Impinj (PI) 28 Jul 222022 Q2 Earnings call transcript

Welcome to the Impinj Second Quarter 2022 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mr. Strategic President, Vice Cobb, Finance. Andy Please go ahead.

outlook. XXXX CEO, Anja. joining detailed of us you, On market call, Co-Founder opportunity quarter Good of Cary our brief quarter will afternoon, for all today's follow and and Impinj's third Diorio, Impinjs's you and thank Chris provide to our review results quarter financial results. a overview and XXXX XXXX Thank will Baker, discuss CFO, performance. second Impinj's a with second

will call in Impinj's Q&A We the CRO, will session. Dossett, open questions. Jeff then for join the us

trended You of data can find management's prepared website. company's the remarks section plus Relations financial Investor on the

We based are Litigation Securities Act under call this on the of forward-looking financial Reform XXXX. our will outlook today. statements performance statements and as in such about Private future make of expectations Any

earnings law. our we on for a except required alter metrics. cash On for are comparable While metrics have to GAAP we annual these because are reports are basis. reconciliation forward-looking and metrics, do release flow file We and for statements, differ the making state as a any financial or metrics we non-GAAP. financial and GAAP statements uncertainties. actual update basis not subject today's refer we We these the otherwise reasonable materially revenue by statements, all in obligation results with expressly the make and today explicitly applicable disclaim uncertainties and call, could of where our to risks to any most believe forward-looking our except undertake SEC. quarterly a to or risks we non-GAAP Balance Please sheet describe

the XX; Jefferies Oppenheimer's the Genuity will Needham and that and Annual on we X; August XXth in X; Technology Tech, Growth one-on-one and Semi August and conference XXnd the our outlook, Robotics XXth hardware on Annual to Conference com many Conference August Conference participate on results Francisco turning Boston Tech Clean XX; Annual August Internet Communications Before XX on Communacopia Industrial note those to IT the Chicago you Frontiers in and We on XX Nashville of in I San Infrastructure now Growth Conference events. turn XXXX XX. will Sandler with call the September in September forward and look in Technology Sachs to connecting Summit at on and Chris. the over Piper Canaccord Goldman

Andy, for joining you, the you Thank thank all call. and

as record strong go-to-market our both model new second revenue least scales. and Based end demand were ICs, and leading products deployments by on at strong, Impinj's at Our quarter results the to expect reader strong in and I our existing remain XXXX, leverage half driven operating our my second conversations expansion through quarterly set highlighted secular driven endpoint with gateways. demand readers, all ICs, deployments. by robust profitability Revenues new and for partners, users a --

Turning of foundry guardedly although first that increased, our trend to partner continue. will process in may cooling, wafer upsides from our optimistic global I demand supply. that The wafers pace recently be that am nodes for finally suggesting has

supply I exceeded upsides. the for consecutive looking by imbalance And more quarter. expect still the Second demand ahead, despite wafer than in quarter persist endpoint IC quarter third to XX% the that fifth

for has component half supply to strong like quarters. said, and revenue and quarter product with side, our growth growth, improves. the Consequently, shortfalls constrain second systems we than to exited demand our quarters, in in supply did first second half. just rather reader are revenue as ability second both growth XXXX broadly the supply supply third past Reader I constrain That expect it it fourth demand systems poised the will quarter in On X we particular exceeded as the and significant for backlog.

driven strong, setting expectations, on I and endpoint demand, our Demand efficiencies. logistics and remains backlog. quarter RAIN item inventory omnichannel for begin on addressing parcel revenue fulfillment tracking or exceeded our growing operating and including supply adopting Second providers and IC layer new Based bookings chain by a retailers continue shipment record. that visibility our inlay to traceability, volumes additional order as strong partners believe will quarterly our

shipment in on Looking tailwinds continue see XXX-millimeter help our meet investment multiyear demand invested chain retail post-processing expansion to June that streamlining endpoint the post-processing. focused team further by XX out, I growing, general cycle on releasing growth our home that supply reduces ICs. XX%. diversifying expansion endpoint To IC our merchandise for focused a goods flow milestone in times months, past over we and apparel, and marked as have a that parcel traceability with and operations

turn to quickly product. We into ready and are future shippable any upside wafers primed

