PI - Earnings call transcript Q4 2020

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Operator

Good day, and welcome to Impinj Fourth Quarter and Full Year 2020 Earnings Conference Call and Webcast. All participants will be a 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 like to turn the conference over to Ellen Davis, Investor Relations. ahead. go Please

Ellen Davis

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

then open section CRO financial Cary trended prepared will the of join call the We Management's Jeff call with Relations and Dossett, is and data company's website. for are Impinj's in Chris the session. along questions. the available Q&A also on on remarks, Investor will the

such Private partners, the they the of and please performance; of will regarding COVID-XX; and make of authorities, potential including our expected of facts, expected statements date we make forward-looking customers not that prospects; of outlook or forward-looking expected the note are to XXXX. those Securities the impact this and or call statements results, products. COVID-XX Before our we Litigation To such the Reform potential meaning the as extent Any we or government production of and within certain the the conference our only availability, are responses objectives that business, company this during operating on adoption statements, financial historical conditions of or our plans, Act start, call. represent

statements obligation information, risk the uncertainties. could to are we events differ concerning a Please expectations more are statements, except these or of about new and results as required subject reasonable, alter update expressly undertake, annual reports not actual any and law. see based for believe We statements future current disclaim result the forward-looking COVID-XX, we including we quarterly forward-looking whether with in risks. as the do by to on While materially and applicable factors because any SEC risks our any or filed information our otherwise make,

call, Balance are During for explicitly measures. measure. for cash except financial revenue flow sheet financial state is numbers in or a we flow and are net non-GAAP otherwise discuss GAAP basis non-GAAP a operating metrics today's Free where used on cash activities. except cash all we

XX. now and ROTH Before I'd outlook, March X the Sachs Telecom and turning Virtual Conference the connecting We like XXrd and XX, Goldman Diorio, CEO. Chris you on note Media results will Technology to Conference and Conference on the the Chris? Impinj's Internet participate on in to and Co-Founder with that to Stanley to turn company I these XXXX at February the events. our will Annual March Technology Morgan of call look many forward

Chris Diorio

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

continued a into fourth of Our We quarters turbulent markets growth. guidance our That we a IC. Year, sequential XX the with to quarter two impact on despite Endpoint shipping company the close year momentum COVID-XX finishing Billionth ongoing of year. revenue core results fourth our our significantly the milestone strong today quarter capped revenue a announced and New exceeded

have future endpoint robust than in brand for an for highlight retailers growth our facing growth of crystallized unit is not we but any apparel our Full early everything and employee is dynamic just of and That the especially opportunity the foundation That overall amplified RAIN within that XX users. think for achievements three the and starts despite our believe to-date begging an us our achievement our closures realize compared Fourth incredible our more record. proving That as of of far anticipated. back is achievements a the only than well-positioned can in $XXX shipment to fourth opportunity. significantly setting Pandemic-related which and grasp, reaching there an IC an days it. amazing and year-over-year end for IC revenue Impinj has revenue Impinj's quarter on our originally the to and see think with Endpoint COVID-XX our of year, the of were surface it's year fulfillment XX trillions topped highlight design retail ago. with effective will apparel both the the to in supply pleased I be vision years I and systems, omni-channel growth I partners Endpoint marquee pace store chain in retailers' call every market, time IC to logistics million only billion quarter connect owners' record I incredible as As opportunity with the know more revenue with will for ICs proposition retail healthy return apparent to to Endpoint our we also Yet our opportunities items in RAIN's history, this retail I connecting just scratched continued just is had We why conversations needs including units to increasing a IC doubling quarter for headwinds. orders billion from win. and milestone On per capitalize annual solution. revenue COVID-XX future and I first value proud, momentum exceeded rate became revenue, Impinj the also annual opportunity. omni-channel in to number expectations endpoint today.

back of the anticipated wafer continue inventory growth ample those shortfalls. forward, semiconductor in experiencing pandemic. the shortfalls Looking to we XXX-millimeter for endpoint Today, and opportunities depths wafer ICs. see built foundries in mid-XXXX We are widespread

demand In XXX-millimeter wafers. accelerating ICs inventory our output. MXXX accelerate transition. Regardless, that needing MXXX our will goal Impinj The by with unit XXX-millimeter between that technology advantage first and inventory a Impinj and producing quarter capacity navigating to endpoint Even structural challenges. readers with the also declining as We growth investment and tight many partners we more saw competitors. and most capacity, has capital our are sheet navigating of COVID-related twice capital us than and year our year-end. efforts our MXXX foundry of XXX-millimeter per quarter other ICs focused accelerated volatile advantage wafers our dynamic us the changes. the in post-processing still revenue our systems to capping strength closures ICs retail we accelerating and press our ICs quarter-over-quarter wafer XXX-millimeter returned ramp respond that of XXX-millimeter requiring ecosystem's half in that to to will our XXX-millimeter XXXX, with a maximize inventory use strategic Fourth XXXX investment on by investment, to die reduced XXX-millimeter of enter XXXX, to wafer adoption build our to crossover limited with with MXXX balance as in exceed store end that In cycle-times users our while on on reader the

distributors in a transition their to we first and sales-out XXXX prerequisite improvement positions transitioning continues Continued deployments. decline for at channel exited with revenue. gateway phase in North levels. and allow inventory In lean our to end user solution with our an expected success logistics, That operational partners quarter-over-quarter American normalize chain reseller an drove large inventory further our and supply

that and large quarter in modest and first an large remains but reader and second generated we supply pace fourth uncertain logistics reader revenue chain the American end expect XXXX, quarter opportunity user deployment timing. North in similarly Our despite modest revenue

