Q3 2019 Earnings Call
Good evening and welcome to the Impinge incorporated third quarter 2019 earnings Conference call.
Participants will be in listen only mode should you need assistance. Please signal a conference specialist pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question in the press Star then one of your telephone keypad to withdraw your question. Please press Star then too. Please note. This event is being recorded.
Now, let's turn the conference over to Ellen Davis. Please go ahead.
Thank you operator, good afternoon, and thank you all for joining us to discuss impinges third quarter 2019 results on today's call Christy reality, just co founder and CEO will provide a brief overview of our market opportunity and performance, Eric Brodersohn, and just president COO and principal financial officer will follow with a detailed review.
Third quarter 2019 financial results in fourth quarter 2019 outlook. We we'll then open up the call for questions Impinges CFO consultant was a little pretty hard and impinges executive Vice President sales and marketing Jeff does that are also on the call and will join Chris and Eric and acuity session.
Management's prepared remarks, along with trended financial data are available on the Investor Relations section of the company's website.
Before we start please note that we will make certain statements. During this call that are not historical facts, including those regarding our plans objectives and expected performance to the extent, we make such statements. They are forward looking with the meaning of the private within the meaning of the private Securities Litigation Reform Act of 90 95, any such forward looking statements represent our outlook only as of the.
This conference call well, we believe any forward looking statements, we make a reasonable our actual results could differ materially because any statements based on current expectations are subject to risks and uncertainties.
We see the risk factor section in the annual and quarterly reports, we filed with the FCC for additional information about these risks we do not undertake an expressly disclaim any obligation to update or alter our forward looking statements, whether as a result of new information future events or otherwise, except as required by applicable law.
During today's call all financial numbers, we discuss except for revenue or where we explicitly state otherwise our non-GAAP financial measures balance sheet and cash flow metrics are on a GAAP basis.
Before turning to our results outlook I'd like to note that the company will attend the RBC 2019 T. I M. T Conference on November 19th in New York and the 22nd annual Needham growth Conference on January 15th in New York, We hope to see many of you. There I will now turn the call over to Christy Oreo Impinges co founder and Chief Executive Officer, Chris.
Thank you Alan Thank you all for joining the call.
Our third quarter results were strong quarterly revenue exceeding $40 million for the first time impinges history.
Strength in both and Onesies and systems contributed to our record revenue.
Year over year endpoint IC revenue growth was solid with retail adoption. The primary driver of that revenue growth, despite macro and freight uncertainties.
Last quarter at the performance apparel and footwear segment showed strength.
With retailers and brands publicly exciting the benefits of rain tagging.
Clearly inventory optimization.
Improved labor productivity and sales uplifts.
She rain as the foundation of retailers business transformation, and omni channel selling strategies and their continued adoption highlights our enthusiasm for retail as an endpoint IC growth factor.
To address that retail opportunity, we will begin ramping production. The first impinge and 700 based endpoint IC, starting first quarter next year.
That ramp will deliver what we believed to be our most significant endpoint IC innovations since Monza one.
It was innovations include increased sensitivity and stronger replies that together enable smaller in ways.
Include near constant sensitivity with inventory speed.
<unk> retailers to reduce inventory time and increased labor productivity.
And they include digital features that will enable rain based loss prevention with frictionless self checkout and.
And embedded tagging with seamless product returns.
But it is the m. seven hundreds migration down Moore's law.
Which some said was impossible for our rain endpoint I see that is the key innovation.
That migration begins with the and 700 family.
We should begin favorably impacting our business next year, and we'll continue with future innovations and advancements.
That migration also portends, a future that I believe will eventually make possible initiatives like Japan's goal to connect 100 billion convenient store items per year.
Year over year systems revenue growth was also solid with continued adoption supply chain and logistics the primary driver of that revenue growth.
Gateway sales remained strong led by the North American project, we discussed the past few quarters.
Reader sales also grew nicely year over year.
For both readers and gateways, leading use case today is tracking box and pellet transitions through dock doors.
But we are now starting to see significant retail opportunities in item based loss prevention at store exits.
To address this emerging opportunity we are expanding our platform development for Palin and case transition through dock doors to also include identifying and preventing items best in retail stores.
