Radio-frequency identification (RFID) solutions provider Impinj (NASDAQ:PI) was scheduled to report its second-quarter results on Aug. 6. But an investigation by the audit committee of Impinj's board of directors related to a complaint filed by a former employee has gummed up the works. Impinj has delayed its earnings release, and it won't be able to file its quarterly report until the investigation is complete.

The company did provide some preliminary second-quarter numbers, though, and CEO Chris Diorio had some optimistic things to say about the company's turnaround.

The Impinj logo.

Image source: Impinj.

The inventory correction is mostly over

Impinj's revenue began to tumble in the fourth quarter of last year thanks to inventory drawdowns at its partners. While IC endpoint consumption was still expected to grow in 2018, partners reducing their inventories took a bite out of Impinj's sales. In both the fourth quarter of 2017 and the first quarter of 2018, revenue fell by more than 20% on a year-over-year basis.

Impinj's revenue declined again in the second quarter, with the company reporting preliminary revenue of $28.5 million. That's down about 16% from the second quarter of 2017. That revenue was above the high end of Impinj's guidance range, but it marks the third straight quarter of slumping sales.

While Impinj's partners continued to reduce inventory in the second quarter, Diorio believes the endpoint inventory correction is now "mostly resolved." The first half of 2018 is viewed by management as the turning point for the business, so a return to growth could be coming later this year.

Impinj also managed to reduce its own inventory by $1.4 million during the quarter, and it expects further improvements in the second half. The company believes it will beat its guidance for revenue, earnings per share, adjusted EBITDA, and inventory when it reports its full second-quarter results. Unfortunately, investors may be waiting a while.

Throwing a wrench in the turnaround

Impinj provided few details about the ongoing investigation. The company said that it was unable to determine at this time whether it would need to restate its results for the first half of 2018 or for any other period. It provided no timeline on when the investigation would be complete.

The investigation is serious enough to derail the second-quarter report, so investors should certainly be concerned. This may turn out to be a minor issue with no real impact on the business or on the previously reported numbers. Or it could result in substantial restatements that change the story for investors. At this point, it's impossible to tell.

These types of investigations can sometimes drag on for multiple quarters, delaying additional quarterly reports and leaving investors in the dark for a long time. Going too long without filing reports could get the stock delisted from the Nasdaq.

Shares of Impinj are down nearly 50% in the past year, and they've lost more than two-thirds of their value since peaking in mid-2017. While shares could rebound if the company returns to growth, this investigation adds a layer of uncertainty that makes it tough to bet on the stock.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends Impinj. The Motley Fool has a disclosure policy.