Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Second-quarter revenue topped $100 million, setting a new record.
- Adjusted EBITDA for the second quarter was $26.8 million, significantly above guidance.
- Free cash flow for the second quarter was $44.1 million.
- Strong demand for products and platform, particularly in apparel, footwear, and general merchandise.
- Promotions and additions to the executive team, indicating strong internal growth and leadership.
Negative Points
- Second-quarter systems revenue was down 14% sequentially and 38% year over year.
- Operating expenses are expected to increase sequentially in the third quarter.
- Lower channel reader sales impacted systems revenue negatively.
- Endpoint IC product revenue growth is expected to be cautious due to outperforming seasonality in the first half of the year.
- Potential future challenges in wafer supply due to the cyclical nature of the semiconductor industry.
Q & A Highlights
Q: Chris, can you provide more details about the second logistics customer and their progress with endpoint ICs and readers?
A: The second large North American supply chain and logistics enterprise is progressing as anticipated. They remain committed to a full rollout, increasing their label consumption and presenting opportunities for our reader ICs. The timeframe for full penetration aligns with their public commitments.
Q: One of your distributors reported slower growth in intelligent labels. How is Impinj growing faster than this distributor?
A: We have close relationships and direct visibility with leading enterprises, which is paying dividends in silicon volumes. We partner with multiple inlay suppliers, not just one, and see strong demand for our products and platform. Our market position remains strong.
Q: Are you seeing any signs of customer rollouts shifting to the right, as mentioned by a distributor?
A: No, we are not seeing a pullback in the market. We see strength in apparel and footwear, retail rebuys, general merchandise, and specialty applications. Retail rebuys are beginning, especially in Europe, and we see no evidence of over-shipping demand.
Q: Can you discuss the line of sight for the systems business and the expected pickup in Q3?
A: We expect systems revenue to increase in Q3, driven by strong E-family reader IC shipment volumes and growth in all systems product lines. The loss prevention final phase is proceeding as expected, and we are encouraged by the traction we are seeing.
Q: What are your expectations for endpoint IC growth in Q3 and Q4?
A: Endpoint IC volumes have significantly outperformed normal seasonality in Q1 and Q2. We expect solid third-quarter product revenue growth for endpoint ICs and typical seasonality in Q4. We guide one quarter at a time.
Q: Can you provide insights into the food tagging vertical and its potential?
A: The food opportunity is moving faster than anticipated, with promising pilots in pallet and case tagging for food freshness. We are also seeing item-level pilots in stores, which is very exciting. The potential for reducing food waste in stores is significant.
Q: What is your visibility on wafer supply given the current semiconductor market dynamics?
A: We have good support from our foundry partner and are increasing wafer orders to stay ahead of demand. We target carrying 180 days of forward inventory to insulate our customers from semiconductor cycles. We feel optimistic about our ability to continue delivering.
Q: What are the commercial implications of the M800 series' performance improvements?
A: The M800 offers 20-25% greater read range and improved readability, unlocking new opportunities and solving difficult problems. It enhances readability in retail supply chains and food tagging, driving new opportunities and market penetration.
Q: Any updates on the digital passport initiative in Europe and the interest in IC-based self-checkout?
A: We are working closely with the RAIN Alliance and European standards bodies to ensure RAIN is an approved data carrier for DPP. For self-checkout, we see strong pull from the retail market, improving customer satisfaction and enabling effective loss prevention.
Q: How do you view the competitive landscape and potential IP design arounds by competitors?
A: We feel good about our market position and demand for our products. While designing around IP is possible, it requires significant effort. Impinj has a strong IP portfolio, and we believe our leading products and enterprise solutions will continue to drive our success.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
