Impinj, Inc. (PI) Earnings Call Transcript & Summary

Hi, everyone. Thank you all for joining us in Seattle. I'm happy the weather cooperated, and you got a nice cloud a day instead of the nice sunny weather you typically get in the summer. And now you know what everybody who travels out here frequently gets to see. For those of you joining us on the webcast, thank you very much. And before we get into the agenda and the forward-looking statement, I would like to call out two special guests, Steve Sanghi, our Chairman; and Carver Mead, our Co-Founder. Steve, Carver, thank you very much for joining us. There's going to be a quiz on this slide later. I'm going to hand out yellow legal pads to the person who can jot all of this down. So please review this slide in detail. To summarize, we will make statements in today's presentation 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. All financial metrics, except for revenue or where we explicitly state otherwise, are non-GAAP. Cash flow metrics are GAAP. Please refer to the appendix in the presentation for a reconciliation of non-GAAP financial metrics to the most comparable GAAP metrics. All right. Now on to the agenda. You can see we have a packed afternoon, capped by a trip upstairs to our RAIN Experience Center, where you get a hands-on experience with Impinj technology in demonstrations run by Impinj team members. At the end of the Q&A session, I'll give you some directions on how to get upstairs to the 12th floor. And before Chris kicks us off, I'm going to pass it off to Cary. Cary is going to read a brief statement.

Thank you, Andy. All right. Before we get started today, as Andy mentioned, I'd like to read a brief statement on Q2. Today, we are reaffirming our second quarter 2023 outlook for both revenue of $84 million to $87 million and adjusted EBITDA of $8.8 million to $10.3 million. I will now provide as much additional color as I'm able to share at this time. I ask that you please defer any follow-on questions, including about our second quarter results or third quarter expectations until our earnings call. We continue to see macro-driven weakness in the retail apparel market, and we see our large programs continuing to move forward. On that note, I would like to thank you all for joining us, and I will pass the microphone to Chris to walk you through our strategy. Chris?

Thank you, Cary, and I'd like to welcome everybody here today, our investors, our analysts, our employees, all of you as friends. You're all friends of the company. You participate in the company's success. You're investors, you own part of the company. I view you as partners in the company. So thank you for being here today, and I look forward to a great day with you. I look forward to presenting to you where we're headed as a company and then taking questions at the end. And so I hope you have a wonderful day here today. I'm going to start with our vision. And before you look directly at this slide, our vision fundamentally is about extending the reach of the Internet from today, we think of the Internet as primarily connecting powered electronic devices, computers, mobile phones, appliances, to connecting everything or on this slide, connect everything, truly extending the reach of the Internet by a factor of 1,000. We call that vision a boundless Internet of Things, and that's the task to which we have set Impinj. We put miniature radio chips on everyday items, here represented by a shoe, and provide visibility to that item from point of manufacturing and transportation through the supply chain, point of sale and give enterprises visibility to that item, allowing them to discover that item, find where it is as a function of time, engage that item, get additional information from it. And we'll be talking today a lot about protecting the item. And by protection, I mean protecting the item, authenticating it as genuine so that an entity knows they're talking to the real item, protecting a person, a person's privacy and then going forward, doing more and more what we can to protect the environment, drive sustainability. And that's where the next part of the slide comes. We envision the Internet of Things extending to people, everyday people who use the items, who can gain the benefit from those connected items, all the way through to recycling at the end of the item's life. And we envision for each of those items, a, what we call a digital twin. And forget the fancy name for a minute. What is it? It's information about the item. It can be a spreadsheet. It can be a database entry. What we envision is as the future unfolds more and more, that information is stored in the cloud. And for every item, there is that repository of information that contains the items ownership, who the current owner is, initially to manufacture, then it transfers maybe to the shipper or maybe the possession transfers immediately to the seller and then to the person. Storing information about that item, where it's been its history, its authenticity, additional information; and allowing people to explore and get more information about the item because once you know what the item is, you can go out and get more information about it. And we are focused on putting our platform at the center of that vision. Our platform comprises endpoint ICs, which are the miniature radio chips, truly smaller than a grain of sand, that go on the items and -- give you an easy way of visualizing how small the ICs are, it's a full radio on a chip. It you take a pencil and sharpen it as sharp as you possibly can and then touch it down to a piece of paper and take it off, the size of the dot, which at my age, you can't see, is the size of that radio I see. Our systems, which comprise reader ICs or reader chips that go on in partner readers, finished high-performance readers that we use to solve difficult enterprise problems, gateways, which are a reader with electrically steered antennas and moving parts, they're electrically steered to find where items are; software to enable applications and as we look to the future, cloud services, which I'll talk a bit more about and Hussein will cover in depth; and then our partner ecosystem. And we include our partner ecosystem as part of our platform because we, as a company, can't touch the thousands of opportunities, tens of thousands of opportunities that are out there in the market. We'll talk about our partners, we have more than 2,000 partners, and our focus is on enabling those partners to drive solutions for end customers into market using our products, using our whole platform. And we use a technology called RAIN RFID. It is a specific type of radio frequency identification that our industry is rebranding as RAIN, a link to Seattle, the cloud was somewhat intentional. And there's a RAIN Alliance meeting going on right now at the University of Washington, tomorrow is an open day, and I hope you're able to attend. Our company is encapsulated really in this slide, our foundation, really who we are and our success strategy. The foundation of the company is our market-leading Internet of Things products. We focus on building the best products, linking them together and selling those products profitably out in the market, enterprise preference for the solution we and our partners create from those products. We'll be talking a lot today about solutions. And I'd like you to focus on Impinj and rethink about Impinj as a solutions company. Yes, we sell chips, lots and lots of them. Yes, we make most of our revenue from selling chips. But our focus is driving solutions that enable enterprise partners to connect everything they manufacture, transport and sell and then monetize those solutions primarily a recurring revenue stream from our endpoint ICs, but not exclusively because we sell the systems, we'll be selling services around those ICs. But think of us as a solutions company and then perhaps most of all, the talent and commitment of our team, and our success strategy is focused on solutions, develop whole platform, the entirety of our platform solutions for lighthouse enterprises, win the endpoint IC opportunity at those enterprises, deliver a platform solution, our endpoint ICs, our readers, a partner ecosystem all tied together to solve an enterprise's problem, engage those partners and make and give them the capability to repeat those successes that account after account, the account being enterprise accounts and then the parts of the market we don't touch directly, compete aggressively for that part of the market through our partners. So our success strategy is really encapsulated in this picture. Our platform in the center, solutions that are built on our systems business, where the solutions drive endpoint IC volumes for us, with us creating those enterprise solutions, stepping and repeating them and winning the endpoint IC opportunity at those solutions we touch directly, and then leverage our systems and our learnings that we get to enable partners to win the remaining opportunities and win majority endpoint IC share at those opportunities. And we believe this two-pronged strategy will give us significant wins, significant share of the endpoint IC market, happy enterprises who want to work with us because we're solving their problems or we're enabling partners to solve their problems and drive our success. Our market focus is very significantly retail general merchandise and supply chain and logistics. You're going to hear a lot about market opportunities. There are many others, aviation, pharmaceutical, healthcare broadly, automotive, industrial, manufacturing, food. We, as a company, have chosen to focus on these two because we think they provide the biggest near-term opportunities that will allow us to advance the market and advance Impinj, and we enable our partners to go after those other opportunities. And we focus on our platform leverage. Now we can use our platform to win those opportunities, either truly win them for the enterprise end users that we engage with directly or enable our partners to win the other ones that we don't touch directly. So of course, it starts with the enterprise solutions, engaging those lighthouse enterprises to drive the solutions and also whole platform learnings. As we build a solution, we learn what it takes to solve the problem. We take those learnings and pull it back -- and pour them back into our products to make the next generation of products, which allows us to solve the next set of problems. So I think of a continuous flywheel, where we solve a problem, get the learnings, turn it into our products and keep going around and around it because we're engaged directly with those enterprises. We're gaining those learnings that I feel very few other companies actually get. Platform preference, focus here, building platform capabilities, platform capabilities, we'll get to that in the next slide; and earn corporate trust, that's the trust of those enterprise end users to win and hold the endpoint IC share in those two verticals for the solutions that we deliver or enable our partners to step and repeat. The platform capabilities and corporate trust, those are keywords, going forward. Leading products are table stakes. Best performance, reliability and supply, we have to deliver all those things. And especially, when enterprises come to rely on us for a solution and to transform their business using our products, we have to have -- we have to be able to supply them. Enterprises are truly transforming their businesses based on the visibility that RAIN RFID provides. Not only are they transforming it, they're coming to rely on it. Think of Delta Airlines. If they can't get bag tags, they can't run the Track My Bags app. They transform their whole operations to base on that. As our enterprises rely on us, truly rely on us for their products and tracking and giving visibility to those products, we have to be able to supply them with the best performance and highest reliability products. And then looking to the future, RAIN services. We are focused on building cloud services that support the platform linkages we'll talk about and drive additional recurring revenue stream from those platform services. So turning to the platform capabilities and corporate trust, we think about platform preference as those words I said previously, on the capability side, performance, okay? We've got to give -- deliver very high-performing products. Always the best performance will never be the case. Always near the top and many times the best, yes. Always better together as our platform than mix and match, yes. And unique capabilities that we put significantly in our endpoint ICs that we leverage in our platform to solve end customer problems, we take the learnings from the problem statement, solve it in our endpoint ICs, deliver the solution to our platform. So to be very precise there. We have a feature in our ICs called Protected Mode to protect consumer privacy. How did we get that? We had an enterprise end user ask us to come up with a way to protect consumer privacy without killing the chip and in a way that was reversible, so if somebody returned an item after purchasing it, they can put the item back on the shelf. We came up with Protected Mode, built it into our endpoint ICs, supported it through our platform and have very high share at that leading enterprise -- retail enterprise end user and protection, protect items, people and environment. And here's another example. The same will go into more depth in this particular example, but we've actually built an entire solution engine around protecting the authenticity of an item. We have an endpoint IC, into which we put a cryptographic engine and a cryptographic key. We've got a cloud service, and the key is only known to the cloud service and to the IC. IC goes on an item, goes in inlay that goes on the item, partner registers the item. So you've got the IC with an identifier for the IC, you've got the identifier for the item that the partner registers. At some point later in the item's life, let's say, at a customs facility, read the item to get its identity, send a challenge to it, get an encrypted answer. Go up to our cloud service, cloud service comes back and says genuine or fake. We're bringing true cryptographic authentication to anticounterfeiting of everyday items. And as you think about the future, the inlays aren't just placed on the item, but are actually embedded into the item. And by the way, we can embed the inlays into the item if we can protect consumer privacy, which is what Protected Mode does, and we can also ensure the authenticity of the item through the item's life. And then as you think to the future, heck, if we can keep that IC alive because it's embedded within the item, then you can use the same IC for recycling at end of life. So that's where we talk about protection, items, people, environment. It's a vision now. We've got Protected Mode. We just introduced Impinj Authenticity, and we have big plans for the future. And then corporate trust, built on our principles, who we are as people, got to be the most important thing. People buy from people, our expertise in RAIN RFID and delivering solutions for enterprises and our dependability as a supplier to enable those enterprises to succeed. At National Retail Federation in January of this year, I -- probably the highlight of the meeting for me was to sit down with an executive from a global Fortune 500 company. Actually, it's the same one that asked for Protected Mode. And he just looked at me and said, "Chris, thank you for what you do. We work with Impinj because you are the best of the best." It's unsolicited that actually made the whole NRF for me. I want every customer to think that way. I want us to enable every customer to be successful. Because at the end, what we're doing is delivering delightful experiences for people. It may seem a little bit trite, yes. But think about it, that's the only thing that matters. Enterprises want their customers to be happy. They want their employees to be happy. They want to be successful. Nobody is successful delivering something other than a delightful experience. And the enterprises are focused on that experience. On this, Carver Mead and I have had a lot of talks about what we as a company can do to deliver delightful experiences. And I talk about this idea all the time with our employees. Our focus is delivering delightful experiences for people. You're going to hear about our platform, which we think of as everything a partner needs to innovate a whole product. It is not the solution. The foundation, a whole product, which is our platform, plus the installation and configuration, systems integration, procedures, training support, additional hardware software services, a whole bunch of stuff, that is everything an enterprise needs to deploy a solution. A solution is everything a person needs to have a delightful experience. And if that person has a delightful experience, they're going to provide the pull through this entire chain, and we will be wildly successful. We engage with these enterprises to work with our partners, so we can build the products that enable the solution that enable the delightful experience, and we engage with those enterprises all the time to understand what they want to accomplish and how they can deliver that delightful experience for their employees and their customers. And through all of it, driving recurring revenue. because it is the recurring revenue streams that, for us, will deliver financial success. And significantly today, the endpoint -- recurring endpoint IC revenue, when somebody buys one of our ICs, puts it on an item, the item gets sold, that enterprise procures another item. We've talked a lot about endpoint ICs as a recurring revenue source, consumable silicon and looking to the future, cloud services, monetizing, for example, that authentication request to verify whether an item is genuine or fake. Our platform is our leverage to deliver ecosystem wins and endpoint IC share. Our solutions drive long-term opportunities in endpoint IC share. If you come away today with only a couple of words, I really want them to be "Impinj has a platform that enables enterprise solutions, that drive recurring endpoint IC revenue, financial success." That's our focus as a company. That's it in a nutshell. You're going to hear a lot about from Jeff and Hussein and Cary about how we're doing all of that and what we're doing to get there, but that is what we're doing as a company and in so doing, connecting everything and, I truly hope, in many ways, making the world a better place, whether it's delighting people, enabling recycling and sustainability, reducing counterfeits, reducing waste and loss, giving visibility to products in hospitals that are necessary for a surgery. It's those use cases that drive me. I truly want to make things better for people. So why Impinj? Our opportunity, it's massive. We're going to connect everything on the planet. Our platform, we're the only company in our space with the platform, with products at both ends of the radio line. Not only that, we've got an incredible partner ecosystem that we've been developing for years and years to take those products in the market and drive those solutions. And those solutions, think of us as a solutions company that monetizes silicon, not as a silicon company. And then most importantly, our team, they're it. We have an incredible team. I have said on multiple of our internal all-hands meetings that I am so lucky to have such an incredible team. And I can tell you, and I've said it on the all-hands, if tomorrow, all of our products were wiped away, we had nothing, strength and commitment of our team would still allow us to be wildly successful. And I truly believe that way. So you're going to hear from some of the team members today jeff, Hussein and Cary. There'll be others that you'll meet, please talk to them, engage with them, ask them questions, ask them how they feel about the future, how they go about Impinj. I think you'll come away realizing that we have truly a fantastic team. And so my #1 focus is right here because the team is what drives our success. And if every employee in the company is wildly successful, then Impinj can't help but be wildly successful. So again, thank you for being here today. I will turn it over to Jeff. Jeff Dossett, our Chief Revenue Officer.