On milestones. achieved the two we retail side,

our leverage The deployment but that quarter fourth first which was self-checkout compelling Asia the revenue, based significant a in highlights drive global a can brand partner a by with generating modest solution. network

loss engine a and account key million marquee The our that is opportunity. loss for we prevention partner for second, a a $X and at RAIN-based us for retail for win a received prepayment prevention

a our prepayment self-checkout. our partners. against represents opportunity latter potentially that self-checkout opportunity for consumer as these solutions inventory teamwork tagging. enables loss hard, Continuing against their come. was the theme, this on most that deliver in turn prevention important in case are to the for and win I will and our invention quarter will XXXX. ago open platform delivered We Both XXX% in that refined decade unlocking drives great we successes that of engineering second identified a with our vectors use partners visibility Consumer up focused retailers and believe compelling Impinj new and our XXXX of after but with problems years one the broadly which defining platform platform many that result retail to end roadmap. growth We user a go-to-market in inventing with year believe

the side, and IC the the two product reader. On families, delivery introduced MXXX groundbreaking RXXX endpoint new we

readers On standalone its system we formalized algorithms our away migration from the refinement after porting successfully software our our and gateways. side, onto ItemSense,

overarching seamlessly an and that advance for to platform essential and continue our so improving we goal to continuously of our we step deployments, with architectural market time landscape partners that use evolution, of software they ubiquitous a can reading. driving making developing easy repeat As

are partners We to bringing and life digital to include experiences services deliver that that our extending everything. people, to enable software also for businesses compelling

forward delivering on investing We platform that and again XXXX. to in continue across entire our look investment

position through to such Looking strengthening back and They our for investment quarter caring the on nurturing resolve and In solidifying closing, Capping team, driving a uncertain an of redefined remain our we our I invested the proud year. and XXXX, detailed financial I team We the how a I extending while leadership winning of Cary? extraordinary you solid grace. as the confident by appreciate another future over bold and will outlook. I in product year adversity and ahead. our work their Impinj. with want give year, and and this look call in our to turn gratified them, forward I our am heartfelt now year's first by market vision. effort COVID thank their to storm, to I and this inspiration your for tremendous review Cary and energized year past in culture together. that ability was a is our push XXXX and through opportunities team. platform, compassion our and To am

Cary Baker

everyone. and Thank afternoon, you, Chris, good

As the even progress The moment one-year our much to the and year as ago. we Today, to also on uncertainty had massive our pandemic I proposition our did Impinj opportunity headwinds, trajectory. more am in I and chain take I value joined amplified omnichannel strong approach reflect XXXX. we and a with convinced the when pandemic clearly want our my brought supply year not year momentum. I into planned. of grow was a scale fulfillment retail Impinj anniversary, Yet The to than despite impacted ability I exited visibility in and

to million, year-over-year XX.X% down compared from Fourth quarter $XX.X million our strong on Now, $XX.X million up XXXX quarter $XX.X was XX.X% with and quarter sequentially in revenue fourth results. third in in million up fourth quarter endpoint million quarter was $XX.X from quarter revenue XXXX quarter year-over-year IC up $XX.X and XX.X% Fourth fourth $XX.X sequentially in XXXX. with third million, XXXX. compared XX.X%

revenue assumptions our holiday also apparel and orders outpaced as Revenue the spring Year-over-year despite returned apparel proliferated. proved demand assumptions continued entering facing carryover inventory headwinds adoption RAIN quarter. Our growth retail about conservative. turns significantly

operational we endpoint was in Looking Gateway fourth while American reader transitioning large XX.X% a IC with sequentially down year-over-year while in quarter revenue with systems and first On revenue from comparison first forward, XXXX difficult XXXX XXXX. quarter North basis its Both revenue sequentially million declined. quarter up gateway Fourth sequentially. million, expectations. increased project our faced Systems and XX.X% $X.X reader supply revenue reader logistics and million declined. revenue compared reader and expect to chain both grow to revenue revenue quarter increased third IC a gateway exceeded $X.X the phase. IC year-over-year $XX.X revenue

loss deployments lesser indirect in $X.X primarily million, increased reader IC compared was a margin against and $X.X $X.X third loss was XX.X%, expense in growth XXXX. million, with and fourth-quarter loss $XX.X a in was profit in We the existing XXXX with million fourth product in in XXXX offset million, million. XXXX expense XX.X% compared adjusted compared and Research quarter per declined Fourth-quarter XXXX. million. share, XXXX, market Full-year The X.X% XX.X offset by million follow General share at non-GAAP systems was of was a XXXX and revenue. by of down or expect marketing XX.X quarter-over-quarter latter million, was margin XXXX. net declined compared using million and or reader $XX.X deployments, in with fourth-quarter the revenue a Endpoint partially by due trends driven XX.X% development in and compared due sequentially. including primarily and XXXX leverage decrease $XX.X XX.X% was new using million, deployed in $XX.X E&O million, higher partially XX%, by mix. compared was and a year-over-year $X.XX GAAP IC share, seasonality E&O of diluted sequential loss that $XXX.X retailer. with to was million. grew $X.X share of $XX.X operating was systems quarter quarter XXXX expense of $XX.X extent, expense per in revenue to count lower Sales GAAP shares. was fourth-quarter charges. XXXX increase Total Fourth-quarter offset spend. million. profit The and to by a driven administrative Fourth diluted was a million decline XXXX declines $X.X operating quarter million, revenue XX.X% notable share and third-quarter Fourth-quarter weighted-average XXXX in increase revenue, RAIN, retailers gains million. adjusted in have was was omnichannel mix, with XXXX with $XX.X gross year-over-year totaled million of American expansion expense XXXX. X.X% gateway net net non-GAAP apparel loss of revenue revenue EBITDA $XX.X a weighted-average driven compared net $XXX.X North costs third-quarter gross was The million $XX.X year-over-year by with XXXX by with $X.XX million of a XXXX. million EBITDA loss strength $X in year-over-year fulfillment, loss slightly was typical million the engineering first revenue with shares. $X $XX.X mix to by count XXXX. charges.

