviewing and managing the product, service and solution offerings we provide to align with customer interests and to meet market demand. In addition, acquisitions historically have helped significantly advance our offerings and drive growth and profitability, in both business segments. In the fourth quarter of fiscal 2025 we completed the acquisition of Jolt Software Inc., a Utah based provider of task management, workforce management and labeling solutions used by food retailers, restaurants and other businesses that might also use our SmartSense by Digi condition monitoring solutions. While it is possible we will complete smaller transactions, we primarily are focusing our efforts for future potential acquisitions on opportunities of scale with the potential to enhance subscription based recurring revenue. In addition, we recently have announced our intention to discontinue the production and sale of certain older products in our IoT Products & Services Segment which are not core to our long-term growth objectives.
IoT Products & Services Segment
Our IoT Products & Services segment is managed so our product management, research and development and sales personnel are aligned along specific product lines. We believe this management structure brings greater market focus and potential growth to our product lines. We also continue to drive efforts to pair our hardware offerings with our remote manager device management platforms as well as other support services. These bundled offerings are sold on a subscription basis and allow customers to monitor and manage the performance of hardware they purchase from us remotely. As of September 30, 2025 the (Annualized Recurring Revenue ("ARR") of this segment was $32 million. Please see "Key Business Metrics" section in Part II, Item 7 for additional details on how ARR is measured.
IoT Solutions Segment
Our IoT Solutions segment is managed with a focus on recurring typically high margin subscription-based revenues. We believe capturing enterprise-level deals should be a driver of growth, leveraging our direct sales model to achieve this. Our offerings provide comprehensive hardware-enabled software solutions. The segment represents approximately 25% of total revenues. As of September 30, 2025 the ARR of this segment was $120 million. We have long-term high organic growth expectations.
Acquisitions and Dispositions
Acquisitions
Our acquisition of Jolt in the fourth quarter of fiscal 2025 described above is the only acquisition we have completed during our fiscal years 2023 through 2025.
Sales Channels
A significant portion of our IoT Products & Services segment sales are made through a global network of distributors, systems integrators and value-added resellers ("VARs"). These third parties accounted for 60.2%, 56.7% and 59.9% of our total consolidated revenue in fiscal 2025, 2024 and 2023, respectively. Our IoT Solutions segment typically does not sell through these channels. The remaining 39.8%, 43.3% and 40.1% of our total consolidated revenue in fiscal 2025, 2024 and 2023, respectively is sold through our dedicated sales organization.
Distributors
Our larger distributors, by sales volume, include Arrow Electronics, Avnet, Bressner, Digi-Key, Express Systems, Ingram Micro, MiTac, Mouser Electronics, Synnex and World Wide Technology. We also maintain relationships with many other distributors both domestically and internationally.
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Strategic Sales Relationships
We maintain alliances with other industry leaders to develop and market technology solutions. These include many major communications hardware and software vendors, operating system suppliers, computer hardware manufacturers, enterprise application providers and cellular carriers. Among others, relationships include: AT&T, AWS, Google, KORE, Novotech, NXP, Orange, Qualcomm, Silicon Laboratories, T-Mobile, Telus, Verizon, Vodafone, Westbase and various 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 utilize many of the world’s leading telecommunications companies and Internet service providers, including, among others, AT&T, T-Mobile and Verizon.
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. In general, our sales are not considered to be highly seasonal, although our first fiscal quarter revenue is often less than other quarters due to holidays and fewer business days.
Competition
We compete primarily in the communications technology industry. This industry is characterized by rapid technological advances and evolving industry standards. This market can be affected significantly by new product introductions and marketing activities of industry participants. It is possible new market entrants could market and sell disruptive technologies that impact one or more of our product or service offerings. In addition, we may compete with other companies to acquire new businesses or technologies and the competition to secure such assets may be intense. We compete for customers on the basis of existing and planned product features, service and software application capabilities, company reputation, brand recognition, technical support, alliance relationships, the quality and reliability of our offerings, product development capabilities, price and availability. 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, given the breadth of our business as well as the greater general business scale of some of these competitors. As the marketplace for IoT connectivity products and solutions continues to grow, we expect to encounter increased competition. Some of these competitors may have access to significantly more financial and technical resources than we possess which could give them advantages in their ability to develop new and better offerings, to meet customer demands, to comply more quickly with new regulatory regimes and to promote and sell their products.
