PI - Earnings call transcript Q4 2018

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Operator

Good afternoon and welcome to Impinj's Fourth Quarter and Year 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chelsea Lish, Investor Relations for Impinj. ahead. go Please

Chelsea Lish

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

session. We available will also call quarterly with Sales for on Vice CFO in and are Impinj's for Management's and data and eight questions. financial quarters Q&A Chris the of on the Breard; Impinj's last prepared then open join remarks President are website. the consultant, Eric will Linda along Dossett, company's the call, Marketing, Jeff and Executive the

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

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

to Conference XX Executive Before announce the Telecom there. in now Francisco to financial the on in & Morgan many results, March company the Officer. attend Chris? see call Chris to San Impinj's Technology, Dana you Chief Stanley like Annual ROTH will Media of XX. February moving Co-Founder hope will on and Point We and I turn the Conference to Diorio, the I'd

Chris Diorio

delivered strong you, share. with per you our a Thank Thank Chelsea. joining and EBITDA XXXX We the beat close record revenue, fourth to all quarter guidance earnings call. We revenue. non-GAAP of the for adjusted on high-end

we equivalents IC to by inventory also basis quarter supply marking maintained revenue XXXX and We and I'm and leadership and $X.X quarter investments cash, strong team. backlog short-term increased grew and our million. on declined, feel basis, year-over-year we our we grew, into recast Fourth with XXXX. pleased sequential year how a the On momentum endpoint heading cash a ended basis. times solid seasonality. our year-over-year in endpoint decline was sequential internal of while yet growth our and execution. another On basis, returning on X% reflects line We expectations, IC revenue with inventory, a lead reducing steady in an a have normal expected

relative year. items recall technologies, to a Reflecting already moment, per large that while to our Internet trillions on other our We vision to is and it give IC is XX number the XX-billionth also of billion quarter. digital shipped in connect endpoint life for

IC Fourth in and highlighted quarterly delivering reader revenue strong another our very trend XXXX We are expectations, at beginning record the growth. gateway quarter secular leading by market been was sales. and whose a journey, opportunity huge exceeded whose of strong systems is again our has and

based, revenue broad in but are showed the opportunities quarter. sequentially year-over-year backlog to IC reader declined supply third Our strength, reader fulfilling due and IC

supply solutions in opportunities exclusively, although chain, driven not by Our we significantly, verification. enable are gateway the for shipment

We quarter keenly remain systems on are execution. in energized and success focused the by fourth our

did embedded market, existing and China, adoption technology have with readers grow, advancements, publicly visionary beyond prevention. brands as where and in inventory continues new to RAIN-based brands and RAIN to in solutions Turning wish-list and piloting Alliance deployments, announcing consumer Xiamen, retailers they retailers the included most visibility, even presented deploying asking self-checkout retailers at meeting frictionless retail the tagging for solutions like RAIN We recent a devices. Decathlon that or such now and loss

retail, of into December in enable as partners month to at International or completed case, will and contract Association, use built on verticals fulfillment. at plan XXXX, National toward Retail of we or door and New pallets they we on these solutions our business-critical their that global City, fourth add deliver a tags. RAIN IATA, show platform. out Board build their in data this facility. automatic traction cases, verify the many in address York our Beyond others, dock all as Federation as the our Impinj's to the see and years. of cost-effectively solutions supply-chain step providing we announced time shipments exhibited and in they have In Last meeting Transport baggage move inlays we Air significant And tracking and opportunities the Governors technology annual a first