Thank you, Chris. Inspiring as always. Good afternoon, everyone. My name is Jeff Dossett, and I'm Impinj's Chief Revenue Officer. And one of the great things about the role that I play here at Impinj is that I get to spend the majority of my time in the market. I get to hear from inspiring enterprise leaders and from very innovative partners. And so I'm very excited today to be here to share perspectives on the market and our opportunities from the vantage point that I have in market and leading our go-to-market team. I'm going to focus on three topics today. First, I want to provide my perspective on this massive market opportunity. Second, I want to provide some insights into the emerging opportunities in each of our two focused markets, retail and supply chain and logistics. And third, I want to provide some important updates on our go-to-market strategy, focus and objectives. As Chris mentioned, we have a massive market opportunity. Our vision is boundless IoT, extending the Internet of Things to trillions of everyday items. Our mission, our why, why we do what we do every day, is to connect everything. In 2022, RAIN connectivity enabled over 34 billion everyday items. And yet as large as that number is, we believe it represents only 0.3% of all connectable items. Today, RAIN is most deeply penetrated in the apparel category, estimated at about 30%. We see growing adoption in other important categories such as pallets and cases, airline baggage and tires. And we're very excited that we're in the early days of RAIN tagging in much, much larger categories, including general merchandise, parcels & post, automotive items, like automotive parts, food and many other everyday items. From my vantage point, I'm very encouraged by the many pilot programs that we and our partners are engaged in with leading enterprises in each of these emerging categories. And on the path to this massive market opportunity, the RAIN endpoint IC market and Impinj have experienced strong growth. From 2010 through 2022, the RAIN endpoint IC market has grown at a compound annual growth rate of 29%. Impinj has shipped over 85 billion endpoint ICs, with most of those ICs being used in retail and supply applications, where visibility and efficiency are important keys to success. We anticipate continuing growth in this market as we and our partners inspire more people and businesses to discover, engage and protect everything that is manufactured, transported and sold. I want to talk about the first of our two focused markets, retail. Today, RAIN tagging is most widely adopted by apparel retailers, who are seeking to improve inventory accuracy and to reduce the time it takes to accurately count inventory. And if you think about it, in the past, retailers typically conducted inventory counts on, generally, a quarterly basis. And they did so by paying store associates or third-party contractors to come in after hours to count each and every individual item of inventory while the store was closed to the public. Today is depicted on the left, the photo on the left on this slide, store associates use RAIN-enabled handheld readers to manually scan inventory wherever it is in the store, whether it's hanging on a rack, it's stacked on a shelf, if it's inside or outside fitting rooms, in bins of returned items behind the sales counter or in back-of-store inventory. The benefits of improved inventory accuracy and visibility have been compelling and widely reported. And it's leading many leading retailers to expand the RAIN tagging beyond apparel into many general merchandise categories. And beyond the expansion of RAIN tagging into general merchandise, retailers are transforming, particularly following the pandemic, which is creating new opportunities for Impinj. Visionary retailers are investing to digitally transform their store operations, in-store and online shopper experiences and their supply chains. And importantly, in our direct engagement with retailers all around the globe, we are seeing these leading retailers increasingly deploying what we refer to as autonomous reading solutions such as the RAIN-enabled loss prevention depicted on this slide. Why? Because it helps them to extend the value of the expanded RAIN tagging that they're doing across apparel and increasingly into general merchandise. The Impinj RAIN platform, as Chris described earlier, enables visionary retailers to deploy RAIN-based autonomous reading solutions for a wide range of use cases, including automated self-checkout, loss prevention, buy online, pickup in store, store item replenishment from back-of-store inventory to front-of-store shipment verification and many more. And importantly, autonomous reading solutions enable store associates to stay focused on in-store shopper experiences and other store operations while helping retailers address increasing labor scarcity and increasing cost. On our earnings call, you've heard us talk about a visionary European retailer as one of our many enterprise solution success stories. This visionary European retailer exemplifies the opportunity of extending an Impinj RAIN deployment to gain more value of expanded tagging across many different use cases. I'm very excited about the future of this visionary European retailer and others. And from my vantage point, leading the go-to-market team, I believe that Impinj is exceptionally well positioned to continue to win in retail. One such visionary influential retailer is Walmart. And in our most recent Impinj Executive Forum, I had the opportunity to sit down in a fireside chat with Matt Alexander. Matt eloquently shared Walmart's plans to expand its RAIN tagging well beyond apparel into a wide variety of general merchandise categories, including home goods, electronics, sporting goods, toys, back-to-school items, stationery and many more. Matt very clearly articulated Walmart's goals to improve inventory accuracy, to enhance the in-store shopper experience and to drive enhanced buy online, pickup-in-store capabilities. Fast Retailing, owner of very popular brands that I hope that you are aware of, including UNIQLO, GU, Theory, Helmut Lang and others, is another global retailer undertaking a very ambitious digital transformation, including expanding its use of RAIN. Fast Retailing's goal is to track everything it manufactures in its factories, transports from its factories to its warehouses and then from its warehouses into the store right through to the sale of that item. And according to Fast Retailing's CIO, our long-term, very good friend, Tambara-san, the digital insights that are derived from expanded tagging and autonomous reading solutions such as the automated self-checkout that you see on the slide here today, are enabling Fast Retailing to improve inventory management, to adjust production to near-term demand and to optimize its supply chain operations. And if you haven't had the opportunity to experience automated self-checkout. I encourage you to seek out your local closest Uniqlo store and give it a try because I think this is a perfect example of what Chris was talking about in terms of providing delightful consumer experiences. I now want to shift gears and talk a little bit about what we're seeing in market in the supply chain and logistics market segment. To date, RAIN has been most widely adopted in supply chain and logistics to verify the contents of incoming and outgoing pallets and cases. And again, think about how this was done in the past, warehouse workers, upon receiving a pallet into the warehouse, would visually inspect that pallet, sometimes even counting the number of cases on that pallet and comparing that to some form of shipping document. Said they were supposed to be 16 boxes, there are 16 boxes. And if time permitted and if so motivated on that particular day, they might actually read human-readable labels on each case. And in rare occasions, they might open up 1 or 2 of those cases and look inside and see "Woah! Multi-colored T-shirts. And that's what I see on the shipping document. So the pallet must be the pallet that I was supposed to receive." Whereas today, RAIN labeling and RAIN handheld readers enable warehouse workers to quickly and accurately verify the entire contents of the pallet, including what is in that -- in those cases. In our engagements with supply chain and logistics companies all around the globe, in North America, in Europe and in Asia, we are seeing something that I think is very important. We are seeing the expansion of RAIN tagging from low volumes of large things like pallets and cases to high volumes of smaller things like packages, parcels and post. Supply chain logistics enterprises, like retailers, are transforming, again, particularly post-pandemic. And one interesting thing that has been shared with us from the executives of these firms is that supply chain and logistics companies, like retailers, are facing -- experiencing labor shortages and increased labor costs. So as you think of it, as RAIN tagging shifts from low volumes of large items to higher volumes of smaller packages, these enterprises have communicated that they simply can no longer rely upon simply adding more and more individuals to manually scan inventory. Through our global engagements, including the first and second large supply chain and logistics companies that we speak of quite frequently on our earnings calls, we are seeing leading enterprises increasingly deploying autonomous reading solutions. Just like we saw through the retail study that I mentioned, the Impinj RAIN platform enables these visionary supply chain and logistics enterprises to deploy RAIN-based autonomous reading solutions that power a very wide range of relevant use cases such as inbound and outbound shipment verification, cross-dock operations, zone transitions as inventory moves to different locations within a warehouse, parcel conveyance, package sortation and many more. And it's worth noting at this point that while we think of supply chain and logistics as its own market, nearly every business relies upon or has some form of supply chain. We've already talked about the importance of supply chain optimization and efficiency for retailers, but let me use another example. Recall, when I was talking about the massive market opportunity, one of the largest categories at the top of that list was food and drink. Today, we are seeing quick-service restaurants seeking increased visibility into perishable inventory and in-transit shipments with a goal of improving food freshness and reducing food waste. I'm very excited about the engagements that we have in the supply chain and logistics market all around the globe. And again, from my vantage point, leading our go-to-market teams, I believe, Impinj is exceptionally well positioned to continue to win in supply chain and logistics. UPS, a leading supply chain and logistics enterprise, is undertaking a bold digital transformation of its business. Carol Tome, UPS' CEO, has spoken frequently on UPS earnings calls about the role of RFID as a key enabler of UPS' Smart Package Smart Facility initiative. And we're excited that Carol has gone on to share some of the statistics and hopes and objectives of this digital transformation. According to Carol in her public statements, RFID will help UPS eliminate over 20 million manual package scans per day, with the goal of reducing missed loads to increase package throughput and associated labor productivity, improved customer service and help save $500 million of nonoperating costs this year. And now I want to shift gears and talk a little bit about our go-to-market strategy, our focus and our objectives. I've been here for 6 years, but I'd like to honor the rich history of Impinj. Impinj has always sought out and engaged with enterprises around the globe to listen to and learn from these businesses about their objectives, their unmet needs, their challenges and their opportunities to help inform our invention, innovation and productization of RAIN RFID products and solutions. Importantly, today, we focus on what we call lighthouse enterprises. These are industry sector-leading enterprises that manufacture, transport and sell lots of things. In fact, we focus our team on those opportunities representing $1 billion or more endpoint ICs every year and building on the engagement model that has enabled us to win our first and second large supply chain and logistics customers, our visionary European customer retailer and our Asia-based global retailer. We have recently formed an enterprise solutions team comprising of our most senior and successful sales leaders and field solution engineers. And very importantly, this enterprise solutions team partners and collaborate very closely with Hussein's engineering team, an exceptionally talented engineering team, and the enterprise project teams to create whole platform solutions that solve the enterprises' needs. We have elevated our focus and dedicated increased resources to pursue the largest and most influential endpoint IC opportunities around the globe. Our objective is very clear, it is to win the endpoint IC opportunity in these enterprise accounts and retain those opportunities through ongoing relentless innovation of the Impinj platform, product quality, reliability and supply. I want to talk a moment about the role of partners. Chris mentioned this in his opening remarks. I recall my interview dinner with Chris a little over 6 years ago. And as you can imagine, it was chalk full of inspiration and insightful commentary, but there was one statement he made that really resonated with me. And in fact, it's guided me and my leadership of our go-to-market team for the whole 6 years that I've been here, and I think it will for all the years ahead. He said, "We succeed when our platform is the engine of our partner's success." Let me repeat that. "We succeed when our platform is the engine of our partner's success." I think it's probably profound and insightful. And if there's one thing that drew me to join this team at Impinj, it was that statement. It was kind of a close of that interview opportunity with Chris that night. We leverage our enterprise learnings to open up new markets to advance our platform and to create opportunities for Impinj and for our partners. We harness or encapsulate these enterprise learnings in what we refer to as Impinj solution engines, everything a partner needs to integrate a unique and differentiated Impinj platform capability into their existing solutions or new solutions development. Our partners play an exceptionally important role to drive RAIN adoption and Impinj endpoint IC preference in many industry sectors across many use cases and all around the globe. We have a very talented, dedicated partner development team here at Impinj that engages with, develops and supports over 2,000 partners in over 100 countries. In this regard, in this part of the GTM strategy, our objective is very clear, it is to win and retain majority market share through and with our partners. I want to talk a little bit about recurring revenue. In fact, every one of us up here today will reinforce the importance and our focus on endpoint IC recurring revenue and creating new recurring revenue streams. I think the Impinj Authenticity solution engine that Chris discussed earlier is a perfect example of what I'm talking about here. Through our enterprise engagements, we uncovered the unmet need to ensure everyday products are genuine at enterprise speed and scale. Again, the Impinj Authenticity solution engine is everything a partner needs to integrate product authentication at enterprise speed and scale into their existing or new solutions development. It leverages the whole Impinj platform to ensure products are genuine throughout their supply chain journey and, in fact, the full life of that product. This creates an opportunity for us not only to monetize the endpoint IC as it's applied or tagged on to the item but through multiple steps in the supply chain and product life, in which an individual or business wishes to confirm the genuine -- that it is a genuine product. We're still in the early days of this solution engines introduction, but I'm very excited about the partner and enterprise reception to Impinj Authenticity. We see emerging opportunities across many markets, including customs and excise tax, duty-free, imported pharmaceuticals, not surprisingly, retail merchandise, particularly those items that are most often targeted for counterfeits as well as some markets, in fact, we didn't even really think about as we brought this solution engine to market. One being construction building materials, where building developers and building owners are paying premium prices for premium quality concrete or steel or glass, and they want to be confident that they're getting value for the money that they're investing in these genuine products. And it's opened my eyes up and our team's eyes up to all of the different potential markets in which premium products are providing premium value to the user, the consumer, but it's critically important that the authenticity of that premium product is insured throughout the entire life cycle. And finally, let me close with where I started. From my vantage point, spending the majority of my time and my team's time in the marketplace, I believe we have a massive market opportunity ahead of us. The comprehensive, easy-to-use, easy-to-deploy Impinj platform that Hussein will speak more about next, enables us to uniquely understand and solve enterprise unmet needs. And let me reinforce Chris' comments about the importance of team. We have a very talented team in the go-to-market organization. They are highly collaborative and importantly, have a deep-seated passion to win. And I value their contributions every single day. I want to end with thanking you for your support, and I look forward to speaking with you more during our Q&A and [ following ]. Thank you very much. And with that, I'll introduce my good friend and colleague, Hussein.

