Q1 2023 Impinj Inc. Earnings Call
Speaker 1: And Val.
Speaker 2: Welcome to the NPAGE First Quarter 2023 Financial Results Earnings Conference Call-In Webcast. All participants will be in listen-only mode. Did you need assistance? Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask a question.
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Speaker 2: Please note, today's event is being recorded.
Speaker 2: I would now like to turn the conference over to Mr. Andy Cobb, Vice President Strategic Finance. Please go ahead.
Speaker 3: Thank you, operator. Good afternoon, and thank you all for joining us to discuss Impinges' first quarter 2023 results. On today's call, Chris Theorio, Impinges' co-founder and CEO will provide a brief overview of our market opportunity and performance.
Speaker 3: Kerry Baker, Impinges CSO, will follow with a detailed review of our first quarter 2023 financial results and second quarter outlook. We will then open the call for questions. Jack Dauphet, Impinges CRO, will join us for the Q&A.
Speaker 3: You can find management's prepared remarks plus trended financial data on the investor relations section of the company's website.
Speaker 3: We will make statements in this call about financial performance and future expectations that are based on our outlook as of today. Any such statements are forward looking under the Private Security's litigation reform Act of 1995. While we believe we have a reasonable basis.
Speaker 3: From making these four looking statements, our actual results can differ materially, because any such statements are subject to risks and uncertainties.
Speaker 3: We describe these risks and uncertainties in the annual and quarterly reports we file with the FCC. We do not undertake an expressly-disglaim any obligation to update or alter our forward-looking statements except as required by law.
Speaker 3: On today's call, all financial metrics, except for revenue, or where we explicitly state otherwise, are non-GAP. Balance sheet and cash flow metrics are GAP. Please refer to our earnings release for a reconciliation of our non- GAAP financial metrics.
Speaker 3: to the most comparable GAT metrics.
Speaker 3: Before turning to our results and outlook, note that we will participate in the UBS Global Industrial and Transportation Conference on June 6th in New York, Baird's Global Consumer Technology and Services Conference on June 7th in New York and Roth.
Speaker 3: London Conference on June 21st. Also, we will host an investor day on June 13th in Seattle. We look forward to connecting with many of you at those events. I will now turn the call over to Chris.
Speaker 4: Thank you, Andy. And thank you all for joining the call.
Speaker 4: Our first quarter set a strong start to the year.
Speaker 4: The first quarter set a strong start to the year. Revenue hit a new quarterly record.
Speaker 4: Our multi-quarter N20C backlog.
Speaker 4: underpinned by our solutions engagements with enterprise end users, is very strong. And our wafer supply is finally improving.
Speaker 4: allowing us to use our balance sheet to begin building inventory to support that backlog, as well as anticipated future growth.
Speaker 4: Starting with end point ICs, first quarter revenue exceeded our expectations, setting a record for the seventh consecutive quarter.
Speaker 4: That performance was driven by underlying demand.
Speaker 4: increasing IC supply and our in-lay partners rebuilding their safety stock.
Speaker 4: Coming off that strong first quarter, we see several cross currents that should drive second quarter and point IC revenue to be flat sequentially.
Speaker 4: First, enterprise program expansions and new use cases.
Speaker 4: The latter builds significantly on our solutions efforts.
Speaker 4: are the main drivers of our end-point IC growth. From today's vantage point, even though every meaningful enterprise deployment, with which we are involved is progressing,
Speaker 4: Each is also delayed relative to our expectations by several months.
Speaker 4: All for their own reasons, but most traceable back to prior supply disruptions and our inability to predict the precise timing and pace of large deployments. Second, product shortfall stole many early opportunities.
Speaker 4: and restarting those opportunities will take time. And finally, as our IC supply recovers, we see our inlay partners slowing their safety stock growth.
Speaker 4: In summary, our command remain healthy.
Speaker 4: Our backlog remains very strong and we expect robust full-year endpoint icy growth, but see a second quarter pause.
