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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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2018
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2017
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2018
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2017
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(in thousands, except per share data)
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||||||||||||||
Revenue:
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||||||||
Product
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$
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47,588
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$
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41,766
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$
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86,042
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$
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84,939
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Services and solutions
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7,203
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3,849
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13,946
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5,851
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Total revenue
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54,791
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45,615
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99,988
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90,790
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Cost of sales:
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||||||||
Cost of product
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23,080
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21,398
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42,290
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43,735
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Cost of services and solutions
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4,287
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2,003
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7,730
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3,177
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Amortization of intangibles
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770
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312
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1,377
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523
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Total cost of sales
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28,137
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23,713
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51,397
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47,435
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Gross profit
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26,654
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21,902
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48,591
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43,355
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Operating expenses:
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||||||||
Sales and marketing
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11,175
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8,731
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20,935
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17,053
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Research and development
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8,617
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6,979
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16,368
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13,884
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General and administrative
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6,359
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4,680
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12,908
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8,484
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Total operating expenses
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26,151
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20,390
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50,211
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39,421
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Operating income (loss)
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503
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1,512
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(1,620
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)
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3,934
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Other (expense) income, net:
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Interest income
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38
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120
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246
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279
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Interest expense
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(4
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)
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(10
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)
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(7
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)
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(43
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)
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Other (expense) income, net
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(527
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)
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(143
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)
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(572
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)
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431
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Total other (expense) income, net
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(493
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)
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(33
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)
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(333
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)
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667
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Income (loss) before income taxes
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10
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1,479
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(1,953
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)
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4,601
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Income tax provision
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367
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148
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2,973
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913
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Net (loss) income
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$
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(357
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)
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$
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1,331
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$
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(4,926
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)
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$
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3,688
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Net (loss) income per common share:
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Basic
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$
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(0.01
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)
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$
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0.05
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$
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(0.18
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)
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$
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0.14
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Diluted
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$
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(0.01
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)
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$
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0.05
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$
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(0.18
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)
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$
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0.14
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Weighted average common shares:
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Basic
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27,084
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26,477
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26,914
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26,324
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Diluted
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27,084
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27,252
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26,914
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27,134
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Three months ended March 31,
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Six months ended March 31,
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2018
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2017
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2018
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2017
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(in thousands)
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Net (loss) income
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$
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(357
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)
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$
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1,331
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$
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(4,926
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)
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$
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3,688
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Other comprehensive income (loss), net of tax:
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Foreign currency translation adjustment
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1,787
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1,277
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2,058
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(2,478
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)
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Change in net unrealized (loss) gain on investments
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(19
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)
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14
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(40
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)
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(10
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)
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Less income tax benefit (expense)
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5
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(5
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)
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8
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4
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Reclassification of realized loss on investments included in net income (1)
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31
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—
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31
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—
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Less income tax benefit (2)
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(8
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)
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—
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(8
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)
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—
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Other comprehensive income (loss), net of tax
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1,796
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1,286
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2,049
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(2,484
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)
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Comprehensive income (loss)
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$
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1,439
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$
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2,617
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$
