Q2 2025 Impinj Inc Earnings Call

Ashya: Welcome to the Impinj second quarter 2025 financial results conference call and webcast. All participants will be in listen-only mode. Should 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 questions. To ask a question, you may press star, then one on your touch tone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Andrew Cobb, Vice President, Strategic Finance. Please go ahead.

Welcome to the in second quarter, 2025 Financial results conference call and webcast all participants will be in listen-only mode. Should 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 questions to ask a question. You may press star then 1 on your touchtone phone to give a draw your question please press star then 2 please note is event is being recorded.

I would now like to turn the conference over to Mr. Andy Cobb, Vice President of Strategic Finance. Please go ahead.

Chris Diorio: Thank you, Ashya. Good afternoon, and thank you all for joining us to discuss Impinj's second quarter 2025 results. On today's call, Chris Diorio, Impinj's co-founder and CEO, will provide a brief overview of our market opportunity and performance. Cary Baker, Impinj's CFO, will follow with a detailed review of our second quarter financial results and third quarter outlook. We will then open the call for questions. You can find management's prepared remarks plus trended financial data on the company's investor relations website. 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 Securities Litigation Reform Act of 1995. Whereas 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 uncertainty.

Thank you, Asha.

Good afternoon and thank you all for joining us to discuss impinges. Second quarter 2025 results.

On today's call, Chris Diorio, co-founder and CEO, will provide a brief overview of our market opportunity and performance.

Terry Baker, you can just CFO will follow with a detailed review of our second quarter Financial results and third quarter Outlook.

We will then open the call for questions.

You can find Management's prepared remarks, plus trended financial data on the company's investor relations website.

We will make statements in this fall about financial performance and future expectations, that are based on our Outlook as of today.

Any such statements are forward-looking under the private Securities. Litigation Reform Act of 1995

Whereas 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.

Chris Diorio: We describe these risks and uncertainties in the annual and quarterly reports we file with the FCC. 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. All balance sheet and cash flow metrics, except for free cash flow, are GAAP. Please refer to our earnings release for a reconciliation of non-GAAP financial metrics to the most comparable GAAP metrics. Before turning to our results and outlook, note that we will participate. Go for it, Tracy.

And uncertainties. We describe these risks and uncertainties in the annual and quarterly reports. We file with the FCC.

We do not Undertake and expressly disclaims any obligation to update for alter our forward-looking statements except except as required by law.

On today's call.

Or where we explicitly State, otherwise.

Our non-gaap.

All balance sheet and cash flow metrics except for free cash flow. Our Gap

Please refer to our earnings release for a Reconciliation of non-gaap financial metrics.

To the most comparable gaap metrics.

Before turning to our results.

Tracy Moran: This is Tracy Moran with Investor Relations. Before turning to the results and outlook, note that we will participate in the 14th annual NEHDM Virtual Industrial Tech, Robotics, and Clean Tech one-on-one conference on August 19th, the Jefferies Semiconductor IT Hardware and Communications Technology Conference on August 26th in Chicago, the Evercore 2025 Semiconductor IT Hardware and Networking Conference on August 27th in Chicago, the Goldman Sachs Communicopia and Technology Conference 2025 on September 9th in San Francisco, and the Piper Sandler Growth Frontiers Conference on September 11th in Nashville. We look forward to connecting with many of you at those events. I will now turn the call over to Chris.

And Outlook note that we will participate go for it. Tracy, this is Tracy Moran with investor relations before turning to our results and Outlook note that we will participate in the 14th annual need of virtual, industrial Tech Robotics and clean Tech 1-on-1 conference on August 19th.

Chris Diorio: Thank you, Andy, and thank you, Tracy, and thank you all for joining the call. Our second quarter results were strong, with revenue exceeding the upper end of our guide range. Adjusted EBITDA also exceeded our guide range while setting a new quarterly record. Endpoint ICs, Reader ICs, and Reader Gateways all outperformed our expectations. This category and use case expansion, M800 adoption, and pull for Gen2X more than offset headwinds from tariffs, inflation, and supply chain disruptions. We expect these same demand drivers to deliver sequential revenue growth in the third quarter. Our solution strategy, focused on using our platform to solve enterprise challenges, is central to our strong results and outlook. The examples are many. In the second quarter, a leading apparel retailer began deploying overhead reading, delivering Reader IC revenue, and looking forward, Endpoint IC share gains.

The Jeffrey semiconductor, it hardware and Communications technology conference on August 26th in Chicago, the ever cord 2025 semiconductor, it hardware and networking conference on August 27th in Chicago. The Goldman Sachs communacopia and Technology conference 2025 on September 9th in San Francisco and the piper Sandler growth Frontiers conference on September 11th. In Nashville. We look forward to connecting with many of you at those events. I will now turn the call over to Chris

Thank you, Andy, and thank you, Tracy.

And thank you all for joining the call.

Our second quarter results were strong with Revenue exceeding. The upper end of our guide range, adjusted ibaa. Also exceeded our guide range while setting a new quarterly record.

And when IC's reader, Isis readers, and gateways all outperformed our expectations, this category and use case expansion and 800 adoption and pull for gentle X more than offset headwinds from policy inflation and supply chain disruptions.

We expect these same demand drivers to deliver sequential Revenue growth in the third quarter.

Our solution strategy focused on using our platform to solve Enterprise challenges is Central to our strong results and Outlook.

The examples are many.

Chris Diorio: We won two new use cases at the visionary European retailer that delivered meaningful Reader revenue in the second quarter and will again in the third. We also won new use cases at the second-large North American supply chain and logistics end user that will deliver meaningful Reader revenue in the third and fourth quarters. And retail loss analytics, derived from the loss prevention solution we developed for the visionary European retailer, drove second quarter demand for our Readers and Endpoint ICs and should again in the third quarter. At all these accounts, we either have or are focused on winning high Endpoint IC share. M800 and Gen2X play a starring role in our strategy. In addition to the aforementioned wins, multiple item-level food accounts today use M800 for its superior performance on hard-to-read items, and we are piloting Gen2X for further readability improvements.

In the second quarter, a leading apparel retailer began to applying overhead reading, delivering reader. I see revenue and looking forward endpoint. I see share gains

We want 2, new use cases, that the Visionary European retailer that delivered meaningful reader Revenue in the second quarter and will again in the third.

We also want new use cases at the second. Large North American supply chain and Logistics and user that will deliver, meaningful reader Revenue in the third, and fourth quarters.

And reach our loss analytics, derived from the loss prevention solution we developed for the visionary European retailer.

Growth second, quarter, demand for our readers and endpoint, RC's, and should again in the third quarter.

At all these accounts, we either have or are focused on winning high end. Point IC share.

And 800 and Jen 2x play a starring role in our strategy.

In addition to the aforementioned wins.

