Revenue and Growth - Revenue increased by $49.7 million (19.3%) in 2023 compared to 2022, driven by higher endpoint IC and systems revenue[244][245] - Revenue for 2023 increased to $307.5 million, up 19.3% from $257.8 million in 2022[352] - Total revenue for 2023 was $307.5 million, with endpoint ICs contributing $234.4 million and systems contributing $73.1 million[501] - Geographic revenue for 2023 was $96.4 million in the Americas, $176.4 million in Asia Pacific, and $34.7 million in Europe, Middle East, and Africa[502] - Revenue in the United States for 2023 was $86.2 million, while revenue in China (including Hong Kong) was $128.3 million[502] - Endpoint IC revenue increased by $42.9 million in 2023, primarily due to higher shipment volumes, offset by a $26.0 million decrease in ASP[248] - Systems revenue increased by $6.8 million in 2023, with test and measurement solutions and gateway revenue increasing by $8.1 million and $5.5 million respectively[249] - Endpoint IC sales volumes increased at a compounded annual growth rate of 26% from 2010 to 2023, despite periodic declines[238] - The company recognized $2.2 million in revenue during 2023 that was included in deferred revenue as of December 31, 2022[499] Gross Profit and Margins - Gross margin decreased by 4.1% in 2023, primarily due to lower product margins and higher excess and obsolescence charges[244][245] - Gross profit for 2023 was $152.0 million, a 10.2% increase from $137.9 million in 2022[352] - Sales of fully reserved inventory had a favorable net impact of 1.5% on the 2021 gross margin[382] Operating Expenses and Losses - Loss from operations increased by $24.0 million in 2023, driven by higher operating expenses partially offset by increased gross profit[244][245] - Net loss for 2023 was $43.4 million, compared to a net loss of $24.3 million in 2022[352] - Net loss for 2023 was $43.366 million, compared to $24.301 million in 2022 and $51.260 million in 2021[361] - U.S. loss before income taxes increased to $40.3 million in 2023 from $24.5 million in 2022, while foreign loss before income taxes was $3.3 million in 2023 compared to a gain of $0.4 million in 2022[433] - Net loss for 2023 was $43.4 million, with a net loss per share of $1.62[503] Research and Development - Research and development expenses increased by $10.0 million in 2022, primarily due to higher personnel and infrastructure costs[257] - Research and development expenses increased to $88.6 million in 2023, up 19.5% from $74.1 million in 2022[352] - Research and development expenses primarily include personnel costs, stock-based compensation, and external consulting services[403] Acquisitions and Intangibles - The company acquired Voyantic Oy in April 2023, leading to a $4.9 million increase in amortization of intangibles[264] - Goodwill increased substantially to $19.7 million in 2023 from $3.9 million in 2022[350] - Goodwill increased from $3.88 million in 2022 to $19.70 million in 2023, primarily due to additions from acquisition of $15.59 million[429] - Intangible assets totaled $13.91 million in 2023, with developed technology accounting for $11.68 million[429] - Amortization expense of intangible assets was $5.0 million for the year ended December 31, 2023[429] - Estimated intangible asset amortization expense for the next five years totals $13.91 million, with $2.96 million expected in 2024[431] - Transaction-related costs for the acquisition were $1.7 million, with an additional $1.6 million recorded for revaluation of contingent consideration[427] - The company uses the acquisition method for business combinations, allocating purchase price to assets and liabilities at fair value, with excess recorded as goodwill[385] - Goodwill impairment is assessed annually in the fourth quarter or when events indicate potential impairment[387] Cash and Investments - Cash and cash equivalents increased significantly to $94.8 million in 2023 from $19.6 million in 2022[350] - The company had $113.2 million in cash, cash equivalents, and short-term investments as of December 31, 2023, with working capital of $238.8 million[281] - The company believes its current cash and investments will be sufficient to meet cash needs for at least the next 12 months[283] - Cash equivalents increased significantly from $14.62 million in 2022 to $78.66 million in 2023, primarily due to money market funds[418] - Short-term investments decreased from $154.14 million in 2022 to $18.44 million in 2023, with U.S. government agency securities dropping from $78.62 million to $11.89 million[418] - Long-term investments remained stable at $19.20 million in 2022 and $0 in 2023[418] - Net cash used in operating activities was $49.382 million in 2023, compared to $641 million provided in 2022[361] - Net cash provided by investing activities was $115.808 million in 2023, compared to $102.799 million used in 2022[361] - Cash and cash equivalents at the end of 2023 were $94.793 million, up from $19.597 million at the end of 2022[361] Inventory and Assets - Inventory nearly doubled to $97.2 million in 2023 from $46.4 million in 2022[350] - Inventory more than doubled from $46.40 million in 2022 to $97.17 million in 2023, with work-in-process increasing from $14.53 million to $42.22 million[423] - Total assets increased slightly to $359.4 million in 2023 from $349.7 million in 2022[350] - Property and equipment increased from $39.03 million in 2022 to $44.89 million in 2023, with machinery and equipment rising from $48.42 million to $57.51 million[424] - The company is committed to purchasing $21.8 million of inventory from third-party manufacturers as of December 31, 2023[496] Liabilities and Equity - Total liabilities decreased to $325.3 million in 2023 from $334.1 million in 2022[350] - Stockholders' equity improved to $34.1 million in 2023 from $15.6 million in 2022[350] - The outstanding principal amount of the 2021 Notes is $287.5 million, with a net carrying amount of $281.9 million as of December 31, 2023[444] - The company may redeem the 2021 Notes for cash on or after November 20, 2024, if certain conditions are met[447] - The company repurchased $76.4 million and $9.9 million principal amount of the 2019 Convertible Senior Notes in November 2021 and June 2022, respectively, paying a total of $183.6 million and $17.6 million in cash, including accrued interest[459] Stock-Based Compensation - Stock-based compensation rose to $47.986 million in 2023, compared to $42.443 million in 2022[361] - Total stock-based compensation expense for 2023 was $47.986 million, with $21.307 million allocated to research and development, $10.240 million to sales and marketing, and $14.570 million to general and administrative expenses[462] - As of December 31, 2023, the company had 1,466,000 stock options outstanding with a weighted-average exercise price of $25.48 per share and a total intrinsic value of $94.650 million[466] - The total intrinsic value of options exercised in 2023 was $19.1 million, with a grant date fair value of $3.3 million for vested options[468] - The company granted 441,000 Restricted Stock Units (RSUs) in 2023 with a weighted-average grant date fair value of $119.12 per share[469] - The fair market value of RSUs vested in 2023 was $64.417 million, while MSUs and PSUs vested had fair market values of $7.219 million and $7.261 million, respectively[471] - Total unrecognized stock-based compensation cost related to unvested RSUs as of December 31, 2023, was $78.4 million, expected to be recognized over 2.4 years[471] - 60,000 stock options were granted to Cathal Phelan on September 21, 2020, with 1/24th vesting monthly starting October 21, 2020[504] - 8,000 RSUs were granted to Cathal Phelan on October 1, 2022, with ¼th vesting quarterly starting January 1, 2023[504] Taxes - Income tax expense decreased by $0.5 million in 2023, resulting in a tax benefit due to the acquisition of Voyantic Oy[272] - Total income tax expense for 2023 was $0.3 million, compared to a benefit of $0.2 million in 2022 and $0.2 million in 2021[433] - The effective income tax rate for 2023 was 0.7%, compared to -0.8% in 2022 and -0.3% in 2021[434] - Deferred tax assets increased to $117.2 million in 2023 from $99.1 million in 2022, with a valuation allowance of $114.0 million in 2023[436] - The company acquired Voyantic Oy in April 2023, resulting in a $3.7 million deferred tax liability associated with intangibles[437] - Accumulated federal tax losses were $230.5 million as of December 31, 2023, with $141.9 million having an indefinite life[438] - The company recorded a deferred tax asset of $32.9 million as of December 31, 2023, due to the capitalization of Section 174 costs[439] - Unrecognized tax benefits increased to $7.6 million as of December 31, 2023, from $5.6 million in 2022[442] - The company uses a two-step approach for evaluating uncertain tax positions, assessing recognition and measurement based on likely settlement outcomes[406] Legal and Patent Matters - The jury awarded the company $18.2 million and $18.4 million in damages for infringement of the '302 and '597 patents, respectively[483] - The company filed a patent infringement lawsuit against NXP in Texas, seeking damages and an injunction against NXP's UCODE 7, 8, and 9 endpoint ICs[489][490] - A patent related to endpoint IC products was acquired for $0.3 million on June 23, 2023, expiring on July 17, 2026[505] Other Income and Expenses - Other income, net, increased by $2.1 million in 2023, driven by higher interest rates on short-term investments[266] - Induced conversion expense decreased by $2.2 million in 2023 compared to 2022, and by $9.1 million in 2022 compared to 2021[268] - Interest expense remained comparable in 2023 vs 2022, but increased by $2.4 million in 2022 vs 2021 due to the issuance of $287.5 million in 2021 Notes[269][271] - Adjusted EBITDA for 2023 was $21.8 million, a decrease of $7.1 million compared to 2022, and an increase of $19.8 million compared to 2021[276] - Non-GAAP net income for 2023 was $19.8 million, a decrease of $4.0 million compared to 2022, and an increase of $18.2 million compared to 2021[280] - Depreciation and amortization expenses increased to $13.623 million in 2023, up from $6.044 million in 2022[361] - Allowance for sales returns and price exceptions increased to $677,000 at the end of 2023, up from $605,000 in 2022[379] - Cloud computing arrangement costs were $0.4 million in prepaid expenses and $1.4 million in other non-current assets as of December 31, 2023[384] - Amortization expense for cloud computing arrangements was $0.5 million in 2023, $0.4 million in 2022, and $0.2 million in 2021[384] - Matching contributions to the 401(k) plan were $1.8 million in 2023 and $1.4 million in 2022[506] Leases and Commitments - The company has noncancellable operating lease agreements in multiple countries with expiration dates from 2024 to 2029[401] - Operating lease costs for 2023 totaled $4.601 million, including $3.486 million in single lease costs and $1.280 million in variable lease costs[475] - Cash paid for operating lease liabilities in 2023 was $4.233 million, with a weighted-average remaining lease term of 3.7 years and a discount rate of 6.9%[476] - Total lease payments for operating leases from 2024 to 2028 and thereafter amount to $14,416 thousand, with a present value of lease liabilities at $12,733 thousand[477] Strategic Restructuring - A strategic restructuring initiated on February 7, 2024, includes a reduction-in-force affecting approximately 10% of employees[509] - Reduction-in-force charges are expected to be between $1.7 million and $2.0 million, recognized in the first and second fiscal quarters of 2024[509] Revenue Concentration - Revenue concentration from Avery Dennison increased to 33% in 2023, up from 28% in 2021[368] - Accounts receivable concentration from Avery Dennison rose to 39% in 2023, compared to 24% in 2022[368] Miscellaneous - The company experienced wafer shortfalls in 2021 and 2022, leading to unmet customer demand and order cancellations[236] - The company's investment portfolio is exposed to interest rate risk, but a 10% increase in rates is not expected to materially affect the portfolio's fair value[323] - The company does not believe inflation has had a material effect on its business, as it has offset higher costs with price increases[325] - Foreign currency exchange risk is minimal, but exposure may increase as the company expands its operations[326] - Revenue is recognized when control of goods or services is transferred, typically at shipment for hardware sales[391] - The company adopted ASU 2020-06 on January 1, 2021, resulting in a $29.3 million increase to long-term debt and a $32.7 million decrease to additional paid-in capital[413] - Consulting fees paid to a limited liability company owned by Cathal Phelan were $0.5 million for the years ended December 31, 2022 and 2021, with no fees recognized in 2023[504] - The company's deferred revenue balance at the end of 2023 was $1.985 million, down from $2.599 million at the beginning of the year[497]

Impinj, Inc. (NASDAQ:PI) Q3 2023 Earnings Call October 25, 2023 5:00 PM ET Company Participants Andy Cobb - Vice President, Strategic Finance Chris Diorio - Co-Founder and Chief Executive Officer Cary Baker - Chief Financial Officer Jeff Dossett - Chief Revenue Officer Conference Call Participants Harsh Kumar - Piper Sandler Toshiya Hari - Goldman Sachs Jim Ricchiuti - Needham and Company T. Michael Walkley - Canaccord Genuity Scott Searle - ROTH MKM Natalia Winkler - Jefferies Operator Welcome to the Impin ...

