908 Devices Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 13, 2025

Key Takeaways

  • 908 Devices completed its strategic transformation by divesting its biopharma desktop portfolio for $70 million, bolstering its cash position and lowering operating costs to concentrate on high-growth handheld chemical detection.
  • Revenue from continuing operations reached $11.8 million in Q1 2025, up 59% year-over-year, with recurring revenue rising 54% to represent 37% of total revenue, and adjusted EBITDA loss improving nearly 50% versus Q1 2024.
  • The company is leveraging secular tailwinds—national security funding boosts, the opioid interdiction agenda (ONDCP priorities) and international preparedness initiatives (EU Rescue U)—to drive demand for its mass spec and FTIR handheld devices.
  • Key commercial wins include a $2 million order from the Texas Department of Public Safety for MX908 devices and follow-on deployments by Washington Metro Area Transit Authority, Homeland Security Investigations, Finland’s Rescue U program and the Czech Republic Fire Brigade.
  • Management targets positive adjusted EBITDA by Q4 2025 and full-year cash flow breakeven in 2026, backed by a manufacturing consolidation to Danbury, Connecticut (expected $2 million in annual facility savings) and ongoing cost discipline.
AI Generated. May Contain Errors.
Earnings Conference Call
908 Devices Q1 2025
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Hello, and welcome, everyone, to the nine zero eight Devices First Quarter twenty twenty five Financial Results Conference Call. My name is Becky, and I'll be your operator today. I will now hand over to your host, Kelly Gura, Investor Relations, to begin. Please go ahead.

Kelly Gura
Vice President at Gilmartin Group

Thank you. This morning, nine zero eight Devices released financial results for the first quarter ended 03/31/2025. If you've not received this news release or if you'd like to be added to the company's distribution list, please send an e mail to ir908devices dot com. Joining me today from nine zero eight is Kevin Knopp, Chief Executive Officer and Co Founder and Joe Griffith, Chief Financial Officer. Before we begin, our commentary today will include the presentation of some non GAAP financial measures.

Kelly Gura
Vice President at Gilmartin Group

These measures should be considered as a supplement to and not a substitute for GAAP financial measures. Reconciliations of the most directly comparable GAAP financial measures can be found in today's earnings press release, which is available in the Investor Relations section of our website. Additionally, I'd like to remind you that management will make statements during this call that are forward looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Forward Looking Statements in the press release nine zero eight devices issued today.

Kelly Gura
Vice President at Gilmartin Group

For a more complete list and description, please see the Risk factors section of the company's annual report on Form 10 k for the year ended 12/31/2024 and in its other filings with the Securities and Exchange Commission. Except as required by law, nine zero eight Devices disclaims any intention or obligation to update or revise any financial projections or forward looking statements, whether because of new information, future events or otherwise. This conference call contains time sensitive information and is accurate only as of the live broadcast, 05/13/2025. With that, I would like to turn the call over to Kevin.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Thanks, Kelly. Good morning, and thank you for joining our first quarter twenty twenty five earnings call. Two months ago, we announced the strategic transformation of nine zero eight devices. Today, nine zero eight devices two point zero is concentrated on higher growth handheld markets aligned with powerful secular tailwinds, including rising national security funding, international preparedness initiatives and urgent public health response to the opioid crisis. With the divestiture of our biopharma desktop portfolio to Repligen complete, we have fortified our cash position and meaningfully reduced our operating costs.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

