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United States securities and exchange commission logo
April 24, 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
File No. 001-34033
Dear James Loch:
We have reviewed your April 2, 2024 response to our comment
letter and have the
following comments.
Please respond to these comments 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 our March 6, 2024 letter.
Form 10-K for the Fiscal Year Ended September 30, 2023
Note 4. Segment Information and Major Customers, page 53
1. We note your breakdown
of industry sectors that are served by each operating segment for
both the IoT Product &
Services (P&S) and IoT Solutions (Solutions) segments in
response to prior
comment 2. Please tell us whether sales for any of the operating
segments included in
each of your reporting segments are concentrated in a particular
industry sector or
sectors, and if so, why. In your response, provide us with a breakdown
of revenue by operating
segment for each industry served.
2. We note that while the
CODM focuses on operating income as a percent of revenue for
your P&S segments and
gross profit margin for the Solutions segments, he receives both
of these measures, as
well as revenue, for each of your operating segments. Please explain
how the CODM uses
revenue for each of the operating segments, gross profit for the P&S
segments, and operating
income for the Solutions segments. For example, clarify whether
he uses it to allocate
resources, in discussions with segment managers, segment manager
compensation, etc.
James Loch
Digi International Inc.
April 24, 2024
Page 2
3. You state in your response the primary measure of profit used by your
CODM to make
decisions in your P&S segments is operating income as a percent of
revenue, excluding
certain allocations. However, there do not appear to be unallocated
expenses in the
measure of profit disclosed in Note 4. We also understand that your
CODM receives each
of gross profit and operating income for each of your operating
segments. Please tell us
how you determined the measure of profit or loss required to be
disclosed for each of your
reportable segments. Refer to ASC 280-10-50-22 and 50-28.
4. You state in your response to prior comment 3 that pricing for the
product sales in your
P&S segments can be variable, and the mix of product sales plays a
heavy factor and does
not always have consistency over reporting periods. Please explain
further your references
to variable pricing and to the mix of product and their impact on
consistency over
reporting periods. In this regard, clarify whether you are referring
to variability for a
particular operating segment period-over-period. If so, provide us
with quantified
information that supports such variability. To the extent you are
referring to variability
among the four operating segments in a given period, if any, explain
further why such
information would not be relevant in assessing performance and
allocating resources for
your P&S operating segments. In addition, tell us whether similar
impacts from these
factors would be observed in operating income, and if not, why not.
5. Please provide us with an analysis of available quantified data as it
relates to revenue,
gross profit, and operating income for each individual operating
segment aggregated
within your P&S and Solutions reportable segments.
6. You state that operating income as a percentage of revenue in fiscal
2021 and 2023 was
similar for three of the four P&S operating segments. You further
state that COVID-19
had a more significant impact on one operating segment than the other
three in the P&S
segment. For the one segment you indicate was outside of the band of
operating income as
a percentage of revenue for each year, please explain why you believe
it was impacted
more by the COVID-19 pandemic, why you believe the other segments were
not similarly
impacted, and how this factored into your aggregation analysis. If
this did not factor into
your analysis, explain why. Also, provide us with quantitative
information to support your
assertions that historically this one segment has demonstrated
economic similarity with
the other three operating segments.
7. You state that projected future performance for the P&S segments is not
expected to
change in a way that would impact your analysis other than in the one
segment, and that
FirstName LastNameJames Loch
projected future performance is not expected to change for the Solutions
segments. Please
Comapany NameDigi
provide us withInternational Inc.data that supports your future
expectations, including
the quantitative
revenue,
April 24, gross2 profit, and operating income, and explain how it was
developed.
2024 Page
FirstName LastName
James Loch
FirstName LastNameJames Loch
Digi International Inc.
Comapany
April NameDigi International Inc.
24, 2024
April 324, 2024 Page 3
Page
FirstName LastName
Please contact David Edgar at 202-551-93459 or Kathleen Collins at
202-551-3499 if you
have questions regarding comments on the financial statements and related
matters.
Sincerely,
Division of
Corporation Finance
Office of Technology
cc: Dave Sampsell