Impinj, Inc. (PI) Q1 2019 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Impinj First Quarter 2019 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Chelsea Lish, Investor Relations for Impinj. Please go ahead.

Thank you, operator. Thank you all for joining us to discuss Impinj's first quarter 2019 results. On today's call, Chris Diorio, Impinj's Co-Founder and CEO will provide a brief overview of our market opportunity and performance. Eric Brodersen, Impinj's President, COO and Principal Financial Officer, will follow with a detailed review of our first quarter 2019 financial results and second quarter 2019 outlook. We will then open the call for questions. Impinj's CFO Consultant, Linda Breard; and Impinj's Executive Vice President of Sales and Marketing, Jeff Dossett, are also on the call and will join Chris and Eric in the Q&A session. Management's prepared remarks, along with transit financial data are available on the company's website. Before we start, note that we'll 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 of 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 disclaims, 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. During today's call, all financial numbers we discuss, except for revenue, or where we explicitly state otherwise, are non-cash financial measures. Balance sheet and cash flow metrics are on a GAAP basis. Also note that in fourth quarter 2017, Impinj took a $3.2 million accounting reserve related to a one-time product exchange, for which we recognized an equal amount of revenue in first quarter 2018. Please see the exhibit attached to the written version of these remarks on our Investor Relations website for our first quarter 2018 and first quarter 2019 revenue comparisons reflecting non-GAAP adjustments related to this exchange. Before moving to the financial results, I'd like to announce that the company will attend the Oppenheimer Emerging Growth Conference on May 14th in New York City. 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. First quarter results were strong with revenue, net loss and adjusted EBITDA loss outperforming our guidance. Revenue at $33.1 million was a record for our first quarter and led by strength in endpoint ICs, reader ICs and gateways. We continue building on the strong momentum we cited entering 2019, and are excited by the growth opportunities we see entering the second quarter. Endpoint IC revenue posted solid year-over-year growth. In March, the RAIN Alliance announced 2018 industry endpoint IC shipments of 15.4 billion units, growing 23% year-over-year. Our endpoint IC unit volume growth rate, subsequent to our 2018 channel inventory correction is consistent with that number. The Alliance also forecasted their expectation that the industry growth rates will remain strong, as I will cover in more detail in a moment. I believe our new Impinj M700 endpoint IC product family will be instrumental to enabling these cases behind those growing unit volumes. Our systems business exceeded expectations, with record revenue for a first quarter, led by project based gateway sales into logistics and supply chain opportunities in North America. We continue to focus our technology and product development efforts on tracking item transitions. Innovating and delivering solutions that our partners sell into logistics and supply chain, as well as into other market opportunities. Reader IC revenue also exceeded expectations, with another quarter of solid year-over-year growth, led by broad-based opportunities in the handheld and embedded reading markets. First quarter industry events included the National Retail Federation show in New York and the RAIN Alliance meeting at the University of Memphis. I talked about NRF on our last call and want to again highlight our growing retail opportunities as the only company with a platform, spanning endpoint ICs to software. Turning to the RAIN Alliance Meeting. Michelle Covey, Vice President of partnerships at GS1 U.S., said GS1 will focus on driving standards for digital twins and data sharing among supply chain partners, as well as promoting RAIN as a core technology for item to cloud connectivity. I am thrilled about the positive impact GS1's initiatives are likely to have on us delivering our vision of digital life for everyday items. Turning to product developments. In March, we announced the technology behind the Impinj M700 endpoint IC family. This announcement is to me our most significant since we introduced the first ever RAIN IC Monza 1 in 2005 and exemplifies the technology leadership Impinj is known for. The Impinj M700 leverages Moore's Law to enable smaller, higher performing ICs with advanced functionalities that our customers need and our competition can't easily match. The Impinj M700, 300 millimeter wafers contain more than twice as many ICs as those of other RAIN or RFID manufacturers using 300-millimeter wafers and more than four times as many as those using 200-millimeter wafers. The new ICs include technology innovations we have been developing for more than a decade and incorporate significant patented Impinj inventions. They also increase the distance, reliability and speed at which a RAIN RFID system can inventory, locate and engage tagged items, while enabling our partners to innovate smaller, high performing global tags. The Impinj M700 technology represents the pinnacle of our market and highlights Impinj's innovation, competitive advantages and yet again our industry leadership. We demonstrated the first ICs in the Impinj M700 family to key partners and customers in April. And their feedback was incredibly positive. I would like to thank the entire Impinj team for their tireless work on the Impinj M700, as we drive our vision of enabling connectivity for trillions of everyday items. Even as we introduce the Impinj M700 product family, we continue innovating and developing the other layers of our platform. In March, we've announced ItemSense 2.0, with improved algorithms for tracking item transitions, deployability, and ease of use. The transition detection improvements increase the speed and accuracy with which ItemSense identifies a tagged item's direction and path, proving existing use cases and enabling new ones. The deployability improvements continue to build on our goal of automating our platform setup and tuning, enabling scalable and repeatable solutions. On prior calls, we've spoken about our platform deployments at Faurecia. I invite you to view a short but compelling video just posted on our website and on our blog that shows transition detection inaction at Faurecia using our platform. On the IT front, we continue advancing the depth and breadth of our patent portfolio to protect new technologies and innovations like those we introduced in Monza-R6 and more recently with our new Impinj M700. We ended the quarter with 253 issued and allowed patents as we focus on extending and protecting our technology lead across our entire product line. In closing, I would like to thank the Impinj team for their efforts this past quarter, and as always, in driving our bold vision. With a strong first quarter behind us, solid team execution today, and good growth prospects ahead, I remain energized by our opportunity, confident in our market position, and excited about the future. I will now turn the call over to Eric for our detailed financial review and second quarter outlook. Eric?

