PI - Earnings call transcript Q1 2018

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Operator

Good afternoon and welcome to the Impinj First Quarter 2018 Conference Call. 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 Chelsea Lish, Investor Relations. Please go ahead.

Chelsea Lish

Gary. you, Thank for XXXX all to Impinj's discuss Thank joining quarter results. first you us call, Co-Founder of quarter and On provide Diorio, with and and Chris today's Impinj's second will Officer quarter overview Impinj's and follow our XXXX Principal Brodersen, results Financial a detailed and of strategy, first Eric XXXX market review outlook. performance; a President COO our brief will CEO financial

the management's Baird call the open for Impinj's is call eight and also the available Linda in financial Please on along quarters will We Q&A will then on last quarterly Company's Eric and CFO questions. for Chris prepared join session. Consultant the website. with are data the note remarks that

statements of those from represent are Securities historical only the conference during they the this Before Private date our of note Litigation are call. regarding statements forward-looking the such extent we expected this start, call Act facts, we not certain meaning Reform that our performance. of including objectives make Any the we and within plans, forward-looking such To as make that statements, outlook XXXX. will

Executive applicable where otherwise, for law. operations or we future all results or state by based update any to subject except about result Also could required explicitly additional statements whether of call, as a information, in We see as the of events new While during forward-looking obligation revenue, today's except our current results will and section turn make Chief annual financial any alter non-GAAP Factors sheet do expressly Impinj’s and file otherwise, Chris? I call on statements, are are statements Balance with these differ risks. information disclaim Risk undertake the quarterly a Co-Founder SEC for to are on the to non-GAAP statements our and we basis. materially the reports not forward-looking and Officer. Diorio, are or we actual cash expectations flow risks Chris and now because Please metrics reasonable, metrics we any believe measures. uncertainties.

Chris Diorio

Chelsea. for you, you all the joining Thank call. Thank

XX.X of First end high is guidance. quarter revenue million the towards our

exceeded quarter. inlay partners by the as Our reduced endpoint in several even their levels million XXX units IC sales inventory our expectations

expect partners, first continue of correction XXXX. will in We our IC mostly endpoint that result inventory half to the

We I our on reduce believe expect map half during channel the also this endpoint Based views to continue our refining of of to inventory Overall, taking enable inventory, the improve our we to our pleased am executed the on volumes. will year. product in the to us visibility the call. projects. for start inventory the customer quarter exchange second successfully and steps XXXX. booking product first to exchange, low materially We enhanced how we I management better end for point demand mark highlighted and sales last by Impinj the trends rallied our normalizing IC the team difficult Also

correction. XXXX lagging inventory first We anticipate IC consumption growth volume continue shipments XX% our endpoint XX% with consumption user to due in end half end to user to unit the

reader year-over-year difficult expectations. XX% XX% quarter our on a decline constraints a of under revenue to reorganization comparison faced versus business basis, quarter Deal on timing, a first versus and systems led IC Our seasonality, first decline sequential XXXX. APAC performance modest a an and supply basis

on like business. moment projections, Based on opportunities. reader this significantly to important project a and meaning to quality enthusiastic a quarter our our the based, remain systems mix our improve timing in IC declines, we reminder, systems quarterly supply meet size results. expand of As are in about factors current and Despite are third size, many and will confident the our the systems I'd second and of quarter deals demand. take

the on and to those continues team solutions. replicate quarter opportunities [ph] tracking to asset A is Americas new key pipeline XXXX. those range the we on right channel first productivity successes Asia, to of shipment execute EMEA selling and solution and have teams reorganization EMEA goal Our of in throughout our this in [after] execute and verification ramp remainder and strategy, build the both teams we expect traditional to

and partners that help to as We implemented embedded programs drugstores incorporate original ended We we market, business, activities initiative XXX xArrays tags. a based case of platform new view patents, success to we applications. convenience first with We a key ItemSense, announced Connection strength reader which quarter including Monza the Electronic for stores. two partner Turning XX,XXX Tag Japanese at their at We targeted hosted a our the National and win deliver Retail HIMSS by allowed extension value to RAIN our connecting trade-show issued Summit of and items and the deployments beyond quarter Federation, including the Government the XX,XXX business, METI's channel create introduced core asset new module, RSXXXX studies Google. include supported several published the end users. and and

