Revenue Radar: Supply chain disruption halts Raspberry Pi from further growth
Raspberry Pi Holdings, a leading low-cost, high-performance computing platform provider, has reported impressive financial results for the first half of 2024, marking a significant milestone as its first earnings report since its successful IPO. However, the company faces ongoing challenges related to inventory management and supply chain dynamics.
Raspberry Pi reported its H1 2024 earnings on September 24, 2024.
“The IPO was the watershed moment of the first half, with Admission to trading just two weeks before the period end. In continued pleasing trading in the first half, we saw strong uptake of our latest flagship SBC, Raspberry Pi5, the launch of the Raspberry Pi AI Kit, and the successful ramp to production of RP2350, our second-generation microcontroller platform,” said CEO Eben Upton.
Total unit sales of Single Board Computers (SBCs) and compute modules: 3.66 million, up 31% year-over-year Microcontroller unit sales: 2.15 million, up 30% year-over-year
The company reported strong growth in unit sales, particularly for its latest product, Raspberry Pi5. As stated in the report: “Raspberry Pi5, selling 1.1m units in H1 following introduction at the end of October 2023.”
However, Raspberry Pi faced challenges in managing inventory levels. The report notes: “Inventory of finished goods increased to $62.5 million (December 2023: $40.8 million; June 2023: $18.4 million) due to increased holdings of finished boards as holdings of Raspberry Pi5 boards and compute modules normalised but also because of slower sales during the second quarter.”
Upton acknowledged the inventory challenges, stating: “Higher than usual customer and channel inventory levels which were evident at the time of the IPO have continued to unwind, and there is a growing sense that this will have concluded by the year end.”
Raspberry Pi’s revenue streams showed strong growth across all categories:
The significant increase in Components revenue was primarily due to increased sales to the company’s licensee channel and direct sales of application processor chips to Sony for licensee use.
Gross profit increased by 47% to $34.2 million, with gross margin reaching 23.8%, down from 26.1% in H1 2023. The decrease in gross margin was attributed to a higher mix of component sales in the first half.
Adjusted EBITDA saw a substantial increase of 55% to $20.9 million, outpacing the 31% increase in unit sales. This improvement in profitability demonstrates the company’s ability to scale efficiently.
In the first half of 2024, Raspberry Pi demonstrated its commitment to innovation and market expansion. The company’s flagship product, Raspberry Pi5, saw strong uptake with 1.1 million units sold since its introduction in October 2023. This success was complemented by the launch of the Raspberry Pi AI Kit, marking the company’s entry into the artificial intelligence market.
Further enhancing its product lineup, Raspberry Pi successfully ramped up production of its RP2350 microcontroller, which supports the new Raspberry Pi Pico 2. The company also made strides in cloud connectivity with the introduction of Raspberry Pi Connect, attracting 50,000 users since its May 2024 launch.
Raspberry Pi’s efforts to strengthen its position in the Industrial and Embedded market bore fruit, with new OEM customers including Target Darts in the UK leisure sector and Techbase in Poland for Energy Management systems. These developments underscore the company’s growing appeal across diverse industries.
Despite its strong financial performance, Raspberry Pi faces several challenges. The company is grappling with higher than usual customer and channel inventory levels, though management expects these to normalize by year-end. Global economic uncertainties loom as a potential impact on demand, and the company must carefully balance its growth in emerging markets with maintaining profitability.
Looking ahead to Q3 2024, Raspberry Pi anticipates higher unit volumes, buoyed by new product launches. However, the company notes that the expected product mix may lead to lower unit economics.
Raspberry Pi’s strategy remains focused on three core areas: growing unit sales, improving total unit profit margin, and increasing profit margin participation. The company’s successful IPO, which raised £178.9 million (approximately $225 million), provides a solid financial foundation to support these strategic initiatives.
Raspberry Pi’s H1 2024 results paint a picture of a company successfully driving revenue growth and improving profitability, even as it navigates supply chain challenges and inventory management issues. The company’s revenue of $144.0 million represents a 61% year-over-year increase, while gross profit rose 47% to $34.2 million.
The strong performance of new products like Raspberry Pi5, and the expansion into AI and cloud connectivity, showcase the company’s innovation capabilities. However, the decrease in gross margin to 23.8% from 26.1% in H1 2023, attributed to a higher mix of component sales, highlights the balancing act the company must perform as it grows.
As Raspberry Pi moves forward, its ability to normalize inventory levels, capitalize on its expanded product portfolio, and maintain its growth trajectory in the face of global economic uncertainties will be crucial. The coming quarters will be telling as the company seeks to leverage its recent successes and navigate the challenges ahead, with investors and industry observers keenly watching its performance.