Chris Diorio: Apparel, accessories, jewelry, and myriad other item categories see faster handheld inventory counting using M800 and Gen2X, saving labor time and cost and increasing ROI. I've mentioned Gen2X a few times, but I'd like to again highlight what it is and what it does. Gen2X is a compatible set of extensions to the Industry Radio protocol. It improves read range for small inlays, increasing the floor coverage of overhead readers. It speeds inventory and improves tag population management, benefiting loss prevention and loss analytics, as well as decluttering tag environments in conveyors and truckloading. It speeds handheld inventory counting, reducing labor costs, and it does much more. Today, Gen2X is driving demand for our products and platform. Longer term, we expect it to be a key component of our industry's future. Turning specifically to Endpoint ICs, our second quarter book-to-bill ratio was strong.

Multiple item-level food accounts today use M800 for its superior performance and hard-to-read items. We are piloting Gen 2 X for further readability improvements.

Apparel accessories, jewelry and Myriad, other item categories. See faster, handheld inventory, counting using m800 and Jen. 2X

Including labor time and cost and increasing Roi.

I've mentioned Jen 2x a few times.

I would like to again highlight what it is and what it does.

Gentle X is a compatible set of extensions to the industry radio protocol.

It improves the read range for small inlays, increasing the floor coverage of overhead readers.

It speeds inventory and improves tag population management benefiting loss. Prevention and loss analytics as well as decluttering tag environments and conveyors and truck loading.

It speeds, handheld inventory, counting reducing labor costs.

And it does much more.

Today, Jen, 2x is driving demand for our products and platform.

Longer term. We expect it to be a key component of our industry's future.

Chris Diorio: Turns orders exceeded our expectations despite the macro softness. M800's superior performance, growing inlay certifications, and Gen2X support paid dividends in sequential Endpoint IC unit volume growth, even as partner channel inventory declined. Strong execution by our sales and operations teams, which helped our inlay partners navigate tariff-related sourcing challenges, also contributed to our results. Looking to third quarter, we expect to again deliver sequential Endpoint IC product revenue growth. In Reader ICs, second quarter revenue declined sequentially due to significantly lower indie shipment volumes. That product line concludes its end of life. E-family revenue met expectations buoyed by a first order for that retail overhead reading deployment. More than 50 e-family partner modules and readers now support Gen2X, creating a virtuous cycle of e-family Reader ICs driving demand for M800 Endpoint ICs and vice versa.

Turning specifically to endpoint ic's our second quarter book to Bill ratio was strong.

Turned orders exceeded our expectations despite the macro softness.

M8, hundreds Superior performance, growing inlay certifications and Jen. 2x support paid dividends in sequential endpoint. I see unit volume growth. Even as partner Channel, inventory declined,

Strong execution by our sales and operations teams, which helped our inlay Partners, navigate tariff, related sourcing challenges also contributed to our results.

We expect to again deliver sequential and paced product revenue growth.

In reader Isis second quarter Revenue declined, sequentially due to significantly, lower Indy shipment volumes that product line concludes its end of life.

E, family Revenue, met expectations. Bullied by A first order for that retail overhead reading deployment.

More than 50 e family partner modules and readers now support gen 2X.

Chris Diorio: Looking to third quarter, we anticipate strong e-family shipment volumes driving sequential Reader IC revenue growth. Turning to Readers and Gateways, second quarter revenue increased sequentially, led by the two new use cases at the visionary European retailer, as well as retail demand for loss analytics. We will continue innovating our Readers and Gateways to solve enterprise challenges, especially using Gen2X, focused on creating a second virtuous M800 demand cycle. Looking to third quarter, we expect to again deliver sequential revenue growth, buoyed by the wins at the visionary European retailer and at the second-large North American supply chain and logistics end user. In closing, our solution's focus continues to win dividends and revenue, adjusted EBITDA, recurring Endpoint IC volumes, and market leadership. It is a key component of our strong financial results in an otherwise challenging retail environment.

Creating a virtuous cycle of e, family reader ic's, driving demand for m800 and pic's and vice versa.

Looking to third quarter. We anticipate strong e, family shipment volumes driving. Sequential reader. I see Revenue growth.

Turning to readers and gateways.

Second quarter revenue increased sequentially, led by the two new use cases at the Visionary European retailer, as well as retail demand for Los Analytics.

we will continue innovating our readers and gateways to solve Enterprise challenges, especially using Jen 2X

Focused on creating a second virtuous, M800 demand cycle.

Looking to third quarter.

We expect to again deliver, sequential Revenue growth.

Buoyed by the winds at the Visionary European retailer and at the second largest North American supply chain and logistics user.

In closing, our solutions focus continues with dividends, revenue-adjusted EBITDA, recurring endpoint of C volumes, and market leadership.

Chris Diorio: And our enterprise customers remain actively engaged despite the macro headwinds, extending their rain deployments to drive efficiencies, grow sales, and improve their supply chain flexibility and resiliency. In addition, our market opportunity continues expanding with more opportunities for secular growth, especially in food, where product freshness, supply chain efficiencies, and consumer self-checkout are collectively driving pallet and case-level deployments and item-level pilots. Through it all, we continue managing our business with a steady hand, focused on extending our technology lead, market share, platform adoption, and delighting our enterprise customers. As always, before I turn the call over to Cary for our financial review and third quarter outlook, I'd like to again thank every member of the Impinj team for your tireless effort. I feel honored by my incredible good fortune to work with you. Cary?

It is a key component of our strong financial results in an otherwise, challenging retail environment

And our Enterprise customers remain actively engaged, despite the macro headwinds.

Extending their reign deployments to drive efficiencies gross sales and improve their supply chain flexibility and resiliency.

In addition, our market opportunity continues expanding with more opportunities for secular growth, especially in food.

For product freshness. Supply chain efficiencies and consumer self-checkout are collectively, driving pallet and case level deployments and item level Pilots.

Through it all we continue managing our business with a steady hand focused on extending our technology lead market share platform adoption and delighting our Enterprise customers.

As always.

Before I turn, I will now turn the call over to Carrie for our financial review and Q3 outlook.

I'd like to again, thank every member of the impinj team for your tireless effort.

I feel honored by my incredible good fortune to work with you.

Cary Baker: Thank you, Chris, and good afternoon, everyone. Second quarter revenue was 97.9 million, up 32% sequentially from 74.3 million in first quarter 2025, and down 4% year-over-year from 102.5 million in second quarter 2024. Second quarter Endpoint IC revenue was 84.6 million, up 38% sequentially from 61.2 million in first quarter 2025, and down 5% year-over-year from 89.4 million in second quarter 2024. Excluding licensing revenue, Endpoint IC product revenue grew 12% sequentially and declined 8% year-over-year, exceeding our expectations, albeit still at the low end of typical seasonal growth. We expect third quarter Endpoint IC product revenue to increase sequentially in line with typical seasonality. Second quarter systems revenue was 13.3 million, up 2% sequentially from 13.1 million in first quarter 2025, and up 1% year-over-year from 13.1 million in second quarter 2024. Systems revenue exceeded our expectations, driven by Reader strength.