The first with assets. hospital Parkland Memorial Hospital track

procedure flow. Clinical The improves University the second with duration patient and visibility Teaching

to we Officer a our "We test took the of deployment the that quarter Aware bookings and $XX our are quarter is the are tracking Innovations the of Bart at to our Patent for testing, Based our customers' to our positive despite this realignment and about half at position remain outlook ITE for We prior that for always we up Summit, partner value revenue our believe sequentially, the first Through use Finally, decline, $XX the U.S. long XXXX for term. equipment customers." between best the ensure sales second vigilant summary, the track reliable, point that strategic and We our Connection turning gateways. and and customer using is backlog best quarter our learned first Trademark most on get use million readers the to successful we product Aware we’ve our easiest Innovations said, believe and needs. inventory, highlighted cash. second Ivy, Impinj to Chief development us business. on positive installation Office, execution, partner million. asset In make meet Solutions platform well and facility trends starting internal steps we on in products revenue

finding to Our Impinj focused their for items. CFO this quarter, business. closing, over on review and outlook. toward everyday to scale Eric our call employees and for our digital the for the financial right search their work I quarter will turn dedication of now vision is candidate our efforts for and In all the ongoing, would detailed like thank to second life Eric? I hard

Eric Brodersen

Thanks, Chris.

our I that you with unless or is of exception results, to a want review first Before explicitly financial stated statement XXXX remind non-GAAP today's the I operations quarter basis. on of revenue otherwise,

are included release cash flow between non-GAAP our on on a and a earnings GAAP and our our website. Our non-GAAP basis, measures our as GAAP measures define reconciliation we balance sheet available how is well metrics as on

quarter. XXXX we the call on quarter received full. product revenue First discussed million, our compared exchange the prior in $XX.X We was in earnings concluded with million one-time prior XX.X and payment

first systems. and the Our XX% product was ICs XX% endpoint exchange mix including quarter revenue

prior gateways with includes quarter. XX% As the compares and ICs, the XX%, mix This readers, in respectively, and reader a latter software. reminder,

down Excluding compared systems the down XX% the one-time was prior revenue and with exchange, product XX% IC was quarter. endpoint

expense, We plan. impact X.X sequential quarter. First mix in expense Revenue the and million. quarter and million, the decline. quarter. cause the administrative XX.X%, quarter million with restructuring the operating with development employees first sales was the margin was of million was general the million, $XX.X Total XX.X excluding was gross compared in and marketing expense prior compared prior restructuring of Research XXX primary consistent quarter with ended our and X.X was was with X the XX.X%

million. of adjusted million and with in guidance. Our in the million XX.X per for prior diluted quarter count with the million adjusted share, GAAP loss was first million the net was EBITDA first loss $X.X X.X a quarter EBITDA net or using weighted share Non-GAAP was a for line X of shares. of loss $X.XX loss average our compared an XX.X quarter

debt of loss $XX sheet, XX.X million and to we On offset Turning million a $XX.X an the cash, net was cash quarter. XXXX, the to to million equivalents compared March in cash our date to XX the we with and refinancing reduction balance million loan our approximately in long-term the X short-term prior million a quarter first in by term $X.X basis million term In investments ended maturity increased increase extending March XXXX. receivable. in accounts equipment and and loans

to We XXXX. March date $XX also drawn facility on not extend revolver. amended We've the to facility revolving our senior the million million credit $XX of maturity credit the

down the million Our XX.X receivable quarter. from was balance XX prior accounts million, in

from to balance million, sheet execute we quarter. up remains plans. sufficient have strong our $XX.X totaled Inventory million capital Our prior the X.X and

total increase inventory $X forecasted in earnings a We remainder sequentially first million than of on systems our quarter at reminder the due second some the first. fourth of approximately XXXX in call quarter the $XX-$XX quarter we expect declining now quarter, As inventory roughly inventory to second to receipt the through growth rather XXXX. million in

meaningfully half to We decline expect through inventory second XXXX. to the continue of

have quarter's earnings our As does of most confident finished material this noted in inventory is growth that call remain not whip risk. than we on last inventory We goods. quarter's obsolescence rather

quarter $XX.X Turning of now in to we to XXXX our $XX.X second revenue million. expect outlook range million the

to EBITDA $X.XX $X.XX a to be million net loss the expect adjusted in We range of million.

