Sign in
II

IMPINJ INC (PI)·Q4 2022 Earnings Summary

Executive Summary

  • Q4 2022 delivered record revenue of $76.6M, up 12% q/q and 46% y/y, with record adjusted EBITDA and non-GAAP EPS; endpoint IC revenue led strength amid improving wafer supply but continued constraints .
  • Management raised Q4 revenue ahead of results via a Jan 10 preliminary 8-K (“> $76M” vs prior $71.5–$73.5 guidance) and then reported $76.6M actual; non-GAAP EPS of $0.41 exceeded Q3 guidance range ($0.32–$0.37) — a meaningful upside versus company guidance .
  • Gross margin of 53.8% declined sequentially due to lighter specialty/industrial mix; management flagged a temporary dip to 52–53% in Q1 2023 from post-processing and component costs, with a return to 53–54% in Q2 2023 .
  • Q1 2023 outlook guides revenue to $82–$85M, adjusted EBITDA $9.2–$10.7M, and non-GAAP EPS $0.30–$0.36, with systems revenue expected flat near-term due to stubborn component tightness; backlog entering 2023 was record-high and wafer visibility improved .
  • Street consensus from S&P Global was unavailable due to data access limits; comparisons vs Wall Street estimates could not be provided (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Record Q4 revenue ($76.6M) and full-year revenue ($257.8M) with sequential double-digit growth in endpoint IC shipments; “We delivered record revenue in both the fourth quarter and for the full year… and have record backlog entering 2023.” — CEO .
  • Endpoint IC revenue hit $58.7M (up 15% q/q, 53% y/y), exceeding expectations for the fifth consecutive quarter; management anticipates significant endpoint IC volume growth in 2023 .
  • Systems revenue reached $17.9M (up 4% q/q, 26% y/y), supported by deployments with a “visionary European retailer” and Asia-based global retailer; reader IC revenue set a record for the third consecutive quarter .

What Went Wrong

  • Gross margin compression to 53.8% (from 56.9% in Q3) driven by lighter specialty/industrial endpoint IC mix; year-over-year decline also reflected less sales of fully reserved inventory .
  • Persistent wafer and component constraints kept the company “hand-to-mouth” on finished endpoint ICs into 2H 2023, limiting ability to fully meet demand despite improved wafer visibility .
  • Q4 free cash flow was -$12.3M, with inventory up $14.5M q/q to $46.4M as work-in-process grew; management expects first-half 2023 planned inventory growth to consume more cash than operations generate .

Financial Results

MetricQ2 2022Q3 2022Q4 2022
Revenue ($USD Millions)$59.8 $68.3 $76.6
Gross Margin (%)54.7% 56.9% 53.8%
Adjusted EBITDA ($USD Millions)$3.8 $9.8 $11.8
Adjusted EBITDA Margin (%)6.4% 14.3% 15.3%
Non-GAAP EPS ($)$0.11 $0.34 $0.41
Total Operating Expense ($USD Millions)$28.8 $29.0 $29.5

Segment Breakdown

Segment Revenue ($USD Millions)Q2 2022Q3 2022Q4 2022
Endpoint IC$42.9 $51.2 $58.7
Systems (Readers, Gateways, Reader ICs)$16.9 $17.1 $17.9

KPIs and Balance Sheet

KPIQ2 2022Q3 2022Q4 2022
Cash, Cash Equivalents & Investments ($USD Millions)$183.7 $201.1 $192.9
Inventory ($USD Millions)$32.0 $31.9 $46.4
Free Cash Flow ($USD Millions)$6.5 $12.2 -$12.3

Context vs Prior Year and Quarter

  • Q4 revenue +46% y/y and +12% q/q; endpoint IC +53% y/y and +15% q/q; systems +26% y/y and +4% q/q .
  • Gross margin declined to 53.8% from 56.9% in Q3 and 58.2% in Q4 2021, driven by lighter specialty/industrial mix and less sales of fully reserved inventory .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2022$71.5–$73.5M (given on 10/26/22) Preliminary “> $76M” (8-K on 1/10/23) Raised (pre-announced beat)
Non-GAAP EPSQ4 2022$0.32–$0.37 (10/26/22) Actual $0.41 (reported 2/8/23) Beat vs guidance
RevenueQ1 2023—$82–$85M New guidance
Adjusted EBITDAQ1 2023—$9.2–$10.7M New guidance
Non-GAAP EPSQ1 2023—$0.30–$0.36 New guidance
Gross MarginQ1 202353–54% “normalized” long-term 52–53% (temporary dip), revert to 53–54% in Q2 2023 Lower near-term, then normalize
Systems RevenueQ1–Q2 2023—Flat Q1; Q2 similar to Q1 (supply-constraint) Maintained/flat
OpExQ1 2023—Increase due to payroll tax resets, bonus cash transition, legal fees, and platform investments Increased
Tax Rate2023—~0%; ~$250M NOLs; only small foreign taxes Maintained near-zero

