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Welcome to the Impinj Third Quarter 2024 Financial Results Earnings Conference Call and Webcast. All participants will be in a 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 Mr. Andy Cobb, Vice President Strategic Finance. Please go ahead.

Thank you, Gary. Good afternoon, and thank you all for joining us to discuss Impinj's third quarter 2024 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 third quarter financial results, and fourth quarter outlook. We will then open the call for questions. Hussein Mecklai, Impinj's COO, will join us for the Q&A. 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. While 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 Baird 2024, Global Industrial Conference on November 13 in Chicago, and the UBS Global Technology Conference on December 4, in Scottsdale. We look-forward to connecting with many of you there. I will now turn the call over to Chris.

Thank you, Andy, and thank you all for joining the call. Our third quarter results were strong with revenue and profitability well above our guidance. Excluding last quarter, with this $15 million licensing revenue, third quarter revenue and adjusted EBITDA both set new records. Strength in supply-chain and logistics, steady growth in retail, general merchandise and continued secular growth in both apparel and long-tail applications, drove these strong financial results. As Cary will highlight, these results again demonstrate the leverage in our operating model. Starting with silicon, third quarter endpoint IC product revenue exceeded our expectations. Unit volumes set a new quarterly record, as parcel shippers and retailers prepared for the holiday season. And for the third consecutive quarter, M800 shipments more than doubled. Looking to the fourth quarter, we expect endpoint IC revenue, to decline modestly versus third quarter with typical seasonal trends, partially offset by market strength. We also expect continued M800 adoption as more M800-based inlays achieved market qualification. Turning to reader ICs, third quarter volumes exceeded our expectations, driven by stronger-than-anticipated demand for both Indy and E-family ICs. Looking to fourth quarter, project timing at the large supply-chain and logistics end user will push E-family revenue lower. Longer-term, as we wind-down our legacy Indy ICs, we see continued E-family adoption across the broad RAIN market. On solutions, we expect the current phase of the visionary European retailers ongoing rollout of our self-checkout and loss prevention solution to spike in the fourth quarter, driving strong fourth quarter gateway revenue, and growing endpoint IC volumes. At the large North American retailer, IC volumes continue ramping, driven by expanding general merchandise tagging. And we see the second large North American supply-chain and logistics end user increasing label consumption this year and next. These very public enterprise successes are driving additional Fortune 500 enterprises to us, both in existing markets like retail general or merchandise and new ones like perishable foods and with them endpoint IC volumes. Our enterprise account pipeline is much larger today than our current base. Expect us to continue investing in enterprise solutions, including software and cloud services that we believe are key to our long-term success. Touching now on the broader market, our conviction in food tagging continues, buoyed by multiple supply-chain and quick-serve restaurant rollouts as well as grocery pilots. While we are still in the early days, the endpoint IC opportunity is at least an order of magnitude larger than any of today's markets. In retail general merchandise, we continue seeing retailers piggyback on the pioneering rollout at the large North American retailer. And Qualcomm's statement about RAIN reading in mobile devices, galvanized expectations of RAIN as a digital product passport data carrier. It also piqued retailer interest in engaging consumers through their connected items. At the recent RAIN Alliance meeting in Florence, I highlighted one potential use-case, which is consumers crowdsourcing the location of items in our everyday world. Think Bluetooth trackers, no additional cost and with 10,000 times today's footprint. With overall RAIN penetration still less than 1% of the total connectable market, we remain laser-focused on winning the race, to connect everything. In closing, we delivered a very strong third quarter. Our solutions focus continues paying dividends and I am personally heartened by the consumer opportunity, which I've been touting for what feels like ages, finally seeming within reach. Looking ahead, we see continued secular endpoint IC growth, category expansion and burgeoning solutions opportunities. As we continue driving our bold vision, I remain confident in our market position, and energized by the opportunities ahead. Before I turn the call over to Cary for our financial review and fourth quarter outlook, I'd like to again thank every member of the Impinj for your tireless effort. As always, I feel honored by my incredible good fortune to work with you. Cary?