Thank you, Jeff. Good afternoon, everyone. Thank you for taking the time to join us in person today. I don't know if you were looking at the pictures that we were flipping through earlier on. I was watching that, especially since some of our colleagues have joined during COVID, so we don't get to see them as much. There was a [ holding pump ] dude on there, who's that? Because it struck me with concern as goes. That's you, dude. So I have to admit, I agree with Jill, I do need a new headshot. So I'm Hussein Mecklai, I'm the Chief Operating Officer for Impinj. I oversee engineering and operations. What I'd like to share with you today is -- see the opportunity that Chris and Jeff shared with you, but through the lens of engineering and operations and share with you how I think we're well positioned to capitalize on that opportunity. As Jeff indicated, we have multiple revenue opportunities in front of us. First of all, it's the continued organic growth of handheld-driven inventory counting for retail apparel. That's expanding from retail apparel to retail general merchandise. The second is a new wave of adoption driven by autonomous reading that enables new use cases that enterprises want to deploy and drives for operational efficiency. And last but not least, the layering on of new services, like Authentication, that creates yet another opportunity for recurring revenue for us. All of this is layered on top of what we've been referring to as the Impinj platform. What is the Impinj platform? It is the sum of the products, software and services that we deliver to our partner ecosystem that they convert into a whole platform solution to solve for an enterprise use case. As an example, if you take our endpoint ICs, we deliver endpoint ICs to our customers. They build inlays with those endpoint ICs that get converted into tags that then get attached to items. Our reader ICs are used by our partners and customers to build [ read point ] solutions such as the handheld that's pictured here. And then our readers and gateways are used by our partners to deliver in-enterprise solutions like the loss-prevention gate that you see pictured above. And on top of all of that, we offer services like the Authentication service so that it enables the end enterprise to extract even more value from the deployments. From here -- I could only work the clicker. As Jeff shared with you, you see the scenario where you have handheld-driven inventory counting of apparel, transitioning to general merchandise. What the transition drives for us is a challenge -- a performance challenge because we now have to be able to create different form factors to adopt the general merchandise as compared to retail apparel. We also have performance challenges associated with dealing with different materials that these items comprise of. As we discussed earlier, the transition from manual to autonomous reading creates a whole new set of challenges. When manual reading, you can train employees to overcome performance challenges, pretty fascinating when you watch what enterprises go through and how they train their employees, want speed to [ work out ], how close to get to the apparel, and that can help to overcome many technology limitations. Unfortunately, in an autonomous situation, you have no such luxury. The technology must work as deployed in the scenario in which it is deployed. As an example, for -- as Jeff mentioned, when stores are doing inventory, they're usually pretty happy with getting about 95% accuracy. You can imagine in the loss prevention solution, 95% accuracy may not cut it. We typically see performance scenario challenges that are targeted anywhere from 99% to 99.9% because every item that you don't detect, you don't catch it on the next inventory round, it's lost for good. If you look at readability, that's one of the fundamental challenges that we're working on to overcome, and they're largely driven by the autonomous solutions. So from the left-hand side, you have the loss prevention solution in retail, package sortation and supply chain and logistics and self-checkout in retail. Starting with the right-hand side, you can imagine the challenge with self-checkout is when somebody goes to check out the items, you want to read all of the items that they're checking out. Otherwise, it kind of gets flagged on your way out the door as having been an item that you might have not wanted to pay for, which is an embarrassing experience at best. But what's even worse is if you happen to read the item on the checkout counter next to you, most customers don't like paying for somebody else's purchases. Don't know why, but they seem to be pretty unhappy with things like that. So it's important to read all of the items, but only the items of interest in the area that you're in. Now the nice thing about that solution is you can take a little bit of time to do that because people are used to waiting on self-checkout. But if you go to package sortation, you have a similar challenge. You need to read specifically the box of interest, but it's also important when you read it. A mistimed read means that the package gets missorted, you're sorting the wrong box. That creates many downstream problems for us. And then if you go to loss prevention, it amplifies the problem even further. Not only do you have to detect only the article that is going through the transition gate because you don't want to be alarming when people are carrying soon-to-be-purchased items across the front of the store or across those gates, all the items that happen to be located near the gates. But if you don't alarm as soon as somebody exits, you can imagine that, especially in a busy shopping center, that becomes part of the flow of traffic, and you've lost that item for good.. So normally, you have to detect the item at the right time, the right place, but also in a timely fashion. One of the things that we've been working on as technology as part of the platform is we built capabilities into our endpoint ICs that are then linked together with the capabilities and features and algorithms that run on our [ read point ] solutions to enable us to do exactly this. And that's why the enterprise engagements are so key for us because they define for us the thresholds of performance that we are required to meet for it to be practically deployable. Not only do we develop those technologies, but then we package those technologies together and deliver them to our enterprise customers in their vernacular. We don't give them a technology, we technology parameters. We give them a solution with attributes that they are used to. So for the loss prevention solution, we [ have three ] options, making [ configure ] based on the store in the region, how quickly they want to detect [ an item ] going out the door? How confident do they want to be that there is a 1 billion items going out the door? And how [ permanent ] are there [ false ] marks? And based on those configurations, all the underlying technology and needs self configures to adapt to those performance requirements. You can imagine how that makes for a much more welcoming experience and giving them what we used to do, which was 200 technology [ brands ] to configure. Furthermore, we'll further partner with the enterprises for the ones that do share the data with us to look at the performance of these solutions real-time. They gather that data, share their data with us, and that allows us to use things like machine learning algorithms to continue to optimize the parameters of the algorithms that we've deployed in order to further improve the performance of the solution even after it's been deployed. As Jeff shared, there's a massive market opportunity. And what's exciting about it is it's [ mattered ] together with a massive technology opportunity as well. We are very, very fortunate that we are partnered with some of the leading visionary enterprises in the supply chain logistics and in the retail space. The reason why that's exciting is we get to see the true business challenges that these enterprises have. They also share with us their vision of where they want the technology to be, how they want their operation to run, what they want the customer experience to be like. And we use that insight to focus our technology development in service of enabling those capabilities. And that allows us to prioritize our technology development in service of an enterprise, which gives us the shortest time to [ money ]. As an example, when Jeff talked about the enterprise of the supply chain and logistics environment, when you're talking about a pallet build verification example, you want to read the tag of the pallet and you want to read the label of the box, not the contents of the box. That allows you to quickly bring the pallet together. However, when you switch in that same environment over to content verification, you're very interested in the contents of the box and the label of the box, and that's the association you're looking at. So in the same environment, you have different pair-wise associations or many-to-many associations that you have to execute in real-time in order to facilitate the enterprise. Inventory location is another great example, where as packages come in, their stage for future pallet building and the ability to find those things is hugely valuable to the enterprises. So the more precise you can be in terms of identifying the inventory, the less time it takes them to build up the pallet, who drives operational efficiencies. Take that same example and apply it to asset management. Suddenly, it's not only the accuracy of finding the asset, but that asset is moving. So you have to locate that asset in real-time and track its movement. Otherwise, the value of tracking the asset is significantly diminished. Similarly, what you see is with shipment verification, it's really important to be able to know which package transitioned through which doorway or portal onto which truck and be able to reconcile that against the manifest to make sure that, that package was intended for that truck. If we don't signal a false -- a missed package, misloaded package right away, the person who's loading the package has left and gone off somewhere else. Now you have to send somebody else in to go find the package, and they don't know which package is misloaded. Whereas if you do it in real-time, the person who is still holding the box, can simply bring it back out again. So you can see how that operational efficiency really matters in how timely it is. When you come over to the retail environment, the challenges are similar, but slightly different. Take the example of front store versus back store. Typically, there's a very thin partitioning, if there's one at all, that separates the front store from the back store. But knowing which side the inventory is on is super important, it makes all the difference between the inventory being available and visible to our customer and not. Similarly, when you look at things like loss prevention, it's not only the technology required for us to be able to detect an item going out the door. But as Chris