What Happened:
Shares of RFID manufacturer Impinj (NASDAQ:PI) jumped 18.4% in the morning session after 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 topline 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 (NASDAQ:).
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.
Firstly, 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.
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What is the market telling us:
Impinj’s shares are quite volatile and over the last year have had 26 moves greater than 5%. But moves this big are very rare even for Impinj and that is indicating to us that this news had a significant impact on the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago, when the stock dropped 28.5% on the news that the company reported first-quarter revenue that narrowly beat analysts’ forecasts, but its earnings per share came in below expectations. In addition, sales and earnings per share guidance for the next quarter fell short of the consensus estimates. Stocks generally react negatively to weak earnings performance and guidance, so this quarter’s earnings should result in downward revisions in financial projections for the company.
Impinj is up 68.8% since the beginning of the year. Investors who bought $1,000 worth of Impinj’s shares 5 years ago would now be looking at an investment worth $6,870.
