Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis together with our consolidated financial statements and the related notes to those statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” and elsewhere in this report, our actual results may differ materially from those anticipated in these forward-looking statements.
For our discussion of our fiscal 2024 results compared to fiscal 2023 for both our results of operations and our liquidity and capital resources sections, refer to “Item 7. 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, 2024 filed with the SEC on February 10, 2025 which is incorporated by reference herein.
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 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. We have enabled connectivity for more than 150 billion items to date, delivering item visibility, traceability and improved 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 are today focused on extending item connectivity from tens of billions to trillions of items and delivering item data not just to enterprises but to people, so they too can benefit from their connected items. We believe the Boundless IoT we are enabling will, in the not-too-distant future, give people ubiquitous access to cloud-based digital twins of every item, each storing the item’s history, location and linked information and helping people explore and learn about the item. We believe that that connectivity will transform the world.
We and our partner ecosystem build item-visibility solutions using products that we design and either sell or license, including silicon radios, reading systems, tag production systems and intellectual property. We also offer software and cloud services, and while nascent from a standalone revenue perspective, they enable our other product offerings and we intend to expand them as a part of our growth strategy. We sell two types of silicon radios. 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. These ICs may also contain a cryptographic key to authenticate the item. The second are reader ICs that our partners use in embedded or finished readers to wirelessly discover, inventory and engage the endpoint ICs. 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 reading systems comprise high-performance finished readers and gateways used primarily in autonomous reading solutions. Our tag production systems enable partner products and facilitate enterprise deployments. Our software and cloud service offerings focus on solutions enablement, particularly at enterprises with whom we have a close business relationship.
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.
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 them, 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
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products. We have also introduced a set of compatible extensions to the RAIN industry’s air-interface standard, which we call Gen2X, that enhance the performance and protection of our solutions. The RAIN industry, on both the reader and solutions side, has broadly embraced Gen2X.
Factors Affecting Our Performance
Macroeconomic Factors
We are subject to impacts from the evolving macroeconomic environment, including uncertainty and volatility in trade measures and tariffs. Because most of our revenue derives from endpoint ICs that our partners embed into or onto items, to the extent that those items are impacted, positively or negatively, by trade measure and tariffs, we are impacted as well. While the impact that recent trade measures will have on our business and financial results is difficult to predict, they could negatively affect our business and financial results. We continue to monitor the broader impacts of these measures on our business, our supply chain and our results of operations. See risk factor “Changes in global trade policies could have a material adverse effect on us.” in Item 1A. of this report for further information.
Inventory Supply
We sell most of our products, both endpoint ICs and systems, through partners and distributors, limiting our visibility to actual enterprise demand. Although we work closely with those partners and distributors to gain as accurate a view as possible, correctly forecasting demand for our products and identifying market shifts in a timely manner remains a challenge. This challenge can be exacerbated when major end users adjust the mix of inlay providers from which they procure inlays incorporating our endpoint ICs.
We also sometimes experience inventory overages or shortages. Inventory overages can increase expenses, expose us to product obsolescence and/or increased reserves and negatively affect our business. Inventory shortages can cause long lead times, missed opportunities, market-share losses and/or damaged customer relationships, also negatively affecting our business.
In 2021 and 2022, demand for our endpoint ICs increased while worldwide wafer demand also increased, leading to wafer shortfalls for many semiconductor companies, including us. These wafer shortfalls prevented us from fully meeting customer demand and, in some cases, caused customers to cancel orders, qualify alternative suppliers or purchase from our competitors. In 2023, macroeconomic conditions led to softness in demand and inventory overages.
Product Adoption and Unit Growth Rates
Enterprises have significantly adopted RAIN in retail apparel, our largest market, and SC&L, but the rate of adoption and unit growth rates have been uneven and unpredictable. From 2010 to 2025, our overall endpoint IC sales volumes increased at a 26% compounded annual growth rate; however, we have experienced declines in endpoint IC sales volumes during various periods.
Regardless of the uneven pace of retail, SC&L and other industry adoption and growth rates, we believe the long-term trend is continued RAIN adoption and growth and we intend to continue investing in developing new products and expanding our product offerings for the foreseeable future. However, we cannot predict whether historical annual growth rates are indicative of the pace of future growth.
Our systems business, at least for readers and gateways, depends significantly on large-scale deployments at discrete end users, and deployment timing causes large yearly variability in our systems revenue. 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. While we continue generating project-based revenue, we did not see it at a comparable scale in 2022 to 2025.
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. In the past, this negotiation typically resulted in reduced revenue and
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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.
Endpoint IC volumes tend to be lower in the fourth quarter than in the third quarter. System sales tend to be higher in the fourth quarter and lower in the first quarter, we believe due to the availability of residual funding for capital expenditures prior to the end of many end users’ fiscal years.
We did not see these seasonal trends in 2023 but began to see them in second-half 2024 and in 2025. We do expect continued quarter-to-quarter revenue and gross margin variability due to macroeconomic conditions, program-launch timing and our ability to migrate OEMs and end users to newer, lower cost products. These factors, among others, may impact seasonal trends.
Results of Operations
Year Ended December 31,
(in thousands, except percentages)
Change
Change
Revenue
Gross profit
Gross margin
Loss from operations
Revenue decreased, due primarily to lower endpoint IC revenue partially offset by higher systems revenue. The endpoint IC revenue decrease was driven primarily by lower ASP due to mix and new pricing that went into effect at the beginning of the year, and the systems revenue increase was due primarily to higher shipment volumes. Gross profit increased, despite lower revenue, due to lower endpoint IC costs from product mix. Gross margin increased due primarily to higher endpoint IC gross margin, the result of product mix, and lower indirect costs in the current year compared to the prior year. Loss from operations decreased due primarily to decreased operating expenses.
Revenue
Year Ended December 31,
(in thousands)
Change
Change
Endpoint ICs
Systems
Total revenue
We currently derive substantially all our revenue from sales of endpoint ICs, reader ICs, readers, gateways, tag production systems and licensing. We sell our endpoint ICs and tag production systems primarily to inlay manufacturers; our reader ICs primarily to OEMs and ODMs through distributors; and our readers and gateways to solutions providers, VARs and SIs, also primarily through distributors. We expect endpoint IC sales to represent the majority of our revenue for the foreseeable future.
Endpoint IC revenue decreased $6.1 million, due to a $32.3 million decrease from lower ASP due to product mix and new pricing that went into effect at the beginning of the year, partially offset by a $25.1 million increase due to higher shipment volumes and a $1.0 million increase in licensing revenue.
Systems revenue increased $1.1 million due to an increase in shipment volumes. Reader revenue increased by $8.3 million offset by decreases of $3.4 million and $4.1 million from gateway and reader IC revenue, respectively.
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Gross Profit and Gross Margin
Year Ended December 31,
(in thousands, except percentages)
Change
Change
Cost of revenue
Gross profit
Gross margin
Cost of revenue includes costs associated with manufacturing our endpoint ICs, reader ICs, readers, gateways and tag production systems, including direct materials and outsourced manufacturing costs as well as associated overhead costs such as logistics, quality control, planning and procurement. 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.
Gross profit increased $0.8 million, despite a decrease in revenue, due primarily to decreased costs from endpoint IC due to product mix. Gross margin increased, due primarily to higher endpoint IC gross margin due to product mix and lower indirect costs in the current year compared to the prior year.
Operating Expenses
Research and Development
Year Ended December 31,
(in thousands)
Change
Change
Research and development
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. We expect research and development expense to increase in absolute dollars in future periods as we continue to focus on new product development and introductions.
Research and development expense increased $3.8 million, due primarily to increases of $4.0 million in product development costs due to timing; $2.4 million in infrastructure costs primarily from increased depreciation and software costs; and $1.3 million in stock-based compensation expense related primarily to increased outstanding equity grants. These increases were partially offset by a decrease of $4.2 million in personnel expenses related to lower bonus achievement compared to the prior-year period.
Sales and Marketing
Year Ended December 31,
(in thousands)
Change
Change
Sales and marketing
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 expense decreased $4.0 million, due primarily to decreases of $4.1 million in stock-based compensation expense, driven by forfeitures related to the retirement of our Chief Revenue
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Officer in the first quarter of fiscal year 2025 and the resulting lower ongoing expense and a decrease of $0.7 million in personnel expenses related to lower bonus achievement compared to the prior-year period.
General and Administrative
Year Ended December 31,
(in thousands)
Change
Change
General and administrative
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.
General and administrative expense decreased $2.6 million, due primarily to a decrease $3.0 million in personnel expenses related to lower bonus achievement compared to the prior-year period and a decrease of $1.7 million in professional services related to legal fees, partially offset by an increase of $1.5 million in stock-based compensation expense related primarily to increased outstanding equity grants.
Amortization of Intangibles
Year Ended December 31,
(in thousands)
Change
Change
Amortization of intangibles
Amortization of intangibles decreased by $0.8 million. The decrease relates to the intangibles acquired as part of our April 3, 2023 acquisition of Voyantic Oy. Certain intangible assets acquired had useful life of less than 1 year, resulting in a higher amortization expense in the prior-year period.
Restructuring Costs
Year Ended December 31,
(in thousands)
Change
Change
Restructuring costs
The decrease in restructuring costs relates to the restructuring we initiated on February 7, 2024. For further information on this restructuring, please refer to Note 18 to our consolidated financial statements included elsewhere in this report.
Income From Settlement of Litigation
Year Ended December 31,
(in thousands)
Change
Change
Income from settlement of litigation
The decrease in income from settlement of litigation relates to the Settlement Agreement with NXP on March 13, 2024. See Note 12, Commitments and Contingencies, included elsewhere in this report, for further details.
Other Income, Net
Year Ended December 31,
(in thousands)
Change
Change
Other income, net
Other income, net, comprises primarily interest income on our short-term investments.
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Other income, net, increased $1.3 million, due to increased interest income given higher invested balances.
Induced Conversion Expense
Year Ended December 31,
(in thousands)
Change
Change
Induced conversion expense
In September 2025, we completed a privately negotiated exchange of $190.0 million principal amount of the 2021 Convertible Notes, or the 2021 Note Exchange. We accounted for the 2021 Note Exchange transaction as an induced conversion in accordance with Accounting Standards Codification 470-20, Debt with Conversion and Other Options (ASC 470-20), as amended for ASU 2024-04. As a result of the induced conversion, we recorded $15.0 million in induced conversion expense which is included in the Consolidated Statements of Operations for the year ended December 31, 2025. The induced conversion expense represents the fair value of the consideration issued upon conversion in excess of the fair value of the securities issuable under the original terms of the 2021 Convertible Notes. See Note 8 Long-term Debt, included elsewhere in this report, for further information.
