Welcome to the Impinj fourth quarter and full year 2022 earnings conference call and webcast. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. 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. Thank you, MJ. Good afternoon, and thank you all for joining us to discuss Impinj's fourth quarter and full year 2022 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 fourth quarter and full year 2022 financial results and first quarter 2023 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 investor relations section of the company's 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. While 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 Susquehanna's 12th annual technology conference on March 2nd in New York, and the 35th annual ROTH Conference on March 13th in Dana Point. We will host an Investor Day on June thirteenth in Seattle. Please save the date. We look forward to connecting with many of you at those events. I will now turn the call over to Chris. Thank you, Andy, and thank you all for joining the call. Fourth quarter 2022 capped a very strong year for Impinj. We delivered record revenue in both the fourth quarter and for the full year. We delivered sequential double-digit revenue growth in second, third, and fourth quarters. We delivered record adjusted EBITDA in the third and fourth quarters. We delivered our 75 billionth endpoint IC, another milestone on our journey to connect every item in our everyday world. We have record backlog entering 2023. Our strong support for, and shipments to, enterprise end users drove those results despite persistent wafer and component shortfalls. As we look into 2023, we see significant end user opportunities for our platform, and we expect those opportunities to pay further dividends in the form of continued strong endpoint IC volume growth. Starting with endpoint ICs, 2022 demand held strong with program expansions and new programs more than offsetting retail inventory headwinds. Fourth quarter endpoint IC revenue exceeded our expectations, setting a record for the fifth consecutive quarter. We anticipate significant endpoint IC volume growth in 2023 despite macroeconomic crosscurrents and retailers ongoing inventory reductions. The bulk of that growth is rooted in our platform focus on supply chain and logistics package tracking, as well as retail self-checkout and loss prevention. On the wafer front, we are seeing improved supply. As anticipated, our inlay partners layered on additional bookings as our wafer visibility improved, creating record year-end backlog. With that improved supply, we can and will ramp shipments into that strong demand. That said, our shipment volumes will remain constrained at least into second half 2023 due to wafer delivery timing and teething issues as we ramp our expanded 300mm post-processing to volume production. Turning now to systems, fourth quarter reader and gateway revenue exceeded our expectations, led by deliveries to the visionary European retailers, self-checkout and loss prevention deployment, despite component shortfalls constraining shipments. Looking forward, although we anticipate less schedule and cost variability as component shortfalls abate, a few components remain stubbornly tight. We do not expect supply to normalize until second half 2023. Like for the fourth quarter, we entered first quarter with significant reader backlog. Reader IC revenue set a record for the third consecutive quarter, driven by Impinj E family strength as our partners built products ahead of their product launches. Looking into first quarter, we expect lower E family volumes as those partners follow the typical product cadence seeding the market, followed by subsequent strength as they ramp production volumes. We expect first quarter strength in our Indy reader ICs to more than offset the E family decline. Looking further into 2023, we expect our E family to significantly outpace and rapidly replace our Indy family. On the product front, in November, we announced the Impinj M780 and M781, our latest 300mm endpoint ICs. They extend our M700 product line with extended product identifiers and significant user memory. We also introduced our patent-pending Impinj Core3D antenna reference design portfolio that enables omnidirectional reading for all M700 ICs, improving item readability. On the project front, the visionary European retailer continued deploying, contributing strong fourth quarter gateway revenue. We expect this project to deliver strong first quarter revenue, then step down as this deployment phase approaches completion. We anticipate future self-checkout and loss prevention opportunities with this retailer at other brands and in new geographies. The Asia-based global retailer self-checkout deployment also generated meaningful fourth quarter revenue. In supply chain and logistics, we continue to expect the second large North American end user to both continue their system deployment and drive large endpoint IC volumes in 2023 and beyond. Turning to our organization, I would like to start by welcoming Cathal Phelan as our Chief Innovation Officer. Cathal will focus on long-term innovation and intellectual property strategy as well as remain on our board of directors. Welcome, Cathal. It's a pleasure to have you on our executive team. In December, we published our second corporate citizenship statement outlining our commitments to