Impinj, Inc. (PI) Q4 2017 Earnings Report, Transcript and Summary

Good afternoon and welcome to the Impinj, Inc Fourth Quarter and Full Year 2017 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chelsea Lish, Investor Relations. Please go ahead.

Thank you, operator. Thank you all for joining us to discuss Impinj's fourth quarter 2017 results. On today's call, Chris Diorio, Impinj's Co-Founder and CEO will provide a brief overview of our vision market and performance. Evan Fein, Impinj's CFO will follow with a detailed review of our fourth quarter 2017 financial results and our first quarter 2018 outlook. We will then open the call for questions. Impinj's President and COO, Eric Brodersen is also on the call and will 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. 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 expectations are subject to risks and uncertainties. Please see the Risk Factors section in the annual and quarterly reports we file 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 except for revenue, or where we explicitly state otherwise, are non-GAAP financial measures. Balance sheet metrics and cash flow metrics are on a non-GAAP basis. Before moving to the financial results, I would like to announce that Chris and Eric will attend the Morgan Stanley Technology, Media and Telecommunications Conference on February 26 in San Francisco. We hope to see many of you there. I will now turn the call to Chris Diorio, Impinj’s Co-Founder and Chief Executive Officer. Chris?

Thank you Chelsea. Thank you all for joining the call. We have four items to cover today. Number one, the market environment and our first quarter 2018 expectations. Number two, our long term vision and our roadmap to deliver that vision. Number three, our fourth quarter 2017 results, and number four, our 2018 financial outlook. I will focus on the first and second topics. Evan will cover the third and fourth. During my remarks, I will refer to a graphic in the script. So if you haven’t yet downloaded the script from the Impinj website, I encourage you to do so now. Starting with an overview of our results and guidance, fourth quarter revenue was $26.9 million, below our preliminary estimates. Our first quarter revenue outlook is between $23.25 million and $25.25 million, above our prior estimates. Both numbers were affected by us accommodating a partner’s request for a product exchange as Evan will cover shortly. System sales exceeded expectations, with reader and gateway unit volumes up 42% year-over-year, our third consecutive quarter with greater than 40% unit volume growth. For the most part, we sidestepped reader and gateway supply constraints by operational execution and our customers requesting a different product mix than we expected at the beginning of the quarter. Our 2017 endpoint IC shipments were 7.1 billion units, in line with our revised guidance. Turning now to our target verticals, retail, logistics and healthcare, the primary driver of our 2018 endpoint IC volumes will be retail. But because retail will still use mostly handheld readers in 2018, meaningful retail systems revenue is farther out in time. By contrast, logistics and healthcare offer 2018 systems opportunities, but with small 2018 endpoint IC volumes because today’s use cases mostly track pallets and assets, with consumables tagging farther out in time. Consequently, rather than provide annual endpoint IC guidance in 2018 as we have done in the past, we will instead provide quarterly revenue results for endpoint ICs and for systems, the latter comprising our platform’s connectivity and software layers. We believe this segmentation better aligns with how we view our business and how we track the fixed reading adoption waves I have discussed on prior calls. Starting with endpoint ICs, our endpoint IC lead times have contracted from an average of 10 to 12 weeks in 2016 to an average of 4 to 6 weeks today. As a consequence, we have seen a significant reduction in our order backlog and we expect our inlay partners to further reduce their inventory by between 500 million and 1 billion units, mostly in the first and second quarters. As a result, even though we anticipate 15% to 20% growth in end user endpoint IC consumption in 2018, our first half 2018 unit volume growth will lag end user consumption. Regarding pricing, we expect our 2018 competitive environment to remain unchanged from the second half of 2017. We also expect to at least maintain end user market share on a full year basis compared with 2017. Turning now to systems, we are enthusiastic about our 2018 opportunities because we believe we can address compelling unsolved problems in logistics and healthcare. The end user and partner engagements I have cited on prior calls, such as for Faurecia in logistics or with Stanley Healthcare, and many others