Hello, everyone. Welcome to the 28th Annual Needham Growth Conference . Our next session will be a fireside with the management of Impinj. We're pleased to have with us today the company's CEO, Co-Founder, Vice Chairman Chris Diorio, and CFO Cary Baker. Also in the front row, many of you already know, Andy Cobb, VP, Corporate Finance and Investor Relations. So welcome, gentlemen. Thanks for joining us today.
Thank you.
I'm going to turn it over to Cary for an announcement, just to talk about the announcement you had last night.
Yeah, thank you, Jim. So on Tuesday, after market close, we issued a press release announcing that we expect fourth quarter 2025 revenue near the high end of our prior guidance of $90 million-$93 million and Adjusted EBITDA above the midpoint of our prior guidance of $15.4 million -$16.9 million. I will now provide as much additional color around that press release as I'm able to share at this time. I ask that you please defer any follow-on questions about the release, including about our fourth quarter results or first quarter expectations, until our earnings call scheduled for Thursday, February 5th, 2026 at 5:00 P.M. Eastern. These preliminary fourth quarter 2025 results reflect a slightly better than seasonal decline in Endpoint IC revenue and sequential growth in systems revenue. Additionally, non-GAAP gross margin increased by more than 125 basis points sequentially.
On that note, Jim, I'd like to thank you for having us at the Needham Conference today, and I'll turn it over to you.
Great. Thanks for that. So the team is fresh from NRF, which, as many of you know, is the retail industry's largest trade show. So let's start there. My impression was, and I was only there for part of the day on Monday, but there just seemed to be more activity around our RAIN RFID in different booths and different types of equipment, vendors. So again, let's start there. Anything you could share as it relates to news from either Impinj there or just around the channel and vendors? So let's start there.
Thanks, Jim. And Cary, you fill in as well. I could probably spend the entire 30 minutes here talking about NRF, but I won't. NRF, I think this was our best NRF ever. It was a very good show for us. For me, the highlights of NRF, for us at least, were number one, our Gen2X enhancements to the industry's radio protocol were prevalent all across NRF. Multiple partners showing products that implemented Gen2X. Me doing a video with Zebra on Gen2X. Just Gen2X was everywhere, and it's truly enhancing readability and performance out in the field. We'll probably talk a little bit more about Gen2X, so I won't go into the details now. The second one was a significant focus on adoption in food. Now, as I said, food being the size of the category it is, it's going to take time.
We're still in the very early days, but there was a lot of talk about food, food retailers present at the show, partner companies showing off everything from weight scales that have embedded tagging for tagging food items to label providers showing their labels that are targeted specifically for food items, some microwave safe capabilities, and other things. So food was a second prevalent theme. And the third one was particularly exciting for me because, for heaven's sake, I've been talking about mobile devices for probably more than 10 years, was there were multiple mobile devices running Android at the show that looks otherwise just like phones. In fact, they were phones that implemented RAIN RFID reading. I have one upstairs. One of our partners gave me one, and I showed it to Jim just a little while ago. It can read at about a three- to four-foot range.
Some of them could read further depending on the antenna configuration and the power, up to about a six foot range. Qualcomm had a demo in their booth with one of their devices, and Decathlon showing a demo of use cases using a mobile device. The idea that we've been talking about for so long, that we will get into mobile phones and be present in mobile phones. When I say we, I mean RAIN RFID reading is truly coming to fruition. All the devices we saw were focused on commercial opportunities, in-store uses, employee usage, and things like that. They were not yet consumer devices, but when you have the technical capability, that technical capability can scale directly to consumer devices. I can't set a time frame for consumer. That will come in due time, but there is no technical challenge to getting into consumer devices.
So those were my three highlights from the show. Really strong takeaways. Cary, anything you'd add?
I thought that was perfect.
Yeah. I mean, just tell us briefly just about that Qualcomm Decathlon use case that they.
Yeah. So it had a really interesting use case for a Decathlon customer. And the use case was such that this customer wanted to go hike the Appalachian Trail. So Decathlon, through the mobile app, populated everything you would need to do a hike of the Appalachian Trail, call it a five-day hike. Then the customer would inventory what items they had in their own closet to support that hike, and the app would not check those off the list and pre-populate a purchase list of everything else that they would need to make that hike a realistic possibility. So it was just a really cool consumer-based application of one retailer's vision of how they will leverage having RAIN reading capabilities in a phone and items in their everyday life tagged.
