Digi International Inc. (DGII): Business Model Canvas [Dec-2025 Updated]

You're digging into the mechanics of Digi International Inc.'s business, and honestly, the story here isn't just about selling connected hardware anymore. After reviewing their structure, it's clear the real value driver is the successful pivot: they are rapidly building a high-margin software powerhouse on top of their established connectivity base. For fiscal year 2025, you see this shift clearly with $152 million in Annualized Recurring Revenue (ARR) sitting alongside $318 million in one-time product sales, showing a defintely deliberate, high-stakes transition. Let's break down exactly how they are structuring the key partnerships, resources, and revenue streams to make this recurring model work, so you can see the full picture below.

Digi International Inc. (DGII) - Canvas Business Model: Key Partnerships

You're looking at the network that powers Digi International Inc.'s reach, which is pretty extensive, honestly. The partnerships here are what get their hardware and services into the field.

Global distributors and Value-Added Resellers (VARs)

The channel is a huge part of the revenue engine for the IoT Products & Services segment. You need to know the scale here.

Third parties, which include your global distributors and VARs, accounted for 60.2% of Digi International Inc.'s total consolidated revenue in fiscal 2025. That's a solid majority of the business flowing through partners. To be fair, the IoT Solutions segment typically doesn't use these channels as much.

Here's a quick look at the channel concentration:

Still, you see that one distributor accounted for 13% of the total consolidated revenue for the twelve months ending September 30, 2025. No other single customer crossed the 10% threshold in 2024 or 2023.

Cellular carriers for Managed Network-as-a-Service (MNaaS)

The MNaaS offering, which is part of the IoT Solutions segment via the Ventus acquisition, relies on the underlying network infrastructure partners. Digi International Inc. uses the world's leading cellular carriers for this.

The carriers involved include, among others, AT&T, T-Mobile, and Verizon. The IoT Solutions segment, which houses MNaaS, posted fiscal 2025 revenue of $112 million, marking a 13% increase compared to fiscal 2024.

The recurring revenue component, which is key to MNaaS, is growing:

• Annualized Recurring Revenue (ARR) for the IoT Solutions segment was $96 million at the end of the third fiscal quarter of 2025.
• This represented a 7% increase from the prior fiscal year end.

Technology alliances for embedded system development

Digi International Inc. ensures its embedded modules and platforms work within a broader ecosystem. They collaborate with hardware and software providers to extend value.

Partnerships in the hardware space include companies like:

• NXP
• ST
• ublox
• Telit

For software, applications, and services, the alliances cover cloud and security platforms:

• AWS
• Azure
• Akamai
• Cylus

The company's embedded solutions, like the Digi ConnectCore family and Digi XBee modules, are designed to integrate seamlessly. Since its founding, Digi International Inc. has helped customers connect more than 100 million things.

Strategic M&A targets to accelerate ARR growth

Inorganic growth remains a top capital priority for Digi International Inc. to accelerate its shift toward recurring revenue.

The most recent example is the acquisition of Jolt Software in August 2025. Here are the numbers on that deal and the resulting ARR impact:

The company's overall Annualized Recurring Revenue (ARR) hit a record $152 million at the end of the fourth fiscal quarter of 2025, representing a 31% year-over-year increase. Management expects ARR growth to outpace top-line revenue growth, targeting that $200 million ARR milestone by the end of fiscal 2028. Finance: draft 13-week cash view by Friday.

Digi International Inc. (DGII) - Canvas Business Model: Key Activities

You're looking at the core engine of Digi International Inc., the things they must do well to keep the lights on and grow. For Digi International Inc., these activities center on innovation, platform management, strategic growth through M&A, and keeping the physical goods moving.

IoT hardware and software research and development.

This is where Digi International Inc. builds the foundation for its connected devices and services. The company's R&D focus is on evolving its core technology stack, which includes the Digi Accelerated Linux operating system (DAL OS) and the integrated IoT device security framework, Digi TrustFence. This activity supports both the IoT Product & Services segment and the software components within the IoT Solutions segment.

While the specific Research and Development expense for the fiscal year ended September 30, 2025, isn't explicitly detailed in the latest reports, the output of this activity is evident in the growth of the recurring revenue base, which is a key focus for the business.

Managing the cloud-based Digi Remote Manager platform.

Managing the cloud platform is critical because it drives the high-margin, sticky Annual Recurring Revenue (ARR). The platform allows customers to monitor and manage their hardware deployments remotely, which is a core part of the bundled offerings.

