Impinj(PI)2024-02-12 21:25Revenue 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]