Q1 2021 Impinj Inc Earnings Call

Good day.

[music].

Good day, everyone and welcome to the <unk> first quarter of 2021 earnings Conference call.

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At this time I would like to turn the conference over to MS. Ellen Hayes Roth Investor Relations Ma'am. Please go ahead.

Thank you operator, good afternoon, and thank you all for joining us for discussing impinges first quarter 2021 results on today's call Kristi, L'oreal and Finjan and co founder and CEO will provide a brief overview of our market opportunity and performance Cary Baker and can just skip I will follow with the detailed review of our first quarter 2021 financial results.

And second quarter 2021 outlook. We will then open the call for questions. Jeff Dossett contingency Arrow is also on the call and will join Chris and carry and the Q&A session.

Management's prepared remarks, along with the trended financial data are available on the Investor Relations section of the Companys website.

Please note that we will make certain statements. During this call that are not historical facts, including those regarding our plans objectives of our expected performance the <unk>.

Expected or potential impact of COVID-19 on our business operating results financial condition or prospects, the expected or potential responses of government authorities customers partners and the company. The COVID-19, and the availability of production and adoption of our products to the extent and we make such statements. They are forward looking within the meeting.

Of the private Securities Litigation Reform Act for 1995, any such forward looking statements represent our outlook only as of the date of this conference call.

While we believe any forward statements forward looking statements, we make including concerning COVID-19 are reasonable our actual results could differ materially because any statements based on current expectations are subject to risks and uncertainties. Please see the risk factors and the annual and quarterly reports, we file with the SEC for more information about these risks.

We do not undertake and 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 are non-GAAP financial measures.

Sheet and cash flow metrics are on a GAAP basis free cash flow is a non-GAAP measure before turning to our results and outlook. Please note that the company will participate and the Oppenheimer sixth annual emerging growth conference on May 11, and the 16th annual need of virtual technology and media conference on May 19, and Baird's 2021 global can.

<unk> technology and services conference on June nine and we look forward to connecting with many of you at these events I will now turn the call to Christy Oreo and pitches co founder and CEO Chris.

Thank you Alan and thank you all for joining the call.

Our fourth our first quarter results were strong with revenue and profitability exceeding our guidance already strong fourth quarter 2020, and bookings became even stronger and first quarter 2021, setting another quarterly record high.

High demand record bookings and terrific progress on our retail loss prevention, and Jim highlighted underlying strength and the business.

And even at those bookings growth and mid.

And wafer supply constrained our ability to fully capitalize on the opportunity.

We know the wait for headwinds will abate.

Remain uncertain win so today, we are carefully managing our partners' needs and those of the growing grain market against the limited wafer supply.

And when I see demand surged in the first quarter.

Revenue and bookings exceeded our expectations and set quarterly records driven in part by enterprises are accelerating their digital transformation at the same time worldwide and wafer demand also of surged restricting our wafer upside.

Leveraging that strong demand and tight supply.

So the significant amount of fully reserved endpoint IC inventory and the first quarter.

Despite of shipping record endpoint IC volumes, our inlay partners are for the most part operating hand to mouth.

Having consume their own inventory.

Recall, we anticipated today's wait for shortfalls back in mid 2020, and built 200 millimeter wafer inventory and the depths of the pandemic and.

In hindsight, we didn't build enough.

And we shipped that prebuilt inventory and the first quarter 2021 at a pace that significantly exceeds our quarterly 200 millimeter wafer supply.

Also recall of our newly introduced and pinch and 700 ramped more slowly in 2020 than we hoped as our partners focused on existing volume runners and then as we invested an additional 300 millimeter wafer post processing capacity and.

In hindsight, we didn't invest soon enough.

The first quarter 2021, and 700 of demand with many times larger than third quarter of 2020 of stripping our current 300 millimeter of post processing capacity.

The power capacity expansion and scheduled to begin coming online and third quarter for now we are maturing the capacity we have.

Looking into the second and third quarters endpoint IC demand far exceeds our wafer supply and.

And until our and 700 coast processes and capacity expansion is fully operational later this year, our 300 millimeter output remains constrained.

We spoke last quarter about navigating the crossover between our declining 200 millimeter inventory and our ecosystem ramping the and 700.

But with today's constraints.

Our focus is simply total unit volumes.

Short of a significant wafer increase from our foundry partner and we do not expect endpoint IC revenue growth and the second quarter. Despite 2021 orders already exceeding total units shipped in 2020.

