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What changed in IMPINJ INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of IMPINJ INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+283 added−297 removedSource: 10-K (2025-02-10) vs 10-K (2024-02-12)

Top changes in IMPINJ INC's 2024 10-K

283 paragraphs added · 297 removed · 216 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

44 edited+10 added−6 removed43 unchanged
Biggest changeThe following table presents total revenue concentration to Avery Dennison and Arizon for the periods presented: Year Ended December 31, 2023 2022 2021 Revenue: Avery Dennison 33 % 28 % 32 % Arizon 11 10 11 44 % 38 % 43 % Manufacturing We outsource most of our product manufacturing to third parties that build our products to our specifications, manufacturing only a small portion of our products, principally some of our test and measurement solutions, ourselves.
Biggest changeThe following table presents revenue concentration from our major customers representing 10% or more of total revenue for the periods presented: Year Ended December 31, 2024 2023 2022 Revenue: Customer A 28 % 33 % 28 % Customer B 17 11 10 Customer C 15 * * 60 % 44 % 38 % * Customer accounted for less than 10% of total revenue in the period.
We believe are the only company with an integrated platform spanning endpoint ICs, reader ICs, readers and gateways, test and measurement solutions and software and cloud services. • Technology Leadership . Our singular RAIN focus has enabled us to regularly be first-to-market with innovative, high-performing products.
We believe we are the only company with an integrated platform spanning endpoint ICs, reader ICs, readers and gateways, test and measurement solutions and software and cloud services. • Technology Leadership . Our singular RAIN focus has enabled us to regularly be first-to-market with innovative, high-performing products.
When a consumer purchases an item, a store or supplier will typically procure another item to sell, including another endpoint IC. We believe endpoint ICs represent the first market for consumable silicon and are a recurring revenue source for us. Systems Our systems comprise our reader ICs; manufacturing, test, encoding and reading systems; and software and cloud services.
When a consumer purchases an item, a store or supplier will typically procure another item to sell, including another endpoint IC. We believe endpoint ICs represent the first market for consumable silicon and are a reoccurring revenue source for us. Systems Our systems comprise our reader ICs; manufacturing, test, encoding and reading systems; and software and cloud services.
We have enabled connectivity for more than 95 billion items to date, delivering item visibility and improving operational efficiencies for retailers, supply chain and logistics, or SC&L providers, restaurants and food-service providers, airlines, automobile manufacturers, healthcare companies and many more.
We have enabled connectivity for more than 120 billion items to date, delivering item visibility and improving operational efficiencies for retailers, supply chain and logistics, or SC&L providers, restaurants and food-service providers, airlines, automobile manufacturers, healthcare companies and many more.
As our inlay partners focus on embedding RAIN tags directly into items, we focus on key innovations like our patented Protected Mode that allows a tag to require a PIN for post-point-of-sale readability, enabling loss-prevention solutions to focus on unsold items while satisfying General Data Protection Regulation, or GDPR, and similar consumer privacy requirements.
As our inlay partners focus on embedding RAIN tags directly into items, we focus on key innovations like our patented Protected Mode that allows a tag to require a PIN for post-point-of-sale readability, enabling loss-prevention solutions to focus on unsold 7 Table of Contents items while satisfying General Data Protection Regulation, or GDPR, and similar consumer privacy requirements.
We primarily sell through our global ecosystem of hundreds of partners as follows: • Endpoint ICs: Directly to inlay and tag OEMs. • Solutions: Directly to a small number of lighthouse enterprises, servicing the rest of the market with and through partners. • Reader ICs : Through distribution to handheld- and fixed-reader OEMs and ODMs. • Readers and gateways: Through distribution to solutions providers, VARs and SIs. • Test and measurement solutions: Directly to inlay and tag OEMs, certification bodies and enterprises. 8 Table of Contents • Cloud services: Access-based services.
We primarily sell through our global ecosystem of hundreds of partners as follows: • Endpoint ICs: Directly to inlay and tag OEMs. • Solutions: Directly to a small number of lighthouse enterprises, servicing the rest of the market with and through partners. • Reader ICs : Through distribution to handheld- and fixed-reader OEMs and ODMs. • Readers and gateways: Through distribution to solutions providers, VARs and SIs. • Test and measurement solutions: Directly to inlay and tag OEMs, certification bodies and enterprises. • Cloud services: Access-based services.
For more information related to market adoption, please see the section of this report captioned “Risk Factors.” 5 Table of Contents Endpoint ICs Our endpoint IC product family comprises miniature radios-on-a-chip that sell for pennies yet can wirelessly connect almost any item. Each IC attaches to a host item and includes a number to identify the item.
For more information related to market adoption, please see the section of this report captioned “Risk Factors.” Endpoint ICs Our endpoint IC product family comprises miniature radios-on-a-chip that sell for pennies yet can wirelessly connect almost any item. Each IC attaches to a host item and includes a number to identify the item.
A member of our management team is currently a RAIN Alliance Director. The Alliance is a global organization promoting the universal adoption of RAIN technology and solutions, with more than 150 members as of December 31, 2023.
A member of our management team is currently a RAIN Alliance Director. The Alliance is a global organization promoting the universal adoption of RAIN technology and solutions, with more than 150 members as of December 31, 2024.
We are an equal-opportunity employer and do not discriminate based on race, religion, color, national origin, sex, gender, gender expression, sexual orientation, age, marital status, veteran status, disability status or any other classification. Training and Development We focus on nurturing each employee, rewarding their unique contributions and providing a runway for their career growth.
We are an equal-opportunity employer and do not discriminate based on race, religion, color, national origin, sex, gender, gender expression, sexual orientation, age, marital status, veteran status, disability status or any other classification. Training and Development Our employees are our company. We focus on nurturing each employee individually, rewarding their unique contributions and providing a runway for their career growth.
We believe our success derives from the capabilities and performance of our enterprise solutions, and the visibility those solutions give enterprise to items they manufacture, transport and sell. RAIN market adoption has historically been slower than we and industry sources have anticipated.
We believe our 5 Table of Contents success derives from the capabilities and performance of our enterprise solutions, and the visibility those solutions give enterprise to items they manufacture, transport and sell. RAIN market adoption has historically been slower than we and industry sources have anticipated.
By participating in GS1 EPCglobal, which produced Gen2, and ISO, which ratified 18000-63, as well as in other standards bodies, we agreed to license certain necessary patents as described in the section captioned “Intellectual Property.” 10 Table of Contents Government Regulations Government regulations require us to certify our readers and gateways in jurisdictions where they operate.
By participating in GS1 EPCglobal, which produced Gen2, and ISO, which ratified 18000-63, as well as in other standards bodies, we agreed to license certain necessary patents as described in the section captioned “Intellectual Property.” Government Regulations Government regulations require us to certify our readers and gateways in jurisdictions where they operate.
By tagging RTI containers, our platform can reduce RTI loss and ensure SC&L companies have the RTI containers they need. • Asset Management. Our platform enables automated asset check-in/out procedures and location monitoring, reducing loss and improving efficiencies and maintenance-schedule compliance. 7 Table of Contents Other Industries These other industries can also obtain benefits using our platform: • Automotive .
By tagging RTI containers, our platform can reduce RTI loss and ensure SC&L companies have the RTI containers they need. • Asset Management. Our platform enables automated asset check-in/out procedures and location monitoring, reducing loss and improving efficiencies and maintenance-schedule compliance. Other Industries These other industries can also obtain benefits using our platform: • Automotive .
The market for RAIN, our platform and our products is highly competitive. New entrants can and do come into our market at any time, and we expect competition to increase as the market and end-user adoption grow.
The markets for RAIN, our platform and our products are highly competitive. New entrants can and do come into our market at any time, and we expect competition to increase as the market and end-user adoption grow.
Item 1. B usiness Overview We envision a world in which every item that enterprises manufacture, transport and sell, and that people own, use and recycle, is wirelessly and ubiquitously connected to the cloud. And a world in which the ownership, history and linked information for every one of those items is seamlessly available to enterprises and people.
Item 1. B usiness Overview Our vision is a world in which every item that enterprises manufacture, transport and sell, and that people own, use and recycle, is wirelessly and ubiquitously connected to the cloud. And a world in which the ownership, history and linked information for every one of those items is seamlessly available to enterprises and people.
We spearheaded developing the RAIN air-interface standard, lobbied governments to allocate radio spectrum and cofounded the RAIN industry alliance that today has more than 150 member companies. Our industry uses free spectrum in 81 countries encompassing roughly 95% of the world’s GDP.
We are a leader in the RAIN market. We spearheaded developing the RAIN air-interface standard, lobbied governments to allocate radio spectrum and cofounded the RAIN industry alliance that today has more than 150 member companies. Our industry uses free spectrum in 81 countries encompassing roughly 95% of the world’s GDP.
With our acquisition of Voyantic Oy, we now sell test and measurement solutions. Finally, we also offer a cloud service to authenticate items. Competitive Advantages We believe we can extend our RAIN market leadership by leveraging our competitive strengths, including: • Platform .
With our acquisition of Voyantic Oy, we sell test and measurement solutions. Finally, we also offer a cloud service to authenticate items. Competitive Advantages 6 Table of Contents We believe we can extend our RAIN market leadership by leveraging our competitive strengths, including: • Platform .
For more information, see the section of this report captioned “Risk Factors.” Competition Each of our competitors competes with some, but not all, of our products.
For more information, see the section of this report captioned “Risk Factors.” 11 Table of Contents Competition Each of our competitors competes with some, but not all, of our products.
Our chief executive officer is a recognized industry thought leader, a prior director of the RAIN Alliance and prior editor of the RAIN radio standard. 6 Table of Contents • Partner Ecosystem .
Our chief executive officer is a recognized industry thought leader, a prior director of the RAIN Alliance and prior editor of the RAIN radio standard. • Partner Ecosystem .
The information contained on our website is not a part of this report or any other document we file with the SEC.
The information contained on our website is not a part of this report or any other document we file with the SEC. 13 Table of Contents
Growth Strategies To continue growing our business and our opportunities, we plan to focus on the following strategic areas: • Enterprise Solutions: We will continue developing solutions to previously unsolved enterprise business problems.
Growth Strategies 8 Table of Contents To continue growing our business and our opportunities, we plan to focus on the following strategic areas: • Enterprise Solutions: We will continue developing solutions to previously unsolved enterprise business problems.
We, our enterprise end users, partners and competitors developed the RAIN radio protocol, whose technical name is EPC™ Radio-Frequency Identity Protocols Generation-2 UHF RFID (standardized as ISO/IEC 18000-63 and known colloquially as Gen2) in 2004, with us as editor. Our community delivered a backward-compatible update in 2013, again with us as editor.
We, our enterprise end users, partners and competitors developed the RAIN radio protocol, whose technical name is EPC™ Radio-Frequency Identity Protocols Generation-2 UHF RFID (standardized as ISO/IEC 18000-63 and known colloquially as Gen2) in 2004, with us as editor. Our community delivered backward-compatible updates to this protocol in 2013 and in 2024, both times again with us as editor.
Our silicon radios follow the RAIN industry’s air-interface standard for their core functionality. We create partner and enterprise preference for our radios and solutions by adding differentiated features into our products, and supporting those features across our platform, to deliver solutions capabilities and performance that surpasses mix-and-match solutions built from competitor products. We are a leader in the RAIN market.
Our radios follow the RAIN industry’s air-interface standard for their core reading functionality. We create partner and enterprise preference for our radios and solutions by adding differentiated features into our products, supporting those features across our platform and licensing them where appropriate, to deliver solutions capabilities and performance that surpasses mix-and-match solutions built from competitor products.
We generally engage all our endpoint IC subcontractors on a purchase-order basis. TSMC manufactures our reader IC wafers in Asia and has been our supplier since 2021. We order our reader IC wafers on a purchase-order basis and do not have a long-term supply agreement with TSMC. We package and test our reader ICs in Asia.
We order our reader IC wafers on a purchase-order basis and do not have a long-term supply agreement with TSMC. We package and test our reader ICs in Asia. We primarily engage our reader IC subcontractors on a purchase-order basis. Plexus Corp., or Plexus, manufactures our readers and gateways in Asia and has been our supplier since 2005.
As of December 31, 2023, our portfolio included 302 issued and allowed U.S. patents, five issued international patents, 16 pending U.S. patent applications and seven pending international patent applications. Industry Use Cases The following use cases are representative of RAIN deployments we serve today.
As of December 31, 2024, our portfolio included 294 issued and allowed U.S. patents, six issued international patents, 18 pending U.S. patent applications and 13 pending international patent applications. Industry Use Cases The following use cases are representative of RAIN deployments we serve today.
Because our portfolio currently comprises mostly U.S. patents, we have limited ability to assert our IP rights outside the United States. Although our patents and trade secrets are valuable assets, we do not view any one of them as material. Instead, we believe the totality of our patent and trade-secret portfolio creates an advantage for our business.
Because our portfolio currently comprises mostly U.S. patents, we have limited ability to assert our IP rights outside the United States. 10 Table of Contents Although our patents and trade secrets are valuable assets, we do not view any one of them as material.
Our primary competition includes: • Endpoint ICs: NXP B.V., or NXP, EM Microelectronic, Kiloway, Quanray, Shanghai Fudan Microelectronics Group, Alibaba and Alien Technology Corporation, or Alien. • Reader ICs: Phychips Inc, Shanghai Fudan Microelectronics Group and MagicRF. • Readers and gateways: Zebra Technologies Corporation, or Zebra. • Test and measurement solutions: CISC Semiconductor GmbH, or CISC.
Our primary competition includes: • Endpoint ICs: NXP B.V., or NXP, EM Microelectronic, Kiloway, Quanray, Shanghai Fudan Microelectronics Group, Alibaba and Alien Technology Corporation, or Alien. • Reader ICs: Phychips Inc, Shanghai Fudan Microelectronics Group and MagicRF. • Readers and gateways: Most major reader and gateway suppliers leverage, or have a stated intent to leverage, our platform. • Test and measurement solutions: CISC Semiconductor GmbH, or CISC.
As one example, our nearest endpoint IC competitor migrated from 200mm wafers to 300mm wafers before we did. That migration caused the inlay OEMs to gradually retrofit their inlay assembly machines to handle 300mm wafers. In the meantime, we focused on an endpoint IC process-node migration, which we completed in 2020.
That migration caused the inlay OEMs to gradually retrofit their inlay assembly machines to handle 300mm wafers. In the meantime, we focused on an endpoint IC process-node migration, which we completed in 2020.
Of our 293 utility patents, 16 will expire in 2024 and of our nine design patents, six, will expire in 2024. To protect confidential information not otherwise subject to patent protection, we rely on trade secret law and enter into confidentiality agreements with our employees, customers, suppliers and partners.
