PI at Needham notes - 1/13/21
Fireside chat format, virtual, with the CEO/Founder and CFO
General comments - While I've followed this industry for over 20 years, this is the first time I've heard the founder speak. Simply brilliant! The reason I had to re-listen is because he provides so much valuable info every time he speaks that I couldn't keep up.
- The pre-announced revenue beat was in both the end point IC business and the systems business. There was QoQ and YoY growth in IC's, even though seasonality usually sees IC's peak in Q3. Systems tend to peak in Q4 as customers flush capex budgets.
- RAIN RFID is 15% penetrated in retail and headed to 20%. It is in their supply chain and logistics down to the item level, in stores using hand held readers, the next opp is self checkout. Covid proved to be very valuable for retailers that have deployed RAIN, it allowed those retailers to quickly pivot to omnichannel with all the different order/ship/pickup possibilities, even pickup from stores that were closed. PI hopes that understanding will drive the next gen use cases.
- He highlighted Decathlon's deployment in France, which has one store that is completely 'ghosted', there is no checkout - walk in, walk out, you are charged automatically. I assume you have information on file.
- Lot of discussion on the new M700 IC, they are traveling down Moore's Law and now get twice the dies/wafer from their nearest competitor. As the M700 grows they expect GM's to grow. They sold a few 100M of the M700 in 2020, 100M in Q3, it a TAM of 19B. GM's are a little below 50 in IC's, a little above in Systems, Corp average right about 50%.
- Discussed the grocery opportunity, which is Trillions of items yearly. A grocer in Japan believes the cost of an inlay on the item needs to come down to 1c-1.5c. He believes they will get there, but it will take time. The inlay will have to be integrated into the packaging. There is activity in the food biz, but it is at the pallet and case level. One valuable area is perishables, where you can track the time items spend in each location to make sure the shelf life is accurate or even extended.
- Explained health care uses, currently at care facilities tracking assets and even patients. Expects progress in the supply chain to make sure products, medicine, and vaccines are delivered efficiently.
- He explained that inventory can be effective even if 10% of your items still require manual tracking, but self checkout must be 100%.
- He provided a good analogy of the development of cell phones to the development of RAIN RFID, it takes time and the proliferation occurs over decades and can expand to being ubiquitous. Their goal is to digitize every product that is created, transported and sold.
- There is one large NA logistics company that has a major pallet level deployment, and one with a large conveyor belt deployment. He believes this area is approaching crossing the chasm to industry wide acceptance.
- 2020 had an inlay spike in Q1, that worked its way through and cleared inventory by Q3, the same occurred in systems and they will announce with Q4 earnings if that has cleared.
- The new M700 can be made invisible at checkout for privacy reasons, with a PIN code on the receipt allowing it to be re-enabled if returned to put item back on shelf.
- The new R700 reader enables enterprise grade reliability/capability, it has 10x the memory and processing power, much better readability, and their combined system exceeds any mix/match systems.
- Identified 3 retailers that drove the early retail success and took the industry over the chasm - Marks & Spencer, Decathlon, and Macys. In supply and logistics, he said the technology was not really ready in the 2005-2010 timeframe when deployments began, but it is now. They can now deliver fixed reading for the pallet/case/conveyor areas. Supply chain and logistics is 10x the market vs. retail.
Cooters |