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(2,877
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)
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$
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1,204
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March 31, 2018
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September 30, 2017
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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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52,391
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$
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78,222
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Marketable securities
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4,757
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32,015
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Accounts receivable, net
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39,789
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28,855
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Inventories
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39,670
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30,238
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Receivable from sale of business
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—
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1,998
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Other
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3,694
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3,032
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Total current assets
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140,301
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174,360
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Marketable securities, long-term
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2,489
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4,753
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Property, equipment and improvements, net
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12,145
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12,801
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Identifiable intangible assets, net
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44,301
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11,800
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Goodwill
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155,982
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131,995
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Deferred tax assets
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3,576
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9,211
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Other
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542
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269
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Total assets
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$
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359,336
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$
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345,189
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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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11,024
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$
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6,240
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Accrued compensation
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6,121
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4,325
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Accrued warranty
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1,348
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987
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Accrued professional fees
|
896
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|
928
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Accrued restructuring
|
636
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1,656
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Unearned revenue
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4,339
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1,343
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Contingent consideration on acquired businesses
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3,759
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388
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Other
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2,858
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2,113
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Total current liabilities
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30,981
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|
|
17,980
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|
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Income taxes payable
|
692
|
|
|
877
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Deferred tax liabilities
|
455
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|
|
534
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|
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Contingent consideration on acquired businesses
|
4,504
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6,000
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Other non-current liabilities
|
676
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|
|
654
|
|
||
Total liabilities
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37,308
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|
|
26,045
|
|
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Contingencies (see Note 12)
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|
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||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding
|
—
|
|
|
—
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|
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Common stock, $.01 par value; 60,000,000 shares authorized; 33,581,353 and 33,007,993 shares issued
|
336
|
|
|
330
|
|
||
Additional paid-in capital
|
251,366
|
|
|
245,528
|
|
||
Retained earnings
|
145,519
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|
|
150,478
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|
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Accumulated other comprehensive loss
|
(20,610
|
)
|
|
(22,659
|
)
|
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Treasury stock, at cost, 6,430,128 and 6,436,578 shares
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(54,583
|
)
|
|
(54,533
|
)
|
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Total stockholders’ equity
|
322,028
|
|
|
319,144
|
|
||
Total liabilities and stockholders’ equity
|
$
|
359,336
|
|
|
$
|
345,189
|
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Six months ended March 31,
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||||||
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2018
|
|
2017
|
||||
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(in thousands)
|
||||||
Operating activities:
|
|
|
|
||||
Net (loss) income
|
$
|
(4,926
|
)
|
|
$
|
3,688
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
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||||
Depreciation of property, equipment and improvements
|
1,406
|
|
|
1,449
|
|
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Amortization of identifiable intangible assets
|
4,287
|
|
|
941
|
|
||
Stock-based compensation
|
2,378
|
|
|
2,328
|
|
||
Excess tax benefits from stock-based compensation
|
—
|
|
|
(315
|
)
|
||
Deferred income tax provision
|
2,682
|
|
|
242
|
|
||
Change in fair value of contingent consideration
|
(425
|
)
|
|
(684
|
)
|
||
Bad debt/product return provision
|
395
|
|
|
296
|
|
||
Inventory obsolescence
|
900
|
|
|
600
|
|
||
Other
|
30
|
|
|
51
|
|
||
Changes in operating assets and liabilities (net of acquisitions)
|
(11,708
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)
|
|
(9,473
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)
|
||
Net cash used in operating activities
|
(4,981
|
)
|
|
(877
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)
|
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Investing activities:
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|
|
|
||||
Purchase of marketable securities
|
—
|
|
|
(33,470
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)
|
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Proceeds from maturities and sales of marketable securities
|
29,513
|
|
|
57,039
|
|
||
Proceeds from sale of Etherios
|
2,000
|
|
|
3,000
|
|
||
Acquisition of businesses, net of cash acquired
|
(56,588
|
)
|
|
(29,994
|
)
|
||
Purchase of property, equipment, improvements and certain other identifiable intangible assets
|
(785
|
)
|
|
(984
|
)
|
||
Net cash used in investing activities
|
(25,860
|
)
|
|
(4,409
|
)
|
||
Financing activities:
|
|
|
|
||||
Acquisition earn-out payments
|
—
|
|
|
(518
|
)
|
||
Excess tax benefits from stock-based compensation
|
—
|
|
|
315
|
|
||
Proceeds from stock option plan transactions
|
3,427
|
|
|
3,246
|
|
||
Proceeds from employee stock purchase plan transactions
|
618
|
|
|
479
|
|
||
Purchases of common stock
|
(681
|
)
|
|
(587
|
)
|
||
Net cash provided by financing activities
|
3,364
|
|
|
2,935
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
1,646
|
|
|
(1,481
|
)
|
||
Net decrease in cash and cash equivalents
|
(25,831
|
)
|
|
(3,832
|
)
|
||
Cash and cash equivalents, beginning of period
|
78,222
|
|
|
75,727
|
|
||
Cash and cash equivalents, end of period
|
$
|
52,391
|
|
|
$
|
71,895
|
|
|
|
|
|
||||
Supplemental schedule of non-cash investing and financing activities:
|
|
|
|
||||
Liability related to acquisition of businesses
|
$
|
(2,300
|
)
|
|
$
|
(1,310
|
)
|
Accrual for purchase of property, equipment, improvements and certain other identifiable intangible assets
|
$
|
(27
|
)
|
|
$
|
(66
|
)
|
Cash
|
$
|
16,759
|
|
Fair value of contingent consideration on acquired business
|
2,300
|
|
|
Total purchase price consideration
|
$
|
19,059
|
|
|
|
||
Fair value of net tangible assets acquired
|
$
|
697
|
|
Fair value of identifiable intangible assets acquired:
|
|
||
Customer relationships
|
6,500
|
|
|
Purchased and core technology
|
3,000
|
|
|
Trade name and trademarks
|
1,000
|
|
|
Order backlog
|
1,800
|
|
|
Goodwill
|
6,062
|
|
|
Total
|
$
|
19,059
|
|
Cash
|
$
|
40,741
|
|
Fair value of contingent consideration on acquired business
|
—
|
|
|
Total purchase price consideration
|
$
|
40,741
|
|
|
|
||
Fair value of net tangible assets acquired
|
$
|
(1,111
|
)
|
Fair value of identifiable intangible assets acquired:
|
|
||
Customer relationships
|
18,300
|
|
|
Purchased and core technology
|
4,000
|
|
|
Trade name and trademarks
|
2,000
|
|
|
Goodwill
|
17,552
|
|
|
Total
|
$
|
40,741
|
|
|
Three months ended March 31,
|
|
Six months ended March 31,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenue
|
$
|
54,791
|
|
|
$
|
50,963
|
|
|
$
|
105,411
|
|
|
$
|
105,349
|
|
Net loss
|
$
|
(340
|
)
|
|
$
|
(867
|
)
|
|
$
|
(4,916
|
)
|
|
$
|
(1,842
|
)
|
|
Three months ended March 31,
|
|
Six months ended March 31,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net (loss) income
|
$
|
(357
|
)
|
|
$
|
1,331
|
|
|
$
|
(4,926
|
)
|
|
$
|
3,688
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
||||||||
Denominator for basic net (loss) income per common share — weighted average shares outstanding
|
27,084
|
|
|
26,477
|
|
|
26,914
|
|
|
26,324
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock options and restricted stock units
|
—
|
|
|
775
|
|
|
—
|
|
|
810
|
|
||||
Denominator for diluted net (loss) income per common share — adjusted weighted average shares
|
27,084
|
|
|
27,252
|
|
|
26,914
|
|
|
27,134
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net (loss) income per common share, basic
|
$
|
(0.01
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.18
|
)
|
|
$
|
0.14
|
|
Net (loss) income per common share, diluted
|
$
|
(0.01
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.18
|
)
|
|
$
|
0.14
|
|
|
March 31,
2018 |
|
September 30, 2017
|
||||
Accounts receivable, net:
|
|
|
|
||||
Accounts receivable
|
$
|
42,778
|
|
|
$
|
31,365
|
|
Less allowance for doubtful accounts
|
566
|
|
|
341
|
|
||
Less reserve for future returns and pricing adjustments
|
2,423
|
|
|
2,169
|
|
||
Accounts receivable, net
|
$
|
39,789
|
|
|
$
|
28,855
|
|
Inventories:
|
|
|
|
||||
Raw materials
|
$
|
24,804
|
|
|
$
|
24,050
|
|
Work in process
|
634
|
|
|
484
|
|
||
Finished goods
|
14,232
|
|
|
5,704
|
|
||
Inventories
|
$
|
39,670
|
|
|
$
|
30,238
|
|
|
Amortized
Cost (1)
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Value (1)
|
||||||||
Current marketable securities:
|
|
|
|
|
|
|
|
||||||||
Certificates of deposit
|
$
|
4,766
|
|
|
$
|
—
|
|
|
$
|
(9
|
)
|
|
$
|
4,757
|
|
Non-current marketable securities:
|
|
|
|
|
|
|
|
||||||||
Certificates of deposit
|
2,509
|
|
|
—
|
|
|
(20
|
)
|
|
2,489
|
|
||||
Total marketable securities
|
$
|
7,275
|
|
|
$
|
—
|
|
|
$
|
(29
|
)
|
|
$
|
7,246
|
|
(1)
|
Included in amortized cost and fair value is purchased and accrued interest of
$25
.
|
|
Amortized
Cost (1)
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Value (1)
|
||||||||
Current marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
$
|
28,275
|
|
|
$
|
—
|
|
|
$
|
(20
|
)
|
|
$
|
28,255
|
|
Certificates of deposit
|
3,756
|
|
|
4
|
|
|
—
|
|
|
3,760
|
|
||||
Current marketable securities
|
32,031
|
|
|
4
|
|
|
(20
|
)
|
|
32,015
|
|
||||
Non-current marketable securities:
|
|
|
|
|
|
|
|
||||||||
Certificates of deposit
|
4,757
|
|
|
—
|
|
|
(4
|
)
|
|
4,753
|
|
||||
Total marketable securities
|
$
|
36,788
|
|
|
$
|
4
|
|
|
$
|
(24
|
)
|
|
$
|
36,768
|
|
(1)
|
Included in amortized cost and fair value is purchased and accrued interest of
$211
.