people, culture, the environment, and governance. Last year, we strengthened our ESG program's foundation by formalizing our board's oversight of ESG matters, measuring and reporting our Scope 1 and Scope 2 emissions, and adopting a new supplier code of conduct. In 2023, we will focus on corporate culture and environmental sustainability and anticipate meaningful progress on both. Last, certainly not least, I want to congratulate my dear friend and Impinj co-founder, Dr. Carver Mead, on his 2022 Kyoto Prize in Advanced Technology. This award is a wonderful honor for a gem of a person who is also one of the fathers of modern IC design and computing, in addition to his many contributions to engineering, physics, and applied science. Carver, it makes me so very happy to see you win this well-deserved award. Congratulations. Before I close, I'd like to thank every member of the Impinj team for the grit you showed every day of 2022. Our results are a testament to your grace under pressure, facing challenge after challenge. To each of you, every member of this company you have built, I'd like to offer my heartfelt thank you. In closing, 2022 was a banner year for Impinj. We delivered record revenue and adjusted EBITDA while launching new products, investing in our team, and unlocking new opportunities. As we continue driving our bold vision to connect every item in our everyday world, I remain confident in our market demand and position and energized by the opportunities ahead. I will now turn the call over to Cary for our financial review and first quarter outlook. Cary? Thank you, Chris, and good afternoon, everyone. As Chris noted, Impinj had a fantastic 2022, with four consecutive record revenue quarters, record adjusted EBITDA margin, and record backlog entering 2023. Momentum built throughout the year, culminating in a record fourth quarter revenue, adjusted EBITDA and EPS. That said, we also wrestled with wafer shortfalls and component challenges, preventing us from fully capitalizing on our demand. Despite those challenges, our team's consistent execution led to meaningfully improved supply and sequential revenue growth every quarter. Today, more than ever, I am energized by our many enterprise deployments in retail and supply chain and logistics that are driving strong secular demand and which will, in turn, enable us to deliver growth and operating leverage. Fourth quarter revenue was $76.6 million, up 12% sequentially compared with $68.3 million in third quarter 2022, and up 46% year-over-year from $52.6 million in fourth quarter 2021. Fourth quarter endpoint IC revenue was $58.7 million, up 15% sequentially compared with $51.2 million in third quarter 2022, and up 53% year-over-year from $38.4 million in fourth quarter 2021. Quarter-over-quarter endpoint IC revenue growth significantly outpaced our original mid to high single-digit expectations. Unit volume growth also exceeded our original expectations, more than offsetting the expected decline in specialty and industrial mix. Looking forward to first quarter 2023, we expect low double-digit sequential endpoint IC revenue growth driven by increasing volumes as wafer supply continues to improve. Fourth quarter systems revenue was $17.9 million, up 4% sequentially compared with $17.1 million in third quarter 2022, and up 26% year-over-year from $14.2 million in fourth quarter 2021. Systems revenue exceeded our expectations due to our contract manufacturer delivering more readers than we had anticipated. On both a sequential and year-over-year basis, gateway and reader IC revenue increased while reader revenue decreased. Despite strong backlog, we expect first quarter 2023 systems revenue to be similar to fourth quarter due to a few stubbornly tight components. 2022 revenue was $257.8 million, up 35% year-over-year compared with $190.3 million in 2021. Endpoint IC revenue grew 38% year-over-year, driven by growing volumes from new deployments, expansion at existing deployments, and a strong specialty and industrial mix. Systems revenue grew 30% year-over-year, driven by E family reader IC strength, the loss prevention deployment with the visionary European retailer, and broad-based reader demand. Fourth quarter gross margin was 53.8%, compared with 56.9% in third quarter 2022 and 58.2% in fourth quarter 2021. The quarter-over-quarter decline was driven by endpoint IC product margins, specifically the lighter mix of specialty and industrial ICs. The year-over-year decline was driven by endpoint IC product margins, both from the lighter mix of specialty and industrial ICs and less sales of fully reserved inventory. Full year 2022 gross margin set an annual record at 55.5%, compared with 54.2% in 2021, with the increase due primarily to endpoint IC product margins, specifically the specialty and industrial mix, partially offset by less sales of fully reserved inventory. Total fourth quarter operating expense was $29.5 million, compared with $29 million in third quarter 2022 and $25.3 million in fourth quarter 2021. Research and development expense was $14 million. Sales and marketing expense was $7.3 million. General and administrative expense was $8.1 million. 