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IMPINJ INC (PI)·Q4 2021 Earnings Summary

Executive Summary

  • Record quarter: Revenue $52.574M, non-GAAP gross margin 58.2%, non-GAAP EPS $0.16, adjusted EBITDA $5.3M; endpoint IC and systems revenues both exceeded expectations .
  • Material beat vs Q4 guidance: Company guided $46–$48M revenue, (-$0.04)–$0.02 non-GAAP EPS, and (-$0.5)–$1.0M adjusted EBITDA, but delivered $52.574M, $0.16, and $5.3M respectively; gross margin also rose as guided .
  • Supply-gated narrative: Demand far outstripped supply again (endpoint IC demand >50% above shipments), with wafer and component constraints expected to persist into 1H22; reader IC supply expected to catch up in Q1 and new E-family in 2H22 .
  • Q1 2022 outlook: Revenue $50–$52M, adjusted EBITDA $0.1–$1.6M, non-GAAP EPS (-$0.05)–$0.01, with sequential gross margin decline on mix and ~$0.7–$0.8M quarterly OpEx uplift from cash incentives; systems down slightly sequentially .

What Went Well and What Went Wrong

What Went Well

  • Fourth quarter and full-year records: “record bookings, revenue and adjusted EBITDA” with record backlog entering 2022; endpoint IC revenue and systems revenue both exceeded expectations .
  • Mix and product execution: Non-GAAP gross margin 58.2% benefited from richer industrial/specialty mix and M700 becoming the volume runner; “M700 volume nearly doubling” quarter-over-quarter .
  • Platform traction and design wins: Reader IC momentum with “more than 100 design wins”; strong partner-led revenue in retail and logistics; AmerisourceBergen RFID Tagging Service highlighted expanding RAIN adoption .

What Went Wrong

  • Wafer supply constraints: Endpoint IC demand exceeded shipments by >50%; foundry nodes shared with automotive remain tight, limiting upside wafer availability and gating revenue .
  • Systems component shortages: Readers/gateways faced “difficult component shortfalls” and packaging bottlenecks on reader ICs, raising costs and causing schedule variability .
  • Cash flow and GAAP loss optics: Free cash flow (-$6.0M) in Q4; GAAP net loss (-$20.014M) driven in part by induced conversion expense related to 2019 notes .

Financial Results

MetricQ4 2020Q3 2021Q4 2021
Revenue ($USD Millions)$36.448 $45.2 $52.574
Non-GAAP Gross Margin %50.4% 53.3% 58.2%
Non-GAAP Diluted EPS ($USD)-$0.15 -$0.04 $0.16
Adjusted EBITDA ($USD Millions)-$3.1 -$0.4 $5.3
GAAP Net Loss ($USD Millions)-$15.717 -$12.9 -$20.014

Segment revenue breakdown:

SegmentQ4 2020Q3 2021Q4 2021
Endpoint IC Revenue ($USD Millions)$28.5 $32.0 $38.4
Systems Revenue ($USD Millions)$7.9 $13.2 $14.2

KPIs and other operating metrics:

KPIQ4 2020Q3 2021Q4 2021
Total Operating Expense ($USD Millions)$21.5 $24.4 $25.3
Cash & Investments ($USD Millions)$106.1 $113.3 $207.6
Inventory ($USD Millions)$36.329 $18.4 $21.958
Free Cash Flow ($USD Millions)-$4.1 -$0.9 -$6.0
Gross Margin Benefit from Fully Reserved Inventory (bps)n/a+200 +130
Endpoint IC Demand vs Shipmentsn/aDemand > shipments by >50% Demand > shipments by >50%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance / ActualChange
Revenue ($USD Millions)Q4 2021$46–$48 $52.574 (Actual) Beat
Adjusted EBITDA ($USD Millions)Q4 2021(-$0.5)–$1.0 $5.3 (Actual) Beat
Non-GAAP EPS ($USD)Q4 2021(-$0.04)–$0.02 $0.16 (Actual) Beat
Gross Margin (Non-GAAP)Q4 2021Increase vs Q3 (53.3%) 58.2% (Actual) Increased as guided
Revenue ($USD Millions)Q1 2022n/a$50–$52 n/a
Adjusted EBITDA ($USD Millions)Q1 2022n/a$0.1–$1.6 n/a
Non-GAAP EPS ($USD)Q1 2022n/a(-$0.05)–$0.01 n/a
Gross Margin (Non-GAAP)Q1 2022n/aDown sequentially on mix Lowered (sequential)
Systems RevenueQ1 2022n/aSlight sequential decline Lowered (sequential)
OpEx (Incentive Comp)FY 2022n/a+$0.7–$0.8M per quarter incremental Raised OpEx
Reader IC SupplyQ1/2H 2022n/aCatch-up in Q1; E-family catch-up in 2H22 Improving in phases

