Impinj : First Quarter 2025 Prepared Remarks

Published: 2025-04-23 16:20:39 ET PI

Impinj First-Quarter 2025 Earnings Conference Call Wednesday, April 23, 2025

5:00 p.m. ET / 2:00 p.m. PT

Andy Cobb, Impinj VP Strategic Finance

Thank you, Nick.

Good afternoon and thank you all for joining us to discuss Impinj's first-quarter 2025 results. On today's call, Chris Diorio, Impinj's co-founder and CEO, will provide a brief overview of our market opportunity and performance. Cary Baker, Impinj's CFO, will follow with a detailed review of our first- quarter financial results and second-quarter outlook. We will then open the call for questions. Hussein Mecklai, Impinj's COO, will join us for the Q&A. You can find management's prepared remarks, plus trended financial data, on the company's investor-relations website.

We will make statements in this call about financial performance and future expectations that are based on our outlook as of today. Any such statements are forward-looking under the Private Securities Litigation Reform Act of 1995. Whereas we believe we have a reasonable basis for making these forward-looking statements, our actual results could differ materially because any such statements are subject to risks and uncertainties. We describe these risks and uncertainties in the annual and quarterly reports we file with the SEC. We do not undertake, and expressly disclaim, any obligation to update or alter our forward-looking statements except as required by law.

On today's call, all financial metrics except for revenue, or where we explicitly state otherwise, are non-GAAP. All balance-sheet and cash-flow metrics except for free cash flow are GAAP. Please refer to our earnings release for a reconciliation of non-GAAP financial metrics to the most comparable GAAP metrics.

I will now turn the call over to Chris.

Chris Diorio, Impinj Co-Founder and Chief Executive Officer

Thank you, Andy. And thank you all for joining the call.

At a time of extraordinary macro uncertainty, Impinj's long-term secular growth opportunity in retail, supply chain and logistics, food and the long tail of other applications remains intact. Enterprises use our platform to digitize their operations for production management, supply-chain optimization and inventory visibility. Those operational needs transcend short-term headwinds or cyclicality and fuel enterprise success. During Covid, enterprises that leveraged our platform outperformed those that didn't. I believe that history is poised to repeat itself, with enterprises that use our platform today better able to adapt to tariffs than those that don't.

Additionally, enterprises use our platform to track and manage the staples people buy regardless of the macro. And they add endpoint ICs to products regardless of whether they source those products from China or from other parts of the world. So although retail prices may increase, shelves aren't going to go empty, and products that carried our ICs yesterday will still carry them tomorrow, even if sourced from a different geography.

We believe we are in a strong position to win in this market. We have number one endpoint IC market share after we took 85% of the industry's 2024 unit-volume growth, and that with most of the M800 ramp still ahead of us. Our balance sheet and operating margins are strong, giving us the confidence to invest in and alongside our enterprise customers. Historically, when we lean into times of uncertainty we emerge on the other side with greater share and a stronger business, and we intend to do so again.

Turning to the first quarter, our execution was solid despite the uncertain environment. Steady demand and higher than expected endpoint IC volumes drove revenue and profitability above our guidance. We also saw a strong book-to-bill ratio and solid pipeline activity, with enterprises remaining active and engaged. We took out a bit less endpoint IC channel inventory than we had expected, primarily due to partners strategically needing inventory for geographic optionality in the face of tariffs. We also saw multiple pull-in, pushout, cancellation and bookings requests, all in the same quarter, which speaks to the challenges our inlay partners are having navigating the tariff uncertainty.

Looking to the second quarter, the tariff- and politics-induced market whipsaw appears unlikely to subside simply because some tariffs are paused. From today's vantage point, we see a modest second-quarter channel-inventory increase as our inlay partners continue building optionality, which in ordinary circumstances might be concerning, but that build is measured against enterprises under- shipping consumer demand as they shift U.S. bound product shipments from China to other

geographies. That geographic shift represents roughly 15% of our endpoint ICs, but our exposure is much less because products from new geographies also carry our endpoint ICs. Assuming consumer demand holds, shipments will catch up to demand, and when they do we should see channel inventory normalization and bookings growth.

Returning to first-quarter highlights, I'll start with Gen2X, which is showing its prowess. Comparing M830 Gen2X against a competing endpoint IC, Gen2X grew the area coverage of an overhead reading solution by 44%, helping convince a large apparel retailer to launch a major overhead deployment. We believe Gen2X will continue driving share gains and demand for our products. Second, our direct engagements with the two large grocery chains we discussed last quarter continue moving forward. Third, we saw strong E-family demand, suggesting ongoing retailer deployments and pushing reader IC revenue above expectations. And finally, a partner extended the loss-prevention solution we developed for the visionary European retailer to loss analytics, which doesn't need 100% tagging, and won a major deployment at another retailer. Overall, we feel good about our market progress and keep pressing forward.

