Prepared remarks
Welcome to Impinj's Second Quarter 2026 Financial Results Conference Call. 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 second 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 second quarter financial results and third 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 Jefferies Semiconductor IT Hardware and Communications Technology Conference on August 25 in Chicago; and the Piper Sandler Growth Frontiers Conference on September 15 in Nashville. 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 second quarter results were strong with revenue, adjusted EBITDA and earnings per share setting new quarterly records. For the second consecutive quarter, endpoint IC bookings also hit an all-time high, driven by strong demand across retail apparel, general merchandise and supply chain and logistics. Looking to the third quarter, we see accelerating demand and strong product revenue growth. Starting with silicon. Second quarter endpoint IC product revenue exceeded our expectations with unit volumes setting a new quarterly record. In supply chain and logistics, the custom ASIC ramp at our second large North American supply chain and logistics end user is ahead of schedule with our inlay partners rapidly filling their supply chain and full conversion expected in the third quarter. In retail apparel and general merchandise, stronger-than-expected demand drove outsized revenue even as channel inventory declined. We believe market expansion, retailer pull-ins before temporary tariffs expired last week, and consumer resilience drove the demand strength. Looking forward, strong bookings suggest continued market expansion and demand on top of our inlay partners rebuilding their IC inventory back to normal levels. Reader IC revenue also beat our expectations, driven by strong enterprise demand. Looking to the third quarter, we expect reader ICs to be our fastest-growing product line. For both endpoint and reader ICs, we have sufficient wafers to support the demand with strong support from our foundry partner. Turning to food. A few weeks ago, another large U.S. grocer publicly cited their ongoing bakery pilot using RAIN to track in-store inventory and product expiration dates. Three of the five largest U.S. grocers have now announced pilots or deployments across bakery, deli or meats. I'll take a moment to give some color on the food opportunity. We are currently supporting four distinct types of food programs. First, store replenishment, led by quick-serve restaurants and focused on availability and freshness. Second, in-store inventory, led by supermarkets and focused on stocking and product expiration. Third, loss identification, also led by supermarkets and focused on flagging unscanned items at point of sale. And fourth, automated self-checkout, led by the large vertically integrated European grocer we've discussed previously. A few enterprises in the first and second categories have progressed to chain-wide rollouts, consuming a modest number of endpoint ICs relative to current RAIN industry volumes, but still small relative to the total opportunity. The third and fourth categories are still in proof of concept with encouraging results to date. Notably, the opportunity breadth and sheer number of large engaged enterprises, so early in the market cycle, is far larger and faster than anything I've seen in our industry's history. With all the excitement around food, I need to encourage you not to lose sight of the opportunities in supply chain and logistics and general merchandise markets. The former is poised to expand from shipments to e-commerce and third-party logistics. The latter continues its inexorable growth and expansion with many large categories such as OTC pharmaceuticals, cosmetics and health and beauty not yet deployed. Given their head start, both markets today are consuming significantly more endpoint ICs than food. Also, both offer significant solutions opportunities for us. Touching on those solutions, despite only modest second quarter reader and gateway shipments to our lighthouse enterprises, our solutions engagements with those enterprises continue advancing. We're focused on two enterprise pain points, replenishment and point of sale using our endpoint and reader ICs, readers, gateways and software to provide real-time event data around supply chain transitions and at front of store. And we are engaging partners to sell and deploy those solutions. We believe the event data our solutions deliver, for example, a 100% certain event that a store received an item, will dramatically improve AI models that analyze and automate enterprise operations. We're incredibly well positioned to lead and win in solutions using machine learning to find moving items and confined read zones, Gen2X to improve item readability, label production systems to ensure label quality and reliability, custom ASICs as needed and solutions engineering and sales to truly deliver the use case. Although we are still in the early days of solutions delivery, my focus is expanding our company from being primarily a component seller to also being a solution provider. I'm confident we can do so. And given our solutions demand, I have never been more excited about our future than I am today. In closing, this month marks our 10-year anniversary as a public company, and our timing couldn't be better. Our market opportunity is expanding rapidly with the growth rate in supply chain and logistics, general merchandise and food outpacing retail apparel, which is in mainstream adoption. We delivered a quarter with record revenue, adjusted EBITDA, earnings per share and endpoint IC volumes and look to another strong quarter ahead. And we have a stellar team, energized by the opportunities in front of us and driving forward with pace and conviction. As always, before I turn the call over to Cary for our financial review and third quarter outlook, I'd like to thank every member of the Impinj team for your tireless effort. I feel honored by my incredible good fortune to work with you.
