Chris Diorio: I’d be happy to. So Voyantic is the industry leader in solutions to ensure inlay quality, reliability, and readability. We acquired Voyantic for that skill set, particularly as pertains to our enterprise opportunities, the ones we’ve been talking about, whose business transformation relies specifically on that inlay quality, reliability, and readability. So we saw an opportunity here with Voyantic, a known leadership team, a known team, overall significant strength in RAIN RFID, very experienced team, and really key to ensuring that the labels that go into the enterprise solutions and there are partner labels, there are no 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 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 Voyantic acquisition fit, and we are thrilled to have them as part of the Impinj family.
Natalia Winkler: Thank you.
Chris Diorio: Thank you, Natalia.
Operator: The next question comes from Scott Searle with ROTH MKM. Please go ahead.
Scott Searle: 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 expectation in the first quarter and the second quarter?
Cary Baker: Yeah, Scott, this is Cary. Thanks for the question. So I highlighted in my prepared remarks that litigation related spend was $4.2 million in the quarter. And it was a little bit higher than we thought just because the timing of deliverables to the court got pulled in versus what I had thought would happen early when we built the guide. As you think about our OpEx for the quarter, adjusting for legal spend in the second quarter, adjusting for the incremental OpEx associated with the Voyantic 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 legal spend, 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.
Scott Searle: Got you. 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, 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 3 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 showing up on the system side with new projects, diversifications into other industries, applications and use cases? Thanks.
Cary Baker: Okay. So Scott, thanks. There’s a lot in that question. I will take the Voyantic financial impact and I’ll hand it to Chris with…
Chris Diorio: Scott, I mean probably have a Jeff talk a little bit about the pipeline.
Cary Baker: Okay. All right. So the way to think about Voyantic, it’s a small tuck-in deal. We have high hopes 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.
Jeff Dossett: 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 on industry sectors, retail and supply chain and logistics. In retail, as Chris noted, increasing focus and interest in the area of enhancing the shopper experience via self checkout and the related and 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 and I’m excited about the plans for new offerings to those supply chain and logistics customers.
That provides premium visibility and new revenue streams for those supply chain and logistics leaders. And then, as was noted in the script, I’m also encouraged by the progress of the pipeline with respect to Impinj 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 trajectory for Impinj. We’re seeing emerging opportunities in food traceability, reducing waste, optimizing freshness, in particular in high value elements of the food industry like proteins. 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.
Scott Searle: Great. Thank you.
Chris Diorio: Thanks, Scott.
Jeff Dossett: Thank you, Scott.
Operator: The next question is a follow-up from Jim Ricchiuti with Needham & Company. Please go ahead.
James Ricchiuti: Hi, 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 at 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?
Chris Diorio: Yeah. So, Jim, on the system side, obviously we have the pipeline of opportunities, which 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 Impinj 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, authentication, supply chain and logistics. And then of course, we have our partners driving all kinds of other opportunities that in myriad verticals, everything from building materials to 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 demand and we look to delivering full platform offerings by which our systems provide pull for our endpoint ICs to make a complete solutions offering. I hope that answered your question.