I'm really proud of our team's performance and execution in the first quarter. We delivered strong growth ahead of internal expectations while responsibly managing OpEx and spending. Revenue from continuing operations was $11,800,000 an increase of 59% over the prior year period. Growth was driven by strong device sales with our mass spec devices accounting for roughly 60% of revenue and FKR products making up the other 40%. Recurring revenue increased 54% from the previous year and represented 37% of total revenues.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Importantly, our adjusted EBITDA loss improved nearly 50% year over year in Q1 twenty twenty five compared to our previously disclosed adjusted EBITDA for Q1 twenty twenty four prior to our transformation. We are truly energized by the massive opportunity ahead for our premier devices in vital health and safety applications. We are pleased with the continued momentum we're seeing in the second quarter and remain well positioned against our reiterated full year revenue guidance. Since the new U. S.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Administration has taken office, there's been a heightened priority on drug interdiction, a clear signal that frontline chemical detection is now a national imperative. In April, the White House Office of National Drug Control Policy referred to as the ONDCP released its statement of drug policy priorities, setting the tone for coordinated federal response to the proliferation of illicit fentanyl and other synthetic drugs. Beyond prevention and treatment, the ONDCP calls for advanced technologies to detect smuggling routes and equip law enforcement and first responders with tools to prevent overdose deaths. We see this as a major catalyst for future procurement opportunities. The increased emphasis on disrupting the global drug trafficking supply chain, particularly fentanyl flows from Asia through Mexico, is also prompting cross border initiatives.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

We anticipate more foreign governments will invest in modernizing their chemical detection capabilities and we are working to favorably position our handheld devices. This is part of a broader global trend. Ongoing geopolitical tensions, particularly in Europe, have amplified concerns around chemical threats. In response, EU member states and NATO countries are significantly increasing their defense and counterterrorism spending. We're seeing strong interest in modern detection equipment across military and security agencies and our mass spec and FTR product portfolio is well positioned to meet these needs.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

To capitalize on these developing tailwinds and realize the vision for nine zero eight Devices two point zero, we've established three strategic focus areas for 2025, targeting market expansion, advancing innovation and reinforcing financial discipline. I'll walk through the progress we've made across each area in the first quarter. Our first focus area is increasing adoption of devices to address global threats to public health and safety. Our devices deliver rapid and accurate answers at the point of need with minimal training, which is exactly what frontline responders need when lives are on the line. Our goal is to be the standard for advanced chemical detection in the field.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

During the first quarter, we received a $2,000,000 order from the Texas Department of Public Safety for our MX908 devices. Our mass spec devices for trace chemical identification will be deployed statewide to support frontline drug interdiction and narcotics enforcement. This follow on order builds upon a successful pilot last year and reflects glowing urgency to modernize public safety tools amid rising fentanyl related deaths in Texas. To protect the public from chemical threats, the Washington Metro Area Transit Authority purchased two ThreatID and two Explorer devices adding to their existing MX908 units. The Threat ID provides chemical identification of over 28,000 bulk solid, liquid, and gas substances while the Explorer can rapidly detect, identify, and quantify up to 5,000 gases in real time.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Also in the same region, the Metropolitan Washington Council of Governments, a regional planning organization that coordinates public safety across jurisdictions in the District Of Columbia, Maryland and Virginia, purchased eight Explorer devices to support emergency response operations. This order builds on their existing MX908 fleet, further strengthening their frontline chemical detection capabilities. At The US federal level, Homeland Security Investigations or HSI, a premier law enforcement agency within the US Department of Homeland Security and a key enterprise account added a dozen MX908 devices during the quarter, bringing their total deployment to over 65 units. These devices support the trace detection and identification of drugs, explosives and chemical warfare agents. Across Europe, heightened geopolitical tensions, including the war in Ukraine, are accelerating disaster preparedness investments.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Through the EU's Rescue U initiative, member states are building strategic stockpiles of response capabilities. Our largest rescue order to date was with Finland in Q4 for 90 Protector devices, which we completed the remaining fulfillment of in the first quarter. The Czech Republic Fire Brigade also received six Threat ID devices in Q1, expanding on a previous purchase of six Explorer devices as European emergency response agencies continue expanding and modernizing their detection toolkits. We're proud to be a trusted partner in this important EU initiative. We are seeing a growing trend of customers returning to purchase additional devices over time, highlighting strong satisfaction and demand across our product portfolio.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