We plan to moderate our inventory burn down and.

And at least for the next two quarters to stretch our IP supply through 2021.

And so doing we recognize our product shipments will not satisfy customer or market demand and we will need to prioritize those shipments.

The first quarter systems revenue declined quarter over quarter.

<unk> and our packaging subcontract of restricted our reader IC supply.

And the revenue shortfall.

<unk> increased revenue from improved reader sales.

We expect those packaging delays to moderate in the second quarter.

But reader IC supply will remain below demand and we expect to carry significant backlog and the third quarter.

Like for endpoint Ics, our reader IC partners of our operating hand to mouth.

Reader revenue increased bucking typical seasonal quarter over quarter declines.

And with Green shoots and partner led the <unk> opportunities driving greater strength and supply chain and logistics.

Here again demand exceeded supply was temporary component shortfall of limiting our reader production and causing some opportunities to shift and the second quarter.

Also our partnered channel reduced the aggregate inventory.

Certain reader products and very lean levels.

We anticipate the component shortfalls to moderate and supply to normalize and second quarter.

And retail we shipped the first production units of our rain based loss prevention engine, recognizing modest first quarter revenue.

We expect to largely delivered the remaining units against the $6 million prepayment from the visionary of European retailer and second quarter.

For the second consecutive quarter, we also generated meaningful revenue from a self checkout deployment for a leading global retailer based in Asia with that retailer and now looking at rain based loss prevention.

Today, I am even more convinced and self checkout and loss prevention represent a terrific opportunity for our platform for the potential to grow our long term endpoint IC opportunities via the 100% tagging required by touch list of consumer self checkout.

On the organizational side, we are thrilled to welcome Steve. Thank you to our board of directors, Steve brings with him of wealth and depth of the operational and business insights and is already providing valuable input to our business.

I look forward to Steve's advice and help and the months and years ahead.

We are also thrilled to announce that Bryan Wong of for time private company CEO of <unk>.

And tangent and early day, as our chief product Officer.

Brian brings 35 years of technical and business expertise and emerging technology market as well as deep semiconductor and Knowhow and Brian welcome to the team and happy birthday today.

In closing, we delivered a record bookings quarter and strengthened our team and see strong demand and growth opportunities ahead.

We exceeded our profitability guidance delivered positive adjusted EBITDA and positive free cash flow.

We also face the IC supply constraints that require of empathy for and closer alignment with our partners as well as superb operational execution by us.

And with the utmost confidence and the <unk> team I am energized by the opportunities ahead, and our efforts to deliver against them.

I will now turn the call over to Terry.

Thank you, Chris and good afternoon, everyone. Today, I will review, our first quarter financial results and provide our second quarter outlook.

First quarter revenue was $45 2 billion up 24, 1% sequentially compared with $36 4 million, Inc. Fourth quarter 2020.

And down five 4% year over year for $47 8 million and first quarter 2020.

First quarter endpoint IC revenue was $38 1 million up 33, 5% sequentially compared with $28 5 million for the fourth quarter 2020.

And the up 13, 1% year over year of 33 $7 million and first quarter 2020.

Endpoint IC revenue exceeded our expectation setting a new quarterly record.

<unk> facing a difficult comparison for first quarter 2020 that included $6 2 million of customer expedite for clubs.

Given the tight supply environment, we were able to sell for a significant amount of fully reserved inventory benefiting both our top and bottom line.

Looking forward, we expect second quarter 2021 endpoint IC revenue to decline sequentially as we stretch our supply.

First quarter systems revenue was $7 2 million down nine 6% sequentially compared with $7 9 billion and fourth quarter 2020, and down 49, 3% year over year for $14 1 billion and first quarter of 2020.

Reader revenue increased while gateway and reader IC revenue declined sequentially and year over year.

Gateway revenue faced a difficult comparison to first quarter 2020, which has the significant revenue from the first large north American supply chain and logistics project.

<unk> revenue was constrained by the packaging delays.

We expect second quarter of 2021 systems revenue to grow sequentially.

And our partner delivered the loss prevention solutions to the visionary European retailer.

Please note the shipments as you model and the third quarter comparisons.

First quarter gross margin was 53% compared with 54% and fourth quarter of 2020 of 46, 1% and first quarter of 2020 the.

For the quarter over quarter decrease was driven by product mix, partially offset by sales of fully reserved inventory and leveraged against the direct costs.