in cash the short-term fourth Turning $XXX.X ended investments to million quarter with equivalents quarter totaled million prior fourth and Fourth flow we $XX.X cash, Property cash $X.X $XXX.X XXXX the balance $XXX.X third-quarter equipment XXXX. used Inventory million. net sheet, down negative was and quarter in operating million, $XXX,XXX. of totaled with million, and the from $X.X cash in purchases activities million. quarter. $X.X million was Free compared

full For million. totaled equipment was purchases year, million. negative Free cash million. activities flow in $XX.X the net operating Property $X.X was cash $XX.X and used

lawsuits. and year from free the we reminder, the flow, a in outflow net of full class-action As used cash excluded shareholder $X.X cash associated cash with activities million settlement operating our

quarter. want to unique on turn our few quarter update first to a strategic of that I give to items want also to I a few an I highlight Before our were guidance, the fourth initiatives.

customer revenue deferred fourth-quarter a related of ongoing million engine. $X.X loss-prevention First, increased sequentially, driven to retail the prepayment by development our

the expect incremental We Then, operating related deployment we second-quarter XXXX. engineering and XXXX. expense ship recognize to incur the in expect in substantially first quarter to project associated products revenue that non-wage to

in Second, quarter, the in in accelerated bookings bookings IC fourth resulting strong began endpoint a third-quarter that XXXX record quarter. the

behind elevated first-quarter a a and end-customer our fourth into industry, order. demand every turns the practice guidance guidance, impacting than embedded XXXX we verify working Given with the lower our to quarter. semiconductor partners we assumption crosscurrents vetting quarter ongoing Covid-XX demand our supply revenue of in typical backlog and the to constraints Similar

quarter. seasonal our endpoint However, may stemming in enhanced that and ecosystem’s crossover first-quarter to dynamic, navigating MXXX, as bookings our vetting traditional dampen in between IC ramp second assumption on and XXXX well XXX visibility the our inventory growth backlog duration. declining the based millimeter is efforts the That revenue us the as from the

experiencing ICs. Third, lead first may long deliveries. our XXXX we high-margin are for quarter reader limit times long times Those packaging lead

the first as flow resolve XXX-millimeter the remain XXXX product operations in XXXX, investment expenditure accelerate Fifth, Our shortened the capital and and do times improved packaging in dividends capacity. guidance adjusted in IC not times of increase form quarter. our to wafer COVID-XX. paying we will begin until we post-processing side returning will endpoint assumes lead Fourth, to after other of committed the lead investment EBITDA flexibility. on This in breakeven

our market leverage. desire as press we advantage remain our operating will against ahead, Looking COVID-XX balance to our desire to drive headwinds

to Turning our outlook.

quarter XXXX. increase quarter a fourth quarter-over-quarter the $XX between $XX.X range million first be with midpoint in and compared to expect $XX of We million XX.X% million revenue the at

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

Impinj want On open line, session. our the reflecting a million thank shares. In call closing, customers and average we count million non-GAAP now our $X.XX I to million the our and weighted loss team to between $X per ongoing diluted between $X.X share suppliers XX.X and and share a between expect bottom operator support. loss you $X.XX to our on million, non-GAAP I XX.X for the the your will question-and-answer investors turn a

Operator

[Operator Our Morgan begin now ahead. Instructions] with will Stanley. from We go Hettenbach question-and-answer Please question Craig first comes session. the

Craig Hettenbach

I you, transition. the seasonality walked QX. does dampened color. through and just And of you XXX Cary, guess to bit there? the some Thank in expectations the you the that kind little around appreciate context, of provide other terms in any in mentioned a you dynamics quarter-to-quarter help of just starting all could QX XXX-millimeter And perhaps

Chris Diorio

Take Cary. it

Cary L. Baker

Yes.

thanks Hi question. Okay. the for Craig

entered So, October in QX. pace continued was on and I'd for November December the that bookings. we year quarter it way as and was strength say and the mild guide pace then accelerated, into the strong so evidenced and And the XXX-millimeter, with bookings the on -- our accelerated really has in first it in

seeing into what customers bookings we're future. the is booking with Now, the further

quarter. customer So a for typical should request times have turns us. extended the fewer what normal we anticipate lead the or as times And -- result, I beyond is say in

Craig Hettenbach

pluses through of of this Chris. things the any then omnichannel seeing versus the terms you omnichannel Thinking for you're in through the retail particularly on and minuses your Thanks year. as pandemic around follow-up see for in the business it and that. kind that impact Okay. of influence maybe of And some a and

Chris Diorio

Yes. Thanks Craig.