Thank you, Chris, and good afternoon, everyone. Second quarter revenue was a record $108.4 million, up 46% sequentially from $74.3 million in first quarter 2026 and up 11% year-over-year from $97.9 million in second quarter 2025. Second quarter endpoint IC revenue was a record $96.4 million, up 53% sequentially from $63.2 million in first quarter 2026 and up 14% year-over-year from $84.6 million in second quarter 2025. Excluding licensing revenue, endpoint IC product revenue grew 26% sequentially and 16% year-over-year, significantly exceeding our expectations. Looking forward, we expect third quarter endpoint IC product revenue to increase sequentially, above the high end of typical seasonal growth. Second quarter systems revenue was $12 million, up 8% sequentially from $11 million in first quarter 2026 and down 10% year-over-year from $13.3 million in second quarter 2025. Systems revenue met expectations with reader IC strength offsetting label production systems weakness. Looking forward, we expect a strong sequential third quarter systems revenue increase. Second quarter gross margin was a record 60.9% compared with 52.4% in first quarter 2026 and 60.4% in second quarter 2025. The sequential increase was driven primarily by licensing revenue. The year-over-year increase was driven primarily by endpoint IC product mix, specifically a richer mix of M800, partially offset by lower systems revenue mix. Excluding licensing revenue, second quarter product gross margin was 53.6% compared with 52.6% in second quarter 2025. Looking forward, we expect third quarter product gross margin to increase sequentially. Total second quarter operating expense was $35.3 million compared with $35.5 million in first quarter 2026 and $31.5 million in second quarter 2025. Operating expense met expectations. Research and development expense was $20.2 million. Sales and marketing expense was $7.1 million. General and administrative expense was $8.1 million. Looking to the third quarter, we expect third quarter operating expense to increase sequentially. Second quarter adjusted EBITDA was a record $30.7 million compared with $3.4 million in first quarter 2026 and $27.6 million in second quarter 2025. Second quarter adjusted EBITDA margin was a record 28.3%. Excluding licensing revenue, adjusted EBITDA margin was 15%. Second quarter GAAP net income was $12.2 million. Second quarter non-GAAP net income was a record $27 million or $0.86 per share on a fully diluted basis. Turning to the balance sheet. We ended the second quarter with cash, cash equivalents and investments of $263.7 million compared with $235.2 million in first quarter 2026 and $260.5 million in second quarter 2025. Inventory totaled $91.5 million, up $5.2 million from the prior quarter. Second quarter capital expenditures totaled $2.4 million. Free cash flow was $29.2 million. Turning to our outlook. We expect third quarter revenue between $105.5 million and $108.5 million compared with $91.4 million product revenue in second quarter 2026, a quarter-over-quarter increase of 17% at the midpoint. We expect adjusted EBITDA between $20.7 million and $22.2 million. On the bottom line, we expect non-GAAP net income between $18.5 million and $20 million, reflecting non-GAAP fully diluted earnings per share between $0.59 and $0.63. In closing, I want to thank the Impinj team, our customers, our suppliers and you, our investors, especially those of you still holding IPO shares today at our 10-year listing anniversary for your ongoing support. I will now turn the call to the operator to open the question-and-answer session.
Questions and answers
The first question will come from Harsh Kumar with BMO Capital Markets.
Chris and the entire Impinj team, congratulations on two distinct things: your 10-year anniversary and the biggest quarter you put up, and also the biggest guide from what I believe, not including royalties. To that end, Chris, I wanted to ask you: the third quarter guide is quite a bit of a surprise to me. Could you provide some color on where you are seeing outsized strength relative to your previous expectations? And then I think you spent quite a bit of time on food and laying out how you will play it. I know that the largest retailer in the United States is implementing food tracking for deli and bakery. I was curious about how that is going because it wasn't announced by you, it was announced by one of your inlay partners. Are you concerned about tariffs at all? Or are you seeing anything? It doesn't seem like you're seeing anything, but I'd be curious if that's something in the back of your mind. Two questions: first on food and then the second one on tariffs.
