Digi International Inc. (DGII): BCG Matrix [Dec-2025 Updated]

You're looking for a clear-eyed assessment of Digi International Inc.'s product portfolio, and honestly, the BCG Matrix is the perfect tool to map their strategic pivot toward recurring revenue. We've mapped out where the $152 million in record Annualized Recurring Revenue (ARR) sits against the stable $318 million revenue engine, identifying the high-growth Stars like the 13% growing IoT Solutions and the legacy Dogs facing the axe. See below how the Cash Cows funding this shift-like the 62.9% margin hardware-are supporting the big bets in Question Marks such as the Jolt acquisition, which already brings in over $20 million in ARR.

Background of Digi International Inc. (DGII)

You're looking at Digi International Inc. (DGII), which, as you know, is a key player in the business and mission-critical Internet of Things (IoT) space, providing products, services, and solutions. For the full fiscal year ending September 30, 2025, Digi International posted total revenue of $430 million, which was a 1% increase compared to the prior year. Honestly, that top-line growth was modest, but the underlying story is about the shift in how they make that money.

The company organizes its business into two primary segments: IoT Products & Services and IoT Solutions. The IoT Products & Services segment, which covers things like cellular products, RF products, and embedded systems, actually saw its revenue decrease by about 2.0% for fiscal 2025. This decline was mainly due to lower one-time sales, even though there was some offset from new project-based customer work.

Now, the IoT Solutions segment-that's where the action is, including SmartSense by Digi, Ventus, and the recently added Jolt Software, which they acquired in the fourth quarter of fiscal 2025. This segment was the growth engine, with revenue increasing by 12.8% for the full fiscal year 2025. This growth was fueled by an increase in recurring revenue and the inclusion of Jolt's results. It's defintely clear where management is placing its bets.

The strategic pivot to subscriptions is really showing up in the Annual Recurring Revenue (ARR) figures. By the end of the fourth fiscal quarter of 2025, total ARR hit $152 million, marking a significant 31% surge year-over-year. This means ARR now makes up about 35% of the total revenue base, which is a big deal because recurring revenue streams typically carry better margins and more predictable cash flow than one-time product sales.

Financially, the results for fiscal 2025 show improved profitability on that revenue base. Adjusted EBITDA for the year reached $108 million, up 11% from the previous year. Furthermore, net income saw a massive jump, increasing by 81% to $41 million. On the balance sheet side, Digi completed a major goal by paying off all remaining debt associated with the Ventus acquisition, strengthening their financial footing as they look ahead.

Digi International Inc. (DGII) - BCG Matrix: Stars

You're looking at the growth engines for Digi International Inc. (DGII), the businesses that are dominating high-growth markets right now. These are the Stars of the portfolio, demanding investment to maintain their lead, so you want to see these numbers climbing.

The IoT Solutions segment is definitely earning its spot here. For fiscal year 2025, this segment pulled in $112 million in revenue, marking a solid 13% increase compared to the prior fiscal year. That growth rate in a key market signals high market share in a growing space. Honestly, this segment is where the future cash flow is being built.

The shift toward recurring revenue is a huge indicator of Star status. Digi International Inc. reported a record Annualized Recurring Revenue (ARR) of $152 million at the end of the fourth quarter of fiscal 2025. That figure represents a significant 31% year-over-year jump, which is the fourth consecutive quarter of double-digit ARR growth. That kind of consistent, high-percentage growth is what defines a Star.

Within that strong segment, SmartSense by Digi stands out as a high-growth, subscription-based solution. It's a key driver in the expanding Industrial IoT market, contributing to the IoT Solutions segment's $112 million in FY2025 revenue. The recurring revenue component from this area, which hit $120 million for the IoT Solutions segment's ARR at Q4 2025 (a 30% increase), shows you the subscription model is working well.

Here's a quick look at the key financial metrics supporting the Star classification for these high-growth areas:

Also contributing to the overall strength, though residing in the IoT Products & Services category, are products like the Opengear brand's infrastructure management solutions. These products benefit from strong demand in verticals like data centers, which are undergoing massive build-outs. While the broader IoT Products & Services segment saw a slight revenue dip of 2% for the full year, the underlying demand drivers for Opengear's specific offerings-especially in the context of AI infrastructure-position it well for future conversion to a Cash Cow if market growth stabilizes.

You can see the focus on maintaining leadership through investment in these areas:

• SmartSense by Digi: Subscription-based growth in Industrial IoT.
• Opengear: Supporting critical data center vertical demand.
• ARR Growth: Sustained double-digit growth, hitting 31% YoY in Q4 2025.
• IoT Solutions Margin: Operating margin increased 670 basis points to 8.3% for FY2025.

If Digi International Inc. keeps pouring resources into these areas, the $152 million ARR base is set up to become the next generation of reliable cash flow once the market growth rate naturally slows down. Finance: draft the Q1 2026 investment allocation plan for the IoT Solutions segment by next Wednesday.

Digi International Inc. (DGII) - BCG Matrix: Cash Cows

You're looking at the core engine of Digi International Inc., the business unit that consistently delivers more than it needs to maintain its position. This is the classic Cash Cow quadrant, characterized by high market share in a mature space, which translates directly to reliable financial returns.

The IoT Products & Services segment stands as the largest revenue generator for Digi International Inc., bringing in approximately $318 million in revenue for the full fiscal year 2025. This segment is built on established cellular routers and embedded modules, which serve a loyal customer base with stable, high-volume sales.

