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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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41-1532464
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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11001 Bren Road East
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Minnetonka, Minnesota
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55343
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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o
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Accelerated filer
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þ
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Non-accelerated filer
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o
(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Emerging growth company
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o
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Page
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Three months ended March 31,
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Six months ended March 31,
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||||||||||||
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2017
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2016
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2017
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2016
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(in thousands, except per share data)
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||||||||||||||
Revenue:
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||||||||
Hardware product
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$
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41,766
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$
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48,732
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$
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84,939
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$
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96,979
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Service
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3,849
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1,430
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5,851
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3,442
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Total revenue
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45,615
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50,162
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90,790
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100,421
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Cost of sales:
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Cost of hardware product
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21,489
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24,283
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43,927
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48,993
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Cost of service
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2,224
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1,137
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3,508
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2,329
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Total cost of sales
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23,713
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25,420
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47,435
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51,322
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Gross profit
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21,902
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24,742
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43,355
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49,099
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Operating expenses:
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||||||||
Sales and marketing
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8,731
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8,165
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17,053
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16,683
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Research and development
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6,979
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7,757
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13,884
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15,595
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General and administrative
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4,680
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5,065
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8,484
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9,126
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Restructuring charge
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—
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102
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—
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753
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||||
Total operating expenses
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20,390
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21,089
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39,421
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42,157
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Operating income
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1,512
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3,653
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3,934
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6,942
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Other (expense) income, net:
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Interest income
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120
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130
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279
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238
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Interest expense
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(10
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)
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(118
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)
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(43
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)
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(126
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)
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Other (expense) income, net
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(143
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)
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(284
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)
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431
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(161
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)
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Total other (expense) income, net
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(33
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)
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(272
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)
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667
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(49
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)
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Income from continuing operations, before income taxes
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1,479
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3,381
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4,601
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6,893
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Income tax provision
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148
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1,155
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913
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1,536
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Income from continuing operations
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1,331
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2,226
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3,688
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5,357
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(Loss) income from discontinued operations, after income taxes
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—
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(89
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)
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—
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3,230
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Net income
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$
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1,331
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$
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2,137
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$
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3,688
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$
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8,587
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Basic net income per common share:
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Continuing operations
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$
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0.05
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$
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0.09
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$
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0.14
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$
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0.21
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Discontinued operations
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$
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—
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$
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—
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$
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—
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$
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0.13
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Net income (1)
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$
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0.05
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$
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0.08
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$
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0.14
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$
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0.34
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Diluted net income per common share:
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Continuing operations
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$
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0.05
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$
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0.09
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$
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0.14
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$
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0.21
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Discontinued operations
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$
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—
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$
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—
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$
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—
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$
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0.12
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Net income (1)
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$
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0.05
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$
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0.08
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$
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0.14
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$
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0.33
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Weighted average common shares:
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Basic
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26,477
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25,820
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26,324
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25,574
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Diluted
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27,252
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25,998
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27,134
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26,116
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Three months ended March 31,
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Six months ended March 31,
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2017
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2016
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2017
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2016
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(in thousands)
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Net income
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$
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1,331
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$
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2,137
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$
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3,688
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$
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8,587
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Other comprehensive income (loss), net of tax:
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Foreign currency translation adjustment
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1,277
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1,421
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(2,478
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)
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(446
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)
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Change in net unrealized gain (loss) on investments
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14
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106
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(10
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)
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43
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Less income tax (provision) benefit
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(5
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)
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(39
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)
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4
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(16
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)
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Reclassification of realized gain on investments included in net income (1)
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—
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—
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—
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(7
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)
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Less income tax benefit (2)
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—
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—
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—
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3
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||||
Other comprehensive income (loss), net of tax
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1,286
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1,488
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(2,484
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)
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(423
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)
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Comprehensive income
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$
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2,617
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$
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3,625
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$
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1,204
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$
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8,164
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March 31, 2017
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September 30, 2016
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||||
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(in thousands, except share data)
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||||||
ASSETS
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Current assets:
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||||
Cash and cash equivalents
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$
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71,895
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$
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75,727
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Marketable securities
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36,081
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58,382
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Accounts receivable, net
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28,720
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28,685
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Inventories
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30,519
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26,276
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Receivable from sale of business
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1,978
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2,997
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Other
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4,399
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3,578
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Total current assets
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173,592
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195,645
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Marketable securities, long-term
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2,262
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3,541
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Property, equipment and improvements, net
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13,613
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14,041
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Identifiable intangible assets, net
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13,164
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4,041
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Goodwill
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129,921
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109,448
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|
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Deferred tax assets
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6,974
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7,295
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|
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Receivable from sale of business
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—
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1,959
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|
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Other
|
153
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|
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196
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|
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Total assets
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$
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339,679
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$
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336,166
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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||||
Current liabilities:
|
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|
||||
Accounts payable
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$
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10,754
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|
|
$
|
8,569
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|
Income taxes payable
|
131
|
|
|
167
|
|
||
Accrued compensation
|
4,198
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|
|
10,787
|
|
||
Accrued professional fees
|
1,134
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|
|
753
|
|
||
Unearned revenue
|
1,636
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|
|
361
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|
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Contingent consideration on acquired businesses
|
1,234
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|
|
513
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|
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Other
|
2,703
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|
|
2,658
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|
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Total current liabilities
|
21,790
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|
|
23,808
