DEF 14A of Digi International Inc, Dec 8, 2023

DEF 14A of Digi International Inc

Filed Dec 8, 2023 · FY20230001104659-23-124668

Open on EDGAR

  1. PROPOSAL NO. 1: ELECTION OF DIRECTORS

    PROPOSAL NO. 1: ELECTION OF DIRECTORS Our business is overseen by our Board with the number of directors, not less than three, fixed from time to time by the Board. The Board is divided into three classes as nearly equal in number as possible, and directors typically are elected to a designated class for a term of three years. The Board has fixed at two the number of directors to be elected to the Board at the 2024 Annual Meeting of Stockholders. The Nominating and Governance Committee has nominated Christopher D. Heim and Sally J. Smith to stand for election, each to serve for a three-year term. Proxies solicited by the Board will, unless otherwise directed, be voted to elect the nominees below named. If a nominee is not elected, then the Board may fill the resulting vacancy or may decrease the size of the Board, each in accordance with the applicable provisions of our By-Laws. The Nominating and Governance Committee of the Board selected each of the below named nominees. In case any nominee is not a candidate for any reason, the persons named as proxies may vote for a substitute nominee selected by the Nominating and Governance Committee. The following provides certain information regarding the nominees for the office of director and the current directors whose terms are scheduled to expire after the 2024 Annual Meeting:

  2. Nominees For Terms Expiring in 2027

    Nominees For Terms Expiring in 2027

  3. Christopher D. Heim, age 59

    Christopher D. Heim, age 59 Mr. Heim has served as a member of our Board since January 2018 and is the Executive Chairman of Fortra, formerly known as HelpSystems, a leading developer of IT management software, a position he has held since July 2019. Prior to this, he was Chief Executive Officer of HelpSystems from December 2014 to July 2019. Before HelpSystems, he was Chief Executive Officer of Axium, a leading provider of project management and accounting solutions to Architectural and Engineering firms, from January 2013 until its sale to Deltek in June 2014. Prior to Axium, Mr. Heim served as Chief Executive Officer of Amcom Software (now known as Spok, Inc.), a provider of mission-critical communications solutions for hospitals, government and hospitality customers, from 2007 until its sale to USA Mobility in 2011 and then as its President and Chief Executive Officer from 2011 to 2012. Prior to Amcom, he was Chief Executive Officer and President of HighJump Software, a software company serving the supply chain management sector, from 1997 until it was acquired by 3M in 2004, and then as its president and General Manager from 2004 to 2006. Mr. Heim is a member of the boards of directors of Fortra, Calabrio, Inc., Ivanti, Inc., Field Nation, LLC and NPH USA. He previously served as a director of USA Mobility (now known as Spok, Inc.) from 2011 to 2013 and Ascentis from 2019 to 2023. Mr. Heim brings broad and extensive business expertise to our Board. In particular, his experience in building leading software and services with recurring revenue models enhances our Board’s oversight of our SmartSense by Digi and Ventus businesses and our overall growth.

  4. Sally J. Smith, age 65

    Sally J. Smith, age 65 Ms. Smith has served as a member of our Board since January 2018 and served as President and Chief Executive Officer of Buffalo Wild Wings, Inc., a restaurant company, from 1996 until its acquisition in February 2018. She previously served as its Chief Financial Officer from 1994 to 1996. From 1984 to 1994, she served as Chief Financial Officer of Dahlberg, Inc., a manufacturer of hearing aids. She began her career with KPMG LLP, an international accounting and consulting firm. Ms. Smith serves as a member of the boards of directors of Hormel Foods Corporation, The Marvin Companies and the National Restaurant Association. She served on the board of directors of Buffalo Wild Wings, Inc. from 1996 to 2017, Alerus Financial Corporation from 2007 to 2022 and Alina Health System from 2011 to 2022. Ms. Smith’s experience as an executive leader of a public company contributes to our Board. Her acumen in restaurant and food service operations is especially useful in our Board’s oversight of SmartSense by Digi. Her strong background in accounting and financial reporting is also valuable to the Board. Ms. Smith’s experience qualifies her as an Audit Committee financial expert. THE BOARD RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES IN THIS PROPOSAL 1.

  5. Directors Whose Terms Expire in 2025

    Directors Whose Terms Expire in 2025

  6. Spiro C. Lazarakis, age 68

    Spiro C. Lazarakis, age 68 Mr. Lazarakis has served as a member of our Board since July 2015. He served in various roles at Ernst & Young LLP, an international accounting and consulting firm, from 1989 until his retirement in July 2015 including most recently as lead partner in charge of audit services for a number of technology companies. Mr. Lazarakis was one of the most experienced assurance partners in Ernst & Young’s Northern California Technology practice. He has over 35 years of experience serving technology companies, ranging from large multinationals to smaller, pre-public growth companies and venture-backed start-up entities. He focused on serving companies in the Internet, software, networking, Software-as-a-Service and semiconductor sectors. He served Blue Coat Systems, Juniper Networks and Infoblox among others during his career. Mr. Lazarakis also serves as a director of each of Venture Lending & Leasing VIII, LLC and WTI Fund X, LLC, providers of debt and equity financing to early and late-stage venture capital backed technology companies. As a former assurance partner with Ernst & Young, Mr. Lazarakis has extensive high technology industry knowledge, leadership experience in management of audit and financial matters and provides expertise to our Board in such areas as finance, mergers and acquisitions, internal controls, risk management and auditing. Mr. Lazarakis’ experience qualifies him as an Audit Committee financial expert.

  7. Hatem H. Naguib, age 55

    Hatem H. Naguib, age 55 Mr. Naguib has served as a member of our Board since February 2019 and has served as the President and Chief Executive Officer of Barracuda Networks, Inc. (“Barracuda”), a company that provides security, networking and storage solutions based on SaaS-based cloud services and network appliances, since August 2021. Mr. Naguib previously served as the Chief Operating Officer and Senior Vice President of Products and Services of Barracuda from December 2018 until August 2021. Prior to serving in this role, he was a Senior Vice President and General Manager of the Security Business Unit at Barracuda from June 2016 to December 2018. Before joining Barracuda, Mr. Naguib served as Vice President of Products Network and Security for VMware, Inc., a digital information software company, from July 2012 to May 2016. Mr. Naguib’s extensive experience both in the communications hardware industry generally and in executing business strategies for networking products and services enhances our Board’s ability to oversee our operations and further support our continued long-term growth.

  8. Directors Whose Terms Expire in 2026

    Directors Whose Terms Expire in 2026

  9. Satbir Khanuja, PhD., age 56

    Satbir Khanuja, PhD., age 56 Dr. Khanuja has served as a member of our Board since June 2013 and has served as its Non-Executive Chairman since January 2018. He has served as an operating partner at Fuse Venture Partners, a technology strategic advisor and investor, since August 2020, as a venture advisor with Ignition Partners, a venture capital firm, since May 2018 and as a member of the Board of Directors of LevelTen Energy, Inc. since February 2018. He was President and Chief Executive Officer of DataSphere Technologies, Inc., an online marketing company, from 2008 until the company was acquired in May 2017. Dr. Khanuja served as Senior Vice President of Marketing and Business Development of Second Space, Inc., an online services company operating a network of immersive lifestyle-oriented web sites, from 2006 to 2008. Prior to that, he held a variety of roles at Amazon.com from 1999 to 2006, including Vice President IMDb.com and Amazon In-Theater and Vice President, Worldwide Traffic. Before joining Amazon.com, Dr. Khanuja was an Engagement Manager with McKinsey & Company from 1998 to 1999. Dr. Khanuja provides the Board with extensive leadership experience in marketing, operations and strategy. His role in the development of internet-based businesses is very valuable as the Company develops cloud-based application solutions such as SmartSense by Digi® and Digi Remote Manager®.

  10. Ronald E. Konezny, age 55

    Ronald E. Konezny, age 55 Mr. Konezny has served as a member of our Board and as our President and Chief Executive Officer since December 2014. From 2013 to December 2014, he served as Vice President, Global Transportation and Logistics at Trimble Navigation Limited, a global provider of navigation and range-finding equipment and related solutions. From 2011 to 2013, he served as General Manager of Trimble’s Global Transportation and Logistics division. From 2007 to 2013, he served as Chief Executive Officer of PeopleNet Communications Corporation, a provider of telematics solutions for the transportation industry, which was acquired by Trimble in 2011. Mr. Konezny founded PeopleNet in 1996 and served in various other roles, including Chief Technology Officer, Chief Financial Officer and Chief Operating Officer, before serving as its Chief Executive Officer. Mr. Konezny serves as a member of the board of director of Sentera, Inc. and ISAAC Instruments. He previously served as a director of Atlas Financial Holdings, Inc. from 2018 to 2022. Mr. Konezny has extensive experience in the wireless M2M industry working with solutions comprised of hardware and cloud-based applications. He brings extensive leadership in corporate strategy, manufacturing, operations, technology, finance and business development to the Board.