Turning now to the market in October I attended impinged partner forums in Tokyo and Shanghai.
Combined we hosted more than 150 partner companies and more than 300 guests.
Most exciting to me.
As of the solutions these partners at bringing to end customers in retail.
Slide showing aviation automotive asset tracking in manufacturing.
Oh using our platform.
I saw new technologies for aviation bag tags.
New approaches to tire tagging and even drone based readers to inventory outdoor assets.
Left Asia energized for the future.
On the organizational side, we welcome Caulfield onto our board of directors.
Kahala is more than 30 years of semiconductor on radio experience, including a CTO and business unit lead at Cypress Semiconductor Corporation.
We look forward to leveraging calls technical and business experience across impinge as we navigate our huge opportunity.
Turning to intellectual property in September NXP filed a response to our to our patent lawsuit in which we cited 26 patents.
And next piece you code seven and eight I see in French.
In October NXP filed a separate patent infringement suit against us in Delaware.
As I said previously our patents and products are the hard on fruits fruits of our significant investment dedication and hard work and.
We will pursue both lawsuits with from determination.
In closing I would like to thank the impinge team for their efforts this past quarter and.
As always and driving our bold vision.
With another record quarter behind us marked by solid team execution.
I remain confident in our market position and energized by the opportunities ahead.
Now I'll turn the call over to Eric for our detailed financial review and fourth quarter outlook Eric.
Thank you Chris.
Third quarter revenue was $40.8 million, a new company record revenue grew 18.5% year over year, and 6.7% quarter over quarter compared with 34.4 million in third quarter 2018.
38.2 million in second quarter 2019, respectively.
Third quarter endpoint, IC revenue was $26.4 million growing 11.2%, both year over year and quarter over quarter compared with 23.7 million in both third quarter 28 team and second quarter 2019.
Third quarter systems revenue was $14.4 million growing 34.6% year over year, compared with 10.7 million in third quarter 2018.
Led again by the large North American Gateway project as well as by strong reader sales, partially offset by a decline in reader IC revenue.
On a quarter over quarter basis systems revenue decline, 0.6% compared with $14.5 million in second quarter 2019.
Mainly due to modest declines in reader and reader IC revenue, partially offset by growth in gateway revenue.
Third quarter gross margin was 50.2% compared with 50% both year ago and last quarter.
The 20 basis point year over year improvement was driven primarily by leverage on the increased revenue.
Partially offset by product mix.
Total third quarter operating expense was $18.3 million compared with 18.1 million and third quarter 28 team and 18.3 million in second quarter 2019.
Research and development expense was 8.1 million.
Sales and marketing expense was 6.1 million.
General and administrative expense was 4.1 million.
Adjusted EBITDA for the third quarter was $2.1 million compared with a loss of 900003rd quarter 2018 on a profit of 800000 in second quarter 2019.
The 3 million dollar year over year improvement in adjusted EBITDA marks another quarter of solid execution.
GAAP net loss for the third quarter was $4.1 million non-GAAP net income for the third quarter was 1.9 million or nine cents per.
Using a weighted average diluted share count of 22.9 million shares.
Turning to the balance sheet.
We ended the second quarter with cash cash equivalents and short term investments of $63.1 million compared with 59.8 million in the parent quarter and 54.7 million in third quarter 2018.
Inventory totaled $36.3 million down 1.6 million from the prior quarter and down 12.9 million from third quarter 2018.
Since early 2018, we've made six never have made significant progress reducing internal inventory.
As we ramped impinge on 700 production and pursue emerging market opportunities, we expect inventory to increase in the fourth quarter.
Before I turn to fourth quarter guidance I want to highlight a few items.
First we continue investing in our business and expect research and development capital and legal expenses to increase.
We continue driving a robust research and development pipeline, including further endpoint IC innovations and a systems focus expanded to include item based loss prevention.
We remain committed to investing a lot research and those product developments as growth drivers for our future increasing our R&D spend on both a percentage basis and in absolute dollars.
As always we make every investment decision through the lens of balancing our desire to achieve adjusted EBITDA and free cash flow breakeven with an equally important desire to invest in our vision our team and in game changing innovations like the M. 700.