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|
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Income taxes payable
|
1,380
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|
|
1,490
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|
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Deferred tax liabilities
|
532
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|
|
616
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|
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Contingent consideration on acquired businesses
|
8,834
|
|
|
9,447
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|
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Other non-current liabilities
|
740
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|
|
776
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|
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Total liabilities
|
33,276
|
|
|
36,137
|
|
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Contingencies (see Note 11)
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|
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|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, $.01 par value; 60,000,000 shares authorized; 32,954,369 and 32,471,175 shares issued
|
330
|
|
|
325
|
|
||
Additional paid-in capital
|
242,836
|
|
|
237,492
|
|
||
Retained earnings
|
144,800
|
|
|
141,112
|
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Accumulated other comprehensive loss
|
(27,175
|
)
|
|
(24,691
|
)
|
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Treasury stock, at cost, 6,425,658 and 6,430,797 shares
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(54,388
|
)
|
|
(54,209
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)
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Total stockholders’ equity
|
306,403
|
|
|
300,029
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|
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Total liabilities and stockholders’ equity
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$
|
339,679
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|
|
$
|
336,166
|
|
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Six months ended March 31,
|
||||||
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2017
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|
2016
|
||||
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(in thousands)
|
||||||
Operating activities:
|
|
|
|
||||
Net income
|
$
|
3,688
|
|
|
$
|
8,587
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|
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
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|
|
|
||||
Depreciation of property, equipment and improvements
|
1,449
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|
|
1,405
|
|
||
Amortization of identifiable intangible assets
|
941
|
|
|
1,001
|
|
||
Stock-based compensation
|
2,328
|
|
|
1,719
|
|
||
Excess tax benefits from stock-based compensation
|
(315
|
)
|
|
(202
|
)
|
||
Deferred income tax provision
|
242
|
|
|
1,397
|
|
||
Gain on sale of business
|
—
|
|
|
(2,870
|
)
|
||
Change in fair value of contingent consideration
|
(684
|
)
|
|
123
|
|
||
Bad debt/product return provision
|
296
|
|
|
168
|
|
||
Inventory obsolescence
|
600
|
|
|
834
|
|
||
Restructuring charges
|
—
|
|
|
753
|
|
||
Other
|
51
|
|
|
59
|
|
||
Changes in operating assets and liabilities (net of acquisitions)
|
(9,473
|
)
|
|
(1,486
|
)
|
||
Net cash (used in) provided by operating activities
|
(877
|
)
|
|
11,488
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|
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Investing activities:
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|
|
|
||||
Purchase of marketable securities
|
(33,470
|
)
|
|
(22,056
|
)
|
||
Proceeds from maturities and sales of marketable securities
|
57,039
|
|
|
27,509
|
|
||
Proceeds from sale of Etherios
|
3,000
|
|
|
2,849
|
|
||
Acquisition of businesses, net of cash acquired
|
(29,994
|
)
|
|
(2,860
|
)
|
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Purchase of property, equipment, improvements and certain other identifiable intangible assets
|
(984
|
)
|
|
(1,209
|
)
|
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Net cash (used in) provided by investing activities
|
(4,409
|
)
|
|
4,233
|
|
||
Financing activities:
|
|
|
|
||||
Acquisition earn-out payments
|
(518
|
)
|
|
—
|
|
||
Excess tax benefits from stock-based compensation
|
315
|
|
|
202
|
|
||
Proceeds from stock option plan transactions
|
3,246
|
|
|
6,267
|
|
||
Proceeds from employee stock purchase plan transactions
|
479
|
|
|
494
|
|
||
Purchases of common stock
|
(587
|
)
|
|
(503
|
)
|
||
Net cash provided by financing activities
|
2,935
|
|
|
6,460
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(1,481
|
)
|
|
71
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(3,832
|
)
|
|
22,252
|
|
||
Cash and cash equivalents, beginning of period
|
75,727
|
|
|
45,018
|
|
||
Cash and cash equivalents, end of period
|
$
|
71,895
|
|
|
$
|
67,270
|
|
|
|
|
|
||||
Supplemental schedule of non-cash investing and financing activities:
|
|
|
|
||||
Receivable related to sale of Etherios
|
$
|
—
|
|
|
$
|
4,906
|
|
Liability related to acquisition of businesses
|
$
|
(1,310
|
)
|
|
$
|
(10,550
|
)
|
Accrual for purchase of property, equipment, improvements and certain other identifiable intangible assets
|
$
|
(66
|
)
|
|
$
|
—
|
|
Cash
|
$
|
28,754
|
|
Fair value of contingent consideration on acquired business
|
10
|
|
|
Total purchase price consideration
|
$
|
28,764
|
|
|
|
||
Fair value of net tangible assets acquired
|
$
|
897
|
|
Fair value of identifiable intangible assets acquired:
|
|
||
Purchased and core technology
|
4,000
|
|
|
Customer relationships
|
4,000
|
|
|
Trade name and trademarks
|
711
|
|
|
Non-compete agreements
|
600
|
|
|
Goodwill
|
18,556
|
|
|
Total
|
$
|
28,764
|
|
|
Three months ended
March 31, |
|
Six months ended March 31,
|
||||||||
|
2016
|
|
2017
|
|
2016
|
||||||
Revenue
|
$
|
51,041
|
|
|
$
|
91,724
|
|
|
$
|
103,011
|
|
Income from continuing operations
|
$
|
1,892
|
|
|
$
|
3,112
|
|
|
$
|
4,804
|
|
Net income
|
$
|
1,803
|
|
|
$
|
3,112
|
|
|
$
|
8,034
|
|
Cash
|
$
|
1,697
|
|
Purchase price payable upon completion of diligence matters
|
303
|
|
|
Fair value of contingent consideration on acquired business
|
1,300
|
|
|
Working capital adjustment
|
(37
|
)
|
|
Total purchase price consideration
|
$
|
3,263
|
|
|
|
||
Fair value of net tangible assets acquired
|
$
|
(37
|
)
|
Fair value of identifiable intangible assets acquired:
|
|
||
Purchased and core technology
|
400
|
|
|
Customer relationships
|
250
|
|
|
Goodwill
|
2,650
|
|
|
Total
|
$
|
3,263
|
|
|
Three months ended March 31, 2016
|
|
Six months ended March 31, 2016
|
||||
Service revenue
|
$
|
—
|
|
|
$
|
891
|
|
Cost of service
|
—
|
|
|
713
|
|
||
Gross profit
|
—
|
|
|
178
|
|
||
Operating expenses:
|
|
|
|
||||
Sales and marketing
|
—
|
|
|
148
|
|
||
Research and development
|
—
|
|
|
103
|
|
||
General and administrative
|
—
|
|
|
43
|
|
||
Total operating expenses
|
—
|
|
|
294
|
|
||
Loss from discontinued operations, before income taxes
|
—
|
|
|
(116
|
)
|
||
(Loss) gain on sale of discontinued operations, before income taxes
|
(42
|
)
|
|
2,870
|
|
||
Total (loss) income from discontinued operations, before income taxes
|
(42
|
)
|
|
2,754
|
|
||
Income tax expense (benefit) on discontinued operations
|
47
|
|
|
(476
|
)
|
||
(Loss) income from discontinued operations, after income taxes
|
$
|
(89
|
)
|
|
$
|
3,230
|
|
|
Six months ended
|
||
|
March 31, 2016
|
||
Amortization of identifiable intangible assets
|
$
|
30
|
|
Depreciation of property, equipment and improvements
|
$
|
—
|
|
Purchases of property, equipment, improvements and certain other identifiable intangible assets
|
$
|
—
|
|
|
Three months ended March 31,
|
|
Six months ended March 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
1,331
|
|
|
$
|
2,226
|
|
|
$
|
3,688
|
|
|
$
|
5,357
|
|
(Loss) income from discontinued operations, after income taxes
|
—
|
|
|
(89
|
)
|
|
—
|
|
|
3,230
|
|
||||
Net income
|
$
|
1,331
|
|
|
$
|
2,137
|
|
|
$
|
3,688
|
|
|
$
|
8,587
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
||||||||
Denominator for basic net income per common share — weighted average shares outstanding
|
26,477
|
|
|
25,820
|
|
|
26,324
|
|
|
25,574
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock options and restricted stock units
|
775
|
|
|
178
|
|
|
810
|
|
|
542
|
|
||||
Denominator for diluted net income per common share — adjusted weighted average shares
|
27,252
|
|
|
25,998
|
|
|
27,134
|
|
|
26,116
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic net income per common share:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
0.05
|
|
|
$
|
0.09
|
|
|
$
|
0.14
|
|
|
$
|
0.21
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.13
|
|
Net income (1)
|
$
|
0.05
|
|
|
$
|
0.08
|
|
|
$
|
0.14
|
|
|
$
|
0.34
|
|
Diluted net income per common share:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
0.05
|
|
|
$
|
0.09
|
|
|
$
|
0.14
|
|
|
$
|
0.21
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.12
|
|
Net income (1)
|
$
|
0.05
|
|
|
$
|
0.08
|
|
|
$
|
0.14
|
|
|
$
|
0.33
|
|
(1)
|
Earnings per share presented are calculated by line item and may not add due to the use of rounded amounts.
|
|
March 31,
2017 |
|
September 30, 2016
|
||||
Accounts receivable, net:
|
|
|
|
||||
Accounts receivable
|
$
|
31,195
|
|
|
$
|
30,885
|
|
Less allowance for doubtful accounts
|
257
|
|
|
209
|
|
||
Less reserve for future returns and pricing adjustments
|
2,218
|
|
|
1,991
|
|
||
Accounts receivable, net
|
$
|
28,720
|
|
|
$
|
28,685
|
|
Inventories:
|
|
|
|
||||
Raw materials
|
$
|
23,922
|
|
|
$
|
21,116
|
|
Work in process
|
591
|
|
|
802
|
|
||
Finished goods
|
6,006
|
|
|
4,358
|
|
||
Inventories
|
$
|
30,519
|
|
|
$
|
26,276
|
|
|
Amortized
Cost (1)
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Value (1)
|
||||||||
Current marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
$
|
25,360
|
|
|
$
|
—
|
|
|
$
|
(29
|
)
|
|
$
|
25,331
|
|
Commercial paper
|
5,988
|
|
|
—
|
|
|
(2
|
)
|
|
5,986
|
|
||||
Certificates of deposit
|
4,757
|
|
|
7
|
|
|
—
|
|
|
4,764
|
|
||||
Current marketable securities
|
36,105
|
|
|
7
|
|
|
(31
|
)
|
|
36,081
|
|
||||
Non-current marketable securities:
|
|
|
|
|
|
|
|
||||||||
Certificates of deposit
|
2,253
|
|
|
9
|
|
|
—
|
|
|
2,262
|
|
||||
Total marketable securities
|
$
|
38,358
|
|
|
$
|
16
|
|
|
$
|
(31
|
)
|
|
$
|
38,343
|
|
(1)
|
Included in amortized cost and fair value is purchased and accrued interest of
$189
.
|
|
Amortized
Cost (1)
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Value (1)
|
||||||||
Current marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
$
|
28,801
|
|
|
$
|
—
|
|
|
$
|
(34
|
)
|
|
$
|
28,767
|
|
Commercial paper
|
23,963
|
|
|
—
|
|
|
(20
|
)
|
|
23,943
|
|
||||
Certificates of deposit
|
3,755
|
|
|
13
|
|
|
—
|
|
|
3,768
|
|
||||
Government municipal bonds
|
1,904
|
|
|
—
|
|
|
—
|
|
|
1,904
|
|
||||
Current marketable securities
|
58,423
|
|
|
13
|
|
|
(54
|
)
|
|
58,382
|
|
||||
Non-current marketable securities:
|
|
|
|
|
|
|
|
||||||||
Certificates of deposit
|
3,505
|
|
|
36
|
|
|
—
|
|
|
3,541
|
|
||||
Total marketable securities
|
$
|
61,928
|
|
|
$
|
49
|
|
|
$
|
(54
|
)
|
|
$
|
61,923
|
|
(1)
|
Included in amortized cost and fair value is purchased and accrued interest of
$271
.
