Impinj (PI) 26 Jul 232023 Q2 Earnings call transcript

Welcome to the Impinj Second Quarter 2023 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask a question. [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.

XXXX CEO, MJ. 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, Impinj’s you and thank Chris provide to our review results quarter financial results. a overview and outlook. XXXX Thank will Baker, discuss CFO, performance. second Impinj’s a with second

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

prepared can find plus You on data, the Investor management’s remarks, website. trended financial Relations company’s

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

these quarterly alter uncertainties basis or We disclaim, to we update in to we statements, statements actual results believe law. the annual While required any except and any obligation differ by a risks are and reports we not uncertainties. and our have such as undertake, making forward-looking do because describe with forward-looking materially risks expressly could subject statements SEC. our these for the reasonable We file and

earnings most to metrics for On Balance-sheet metrics state our metrics. otherwise, Please a where and GAAP. financial today’s are reconciliation GAAP non-GAAP the cash-flow call, or release financial revenue, except to refer non-GAAP. all of for we explicitly comparable metrics are

on September XXrd on Frontiers Xth; August outlook, Annual Goldman XXth San Annual forward Chicago; Conference IT many Needham and Conference Jefferies and in and the the Piper Robotics, XXth on XXth We Conference Sachs Before XXth Growth in Boston; Xth Tech Summit Street’s of Sandler August and Francisco; XXth Tech, XXth and Growth note Big in Technology, in the to we Communications the the one on events. Semiconductor, at Nashville; Canaccord August August Conference Xth; Communications our in Virtual New September in turning that Conference and to with you Genuity on Lake on XXth Conference Oppenheimer Hardware Internet results Annual those on one will York. the on connecting and Industrial participate September Communicopia Technology Technology X look Clean

will now I call Chris. to turn the over

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

the deployment endpoint primary the set record, was systems record revenue apparel revenue. IC revenue quarter the IC Second endpoint visionary with of more-than-offsetting was driver a at of systems weakness destocking. larger-than-anticipated The retailer. strength loss-prevention new The primary European retail weaker-than-anticipated the revenue driver inventory

quarter. destocking expect least impacts We through at inventory the the of third persist that to

applications. not expectations. endpoint quarter, Focusing whom late sequentially, became ICs inventory in IC second hundred American upside coming recently several magnitude requested MXXX offset the first authentication us of us and into ICs destocking chain inlay our below some but also retail April. slightly as supply That to The ICs, to than our and revenue enterprise in as seeding apparent on Impinj large North growth customer declined quarter million destocking our had logistics at multiple partners, the second just more of sequential

anticipating the inlay air still into IC but created curve partners an new-program built month’s roughly industry Looking primarily Also, has strong. are our XXXX worth launches, and a working Those shifted third time, the is safety as of recovery. our the shortfalls, a by tail fourth. burning that pocket the the to grown, anticipate third wafer remains the At at demand recovery, our with partners down in to retail of the adoption ICs, a right through. quarter product and customers share supply stronger third-quarter quarter, enterprise we the same softer-than-expected they our IC endpoint stock now

insufficient headwinds are third-quarter and, wins endpoint decline these will to enterprise sequentially. result, as IC Our a revenue our overcome

pulled who expect behind headwinds, user growing we drive RAIN not demand single after adoption corrections back to a another long-term we these despite these of end know do Importantly, RFID. us. from are remains and our Said opportunity has strong, way,

XX% also We endpoint XXXX IC expect unit-volume greater than growth.