Impin IMPINJ 6 • Unique ID: for pennies per tag • Worldwide: spectrum, standards & ecosystem Market Opportunity | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |-------|-----------------------------------------------|-------|-------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------|-------|-------|-------|--------------------------------------------------------------------------- ...

[Risk Factor Summary](index=3&type=section&id=Risk%20Factor%20Summary) Impinj faces intense competition, uncertain RAIN RFID adoption, supply chain reliance, IP disputes, and a history of losses - Operates in a very competitive market, with RAIN RFID adoption concentrated in key industries and uncertain beyond[8](index=8&type=chunk) - Reliance on limited third-party suppliers and potential for silicon/component shortages[8](index=8&type=chunk) - History of losses and intermittent profitability, with significant fluctuations in quarterly and annual operating results[8](index=8&type=chunk) - Executive officers, directors, and principal stockholders beneficially owned approximately **54.6%** of outstanding common stock as of September 30, 2023, enabling significant influence[8](index=8&type=chunk) - Potential inability to satisfy obligations under the **$287.5 million** aggregate principal amount **1.125%** convertible senior notes due 2027[8](index=8&type=chunk) [PART I. — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, and equity changes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Item | Sep 30, 2023 | Dec 31, 2022 | | :--------------------------------- | :----------- | :----------- | | **Assets:** | | | | Cash and cash equivalents | $78,100 | $19,597 | | Short-term investments | $35,129 | $154,148 | | Inventory | $106,806 | $46,397 | | Total current assets | $272,963 | $275,170 | | Goodwill | $19,049 | $3,881 | | Total assets | $363,601 | $349,737 | | **Liabilities:** | | | | Total current liabilities | $33,758 | $42,369 | | Long-term debt | $281,449 | $280,244 | | Total liabilities | $328,801 | $334,146 | | **Stockholders' Equity:** | | | | Total stockholders' equity | $34,800 | $15,591 | - Total assets increased by **$13.9 million** from December 31, 2022, to September 30, 2023, primarily driven by increases in cash and cash equivalents and inventory, partially offset by a decrease in short-term investments[10](index=10&type=chunk) - Total stockholders' equity significantly increased by **$19.2 million**, from **$15.6 million** to **$34.8 million**, over the nine-month period[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $65,005 | $68,270 | $236,888 | $181,210 | | Cost of revenue | $34,237 | $30,835 | $118,776 | $83,494 | | Gross profit | $30,768 | $37,435 | $118,112 | $97,716 | | Loss from operations | $(15,834) | $(1,744) | $(28,645) | $(19,535) | | Net loss | $(15,762) | $(2,199) | $(28,186) | $(24,183) | | Net loss per share — basic and diluted | $(0.59) | $(0.09) | $(1.06) | $(0.95) | - For the three months ended September 30, 2023, revenue decreased by **4.8%** year-over-year, and net loss significantly increased to **$15.8 million** from **$2.2 million**[12](index=12&type=chunk) - For the nine months ended September 30, 2023, revenue increased by **30.7%** year-over-year, but net loss also increased to **$28.2 million** from **$24.2 million**, driven by higher operating expenses[12](index=12&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(15,762) | $(2,199) | $(28,186) | $(24,183) | | Unrealized gain (loss) on investments | $223 | $(504) | $1,060 | $(1,691) | | Foreign currency translation adjustments | $(900) | $— | $(813) | $— | | Total other comprehensive gain (loss) | $(677) | $(504) | $247 | $(1,691) | | Comprehensive loss | $(16,439) | $(2,703) | $(27,939) | $(25,874) | - Comprehensive loss for the three months ended September 30, 2023, was **$16.4 million**, significantly higher than the **$2.7 million** loss in the prior year, primarily due to increased net loss and foreign currency translation adjustments[14](index=14&type=chunk) - For the nine months ended September 30, 2023, comprehensive loss was **$27.9 million**, with a positive total other comprehensive gain of **$0.2 million**, contrasting with a loss in the prior year[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Item | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $(50,809) | $6,813 | | Net cash provided by (used in) investing activities | $101,480 | $(86,304) | | Net cash provided by (used in) financing activities | $7,890 | $(5,102) | | Net increase (decrease) in cash and cash equivalents | $58,503 | $(84,593) | | Cash and cash equivalents, End of period | $78,100 | $39,310 | - Operating activities used **$50.8 million** in cash for the nine months ended September 30, 2023, a significant shift from generating **$6.8 million** in the prior year, primarily due to increased working capital usage for inventory[17](index=17&type=chunk)[152](index=152&type=chunk) - Investing activities generated **$101.5 million**, largely from investment maturities and sales, contrasting with a usage of **$86.3 million** in the prior year[17](index=17&type=chunk)[154](index=154&type=chunk) - Financing activities generated **$7.9 million**, mainly from stock option exercises and the employee stock purchase plan[17](index=17&type=chunk)[156](index=156&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Item | Dec 31, 2022 | Sep 30, 2023 | | :--------------------------------- | :----------- | :----------- | | Total Stockholders' Equity | $15,591 | $34,800 | | **Key Changes (9M 2023):** | | | | Issuance of common stock | | $7,890 | | Stock-based compensation | | $35,679 | | Net loss | | $(28,186) | | Common stock issued for Voyantic acquisition | | $3,579 | - Total stockholders' equity increased from **$15.6 million** at December 31, 2022, to **$34.8 million** at September 30, 2023, primarily driven by **$47.1 million** in additional paid-in capital from stock issuances and stock-based compensation[18](index=18&type=chunk) - This increase was partially offset by a net loss of **$28.2 million** and other comprehensive losses during the nine-month period[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Summary of Significant Accounting Policies](index=9&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) - The condensed consolidated financial statements are prepared in conformity with U.S. GAAP and SEC interim reporting rules, with certain information and note disclosures condensed or omitted[21](index=21&type=chunk) - Business combinations, such as the acquisition of Voyantic Oy in April 2023, are accounted for using the acquisition method, involving fair value estimates for assets, liabilities, and contingent consideration[23](index=23&type=chunk)[24](index=24&type=chunk) - Goodwill is calculated as the excess of the purchase price over net assets acquired, and identifiable intangible assets with finite lives are amortized on a straight-line basis[25](index=25&type=chunk)[26](index=26&type=chunk) - Foreign currency translation adjustments for non-U.S. dollar functional currency subsidiaries are recognized in accumulated other comprehensive income (loss)[27](index=27&type=chunk) - Management's financial statements rely on estimates and assumptions, particularly for revenue recognition, inventory, income taxes, and fair value of stock awards[28](index=28&type=chunk) [Note 2. Fair Value Measurements](index=10&type=section&id=Note%202.%20Fair%20Value%20Measurements) - Assets and liabilities are measured at fair value using a three-level hierarchy: Level 1 for quoted prices in active markets (e.g., money market funds), Level 2 for observable market data (e.g., fixed income securities), and Level 3 for unobservable inputs (e.g., contingent consideration liability)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - The contingent consideration liability from the Voyantic Oy acquisition, valued at approximately **$4.6 million** as of September 30, 2023, is classified as Level 3 and estimated using a Monte Carlo simulation[34](index=34&type=chunk) Assets and Liabilities Measured at Fair Value (in thousands) | Item | Sep 30, 2023 (Total) | Dec 31, 2022 (Total) | | :--------------------------------- | :------------------- | :------------------- | | **Assets at Fair Value:** | | | | Money market funds (Level 1) | $60,628 | $14,620 | | Short-term investments (Level 2) | $35,129 | $154,148 | | Long-term investments (Level 2) | $— | $19,200 | | Total assets at fair value | $95,757 | $187,968 | | **Liabilities at Fair Value:** | | | | Acquisition-related contingent consideration liability (Level 3) | $4,602 | $— | | Total liabilities at fair value | $4,602 | $— | - As of September 30, 2023, total estimated fair value of investments was **$95.8 million** with gross unrealized losses of **$189 thousand**, primarily due to changes in interest rates[37](index=37&type=chunk)[38](index=38&type=chunk) [Note 3. Inventory](index=13&type=section&id=Note%203.%20Inventory) Inventory (in thousands) | Item | Sep 30, 2023 | Dec 31, 2022 | | :----------------- | :----------- | :----------- | | Raw materials | $14,908 | $14,678 | | Work-in-process | $54,128 | $14,525 | | Finished goods | $37,770 | $17,194 | | Total inventory | $106,806 | $46,397 | - Total inventory significantly increased to **$106.8 million** as of September 30, 2023, from **$46.4 million** at December 31, 2022, primarily driven by a substantial rise in work-in-process and finished goods inventory[39](index=39&type=chunk) [Note 4. Goodwill and Intangible Assets](index=13&type=section&id=Note%204.%20Goodwill%20and%20Intangible%20Assets) - On April 3, 2023, Impinj acquired Voyantic Oy for an aggregate purchase price of **$32.7 million**, including **$3.6 million** in common stock and **$4.6 million** in contingent consideration, adding label design, manufacturing, and test systems[40](index=40&type=chunk) - The preliminary purchase price allocation resulted in **$15.6 million** in goodwill and **$18.4 million** in identifiable intangible assets, with goodwill representing expected synergies and assembled workforce[41](index=41&type=chunk) Goodwill (in thousands) | Item | Nine Months Ended Sep 30, 2023 | | :--------------------------------- | :----------------------------- | | Balance at beginning of period | $3,881 | | Additions from acquisition | $15,590 | | Foreign currency translation adjustment | $(422) | | Total | $19,049 | Definite-lived Intangible Assets (in thousands, as of Sep 30, 2023) | Item | Estimated Useful Life (Years) | Net | | :--------------------------------- | :---------------------------- | :----------- | | Developed Technology | 7.25 | $11,630 | | Customer Relationships | 1 | $1,773 | | Tradename | 8 | $1,091 | | Patent | 3 | $233 | | Total definite-lived intangible assets | (Weighted average: 6) | $14,727 | - Amortization of intangible assets was **$1.4 million** for the three months and **$3.6 million** for the nine months ended September 30, 2023[43](index=43&type=chunk) [Note 5. Stock-Based Awards](index=14&type=section&id=Note%205.