|
|
March 31, 2017
|
||||||||||||||
|
Less than 12 Months
|
|
More than 12 Months
|
||||||||||||
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
||||||||
Corporate bonds
|
$
|
25,331
|
|
|
$
|
(29
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
5,986
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
31,317
|
|
|
$
|
(31
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
September 30, 2016
|
||||||||||||||
|
Less than 12 Months
|
|
More than 12 Months
|
||||||||||||
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
||||||||
Corporate bonds
|
$
|
24,454
|
|
|
$
|
(33
|
)
|
|
$
|
4,102
|
|
|
$
|
(1
|
)
|
Commercial paper
|
23,943
|
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
48,397
|
|
|
$
|
(53
|
)
|
|
$
|
4,102
|
|
|
$
|
(1
|
)
|
|
Total Fair
Value at
|
|
Fair Value Measurements Using
Inputs Considered as
|
||||||||||||
|
March 31, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market
|
$
|
37,125
|
|
|
$
|
37,125
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate bonds
|
25,331
|
|
|
—
|
|
|
25,331
|
|
|
—
|
|
||||
Commercial paper
|
5,986
|
|
|
—
|
|
|
5,986
|
|
|
—
|
|
||||
Certificates of deposit
|
7,026
|
|
|
—
|
|
|
7,026
|
|
|
—
|
|
||||
Total assets measured at fair value
|
$
|
75,468
|
|
|
$
|
37,125
|
|
|
$
|
38,343
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration on acquired businesses
|
10,068
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,068
|
|
|
Total liabilities measured at fair value
|
$
|
10,068
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,068
|
|
|
Total Fair
Value at
|
|
Fair Value Measurements Using
Inputs Considered as
|
||||||||||||
|
September 30, 2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market
|
$
|
44,319
|
|
|
$
|
44,319
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate bonds
|
28,767
|
|
|
—
|
|
|
28,767
|
|
|
—
|
|
||||
Commercial paper
|
23,943
|
|
|
—
|
|
|
23,943
|
|
|
—
|
|
||||
Certificates of deposit
|
7,309
|
|
|
—
|
|
|
7,309
|
|
|
—
|
|
||||
Government municipal bonds
|
1,904
|
|
|
—
|
|
|
1,904
|
|
|
—
|
|
||||
Total assets measured at fair value
|
$
|
106,242
|
|
|
$
|
44,319
|
|
|
$
|
61,923
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration on acquired businesses
|
$
|
9,960
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,960
|
|
Total liabilities measured at fair value
|
$
|
9,960
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,960
|
|
|
Three months ended March 31,
|
|
Six months ended March 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Fair value at beginning of period
|
$
|
10,660
|
|
|
$
|
10,400
|
|
|
$
|
9,960
|
|
|
$
|
—
|
|
Purchase price contingent consideration
|
10
|
|
|
—
|
|
|
1,310
|
|
|
10,400
|
|
||||
Contingent consideration payments
|
—
|
|
|
—
|
|
|
(518
|
)
|
|
—
|
|
||||
Change in fair value of contingent consideration
|
(602
|
)
|
|
122
|
|
|
(684
|
)
|
|
122
|
|
||||
Fair value at end of period
|
$
|
10,068
|
|
|
$
|
10,522
|
|
|
$
|
10,068
|
|
|
$
|
10,522
|
|
|
March 31, 2017
|
|
September 30, 2016
|
||||||||||||||||||||
|
Gross
carrying
amount
|
|
Accum.
amort.
|
|
Net
|
|
Gross
carrying
amount
|
|
Accum.
amort.
|
|
Net
|
||||||||||||
Purchased and core technology
|
$
|
50,720
|
|
|
$
|
(45,079
|
)
|
|
$
|
5,641
|
|
|
$
|
46,594
|
|
|
$
|
(44,999
|
)
|
|
$
|
1,595
|
|
License agreements
|
18
|
|
|
(12
|
)
|
|
6
|
|
|
18
|
|
|
(10
|
)
|
|
8
|
|
||||||
Patents and trademarks
|
12,334
|
|
|
(10,974
|
)
|
|
1,360
|
|
|
11,619
|
|
|
(10,871
|
)
|
|
748
|
|
||||||
Customer relationships
|
21,517
|
|
|
(15,930
|
)
|
|
5,587
|
|
|
17,463
|
|
|
(15,773
|
)
|
|
1,690
|
|
||||||
Non-compete agreements
|
600
|
|
|
(30
|
)
|
|
570
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
85,189
|
|
|
$
|
(72,025
|
)
|
|
$
|
13,164
|
|
|
$
|
75,694
|
|
|
$
|
(71,653
|
)
|
|
$
|
4,041
|
|
2017 (six months)
|
$
|
1,255
|
|
2018
|
2,475
|
|
|
2019
|
1,989
|
|
|
2020
|
1,476
|
|
|
2021
|
1,268
|
|
|
2022
|
1,097
|
|
|
Six months ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Beginning balance, October 1
|
$
|
109,448
|
|
|
$
|
100,183
|
|
Acquisitions
|
21,206
|
|
|
11,020
|
|
||
Foreign currency translation adjustment
|
(733
|
)
|
|
(496
|
)
|
||
Ending balance, March 31
|
$
|
