Impinj, Inc. (NASDAQ:PI) Q2 2023 Earnings Call Transcript

Impinj, Inc. (NASDAQ:PI) Q2 2023 Earnings Call Transcript July 26, 2023

Impinj, Inc. misses on earnings expectations. Reported EPS is $-0.32 EPS, expectations were $0.3.

Operator: Welcome to the Impinj Second Quarter 2023 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask a question. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Andy Cobb, Vice President, Strategic Finance. Please go ahead.

Andy Cobb: Thank you, MJ. Good afternoon and thank you all for joining us to discuss Impinj’s second quarter 2023 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 2023 financial results and third quarter outlook. We will then open the call for questions. Jeff Dossett, Impinj’s CRO, will join us for the Q&A. 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. While 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 uncertainties. We describe these risks and uncertainties in the annual and quarterly reports we file with the SEC. 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. Balance-sheet and cash-flow metrics 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 in the 12th Annual Needham Virtual Industrial Tech, Robotics, and Clean Tech one on one Conference on August 4th; the Oppenheimer 26th Annual Technology, Internet and Communications Conference on August 8th; the Canaccord Genuity 43rd Annual Growth Conference on August 10th in Boston; the Jefferies Semiconductor, IT Hardware and Communications Technology Summit on August 29th and 30th in Chicago; the Goldman Sachs Communicopia and Technology Conference on September 6th in San Francisco; the Piper Sandler Growth Frontiers Conference on September 12th in Nashville; and Lake Street’s Big 7 Conference on September 14th in New York. We look forward to connecting with many of you at those events.

I will now turn the call over to Chris.

Chris Diorio: Thank you, Andy. And thank you all for joining the call. Second quarter revenue set a new record, with record systems revenue more-than-offsetting weaker-than-anticipated endpoint IC revenue. The primary driver of the systems revenue strength was the loss-prevention deployment at the visionary European retailer. The primary driver of the endpoint IC weakness was larger-than-anticipated retail apparel inventory destocking. We expect the impacts of that inventory destocking to persist at least through the third quarter. Focusing first on endpoint ICs, second quarter revenue declined sequentially, coming in slightly below our expectations. The magnitude of the retail inventory destocking became apparent late in the quarter, not just to us but also to our inlay partners, some of whom had requested upside ICs as recently as April.

That destocking more than offset sequential IC growth at our second large North American supply chain and logistics enterprise customer and us seeding several hundred million Impinj M775 ICs into multiple authentication applications. Looking to the third quarter, our endpoint IC share at our enterprise customers remains strong. At the same time, we and our inlay partners now anticipate softer-than-expected third-quarter retail demand recovery. Those partners built IC safety stock anticipating a stronger recovery, and as our wafer supply has grown, they are burning down roughly a month’s worth of ICs, primarily in the third quarter but with a tail into the fourth. Also, the curve of new-program launches, shifted to the right by the 2022 product shortfalls, created an adoption air pocket that the industry is still working through.

Our enterprise wins are insufficient to overcome these headwinds and, as a result, our third-quarter endpoint IC revenue will decline sequentially. Importantly, despite these headwinds, we do not know of a single end user who has pulled back from RAIN RFID. Said another way, our long-term opportunity remains strong, and we expect growing adoption to drive demand after these corrections are behind us. We also expect greater than 25% 2023 endpoint IC unit-volume growth. Turning to systems, second-quarter reader and gateway revenue exceeded our expectations, driven by better-than-anticipated component availability. The additional supply allowed us to deliver more gateways into the visionary European retailer’s self-checkout and loss-prevention deployment than we had expected, as well as fulfill our prior-period reader backlog.

It also allows our team to shift their focus to new opportunities for our solutions offerings. Regardless, for the third quarter, we expect a sequential decline in reader and gateway revenue due to delivery timing to the visionary European retailer and our return to typical reader and gateway backlog entering the quarter, the latter after nearly two years of component supply constraints. Our second-quarter reader IC revenue remained healthy, with robust demand for printer-encoders in North America offsetting weak macro demand in China. Looking to third quarter, we see the printer-encoder demand mostly fulfilled while China remains soft. Our Chinese reader partners built Indy reader IC inventory ahead of our planned end-of-life, and are today focused on selling Indy-based product inventory rather than ramping Impinj E-family-based designs.