Our were me. how items. progress, we our every attend, or connected first us, In continues platform XXXX, unaware year, of we retailers year most amaze our to

improving enhancing worked loss and reduce customer costs to year by experiences conversations our our to on focused inventory-visibility over and then sales. our to this over. back programs multiple proven how prevention. returned technology, expanding how Some increase By booth contrast, self-checkout could and see on visibility conversations The demos times inventory frictionless and platform centered RAIN-based

as inventory-taking. loss Our visibility, robotic booth as and solutions smart fitting enhanced well rooms, showcased analytics these supply-chain

businesses are building Engineers to see first demonstration XXXX retail first saw look in people, cloud and now item-based significant and with about step We our the diversity endpoint delivered with spanning Wireless summary, ever-increasing We and verified also chain. every received of like an into helping We He I items enabling division delivering in and authenticity, authenticate cloud welcome Impinj trillions playing growing locate of ever-growing ICs opportunity Engineering Impinj's Internet truly unique the pleased of outlook. profit items. brand-protection In quarter opportunities Impinj most our Engineering. has each everyday Women In delivered confident, Vice outperformed centers. subsequently excited software turn in of achieve turning those I his his in continued silicon, financial President solutions Executive sustainable experience employee would we leading Vice as to thank I supply quarter Vice scaling national building and in the XX recruiting, as and enabling radio rapid, demand IC vision. role award detailed President Impinj promoting Intel, engineering on Things. to services. opportunities Infineon. growth. forward first that has to Society endpoint platform targets us and extensive organizations, and at talent from the development, in to for to We the Group including platform call welcome passionate in and items' another that Intel, our for retail our Product our prior systems, Mecklai and retaining showed platform at than our a industry Hussein innovation, well services strong and enter leverage will and and as as and an a registered in to platform. connect, am our focused of our businesses team more We Eric dedication, with women President to as service recently for progressing experience Manager only Architecture previously another organizations, our to principles the commitment to Hussein their for focus which years' Hussein review RAIN and teams, Eric? commitment on a exciting He transforming experience General leveraging financial growth, and and the our over to position as roles. on company warmly engineering technical the in of

Eric Brodersen

Thanks, Chris.

Investor XX% XX% full year primary and the $XX.X revenue $X.X for and in revenue of except this which revenue of year-over-year. sequential is grew related exhibit unless or in fourth a XXXX Relations a XXXX, and how Gateway basis. endpoint of in XXXX. Recall of fourth systems. website, revenue this mix GAAP we XX% basis. A appended on sequentially X% product IC onetime sales reflecting first took reserve related compared in revenue in Please revenue XXXX XXXX. to third exchange, recognized quarter GAAP million, Fourth $XX.X sheet release exchange our quarter our million earnings reminder, $XX.X quarter between revenue script, was XXXX and a with quarter balance comparisons for $X.X we on available version million and to million quarter we and and for GAAP on fourth to measures, quarter as grew All guidance. our explicitly quarter is versus million accounting and stated XX% quarter for the operations written included a cash otherwise, ICs Systems earnings the over-performance available sequentially year-over-year see XX% XX% Fourth website. XXXX, growth. reconciliation are non-GAAP declined driver year-over-year. non-GAAP define and measures, on today's statement our non-GAAP a the As were fourth our was metrics well our as flow Endpoint