The profitability here is defintely strong, with the overall company achieving a high gross profit margin of 62.9% for the full fiscal year 2025. This high margin, coupled with the stable sales volume, means these core product lines are generating substantial cash flow, enabling Digi International Inc. to realize $105 million in free cash flow for fiscal year 2025.

Here's what those numbers tell you about this unit's role:

• Revenue Base: $318 million from IoT Products & Services in FY2025.
• Profitability Indicator: Overall gross margin at 62.9%.
• Cash Generation: Free cash flow reached $105 million in FY2025.
• Yield Strength: The free cash flow yield was 8%.

Digi International Inc. (DGII) - BCG Matrix: Dogs

Older, non-core products within the IoT Products & Services segment are being actively managed toward obsolescence, evidenced by management expecting a general trend of declining sales for many mature products, with the pace of decline potentially accelerating. These legacy hardware products historically commanded higher gross margins compared to some other product and service offerings.

The one-time sales component of the IoT Products & Services segment showed clear contraction across the middle of fiscal 2025. For the second fiscal quarter of 2025, the segment's revenue was $105 million, a 3% decrease year-over-year. Within that, one-time sales saw a decrease partially offset by $1.2 million of recurring revenue growth. Looking at the reported figures for the IoT Products & Services segment specifically in Q2 2025, revenue was $77.8 million, which included a $6.8 million decline in one-time sales.

The trend continued into the third fiscal quarter of 2025. The segment's revenue for Q3 2025 was $80.0 million, flat compared to the prior year. This flatness consisted of a $1.3 million decrease in one-time sales, which was exactly offset by a $1.3 million increase in recurring revenue.

The pressure on legacy hardware is also reflected in inventory dynamics. For the full fiscal year 2025, total revenue was $430 million, a 1% increase. However, operating margins in the fourth fiscal quarter of 2025 decreased 640 basis points to 5.6%, partly due to increased inventory-related expenses. Management signaled the need to continue to seek optimal inventory levels as the supply chain normalizes.

The characteristics suggesting a Dog position include:

• Older, non-core products approaching end of product life cycles.
• One-time sales component decline in Q2 2025 by $6.8 million.
• One-time sales component decline in Q3 2025 by $1.3 million.
• Inventory-related expenses contributing to a Q4 2025 operating margin decrease of 640 basis points.
• Management focus on reducing debt and increasing high-growth ARR, implying less focus on low-growth product lines.

By the end of the fourth fiscal quarter of 2025, the IoT Product & Services segment ARR was $32 million, a 33% increase from the prior year, driven by subscription growth in remote management platforms and warranties. This recurring revenue growth within the segment suggests that while the one-time sales component may fit the Dog profile, the segment as a whole is being steered toward subscription revenue, which is a Cash Cow or Star characteristic, but the legacy hardware sales component remains a candidate for divestiture.

Digi International Inc. (DGII) - BCG Matrix: Question Marks

You're looking at the areas of Digi International Inc. that demand significant capital infusion now for a chance at future market leadership. These are the units operating in high-growth spaces but currently hold a smaller slice of the overall market pie. They are cash consumers by design, aiming to rapidly build share before they risk becoming Dogs.

The recent Jolt Software, Inc. acquisition exemplifies this quadrant. Digi spent approximately $145.5 million in cash to bring Jolt into the fold in the fourth quarter of fiscal 2025, integrating it into the SmartSense business. Jolt itself brought over $20 million in Annual Recurring Revenue (ARR) as of its fiscal year ending January 31, 2025. This move is a clear investment to capture market share in the operational intelligence and compliance automation space, which requires significant integration effort to realize projected returns, such as an incremental $11 million in annualized adjusted EBITDA through synergies by the end of calendar 2026.

Here's a look at the immediate financial context surrounding this strategic investment and the shift to recurring revenue:

The company is also placing capital behind new, high-growth initiatives in AI and industrial IoT that are still in early adoption phases. While the IoT Solutions segment saw a 12.8% revenue increase in fiscal 2025, much of this is tied to established areas like SmartSense and the new Jolt integration. The true Question Mark lies in nascent technologies where buyers are just starting to discover the value proposition. Management is signaling long-term belief in these areas by reiterating targets of $200 million in ARR and $200 million in adjusted EBITDA by the end of fiscal 2028, suggesting heavy investment is needed now to reach those future Star positions.

The focus on shifting the customer base also places certain revenue streams in this category. The move toward new subscription models for traditional hardware customers is a necessary evolution, but acceptance risk is a near-term concern. The overall push resulted in ARR accounting for 35% of total revenues in fiscal 2025, up from a lower percentage previously. This transition consumes cash in sales and marketing efforts to secure multiyear contracts, which is the classic investment pattern for a Question Mark.

Consider the international footprint as another area requiring focused effort to solidify market share:

• International sales accounted for approximately $88.3 million in FY2025 revenue from foreign customers and export sales.
• This figure represents a smaller, volatile growth area relative to the total revenue base of $430.2 million for fiscal 2025.
• The strategy here must be to invest enough to rapidly grow this segment's share, or risk it stagnating due to regional volatility.

The IoT Products & Services segment actually saw a 2.0% revenue decrease in fiscal 2025, largely due to a decline in one-time sales, which highlights why the company needs these high-growth, recurring-revenue Question Marks to succeed. Finance: draft the 13-week cash view incorporating the Jolt integration burn rate by Friday.