Thank you, Chris, and good afternoon, everyone. Third quarter revenue was $95.2 million, down 7% sequentially from $102.5 million in second quarter 2024, and up 46% year-over-year from $65 million in third quarter 2023. Third quarter endpoint IC revenue was $81 million, down 9% sequentially from $89.4 million in second quarter 2024 and up 67% year-over-year from $48.6 million in third quarter 2023. Excluding the $15 million second quarter licensing revenue, endpoint IC revenue grew 9% sequentially. Looking-forward, we expect fourth quarter endpoint IC revenue to decline, but on the favorable side of normal seasonality. Third quarter Systems revenue was $14.2 million, up 9% sequentially from $13.1 million in second quarter 2024, and down 13% year-over-year from $16.4 million in third quarter 2023. Systems revenue exceeded our expectations, driven by strength in both test and measurement and reader IC sales. Looking-forward, we expect fourth quarter Systems revenue to increase sequentially. Third quarter gross margin was 52.4%, compared with 58.2% in second quarter 2024, and 50.5% in third quarter 2023. The year-over-year increase was due primarily to less excess, and obsolescence charges in the current year. The sequential decrease was due primarily to second quarter licensing revenue. Excluding the licensing revenue, third quarter product gross margin increased 140 basis points sequentially, driven primarily by endpoint IC product mix, including fewer 200 millimeter wafers. Looking-forward, we expect fourth quarter gross margin to increase sequentially. Total third quarter operating expense was $32.5 million, compared with $32.8 million in second quarter 2024, and $32.6 million in third quarter 2023. Operating expense was below expectations driven by engineering program timing. Research and development expense was $17.9 million. Sales and marketing expense was $7.1 million. General and administrative expense, was $7.6 million. Looking-forward, we expect fourth quarter operating expense to increase sequentially. Third quarter adjusted EBITDA was $17.3 million, compared with $26.8 million in second quarter 2024 and $300,000 in third quarter 2023. Third quarter adjusted EBITDA margin was 18.2%. Third quarter GAAP net income was $200,000. Third quarter non-GAAP net income was $16.9 million or $0.56 per share on a fully-diluted basis. Turning to the balance sheet. We ended the third quarter with cash, cash equivalents and investments of $227.4 million, compared with $220.2 million in second quarter 2024, and $113.2 million in third quarter 2023. Inventory totaled $88.4 million, up $7.6 million from the prior quarter. Third quarter capital expenditures totaled $5.4 million, free-cash flow was $4.7 million. Before turning to our guidance, I want to highlight three items specific to our results and outlook. First, we expect fourth quarter gross margins to increase sequentially, driven by lower 200-millimeter endpoint IC volume, a larger mix of systems revenue, and endpoint IC replenishments into Asia-based authenticity pilots. Second, as we signaled last quarter, we increased our second half 2024 wafer purchases. We will move some of those wafers to inventory ahead of 2025 growth, and the remainder to fulfill stronger-than-anticipated second half 2024 demand. Finally, with the additional revenue and disciplined investment in third quarter, our adjusted EBITDA margins are approaching the long-term range we presented at our 2023 Investor Day. As our revenue scales, we anticipate incremental leverage and cash-flow generation. Turning to our outlook, we expect fourth quarter revenue between $91 million and $94 million, compared with $70.7 million in fourth-quarter 2023, a 31% increase at the midpoint. We expect adjusted EBITDA between $13.6 million and $15.1 million. On the bottom-line, we expect non-GAAP net income between $13.4 million and $14.9 million, reflecting non-GAAP fully-diluted earnings per share between $0.45 and $0.49. 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. Gary?

[Operator Instructions] Our first question is from Jim Ricchiuti with Needham & Company. Please go ahead.

Hi, thanks. Good afternoon. I wanted to go back to some of the commentary that you had about the systems business. I'm trying to reconcile some of the comments you made, you're talking I think about the current phase of your European - your retailer, this visionary retailer you talked about. And talking about, I think in the text of your transcript, you're talking about solutions spiking in Q4. Now normally, Q4 is a better quarter seasonally, right, in the systems business. So are you anticipating, a stronger systems quarter as a result of some of the factors I just mentioned?

Hi Jim, yes, this is Cary. Thanks for the question. And you've interpreted things correctly. So, we were expecting fourth quarter Systems revenue to increase sequentially due to a few factors. And you've highlighted a couple of them. First, and just as a matter of baseline, Q4 has historically been a seasonally stronger quarter for the systems business as our customers typically look to deploy capital ahead of the end of their fiscal years. And then specific to this fourth quarter, we're seeing the benefits from the visionary European retailers ongoing self-checkout and loss prevention roll-out. And that deployment will spike in terms of volume, and therefore revenue in Q4 before normalizing in Q1. And then finally, the Indy reader IC, end-of-life process has elongated a little bit. We anticipated last time shipments in the second quarter, though some of those have moved into Q3 and to Q4. And as a result, that's adding a little bit of a tailwind to Q4 Systems revenue as well.