Interest Expense
Year Ended December 31,
(in thousands)
Change
Change
Interest expense
Interest expense comprises primarily cash interest, amortization of debt issuance costs and debt discount.
Interest expense decreased by $0.5 million, due primarily to decreased interest on our convertible debt, from the 2021 Note Exchange transaction.
Income Tax Expense
Year Ended December 31,
(in thousands)
Change
Change
Income tax benefit (expense)
We are subject to federal and state income taxes in the United States and foreign jurisdictions.
Income tax expense increased by $0.2 million due to changes in our estimated effective tax rate.
On July 4, 2025, President Trump signed Public Law No. 119-21 - An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14, or “H.R.1”, into law. One key provision, applicable to us, is the treatment of domestic research and experimental expenditures, which can now be capitalized or expensed. As previously required under the Tax Cuts and Jobs Act, we capitalized research and development expenditures in the years ended December 31, 2022 through December 31, 2024. With the enactment of H.R.1, we began deducting domestic Section 174 costs in 2025.
Liquidity and Capital Resources
As of December 31, 2025, we had cash, cash equivalents and short-term investments of $175.3 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. As of December 31, 2025, we had working capital of $212.7 million, up from $(4.8) million as of December 31, 2024. The increase is due to a decrease in the balance of the 2021 Notes, which was driven by a privately negotiated exchange of $190.0 million principal amount of the 2021 Convertible Notes, or the 2021 Note Exchange (refer to Note 8, Long-term debt, in our consolidated financial statements included elsewhere in this report for further information).
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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.
We believe, based on our current operating plan, that our existing cash, cash equivalents and short-term investments will be sufficient to meet our anticipated cash needs for at least the next 12 months. Over the longer term, we plan to continue investing to enhance and extend our platform. If our available funds are insufficient to fund our future activities or execute our strategy, then we may raise additional capital through equity, equity-linked or debt financing, to the extent such funding sources are available. Alternatively, we may need to reduce expenses to manage liquidity; however, any such reductions could adversely impact our business and competitive position.
Sources of Funds
From time to time, we may explore additional financing sources and ways to reduce our cost of capital, including equity, equity-linked and debt financing. In addition, in connection with any future acquisitions, we may pursue additional financing which may be debt, equity or equity-linked financing or a combination thereof. 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, or the 2021 Notes. The 2021 Notes are our senior unsecured obligation, bearing interest at a fixed rate of 1.125% per year, payable semi-annually in arrears on May 15 and November 15 of each year. 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 terms of the terms of the Indenture governing the 2021 Notes. The net proceeds from the 2021 Notes were approximately $278.4 million after initial debt issuance costs, fees and expenses.
In September 2025, we completed the 2021 Note Exchange. We accounted for the 2021 Note Exchange as an induced conversion in accordance with Accounting Standards Codification 470-20, Debt with Conversion and Other Options (ASC 470-20) and in accordance with ASU 2024-04: Debt—Debt with Conversion and Other Options (Subtopic 470-20) - Induced Conversions of Convertible Debt Instruments, which we early adopted as of January 1, 2025. Refer to the paragraph ’ s below under 2025 Notes for further information.
For further information on the terms of this debt, please refer to Note 8 to our consolidated financial statements included elsewhere in this report.
2025 Note s
In September 2025, we issued convertible notes due 2029 in an aggregate principal amount of $190.0 million, or the 2025 Notes. The 2025 Notes are our senior unsecured obligation, bearing no regular interest. The 2025 Notes are convertible into cash, shares of our common stock or a combination thereof, at our election, and will mature on September 15, 2029 unless earlier repurchased, redeemed or converted in accordance with the terms of the Indenture governing the 2025 Notes.
The net proceeds from the 2025 Notes were approximately $183.6 million after initial debt issuance costs, fees and expenses. We used the net proceeds and cash on hand to exchange $190.0 million aggregate principal amount of the 2021 Notes for approximately $190.0 million in cash, representing the principal amount exchanged, and approximately 811,000 shares of our common stock, representing the exchange value in excess thereof, and also paid accrued and unpaid interest thereon, in individual privately negotiated transactions concurrent with the 2025 Notes offering. In addition, we used approximately $11.2 million of cash on hand to pay the cost of the capped call transactions entered into in connection with issuing the 2025 Notes.
For further information on the terms of this debt, please refer to Note 8 to our consolidated financial statements included elsewhere in this report.
Historical Cash Flow Trends
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The following table shows a summary of our cash flows for the periods indicated:
Year Ended December 31,
(in thousands)
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Operating Cash Flows
For the year ended December 31, 2025, we generated $58.7 million of net cash from operating activities. These net cash proceeds comprised $73.5 million of net income adjusted for non-cash items, partially offset by a $14.8 million decrease in working capital due primarily to lower accrued compensation and employee related benefits and accounts payable.
Investing Cash Flows
For the year ended December 31, 2025, we used $48.0 million of net cash from investing activities. This net cash usage was due primarily to purchases of investments of $202.8 million and property and equipment purchases of $12.9 million, partially offset by proceeds from maturities of investments of $154.7 million and proceeds from sales of investments of $12.9 million.
Financing Cash Flows
For the year ended December 31, 2025, we used $8.9 million of net cash from financing activities. We used this net cash for payment of our 2021 Notes of $190 million, premiums paid for capped call transactions of $11.2 million and $3.2 million in taxes paid to cover RSU vesting. This net cash usage was offset by $183.7 million of net proceeds from issuing our 2025 Notes and $11.8 million of proceeds from stock-option exercises and our employee stock purchase plan.
Contractual Obligations
The following table reflects a summary of our contractual obligations as of December 31, 2025:
Payments Due By Period
Total
Less
Than
1 Year
Years
Years
More
Than
5 Years
(in thousands)
Convertible senior notes (1)
Operating lease obligations
Operating lease obligations
Purchase commitments (2)
Total
(1) The convertible senior notes include $1.6 million in interest payments.
(2) Purchase commitments comprise primarily noncancelable commitments to purchase $28.2 million of inventory as of December 31, 2025, noncancelable software license agreements with vendors and equipment purchases.
Off-Balance-Sheet Arrangements
Since inception, we have not had any relationships with unconsolidated entities, such as entities often referred to as structured finance or special-purpose entities, or financial partnerships that would have been established for the purpose of facilitating off-balance-sheet arrangements or for another contractually narrow or limited purpose.
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Critical Accounting Policies and Significant Estimates
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements which we have prepared in accordance with GAAP. Our preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities, revenue and expenses at the date of the consolidated financial statements. Generally, we base our estimates on historical experience and on various other assumptions, in accordance with GAAP, that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under other assumptions or conditions.
Critical accounting policies and estimates are those we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. 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.
We recognize revenue when we transfer control of the promised goods or services to our customers, which for hardware sales is generally at the time of product shipment as determined by agreed-upon shipping terms. We measure revenue based on the amount of consideration we expect to be entitled-to in exchange for those goods or services. We expect the period between when we transfer control of promised goods or services and when we receive payment to be one year or less, and that expectation is consistent with our historical experience. As such, we do not adjust our revenue for the effects of a significant financing component. We recognize any variable consideration, which comprises primarily sales incentives, as revenue reduction at the time of revenue recognition. We estimate sales incentives based on our historical experience and current expectations at the time of revenue recognition and update them at the end of each reporting period as additional information becomes available.
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. For these contracts, we account for individual performance obligations separately if they are distinct. 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. We defer amounts allocated to extended warranty and enhanced maintenance sold with our reader and gateway products and recognize them on a straight-line basis over the term of the arrangement, which is typically from one to three years. 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. We recognize revenue from licensing the right to use functional intellectual property at the point in time the control of the license transfers to the customer, which is generally upon delivery, or as usage occurs.
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If a customer pays consideration before we transfer a good or service under the contract, then we classify those amounts as contract liabilities, or deferred revenue. We recognize contract liabilities as revenue when we transfer control of the promised goods or services to our customers.
Payment terms typically range from 30 to 120 days. We present revenue net of sales tax in our consolidated statements of operations. We include shipping charges billed to customers in revenue and the related shipping costs in cost of revenue.
Practical Expedients and Exemptions: We expense sales commissions when incurred because we expect the amortization period to be one year or less. 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.
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. 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. If future demand or market conditions are less favorable than our projections, or our product development plans change from current expectations, then a write-down of excess or obsolete inventory may be required and is reflected in cost of goods sold in the period the updated information is known.
Income Taxes
We use the asset and liability approach for accounting, which requires recognizing deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to be in effect when the assets and liabilities are recovered or settled. We recognize the effects of a change in tax rates on deferred tax assets and liabilities in the year that of the enactment date. We determine deferred tax assets, including historical net operating losses and deferred tax liabilities, based on temporary differences between the book and tax bases of the assets and liabilities. We believe that it is currently more likely than not that our deferred tax assets will not be realized and, as such, we have recorded a full valuation allowance for these assets. 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. First, we evaluate recognition, which requires us to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes. If we consider a tax position more likely than not to be unsustained, then no benefits of the position are recognized. Second, we measure the uncertain tax position based on the largest amount of benefit which is more likely than not to be realized on effective settlement. This process involves estimating our actual current tax exposure, including assessing the risks associated with tax audits, together with assessing temporary differences resulting from the different treatment of items for tax and financial reporting purposes. If actual results differ from our estimates, then our net operating loss and credit carryforwards could be materially impacted.
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Us realizing the benefits of the NOLs and credit carryforwards depends on sufficient taxable income in future years. We have established a valuation allowance against the carrying value of our deferred tax assets, as it is currently more likely than not we will be unable to realize these deferred tax assets. In addition, using NOLs and credits to offset future income subject to taxes may be subject to substantial annual limitations due to the “change in ownership” provisions of the Code and similar state provisions. Events that cause limitations in the amount of NOLs that we may use in any one year include, but are not limited to, a cumulative ownership change of more than 50%, as defined by Code Sections 382 and 383, over a three-year period. Using our NOLs and tax credit carryforwards could be significantly reduced if a cumulative ownership change of more than 50% has occurred in our past or occurs in our future.
We do not anticipate that the amount of our existing unrecognized tax benefits will significantly increase or decrease within the next 12 months. Due to our NOLs, in most jurisdictions our tax years remain open for examination by taxing authorities back to 2004.