Terry.

Thank you, Chris and good afternoon everyone second quarter Revenue was 97.9 million of 32%. Sequentially from 74.3 million in first quarter, 2025 and down 4% year-over-year from 102.5 million. In second quarter 2024,

Second quarter end point, I see Revenue was 84.6 Million up 38% sequentially from 61.2 million. In first quarter 2025 and down, 5% year-over-year from 89.4 million and second quarter 2024

Excluding licensing, revenue and point I see product Revenue. Grew 12%, sequentially and declined, 8% year-over-year exceeding. Our expectations, albeit still at the low end of typical seasonal growth.

we expect third quarter endpoint, I see product Revenue to increase sequentially in line, with typical seasonality,

Second quarter systems Revenue was 13.3 million of 2% sequentially from 13.1 million in first quarter, 2025, and up 1% year-over-year from 13.1 million. In second quarter 2024,

Cary Baker: Looking forward, we expect third quarter systems revenue to increase sequentially, led by strong Reader and Gateway demand. Second quarter gross margin was 60.4% compared with 52.7% in first quarter 2025 and 58.2% in second quarter 2024. The sequential increase was driven primarily by licensing revenue. The year-over-year increase was driven primarily by Endpoint IC product mix, specifically a richer mix of M800 and by licensing revenue. Excluding licensing revenue, second quarter product gross margin was 52.6% compared with 51% in second quarter 2024. Looking forward, we expect third quarter product gross margin to increase sequentially. Total second quarter operating expense was 31.5 million, compared with 32.6 million in first quarter 2025 and 32.8 million in second quarter 2024. Operating expense was below expectations as our team exercised good fiscal discipline. Research and development expense was 17.5 million. Sales and marketing expense was 6.7 million.

Systems Revenue, exceeded our expectations driven by reader strength.

Looking forward. We expect third quarter, systems Revenue to increase, sequentially led by strong reader and Gateway demand.

Second quarter, gross margin was 60.4% compared with 52.7% in first quarter, 2025 and 58.2%. In second quarter 2024. The sequential increase was driven primarily by licensing Revenue.

The year-over-year increase was driven primarily by end point. I see product mix specifically a richer mix of m800 and by endpoint, I and by licensing Revenue.

Excluding licensing, Revenue second quarter product. Gross margin was 52.6%, compared with 51% and second quarter of 2024.

Looking forward. We expect third quarter product, growth margin to increase sequentially.

Total second quarter, operating expense was 31.5 million compared with 32.6 million. In first quarter 2025, and 32.8 million in second quarter 2024.

Cary Baker: General and administrative expense was 7.3 million. Looking forward, we expect third quarter operating expense to increase sequentially. Second quarter adjusted EBITDA was 27.6 million, compared with 6.5 million in first quarter 2025 and 26.8 million in second quarter 2024. Second quarter adjusted EBITDA margin was 28.2%, a new quarterly record. Excluding licensing revenue, adjusted EBITDA margin was 14.2%. Second quarter GAAP net income was 11.6 million. Second quarter non-GAAP net income was 24.5 million, or 80 cents per share on a fully diluted basis. Turning to the balance sheet, we ended the second quarter with cash, cash equivalents, and investments of 260.5 million, compared with 232.5 million in first quarter 2025 and 220.2 million in second quarter 2024. Inventory totaled 96.2 million, down 2.3 million from the prior quarter. Second quarter capital expenditures totaled 6.5 million. Free cash flow was 27.3 million.

Research and development, expense was 17.5, million sales and marketing, expense was 6.7 million. General and administrative expense was 7.3 million.

Looking forward. We expect third quarter operating expense to increase sequentially.

Second quarter, adjusted ibida was 27.6 Million compared with 6.5 million. In first quarter 2025 and 26.8 million in second quarter 2024

Second quarter adjusted on margin was 28.2%. A new quarterly record excluding licensing, Revenue adjusted, EBA margin was 14.2%.

Second quarter gaap. Net income was 11.6 million second quarter non-gaap. Net income was 24.5 million or 800 cents per share on a fully diluted basis.

according to the balance sheet, we ended the second quarter with cash, cash, equivalents and Investments of 260.5 million compared with 232.5 million in first quarter of 2025 and 220.2 million in second quarter 2024,

Inventory totaled, 96.2, million down 2.3 million from the prior quarter.

Cary Baker: Before turning to our guidance, I want to highlight a few items specific to our results and outlook. First, both gross margin and adjusted EBITDA margin set new quarterly records, an important milestone toward our long-term financial targets. More work remains, but I continue to be encouraged by our progress. Second, we anticipate product gross margin to increase in the third quarter, driven by higher M800 NICs and sell-through of lower-cost wafers. We anticipate further gross margin benefit from these factors in the fourth quarter. Finally, given the continuing tariff-related uncertainty and volatility, we are again assuming minimal turns at the midpoint of our revenue guidance. Turning to our outlook, we expect third quarter revenue between 91 and 94 million, compared with product revenue of 81.9 million in second quarter 2025, a quarter-over-quarter increase of 13% at the midpoint. We expect adjusted EBITDA between 15.6 and 17.1 million.

Second quarter, Capital expenditures totaled. 6.5 million free cash flow was 27.3 Million.

Before turning to our guidance, I want to highlight a few items specific to our results and Outlook.

First both gross margin and adjusted e. B job. Margin set new quarterly records an important Milestone toward our long-term Financial targets.

More work remains but I continue continue to be encouraged by our progress.

Second, we anticipate product, growth margin to increase in the third quarter driven by higher m800, mix and sell through a lower cost wafers.

We anticipate further gross margin benefits from these factors in the fourth quarter.

Finally, giving given the continuing tariff related uncertainty and volatility. We are again, assuming minimal turns at the midpoint of our Revenue guidance.

Journey to our Outlook. We expect third quarter revenue, between 91 and 94 million compared with product revenue of 81.9 million in second quarter, 2025 a quarter over quarter increase of 13% at the midpoint

Cary Baker: On the bottom line, we expect non-GAAP net income between 14 and 15.5 million, reflecting non-GAAP fully diluted earnings per share between 47 cents and 51 cents. In closing, I want to thank the Impinj team, our customers, our suppliers, and you, our investors, for your ongoing support. I will now turn the call to the operator to open the question and answer session. Operator?

We expect adjusted evida between 15.6 and 17.1 million on the bottom line. We expect non-gaap net income between 14 and 15.5 million reflecting non-gaap, fully diluted earnings per share between 47 cents and 51 cents.

In closing, I want to thank the Impinj team, our customers, our suppliers, and our investors for your ongoing support.