  11. Director Nominee Selection Process and Criteria

    Director Nominee Selection Process and Criteria The Nominating and Governance Committee generally identifies director candidates based upon suggestions from current directors and senior management, recommendations by stockholders and/or use of a director search firm. Stockholders who wish to suggest qualified candidates should write to the attention of the Chair of our Board’s Nominating and Governance Committee: Digi International Inc., 9350 Excelsior Blvd., Suite 700, Hopkins, MN 55343. All recommendations should state in detail the qualification of such persons for consideration by the Committee and should be accompanied by an indication of the person’s willingness to serve. The Nominating and Governance Committee will consider candidates recommended by stockholders in the same manner that it considers all director candidates. Candidates for director nominees are reviewed in the context of the current composition of our Board, our operating requirements and the long-term interests of our stockholders. We do not have a formal policy regarding the consideration of diversity in identifying director nominees. The Nominating and Governance Committee will consider, at a minimum, the following factors in nominating existing and potential new members of the Board, in addition to other factors it deems appropriate based on the current needs and desires of the Board: • demonstrated character and integrity, an inquiring mind, experience at a strategy/policy setting level, sufficient time to devote to our affairs, and high-level managerial experience; • whether the member/potential member is subject to a potentially disqualifying factor, such as relationships with competitors, customers, suppliers, contractors, counselors or consultants, or recent previous employment with us; • the member’s/potential member’s independence; • whether the member/potential member assists in achieving a mix of members on the Board that represents a diversity of background and experience, including with respect to specialized experience, age, gender, international background and race; • whether the member/potential member has general and strategic business management experience and financial experience with companies of a similar size that operate in the same general industry as us; • whether the member/potential member, by virtue of particular experience, technical expertise, or specialized skills, will add specific value as a member of the Board; and • any factors related to the ability and willingness of a new member to serve, or an existing member to continue his/her service.

  12. Executive Summary

    Executive Summary Our compensation philosophy is built on a foundation of pay-for-performance and rewards Named Executives for positive developments in the results of our Company and the price of our common stock over time. Below is a comparison of our total stockholder return (“TSR”) for the past one, three and five most recently completed fiscal years as compared to the median TSR for the same periods of our fiscal 2023 peer group as described below in the CD&A (our “Peer Group”). Data Source: Yahoo Finance, Adjusted Closing Price(s) TSR was calculated using average closing prices for the ten trading days up to and including September 30, 2023 for all periods presented. Peer Group median TSR data excludes Sierra Wireless Inc. because it was acquired in January 2023 and, with respect to the five-year presentation only, Cambium Networks Corporation because it became public in June 2019. Below is a summary of the key decisions impacting fiscal 2023 compensation for the Named Executives: • Base pay was consistent with general market practices and pay levels of our comparable Peer Group. Base salary increases are considered for Named Executives based on competitive market pay levels and individual performance. When base pay was initially set for fiscal 2023, base salaries for Messrs. Konezny, Loch, Sampsell and Schneider were increased. Ms. Chavali, who joined the Company in the months leading up the conclusion of fiscal 2022, did not receive an increase in base salary for fiscal 2023. The fiscal 2023 annual cash incentive plan design was changed from fiscal 2022 to include Annual Recurring Revenue (“ARR”) as a new performance measure. See the page 20 for a discussion on base salaries and cash compensation for fiscal 2023. • Stock option grants, time based restricted stock unit (“RSU”) grants and performance based restricted stock unit (“PSU”) grant values were awarded based on market practices, fiscal 2023 performance against our goals, our relative performance against our Peer Group, executive performance, retention goals, individual potential and our desire to incent Named Executives for the long-term with equity awards that require our share price to increase to create value and align the interests of Named Executives with our stockholders. In fiscal 2021 and 2022, ten percent of the value of Mr. Konezny’s long-term equity awards were granted in the form of PSUs that only vest if the Company meets certain performance objectives. In fiscal 2023, the Company introduced PSUs for the other Named Executives, whereby their long-term incentive amount transitioned to 50% RSUs and 50% PSUs. Executive Vice Presidents may achieve a maximum of 200% of granted PSUs, and Senior Vice Presidents may achieve a maximum target of 100% of granted PSUs. As discussed in further detail in this CD&A, we believe we exercise sound executive compensation management practices, including: • independent general oversight of compensation programs by our Compensation Committee and their use of external consultants as needed; • balanced compensation programs that emphasize pay-for-performance, alignment with stockholder value creation, and attraction and retention of key talent without creating undue risk; • maintaining a clawback policy as required by the SEC and Nasdaq listing rules and stock ownership guidelines since 2014, the expansion of the scope of our clawback policy in December 2020 to include performance-based equity awards, and the adoption of a new clawback policy in November 2023 to comply with new Nasdaq listing rules; • competitive compensation levels that are supported by our Peer Group compensation practices; and • multiple compensation program elements that emphasize short- and long-term business strategies and performance.

  13. Responsibility for Determining Executive Compensation

    Responsibility for Determining Executive Compensation Our Compensation Committee (referred to in this CD&A as the “Committee” or “Compensation Committee”) reviews and approves all executive compensation programs and the specific compensation arrangements with each of our Named Executives. The Committee also provides general oversight of our compensation plans. The Committee is composed of three independent, non-employee directors as defined by the SEC and Nasdaq. The Committee maintains responsibility for overseeing the independence of any compensation consultant that it retains. A brief summary of the role of the Committee is found in “Committees of the Board and Meeting Attendance” in this proxy statement. The Committee periodically retains the services of a third-party consultant to provide guidance and recommendations on compensation strategy, program design, Peer Group selection, and market compensation trends. Members of management participate in Committee meetings at the Committee’s request. Presently our VP of Human Resources, who reports to our Chief Financial Officer, oversees our human resources department and, together with other members of the human resources department, contributes analysis on market trends, Peer Group compensation levels and compensation levels of companies in our broad technology industry category to the Committee. Our Chief Executive Officer provides recommendations on the compensation of other Named Executives. Our Executive Vice President, Corporate Development, General Counsel and Corporate Secretary generally serves as Secretary of Committee meetings. For fiscal 2023, the Committee used the same methodology presented by Radford Consulting, a business unit of AON which the Committee retained in fiscal 2022 to provide recommendations on competitive benchmark data for our executive positions, Peer Group and industry trends on compensation plan design. The Committee also used certain information from a compensation database maintained by Radford to which we subscribe to collect updated and current benchmarking information. For the purposes of determining compensation for the fiscal year ending September 30, 2024, which we refer to as “fiscal 2024,” the Committee retained Radford Consulting, a business unit of AON, to provide recommendations on competitive benchmark data for our executive positions, Peer Group and industry trends on compensation plan design for fiscal 2024.

  14. Compensation Benchmarking

    Compensation Benchmarking To determine a range of competitive compensation for comparable jobs, the Committee reviews compensation data for a group of peer companies. The Committee also considers third-party survey data of companies in our broad technology industry category with comparable annual revenues to supplement Peer Group data. Cash Compensation The Committee generally sets base salaries for Named Executives to fall between the 25th and 60th percentile of comparable positions at Peer Group companies. Determination of the base salary level is based on the compensation determination factors listed above, with specific focus on the nature of the position, the Named Executives’ skills and potential, as well as past performance results. Currently, the base salaries of our Named Executives comprise 48% to 71% of their total annual cash compensation target, which places significant emphasis on annual incentive compensation. This supports our pay-for-performance philosophy as the Company will need to meet or exceed Company financial targets for Named Executives to realize their full annual cash compensation potential. Total cash compensation, when earned, is targeted to result in Named Executive total cash compensation falling on average between the 25th and 75th percentile of the comparable Peer Group positions if all financial metrics associated with annual incentive compensation are achieved or exceeded. By design, actual total cash compensation for Named Executives could fall below this range if we do not achieve all of our financial metrics in the fiscal year and could fall above this range if we exceed our financial metrics in the fiscal year. Equity Compensation The Committee historically has awarded stock options and RSUs to Named Executives. Starting in fiscal 2023, the Committee stopped granting stock options and began awarding PSUs in addition to RSUs to all Named Executives. The grant date target values of all of these awards are based on the following factors: • the value of equity awards within our Peer Group for comparable positions; • each Named Executive’s past performance and potential for the Named Executive to contribute to Company success in the future; and • the strategic impact of the Named Executive’s position and necessity to retain the Named Executive. Excluding new hire equity awards, target equity compensation award values for Named Executives in fiscal 2023 were generally within the 25th and 75th percentiles of Peer Group long-term incentive amounts. Fiscal 2023 Compensation Benchmarking For determining compensation for fiscal 2023, the Committee leveraged a combination of internal Digi compensation resources, prior year data from Radford Consulting and certain information from a compensation database maintained by Radford to which we subscribe to provide a competitive analysis of the base salary, annual cash incentives and equity incentive elements and levels for our Named Executives. This analysis consisted of: • a comparison of our compensation elements and levels against the fiscal 2023 Peer Group to determine our overall market percentile position on each element as well as our total cash compensation and total equity compensation; and • a comparison of our compensation elements and levels against companies in our broad technology industry category based on data obtained from an independent third-party compensation survey published by Radford. The broader survey data contained information for high technology companies in our broader industry and revenue categories and was used in conjunction with the Peer Group data. During fiscal 2022, the Committee reviewed our fiscal 2023 Peer Group to assess whether modifications were appropriate based on our business model, financial metrics, and appropriate competitors within our general market. Based on that review, the Peer Group remained unchanged from fiscal 2022, except that NeoPhotonics Corporation was removed from the Peer Group due to its acquisition by another company in August 2022. The final Peer Group for fiscal 2023 therefore includes:

  15. Compensation Benchmarking

    | ADTRAN, Inc. | EMCORE Corporation | | A10 Networks, Inc. | Harmonic Inc. | | Aviat Networks, Inc. | Inseego Corp. | | CalAmp Corp. | KVH Industries, Inc. | | Calix, Inc. | PowerFleet, Inc. | | Cambium Networks Corporation | Ribbon Communications Inc. | | Clearfield, Inc. | Sierra Wireless Inc.1 | | Comtech Telecommunications Corp. | Synchronoss Technologies, Inc. | | Dasan Zhone Solutions Inc. | |

  16. Compensation Benchmarking

    (1) Sierra Wireless Inc. was acquired in January 2023.

  17. Fiscal 2024 Compensation Benchmarking

    Fiscal 2024 Compensation Benchmarking For fiscal 2024, the Committee retained Radford Consulting to provide a competitive analysis of the base salary, annual cash incentives and equity incentive elements and levels for our Names Executives. This analysis consisted of: • a comparison of our compensation elements and levels against the fiscal 2023 peer group to determine our overall market percentile position on each element as well as our total cash compensation and total equity compensation; and • a comparison of our compensation elements and levels against companies in our broad technology industry category based on data obtained from an independent third-party compensation survey published by Radford. The broader survey data contained information for high technology companies in our broader industry and revenue categories and was used in conjunction with the peer group data. The Committee retained Radford Consulting to review our fiscal 2024 peer group and industry to assess whether modifications were appropriate based on our business model, financial metrics, and appropriate competitors within our general market. Based on that review, Agilysys, Extreme Networks, Impinj, InterDigital, Napco Security Technologies, NetScout Systems and Semtech were added. CalAmp, EMCORE, Inseego, NeoPhotonics, PowerFleet, Sierra Wireless and Synchronoss Technologies were removed. The final peer group for fiscal 2024 included:

  18. Fiscal 2024 Compensation Benchmarking

    | ADTRAN, Inc. | Extreme Networks | | A10 Networks, Inc. | Harmonic Inc. | | Agilysys | Impinji | | Aviat Networks, Inc. | InterDigital | | Calix, Inc. | KVH Industries, Inc. | | Cambium Networks Corporation | Napco Security Technologies | | Clearfield, Inc. | NetScout Systems | | Comtech Telecommunications Corp. | Ribbon Communications Inc. | | Dasan Zhone Solutions Inc. | Semtech |

  19. Compensation Program Elements

    | Name | Annual Base Salary ($) | Target Annual Cash Incentive ($) | Target Annual Cash Incentive as % of Base Salary (%) | Target Total Cash Compensation ($) | | Ronald E. Konezny | 550,000 | 605,000 | 110 | 1,155,000 | | James J. Loch | 375,000 | 187,500 | 50 | 562,500 | | David H. Sampsell | 315,000 | 157,500 | 50 | 472,500 | | Terrence G. Schneider | 275,000 | 110,000 | 40 | 385,000 | | Radha R. Chavali | 312,000 | 124,800 | 40 | 436,800 |

  20. Compensation Program Elements

    Base Salaries Base salary levels reflect the Committee’s compensation philosophy of favoring compensation, as appropriate, that is contingent on the achievement of performance objectives while providing a market competitive level of salary that will allow us to attract and retain talent. This translates to base salary levels for our Named Executives that fall roughly between the 25th and 60th percentile of our Peer Group. Base salaries are reviewed annually but are not automatically increased. Adjustments are approved by the Committee based upon changes in competitive market data and the compensation determination factors listed earlier in this CD&A. Based on economic factors of the business, our competitive market analysis for each position and the individual’s past performance, base salaries for Named Executives for fiscal 2023 were increased from 0% to 10%. The increases were determined based on our competitive market analysis for each position and each individual’s performance for fiscal 2022. For fiscal 2024, base salaries for Named Executives were increased in amounts varying from 0% to 8%. The increases were determined based on our competitive market analysis for each position and each individual’s performance for the fiscal year. Annual Cash Incentive Programs Our annual cash incentive program provides Named Executives the opportunity to receive cash incentive payments depending on the degree to which we achieve or exceed annual financial goals. This incentive typically has been tied to achievement of revenue and earnings before interest, taxes, depreciation and amortization (“EBITDA”), subject to any appropriate adjustments. The program historically has required a minimum threshold of performance to earn any payment, and a maximum payment opportunity. Named Executives only receive payments after the end of the fiscal year following the Committee’s review and approval of our financial results. Cash incentive plan metrics and potential cash incentive amounts are determined by the Committee near the start of each fiscal year based upon elements of our board-approved operating plan for that year. In some years, the metrics have included other objective measurements of quarterly or annual financial success as approved by the Committee. The annual cash incentive component pays out based on performance if the Named Executive remains employed with us for the full year. In the event the employment of a Named Executive is terminated without cause during the year, payment of any annual incentive component will be based on their employment agreement. The Committee approves plan elements and targets that they believe will support continued growth and creation of stockholder value. The Committee also reserves the right to award discretionary cash bonuses based upon its assessment of a Named Executive’s performance and contributions. Fiscal 2023 Cash Incentives For fiscal 2023, the Committee established an annual cash incentive plan for Named Executives designed to incent and reward profitable growth of the Company. Performance measurements were established based on achievement of annual revenue, Adjusted EBITDA and ARR goals for the Company. “Adjusted EBITDA” is a non-GAAP financial measure that can be calculated from our audited financial statements by subtracting interest income net of interest expense located on our Consolidated Statements of Operations from income before income taxes and then adding depreciation of property, equipment and improvements and amortization of identifiable intangible assets and other assets, both of which are located on the Consolidated Statements of Cash Flows. Further adjustments are made by adding back non-cash stock compensation expense, restructuring and severance related charges, and certain transaction expenses, including earnout payments, incurred in connection with acquisitions, divestitures or mergers. ARR represents monthly revenue recognized from all billable subscription contracts of the Company measured at the end of any fiscal month multiplied by twelve. When measured at the end of a fiscal year, ARR would be based on the monthly revenue recognized for the month of September. ARR is a key operating metric of the Company because it recurs without the need to make a new sale. This provides a stable base of revenue that typically comes with higher margins than sales not based on a subscription. The annual cash incentive for fiscal 2023 was dependent on achievement of annual financial goals. The plan provided for payment, to the extent that goals were met, of an amount between 50% and 200% of target. Upon achievement of both threshold revenue and threshold Adjusted EBITDA, 50% of target would be earned. Provided threshold revenue was met, between 50% and 100% of target would be earned based on a sliding scale for actual performance between threshold Adjusted EBITDA and the Adjusted EBITDA goal. 100% of target would be earned upon full achievement of the Adjusted EBITDA goal. Additional payments beyond 100% would be earned if the revenue and ARR goals were achieved, up to a maximum of 200% based on Adjusted EBITDA performance using a sliding scale between the goal and maximum Adjusted EBITDA. The final annual incentive due was calculated based on annual results and performance against revenue, Adjusted EBITDA and ARR. This final payment was determined by multiplying the Named Executives’ target total cash incentive for the fiscal year by the multiplier based on the annual achievement against the goal. The revenue, Adjusted EBITDA and ARR components of the annual cash incentive plan were set and measured exclusive of the impact of any acquisitions we closed during the fiscal year. The Committee could adjust the incentive payout by up to 25% upwards or downwards based on individual performance, but the Committee did not exercise such discretion. For fiscal 2023, threshold revenue and Adjusted EBITDA were satisfied, entitling eligible participants to a payment. Set forth below are the threshold and target performance levels along with our actual performance for fiscal 2023 (dollar amounts in millions):

  21. Compensation Program Elements

    | | Revenue | | | Adjusted EBITDA(1) | | | | ARR | | Incentive Payout Achieved (%) | | Business/Segment | Threshold ($) | Goal ($) | Actual ($) | Threshold ($) | Goal ($) | Maximum ($) | Actual ($) | Goal ($) | Actual ($) | | | Total Company | 410.0 | 425.0 | 444.8 | 83.7 | 88.0 | 93.9 | 96.5 | 104.0 | 106.0 | 200.0 |