Manufacturing Operations
We outsource our manufacturing operations to certain contract manufacturers, which are located primarily in Thailand, Mexico, Taiwan and Cambodia . We rely on third party foundries or companies who rely on third party foundries for our semiconductor devices that are Application Specific Integrated Circuits ("ASICs"). These foundries are located primarily in Taiwan. We also outsource printed circuit board production. 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.
Our products are manufactured to our designs with standard and custom components. Most of the components are available from multiple vendors. We have several single-sourced supplier relationships, either because alternative sources are not available or because the relationship is advantageous to us. As disclosed elsewhere, our manufacturing operations, like those of other companies, are dependent on relationships with these suppliers who, like us, are subject to potential supply chain disruptions. If these suppliers are unable to provide a timely and reliable supply of components, we could experience manufacturing delays that could adversely affect our consolidated results of operations in a material way. In recent quarters, inventory on hand has returned to historical levels, but we will continue to monitor whether adjustments to inventory levels are necessary. Further, a range of conditions and circumstances beyond our control such as global conflicts, recessionary economic conditions in various regions of the world or a recurrence of a global pandemic could disrupt the availability of raw materials and components as well as our capacity to make and distribute our products.
Research & Development and Intellectual Property Rights
Due to rapidly changing technology in the communications technology industry, we believe a large part of our success depends upon the product and service development skills of our personnel as well as our ability to integrate any acquired technologies with organically developed technologies. While we dedicate significant resources to research and development, many of our
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competitors are focused on a smaller set of products than us and are likely able to dedicate more resources than us toward the portions of the market in which we compete with them.
Our proprietary rights and technology are protected by a combination of copyrights, patents, trade secrets and trademarks.
We have established common law and registered trademark rights on a family of marks for a number of our products. Our IoT Products & Services primarily are sold under the Digi, Digi XBee®, and Opengear® brands. We believe that the Digi brand has established a strong identity with our targeted customer base and our customers associate the Digi brand with "reliability." 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. Our IoT Solutions are offered under the Ventus, SmartSense by Digi and Jolt brands.
Our patents are applicable to specific technologies and are valid for varying periods of time based on the date of patent application or patent grant in the U.S. and the legal term of patents in the various foreign countries where patent protection is obtained. We believe our intellectual property has significant value and is an important factor in the marketing of our company and products.
HUMAN CAPITAL RESOURCES
Digi’s workforce consists of 913 employees globally as of September 30, 2025. We believe we have a good working relationship with our employees.
Culture
At Digi we promote cultural imperatives that drive our approach to our daily work and our customer care:
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our management's discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, as well as our subsequent reports on Form 10-Q and Form 8-K and any amendments to such reports.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report on Form 10-Q contains certain statements that are "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995, and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-Looking Statements
This report contains forward-looking statements that are based on management’s current expectations and assumptions. These statements often can be identified by the use of forward-looking terminology such as "assume," "believe," "continue," "estimate," "expect," "intend," "may," "plan," "potential," "project," "should," or "will" or the negative thereof or other variations thereon or similar terminology. Among other items, these statements relate to expectations of the business environment in which Digi operates, projections of future performance, including but not limited to expectations regarding the Company’s profitability and net cash position, inventory levels, supply chain normalization, perceived marketplace opportunities, debt repayments, attributions of potential acquisitions and statements regarding our mission and vision. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions. Among others, these include risks related to our ability to realize synergies and operating benefits from acquisitions, like our recent acquisitions of Jolt completed in August 2025, and Particle completed in January 2026, ongoing and varying inflationary and deflationary pressures around the world and the monetary and trade policies of governments globally as well as present and ongoing concerns about a potential recession, the potential for longer than expected sales cycles, the ability of companies like us to operate a global business in such conditions as well as negative effects on product demand and the financial solvency of customers and suppliers in such conditions, risks related to ongoing supply chain challenges that continue to impact businesses globally, regulatory risks that include, but are not limited to, the potential expansion of tariffs and potential changes to regulations impacting the functionality or compliance of our products, risks related to cybersecurity, data breaches and data privacy, risks arising from military conflicts such as those in Ukraine and the Middle East, the highly competitive market in which we operate, rapid changes in technologies that may displace products sold by us, declining prices of networking products, our reliance on distributors and other third parties to sell our products, the potential for significant purchase orders to be canceled or changed, delays in product development efforts, uncertainty in user acceptance of our products, the ability to integrate our products and services with those of other parties in a commercially accepted manner, potential liabilities that can arise if any of our products have design or manufacturing defects, our ability to defend or settle satisfactorily any litigation, the impact of natural disasters and other events beyond our control that could negatively impact our supply chain and customers, potential unintended consequences associated with restructuring, reorganizations or other similar business initiatives that may impact our ability to retain important employees or otherwise impact our operations in unintended and adverse ways, and changes in our level of revenue or profitability which can fluctuate for many reasons beyond our control.
