Baird Global Industrial Conference - Impinj
Quite a bit of new info, at least for me.
Some highlights
60ish % of all endpoint ICs are apparel
Food - for proteins - chicken is still not being deployed, too much water content
Deployment pace 0 -20% deployed is slow (training), 20-80% is fast, final 20% is slow difficult to label items
Opex investments are to make deployments faster and easier - able to work with more customers at once
Logistics pipeline is very active - everyone knows they are playing catch up, takes time to get deployments rolling
Some key snips from this transcript: investing.com
Cary Baker, CFO, Impinj: Yeah. Our largest vertical is retail apparel. Upwards of 60% of the ICs we ship go into retail apparel. Our second largest vertical is logistics.
Regarding systems revenue in Q4: Ninety days ago, we thought we’d actually be up slightly in the fourth quarter, not as strong as usual, but because of the strong Q3, only up kind of on the lower side of normal seasonality, which is plus 10%-20%. What we saw, though, was we saw those projects accelerate into Q3 and then stretch a little bit into 2026. The result is we’re going to be slightly down on systems revenue in the fourth quarter. Those projects, the size and scope are unchanged. The customer’s ambitions are unchanged.
Cary Baker, CFO, Impinj: Yeah, I think anytime you have large systems deployment, it is a benefit to endpoint ICs down the road. These were actually the projects that we mentioned in Q3 that were kicking off were with two existing customers, our visionary European retailer as they’re expanding their deployment beyond inventory visibility, beyond self-checkout and loss prevention, and then at our second-largest logistics customer as they too continue expanding their deployments.
—-what could the use case be for the Visionary European Retailer? E-commerce, 3PL, something else?
Cary Baker, CFO, Impinj: Yeah, food is going to be a massive opportunity. If I compare it to the other three verticals that are more penetrated at this point, apparel is 80 billion units a year. General merchandise is 325 billion units per year. Logistics is 400 billion units per year. Food is bigger than all three of those combined. We’re very early days right now with just two programs announced, but I would say that the activity in the pipeline is very strong. While Kroger and Walmart are ahead, there are others following behind them. Like apparel, which benefited from shared learnings, once we knew as an industry, we knew how to tag a pair of jeans, every apparel manufacturer knew how to apply a tag to the pair of jeans. Food’s going to be the same way. Once we know how to tag a steak, everybody will know how to tag a steak. Once we know how to tag a bag of bagels, everybody will know how to tag a bag of bagels.
Chicken is a problem: We see that play out in terms of the pace of a deployment. Any large deployment follows somewhat of a similar path. Going from 0% to 20% deployed takes time. It is slow because you’re training the employees, you’re doing the infrastructure lift, you’re gaining the momentum of having a foundation. Going from 20% to 80% goes really fast. You have the foundation, you know what you’re doing. Now it’s just rinse, wash, repeat. The final 20%, going from 80% to 100%, takes time again because you land at your edge cases, hard-to-tag items. As an example in food that we’re dealing with right now is how do we tag a chicken, a chicken breast, poultry? Poultry has high water content. Water content interferes with RF propagation. We’ve solved it. We, the industry, have solved it for steaks by putting a spacer underneath the tag that creates enough air gap for the RF to propagate. A steak has far less water content than does a piece of chicken. It is something that we will have to solve as an ecosystem. It is entirely solvable. It will just take more time. As I mentioned before, once it is solved, then everybody in the industry benefits from it.
Cary Baker, CFO, Impinj: Retail apparel, as I mentioned, largest vertical that we have, $80 billion units per year opportunity. We think by volume, we’re roughly 40% penetrated. By brand, we’re probably north of 90% penetrated. Most retailers have made the decision to move forward. Most retailers are not yet 100% deployed. They’re following kind of a pragmatic approach to deployment. They’re going geo by geo or brand by brand or product line by product line. They’re just kind of increasing their penetration every year based on that progress. The goal is to get to 100% because then you can unlock more use cases. Up to 100%, they’re using the only use case they’re primarily driving is inventory visibility using a handheld reader. That’s making sure you know what’s on the shelf, what’s not on the shelf, and moving it from the back of the store to the front of store.