That Indy focus will drive a sequential decline in third-quarter reader IC revenue. Like for readers and gateways, our reader IC supply has normalized and we enter the third quarter with typical reader IC backlog. Turning to new products, last week we launched the Impinj M800 series RAIN RFID endpoint ICs. The first ICs in the series, the Impinj M830 and M850, are the most advanced in the market, with performance and features designed to help enterprises read the right tag, at the right place, at the right time. In addition to 25% more die per wafer than the Impinj M700, the M800 has 30% lower power consumption, allowing businesses to use a single, small tag across a broad range of items. With enhanced tag reliability, manufacturability and drop-in compatibility with M700 antennas, we expect the M800 to drive additional RAIN adoption.

It is also a key component of our long-term growth and margin targets. Turning to intellectual property, we are the innovation leader in our industry, with more than 300 issued and allowed patents. I am pleased to say we successfully defended our leadership position by prevailing in two separate trials. In June, a federal jury in Washington found that Impinj endpoint ICs do not infringe an NXP patent. In July, a federal jury in California found that NXP endpoint ICs do infringe two Impinj patents, one willfully. The California jury awarded Impinj approximately $18.9 million in damages and lost profits, and we have asked the court for injunctive relief. We now turn our attention to the upcoming Texas trials against NXP. In closing, from today’s vantage point we see several headwinds driving lower third-quarter revenue.

Photo by Christian Wiediger on Unsplash

At the same time, our long-term opportunity remains strong, and we see some green shoots in retail apparel. We as a company have been through industry cycles before, and have come through those cycles stronger. With confidence in our growing opportunity and our leading position in it, I have no doubt we will do so again. 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 constant effort driving our bold vision. I feel honored by my incredible good fortune to work with you. Cary?

Cary Baker: Thank you Chris and good afternoon everyone. On today’s call, I will review our second quarter financial results and third quarter financial outlook. Second quarter revenue was $86 million, up slightly sequentially compared with $85.9 million in first quarter 2023 and up 44% year-over-year from $59.8 million in second quarter 2022. Second quarter endpoint IC revenue was $64.9 million, down 3% sequentially compared with $67 million in first quarter 2023 and up 51% year-over-year from $42.9 million in second quarter 2022. Looking to the third quarter, we expect a sequential decline in endpoint IC revenue, driven by inlay-partner safety-stock reductions and weak retail apparel demand more than offsetting growth from our platform wins.

Second quarter systems revenue was $21.1 million, up 12% sequentially compared with $18.8 million in first quarter 2023 and up 24% year-over-year from $16.9 million in second quarter 2022. Second quarter systems revenue exceeded our expectations, driven by better-than-anticipated component availability allowing us to service reader and gateway demand. On a sequential basis, reader revenue increased while reader IC and gateway revenue decreased. On a year-over-year basis, gateway revenue increased while reader IC and reader revenue decreased. Systems included Voyantic revenue starting second quarter. Looking ahead, we expect a sequential decline in third-quarter systems revenue, with declines in all product lines. Second quarter gross margin was 53.3%, compared with 52.4% in first quarter 2023 and 54.7% in second quarter 2022.

The sequential increase was driven by endpoint IC product mix. The year-over-year decrease was driven by lower endpoint IC product margins, specifically a smaller specialty and industrial IC mix, and lower systems product margins driven by increased costs. Looking to the third quarter we expect our gross margin to decline. Total second quarter operating expense was $35.9 million, compared with $36.4 million in first quarter 2023 and $28.8 million in second quarter 2022. Research and development expense was $16.8 million. Sales and marketing expense was $7.7 million. General and administrative expense was $11.3 million. Litigation expense was $4.3 million. Despite litigation expense being similar to second quarter we expect a sequential decline in third quarter operating expense, as we tighten our belt on spending.

