Impinj Reports Third Quarter 2020 Financial Results

Rhea-AI Summary

Impinj, Inc. (NASDAQ: PI) reported third-quarter 2020 revenue of $28.2 million, showing a sequential improvement attributed to increased retail-apparel volumes. The company reported a GAAP gross margin of 47.4% and a non-GAAP gross margin of 50.1%. However, it experienced a GAAP net loss of $14.3 million, equating to a loss of $0.63 per diluted share. Adjusted EBITDA also reflected a loss of $6.2 million. The company has provided cautious guidance for Q4 2020, noting that actual results may vary significantly.

Positive

• Sequential revenue growth driven by increased retail-apparel volumes.
• Non-GAAP gross margin of 50.1%, indicating strong operational efficiency.

Negative

• GAAP net loss of $14.3 million, a significant financial decline.
• Adjusted EBITDA loss of $6.2 million, reflecting ongoing financial challenges.

SEATTLE--(BUSINESS WIRE)--Impinj, Inc. (NASDAQ: PI), a leading provider and pioneer of RAIN RFID solutions, today released its financial results for the third quarter ended September 30, 2020.

“Third-quarter revenue improved sequentially, driven primarily by rebounding retail-apparel volumes that drove endpoint IC sales,” said Chris Diorio, Impinj co-founder and CEO. “With game-changing new products and a platform and vision that sit squarely in the center of our end users’ digital transformation, the opportunity in front of us is more compelling than ever.”

Third Quarter 2020 Financial Summary

• Revenue of $28.2 million
• GAAP gross margin of 47.4%; non-GAAP gross margin of 50.1%
• GAAP net loss of $14.3 million, or loss of $0.63 per diluted share using 22.9 million shares
• Adjusted EBITDA loss of $6.2 million
• Non-GAAP net loss of $6.7 million, or loss of $0.29 per diluted share using 22.9 million shares

A reconciliation between GAAP and non-GAAP information is contained in the tables below. Additionally, descriptions of these non-GAAP financial measures are provided in the “Non-GAAP Financial Measures” sections below.

Fourth Quarter 2020 Financial Considerations

Impinj provides guidance based on current market conditions and expectations; actual results may differ materially. Please refer to the comments below regarding forward-looking statements. The following table presents Impinj’s financial outlook for the fourth quarter of 2020 (in millions, except per share data):

		Three Months Ending
		December 31, 2020
Revenue		$26.5 to $28.5
GAAP Net loss		($17.2) to ($16.2)
Adjusted EBITDA loss		($8.9) to ($7.4)
Non-GAAP net loss		($9.3) to ($7.8)
GAAP Weighted-average shares — basic and diluted		23.00 to 23.10
GAAP Net loss per share — basic and diluted		($0.75) to ($0.70)
Non-GAAP Weighted-average shares — basic and diluted		23.00 to 23.10
Non-GAAP Net loss per share — basic and diluted		($0.40) to ($0.34)

A reconciliation between GAAP and non-GAAP is provided in the "Non-GAAP Financial Measures" section below.

Conference Call Information

Impinj will host a conference call today, Oct. 28, 2020 at 5:00 p.m. ET / 2:00 p.m. PT for analysts and investors to ask questions on its third quarter 2020 results. Open to the public, investors may access the call by dialing +1-412-317-5196. A live webcast of the conference call will also be accessible on our website at investor.impinj.com. Following the webcast, an archived version will be available on the website for one year. A telephonic replay of the call will be available one hour after the call and will run for five business days and may be accessed by dialing +1-412-317-0088 and entering passcode 10148757.

Management’s prepared written remarks, along with quarterly financial data, will be made available on our website at investor.impinj.com commensurate with this release.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding the market for RAIN RFID, our strategy, prospects, the impact of Covid-19, and financial considerations for fourth quarter of 2020 and future periods.

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance.

The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the caption "Risk Factors" and elsewhere in our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the U.S. Securities and Exchange Commission. All information provided in this release and in the attachments is as of the date hereof, and we undertake no duty to update this information unless required by law.

About Impinj

Impinj (NASDAQ: PI) helps businesses and people analyze, optimize, and innovate by wirelessly connecting billions of everyday things — such as apparel, automobile parts, luggage, and shipments — to the Internet. The Impinj platform uses RAIN RFID to deliver timely data about these everyday things to business and consumer applications, enabling a boundless Internet of Things. www.impinj.com

Impinj is a registered trademark of Impinj, Inc. All other trademarks are the property of their owners.

