Welcome to the Impinj First Quarter 2023 Financial Results 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 zero. After today's presentation, there will be an opportunity to ask a question. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, today's 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, Operator. Good afternoon, thank you all for joining us to discuss Impinj's First Quarter 2023 Results. On today's call, Chris Diorio, Impinj's Co-Founder and CEO, will provide a brief overview of our market opportunity and performance. Cary Baker, Impinj's CFO, will follow with a detailed review of our first quarter 2023 financial results and second quarter outlook. We will 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. 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 our non-GAAP financial metrics to the most comparable GAAP metrics. Before turning to our results and outlook, note that we will participate in the UBS Global Industrials and Transportation Conference on June 6th in New York, Baird's Global Consumer Technology and Services Conference on June 7th in New York, and Roth's London Conference on June 21st. We will host an Investor Day on June 13th in Seattle. 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. Our first quarter set a strong start to the year. Revenue hit a new quarterly record. Our multi-quarter endpoint IC backlog, underpinned by our solutions engagements with enterprise end users, is very strong. Our wafer supply is finally improving, allowing us to use our balance sheet to begin building inventory to support that backlog as well as anticipated future growth. Starting with endpoint ICs, first quarter revenue exceeded our expectations, setting a record for the seventh consecutive quarter. That performance was driven by underlying demand, increasing IC supply, and our inlay partners rebuilding their safety stock. Coming off that strong first quarter, we see several crosscurrents that should drive second quarter endpoint IC revenue to be flat sequentially. First, enterprise program expansions and new use cases, the latter built significantly on our solutions efforts, are the main drivers of our endpoint IC growth. From today's vantage point, even though every meaningful enterprise deployment with which we are involved is progressing, each is also delayed relative to our expectations by several months, all for their own reasons, but most traceable back to prior supply disruptions and our inability to predict the precise timing and pace of large deployments. Second, product shortfalls stalled many early opportunities, and restarting those opportunities will take time. Finally, as our IC supply recovers, we see our inlay partners slowing their safety stock growth. In summary, our demand remains healthy, our backlog remains very strong, and we expect robust full-year endpoint IC growth, but see a second quarter pause. Beginning with those enterprise deployments, we received a PO for the third phase of the loss prevention deployment at the visionary European retailer. This phase is roughly 75% the size of the prior phase, starts in second quarter, spans several quarters, and will drive incremental endpoint IC volumes. We continue to be excited by the self-checkout and loss prevention use case and see expansion opportunities at this retailer and at others. In retail general merchandise, we expect strong second half 2023 endpoint IC demand growth from category expansion at the large North American retailer. On the supply chain and logistics front, we see very strong partner demand for our reader ICs used in printer-encoders. For our second large North American end user, we expect that end user to drive large endpoint IC volumes in second half 2023 and beyond. Turning to the early opportunities, I am pleased by our progress with Impinj Authenticity and expect meaningful second quarter Impinj M775 endpoint IC volumes for tax tracking as well as healthcare and specialty foods. I'm also excited about book and magazine tracking in Japan, a use case we pioneered years ago that we expect will consume several hundred million endpoint ICs in 2023. We are well-positioned to capitalize on these early opportunities. On the supply front, wafer availability will finally catch up to demand in the second quarter. Between support from our foundry partner and our post-processing investments, we look to avoid a repeat of our painful 2021 and 2022 shortfalls by building appropriate inventory. For readers, we enter the second quarter with significant backlog, but stubborn tightness in a few components means we will likely carry significant reader backlog into third quarter. For reader ICs, demand for our legacy Indy products was strong even as our partners began ramping 65 announced E-Family based products to production, with more than 75 new products in development. Turning to our organization, in April, we acquired Voyantic, the industry leader in solutions for inlay design, measurement, and test. With leading end users relying on our platform to transform their operations, this acquisition expands our solutions footprint to advance the quality, reliability, and readability of the partner inlays used in those enterprise deployments. Perhaps most important to a successful integration, the cultural fit between the two teams is very strong. I have worked closely with and trusted the Voyantic leadership for the better part of 15 years, and I'm thrilled to have them and the very experienced Voyantic team as part of the Impinj family. I am also thrilled to welcome Miron Washington to Impinj's board. Miron has 25 years experience in business-to-consumer and business-to-business e-commerce, global supply chain operations, digital