What happened

Shares of Impinj Inc. (NASDAQ:PI), a provider of radio frequency identification solutions, slumped on Friday following the company's fourth-quarter report. Impinj beat analyst estimates for revenue and earnings, but its guidance for the first quarter may have underwhelmed investors. At 11:45 a.m. EST, the stock was down about 12%.

So what

Impinj reported fourth-quarter revenue of $33.7 million, up 48.7% year over year and a little over $1 million higher than the average analyst estimate. Growth was driven by a 70% increase in endpoint IC volume.

The Impinj logo.

Image source: Impinj Inc.

Non-GAAP EPS came in at $0.11, up from $0.07 during the prior-year period and $0.02 better than analysts were expecting. GAAP EPS was $0.01, up from a loss of $0.49. Operating income declined, however, due to rapidly rising expenses. Operating margin was 1%, down from 2.3% in the prior-year period.

CEO Chris Diorio discussed how the company's recent secondary offerings will help it continue growing quickly:

"We raised a total of approximately $107 million in net proceeds in two successful equity offerings, expanding our available capital to continue investing in the massive market opportunity and enhance our leading market position."

Now what

While Impinj beat analyst estimates for the fourth quarter, its guidance for the first quarter may be what caused the stock to drop on Friday. Impinj expects revenue between $30 million and $31.5 million, a slight sequential drop driven by seasonality. Non-GAAP EPS is expected in the range of a loss of $0.06 to a gain of $0.01. The expected loss indicates that spending will rise faster than revenue, which may have disappointed investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.