|
|
March 31, 2018
|
||||||||||||||
|
Less than 12 Months
|
|
More than 12 Months
|
||||||||||||
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
||||||||
Certificates of deposit
|
6,745
|
|
|
(28
|
)
|
|
250
|
|
|
(1
|
)
|
||||
Total
|
$
|
6,745
|
|
|
$
|
(28
|
)
|
|
$
|
250
|
|
|
$
|
(1
|
)
|
|
September 30, 2017
|
||||||||||||||
|
Less than 12 Months
|
|
More than 12 Months
|
||||||||||||
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
||||||||
Corporate bonds
|
$
|
26,196
|
|
|
$
|
(20
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit
|
3,751
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
29,947
|
|
|
$
|
(24
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Total Fair
Value at
|
|
Fair Value Measurements Using
Inputs Considered as
|
||||||||||||
|
March 31, 2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market
|
$
|
17,632
|
|
|
$
|
17,632
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit
|
7,246
|
|
|
—
|
|
|
7,246
|
|
|
—
|
|
||||
Total assets measured at fair value
|
$
|
24,878
|
|
|
$
|
17,632
|
|
|
$
|
7,246
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration on acquired businesses
|
$
|
8,263
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,263
|
|
Total liabilities measured at fair value
|
$
|
8,263
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,263
|
|
|
Total Fair
Value at
|
|
Fair Value Measurements Using
Inputs Considered as
|
||||||||||||
|
September 30, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market
|
$
|
39,524
|
|
|
$
|
39,524
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate bonds
|
28,255
|
|
|
—
|
|
|
28,255
|
|
|
—
|
|
||||
Certificates of deposit
|
8,513
|
|
|
—
|
|
|
8,513
|
|
|
—
|
|
||||
Total assets measured at fair value
|
$
|
76,292
|
|
|
$
|
39,524
|
|
|
$
|
36,768
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration on acquired businesses
|
$
|
6,388
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,388
|
|
Total liabilities measured at fair value
|
$
|
6,388
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,388
|
|
|
Three months ended March 31,
|
|
Six months ended March 31,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Fair value at beginning of period
|
$
|
5,981
|
|
|
$
|
10,660
|
|
|
$
|
6,388
|
|
|
$
|
9,960
|
|
Purchase price contingent consideration
|
2,300
|
|
|
10
|
|
|
2,300
|
|
|
1,310
|
|
||||
Contingent consideration payments
|
—
|
|
|
—
|
|
|
—
|
|
|
(518
|
)
|
||||
Change in fair value of contingent consideration
|
(18
|
)
|
|
(602
|
)
|
|
(425
|
)
|
|
(684
|
)
|
||||
Fair value at end of period
|
$
|
8,263
|
|
|
$
|
10,068
|
|
|
$
|
8,263
|
|
|
$
|
10,068
|
|
|
March 31, 2018
|
|
September 30, 2017
|
||||||||||||||||||||
|
Gross
carrying
amount
|
|
Accum.
amort.
|
|
Net
|
|
Gross
carrying
amount
|
|
Accum.
amort.
|
|
Net
|
||||||||||||
Purchased and core technology
|
$
|
58,541
|
|
|
$
|
(47,787
|
)
|
|
$
|
10,754
|
|
|
$
|
51,292
|
|
|
$
|
(46,304
|
)
|
|
$
|
4,988
|
|
License agreements
|
102
|
|
|
(32
|
)
|
|
70
|
|
|
18
|
|
|
(17
|
)
|
|
1
|
|
||||||
Patents and trademarks
|
15,542
|
|
|
(11,701
|
)
|
|
3,841
|
|
|
12,484
|
|
|
(11,280
|
)
|
|
1,204
|
|
||||||
Customer relationships
|
46,918
|
|
|
(19,082
|
)
|
|
27,836
|
|
|
21,914
|
|
|
(16,817
|
)
|
|
5,097
|
|
||||||
Non-compete agreements
|
600
|
|
|
(150
|
)
|
|
450
|
|
|
600
|
|
|
(90
|
)
|
|
510
|
|
||||||
Order backlog
|
1,800
|
|
|
(450
|
)
|
|
1,350
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
123,503
|
|
|
$
|
(79,202
|
)
|
|
$
|
44,301
|
|
|
$
|
86,308
|
|
|
$
|
(74,508
|
)
|
|
$
|
11,800
|
|
|
Six months ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Beginning balance, October 1
|
$
|
131,995
|
|
|
$
|
109,448
|
|
Acquisitions
|
23,614
|
|
|
21,206
|
|
||
Foreign currency translation adjustment
|
373
|
|
|
(733
|
)
|
||
Ending balance, March 31
|
$
|
155,982
|
|
|
$
|
129,921
|
|
•
|
Cellular routers and gateways;
|
•
|
Radio frequency (RF) which include our XBee
®
modules as well as other RF solutions;
|
•
|
Embedded products include Digi Connect
®
and Rabbit
®
embedded systems on module and single board computers;
|
•
|
Network products, which has the highest concentration of mature products, including console and serial servers and USB connected products;
|
•
|
Digi Wireless Design Services;
|
•
|
Digi Remote Manager
®
; and
|
•
|
Support services which offers various levels of technical services for development assistance, consulting and training.
|
|
|
Three months ended March 31,
|
|
Six months ended March 31,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenue
|
|
|
|
|
|
|
|
|
||||||||
IoT Products & Services
|
|
$
|
49,825
|
|
|
$
|
43,873
|
|
|
$
|
90,705
|
|
|
$
|
88,809
|
|
IoT Solutions
|
|
4,966
|
|
|
1,742
|
|
|
9,283
|
|
|
1,981
|
|
||||
Total revenue
|
|
$
|
54,791
|
|
|
$
|
45,615
|
|
|
$
|
99,988
|
|
|
$
|
90,790
|
|
Operating (loss) income
|
|
|
|
|
|
|
|
|
||||||||
IoT Products & Services
|
|
$
|
4,689
|
|
|
$
|
2,710
|
|
|
$
|
5,953
|
|
|
$
|
5,797
|
|
IoT Solutions
|
|
(4,186
|
)
|
|
(1,198
|
)
|
|
(7,573
|
)
|
|
(1,863
|
)
|
||||
Total operating (loss) income
|
|
$
|
503
|
|
|
$
|
1,512
|
|
|
$
|
(1,620
|
)
|
|
$
|
3,934