Second record. revenue and exceeded Reader systems a from spot, were challenges a also quarterly revenue bright ICs our last new post-processing recovering quarter expectations. setting quarter's

help revenue anticipated. expect Reader revenue. with Looking than annual I e-family our more drive forward, supply to reader volumes IC strong and e-family also team of reader third ICs IC growing had our we expectations operations record supply quarter securing quarter second exceeded

with reader Gateway retailers deployment. we launched June, prevention to EXXX market. led Our the IC, In offering new Reader our line shipments performance of IC loss in expectations, by expanded performed revenue on highest Impinj any European the the visionary

accelerate market of EXXX stack, partners believe allowing of our will vision and Things. reference readers, design based EXXX,EXXX, performance new devices combination handhelds, and sibling with a this uses its EXXX includes classes to design new wins Our to products further partner the boundless time and the wearables of high brings I and to common e-family, market. of EXXX RAIN smart printers. Internet EXXX, bring modules, our fixed e-family quickly software and With a edge rapid ICs, which now to

as prevention with momentum pleased the Starting of retailer, are expected. On generating meaningful they loss the anticipate the several continue second geographies. revenue their new in see the revenue expanded over I into to meaningful self-checkout quarters. both and they return I continued as performance and quarter supply front, global project logistics. this And reader deployment retail, deploying our retailer from retail Asia-based visionary with of RAIN-based discussions marked deployment the next continue the chain with in and my European offering

the quarter. supply growing thank second their delivered and Impinj chain customer revenue. chain American deployment, healthy growth, drive this confident position In in introduced for advancing turn challenges. closing, tremendous large quarter and I the and for platform, reader quarter now third financial and will endpoint by like ensured products, our beyond. your logistics supply I while On I generating expect our a of navigating North our our the opportunity Cary? reader XXXX to team us strong large and Cary effort continued our customers, and to We second revenue new front, in With opportunity, record IC this supply member energized growing remain I'd profitability, call every outlook. over market and to positioned market-leading strong team for review a all persistent advanced the operations demand. a

I you, Thank On outlook. quarter Chris, and good quarter our results will everyone. third review and financial call, afternoon, financial today's second

was quarter million year-over-year million, $XX.X Second from XX% XXXX million up quarter $XX.X second quarter revenue up $XX.X in XXXX. and sequentially in with first XX% compared

XXXX allowed was compared us wafers, IT and with second the revenue endpoint Close revenue IC dividends, accelerating sequentially engagement $XX.X quarter ship million XX% our up first quarter and in expectations. in $XX.X partner endpoint pace million from of which million, to started with XXXX. upside $XX.X foundry up more quarter XX% drive year-over-year paying Second above

Looking in endpoint further revenue we that quarter availability. forward, IC sequential expect a upside we increase as third wafer leverage

systems revenue XXXX first million, compared quarter in and IC quarter Reader a with and Second and Gateway up our exceeded declined. reader million demand, by $XX.X XX% reader while systems revenue up XXXX. revenue basis, slight in a increased, shortfalls. driven Despite sequential reader revenue sequential we Systems $XX.X basis, decline strong navigating expect third million gateway revenue. component revenue and quarter from IC in On year-over-year as expectations was revenue IC sequentially reader continue X% declined. increased we year-over-year a $XX.X reader strong revenue second On quarter while

quarter XX.X% was higher-cost endpoint second mix development driven partially through General expense and was quarter in margin $XX.X expense margins, second and million operating the $XX.X million. XXXX was product XXXX. compared $XX.X sequential quarter gross flowing and with quarter product million. partially Total by with first million and quarter costs. quarter The was wafers decrease offset IC Research offset of product $X.X Second and second increase XX% was expense year-over-year in marketing The XX.X% million. indirect compared driven $XX.X in XXXX. was was and $X.X Sales by million in expense mix. administrative first by XXXX COGS, by

similar in expect We expense quarter. third operating

quarter Second EBITDA $X.X first in with million compared adjusted was million $X.X quarter and XXXX of second million $X.X XXXX. in quarter

we EBITDA, was Second And quarter EBITDA our continue in margin we adjusted business. X.X%. as investing even grow adjusted

was quarter million. Second loss GAAP $XX.X net

$X.XX income quarter was share. per or Second net non-GAAP million $X

aggregate million, cash accrued decline investments interest. to XXXX convertible compared plus the Turning We $X.X of primarily million us and $XX.X $XXX principal second the repurchasing $XX or ended remaining the quarter. million balance of quarter equivalents and due million sheet. the totaled second XXXX. our $XXX.X quarter was million cash from notes with prior The XXXX first million with in sequential to up Inventory in quarter slightly $XXX.X cash,

