Impinj, Inc. (PI) Q2 2017 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Impinj Second Quarter 2017 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, we will conduct a question-and-answer session. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Maria Riley, Investor Relations. Please go ahead.

Thank you, Operator. Thank you all for joining us to discuss Impinj's second quarter 2017 results. On today's call, Chris Diorio, Impinj's Cofounder and Chief Executive Officer will provide a brief overview of our performance in market. Evan Fein, Impinj's Chief Financial Officer will follow with a detailed review of our second quarter 2017 financial results and third quarter 2017 outlook. We will then open the call for questions. Impinj's President and COO, Eric Brodersen is also on the call and we'll join Chris and Evan in the Q&A session. Please note that management's prepared remarks along with quarterly financial data for the last eight quarters are available on the company's website. Also we will consider questions received via email prior to the call and will address some of these questions in the Q&A session on this call. Before we start, note that we will make certain statements during this call that are not historical facts, including those regarding our plans, objectives and expected performance. To the extent we make such statements, they are forward-looking within the meaning of the Private Securities Litigation Reform Act from 1995. Any such forward-looking statements represent our outlook only as of the date of this conference call. While we believe any forward-looking statements we make are reasonable, our actual results could differ materially because any statements based on current expectation are subject to risks and uncertainties. Please see the Risk Factors section in the annual and quarterly report we filed with the SEC for additional information about these risks. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise except as required by applicable law. Also during today's call, all statements of operations results with the exception of revenue or where we explicitly state otherwise are non-GAAP financial measures. Balance sheet metrics and cash flow metrics are on a GAAP basis. Before moving to the financial results, I would like to announce that Impinj management will attend the Canaccord Genuity Growth Conference on August 9, in Boston. We hope to have the opportunity to see many of you there. With that, I'd like to turn the call to Chris Diorio, Impinj Cofounder and Chief Executive Officer. Chris?

