Impinj, Inc. (PI) Q1 2026 Earnings Report, Transcript and Summary

Welcome to Impinj's First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Andy Cobb, Vice President, Corporate Finance and Investor Relations. Please go ahead.

Thank you, Nick. Good afternoon, and thank you all for joining us to discuss Impinj's first quarter 2026 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 first quarter financial results and second quarter outlook. We will then open the call for questions. You can find management's prepared remarks plus trended financial data on the company's Investor Relations website. We will make statements in this call about financial performance and future expectations that are based on our outlook as of today. Any such statements are forward-looking under the Private Securities Litigation Reform Act of 1995, whereas we believe we have a reasonable basis for making these forward-looking statements, our actual results could differ materially because any such statements are subject to risks and uncertainties. We describe these risks and uncertainties in the annual and quarterly reports we file with the SEC. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, except as required by law. On today's call, all financial metrics, except for revenue or where we explicitly state otherwise, are non-GAAP. All balance sheet and cash flow metrics, except for free cash flow are GAAP. Please refer to our earnings release for a reconciliation of non-GAAP financial metrics to the most comparable GAAP metrics. Before turning to our results and outlook, note that we will participate in the 2026 Evercore TMT Global Conference on June 2 in San Francisco. We look forward to connecting with many of you this quarter. I will now turn the call over to Chris.

Thank you, Andy, and thank you all for joining the call. Our first quarter results were solid with revenue and adjusted EBITDA exceeding the top end of our guide range. Endpoint IC bookings hit an all-time record, driven by the custom ASIC ramp at our second large North American supply chain and logistics end user, our market-leading share position, retailer rebuys and customers booking beyond our standard lead times amid lengthening competitor lead times. Looking further out, we're approaching second half 2026 prudently, hedging against multiple possible macro scenarios. Starting with endpoint ICs, the RAIN Alliance has now released the 2025 industry volumes and our market share grew 1,700 basis points over 2024. That share gain is a springboard for strong second quarter demand. We believe we can meet that demand in the multiple scenarios we are modeling. Looking forward, we are focused on using Gen2X and enterprise solutions to spur preference for our endpoint ICs and grow our share further. First quarter inlay partner inventory declined sequentially as expected. So we entered the second quarter with healthy channel inventory and clear air to execute our strategy. Turning to our opportunities. In supply chain and logistics, we shipped meaningful volumes of the custom ASIC in the first quarter and expect those volumes to more than double in the second with the end user on track to fully convert to that ASIC before year-end. That ASIC opens the door for us to migrate upstream to our customers' customers, delivering ICs and solutions software that improve item visibility and traceability at a double-digit number of accounts. In retail apparel, we expect endpoint IC demand to increase in the second quarter. Multiple new end users are speaking openly about RAIN adoption, including a large European brand with whom we are closely engaged. And we are proving the benefits of Gen2X in retail, for example, by using it to dramatically improve item readability at a large Asia-based lifestyle brand and unlock a significant share shift opportunity. In general merchandise, we're focused on cosmetics, personal care and health with the goal of unlocking significant incremental endpoint IC opportunities and again, demonstrating the benefits of Gen2X. Food volumes are growing modestly as expected with the bakery rollout on track to double the number of deployed stores this year. Also in food, we and our partners beat the self-checkout readability targets set by the European grocer to progress to a store pilot. Although still early, full store grocery self-checkout enabled by our endpoint ICs and software is a massive opportunity. Overall, we are making strong progress advancing supply chain and logistics, general merchandise and food to fill in behind retail apparel, which is now in mainstream adoption. On the development front, we're growing our software and solutions teams to help solve end-to-end enterprise systems problems. We upgraded the processor and memory in our flagship reader to better support machine learning at the edge, helping us address those enterprise systems problems. And because the solutions almost invariably need Gen2X, we drive preference for our endpoint ICs at the same time. We also continue advancing Gen2X, for example, with a forthcoming update to our reader ICs and readers that improve M800 tag read range by up to 25%. In closing, we have an enviable market position, endless opportunities in front of us, good product supply and a strong wind at our backs. As we continue driving our bold vision, I remain confident in our market position and energized by the opportunities ahead. But faced with today's unpredictable macro, we're approaching the second half prudently even as we pursue market share, solutions successes and growth. As always, before I turn the call over to Cary for our financial review and second quarter outlook, I'd like to again thank every member of the Impinj team for your tireless effort. I feel honored by my incredible good fortune to work with you. Cary?

