Impinj Inc (PI) 2017 Q2 法說會逐字稿

Good afternoon, and welcome to Impinj's Second Quarter 2017 Financial Results Conference Call.

(Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Maria Riley, Investor Relations.

Please go ahead.

Thank you, operator.

Thank you all for joining us to discuss Impinj's second quarter 2017 results.

On today's call, Chris Diorio, Impinj's Cofounder and Chief Executive Officer, will provide a brief overview of our performance in market.

Evan Fein, Impinj's Chief Financial Officer, will follow with a detailed review of our second quarter 2017 financial results and third quarter 2017 outlook.

We will then open the call for questions.

Impinj's President and COO, Eric Brodersen, is also on the call and will join Chris and Evan in the Q&A session.

Please note that management's prepared remarks, along with quarterly financial data for the last 8 quarters, are available on the company's website.

Also we will consider questions received via e-mail prior to the call and will address some of these questions in the Q&A session on this call.

Before we start, note that we will make certain statements during this call that are not historical facts, including those regarding our plans, objectives and expected performance.

To the extent we make such statements, they are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995.

Any such forward-looking statements represent our outlook only as of the date of this conference call.

While we believe any forward-looking statements we make are reasonable, our actual results could differ materially because any statements based on current expectations are subject to risks and uncertainties.

Please see the Risk Factors section in the annual and quarterly reports we file with the SEC for additional information about these risks.

We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Also during today's call, all statement of operation results, with the exception of revenue or where we explicitly state otherwise, are non-GAAP financial measures.

Balance sheet metrics and cash flow metrics are on a non -- are on a GAAP basis.

Before moving to the financial results, I'd like to announce that Impinj's management will attend the Canaccord Genuity Growth Conference on August 9 in Boston.

We hope to have the opportunity to see many of you there.

With that, I'd like to turn the call over to Chris Diorio, Impinj's Cofounder and Chief Executive Officer.

Chris?

Thank you, Maria, and thank you all for joining the call.

I'm delighted to be here with you here today.

We delivered a strong second quarter, with revenue growing 31% year-over-year to $34.1 million, just above the top end of our guidance.

Consistent with the market dynamics I described on our last earnings call, our second quarter momentum remains strong, and my long-term view of the RAIN market remains strong growth with enormous potential.

In the second quarter, we saw significant wins and expanded deployments in retail, logistics and healthcare.

We and our partner, SLS, enabled a major U.S. apparel retailer to automate logistics operations in their new 500,000 square-foot distribution center.

Faurecia, the large European automotive supply chain company we discussed our last call, has now deployed the Impinj platform at 4 of its logistics centers.

With our partner, Argo Wireless, we expanded our platform deployment at a large Texas hospital, tracking 60,000 durable medical assets.

And McDonald's Europe continues their rollout, with the Impinj platform now operational in 148 restaurants.

Our fixed reader business also continued its strong growth, with second quarter reader and gateway unit volumes together up 53% year-over-year, driven in part by improved sales and channel execution behind updated partner programs.

We have previously disclosed the large size of some of our end customer opportunities and how their rollout timing can be unpredictable.

In 2016, we benefited from several large end customer rollouts that helped drive our endpoint IC volumes up approximately 70% over 2015.

As we enter the third quarter, we see a different situation with several large end customers delaying planned expansions.

I visited 2 of these customers overseas in the last 30 days.

According to them, their deployment plans and goals remain unchanged, but their rollouts are delayed by internal schedule slips.

Consequently, we are reducing our full year 2017 endpoint IC guidance from between 7.8 billion and 8.0 billion units to between 7.0 billion and 7.2 billion units, representing 18% growth over 2016 at the midpoint.

Let me put our revised guidance in perspective.

Our endpoint IC growth for 2010 through 2017 remains at roughly a 30% CAGR.

The 2017 midpoint, 7.1 billion units, is a huge number, but it is still a miniscule fraction of the total number of connectable items per year.