non-GAAP of between per million first the last our X we expect tightening closing completed diluted development plan and On in count focus, between sublease In call, by loss $X.XX product million shares. we office remote facility share working On $X.XX a a quarter's expansion, Seattle global the a share restructuring of share per a to announced XXXX, our we based our revenue loss million bottom-line halting XX.X that and and and quarter to of our several reduced outlook. plan non-GAAP light average weighted workforce, on offices. reducing XX.X X.X

turn intensely about noted, strategy. of cash we focused our the leader As to open session. on Chris question-and-answer I the operator remain now executing to team the our will the vigilant call usage

Operator

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

Mike Walkley

better still about through and views XX%, And confidence you what change you're customer XX% walk if seeing around Chris, what channel you've industry gives maybe us despite in to Can as talked customer project. refining channel projects? inventory you for demand your the inventory? you you end map the --

Chris Diorio

understand better end segment retail at and to the our other channel So, our end with level inventory. inlay and we partners in segments. customer growth both in see We customers engage

aligned XX% those overall cited XX% in roughly to and match of you've hearing and at terms in inventory what data what been growth space. about We expectations have the our end assumption volumes, customer are others from others unit

Mike Walkley

expect on sounds like it a some listed you business pickup are than sequentially we in in recovery the QX? your little a just systems QX that to the then softer talk on this is reasons. the just -- to QX how should the going expected about think Or see you but stronger you've component And you piece sales, business? on then and what's about Can of side, going

Eric Brodersen

this Chris said on deals factor. experienced but a we QX as project call, expect we before deal we a about highlighted the that talked on APAC Mike, you about systems play modestly there can based that we restructuring the reader on as is supply can of From is a business systems standpoint, so systems our including in the are but a factors improve range can expectations. QX also talk timing to side, below say I that these IC think idea was and Eric. the mix timing the business We business

Chris Diorio

quarter Mike cut ICs, in up then expect we to and to fully of had catch regarding significantly we be a answer the reader quarter, out question, the and And shortfall expect last first by quarter. second third we your supply in part just

Mike Walkley

overall relative in is several think think of walk can to that you you us you inventory terms reduction, Just through million of reduction. finishing reduction about talked I where unit kind hundred it

you it be upwards talked billion think I of units. maybe could the

terms exiting your far So growth XXXX right think are you the what could future for we how now? versus mean that inventory then in of do run endpoint that correction? And

Eric Brodersen

inventor, that burned what's XXX of for position to there happening have correction be we down focused of going but and partners that that's we 'XX we know pockets inventory our of yet Mike the and always be believe keeps inventory we the that our channel half need call inventory of work, our and to current highlighted is on the that first to previous inventories several channel continue to track to completed units right assessment I'll to the in in of on assessment correction that know complete. inventory move channel stay we million mostly us the that current on have we

Operator

comes Please go Nick question from from of Jaffray. Piper ahead. next The the line Johnson

Nick Johnson

and program, quarter. new if I I'd the going channel a this on trying your you've sales it am marketing partners? [indiscernible] more [indiscernible] partners train say is about add first turning maybe over reduce an press help understand offset partner to on. to - maybe had to more to release your like to or help as the Congrats out by increase to could

Eric Brodersen

updates capabilities is and are to go-to-market and from of appropriately partners designed based best tiered overall channel around our our to that a program overall channel better extended our overall those aligns our aligning support Eric. and to the on Nick, really this system team and our implemented Impinj partners, channel channel our team so we've tier. of overall support

sales it be marketing we will around optimize more be don’t -- the our it an as standpoint, it OpEx think efficiency actually base. we we I driver support from a represent of and core partner will expect increase not to an

we're partners. target in. is continuing we've from the So, and to they in into excited about that verticals gotten partners great verticals that our And feedback channel our about leverage our specialize through key grow