Operator: Thank you. 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're 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 free queue, and we will take as many questions as time allows. At this time, we will pause momentarily to assemble a roster. The first question comes from Harsh Kumar with Piper Sandler. Please go ahead.

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

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're 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 address your question, please press star then 2

As a courtesy to others, we ask that you limit your 12 to 1 question and 1 follow-up. If you have additional questions please req and we will take as many questions as time allows

At this time, we will pause momentarily to assemble a roster.

Harsh Kumar: Yeah, hey, first of all, Andy, we like working with you a lot. We hope you're OK and you're simply overcome with the great, you know, overcome with emotions with the great results you're putting up. So hope you're well. Question for Cary. Question for Cary. Cary, as you look at your results and the strong beat you put up in the June quarter, you didn't have turns in there before. So I guess my first question is I want to understand how much of the beat in Q2 was turns related and how much of it was just tremendous strength that you saw. And then you're saying that you have a minimal amount of turns in the third quarter guidance for September. And I want to just understand how much you're building in.

The first question comes from hers. Kumar with Piper Sandler, please go ahead.

Yeah. Hey first of all Andy, we like working with you a lot, we hope you're okay. And you're simply overcome with the great, you know, overcome with emotions with the great results you're putting up. So hope you're well uh question for Carrie Carrie.

Harsh Kumar: You know, if you can give us a percentage or maybe just some color if you don't want to give us a percentage, and then I've got to follow up.

Cary Baker: Yeah, sure, Harsha. Thanks for the question. So we continue operating in a very dynamic and rapidly changing market. In the second quarter, we did see more turns than we expected, but we also saw adjustments to delivery timing and location as our partners continue to optimize their geographic production strategies. This dynamic may continue into the third quarter, so we're deploying a similar approach in building our guidance, and we've assumed no additional turns at the midpoint of our guide. Now, given our stated lead times and our inventory position, we could fill up a few more weeks of turns order in the third quarter. So this approach should give us enough room to absorb any potential requests for order adjustments.

Question for Carrie. Uh Carrie is as you as you look at your results and the strong beats you put up in the June quarter. You didn't have turns in there before. Uh, so I guess my first question is I want to understand how much of the beat in 2q was translated and how much of it was just tremendous strength that you saw, and then you're saying that you have minimum amount of turns in the third quarter guidance, for September and I want to just understand how much you're building in. Um you know if you can give us a percentage or maybe just some color, if you don't want to give us a percentage and then I've got to follow up.

The midpoint of our guide.

Now, given our stated lead times and our inventory position. We could fill up a few more weeks of turns order in the third quarter. So this approach should give us enough room to absorb any potential requests for order adjustments.

Harsh Kumar: Great. And then you are talking about the margins being up quite substantially, or they were already up. And you're saying you had the benefit of M800 proliferating through the revenue stream. And then you talked also about some kind of wafer cost. Could you maybe elaborate on what you mean by that? And then I guess maybe just give us a sense of which is a bigger factor. Is the wafer pricing better for you dramatically, or is it mostly M800 coming through for you, or is it something else altogether?

Cary Baker: Yeah, Harsha. So the M800 continues to ramp. It ramped nicely in the second quarter. We expect it to do so again in the third quarter and again in the fourth quarter. So we are starting to see the benefit of the M800 cost advantage in our gross margin. We saw some of it in Q2. We'll see more of it in Q3. The comment as it relates to wafers is we are in an environment where we are back to normal ASP declines, where those ASP declines go into effect in the first quarter of the year. And typically, we support those ASP declines with wafer cost downs. The wafer cost down pricing also goes into effect at the beginning of the year. However, because we want to ensure supply to our customers, we carry approximately six months of forward-looking inventory.

Great. Um, and then you are talking about the margins being up quite substantially or, or they were already up and you're, you're, you're saying, you had, uh, the benefit of m800 proliferating to the um, to the revenue stream. And then you talked also about some kind of wafer cost, could you maybe elaborate on what you, what you mean by that? And then I guess maybe just give us a sense of which is a bigger Factor. The wafer pricing better for you dramatically or is it mostly m800 coming through for you? Or is it something else altogether?

Yeah, harsh. So the, the m800 continues to ramp it, ramped nicely in the second quarter, we expect it to do. So again in the third quarter and again in the fourth quarter. So we are starting to see the benefit of the m800 cost advantage in our gross margin. We saw some of it in Q2, we'll see more of it in Q3 the, the comment as it relates to Wafers is we are in an environment where we are back to normal ASP declines where those DSP declines, go into effect in the first quarter of the year and typically, we support those ASP. Declines with wafer cost Downs. The wafer cost, down pricing. Also goes into the effect at the beginning of the year. However,

Cary Baker: So we have to sell through that inventory first before we get to the wafers that are costed in 2025 pricing terms. So that's what we're seeing now. We're six months through the year. We're starting to see the benefit of those cost downs on the wafer side that we achieved in the first quarter.

Harsh Kumar: Hey, guys, congratulations. I'll get back into the line.

Because we want to ensure Supply to our customers, we carry approximately 6 months of forward-looking inventory. So we have to sell through that inventory. First, before we get to the Wafers that are costed in 2025, pricing terms. So that's what we're seeing. Now, we're 6 months through the year, we're starting to see the benefit of those cost Downs. On the wafer side that we achieved in the first quarter.

Hey guys. Congratulations, I'll get back in the line.

Cary Baker: Thank you, Harsha.

Thank you.

Operator: The next question comes from Christopher Rowland with South Kahana. Please go ahead.

The next question comes from Christopher Rowland with South Carolina. Please go ahead.

Christopher Rolland: Hey, guys, thanks for the question. So just as I look at some of your channel partners, so a large North American partner described kind of slower apparel and general retail growth, but faster or solid food and logistics growth. I guess, first of all, would you concur with those takes, agree with those takes? And then secondly, a partner out of Asia had softer Q2 sales. Are you seeing anything there with that partner as well? Thank you.

Hey guys, thanks for the question. Um,

So, just as I look at some of your channel Partners, um so a large North American partner, described kind of slower apparel uh and general retail growth but faster or solid food and Logistics growth, I guess. First of all, would you, um, concur? Uh, with those takes agree with those takes. Uh, and then, secondly, a partner out of Asia had softer. Uh, 2q sales, are you seeing anything there, uh, with that partner as well? Thank you.

Chris Diorio: So, Chris, the answer to your first question is a simple yes. We feel good about our market position and good about our partnership with that North American partner. And the things that they're seeing in the market are basically what we're seeing in the market. That said, we don't always line up exactly with them. And this year, for example, we saw first quarter supply chain and logistics correction and some NIC shift changes separate from what they saw. But overall, in terms of the comments they've made, we're seeing the same thing out in the market. In terms of the Asian partner, we obviously have a very good relationship with them as well. They're one of our, one of our, also one of our top partners. They deliver very well into the market. And we expect continued strength from them going forward.