provided cash equipment cash Property $X.X million. operating Free million. totaled $X.X activities net flow was quarter by Second purchases $XXX,XXX. was and

on second items to Before of few a guidance, I to our initiatives. I turn update want to our quarter also few third and an quarter highlight give a strategic unique

our expense convertible advantage $X.X potential First, at remaining The notes removed more of interest we favorable saves XXXX and all-cash market our XXX,XXX weakness refinancing. prices repurchase repurchase the in shares principal non-GAAP us of XXXX took million dilution. November to of than

third Second, expect decline challenge constrained our third reader we and to reader remain From and ongoing vantage supply reader remain to the quarter production. shortfalls revenue limit our reader point, component through sequentially year-end. current will an quarter

drove timing in decline a quarter expenditures. purchase equipment Third, capital second sequential

XXXX. that XXXX third reverse and to expect similar quarter to continue to spending be the to CapEx in We timing expect

expect Finally, revenue to given quarters. we strong into pace XXXX. increases supply from demand, we sequentially in with our fourth recent wafer and third than foundry endpoint endpoint in partner, revenue IC to growth rather supply the IC Regardless, grow our expect both the demand

our outlook. Turning to

third expect at in revenue XXXX. $XX.X a quarter million quarter XX% between year-over-year compared increase million, $XX.X We third midpoint $XX.X with and million the

million between expect million. EBITDA and $X.X We adjusted $X.X

$X.XX want in thank million, income per midpoint, its bottom call and our the team, and to between income question-and-answer and non-GAAP turn our for the the I reflects EBITDA between non-GAAP session. $X support. highlight non-GAAP our reflecting $X.XX. $X.X suppliers investors, revenue, closing, expect net earnings share, demonstrating share now also the your will ongoing leverage operating our to MJ? want your open our business. to contributions and customers, you, the I operator at our Impinj In to record that we per million outlook I adjusted On line, and net

[Operator Instructions].

with question Ricchiuti first comes The from Jim & Needham Company.

wanted business. focus first systems on to I the

might second feel to persist be be some going Do I to begin going better? of meet that how easing some like begin guess, through you able And entering that availability you potentially to seeing? get that you're You look see half. the shortages mean, does the to should to where indicated, in I there's better that are XXXX? component you'll demand the

and thanks it, I'll of the I'll So to Jim, for off question. hand take first part the Cary. then

And So off in to quarter of had and go-forward it we Cary, around. the that that our you the of few quarter, last led some this of ability had we previously to of we line an had sight time indicated hand I'll through our in see to decommits expected that year. latter terms to We the key a estimates. to revised call statement half supply components first

These thanks our take Cary. is life forward, we several step the This shortfalls And Jim, quarters for ebb of component been So reality it's flow. We have an at a this for and as have point. take a we're navigating to list team component constantly to an of job done be operation shortfalls trying them. step outstanding a The of new a and what every outmaneuver quarter. seems back, engineering an question.

that signaled to I revenue right be constrained is and think going the impact a in having where of business. sequentially. in time to QX there's in and shortfalls least demand, would despite we'll now, and Reader I confidence at I think those QX, to to still the As QX, be are We'll and the QX I look which Reader flat strong between but slightly us slightly Gateway be down lot why have I Gateway up now hopefully on in team future

through did just guess, you the thus question seeing quarter? relates seeing bit, that from follow-up some I How you're your that might as went trend be And little in signs is my to partner. encouraging potentially that a easing trending allocation. what things QX? And and foundry better far a you're how

as incremental increasing. also continue. is wafer seeing seems trending trend guardedly is it's it's that, pull-ins optimistic said gradually And some seeing of Chris. in we're -- and upsides incremental Jim, we're pace remarks, prepared that scheduled I How the this We're deliveries. my will

tight. notes the constrained our However, and really and process are the well year. And will into looking second third and processes half the be supply remain we in still quarter the still significantly of into we're

there bit little is daylight, would of lot forward. to see although more a daylight we like going So a

Yes. And Jim. I can well, add maybe that as to

I think or a quarters, X-quarter we're supply, you've we've on over exceed. going several almost be equal and saying the heard give last outlook to been us

that had then we've coming confidently supply endpoint demand news, to the out flattish still, supply there. That's following keeping in well short is them it's quarter. to of to point, kind we're going So visibility our up first out X say the Chris' increase that quarters, This QX the slightly shipments in enough time again the of in but QX. to and increase IC great that's in

what we increasing. also are spoke revenue noted those shipment the -- are prepared the And remarks, in volumes to Cary shipments,

comes question with next from Piper Sandler. The Harsh Kumar

strong grow to you're that. First and this tough in managing on economics doing, congratulations challenging environment, particularly of all, what congratulations in on