To protect confidential information not otherwise subject to patent protection, we rely on trade secret law and enter into confidentiality agreements with our employees, customers, suppliers and partners.
We then introduced our newest endpoint IC 9 Table of Contents products, the Impinj M830 and M850, in 2023, with approximately 25% more die per wafer than the M700 family and the inlay OEMs again able to immediately assemble the 300mm wafers.
We then introduced our newest endpoint IC products, the Impinj M830 and M850, in 2023, with approximately 25% more die per wafer than the M700 family and the inlay OEMs again able to immediately assemble the 300mm wafers. We have a team of skilled engineers that today conduct all our research and most of our product development internally.
We order endpoint IC wafers on a purchase-order basis and do not have a long-term supply agreement with TSMC. We test the wafers primarily in Asia. We use multiple subcontractors to post-process the wafers including Stars Microelectronics (Thailand) Public Company Limited, or Stars, Chipbond Technology Corporation, or Chipbond, and Unisem Group, or Unisem.
We use multiple subcontractors to post-process the wafers including Stars Microelectronics (Thailand) Public Company Limited, or Stars, Chipbond Technology Corporation, or Chipbond, and Unisem Group, or Unisem. We generally engage all our endpoint IC subcontractors on a purchase-order basis. TSMC manufactures our reader IC wafers in Asia and has been our supplier since 2021.
In addition, our competitive position depends on our ability to continue attracting and retaining talent while protecting our IP. For additional information on the risks associated with our business, see “Risk Factors.” Employees and Culture Principals and Culture Our corporate culture embodies a set of principles centered around respect, collaboration, accountability, empowerment and thinking big.
In addition, our competitive position depends on our ability to continue attracting and retaining talent while protecting our IP. For additional information on the risks associated with our business, see “Risk Factors.” Employees and Culture Principals and Culture We firmly believe our success stems, first and foremost, from our corporate culture.
Our principal executive office is located at 400 Fairview Avenue North, Suite 1200, Seattle, Washington 98109. Our telephone number is (206) 517-5300. Our website is www.impinj.com . Information contained in, or that can be accessed through, our website is not a part of, and is not incorporated into, this report.
Our website is www.impinj.com . Information contained in, or that can be accessed through, our website is not a part of, and is not incorporated into, this report.
We primarily engage our reader IC subcontractors on a purchase-order basis. Plexus Corp., or Plexus, manufactures our readers and gateways in Asia and has been our supplier since 2005. We order readers and gateways pursuant to non-exclusive purchase agreements that automatically renew each year, subject to each party’s right to terminate on 180 days’ notice.
We order readers and gateways pursuant to non-exclusive purchase agreements that automatically renew each year, subject to each party’s right to terminate on 180 days’ notice. We use subcontractors on a purchase-order basis to assemble and test printed circuit boards, to build our reader and gateway enclosures and to test our readers and gateways.
We use subcontractors on a purchase-order basis to assemble and test printed circuit boards, to build our reader and gateway enclosures and to test our readers and gateways. We manufacture our test and measurement solutions in Finland, at Voyantic Oy, which we acquired in April 2023. This acquisition added label design, manufacturing and test systems to our platform offering.
We manufacture our test and measurement solutions in Finland, at Voyantic Oy, which we acquired in April 2023. This acquisition added label design, manufacturing and test systems to our platform offering. Research and Development We built our company on a foundation of technology leadership, innovation and best-in-class products.
We facilitate personal and professional development by offering a variety of tools and opportunities to support their growth. Offerings range from management training programs for new leaders, technical training focused on RAIN RFID and tuition reimbursement to further develop skills for current and future positions. Available Information We were incorporated in Delaware in April 2000.
We facilitate personal and professional development by offering a variety of tools and opportunities to support employee growth, ranging from training programs for new leaders, advanced skills programs for more experienced leaders, technical training and tuition reimbursement.
We believe we have achieved our leading market position by continuously improving our product performance, features, quality and reliability while reducing costs, and we plan to invest to continue doing so. In most situations, we strive to lead the market with new products and innovations, but we sometimes adopt a more deliberate approach depending on the situation.
Throughout our history we have committed, and we plan to continue committing, significant resources to technology, innovation and product and solutions development. We believe we have achieved our leading market position by continuously improving our product performance, features, quality and reliability while reducing costs, and we plan to invest to continue doing so.
We believe our principles and the culture that derives from them are essential to the health and success of our business. More information on principles can be found at www.impinj.com/about-us/our-principles. As of December 31, 2023, we had 475 employees in the Americas, Europe and Asia Pacific. Most of our employees are not represented by a labor union.
Our principles underpin that culture and guide everything we do, from hiring to business relationships to our work ethic. They embody our core objective of making the world a better place. More information on our principles is available at www.impinj.com/about-us/our-principles. As of December 31, 2024, we had 451 employees in the Americas, Europe and Asia Pacific.
We call our expansive vision a Boundless Internet of Things, or IoT, and we are well on our way to realizing it. Our mission is to connect every thing. We use a type of radio-frequency identification, or RFID technology known as RAIN for the ubiquitous, wireless item-to-cloud connectivity.
We call our expansive vision a Boundless Internet of Things, or IoT. We design and sell a platform that enables that wireless item-to-cloud connectivity and with which we and our partners innovate IoT solutions. Our mission is to connect every thing.
Compensatio n 11 Table of Contents We are committed to providing competitive compensation and benefits. In addition to salary, we offer equity awards to all eligible employees because we believe all contribute to, and should share in, our success.
Most of our employees are not represented by a labor union. Compensatio n Our people are the foundation of our success. We provide competitive compensation and benefits, as well as equity awards to all eligible employees because we believe all contribute to, and should share in, our long-term success. Additionally, eligible employees participate in our annual variable-performance-based cash bonus plan.
We also offer broad benefits packages that we believe provide the time, resources and flexibility to support the well-being of our employees and their families. Commitment to Diversity, Equity and Inclusion (DEI) We value our global workforce and the varied backgrounds, viewpoints and experiences they bring.
We also offer broad benefits packages that we believe provide the time, resources and flexibility to support the well-being of our employees and their families. Benefits vary by country and meet or exceed all applicable laws and regulations. Pay Equity 12 Table of Contents We comply with federal, state and local laws and regulations and are committed to pay equity.
We have a team of skilled engineers that today conduct all our research and most of our product development internally. As of December 31, 2023, we had 243 employees in research and development. We regularly review our technology, products and market development opportunities and reallocate our spending and resources accordingly.
As of December 31, 2024, we had 241 employees in research and development. We regularly review our technology, products and market development opportunities and reallocate our spending and resources accordingly. Intellectual Property We protect our technologies by filing patent applications, retaining trade secrets and defending and enforcing our intellectual property rights where appropriate.
By building and empowering underrepresented populations across our workforce and cultivating an environment where everyone feels a sense of belonging, our DEI efforts are key to how we win. We continue making efforts to educate ourselves, learn from others, identify issues, improve our recruiting practices, engage in respectful and constructive dialogue and advance community initiatives.
We continually work to educate ourselves, learn from others, identify issues, improve our recruiting practices, engage in respectful and constructive dialogue and advance community initiatives. We do not tolerate discrimination, harassment or impropriety of any kind.
We have entered into licensing, broad-scope cross licensing and other agreements authorizing us to use or to operate within the scope of patents and IP owned by third parties. For example, we have licenses to third-party IP we use in our products.
Instead, we believe the totality of our patent and trade-secret portfolio creates an advantage for our business. We have also entered into certain inbound and outbound intellectual property licenses and cross-licenses with other companies. For example, we have licenses to third-party IP we use in our products.
This capital-efficient operating model scales efficiently with volume, allowing us to focus our resources on developing new products and solutions. Taiwan Semiconductor Manufacturing Company Limited, or TSMC, manufactures our endpoint IC wafers primarily in Taiwan and has been our supplier since 2003.
Manufacturing We outsource most of our product manufacturing to third parties that build our products to our specifications, manufacturing only a small portion of our products, principally some of our test and measurement solutions, ourselves. This capital-efficient operating model scales efficiently with volume, allowing us to focus our resources on developing new products and solutions.
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We sell a suite of products that we and our partner ecosystem use to connect and deliver item data to enterprises.
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Taiwan Semiconductor Manufacturing Company Limited, or TSMC, manufactures our endpoint IC wafers primarily in Taiwan and has been our supplier since 2003. We order endpoint IC wafers on a 9 Table of Contents purchase-order basis and do not have a long-term supply agreement with TSMC. We test the wafers primarily in Asia.
Removed
Avery Dennison Corporation, or Avery Dennison, and Arizon RFID Technology (Yangzhou) Co., LTD., or Arizon, purchase our endpoint ICs for their inlay and tag products.
Added
In most situations, we strive to lead the market with new products and innovations, but we sometimes adopt a more deliberate approach depending on the situation. As one example, our nearest endpoint IC competitor migrated from 200mm wafers to 300mm wafers before we did.
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Research and Development We built our company on a foundation of technology leadership, innovation and best-in-class products. Throughout our history we have committed, and we plan to continue committing, significant resources to technology, innovation and product and solutions development.
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As of December 31, 2024, our intellectual property portfolio includes 294 issued and allowed U.S. patents, six issued international patents, 18 pending U.S. patent applications and 13 pending international patent applications. Of our 284 utility patents, 16 will expire in 2025 and of our four design patents, none will expire in 2025.
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Intellectual Property We protect our technologies by filing patent applications, retaining trade secrets and defending and enforcing our intellectual property rights where appropriate. To date, our intellectual property portfolio includes 302 issued and allowed U.S. patents, five issued international patents, 16 pending U.S. patent applications and seven pending international patent applications.
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In addition to the above and other licenses, we as well entered into a broad patent cross-license agreement as a part of a legal settlement. For further information on this agreement, see note 12 of our consolidated financial statements included elsewhere in this report.
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As of December 31, 2023 our community was nearing completion of yet another update, again with us as an editor. Our industry uses the RAIN radio protocol nearly exclusively.
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Our industry uses the RAIN radio protocol nearly exclusively. In 2024, we introduced enhancements to the radio and logical layers of the RAIN radio protocol that speed inventory, increase tag read range, declutter the tag environment, protect consumers, inhibit label and item counterfeiting and reduce solution cost. We call these enhancements Gen2X.
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All employees complete training courses on diversity and inclusion, bias, and recognizing and preventing harassment and discrimination. We do not tolerate discrimination, harassment or impropriety of any kind.
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We proactively review compensation for all roles at least annually. Our executive leadership team reviews and approves all compensation. Commitment to Diversity, Equity and Inclusion (DEI) Our employees from around the globe, each of whom bring varied backgrounds, viewpoints and experiences, form the heart of everything we do.
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We strengthen who we are and what we can achieve by fostering a diverse and inclusive culture built on respect, equity and collaboration. Our Diversity, Equity and Inclusion, or DEI, program focuses on making DEI part of our DNA.
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We build and empower underrepresented populations across our workforce and cultivate an environment where everyone can belong, contribute and be their authentic selves. All employees complete training on the importance of diversity, equity, inclusion and avoiding bias, and on recognizing and preventing harassment and discrimination.
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Our leaders strive to provide what each employee needs to thrive. Employees and managers meet frequently to set and evaluate personal goals as part of a larger program to empower teams to deliver and succeed. To help our employees excel, we put significant effort into employee training and learning.
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We strive to create a work environment where information sharing is valued, encouraged and recognized because we believe the best learning experiences come from working alongside others. Available Information We were incorporated in Delaware in April 2000. Our principal executive office is located at 400 Fairview Avenue North, Suite 1200, Seattle, Washington 98109. Our telephone number is (206) 517-5300.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

104 edited+39 added−21 removed126 unchanged
Biggest changeDespite the subsequent availability of an industry-wide license, we believe those lawsuits adversely affected demand for our products from 2011 to 2019. The last of the licensed Round Rock patents expired in 2019. However, we, our partners, suppliers or end users could be involved in similar disputes in the future which could adversely affect our operating results and growth prospects.
Biggest changeIntellectual property disputes have adversely affected RAIN adoption in the past and could disrupt growth prospects in the future. In 2011, Round Rock Research filed lawsuits against 11 end users, including Walmart and Macy’s, for RAIN-related patent infringement. Despite the subsequent availability of an industry-wide license, we believe those lawsuits adversely affected demand for our products from 2011 to 2019.
Foreign acquisitions involve additional risks beyond those above, including related to integrating operations across different cultures and languages, currency risks and the economic, political and regulatory risks associated with other countries. Also, the anticipated benefit of any acquisition, domestic or foreign, may not materialize.
Foreign acquisitions involve additional risks beyond those above, including those related to integrating operations across different cultures and languages, currency risks and the economic, political and regulatory risks associated with other countries. Also, the anticipated benefit of any acquisition, domestic or foreign, may not materialize.
In addition, the United States and other countries continue to expand the economic sanctions and export control restrictions imposed against Russia and Belarus and certain Russian nationals and entities after Russia invaded Ukraine. We must undertake additional diligence efforts to comply with these rules, which may be time-consuming and result in delayed or lost opportunities.
In addition, the United States and other countries continue to expand the economic sanctions and export control restrictions imposed against Russia and Belarus and certain Russian nationals and entities after Russia invaded Ukraine. We must undertake additional diligence efforts to comply with these, and other, rules, which may be time-consuming and result in delayed or lost opportunities.
Our competitors’ relationships with, or acquisitions of, these partners or distributors could interfere with our relationships with them. Any such interference could impair or delay our product sales or increase our cost of sales. We engage directly some with end users.
Our competitors’ relationships with, or acquisitions of, these partners or distributors could interfere with our relationships with them. Any such interference could impair or delay our product sales or increase our cost of sales. We engage directly with some end users.
End users drive demand for our products but because we sell our products primarily through partners, we are one step removed from those end users and often unable to directly assess and affect their demand.
End users drive demand for our products but because we sell our products primarily through partners, we are one step removed from those end users and are often unable to directly assess and affect their demand.
Loss of any such licenses could cause manufacturing interruptions or delays or reductions in product shipments until we can develop, license, integrate and deploy alternative technologies, if even possible, which could harm our business and operating results. Our use of open-source software may expose us to additional risks and weaken our intellectual property rights.
Loss of any such licenses could cause manufacturing interruptions or delays or reductions in product shipments until we can develop, license, integrate and deploy alternative technologies which, if even possible, could harm our business and operating results. Our use of open-source software may expose us to additional risks and weaken our intellectual property rights.