Thank you, Chris, and good afternoon, everyone. First quarter revenue was $74.3 million, down 20% sequentially from $92.8 million in fourth quarter 2025 and flat year-over-year from $74.3 million in first quarter 2025. First quarter endpoint IC revenue was $63.2 million, down 16% sequentially from $75.2 million in fourth quarter 2025 and up 3% year-over-year from $61.2 million in first quarter 2025. Endpoint IC revenue exceeded our expectations, driven by turns orders. Looking forward, we expect second quarter endpoint IC product revenue to increase sequentially on the favorable side of normal seasonality. First quarter systems revenue was $11 million, down 37% sequentially from $17.7 million in fourth quarter 2025 and down 15% year-over-year from $13.1 million in first quarter 2025. Systems revenue fell short of our expectations due primarily to the timing of Lighthouse enterprise CapEx spend. Looking forward, we expect second quarter systems revenue to increase sequentially. First quarter gross margin was 52.4% compared with 54.5% in fourth quarter 2025, and 52.7% in first quarter 2025. The sequential decline was driven primarily by higher indirect costs, annual endpoint IC price declines and revenue mix. The year-over-year decline was driven primarily by higher indirect costs and revenue mix, partially offset by the continued M800 ramp. Looking forward, we expect second quarter product gross margin to increase sequentially. Total first quarter operating expense was $35.5 million compared with $34.2 million in fourth quarter 2025 and $32.6 million in first quarter 2025. Operating expense was below our expectations, driven primarily by good fiscal discipline and timing of spend. Research and development expense was $20.4 million. Sales and marketing expense was $7.3 million. General and administrative expense was $7.8 million. Looking to second quarter, we expect similar operating expense to first quarter. First quarter adjusted EBITDA was $3.4 million compared with $16.4 million in fourth quarter 2025 and $6.5 million in first quarter 2025. First quarter adjusted EBITDA margin was 4.5%. First quarter GAAP net loss was $25.3 million. First quarter non-GAAP net income was $4.4 million or $0.14 per share on a fully diluted basis. Turning to the balance sheet. We ended the first quarter with cash, cash equivalents and investments of $235.2 million compared with $279.1 million in fourth quarter 2025 and $232.5 million in first quarter 2025. Inventory totaled $86.3 million, up $1.3 million from the prior quarter. First quarter capital expenditures totaled $1.7 million. Free cash flow was $2.2 million. Before turning to our guidance, I want to highlight a few items specific to our results and outlook. First, in March, we opportunistically repurchased $40.2 million aggregate principal of our 1.125% convertible notes due May 2027 using cash on hand. This repurchase highlights our commitment to minimize dilution, in this case, by roughly 400,000 shares as we manage our convertible debt. Second, our indirect cost of goods sold increased in the first quarter, driven by a short-term endpoint IC production issue that reduced our back-end capacity utilization. That issue is fixed and behind us. Third, as Chris highlighted, our inlay partners exited first quarter with healthy endpoint IC channel inventory. In second quarter, we anticipate strong sequential endpoint IC product revenue growth, driven primarily by underlying demand and to a lesser extent, by no channel inventory burn down. Turning to our outlook. We expect second quarter revenue between $103 million and $106 million compared with revenue of $97.9 million in second quarter 2025, a year-over-year increase of 7% at the midpoint. We expect adjusted EBITDA between $27.8 million and $29.3 million. On the bottom line, we expect non-GAAP net income between $24.6 million and $26.1 million, reflecting non-GAAP fully diluted earnings per share between $0.77 and $0.82. In closing, I want to thank the Impinj team, our customers, our suppliers and you, our investors, for your ongoing support. I will now turn the call to the operator to open the question-and-answer session. Nick?

[Operator Instructions] And the first question will come from Timothy Arcuri with UBS.

