Summary of Impinj Conference Call Company Overview - **Company**: Impinj, Ticker: PI - **Industry**: Endpoint Integrated Circuits (ICs) for RFID technology Key Points Market Stability and Volatility - The endpoint IC market is showing signs of stability after a volatile Q1, which was influenced by tariffs affecting partner ecosystems [2][3] - Q2 saw moderated volatility, primarily involving adjustments to delivery timing rather than cancellations [2][3] End Market Penetration - Approximately 50% to 60% of endpoint ICs are shipped to the retail market, which represents an opportunity of 80 billion units annually [5] - Retail apparel has a penetration rate of about 40% by volume, with over 90% penetration on a brand basis [8] - New verticals such as general merchandise ($325 billion unit opportunity) and logistics ($400 billion unit opportunity) are emerging, both currently at low single-digit penetration [8][9] - The food sector presents a significant opportunity, larger than all other verticals combined, but is still in early pilot stages [9][10] Food Market Developments - The largest public pilot in the food category is Kroger's bakery deployment, currently at around 700 stores [13] - Eight out of the ten largest grocers are either piloting or exploring RAIN deployments in food [13] General Merchandise and Retail Apparel - A major North American retailer has expanded from apparel to general merchandise, with ongoing assessments for future phases [14][15] - Despite a softer macro environment, retail apparel continues to see progress with new deployments from brands like Old Navy and Academy Sports [18] Digital Product Passport (DPP) - DPP aims to track items from manufacture to recycling, enhancing consumer engagement and potential use cases [21][22] - The initiative is being phased in, starting with lithium-ion batteries and moving to textiles, which aligns with apparel customers [25] Impinj M800 Chip - The M800 chip is the smallest and most sensitive endpoint IC, offering a 25% increase in die per wafer compared to its predecessor, the M700 [26][27] - Anticipated gross margin accretion of 300 basis points as the M800 ramps up, expected to cross the 50% threshold by 2025 [27] Gen2X Protocol - Gen2X enhances readability, speed, and range of RAIN RFID, enabling fixed or autonomous reading applications [29][30] - Impinj is unique in offering both reader ASICs and endpoint ICs, providing a competitive edge in the RFID market [31] Cost Reduction Strategies - Cost reductions are achieved through smaller, more sensitive chips and competitive pricing in the inlay market, with sub-$0.02 inlays becoming common [33] Future Outlook - All three key markets (apparel, general merchandise, and food) are expected to contribute to growth, with food anticipated to become the largest category in the long term due to its high velocity [34] Additional Insights - The company is actively engaging with major retailers and grocers to expand its market presence and explore new opportunities in various sectors [12][13][14]

Financial Data and Key Metrics Changes - First quarter revenue was $74.3 million, down 19% sequentially from $91.6 million in Q4 2024 and down 3% year over year from $76.8 million in Q1 2024 [16] - First quarter endpoint IC revenue was $61.2 million, down 17% sequentially from $74.1 million in Q4 2024 and slightly down year over year from $61.5 million in Q1 2024 [16] - First quarter systems revenue was $13.1 million, down 25% sequentially from $17.5 million in Q4 2024 and down 15% year over year from $15.3 million in Q1 2024 [17] - First quarter adjusted EBITDA was $6.5 million, compared to $15 million in Q4 2024 and $6.7 million in Q1 2024 [19] - First quarter GAAP net loss was $8.5 million, while non-GAAP net income was $6.3 million or $0.21 per share on a fully diluted basis [19] Business Line Data and Key Metrics Changes - Endpoint IC revenue exceeded expectations driven by turns orders, with a forecast for an increase in Q2 [16] - Systems revenue exceeded expectations due to strength in both reader and reader IC sales, but a decline is expected in Q2 driven by lower reader IC revenue [17] - First quarter gross margin was 52.7%, compared to 53.1% in Q4 2024 and 51.5% in Q1 2024, with expectations for similar margins in Q2 [17][18] Market Data and Key Metrics Changes - The company holds the number one endpoint IC market share, capturing 85% of the industry's 2024 unit volume growth [10] - A geographic shift in sourcing products from China to other regions represents roughly 15% of endpoint ICs, with the company’s exposure being much less [12] Company Strategy and Development Direction - The company aims to extend its technology lead, market share, and platform adoption while managing business with a steady hand [15] - The focus remains on investing in enterprise solutions that transform the industry, particularly in retail, supply chain, and logistics [7][14] - The company is strategically shifting investments away from China towards the U.S. and Europe to mitigate tariff impacts [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledges extraordinary macro uncertainty but believes the long-term growth opportunity remains intact [7] - The company expects a modest increase in channel inventory in Q2 as partners build optionality, but anticipates normalization and bookings growth if consumer demand holds [12][22] - Management remains optimistic about the enterprise end customer base and believes that those leveraging the platform will outperform competitors [7][28] Other Important Information - The company ended Q1 with cash, cash equivalents, and investments of $232.5 million, down from $239.6 million in Q4 2024 [19] - Free cash flow was negative $13 million, driven primarily by unfavorable working capital timing, which is expected to reverse in Q2 [20] Q&A Session Summary Question: How are you thinking about the impact of tariffs on demand? - Management indicated that they are navigating the tariff situation and believe that enterprises are undershipping consumer demand due to geographic shifts in sourcing [28][30] Question: What is the outlook for inventory levels? - Management stated that channel inventory is not high relative to consumer demand and that partners are adjusting their inventory strategies due to tariffs [44][70] Question: What are the growth opportunities for 2025 and beyond? - Management highlighted food as a significant opportunity but noted that it would be more material in 2026 and beyond, with a focus on fixed reading solutions in supply chains [74][76] Question: How is the M800 ramp progressing? - The M800 is expected to ramp nicely, with anticipated gross margin benefits as it becomes a volume runner later in the year [58][93] Question: What is the status of the large logistics customer? - Management reported continued support and growth with the logistics customer, despite inventory issues at the channel partner level [86]