IMPINJ, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value, unaudited)
	September 30, 2020				December 31, 2019 (1)
Assets:
Current assets:
Cash and cash equivalents	$	40,063			$	66,898
Short-term investments		65,057				49,597
Accounts receivable, net		17,730				23,735
Inventory		37,982				34,153
Prepaid expenses and other current assets		3,339				2,386
Total current assets		164,171				176,769
Property and equipment, net		16,365				17,442
Operating lease right-of-use assets		14,472				16,501
Other non-current assets		1,193				453
Goodwill		3,881				3,881
Total assets	$	200,082			$	215,046
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	8,597			$	5,600
Accrued compensation and employee related benefits		4,062				5,859
Accrued liabilities		2,334				3,755
Current portion of operating lease liabilities		3,618				3,380
Current portion of deferred revenue		953				551
Other current liabilities		19				352
Total current liabilities		19,583				19,497
Long-term debt, net of current portion		53,595				50,876
Operating lease liabilities, net of current portion		16,160				18,907
Deferred revenue, net of current portion		260				213
Long-term liabilities — other		1,056				314
Total liabilities		90,654				89,807
Stockholders' equity:
Common stock, $0.001 par value		23				22
Additional paid-in capital		408,342				387,926
Accumulated other comprehensive income		12				34
Accumulated deficit		(298,949	)			(262,743	)
Total stockholders' equity		109,428				125,239
Total liabilities and stockholders' equity	$	200,082			$	215,046
(1) Certain immaterial amounts on our condensed consolidated balance sheets in prior periods have been reclassified to conform with current period presentation.

IMPINJ, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data, unaudited)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
Revenue		$	28,196			$	40,762			$	102,475			$	112,015
Cost of revenue			14,824				20,981				54,749				57,945
Gross profit			13,372				19,781				47,726				54,070
Operating expenses:
Research and development			11,901				10,344				33,619				27,678
Sales and marketing			6,964				7,842				20,577				24,579
General and administrative			7,527				5,503				26,215				16,653
Total operating expenses			26,392				23,689				80,411				68,910
Loss from operations			(13,020	)			(3,908	)			(32,685	)			(14,840	)
Other income, net			49				317				584				947
Interest expense			(1,360	)			(413	)			(4,021	)			(1,263	)
Loss before income taxes			(14,331	)			(4,004	)			(36,122	)			(15,156	)
Income tax expense			(15	)			(77	)			(84	)			(151	)
Net loss		$	(14,346	)		$	(4,081	)		$	(36,206	)		$	(15,307	)
Net loss per share — basic and diluted		$	(0.63	)		$	(0.19	)		$	(1.60	)		$	(0.70	)
Weighted-average shares — basic and diluted			22,931				21,961				22,686				21,738

IMPINJ, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, unaudited)
		Nine Months Ended
		September 30,
		2020				2019
Operating activities:
Net loss		$	(36,206	)		$	(15,307	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation			3,402				3,637
Stock-based compensation			15,501				11,813
Accretion of discount or amortization of premium on short-term investments			85				(464	)
Amortization of debt issuance costs and debt discount			2,719				51
Changes in operating assets and liabilities:
Accounts receivable			6,005				(6,341	)
Inventory			(3,829	)			8,451
Prepaid expenses and other assets			(1,637	)			(222	)
Deferred revenue			449				114
Accounts payable			2,608				1,508
Accrued compensation and employee related benefits			(1,797	)			(2,440	)
Operating lease right-of-use assets			2,029				1,505
Operating lease liabilities			(2,509	)			(2,255	)
Accrued liabilities and other liabilities			(372	)			164
Net cash provided by (used in) operating activities			(13,552	)			214
Investing activities:
Purchases of investments			(57,298	)			(59,036	)
Proceeds from maturities of investments			41,675				51,794
Purchases of property and equipment			(2,336	)			(971	)
Net cash used in investing activities			(17,959	)			(8,213	)
Financing activities:
Principal payments on finance lease obligations			(240	)			(410	)
Payments on term and equipment loans			—				(4,222	)
Proceeds from term loans, net of debt issuance costs			—				3,991
Proceeds from exercise of stock options and employee stock purchase plan			4,916				8,041
Net cash provided by financing activities			4,676				7,400
Net decrease in cash and cash equivalents			(26,835	)			(599	)
Cash and cash equivalents
Beginning of period			66,898				17,530
End of period		$	40,063			$	16,931

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements prepared and presented in accordance with U.S. generally accepted accounting principles, or GAAP, our key non-GAAP performance measures include adjusted EBITDA and non-GAAP net income (loss), as defined below. We use adjusted EBITDA and non-GAAP net income (loss) as key measures to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operating plans. We believe these measures provide useful information for period-to-period comparisons of our business to allow investors and others to understand and evaluate our operating results in the same manner as our management and board of directors. Our presentation of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP, and our non-GAAP measures may be different from similarly termed non-GAAP measures used by other companies.

Adjusted EBITDA

We define adjusted EBITDA as net income (loss) determined in accordance with GAAP, excluding, if applicable for the periods presented, the effects of stock-based compensation; depreciation; investigation costs; restructuring costs; settlement and related costs; other income, net; interest expense; loss on debt extinguishment; and income tax benefit (expense). In fourth-quarter 2019, we revised our definition of adjusted EBITDA to exclude loss on debt extinguishment incurred in connection with the December 2019 repayment of our senior credit facility. In second-quarter 2020, we revised our definition of adjusted EBITDA to exclude litigation settlement costs for the class-action and derivative lawsuits, including related costs. We have excluded these costs and expenses because we do not believe they reflect our core operations and us excluding them enables more consistent evaluation of our operating performance. Neither revision to the definition of adjusted EBITDA impacted adjusted EBITDA previously reported for prior periods preceding the revisions.