Some end users already consume more than 500 million ICs per year; future potential end users, such as the 5 Japanese convenience store chains we discussed on our last call, together anticipate using 100 billion ICs per year.

We are, as I said on our last call, landing whale.

Sometimes a few quicken their pace, like we saw in 2016; and sometimes a few go slower than we expected them to, like we are seeing now.

For these large opportunities, a rollout speed-up or delay can represent several hundred million ICs to us.

We're learning in real-time the dynamics of leading a nascent but gigantic opportunity, engaging large end users who can set the adoption pace for their industry and help grow our opportunity to its long-term potential.

And our focus remains that gigantic opportunity, that macro trend of connecting businesses and people to everyday items.

So expect us to continue driving hard to accelerate and win every opportunity in every vertical we pursue, competing relentlessly with and at every layer of our platform, and investing in the people, platform and solutions that drive scale and long-term value.

Turning now to that platform and those solutions, we have previously emphasized the importance of fixed readers to our future.

Unlike handheld readers, fixed readers deliver RAIN data in real-time, enable use cases that handheld readers cannot deliver and do not have ongoing labor costs.

In the second quarter, we introduced the Speedway R120 enterprise-class fixed reader, optimized for smart fitting rooms, inventory management and interactive product displays.

With our introduction of the R120, we now sell a fully developed enterprise-class fixed reader family with coverage from 1 to 32 read zones, allowing end customers to rightsize their read zone coverage to their business needs.

Our gateway family complements those fixed readers by locating items and tracking item transitions.

Together, our industry-leading fixed readers and gateways allow end users to optimize their hands-free deployments in retail, healthcare, logistics, manufacturing and many other verticals.

We also introduced a new reader module, the Indy RS1000, optimized for embedded reader integrations such as at point-of-sale.

We introduced 4 joint solutions in the second quarter, 2 in laundry, 1 in retail and 1 in fast food.

We haven't previously discussed laundry on our calls, and although not as well-known as other opportunities we have discussed, our laundry opportunity spanned Asia, North America and Europe.

Our partners use our platform to lease, source, clean and maintain connected linens and uniforms in healthcare, hotels, restaurants and cleanrooms.

These deployments, which already connect tens of millions of laundry items, employ specialized tags embedded within the linen or garment that survive repeated washings and pressings.

Fixed readers identify, sort and track the connected laundry items.

The result -- faster processing, improved efficiencies and reduced loss.

As one example, Berendsen, a large U.K. textile service solution provider, uses our platform to process 15,000 laundry items per day at a single facility.

In retail, our joint solution with Capgemini uses our platform to identify and locate individual retail store items by combining order and product information from SAP, with data about an item's identity and location in IBM Bluemix, delivering real-time store inventory and eliminating manual stock counting.

And our joint solution with Retail Reload allows French lingerie retailer, Undiz, to improve the consumer shopping experience by having up-to-date inventory available online, allowing shoppers to use their smartphones to select items before they get to the store.

Upon arriving at the store, beacons detect the product from a smartphone app.

90 seconds later, capsules shoot the item via pneumatic tubes from the store's stock room to a kiosk.

Shoppers can they pay on the spot without having to wait in line for a cashier.

In my talk at the Rain Alliance meeting 2 weeks ago, I painted a picture of Impinj's vision of digital life for everyday items.

A picture of what I believe is an inexorable trend in which every physical item has a digital life, a digital twin.

The physical item has identity, location and authenticity; the digital twin has history, services and ownership.

If you missed the meeting, then I'd encourage you to look at that presentation posted on the RAIN Alliance website.

I'm energized by this vision and my presentation is part of my effort to engage the community to drive it together.

Other meeting presentations on the website, especially those from healthcare professionals, describe automated inventory replenishment, operating room asset management and improved efficiencies and labor savings in hospitals.

To me, their assessment of the value that RAIN solutions bring to the healthcare market is compelling.

In summary, I'm proud of the Impinj team's execution this quarter and our continued progress toward our vision of digital life for everyday items.