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
||||||||
IoT Products & Services
|
|
$
|
1,729
|
|
|
$
|
953
|
|
|
$
|
2,578
|
|
|
$
|
1,800
|
|
IoT Solutions
|
|
1,559
|
|
|
436
|
|
|
3,115
|
|
|
590
|
|
||||
Total depreciation and amortization
|
|
$
|
3,288
|
|
|
$
|
1,389
|
|
|
$
|
5,693
|
|
|
$
|
2,390
|
|
|
|
Six months ended March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Expended for property, plant and equipment
|
|
|
|
|
||||
IoT Products & Services
|
|
$
|
785
|
|
|
$
|
962
|
|
IoT Solutions
|
|
—
|
|
|
22
|
|
||
Total expended for property, plant and equipment
|
|
$
|
785
|
|
|
$
|
984
|
|
|
|
March 31,
2018 |
|
September 30, 2017
|
||||
Assets
|
|
|
|
|
||||
IoT Products & Services
|
|
$
|
207,682
|
|
|
$
|
182,555
|
|
IoT Solutions
|
|
92,016
|
|
|
47,644
|
|
||
Unallocated*
|
|
59,638
|
|
|
114,990
|
|
||
Total assets
|
|
$
|
359,336
|
|
|
$
|
345,189
|
|
|
|
March 31,
2018 |
|
September 30, 2017
|
||||
Goodwill
|
|
|
|
|
||||
IoT Products & Services
|
|
$
|
105,791
|
|
|
$
|
98,981
|
|
IoT Solutions
|
|
50,191
|
|
|
33,014
|
|
||
Total goodwill
|
|
$
|
155,982
|
|
|
$
|
131,995
|
|
Unrecognized tax benefits as of September 30, 2017
|
$
|
1,335
|
|
Decreases related to:
|
|
||
Expiration of statute of limitations
|
(116
|
)
|
|
Unrecognized tax benefits as of March 31, 2018
|
$
|
1,219
|
|
|
Balance at
|
|
Warranties
|
|
Settlements
|
|
Balance at
|
||||||||
Period
|
January 1
|
|
issued
|
|
made
|
|
March 31
|
||||||||
Three months ended March 31, 2018
|
$
|
1,164
|
|
|
$
|
362
|
|
|
$
|
(178
|
)
|
|
$
|
1,348
|
|
Three months ended March 31, 2017
|
$
|
1,025
|
|
|
$
|
62
|
|
|
$
|
(195
|
)
|
|
$
|
892
|
|
|
|
|
|
|
|
|
|
||||||||
|
Balance at
|
|
Warranties
|
|
Settlements
|
|
Balance at
|
||||||||
Period
|
October 1
|
|
issued
|
|
made
|
|
March 31
|
||||||||
Six months ended March 31, 2018
|
$
|
987
|
|
|
$
|
716
|
|
|
$
|
(355
|
)
|
|
$
|
1,348
|
|
Six months ended March 31, 2017
|
$
|
1,033
|
|
|
$
|
231
|
|
|
$
|
(372
|
)
|
|
$
|
892
|
|
|
Three months ended March 31,
|
|
Six months ended March 31,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Cost of sales
|
$
|
46
|
|
|
$
|
54
|
|
|
$
|
96
|
|
|
$
|
116
|
|
Sales and marketing
|
391
|
|
|
345
|
|
|
725
|
|
|
685
|
|
||||
Research and development
|
167
|
|
|
155
|
|
|
175
|
|
|
337
|
|
||||
General and administrative
|
721
|
|
|
601
|
|
|
1,382
|
|
|
1,190
|
|
||||
Stock-based compensation before income taxes
|
1,325
|
|
|
1,155
|
|
|
2,378
|
|
|
2,328
|
|
||||
Income tax benefit
|
(277
|
)
|
|
(382
|
)
|
|
(498
|
)
|
|
(757
|
)
|
||||
Stock-based compensation after income taxes
|
$
|
1,048
|
|
|
$
|
773
|
|
|
$
|
1,880
|
|
|
$
|
1,571
|
|
|
|
Options Outstanding
|
|
Weighted Average Exercised Price
|
|
Weighted Average Contractual Term (in years)
|
|
Aggregate Intrinsic Value (1)
|
|||
Balance at September 30, 2017
|
|
3,902
|
|
|
$10.54
|
|
|
|
|
||
Granted
|
|
660
|
|
|
10.28
|
|
|
|
|
||
Exercised
|
|
(384
|
)
|
|
8.93
|
|
|
|
|
||
Forfeited / Canceled
|
|
(490
|
)
|
|
13.02
|
|
|
|
|
||
Balance at March 31, 2018
|
|
3,688
|
|
|
$10.34
|
|
4.6
|
|
$
|
2,443
|
|
|
|
|
|
|
|
|
|
|
|||
Exercisable at March 31, 2018
|
|
2,324
|
|
|
$9.99
|
|
3.8
|
|
$
|
2,033
|
|
|
Six months ended March 31,
|
||
|
2018
|
|
2017
|
Weighted average per option grant date fair value
|
$3.72
|
|
$4.64
|
Assumptions used for option grants:
|
|
|
|
Risk free interest rate
|
2.12% - 2.58%
|
|
1.46% - 1.96%
|
Expected term
|
6.00 years
|
|
6.00 years
|
Expected volatility
|
33% - 34%
|
|
33% - 34%
|
Weighted average volatility
|
33%
|
|
34%
|
Expected dividend yield
|
0
|
|
0
|
|
Number of Awards
|
|
Weighted Average Grant Date Fair Value
|
|||
Nonvested at September 30, 2017
|
566
|
|
|
$
|
11.28
|
|
Granted
|
359
|
|
|
$
|
10.35
|
|
Vested
|
(189
|
)
|
|
$
|
11.08
|
|
Canceled
|
(39
|
)
|
|
$
|
11.19
|
|
Nonvested at March 31, 2018
|
697
|
|
|
$
|
10.86
|
|
|
Q3 2017
Restructuring
|
||||||||||
|
Employee
Termination Costs |
|
Other
|
|
Total
|
||||||
Balance at September 30, 2017
|
$
|
1,528
|
|
|
$
|
128
|
|
|
$
|
1,656
|
|
Payments
|
(971
|
)
|
|
(132
|
)
|
|
(1,103
|
)
|
|||
Foreign currency fluctuation
|
79
|
|
|
4
|
|
|
83
|
|
|||
Balance at March 31, 2018
|
$
|
636
|
|
|
$
|
—
|
|
|
$
|
636
|
|
•
|
IoT Products & Services (formerly “M2M”) segment; and
|
•
|
IoT Solutions (formerly “Solutions”) segment.
|
|
Three months ended March 31,
|
||||||||||||
|
2018
|
|
2017
|
||||||||||
($ in thousands)
|
|
|
% of total
revenue |
|
|
|
% of total
revenue |
||||||
Total revenue
|
$
|
54,791
|
|
|
100.0
|
%
|
|
$
|
45,615
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(357
|
)
|
|
|
|
$
|
1,331
|
|
|
|
||
Interest income, net
|
(34
|
)
|
|
|
|
(110
|
)
|
|
|
||||
Income tax provision
|
367
|
|
|
|
|
148
|
|
|
|
||||
Depreciation and amortization
|
3,288
|
|
|
|
|
1,389
|
|
|
|
||||
Stock-based compensation
|
1,325
|
|
|
|
|
1,155
|
|
|
|
||||
Acquisition expense
|
249
|
|
|
|
|
750
|
|
|
|
||||
Adjusted EBITDA
|
$
|
4,838
|
|
|
8.8
|
%
|
|
$
|
4,663
|
|
|
10.2
|
%
|
|
Three months ended March 31,
|
% incr.
|
|
Six months ended March 31,
|
% incr.
|
||||||||||||||||||||||||||
($ in thousands)
|
2018
|
|
2017
|
(decr.)
|
|
2018
|
|
2017
|
(decr.)