By cross deploying both handheld mass spec and FTIR technologies, they are building adaptable resilient toolkits for emergency response. Our second focus area is advancing our next gen analytical tools portfolio. At our core, we are an innovation driven analytical instrumentation company. We are committed to the relentless pursuit of higher performance, breakthrough capabilities, and greater simplicity. We recently released a software update for Protector featuring a new search algorithm that significantly improves the identification of complex solid and liquid mixtures.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

This condensed phase mixture analysis offers detailed breakdowns with confidence ratings providing clear, faster decision support in the field. Looking ahead, we have new FTIR devices in development and remain on track for the 2026 launch of our next gen handheld mass spec. Additionally, we expect to receive notice to proceed to full rate production and begin to ramp deliveries for the U. S. Department of Defense AVCAD program by year end.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

With our partner Smith's detection, we are working through a handful of incremental improvement and fixes requested during evaluation and are encouraged as we believe we are meeting the program's detection performance expectations. As a reminder, this program has the potential to generate over $10,000,000 in annual revenue at full production. I'm excited to provide an update on all of these initiatives as we progress through the year. Our roadmap is rich with updates and releases through this year and next, serving as key catalysts to support our long term growth trajectory. Supporting our growing U.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

S. Government business more broadly, we have shifted much of our supply chain to domestic sources over the past few years. With all of our manufacturing now located in The U. S, we are in a strong position to mitigate the potential impact of tariffs on our products As we develop new products, including next generation MX device, we will continue to prioritize U. S.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Manufactured components to strengthen this advantage. And finally, our third focus area is strengthening our financial position and accelerating profitability. We are targeting positive adjusted EBITDA by the fourth quarter of this year and full year cash flow positivity in 2026. The $70,000,000 cash sale of our bioprocessing portfolio to Repligen has fortified our balance sheet and provides a meaningful margin of safety as we execute and drive towards cash flow breakeven. The transition has been smooth and continues to progress on schedule with completion of the asset transfer expected by the end of the second quarter.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

We have also begun transitioning all of our production from Boston to Danbury, Connecticut and are preparing to relocate our corporate and R and D teams to a new cost efficient headquarters in the Greater Boston area. We remain on track to complete the production consolidation in time to support our second half revenue ramp. This move is expected to significantly lower facility costs, improve margins and further strengthen our path to profitability. In summary, demand is accelerating, our pipeline is delivering and our operations are scaling. I'll now hand it over to Joe to review our first quarter financial performance.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Thanks, Kevin. As a result of the sale of our desktop portfolio in the first quarter, our financials will be reporting continuing operations only with any current and past activity related to our desktops, including the gain on sale on one line item within discontinued operations in our financial statements. As we shared on our last earnings call, we will now report revenue across three categories: first, handheld product and service revenue second, program product and service revenue, which includes contribution from the U. S. Department of Defense, AvCAD program and third, OEM and funded partnership revenue, which includes contract revenue.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Full revenue from continuing operations in the first quarter twenty twenty five was $11,800,000 dollars up 59% from $7,400,000 in the prior year period, primarily driven by an increase in handheld product and service revenue and offset by an anticipated decrease in program product and service revenue. Handheld product and service revenue was $11,000,000 for the first quarter twenty twenty five, up 86% from $5,900,000 for the first quarter twenty twenty four. This increase was driven primarily by $4,000,000 in revenue related to our recently acquired FTIR products. We shipped 157 devices in the first quarter compared to 53 devices shipped in the first quarter of twenty twenty four prior to the RedWave technology acquisition bringing our installed base to 3,172. Program product and service revenue was $100,000 for the first quarter twenty twenty five, decreasing $1,400,000 year over year.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