Second I would like to remind you of the seasonality trends, we typically see in our business.
In the fourth quarter, we typically see lower endpoint IC volumes, partially offset by stronger system sales.
And the first quarter annual pricing negotiations typically impact endpoint IC revenue and gross margin while system sales tend to be seasonally lower.
Also in the first quarter operating expenses tend to increase over the prior quarter due to payroll tax resets and increased health care costs.
Although these trends are typical and the number of factors can mask that seasonality, including project based systems revenue, where size timing and mix can impact our quarterly results.
Turning to our outlook.
We expect fourth quarter revenue to be between 30 $739 million, a 10% year over year improvement at the midpoint of the range.
We expect adjusted EBITDA to be between a loss of $500000 and a positive $1 million.
On the bottom line, we expect to non-GAAP net income between a loss of 700000 and a positive $900000.
Reflecting non-GAAP per share earnings up between minus three cents and plus four cents on a weighted average diluted share count of 22.1 to 23.1 million shares.
In closing I want to thank our team.
Our customers, our suppliers and our investors for your ongoing support.
Ill now turn the call to the operator open the question answer session.
We will now begin the question answer session to ask your question you May Press Star then one under telephone keypad. If you were using a speakerphone. Please pick up your handset for pressing the keys if at any time.
During Q a session to your question has been addressed and you would like to withdraw. Your question. Please press Star then to at this time, we will pause momentarily to assemble our roster.
Our first question comes from Mike Welcome.
Canaccord Genuity. Please go ahead.
Great. Thank you very much.
Graduation got to another strong quarter over results.
Thank you.
Yes, great on the on the systems business, it's been running so strong for so many quarters can you give us any idea of just kind of where you are that north American project and and how do you think about that business growth longer term coming off the 30% plus growth we've seen for several quarters now.
Mike This is Jeff Das said as we've discussed on the last couple of calls and including in the script today.
That large north American gateway deployment is in the supply chain in logistics sector.
We're very excited about this deployment.
But for confidentiality reasons, we can't say more about the specific customer.
I'd also say that we are continuing to guide only one quarter at a time.
And I want to reiterate that project based revenue is subject to the size of the project timing in the mix and as we discussed last quarter also impacted by overall project schedules, including partner and.
And customer integration efforts. So I think that's what we'd be willing to share at this time.
Okay. That's fair I understood, maybe switching gears a little bit then if you look at it.
Air Transportation industry, those could be some long system the deals any any update on how that's progressing after the success of Delta was there but their program.
Yeah, Mike This is Chris we're still on the early days at the aviation opportunity. We continue to see progress in that space actually worldwide with new airlines continuing to move forward, but like I said, it's still early days and that kind of that roll unemployment is going to take because a good number of years.
Great. Thanks last question for me and I'll pass on the line, Chris with another quarter Alethia 700 family and discussions with your partners an ecosystem can you just give us an update on your lead versus your competition and how this is set in the with your customer demand into the in the upcoming years. Thank you.
Yeah, I can say a few things and then maybe Jeff will have something to add in terms of where we spend relative to the market as I think you could tell from that are in his script I'm Super excited about the in 700.
We announced it earlier this year and during that timeframe, we've been assisting our partners with their antenna designs and their qualification and their customers qualifications.
And.
Going forward, our production ramp provide some limited product availability to early access partners in first quarter next year with general general availability to follow and as I said just in the script just a minute ago I really think it's a migration down Moore's law. The fact that we can make a smaller chip with increased logical functionalities that really portends a future.
For significantly for us and for the rent industry as a whole really shows the path forward that will drive innovation in our industry.
Jeff anything you'd like to add.
I think what I would add Mike is that and I know we've discussed this in the past but.
Products tend to have a very long life.
And as excited as we are about the impinge M. 700, and the new opportunities that yet unlocks.
We traditionally experience.
Relatively long term layering of continued demand for our existing endpoint IC east.
So we while we anticipate.
The industry.
We will evolve into a parent users to adopt the impinge M. 700 series, we think that full impact will be realized over a period of time and so we would anticipate the impinge M. 700 series, having an impact later in 2020.