Stock-Based Compensation
We have various equity award plans, or Plans, for granting share-based awards to employees, consultants and non-employee directors of the Company. 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. We determine the fair value of stock options using the Black-Scholes option-pricing model, which considers, among other things, estimates and assumptions on the expected life of the options, stock price volatility and market value of the Company’s common stock. We determine the fair value of RSUs and PSUs based on the closing price of our common stock at grant date. Additionally, for awards with a market condition, we use a Monte Carlo simulation model to estimate grant date fair value, which takes into consideration the range of possible stock price of total stockholder return outcomes.
Recent Accounting Pronouncements
For information on recent accounting pronouncements, please refer to Note 2 in our consolidated financial statements included elsewhere in this report.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Some of these risks are related to fluctuations in interest rates.
Interest Rate Risk
Under our current investment policy, we invest our excess cash in money market funds, U.S. government securities, corporate bonds and notes and commercial paper. Our current investment policy seeks first to preserve principal, second to provide liquidity for our operating and capital needs and third to maximize yield without putting our principal at risk. We do not enter into investments for trading or speculative purposes.
We had cash, cash equivalents and short-term investments of $175.3 million and $164.7 million as of December 31, 2025 and 2024, 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. Because most of our investment portfolio is short-term in nature, we do not believe an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio, and therefore we do not expect our results of operations or cash flows to be materially affected by a sudden change in market interest rates.
Our convertible notes have fixed interest rates, thus a hypothetical 100 basis point increase in interest rates would not impact interest expense.
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Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. To date, we have been able to substantially offset higher product costs by increasing our product selling prices. If our product costs became subject to significant future inflationary pressures, then we may not be able to fully offset these higher costs through price increases. Our inability or failure to do so could adversely affect our business, financial condition and results of operations.
Foreign Currency Exchange Risk
We are subject to risks associated with transactions that are denominated in currencies other than our functional currency and the effects of translating amounts denominated in a foreign currency to the U.S. dollar as a normal part of our reporting process. The functional currency of the majority of our foreign subsidiaries is the U.S. dollar. Accordingly, gains and losses resulting from remeasuring transactions denominated in currencies other than U.S. dollars are included in other income, net, on our consolidated statements of operations. One of our European subsidiaries utilizes Euros as their functional currency, which results in a translation adjustment that we include as a component of accumulated other comprehensive income. 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.
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Item 8. Financial Statemen ts and Supplementary Data
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 )
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Impinj, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Impinj, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 9, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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Inventory valuation
Description of the Matter
The Company's inventory totaled $85 million as of December 31, 2025. As explained in Note 2 to the consolidated financial statements, the Company determines the appropriate value of all inventory in each reporting period. Obsolete inventory or inventory in excess of management's estimated usage requirement is written down to its estimated net realizable value if those amounts are determined to be less than cost.
Auditing management's estimates for excess and obsolete inventory involved judgment because the estimates are affected by market and economic conditions outside the Company's control.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's excess and obsolete inventory reserve estimate. This included management’s identification of items which may be excess or obsolete and the determination of the net realizable value for those items.
To test the Company's estimates for excess and obsolete inventory, we tested the accuracy and completeness of underlying data used in management’s excess and obsolete inventory valuation assessment. This included evaluating inventory levels compared to historical sales and product life cycles. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses to evaluate the changes in the excess and obsolete inventory estimates that would result from changes in the underlying estimates. Finally, we assessed sources of contrary information which could indicate a decline in future demand relative to historical periods, including external sources of overall industry trends.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2020.
Seattle, Washington
February 9, 2026
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Impinj, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Impinj, Inc.’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Impinj, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated February 9, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Seattle, Washington
February 9, 2026
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Impinj, Inc.
Consolidated B alance Sheets
(in thousands, except par value)
December 31, 2025
December 31, 2024
Assets:
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Total current assets
Long-term investments
Property and equipment, net
Intangible assets, net
Operating lease right-of-use assets
Other non-current assets
Goodwill
Total assets
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable
Accrued compensation and employee related benefits
Accrued and other current liabilities
Current portion of operating lease liabilities
Current portion of long-term debt
Current portion of deferred revenue
Total current liabilities
Long-term debt
Operating lease liabilities, net of current portion
Deferred tax liabilities, net
Deferred revenue, net of current portion
Total liabilities
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, $ 0.001 par value — 5,000 shares authorized, no shares issued and outstanding at December 31, 2025 and 2024
Common stock, $ 0.001 par value — 495,000 shares authorized, 30,222 and 28,504 shares issued and outstanding at December 31, 2025 and 2024, respectively
Additional paid-in capital
Accumulated other comprehensive income (loss)
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
The accompanying notes are an integral part of these consolidated financial statements .
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Impinj, Inc.
Consolidated Statem ents of Operations
(in thousands, except per share data)
Year Ended December 31,
Revenue
Cost of revenue
Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Amortization of intangibles
Restructuring costs
Total operating expenses
Loss from operations
Other income, net
Income from settlement of litigation
Induced conversion expense
Interest expense
Income (loss) before income taxes
Income tax benefit (expense)
Net income (loss)
Net income (loss) per share — basic
Net income (loss) per share — diluted
Weighted-average shares outstanding — basic
Weighted-average shares outstanding — diluted
The accompanying notes are an integral part of these consolidated financial statements.
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Impinj, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Year Ended December 31,
Net income (loss)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on investments
Foreign currency translation adjustment
Total other comprehensive income (loss)
Comprehensive income (loss)
The accompanying notes are an integral part of these consolidated financial statements.
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Impinj, Inc.
Consolidated Statements of Cha nges in Stockholders’ Equity
(in thousands)
Accumulated
Additional
Other
Total
Common Stock
Paid-in
Accumulated
Comprehensive
Stockholders'
Shares
Amount
Capital
Deficit
Income (loss)
Equity
Balance at December 31, 2022
Issuance of common stock
Stock-based compensation
Net loss
Equity issuance for Voyantic acquisition (Note 6)
Other comprehensive income
Balance at December 31, 2023
Issuance of common stock
Stock-based compensation
Restructuring equity modification expense
Net income
Other comprehensive loss
Balance at December 31, 2024
Issuance of common stock
Stock-based compensation
RSU tax withholding
Induced conversion on 2021 Notes (Note 8)
Premiums paid for capped calls (Note 8)
Net loss
Other comprehensive income
Balance at December 31, 2025
The accompanying notes are an integral part of these consolidated financial statements.
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Impinj, Inc.
Consolidated Statem ents of Cash Flows
(in thousands)
Year Ended December 31,
Operating activities:
Net income (loss)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
Stock-based compensation
Restructuring equity modification expense
Accretion of discount or amortization of premium on investments
Amortization of debt issuance costs
Induced conversion expense related to convertible notes
Deferred tax expense
Revaluation of acquisition-related contingent consideration liability
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable
Inventory
Prepaid expenses and other assets
Accounts payable
Accrued compensation and employee related benefits
Accrued and other liabilities
Acquisition-related contingent consideration liability
Operating lease right-of-use assets
Operating lease liabilities
Deferred revenue
Net cash provided by (used in) operating activities
Investing activities:
Purchases of investments
Proceeds from sales of investments
Proceeds from maturities of investments
Proceeds from sale of property and equipment
Purchases of intangible assets
Purchases of property and equipment
Business acquisitions, net of cash acquired
Net cash provided by (used in) investing activities
Financing activities:
Proceeds from issuance of 2025 Notes, net of issuance costs
Premiums paid for capped call transactions
Payment of 2021 Notes
Proceeds from exercise of stock options and employee stock purchase plan
Payments of taxes on restricted stock units
Payment of acquisition-related contingent consideration
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents
Beginning of period
End of period
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Supplemental disclosure of cashflow information:
Cash paid for interest
Purchases of property and equipment not yet paid
Lease liabilities arising from obtaining ROU Assets
26,396 shares of common stock issued for Voyantic Oy acquisition
Acquisition-related contingent consideration liability
The accompanying notes are an integral part of these consolidated financial statements.
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IMPINJ, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Description of Business
Impinj, Inc., a Delaware corporation, is headquartered in Seattle, Washington. The Impinj platform wirelessly connects items and delivers data about the connected items to business and consumer applications. Impinj generates revenue from enterprise solutions that use our platform ’ s constituent elements — endpoint ICs, reader ICs, readers, gateways and tag production systems — as well as from development, service and license agreements.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include Impinj, Inc. and its wholly owned subsidiaries. We have eliminated intercompany balances and transactions in consolidation. We have prepared these consolidated financial statements in conformity with U.S. generally accepted accounting principles, or GAAP.
All numbers in the consolidated financial statements are rounded to the nearest thousand, except for per share data, and numbers in the notes to the consolidated financial statements are rounded to the nearest million.
Use of Estimates
Preparing financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and related disclosures as of the date of the financial statements, as well as the reported revenue and expenses during the periods presented. We evaluate our estimates on an ongoing basis, including those related to revenue recognition, sales incentives, the fair value of assets acquired, liabilities assumed, contingent consideration in business combinations, inventory excess and obsolescence and income taxes. To the extent there are material differences between our estimates, judgments or assumptions and actual results, our financial statements will be affected.
Concentrations of Credit Risk
Financial instruments, which potentially subject us to credit-risk concentration, comprise primarily cash equivalents, investments and accounts receivable. We place our cash and cash equivalents and investments with major financial institutions, which management assesses to be of high credit quality, to limit our investment exposure. We extend credit to customers based on our evaluation of the customer’s financial condition and generally do not require collateral. The following tables present total revenue and accounts receivable concentration for the indicated periods as of the dates presented:
Year Ended December 31,
Revenue:
Customer A
Customer B
Customer C
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* Customer accounted for less than 10 % of total revenue in the period.
As of December 31,
Accounts Receivable:
Customer A
Customer B
Customer C
Concentration of Supplier Risk
We outsource the manufacturing and production of our hardware products to a small number of suppliers. We believe other suppliers could provide similar products on comparable terms if needed. However, a supplier change could delay manufacturing and cause a sales loss, which would adversely affect our operating results.
Cash and Cash Equivalents
Cash includes demand deposits with banks or financial institutions. Cash equivalents include short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present minimal risk of changes in value with changes in interest rates. Our cash equivalents are solely investments with an original or remaining maturity of three months or less at the date of purchase. We regularly maintain cash amounts exceeding federally insured limits at financial institutions.