Yeah. I wanted to also go a little bit into the release they did over the weekend, which I don't know if folks saw it, but maybe talk about that press release that you issued with EM Microelectronic, which is part of the Swatch Group.
The Swatch Group.
So tell us about that.
EM Microelectronic has been in the RFID space longer than we have, dating back to the 1990s. They make NFC products, dual frequency products, RAIN RFID and NFC. They have been historically a smaller player in the RAIN RFID space, but they've been present. They participated with us in the standards development, and we've always had a good working relationship with them. We licensed Gen2X to them. They are the first endpoint IC silicon provider to whom we've licensed Gen2X. We see them as a strategic partner, a great opportunity to partner going forward as we continue to evolve Gen2X. They saw the value in Gen2X, how it improves readability, how it enables consumer privacy protection and enhances use cases. They came to us, said, "Let's partner on it," and we said, "We'd love to." I see us working arm in arm.
They're mostly complementary to us today. They probably will be complementary to us going forward, but they are a second source of silicon supply for Gen2X-enabled endpoint ICs.
Will you be sharing any of the financial impact if there is any on this?
Yeah, so we've licensed to just their dual frequency endpoint IC right now, an IC that has RAIN reading capability and NFC reading capability. That chip won't be available into 2027, so assume immaterial impact to the 2026 P&L.
Okay, but view it as a strategic opportunity and view it as a confidence builder to end users that there will be multiple sources of supply for Gen2X-enabled endpoint ICs.
So let's talk about what we can talk about before the release from last night, and that's the results that Impinj put up through the first nine months. Maybe, Chris, tell us what might have any surprises, positives or negatives, that you saw through the nine-month period for either the industry or for certainly the industry. There's some positive ones, but for Impinj as well.
Yeah. So the year started out difficult, as we all know, but the team, our team rallied. We had two subsequent strong quarters. I'm really happy with how the team pulled together, and we drove M800 adoption into the market and our replacement of our prior generation ICs with M800 in a meaningful way. And M800 carries Gen2X. It's our flagship that enables Gen2X out in the market, so it allows us to drive these Gen2X capabilities into market. We strengthened our relationship with our lighthouse enterprises, and those lighthouse enterprises are using Gen2X to improve their use cases and either reduce infrastructure costs, reduce the labor costs for inventory because we can speed inventory because Gen2X improves the reliability of reading over the air link, so you can either reduce handheld inventory counting time, labor time, reduce infrastructure costs, or improve accuracy.
So the engagements we've had with our lighthouse enterprises accelerated, and I just really feel really positive about the market, our opportunities in the food space and others, and just our overall position as kind of the, I guess I'm going to say the foundation of the market overall. Cary, anything you'd add?
Nope. That was perfect.
Cary, normally we ask you questions about pricing and price negotiations. Remind us that that process begins when? In December?
Yeah, in kind of the mid-fourth quarter time frame. Now, typically we like to have it wrapped up by the end of the fourth quarter, but this year those conversations extended into the NRF, so we're still assimilating kind of where we landed on that.
So is that longer than normal in terms of the value?
It's been a trend that's been at play for the last several years. NRF is a meeting point of the entire ecosystem, so just naturally it becomes a point where you can wrap.
Spoiler tip, it always extends into NRF.
Yeah. Let's dig a little bit more deeply into the markets that you guys play in. We think about the key market verticals, where we are in the different stages of development, and I think most of us know retail apparel, general merchandise, logistics, now food. Yeah. I guess the question is, how far along are we in this required infrastructure that needs to be in place to really see the buildup of these markets?
If you just start with the infrastructure element and you look in retail stores, whether it's apparel or general merchandise or food, the primary reading modality is a handheld reader. An employee takes a handheld out in the store, and they do handheld inventory. Or now, if you have the phone device, they will be able to do some inventory with a phone device, but it's not as capable as a handheld reader, so there will still be handheld-driven inventory counting. And for the life of our industry, those handhelds have been the number one reading modality. This year has been a transition where we saw fairly significant growth in fixed reading opportunities. And those fixed reading opportunities are also in retail stores at point of sale, at loss prevention, in fitting rooms, front store, back store.
