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Impinj Slashes Guidance Due To Customer Delays

RAIN radio-frequency identification solutions provider Impinj (NASDAQ: PI) reported its second-quarter results after the market closed on August 3. The company posted solid revenue growth and managed to keep adjusted earnings flat year-over-year, but its guidance for the third-quarter called for a dramatic slowdown, driven by a slashed outlook for full-year endpoint IC shipments. A few large customers have delayed expanded roll-outs, pushing revenue into the future and knocking down near-term guidance. Here's what investors need to know about Impinj's second-quarter report.

Impinj results: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenue

$34.1 million

$26.0 million

31.2%

Net income attributable to common shareholders

($1.0 million)

$(3.1 million)

N/A

Non-GAAP EPS

$0.06

$0.06

0%

Data source: Impinj.

A graphic illustrating Impinj's platform. Image source: Impinj.

What happened with Impinj this quarter?

  • GAAP gross margin was 53.3%, while non-GAAP gross margin was 54.7%. These compare to 52.3% and 53.4%, respectively, during the prior-year period.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $1.4 million, up from $1.3 million during the prior-year period.
  • GAAP operating expenses rose 42%, increasing faster than revenue.
  • Impinj had $74.5 million of cash and investments on the balance sheet at the end of the quarter, down from $83.5 million at the end of the first quarter.

Impinj provided the following guidance:

  • Third-quarter revenue between $31.75 million and $33.25 million, up from $31 million during the prior-year period.
  • Third-quarter non-GAAP loss between $0.01 and $0.08 per share, compared to a profit of $0.10 per share during the prior-year period.
  • For the full year, Impinj now expects to ship between 7.0 billion and 7.2 billion endpoint ICs, down from a previous range of 7.8 billion to 8.0 billion. The company blamed several large customers delaying roll-out expansions for the slashed guidance.

Image source. Getty Images.

What management had to say

Impinj co-founder and CEO Chris Diorio commented on the customer delays:

We continue seeing strong indicators of growing adoption of RAIN and the Impinj platform across multiple verticals, including retail, healthcare and logistics. However, as we enter the third quarter we see schedule slips in planned rollout expansions at several large end customers, and consequently, we are revising our 2017 full-year endpoint IC estimate to be between 7.0 billion to 7.2 billion units. We remain confident in our market opportunity and will continue investing to enhance our leading market position.

During the conference call, Diorio explained that roll-outs can be unpredictable. He pointed out that some end users currently buy more than 500 million endpoints annually, and that five Japanese convenience store chains alone have the potential to eventually consume 100 billion endpoints each year.

Looking forward

Impinj's new guidance implies just 18% growth in endpoint IC shipments this year, a dramatic slowdown compared to 70% growth in 2016. With Impinj going after large customers, the company's performance is heavily tied to the timing of major rollouts.

The long-term potential of RFID technology hasn't changed, but it remains to be seen whether slower growth is the new norm for Impinj, or if these delays are simply a temporary issue. Hundreds of billions, or perhaps even trillions, of RFID chips could eventually be sold each year if retail, logistics, and other industries adopt the technology en masse. The pace of that adoption is the wildcard on which Impinj's future growth depends.

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Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Impinj. The Motley Fool has a disclosure policy.