Impinj, Inc. (PI) Q4 2019 Earnings Report, Transcript and Summary

Good day and welcome to the Impinj Fourth Quarter 2019 Earnings 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 Ellen Hayes-Roth, Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon and thank you all for joining us to discuss Impinj’s fourth-quarter and year-end 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. Cary Baker, Impinj’s CFO, will follow with a detailed review of our fourth-quarter and year-end 2019 financial results and first-quarter 2020 outlook. We will then open the call for questions. Linda Breard, Consultant to Impinj’s CEO, and Jeff Dossett, Impinj’s Executive Vice President of Sales and Marketing, are also on the call and will join Chris and Cary in the Q&A session. Management’s prepared remarks, along with trended financial data, are available on the investor relations section of the Company’s website. Before we start, please 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 sections 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. During today’s call, all financial numbers we discuss, except for revenue, or where we explicitly state otherwise, are non-GAAP financial measures. Balance-sheet and cash-flow metrics are on a GAAP basis. Before turning to our results and outlook, I’d like to note that the Company will attend the Morgan Stanley Technology, Media & Telecom Conference in San Francisco on March 4th and the 32nd Annual ROTH Conference in Dana Point on March 17th. We hope to see many of you there. I will now turn the call to Chris Diorio, Impinj’s co-founder and CEO. Chris.