Speaker 4: we received a PO for the third phase of the loss prevention deployment at the visionary European retailer
Speaker 4: This phase is roughly 75% the size of the prior phase.
Speaker 4: starts in second quarter.
Speaker 4: to be excited by the self-checkout on loss prevention use case and see expansion opportunities at this retailer and at others.
Speaker 4: and retail general merchandise.
Speaker 4: We expect strong second half 2023 endpoint IC demand growth from category expansion at the large North American retailer
Speaker 4: And on the supply channel logistics front.
Speaker 4: We see very strong partner demand for our reader ICs.
Speaker 4: used in printer encoders for our second large North American end user.
Speaker 4: We expect that end user to drive large endpoint IC volumes.
Speaker 4: the second half 2023 and beyond.
Speaker 4: Turning to the early opportunities, I am pleased by our progress with entange authenticity and expect meaningful second quarter entange M775 endpoint IC volumes.
Speaker 4: for tax tracking as well as healthcare and specialty foods.
Speaker 4: I'm also excited about book and magazine tracking in Japan.
Speaker 4: A use case we pioneered years ago that we expect will consume several hundred million endpoint ITs in 2023.
Speaker 4: We are well positioned to capitalize on these early opportunities.
Speaker 4: On the supply front, we for availability will finally catch up to demand in the second quarter.
Speaker 4: Between support from our Foundry partner and our post-processing investments, we look to avoid a repeat of our painful 2021 and 2022 shortfalls by building appropriate inventory.
Speaker 4: For readers, we enter the second quarter with significant backlog.
Speaker 4: Let's stubborn tightness in a few components means we will likely carry significant reader backlog into third quarter For reader I see demand for our legacy indie products was strong
Speaker 4: Even as our partners began ramping 65 announced e-family-based products to production,
Speaker 4: It's more than 75 new products in development.
Speaker 4: Turning to our organization in April we acquired Volantic.
Speaker 4: the industry leader and solutions for inlay design, measurement, and test.
Speaker 4: with leading end users relying on our platform to transform their operations.
Speaker 4: This acquisition expands our solutions footprint to advance the quality, reliability and readability of the partner inlays used in those enterprise deployments.
Speaker 4: Perhaps most important to a successful integration.
Speaker 4: The cultural fit between the two teams is very strong.
Speaker 4: I have worked closely with and trusted the voyantic leadership for the better part of 15 years, and I'm thrilled to have them and the very experienced voyantic team.
Speaker 4: and trusted the Volantic leadership for the better part of 15 years and I'm thrilled to have them and the very experienced Volantic team as part of the Impinj family.
Speaker 4: I am also thrilled to welcome Myron Washington to impinges board.
Speaker 4: digital transformation and multi-billion dollar P&L ownership.
Speaker 4: His knowledge and experience in our target market verticals will pay dividends on our journey to connect every item in our everyday world.
Speaker 4: Myron, welcome to the Pinge family. Before I close, I'd like to thank every member of the Pinge team for your unflagging effort on so many fronts.
Speaker 4: from new product development to scaling our operational capabilities to delighting our many customers.
Speaker 4: I feel honored by my incredible good fortune to work with you.
Speaker 4: In closing, from today's vantage point, I see first half 2023 as a transition from product shortfalls and project delays.
Speaker 4: to timely shipments against growing opportunities. Looking to second half 2023, I see secular market growth.
Speaker 4: Strong a pinch backlog and our platform solutions efforts paying dividends.
Speaker 3: On today's call, I will review our first quarter financial results and second quarter financial hopefully I can apply them.
Speaker 3: and up 62% year-over-year from 53.1 million in first quarter 2022.
Speaker 3: First quarter, endpoint IC revenue was 67 million, a 14% sequentially compared with 58.7 million in fourth quarter 2022, and up 73% year over year from 38.8 million in first quarter 2022.