%20Stock-Based%20Awards) Stock-Based Awards Activity (in thousands, 9M 2023) | Item | RSUs | MSUs | PSUs | | :--------------------------------- | :----- | :----- | :----- | | Outstanding at Dec 31, 2022 | 1,310 | 110 | 74 | | Granted | 424 | 126 | — | | Vested | (521) | (58) | (57) | | Forfeited | (40) | (4) | (17) | | Outstanding at Sep 30, 2023 | 1,173 | 174 | — | Total Stock-Based Compensation Expense (in thousands) | Period | 2023 | 2022 | | :--------------------------------- | :----------- | :----------- | | Three Months Ended Sep 30, | $12,307 | $10,057 | | Nine Months Ended Sep 30, | $35,679 | $32,230 | - Total stock-based compensation expense for the nine months ended September 30, 2023, increased to **$35.7 million** from **$32.2 million** in the prior year[47](index=47&type=chunk) [Note 6. Commitments and Contingencies](index=15&type=section&id=Note%206.%20Commitments%20and%20Contingencies) - Committed to purchase **$30.9 million** of inventory as of September 30, 2023[49](index=49&type=chunk) - In patent infringement claims against NXP in California, a jury awarded Impinj **$36.6 million** in damages, later reduced to **$13.1 million** for one patent, with a new trial granted for the other. Impinj's motion for a permanent injunction was denied and appealed[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - In NXP's patent infringement claims against Impinj in Washington, a jury found Impinj did not infringe, and NXP has appealed the judgment[59](index=59&type=chunk) - NXP withdrew all three patent infringement lawsuits against Impinj in China on September 27, 2023, concluding all civil actions initiated by NXP against Impinj in China[67](index=67&type=chunk) [Note 7. Long-term debt](index=17&type=section&id=Note%207.%20Long-term%20debt) - Impinj has **$287.5 million** aggregate principal amount of **1.125%** convertible senior notes due May 15, 2027 (2021 Notes), with a net carrying value of **$281.4 million** as of September 30, 2023[68](index=68&type=chunk) 2021 Notes Carrying Value (in thousands) | Item | Sep 30, 2023 | Dec 31, 2022 | | :--------------------------------- | :----------- | :----------- | | Principal Amount | $287,500 | $287,500 | | Unamortized debt issuance costs | $(6,051) | $(7,256) | | Net Carrying Amount | $281,449 | $280,244 | - Interest expense for the nine months ended September 30, 2023, was **$3.6 million**, primarily from the 2021 Notes[73](index=73&type=chunk) - The fair value of the 2021 Notes was estimated at **$251.9 million** as of September 30, 2023, classified as Level 2[74](index=74&type=chunk) - Capped-call transactions related to the repurchased 2019 Notes remain outstanding, designed to reduce potential dilution from conversion, with an initial cap price of **$54.20** per share[75](index=75&type=chunk) [Note 8. Net Loss Per Share](index=19&type=section&id=Note%208.%20Net%20Loss%20Per%20Share) Net Loss Per Share (in thousands, except per share amounts) | Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(15,762) | $(2,199) | $(28,186) | $(24,183) | | Weighted-average shares outstanding — basic and diluted | 26,920 | 25,743 | 26,639 | 25,384 | | Net loss per share — basic and diluted | $(0.59) | $(0.09) | $(1.06) | $(0.95) | - Basic and diluted net loss per share for the three months ended September 30, 2023, was **$(0.59)**, and for the nine months, it was **$(1.06)**[77](index=77&type=chunk) - Common stock equivalents, including stock options, RSUs, MSUs, PSUs, employee stock purchase plan shares, and 2021 Notes, were excluded from diluted EPS calculation as their effect would have been antidilutive[77](index=77&type=chunk) [Note 9. Segment Information](index=19&type=section&id=Note%209.%20Segment%20Information) - Impinj operates as a single reportable and operating segment focused on the development and sale of RAIN products and services[78](index=78&type=chunk) Revenue by Category (in thousands) | Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Endpoint ICs | $48,592 | $51,155 | $180,546 | $132,804 | | Systems | $16,413 | $17,115 | $56,342 | $48,406 | | Total revenue | $65,005 | $68,270 | $236,888 | $181,210 | - For the three months ended September 30, 2023, Endpoint ICs revenue decreased by **5.0%** YoY, and Systems revenue decreased by **4.1%** YoY[79](index=79&type=chunk) - For the nine months ended September 30, 2023, Endpoint ICs revenue increased by **36.0%** YoY, and Systems revenue increased by **16.4%** YoY[79](index=79&type=chunk) [Note 10. Deferred Revenue](index=20&type=section&id=Note%2010.%20Deferred%20Revenue) - Deferred revenue, primarily from extended warranty, enhanced product maintenance, and advance payments on non-recurring engineering (NRE) services, totaled **$2.8 million** as of September 30, 2023[80](index=80&type=chunk)[81](index=81&type=chunk) Changes in Deferred Revenue (in thousands) | Item | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $2,599 | $794 | | Opening balance from Voyantic acquisition | $1,233 | — | | Deferral of revenue | $2,477 | $3,058 | | Recognition of deferred revenue | $(3,557) | $(700) | | Balance at end of period | $2,752 | $3,152 | - The company recognized **$2.1 million** of revenue related to amounts included in deferred revenue as of December 31, 2022, for the nine months ended September 30, 2023[80](index=80&type=chunk) [Note 11. Related-Party Transactions](index=20&type=section&id=Note%2011.%20Related-Party%20Transactions) - Cathal Phelan, a board member, transitioned from a consulting role (paid **$385,000** in 9M 2022) to Chief Innovation Officer on January 1, 2023[82](index=82&type=chunk) - In June 2023, Impinj acquired a patent for **$250,000** from a related party where another board member holds an executive position; this patent is included in intangible assets[83](index=83&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis of financial condition and operations, covering performance factors, liquidity, and critical accounting policies [Our Business](index=21&type=section&id=Our%20Business) - Impinj's vision is a boundless Internet of Things, connecting every physical item to a digital twin in the cloud, with a mission to connect every 'thing'[87](index=87&type=chunk)[88](index=88&type=chunk) - The platform comprises endpoint ICs (miniature radio ICs for item identification), systems (reader ICs, readers, gateways, software, cloud services, and test & measurement solutions from Voyantic Oy acquisition), and a partner ecosystem[89](index=89&type=chunk) - The platform utilizes RAIN RFID technology, which Impinj spearheaded, believing its capabilities (battery-free, 30-foot range, non-line-of-sight, high read rate, cryptographic authentication, low cost) position it as the leading item-to-cloud connectivity technology for IoT[91](index=91&type=chunk)[92](index=92&type=chunk) [Factors Affecting Our Performance](index=22&type=section&id=Factors%20Affecting%20Our%20Performance) - Inventory levels fluctuate due to demand misestimation, manufacturing capacity, and macroeconomic conditions; 2023 saw inventory overages due to demand softness, following 2021-2022 wafer shortfalls[93](index=93&type=chunk) - The company continues to invest in R&D to enhance its platform, focusing on retail self-checkout, loss prevention, and supply chain & logistics package tracking, with investment outcomes remaining uncertain[95](index=95&type=chunk)[96](index=96&type=chunk) - Financial performance depends on the pace and scope of end-user RAIN adoption in key industries, which has been uneven and impacted by macroeconomic conditions and supply chain disruptions[98](index=98&type=chunk)[99](index=99&type=chunk) - Average Selling Prices (ASPs) generally decline over time but increased in 2021-2023 to offset rising costs; inability to manage these dynamics could impact revenue and gross margins[106](index=106&type=chunk) - Seasonal trends, such as Q1 pricing renegotiations for endpoint ICs and stronger Q4 system sales, were not observed in 2022 and may not be in 2023 due to market variabilities[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Results of Operations Summary (in thousands, except percentages) | Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $65,005 | $68,270 | $236,888 | $181,210 | | Gross profit | $30,768 | $37,435 | $118,112 | $97,716 | | Gross margin | 47.3% | 54.8% | 49.9% | 53.9% | | Loss from operations | $(15,834) | $(1,744) | $(28,645) | $(19,535) | - For Q3 2023, revenue decreased by **4.8%** YoY, and gross profit decreased by **17.8%** YoY, leading to a significant increase in loss from operations to **$15.8 million**[110](index=110&type=chunk)[111](index=111&type=chunk) - For 9M 2023, revenue increased by **30.7%** YoY, and gross profit increased by **20.9%** YoY, but loss from operations still increased to **$28.6 million** due to higher operating expenses, particularly from the Voyantic Oy acquisition[110](index=110&type=chunk)[112](index=112&type=chunk) [Revenue](index=24&type=section&id=Revenue) Revenue by Product Category (in thousands) | Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Endpoint ICs | $48,592 | $51,155 | $180,546 | $132,804 | | Systems | $16,413 | $17,115 | $56,342 | $48,406 | | Total revenue | $65,005 | $68,270 | $236,888 | $181,210 | - Q3 2023 Endpoint IC revenue decreased by **$2.6 million** YoY, primarily due to a **$11.3 million** decrease from average ASP (mix-driven), partially offset by higher shipment volumes[114](index=114&type=chunk) - Q3 2023 Systems revenue decreased by **$0.7 million** YoY, mainly due to lower shipment volumes, partially offset by revenue from test and measurement solutions and gateways[115](index=115&type=chunk) - 9M 2023 Endpoint IC revenue increased by **$47.7 million** YoY, driven by higher shipment volumes (**$71.4 million** increase) partially offset by lower average ASP (**$23.6 million** decrease)[116](index=116&type=chunk) - 9M 2023 Systems revenue increased by **$7.9 million** YoY, primarily due to overall higher shipment volumes, including increases from gateway and test and measurement solutions[117](index=117&type=chunk) [Gross Profit and Gross Margin](index=25&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Gross Profit and Gross Margin (in thousands, except percentages) | Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cost of revenue | $34,237 | $30,835 | $118,776 | $83,494 | | Gross profit | $30,768 | $37,435 | $118,112 | $97,716 | | Gross margin | 47.3% | 54.8% | 49.9% | 53.9% | - For Q3 2023, gross profit decreased by **$6.7 million** (**17.8%**) and gross margin declined by **7.5 percentage points** YoY, primarily due to decreased product margins in endpoint ICs (mix-driven) and systems (increased costs), along with higher excess and obsolescence charges[119](index=119&type=chunk) - For 9M 2023, gross profit increased by **$20.4 million** (**20.9%**), but gross margin still decreased by **4.0 percentage points** YoY, mainly due to decreased product margins in endpoint ICs