On mobile off. some are weakness guys the again, of and PC the understanding backing supply, the they're experiencing and is topic my

You're the the taking helping in by and out foundries stepping place.

situations the this back, And happens what incremental do you, part a but hopping in you have They're you or When with guys capacity? in June Or curious out do put year, you're follow-up. bigger March and lot that next let's I'm then now of they those get take a taking do So of line? capacity. first part say, to quarter the come you're than back. back come continue when I incremental first in

will best here. on Harsh, do my So I that question

nodes Jim's answering supply in in said question, our I remains as So tight. process still

foundry So the just helping supply words in I tight. our out want the little cautious to be is a because

for potential Now, our has cause market, wafers indicated priority upside I are for that of for -- to to prioritization, wafers. upsides. we the an partner our a both period for and of And the wafer in believe high will priority the extended us demand time. level high foundry that that us we have maintain had a prioritization a existing future

going today are RAIN when will come yes, a in to time future larger. be larger. So other There industries the RFID is

what's partner we're part to maintain and we latter all continued everything fronts upsides to supply can prioritization to the closely to our working upsides. to happen I So year, our continue foundry across we going ensure supply of wafer get and with to going but get going that can't that speak next we're forward. maintain in to do

in cause to back? brought about was year you Appreciate reiterated next about customers. again cause was the which customer us to I on program clarity. it that takes ICs on revenues follow-up Chris. in your customer logistics pros having what and and on of Just My curious, program Then endpoint our it time what your pushed quarter, you on this can #X, some Last the think And talked puts was be happen? cons color shipping to can big first that potentially logistics the curious the XXXX. call. there. I'd push situation maybe earnings -- be I

shipments, with supply to needs going traceability the are essentially of about through I'm efficiencies, opportunity manual visibility very call reduce and reduce So if customer parcel basically we're system. is customer their start associated moving a into that approve scans overall missed reduce their them that chain, it, and automation in labor for by the items with or reduce errors to excited to improve the program and handling, saying their supply The you and working and want shipments.

some extent And demonstrate to we do to quickly, challenges those things, has quickly. So extent the opportunity it can adopt some delays. there that to be the the there's that gains. And whether readability end with for way, those to is customer, or integration they're the other to the us going or along demonstrate with gains

any going with be deployment. Program they program. like the level the of pleased date, So it's paced are successes. To by is other to

are pleased We with results. the

working with we're program successful. make that that closely best do and going to our customer, We to continue very

that, point? all at I qualification just passed done be of can qualification sort and work Chris, like and this testing ask in wouldn't this testing on the this time already that at sort type of the point all

deployments side as no. early at the scale, little bit. things, and so anticipated. yes testing had but Harsh, scale. challenges neither So at Yes, deploy And answer The is changes that you cover world piloting a

just through infrastructure. work operational the scaling to have overall You in

So to successful. program that make joint it effort is an ongoing

like the about will got they've the about navigate feel where that we make that incredibly on I from to for help results in can priority to That to great to our achieved us. really effort date, and said, help So going stay it high an do. side to we we I We put we've ball. continue And is do the do come are, along, We're yet and so. great them challenges program successful. to

question next Lake Street Troy from Capital. Jensen Our is of

right We're basis. flat now. leverage And You Chris, I I going I you're it -- accelerate to now. in it like And is history OpEx in guys, just of to my always mean more kind right? this a feels So sights sequential the go from Cary, did you hear like invest back was sounds you upside is market huge. if in said on business your

keep to growth? the talk type know curious slower or just targets growth? of you basis kind long flatter how of if about a OpEx guys operating Or you margin try could or to kind So would at

Yes.

or indication It's The that flat more not step some taking investment OpEx a the of is flat place to timing, timing an big up repeating spot. slowing at related, and we investment its an lack keep QX, which of thanks investment. Troy, artifact in took the of So of was question. for incremental not us

So on, the we and we're ever. a that the investment things making that than more lot to continues. We've that. our got work of We're want do fuel to has sure excited team

taking the adjusted were looking getting downturn, focused breakeven. broadly, EBITDA XXXX more back COVID a following to on step Now, and we

to guiding EBITDA evolved, and in have expectations generate adjusted in now Our is even we third even And environment. to continue our adjusted quarter supply-constrained delivered profitability. we on our as second EBITDA we're investing EBITDA adjusted EBITDA adjusted We and profitability quarter focused a our goal profitability, profitability. remain expanding delivering that business,

next in flow. cycle the moving free step Our will towards be generating cash

of targets kind to want see. you to give Cary, and wait or we Any us, got

Not right now, Troy.

