Digi International (DGII) risk factors, FY2024 10-K

Operational Risks

1. 01We depend on manufacturing relationships and a broad set of suppliers, some of whom provide us with limited-source components and parts, and disruptions in these relationships may cause damage to our customer relationships or otherwise negatively impact our business
2. 02The long and variable sales cycle for certain of our products and services makes it more difficult for us to predict our operating results and manage our business
3. 03Acquisitions could disrupt our business and seriously harm our financial condition
4. 04Certain parts of our business are subject to customer concentrations
5. 05We acquired Opengear in fiscal 2019. Although Opengear has many customers, its business historically has been significantly concentrated on its relationships with a few large customers
6. 06From time to time, we are subject to claims and litigation regarding intellectual property rights or other claims pertaining to our business, which could seriously harm us and require us to incur significant costs
7. 07Our participation in a services and solutions model, using hardware and cloud-based services, presents execution and competitive risks
8. 08Our ability to sustain and grow our business depends in large part on the success of our third-party distributors and resellers
9. 09The businesses of our IoT Solutions segment are subject to the risks faced by businesses operating in emerging markets
10. 10Our sales and operations globally face risks related to health epidemics or pandemics that could disrupt our operations and adversely impact our sales and operating results

Technology and Cybersecurity Risks

1. 11We are subject to various cybersecurity risks, including risk to our products, solutions, and internal systems. These risks may increase our costs and could damage our brand and reputation
2. 12If a cyberattack or other security incident were to allow unauthorized access to or modification of our customers’ data or our own data, whether due to a failure with our systems or related systems operated by third parties, we could suffer damage to our brand and reputation
3. 13Issues related to the of artificial intelligence may result in regulatory or legal action, damage our reputation, or harm our business

Risks Relating to Our Foreign Operations

1. 14Our use of suppliers in other parts of the world as well as our purchases of components containing certain materials involves risks that could negatively impact us
2. 15We face risks associated with our international operations that could impair our ability to grow our revenue abroad as well as our overall financial condition
3. 16Our failure to comply effectively with regulatory laws pertaining to our foreign operations could have a material adverse effect on our revenue and profitability
4. 17We face intense competition from established companies that may have significant advantages over us and our products
5. 18Our dependence on new product development and the rapid technological change that characterizes our industry make us susceptible to loss of market share resulting from competitors’ product introductions and enhancements, service capabilities and similar risks as well as from regulatory changes
6. 19Our failure to compete successfully in our highly competitive market could result in reduced prices and loss of market share

Strategic Risks

1. 20We intend to continue to devote significant resources to our research and development, which, if not successful, could cause a decline in our revenue and harm our business
2. 21Our ability to grow our business is dependent in part on strategic relationships we develop and maintain with third parties as well as our ability to integrate and assure use of our products and services in coordination with the products and services of certain strategic partners in a commercially acceptable manner
3. 22Our failure to anticipate or manage product transitions effectively could have a material adverse effect on our revenue and profitability
4. 23We are dependent on third parties to manufacture our products which could have adverse impacts on our business if such manufacturers encounter operating restraints or if we do not properly forecast customer demand
5. 24The loss of key personnel could prevent us from executing our business strategy

Risks Related to Economic and Market Conditions

1. 25Our consolidated operating results and financial condition may be adversely impacted by worldwide economic and credit conditions
2. 26Our gross margins may be subject to decline
3. 27Our revenue may be subject to fluctuations based on the level of significant large project-based purchases
4. 28Some of our products are sold into mature markets, which could limit our ability to continue to generate revenue from these products
5. 29Unanticipated changes in our tax rates could affect our future results
6. 30We may have additional tax liabilities

Risks Relating to Our Industry

1. 31We are dependent on wireless communication networks owned and controlled by others
2. 32Natural disasters, wars and other events beyond our control could impact our supply chain and customers negatively resulting in an adverse impact to our revenue and profitability
3. 33Failure to comply with the covenants under our credit facility may have a material adverse effect on our ability to access additional capital and/or create an event of default
4. 34Negative conditions in the global credit markets may impair a portion of our investment portfolio

Risks Related to Our Intellectual Property

1. 35Our ability to compete could be jeopardized if we are unable to protect our intellectual property rights
2. 36Our inability to obtain the appropriate telecommunications carrier certifications or approvals from governmental regulatory bodies as well as reconfiguration of communications protocols such as radio bands could impede our ability to grow revenue in our wireless products
3. 37Our failure to comply effectively with the requirements of applicable environmental, data privacy and security legislation and regulation could have a material adverse effect on our revenue and profitability

Risks Related to Our Common Stock

1. 38Unsolicited takeover proposals, governance change proposals, proxy contests and resulting litigation may adversely impact our operations, create uncertainty and affect the market price and volatility of our securities
2. 39Certain provisions of the Delaware General Corporation Law and our charter documents have an anti-takeover effect
3. 40The price of our common stock has been volatile and could continue to fluctuate in the future
4. 41If our stock price declines over a sustained period of time, our profits significantly decrease or our acquired businesses do not attain results that were anticipated at the time of acquisition, we may need to recognize an impairment of our goodwill