from product mix[120](index=120&type=chunk) [Operating Expenses](index=25&type=section&id=Operating%20Expenses) Operating Expenses (in thousands) | Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $21,588 | $18,766 | $67,426 | $55,124 | | Sales and marketing | $10,073 | $9,326 | $30,678 | $28,239 | | General and administrative | $13,532 | $11,087 | $45,098 | $33,888 | | Amortization of intangibles | $1,409 | $— | $3,555 | $— | | Total operating expenses | $46,602 | $39,179 | $146,757 | $117,251 | - Research and development expense increased by **$12.3 million** for 9M 2023, driven by higher personnel expenses, product development costs, stock-based compensation, and infrastructure costs[123](index=123&type=chunk) - General and administrative expense increased by **$11.2 million** for 9M 2023, primarily due to higher professional services (including legal and Voyantic Oy acquisition transaction expenses) and personnel expenses[129](index=129&type=chunk) - Amortization of intangibles increased significantly due to the intangibles acquired as part of the Voyantic Oy acquisition in April 2023[131](index=131&type=chunk) [Other Income, net](index=27&type=section&id=Other%20Income,%20net) Other Income, net (in thousands) | Period | 2023 | 2022 | | :--------------------------------- | :----------- | :----------- | | Three Months Ended Sep 30, | $1,090 | $774 | | Nine Months Ended Sep 30, | $3,620 | $1,367 | - Other income, net, primarily interest income on short-term investments, increased for both the three and nine months ended September 30, 2023, compared to the prior year periods, driven by an increase in interest rates[132](index=132&type=chunk) [Induced Conversion Expense](index=27&type=section&id=Induced%20Conversion%20Expense) - The company recorded **$2.2 million** in induced conversion expense for the nine months ended September 30, 2022, related to the repurchase of the remaining **$9.85 million** principal amount of the 2019 Notes in June 2022. No such expense was incurred in 2023[133](index=133&type=chunk) [Interest Expense](index=27&type=section&id=Interest%20Expense) Interest Expense (in thousands) | Period | 2023 | 2022 | | :--------------------------------- | :----------- | :----------- | | Three Months Ended Sep 30, | $1,213 | $1,205 | | Nine Months Ended Sep 30, | $3,633 | $3,716 | - Interest expense remained comparable for both the three and nine months ended September 30, 2023, compared to the prior year periods, primarily comprising cash interest and amortization of debt issuance costs on the company's debt[134](index=134&type=chunk)[135](index=135&type=chunk) [Income Tax Expense](index=27&type=section&id=Income%20Tax%20Expense) Income Tax Benefit (Expense) (in thousands) | Period | 2023 | 2022 | | :--------------------------------- | :----------- | :----------- | | Three Months Ended Sep 30, | $195 | $(24) | | Nine Months Ended Sep 30, | $472 | $(67) | - The company reported an income tax benefit for both the three and nine months ended September 30, 2023, attributed to the estimated effective tax rate, which incorporated the acquisition of Voyantic Oy[136](index=136&type=chunk) [Non-GAAP Financial Measures](index=28&type=section&id=Non-GAAP%20Financial%20Measures) - Impinj uses Adjusted EBITDA and Non-GAAP Net Income (Loss) as key measures to evaluate core operating performance, with definitions revised in 2023 to exclude acquisition transaction expenses and related purchase accounting adjustments[138](index=138&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(15,762) | $(2,199) | $(28,186) | $(24,183) | | Adjustments: | | | | | | Other income, net | $(1,090) | $(774) | $(3,620) | $(1,367) | | Interest expense | $1,213 | $1,205 | $3,633 | $3,716 | | Income tax expense (benefit) | $(195) | $24 | $(472) | $67 | | Depreciation and amortization | $3,668 | $1,483 | $9,734 | $4,456 | | Stock-based compensation | $12,307 | $10,057 | $35,679 | $32,230 | | Purchase accounting adjustments | $112 | $— | $388 | $— | | Induced conversion expense | $— | $— | $— | $2,232 | | Acquisition transaction expense | $4 | $— | $1,676 | $— | | **Adjusted EBITDA** | **$257** | **$9,796** | **$18,832** | **$17,151** | Non-GAAP Net Income (Loss) Reconciliation (in thousands) | Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(15,762) | $(2,199) | $(28,186) | $(24,183) | | Adjustments: | | | | | | Depreciation and amortization | $3,668 | $1,483 | $9,734 | $4,456 | | Stock-based compensation | $12,307 | $10,057 | $35,679 | $32,230 | | Purchase accounting adjustments | $112 | $— | $388 | $— | | Induced conversion expense | $— | $— | $— | $2,232 | | Acquisition transaction expense | $4 | $— | $1,676 | $— | | Income tax effects of adjustments | $(207) | $(878) | $(1,990) | $(1,385) | | **Non-GAAP net income** | **$122** | **$8,463** | **$17,301** | **$13,350** | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2023, Impinj had **$113.2 million** in cash, cash equivalents, and short-term investments, with working capital of **$239.2 million**[144](index=144&type=chunk) - The company believes existing funds are sufficient to meet anticipated cash needs for at least the next 12 months and plans to continue investing in its platform[146](index=146&type=chunk) - The **$287.5 million** 2021 Notes are a key part of its long-term debt, with net proceeds used for repurchasing prior notes and general corporate purposes[148](index=148&type=chunk)[149](index=149&type=chunk) - The company may explore additional financing sources, including equity, equity-linked, or debt financing, for future activities or acquisitions[147](index=147&type=chunk) [Cash Flows](index=30&type=section&id=Cash%20Flows) Summary of Cash Flows (in thousands) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $(50,809) | $6,813 | | Net cash provided by (used in) investing activities | $101,480 | $(86,304) | | Net cash provided by (used in) financing activities | $7,890 | $(5,102) | - For 9M 2023, operating activities used **$50.8 million** in cash, primarily due to increased working capital for inventory[152](index=152&type=chunk) - Investing activities generated **$101.5 million**, mainly from investment maturities and sales, partially offset by the Voyantic Oy acquisition and capital expenditures[154](index=154&type=chunk) - Financing activities generated **$7.9 million**, primarily from stock option exercises and the employee stock purchase plan[156](index=156&type=chunk) [Cash Requirements and Contractual Obligations](index=30&type=section&id=Cash%20Requirements%20and%20Contractual%20Obligations) - Primary cash requirements are for operating expenses and capital expenditures[158](index=158&type=chunk) - As of September 30, 2023, the principal balance outstanding on the 2021 Notes is **$287.5 million**[159](index=159&type=chunk) - Total purchase commitments as of September 30, 2023, are **$41.7 million**, primarily consisting of **$30.9 million** for non-cancelable inventory purchases[160](index=160&type=chunk) - The company has no off-balance-sheet arrangements[161](index=161&type=chunk) [Critical Accounting Policies and Significant Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) - The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures[162](index=162&type=chunk) - For detailed information on critical accounting policies and estimates, refer to Part II, Item 7 of the Annual Report on Form 10-K for the year ended December 31, 2022[162](index=162&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses market risks from interest rates, inflation, and foreign currency, and the company's approach to managing them - Interest rate risk is managed by investing excess cash in short-term, highly liquid securities; a **10%** increase in interest rates is not expected to materially affect the portfolio's fair value or results, and convertible notes have fixed interest rates[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - Inflation risk has not materially affected the business to date, as higher product costs have been substantially offset by price increases; however, future inability to offset could adversely affect financial condition[167](index=167&type=chunk) - Foreign currency exchange risk is currently not material, but exposure is expected to become more significant as international operations grow[169](index=169&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, evaluated and concluded that disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2023[170](index=170&type=chunk) - There were no changes that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the three months ended September 30, 2023[171](index=171&type=chunk) - The company recognizes that control systems provide reasonable assurance, not absolute, and are based upon certain judgments and assumptions[172](index=172&type=chunk) [PART II. — OTHER INFORMATION](index=33&type=section&id=PART%20II.%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) Impinj is involved in ongoing patent infringement lawsuits with NXP, with uncertain outcomes and potential for further litigation - Impinj is engaged in ongoing patent infringement lawsuits with NXP USA, Inc. and its parent NXP Semiconductors N.V., with both parties having filed claims against each other[176](index=176&type=chunk) - The ultimate outcome of the patent dispute remains uncertain, despite some verdicts, and additional lawsuits may be filed[176](index=176&type=chunk) - Further information on these lawsuits is detailed in Note 6 of the condensed consolidated financial statements[176](index=176&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) Details numerous risks impacting Impinj's business, covering platform, operations, relationships, IP, privacy, finance, tax, and securities - The report outlines a comprehensive set of risk factors that could materially impact Impinj's business, operating results, and financial condition[177](index=177&type=chunk) - Risks are categorized into several key areas, including those related to the company's platform, products, and technologies; personnel and business operations; relationships with partners and end users; intellectual property; privacy and cybersecurity; financial position and capital needs; U.S. federal income tax; and owning or trading securities[177](index=177&type=chunk) [Risks Relating to Our Platform, Products and Technologies](index=33&type=section&id=Risks%20Relating%20to%20Our%20Platform,%20Products%20and%20Technologies) - Impinj operates in a highly competitive market against larger companies and potential new entrants, including those supported by the Chinese government, which could lead to pricing pressure or market share loss[178](index=178&type=chunk)[179](index=179&type=chunk) - RAIN adoption is concentrated in key industries (e.g., retail apparel, SC&L), and the pace and extent of adoption beyond these industries are uncertain, making accurate forecasting difficult[180](index=180&type=chunk)[182](index=182&type=chunk) - The company's ability to introduce new products and deliver