like them, fuel our enthusiasm. Because our opportunities are project based, size, timing and mix will play an important role in our results when viewed on a quarterly basis. Let me now add a few clarifying comments. First, we remain confident in both our market opportunity and our market position. Second, we continue investing in our integrated platform, with a focus on retail’s coming transition to fixed reading and logistics and healthcare adding consumables tagging, while at the same time, supporting partners who are driving our platform’s adoption in other verticals such as airlines, laundry and automotive. Focusing for a moment on our platform, we link its three layers to deliver advanced capabilities and performance that surpasses mix and match solutions built from competitor products. Today, those linkages are primarily algorithms shared by our operating system software, readers and gateways. Over the next three years, we will extend those linkages substantially, with our next generation reader delivering item authentication features that our operating system will deliver as a cloud service, and our next generation endpoint IC connecting via our platform to that cloud service. We are driving a future where every item in our everyday world has a digital counterpart, a digital twin, in the cloud. The essence of our platform roadmap is to connect physical items with their digital twins. Today, we deliver each physical item’s identity, location and authenticity. Our future is linking those physical items with cloud based twins that include the item’s history, ownership and available services. Our operating system will include some of those services, including those essential for developers to link business and people with items. Step by step, we are creating that platform to connect everyday items to their digital twins. To highlight our vision and our business opportunity in concrete terms, I’d like to walk you through a representative healthcare example that we believe will improve medical device traceability, hospital reimbursement and ultimately patient care. Consider a medical device such as a heart valve as it journeys from manufacturer to distributor to hospital to patient. The manufacturer uses our platform to associate our endpoint IC in the valve’s packaging with the valve’s digital twin in the cloud. Our platform tracks the valve from WIP through shipment to a distributor. The distributor uses our platform to read the IC, authenticate the valve, create a new digital twin, chain this new twin to the prior twin cryptographically and automate the chain of custody transfer. A hospital that uses our platform for automated restocking autonomously orders the valve. Upon receipt, the hospital uses our platform to read the IC, authenticate the valve, create a new digital twin, chain this twin to the prior twin and automate chain of custody transfer. Prior to a surgical procedure the operating room autonomously orders the valve from stock, ensuring receipt and surgical kit completeness. During surgery, the OR automatically bills the valve’s use and associates the valve’s digital twin with the patient’s medical record, all without human intervention. To enable and win opportunities like this healthcare example, we are investing in revolutionary product developments and lighthouse accounts. Yes, our vision is audacious. Yet, we intend our three year platform roadmap to enable opportunities such as that healthcare example and others like it. And while we are disappointed on our recent short term financial performance, our focus on our vision is unwavering and our dedication intense. We recognize that RAIN is one of many item to cloud connectivity technologies. Yet we firmly believe that RAIN’s capabilities, unique identifiers, no battery, low cost, long range, not line of sight, 1000 reads per second, essentially unlimited life and cryptographic authentication are unmatched by any other technology and enable RAIN to coexist with those other technologies yet dominate item to cloud connectivity. If you’d like to see that coexistence and RAIN’s differentiated capabilities, then consider attending the open day of the Connections Summit hosted by the RAIN Alliance, the NFC forum and Google in Sunnyvale on March 7th. Before I turn over the call over to Evan to give you a detailed look at our fourth quarter results and our first quarter outlook, I would like to take a moment to comment on his departure. I know I speak for the entire Impinj team when I express my gratitude for Evan’s countless contributions over the past 17 years. We will miss the partnership we have forged. Evan will remain with the company through March 30th and we are actively searching for his successor. I’m confident we will add an outstanding CFO and together, we will win this gigantic market opportunity. Evan?