The year over year increase was driven by the sale of fully reserved inventory compared to the excess and obsolescence charges and the first quarter 2020, partially offset by product mix.

The first quarter of benefit from selling the reserve inventory was 220 basis points.

Total first quarter operating expense was $21 9 million compared with $21 5 million in the fourth quarter of 2020, and $19 million and first quarter of 2020 the <unk>.

Sequential increase was due primarily to increased payroll taxes and professional services.

Research and development expense was $10 3 million sales and marketing expenses were $5 7 million general and administrative expenses was $5 eight.

First quarter adjusted EBITDA, while the profit of 900000.

Comparable to a loss of $3 1 billion and fourth quarter 2020 at a profit of $3 million and first quarter of 2020.

First quarter GAAP net loss of $9 4 million first quarter non-GAAP net profit was 300000 for.

<unk> per share using a weighted average diluted share count of 25 7 million shares.

Turning to the balance sheet, we ended the first quarter with cash cash equivalents and short term investments of $119 3 million compared with $106 1 billion and fourth quarter of 2020, and $119 2 million and first quarter 2020.

The sequential increase was due primarily to reduce inventory and proceeds from stock option exercises and positive adjusted EBITDA.

Inventory totaled $28 1 million down $8 3 million from the prior quarter.

Our convertible notes moved into the current liabilities, because our stock price exceeded 130% of the conversion price for more than 20 of the 30 consecutive trading days ended March 31 also our convertible notes liability now reflect the par value adjusted for the debt issuance costs following up.

Adopting the new convertible debt accounting guidance in January.

First quarter net cash provided by operating activities was $9 4 billion property and equipment purchases totaled $4 for free cash flow was positive $5 million.

Before and turn towards second quarter guidance I want to highlight a few items that were unique for the first quarter. I also want to give us update on a few of our strategic initiatives.

First package and the waste for high margin reader IC will improve in the second quarter and reader IC revenue will grow sequentially to expedite deliveries, we are paying increased packaging cost for our reader Ics.

And we anticipate normalized reader IC revenue and third quarter of 2021.

Second strong endpoint IC bookings continued and the first quarter, resulting in record bookings like for the first quarter, we embedded and lower terms of assumption into our second quarter revenue guidance and in a typical quarter.

We assume our second quarter 2021 endpoint IC revenue will be supply not demand and limited.

For todays vantage point accelerating and several hundred production and adoption will be a key factor and the pace of third quarter endpoint IC revenue growth.

But absent increased wafer supply for more foundry partner endpoint IC revenue growth will remain constrained potentially through year end.

Third capital expenditures will remain elevated in the second quarter as we deploy additional 300 millimeter post processing capacity to Inc.

Chris our production throughput beginning of the third quarter of 2021.

Turning to our outlook.

We expect second quarter revenue to be between 41, 5% and $43 5 million, a 60% year over year increase at the midpoint of the range compared with $26 $5 million and second quarter 2020.

We expect adjusted EBITDA to be between and loss of $1 5 million and breakeven on the bottom line, we expect non-GAAP loss between $2 million, and 500, and reflecting a non-GAAP loss per share between <unk> and <unk> on a weighted average diluted share count between $24 1 million and 'twenty for.

3 million shares.

In closing I want to thank our opinions to our customers our suppliers and you our investors for your ongoing support and I.

I will now turn the call for the operator to open the question and answer session.

Yes.

Ladies and gentlemen at this time well begin the question and answer session.

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Ask the question.

We will pause momentarily to assemble the roster.

And our first question today comes from Scott Scott Searle from Roth Capital. Please go ahead with your question.

Hey, good afternoon, and thanks for taking my questions nice job on the quarter and a very very difficult operating environment.

Just quickly just to confirm.

The reserved inventory and put did I hear 220 basis points, so about $1 million of reserved inventory was sold and in the quarter and is the expectation in the the June quarter will there be any additional reserved inventory sales of that completely depleted and then just in terms of the visibility of their of endpoint IC has been down I would imagine given the bookings that you're talking about and being <unk>.

Hi, constraint that you basically are virtually of 100% visibility to whats youre forecasting and the current period.

Hi, Scott Thanks for the question.

You heard correctly and your math is good there were was of 220 basis point impact to gross margin the benefit from the sale of fully reserved inventory from a cogs perspective that was about a $1 million worth of.

The inventory.

There is still some fully reserved inventory of remaining for perhaps some could come through and the second quarter, but I believe of the bulk of it hit us and the first quarter.

Sure.