Second quarter adjusted EBITDA was $10 million, compared with $8.6 million in first quarter 2023 and $3.8 million in second quarter 2022. Second quarter adjusted EBITDA margin was 11.6%. Second-quarter GAAP net loss was $8.1 million. Second-quarter non-GAAP net income was $9.3 million, or $0.33 per share on a fully diluted basis. Turning to the balance sheet. We ended the second quarter with cash, cash equivalents and investments of $114.9 million, compared with $164.7 million in first quarter 2023 and $183.7 million in second quarter 2022. Inventory totaled $112.3 million, up $26.5 million from the prior quarter, with wafer-delivery timing and the initial M800 ramp contributing to the increase. Net cash paid for Voyantic totaled $23.4 million.

Second quarter net cash used by operating activities was $22.5 million. Property and equipment purchases totaled $5.7 million. Free cash flow was negative $28.2 million, including $25.3 million for inventory growth. Before turning to our third-quarter guidance, I want to highlight a few items unique to our results and outlook. First, we anticipate third quarter gross margin to decline by approximately 300 basis points, due primarily to lower revenue on fixed costs and less reader ICs. As our revenue recovers, we are confident that our gross margin will recover with it. And we remain confident in the long-term margin targets I outlined at our investor day. Second, we have updated our non-GAAP net income to include estimated taxes based on statutory tax rates.

Given our NOLs, we expect our cash tax payments to remain well below this estimated rate at least for the next few years. Please see our trended file for a retrospective view of our non-GAAP net income following this revised tax treatment. Third, we have reduced our wafer purchases, adjusted our wafer-delivery timing and are focused on better aligning our inventory to our outlook. We expect those efforts to impact fourth quarter inventory. We currently expect third quarter inventory to be similar to second quarter. Finally, based on our revised view of market demand, we believe our inlay partners have roughly a month’s worth of excess IC safety stock. Our third quarter guidance assumes progress right sizing that safety stock, with a tail into the fourth quarter.

Turning to our outlook. We expect third quarter revenue between $63 and $66 million, compared with $68.3 million in third quarter 2022, a 6% year-over-year decline at the midpoint. We expect an adjusted EBITDA loss between $3.3 and $1.8 million. On the bottom line, we expect non-GAAP net loss between $3.2 and $1.7 million, reflecting non-GAAP fully diluted loss-per-share between $0.12 and $0.06. 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. MJ.

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Q&A Session

Operator: Thank you very much. [Operator Instructions] Today’s first question comes from Harsh Kumar with Piper Sandler. Please go ahead.

Harsh Kumar: Yes. Hey guys. Thanks for letting me ask a question. I had two Chris and Cary, one for you. So I think if I’m reading this correctly, I think we’re thinking there’s about a month’s worth of inventory safety stock at the inlay partners. But then today is what, July 26th, so there’s a whole month or so left. I can understand this – this sort of trails into the third quarter, but I guess I’m trying to understand your comment about this might dovetail into the fourth quarter as well, the inventory correction. I was – I was wondering if you could provide some color around why it might spill into the fourth quarter and why won’t the logistics uptick that you might be anticipating with that rollout not come as a positive and sort of offset this decline?

Cary Baker: Okay. Thanks Harsh, this is Carrie. I’ll take that question. Looking into our third quarter, our guide assumes that endpoint IC revenue is going to be down in the mid-20s sequentially. There are going to be a few factors driving that sequential decline. So I want to unpack each of those right now. First in – in the second quarter we shipped several hundred million higher ASP M775 authentication ICs as we seeded multiple applications ahead of their commercial launch. The timing and success of those launches will determine when more product is pulled. And then second to your point, we’re attempting to burn down as much of the excess safety stock as possible. Based on our current view of demand, we anticipate burning down roughly two to three weeks in Q3. Unfortunately, both of those factors are masking growth from the large project ramps and logistics in general merchandise.

Chris Diorio: And Harsh, I guess I’ll add that, that our partners have need for specific products. Not all our ICs are identical, so we’re still fulfilling orders and so the – the burn down of that IC inventory is just, it doesn’t happen over two – over two months. It’s going to tail into the fourth quarter. And as Cary said we’re going to take as much of it out in the third quarter as we can, but there will be a tail end of the fourth.