They're in the supply chain for supply chain visibility in conveyors, tunnels, sortation systems, vehicle loading, and we will see more fixed reading use cases, and those fixed reading use cases play to Impinj's strengths because we are building machine learning into our reading capabilities. We're building smart devices and smart readers that can emulate the performance of a person having a handheld, being able to adapt to the environment. We're going to build them into our readers, leveraging the capabilities in Gen2X to provide the infrastructure that enables broader adoption than just handheld-driven inventory counting.
One of the things we want to hit on, I'd like to hit on, is just some of the activity within the lighthouse customers. We've all been waiting for some further traction in logistics, some further traction in general merchandise. Talk to us a little bit, to the extent you can, about where we are there in terms of the deployments, both with your existing lighthouse customers, maybe what we can anticipate going forward, and then the pilots, to the extent you have pilots underway, and you've talked about them. I don't know.
Yeah. That's another broad question. I'm going to do my best. Cary, again, jump in. We have a small number of lighthouse enterprises, their leading Fortune 100 and Fortune 500 companies, with whom we have committed to work closely with them to drive their adoption and to drive our understanding of market needs to drive new verticals. For the most part, if you look at our second North American supply chain and logistics end user, they are now effectively 100% penetrated in terms of their tagging in North America. There's still opportunities for expansion overseas. There's still opportunities for expansion into existing use cases that they have, as well as new cases. So don't think of this as static. But if you only think about endpoint ICs, you'll say, "Well, for heaven's sake, you guys are at 100% tagging." But as we engage with that, we call them a customer.
I want to call them a partner. As we engage with them as a partner, they continue coming to us with a list of requests, a list of ways we can enable them, a list of new areas where we can innovate, which include in the solution space, in the software space, in the reading space that allow us to advance our products and will allow us to address new market opportunities out there. So essentially, they are a key part of our innovation engine. The same thing happens with our visionary European retailer. Exact same situation. Their volumes are growing as they grow. Use cases are expanding. Yet we have a gigantic list of requests from them, partnering with them to drive adoption. And same thing with our Asia-based fashion retailer. So those lighthouse enterprises don't just represent endpoint IC opportunities for us. They represent solutions opportunities for us.
Impinj, as a company, is really focused on enabling enterprise solutions. Of course, we had to start with the endpoint ICs and the readers and the reader ICs because you have to build a foundation. The foundation is mature enough that we can really now focus on the enterprise business outcomes that we deliver more than the individual parts that we sell to them. That is how we are growing and transitioning our company, and we're doing it in partnership with those lighthouse enterprises.
Okay. But in the near term, let's take that second logistics customer. Yeah, there's the potential that they, I guess there'll still be some easy comparisons in the first half of the year because they hadn't been fully deployed. Is that fair to say?
We have the opportunity for the annualization of running domestically.
And then an opportunity potentially internationally. But what you're saying, Chris, is down the road, there's going to be some other opportunities with that customer for.
Including endpoint ICs as they continue to grow and address new markets, including with software, including with readers, including with everything. But it's really a solutions play, including engaging them on solutions.
Yeah. You think about their infrastructure deployments. It's not just a single infrastructure deployment. They started with conveyors. They went to preloaders. They went to trucks. They went to dock doors. They are outfitting their entire operation with RAIN reading capabilities in order to maximize the ROI. So we think of that customer as multiple different deployments.
Partner.
Partner.
How active are the pilots with other logistics customers?
The pipeline in logistics is very active. Everybody sees what this logistics provider is delivering, what ROI they're gathering, what customers they're winning from that. So the logistics pipeline is active. There are pilots in place right now. Now, time will tell if those pilots are able to convert to actual program rollouts in 2026, but we're very pleased with the activity in the pipeline.
The deployment with that existing second logistics customer, remind us, how many years was that?