see fulfillment omnichannel we to towards retailers is RAIN believe the in deliver their and driving those owners ability noted to the brand and differentiator that I as prepared pandemic So, we continue do you in a remarks, revenue our receipts store in IC are retail US these XX% from XXXX. the but year was Census down had XX% Bureau X.X%, note I'll against omnichannel down the needs. store endpoint US receipts that -- if up

differentiator So about prevention we looking differentiation their we in benefit clearly The opportunity. is loss ability continue And self-checkout RAIN a see touch-free to essentially of to these self-checkout. forward is talked and as for the that it's retailers terms sell. self-checkout of a

spend out essentially to shopping themselves check during time the store. maintaining experience with consumer store associates can consumer the Our leaving the or either

continue RAIN to see accelerant and COVID-XX. efficient again so in to future we an as And differentiations the more for with stores associated drive

we believe -- RAIN already a leading overall, continue So of is retailers' and be key in the to the will positioning today and today aspect future. be will

Craig Hettenbach

Got it. you. Thank

Chris Diorio

you, Thank Craig.

Operator

go with Our next question Harsh Please comes ahead. from Piper Sandler. Kumar

Harsh Kumar

quarter that, Yes. Hey, Cary Impinj one that Or continuing all else of IC growth I from future? but the guys that in and thank is is sort that your market? endpoint so that is some Or guess, your lead are second that there market? get the can time on? to orders, happen The XQ facing this for to does you you saw -- longer in from an congratulations. of are lead implementation are team how from you. time is this of this foreseeable how tremendous you. I -- us Cary see something chain and that near-term the the is supply everybody what sustainable -- retail commentary I out December half going you figure results. end Hey, continue to happen trying in Chris, think is These and in customers Chris, I for had particularly mentioned end is

Chris Impinj

Yes.

holiday there with as holiday had of So, we say so certainty. there the will for answer was retailers strength Harsh, There's that, we anticipated the and benefits real the to inventory course the that's and less better so see in season season. was omni-channel with I and strength. a carryover spring associated than difficult well question some

as of lot now. and comes to quarter pandemic going where that towards strength hope where looking the see first how will lot rest of it we're only dependent continues guide right a out driven our in do one of we quarter. by at And retail. as the we A the side strength it's today on be the we're And course, are the world. be time, we that Of pandemic COVID-XX being U.S. well the the and a other and

Harsh Kumar

Okay.

ahead. go Sorry, please

Chris Impinj

go Harsh, So ahead.

Harsh Kumar

Okay.

ready what describing customer question were I first second that term was that you first that very sort Or operational getting this are Does the the chain supply with they results that they're where test comfortable implement just you they systems? particular in process? of supply customer are used. side my continue actually now is to nomenclature customer -- chain the transitioning that was that of of using of point trying conducting this I'm the a when to were think the So and understand getting kind as sort towards mean you to trial the means. then your a to is

Chris Diorio

Yes.

question phase out do they're of think I these provide once how the to side-by-side set operational customer systems. now because color some then more same in they of number do many the go other proof to systems believe rolls with sufficiently thing they also they out that customer an pilot facilities. you a a deployments. get these be significant future concept. then to rolling the when rolled past is end large along stores run they And for answering customers existing going will the begin any around or questions the associated We end lines stage and it's of first out live, Once cases helpful with

not particular live. business cutover. their kind end So confident how of -- rely seeing. or results can level again, as that that own on and the to they RAIN-based rely live to kinks data but they the internal takes out in confident needs, aggressiveness they the they're the customer they system The enough then they're getting existing switch the the of just After on it's have worked monitor and the it to run on can their they flip see they're and comfortable the performing. though their results was for they new And caution it's go it amount systems of depends system any to time get they're it

when that across transitioning when fully and go in So some operational, an oftentimes stores they okay and to so over. over they all facilities. it stage live entire we continues transitioning are once the facility. They work phase don't at Even flip say of and do to they watching they over other then flip then

where we to stand So opportunities. prerequisite further phase. in operational the that transition that's deployments And is transition and of further course, in a success for

Harsh Kumar

helpful. Very again, Wonderful. guys. Congratulations

Chris Impinj

Thank you, Harsh.

Operator

Mike Our Canaccord Please comes next from ahead. go question with Walkley Genuity.

Mike Walkley

shipping, Great. Thanks sure company? healthy on And for taking everybody was the celebration is my well. Chris XX endpoint hope your question. banging a gong on nice that congratulations for I the billionth call and I'm

Chris Impinj

office and in But I would hope were the we we you been. healthy and Mike, If safe you have Indeed. are well. thank as

Mike Walkley

there a Hopefully, is XXXX. symbolic gong

to Just a more. on just dig I in little want Cary, the clues guidance and for it. the all thanks

dig historically force QX of on last tracked suggesting Are you seasonality? time those and a seasonal just or to clues QX who've is to but guidance you a But year? to saw similar has just QX for Just us a puts even after little has the of I'm QX. for higher? QX bigger maybe on -- a I kind excluding commentary guys into been maybe trying your of year. dip this QX QX. bit about want is we for less-than-normal your last want some better just in quarter the Or long a to improvement little year bookings and directionally like takes. I understand don't in

Cary Baker

Mike Yes. thanks the for question.

to we QX, that definitely to dynamics So are there it's early too but highlight. changing wanted forecast

to endpoint then we're IC sure of and signaling future. we're -- QX. So the learn seasonality and into our obviously think we that been more the a that stage out further seasonality the industry hold, endpoint we get And once in quarter. to could seasonality and level again QX booking XXX-millimeter at that be from as we that basis can the to not of the move QX. bookings, into we second can migrate And relates on have lot that with IC. seasonality that's in need That's And super quarter MXXX on had dampened it as throughout in the XXX-millimeter we'll this combine strong customers'