Harsh Kumar: I got you. Thank you for that color. And then one of your large customers, I guess, reported yesterday, they talked about a pretty substantial growth. So I guess kind of going back into your answer to the first question that I asked, is there – is the logistics ramp already inventoried in some manner at some of your customers? Is that part of the safety stock that you’re referring to or is the safety stock comments all related to sort of the – the debacle in detail that is basically happening in the industry due to macroeconomic factors?

Chris Diorio: Yes. Thanks Harsh. So I’ll – I’ll try and take that and Jeff might step in. So we – we continue to – to deliver ICs into that enterprise, deployment obviously through – through our partners. As that large partner of ours reported yesterday, they are also sitting on IC safety stock. So even though there is for them some demand growth in the market, and I know the green shoots in my prepared remarks. Our expectation is that our partners fulfill those green shoots and whatever as well as existing demand by – by reducing their inventory. So that the – the comments they made are consistent with what we are seeing and saying, which is that there’s some excess inventory in the channel significantly built up as a consequence of our inlay partners being worried about IC supply, up until very recently and about IC tightness going forward.

They built safety stock now that we’ve got inventory, they’re going to be focused on burning it down a bit.

Harsh Kumar: Yes.

Chris Diorio: So that retail recovery for us at least is pushed beyond the third quarter.

Harsh Kumar: I got you. Okay. Thanks guys.

Cary Baker: I would just – I would just add that we don’t always line up with Avery Dennison’s prints and that’s for a variety of reasons including us selling to the broader market, but probably more importantly as we ship in front of their demand and – and our shipments can proceed our partners demand by up to 90 days, and that can be even further elongated when new programs are coming online. So you have to factor that timing in, and – and I would point you back to a – a comment that Chris made in his prepared remarks. We’re anticipating greater than 25% endpoint IC unit growth in 2023 on a year over year basis.

Harsh Kumar: Got you. Thanks guys. I’ll be back in queue. Thank you.

Chris Diorio: Okay. Thank you, Harsh.

Operator: The next question comes from Jim Ricchiuti with Needham & Company. Please go ahead.

Jim Ricchiuti: Hi, good afternoon. Cary, I wanted to follow-up on just that point about your expectation for 25% endpoint unit volume growth in 2023. What has it been through the first six months? And just based on the way your expectations for Q3, what does that translate to, because it would seem to suggest, I think, some recovery outside of the soft retail market in Q4. Maybe you could help with that.

Cary Baker: Yes. Hi, Jim. Thanks for the question. So you’ll see in our 10-Q that our volume is up roughly 70% on a year-to-date basis through the first two quarters of the year. When you map that in to our 25% year-over-year number, you’ll see that yes, there is a step down in the back half of the year. We announced that our Investor Day in the middle of June that we had increased our life to date shipments by about 10 billion units. So you can assume that through the first half of the year, we did a little bit more than 10 billion units called 11 billion units in the first half of the year.

Jim Ricchiuti: Okay. The follow-up I have is just I’m trying to understand how you get to your adjusted EBITDA guidance for Q3 of these low levels of revenue and lower gross margins. And maybe you could talk a little bit about how we should think about the OpEx in Q3 as it relates to the bigger areas. And then the question is as you come out of this are you – is your intent to maintain these OpEx levels at lower than previous levels that perhaps we were thinking?

Cary Baker: Yes, great question, Jim. So, as I noted, we are tightening our belt on spending, and OpEx is coming down in the third quarter. I also signaled that the litigation expense would be roughly flat in Q3, so Q2 was $4.3 million. So assume that same level of litigation spend, absent that litigation spend, my guide would have been in the black for the third quarter. But yes, we are tightening our belt on spending given this lower revenue line.

Jim Ricchiuti: Okay, thank you.

Chris Diorio: Thanks, Jim.

Operator: [Operator Instructions] The next question comes from Mike Walkley with Canaccord Genuity. Please go ahead.

Mike Walkley: Great, thank you. Maybe just shifting a little bit to the systems business with the strategic European retailer or is it a pause or are they pretty much done rolling out the systems and maybe you could remind us what a more normalized system quarterly cadence is for your business?