alluded to earlier, how do you protect consumer privacy? How do you ensure that nobody else is tracking that [ label ]? Well, one of the most common things people did was they would kill the tag at the point of purchase, which is great right up until the time you have to return the item. Now the tag is dead, what do you do now? . So that's what drove us to develop technologies and capabilities like Protected Mode. That's a platform-level capability that takes advantage of a capability inside the endpoint IC that is then utilized by a [ read point ] to make the tag invisible at point of sale and then at point of return to make the tag visible again. Plus, it gives us the -- we specifically set it up so that nobody else can make that tag visible, which is also an important consideration. If you look at the services, we developed the services specifically to create more value from the deployment for our customers and for the enterprises. So the way our authentication solution works is when we produce the endpoint IC, the M775 in this example, we program a unique key to every single endpoint IC we manufacture, and we store that association in a cloud -- in our cloud. We -- then, that endpoint IC gets embedded in a partner label, which then gets associated with an item. Today, it would probably be a hang tag. In the future, we envision that, that inlay would be embedded in the item at point of manufacture and survive with it all the way through its life cycle. You can imagine how powerful that is. At any future -- and then our customers or our partners would create the association between a particular endpoint IC and the product to which it is attached. At any future point in time, if somebody runs a query on the item, the partner gets that query, sends an authentication to us, we do a standard challenge response, confirm the identity of the endpoint IC and then our partner associates the endpoint IC to the item to confirm the authenticity of the product to which it is attached. Our platform comprises a set of the products that we build. Our goal is to maintain an industry leadership on every product in that platform, in addition to providing the leading edge capabilities of the platform as a whole. The R700 product, when it was launched, succeeded the R420 product, which was already an industry-leading fixed point read solutions. And the R700 delivered 4x as much performance as the R420. We continue to drive innovation and performance into our solutions because of what we see as the need of the performance of the platform as a whole. So it's not important only what that product can do by itself, but what that product does in conjunction with all the other products that it works together within the environment in which it's deployed. Our E-Series reader ICs succeeded our previous-generation R-Series reader ICs, which were already industry-leading. But with the E-Series, we delivered twice as much performance in half the footprint at half the power consumption. That's the kind of innovation we continue to drive. With our next release of software, we will have a unified software stack across this entire [ read point ] product line, whether it's the fixed readers or the reader ICs. By doing that, the technologies and capabilities that we develop when we are solving for enterprise use cases, can then be deployed out to our partner ecosystem, as Jeff mentioned. And they have access to those same technologies and capabilities to solve for the enterprise use cases that they're engaged with, whether it's replicating the use cases in other enterprises where we don't directly engage or whether it is to solve new use cases in different verticals where we don't directly participate. All of this is enabled real-time by us because of the way we have harmonized our product line. Speaking of innovation, our previous generation of endpoint ICs, which were developed in 180 and 152-nanometer technology, which is the Monza 4 and the Monza R6 product line, has been succeeded by the M700 series of products, which is built in 65-nanometer. Not only did we [ lost ] the M700, but we have now completed the entire portfolio of products that have a successor for every single previous generation of products that we have. In addition, we were also able to, because of the process technology and much innovation, generate the M775. The M775 is our first product with an authentication offering. It has an encryption engine embedded in it. What makes it unique is that the performance that we deliver for an encryption-enabled endpoint IC is industry-leading. And it is significantly ahead of the competition, and it's very close to what we can do without authentication. As a consequence, it expands the product portfolio that we can address to enable authentication for a larger set of products than ever before. Not only that, but I'm super excited to share with you our second-generation product line in 65 nanometer, coming soon, the M800 series. The M800 endpoint IC has a significant performance advantage over the M700 even, which was already industry leading. We also have second generation of platform capabilities. I gave you Protected Mode as an example. There are many other platform capabilities that we continue to build into our endpoint ICs to allow us a richer set of technologies with which to solve enterprise use cases. And last but not least, 25% more die per wafer than the M700. You can imagine both the economies of scale and the supply availability that we can address with that. All of this built on a foundation of enhanced quality, reliability and manufacturability. Let me share with you how we've addressed those things. One of the things we saw early on was that shrinking the endpoint IC made it increasingly challenging for our customers to be able to build inlays with them. The smaller the IC, the harder it is for the equipment and for the people to handle. So what we did is we expanded our view of what we consider as quality to embrace what our customers experiences with designing and manufacturing those inlays with our endpoint ICs. So we now build and manufacture our own reference designs for the inlays. We provide those reference recipes to our customers to show them a baseline setting that would give them high-quality inlays that they can start with, and then they can innovate from there. So that gives them a much more advanced starting point. The second thing that we did was we made the M800 drop-in replaceable into an M700 design inlay, means you don't have to go build a new inlay, you can take your existing inlays that were designed for M800, put in the M800 and get superior performance straight out of the gate. However, to maximize the full benefit of the M800, you would want to build custom inlays, whether you choose to build much smaller inlays than you could do before for the same performance or whether you choose to build a single inlay that will meet the entire portfolio of the most challenging inlay specifications for ease of supply chain management and scalability, it is your choice. We have now also provided a reference design for the inlay design itself that allows you both options, so you can see the full potential of the M800 and what it can bring to you. Using that as a starting point, allows, again, a much more advanced starting point for our customers to be able to then innovate from a very rich starting point already to be able to bring their products to market. All of this in service of shortening our time to money and our customers' ability to get into market with their leading-edge products. As you can imagine, as we go forward and we become more and more critically an important part of our enterprises operations, where the lack of availability means they can't run their business. That is not an acceptable place to be. So what we have taken on for ourselves is to enable strategic supply and ensure supply so that no enterprise runs into that situation, so we remove a barrier to adoption that would otherwise exist. In particular, what we have done is we have ensured a diversity of supply. For the front end, our latest generation of endpoint ICs, everything in 65 nanometers, is already qualified in multiple fabs, including the M800, even before product launch. That means we have multiple fab sources that we can use to support supply. The second thing we've done is our back end has also diversified. We have multiple companies that we leverage to be able to support our back end in multiple geographies, and we bring them all up to a standard capability so that the supply is seamless across all of them. And last but not least, we've continued to invest in building up our own inventory so that we can support any short-term perturbations and opportunities that present themselves. As you'll see, what we have done recently is, with the improved wafer availability in the second quarter of this year, we have pulled forward our allocation of wafers earlier into the year so that we can, a, get into a healthier situation from a finished goods inventory perspective and b, that we can start to do a prebuild in anticipation of our M800 product launch so that we are ready to go with not just having customers qualified with new products, but that they can ramp into volume right away. With that, I hope I've shared with you the opportunity from a technology perspective. I believe we have barely scratched the surface of the potential of this technology. Having spent 2 decades in the wireless space myself, those of you who have had that experience, know how much innovation is possible in the wireless space. And I can assure you that the RAIN is only at the bare beginning of that, but also has unique challenges and unique requirements that are required to adapt the innovations that are out there to make it applicable to RAIN. So this is not a slam dunk. It does require a lot of work, but there is proof of existence that it's possible to do. Our intent is to build industry-leading products and be an industry leader from this point forward. We will not look back. And our drive for being an industry leader is not just to exceed the competition, but it is to deliver the most advanced technology platform that enables the solution of use cases that nobody else can solve. That, we believe, is our core value proposition. And as Chris pointed out, when you talk about the team, I'm proudest of the team not just for their talent, not just for their desire to win, not just because they've delivered the most advanced products in the market across all our product lines, but because they have embraced the mindset that our measure of success is when our enterprises win. When Chris shared the comment back from an enterprise customer that says, "We work with you because you are the best of the best," that's what makes our day, that's what we use as the criteria for success. Because if we make our enterprises win, that's how we win, that's what matters, and that's what this team has embraced, that's the yardstick they hold themselves to, and that's why I believe we're well positioned to win. So thank you. And with that, I'll turn it over to Cary.