We grew to 283 employees and exited the year -- the quarter with 2,016 issued and allowed patents, an increase of 6 over last quarter.

Although we rollout delays, we understand those delays and remain confident and excited about our market leadership and our opportunity.

Consequently, we intend to hold a steady course and continue investing in our people, platform and solutions.

I will now turn the call over to Evan to give you a detailed look at our second quarter financial results and our outlook for the third quarter.

Evan?

Thanks, Chris.

Before I review our second quarter 2017 financial results, I want to remind you that with the exception of revenue, or unless explicitly stated otherwise, today's statement of operations is on a non-GAAP basis.

All balance sheet and cash flow metrics are on a GAAP basis.

A reconciliation between our non-GAAP and GAAP measures, as well as how we define our non-GAAP measures, is included in our earnings release available on our website.

As Chris mentioned, we delivered a strong second quarter, with revenue of $34.1 million, representing 31% growth over the second quarter of 2016.

Gross margin was 54.7% compared with 53.4% in the second quarter of 2016.

The 130 basis point year-over-year improvement reflects continued adoption of our Monza R6 endpoint IC family.

Total operating expense in the quarter was $17.2 million, or 50.5% of revenue, compared with $17.0 million, or 53.4% of revenue in the prior quarter.

R&D expense was $6.4 million, or 18.7% of revenue.

Sales and marketing expense was $6.3 million, or 18.6% of revenue.

G&A expense was $4.5 million, or 13.2% of revenue.

We ended the quarter with 283 employees and 31 open positions compared with 261 employees at the end of last quarter.

We delivered $1.4 million in adjusted EBITDA in the quarter, or 4.1% of revenue compared with $246,000, or 0.8% of revenue in the prior quarter.

GAAP net loss for the quarter was $977,000.

On a non-GAAP basis, we achieved second quarter net income of $1.3 million, or earnings of $0.06 per share using a weighted average diluted share count of 21.9 million shares.

Turning to the balance sheet.

We ended the quarter with cash and cash equivalents and short-term investments of $74.5 million.

Accounts receivable balance was $25.5 million, an increase of $4.5 million from last quarter.

We increased inventory by $4.2 million over the prior quarter, bringing our inventory balance to $43.4 million.

We will continue investing in inventory to build one billion units of endpoints IC buffer by year-end.

Inventory will grow at a slower pace going forward, because we have already purchased most of that inventory buffer.

Turning now to our outlook, we expect third quarter 2017 revenue to be in the range of $31.75 million to $33.25 million, up 4.6% year-over-year.

We expect adjusted EBITDA to be a loss between $1.65 million and $150,000.

We intend to maintain our current level of investment in the business.

So on the bottom line, we expect non-GAAP earnings to be a loss between $1.7 million and $200,000, or a loss between $0.08 and $0.01 on a per share basis using a weighted average basic and diluted share count in the range of 20.8 million to 21.3 million shares.

As Chris noted, we expect our full year 2017 endpoint IC volume to be between 7.0 billion and 7.2 billion units, representing 18% growth over 2016 at the midpoint.

We are confident in the long-term adoption trend, our market leadership and our progress towards our vision of digital life for everyday items.

I will now turn the call over to the operator to open the question-and-answer session.

(Operator Instructions) And our first question comes from Craig Hettenbach with Morgan Stanley.

Yes.

Chris, appreciate the color on the customer visit and just kind of how things are playing out.

Any sense in terms of how long they view the delay?

Is there some digestion period?

Any visibility into when they would kind of ramp back up?

Craig, I think I'm going to say a little bit about kind of those delays, maybe a little bit more right now, and then we'll touch on their ramp period as they ramp back up.

So despite seeing significant wins in the second quarter in retail logistics and healthcare, in this coming third quarter, we're seeing coincident schedule slips in a few planned and funded end customer deployments.

Our direct discussions with these end customers indicate the delays are due primarily due to internal process and integration challenges at their end.

We don't see evidence that macro trends are common themes other than our difficulty predicting the timing of large rollouts, which we have talked about previously.