IC for Sales an as are was quarter decrease systems, $XX.X mix change attainment systems improvement quarter revenue results revenue reflects, was the pleased share million. with a with loss $X.XX G&A our XX% $X.X quarter million indicator $X.X X% manufacturing $XX.X and IC excess or the strength. our mix primarily with and the lower view, focus in our in fourth year. unit Non-GAAP channel than strength Total negatively latter the second our net loss shares. XXXX. loss million, higher to was million, XX% endpoint $X.XX both compared And and and $X expense revenue start diluted XXXX systems declined incentives due the year-over-year due the a view margin quarter share, gateways. customer million on The XX.X expense marketing expense in with per million quarter considering revenue obsolescence customer net quarter, within was fourth year-over-year, and of million XX.X% weighted with was charges. which in $X.X XX% quarter XX% XX% due my $XXX,XXX $X.X exit attainment XX% by count Adjusted our ASP and include compared to ICs the quarter pleased XXXX. million endpoint execution volume decline challenging $X.X XX.X The Non-GAAP correction offset and of ICs to business. per count our was we an of a year-over-year EBITDA expenses, using excess XX%, sequential and was the of was the of endpoint in discussed of million, $XX.X year-over-year, was are for Despite $XX.X prior calls. and We our in quarter in was XXXX. We primarily million a using fourth volumes, gross to Research and inventory grew loss Endpoint higher cost $XXX.X diluted year the weighted-average prior $XX.X a of was was in decline million, compared incentives loss partially million. for with in volume strength decline, The quarter full and of businesses. and XXXX. the XXXX million we prior development quarter prior compared million business year-over-year million loss obsolete of revenue, impacted Fourth business million. on similar overhead systems shares. in Revenue of XXXX with or the growth to by and fourth IC quarter was expense on $XXX.X in charges. fourth the and with record strength for due reader average systems year-over-year adjusted in primarily GAAP straight share in compared the $X GAAP XXXX. respectively was share, million. containment. operating EBITDA prior $X.X determined a net year and fourth we

and quarter with we the million, Turning compared quarter the the with $XX.X to million short-term prior of $XX.X equivalents investments sheet, balance quarter cash, ended XXXX. $XX.X fourth in million fourth cash and in

and was balance receivable fourth accounts the Our from XXXX. quarter quarter down $XX.X from prior million,

over $XX.X down from NOL federal $X.X quarter million. prior Our the the $XXX.X total end-of-XXXX million, and million million prior Inventory $X.X was year. totaled

to XXXX. inventory through to decline We expect total continue

Before would endpoint sales. typically I seasonality seasonally and offset IC in you transition first like endpoint margin Also quarter, annual expenses lower by business. to In our first trends quarter increase we the lower. quarter, are IC gross systems in the of negotiations quarter, typically remind sales volumes impact stronger fourth systems revenue guidance, both quarter. In the over partially the are prior to see I pricing while tend to the first

our given size, seasonality results. typical Although mask timing, any can these systems mix an role trends, play in in including that any and number all are factors where revenue of quarterly year, project-based important

$XX revenue of year-over-year at in an decline range the quarter with considering sequential the of range to the seasonality our expectations. Turning million revenue XXXX the we reserve-related recognized expect strong especially outlook, XXXX. quarter XX% $XX is midpoint our $X.X The million to in line million, in first we first improvement

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

line, $X.X on bottom million average we gigantic share non-GAAP the and execution Throughout $X.XX share in non-GAAP to loss share per XX.X we million, shares. of and and and loss count were $X.X opportunity. weighted between of XX.X per momentum focused a On intensely diluted expect $X.XX regaining between XXXX, this market on based a

of want with turn now thank feel us, our and support for session. just to everyday call long-term our ongoing record our the investors customers, two we to question-and-answer behind open we team, I As will digital exit as the momentum. suppliers quarters strong your for of to the our we XXXX, consecutive operator drive revenue items. life I vision

Operator

you. Thank

question Jensen We question-and-answer Instructions] first ahead. Piper. The begin Please session. with will from the Troy [Operator now go comes

Troy Jensen

gentlemen. Hey,

the year. congrats end of off, on solid the First

Eric Brodersen

Thank you.

Chris Diorio

Thank you.

Troy Jensen

the Hey, first gross margins. so just for maybe Eric, question a on

pretty stuff You prepared of But sequential some remarks. into the all discussed did the play the ASP erosion mix well in at decline?

Eric Brodersen

ASP in Linda, in decline erosion, to want From our in to gross a in part margin that that? not impact standpoint our period. that's sequential do add gross of you margin QX,

Linda Breard

with customers. within with is that. add incentives, impactful going It up really mix systems a good I'll and was items try sequentially to primarily then business is was to related other which to the that our volume thing volumes our our

primary the are those So drivers versus ASP.