Chris Diorio: You know, every company has their corrections that they have to go through. We went through one in the first quarter. They're seeing a little bit of one right now. But in terms of their overall market position, in terms of how we engage with them, we continue to engage with them as a very close partner. And we feel good about where they're headed and about all of it. You know, just at the highest level, I feel good about the market. Despite the macro headwinds, despite the tariff-related uncertainties, despite the things that are going on, you can see strength in the market. And the reason I highlighted our solution strategy is I feel good about our position in the market with that solution strategy driving strength for us overall.

So, Chris the answer to your first question is a simple? Yes. Um, we we are we feel good about a market position and good about our partnership with that um, North American partner, um, and the things that they're seeing in the market are basically what we're seeing in the market. Um, that said, we don't always line up exactly with them. And this year, for example, we saw first quarter supply chain and Logistics, correction, and some mixed shift changes separate from what they saw, what they saw. But overall, um, in terms of the comments they've made, we're seeing the same thing out in the market, in terms of the the Asian partner. Um we obviously have very good relationship with them as well. They're 1 of our 1 of our, also 1 of our top Partners, they deliver very well into the market. Um and we expect complete strength from them going forward. You know every company has their Corrections that they have to go through. We went through 1 of the first quarter, they're seeing a little bit of 1 right now, but in terms of their overall Market position in terms of how how, how we engage with them, we continue to engage with them as a very close partner.

And we feel good about where they're headed.

Not all of them. Well, you know, just just at the highest level.

Feel good about the market, um, despite the macro headwinds, despite the Tariff related uncertainties. But despite the things that are going on, you can see strength in the market. And, and the reason I highlighted, our solution strategy is, I feel good about our position in the market.

With that solution strategy, driving strength for us overall.

Christopher Rolland: Thank you, Chris. We feel good about it too. I wanted to ask you on the economics of Gen2X. I think it's just available on M800 ICs, and then there's like a software or firmware update for readers. But is there any other kind of better economics associated with Gen2X, like ASP or gross margin, or is this just really all about like a faster transition to M800?

Uh, thank you, Chris. We we feel good about it too. Uh,

The, uh, I I I wanted to ask you on the economics, uh, of Jen 2x, um, I I think it's just available on m800 ic's, uh, and then there's like a software or firmware update for readers. Uh, but is there any other uh, kind of better economics associated with Jen 2x, um like ASP or gross margin? Um, or is this just really all about like a faster transition to, to m800.

Chris Diorio: Right now, it's focused on a faster transition to M800. But perhaps more importantly, it's focused on enabling our enterprise customers with solutions that we couldn't solve previously. So we introduced Gen2X to improve, for all the reasons I said in the prepared remarks, improved readability and lower footprint and other things. And we're using Gen2X to enable enterprise solutions, which turns around and provides that virtuous cycle of pull for M800. So that's where you should focus. You should focus on us using Gen2X to enable enterprise solutions that we couldn't do previously.

Customers with solutions that were that we couldn't solve previously. So we introduced Jen 2x to approve for all the reasons I said in the prepared remarks Emperor's readability and and

For a footprint and other things. We are using Gen 2x to enable Enterprise Solutions, which turns around and provides that virtuous cycle of pull for M800. Um, so that's where you should focus. You should focus on using Gen 2x for solutions that we couldn't do previously.

Christopher Rolland: Great. Thanks so much, Chris.

Chris Diorio: Sure. Thank you.

Great. Thanks so much, Chris.

Sure, thank you.

Operator: The next question comes from Blaine Curtis with Jefferies. Please go ahead.

Christopher Rolland: Hi, Ezra Weiner on for Blaine. Thanks for taking my question. I guess two quick ones. One, in terms of your overhead reading and other solutions that you are talking about bringing to market, can you help size the impact of what that means from both a reader, but also from an Endpoint IC perspective? And then secondly, can you just talk about what you're seeing from channel inventory? I know you had talked about two extra weeks for supply chain optionality, but you also talked a little bit about inventory coming down in the quarter. So can you talk about the moving pieces there? Thank you.

Chris Diorio: Yeah. So thanks, Blaine. I'll take the first question, and I'll let Cary take the second one. So in regards to the opportunity with these enterprise customers and really where our focus is, let me just start by saying the overhead reading opportunity is primarily a Reader IC opportunity. We're supporting a partner there, not a direct Reader and Gateway opportunity. With that said, our ability to enhance the performance and then demonstrate further performance benefits with Gen2X, we're using to drive our Endpoint IC market share. In general, the enterprises that we engage directly with have high or very high Impinj Endpoint IC market share. And that is our goal engaging with these enterprises from our perspective. So we're monetizing the relationships by selling Readers and Gateways, of course, but primarily in the recurring revenue stream from the Endpoint ICs.

The next question comes from, Blaine Curtis with Jeffrey. Please go ahead. Hi Erin. I'm from Blaine. Thanks for taking my question. Uh, I guess 2, quick ones, 1 uh, in terms of your overhead, reading and other solutions that you are talking about bringing to Market, can you help size the impact of what that means? From both a reader. But also from an endpoint, I see perspective, and then, secondly, uh, can you just talk about what you're seeing from Channel inventory? I know you had talked about 2 extra weeks for, uh, supply chain. Optionality. But you also talked a little bit about inventory coming down in the quarter. So can you talk about the moving pieces there? Thank you.

So thanks, Blaine. I'll take the first question, and I'll let Carrie take the second one. Um, so.

In regards to the opportunity with these enterprise customers and...

Really where our focus is.

Um, let me just start by saying the overhead reading opportunity is primarily a reader. I see opportunity, we're supporting a partner there, not a direct reader opportunity.

With that said, our ability to enhance the performance and then demonstrate further performance. Enhance benefits with Jen 2x. Um, we're using to drive our endpoint AC market share in general. The Enterprises that we engage directly with have high or very high.

Chris Diorio: At the same time, when we commit to an enterprise end user, we truly commit to them. So what you're seeing in these recurring engagements is us committing to them, them committing to us, and us working in partnership with the enterprise to drive further use case. They become core partners for our learnings. They become reference customers for us. And they allow us to advance our position in the market, all while maintaining high Endpoint IC market share. So that is essentially our solutions focus. And you can see it in every account, every enterprise account that we work directly with.

Cary Baker: Hi, Ezra. This is Cary. Regarding your channel inventory question, we anticipated a modest channel inventory build in Q2 as our partners continue building geographic production optionality. However, we actually saw channel inventory come down even as they built that optionality. Overall, we believe channel inventory is healthy compared to our inlay partner demand. And we expect the weeks of channel inventory to roughly stay in this range for the foreseeable future. So we feel really good about where we are from a channel perspective.