Harsh, thank you for your kind words. To answer your question on where we're seeing strength: as I said in our prepared remarks, we're seeing pull-in in general merchandise, supply chain and logistics and food. There's also continued expansion in retail apparel. New programs are coming online as well as growth in existing programs. Although retail apparel is in mainstream adoption and its pace of growth has slowed, it's still contributing significant volume growth to us. On top of that, we saw share gains last year in the overall market, and those share gains are giving us momentum in 2026. Put all those pieces together—strong market demand, market pull for solutions, multiple verticals, our strength in the market—and they all contribute to a strong Q2 and a strong Q3. On the food space, we as a company tend to let our partners and customers speak for themselves. I devoted a significant portion of my script to the food opportunity because I'm truly excited about it. The number of large enterprises that are engaged is far greater than anything I've seen in our history. If you look at supply chain and logistics, it was led primarily by one enterprise. Some of the growth in retail apparel in earlier years was led by a very small number of enterprises. Here, we have three of the five largest U.S. grocers jumping in at the beginning. So the demand and pace are remarkable. We're working with those grocers, including the one you mentioned, supporting them as we can, but we'll let them speak for themselves about where their programs are. Regarding tariffs, we did see some pull-ahead in the second quarter before the prior tariffs expired a week ago, and we saw some channel inventory decline as our inlay and label partners filled into demand before those tariffs expired. That said, we still see strength in the market built on consumer resilience and ongoing category and market expansion. As Cary noted, we see very strong demand for our endpoint ICs. So yes, there was pull-ahead for tariffs, yes, continued market strength, and we expect our inlay and label partners to rebuild their inventories in the back half of the year.
The next question will come from Christopher Rolland with Susquehanna.
Mine is around logistics. Chris, you mentioned logistics on your main partner there. They had some very positive comments about RFID and an increased deployment there, basically going from a scanner world to RFID world, and perhaps most significantly, an expansion internationally as well. If you could talk about what that means for you and any other movement on other logistics potential engagements and customer opportunities.
We do our very best to support that customer; I consider them a partner. We work closely together, support each other, and we're very excited about what they're doing. They spoke a bit about AI and the opportunities there. One thing I'd like to emphasize is that we deliver what I call hard event data. For example, 100% certainty that a particular item arrived at a certain location at a certain time. When we read an item, we have certainty about the item, the time and the location. That kind of hard data is a boon to AI models because you don't have to create synthetic data or infer what's going on with the underlying data. The data are real, and the AI model's job is to optimize enterprise operations. That partner's ability to ingest real hard event data, optimize their operations and then take their learnings to their customers—who then become our customers—is where we want to take the company and deliver solutions to that partner's customers. That's why I talk about third-party logistics opportunities. It's a huge opportunity with them; we will support them and we never let them down. I'm incredibly excited about the future in supply chain and logistics. There are other companies in supply chain and logistics; we support them as well through partners. But the partner we work with is well ahead of everybody else.
Excellent. Additionally, you're great at looking ahead at trends. First, if you could talk about any new opportunities, end markets or opportunities you see on the horizon. Second, the digital product passport opportunity—can you talk about any progress we might have seen there?
On new opportunities beyond supply chain and logistics and food: note the categories I mentioned around retail general merchandise. The three categories I mentioned—OTC, pharmaceuticals, health and beauty, and cosmetics—are all very large and would benefit significantly from tagging for expiration, guarantees of product, availability on a shelf and stock accuracy. Those categories hold significant potential future volume for us. If you look across retail apparel, retail general merchandise (especially those three categories), supply chain and logistics and food, that's enough to propel the industry forward. On digital product passports (DPP): I've been pushing a vision for getting readers in the hands of consumers, and the DPP benefit is part of that but it's more than a DPP benefit. It's about giving consumers the ability to get information about items they own and recycling at end of life. Qualcomm announced embedding RAIN RFID reading in their mobile phone chipsets—initially for industrial devices, but porting to consumer devices is possible. Progress on the regulatory side around DPP and other developments could come together by the end of this decade. DPP helping to drive consumer use cases and consumers driving DPP use cases could converge. It's a little early to post results because both are in the early days, but in the out years they hold huge promise for our future.
The next question will come from Jim Ricchiuti with Needham & Company.
Chris, with respect to OTC, cosmetics and health and beauty: I'm not aware of a large general merchandise retailer moving forward with that phase of deployment. Do you anticipate this potentially being a driver in 2027? If you can't comment directly, can you give a sense that if a retailer like this moves forward, how would you think about scaling versus some of the other general merchandise categories in the past?