All right. Thank you, Hussein. It's great to see a packed house in Seattle. I appreciate everyone making the trip out here. When I joined Impinj in early 2020, I spoke with many of you about my excitement for the opportunity in front of the Impinj. I detailed out the opportunities for top line growth as RAIN RFID moved from a nascent technology into a mainstream product, touted by some of the largest companies in the world. And I highlighted that the innovation -- significant innovation coming from the small company could drive outsized financial results. I'm excited today to share with you our financial priorities and provide visibility into our long-term objectives. As I look back, I'm proud of the financial progress that we have made. 2022 revenue was up 86% versus 2020. And just as importantly, we transitioned over that time period from a loss-making company to one with adjusted EBITDA margins in the low teens. Looking ahead, I see the opportunity in front of us even more clearly. Starting with our financial priorities. Leveraging our market-leading product portfolio to drive revenue growth has been and continues to be our #1 priority. Even in a supply constrained -- heavily supply-constrained 2022, we were able to deliver 36% year-over-year revenue growth. And looking ahead, we look to layer on market share growth from our enterprise solutions and our platform preference on top of the secular market growth we've already enjoyed. Our second financial priority is profitability. As we exited COVID, our goal was to get back to breakeven as soon as possible. Through innovation and specifically the launch of the M700, we were able to add 300 basis points of gross margin expansion. We went from a prelaunch average of 50% to today's normalized rate of 53% to 54% gross margin. That margin expansion, combined with revenue growth, let us back to breakeven. And then we turned our sights on expanding gross margin. And last year, you saw our adjusted EBITDA margins expand into the low teens, and you got a glimpse of the earning potential of this business model. Our third financial priority is free cash flow generation. This is our next objective. And once we get on the other side of our inventory rebuild, the pieces are in place for us to deliver on this next stage of financial maturity. Now let's take a look at revenue. Over the last 11 years, we've delivered revenue growth at a CAGR of 20%. And over that period, there were only 2 years where we were unable to deliver revenue growth. The first in 2018, we saw a slight decline year-over-year as we navigated an inventory correction. And then in 2020, the U.S. retail complex shrank by 26% under the weight of COVID shutdowns. But our endpoint IC business grew in 2020. It grew because there were very clear winners and losers in the retail space. The winners were those who were able to transition to an omnichannel model when their brick-and-mortar stores were shut down. The foundational element of any omnichannel model is visibility of inventory at the retail store level. That is exactly what the RAIN solution provided. Without RAIN solution, inventory visibility is measured in the mid-60% accuracy. And as you heard from Hussein and Jeff, inventory visibility with the RAIN solution is measured in 99% or better at the retail level. We were found on the winning side of that ledger in 2020. And by the end of 2020, the value and the benefits and the efficiency gains that RAIN could provide to retailers was well understood. And by mid-2021, Accenture had put out a report, highlighting that more than 90% of U.S. retailers had deployed or were piloting a RAIN deployment. So while this was the disappointing year in that chart, the year that we showed revenue decline, I think the history books will show 2020 as one of the most pivotal and influential in Impinj's journey. And even when we narrow the aperture down to just the most recent 5 years, you see that the growth rate has continued. The engine of our growth is the endpoint IC, delivering revenue growth at a CAGR of 23%. Over this period of time, the bulk of the revenue growth in endpoint ICs has been from the retail apparel vertical. As Jeff mentioned, we estimate retail apparel to be 30% penetrated. However, only a handful of retailers are fully deployed. As a result, we expect significant growth for the next several years from the retailer space as all of these retailers that have made the decision to move forward, continue their expansion plans. In 2022, we also saw the growth drivers begin to broaden. Retailers seeing the benefits in apparel, began moving into general merchandise. And in 2023, after years of infrastructure investment, we see the supply chain logistics market moving forward, and we expect to ship significant quantities of endpoint ICs into that market in support of parcel tracking. By comparison, general merchandise and supply chain and logistics are individually 4 to 5x the size of retail apparel. Yet they are only -- they are less than 1% penetrated at this point. So we see these two much larger growth verticals as providing substantial fuel to support the next phase of our endpoint IC growth. Our systems business, while project based in nature, is also delivering strong revenue growth at a 15% CAGR over this 5-year period. Even if you were to back out some of the large products, back out from 2019, the dock door deployment with our first large North American supply chain and logistics provider and back out from '21 and '22 the loss prevention deployment with our visionary European retailer, you would see a systems business that is driving more and more read points into the market. And if you double click one more time, you would see a reader IC business that is accelerating, putting more read points into the market at an even faster rate, but more importantly or just as importantly, providing the fuel for our partners' innovation. Jeff and Hussein and Chris have all mentioned the importance of our systems business. Endpoint ICs may be the crown jewel, but systems have the competitive advantage. Look for us to begin leveraging that competitive advantage, going forward, to drive -- to build and drive enterprise solutions that will eventually drive reoccurring endpoint IC quantities to Impinj. Now I'd like to talk about margin expansion. In 2020, we began to be more focused on profitability. Leverage in our business came from two areas: First, with the step-down Moore's Law with the M700, we were able to shrink the size of the die by half versus the prior generation, Monza R6 while also increasing performance. We leverage that substantial cost advantage in two ways. One, we put a very competitive price point to our customers; and two, we began expanding our gross margin. As I mentioned before, prelaunch, M700 was -- our corporate average gross margin was 50%. Now that the M700 is fully ramped, our normalized rate is 53% to 54%. And we're not done innovating. You just heard Hussein talk about the M800, 25% more die per wafer while also being more performing. In the next few slides, I'll talk to you about where I think the M800 can take our gross margin. Now one reminder on gross margin. Our 2022 gross margin benefited from an exceptionally strong mix of high-margin specialty and industrial SKUs. If you back that out -- that impact was about 200 basis points. And if you were to back that out, you'd see we'd be in our targeted range of 53 to 54 in 2022. The second area driving leverage is our disciplined focus on investment. Over these 3 years, we've seen leverage across each of our operating categories. R&D was 26% of revenue in 2020, was 21% in 2022. Sales and marketing went from 16% to 11%. G&A went from 15% to 12%. And it's important to note in our G&A line in 2022, included litigation-related spending. If you were to remove that litigation-related spending, you would see a G&A line item that was at 9% of revenue. The combination of strong revenue growth potential, expanding margins and disciplined investment is the combination or the calculus for the significant leverage that I believe this business model has. Many of you have asked me about our inventory strategy. So I want to take a few minutes to elaborate on that. We have very large enterprises, several in the Fortune 50, relying on Impinj to support their digital transformation. If we cannot supply, we break their business processes. Neither they nor us are willing to accept that risk. And with the significant efficiency gains that RAIN can offer, we need to have the finished goods supply to support growth in existing deployments as well as new customer ramps. Now we're fortunate, in that we benefit from long product life cycles, which minimizes our obsolescence risk. As an example, our Monza 4, which is a high-memory industrial SKU, launched in 2010, we're still adding volumes in 2022. Our Monza R6, which was our prior generation to our M700, so our volume-running SKU, was introduced in 2014 and will still drive meaningful revenue contribution today. We expect similar long product life cycles in our 65-nanometer product family. So with big enterprises betting on Impinj with long product cycles at a massively growing end market, we intend to manage our inventory at 180 days on a forward-looking basis. Now we may not be there at every quarter. The timing of customer ramps, the timing of wafer delivery, cyclicality in the foundry industry will all factor into our inventory calculus. You can see that in '21 and '22, in a heavily supply-constrained environment, we weren't able to get anywhere near a 180-day target in any of those periods. And in 2023, as Hussein mentioned, we've asked for our wafer delivery to be front-half loaded, and we're also preparing for the M800 ramp. As a result, our 2Q ending inventory will be north of that 180 days before falling back to the target level in the back half of the year. So now let's take a look at the long-term model. Given the impact project timing has on our business and the fact that large customers and large verticals are deploying, we've given our revenue -- our financial profile of 2 revenue benchmarks, $500 million and $750 million, despite the fact that we've grown at a 20% clip historically. As we move from $260 million to the $500 million in revenue, growth will come from retail, both apparel and general merchandise and supply chain and logistics. With the initial ramp of the M800, we expect to take gross margin from the normalized levels of 53% to 54% today up to 55% to 56%. And with additional leverage in each of our operating categories, we expect adjusted EBITDA margins in the 19% to 21% range. As we move from $500 million to $750 million in revenue, the revenue growth will come from the much-larger general merchandise and supply chain and logistics market. They will overtake the growth that apparel has during this window. With the M800 fully ramped, we expect gross margin to grow to 56% to 57%. Much like the M700 before it, we expect 300 basis points of gross margin accretion from the M800, but we're modeling a little bit more conservative ramp the M700 ramp very quickly due to supply constraints that we don't anticipate right now. And with additional leverage again in each of the operating categories, we expect to take our adjusted EBITDA margins to the 23% to 25% range. In each of the categories, we're assuming 5% capital intensity, with most of our CapEx going into endpoint IC post processing capacity. So in closing, we have a massive opportunity to innovate in a market that's counted in trillions of units. We only delivered, as an industry, 34 billion units last year. Our business model has just begun to scale, and there is significant opportunity for leverage in front of us. So now we're going to take a few minutes to get set up for the Q&A session, and we'll be back in just a minute.