So I question, I to the know but want think just this out answer it I there. to get

to you assuming still [indiscernible] above have tag exit year with backlog the and would you where currently? record are going have IC, is growth and book-to-bill X than So it greater for guys great X the a of expect next to the quarters your level sales,

to that one. going I'm start on So

by paced Our today bookings are supply.

my remarks, addressing so supply our backlog, partners to I layer that as as in And said begin expect we I additional prepared on bookings.

about about Anything at the bookings you'd position you as we bookings of should so in supply in think and limited we bookings like of terms expect incremental to feel very very I our be add? good looking a And in the the feel We But have position market in get. good we market to opportunity. our demand. terms

partners we the our add as into going in to to just is booked environment, bookings the given are anticipate I do same supply we XXXX. additional time, Jeff. of demand inlay improve. the layer well will yet continues This at strength And that was

business the would that Troy, just this And XX% add, that I remember a quarter. historically, turns in then, is

into pretty well is XXXX being booked substantial. So

Scott next Roth is Our of from Capital. question Searle

a bit maybe Nice improve. Chris, as the It to to jump on back move just loosening up front. see to things like of into in wafer supply little are visibility half we sounds continuing year. this the

but under XX%. upside, shipping still you're by You're demand getting some

do kind foundry into start to expect you wondering on talking front. your that supply-demand what XXXX, you're and to get really And you're soon XXXX, indications balance too of into to that wafers incremental for back and we As in partner call? that looking getting I'm or allocation

Yes.

going answer first. the So to Scott, I'm latter question the part of

happen half I from It's up some To call. crosscurrents at think too soon Harsh the of kind in of really given capacity and in too pieces other I it's all to earlier around, the products. we're with macro question swirling just it's -- about early what's call back the latter the building foundries had demand XXXX these seeing, to it's -- picking 'XX. to for nodes given going

focused the latter where terms right now, 'XX. In we're half we're focused on of of

for working and pull-ins of can this our getting then of on as drive much So with to remainder transitioning opportunity our partner to -- this foundry we're as focus the and be our year to over XXXX. partner, year, we'll upside the we

I away. and looking not about working with XXXX. wafer speak terms XXXX much now to So it's be that's We'll volumes to our potential both for of ways still right build upsides because into prefer a partner foundry base our in

up following margin that job could, I doing if good And a enough. you front, are guys on the on Fair front. gross

You've prices, that are a given of we the going of got this as incremental any talking terms in you foundry we're Is and Do up? on annual you year? steady? a constraints keep an bit that as going to about looking endpoint half a bit, do the ability about quarter. back pricing into front of I get little on some year first that could talk their as XXXX. are of negotiations into pass of this in prices sort horizon, systems into if or this next increasing the go year some manage the But foundries how little quarter it's again, you further ICs you're come we the out, know but to right, I go mix, giving wonder you thinking costs raise And the supply there XXXX. how second price

is This Jeff. question. great Scott,

partners end and to cost those monitor costs with continue our pass and We to model, closely to into customers. inputs their our work all through we evaluate

protect the to the is integrity objective of gross model. margin primary Our

position for as and their and for pricing feel good our XXXX. partners we about So into turn, that the expectations proceed we're our in we today setting end customers

Scott, I And to add Yes. the in range. margin guided that XX% quarter, gross last we would XX%

current sales towards spot mix, deconstruct XX% that right of Based trending on I see higher as think And outlook OpEx, gross right us and we're view into for flattish the that if the we're in now. is and supply a that about a our signaling end resulting the we the look QX. you our assume you'll range margin for QX.

out, IC we XXX-millimeter for anticipate drive further accretion. additional Looking future margin endpoint gross innovation opportunities to

Instructions]. session. this our would and CEO, no conference [Operator concludes over closing to Diorio, for like Seeing Co-Founder Chris further any questions, question-and-answer the I to back remarks. turn

you like you I'd Thank the and remain I hope and joining today, very much. Bye, call ones for loved MJ. bye. and safe are you you, you and Thank to well. thank all

has attending conference now The concluded. Thank today's you for presentation.

You disconnect. may now