Impinj and point I see market share, and that is our goal in engaging, with these Enterprises from our perspective. So we're monetizing the Relationships by selling readers and gateways, of course, but primarily in the recurring Revenue stream from the endpoint, I sees at the same time, when we commit to an Enterprise end user, we truly commit to them. So, what you're seeing in these recurring engagements is US committing to them, then committing to us and, and us working in partnership with the Enterprise to drive further, use case they become core partners for our learnings, they become reference customers for us, and they allow us to advance our position in the market all while while maintaining high input, I see market share. So, that is essentially our Solutions focus, and you can see it in every account, every Enterprise account that we work directly with.

Chris Diorio: Awesome. Thank you very much.

Hi ASA. This is Carrie. Regarding your channel inventory question, we anticipated a modest channel inventory build in Q2 as our partners continue building geographic production optionality. However, we actually saw channel inventory come down even as they built that optionality overall. We believe channel inventory is healthy compared to our inlay partner demand, and we expect the weeks of channel inventory to roughly stay in this range for the foreseeable future. So we feel really good about where we are from a channel perspective.

Cary Baker: Great. Thank you.

Awesome, thank you very much.

Great. Thank you.

Operator: The next question comes from Troy Jensen with Cantor Fitzgerald. Please go ahead.

Troy Jensen: Hey, gentlemen. Congrats on another great quarter here.

The next question comes from Troy Johnson with Cantor Fitzgerald, please go ahead.

Chris Diorio: Thank you, Troy.

Hey John, congrats on another great quarter here.

Troy Jensen: Hey, I want to talk, well, maybe two verticals here. So specifically, you know, logistics, obviously, you've done well. You kind of commented on two customers there. Can you just talk about the pipeline or the opportunity? Is there more big deals in the logistics vertical in coming quarters?

Thank.

Hey, I want to talk, uh, well maybe about two verticals here. So specifically, uh, you know logistics, you obviously you've done well. Can you just comment on two customers there? Can you just talk about the pipeline or the opportunities there? More big deals in the logistics vertical group in the coming quarters.

Chris Diorio: So, Troy, yes, there are more opportunities in the logistics space. But what I'd like to do right now is kind of get you to think about broadening that aperture a bit because there are straight supply chain and logistics customers. And then there are a variety of retailers and others who manage their own supply chains. And right now, given the tariff situation, all of those enterprise end users or enterprise customers are looking to improve the resiliency and flexibility of their supply chains. So even when we talk about food opportunities and other things, we're still talking, in many cases, about supply chain resiliency and flexibility. So you should expect us to continue talking about supply chain and logistics, but broadening the aperture beyond just pure SCNL or e-commerce companies to kind of just everybody who has a supply chain, which is essentially every one of our customers.

Oh Troy. Yes, there are more opportunities in the logistics space. Um,

but what I'd like to do right now is kind of gave you to think about broadening that aperture a bit because there are straight selection and Logistics um customers and then there are a variety of retailers and others who managed the wrong Supply chains and and right now given the Tariff situation, all of those Enterprise end users are Enterprise. Customers are looking

Troy Jensen: Right. Okay. And then for Cary, are you allowed to give us what the licensed revenues were in Q2?

To improve the resiliency and flexibility of their supply chains. So even when we talk about food opportunities and other things, we're still, talking many cases about supply chain, resiliency and flexibility. So you should expect us to continue talking about supply chain and Logistics. But broadening the aperture Beyond just pure, um, uh, scnl or e-commerce companies to a kind of just everybody who has a supply chain, which is essentially every 1 of our customers.

Right. Okay. And then after carry, are you allowed to give us what the license revenues were in Q2?

Cary Baker: Yeah, you'll see it in our 10-Q. It was $16 million.

Troy Jensen: Was it up from 15 or up from 15.5 or where was it last year? I'm curious.

Yeah, you'll see it and our 10q it was 16 million dollars.

Cary Baker: Up from 15 million last year.

Troy Jensen: Awesome. All right, gentlemen, keep up the good work.

Or up from 15.5 or where was it last year, I'm curious up up from 15 million last year.

Chris Diorio: Thank you, Troy.

Awesome. All right, gentlemen, keep up the good work.

Thank you, Troy.

Operator: The next question comes from Jim Ricciuti with NEHDM & Company. Please go ahead.

Next question comes from Jim Ricci with Medium and Company. Please go ahead.

Christopher Rolland: Hi, thanks. Good afternoon. I joined a little bit late. Just gone through the the transcript. But Cary, I was hoping if you didn't give this, and I just haven't gotten to it, the improvement you're expecting in product and gross margins in Q3, I mean, it sounds like you're looking, you're more optimistic not only on the Endpoint IC business, but also on the systems portion of the business. I mean, it sounds like these are multiple drivers that impact your Q3 gross margins. And then presumably, as you look at Q4, you get a better mix of M800 and maybe more systems business. But I'm just wondering, is there any more color you can provide that if you haven't on gross margins?

Hi, thanks. Yeah, good afternoon. I I joined a little bit late, just gone through the uh, the the transcript but um, Carrie I was hoping uh, if you didn't give this and I just haven't gotten to it. The Improvement. You're Expecting in product.

gross margins in Q3, I mean it sounds like

You're looking.

You're more optimistic, not only on the endpoint, I see business, but also on the systems portion of the business. I mean, it sounds like these are multiple drivers that impact your Q3 gross margins. Then, presumably, as you look at Q4, you get a better mix of M800 and maybe more systems business. But I'm just wondering, is there any more color you can provide, if you haven't, on gross margins?

Cary Baker: Yeah, Jim. I think the biggest drivers of the gross margin increase on a quarter-over-quarter basis for Q3 that we're signaling is, first, the M800 mix. It's continuing to ramp. I expect the M800 to achieve volume-running status at some point this year. I don't think it blends for the full year, and I don't think it reaches its terminal mix in 2025. But we're starting to hit our stride on the M800. And you're seeing that benefit come through in Q3 gross margin and we signaled it again in the fourth quarter gross margin. Then the second factor that's helping us is we're finally getting to the lower-cost wafers. So this goes back to Harsh's question earlier on, where, yes, we're back in a normal pricing environment where we deliver ASP declines to our customers that go into effect at the beginning of the year.

Cary Baker: We support those with wafer cost down. But because we carry six months of forward-looking inventory to ensure supply to our customers, it takes us six months to get to those lower-cost wafers. We're starting to see that benefit now.

Yeah, Jim. I I think the the biggest drivers of of the gross margin increase on a quarter over quarter basis for Q3 that were signaling is is first the m800 mix. It's continuing to ramp, uh, I expect the m m800 to achieve volume running status at some point this year. I don't think it Blends for the full year, and I don't think it it reaches its terminal mix in 2025, but we're starting to hit our stride on the m800 and you're seeing that benefit comes through, in Q3 gross margin and these signals again in the fourth quarter, gross margin. Then the second Factor that's helping us is we're finally getting to the lower cost Wafers. So this goes back to harshest, question earlier on where yes, we're back in a normal pricing environment where we deliver ASP declines to our customers that go into effect, at the beginning of the year, we support. Those was wafer cost down, but because we carry 6 months of forward-looking inventory, to ensure Supply, to our customers, and

It takes us 6 months to get to those lower-cost wafers. We're starting to see that benefit now.