Among other things, our certificate of incorporation and bylaws: • permit our board of directors to issue up to 5,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate; • provide that the authorized number of directors may be changed only by resolution of the board of directors; 31 Table of Contents • provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; • restrict the forum for certain litigation against us to Delaware; • require that any action taken by our stockholders be effected at a duly called annual or special meeting of stockholders and not by written consent; • provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice; • do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any uncontested election of directors to elect all of the directors standing for election, if they should so choose); and • provide that special meetings of our stockholders may be called only by the chair of the board, our chief executive officer or the board of directors.
Among other things, our certificate of incorporation and bylaws: • permit our board of directors to issue up to 5,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate; • provide that the authorized number of directors may be changed only by resolution of the board of directors; • provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; • restrict the forum for certain litigation against us to Delaware; • require that any action taken by our stockholders be effected at a duly called annual or special meeting of stockholders and not by written consent; • provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice; 35 Table of Contents • do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any uncontested election of directors to elect all of the directors standing for election, if they should so choose); and • provide that special meetings of our stockholders may be called only by the chair of the board, our chief executive officer or the board of directors.
Material factors that contribute to fluctuations in our operating results include: • macroeconomic conditions, including inflation, recession or economic slowdown, and their impact on our business and that of our suppliers, partners and end users; • fluctuations or delays in RAIN adoption and deployment by end users; • changes in the pace or direction of major deployments, whether due to macroeconomic conditions or enterprise-specific events or circumstances, and our, or our partners', ability to win business from these deployments; • fluctuations in demand for our products or platform, including by tag OEMs and other significant partners and end users on whom we rely for a substantial portion of our revenue; • fluctuations in the pricing and availability or supply of our products or key elements or components of those products, especially semiconductor wafers; • degradations in product quality, whether due to us or our suppliers, including quality claims or product returns; • delays in new-product introductions and in the maturity of our new-product technologies; • decreases in selling prices for our products; • delays in our product-shipment timing, customer or end-user sales or deployment cycles, or work performed under development contracts; • intellectual property disputes involving us, our partners, end users or other participants in our industry; • adverse outcomes of litigation or governmental proceedings; • timing variability in product introductions, enhancements, services and technologies by us and our competitors as well as market acceptance of new or enhanced products, services and technologies; • unanticipated excess or obsolete inventory as a result of significant demand fluctuations, supply-chain mismanagement, new-product introduction, quality issues or otherwise; • changes in the amount and timing of our operating costs, including those related to expanding our business, operations and infrastructure; 27 Table of Contents • changes in business cycles or seasonal fluctuations that affect the markets in which we sell; • changes in industry standards or specifications, or changes in government regulations, relating to our products or our platform; • late, delayed or cancelled payments from our partners or end users; and • unanticipated impairment of long-lived assets and goodwill.
Material factors that contribute to fluctuations in our operating results include: • macroeconomic conditions, including inflation, recession or economic slowdown, and their impact on our business and that of our suppliers, partners and end users; • fluctuations or delays in RAIN adoption and deployment by end users; • changes in the pace or direction of major deployments, whether due to macroeconomic conditions or enterprise-specific events or circumstances, and our, or our partners', ability to win business from these deployments; • fluctuations in demand for our products or platform, including by tag OEMs and other significant partners and end users on whom we rely for a substantial portion of our revenue; 30 Table of Contents • fluctuations in the pricing and availability or supply of our products or key elements or components of those products, especially semiconductor wafers; • degradations in product quality, whether due to us or our suppliers, including quality claims or product returns; • delays in new-product introductions and in the maturity of our new-product technologies; • decreases in selling prices for our products; • delays in our product-shipment timing, customer or end-user sales or deployment cycles, or work performed under development contracts; • intellectual property disputes involving us, our partners, end users or other participants in our industry , or the timing of license payments for our intellectual property ; • adverse outcomes of litigation or governmental proceedings; • timing variability in product introductions, enhancements, services and technologies by us and our competitors as well as market acceptance of new or enhanced products, services and technologies; • unanticipated excess or obsolete inventory as a result of significant demand fluctuations, supply-chain mismanagement, new-product introduction, quality issues or otherwise; • changes in the amount and timing of our operating costs, including those related to expanding our business, operations and infrastructure; • changes in business cycles or seasonal fluctuations that affect the markets in which we sell; • changes in industry standards or specifications, or changes in government regulations, relating to our products or our platform; • late, delayed or cancelled payments from our partners or end users; and • unanticipated impairment of long-lived assets and goodwill.
Many countries, as well as organizations such as the Organization for Economic Cooperation and Development, have proposed changes to existing tax laws, including a proposed 15% global minimum tax. Any of these developments or changes in U.S. federal, state or international tax laws or tax rulings could adversely affect our effective tax rate and our operating results.
Many countries, as well as organizations such as the Organization for Economic Cooperation and Development, have implemented or proposed changes to existing tax laws, including a 15% global minimum tax. Any of these developments or changes in U.S. federal, state or international tax laws or tax rulings could adversely affect our effective tax rate and our operating results.
We anticipate growing our business, in part, by growing our international operations, which presents a variety of risks, including: • changes, some unexpected or unanticipated, in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions; • lack of established, clear or fairly implemented standards or regulations with which our products must comply; • greater difficulty in enforcing contracts, judgments and arbitration awards in international courts, and in collecting accounts receivable as well as longer payment and collection periods; • limited or unfavorable intellectual property protection; • misappropriation of our intellectual property; • inflation and fluctuations in foreign currency exchange and interest rates; 19 Table of Contents • restrictions, or changes thereof, on foreign trade or investment, including currency-exchange controls, including as a result of sanctions against Russia; • changes in a country’s or region’s political, regulatory, legal or economic conditions, including, for example, global and regional economic disruptions caused by any future public health outbreaks or pandemics, including a resurgence of Covid-19; • political, social and economic instability abroad; wars and other armed conflicts, such as those in Ukraine and the Gaza Strip; geopolitical tensions, such as those between the United States, China and Taiwan; and terrorist attacks and security concerns in general; • differing regulations with regard to maintaining operations, products and public information; • inequities or difficulties obtaining or maintaining export and import licenses; • differing labor regulations, including where labor laws may be more advantageous to employees than in the United States; • restrictions on earnings repatriation; • corrupt or unethical practices in foreign jurisdictions that may subject us to exposure under applicable anti-corruption and anti-bribery laws such as the U.S.
We anticipate growing our business, in part, by growing our international operations, which presents a variety of risks, including: • changes, some unexpected or unanticipated, in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions; • lack of established, clear or fairly implemented standards or regulations with which our products must comply; • greater difficulty in enforcing contracts, judgments and arbitration awards in international courts, and in collecting accounts receivable as well as longer payment and collection periods; • limited or unfavorable intellectual property protection; • misappropriation of our intellectual property; • inflation and fluctuations in foreign currency exchange and interest rates; • restrictions, or changes thereof, on foreign trade or investment, including currency-exchange controls, including as a result of sanctions against Russia; • changes in a country’s or region’s political, regulatory, legal or economic conditions, including, for example, global and regional economic disruptions caused by any future public health outbreaks or pandemics, including a resurgence of Covid-19; • political, social and economic instability abroad; wars and other armed conflicts, such as those in Ukraine; geopolitical tensions, such as those between the United States, China and Taiwan; and terrorist attacks and security concerns in general; • differing regulations with regard to maintaining operations, products and public information; • inequities or difficulties obtaining or maintaining export and import licenses; • differing labor regulations, including where labor laws may be more advantageous to employees than in the United States; • restrictions on earnings repatriation; • corrupt or unethical practices in foreign jurisdictions that may subject us to exposure under applicable anti-corruption and anti-bribery laws such as the U.S.
Our ESG practices may not meet their standards, and they as well as advocacy groups may campaign for us to change our business or practices to address their ESG-related concerns. Our failure, or perceived failure, to respond to any such campaigns could harm our business and reputation and negatively impact the market price of our securities.
Our ESG practices may not meet their standards, and they as well as advocacy groups may campaign for us to change our business or practices to address their ESG-related concerns. Our failure, or perceived failure, to adequately respond to any such campaigns could harm our business and reputation and negatively impact the market price of our securities.
We introduce new products and services to advance our business, satisfy increasingly demanding end-user requirements and grow RAIN market adoption. We commit significant resources developing and introducing these new products and services. We also commit significant resources improving the performance and reliability of, and reducing the costs of, our existing products and services.
We introduce new products and services to advance our business, satisfy increasingly demanding end-user requirements and grow RAIN market adoption. We commit significant resources developing and introducing these new products and services, and to improving the performance and reliability of, and reducing the costs of, our existing products and services.
Increasing attention to environmental, social and governance matters may cause us to incur additional costs or expose us to additional risks. Investors, governmental and nongovernmental organizations, partners and end users are increasingly focusing on environmental, social and governance, or ESG, practices.
Increasing attention to environmental, social and governance and regulatory matters may cause us to incur additional costs or expose us to additional risks. Investors, governmental and nongovernmental organizations, partners and end users are increasingly focusing on environmental, social and governance, or ESG, practices.
The following factors, in addition to general risks and other risks described in this report, may have a material effect on the trading price of our common stock: • price and volume fluctuations in the overall stock market; • changes in operating performance, stock market valuations and volatility in the market prices of other technology companies generally, and of those in our industry in particular; 29 Table of Contents • actual or anticipated quarterly variations in our results of operations or those of our competitors; • actual or anticipated changes in our growth rate relative to our competitors; • delays in end-user deployments of RAIN solutions; • announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments; • supply interruptions, including semiconductor wafer or other product or component shortfalls; • developments relating to intellectual property rights or in disputes relating to those rights; • our ability to develop and market new and enhanced products on a timely basis; • commencement of, or our involvement in, litigation; • changes in our board of directors or management; • changes in governmental regulations or in the status of our regulatory approvals; • unstable political and economic conditions, including instability resulting from wars and other armed conflicts, such as those in Ukraine and the Gaza Strip, or geopolitical tensions, such as those between the U.S., China and Taiwan; • the trading volume of our stock; • actual or perceived security breaches or incidents; • limited public float; • any future sales of our common stock or other securities; • financial analysts dropping or reducing their coverage of us; changes in financial estimates by analysts who do cover us; or our failure to meet analyst estimates or investor expectations; • fluctuations in the values of companies that investors perceive to be comparable to us; • the financial projections we may provide to the public, as well as any changes in those projections or our failure to meet those projections; and • general economic conditions and slow or negative growth in the markets in which we operate.
The following factors, in addition to general risks and other risks described in this report, may have a material effect on the trading price of our common stock: • price and volume fluctuations in the overall stock market; • changes in operating performance, stock market valuations and volatility in the market prices of other technology companies generally, and of those in our industry in particular; • actual or anticipated quarterly variations in our results of operations or those of our competitors; • actual or anticipated changes in our growth rate relative to our competitors; • delays in end-user deployments of RAIN solutions; • announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments; • supply interruptions, including semiconductor wafer or other product or component shortfalls; • developments relating to intellectual property rights or in disputes relating to those rights; • our ability to develop and market new and enhanced products on a timely basis; • commencement of, or our involvement in, litigation; • changes in our board of directors or management; • changes in governmental regulations or in the status of our regulatory approvals; • unstable political and economic conditions, including instability resulting from wars and other armed conflicts, such as those in Ukraine and the Gaza Strip, or geopolitical tensions, such as those between the United States, China and Taiwan; • the trading volume of our stock; • actual or perceived security breaches or incidents; 33 Table of Contents • limited public float; • any future sales of our common stock or other securities; • financial analysts dropping or reducing their coverage of us; changes in financial estimates by analysts who do cover us; or our failure to meet analyst estimates or investor expectations; • fluctuations in the values of companies that investors perceive to be comparable to us; • the financial projections we may provide to the public, as well as any changes in those projections or our failure to meet those projections; and • general economic conditions and slow or negative growth in the markets in which we operate.
If we are unable to identify or correct errors, defects, incompatibilities or other problems in our products, we could experience: • loss of customer orders or customers; • lost or delayed market acceptance (either of our products and solutions or RAIN generally); • lost or delayed sales; • loss of market share; • damage to our brand and reputation; • impaired ability to attract new customers; • diversion of development resources; • increased service and warranty costs; • replacement costs; • legal actions by our partners or end users; and • increased insurance costs.
If we are unable to identify or correct errors, defects, incompatibilities or other problems in our products, we could experience: • loss of customer orders or customers; • lost or delayed market acceptance (either of our products and solutions or RAIN generally); • lost or delayed sales; 16 Table of Contents • loss of market share; • damage to our brand and reputation; • impaired ability to attract new customers; • diversion of development resources; • increased service and warranty costs; • replacement costs; • legal actions by our partners or end users; and • increased insurance costs.
The consequences of loss, unavailability, misuse, corruption or other unauthorized processing of confidential, personal or proprietary information could include, among other things, unfavorable publicity, reputational damage, difficulty marketing or selling our products, customer allegations of breach of contract, loss or theft of intellectual property, claims and litigation, governmental and regulatory investigations and other proceedings and fines, penalties and other damages and liabilities.
The consequences of loss, unavailability, misuse, corruption or other unauthorized processing of confidential, personal or proprietary information could include, among other things, unfavorable 29 Table of Contents publicity, reputational damage, difficulty marketing or selling our products, customer allegations of breach of contract, loss or theft of intellectual property, claims and litigation, governmental and regulatory investigations and other proceedings and fines, penalties and other damages and liabilities.
They could devote more resources than we can to product development, promotion, sale and support. They could also bundle other technologies, including those we do not have in our product portfolio, with their RAIN products.
They could devote more resources than we can to product development, promotion, sales and support. They could also bundle other technologies, including those we do not have in our product portfolio, with their RAIN products.
Sales of some of our products could cannibalize revenue from other products. 16 Table of Contents Some of our partners develop products that compete with our products. For example, some of our OEM partners use our reader ICs to build and sell readers and gateways that compete with our readers and gateways.
Sales of some of our products could cannibalize revenue from other products. 18 Table of Contents Some of our partners develop products that compete with our products. For example, some of our OEM partners use our reader ICs to build and sell readers and gateways that compete with our readers and gateways.
In anticipation of those orders, we may incur substantial costs before the sales cycle is complete and before we receive any customer orders or payments, if we receive them at all. 15 Table of Contents An inability or limited ability of end user systems to exploit RAIN information may adversely affect the market for our products.
In anticipation of those orders, we may incur substantial costs before the sales cycle is complete and before we receive any customer orders or payments, if we receive them at all. An inability or limited ability of end user systems to exploit RAIN information may adversely affect the market for our products.