2022 operating expense totaled $114.2 million, compared with $94.1 million in 2021. We expect total first quarter 2023 operating expense to increase, driven by annual payroll tax resets, bonus structure changes, legal fees, as well as continued investments in our platform. Fourth quarter adjusted EBITDA was $11.8 million, compared with $9.8 million in third quarter 2022 and $5.3 million in fourth quarter 2021. Fourth quarter adjusted EBITDA margin was 15.3%. 2022 adjusted EBITDA was $28.9 million, compared with $9.1 million in 2021. 2022 adjusted EBITDA margin was 11.2%. Fourth quarter GAAP net loss was $100,000. Fourth quarter non-GAAP net income was $11.6 million, or $0.41 per share on a fully diluted basis. 2022 GAAP net loss was $24.3 million. 2022 non-GAAP net profit was $26.3 million, or $0.96 per share on a fully diluted basis. Turning to the balance sheet, we ended the fourth quarter with cash equivalents, and investments of $192.9 million, compared with $201.1 million in third quarter 2022 and $207.6 million in fourth quarter 2021. Inventory totaled $46.4 million, up $14.5 million from the prior quarter, with the increase coming primarily from endpoint IC work in process. Fourth quarter net cash used in operating activities was $6.2 million. Property and equipment purchases totaled $6.1 million. Free cash flow was negative $12.3 million. For the full year, net cash provided by operating activities was $600,000. Property and equipment purchases totaled $12.1 million. Free cash flow was negative $11.4 million. Before turning to our first quarter guidance, I want to highlight a few items unique to our fourth quarter results and first quarter outlook. First, we currently anticipate first quarter 2023 gross margins between 52%-53%, with a sequential reduction due to a lighter mix of E family reader ICs and unanticipated costs in both 300mm endpoint IC post-processing and reader components. We are actively addressing these elevated costs and anticipate gross margins to return to our targeted 53%-54% range in second quarter 2023. Looking further ahead, we see gross margin stabilizing in that 53%-54% range until product innovations create opportunities for gross margin accretion. Second, our business model demonstrated significant 2022 operating leverage. While we expect a step down in first quarter 2023 adjusted EBITDA margin, our goals remain operating margin expansion and then consistent free cash flow. That said, in first half 2023, our planned inventory growth, comprising primarily endpoint IC work in process, will consume more cash than we will otherwise generate from operations. Finally, upside wafers began layering into our fourth quarter 2022 inventory, and we expect another increase during first quarter 2023. Despite that increase, we expect to be hand to mouth on finished endpoint ICs at least until second half 2023 for the reasons Chris already noted. Nonetheless, we anticipate growing endpoint IC shipment volumes to drive low double-digit sequential endpoint IC revenue growth in first quarter 2023 and mid to high single-digit sequential endpoint IC revenue growth in second quarter 2023. Turning to our outlook, we expect first quarter revenue between $82 million and $85 million, compared with $53.1 million in first quarter 2022, a 57% year-over-year increase at the midpoint. We expect adjusted EBITDA between $9.2 million and $10.7 million. On the bottom line, we expect non-GAAP net income between $8.6 million and $10.3 million, reflecting non-GAAP fully diluted earnings per share between $0.30 and $0.36. In closing, I want to thank our 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? Thank you very much. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. As a courtesy to others, we ask that you limit yourself to one question and one follow-up. If you have additional questions, please re-queue, and we will take as many questions as time allows. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Toshiya Hari with Goldman Sachs. Please go ahead. Hi, guys. Good afternoon and congratulations on the strong results. My first question is for Chris. I was hoping you could talk a little bit about how you're thinking about the full year, both from a supply perspective as well as a demand perspective. On the supply side, it sounds like you're still working through, you know, some of the constraints both in your IC business as well as your systems business. At this point in time, what kind of visibility do you have? You know, what kind of support do you have from your foundry partners and some of your component suppliers, in terms of growth for the full year? I guess on the demand side, if you can talk a little bit about, you know, what you're seeing from a pricing perspective and how you're thinking about volume, particularly across logistics, supply chain, and retail, that would be super helpful. Thank you. Okay. Thank you, Toshiya. I will do my best to hit that question. I'm looking at Jeff and Cary for a little bit of assistance because there's a lot of items to unpack there. To start out, in 2023, we anticipate significant endpoint IC volume growth. Despite macroeconomic crosscurrents and retailers' ongoing inventory reductions, we see long-term multiyear tailwinds for our industry overall. We have, of course, very strong backlog entering the year. There is pent-up demand out there in the market from programs that were either delayed or that we couldn't fully get going in 2022. We are seeing increased supply from our foundry partner. As I noted in my prepared remarks, that increased supply is ramping up, so we will as well as