Investments
Our investments comprise fixed income securities, including U.S. government securities, corporate notes and bonds, and commercial paper. The contractual maturities of some of our available-for-sale, or AFS, debt securities exceed a year and are classified as long-term investments on our balance sheet. We carry AFS debt securities at fair value with unrealized gains and losses reported as a component of other comprehensive income (loss). Our investments are subject to a periodic impairment review. We recognize an impairment charge when a decline in fair value of an investment below the cost basis is determined to be other-than-temporary. Factors we consider in determining whether a loss is temporary include the extent and length of time the investment's fair value has been lower than its cost basis, the financial condition and near-term prospects of the investee, our intent to sell the security and whether or not we will be required to sell the security prior to the expected recovery of the investment's amortized cost basis. No such impairment changes were recorded during the years ended December 31, 2025, 2024 and 2023. See Note 3 t ables for the cost or amortized cost, gross unrealized , gross unrealized and total estimated fair value of our financial assets as of December 31, 2025 and 2024.
Fair Value Measurement
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which are internally developed, and considers risk premiums that a market participant would require.
We do no t have any financial assets or liabilities in Level 3 as of December 31, 2025 or 2024.
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We applied the following methods and assumptions in estimating our fair value measurements:
Cash Equivalents — Cash equivalents comprise highly liquid investments, including money market funds with original maturities of less than three months at the acquisition date. We record the fair value measurement of these assets based on quoted market prices in active markets.
Investments — Our investments comprise fixed income securities, which include U.S. government agency securities, corporate notes and bonds, commercial paper and treasury bills. The fair value measurement of these assets is based on observable market-based inputs or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.
Long-term Debt —See Note 8 for the carrying amount and estimated fair value of the Notes.
Contingent Consideration — The contingent consideration liability is related to our acquisition of Voyantic Oy (see Note 6: Goodwill and Intangible Assets). We paid the contingent consideration amount of $ 7.2 million in second-quarter 2024.
Accounts Receivable and Allowances
Accounts receivable comprises amounts billed and currently due from customers, net of allowances for doubtful accounts, sales returns and price exceptions.
The allowance for doubtful accounts is our best estimate of the amount of probable lifetime-expected credit losses in existing accounts receivable and is determined based on our historical collections experience, age of the receivable, knowledge of the customer and the condition of the general economy and industry as a whole. We record changes in our estimate of the allowance for doubtful accounts through bad debt expense and write off the receivable and corresponding allowance when accounts are ultimately determined to be uncollectible. We include bad debt expense in general and administrative expenses. For the periods presented in this report, bad debt expense and the allowance for doubtful accounts were not material.
We derive most of our accounts receivable from sales to original equipment manufacturers, or OEMs, original design manufacturers, ODMs, solution providers and distributors who are large, well-established companies. We do not have customers that represent a significant credit risk based on current economic conditions and past collection experience. Also, we have not had material past-due balances on our accounts receivable as of December 31, 2025 or 2024.
The allowance for sales returns and price exceptions is our best estimate based on our historical experience and currently available evidence. We record changes in our estimate of the allowance for sales returns and price exceptions through revenue, and relieve the allowance when we receive product returns or process claims for price exceptions. The following table summarizes our allowance for sales returns (in thousands):
Balance at Beginning of Year
Additional Reserve
Applied Sales Return
Balance at End of Year
Allowance for sales returns and price exceptions:
During year ended December 31, 2025
During year ended December 31, 2024
During year ended December 31, 2023
Inventory
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We state inventories at the lower of cost or estimated net realizable value using the first-in, first-out method. 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. If future demand or market conditions are less favorable than our projections, or our product development plans change from current expectations, then a write-down of excess or obsolete inventory may be required and is reflected in cost of goods sold in the period the updated information is known.
Excess and obsolescence charges had an immaterial impact on our 2025, 2024 and 2023 gross margin.
Property and Equipment
We record property and equipment at cost and depreciate it using the straight-line method over the estimated useful lives of the related assets. The useful lives are as follows:
Category
Useful Life
Machinery and equipment
1 to 10 years
Computer equipment and software
3 to 5 years
Furniture and fixtures
3 to 7 years
Equipment acquired under finance leases
3 to 7 years
Leasehold improvements
Shorter of remaining lease term or expected useful life
We charge maintenance and repair costs to expense when incurred. We capitalize major improvements, which extend the useful life of the related asset. Upon disposal of a fixed asset, we record a gain or loss based on the differences between the proceeds received and the net book value of the disposed asset.
Other Assets
Other assets comprise primarily capitalized implementation costs from cloud computing arrangements and security deposits. We capitalize eligible costs associated with cloud computing arrangements over the term of the arrangement, plus reasonably certain renewals, and recognize those costs on a straight-line basis in the same line item in the consolidated statement of operations as the expense for fees associated with the cloud computing arrangement. Cloud computing arrangement costs, included in prepaid expenses and other current assets, were $ 0.4 million and $ 0.4 million , and other non-current assets w ere $ 0.7 million and $ 1.0 million , as of December 31, 2025 and 2024, respectively. Amortization expense associated with the cloud computing arrangements was $ 0.4 million for 2025, $ 0.4 million for 2024, and $ 0.5 million for 2023. We present cash flows related to capitalized implementation costs in cash flows used in operating activities.
Business Combinations and Intangible Assets Including Goodwill
We account for business combinations using the acquisition method which involves allocating the purchase price paid to assets acquired and liabilities assumed at their acquisition-date fair values. The excess of the fair value of purchase consideration over the fair value of the identifiable assets and liabilities is recorded as goodwill. While we use our best estimates and assumptions to accurately estimate the fair value of assets acquired, liabilities assumed and the contingent consideration liability, our estimates are inherently uncertain. These estimates include, but are not limited to, estimates of future revenue, revenue growth rates, discount rates, underlying product or technology life cycles and expenses necessary to support the acquired technology, and estimated sales cycle for customer relationships. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.
We review assumptions related to the fair value of the contingent consideration each reporting period until the contingency is satisfied. We recognize the change in fair value of the contingent
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consideration liability in “General and administrative” expense on the consolidated statements of operations for the period in which the fair value changes.
We assess the impairment of goodwill on an annual basis, during the fourth quarter, or otherwise when events or changes in circumstances indicate that goodwill may be impaired.
We amortize identifiable intangible assets with finite lives over their useful lives on a straight-line basis.
We expense acquisition-related costs, including advisory, legal, accounting, valuation and other similar costs in the periods in which the costs are incurred.
Revenue Recognition
We generate revenue primarily from sales of hardware products. We also generate revenue from software, extended warranties, enhanced maintenance, support services and nonrecurring engineering, or NRE, development services, none of which are material.
We recognize revenue when we transfer control of the promised goods or services to our customers, which for hardware sales is generally at the time of product shipment as determined by agreed-upon shipping terms. We measure revenue based on the amount of consideration we expect to be entitled-to in exchange for those goods or services. We expect the period between when we transfer control of promised goods or services and when we receive payment to be one year or less, and that expectation is consistent with our historical experience. As such, we do not adjust our revenue for the effects of a significant financing component. We recognize any variable consideration, which comprises primarily sales incentives, as revenue reduction at the time of revenue recognition. We estimate sales incentives based on our historical experience and current expectations at the time of revenue recognition and update them at the end of each reporting period as additional information becomes available.
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. For these contracts, we account for individual performance obligations separately if they are distinct. 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. We defer amounts allocated to extended warranty and enhanced maintenance sold with our reader and gateway products and recognize them on a straight-line basis over the term of the arrangement, which is typically from one to three years . 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. We recognize revenue from licensing the right to use functional intellectual property at the point in time the control of the license transfers to the customer, which is generally upon delivery, or as usage occurs.
If a customer pays consideration before we transfer a good or service under the contract, then we classify those amounts as contract liabilities or deferred revenue. We recognize contract liabilities as revenue when we transfer control of the promised goods or services to our customers.
Payment terms typically range from 30 to 120 days . We present revenue net of sales tax in our consolidated statements of operations. We include shipping charges billed to customers in revenue and the related shipping costs in cost of revenue.
Practical Expedients and Exemptions: We expense sales commissions when incurred because we expect the amortization period to be one year or less. We record these costs within sales and marketing expenses. We do not disclose the value of unsatisfied performance obligations for (1) contracts with an
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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.
Product Warranties
We provide limited warranty coverage for most products, generally ranging from a period of 90 days to one year from the date of shipment. We record a liability for the estimated cost of these warranties based on historical claims, product failure rates and other factors when we recognize the related revenue. We review these estimates periodically and adjust our warranty reserves when actual experience differs from historical estimates or when other information becomes available. The warranty liability primarily includes the anticipated cost of materials, labor and shipping necessary to repair or replace the product. Accrued warranty costs in 2025, 2024 and 2023 were not material.
Leases
We determine, at inception, whether an arrangement is or contains a lease. Right-of-use, or ROU, assets represent our right to use an identified asset for the lease term. Lease liabilities represent our obligation to make lease payments arising from the lease. We recognize operating lease ROU assets and liabilities at commencement date based on the present value of future lease payments over the lease term, reduced by landlord incentives. We use an incremental borrowing rate in determining the present value of future lease payments because our operating leases do not provide an implicit rate. Our incremental borrowing rate is based on a credit-adjusted risk-free rate, which best approximates a secured rate over a similar term of lease. We recognize lease expense for lease payments on a straight-line basis over the lease term. Our lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes or other costs. We expense variable lease costs on the consolidated statements of operations as incurred. Our lease agreements generally do not contain any residual value guarantees or restrictive covenants.
We have various noncancellable operating lease agreements for office, warehouse and research and development space in the United States, Taiwan and Finland, with expiration dates from 2026 to 2038 . Certa in of these arrangements have free or escalating rent payment provisions and optional renewal and termination clauses that we factor into the classification and measurement of the lease when appropriate. These lease agreements typically include lease and non-lease components and are generally accounted for as a single lease component. We consider variable CAM expenses for real estate leases as non-lease components.
We do not record leases with an initial term of 12 months or less on our consolidated balance sheet; we instead recognize lease expense for these leases on a straight-line basis over the lease term.
Research and Development Costs
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; external consulting and service costs; prototype materials; other new-product development costs; and an allocated portion of infrastructure costs which include occupancy, depreciation and software costs.
Foreign Currency
We translate the assets and liabilities of our non-U.S. dollar functional currency subsidiary into U.S. dollars using exchange rates in effect at the end of each period. Revenue and expenses for this subsidiary are translated using rates that approximate those in effect during the period. We recognize gains and losses from these translations as a component of accumulated other comprehensive income (loss) in stockholders' equity. Our subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and liabilities at exchange rates in effect at the end of each period, and non-monetary assets and liabilities at historical rates. We have included the gains or losses from foreign currency remeasurement in earnings.