As a reminder, in the first quarter twenty twenty four, we recognized $1,500,000 of revenue from our initial low rate production delivery under the U. S. Department of Defense, AVAB program. We are not assuming any meaningful revenue contribution from the AVAB program in 2025 as we completed the initial low rate production deliveries in Q3 twenty twenty four and are preparing for full rate production in 2026. OEM and funded partnership revenue was 700,000 for the first quarter twenty twenty five with no comparable revenue recorded in the prior year period.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

This revenue was primarily driven by pharma and industrial QAQC customers. Recurring revenue, which consists of consumables, accessories and service revenue, represented 37% of total revenues this quarter and was $4,400,000 a 54% or $1,500,000 increase over the prior year period, largely driven by service and OEM revenues. Looking ahead, we expect recurring revenue for the full year to be approximately 30% of total revenue. Gross profit was $5,500,000 for the first quarter of twenty twenty five compared to $3,900,000 for the prior year period. Gross margin was 47% for the first quarter twenty twenty five compared to 52% for the prior year period with the decrease primarily driven by intangible amortization from the RedWave acquisition.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Adjusted gross profit was $6,400,000 for the first quarter of twenty twenty five compared to $4,000,000 for the prior year period. Adjusted gross margin was 54%, an increase of approximately 75 basis points compared to the prior year period. The increase in adjusted gross margin was driven by an increase in revenue offset by a higher percentage of sales through the international distributors. Total operating expenses for the first quarter of twenty twenty five were $16,600,000 compared to $11,500,000 in the prior year period. The increase in operating expenses was driven by a $2,500,000 non cash charge for the change in the fair value of the contingent consideration liability and an increase in operating expenses primarily related to our RedWave acquisition in the second quarter twenty twenty four.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Net loss from continuing operations for the first quarter of twenty twenty five was $9,800,000 compared to $5,900,000 in the prior year period. This increase was largely due to the $2,500,000 non cash charge that I just mentioned, intangible amortization with the Red Wave acquisition, higher deal related costs and lower interest income. Our focus is managing adjusted EBITDA towards profitability. Adjusted EBITDA for the first quarter of twenty twenty five was a loss of $4,600,000 an improvement from a loss of $5,300,000 in the prior year period. And as Kevin pointed out earlier, this is a major improvement compared to our adjusted EBITDA prior to our strategic transformation.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

We ended the first quarter twenty twenty five with 124,300,000 in cash, cash equivalents and marketable securities with no debt outstanding. The increase of $54,700,000 in cash in the first quarter was primarily related to the net proceeds from the sale of our desktop portfolio. Excluding the sale proceeds, we consumed approximately $10,000,000 of cash in the first quarter of twenty twenty five related to our loss from continuing operations and working capital changes. Q1 is typically our largest cash consuming quarter. The net proceeds from the sale of our desktop portfolio combined with the streamlined cost structures we implemented in Q4 and our growth drivers for 2025 and beyond gives us confidence we will cross over to cash flow breakeven on a full year basis in 2026 with a healthy cash balance.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Looking ahead in 2025, we continue to expect revenue from continuing operations to be in the range of 53,000,000 to $55,000,000 representing growth of 11% to 15% over full year 2024 revenue from continuing operations. Our guidance range includes the following assumptions. First, we expect handheld product and service revenue to grow 11% to 15% year over year, which equates to a range of 51,000,000 to $53,000,000 Second, we expect OEM and funded partnerships, including contract revenue, to be approximately $2,000,000 And third, as mentioned, we are not assuming any meaningful revenue contribution from the U. S. Department of Defense, AVCAD program in 2025 as we completed the initial low rate production deliveries in Q3 twenty twenty four and are preparing for potential full rate production in 2026.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