Troy Jensen

And in in the think Linda. you either in XXXX? one be do anyone then, on thoughts IC in maybe just Okay, will or about perfect, rate of XXXX for room, the and tag it of how XXXX, you tags growth what growth what here was

Chris Diorio

Troy, from all yet yet hopefully, I out don't as collects to will of And speculate. published volumes. so from RAIN numbers so data you be industry the terms know, the from have those suppliers prepared or RAIN Alliance, The we're don't the soon. the in IC data analysts key endpoint we Alliance, think

somewhere any XX% but year-over-year going the at have growing not that XXXX. years, predictions been range in note or the we're past growth, X back trends X making the will We for historically of

Troy Jensen

just fair. is kind line here, Okay, And about into of it, could the tag revenue on to what think ASP that's then, do growth? we so that can how expect we you IC a see erosion tags, subject back

Eric Brodersen

from partners. our the with negotiations as complete really reasons, of pricing we're Troy, on negotiation, - those outcomes expectations, to where is silent this we our time competitive Those our with pricing annualized and line in negotiations. the you're going supply period remain familiar for concluded but

Troy Jensen

guys question for me cashier-less mentioned Last you understood. applications. Okay, then,

these if there are U.S. overseas? mostly deployments any are Just curious or

Chris Diorio

this Troy, Chris. So, is

and of I frictionless not what obviously not I that have of RAIN self-checkout. I am interest of are prior my actually aware to there mean so is Federation retailers There loss they're deployments want as that tie they we self-checkout. ensure frictionless go I I've mentioned in say room, overseas. do they as aren't any when prevention, see That will any. that U.S. you But - that can currently. calling self-checkout some two also based I don't the show, calls, step Retail from the And a spoken there lot retailer personally any. doesn't have But together of increased them. know to the And when deployments around Looking National out used to

Troy Jensen

Okay.

understood. Okay,

in Okay, I wish you the best XXXX. here

Chris Diorio

Thank you, Troy.

Linda Breard

you. Thank

Eric Brodersen

Thanks, Troy.

Operator

be Hettenbach will ahead. question Craig from next Our Please Morgan with go Stanley.

Craig Hettenbach

Yes, thanks. watch XXXX? to of key Can of you incremental you're systems' geography also and in color for seeing, elaborate the just on by kind momentum some that verticals any

Chris Diorio

Chris, So have and answers this question. that of both I will Craig, a I Eric to think is couple and probably

two our just we in so partners, momentum, future. of So opportunity, overall, record our market strong terms systems about groups good we significant and and and customers, had highlight revenue the industry in others of terms with IoT quarters discussions feel -

and of good say In see we Eric opportunities terms additional in systems I'll there. shipment opportunities, of verification couple let a words

Eric Brodersen

shipments. yeah, systems overall supply was and operational primarily, focus year-over-year with the on focused The and continued IC verification, reader gateways but both in on momentum a business, shipment chain where business basis. not particularly really efficiency supply in the gateway got Yeah, really missed the chain the on logistics, we're we strength our improve reduce those helping and exclusively

Craig Hettenbach

of do the of Got environment back modest when you cost to aligning kind OpEx, the what then, follow-up, made terms if arguably last term? a it. in for think you Chris, growth structure adjustments feel today through just was as but then, some have year, more And you I to opportunities nonetheless a intermediate how kind difficult relative over of

Chris Diorio

question. I'll take that Linda, think go Linda ahead. let I

Linda Breard

Chris. Sure,

of reduction approximately So and number XXXX, X% headcount exiting into of including adjustments of made coming a headcount. our overall a we facilities some

we it to or very reduce look where about good sitting investment move we're feel add the for to overall. value other things to we organization today. either we invest thoughtful and think where that We're where more about I opportunities

So we looking be forward our head as thoughtful forward and we're and to as we to very go investments year. into continue about XXXX, diligent we'll the

Craig Hettenbach

you. Got it. Thank

Chris Diorio

Thanks, Craig.