The success of this activity is reflected in the financial metrics:

The IoT Solutions segment, which houses much of the recurring software revenue, saw its revenue grow to $112 million in fiscal 2025, an increase of 13% for the year.

Integrating recent acquisitions like Jolt Software.

Digi International Inc. actively pursues acquisitions to accelerate its subscription-based revenue strategy. The August 2025 acquisition of Jolt Software, Inc. is a prime example, costing approximately $145.5 million in cash.

The integration activity is focused on combining Jolt's workflow and workforce management tools with the SmartSense IoT platform. Here are the key financial impacts driving this activity:

• Jolt generated over $20 million in ARR for its fiscal year ended January 31, 2025.
• The acquisition is expected to contribute an incremental $11 million in annualized adjusted EBITDA through synergies by the end of calendar 2026.
• The deal immediately contributed to the updated fiscal 2025 guidance projecting 28% ARR growth overall.

This move positions Digi International Inc. to deepen customer engagement in verticals like foodservice and retail.

Global supply chain and logistics management.

This activity involves sourcing components, manufacturing, and getting the physical IoT hardware to customers globally, all while managing inventory levels in a normalizing, yet still complex, environment. Effective management here directly impacts gross margins and cash flow.

The focus on inventory management has yielded tangible results:

• Inventory levels at the end of the third fiscal quarter of 2025 were $35 million.
• This was a significant reduction from the $53 million reported at September 30, 2024.
• The company delivered $105 million in free cash flow for fiscal 2025, representing a yield of 8%, partly due to inventory discipline.

Digi International Inc. is also actively monitoring macroeconomic and regulatory challenges, including tariffs, which directly affect logistics costs and planning.

Digi International Inc. (DGII) - Canvas Business Model: Key Resources

You're looking at the core assets that power Digi International Inc.'s operations as of late 2025. These aren't just line items; they are the engines driving recurring revenue and market position in the industrial Internet of Things (IoT) space.

The proprietary cloud platforms are central to delivering ongoing value. These include Digi Remote Manager, the sophisticated platform for remotely monitoring device deployments of any size, anywhere, and Lighthouse. These platforms are what enable the shift toward subscription-based revenue streams.

The specialized engineering talent for embedded systems is a deep pool of expertise. Digi International Inc. has 800+ employees worldwide, including professional design, implementation, and certification teams ready to help you carry out your vision, no matter how large or small. This human capital is critical for maintaining a lead in complex connectivity solutions.

Intellectual property in mission-critical IoT connectivity is substantial. Digi International Inc. holds more than 160 patents, reflecting a long history of innovation in wireless communication, from radio frequency modems to cellular routers and embedded system-on-modules (SOMs).

Here's a quick look at the scale these key resources supported in the Fiscal Year 2025 results, which gives you a sense of the asset base:

The Annualized Recurring Revenue (ARR) base is perhaps the most telling metric of the value locked in these resources. As of the end of the fourth fiscal quarter of 2025, the ARR stood at $152 million. That's a significant 31% increase year-over-year. To be fair, this ARR now represents approximately 35% of the total consolidated revenue, underscoring the successful transition from purely transactional sales to multi-year solution subscriptions, which is exactly what those cloud platforms and engineering teams are designed to drive.

Finance: draft 13-week cash view by Friday.

Digi International Inc. (DGII) - Canvas Business Model: Value Propositions

You're looking at how Digi International Inc. delivers distinct value to its customers right now, late in 2025. It's all about moving from selling boxes to selling reliable, ongoing service, which you see reflected in their financial mix.

Mission-critical, secure cellular connectivity (routers/gateways).

Digi International Inc. provides the foundational hardware that keeps critical systems talking, often over cellular networks. This value proposition is proven by the sheer volume of their embedded components in the field. As of October 2025, the company celebrated shipping over 25 million Digi XBee wireless modules, which cover everything from space missions to smart city infrastructure. You can see the scale in their product segment performance; the IoT Product & Services segment-where many of these embedded modules reside-posted fourth fiscal quarter 2025 revenue of $82 million, a 4% increase year-over-year. They support this with various cellular options, including LTE-M/NB-IoT, LTE Cat 1, and LTE Cat 4 connectivity options within the XBee ecosystem.

High-margin recurring solutions for condition monitoring (SmartSense).