When you get to 100%, you can extract even more ROI out of that tag. You can now do self-checkout. You can now do loss prevention. You can do smart dressing rooms. You can do better front store, back store management. Those are the use cases that are happening now that we expect to continue going as our retailers reach 100% tagging. In the logistics space, we see the same type of approach. Strive to get to 100% tagging and then add on, or sometimes in parallel to getting to 100%, add on additional use cases. With our second-large logistics provider, we saw them start with conveyors, putting our R700 reader on a conveyor, in some cases in place of the six-camera array solutions to track packages more efficiently moving down the conveyors.
Cary on logistics: The logistics pipeline is very active. Everybody, I believe, in the market realizes how far behind they are. They are trying to play catch-up right now. A logistics deployment, as I just walked through, on conveyors, then on pre-loaders, then on trucks, is much more complex than an apparel initial deployment where you are using just a handheld reader, which is to say it just takes some time.
Cary Baker, CFO, Impinj: Yeah. Walmart has announced two phases of general merchandise rollout, including categories like home goods, electronics, toys, stationery, some lawn and garden. Not 100% penetration in any of those categories, but announced a dozen or so different categories. Admittedly, we’re behind on the project timing for that. There’s still expansion left within those two phases that have been announced. It has been impacted by tariffs where apparel was able to move outside of China relatively easier when the tariffs hit. General merchandise was not as able to move outside of China. So we felt the impact from that. The whole ecosystem felt the impact from that. There is additional opportunity within Walmart. We expect a phase three, the category timing TBD, but we still expect that. And then there are other opportunities within the general merchandise space.
Cary Baker, CFO, Impinj: The OpEx has been managed, yes, but not as a result of internal use of AI. We’re still exploring where we might be able to deploy AI internally. The AI resources that we have right now are focused on how do we put it into the product. Look for us to put machine learning at the edge of our reading environment in ways that help improve the ease of deployment in a RAIN solution. If you think back to Wi-Fi years ago, you practically needed a PhD to log on to a Wi-Fi network. God forbid if you had a Mac, you just had no chance at doing it. Today, it’s easy. You just click the button and the Wi-Fi works. We are trying to make RAIN work like that.
We’re trying to take the RF out of the RFID to make the deployments ubiquitous and easy to stand up.
Rob Mason, Senior Analyst, Baird: Okay. You previewed some growth investments that will start maybe in the fourth quarter. Is that focused on this effort? Other parts of the technology stack that you’re investing in that you want to call out and how we should be thinking about where you’re headed with it?
Cary Baker, CFO, Impinj: Yeah. So what we called out was an investment in software. We think there’s an opportunity to layer cloud or SaaS-like solutions on top of our platform to make deployments easier, to better manage devices. It’s nascent today. We see the opportunity. We have strong ambitions. This is one of the areas that we’re going to invest for next year is building out those cloud solutions. The other areas that we will invest next year really relate around how do we stand up and support more enterprise customers at once. Today, we can handle one to two lighthouse or large enterprise accounts at once, but the demand is much greater than that. Look for us to invest in the sales and the engineering type resources that we can deploy on site to customers to help bring solutions alive.
Cary Baker, CFO, Impinj: Yeah. Part of it is making our products more easy to use. Making the readers more simple to use, the reader ICs more simple to implement, the endpoint ICs more simple to deploy. We’re absolutely working on that. When we are working with a large enterprise customer, we’re never able to be the ones that go deploy it for that customer. Oftentimes, they’ll match us with one of their SIs to train the SI up on how to deploy. Our goal with that is to train them so that they can take the product to market in other opportunities. Those are just a couple of ways of how we address that. |