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Income Taxes
We use the asset and liability approach for accounting, which requires recognizing deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to be in effect when the assets and liabilities are recovered or settled. We recognize the effects of a change in tax rates on deferred tax assets and liabilities in the year of the enactment date. We determine deferred tax assets, including historical net operating losses and deferred tax liabilities, based on temporary differences between the book and tax bases of the assets and liabilities. We believe that it is currently more likely than not that our deferred tax assets will not be realized and, as such, we have recorded a full valuation allowance for these assets. 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. First, we evaluate recognition, which requires us to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes. If we consider a tax position more likely than not to be unsustained, then no benefits of the position are recognized. Second, we measure the uncertain tax position based on the largest amount of benefit which is more likely than not to be realized on effective settlement. This process involves estimating our actual current tax exposure, including assessing the risks associated with tax audits, together with assessing temporary differences resulting from the different treatment of items for tax and financial reporting purposes. If actual results differ from our estimates, then our net operating loss and credit carryforwards could be materially impacted.
Realizing the benefits of the NOLs and credit carryforwards depends on having sufficient taxable income in future years. We have established a valuation allowance against the carrying value of our deferred tax assets, as it is currently more likely than not we will be unable to realize these deferred tax assets. In addition, using NOLs and credits to offset future income subject to taxes may be subject to substantial annual limitations due to the “change in ownership” provisions of the Code and similar state provisions. Events that cause limitations in the amount of NOLs that we may use in any one year include, but are not limited to, a cumulative ownership change of more than 50 %, as defined by Code Sections 382 and 383, over a three-year period. Using our NOLs and tax credit carryforwards could be significantly reduced if a cumulative ownership change of more than 50% has occurred in our past or occurs in our future.
Stock-Based Compensation
We have various equity award plans or Plans for granting share-based awards to employees, consultants and non-employee Company directors. The Plans provide for granting several available forms of stock compensation such as restricted stock units, or RSUs, RSUs with performance conditions, or PSUs, and RSUs with market and service conditions, or MSUs and an employee stock purchase plan, or ESPP.
We measure stock-based compensation costs for all share-based awards at fair value on the measurement date, which is typically the grant date. We determine the fair value of RSUs and PSUs based on the closing price of our common stock at grant date. Additionally, for awards with a market condition, we use a Monte Carlo simulation model to estimate grant date fair value, which takes into consideration the range of possible stock price of total stockholder return outcomes.
Net Earnings (Loss) per Share
We compute net earnings (loss) per share by dividing net income (loss) by the weighted-average number of shares of common stock outstanding. We have outstanding stock options, RSUs, PSUs, MSUs and an ESPP, each of which we include in our calculation of diluted net loss per share if their effect would be dilutive. We compute diluted net loss per share by considering all potential dilutive common stock equivalents outstanding for the period.
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Recently Adopted Accounting Standards
In November 2023, the FASB released ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which amends reportable segment requirements, primarily through enhanced disclosures about significant segment expenses, including for public entities that have a single reportable segment. The standard is effective for fiscal years beginning after December 31, 2023 and interim periods within fiscal years beginning after December 31, 2024. We adopted ASU 2023-07 on January 1, 2024 and have made the necessary reportable segment disclosures (See Note 14—Segment Disclosures).
In December 2023, the FASB released ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which amends income tax disclosure requirements to enhance the transparency and decision usefulness for users of the financial statements. The standard is effective for fiscal years beginning after December 31, 2024. We adopted ASU 2023-09 on January 1, 2025 using the retrospective transition method. The financial statements have been adjusted to reflect the application of the new accounting guidance for all periods presented (See Note 7—Income Taxes).
In November 2024, the FASB released Accounting Standard Update (“ASU” ) 2024-04, Debt - Debt with Conversion and Other Options (Subtopic 470-20), which improves the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20, Debt - Debt with Conversion and Other Options. The standard is effective for fiscal years beginning after December 31, 2025, and early adoption is permitted. We early adopted ASU 2024-04 on January 1, 2025 , using the prospective transition approach. As a result of our adoption, we accounted for the exchange of the 2021 Notes in September 2025 described below, as an induced conversion. See Note 8 —Long term d ebt for additional details of this exchange transaction.
Recently Issued Accounting Standards Not Yet Adopted
In November 2024, the FASB released ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which amends disclosure requirements related to the disaggregation of income statement expenses in the notes to financial statements. The standard is effective for fiscal years beginning after December 31, 2026. We are currently evaluating any impact of this standard on our financial statement disclosures.
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Note 3. Fair Value Measurements
The following table presents the balances of assets measured at fair value on a recurring basis, by level within the fair value hierarchy, as of the dates presented (in thousands):
December 31, 2025
December 31, 2024
Level 1
Level 2
Total
Level 1
Level 2
Total
Cash equivalents:
Money market funds
Total cash equivalents
Short-term investments:
U.S. Government agency securities
U.S. Treasury securities
Corporate notes and bonds
Commercial paper
Total short-term investments
Long-term investments:
U.S. Government agency securities
U.S. Treasury securities
Corporate notes and bonds
Total long-term investments
Total
The following table presents additional information about liabilities measured at fair value for which the Company utilizes Level 3 inputs to determine fair value during fiscal year 2024. We do no t have any financial assets or liabilities in Level 3 as of December 31, 2025 or 2024.
December 31, 2024
Balance as of January 1
Addition of contingent consideration liability due to acquisition
Change in fair value of contingent consideration liability due to remeasurement
Contingent consideration payment made
Balance as of December 31
We recorded the contingent consideration related to the Voyantic Oy acquisition at its fair value using unobservable inputs and used the Monte Carlo simulation option pricing framework, incorporating contractual terms and assumptions regarding financial forecasts, discount rates and volatility of forecasted revenue and gross margins. A decrease in estimated revenue and gross margins or an increase in the discount rate would decrease the fair value of the contingent consideration liability. The estimated revenue and gross margins are not interrelated inputs. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations is management's responsibility with the assistance of a third-party valuation specialist. During the year ended December 31, 2024 we remeasured the fair value of the contingent consideration liability based on updated inputs related to actual performance results and recorded an additional expense of $ 1.0 million, in general and administrative expense on the consolidated statement of operations. During second-quarter 2024, we paid the contingent consideration and a s of December 31, 2025 and 2024, the contingent consideration is $ 0 .
We expect short-term investments to mature within 1 year of the reporting date. We expect long-term investments to mature between 1 and 2 years from the reporting date. See Note 8 for the carrying amount and estimated fair value of our convertible senior notes due 2027 and 2029 .
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The following tables present the cost or amortized cost, gross unrealized gains, gross unrealized losses and total estimated fair value of our financial assets as of the dates presented (in thousands):
December 31, 2025
Cost or
Gross
Gross
Total Estimated
Amortized Cost
Unrealized Gains
Unrealized Losses
Fair Value
Description:
Money market funds
U.S. Government agency securities
U.S. Treasury securities
Corporate notes and bonds
Commercial paper
Total
December 31, 2024
Cost or
Gross
Gross
Total Estimated
Amortized Cost
Unrealized Gains
Unrealized Losses
Fair Value
Description:
Money market funds
U.S. Government agency securities
U.S. Treasury securities
Corporate notes and bonds
Commercial paper
Total
Marketable securities in a continuous loss position for less than 12 months had an estimated fair value of $ 74.9 million and unrealized losses of $ 0.1 million a s of December 31, 2025. Marketable securities in a continuous loss position for less than 12 months had an estimated fair value of $ 142.8 million and unrealized losses of $ 0.6 million as of December 31, 2024. Marketable securities in a continuous loss position for greater than 12 months had an estimated fair value of $ 8.5 million and immaterial unrealized losses as of December 31, 2025 . We did no t have any marketable securities in a continuous loss position for greater than 12 months as of December 31, 2024.
Unrealized losses from our fixed-income securities are primarily attributable to changes in interest rates and not to lower credit ratings of the issuers. In determining whether an unrealized loss is other-than-temporary, for the periods presented, we determined we do not have plans to sell the securities nor is it more likely than not that we would be required to sell the securities before their anticipated recovery.
Note 4. Inventory
The following table presents the detail of inventories as of the dates presented (in thousands):
December 31, 2025
December 31, 2024
Raw materials
Work-in-process
Finished goods
Total inventory
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Note 5. Property and Equipment
The following table presents property and equipment details as of the dates presented (in thousands):
December 31, 2025
December 31, 2024
Machinery and equipment
Computer equipment and software
Furniture and fixtures
Equipment acquired under finance leases
Leasehold improvements
Total property and equipment, gross
Less: Accumulated depreciation
Total property and equipment, net
Depreciation expense, which includes amortization of finance lease asse ts, was $ 13.0 million, $1 0.7 million and $ 8.7 million for the years ended December 31, 2025, 2024 and 2023, respectively. We did no t acquire any property and equipment under finance leases for the years ended December 31, 2025 or 2024 .
Note 6. Goodwill and Intangible Assets
On April 3, 2023, we acquired all of the outstanding equity of Voyantic Oy for an aggregate purchase price of $ 32.7 million. Our acquisition of Voyantic Oy adds tag design, manufacturing, test, encoding and commissioning, or collectively tag production systems, to our systems offerings, to advance the quality, reliability and readability of partner inlays. The consideration comprised (i) $ 3.6 million in shares of our common stock valued using the market price on the date of the acquisition, (ii) $ 4.6 million in deferred payments contingent upon revenue and gross margin performance over a one-year period from the acquisition date, and (iii) the remainder in cash paid at closing.
We recorded the assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. We recorded the excess of the purchase price over the assets acquired and liabilities assumed as goodwill. The fair value of net assets acquired, goodwill, intangible assets and deferred tax liability were $ 2.4 million, $ 15.6 million, $ 18.4 million and $ 3.7 million, respectively. The goodwill amount represents synergies we expect to realize from the business combination and assembled workforce. We allocated the goodwill to our one reporting unit and reportable segment. The acquired goodwill and intangible assets were not deductible for tax purposes.
The transaction-related costs for the acquisition were $ 1.0 million for the year ended December 31, 2024. Transaction expenses and contingent consideration expense are included in general and administrative expense in the consolidated statements of operations.