And then and your your next question around just Justin we don't have the 100%.

Go ahead no no no.

And that's all just kind of reiterate the question sorry.

Okay.

For the endpoint visibility.

And do have enhanced visibility and customers of bookings further into the future.

For the second quarter.

And we took a lower turns of assumption similar to what we did and the first quarter, that's because of the enhanced visibility, yes, but also because of our desire to stretch our suppliers for the quarter. So if the supply and limited guidance not a demand limited guidance.

At this stage, we also have some visibility into Q4, given the duration of the bookings okay. Great advantages. This is Chris I'll, just add a little bit more there and your question was kind of getting at the <unk>.

The ability that we had and the second quarter, but just recognize there are components of our fault on our debt.

And the system side of our business for example, and our readers and we're also working through packaging constraints on our reader Ics. So we still have things to work during the quarter.

Got you and Chris maybe just to dig in a little bit in terms of the managing the transition of products and 200 millimeter of 300 millimeter of the 700 and I think is on the 300 millimeter.

What are the constraints from a customer standpoint in this environment and in terms of managing that transition or are you going to be able to push.

Some of your customers quicker and and lay partners quicker in that direction or is there still just kind of continue to move at their own pace on the Clinton and I guess as part of that.

Given the globally constrained environment that we're in.

Do you expect to maintain share in this environment or guys like NXP being able to allocate more of their wafer capacity to RFID tags and otherwise.

Okay.

And my best to answer those questions and come back and maybe if I don't catch all of it so.

We see strong demand today for both our 200 millimeter product Thats for example of our existing month of our <unk> as well as of our 300 millimeter product of BRL 700, and strong demand for both.

We are constrained in terms of our availability and vote for.

For the latter of that you guys and 300 millimeter and 700 the constraints are really.

Focus for a little bit more right now on the way for post processing, which were maturing at this point in time and of course, yes, you are right the whole and the whole industry has.

Has wafer constraints as do many other industries and so we.

I would say debt from our perspective the.

The entire industry is constrained in terms of the endpoint IC availability.

And you also asked a little bit about share, we typically don't give visibility and to share until the end of the year. When we get the rain alliance numbers, we feel good about our position and the market today about the exit of 100 and what it brings to the market. So.

And we'll report out later, when we actually get the final share numbers, but I can say that from where we stand right now we feel very good about our position and.

And we look for our ability to maximize total unit volumes and the second.

Going forward from here and especially in the second half of the year.

Great and lastly, if I could just clarification in terms of the loss prevention engine. The majority of that the remaining component will all shipping and this quarter as well or is that also component constrained in terms of what you are able to ship and recognize in the quarter. Thanks.

Yeah, Thanks, Scott and we shipped a handful of units and at the end of Q1, we will largely shift for the remaining $6 million and Q2.

Great. Thank you.

Okay. Thank you Scott.

And our next question comes from harsh Kumar from Piper Sandler. Please go ahead with your question.

Hey, guys. This is Matt on for harsh congrats on the solid results and thanks for letting me ask the question.

First how should we think about the mass margin for the convert.

Italy, as we move through 2020. One are there any costs that you guys sort of having to deal with due to the supply constraints and have you been able to pass these costs onto the customers and I guess anything outside of mix that we should be thinking about as we think about gross margin in 2020 one.

Okay.

Yes, thanks for that.

And.

And there are a lot of factors impacting gross margin. This year of first let me start just for Q2.

Q2, gross margin will benefit from the loss prevention agent revenue, primarily landing and that quarter and that quarter. So we anticipate gross margin going up in the second quarter as we look into the third quarter, we'll lose the benefit from the higher systems revenue, but we will get back.

Partially offsetting is our reader IC, which is our highest margin.

The systems product, we will get back to a more normalized state. So those are kind of two puts and takes that happened and Q2 and then moving into Q3, and then kind of an overarching comment.

And 700 because of the structural advantages and there will be accretive to gross margin as that mix increase was relative to the rest of our endpoint IC sales and and.

And so our overall business so we.

The pay down 700 sales increasing quarter over quarter throughout the rest of the year into the next year and that will provide some gross margin lift as well.

Matt This is Jeff as it relates to your question regarding pricing.

And are evaluating a comprehensive set of options.

Of course as you can imagine there are a number of short and long term factors to consider and making a pricing decision.

Including but not limited to our existing partner agreements, but again, we are considering a full range of pricing options going forward.

Thank you for those.

Inside of <unk> got it and then.

