Impinj, Inc. (NASDAQ:PI) Q3 2023 Earnings Call Transcript

Chris Diorio: I’m almost prepared to quote Lincoln, with excitement for the future, with no prediction with respect to it is ventured. We feel excitement for 2024, as I said in my prepared remarks, but we guide one quarter at a time, and I don’t want us to get too far ahead of ourselves. Cary, anything you’d add?

Cary Baker: Yeah. I just reiterate that, you know, as Chris said, that the opportunities are there for secular growth for additional program to roll on, but the market is still pretty dynamic right now. We’re still seeing the softness in our systems business while retail start or while endpoint ICs are starting to recover. So just given that dynamic nature, we’re going to hold off on, we need to fire to the future at this point.

Chris Diorio: And I think Lincoln said with optimists, future, not excitement, but I misquoted him a little bit. Sorry. That’s

Scott Searle: That’s okay. Sounds like you guys have some excitement and optimism. So, thank you.

Chris Diorio: Thanks, Scott.

Operator: (Operator Instructions). The next question is a follow-up from Harsh Kumar with Piper Sandler. Please go ahead.

Harsh Kumar: Yeah. Hey, Chris. I wanted to go back to the question that was just asked about the growth for endpoint IC in 2023. I think correct me if I’m wrong, but I heard 29%, endpoint IC growth for the business in 2023. Is that accurate?

Chris Diorio: What we said was we expect our endpoint IC volumes to be consistent with our industry’s historical unit volume CAGR. The historical CAGR has been 29%. We didn’t peg ourselves at 29%. What we basically said is we’re applying a range around that number. But in the general vicinity of our the historical industry unit volume without citing an accurate number, and not to be within like 1% accuracy or something like that. But the historical CAGR has exceeded 25%. You know, if you look back years and years, right now, it’s in the range of 29%. Depending on what each year brings. And so we expect ourselves, we expect our unit volume growth to exceed 25% and be in the general range of the historical unit volume CAGR.

Harsh Kumar: Yeah. So as I’m looking at my model and the reason why I asked this question was as I’m looking at my model. So I need to be close to that number of 29%, call it even 27 or 28 implies a pretty significant sequential uptake in the December quarter. You know, somewhere in the neighbourhood of 30% to 40% sequential uptake. Is that how we should think about your guidance, or am I missing something here in the middle?

Chris Diorio: I think something may be missing in that because it’s not that type of a volume increase in the fourth quarter. Last year included a high mix of specialty industrial IC. So that impacted revenue, but not the unit volume. So you have to make sure that you’ve normalized for that. And then if, if the commentary we’ve made throughout this year on unit volume growth, you can roughly estimate what we’re thinking for Q4 unit volume.

Harsh Kumar: Fair enough. Thank you.

Chris Diorio: First, I’ll add to get Cary’s point of spot on about specialty. But the one point I want to add is that the fact that we’re able to deliver growth in unit volumes in a significantly down market is what gives us significant confidence in our long term opportunity. We’re driving — we’re driving massive improvements at enterprise end users in terms of them being able to track out of manufacture, transport and so. And even in a down market, we still see growth in that opportunity. We see our large, our target supply channel logistics end user continue to press forward because the value proposition that ran our [indiscernible], which is why we’re bullish on the long term future. It’s unfortunate we have to go through the pain of this current downturn. We’re down with the retail market overall. We remain excited about our long term opportunity.

Harsh Kumar: Understood, guys. Thank you for the clarification. That that wasn’t I had pressed the buttons for to ask, but that question was interesting, so I jumped on it. But I know you don’t want to talk about 2024, but you are citing sort of things green shoots and you are citing some numbers for the industry unit volume of or your unit volume of 20, I call it high 20s, Maybe you could help us think about, how we should think about 2024 as a year that’s coming off the bottom. Would you expect yourself to do better than the industry numbers in 2024 as everything rebounds with the growth rates being excess? And then what’s a good growth for the systems business, and if there’s any seasonality that we should think about with your business in 2024.

Chris Diorio: You know, Harsh, you fix the retail market and we’ll do the rest. No. But in all seriousness, we’re just coming through a very difficult environment where we said in our prepared remarks, it’s too early to call a bottom. Field green shoots. We really can’t estimate the pace of that turnaround. It depends on factors that are so much larger than us. Macro factors in terms of retail, in terms of spend, in terms of the government spending, there’s just too many variables in there. What I believe we can say is that we see unit volume CAGR growth in a difficult market this year. And we fully anticipate there will be significant unit volume growth next year. Magnitude of it, exactly what it turns out to be, exactly what it’s going to be and everything, it’s far too early for us to predict.

But our industry has grown year over year, every year since 2010 in terms of unit volumes. And we have no doubt that 2024 will follow the similar trend. I just can’t peg where it’s going to be.

Harsh Kumar: Great. That that’s it for me. Chris and Cary, thank you for all the input today.

Chris Diorio: Thank you, Harsh.

Operator: The next question comes from Natalia Winkler with Jefferies. Please go ahead.

Natalia Winkler: Hi guys. Thanks for taking my questions. So, the first one was just on the logistics end market. It sounds like given the retail’s kind of weak, this is where we see a lot of, you know, the spotlight. So could you guys speak about, you know, the opportunities beyond this project that you’re seeing ramping right now? How was your engagement with maybe some of the other potential customers there. And what is, you know, like at which point of this current ramp do you think you will see sort of any potential further inflection in demand in that logistics end market.

Jeff Dossett: Hi, Natalie. This is Jeff. I think I first reiterate what we’ve said often, which is, you know, the pace and timing of new enterprise deployments is very hard to predict. But what I will say is that the supply chain and logistics industry is engaged and closely monitoring what others in the industry are doing that would impact their competitive opportunity in the same marketplace. So I’m encouraged by the level of engagement that we have with other supply chain and logistics organizations that are considering how impinge platform and RAIN RFID can help them improve their competitiveness in a difficult market.

Chris Diorio: Emily, this is Chris. I’m going to add — Natalia. I’m sorry. This is Chris. I’m going to add one thing. If you look at our markets our industry’s history, it’s generally been the case that, one of our small number of end users have caused us segments to go. So if I look at retail opportunity, it was ACs and Marks & Spencer and [Indiscernible] back in the early days. If I look at aviation led by Delta Airlines and then KLM Air France joined in, and then I added notice that all member airlines would fall aboard suit. Now, of course, that’s installed by the setback that we had during COVID time. It was the same in the automotive space with a small number of automotive companies that led, for example, by Volkswagen, to drive forward.