Okay. Thanks Cary. A follow-up question, actually unrelated, your large inlay customer earlier today - was talking about the adoption that they're seeing RAIN, RFID in grocery stores, in particular, I think bakery being one of the early use cases. And I'm wondering and maybe, Chris is a question for you. If you could frame the opportunity, how that might look like for the industry? You've obviously been getting more positive about the opportunity in food, both in the grocery and QSR. I'm just wondering if you could talk a little bit to that.

Yes, Jim, thank you. So, I've been talking about food on the past couple earnings calls, if you recall I - it's a little bit slow and coming to the table here to talk about food, because it's such a big opportunity. I didn't - and I wanted to give us some time to see how things would play out. But what we're really seeing right now is exactly what you cited. We're seeing opportunities in quick-serve restaurants, in the food supply-chain and now in individual grocers. We feel very well-positioned in these opportunities. And although given the size of these enterprises, this overall size of the 2025 food volumes will not be as - will be just a start down this gigantic path. And we still think, there'll be some meaningful volumes in 2025. So we're excited by the food opportunity. We're excited by the announcement that you just saw, and there are more opportunities out there in the market today.

Okay. Thanks very much.

Thank you.

The next question is from Harsh Kumar with Piper Sandler. Please go ahead.

Yes. Hi guys. First of all, congratulations on very strong results to the whole team. I had two. Maybe the first one for Chris. Chris, you had quite a bit of out-performance in your September quarter results. I mean, I wanted to ask the question, if there was one thing that stood out, but it seems like it's very broad-based. However, if I was to ask you that question, if there was you think one driver that stands greater than the rest in driving the September quarter results, which one would that be?

Thanks Harsh for the question. One driver, you know, Harsh, I don't think I can give you one. And I'm going to apologize for that, but we're seeing supply-chain and logistics strength, steady growth in retail, general merchandise, secular growth in apparel and long-tail applications. And we're seeing our solutions efforts paying dividends, on kind of across the solutions that we're driving into. So, I feel that we as a company are pushing hard in several areas, the areas that I just cited. We see the market overall pushing hard in those areas. And we just are now really in the thick of broad-based industry adoption, not market adoption, not any one particular market. We're broad-based industry adoption. And if you look at the food announcement, and we're kind of we've been talking about food, that broad-based industry adoption is poised to continue. So I feel - I'd hope my prepared remarks conveyed my enthusiasm about the market overall and I really, I truly feel that enthusiasm. So I'm sorry, I can't point to one. I gave you four, but they're all meaningful.

Hi, thank you. This is very good color. I was trying to pin you down, but it seems like you are seeing broad adoption. I had a - follow-up, maybe a two-part question. I'm cheating here a little bit. You mentioned in the Logistics segment, your second customer will increase adoption in 2024, and then again in 2025. I was curious if you could give us some idea of where they are, how much are you penetrated into that customer? And then part two separate question is, I've gotten this from a client already. It seems like your logistics systems business will be down, but you'll see a spike in Europe from your visionary European customer. And it seems like the balance is positive, but I was curious if you could give us an interplay between those two, what is happening? What is happening with the logistics customer come down? Is it just the end-of-life of one thing versus the other or something else going on there?

Okay. Going back to the first question, Harsh, I can't really cite volumes at where they are. We obviously have a very good relationship with that customer, but I think you need to listen to their remarks. What I can say is, their execution has been very strong. I think I've used the word before, I mean this in the most positive way that they're a machine and they're executing like a machine. And I mean that very positively. Execution has been strong. They are not fully deployed. Obviously, they wouldn't be fully deployed, if I said things are going to pick-up next year, or increase next year. But if you look at their public - if they listen to their public statements, I think they give the best picture in terms of where they are overall. In terms of the go-forward endpoint IC volumes, we expect to increase next year. Our reader IC, there will be some project timing-related items, as I noted, we see reader ICs down in fourth quarter due to that project timing. But you shouldn't read anything really meaningful into that. It just - it truly is project timing and the projects they've got going on right now continue to move at pace. I wish I could give you more specific answers, but obviously, I can't say anything more specific at this point in time, but I think the customer speaks a lot for themselves.