opportunities backlog. Turning to reader European the loss-prevention driven second-quarter team more expectations, gateway availability. well to fulfill our revenue timing revenue expected, component offerings. to gateway decline exceeded for deployment solutions the constraints. our in to backlog It systems, the our as nearly to self-checkout allowed allows as entering deliver gateways had expect The us prior-period and we European of we focus and quarter, sequential into by our the reader for additional supply our gateway visionary two than typical latter their new supply return delivery component and shift to due visionary quarter, and better-than-anticipated to also reader a after Regardless, reader retailer’s years the retailer third and

in Our with weak robust in China. North reader America revenue healthy, macro offsetting printer-encoders second-quarter IC demand demand for remained

third to demand see quarter, we remains soft. fulfilled printer-encoder while Looking mostly China the

a we with IC gateways, focused backlog. are reader drive reader in IC That for sequential decline end-of-life, and partners Indy-based designs. focus Indy reader Indy third-quarter rather Chinese the and planned Our reader Impinj normalized will selling product Like our quarter enter ahead reader today E-family-based revenue. on supply our of inventory built inventory than ramping and IC IC has typical readers third

week ICs. we new endpoint last launched to the Turning Impinj MXXX series RFID products, RAIN

the designed the MXXX, first The with MXXX most and the and in read in at the Impinj features time. the the market, performance place, right advanced tag, help ICs enterprises are the to series, at right right

per expect wafer to to is across manufacturability of use addition XX% die also additional targets. businesses tag broad reliability, and compatibility range a has allowing XX% with items. consumption, enhanced a long-term than With growth single, It lower MXXX the power MXXX, drive to of margin and tag key MXXX antennas, we drop-in small RAIN a adoption. component the our MXXX In the Impinj more

In property, pleased that approximately to that defended awarded infringe federal are NXP NXP am jury I the asked for Washington successfully the allowed a our we prevailing upcoming relief. NXP. do in in in million willfully. endpoint leadership with issued lost jury not do one turn an injunctive trials by $XX.X ICs trials. In Impinj position now intellectual federal June, Impinj say the found separate in endpoint industry, a attention found The we ICs California Impinj and leader our than Texas our two patent. against have innovation in July, California infringe patents. jury to two and patents, to XXX damages profits, and we Turning court We more

third-quarter come time, through so our cycles long-term in through have again. opportunity the several see confidence we our as strong, today’s same lower company stronger. opportunity With revenue. doubt At headwinds from it, and before, remains some we closing, retail green industry In vantage been and in will we point We see a apparel. driving and shoots our no those have have position leading do growing cycles I in

quarter constant incredible work to vision. financial team every bold again you. of I and Cary like the effort third by good our I for I’d outlook, turn thank to driving for Cary? with my fortune Before over honored Impinj to review your our feel call member the

everyone. afternoon Chris and you good Thank

today’s outlook. quarter call, results and I financial our quarter third On second will financial review

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

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

and safety-stock IC platform to reductions driven in wins. decline Looking weak retail offsetting we than our more endpoint expect quarter, by revenue, growth third the inlay-partner a apparel demand sequential from

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

better-than-anticipated availability starting decreased. revenue and our gateway increased IC quarter. gateway allowing us systems driven On expectations, a On reader and revenue basis, decreased. Second demand. sequential increased reader Systems reader to revenue basis, Voyantic year-over-year component reader and while revenue reader second by quarter while IC exceeded a gateway included revenue revenue service

with sequential systems expect lines. we in ahead, Looking in third-quarter all decline product a revenue, declines

mix. in XXXX year-over-year lower IC quarter mix, specialty XX.X% driven product industrial and was quarter first a IC systems with lower XX.X%, sequential in and margin product product second Second driven increase driven by smaller was margins XXXX. quarter endpoint IC and The gross specifically XX.X% margins, by costs. The endpoint was by decrease compared increased

margin to we gross expect Looking to our decline. third the quarter

marketing belt and expense Total third operating being million decline million $XX.X we $XX.X expense with quarter similar tighten million. $XX.X in million. second $X.X quarter was sequential on second expect General $X.X administrative $XX.X we in as Despite our Litigation compared and a to litigation and was spending. development quarter second was expense, million. expense operating Research expense XXXX expense was quarter $XX.X million, Sales in million. and XXXX. expense was quarter first