Thank you, Maria, and thank you all for joining the call. I'm delighted to be here with you today. We delivered a strong second quarter, with revenue growing 31% year-over-year, to $34.1 million, just above the top end of our guidance. Consistent with the market dynamics I described on our last earnings call, our second quarter momentum remains strong and our long-term view of the RAIN market remains strong growth with enormous potential. In the second quarter we saw significant wins and expanded deployments in retail, logistics and healthcare. We and our partner SLS enabled a major US apparel retailer to automate logistics operations in our new 500,000 square foot distribution center. Faurecia, a large European automotive supply chain company, we discussed on our last call has not deployed the Impinj platform F4 of its logistics centers. With our partner Argo Wireless we expanded our platform deployment at a large Texas hospital tracking 60,000 durable medical assets. And McDonald's Europe continues their rollout with the Impinj platform now operational in 148 restaurants. Our fixed reader business also continued its strong growth with second quarter reader and gateway unit volumes together up 53% year-over-year driven in part by improved sales and channel execution behind update partner programs. We have previously disclosed the large size of our some of our end customer opportunities and how their rollout timing can be unpredictable. In 2016, we benefited from several large end customer rollouts that helped drive our endpoint IC volumes up approximately 70% over 2015. As we enter the third quarter we see a different situation with several large end customers delayed planned expansions. I visited two of these customers overseas in the last 30 days. According to them, their deployment plans and goals remain unchanged. But their rollouts are delayed by internal schedule slips. Consequently, we're reducing our full year 2017 endpoint IC guidance from between 7.8 and 8.0 billion units to between 7.0 and 7.2 billion units representing 18% growth over 2016 at the midpoint. Let me put our revised guidance in perspective. Our endpoint IC growth for 2010, 2017 remains at roughly a 30% CAGR. The 2017 midpoint 7.1 billion units is a huge number, but it is still a miniscule fraction of the total number of connectible items per year. Some end users already consume more than 500 million IC per year, the future potential end users such as the five Japanese convenient store chains we discussed on our last call. Together anticipate using 100 billion ICs per year. We are, as I said on our last call landing whale. Sometimes a few quick in their pace like we saw in 2016 and sometimes if you go slower than we expected them to, like we're seeing now. These large opportunities, a rollout, speed up or delay can represent several hundred million ICs to us. We're learning in real-time the dynamics of leading a nascent by gigantic opportunity. Engaging large end users, who can set the adoption pace for their industry and help grow our opportunity to its long-term potential. And our focus remains that gigantic opportunity, that macro trend of connecting businesses and people to everyday items. So expect us to continue driving hard to accelerate and win every opportunity, in every vertical we pursue competing relentlessly with and that every layer of our platform and investing the people platform and solutions that drive scale and long-term value. Turning now to that platform and those solutions, we have previously emphasized the importance of fixed readers to our future. Unlike handheld readers fixed readers deliver RAIN data in real-time enable used cases that handheld readers cannot deliver and do not have ongoing labor costs. In the second quarter, we introduced the Speedway R120 enterprise class fixed reader optimized for smart fitting rooms, inventory management and interactive product displays. With our introduction of the R120, we now sell a fully development enterprise class fixed reader family with coverage from one to 32 read zone allowing end customers to right size their read zone coverage with their business needs. Our gateway family complements those fixed readers by locating items and tracking item transitions. Together, our industry leading fixed readers and gateway allow end users to optimize their hands-free deployments in retail, healthcare, logistics, manufacturing and many other vertical. We also introduced a new reader module. The Indy RS1000 optimized for embedded reader integrations such as point of sale. We introduced four joint solutions in the second quarter two in laundry, one in retail and one in fast food. We haven't previously discussed laundry on our calls and although not as well as known as other opportunities we have discussed, our laundry opportunity span Asia, North America and Europe. Our partners use our platforms to lease, source, clean and maintain connected linens and uniforms in healthcares, hotels, restaurant and clean rooms. These deployments which already tens of millions of laundry items, employ specialized tags embedded with the linen or garment that survive repeated washings and pressings. Fixed readers identify, sort and track the connected laundry items. The result, faster processing, improved efficiencies and reduced loss. There's one example Berenson, a large UK textile service solution provider uses our platform to process 15,000 laundry items per day at a single facility. In retail, our joint solution with Capgemini uses our platform to identify and locate individual retail store items by combining order and product information from SAP with data about an items identity and location in IBM Bluemix delivering real-time store inventory and eliminating manual stock counting. And our joint solution with retail reload [ph] allows French lingerie retailer undies [ph] to improve the customer shopping experience by having up to date inventory available online. Allowing shoppers to use their smartphones to select items before they get to the store. Upon arriving at the store, [indiscernible] detect the product from a smartphone app, 90 seconds later. Capsules shoot the items via pneumatic tubes from the stores stock room to a kiosk. Shoppers can then pay on the spot, without having to wait in line for our cashier. In my talk, at the RAIN Alliance Meeting two weeks. I painted a picture of Impinj's vision of digital life for everyday items. A picture of what I believe is an inexorable trend in which every physical item has a digital life, a digital twin. The physical item has identify, location and authenticity. The digital twin has history, services and ownership. If you missed the meeting, then I'd encourage you to look at that presentation posted on the RAIN Alliance website. I'm energized by this vision and my presentation is part of my effort to engage the community to drive it together. Other meeting presentations on the website, especially those from healthcare professionals, prescribed automated inventory replenishment, operating room asset management and improved efficiencies and labor savings in hospitals. To me their assessment of the value that RAIN solutions bring to their healthcare market is compelling. In summary, I'm proud of the Impinj teams execution this quarter and our continued progress toward our vision of digital life for everyday items. We grew to 283 employees and exited the year the quarter with 2016 issued and a lot of patents and increase of six over the last quarter. Although we see rollout delays, we understand those delays and remain confident and excited about our market leadership and our opportunity. Consequently, we intend to hold this steady course and continue investing in our people, platform and solutions. I will now turn the call over to Evan to give you a detailed look at our second quarter financial results and our outlook for the third quarter. Evan?