We expect total revenue growth to accelerate above 20% in 2026, driven by our three growth catalysts: expanding handheld adoption, launching next generation products and scaling our U. S. Government programs. Moving down the P and L, we continue to expect adjusted gross margins to increase to the mid to high 50% range for full year 2025 with further expansion in 2026 following our manufacturing consolidation in Connecticut which is currently underway. And we continue to expect to become adjusted EBITDA positive by Q4 of this year and cash flow positive on a full year basis in 2026, supported by accelerated revenue growth and cost savings from our facility consolidation and desktop portfolio divestiture.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Our guidance does not assume any significant impact from tariffs based upon current economic policies in place. Historically, about 75% of our revenue comes from North America. And on the cost side, as Kevin mentioned earlier, our products are U. S. Manufactured with our materials and components substantially sourced from domestic suppliers.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

As a result, we expect minimal impact in 2025 supported by our healthy component inventory and proactive supply chain management. We will continue to monitor this evolving environment. We delivered strong top line performance in the first quarter and believe this momentum can continue throughout the year. That said, it's still early in the year and given our typical second half weighted seasonality, we believe it's appropriate to reiterate our guidance at this time. At this point, I would like to turn the call back to Kevin.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Thanks, Joe. I'm incredibly proud of how our team has embraced this transformation and delivered meaningful progress against each of our strategic priorities. In just a few short months, we've reshaped our business, strengthened our foundation and begun realizing the promise of nine zero eight Devices two point zero. We're leaning into high growth markets with urgency and focus, advancing chemical analysis innovation with a strong pipeline and making disciplined moves to accelerate our path to profitability. Just as we said last quarter, this is more than a restructuring, it's a relaunch.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

The strong start we've made in Q1 reinforces our conviction that we have the right team, the right products and the right strategies to lead. With clear momentum and a fortified balance sheet, we're unlocking value and positioning the company to deliver strong financial performance and sustainable growth. With that, let's open it up to questions.

Operator

Thank you. Our first question is from Matt Larew from William Blair. Your line is now open. Please go ahead.

Matt Larew
Research Analyst - Healthcare at William Blair

Thanks for taking my question. I wanted to ask on the commercial side, you've now had RedWave, you know, here about a year and then you completed the commercial integration last year. Just want to get a sense for any additional benefits you're seeing from, any cross selling. I think, Kevin, you spoke to accelerating demand really globally. Just wanna get a sense for whether you you think you have the infrastructure in place to to really realize and tackle that demand or if there are any, you know, target investments that you might want to make.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Yeah. Absolutely. Thanks, Matt, for the for the question. Yeah. We're we're super excited about how the integration with RedWave has has gone.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

We're just kind of at that year anniversary point, and it's really been a foundation for the transformation that we've been working on here. Right? Because we went from one product to now four. So we've got a a much larger portfolio, which has been helping us diversify our revenue streams there. I would say that, yes, the sales team's really been hitting stride with these products and and really getting it out there.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

We have about 40 people in our in our combined sales and marketing team. We think we do have the right investments and the team in place to to keep driving growth. The cross selling opportunities are many. We had some in our prepared remarks. We did see some good wins in that regard from follow on orders, whether it be part of the Rescue U program or Washington Metropolitan Area Transit Authority and several others where we saw people picking up one or more of our products in the portfolio after starting with the previous one with follow on order.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

From the demand acceleration side, I think you're right. I mean, we're seeing certainly some of the tailwinds develop out there with some of the macro pressures.

Matt Larew
Research Analyst - Healthcare at William Blair

Okay. Fair enough. And then, Joe, just wanted to check on the transition to Danbury. I think you talked about maybe that being like a third quarter, element. Just any kind of update on the progress that you've made and and some of the data points you've given around, annual savings targets just as you get closer to realizing it, if those have moved around at all.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Yeah. We're mid stride on the move. You know, some of the initial trucks have made their way from Boston down to Danbury, so I I think it's going well so far. We've been fortunate to have a strong team down there in Danbury to receive it and some key employees that are transferring. So, you know, we're looking to try to complete it by midyear.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

So we'll be up and running for manufacturing in in the back half and the ramp with the second half. And, yeah, from a facility perspective, it's a lower cost footprint. And savings overall on the facility side will approach $2,000,000 a year, so we'll start to see some of the benefits in the back half, maybe in the neighborhood of 40% of those savings are through the gross margin line. So excited on the progress to date and pleased, if anything, it's ticking a bit ahead of plan compared to where we were a few months ago.