  22. Compensation Program Elements

    | Name | Total Target Incentive ($) | Actual Incentive Earned ($) | Percentage of Target Total Cash Incentive Earned (%) | | Ronald E. Konezny | 605,000 | 1,210,000 | 200.0 | | James J. Loch | 187,500 | 375,000 | 200.0 | | David H. Sampsell | 157,500 | 315,000 | 200.0 | | Terrence G. Schneider | 110,000 | 220,000 | 200.0 | | Radha R. Chavali | 124,800 | 249,600 | 200.0 |

  23. Fiscal 2024 Cash Incentive

    Fiscal 2024 Cash Incentive For fiscal 2024, the Committee has established an annual cash incentive plan for Named Executives designed to incent and reward profitable growth of the Company. Performance will be measured based on achievement of annual revenue, Adjusted EBITDA and ARR goals for the Company. The annual cash incentive for fiscal 2024 has a provision for payment between 50% and 200% of target if annual financial goals are met. Upon achievement of the minimum thresholds for revenue, Adjusted EBITDA and ARR, 50% of target will be earned. Upon achievement of the goals for revenue, Adjusted EBITDA and ARR, 100% of target will be earned. Additional incentive payments beyond target and up to 200% may be earned if both the revenue and ARR goals are achieved. Payouts beyond target and up to 200% will then be based on Adjusted EBITDA performance. The final annual incentive due will be calculated based on annual results and performance against revenue, ARR and Adjusted EBITDA goals. This final payment will be determined by multiplying the Named Executives’ target total cash incentive for the fiscal year by the multiplier based on the performance of these metrics. The revenue, ARR and Adjusted EBITDA components of the annual cash incentive plan are set and all will be measured exclusive of the impact of any acquisitions activity we may complete during the fiscal year. The Committee can adjust any individual’s incentive payout by up to 25% upwards or downwards based on individual performance.

  24. Equity Incentive Compensation

    Equity Incentive Compensation Equity incentive compensation is designed to reward demonstrated performance and leadership, motivate future superior performance that drives overall Company growth, aligns the interests of the Named Executive with our stockholders, and allows us to attract and retain talent through the long-term reward potential of this program. These awards seek to align our equity incentive compensation with market practices and support our compensation philosophy as above described. Prior to fiscal 2023 we historically provided a mix of 50% non-statutory stock options and 50% RSUs. In each of fiscal 2021 and 2022 our CEO received 10% of his long-term incentive value in the form of PSUs as below further described. For fiscal 2023 stock awards for Named Executives we removed Stock Options and replaced them with PSUs as a core component of Named Executive compensation. This means for fiscal 2023 Named Executives received 50% of their equity incentive grants in PSUs and 50% in RSUs. The Compensation Committee moved to grant PSUs instead of stock options for Named Executives primarily because PSUs vest based upon the achievement of one or more operating metrics and stock options vest only based on continued employment. Equity awards are made to Named Executives annually and on other dates that generally correspond to the Named Executive’s start date with us, promotions, or as acknowledgement for extraordinary performance. Equity award amounts historically have been based upon competitive equity compensation within our Peer Group and/or survey group along with the above listed individual factors. Existing ownership levels generally are not a factor in award determinations as we do not want to discourage Named Executives from accumulating Digi stock. However, the Committee may take into consideration a Named Executive’s previous equity awards and may approve larger awards in certain cirumstances, such as to newer Named Executives with less equity by reason of their shorter tenure. Fiscal 2023 Equity Awards For fiscal 2023, the Committee reviewed equity and long-term incentive practices of equivalent positions within our Peer Group, and for certain positions, the practices within the broader survey group. The Committee approved equity awards with a grant date target value falling between the 25th and 75th percentile of reported equity and long-term incentive awards for the most recent fiscal year of companies in our Peer Group and our broad technology industry category, except for Ms. Chavali who received a smaller award due to her new hire status. The selection of award size between the 25th and 75th percentile was based on the Company’s fiscal 2022 performance and the individual factors listed above, most notably, individual performance, long-term potential and retention goals. The Company delivered the equity award value 50% in RSUs and 50% in PSUs. The Company uses the six-month average market closing price of the stock as of a date on the final approval of the RSU and PSU awards, which was $32.119 per share as of November 29, 2022, to determine the value of PSU and RSU awards. Accordingly, the following RSU and PSU awards were granted to the Named Executives on November 29, 2022.

  25. Equity Incentive Compensation

    | Name | Restricted Stock Units (#) | Performance Stock Units at Target (#) | | Ronald E. Konezny | 123,351 | 23,351 | | James J. Loch | 21,676 | 11,676 | | David H. Sampsell | 15,449 | 5,449 | | Terrence G. Schneider | 4,671 | 4,671 | | Radha R. Chavali | 6,870 | 1,557 |

  26. Equity Incentive Compensation

    The PSUs granted are eligible to vest based on achievement of ARR over a three-year performance period consisting of fiscal 2023, fiscal 2024 and the fiscal year ending September 20, 2025, which we refer to as “fiscal 2025.” If ARR exceeds an established performance goal in a given fiscal year during the performance period, the PSU award will pay out one-third of the target shares for that fiscal year. If ARR exceeds the performance goal for the first two fiscal years, then the PSU award will payout out two-thirds of the target shares (after deducting any shares earned for performance in an individual fiscal year). Similarly, if ARR exceeds the performance goal for all three fiscal years, then the PSU will payout all of the target shares. For Messrs. Konezny, Loch and Sampsell, if relative TSR based on the Russell 2000 index is achieved during the performance period, additional PSUs up to 200% of the target shares may be earned. The Committee established ARR performance goals in November 2022 of $104.0 million for fiscal 2023, $114.4 million for fiscal 2024 and $125.8 million for fiscal 2025. Also in November 29, 2022, as recognition for exceptional performance, the Committee approved supplemental awards of RSUs to Messrs. Konezny, Loch and Sampsell that are scheduled to vest in full on the three-year anniversary of the dates of grant for Messrs. Loch and Sampsell with Mr. Konezny’s grant award to vest over a three-year period, starting with the three-year anniversary of the date of grant and completing at the five-year anniversary. PSUs Granted in Fiscal 2021 In fiscal 2021, the Committee granted to Mr. Konezny performance share units that were eligible to vest based on achievement of a cumulative adjusted earnings per share metric measured over a three-year performance period consisting of fiscal 2021, fiscal 2022 and fiscal 2023 (“Cumulative Adjusted EPS”). If Cumulative Adjusted EPS exceeded an established performance goal in a given fiscal year during the performance period, the performance stock unit award paid out one-third of the target shares for that fiscal year. If Cumulative Adjusted EPS exceeded a separate performance goal for the first two fiscal years combined, then the performance stock unit award would pay out two-thirds of the target shares (after deducting any shares earned for performance in an individual fiscal year). Similarly, if Cumulative Adjusted EPS exceeded a separate performance goal for all three fiscal years combined, then the performance stock unit paid out the target shares. Finally, to the extent Cumulative Adjusted EPS exceeded the performance target for the three-year period up to an established maximum amount, the performance stock unit award paid out additional shares based on linear interpolation between the performance goal and maximum performance, up to a maximum payout of 200% of the target amount. For purposes of the performance stock units, “Cumulative Adjusted EPS” is defined as the Company’s adjusted earnings per share as reported for the applicable period in the Company’s annual earnings releases, including adjustments as determined under U.S. Generally Accepted Accounting Principles for significant non-cash or non-recurring items such as reversals of tax reserves, discrete tax benefits, restructuring charges and reversals, intangible amortization, stock-based compensation, other non-operating income/expense, changes in fair value of contingent consideration, acquisition-related expenses and interest expense related to acquisitions. The Committee established a Cumulative Adjusted EPS performance goal of at least $3.99 per share. Based on actual Cumulative Adjusted EPS of $4.13 per share at the end of fiscal 2023, Mr. Konezny was awarded 114.47% of the target shares to be earned over the three-year period, which resulted in a total of 10,027 shares awarded over the three-year performance period.