The second question.

I understand that every customer and every geography is different but as we think of kind of big global reopening and retail channel.

What inning would you characterize that we are and and I'll have retail customer conversations changed over the last 90 days with the pit.

Picked up and some public cases around the world here recently.

Yes.

Matt. This is Jeff again, I think the first comment I would make is that we are in.

Encouraged as we and our partners are re engaging and customer opportunities around the globe.

And the pace of recovery varies by geography.

For example, in the U S and China, I think we see recovery moving kind of.

The faster pace than in other markets.

In particular, and North American performance apparel and footwear.

And are continuing to hold up well and better when compared to Europe.

So overall of the pace of of economic recovery is different by geography, but overall, we're encouraged by the adaptation of our partners and customers and and cadence and we look forward to those emerging opportunities and the quarters ahead.

Thanks, guys. Congrats again on the solid results.

Okay. Thank you Matt Thank you.

Once again, if you would like to ask a question. Please press star and then one to withdraw your question you May press Star and two.

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

Hi, everyone. Thanks for taking my questions I, just wanted to clarify something from the script. The commentary on 300 millimeter output will remain constrained until and 700 post processing capacity is expanded.

Sounds like the bottleneck is more in your control correct.

You had sort of already made that 300 millimeter transition would you be able to completely fulfill that and 700 demand youre seeing today with potentially excess capacity of thereafter.

Thanks, Derrick So this is Chris speaking.

As of right now of the bottleneck is on our side.

We are constrained by our 300 millimeter post processing capacity and getting wafers through the pipe as we said.

And we've got additional capacity that we invested and will start coming online and the third quarter and we expect to continue to ramp that post processing throughput through the end of the year, especially as we mature the technology that we're using that the plasma dicing and and and get essentially build up our machine capacity.

We are not unlimited and our 300 millimeter wafers and we will.

We'll have 300 millimeter wafer constraints.

Through the latter part of the year, unless we get additional wafer and upside from our foundry partners. So as we stand right now post processing constraints and the limit wafer constrained.

Got it and as my follow up I wanted to talk about recent commentary from your largest customer on the size of the market as they see it the called for a 40 billion unit opportunity and apparel, whereas I think you've stated that apparel is more like $80 billion.

And maybe you could bridge that gap for me and then also I think logistics.

And it was a 60 billion unit opportunity and 200 billion and food.

I think it would also be helpful. Chris to hear your thoughts on their estimates and non apparel markets. Thanks.

Sure.

And.

And do my best to answer those questions. The answers will be kind of a little bit soft answers because it depends on how you evaluate the market and the timeframe of what she upward which you hear of valuation.

And our best estimate of the total retail apparel market opportunity.

<unk> is about 230 and units we have judged that down to about $80 billion based on what we think is the Super Bowl market or the market that's available to us the basically the cervical market to us and thats the whole market, including the long tail of adoption kind of of if you wanted to use the crossing the chasm model of the laggards as well the near term.

<unk> of course is a bit smaller and depending on where you cut your timeframe you may end up with smaller or larger volume. So we continue to believe the total available market opportunity on the retail side for US is about 8 billion units, that's from where we stand today and supply chain and logistics is a little bit of a different answer depends on how broadly you cast your net for supply chain and logistics if youre just looking at.

The boxes and cartons and pallets that are shipped at the smaller number if you look at kind of all of the parcels that get shipped including for automotive and retail and so many of our opportunities with the number of comes very very large and interesting and the food space. If you look at food with the lens of boxes and pallets going for example, the restaurants, it's relatively smaller opportunities and instead of a.

100 million units per year.

If you look at the total fluid opportunity.

And that's including food items and go to consumers, it's gigantic it's measured and the trillions.

No.

We feel that our our view of the market is very consistent with our partners and just we take a little bit different lens on things.

Perfect. Thanks.

Does that answer your question Eric.

Yes.

Yes.

And our next question comes from Jim Ricchiuti from Needham and company. Please go ahead with your question.

Hi, good afternoon.

Well, we've seen an environment like this where we have.

Kind of.

The supply chain shortages component shortages, and there's always the risk for double and in some cases triple.

And so I'm wondering.

To what extent you are monitoring that and then to what extent.

For some projects, perhaps discretionary for some of your and cash.

Customers and maybe things just slide further out until two years of data.

Supply demand balance.

Thanks, Jim. So this is Chris I'm going to take the first part of the question and answer and then I'm going to hand off to Jeff and of course double order and it's always the rest of especially in a two step distribution model like we have for <unk>.