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

was margin EBITDA adjusted XX.X%. quarter Second

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

income Second-quarter per was million, diluted $X.XX basis. non-GAAP net on share a or $X.X fully

from contributing cash the XXXX. to balance increase. totaled cash, $XXX.X $XX.X quarter wafer-delivery compared second in million million. first million quarter the MXXX $XXX.X Inventory to of the and up timing million $XXX.X equivalents cash prior million, the the XXXX We second quarter paid with sheet. Voyantic Turning Net ramp for initial and in with $XX.X ended totaled $XXX.X quarter, million, investments and with

including Free totaled Property used for million $XX.X quarter was million. inventory $XX.X cash Second million, million. net cash was by purchases activities $XX.X flow operating and negative equipment growth. $X.X

our turning outlook. Before unique few our want to a results to I and guidance, third-quarter to highlight items

by due lower gross ICs. First, fixed third we margin quarter anticipate on points, XXX revenue primarily less basis to to costs reader and approximately decline

that with recovers, investor margin in targets gross outlined remain confident day. our at long-term our revenue we And our recover margin confident the we As I are will it.

based income rates. have tax estimated to non-GAAP on include our we updated taxes Second, statutory net

Given net rate our our file remain see for the Please to our revised this least following below NOLs, tax estimated for at payments view of our cash income well next this a few tax treatment. trended non-GAAP retrospective years. we expect

to reduced have our are our wafer focused Third, outlook. timing adjusted aligning better and our our inventory we purchases, on wafer-delivery

impact quarter. to third those quarter fourth efforts be inventory. currently to expect We We inventory to expect similar quarter second

view our believe on month’s partners stock. market based safety excess demand, a inlay IC revised of our we have roughly worth Finally, of

Our the third quarter sizing into fourth a guidance stock, right that quarter. progress tail with safety assumes

our to outlook. Turning

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

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

On the and and $X.XX. we loss-per-share reflecting loss bottom $X.XX between expect $X.X non-GAAP non-GAAP fully million, between diluted line, $X.X net

our In for closing, team, the Impinj suppliers support. to thank our investors customers, and you want ongoing our I your

will the question-and-answer open operator session. the MJ. now turn to call I the to

Piper go ahead. Thank Today’s comes with Instructions] Sandler. you very from first question Harsh [Operator much. Please Kumar

had ask I Yes. for Chris guys. and a Hey Cary, two Thanks letting one question. for me you.

I fourth decline? positive uptick correction. might if was this that of the worth this inlay inventory correctly, around if is of quarter stock about with well, some to this was dovetail come I quarter it comment then So could why thinking at XXth, or and rollout this be so But inventory there’s a I into about the – safety your month’s logistics might the July provide fourth can third of sort today color understand I trails guess as left. as this month I’m into the I’m why the what, might that offset into I so think trying we’re you but sort reading – understand the quarter, there’s a think anticipating whole you a I and not spill won’t partners. wondering

that Thanks Harsh, this Okay. take I’ll Carrie. is question.

into down factors third in decline. to to endpoint our the are that our Looking assumes is going that sequentially. quarter, be be few There mid-XXs driving sequential going revenue IC a guide

of to want I unpack So those right each now.

excess quarter when is their product of shipped second as ASP higher your growth general anticipate will million point, hundred second we’re pulled. then to ahead determine as First launches those three much in burn burning the the merchandise. down of project commercial factors on seeded in we Based to launch. stock timing roughly masking we – Unfortunately, in those and from ICs And to as two and logistics view we the of QX. of possible. ramps MXXX large of demand, The several down attempting applications safety both weeks current are authentication in multiple our success more

tail can, two as into doesn’t so And are – we out our as much happen It’s the fourth months. add be going that the Harsh, – partners of the going I’ll orders it to all two that of burn identical, quarter so have fulfilling third said down guess inventory is quarter. still specific Cary IC And will over to Not for our in the that, a but end there take I ICs and we’re products. we’re need of tail fourth. over as it just, the

And of Thank guess, substantial reported pretty your that I large talked growth. a then about color. for you yesterday, I got you. customers, one they

comments back in of some So there your I answer I first – guess kind that the logistics into question to is already of inventoried going that asked, the manner Is your customers? the to ramp the stock referring sort at factors? safety is stock part some the is in that to safety all debacle the of of that – or you’re in to is industry due the macroeconomic related basically happening detail

Harsh. Thanks Yes.