These and other risks, uncertainties and assumptions identified from time to time in our filings with the United States Securities and Exchange Commission, including without limitation, those set forth in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended September 30, 2025, and any other subsequent filings, including, but not limited to, this filing, could cause our actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. Many of such factors are beyond our ability to control or predict. These forward-looking statements speak only as of the date for which they are made. Except to the extent required by law, we do not undertake, and expressly disclaim, any intent or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
CRITICAL ACCOUNTING ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, the disclosure of contingent assets and liabilities and the values of purchased assets and assumed liabilities in acquisitions. We base our estimates on historical experience and various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
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A description of our critical accounting estimates was provided in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.
OVERVIEW
We are a leading global provider of business and mission-critical IoT connectivity products, services and solutions. Our business is comprised of two reporting segments: IoT Products & Services and IoT Solutions.
In fiscal 2026, our key operating objectives are to continue driving growth in Annualized Recurring Revenue ("ARR"), Adjusted Net Income, Adjusted EBITDA and cash flow generation.
We utilize many financial, operational, and other metrics to evaluate our financial condition and financial performance. Below we highlight the metrics for the second quarter of fiscal 2026 that we feel are most important in these evaluations, with comparisons to the second quarter of fiscal 2025:
•Revenue was $131 million, an increase of 25%.
•Gross profit margin was 64.0%, an increase of 190 basis points.
•Operating margin was 13.1% in both periods.
•Net income was $11 million, an increase of 8%.
•Net income per diluted share was $0.29, an increase of 4%.
•Adjusted net income was $24 million, an increase of 33%.
•Adjusted net income per diluted share was $0.62, an increase of 29%.
•Adjusted EBITDA was $34 million, an increase of 32%.
•Annualized Recurring Revenue ("ARR") was $184 million at quarter end, an increase of 50%.
(1) Fiscal 2026 results include the results of Jolt for the full six-month period and Particle following the January 2026 acquisition date.
Reconciliations of non-GAAP financial measures to their closest GAAP analogs appear in this document, as well as a discussion of recent changes to the method of calculating adjusted net income and adjusted net income per share.
Key trends regarding our existing business
We believe the following trends will continue to impact our business in fiscal 2026 and beyond:
•We believe the market for Industrial IoT products and services is in the midst of a long-term expansion across a broad range of industries and solutions.
•As recurring revenue from subscription and cloud monitoring services becomes a greater portion of our overall revenue, delivering at higher operating margins rates than one-time revenue, we expect operating margin rates to expand.
•Technology infrastructure necessary to support the deployment of artificial intelligence and other innovations has seen a significant increase in spending on datacenters and other related infrastructure and we have been and expect to be a beneficiary of this ongoing trend.
In addition to the above trends, there are a number of macro circumstances globally that we continue to monitor for potential impacts on our business. These include evolving international trade policies, global economic conditions, military conflicts and political tensions that may have the potential to disrupt our business or those of our vendors or customers.
Both tariffs imposed by various governments globally as well as extremely high demand for certain components associated with technology capital spending on AI and other global business initiatives have the potential to disrupt existing supply chains and impose additional costs on our business.
Monetary and fiscal policies continue to fluctuate globally in response to inflationary and deflationary pressures. These situations could all lead to potential adverse impacts on a wide range of businesses and could affect the businesses of our
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
vendors and customers in ways that could harm our business. Due to the war in Ukraine, sanctions remain imposed on trade with Russia and Belarus which has the potential to disrupt the supply of raw materials needed to make components. Political tensions between China and other nations have intensified, which could lead to similar issues. Additionally, the military conflict with Iran that began in late February has created volatility in both the price of oil and other commodities as well as shipping that has impacted our transportation costs.