Thanks Chris. First quarter 2019 revenue was $33.1 million, above the high end of our guidance and a record for a first quarter. On a GAAP basis, revenue grew 32% year-over-year, compared with $25.1 million in first quarter 2018. On a non-GAAP basis, revenue grew 51% year-over-year compared with $21.8 million in first quarter 2018. First quarter 2019, endpoint IC revenue was $21.9 million. On a GAAP basis, revenue grew 13% year-over-year compared with $19.4 million in first quarter 2018. On a non-GAAP basis, revenue grew 35% year-over-year compared with $16.2 million in first quarter 2018. First quarter 2019 systems revenue was $11.2 million, reflecting 98% growth on a year-over-year basis compared with $5.7 million in first quarter 2018, led by project based gateway sales in North America. Recall that first quarter 2018 revenue was impacted by APAC business reorganization and reader IC shortages. Endpoint ICs, gateways, and reader ICs, all contributed to our first -- our strong first quarter performance. Gross margin was 50% compared with 49.2% a year ago and 49% last quarter, with the 80 basis point year-over-year improvement driven by systems representing a larger portion of total revenue, and the 100 basis point sequential improvement, driven by lower manufacturing overhead expenses. Total first quarter operating expense was $18.8 million, compared with $19.5 million in first quarter 2018. The primary driver of the year-over-year decline was lower sales and marketing expense from reduced headcount. Research and development expenses was $7.1 million, sales and marketing expense was $7.1 million. General and administrative expense was $4.6 million. Adjusted EBITDA for the first quarter was a loss of $2.3 million, compared with the loss of $7.1 million in first quarter 2018. The $4.8 million year-over-year improvement in adjusted EBITDA, reflects our determined and ongoing focus on business execution, cost management and resource allocation. Even as we focus on operating discipline and reducing expenses, we continue investing for growth. GAAP net loss for the first quarter was $7.1 million. Non-GAAP net loss for the first quarter was $2.4 million or $0.11 per share, using a weighted average diluted share count of 21.5 million shares. Turning to the balance sheet, we ended the first quarter with cash, cash equivalents and short-term investments of $56.6 million, compared with $56.1 million in the prior quarter and $57.9 million in first quarter 2018. In April 2019, we amended our senior credit facility to consolidate our outstanding term loan and equipment advance. Refinancing $23.5 million, and extending the maturity date to April 2023. With this amendment, we also amended the maturity date of the $25 million revolving credit facility to May 2021. Inventory totaled $41.2 million, down $3.5 million from the prior quarter and down $13.5 million from first quarter 2018. We continue to make progress reducing our internal inventory and we expect total inventory to decline further by year-end. We remain confident in our ability to meet the unique needs of our business even as we reduce internal inventory. Before I turn to second quarter guidance, I want to say a few words about how we balance product strategy and investment trade-offs. Particularly in light of our recent announcement of and our deep investment in the Impinj M700 IC family. We make every investment decision through the lens of balancing our desire to achieve adjusted EBITDA and free cash flow breakeven, with an equally important desire to invest in our vision and in game changing innovations like the Impinj M700. As we and our partners begin the product qualifications that will lead to the production launch of the first ICs and in lays in the Impinj M700 family. We expect the Impinj M700 to begin favorably impacting our business next year. Looking further up, we are incredibly excited about the impact, the Impinj M700 will have on our vision of connecting trillions of everyday items. Turning to our outlook, we expect second quarter revenue in the range of $34 million to $36 million, a 23% year-over-year improvement at the midpoint of the range. We expect adjusted EBITDA to be a net loss in the range of $2.1 million to $600,000. On the bottom-line, we expect a non-GAAP loss of between $2.3 million to $800,000, reflecting a non-GAAP per share loss between $0.11 and $0.04 on a weighted average diluted share count of $21.6 million to $21.7 million shares. First quarter 2019 represented another quarter of solid execution. I want to thank our team, our customers, our suppliers and our investors for your ongoing support, as we drive our vision of digital life for everyday items. I will now turn the call to the operator to open the question-and-answer session.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Craig Hettenbach with Morgan Stanley. Please go ahead. Q – Craig Hettenbach: Oh! Yes. The question on the M700 product, just expectations around, when you might be keen to kind of sample that, and then also, your thoughts on implications long-term for our gross margin? A – Chris Diorio: So Craig, this is Chris. I'll take part of the question. And then I'll hand off to Linda, a little bit afterwards. So, in terms of sampling, so we provided some samples to some of our early partners in March or actually in April. And as we said, we will be -- we anticipate qualifying that product going forward and it will impact our business next year. A – Linda Breard: So, now I would just add to that. We typically don't Craig provide pricing or margin sort of impacts for new products that are coming out, just because, they can take different amounts of time to ramp. So, we aren't readily prepared to do that. Q – Craig Hettenbach: Okay. And then, just as a follow-up, Chris. Any update on just some of the tagging initiatives around the airport luggage and visibility into such programs? A – Chris Diorio: Sure. So in terms of the airline opportunities, so we continue to see go forward opportunities in the aviation space. I had a Board of Governors, an announced at the end of last year in December of last year that they would be going forward with significant tagging or significant rollouts and with a goal of by the end of 2019 rolling out 10 major airports. Obviously, IOTA, it's an advisory body -- those aren't mandates. But we do see good prospects going forward in aviation. And we expect that rollout. As it happens -- the full scale rollout to take many years and have a good positive upside for us and for our industry. Q – Craig Hettenbach: Got it, thanks.