It was an opportunity that we announced the win in the middle of 2020. That was to just a small portion of their business. It was the high-end medical shipping. And their plan with that was they've already gone through a successful pilot. They wanted to prove out the ROI at scale before they deployed it to the rest of their operations. That was successful. We began rolling out the endpoint IC at volume in late 2022, but primarily in 2023, 2024, and then in 2025. And in the third quarter of 2025, we reached 100% in their North America operations. But behind that, there were multiple infrastructure deployments that I mentioned going on. So we've been working with this customer for a very long time.
Although anytime you work with a Fortune 100 customer, because of their sheer size and scale, things don't happen overnight. They just can't. I mean, we're fundamentally working together to transform their operations, how they run their company. And that takes time, but it also is, like I said, a huge opportunity.
And there's another high-profile use case. Walmart's been very active in moving into the general merchandise category over the years. And there's talk about a phase three of that before we even get into the discussion on food. But what can you say about that relationship and where they may be in terms of deployment?
I've had a very long experience working with Walmart. I'm going back more than 20 years. They are, as you all know, incredibly effective when they have an initiative in driving it forward, so what they've recognized in RAIN RFID is that they need to go set up categories by categories, which they've chosen to do. That within any one of those categories, there are items that are easy to get tagged, and there are items that are hard. The hard items may have metal or liquids, or there may be something where it's hard to get a label insertion point in the manufacturing line, whatever, whatever the reason, so they have kicked off phases. Apparel was phase one. They're, I believe, pretty close to 100%, but maybe not fully there in apparel. They're not at 100% in phase. I mean, in apparel, they're not at 100% in Phase I.
They're not even close to 100% in Phase II, but they're still proceeding methodically to build penetration in each of those phases. And then at some point in the future, can't say when or what the category will be, they will announce a Phase III. They've already kind of signaled that they're looking at Phase III. And we don't know what the category could be. There are many parts of the store that are not yet tagged, whether it's cosmetics or health and beauty or over-the-counter pharma or many others. There's so many areas they haven't touched yet. So the opportunities are out there. They do it in bite-sized chunks, and they do things at a methodical pace to get to 100%.
But it represents sizable endpoint IC potential.
Absolutely. We tend to see them bite off chunks of two to four billion unit opportunities. So those are, we say bite-sized, but that's a big bite.
Speaking of bite-sized, yeah, the announcement that they're working with one of your inlay customers on food, and talk to us about that opportunity because what sometimes comes across is this inlay partner, Avery Dennison, is very public, has been more bullish about the near-term opportunity. You've been a little bit more measured, and I think I know why, but maybe you could share with us about that.
There's a couple of reasons why. I'm going to go back to the prior question for just a second, just to say that I personally, and I think I speak for our entire industry, that we're very thankful to the efforts Walmart has put in over the past years to drive adoption. So they've done really a heavy lift, and they've benefited all of us, including them, and we're all committed to support them. And I speak for the entire industry when I say that. In terms of the food category, the food opportunity, there are now two end users who have announced food tagging, Kroger and Walmart. Kroger in bakery, Walmart in deli and meats and bakery as well.
Focusing on perishable items to inventory a store quickly, know what they've got, know what they need to supply to a store, to find items that are close to expiration and mark them down. The use case is compelling in both, and they're both seeing meaningful value. There is also a significant elasticity of demand with label price because margins in the food space are not that high. The label price has come down enough over the past couple of years that food adoption can begin. For heaven's sake, we were talking about food, Jim, 15 years ago or so when you were saying, "When's it going to happen?" We are now at the point where the economics for food make sense. We've got those two end users leading.
There are others, as we said, we were working with a European grocer in food tagging, but there are others on top of that. So I think I said in my prepared remarks last quarter that we see piloting and kind of adoption work going on in the first half of this coming year with some modest volumes in the second half. We still have that expectation. But I don't want to set the unrealistic expectation that food is going to have some sort of a hockey stick and ramp quickly. The larger the category, the slower it goes. This is a gigantic category. It represents huge volumes for us in the future. We'll be measured about it, and I want to underpromise and overdeliver.
Is it something that?
Yeah, go ahead, Cary.
I was going to say, as it relates to the Walmart program, what we highlighted in Q3 was this is just kicking off right now. There's a lot of work to do to get this program up and running. All the weight scales in their 5,000-plus stores need to be updated with a printer encoder so that the next time an employee puts a tag on a steak, it has an encoded IC on it. There's tens of thousands of employees that probably need to be trained on how to use a RAIN reader on the store floor that haven't used that type of reader before. So what we see with these types of rollouts is it typically starts off slow and then builds momentum as they have that foundation, both in the infrastructure and the learning.