Our perspective today, our team season for purchase orders of noncancelable, our visibility into our partner inventory levels of relatively good and it shows they are lean.

We do believe that the demand is real out of the market in terms of how much of that opportunity can push out because it's not it's not.

A lot of use the word mandatory.

When you're on the other end of a customer calls as we are every every project is important to every customer every thing that we can deliver against is important and some of course have a higher level of criticality, which is where we talk about a prioritization. For example items that are going into hospitals of our pharmaceuticals or the COVID-19 and of course, we have a higher priority but.

<unk>.

Our goal is to support all of our customers and our end markets as best we can Jeff anything you'd like to add there.

Jim I, just like the reading for us, but our partners are very important to us and so we're working very closely with our partners to understand.

The needs of their end customers and working together we are.

We have of common objective.

Optimally.

And match that our available supply to those and customer requirements and the order of priority mute.

Mutually aligned and our desire to continue to service those and customer deployments as well as possible and I'm very proud of our team and very thankful and grateful for the engagement of our partner sites, we work together to navigate.

Complex supply demand environment, and and Jim. This is Chris I wanted to I want to jump in and say one more thing and I think this is very important for everybody to realize.

Our industry delivered more than 20 billion units last year.

Rain RFID touches the fabric of.

Everybody's for life.

It's in.

Stage of permits issued.

And <unk>.

And retail apparel items and <unk>.

Pharmaceutical and its associated with food delivery.

Non aviation bank and she goes on automotive parts on airbags and bumpers.

It's core to the fabric of.

Hi chain today.

And you can say well and some things push out and go back and you have any cash.

And with the disruption that can be caused by the severe shortfall and our industry can ripple through the entire supply chain.

So we are focused on and the best we can delivering against that opportunity and.

Minimizing the impact for upon and trying to make here is it sounds like rain, it's optional anymore.

Woven into the fabric of.

The worldwide supply chain.

And it's a fair point, Chris Thanks for that and.

And maybe this one's for you.

We see these.

Constrains persisting through year.

Year end.

Yes, I guess, what I'm wondering is do you, perhaps you recalibrate some of the expenses in response to this.

Kind of unprecedented environment that we're inc.

Yes.

Yeah, So good question and Jim.

And with customers booking further into the future we have better visibility.

Into the second half demand than we would've otherwise and.

And as we signaled the Q2, FY 19, and we're going to be lower in fact, we signal of that last quarter, where we're coming out of a couple of supersedes all quarters for endpoint IC. We knew Q1 was going to the strong.

And.

And we anticipated Q2 coming down from the seasonal perspective for a sequential perspective that is and then when you layer in the.

Stretching of all of our inventory Walmart and our new 300 millimeter capacity is coming online and you see that the sequential decrease and endpoint Ics coming into.

Into our guidance for being factored into our guidance, but when we look into the the <unk>.

Third quarter, we see endpoint IC revenue growth.

Now the obviously, that's going to be determined to a great degree by the production of the adoption of the gains of 700.

But we see we see growth of the third quarter.

And over and over the last four of five years with sequential growth in Q3 for Q2 of the 15% to 20% range.

And while that.

Pretty good benchmark was going to a benchmark as we have right now that being said that pace of growth going into Q3 is still limited by supply for the band is out there to do more for the supply is limited and.

And we'll also and in the position where we can look into Q4 right now we have meaningful backlog for Q4.

And Q4 endpoint Ics and typically go down again over the last for five years were down five 5% and 10% I feel the BD not in Q4 so.

When I look at that type of of forecast and I come back to Opex.

I don't I don't necessarily see a reason to change our opex structure will step up a little bit and Q2 some of the non wage spend that I anticipated in Q1 actually slipped into Q2.

We finished a lot of our investment hiring last year as we've talked about many times on these calls, but there are incremental hires.

In 2021 that will continue at pace, we think.

And the opportunity, though the oversupply constrained right now and we think that the opportunity and demand for layoffs ideas and really strong and we want to continue being in front of that investment curve.

Got it thanks, thanks very much for Ms.

Thank you Jamie.

And ladies and gentlemen, im showing no additional questions I'd like to turn the floor back over to management for any closing remarks.

And this is Chris speaking I'd, just like to say thank you all for joining the call today and I Hope you Andrew loved ones are and remain safe and well. Thank you again bye bye.

And ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending.

Now disconnect your lines.