The next question comes from Scott Searle with Roth Capital. Please go ahead. Q – Scott Searle: Hey! Good afternoon. Thanks for taking my question. Hey, Chris maybe just a follow-up real quickly on the M700 again. Could you just kind of take us through the certification process or what needs to happen along those lines? And then help us understand, how it will feather into the expectations as we get into 2020 and beyond? Looking back, at the Monza example, it takes several years it looks like for this to become a majority of the product portfolio. Could you help us kind of understand how that lifecycle would look? And then maybe as well, kind of layer that into some of the larger opportunities that are out there, right? Whether we're talking about many in self-checkout in Japan or some of the postal opportunities, does this get you to those price points that really start to open those trillion unit types of opportunities? Then I had one or two quick follow-ups. A – Chris Diorio: Okay. I'm doing to do my best to go through those Scott. And to be extent comes back to you for a follow-up. Please, feel free to jump in. So, we introduced the Impinj M700, technology to enable our partners to design a qualified in lays to this incredibly innovative IC as we qualify the IC itself. So, it takes some time for us to do that qualification, and for our partners to qualify those products at their end customers. So, like we said, we anticipate the M700 to impact our business results in 2020. And we continue to work going forward on it and as well as our partners. And given kind of a big advancement that we made. We've given our partners as well as ourselves a little bit of additional time. It's such a big step for the industry, such a small size IC that it not only does it present opportunity, but there is additional work to do, because of its innovative nature. In terms of what the M700 represents for us going forward? As we said, we've leveraged Moore's Law to both drive higher performance and smaller IC size and just really to advance our industry going forward. And one of the benefits of going down Moore's Law is the digital logic shrinks significantly. And so those digital logic shrinks allow us to incorporate over time and with products built on the M700 family, additional advanced functionalities that we believe the market needs. We've talked a little bit in the past about item authentication and we see other significant opportunities to introduce innovative features in the M700 that would have been difficult to introduce in the older generation technologies. And then just in terms of the long-term ramp, given the capabilities and the benefits and the performance of the M700, we're optimistic that we're going to see a fairly a fast ramp with that product, but we're not today making predictions about the future of it. And even with a fast ramp, we still expect that the volumes will continue -- as we -- after we finish our call and start ramping, we expect the volumes to significantly increase over time as what has happened with our prior products. And for that matter, our prior products keep selling for extended period of time even as we introduce the new ones.