transformation, and multi-billion dollar P&L ownership. His knowledge and experience in our target market verticals will pay dividends on our journey to connect every item in our everyday world. Miron, welcome to the Impinj family. Before I close, I'd like to thank every member of the Impinj team for your unflagging effort on so many fronts, from new product development to scaling our operational capabilities to delighting our many customers. I feel honored by my incredible good fortune to work with you. In closing, from today's vantage point, I see first half 2023 as a transition from product shortfalls and project delays to timely shipments against growing opportunities. Looking to second half 2023, I see secular market growth, strong Impinj backlog, and our platform solutions efforts paying dividends. As we continue driving our bold vision, I remain confident in our market position and energized by the opportunities ahead. I will now turn the call over to Cary for our financial review and second quarter outlook. Cary? Thank you, Chris, and good afternoon, everyone. On today's call, I will review our first quarter financial results and second quarter financial outlook. First quarter revenue was $85.9 million, up 12% sequentially compared with $76.6 million in fourth quarter 2022, and up 62% year-over-year from $53.1 million in first quarter 2022. First quarter endpoint IC revenue was $67 million, up 14% sequentially compared with $58.7 million in fourth quarter 2022, and up 73% year-over-year from $38.8 million in first quarter 2022. Improving supply drove first quarter revenue above our expectations. Looking to second quarter, we expect the project timing and first quarter strength Chris mentioned to now result in similar endpoint IC revenue to first quarter. First quarter systems revenue was $18.8 million, up 6% sequentially compared with $17.9 million in fourth quarter 2022, and up 31% year-over-year from $14.3 million in first quarter 2022. First quarter systems revenue exceeded our expectations, driven by strong reader IC, reader, and gateway shipments. On a sequential basis, reader and reader IC revenue increased while gateway revenue decreased. On a year-over-year basis, gateway and reader IC revenue increased while reader revenue decreased. Looking ahead, we expect a slight sequential decrease in second quarter systems revenue as stubborn component shortfalls more than offset Voyantic revenue. First quarter gross margin was 52.4% compared with 53.8% in fourth quarter 2022, and 57% in first quarter 2022. The sequential decrease was driven by both endpoint IC product margins, specifically indirect costs related to ramping 300mm post-processing and systems product margins, specifically the lower mix of E-Family reader ICs. The year-over-year decrease was driven by lower endpoint IC product margins, specifically a smaller specialty and industrial IC mix. Looking to second quarter, we expect our gross margin to return to the 53%-54% range. Total first quarter operating expense was $36.4 million compared with $29.5 million in fourth quarter 2022, and $26.8 million in first quarter 2022. Research and development expense was $17.3 million. Sales and marketing expense was $7.7 million. General and administrative expense was $11.4 million. We expect a slight sequential decrease in second quarter operating expense. First quarter Adjusted EBITDA was $8.6 million, compared with $11.8 million in fourth quarter 2022, and $3.5 million in first quarter 2022. First quarter Adjusted EBITDA margin was 10%. First quarter GAAP net loss was $4.4 million. First quarter non-GAAP net income was $8.7 million, or $0.30 per share on a fully diluted basis. Turning to the balance sheet. We ended the first quarter with cash equivalents, and investments of $164.7 million, compared with $192.9 million in fourth quarter 2022, and $193.4 million in first quarter 2022. Inventory totaled $85.8 million, up $39.4 million from the prior quarter, with endpoint IC raw materials and WIP driving the increase. First quarter net cash used by operating activities was $26.6 million. Property and equipment purchases totaled $7.6 million. Free cash flow was negative $34.2 million, including $39.4 million for inventory growth. Before turning to our second quarter guidance, I want to highlight a few items unique to our results and outlook. First, as Chris mentioned, we acquired Voyantic, our first acquisition in many years. This tuck-in deal advances our solutions efforts and will both grow revenue and expand gross margin. Second, although we began rebuilding wafer inventory in first quarter, we do not anticipate having a sustainable amount of 300 mm Endpoint IC finished goods inventory until at least third quarter 2023. Today, our unit backlog significantly exceeds our inventory. Finally, from a profitability standpoint, first quarter operating expense exceeded our expectations due to litigation spend ahead of our scheduled trial dates. That $4.2 million spend was $1.3 million more than we expected, pushing our first quarter Adjusted EBITDA below the low end of our guidance. Looking ahead, we expect second quarter Adjusted EBITDA margin expansion and anticipate third and fourth quarter operating expense to be below the first half run rate. Turning to our outlook. We expect second quarter revenue between $84 million and $87 million, compared with $59.8 million in second quarter 2022, a 43% year-over-year increase at the midpoint. We expect Adjusted EBITDA between $8.8 million and $10.3 million. On the bottom line, we expect non-GAAP net income between $8.2 million and $9.7 million, reflecting non-GAAP fully diluted earnings per share between $0.28 and $0.33. In closing, I want to thank the Impinj