Impinj (NASDAQ:PI) is seeing strong interest in radio frequency identification technology from the food industry, even as shipment volumes in the relatively new market remain modest, Chief Financial Officer Cary Baker said at a BMO event.
Baker said the company shipped 29 billion units last year, making it difficult for a new category to contribute meaningfully at first. Still, he described the pull from food as unprecedented in Impinj’s experience with new markets, with multiple large players in grocery, quick-service restaurants and food logistics moving forward.
Grocery deployments and self-checkout
Food retailers are starting where they control production, packaging and labeling, Baker said. Kroger is deploying RFID in its bakery department and has reached 1,500 stores, with a path to 2,300, he said. Walmart, meanwhile, is piloting the technology in bakery, protein and deli products that it packages and labels.
Impinj is also working with an unnamed grocer on an RFID-based self-checkout concept. Baker said the company has demonstrated the technology in a lab and is planning a single-store pilot.
The grocer is initially focused on tagging products at their source, beginning with higher-value goods such as alcohol, proteins, olive oil and specialty items. Baker said that approach could support a loss-identification system while the grocer expands tagging ahead of a self-checkout deployment.
Licensing and software plans
Baker discussed a 10-year intellectual-property licensing agreement with an unnamed competitor following infringement litigation. The competitor paid $45 million upfront and annual payments that began at $15 million and rise by a mid-single-digit percentage, he said.
The agreement allows the competitor to exit if it introduces a non-infringing integrated circuit and stops selling chips that use Impinj’s intellectual property. Baker said Impinj is in the third year of the agreement and expects with reasonable confidence to receive the 2027 payment. He said 2028 is the point at which an early exit could become possible, consistent with the company’s prior view.
On software, Baker said Impinj plans to develop more algorithms for uses such as loss prevention and self-checkout and sell them with monthly fees and ongoing service, rather than solely as part of a one-time reader sale. A more ambitious goal is to combine software and machine learning with readers and gateways to make RFID networks easier for customers’ internal IT teams to deploy and manage.
Logistics visibility and apparel demand
Baker said a custom chip developed with Impinj’s second-largest logistics customer is nearing full penetration, although some readers still need to be updated. The chip is based on Impinj’s M800 platform and took roughly 12 months to move from initial concept to a test-ready chip, he said.
The custom design also gives Impinj better visibility into inventory held by channel partners, Baker said. Previously, partner inventory buildups were difficult to distinguish from demand for the general-purpose M800 chip, contributing to forecasting missteps in the last two first quarters, he said.
In retail apparel, Baker said demand has shown relative strength after a prolonged period of softness as retailers reduced inventories. He said Impinj is now shipping closer to retail demand, although he does not yet see retailers rebuilding inventory.
Apparel is Impinj’s most mature market, with RFID penetration of about 40% by volume, Baker said. Many existing retail customers have not fully deployed the technology, leaving room for expansion, while smaller retailers continue to adopt it through Impinj’s partner ecosystem.
About Impinj (NASDAQ:PI)
Impinj, Inc. develops radio-frequency identification (RFID) technology used to identify and track items. Its platform is based on RAIN RFID, a wireless technology that enables businesses to collect item-level data without requiring direct line of sight. The company’s products include endpoint integrated circuits that are embedded in item tags, reader chips that capture tag data, and related systems and software. These technologies support applications such as inventory management, supply-chain visibility, asset tracking, and loss prevention across retail, logistics, healthcare, and other industries.