Let me be clear: I mentioned those categories because I see the opportunity there. Historically, the cosmetics use case helped get this industry started 25 years ago. There's been broad interest in those categories in the past, and they haven't fully deployed yet, which is why we see opportunity. We are doing work internally to enable those categories. That said, there's been no announcement that I'm aware of by any retailer that they're moving forward with those categories. It's just where I see the opportunity. In terms of size, those categories are smaller than food but still gigantic and they drive sales uplift for enterprises. Health and beauty is huge, cosmetics drove the industry's early days, and OTC could be a step toward prescription pharma. All are taggable; they take work but can be done. We're putting effort into helping them move forward.
Yes. I knew it would be tough to answer directly, but you provided good color on the market opportunity. I wanted to switch gears on the competitive environment. Your major competitor has introduced a new endpoint IC. Could this impact some of the share gains you've made in recent years? Also, a quick question to Cary: with respect to gross margin improvement in Q3 on the product side, how much of that is due to the full conversion of the ASIC ramp on the logistics side of the business?
On the gross margin side, Jim, it's really our continued ramp with the M800. Think of the custom ASIC as part of the M800 platform and contributing to the 300 basis points of gross margin accretion that the M800 will eventually deliver. In Q2, on a product gross margin basis, we saw gross margin increase by about 120 basis points sequentially. I expect a roughly similar increase sequentially in Q3, again on a product gross margin basis.
Jim, on the competitor: our key competitor highlighted strong demand for their products. We see strong demand as well, evidenced by our second quarter results and third quarter guide and propelled by our last year's share gains. Strong demand is driven by market growth. We feel good about our share position today. They have introduced a new product, but we have not seen it significantly in market yet. You know from our M800 ramp that introducing new products takes time because end customers need to qualify them and testing takes a while. We feel good about our share position and where we're driving forward. We have high-performing products in market that meet end customers' needs. We're driving forward with Gen2X to improve readability, machine learning for solutions, confined read zones and identify transitions, and we'll continue driving solutions to win our fair share of the market.
The next question will come from Scott Searle with ROTH Capital.
Congrats on the anniversary and the quarter. Chris, to follow up on your comments with Gen2X: significant performance in terms of throughput and readability. Could you extrapolate on market share potential and what you're seeing in terms of customer engagement? Gen2X has huge performance advantages when using endpoint ICs from Impinj. How is that impacting the share outlook when talking to existing and new customers? Also fold in the custom ASIC development: you gave an update on where that was with the pre-existing customer, but you referenced additional customers moving in that direction. How's that playing out?
On Gen2X: the vast majority of labels today are still read with handheld readers for inventory visibility. We have demonstrated a material benefit from Gen2X in handheld reading scenarios, especially in difficult-to-read categories like food, which gives us an edge. Partners like Zebra and Qualcomm are pushing forward with Gen2X because of its readability benefits. In the base market—handheld inventory counting—we see a benefit from Gen2X with our endpoint ICs, and you don't need 100% Impinj endpoint ICs to get that benefit. For fixed reading, which is the rapidly growing part of the market—transitions, point-of-sale, store exits—Gen2X has an outsized benefit because we've tailored Gen2X capabilities to enable the machine learning enhancements that make the solutions work. Those Gen2X enhancements are critical to our solutions efforts, and our two high-share enterprise end users in supply chain and logistics and retail apparel are both using Gen2X to enhance readability and enable their use cases. Going forward, we'll use Gen2X more to enable solutions we otherwise could not do. On custom ASICs: we've delivered one custom ASIC already. We don't have anything else to report right now on additional custom ASICs. We'll do custom ASICs as needed, but I use that term carefully because custom ASICs bring operations complexity. Where a custom ASIC is needed for an enterprise, we'll build it. Where base Gen2X suffices, we'll use that. We don't expect to push everything to custom ASICs because of the operations challenges, but we'll do them as needed.
If I could follow up on the food front: a lot of progress in North America and also in Europe, but we're in the pilot phase. Could you provide color as we look into 2027? Is the expectation that these pilots will convert to full deployments? Given the growth you're seeing and the unit opportunity within these pilot customers—three of the top five in North America and Europe—are we due for an inflection point in RAIN RFID ICs as we go into 2027 and 2028?