Speaker 3: Improving supply drove first quarter revenue above our expectations. Looking to second quarter, we expect the project timing and first quarter strength Chris mentioned will now result in similar EndpointIC revenue to first quarter.
Speaker 3: First quarter systems revenue was $18.8 million, up 6% sequentially, compared with $17.9 million in fourth quarter 2022, and up 31% year-over-year from $14.3 million in first quarter 2022. First quarter systems revenue exceeded our expectations, driven by strong ReaderIC and
Speaker 3: decrease in second quarter systems revenue as stubborn component shortfalls more than offset voyantic revenue. First quarter gross margin was 52.4% compared with 53.8% in fourth quarter 2022 and 57% in first quarter 2022. The sequential decrease was driven by both end-point IC product margins.
Speaker 3: specifically indirect costs related to ramping 300 millimeter post processing and systems product margins, specifically the lower mix of e-family reader ICs.
Speaker 3: The year-over-year decrease was driven by lower endpoint IC product margins, specifically a smaller specialty and industrial IC mix.
Speaker 3: Looking to second quarter, we expect our gross margin to return to the 53-54% range.
Speaker 3: Total first quarter operating expense was 36.4 million compared with 29.5 million in fourth quarter 2022 at 26.8 million in first quarter 2022.
Speaker 3: Research and development expense was 17.3 million, sales and marketing expense was 7.7 million, general and administrative expense was 11.4 million.
We expect a slight sequential decrease and second quarter operating expense.
First quarter adjusted EBITDA was 8.6 million compared with 11.8 million in fourth quarter 2022 and 3.5 million in first quarter 2022. First quarter adjusted EBITDA margin was 10%.
The first quarter gap net loss was 4.4 million. The first quarter non-gap net income was 8.7 million or 30 cents per share on a fully defeated taxes.
Turn to the balance sheet. We ended the first quarter with cash, cash equivalence and investments of 164.7 million compared with 192.9 million in fourth quarter 2022 and 193.4 million in first quarter 2022.
Inventory totaled 85.8 million, up 39.4 million from the prior quarter, with N.4 IC raw materials and whip driving the increase.
First quarter net cash used by operating activities was 26.6 million. Property and equipment purchases totaled 7.6 million. Free cash flow was negative 34.2 million, including 39.4 million for inventory growth.
Before turning to our second quarter guidance, I want to highlight a few items unique to our results and outlook. First, as Chris mentioned, we acquired Voyantec, our first acquisition in many years. This tuck-in deal advances our solutions efforts and will both grow revenue and expand gross margin.
Second, although we began rebuilding wafer inventory in first quarter, we do not anticipate having a sustainable amount of 300 millimeter N.5C finish goods inventory until at least third quarter 2023.
Today, our unit backlogs significantly exceeds our inventory. Finally, from a profitability standpoint, first-quarter operating expense exceeded our expectations due to litigation spend ahead of our scheduled trial dates. That 4.2 million spend was 1.3 million more than we expected.
pushing a first quarter adjusted EBITDA below the low end of our guidance. Looking ahead, we expect second quarter adjusted EBITDA margin expansion and anticipate third and fourth quarter operating expense to be below the first half run rate.
Turning to our outlook, we expect second quarter revenue between 84 and 87 million, compared with 59.8 million and second quarter 2022, a 43% year-over-year increase at the midpoint.
We expect adjusted EBITDA between $8.8 and $10.3 million. On the bottom line, we expect non-GAAP net income between $8.2 and $9.7 million.
reflecting non-GAAP fully diluted earnings per share between $0.28 and $0.33.
In closing, I want to thank the Impinj team, our customers, our suppliers, and your investors for your ongoing support. I will now turn the call to the operator to open the question and answer session. Operator. Operator.
Thank you very much.
Thank you very much. We will now begin the question and answer session.
To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. As a courtesy to others, we ask that you limit yourself to one question and one follow-up. If you have additional questions, please be sure to queue and we will take as many questions of time allows.
At this time, we will pause momentarily to assemble our roster. Today's first question comes from Harsh Kumar with Piper Fandler. Please go ahead.