Nick Johnson

or your rate competitive is locked dynamics it a in to prices you of contracts competitive entire different there? And then long endpoint purchases How are taken have at look you ICs, have for kind I it customers, your when yearly customers. And for? some from for across it a business? environment talk [reissue][ph]

Chris Diorio

hasn’t in Chris. the changed the is IC From the standpoint, endpoint this level. competitive So, at significantly our industry dynamic

as NXP competitor, really be the primary in space. see market -- we a continue but competitor, leader to to a continue We the

are company the platform with drive We intellectual strong the integrated only and overall. continue RFID we within to property business RAIN

and on Tell really focus focus we part question. again your about the on it's doing. we think I of what So second me

Nick Johnson

would the customers across in your wondering prices terms, with I'm the yearly customers of year be if if all or same endpoint ICs locked different kind it it's you the in and Yes, by customer? just how it's for whether for

Chris Diorio

Okay, yes.

So, negotiations negotiations for those and generally the first typically pricing generate same the quarter it's customers. all do We the in last throughout year. pricing

Nick Johnson

one versus last up then - you is if came your just question vertical a And something was from number but obviously quarter I retail bit this through expectation. know talk me, maybe of performance surprise. that that

Chris Diorio

versus in other other you say verticals verticals. of performance, terms you when for So, example verticals retail mean in performance the

Nick Johnson

Correct.

Chris Diorio

beginning IC growth as -- and strong So, we do we infrastructure highlight we fixed see see continue to to to as alternatives retail, but especially handheld move in solutions, retailers see reading. investigate endpoint they -- they begin to

to automotive -- logistics, other those airlines to industrial, which are tagging. investigating the cosmetics retailers supply and focus two see seeing categories time, way to Healthcare the of even And same healthcare. core marijuana also other up verticals, partners many track chain then for growth are products in everything everything are asset products verticals cases food the products. our includes from areas. to healthcare, partners At all We beauty broader automotive to and and example in we significantly tracking and

base our and into opportunities deploy platform those goes those opportunities. after Our they partner

Operator

with question go ahead. The comes Hettenbach Morgan next from Stanley. Craig Please

Craig Hettenbach

Now year what the back at Chris, the like of recovery question bottoming half just into you're the second of your as talk of from look what a level? trajectory on the a first just year. framing out as and high is even Can of the visibility you about kind you maybe half today process, half? the expecting the into

Chris Diorio

at terms our in the of execution, our we're our And market unfold and executing we're according market guidance. one of our plan how Craig, expectations. against time we're against the So, terms unfold, quarter a really seeing to in seeing

Craig Hettenbach

know growth that, of mean, I things initiative, there recovery? back the inventory for kind year, of through dynamics getting into we inventory some the getting for watching you Okay, are from anything from the a an of hopefully that what is the through be depletion, I understood. again but half should

Chris Diorio

that relative the we I to think overall performance our look you should expectations set. at just

growth business. not just but not endpoint overall You the Monza, at systems should just continued to IC, of look sales, platform overall our

only should also strategic to and against our And we're You but against after should opportunities. against -- that measure measure going deliver ability supply not look healthcare opportunities verticals, us retail, our in at chain. those

Craig Hettenbach

follow opportunity then on something really see just at like leverage you an a if maybe could competitors will And there? you initiative. Japan when within? your could be what's you about up talk it. that? Can advantage electronics if Got the And I that Impinj tags like just that, where high-level potential Where initiative? to And

Chris Diorio

as Well at -- opportunity. XXX year, in there're initiative initiatives a billion at even billion now it being that was and per connecting that look the announcement looking messy have companies Obviously, which was you and stores, original initiative like that the items hundred many convenience that an just as is a which expanded.

having to of can underlying everyday step a being those there competition in ultimately that connectivity the in are that's initiative. of large continued the but also thought think is go key and in well platform a to solutions our For I I whether very opportunities. for decade, whether drive presence I being go for win items. I be ahead our fully us think which going to our Japan, how initiatives can't processes many we're back say our after that And kind sooner integrated and say the successful, efforts leader what delivery well -- positioned be a us position space, than driver traditionally terms more innovativeness of to of and