|
||||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Product
|
$
|
47,588
|
|
|
86.9
|
%
|
|
$
|
41,766
|
|
|
91.6
|
%
|
13.9
|
|
|
$
|
86,042
|
|
|
86.1
|
%
|
|
$
|
84,939
|
|
|
93.6
|
%
|
1.3
|
|
Services and solutions
|
7,203
|
|
|
13.1
|
|
|
3,849
|
|
|
8.4
|
|
87.1
|
|
|
13,946
|
|
|
13.9
|
|
|
5,851
|
|
|
6.4
|
|
138.4
|
|
||||
Total revenue
|
54,791
|
|
|
100.0
|
|
|
45,615
|
|
|
100.0
|
|
20.1
|
|
|
99,988
|
|
|
100.0
|
|
|
90,790
|
|
|
100.0
|
|
10.1
|
|
||||
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cost of product
|
23,080
|
|
|
42.2
|
|
|
21,398
|
|
|
46.9
|
|
7.9
|
|
|
42,290
|
|
|
42.3
|
|
|
43,735
|
|
|
48.2
|
|
(3.3
|
)
|
||||
Cost of services and solutions
|
4,287
|
|
|
7.8
|
|
|
2,003
|
|
|
4.4
|
|
114.0
|
|
|
7,730
|
|
|
7.7
|
|
|
3,177
|
|
|
3.5
|
|
143.3
|
|
||||
Amortization of intangibles
|
770
|
|
|
1.4
|
|
|
312
|
|
|
0.7
|
|
146.8
|
|
|
1,377
|
|
|
1.4
|
|
|
523
|
|
|
0.6
|
|
163.3
|
|
||||
Total cost of sales
|
28,137
|
|
|
51.4
|
|
|
23,713
|
|
|
52.0
|
|
18.7
|
|
|
51,397
|
|
|
51.4
|
|
|
47,435
|
|
|
52.3
|
|
8.4
|
|
||||
Gross profit
|
26,654
|
|
|
48.6
|
|
|
21,902
|
|
|
48.0
|
|
21.7
|
|
|
48,591
|
|
|
48.6
|
|
|
43,355
|
|
|
47.7
|
|
12.1
|
|
||||
Operating expenses
|
26,151
|
|
|
47.7
|
|
|
20,390
|
|
|
44.7
|
|
28.3
|
|
|
50,211
|
|
|
50.2
|
|
|
39,421
|
|
|
43.4
|
|
27.4
|
|
||||
Operating income (loss)
|
503
|
|
|
0.9
|
|
|
1,512
|
|
|
3.3
|
|
(66.7
|
)
|
|
(1,620
|
)
|
|
(1.6
|
)
|
|
3,934
|
|
|
4.3
|
|
(141.2
|
)
|
||||
Other (expense) income, net
|
(493
|
)
|
|
(0.9
|
)
|
|
(33
|
)
|
|
(0.1
|
)
|
1,393.9
|
|
|
(333
|
)
|
|
(0.3
|
)
|
|
667
|
|
|
0.8
|
|
(149.9
|
)
|
||||
Income (loss) before income taxes
|
10
|
|
|
—
|
|
|
1,479
|
|
|
3.2
|
|
(99.3
|
)
|
|
(1,953
|
)
|
|
(1.9
|
)
|
|
4,601
|
|
|
5.1
|
|
(142.4
|
)
|
||||
Income tax provision
|
367
|
|
|
0.7
|
|
|
148
|
|
|
0.3
|
|
148.0
|
|
|
2,973
|
|
|
3.0
|
|
|
913
|
|
|
1.0
|
|
225.6
|
|
||||
Net (loss) income
|
$
|
(357
|
)
|
|
(0.7
|
)%
|
|
$
|
1,331
|
|
|
2.9
|
%
|
(126.8
|
)
|
|
$
|
(4,926
|
)
|
|
(4.9
|
)%
|
|
$
|
3,688
|
|
|
4.1
|
%
|
(233.6
|
)
|
|
Three months ended March 31,
|
|
$ incr.
|
% incr.
|
|
Six months ended March 31,
|
|
$ incr.
|
% incr.
|
||||||||||||||||
($ in thousands)
|
2018
|
|
2017
|
|
(decr.)
|
(decr.)
|
|
2018
|
|
2017
|
|
(decr.)
|
(decr.)
|
||||||||||||
North America, primarily United States
|
$
|
39,412
|
|
|
$
|
29,711
|
|
|
9,701
|
|
32.7
|
|
|
$
|
68,991
|
|
|
$
|
59,373
|
|
|
9,618
|
|
16.2
|
|
Europe, Middle East & Africa
|
9,504
|
|
|
9,545
|
|
|
(41
|
)
|
(0.4
|
)
|
|
19,660
|
|
|
19,356
|
|
|
304
|
|
1.6
|
|
||||
Asia
|
4,778
|
|
|
5,370
|
|
|
(592
|
)
|
(11.0
|
)
|
|
9,306
|
|
|
9,938
|
|
|
(632
|
)
|
(6.4
|
)
|
||||
Latin America
|
1,097
|
|
|
989
|
|
|
108
|
|
10.9
|
|
|
2,031
|
|
|
2,123
|
|
|
(92
|
)
|
(4.3
|
)
|
||||
Total revenue
|
$
|
54,791
|
|
|
$
|
45,615
|
|
|
9,176
|
|
20.1
|
|
|
$
|
99,988
|
|
|
$
|
90,790
|
|
|
9,198
|
|
10.1
|
|
|
Three months ended March 31,
|
|
$ incr.
|
|
Six months ended March 31,
|
|
$ incr.
|
||||||||||||||||||||||||||||
($ in thousands)
|
2018
|
|
2017
|
|
(decr.)
|
|
2018
|
|
2017
|
|
(decr.)
|
||||||||||||||||||||||||
Sales and marketing
|
$
|
11,175
|
|
|
20.4
|
%
|
|
$
|
8,731
|
|
|
19.1
|
%
|
|
$
|
2,444
|
|
|
$
|
20,935
|
|
|
20.9
|
%
|
|
$
|
17,053
|
|
|
18.8
|
%
|
|
$
|
3,882
|
|
Research and development
|
8,617
|
|
|
15.7
|
%
|
|
6,979
|
|
|
15.3
|
%
|
|
1,638
|
|
|
16,368
|
|
|
16.4
|
%
|
|
13,884
|
|
|
15.3
|
%
|
|
2,484
|
|
||||||
General and administrative
|
6,359
|
|
|
11.6
|
%
|
|
4,680
|
|
|
10.3
|
%
|
|
1,679
|
|
|
12,908
|
|
|
12.9
|
%
|
|
8,484
|
|
|
9.3
|
%
|
|
4,424
|
|
||||||
Total operating expenses
|
$
|
26,151
|
|
|
47.7
|
%
|
|
$
|
20,390
|
|
|
44.7
|
%
|
|
$
|
5,761
|
|
|
$
|
50,211
|
|
|
50.2
|
%
|
|
$
|
39,421
|
|
|
43.4
|
%
|
|
$
|
10,790
|
|
|
Three months ended March 31,
|
% incr.
|
|
Six months ended March 31,
|
% incr.
|
|||||||||||||||||||||||||
($ in thousands)
|
2018
|
|
2017
|
(decr.)
|
|
2018
|
|
2017
|
(decr.)
