Impinj Files for Initial Public Offering

By Claire Swedberg

The chip manufacturer filed an IPO this week, seeking up to $100 million to pay for debts and fund further research.

Impinj, a Seattle-based manufacturer of ultrahigh-frequency (UHF) RFID chips, has registered for an initial public offering (IPO) of its common stock on the exchange. The company expects to raise up to $100 million. The number of shares to be offered has yet to be determined, nor have timing and price.

The announcement follows what the company calls its largest sales year since its formation a decade ago. According to its S-1 registration statement filed with the U.S. Securities and Exchange Commission, Impinj reported an annual revenue of $25 million in 2008, $21 million in 2009, and $32 million last year. However, like many startups, the firm has never been reported as profitable. It suffered net losses of $11.9 million in 2008, $9.9 million in 2009, and $11.4 million in 2010.

Michael Liard, director of ABI Research's RFID practice

During the first three months of 2011, Impinj saw a net loss of $1.8 million, bringing its total accumulated loss up to $155.8 million. But the firm anticipates that the incubation period for RFID technology is coming to an end, and that adoption will accelerate over the coming years. In the S-1 filing, Impinj stated, "We believe demand for UHF Gen 2 systems will grow, both by further penetration into existing applications, such as apparel tagging, and by expansion into myriad other high-volume tagging applications."

The company's IC products are sold as part of a technology platform known as GrandPrix, which includes Monza tag ICs, Indy reader ICs and Speedway readers. The technology is often employed by the retail market—including apparel, pharmaceuticals, food and beverages—as well as by technology and logistics companies, and government agencies.

Impinj declined to comment for this story, citing SEC rules. The offering signifies greater confidence in the RFID market on the company's part, says Michael Liard, ABI Research's practice director of RFID. "I think there's a sense in the market that this technology solves business problems, and this [public offering] is a sign of the market growing and stabilizing."

From 2009 to 2010, Impinj reported that sales of its Monza UHF Gen 2 tag ICs—the company's largest source of revenue—grew by 279 percent. The firm says it has sold two billion Monza tag ICs to date since the product was introduced in 2005, with 940 million of those sales taking place last year.

In 2010, Monza IC chips sold to tag manufacturers Avery Dennison represented 42 percent of sales, with sales to UPM RFID representing 29 percent. However, the company indicates, as more inlay manufacturers come into the market, these other businesses will account for a larger percent of sales.

Indy reader ICs, on the other hand, are sold through distributors, as well as directly to users, including Coca-Cola, Motorola Solutions and Trimble. Most Speedway readers are sold to distributors or system integrators.

The company's revenue from technology development represented a large percentage of total revenue in 2008 (31.3 percent), but that number fell to just 3.9 percent in 2010. This reduction in development, as well as service and licensing revenue, was the result of the completion of a large project for a single customer that ended in 2009, the company reported in its filing paperwork.

In the filing, Impinj credited the total revenue increase from 2009 to 2010 to sizable deployments of products made by large retailers, including Wal-Mart Stores and Banana Republic. There was a decline in sales for the other product lines, which offset that increase. Between 2008 and 2009, revenue from reader sales declined significantly, largely due to the completion of major orders by a single customer in 2008.

Over the past year, revenue grew by 22 percent in North America and South America, which account for 60 percent of the company's total sales; by 176 percent in the Asia-Pacific region; and by 98 percent in Europe, the Middle East and Africa (EMEA).

"Impinj is well-positioned in a high-growth sector with lots of technology innovation," Liard says. If the IPO is successful, he notes, "it would be a validation of the hard work of not just Impinj, but lots of RFID companies."

"When a company tries to go public, it's always a good thing," Liard adds, noting that if the IPO ultimately proves unsuccessful, "I think there's enough energy among [RFID] users and adopters that this will hardly be an end for the market."

Impinj was founded by Chris Diorio, a University of Washington associate professor who is the firm's chairman and CTO, and who won the 2011 RFID Journal Award for Special Achievement, for his work in the development of the UHF EPC Gen 2 RFID standard (see RFID Journal Announces Winners of Its Fifth Annual Awards). In 2006, Impinj became the first company to introduce products based on EPCglobal's UHF Gen 2 standard, and its Monza ICs were the first UHF Gen 2 RFID tag chips. In April 2011, the company released its new Monza 5 chips for speedy item-level encoding with fewer errors (see Impinj Launches Products to Speed Item-Level Encoding). The company has 90 issued and allowed U.S. patents, in addition to 77 pending U.S. patent applications, and uses third-party foundries and subcontractors to manufacture the ICs, as well as contract manufacturers to assemble readers and subsystems

Impinj lists Morgan Stanley, J.P. Morgan, Needham & Co., Pacific Crest Securities and Raymond James as the IPO's underwriters.