I’ll and might Jeff step and try that – I’ll take So in.

obviously that – ICs we deliver continue we partners. to – enterprise, deployment into So our – to through through

yesterday, are ours of that on As partner they safety sitting also reported IC stock. large

the them remarks. know green growth the for is some I and in market, So demand even prepared shoots though my in there

that fulfill shoots – their inventory. those is green reducing as whatever existing partners by Our and expectation demand well by our as

forward. up they IC So up – be there’s tightness is that partners very what it down and the IC a and we’ve that got safety going are stock supply, inlay consequence that which inventory, they’re as our bit. channel consistent made now a inventory recently built until comments of the to burning saying, the we seeing They being some significantly worried in built with going about on focused are about excess

Yes.

us retail the is that beyond third pushed So quarter. for recovery least at

you. got I

Thanks Okay. guys.

days, as for we Dennison’s demand of always online. further be I demand including a more reasons and that partners and front probably and and that – new even coming ship their the broader would don’t in selling shipments Avery are us I XX can proceed with – when elongated up can to of variety our importantly add up that’s would market, our to but by programs prints just just we line

factor made – a comment timing in, prepared to have I Chris you point and and that you So that would – his remarks. to a back in

We’re endpoint anticipating than year on unit over IC greater a basis. XX% in growth year XXXX

be queue. guys. Thanks Thank I’ll you. back Got in you.

Okay. Thank you, Harsh.

comes next Ricchiuti Company. from with ahead. Please question Needham The go Jim &

endpoint What Cary, outside help good just would XX% just seem been does your expectation wanted point for I to suggest, with some unit on about market the that first XXXX. months? growth it And based that Hi, through afternoon. has volume six follow-up the in on translate Maybe because to, could for of retail way QX. I expectations what that. your think, QX, in to it recovery the soft you

the for Thanks Jim. Hi, question. Yes.

XX life of Day half yes, we about up back that there is a by middle year-to-date We see see you’ll increased our two in roughly volume the the through that billion our So is units. XX% of XX% map on number, step When of that the the Investor to you a in our basis our down year. year-over-year announced you’ll year. in XX-Q the first June in that that date our shipments quarters had to

a called half that first bit the billion year. in the XX units XX of half assume did more can units year, you the than we the little of first So billion through

come to we you relates I’m is should these follow-up in the a understand The your to that of about maintain QX levels then levels these low you of as you are bigger EBITDA margins. for about maybe the as your it think previous I revenue the out at And question were to is than trying Okay. intent OpEx and have thinking? – lower you QX perhaps get bit OpEx talk we to areas. lower this just could guidance And is gross how levels little adjusted how of

Jim. question, great Yes,

our tightening I third down spending, the So, as noted, million. quarter. coming signaled would on belt is was in OpEx and so litigation are expense QX, QX the in also that be I flat $X.X we roughly

that our assume line. we But spend, absent are for have guide that litigation been the my tightening spending yes, So this revenue level in of quarter. same given black on spend, lower would third the belt litigation

Okay, thank you.