|
|||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Product
|
$
|
47,588
|
|
|
95.5
|
%
|
|
$
|
41,766
|
|
|
95.2
|
%
|
13.9
|
|
$
|
86,042
|
|
|
94.9
|
%
|
|
$
|
84,939
|
|
|
95.6
|
%
|
1.3
|
|
Services
|
2,237
|
|
|
4.5
|
|
|
2,107
|
|
|
4.8
|
|
6.2
|
|
4,663
|
|
|
5.1
|
|
|
3,870
|
|
|
4.4
|
|
20.5
|
|
||||
Total revenue
|
49,825
|
|
|
100.0
|
|
|
43,873
|
|
|
100.0
|
|
13.6
|
|
90,705
|
|
|
100.0
|
|
|
88,809
|
|
|
100.0
|
|
2.1
|
|
||||
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cost of product
|
23,080
|
|
|
46.3
|
|
|
21,398
|
|
|
48.8
|
|
7.9
|
|
42,290
|
|
|
46.6
|
|
|
43,735
|
|
|
49.3
|
|
(3.3
|
)
|
||||
Cost of services
|
1,410
|
|
|
2.8
|
|
|
1,321
|
|
|
3.0
|
|
6.7
|
|
2,749
|
|
|
3.0
|
|
|
2,388
|
|
|
2.7
|
|
15.1
|
|
||||
Amortization of intangibles
|
246
|
|
|
0.5
|
|
|
91
|
|
|
0.2
|
|
170.3
|
|
330
|
|
|
0.4
|
|
|
192
|
|
|
0.2
|
|
71.9
|
|
||||
Total cost of sales
|
24,736
|
|
|
49.6
|
|
|
22,810
|
|
|
52.0
|
|
8.4
|
|
45,369
|
|
|
50.0
|
|
|
46,315
|
|
|
52.2
|
|
(2.0
|
)
|
||||
Gross profit
|
25,089
|
|
|
50.4
|
|
|
21,063
|
|
|
48.0
|
|
19.1
|
|
45,336
|
|
|
50.0
|
|
|
42,494
|
|
|
47.8
|
|
6.7
|
|
||||
Total operating expenses
|
20,400
|
|
|
41.0
|
|
|
18,353
|
|
|
41.8
|
|
11.2
|
|
39,383
|
|
|
43.4
|
|
|
36,697
|
|
|
41.3
|
|
7.3
|
|
||||
Operating income
|
$
|
4,689
|
|
|
9.4
|
%
|
|
$
|
2,710
|
|
|
6.2
|
%
|
73.0
|
|
$
|
5,953
|
|
|
6.6
|
%
|
|
$
|
5,797
|
|
|
6.5
|
%
|
2.7
|
|
|
Three months ended March 31,
|
% incr.
|
|
Six months ended March 31,
|
% incr.
|
||||||||||||||||||||||||||
($ in thousands)
|
2018
|
|
2017
|
(decr.)
|
|
2018
|
|
2017
|
(decr.)
|
||||||||||||||||||||||
Solutions revenue
|
$
|
4,966
|
|
|
100.0
|
%
|
|
$
|
1,742
|
|
|
100.0
|
%
|
185.1
|
|
|
$
|
9,283
|
|
|
100.0
|
%
|
|
$
|
1,981
|
|
|
100.0
|
%
|
368.6
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cost of services
|
2,877
|
|
|
57.9
|
|
|
682
|
|
|
39.1
|
|
321.8
|
|
|
4,981
|
|
|
53.6
|
|
|
789
|
|
|
39.8
|
|
531.3
|
|
||||
Amortization of intangibles
|
524
|
|
|
10.6
|
|
|
221
|
|
|
12.7
|
|
137.1
|
|
|
1,047
|
|
|
11.3
|
|
|
331
|
|
|
16.7
|
|
216.3
|
|
||||
Total cost of sales
|
3,401
|
|
|
68.5
|
|
|
903
|
|
|
51.8
|
|
276.6
|
|
|
6,028
|
|
|
64.9
|
|
|
1,120
|
|
|
56.5
|
|
438.2
|
|
||||
Gross profit
|
1,565
|
|
|
31.5
|
|
|
839
|
|
|
48.2
|
|
(86.5
|
)
|
|
3,255
|
|
|
35.1
|
|
|
861
|
|
|
43.5
|
|
(278.0
|
)
|
||||
Total operating expenses
|
5,751
|
|
|
115.8
|
|
|
2,037
|
|
|
117.0
|
|
182.3
|
|
|
10,828
|
|
|
116.7
|
|
|
2,724
|
|
|
137.5
|
|
297.5
|
|
||||
Operating loss
|
$
|
(4,186
|
)
|
|
(84.3
|
)%
|
|
$
|
(1,198
|
)
|
|
(68.8
|
)%
|
249.4
|
|
|
$
|
(7,573
|
)
|
|
(81.6
|
)%
|
|
$
|
(1,863
|
)
|
|
(94.0
|
)%
|
306.5
|
|
|
Six months ended March 31,
|
|
% increase
|
|||||
|
2018
|
|
2017
|
|
(decrease)
|
|||
Euro
|
1.2029
|
|
|
1.0727
|
|
|
12.1
|
%
|
British Pound
|
1.3591
|
|
|
1.2415
|
|
|
9.5
|
%
|
Japanese Yen
|
0.0090
|
|
|
0.0090
|
|
|
—
|
%
|
Canadian Dollar
|
0.7893
|
|
|
0.7523
|
|
|
4.9
|
%
|
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, 2018 - January 31, 2018
|
|
4,335
|
|
|
$
|
10.40
|
|
|
—
|
|
|
$19,725,797.42
|
February 1, 2018 - February 28, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$19,725,797.42
|
March 1, 2018 - March 31, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$19,725,797.42
|
Total
|
|
4,335
|
|
|
$
|
10.40
|
|
|
—
|
|
|
$19,725,797.42
|
(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
|
(1)
|
Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed October 25, 2017 (File No. 1-34033)
|
(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)
|
(3)
|
Incorporated by reference to Exhibit 3(b) to the Company’s Current Report on Form 8-K filed August 28, 2017 (File No. 1-34033)
|
(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)
|
(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)
|
(6)
|
Incorporated by reference to Appendix A to the Company’s definitive proxy statement on Schedule 14A filed December 8, 2017 (File No. 1-34033)
|
|
|
|
|
|
|
|
|
DIGI INTERNATIONAL INC.
|
|
||
Date:
|
May 1, 2018
|
By:
|
/s/ Michael C. Goergen
|
|
|
|
|
|
Michael C. Goergen
|
|
|
|
|
|
Senior Vice President, Chief Financial Officer and
Treasurer (Principal Financial Officer and Authorized Officer)
|
|
|
|
|
|
Name of Participant:
|
|
Number of Restricted Stock Units:
|
Grant Date:__________, 20__
|
Vesting Schedule:
|
|
Vesting Date(s)
|
Number of Stock Units that Vest
|
|
|
|
|
|
|
PARTICIPANT:
|
|
|
By:
|
|
(a)
|
Scheduled Vesting
. If you remain a member of the Board continuously from the Grant Date specified on the cover page of this Agreement, then the Units will vest in the numbers and on the dates specified in the Vesting Schedule on the cover page of this Agreement.
|
(b)
|
Accelerated Vesting
. Vesting of the Units may be accelerated during the term of the Award at the discretion of the Committee in accordance with Section 16.2 of the Plan and under the following circumstances:
|
(i)
|
Upon a Change in Control, this Award shall become fully vested and exercisable upon the occurrence of the Change in Control.
|
(ii)
|
In the event the stockholders of the Company approve the complete dissolution or liquidation of the Company, this Award shall vest and become fully exercisable, and will terminate immediately prior to the consummation of any such proposed action.