Thank you, Ellen. Thank you all for joining the call. Our fourth-quarter results were strong, with revenue exceeding $40 million for the second consecutive quarter and setting a third straight quarterly record. For the full year, we delivered 24.6% revenue growth, driven by strength in both endpoint ICs and systems. Fourth-quarter endpoint IC revenue growth was healthy. Compared with last quarter, year-over-year growth accelerated. We were especially pleased with our results as we faced a difficult year-over-year growth comparison to fourth-quarter 2018 and seasonal fourth-quarter endpoint IC headwinds. Full-year endpoint IC revenue set an annual record with performance apparel and footwear a key growth driver. We expect retail apparel overall, including the performance segment, to lead endpoint IC volume growth in 2020. We believe the retail apparel market was only roughly 15% penetrated in 2019 so there is plenty of room for growth. We also expect the new Impinj M700 IC family to be a key driver of that growth, with retailers excited about the M700 because it enables the highest performing, smallest, worldwide-tuned inlays with fast inventory and exceptional readability. It also introduces Protected Mode, a patented Impinj innovation, enabling new opportunities for loss prevention with automated self-checkout and seamless product returns. Fourth-quarter year-over-year systems revenue growth was healthy, with strength in both readers and gateways. We continued to win in retail, tracking items at back-store to front-store transitions and at point-of-sale and store exits, and in the supply chain, verifying shipments moving through dock doors. Full-year systems revenue delivered the strongest growth rate in the past five years, with double-digit reader and triple-digit gateway revenue growth, partially offset by a decline in reader IC revenue. While our reader IC business faced difficult comparisons to a very strong 2018, the underlying market dynamics remain healthy and we continue investing in this important business. Overall, I am pleased with the traction our systems business delivered in 2019. In 2020, we will continue investing in our platform, end-customer adoption and linking silicon to applications. In February, we announced our next-generation fixed reader, the Impinj R700, designed for enterprise-grade RAIN deployments. Building on our rich heritage of innovation, the R700 delivers industry-leading performance with the best wireless sensitivity, fastest network connectivity, powerful edge processing and intelligent on-reader algorithms that simplify solutions development. We are currently shipping R700 readers in limited quantities for North American deployments as we execute our production ramp. We anticipate worldwide regional support by third-quarter 2020. While we are excited by the advancements the R700 delivers, we will continue offering our Speedway readers, with the R700 enabling us to execute a tiered selling strategy. For applications that require the R700’s advancements, we offer our customers a smooth transition from Speedway to the R700 via backward-compatible APIs and programming environments. Although we have modest 2020 revenue expectations for the R700, we expect the R700 to meet increasing end-user demands for enterprise-grade security, performance, reliability and product longevity. The R700 exemplifies our commitment to innovating across our platform. Expanding on that innovation theme, in 2020 we will increase our research and development spend in absolute dollars, focusing on growing our engineering team, accelerating our product advancements, strengthening our platform linkages and driving our growth. We will also invest in operations, focusing on ROI-driven capital investments that shorten our endpoint IC wafer post-processing flow to improve inventory turns, increase operations responsiveness and broaden our geographic and partner diversity. These R&D and operations investments are focused on growing and scaling our company to win the gigantic opportunity in front of us. Turning to the market, in January we exhibited at the National Retail Federation tradeshow in New York City. In my view, this year’s NRF was our best ever. A key take away from the show was how retailers are extending their RAIN deployments from handheld inventory counting, which has driven retail apparel tagging, to now include back-store to front-store transitions, consumer self-checkout and monitoring store exits. Also, 14 partners featured our products in their booths. Cisco showed an Impinj xArray gateway in their Grape-to-Glass demonstration, tracking a wine bottle from vineyard to consumer. Lexmark showed a printer that both printed and encoded shipping and return labels with our Monza R6 endpoint IC embedded in the label. These use cases highlighted the power of the applications that Impinj partners can build using our platform. In our booth, we showed two M700 Protected Mode use cases, the first focused on loss prevention with frictionless self-checkout and the second on loss prevention with seamless product returns. A retailer, seeing our demonstrations, suggested a third -- using Protected Mode to inhibit fraudulent returns, which is a use case we had not anticipated. Reflecting on that interaction as well as other partner and customer conversations, I was struck by the breadth and depth of solutions our partners are delivering, the rapid pace at which RAIN has become a mainstream and essential retail technology and the scope of use cases that retailers envision using the Impinj platform, oft times surpassing our own imagination. On the organizational side, we recently announced that Eric Brodersen, our president and COO, will step down on March 6th. I would like to extend my sincerest, heartfelt gratitude to Eric for his tireless commitment over the past five years. Eric helped grow Impinj into a far stronger organization with the most talented and capable leadership team in our history. Eric, thank you for all that you have done for Impinj. We also announced our new CFO, Cary Baker, who joined us on February 17th. Cary brings a keen strategic eye, strong financial acumen and a wealth of experience in multiple industries that will serve Impinj well as we grow and scale. I am excited for you to meet him during our upcoming conferences and road shows. Turning to coronavirus, the safety and well-being of our team, partners, customers and suppliers is and remains our top priority. The virus’s impact on our business has been modest to-date, with us adjusting our operations to compensate for macro trends that include extended holidays and furloughs which have impacted product availability and customer workflows. The impact on the M700 has been larger, with coronavirus contributing to more than a month delay in our production ramp as our inlay partners, understandably, prioritize producing existing products over a new-product ramp. Regardless, we still anticipate transitioning from production ramp to volume production, and to begin fulfilling volume production orders from multiple inlay partners, late in the second quarter. We also still expect the M700 to positively impact our business in 2020. Looking forward, we anticipate coronavirus will impact sales of our endpoint ICs worldwide and may impact our systems sales, the latter at least in China and perhaps in other countries as well. We continue to monitor and adapt to the situation as it unfolds, confident in our market position and balance sheet, with our thoughts and hearts turning to those who are impacted across the world and to whom we wish a speedy recovery. In closing, 2019 was a fantastic year as Impinj delivered a string of record revenue quarters and laid the groundwork to deliver production volumes of new, industry-leading products in 2020. I would like to thank the entire Impinj team for their efforts this past year and, as always, in driving our bold vision. With a record year behind us marked by steady execution, I remain confident in our market position and energized by the opportunities ahead. I will now turn the call over to Cary for our detailed financial review and fourth-quarter outlook. Cary.