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2022)Previous Mentions (Q3 2022)Current Period (Q4 2022)Trend
Wafer supply & endpoint IC constraintsDemand exceeded supply by >50% for 5th straight quarter; guarded wafer upsides Demand > supply by >50% for 6th quarter; record backlog; wafer upsides layering “Hand-to-mouth” into 2H 2023 despite improved visibility; significant 2023 IC volume growth expected Improving supply visibility, still constrained
Reader componentsShortfalls constraining readers; systems backlog Components constrain systems; Q4 systems revenue to be similar A few components remain tight; systems revenue flat Q1 and similar in Q2 Gradual normalization later in 2023
Pricing pass-throughMonitoring foundry cost inputs; protect margin integrity Foundry price increases anticipated for 2023; pass-through to maintain margins Foundry raised prices; pass-through to preserve margins Ongoing pass-through discipline
Gross margin drivers54.7% (Q2) on mix/costs 56.9% (Q3) boosted by richer specialty/industrial mix 53.8% (Q4) on lighter specialty/industrial mix; temporary dip to 52–53% in Q1 then back to 53–54% in Q2 Normalizing to 53–54%
Authenticity (cryptographic)Introduced vision; pipeline forming Launched Impinj Authenticity; early interest across sectors Pipeline growing; services revenue longer-term, small 2023 units Early-stage, building
Retail use casesAsia-based retailer expanding self-checkout; EU retailer loss prevention Continued deployments; meaningful revenue next quarters Strong Q4 systems from EU retailer; future opportunities across brands/geographies Expansion potential
Logistics (parcel tracking)Large North American customer progressing, big 2023 IC opportunity Second large NA end user to drive large IC volumes in 2023+ Strong secular demand; pipeline building; potential follow-on enterprises Expanding pipeline
ESG & organization—Authenticity and sustainability vision Corporate Citizenship Statement; Board ESG oversight; new Chief Innovation Officer Institutionalizing ESG

Management Commentary

  • “Fourth-quarter 2022 capped a very strong year... record revenue in both the fourth quarter and for the full year... and we have record backlog entering 2023.” — CEO .
  • “Fourth-quarter revenue was $76.6 million... endpoint IC revenue was $58.7 million… systems revenue was $17.9 million… fourth-quarter adjusted EBITDA was $11.8 million… non-GAAP EPS was $0.41.” — CFO .
  • “We anticipate significant endpoint IC volume growth in 2023, despite macroeconomic crosscurrents and retailers' ongoing inventory reductions.” — CEO .
  • “Gross margins between 52% and 53% in Q1... return to 53% to 54% in Q2 2023… we expect Q1 revenue between $82M and $85M and non-GAAP EPS $0.30–$0.36.” — CFO .
  • “Expect us to handle [foundry] price increases… pass those on… to maintain the integrity of our margin model.” — CFO .

Q&A Highlights

  • Supply/demand: Demand continues to outstrip supply; endpoint IC demand exceeded supply by >50% for seven consecutive quarters; management will stop quoting the metric going forward but confirmed for Q4 .
  • Pricing and margins: Foundry price increases are being passed through; temporary gross margin dip in Q1 from post-processing and component costs, with rebound in Q2 .
  • Systems pipeline: Strong pipeline, but component constraints keep near-term systems revenue flat; opportunities to expand within large retail accounts .
  • Authenticity monetization: Early-stage with growing pipeline; potential services revenue longer-term; small unit shipments start in 2023 .
  • Taxes: ~Zero tax modeled near-term given ~$250M NOLs; small foreign taxes only .
  • Japan convenience stores/food: Post-COVID narrative shifted from tag cost to digital transformation and labor efficiency; food opportunities rising globally .

Estimates Context

  • S&P Global consensus estimates for Q4 2022 EPS and revenue were unavailable due to access limits, so we cannot provide estimate comparisons or beat/miss analysis (S&P Global data unavailable).

Key Takeaways for Investors

  • Structural demand remains robust across retail (self-checkout, loss prevention) and logistics (parcel tracking), with record backlog and improving wafer visibility supporting 2023 endpoint IC volume growth .
  • Q4 delivered a strong upside to company guidance (raised prelim revenue and beat EPS guidance), and Q1 2023 revenue guide ($82–$85M) implies continued momentum despite component tightness in systems; near-term margin dip appears transitory .
  • Mix-normalization and cost pressures drove Q4 gross margin compression; management expects reversion to 53–54% by Q2, supporting operating leverage continuity .
  • Inventory build and planned WIP growth will consume cash in 1H 2023; monitor FCF trajectory into 2H as supply normalizes and component constraints ease .
  • Authenticity solution is an emerging growth vector with services revenue potential; pipeline expanding beyond apparel into pharma and building materials — watch for customer wins and monetization updates .
  • Taxes should be de minimis given large NOLs; supports EPS leverage as volumes scale .
  • Near-term trading implications: Strong Q1 guide and preliminary Q4 raise are positive catalysts; margin normalization trajectory and component supply updates are key swing factors for sentiment .