|
(c)
|
Change in Control
. “
Change in Control
” means one of the following:
|
(i)
|
any individual, entity or Group (a “
Person
”) becomes a “beneficial owner” (as defined in Rule 13d-3 or any successor rule under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of the Company’s voting securities, except that the following shall not constitute a Change in Control: (A) any acquisition or beneficial ownership by the Company or a Subsidiary; (B) any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by the Company or one or more Subsidiary; (C) any formation of a Group consisting solely of beneficial owners of the Company’s voting securities as of the effective date of this Plan, or any repurchase or other acquisition by the Company of its voting securities that causes any Person to become the beneficial owner of 30% or more of the Company’s voting securities, in either case so long as such Person does not acquire beneficial ownership of additional Company voting securities after the Person initially became the beneficial owner of 30% or more of the Company’s voting securities by one of the means described in this clause (C); or (D) any acquisition of beneficial ownership by any entity with respect to which, immediately following such acquisition, more than 50% of the combined voting power of such entity’s then outstanding voting securities is beneficially owned, directly or indirectly, by all or substantially all of the Persons who beneficially owned the Company’s voting securities immediately prior to such acquisition in substantially the same proportions as their ownership of the Company’s voting securities immediately prior to such acquisition;
|
(ii)
|
Individuals (A) who are, as of the effective date of the Plan, directors of the Company, or (B) who are elected as a directors of the Company subsequent to the Grant Date and whose initial election, or nomination for initial election by the Company’s stockholders, was approved by at least a majority of the then Continuing Directors (collectively, “
Continuing Directors
”) cease for any reason to constitute a majority of the members of the Board; or
|
(iii)
|
The consummation of a Fundamental Change unless, immediately following such Fundamental Change, all or substantially all of the Persons who were the beneficial owners of the Company’s voting securities immediately prior to such Fundamental Change beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities of the surviving or acquiring entity (or its Parent) resulting from such Fundamental Change in substantially the same proportions as their ownership, immediately prior to such Fundamental Change, of the Company’s voting securities.
|
(iv)
|
Notwithstanding the foregoing, to the extent that this Award constitutes a deferral of compensation subject to Code Section 409A, then no Change in Control shall be deemed to have occurred upon an event described in this Section 3(c) unless the event would also constitute a change in ownership or effective control of, or a change in the ownership of a substantial portion of the assets of, the Company under Code Section 409A.
|
|
|
|
|
Name of Participant:
|
|
Number of Restricted Stock Units:
|
Grant Date:__________, 20__
|
Vesting Schedule:
|
|
Vesting Date(s)
|
Number of Stock Units that Vest
|
|
|
|
|
|
|
PARTICIPANT:
|
|
|
By:
|
|
(a)
|
Scheduled Vesting
. If you remain employed (which includes other service relationships described in Section 5 of the Plan) by the Company or any of its Affiliates continuously from the Grant Date specified on the cover page of this Agreement, then the Units will vest in the numbers and on the dates specified in the Vesting Schedule on the cover page of this Agreement.
|
(b)
|
Effect of Change in Control
. The following provisions shall apply if a Change in Control (as defined in Section 3(c)) occurs while Units remain outstanding pursuant to this Award.
|
(1)
|
If the surviving or successor entity (which may include the Company), or such entity’s parent corporation, continues, assumes or replaces this Award (with such adjustments as may be required or permitted by Section 17 of the Plan), this Award or its replacement shall remain outstanding and be governed by its terms, including Section 3(b)(3) below. For these purposes, this Award shall be considered assumed or replaced if, in connection with the Change in Control, either (i) the contractual obligations represented by the Award are expressly assumed by the surviving or successor entity (or its parent corporation) with appropriate adjustments to the number and type of securities subject to the Award that preserves the intrinsic value of the Award existing at the time of the Change in Control, or (ii) you have received a comparable equity-based award that preserves the intrinsic value of this Award existing at the time of the Change in Control and contains terms and conditions that are substantially similar to those of this Award.
|
(2)
|
If and to the extent that this Award is not continued, assumed or replaced in connection with a Change in Control, then all outstanding Units shall fully vest at or immediately prior to the effective time of the Change in Control. The Committee may alternatively provide that this Award shall be canceled at or immediately prior to the effective time of the Change in Control in exchange for a payment to you in an amount equal to the fair market value (as determined in good faith by the Committee) of the consideration that would otherwise be received in the Change in Control transaction by a Company stockholder for the number of Shares for which outstanding Units could then be settled (or, if no consideration would be received by the Company’s stockholders in the Change of Control transaction, the fair market value (as determined in good faith by the Committee) of such number of Shares immediately prior to the Change in Control). Payment of any such amount may be made in such form, on such terms and subject to such conditions as the Committee determines in its discretion, which may or may not be the same as the form, terms and conditions applicable to payments to the Company’s stockholders in connection with the Change in Control, and may, in the Committee’s discretion, include subjecting such payments to escrow or holdback terms comparable to those imposed upon the Company’s stockholders under the Change in Control, or calculating and paying the present value of payments that would otherwise be subject to escrow or holdback terms.
|
(3)
|
If and to the extent that this Award is continued, assumed or replaced under the circumstances described in Section 3(b)(1), and if within 12 months after the Change in Control you experience an Employment Termination Event (as defined in Section 3(d)), then this Award and any outstanding Units shall immediately vest in full.
|
(c)
|
Change in Control
. “
Change in Control
” means one of the following:
|
(i)
|
any individual, entity or Group (a “
Person
”) becomes a “beneficial owner” (as defined in Rule 13d-3 or any successor rule under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of the Company’s voting securities, except that the following shall not constitute a Change in Control: (A) any acquisition or beneficial ownership by the Company or a Subsidiary; (B) any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by the Company or one or more Subsidiary; (C) any formation of a Group consisting solely of beneficial owners of the Company’s voting securities as of the effective date of the Plan, or any repurchase or other acquisition by the Company of its voting securities that causes any Person to become the beneficial owner of 30% or more of the Company’s voting securities, in either case so long as such Person does not acquire beneficial ownership of additional Company voting securities after the Person initially became the beneficial owner of 30% or more of the Company’s voting securities by one of the means described in this clause (C); or (D) any acquisition of beneficial ownership by any entity with respect to which, immediately following such acquisition, more than 50% of the combined voting power of such entity’s then outstanding voting securities is beneficially owned, directly or indirectly, by all or substantially all of the Persons who beneficially owned the Company’s voting securities immediately prior to such acquisition in substantially the same proportions as their ownership of the Company’s voting securities immediately prior to such acquisition;
|
(ii)
|
individuals (A) who are, as of the effective date of the Plan, directors of the Company, or (B) who are elected as directors of the Company subsequent to the Grant Date and whose initial election, or nomination for initial election by the Company’s stockholders, was approved by at least a majority of the then Continuing Directors (collectively, “
Continuing Directors
”) cease for any reason to constitute a majority of the members of the Board; or
|
(iii)
|
the consummation of a Fundamental Change unless, immediately following such Fundamental Change, all or substantially all of the Persons who were the beneficial owners of the Company’s voting securities immediately prior to such Fundamental Change beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities of the surviving or acquiring entity (or its Parent) resulting from such Fundamental Change in substantially the same proportions as their ownership, immediately prior to such Fundamental Change, of the Company’s voting securities.