Great, but everything remains on track with your with your timing though.
Yes, yes.
Great I'll pass line. Thank you very much.
Okay. Thank you Mike.
Our next question comes from Jim.
Rich you liedtke with Needham and company.
Please go ahead.
Thanks, Good afternoon.
Hey, Thanks Jen.
Yes, the question in any way.
With respect to the North American Gateway project can you say is any of this business that you're seeing represents follow on business or is it. The initial order that you received.
Okay.
Jim This is Jeff.
What I, what I can say is that successful customer deployments.
Result in consideration typically within that company and more broadly in the industry of.
Other deployments, but I don't think I could say mark anything more specific than that at this time.
Okay.
And then on the 700.
Sounds like you're on track there I'm wondering if you could talk a little bit about where we might see the early adoption use cases for this.
New I see within within retail and I'm, assuming it's initially going to have probably more traction within your core retail market.
Good comment on that.
Yes, so Jim this is Chris.
Yes, we expect retail to be the significant adopter adopter of the impinge 707 hundred straight out the gate.
We do see of course opportunities in aviation supply chain and logistics and other areas, but since retail.
Heroin footwear is really the driver of at least endpoint IC volumes in our industry, we expect that segment to be the leading adopter.
And consistent with the.
Words, we just used in the earnings scripts, we see opportunities in loss prevention as really the next step forward for the industry and we've actually included features and capabilities in the impinge and 700 series that facilitate that loss prevention opportunity.
Got it last question if I may.
Is on the R&D is that is the increase we saw an R&D is that is it mainly associated with the.
The launch of the IBM 700.
Or is it.
More broadly.
Allocated to other areas that you're investing.
Yes. So the increase you had an R&D is primarily related to product launch that we continue to invest across all of our product lines on our roadmap as far as.
We have a roadmap, it's got more than just and 700 on it but.
Fair amount of the increase was related to 700 launch.
Does that tell all or does it continue and then the next quarter or so as you get to repair the launch.
Yeah, I would say and we talk a little bit about in his script that we will continue to invest in R&D. It's as we get ready for the launch and also related to other products on a roadmap.
Okay. Thank you.
The absolute dollar and percentage.
Thank you.
Thank you thanks, Jim.
Our next question comes from Craig Hettenbach with Morgan Stanley . Please go ahead.
Yes. Thank you first question just for Chris on the context, the Japanese convenience stores it didn't really around this and 700 and so.
Is it.
The product capabilities in terms of the driving force that can kind of push adoption because I know you're talking about Japan over the last year and then from a timing perspective now you have a product launch said that seems to.
Kind of line up pretty well to drive that market.
So yes, thanks, Craig so.
I think we should think about the impinge on 700 as number one it's a significant migration down Morse law and so its smaller size and high performance capabilities and also the ability to add some additional functionalities, which are a significant value add in the market as already mentioned for loss prevention.
It will enable new segments as associate associated with its capabilities and the smaller inlay sizes that are made possible.
But we should also look at is it really is the first significant step in continuing innovation in our industry and fight with impinge, leading that industry, leading those innovations that sets us up for the future sets us up a few further advancements and further developments that as I said in his script will overtime I believe and.
Label that Japan opportunity and really as you think about the Japan opportunities not just depend it's really the food tagging opportunity and so I believe it portends, a future where our industry will be able to address food tagging, which is by far and away the largest opportunity out there.
Got it and then just the discussion around increased R&D can you talk about that perhaps in terms of the investments needed to kind of advance through kind of Moore's law and then.
Maybe on the back of those investments you kind of get it back in terms of higher revenue growth so im on margins.
Huh.
So I think you know the history of standard semiconductors in general right migrate down Moore's law, you get smaller Icees, which initially.
Due to the cost or the new process node you have to work through just to get your costs down that you continue innovating in that note in a jump to the next one.
I think the benefit we've got an hour industry is that we are still relatively at least previously were still on relatively mature technology. So we have all up Moore's law ahead of us to to drive down and so.
You should expect us to increase our R&D spend as we drive down does more advanced process nodes. You should also expect us to in any given process node, including the one we just moved into continue to innovate within that process no for awhile before you move to the next one is sort of kind of the standards and that standard in the semiconductor industry, but overall, yes, we will be increasing our R&D spend.