Jim. Thanks,

ahead. from The Canaccord with Instructions] Genuity. Walkley question next comes Please [Operator Mike go

the Great, what retailer systems systems your is remind maybe out pause a shifting European they bit or us could rolling for pretty thank are much little cadence a is quarterly more normalized and the it with you. or Maybe business done system strategic business? the to just a you

done, say They for I’m not over I’m going Mike, little it going pacing. to thanks the are just and us. about tell to joining hand you Jeff to a to bit

were additional brands. European the our completing retailer second Yes, third quarter, for second question, into your phase of In the phase visionary beginning deployment and Mike. their thanks while overall the we

resulting of the shipping So third the of in the and first into of investment into quite end in quarter, deployment be a effect phase, phase step third from the that brand and third had to we’ll this in the customer across whereas But is quarter, layering and down second ramp overall XQ again, shipping satisfied to we beginning with date phase XQ. the footprint. store ramping its increasing its

the And the into in add than third size of did the phase this we Chris. second. the I’ll larger – – is that deployment quarter is third

So for which that the the essentially phase, pacing phase, third to fulfill but the of second increasing we’re is continuing losing completed. is benefit

little on two one because to versus think from that opportunities? weeks a up that bit maybe bit up would And adjustments, into of new Okay, you a thanks. the from I endpoint some – the clearing is weeks QX about helpful. talked in lead we three bit inventory about QX, inventory. opportunities little still So then and That’s a case kind the to it’s side, of think the up absent QX new seasonally clearing of a just two maybe to little these

good So it’s QX framework about a to endpoints. think

guiding this not at we’re time. Mike, QX So,

enterprise through COVID, to you the after going in the ability and us QX The a It’s not right When partner’s coming still right covering quarter along, We’ll lot. as – anything to quarter get for growth inventory opportunities better now given partners that we’re it but we’re early insufficient our put watching macro and are a fourth as to be predict our dynamics really the recovery, and what fourth guiding see put all inventory. further all pieces quarter. overall going basically together, saying and and burning view supply, size their of fourth inventory we – we’re destocking retail with there. – of associated together. have We’re down too where those

Understood.

Okay. Thank you.

you. thank Okay,

question Jefferies. ahead. go Mark Please comes with next Lipacis from The

fully for either Thanks a question just and does does so the could programs. questions, a like do year this you those growth? could before big or to top in then the you Can like my get – one that be wondering grow XX% a Any us. how sense And Hi. Thanks. of it ramp? to on color this customer take at new could organically long give you larger what does happen be – consider impact it you those quarters, sense degree? to these with taking before you does And on us like give two customers customers because your not they like like of kind a – your ramp you ultimately line two or grateful quarter, how to could and that, for how of ramped would give ramp more I’m ultimately of

the it. it. appreciate Got call. joining I for Thanks you. Thank

When customers, that’s got Don’t talking think ramps that we’re them it a about size So And for of fully phases time. just the they’ve these thing. really they positive roll of the planned, negatively. long typically take even of the mean, enterprises, years. takes large for a some do. deployments to their these out, I

ramping who time. persist We the are transforming quarter. Both out You’ve volumes They’re sustained. rolling ramping They’re are ramp of fourth and They transforming. see quarter. volumes takes see opportunities their have systems digitally got enterprise. customers, endpoint in quarters. the over multiple We again We IC talked that ones see about ramping. across we that ramping. already their third in will enterprise, giant IC They

just Jeff retailer, the rollout and when focus See with enterprise customers up opportunities are third wildly at and the There loss retailer, job of because use benefits with make with wildly even And successful. large thing done enterprises, our to we’re successful on are And in phase, successful, as European cases. if going as successful of opportunities a we’re other simply not we’ll to and with ensure scale them self-checkout. in prevention use all they of a start sure then visionary that’s with we because, their deployments. noted, the we’ve done deployments deploying they’re And and as that cases. our phase our they they their are that retailers, Impinj we’re other those same see other come our transforming RAIN wildly be additional And is RFID. is still

you. Got you, very helpful. Thank

Okay, thanks Mark.