This is Natalia Winkler for Timothy here. So first one was on the record bookings. Congratulations on that. Just wanted to understand if that kind of offers you guys incrementally more visibility into September quarter. And I think specifically, you're calling out having a little bit more of a conservative stance in the second half. So how should we kind of think about the visibility that you guys have?

Yes. Natalia, this is Cary. Thanks for the question. I'll take it first. There are a variety of factors that drove our strong Q1 bookings. First, our ecosystem is aggressively ramping, the custom ASIC to support our North American supply chain and logistics customer. And second, we're beginning to see retail rebuys after a prolonged period of destocking. Within those 2 trends, we did see inlay partner request times move from the lower end of our standard to the higher end of our standard lead times. And then finally, to a lesser extent, we saw some customers book beyond our standard lead times, likely in response to lengthening lead times from our competitor. At this point, we believe that the orders match the demand. And in fact, our 2Q bookings are off to a good start, and they're right within our standard lead times.

And I guess a follow-up, Cary, probably to you as well on the gross margin. It sounds like in March quarter, there were a few factors affecting -- there's the onetime back-end capacity issue and mix. And then I think usually, you go through the annual kind of pricing negotiations in this quarter as well. Can you kind of help us maybe decipher how these factors are -- how they have transpired in the first quarter and how we should think about them in the second quarter?

Yes. I'll start first with the annual price negotiations. Those were largely complete entering the first quarter. There were a little bit -- a couple of laggards, but mostly complete entering the quarter. We didn't exactly size it other than to say it was within our normal expectations. Maybe a little bit on the aggressive side as we were driving pricing to support the food ramp that we expect to begin this year. On the capacity utilization issue, we had an issue with one of our production tools that drove that capacity underutilization. As I mentioned, that issue is now behind us, and we expect to have full production in Q2. If I were to size it, I would say that the underutilization charge was roughly 100 basis point impact to Q1. And we expect in the second quarter on a product basis, our gross margin to increase sequentially. Of course, in second quarter, recall, we had the $17 million license revenue. So that will drive an outsized gross margin increase. But if I strip that out and look at just the product, we expect a sequential increase in product gross margin.

The next question will come from James Ricchiuti with Needham & Company.

Cary, just a follow-up to that, is the improvement that you're anticipating in Q2 product gross margin, is that mainly that 100 basis points? Or are there some other factors that will drive additional improvement to product gross margins in Q2?

Yes. The 100 basis points is obviously sizable. So yes, that's driving a lot of it. But in addition, the M800 continues to ramp. That drives gross margin accretion. We're getting our lots of revenue scale back in Q2, which will drive leverage against our fixed operating costs. And we also expect higher systems revenue in the second quarter. All of those factors will contribute to the sequential increase in product gross margin.

And the 3 factors that you cited beyond the production issue, would you say that the total combined would be a bigger tailwind than just recapturing that 100 basis points?

Probably not, Jim. I think the 100 basis points will be the largest even when comparing the rest as a collective.

Okay. And just a quick follow-up just on OpEx. I'm wondering if -- how we might be thinking about OpEx in the second half, just given some of the puts and takes around demand and also some of the conservatism that you talked about just in light of the macro.

Yes. We expect our OpEx to follow normal seasonal patterns. So we'll see similar OpEx in the second quarter and then the back half steps up. That is a combination of us continuing to invest in our business, primarily in the engineering line and offset by the seasonal pressure -- upward pressure on OpEx that we see in the first half of the year.

The next question will come from Troy Jensen with Cantor Fitzgerald.

Congrats on just another great quarter and great results here. So Chris, I guess for you, I thought coming into the quarter, retail might have been at risk a little bit given the high gas prices, but you seem more bullish than ever on retail. So can you just talk a little bit? Is this -- obviously, it seems like it's expanding SKUs and new customers, but any more detail would be great.

Yes. So Troy, we do see some retail strength. We see retail rebuys, especially helped by the tariff clarity and essentially the tariff whipsaws are gone and there's more certainty in the markets associated with tariffs. We see new program growth at many accounts, Abercrombie & Fitch, Aritzia, Fabletics, Old Navy, just many others. And so when you combine those factors together, we feel good about the retail situation in the market. And on top of that retail growth, we feel good about what's falling in behind, which is supply chain and logistics, retail general merchandise and food. So I think those factors are contributing to our -- some of the strength we saw in the first quarter and the very strong bookings we saw in the first quarter leading into the second quarter. Obviously, macro uncertainties are staring us in the face behind that. And so we're being prudent and cautious as we look forward. But we feel good about 2026, absent that macro uncertainty and there's a big if associated with it. But if consumer demand holds up through that macro, we feel good about 2026 overall.

