IMPINJ INC

Previous wording

the impact of any future health outbreak or pandemic, including a potential resurgence in Covid-19 cases, including on our business, operations and financial condition as well as on macroeconomic conditions;

Current wording

the impact of any future health outbreak or pandemic, including a potential resurgence of Covid-19 on our business, operations and financial condition as well as on macroeconomic conditions;

Previous wording

Enterprises have significantly adopted RAIN in retail apparel, our largest market, and SC&L, but the rate of adoption and unit growth rates have been uneven and unpredictable. From 2010 to 2023, our overall endpoint IC sales volumes increased at a compounded annual growth rate of 26%; however, we have experienced uneven growth rates in various periods.

Current wording

Enterprises have significantly adopted RAIN in retail apparel, our largest market, and SC&L, but the rate of adoption and unit growth rates have been uneven and unpredictable. From 2010 to 2023, our overall endpoint IC sales volumes increased at a 26% compounded annual growth rate; however, we have experienced uneven growth rates in various periods.

Previous wording

Our systems business, at least for readers and gateways, depends significantly on large-scale deployments at discrete end users, and deployment timing causes large yearly variability in our systems revenue. For example, we generated 14% of total 2019 revenue from a gateway deployment at a large North American SC&L provider. We did not have comparable project-based revenue in 2020. Similarly, in 2021, we generated 13% of our quarterly revenue from a project-based gateway deployment for RAIN-based self-checkout and loss prevention at a large Europe-based global retailer. We did not have comparable project-based revenue in 2022 or 2023.

Current wording

Our systems business, at least for readers and gateways, depends significantly on large-scale deployments at discrete end users, and deployment timing causes large yearly variability in our systems revenue. For example, we generated 14% of total 2019 revenue from a gateway deployment at a large North American SC&L provider. We did not have comparable project-based revenue in 2020. Similarly, in 2021, we generated 13% of our quarterly revenue from a project-based gateway deployment for RAIN-based self-checkout and loss prevention at a large Europe-based global retailer. We did not have comparable project-based revenue in 2022, 2023 or first-half 2024.

Previous wording

We typically negotiate pricing with most of our endpoint IC OEMs with an effective date of the first quarter of the calendar year. In the past, this negotiation typically resulted in reduced revenue and gross margins in the first quarter compared to prior periods, which then normalized in subsequent quarters as we reduced costs and adjusted product mix by migrating those OEMs and end users to newer, lower-cost products.

Current wording

We typically negotiate pricing with most of our endpoint IC OEMs with an effective date of the first quarter of the calendar year. In the past, this negotiation typically resulted in reduced revenue and gross margins in the first quarter compared to prior periods, which then normalized in subsequent quarters as we reduced costs and adjust product mix by migrating those OEMs and end users to newer, lower-cost products.

Previous wording

Revenue decreased, due primarily to lower endpoint IC and systems revenue. Gross profit decreased due to the lower revenue which was partially offset by lower cost of revenue. The endpoint IC revenue decrease was driven primarily by lower average ASP due to higher concentration of revenue from our 300mm products and lower shipment volumes when compared to the prior year period. The systems revenue decrease was driven primarily by lower revenue from readers, gateways and reader ICs, partially offset by increased revenue from test and measurement solutions. Gross margin decreased, due primarily to increased production costs on lower production volumes and revenue over the prior year period. Loss from operations increased, due primarily to decreased gross profit and increased operating expenses. The operating expense increase was due primarily to higher restructuring costs and amortization of intangibles, both of which we did not have in the prior year period. This increase was partially offset by a decrease in general and administrative expenses.

Current wording

Revenue and gross profit increased, due primarily to higher endpoint IC revenue partially offset by lower systems revenue. The endpoint IC revenue increase was driven primarily by licensing revenue as well as higher endpoint IC shipment volumes when compared to the prior-year period. Systems revenue decreased, due primarily to lower shipment volumes. Gross margin increased, due primarily to the high-margin licensing revenue contribution, slightly offset by a decrease in product margins due to revenue mix between endpoint ICs and systems. Income from operations increased, due primarily to increased gross profit and decreased operating expenses. The operating expense decrease was due to lower general and administrative costs, sales and marketing costs and amortization of intangibles, partially offset by higher research and development costs.

Previous wording

We currently derive substantially all our revenue from sales of endpoint ICs, reader ICs, readers, gateways and test and measurement solutions. We sell our endpoint ICs and test and measurement solutions primarily to inlay manufacturers; our reader ICs primarily to OEMs and ODMs through distributors; and our readers and gateways to solutions providers, VARs and SIs, also primarily through distributors. We expect endpoint IC sales to represent the majority of our revenue for the foreseeable future.

Current wording

We currently derive substantially all our revenue from sales of endpoint ICs, reader ICs, readers, gateways, test and measurement solutions and licensing. We sell our endpoint ICs and test and measurement solutions primarily to inlay manufacturers; our reader ICs primarily to OEMs and ODMs through distributors; and our readers and gateways to solutions providers, VARs and SIs, also primarily through distributors. We expect endpoint IC sales to represent the majority of our revenue for the foreseeable future.