On the mentioned will that the prevention the European in house, $X QX. substantially the prepayment that systems large shipped retailer be that's side of million deploying loss Chris

gross will deployment, systems for assuming at we're have you're margins average. margin, QX our substantially than revenue and revenue as thinking unable ship that QX, from systems we're incremental you our that second And quarter know it because benefiting on you So will corporate then finally, the reader gross side we the higher are also ship gross as because to benefiting in of depressed margin inability forecasting going to or ICs be our gross QX margin to QX an ship least product. highest-margin QX

to normal in QX. IC to to reader back that correct expect We levels

little from dynamic margin result from buoyancy see a -- So on QX you'll as the of of that side well. as gross going bit a QX to

Mike Walkley

the supply to ship? wafers, to ship choice is on guys' able you've Great. given the inventory this bookings, do whole gained Just share? of Thanks for even competitors build to strong and smart been with your the of are clarifying that. endpoint the think able like And curious the you've more constraints if industry you kind Or your coming then side back?

Cary Baker

service if or in year. be will could a the book a industry. variety for of get It evaluate We've near nature. are order future. driven seeing of continue further things. of the the Alliance to From result constraints end the perspective, customers semiconductor It share be the structural and behavior we evaluate don't in supply We're strength doing electing end inlays into and part in momentum by of the the could been factors. that year. the could year preceding year strong changes last be our these RAIN And to of the demand we Yes. That is And data to beginning those their this of orders our term. of until best we number more at a the the share temporary when

Mike Walkley

question pass are second focus Last maybe you lot in across me decision to Impinj then with the products what's you macro did And Chris, you. profits? now on the markets logistics of what to despite some this for for and the like on areas market years? last really and came two new versus on. in the already the Got chain new terms balancing road year. or might for you opportunity should I'll you execute focus the any about and of a just is on investment and think map commentary be of it past that in big you thinking for challenging are Chris the for growth How made hints chasm investors in supply question interesting investing next

Chris Diorio

Mike, to question I to part. the latter remind yes, want I'm the but the former and think to latter hit part take it, part first going when then back me you we do the on of So of get ask to I

the drove that identified actually of in vision two enabled codified was And against we EPC to a is I prevention on win part it If of the time, largest a retailers And And self-checkout it requirements Global XXXX world. back that problem. loss literally in were because couldn't of and in would collected as to was requirements-gathering and but after team retail I That efforts go ask self-checkout really inventory number where I some at what to retailers an collected time self-checkout set a It years. encourage GSX under involved their how those others we're really the was we prevention from that opportunity. well. of kind included actually in they led deliver requirements-gathering one led back that groups loss there in prevention loss that and and nobody even is then. visibility. their requirements. requirements the think many knew retailers I dozens that And the So focused area talked significant believe spanned those I then, solve them back future of very marquee opportunity, further about it and on we focus

rolled That in solve embedded out Protected Mode step journey still was problem. the to garments Impinj consumer ICs endpoint So our that protect and privacy. first to enable in

The based rethink as believe need portion the tagging, of to second on as enable stores identify of you're the solution. to in speak and us be from prepared to XXX% a items run opportunity use our because that systems engine prevention XXX% now RAIN. kind tagging remarks how a systems rolling a stores will that I RAIN the store, do out leaving is for I doing also in well step and self-checkout if loss perspective the RFID noted to you as our self-checkout going to drives get and partners

focus I So our to it company that's investors for where and as be area would I'm -- helpful the the focused is one think particularly for core focused well. just the

first So back forgotten asked. to what part the me you you which of I remind subsequently question have your could if

Mike Walkley

Yes.

to script future the so be about profits Just just opportunity get how the and profitability maybe growth pandemic and I growth you in some business which to with growth on But seems the was now. all that you're there thoughts in in investing your paying commentary maybe on off. the balancing and go wanted going so profit, to for decided balance or clarify maybe to

Chris Diorio

ahead Cary. Go

Cary Baker

Mike, is Hey this Cary.

a better COVID-XX. goal commitment pandemic the adjusted quarters our and strung of back the It is other we to our to EBITDA. prior together to had on get breakeven So four in that side row of or

investing And balancing continue that. we you're those COVID positioned as to forward. well the made right, massive dynamics we go that think we are headwinds -- of as we're And XXXX. two enter into We invest with I desire in into have that the balancing opportunity and us I going think decisions front this us to

Chris Diorio

across And of future. investing our platform. course we entire will continue It's the

talked I future. As opportunity of in about big for that us are the we investing front

Mike Walkley

Got it. good Congrats the on again results. That's helpful.

Chris Diorio

you. Thank

Operator

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

Jim Ricchiuti

Thank right. afternoon. All you. Good

as of just you also maybe accelerate a foundry what these talking you with to Or So incurring costs? we're additional from supply costs of IC hearing can ability are expedited constraints. on respect transition? anticipate chain and the about the a the case question supply the wondering MXXX the partners your in result I'm whether to issues any if potentially

Chris Diorio

first part take take I'll you don't why Cary part. the second the

Cary Baker

Okay.

