Endpoint IC Growth Outlook
Q: Are you seeing any slowdown in endpoint IC growth into Q3 and Q4?
A: Management is not seeing any pullback in customer demand and expects solid third-quarter product revenue growth extending to endpoint ICs. They have outperformed normal seasonality in Q1 and Q2, with endpoint IC volumes up 14% in Q1 and 21% in Q2. While they anticipate typical seasonality in Q4, they see broad strength and remain optimistic.

Margin Outlook
Q: What is the outlook for gross margins in Q3 and beyond?
A: They expect product gross margins to increase sequentially in Q3 but note they are currently below their targeted 53–54% range. This is due to a stronger mix of lower-margin endpoint IC revenue and a higher percentage of lower-margin older SKUs. Efforts to address these issues should mostly be completed before entering Q4.

Competition and NXP
Q: Does NXP's strong results impact your market share, and can they work around your IP?
A: Management feels good about their market position and demand for their products and platform. They can't comment on market share changes until the end of the year. While companies can design around IP with significant effort, Impinj has a large number of patents, making it challenging.

Food Vertical Opportunities
Q: How are early implementations and pilots in the food vertical progressing?
A: The food opportunity is moving more quickly than previously anticipated. They are seeing promising opportunities in pallet and case tagging for food freshness and are now witnessing item-level pilots in stores. While they can't provide a specific time frame for deployments, they are excited about the potential.

Wafer Supply and Inventory
Q: What is your longer-term visibility on wafer supply?
A: They are increasing wafer orders to stay ahead of growing demand and have good support from their foundry partner. They are better at forecasting and purchasing ahead. Currently, they target carrying 180 days of forward inventory on the balance sheet, which provides insulation from semiconductor cycles.

Systems Business Outlook
Q: What's the outlook for the systems business into Q3? Is there a pickup?
A: They expect systems revenue to increase quarter-over-quarter in Q3. While reader IC revenue will be modestly lower due to winding down prior-generation ICs, they anticipate all other systems product lines to grow sequentially. They are encouraged by the traction they're seeing and hope the recent low point is behind them.

Response to Distributor's Comments
Q: How are you growing faster than a large distributor who lowered growth expectations?
A: Management highlights their close relationships with leading enterprises, which are paying dividends in silicon volumes. They partner with eight large inlay suppliers and dozens of smaller ones, providing broad market reach. They note they don't always align with this distributor's public comments each quarter.

M800 Series Impact
Q: What are the commercial implications of the M800's performance improvements?
A: M800 volumes are currently small but growing sharply. The M800 achieves 20–25% greater read range and unlocks opportunities previously difficult to solve. Examples include improved readability of densely packed items in supply chains and solving readability challenges in food applications.

Second Logistics Customer Progress
Q: Can you provide an update on the second large North American logistics customer?
A: Their deployment is proceeding as anticipated, and they remain committed to a full rollout . Management sees them increasing their label consumption and identifies opportunities for reader ICs. For the time frame to reach full penetration, they refer to the customer's own public statements.

Self-Checkout Opportunities
Q: Have you seen increased interest in IC-based self-checkout?
A: They are seeing self-checkout opportunities in retail stores, which enhance customer satisfaction. Effective loss prevention at store exits is required, and they have effectively solved this problem. There's a pull from the retail market, and they focus on ensuring robust solutions for broader adoption.

Digital Passport in Europe
Q: Any updates on the digital passport initiative in Europe?
A: Impinj is working closely with the RAIN Alliance and European standards bodies to get RAIN approved as a data carrier for digital product passports. The initial target is consumer mobile devices to enable consumers to read tagged items, with significant push from the community and pull from enterprises.