Q3 2022 Impinj Inc Earnings Call
Okay.
Welcome to the impinge third quarter 'twenty to 'twenty, two earnings conference call and webcast.
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I would now like to turn the conference over to Mr. Andy Cobb, Vice President Strategic Finance. Please go ahead.
Thank you Jay.
Good afternoon, and thank you all for joining us to discuss impinges third quarter 2022 results.
On today's call Kristi Oreo you can just co founder and CEO will provide a brief overview of our market opportunity and performance.
Cary Baker <unk>.
<unk> CFO will follow with a detailed review of our third quarter 2022 financial results and fourth quarter 2022.
We will then open up call for questions.
Jeff Dossett, Impinges zero will join us for the Q&A.
You can find management's prepared remarks, plus trended financial data on the Investor Relations section of the company's website.
We will make statements in this call about financial performance and future expectations that are based on our outlook as of today.
Such statements are forward looking under the private Securities Litigation Reform Act of 1995, while we believe we have a reasonable basis for making these forward looking statements. Our actual results could differ materially because any such statements are subject to risks and uncertainties.
We describe these risks and uncertainties in the annual and quarterly reports, we file with the SEC we.
We do not undertake and expressly disclaim any obligation to update or alter our forward looking statements, except as required by law.
On today's call all financial metrics, except for revenue or where we explicitly state otherwise are non-GAAP .
Balance sheet and cash flow metrics are GAAP.
Please refer to our earnings release for a reconciliation of non-GAAP financial metrics for the most comparable GAAP metrics.
Before turning to our results and outlook note that we will participate in the Baird 2022 Global Industrial conference on November 10 in Chicago, and we will virtually attend the Susquehanna semiconductor showcase on December 13.
Look forward to connecting with many of you at those.
I will now turn the call over to Chris.
Thank you Andy and thank you all for joining the call.
Our third quarter results with strong revenue and adjusted EBITDA exceeded our guidance.
It's both setting new quarterly records.
Against the backdrop of broader macro crosscurrents ease record results I like our growth potential as product supply improves.
Last quarter, I said that based on my conversations with it being just leading end users in go to market partners.
I expect the demand to remain strong at least through second half 2022.
Recent conversations with those end users and partners suggest that strength extends well into 2023.
They've been by new deployments and expansion at existing deployments.
Highlighting the strong demand, we entered the fourth quarter with record backlog.
Yeah.
Starting with endpoint IC supply.
Tastes and lead times of wafer upsides from our foundry partner continue to gradually improve.
Despite that improvement third quarter demand still exceeded supply.
More than 50%.
For the sixth consecutive quarter and.
And we expect demand to exceed supply well into 2023.
It Impinges yearly executive Forum.
Partner event, which we just held.
Our leading inlay partners highlighted they are adding significant inlay manufacturing capacity and reiterated it would layer on additional endpoint IC bookings, if we had more wafers.
We look forward to the day, when our improving supply situation positions us to take those additional bookings.
Third quarter endpoint IC revenue exceeded our expectations.
For the fourth consecutive quarter set a new quarterly record.
Our current supply visibility supports continued endpoint IC unit volume growth in both fourth quarter 2022 and 2023.
Looking further out.
Continue to see multi year growth tailwind for our endpoint Ics.
Turning to system supply.
Opponents shortfalls again constrained our reader shipments like they have for the past four quarters.
Our reader Ics, although third quarter supply, mostly caught up to demand.
These strong orders heading into fourth quarter, particularly for our <unk> family products.
Yeah.
Entered fourth quarter with significant systems backlog.
Yeah with product supply still constraining constraining systems revenue growth into 2023.
Like for endpoint Ics, we look forward to the day, when we have enough system supply to satisfy market needs.
Third quarter systems revenue exceeded our expectations reader Ics were a bright spot.
Setting a new quarterly record.
Leader in Gateway revenue met our expectations met again by shipments to the visionary European retailers expanded loss prevention deployment.
Looking into 2023 and see solid systems demand led by rapid unit volume growth in our E family Reader Ics.
On the product front.
Thrilled by our September launch at the impinge authenticity solution Jim.
More than a decade in the making ange authenticity as an end to end platform offering for cryptographically authenticate in everyday items as genuine.
Comprising a new endpoint IC impinge M 70 75.
Which pairs and ISO standardized cryptographic engine with a unique key in each IC.
New firmer and our reader Ics readers that enables a challenge response dialogue with those endpoint axes.