Hey, good afternoon. Chris and the Impinj team. I had two questions. Chris, when I listen to your commentary, it seems like the end demand is fine. You're going to what I would call as growing pains, kind of fixing a few things. How would you characterize the end demand? Historically, we've always caught up in Impinj as a 25-year-old.
the question. So to take the first part of your question, the end user demand remains strong. We have not seen any pullbacks of any significance in any of the programs we've been working with. What we have seen is just due to the difficulty in predicting the pace and timing of those deployments and just been for many of them given their sheer size.
We see a bit of a push to the right. That said, our backlog remains strong, our backlog which is going into those programs remains strong.
And we see that backlog driving multi-quarter growth at those large programs. So that's why in my prepared remarks I use the word pause. It's a bit of a pause in the second quarter as we see a growing demand into the third quarter.
We do see a strong year, we only got one quarter at a time. We do see robust, full year endpoint IC growth.
And, you know, the industry unit volume keg are going back over the past decade has been between 25 and 30 percent. And we don't see any reason why that unit volume keg is going to change, given the demand we still see out in the market. And we don't see any reason why that unit volume keg is going to change.
Thank you for the clarity. And then for my second and I guess last question, I will get back in queue. I wanted to ask about the second logistics customer. Presumably they will be taking billions of ICs. So why I guess would we not see the benefits sooner than later? I guess I am asking about the lag between depletion of inventory and the lack of inventory
Sure, so to answer the first part of your question, the timing of the deployment is currently a ramp.
So it's early days for that deployment. But there are significant...
systems efforts going on now on, as I mentioned in my prepared remarks, the printer encoder side to put printers in the facilities to be able to encode the labels.
So, you should really be thinking of that deployment as ramping and we are a bit delayed relative to our expectations in terms of where the ramp is. In terms of our share at those deployments, as you know, we have been working very hard to advance our entire platform to enable solutions for the center of crisis.
And that solution includes...
many elements of our platform, including our endpoint ICs, to basically use our know-how, our entire platform, the better together combined performance of our overall systems to advance our platform and our ability really to meet the end customer's needs. And to the extent that we can deliver against those end customer needs.
outperform the competition, I expect us to maintain very good share of those accounts.
I expect us to maintain very good share of those accounts. Understood. Thank you, Chris.
Thank you, Harsh. The next question comes from Jim Rashudi with Needham and Company. Please go ahead. Let's go ahead.
Hi, thank you. I just wanted to go a little bit more deeply if we can into the delays that you're noting with respect to some of these enterprise deployments. Yeah, I can get to see how many customers we're talking about and how confident are you that these delays are.
Partly a function of supply chain challenges that you've experienced or, you know, I think there's obviously some macro headwinds out there. How confident are you that it's not the latter?
So thanks Jim for your question.
To answer your question, we are confident in those deployments. We see no indication that they're pulling back. And in fact, we see strength in systems and in systems demand to be able to service the infrastructure needs for those deployments. And as I mentioned in our prepared remarks, we just won the third phase of deployment at the Visionary European Retailer.
We're seeing significant reader IC demand into the second large North American supply chain logistics customer to build out some of the infrastructure.
But the delays are built on many factors, one of them being just the headwinds we faced earlier in terms of product availability. And it's not just the end-point-I-see product availability, it's systems product availability as well. So delays in that product availability.
certainly impacted the timing of those project grants, as David just answered for harsh, the sheer size and scale of what these enterprises are attempting. So I feel very good about the opportunities. Of course, we're in regular engagement with these end customers.
We are confident in the future. As I said just a minute ago, we still expect to see significant full year and full I.C. growth. But just given the timing and pace of some of these large deployments, things have moved to the right just a bit. And the move to the right is measured in months. We're not talking a huge move to the right. We're not talking multiple.
at which you're scaling this because it also appears to have been, you know, one of the nagging issues that's been holding you back a little bit.