our post-processing is ramping up. We will still be running hand to mouth for at least the next two quarters, heading into the second half of 2023, and we'll have to give an update at that time based on what the demand looks like and what our supply and our post-processing looks like to give, to get an idea of how much we're catching up, if at all. In terms of overall strength in the market, we collectively, all of us, feel very good about where the market is right now, the growth opportunities that we're seeing, both in retail and supply chain and logistics and more broadly. I'll just add a little anecdote here. Back when we first started at RAIN RFID, 15 years ago, I remember a lot of programs that were potentially going to ramp at that time, including everything from magazines, to pharmaceuticals, to building supplies, and so many, just so many areas. Back at that time, the technology wasn't ready, the products weren't ready, and quite frankly, the RAIN RFID wasn't far enough along for that kind of broad-based adoption. What we're seeing right now is those programs starting to return. We're seeing demand on the market from many verticals in addition to the strength in retail and supply chain and logistics that give me a very positive feeling for the future, 2023 and beyond. I'll pause to see if anybody else here would like to layer anything else on, or if I'll just turn it back to you, Toshiya, for a follow-up question. I think we're good. Did I answer your questions, Toshiya? Yeah, just Chris, on pricing, I think it's well telegraphed that your key foundry supplier increased pricing across the board, not just for you guys, but for all fabless customers. Your ability to pass that through to customers in 23. I'll just ask my follow-up as well. This one's for Cary. The increased costs you spoke to on the post-processing side of things, I wasn't quite sure what exactly is going on there in Q1. If you can kind of expand on that or elaborate, that would be super helpful. Your conviction level around that reverting in Q2 and beyond. Thank you. Thanks, Toshiya. I'm gonna hand the entire thing off to Cary. Go, Cary. All right. For Toshiya, starting with the first part of your question. Yes, our foundry partner raised prices. Those price increases are going into effect right now. Expect us to handle that in a similar way that we've handled previous cost increases. We will look to pass those on to our customers in a way that enables us to maintain the integrity of our margin model. Those price increases are going into effect now over the course of the first couple quarters of the year at this point. To your question on post-processing, the dip in gross margin is temporary and will rebound in Q2 for a couple of reasons. First, we had a very last-minute cost increase from one of our back-end partners. For the first quarter, we are prioritizing production volumes over cost so that we may deliver on our customer commitments and continue scaling into this record demand. For Q2, however, we will flex our supply chain so that we may get back to our targeted gross margin percent while delivering on increased volumes as well. We just need a little bit more time to flex to support that. The second item relates to ongoing component challenges for our reader business. We had a cancellation and decided to pay a premium to secure the component from an alternative supplier. Based on today's visibility, however, we expect to deliver flat systems revenue in Q2 at a richer margin than Q1. For those reasons, we expect Q2 to bounce back into the 53%-54% range. I would end with, I expect full year gross margin to be in the 53%-54% range, so we'll more than make up for it in the back half of the year. Great. Thanks for all the details. Yep. Thank you, Toshia. The next question comes from Harsh Kumar with Piper Sandler. Please go ahead. Yeah. Hey, guys. First of all, congratulations. Pretty incredible results in this economy. I had a couple of questions. First, I wanted to clarify something. Cary, did you say the second quarter will see double-digits sort of teens endpoint IC growth, just as a point of clarification? My question is, you're seeing very healthy increases in revenues in endpoint IC. I was curious if you could, just to take Toshiya's question and sort of turn it around, could you point us to the end markets that this is coming from? Yeah. I'll take the first one and then hand over to Jeff or Chris for the second. Harsh, to clarify, for the first quarter, expect low double-digit quarter-over-quarter revenue growth for endpoint IC. In the second quarter, expect mid to high single-digit quarter-over-quarter EndpointIC revenue growth. Thank you. Go ahead. Keep going. Yeah, sorry. That was it. Thank you. The clarification on where revs are coming from. Harsh, demand is coming from, as I said in my prepared remarks, significantly from our target verticals, retail and supply chain logistics, buoyed by some of the work we're doing in package tracking and supply chain logistics and loss prevention and self-checkout on the retail side. As I said in answer to Toshiya's question, we're also seeing a kind of broad-based growth in other verticals and other opportunities, and although we don't call those out specifically, we feel some buoyancy in the market from those many opportunities. They will not all materialize into instant volumes. Programs that I had thought were, you know, well behind us and I had kind of put out of my mind, they're starting to return right now. I feel good about the market, and I see Jeff nodding his head the same. I think we feel good about where we are in terms of long-term endpoint IC unit volume opportunities and the tailwinds we see overall for our industry and for us in particular. Okay, great. Thank you so much, Chris, for that color. Cary, for my follow-up, I think when I worked the numbers to the model, the OpEx goes up quite significantly. I think you laid out a bunch of things. Would this be the new base for OpEx as we move forward? Or are you expecting a sort of a one-time step-up for a variety of reason in the March quarter? 