  27. Perquisites

    Perquisites We do not provide our Named Executives with perquisites and benefits in addition to the same benefits that are available to all regular full-time employees, except for the addition of a $500,000 supplemental life insurance policy. Employment Agreements We have entered into employment agreements with our Named Executives to align their interests with stockholders and attract and retain executives by providing contractual arrangements that address the consequences of significant organization changes. Ronald E. Konezny. We and Mr. Konezny are parties to an employment agreement dated November 26, 2014. The agreement entitled Mr. Konezny to an initial annual base salary, subject to review at least annually, and eligible for decrease only in connection with a uniform reduction affecting all of our senior executives proportionately. The agreement also provides that if we terminate his employment without cause he will receive: (1) severance pay at a rate equal to his base salary for a period of twelve months following termination, paid in installments on regular payroll dates during that period, (2) if Mr. Konezny is eligible for, and takes all steps necessary to continue his group health insurance coverage, we shall pay for the portion of the premium costs for such coverage that the Company pays for then active employees of the Company, at the same level of coverage that was in effect as of the termination date of his employment, for a period of 12 months thereafter, and (3) a pro rata portion of any bonus that would have been payable to him for the fiscal year during which his employment terminated, based on actual results against the annual objectives set by the Committee. Under the employment agreement, Mr. Konezny is entitled to a cash annual incentive bonus, provided that objectives set by the Committee are met. If some or all of the objectives are not met for a fiscal year, then the Committee shall determine the actual bonus earned based on actual performance against plan as determined through Mr. Konezny’s annual cash incentive plan. If the objectives set by the Committee for a cash performance bonus are exceeded for a fiscal year, the Committee may, in its discretion, award Mr. Konezny a bonus in addition to any other bonus to which he is otherwise entitled. The employment agreement also provides that Mr. Konezny is entitled to the benefits and perquisites which we generally provide to our other employees under our applicable plans and policies. James J. Loch. We and Mr. Loch are parties to a letter agreement dated May 1, 2019. Under this agreement, if Mr. Loch’s employment is terminated by us without cause at any time, he will be entitled to receive severance equal to twelve months’ base salary paid as a lump sum and a bonus that will be based on the number of months of service during the fiscal year in which his employment was terminated and our actual performance against any established performance objectives under our annual cash incentive compensation plan. The letter agreement provided for two equity awards in connection with the commencement of Mr. Loch’s employment. On August 13, 2019, he received an option to purchase 100,000 shares of our common stock, which is scheduled to vest as to 25% of the shares on the first anniversary of the grant date and in 36 substantially equal monthly installments thereafter, with a term of seven years. He also received an RSU award in the amount of 53,663 shares of our common stock, which is scheduled to vest as to 25% of the shares on each of the first four anniversaries of the grant date. Both awards will vest as to all shares if his employment is terminated without cause or terminates for good reason within one year following a change in control. David H. Sampsell. We and Mr. Sampsell are parties to a letter agreement dated April 8, 2011. The letter agreement provides that if Mr. Sampsell’s employment is terminated by us without cause at any time, he will be entitled to receive severance equal to six months’ base salary paid as a lump sum and a bonus that will be based on the number of months of service during the fiscal year in which his employment was terminated and our actual performance against any established performance objectives under our annual cash incentive compensation plan. Terrence G. Schneider. We and Mr. Schneider are parties to a letter agreement dated May 9, 2016 and amended May 23, 2016. The letter agreement provides that if Mr. Schneider’s employment is terminated by us without cause at any time, he will be entitled to receive severance equal to six months’ base salary paid as a lump sum and a bonus that will be based on the number of months of service during the fiscal year in which his employment was terminated and our actual performance against any established performance objectives under our annual cash incentive compensation plan. Radha R. Chavali. We and Ms. Chavali are parties to a letter agreement dated May 23, 2022 and amended December 9, 2022. The letter agreement provides that if Ms. Chavali’s employment is terminated by us without cause at any time, she will be entitled to receive severance equal to six months’ base salary paid as a lump sum and a bonus that will be based on the number of months of service during the fiscal year in which her employment was terminated and our actual performance against any established performance objectives under our annual cash incentive compensation plan.

  28. Compensation Governance Policies

    The guidelines were adopted in 2014. A covered individual has five years from the date he or she becomes subject to these guidelines (or any heightened ownership level under these guidelines) to achieve compliance with the applicable target value. Shares are counted toward the target value by including fully-vested outstanding shares of which the covered person is deemed to be the “beneficial owner” (pursuant to Section 16 under the Exchange Act) and by including shares subject to a stock option or stock appreciation right to the extent that the award is vested as to those shares and the award is “in-the-money” (i.e., the closing price of a share of the Company’s stock on the determination date exceeds the exercise price). Shares subject to a performance-based compensatory equity-based award of any kind that has not yet vested and shares subject to an RSU that has not yet vested are not counted. The value of the shareholdings of a covered individual is based on the greater of (i) the closing price of a share of the Company’s common stock as of the most recent fiscal year end, or (ii) the “acquisition value” of the shares (the purchase price, if acquired in a market or other arm’s-length transaction, or its fair market value at the time the receipt of the share was taxable or the share was received in a gift transaction). As of September 30, 2023, all non-employee directors and executive officers were either in compliance with the stock ownership guidelines or had made progress toward achieving the stock ownership guidelines within the five-year period before the guidelines become effective for them.

  29. Summary Compensation Table

    Summary Compensation Table The following summarizes the compensation for the fiscal years noted for the individuals who served at any time during our fiscal 2023 as Chief Executive Officer or Chief Financial Officer as well as our other three most highly compensated officers for fiscal 2023 (whom we have referred to in the CD&A and here as the “Named Executives”).

  30. Summary Compensation Table

    | Name and Principal Position | Fiscal Year | Salary(1) ($) | Stock Awards(2) ($) | Option Awards(3) ($) | Non-Equity Incentive Plan Compensation(4) ($) | All Other Compensation(5) ($) | Total ($) | | Ronald E. Konezny President and Chief Executive Officer | 2023 | 542,308 | 6,914,355 | — | 1,210,000 | 13,975 | 8,680,638 | | | 2022 | 515,385 | 843,607 | 584,911 | 1,100,000 | 12,975 | 3,056,878 | | | 2021 | 478,523 | 1,100,796 | 540,031 | 295,680 | 12,375 | 2,427,405 | | James J. Loch Executive Vice President, Chief Financial Officer and Treasurer | 2023 | 371,154 | 1,830,838 | — | 375,000 | 13,979 | 2,590,972 | | | 2022 | 358,654 | 332,789 | 324,954 | 350,000 | 13,879 | 1,380,276 | | | 2021 | 321,162 | 305,654 | 250,014 | 91,000 | 10,510 | 978,340 | | David H. Sampsell Executive Vice President of Corporate Development, General Counsel and Corporate Secretary | 2023 | 312,692 | 1,071,269 | — | 315,000 | 10,360 | 1,709,322 | | | 2022 | 308,654 | 153,595 | 149,984 | 300,000 | 8,976 | 921,209 | | | 2021 | 282,798 | 122,258 | 100,003 | 79,800 | 8,560 | 593,419 | | Terrence G. Schneider Senior Vice President, Supply Chain Management | 2023 | 272,692 | 379,846 | — | 220,000 | 9,582 | 882,120 | | | 2022 | 268,077 | 127,996 | 124,988 | 208,000 | 8,720 | 737,781 | | | 2021 | 246,954 | 122,258 | 100,003 | 56,000 | 8,418 | 533,633 | | Radha R. Chavali Senior Vice President, Chief Information Officer | 2023 | 312,000 | 345,298 | 162,296 | 249,600 | 9,600 | 1,078,794 | | | 2022 | 48,000 | — | — | 36,927 | — | 84,927 |

  31. Summary Compensation Table

    (1) The “Salary” column presents the pre tax base salary earned during the fiscal year. (2) The “Stock Awards” column presents the grant date fair value of RSUs granted in the respective fiscal year as computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation—Stock Compensation (“ASC 718”). Accordingly, the grant date fair value was determined by multiplying the number of RSUs by the closing stock price on the date of grant. For a description of the vesting terms of the stock awards, see the narrative disclosure under “Grants of Plan Based Awards” on page 29. (3) The “Option Awards” column presents the aggregate grant date fair value of stock option awards granted in the respective fiscal year as computed in accordance with ASC 718. The fair value of each stock option award is estimated on the date of grant using a Black Scholes option valuation model. We calculated these amounts based on the grant date fair value of the awards using the valuation assumptions set forth in Note 14 to our fiscal 2022 audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. (4) The “Non-Equity Incentive Plan Compensation” column presents cash bonuses earned under our annual cash incentive plans for fiscal 2023, 2022 and 2021. (5) Amounts shown in the “All Other Compensation” column for fiscal 2023 include:

  32. Summary Compensation Table

    | Name | Year | Digi Contribution to 401(k) Plan ($) | Value of Supplemental Life Insurance Premiums ($) | Severance ($) | Total ($) | | Ronald E. Konezny | 2023 | 13,200 | 775 | — | 13,975 | | James J. Loch | 2023 | 12,969 | 1,010 | — | 13,979 | | David H. Sampsell | 2023 | 9,692 | 668 | — | 10,360 | | Terrence G. Schneider | 2023 | 8,462 | 1,120 | — | 9,582 | | Radha R. Chavali | 2023 | 9,600 | — | — | 9,600 |

  33. Grants of Plan-Based Awards for Fiscal 2023

    Grants of Plan-Based Awards for Fiscal 2023 For services during fiscal 2023, the Named Executives received three types of plan-based awards: (1) cash-based awards under the annual incentive plan, (2) RSU awards granted on November 14, 2022 and/or November 29, 2022, and (3) PSU awards granted on November 29, 2022. Each stock option was scheduled to vest as to 25% of the shares subject to the option one year after the date of grant and in 36 monthly installments thereafter as to the rest of the shares, has a seven-year term, and has an exercise price equal to the closing price of a share of our common stock on the date of grant. Except as indicated in footnote 3 to the table below, each RSU vests in four substantially equal increments of 25% per year on the anniversary of the grant date. The annual cash incentive plan for fiscal 2023 is described beginning on page 20 and throughout the CD&A.

