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United States securities and exchange commission logo
March 6, 2024
James Loch
Chief Financial Officer
Digi International Inc.
9350 Excelsior Blvd., Suite 700
Hopkins, MN 55343
Re: Digi International
Inc.
Form 10-K for the
fiscal year ended September 30, 2023
Form 8-K furnished
on January 31, 2024
File No. 001-34033
Dear James Loch:
We have reviewed your February 16, 2024 response to our comment
letter and have the
following comments.
Please respond to this letter within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe a
comment applies to your facts and circumstances, please tell us why in
your response.
After reviewing your response to this letter, we may have
additional comments. Unless
we note otherwise, any references to prior comments are to comments in
our February 2, 2024
letter.
Form 10-K for the Fiscal Year Ended September 30, 2023
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Revenue Recogntion, page 44
1. We note your response
to prior comment 4 where you indicate contracts with multiple
performance obligations
that include implementation fees are isolated to SmartSense
arrangements in which
you do not retain ownership. However, SmartSense appears to be
part of your IoT
Solutions segment while your proposed revised discussion of multiple
performance obligations
refers to Digi Remote Manager, which appears to be part of your
IoT Product and
Services segment. Please explain this apparent inconsistency. In addition,
we note from your
response to prior comment 5 that customers in your IoT Products and
Services segment can
purchase services such as Digi Remote Manager, Lighthouse
Management software or
technical services. Tell us whether you have other multiple
James Loch
FirstName LastNameJames Loch
Digi International Inc.
Comapany
March NameDigi International Inc.
6, 2024
March2 6, 2024 Page 2
Page
FirstName LastName
performance obligations besides SmartSense arrangements and if so,
tell us the amount of
such arrangements for each period presented. Lastly, revise your
proposed disclosures to
include a discussion of how you determine standalone selling price for
such contracts as
indicated in your response. Refer to ASC 606-10-50-20(c).
Note 4. Segment Information and Major Customers, page 53
2. Please address the following as it relates to your response to prior
comment 5:
You state that end users purchase the hardware products in your
IoT Products and
Services segment (P&S segment) based on consideration of the
hardware products
technical features and functionality. Provide us with a discussion
of the features and
functionalities separately for the products in each of the
operating segments and
explain how any differences in features and functionalities
factored into your
qualitative analysis.
Quantify the portion of revenue attributable to products and to
services within each of
the operating segments aggregated in the P&S segment, explain any
differences
between the operating segments, and tell us how such differences
were considered as
part of your analysis.
You state all P&S product lines leverage third-party contract
manufacturers that
typically supply a range of products that cut across the operating
segments. Tell us
whether each of your operating segments use contract manufacturers
for the supply of
all products or whether any are manufactured by the company, and
if so, to what
extent. Tell us more about the mix of contract manufacturers,
including whether
certain manufacturers are primarily responsible for supplying
products to a particular
segment, and if so, why. Describe further the manufacturing
process performed by
these third-parties for each operating segment and how they are
similar and whether
there are any differences. Also, provide further detail regarding
the range of products
provided by the contract manufacturers and the specific segments
to which they
relate.
You indicate that distributors and resellers are typically your
customer in the P&S
segment. Describe any differences between the industries served by
the distributor
and reseller customers of each operating segment, and how any
differences were
considered in your analysis. Also describe the types or classes of
customers for each
segment other than distributors and resellers, and the types of
products and services
they purchase.
Describe further the data that is monitored for each of the
operating segments in the
IoT Solutions segment (Solutions segment) and tell us how the
services rendered by
each operating segment are similar and how they differ. For
example, explain how
SmartSense s ability to monitor temperature and other
environmental conditions in
refrigeration for perishable goods is similar to Ventus providing
MNaaS solutions to
simplify the complexity of enterprise wide-area-network
connectivity, and how they
differ.
Describe further the hardware provided for each of the operating
segments in the
Solutions segment, including consideration of similarities and
differences.
James Loch
Digi International Inc.
March 6, 2024
Page 3
Describe the manufacturing process performed by third-party
contract manufacturers
for each of the Solutions operating segments, and whether there are
any differences.
Tell us more about the mix of contract manufacturers, including
whether certain
manufacturers are primarily responsible for supplying products to a
particular
segment, and if so, why. In this regard, we note your disclosure on
page 6 that Ventus
relies almost exclusively on a manufacturer in China for the
production of the
hardware it provides to its customers.
Tell us what industries each of the Solutions operating segment
service and explain
further the overlap of customers between segments.
3. Regarding the Quantitative Review provided in your response, please
provide us with a
revised analysis supporting your conclusion that the aggregated
operating segments have
similar economic characteristics that includes the following:
The underlying historical and projected financial and other data you
considered in
concluding that the aggregated segments have similar economic
characteristics under
ASC 280-10-50-11. Include quantitative data for revenues, each of
gross profit and
operating income, as well as any other measures of segment
profitability you
considered, by year, for each operating segment.
An analysis of the economic characteristics for each individual
operating segment
aggregated within your P&S and Solutions reportable segments,
including a
quantified discussion of revenue, gross profit, and operating
income.
Identification of the operating segments that experienced unique
circumstances as
indicated in your response.
Further explanation of your references to future performance
and future
prospects and the period(s) each represents.
4. Please provide us with your analysis of how aggregation of the operating
segments within
your P&S and Solutions reportable segments is consistent with the
objective and basic
principles of ASC 280. Refer to ASC 280-10-50-11.
Please contact Dave Edgar at 202-551-3459 or Kathleen Collins at
202-551-3499 if you
have questions regarding comments on the financial statements and related
matters.
Sincerely,
FirstName LastNameJames Loch
Division of
Corporation Finance
Comapany NameDigi International Inc.
Office of Technology
March 6, 2024 Page 3
cc: Dave Sampsell
FirstName LastName