10-Q 1 pi-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-37824

 

IMPINJ, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

91-2041398

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

400 Fairview Avenue North, Suite 1200, Seattle, Washington

 

98109

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (206) 517-5300

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

PI

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of April 12, 2024, 27,712,953 shares of common stock were outstanding.

 


IMPINJ, INC.

QUARTERLY REPORT ON FORM 10-Q

 

Table of Contents

 

 

 

Page

 

 

Risk Factor Summary

 

3

 

 

 

 

 

 

 

PART I. — FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements (Unaudited)

 

4

 

Condensed Consolidated Balance Sheets

 

4

 

 

Condensed Consolidated Statements of Operations

 

5

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

 

6

 

Condensed Consolidated Statements of Cash Flows

 

7

 

 

Condensed Consolidated Statements of Changes in Stockholders' Equity

 

8

 

Notes to Condensed Consolidated Financial Statements

 

9

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

27

Item 4.

 

Controls and Procedures

 

29

 

 

PART II. — OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

30

Item 1A.

 

Risk Factors

 

30

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

47

Item 3.

 

Defaults Upon Senior Securities

 

47

Item 4.

 

Mine Safety Disclosures

 

48

Item 5.

 

Other Information

 

48

Item 6.

 

Exhibits

 

49

 

 

Signatures

 

50

 

 

2


 

Risk Factor Summary

 

Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this report captioned “Risk

Factors.” These risks include, but are not limited to, the following:

 

we operate in a very competitive market;
RAIN adoption is concentrated in key markets and the extent and pace of RAIN market adoption beyond these markets is uncertain;
our abilities to deliver enterprise solutions at scale are nascent;
poor product quality could result in significant costs to us and impair our ability to sell our products;
end users and partners must design our products into their products and business processes;
an inability or limited ability of end user systems to exploit RAIN information may adversely affect the market for our products;
alternative technologies may enable products and services that compete with ours;
we obtain the products we sell through a limited number of third parties with whom we do not have long-term supply contracts;
shortages of silicon wafers or components used in our readers and gateways may adversely affect our ability to meet demand for our products and adversely affect our revenue and/or gross margins;
we rely on a small number of customers for a large share of our revenue;
our ability to affect or determine end-user demand is limited in part because we sell and fulfill primarily through partners and rarely to end users;
our growth strategy depends in part on the success of strategic relationships with third parties and their continued performance and alignment;
if we are unable to protect our intellectual property, then our business could be adversely affected;
we have been and may in the future be, party to intellectual property disputes which could be time consuming and costly to prosecute, defend or settle, result in the loss of significant rights, and adversely affect RAIN adoption or adoption of our products or platform;
we have a history of losses and have only achieved profitability intermittently and we cannot be certain that we will attain or sustain profitability in the future;
we have a history of significant fluctuations in our quarterly and annual operating results;
our executive officers, directors and principal stockholders, together with their affiliates, beneficially owned approximately 51.0% of our outstanding common stock as of March 31, 2024, and as a result are able to exercise significant influence over matters subject to stockholder approval; and
we may not have sufficient cash flow or access to cash necessary to satisfy our obligations under the $287.5 million aggregate principal amount 1.125% convertible senior notes due 2027, also referred to as the 2021 Notes, and our current and future indebtedness may restrict our business.

 

3


PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements (unaudited).

IMPINJ, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value, unaudited)

 

 

March 31, 2024

 

 

December 31, 2023

 

Assets:

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

166,852

 

 

$

94,793

 

Short-term investments

 

7,292

 

 

 

18,440

 

Accounts receivable, net

 

59,384

 

 

 

54,919

 

Inventory

 

87,757

 

 

 

97,172

 

Prepaid expenses and other current assets

 

3,120

 

 

 

4,372

 

Total current assets

 

324,405

 

 

 

269,696

 

Property and equipment, net

 

47,451

 

 

 

44,891

 

Intangible assets, net

 

12,207

 

 

 

13,913

 

Operating lease right-of-use assets

 

9,107

 

 

 

9,735

 

Other non-current assets

 

1,370

 

 

 

1,478

 

Goodwill

 

19,343

 

 

 

19,696

 

Total assets

$

413,883

 

 

$

359,409

 

Liabilities and stockholders' equity:

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

9,416

 

