Impinj (PI) Q1 2025 Earnings Call April 23, 2025 05:00 PM ET Company Participants Andy Cobb - Vice President of Strategic FinanceChris Diorio - Co-Founder, Vice Chairman & CEOCary Baker - CFOGuy Hardwick - Managing DirectorTroy Jensen - Managing Director Conference Call Participants Harsh Kumar - Managing Director & Senior Research AnalystScott Searle - Managing Director, Senior Research AnalystJames Ricchiuti - Senior AnalystChristopher Rolland - Analyst Operator Welcome to Impinj's First Quarter twenty tw ...

Revenue and Profit - Revenue for Q1 2025 was $74.3 million, a decrease of 3.3% from $76.8 million in Q1 2024[89] - Gross profit for Q1 2025 was $36.7 million, down from $37.5 million in Q1 2024, with a gross margin increase to 49.4% from 48.9%[90] Sales Performance - Endpoint IC revenue decreased by $0.3 million, primarily due to a $9.3 million decrease in average selling prices (ASPs) offset by a $9.0 million increase in shipment volumes[92] - Systems revenue decreased by $2.3 million, driven by lower shipment volumes, with gateway revenue down $2.8 million and test and measurement solutions down $1.0 million[93] - The overall endpoint IC sales volumes increased at a compounded annual growth rate of 27% from 2010 to 2024, despite experiencing declines during various periods[83] - The company expects endpoint IC sales to continue representing the majority of revenue for the foreseeable future[91] Expenses - Research and development expenses increased by $2.8 million to $25.3 million in Q1 2025, reflecting higher stock-based compensation and product development costs[96] - Sales and marketing expenses decreased by $2.1 million to $8.1 million in Q1 2025, primarily due to a reduction in stock-based compensation expenses[98] - General and administrative expenses decreased by $1.0 million to $12.4 million for the three months ended March 31, 2025, primarily due to a $2.2 million decrease in professional services related to legal fees[101] Other Financial Metrics - Amortization of intangibles decreased by $0.9 million to $485,000, attributed to the intangibles acquired from the April 3, 2023 acquisition of Voyantic Oy[102] - Restructuring costs were eliminated, with no costs reported for the three months ended March 31, 2025, compared to $1.8 million in the prior year[103] - Other income, net increased by $768,000 to $2.1 million, driven by higher interest income from increased invested balances and interest rates[104] - Income from settlement of litigation dropped to $0, a decrease of $45 million compared to the prior year due to a settlement reached with NXP[105] Cash Flow and Investments - As of March 31, 2025, the company had cash, cash equivalents, and short-term investments totaling $147.9 million, with working capital of $280.4 million[108] - Net cash used in operating activities was $11.1 million for the three months ended March 31, 2025, primarily due to $18.5 million in working capital changes[116] - The company generated $21.2 million in net cash from investing activities, resulting from investment maturities of $49.0 million[117] - Financing activities provided $5.1 million in net cash, mainly from stock-option exercises and the employee stock purchase plan[118] Commitments and Future Outlook - Purchase commitments as of March 31, 2025, totaled $31.3 million, representing noncancelable commitments to purchase inventory[121] - Macroeconomic conditions in 2023 led to softness in demand and inventory overages, impacting overall performance[82] - The company has enabled connectivity for over 120 billion items and aims to extend this to trillions of items in the future[74]