platform solutions at scale is nascent and uncertain, requiring significant resources and successful partner integration[183](index=183&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) - Reliance on endpoint IC sales for most revenue, coupled with fluctuating Average Selling Prices (ASPs) and potential product quality issues, poses significant risks to revenue and gross margins[187](index=187&type=chunk)[189](index=189&type=chunk)[193](index=193&type=chunk) - Alternative technologies, changes in RAIN standards, or government spectrum regulations could negatively impact the business, and sales of some products could cannibalize revenue from others[200](index=200&type=chunk)[201](index=201&type=chunk)[204](index=204&type=chunk)[207](index=207&type=chunk) [Risks Relating to Our Personnel and Business Operations](index=37&type=section&id=Risks%20Relating%20to%20Our%20Personnel%20and%20Business%20Operations) - Impinj relies on a limited number of third-party manufacturers without long-term supply contracts, exposing it to risks of capacity shortfalls, cost increases, and quality issues, particularly for silicon wafers and components[208](index=208&type=chunk)[209](index=209&type=chunk)[213](index=213&type=chunk) - Acquisitions, such as Voyantic Oy, pose integration challenges, potential dilution, and unforeseen expenditures, with foreign acquisitions involving additional risks[215](index=215&type=chunk)[216](index=216&type=chunk) - The magnitude and duration of Covid-19's effects on product demand, supply, and costs remain uncertain[217](index=217&type=chunk)[220](index=220&type=chunk) - Changes in global trade policies (tariffs, sanctions) and geopolitical instability (e.g., China-Taiwan tensions) could disrupt supply chains, international operations, and increase costs[221](index=221&type=chunk)[224](index=224&type=chunk)[227](index=227&type=chunk)[231](index=231&type=chunk) - Business operations could be disrupted by natural disasters in areas where facilities or subcontractors are located, leading to production delays and financial losses[232](index=232&type=chunk) [Risks Relating to Our Relationships with Partners and End Users](index=41&type=section&id=Risks%20Relating%20to%20Our%20Relationships%20with%20Partners%20and%20End%20Users) - Reliance on a small number of customers (e.g., Avery Dennison, Arizon) for a large share of revenue reduces bargaining power and increases competition risk[234](index=234&type=chunk)[235](index=235&type=chunk) - Selling primarily through partners limits direct visibility into end-user demand, increasing the risk of inaccurate forecasts or partners prioritizing competitors' products[238](index=238&type=chunk)[239](index=239&type=chunk) - Growth strategy depends on successful strategic relationships with third-party solution providers; failure to develop or maintain these relationships could harm the business[240](index=240&type=chunk) - Inability to maintain or enhance brand recognition or reputation, particularly due to supply shortages or price increases, could negatively impact relationships with partners and end users[241](index=241&type=chunk)[242](index=242&type=chunk) - Increasing attention to environmental, social, and governance (ESG) matters may cause additional costs or expose the company to risks if practices do not meet evolving standards[243](index=243&type=chunk) [Risks Relating to Our Intellectual Property](index=42&type=section&id=Risks%20Relating%20to%20Our%20Intellectual%20Property) - Impinj's success depends on protecting its intellectual property (IP), but protection is limited outside the U.S., and enforcement is difficult, costly, and uncertain[244](index=244&type=chunk)[245](index=245&type=chunk) - Ongoing patent infringement lawsuits with NXP are complex, costly, and uncertain, potentially leading to significant damages, injunctions, or licensing requirements, and could negatively impact relationships and RAIN adoption[246](index=246&type=chunk)[247](index=247&type=chunk)[249](index=249&type=chunk) - Participation in industry standards organizations (GS1, ISO) may require royalty-free or RAND licensing of its IP, potentially devaluing it or leading to disputes[251](index=251&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk) - Reliance on third-party license agreements means impairment or termination could cause production or shipment delays[254](index=254&type=chunk) - The use of open-source software may expose the company to additional risks and could weaken its intellectual property rights[255](index=255&type=chunk) [Risks Relating to Privacy and Cybersecurity](index=44&type=section&id=Risks%20Relating%20to%20Privacy%20and%20Cybersecurity) - Concerns about RAIN technology compromising consumer privacy or facilitating theft could damage Impinj's reputation and deter customers[257](index=257&type=chunk) - Non-compliance with evolving data security and privacy laws (e.g., CCPA, GDPR) could result in regulatory actions, claims, litigation, and substantial costs[259](index=259&type=chunk)[261](index=261&type=chunk) - Security breaches or incidents impacting Impinj's systems or third-party services could lead to reputational damage, loss of intellectual property, legal liabilities, and increased costs, with insurance potentially inadequate[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk) [Risks Relating to Our Financial Position and Capital Needs](index=45&type=section&id=Risks%20Relating%20to%20Our%20Financial%20Position%20and%20Capital%20Needs) - Impinj has a history of losses and intermittent profitability, with an accumulated deficit of **$386.8 million** as of December 31, 2022; attaining sustained profitability is uncertain due to significant operating costs and market factors[269](index=269&type=chunk) - Quarterly and annual operating results have fluctuated significantly and are difficult to forecast, leading to potential impacts on profitability and stock price[270](index=270&type=chunk)[271](index=271&type=chunk) - The company may need to raise additional capital, which could dilute stockholders, restrict operations, or impose financial covenants[274](index=274&type=chunk)[275](index=275&type=chunk) - Management has broad discretion in spending capital, and ineffective deployment could harm the business, financial condition, and stock price[276](index=276&type=chunk)[277](index=277&type=chunk) [Risks Relating to U.S. Federal Income Tax](index=47&type=section&id=Risks%20Relating%20to%20U.S.%20Federal%20Income%20Tax) - The ability to use federal net operating loss (NOL) carryforwards (**$249.3 million**) and research and development credit carryforwards (**$22.3 million**) may be limited by ownership changes under Sections 382 and 383 of the U.S. Internal Revenue Code[278](index=278&type=chunk)[279](index=279&type=chunk) - The company is subject to income taxes in various jurisdictions, and the final determination of tax audits could materially differ from historical provisions[280](index=280&type=chunk) - Changes in tax laws (e.g., Inflation Reduction Act, global minimum tax proposals) could adversely affect tax rates and liabilities[281](index=281&type=chunk)[283](index=283&type=chunk) - Taxing authorities may successfully assert that the company should have collected sales and use, value-added, or similar taxes, leading to assessments and penalties[284](index=284&type=chunk) [Risks Relating to Owning or Trading Our Securities](index=48&type=section&id=Risks%20Relating%20to%20Owning%20or%20Trading%20Our%20Securities) - The market price of Impinj's common stock has been and is expected to remain volatile due to various factors, including operating performance, market valuations, competitive announcements, supply interruptions, and geopolitical events, which can also lead to litigation[289](index=289&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk) - Transactions related to the 2021 Notes, such as conversions or hedging activities by financial counterparties, could dilute existing stockholders or decrease the stock price[292](index=292&type=chunk)[293](index=293&type=chunk) - Executive officers, directors, and principal stockholders beneficially own a significant percentage (**54.6%**) of the stock, allowing them to exercise substantial influence over stockholder approval matters, potentially delaying or preventing a change in control[295](index=295&type=chunk) - The company's ability to satisfy obligations under the 2021 Notes depends on future performance, and current/future indebtedness could restrict business operations[296](index=296&type=chunk)[297](index=297&type=chunk) - Anti-takeover provisions in charter documents and state law could prevent or delay acquisitions, adversely affecting stock price, and bylaws may limit stockholders' choice of judicial forum for disputes[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds occurred during the reporting period[302](index=302&type=chunk) [Item 3. Defaults Upon Senior Securities](index=51&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities to report during the period - No defaults upon senior securities occurred during the reporting period[303](index=303&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Impinj, Inc - This item is not applicable to the company[304](index=304&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the last fiscal quarter - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the last fiscal quarter[305](index=305&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including corporate governance documents, certifications, and Inline XBRL documents - Key exhibits include the Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and certifications of the Principal Executive Officer and Principal Financial Officer[306](index=306&type=chunk) - Inline XBRL documents for the condensed consolidated financial statements and the cover page are also filed[306](index=306&type=chunk) - The certifications attached as Exhibits 32.1 and 32.2 (Rule 13a-14(b)) are not deemed filed with the Securities and Exchange Commission[306](index=306&type=chunk) [Signatures](index=53&type=section&id=Signatures) [Signatures](index=53&type=section&id=Signatures) The report was duly signed on behalf of Impinj, Inc. by Cary Baker, Chief Financial Officer, on October 25, 2023 - The report was signed by Cary Baker, Chief Financial Officer (principal financial officer and duly authorized signatory)[310](index=310&type=chunk) - The signing date was October 25, 2023[310](index=310&type=chunk)

Investor Presentation Second Quarter 2023 1 © 2023 IMPINJ mp 201 IMPINJ Our Vision is boundless IoT, extending the Internet of Things to trillions of everyday items 3 4 Digital Twins Manufacturer Shipper Seller Person Archive Connect Every Thing Own | Store | Explore | --- | --- | --- | --- | --- | --- | --- | --- | |-------------------|-------|-------|-------|-------|-------|-------|----------------------------------------------------------------------------------------------------------------------------- ...