Yes. Clearly. All right. Maybe one quick follow-up too. Can we just dive into a little bit on the NXP royalty, just the longevity of that. Do you guys feel like their new chip has no longer violates your guys' IP? And if so, how long would it take them to try to like design out? And if designing out, is that an opportunity for you guys to get more share here? But any insight would be great.

So yes, Troy, there's a limited amount of information that we have right now because NXP's new IC is, of course, new. I'll just say that we don't know yet if they have designed out or not designed out our intellectual property. We do know, of course, that the older ICs, which are still in market, use our intellectual property because there were court rulings and juries decided that they did use our intellectual property. So NXP needs to either sunset those existing ICs or redesign them as well. We don't know the time frame for them doing so. We obviously got the payment this year. I can't speak to next year, but we're guardedly optimistic that we'll get another payment next year, and then we'll see what happens after that. Obviously, time will tell. And as we learn more and are able to report things out, we will.

And Troy, just to be clear, the payment that we received this year was $17 million, up from $16 million last year.

The next question will come from Blayne Curtis with Jefferies.

Ezra Weener on for Blayne. Just wanted to follow up on the European grocery opportunity. I know the current food opportunity, bakery moving into protein. This seems like it would be a little bit more all-encompassing. Can you talk about kind of the sizing of that opportunity and the time line? And then I have a follow-up after.

So yes, Ezra. So it is a very large opportunity. It is really for us, the first meaningful opportunity that is a full store, every item tagging and consumer self-checkout opportunity. To date, the testing has been all lab testing. European grocers set certain readability targets for them to make an internal decision to transition to a live store pilot. And not only did we and our partners meet those readability targets, but we exceeded them, and we're waiting for the decision for them to go forward with a store pilot. So we're excited about that opportunity. We continue to be -- we have a very close relationship with that grocer and looking forward to being able to continue to report positive results there. But to answer your question, very large, all items. They do control a lot of their own supply. So they're one of the grocers that would be an -- that are an ideal candidate for tagging all items because they can get the tags on because they have significant control over their own supply chain.

Got it. And then a follow-up question. You talked about with the ASIC opportunity moving upstream at a double-digit number of accounts. Can you talk a little bit about that process and what that looks like?

Yes. So our second large North American supply chain and logistics end user has done an amazing -- just an amazing job driving operational efficiencies across their organization using RAIN RFID. The custom IC is a further step down that path for them and also for us. Both, they and we see opportunities for them to use their prowess and their learnings, basically what they've done, what they've learned to help their customers in the same way. It's not just about package shipping. It's about driving operational efficiencies at their customers and leveraging their learnings to improve their customers' operations. So it's a big opportunity for them. It's also a big opportunity for us. And I guess the way I think you really should think about it is that end user that we've been working with for these many years is actually a partner for us. It is a replication partner that is now starting to pull us into other accounts. And they're a fantastic partner for us.

The next question will come from Christopher Rolland with Susquehanna.

My question is also on the competitive landscape and your competitors' new offering. They kind of described their situation in RFID as having channel issues in 2025 with their partners, but coming in 2026, clean in terms of that perspective and then great prospects for their new product with greater capabilities. I guess, would you describe their situation as similar to your own? And then if you could talk about the competitive prospects for their new product and where you think market share might move between you and them moving forward on these new capabilities?

