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Impinj unveils long-awaited public offering;
IPO will ignite investment in RFID sector

04/25/11 | John R. Johnson | email

Four years ago, Alien Technology created a buzz in the industry by filing for an IPO. Buzz quickly turned to bust because of poor market timing, a balance sheet that didn't please investors, and orders that never materialized.

How is last week's announcement by Impinj to pursue an IPO possibly worth $100 million any different? Like Alien, Impinj has never turned a profit. Impinj lost $11.4 million in 2010, and $1.8 million in Q1 2011.

Well, the losses are the only similarity, and they carry an asterisk, since tag sales are exploding, something that was not true four years ago. Today's market features real orders and strong momentum. Impinj grew sales from $20.8 million in 2009 to $31.8 million last year. First quarter revenue for 2011 came in at $12.2 million, compared with $5.1 million for the same period last year.

"There is a different story here," notes Drew Nathanson, Auto-ID practice director at VDC Research. "When Alien announced its IPO, the market wasn't there yet. This is real money coming in."

"And even though Impinj is not profitable, it is clear they will be eventually because they own so much share in a lot of these core markets that are growing at huge rates."

Impinj will not comment on the IPO because of SEC regulations, but the company will not be profitable in the near-term. However, explosive growth is occurring in the apparel item-level sector, an industry Impinj is a big player in. And Impinj execs see item level tagging spreading quickly into non-apparel sectors like electronics, cosmetics, tires and jewelry. In fact, it is highly believed that Walmart is ready to extend its item level-tagging program to electronics and tires and possibly other non-apparel product lines before year-end.

Impinj has sold over two billion of its Monza tag ICs since the product line was introduced in 2005, including 940 million tags in 2010 alone. VDC projects the number of UHF Gen2 ICs shipped will grow from 1.6 billion in 2010 to 41 billion in 2015, a compound annual growth rate of 92.2 percent. Investors drool over such growth numbers, and such explosive growth should also push Impinj to a profit.

Impinj focuses exclusively on UHF RFID solutions, which is the fastest growing segment of the RFID market. UHF Gen2 systems are ideally suited for high-volume, item-level applications that require low-cost, consumable tags, such as retail inventory management, pharmaceutical authentication and airline baggage tracking. From 2009 to 2010, unit sales of the Monza UHF Gen2 tag ICs increased by 279 percent. Impinj is the market leader in UHF Gen2 tag ICs, reader ICs and stationary readers. According to VDC, Impinj owns 60 percent of the tag IC market, 86 percent of the reader IC market and a 25 percent share of the stationary reader market.

Impinj estimates that its technology enables more than 70 percent of the UHF Gen2 reader market when you combine the share of its Speedway reader with that of other readers based on its Indy reader ICs.

"Their innovation rate is aligned and they seem to have a very good understanding of how their markets are evolving and the constantly changing end user requirements," says Nathanson.

Impinj will use the proceeds of the IPO to pay down debt, including venture firms that have financed the company to the tune of at least $160 million since it was founded in 2000. Published reports say that venture capital firms own about half of the company. Intel holds a stake worth about 6 percent.

A successful IPO would drive further investment in the industry, resulting in the potential for more IPOs and increased M&A activity. A year ago, RFID 24-7 reported that ODIN could be 12-18 months away from filing an IPO. Privately held ODIN has never commented on its sales, although industry estimates place revenue at $25-30 million annually. That puts ODIN at about the same size sales-wise as Impinj. ODIN CEO Patrick Sweeney said this month that first quarter sales increased by 30 percent in 2011, indicating continued solid growth.

Is ODIN on track for an IPO too? All you have to do is read into Sweeney's blog post regarding the Impinj IPO: "The big winner will be the second company to IPO, because everyone who is sitting on the sidelines during Impinj's road show is about to see a very successful tech company emerge and will wish they got in on Impinj; and they will climb all over themselves to get in on the second IPO in the RFID sector. If Impinj is successful, and I believe they will be, and I owned an RFID company I would be doing everything I could to be the second company out in the IPO market."

ODIN, which acquired Reva Systems late last year, is also a potential takeover target, as are companies like GlobeRanger, Tego, Omni-ID, and Intelleflex, especially if momentum behind cold chain tracking continues.

The Impinj IPO places a spotlight on a pure-play RFID star. A successful IPO means investors will take note that the technology is finally mature and that they can invest in the industry and reap gains in the short term, instead of waiting years for payback.

"The call volume coming in from the investment community, especially the larger investment firms, indicates that they are really looking at this market in a big way," says one industry expert. "They are looking to dump more money in, so expect a lot of acquisitions happening going forward."

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