The shift to high-margin, recurring revenue is a core part of the value. This is where solutions like SmartSense by Digi, which handles operational intelligence and compliance automation, fit in. The success of this strategy is clear in the Annualized Recurring Revenue (ARR) growth. For the full fiscal year 2025, ARR reached $152 million, marking a significant 31% increase from the prior fiscal year. This recurring component now represents approximately 35% of total revenue as of Q4 FY2025. The IoT Solutions segment, which includes SmartSense and the recently acquired Jolt, saw its fiscal 2025 revenue increase by 13% to $112 million, driven by an $11.2 million increase in recurring revenue. Honestly, this recurring stream is what drives margin expansion; the company's Adjusted EBITDA margin hit 25.6% in Q4 FY2025.

Here's a quick look at how the revenue streams broke down for the fourth fiscal quarter of 2025:

Consolidated remote device management via a single platform.

You get the benefit of managing vast fleets of devices from one place, which is a huge operational simplification. The growth in ARR is directly attributed to the expanding subscription base across remote management platforms and extended warranty offerings. The integration of Jolt Software with SmartSense is specifically noted as generating favorable market acceptance, suggesting the consolidated solution set is resonating. This platform, which includes the secure remote management via Digi Remote Manager®, helps customers deploy and monitor devices anywhere. The company has a clear target to reach $200 million in ARR by the end of fiscal 2028, showing a commitment to scaling this management value.

Accelerated time-to-market for OEMs using embedded modules.

For Original Equipment Manufacturers (OEMs), the value is in reducing the complexity of connectivity design, letting them focus on their core product. By using established, secure modules like the Digi XBee, OEMs skip months of development and certification work. Steve Ericson, SVP and GM of OEM Solutions, noted that the 25 million+ deployed modules prove that Digi XBee lets customers build and deploy at scale as technology evolves. The platform flexibility, supporting protocols like Zigbee, LoRaWAN, and Wi-SUN, means OEMs aren't locked into one technology path, which is a defintely valuable hedge against future standards shifts.

You should track the continued growth in attach rates for the IoT Product & Services segment, as this directly reflects how well OEMs are bundling these recurring management services with the core hardware.

Digi International Inc. (DGII) - Canvas Business Model: Customer Relationships

You're looking at how Digi International Inc. keeps its customers engaged and spending, especially as they push harder into subscription services. The relationship structure clearly supports both high-touch, complex deployments and scalable, automated interactions.

Dedicated professional services for design and implementation.

Digi International Inc. generates substantial revenue from its service offerings, which includes the design and implementation support you'd expect for complex IoT projects. For the full fiscal year 2025, the company reported service revenue of $133.6 million. This service component is a critical part of the overall business, supporting the deployment of their solutions across various customer bases, including OEMs, enterprise, and government clients.

Subscription-based models for high-touch IoT Solutions.

The shift toward recurring revenue is a major theme in Digi International Inc.'s customer relationship strategy. As of the end of the fourth fiscal quarter of 2025, the Annual Recurring Revenue (ARR) stood at $152 million. This figure represents approximately 35% of the total fiscal year 2025 revenue of $430.2 million. This recurring revenue stream saw a year-over-year increase of 31% at the end of the fourth quarter. The IoT Solutions segment, which includes SmartSense and the recently acquired Jolt Software, saw its recurring revenue increase by $11.2 million for fiscal 2025.

Here's a quick look at the key financial metrics underpinning this relationship shift:

The acquisition of Jolt Software in August 2025 for $145.7 million, net of cash assumed, was specifically aimed at boosting recurring revenue within the IoT Solutions segment.

Automated self-service for hardware and firmware updates.

The growth in recurring revenue is also tied to offerings that support ongoing device management, which implies automated or easily accessible self-service capabilities. The IoT Product & Services segment's ARR increased by 33% year-over-year as of Q4 FY2025, specifically driven by growth in the subscription base for remote management platforms and extended warranty offerings. This points to a relationship model where customers subscribe for ongoing maintenance and updates, reducing the need for constant, manual support intervention.

Key drivers for recurring revenue growth in the IoT Product & Services segment include:

• Growth in the subscription base for remote management platforms.
• Increased attach rates for extended warranty offerings.

Account management for large enterprise and government clients.

Digi International Inc. explicitly structures its IoT Products & Services segment to support enterprise and government customers. The high-touch nature of professional services revenue, at $133.6 million for the year, is likely concentrated here, ensuring dedicated support for these larger accounts. The company's focus on delivering reliable and secure value-added IoT solutions is a direct appeal to these segments.

You can see the segment breakdown supporting these customer types:

• IoT Products & Services FY 2025 Revenue: $318 million.
• IoT Solutions FY 2025 Revenue: $112 million.

Finance: draft 13-week cash view by Friday.

Digi International Inc. (DGII) - Canvas Business Model: Channels

The Channels component for Digi International Inc. relies on a multi-faceted approach to reach its diverse customer base, with a significant portion of revenue flowing through third parties.