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2021)Trend
Supply constraints (wafer/component)Q2: Demand > shipments by ~50%; endpoint IC wafer-limited; systems component decommits . Q3: Demand > shipments by >50%; reader IC packaging-limited .Endpoint IC demand again >50% above shipments; wafer nodes remain tight; systems components difficult .Persistent constraints; gating top-line.
M700 endpoint IC rampQ2: M700 a margin tailwind; 300mm capacity doubling/tripling through YE . Q3: Crossover to 300mm/M700 mix; Q4 GM guided up .M700 became volume runner; GM lift alongside richer mix .Accelerating mix benefit.
Cost pass-throughsQ2: Broad cost inflation; plan to pass-through increases . Q3: Began pass-throughs in October; demand intact .Continued pass-throughs to protect margin model .Sustained pricing discipline.
Systems (readers/gateways) supplyQ2: Component shortfalls constrain builds . Q3: Reader ICs catch up in Q1; readers still constrained .Q4 systems exceeded expectations; components still tight; reader backlog entering Q1 .Gradual normalization (reader ICs), others constrained.
Vertical adoptionQ2/Q3: Strong retail self-checkout, European loss-prevention, logistics deployments .Broader demand across retail and supply chain/logistics; AmerisourceBergen pharma tagging .Broadening use cases.
Margin outlookQ3: GM to increase on specialty/industrial mix and M700 .Q4 non-GAAP GM 58.2%; Q1 GM guide down, Q2 normalize .Near-term mix headwind, structurally improving with M700.

Management Commentary

  • “Impinj capped 2021 with record fourth quarter and full-year revenue and bookings… culminating with record backlog entering 2022.”
  • “Like for the second and third quarters, fourth quarter endpoint IC demand exceeded shipments by more than 50%.”
  • “We… began passing those cost increases to our customers… to maintain the integrity of our margin model.”
  • “The M700 series became our volume runner, providing a gross margin tailwind in the fourth quarter.”
  • “Reader IC revenue was a bright spot… we expect supply of our… Indy reader ICs to catch up to demand in first quarter 2022, and supply of our new E-family reader ICs… in second half 2022.”
  • “AmerisourceBergen launching its RFID Tagging Service… marks the first time a major corporation is sharing information about their RAIN-tagged items with people… unconstrained.”

Q&A Highlights

  • Revenue cadence and supply gating: Management reiterated a supply-limited outlook; Q1 guided to ~$51M midpoint, Q2 similar levels absent upside wafers, with potential step-up in 2H only if supply improves .
  • Gross margin normalization: Q4 GM boost primarily from specialty/industrial mix and fully reserved inventory sales (+130 bps); Q1 to see a smaller mix benefit and sequential GM decline, with normalization by Q2 .
  • Pricing pass-throughs: Cost pass-throughs implemented in October to preserve margin model; elevated costs expected to persist through 2022; no typical seasonal ASP concessions anticipated .
  • Reader IC supply and projects: Reader IC supply catch-up in Q1; E-family in 2H22; pipeline across large projects remains strong, with careful pacing to match supply visibility .
  • Double-ordering risk: Bookings viewed as real demand given noncancelable POs, visibility into partner inventories, and frequent “lines down”; management monitors closely .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2021 and Q1 2022 EPS/revenue was unavailable due to S&P Global daily request limit; comparison to consensus cannot be provided at this time.
  • In lieu of consensus, results materially exceeded company’s own Q4 guidance ranges for revenue, adjusted EBITDA, EPS, and gross margin, implying a likely positive surprise versus typical expectations .

Key Takeaways for Investors

  • Narrative remains supply-gated: Demand materially exceeds supply (endpoint IC demand >50% above shipments), making upside dependent on foundry wafer relief; management is prioritized for upside but has no visibility yet .
  • Quality of beat: Q4 delivered outsized non-GAAP GM (58.2%) and EPS ($0.16) on richer mix and M700 volume runner; operating leverage showed despite constraints (adjusted EBITDA $5.3M) .
  • Near-term margin headwind: Q1 GM to decline sequentially on mix normalization and no repeat of reserved-inventory benefit; watch Q2 for normalization and M700-led structural tailwinds .
  • Systems supply progressively improving: Reader IC supply catch-up in Q1 and new E-family in 2H22 support systems revenue resilience despite component shortages .
  • Pricing discipline intact: Cost pass-throughs implemented to preserve margin model amid inflation; expect elevated costs to persist in 2022, limiting ASP concessions .
  • Strong balance sheet to invest through constraints: Cash & investments $207.6M post convertible issuance; continued investment in 300mm post-processing capacity positions PI to capture upside supply when available .
  • Catalysts: Any wafer supply upside, reader IC normalization, and continued retail/logistics deployments could drive estimate revisions and stock reaction; management emphasized supply being the swing factor .