CONSOLIDATED RESULTS OF OPERATIONS
The following table sets forth selected information derived from our interim condensed consolidated statements of operations:
| Three months ended March 31, | % incr. | |||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | (decr.) | |||||||||||||||||||||||||||
| Revenue | $ | 130,743 | 100.0 | % | $ | 104,503 | 100.0 | % | 25.1 | % | ||||||||||||||||||||
| Cost of sales | 47,068 | 36.0 | 39,570 | 37.9 | 18.9 | |||||||||||||||||||||||||
| Gross profit | 83,675 | 64.0 | 64,933 | 62.1 | 28.9 | |||||||||||||||||||||||||
| Operating expenses | 66,602 | 50.9 | 51,206 | 49.0 | 30.1 | |||||||||||||||||||||||||
| Operating income | 17,073 | 13.1 | 13,727 | 13.1 | 24.4 | |||||||||||||||||||||||||
| Other expense, net | (2,264) | (1.8) | (1,379) | (1.3) | 64.2 | |||||||||||||||||||||||||
| Income before income taxes | 14,809 | 11.3 | 12,348 | 11.8 | 19.9 | |||||||||||||||||||||||||
| Income tax expense | 3,506 | 2.7 | 1,851 | 1.8 | 89.4 | |||||||||||||||||||||||||
| Net income | $ | 11,303 | 8.6 | % | $ | 10,497 | 10.0 | % | 7.7 | |||||||||||||||||||||
| Six months ended March 31, | % incr. | |||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | (decr.) | |||||||||||||||||||||||||||
| Revenue | $ | 253,205 | 100.0 | % | $ | 208,369 | 100.0 | % | 21.5 | % | ||||||||||||||||||||
| Cost of sales | 93,139 | 36.8 | 79,038 | 37.9 | 17.8 | |||||||||||||||||||||||||
| Gross profit | 160,066 | 63.2 | 129,331 | 62.1 | 23.8 | |||||||||||||||||||||||||
| Operating expenses | 126,667 | 50.0 | 102,245 | 49.1 | 23.9 | |||||||||||||||||||||||||
| Operating income | 33,399 | 13.2 | 27,086 | 13.0 | 23.3 | |||||||||||||||||||||||||
| Other expense, net | (4,571) | (1.8) | (3,642) | (1.7) | 25.5 | % | ||||||||||||||||||||||||
| Income before income taxes | 28,828 | 11.4 | 23,444 | 11.3 | 23.0 | |||||||||||||||||||||||||
| Income tax expense | 5,814 | 2.3 | 2,864 | 1.4 | 103.0 | |||||||||||||||||||||||||
| Net income | $ | 23,014 | 9.1 | % | $ | 20,580 | 9.9 | % | 11.8 | |||||||||||||||||||||
NM means not meaningful
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
REVENUE BY SEGMENT
| Three months ended March 31, | % incr. | |||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | (decr.) | |||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||
| IoT Products & Services | $ | 93,631 | 71.6 | % | $ | 77,783 | 74.4 | % | 20.4 | % | ||||||||||||||||||||
| IoT Solutions | 37,112 | 28.4 | 26,720 | 25.6 | 38.9 | |||||||||||||||||||||||||
| Total revenue | $ | 130,743 | 100.0 | % | $ | 104,503 | 100.0 | % | 25.1 | % | ||||||||||||||||||||
| Six months ended March 31, | % incr. | |||||||||||||||||||||||||||||
| 2026 | 2025 | (decr.) | ||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||
| IoT Products & Services | $ | 179,985 | 71.1 | % | $ | 155,606 | 74.7 | % | 15.7 | % | ||||||||||||||||||||
| IoT Solutions | 73,220 | 28.9 | 52,763 | 25.3 | 38.8 | |||||||||||||||||||||||||
| Total revenue | $ | 253,205 | 100.0 | % | $ | 208,369 | 100.0 | % | 21.5 | % | ||||||||||||||||||||
IoT Products & Services
IoT Products & Services revenue increased $15.8 million for the three months ended March 31, 2026, as compared to the same period in the prior fiscal year. This was driven by increased customer demand and consisted of a $10.3 million increase in one-time sales and $5.5 million of recurring revenue growth, with no material impact from pricing. These increases were driven largely by organic growth, with a contribution from the Particle acquisition.
IoT Products & Services revenue increased $24.4 million for the six months ended March 31, 2026, as compared to the same period in the prior fiscal year. This was driven by increased customer demand and consisted of a $16.6 million increase in one-time sales and $7.8 million of recurring revenue growth, with no material impact from pricing. These increases were driven largely by organic growth, with a contribution from the Particle acquisition.