Changes in global trade policies could have a material adverse effect on us. Changes in U.S. and foreign laws and policies governing foreign trade, manufacturing, development and investment in the jurisdictions where we currently develop and sell products, and any negative consequences resulting from such changes, could materially affect our business.
Changes in global trade policies could have a material adverse effect on us. Changes in U.S. and foreign laws and policies governing international trade, export controls, manufacturing, development and investment in the jurisdictions where we currently develop and sell products, and any negative consequences resulting from such changes, could materially affect our business.
Further, some GS1 EPCglobal members declined to 24 Table of Contents license their intellectual property on royalty-free terms, instead retaining the right to license their technology on RAND terms. These members may choose to assert their intellectual property, in which case we will need to defend ourselves within the confines of the GS1 and ISO intellectual property policies.
Further, some GS1 EPCglobal members declined to license their intellectual property on royalty-free terms, instead retaining the right to license their technology on RAND terms. These members may choose to assert their intellectual property, in which case we will need to defend ourselves within the confines of the GS1 and ISO intellectual property policies.
This ownership concentration could also prevent attempts by our stockholders to replace or remove our board of directors or management. We may not have sufficient cash flow or access to cash necessary to satisfy our obligations under the 2021 Notes, and our current and future indebtedness may restrict our business.
This ownership concentration could also prevent attempts by our stockholders to replace or remove our board of directors or management. 34 Table of Contents We may not have sufficient cash flow or access to cash necessary to satisfy our obligations under the 2021 Notes, and our current and future indebtedness may restrict our business.
We cannot guarantee that: • any of the patents, trademarks, copyrights, trade secrets or other intellectual property rights we presently employ in our business will not lapse or be invalidated, circumvented, challenged or abandoned; • our intellectual property rights will provide competitive advantages to us; • our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties; • any of our pending or future patent applications will issue or have the coverage we originally sought; • our intellectual property rights can or will be enforced, particularly in jurisdictions where competition may be intense or where legal protections may be weak; • we will not lose the ability to assert our intellectual property rights against, or to license our technology to, others and collect royalties or other payments; or • we will retain the right to ask for a royalty-bearing license to an industry standard if we fail to file an intellectual property declaration pursuant to the standards process.
We cannot guarantee that: • any of the patents, trademarks, copyrights, trade secrets or other intellectual property rights we presently employ in our business will not lapse or be invalidated, circumvented, challenged or abandoned; • our intellectual property rights will provide competitive advantages to us; • our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes successfully; • any of our pending or future patent applications will issue or have the coverage we originally sought; • our intellectual property rights can or will be enforced, particularly in jurisdictions where competition may be intense or where legal protections may be weak; • we will not lose the ability to assert our intellectual property rights against, or to license our technology to, others and collect royalties or other payments; or • we will retain the right to ask for a royalty-bearing license to an industry standard if we fail to file an intellectual property declaration pursuant to the standards process.
Convincing enterprises to engage us to solve their business problems – including evaluation, design, deployment, operations and services, as well as integrating RAIN data into the enterprise's information systems, requires tight coordination among our and our partners' sales, marketing, operations and engineering teams.
Convincing enterprises to partner with us to solve their business problems — including evaluation, design, deployment, operations and services, as well as integrating RAIN data into the enterprise's information systems — requires tight coordination among our and our partners' sales, marketing, operations and engineering teams.
If we raise additional capital but do not deploy it effectively then our business, financial condition, results of operations and prospects could be harmed and the market price of our common stock could suffer. Risks Relating to U.S.
If we raise additional capital but do not deploy it effectively then our business, financial condition, results of operations and prospects could be harmed and the market price of our common stock could suffer. 31 Table of Contents Risks Relating to U.S.
The results of an audit or litigation could have a material effect on our operating results or cash flows in the period or periods for which that determination is made. 28 Table of Contents Changes in tax laws could have a material adverse effect on our business, cash flow, results of operations or financial conditions.
The results of an audit or litigation could have a material effect on our operating results or cash flows in the period or periods for which that determination is made. Changes in tax laws could have a material adverse effect on our business, cash flow, results of operations or financial conditions.
As a participant in developing GS1 EPCglobal UHF Gen2, UHF Gen2 V2, tag data standards, low-level reader protocol and other GS1 EPCglobal protocols, we agreed to license to other GS1 EPCglobal members, on a royalty-free basis, those of our patents necessary to practice those protocols, subject to us receiving reciprocal royalty-free rights from the other GS1 EPCglobal member practicing the protocol.
As a participant in developing GS1 EPCglobal UHF Gen2, UHF Gen2 V2, UHF Gen2 V3, tag data standards, low-level reader protocol and other GS1 EPCglobal protocols, we agreed to license to other GS1 EPCglobal members, on a royalty-free basis, those of our patents necessary to practice those protocols, subject to us receiving reciprocal royalty-free rights from the other GS1 EPCglobal member 27 Table of Contents practicing the protocol.
This activity could cause a decrease in our stock price. 30 Table of Contents For more information on the 2019 Notes, the 2021 Notes and the capped-call transactions, see Note 8 of our consolidated financial statements included elsewhere in this report.
This activity could cause a decrease in our stock price. For more information on the 2019 Notes, the 2021 Notes and the capped-call transactions, see Note 8 of our consolidated financial statements included elsewhere in this report.
As demand for older products declines, or as competition from competitors with lower product costs or lower profitability expectations increases, or during times of oversupply, ASPs may decline quickly. To compete profitably we must continually improve our technology and processes and reduce unit costs in line with lower selling prices.
As demand for older products declines, or as competition from competitors with lower product costs or lower profitability expectations increases, or during times of oversupply, ASPs may decline quickly. To compete profitably, we must continually improve our technology and processes, reduce unit costs in line with lower selling prices, and introduce new, higher margin products.
We outsource our manufacturing and production to suppliers in a small number of Asian jurisdictions including Thailand, Malaysia, Taiwan and China. Some of these jurisdictions have experienced, and may yet experience, restrictions related to Covid-19. These jurisdictions have also experienced significant changes in political, social, business or economic conditions in the past and may experience them in the future.
We outsource our manufacturing and production to suppliers in a small number of Asian jurisdictions including Thailand, Malaysia, Taiwan and China. Some of these jurisdictions experienced significant restrictions during the Covid-19 pandemic. These jurisdictions have also experienced significant changes in political, social, business or economic conditions in the past and may experience them in the future.
Product supply shortages have challenged our ability to meet market needs and we have increased prices in response to our suppliers increasing their prices to us.
From time to time, product supply shortages have challenged our ability to meet market needs and we have increased prices in response to our suppliers increasing their prices to us.
Moreover, the adoption or expected adoption of new or changed standards could slow sales of our existing products before we can introduce new products that meet the new or changed standards. New standards or changes to existing standards could also limit our ability to implement new features in our products.
Moreover, the adoption or expected adoption of new or changed standards could slow sales of our existing products before we can introduce new products that meet the new or changed standards, and could also limit our ability to implement new features.
We must export and import our products in compliance with U.S. export controls, including the Commerce Department’s Export Administration Regulations and economic and trade sanctions established by the Treasury Department’s Office of Foreign Assets Controls, as well as similar controls established in the countries in which we do business. For example, the U.S.
We must export and import our products and conduct our business activities in compliance with U.S. export controls and trade and economic sanctions, including the Commerce Department’s Export Administration Regulations and economic and trade sanctions established by the Treasury Department’s Office of Foreign Assets Controls, as well as similar controls established in the countries in which we do business.
Breakthroughs in legacy RFID technologies or markets, including those using low frequency or high frequency RFID technology, or in other radio technologies, could adversely affect RAIN market growth and demand for our products. Likewise, new technologies may enable lower-cost ICs than our products.
Breakthroughs in legacy RFID technologies or markets, including those using low frequency or high frequency RFID technology, or in other radio technologies, could adversely affect RAIN market growth and demand for our products. 17 Table of Contents Likewise, new technologies may enable lower-cost ICs than our products.
The European Commission, or the EC, has issued guidance to address privacy concerns about RFID. In May 2009, the EC issued a recommendation that retailers in the EU inform their customers when RFID tags are either 25 Table of Contents on or embedded within products.
The European Commission, or the EC, has issued guidance to address privacy concerns about RFID. In May 2009, the EC issued a recommendation that retailers in the EU inform their customers when RFID tags are either on or embedded within products.
As a result, we may be unable to accurately forecast our future operating results including revenue, gross margins, cash flows and profitability, any or all of which could negatively impact our financial performance. We must regularly introduce new products and product enhancements to compete effectively.
As a result, we may be 14 Table of Contents unable to accurately forecast our future operating results including revenue, gross margins, cash flows and profitability, any or all of which could negatively impact our financial performance. We must introduce new products, product enhancements and services to compete effectively.
By focusing our intellectual property protection on the United States and a small number of foreign countries, we have a limited ability to assert that intellectual property outside the United States, including in some significant foreign markets such as China.
By focusing our intellectual property protection on the United States and a small number of foreign countries, we have a limited ability to assert intellectual property rights outside the United States, including in some significant foreign markets such as China or Europe.
Any failure or perceived failure by us or any third parties with which we do business to comply with these laws and regulations or other actual or asserted obligations may result in claims or litigation; actions against us by governmental entities; legal and other costs; substantial time and resources and fines, penalties or other liabilities.
Any failure or perceived failure by us or any third parties with which we do business to comply with these laws and regulations or other actual or asserted obligations relating to privacy, data protection or security may result in claims or litigation; actions against us by governmental entities; legal and other costs; substantial time and resources and fines, penalties or other liabilities.
If any pending or future proceedings result in an adverse outcome then we could be required to: 23 Table of Contents • cease manufacturing, using or selling the infringing products, processes or technology; • pay substantial damages for infringement; • expend significant resources to develop noninfringing products, processes or technology; • license technology from the party claiming infringement, which license may not be available on commercially reasonable terms or at all; • cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; or • pay substantial damages to our partners or end users for them to discontinue using, or replace, infringing products with non-infringing products.
If any pending or future proceedings result in an adverse outcome, our intellectual property rights could be weakened and we could be required to: 26 Table of Contents • cease manufacturing, using or selling the infringing products, processes or technology; • pay substantial damages for infringement; • expend significant resources to develop noninfringing products, processes or technology; • license technology from the party claiming infringement, which license may not be available on commercially reasonable terms or at all; • cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; or • pay substantial damages to our partners or end users for them to discontinue using, or replace, infringing products with noninfringing products.
Similarly, some of our partners use our readers to build and sell gateways that compete with our gateways. If we fail to manage such conflicts successfully, then our business and operating results could be negatively affected.
Similarly, some of our partners use our readers to build and sell gateways that compete with our gateways. If we fail to manage such conflicts successfully, then our business and operating results could be negatively affected. Our licensing program is nascent.
We do not collect sales and use, value-added or similar taxes in all jurisdictions in which we have sales, based on our belief that such taxes are either not applicable or an exemption from such taxes applies.
We do not collect sales and use, value-added or similar taxes in all jurisdictions in which we have sales, based on our belief that such taxes are either not applicable or an exemption from such taxes 32 Table of Contents applies.
Supply disruptions can also distort demand, making it even harder to meet true demand with finished products. If our suppliers fail to manufacture our products at reasonable prices or with satisfactory quality levels, then our ability to bring those products to market and our reputation could both suffer.
Supply disruptions can also distort demand, making it even harder to meet true demand. 19 Table of Contents If our suppliers fail to manufacture our products at reasonable prices or with satisfactory quality levels, then our ability to bring those products to market and our reputation could both suffer.
Our principal stockholders and management own a significant percentage of our stock and are able to exercise significant influence over matters subject to stockholder approval. As of December 31, 2023, our executive officers, directors and principal stockholders, together with their respective affiliates, beneficially owned approximately 55.7% of our stock.
Our principal stockholders and management own a significant percentage of our stock and are able to exercise significant influence over matters subject to stockholder approval. As of December 31, 2024, our executive officers, directors and principal stockholders, together with their respective affiliates, beneficially owned approximately 51.3% of our stock.
We have historically focused on filing U.S. patent applications, for many reasons, including the fact that a significant portion of RAIN products are used in or imported into the United States. We have only a small number of foreign patents and applications.
We have historically focused on filing U.S. patent applications, for many reasons, including the fact that a significant portion of RAIN products are sold for use in the United States. We have only a small number of foreign patents and applications.
If the inventory and resale information our partners and distributors provide is inaccurate, or if we do not receive it in a timely manner, then we may not have a reliable view of products being sold to end users which could negatively impact our operating results.
If the inventory and resale information our partners and distributors provide is inaccurate, or if we do not receive it in a timely manner, then we may not have a reliable view of products expected to be sold to end users which could ultimately have a negative impact on our operating results.
Whether our new products and services will succeed is uncertain.
Whether our new or enhanced products and services will succeed is uncertain.
As of December 31, 2023, we had federal U.S. net operating loss carryforwards, or NOLs, of $230.5 million and U.S. federal research and development credit carryforwards of $30.5 million, which we may use to reduce future taxable income or income taxes. We have established a valuation allowance against the carrying value of these deferred tax assets.
As of December 31, 2024, we had federal U.S. net operating loss carryforwards, or NOLs, of $190.3 million and U.S. federal research and development credit carryforwards of $38.7 million, which we may use to reduce future taxable income or income taxes. We have established a valuation allowance against the carrying value of these deferred tax assets.
Our success developing the technologies, processes or capabilities necessary or desired for new or enhanced products and services, or licensing or otherwise acquiring them from third parties, and our ability to introduce new products and services before our competition, depends on many factors, including: • our ability to identify new product capabilities or services that end users will widely adopt; • our timely and efficient completion of the design process; • our timely and efficient implementation of manufacturing, assembly and testing procedures; • our attainment of appropriate product or service performance levels and product certifications; • partnering successfully with others to deliver complementary products or services; • the quality, reliability and selling price of our product or service; and • the effectiveness of our marketing, sales and service. 13 Table of Contents When we introduce new products, our success in ramping adoption depends, in part, on us making those products easy for our partners and end users to deploy and use.
Our success developing the technologies, processes or capabilities necessary or desired for new or enhanced products and services, or licensing or otherwise acquiring them from third parties, and our ability to introduce new or enhanced products and services before our competition, depends on many factors, including: • our ability to identify new product capabilities or services that end users will widely adopt; • our timely and efficient completion of the design process; • our timely and efficient implementation of manufacturing, assembly and testing procedures; • our attainment of appropriate product or service performance levels and product certifications; • partnering successfully with others to deliver complementary products or services; • the quality, reliability and selling price of our product or service; and • the effectiveness of our marketing, sales and support.