Financial Performance - First Quarter 2025 revenue was $74.3 million, a decrease from $76.8 million in the same period last year[16] - GAAP net loss for the first quarter was $8.5 million, or a loss of $0.30 per diluted share[4] - Non-GAAP net income for the first quarter was $6.3 million, or income of $0.21 per diluted share[4] - GAAP net loss for Q1 2025 was $8,451,000, a significant decrease from a net income of $33,344,000 in Q1 2024[23] - Adjusted EBITDA for Q1 2025 was $6,474,000, slightly down from $6,685,000 in Q1 2024[23] - Free cash flow for Q1 2025 was $(13,006,000), a decline from $53,938,000 in Q1 2024[24] Revenue Guidance - Second Quarter 2025 revenue guidance is projected between $91.0 million and $96.0 million[5] - Non-GAAP net income for Q2 2025 is projected to be $22,059,000, with a diluted non-GAAP net income per share of $0.72[26] - GAAP net income for Q2 2025 is expected to be $6,812,000, with a diluted GAAP net income per share of $0.23[26] EBITDA and Cash Flow - Adjusted EBITDA for the first quarter was $6.5 million, with a forecast of $23.5 million to $26.0 million for the second quarter[4][5] - Forecasted adjusted EBITDA for Q2 2025 is $24,700,000[26] - GAAP net cash used in operating activities for Q1 2025 was $(11,143,000), compared to $60,140,000 in Q1 2024[24] Assets and Liabilities - Cash and cash equivalents increased to $61.3 million from $46.1 million at the end of the previous quarter[18] - Total assets decreased to $479.8 million from $489.1 million at the end of 2024[14] - Total liabilities decreased to $319.3 million from $339.2 million at the end of 2024[14] Gross Margin - GAAP gross margin for Q1 2025 was 49.4%, an increase from 48.9% in Q1 2024[23] - Non-GAAP gross margin for Q1 2025 was 52.7%, compared to 51.5% in Q1 2024[23] Strategic Focus - The company is focused on extending its technology lead and market share in the RAIN RFID sector[2] - The company reported a significant increase in stock-based compensation, forecasted at $15,000,000 for Q2 2025[26]

Core Viewpoint - Impinj's stock has significantly underperformed, dropping 21.3% over the past month, raising concerns about its future performance in the RFID technology sector [1] Group 1: Financial Performance and Projections - Impinj's revenue from China and Hong Kong represented 44.4% of total revenues in 2024, indicating a heavy reliance on these markets, which are now affected by geopolitical tensions and tariffs [2] - The Zacks Consensus Estimate for Impinj's 2025 revenues is projected at $360.1 million, reflecting a year-over-year decline of 1.64%, while earnings per share are expected to drop by 30.33% to $1.47 [5] - Impinj reported that it will not sustain its previous growth rate of 34% in endpoint IC unit volume due to excess inventory issues among partners [4] Group 2: Competitive Landscape - Impinj faces intense competition from NXP Semiconductors in the Endpoint IC market and Zebra Technologies in RF readers and gateway solutions [9] - The ongoing legal battles between Impinj and NXP, which began in 2019, have created additional challenges for the company [10] - The competitive environment has led to customers negotiating for lower prices, impacting Impinj's sales volume and profit margins [12] Group 3: Market Trends - Impinj's stock is currently trading below both the 50-day and 200-day moving averages, indicating a bearish trend in the near term [13] - The combination of geopolitical risks, excess inventory, and competitive pressures suggests a challenging outlook for Impinj [14][15]