Matt Larew
Research Analyst - Healthcare at William Blair

All right. Thank you.

Operator

Thank you. Our next question comes from Dan Arias from Stifel. Your line is now open. Please go ahead.

Daniel Arias
Daniel Arias
Managing Director at Stifel Financial

Hi, good morning guys. Thanks for the questions.

Daniel Arias
Daniel Arias
Managing Director at Stifel Financial

Kevin on AvCAD, it sounds like that's progressing well. What is the timing that you expect at this point anyways when it comes to getting the thumbs up to move into full production mode from Smith there? And when that is when that does step up to revenue generation mode at the higher level, the $10,000,000 that you referenced, is that a gradual ramp in recognition? Or do you think that you sort of reach a steady state of revenue generation during that phase?

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Yeah. Thanks, Dan, for the for the question. Yeah. We we remain very excited about the AbCAD program. It's been a development we've been working on for for nearly a a ten year period, driven in in partnership with Smith's Detection, who who is our our lead partner there.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

We're a subcontractor to to Smith's, who's who's the prime on this program. Certainly, impactful program. We're working through, call it, a a handful of of improvements and fixes that have come up during the evaluation, and and we're most encouraged that the kind of fundamental detection performance is, appears to be meeting program expectations. So meaning we're able to detect the analytes of of interest at the levels, that they're interested in. So, we're excited for that.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Now we're working through, as you know, last year, we delivered on the on the low rate initial production, and we're waiting for a potential decision to move forward for full rate production, the FRP phase of it. We do expect that decision by the end of the government fiscal year. Some risk that it moves into the later half of our calendar year here, so by calendar year end. But I think we're really looking for it by the end of the government fiscal year. So a lot of to be determined.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Mean, certainly, there's a new administration in place. Anything is possible. Certainly, a delay is possible, but equally possible, in our mind, is an acceleration. So we're we're seeing, good engagement as we work through the the final phases and and they approach their decision. On the timing of revenues, I'll pass it to you, John.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Yeah. From a a a ramp perspective, you know, we'll learn a lot as, hopefully, we see the full rate production contract come into to place, you know, kind of five to seven year window of deliveries. We do see that more ramping as far as a faucet being turned on or turned off, You know? But we'll learn a lot more about the quantities and how that goes. It is kinda year by year.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

We think there's an opportunity that could ramp quickly to 10,000,000 a year possibly in 2026, but you might see that span over '26 into '27 before it gets to that full rate level. So we're excited that with the way it's progressed, but looking forward to learning some of the dynamics on the exact step up and ramp in that opportunity.

Daniel Arias
Daniel Arias
Managing Director at Stifel Financial

Yeah. For sure.

Daniel Arias
Daniel Arias
Managing Director at Stifel Financial

Okay. And then, Joe, as we as we think about the opportunity for installed base expansion and then conversion on a next gen system, can you maybe just true us up on what percentage of the MX systems that are in the field are active? And then on the next gen system itself, apologies if we covered this last quarter, I'm not remembering, but is there a gross margin benefit to be had there? Can you just remind us how that comparison would look from a profitability standpoint? Thanks a bunch. Mhmm.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Sure. Yeah. Can give a little bit of color, then, Kevin, you may have some additional details. But, yeah, from a gross margin benefit, we do see an opportunity with any next generation launch to find more efficiencies in in the materials, the components, you know, learnings as we move from one generation to the next. So we'd expect some level of gross margin benefit, you know, as we move into next gen, and and the biggest piece is the top line, which we think, you know, from an ASP perspective, could be comparable even with those cost savings. You know, on the MX nine zero eight itself, you know, greater than 2,800 out in the field, you know, a good chunk of those, you know, kind of 50% greater, you know, are under service contract. We see some good attachments and renewal rates, you know, related to staying on service contract.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