Searle next question MKM. with ahead. Scott from ROTH go The Please comes

million of Thanks IC in et got questions. comments, Hey, the systems ongoing, $XX And that it’s normalized a looks you’ve my good are I’m earlier trying the U.S. range today, afternoon. probably Maybe of demand to so. looks like deployments logistics other follow-up retailer, provider, for level taking like cetera. some that what then European or understand on endpoint to it

two a of to get that and I of clip. next other into rate year does plus non-retail mix? And up, in you I’m growth think normalized then mix I at Avery we look as ramp was XX% looks there. the your wondering what mix am of about some like terms apparel looks if today? like non-retail the of Dennison with provide that like start you what the growing So, us idea yesterday of these think I IC could your having pretty upbeat What demand beginning apparel projects and we’re is the starting level questions. real some guess

Yes.

the the a Scott, IC impacting So, highlight you. the QX is couple has that. I endpoint. transition that growth Cary. on QX factors to would this is Thank what question demand first real from are in

opportunity in seeding several launches. an those shipped QX. the mentioned ASP MXXX That I of before as authentication we ICS hundred before, commercial First, was high

the by commercial volume won’t wait in until X. We’ll the launches. that following through products level pulled immediately in – to see those rebound of we are see the actually volume So,

comes that So down.

pulling We two on IC also three to it pull that see month trying are we it’s a stock weeks. the about down – down we right by safety now, also see to

ramps in that’s the much offsetting now. So, masking the of of demand of quarter. The than as big or general think is of that logistics the logistics, And real – much projects. logistics ramp than merchandise bigger right general that bigger What’s is that partially merchandise. is as the think

the industry basis. won’t now, industry year QX, Last a shipped year-over-year modeling know of XX% until growth part as XX sits IC billion greater what units We early but in unit total. Impinj year on we’re this the ships right endpoint than

exiting start Cary That does happened Thanks. XX% that just negotiations once the the – levels? from to into quarter mix at we follow-up, you – of years one ramp the pricing typically general the – time, hasn’t wafer customers into going normalized on this given there merchandise into XXXX? that pricing have the first just of get availability go And because Then this and of to fourth the in quarter. year, point Does as into in then, is issues. front, return back get the other, couple last the logistics of to we

our estimate only to the talk then the XX% So and Jeff penetrated. going of about still question buy I’m Scott, hand and your pricing about and first the to over to negotiations. Cary Retail apparel take part is

merchandise endpoint We market. opportunities the supply still see general enormous is and in opportunities layers IC driver still and then being chain retail volumes. as on Retail huge of primary growth there So has growth top. logistics that

our and time. We long-term in a over confidence opportunity, also long-term see have adoption – see It’s has increase opportunity increased we we secular that in industry. long-term will growth

inventory to to going of our consequence to are given the be we’re in back, out wafers, our noted the this we’re the as that come and that take they’re had an through. those the there me that we’re we on of stronger now opportunities, consequence call, seeing just going are future. partners that to side, we in let stock, some strengths their down shortfalls enough now delivering have confident as at to leverage is the But into manage have we over shortfalls dynamics we’re going inventory a we burning the safety downturn, going So, through entered work we’re XXXX, product we to that other gyrations situation

as we provide report be can them fourth, forward. about the We’re in quarter. strong. in we’ll tail into fourth a will third opportunity the visibility out But work us going front There on our know as as the soon to and long-term and more as call going through much more the information of next remains we of

To the your second of to terms part question happen. in and negotiations of when pricing

maintaining pass maintain the would integrity what’s want our model. don’t onto case our going the absolutely late I but the has low-to-mid to of historically, Scott, project increased couple price I model, in you goal are last to the our been those cost margin in margin order happen years Yes, right ASP quarter correct, in result fourth have occurred declines single the customers. and first now, digit as of the our is negotiations in in the integrity we quarter. costs to reiterate That hasn’t

to tough Impinj. cost that we it’s unless decline do a for So, see

you. Thank

you. thank Okay,

This the our remarks. question-and-answer would closing concludes over I conference like Chris CEO session. any and turn for to back Diorio, to Co-Founder

I Thank today. to remain joining like thank your hope and safe the are you call Thank ones all you you. you, well. and MJ. and would for I loved

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

disconnect. now may You