Operator

The Company. next Dougherty go Anderson question Please ahead. with comes from & Charlie

Charlie Anderson

to speak of margins basis, and I've the on over with like couple a into products QX like maybe year? I there, gross the year even big maybe Then their gross going half back year got a factor and it just was follow-ups. you mix I and to sounds start wanted like-for-like of think sequential know I but margins. margins

Eric Brodersen

Charlie, performed the expectations. really this highlighted it's to on on systems. highlighting business is The our that like-for-like relative that around the margin gross basis, a mix in we on according that so our Eric. been QX, expectations I'll margin by challenge start to as our overall the mix gross that's underperformance our

business be it As in of percentage go as QX margin. gross forward, us expecting a we for and of really increase will our driver systems are to a that relates to

Charlie Anderson

are didn’t too. last products just product, us script How you that still I can that Chris whole it's in wondering help new about then, the on helpful? hear in more any update anything ecosystem calls type think this maybe of I and and the And this to part had couple of time approach? would you new to highlighted call important there. this be it of even if I'm it going year can going Is something year be products potentially next the was update dynamic year new

Chris Diorio

Charlie. Sure,

we So, this which introduced new we RSXXXX did reader the mention that quarter. module is

leading new of So innovating we’re material just to market innovating, don’t as I new introduced to we we it we wonder and last our platform of in continue the want going a products products expect what we said layers guess But say the and innovator, on be where introduce across is layer, market call, to revenue I I become our we see available. percentage XXXX. all all we are continued us, we products as the

Charlie Anderson

last And me. one from then

increasing wonder are competition product out get highlight market treating your in any of partners should opportunity unique little to far specifically what as grocery ways think throughout that food, that's wonder bit with good of on relative some to have maybe you end maybe just of that how and gave I concerned but as set. the overview pace. your the in of some You you markets, a I I

Chris Diorio

other we partners significant our example for Yes, in food the for on it happens Asia like be example to to whether food in in excited, opportunities of in products net perishable stores going smart Japan to refrigerators. or initiative so see convenience things parts

primarily ramp. long-term deliver we're mature being and is to don’t to against -- just type areas We a its grow it directly products food immediate about those delivered as the going in but expect retailers as We see food growth food look fast because size, as What really we we gigantic just that worldwide type those retail that opportunities and and consumers retailers, fast given around opportunity. It's seeing to don’t think we example an expect it's space overtime, part selling biggest retailers opportunities. that on the at U.S. retail. of to I products. are don’t time food that early for some So, opportunity

so, terms it continue overall in initiative. to retail And of we pursue our

Operator

Capital question comes Mitch line Please the go ahead. RBC next Markets. with of from Steves The

Mitch Steves

going a you that's numbers out mid-teens, on implying are the you're at look the Just that. question it to be in mean doing this million second implies commentary. had you about back guide to half if I XX just Since that going endpoint I break

revenue fair from back So, just is half from of growth it modeling perspective as to assume see year? you'll the

Eric Broderse

Just Mitch. a second

when Mitch, think our guidance you really methodology, works. So, it about

said, and time. on we're focusing guidance executing Chris delivering As at one quarter our against a

standpoint, we a just focused with deliver the we on quarterly really QX prove just so commentary we same outlined to half respect and as And each guide. ourselves to continue on second want to guidance from say

Mitch Steves

to I guess and one follow-up here. clarify just

the if in you're up any revenue? meaning be is growth XX% revenue reason to there endpoint XX% unit that shouldn’t true up the going So, terms endpoint then near of growth, why shouldn’t

Chris Diorio

of happened to volumes pricing beginning as our already. to There’re is overall first the the at mostly And in pockets pricing. endpoint half obviously into said, at with, the we as inventory there our in especially end always Eric said inventory inventory Well, increase we we customers year. And XX% of our we our inventory. through there’re burn expect the the expect key reduced pockets to we’re is may for correction, XX% remain second of dealing the the enter of the IC reductions grow as half direct in year. our year that we as that consumption And but correction

Operator

Ricchiuti comes Needham and Please with ahead. [Operator Jim go from Instructions] The question next Company.

