Acquisitions

6 Months Ended

Mar. 31, 2022

Acquisition of Ventus

On November 1, 2021, we acquired Ventus Networks, LLC ("Ventus") for approximately $350 million in cash. The acquisition was funded through a combination of cash on hand and debt financing under a $350 million credit facility committed by BMO Harris Bank N.A.

For tax purposes, this acquisition is treated as an asset acquisition. We believe this is a complementary acquisition for us as it significantly enhances our IoT Solutions segment by enhancing Digi's service portfolio and immediately extends the company's market reach with a Managed Network-as-a-Service ("MNaaS") solutions offering.

Costs directly related to the acquisition of $4.0 million incurred fiscal year to date 2022 have been charged to operations and are included in general and administrative expense in our condensed consolidated statements of operations. These acquisition costs include legal, accounting, valuation and investment banking fees.

The following table summarizes the preliminary fair values of Ventus assets acquired and liabilities assumed as of the acquisition date (in thousands).


Cash	$	350,000

Fair value of net tangible assets acquired	$	22,110
Identifiable intangible assets:
Customer relationships	179,000
Purchased and core technology	16,000
Trademarks	16,000

Goodwill	116,890
Total	$	350,000

The condensed consolidated balance sheet as of March 31, 2022 reflects the preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The estimated fair value of the net assets acquired, liabilities assumed and identifiable intangible assets are preliminary and remain subject to change, as preliminary purchase price allocation has not yet been completed. Included in the fair value of net tangible assets acquired was $0.9 million of right-of-use asset included in other non-current assets and $0.9 million of lease liability included in other current liabilities and other non-current liabilities associated with Ventus’s operating leases.

The preliminary weighted average useful life for all the identifiable intangibles listed above is estimated to be 19.2 years. For purposes of determining fair value, the existing customer relationships identified above are assumed to have a useful life of 20.5 years, purchased and core technology is assumed to have useful life of 11 years and trademarks are assumed a useful life of 13 years. Useful lives for identifiable intangible assets are estimated at the time of acquisition based on the periods of time from which we expect to derive benefits from the identifiable intangible assets. The identifiable intangible assets are amortized using the straight-line method which reflects the pattern in which the assets are expected to be consumed.

The following consolidated pro forma information is presented as if the acquisition had occurred on October 1, 2020 (in thousands):


	Three months ended March 31,				Six months ended March 31,
	2022		2021		2022		2021
Net sales	$	94,713	$	90,363	$	184,035	$	175,351
Net income (loss)	2,578		2,058		(1,075)		(5,725)

Pro forma net income has been adjusted to include interest expense related to debt incurred as a result of the acquisition, amortization on the fair value of the intangibles acquired and remove any costs incurred with the sale transaction. Net income for the six months ended March 31, 2021 was adjusted to include acquisition-related costs of $3.1 million.