Chris Diorio: I’m going to say Mike, thanks for joining us. They are not done, and I’m going to hand it over to Jeff to just tell you a little bit about the pacing.

Jeff Dossett: Yes, thanks for your question, Mike. In the second quarter, we and our European visionary retailer were completing the second phase of their overall deployment while beginning the third phase into additional brands. So in second quarter, we had that layering effect of shipping into the end of the first phase and the beginning ramp of the third phase, whereas in third quarter, we’ll be shipping into the ramping third phase resulting in a step down from 2Q to 3Q. But again, this customer is quite satisfied with the deployment to date and increasing its investment across its overall brand and store footprint.

Chris Diorio: And this is Chris. I’ll add that the – the size of the third quarter – deployment into the third phase is larger than we did in second. So the pacing is increasing for that third phase, but we’re losing the benefit of continuing to fulfill the second phase, which is essentially completed.

Mike Walkley: Okay, thanks. That’s helpful. And maybe just a little bit into in the endpoint side, I think you talked about some of the new opportunities would lead to a – Q4 seasonally up from Q3, absent kind of these inventory adjustments, is that still the case on the new opportunities? So we think about Q4 up a little bit from that and then up a little bit because it’s maybe one to two weeks clearing versus two to three weeks clearing of inventory. So it’s a good framework to think about Q4 endpoints.

Chris Diorio: So, Mike, we’re not guiding Q4 at this time. We’re really saying a lot. It’s too early for us to predict Q4 given the dynamics that we’re going through – still covering – coming after the COVID, insufficient supply, recovery, inventory destocking and our partners burning down inventory. When you put it all together, we’re going to be watching and see where – what the enterprise opportunities are in fourth quarter and growth there. The overall macro retail and our partner’s ability to basically right size their inventory and put all those pieces together. We’ll have a better view of fourth quarter as we get further along, but as of right now we’re not guiding anything associated with fourth quarter.

Mike Walkley: Understood. Okay. Thank you.

Chris Diorio: Okay, thank you.

Operator: The next question comes from Mark Lipacis with Jefferies. Please go ahead.

Mark Lipacis: Hi. Thanks for taking my questions, a question on the ramp of the two new larger programs. Can you give us a sense like how do those ramp – like how long before you get to what you would consider to be fully ramped at those customers and before you kind of grow more organically with your customer growth? And I’m wondering does this like – does this happen like in one quarter, two quarters, and does it take a year or so to ramp? And then could you give a sense of how big they could ultimately because – could either of these be like 10% customers or just does it not impact your top line ultimately to that degree? Any color you could give on that, grateful for us. Thanks.

Chris Diorio: Got it. Thank you. Thanks for joining the call. I appreciate it. So for these large customers, the ramps take typically years. I mean, they really do. When we’re talking the size of some of these enterprises, for them to fully roll out, even just the phases of their deployments that they’ve got planned, takes a long time. And that’s a positive thing. Don’t think about it negatively. You’ve got giant customers, who are rolling out across their enterprise. They’re transforming. They’re digitally transforming their enterprise, and that takes time. We see systems opportunities persist over multiple quarters. We see endpoint IC volumes ramping. Both of the ones we talked about have IC volumes already ramping.

They are ramping in third quarter. They will ramp again in the fourth quarter. We see that ramping sustained. And even when we’ve done a phase, we’re not done because, as Jeff just noted, we’re in the third phase of a rollout at our visionary European retailer, and that’s still simply on loss prevention and self-checkout. There are other opportunities with that retailer, with other retailers, other use cases. And we see the same thing with all of our large scale enterprise deployments as they start deploying RAIN RFID. See the benefits of transforming their enterprises, they come up with additional opportunities and use cases. And our job as Impinj is to ensure those customers are wildly successful in their deployments. And that is our focus because if they are wildly successful, then we’ll be wildly successful with them and we’re going to make sure they’re successful.

Mark Lipacis: Got you, very helpful. Thank you.

Chris Diorio: Okay, thanks Mark.

Operator: The next question comes from Scott Searle with ROTH MKM. Please go ahead.