Christopher Rolland: Okay. And you also signaled, sorry, go ahead.

Okay. And um, you also signal, sorry, go ahead.

Cary Baker: Yeah, I just remembered the second part of your question. You asked about OPEX. I expect OPEX to increase in the third quarter.

Yeah, I just remembered the second part of your question. You asked about Opex? I expect Opex to increase in the third quarter.

Christopher Rolland: Okay. And maybe just to follow up on that inlay partner in North America, the messaging also, being more optimistic about food, they seem to call out proteins as being another opportunity. And Chris, I'm wondering, as you think about the opportunities being talked about, it's been bakery departments. You've talked about some other areas, but how quickly could we see this adoption as it relates to proteins?

Okay. Um and maybe just to follow up on that uh um inlay

partner.

In North America, the messaging also being more optimistic about food, they seem to call out proteins and as being, um, another opportunity and Chris, I'm wondering as you think about the opportunities been, um, talked about has been Bakery departments, you've talked about some other areas. But how, how quickly could we see this? Adoption as it relates to proteins.

Chris Diorio: Yeah. So, Jim, first, I'd look at bakery proteins and fresh. At the pellet and case level, there are active deployments ongoing. At the item level, I would still characterize what's going out in the market as pilots. Of course, they're food-sized pilots, which means they're large, but I would still call them pilots. Both our close partner and we are very excited about all of those opportunities. And we see, and we're gardenly optimistic that those pilots are really going to turn into full-fledged deployments because, as you heard in some of the other prepared remarks from others, you know, the ROI is positive. I will say that given the size of the food category and given it's, you know, we're in the early innings, don't expect things to ramp just instantaneously. It's going to take time. As I've always said, the bigger the category, the longer it takes.

Yeah, so Jim, first, I'd look at Bakery proteins and fresh.

um,

at the pellet and Pace level, there are active deployments ongoing.

At the item level, I would still characterize what's going on in the market. As Pilots, of course, they're food-sized Pilots, which means they're large, but I would still call them Pilots.

Um, both the our close partner and we are very excited about all of those opportunities and we see and regarding the optimistic that those Pilots are really are really going to turn into full-fledged deployments because um, as you heard in some of the other prepared remarks from others, um, you know, the ROI is positive.

I will say that, given the size of the food category.

Chris Diorio: But with that caveat, I'm about as excited as I could be about the food opportunity because the pace at which we see enterprises either piloting or being interested reminds me of what happened in the early days of retail apparel once we got over the hump of having the right level products that worked and everything like that. There was a rapid surge in interest and demand, which then turned into the market we have today. I'm seeing the same thing in food. I'm excited. I'm bullish. That said, it takes time.

And given its, you know, we're in the early innings, don't expect things to ramp just instantaneously. It's going to take time. As I've always said, the bigger the category, the longer it takes.

um, but with that caveat, I'm about as excited as I could be about the food opportunity because

The pay set which we see enterprises, either piloting or being interested, reminds me of what happened.

In the early days of retail apparel, once we got over the hump of having the right level products that worked, and everything like that. There was a rapid surge in interest and demand, which then turned into the market we have today. I'm seeing the same thing of food. I'm excited. I'm bullish. That said, it takes time.

Cary Baker: Okay. Thank you.

Thank you.

Chris Diorio: Thanks, Jim. Thank you, Jim.

Thanks Jim. Thank you, Jim.

Operator: Once again, if you have a question, please press star one. The next question comes from Scott Thorold with Roth Capital. Please go ahead.

Cary Baker: Hey, good afternoon. Thanks for taking my questions. Great job on the quarter, guys.

Once again, if you have a question, please press star 1. The next question comes from Scott, so it's Rod Capital, please go ahead.

Chris Diorio: Thank you, guys.

Hey, good afternoon. Thanks for taking my questions. Great job on the quarter, guys.

Cary Baker: Hey, Chris, maybe to follow up on Jim's question to dive in a little bit deeper on the food front, you've talked about the two larger customers and pilots that have been ongoing in bakery, fresh proteins, and private label. I'm wondering if you could give us more of a 30,000-foot view in terms of the level of engagement across the industry and then the timelines, maybe digging in a little bit more on that front. You know, next year, do we start to see more accelerated push into not just the categories you've talked about, but getting a little bit broader, getting down to the item level? And what does it take to get down to the item level? It sounds like Gen2X is certainly a key component of that.

Thank you.

Cary Baker: But does it also require, you know, the holy grail, the 1 cent tag to start to tag everything within the food service opportunity? And then I had a follow-up.

Chris Diorio: Yeah. Okay. I'm going to do my best on this question, but there's a lot of pieces to it. So the close partner that we've mentioned a couple of times so far on this call already cited in their prepared remarks that one of their customers is seeing a positive, a more positive ROI in bakery than they expected. And I think, and I'm not surprised by that. I think it really highlights the opportunity that Raynor FedE brings and the fact that enabling those enterprises to track their items using expiration dates, the value proposition that it brings in food freshness, reduced food waste, and increased sales to their consumers. So I am, like I said to Jim, I am very excited about the food opportunity.

Hey, Chris, maybe to follow up on Jim's question to dive in a little bit deeper on the food fraud. You've talked about uh, the 2 larger customers and Pilots that have been ongoing and and bakery fresh proteins, and private label. Uh, I'm wondering if you could give us more of a 30,000 foot view, in terms of the level of Engagement across the industry and then the timelines, maybe digging in a little bit more on that front. You know, next year, do do we start to see more accelerated push into not just the categories, you talked about but getting a little bit broader getting down to the item level. And what does it take to get down to the item level? It sounds like Jen. 2x is certainly a key component of that but does it also require you know the the Holy Grail of the 1 cent tag to start the tag everything within the Food, Service opportunity. And then I had a follow-up

Yeah. Okay I'm going to do my best on this question. Um but there's there's a lot of pieces to it. So um the close partner that we've mentioned a couple of times so far on this call um already cited in their prepared remarks that 1 of their customers are seeing a a a positive, a more positive Roi in Bakery than they expected. And um I think and I'm not surprised by that. I think it really.

Highlights.

The opportunities that rain RFID brings. And the fact that that um,

Enabling those those Enterprises to.