Okay. Chris, that's quite a question. I think I could talk for maybe an hour on that one, but I'll do my best here. First, starting with our competitor's IC. I'm going to start in a slightly different spot. You probably noticed as have others that the RAIN Alliance endpoint IC numbers in 2025 were down. Part of that reason, of course, was due to retailer destocking and the impact of tariffs and other whipsaws that happened in the market. But we believe another part of it was due to excess channel inventory of our competitor ICs. So competitor ICs in the channel that needed to get burned down. So we believe that to be the case. I think your comments that there was some -- you didn't use the word burn down, but that there was some improvement in our overall channel position would tend to buoy our belief that that's what happened and was part of the reason for the decline. As we look forward, we had record first quarter endpoint IC bookings. Some of that strength undoubtedly spilled over to our competitor as well. The market is strong. We're doing well. We had strong bookings. They probably did too. As we look forward, they've got a new IC. It's early in the market. We haven't seen it out there much at all. Our competition for it is our existing M800, which is performing very well in the market. We also continue to improve that M800 with time and Gen2X. And Gen2X is kind of unique in that it doesn't just improve the endpoint IC, it improves the reader as well. On the last earnings call, I talked about improvements to reader sensitivity that extended a reader's hearing range by more than 40%. On this call, I talked about changes that improve a tag's ability to be powered and extend its range by up to 25%. And we've got further improvements in Gen2X in the wings. I truly -- and Gen2X is really optimized for enterprise solutions. So I truly believe that our product portfolio, our solutions emphasis, what we're doing in Enterprise Solutions and Gen2X will allow us to solve enterprise problems in a way that mix and match components just can't. So look for us to continue to drive into the market, focus on enterprise solutions and drive successes for us as a company.

Fantastic. And maybe coupled with that success, where are you planning to invest or reinvest? Do you just see many more inorganic or organic opportunities? Or do you think there could be some inorganic opportunities here to -- whether they're bolt-ons or adjacencies, something else to do in this market?

Yes. So I'll take that one also. So invest, we continue investing in our existing product lines and expect us to continue doing so. We've got a lot of improvements and changes and overall positive things we can make. Equally importantly, perhaps more important is the effort we're putting into enterprise solutions, making our products and the enterprise benefit from those products be seamless for the enterprise and driving partner replication of those solutions so we can expand the pace or both expand adoption and increase the pace of adoption. So in response to the last question, I talked about our second large North American supply chain and logistics end user as a partner. And we truly see them as a partner because with their prowess and know-how and our technology underpinning, I believe we can drive solutions out into the market broadly. In terms of other opportunities for us, inorganic opportunities, obviously, we keep our eyes open. And if an opportunity arises, we'll be looking.

The next question will come from Guy Hardwick with Barclays.

Just a quick fairly easy one for you, Chris. I mean you said you feel good about 2026. If I ask you to order, rank in order the factors which make you feel good about '26. What would you start with? And what are the other ones?

Well, I'm going to have to think about that one for a second, Guy. So I'm excited about a lot of things. Number one, I'd start with our opportunities around enterprise solutions. Us bringing ML to bear at the edge on the reader to confine read zones, to identify items that are transitioning, whether it's to a dock door, store exit, front store, back store, any of these transitions. ML is providing us some very significant benefits, and I believe will transform the industry and our ability to drive those solutions in the market and provide enterprise benefits, so that would be number one. Number two, after that would be Gen2X and what we're doing in Gen2X to enable those ML solutions, again, to spur enterprise adoption. We're going to see those -- that adoption happening in the areas that I mentioned already, supply chain and logistics. And I'll put that one first because that's where -- we believe we can first and best apply our ML techniques in Gen2X. And obviously, there's a lot of transitions and readability needs to be incredibly high for those use cases. You don't want to miss any package. So supply chain and logistics and us falling in behind our key end user there and helping them and us and their customers in the market. So I probably put that one number one. And then, of course, we have general merchandise and food, which are the other 2 that I mentioned. We are waiting on some of the key end users to choose what categories they'll be going forward with in the latter part of 2026 across general merchandise. We mentioned some categories, of course, health, cosmetics, beauty, and then there's obviously food there, food ramp and proteins and bakery. So all of those are out there. We're being a little bit prudent in terms of us picking and choosing simply because we're going to wait to see what the customer announces. But we do expect a growth in general merchandise and food this year, and we'll be pushing on both of them. So that's how I order them. I order them in basically the order in which I spoke to them rather than calling 1, 2 and 3, but that's how I'd see things. Secular growth in retail, of course, supply chain and logistics, enterprise solutions, huge opportunity and then food and general merchandise coming up behind.