Jim Ricchiuti

least ASP the that in you the about saw half. X% second the or far the in in you year? was seeing similar last to call in at you’re XX% thus erosion that talked this what to what range think I Is

Eric Brodersen

Jim, this is Eric.

seen haven’t last call. market in pricing the changes material the We any in since environment our

Jim Ricchiuti

wondered sense how a retail. What’s talk these in about to could you your the on? I bit as And if could Chris, long pilots infrastructure these pilots little regarding go fixed I of you a wonder about it that’s seem if because could like the little you just bit longer some these the on for system side? pilots, elaborate opportunity that does term

Chris Diorio

Sure. handheld of And chain Jim, as infrastructure, I you immediate know, in the and the I hours that mean we am this terms to verticals, can previously, of of lead aren't and about going most inappropriate. could the healthcare say I isn’t said in in of as the and model cases talk and think topic. in in that are use there, more preexisting a for handhelds many because there use verticals cases those opportunities fixed guess supply I I

tracking of locations fixed going it in or with infrastructure for boxes position or in assets or the happens is case items you’re the be, whether the the USPTO. with So to if example pallets

there’re other fixed significant verticals. so, and in opportunities And those two infrastructure,

supply Now time in labor they additional of look fill said doing as a general less and Retail to more prevention dense. cases, they before are maybe example, their or very case focus and inventory, we is turning or visibility closer on customers case, terms give for look stores. to infrastructure as environments fixed XXX% up their significant to time on to or want chain either visibility, complete items a they inventory gets inventory tagging I to their benefits loss use retail in using gets either that. free In at within at want visibility complex in a see to what retailer the and for them store which

big But we premise a the And that is infrastructure continue relative pursue tend types verticals. we in is other a those a to go gigantic of consequence take time, to upside to we and of And replenishment fixed that, a replenishment. as day just omni-channel -- fixed for as reasonable truly it retail future, the us amount infrastructure really, end see the the and to in and to course it. do pilots at of allow that opening, opportunity net omni-channel want the after retailers it enable that of them enable will that of believe so,

Jim Ricchiuti

in in know for Are have they get take little split Europe more the just sense departments to I'm U.S. are is? but the going or a a that of retail, in them specialty in these pilots the as underway of while, I mainly just stores. to that they it's where you to you're activity trying where activity terms seeing?

Chris Diorio

can You my know, we a in half a Asia, worldwide. yes. and that I to yes Asia go was I visit I that, beyond Japan see don't straight question there's just a best world I I further week in is, is think and Everywhere, answer lot, opportunities, the go just Europe across answer Jim, around a North ago, opportunities America. up The opportunities

Jim Ricchiuti

lastly, Well can ItemSense? provide on you there is any update

Chris Diorio

take want that you to Eric, Sure, one?

Eric Brodersen

platform at checkout in at a revenue recently work asset healthcare on still percent Parkland most in ItemSense website a deployments pace said, we are published the is and tracking fraction. ItemSense examples. So, deployments, there's an platform university prestigious our XX and important those small teaching would ItemSense as couple underway. now our but full continues I QX of and of since They're studies. Jim, the both we went That And hospital, to our review encourage [indiscernible] 'XX, on and more active than pilots have of case and and

Operator

our concludes for closing Diorio over session. to and now would back any remarks. I Chris question This the answer like to turn conference

Chris Diorio

I'd I'd you. the by execution like today. call And quarter. to again the just past for Impinj this joining their like team close thank everybody for thanking to Thank

Operator

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

Chelsea Lish	IR
Chris Diorio	Co-Founder CEO
Eric Brodersen	President, COO and Principal Financial Officer
Linda Baird	CFO consultant
Mike Walkley	Canaccord Genuity
Nick Johnson	Piper Jaffray
Craig Hettenbach	Morgan Stanley
Charlie Anderson	Dougherty & Company
Mitch Steves	RBC Capital Markets
Jim Ricchiuti	Needham and Company

Impinj (PI) 7 May 182018 Q1 Earnings call transcript