  34. Grants of Plan-Based Awards for Fiscal 2023

    | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise Price of Option Awards(4) ($/Sh) | Grant Date Fair Value of Option and Stock Awards(5) ($) | | Name | Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Target (#) | Maximum (#) | | | | | | Ronald E. Konezny | AIP | | 302,500 | 605,000 | 1,210,000 | | | | | | | | | RSU | 11/29/2022 | | | | | | 123,351 | | | 5,015,452 | | | PSU | 11/29/2022 | | | | 23,351 | 46,702 | | | | 1,898,903 | | James J. Loch | AIP | | 93,750 | 187,500 | 375,000 | | | | | | | | | RSU | 11/29/2022 | | | | | | 21,676 | | | 881,346 | | | PSU | 11/29/2022 | | | | 11,676 | 23,352 | | | | 949,492 | | David H. Sampsell | AIP | | 78,750 | 157,500 | 315,000 | | | | | | | | | RSU | 11/29/2022 | | | | | | 15,449 | | | 628,156 | | | PSU | 11/29/2022 | | | | 5,449 | 10,898 | | | | 443,113 | | Terrence G. Schneider | AIP | | 55,000 | 110,000 | 220,000 | | | | | | | | | RSU | 11/29/2022 | | | | | | 4,671 | | | 189,923 | | | PSU | 11/29/2022 | | | | 4,671 | 4,671 | | | | 189,923 | | Radha R. Chavali | AIP | | 62,400 | 124,800 | 249,600 | | | | | | | | | NQSO | 11/14/2022 | | | | | | | 8,041(6) | 41.130 | 162,509 | | | RSU | 11/14/2022 | | | | | | 5,313 | | | 218,683 | | | RSU | 11/29/2022 | | | | | | 1,557 | | | 63,308 | | | PSU | 11/29/2022 | | | | 1,557 | 1,557 | | | | 63,308 |

  35. Grants of Plan-Based Awards for Fiscal 2023

    AIP=Annual incentive plan for fiscal 2023 NQSO=Non-qualified stock option RSU=Restricted stock unit award PSU=Performance stock unit award. (1) These columns present possible payments under the annual cash incentive plan for fiscal 2023. See the Summary Compensation Table for fiscal 2023 (under the column “Non Equity Incentive Plan Compensation”) for the actual amount paid to each Named Executive under the annual cash incentive plan. Threshold refers to the minimum amount payable upon achievement of the minimum performance levels required to earn any payment. Target refers to the amount payable if specified targets were reached. Maximum refers to the maximum payout possible under the plan. (2) These columns present potential issuances of shares of common stock in settlement of performance stock unit awards granted under the 2021 Plan in fiscal 2023 and having a three-year performance period spanning fiscal 2023, fiscal 2024, and fiscal 2025. The number of shares to be issued is based on the degree to which we achieved specified ARR for each covered fiscal year. See “Equity Incentive Compensation” in the CD&A for the performance goals. (3) Scheduled to vest as to 25% of the shares on the first anniversary of the date of grant and each anniversary thereafter unless earlier accelerated or terminated pursuant to their terms. The RSUs are subject to accelerated vesting if the award is not assumed or replaced in connection with a change in control, or if the award is so assumed or replaced, if the Named Executive’s employment is terminated without cause by the successor or for good reason by the Named Executive within 12 months following a change in control. Certain supplemental awards of RSUs to Messrs. Konezny, Loch and Sampsell are scheduled to vest in full on the three-year anniversary of the dates of grant for Messrs. Loch and Sampsell with Mr. Konezny’s grant award to vest over a three-year period, starting with the three-year anniversary of the date of grant and completing at the five-year anniversary. (4) The exercise price for the options granted is the closing price of our common stock on the Nasdaq Global Select Market on the date of grant. (5) This column shows the full grant date fair value under authoritative guidance issued by ASC 718 of the stock options, RSUs and PSUs on the date of grant. Scheduled to vest as to 25% of the shares on the first anniversary of the date of grant and thereafter in 36 monthly installments unless earlier accelerated or terminated pursuant to their terms.

  36. Outstanding Equity Awards at Fiscal 2023 Year-End

    Outstanding Equity Awards at Fiscal 2023 Year-End The table below provides information on each Named Executive’s outstanding equity awards as of September 30, 2023. The equity awards consist of stock options, RSUs and PSUs. The market value of each RSU and PSU that had not vested equaled $27.00, which was the closing price of our common stock on September 29, 2023 (the last trading day of the fiscal year).

  37. Outstanding Equity Awards at Fiscal 2023 Year-End

    | | | Option Awards(1) | | | | Stock Awards(2)(3) | | | | | | | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Units of Stock That Have Not Vested (#) | Market Value of Units That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Units That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Units That Have Not Vested ($) | | Ronald E. Konezny | 11/29/2022 | | | | | 123,351 | 3,330,477 | | | | | 11/29/2022 | | | | | | | 46,702 | 1,260,954 | | | 5/9/2022 | | | | | | | 10,305 | 278,235 | | | 11/30/2021 | 27,800 | 32,854 | 21.53 | 11/30/2028 | | | | | | | 11/30/2021 | | | | | 20,866 | 563,382 | | | | | 2/8/2021 | | | | | | | 11,678 | 315,306 | | | 11/24/2020 | 54,248 | 22,337 | 16.75 | 11/24/2027 | | | | | | | 11/24/2020 | | | | | 19,708 | 532,116 | | | | | 2/4/2020 | | | | | 25,000 | 675,000 | | | | | 11/27/2019 | 127,778 | 5,555 | 17.94 | 11/27/2026 | | | | | | | 11/27/2019 | | | | | 11,538 | 311,526 | | | | | 11/20/2018 | 125,000 | — | 11.87 | 11/20/2025 | | | | | | James J. Loch | 11/29/2022 | | | | | 21,676 | 585,252 | | | | | 11/29/2022 | | | | | | | 23,352 | 630,504 | | | 11/30/2021 | 15,445 | 18,252 | 21.53 | 11/30/2028 | | | | | | | 11/30/2021 | | | | | 11,592 | 312,984 | | | | | 11/24/2020 | 25,115 | 10,341 | 16.75 | 11/24/2027 | | | | | | | 11/24/2020 | | | | | 9,124 | 246,348 | | | | | 11/27/2019 | 37,269 | 1,620 | 17.94 | 11/27/2026 | | | | | | | 11/27/2019 | | | | | 3,365 | 90,855 | | | | | 8/13/2019 | 100,000 | — | 13.76 | 8/13/2026 | | | | | | David H. Sampsell | 11/29/2022 | | | | | 15,449 | 417,123 | | | | | 11/29/2022 | | | | | | | 10,898 | 294,246 | | | 11/30/2021 | | | | | 5,350 | 144,450 | | | | | 11/30/2021 | 648 | 8,424 | 21.53 | 11/30/2028 | | | | | | | 11/24/2020 | 591 | 4,136 | 16.75 | 11/24/2027 | | | | | | | 11/24/2020 | | | | | 3,649 | 98,523 | | | | | 11/27/2019 | 21,296 | 926 | 17.94 | 11/27/2026 | | | | | | | 11/27/2019 | | | | | 1,923 | 51,921 | | | | | 11/20/2018 | 18,750 | — | 11.87 | 11/20/2025 | | | | | | Terrence G. Schneider | 11/29/2022 | | | | | 4,671 | 126,117 | | | | | 11/29/2022 | | | | | | | 4,671 | 126,117 | | | 11/30/2021 | 5,941 | 7,020 | 21.53 | 11/30/2028 | | | | | | | 11/30/2021 | | | | | 4,458 | 120,366 | | | | | 11/24/2020 | 10,046 | 4,136 | 16.75 | 11/24/2027 | | | | | | | 11/24/2020 | | | | | 3,649 | 98,523 | | | | | 11/27/2019 | 15,973 | 694 | 17.94 | 11/27/2026 | | | | | | | 11/27/2019 | | | | | 1,442 | 38,934 | | | | | 11/20/2018 | 12,500 | — | 11.23 | 11/20/2025 | | | | | | Radha R. Chavali | 11/29/2022 | | | | | 5,313 | 143,451 | | | | | 11/29/2022 | | | | | | | 1,557 | 42,039 | | | 11/14/2022 | | | | | 3,114 | 84,078 | | | | | 11/14/2022 | — | — | 41.16 | 11/30/2028 | | | | |

  38. Outstanding Equity Awards at Fiscal 2023 Year-End

    (1) Unless otherwise noted, all options are scheduled to vest as of 25% of the shares on the first anniversary of the date of grant and thereafter in 36 monthly installments unless earlier accelerated or terminated pursuant to their terms. (2) Unless otherwise noted, all RSUs are scheduled to vest as to 25% of the shares on the first anniversary of the date of grant and each anniversary thereafter unless earlier accelerated or terminated pursuant to their terms. Unless otherwise noted, all PSUs without an overachievement feature are scheduled to vest in equal installments on each of the first, second and third anniversaries of the date of grant, and PSUs with an overachievement feature are scheduled to vest at rates determined at the end of the third anniversary of the date of grant.