Thanks, Chris. Before I review our fourth quarter and year 2017 financial results, I want to remind you that with the exception of revenue, or unless explicitly stated otherwise, today’s statement of operations is 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 we define our non-GAAP measures, is included in our earnings release available on our website. Fourth quarter revenue was $26.9 million, compared with $33.7 million in the fourth quarter of 2016, below the preliminary estimates we announced in our February 1 prerelease. After that prerelease, we agreed to a partner’s request for a one-time product exchange, requiring us to take an accounting reserve and decrease our 2017 revenue by $3.2 million. There is also a decrease to our cost of sales and an increase to our inventory. We expect to reverse this reserve in the first quarter of 2018 when we complete the exchange and recognize $3.2 million in revenue at that time. We increased our first quarter guidance by this $3.2 million reserve. Fourth quarter revenue mix was 65% from endpoint ICs and 35% from systems, the latter including readers, reader ICs, gateways and software. Endpoint IC revenue was down 33% while systems was up 27%, both compared with fourth quarter 2016. For the full year, we grew revenue 12% to $125.3 million. Endpoint ICs represented 73% of that revenue, up 6% from the prior year to $91.7 million. Systems represented 27% of that revenue, up 29% from the prior year to $33.6 million. Fourth quarter gross margin was 50.5%, compared with 53.7% in the prior quarter and 55.6% in fourth quarter 2016. The sequential decline was due to the product exchange, ASP reductions, product mix and a temporary increase in production costs due to reduced volumes. Total fourth quarter operating expense was $19.3 million or 72% of revenue, compared with $19.0 million, or 58.4% of revenue in the prior quarter. R&D expense was $7.7 million, or 28.5% of revenue. Sales and marketing expense was $7.9 million, or 29.5% of revenue. G&A expense was $3.7 million, or 13.9% of revenue. We ended the quarter with 311 employees, compared with 310 employees at the end of last quarter. Our adjusted EBITDA was a loss of $5.8 million, compared with an adjusted EBITDA loss of $1.5 million in the prior quarter. GAAP net loss for the fourth quarter was $9.3 million, and for the year was $17.3 million. Non-GAAP net loss for the fourth quarter was $5.9 million, or $0.28 per share, using a weighted average diluted share count of 20.9 million shares. Non-GAAP net loss for the full year was $6.1 million, or $0.29 per share, using a weighted average diluted share count of 20.7 million shares. Turning to the balance sheet, our cash position is strong and our business plan is fully funded. We ended the fourth quarter with cash, cash equivalents and short term investments of $58.1 million, compared with $62.5 million in the prior quarter. Our accounts receivable balance is healthy at $22.2 million, down from the prior quarter. Because of the new U.S. statutory tax rate, we adjusted the value of our deferred tax assets, resulting in a one-time reduction of approximately $19.5 million in the fourth quarter. Our total end of 2017 federal NOL was $126.4 million. Inventory totaled $47.1 million, up $1.3 million over the prior quarter. We moderated fourth quarter endpoint IC inventory growth by slowing production and reducing wafer starts, but because our production cycle times exceed 5 months and we desire adequate wafer supply in a year of global semiconductor wafer tightness, we anticipate a further inventory build in the first quarter. We will stage this additional inventory mostly in WIP rather than as finished goods and remain confident that it does not have material obsolescence risk. We will also continue investing in reader and gateway inventory to meet growing demand. We expect total inventory to grow by roughly $10 million to $12 million in the first quarter, then decline sequentially through the remainder of 2018. Turning now to our outlook, we expect first quarter 2018 revenue in the range of $23.25 million to $25.25 million. We expect adjusted EBITDA to be a net loss in the range of $7.5 million to $6.0 million. On the bottom line, we expect a non GAAP loss of between $8.9 and $7.4 million, and non-GAAP loss per share between $0.42 and $0.35 per share based on a weighted average diluted share count of 21.0 million to 21.4 million shares. I will add one final note on the first quarter. Although we attribute the majority of our revenue decline to inventory drawdown at our inlay partners, other factors include typical seasonality in our systems business, an ongoing reorganization of our APAC business and a short term supply constraint for some reader ICs. In light of our reduced revenue outlook, we have reduced expenses by eliminating some positions in our global work force, tightening our product development focus, halting our office expansion and closing several remote offices. We expect these changes to save approximately $4 million in 2018 after one-time restructuring costs of approximately $4 million. Our cash position remains strong, allowing us to continue driving our long term vision without sacrificing our ability to execute in this emerging market. As Chris noted, we will no longer provide full year endpoint IC volume guidance. Instead we will report revenue results for endpoint ICs and systems on a quarterly basis, with a historical breakdown on our website. Before I open the call to questions, I’d like to take this opportunity to thank the entire Impinj team for their support, commitment and dedication during my 17 years with the company. We have together accomplished so much since I joined. I will now turn the call to the operator to open the question-and-answer session.