Thank you, Chris. First, I want to say how incredibly excited I am to be an Impinjer. I believe Impinj’s opportunity is massive and the value we can deliver by linking silicon to the cloud is game-changing. We are also uniquely positioned with a comprehensive platform, strong market position and a truly innovative culture. Perhaps most importantly, what I see that separates Impinj from other companies is our people. I am thrilled to have joined such a superb team. Second, my focus is growing and scaling the Company to win this massive opportunity and deliver shareholder value. I will have more to say on this latter topic after I spend time learning from our end customers, partners, suppliers and team members. Turning to our results, fourth-quarter revenue was $40.8 million, up slightly quarter-over-quarter and up 17.9% year-over-year. Fourth-quarter endpoint IC revenue was $25.7 million, declining 2.4% sequentially and growing 17.9% year-over-year, compared with $26.4 million in third-quarter 2019 and $21.8 million in fourth-quarter 2018. Year-over-year revenue growth accelerated -- a strong result given the difficult growth-rate comparison to the prior year. Fourth-quarter systems revenue was $15.1 million, growing 4.8% compared with $14.4 million in third-quarter 2019, driven by strength in reader revenue partially offset by declines in gateway and reader IC revenue. On a year-over-year basis, systems revenue increased 18.0% compared with $12.8 million in fourth-quarter 2018, led again by the large North American systems project as well as by strong reader revenue, partially offset by a decline in reader IC revenue. 2019 revenue was $152.8 million, growing 24.6% year-over-year compared with $122.6 million in 2018. Endpoint IC revenue grew 14.9% year-over-year, driven primarily by strength in the retail segment, including performance apparel and footwear, and by our 2018 channel-inventory correction. 2019 systems revenue grew 46.5% year-over-year, with strength in gateway and reader revenue partially offset by declines in reader IC revenue. The North American project represented 14% of our total 2019 revenue. Fourth-quarter gross margin was 50.6%, compared with 50.2% last quarter and 49.0% a year ago. Full-year 2019 gross margin was 50.2%, compared with 49.5% in 2018. The improvements in gross margin were due primarily to mix, including gateway sales into the North American project, and underlying product margins. Total fourth-quarter operating expense was $19.6 million, compared with $18.4 million in third-quarter 2019 and $18.7 million in fourth-quarter 2018. Research and development expense was $8.3 million. Sales and marketing expense was $6.0 million. General and administrative expense was $5.4 million. The sequential increase in operating expense was primarily due to increased legal spend. 2019 operating expense totaled $75.1 million, a slight increase compared with $74.6 million in 2018. As Chris already noted, we intend to increase the investments in our business to strengthen our product leadership and market position. Adjusted EBITDA for the fourth quarter was $1.0 million, compared with $2.1 million in third-quarter 2019 and a loss of $1.7 million in fourth-quarter 2018, marking another quarter of solid execution. 2019 adjusted EBITDA was $1.6 million, compared with a loss of $13.8 million in 2018. GAAP net loss for the fourth quarter was $7.7 million. Non-GAAP net income for the fourth quarter was $800 thousand, or $0.03 per share, using a weighted-average diluted share count of 22.8 million shares. GAAP net loss for 2019 was $23.0 million. Non-GAAP net income for 2019 was $900 thousand, or $0.04 per share, using a weighted-average diluted share count of 22.6 million shares. Turning to the balance sheet, we ended the fourth quarter with cash, cash equivalents and short-term investments of $116.5 million, compared with $63.1 million in the prior quarter and $56.1 million in fourth-quarter 2018. In the fourth quarter, we issued convertible notes with a 2% coupon rate, generating $86.25 million in gross proceeds and $49.4 million in net proceeds after paying fees, retiring our unsecured debt and purchasing the capped call. Looking forward, our current plan is to settle the notes principal in cash, so for non-GAAP modeling purposes you should include additional shares proportional to the value of the conversion premium once our stock has moved through the $54.20 capped-call price. A table in our fourth-quarter 2019 trended file, on our investor-relations website, outlines the dilution from the convertible notes for both GAAP and non-GAAP share count. In the fourth quarter, net cash provided by operating activities was $4.5 million and property and equipment purchases totaled $1.5 million. For the full-year, net cash provided by operating activities was $4.7 million and property and equipment purchases totaled $2.4 million. Inventory totaled $34.2 million, down $2.1 million from the prior quarter and below our expectations, driven primarily by wafer-delivery timing. Before I turn to first-quarter guidance, I want to highlight a few items. First, a reminder of the seasonality trends we typically see in our first quarter. Annual pricing negotiations typically impact endpoint IC revenue and gross margin. Systems sales tend to be seasonally lower. Also, operating expenses tend to increase over the prior quarter due to payroll tax resets and increased healthcare costs. Although these trends are typical, any number of factors can mask that seasonality including project-based systems revenue where size, timing and mix can impact our quarterly results. Second, the North American systems project contributed meaningful fourth-quarter 2019 revenue and will contribute meaningful first-quarter 2020 revenue. That project will transition from deployment to operations at the end of the first quarter, with the customer not purchasing additional gateways in second-quarter 2020. Their transition engenders a meaningful headwind for our systems business beginning second-quarter 2020. We will continue supporting this important end customer as we look for future growth opportunities with them. We also remain confident in the underlying strength of our systems business as we continue pursuing other opportunities at multiple large end customers. Third, we have widened our first-quarter 2020 outlook range as a consequence of the coronavirus situation. Turning to our outlook, we expect first-quarter revenue to be between $37.0 and $41.0 million, an 18% year-over-year improvement at the midpoint of the range. We expect adjusted EBITDA to be between a loss of $2.3 million and a gain of $700 thousand. On the bottom line, we expect non-GAAP earnings between a net loss of $2.5 million and a net profit of $500 thousand, reflecting non-GAAP earnings per-share of between a loss of $0.11 and a profit of $0.02 on a weighted-average diluted share count of 22.4 million shares. In closing, I want to thank the Impinj team for their warm welcome and support leading up to this call. To our customers, suppliers and investors, I look forward to meeting many of you in the coming weeks and months. Thank you all for your contributions to a strong fourth-quarter and full-year 2019. 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] And our first question is from Mike Walkley of Canaccord Genuity. Please go ahead.