Our thought last quarter was that our volumes from this program would be modest in the first half of the year and then accelerating in the second half, this year being 2026, to be clear.
Yeah, I pulled it back already a little bit in what I said, just underpromise and overdeliver.
Maybe going back to Tanner or Ralph, I think you talked, we saw Avery and Kroger doing something there. Was it talking about, was it a fireside?
Yeah, you attended that session, the Fireside Chat.
Yeah. Any highlights from that?
Yeah. So Avery and Kroger held a Fireside Chat at NRF this week, talking about the food program and how it was working at Kroger. Very much being very positive about the program, signaling that they were seeing strong ROIs. The one data point that they provided in that is that historically, when the stores, the bakery department was inventoried in the morning, it would take an hour, a little over an hour to inventory that department and then inform the production cycle of what they needed to produce for the day. With the RAIN deployment, they're now able to take that hour-plus time and condense it into a matter of minutes of inventorying the store. So significant time savings. That was the only ROI data point that they provided, but it was pretty compelling.
Okay. Let's talk a little bit about Gen2X and what that capability brings. It's part of the M800 family, which has scaled nicely. We want to highlight that as well where we stand with that. But I'd like to spend a little time on the Gen2X capability and what it does for the market and the use cases.
Yeah, sure. So what Gen2X is, is a set of compatible extensions to the industry's radio protocol, the way a reader communicates with a tag and vice versa. And on the performance side, it improves the reliability of that air link, just the reliability of sending information over the air. It's like if I'm talking to Jim, just the ability of us to communicate. If you really want to think about it, it's the difference in your phone between having one bar and five bars. When you improve the reliability of that air link and the ability of the two to engage the reader and the tag, we can improve inventory accuracy for inventorying items in a store. We can reduce inventory time, in some cases very meaningfully compared to the industry standard. Reducing inventory time saves labor costs.
And we can extend the range and readability of tags, which for fixed infrastructure deployment reduces the infrastructure cost. You put all those pieces together, and it is such a meaningful advancement to the industry that all of our lighthouse enterprises are adopting it, as well as other enterprises, as well as partners. And I mentioned I did the video with Zebra because it's such a dramatic improvement to the communications link. On top of that, we've added consumer privacy protections and other data protections that further advance the benefits to the industry. So we have countless partners on the reader side who have adopted it, EM Microelectronic on the endpoint IC side, and we will be pushing Gen2X more broadly out into the market. And Gen2X isn't static. We will continue to improve that air link to improve the reliability of reading.
And our goal is that mobile phones, that's a goal, we use Gen2X to improve their readability as well.
Fair to say it's been a true competitive differentiator with you, Impinj, and your next largest competitor, right?
Correct, it has. And as I said last time when I met with you, if they would like to license Gen2X, we're here to talk. But it is a competitive differentiator for us, and it has proven its value out in the market. You could see it across the show. It was everywhere in the show.
Cary, on the M800, remind us where we are with that?
Yeah, the M800 was the volume runner in the fourth quarter. We signaled that we anticipated that to be the case. It helped drive the 125 basis points, greater than 125 basis points, the sequential gross margin accretion. It is not at its terminal mix yet, and we expect the M800 to continue ramping into 2026 as well.
Just coming back to Gen2X, Chris, how important was it maybe in the decision-making in food for some of these, particularly the one that we know of on proteins? Was it a factor, or is it expected to be a factor going forward for some of these deployments?
Initially, it was not really a factor because we launched Gen2X at the latter part of last year. It really wasn't enabled in the readers and reader ICs and in our endpoint ICs until relatively recently. So the early pilots and things just used standard Gen2. What we've demonstrated with Gen2X is that we can improve readability, like I said, and reduce inventory time, reduce labor costs, which further drives the ROI for food tagging. So it will come to the fore in the future for food, but it wasn't the driver in the past. So the use case penciled out without it. We're going to make the use case better with it.
Yeah. Competition. What has anything new on that score in terms of endpoint ICs, including potential competitors out of China?