[Risk Factor Summary](index=3&type=section&id=Risk%20Factor%20Summary) Key risks include market competition, RAIN RFID adoption uncertainty, supplier reliance, historical losses, and convertible note obligations - The company operates in a highly competitive market[8](index=8&type=chunk) - RAIN RFID adoption is concentrated in key industries, and its pace beyond those industries is uncertain[8](index=8&type=chunk) - The company relies on a limited number of third-party suppliers and a small number of customers for a large share of its revenue[8](index=8&type=chunk) - Impinj has a history of losses and has only achieved profitability intermittently, with no certainty of future sustained profitability[8](index=8&type=chunk) - There is a risk of insufficient cash flow to satisfy obligations under the **$287.5 million** convertible senior notes due 2027[8](index=8&type=chunk) [PART I. — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents unaudited financial statements, management's discussion, market risk disclosures, and controls and procedures [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents unaudited condensed consolidated financial statements and detailed notes on accounting policies and disclosures [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides a snapshot of the company's financial position, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :-------------- | :---------------- | | Total current assets | $283,623 | $275,170 | | Total assets | $383,546 | $349,737 | | Total current liabilities | $50,878 | $42,369 | | Total liabilities | $346,751 | $334,146 | | Total stockholders' equity | $36,795 | $15,591 | | Cash and cash equivalents | $45,244 | $19,597 | | Inventory | $112,323 | $46,397 | | Goodwill | $19,516 | $3,881 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This table presents the company's revenues, costs, gross profit, and net loss over specified interim periods Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $85,986 | $59,796 | $171,883 | $112,940 | | Cost of revenue | $42,172 | $28,294 | $84,539 | $52,659 | | Gross profit | $43,814 | $31,502 | $87,344 | $60,281 | | Loss from operations | $(8,369) | $(8,476) | $(12,811) | $(17,791) | | Net loss | $(8,066) | $(11,523) | $(12,424) | $(21,984) | | Net loss per share — basic and diluted | $(0.30) | $(0.45) | $(0.47) | $(0.87) | [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This table details the company's net loss and other comprehensive income or loss components for interim periods Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(8,066) | $(11,523) | $(12,424) | $(21,984) | | Unrealized gain (loss) on investments | $193 | $(510) | $837 | $(1,187) | | Foreign currency translation adjustments | $87 | — | $87 | — | | Total other comprehensive gain (loss) | $280 | $(510) | $924 | $(1,187) | | Comprehensive loss | $(7,786) | $(12,033) | $(11,500) | $(23,171) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes cash inflows and outflows from operating, investing, and financing activities for interim periods Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(49,104) | $(7,639) | | Net cash provided by (used in) investing activities | $68,991 | $(72,616) | | Net cash provided by (used in) financing activities | $5,753 | $(11,068) | | Net increase (decrease) in cash and cash equivalents | $25,647 | $(91,323) | | Cash and cash equivalents, End of period | $45,244 | $32,580 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section outlines changes in the company's equity accounts, including common stock and accumulated deficit, over the period Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric | Balance at December 31, 2022 | Balance at June 30, 2023 | | :-------------------------- | :--------------------------- | :----------------------- | | Common Stock (Shares) | 26,098 | 26,819 | | Common Stock (Amount) | $26 | $27 | | Additional Paid-in Capital | $403,599 | $436,302 | | Accumulated Deficit | $(386,785) | $(399,209) | | Accumulated Other Comprehensive Loss | $(1,249) | $(325) | | Total Stockholders' Equity | $15,591 | $36,795 | - Total stockholders' equity increased by **$21.2 million** from December 31, 2022, to June 30, 2023, primarily due to increases in additional paid-in capital from stock issuances and stock-based compensation, partially offset by net losses[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1. Summary of Significant Accounting Policies](index=9&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the condensed consolidated financial statements - The condensed consolidated financial statements are prepared in conformity with U.S. GAAP and SEC interim financial reporting rules[21](index=21&type=chunk) - Business combinations are accounted for using the acquisition method, allocating the purchase price to assets acquired and liabilities assumed at fair value, with goodwill representing the excess consideration over net assets[23](index=23&type=chunk)[25](index=25&type=chunk) - Identifiable intangible assets with finite lives are amortized on a straight-line basis over their useful lives[26](index=26&type=chunk) [Note 2. Fair Value Measurements](index=10&type=section&id=Note%202.%20Fair%20Value%20Measurements) This note details the company's fair value measurements, categorizing assets and liabilities based on input observability - Fair value measurements are categorized into a three-level hierarchy based on the observability of inputs: Level 1 (quoted prices in active markets), Level 2 (observable market data for similar instruments), and Level 3 (unobservable inputs)[31](index=31&type=chunk) - A contingent consideration liability of **$4.6 million** related to the Voyantic Oy acquisition was recorded as of June 30, 2023, valued using Level 3 unobservable inputs via a Monte Carlo simulation[34](index=34&type=chunk)[36](index=36&type=chunk) Assets and Liabilities Measured at Fair Value (in thousands) | Category | June 30, 2023 (Total) | December 31, 2022 (Total) | | :-------------------------- | :-------------------- | :------------------------ | | Cash equivalents | $30,062 | $14,620 | | Short-term investments | $63,656 | $154,148 | | Long-term investments | $5,995 | $19,200 | | Total assets at fair value | $99,713 | $187,968 | | Acquisition-related contingent consideration liability | $4,602 | — | [Note 3. Inventory](index=13&type=section&id=Note%203.%20Inventory) This note provides a breakdown of inventory components and highlights significant changes over the reporting period Inventory Details (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :-------------- | :------------ | :---------------- | | Raw materials | $25,630 | $14,678 | | Work-in-process | $45,369 | $14,525 | | Finished goods | $41,324 | $17,194 | | Total inventory | $112,323 | $46,397 | - Total inventory increased significantly by **$65.9 million** from December 31, 2022, to June 30, 2023, driven by increases across raw materials, work-in-process, and finished goods[40](index=40&type=chunk) [Note 4. Goodwill and Intangible Assets](index=13&type=section&id=Note%204.%20Goodwill%20and%20Intangible%20Assets) This note details the company's goodwill and intangible assets, including additions from recent acquisitions - On April 3, 2023, Impinj acquired Voyantic Oy for **$32.7 million**, adding label design, manufacturing, and test systems to its product offerings[41](index=41&type=chunk) - The acquisition resulted in an addition of **$15.6 million** in goodwill and **$18.4 million** in intangible assets[42](index=42&type=chunk) Goodwill (in thousands) | Metric | June 30, 2023 | | :-------------------------- | :-------------- | | Balance at beginning of period | $3,881 | | Additions from acquisition | $15,590 | | Foreign currency translation adjustment | $45 | | Total | $19,516 | Definite-lived Intangible Assets (in thousands, as of June 30, 2023) | Asset Category | Estimated Useful Life (Years) | Net Amount | | :------------------ | :---------------------------- | :--------- | | Customer Relationships | 1 | $2,742 | | Developed Technology | 7.25 | $12,433 | | Patent | 3 | $250 | | Tradename | 8 | $1,162 | | Total | N/A | $16,587 | [Note 5. Stock-Based Awards](index=14&type=section&id=Note%205.%20Stock-Based%20Awards) This note presents the stock-based compensation expense recognized across various categories for interim periods Stock-Based Compensation Expense (in thousands) | Expense Category | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of revenue | $472 | $299 | $889 | $898 | | Research and development expense | $5,879 | $4,336 | $10,448 | $9,111 | | Sales and marketing expense | $2,790 | $2,642 | $4,929 | $5,394 | | General and administrative expense | $4,007 | $3,582 | $7,106 | $6,770 | | Total stock-based compensation expense | $13,148 | $10,859 | $23,372 | $22,173 | - Total stock-based compensation expense increased by **$2.289 million** for the three months ended June 30, 2023, and by **$1.199 million** for the six months ended June 30, 2023, compared to the prior year periods[48](index=48&type=chunk) [Note 6. Commitments and Contingencies](index=15&type=section&id=Note%206.%20Commitments%20and%20Contingencies) This note outlines the company's purchase commitments and provides updates on ongoing patent infringement lawsuits - The company is committed to purchase **$43.7 million** of inventory as of June 30, 2023[50](index=50&type=chunk) - A jury returned a verdict in Impinj's favor in a patent infringement lawsuit against NXP in California, finding willful infringement and awarding approximately **$18.9 million** in damages[54](index=54&type=chunk) - In a separate patent infringement lawsuit filed by NXP against Impinj in Washington, a jury found Impinj did not infringe the patent, and a final judgment was entered in Impinj's favor[57](index=57&type=chunk) - Impinj and NXP are involved in additional ongoing patent infringement lawsuits in Texas and China[58](index=58&type=chunk)[62](index=62&type=chunk) [Note 7. Long-term debt](index=17&type=section&id=Note%207.%20Long-term%20debt) This note details the company's convertible senior notes, including their terms, interest expense, and fair value - Impinj issued **$287.5 million** aggregate principal amount of 1.125% convertible senior notes due May 15, 2027 (2021 Notes)[66](index=66&type=chunk) - The initial conversion rate for the 2021 Notes is **9.0061 shares per $1,000 principal amount**, corresponding to an initial conversion price of **$111.04 per share**[66](index=66&type=chunk) Interest Expense Related to Notes (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Amortization of debt issuance costs | $402 | $403 | $802 | $807 | | Cash interest expense | $809 | $847 | $1,618 | $1,704 | | Total interest expense | $1,211 | $1,250 | $2,420 | $2,511 | - The fair value of the 2021 Notes was estimated at **$312.6 million** as of June 30, 2023, and **$347.4 million** as of December 31, 2022[72](index=72&type=chunk) [Note 8. Net Loss Per Share](index=19&type=section&id=Note%208.%20Net%20Loss%20Per%20Share) This note presents the calculation of basic and diluted net loss per share, including the treatment of common stock equivalents Net Loss Per Share (in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(8,066) | $(11,523) | $(12,424) | $(21,984) | | Weighted-average shares outstanding | 26,713 | 25,429 | 26,499 | 25,204 | | Net loss per share — basic and diluted | $(0.30) | $(0.45) | $(0.47) | $(0.87) | - Common stock equivalents (stock options, RSUs, MSUs, PSUs, employee stock purchase plan shares, and 2021 Notes) were excluded from diluted net loss per share calculations because their effect would have been antidilutive[75](index=75&type=chunk) [Note 9. Segment Information](index=19&type=section&id=Note%209.%20Segment%20Information) This note clarifies that Impinj operates as a single reportable segment and provides a breakdown of revenue categories - Impinj operates as a single reportable and operating segment, focusing on the development and sale of RAIN products and services[76](index=76&type=chunk) Revenue Categories (in thousands) | Category | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :---------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Endpoint ICs | $64,905 | $42,854 | $131,954 | $81,649 | | Systems | $21,081 | $16,942 | $39,929 | $31,291 | | Total revenue | $85,986 | $59,796 | $171,883 | $112,940 | [Note 10. Deferred Revenue](index=20&type=section&id=Note%2010.%20Deferred%20Revenue) This note details the changes in deferred revenue, including deferrals, recognition, and acquisition-related balances Changes in Deferred Revenue (in thousands) | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------- | :--------------------------- | :--------------------------- | | Balance at beginning of period | $2,599 | $794 | | Opening balance from Voyantic acquisition | $1,233 | — | | Deferral of revenue | $1,672 | $2,661 | | Recognition of deferred revenue | $(2,640) | $(459) | | Balance at end of period | $2,864 | $2,996 | - The company recognized **$2.0 million** of revenue related to amounts included in deferred revenue as of December 31, 2022, for the six months ended June 30, 2023[78](index=78&type=chunk) [Note 11. Related-Party Transactions](index=20&type=section&id=Note%2011.