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United States securities and exchange commission logo
February 2, 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 limited our review of your filing to the financial
statements and related
disclosures 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.
Form 10-K for the fiscal year ended September 30, 2023
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Consolidated Results of Operations, page 23
1. You state that the
increase in IoT Products and Services revenue in fiscal 2023 was
primarily due to the
growth in sales volume for both your OEM and Infrastructure product
lines. In addition, you
attribute the growth in the IoT Solutions revenue to both your
SmartSense by Digi and
Ventus offerings, as well as the Ventus acquisition. Where two or
more factors contribute
to a material change in revenue or expenses from period-to
period, including any
offsetting factors, please revise to include a quantitative discussion
of such factors. Also,
avoid using vague terms such as "primarily" in favor of specific
quantification. Similar
revisions should be made to your discussion of operating expenses
along with a separate
discussion of any material change in each individual expense line
item. Refer to Item
303(b) of Regulation S-K.
James Loch
FirstName LastNameJames Loch
Digi International Inc.
Comapany2,NameDigi
February 2024 International Inc.
February
Page 2 2, 2024 Page 2
FirstName LastName
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Revenue Recognition, page 44
2. Please explain your reference to ASC 845 as it relates to estimated
sales returns for your
distributor stock rotation program and tell us what consideration was
given to accounting
for such returns as variable consideration pursuant to the guidance of
ASC 606-10-32-5 to
32-10.
3. You state that that platform-as-a-service (PaaS) revenue and support
services revenue are
recognized over the life of the contract term. Please revise to
clarify when you invoice
your customers for such services. Also, tell us whether the number of
devices being
managed or monitored for a customer changes throughout the PaaS period
and if so, what
impact that has on the amount of revenue recognized each period.
Lastly, revise to clarify
the methods used to recognize revenue for services that are
transferred over time. Refer
to ASC 606-10-50-18(a).
4. Please address the following as it relates to your contracts with
multiple performance
obligations:
Explain further what is included in the implementation fee that is
charged when you
retain ownership of the equipment and how you determined that
ratable recognition is
appropriate.
Tell us the amount of revenue from multiple performance obligation
arrangements for
each period presented as well as from the implementation fees
included in such
arrangements.
Tell us and revise to disclose how you determine the
stand-alone-selling price for
each of the performance obligations in your multiple performance
obligation
arrangements.
Note 4. Segment Information and Major Customers, page 53
5. We note that you considered various qualitative and quantitative
factors in determining
that your various operating segments should be aggregated into two
reportable segments.
Please provide us with a detailed analysis of each of the criteria in
ASC 280-10-50-11 for
each operating segment to support such aggregation. Also, provide us
with any underlying
financial information considered as part of your quantitative
analysis.
James Loch
FirstName LastNameJames Loch
Digi International Inc.
Comapany2,NameDigi
February 2024 International Inc.
February
Page 3 2, 2024 Page 3
FirstName LastName
Form 8-K furnished on January 31, 2024
Exhibit 99.1, page 8
6. We note you present adjusted EBITDA in the bullet point highlights
without also
presenting the comparable GAAP measure of net loss with equal or
greater prominence.
Where you present a non-GAAP measure, please revise to also present
the comparable
non-GAAP measure with equal or greater prominence. Refer to Question
102.10(a) of the
non-GAAP C&DIs.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
Please contact Dave Edgar at 202-551-3459 or Kathleen Collins at
202-551-3499 with
any questions.
Sincerely,
Division of
Corporation Finance
Office of Technology
cc: Dave Sampsell