And just as a follow-up, just after 5 consecutive months of double-digit declines in U.S. apparel imports, just wondering how you feel about the status of apparel inventories amongst your largest customers here in the U.S.?

We see apparel inventories picking up, both because they're incredibly lean right now. And you can listen to some of the retailers are actively talking about growing some inventories. So we see inventories picking up. And it's also the tariff side. Tariff certainty has contributed to increased orders.

The next question will come from Scott Searle with ROTH Capital.

Great job on the quarter and the outlook. Chris, you've referenced a couple of times concern from a macro standpoint. I wonder if you could flesh that out a little bit. Are you seeing any of that in terms of order patterns from your customer base? And then as we look into the second half of this year, and you kind of answered this indirectly in a couple of earlier questions. But should we be expecting normal seasonality, all things equal? And what are you baking in, in terms of your expectations for a large general merchandise customer moving into the next phase of development and food? Given yesterday's comments from Avery Dennison, it sounds like they're expecting those to move pretty aggressively in the second half. I'm wondering if you could kind of gauge the range of outcomes of what you guys are building into your baseline expectations.

Okay. I'm going to try and take those questions. There's a lot of questions in there, and I'm going to try and take them, but I'm going to tag team with Cary, and you'll catch me on the parts that I miss. So to start with, no, we are not seeing anything currently from the macro perspective. However, we look at the clouds on the horizon, and we want to be prudent. Our hope and expectation is that consumer demand will hold. And if it does, as I said, we expect 2026 to be a good year. But I can't predict the future and the things that are going on right now are way out of our control. And so that's where our prudence comes in. So we're just being careful, and we're modeling a bunch of different scenarios. But as of right now, do we see anything, any pullbacks or any impact right now? Nothing of consequence. Second, in the categories, let me speak to food a little bit because, yes, Avery Dennison did make those comments the other day and -- or yesterday. And we obviously know of those -- or know of that account and specifically the accounts that they're talking about and are in there and trying to drive the use case in those accounts. Our preference here is to wait for the enterprise end user to make a statement in terms of what they're going to do. And that's just a preference, just as the way they are. And I'm not saying anything negative there, just we're going to wait and see until they make an announcement and then we'll speak a bit more about it. So don't view our reticence to speak a lot as anything negative on the opportunity there. It is a real opportunity, and we're excited about it. We only guide one quarter at a time. Customer hasn't made an announcement yet. So when they make an announcement, we'll speak more about it. And that also covers the general merchandise categories. I alluded to some of the general merchandise categories, as I spoke just a minute ago about. We see significant opportunities in those categories, health, beauty, cosmetics, personal care, and we're putting effort into those categories to make them go. When the customer makes an announcement, we'll be as excited as you are. Or maybe the other -- we'll be more excited than you are. I'll put it that way. So what did I miss? Cary, what did I miss?

You did great.

No, that was perfect, Chris. And I'll hopefully make this the follow-up quick. But in terms of the European food opportunity, given the magnitude of the items there, you have to push down across the entire supply chain and vendor supply chain. Is that something that requires DPP? And maybe just some quick updated thoughts on that and timing?

The first answer -- the answer to the first question is it is not -- it doesn't really require DPP. DPP is rolling out. The category that impacts us in terms of the DPP rollout is textiles, and this is a grocery opportunity. The other stuff is batteries and tires and stuff, which is kind of not really relevant. The difference between this grocer and many others is that they control the significant majority of their own supply chain. So if they want to get tagging, they can do it themselves. Of course, they sell some categories as well, but they're in a very good position in order to drive the tagging when they say go. So that's why we see a significant opportunity there. In terms of the DPP overall, the delegated act for textiles will come into force in 2027. There'll be a grace period currently estimated to be about 18 months. We'll have to wait and see how that goes. To my best estimate, I'd say DPP will be meaningful near the end of this decade. We are participating in many of those DPP efforts. RAIN RFID is now approved as a data carrier for DPP. We are doing some work on the endpoint IC side on the beta side on our ICs to support DPP. And so expect us to be a key part of it, but at a measured pace because the actual implementation is still several years away.

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

Thank you, Nick, and I'd like to thank you all for joining the call today. Thank you very much for your ongoing support. Bye-bye.

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