So we see 2 impacts to our business.

First, our endpoint IT business is impacted by scheduled foot slips at a few retail end customers.

And then second, our fixed infrastructure business is impacted by scheduled slips in a few non-retail deployments.

And the length of the slips really varies by the end customer, and so it's difficult to predict how quickly they're going to overcome the integration challenges.

Really, as we've noted before, timing whales is just difficult.

Sure.

Understood.

I guess as a follow-up question, more bigger picture, particularly coming off of the RAIN industry event.

Can you give a sense in terms of your customer meetings and just level of engagement?

And any kind of highlights for you in terms of kind of intermediate to longer-term growth drivers?

I'll take the first part of the question, and then I'll hand off to Eric on some of the growth drivers.

So in my meetings, I mentioned new customers because I personally visited them.

But our go-to-market team has touchpoints with the others.

And so, we're pulling data from these multiple customers to give visibility into the -- into what they're doing and the schedule slips we already mentioned.

And just going back to that prior question, to give a little bit more color, the slips are generally measured units in of quarters.

But to answer the second part of your question, Eric?

Yes.

I think it's best to just highlight back some of the points that Chris mentioned in his opening remarks.

Our Q2 and go-forward growth drivers continue to sit squarely on top of our progress in healthcare, retail and logistics.

And those platform deployments and the use cases, we feel, are particularly solid around healthcare asset management in the logistics space, managing transitions; and in the retail space, across a range of use cases spanning inventory control to point-of-sale to in-store experience.

So from a growth driver standpoint, those continue to be the spaces where we see ongoing traction in the business.

Our next question comes from Mitch Steves of RBC Capital Markets.

So I think the biggest highlight here, and what people are starting to figure out is, you mentioned that you landed already whales and the contracts are signed.

So if that's the case, does that mean we're going to see kind of material growth when we start out 2018?

Or how does kind of the sequential trend work out given that the timing is very difficult for you guys to figure out?

So Mitch, there's a couple of pieces here to your question.

You're sort of probing on timing and the pace at which some of these programs come back online, correct?

So I think as Chris highlighted it, the length of these schedule slips really is dependent on the customer.

But I think, we're comfortable saying that it's generally measured in quarters.

And so that's the way that I think I would best describe the way that you think about modeling or the way that you think about when the business comes back online.

Got it.

Okay.

And then secondly (inaudible) kind of your long-term objectives of being mid-teens profitable in 2019, 2020, roughly.

Is any of that changing at all?

Or you guys think you'll sort of be able to get there given that some of these have been pushed out a couple of quarters or so.

Evan, you want to take that one?

Yes.

Mitch, this is Evan.

We have no change to our long-term model.

As a reminder, that was 25% revenue growth.

And in the 2019 to 2020 timeframe, gross margins of 57% to 60% and EBITDA margins of 12% to 16%.

Got it.

And then one last one.

I mean, if these are signed, is there any timeframe where we should expect a customer announcement like in the next, call it, 3 quarters?

Or is that still up in the air?

I think I'll take that one, Mitch.

In general, we make customer announcements when there's something -- when the customer is interested in going public.

And so those customer announcements happen when there's other public information that we can share, and we don't make announcements otherwise.

(Operator Instructions) Our next question comes from Mike Walkley of Canaccord Genuity.

Just digging a little bit on some of these pushouts.

But also, just Q3 tends to be a seasonally stronger quarter in the retail area.

So when you land some of these large customers or land a whale, they continue to tag stuff, you get some recurring revenue.

Is there anything in your guidance, you think, in Q3, some share shifts with the endpoints amongst some of your big customers potentially on the short-term?

So I'm going to start with a part of the answer to that question, and then I'm going to again hand over to Eric.

So we believe that the foundation we built in 2016 is a strong foundation.

And we haven't seen any of those customers that deployed in 2016 actually pulling back.

What we're talking about now is new deployments or expansions to existing programs, where there are simply just integration challenges that I'll let Eric talk about in a second.