Our new cloud based in PNG authentication service that can verify and Ics authenticity in milliseconds.
And easy to use Apis that enable partner or end user product databases. They.
The pair each item with it's a dedicated endpoint IC.
Hinge authenticity will inhibit counterfeits.
Improved product safety and secure the supply chain.
With impinge authenticity, we hope to make a substantial dent in global counterfeiting, which costs legitimate enterprises hundreds of billions of dollars annually.
Only available from the <unk> platform and pinch authenticity is also our first product offering focused on expanding our recurring revenue opportunity from endpoint Ics to.
To include cloud services.
And then Jonathan intensity represents another key element of Impinges mission connect.
Connecting every item in our everyday world and.
While doing so.
Checking those items.
The privacy of people, who benefit from those connected items and.
In the World we live in.
I'm pinch authenticity for protecting items protected mode for protecting privacy.
And looking forward using.
Using the <unk> platform to improve the sustainability of those connected items.
On the project front, we see continued strong retail momentum.
The visionary European retailer please.
Please without rain based loss prevention offering continues deploying as planned.
We expect that deployment to continue generating meaningful revenue for at least the next two quarters.
The Asia based global retailers continued expansion of their self checkout deployment into new geographies generated meaningful reader revenue again in the third quarter.
And in supply chain and logistics.
Can you to expect the second large north American customer to drive large endpoint IC volumes in 2023 and beyond.
In closing I'd like to thank every member of the <unk> team for your tremendous effort this quarter.
We delivered record revenue and adjusted EBITDA.
Produced a new first of its kind platform offering to inhibit global counterfeiting.
Strengthen our bond with partners and end users positioned us for growth.
All while navigating ongoing supply challenges.
With a strong team and a growing opportunity I remain confident in our market position and energized by our strong demand.
I will now turn the call over to Kerry.
Our financial review fourth quarter outlook.
Thank you, Chris and good afternoon, everyone on today's call I will review, our third quarter financial results and fourth quarter financial outlook.
Quarter revenue was $68 3 million up 14% sequentially compared with $59 8 million second quarter 2022.
31% year over year from $45 2 million in third quarter 2021.
Third quarter endpoint IC revenue was $51 2 billion up 19% sequential comparable 42 point now going from second quarter 2000 and.
And up 60% year over year from 32 million third quarter 2021.
Celebrated demand for specialty and industrial items drove third quarter revenue above our expectations and although that specialty and industrial mix will normalize in the fourth quarter, we still expect sequential endpoint IC revenue growth and wafer supply.
Third quarter systems revenue was $17 1 billion up 1% sequentially compared with $60 9 million second quarter 2022 and 20.
29% year over year, and $13 2 million in third quarter.
Third quarter systems revenue exceeded our expectations driven by strong reader IC shipments.
On a sequential basis reader IC revenue increased rigor revenue was flat and gateway revenue decline on a year over year basis reader IC and gateway revenue increase while reader revenue decline. Despite strong demand, we expect similar fourth quarter systems revenue as we continued navigating.
Shortcuts.
Third quarter gross margin was 56, 9% compared with 54, 7% in second quarter, 2022, and 53, 3% in third quarter 2021.
The increase was driven by endpoint IC product margin, specifically, the richer mix of specialty and industrial.
The year over year increase was driven by higher endpoint IC product margins.
Both the specialty and industrial IC mix and a larger impinged M 700 mix, partially offset by decreased sales old reserve inventory.
Total third quarter operating expense was $29 million compared with $28 8 million in second quarter, 2022, and $24 4 million per quarter in 2021.
Research and development expense was $14 million sales and marketing expense was $7 4 million general and administrative expense was $7 7 million.
We expect similar total operating expense in the fourth quarter.
Third quarter, adjusted EBITDA was $9 8 million compared with $3 8 million in second quarter 2022.
400000 in third quarter 2021.
Third quarter adjusted EBITDA margin was 14, 3%.
Third quarter GAAP net loss was $2 2 million third quarter non-GAAP net income was $9 3 million or 34 cents per share on a fully diluted basis.
Turning to the balance sheet, we ended third quarter with cash cash equivalents and investments of $201 1 million compared with $183 7 million second quarter 2020 to $113 3 million in third quarter 2021.
Inventory totaled $31 9 million down slightly from the prior quarter.
Third quarter net cash provided by operating activities was $14 5 billion property and equipment purchases totaled $2 3 million free cash flow was $12 2 million.