In absolute dollars on on a percentage basis to develop those innovations on the endpoint IC side as well as across our entire portfolio.
Got it thank you.
Thank you Thanks, Craig Craig.
Our next question comes from Troy Jensen, It with Piper Jaffray and company. Please go ahead.
First off congrats on the group results again.
Thanks.
Hey, guys a quick just a follow up on the 700.
Is there anything you can give us with maybe the number of design wins, you've had or the win rate percentage versus prior on platforms.
Try we really can't at this time, it's a little bit early where we're providing a court. We previously provided engineering wafers to early access partners went out working on driving and enabling the market going in terms of design wins or anything else. It's Stuart too early for us to decide anything okay that makes sense and maybe how about I.
Very good Linda.
Just gross margin trends going into next year and I'm curious to know.
As the M. 700 ramps I think longer term, we will have higher margins, but low volumes as would be initial drag. It all so any color on how you think gross margins trend going forward would be helpful. Sure. Thanks Troy.
Well I will look at them seven how do we really do continue to expect whole product family.
To positively impact our business in 2020 and beyond.
But we really although we set out we don't break out gross margins for individual products and one thing that I think is important to keep in mind as during those initial production ramp phases.
Underlying product costs will be higher than normal that's pretty standard anytime you're product housing and coming from small volume to large so just things to keep in mind is your modeling gross margin next year.
Okay and then maybe my last question here I think Chris you mentioned that you guys had 26.
Patent violence against NXP today see how many years leading users.
Yes, they did in the suit they filed against US they cited eight patents.
Okay perfect guys keep up the good work.
Thank you for driving stronger.
Our next question comes from Mitch Stevens with RBC capital markets. Please go ahead.
Hey, guys. Thanks, taking my question I just had to them on the first one is just in terms of the overall market. If you like we're getting close to year over year comparable is be more easier. So I guess what is the overall industry outlook can you. They do over next three to five years.
It's possible by end market into the second one I was just wanted to just modeling. So I realize it Q1 is typically seasonally down but is there a way to think about it gross margins come down a bit more than operating margins are.
Actually come down more than the cost of goods sold just any help there would be helpful.
Okay, Mitch I am. So this is Chris I'll I'll start on the first one which is kind of overall industry growth trends and.
We remain excited about the opportunity in front of US as I think you can you can hear in our tone and all of that all the verticals that are moving whether it happens to be retail.
Performance fashion, our performance apparel and footwear.
The Asian and these are there opportunities, we see growth and strengthen the market and I think the best indicator you can have of where the industry itself thinks it's going is to look at the rent Alliance data.
They make projections going forward in terms of where they think the endpoint IC Blanchard at least are going to be a year out and so beyond a year out.
We're not making any forecast, but but we still we remain excited both about the existing opportunities existing segments as well as growth in new segments.
And then.
And mission with respect to first quarter, and just sort of how to think about.
Gross margin and an operating margin I just.
Go back to some of the key points out was highlighting earlier with respect to some of the seasonal trends were.
The first quarter annual pricing negotiations are going to impact our endpoint IC revenue and gross margins.
And then I had an opex level, we also tend to see increases in the first quarter.
Primarily due to some things associated with payroll and healthcare so.
That's just some some feedback on how to look at first quarter and they should I would also fan first and second quarter of the year. We also have more trade shows that we that we attend so that's another thing that we typically see seasonally and Eric's comment.
Okay, Yes, just one last to clarify so I guess Simplistically would Cogs go up more often.
Okay.
We haven't guided for Cognex, our Opex perspective, I think it's you can take that seasonality trends around and when I see and pricing negotiations that we're going through now and then the fact that we've stated that we would be investing more in R&D as you get closer to the launch.
Along with having the other DNA cost around health care and so forth. So.
Probably helpful to look at trends over the past and also our commentary related to our R&D investment and seven Henry as they get closer to the launch.
Okay. Thank you.
Thanks, Mitch Thanks Mitch.
Our next question comes from Charlie Anderson with Dow Tree and company. Please go ahead.