'Cause you gave us the revenues, you gave us the margins, and then there isn't a whole lot outside of OpEx that will vary the numbers. Chris, for you, Avery Dennison talks about 20% growth organically in this, in the intelligent label business. Your growth is much larger. I was trying to understand why you're growing so much faster than your biggest distributor. Okay. Harsh, this is Cary. I think I can take both of those. Yes, we are anticipating a step up in OpEx for the reasons I mentioned in the prepared remarks. It is the seasonal effect of payroll tax resets. It's the structural change to our bonus. Remember, this is the second final step- Yeah. ... to changing our bonus to 100% cash. It is legal fees, then it's our ongoing investment in our platform. As you look forward, I expect this level to be at approximately where we'll be for the near term with fluctuation depending on G&A related to legal fees, which I expect more first half weighted than second half. Then as the seasonal expense abates, expect our investment in our engineering team and our sales and marketing to step into that. The trend will match somewhat similar to what you saw in 2022, since many of the dynamics are present in 2023 as they were in 2022. Understood. Your second question regarding our growth rates relative to one of our top customers, Avery Dennison. We don't always line up with Avery Dennison in each quarter. They report an enterprise-wide intelligent labels revenue growth rate, there are mix and ASP differences that need to be taken into account. We are also in a high inflationary environment right now, and it's unlikely that it's impacting us both in this exactly the same way. What I would add is that we're incredibly encouraged that they are talking about the market acceleration in 2023, and that's exactly what we see as well. Great. Thanks, guys. [crosstalk] Yeah. We serve kind of the broader market in general. Dennison, is of course, one of the key suppliers of labels [in their place] but there are others out there. And so we serve the broader market, which includes many other partners also. And keep going. [crosstalk]. I cut you off, I'm sorry. No, no, no. I was just saying thank you for all the color guys, and congratulations again. Thank you. Thank you, Harsh. The next question comes from Mike Walkley with Canaccord Genuity. Please go ahead. Great. Thank you. Let me add my congratulations. It's been certainly fun to follow the Impinj journey over the past decade and all that you guys have accomplished. Thank you, Mike. [crosstalk] Yeah. Thanks. My first question is just on the systems business. You know, you've had some very large projects roll out over the past year, and it sounds like it should be flattish into the first half of the year. How should we think about just the systems business in the pipeline in maybe the second half of the year, or is it too early to call when some new projects might hit? This is Jeff. I'd start by saying that the systems pipeline is strong and growing nicely. We do have some large enterprise deployments that are going well, and success in those initial deployments creates opportunity to expand within those accounts as well as other enterprises in the retail and supply chain and logistics sectors, which are both significant growth vectors for Impinj. As it relates to... I'll pass it to Cary to speak to the timing and impact of revenue in 2023. Yeah. Mike, thanks for the question. We signaled that we expect similar systems revenue in Q1 that we delivered in Q4. In Q1, we have a lot of the same dynamics with the visionary European retailer continuing to deploy the second phase of their loss prevention deployment. That phase will wrap up largely in Q1. There's opportunities to win more business with this customer that are as great as what we've already delivered to the customer, but the timing may not match up perfectly. We have been prioritizing that deployment in terms of allocating our finite components that continue to be a struggle for us to get. As that phase 2 ramps down, that frees up some components for us to deliver to other customers that have unfortunately been waiting on the sidelines for their readers. Now that we have a little bit better visibility into 2Q component supply, we're able to signal that Q2 will be similar to Q1, whereas you recall last quarter, we were worried that we wouldn't be able to deliver similar revenue, and we actually guided Q2 down just a little bit. We're in a little bit better position than when we were a quarter ago, but we're still in a situation where demand outstrips our ability to supply for systems because of these component shortfalls. Great. That's helpful