|
(iv)
|
Notwithstanding the foregoing, to the extent that this Award constitutes a deferral of compensation subject to Code Section 409A, then no Change in Control shall be deemed to have occurred upon an event described in this Section 3(c) unless the event would also constitute a change in ownership or effective control of, or a change in the ownership of a substantial portion of the assets of, the Company under Code Section 409A.
|
(d)
|
Employment Termination Event
. An “
Employment Termination Event
” will be deemed to have occurred upon either: (i) the involuntary termination of your employment for reasons other than Cause (as defined in Section 3(e)), or (ii) the voluntary termination of your employment for Good Reason (as defined in Section 3(f)).
|
(e)
|
Cause
. “
Cause
” means only the following: (i) your 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) your commission any crime or offense involving dishonesty with respect to the Company; (ii) theft or embezzlement by you of Company property or commission of similar acts involving dishonesty or moral turpitude; (iii) repeated material negligence in the performance of your duties after you have received written notice of the same; (iv) your failure to devote substantially all of your working time and efforts during normal business hours to the Company’s business; (v) your knowing engagement in conduct that is materially injurious to the Company; or (vi) your 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.
|
(f)
|
Good Reason
. “
Good Reason
” means the existence of one or more of the following conditions without your consent, so long as you provided written notice to the Company of the existence of the condition not later than 90 days after the initial existence of the condition and the condition has not been remedied within 30 after receipt of such notice: (i) the failure of the Company to pay any material amount due to you under a prevailing Employment Agreement; (ii) a meaningful diminution, without Cause, as defined above, in your responsibilities or job functions unless approved by you; (iii) a material reduction in your total compensation potential as defined by annual base salary and cash compensation targets; or (iv) your relocation to an office location greater than 50 miles from your office location at the time of a Change in Control.
|
|
|
|
|
Name of Participant:
|
|
Number of Restricted Stock Units:
|
Grant Date:__________, 20__
|
Vesting Schedule:
|
|
Vesting Date(s)
|
Number of Stock Units that Vest
|
|
|
|
|
|
|
PARTICIPANT:
|
|
|
By:
|
|
(a)
|
Scheduled Vesting
. If you remain employed (which includes other service relationships described in Section 5 of the Plan) by the Company or any of its Affiliates continuously from the Grant Date specified on the cover page of this Agreement, then the Units will vest in the numbers and on the dates specified in the Vesting Schedule on the cover page of this Agreement.
|
(b)
|
Effect of Change in Control
. The following provisions shall apply if a Change in Control (as defined in Section 3(c)) occurs while Units remain outstanding pursuant to this Award.
|
(1)
|
If the surviving or successor entity (which may include the Company), or such entity’s parent corporation, continues, assumes or replaces this Award (with such adjustments as may be required or permitted by Section 17 of the Plan), this Award or its replacement shall remain outstanding and be governed by its terms. For these purposes, this Award shall be considered assumed or replaced if, in connection with the Change in Control, either (i) the contractual obligations represented by the Award are expressly assumed by the surviving or successor entity (or its parent corporation) with appropriate adjustments to the number and type of securities subject to the Award that preserves the intrinsic value of the Award existing at the time of the Change in Control, or (ii) you have received a comparable equity-based award that preserves the intrinsic value of this Award existing at the time of the Change in Control and contains terms and conditions that are substantially similar to those of this Award.
|
(2)
|
If and to the extent that this Award is not continued, assumed or replaced in connection with a Change in Control, then all outstanding Units shall fully vest at or immediately prior to the effective time of the Change in Control. The Committee may alternatively provide that this Award shall be canceled at or immediately prior to the effective time of the Change in Control in exchange for a payment to you in an amount equal to the fair market value (as determined in good faith by the Committee) of the consideration that would otherwise be received in the Change in Control transaction by a Company stockholder for the number of Shares for which outstanding Units could then be settled (or, if no consideration would be received by the Company’s stockholders in the Change of Control transaction, the fair market value (as determined in good faith by the Committee) of such number of Shares immediately prior to the Change in Control). Payment of any such amount may be made in such form, on such terms and subject to such conditions as the Committee determines in its discretion, which may or may not be the same as the form, terms and conditions applicable to payments to the Company’s stockholders in connection with the Change in Control, and may, in the Committee’s discretion, include subjecting such payments to escrow or holdback terms comparable to those imposed upon the Company’s stockholders under the Change in Control, or calculating and paying the present value of payments that would otherwise be subject to escrow or holdback terms.
|
(c)
|
Change in Control
. “
Change in Control
” means one of the following:
|
(i)
|
any individual, entity or Group (a “
Person
”) becomes a “beneficial owner” (as defined in Rule 13d-3 or any successor rule under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of the Company’s voting securities, except that the following shall not constitute a Change in Control: (A) any acquisition or beneficial ownership by the Company or a Subsidiary; (B) any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by the Company or one or more
|
(ii)
|
individuals (A) who are, as of the effective date of the Plan, directors of the Company, or (B) who are elected as directors of the Company subsequent to the Grant Date and whose initial election, or nomination for initial election by the Company’s stockholders, was approved by at least a majority of the then Continuing Directors (collectively, “Continuing Directors”) cease for any reason to constitute a majority of the members of the Board; or
|
(iii)
|
the consummation of a Fundamental Change unless, immediately following such Fundamental Change, all or substantially all of the Persons who were the beneficial owners of the Company’s voting securities immediately prior to such Fundamental Change beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities of the surviving or acquiring entity (or its Parent) resulting from such Fundamental Change in substantially the same proportions as their ownership, immediately prior to such Fundamental Change, of the Company’s voting securities.
|
(iv)
|
Notwithstanding the foregoing, to the extent that this Award constitutes a deferral of compensation subject to Code Section 409A, then no Change in Control shall be deemed to have occurred upon an event described in this Section 3(c) unless the event would also constitute a change in ownership or effective control of, or a change in the ownership of a substantial portion of the assets of, the Company under Code Section 409A.
|
|
|
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: 2018 Omnibus Incentive Plan
ID:
|
|
||||||
|
|
|
|
|
|
|
Shares
|
|
Vest Type
|
|
Full Vest
|
|
Expiration
|
|
|
|
|
|
|
|
By signing below, you agree to all of the terms and conditions contained in this Agreement and in the Plan document. You acknowledge that you have reviewed these documents and that they set forth the entire agreement between you and the Company regarding your right to purchase shares of the Company’s common stock pursuant to this Option.
|
||||||
_______________________________________________
Digi International Inc.
|
|
__________________________________________
Date
|
||||
_______________________________________________
[Optionee]
|
|
__________________________________________
Date
|
(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 1, 2018
|
/s/ Ronald E. Konezny
|
|
||
|
Ronald E. Konezny
|
|
||
|
President and Chief Executive Officer
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
May 1, 2018
|
/s/ Michael C. Goergen
|
|
||
|
Michael C. Goergen
|
|
||
|
Senior Vice President, Chief Financial Officer and Treasurer
|
|
|
||||
|
|
|
|
|
May 1, 2018
|
|
|
|
|
|
/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
|
|