Direct sales force for large enterprise and OEM accounts.

• Revenue sold through Digi International Inc.'s dedicated sales organization accounted for 39.8% of total consolidated revenue in fiscal 2025.
• The total consolidated revenue for Digi International Inc. in fiscal 2025 was $430.2 million.
• This direct channel revenue is estimated to be approximately $171.22 million ($430.2 million multiplied by 39.8%).

Global network of third-party distributors and resellers.

A significant portion of the IoT Products & Services segment sales utilize this route. The IoT Solutions segment typically does not sell through these channels.

• One distributor customer represented 13% of consolidated revenue for the twelve months ended September 30, 2025.
• Larger distributors include Arrow Electronics, Avnet, Digi-Key, and Mouser Electronics.

E-commerce for off-the-shelf and smaller volume products.

Specific revenue figures for the e-commerce channel are not separately itemized from the dedicated sales organization revenue stream in the reported segment data.

Acquired sales channels from Ventus and Jolt Software.

The acquisition of Jolt Software, Inc. in August 2025 is expected to accelerate Annualized Recurring Revenue (ARR) growth and deepen customer engagement, integrating Jolt into the IoT Solutions segment.

• Jolt Software was acquired for approximately $145.5 million in cash (net of Jolt's cash).
• Jolt generated over $20 million in ARR in its fiscal year ending January 31, 2025.
• The IoT Solutions segment, which includes Ventus and the newly acquired Jolt, generated fiscal 2025 revenue of $112 million, an increase of 13% over fiscal 2024.
• Digi International Inc. expects Jolt to contribute an incremental $11 million in annualized adjusted EBITDA through synergies by the end of calendar 2026.

Digi International Inc. (DGII) - Canvas Business Model: Customer Segments

You're looking at the core buyers for Digi International Inc. (DGII) as of late 2025, which clearly splits between hardware-focused product sales and higher-value, recurring solutions. The company's overall fiscal 2025 revenue landed at $430.2 million, with the latest quarter, Q4 FY2025, hitting a record $114 million.

The customer base is heavily concentrated in North America, accounting for 70%+ of revenue. A notable risk point is customer concentration; one distributor accounted for 13% of consolidated revenue for the twelve months ending September 30, 2025.

Large enterprises in food service and healthcare are key targets, primarily served through the IoT Solutions segment, which includes SmartSense by Digi and the recently acquired Jolt Software. This segment is where the recurring revenue focus lies, with Annualized Recurring Revenue (ARR) reaching $120 million as of September 30, 2025. The Jolt acquisition, which closed in Q4 FY2025 for $145.7 million, specifically expanded task, workforce, and labeling solutions in these vertical markets.

Original Equipment Manufacturers (OEMs) for embedded solutions are the backbone of the IoT Products & Services segment. This segment sells hardware, device management, and services, and it generated an ARR of $32 million at the end of Q4 FY2025. This segment's fiscal 2025 revenue was $318 million, though it saw a 2% decrease year-over-year.

For transportation, logistics, and smart city infrastructure, Digi International Inc. has offerings that span its portfolio, as the company lists these as general industries it serves. The IoT Solutions segment, which grew its revenue by 13% in fiscal 2025 to $112 million, is where the company is heavily pushing its subscription model, with ARR representing approximately 35% of total revenue.

IT/Network Operations teams needing remote console access are served through managed services offerings, including Opengear and Ventus. The growth in recurring revenue in Q4 FY2025 was specifically driven by growth in both SmartSense and Ventus.

Here's a quick look at the financial split between the two main customer-facing segments as of the end of fiscal 2025:

The strategic shift is clear in the customer base focus:

• ARR growth was 31% year-over-year, reaching $152 million total at quarter end.
• The company aims for $200 million in ARR by the end of fiscal 2028.
• The IoT Solutions segment is the primary driver of this recurring revenue goal.
• Sales channels show that third parties (distributors, VARs) accounted for 60.2% of total consolidated revenue in fiscal 2025.
• The dedicated sales organization accounted for the remaining 39.8% of total consolidated revenue in fiscal 2025.

Finance: draft FY2026 customer acquisition cost projection by Friday.

Digi International Inc. (DGII) - Canvas Business Model: Cost Structure

You're looking to map out the hard costs Digi International Inc. (DGII) is incurring to run its business as of late 2025. Honestly, the cost structure reflects a company balancing heavy investment in future tech with the realities of hardware manufacturing and a recent, significant software acquisition. Here's the quick math on where the money is going, grounded in the Fiscal Year 2025 results ending September 30, 2025, unless otherwise noted.