So Jim thanks the question. for

small Yes, and we're cost there. navigated. really very a on incremental incremental bit In terms expedites we of little here cost as paying we're

spend this of capital accelerated at seeing us definitely from playing Like but have they capacity, any increases any point. increase the to this. suppliers not we're We price be our to seem game long on

Chris Diorio

second geometries tight. XXX-millimeter to wafer are process supply And the question, then older the and Jim is of part the tight

geometry is XXX-millimeter process tight. if have in a the an older wafer capacity So still you even

goal XXX-millimeter get in to process the more we and is into The we from die At is MXXX per as on is need same to desired did gives for it the the size. in it many that wafer wafer goes you Xx So it twice node the wafer. MXXX actually time, on many our squared as XXX-millimeter many roughly XXX-millimeter advanced die our wafer MXXX. which That's die half as as per wafer Monza RX. per a a for Xx drive die

driving prior that on at same partners accelerate focused we're on our MXXX. It's and Yet We're differentiated. in is the ramping a a so product difficult and focused for their of pandemic. so we're time, size with difficult half new the product that the ramping also the So growth MXXX. advanced adoption of the a working It's to our products. new MXXX. opportunities It's

market. partners it and to are with comfortable it, still it, using basically So our assembling bringing getting

the which to the to commentary had make the we why hoped. the and going we're factors transition, had we at transition those the pandemic originally drive and happen. a transition that about a the size in we than is two need made bit So have small same MXXX us to launching make die slower it needing to Yet time

Jim Ricchiuti

I And RAIN, we've an seen we of impact? frankly it in it years early were too don't it. where issue was the an when Or Got IC adoption still in less recall past Chris of you? had for tightness in supplies,

Chris Diorio

like wafers. Previously number of others sufficient difficulty we getting had cycles, during prior

not we're on yes, in so industry. And immune to the trends going are that the

facts put and us other upside. to we in have optimistic respect things. into global wafer fact get our tracking wafers asking additional And are everywhere. equipment at We does. widely guardedly We're with -- guardedly is position protective But that economy. in so for deployed. They're fact work the distribution a and that to -- confident the used just good as and else personal -- tightness important that optimistic vaccine everybody used they're that to so to like those products are They're essentially the goes the the to RAIN industry

Cary Baker

through inventory down. factored year XXX-millimeter decision living that our Jim history last sales our into And to even as going build were

we to we So, tried in front us much could. get as of it as

Chris Diorio

we and coming it what then. built saw We could we Yes. back

Jim Ricchiuti

there's go wondering Got evolved The the how question is you if that me some through of you you that characterize can last it. price Thanks. went if I'm as through just for just how you negotiations -- this. -- all normally

Chris Diorio

Jeff, can you one? that take

Jeff Dossett

is I'll that one. take Jim. Jeff. Thanks This

Jim Ricchiuti

Jeff. Hi,

Jeff Dossett

as How our are our outcome during partners negotiations with characterize I XXXX. in partner you? line XXXX We pricing discussions with successfully the of and inlay concluded XQ expectations. our XQ our

our year-over-year past experienced we is scenario, so years' pricing typical And which of experiences.

Jim Ricchiuti

the just know if just would you erosion you of pricing type normally I see. be would decline And to willing of don't could remind or you us if

Jeff Dossett

decline say percentage would negotiations in our single with is again, single-digits I average XXXX And expectations. entering price. what typically pricing our line in it's that overall -- low were selling Jim

Cary Baker

just first drive on to We're signaling said, this that expected first it's unit revenue volume And increased experiencing pressure ASP not Jim that ASPs because them small IC the lower as in that typically from to enough quarter We're negotiations offset Jeff for a seasonality We're that. were price the endpoint where land. quarter. in seeing we'd perspective, not QX. the that

Jim Ricchiuti

helpful it. congratulations. and Got That's

Chris Diorio

Jim. you Thank

Jeff Dossett

Jim. Thanks

Operator

Please comes question Derek ahead. Our go from Securities. next Soderberg with Colliers

Derek Soderberg

questions. want with for start ICs. to my I taking reader Thanks Hi.

the you could terms reader and recently refreshed have in guys technologies. to road I'm the an provide need wondering And anything some if tag products. I excess ICs. had and if there's map there, inventory on you reader guys of think update then You IC you add in product

there. I'm brick-and-mortar you As an on inventory comes what seeing update retail back you're can provide wondering if levels online,

Chris Diorio

of This inventory start the with then part associated I'll Chris. and Thanks the Cary to I'll Okay. it question. is hand the Derek. answer off

and you could ICs we're reader available is as expect the kind Regarding our when to the innovator us advance line. of and going products introduce new product where and leader, right. they as We're time continually become investing, to market's

remarks to everything, pointed doing, kind compelling being to our vision partners not spoke our of obviously extending software drive may I businesses we authenticate digital anything but we about that our to cloud, twins to services that that can't really items we'll experiences So at people. that enable and -- our preannounce digital for be note prepared may statement the include also or of And of was of life as being vision our the vision for genuine. in able in

And to really the area an connectivity another reader, the where additional On services but We're a can an around in And Cary? should because about some really that RAIN essential be associated part value. it's what and looking item in for a things network. cloud think the of store in us, our not enabling the to with second information the connected to from future directly just backend so item it for that's is I connecting you offers. the we represents industry, where opportunity the that item provide greenfield drive

Cary Baker

Yes. Hey, Derek thanks for question. the

for we inventory delays right for the are now experiencing of reader reader packaging ICs. terms IC, In our

and We'll will quarter. think impact of perspective, magnitude be can order an orders we've From first the inventory that you fulfill we unable we've QX sell-through So sizing to in ICs to -- points then back quarter. second gross received $X our and That north basis that volume in margin. and expect of that to our quarter of in million the to existing impact revenue. will for normalized a a in the level got then maybe second correct IC go the QX we reader reader XXX more