For more information, see “Changes in global trade policies could have a material adverse effect on us.” Any changes in our product or in export or import regulations or legislation; shifts or changes in enforcement; or changes in the countries, persons or technologies targeted by these regulations could delay us introducing new products in international markets, decrease use of our products by, or decrease our ability to export or sell our products to, existing or potential customers with international operations, adversely affecting our business and results of operations. 20 Table of Contents Instability or deterioration in the political, social, business or economic conditions in key jurisdictions could harm our supply or development of products.
For more information, see “Changes in global trade policies could have a material adverse effect on us.” Any changes in our product or in export or import regulations or legislation; shifts or changes in enforcement; or changes in the countries, persons or technologies targeted by these regulations could delay us introducing new products in international markets, decrease use of our products by, or decrease our ability to export or sell our products to, existing or potential customers with international operations, adversely affecting our business and results of operations.
We could lose that leadership position; our influence in standards development could diminish; or we could choose not to participate in certain standards activities. New or changed industry standards could affect us negatively.
For any number of reasons we could lose that leadership position or our influence in standards development, or we could choose not to participate in certain standards activities. New or changed industry standards could affect us negatively.
If industry standards diverge from our or the RAIN market’s needs, then our products may fail to keep pace with the market or cause end users to delay their deployments.
If industry standards were to diverge from our or the RAIN market’s needs, then our products could fail in the market or cause end users to delay their deployments.
We derive, and expect to continue to derive, most of our revenue from our endpoint ICs. If demand declines, or if we are unable to procure enough wafers to meet the demand we have, or if we are unable to raise prices to offset cost increases, then our business and operating results will suffer.
If demand declines, or if we are unable to procure enough wafers to meet the demand we have, or if we are unable to raise prices to offset cost increases, then our business and operating results will suffer.
Our business will be harmed if we fail to develop and grow these partner relationships. For example, our operating results may suffer if our efforts developing partner relationships increase our costs but do not increase revenue. Partner relationships may also include exclusivity provisions, multiple levels of distribution, discounted pricing or investments in other companies.
For example, our operating results may suffer if our efforts developing partner relationships increase our costs but do not increase revenue. Partner relationships may also include exclusivity provisions, multiple levels of distribution, discounted pricing or investments in other companies.
Although wafer availability improved in 2023, supply/demand imbalances can still occur. Additionally, we expect wafer capacity in the semiconductor nodes we use to be tight for the foreseeable future. We procure wafers on a purchase-order basis, so our wafer supply is not guaranteed, and we may not receive adequate supply from our foundry partners when shortages occur.
We expect wafer capacity in at least some of the semiconductor nodes we use to be tight for the foreseeable future. We procure wafers on a purchase-order basis, so our wafer supply is not guaranteed, and we may not receive adequate supply from our foundry partners when shortages occur.
In 2023, sales to tag OEMs Avery Dennison and Arizon accounted for 33% and 11% of our total revenue, respectively. Sales concentration to a small number of OEMs decreases our bargaining power and increases the risk that our pricing or sales could decline based on actions taken by our competitors or our own failure to compete effectively.
In 2024, sales to three major customers accounted for 60% of our total revenue. Sales concentration to a small number of OEMs decreases our bargaining power and increases the risk that our pricing or sales could decline based on actions taken by our competitors or our own failure to compete effectively.
However, to fully capitalize on our platform's potential, we must make our current offerings repeatable across multiple enterprises as well as deliver additional solutions to enterprise needs. We must also develop relationships with top-tier solution partners to gain access to and address challenging new use cases.
However, to fully capitalize on our platform's potential, we must make our current offerings repeatable across multiple enterprises and in a variety of market segments. We must also develop relationships with top-tier solution partners to gain access to and address challenging new use cases.
Notably, China has refused to renounce the use of military force against Taiwan, and there can be no assurance that relations between China and Taiwan will not deteriorate further, particularly in light of ongoing tensions between the United States and China. Any such developments could materially and adversely affect our business, financial condition and results of operations.
Notably, China has refused to renounce the use of military force against Taiwan, and there can be no assurance that relations between China and Taiwan will not deteriorate further, particularly in light of ongoing tensions between the United States and China.
We have limited experience executing acquisitions. Integrating an acquired company, business or technology may create unforeseen operating difficulties and expenditures.
Integrating an acquired company, business or technology may create unforeseen operating difficulties and expenditures.
We regularly evaluate potential strategic transactions, and we may pursue them if complementary to our business. For example, in April 2023 we completed our acquisition of Voyantic Oy, a global provider of RFID (primarily RAIN and NFC) inlay and label design, manufacturing and test systems. Strategic transactions could be material to our financial condition and operating results.
For example, in April 2023 we completed our acquisition of Voyantic Oy, a global provider of RFID (primarily RAIN and NFC) inlay and label design, manufacturing and test systems. 20 Table of Contents Strategic transactions could be material to our financial condition and operating results. We have limited experience executing acquisitions.
To convert the wafers we receive from our foundry partner into saleable ICs, we perform additional steps including testing, thinning, bumping and dicing.
Shortfalls of our silicon products can also occur due to post-processing constraints. To convert the wafers we receive from our foundry partner into saleable ICs, we perform additional steps including testing, thinning, bumping and dicing.
Our insurance may not adequately cover claims relating to an actual or perceived security breach or incident and any breach or incident may increase our insurance costs as well as reduce or eliminate the future availability of such insurance, harming our business and reputation. 26 Table of Contents Risks Relating to Our Financial Position and Capital Needs We have a history of losses and have only achieved profitability intermittently.
Our insurance may not adequately cover claims relating to an actual or perceived security breach or incident and any breach or incident may increase our insurance costs as well as reduce or eliminate the future availability of such insurance, harming our business and reputation.
Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, debt incurrence, contingent liabilities or amortization expenses or goodwill write-offs, any of which could harm our financial condition.
Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, debt incurrence, contingent liabilities or amortization expenses or goodwill write-offs, any of which could harm our financial condition. Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on favorable terms or at all.
Our partners may not properly forecast end users’ demand for our products. Our partners may purchase more of our products than they need to satisfy end-user demand, increasing their inventory and reducing our future sales to them. Distributors may, subject to time and quality limitations, return products in exchange for other products.
In the short term, our partners might purchase more of our products than they need, increasing their inventory and reducing 24 Table of Contents our future sales to them, and distributors may, subject to time and quality limitations, seek to return products in exchange for other products.
Our reserves estimates for products stocked by our distributors are based primarily on reports provided to us by those distributors, typically monthly.
Our partners may not properly forecast end users’ demand for our products. Our reserve estimates for products stocked by our distributors are based primarily on reports provided to us by those distributors, typically monthly.
Our readers and gateways are collectively certified for use in more than 40 countries worldwide, including the United States, Canada, Mexico, China, Japan, South Korea and every country in the EU.
Changes in government spectrum regulations or in their enforcement could adversely affect our ability to sell our products. Our readers and gateways are collectively certified for use in more than 40 countries worldwide, including the United States, Canada, Mexico, China, Japan, South Korea and every country in the European Union, or the EU.
We are subject to risks inherent in operating abroad and may not be able to successfully maintain or expand our international operations. In 2023, we derived 72% of our total revenue from sales outside the United States.
Various factors will determine their effect, including whether and when they are implemented and their amount, scope and nature. We are subject to risks inherent in operating abroad and may not be able to successfully maintain or expand our international operations. In 2024, we derived 77% of our total revenue from sales outside the United States.
If we do not succeed in identifying, developing, selling and deploying enterprise solutions, particularly solutions that rely on autonomous reading, with top-tier partners and across a range of markets and end users, then our business prospects will suffer.
We believe we are still at a very early stage in our ability to deliver enterprise solutions. If we do not succeed in identifying, developing, selling and deploying enterprise solutions with top-tier partners and end users across a range of markets and use cases, then our business prospects will suffer.
We are and may continue to 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 are engaged in several patent infringement lawsuits against certain affiliates of NXP Semiconductors N.V.
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. Patent litigation is complex and uncertain.
Consequently, we may not be able to account for such rights until after a patent issues. Intellectual property policies of industry standards organizations in whose working groups we participate could require us to provide royalty-free licenses of some of our intellectual property.
Intellectual property policies of industry standards organizations in whose working groups we participate could require us to provide royalty-free licenses of some to our intellectual property.
However, many of our partners have difficulty accurately forecasting their demand and the timing of that demand. They also sometimes cancel orders or reschedule product shipments, in some cases with little or no advance notice to us. We also sometimes receive soft commitments for large orders which do not materialize.
We typically order products from our suppliers based on partner forecasts before we receive purchase orders. However, many of our partners have difficulty accurately forecasting their demand and the timing of that demand, and sometimes cancel orders or reschedule product shipments, in some cases with little or no advance notice to us.
Our primary competitors are: • Endpoint ICs: NXP, EM Microelectronic, Kiloway, Quanray, Shanghai Fudan Microelectronics Group, Alibaba and Alien. • Reader ICs: Phychips Inc, Shanghai Fudan Microelectronics Group and MagicRF. 12 Table of Contents • Readers and gateways: Zebra. • Test and measurement systems: CISC.
Our primary competitors are: • Endpoint ICs: NXP, EM Microelectronic, Kiloway, Quanray, Shanghai Fudan Microelectronics Group, Alibaba and Alien. • Reader ICs: Phychips Inc, Shanghai Fudan Microelectronics Group, MagicRF and NationRFID. • Readers and gateways: Most major reader and gateway suppliers leverage, or have a stated intent to leverage, our platform. • Test and measurement systems: CISC.
If we are unable to replace project-based revenue with new revenue streams, or if end users with large projects change or delay those projects without giving us with adequate notice, then our sales could decline from period to period and harm our stock price. 21 Table of Contents Our ability to affect or determine end-user demand is limited in part because we sell and fulfill primarily through partners and rarely directly to end users.
If we are unable to replace project-based revenue with new revenue streams, or if end users with large projects change or delay those projects without providing us with adequate notice, then our sales could decline from period to period and harm our stock price.
During the ordinary course of business, we use significant judgment in evaluating our worldwide income-tax obligations and we conduct many transactions for which the ultimate tax determination is uncertain. Although we believe our tax determinations are proper, the final determination of any tax audits and any possible litigation could be materially different from our historical income-tax provisions and accruals.
During the ordinary course of business, we use significant judgment in evaluating our worldwide income tax obligations and we conduct many transactions for which the ultimate tax determination is uncertain.
We have additional uncertainty arising from competition and from unanticipated external events, such as macroeconomic trends or events and changes in regulatory standards, all of which can adversely affect demand and consequently our inventory levels, sales and operating results. Acquisitions could result in operating difficulties, dilution and other harmful consequences.
Partners will also sometimes give us soft commitments for large orders that do not materialize. We have additional uncertainty arising from competition and from unanticipated external events, such as macroeconomic trends or events and changes in regulatory standards, all of which can adversely affect demand and consequently our inventory levels, sales and operating results.
Many of our agreements require us to indemnify and defend partners and end users from third-party infringement claims and pay damages in the case of adverse rulings. These damages could be sizable and disproportionate to the business we derive from those partners or end users.
We, our partners, suppliers or end users could continue to be involved in intellectual property disputes in the future which could adversely affect our operating results and growth prospects. Many of our agreements require us to indemnify and defend partners and end users from third-party infringement claims and pay damages in the case of adverse rulings.
Endpoint IC sales, which constitute and likely will continue to constitute the majority of our product revenue, have, for the most part, lower gross margins than our systems product sales. Our overall product gross margins are affected by product mix, which can fluctuate based on demand and supply, competitive pressures and end-user needs and demand.
Changes in our product mix could adversely affect our overall gross margin. Endpoint IC sales, which constitute and likely will continue to constitute the majority of our product revenue, have, for the most part, lower gross margins than our systems product sales.
We believe we are still at a very early stage in our ability to deliver enterprise solutions. We are developing solutions for retail self-checkout and loss prevention and SC&L package routing that have been, or that we expect to be, deployed by the industry-leading enterprise end users.
We have developed, and continue developing, solutions for retail self-checkout and loss prevention and SC&L package routing that have been, or that we expect to continue being, deployed by industry-leading enterprise end users. We have also launched features in Gen2X that we believe will improve RAIN’s ability to deliver cost-effective solutions to enterprises.
If spectrum regulations change, or if our products are found to be noncompliant despite being certified, we could need to redesign our products, potentially resulting in significant costs, including costs associated with obsolete inventory. Regulatory changes may also cause us to forego opportunities, adversely affecting our business.
Our products operate in spectrum bands where they are certified to transmit. If the spectrum regulations were to change, or if our products were found to be noncompliant despite being certified to operate, then we would need to redesign our products, potentially resulting in significant costs, including costs associated with obsolete inventory.
We cannot be sure that any limitation-of-liability provisions in our agreements with customers, contracts with third-party vendors and service providers or other contracts are enforceable or adequate or will protect us from any liabilities or damages against claims relating to a security breach or other privacy- or security-related issue.
Any actions or concerns about security and privacy may be expensive to defend, cause us to expend substantial time and resources and damage our reputation and operating results and/or negatively impact overall RAIN industry development, even if unfounded. 28 Table of Contents We cannot be sure that any limitation-of-liability provisions in our agreements with customers, contracts with third-party vendors and service providers or other contracts will protect us from liabilities or damages against claims relating to a security breach or other privacy- or security-related issue.
Moreover, we may not know whether we are infringing a third party’s rights due to the large number of RAIN-related patents or to other systemic factors. For example, patent applications in the United States are maintained in confidence for up to 18 months after filing or, in some instances, for the entire time prior to patent issuance.
For example, patent applications in the United States are maintained in confidence for up to 18 months after filing or, in some instances, for the entire time prior to patent issuance. Consequently, we may not be able to account for such rights until after a patent issues.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur VP IT and Senior ISM are responsible for assessing and managing material risks from cybersecurity threats, as well as managing and responding to material cyber incidents if any occur. Our VP IT has a bachelor’s degree in management information systems and more than 25 years experience managing enterprise information-technology systems and resources.
Biggest changeOur Vice President Information Technology, or VP IT, and Senior Information Security Manager, or Senior ISM, are responsible for assessing and managing material risks from cybersecurity threats, as well as managing and responding to material cyber incidents if any occur.
Our VP IT and Senior ISM will provide periodic briefings to the audit committee and to the board of directors about our cybersecurity risks and activities, including cybersecurity incidents and responses, cybersecurity systems testing, third-party activities and related topics.
Our VP IT and Senior ISM provide periodic briefings to the audit committee and to the board of directors about our cybersecurity risks and activities, including cybersecurity incidents and responses, cybersecurity systems testing, third-party activities and related topics.
