Conference Transcript - PI 2026-06-02

Mark Lapatzis, Analyst — Evercore ISI

well um thanks uh everybody and welcome to the evercore annual tmt conference for our first inaugural conference here in san francisco my name is mark lapatzis i'm the senior semiconductor analyst at evercore isi and i'm very excited to have carrie baker who is the cfo of impinge so um i'm going to run through some questions but i think most of you probably know that impinge is the leader in RAINN RFID, providing the whole stack, the endpoint ICs, the readers, and support in the cloud and the software stack as well. So with that, Kerry, welcome. Thanks for joining us.

Cary Baker, CFO

Yeah, Mark, thanks for having us.

Mark Lapatzis, Analyst — Evercore ISI

Did you want to start off with any introductory comments or you would just want to go right to Q&A? Let's go right to Q&A. Okay, great. All right. So you're, you know, if we just start with the endpoint ICs, which are about 80% of your revenues. The bookings hit an all-time high in the first quarter. And on your earnings call, you mentioned that you had some concerns or uncertainty going into the second half of the year due to the macro conditions. And I wonder if your concerns have gotten worse or better as you've gone through the quarter. How do you think

Cary Baker, CFO

about macro now? Yeah, there were several factors contributing to the strong bookings in Q1. First, we were ramping the custom ASIC for our second North American supply chain logistics company. We also saw after a pretty disappointing 2025, the retail apparel market begin to rebuy. They weren't necessarily rebuilding inventory, but they weren't taking it down any lower, which is the trend that we saw most of last year. And then a micro trend within that, we saw our inlay partners move from the lower end of standard lead times to probably the higher end standard lead times, but still with orders matching demand. The question that we had and that was causing the uncertainty was exactly what you highlighted as the macro. I don't know that I have an update today on that. We continue watching for the impacts of the Iran war and inflationary pressures on all of our markets, but in particular in retail apparel. Will the strength that we began to see in our order flow continue into the second half of the year? Until we get better visibility to that i think you should expect us to continue to view second half with a prudent approach and wait till we have the visibility that we need to to to to call it like

Mark Lapatzis, Analyst — Evercore ISI

that okay fair enough and then um i think one of the most interesting things about last year despite it being challenging was uh that you gained 17 points or 1700 basis points of market share uh in 2025 in endpoint ics how did you do that and is that sustainable yeah our strategy

Cary Baker, CFO

is to leverage both ends of the radio link to deliver solutions to our customers especially our enterprise and our lighthouse customers that were previously unsolvable we think our our know how on both ends of the radio link is our competitive advantage and that's why we can deliver those solutions and you're seeing us bring those solutions to market in a couple different ways first with gen2x which is an embrace and extension of the current standard communication protocol so think of this as driving greater efficiencies and read range or read accuracy in the ICs by working more closely with the read points the reader ICs or the readers and gateways and then also think of this strategy manifesting in our platform solutions whether that be loss prevention for a visionary European retailer or the custom ASIC and custom reading environment for our second large supply chain and logistics strategy. Our objective with this strategy is to gain more share and that's why we're delivering those solutions because we think we're the only ones that will be able to do that. Now if I look at 2025 to 2026 there is one other factor that I think is worth highlighting. In 2025 we think there was a material amount of competitor ICs that were burned down, excess channel inventory that came out of the system. So we'll watch that sell in versus sell through dynamic in 2026 but it's another factor that we're looking at in the

Mark Lapatzis, Analyst — Evercore ISI

very near term okay all right good um and uh i want to ask you about the custom asic uh business at your your second largest north american supply chain logistics company it seems to be a near-term catalyst of the volumes i think are expected to double in the second quarter what is what is the implication of making an ASIC? Normally when you think about a standard, RAINN RFID as a standard, you would imagine that your customers may want to have an opportunity to source from a lot of different suppliers. And so what does this mean? What should investors think about when they think about you making an ASIC for one of your customers? So think of this as a byproduct of our

Cary Baker, CFO

annual semi-annual technology summits we have with this end customer where we talk about their RAIN RFID deployment what's going well what's not going well what is the art of possible and in in this most recent summit the second last year's summit actually what early 2024 they highlight a couple challenges that we thought we could solve with a custom ASIC so we took the M800 platform we pulled out what they didn't need and added features that they did need one One example would be countering fraudulent labels that enter their ecosystem to get shipped without ever being billed for. So we're able to solve that not only in the custom ASIC, but working together with the read points that are throughout their infrastructure to counteract that counterfeit activity. There are other examples of technology and features that we've put into it, but think of it as tuning it to their solution. Now, the real exciting piece of this is this customer has done an amazing job of driving efficiencies throughout their organization. They're now looking to take that know-how to their customers and deliver a supply chain solution to their customers. The opportunity for us is to help facilitate that with anything spanning reader ICs and readers to software to also extending the footprint of our custom ASIC. So it's a very exciting opportunity at multiple levels for us.

Mark Lapatzis, Analyst — Evercore ISI

And how does this impact your business model from a profitability standpoint?

Cary Baker, CFO

Think of it as part of the M800 platform, which will contribute the 300 basis points of gross margin accretion that we've been talking about for some time.

Mark Lapatzis, Analyst — Evercore ISI

Gotcha. And then is this something that investors should expect to see more of? Is there a way to unpack the contribution from the ASIC business versus the standard products business? And how should we think about, are there more opportunities for you to do that? Would you expect to do more ASICs for different customers?

Cary Baker, CFO

It's too early to unpack at this stage. But we would definitely be open to leveraging our know-how to build custom ASIC. But it has to be a unique opportunity. You think about this logistics provider. We have a deep technological relationship with them. Our engineers work hand in hand in bringing the solutions to life. We would need that type of engagement. It would have to be that type of an opportunity for us to do additional custom basics. But it's certainly something in our arsenal.

Mark Lapatzis, Analyst — Evercore ISI

So I think you can't have a conversation about your business without talking about Walmart just because they're so important and validating for your technology. Can you just give us an update, like where is that program today? I think Avery Dennison mentioned that Walmart was the biggest part of their intelligent label segment and with a significant ramp expected in the second half of the year. I think you had mentioned that there's a phase three that should be announced sometime this year. where where are we in the ramp here yeah can you give us an update yes so think

Cary Baker, CFO

of Walmart as having rolling out three major categories some of which are rolled out in phases the first major category was launched in late 2019 early 2020 and that was retail apparel today retail apparel is fully deployed at Walmart the next category that they rolled out was general merchandise across two phases so far. These phases covered home goods, electronics, toys, stationary, a variety of other categories. Phases one and two got off to somewhat of a slow start, first due to supplier tagging readiness and then due to the tariff whipsaws that we saw last year and in 2024. Phases one and two are not fully deployed yet, so there's still room to grow in phases one and two, which we expect to see some of that in 2026. Beyond that there's a lot of work in the ecosystem around going on around standing up a phase three which we continue to expect at some point this year. Now we'll wait for Walmart to announce the timing and the categories that are included in that phase three but we're very excited about the next potential phase of general merchandise. And then the the final category that Walmart is working on is food and think of this as items that are prepared and packaged inside the store so walmart team is actually doing the work so this is bakery proteins and deli a lot of work going on here at this point it's still in the the multi-store pilot stage and we're waiting for them to announce the timing of when

Mark Lapatzis, Analyst — Evercore ISI

they want to roll that out broadly okay so that uh hopefully it's on the come yes gotcha all right and when we talk about food um i think you know when we originally did the estimates of the tam and I think you guys may be the only pure play on a multi-trillion unit TAM at least that we cover it seems like food is would be an important contributor to that kind of a TAM and I think you mentioned a European grocery opportunity as the first meaningful full store here where you potentially are tagging every item with a consumer a checkout can you talk about this opportunity? When would you expect to see revenue contribution? And then could you talk about like the challenges with ramping this kind of an opportunity?

Cary Baker, CFO

Yeah, so food is far and away the largest opportunity in front of us. Logistics, as just by comparison, we think of as a 400 billion unit opportunity per year. Just packaged goods and food are measured in the trillions, the multiple trillions of opportunity so it's on a very different scale where most of the work today in food is as kind of where Walmart and Kroger are focused where they control the supply chain their packaging producing labeling everything inside the store so when I say bakery it's not full bakery it's not the bag of Wonder Bread that comes in it's the loaf of French bread that the store makes behind the counter so it's a subset of that category the the grosser opportunity that you reference as a full store is a completely different opportunity in terms of size. This grocer wants to go from straight from the perishability all the way to self-checkout. In order to do self-checkout every item in the store needs to be tagged. Not just the loaf of French bread that you made, not just the bag of Wonder Bread, but also the box of cereal that's in the middle of the store and the can of beans that are in the middle of the store. So in terms of size, the opportunity is significantly larger. Now, why this grocer can go to that point is they are heavy mix of private label. They control their supply chain. So they don't need to go negotiate with the big CPGs to put a tag on a box of cereal. They have their own brand of that cereal and can make that decision for the supply chain. So much different opportunity in terms of size and scope. Now where we are today in front of this massive opportunity is still very early days. Most of the work that's been done to date has been in the lab developing the proof of concept. The customer set up readability targets that we and our ecosystem partners needed to achieve in order to move forward and only recently we were able to not only achieve but to exceed those readability categories. Now the next step for this program is to go into a single store pilot and planning has begun for that presuming success in a single store pilot it will likely go to a multi-store pilot before we start talking about a broad rollout so a lot of work left to do against this opportunity but if we're able to solve it here to solve self-checkout at a grocery store where every item needs to be able to be tagged to be able to solve how to tag a box of cereal how to tag a can of beans we can take that and replicate it with every grocer across the across the globe or across our markets at least and if we can do that then we stop talking about the tens of billions of items that we ship today and we can start talking about that trillion item opportunity that's in that's in front of us this it's I have

Mark Lapatzis, Analyst — Evercore ISI

to say on two dimensions it's it's remarkable because the can you talk first about the economics for your customer here like what what is the perishability like what what is the potential that you can save your your customer in this and then can you talk about like operationally like how do you get everything tagged to realize the you know what comes out on the checkout side

Cary Baker, CFO

Yeah. So in terms of the ROI, it's measured in multiple different vectors. It's measured in just food waste. It's measured in revenue because you know what's on the shelf, what's not on the shelf, what's getting ready to expire that can be marked down and move to the end cap with an orange sticker. One, and we're still, I don't have the quantitative metrics yet because it's just not available at this point, but one example of ROI that I heard at NRF this year was when one of the Kroger executives was talking about their food deployment, and he highlighted that in just the bakery department, at the beginning of every day, the bakery employees had to go out and inventory the items on the store floor to help inform what the production cycle was going to be for that morning. and that was a process that took multiple hours and he said with RFID they were able to take it down to a couple minutes to inventory all that source so just a massive labor savings and efficiency so that's from an ROI perspective with self checkout I think there's going to be a huge customer experience benefit as well and we've all been to grocery stores to do today's version of self checkout where you have to find the barcode or you have to look up the code for the garlic and then weigh the garlic and then put it into your bag. The self-checkout that we're envisioning today looks much more like a Uniqlo self-checkout where you walk up, you drop your items on a bin, in this case it'll probably be a conveyor that goes through a tunnel, but the items are immediately scanned, the screen is populated, you hit the green button to purchase your items, you bag them and you walk out. So a much, much more efficient and seamless customer experience at self-checkout that most of us just can't imagine today.

Mark Lapatzis, Analyst — Evercore ISI

It seems like a remarkable opportunity, but like a huge, huge effort to get that to happen. So you've talked about, I mean, we can't talk to a semiconductor company without talking about the cycle. You talked about confidence that the restocking has started in that your supply chain is lean. Can you talk about that a little bit? What gives you confidence

Cary Baker, CFO

that that is where we are in the cycle? I don't think restocking has happened just yet. I think rebuying has happened. The distinction being over the last multiple quarters, we've seen retailers bring their inventory levels down. We are now seeing rebuys where they're not bringing their inventories down any further but we haven't started rebuilding their inventories yet. So at the end customer level that's the behavior that we see going on. If we look at our channel, the first layer of inventory, we entered the year with excess channel inventory mostly around our planning around our logistics provider. We corrected that coming out of the first quarter and entered Q2 healthy. When we look at our channel inventory and we look at our order patterns right now, we think that the orders are matching demand. So we don't think we're building inventory within the channel. This is obviously something that's been a challenge for us in the past. Most recently in the last couple years, it's been related to a single customer. It hasn't been broad-based, but it is something that we continue to watch via our monthly channel inventory reports, via our planning with our end customers, via our channel checks with the service bureaus.

Mark Lapatzis, Analyst — Evercore ISI

Gotcha. And when you talk about, when we think about you guys, we think about like, you know, you kind of have a big announcement with a big customer, and then you kind of ramp, and you go to a next level in revenues, and then you announce another customer, you go to a next level in revenues. Appreciate that, you know, you have more stages on Walmart to ramp but can you talk about like the pipeline more broadly like like how many different opportunities are you prosecuting where are they in in the pipeline when when could we expect to see another kind of like big announcement or deployment um happen for you yeah i think the

Cary Baker, CFO

bulk of the activity in our pipeline right now is focused on logistics it's focused on food and it's focused on general merchandise there are new retail deployments that get announced every quarter but we're in for handheld inventory visibility in the retail space we typically don't get very involved that the partner ecosystem can handle that and set those up on their own but when we start moving into fixed or autonomous reading that's where we're starting to lean in or we continue to lean in to help our customers it's really hard to predict what a program goes from from the lab to a pilot and then to a multi-store pilot and then to a broad rollout what we have historically seen is that cycle is long when a customer makes a decision the broad rollout takes time the first 20 percent takes a long time because you're the customers learning how to do things for the first time there their employees are learning how to use an RFID reader which looks an awful lot like a barcode reader but it's still a different motion You no longer have to basically touch each item. You can just walk up and down the aisles. There's infrastructure that needs to be rolled out. It just it takes some time, but going from 20 to 80% of a deployment goes really fast. You've got the foundation you can move forward and then that final 20% is really when you get to the edge cases. We haven't solved this tagging for this item or this part of the store needs better readability how do we solve for that those those just takes a little bit

Mark Lapatzis, Analyst — Evercore ISI

to get over the finish line gotcha the ROI seems to be not the challenge it's

Cary Baker, CFO

the changing of the business process that's right and the ROI begins very early on that process and even a partial deployment will generate an ROI and that that helps alleviate some of the customer pain of going through that first 20% is because every increment that they make they are earning an ROI and

Mark Lapatzis, Analyst — Evercore ISI

I think that will have to be the last word Kerry thanks for joining us in San Francisco this year appreciate the participation support thank you mark

Cary Baker, CFO

thanks for the opportunity thanks