In closing, while we're not immune to the tariff shockwaves, I believe we are well positioned to play offense. We lead in endpoint ICs, reader ICs and fixed readers. We create the enterprise solutions that transform our industry. We manufacture and deliver our products overseas, so for the most part we are not subject to direct tariffs. Our endpoint ICs represent a tiny fraction of the cost of the retail staples they are used on, meaning tariffs are unlikely to change enterprise decisions to use our ICs. And finally, we saw the tariff impact early, said what we saw and quickly began adjusting our business, shifting investments away from China and toward the U.S. and Europe where we see continued growth opportunities. We are managing our business with a steady hand, focused on extending our technology lead, market share and platform adoption.

As always, before I turn the call over to Cary for our financial review and second-quarter outlook, I'd like to again thank every member of the Impinj team for your tireless effort. As always, I feel honored by my incredible good fortune to work with you. Cary.

Cary Baker, Impinj Chief Financial Officer

Thank you Chris, and good afternoon everyone.

First-quarter revenue was $74.3 million, down 19% sequentially from $91.6 million in fourth-quarter 2024 and down 3% year-over-year from $76.8 million in first-quarter 2024.

First-quarter endpoint IC revenue was $61.2 million, down 17% sequentially from $74.1 million in fourth-quarter 2024 and down slightly year-over-year from $61.5 million in first-quarter 2024. Endpoint IC revenue exceeded our expectations, driven by turns orders. Looking forward, we expect second-quarter endpoint IC product revenue to increase sequentially.

First-quarter systems revenue was $13.1 million, down 25% sequentially from $17.5 million in fourth- quarter 2024 and down 15% year-over-year from $15.3 million in first-quarter 2024. Systems revenue exceeded our expectations, driven by strength in both reader and reader IC sales. Looking forward, we expect second-quarter systems revenue to decline sequentially, driven by lower reader IC revenue.

First-quarter gross margin was 52.7%, compared with 53.1% in fourth-quarter 2024 and 51.5% in first-quarter 2024. The year-over-year increase was due primarily to lower indirect costs. The sequential decrease was driven by lower systems revenue mix. Looking forward, we expect second- quarter product gross margins to be similar to first quarter.

Total first-quarter operating expense was $32.6 million, compared with $33.6 million in fourth-quarter 2024 and $32.9 million in first-quarter 2024. Operating expense was below expectations as we managed spend and benefited from favorable timing. Research and development expense was $17.3 million. Sales and marketing expense was $7.7 million. General and administrative expense was $7.6 million. Looking forward, we expect second-quarter operating expense to be similar to first quarter.

First-quarteradjusted EBITDA was $6.5 million, compared with $15.0 million in fourth-quarter 2024 and $6.7 million in first-quarter 2024. First-quarter adjusted EBITDA margin was 8.7%.

First-quarter GAAP net loss was $8.5 million. First-quarter non-GAAP net income was $6.3 million, or 21¢ per share on a fully diluted basis.

Turning to the balance sheet, we ended the first quarter with cash, cash equivalents and investments of $232.5 million, compared with $239.6 million in fourth-quarter 2024 and $174.1 million in first-quarter 2024. Inventory totaled $98.5 million, down $900 thousand from the prior quarter.

First-quarter capital expenditures totaled $1.9 million. Free cash flow was negative $13.0 million,

driven primarily by unfavorable working capital timing, which we expect to reverse in second quarter.

Before turning to our guidance, I want to highlight a few items specific to our results and outlook.

First, as Chris noted, due to partners changing their inventory strategies for geographic optionality, our first-quarter endpoint IC channel inventory declined by only one week. From today's vantage point, we see partners maintaining higher endpoint IC inventory balances for the foreseeable future.

Second, first-quarter product gross margin exceeded our expectations, partially driven by reader IC revenue strength. We anticipate similar product gross margin in second quarter, even as our high- margin reader IC revenue declines. Looking to the second half, product gross margins will benefit from higher M800 mix, improved production yield and lower-cost wafers.

Finally, I am proud of our operational execution in the first quarter. We tightly managed operating expenses, inventory and margins, delivering adjusted EBITDA well above our guidance. Looking ahead, we will align our investments to our revenue profile, staying agile in this uncertain environment.

Turning to our outlook, we expect second-quarter revenue between $91.0 and $96.0 million, compared with $74.3 million in first-quarter 2025, a quarter-over-quarter increase of 26% at the midpoint including the license-fee payment, and 4% excluding it. We expect adjusted EBITDA between $23.5 and $26.0 million. On the bottom line, we expect non-GAAP net income between $20.8 and $23.3 million, reflecting non-GAAP fully diluted earnings-per-share between 68¢ and 76¢.

In closing, I want to thank the Impinj team, our customers, our suppliers and you, our investors, for your ongoing support. I will now turn the call to the operator to open the question-and-answer session. Nick.

Disclaimer

Impinj Inc. published this content on April 23, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 23, 2025 at 20:20 UTC.