Yes, thanks for taking my questions and my congrats as well and a strong quarter.
Thank you Charlie Christie mentioned exit doors.
The redid the reader opportunity ANNEXA doors.
And it sounds like there maybe some modification to the product or a new product best to come up to address that I Wonder. If you maybe just speak to what has to change to address that opportunity from your current products that and maybe if you want to speak about the size of the opportunity as well circle.
Yes, so, yes, and specifically inciting exit doors, what we what I was really referring to there with store exits right for loss prevention for store exits.
So there's a there's a couple of things that we've looked at four.
Store exit so one is.
Really not necessarily so much modifications to our harbor products puts the software algorithms that we use to detect items that are transitioning out of store exit and it really is as we've talked about previously our desire to do more and more in software lessen lessening the hardware because in so doing we will enable deployability suite. So we continue to innovate on the software side to enable us capabilities and then the second is depend.
Jim 700, I see has capabilities in it specifically focused on loss prevention.
To allow embedded tagging with seamless product returns and to allow loss prevention with frictionless tough self checkout. We havent described in any more detail at this point in time with those innovations are they'll be coming out in more detail as we go further down the product announcement and launch.
But we're really focused on that use case and it has been a use case that's been in front of the rent industry for a long period of time in fact retailers began talking about it.
Probably more 10 years ago, but the technology wasn't ready now with the impinge M. said 100 with insensitivity small size and these features we have embedded in it and with our innovations on the system software algorithms. We believe the opportunity is now just started dressing that use case.
And we end up it is a very large opportunity.
Okay, great and they're just following on the Japanese can be in syrup.
Sorry go ahead, Jeff.
Charlie I, just thought I would add that as you know well partners play a very important role in creating and deploying solutions for all of our customers, but in particular in retail as it relates to that loss prevention challenge and opportunity.
And so as we approach.
Our contribution to those solutions, we think of creating leveraging reign to create the most power falling capable loss prevention engine that essentially enables partners to achieve loss prevention solutions previously not possible.
That makes a lot of sincere. Thank you for that and then just follow up for the follow up.
Going back to the Japanese can be in store opportunity that you guys put a press release, maybe a month ago.
The deal in the up 700 him.
There was a quote from a loss and executive I Wonder if you could maybe just.
Speak to kind of where we are today I think there's been some stores that have trial the technology.
What does 2020 look like in terms of deployment.
There are targets within the feature but just more of the immediate term what has happened in Japan. Thanks.
Yes, so Charlie this is Chris again.
So.
I think that way you should look at this opportunity is that it's a long term development to address the significant use case, which is food tagging those pilots have been ongoing in Japan and that we have every reason to anticipate pilots will continue ongoing and as evidenced by the Lawson statement that was in our press release.
We see food hanging opportunities kind of worldwide and see the opportunity for the and Jim 700 to start addressing those food opportunities.
But the Japanese convenient store opportunities is kind of a marker out there and they that Japan Mehdi itself cited they want to have the system rollout in 2025, it's a market for the future. That's as you can get to this opportunity you can deliver the ability to tag. These items added cost effective and performance fact appoint.
The opportunity in Japan alone is 100 billion items. So I think what you should look at is it's a northstar northstar for where the industry needs to get to in order to tag of food items and I think you should look the impinge and 700 as a first but significant step.
In the direction of that Northstar.
Got it thanks, so much.
Thanks, Charlie.
Our next question comes from Scott, Sarah with Roth Capital. Please go ahead.
Hey, good afternoon nice quarter, Thanks for taking my question.
Thank you.
Just a quick we follow up on the gross margin front given the mix in the third quarter gross margins were very strong Im wondering if there's anything else. It was going on within that particularly on the IC front or gross margins starting to bounce back there and get get a little bit better is there something else going on and then looking to the the seasonal.
Price declines that you see in in the first quarter.
You Havent highlight anything so assuming it's within the normal range of expectations are that I had a couple of follow ups.
This call I'll take the first time gross margin so year over year gross margin increased primarily due to the leverage on the increased revenue, which was partially offset by our product mix and then if you look at it on a sequential perspective and gross margin increased slightly more favorable mix within the endpoint IC. This is Ben.
