Impinj's (NASDAQ:PI) Reports Beat and Raise Quarter, Stock Jumps 20.7%
RFID manufacturer Impinj (NASDAQ:PI) reported results in line with analysts' expectations in Q3 FY2023, with revenue down 4.78% year on year to $65 million. Guidance for next quarter's revenue was also better than expected at $67 million at the midpoint, 1.45% above analysts' estimates. Turning to EPS, Impinj made a GAAP loss of $0.59 per share, down from its loss of $0.09 per share in the same quarter last year.
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Impinj (PI) Q3 FY2023 Highlights:
Revenue: $65 million vs analyst estimates of $64.7 million (small beat)
EPS (non-GAAP): $0 vs analyst estimates of -$0.09 ($0.09 beat)
Revenue Guidance for Q4 2023 is $67 million at the midpoint, above analyst estimates of $66.0 million
Free Cash Flow was -$4.47 million compared to -$28.2 million in the previous quarter
Inventory Days Outstanding: 284, up from 242 in the previous quarter
Gross Margin (GAAP): 47.3%, down from 54.8% in the same quarter last year
“Third-quarter results were solid, with profitability exceeding our expectations,” said Chris Diorio, Impinj co-founder and CEO.
Founded by Caltech professor Carver Mead and one of his students Chris Diorio, Impinj (NASDAQ:PI) is a maker of radio-frequency identification (RFID) hardware and software.
Analog Semiconductors
Demand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.
Sales Growth
Impinj's revenue growth over the last three years has been very strong, averaging 34% annually. As you can see below, this quarter was especially strong, with revenue growing from $68.3 million in the same quarter last year to $65 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
This was a slow quarter for the company as its revenue dropped 4.78% year on year, in line with analysts' estimates.
Impinj's revenue inverted from positive to negative growth this quarter, which was unfortunate to see. Looking ahead to the next quarter, the company's management team forecasts a 12.5% year-on-year revenue decline. On the other hand, analysts expect revenue to turn positive over the next 12 months, with average estimates of 1.91% growth.
The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.
Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Impinj's DIO came in at 284, which is 124 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.
Key Takeaways from Impinj's Q3 Results
Although Impinj, which has a market capitalization of $1.43 billion, has been burning cash over the last 12 months, its more than $113.2 million in cash on hand gives it the flexibility to continue prioritizing growth over profitability.
While revenue beat by a small magnitude, we were impressed by how significantly Impinj blew past analysts' EPS expectations this quarter. We were also glad next quarter's revenue guidance was raised and came in higher than Wall Street's estimates. In fact, the full year outlook for all major line items was raised and came in above Consensus, making for a nice beat and raise quarter. In the release, the company said that it is seeing "early signs of retail demand improvement, strong ongoing endpoint IC unit-volume growth despite the downturn and remain optimistic for the future." On the other hand, its gross and operating margin shrunk. Overall, the results could have been better. The stock is up 20.7% after reporting and currently trades at $60 per share.
Impinj may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.