 

$

8,661

 

Accrued compensation and employee related benefits

 

8,207

 

 

 

8,519

 

Accrued and other current liabilities

 

11,694

 

 

 

8,614

 

Current portion of operating lease liabilities

 

3,454

 

 

 

3,373

 

Current portion of deferred revenue

 

1,672

 

 

 

1,713

 

Total current liabilities

 

34,443

 

 

 

30,880

 

Long-term debt

 

282,262

 

 

 

281,855

 

Operating lease liabilities, net of current portion

 

8,444

 

 

 

9,360

 

Deferred tax liabilities, net

 

2,574

 

 

 

2,911

 

Deferred revenue, net of current portion

 

237

 

 

 

272

 

Total liabilities

 

327,960

 

 

 

325,278

 

Commitments and contingencies (Note 12)

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

Preferred stock, $0.001 par value — 5,000 shares authorized, no shares issued and outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

Common stock, $0.001 par value — 495,000 shares authorized, 27,658 and 27,166 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

28

 

 

 

27

 

Additional paid-in capital

 

482,972

 

 

 

463,900

 

Accumulated other comprehensive income (loss)

 

(270

)

 

 

355

 

Accumulated deficit

 

(396,807

)

 

 

(430,151

)

Total stockholders' equity

 

85,923

 

 

 

34,131

 

Total liabilities and stockholders' equity

$

413,883

 

 

$

359,409

 

See accompanying notes to condensed consolidated financial statements.

 

4


IMPINJ, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data, unaudited)

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Revenue

$

76,825

 

 

$

85,897

 

Cost of revenue

 

39,277

 

 

 

42,367

 

Gross profit

 

37,548

 

 

 

43,530

 

Operating expenses:

 

 

 

 

 

Research and development

 

22,519

 

 

 

22,435

 

Sales and marketing

 

10,176

 

 

 

9,973

 

General and administrative

 

13,365

 

 

 

15,564

 

Amortization of intangibles

 

1,409

 

 

 

 

Restructuring costs

 

1,812

 

 

 

 

Total operating expenses

 

49,281

 

 

 

47,972

 

Loss from operations

 

(11,733

)

 

 

(4,442

)

Other income, net

 

1,292

 

 

 

1,365

 

Income from settlement of litigation

 

45,000

 

 

 

 

Interest expense

 

(1,216

)

 

 

(1,209

)

Income (loss) before income taxes

 

33,343

 

 

 

(4,286

)

Income tax benefit (expense)

 

1

 

 

 

(72

)

Net income (loss)

$

33,344

 

 

$

(4,358

)

 

 

 

 

 

 

Net income (loss) per share — basic

$

1.22

 

 

$

(0.17

)

Net income (loss) per share — diluted

$

1.10

 

 

$

(0.17

)

Weighted-average shares outstanding — basic

 

27,357

 

 

 

26,285

 

Weighted-average shares outstanding — diluted

 

31,425

 

 

 

26,285

 

See accompanying notes to condensed consolidated financial statements.

 

5


IMPINJ, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, unaudited)

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Net income (loss)

$

33,344

 

 

$

(4,358

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

Unrealized loss on investments

 

34

 

 

 

644

 

Foreign currency translation adjustment

 

(659

)

 

 

 

Total other comprehensive income (loss)

 

(625

)

 

 

644

 

Comprehensive income (loss)

$

32,719

 

 

$

(3,714

)

See accompanying notes to condensed consolidated financial statements.

 

6


IMPINJ, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Operating activities:

 

 

 

 

 

Net income (loss)

$

33,344

 

 

$

(4,358

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

3,909

 

 

 

1,793

 

Stock-based compensation

 

11,790

 

 

 

10,224

 

Restructuring equity modification expense

 

366

 

 

 

 

Accretion of discount or amortization of premium on investments

 

(67

)

 

 

(766

)

Amortization of debt issuance costs

 

407

 

 

 

400

 

Deferred tax expense

 

(278

)

 

 

 

Revaluation of acquisition-related contingent consideration liability

 

907

 

 

 

 

Changes in operating assets and liabilities, net of amounts acquired:

 

 

 

 

 

Accounts receivable

 

(4,503

)

 

 

(10,970

)

Inventory

 

9,400

 

 

 

(39,412

)