Derek Soderberg

then And your there expectations. have shipped Got it. question of on an then product with what's in off with the earlier if mix line sort to us the just I kind building the pricing margin was wondering Thanks negotiations, I'm the you And you for today can said if what in you've, tags? could, of, I negotiations past and MXXX pricing Thanks. gross on said the wondering remind there. anything you compared know older MXXX has if color changed

Cary Baker

Okay.

landed negotiations. said accretive a a earlier as the we margin our from rest increase So be gross gross From we of as as will to where where -- negotiation, the MXXX perspective, price or of that. the wanted about price Jeff MXXX we mix overall margin expected our the did

doubled a more was MXXX But QX. million of our like slowed excuse a than the by of -- sounds QX. pretty percentage small We in me that in shipped the though that's MXXX mix. number We ramp big even that units -- that the pandemic. in Now XXX QX

and in QX, back in of starting the it ramp then margin the again year. accretion in see of the anticipate well. to QX in it some the will ramp as half will that half So back I would of year gross

Derek Soderberg

Great. Thanks.

Chris Diorio

Thank you, Derek.

Operator

comes Our question next Goldman Please go Toshiya ahead. from Hari with Sachs.

Toshiya Hari

question profitability strong to results and much guidance. taking so for you on about had going think one Thank and congrats forward. I question, the on how just the

and Should more grow investing you're about a should EBITDA versus you it first guys second hang Is we XXXX? probably on If the little the we you more expect my XXXX and the I you dollars? EBITDA trajectory to go you Thank now how extrapolate statement? depends it think is, As right breakeven, can around post-COVID. business? how guess, guess, back breakeven? is you. Or a ahead to we is really you calendar onward? And and out trajectory there to EBITDA I in profitability to about bit think provide importantly positive to of guess, there that expect once pointed half then granularity I be return that would can breakeven question the secondly out expectation helpful.

Chris Diorio

Yes, Toshiya is Chris. this

going out my the the other we're answers a thinking side is future to make come While get I'm think to to I'm about going those I COVID and just as COVID. when to questions of first waiting Cary of still comment shot. the

And future so, associated with is hugely obviously, uncertain. the COVID-XX

much it's COVID-XX anything difficult predict us overall. future for to less the very so with associated predict And

future how dynamic be factor uncertainty And COVID how think significant to the will the going guiding the that we about we're Cary into So and creates how about thinking business. Cary? is

Cary Baker

Yes.

here returning echo how just a COVID-XX to would I And part because a timing can't just going I all put certainly around. is be good going to we on for hang It's of to long know if don't that. XXXX. breakeven Chris. thanks not So

QX haven't at investment But we that you the at that the And loss not our the in look expense engineering substantially at yet. have QX, will I and full that was year. incremental you impact year, prevention of did that. long-term in then scale additional be There for provided but completed look this investment business, non-wage pretty OpEx. business, Chris year. model it signaled QX was related we we as the win to As and last announced. COVID-XX that last a we has meaningful delayed hiring felt a the

in kind then near-term. specifically go to that have So a non-wage and is back this gross position The -- QX we it the we spend adoption. expect leverage when play accretion. is to we'll some margin not MXXX spike to this model really time to think and our a normalized we'll margin that. in lead in the will just it. We're MXXX levers say have more model has yet And over in level of to gross

Toshiya Hari

color. And again. for congrats Thank the you

Chris Diorio

Thank you, Toshiya.

Operator

Our [Operator ROTH Instructions] with ahead. Scott Please Capital. next Searle question comes from go

Scott Searle

I quarter and and your well. hope nice the on Congrats doing questions. and teams family you, my taking are for Thanks afternoon. safe Good Hey. guys your sound and

Chris Diorio

hope Scott. for the well. Thank you same I as you,

Scott Searle

revenue front, we where of third a just rev with over sounds to the of by thinking quarter? again it of $X magnitude rec in recognized quarters? was up So kind that like little frame as help under in you're So third systems of on but less-than-normal the the get because the the traditional that offset correct? IC quarter IC revenue of start sounds related me into seasonality pick all like million. deferred dynamics, most about to Is seasonality. think Or side. just then the it on this loss quarter And goes split how get on is revenue clarify said that and the second that's the a or you being to systems opportunity I couple it XQ it Does then should that

Cary Baker

Yes. question. for is Cary. Hi, Scott. the This Thanks

should win On prevention win say, deployment. yes a was loss that -- engine the prevention win for that million $X loss I

We expect it ship in to QX. substantially

So on the to that's early comment dynamics dynamics right kind our of now for of to because is that It in remarks. what that QX the past. changing right included QX. is years' too just -- it are We it's different we given in know than provide all tried me now impacting we prepared

Scott Searle

just the And or is loss there that with Cary, to associated gets revenue you. once any Got deployed? prevention, software other it clarify, recurring

Cary Baker

the this as RXXX of our win loss embedded Think into No. prevention solution. and an RXXX-based algorithms

Chris Diorio

opportunities its to as in believe a MXXX so want mentioned point-of-sale, just IC tag. the make Protected the exit some is critical while many little endpoint these the forward remarks I tag at But Mode to of them to the I and of ago, gate Scott, allows you we doesn't a add some of going invisible because see

that's see At tags. embedded an time, out consumer same gate consumer thereby bought and doesn't the a allowing so the privacy the basically store item the and item. walk it And protects can

Mode the in So that with loss did step to was first introduce we that Protected it. in prevention that MXXX