Previous wording

Sales and marketing expense increased $203,000, due primarily to increases of $270,000 in stock-based compensation expense primarily related to increased outstanding equity grants.

Current wording

Research and development expense increased $1.5 million, due primarily to increases of $2.6 million in personnel expenses related to higher bonus achievement and higher taxes associated with equity vesting; $0.7 million in stock-based compensation expense primarily related to increased outstanding equity grants; and $0.4 million in infrastructure costs; partially offset by a $2.0 million decrease in product development costs due to timing.

Previous wording

Research and development expense was relatively flat compared to the prior year period. Increases of $692,000 in stock-based compensation expense primarily related to increased outstanding equity grants, $638,000 in personnel expenses primarily from higher headcount, and $277,000 in infrastructure costs due to increased depreciation and software costs were offset by a decrease of $1.4 million in product development costs due to timing.

Current wording

Research and development expense increased $1.6 million, due primarily to increases of $3.2 million in personnel expenses from higher bonus achievement, higher headcount primarily related to our acquisition of Voyantic and higher taxes associated with equity vesting; $1.4 million in stock-based compensation expense primarily related to increased outstanding equity grants; and $0.7 million in infrastructure costs; partially offset by a $3.5 million decrease in product development costs due to timing.

Previous wording

General and administrative expense decreased $2.2 million, due primarily to a decrease of $3.1 million in professional services due primarily to decreased legal expense. This decrease was partially offset by increases of $566,000 in stock compensation expense due primarily to increased outstanding equity grants and $243,000 in personnel expenses primarily from higher headcount.

Current wording

General and administrative expense decreased $2.8 million, due primarily to a decrease of $5.5 million in professional services related to decreased legal fees and transaction expenses in current year. This decrease was partially offset by increases of $1.7 million in personnel expenses primarily from higher bonus achievement and higher taxes associated with equity vesting and $0.8 million in stock compensation expense due primarily to increased outstanding equity grants.

Previous wording

Other income, net decreased from the prior period due to decreased interest income.

Current wording

Other income, net increased from the prior period due to increased interest income given higher invested balances and higher interest rates.

Previous wording

The increase in income from settlement of litigation relates to the litigation settlement we reached with NXP on March 13, 2024. See Note 6 Commitments and Contingencies for further details.

Current wording

The increase in income from settlement of litigation relates to the Settlement Agreement with NXP on March 13, 2024. See Note 6, Commitments and Contingencies for further details.

Previous wording

We are subject to federal and state income taxes in the United States and foreign jurisdictions. Income tax expense decreased $73,000 due to our estimated effective tax rate which incorporated the acquisition of Voyantic Oy.

Current wording

We are subject to federal and state income taxes in the United States and foreign jurisdictions. Income tax expense decreased $0.3 million for the three and six months ended June 30, 2024 compared to the prior-year periods due to changes in our estimated effective tax rate after we acquired Voyantic Oy.

Previous wording

As of March 31, 2024, we had cash, cash equivalents and short-term investments of $174.1 million, comprising cash deposits held at major financial institutions and short-term investments in a variety of securities, including U.S. government securities, treasury bills, corporate notes and bonds, commercial paper, asset-backed securities and money market funds. As of March 31, 2024, we had working capital of $290.0 million.

Current wording

As of June 30, 2024, we had cash, cash equivalents and short-term investments of $220.2 million, comprising cash deposits held at major financial institutions and short-term investments in a variety of securities, including U.S. government securities, treasury bills, corporate notes and bonds, commercial paper, asset-backed securities and money market funds. As of June 30, 2024, we had working capital of $39.4 million.

Previous wording

For the three months ended March 31, 2024, we generated $60.1 million of net cash from operating activities. These net cash proceeds were due primarily to $50.4 million of net income adjusted for non-cash items and $9.8 million in working capital due primarily to lower inventory.

Current wording

For the six months ended June 30, 2024, we generated $105.6 million of net cash from operating activities. These net cash proceeds were due primarily to $78.4 million of net income adjusted for non-cash items and $27.2 million in working capital due primarily to lower inventory.

Previous wording

For the three months ended March 31, 2024, we generated $5.0 million of net cash from investing activities. These net cash proceeds were due primarily to investment maturities of $11.2 million, partially offset by cash paid for equipment purchases of $6.2 million.

Current wording

For the six months ended June 30, 2024, we generated $5.5 million of net cash from investing activities. These net cash proceeds were due primarily to investment maturities of $13.0 million, partially offset by cash paid for equipment purchases of $7.6 million.

Previous wording

For the three months ended March 31, 2024, we generated $6.9 million of net cash from financing activities. These net cash proceeds were due to stock-option exercises and our employee stock purchase plan.

Current wording

For the six months ended June 30, 2023, we generated $5.8 million of net cash from financing activities. These net cash proceeds were due primarily to $5.8 million from stock-option exercises and our employee stock purchase plan.

Previous wording

Purchase Commitments – Purchase commitments as of March 31, 2024 total $17.6 million and consist of non-cancelable commitments to purchase inventory.

Current wording

Purchase Commitments – Purchase commitments as of June 30, 2024 total $27.8 million and comprise noncancelable commitments to purchase inventory.