A lot of that is because you get the latest and greatest software updates, the library enhancements as we develop new analogs to be built into the library. And, know, we have a top notch service and application support team that's very responsive to the customer, and we often get, you know, rave reviews, you know, from our customers in in the period of performance. But MX is a great opportunity as we move into 2026.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Yeah. We're we're super excited about that one, Dan, because it's a kind of a step change in simplicity and size and weight, and and we believe it can drive that upgrade cycle. And and it's pretty consistent. We've talked about our goal is to have a a major product release every twenty four months or so. We've got a pretty rich pipeline of things that we're working on, including FTIR devices, including software, including more on the recurring revenue, continued, connected services and through our team leader application.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

So a lot of exciting things happening on the NPI side.

Daniel Arias
Daniel Arias
Managing Director at Stifel Financial

Okay. Thank you.

Operator

Thank you. Our next question comes from Puneet Souda from Leerink Partners. Your line is now open. Please go ahead.

Puneet Souda
Senior MD at Leerink Partners

Yes. Hi, guys. So just wondering for the full year guide, how are you thinking about first half versus second half in terms of the installs into the second half? Obviously, you don't have AVCAD there. But just given the opportunity you're seeing, maybe also talk about the Texas Department of Public Safety order. Should that be all in 2Q? Or could that slip more slip some into the second half as well?

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

We're excited with the way Q1 kind of getting out of the gate, being that 11,800,000.0 You gotta see opportunity in in early stages pipeline development for q two and really the back half. Specifically on on Texas, that is a q two opportunity. It was great to get the the order over the line and delivery, you know, here in q two. So we were anticipating each one to be carried primarily by state and local and international opportunities, and that's played out. And I'd say that the team collectively, whether it's on the Fed mill, which has a few more challenges this year, but on the international side, state and local continued development of the pipeline to support that back half weighted ramp and that seasonality that we typically see and really looking towards a really strong Q4 as we get beyond the U. S. Government fiscal year.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Yeah. And maybe, Puneet, if it helps, I can add a little more color on to the to the US federal military side. I mean, I I think we we are really set up with our transformation around the some of the what we think is tailwinds that are really developing there. So we're we're not involved with the groups like NIH and academic. Right?

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

We're more prioritized around the national security and law enforcement that we're seeing the new administration prioritize. So as as Joe mentioned, it's certainly a turbulent time there, but I I think what we're seeing is largely aligning in in our favor, whether it's the the plus ups that are happening on the DOD side or or proposed for 2026 or the Department of Homeland Security, both of which, much like NIH grant funding, flow down to customers through DHS grant that local law enforcement and fire and emergency services use. I think that is setting us up to support what Joe mentioned in the second half.

Puneet Souda
Senior MD at Leerink Partners

And then on that point of the government contracts, what sort of visibility that you have? Obviously, there is quite a few moving pieces right now within the government as well with changes and other impacts that we have seen so far, but there are opportunities as well. So just wondering sort of where are you getting the visibility, where the visibility is more stronger versus less? And then I have a follow-up on gross margin, if I may. Thank you.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Sure. Yes, absolutely. Yes, from a visibility perspective, especially on the FedGov side, but also international more and more, Yeah. We kinda see those multiple 20 plus unit opportunities that we maybe touched on in the past and the importance of those creating visibility and as we get, in hand, you know, kind of the confidence around, around the numbers. So, yeah, I'd say good pipeline development there, you know, and and shaping up.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

