Welcome to the Impinj Fourth Quarter and Full Year 2022 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. 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. Also, we will host an Investor Day on June 13th 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 the 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. And 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 the second half of 2023 due to wafer delivery timing and teething issues as we ramp our expanded 300 millimeter 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 retailer's self-checkout and loss-prevention deployment and 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, and we do not expect supply to normalize until the second half of 2023. Like for the fourth quarter, we entered the 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 the 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 300 millimeter endpoint ICs. They expand 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 a strong first-quarter revenue and 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's self-checkout deployment also generated meaningful fourth-quarter revenue. And 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 is 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, and 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.

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 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 the 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 the 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 expenses were $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, 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% and 53%, with the sequential reduction due to a lighter mix of E-family reader ICs and unanticipated costs in both 300 millimeter endpoint IC post-processing and reader components. We are actively addressing these elevated costs and anticipate gross margins to return to our targeted 53% to 54% range in second-quarter 2023. Looking further ahead, we see gross margin stabilizing in that 53% to 54% range until product innovations create opportunities for gross margin accretion. Second, our business model demonstrated significant 2022 operating leverage. And 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.

Thank you very much. We will now begin the question-and-answer session. 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 some of the constraints both in your IC business as well as your system's business. But at this point in time, what kind of visibility do you have? 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? And I guess on the demand side if you can talk a little bit about what you're seeing from a pricing perspective and how you're thinking about volume, particularly across the logistics supply chain, and retail. That would be super helpful. Thank you.

Thank you, Toshiya. I'll do my best to address that question. I'm looking at Jeff and Cary for some help because there's a lot to consider. To begin, in 2023, we expect to see significant growth in endpoint IC volume. Despite the challenges posed by the macroeconomic environment and ongoing inventory reductions from retailers, we perceive long-term growth opportunities for our industry. We also have a solid backlog as we enter the year. There is substantial unmet demand in the market due to programs that were either delayed or could not be fully initiated in 2022. We're also observing increased supply from our foundry partner. As I mentioned earlier, this increased supply is being ramped up. Our post-processing capabilities are also increasing. However, we will still be operating with tight supply for at least the next two quarters heading into the latter half of 2023, and we will provide an update based on demand, supply, and post-processing conditions at that time. Overall, we feel optimistic about the current market conditions. We see growth opportunities across retail, supply chain, and logistics, among other areas. I’ll add a personal note that when we initially started in RAIN RFID 15 years ago, we had many potential programs lined up, but the technology and products were not ready for widespread adoption. Now, those programs are starting to emerge again, and we're seeing demand from various sectors, alongside the robustness in retail and supply chain. This gives me a positive outlook for 2023 and beyond. I'll pause to see if anyone else wants to contribute or if I should return it to you for a follow-up question, Toshiya. Did I address your questions?

Sure. Chris, regarding pricing, it's clear that your primary foundry supplier has raised prices across the board, affecting not only you but all fabless customers. How do you plan to pass those costs onto customers in 2023? Additionally, Cary, could you clarify the increased costs you mentioned related to post-processing in Q1? Any further details would be greatly appreciated, as well as your level of confidence in those costs reverting in Q2 and beyond. Thank you.

Thanks, Toshiya. I'm going to hand the entire thing up to Cary. So, Cary.

Alright. To address the first part of your question, yes, our foundry partner has raised prices, and those increases are currently being implemented. We plan to manage this similarly to how we have handled past cost increases, aiming to pass them on to customers to maintain our margin model's integrity. These price hikes will take effect over the first couple of quarters this year. Regarding post-processing, the decline in gross margin is temporary and we anticipate a rebound in Q2 for several reasons. Firstly, we experienced an unexpected cost increase from one of our back-end partners. During the first quarter, we are focusing on production volumes over costs to meet our customer commitments and scale amid record demand. However, in Q2, we will adjust our supply chain to regain our targeted gross margin percentage while also increasing volumes. We just need a bit more time to support this. Secondly, we are facing ongoing component challenges in our reader business. After a cancellation, we opted to pay a premium for components from an alternative supplier. Based on our current outlook, we expect to achieve flat systems revenue in Q2 with a better margin than in Q1. For these reasons, we project that Q2 will recover to the 53% to 54% range. Additionally, I anticipate that the full-year gross margin will also be within the 53% to 54% range, allowing us to recover significantly in the latter half of the year.

Great. Thanks for all the details.

Congratulations on the impressive results in this economy. I have a couple of questions. First, Cary, did you mention that the second quarter will see double-digit growth in endpoint IC? Additionally, with the healthy increase in revenues and endpoint IC, could you specify the end markets contributing to this growth?

I'll address the first question and then let Jeff take over for the second. Harsh, to clarify, in the first quarter, we anticipate low double-digit quarter-over-quarter revenue growth for endpoint IC. In the second quarter, we expect mid to high single-digit quarter-over-quarter revenue growth for endpoint IC.

Yes, demand is coming significantly from our target verticals, particularly retail and supply chain logistics. This has been supported by our efforts in packaged tracking, supply chain logistics, loss prevention, and self-checkout in retail. Additionally, we're observing broad-based growth across other verticals and opportunities, even though we don't specify those. We sense positive momentum in the market from many avenues. While not all of these will translate into immediate volumes, some programs that I had previously considered to be behind us are beginning to resurface. Overall, I feel optimistic about the market, and Jeff shares the same sentiment. We are confident about our long-term opportunities for endpoint IC unit volume and the favorable conditions we see for both our industry and our company specifically.

Thank you, Chris, for that insight. Cary, for my follow-up, I've noticed that OpEx has increased significantly. You've mentioned various factors contributing to this. Should we consider this the new baseline for OpEx going forward, or is this just a temporary increase due to several reasons in the March quarter? You have provided revenue and margin figures, but not much else beyond OpEx that affects the numbers.

Okay. Harsh, this is Cary. I think I can take both of those. So, 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 to changing our bonus to 100% cash. It is legal fees and then it's our ongoing investment in our platform. So, 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. And then as the seasonal expense abates expect our investment in our engineering team and our sales and marketing to step into that. So, 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.

And then 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, but 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.

We serve kind of the broader market in general. Denison is, of course, one of the key suppliers of labels but there are others out there. And so, we serve the broader market, which includes many other partners also. And keep going.

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. I guess my first question is just on the systems business, 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, but how should we think about just the systems business in the pipeline and maybe the second half of the year or is it too early to call once new projects might hit.

This is Jeff. I want to emphasize that our system's pipeline is robust and continues to expand effectively. We are experiencing positive outcomes from several large enterprise deployments. Success in these initial deployments opens up chances to grow within those accounts as well as other enterprises in the retail, supply chain, and logistics sectors, which represent significant areas of growth for Impinj. Now, I'll let Cary discuss the timing and revenue impact for 2023.

Yeah. Mike, thanks for the question. We signaled that we expect similar systems revenue in Q1 that we delivered in Q4. And 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. Now 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. So, as that Phase II 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. So, 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. So, 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.

Right. That's helpful color. And for my follow-up question, maybe for Chris or Jeff. Just how is the customer feedback for Impinj authenticity now that you've had a quarter that rolled out and 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 you asked the question. I'm very encouraged by the growing interest among our solution partners and an increasing number of enterprise end customers who are engaging with Impinj's authenticity solution engine. This is an innovative and differentiated platform that provides cryptographic product authentication to protect brands and consumers. The pipeline is expanding nicely. Of course, predicting the timing and pace of those opportunities is challenging. However, I feel even more optimistic today than I did last quarter about our potential to build recurring revenue from endpoint ICs and to create new service revenue opportunities in the long 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 does matter of think of any early successful technology that hasn't rolled out security, you'd be hard-pressed to find one. And here, we're the first ones to truly launch an endpoint IC design for broad-based adoption that has a cryptographic engine and the key in it. And that cryptographic engine and the 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, because we get better and better at doing this, there will be a key in every single IC, there needs to be. It’s just how technology goes. So, we're excited about where we stand today. We're excited about our pipeline, and I personally I'm excited about the long-term opportunities, not just a year or two out, but further out in time as well.

Hey, good afternoon, and thanks for taking my questions. And congrats again on the nice quarter.

Thanks, Scott.

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. And then on the systems outlook, I just want to clarify, again, it sounds like now with the 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 kind of wondering how you think that progresses then into the second half of this year. Because 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.

So, 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 exceeds supply by more than 50%. I can say that the same for this current quarter as well. So for seven quarters, demand is at 60%, supply 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 going to try and provide more color rather than just one single number going forward. But if you're asking about, did we achieve that metric again for the seventh quarter? The answer is yes.

And Scott, this is Cary. I can address the second question. Yes, you heard correctly. We now expect systems revenue to be flat through the first two quarters of the year. The loss deployment phase will conclude, and the limited supply we have will be allocated to other customers in Q2, while keeping revenue stable. I am not ready to provide guidance on second-half systems revenue just yet. We are still managing component shortages, so I don't feel comfortable extending our outlook beyond the next couple of quarters. However, once we have clearer visibility on components, we will provide an update.

Great, very helpful. And if I could, just on the big picture front, I guess two items. Following up on Mike's question on authenticity and you kind of 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? And then, Chris, from a really high level If we look over the past decade, endpoint ICs have been growing in the ballpark of 25% to 30% per year on a compound annual growth rate. We're seeing that start to inflect 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. So, 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. We're still constrained by supply and wafer availability, but that's easing. But it's just a market that's going to grow 50% for the next three to five years, do you guys have any take on that? Thanks.

Let me address the second question first, and then I'll turn it over to Chris regarding authenticity. Scott, I could make several guesses about where this market might head, and I believe there is significant demand out there, particularly among enterprise end-users rather than partners. I'm optimistic about the market, the opportunities, and growth not only in our core vertical but also in adjacent ones. However, I don't feel confident enough to predict that the market will deviate from the historical trends of 25% to 30%. It is possible that it could change, and if it does, we will update you. For now, the most accurate forecast I can provide is that we expect to see those historical trends of 25% to 30% continue going forward.

Hey, Scott. This is Cary. I can take the question. I’m sorry.

Yeah, go ahead.

And Scott, unfortunately, my answer on the authentication model is going to 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 authentic and extreme endpoint IC some as early as Q1, but very small quantities at this stage. So it won't really hit the radar. So, give us a little bit of time before we can provide clarity on that. And go ahead, Jeff.

I want to express my optimism about the innovative approaches taken by our solution partners who are integrating cryptographic product authentication into their offerings. We are currently engaging with leading enterprises to explore how they perceive the value created by incorporating product authentication into their service and product portfolios. During these discussions, these enterprise customers are suggesting imaginative ways to attribute value to both endpoint IC recurring revenue and services revenue, and how we, along with them and their partners, can collaborate in building that value. It is crucial that as we develop this emerging opportunity, we attentively listen to enterprise customers about how they generate value and recognize the role of the Impinj authenticity solution engine in that process, ultimately determining how we can co-create and share that value.

Okay. Great. Thanks so much, guys. Great quarter.

Okay. Thank you, Scott.

Thank you.

The next question is from Jim Ricchiuti of Needham and Company. Please go ahead.

Hi, good afternoon. This is actually Chris on for Jim. Congrats on the quarter.

Thanks, Chris.

Could you talk about M700 as a percentage of the mix and how you expect that to progress over the next few quarters?

We do not provide a percentage breakdown of our different product families. However, I can tell you that the volumes for our Impinj M700 family are increasing. These products are our latest offerings, and we are focused on investing in and enhancing our post-processing capacity. Our future growth is centered around the entire Impinj M700 family, so you can expect a greater emphasis on these volumes as we move forward.

Great. And 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? And 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 in M781 as kind of core element of the M700 product family and just expanding the breadth of the offering. So, if something notable comes up like we have a particular win that gives them expect us to come forward with it, otherwise, we won't be breaking it out separately, but we're excited about the introduction because those particular ICs open up just a broader range of opportunities for us.

Hey, gentlemen, also my congratulations as usual. I'm just going to ask one quick question here, it can be for Jeff or for Chris? But I'd like to just chat a little bit about the pipeline and specifically logistics. We know you've got the big first customer and the marquee second customer, but we've always talked about others waiting in the length and it has to be apparent now that this big marquee customers clients success moving forward. So, just curious if you could talk about big opportunities there. Do you think we will be talking about a third logistics customer in 2022?

This is Jeff. I can't discuss any specific customers, but when leading companies announce their investments in RAIN RFID and the benefits they are experiencing, it's likely that others in the industry are paying attention to those developments. I can say that our pipeline in supply chain and logistics is continuing to grow well. However, as always, the pace and timing of these opportunities are difficult to predict. I see more businesses in that sector beginning to explore planning for and ultimately implementing solutions that will enhance their future business value.

And Tory, expect us to keep investing in this logistics opportunity because we truly think that it's about whether opportunity for us, specifically, given the solutions that we're bringing to market.

Yeah. Very well guys, thank you so much for all the color, I appreciate it.

Thank you. 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 remain safe and well. Thank you.

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