Partially offset by overall next switching and finance season systems.
The third quarter compared to the second quarter.
And then I think at a question on on price the typical sales sales concessions going into the first quarter.
Within the normal seasonal.
Expectation that you've seen over the past couple of years anything to highlight or note.
This is Jeff Scott.
As you know and as we cited in the earnings script. We are in the fourth quarter. This year, we are in pricing negotiations with our partners and it's really too early to comment on the outcome.
Of.
Those negotiations.
Gotcha and following up on the M. 700, it sounds like.
We start to the engineering samples general availability in the first half transitioning into revenue in the second half.
Looking at past.
Product cycles, how long did it take for the prior introductions of Monza to reach perhaps 10% of sales to give us some ideas of how quickly you would expect the ramp over the next several quarters.
Reached 10% of sales. So this is Chris.
I'm looking around the room here I'm trying to remember the charts in my head I think that we reached 10% of sales within the first year okay.
And that generally took off fairly quickly after that as designs got qualified and started ramping as Jeff said.
We will continue selling the existing products for an extended period of time, because once your call up designed into qualified and opportunity they tend to stay there.
In conjunction with 100 really significantly addressing new opportunities and enabling new use cases in the dose as those come online.
Next we see that see the ramp.
And then let's say if I could Chris following up on some of your comments related to the M. 700 loss prevention, but also pat's comments talking about change of ownership of various certification authentication types of opportunities for authenticity of products are you starting to see the green shoots and model of different red.
A new streams being derived.
From partnerships with different players out there and apparel and otherwise as you start to rollout products lithium 700. Thanks.
Sure. So the in 700 is our is our first foray into some of these advanced capabilities with this loss prevention opportunity and where you are seeing excitement among end customer significant end customers for those capabilities in terms of that kind of the next round of capabilities that Moore's law migration enables we haven't said introduction dates.
Really disclosed anything specific about them. So I can't say anything about them right now, but we remain excited about.
What Moore's law will enable us to do in the rain endpoint IC today with the in PJM 700 launch and in the future and it's our opportunity to innovate.
Great. Thank you.
Thank you Scott Thank you Scott.
Thank you.
Again, if you have a question you may enter the question Q by pressing Star then one.
Our next question comes from Jim Ricchiuti with Needham and company. Please go ahead.
Thanks, John you alluded to.
I believe strong reader sales.
Year over year I was wondering if you might you look quantify that.
We typically don't quantify within readers are readers IC and looking system Jim.
Thanks, Casey system, you're up year over year systems was up 35% from from 10.7 million in Threeq you have 18 to 14.4.
Got it okay.
Nice strength in that area.
And I don't recall I'll have to check, but it was it in the easier comparisons on the readers side of the business versus year ago.
Jim third quarter year ago, We noted was 10.7 million so.
Lower significant growth this year, but I think thats reflective of the business at the time and I don't think it yet I don't think there's anything particular that made it easier compare or anything happening back at that time.
Was pressing guys.
Okay and by the way you can provide.
The.
Domestic versus international portions of the business.
Turning if you're seeing any.
Any difference in business conditions in the key verticals.
I'll try to answer that.
I would say that we're seeing a similarity in the growth opportunities around the globe I know, we've cited supply chain and logistics that continued strength in retail.
Industry for dot over smart manufacturing.
So often referred to as a as strong in Europe , we see it around the globe and the same is true with aviation Air Transport. So I think we're seeing those use cases and those opportunities grow fairly consistently around the globe.
And last question for me, it's a very different industry, but I was just wondering versus a number of years ago. When we did see.
A pickup in some of the litigation industry litigation, but is there do you see any risk with his ongoing litigation that it could be at all disruptive to the market.
So Jim we don't really comment much about about the litigation or kind of its plans or trends going forward, but it is our desire as as I stated in a NN and note that I put out to the community when if when we first filed a lawsuit that is our desire not to disrupt the industry and for the adoption to could end user adoption to continue going forward.
Okay. Thank you.
Thank you Jim Thank you Jim.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
This is Chris I, just like to say thank you all for joining the call today and a special thanks to the pinch team for the solid execution. This past quarter. Thank you all.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.