Hey, gentlemen, thanks for taking my questions here. I‘ve got a couple for you. First of all just can you help explain, if we're talking about a six week reduction in lead times, why do you think it is going to take two quarters to achieve this inventory depletion?

If anyone would take that one? I am sorry, Eric, would you like to take that one?

Troy, I think, as you think through the inventory correction, a couple of things. Really when you take a look at the history of our business over the last couple of quarters as we guided and evidenced by our guide middle of last summer, we saw demand beginning to adjust downward and saw our backlog decline through the second half with really no corresponding customer inventory change. But as our lead times have normalized back down around that four to six week level, down from 10 to 12, inlay customers are adjusting their inventory to our new lead times. So to quantify that, if you look at 2017 volumes we ship about 140 million units a week. So a four to eight week lead time contraction equates to roughly 500 million to 1 billion units. And the confirmation on that is really linked to our detail bottoms up work that we've been undergoing with our inlay customers over the last few weeks as we have been finalizing our annual negotiations which also centers around a corresponding reduction right in that same range. So we feel like that that's a very solid assessment of inventory drawdown.

Okay, that’s fair. Is there any way you guys could you quantify how much of the March quarter revenue reduction is in inventory depletion?

I think that we're just going to refer back to the statements that Evan made where the effect on the first quarter is a consequence of the inventory reduction and several other factors which include seasonality. The product exchange that we referred to previously and product mix.

Okay. Let me ask a different question and may help me get to this. What is the ASP on the tagged ICs?

Can you repeat the question?

Average selling price for you tagged ICs.

Yeah. Troy, this is Evan. The change in the ASP decline for 2018 we anticipate to be equivalent to that of the second half of 2017. That is roughly in the 8% to 10%.

I guess the question Evan was the – is it a $0.02 product, $0.025 product, $0.03 product, what’s the ASP for a tagged IC?

In 2017 the ASP was around $0.013.

$0.013, so –

That’s an approximate number, that’s not exact.

There is whole range of SKUs.

So if I take 750 million units at $0.013, you're talking about a $10 million reduction here, so is it safe to assume about 5 million coming out of March and June with this kind of two quarter correction? What I'm trying to get you guys, I'm trying to figure out what September quarter looks like.

Just to put a finer point on the math, I think as we look at our weekly revenues it would be about 1.8 million per week, so over that time period for that -- over that 500 million to 1 billion units that's $7 million to $15 million, that's about the right calculation

Yes, okay, perfect. Just last question –

Just to clarify, over what we expect to be a multi-quarter period.

Yes, okay, understood. Then the last question [indiscernible] just can you help us out with what you think the gross margins are going to look like at this kind of March quarter revenue level?

Sure. Yeah, so as I mentioned – this is Evan, Troy. And as I mentioned in my script there were some temporary declines in the fourth quarter gross margin. We do not expect those to continue into the first quarter and the product exchange will drive our gross margins up. So we view the fourth quarter gross margin as not representative of the future gross margins. You know we don't guide our gross margin, but there were some one-time factors that drove down gross margin in this quarter.