129,921
|
|
|
$
|
110,707
|
|
Unrecognized tax benefits as of September 30, 2016
|
$
|
1,708
|
|
Decreases related to:
|
|
||
Expiration of statute of limitations
|
(79
|
)
|
|
Unrecognized tax benefits as of March 31, 2017
|
$
|
1,629
|
|
|
Balance at
|
|
Warranties
|
|
Settlements
|
|
Balance at
|
||||||||
Period
|
January 1
|
|
issued
|
|
made
|
|
March 31
|
||||||||
Three months ended March 31, 2017
|
$
|
1,025
|
|
|
$
|
62
|
|
|
$
|
(195
|
)
|
|
$
|
892
|
|
Three months ended March 31, 2016
|
$
|
968
|
|
|
$
|
172
|
|
|
$
|
(196
|
)
|
|
$
|
944
|
|
|
|
|
|
|
|
|
|
||||||||
|
Balance at
|
|
Warranties
|
|
Settlements
|
|
Balance at
|
||||||||
Period
|
October 1
|
|
issued
|
|
made
|
|
March 31
|
||||||||
Six months ended March 31, 2017
|
$
|
1,033
|
|
|
$
|
231
|
|
|
$
|
(372
|
)
|
|
$
|
892
|
|
Six months ended March 31, 2016
|
$
|
1,014
|
|
|
$
|
292
|
|
|
$
|
(362
|
)
|
|
$
|
944
|
|
|
Three months ended March 31,
|
|
Six months ended March 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Cost of sales
|
$
|
54
|
|
|
$
|
51
|
|
|
$
|
116
|
|
|
$
|
105
|
|
Sales and marketing
|
345
|
|
|
227
|
|
|
685
|
|
|
426
|
|
||||
Research and development
|
155
|
|
|
147
|
|
|
337
|
|
|
295
|
|
||||
General and administrative
|
601
|
|
|
478
|
|
|
1,190
|
|
|
888
|
|
||||
Stock-based compensation before income taxes
|
1,155
|
|
|
903
|
|
|
2,328
|
|
|
1,714
|
|
||||
Income tax benefit
|
(382
|
)
|
|
(293
|
)
|
|
(757
|
)
|
|
(550
|
)
|
||||
Stock-based compensation after income taxes
|
$
|
773
|
|
|
$
|
610
|
|
|
$
|
1,571
|
|
|
$
|
1,164
|
|
|
|
Options Outstanding
|
|
Weighted Average Exercised Price
|
|
Weighted Average Contractual Term (in years)
|
|
Aggregate Intrinsic Value (1)
|
|||
Balance at September 30, 2016
|
|
3,963
|
|
|
$10.36
|
|
|
|
|
||
Granted
|
|
598
|
|
|
12.87
|
|
|
|
|
||
Exercised
|
|
(305
|
)
|
|
10.64
|
|
|
|
|
||
Forfeited / Canceled
|
|
(223
|
)
|
|
13.30
|
|
|
|
|
||
Balance at March 31, 2017
|
|
4,033
|
|
|
$10.55
|
|
4.7
|
|
$
|
7,283
|
|
|
|
|
|
|
|
|
|
|
|||
Exercisable at March 31, 2017
|
|
2,676
|
|
|
$10.19
|
|
3.9
|
|
$
|
5,459
|
|
|
Six months ended March 31,
|
||
|
2017
|
|
2016
|
Weighted average per option grant date fair value
|
$4.64
|
|
$3.92
|
Assumptions used for option grants:
|
|
|
|
Risk free interest rate
|
1.46% - 1.96%
|
|
1.61% - 1.85%
|
Expected term
|
6.00 years
|
|
6.00 years
|
Expected volatility
|
33% - 34%
|
|
32%
|
Weighted average volatility
|
34%
|
|
32%
|
Expected dividend yield
|
0
|
|
0
|
|
Number of Awards
|
|
Weighted Average Grant Date Fair Value
|
|||
Nonvested at September 30, 2016
|
505
|
|
|
$
|
9.67
|
|
Granted
|
283
|
|
|
$
|
12.78
|
|
Vested
|
(178
|
)
|
|
$
|
9.31
|
|
Canceled
|
(3
|
)
|
|
$
|
10.89
|
|
Nonvested at March 31, 2017
|
607
|
|
|
$
|
11.22
|
|
|
Q2 2016
Restructuring
|
|
Q1 2016
Restructuring
|
|
|
||||||||||
|
Employee
Termination Costs |
|
Employee
Termination Costs |
|
Other
|
|
Total
|
||||||||
Balance at September 30, 2015
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restructuring charge
|
—
|
|
|
480
|
|
|
171
|
|
|
651
|
|
||||
Balance at December 31, 2015
|
$
|
—
|
|
|
$
|
480
|
|
|
$
|
171
|
|
|
$
|
651
|
|
Restructuring charge
|
78
|
|
|
—
|
|
|
24
|
|
|
102
|
|
||||
Payments
|
(76
|
)
|
|
(113
|
)
|
|
(195
|
)
|
|
(384
|
)
|
||||
Foreign currency fluctuation
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
||||
Balance at March 31, 2016
|
$
|
2
|
|
|
$
|
380
|
|
|
$
|
—
|
|
|
$
|
382
|
|
|
Three months ended March 31,
|
||||||||||||
|
2017
|
|
2016
|
||||||||||
|
|
|
% of total
revenue |
|
|
|
% of total
revenue |
||||||
Total revenue
|
$
|
45,615
|
|
|
100.0
|
%
|
|
$
|
50,162
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
||||||
Income from continuing operations
|
$
|
1,331
|
|
|
|
|
$
|
2,226
|
|
|
|
||
Interest income, net
|
(110
|
)
|
|
|
|
(12
|
)
|
|
|
||||
Income tax provision
|
148
|
|
|
|
|
1,155
|
|
|
|
||||
Depreciation and amortization
|
1,389
|
|
|
|
|
1,214
|
|
|
|
||||
EBITDA from continuing operations
|
$
|
2,758
|
|
|
6.0
|
%
|
|
$
|
4,583
|
|
|
9.1
|
%
|
|
Three months ended March 31,
|
% incr.
|
|
Six months ended March 31,
|
% incr.
|
||||||||||||||||||||||||||
|
2017
|
|
2016
|
(decr.)
|
|
2017
|
|
2016
|
(decr.)