Operator

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

Charles Anderson

the Yeah, you the like specific kind will I it thanks was color also questions. a on be looks appreciate taking I QX. not margin. margin. But gross to of gross But know my are guiding for down. QX it on curious I

there it? because I'm OpEx just like-for-like guess, going what's aside, on Then sort just on curious, I'm that's curious, is I basis a margin. too, mix kind seasonal if you are did on degree you speak there just a the QX, So, of could some those historically. expenses gross seasonal of follow-up. on anything those I mention about I've in of there got think to and And

Linda Breard

This Charlie. Good, take is Linda. I'll that one. Okay.

perspective we a our that talked in with So into fall price sequential our our QX, IC, endpoint XXXX, we from we our head the negotiations as which XX% the approximately customers of fact of about largest is business. on we do

seen we've So But the and other be in always. step-up you negotiations quarter revenue see sort a that From is year benefits margin. the of drive the and compare. a might to first this. what you healthcare resets, step-up, market There see an that every that's things payroll gross quarter typically see you'd up of have those typically in that in perspective, first see the some the small on tax year things not compression impact OpEx typically We you past, the typically can overshadow and the both perspective. gross margin related increases

Charles Anderson

of product to And talked a kind you wanting cadence, is pipeline past you looking maybe the great. I on about how know the of… then, question in new then, sort Okay, just there? And Chris, for

Chris Diorio

go sorry, you ahead. did - Charlie, oh,

Charles Anderson

where efforts things to you think help Maybe us I about some of talked those can you speed if Thanks. the update just are. too past wanting adoption. Yeah, on in do that

Chris Diorio

the into some as grow their - both those I on and, our we the consequence significantly coming think is put have well I engaging with see an we of efforts and for various with at in the forward and focus the as even in those bodies as But the And it's to that offering. deploy you market accelerating the are standard partners market, growing industry industry those things lines. earnings customers we that direct one script, end illustrative and to one Alliance RAIN really end things help side us of the others need of and solutions here retailer solutions order market problems, our opportunities. customers a partners in more customers, in the we to end-customer significant participation as of there have So with specific along mentioned and like saying, our in that course, adopt is solve you that example

should industry. be to in putting expect And us into adoption forward significant the so an efforts you driving accelerating in going growth

Linda Breard

in shows more fair it's as attend first thing too perspective. of that Charlie, first so investment is and sequential heavier the the we increase in non-GAAP on year One a we a And, quarter OpEx quarter, this Linda. QX, the in seasonality than in trade the have later number a from

Charles Anderson

cash with Great. If thinking How year? I QX. curious just of negative Thanks. one just I'm kind more about the you EBITDA for are guys too, echo the use in

Linda Breard

investment and are company. on, Like very cash sequentially use and Chris perspective. the as and talked focused we up I about, investments a quarter as earlier cash on both cash in we balances, Eric cash and our a were fourth said So definitely

manage We further QX guiding than will and year. take in And to since to any just we continuing harder way the we're cash past extrapolate. focused it's be on QX, have out not been

Charles Anderson

great. Thanks Okay, so much.

Chris Diorio

Okay. Thanks, Charlie.

Operator

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

Michael Walkley

you. Right, thank

cash it Just work the your as last you building throughout you want industry be year? working Is do inventory is it you level, can with or Thank the you. on level? inventory a source something to about it maybe next that how question, down of through something feel where

Linda Breard

is again. So, this Linda Mike,

to definitely XXXX. But to in what it inventory So guiding similar will at decline - number. generate further look would be it would in reducing XXXX, not XXXX. we We're cash our in

Michael Walkley

good that? sign as inventory inventory of about And I also on in industry? we the of the the Are picture you clearing? how that for getting that, guess, through there the let us you in industry. some maybe we're incented comment could is industry, just any then, then, Okay, post this inventory lowering? you're clearing. on the level backdrop the know bigger through thanks. volumes kind And the But of you year Can a competitive the just environment feel on change just

Eric Brodersen

So, today, Mike, a and we as trends correction endpoint the previously. of and forward And we unit typical period believe expect, volume resolved we yeah, inventory as to growth is yeah, return more IC this do said going overall.