We devote significant resources and designate members of our management, including our VP, IT and Facilities, or VP IT, who reports to our Chief Financial Officer, and our Senior Information Security Manager, or Senior ISM, to manage the risk assessment and mitigation process.
We devote significant resources and designate members of our management, including our VP, IT and Facilities, or VP IT, who reports to 36 Table of Contents our Chief Financial Officer, and our Senior Information Security Manager, or Senior ISM, to manage the risk assessment and mitigation process.
Following these risk assessments, we evaluate how to appropriately implement and maintain reasonable safeguards to mitigate identified risks; reasonably address any identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards.
We conduct these risk assessments directly and also engage third parties to support these processes. Following these risk assessments, we evaluate how to appropriately implement and maintain reasonable safeguards to mitigate identified risks; reasonably address any identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards.
Our Senior ISM has an undergraduate degree in management information systems, an MBA and multiple professional cybersecurity certifications, has specialized in cybersecurity for more than a decade and is focused primarily on cybersecurity.
Our VP IT has a bachelor’s degree in management information systems and more than 25 years experience managing enterprise information-technology systems and resources. Our Senior ISM has an undergraduate degree in management information systems, an MBA and multiple professional cybersecurity certifications, has specialized in cybersecurity for more than a decade and is focused primarily on cybersecurity.
We conduct periodic risk assessments to identify cybersecurity threats, as well as assessments when there is a material change in our business practices that we believe could affect information systems that are vulnerable to cybersecurity threats.
We conduct periodic risk assessments to identify cybersecurity threats, as well as assessments when there is a material change in our business practices that we believe could affect information systems that are vulnerable to cybersecurity threats. These risk assessments include identifying reasonably foreseeable internal and external risks and the potential harm if the risks were to materialize.
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These risk assessments include identifying 32 Table of Contents reasonably foreseeable internal and external risks and the potential harm if the risks were to materialize. We conduct these risk assessments directly and also engage third parties to support these processes.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Purpose Approximate Square Feet Principal Lease Expiration Dates Seattle, Washington Corporate headquarters 70,000 2026 Seattle, Washington Design laboratory 29,000 2029 Shanghai, China General office space 4,000 2025 Helsinki, Finland Voyantic office space 7,000 2027 33 Table of Contents In addition, we lease offices in Thailand, Malaysia, Brazil and San Diego, California.
Biggest changeLocation Purpose Approximate Square Feet Principal Lease Expiration Dates Seattle, Washington Corporate headquarters 70,000 2026 Seattle, Washington Design laboratory 29,000 2029 Shanghai, China General office space 4,000 2025 Helsinki, Finland Voyantic office space 7,000 2027 In addition, we lease offices in Thailand, Malaysia, Brazil and San Diego, California.
Item 2. Pr operties We have several operating leases for office space, summarized as of December 31, 2023 in the table below. We believe that our facilities are adequate for our current needs.
Item 2. Pr operties We have several operating leases for office space, summarized as of December 31, 2024 in the table below. We believe that our facilities are adequate for our current needs.
For more information about our lease commitments, please refer to Note 11 to our consolidated financial statements included elsewhere in this report.
For more information about our lease commitments, please refer to Note 11 to our consolidated financial statements included elsewhere in this report. 37 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings In the normal course of business, we may be named as a party to various legal claims, actions and complaints. We cannot predict whether any resulting liability will have a material adverse effect on our financial position, results of operations, cash flows, market position or stock price.
Biggest changeItem 3. Legal Proceedings As of the date of this report, we are not a party to any material legal proceedings. In the normal course of business, we may be named as a party to various legal claims, actions and complaints.
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Patent Litigation We are engaged in multiple patent lawsuits with subsidiaries of NXP N.V., or NXP, our primary endpoint IC competitor. On June 6, 2019, we filed a patent infringement lawsuit against an NXP subsidiary, NXP USA Inc. On October 4, 2019, NXP USA, Inc. and NXP Semiconductors Netherlands, B.V., or NXP Netherlands, filed a patent infringement lawsuit against us.
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We cannot predict whether any resulting liability will have a material adverse effect on our financial position, results of operations, cash flows, market position or stock price. Item 4. Mine Safe ty Disclosures Not applicable. 38 Table of Contents PART II
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On May 25, 2021 and August 11, 2023 we filed two additional lawsuits against NXP, USA Inc. and NXP Netherlands. Several of these lawsuits have gone to trial and had verdicts rendered, but pending post-trial motions and appeals make the final outcome of our patent dispute with NXP uncertain.
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We may still file additional lawsuits against NXP or they may file additional lawsuits against us. For further information on these lawsuits, please refer to Note 12 of our consolidated financial statements included elsewhere in this report. Item 4. Mine Safe ty Disclosures Not applicable. 34 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 34 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 35 Item 6. Reserved 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 49 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 38 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 39 Item 6. Reserved 40 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 41 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock has traded on The Nasdaq Global Select Market under the symbol “PI” since July 21, 2016. Holders of Record As of February 2, 2024, there were 33 holders of record of our common stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock has traded on The Nasdaq Global Select Market under the symbol “PI” since July 21, 2016. Holders of Record As of January 31, 2025, there were 28 holders of record of our common stock.
The stock price performance in the graph is not indicative of future stock price performance. 35 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans For more information on securities authorized for issuance under our equity compensation plans, see Note 9 and Note 10 of our consolidated financial statements included elsewhere in this report.
The stock price performance in the graph is not indicative of future stock price performance. 39 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans For more information on securities authorized for issuance under our equity compensation plans, see Note 9 and Note 10 of our consolidated financial statements included elsewhere in this report.
The following performance graph compares the cumulative total stockholder return of our common stock versus the NASDAQ Composite Index and the Philadelphia Semiconductor Index. This graph assumes that the investment in our common stock and in each index was $100 on December 31, 2017, and assumes dividend reinvestment, if any.
The following performance graph compares the cumulative total stockholder return of our common stock versus the NASDAQ Composite Index and the Philadelphia Semiconductor Index. This graph assumes that the investment in our common stock and in each index was $100 on December 31, 2019, and assumes dividend reinvestment, if any.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear ended December 31, 2022 compared with year ended December 31, 2021 Sales and marketing expense increased $3.6 million, due primarily to increases of $2.9 million in personnel expenses from higher headcount and the change in bonus payment structure from 100% PSUs to 50% cash and 50% PSUs, and $0.6 million in marketing and advertising expenses. 40 Table of Contents General and Administrative Year Ended December 31, 2023 vs 2022 2022 vs 2021 (in thousands) 2023 2022 2021 Change Change General and administrative $ 60,828 $ 45,465 $ 36,137 $ 15,363 $ 9,328 General and administrative expense comprises primarily personnel expenses (salaries, benefits and other employee related costs) and stock-based compensation expense for our executive, finance, human resources and information technology personnel; legal, accounting and other professional service fees; travel and insurance expense; and an allocated portion of infrastructure costs which include occupancy, depreciation and software costs.
Biggest changeGeneral and Administrative Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands) 2024 2023 2022 Change Change General and administrative $ 51,802 $ 60,828 $ 45,465 $ (9,026 ) $ 15,363 General and administrative expense comprises primarily personnel expenses (salaries, benefits and other employee related costs) and stock-based compensation expense for our executive, finance, human resources and information technology personnel; legal, accounting and other professional service fees; travel and insurance expense; and an allocated portion of infrastructure costs which include occupancy, depreciation and software costs.
The 2021 Notes are convertible into cash, shares of our common stock or a combination thereof, at our election, and will mature on May 15, 2027 unless earlier repurchased, redeemed or converted in accordance with the indenture terms. 44 Table of Contents The net proceeds from the 2021 Notes were approximately $278.4 million after initial debt issuance costs, fees and expenses.
The 2021 Notes are convertible into cash, shares of our common stock or a combination thereof, at our election, and will mature on May 15, 2027 unless earlier repurchased, redeemed or converted in accordance with the indenture terms. 46 Table of Contents The net proceeds from the 2021 Notes were approximately $278.4 million after initial debt issuance costs, fees and expenses.
In the past, this negotiation typically resulted in reduced revenue and gross margins in the first quarter compared to prior periods, which then normalized in subsequent quarters as we reduced costs and adjusted product mix by migrating those OEMs and end users to newer, lower-cost products.
In the past, this negotiation typically resulted in reduced revenue and gross margins in the first quarter compared to prior periods, which then normalized in subsequent quarters as we reduced costs and adjust product mix by migrating those OEMs and end users to newer, lower-cost products.
We have enabled connectivity for more than 95 billion items to date, delivering item visibility and improving operational efficiencies for retailers, supply chain and logistics, or SC&L, providers, restaurants and food-service providers, airlines, automobile manufacturers, healthcare companies and many more.
We have enabled connectivity for more than 120 billion items to date, delivering item visibility and improving operational efficiencies for retailers, supply chain and logistics, or SC&L providers, restaurants and food-service providers, airlines, automobile manufacturers, healthcare companies and many more.
We evaluate the likelihood of our ability to realize deferred tax assets in future periods on a quarterly basis, and if evidence indicates we will be able to realize some or all of our deferred tax assets then we will revise our valuation allowance accordingly. We use a two-step approach for evaluating uncertain tax positions.
We evaluate the likelihood of our ability to realize deferred tax assets in future periods on a quarterly basis, and if evidence indicates we will be able to realize some or all of our deferred tax assets then we will revise our valuation allowance accordingly. 49 Table of Contents We use a two-step approach for evaluating uncertain tax positions.
The Plans provide for granting several forms of stock compensation such as stock option awards, restricted stock units, or RSUs, RSUs with performance conditions, or PSUs, and RSUs with market and service conditions, or MSUs. 48 Table of Contents We measure stock-based compensation costs for all share-based awards at fair value on the measurement date, which is typically the grant date.
The Plans provide for granting several forms of stock compensation such as stock option awards, restricted stock units, or RSUs, RSUs with performance conditions, or PSUs, and RSUs with market and service conditions, or MSUs. We measure stock-based compensation costs for all share-based awards at fair value on the measurement date, which is typically the grant date.
For example, we generated 14% of total 2019 revenue from a gateway deployment at a large North American SC&L provider. We did not have comparable project-based revenue in 2020. Similarly, in 2021, we generated 13% of our quarterly revenue from a project-based gateway deployment for RAIN-based self-checkout and loss prevention at a large Europe-based global retailer.
For example, we generated 14% of total 2019 revenue from a gateway deployment at a large North American SC&L provider. We did not have comparable project-based revenue in 2020. Similarly, in second-quarter 2021, we generated 13% of our revenue from a project-based gateway deployment for RAIN-based self-checkout and loss prevention at a large Europe-based global retailer.
Our critical accounting policies and estimates include those related to: • revenue recognition; • inventory; • income taxes; and • stock-based compensation. 46 Table of Contents Revenue Recognition We generate revenue primarily from sales of hardware products. We also generate revenue from software, extended warranties, enhanced maintenance, support services and NRE development services, none of which are material.
Our critical accounting policies and estimates include those related to: • revenue recognition; • inventory; • income taxes; and • stock-based compensation. Revenue Recognition We generate revenue primarily from sales of hardware products. We also generate revenue from software, extended warranties, enhanced maintenance, support services and NRE development services, none of which are material.
Overview We envision a world in which every item that enterprises manufacture, transport and sell, and that people own, use and recycle, is wirelessly and ubiquitously connected to the cloud. And a world in which the ownership, history and linked information for every one of those items is seamlessly available to enterprises and people.
Overview Our vision is a world in which every item that enterprises manufacture, transport and sell, and that people own, use and recycle, is wirelessly and ubiquitously connected to the cloud. And a world in which the ownership, history and linked information for every one of those items is seamlessly available to enterprises and people.
Liquidity and Capital Resources As of December 31, 2023, we had cash, cash equivalents and short-term investments of $113.2 million, comprising cash deposits held at major financial institutions and short-term investments in a variety of securities, including U.S. government securities, treasury bills, corporate notes and bonds, commercial paper and money market funds.
Liquidity and Capital Resources As of December 31, 2024, we had cash, cash equivalents and short-term investments of $164.7 million, comprising cash deposits held at major financial institutions and short-term investments in a variety of securities, including U.S. government securities, treasury bills, corporate notes and bonds, commercial paper and money market funds.
Operating Expenses Research and Development Year Ended December 31, 2023 vs 2022 2022 vs 2021 (in thousands) 2023 2022 2021 Change Change Research and development $ 88,562 $ 74,106 $ 64,058 $ 14,456 $ 10,048 Research and development expense comprises primarily personnel expenses (salaries, benefits and other employee related costs) and stock-based compensation expense for our product-development personnel; product development costs which include external consulting and service costs, prototype materials and other new-product development costs; and an allocated portion of infrastructure costs which include occupancy, depreciation and software costs.
Operating Expenses Research and Development Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands) 2024 2023 2022 Change Change Research and development $ 98,829 $ 88,562 $ 74,106 $ 10,267 $ 14,456 Research and development expense comprises primarily personnel expenses (salaries, benefits and other employee related costs) and stock-based compensation expense for our product-development personnel; product development costs which include external consulting and service costs, prototype materials and other new-product development costs; and an allocated portion of infrastructure costs which include occupancy, depreciation and software costs.
Sales and Marketing Year Ended December 31, 2023 vs 2022 2022 vs 2021 (in thousands) 2023 2022 2021 Change Change Sales and marketing $ 41,123 $ 37,894 $ 34,287 $ 3,229 $ 3,607 Sales and marketing expense comprises primarily personnel expenses (salaries, incentive sales compensation, or commission, benefits and other employee-related costs) and stock-based compensation expense for our sales and marketing personnel; travel, advertising and promotional expenses; and an allocated portion of infrastructure costs which include occupancy, depreciation and software costs.
Sales and Marketing Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands) 2024 2023 2022 Change Change Sales and marketing $ 40,579 $ 41,123 $ 37,894 $ (544 ) $ 3,229 Sales and marketing expense comprises primarily personnel expenses (salaries, incentive sales compensation, or commission, benefits and other employee-related costs) and stock-based compensation expense for our sales and marketing personnel; travel, advertising and promotional expenses; and an allocated portion of infrastructure costs which include occupancy, depreciation and software costs.
We can provide no assurance that any additional financing will be available to us on acceptable terms. 2021 Notes In November 2021, we issued the 2021 Notes in an aggregate principal amount of $287.5 million.
We can provide no assurance that any additional financing will be available to us on acceptable terms. 2021 Notes In November 2021, we issued convertible notes due in 2027 in an aggregate principal amount of $287.5 million, which we refer to as the 2021 Notes.