Actually to be very clear on that, the product exchange had a negative impact on gross margins in fourth quarter and that will have a corresponding positive impact in the first quarter.

Okay, perfect. Good luck and Evan a good luck in retirement.

Yeah, thank you, Troy.

The next question comes from Mike Walkley with Canaccord Genuity. Please go ahead.

Great. Thanks. Just a quick question on the guidance. With the restructuring charges is that most of that 4 million in – you are going to take that charge in the Q1 and that's the big difference between the GAAP and non-GAAP, I'm just trying to make sure I'm reconciling that and your adjusted EBITDA correctly?

Yes, you got it. Most of the 4 million is in the fourth quarter, not all of it, but most of it.

Okay, that’s helpful. That helps me tie in the numbers to your guidance. And then just on a demand question. Can you -- I know you are the -- I understand inventory adjustments, you also talked previously about some bigger customer engagements getting pushed out of second half of 2017 into 2018. Is there any update on those engagements, do you think they will come back in the model later this year or there have been more delay just trying to get a feel for any change into end customer big projects that you saw pushed out into the year?

Okay, so this is Chris. We see retail apparel grown continuing and with regards to those large accounts we talked about on a couple calls ago, I've actually traveled overseas last week, met with some of those big accounts and at least one of them is moving forward and it's built into our 2018 market forecast, but because the market is so much bigger than it was in 2015, those new large accounts are smaller fraction of the overall growth. So I think what we should be looking for going forward is that none of these large customers have pulled back. At least one of them is moving forward substantively in 2018. We are yet to see about the other ones. But because they represent a smaller fraction of the overall market we won't see the same step changes that we start in 2016.

Okay, thank you. And then Chris, you talked about previous call some increased price competition on the endpoint side and you guys have shared the updated guidance, so with the inlay partners kind of changing how they are keeping inventory, can you talk at all about share shifts maybe that might have happened to as you guys get your bottoms up work and look at demand, do you see any kind of change in your relative share or is it all just pure inventory and share is pretty stable.

Eric, you want to take that one?

Yeah, thanks, Mike. I guess let’s break that down a couple of points around the pricing environment itself, you know that our annual pricing and supply negotiations have been completed with our major customers. And in that process a couple of things are evident for us. One, we've done a significant amount of both market demand, capacity and volume alignment with those customers and we've worked through to end customer consumption trends. So by working through that analysis over the last few weeks and quarter, based our best analysis and the rigor that we apply to that with our partners, we believe that we will at least at a minimum hold share on an end user consumption basis. Now specific to pricing, I think it's best to characterize the pricing environment as consistent with the second half of 2017 and that annualized reduction should be expected in the high teens, 8% to 10% for 2018.

Great. Last question for me, I will pass it on. Just with the potential for Qualcomm to buy your biggest endpoint competitor, is that worrying kind of inlay partners about anything Qualcomm might do with that asset or any change in the competitive environment that you could see maybe from that consolidation?

This is Chris. I think the best way that I can answer is we're monitoring the situation carefully. As you can see, we've built up some additional wafer capacity to meet 2018 demand as we see it as well as some 2018 upside and we'll continue monitoring the situation and take advantage of whatever opportunities arise.

Hey, Mike, it’s Eric. Just to clarify my earlier comment, it's high single digits and an 8% to 10% price reduction range, just so I'm clear.

Okay, that's helpful. Thank you.

The next question comes from Charlie Anderson with Dougherty & Company. Please go ahead.

Yeah, thanks for taking my questions. I appreciate the outlook on the consumption of endpoint ICs of 15% or 20% for the year. I wonder given how volatile this has been and you have certain customers launch at certain times. Do you have a sense of how that looks first half versus second half, meaning when you come out of this, do you come out of it aligning with a market that's growing 15% to 20% or the market that’s growing any faster, slower, any commentary on that would be helpful? And then I’ve got a follow-up.