Revenue and Sales - The company relies heavily on endpoint IC sales, which constitute the majority of its revenue, and any decline in demand could adversely affect its operating results [87]. - In 2024, 77% of the company's total revenue was derived from sales outside the United States, indicating a strong international presence [132]. - In 2024, sales to three major customers accounted for 60% of total revenue, indicating a high sales concentration risk [142]. - The company's total revenue for the year ended December 31, 2024, was $366.1 million, representing a 19% increase from $307.5 million in 2023 [350]. - Revenue concentration showed that Customer A accounted for 28% of total revenue in 2024, down from 33% in 2023, indicating improved diversification [367]. Pricing and Costs - The average selling price (ASP) of the company's products has historically decreased over time, influenced by competitive pressures and macroeconomic conditions [89]. - The company raised prices in 2021, 2022, and 2023 to accommodate higher wafer costs, indicating potential future price increases due to inflationary pressures [91]. - The company has been able to offset higher product costs by increasing selling prices, but future inflationary pressures could adversely affect its financial condition [319]. Competition and Market Position - The company faces significant competition from larger firms with greater resources, which could impact its market share and pricing strategies [76]. - The company must successfully integrate its products with end-user information systems to ensure successful deployments and market acceptance [100]. - The company is still in the early stages of delivering enterprise solutions and must build relationships with top-tier partners to capitalize on market opportunities [84]. Financial Performance and Risks - The company has incurred losses each year since its inception in 2000, with profitability achieved only periodically [182]. - The company faces significant fluctuations in quarterly and annual operating results, making financial planning and forecasting difficult [183]. - A substantial portion of the company's operating expenses are fixed in the short term, leading to immediate impacts on profitability from revenue fluctuations [186]. - The company may need to raise additional capital in the future, which may not be available on favorable terms [187]. - Changes in tax laws, including a 1% excise tax on stock buybacks and a 15% alternative minimum tax, could adversely affect the company's financial condition [195]. Supply Chain and Operational Challenges - The company faces risks related to supply chain disruptions, particularly shortages of silicon wafers and components, which may adversely affect revenue and gross margins [118]. - The company anticipates that wafer capacity will remain tight for the foreseeable future, impacting its ability to meet demand [118]. - The company bears inventory risks due to long lead times and reliance on partners for sales and distribution, which could impact operating results [122]. Strategic Initiatives and Growth - The company is focused on developing new products and services to meet increasing end-user demands and to drive RAIN market adoption [82]. - The company has launched features in Gen2X aimed at improving RAIN's ability to deliver cost-effective solutions to enterprises [85]. - The company completed the acquisition of Voyantic Oy in April 2023, which is expected to enhance its RFID capabilities [125]. - The company’s growth strategy depends on successful strategic relationships with third parties, and failure to develop these relationships could harm business [148]. Legal and Regulatory Risks - Changes in government spectrum regulations could adversely affect the company's ability to sell its products, particularly if compliance issues arise [108]. - The company is subject to risks from changes in global trade policies, which could materially affect its business and financial results [127]. - The company has limited ability to enforce intellectual property rights outside the United States, which could affect competitive advantages [154]. - The company has been involved in intellectual property disputes that could disrupt growth prospects and adversely affect operating results [160]. Financial Health and Cash Management - As of December 31, 2024, the company had cash, cash equivalents, and short-term investments totaling $164.7 million, an increase from $113.2 million in 2023 [317]. - The company reported a net income of $40.8 million for 2024, a significant recovery from a net loss of $43.4 million in 2023 [350]. - Total stockholders' equity increased to $149.9 million in 2024 from $34.1 million in 2023, reflecting improved financial health [347]. - Cash provided by operating activities for 2024 was $128,310 thousand, a substantial increase compared to cash used in operating activities of $(49,382) thousand in 2023 [358]. Environmental and Social Governance (ESG) Risks - The company faces risks related to environmental, social, and governance (ESG) practices, which could increase costs and negatively impact reputation [151]. - The company may face potential liability and significant costs related to privacy and cybersecurity concerns, which could damage its reputation and operating results [170]. Market and Economic Conditions - The company’s financial performance is dependent on the pace of RAIN adoption in key markets, which is subject to business cycles and macroeconomic trends [78]. - The evolving data security and privacy legislative landscape may require the company to modify its products and practices, potentially incurring substantial costs [175]. - The company is exposed to geopolitical tensions and trade restrictions, particularly between the U.S. and China, which could negatively affect its operations [128].