Before turning to our fourth quarter guidance I want to highlight a few items, we need for our results and outlook.
Third quarter gross margin exceeded expectations due primarily to the favorable shipment timing of specialty and industrial and quite high.
Looking forward, we anticipate gross margins to stabilize in the 53% to 54% range at the endpoint IC mix normalizes at least until further 300 millimeter innovation opportunities for gross margin accretion.
Second we currently anticipate receiving a meaningful quantity of wafers late in the fourth quarter that are scheduled for early first quarter customer shipment.
That balance sheet timing will mask, the fact that our shippable supply remains extraordinarily weak.
Third equipment delivery tiny has resulted in lower than expected capital expenditures year to date.
And despite some catch up in fourth quarter, we now anticipate our 2022 Capex would fall below 2021, regardless, we have sufficient endpoint IC post processing capacity that the equipment delays will not impact our ability to grow 2020 endpoint IC shipment.
Finally, as wafer upsides from our foundry partner continue layering in we foresee increasing endpoint IC shipments driving mid to high single digit sequential endpoint IC revenue growth in fourth quarter 2022, and again in first quarter 2020.
Turning to our outlook.
We expect fourth quarter revenue between 71, $573 5 million compared with $52 6 million in fourth quarter 2021, a 38% year over year increase at the midpoint.
We expect adjusted EBITDA between nine eight and $11 3 million on the bottom line, we expect non-GAAP net income between nine and $10 5 billion, reflecting non-GAAP fully diluted earnings per share between 30% and 37%.
In closing I want to thank the pinch team for your outstanding execution this quarter, particularly in driving operating leverage one of our chief financial objectives back.
Back in 2020, we are committed to returning to adjusted EBITDA breakeven. We have now delivered four consecutive quarters of positive adjusted EBITDA with third quarter 2022, setting a new record and looking ahead I see opportunities for continued operating leverage improvement.
Even as we continue investing in our business, we now turn our focus toward next gen.
<unk> generating consistent free cash flow I.
I look forward to ongoing progress towards that goal.
I will now turn the call to the operator to open the question and answer session I'm James.
Thank you we will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
The first question today comes from Mark the paces from Jefferies. Please go ahead.
Hi, Thanks for taking my questions and congrats on.
Executing on the supply.
On the question of supply going forward aside from.
The strategy of just waiting for more.
Wafers to become available could you just frame out like what you know what what are the realm of possibilities to.
Get supply on on a more consistent basis, and then as a follow up to that.
Maybe Terry if you could just talk about that.
I mean, the industry. There are some people who believe that the industry is going to go into an inventory correction.
Gonna have capacity loosen up a lot and then in the first half of next year.
And then often that's followed by a restocking cycle and then we get tight capacity again and I'm wondering you know.
How how much working capital would you consider putting to building inventories I guess you have around 90 days would you would you consider 180 or are you know three quarters of three quarters.
A year of of inventories just to kind of.
Make your customers feel better that you have the ability to supply them in and hit that upside those are the three the two questions. Thank you.
Thank you Mark this is Chris I'll start.
In the timeframe that we're talking about here over the next couple of quarters, our supply opportunity is to work closely with our foundry partner.
Should generate additional supply as it frees up and as they are able to deliver more wafers they deliver more wafers both from there.
Their fabs exceeding their capacity plans as well as from any.
Any demand shortfalls from other customers in other industries, we are positioned to take as those wafers become available we've seen modest upsides already we expect to compete or we hope to continue seeing modest upsides and depending on how the market goes you know.
We will take what we can get from our foundry partner, we work closely with them and we believe we are prioritized for that upside.
Even with our current supply visibility that visibility supports and can I see unit volume growth in fourth quarter 2022 and in 2023.
In terms of our ability to take and how much we take and kind of the inventory build which is what you're getting out of if supply becomes more available I'll turn it over to Kerry.
Mark Thanks for the question. So yes, if we were to have the opportunity to rebuild supply we absolutely. What we are we're very lean, particularly on our finished goods, where we're effectively producing units and shipping them out within the following weeks. So we would built supply.
Worried about.
Building the supply because our products have incredibly long lifecycle. Our Monza four was introduced more than 10 years ago with increasing volumes of share. Our Monza are six or six peach were introduced more than five years ago, and they're still growing volumes. This year. So there was a long product lifecycle that gives us the flexibility to two.
AD inventory now I see the same reports that you are and I am hopeful that supply will break free for US currently I'm not modeling inventory build this year I don't see us getting enough incremental supply to first satisfy the demand that's in the market and then be in a position to build inventory.