color. For my follow-up question, maybe for Chris or Jeff, just how is the customer feedback for Impinj Authenticity, now you've had a quarter of it rolled out? Do you see anything even close to competitive on the market that can match this vision and solution? I'll take that one, Mike, I'm excited that you asked the question. I'm very encouraged by the growing level of interest among our solution partners, and an increasing number of enterprise end customers regarding Impinj Authenticity solution engine. Recall that it's an innovative, differentiated Impinj platform solution engine that delivers cryptographic product authentication that protects brands and consumers. The pipeline is growing nicely. Of course, the time and pacing or the pace and timing of those opportunities is challenging to predict, but I am even more optimistic today than when we had this conversation last quarter regarding the opportunity not only to build endpoint IC recurring revenue, but also to establish a new services revenue opportunity in the longer term. Mike, I guess I'd like to add one thing there just as you think about it long term. Now think about any technology. It doesn't matter which one you pick. Can you think of any really successful technology that hasn't rolled out security? You'd be hard-pressed to find one. Here, we're the first ones to truly launch an endpoint IC designed for broad-based adoption that has a cryptographic engine and a key in it. That cryptographic engine and a key allows us to authenticate the item to which the IC is attached. We believe that capability for the future will be essential, and that at some point in the distant future, as, you know, as we get better and better at doing this, that there will be a key in every single IC. There needs to be. I mean, it's just how technology goes. We're excited about where we stand today, we're excited about our pipeline, and I personally am excited about the long-term opportunities, not just a year or two out, but further out in time as well. Great. Thanks for taking my questions. Thank you. The next question comes from Scott Searle with Roth. Please go ahead. Hey, good afternoon. Thanks for taking my questions, and congrats again on the nice quarter. Thanks, Scott. Hey, Chris. In past quarters, I think you've talked about under shipping demand from an endpoint IC in the ballpark of 50% plus. I didn't hear a number this time around, so I was wondering if there is one that you're willing to share with us. On the systems outlook, I just wanna clarify again. It sounds like now with European visionary retail phase 1 deployment rolling off in the first quarter, you still have visibility at this point and comfort to a flat second quarter. I'm kinda wondering how you think that that progresses then into the second half of this year 'cause it sounds like phase 2 is not being factored in there. If it does, that would be upside that we could possibly see in the second half of this year or into 2024? Scott, I think I'll take the first part of the first question, and then I'll hand off to Cary. We had signaled that for six consecutive quarters, demand exceeded supply by more than 50%. I can say that the same for this current quarter as well. For seven quarters, demand has exceeded supply by more than 50%. However, we're going to stop using that metric going forward and instead focus on providing more detailed information about demand, supply, the market, and other things. We're gonna try and provide more color rather than just one single number going forward. If you're asking about did we, did we achieve that metric again for the seventh quarter? The answer is yes. Scott, this is Cary. I can take the second question. Yes, you heard correctly. We now believe systems revenue will be flat through the first two quarters of the year. The loss deployment phase will roll off, and then the limited supply that we have will go to other customers in Q2, but keeping revenue about flat. I don't wanna guide second half systems revenue just yet. We're still navigating these component shortfalls, so I don't feel comfortable going beyond kind of the next couple quarters. As soon as we have better visibility to components, we will update that. Great. Very helpful. If I could just on the big picture front, I guess two items. Following up on Mike's question on authenticity, and you kinda opened the door there from a services revenue standpoint, I'm wondering how you're starting to see that model develop, if there's any commentary in terms of timeline, how you think that'll function, and when we would actually see some contribution? Then, Chris, from a really high level, you know, if we look over the past decade, endpoint ICs have been growing in the ballpark of 25%-30% a year on a, you know, compound annual growth rate. We're seeing that start to inflect, you know, being pulled forward by the pandemic, obscured by a lot of the supply chain issues that we've had ongoing for the last several quarters. I'm wondering if you would take a stab at what the growth rate of this market looks like over the next two, three, five years. It's still very early days. You know, we're still constrained by supply and wafer availability, but that's easing. Is this a market that's gonna grow 50% for the next 3-5 years? Do you guys have any take on that? Thanks. Let me take the second question first. I'll hand over to the