Nothing meaningful, really nothing meaningful. There are a couple of Chinese Endpoint IC manufacturers that are competitive. They tend to be significantly focused on China. They don't have the same level of performance. They don't have Gen2X. None of them have come to us about Gen2X. And so today, the competitive environment is primarily us, our primary competitor, NXP. And then, of course, as I said, we're working closely with EM Microelectronic. Those would be the three primary suppliers that I think of when I think about tagging in the Western world.
How do you think about the systems business and how that competitive landscape is evolving and where longer term, how do we think about that part of your business?
The move towards more fixed infrastructure benefits our systems business, but going forward, in order for us to scale the industry, we will be moving more to an Impinj side and an enabler of the industry because we have to drive adoption, so look to us to focus on our reader ICs, pushing them out into market, making them as capable as possible, providing our readers through partners, and really focusing on partner enablement. You know, Jim, as I use this analogy sometimes today, as I think about the opportunity out in the market, I think of a barbell. I think of the endpoint ICs as a huge opportunity because they're a recurring revenue source. I think of the solutions on the other side of the barbell, and the solutions opportunity, including software, including what we can enable in terms of enterprise solutions, is an untapped opportunity for us.
We're just getting going, but you can't have the barbell without the bar, and the bar is where all the reading happens, all the other capabilities, and I'm not trying to minimize it. It's an essential part, but our focus is going to be on the endpoint ICs and then the enterprise solutions and making sure that bar is stiff and strong and our partners are there to deliver it, and we're going to do everything we can to enable it.
Okay. Cary, I want to talk a little bit about the model. Three years ago, I guess this June, you provided some color on how to think about the long-term model. Maybe take us through some of that, and to the extent things have changed, obviously, in that three-year period, is there anything we need to be thinking about in terms of the leverage that you articulated with us back then?
In the long-term model, we provided revenue goalposts of $500 million and $750 million. We had a gross margin range of 55%-57% and an operating margin range of 19%-25% in that. We've made significant progress on the leverage component of that. If you look at our September 25 trailing 12 months, gross margin was almost 55% and operating margin was 19%. And that's that revenue of $360-ish million. We've achieved the bottom end of the operating margin and the gross margin targets without yet achieving the revenue scale that we anticipated. As I look forward, and nothing's really changed in our operating margin objectives, we still expect leverage across all three spend categories. Most of our investment will be within R&D, but we still expect leverage in the R&D line. There'll be investment in sales and marketing, but there'll be more leverage in that.
And then obviously, there's a ton of leverage in the G&A line item. If I take a step back from the top line perspective, those revenue targets were based largely on apparel growth, on general merchandise growth, and logistics growth. Food wasn't really contemplated in those targets because we didn't think food was going to happen as quick as it has. So we are constantly updating internally our targets, but there are new developments certainly that have happened since three years ago when we put that in place. But overall, we're very pleased with the margin leverage that we've achieved.
Maybe finally, just on capital allocation, the company has done some M&A, but how are you thinking about the potential around that area? Are there things that you might look at? How active is that as part of the overall longer-term strategy?
Yeah. So two things on capital allocation. The first thing that we're focused on is our convertible debt. And you saw us refinance $190 million of our $287 million outstanding convertible debt a few months back. The reason for that was threefold. One is we wanted to reduce coupon. So that $190 million, we traded one and an eighth interest for 0% coupon. We wanted to also reduce underlying dilution. That transaction, we took out about 200,000 shares of underlying dilution. But the third and most important thing that we were trying to achieve was split the maturities into manageable chunks so that when it came time to retire the maturities, we could leverage our balance sheet to do so. The convertible debt has been a wonderful way for us to finance or capitalize our company.
But as we've become profitable, as we've begun generating consistent annual free cash flow, there are more options available to us right now. So we view this move as creating a pathway to exit the convertible debt treadmill in a very dilution-friendly way. So that's our first focus. The second focus is obviously M&A. We would like to be very active in that space. It's a small market. We look at a lot of things that come across our desk, and we evaluate things that don't even come across our desk. But there's a pretty high threshold to hurdle in order for us to focus on M&A, just given all the priorities that we have right now.
I think we're going to have to end it there, but thank you.
Thank you.
Thank you.