But mark this is Chris I'll, just add during the depths of the pandemic we built.
Many billions of units of inventory.
In fact, what was considered at that time, an outsized inventory built.
We burn through that inventory essentially in two quarters.
And and we've been short ever since and I will say that we learned from that situation, especially as Carrie said, given the long life of our products and given the opportunity to build inventory. This time around we'd like to do so again.
And so we are looking at all of our options for supply within the timeframe that you're talking about like I said.
The opportunity here is to work closely with our existing foundry partner.
Great. Thank you very helpful.
The next question comes from Jim Ricchiuti of Needham <unk> Company. Please go ahead.
Hi, Thanks, good afternoon.
I'm wondering if as you look at the two areas of the business, where you're clearly constrained.
Which part normalizes.
First.
In terms of the supply challenges you know based on the conversations that you're having.
Yeah. Thanks, Jim So yes, we're constrained on both sides of our business on the systems side and on the policy side.
Obviously predicting the future here is very difficult.
I'm going to hazard a.
I guess that we will probably see the system supply free up earlier, because we are so far behind in terms of our endpoint IC supply demand imbalance.
We've got a lot of catching up to do.
And at the same time, you know, where we are seeing system components gradually start to free up.
So my expectation would be looking forward that we will see systems normalize before the end point Ics do but that's an expectation based on today's facts and of course the situation on the ground could change at any time.
Got it and then the follow up question I have just relates to to that.
Chris.
This really comes down to I guess, your you're entering Youre beginning to enter your your normal end of year price negotiations.
I wonder.
How are you.
How would you think about the.
Your leverage frankly as you go into this process. It sounds like you know you're in a pretty good position for a second year in a row now.
Or third year.
Yeah, So Jim I'm going to say a few words, there and then turn it over to Jeff Endo Terry.
We are currently looking at.
Continued price increases from our foundry partner.
We are looking of course at continued.
Constrained supply.
And strong market demand. So that's the situation in front of us right now.
Of course at the same time, we want to deliver into the opportunity and grow those market opportunities as much as we can.
Gary why don't you say a little bit about the integrity of our margin model and then Jeff anything you would like to add.
Kind of the dynamics in the fourth quarter certainly.
Jim our foundry partner has signaled another round of price increases beginning in 2020, you should expect us to handle those the same way we did on the previous rounds of price increases we will look to.
Pass those costs onto our customers in a way that maintains the integrity of the margin model.
This is Jeff I think the only other thing I would address that.
In the context of this extended supply constrained we have been working very closely.
Very hard on behalf of our partners their efforts on behalf of their customers to optimize the supply is available into the market.
The primary focus of our engagement with our partners as opposed to typical fourth quarter ended the year pricing negotiations.
Conversations continue to be supply.
Focused and focused on optimizing and customer outcomes to help service programs that are already deployed as well as to plans for the activation of new programs when the supply outlook improves and as Carrie said, we continue to work.
Closely with our partners with respect to.
Pass throughs, if our costs increased by two.
Those three effectively to our partners and customers.
Got it thanks, I'll rejoin the queue.
Okay. Thank you Jim.
The next question comes from Mike Walkley of Canaccord Genuity. Please go ahead.
Great. Thanks for taking my questions and congrats on the strong execution again.
I guess, Chris My question is just digging a little more too.
Tangent authenticity, yeah, how should we think about that recurring revenue you know the opportunity how you might price it.
Ah trial time with customers and when it might start to impact the financial model.
Yeah. So thank you Mike so.
Yeah. So impinging authenticity is our first.
That form offering really end to end platform offering comprising essentially every element of our platform.
And it expands our recurring revenue opportunity from endpoint Ics to include cloud services.
You know the <unk> revenue opportunity is of course meaningful systems revenue opportunity is meaningful.
And at the same time, we spent years building a cloud service from which we will monetize authenticating items.
Given that it's a it's a really a new offering this idea of bringing cryptographic authentication to everyday items.
It's too early to model model significant 2023 revenue we will keep.
Even our investors and everybody else updated as we make progress on this opportunity and as we make progress in different verticals, but as of right. Now we're really excited about the launch exciting excited about what we brought to market here and really energized by the opportunity in front of us and we're working on it for a long time expect us to push it really hard in the market and I.
Personally I have a lot invested in this one you know I've talked about it for quarters and I am absolutely thrilled that we were able to launch it.