Okay. I think we are ready to start the Q&A. If you have a question, please raise your hand and wait for Andy to bring the microphone to you. And for the benefit of those on the webcast, please state your name and firm along with your question.

Jim Ricchiuti with Needham & Company. I just wanted to understand a little bit more about the M800 and some of the comments you made about it being qualified in multiple fabs. Is that with your existing foundry partner? Or is there potentially another foundry partner involved?

Hussein, why don't you take that?

Yes. So the -- that statement is with our existing foundry partners. So they have multiple fabs in different geos, and we are qualified at multiple of those.

Cary, a question for you. And I understand the sensitivity around the Q2 reaffirming that. But if we went back to when you gave guidance, you gave some directional guidance and thinking about Q3 in terms of [ system ] and IC as well as Q4. Is that something we should just wait or has there been -- in other words, has there been any change in the way you characterize the second half?

I appreciate the question, Jim. We're only updating on Q2 today. So stick with us until the earnings call that we'll have the color commentary on Q3 and Q4 as well.

Toshiya Hari from Goldman Sachs. First of all, thank you so much for hosting this event, super informative. I guess first question, high level for maybe Chris or Jeff. Based on everything you guys said during the presentation, it's pretty clear that RFID is at an inflection point and all the benefits associated with RFID is pretty clear. . When you walk into a customer and when you have these engagements, when they ultimately decide not to go forward with the project, what is typically the reason or what are the reasons for a customer or a certain vertical application to not move forward because the 0.3% number that you cited in terms of RFID as a percentage of taggable items, that's remarkably low, despite all these benefits? So I was curious, what are the barriers to adoption?

Great question. Thank you. To be honest, it doesn't happen that often when an enterprise elects to undertake a pilot program. Of course, it's an attempt to prove the value. And in my experience, the things that either slow down, rarely stop a deployment, is an increasing understanding within an enterprise about all of the other process people and technology changes that must also take place for the benefits of the RAIN RFID deployment to flow through the entire enterprise. So sometimes, an enterprise underestimate some of the systems integration and other people in process changes that are required, and that may change the pace or the timing. But typically, it's just that. It's -- we say often, it's hard to predict the pace and timing of new enterprise deployment. And as I said in my experience, they start to understand broader implications and requirements and they need to get those projects or deployment elements underway.

Yes, I will do that. Actually, I would just like to add two things. The first one is that this process is kind of a flywheel. As we grow, we become able to engage with more enterprises, which drives more adoption, which allows us to grow faster, which allows us to engage with more enterprises. So if anything, we have more opportunities today than we're able to service. And we were very focused on just two strategic verticals that I pointed out, retail general merchandise and supply chain and logistics. That's not to say there aren't other opportunities out there. We've got to build that internal flywheel, where as we grow, we can continue to do more. So expect the growth -- expect us to keep pushing within the financial constraints that Cary indicated to enable us to go forward. And then the second one, which Carver just mentioned is, even when people might go away for a while, for example, Walmart seats deploying in the year 2011 associated with the Round Rock lawsuits that kind of stalled the industry, and those patents expired in 2019, Walmart was back. And so we see demand out in the market. We see a deep understanding among these enterprise end customers about the opportunity associated with RAIN RFID. You see -- we see no longer us going out and trying to create demand in talking about ROI. We see demand for digital transformation. We see pull in the market. And really, the two things in front of us are just how fast can we grow in scale, and I've asked in the enterprises actually ramp the pace of their deployment because they're truly transforming their enterprise.

Then one quick follow-up for Cary. In terms of the long-term model, and sorry if I missed this, but is there a time frame on the model? And I appreciate predicting revenue and everything else is difficult, but $500 million to $750 million is a pretty broad range. As your central case, as you think about the market, do you assume or expect 30%-ish growth in the market as has been the case over the past 5, 10 years? Or should we brace for an acceleration or deceleration? How are you thinking about the market?

Yes, it's a good question, Toshiya. So we -- obviously, we purposely gave revenue profile at those 2 ranges because we have big projects in the pipeline, big projects that are going on right now that can move the needle pretty substantially. . The endpoint IC CAGR, on a unit basis, has been pretty consistent, as Jeff highlighted, at 29%. That 29% was retail apparel, predominantly, really doesn't have general merchandise in it yet. It doesn't have any supply chain and logistics in it yet. So there's opportunities for growth. Now when you dial it down to our historical revenue CAGR, that's been in about 20%, so it's a little bit less than the endpoint IC unit CAGR. So I'll give you those factors and you can model when you think the timing might be. But for today's purposes, for our first Investor Day in quite a while, we thought it was the best approach to give two different revenue profiles and the financials associated with each.

Robert Aguanno, Piper Sandler. You guys talked a lot about authenticity. And I was wondering, in terms of the timeline for Authenticity, how big can that revenue opportunity be? And ultimately, talk about some of the timing of the implementation.

Yes. Why don't I start with the financial model, and then you guys can join?

I want to hit the vision at the end.

Yes, you can hit the vision at the end. So as we've said throughout this year that it's too early to model the services revenue in 2023 associated with Authentication. We've seen strong uptake. We started shipping chips in Q1. Quantities of chips shipped in Q2 will be in the hundreds of millions range. So we're seeing nice uptick, but it's still too early to model the services revenue. As it relates to the long-term model, we've taken a pretty conservative approach or a modest approach, if you will, to Authentication. It's in the low single digits in each of our models -- each of those revenue profiles, Authentication. Now, we think it can be bigger. We think it could potentially be much bigger. Because we just don't have the experience yet, I voted -- I moved to go with a more modest assumptions in the model. Now as you think about Authentication and the services revenue, think of that as more SaaS-like, so higher gross margin potential with the authentication services. The chips that we're selling right now are priced at a premium, so there is a gross margin benefit from that. The gross margins that we presented in the $500 million and $750 million scenarios, have a very small impact from Authentication. So there's potential there to grow. And I hope by the time we do our next Investor Day, you can see that Authentication is the next leg of gross margin expansion for us. I'll hand it over.

I'll add first and then I'll pass it over to Chris for vision. I think one of the exciting things about the introduction of Impinj authenticity is the creativity of enterprises and partners as to how to really harness the potential value. And part of that, which is reflected in the pilot programs underway, is to determine the true value of authenticating an item is genuine throughout its life cycle. So instead of like a one-time monetization of an endpoint IC, there may be multiple stages and multiple points in that product life where authenticating the product as genuine will add value. We want to take a long-term view here. We want to make sure that we and our partners are extracting the appropriate value that the Impinj authenticity solution engine is providing. So we are allowing for more time in these pilot programs to find more opportunities to authenticate and what impact that has on the business model of that enterprise and the value. We want to extract the appropriate significant value of that authentication service, and it's not something that I think is in our interest to rush. I think if we are thoughtful, at the long term in mind, we will optimize the value that it can -- we can drive for Impinj.

And I'll just add that I'm super excited that we're leading in this opportunity. Think of any other wireless technology, any of them, how many don't have security? Do you think of one? I can think of one, RAIN RFID. And we're the ones that are bringing security to RAIN RFID. It has to be. And my vision is to put cryptographic authentication in every single one of our ICs. We don't know how to do that yet at an appropriate price point for every application, but we're going to find a way.

A quick follow-up for Cary. As Jeff -- as you mentioned, M800 comes with some pricing increases. And we know you guys also mentioned that passed on some price increases at the beginning of the year due to supply. How do the customers perceive this price increase? And maybe, is it the same across all items as well?

Yes. Maybe I can tag team that one with you, Jeff. So first, a clarification. The M800 is not with a price increase. The gross margin lift that I referenced and that we have in our model is because of a cost advantage. We're getting 25% more die per wafer. Wafer is the bulk of the cost in our die. So think of it in 70% to 80% of our cost profile is the actual wafer. So that cost advantage is what's driving the gross margin accretion. And then, Jeff, do you want to take...

Sure. As part of my responsibilities leading the go-to-market organization in addition to sales, marketing, communication, the product management team reports to me. And I know they'd want me to reinforce that Impinj M800-series tag chips are coming soon, and we've not set pricing for the M800 at this time. And again, I'd just reinforce, we want to ask of the market the value of our invention and innovation, and we want to be thoughtful about the pricing for the Impinj M800 to ensure that we're extracting appropriate value from the marketplace while trying to drive broad adoption and opening up the overall market.