Income Tax Expense Year Ended December 31, 2023 vs 2022 2022 vs 2021 (in thousands) 2023 2022 2021 Change Change Income tax expense $ (322 ) $ 184 $ 153 $ (506 ) $ 31 We are subject to federal and state income taxes in the United States and foreign jurisdictions.
Income Tax Expense Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands) 2024 2023 2022 Change Change Income tax expense (benefit) $ 157 $ (322 ) $ 184 $ 479 $ (506 ) We are subject to federal and state income taxes in the United States and foreign jurisdictions.
In instances where the standalone selling price is not directly observable, such as when we do not sell the product or service separately, we determine the standalone selling price using one, or a combination of, the adjusted market assessment or expected cost-plus margin.
We allocate the transaction price to the separate performance obligations on a relative standalone selling-price basis. In instances where the standalone selling price is not directly observable, such as when we do not sell the product or service separately, we determine the standalone selling price using one, or a combination of, the adjusted market assessment or expected cost-plus margin.
(2) Purchase commitments comprise primarily noncancelable commitments to purchase $21.8 million of inventory as of December 31, 2023, noncancelable software license agreements with vendors and equipment purchases.
(2) Purchase commitments comprise primarily noncancelable commitments to purchase $24.6 million of inventory as of December 31, 2024, noncancelable software license agreements with vendors and equipment purchases.
From 2010 to 2023, our overall endpoint IC 37 Table of Contents sales volumes increased at a compounded annual growth rate of 26%; however. we have experienced declines in endpoint IC sales volumes during various periods.
From 2010 to 2024, our overall endpoint IC sales volumes increased at a 27% compounded annual growth rate; however, we have experienced declines in endpoint IC sales volumes during various periods.
We did not have comparable project-based revenue in 2022 or 2023. Seasonality and Pricing We typically negotiate pricing with most of our endpoint IC OEMs with an effective date of the first quarter of the calendar year.
Although we continue generating project-based revenue, we have not seen it at a comparable scale in 2022, 2023 or in 2024. Seasonality and Pricing We typically negotiate pricing with most of our endpoint IC OEMs with an effective date of the first quarter of the calendar year.
For further information on the 2021 Notes, please refer to Note 8 to our consolidated financial statements included elsewhere in this report.
For further information on this restructuring, please refer to Note 18 to our consolidated financial statements included elsewhere in this report.
Gross Profit and Gross Margin Year Ended December 31, 2023 vs 2022 2022 vs 2021 (in thousands, except percentages) 2023 2022 2021 Change Change Cost of revenue $ 155,557 $ 119,916 $ 91,329 $ 35,641 $ 28,587 Gross profit 151,982 137,884 98,954 14,098 38,930 Gross margin 49.4 % 53.5 % 52.0 % (4.1 )% 1.5 % Cost of revenue includes costs associated with manufacturing our endpoint ICs, reader ICs, readers, gateways and test and measurement solutions, including direct materials and outsourced manufacturing costs as well as associated overhead costs such as logistics, quality control, planning and procurement.
Gross Profit and Gross Margin Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands, except percentages) 2024 2023 2022 Change Change Cost of revenue $ 177,232 $ 155,557 $ 119,916 $ 21,675 $ 35,641 Gross profit 188,855 151,982 137,884 36,873 14,098 Gross margin 51.6 % 49.4 % 53.5 % 2.2 % (4.1 )% Cost of revenue includes costs associated with manufacturing our endpoint ICs, reader ICs, readers, gateways and test and measurement solutions, including direct materials and outsourced manufacturing costs as well as associated overhead costs such as logistics, quality control, planning and procurement.
Historical Cash Flow Trends The following table shows a summary of our cash flows for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 2021 Net cash provided by (used in) operating activities $ (49,382 ) $ 641 $ 6,465 Net cash provided by (used in) investing activities 115,808 (102,799 ) (18,642 ) Net cash provided by (used in) financing activities 8,736 (2,148 ) 112,444 Operating Cash Flows For the year ended December 31, 2023, we used $49.4 million of net cash from operating activities.
Historical Cash Flow Trends The following table shows a summary of our cash flows for the periods indicated: Year Ended December 31, (in thousands) 2024 2023 2022 Net cash provided by (used in) operating activities $ 128,310 $ (49,382 ) $ 641 Net cash provided by (used in) investing activities (192,570 ) 115,808 (102,799 ) Net cash provided by (used in) financing activities 15,679 8,736 (2,148 ) Operating Cash Flows For the year ended December 31, 2024, we generated $128.3 million of net cash from operating activities.
We used approximately $183.6 million of the net proceeds to repurchase approximately $76.4 million aggregate principal amount of the 2019 Notes through individual privately negotiated transactions concurrent with the 2021 Notes offering. We used $17.6 million to repurchase the remaining $9.85 million aggregate principal of the 2019 Notes through individual privately negotiated transactions in June 2022.
We used approximately $183.6 million of the net proceeds to repurchase approximately $76.4 million aggregate principal amount of convertible notes due 2026, or the 2019 Notes through individual privately negotiated transactions concurrent with the 2021 Notes offering.
For further information on the terms of this debt, please refer to Note 8 to our consolidated financial statements included elsewhere in this report.
We will use the rest of the net proceeds for general corporate purposes. For further information on the terms of this debt, please refer to Note 8 to our consolidated financial statements included elsewhere in this report.
We and our partner ecosystem build item-visibility solutions using products that we design and either sell or license, including silicon RAIN radios; manufacturing, test, encoding and reading systems; and software and cloud services. Our platform comprises our products and supporting partner ecosystem.
We and our partner ecosystem build item-visibility solutions using products that we design and either sell or license, including silicon RAIN radios; manufacturing, test, encoding and reading systems, software and cloud services that encapsulate our solutions know-how and intellectual property. We sell two types of silicon IC radios.
We defer amounts allocated to support services sold with our reader and gateway products and recognize them when we transfer control of the promised services to our customers.
We defer amounts allocated to support services sold with our reader and gateway products and recognize them when we transfer control of the promised services to our customers. Revenue generated from licensing our intellectual property is governed by licensing agreements.
This net cash usage was due primarily to investments and equipment purchases of $205.8 million and $12.1 million, respectively, partially offset by investment maturities of $114.8 million. For the year ended December 31, 2021, we used $18.6 million of net cash from investing activities.
Investing Cash Flows For the year ended December 31, 2024, we used $192.6 million of net cash from investing activities. This net cash usage was due primarily to purchases of investment of $202.1 million and property and equipment purchases of $17.1 million, partially offset by proceeds from maturities of investments of $26.6 million.
Our reader and gateway products are highly dependent on embedded software and cannot function without this embedded software. We account for the hardware and embedded software as a single performance obligation and recognize revenue when control is transferred. Our customer contracts with multiple performance obligations generally include a combination of hardware products, extended warranty, enhanced maintenance and support services.
We account for the hardware and embedded software as a single performance obligation and recognize revenue when control is transferred. 48 Table of Contents Our customer contracts with multiple performance obligations generally include a combination of hardware products, extended warranty, enhanced maintenance and support services. For these contracts, we account for individual performance obligations separately if they are distinct.
Systems revenue increased $6.8 million. Test and measurement solutions and gateway revenue increased $8.1 million and $5.5 million respectively due primarily to increased shipment volume. These increases were offset by a decrease of $7.8 million in reader revenue as a result of decreased shipment volumes.
Systems revenue decreased $12.9 million due primarily to a decrease in shipment volumes. Reader and gateway revenue decreased $5.8 million and $8.6 million, respectively. These decreases were partially offset by an increase of $3.1 million from test and measurement solutions revenue.
Cost of revenue also includes charges for excess and obsolescence and warranty costs. Our gross margin varies from period to period based on the mix of endpoint IC and systems; underlying product margins driven by changes in mix, ASPs or costs; as well as from inventory excess and obsolescence charges.
Our gross margin varies from period to period based on the mix of endpoint IC and systems; underlying product margins driven by changes in mix, ASPs or costs; as well as from inventory excess and obsolescence charges. 43 Table of Contents Gross profit increased $36.9 million, due primarily to increased endpoint IC revenue partially offset by decreased systems revenue.
This net cash usage was due primarily to $17.6 million to repurchase the remaining $9.85 million aggregate principal amount of the 2019 Notes described in the section “ Repurchase of the Convertible Senior Notes – 2019 ” as described in Note 8 to our consolidated financial statements included elsewhere in this report.
We used $17.6 million to repurchase the remaining $9.85 million aggregate principal of the 2019 Notes through individual privately negotiated transactions in June 2022. Please refer to the section “ Repurchase of the Convertible Senior Notes – 2019 ” as described in Note 8 to our consolidated financial statements included elsewhere in this report.
Interest Expense Year Ended December 31, 2023 vs 2022 2022 vs 2021 (in thousands) 2023 2022 2021 Change Change Interest expense $ 4,848 $ 4,923 $ 2,550 $ (75 ) $ 2,373 Interest expense comprises primarily cash interest, amortization of debt issuance costs and debt discount.
Interest Expense Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands) 2024 2023 2022 Change Change Interest expense $ 4,873 $ 4,848 $ 4,923 $ 25 $ (75 ) 45 Table of Contents Interest expense comprises primarily cash interest, amortization of debt issuance costs and debt discount. Interest expense remained comparable to the prior period.
Other Income, Net Year Ended December 31, 2023 vs 2022 2022 vs 2021 (in thousands) 2023 2022 2021 Change Change Other income, net $ 4,644 $ 2,517 $ 25 $ 2,127 $ 2,492 Other income, net, comprises primarily interest income on our short-term investments.
See Note 12, Commitments and Contingencies for further details. Other Income, Net Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands) 2024 2023 2022 Change Change Other income, net $ 7,937 $ 4,644 $ 2,517 $ 3,293 $ 2,127 Other income, net, comprises primarily interest income on our short-term investments.
Amortization of intangibles Year Ended December 31, 2023 vs 2022 2022 vs 2021 (in thousands) 2023 2022 2021 Change Change Amortization of intangibles $ 4,953 $ — $ — $ 4,953 $ — The increase in amortization expense relates to the intangibles acquired as part of our April 3, 2023 acquisition of Voyantic Oy, a global provider of RFID test and measurement solutions.
Amortization of Intangibles Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands) 2024 2023 2022 Change Change Amortization of intangibles $ 2,902 $ 4,953 $ — $ (2,051 ) $ 4,953 Amortization of intangibles decreased by $2.1 million. The decrease relates to the intangibles acquired as part of our April 3, 2023 acquisition of Voyantic Oy.
Year ended December 31, 2023 compared with year ended December 31, 2022 Research and development expense increased $14.5 million, due primarily to increases of $6.0 million in personnel expenses from higher headcount, $3.3 million in stock-based compensation expense related primarily to increased outstanding equity grants, $3.1 million in product development costs, and $2.0 million in infrastructure costs primarily from increased depreciation and software costs.
Research and development expense increased $10.3 million, due primarily to increases of $8.5 million in personnel expenses primarily from higher bonus achievement and to a lesser extent increased headcount, $4.4 million in stock-based compensation expense related primarily to increased outstanding equity grants, and $1.5 million in infrastructure costs primarily from increased depreciation and software costs, partially offset by a decrease of $4.1 million in product development costs.
We do not disclose the value of unsatisfied performance obligations for (1) contracts with an original expected length of one year or less and (2) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. 47 Table of Contents Inventory We state inventories at the lower of cost or estimated net realizable value using the average costing method, which approximates a first-in, first-out method.
We record these costs within sales and marketing expenses. We do not disclose the value of unsatisfied performance obligations for (1) contracts with an original expected length of one year or less and (2) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
These net cash proceeds were due to $8.7 million from stock-option exercises and our employee stock purchase plan, or ESPP. 45 Table of Contents For the year ended December 31, 2022, we used $2.2 million of net cash from financing activities.
Financing Cash Flows For the year ended December 31, 2024, we generated $15.7 million of net cash from financing activities. These net cash proceeds were due to $20.3 million from stock-option exercises and our employee stock purchase plan, or ESPP, partially offset by $4.6 million of cash paid for the earnout payment related to the Voyantic Oy acquisition.
The operating expense increase was due primarily to higher research and development and general and administrative costs. 38 Table of Contents Revenue Year Ended December 31, 2023 vs 2022 2022 vs 2021 (in thousands) 2023 2022 2021 Change Change Endpoint ICs $ 234,426 $ 191,532 $ 139,250 $ 42,894 $ 52,282 Systems 73,113 66,268 51,033 6,845 15,235 Total revenue $ 307,539 $ 257,800 $ 190,283 $ 49,739 $ 67,517 We currently derive substantially all our revenue from sales of endpoint ICs, reader ICs, readers, gateways and test and measurement solutions.
Revenue Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands) 2024 2023 2022 Change Change Endpoint ICs $ 305,915 $ 234,426 $ 191,532 $ 71,489 $ 42,894 Systems 60,172 73,113 66,268 (12,941 ) 6,845 Total revenue $ 366,087 $ 307,539 $ 257,800 $ 58,548 $ 49,739 We currently derive substantially all our revenue from sales of endpoint ICs, reader ICs, readers, gateways, test and measurement solutions and licensing.
The endpoint IC revenue increase was driven primarily by higher shipment volumes partially offset by lower average ASP due to mix, and the systems revenue increase was due to higher shipment volumes. Gross margin decreased due primarily to decreased product margins and, to a lesser extent, higher excess and obsolescence charges and indirect costs.
The endpoint IC revenue increase was driven primarily by higher shipment volumes and licensing revenue partially offset by lower average ASP due to mix and short-term pricing incentives on legacy products, and the systems revenue decrease was due primarily to lower shipment volumes.
Results of Operations Year Ended December 31, 2023 vs 2022 2022 vs 2021 (in thousands, except percentages) 2023 2022 2021 Change Change Revenue $ 307,539 $ 257,800 $ 190,283 $ 49,739 $ 67,517 Gross profit $ 151,982 $ 137,884 $ 98,954 $ 14,098 $ 38,930 Gross margin 49.4 % 53.5 % 52.0 % (4.1 )% 1.5 % Loss from operations $ (43,484 ) $ (19,479 ) $ (37,249 ) $ (24,005 ) $ 17,770 Year ended December 31, 2023 compared with year ended December 31, 2022 Revenue and gross profit increased, due primarily to higher endpoint IC and systems revenue.