And those integration challenges are what just sort of kind of delays those deployments.

And maybe Eric can say a few words about the nature of those integration challenges.

Yes.

I think you're spot on, Chris.

The nature of these pushouts are in instances where programs have already been in flight, and they're looking to expand either to new bands or new geographies and they're shifting timing.

But these are enterprise-class end customers who are adapting internal processes and systems to take advantage of game-changing -- the game-changing value of RAIN-based data or RAIN-based item data, and these are complex internal efforts to our end customers.

They're involving multiple applications, whether it's inventory control application or an ERP system, and they're changing internal processes and employee training.

So these are sizable significant initiatives inside large customers.

And sometimes, those timelines shift.

And Mike, I think you also asked a little about how those -- some of the slips might impact guidance.

Yes, we baked in the slips -- this is Evan, by the way, Mike.

We've baked in those slips into our 2017 endpoint IC guidance.

Okay.

And Evan, just in terms of context, I know you had a big acceleration in your endpoint business kind of throughout '16 and especially in the back half of the year.

Is the updated guidance like for Q3, is endpoint units still growing on a year-over-year basis?

Or is there a little bit of a pause there just given some of these slipouts?

Yes.

We haven't commented on the quarterly growth year-over-year.

On an annual basis, it grows 18% over 2016, if you use the midpoint of the guidance.

Okay.

I got that.

And so just a follow-up question then on the margin structure.

When you win some of these big deals, you get the endpoints after.

Then there tends to be a switch to fixed readers as companies go to broader adoption.

How do you see those trends in the marketplace?

And how should we think about gross margins trending towards your long term model should that mix shift happen within your revenue?

I think I'm going to leave the answer to that question by talking a little bit about the fixed readers and then hand off again to Evan.

We do see continued growth in our fixed reader business, as evidenced by our -- the numbers we presented, the 53% year-over-year for the past quarter.

And we see strength in that business, which is also why we continue investing in it.

We think that the transition to fixed readers is really an inexorable trend for the reasons that I cited, reducing labor costs, enabling additional use cases.

So we're confident.

We're excited about that trend and intend to keep driving it.

And then Mike, we don't give guidance on our margins on a quarterly basis.

But margins remain very healthy.

As you know, they increased 130 basis points to over a year ago.

And we do believe we're on track to hit our 2019, '20 model for gross margins of 57% to 60%.

Our next question comes from Jim Ricchiuti of Needham & Company.

Can you say, how many customers this involves?

So Jim, it's a few customers.

I visited 2 that are overseas.

And there's a couple more that we cited.

We've used the number a few here, and that's really, I think, is about as far as we're going to go in terms of citing how many there are.

There's a small number of customers that are significant deployments that have had some internal schedule slips.

And Chris, just -- can you say, it sounds like one or more of these may be existing customers that was in the process of expanding the deployment?

Or maybe, are these entirely new customers?

You are correct.

Some are customers that were expanding existing deployment.

Some of them, kind of visionary customers that were having expansions and they've just gone a little slower for internal reasons.

And some may be new customers that had already planned deployments and they had schedules, and for internal reasons, again, they had schedule slips.

And I think what we're just seeing here is that -- the word I used previously was there's some coincident schedule slips.

We don't see any macro trend in those -- in the coincident nature of those schedule slips.

It just happens to be that a couple of them happened at the same time.

And as a consequence, they've reduced our endpoint IC guidance.

Okay.

And I want to just pursue the growth in the fixed reader part of the business.

Fairly strong unit growth.

And I wonder if you could talk about that in terms of the verticals, where you're seeing the most traction?

Where you're seeing the most growth?

Eric, you want to take that one?

Yes, Jim.

I think I'd start right back on top of those top 3 verticals.

On the fixed infrastructure side, we do see continued strength that healthcare, healthcare asset management use case, as well as in the logistics arena as well.

So those are both contributors to fixed infrastructure and software deployments for us.

