Impinj (NASDAQ:PI) Beats Q1 Sales Targets, Stock Jumps 15.1%

RFID manufacturer Impinj (NASDAQ:PI) reported Q1 CY2024 results topping analysts' expectations, with revenue down 10.6% year on year to $76.83 million. On top of that, next quarter's revenue guidance ($97.5 million at the midpoint) was surprisingly good and 23.4% above what analysts were expecting. It made a non-GAAP profit of $0.21 per share, down from its profit of $0.30 per share in the same quarter last year.

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Impinj (PI) Q1 CY2024 Highlights:

• Revenue: $76.83 million vs analyst estimates of $73.58 million (4.4% beat)
• EPS (non-GAAP): $0.21 vs analyst estimates of $0.11 ($0.10 beat)
• Revenue Guidance for Q2 CY2024 is $97.5 million at the midpoint, above analyst estimates of $79.04 million (adjusted EPS guidance also handily beat expectations)
• Gross Margin (GAAP): 48.9%, down from 50.7% in the same quarter last year
• Inventory Days Outstanding: 203, down from 240 in the previous quarter
• Free Cash Flow of $53.94 million is up from -$1.20 million in the previous quarter (large beat and first positive FCF quarter in over a year)
• Market Capitalization: $3.42 billion

“2024 started strong, with revenue and profitability exceeding both our fourth-quarter results and first-quarter guidance,” 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 SemiconductorsDemand 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 GrowthImpinj's revenue growth over the last three years has been very strong, averaging 33.9% annually. But as you can see below, its revenue declined from $85.9 million in the same quarter last year to $76.83 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).

Even though Impinj surpassed analysts' revenue estimates, this was a slow quarter for the company as its revenue dropped 10.6% year on year. This could mean that the current downcycle is deepening.

Product Demand & Outstanding InventoryDays 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 203, which is 43 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.

Key Takeaways from Impinj's Q1 Results We were impressed by Impinj's strong improvement in inventory levels. We were also excited its revenue and EPS outperformed Wall Street's estimates. Adding to the good news was guidance that came in well above expectations for revenue and EPS. Overall, we think this was a really good quarter that should please shareholders. The stock is up 14.3% after reporting and currently trades at $138 per share.