Quarter-to-quarter revenue variability due to macroeconomic conditions and program-launch timing may impact these seasonal trends in the future. 42 Table of Contents Results of Operations Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands, except percentages) 2024 2023 2022 Change Change Revenue $ 366,087 $ 307,539 $ 257,800 $ 58,548 $ 49,739 Gross profit $ 188,855 $ 151,982 $ 137,884 $ 36,873 $ 14,098 Gross margin 51.6 % 49.4 % 53.5 % 2.2 % (4.1 )% Loss from operations $ (7,069 ) $ (43,484 ) $ (19,479 ) $ 36,415 $ (24,005 ) Revenue and gross profit increased, due primarily to higher endpoint IC and partially offset by lower systems revenue.
Year ended December 31, 2023 compared with year ended December 31, 2022 Sales and marketing expense increased $3.2 million, due primarily to increases of $1.7 million in personnel expenses from higher headcount offset by lower commission expense, $0.8 million in stock-based compensation expense related primarily to increased outstanding equity grants, and $0.5 million in travel expenses.
Sales and marketing expense decreased $0.5 million, due primarily to decreases of $0.5 million in marketing related spend and $0.4 million in personnel expenses resulting from lower headcount, partially offset by higher bonus achievement and commissions. These decreases were partially offset by an increase of $0.5 million in stock-based compensation expense related primarily to increased outstanding equity grants.
Contractual Obligations The following table reflects a summary of our contractual obligations as of December 31, 2023: Payments Due By Period Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years (in thousands) Convertible senior notes (1) $ 298,820 $ 3,234 $ 6,469 $ 289,117 $ — Operating lease obligations Operating lease obligations 14,416 4,120 8,330 1,417 549 Purchase commitments (2) 31,003 30,265 738 — — Total $ 344,239 $ 37,619 $ 15,537 $ 290,534 $ 549 (1) The 2021 Notes include $11.3 million in interest payments.
Contractual Obligations The following table reflects a summary of our contractual obligations as of December 31, 2024: Payments Due By Period Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years (in thousands) Convertible senior notes (1) $ 295,586 $ 3,234 $ 292,352 $ — $ — Operating lease obligations Operating lease obligations 10,248 4,101 4,956 1,191 — Purchase commitments (2) 35,021 35,021 — — — Total $ 340,855 $ 42,356 $ 297,308 $ 1,191 $ — 47 Table of Contents (1) The 2021 Notes include $8.1 million in interest payments.
As of December 31, 2023, we had working capital of $238.8 million. Historically, we have funded our operations primarily through cash generated from operations and by issuing equity securities, convertible-debt offerings and/or borrowing under our prior senior credit facility. In 2023, our principal uses of cash were increases in our inventory balance, our acquisition of Voyantic Oy and capital expenditures.
This decrease was partially offset by an increase in cash and short-term investments. Historically, we have funded our operations primarily through cash generated from operations and by issuing equity securities, convertible-debt offerings and/or borrowing under our prior senior credit facility.
Inventories comprise raw materials, work-in-process and finished goods. We continuously assess our inventory value and write down its value for estimated excess and obsolete inventory. This evaluation includes an analysis of inventory on hand, current and forecasted demand, product development plans and market conditions.
This evaluation includes an analysis of inventory on hand, current and forecasted demand, product development plans and market conditions.
Year ended December 31, 2023 compared with year ended December 31, 2022 General and administrative expense increased $15.4 million, due primarily to increases of $11.0 million in professional services related primarily to non-settlement-related legal fees and transaction expenses for the Voyantic Oy acquisition, $2.5 million in personnel expenses from higher headcount, $1.1 million in stock-based compensation expense related primarily to increased outstanding equity grants, and $0.5 million in infrastructure expenses primarily related to rent and facilities.
General and administrative expense decreased $9.0 million, due primarily to a decrease of $18.0 million in professional services related to legal fees and transaction expenses, partially offset by increases of $5.2 million personnel expenses from higher bonus achievement, higher headcount and higher payroll 44 Table of Contents taxes, and $3.5 million in stock-based compensation expense related primarily to increased outstanding equity grants.
We sell our products, either individually or as a whole platform offering, primarily with or through our partner ecosystem. Factors Affecting Our Performance Inventory Supply Most of our revenue derives from endpoint ICs that our partners embed into or onto enterprise items and is therefore affected by macroeconomic trends.
We create partner and enterprise preference for our radios and solutions by adding differentiated features into our products, including our Gen2X functionality, supporting those features across our platform and licensing them where appropriate, to deliver solutions capabilities and performance that surpasses mix-and-match solutions built from competitor products. 41 Table of Contents Factors Affecting Our Performance Inventory Supply Most of our revenue derives from endpoint ICs that our partners embed into or onto enterprise items and is therefore affected by macroeconomic trends.
We call our expansive vision a Boundless Internet of Things, or IoT, and we are well on our way to realizing it. Our mission is to connect every thing. We use a type of radio-frequency identification, or RFID, technology known as RAIN for the ubiquitous, wireless item-to-cloud connectivity.
We call our expansive vision a Boundless Internet of Things, or IoT. We design and sell a platform that enables that wireless item-to-cloud connectivity and with which we and our partners innovate IoT solutions. Our mission is to connect every thing.
These net cash proceeds were due primarily to $27.8 million of net loss adjusted for non-cash items, partially offset by $27.2 million of working capital usage due primarily to higher inventory and accounts receivable offset by higher accounts payable. For the year ended December 31, 2021, we generated $6.5 million of net cash from operating activities.
These net cash proceeds were due to $112.3 million of net income adjusted for non-cash items and $16.0 million of working capital proceeds due primarily to higher accrued compensation and employee related benefits and accounts payable, partially offset by lower operating lease liabilities, acquisition related contingent consideration liability and higher inventory.
Restructuring costs Year Ended December 31, 2023 vs 2022 2022 vs 2021 (in thousands) 2023 2022 2021 Change Change Restructuring costs $ — $ (102 ) $ 1,721 $ 102 $ (1,823 ) On February 2, 2021, we restructured our go-to-market organization to strategically align our global sales, product, partner development and marketing teams.
Restructuring Costs Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands) 2024 2023 2022 Change Change Restructuring costs $ 1,812 $ — $ (102 ) $ 1,812 $ 102 The increase in restructuring costs relates to the restructuring we initiated on February 7, 2024.
Our products include endpoint ICs that store a serialized number to wirelessly identify an item; reader ICs that our partners use in finished readers to wirelessly discover, inventory and engage endpoint ICs; manufacturing, test and encoding systems that enable partner products and facilitate enterprise deployments; finished readers and gateways for autonomous reading solutions; and software and cloud services for solutions enablement.
The first are endpoint ICs that store a serialized number to wirelessly identify an item. Our partners embed endpoint ICs into an item or its packaging. The ICs may also contain a cryptographic key to authenticate the item. The second are reader ICs that our partners use in finished readers to wirelessly discover, inventory and engage the endpoint ICs.
We did not see these seasonal trends in 2022 or 2023 and may not see them in 2024. Whether and when these trends will return is not clear. We do expect continued quarter-to-quarter revenue variability due to changing macroeconomic conditions.
We did not see these seasonal trends in 2022 or 2023 but began to see them in the second half of 2024.
Year ended December 31, 2023 compared with year ended December 31, 2022 Income tax expense decreased by $0.5 million. which resulted in a benefit for the year ended December 31, 2023. This benefit was due to our estimated effective tax rate which incorporated the acquisition of Voyantic Oy.
Income tax expense increased by $0.5 million due to changes in our estimated effective tax rate.
Year ended December 31, 2023 compared with year ended December 31, 2022 Endpoint IC revenue increased $42.9 million, due primarily to a $68.9 million increase from higher shipment volumes offset by a $26.0 million decrease due to ASP, the latter due primarily to lower revenue contribution from industrial and specialty endpoint ICs as well mix within those industrial and specialty ICs.
Endpoint IC revenue increased $71.5 million, due primarily to a $79.7 million increase from higher shipment volumes and $15.0 million from licensing revenue that did not occur in the prior year, partially offset by a $23.2 million decrease due to lower average ASP, the latter due primarily to product mix shift, and to a lesser extent, short-term pricing incentives on legacy products.
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We sell a suite of products that we and our partner ecosystem use to connect and deliver item data to enterprises.
Added
For our discussion of our fiscal 2023 results compared to fiscal 2022 for both our results of operations and our liquidity and capital resources sections, refer to "Item 7.
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The lower product margins were driven by lower endpoint IC margins due to a smaller revenue contribution from industrial and specialty endpoint ICs as well as mix within those industrial and specialty endpoint ICs. Loss from operations increased due primarily to increased operating expenses partially offset by increased gross profit.
Added
Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 12, 2024 which is incorporated by reference herein.
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The operating expense increase was due primarily to higher research and development, general and administrative costs and amortization of intangibles as a result of us acquiring Voyantic Oy. Year ended December 31, 2022 compared with year ended December 31, 2021 Revenue and gross profit increased, due primarily to higher endpoint IC and systems revenue.
Added
Those readers may also protect an item or consumer, for example by authenticating the item as genuine or privatizing the item by rendering the endpoint IC unresponsive without the consumer first providing a password. Our manufacturing, test and encoding systems enable partner products and facilitate enterprise deployments. Our reading systems comprise high-performance finished readers and gateways for autonomous reading solutions.
Removed
The endpoint IC revenue increase was driven primarily by higher ASP and shipment volumes. Gross margin increased, due primarily to increased product margins. The increased product margins were driven primarily by an increase in endpoint IC margins due to product mix. Loss from operations decreased, due primarily to increased gross profit offset by increased operating expenses.
Added
Our software and cloud services focus on solutions enablement. We sell our products, individually or as a whole platform offering primarily with or through our partner ecosystem. That ecosystem comprises original equipment manufacturers, or OEMs, tag service bureaus, original device manufacturers, or ODMs, systems integrators, or SIs, value-added resellers, or VARs, independent software vendors, or ISVs, and other solution partners.
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Year ended December 31, 2022 compared with year ended December 31, 2021 Endpoint IC revenue increased $52.3 million, due primarily to a $35.5 million increase from higher ASPs and a $16.8 million increase from higher shipment volumes.
Added
Our radios follow the RAIN industry’s air-interface standard for their core reading functionality.
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The ASP increase was due primarily to price increases we implemented to offset higher product costs as well as product mix, the latter from a higher contribution from industrial and specialty ICs.
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Gross margin increased due primarily to high-margin licensing revenue recognized in the year that did not occur in the prior year. Loss from operations decreased due primarily to increased gross profit.
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Systems revenue increased $15.2 million, due primarily to increases of $7.6 million in reader IC revenue, $4.9 million in gateway revenue and $3.3 million in reader revenue offset by a decrease of $0.9 million in nonrecurring engineering, or NRE, revenue.
Added
Cost of revenue also includes charges for excess and obsolescence and warranty costs.
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The reader IC and gateway revenue increases were due primarily to higher shipment volumes; the reader revenue increase was due primarily to higher ASPs.
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Gross margin increased, due primarily to high-margin licensing revenue recognized in the year that did not occur in the prior year.
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Year ended December 31, 2023 compared with year ended December 31, 2022 Gross profit increased $14.1 million, due primarily to increased endpoint IC and systems revenue. Gross margin decreased, due primarily to decreased product margins and to a lesser extent higher excess and obsolescence charges and indirect costs.
Added
Certain intangible assets acquired had useful life of less than 1 year, resulting in a higher amortization expense in the prior-year period.
Removed
The decreased product margins were driven primarily by lower endpoint IC margins due to product mix and a smaller contribution from industrial and specialty endpoint ICs as well as mix within those industrial and specialty endpoint ICs.
Added
Income From Settlement of Litigation Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands) 2024 2023 2022 Change Change Income from settlement of litigation $ 45,000 $ — $ — $ 45,000 $ — The increase in income from settlement of litigation relates to the Settlement Agreement with NXP on March 13, 2024.
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Excess and obsolescence charges had an immaterial gross margin impact for the years ended December 31, 2023 and 2022. 39 Table of Contents Year ended December 31, 2022 compared with year ended December 31, 2021 Gross profit increased $38.9 million, due primarily to increased endpoint IC and systems revenue.
Added
Other income, net, increased $3.3 million, due to increased interest income given higher invested balances and higher interest rates.
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Gross margin increased, due primarily to increased product margins, with offsetting fluctuations from reduced sales of fully reserved inventory and higher indirect costs. The product-margin increase was due primarily to higher endpoint IC margins from a higher revenue contribution from industrial and specialty ICs.
Added
Induced Conversion Expense Year Ended December 31, 2024 vs 2023 2023 vs 2022 (in thousands) 2024 2023 2022 Change Change Induced conversion expense $ — $ — $ 2,232 $ — $ (2,232 ) There was no induced conversion expense for the years ended December 31, 2024 and 2023.
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Excess and obsolescence charges had an immaterial gross margin impact for the year ended December 31, 2022, compared to a favorable gross margin impact of 1.5% due to the sale of fully reserved inventory for the year ended December 31, 2021.
Added
As of December 31, 2024, we had working capital of $(4.8) million, down from $238.8 million as of December 31, 2023. The decrease was driven by the reclassification of our convertible debt from long-term to current, due to certain conditions being met (refer to Note 8 our consolidated financial statements included elsewhere in this report for further information).
Removed
Year ended December 31, 2022 compared with year ended December 31, 2021 Research and development expense increased $10.0 million, due primarily to increases of $6.6 million in personnel expenses from higher headcount and a change in bonus payment structure from 100% PSUs to 50% cash and 50% PSUs, $1.9 million in infrastructure costs primarily from increased software costs, and $0.8 million in stock-based compensation expense related primarily to increased outstanding equity grants.
Added
Our reader and gateway products are highly dependent on embedded software and cannot function without this embedded software.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+1 added−0 removed8 unchanged
Biggest changeWe do not enter into investments for trading or speculative purposes. We had cash, cash equivalents and short-term investments of $113.2 million and $173.7 million as of December 31, 2023 and 2022, respectively. Our investments are exposed to market risk due to fluctuations in prevailing interest rates, which may reduce the yield on our investments or their fair value.
Biggest changeWe do not enter into investments for trading or speculative purposes. 50 Table of Contents We had cash, cash equivalents and short-term investments of $164.7 million and $113.2 million as of December 31, 2024 and 2023, respectively.
For any of the periods presented, we did not have material impact from exposure to foreign currency fluctuation. As we grow our operations, our exposure to foreign currency risk will likely become more significant. 49 Table of Contents
For any of the periods presented, we did not have material impact from exposure to foreign currency fluctuation. As we grow our operations, our exposure to foreign currency risk will likely become more significant. 51 Table of Contents
Added
Our investments are exposed to market risk due to fluctuations in prevailing interest rates, which may reduce the yield on our investments or their fair value.

Other PI 10-K year-over-year comparisons