question on authenticity. No, Scott. I could hazard a lot of guesses in terms of where this market could go or might go. I do feel there's very strong demand out in the market at NRF. Really for the most part, I was talking to enterprise end users as opposed to partners. I feel very good about the market, about the opportunity, about growth, not only in our core verticals, but in adjacent ones as well. That said, I don't feel good enough, or I don't have predictive powers that are good enough to suggest that the market in the future will be any different from the historical trends of 25% to 30%. It may turn out to be the case, and if it is, we'll come forward and tell you. Right now, the best prediction that I can make is just the historical trends have been 25% to 30%, and that's kind of what we're holding going forward. Scott, this is Cary. I can take the question. Oh, I'm sorry. Yeah, go ahead. Oh, no. Sorry. I, Chris, I just figured I'd give it a shot and try and pry that one out of you. Yeah. My crystal ball is not quite that good. Sorry. Scott, unfortunately, my answer on authentication modeling is gonna be roughly similar. It's a little too early to model authentication revenue in 2023. We are shipping, or we will ship units on our endpoint IC, authentication endpoint IC, some as early as Q1, but very small quantities at this stage, so it won't really hit the radar. Give us a little bit of time before we can provide clarity on that. Go ahead, Jeff. Yeah. I think I would just add to that I'm very encouraged by the creativity of our solution partners, who will integrate cryptographic product authentication into their overall solutions offerings. One of the important things we're doing right now is engaging with leading enterprises in how they see building value through the introduction of product authentication within their overall service and product portfolios. In those discussions, these enterprise end customers are bringing forth creative ways in which that value could be attributed to both endpoint IC recurring revenue and the services revenue and how we and they and their partners might share in that building value. I think it's very important that we're, as we're developing this emerging opportunity, to listen to enterprise customers on how they create value, the contribution that the Impinj Authenticity Solution Engine is making, and therefore how we ought to, in partnership, create and share that value. Okay, great. Thanks so much, guys. Great quarter. Okay, thank you. Thanks, Ted. The next question is from Jim Ricchiuti of Needham & Company. Please go ahead. Hi, good afternoon. This is actually Chris Grenga offering Jim. Congrats on the quarter. Sure. Thanks, Chris. Could you talk about the M700 as a percentage of the mix and how you expect that to progress over the next few quarters? We don't break down on a percentage basis the difference between our different product families. What I will say is that our Impinj M700 family product volumes are growing. They represent our newest products. That's where we're investing in building our post-processing capacity. Our future really is around that entire Impinj M700 family. You should expect that more and more as we go forward, our volumes will be focused on the Impinj M700 family. Great. With respect to the two new chips that are targeting the new use cases in automotive, pharma, and food, what should we be looking for there, in terms of key milestones? What would you be planning to share with us over the course of the next few quarters? I think the answer to that question is that we have particular customer opportunities that are using those ICs will come forward and highlight them. Otherwise, we intend to just treat the new Impinj M780 and M781 as kind of core elements of the M700 product family, and just expanding the breadth of the offering. If something notable comes up, like we have a particular win that uses them, expect us to come forward with it. Otherwise, we won't be breaking it out separately. We're excited about the introduction because those particular ICs open up a, you know, just a broader range of opportunities for us. Great. Thanks very much, and congrats again on the results. Thank you, Chris. The next question is from Troy Jensen with Lake Street Capital. Please go ahead. Hey, gentlemen. also wanna offer my congratulations as usual. I'm just gonna ask one quick question here. It can be either for Jeff or for Chris. I'd like to just chat a little bit about the pipeline and specifically logistics. We know you got, you know, the big first customer and the marquee second customer, but we've always talked about others waiting in the wings, and it has to be apparent now that this big marquee customer is, you know, finds it successful and is moving forward. I'm just curious if you could talk about, you know, big opportunities there. Do you think we'll be talking about a third logistics customer in 2023? This is Jeff. I can't speak to any specific customer, but when you do have sector-leading enterprises speaking publicly about the investments they're making in their RAIN RFID deployments and the benefits they're already seeing in it, no doubt others in the industry sector are tracking that those developments, if you will. I will say that the systems pipeline, including supply chain and logistics, continues to build nicely. As always, I wanna reinforce that