|
||||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Hardware product
|
$
|
41,766
|
|
|
91.6
|
%
|
|
$
|
48,732
|
|
|
97.1
|
%
|
(14.3
|
)
|
|
$
|
84,939
|
|
|
93.6
|
%
|
|
$
|
96,979
|
|
|
96.6
|
%
|
(12.4
|
)
|
Service
|
3,849
|
|
|
8.4
|
|
|
1,430
|
|
|
2.9
|
|
169.2
|
|
|
5,851
|
|
|
6.4
|
|
|
3,442
|
|
|
3.4
|
|
70.0
|
|
||||
Total revenue
|
45,615
|
|
|
100.0
|
|
|
50,162
|
|
|
100.0
|
|
(9.1
|
)
|
|
90,790
|
|
|
100.0
|
|
|
100,421
|
|
|
100.0
|
|
(9.6
|
)
|
||||
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cost of hardware product
|
21,489
|
|
|
47.1
|
|
|
24,283
|
|
|
48.4
|
|
(11.5
|
)
|
|
43,927
|
|
|
48.4
|
|
|
48,993
|
|
|
48.8
|
|
(10.3
|
)
|
||||
Cost of service
|
2,224
|
|
|
4.9
|
|
|
1,137
|
|
|
2.3
|
|
95.6
|
|
|
3,508
|
|
|
3.9
|
|
|
2,329
|
|
|
2.3
|
|
50.6
|
|
||||
Total cost of sales
|
23,713
|
|
|
52.0
|
|
|
25,420
|
|
|
50.7
|
|
(6.7
|
)
|
|
47,435
|
|
|
52.3
|
|
|
51,322
|
|
|
51.1
|
|
(7.6
|
)
|
||||
Gross profit
|
21,902
|
|
|
48.0
|
|
|
24,742
|
|
|
49.3
|
|
(11.5
|
)
|
|
43,355
|
|
|
47.7
|
|
|
49,099
|
|
|
48.9
|
|
(11.7
|
)
|
||||
Operating expenses
|
20,390
|
|
|
44.7
|
|
|
21,089
|
|
|
42.0
|
|
(3.3
|
)
|
|
39,421
|
|
|
43.4
|
|
|
42,157
|
|
|
42.0
|
|
(6.5
|
)
|
||||
Operating income
|
1,512
|
|
|
3.3
|
|
|
3,653
|
|
|
7.3
|
|
(58.6
|
)
|
|
3,934
|
|
|
4.3
|
|
|
6,942
|
|
|
6.9
|
|
(43.3
|
)
|
||||
Other (expense) income, net
|
(33
|
)
|
|
(0.1
|
)
|
|
(272
|
)
|
|
(0.6
|
)
|
(87.9
|
)
|
|
667
|
|
|
0.8
|
|
|
(49
|
)
|
|
—
|
|
NM
|
|
||||
Income from continuing operations, before income taxes
|
1,479
|
|
|
3.2
|
|
|
3,381
|
|
|
6.7
|
|
(56.3
|
)
|
|
4,601
|
|
|
5.1
|
|
|
6,893
|
|
|
6.9
|
|
(33.3
|
)
|
||||
Income tax provision
|
148
|
|
|
0.3
|
|
|
1,155
|
|
|
2.3
|
|
(87.2
|
)
|
|
913
|
|
|
1.0
|
|
|
1,536
|
|
|
1.5
|
|
(40.6
|
)
|
||||
Income from continuing operations
|
1,331
|
|
|
2.9
|
%
|
|
2,226
|
|
|
4.4
|
%
|
(40.2
|
)
|
|
3,688
|
|
|
4.1
|
|
|
5,357
|
|
|
5.4
|
|
(31.2
|
)
|
||||
(Loss) income from discontinued operations, after income taxes
|
—
|
|
|
—
|
|
|
(89
|
)
|
|
(0.1
|
)
|
(100.0
|
)
|
|
—
|
|
|
—
|
|
|
3,230
|
|
|
3.2
|
|
(100.0
|
)
|
||||
Net income
|
$
|
1,331
|
|
|
2.9
|
%
|
|
$
|
2,137
|
|
|
4.3
|
%
|
(37.7
|
)
|
|
$
|
3,688
|
|
|
4.1
|
%
|
|
$
|
8,587
|
|
|
8.6
|
%
|
(57.1
|
)
|
|
Three months ended March 31,
|
% incr.
|
|
Six months ended March 31,
|
% incr.
|
||||||||||||||||||||||||||
($ in thousands)
|
2017
|
|
2016
|
(decr.)
|
|
2017
|
|
2016
|
(decr.)
|
||||||||||||||||||||||
Cellular routers and gateways
|
$
|
11,448
|
|
|
27.4
|
%
|
|
$
|
12,910
|
|
|
26.5
|
%
|
(11.3
|
)
|
|
$
|
25,204
|
|
|
29.7
|
%
|
|
$
|
25,070
|
|
|
25.8
|
%
|
0.5
|
|
RF
|
7,961
|
|
|
19.1
|
|
|
7,879
|
|
|
16.2
|
|
1.0
|
|
|
14,535
|
|
|
17.1
|
|
|
17,065
|
|
|
17.6
|
|
(14.8
|
)
|
||||
Embedded
|
11,712
|
|
|
28.0
|
|
|
13,795
|
|
|
28.3
|
|
(15.1
|
)
|
|
23,553
|
|
|
27.7
|
|
|
26,923
|
|
|
27.8
|
|
(12.5
|
)
|
||||
Network
|
10,645
|
|
|
25.5
|
|
|
14,148
|
|
|
29.0
|
|
(24.8
|
)
|
|
21,647
|
|
|
25.5
|
|
|
27,921
|
|
|
28.8
|
|
(22.5
|
)
|
||||
Total hardware product revenue
|
$
|
41,766
|
|
|
100.0
|
%
|
|
$
|
48,732
|
|
|
100.0
|
%
|
(14.3
|
)
|
|
$
|
84,939
|
|
|
100.0
|
%
|
|
$
|
96,979
|
|
|
100.0
|
%
|
(12.4
|
)
|
|
Three months ended March 31,
|
|
$ incr.
|
% incr.
|
|
Six months ended March 31,
|
|
$ incr.
|
% incr.
|
||||||||||||||||
($ in thousands)
|
2017
|
|
2016
|
|
(decr.)
|
(decr.)
|
|
2017
|
|
2016
|
|
(decr.)
|
(decr.)
|
||||||||||||
North America, primarily United States
|
$
|
29,711
|
|
|
$
|
33,332
|
|
|
(3,621
|
)
|
(10.9
|
)
|
|
$
|
59,373
|
|
|
$
|
63,900
|
|
|
(4,527
|
)
|
(7.1
|
)
|
Europe, Middle East & Africa
|
9,545
|
|
|
10,965
|
|
|
(1,420
|
)
|
(13.0
|
)
|
|
19,356
|
|
|
21,982
|
|
|
(2,626
|
)
|
(11.9
|
)
|
||||
Asia
|
5,370
|
|
|
5,025
|
|
|
345
|
|
6.9
|
|
|
9,938
|
|
|
10,149
|
|
|
(211
|
)
|
(2.1
|
)
|
||||
Latin America
|
989
|
|
|
840
|
|
|
149
|
|
17.7
|
|
|
2,123
|
|
|
4,390
|
|
|
(2,267
|
)
|
(51.6
|
)
|
||||
Total revenue
|
$
|
45,615
|
|
|
$
|
50,162
|
|
|
(4,547
|
)
|
(9.1
|
)
|
|
$
|
90,790
|
|
|
$
|
100,421
|
|
|
(9,631
|
)
|
(9.6
|
)
|
|
Three months ended March 31,
|
|
$ incr.