Hi, This is Jeff.
Pick up.
Observations or insights from the market.
I had the opportunity to engage with executives.
<unk> sector, leading enterprises and the topic.
Brand value has been a consistent focus and priority and they talk a lot about we talked a lot about how they create and lose value associated with their branding and counterfeits is clearly.
Clearly a very significant.
Value erosion as situations. So we're very excited to be able to come to those conversations.
With the impinge authenticity solution engine, which enables our partners to craft a whole new category a whole new approach to.
Improving the authenticity of everyday items.
And we're already beginning to get expressions of interest to begin to build the pipeline.
We're seeing interest not only in apparel and footwear as we anticipated, but also in other sectors, including pharmaceutical building materials at many many more so in this as a long term opportunity we hope to create a new growth factor for <unk> and we look forward to updating you in <unk>.
Sequential quarterly.
Earnings calls.
Great Yeah look toward the updates that congrats on getting that launch I guess for my follow up question just for clarity.
Yeah.
Great to see the inflection point in the model over the last two quarters and I guess three based on your guidance.
Is there any any way to think about adjusted EBITDA and free cash flow margins going forward is that the back half of this year, a fair way to be thinking about future years or is this above.
Where you might be future years, given the investments you plan to keep making in the business.
Yeah. So thanks for the question.
Yes, so I think the back half of the year is as a good starting point in the near term we expect to.
To continue we expect additional leverage in our model and we will continue to drive that there will be incremental investment in our business. We see the opportunity in front of US is massive and we're going to invest in front of that opportunity you should assume most of that investment is in the R&D line. So as you think about your long term models.
<unk> assumed that we will grow R&D roughly the same rate as revenue.
On the sales and marketing line.
There is investment required to be sure, but we have a strong network of partners that we leverage to take our products to market. Both on the endpoint IC side and the system side. So while there will be continued investment in sales and marketing it won't have to be at the same rate of revenue growth.
Then clearly there will be leverage in the G&A side as you look in the very near term. So Q1 recall that last year, we made the decision to transition our management bonus from a 100% stock to 50% stock and 50% cash with the cash component <unk>.
Acting on non-GAAP Opex, you should expect us to take that next step to 100% cash beginning in 2024 weeks, so that along with payroll tax reset flows occur at the beginning of the year the heavier audit fees I'm expecting a step up in Opex in Q1.
That's very helpful. Thanks for all that detail.
Thank you Mike.
The next question comes from Troy Jensen with Lake Street, <unk> Lake Street Capital. Please go ahead.
Hey, gentlemen, first of all congrats on the sustained outperformance.
Alright, Thanks, Brian .
Hey, so how 'bout Kerry just to challenge you a little bit on kind of the gross margin guidance for Q4 of 53% to 54%.
Laughing already over the last time you were there was a year ago. When you were doing $45 million in revenue right and that now.
Now you're talking $17 5 million and I get and I know, you're probably gonna say specialty and industrial Ics sales where we.
We were strong or unseasonably strong, but it seems like that's a recurring problem for you guys, but can you just talk us through how gross margins get to 53% to 54%.
Yeah, so yeah.
You're right the biggest impact has been the specialty and industrial is.
This quarter was a little bit different in that part of it was demand timing. We had orders that we had planned for a modeled in Q4 that our customers requested in Q4.
So there's a little bit of a pull forward effect.
That being said the level, but we are modeling in Q4 that is the basis for our 53% to 54% normalized gross margin I look at our preliminary modeling for 2023 and I see that as a consistent quarterly level looking looking into 2020, so that gives me confidence that.
At least at this moment I think some of that the new once its been created very good b wants to be clear that's been created from the specialty and industrial is behind us at this point.
You will note in more in our guide what's embedded in there assuming the similar opex is that our modeling at the high end of that 53% to 54% range again.
But I think that's the right spot for US right now I think endpoint IC mixes normalizing, we're not done there there's more opportunity for Incretion as we continue innovating on our 300 millimeter product line.
Got it Okay. Now it is my follow up can you just talk about wafer supply diversification is there anything you guys are doing to try to.
Spread out the the wafer production.
Yes, Troy as I mentioned, a little bit earlier at least in the timeframe, we're talking about over the next couple of quarters.
Our opportunity is to work closely with our existing foundry partner and the new products that we had spent so much time developing with them and launching with them.
And to focus on working with them to get wafer upside.
Two two.
To basically drive our position or <unk>.
<unk> into the market.