Prepaid expenses and other assets

 

1,355

 

 

 

1,389

 

Accounts payable

 

1,878

 

 

 

14,650

 

Accrued compensation and employee related benefits

 

(292

)

 

 

(2,006

)

Accrued and other liabilities

 

2,182

 

 

 

4,472

 

Operating lease right-of-use assets

 

614

 

 

 

695

 

Operating lease liabilities

 

(820

)

 

 

(891

)

Deferred revenue

 

(52

)

 

 

(1,780

)

Net cash provided by (used in) operating activities

 

60,140

 

 

 

(26,560

)

Investing activities:

 

 

 

 

 

Proceeds from sales of investments

 

 

 

 

13,372

 

Proceeds from maturities of investments

 

11,248

 

 

 

34,136

 

Purchases of property and equipment

 

(6,202

)

 

 

(7,582

)

Net cash provided by investing activities

 

5,046

 

 

 

39,926

 

Financing activities:

 

 

 

 

 

Proceeds from exercise of stock options and employee stock purchase plan

 

6,917

 

 

 

4,520

 

Net cash provided by financing activities

 

6,917

 

 

 

4,520

 

Effect of exchange rate changes on cash and cash equivalents

 

(44

)

 

 

 

Net increase in cash and cash equivalents

 

72,059

 

 

 

17,886

 

Cash and cash equivalents

 

 

 

 

 

Beginning of period

 

94,793

 

 

 

19,597

 

End of period

$

166,852

 

 

$

37,483

 

 

 

 

 

 

Supplemental disclosure of cashflow information:

 

 

 

 

 

Purchases of property and equipment not yet paid

 

299

 

 

 

3,284

 

Acquisition-related contingent consideration liability

 

7,087

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

7


IMPINJ, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity (Deficit)

 

Balance at December 31, 2022

 

 

26,098

 

 

$

26

 

 

$

403,599

 

 

$

(386,785

)

 

$

(1,249

)

 

$

15,591

 

Issuance of common stock

 

 

483

 

 

 

1

 

 

 

4,519

 

 

 

 

 

 

 

 

 

4,520

 

Stock-based compensation

 

 

 

 

 

 

 

 

10,224

 

 

 

 

 

 

 

 

 

10,224

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(4,358

)

 

 

 

 

 

(4,358

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

644

 

 

 

644

 

Balance at March 31, 2023

 

 

26,581

 

 

$

27

 

 

$

418,342

 

 

$

(391,143

)

 

$

(605

)

 

$

26,621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity (Deficit)

 

Balance at December 31, 2023

 

 

27,166

 

 

$

27

 

 

$

463,900

 

 

$

(430,151

)

 

$

355

 

 

$

34,131

 

Issuance of common stock

 

 

494

 

 

 

1

 

 

 

6,916

 

 

 

 

 

 

 

 

 

6,917

 

Stock-based compensation

 

 

 

 

 

 

 

 

11,790

 

 

 

 

 

 

 

 

 

11,790

 

Restructuring equity modification expense

 

 

 

 

 

 

 

 

366

 

 

 

 

 

 

 

 

 

366

 

Net income

 

 

 

 

 

 

 

 

 

 

 

33,344

 

 

 

 

 

 

33,344

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(625

)

 

 

(625

)

Balance at March 31, 2024

 

 

27,660

 

 

$

28

 

 

$

482,972

 

 

$

(396,807

)

 

$

(270

)

 

$

85,923

 

See accompanying notes to condensed consolidated financial statements.

8


IMPINJ, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include Impinj, Inc. and its wholly owned subsidiaries. We have eliminated intercompany balances and transactions in consolidation. We have prepared these condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"), and applicable rules and regulations of the Securities and Exchange Commission ("SEC"), regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2023 included in Impinj, Inc.’s Annual Report on Form 10-K, which was filed with the SEC on February 12, 2024.

The unaudited condensed consolidated interim financial statements, in the opinion of management, reflect all adjustments, comprising normal recurring adjustments, necessary to state fairly our financial position, results of operations and our cash flows for the periods presented. Interim results are not necessarily indicative of the results for a full year or for any other future period.