|
|
Six months ended March 31,
|
|
$ incr.
|
||||||||||||||||||||||||||||
($ in thousands)
|
2017
|
|
2016
|
|
(decr.)
|
|
2017
|
|
2016
|
|
(decr.)
|
||||||||||||||||||||||||
Sales and marketing
|
$
|
8,731
|
|
|
19.1
|
%
|
|
$
|
8,165
|
|
|
16.3
|
%
|
|
$
|
566
|
|
|
$
|
17,053
|
|
|
18.8
|
%
|
|
$
|
16,683
|
|
|
16.6
|
%
|
|
$
|
370
|
|
Research and development
|
6,979
|
|
|
15.3
|
%
|
|
7,757
|
|
|
15.5
|
%
|
|
(778
|
)
|
|
13,884
|
|
|
15.3
|
%
|
|
15,595
|
|
|
15.5
|
%
|
|
(1,711
|
)
|
||||||
General and administrative
|
4,680
|
|
|
10.3
|
%
|
|
5,065
|
|
|
10.0
|
%
|
|
(385
|
)
|
|
8,484
|
|
|
9.3
|
%
|
|
9,126
|
|
|
9.1
|
%
|
|
(642
|
)
|
||||||
Restructuring
|
—
|
|
|
—
|
%
|
|
102
|
|
|
0.2
|
%
|
|
(102
|
)
|
|
—
|
|
|
—
|
%
|
|
753
|
|
|
0.8
|
%
|
|
(753
|
)
|
||||||
Total operating expenses
|
$
|
20,390
|
|
|
44.7
|
%
|
|
$
|
21,089
|
|
|
42.0
|
%
|
|
$
|
(699
|
)
|
|
$
|
39,421
|
|
|
43.4
|
%
|
|
$
|
42,157
|
|
|
42.0
|
%
|
|
$
|
(2,736
|
)
|
|
Six months ended March 31,
|
|
% increase
|
|||||
|
2017
|
|
2016
|
|
(decrease)
|
|||
Euro
|
1.0727
|
|
|
1.0991
|
|
|
(2.4
|
)%
|
British Pound
|
1.2415
|
|
|
1.4757
|
|
|
(15.9
|
)%
|
Japanese Yen
|
0.0090
|
|
|
0.0085
|
|
|
5.9
|
%
|
Canadian Dollar
|
0.7523
|
|
|
0.7384
|
|
|
1.9
|
%
|
Period
|
|
Total Number of Shares Purchased (1)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of a Publicly Announced Program
|
|
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program
|
||||
January 1, 2017 - January 31, 2017
|
|
14,459
|
|
|
$
|
13.60
|
|
|
—
|
|
|
$15,000,000.00
|
February 1, 2017 - February 28, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$15,000,000.00
|
March 1, 2017 - March 31, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$15,000,000.00
|
Total
|
|
14,459
|
|
|
$
|
13.60
|
|
|
—
|
|
|
$15,000,000.00
|
(1)
|
All shares reported were forfeited by employees in connection with the satisfaction of tax withholding obligations related to the vesting of restricted stock units.
|
ITEM 6.
|
|
EXHIBITS
|
|
|
|
|
Exhibit No.
|
Description
|
||
2
|
|
|
Stock Purchase Agreement with West Monroe Partners, LLC dated as of October 23, 2015 (1)
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3
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(a)
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Restated Certificate of Incorporation of the Company, as amended (2)
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3
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(b)
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Amended and Restated By-Laws effective December 17, 2014 (3)
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4
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(a)
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Share Rights Agreement, dated as of April 22, 2008, between the Company and Wells Fargo Bank, N.A., as Rights Agent (4)
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4
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(b)
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Form of Amended and Restated Certificate of Powers, Designations, Preferences and Rights of Series A Junior Participating Preferred Shares (5)
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10
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(a)
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Employment Agreement between the Company and Kevin C. Riley dated January 23, 2013*
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10
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(b)
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Digi International Inc. 2017 Omnibus Incentive Plan (6)*
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10
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(b)(i)
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Form of (Director) Restricted Stock Unit Award Agreement (for awards under Digi International Inc. 2017 Omnibus Incentive Plan)*
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10
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(b)(ii)
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Form of (Executive) Restricted Stock Unit Award Agreement (for awards under Digi International Inc. 2017 Omnibus Incentive Plan)*
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10
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(b)(iii)
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Form of (Employee) Restricted Stock Unit Award Agreement (for awards under Digi International Inc. 2017 Omnibus Incentive Plan)*
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10
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(b)(iv)
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Form of Notice of Grant of Stock Options and Option Agreement (for grants under Digi International Inc. 2017 Omnibus Incentive Plan)*
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31
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(a)
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Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
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31
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(b)
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Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
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32
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Section 1350 Certification
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Label Linkbase Document
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101.PRE
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XBRL Taxonomy Presentation Linkbase Document
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(1)
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Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed October 29, 2015.
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(2)
|
Incorporated by reference to Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the year ended September 30, 1993 (File No. 0-17972)
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(3)
|
Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed December 5, 2014 (File No. 1-34033)
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(4)
|
Incorporated by reference to Exhibit 4(a) to the Company’s registration statement on Form 8-A filed on April 25, 2008 (File No. 1-34033)
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(5)
|
Incorporated by reference to Exhibit 4(b) to the Company’s registration statement on Form 8-A filed on April 25, 2008 (File No. 1-34033)
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(6)
|
Incorporated by reference to Appendix A to the Company’s definitive proxy statement on Schedule 14A filed December 16, 2016 (File No. 1-34033)
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DIGI INTERNATIONAL INC.
