Impinj Reports Full Second Quarter 2018 Financial Results

Sep 12, 2018

Company Completes Independent Investigation and Files Form 10Q

SEATTLE--(BUSINESS WIRE)--Sep. 12, 2018-- Impinj, Inc. (NASDAQ: PI), a leading provider and pioneer of RAIN RFID solutions for identifying, locating and authenticating everyday items, today released its full financial results for the quarter ended June 30, 2018. The Company also disclosed that the Audit Committee completed the independent investigation the Company announced in its August 2^nd press release related to a complaint filed by a former employee. The Committee concluded there was no credible evidence supporting the former employee’s claims. The Company had delayed filing its second-quarter Form 10Q and announcing full second-quarter results pending completion of the investigation.

“Our second quarter 2018 results are consistent with our August 2^nd press release,” said Chris Diorio, Impinj co-Founder and CEO. “We are pleased that the Audit Committee was able to complete its independent investigation, and are proud that the outcome reaffirms that we operate our business according to the highest ethical principles. We continue to see momentum building as our team focuses on executing our vision of identifying, locating and authenticating every item in our everyday world.”

Second Quarter 2018 Financial Summary

Revenue was $28.5 million
GAAP gross margin of 47.9%; non-GAAP gross margin of 50.0%
GAAP net loss of $7.7 million, or loss of $0.36 per basic and diluted share using 21.3 million shares
Adjusted EBITDA loss of $4.0 million
Non-GAAP net loss of $4.1 million, or loss of $0.19 per diluted share using 21.3 million shares

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

Third Quarter 2018 Financial Outlook

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 third quarter of 2018 (in millions, except per share data):


		Three Months Ended
		September 30,
		2018
Revenue		$33.0 to $34.0
Net loss ⁽¹⁾		$(10.3) to $(9.3)
Adjusted EBITDA		$(3.4) to $(2.4)
Non-GAAP Net loss		$(3.6) to $(2.6)
GAAP Weighted-average shares — basic and diluted		21.4 to 21.5
Net loss per share — basic and diluted		$(0.48) to $(0.43)
Non-GAAP Weighted-average shares — basic and diluted		21.4 to 21.5
Non-GAAP Net loss per share — basic and diluted		$(0.17) to $(0.12)

⁽¹⁾ The third quarter outlook for GAAP Net loss includes estimated expenses associated with the recently completed investigation. If actual investigation costs differ from our estimate, net loss may differ from the outlook provided.

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

Audit Committee Investigation Findings

The Audit Committee, assisted by independent counsel that the Committee retained to oversee a thorough and careful investigation, concluded that there was no credible evidence supporting the former employee’s complaint. Accordingly, the Audit Committee determined that no additional actions were necessary or warranted with respect to the complaint or the investigation, including that no adjustments to past financial statements were appropriate or required, and that, at this time, no further investigatory steps need to be taken. With the filing of the Company’s second-quarter Form 10Q today, the Company is in compliance with its SEC filing obligations.

Conference Call Information

Impinj will host a conference call tomorrow, September 13, 2018 at 8:00 a.m. ET / 5:00 a.m. PT for analysts and investors to ask questions on our second quarter 2018 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 10121728.

Management’s prepared written remarks, along with quarterly financial data for the last eight quarters, 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, and financial outlook for the third quarter of 2018. 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, Inc. (NASDAQ: PI) wirelessly connects billions of everyday items such as apparel, medical supplies, automobile parts, luggage and food to consumer and business applications such as inventory management, patient safety, asset tracking and item authentication. The Impinj platform uses RAIN RFID to deliver timely information about these items to the digital world, thereby enabling the Internet of Things.


IMPINJ, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value, unaudited)

	June 30,			December 31,
	2018			2017
Assets:
Current assets:
Cash and cash equivalents	$	15,500		$	19,285
Short-term investments		37,307			38,831
Accounts receivable, net		20,016			22,244
Inventory		53,278			47,083
Prepaid expenses and other current assets		1,533			2,359
Total current assets		127,634			129,802
Property and equipment, net		16,918			18,110
Other non-current assets		214			241
Goodwill and other intangible assets, net		3,881			3,881
Total assets	$	148,647		$	152,034
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	5,299		$	4,666
Accrued compensation and employee related benefits		5,992			5,729
Accrued liabilities		3,140			3,162
Accrued restructuring costs		1,590			—
Current portion of long-term debt		1,593			4,088
Current portion of capital lease obligations		703			936
Current portion of deferred rent		374			628
Current portion of deferred revenue		509			714
Total current liabilities		19,200			19,923
Long-term debt, net of current portion		18,266			5,500
Capital lease obligations, net of current portion		495			745
Long-term liabilities — other		560			532
Long-term restructuring liabilities		685			—
Deferred rent, net of current portion		5,495			5,891
Deferred revenue, net of current portion		219			501
Total liabilities		44,920			33,092
Stockholders' equity:
Preferred stock, $0.001 par value — 5,000 shares authorized, no shares issued and outstanding at June 30, 2018 and December 31, 2017		—			—
Common stock, $0.001 par value — 495,000 shares authorized, 21,395 and 20,973 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively		21			21
Additional paid-in capital		330,441			323,482
Accumulated other comprehensive loss		(36	)		(36	)
Accumulated deficit		(226,699	)		(204,525	)
Total stockholders' equity		103,727			118,942
Total liabilities and stockholders' equity	$	148,647		$	152,034


