Impinj (PI 25.81, +7.03, +37.43%) is trading sharply higher today after
announcing that a previously-announced Audit Committee investigation has
confirmed that its Q2 results are accurate. On August 2, Impinj announced an
investigation after a complaint was filed by a former employee. The Committee
concluded that there was no credible evidence supporting the former employee's
claims. Impinj had delayed filing its Q2 form 10-Q and announcing full Q2
results pending the investigation.
Since many people are unfamiliar with Impinj, we wanted to provide some color on what they do. Impinj enables wireless connectivity to billions of everyday items such as apparel, medical supplies, automobile parts, food, and more. The Impinj platform delivers an item's identity, location, and authenticity to business and consumer applications.
Impinj connects items via a miniature radio chip embedded in the item or in its packaging. To date, Impinj has enabled connectivity to more than 25 billion items, enabling retailers, hospitals, airlines, automotive manufacturers, and many other industries to derive timely business value from those connected items. Its platform connects everyday items using RAIN, a radio-frequency identification, or RFID, technology that Impinj pioneered. Impinj spearheaded development of the RAIN radio standard, lobbied governments to allocate frequency spectrum, and cofounded the RAIN Industry Alliance, which today has more than 150 member companies. Today, the RAIN RFID industry uses the RAIN radio standard nearly exclusively, has access to radio spectrum freely available in 78 countries encompassing roughly 96.5% of the world's GDP, and has connected tens of billions of items.
RAIN's unique capabilities -- unique identifiers for individual items, battery-free operation, low cost, long range, not line-of-sight, 1,000 reads per second, designed to have essentially unlimited life and available cryptographic item authentication -- position RAIN to be the leading item-to-cloud connectivity technology for the IoT (Internet of Things). The Impinj platform comprises software, connectivity, and endpoint integrated circuits, or ICs, that together deliver item data to business applications.
For example, retailers are big users of Impinj's platform as it delivers accurate and timely data about a retailer's inventory, delivering visibility into what items a retailer has and where the items are located. Also, the cornerstone of a successful omnichannel operation is real-time inventory visibility that provides accurate item information in stores, distribution and fulfillment centers. Another big benefit is inventory management. Many retailers are stuck doing things the old way—manually counting items. And the data is outdated soon after they complete a cycle count. The Impinj platform delivers timely information about items in retail stores and warehouses.
Another example is healthcare. The Impinj platform wirelessly connects information about an asset's identity and location to the hospital's enterprise systems, tracking assets as they move through the hospital. This asset visibility allows hospital staff to visualize an item's location in real-time. The Impinj platform also provides accurate, real-time visibility into inventory levels in hospital supply rooms.
Other examples of deployments that use part or all of the Impinj Platform include: Airlines: (RAIN-enabled luggage tags provide passengers with the real-time location of their checked bags); Automotive: (Fueling stations use vehicle windshield tags to enable automatic, cashless fueling).; Industrial and Manufacturing: Car and aircraft manufacturers track components to ensure proper assembly, reduce labor costs and improve operations; Consumer Experience: Marathons track runners via endpoint ICs in race bibs; golf venues score participants' shots via endpoint ICs inside golf balls; Food: Coca-Cola uses Impinj's endpoint and reader ICs for syrup tracking and replenishment in its Freestyle soda fountains. In Europe, McDonald's uses its endpoint ICs and gateways to enable direct-to-table food service.
Turning to today's news, Impinj confirmed its previously-released Q2 revenue figure of $28.5 mln. New information was that Impinj reported a non-GAAP loss of $(0.19), which was much better than market expectations. Impinj also guided for Q3 revenue of $33-34 mln and a non-GAAP loss of $(0.17)-(0.12) per share. Both are better than expected.
In sum, the confirmation of the accounting results is a big positive for Impinj. It removes a cloud over the stock, and now they can focus on moving forward. With that said, the stock has been a roller coaster ride since it made its IPO debut in mid-2016. It traded as high as $60 in mid-2017, but it has been falling for much of the past year, closing yesterday at $18.78.
Impinj's problems were lingering before this accounting issue. The RAIN market is relatively new and is, to a large extent, unproven. The adoption of RAIN technology has been slower than Impinj had been anticipating. Its industry has also experienced periods of accelerated adoption that were not sustained. For example, RAIN adoption accelerated in 2016, but then decelerated in 2017, in part due to delays in the implementation of planned programs by certain large retailers. Near-term RAIN adoption depends on large companies with market influence, particularly in the retail industry. Long-term RAIN market growth will depend on adoption by other industries. While resolving this accounting issue was good news, the longer-term hurdle for Impinj will be getting broader market adoption.
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