  39. Options Exercised and Stock Vested During Fiscal 2023

    Options Exercised and Stock Vested During Fiscal 2023 The table below provides information regarding stock option exercises, RSUs and PSUs vested by the Named Executives during the fiscal year ended September 30, 2023. None of the Named Executives had any other form of stock award that vested.

  40. Options Exercised and Stock Vested During Fiscal 2023

    | | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | | Ronald E. Konezny | — | — | 69,217 | 2,720,124 | | James J. Loch | — | — | 25,207 | 905,866 | | David H. Sampsell | 23,054 | 345,743 | 7,165 | — | | Terrence G. Schneider | 12,500 | 288,188 | 5,842 | 244,915 | | Radha Chavali | — | — | — | — |

  41. Options Exercised and Stock Vested During Fiscal 2023

    (1) Represents the difference between the market value of the shares acquired upon exercise and the aggregate exercise price of the shares acquired. (2) Represents the number of shares vested multiplied by the market value of the shares on either (i) the date they were vested or (ii) if the Compensation Committee must certify the number of shares earned, the date such certification occurs.

  42. Potential Payments Upon Termination or Change in Control

    Potential Payments Upon Termination or Change in Control As described above in the CD&A, we have entered into employment agreements and letter agreements with our Named Executives providing for severance benefits. In addition, in certain circumstances, we may enter into separate transition or severance agreements with Named Executives to facilitate the orderly transition of their responsibilities upon their departure from the Company in a manner that is least disruptive to our organization. When entering into these agreements, the Committee considers market terms for these benefits, although the actual agreements are individually negotiated based on the circumstances of the executive being employed or retained. We have not entered into any new arrangements in fiscal 2023 with any of our Named Executives. The table that follows provides the estimated additional payments and benefits that would be provided to our Named Executives or their beneficiaries under the employment agreements and equity compensation plans described above under various scenarios involving a termination of employment and/or a change in control, and assuming that the event(s) occurred on September 30, 2023. For these purposes, “cause” generally refers to acts by an executive that result in a felony conviction, willful non-performance of material employment duties, or willfully engaging in fraud or gross misconduct that is materially detrimental to our financial interests.

  43. Potential Payments Upon Termination or Change in Control

    | Compensation Element | Involuntary Termination Without Cause ($) | Death or Disability (Single Trigger) ($) | Change in Control (Double Trigger)(1) ($) | | Severance(2) | | | | | Ronald E. Konezny | 550,000 | — | 550,000 | | James J. Loch | 375,000 | — | 375,000 | | David H. Sampsell | 157,500 | — | 157,500 | | Terrence G. Schneider | 137,500 | — | 137,500 | | Radha R. Chavali | 156,000 | — | 156,000 | | Medical Benefit Continuation | | | | | Ronald E. Konezny | 20,969 | — | 20,969 | | Pro Rata Bonus(3) | | | | | Ronald E. Konezny | 756,250 | — | 756,250 |

  44. Potential Payments Upon Termination or Change in Control

    | Compensation Element | Involuntary Termination Without Cause ($) | Death or Disability (Single Trigger) ($) | Change in Control (Double Trigger)(1) ($) | | James J. Loch | 234,375 | — | 234,375 | | David H. Sampsell | 196,875 | — | 196,875 | | Terrence G. Schneider | 137,500 | — | 137,500 | | Radha R. Chavali | 156,000 | — | 156,000 | | Accelerated Stock Options(4) | | | | | Ronald E. Konezny | — | 1,181,148 | 1,181,148 | | James J. Loch | — | 595,240 | 595,240 | | David H. Sampsell | — | 267,259 | 267,259 | | Terrence G. Schneider | — | 232,869 | 232,869 | | Radha R. Chavali | — | — | — | | Restricted Stock Units(5) | | | | | Ronald E. Konezny | — | — | 5,412,501 | | James J. Loch | — | — | 650,187 | | David H. Sampsell | — | — | 712,017 | | Terrence G. Schneider | — | — | 257,823 | | Radha R. Chavali | — | — | 294,894 | | Performance Stock Units(6) | | | | | Ronald E. Konezny | — | — | 1,854,495 | | James J. Loch | — | — | 630,504 | | David H. Sampsell | — | — | 126,117 | | Terrence G. Schneider | — | — | 294,246 | | Radha R. Chavali | — | — | 42,039 | | Total | | | | | Ronald E. Konezny | 1,327,219 | 1,181,148 | 9,775,363 | | James J. Loch | 609,375 | 595,240 | 2,485,306 | | David H. Sampsell | 1,110,625 | 232,259 | 891,809 | | Terrence G. Schneider | 275,000 | 267,259 | 2,384,147 | | Radha R. Chavali | 546,375 | — | 883,308 |

  45. Potential Payments Upon Termination or Change in Control

    Represents payments upon termination without cause or for good reason within 12 months following a change in control. (2) Severance arrangements generally provide Messrs. Konezny and Loch with one year of base salary and all others with six months of base salary. (3) Pro rata bonus is based on the number of months that the individual was employed during the year in which his employment was terminated and our actual performance against the annual objectives set by the Committee. For purposes of this presentation, since the assumed date of termination was September 30, 2023, the bonus amount shown for all executives is the actual cash incentive earned for all of fiscal 2023. (4) Amounts represent the intrinsic value of stock option awards as of September 30, 2023 for which the vesting was accelerated due to death or disability. The value entered is based on the difference between $27.00, the closing price of our Common Stock on September 29, 2023 (the last trading day of the fiscal year), and the option exercise price. (5) Amounts represent value of unvested RSUs using closing price of $27.00 of our Common Stock on September 29, 2023 (the last trading day of the fiscal year). Amounts represent value of unvested PSUs using closing price of $27.00 of our Common Stock on September 30, 2023 (the last trading day of the fiscal year).

  46. CEO Pay Ratio

    CEO Pay Ratio For fiscal 2023, the annual total compensation for our Chief Executive Officer was $8,680,638, as reflected in the Summary Compensation Table appearing on page 28 above. We estimate that the median employee’s annual total compensation was $117,140 for fiscal 2023. This comparison results in a CEO Pay Ratio of 74:1. This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K promulgated under the Exchange Act and as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. As of September 30, 2023, our employee population consisted of approximately 629 U.S. employees and 191 non-U.S. employees. As a result, our median employee was selected from an adjusted employee population of 819 employees (excluding our Chief Executive Officer). To identify a median employee among our adjusted employee population (excluding our Chief Executive Officer) employed on September 30, 2023, we used a compensation measure that included base pay received during fiscal 2023 (on an annualized basis for permanent employees employed for less than the full fiscal year) plus actual bonuses and commissions earned and the aggregate grant date fair value of equity-based awards determined in a manner consistent with the Summary Compensation Table. To improve comparability, we did not include overtime wages in our compensation measure. Using this compensation measure, we selected the individual at the median of our employee population and then determined that individual’s annual total compensation in accordance with Item 402(c)(2)(x) of Regulation S-K as shown above.

  47. PAY VERSUS PERFORMANCE

    PAY VERSUS PERFORMANCE The following table sets forth additional compensation information of our PEO and our other NEOs (averaged) along with TSR, Net Income and Adjusted EBITDA during each of fiscal 2021, fiscal 2022 and fiscal 2023. This information is disclosed per the requirements of Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K.

