Impinj, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Impinj develops and sells RAIN RFID products, including endpoint ICs and systems such as reader ICs, readers, gateways and software.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $47.3 million | $26.5 million | $92.5 million | $74.3 million |
| Gross profit | $24.8 million | $13.0 million | $46.8 million | $34.4 million |
| Gross margin | 52.4% | 49.0% | 50.5% | 46.2% |
| Operating loss | $8.3 million | $16.3 million | $17.2 million | $19.7 million |
| Net loss | $8.9 million | $17.5 million | $18.3 million | $21.9 million |
| Adjusted EBITDA (non-GAAP) | $3.3 million | $(5.2) million | $4.2 million | $(2.2) million |
- Q2 revenue increased 79% year over year. Endpoint IC revenue was $30.8 million, up $12.2 million; systems revenue was $16.5 million, up $8.6 million. Systems growth included $6.3 million from a project-based gateway deployment for a large European retailer.
- For the first half, endpoint IC revenue rose $16.6 million, while systems revenue increased $1.6 million. Lower reader IC shipments, affected by packaging delays, partly offset growth in readers and gateways.
- Gross margin improved versus 2020, reflecting higher revenue, prior-year inventory obsolescence charges, and first-half 2021 sales of previously reserved inventory. Endpoint IC ASPs declined due to mix and annual pricing negotiations.
- Operating expenses rose in Q2, mainly due to higher stock-based compensation, R&D personnel expense and product-development costs. First-half results also included $1.3 million of restructuring charges. Stock-based compensation was $18.0 million for the half.
Cash, liquidity and debt
- At June 30, 2021, cash and cash equivalents were $51.2 million and short-term investments were $60.8 million, totaling $112.0 million. Working capital was $58.0 million. Management said available cash and investments should cover anticipated needs for at least 12 months under its current operating plan.
- First-half operating cash flow was $5.0 million, compared with $2.8 million a year earlier. Capital expenditures were $7.9 million; cash increased $27.5 million to $51.2 million, with investment maturities and employee equity-plan proceeds contributing to cash flows.
- The company had $86.3 million principal amount of 2.00% convertible senior notes due 2026. The notes became convertible at holders’ option as of June 30, 2021; their carrying value was $84.0 million. The reported balance sheet classified this carrying value as current. The notes’ estimated fair value was $144.6 million, and their if-converted value exceeded principal by $42.5 million at the quarter-end share price.
- Non-cancelable purchase commitments totaled $18.0 million, including $14.9 million of inventory commitments. Net operating lease commitments were $18.8 million.
Outlook, risks and unusual items
- No quantitative revenue or earnings guidance is provided in the supplied filing text. Management expects elevated demand but says supply constraints limit its ability to meet it. It expects endpoint IC supply constraints and tight foundry availability to persist into 2022, with reader IC packaging delays and component shortages continuing through the second half of 2021.
- Management reported strong demand for endpoint ICs, including the M700 product family, and systems, but said wafer, packaging and other component shortages constrain production. It is prioritizing wafer availability, ramping 300mm post-processing capacity and maximizing unit volumes. Higher component and packaging costs could pressure margins if not offset by pricing or other savings.
- Covid-19 continues to create uncertainty in demand, customer deployments, manufacturing capacity and employee operations. Retail is a key market; demand recovery and channel visibility remain difficult to forecast. Revenue also depends on concentrated customers and project-based deployments.
- Other major risks include reliance on third-party suppliers without long-term supply contracts, competition and pricing pressure, potential inventory mismatches, and the company’s history of losses and volatile results.
- Impinj and NXP are involved in multiple patent disputes in the United States and China. Outcomes remain uncertain; no contingency liabilities were accrued at June 30. A previously settled New York securities class action was closed in April 2021; a related derivative settlement remained subject to final court approval.
- Adoption of ASU 2020-06 on January 1, 2021 changed convertible-note accounting, increasing reported debt by $29.3 million and decreasing additional paid-in capital by $32.7 million, with a $3.4 million decrease in accumulated deficit. The change also reduced 2021 interest expense versus the unadjusted prior-year comparison.
- A February 2021 go-to-market restructuring eliminated approximately seven positions, about 2% of the workforce, and was substantially completed by quarter-end. Disclosure controls were assessed as effective at a reasonable assurance level.
Key facts for investors to verify
- Whether constrained wafer, packaging and component supply allows Impinj to fulfill demand and support expected 2022 endpoint IC volumes.
- Whether revenue growth, particularly the large European gateway deployment, is repeatable or reflects project timing and customer concentration.
- How falling endpoint IC ASPs and higher supply-chain costs affect gross margin as product mix and supply availability change.
- The potential cash, dilution and balance-sheet implications of the 2026 convertible notes, which were convertible at holders’ option at quarter-end.
- Developments and possible financial or operating effects of the NXP patent litigation and pending derivative settlement approval.
- The company’s path to sustained GAAP profitability: it remained loss-making despite positive non-GAAP adjusted EBITDA.