And then, Robert, to your initial question, we have ran price increases from our foundry partner over the last 18 months or so. And each time that's happened, we have passed those on to our customers in a way to maintain the integrity of the margin model.

Bobby Eubank from Chevy Chase Trust. Jeff and Chris, congratulations on expanding the team. It's been great to have you, Hussein and Cary, welcome additions. And congrats to the Impinj team at large. First question on the lawsuit that you have out there with your largest competitor. Just any updates on that? Is any of that factored into the guidance that's prepared out there? You mentioned the Round Rock patents that expired earlier. Any comments about how negotiations with potential customers, if they're watching this, if this is a nonevent for customer adoption? And then a follow-up.

So why don't I start there? I could kind of [ wax ] eloquent about the lawsuit since I just came out of 3 hours of testimony. But where we stand right now is if you can see NXP in California on 26 patents, the judge -- that was kind of a statement. Judge asked us to withdraw a lot of patents. We got down to 4 in California. We prevailed on one -- these are all us suing NXP. We prevailed on summary judgment on one. We did not prevail on 2 of the remaining 4, and there's one that's still open. Trial in California is scheduled for July. NXP countersued us in Delaware. That case got transferred to Washington, initially 8 patents, a little down to 1. We're fighting that case in court right now. That's where I testified this morning. Of the remaining 26 patents that we had, we sued NXP in Texas, and they countersued us, and those cases start later this year. I can't give any commentary in terms of how I feel about it. But like I said, I just finished my testimony, and I'm prepared to do it again. In terms of the financial impact, Cary, if you want to say a few words?

So Bobby, the reaffirmation of the Q2 guide today includes any impact from litigation-related spend. Chris highlighted that trials are either happening right now or coming up in early Q3. On our Q1 call, I did state that I was assuming litigation-related spend for the rest of this year.

And in terms of engagements with end customers, it hasn't really been a topic. Enterprise end customers know that the market will find a way. None of us have a desire to disserve our enterprise end customers. And -- so it has not been a topic with this large end customers. But obviously, there's things to work through in terms of a trial and injunctions and all those other things, and I can't predict the outcome in any of the particular cases. But just know that the litigation continues, and we have already prevailed on some -- in summary judgment on one of the patents in California.

And then lastly, the long-term model does not assume litigation spend.

I reinforce Chris' statement that it's not been a major topic in the marketplace and our engagement with enterprises. But I will say that when it has come up in the conversation, we reiterate that we respect the IP of others, and we expect others to respect ours. And that resonates because think of the enterprises that we're doing business with, they have -- typically have, within their product portfolio, intellectual property and things that they wish all the rest of the world would respect. And so that's the nature of the conversation. We simply say we respect the IP of others, and we expect everyone else to respect our IP, end of story.

My follow-up, Cary, maybe the 15% systems CAGR over the last 5 years you talked about, given some of these large enterprise adoptions, maybe I could have even thought that would be a little bit higher. I know you had some supply chain constraints in there. How do you think about that business relative to the mix, going forward? The gross margins in the -- sorry, the $500 million and $750 million revenue implies that maybe systems does hold up better. Can you talk about the systems business and maybe the market share within that business and market share, expecting that $500 million and $750 million across the endpoint, readers IC and systems business?

Yes. So in the 4-year look back, the 15% CAGR for systems was really impacted by 2020. Though we saw our endpoint IC business grow in 2020, the systems business did contract. So that's impacting the 15% number. As we look forward and into the long-term model, with the reoccurring nature of endpoint ICs, I expect that as a percentage of the mix to continue to grow, much like it's been doing over the last couple of years. However, there are very large deals that we're working on today and that are in the pipeline. In any given period, that mix could skew with the large deals.

This is Troy from Lake Street. Just two quick questions. One is if a customer is going to deploy authenticity, do they have to be 100% Impinj chips?

The answer is, today, we are the only supplier of mainstream endpoint ICs that include a cryptographic engine. And therefore, they will be deploying our chips in the future. Whether our platform supports competitors' chips, if they ever introduce any, is a decision that we will make at the time, depending on what the enterprise customer needs, the economics and obviously, all the business decisions. It is fundamentally a business decision. Each of the suppliers in the market has the opportunity to choose their own cryptographic suite and their own implementation in conformance with the protocol because the protocol didn't specify a cryptographic suite. So support is not as easy as just saying, "Oh, I support that customers, that competitor's chips as well." It's -- you've got to actually do the implementation for the competitor. And cryptographic authentication is symmetric. Therefore, the service that does the authentication needs to know the keys. So we'll be supporting our chips and our platform, and we'll see what the future holds in terms of competitor chips.

Okay. And then maybe a follow-up for Cary. Can you talked about the M800, you talked about services and higher-margin businesses. I think pretty much everybody in the room would have thought $750 million in revenues, we get a gross margin closer to a 6 handle. So just let us know, are we capped out on gross margins here in the high 50s? Or is there ways we could get to higher gross margins in?

Yes. There's absolutely ways to get to the higher gross margin. Think of the accretion in these two revenue profiles as coming from the M800, so the second phase of the endpoint IC innovation. What the next phase of gross margin expansion will come from the services M800 component? As I mentioned, we've taken a pretty modest approach to modeling services in these two revenue profiles, just given the newness of those in the market.

Chris Zepf from Cinctive. Two questions. First, on Authentication. I understand wanting to be conservative. But so in the model we saw is mid-single digit as a percentage of revenue. Is that...

That's low single digit.

Okay. But you mentioned this quarter, it's already a couple of hundred million units. So it seems like that year -- what was your pent-up demand because it almost seems like from -- you just released it last quarter, it seems like you're already in low mid-single digits as percentage of revenue right now?

Yes. So this is the initial product ramp. So we'll ship a higher quantity of chips early on to get our customers up to speed with them. They haven't rolled them out yet. So we haven't seen the chips in market. We haven't seen the authentication services revenue flow-through yet, which is why I've signaled that to 2023, it's too early to model authentication services revenue.

And then in terms of the long-term model, I think you've said before in terms of -- you've aspirationally would like to spend R&D in line with revenue growth. But even at this relatively low revenue level, it's difficult to do. If I fast forward a year when UPS has kicked in, how has that reflected in the model? Is R&D still staying the same as a percentage of revenue in that target model? So how should I think of that, whether or not that's still aspirational and there could be leverage if you can't meet that?

Yes. It's a good question because growing R&D at the same rate of revenue has been our aspiration. And to your point, we've been unable to do this. In the long-term model, we're expecting leverage in each of our operating categories, so that includes R&D. More of the leverage comes from the SG&A lines, but we will see our R&D spend scale as revenue scale, as the revenue grows.

This is Dustin Fowler from Oppenheimer. This one is for Jeff. Can you help us better understand the distinction between the sales org and the partnership organization? Specifically, I guess, how much of sales are coming from direct versus partnerships?

The go-to-market organization is integrated, so we think holistically about how to grow the market and our opportunity within it. We don't disclose the percentage of revenue that is generated via our enterprise sales versus a general partner market. And in part, that's because many of the enterprise solutions opportunities are done in partnership with strategic partners that either the enterprise has brought to the opportunity or have asked us to help integrate into the opportunity. So that distinction between enterprise solution sales as a channel -- a source of revenue and channel is less relevant to how we think about growing the market and our share within that market.

And a quick follow-up. Sounds like you're following kind of an account-based sales strategy going after these greater than 1 billion unit endpoint customers. I guess, do you see expansion driving your longer-term model? Or is that coming from new customers as well?

Well, I'll start with -- it's true. In my presentation, I spoke of the focus of our enterprise solutions team on opportunities that reflect a 1 billion or greater endpoint IC opportunity per year. . From one perspective, one of the challenges that I face is when you think of all of the categories that we've talked about, the trillions of items that are represented in all those categories, one of the challenges we have is selecting which lighthouse enterprise opportunities to participate in. And we have -- arguably like to be in more of those, but we are thoughtfully selecting those which we think are likely to unlock a market. These are -- these lighthouse enterprises are sector leading and influential, at least according to our assessment. A win in that lighthouse enterprise is likely to influence or pull others within that industry sector into looking at and deploying an Impinj RAIN RFID solution. So the market is very large. When you think of the number of businesses across the world that manufacture, transport and sell more than 1 billion items per year, that's a very long list. We are targeting or selecting these lighthouse enterprise accounts to help unlock opportunity to get that flywheel that Chris talked about, underway.

Alex [ Travis ] with GGHC. You mentioned that M800 has better performance, I assume that means better ratability. I always kind of amazes me that you can make something smaller that's doing radio signal processing and make it a better performance. But does that mean better readability? And as readability increases, does that increase the addressable market significantly because there's more things that you can successfully do with it? And how does that play out to the business?

Do you want to take that one, Hussein?

So yes and yes. It does mean more readability. And the increased readability does expand the addressable market, to your point. In fact, as Jeff mentioned earlier, the whole transition from retail apparel to retail general merchandise, we feel that this is a key contributor to general merchandise because we do see increasingly aggressive inlay specifications coming down the pipe to be able to support general merchandise, and the M800 is designed to go address those.

Alex, I'm going to add that given we had kind of M800 for a long time, I've been speaking with investors about further opportunities in the 65-nanometer node for years. We've been working on this chip for a while. It has substantially better performance. Substantial -- will allow smaller inlays and/or greater [ read range ]. It has other features in it and capabilities that we haven't disclosed yet that actually -- they come about from our enterprise engagements that will allow us to enterprise problems. It's just an overall better chip, and I am very excited about the opportunities it brings to the market.

Is it required? And then, is it sufficient in order to start embedding the tags in products, moving them from the hang tags or the garment tags, is that part of the opportunity?

it's because the chip allows -- is much more sensitive, it allows a smaller inlay and different types of form factors for those inlays. So we're getting to the point where it should be easier to embed the IC as a part of the item. That embedding may not have as good an antenna as, for example, a standard inlay. But if the chip's more sensitive, then you could basically compensate for the lesser antenna. Or alternatively, having a much smaller antenna further enables the embedding. It's not going to turn embedded solutions overnight. But every step we take is towards that embedded vision.