Now, correct. And we have built out our post-processing capability to get ahead of the demand from these enterprise deployments. And I do not anticipate us being limited by post-processing capacity.
in the second half of this year. We will be getting caught up on wafers by the end of the quarter will 300 millimeter wafer availability will finally have caught up to demand.
And our goal is not to be limited by post-processing or by wafer availability in the second half of the year. And I believe we will achieve that goal.
Thank you all jump back in the queue. Okay, thank you Jim.
The next question comes from Mike Walkley with Canaccord Genuity. Please go ahead. Great, thanks. Maybe I'll start with Kerry. I just want to dig into the inventory a little more. It's the highest in company history. Is there some system side in there that's nearly done and you're just waiting on some stubborn components? Or is this...
Overall, where you want inventory going forward is you're building up capacity for that endpoint demand or should it come down a little bit. Just try to get a feel for is this the right inventory level going forward or do you think you maybe need to build even more.
Yeah, yeah, thanks Mike. It is a record inventory level. I would also remind you it's also record revenue for a pinch as well. Most of the growth as I noted in my prepared remarks were endpoint IC specifically raw materials and whatever.
Either as we think about our strategy, Fortune 500 companies rely on a pinch to supply rain products that they're using to transform and run their business.
It's no secret that we let them down in 2021 and 2022 where we couldn't get enough supply and we don't want to do that again. We're on a path to build appropriate level of inventory that supports growth expectations and also incorporates our Foundry partner's signal of wafer tightness in our nodes in 2024. fraud is under the rigor of the Bell, a blockchain platform that providers familiar with and is also K exhilarating.
Today's backlog, which comprises non-refundable, non-cancellable orders with request dates, primarily in 2023, significantly exceeds the level of inventory that we have today. So we're comfortable with where we are. We expect to build a little bit more in front of these growth opportunities.
And Mike, this is Chris. I mean, I'll just add just to re-emphasize the point that Carrie made, our inventory growth is being built on program growth that we're seeing at these Fortune 500 enterprises. So new programs, new expansions, significant program expansions.
that we want to make sure go forward and we're building the appropriate inventory to be able to service those opportunities. From my follow-up course that kind of feeds into it, you seem confident in that second half of the year ramp. Now that supply demand started to reach balance into the second half of the year.
Can you maybe remind longer term investors just that seasonality of your business that tends to be stronger in that third quarter and maybe how we should think about seasonality in the second half of the year?
Yeah, great question Mike. This is Kerry. I'll take that one for Chris. So yes, historical seasonality has been such where endpoint IC revenue and volumes peak in Q3 before declining in Q4 and that's a result of our largest vertical being retail apparel.
Today we haven't seen normal seasonality in a couple of years now, probably three years at this point. So I'll provide a little bit more color on how we see the business progressing, the endpoint I see business progressing today. Starting first with, we continue to expect strong full year endpoint IC growth. Our 2023 growth continues to be underpinned by enterprise program.
So growth that we expected in Q2 moves to Q3, Q3, Q4, etc. So accordingly, we expect endpoint IC revenue to grow sequentially in Q3 and then again in Q4, so different than historical seasonality. All right, thanks. Last question, just a logical one, on the system side, that some of these things pause. What that had it.
decline maybe mid-year and then grow again or how you're thinking about the systems business? Yeah, so no. So, a quarter ago we guided systems to be flat in Q2 because we anticipated improving component supply. That supply has improved.
But we're guiding Q2 systems down slightly sequentially because we're prioritizing supply for the third phase of the European retailer self-checkout and loss prevention deployment because a few components remain stubbornly tight.
That deployment will begin in Q2 and then ramp in the back half of the year. As a result, we anticipate second half systems revenue to exceed the first half. And I think here, I think Q3 and Q4 follow typical seasonality where systems business is strongest in the fourth quarter. That's helpful. Thank you very much.
will begin in Q2 and then ramp in the back out of the year. As a result, we anticipate second half systems revenue to exceed the first half. And I think here, I think Q3 and Q4 follow typical seasonality where systems business is strongest in the fourth quarter. Great, that's helpful. Thank you very much. Thank you, Mike.