IMPINJ, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data, unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Revenue	$	28,542		$	34,111		$	53,610		$	65,838
Cost of revenue		14,882			15,940			28,188			30,899
Gross profit		13,660			18,171			25,422			34,939
Operating expenses:
Research and development		8,363			7,119			16,366			14,462
Sales and marketing		8,023			7,044			16,882			14,380
General and administrative		5,061			4,822			10,286			8,909
Restructuring costs		(178	)		—			3,749			—
Total operating expenses		21,269			18,985			47,283			37,751
Loss from operations		(7,609	)		(814	)		(21,861	)		(2,812	)
Other income (expense), net		267			189			357			458
Interest expense		(351	)		(307	)		(580	)		(681	)
Loss before income taxes		(7,693	)		(932	)		(22,084	)		(3,035	)
Income tax expense		(39	)		(45	)		(90	)		(102	)
Net loss	$	(7,732	)	$	(977	)	$	(22,174	)	$	(3,137	)
Net loss per share — basic and diluted	$	(0.36	)	$	(0.05	)	$	(1.04	)	$	(0.15	)
Weighted-average shares outstanding — basic and diluted		21,333			20,636			21,229			20,491


IMPINJ, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Net loss	$	(7,732	)	$	(977	)	$	(22,174	)	$	(3,137	)
Other comprehensive loss, net of tax:
Unrealized gains / (losses) on investments		20			(4	)		—			(40	)
Total other comprehensive income / (loss)		20			(4	)		—			(40	)
Comprehensive loss	$	(7,712	)	$	(981	)	$	(22,174	)	$	(3,177	)


IMPINJ, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)

	Six Months Ended
	June 30,
	2018			2017
Operating activities:
Net loss	$	(22,174	)	$	(3,137	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		2,258			1,847
Stock-based compensation		4,678			2,623
Restructuring costs		(454	)		—
Accretion of discount or amortization of premium on short-term investments		(143	)		105
Amortization of debt issuance costs		39			48
Changes in operating assets and liabilities:
Accounts receivable		2,228			(8,042	)
Inventory		(6,195	)		(15,685	)
Prepaid expenses and other assets		864			724
Deferred revenue		(487	)		196
Deferred rent		(87	)		857
Accounts payable		579			(1,121	)
Accrued compensation and benefits		341			(1,886	)
Accrued liabilities		(34	)		691
Accrued restructuring costs		2,275			—
Net cash used in operating activities		(16,312	)		(22,780	)
Investing activities:
Purchases of investments		(19,154	)		(17,293	)
Proceeds from maturities of investments		20,800			24,362
Purchases of property and equipment		(1,071	)		(4,131	)
Net cash provided by investing activities		575			2,938
Financing activities:
Payments on capital lease financing obligations		(483	)		(557	)
Payments on term loans		(2,147	)		(688	)
Proceeds from term loans, net of debt issuance costs		12,379			—
Proceeds from exercise of stock options and employee stock purchase plan		2,203			2,933
Payments of deferred offering costs		—			(650	)
Net cash provided by financing activities		11,952			1,038
Net decrease in cash and cash equivalents		(3,785	)		(18,804	)
Cash and cash equivalents
Beginning of period		19,285			33,636
End of period	$	15,500		$	14,832

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, we use non-GAAP financial measures by financial statement line items that exclude the effects of stock-based compensation, depreciation, restructuring costs and other expenses that we believe do not reflect our core operating performance. Our key non-GAAP liquidity and performance measures include adjusted EBITDA and non-GAAP net income (loss), see definitions of such 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 excluding those expenses inherent in calculating adjusted EBITDA and non-GAAP net income (loss) can provide useful measures for period-to-period comparisons of our business. Accordingly, we believe that adjusted EBITDA and non-GAAP net income (loss) provide useful information to investors and others in understanding and evaluating our operating results in the same manner as it does for 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 non-GAAP measures used by other companies.

Adjusted EBITDA

We define adjusted EBITDA as net income (loss) determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation, restructuring costs, other income (expense), net, interest expense and income tax expense. Restructuring costs relate to an effort in the first quarter of 2018 to reduce headcount and sublease office space to match strategic and financial objectives and optimize resources for long term growth. We believe that adjusted EBITDA provides meaningful supplemental information regarding our performance and liquidity.

Non-GAAP Net Income (Loss)

We define non-GAAP net income (loss) to consist of net income (loss) determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation, restructuring costs (for more information about restructuring costs, please refer to description in adjusted EBITDA above), amortization of debt issuance costs and non-cash income tax expense. We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of future income tax liabilities by utilizing our deferred tax assets, which primarily consist of federal net operating loss carryforwards and federal research and experimentation credit carryforwards. By better reflecting our future operating performance we believe this presentation will enhance comparability of our operating results.