Thanks Chris. Before I review our second 2017 financial results. I want to remind you that with the exception of revenue or unless explicitly stated otherwise today's statement of operations are on a non-GAAP basis. All balance sheet and cash flow metrics are on a GAAP basis. A reconciliation between our non-GAAP and GAAP measures as well as how define our non-GAAP measures is included in our earnings release available on our website. As Chris mentioned, we delivered a strong second quarter. With revenue of $34.1 million representing 31% growth over the second quarter of 2016. Gross margin was 54.7% compared with 53.4% in the second quarter of 2016. The 130 basis point year-over-year improvement reflects continued adoption of our Monza-R6-endpoint IC family. Total operating expense in the quarter with $17.2 million or 50.5% of revenue compared with $17.0 million or 53.4% of revenue in the prior quarter. R&D expense was $6.4 million or 18.7% of revenue. Sales and marketing expense was $6.3 million or 18.6% of revenue. G&A expense was $4.5 million or 13.2% of revenue. We ended the quarter of 283 employees and 31 open positions. Compared with 261 employees at the end of last quarter. We delivered $1.4 million and adjusted EBITDA in the quarter or 4.1% of revenue compared with $246,000 or 0.8% of revenue in the prior quarter. GAAP net loss for the quarter was $977,000. On a non-GAAP basis, we achieved second quarter of net income of $1.3 million or earnings $0.06 per share using a weighted average diluted share count of 21.9 million shares. Turning to the balance sheet, we ended the quarter with cash and cash equivalents and short-term investments of $74.5 million. Accounts receivable balance was $25.5 million an increase of $4.5 million from last quarter. We increased inventory by $4.2 million over the prior quarter bringing our inventory balance to $43.4 million. We will continue investing in inventory to build 1 billion unit of endpoint IC buffer by year end. Inventory will grow at slower phase going forward because we've already purchased most of that inventory buffer. Turning now to our outlook, we expect third quarter 2017 revenue to be in the range of $31.75 million to $33.25 million, up 4.6% year-over-year. We expect adjusted EBITDA to be a loss between $1.65 million and $150,000. We intend to maintain our current level of investment in the business. So in the bottom line we expect non-GAAP earnings to be a loss between $1.7 million and $200,000 or a loss between $0.08 and $0.01 on a per share basis using a weighted average basic and diluted share count in the range of 20.8 million to 21.3 million shares. As Chris noted, we expect our full year 2017 endpoint IC volumes to be between 7.0 and 7.2 billion units representing 18% growth over 2016 at the midpoint. We're confident in the long-term adoption trend, our market leadership and our progress towards our vision of digital life for everyday item. I will now turn the call over to the operator, to open the question-and-answer session.

[Operator Instructions] our first question comes from Craig Hettenbach with Morgan Stanley. Please go ahead.

Chris, appreciate the color on the customer visit and just kind of how things are playing out. In any sense in terms of how long the view, the delay, there are some digestion period. Any visibility into when they would kind of ramp back up?

Craig I think I'm just going to, say a little bit about kind of those delays maybe a little bit more right now and then we'll touch on, their ramp period as they ramp back up. So despite seeing significant wins in the second quarter in retail, logistics and healthcare and this coming third quarter, we're seeing coincident schedule slips in a few planned and funded and customer deployments. Our direct discussions with these end customers indicate the delays are due primarily to internal process and integration challenges at their end. We don't see evidence of macro trends or common themes, other than our difficulty predicting the timing of large rollouts which we've talked about previously. So we see two impacts for our business, first our endpoint IC business is impacted by schedule slips at a few retail end customers. And then second, our fixed infrastructure is business impact by scheduled slips in a few non-retail deployments. And the length of slips really varies by the end customer and so it's difficult to predict, how quickly they're going to overcome this integration challenges. Really as we've noted before, timing is just difficult.

Sure, understood. I guess as a follow-up question. More bigger picture, particularly coming off of the RAIN industry event. Can you give us a sense in terms of your customer meetings and just levels, engagement and kind of highlights for you in terms of kind of intermediate to longer term growth drivers?

I'll take the first part of the question and then I'll hand off to Eric and some of the growth drivers. So my meetings, I mentioned new customers because I personally visited them. But our go-to-market teams has touched points with the others and so we're pulling data from these multiple customers to give visibility into what they're doing and the schedule slips we already mentioned and I'm just going to back to that prior question, to little bit more color. The slips are generally measured in units to quarters. But to answer the second part of your questions. Eric?

I think it's best to just highlight back some of the points that Chris mentioned in his opening remarks. Our Q2 and go forward growth drivers continue to sit squarely on top of our progress and healthcare, retail and logistics. And those platform deployment in the used cases we feel are particularly solid around healthcare asset management in the logistic space, managing transitions and in the retail space across a range of used cases spanning inventory control to point of sale to in-store experience. So from a growth driver standpoint, those continue to be the spaces where we see ongoing traction in the business.

Got it. Thanks for that.

Our next question comes from Mitch Steves of RBC Capital Markets. Please go ahead.

So I think the biggest highlight here and what people are trying to figure out is, they mention that landed already whales and the contracts are signed. So if that's the case, does that mean we're going to see kind of material growth when we start on 2018? Or how is kind of the situational trend workout given that the timings were a difficult to figure out?