team, our customers, our suppliers, and you, our investors for your ongoing support. I will now turn the call to the operator to open the question- and- answer session. Operator. Thank you very much. We will now begin the question- and- answer session. To ask a question, you may press star and one on your touch tone phone. If you are using a speaker phone, 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 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 Harsh Kumar with Piper Sandler. Please go ahead. Yeah, hey, good afternoon, Chris, Cary, and the Impinj team. I had two questions. Chris, when I listen to your commentary, it seems like the end demand is fine. You're going through what I would call as growing pains, kinda fixing a few things. How would you characterize the end demand? Then historically, you know, we've always thought of Impinj as a 25%-30% grower, at least in this phase of its life cycle. Do you think with a flattish first and second quarter that number is in jeopardy, or would you still be in a position to be able to talk about that kinda growth rate for the year? Okay. Thank you, Harsh. Thank you for the question. To take the first part of your question, the end user demand remains strong. We have not seen any pullbacks of any significance in any of the programs we've been working with. What we have seen is just due to the difficulty in predicting the pace and timing of those deployments, and for many of them, given their sheer size, we see a bit of a push to the right. That said, our backlog remains strong. Our backlog, which is going into those programs, remains strong. We see that backlog driving multi-quarter growth at those large programs. That's why in my prepared remarks, I used the word pause. It's a bit of a pause in the second quarter as we see a growing demand into the third quarter. For the latter part of your question, in terms of overall. Oh, I'm sorry, not in inventory. Overall, unit revenue growth for the year, we do see a strong year. We only guide one quarter at a time. We do see robust full-year endpoint IC growth. You know, the industry unit volume CAGR going back over the past decade has been between 25% and 30%. We don't see any reason why that unit volume CAGR is going to change given the demand we still see out in the market. Understood, Chris. Thank you for the clarity. For my second, and I guess last question, I'll get back in queue. I wanted to ask about the second logistics customer. Mm-hmm ...presumably they'll be taking billions of ICs. Why, I guess, would we not see the benefits sooner than later? I guess I'm asking about the lag between depletion of inventory for that customer and the inlay partners and the resumption of orders that you might see from the inlay partners. Another question we get is, how much share do you keep at these kind of applications with, like, let's say, the second logistics customer? Sure. To answer the first part of your question, the timing of the deployment is currently a ramp. It's early days for that deployment, but there are significant systems efforts going on now on, as I mentioned in my prepared remarks, the printer-encoder side to put printers in the facilities to be able to encode the labels. There's other efforts around other parts of the reading infrastructure. You should really be thinking of that deployment as ramping, and we are a bit delayed relative to our expectations in terms of, in terms of where the ramp is. In terms of our share at those deployments, as you know, we have been working very hard to advance our entire platform to enable solutions for these enterprises. That solution includes many elements of our platform, including our endpoint ICs, to basically use our know-how, our entire platform, the better together combined performance of our overall systems, to advance our platform and our ability really to meet the end customer's needs. To the extent that we can deliver against those end customer needs and outperform the competition, I expect us to maintain very good share of those accounts. Understood. Thank you, Chris. Okay. Thank you, Harsh. The next question comes from Jim Ricchiuti with Needham & Company. Please go ahead. Hi. Thank you. I just wanted to go a little bit more deeply, if we can, into the delays that you're noting, you know, with respect to some of these enterprise deployments. Can you give a sense how many customers we're talking about? You know, how confident are you that these delays are, you know, partly a function of supply chain challenges that you've experienced? You know, I think there's obviously some macro headwinds out there. How confident are you that it's not the latter? Thanks, Jim, for your question. To answer your question, we are confident in those deployments. We see no indication that they're pulling back, and in fact, we see strength in systems and in systems demand to be able to service the infrastructure needs for those deployments. As I mentioned in our prepared remarks, you know, we just won the third phase of the deployment at the visionary European retailer. We're seeing significant reader IC demand into the second-largest North American supply chain and logistics customer, to build out some of the infrastructure. We are confident those programs are going forward, and we're confident in our position at those accounts. The delays are built on many factors, one of them being just the, you know, the headwinds we faced earlier in terms of product availability. It's not just the endpoint IC product availability, it's systems product availability as well. Delays in that product availability certainly impacted the timing of those project ramps, as did, as I just answered for Harsh, the sheer size and