Very helpful, Chris. Congratulations again. Thank you.

Thank you very much.

The next question is from Troy Jensen with Cantor Fitzgerald. Please go ahead.

Hi, gentlemen. I also want to say congrats on another great quarter here.

Thank you.

Maybe - you're very welcome. Maybe first question here for Chris. Could you just talk a little bit more about the Qualcomm partnership? What are the implications and the timing? And is this at all related to RFID getting into tablets and iPhones, watches and whatnot, but just an update there would be great?

Yes, Troy. So I might go a little bit long on this one, but I kind of want to set the stage a little bit. I'm going to start by saying that we Impinj and the overall RAIN industry, I'm very thankful to Qualcomm for them coming out with a public statement about RAIN in mobile devices, because that public statement has dramatically helped advanced the position of RAIN as a data carrier for the digital product passport in the EU. Combination of that statement and push from major retailers in Europe has essentially moved - the ball forward such that RAIN is no longer questioned within the standards bodies in Europe as whether it's going to be part of DPP, but now exactly what the implementations. As we project forward, in Qualcomm statement and some of the follow-up that's happened, particularly at the RAIN Alliance meeting in Florence. The first opportunities are going to be in enterprise mobile. Qualcomm declined to cite a timeline for consumer mobile other than to say it's following the enterprise mobile. I actually myself don't believe that it's going to be the implementation in the phones that's, going to be pacing us in consumer mobile. But it's going to be the readiness of the entire community in terms of item data resolution. In terms of the back-end services, and other stuff that has to all get prepared in advance of consumers, being able to engage with those connected items. So you shouldn't be thinking in months or quarters, it's going to take a bit longer than that to build-up the entire back-end. But I'm personally incredibly excited, because when was the last new significant radio incorporated into a mobile device? These are some minor introductions, but think back, when was the last big one. And I firmly think that RAIN is going to be a big one. We're going to have to get it right. We're to focus on getting it right, but I'm super excited. So I did my best to answer your question. I didn't give you exact date, but that's the best I can do.

No, that was great. Let me ask, you said the first implementation into enterprise mobile applications, would that specifically be under logistics? Would it be into the logistics, I guess, is my question?

Not necessarily. No, it's going to be - it will be broad-based, because those enterprise - mobile devices think mobile devices that employees carry around in-stores and they carry-on in supply-chain of logistics centers. They're basically, they're kind of the broad-base of enterprise mobile devices. But those chipsets that go into those enterprise devices are essentially the same chipsets that go into mobile phones. So that's why I said it's not - the implementation is not going to be - the phone implementation is not going to be what paces the adoption, it's going to be the readiness. And so, we all of us, not just Impinj, but the entire community needs to work on that readiness for consumers to connect to items.

Yes, awesome. I love the excitement. How about a follow-up then quick for Cary. I always love when you kind of give us a little bit more incremental gross margin guidance, and thoughts on kind of how much does it spike here in Q4, and is there any roll-through in the next year, or just any insight would be helpful.

Yes, sure, Troy. So if you unpack our guidance, you could reasonably get to a Q4 gross margin around 53%. Now understand that there's a couple of benefits in Q4 that we're calling out. First, with the strength that we already talked about in systems, we see a richer systems mix on the revenue profile. And then, we're also shipping some high-margin authenticity endpoint ICs into those Asia-based pilots. Which they're small quantity, but those are a little bit higher IC and therefore higher-margin products for us. So that provides a little bit of a tailwind into the fourth quarter gross margin. Then as you look over the long-term, clearly M800 plays a role in our gross margin accretion. And what I would say is that we remain confident in the gross margin targets that we outlined at our 2023 Investor Day.

Okay. Perfect. All right, guys. Keep up the amazing work.

Thank you, Troy.

Thanks Troy.

The next question is from Christopher Rolland with Susquehanna. Please go ahead.

Hi guys. Just following-up on that Qualcomm topic as well. Excuse me, are there any ways - excuse me to monetize the reader IC and the mobile device, or does Qualcomm provide that? Like just on the mobile device side, maybe you can talk about if there are any economics there, either IP or hardware or is this really just a driver of endpoints, and more general adoption for you guys?