But I would say, I do want to emphasize, we've made some important leadership investments in our organization on the go-to-market side and I feel like we've made important strides in improving our execution into our traditional channel.

And so you're seeing strength in our business as we drive in the classic Impinj channel that is, frankly, quite broad in its distribution as we've talked about before.

It touches many different use cases.

And those themes that Eric just highlighted are some of the reasons why we remain very confident and continue investing in our business.

Okay.

And just one final question, then I'll put this to you.

Just looking at the operating expenses in Q2, sequentially, down R&D and the big uptick in G&A.

Is there anything we should think about in terms of the way some of these expense items are flowing and how we might think about it in Q3?

Sure.

Good question, Jim.

So as you know, our biggest investment is in people.

We do have some investments that are not in people.

We work with some partners and things like that, but they're mostly people.

And then we operate in a market where hiring's competitive, and we only hire top talent.

So I expect that, sequentially, our operating expenses will increase as we continue to invest in the business and enhance our leadership position.

From any given quarter to the next within a line like R&D, maybe some bumpiness.

But that's not indicative of any trend.

I would look at it on an annual basis and know that we continue to invest in this massive opportunity.

Our next question comes from Brad Erickson of KeyBanc Capital Markets.

Apologies, I jumped on late.

So if these have already been answered, my bad.

Just curious on the schedule slips that you called out.

It sounded like you were having direct discussions with the retailers.

Did you get any indications from -- or I guess, were these going through any of your indirect partners, like the inlay partners that you typically wok with your retail customers?

Or was there a reason you got more directly involved with these particular end users or end customers?

Sure, Brad.

I'll make a couple of comments.

First, the slips are not all isolated to the retail vertical.

And so I noted, probably before you joined the call, that there's impacts on the retail side, as well as fixed infrastructure business in other verticals.

So it's not all confined to retail, which is against the point that we don't see a macro trend.

And then for us, we really use the best techniques available to us to get information, as well as to drive our business forward.

So we engage closely with our partners and we also engage directly with the end customers helping our partners drive business into those end customers.

And our engagements with those end customers not only allows us to really time the deployments and understand what the market's doing, but also gives us information on the nature of these slips and helps us drive business.

So we remain confident in our long-term outlook vision as a consequence, and it's just the nature of how we're engaging in the market today that gives us this visibility to these slips, which again, for a customer that's a whale, they can pull in or push out kind of at their whim.

And I guess, I don't want to use quite that word, but they do it based on what their internal schedules drive.

And as I noted in my comments, a pull in or a push out could actually mean several hundred million IC units to us.

Yes.

Understood.

That's Great.

And then just following on that.

So the ones that were within retail, any signs of being associated with like footprint reduction that we've seen so often from several retailers out there, not necessarily the ones you work with?

But anything to read into that?

I know you said no macro trends, but just curious of any more granularity on the drivers of the pushouts other than just as you laid out internal?

Yes.

To our knowledge, the slips were not associated with footprint reductions.

They were associated with the integration challenges that Eric already highlighted.

Got it.

And then just regarding software.

I don't know if you've mentioned anything about this.

But as you're starting to work with some of these customers that are getting more fully deployed with the tag ICs and, obviously, talk -- looking at fixed reader deployments here, how able and how part and parcel are the discussions with that?

Are you able to talk about software and, potentially, bringing those guys on as sort of end-to-end customers?

Maybe just any update around that would be great.

I think I'll let Eric say a few words here.

I'd say Brad, the predominant driver of that platform sales motion where we're selling software to endpoints is really right in the middle of some of those wins that Chris has talked about in the healthcare asset management and logistics space.

And so those conversations absolutely underscore the ease of integration, the simplicity of management and our ability to provide value-add around the data that we can give to an enterprise application and be it -- whether it's at healthcare or logistics space.

So those are places where we continue to see strong resonance for our value proposition around the software layer and our distributed OS item sense.

In terms of our ability to engage with end customers who are broadscale endpoint customers, I'd say we continue to make progress, engaging and evolving, and have discussions with retailers regularly around how their -- evolving their usage model from handhelds to fixed infrastructure.