There's a couple pieces to your question, you're sort of probing on timing and the pace at which some of these programs come back online, correct? So I think as Chris highlighted it, the length of these schedule slips really is dependent on the customer and I think we're comfortable saying that, it's generally measured in quarters and so that's the way I think, I would best describe the way that you think about modeling or the way that you think, when the business comes back online.

Okay and then secondly going back to your kind of your long-term objectives, of being mid-teens profitable on 2019, 2020 roughly. Is any of that changing at all? Or you guys think you're sort of really get there given that some of these ambitions of couple quarters?

Evan, you want to take that one?

Mitch, this is Evan. We have no change to our long-term model as a reminder that was 25% revenue growth and in the 2019 to 2020 timeframe gross margins of 57% to 60% and EBITDA margins of 12% to 16%.

Got it and then last one. I mean, if these are signs, is there any timeframe where we should expect a transfer announcement going to the next three quarters or is that still up in the air?

I think I'll take that one, Mitch. In general we make customer announcement when the customer is interested in going public and so those customer announcements happen when there is other public information that we can share and we don't make announcements, otherwise.

Got it. Thank you.

[Operator Instructions] our next question comes from the Mike Walkley of Canaccord Genuity. Please go ahead.

Just digging a little bit on some of these push outs, but also just Q3 tended to be a seasonally stronger quarter in the retail area. So when you land some of these large customers or land a whale. You know they continue to tag stuff, you get some recurring revenue. Is there anything in your guidance you think in Q3, some sheer shifts within endpoint amongst some of your big customers potentially on the short-term?

So I'm going to start with part of the answer to that question and then I'm going to again hand over to Eric. So believe that the foundation we built in 2016 was a strong foundation and we haven't seen any of those customers that deployed into 2016 actually pulling back. What we're talking about now is new deployments our expansions to existing programs and where there are simply just integration challenges, that I'll let Eric talk about in a second. And those integration challenges are which to sort of kind delays those deployments. And maybe Eric can say a few words about the nature of those integration challenges.

Yes, I think you're spot on Chris. The nature of these push outs are and instances programs have already been in flight and they're looking to expand either to new brands or new geographies and they're shifting time. But these are enterprise class end customers for adapting internal processes and systems to take advantage, the game changing value of RAIN based data or RAIN based item data. And these are complex internal efforts to our own customers. They're involving multiple applications, whether it's inventory control applications or an ERP system and they're changing internal processes and then employee training, so these are sizable significant initiatives inside large customers and sometimes those timelines shift.

And Mike, I think you also asked a little bit about, how some of those slips might impact guidance.

Yes, we've baked in the slips, this is Evan, by the way Mike. We've baked in those slips into our 2017 endpoint IC guidance.

Okay, thanks and Evan just in terms of context, I know you had a big acceleration in your endpoint business kind of throughout 2016 and especially in the back half of the year. is the updated guidance is like for Q3, is endpoint unit still growing on a year-over-year basis or is there a little bit of a pause there, just getting some of these slip outs.

Yes we haven't commented on the quarterly growth year-over-year. On an annual basis, growth 18% over 2016 if you use the midpoint of the guidance.

Okay, I got that. So just a follow-up question then on the margin structure. When you win some of these big deals you get the endpoint opted and there tended to be switch to fixed readers, is company a good broader adoption. How do you see those trends in the market place? And how should we think about gross margins trending towards your long-term model to that mixed shift happened within your revenue? Thank you.

I think I'm leave the answer to that question by talking a little bit about the fixed readers then hand off again to Evan. We do see continued growth in our fixed reader business as evidenced by our - the numbers we presented the 53% year-over-year for the past quarter. And we see strength in that business which is also why we continue investing in it. We think that the transition to fixed readers is really an [indiscernible] trend for the reasons that I've cited reducing labor costs, enabling additional used cases. So we're confident, we're excited about that trend and intend to keep driving it.

Mike, we don't give guidance on our margins on a quarterly basis, but margins remain very healthy as you know they increase 130 basis points over a year ago and we do believe we're on track to hit our 2019, 2020 model for gross margins of 57% to 60%.

Great. Thanks. I look forward to seeing your conference next year.

Our next question comes from Jim Ricchiuti of Needham and Company. Please go ahead.

Can you say how many customers this involves?