This acquisition did not have a material impact on our reported revenue or net loss amounts for any period presented; therefore, we have not presented historical and pro forma disclosures.
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in business combinations accounted for under the purchase method of accounting. The following table presents goodwill as of December 31, 2025 and 2024 (in thousands):
Year Ended December 31,
Balance at beginning of period
Foreign currency translation adjustment
Total
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As of December 31, 2025, intangible assets comprised the following (in thousands):
Estimated Useful Life in Years
Gross Carrying Amount
Accumulated Amortization
Net
Definite-lived intangible assets:
Developed Technology
Patent
Tradename
Total definite-lived intangible assets (1)
(1) Foreign intangible asset carrying amounts are affected by foreign currency translation
We amortize identifiable intangible assets with finite lives over their useful lives on a straight-line basis. The weighted-average life of our intangible assets is approximately seven years . Amortization expense of intangible assets was $ 2.1 million and $ 2.9 million f or the years ended December 31, 2025 and 2024, respectively.
As of December 31, 2025, the estimated intangible asset amortization expense for the next five years and thereafter is as follows:
Estimated Amortization
(in thousands)
Thereafter
Total
Note 7. Income Taxes
We are subject to federal and state income taxes in the United States and foreign jurisdictions.
The following table presents U.S. and foreign components of income (loss) before income taxes (in thousands):
Year Ended December 31,
Foreign
Income (loss) before income taxes
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The following table presents income taxes paid, net of refunds received (in thousands):
Year Ended December 31,
U.S. - Federal
U.S. - State
Alabama
Texas
Other State
Total U.S. - State
Foreign
Brazil
Finland
United Kingdom
Other Foreign
Total Foreign
Total Income Taxes Paid
The following table presents the detail of income tax benefit (expense) for the periods presented (in thousands):
Year Ended December 31,
Current:
U.S. - Federal
U.S. - State
Foreign
Total current taxes
Deferred:
U.S. - Federal
U.S. - State
Foreign
Total deferred taxes
U.S. - Federal
U.S. - State
Foreign
Total income tax benefit (expense)
We have not recorded a liability for U.S. income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries as of December 31, 2025 because we intend to permanently reinvest the earnings outside the United States. We expect the amount of the unrecognized deferred tax liability, if incurred, to be immaterial.
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The following table presents a reconciliation of the federal statutory rate and our effective tax rate for the periods presented:
Year Ended December 31,
At Statutory Rate
State Income Taxes, net of Federal Effect
Change in Valuation Allowance
Nontaxable or Nondeductible Items
Equity Compensation
Debt Issuance Costs
Other Nondeductible Items
Inducement Premium
Changes in Tax Laws or Rates
Tax Credits
R&D Credits
Other Tax Credits
Cross-Border Tax Laws
Foreign Inclusions
Worldwide Changes in UTB
Other
Foreign Tax Effects
Brazil
Nondeductible Item
Other Brazil
Other Foreign Jurisdictions
In 2025, state and local income taxes in North Carolina and Kentucky comprise the majority of state and local income taxes, net of federal effect. Texas comprised the majority of our 2023 and 2024 state and local income taxes, net of federal effect.
We continue to maintain a full valuation allowance against our net deferred tax assets in the U.S. but recognize deferred income tax expense (benefit) due to the change in the indefinite deferred tax liability related to goodwill, which is partially offset by indefinite tax attributes.
Deferred federal, state and foreign income taxes reflect the net tax impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and for tax purposes.
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The following table presents the significant components of our deferred tax assets and liabilities as of the dates presented (in thousands):
December 31, 2025
December 31, 2024
Net operating loss carryforwards
Credit carryforwards
Capitalized research and development
Operating lease liabilities
Allowances
Deferred revenue
Stock-based compensation
Inventory cost capitalization
Other
Deferred tax assets
Less: Valuation allowance
Net deferred tax assets
Deferred tax liability:
Goodwill
Depreciation and amortization
Operating lease ROU assets
Deferred tax liabilities
Net deferred tax liability
Realizing deferred tax assets depends on us generating future taxable income, the timing and amount of which are uncertain. We have provided a full valuation allowance against the net deferred tax assets as of December 31, 2025 and 2024 because, based on the weight of available evidence, it is more likely than not we will be unable to realize the deferred tax assets.
As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to US federal deferred tax assets in the “change in valuation allowance” line of the rate reconciliation.
The following table presents a reconciliation of the total change in the valuation allowance (in thousands):
December 31, 2025
December 31, 2024
Beginning Balance
Change charged to income tax expense
Ending Balance
We have accumulated federal tax losses of approximately $ 275.8 million and $ 190.3 million, respectively, as of December 31, 2025 and 2024 , which are available to reduce future taxable income. The Tax Cuts and Jobs Act, or TCJA, enacted on December 22, 2017 altered the carryforward period for federal net operating losses and as a result, all net operating losses generated in 2018 and forward have an indefinite life. Of the net operating losses reported, we have accumulated $ 226.6 million with an indefinite life as of December 31, 2025 . We have accumulated state tax losses of approximately $ 17.8 million and $ 18.8 million as of December 31, 2025 and 2024 , respectively. We also have net research and development credit carryforwards of $ 43.7 million and $ 38.7 million as of December 31, 2025 and 2024, respectively, which are available to reduce future tax liabilities.
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H.R.1, enacted on July 4, 2025, introduced notable changes to the U.S. Internal Revenue Code, including immediate expensing of domestic Section 174 costs. Section 174 costs are expenditures which represent research and development costs that are incident to the development or improvement of a product, process, formula, invention, computer software, or technique. As previously required under the Tax Cuts and Jobs Act, we capitalized research and development expenditures in the years ended December 31, 2022 through December 31, 2024. With the enactment of H.R.1, we began deducting domestic Section 174 costs in 2025. As of December 31, 2025, we have a deferred tax asset of $ 35.2 million related to capitalized Section 174 expenditures.
The pre-2018 federal and state tax losses and federal research and development credit carryforwards began expiring in 2020 . Under Sections 382 and 383 of the Internal Revenue Code, if a corporation undergoes an ownership change, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income or income tax liability may be limited. We have completed a formal IRC Section 382 study through December 31, 2025 and the attributes disclosed in this footnote reflect the conclusion of that study. However, subsequent ownership changes may affect the limitation in future years.
We are currently not under audit in any tax jurisdiction. Tax years from 2007 through 2025 are currently open for audit by federal and state taxing authorities.
We establish reserves for tax positions based on estimates of whether, and the extent to which, additional taxes will be due. We establish the reserves when we believe that our tax-return positions might be challenged by taxing authorities, despite our belief that our tax return positions are fully supportable.
The following table presents the total balance of unrecognized tax benefits as of the dates presented (in thousands):
Year Ended December 31,
Balance at beginning of period
Gross increase to tax positions in current periods
Balance at end of period
As of December 31, 2025, we recorded a total amount of unrecognized tax benefit of $ 11.0 million as a reduction to the deferred tax asset. If recognized, this tax benefit would have no impact to our effective tax rate because we have a full valuation allowance. We record accrued interest and penalties related to unrecognized tax benefits as income tax expense and their value is zero .
Note 8. Long-term debt
In November 2021, we issued $ 287.5 million aggregate principal amount of convertible promissory notes due May 15, 2027 (the “2021 Notes”) and in September 2025, we issued $ 190.0 million aggregate principal amount of convertible promissory notes due September 15, 2029 (the “2025 Notes” and collectively, the “Notes”).
The following table presents the outstanding principal amount and carrying value of the Notes as of the dates indicated (in thousands):
December 31, 2025
December 31, 2024
Principal Amount
Unamortized debt issuance costs
Net Carrying Amount
Principal Amount
Unamortized debt issuance costs
Net Carrying Amount
2021 Notes
2025 Notes
Total Debt
Short-term Debt
Long-term Debt
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Further details of the Notes are as follows:
Issuance
Maturity Date
Interest Rate
First Interest Payment Date
Effective Interest Rate
Semi-Annual Interest Payment Dates
Initial Conversion Rate per $1,000 Principal
Initial Conversion Price
Number of Shares (in millions)
2021 Notes
May 15, 2027
May 15, 2022
May 15; November 15
2025 Notes
September 15, 2029
The Notes are senior unsecured obligations, do not contain any financial covenants. Each series of Notes is governed by an indenture (collectively, the “Indentures”). The 2025 Notes do not bear regular interest and the principal amount of the 2025 Notes does not accrete. The total net proceeds from the 2021 Notes and the 2025 Notes , after deducting initial debt issuance costs, fees and expenses, were $ 278.4 million and $ 183.6 million, respectively . We used approximately $ 183.6 million of the 2021 Notes net proceeds, excluding accrued interest, to repurchase approximately $ 76.4 million aggregate principal amount of convertible notes due 2026 (the “2019 Notes”) through individual privately negotiated transactions concurrent with us offering the 2021 Notes. We used approximately $ 17.6 million, excluding accrued interest, to repurchase the remaining $ 9.9 million aggregate principal amount of the 2019 Notes in June 2022. We used the remainder of the net proceeds from the 2021 Notes for general corporate purposes. We used the 2025 Notes net proceeds, and cash on hand to exchange $ 190.0 million aggregate principal amount of the 2021 Notes for approximately $ 190.0 million in cash, representing the principal amount exchanged, and approximately 811,000 shares of our common stock, representing the exchange value in excess thereof, and also paid accrued and unpaid interest thereon, in privately negotiated transactions concurrently with the 2025 Notes offering.
Terms of the Notes
The holders of each series of Notes may convert their respective Notes at their option at any time prior to the close of business on the business day immediately preceding the respective conversion dates under the following circumstances:
during any fiscal quarter ( and only during such fiscal quarter), if the last reported sale price of our common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the applicable conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the applicable series of Notes for each trading day was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate for such series of Notes on each such trading day;
prior to the close of business on the second scheduled trading day immediately preceding the redemption date if we call the applicable series of Notes for redemption; or
upon the occurrence of specified corporate events, as described in the Indenture governing the applicable series of Notes .
Regardless of the foregoing circumstances, holders may convert all or any portion of the 2021 Notes, in increments of $1,000 principal amount, on or after February 15, 2027, and may convert all or any portion of the 2025 Notes, in increments of $1,000 principal amount, on or after June 15, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date for the applicable series of Notes .
We may redeem all or any portion of the 2021 Notes for cash, at our option, on or after November 20, 2024, and all or any portion of the 2025 Notes for cash, at our option, on or after March 20, 2028 , if the last reported sale price of our common stock has been at least 130 % of the conversion price for the applicable series of Notes for at least 20 trading days (whether or not consecutive) during any 30
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consecutive trading day period at a redemption price equal to 100% of the principal amount of the Notes being redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date for such Notes.