As a reminder, to ask a question, you may press star and then one. The next question comes from Natalia Winkler with Jefferies. Please go ahead. The next question comes from
Hi, thank you for taking my question. I wanted to ask Chris if he can help us with some color on the retail apparel and penetration. So, trying to figure out here, how has that changed over the last couple of years? How has the battery...
rate for the impinge IC tax has changed and trying really to understand if we should expect the retail business to now kind of trend together with the retail industry and if the retail inventory build may be now kind of showing for you as well.
Yes, so thank you Natalia. So we have estimated the retail apparel attach rate at between 20 and 25 percent.
And so yes, I think it's fair to assume that, you know, if you look at probably two-thirds of the endpoint IC market demands today before these new opportunities ramp, it's probably tied to retail apparel. As the retail apparel market goes a significant portion of the range.
our partners begin being able to build.
Healthy levels are getting to healthy levels of inventory. We still see a bit of inventory growth in the second quarter.
If retail apparel demand is to pick up in the second quarter, some of that inventory growth in second quarter will turn to pull through.
But we are carefully watching the retail apparel market because it provides a pull for a significant portion of the N1IC that we deliver today. And we do see significant retail opportunities still ahead of us as we talk about the second......we talked about the vision of a European retailer and its opportunities like that and others including for our soap, shotgun and loss prevention use case.
and what's how should we think about from the strategic your portfolio? I'd be happy to. So, on Voyant, it's the industry leader in the solutions to ensure in-lake quality, reliability, and readability. We acquired Voyant for that skill set, particularly as pertains to our enterprise opportunities that we've been talking about.
whose business transformation relies specifically on that inlay quality, reliability and readability. So we saw an opportunity here with Voyantec, a known leadership team, a known team overall, significant strength in Rainer RFID, very experienced team and really...
key to ensuring that the labels that go into the enterprise solutions and you know, there are partner labels and a partner inlays, but they really form part of the overall solution we as a company are focusing on delivering.
We want to be there with our partners helping them and our enterprise and customers ensure the quality and reliability and readability of those products. So basically we want to continue to have more pieces of the solution to make sure the solution works. And so that was where the Boantic acquisition fit and we are thrilled to have them as part of the Impinj family. Thank you.
be there with our partners helping them and our enterprise end customers, ensure the quality and reliability and readability of those products. So basically we want to continue to have more pieces of the solution to make sure the solution works. And so that was where the Boantic acquisition fit and we are thrilled to have them as part of the impinge family. Thank you. Thank you, Nisaya.
The next question comes from Scott Searle with RothMKM. Please go ahead. Hey, good afternoon. Thanks for taking my questions. Hey, maybe quickly to dive in on the OpEx, I want to get a couple of clarifications. It sounds like sequentially things start to flatten out a little bit there, but could you talk about what the expectation is in the second half of this year net of litigation, and then could you recap for us again the litigation expectations?
early when we built the guide.
As you think about our OP-X for the quarter...
you know, adjusting for legal spend in the second quarter, adjusting for the incremental OPEX associated with the Volantic acquisition, we expect OPEX to decline in the second quarter. And then if you look to the second half of the year, we expect third quarter and fourth quarter to be below the first half run rate for OPEX.
I can't put a timeline on the legal spend that follows the path of the courts, but I will continue updating you on how that factors into our expense. If you were just to back out the litigation related legal spend from our first quarter and just do the straight math on it, it would suggest an 18% operating margin for the business.
Gotcha, helpful. And if I could just to follow up on the acquisition, what does that do? Are there some other metrics around it in terms of number of employees, you know, what you expect that to do to the revenue opportunity on a per customer basis and or if you're kind of dipping your toe in a little bit into what your inlay partners do or is this something that's welcomed by them? And lastly if I could...