So, first question is just on the systems business, the headwind starting in Q2 and the tougher comps from this large North American project. Can you help us maybe think about the headwinds, any type of numbers, you can put behind it? Would you think the system business still grow in 2020 versus the strong 2019 without this customer given the pipeline? Just trying to help us any way to quantify what you mean by meaningful headwinds for the systems business?

Mike, this is Jeff Dossett. Let me take a first cut at an answer. First of all, I think, I can comment on bookings and pipeline and opportunities throughout the broad-based systems business and say we have healthy bookings. We have a healthy pipeline. And we see broad-based opportunity for the systems business across a variety of industry sectors, and use cases and all around the globe. Having said that in the script, we do call out significant headwind associated with the transition of this large North American account, I would further say that we have taken into account that headwind in setting the guidance for 1Q '20. So I think that should be helpful in trying to size the impact and the opportunity.

I guess just following up on that. In Q1, '20 you did indicate, it was another strong quarter of contribution from that. So that, how we're supposed to read just expect a downtick from this run rate in Q1. Just trying to get a little clarity around meaningful headwind again?

Yes. I think Mike, that's a fair approach.

And then just the annual price negotiations are those kind of done now in line with your expectations to start the year. And then just any color on the M700? I know it's pushed out a little bit because coronavirus and some interruptions to the supply chain. But how should we think about that ramp later this year, if everything gets back on track?

Mike, this is Jeff. I'll answer the first part of the question regarding the annual pricing negotiations, and I think the clear and simple answer is that it was in line with our expectations.

And Mike, I'm not sure if there was a question relative to the M700. But as we said on the call, we do see some impact to the M700 ramp to production, and the transition from production ramp to full production associated with our inlay partners, as I said on the -- in the script understandably. Focusing the first priority is on delivering production product. Regardless, we still, we've taken the steps we can to compensate for those delays, and we still anticipate pushing hard to get the M700 into full production in the second quarter.

Okay. Thanks. Last question for me and I'll pass the line. It was a stronger gross margins than what I expected, so congrats on the strong margins. Was it more leverage from the higher revenue, or is there a positive mix or maybe just speak to kind of gross margins and the trends going forward?

Yes. Mike, this is Cary Baker. Good to meet you. Gross margins in the fourth quarter were positively impacted by the systems revenue which carries a higher gross margin than our endpoint IC business. Seasonally endpoint ICs are typically a little bit lower as we're going into the annual price negotiation. So really the primary factor was the underlying revenue mix of the business.

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

Just putting aside the M700 slippage for a second, can you talk a little bit about the impact of the coronavirus in Q1, given that we're -- we've got about a month left in the quarter. I'm wondering what kind of an impact you're seeing on the underlying IC, endpoint IC and systems business in Q1?

So, Jim, this is Chris. As I said in the script, the impact in the first quarter has been modest, but as we look forward in RAIN label is really a key piece in multiple complex and diverse sourcing and supply chains, everything as you think of aviation to retail to industrial logistics, automotive, to all the use cases. I mean, there is upstream and downstream impacts related to demand materials freight and labor. So given that complexity and because the coronavirus situation is evolving literally daily, you can't make much in the way of projections for second quarter. I think you're just going to have to stick with what I said previously, which is the impact of first quarter, we see as being modest outside of the impact we cited for the M700 transition from production ramp to full production.

And maybe if we could just turn for a moment to the large North American customer, and I'm not asking for specifics on that customer, but I'm just trying to get some sense as you pursue some of these other opportunities. What kind of sales cycle do you see on some of these larger projects? And is there the potential that the sales cycle could shorten, given what you've demonstrated presumably with this customer to other customers?