  48. PAY VERSUS PERFORMANCE

    | | Summary Compensation Table Total for PEO(1)(2) ($) | Compensation Actually Paid to PEO(1)(2) ($) | Average Summary Compensation Table for Other NEOs(1)(2) ($) | Average Compensation Actually Paid to Other NEOs(1)(2) ($) | Value of Initial Fixed $100 Investment Based On: | | | | | | | | | | Total Shareholder Return(4) ($) | Peer Group Total Shareholder Return(4)(5) ($) | Net Income ($) | Adjusted EBITDA(3) ($) | | 2023 | 8,680,638 | 5,157,171 | 1,565,302 | 910,236 | 173 | 95 | 24,770,000 | 96,500,000 | | 2022 | 3,056,878 | 7,194,627 | 555,704 | 890,973 | 221 | 80 | 19,383,000 | 79,415,000 | | 2021 | 2,427,405 | 4,322,591 | 765,929 | 1,010,845 | 134 | 110 | 10,366,000 | 48,261,000 |

  49. PAY VERSUS PERFORMANCE

    (1) Our PEO and Other NEOs for each reported fiscal year were:

  50. PAY VERSUS PERFORMANCE

    | Year | PEO | Other NEOs | | 2023 | Ronald E. Konezny | James J. Loch, David H. Sampsell, Terrence G. Schneider, and Radha R. Chavali | | 2022 | Ronald E. Konezny | James J. Loch, David H. Sampsell, Terrence G. Schneider, Radha R. Chavali, Tracy L. Roberts, and Kevin C. Riley | | 2021 | Ronald E. Konezny | James J. Loch, David H. Sampsell, Tracy L. Roberts, Kevin C. Riley, and Michael A. Ueland |

  51. PAY VERSUS PERFORMANCE

    (2) SEC rules require certain adjustments be made to the Summary Compensation Table (“SCT”) totals to determine “compensation actually paid” (“CAP”) as reported in the Pay Versus Performance table. CAP does not necessarily represent cash and/or equity value transferred to the applicable NEO without restriction, but rather is a value calculated under applicable SEC rules. A reconciliation of the SCT totals to CAP to our PEO and our Other NEOs (as an average) is shown below:

  52. PAY VERSUS PERFORMANCE

    | | 2023 | | 2022 | | 2021 | | | Adjustments(A) | PEO ($) | Average of Other NEOs ($) | PEO ($) | Average of Other NEOs ($) | PEO ($) | Average of Other NEOs ($) | | Total Compensation from SCT | 8,680,638 | 1,565,302 | 3,056,878 | 555,704 | 2,427,405 | 765,929 | | Adjustments for stock and option awards: | | | | | | | | Subtract SCT amounts of stock and option awards | (6,914,355) | (947,441) | (1,428,595) | (236,131) | (1,640,833) | (333,403) | | Add fair value at year-end of awards granted during the covered fiscal year that are outstanding and unvested at year-end | 4,591,431 | 621,982 | 2,701,902 | 453,599 | 2,022,626 | 459,553 | | +/- The difference between fair value of awards from the end of the prior fiscal year to the end of the covered fiscal year for awards granted in any prior fiscal year that are outstanding and unvested at the end of the covered fiscal year | (1,203,605) | (187,270) | 2,990,479 | 331,887 | 1,231,195 | 216,009 | | +/- The change in fair value from the end of the prior fiscal year to the vesting date for awards granted in any prior fiscal year which vested during the covered fiscal year | 3,062 | (142,337) | (126,037) | (22,899) | 282,198 | 24,813 | | Subtract fair value at end of prior fiscal year for awards granted in any prior fiscal year that fail to meet the applicable vesting conditions during the covered fiscal year | — | — | — | (191,187) | — | (122,056) | | Compensation Actually Paid (as calculated) | 5,157,171 | 910,236 | 7,194,627 | 890,973 | 4,322,591 | 1,010,845 |

  53. PAY VERSUS PERFORMANCE

    (A) Rows reporting the following adjustments were omitted from this table because they were not applicable: (i) aggregate change in the actuarial present value of accumulated benefits under all defined benefit and pension plans reported in the SCT; (ii) service cost; (iii) prior service cost; and (iv) dividends or other earnings paid on stock or option awards in the covered fiscal year prior to vesting if not otherwise included in the fair value of the award or the SCT total compensation for the covered fiscal year. Total shareholder return is calculated based on a fixed investment of one hundred dollars measured from the market close on September 30, 2020 (the last trading day of fiscal 2020) through and including the end of each fiscal year reported in the table. (4) Our peer group used for the TSR calculation is the Nasdaq Telecommunications Index, which is the same “peer index” used in the performance graph appearing in our annual report on Form 10-K. (5) Our company-selected measure, which is the measure we believe represents the most important financial performance not otherwise presented in the table above that we use to link CAP to our NEOs for fiscal 2023 to our Company’s performance, is Adjusted EBITDA. Adjusted EBITDA is EBITDA adjusted for stock-based compensation expense, acquisition-related expenses, restructuring charges and reversals and changes in fair value of contingent consideration is useful to investors to evaluate our core operating results and financial performance because it excludes items that are significant non-cash or non-recurring expenses reflected in the consolidated statements of operation.

  54. COMPENSATION OF DIRECTORS

    COMPENSATION OF DIRECTORS The fiscal 2023 director compensation program provided non-employee directors with a combination of cash and RSUs that resulted in an annual aggregate value ranging from approximately $181,000 to $226,000 per director depending on committee service in fiscal 2023. The Compensation Committee conducts periodic competitive reviews of the compensation plan for non-employee directors. For fiscal 2023, the Committee reviewed a competitive analysis of director compensation as compared to our Peer Group. This analysis provided details on total compensation levels and committee service fees for directors in our Peer Group as well as the allocation of compensation between cash and equity. Our director compensation program was determined to be in the 25th through 50th percentile relative to the Peer Group. In response, cash retainers for service as a non-employee board member as well as for service as Audit Committee Chair, Compensation Committee Chair, Audit Committee Member and Compensation Committee Member were increased. The director compensation plan continues to provide an annual equity award, in the form of RSUs, with a target value of $120,000. This award is approved at the regularly scheduled meeting of the Compensation Committee immediately prior to the annual meeting of stockholders and granted after the public announcement of first fiscal quarter financial results. These RSUs are scheduled to vest in full on the date immediately preceding our next annual meeting of stockholders, which is historically approximately one year after the date of grant. In addition, a newly elected director is expected to be awarded a one-time RSU award valued at $125,000 in connection with their appointment or initial election. These RSUs vest 50% after one year and 100% after two years from date of award. The following table describes compensation arrangements with our non-employee directors effective for fiscal 2023:

  55. COMPENSATION OF DIRECTORS

    | Compensation Element | Amount Payable | | Annual Cash Retainers(1) | | | •Board Member | $50,000 | | •Audit Committee Chair | $20,000 | | •Compensation Committee Chair | $15,000 | | •Nominating & Governance Committee Chair | $10,000 | | •Non-Executive Chairperson | $40,000 | | •Audit Committee Member | $10,000 | | •Compensation Committee Member | $6,000 | | •Nominating & Governance Committee Member | $5,000 | | Annual Equity Award(2)(3) | $120,000 | | New Director Equity Award(3) | $125,000 |

  56. COMPENSATION OF DIRECTORS

    (1) Retainers are paid in quarterly installments each representing 25% of total annual retainer amount. (2) An annual RSU equity award is provided to each non-employee director on or near the date of the annual meeting of stockholders and each such award becomes fully vested after one year. The amount of the annual equity award indicated in the table represents the target valuation of the equity award. For fiscal 2023, the actual number of shares underlying the RSUs awarded was determined by dividing the targeted RSU award value by $36.43, which represented the average closing price of our common stock during the six months preceding February 6, 2023, the date the awards were granted.

  57. Director Compensation for Fiscal 2023

    Director Compensation for Fiscal 2023 The table below summarizes compensation provided to non-employee directors for services provided during fiscal 2023.

  58. Director Compensation for Fiscal 2023

    | Name | Fees Earned or Paid in Cash ($) | Stock Awards(1)(2) ($) | Total ($) | | Christopher D. Heim | 76,666 | 118,057 | 194,723 | | Satbir Khanuja, Ph.D. | 105,001 | 118,057 | 223,058 | | Spiro C. Lazarakis | 74,000 | 118,057 | 192,057 | | Hatem Naguib | 60,083 | 118,057 | 178,140 | | Sally J. Smith | 69,083 | 118,057 | 187,140 |

  59. Director Compensation for Fiscal 2023

    (1) The “Stock Awards” column presents the aggregate grant date fair value of RSUs granted to each non-employee director during fiscal 2023 as computed in accordance with ASC 718. The fair value of each RSU was considered to be the closing price of the Company’s common stock on the date the RSU was granted. (2) Information regarding the RSUs granted to the non-employee directors during fiscal 2023 and their aggregate stock options and RSUs outstanding at September 30, 2023, is contained in the following table:

  60. Director Compensation for Fiscal 2023

    | Name | Grant Date | Number of RSUs Awarded (#) | Grant Date Fair Value of RSUs(A) ($) | Total Number of RSUs Outstanding (#) | | Christopher D. Heim | 2/6/2023 | 3,294 | 118,057 | 3,294 | | Satbir Khanuja, Ph.D. | 2/6/2023 | 3,294 | 118,057 | 3,294 | | Spiro C. Lazarakis | 2/6/2023 | 3,294 | 118,057 | 3,294 | | Hatem Naguib | 2/6/2023 | 3,294 | 118,057 | 3,294 | | Sally J. Smith | 2/6/2023 | 3,294 | 118,057 | 3,294 |

  61. Director Compensation for Fiscal 2023

    (A) This column shows full grant date fair value under authoritative guidance issued by ASC 718 of the RSUs granted to non-employee directors in fiscal 2023.