Impinj Conference Call Summary Company Overview - **Company**: Impinj (NasdaqGS:PI) - **Industry**: RAIN RFID technology Key Points and Arguments Market Potential and Growth - The Total Addressable Market (TAM) for the RAIN industry is significant, with a unit Compound Annual Growth Rate (CAGR) of 28% since 2010, reaching a total volume of **$52.8 billion** in 2024, an increase of **$8 billion** from the previous year [6][7] - The primary growth driver is the retail apparel sector, but there is expansion into logistics, general merchandise, and item-level food [7] Challenges in Market Penetration - The industry must build a robust hardware foundation before fully realizing its potential, similar to the mobile phone evolution [6] - Key verticals such as automotive and pharmaceuticals are lagging in adoption despite having use cases [10] Competitive Advantage - Impinj's platform is a competitive advantage, with unique functionalities in their Integrated Circuits (ICs) that cannot be replicated by mix-and-match solutions [11] - The introduction of Gen2X features in their ICs enhances read speed and range, providing a significant edge in the market [12][15] Retail Market Dynamics - Retail apparel is currently using handheld readers for inventory, but the goal is to achieve 100% tagging to unlock additional use cases like self-checkout and loss prevention [19][20] - The transition to fixed or autonomous reading systems is expected to drive market share for Impinj as retailers strive for full tagging [20][22] Supply Chain Management - Impinj manages supply chain risks by obtaining monthly inventory reports from channel partners and tracking macro trends in retail [24] - Lead times for inventory are typically **six to seven weeks**, with a 50% turnover rate each quarter [25] Food Market Opportunities - The item-level food market is seen as the largest RAIN market, with several global food retailers exploring RAIN technology [29] - Challenges in tagging high moisture and metal-containing items are being addressed through innovative solutions [33][34] Financial Performance and Margins - The ramp-up of the M800 IC is expected to drive a **300 basis points** gross margin uplift, with further improvements anticipated as the product mix evolves [45][46] - The company is focused on optimizing its balance sheet, including refinancing convertible debt to reduce dilution and improve financial flexibility [47] Future Outlook - Impinj anticipates growth opportunities in apparel, general merchandise, logistics, and food sectors in 2026, driven by increased penetration and new programs [31][32] - The company is also exploring software solutions to enhance its offerings and drive recurring revenue streams [48][49] Revenue Mix Evolution - Endpoint ICs currently account for approximately **80%** of revenue, but growth in systems and software is expected to diversify the revenue mix over the coming years [50] Additional Important Insights - The company is actively working on solutions for hard-to-tag items, demonstrating a commitment to innovation and customer support [36] - Impinj's partnerships with major retailers and logistics providers are crucial for driving adoption and showcasing the ROI of RAIN technology [43][44]

Financial Data and Key Metrics Changes - Third quarter revenue was $96.1 million, down 2% sequentially from $97.9 million in the second quarter 2025, and up 1% year-over-year from $95.2 million in the third quarter 2024 [13] - Third quarter endpoint IC revenue was $78.8 million, down 7% sequentially from $84.6 million in the second quarter 2025, and down 3% year-over-year from $81 million in the third quarter 2024 [13] - Third quarter systems revenue was $17.3 million, up 30% sequentially from $13.3 million in the second quarter 2025, and up 21% year-over-year from $14.2 million in the third quarter 2024 [13] - Third quarter adjusted EBITDA was $19.1 million, compared to $27.6 million in the second quarter 2025 and $17.3 million in the third quarter 2024 [16] - Third quarter GAAP net loss was $12.8 million, while non-GAAP net income was $17.7 million, or $0.58 per share on a fully diluted basis [16] Business Line Data and Key Metrics Changes - Endpoint IC revenue decreased sequentially but grew 15% when excluding the $16 million second quarter licensing revenue [13] - Systems revenue exceeded expectations, driven by reader strength in supply chain and logistics [14] - Gross margin for the third quarter was 53%, down from 60.4% in the second quarter 2025 but up from 52.4% in the third quarter 2024 [14] Market Data and Key Metrics Changes - Retail volumes grew modestly, influenced by the upcoming holiday season, but with cautious buying patterns from partners and end users [5] - The company expects a modest decline in fourth quarter volumes for both supply chain and logistics and retail endpoint ICs [5] Company Strategy and Development Direction - The company is focusing on expanding its market opportunities in retail, supply chain and logistics, food, and other applications [11] - The introduction of Gen2X is aimed at solving industry challenges and enhancing product offerings, with a focus on customization for various market verticals [10] - The company is aggressively hiring technical and business talent to develop software solutions and capitalize on recurring revenue opportunities [8] Management's Comments on Operating Environment and Future Outlook - Management noted that the current operating environment is dynamic, with adjustments in project timing and delivery requests from partners [20] - The company expects fourth quarter revenue to decline slightly, with guidance between $90 million and $93 million [18] - Management expressed confidence in the long-term growth potential, particularly in the food sector, with expectations for modest volumes in the first half of 2026 and acceleration thereafter [26] Other Important Information - The company issued $190 million of 0% convertible notes while repurchasing $190 million of its 1.125% convertible notes, aimed at reducing interest expense and improving balance sheet flexibility [17] - The company ended the third quarter with cash, cash equivalents, and investments totaling $265.1 million, an increase from $260.5 million in the second quarter 2025 [16] Q&A Session Summary Question: What does the timing mean for Q4 revenue? - Management indicated that Q3 revenue was stronger than anticipated, leading to a natural step down in Q4, with some project timing shifting to the right [20][22] Question: Can you discuss the Walmart announcement? - Management expressed excitement about the Walmart announcement, emphasizing the importance of product freshness and customer experience, with expectations for modest food volumes through the first half of 2026 [25][27] Question: Is there a fundamental problem in tagging produce? - Management clarified that there are no fundamental limits to tagging produce, but challenges exist in the tagging process, which may require innovation in packaging [30] Question: How does Gen2X impact gross margins? - Management stated that Gen2X is expected to help drive adoption of the M800 but does not directly increase gross margins beyond what was already anticipated [51] Question: What are the expectations for operating expenses? - Management expects operating expenses to increase in the fourth quarter, consistent with seasonal patterns, while maintaining fiscal discipline [68]