Yes, Chris, thanks for the question. I'm pausing a little bit here. Without saying anything specific, I think - you really should think about it number one, as a driver of broad-based industry adoption. And number two, as a driver for differentiation and advancement in the market. The differentiation and advancement in the market is around authentication, privacy, sustainability, security. The differentiation in the market is cloud services that support not only those protection features, but also consumers to think about it as the opportunity for enterprises to engage consumers, through their connected items. And in that engagement, rely on the prior two things I just spoke to. So you think of it first and foremost as a broad endpoint IC opportunity, and perhaps equally important as a broad ecosystem play, and much less so as an opportunity for the ICs and the folks.

Understood. I was just wondering if you share in any economics in the reader at all?

Yes, I told you what the prices are. I can't answer that question directly. We haven't said anything publicly on that front. But I think it kind of gave you our thought process in terms of what we see as the prize. And the prize are the things that - by a huge amount. The prices are the things that I just highlighted, and those are our focus areas. It's the endpoint ICs and the ecosystem opportunity at large, which gets monetized by those endpoint ICs, cloud services software, just a bunch of stuff.

Excellent. And then for a second question, Chris. I think you talked about food and order of magnitude bigger than general merchandise - that's pretty incredible, if I understood that correctly. As these products are attached to lower and lower priced products, and of course, higher volumes with those. Is there any point at which these tags, which could be, call it $0.05 to $0.10 each could be reused used by your customers, or do you fully expect them to be disposable? Thanks.

Yes. So a couple of points there, Chris. Number one, I think you should be thinking about lower price points even straight out the gate. It's not $0.05 to $0.10, its well under that. And number two, you should be thinking about the - we've spoken a lot about the elasticity of demand, and that is the label price point comes down. It drives new opportunities and you should view the food opportunity as getting to the point where we can hit the price points needed by the food market to actually tag individual everyday items. And number three, I don't see much, if any opportunity for reusable tags, food items, the packaging is disposable. In fact, it would be hard to even think of a scenario, where the FDA would allow reusing a tag, or any part of packaging associated with an item. So the price points of the additional labels that go on food items need such that, the tag itself can be discarded. The price point that I believe will allow gigantic industry adoption, is probably best set by METI in Japan a couple of years ago. They did an analysis and said basically, we can get down to about $0.015 incremental cost for the wireless digital identifier, it makes sense to tag every item in Japanese convenience stores. And the average selling price for those items was between $1 and $1.50. So that will kind of kind of give you a benchmark of where we need to get to in order for broad - I mean super broad adoption to happen.

That's great. That's a great piece of data. Thanks, Chris. Appreciate guys.

Okay. Thank you. Thank you. Thank you.

The next question is from Guy Hardwick with Freedom Capital Markets. Please go ahead.

Hi, good afternoon.

Good afternoon.

Congratulations on the results, tremendous.

Thank you.

So could you update us on the M800 certification? How many more inlay partners have been certified, and maybe you can give us some a bit of color around that, and the sort of continued ramp of the M800 chip, please?

Hi guys. This is Hussein I'll feel that question. Thank you for the question. So far, we've heard that two of our major inlay partners have gotten certification for the M800, are in the process of designing multiple inlays and multiple products, to service their enterprises. And we believe that behind them, there are additional major customers that are on the verge of getting their certification. We expect to see - in general, we're seeing the loud jam break and we're expecting to see a multiple customers coming out fairly soon with products space. So right now, the M800 ramp is looking very promising. It's going as we had expected and hoped. It's a healthy ramp and it looks like customers are pleased with the product, and they're getting their certifications to be able to launch it in the market.

Okay. And just as a follow-up on the systems, you've guided to sequential growth in Systems revenue. Is there a percentage kind of number you can put behind that for us?

And maybe the way I would - this is Cary, Guy. Maybe the way I would think about it, is we do look at our guiding context of endpoint ICs and systems. So we have guided endpoint ICs to be down sequentially based on normal seasonality. And the reason we have down seasonality in Q4, is we ship in front of the holiday season for both retailers and logistics providers. Normal seasonality in Q4 for endpoint ICs is down 5% to 10%, and I signal that we'd be on the more favorable side of that. So if you use that as an anchor point and our overall guide, you can back into where we think our systems business is.

Thank you.

The next question is from Scott Searle with ROTH Capital. Please go ahead.