Non-GAAP Net Income (Loss)

We define non-GAAP net income (loss) as net income (loss), excluding, if applicable for the periods presented, the effects of stock-based compensation; depreciation; investigation costs; restructuring costs; settlement and related costs; amortization of debt discount related to the equity component of our convertible notes; and prepayment penalty on debt extinguishment. In fourth-quarter 2019, we revised our definition of non-GAAP net income (loss) to exclude the prepayment penalty on debt extinguishment incurred in connection with the December 2019 repayment of our senior credit facility and amortization of debt discount related to the equity component of the 2019 Notes. We have revised the prior period non-GAAP net income (loss) to conform to our current period presentation. In second-quarter 2020, we revised our definition of non-GAAP net income (loss) to exclude litigation settlement costs for the class-action and derivative lawsuits, including related costs. Excluding settlement and related costs did not impact non-GAAP net income (loss) previously reported for prior periods preceding the revision.

GAAP requires that certain convertible debt instruments that may be settled in cash on conversion be accounted for as separate liability and equity components in a manner that reflects our non-convertible debt borrowing rate. This accounting results in the debt component being treated as though it was issued at a discount, with the debt discount being amortized as additional non-cash interest expense over the debt instrument term using the effective interest method. As a result, we believe that excluding this non-cash interest expense attributable to the debt discount in calculating our non-GAAP net income (loss) is useful because this interest expense is not indicative of our ongoing operational performance.

IMPINJ, INC. RECONCILIATIONS OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (in thousands, except percentages, unaudited)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
GAAP Gross margin			47.4	%			48.5	%			46.6	%			48.3	%
Adjustments:
Depreciation			1.9	%			1.2	%			1.3	%			1.4	%
Stock-based compensation			0.8	%			0.5	%			0.6	%			0.4	%
Non-GAAP Gross margin			50.1	%			50.2	%			48.5	%			50.1	%
GAAP Net loss		$	(14,346	)		$	(4,081	)		$	(36,206	)		$	(15,307	)
Adjustments:
Depreciation			1,108				1,220				3,402				3,637
Stock-based compensation			5,683				4,793				15,501				11,813
Other income, net			(49	)			(317	)			(584	)			(947	)
Interest expense			1,360				413				4,021				1,263
Income tax expense			15				77				84				151
Settlement and related costs			—				—				5,359				—
Adjusted EBITDA		$	(6,229	)		$	2,105			$	(8,423	)		$	610
GAAP Net loss		$	(14,346	)		$	(4,081	)		$	(36,206	)		$	(15,307	)
Adjustments:
Depreciation			1,108				1,220				3,402				3,637
Stock-based compensation			5,683				4,793				15,501				11,813
Amortization of debt discount			897				—				2,637				—
Settlement and related costs			—				—				5,359				—
Non-GAAP Net income (loss)		$	(6,658	)		$	1,932			$	(9,307	)		$	143
Non-GAAP Net income (loss) per share:
Basic		$	(0.29	)		$	0.09			$	(0.41	)		$	0.01
Diluted		$	(0.29	)		$	0.08			$	(0.41	)		$	0.01
GAAP and non-GAAP Weighted-average shares — basic			22,931				21,961				22,686				21,738
GAAP Weighted-average shares — diluted			22,931				21,961				22,686				21,738
Dilutive shares from stock plans			—				894				—				658
Non-GAAP Weighted-average shares — diluted			22,931				22,855				22,686				22,396

IMPINJ, INC. RECONCILIATIONS OF GAAP FINANCIAL OUTLOOK TO NON-GAAP FINANCIAL OUTLOOK (in thousands, except per share data, unaudited – calculated at the midpoint of the outlook range)
		Three Months Ending
		December 31,
		2020
GAAP Net loss		$	(16,700	)
Adjustments:
Forecasted Depreciation			1,200
Forecasted Stock-based compensation			6,000
Forecasted Interest expense			1,400
Forecasted Other income, net			(50	)
Forecasted Income tax expense			—
Adjusted EBITDA loss		$	(8,150	)
GAAP Net loss		$	(16,700	)
Adjustments:
Forecasted Depreciation			1,200
Forecasted Stock-based compensation			6,000
Forecasted Accretion of debt discount			950
Non-GAAP Net loss		$	(8,550	)
GAAP Net loss per share — basic and diluted		$	(0.72	)
Non-GAAP Net loss per share — basic and diluted		$	(0.37	)
GAAP weighted-average shares — basic and diluted			23,050
Non-GAAP weighted-average shares — basic and diluted			23,050