the pace and timing of those opportunities is hard to predict. But I see increasing opportunity for follow-on enterprises in that sector evaluating, planning for, and ultimately deploying solutions that are relevant to how they create business value in the future. Troy, expect us to keep investing in the supply chain and logistics opportunity because we truly think that it's a bellwether opportunity for us specifically, given the solutions that we're bringing to market. Yep. Understand completely. Keep up the good work, guys. Thank you. Thanks. Thanks, Troy. The next question is a follow-up from Harsh Kumar with Piper Sandler. Please go ahead. Yeah. Hey, guys. Actually, I had two quick ones. I noticed that we're modeling taxes at zero going forward. I was curious, Cary, if you could give us a sense of, what kind of tax loss carry-over you have and if it's appropriate to model zero percent taxes for the foreseeable future. Yeah. It's almost zero. We have some foreign taxes that I think are in the couple hundred thousand dollar range. We have almost $250 million of NOLs. I don't anticipate a tax bill in the near term. Fair enough. That's pretty straightforward. And then one for Chris. Chris, there was a fair bit of talk, I think, midpoint of last year, that the Japanese convenience store guys were very interested in RFID if the cost could come down just a little bit. I was curious if you could help us understand how the total, you know, tag cost might come down. You know, I know it's probably not you guys because you're the main brains behind it at a penny. What are some of the other components that might come down? Maybe an update on those, on the Japanese convenience sort of consortium. Yeah. Harsh, I'll do my best to unpack that one and give a cogent, broad-based answer to it. Post-COVID, the world has changed. Prior to COVID, there was a significant push to drive the inlay cost down as the key driver that would enable adoption. Of course, inlay cost and the increment on our overall tag cost are still important, the discussions we're having with end customers now are much more about digital transformation, with how we can help those enterprises change their business, change how they run their business, enable them to track every item they manufacture, transport, and sell, optimize their labor teams in terms of overall efficiency, drive efficiencies in the organization. The entire dynamic has changed post-COVID. I'm not saying cost doesn't matter, but it's no longer the single biggest thing that we get into discussion on. A lot more discussion is how we can solve the problem for the end customer. As IC costs, other costs have gone up, you know, across essentially all industries, costs have increased. We of course still have those cost discussions. It's hard to predict what the future holds from a cost perspective. I would anticipate, you know, as things settle out long-term post-COVID, you know, we'll go back to gradually decreasing costs over time, low single digit, you know, ASP declines overall for our industry, but that's to be determined. It really depends on what the future holds. As I think specifically about that opportunity in Japan, that opportunity has gone slowly, and at least from our perspective, although not gone away, there are other food opportunities worldwide that have actually come to the fore really ahead of it. We don't have the ability to really speak about those opportunities. We hear about other companies talking about food on some of their calls, and food is one of those areas where we see these kind of long-term growth prospects. So we will be pushing in that area, and of course, food is very sensitive to cost. If the cost aspect will come up associated with food. Right now, what we're really focused on is digital transformation. Two quick things that I would add to that, this is Jeff, is that recall that the challenge that the Japanese convenience store enterprises are seeking to address is the scarcity of labor and the cost of labor. That challenge is no less today than it was when they started the investigation into the role of RAIN RFID in helping address that challenge. While cost does matter, other costs have continued to increase, which has a favorable impact on the business modeling, if you will, about making a platform investment to address the labor shortage or scarcity. I would say the Impinj platform and its contribution to self-checkout has advanced well within that same time frame. The opportunity to smartly invest in increasingly performant Impinj platform-based solutions to self-checkout in an environment where labor costs continue to increase and labor scarcity continues to worsen means that over time, though it's hard to predict the pace and timing, that opportunity, within that sector, as well as Chris mentioned to overall, food and quick service restaurant, et cetera, is an increasing opportunity and growth vector for Impinj in the longer term. Very well, guys. Thank you so much for all the color. Appreciate it. Thank you, Harsh. Thank you very much, Harsh. This concludes our question and answer session. I would now like to turn the conference back over to Chris Diorio, Co-founder and CEO, for any closing remarks. Thank you, MJ. I'd 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. The conference has now concluded. Thank you for attending today's presentation. You may now dis-.