Hi, good afternoon. Congrats on the quarter and thanks for taking the questions. Hi, Chris, just a quick clarification first-off on DPP. I just want to make sure I heard this correctly. It sounds like there's been a lot of advancements since the original RAIN Alliance blog post and momentum with Qualcomm. But is RAIN certified at the current time and/or do you still expect it to be a multimodal technology in terms of DPP implementation? And then maybe Cary, seasonality into the March quarter. I know it's a little bit early, but historically it's in recent years, it's kind of been all over the place. So I was wondering if you could remind us about how things are starting to shape up at this point in time. And if pricing discounts, right, we used to - we typically had the annual price decline kick-in the March quarter. Is that something that's coming back into play in 2025?

Yes. So thanks, Scott, and I'll take the first question. So RAIN is not yet an approved data carrier for DPP, but that doesn't really say anything. Because nothing is an approved data carrier for DPP, because the standards aren't done yet. So that - what's happened now is the dialog has changed. Previously, the dialogue was, barcodes and QR codes couldn't be an approved data carrier. NFC could be an approved data carrier, but RAIN is this new thing - it's how are consumers going to get access to information with Qualcomm statement. And a major push from significant enterprise end users, not just as I said in the retail space before, but it goes beyond the retail space. It includes automotive and tires and others significant push. The dialogue has fundamentally changed. It's nominal really no longer about whether RAIN is going to be an approved data carrier, but how we get the standards done and everything approved. So you should expect multimodal approvals. Given the strength of the end user commitments that they signaled in those standards meetings in Europe, and if you want me to place my bet, and of course, I'm biased. But if you want me to place my bet, RAIN will be the carrier, everybody goes - the data carrier, everybody goes forward with, because it's already in the supply-chain it will extend it to consumers and the opportunity is huge. That doesn't mean the other stuff is going to get locked-out, but I think we've moved from a question mark to being in a poll position.

Okay, Scott. And then, I can take the second part of your question. So from an endpoint IC pricing negotiation, those conversations are just now getting underway. So stay-tuned. We'll keep you apprised of that. To your question regarding Q1 seasonality, you're right, it's been all over the place. I would say, historically, we saw seasonality being flat to slightly down. More recently, we've seen it as flat to slightly up. So we kind of think of it right now as flattish for endpoint ICs. I'm speaking specifically to endpoint ICs here. And I think that's why I'd leave it. Our philosophy, we guide one quarter at a time, and then we go out and execute against that.

Got you. Very helpful. And maybe we could just quickly on the Systems front, that's a lead indicator. I know there's, it seems like there's a lot of activity in the pipeline, but I'm wondering if you could help us understand either pilots, or other activity to be that lead indicator as we get into 2025. You start to talk about foodservice, it sounds like other big-box guys are being pulled in by the conditioning of the Walmart supply-chain. I'm wondering if you could just leave us, a few more breadcrumbs in terms of how that is shaping up, as we go into 2025? Thank you.

Okay. I'm going to start, Cary and Hussein, feel free to jump-in. So Scott, we're putting a very significant effort into solutions. And the systems that enable those solutions, including our fixed readers, our reader ICs and software and cloud services. We typically don't cite anything publicly until the end-customers themselves says something publicly. But as I noted in my prepared remarks, our pipeline is fairly large. Our pipeline is additional Fortune 500 and Fortune 100 enterprise who are coming to - enterprises who are coming to us with unsolved or unmet business needs. Those business needs can be around inventory, parcel sortation, dock doors, food, just many, many use cases. I can't give you a number, we didn't site a number. I can't tell you how soon we're going to be able to go public. What I can say is that given the size of those enterprises, adoption doesn't happen overnight. But given the enthusiasm I'm conveying, I feel really good about the solution space. And I'll say one more thing, and then I'll see if the other gentleman want to add anything in. I've said multiple times over the past years that in our industry, really what it takes for an industry to move forward, is to have one giant end-user take the leap. So, we had in the early days, in retail apparel, that's how we got off the ground with Decathlon, Marks & Spencer and Macy's. In later years, the second large North American supply-chain and logistics sending service pulling supply-chain and logistics across the line. The large North - the large North American enterprise that's for general merchandise is pulling that forward. And now we've got a very large grocer - very, very large grocer stepping in. And that's my experience. It takes one, one big one to galvanize an industry moving. So I am incredibly excited about the solutions opportunities in front of us today and just stay tuned.

Yes. And Scott, this is Cary. To your question on System seasonality, it is a little more variable just given project timing. But generally what we see is Q4, is the strongest for the reasons I mentioned previously, and then Q1 is down in the 10% to 20% range.

