Stock Story -
RFID manufacturer Impinj (NASDAQ:PI) reported results ahead of analysts' expectations in Q4 FY2023, with revenue down 7.8% year on year to $70.65 million. Guidance for next quarter's revenue was also optimistic at $73.5 million at the midpoint, 3.8% above analysts' estimates. It made a non-GAAP profit of $0.09 per share, down from its profit of $0.41 per share in the same quarter last year.
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Impinj (PI) Q4 FY2023 Highlights:
- Revenue: $70.65 million vs analyst estimates of $69.63 million (1.5% beat)
- EPS (non-GAAP): $0.09 vs analyst estimates of $0.01 ($0.08 beat)
- Revenue Guidance for Q1 2024 is $73.5 million at the midpoint, above analyst estimates of $70.84 million
- Free Cash Flow was -$1.20 million compared to -$4.48 million in the previous quarter
- Inventory Days Outstanding: 240, down from 284 in the previous quarter
- Gross Margin (GAAP): 47.9%, down from 52.4% in the same quarter last year
- Market Capitalization: $2.90 billion
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 34.3% annually. But as you can see below, its revenue declined from $76.59 million in the same quarter last year to $70.65 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).
Even though Impinj surpassed analysts' revenue estimates, this was a slow quarter for the company as its revenue dropped 7.8% year on year. This could mean that the current downcycle is deepening.
Impinj's revenue growth has slowed over the last three quarters and its management team projects revenue to fall next quarter. As such, the company is guiding for a 14.4% year-on-year revenue decline, but Wall Street thinks there will be a recovery next year. Analysts' estimates call for 12.6% growth over the next 12 months.
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 240, which is 80 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 Q4 ResultsWe were impressed by Impinj's strong improvement in inventory levels. We were also excited its EPS outperformed Wall Street's estimates. On the other hand, its operating margin regrettably fell and its gross margin shrunk. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The stock is up 13.6% after reporting and currently trades at $121 per share.