Financial Data and Key Metrics Changes - In Q4 2024, total revenue was $91.6 million, down 4% sequentially from $95.2 million in Q3 2024, but up 30% year-over-year from $70.7 million in Q4 2023 [27] - Endpoint IC revenue for Q4 2024 was $74.1 million, down 9% sequentially from $81 million in Q3 2024, and up 37% year-over-year from $53.9 million in Q4 2023 [27] - Full year 2024 revenue totaled $366.1 million, up 19% year-over-year compared to $307.5 million in 2023 [29] - Q4 adjusted EBITDA was $15 million, compared to $17.3 million in Q3 2024 and $3 million in Q4 2023 [33] - Q4 GAAP net loss was $2.7 million, while non-GAAP net income was $14.5 million or $0.48 per share on a fully diluted basis [34] Business Line Data and Key Metrics Changes - Q4 systems revenue was $17.5 million, up 23% sequentially from $14.2 million in Q3 2024, and up 4% year-over-year from $16.8 million in Q4 2023 [28] - Systems revenue exceeded expectations, driven by strength in reader gateway and reader IC sales [28] - Full year 2024 endpoint IC revenue grew 30% year-over-year, while systems revenue declined 18% year-over-year [30] Market Data and Key Metrics Changes - The company noted solid U.S. retail demand and healthy growth for RAIN labels in the EU, with expectations for modest growth in food volumes [14] - The company is engaged with two large grocery chains, indicating significant potential for endpoint IC volumes [16] Company Strategy and Development Direction - The company aims to leverage its leadership position in the industry and capitalize on long-term secular tailwinds, particularly in retail apparel, general merchandise, and supply chain logistics [11] - The launch of Gen2X is expected to enhance performance and security of RAIN systems, with strong adoption from partners [20] - The company is focused on helping inlay partners manage excess inventory and navigate geopolitical challenges [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged headwinds in Q1 2025 due to geopolitical uncertainties, inventory adjustments, and shorter ordering cycles [12][23] - The company remains optimistic about long-term growth, citing a strong enterprise pipeline and ongoing demand in North America [90] Other Important Information - The company ended Q4 2024 with cash, cash equivalents, and investments totaling $239.6 million, with inventory at $99.3 million [35] - The Chief Revenue Officer announced retirement, with a new leader appointed to continue the mission [21] Q&A Session Summary Question: Timing of inventory flattening and pushouts - Management indicated that excess channel inventory was built due to a mix of demand and timing, with unexpected pullbacks from partners [44] Question: Comparison to past corrections - Management expressed confidence in their ability to navigate the current correction, citing a more seasoned team and proactive measures [50] Question: Excess inventory details - Management estimated a few weeks of excess inventory, concentrated primarily in logistics due to demand changes [56] Question: Impact of customer changes on demand - Management confirmed that changes in logistics demand were affecting their second largest customer, impacting overall demand [58] Question: Future program ramps - Management noted a strong enterprise pipeline but acknowledged a lull in new Fortune 100 company engagements in the first half of the year [63] Question: Pricing dynamics and ASP reductions - Management explained that aggressive price shopping is occurring at multiple levels, impacting order timing and ASPs [80] Question: Geopolitical impacts on sourcing - Management clarified that geopolitical factors are causing sourcing uncertainties, leading to shorter order cycles [96] Question: Pipeline opportunities beyond food - Management highlighted ongoing efforts in retail apparel and general merchandise, with significant opportunities still present [97]

Core Insights - Impinj (PI) reported quarterly earnings of $0.48 per share, exceeding the Zacks Consensus Estimate of $0.47 per share, and significantly up from $0.09 per share a year ago, indicating a strong earnings surprise of 2.13% [1] - The company generated revenues of $91.57 million for the quarter ended December 2024, which was slightly below the Zacks Consensus Estimate by 1.33%, but up from $70.65 million year-over-year [2] - Impinj has consistently surpassed consensus EPS estimates over the last four quarters, achieving this four times [2] Earnings Outlook - The future performance of Impinj's stock will largely depend on management's commentary during the earnings call and the sustainability of its immediate price movement based on the latest earnings numbers [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.44, with expected revenues of $92.8 million, while the estimate for the current fiscal year stands at $2.79 on revenues of $439.07 million [7] Industry Context - The Electronics - Semiconductors industry, to which Impinj belongs, is currently ranked in the top 34% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked using tools like the Zacks Rank [5][6]

Financial Performance - Impinj, Inc. announced preliminary unaudited financial information for Q4 2024, with revenue guidance reiterated ahead of the 27th Annual Needham Growth Conference[5] - The actual results for Q4 2024 are still being finalized, indicating that preliminary figures may differ materially from management's expectations[5] - The press release regarding the financial information was issued on January 14, 2025, highlighting the company's ongoing financial review process[5]

Impinj (PI) has been on a downward spiral lately with significant selling pressure. After declining 19.6% over the past four weeks, the stock looks well positioned for a trend reversal as it is now in oversold territory and there is strong agreement among Wall Street analysts that the company will report better earnings than they predicted earlier.Here is How to Spot Oversold StocksWe use Relative Strength Index (RSI), one of the most commonly used technical indicators, for spotting whether a stock is overs ...

Impinj (PI) is expected to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended December 2024. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on February 5. On ...