IMPINJ, INC.
RECONCILIATIONS OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(in thousands, except percentages, unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
GAAP Gross profit	$	13,660		$	18,171		$	25,422		$	34,939
Adjustments:
Depreciation		503			438			1,003			823
Stock-based compensation		98			37			181			83
Non-GAAP Gross profit	$	14,261		$	18,646		$	26,606		$	35,845

GAAP Gross margin		47.9	%		53.3	%		47.4	%		53.1	%
Adjustments:
Depreciation		1.8	%		1.3	%		1.9	%		1.3	%
Stock-based compensation		0.3	%		0.1	%		0.3	%		0.1	%
Non-GAAP Gross margin		50.0	%		54.7	%		49.6	%		54.3	%

GAAP Research and development expense	$	8,363		$	7,119		$	16,366		$	14,462
Adjustments:
Depreciation		(402	)		(311	)		(787	)		(617	)
Stock-based compensation		(822	)		(415	)		(1,581	)		(898	)
Non-GAAP Research and development expense	$	7,139		$	6,393		$	13,998		$	12,947

GAAP Sales and marketing expense	$	8,023		$	7,044		$	16,882		$	14,380
Adjustments:
Depreciation		(131	)		(126	)		(260	)		(245	)
Stock-based compensation		(931	)		(572	)		(1,688	)		(1,179	)
Non-GAAP Sales and marketing expense	$	6,961		$	6,346		$	14,934		$	12,956

GAAP General and administrative expense	$	5,061		$	4,822		$	10,286		$	8,909
Adjustments:
Depreciation		(102	)		(98	)		(208	)		(162	)
Stock-based compensation		(762	)		(229	)		(1,228	)		(463	)
Non-GAAP General and administrative expense	$	4,197		$	4,495		$	8,850		$	8,284

GAAP Total operating expense	$	21,269		$	18,985		$	47,283		$	37,751
Adjustments:
Depreciation		(635	)		(535	)		(1,255	)		(1,024	)
Stock-based compensation		(2,515	)		(1,216	)		(4,497	)		(2,540	)
Restructuring costs		178			—
Non-GAAP Total operating expense	$	18,297		$	17,234		$	41,531		$	34,187


IMPINJ, INC.
RECONCILIATIONS OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data, unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017

Net loss	$	(7,732	)	$	(977	)	$	(22,174	)	$	(3,137	)
Depreciation		1,138			973			2,258			1,847
Stock-based compensation		2,613			1,253			4,678			2,623
Other (income) expense, net		(267	)		(189	)		(357	)		(458	)
Interest expense		351			307			580			681
Income tax expense		39			45			90			102
Restructuring costs		(178	)		-			3,749			-
Adjusted EBITDA	$	(4,036	)	$	1,412		$	(11,176	)	$	1,658


	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017

Net Loss	$	(7,732	)	$	(977	)	$	(22,174	)	$	(3,137	)
Adjustments:
Depreciation		1,138			973			2,258			1,847
Stock-based compensation		2,613			1,253			4,678			2,623
Restructuring costs		(178	)		-			3,749			-
Amortization of debt issuance costs		18			25			39			48
Non-cash income tax expense		12			23			28			45
Non-GAAP Net income (loss)	$	(4,129	)	$	1,297		$	(11,422	)	$	1,426
Non-GAAP Net income (loss) per share:
Basic	$	(0.19	)	$	0.06		$	(0.54	)	$	0.07
Diluted	$	(0.19	)	$	0.06		$	(0.54	)	$	0.07
GAAP and non-GAAP Weighted-average shares — basic		21,333			20,636			21,229			20,490
Adjustments:
Effects of dilutive securities
Unvested shares of common stock subject to repurchase		-			84			-			92
Stock options		-			1,194			-			1,219
Non-GAAP Weighted-average shares — diluted		21,333			21,914			21,229			21,801


IMPINJ, INC.
RECONCILIATIONS OF GAAP FINANCIAL OUTLOOK TO NON-GAAP FINANCIAL OUTLOOK
(in thousands, except per share data, unaudited)

	Three Months Ended
	September 30,
	2018
Forecasted Net loss⁽¹⁾	$	(9,820	)
Adjustments:
Forecasted Depreciation		1,900
Forecasted Stock-based compensation		3,030
Forecasted Other (income) expense, net		(180	)
Forecasted Interest expense		369
Forecasted Income tax expense		51
Forecasted Investigation expenses ⁽¹⁾		1,750
Adjusted EBITDA	$	(2,900	)

Forecasted Net loss ⁽¹⁾	$	(9,820	)
Adjustments:
Forecasted Depreciation		1,900
Forecasted Stock-based compensation		3,030
Forecasted Amortization of debt issuance costs		20
Forecasted Non-cash income tax expense		20
Forecasted Investigation costs ⁽¹⁾		1,750
Non-GAAP Net loss	$	(3,100	)
Non-GAAP Net loss per share — basic and diluted	$	(0.14	)
Weighted-average shares — basic and diluted		21,450

View source version on businesswire.com: https://www.businesswire.com/news/home/20180912006027/en/

Source: Impinj, Inc.

Impinj, Inc.
Investor Relations, +1-206-315-4470
ir@impinj.com

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