So this is Chris, I'll start with that question and then I think Eric might have some additional comments to make. We monitor things on a yearlong basis that the timing of any particular customer when they go live and ramp that they have, it's hard for us to predict and further given the large size of the market today, the industry estimates are roughly the total number of endpoint ICs consumed by retail market alone was about 8.5 billion last year. So over time that kind of timing and moves back and forth sort of gets washed out just because of the large size of the market. So I can't give you any better guidance than we just see 15% to 20% overall growth for 2018. Eric, anything to add there.

I’d just restate that we're focused on quarterly guidance and projection that near term view and making those productions clear and leaving our longer term views to be demonstrated over time.

Got it. Okay, and then a question on OpEx, I know you guys are guiding to a specific OpEx number and we don't have a gross margin number so it’s a difficult to sort of back and do it, but just contemplating the reductions that you're making I wonder if you could be just help us on sort of a quarterly run rate for OpEx going forward on a non-GAAP basis.

Sure, can Charlie. This is Evan. So, as you know, we reduced our expense structure to better match the revenue growth. We expect the expenses to grow modestly throughout 2018, but for the full year grow by a much lower percentage than they did in 2018 and our 2018 adjusted EBITDA loss will be greater than our 2017 adjusted EBITDA loss.

Okay. Thanks so much.

Thank you.

The next question comes from Craig Hettenbach with Morgan Stanley. Please go ahead.

Yes, thank you. Just a question following up on the lead times, if you can discuss kind of just some of the background there in terms of as they are stretched and just things you might look to do to assess that on go forward basis terms of being able to perhaps maybe manage the lead times differently.

Craig, this is Eric. I think the expansion in the market that we saw in ’16 evidenced by our growth rates in that time period really drove as we've highlighted before a contraction in our ability to supply and in certain cases we ought to extend our lead times as we said, into that 10 to 12 week range. What we're at today in that 4 to 6 range is the normal baseline that we expect to run the business against.

Got it. And then just a follow up on retail and health care, any update in terms of just as you think through the retail market because I think you mentioned 8.5 billion units but just from a penetration perspective, are you seeing growth in kind of existing customers or are there any newer customers coming into the fold?

So the easiest answers are yes, yes, and yes. So we see growth in existing customers, customers who are sub 100% taking their end point tagging up into new categories. We see growth, as I mentioned one of the new larger accounts is moving out this year. I visited them last week as well as others, so we see growth in new accounts both in the large end customer base as well as in smaller end customers. Oftentimes we are focused on kind of these large accounts that can do volumes based in billions but there are many other customers out there that sell 100 million units per year, 200 million units per year, those are apparel items. And so we see growth in those, in that customer base as well. So I think what we're just seeing is overall retail apparel adoption. If you wanted me to take an estimate like we've said previously that the total number of taggable retail apparel items is about 80 billion, so if you say 8.5 billion in 2017, it’s roughly 10% adoption. So we see continued opportunities in resell and then moving to larger retail overall.

Got it. And then just following up on the healthcare side in terms of different market and applications, can you just talk us through kind of how you see that market developing this year and over the intermediate to longer term.

So as I think about the health care market we see a really significant opportunity there. Most of the opportunity right now is really focused on locating assets, locating assets in a hospital, finding those assets being able to get better asset utilization. As I said on the script, what we see happening is that’s delivering fixed infrastructure into those hospitals to do asset tracking and then over time we expect hospitals and the medical use cases to really be looking at tracking consumables.

Got it. Thank you.

Thank you.

The next question comes from Brad Erickson with KeyBanc Capital Markets. Please go ahead.

Hi guys, thanks for taking the questions. First can you talk through the – just curious to get a sense of targets through the timing of when you came to understand the excess inventory at the inlay partners during the quarter and I guess curious if they came up kind of simultaneously or did you sort of discover them one at a time as you were going through different points in the quarter?