That's a hard question because we don't guide into 2027. For programs this size, there's a huge commitment by the end user to go forward. We have at least one enterprise that has deployed many hundreds of stores and continues with store rollout and moving to additional categories. We have the other grocers engaged. The pace of adoption and number of end users is unlike anything I've seen. Because we're generating positive results for enterprises, I expect rapid growth on a percentage basis. However, other categories—retail apparel, supply chain and logistics, and retail general merchandise—are far ahead in volumes, so it will take time for food volumes to cross over. In terms of excitement, I'm incredibly excited about food.
The next question will come from Troy Jensen with Cantor Fitzgerald.
Congrats. Chris, can you expand on your comments about becoming more of a solution provider? What do you have to do, and does this compete with some of your partners?
On partners: this opportunity is so big that, outside of our endpoint IC competitor, I view everyone else as a partner. There's no reason for us to compete with others in this space, including in solutions delivery, because the opportunities are so compelling. I mentioned food as an example. Loss identification at point of sale is another—one grocer said they lose $100 million a year from theft at point of sale, primarily proteins and alcohol. These are large opportunities that require fixed reading; handhelds can't fully solve them. We're developing solutions that include every layer of our platform plus a significant push on software for machine learning, device management and solutions management. Rather than serving up raw data, we want to serve up events while working closely with partners to deliver those solutions to enterprises. Impinj alone cannot deploy thousands of stores; we must partner. There are huge opportunities for us and partners, including ERP and WMS partners and other RAIN RFID partners. The opportunity is fixed-reading solutions to drive a new chapter beyond inventory accounting, and it's where I'm pushing the company.
Follow-up for Cary: on the inlay partners handling the IC transition with your logistics customer—do you have good visibility on that? Any risk of being surprised on channel inventory during that transition?
Good question, Troy. After missteps in the last couple of Q1s, we're very alert to this because those missteps centered around that second large supply chain and logistics customer. Both years had different reasons, but the core issue was our inability to see the channel inventory our partners held in support of that customer. Until this year, that customer used our general-purpose M800, which can go into apparel, general merchandise or food applications, making it difficult to understand how much inventory was held for supply chain versus other markets. Because this end customer typically does a share reallocation at year-end, we found ourselves early in the next year navigating channel inventory noise. With the transition to a custom IC, we have much better visibility. We know what we ship into the channel, what gets pulled from the channel, and therefore what remains. One thing we've learned is that the purchasing seasonality of our inlay partners supporting this customer is dislocated from the seasonality of the customer's package volume. Our peak season supporting this customer is Q2 into Q3 with a steeper decline in Q4 as the ecosystem prepares for the annual RFP process. We feel good that our visibility into this channel is much improved versus the prior two years, but we understand we have to prove it to you in Q1 of 2027.
The next question will come from Guy Hardwick with Barclays.
This is Nick Igneri on for Guy. You mentioned endpoint IC bookings reached another all-time high. Can you discuss the composition of those bookings by vertical and how much visibility they provide into Q4 and early 2027 demand?
We delivered record bookings in Q2 after posting record bookings in Q1. Several drivers underlie the booking strength. First, after a prolonged period of softness, we're seeing encouraging signs from retail apparel and general merchandise. There continues to be market expansion in both verticals and the consumer remains resilient. We also saw some pull-ins from retailers ahead of the July tariff reset. That reset wasn't large and the rates are not that different from the expiring rates. Second, in supply chain and logistics, the custom ASIC ramp at our second large North American retail supply chain and logistics customer is ahead of schedule. Our inlay partners are filling their channel and supply chain, and we expect full conversion at some point in the third quarter. Finally, some customers are booking into the fourth quarter, which is a little further out than our standard 6- to 8-week lead time. If I were to break it down, it's those three factors—in that order—driving booking strength.
Can you help quantify the retailer pull-ins? Was this a modest boost or a meaningful portion of the endpoint IC upside in the quarter? And what assumptions about pull-ins are embedded in Q3 guidance?
It was a small benefit to the quarter; that's why I listed it third. It's hard to quantify specifically, but retailers signaled it and partners in the ecosystem indicated it was happening. We don't think it was a meaningful driver of the growth.
This concludes our question-and-answer session. I would like to turn the conference back over to Chris Diorio, Co-Founder and CEO, for closing remarks.
Thank you, Nick. I'd like to thank everybody for joining the call today, and a special thanks for your ongoing support. Thank you very much. Goodbye.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.