Protected on it is the on loss what built that prevention significant win so Even MXXX introducing engine first of we've us as we loss Mode. but engine, signaled the and heels follows just were developing our with prevention

Scott Searle

NXP expectations then Okay. relates getting what -- seeing perspective? Chris or to to into what At a And MXXX, least are you the share front you're Very are as from follow that up helpful. on maybe when right it the your to you between cases. able based in certain to Is what and customers? for concrete really split you're and on show demonstrate MXXX share your seeing customer’s shifts -- are the you get business used

Chris Diorio

end too respect good results year. RAIN Scott, visibility to We in visibility say least good get don't into every to of we not at share. confident have really with feel anything can Yes. alliance until early it's that share, at the the we

Mode the very product, differentiated believe saying, down Moore's and were with endpoint a We goes be in Law silicon many the of improved the couldn't the in logical people by more read of chip. we Protected features because compared we Moore's improved going real can successors MXXX down. we as that RX the on the you IC RAIN a of fact it estate, did that to Law and die and believe Monza migrate you down a It's its like the to these performance, for basically hard decrease driving fastest shrunk the the MXXX represents a we're cost We speed as is so. industry. add the factor future almost continue to ability add to digital features can. overall future us so with kind And migrate of some and features added as more those of We for half

Scott Searle

Are there you're guess, endpoint in in how of I front, other a we XX% second out And inflection? the the lack of we've starting to to COVID backdrop cleared see relates able somewhere of, standpoint, front long-winded of Or visibility wrap-up a that of ICs now to thinking bit you've big of several wins channel, there a going a in inventory the you've you of on years? back and quarter. couple back terms out for years, could give the outcomes can a a what's deployments just standpoint Got the then, question that? year over think Thanks. do lastly, system on or the When an growing at get and you to that are that you. you market little some the, from range ballpark And But, about or unfair IC if I sustained maybe of larger comes IC saying, systems trough that this as I grow, big the way been it to Are end the front. take. some out seeing. XXXX? revenue RFPs an in next in of win saw got of the of past to guess you have is come around with level

Chris Diorio

Yes.

the that let try kind of And to fill let then, answer a Jeff general with in with So picture. gaps. of question me -- some I'm broad-brush going

where a call carrying been use those volumes the future you into ICs driving volumes by of loss a visibility do vast And IC we volumes many reading. aren't. And amenable in inventory, But reading. aren't We handhelds. a aren't. prevention If IC roughly fulfillment today, by majority person are driven cases are handheld the been derive that think of are vast endpoint of the store doors endpoint from about are And wasn't. driven Conveyor endpoint, go inventory believe there handheld a to estimate center fixed in in handhelds or Certainly endpoint significantly. that it the now. retail handheld-driven have IC going Locked be to belts we to two-thirds that it's majority retail. the

two customers. the and of in logistics in now inventing successes future. chain that right large got the are we process So solid We've supply

a and win with in, win just loss key And brand. another self-checkout on a self-checkout prevention. major Now in Asian

the believe these future. of and for of is it's other to going rid to it up that which that's wins Jeff, been all get opportunities. drive tell that our it would the to to we you just needs it we happen, will But the anything I for want add? we've how I long it's reading something as So to it's you of need fixed happen. open -- which on to or industry year happen focused indicative driving are we is happen, really can't reading, year but feel, believe basically we're a these can. next change as to future continue that this And a vision make at least fast handheld hard And we And course. going time. or in not

Jeff Dossett

Yes.

that the have that, to well I But or about, had on customers as continued testing talked as impact end pace of of I existing deployments, those. And quarter investments. what as other So add our adapt. COVID-XX end we since Impinj last then, think and saw on we deployments would proof-of-concept impact as it partners, customer the an

and beginning And the to to in in of on-site see, modest so And continues a our opportunities deployments we're testing. -- increase grow. pipeline

remain, post-COVID-XX dynamic headwinds some feel ahead or year COVID-XX we So, the while that could of in adaptation, signals seeing reason progress impact give us to the toward are marketplace.

Scott Searle

on Congratulations guys. Thanks Great. the quarter.

Jeff Dossett

Thank you, Scott.

Chris Diorio

Thank you, Scott.

Cary Baker

Thanks Scott.

Operator

from Our go Capital. final question Please will come Jensen [ph] Lake Street with ahead. Troy

Unidentified Analyst

congrats on in, and for Thanks the great squeezing results. guys. I Hey me

Chris Diorio

Troy. you, Thank

Cary Baker

Troy. Thanks

Jeff Dossett

Troy. Thanks

Unidentified Analyst

questions growth kind to customer? big first guided of maybe QX. retail purely customer, inventory other due of on normal the follow-up of just about to and channel just it that so to And in How the much Or logistics big the the and IC QX some logistics is for back being strong? is kind of

Chris Diorio

for our pallets, relatively opportunities. initial and that customer, and noted at logistics that relatively as we is to previously because overall amount the chain case so use A the total supply endpoint least with from is small first are number IC associated volumes, of a tracking these pallets number, tracked small compared

deployment IC with shipped is just the quite end the forward, of the with are worldwide customer first first Going large large. But pallets number endpoint volumes modest. the

Operator

I question-and-answer concludes closing the any our to management would over to conference remarks. This for session. like turn

Chris Diorio

Okay. thank you. for you you I'd loved like well. today. I call your joining are to remain and hope all and the Thank ones and safe

Operator

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

You disconnect. may now

Impinj (PI) 11 Feb 212020 Q4 Earnings call transcript