%20Related-Party%20Transactions) This note discloses transactions with related parties, including consulting agreements and patent acquisitions - A consulting agreement with Cathal Phelan, a board member, ceased on January 1, 2023, as he joined the company as Chief Innovation Officer[80](index=80&type=chunk) - On June 23, 2023, Impinj acquired a patent for its endpoint IC products from a related party for **$250,000**[81](index=81&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Impinj's financial condition, results of operations, business overview, and performance factors [Our Business](index=21&type=section&id=Our%20Business) This section outlines Impinj's vision for the Internet of Things and describes its platform and partner ecosystem - Impinj's vision is to enable a boundless Internet of Things (IoT) by wirelessly connecting every physical item to a digital counterpart in the cloud[85](index=85&type=chunk) - The company's platform comprises endpoint ICs (for item identification), systems (reader ICs, readers, gateways, software, cloud services, and test solutions), and a partner ecosystem[87](index=87&type=chunk)[88](index=88&type=chunk) - The platform utilizes RAIN RFID technology, which Impinj spearheaded, offering features like battery-free operation, 30-foot range, and high read rates at a low cost[89](index=89&type=chunk)[90](index=90&type=chunk) [Factors Affecting Our Performance](index=22&type=section&id=Factors%20Affecting%20Our%20Performance) This section discusses key influences on Impinj's financial results, such as supply chain, R&D, market adoption, ASPs, and seasonality - Impinj experienced IC wafer shortages in 2021 and 2022, which constrained its ability to meet customer demand, but achieved sustainable inventory levels by June 30, 2023[91](index=91&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) - The company continues to invest in research and development to enhance its platform, focusing on retail self-checkout, loss prevention, and supply chain & logistics package tracking[97](index=97&type=chunk) - Financial performance is highly dependent on the pace and scope of RAIN adoption in key industries like retail apparel and supply chain & logistics, which can be uneven and unpredictable[100](index=100&type=chunk)[104](index=104&type=chunk) - Average Selling Prices (ASPs) generally decline over time due to competitive pressures, but prices were raised in 2021 and 2022 to offset increased product costs, leading to expected volatility in product margins[108](index=108&type=chunk) - Historical seasonal trends (e.g., lower Q1 revenue/margins, stronger Q4 system sales) were not observed in 2022 and may not be in 2023 due to supply uncertainty and deployment timing[109](index=109&type=chunk)[110](index=110&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's revenue, gross profit, and operating expenses for the reported periods Overall Performance (in thousands, except percentages) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $85,986 | $59,796 | $171,883 | $112,940 | | Gross profit | $43,814 | $31,502 | $87,344 | $60,281 | | Gross margin | 51.0% | 52.7% | 50.8% | 53.4% | | Loss from operations | $(8,369) | $(8,476) | $(12,811) | $(17,791) | Revenue Breakdown (in thousands) | Category | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :---------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Endpoint ICs | $64,905 | $42,854 | $131,954 | $81,649 | | Systems | $21,081 | $16,942 | $39,929 | $31,291 | - Endpoint IC revenue increased by **$22.1 million (51.5% YoY)** for Q2 2023 and **$50.3 million (61.6% YoY)** for H1 2023, driven by higher shipment volumes partially offset by lower ASPs due to product mix[119](index=119&type=chunk)[121](index=121&type=chunk) - Systems revenue increased by **$4.1 million (24.4% YoY)** for Q2 2023 and **$8.6 million (27.6% YoY)** for H1 2023, primarily due to test and measurement solutions revenue and increased gateway shipment volumes[120](index=120&type=chunk)[122](index=122&type=chunk) Operating Expenses (in thousands) | Expense Category | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Research and development | $23,403 | $18,369 | $45,838 | $36,358 | | Sales and marketing | $10,632 | $9,614 | $20,605 | $18,913 | | General and administrative | $16,002 | $11,995 | $31,566 | $22,801 | | Amortization of intangibles | $2,146 | — | $2,146 | — | [Non-GAAP Financial Measures](index=28&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles GAAP net loss to Adjusted EBITDA and Non-GAAP net income, explaining adjustments made Adjusted EBITDA Reconciliation (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(8,066) | $(11,523) | $(12,424) | $(21,984) | | Total Adjustments | $18,023 | $15,339 | $33,274 | $29,865 | | Adjusted EBITDA | $9,958 | $3,848 | $18,575 | $7,355 | Non-GAAP Net Income (Loss) Reconciliation (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(8,066) | $(11,523) | $(12,424) | $(21,984) | | Total Adjustments | $17,362 | $14,271 | $29,603 | $26,871 | | Non-GAAP net income | $9,296 | $2,748 | $17,179 | $4,887 | - The definition of Adjusted EBITDA was revised in Q1 2023 to exclude acquisition transaction expenses and related purchase accounting adjustments, and Non-GAAP Net Income (Loss) was further revised in Q2 2023 to adjust for income tax effects of adjustments[146](index=146&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet financial obligations, detailing cash, investments, working capital, and cash flow activities - As of June 30, 2023, Impinj had **$108.9 million** in cash, cash equivalents, and short-term investments, and **$232.7 million** in working capital[151](index=151&type=chunk) - Management believes existing cash, cash equivalents, and short-term investments will be sufficient to meet anticipated cash needs for at least the next 12 months[153](index=153&type=chunk) Summary of Cash Flows (in thousands) | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(49,104) | $(7,639) | | Net cash provided by (used in) investing activities | $68,991 | $(72,616) | | Net cash provided by (used in) financing activities | $5,753 | $(11,068) | - Net cash used in operating activities significantly increased to **$49.1 million** in H1 2023, primarily due to a **$65.2 million** increase in working capital, driven by higher inventory and accounts receivable[159](index=159&type=chunk) - Net cash provided by investing activities was **$69 million** in H1 2023, a significant shift from **$72.6 million** used in H1 2022, mainly due to investment maturities and sales, partially offset by the Voyantic Oy acquisition and property/equipment purchases[161](index=161&type=chunk) - Purchase commitments as of June 30, 2023, totaled **$56.1 million**, with **$43.7 million** specifically for inventory[167](index=167&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses Impinj's exposure to market risks, specifically interest rate risk and inflation risk, and the strategies in place to manage them - Impinj invests excess cash in money market funds, U.S. government securities, corporate bonds, and commercial paper, with a policy focused on preserving principal, providing liquidity, and maximizing yield[171](index=171&type=chunk) - Due to the short-term nature of its investment portfolio and fixed interest rates on convertible notes, an immediate **10% increase** in interest rates is not expected to materially affect the fair market value of the portfolio or interest expense[172](index=172&type=chunk)[173](index=173&type=chunk) - Inflation has not had a material effect on the business, as higher product costs have been largely offset by increases in product selling prices[174](index=174&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms that management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2023, and concluded they were effective - Management, including the chief executive officer and principal financial officer, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023[177](index=177&type=chunk) - There were no changes that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the three months ended June 30, 2023[178](index=178&type=chunk) [PART II. — OTHER INFORMATION](index=34&type=section&id=PART%20II.%20%E2%80%94%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, exhibits, and signatures [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) This section provides an update on the ongoing patent litigation between Impinj and NXP, noting that the outcome remains uncertain and could lead to further legal actions - Impinj is engaged in ongoing patent infringement lawsuits with NXP USA, Inc. and its affiliates, with both companies having filed claims against each other[183](index=183&type=chunk) - The outcome of this patent litigation remains uncertain, and additional lawsuits may be filed by either party[183](index=183&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) This comprehensive section outlines various risks that could materially impact Impinj's business, including intense market competition, uncertainties in RAIN adoption, reliance on third-party suppliers, challenges in integrating acquisitions, geopolitical and trade policy risks, intellectual property disputes, privacy and cybersecurity concerns, historical financial losses, and factors affecting stock price volatility - Impinj operates in a highly competitive market against companies with greater resources, and its partners may also become competitors[185](index=185&type=chunk)[186](index=186&type=chunk) - The extent and pace of RAIN market adoption beyond key industries like retail apparel remain uncertain, making financial forecasting difficult[187](index=187&type=chunk)[189](index=189&type=chunk) - Reliance on a limited number of third-party suppliers for silicon wafers and components exposes Impinj to supply disruptions, capacity shortfalls, and price increases, which could impact revenue and gross margins[215](index=215&type=chunk)[216](index=216&type=chunk)[220](index=220&type=chunk) - Acquisitions, such as Voyantic Oy, carry risks including integration difficulties, inability to retain employees, and potential dilution or unforeseen liabilities[222](index=222&type=chunk)[223](index=223&type=chunk) - Geopolitical events, changes in global trade policies (e.g., tariffs, sanctions), and instability in key jurisdictions (e.g., China-Taiwan tensions) could adversely affect supply chains and international operations[229](index=229&type=chunk)[231](index=231&type=chunk)[239](index=239&type=chunk) - Inability to protect intellectual property rights (patents, copyrights, trade secrets) or adverse outcomes from ongoing patent litigation (e.g., with NXP) could significantly harm the business and RAIN adoption[252](index=252&type=chunk)[255](index=255&type=chunk) - Privacy and security concerns related to RAIN technology, evolving regulations, and potential security breaches could damage reputation, incur costs, and deter customer adoption[266](index=266&type=chunk)[270](index=270&type=chunk)[273](index=273&type=chunk) - Impinj has a history of losses and significant fluctuations in operating results, making future profitability uncertain and dependent on market growth and expense management[277](index=277&type=chunk)[279](index=279&type=chunk) - The market price of common stock is volatile due to various factors, and transactions related to convertible notes or significant ownership by principal stockholders could affect its value[296](index=296&type=chunk)[300](index=300&type=chunk)[303](index=303&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds during the reporting period - No unregistered sales of equity securities or use of proceeds occurred during the period[311](index=311&type=chunk) [Item 3. Defaults Upon Senior Securities](index=52&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred during the period[312](index=312&type=chunk) [Item 4. Mine Safety Disclosures](index=52&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that the disclosure requirements for mine safety are not applicable to the company - Mine Safety Disclosures are not applicable to Impinj, Inc[313](index=313&type=chunk) [Item 5. Other Information](index=52&type=section&id=Item%205.%20Other%20Information) This section discloses that no directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements and that the board of directors ratified certain stock option and restricted stock unit issuances - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the last fiscal quarter[314](index=314&type=chunk) - On June 26, 2023, the board of directors adopted resolutions to ratify the issuance of options to purchase common stock and an award of restricted stock units, pursuant to Section 204 of the Delaware General Corporation Law[315](index=315&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, certifications, and specific resolutions - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, certifications of the Principal Executive Officer and Principal Financial Officer, and the Unanimous Written Consent of the Board of Directors regarding stock award ratification[317](index=317&type=chunk) [Signatures](index=54&type=section&id=Signatures) This section contains the required signatures, confirming the due authorization and filing of the Quarterly Report on Form 10-Q - The report was signed by Cary Baker, Chief Financial Officer, on July 26, 2023[322](index=322&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 Securities registered pursuant to Section 12(b) of the Act: | Title of each class | Trading symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Common Stock, par value $0.001 per share | PI | The Nasdaq Global Select Market | Indicate by check mark whether the registran ...