Scott Searle: Hey, good afternoon. Thanks for taking my questions. Maybe to follow-up on some of the earlier comments, I’m trying to understand what a normalized level of endpoint IC demand looks like today, it looks like it’s probably in that $60 million range or so. And then you’ve got other systems deployments that are ongoing, the European retailer, U.S. logistics provider, et cetera. So, I guess I’m having two questions. What is the real normalized level of that IC demand that we’re starting today? And then as we get into the beginning of next year and some of these other projects start to ramp up, what does non-retail apparel look like in terms of your mix? I think Avery Dennison was pretty upbeat yesterday about the non-retail apparel mix growing at a 50% plus clip. I am wondering if you could provide us with some idea of what you think your mix looks like and the growth rate looks like there.

Cary Baker: Yes. So, first question Scott, this is Cary. Thank you. I would highlight the transition from Q2 to Q3 on the endpoint. IC growth has a couple factors that are impacting what is the real demand in that. First, as I mentioned before, we shipped several hundred of those high ASP M775 authentication ICS in Q2. That was seeding an opportunity before the commercial launches. So, we won’t see that level of volume immediately following in 3. We’ll wait to see – the rebound in the volume until those products are actually pulled through by the commercial launches. So that comes down. We also see – we also see on the IC safety stock pulling that down it’s about a month right now, we are trying to pull it down by two to three weeks.

So, that’s masking real demand in the quarter. What’s offsetting that or partially is the ramps of the big projects. And think of that as logistics, think of that as general merchandise. The logistics is much bigger than – the ramp of logistics is much bigger than general merchandise right now. Last year the industry shipped 34 billion units in total. We won’t know what the industry ships this year until early part of Q1, but as Impinj sits right now, we’re modeling greater than 25% endpoint IC unit growth on a year-over-year basis.

Scott Searle: And Cary then, just to follow-up, is there – exiting this year, given the ramp of customers into general merchandise and logistics – does that start to get the 50% of the mix at this point in time, once we get back to normalized levels? Then one other, just on the pricing front, typically you have pricing negotiations going into the – from the fourth quarter into the first quarter. That hasn’t happened in the last couple of years because of wafer availability issues. Does that return as we go into 2024? Thanks.

Chris Diorio: So Scott, I’m going to take the first part of your question and then hand over to Jeff and Cary to talk about the pricing and the negotiations. Retail apparel is still buy our estimate only about 25% penetrated. So there is still huge growth opportunities in that market. Retail general merchandise has enormous growth opportunities and then supply chain and logistics layers on top. We still see retail as being the primary driver of endpoint IC volumes. We also see – we see long-term secular growth in our industry. It’s a long-term opportunity, we have confidence in that long-term opportunity adoption has increased and will increase over time. So, we’re going to manage through this downturn, we’re going to come out stronger to the other side, we’re going to be delivering into those opportunities, we’re going to leverage our strengths and we’re confident in the future.

But as we just noted on the call, given the dynamics that are consequence of the inventory shortfalls let me take that back, that are a consequence of the product shortfalls we had in 2022, we now entered an over inventory situation at our partners as they’re burning down their safety stock, now seeing that we have enough wafers, there is some gyrations that we have to work through. We’re going to work through as much of them as we can in the third quarter. There will be a tail into the fourth, and we’ll report out as soon as we know more information about the fourth on our next call and provide more visibility going forward. But the long-term opportunity in front of us remains strong. To the second part of your question in terms of pricing and when to negotiations happen.

Cary Baker: Yes, you are absolutely correct, Scott, historically, price negotiations have occurred late in the fourth quarter and result in low-to-mid single digit ASP declines in the first quarter. That hasn’t been the case in the last couple years as our cost has increased in order to maintain the integrity of our margin model, we pass those costs onto our customers. I don’t want to project what’s going to happen right now, but our goal I would reiterate is maintaining the integrity of the margin model. So, it’s tough to do that unless we see a cost decline for Impinj.

Chris Diorio: Thank you.

Scott Searle: Okay, thank you.

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 any closing remarks.

Chris Diorio: Thank you, MJ. I would like to thank you all for joining the call today. I hope you and your loved ones are and remain safe and well. Thank you.

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