That's a lot of positive things.

And -- did I catch all the things you asked?

You got. That was perfect, Chris. And if I could just two quick follow-ups. Just in terms of the mix of the sales outlook going forward, give us some idea maybe how things are looking from an IC versus system standpoint as we're thinking about 2019? It seems like there are a lot of applications and end-markets now that are starting to favor more of the fixed portal, type deployments, which could really help drive your business and be front-end loaded, be curious as to your view on that? And I think you did mention in terms of your opening comments, some of the end market verticals specifically supply chain, but I'm wondering if you could talk a little bit about what's going on in some of the different verticals and where you see some of the opportunities in 2019 and 2020? Thanks. Nice quarter.

Sure. Thank you. So we don't guide the splits, although, as it says, evidence from the call, we see strength kind of across our entire platform, and we're excited about that strength. And as you know also some of our opportunities are project-based. So for -- in any one quarter, there can be a mix one way or the other. Especially, our systems project, but we see growth in the endpoint opportunities and some project-based opportunities on the endpoint IC side as well. In terms of momentum where we see opportunities, I think I'm going to hand off to Jeff a little bit to talk a little bit about kind of where we see some growth opportunities in the overall market.

Sure. Thanks, Chris. Scott, this is Jeff Dossett. And I would say that we're seeing continued growth across a variety of industry verticals. I would highlight the growth and opportunity and supply chain and logistics, as well as manufacturing across a variety of different types, but in particular, automotive and aviation. Of course, we're continuing to see growth in retail, both apparel and footwear, but also had a great expansion including new categories such as health and beauty, for example, cosmetics. We're also continuing to see interesting proofs of concepts and pilots in the food distribution industry, as well as continuing progress in healthcare, in which we go to market with strong partners, such as STANLEY Healthcare, TeleTracking and iDoc's Health in the United Kingdom. So it's broad-based growth across a wide variety of industry verticals.

Great. Thanks so much. Nice quarter.

Thank you.

Thanks.

Thank you, Scott.

The next question comes from Troy Jensen with Piper Jaffray and Company. Please go ahead.

Hi, thanks. First off, congrats on the nice results, gentlemen.

Thank you.

Thank you.

Hey, how about for Eric. I like to just dive in a little bit on the system strength. This has been an extended period of strength in this category. I mean, can you just clearly share gains. But just curious to know if you think this strength can sustain? Are there any tough comps that were coming up against any year-over-year basis?

Thanks, Troy. That's – you're picking up on some key parts of the systems business. I think it's important just to start with that baseline. As we've said, it's definitely a project based business. So getting to a point where we can project, a normalized trend rate for that business is difficult. And I'd say that, in Q1, we're really pleased by our results. But as you noted, we're up against a relatively easy compare, when you look back at Q1 of 2018 when we had our restructuring and some reader IC constraints. But I'd say, broadly, we continue to be pleased with the team's execution and our work in continuing to pursue those project-based opportunities.

Okay. And Eric, for you or maybe Linda. Just on the gross margin side – so you improved a 100 bps sequentially, but systems was a smaller percent of sales in Q1 than there were in Q4. So I think you said there are some manufacturing efficiencies that drove that incremental margin. So just touch on that? And can you just help us on how do you think gross margins will trend throughout this year?

Yeah. So I'll just kind of stick with the first quarter. Our manufacturing overhead in the first quarter was lower than it was in the fourth quarter, part of that is based we talked about last year. So our margins improved in Q1 over 4Q. As far as guiding forward on margin, we tend to stick a quarter at a time.