The pipeline for the systems opportunity, it sounds like phase three rollout is certainly going to be favorable in the second half of this year. But I'm wondering if you could address how else that pipeline is filling up on the systems side with new projects, diversifications into other industries, applications, and use cases. Thanks. Okay. So, Scott, thanks. There's a lot in that question.
to grow the revenue from it, but it's small revenue at this point. It will be reported in our systems line. It is a gross margin that will be accretive, so think of it at the top end of our systems business.
So we'll expect a little bit of a lift from it as that revenue line grows. Scott, this is Jeff. I'll just speak a little bit to the systems pipeline. The systems pipeline remains strong and is building in its diversity both by...
industry sector and geographic. So there's still lots of opportunity in our focus, industry sectors, retail and supply chain and logistics. In retail, as Chris noted, an increasing focus and interest in the area of enhancing the shopper experience via self-checkout and the related.
an important role of loss prevention in supporting that shopper experience, in supply chain and logistics, all the way from freight to small package. It's clear that the industry is embracing the rain RFID opportunity to improve visibility.
in this script. I'm also encouraged by the progress of the pipeline with respect to impinge authenticity. We're seeing our partner ecosystem and leading enterprises embrace the unique and differentiated approach to authenticity and I think that creates another growth.
pharmaceutical organizations are investigating supply chain safety and traceability to protect brands and consumers. And then finally, I would say increasingly sustainability and the circular economy are becoming key growth opportunities for us in that inventory visibility is really at the sort of the foundation of knowing.
everything about everything that you manufacture, transport and sell. And when you have that visibility, you can begin to optimize your supply chain, which delivers real value into sustainability initiatives. And then the circular economy, when you're able to know more about each particular item upon its return into the economy for recycling or reuse.
So I remain very optimistic and bullish about the growing opportunity across industry sectors and geographies.
Great, thank you. Thank you, Scott. The next question is a follow-up from Jim Rachute with Anita Mn Company. Please go ahead.
All right, thank you. I think we appreciate the growth trajectory out there for the endpoint IC business. And I'm wondering, you may spend time on this. I assume you'll spend some time on this in June of the investor day. But
How should we think about the pipeline, the line of sight, the growth prospects in the systems area of the business? Yeah, so Jim on the systems side,
Obviously, we have the pipeline of opportunities we speak to, the specific ones, for example, the visionary European retailer, the Asia-based global retailer, the second large North American supply chain and logistics customer. We're also driving new opportunities, as Jeff just mentioned, around the world.
and authenticity, which is a whole platform offering that uses our readers, our reader ICs, and our cloud service at the back end. And so,
we see systems pipeline strength.
in retail, specifically for those use cases that use fixed reading.
specifically for those use cases that use fixed reading, authentication,
supply chain and logistics. And then of course we have our partners driving all kinds of other opportunities that in in myriad verticals, everything from building materials to that, you know, the bookstore.
opportunity that I spoke about in my prepared remarks. So we're very excited about the opportunities ahead and look to see, look to strong systems and we look to delivering pull platform offerings that by which our systems provide pull for our endpoint ICs to make it complete.
solutions offering.
I hope that answered your question. It does. It's been lumpy, Chris, as we know. This has been a lumpy business because of the deployment of some of these customers. But is this, should we think of this as a double-digit growth business? Jim, this is...
get supply.
So we anticipate exiting Q2, entering Q3 with pretty substantial reader backlog that we have just been unable to support. We expect second half systems business to be greater than first half, so we will certainly grow in the second half of the year. I think the better way to think of it is that the systems business…
with our endpoint ICs. So that's how we think of the systems opportunity going forward.
our endpoint ICs. So that's how we think of the systems opportunity going forward. Got it. Thank you.
Thank you, Jim. This concludes our question-and-answer session. I would like to turn the conference back over to co-founder and CEO , Chris DiOrio, for any closing remarks. Bye for now folks.
Thank you operator. 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.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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