IoT Solutions
IoT Solutions revenue increased $10.4 million for the three months ended March 31, 2026, as compared to the same period in the prior fiscal year. The increase consisted of a $7.8 million increase in recurring revenue and a $2.6 million increase in one-time sales, with the majority of both driven by the Jolt acquisition.
IoT Solutions revenue increased $20.5 million for the six months ended March 31, 2026, as compared to the same period in the prior fiscal year. The increase consisted of a $15.5 million increase in recurring revenue and a $5.0 million increase in one-time sales, with the majority of both driven by the Jolt acquisition.
ARR
ARR was $184 million as of March 31, 2026, compared to $123 million as of March 31, 2025. IoT Products & Services ARR was $57 million as of March 31, 2026, compared to $28 million as of March 31, 2025. This increase was driven primarily by the acquisition of Particle and supported by growth in the subscription base across remote management platforms, extended warranty offerings and technical support. IoT Solutions ARR was $127 million as of March 31, 2026, compared to $95 million as of March 31, 2025, primarily driven by the acquisition of Jolt, as well as growth in our existing Solutions businesses.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
COST OF GOODS SOLD AND GROSS PROFIT
Below are cost of goods sold and gross profit as a percentage of their respective total revenue:
| Three months ended March 31, | Basis point | |||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | inc. (decr.) | |||||||||||||||||||||||||||
| Cost of sales | $ | 47,068 | 36.0 | % | $ | 39,570 | 37.9 | % | (190) | |||||||||||||||||||||
| Gross profit | $ | 83,675 | 64.0 | % | $ | 64,933 | 62.1 | % | 190 | |||||||||||||||||||||
| Six months ended March 31, | Basis point | |||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | inc. (decr.) | |||||||||||||||||||||||||||
| Cost of sales | $ | 93,139 | 36.8 | % | $ | 79,038 | 37.9 | % | (110) | |||||||||||||||||||||
| Gross profit | $ | 160,066 | 63.2 | % | $ | 129,331 | 62.1 | % | 110 | |||||||||||||||||||||
Gross profit margin of 64.0% increased 190 basis points the second quarter of fiscal 2026 as compared to second quarter of the prior fiscal year. This increase was the result of lower manufacturing related costs.
Gross profit margin of 63.2% increased 110 basis points in the six months ended March 31, 2026, as compared to the same period in the prior fiscal year. This increase was the result of a higher proportion of volume from recurring revenue, which has a higher margin.
OPERATING EXPENSES
Below are our operating expenses and operating expenses as a percentage of total revenue:
| Three months ended March 31, | $ | % | |||||||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | incr. (decr.) | incr. (decr.) | |||||||||||||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 27,526 | 21.1 | % | $ | 22,041 | 21.1 | % | $ | 5,485 | 24.9 | % | |||||||||||||||||||||||
| Research and development | 19,280 | 14.7 | 15,325 | 14.7 | 3,955 | 25.8 | |||||||||||||||||||||||||||||
| General and administrative | 19,796 | 15.1 | 13,840 | 13.2 | 5,956 | 43.0 | |||||||||||||||||||||||||||||
| Total operating expenses | $ | 66,602 | 50.9 | % | $ | 51,206 | 49.0 | % | $ | 15,396 | 30.1 | % | |||||||||||||||||||||||
| Six months ended March 31, | $ | % | |||||||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | incr. (decr.) | incr. (decr.) | |||||||||||||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 53,503 | 21.1 | % | $ | 43,798 | 21.0 | % | $ | 9,705 | 22.2 | % | |||||||||||||||||||||||
| Research and development | 36,434 | 14.4 | 30,352 | 14.6 | 6,082 | 20.0 | |||||||||||||||||||||||||||||
| General and administrative | 36,730 | 14.5 | 28,095 | 13.5 | 8,635 | 30.7 | |||||||||||||||||||||||||||||
| Total operating expenses | $ | 126,667 | 50.0 | % | $ | 102,245 | 49.1 | % | $ | 24,422 | 23.9 | % | |||||||||||||||||||||||
The $15.4 million increase in operating expenses for the three months ended March 31, 2026, as compared to the same period in the prior fiscal year, was due to a $11.5 million increase in labor expense and a $4.0 million increase in non-labor expense. These increases were driven by incremental costs from Jolt and Particle, including an increase in amortization expense due to acquisition-related intangibles, and higher labor costs among existing employees.