Holders who convert their Notes in connection with certain corporate events that constitute a make-whole fundamental change (as defined in the Indenture governing each series of Notes) are, under certain circumstances, entitled to an increase in the conversion rate for such Notes. Additionally in the event of a corporate event constituting a fundamental change (as defined in the Indenture governing each series of Notes ), holders of the Notes may require us to repurchase all or a portion of their Notes of such series at a repurchase price equal to 100 % of the principal amount of the Notes of such series being repurchased, plus any accrued and unpaid interest to, but excluding, the repurchase date.
Our common stock exceeded 130 % of the conversion price of the 2021 Notes for more than 20 trading days during the 30 consecutive trading days ended December 31, 2025. Accordingly, the 2021 Notes are convertible at the option of the holders as of December 31, 2025 and therefore, are classified as current portion of long-term debt on the consolidated balance sheet as of December 31, 2025. The “if-converted value” exceeded the principal amounts by $ 55.3 million based on the closing price of our common stock of $ 174.01 as of December 31, 2025.
Accounting for the Notes
We account for each series of Notes as a single liability measured at its amortized cost. We presented the 2021 Notes total issuance costs of $ 9.1 million as a direct deduction from the face amount of the 2021 Notes and amortized the issuance costs to interest expense over the respective term of the 2021 Notes using the effective interest rate method. We presented the 2025 Notes total issuance costs of $ 6.3 million as a direct deduction from the face amount of the 2025 Notes and amortized the issuance costs to interest expense over the respective term of the 2025 Notes using the effective interest rate method.
Interest expense related to the Notes was as follows (in thousands):
Year Ended December 31, 2025
Year Ended December 31, 2024
Year Ended December 31, 2023
2025 Notes
2021 Notes
2021 Notes
2021 Notes
Amortization of debt issuance costs
Cash interest expense
Total interest expense
Accrued interest related to the 2021 Notes as of December 31, 2025 and 2024 was $ 0.1 million and $ 0.4 million, respectively. There is no accrued interest for the 2025 Notes. We record accrued interest in accrued liabilities in our consolidated balance sheet.
We estimate the fair value of the 2021 Notes to be $ 159.1 million and $ 408.7 million as of December 31, 2025 and 2024 , respectively, which we determined through consideration of quoted market prices. We estimate the fair value of the 2025 Notes to be $ 195.6 million as of December 31, 2025 , which we determined through consideration of quoted market prices. The fair value for the Notes is classified as Level 2, as defined in Note 2.
Capped Call Transactions
In connection with issuing the 2019 Notes and the 2025 Notes, we entered into privately negotiated capped call transactions with certain financial counterparties. The capped call transactions are generally expected to reduce the potential dilution to our common stock upon any conversion of the 2019 Notes or the 2025 Notes, and/or offset any cash payments we would be required to make in excess of the principal amount of converted 2019 Notes or 2025 Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. If, however, the market price per share of our common stock exceeds the cap price of the respective capped call transactions, then our stock would experience some
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dilution and/or such capped call transactions would not fully offset the potential cash payments, in each case, to the extent the then-market price per share of our common stock exceeds the cap price.
The capped call transactions entered into in connection with the 2019 Notes, remains outstanding even though we have repurchased the 2019 Notes, to reduce the potential dilution of the remaining 2021 Notes. The initial cap price of these capped call transactions is $ 54.20 per share, subject to certain adjustments under the terms of these capped call transactions. These capped call transactions expire over 40 consecutive scheduled trading days ending on December 11, 2026 .
The initial cap price of the capped call transactions, entered into in connection with the 2025 Notes, is $ 340.32 per share, subject to certain adjustments under the terms of these capped call transactions. These capped call transactions expire on September 15, 2029. The cost of $ 11.2 million incurred in connection with the 2025 capped call was recorded as a reduction to additional paid-in capital.
The capped call transactions are separate transactions, and not part of the terms of the 2019 Notes or the 2025 Notes. These transactions meet the criteria for classification in equity, are not accounted for as derivatives and are not remeasured each reporting period.
Partial Exchange of the 2021 Notes
In September 2025, we entered into privately-negotiated exchanges with certain holders of our outstanding 2021 Convertible Notes with respect to the exchange of $ 190.0 million principal amount of the 2021 Convertible Notes (the “2021 Note Exchange”).We accounted for the 2021 Note Exchange transaction as an induced conversion in accordance with Accounting Standards Codification 470-20, Debt with Conversion and Other Options (ASC 470-20), as amended for ASU 2024-04, which we early adopted on January 1, 2025, using the prospective transition approach. In connection with the induced conversion, we paid approximately $ 190.0 million in cash, representing the principal amount exchanged , issued approximately 811,000 shares of our common stock, representing the exchange value in excess thereof, and also paid accrued and unpaid interest thereon. As a result of the induced conversion, we recorded $ 15.0 million in induced conversion expense which is included in the Consolidated Statements of Operations for the year ended December 31, 2025. We did not receive any cash proceeds from issuing the shares of common stock but recognized additional paid-in-capital of $ 13.1 million representing the induced conversion expense, net of approximately $ 2.0 million of unamortized debt issuance costs related to the converted 2021 Notes.
Note 9. Stockholders’ Equity
Preferred Stock
Our board of directors has the authority to fix the designations, powers, preferences and rights and the qualifications, limitations or restrictions thereof, of any wholly unissued series of preferred stock, and to increase or decrease the number of shares in any series of preferred stock, subject to limitations prescribed by law and by our certificate of incorporation. We had no preferred stock issued and outstanding as of December 31, 2025 or 2024.
Common Stock
As of December 31, 2025 , we had authorized 495,000,000 shares of voting $ 0.001 par value common stock. Each holder of the common stock is entitled to one vote per common share . At its discretion, the board of directors may declare dividends on shares of common stock, subject to the prior rights of our preferred stockholders, if any. Upon liquidation or dissolution, holders of common stock will receive distributions only after preferred stock preferences have been satisfied.
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Note 10. Stock-Based Awards
Stock-Based Compensation Expense
The following table presents the detail of stock-based compensation expense amounts included in our consolidated statements of operations for the periods presented (in thousands):
Year Ended December 31,
Cost of revenue
Research and development expense
Sales and marketing expense
General and administrative expense
Total stock-based compensation expense
2016 Equity Incentive Plan
In June 2016, our board of directors adopted and our stockholders approved our 2016 Equity Incentive Plan, or the 2016 Plan, which became effective in July 2016 at which time the 2010 Equity Incentive Plan, or the 2010 Plan, was terminated. The number of shares of common stock reserved for issuance under the 2016 Plan may increase on January 1 of each year, beginning on January 1, 2017 and ending on and including January 1, 2026, by the lesser of (1) 1,825,000 shares; (2) 5 % of the total number of shares of common stock outstanding on December 31 of the preceding calendar year; and (3) a lesser number of shares determined by our board of directors. The 2016 Plan provides for granting incentive or non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights and performance shares or performance units to employees, non-employee directors and consultants. We have not issued options or PSUs under the 2016 Plan since the year ended December 31, 2021 and December 31, 2023, respectively.
All options historically granted under the 2010 Plan and the 2016 Plan have a maximum 10 -year term and generally vest and become exercisable over four years of continued employment or service as defined in each option agreement. As allowed under the 2016 Plan, there are a few exceptions to this vesting schedule, which permit vesting at different rates or based on achieving performance targets. We use newly issued shares to satisfy option exercises. As of December 31, 2025 , we had approximately 4.7 million shares of common stock available for future grants.
Stock Options
The following table summarizes option award activity for the year ended December 31, 2025 (in thousands, except per share data and years):
Number of
Underlying Shares
Weighted-Average
Exercise Price
Per Share
Weighted-Average
Remaining
Contractual
Life (Years)
Total Intrinsic
Value
Outstanding at December 31, 2024
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2025
Vested and exercisable at December 31, 2025
The total intrinsic value of options exercised during 2025, 2024 and 2023 was $ 38.9 million, $ 85.1 million and $ 19.1 million, respectively. The total grant date fair value of options vested was immaterial during 2025 and $ 1.0 million and $ 3.3 million during 2024 and 2023, respectively.
As of December 31, 2025 , there was no unrecognized stock-based compensation cost related to unvested stock options.
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Restricted Stock Units
The following table summarizes activity for restricted stock units, or RSUs and MSUs for the year ended December 31, 2025 (in thousands, except per share data):
Number of Underlying Shares
Weighted-Average Grant Date Fair Value
RSUs
MSUs
RSUs
MSUs
Outstanding at December 31, 2024
Granted
Vested
Forfeited
Outstanding at December 31, 2025
We record stock-based compensation expense for RSUs and MSUs on a straight-line basis over the requisite service period, which is generally the vesting period. Forfeitures are recognized as they occur.
In fiscal year 2022, we transitioned to a bonus plan that was half cash and half PSUs. The number of annual PSUs that ultimately vest depends on us attaining certain financial metrics for the fiscal year as well as on the employee’s continued employment through the vesting date. In fiscal year 2023, we transitioned to an all cash bonus plan.
The following table summarizes information related to granted and vested RSUs, PSUs and MSUs (in thousands, except per share data):
Year Ended December 31,
RSU weighted-average grant date fair value
MSU weighted-average grant date fair value
PSU weighted-average grant date fair value
Fair market value of RSUs vested
Fair market value of MSUs vested
Fair market value of PSUs vested
As of December 31, 2025 , our total unrecognized stock-based compensation cost related to unvested MSUs was $ 23.5 million, which we will recognize over the weighted-average period of 1.3 years. As of December 31, 2025, there was $ 81.2 million of total unrecognized compensation cost related to unvested RSUs, which we expect to recognize over a weighted-average period of 2.5 years.
Employee Stock Purchase Plan
Effective July 2016, we adopted the 2016 Employee Stock Purchase Plan, or the ESPP, allowing eligible employees to authorize payroll deductions of up to 15 % of their eligible compensation. An ESPP participant may purchase a maximum of 4,000 shares, or a lesser number as determined by the IRS rules, each six-month period. The offering periods generally start on the first trading day on or after February 20 and August 20 of each year. Participants in an offering period are granted the right to purchase common shares at a price per share that is 85 % of the lesser of the fair market value of the shares on (1) the first day of the offering period or (2) the end of the purchase period. The number of shares reserved for the ESPP may increase each year, beginning on January 1, 2017 and continuing through and including January 1, 2036, by the lesser of: (1) 1 % of the total number of shares of common stock outstanding on the first day of each year; (2) 365,411 shares of common stock; and (3) an amount determined by our board of directors.