As Kerry noted.
There are opportunities for some gross margin accretion as we continued to advance our 300 millimeter product portfolio.
Along those lines, there's opportunities to increase the number of die per wafer.
And potentially get some more IC supply it that way and so but in the timeframe, we're talking about the opportunities with our existing foundry partner.
Alright understood keep up the good work gentlemen.
Thank you Josh.
Again, if you have a question. Please press Star then one.
The next question comes from Scott starts goodness, Scott Searle of Roth Capital. Please go ahead, hey, good afternoon. Thanks for taking my question nice job on the quarter again guys.
Thanks, Chris.
Maybe diving into 'twenty 'twenty three you've given some color as it relates to some of the customers that you talked about in the past you European visionary customer a large logistics and <unk>.
North America et cetera, I'm wondering if you could talk a little bit more about what else is in the pipeline as opposed to some of the existing customers on what use cases are getting pulled forward and how should we think about the mix of the end verticals as we get into the end of 'twenty three.
Yes, Scott. Thanks for the question I, obviously can't talk about specific customer opportunities specific ones I'm looking at 2023 above and beyond what we've spoken about already however, I will say.
We are looking at.
Retail expanding beyond apparel to general merchandise, which I think you are well aware of.
And that general merchandise opportunity is is quite Israeli law I mean, it's large it's it's much larger than the retail apparel opportunity overall.
We do see gross and you you can hit kind of hear it on other calls from other executives from other companies associated with the supply chain and logistics opportunity and we expect to see large endpoint IC volumes, turning to 2023 and beyond so that supply chain and logistics opportunity.
There is a food opportunity, which we generally include in supply chain and logistics for now because most of that food opportunity is associated with shipments rather than I'd say, most not exclusively but mostly associated with shipments so we're including.
Food opportunity in supply chain, and logistics, which even makes it supply chain and logistics opportunity even larger.
And then Jeff spoke to associated with impinge authenticity.
The opportunity in pharmaceuticals, and medical devices.
Layer all of those together.
The opportunity in front of us is far far larger than the opportunity that we and the industry have already achieved and our.
Our industry as a whole is still <unk>.
Sub 1% penetrated in a gigantic market, we are seeing that market open up in multiple verticals and we're truly excited about the future staring into 2023 and beyond.
Great very helpful. Thank you.
Scott This is Kerry as you think about the pacing of.
The quarters first with endpoint IC I mentioned in my prepared remarks that we're expecting mid to high single digit growth on endpoint IC revenue in Q4 and again in Q1.
We are expecting growth overall and endpoint IC is based on the current supply that we have but at the end of the day, we're still going to be supply limited not demand limited throughout 2020 for endpoint Ics.
And then on the systems side, I signaled flat systems revenue going into Q4, because of reader components shortfalls, not because of demand I believe those reader components shortfalls persist through the first half of 2023 and then the other factor to consider in 2023 as it relates to systems is the.
A large loss.
Loss prevention deployment with the visionary European retailer that project will continue generating meaningful revenue for at least the next two quarters as we complete this phase of the project. This deployment is going very well and there are opportunities from both a store any brand perspective to win more business with this customer and we're going to have to.
Balance those opportunities the customers timing desires as well as those component availability as we manage our systems business into the second half of 2023.
Very helpful and lastly, if I could just to follow up on Mikes earlier question on <unk> and Pingo authenticity I know, it's early days, but in terms of the model. How are you guys thinking about it is it a subscription based model is it a per unit model or a usage model. What are what are the early thoughts on that front. Thanks.
Yeah.
Yeah. So Scott we're exploring so we are actively engaging right now with partners.
Terms of the details enough model.
Different.
Articles and different use cases will have different needs, but I think you should really be thinking about us focus on focusing on.
<unk> recurring revenue from that authentication opportunity.
And pushing forward with different models subscription.
Per used click and to others.
Depending on the needs of that particular segment and particular end user.
The key to us is that.
We're going to be generating recurring revenue from the endpoint of seat from the service both of them together and linking the entire thing through the <unk> platform as an entire complete platform offering that is exclusive to the <unk> platform and that's where the excitement for us really comes in.
Great. Thanks, so much.
Thank you.
This concludes our question and answer session.
I'd now like to turn the conference back over to Kristy, Oreo co founder and CEO for any closing remarks.
Thank you N J M.
I'd like to thank you all for joining the call today.
And I hope you and your loved ones are and remain safe and well.
Thank you very much bye bye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.