And some of that comes via logistics, in other cases, it's via inventory.

But it's just part of our ongoing sales motion.

Got it.

And then just one last one if I could.

I think a quarter or 2 ago, you had spoken of connectivity becoming a higher portion of revenue in '17 versus '16.

Are you able to confirm that today?

Yes.

Brad, this is Evan.

In our 2019 to '20 model, we do still anticipate connectivity revenues at greater than 30% of overall revenues.

And in 2017, we think they'll increase over last year.

Our next question comes from Nick Jensen of Piper Jaffray.

I want to go back to the pushouts you're seeing from some of these large retail customers.

It sounds like they're coming from some new application uses that are financing their businesses, is that right?

More so than --

No, not so necessarily.

There can be expansions into new brands.

There can be expansions in new geos.

There can be expansions just in the new types of products as well as some new rollouts.

So really, the -- it's a point of no macro trends, but really, we really haven't identified macro trends here.

Okay.

But for some of the new application, they're finding maybe some of the holdups that it's causing.

What's the kind of product segments, would it be grocery, clothing, hard lines, are they implementing that are kind of some new areas?

So again, so not -- we're seeing a couple of coincident schedule slips at end customers; some in retail, but not exclusively in retail.

And in existing programs, for example, in the retail space, they tend to be in existing programs that are expansions.

In other spaces, they can be in new programs.

So I guess I would try not to characterize or lump all the -- or a few sets of push outs that we see at these large end customers and any one in particular category.

Again, just getting to the point that it's -- we, at least, don't see any trend that we can point to among the couple of push outs that we see.

Okay.

And then going to the -- you guys talked about how you've entered the laundromat.

You have a few customers that found some new deployment.

Can you help break down kind of -- what kind of incremental revenue that's provided in this quarter end and going forward?

And is it substantial?

Yes.

Nick, this is Evan.

So one way to think about revenue opportunities from a given rollout is, generally, endpoint ICs are sold for pennies as the connectivity layer fixed readers or gateways are sold for between hundreds to thousands of dollars, reader ICs are sold for tens of dollars, and software are sold as a percentage of the hardware sales.

And so, using some of those metrics, you can probably put together a model on how much a given use case or vertical would mean for us.

Okay.

But not a specific revenue number from this past quarter in laundry?

That's correct.

Okay.

Last question.

Kind of your go-to-market strategy, as you guys have talked about, with these large retail customers, are you guys working directly with them and kind of helping them through how to use your end use cases?

And -- or just can you talk a little bit more about your relationship with these customers on the go-to-market side and implementing them in their business?

Yes.

So our go-to-market model really involves engaging directly at the end customer and fulfilling through our partners.

And we engage with the end customer with our partners, of course, but we do the things that we can do to help accelerate their deployments, to help enable them to do their deployments.

But there's some things that are beyond our reach and scope.

For example, as Eric mentioned, the ERP integrations and other things that have to happen at the end retail.

So we do what we can, working directly with the end customer.

And again, I'll avoid using retail because we're in so many different verticals.

We do what we can working with the end customers to accelerate their deployments.

And when it comes to RAIN stuff, we're the experts and we help drive their solutions.

But at some point, some of these retailers have their own sets of challenges, whether it happens to be employee training or ERP integration or other sets of things that are kind of beyond our scope, and that's where we are today.

Our last question is a follow-up from Mitch Steves of RBC Capital Markets.

Guys, just one small just follow-up on the long-term target.

So this year, you guys should still be able to hit that long-term growth target of 25%, correct?

Mitch, as you know, we give one annual guidance number, which is our endpoint ICs.

So we given that.

It's 7.0 billion to 7.2 billion units, which represents 18% growth on unit basis over 2016.

This concludes our question-and-answer session.

I would like to turn the conference back over to Chris Diorio for any closing remarks.

I'd just like to say thank you, all, for joining us today, and thank you very much for your support.

The conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.