Digi International, Inc. (DGII) is a provider of IoT connectivity products, software, and services. Shares moved higher following a strong earnings report that reinforced improving business momentum and a more durable growth profile. The quarter reflected broad-based demand and continued progress in shifting toward higher-margin recurring revenue streams, with operating leverage supporting profitability, as revenue increased 18% YoY. Solid execution and an improving outlook further supported investor confidence.

Digi International Inc. (DGII) is a leading global provider of business and mission-critical Internet of Things (IoT) connectivity products, services, and solutions. The IoT industry is experiencing a multi-year expansion as many sectors undergo digital transformation, driving demand for IoT capabilities. Management is targeting 6–8% annual sales growth and EBITDA margin expansion toward 24%, leveraging automation and product innovation. Recurring revenue has grown from 4% to 27% of total revenue between 2019 and 2025, resulting in significant margin expansion and greater visibility. This trend is expected to continue, positioning DGII for outsized earnings growth.

Digi International, Inc. (DGII) was a positive contributor to our relative returns in the Telecommunications sector. The company has demonstrated strong performance, which reflects its solid positioning within the market. Our investment in Digi International, Inc. aligns with our strategy of focusing on companies that are well-positioned for growth and can capitalize on emerging trends in technology. The positive stock selection effects from Digi International, Inc. indicate its potential for continued success.