The Cost of Goods Sold (COGS) is a major component, tied directly to the IoT Products & Services segment, which still represents the majority of sales. We can derive the full-year COGS using the reported total revenue and gross profit margin for the period.

Cost of Goods Sold (COGS) for hardware production and inventory:

• Full Year Fiscal 2025 Revenue: $430 million.
• Full Year Fiscal 2025 Gross Profit Margin: 62.9%.
• Derived Full Year Fiscal 2025 COGS: $159.53 million (Calculated as $430 million (1 - 0.629)).
• Q4 Fiscal 2025 Cost of Sales (for the quarter only): $41.26 million.

R&D investment in next-gen IoT, AI, and edge computing:

Digi International Inc. is clearly putting significant capital into future innovation, as evidenced by the full-year Research and Development spend.

• Full Year Fiscal 2025 Research and Development Expense: $63,659 thousand.
• This R&D spend represents approximately 14.8% of the total Fiscal 2025 revenue.

Sales and marketing expenses to drive subscription adoption:

Driving the shift to recurring revenue requires investment in the sales force to push solutions like SmartSense. While the full-year number is best derived, the first half gives us a strong baseline.

• Sales and Marketing Expense (Six months ended March 31, 2025): $43,798 thousand.
• The company noted that total operating expenses for the full year were $214,387 thousand.

Acquisition costs, like the $145.7 million paid for Jolt Software:

The August 2025 acquisition of Jolt Software was a major cash outlay, immediately impacting the balance sheet and future cost structure through amortization and integration. You defintely need to factor this in when looking at leverage.

• Jolt Software Acquisition Cost (Cash paid): Approximately $145.5 million to $145.7 million.
• Jolt contributed over $20 million in Annual Recurring Revenue (ARR) in its last fiscal year (ending January 31, 2025).
• The deal was funded via the credit facility, resulting in a net debt to adjusted EBITDA leverage ratio of 1.46x upon completion.
• The transaction is expected to generate an incremental $11 million in annualized adjusted EBITDA through synergies by the end of calendar 2026.
• Jolt brought tax attributes, including a net operating loss carryforward of approximately $30 million.

To give you a clearer view of the operating expense breakdown for the full fiscal year 2025, here is what we can piece together from the 10-K data:

If you add the calculated S&M ($91,834k) to the stated R&D ($63,659k) and G&A ($58,894k), it sums to $214,387 thousand, matching the total operating expenses reported. That's your core operating cost base, before factoring in the one-time cash cost of the Jolt acquisition.

Digi International Inc. (DGII) - Canvas Business Model: Revenue Streams

You're looking at how Digi International Inc. actually brings in the money as of late 2025, which is definitely shifting toward more predictable income. The focus is clearly on locking in customers with ongoing services rather than just one-off hardware sales, so you see the Annualized Recurring Revenue (ARR) number getting a lot of attention.

For the full Fiscal Year 2025, Digi International Inc. brought in total revenue of $430 million, which was a 1% increase compared to the prior fiscal year. The company's stated goal is a shift to recurring revenue, and the numbers back that up; by the end of Q4 2025, the Annualized Recurring Revenue (ARR) hit a record $152 million. That ARR figure represents approximately 35% of the total full-year revenue, showing the progress in that strategic pivot.

Here's a quick look at the revenue components as of the end of the fourth quarter of fiscal 2025:

The revenue streams are primarily split between the two main segments, IoT Products & Services and IoT Solutions. The IoT Solutions segment, which houses SmartSense and Ventus, is a major driver of the recurring revenue growth, seeing a 30% increase in its segment ARR to $120 million by the end of Q4 2025.

You can see the core elements that make up the recurring side of the business here:

• Subscription fees from IoT Solutions, specifically from platforms like SmartSense and Ventus.
• Recurring revenue growth from the IoT Products & Services segment, which includes remote management platforms and extended warranty offerings.
• Professional services and enhanced support contracts, which are bundled with their hardware and software offerings to ensure deployment success and ongoing operation.

The shift to recurring revenue is defintely a core focus, as evidenced by the 31% year-over-year growth in total ARR to $152 million at the end of Q4 2025. This recurring stream provides a more stable base compared to the one-time sales of hardware and initial deployment fees. For instance, the IoT Solutions segment saw its ARR grow to $120 million by Q4 2025, largely due to growth in SmartSense, Ventus, and the addition of Jolt.

Finance: draft 13-week cash view by Friday.