And I guess to the business point, if somebody is using some of these amazing features of it to embed it in the thread of a sweater or inside a sneaker or something like that, and it's a product that really only you can do is the way you can charge a little bit more for that or you'll still be capped at the same kind of price point and letting people use all of this amazing innovation?

So we look -- specifically, if you look to our slides, winning lighthouse enterprises with whole platform solutions and enabling our partners to step and repeat, continuing to deliver the capability so that we can hold those enterprise opportunities, what we believe is that delivering products that solve an enterprise problem at a fair price and becoming a partner with that enterprise will give us a long-term revenue opportunity, and that's where we're focused. It's a win and hold.

Andy, let's take a couple of more questions.

Scott Searle with ROTH MKM. Maybe to follow up on some of the questions around recurring revenue. And specifically, I want to make sure I understand the model, it sounds like it's still evolutionary, and what appropriate value is. So are you thinking it's on a per unit basis for dip and check for authenticity or is it the number of units that are managed within the system? Just kind of wondering conceptually, how you guys are thinking about it at this point in time? And then also within the model, talking about low single-digit types of revenue, is that only from authenticity? I know there's some other -- looks like feature sets that are going to come with the M800, is there something else that's built into it now that we're not really thinking about it at the current time? And I'll throw one more on top of that. In terms of the existing base, installed base today, if we were to look at that, what is really addressable? When you think about authenticity, is that addressable within 5% of the marketplace that you're seeing today, 10%? How should we be thinking about sort of that penetration? Then I have a broader market question.

Maybe I'll take one of the 5 or 6 questions. One or two after we -- thank you, Scott. I appreciate it. . With respect to the value, the incremental value associated with Impinj authenticity, there are many different use cases that we see underway at this time or concepts and early pilots that suggests that in the different environments, there are different value attributed to one or more authentications in that product's life. One of the things I said about how we engage with enterprises is we first listen and learn from them how they create value or lose value in their business, and then we try to bring the Impinj whole platform solution to that unmet need or that challenge and try to derive appropriate value for that. And so it's -- I believe it's very important for us at this stage in the early days of Impinj authenticity to listen, learn, bring our enterprise solutions focused to the opportunity. And then as we see how those programs are evolving and will be ultimately scaled, we'll work with that enterprise and partners to determine the appropriate way to create and participate in that value.

And then Scott, I think you asked effectively what is -- so authenticity is a whole platform -- Impinj authenticity is a whole platform offering. And what's next after that? And so as you think about our opportunities to differentiate -- by the way, I'm not going to answer the question directly. I was talking about authenticity for a while, and then we rolled it out. But tech items, that's authenticity. Protect people, that's Protected Mode. Today, it's just the capability, is more we can do there. Protect the environment and deliver performance-related capabilities that solve enterprise problems, which can be a whole host of things. We think of those 4 vectors: items, people, environment, solutions. We will be innovating on all of them in order to drive differentiated value from our platform.

And if I could just follow up on a market-related question. 29% CAGR since 2010, certainly, the pandemic pulled forward a lot of use cases. I think conventionally, if we went back 5 years ago, you kind of kept thinking, "Well, iterational products, we bring down some costs," in-person feature sets, and it really starts to open up that broader market opportunity. But lo and behold, right, COVID kind of brought forward a lot of these other use cases by a number of years. So the question is when I look at the M700, now the M800, which I guess we'll see more data points in terms of what those feature sets entail, how big of a market -- how broadly does that address the market today? When we look at that multitrillion unit opportunity, they're certainly like that [ $0.01 ] tag to go to food items. But if I look at the M700 and the M800, does that address 500 billion units a year? Or do we need the M900 to really start to drive further penetration? How far does that take us to the existing portfolio?

I think I'll take a lead on that one. The M800 is broadly applicable. In fact, I can't think -- maybe these gentlemen to come up with something, but I can't think of a use case where it's not applicable or where its enhancements won't drive additional opportunities. It can go anywhere. Now, it doesn't have authenticity. Right now, it's not built-in. We have the M775, we still have things that we can do. But it allows -- it's better performance, smaller antennas, built-in capabilities that solve enterprise solutions and smaller die size, smaller inlays. It can go into everything from automotive to food, to industrial, to manufacturing, to retail apparel, to retail general merchandise, supply chain and logistics. It's not limited. The limits are, as Jeff described previously, time frame over which large -- that large enterprises take to transform their operations. We've got a gigantic enterprise, it just can't happen that fast. And then us scaling that flywheel, we grow our revenue, grow our size and can do more. We're not limited by the endpoint IC capabilities. And M800 could go everywhere.

There's a lot of space between 34 billion and -- items and trillions of items. And so really, it's -- no one thing will close that gap entirely. But I'm very confident as we build out the portfolio of Impinj endpoint ICs, and I think it's an important point to reinforce, while the next generation will always be an important value add and market-creating opportunity, our products have a long life cycle. Once an enterprise adopts a solution, based upon an existing Impinj endpoint IC, and it works and creates value for them, they tend to stick with that, and they want us to -- in fact, they come to us saying, "Please continue to make that product available for many years to come." And so I'd just like to reinforce that advancements in any element of the platform only create more opportunity. And the remainder of the platform or that product portfolio still has lots of life ahead.

Matthew from Black Creek Investment Management. Maybe related to that question, what are the main things that need to happen in order to gain traction in the food and drinks packaging industry?

We're learning a lot. In the food and drinks industry right now, we and our partners -- as I said, I'm quite enthusiastic or excited about the number of pilot programs underway today. . I would say, one of the things that I've experienced and our team is experienced is that, that's an example where there are process and people-training elements to deploying at scale solution that are as important in terms of evolution as it is the RAIN -- the Impinj RAIN contribution to the solution. So that industry is rethinking how it does what it does and how RAIN-based solutions can help it grow the market, reduce waste and ensure freshness of product. And there's a lot of evaluation about all of the different things that need to evolve, including the enterprise systems that they've relied upon for years. But of course, it's very large long-term opportunity for us. And what's exciting today are the number of leaders within each subcategory of food and drink that are beginning to evaluate how RAIN can improve their supply chain, improve their customer experience, improve their operating efficiencies.

I'm going to say one more quick thing. A significant portion of those food and drink opportunities today are in the supply chain, pallets and cases and food items. So for us, that food opportunity appears within supply chain and logistics.

Okay. We'll take one more question. Last one.

Slide one more in there, just one. Jim Jungjohann, DigitalBridge. So we all understand the ecosystem, but we also understand some of it's out of your control, i.e., printers. So I thought today would be a great day if you give us some color on how you see kind of how this -- the printer is -- the ecosystem and printers, you have one customer, you have -- do you see that as like an ongoing persistent issue as these large -- some of the larger enterprises roll these out? Or is printer -- or do you think the printer issue is kind of behind us?

We don't really see our printers as a significant issue. If somebody places a big order coming out the other set of a pandemic, and there's not enough supply, the system can get behind a little bit. There are multiple printer suppliers out there in the market. We can supply enough readers ICs into those printers. There is some, what do you want to call it, slinking going on as some of the orders pick up, but I don't see any reason why the market can't deliver a sufficient number of printers from multiple suppliers. But there will obviously be disruption when demand takes a step function.

Yes. I wonder if you could talk a little bit more about the lighthouse enterprise customers you've identified. I mean, can you give us a sense of how many that you are working with? And are they in the two main verticals?

Jim, it's a good question. Yes, the lighthouse enterprises we are engaged in, are within our focus -- two focus markets, retail and supply chain and logistics. And I would say, there's a handful. And I prefer not to be more specific than that at this time. But remember, one of the criteria, these are enterprises that manufacture, transport and sell more than 1 billion items, some many billions of items. So they represent a significant pipeline opportunity for us, even if just a handful or so. And as we continue to prove out this enterprise solutions engagement model, of course, we'll have a better set of inputs on the return on an increasing investment to pursue more of those. But just as importantly, the way we're engaging in these lighthouse enterprises is to extract the learnings, harness those learnings and advance our platform, integrate them into solutions engines and then provide those to our partners who can actually reach out to hundreds and thousands of enterprises around the globe in a variety of use cases and sectors. That's where the scale comes from.

And if I may, just last question, I didn't hear a whole lot about M&A. You guys did an acquisition that you talked about last quarter, it helps, I think, in inlay design. But relative to the way you're thinking about the business longer term, how does that play into it?

Sure. We will continue to evaluate opportunities in the market. Most of the things we're doing right now are blue ocean, so the number of M&A opportunities for us has been relatively small things that were opportunities that fit in the direction of growth that we're seeing. As we see opportunities, we will, of course, evaluate them. And so we did the Voyantic acquisition because we see it as a way where we can significantly accelerate adoption in the market because Voyantic was the #1 provider of inlay design manufacturing of test solutions. And when combined with what Hussein spoke about in terms of operational excellence and delivering on the market, put those two together, we think we're going to accelerate adoption. And expect us to keep looking.

And Jim, while we would like to do more M&A, it's not necessary for us to achieve the long-term model objectives.

I would like to -- are there more questions?

No, I think we're good, Chris.

Okay. I would like to say one thing, and then I'll -- or two things, and then I think I'll turn it over to Cary, although I don't want to steal Cary's thunder. But we've been talking about the fact that we're 0.3% penetrated in a gigantic opportunity. Hussein said some words that based on his experience with more than 20 years in wireless technologies that we're just scratching the surface of what's capable or what's possible from a technology perspective. And although I can't personally put a percentage number on it, my 40 years of experience in wireless technologies really leads me to believe, and I can just see it, that we are just at the beginning of a huge opportunity. There's opportunities in the endpoint ICs, the reader ICs, the readers and gateways, the software, the solutions, the protection, the performance, consumer engagement. I'm going to speak at the RAIN Alliance meeting tomorrow about our need in order to engage consumers to create a DNS to a [ name ] service for the Internet of Things, it doesn't exist today, to get readers into consumer devices to give consumers the benefit of the connected items. We are just at the beginning of what I think of, you may laugh at me, but is the biggest opportunity there has ever been, is we're going to connect everything on the planet. And so I want to say thank you all for being with us and being part of this journey with us. And I'm going to turn it over to Cary to say the closing words.

I think that's the perfect way to end today's Investor Day. Thank you all for joining us here in Seattle and virtually. Those on the webcast, this will conclude the webcast. Thank you.