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|
||
Date:
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May 5, 2017
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By:
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/s/ Michael C. Goergen
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|
|
Michael C. Goergen
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|
Senior Vice President, Chief Financial Officer and
Treasurer (Principal Financial Officer and Authorized Officer)
|
|
1)
|
|
Twelve months of base salary in effect at the time of termination. This shall be paid in a lump sum as soon as administratively feasible after the later of the date of termination or the date the release of claims has become irrevocable.
|
2)
|
|
A pro-rata bonus based on number of months worked in the fiscal year prior to a qualifying termination and the Company’s actual performance against annual objections. This pro-rata bonus shall be paid no later than 2.5 months after the close of the fiscal year in which the qualifying termination occurs.
|
•
|
$60,000 paid in one lump sum (less standard deductions), for incidental expenses, i.e. storage, utility hook-ups, closing costs on current residence, etc. This payment will be made 2 weeks prior to the closing of your primary residence in Connecticut. Additional lump sums may be paid out to reach maximum value of the package, dependent on your spending in other categories.
|
•
|
Six (6) months temporary housing expenses, based on an agreed upon monthly amount.
|
•
|
Roundtrip airfare to Connecticut (4 tickets monthly) for the Employee or family member for the first 6 months. This will be at coach fare.
|
•
|
Packing and shipping of household goods, including insurance of goods and personal effects of the employee & family. Excluded items include recreational vehicles (RVs, boats, motorcycles, ATVs, etc.), firewood, paint, inflammable solutions, explosives, frozen foods, shrubs, plants, livestock, ammunition. Alcoholic beverage, valuable papers, stock & bonds, stamps & coin collection, sterling silver place settings, play yard systems, oversized trophies, and money & fine jewelry.
|
•
|
Shipment of 2 cars plus airfare to location, or if driving, normal trip expenditures (mileage, hotel, meals, etc.
|
•
|
The maximum expense reimbursement under this package is $125,000 gross. You should design components to the relocation package to fit individual needs of you and your family within this limit.
|
|
|
|
|
|
/s/ Kevin Riley
|
|
January 24, 2013
|
|
January 30, 2013
|
|
|
|
|
|
Kevin Riley
|
|
Date
|
|
Start Date
|
Name of Participant:
|
|
Number of Restricted Stock Units:
|
Grant Date:__________, 20__
|
Vesting Schedule:
|
|
Vesting Date(s)
|
Number of Stock Units that Vest
|
|
|
PARTICIPANT:
|
DIGI INTERNATIONAL INC.
|
|
By:
|
|
Title:
|
Name of Participant:
|
|
Number of Restricted Stock Units:
|
Grant Date:__________, 20__
|
Vesting Schedule:
|
|
Vesting Date(s)
|
Number of Stock Units that Vest
|
|
|
PARTICIPANT:
|
DIGI INTERNATIONAL INC.
|
|
By:
|
|
Title:
|
Name of Participant:
|
|
Number of Restricted Stock Units:
|
Grant Date:__________, 20__
|
Vesting Schedule:
|
|
Vesting Date(s)
|
Number of Stock Units that Vest
|
|
|
PARTICIPANT:
|
DIGI INTERNATIONAL INC.
|
|
By:
|
|
Title:
|
Notice of Grant of Stock Options and Option Agreement
|
Digi International Inc.
ID:
41-1532464
11001 Bren Road East
Minnetonka, MN 55343
|
[Optionee]
[Address]
[City, State, County, Zip Code]
|
Option Number:
Plan: 2017 Omnibus Incentive Plan
ID:
|
(i)
|
any person, as defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”), becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated pursuant to the Exchange Act), directly or indirectly, of securities of the Company having 25% or more of the voting power in the election of directors of the Company, excluding, however, Participant (or a group of persons, including Participant, acting in concert); or
|
(ii)
|
the occurrence within any period, commencing immediately after an Annual Meeting of Stockholders and continuing to and including the Annual Meeting of Stockholders occurring on or about the third anniversary date of the commencement of such period, of a change in the Board of Directors of the Company with the result that the Incumbent Members (as defined below) do not constitute a majority of the Company’s Board of Directors. The term “Incumbent Members” shall mean the members of the Board on the date of the commencement of such period, provided that any person becoming a director during such period whose election or nomination for election was approved by a majority of the directors who, on the date of such election or nomination for election, comprised the Incumbent Members shall be considered one of the Incumbent Members in respect of such period.
|
(i)
|
indictment or conviction of, or a plea of nolo contendere to, (A) any felony (other than any felony arising out of negligence), or any misdemeanor involving moral turpitude with respect to the Company, or (B) any crime or offense involving dishonesty with respect to the Company;
|
(ii)
|
theft or embezzlement of Company property or commission of similar acts involving dishonesty or moral turpitude;
|
(iii)
|
repeated material negligence in the performance of Participant’s duties after the Participant has received written notice of the same;
|
(iv)
|
Participant’s failure to devote substantially all of his working time and efforts during normal business hours to the Company’s business;
|
(v)
|
knowing engagement in conduct that is materially injurious to the Company; or
|
(vi)
|
knowingly providing materially misleading information concerning the Company to the Company’s Board of Directors, any governmental body or regulatory agency or to any lender or other financing source or proposed financing source of the Company.
|
(i)
|
the failure of the Company to pay any material amount due to Participant under a prevailing Employment Agreement;
|
(ii)
|
a meaningful diminution, without Cause, as defined above, in the responsibilities or job functions of the Participant unless approved by the Participant;
|
(iii)
|
a material reduction in total compensation potential as defined by annual base salary and cash compensation targets; or
|
(iv)
|
the relocation of Participant to an office location greater than 50 miles from his/her office location at the time of a Change in Control.
|
|
||||
|
|
|
|
|
|
|
|
|
|
May 5, 2017
|
/s/ Ronald E. Konezny
|
|
||
|
Ronald E. Konezny
|
|
||
|
President and Chief Executive Officer
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
May 5, 2017
|
/s/ Michael C. Goergen
|
|
||
|
Michael C. Goergen
|
|
||
|
Senior Vice President, Chief Financial Officer and Treasurer
|
|
|
||||
|
|
|
|
|
May 5, 2017
|
|
|
|
|
|
/s/ Ronald E. Konezny
|
|
||
|
Ronald E. Konezny
|
|
||
|
President and Chief Executive Officer
|
|
||
|
||||
|
/s/ Michael C. Goergen
|
|
||
|
Michael C. Goergen
|
|
||
|
Senior Vice President, Chief Financial Officer and Treasurer
|
|