So from a channel inventory position, we corrected. believe that's been completed and

secondary You comments back the comment in that made respect won't hearken with pricing had reasons, you I'd really where a my environment. a - line about a the from bit endpoint on competitive little volume we talk negotiations question any to how really pricing to we expectations. with we a the about cautious business, be - to overall about process competitive our the to environment. further due and want completed But

Michael Walkley

maybe last change Any competitors there? or entrants or for during more endpoints qualitatively out the inventory? the in Maybe any systems, that's just channel the period new year changed on anything Okay. transitional this

Chris Diorio

Yeah.

So, Mike, is this Chris.

haven't significant changes competitive terms the of in metrics, we recent those In environment. seen

Michael Walkley

to about that the how today Okay, that maybe industry, adopted be the baggage opportunity RAIN can longer and on tags? we can should great. large the Last question how industry? penetration size the for all What's opportunity term across be of think airline just me,

Chris Diorio

couple a of So, Mike. points there,

a that's in out. you tagging freight rollout, or has going numbers, doesn't right the said numbers year. about and only It's other also worldwide. doing. IATA But basically little a So, they're first, across of X infrastructure quoted, else. bags should significant own anything Their be just it's of build-out of north terms which not something in and the is range the is a any to to talking what That at but then a bags we infrastructure anticipate multi-year rollout, bit just build their what airports facilities bags alone. billion look going And count they've but a multi-year They're there now.

in of and the terms systems. fact, RAIN the signals because the in ICs what moving opportunities as with is And on very one see strength that's operations. forward great call, aviation our moving drive we their they're or and is the I those thoughtful deliberate said that aviation rollout, And airline a industry multi-year endpoint of both of prior critical industries I that have they feel piece to and technologies forward we industry It about at really So really a least of for delivered. adopt. fact

Michael Walkley

Great. Well, year congrats wishes XXXX. the strong on and the close to for best

Chris Diorio

you. Thank

Linda Breard

Thanks, Mike.

Eric Brodersen

you. Thank

Operator

The Mitch next from be Markets. go Capital Please question will ahead. with RBC Steves

Mitch Steves

guys. question. I guess, But pricing drive the kind the on help side And down the if - Can the I issues you it's bit wanted why me came focus larger that component my portion Looks be of to margins a for understand we're up? business wouldn't of mix Hey, bit margin to or a why here. Thanks sequentially. taking a getting of just like revenue. gross was? systems the secondly, is if seeing then, margins here, sort any the

Linda Breard

drives Mitch. this within The the Yeah, mix really is Linda, the Right. margin business there. systems

definitely QX. thing payments the and have customer from primarily can our that definitely, higher that are sequential on a quarter products we the systems customers. a to lot volume a the which of incentive that perspective, about factors QX impacted We sequential volumes with this and is did business from impacts earlier talked a we So within two positive And sell different perspective higher with those margin.

Mitch Steves

Okay.

than from a guess as products were a follow-up of basis? better I others terms what high-level selling in there, like just quick mix, the Just

Chris Diorio

bit I can change were understand little a think to mix. smaller mix QX reader a primary component back we played you how systems the you QX were The ICs, fulfilling if backlog refer overall the reader - a when ICs in shifted significant the of amounts on of as

Mitch Steves

Got it. Thank you.

Operator

conference this over the our gentlemen, any closing I back to and session. for remarks. concludes turn like to Chris Diorio Ladies question-and-answer would

Chris Diorio

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

Operator

presentation. concluded. conference attending And thank now has The you, Thank sir. today's you for

disconnect. now may You

Impinj (PI) 20 Feb 192018 Q4 Earnings call transcript