What Happened?

Shares of RFID manufacturer Impinj (NASDAQ: PI) fell 25.9% in the pre-market session after the company reported disappointing fourth quarter results, with revenue slightly missing Wall Street estimates and next-quarter revenue, EBITDA, and earnings guidance falling significantly short. EBITDA also missed, suggesting profits are under pressure, while earnings came in roughly in line. Management is anticipating near-term headwinds, suggesting the company is not out of the woods yet​. Overall, this quarter could have been better.

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What The Market Is Telling Us

Impinj’s shares are very volatile and have had 20 moves greater than 5% over the last year. But moves this big are rare even for Impinj and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 10 months ago when the stock gained 18.4% on the news that the company reported first-quarter results with strong improvement in inventory levels. Its revenue and EPS also outperformed Wall Street's estimates during the quarter. The top line benefitted from strong demand in the endpoint IC segment, with sales up 14% sequentially, ahead of analysts' expectations, and offsetting the underperformance in the systems segment. 

Adding to the good news was guidance that came in well above expectations for revenue and EPS. Notably, Impinj also provided some insights into their recent licensing agreement with NXP Semiconductors. 

As a quick recap, Impinj announced on February 9, 2024, that it successfully settled its patent disputes with NXP Semiconductors through a new Settlement and Patent Cross-License agreement, terminating ongoing legal actions and releasing each other from patent infringement claims. 

As a part of the agreement, NXP paid a one-time $45 million litigation settlement in the first quarter. Looking ahead, Impinj expects NXP to pay an annual license fee each April for up to 10 years "unless they design out the IP and exercise an early termination rate." Earlier in the month, Impinj noted that it received $15 million covering the period from April 1, 2024 to March 31, 2025. It expects to recognize the full value of that payment as second-quarter endpoint IC revenue, which is baked into the second-quarter guidance at nearly 100% gross margin. 

Overall, we think this was a really good quarter that should please shareholders.

Impinj is down 25% since the beginning of the year, and at $110.02 per share, it is trading 53.9% below its 52-week high of $238.58 from October 2024. Investors who bought $1,000 worth of Impinj’s shares 5 years ago would now be looking at an investment worth $3,287.

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