All right. Understood. I mean, obviously the new chips aren't going to help the next year. I guess, else kind of piecing this with the system strength. I mean, do you think we continue, I guess, you probably won't answer it, but do you think you can continue to maintain gross margins above 50 bps?

Yeah. I'm not going to comment on the gross margin about 50 bps. I would also say that, we had – Chris talked about we had a favorable mix – more favorable mix expected on our systems business and our reader IC business in the first quarter and that also was reflective of our overall improvement sequentially.

Okay. Last question –

And also I was – go ahead.

Lastly, my last question would be on ItemSense 2.0. I'd just be curious to know what kind of new features – going to make this better even ItemSense 1.0? And to my recollection did ItemSense hit your objectives previously or where we are in the expectations at this?

So this is Chris. I'll take that one. So the new features an ItemSense 2.0 really focus on algorithm improvements for item transitions and we see those item transitions and tracking item transitions is being instrumental for supply chain opportunities, for logistics opportunities. And then, even some retail use cases and others tracking item transitions as items move around. We talked about our platform to delivering the identity, location and authenticity of items, identity i.e. read the tag, you read the item you get the items unique identity location is just – tracking item transitions gives you a timestamps trajectory of where the item is moving. That information is incredibly valuable to our end customers. In terms of -- and we also talked -- I also talked about how we improve the deployability and ease of use, because we think the ability of ItemSense to improve our platforms deployability is critically important to driving greater and greater adoption out into the market. In terms of just how we view ItemSense overall, it's an essential component, an essential element of our platform and allows us to deliver against enterprise scale and enterprise class opportunities. That's how we're positioning it, and that's really where we see its strength. ItemSense is still a very small portion of our overall revenue. But in terms of its impact on our platform and the scalability of our platform, it has an outsized impact.

Yes. All right, understood. Keep up the good work, gentlemen.

Thank you.

Thanks Troy. Thank you.

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

Great, thank you. And my congrats on a strong quarter also. Chris, just going back to the M700 family. Can you just give us some color on what do you think will be the end markets or industries that would be the first to adopt the new technology? Thank you.

So, Mike, to that, I want to might just say, yes. So we see adoption of M700 as basically impacting all of the opportunities, all of the vertical markets that are currently served by our existing platform. The fastest growth and the greatest opportunity is probably going to be in the retail space, because retail adoption is still the primary driver of our overall industry. But Jeff mentioned, opportunities in automotive and aviation, in healthcare and in emerging parts of the retail market, health and beauty, for example. And we see the M700 impacting all of those areas. And then, as we introduce additional advanced functionalities, targeting specific market segments, we see the opportunity to drive an accelerated adoption and overall growth and gains in those market segments, based on the advanced functionalities.

Great, thanks. And just build on that, I guess, just trying to get to also, is there certain industries you think that would pay up for the new technology next year, relative to some other industries that might be fine sticking with the Monza family. Just trying to get a flavor of maybe potential industries that would be willing to pay for this better technology versus your competitor products?

So I think, Mike, on that one, I think, time is going to tell. Our positioning of the product, the new capabilities we bring to market, overall how we position M700 in the context of our overall platform. We're going to do our best to address as many market opportunities as we can and you should expect us to leverage the M700 to improve the overall deployability and benefits of our platform.

Okay, great. And follow-up question for me. Just going back to the record first quarter systems and gateway business. Nice to see that as a leading indicator of adoption in the industry. Can you provide any color, I think you mentioned there's some strong project-based gateway sales, are those coming up or those be a pretty good visibility to continue for the next several quarters?

So, this is Eric. I think, I keep reinforcing that all of our products grew year-on-year. Within that systems and in particular the gateway space, there were multiple customers, multiple projects in our Q1 time period. I won't project forward out of, say, within our current time period, but I think it's fair to say that there was a large project that favorably impacted our gateway business in Q1.

Okay. Thanks, Eric. And last question for me, just, I know Q1 tends to be the first quarter where you get a price reduction on -- to start the year. Just how is pricing relative to the expectations, and on the endpoint side, is this usually the lowest gross margin quarter as volumes build throughout the rest of the calendar year? Thank you.