Key Financial Highlights (FY 2022 vs FY 2021) | Financial Metric | FY 2022 | FY 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $257.8 M | $190.3 M | +$67.5 M | +35.5% | | **Gross Profit** | $137.9 M | $99.0 M | +$38.9 M | +39.3% | | **Gross Margin** | 53.5% | 52.0% | +1.5 pts | N/A | | **Loss from Operations** | ($19.5 M) | ($37.2 M) | +$17.7 M | -47.7% | | **Net Loss** | ($24.3 M) | ($51.3 M) | +$27.0 M | -52.6% | | **Adjusted EBITDA** | $28.9 M | $9.1 M | +$19.8 M | +217.4% | - The company's vision is to create a boundless Internet of Things (IoT) by wirelessly connecting everyday physical items to the cloud using its RAIN RFID platform[19](index=19&type=chunk)[212](index=212&type=chunk) - Key risks highlighted include operating in a very competitive market, reliance on a limited number of third-party suppliers, vulnerability to silicon wafer shortages, and a history of financial losses[14](index=14&type=chunk) [PART I](index=4&type=section&id=PART%20I) [Business](index=4&type=section&id=Item%201.%20Business) Impinj provides a RAIN RFID platform connecting items to IoT, serving retail and logistics via partners - The Impinj platform is comprised of two main product families: Endpoint ICs, which are miniature radios-on-a-chip that connect items, and Systems, which include reader ICs, readers, and gateways that communicate with the endpoint ICs[21](index=21&type=chunk)[26](index=26&type=chunk)[29](index=29&type=chunk) - The company's growth strategy focuses on developing enterprise solutions with partners, enhancing its platform, leading the RAIN silicon market, making reading ubiquitous, and investing in cloud services[39](index=39&type=chunk) Revenue Concentration from Major Customers | Customer | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Avery Dennison | 28% | 32% | 32% | | Arizon | 10% | 11% | 10% | | **Total** | **38%** | **43%** | **42%** | - Impinj outsources all product manufacturing to third parties, including TSMC and Tower for IC wafers and Plexus Corp. for readers and gateways, allowing the company to focus resources on product development[41](index=41&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) - As of December 31, 2022, the company's intellectual property portfolio included **296** issued and allowed U.S. patents and five international patents[38](index=38&type=chunk)[48](index=48&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from competition, supply chain, customer concentration, and litigation - The company operates in a highly competitive market against competitors like NXP, STMicroelectronics, and Zebra, which have greater financial and operational resources[65](index=65&type=chunk)[66](index=66&type=chunk) - Impinj is vulnerable to silicon wafer shortages and relies on a limited number of third-party manufacturers without long-term supply contracts, which can adversely affect its ability to meet product demand[96](index=96&type=chunk)[97](index=97&type=chunk) - A large share of revenue is derived from a small number of customers. In **2022**, sales to Avery Dennison and Arizon accounted for **28%** and **10%** of total revenue, respectively[118](index=118&type=chunk)[119](index=119&type=chunk) - The company is engaged in several patent infringement lawsuits with NXP, which are costly, time-consuming, and could result in the loss of significant rights[131](index=131&type=chunk) - Impinj has a history of losses, with a net loss of **$24.3 million** for the year ended December **31**, **2022**, and an accumulated deficit of **$386.8 million**. The company has only achieved profitability intermittently and cannot guarantee sustained profitability[158](index=158&type=chunk) [Unresolved Staff Comments](index=30&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This section is not applicable as the company reports no unresolved SEC staff comments - The company reports that this item is not applicable[193](index=193&type=chunk) [Properties](index=31&type=section&id=Item%202.%20Properties) Impinj leases office and laboratory facilities, including its Seattle headquarters, which are deemed adequate Principal Leased Properties as of December 31, 2022 | Location | Purpose | Approx. Square Feet | Lease Expiration | | :--- | :--- | :--- | :--- | | Seattle, WA | Corporate headquarters | 109,000 | 2026 | | Seattle, WA | Design laboratory | 11,000 | 2024 | | Seattle, WA | Design laboratory | 29,000 | 2029 | | Shanghai, China | General office space | 4,000 | 2023 | [Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ongoing patent infringement litigation with competitor NXP, with uncertain outcomes - Impinj is engaged in patent infringement lawsuits with competitor NXP. The litigation began in June **2019** when Impinj filed a suit, followed by a countersuit from NXP in October **2019**. The legal proceedings are ongoing[198](index=198&type=chunk) [Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - The company reports that this item is not applicable[199](index=199&type=chunk) [PART II](index=32&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=32&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Impinj's common stock trades on Nasdaq under "PI"; the company has no plans for cash dividends - The company's common stock has traded on The Nasdaq Global Select Market under the symbol "PI" since July **21**, **2016**[202](index=202&type=chunk) - Impinj has never declared or paid a cash dividend and currently intends to apply available funds and future earnings to grow the business[204](index=204&type=chunk) [Reserved](index=33&type=section&id=Item%206.%20%5BReserved%5D) This section is intentionally left blank - This item is reserved and contains no information[209](index=209&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 2022 performance, revenue growth, supply constraints, liquidity, and accounting policies [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Revenue increased by **35.5%** to **$257.8 million** in 2022, driven by IC and systems sales, narrowing operating loss Consolidated Results of Operations (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Revenue** | $257,800 | $190,283 | $138,923 | | **Gross Profit** | $137,884 | $98,954 | $65,140 | | **Gross Margin** | 53.5% | 52.0% | 46.9% | | **Loss from Operations** | ($19,479) | ($37,249) | ($47,071) | Revenue by Product Category (in thousands) | Category | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Endpoint ICs | $191,532 | $139,250 | $102,326 | | Systems | $66,268 | $51,033 | $36,597 | | **Total Revenue** | **$257,800** | **$190,283** | **$138,923** | - The increase in Endpoint IC revenue in **2022** was driven by a **$35.5 million** increase from higher Average Selling Prices (ASPs) and a **$16.8 million** increase from higher shipment volumes[246](index=246&type=chunk) Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Net loss** | ($24,301) | ($51,260) | ($51,923) | | **Adjustments** | $53,207 | $60,372 | $39,857 | | **Adjusted EBITDA** | **$28,906** | **$9,112** | **($11,533)** | [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) Impinj held **$173.7 million** in cash as of December 2022, funding operations via cash flow, equity, and debt offerings - As of December **31**, **2022**, the company had cash, cash equivalents, and short-term investments of **$173.7 million** and working capital of **$232.8 million**[282](index=282&type=chunk) - In November **2021**, the company issued **$287.5 million** in **1.125%** convertible senior notes due **2027**. Net proceeds were approximately **$278.4 million**[290](index=290&type=chunk)[291](index=291&type=chunk) - The company repurchased all of its outstanding **2019** Notes, completing the final repurchase of **$9.85 million** in principal in June **2022** for approximately **$17.6 million** in cash[289](index=289&type=chunk)[300](index=300&type=chunk) Summary of Cash Flows (in thousands) | Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $641 | $6,465 | ($16,877) | | Net cash used in investing activities | ($102,799) | ($18,642) | ($36,287) | | Net cash from (used in) financing activities | ($2,148) | $112,444 | $9,902 | [Critical Accounting Policies and Significant Estimates](index=46&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) Critical accounting policies involve significant judgment in revenue recognition, inventory, income taxes, and stock compensation - Critical accounting policies and estimates are those most important to the portrayal of the company's financial condition and results, requiring difficult, subjective, or complex judgments[308](index=308&type=chunk) - Key areas of estimation include revenue recognition (especially for contracts with multiple performance obligations), inventory valuation (assessing excess and obsolete inventory), income taxes (including the valuation allowance for deferred tax assets), and stock-based compensation (determining fair value of awards)[313](index=313&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Impinj faces market risks from interest rates, inflation, and foreign currency, with current impact deemed low - The company's primary market risks are related to fluctuations in interest rates, inflation, and foreign currency exchange[326](index=326&type=chunk)[330](index=330&type=chunk)[331](index=331&type=chunk) - Interest rate risk is considered low, as the investment portfolio is short-term in nature and the convertible notes have fixed interest rates[328](index=328&type=chunk)[329](index=329&type=chunk) - Foreign currency risk from subsidiaries is not currently material, as the functional currency is the U.S. dollar[331](index=331&type=chunk)[333](index=333&type=chunk) [Financial Statements and Supplementary Data](index=50&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements and accompanying notes for 2020-2022 Consolidated Balance Sheet Summary (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $275,170 | $255,802 | | **Total Assets** | $349,737 | $315,537 | | **Total Current Liabilities** | $42,369 | $35,503 | | **Total Liabilities** | $334,146 | $326,613 | | **Total Stockholders' Equity (Deficit)** | $15,591 | ($11,076) | Consolidated Statement of Operations Summary (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Revenue** | $257,800 | $190,283 | $138,923 | | **Gross Profit** | $137,884 | $98,954 | $65,140 | | **Loss from Operations** | ($19,479) | ($37,249) | ($47,071) | | **Net Loss** | ($24,301) | ($51,260) | ($51,923) | | **Net Loss per Share** | ($0.95) | ($2.12) | ($2.28) | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=83&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes or disagreements with accountants on financial disclosure - None reported[503](index=503&type=chunk) [Controls and Procedures](index=83&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal financial reporting controls were effective as of December 31, 2022 - Management, including the CEO and principal financial officer, concluded that the company's disclosure controls and procedures were effective as of December **31**, **2022**[504](index=504&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December **31**, **2022**, based on the COSO **2013** framework. This assessment was audited by Ernst & Young LLP, which issued an unqualified opinion[505](index=505&type=chunk)[506](index=506&type=chunk)[511](index=511&type=chunk) [Other Information](index=86&type=section&id=Item%209B.%20Other%20Information) No other information was reported in this section - None reported[520](index=520&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=86&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) No information was reported regarding foreign jurisdictions preventing inspections - None reported[521](index=521&type=chunk) [PART III](index=87&type=section&id=PART%20III) Part III incorporates governance, compensation, and related party information by reference from the proxy statement - Information required for Items **10**, **11**, **12**, **13**, and **14** is incorporated by reference from the company's definitive proxy statement for the **2023** annual meeting of stockholders, to be filed within **120** days of the fiscal year-end[523](index=523&type=chunk)[525](index=525&type=chunk)[526](index=526&type=chunk) [PART IV](index=88&type=section&id=PART%20IV) Part IV lists financial statements, schedules, and exhibits filed with the Form 10-K [Exhibits, Financial Statement Schedules](index=88&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements and exhibits, with financial statements located in Item 8 - This item lists the financial statements filed as part of the report (under Item **8**) and provides an index of all exhibits filed[530](index=530&type=chunk)[532](index=532&type=chunk) [Form 10-K Summary](index=91&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company did not provide a summary for its Form 10-K - None provided[538](index=538&type=chunk)

Impinj, Inc. (NASDAQ:PI) Q4 2022 Earnings Conference Call February 8, 2023 5:00 PM ET Company Participants Andy Cobb - Vice President, Strategic Finance Chris Diorio - Co-Founder and CEO Cary Baker - CFO Jeff Dossett - CRO Conference Call Participants Toshiya Hari - Goldman Sachs Harsh Kumar - Piper Sandler Michael Walkley - Canaccord Genuity Scott Searle - ROTH Capital Troy Jensen - Lake Street Capital Operator Welcome to the Impinj Fourth Quarter and Full Year 2022 Earnings Conference Call and Webcast. Al ...

(1) Variations due to rounding © 2023 25 | --- | --- | --- | --- | --- | --- | --- | --- | --- | |--------------------------------------------------------------------------------------------------------------------------------|-------|-------|-------|-------|-------|-------|-------|-------| | | | | | | | | | | | Boundless IoT Investor Presentation Fourth Quarter 2022 See what's possible when every thing is connected to the digital world | | | | | | | | | | | | | | | | | | | | | | | | | | | | | In addition t ...