As of December 31, 2025, the total unrecognized stock-based compensation from the ESPP was $ 0.3 million, which we will recognize on a straight-line basis over the weighted-average remaining service period of less than one year .
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We estimate the fair value of the ESPP grant at the start of the offering period using the Black-Scholes option-pricing model with the following assumptions for the periods presented:
Year Ended December 31,
Risk-free interest rate
Expected term
0.5 Years
0.5 Years
0.5 Years
Expected volatility
Note 11. Leases
The following table presents the components of lease expense in our consolidated statements of operations for the periods presented (in thousands):
Year Ended December 31,
Operating lease costs (1)
Single lease costs
Variable lease costs
Sublease income
Total operating lease costs
(1) Includes short-term lease costs, which are immaterial.
The following table presents supplemental cash flow information related to operating leases for the periods presented (in thousands):
Year Ended December 31,
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used
The following table presents weighted-average remaining lease term and weighted-average discount rate related to operating leases as of:
Weighted-average remaining lease term (years)
Weighted-average discount rate
The following table presents future lease payments under operating leases as of December 31, 2025 (in thousands):
Operating Leases
Lease Payments
Thereafter
Total lease payments
Less: Imputed interest
Less: Tenant improvement receivable
Present value of lease liabilities
Less: Current portion of lease liabilities
Lease liabilities, net of current portion
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As of December 31, 2025, we have excluded from the table above an additional operating lease that has not yet commenced with aggregate rent payments of $ 2.2 million. This operating lease will commence in 2026 with a lease term of approximately 12 years.
Note 12. Commitments and Contingencies
Indemnification
In the normal course of business, we may enter into agreements that require us to indemnify either customers or suppliers for certain risks. Although we cannot estimate our maximum exposure under these agreements, to date indemnification claims have not had a material impact on our consolidated results of operations or financial condition.
Litigation
From time to time, we are subject to various legal proceedings or claims that arise in the ordinary course of business. We accrue a liability when management believes that it is both probable that we have incurred a liability and we can reasonably estimate the amount of loss. As of December 31, 2025 and 2024 , we did no t have accrued contingency liabilities. The following is a description of our significant legal proceedings. Although we believe that resolving these claims, individually or in aggregate, will not have a material adverse impact on our financial statements, these matters are subject to inherent uncertainties.
Patent Infringement Claims and Counterclaims
Impinj Patent Infringement Claims Against NXP
From 2019 to 2023, we engaged in active patent litigation against our primary endpoint IC competitor, NXP Semiconductors N.V., or NXP. During this time, we filed three patent infringement lawsuits against subsidiaries of NXP in federal courts in California and Texas. In response, NXP filed a suit against us in federal court in Delaware, later transferred to Washington, countersued us in Texas, and filed three lawsuits against our subsidiary in China.
In three U.S. trials held in 2023, juries in California and Texas returned verdicts that NXP endpoint ICs infringed five of our patents that made it to trial, and juries in Washington and Texas ruled that we did not infringe any of the three patents NXP accused us in court of infringing. Also in 2023, NXP withdrew all three cases it filed against us in China.
On March 13, 2024, while additional trials were pending in the U.S., we and NXP entered into a settlement agreement, or the Settlement Agreement. Under the Settlement Agreement, NXP paid us a one-time amount of $ 45.0 million and agreed to make annual license fee payments, if the specified set of Indicator Patents are still in use, on April 1 of each year, effective April 1, 2024. The annual license fee is to incr ease by a fixed percentage each year after 2024 for the remaining term of the Settlement Agreement. We have no obligation to pay NXP under the Settlement Agreement. We have no obligation to pay NXP under the Settlement Agreement. In the agreement, we and NXP agreed to grant each other non-exclusive, worldwide patent licenses to make, have made, import, use, offer for sale and sell our respective products and services, subject to the terms of the agreement. The Settlement Agreement is to remain in force until all the valid claims of a specified set of Impinj patents, or the Indicator Patents, expire in about 2034. NXP can terminate the Settlement Agreement if it successfully designs out all valid claims of the Indicator Patents.
We allocated the consideration from the Settlement Agreement to the components of the Settlement Agreement. We recorded the $ 45.0 million payment in income from settlement of litigation in the condensed consolidated statements of operations in first-quarter 2024, upon receipt, and recognized the first and second annual license fees of $ 15.0 million and $ 16.0 million in revenue in second-quarter 2024 and 2025, respectively. Licensing of our intellectual property is part of our ongoing operations and therefore, we will recognize the license fee, which relates to annual usage of the license from April 1 to March 31 of each applicable year, as revenue in the second quarter of each year until the Settlement Agreement terminates.
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Obligations with Third-Party Manufacturers
We manufacture products with third-party manufacturers. We are committed to purchase $ 28.2 million of inventory as of December 31, 2025 .
Note 13. Deferred Revenue
Deferred revenue, comprising individually immaterial amounts for extended warranties, enhanced product maintenance and advance payments on NRE services contracts, represents contracted revenue that we have not yet recognized.
The following table presents the changes in deferred revenue for the indicated periods (in thousands):
Year Ended December 31,
Balance at beginning of period
Deferral of revenue
Recognition of deferred revenue
Balance at end of period
During 2025, we recognized $ 1.8 million revenue which we included in deferred revenue as of December 31, 2024. During 2024 , we recognized $ 1.4 million revenue which we included in deferred revenue as of December 31, 2023 .
Note 14. Segment Reporting
We have one reportable and operating segment: the development and sale of our products and services. We identified our reportable segment based on how our chief operating decision-maker, or CODM, manages our business, makes operating decisions and evaluates our operating performance. Our chief executive officer acts as the CODM and reviews financial and operational information on an entity-wide basis. We have one business activity and there are no segment managers who are held accountable for operations, operating results or plans for plans at components. Accordingly, we have determined that we have a single reporting segment and operating unit structure.
Information by Revenue Categories
Our chief executive officer reviews information about our revenue categories, endpoint ICs, including licensing of intellectual property, and systems, the latter defined as reader ICs, readers, gateways, tag production systems and software. The following table presents our revenue categories for the indicated periods (in thousands):
Year Ended December 31,
Endpoint ICs
Systems
Total revenue
Information by Geography
The following table summarizes our long-lived assets, comprising property and equipment, less accumulated depreciation (in thousands):
December 31, 2025
December 31, 2024
United States
Malaysia
Taiwan
Others
Total
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Our geographic revenue in the following table is based on the location of the VARs, inlay manufacturers, reader OEMs, distributors or end users who purchased products and services directly from us. For sales to our resellers and distributors, their location may be different from the locations of the ultimate end users. The following table presents our sales by geography for the indicated periods (in thousands):
Year Ended December 31,
Americas
Asia Pacific
Europe, Middle East and Africa
Total revenue
Total revenue in the United States, which is included in the Americas, was $ 75.1 million, $ 82.9 million and $ 86.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. Total revenue in Mexico, which is included in Americas, was $ 41.3 million for the year ended December 31, 2025. Total revenue in China (and Hong Kong), which is included in Asia Pacific, was $ 159.2 million, $ 162.7 million and $ 128.3 million for the years ended December 31, 2025, 2024 and 2023, respectively. No sales to countries other than the United States, Mexico and China accounted for more than 10% of revenue for the years ended December 31, 2025, 2024 and 2023.
Significant Segment Expenses
As our CODM manages operations on a consolidated basis, consolidated net income as reported in our Statement of Operations is the US GAAP measure that is used to make operating decisions and evaluate operating performance. The significant expense categories which are used to manage operations are those reflected in our consolidated Statement of Operations.
Note 15. Net Earnings (Loss) per Share
For the periods presented, the following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net earnings (loss) per share (in thousands, except for per-share amounts):
Year Ended December 31,
Numerator:
Net income (loss)
Denominator:
Weighted average common shares outstanding, basic
Dilutive effect of:
Stock plans
Convertible notes
Weighted average common shares outstanding, diluted
Net earnings (loss) per share — basic
Net earnings (loss) per share — diluted
Basic net earnings (loss) per share is calculated using our net income and our weighted average outstanding common shares.
Diluted net earnings (loss) per share is calculated using our net income (loss) attributable to common stockholders with interest charges applicable to our convertible debt added back under the if converted method, if dilutive, and our weighted average outstanding common shares including the dilutive effect of stock awards and employee stock purchase plan shares as determined under the treasury stock method and of our convertible notes using the if converted method, if dilutive. In periods when we recognize a net loss, we exclude the impact of outstanding stock awards and the potential share settlement impact related to our convertible notes from the diluted loss per share calculation as their inclusion would have an antidilutive effect.
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The following table presents the outstanding shares of our common stock equivalents excluded from the computation of diluted net earnings (loss) per share as of the dates presented because their effect would have been antidilutive (in thousands):
Year Ended December 31,
Stock options
RSUs, MSUs and PSUs
Employee stock purchase plan shares
2021 Notes
2025 Notes
Note 16. Related-Party Transactions
On June 23, 2023, we acquired a patent from a related party in which a member of our board of directors holds an executive leadership position. The patent pertains to our endpoint IC products and the acquisition price was $ 0.3 million. The patent expires on July 17, 2026 and does not have renewal rights. This patent is included in our intangible assets on our consolidated balance sheet as of December 31, 2025.
On December 22, 2025, we signed a goods and services agreement with Microchip Technology Incorporated, of which a member of our board of directors holds both an executive leadership and board of directors position. No transactions have occurred under this agreement as of December 31, 2025.
Note 17. Retirement Plans
In 2001, we adopted a salary deferral 401(k) plan for our employees. The plan allows employees to contribute a percentage of their pretax earnings annually, subject to limitations imposed by the Internal R evenue Service, and allows a matching contribution, subject to certain limitations. We contributed $ 2.0 million a nd $ 1.7 million as matching contributions for the years ended December 31, 2025 and 2024, respectively.
Note 18. Restructuring
On February 7, 2024, we initiated a strategic restructuring to align financial, business and research and development objectives for long-term growth, including a reduction-in-force affecting approximately 10 % of our employees. We incurred restructuring charges of $ 1.8 million for employee terminations benefits, including equity modification expense in first-quarter 2024. Restructuring payments were complete in second-quarter 2024.
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