Shares of Impinj Inc.PI declined 11.85% to close at $31.17 on Feb 17, following the company's fourth-quarter 2016 results. The decline reflected weaker guidance in terms of first-quarter revenue growth, IC volumes and gross margins.
The RAIN RFID (radio frequency identification) tag provider reported earnings (including stock-based compensation and depreciation & amortization expense) of a penny, which missed the Zacks Consensus Estimate by 8 cents.
However, the company reported non-GAAP earnings (excluding stock-based compensation) of 11 cents per share, which surged 57.1% from the year-ago quarter.
Impinj, Inc. Price, Consensus and EPS Surprise
Revenues advanced 48.7% to $33.7 million, driven by 50.6% increase in product revenues, a reflection of strong demand for Impinj's end point ICs.
Gross margin (including stock-based compensation) contracted 110 basis points (bps) to 53.3% in the quarter. Impinj reported adjusted EBITDA of $2.4 million as compared with $1.5 million in the year-ago quarter.
Operating expenses as percentage of revenues soared 330 bps to 49.6%. The massive growth was primarily attributed to 330 bps surge in general & marketing (S&M) expenses.
Non-GAAP earnings (excluding stock-based compensation) were 22 cents in full-year 2016, down 15.4% from 2015. However, revenues increased 43.1% to $112.3 million. The company shipped 6 billion endpoint ICs, up almost 70% on a year-over-year basis.
We note that Impinj has outperformed the Zacks Electronics Semiconductors industry in the last six-months. While the stock has gained 46.4%, the industry returned 18.8% in the same period.
Impinj's products primarily cater to retail and healthcare sector. The company introduced 12 joint solutions in 2016, four in retail, seven in healthcare, and one in logistics.
During the quarter, Impinj announced a joint solution with Oak Labs on an interactive retail fitting room mirror that synchronizes with the retailer's inventory system and online catalogue. Oak Labs has announced installations at select Ralph Lauren and Rebecca Minkoff stores.
Further, the company announced two jointly developed healthcare solutions - Terso and VIEWMED during the quarter.
Impinj forecasts revenues to be in the range of $30-$31.5 million for first-quarter 2017. This reflects almost 42.2% year-over-year growth at the midpoint of the range. Management expects adjusted EBITDA to be in the range of a loss of $1 million to income of $0.5 million. Non-GAAP earnings are estimated to be in the range of a loss of 6 cents to income of a penny per share for the quarter.
Management expects to sell 7.8-8 billion endpoint ICs in 2017, representing 32% growth over 2016 at the midpoint, in line with the industry expectations.
Gross margin in first-half 2017 is anticipated to be affected by price negotiations with endpoint customers, which will pass off in the second half.
Impinj remains on track to reach its target model in 2019 to 2020 with endpoint IC revenue greater than 60% of its total, connectivity greater than 30%, and approximately 5% from software. Management also targets gross margins in the range of 57-60% driven by newer products like Monza R6 and XSpan, and increasing low-cost software revenues. Further, adjusted EBITDA is expected to be in the range of 12-16%. Management expects to maintain EBITDA margin in the low-single digits in 2017.
We believe that growing customer base that includes the likes of Coca Cola KO and McDonald's MCD is a good sign. However, continuing investments in strategic initiatives will hurt margins and bottom-line growth in the near term.
Zacks Rank & Key Picks
Currently, Impinj carries a Zacks Rank #3 (Hold). Applied Optoelectronics AAOI is a better-ranked stock in the sector sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Long-term earnings growth rate for Applied Optoelectronics is pegged at 18.33%.
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