So Jim, it's a few customers. I've visited two that are overseas and there's a couple more that we cited, we've used the number few here and that's really I think about as far as we're going to in terms of citing how many there are. Small number of customers that are significant deployment that have had some internal schedule slips.

And Chris just, can you say, it sounds like one or more of these maybe existing customers that was in the process of expanding a deployment or maybe or these are entirely new customers?

You're correct. Some are customers that were expanding, existing deployment, some of them kind of visionary customers that we're having expansions. You know they've just gone a little slower for internal reasons and some maybe new customers that had already planned deployments and they have schedules and for internal reasons again they had schedule slips. And I think what we're just seeing here is that, the word I used previously was there is coincidence schedule slips. We don't see any macro trend in those, in the coincident nature of those schedule slips, it just happens to be that a couple of them happened at the same time. And as a consequence we reduced our endpoint IC guidance.

Okay and I want to just pursue the growth in the fixed reader part of the business. Fairly strong unit growth and I wonder if you could talk about that in terms of verticals, where you're seeing the most traction, where you're seeing the most growth.

Eric, do you want take that one?

Jim, I think I'd start right back on top of those, those top three verticals. On the fixed infrastructure side, we do see continued strength in that healthcare, healthcare asset management used case as well as in the logistics arena as well, so those are both contributors to fixed infrastructure and software deployments for us. But I would say, I do want to emphasize we've made some important leadership investments in our organization on the go-to-market side and I feel like we're, we've made important strides in improving our execution into our traditional channel and so you're seeing strength in our business as we drive in the classic Impinj channel that is frankly quite broad in its distribution as we've talked about before that touches many different use cases.

And those themes that Eric just highlighted are some of the reasons why we remain very confident and continue investing in our business.

And thank you. And just one final question, Evan I'll flip this to you. Just looking at the operating expenses in Q2. Sequentially down R&D and big uptick in G&A, is there anything we should think about in terms of the way some of these expense items are flowing and how we might think about it in Q3?

Sure, good question, Jim. So as you know our biggest investment is in people. We do have some investments that are not in people, we work with some partners and things like that. But they're mostly people - we operate in the market where hiring is competitive and we only hire top talent. So I expect that sequentially our operating expenses will increase as we continue to invest in the business and enhance our leadership position. From any given quarter to the next within align like R&D, maybe bumpiness but that's not indicative of any trend, I would look at it on an annual basis and know that we continue to invest in this mess of opportunity.

Okay, thank you.

Our next question comes from Brad Erickson of KeyBanc Capital Markets. Please go ahead.

And apologies, I jumped on late. So if these have already been answered, my bad. Just curious on these schedule slips you called out. It sounded like you're having direct discussion with the retailers. Did you get any indications from? Or I guess were these going through any of your direct partners like the [indiscernible] partners that you typically work with, with your retail customers or was there reason you got more directly involved with these particular end users or end customers?

Sure, Brad. I'll make a couple of comments. First, the slips are not all isolated to the retail vertical and so I noted, but probably before you joined the call that there's impacts on the retail side as well as extend to structure business in other vertical, so it's not all confined to retail, which is against the point that we don't see a macro trend. And then for us, we really use the best techniques available to us to get information as well as to drive our business for work. So we engage closely with our partners and we also engage directly with the end customers helping our partners drive their business into those end customers. And our engagement with those end customers not only allows us to really time the deployments and understand what the market is doing, but also gives us information on the nature of these slips and helps us drive business. So we remain confident in our long-term outlook vision as a consequence and it's just the nature of how we're engaging in the market today that gives us these visibility to these slips which again, for our customers that's availed they can pull in or push out kind of at their whim and I guess I don't want to use quite that word, but they do it based on what their internal schedule's drive and as I noted in my comments, a pull in or push out could actually mean several hundred million IC units to us.

Yes, understood that's great. And then just following on that. For the ones that were within retail. In any signs of being associated with like footprint reductions that we've seen so often from several retailers out there, not necessarily ones you work with, but anything to read into that. I know you said no macro trend, we're just curious of any more granularity on the drivers of the push outs rather than just as you laid out internal.

Yes, to our knowledge the slips were not associated with footprint reductions, they were associated with the integration challenges that Eric already highlighted.

Got it. And then, just regarding software, I don't know if you've mentioned anything about this. But as you're starting to work with some of these customers that are getting more fully deployed with the tag IC's obviously talk looking at fixed reader deployments here. How able and how part and parcel are the discussions with that - are you able to talk about software and potentially bringing those guys on as sort of end-to-end customers. Maybe just any update around that would be great?