I would say more generally that success in any customer in any industry sector bodes well for -- and positively influences sales cycles going forward. Success, we get more success if you will. So any project including this project that has successfully transitioned to deployment from deployment into operations is an opportunity, to utilize the learning and extend to new opportunities around the globe.

Okay. And last question from me is just looking at the reader IC business and there is some moving pieces there, just given the headwinds from the coronavirus, but you should have easier comps in that business, and I'm just wondering, how we might think about the business, the reader IC portion of the systems business in 2020?

We feel very confident about the underlying foundational strength that the reader IC business going into 2020.

And any -- should we assume that that portion of the business given what you see could be up in 2020?

Well, we continue to guide one quarter at a time. But I would signal that we feel good about the bookings, the pipeline and the many opportunities for our reader ICs embedded in or integrated into a wide variety of solutions serving multiple industry sectors and use cases. So we feel good about the sound foundational strength of the reader IC business.

And Jim, that's the genesis of my comment that we continue investing in this business because we see it as strength for the future.

Our next question comes from Craig Hettenbach of Morgan Stanley. Please go ahead.

Yes. Thank you. First question for Cary in understanding with which you just started out and I might not be formal targets, but just kind of curious as you look at the business and then how your initial thoughts are in terms of kind of growth and balancing that with kind of investments in margins?

Yes. Craig so, thanks for the question. I'm two weeks into it. So you can assume that I am getting up to speed on the business, I think quickly, but there is a lot to learn of course. So as I look at the revenue profile, the growth trajectory and the investments necessary to drive that, I'm still coming up with how we should look at that into the future. So at this point. I'm not ready to offer anything specific, but know that it is a top of the list of something that I'm working on.

And then just a follow-up on the M700, any thoughts on just kind of milestones or things that we should kind of be watching as you work through kind of partners and ecosystem and expectations for trajectory as you kind of move through the year?

So Craig, this is Chris. I am -- you should expect us to continue speaking about the Impinj M700 given, given how important it is to our future. And given that the how on and we really view it as a game changer in the market opportunity. As we said, we still expected to positively impact the business in 2020 and we'll make statements about the Impinj M700 as new information becomes available.

Our next question comes from Troy Jensen of Piper Jaffray.

So could you guys talk about Avery Dennison and SmartTrack. Those two companies are getting acquired or merging, whatever you want to call it, but just what are the implications for PI given you're not going to have one customer that could be 25% to 30% of your revenues?

This is Chris. I'll start there and maybe Jeff will add a little bit if he's got anything to say after I make a few comments. Obviously, the deal just closed this morning. Historically we've enjoyed a mutually beneficial partnership with both companies. Avery Denison SmartTrack and we plan to build on that strong foundation to grow and serve the market going forward, working with them to drive mutual opportunities out into the market. And if you like to add, keep going, Troy.

I was about to say any concerns about just inventory rationalization or would love to get your thoughts?

No, at this time, I don't have any particular concerns, and as Chris said, we've worked closely with each of SmartTrack and Avery Dennison for many years. Developed deep partnership, deep relationships within both companies and we very much look forward to working together closely now is sort of a combined entity for Avery Dennison and SmartTrack as we seek to grow the RAIN industry and work to serve opportunities that emerge in a variety of industry sectors and around the globe. So we view this optimistically and look forward to working closely with them.

Then just my last question would be, can you give us an update on the airline industry and the [indiscernible]?

Yes. So, Troy this is Chris. That aviation opportunity is going to span several years. And so, we're still in the early days. We do continue to see progress in the space, highlighted by expanding deployments within IATA member airlines and airports, and also on non-IATA member airlines and airports. So, we are starting to see growth and good opportunities. There is a lot of questions coming in and I guess what I can say is that I think what we're seeing at the market in terms of inbound to us is consistent with a measured multi-year growth trajectory as we expect from the airline industry as a whole, moving forward.

I think that one thing that I would add, this is Jeff is that. This industry like most will progress on a project basis. So project size, timing and sort of the mix of the elements of that solution will vary quarter-to-quarter, but we're quite optimistic in the long-term opportunity and how well we're positioned to participate in that growing opportunity both as it relates to endpoint ICs as well as the systems business, both fixed readers like Speedway and the new R700 as well as readers based upon our reader IC.

[Operator Instructions] And our next question will come from Charlie Anderson of Dougherty & Company. Please go ahead.