Track their items, using expiration dates, the value proposition that it brings in food, freshness, reduced food waste um and increased sales to the to, you know, their consumers. So,

Chris Diorio: I am not overestimating how quickly it's going to go, but I do believe that given the state of the pilots that are happening now, the positive results that we're seeing and the readability on items, that food is going to go at the item level. We're already seeing it at the pellet and case level. It will go at the item level. I believe that what we should do over the next couple of quarters is focus on those categories where expiration date matters. So bakery items, deli items, proteins, you know, things that expire quickly, and they're useless if you don't sell them before they expire. I think that's where the return is we're going to see over a good while before food migrates to other categories.

I am, like I said to Jim, I'm very excited about the food opportunity. I am.

Not overestimating how quickly it's going to go. But I do believe that given the state of the pilots that are happening now, the positive results that we're seeing, and the readability on items, food is going to go at the item level. We're already seeing it at a pilot at a case level; it will go at the item level.

I believe that what we should do over the next couple of quarters is focus on those categories where the expiration date matters.

So basically, items—daily items—are proteins; you know, things that expire quickly and are useless if you don't sell them before they expire. I think that's where the return is. We're going to see it over, over.

Chris Diorio: I could be proven wrong in the out years, but I suspect for right now, we're on the right track, and that's where you see the adoption happening. So we'll keep talking about food in our upcoming calls, and I'm sure others will as well. And as you poke around a little bit more and try going to some stores and things like that, you might actually see items tagged in some of the stores where you buy things even today. Hey, Chris, I don't know if I didn't ask you to answer your question. Yeah, keep going.

For a good while before food migrates to other categories, I could be proven wrong, and in the out years. But I suspect— I suspect for right now, we're on the right track, and that's where you see the adoption happening. So we'll keep talking about food in our upcoming calls, and I'm sure others will as well.

And as you poke around a little bit more and try going to some stores and things like that, you might actually see items tagged in some of the stores where you buy things even today.

Cary Baker: You did. I apologize. It was very amorphous and wide open. But let me ask this. So in the second half of '26, is there a number of commercial deployments you would expect at that period of time, or is there a number of units that you would be willing to believe that food service will be a part of, 5% to 10% of units exiting next year, or is that too difficult to determine at the current time? And then just one other question from a systems-level perspective. A lot of, I think, engagements or discussions going on with other big-box retailers leveraging the Walmart supply chain. I'm wondering any updates on that front. It sounds like the systems outlook is pretty healthy.

Hey Chris, I don't know if they did just your question.

Cary Baker: I'm wondering if you could dive down a little bit into that in terms of where it's coming in terms of new customers, what that opportunity pipeline looks like. Thanks.

Chris Diorio: Okay. Thanks. I'll do my best. On the food opportunity, item-level food, I'd look to 2026 as driving meaningful volumes. It's, like I said, we're in the pilot phase now. Anything on a food size is large, but in terms of really meaningful volumes and actually seeing those pilots turn into full-fledged ramps, we're looking at next year. That doesn't take away at all from the excitement. In terms of big-box expansion in general merchandise, we are seeing the large North American retailer continue to push forward and continue adopting in the categories they've already announced. We also see them piloting and doing R&D on additional categories. The pace and timing at which they continue to roll out is clearly going to be up to them, but they continue moving forward, and we're excited to be supporting them.

You did, it was, it was I apologize. It was very amorphous, um, and and wide open, but let me, let me ask this. So in the second half of 26, is there, is there a number of of commercial deployments you would expect at that period of time? Or is there a number of units that you would be willing to to believe that food service will be a part of 5 to 10% of the units exiting next year or is that too difficult to determine that the current time and then just 1. Other question from a, a systems level perspective. Uh, a lot of I think engagements or discussions going on with other big box, retailers leveraging, the Walmart supply chain. I'm wondering any updates on that front. It sounds like the systems. Uh, Outlook is pretty healthy. I'm wondering if you could dive down a little bit into that in terms of where it's coming, in terms of new customers, what that opportunity pipeline looks like, thanks.

Okay. Thanks, I'll do my best, um, on the, uh, the food opportunity. Item level food. I'd love to 2026 as Tech driving, meaningful volumes. It's um, like I said, we're in the pilot phase. Now, anything out of food size is large, but in terms of really meaningful volumes and actually seeing those Pilots turn into full-fledged ramps,

We're looking at next year. Um um that doesn't take away at all from the excitement.

in terms of uh um uh big box expansion in general merchandise,

We are seeing, um, the large North American Retailer, continue to push forward and continue adopting into categories. They've already announced we also see them piloting and doing R&D on additional categories.

Chris Diorio: We do see those general merchandise categories beginning to trickle down to other retailers and significantly big-box suppliers, but there haven't been any big announcements that I am aware of. And I can't say when there will be one, but there are some trickle-down effects that are going on. And then fixed reading versus handheld reading versus what we're seeing out in the environment. For the fresh stuff, retail, I'm sorry, for food freshness, let me be clear. For food freshness, we're seeing that predominantly being driven by handheld readers, employees going out in the store and finding the about-to-expire items. In other parts of the industry, including in food for item and, I mean, for case and pellet level, we are seeing a resurgence of autonomous reading, which is where a lot of our demand for our readers and gateways is coming from.

Are some trickle down effects that are going on and then fixed reading versus handheld, reading versus what we're seeing out in the environment, for the fresh stuff in retail. I'm sorry for food freshness, let me be clear for food freshness, we're seeing that predominantly being driven by handheld leaders, my employees going out in the store and finding they about to expire items.

Chris Diorio: Now, the autonomous reading, whether it's overheads, dock doors, front store, back store, store, exits, loss prevention, loss identification, it's all driving demand for fixed reading. And that's where we're seeing that resurgence in fixed reading, and we are putting a significant focus on it as a company.

In other parts of the industry including in food for um item. And I mean for case and pallet level, we are seeing a Resurgence of autonomous reading, which is where a lot of our demand for our readers and gateways is coming from the autonomous reading whether it's overhead stock doors. Front door, Back Store store, exits, loss, prevention, Los, Los Los identification. It's all driving to man, demand for fixed reading. And that's where we seeing that Resurgence in fixed reading. And we are putting a significant focus on it as a company.

Cary Baker: Great. Thanks, Jim.

Chris Diorio: What didn't I answer?

Cary Baker: That's good.

Chris Diorio: Okay. Did I get it all?

Cary Baker: You got it.

Chris Diorio: Thanks.

Cary Baker: Thank you.

Chris Diorio: Okay. Thanks, Scott.

Great. Thanks so much. Okay. Did I get it all? Okay, got it. Okay, thanks, Scott.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Chris Diorio, co-founder and CEO, for closing remarks. Please go ahead.

Chris Diorio: Thank you, Operator. I'd like to thank you all for joining our call today, and thank you for your ongoing support. Take care. Bye-bye.

This concludes your question and answer session. I would like to turn the conference back over to Christy Oreo co-founder and CEO for closing remarks. Please go ahead.

Thank you operator. Um I'd like to thank you all for joining our call today and um thank you for your ongoing support take care. Bye bye.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect