Earnings Call Transcript - PI Q4 2024

Tracy Moran, Senior Investor Relations Manager

Thank you, Nick. Good afternoon, and thank you all for joining us to discuss Impinj's fourth quarter and full year 2024 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 2024 financial results and first quarter 2025 outlook. We will then open the call for questions. Andy Cobb, Impinj's Vice President of Strategic Finance, will join us for the Q&A. Hussein Mecklai, who normally joins us unfortunately has the flu, so cannot be here today. 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. Whereas 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. All balance sheet and cash flow metrics, except for free cash flow or 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 14th Annual Technology Conference on February 27 in New York, the Cantor Global Technology Conference on March 11 in New York and the 37th Annual Roth Conference on March 18 in Dana Point. We look forward to connecting with many of you at those events. I will now turn the call over to Chris.

Chris Diorio, Co-Founder and CEO

Thank you, Tracy, and thank you all for joining the call. 2024 marked our fourth consecutive year of double-digit revenue growth and another yearly revenue record. Underlying that growth was market strength in retail apparel, general merchandise, and supply chain and logistics. Our endpoint IC unit volumes grew 34% over 2023. Our top line growth, combined with strong operating leverage and our favorable litigation settlement, drove record annual adjusted EBITDA and free cash flow. 2024 also ushered in two major market catalysts. First, the start of item-level food tagging; Second, Impinj Gen2X, which dramatically expands the landscape of enterprise solutions we and our partners can deliver. The long-term secular tailwinds underlying our industry remain strong, and our leadership position in it is as strong as ever. That said, we faced headwinds at the end of the fourth quarter that will spill into the first. Geopolitical uncertainty in tariffs, end users changing label-partner share allocations, aggressive label price shopping, and shorter ordering cycles disrupted partner bookings. First quarter impact includes some partners having extra endpoint IC inventory and asking us to reschedule orders. Compounded by no large new programs ramping in the first half of 2025, we cannot sustain our prior 34% endpoint IC unit volume growth pace in the first quarter. So, our focus is helping our inlay partners clear a few weeks of inventory and together, navigate the geopolitical and tariff landscape. And through it all, using our best-in-class products, Enterprise Solutions leadership, and Gen2X to regain momentum and increase market share as we accelerate out of a disappointing first quarter. For 2025, we continue to anticipate solid industry RAIN label expansion, driven by growth in retail apparel, general merchandise, and supply chain and logistics, buoyed by modest but growing food volumes. Recent conversations with our enterprise and service bureau partners suggest that U.S. retail demand is solid, and U.S. demand for RAIN labels is healthy and growing in the EU, if not growing, at least stable. Our E-Family reader IC order book is strong across all large partners and geographies, buoying our belief that our first quarter endpoint IC headwinds are temporary. Turning to solutions. Today, we are directly engaged with two large grocery chains, one focused on perishables and the other on seamless self-checkout. Imagine grocery checkout as easy as today's apparel checkout at our visionary European retailer. In terms of potential endpoint IC volumes, both are larger than any program that has come before, and in terms of the overall opportunity, food is huge. One, if not both of these enterprises may ramp in 2026. In general merchandise, the large North American retailer's multi-category rollout continues with compliance increasing quarterly and room to grow in 2025. In Supply Chain and Logistics, the second large North American end user increased their label volumes in 2024, and we expect modest growth in 2025 as they continue their autonomous reading journey using our E-family reader ICs. The visionary European retailer's ongoing rollout of our self-checkout and loss prevention solution grew in the fourth quarter, driving strong gateway revenue, but will decline in the first quarter as that program completes successfully. That said, our opportunity in new RAIN-based use cases with them is far from over, including their ongoing embedded tagging ramp. In addition to our direct engagements, we have partners using our E-family reader ICs and Gen2X to expand existing use cases like loss prevention and enable previously challenging use cases like always on overhead reading in retail stores. Those partner engagements further expand our platform's footprint and create multiple endpoint IC share-gain opportunities for us. Our December launch of Gen2X was a bellwether event for our industry. Gen2X dramatically enhances the performance and security of RAIN systems. The response from our ecosystem has been overwhelming, with our top six reader partners already deploying Gen2X and others, including prior competitors working with us to deliver clear benefits to end users. Gen2X is embedded natively in our M800, so unlocking it simply requires reader enablement. Gen2X enables smaller, more cost-effective M800 inlays for most use cases, but especially for cosmetics, accessories, and food, adding to our recurring endpoint IC opportunity. We already have multiple enterprises piloting and using Gen2X with more on the way. On the organizational front, Jeff Dossett, our Chief Revenue Officer, announced his retirement after eight years at Impinj. Jeff, we will miss you. But know that we will continue your mission to build peerless solutions engineering and sales teams that leverage our platform to win and delight Fortune 100 enterprises. Gahan Richardson, a seven-year Impinj veteran, will lead the sales organization. In closing, 2024 was another year of strong revenue growth and free cash flow. We delivered record adjusted EBITDA and earnings per share, successfully resolved our patent litigation, and delivered market-leading products and innovations. Looking forward, we see first quarter headwinds, but we have been through tough times before. Each time, we press our competitive advantages to emerge as a stronger company and stronger market position. This time, we are better positioned with a far more seasoned team than we have ever been to do so. As we continue driving our bold vision to connect every item in our everyday world, I remain confident in our market position and energized by the opportunities ahead. Before I turn the call over to Cary for our financial review and first quarter outlook, I'd like to again thank every member of the Impinj team for your constant effort driving our bold vision. As always, I feel honored by my incredible good fortune to work with you.

Cary Baker, CFO

Thank you, Chris, and good afternoon, everyone. When I joined Impinj five years ago, I was drawn both to the massive opportunity and the leverage of recurring silicon revenue. 2024 offered a glimpse of what that future holds with exceptional operating margin expansion on the back of strong revenue growth. We delivered record annual adjusted EBITDA and record free cash flow, while just scratching the surface of our market opportunity. Today, more than ever, I am energized by our secular demand and operating leverage potential. Fourth quarter revenue was $91.6 million, down 4% sequentially compared with $95.2 million in the third quarter of 2024 and up 30% year-over-year from $70.7 million in the fourth quarter of 2023. Fourth quarter endpoint IC revenue was $74.1 million, down 9% sequentially compared with $81 million in the third quarter of 2024 and up 37% year-over-year from $53.9 million in the fourth quarter of 2023. Although we typically see fourth quarter declines, this year was below our expectations as we accommodated partner pushout requests. Looking to the first quarter, we again expect a sequential endpoint IC revenue decline. Fourth quarter systems revenue was $17.5 million, up 23% sequentially compared with $14.2 million in the third quarter of 2024 and up 4% year-over-year from $16.8 million in the fourth quarter of 2023. Systems revenue exceeded our expectations, driven by strength in reader gateway and reader IC sales. Looking to the first quarter, we expect systems revenue to decline more than seasonally as the self-checkout and loss prevention deployment at the visionary European retailer concludes successfully. Total 2024 revenue was $366.1 million, up 19% year-over-year compared with $307.5 million in 2023. Endpoint IC revenue grew 30% year-over-year, driven by apparel, general merchandise, supply chain and logistics, the long tail of applications and licensing revenue. Systems revenue declined 18% year-over-year with reader and gateway declines more about offsetting growth in both test and measurement and reader ICs. Fourth quarter gross margin was 53.1% compared with 52.4% in the third quarter of 2024 and 50.9% in the fourth quarter of 2023. The year-over-year increase was driven by leverage on fixed costs. The quarter-over-quarter increase was driven by higher systems revenue mix and improved endpoint IC direct margins. Full year 2024 gross margin was 54% compared with 51.9% in 2023, with the increase due primarily to licensing revenue. Looking to the first quarter of 2025, we expect gross margin to decline modestly sequentially. Total fourth quarter operating expense was $33.6 million compared with $32.5 million in the third quarter of 2024 and $33 million in the fourth quarter of 2023. Research and development expense was $18 million. Sales and marketing expenses were $7.8 million. General and administrative expenses were $7.9 million. 2024 operating expense totaled $131.9 million compared with $137.8 million in 2023. We expect total first quarter 2025 operating expense to increase sequentially, driven by normal seasonal factors. Fourth quarter adjusted EBITDA was $15 million compared with $17.3 million in the third quarter of 2024 and $3 million in the fourth quarter of 2023. Fourth quarter adjusted EBITDA margin was 16.4%. 2024 adjusted EBITDA was $65.9 million compared with $21.8 million in 2023. 2024 adjusted EBITDA margin was 18%. Fourth quarter GAAP net loss was $2.7 million. Fourth quarter non-GAAP net income was $14.5 million or $0.48 per share on a fully diluted basis. 2024 GAAP net income was $40.8 million; 2024 non-GAAP net income was $62.9 million, or $2.11 per share on a fully diluted basis. Turning to the balance sheet, we ended the fourth quarter with cash, cash equivalents, and investments of $239.6 million. Inventory totaled $99.3 million, up $11 million from the prior quarter, with the increase coming primarily from endpoint ICs. Fourth quarter net cash provided by operating activities was $12.6 million. Property and equipment purchases totaled $4.1 million. Free cash flow was $8.5 million. For the full year, net cash provided by operating activities was $128.3 million. Property and equipment purchases totaled $17.1 million. Excluding the $45 million income from the litigation settlement, free cash flow was $66.2 million, driven by revenue growth and operating margin expansion. Before turning to our guidance, I want to highlight a few items unique to our results and outlook. First, endpoint IC revenue will decline sequentially in the first quarter, primarily driven by volume as our channel burns through a few weeks of inventory to a much lesser degree, yearly price reductions and product mix specifically M800 ramping at lower ASPs impact our first quarter outlook. Second, we anticipate first quarter gross margin to mark the low point for the year. Second quarter product gross margin will begin benefiting from higher M800 mix and lower-cost wafers. Third, while our January bookings exceeded our fourth quarter run rate, to be prudent, we are assuming fewer turns at the midpoint of our revenue guidance. Turning to our outlook, we expect first quarter revenue between $70 million and $73 million. We expect adjusted EBITDA between $1.1 million and $2.6 million. On the bottom line, we expect non-GAAP net income between $1.7 million and $3.2 million, reflecting non-GAAP fully diluted earnings per share between $0.06 and $0.11. In closing, I want to thank the Impinj team, our customers, our suppliers, and you, our investors, for your ongoing support.

Operator, Operator

And your first question today will come from Blayne Curtis with Jefferies. Please go ahead.

Blayne Curtis, Analyst

I guess a couple I just wanted to kind of understand the timing of which because you did kind of have a flatter December and you've been through these cycles before. Did you have any kind of thoughts that this might happen back then? I'm just trying to understand the timing when things kind of flattened out, were you sensing some inventory and then maybe can you talk about when do you see the bulk of these pushouts kind of come to you?

Chris Diorio, Co-Founder and CEO

Yes. Cary, go ahead.

Cary Baker, CFO

So Blayne, thanks for the question. So, as it relates to the channel inventory build, we built a few weeks of excess channel inventory. And we believe the cause of that was a mix between demand and timing, with demand being the larger factor. From a demand perspective, our channel inventory levels are a function of their expected demand and the bit that they build ahead of that demand. Nine days ago, we and our partners were expecting stronger demand entering 2025, and for example, the pullback we've seen with our second large North American supply chain and logistics customers was unanticipated when we guided Q4. From a timing perspective, aggressive label price shopping and end customers adjusting their inlay supplier mix has resulted in pockets of inventory because not all of our partners run with the same amount of endpoint IC inventory. And then lastly, you're probably also seeing inlay partners order shorter to shorter leading times and bringing down their inventory levels to match.

Blayne Curtis, Analyst

Great. And then maybe you can just relate this to some of the other corrections you've seen. Do you feel like you're ahead of this one anymore? Because in the past, it's taken a couple of quarters to kind of dig out. I know you said Q1 would be the bottom. I think the question is going to be how fast do you recover this year. So, I'm just kind of curious how you think about the shape of this correction versus other ones you've seen in the past.

Chris Diorio, Co-Founder and CEO

Yes, Blayne, this is Chris. I'll say a few words, and I'll see if Cary wants to jump in. When we saw the production starting in the back half of the fourth quarter, we took swift action. And as I said in my prepared remarks, we've seen this way before. We're better seasoned, we're better positioned at the time with a more seasoned team than we've ever been. We're not calling the duration of the correction that we're going to go through, but we are actively working through it. And as I said, working with our partners to burn down their excess channel inventory and emerge in a stronger position on the other side. And I personally believe that we're in a far better position to emerge in that stronger position given everything we've got going on in the market. Gen2X, Enterprise Solutions M800, we're in a strong position this time. So, expect us to accelerate out, but we're not predicting the timing right now.

Cary Baker, CFO

Yes. Blayne, I'll start by just highlighting, we only guide one quarter at a time. We're not going to hazard a guess on Q2 at this point. What we see are customers ordering with very short lead times given the market uncertainty. We are prudently modeling fewer turns in our guide input and specifically, we're modeling zero turns for our endpoint IC business. Are there scenarios where second quarter endpoint IC product revenue recovers on a smaller channel inventory headwind? Yes. But we understand that these problems are rarely a one-quarter issue. And while we see those scenarios of a potential snapback, we're going to prepare for a larger headwind and hope for a better outcome.

Operator, Operator

And your next question today will come from Harsh Kumar with Piper Sandler. Please go ahead.

Harsh Kumar, Analyst

I wanted to ask on a similar note on the success inventory. How many weeks of excess inventory do you think you have and is it spread out over a bunch of different areas or mostly concentrated in one or two sort of inlay partners or industry, however you want to categorize it? But the main question is how many weeks success inventory do you think you have?

Cary Baker, CFO

Harsh, this is Cary. I think it's a few weeks. It's more concentrated than is typical. A lot of it relates to logistics given the change in demand we see from our second large logistics provider.

Harsh Kumar, Analyst

Okay. Great. So, my second question was on that. When you talk about the change in demand, are you referring to the Amazon deal with UPS, which is now public, where the volumes will decline? Is that the large function that you are referring to as your second-largest customer?

Cary Baker, CFO

Well, Harsh, we don't name specific customers, but if you've been following the news, you know there's been changes in logistics demand.

Chris Diorio, Co-Founder and CEO

Yes. And Harsh, there's another element as well. There's been some share allocations as well. So, our M800 partners built ahead, assuming a certain portion of share; it was a share reallocation, which on top of that, a bit of a pushout has resulted in some channel inventory. And that's the bulk of the channel inventory that we need to correct, not all of it but the bulk of it.

Operator, Operator

And your next question today will come from Jim Ricchiuti with Needham & Company. Please go ahead.

Jim Ricchiuti, Analyst

You mentioned that you are not seeing significant program ramps, which is affecting the first half of the year. I understand you can't provide guidance beyond the current quarter, but could you describe what you observe in the pipeline regarding potential program ramps that might influence the latter part of the year?

Chris Diorio, Co-Founder and CEO

So, Jim, regarding our strong enterprise pipeline, I mentioned two food opportunities in our prepared remarks, and there are additional opportunities as well. Overall, we are experiencing favorable conditions for our industry, with significant growth in labels compared to last year. As we incorporate new opportunities, we anticipate robust growth moving forward. However, we are currently experiencing a lull, as there haven't been new Fortune 100 companies entering the market, at least in the first half of the year. Any developments in the second half would only mark the beginning of the process. In summary, we have a solid enterprise pipeline with considerable interest, but we are facing a temporary lull.

Jim Ricchiuti, Analyst

Got it. And Chris, with respect to the customers that are working in the grocery vertical, obviously, it's been public Kroger is doing something. Can you say whether the second grocer is a U.S.-based grocer? Or is it a European grocer?

Chris Diorio, Co-Founder and CEO

Jim, of course, we know I think for competitive reasons, we prefer not to give an answer to that question right now. But it is a large opportunity, and it's one that we've decided to work directly with that enterprise end user because of the potential built into it. I'm sorry, I can't answer directly.

Jim Ricchiuti, Analyst

Fair enough.

Chris Diorio, Co-Founder and CEO

Okay. Thank you, Jim.

Operator, Operator

And your next question today will come from Troy Jensen with Cantor Fitzgerald. Please go ahead.

Troy Jensen, Analyst

Maybe a couple here for Cary. You guys talked about aggressive endpoint price shopping. Can you just kind of talk to us about what is the ASP reductions? Or just any more insight on that?

Cary Baker, CFO

Yes. So, when we think of endpoint IC from kind of our pricing impact, which I think is really going on your question, Troy, I would say, given the current market dynamics, the negotiations came in line largely with our expectations. Our focus in this year's negotiations was driving M800 adoption; as you know, the M800 is a lower-priced SKU. So, we can expect average ASPs to come down as the M800 ramps as a percentage of our mix. The trade-off, however, comes from the gross margin line, where we expect accretion as the lower-cost M800 ramps into our volume running SKU.

Chris Diorio, Co-Founder and CEO

And Troy, I'll say a little bit more. In terms of aggressive label price shopping, there's a bit of excess overcapacity out in the market right now. And so, there's a fairly competitive market dynamic at the label level. And so, we're seeing end users price shopping aggressively, which has resulted in delayed orders to us.

Troy Jensen, Analyst

Got you. All right. Understood. And then, in conjunction with that, just Cary, you talked about gross margins being down modestly in Q1. Could you just frame what modestly means?

Cary Baker, CFO

Yes. I think maybe let's talk about the impacts that we'll see to gross margin. I did say modestly, and it will mark the low point for the year. We'll begin benefiting, as we move forward, from the M800 mix and lower-cost wafers flowing through. Now, when you construct the guide and you have the top and the bottom line, you can back into roughly what you might think that gross margin will be. But I think the key point is to understand that it will build throughout the year as we ramp the M800 and as we get to those lower-cost wafers.

Operator, Operator

And your next question today will come from Christopher Rolland with Susquehanna. Please go ahead.

Christopher Rolland, Analyst

Yes, I have a follow-up. First, regarding the price shopping comment, can you clarify whether that pricing is in comparison with your IC competitor? I would like to understand that better. Additionally, Chris, you mentioned something about an aggressive strategy—are there lower margin competitors in the inlay space? Please help me grasp the pricing dynamics you were discussing.

Chris Diorio, Co-Founder and CEO

Sure, Chris. Thanks for the question. So, the label price shopping is twofold. It's the enterprise end users to service providers and from the service bureaus to the bonders, people who actually take our ICs and put them on a label because there's some responding capacity in the market right now, and it's a pretty competitive market. There's a lot of price shopping going on, which has resulted in delayed orders. So, I was referring to the price shopping; it is from our customer, it is between our customer and our customers' customers, which is the enterprise end user. Does that help?

Christopher Rolland, Analyst

That does help. Thank you for that clarity. And then, I know you guys only guide one quarter at a time, but any broad thoughts as to how this inventory dynamic may impact seasonality? Is there going to be any seasonality going forward? Or do we flatline off this space? Just any broad thoughts, nothing specific I think would be appreciated by all of us.

Cary Baker, CFO

Yes, we only provide guidance for one quarter at a time, so I prefer not to speculate on the second quarter right now. There are several factors influencing our guidance. Firstly, our January bookings were strong, surpassing our fourth quarter run rate, and included orders for endpoint IC turns. However, to be cautious, we are assuming fewer turns at the midpoint of our guidance, specifically zero turns on our endpoint IC business. We want to take some time to better understand the situation. We are making efforts to reduce the channel inventory, but we recognize that this process may take time. That's our current perspective, and we will share more updates as we progress.

Chris Diorio, Co-Founder and CEO

If there's one word, I'd like you to take away, it's just prudent. That's where Cary used, and that's that we're all behind that word, and that's where we stand right now, just we're being prudent as we look forward.

Operator, Operator

And your next question today will come from Scott Searle with ROTH Capital. Please go ahead.

Scott Searle, Analyst

Chris, maybe just given the near-term inventory headwinds. I'm wondering if you could talk about the dynamic of the longer-term growth in the marketplace, right? You've consistently talked about the historic endpoint IC unit growth of 25% to 30%. Is that demand profile changing at all when you're looking at 2025? Or is that still tracking; we're just working through a near-term inventory issue?

Chris Diorio, Co-Founder and CEO

Scott, I wish I could answer that question for you. I'll have a better read on it a little bit through the year. What we see right now is essentially what I said in our prepared remarks, we see strength in North America driven a little bit across the board, retail apparel, retail general merchandise, and supply chain and logistics as well as new opportunities and then the growing food opportunity. So North America, we see as still solid and it's still going forward. The EU is flattish at least from our current perspective. And we don't usually call out Asia, and that's smaller anyway. So, it's hard for me to project what those factors mean for 2025 overall. In the longer term, we see long-term secular tailwinds underlying our industry, the food opportunity layering on. At least if we see some ramps heading into 2026, on top of other things that are going on, suggest that the future is very bright, and we fundamentally believe it's very bright. I just can't hazard a guess right now on 2025, especially given the geopolitical dynamics, the tariff situation, and all those other things. I wish I could give you a better answer, but as right now, I can't.

Scott Searle, Analyst

And Chris, just a clarification on the tariff issue. When you say geopolitical, is that because customers were pre-buying and pre-shipping ahead of any sort of the tariff situation? Or is there some other dynamic going on there? And then if I could finally just wrap up with the pipeline. It sounds like the pipeline is still pretty active. I was wondering if you could expand beyond food. I think you've addressed that a couple of times. But with your large North American retailer general merchandise, I think they will move into Phase 3; how things like that are progressing on that front and leveraging that existing customer supply channel or supply chain? I think you were talking about other big-box retailers starting to pull forward. Has that dynamic changed at all? Or are some of those opportunities still existing in '25?

Chris Diorio, Co-Founder and CEO

Yes. Okay. I'll do my best on those questions. In terms of the geopolitical situation, it was less of a pull forward and more of, I'm going to use the word sourcing uncertainty and the sourcing uncertainty being primarily if you're a supplier to an enterprise, you need to know where to source based on what the tariff situation is. So, we're seeing some delayed orders just for sourcing decisions based on where the tariffs might hit. And that is resulting in shorter order cycles and essentially causing, at least from our perspective, later orders to us as those decisions get made. In terms of the pipeline, we have ongoing efforts with our lead customers and lead enterprise end users in the retail apparel space. We still see significant opportunities there, and we'll be expanding some of the engagements in the retail apparel space because, as I mentioned in the prepared remarks, some of the things our partners are doing around loss prevention and self-checkout around overhead reading could open up a new wave of opportunities in retail. On top of that, obviously, there is further expansion in retail general merchandise, second large North American supply chain and logistics end user with some spillover to other big-box retailers. We're taking advantage of some of the tag categories. And then, the third big thing we're looking at is the enterprise mobile transitioning into consumer mobile. The date that the enterprise mobile is not yet announced yet, but we're obviously talking about it, all of us are talking about it. The date for a transition to consumer mobile is further out in time, and that's still a guarded expectation on our part. But we're going to do everything we can to drive that consumer opportunity, which will truly change the dynamics in the industry. So, it's all other things. It just basically finds a picture to a bright future. But right now, we've got a little bit of a rough time to go through.

Operator, Operator

And your next question today is a follow-up from Harsh Kumar of Piper Sandler. Please go ahead.

Harsh Kumar, Analyst

I wanted to ask about the new customer at the grocery level. Could you tell us if it's a large customer or a smaller boutique grocery chain, even though I know you can't provide a name? Additionally, if you're planning to ramp up with one of these customers significantly in 2026, should we expect to see some volume perhaps in the second half of 2025 with your inlay partners?

Chris Diorio, Co-Founder and CEO

Yes, I'll address that. The first part of your question is about a large customer, and anytime we discuss food, it typically involves large entities. Specifically, this is in the grocery sector, not fast food or similar areas. We are looking at grocery at the item level, and regarding the timeline, the opportunities are significant. The larger opportunity is linked to the pace of implementation, and we expect some endpoint IC volumes in the latter half of the year. A lot depends on how quickly our customers proceed. We anticipate some volumes during that time, ideally with one or both of these opportunities gaining traction into 2026. That said, since this is a self-checkout opportunity, there is considerable work required to fully establish and optimize it. We are in the early stages, and it will take time, similar to our previous experience with the self-checkout loss prevention project for a prominent European retailer. We need to put in the effort to ensure this works for this particular grocer. While this is not a loss prevention initiative, implementing self-checkout at the item level in grocery will require significant effort on our part. I believe we are the most capable company to tackle this challenge, and if anyone can succeed, it's us. We are committed to making it happen, but I cannot provide a specific timeline just yet.

Harsh Kumar, Analyst

Understood. Thank you, Chris, for that color.

Operator, Operator

That concludes our question-and-answer session. I would like to turn the conference back over to Chris Diorio, Co-Founder and CEO, for any closing remarks.

Chris Diorio, Co-Founder and CEO

Thank you, Nick, and I'd like to thank all of you for joining the call today. Thank you for your ongoing support. Bye-bye.

Operator, Operator

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