23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The $24.4 million increase in operating expenses for the six months ended March 31, 2026, as compared to the same period in the prior fiscal year, was due to a $16.2 million increase in labor expense and a $8.5 million increase in non-labor expense, partially offset by a $0.2 million in net gains on intangible asset sales. These increases were driven by incremental costs from Jolt and Particle, including an increase in amortization expense due to acquisition-related intangibles, and higher labor costs among existing employees.
OPERATING INCOME
| Three months ended March 31, | Basis point increase (decrease) | |||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | ||||||||||||||||||||||||||||
| Operating Income | ||||||||||||||||||||||||||||||
| IoT Products & Services | $ | 13,980 | 14.9 | % | $ | 11,298 | 14.5 | % | 40 | |||||||||||||||||||||
| IoT Solutions | 3,093 | 8.3 | % | 2,429 | 9.1 | % | (80) | |||||||||||||||||||||||
| Total operating income | $ | 17,073 | 13.1 | % | $ | 13,727 | 13.1 | % | — | |||||||||||||||||||||
| Six months ended March 31, | Basis point increase (decrease) | |||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | ||||||||||||||||||||||||||||
| Operating Income | ||||||||||||||||||||||||||||||
| IoT Products & Services | $ | 25,666 | 14.3 | % | $ | 22,255 | 14.3 | % | — | |||||||||||||||||||||
| IoT Solutions | 7,733 | 10.6 | % | 4,831 | 9.2 | % | 140 | |||||||||||||||||||||||
| Total operating income | $ | 33,399 | 13.2 | % | $ | 27,086 | 13.0 | % | 20 | |||||||||||||||||||||
IoT Products & Services
IoT Products & Services operating income increased 40 basis points for the second quarter of fiscal 2026, as compared to the second quarter of fiscal 2025. This increase was due to lower manufacturing related costs, partially offset by an increase in amortization expense, due to the addition of acquisition-related intangibles.
IoT Products & Services operating income was flat for the six months ended March 31, 2026, as compared to the same period in the prior fiscal year. This was the result of a higher proportion of volume from recurring revenue, which has a higher margin, offset by an increase in amortization expense, due to the addition of acquisition-related intangibles.
IoT Solutions
IoT Solutions operating income decreased 80 basis points for the second quarter of fiscal 2026, as compared to the second quarter of fiscal 2025. This decrease was the result of an increase in amortization expense, due to the addition of acquisition-related intangibles.
IoT Solutions operating income increased 140 basis points for the six months ended March 31, 2026, as compared to the same period in the prior fiscal year. This increase was the result of a higher proportion of volume from recurring revenue, which has a higher margin, partially offset by an increase in amortization expense, due to the addition of acquisition-related intangibles.
24
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OTHER EXPENSE, NET
Below are our other expenses, net, and other expenses, net as a percentage of total revenue:
| Three months ended March 31, | $ | % | |||||||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | incr. (decr.) | incr. (decr.) | |||||||||||||||||||||||||||||||
| Other expense, net | |||||||||||||||||||||||||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-06-02 | Loch James J. | SR VP, CFO AND TREASURER | Sell | -100,000 ×2 | $69.44 | -$6,944,342 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-11-20 10-K expected by 2026-11-26 (in 86 days)
- ~2027-02-03 10-Q expected by 2027-02-08 (in 161 days)
- ~2027-05-05 10-Q expected by 2027-05-10 (in 252 days)
- ~2027-08-04 10-Q expected by 2027-08-09 (in 343 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-08-05 8-K Earnings Release; Financial Statements and Exhibits
- 2026-08-05 10-Q Quarterly Report
- 2026-05-06 8-K Earnings Release; Financial Statements and Exhibits
- 2026-05-06 10-Q Quarterly Report
- 2026-03-05 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-02-04 10-Q Quarterly Report
- 2026-02-04 8-K Earnings Release; Financial Statements and Exhibits
- 2025-12-30 8-K Material Agreement Entered; Financial Statements and Exhibits
- 2025-11-21 10-K Annual Report
- 2025-11-12 8-K Earnings Release; Financial Statements and Exhibits
- 2025-08-06 10-Q Quarterly Report
- 2025-08-06 8-K Earnings Release; Financial Statements and Exhibits
- 2025-05-07 10-Q Quarterly Report
- 2025-05-07 8-K Earnings Release; Financial Statements and Exhibits
- 2025-02-05 10-Q Quarterly Report