Hi, thanks so much, guys, and congrats on the quarter.

Thank you.

Thank you.

The next question is from Mark Lipacis with Evercore. Please go ahead.

Hi, thanks for taking my question. Chris, when you mentioned earlier in the script, and I forgot the exact language you used that other retailers are piggying back - piggybacking on the large retailer. Can you just give us a sense of what that means? Maybe talk about the design cycle to win a big program, like what are the steps? And does this mean that you got a bunch of companies on the sidelines just watching and doing check-ins or they start to do working on designing their systems, or business processes with you? If you could provide maybe color on that or the design cycle, and where some of these guys are, that I think that'd be helpful? Thank you.

Yes. Thanks, Mark, and I'm happy to. It's actually fairly simple. So at least for retail store inventory, inventory is driven by handheld accounting. And the store employee carries a handheld around. They can read 100 items per second or even faster and they do quick inventory in the stores. Maybe let's call it twice a week. And so, the difference between retail apparel and retail general and merchandise is just - somebody over to the general merchandise category. What's difficult or what has historically been difficult is getting the tags on the items, because it wasn't the infrastructure to put tags on this whole gigantic range of items, everything from stationary to toys, to car batteries and all these things. And so that's where the real work effort is. How do you put a tag on a car battery? How do you put it on a small stationary item, without degrading the look of the stationary item. Having put it on a box, like think of a box that there're toys in, but there's no other stickers on the box? The large North American retailer has cracked a lot of those nuts and the tags are going on items today. So what we're seeing now is other general merchandise retailers, basically as they place RFQs for products in the coming year, they're just saying the products need to come tagged, and it's nothing more than that. They're just placing RFQs, send this category of products with tags on. And then they go and do the inventory, and expand the inventory in their stores. So that piggybacking is actually a very fast piggyback. Does that help or is there - did I answer it long enough?

Yes. And if I may just have a follow-up on that, because I think it's very helpful. So they place RFQs to their suppliers that the products need to be tagged. But it seems like there's also a process of making the decision, to flip the switch and what does that involve? I mean, I imagine that they need to redesign business processes, and that takes some kind of effort also. So if you could just help us understand how that next step plays out? Thank you.

Yes. So think about it this way. If you've got a - if you've got an enterprise that sells to people and customers and they are ready using tagged apparel items, so they already have the business processes in place. But I just say, okay, we were doing first apparel, then we moved to footwear and we just added categories. And now we're adding this other category and this other category, and this other category. So flipping the switch, it's not instantaneous, but it's way faster than anything - than kind of opening or creating a whole new market or something like that, because they already know the processes for apparel and footwear. So they just add some additional categories there. And they already have the employees in the store, the employees with handhelds in the stores. So essentially the ability to leverage those tags is already built out. And so, it is a quick process to add additional items if you're already using tags on apparel and footwear.

Got you. All right. That's very helpful. Thank you.

Okay. Thank you, Mark.

[Operator Instructions] The next question is a follow-up from Harsh Kumar with Piper Sandler. Please go ahead.

Hi, guys. Thanks for letting me ask a follow-up. Chris and Cary, I did want to ask about you mentioned that you had - you will have some authentication-type opportunity come through for you in the fourth quarter related to Asia. Could you just talk about, is this the start of something big that you've been talking about last year, or you think this is just one-time in nature? How should we look at this opportunity?

So Harsh, we've had this Asia opportunity for a while and what we're seeing now is some replenishments into that opportunity. And so, we're happy to see those replenishments. I will say two things are about our authentication opportunity. Number one, is I believe it's critically important going forward to not just us, but to the market overall. In fact, I'd say it's essential, as you think about RAIN going into consumer mobile devices. Today tags just expose a number, and they send plain text and there's no protection around it. I don't know of any other wireless technology in a mobile device that doesn't have protection, and security built into it. So I firmly believe that the authentication is absolutely necessary, and that's why we introduced our product line and our cloud service associated with it. That said, the pace of adoption has been slower than we had originally hoped for, and we will be redoubling our efforts going forward to ramp authentication, and additional security efforts to drive adoption. So that we are ready for that consumer opportunity from a consumer perspective as it comes.

Understood. Thank you so much.

Thank you, Harsh.

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, Gary. I'd like to thank all of you for joining our call today. And thank you for your ongoing support. Bye-bye.