This is Jeff. I think the first and most important comment would be that we've not seen any significant changes to the competitive marketplace inclusive of pricing. So, I think that I would articulate it as typical and as expected.

And I guess, I would add to Jeff's comment and say, the impact of our annual endpoint IC pricing negotiations on Q1 -- on our margin in Q1 was offset by favorable systems revenue and also favorable mix within our endpoint IC business too so.

Thanks. Understood. Thank you. Congrats, again.

Thank you, Mike.

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

Yeah. Thanks for taking my questions and my congrats on a strong quarter and guidance.

Thank you, Charlie.

Yeah, I wanted to ask on the Reader IC, I think you guys called out some strength there, you know that was upside relative to your forecast. But maybe just update us on what's going on there that seems to be a little project based, a little bit more ongoing. So that's my first question, and I have got follow-up.

So we don't usually guide to -- or we don't guide the Reader ICs. But as I said, we see strength in the Reader IC business as just greater and greater adoption of kind of readers across a broad range of verticals and I specifically cited the embedded market opportunities, where we see strength, as well as handhelds and a lot of handhelds go into retail opportunities. So, as you see strength in retail opportunities as demand for handheld readers. And so, we see more and more Reader ICs going into those handheld readers.

Great. And then sort of a big picture question M700, Chris. Obviously, there some use cases you maybe get at I think in some cases because of price, but others in terms of capability. So between those two -- where do you see M700 addressing the need more -- is it more on the price side, or more on the capability and -- are there any examples of end-markets where those has been barriers in the past where you cannot breakthrough. It'll be interesting to hear some examples of those? Thanks.

So, initially our focus is on driving advanced functionalities and advanced capabilities that open up new market segments. For example, like we've talked about the item authentication. Going forward, as you migrate down Moore's Law, you get smaller IC's and smaller IC's allow you to address some economies of scale. And thereby, address the larger market opportunities. And you should see us continue innovating kind of all across the board on those ICs, as we introduce more products in the Impinj M700 family.

Great. Thanks so much.

Thank you, Charlie.

Thank you.

The next question comes from Jim Ricchiuti with Needham & Company. Please go ahead.

Hi, team. This is Mike Sticos [ph] on for Jim Ricchiuti. Congratulations on the quarter.

Thank you.

Just had a quick question for you guys on the systems business. Wanted to get a better idea of the quarter itself as far as how it came together, whether it was I guess the cadence of the quarter and I know that there was a large projects specifically called out that favorably impacted the results. Did you guys quantify the size of that customer?

This is Jeff. No, we don't disclose the size of any one particular customer. But to your question regarding how the quarter came together, we signaled strength coming out of 2018 into 2019. We entered 1Q, 2019 with a strong backlog and a healthy and growing pipeline. And so the quarter came together in a well structured and predictable manner.

Okay. And then just a couple of follow-ups there. The first being, I guess on the systems again. Again, probably difficult to quantify, but did you guys size up the impact to Q1 of last year from the reader IC shortages and the APAC business reorganization? And then the second question, coming back to the M700 now and I know it's difficult to size up the timeline with the qualifications you guys are currently going through, but maybe you could help us understand prior product launches that you guys have had and what the time horizon is for those so we can try and get a better sense of how the M700 will come along? Thank you. A – Chris Diorio: So this is Chris. I'd like Linda to take the first part of the question and then I'll dive in to talk about the M700 launch and timing. A – Linda Breard: Yes, so Mike, we didn't say that the impact -- so we have $5.7 million in Q1 of '18 in systems business. So we did talked about, we had just shared in the earnings call that we had APAC reorganization and some other things that were impacting the systems business in that quarter. But we can't provide size or magnitude. A – Chris Diorio: And then turning to our prior product launches, if I look back to Impinj Monza R6, which we introduced late in April of 2014, that product also had some significant innovations in it. It took our partners and us roughly through the end of 2014 to qualify it on both our IC itself and into some end customer accounts. We saw it begin impacting our revenues and our business in 2015 and continued growing from there. So our expectation is that rough and tough that our rollout of the Impinj M700 will take -- will follow the same trajectory as the Monza R6 did.

Terrific. That's really helpful. Thank you, guys. A – Chris Diorio: Thank you. A – Linda Breard: 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.

Thank you, all for joining the call today. And a special thanks to the Impinj team for the solid execution this past quarter.

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