I think I'd let Eric say a few words here.

I'd say Brad the predominant driver of that platform sales motion where we're selling software to endpoints is really right in the middle of some of those wins that Chris talked about in that healthcare asset management and logistic space. And so those conversation absolutely underscore the ease of integration, the simplicity of management and our ability to provide value add around the data, that we can give to an enterprise application and whether that's healthcare of logistic space. So those are places where we continue to see strong resonance for our value proposition around the software layer and our distributed OS item sense. In terms of our ability to engage with end customers who are broad scale endpoint customers. I'd say we continue to make progress engaging and evolving and have discussions with retailers regularly around how they're evolving their usage model from handhelds to fixed infrastructure and some of that comes via logistics. In other cases it's via inventory but it's just part of our ongoing sales motion.

Got it and then just one last one, if I could. I think a quarter or two ago, you had spoken of connectivity becoming a higher portion of revenue in 2017 versus 2016. Are you able to confirm that today?

Yes, Brad this is Evan. In our 2019 to 2020 model we do still anticipate connectivity revenues greater than 30% of overall revenues and in 2017, we think they'll increase over last year.

That's great. Thanks guys.

Our next question comes from Nate [ph] Johnson of Piper Jaffray. Please go ahead.

I want to go back to the push outs you're seeing from these large retail customers. It sounds like they're coming from some new application uses as they're fighting for their business, is that right? More so then.

No not necessarily. There can be expansions into new brands, there can be expansions in new GOs, there can be expansions just into new types of products as well as some new rollouts. So really - it's a point of no macro trends, we really haven't identified macro trends here.

Okay, but some of the new application they're finding, maybe some holds up that's causing, what kind of product segments that will be grocery, clothing, [indiscernible] implementing that are kind of the new areas?

So again, we're seeing a couple of coincident schedule slips at end customer, some in retail but not exclusively in retail and in existing programs for example, in the retail space they tend to be in existing programs that are expansions. In other space they can be in new programs. So I guess I would try not to characterize or lump all the - few sets of push outs that we see before our gen customers any one particular category. Again just getting to a point that, we at least don't see any trend that we can point to among the couple of push outs that we see.

Okay and then going into, you guys talked about how you enter the long-term [indiscernible], you have few customers that - that's a new deployment. Can you help breakdown what kind of incremental revenue that's provided in this quarter endpoint - bit consensual?

Nick [ph] this is Evan. So one way to think about revenue opportunities from a given rollout, is generally endpoint ICs are sold for pennies, as a connectivity layer, fixed readers or gateways are sold for between hundreds to thousands of dollars. Reader ICs are sold for tens of dollars and software sold as a percentage of the hardware sales. And so using some of those metrics you can probably put together a model on how much given used case of vertical would mean for us.

Okay, but not as - typical revenue from this past quarter in lingerie?

That's correct.

Okay, one last question as kind of your go-to-market strategy, as you guys have talked about these large retail customers. Are you guys working directly with them and kind of helping them through, how to use end user cases and whereas can you talk a little bit more about, your relationship with these customers in the go-to-market side and implementing them in their business?

Yes, so our go-to-market model really is engaging directly at the end customer and fulfilling to our partners. And we engage with the end customers with our partners of course but we do the things that we can do to help accelerate their deployments to help enable them to do their deployments. But there is something beyond our regions go for example as Eric mentioned the ERP integrations and other things that have to happen at the end retail. So we do what we can working directly with the end customer and again I'll avoid using retail because we're in so many different verticals, we do what we can working with the end customers to accelerate their deployments and when it RAIN stuff, we're the experts and we help drive their solutions. But at some point, some of these retailers have, their onsets of challenges whether that happens to be employee training or ERP integration or other sets of things that are kind of beyond our scope and that's where we're today.

Thank you very much.

Our last question as a follow-up from Mitch Steves of RBC Capital Markets. Please go ahead.

Just one small and just follow-up on the long-term target. So this year you guys shift to be able to hit that long-term growth target of 25%, correct?

Mitch as you know we give one annual guidance number which are endpoint ICs. So we've given that, it's 7.0 to 7.2 billion units, which represent 18% growth on a unit basis over 2016.

Got it, okay. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Chris Diorio for any closing remarks.

And I just like to say thank you all for joining us today. And thank you very much for your support.