Brad, I think it’s best to highlight that as part -- the deepest understanding really is driven by the detailed work we're doing in our negotiations around annual supply agreements and pricing negotiations and continued working and measuring and managing and triangulating with our customers around their expected demand and their corresponding inventory positions. So it's really been over the last, as I said, few weeks, quarters so.

Got it, and then just what are you -- when you talk about 15% to 20% end market growth what’s -- I haven't really heard substantiation of like what that's based on if you could just help us with.

So we're citing the 15% to 20% number based on industry analysts as well as other partners in the space who have come up with, similar numbers based on what they see the market growing over all at the retail apparel level. But that’s just a retail growth number.

Okay. And then finally I guess just you called out that obviously the first half volumes are clearly going to lag. Those levels, is it too I guess and Chris thanks for the color on some of the deployment delays, sounds like at least one of those is going to come back in 2018. Is it sort of way too optimistic then to expect any kind of like a return to growth in the second half of the year or just any help there would be great.

So I'm going to say we remain confident in the long term and we're really focused on delivering our quarterly revenue guidance one quarter at a time and looking at the market overall and saying how we can best drive into it and deliver our quarterly results.

Got it. Thanks.

Thank you.

The next question comes from Mitch Steves with RBC Capital Markets. Please go ahead.

Hey, guys, thanks for my question. I just wanted to circle back in kind of the customer question that impacted 2017. At the time you guys mentioned this was in magnitude of quarters. Is that still the case where basically it's not a multi-year push out and you so believe that magnitude of quarters as of the date in 2017?

So the answer is s really yes. So as I said I visited some of those customers last week, those end customers and one of them is moving out already and the other one is -- none of them have pulled back and the ones are basically doing their proof of concepts or technology assessments or things I can't say exactly when they're going to go and what quarter it's going to be in, but we remain optimistic about the long term future for those large retail accounts. Also and as I said before about new smaller accounts as well.

Got it. And then circling back in kind of the long term guide you originally gave about a year ago or so, I am guessing those numbers are off the table given that the numbers would have to be kind of plus 50% growth to get. Is that fair to assume?

We expect -- we will deliver a new long term model, but we expect our incoming CFO will want to have a hand in reviewing that model and finalizing it before we put it -- before we push it out.

Okay, got it. And then one last one for me. On the endpoints, on the retail side, what was the pricing I guess the margin side for that specific segment given the NXPI competition?

Mitch, this is Evan. We don't do gross margin on a specific segment. As you know the end point I think gross margin is just below that of the overall company margin, but we don't do it by retail or by segment.

Okay, got it. Thank you.

Thank you. [Operator Instructions] The next question comes from Ethan Potasnic with Needham and Company. Please go ahead.

Yeah, hi. This is Ethan Potasnic joining in for Jim Ricchiuti. I was wondering if perhaps I missed this but how should we think about the pace of new products in 2018 with respect to end point ICs? Would there be any revenue impact this year or perhaps early next year?

So as we said, we have a three year roadmap with us significant new product introductions and we're really targeting revolutionary rather than evolutionary products. Given where we are in the market right now and given the fact that it takes time to qualify a new product into account, I don't think you should expect a new product to affect 2018 materially.

Okay. I guess demand, if it remains sluggish further into 2018, may what are some contingency plans that you guys have with regards to OpEx?

I guess we don't see -- as we cited, we see good end -- good demand at the end customer level so I guess we wouldn't characterize demand in a market whether it's in the retail healthcare or logistics basis being sluggish. That said we evaluate things on an ongoing basis and depending on what we see in the market we will take appropriate actions. Ethan, did we lose you.

His line is still connected. This concludes our question-and-answer session. I'd like to turn the conference back over to Chris Diorio for any closing remarks.

I'd like to thank you all for joining our call today and I really appreciate you being with us. Thank you.