Use of Estimates

Preparing financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and related disclosures as of the date of the financial statements, as well as the reported revenue and expenses during the periods presented. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, sales incentives, percentage completion of development contracts, inventory excess and obsolescence, income taxes and fair value of stock awards. To the extent there are material differences between our estimates, judgments, or assumptions and actual results, our financial statements will be affected.

Licensing of Intellectual Property

On March 13, 2024, we and NXP Semiconductors N.V. ("NXP") entered into a Settlement and Patent Cross-License Agreement (the “Settlement Agreement”). Under the Settlement Agreement, NXP made a one-time payment of $45 million and agreed to make annual license fee payments on April 1 of each year, starting on April 1, 2024, until the termination of the Settlement Agreement. The annual license fee payment for 2024 is $15 million and will increase each subsequent year by a fixed percentage. We allocated the consideration from the Settlement Agreement to the related components of the agreement. We recorded the $45 million payment in income from settlement of litigation in the condensed consolidated statements of operations upon receipt. We will recognize the license fee, which relates to annual usage of the license from April 1 to March 31 of each applicable year, as revenue in the second quarter of each year for as long as NXP is still using the Indicator Patents as specified in the Settlement Agreement.

We recognize revenue from licensing the right to use functional intellectual property, such as the Settlement Agreement discussed above, at the point in time the control of the license transfers to the customer, which is generally upon delivery, or as usage occurs. See Note 6 Commitments and Contingencies for additional details of the Settlement Agreement with NXP.

Recently Issued Accounting Standards Not Yet Adopted

In November 2023, the FASB released ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which amends reportable segment requirements, primarily through enhanced disclosures about significant segment expenses, including for public entities that have a single reportable segment. The standard is effective for fiscal years beginning after December 31, 2023 and interim periods within fiscal years beginning after December 31, 2024. We are currently evaluating any impact of this standard on our financial statement disclosures.

In December 2023, the FASB released ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which amends income tax disclosure requirements to enhance the transparency and decision usefulness for users of the financial statements. The standard is effective for fiscal years beginning after December 31, 2024. We are currently evaluating any impact of this standard on our financial statement disclosures.

9


Note 2. Fair Value Measurements

Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.

We do not have any financial assets or liabilities in Level 3 as of March 31, 2024 or December 31, 2023, except for the liability for the earnout consideration related to the Voyantic Oy acquisition. We have classified this liability as such because we determined the fair value using significant unobservable inputs.

We applied the following methods and assumptions in estimating our fair value measurements:

Cash Equivalents — Cash equivalents comprise highly liquid investments, including money market funds with original maturities of less than three months at the acquisition date. We record the fair value measurement of these assets based on quoted market prices in active markets.

Investments — Our investments comprise fixed income securities, which include U.S. government agency securities, corporate notes and bonds, commercial paper, treasury bills and asset-backed securities. The fair value measurement of these assets is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Long-term Debt — See Note 7 for the carrying amount and estimated fair value of the Notes.

Contingent Consideration — The contingent consideration liability is related to the acquisition of Voyantic Oy (see Note 4: Goodwill and Intangible Assets), and the related payments are expected to occur in 2024. As of March 31, 2024, the contingent consideration liability of $7.1 million is included in "Accrued expenses and other current liabilities" on the condensed consolidated balance sheet.

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy, as of the dates presented (in thousands):

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

132,475

 

 

$

 

 

$

 

 

$

132,475

 

 

$

78,661

 

 

$

 

 

$

 

 

$

78,661

 

Total cash equivalents

 

 

132,475

 

 

 

 

 

 

 

 

 

132,475

 

 

 

78,661

 

 

 

 

 

 

 

 

 

78,661

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

 

 

 

 

4,963

 

 

 

 

 

 

4,963

 

 

 

 

 

 

11,893

 

 

 

 

 

 

11,893

 

Corporate notes and bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury bill

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yankee bonds

 

 

 

 

 

1,973

 

 

 

 

 

 

1,973

 

 

 

 

 

 

1,951

 

 

 

 

 

 

1,951

 

Agency bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,994

 

 

 

 

 

 

2,994

 

Asset-backed securities

 

 

 

 

 

356

 

 

 

 

 

 

356

 

 

 

 

 

 

1,602

 

 

 

 

 

 

1,602

 

Total short-term investments

 

 

 

 

 

7,292

 

 

 

 

 

 

7,292

 