So I wanted to start with maybe Chris from you, just sort of big picture wise, 2019 was really great for RAIN RFID, we had a lot of major brands deploy. You mentioned performance apparel, footwear, and it sounds like that's going to be sort of similar set of circumstances for 2020. But I wonder if maybe you could expand on that in terms of what you're seeing in the pipeline in terms of who may deploy. And if you can make any comments on sort of apparel as well as if there are any other end markets that looks promising to you, particularly in 2020? And I have a follow up.

Yes. Sure, Charlie. I'm not going to name a specific end customers by name, because those that have wanted to say things publicly would have done, so if there on the court, but you can see a fairly large number of retailers making statements about the positive impact that RAIN RFID is having on their inventory visibility, and that was starting to talk about in more advanced use cases. I will say that I personally have done now self-checkout using automated self-checkout terminals, RAIN based sub checkout terminals in Europe and in Asia. And I can see the attraction to automated self-checkout and loss prevention systems where I can just literally go to a sub checkout terminal, buy the items pay and walk out of the store. It used to move those places and I see the opportunity for expansion of RAIN RFID from more -- from the base, which has been inventory visibility, handheld driven inventory visibility is more and newer fixed use cases. On top of the growth we expect and hope to see in the retail apparel segment, we are of course, seeing opportunities in aviation as we just spoke about a minute ago. Supply chain and logistics continues to grow in our trucking items transitioning through dock doors and across facilities. And we see good opportunities in that use case, and as I mentioned, I believe it was on the last call, we also see opportunities in the automotive space, so broad brush, multiple large verticals adopting and growing, retail continuing to lead but lots of excitement out in the market.

Okay, great. And then you've obviously now refreshed the endpoint IC product, you've refreshed the reader product here with R700. I'm curious where things stand on the reader IC product, if you can maybe talk about the roadmap there as far as that's concerned and any improvement you can make to that product. Thanks so much.

Well as the markets innovator and leader, you should expect us to be continually advancing our product line. We don't make advance announcements before we have something that we're going to show. We will introduce new products as they become available and when the time is right.

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

Hey guys. Thanks for taking my question. My first one just kind of on the sales strategy, given the fact the IC reader are having some change in of management there. I mean is there any change where you guys originally planned Q about a year and a half ago in terms of go-to-market. And then secondly, I just want to clarify, in the verticals, you guys are talking about growth again in retail, I guess, would it be safe to assume that pursue the fastest growing vertical in 2020? And if so, what would be kind of your expectation in the second factor vertical for 2020?

Mitch, this is Jeff Dossett. I'll take the first question with regard to sales strategy. As you may know I assume responsibility for the sales organization in 1Q 2018 and I would say, we anticipate continuing the sales strategy under way today. What I'd like to call out as we have in the past is in the important role that partners play and crafting and designing and deploying specialized RAIN based solutions, addressing the needs of very wide range of industry sectors and use cases. And so partners have been at the foundation of our sales and go-to-market strategy for years and it will continue to be a very major focus in 2020 and going forward. So the overall sales strategy and aspirations remain consistent as we head into this phase of Impinj's growth going forward.

And Mitch, this is Chris. I'll try and take a stab at your second question. Obviously, it's a big question that we could talk later really about it for hours. As you think about growth in the market, retail is coming off the biggest base. Retail apparels coming off the biggest base. I would not say that it's -- that has the fastest growth on a percentage basis. But given the base is coming off of interest in terms of sheer volumes for endpoint ICs, it represents the largest opportunity in the market in 2020 as I said in the script. On a percentage basis, the newer opportunities are growing faster and we talk about supply chain and logistics, we talk about aviation and we talk about automotive opportunities and for each of those opportunities. You have to look at the mix between endpoint ICs and systems. Some of them trend to be heavy on the systems and a little lighter on the endpoint ICs or vice versa. They're all very early and growing probably on a percentage basis at much faster clip. But I think it's important to think of those four overall with others behind them, we've talked to the past about healthcare and other opportunities, but you should think about them overall, as just representing the fact that RAIN is penetrating very heavily into multiple industry verticals. RAIN Alliance, said that the industry delivered 18.5 billion endpoint ICs in 2019, which is significant growth over 2018, which is growth over 2017. And we are very excited about the future and what the future brings for us in terms of opportunities and customers as well as overall market segments.

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 I'd like to give a very special thanks to the Impinj team for the solid execution this past quarter and again to thank Eric for his incredible support over these past five years. Eric, thank you very much.

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