scale of what these enterprises are attempting. I feel very good about the opportunities. Of course, you know, we're in regular engagement with these end customers. We are confident in the future. As I said just a minute ago, we still expect to see significant full-year endpoint IC growth. Just given the timing and pace of some of these large deployments, things have moved to the right just a bit. The move to the right is measured in months. We're not talking a huge move to the right. We're not talking multi-quarters here. We're talking months. Got it. My follow-up question is just regarding the 300 mm post-processing. How satisfied are you with the pace at which you're scaling this? Because it also appears to have been, you know, one of the nagging issues that's been holding you back a little bit. Correct. We have built out our post-processing capability to get ahead of the demand from these enterprise deployments. I do not anticipate us being limited by post-processing capacity in the second half of this year. We're getting caught up on wafers. By the end of the quarter, we'll the 300 mm wafer availability will finally have caught up to demand. Our goal is not to be limited by post-processing or by wafer availability in the second half of the year. I believe we will achieve that goal. Thank you. I'll jump back in the queue. Okay. Thank you, Jim. The next question comes from Mike Walkley with Canaccord Genuity. Please go ahead. Great. Thanks. Maybe I'll start with Cary. Just wanna dig into the inventory a little more. You know, it's the highest in company history. Is there, like, some system side in there that, you know, are nearly done, and you're just waiting on some stubborn components? Is this overall where you want inventory going forward as you're building up capacity, you know, for that endpoint demand, or should it come down a little bit? Just trying to get a feel for is this the right inventory level going forward or do you think you maybe need to build even more? Yeah. Yeah. Thanks, Mike. It is a record inventory level. I would also remind you it's also a record revenue for Impinj as well. Most of the growth, as I noted in my prepared remarks, were endpoint IC, specifically raw materials and WIP. You know, as we think about our strategy, Fortune 500 companies rely on Impinj to supply RAIN products that they're using to transform and run their business. You know, it's no secret that we let them down in 2021 and 2022, where we couldn't get enough supply, and we don't wanna do that again. We're on a path to build appropriate level of inventory that supports growth expectations and also incorporates our foundry partner signal of wafer tightness in our nodes in 2024. Today's backlog, which comprises non-refundable, non-cancellable orders with request dates primarily in 2023, significantly exceeds the level of inventory that we have today. We're comfortable with where we are. We expect to build a little bit more in front of these growth opportunities. Mike, this is Chris. I mean, I'll just add, just to reemphasize the point that Cary made, our inventory growth is being built on program growth that we're seeing at these Fortune 500 enterprises. New programs, new expansions, significant program expansions that we wanna make sure go forward, and we're building the appropriate inventory to be able to service those opportunities. Great. Thanks. For my follow-up, Chris, that kind of feeds into it. You seem confident in that second half of the year ramp. Now that supply demand's starting to reach balance into the second half of the year, you know, can you maybe remind longer term investors just that seasonality of your business that tends to be stronger in that third quarter and maybe how we should think about seasonality in the, in the second half of the year? Yeah, great question, Mike. This is Cary. I'll take that one for Chris. Yes, historical seasonality has been such where endpoint IC revenue and volumes peak in Q3 before declining in Q4. That's a result of our largest vertical being retail apparel. Today, we haven't seen normal seasonality in a couple years now, probably three years at this point. I'll provide a little bit more color on how we see the business progressing, the endpoint IC business progressing today, starting first with we continue to expect strong full year endpoint IC growth. Our 2023 growth continues to be underpinned by enterprise program and expansion and new use cases that are significantly leveraging our platform solutions. We're now modeling Q2 endpoint IC revenue flat because as Chris mentioned, some of those big programs have slid to the right by about a quarter. As a result, our growth expectations have also time shifted for about a quarter. Growth that we expected in Q2 moves to Q3, and Q3- Q4, et cetera. Accordingly, we expect endpoint IC revenue to grow sequentially in Q3 and then again in Q4, so different than historical seasonality. Great. Thanks. Last question, just a logical one. On the systems side, with some of these things paused, will that have a decline maybe mid-year and then grow again? How are you thinking about the systems business? No. A quarter ago, we guided systems to be flat in Q2 because we anticipated improving component supply. That supply has improved, but we're guiding Q2 systems down slightly sequentially because we're prioritizing supply for the third phase of the European retailer self-checkout and loss prevention deployment because a few components remain stubbornly tight. That deployment will begin in Q2 and then ramp in the back half of the year. As a result, we anticipate second half systems revenue to exceed the first half. I think here, I think Q3 and Q4 follow typical seasonality where systems business is strongest in the fourth quarter. That's helpful. Thank you very much. Thank you, Mike. As a reminder, to ask a question, you may press star and then one. The next question comes from Natalia Winkler with Jefferies. Please go ahead. Hi. Thank you for taking my question. I wanted to ask Chris if you can help us with some color on the retail apparel and penetration. Trying to figure out here if how has that changed over the last couple of years. How has the attach rate for the Impinj IC tags has changed? Trying really to understand if we should expect the retail business to now kind of trend together with the retail industry. If the retail inventory's build may be now kind of showing for you as well. Thank you, Natalia. We have estimated the retail apparel attach rate at between 20% and 25%. Yes, I think it's fair to assume that, you know, if you look at probably 2/3 of the endpoint IC market demand today before these new opportunities ramp, is probably tied to retail apparel. As the retail apparel market goes, a significant portion of the RAIN RFID demand goes. When I say goes, I mean in a positive way. It goes up, we go up. It goes down a little bit, we go down a little bit. What we saw a bit of in first quarter was more retail apparel inventory digestion than we and our partners had previously expected. A little less pull-through of endpoint ICs, therefore, our partners begin being able to build healthy levels or getting to healthy levels of inventory. We still see a bit of inventory growth in the second quarter. If retail apparel demand is to pick up in the second quarter, some of that inventory growth in second quarter will turn to pull-through. We are carefully watching the retail apparel market because it provides a pull for a significant portion of the endpoint ICs that we deliver today. We do see significant retail opportunities still ahead of us as we talk about the second act. I I mean, as we talked about the visionary European retailer, and it's opportunities like that and others, including for our self-checkout and loss prevention use case, that we think will keep driving retail apparel attach above the 25% rate. That's very helpful. That's very helpful. Thank you. For my second question, Chris, would you mind providing a little bit more color on the acquisition you guys have made and how should we think about it from the strategic kind of your portfolio, stance? I'd be happy to. Voyantic is the industry leader in solutions to ensure inlay quality, reliability, and readability. We acquired Voyantic for that skill set, particularly as it pertains to our enterprise opportunities, the ones we've been talking about. This business transformation relies specifically on that inlay quality, reliability, and readability. We saw an opportunity here with Voyantic, a known leadership team, a known team overall, significant strength in RAIN RFID, very experienced team, and really key to ensuring that the labels that go into the enterprise solutions and, you know, there are partner labels and partner inlays, but they really form part of the overall solution we as a company are focusing on delivering. We want to be there with our partners, helping them and our enterprise end customers ensure the quality and reliability and readability of those products. Basically, we wanna continue to have more pieces of the solution to make sure the solution works. That was where the Voyantic acquisition fit, and we are thrilled to have them as part of the Impinj family. Thank you. Thank you, Natalia. The next question comes from Scott Searle with Roth MKM. Please go ahead. Good afternoon. Thanks for taking my questions. Maybe quickly to dive in on the OpEx, I want to get a couple of clarifications. It sounds like sequentially, things start to flatten out a little bit there. Could you talk about what the expectation is in the second half of this year, net of litigation? Could you recap for us again the litigation expectation in the first quarter and the second quarter? Scott, this is Cary. Thanks for the question. I highlighted in my prepared remarks that litigation-related spend was $4.2 million in the quarter. It was a little bit higher than we thought, just because the timing of deliverables to the court got pulled in versus what I had thought would happen early when we built the guide. As you think about our OpEx for the quarter, you know, adjusting for legal spend in the second quarter, adjusting for the incremental OpEx associated with the Voyantic acquisition, we expect OpEx to decline in the second quarter. Then if you look to the second half of the year, we expect third quarter and fourth quarter to be below the first half run rate for OpEx. I can't, I can't put a timeline on the legal spend that follows the path of the courts, but I will continue updating you on how that factors into our expense. If you were just to back out the legal spend, the litigation-related legal spend from our first quarter and just do the straight math on it would suggest an 18% operating margin for the business. Gotcha. Helpful. If I could just to follow up on the acquisition, what does that do? Are there some other metrics around it in terms of number of employees? You know, what do you expect that to do to the revenue opportunity on a per customer basis, and/or if you're kind of dipping your toe in a little bit into what your inlay partners do, or is this something that's welcomed by them? Lastly, if I could, the pipeline for the systems opportunity, it sounds like phase III rollout is certainly gonna be favorable in the second half of this year. I'm wondering if you could address how else that pipeline is filling up on the system side with new projects, diversifications into other industries, applications, and use cases. Thanks. Okay. There, Scott, thanks. There's a lot in that question. I will take the Voyantic financial impact, and I'll hand it to Chris. Scott, I think probably have Jeff talk a little bit about the pipeline. Okay. All right. The way to think about Voyantic, it's a small tuck-in deal. We have high hopes to grow the revenue from it, but it's small revenue at this point. It will be reported in our systems line. It is a gross margin that will be accretive. Think of it as at the top end of our systems business. We'll expect, you know, a little bit of a lift from it as that revenue line grows. Scott, this is Jeff. I'll just speak a little bit to the systems pipeline. The systems pipeline remains strong and is building in its diversity, both by industry sector and geographic. There's still lots of opportunity in our focus industry sectors, retail and supply chain and logistics. In retail, as Chris noted an increasing focus and interest in the area of enhancing the shopper experience via self-checkout and the related and important role of loss prevention in supporting that shopper experience. In supply chain and logistics, all the way from freight to small package, it's clear that the industry is embracing the RAIN RFID opportunity to improve visibility. I'm excited about the plans for new offerings to those supply chain and logistics customers that provide premium visibility and new revenue streams for those supply chain and logistics leaders. As was noted in the script, I'm also encouraged by the progress of the pipeline with respect to Impinj Authenticity. We're seeing our partner ecosystem and leading enterprises embrace the unique and differentiated approach to authenticity, and I think that creates another growth trajectory for Impinj. We're seeing emerging opportunities in food traceability, reducing waste, optimizing freshness, in particular in high value elements of the food industry like proteins. Pharmaceutical organizations are investigating supply chain safety and traceability to protect brands and consumers. Finally, I would say, increasingly, sustainability and the circular economy are becoming key growth opportunities for us in that inventory visibility is really at the sort of the foundation of knowing everything about everything that you manufacture, transport, and sell. When you have that visibility, you can begin to optimize your supply chain, which delivers real value into sustainability initiatives. The circular economy, when you're able to know more about each particular item upon its return into the economy for recycling or reuse. I remain very optimistic and bullish about the growing opportunity across industry sectors and geographies. Great. Thank you. Thanks, Scott. Thank you, Scott. The next question is a follow-up from Jim Ricchiuti with Needham & Company. Please go ahead. All right. Thank you. I think we appreciate the growth trajectory out there for the endpoint IC business. I'm wondering, and you may spend time on this, I assume you'll spend some time on this in June at the Investor Day. How should we think about the pipeline, the line of sight, the growth prospects in the systems area of the business? Yeah. Jim, on the systems side, obviously, we have the pipeline of opportunities we speak to, the specific ones, for example, the visionary European retailer, the Asia-based global retailer, the second largest North American supply chain and logistics customer. We're also driving new opportunities, as Jeff just mentioned, around Impinj Authenticity, which is a whole platform offering that uses our readers, our reader ICs, and our cloud service at the back end. We see systems pipeline strength in retail, specifically for those use cases that use fixed reading, authentication, supply chain and logistics. Of course, we have our partners driving all kinds of other opportunities that in myriad verticals, everything from building materials to the, you know, the bookstore opportunity that I spoke about in my prepared remarks. We're very excited about the opportunities ahead and, look to strong systems demand, and we look to delivering full platform offerings that, by which our systems provide pull for our endpoint ICs to make a complete solutions offering. I hope that answered your question. It does. It's been lumpy, Chris, as we know, this has been. Yeah. a somewhat lumpy business because of the deployment of some of these customers. Should we think of this as a double-digit growth business? Jim, this is Cary. It's hard to put a% growth on it like that because of the lumpiness of this business. Now, our growth has been depressed in the last several quarters because we haven't been able to get supply. We're entering or we anticipate exiting Q2, entering Q3 with pretty substantial reader backlog that we've just been unable to support. We expect second half systems business to be greater than first half. We'll certainly grow in the second half of the year. I think the better way to think of it is that the systems business enables endpoint IC volume. As we continue to push down the platform solution path, it will enable endpoint IC volume for Impinj because we're unlocking new features and new functionality that's only available in our readers when combined with our endpoint ICs. That's how we think of the systems opportunity going forward. Got it. Thank you. Thank you, Jim. This concludes the question- and- answer session. I would like to turn the conference back over to Co-Founder and CEO, Chris Diorio, for any closing remarks. Thank you, Operator. 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 very much. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.