 

 

 

 

 

18,440

 

 

 

 

 

 

18,440

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yankee bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total long-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

132,475

 

 

$

7,292

 

 

$

 

 

$

139,767

 

 

$

78,661

 

 

$

18,440

 

 

$

 

 

$

97,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition related contingent consideration liability

 

 

 

 

 

 

 

 

7,087

 

 

 

7,087

 

 

 

 

 

 

 

 

 

6,180

 

 

 

6,180

 

Total liabilities at fair value

 

$

 

 

$

 

 

$

7,087

 

 

$

7,087

 

 

$

 

 

$

 

 

$

6,180

 

 

$

6,180

 

 

10


 

The following table presents additional information about liabilities measured at fair value for which the Company utilizes Level 3 inputs to determine fair value as of March 31, 2024 (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

Balance as of January 1

 

$

6,180

 

Change in fair value of contingent consideration liability due to remeasurement

 

 

907

 

Balance as of March 31

 

$

7,087

 

 

At the acquisition date, we recorded the contingent consideration related to the Voyantic Oy acquisition at its fair value using unobservable inputs and used the Monte Carlo simulation option pricing framework, incorporating contractual terms and assumptions regarding financial forecasts, discount rates and volatility of forecasted revenue and gross margins. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations is management's responsibility with the assistance of a third-party valuation specialist. During the quarter ended March 31, 2024, we remeasured the fair value of the contingent consideration liability based on updated inputs related to actual performance results and recorded an additional expense of $907,000 in general and administrative expense on the consolidated statement of operations. As of March 31, 2024 the contingent consideration liability of $7.1 million is included in "Accrued expenses and other current liabilities" on the condensed consolidated balance sheet.

 

As of December 31, 2023, the contingent consideration liability was $6.2 million.

 

We expect short-term investments to mature within 1 year of the reporting date. We expect long-term investments to mature between 1 and 2 years from the reporting date. See Note 7 for the carrying amount and estimated fair value of our convertible senior notes due 2027.

Investments

The following tables present the cost or amortized cost, gross unrealized gains, gross unrealized losses and total estimated fair value of our financial assets as of the dates presented (in thousands):

 

March 31, 2024

 

 

Cost or

 

 

Gross

 

 

Gross

 

 

Total Estimated

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

Description:

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

132,475

 

 

$

 

 

$

 

 

$

132,475

 

U.S. government agency securities

 

4,975

 

 

 

 

 

 

(12

)

 

 

4,963

 

Corporate notes and bonds

 

 

 

 

 

 

 

 

 

 

 

Yankee bonds

 

1,977

 

 

 

 

 

 

(4

)

 

 

1,973

 

Commercial paper

 

 

 

 

 

 

 

 

 

 

 

Treasury bill

 

 

 

 

 

 

 

 

 

 

 

Agency bond

 

 

 

 

 

 

 

 

 

 

 

Asset-backed securities

 

356

 

 

 

 

 

 

 

 

 

356

 

Total

$

139,783

 

 

$

 

 

$

(16

)

 

$

139,767

 

 

 

December 31, 2023

 

 

Cost or

 

 

Gross

 

 

Gross

 

 

Total Estimated

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

Description:

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

78,661

 

 

$

 

 

$

 

 

$

78,661

 

U.S. government agency securities

 

11,932

 

 

 

 

 

 

(39

)

 

 

11,893

 

Corporate notes and bonds

 

 

 

 

 

 

 

 

 

 

 

Yankee bonds

 

1,956

 

 

 

 

 

 

(5

)

 

 

1,951

 

Commercial paper

 

 

 

 

 

 

 

 

 

 

 

Treasury bill

 

 

 

 

 

 

 

 

 

 

 

Agency bond

 

2,998

 

 

 

 

 

 

(4

)

 

 

2,994

 

Asset-backed securities

 

1,604

 

 

 

 

 

 

(2

)

 

 

1,602

 

Total

$

97,151

 

 

$

 

 

$

(50

)

 

$

97,101

 

 

11


Marketable securities in a continuous loss position for less than 12 months had an estimated fair value of $7.1 million and $10.2 million and unrealized losses of $16,000 and $25,000 as of March 31, 2024 and December 31, 2023, respectively. Marketable securities in a continuous loss position for greater than 12 months had an estimated fair value of $100,000 and $8.2 million and immaterial unrealized losses as of March 31, 2024 and $26,000 in unrealized losses as of December 31, 2023.

Unrealized losses from our fixed-income securities are primarily attributable to changes in interest rates and not to lower credit ratings of the issuers. In determining whether an unrealized loss is other-than-temporary, for the periods presented, we determined we do not have plans to sell the securities nor is it more likely than not that we would be required to sell the securities before their anticipated recovery. We used the specific identification method to determine cost of securities sold.

 

 

12


Note 3. Inventory

The following table presents the detail of inventories as of the dates presented (in thousands):

 

 

 

 

 

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Raw materials

 

$

19,787

 

 

$

21,773

 

Work-in-process

 

 

32,311

 

 

 

42,217

 

Finished goods

 

 

35,659

 

 

 

33,182

 

Total inventory

 

$

87,757

 

 

$

97,172

 

 

Note 4. Goodwill and Intangible Assets

On April 3, 2023, we acquired all of the outstanding equity of Voyantic Oy for an aggregate purchase price of $32.7 million. Our acquisition of Voyantic Oy adds label design, manufacturing and testing to our systems offerings, to advance the quality, reliability and readability of partner inlays. The consideration comprised (i) $3.6 million in shares of our common stock valued using the market price on the date of the acquisition, (ii) $4.6 million in deferred payments contingent upon revenue and gross margin performance over a one-year period from the acquisition date, and (iii) the remainder in cash paid at closing.

We recorded the assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. We recorded the excess of the purchase price over the assets acquired and liabilities assumed as goodwill. The fair value of net assets acquired, goodwill, intangible assets and deferred tax liability were $2.4 million, $15.6 million, $18.4 million and $3.7 million, respectively. The goodwill amount represents synergies we expect to realize from the business combination and assembled workforce. We allocated the goodwill to our one reporting unit and reportable segment. The acquired goodwill and intangible assets were not deductible for tax purposes.

The transaction-related costs for the acquisition were $907,000 for the three months ended March 31, 2024. These costs are related to the revaluation of the contingent consideration subsequent to the acquisition date and are included in general and administrative expenses in the condensed consolidated statements of operations. See Note 2. Fair Value Measures for additional information on the contingent consideration.

This acquisition did not have a material impact on our reported revenue or net loss amounts for any period presented; therefore, we have not presented historical and pro forma disclosures.

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in business combinations accounted for under the purchase method of accounting. The following table presents goodwill as of March 31, 2024 (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Balance at beginning of period

 

$

19,696

 

 

$

3,881

 

Foreign currency translation adjustment

 

 

(353

)

 

 

 

   Total

 

$

19,343

 

 

$

3,881

 

As of March 31, 2024, intangible assets comprised of the following (in thousands):

 

 

 

Estimated Useful Life in Years

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net

 

Definite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

   Backlog

 

0.25

 

$

755

 

 

$

(755

)

 

$

 

   Customer Relationships

 

1

 

 

3,615

 

 

 

(3,615

)

 

 

 

   Developed Technology

 

7.25

 

 

12,734

 

 

 

(1,757

)

 

 

10,977

 

   Patent

 

3

 

 

250

 

 

 

(59

)

 

 

191

 

   Tradename

 

8

 

 

1,187

 

 

 

(148

)

 

 

1,039

 

   Total definite-lived intangible assets (1)

 

 

 

 

18,541

 

 

 

(6,334

)

 

 

12,207

 

(1) Foreign intangible asset carrying amounts are affected by foreign currency translation

 

We amortize identifiable intangible assets with finite lives over their useful lives on a straight-line basis. The weighted average life of our intangible assets is approximately six years. Amortization of intangible assets was $1.4 million for the three months ended March 31, 2024. There was no amortization of intangible assets for the three months ended March 31, 2023.

13


As of March 31, 2024, the estimated intangible asset amortization expense for the next five years and thereafter is as follows:

 

 

Estimated Amortization

 

 

 

(in thousands)

 

2024

 

 

1,491

 

2025

 

 

1,988

 

2026

 

 

1,950

 

2027

 

 

1,905

 

2028

 

 

1,905

 

Thereafter

 

 

2,968

 

Total

 

$

12,207