And we've tried to develop a a a cadence of announcing some of those opportunities as they do come to fruition to show that traction, and you probably saw some of that whether it was with, you know, U Ukraine or the Texas DPS opportunity.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Yeah. And and it's really that progression that we've talked about over the last few years of moving people from those first initial placements or pilots and then moving them into these larger enterprise accounts. And maybe one last final point on this is that with the RedWave acquisition now under our belts, we have certainly diversified our sales and revenue channels there. So as a point in time in 2024 that we've called out in the past, it's about a third of our device sales have come from international customers and another third coming from the state and local that we just gave you a couple of examples of. And then the last third from those larger US federal, call it, DHS, Department of Defense type accounts.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

So I think we're we're pleased with seeing how that has diversified over time, And we're also pleased in that the larger number of installed base is 3,000 or more, and the support and service, which is helping drive that 37% recurring revenue that we're seeing.

Puneet Souda
Senior MD at Leerink Partners

Got it. And then just briefly on gross margins. Can you provide your view on pricing? And if there are any levers you can pull there? And then with respect to the move to Danbury, just trying to understand the capacity utilization of that facility.

Puneet Souda
Senior MD at Leerink Partners

Do you think the cost benefits would be immediate? Or would there be sort of underutilization of facility for some time before we start to see those benefits.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Yes. A few different pieces there. I think on pricing, we'll look to hold our pricing as set for 2025. We're continuing to monitor potentially on the tariff side, we'll see if we need to consider any surcharges, but not at this time. And a big piece of that is we just don't see, at least today, much of an impact there as our supply and our components.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

We have a lot of the goods in hand. So I'd say we're in a bit of wait and see, but we haven't triggered anything at this point. But that is a lever that we can introduce on the pricing side. On the move to Danbury,

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

I think the impact can be fairly immediate, where we've picked up and moved our whole Boston facility, and we'll be moving it at the stand up MX908. It's a similar sized facility, but now having all of our FTIR and our handhelds, all MX908, all under one roof. We run one shift down there. There's definitely capacity to increase our production, you know, that we're doing today on a weekly basis. We have some some initial, square footage that's not gonna be used, but I think within, you know, the next twelve months, you know, future product launches will fill that out pretty quickly.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

And when and if ever needed, you know, we could go to a second shift or continue other alternatives. But I do see that very little underutilization out of the box.

Puneet Souda
Senior MD at Leerink Partners

Got it. Thanks, guys.

Joseph Griffith
Joseph Griffith
CFO at 908 Devices

Thank you.

Operator

Our next question comes from Brendan Smith from TD Cowen. Your line is now open. Please go ahead.

Brendan Smith
Director & Senior Analyst at TD Cowen

Great. Thanks for taking the questions, Congrats on all the progress. Maybe just a quick one from us. Kind of given all the different rollouts ongoing and planned in the months ahead, and really as you're kind of approaching cash flow breakeven, just kind of wondering how you're thinking about any potential m and a or additional BD, and and really, I guess, what the strategy or criteria for that would be as you kind of settle into this new era for 09/2008 and and just take stock of where you see the company going over the next few years.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Yeah. Thanks thanks for that question, Brendan. I mean, m and a has certainly been part of our strategy over the past few years, and and, you know, the Red Wave acquisition to us has really been a It's becoming a very quick, meaningful contributor. Right?

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

So we we announced today it was about 40% of our revenues in the first quarter came from our FTIR products and 60% from our mass spec based products. So the team's really hitting stride now and has allowed us to to greatly, gain efficiency of that sales force and putting more products into their bag. So we're super, super pleased about that. You know, we'll continue to be opportunistic and look at things and and that we believe that are very synergistic and and aligned with financial profile. You know, there's definitely opportunities out there, but we've got pretty tight, filters in in our mind.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

But, you know, all that said, we are incredibly focused right now, tax to hand, really executing on those targets we we put out there today, and we have the catalyst we need to drive that 20% plus growth in 2026 and beyond. We have those well within our control here today and such a great runway that we see for that organic opportunity. So and and then we touched on already the secular tailwinds here. We see them, unfolding in our in our favor. So we see a lot a lot there to execute on.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

So something we'll be mindful of, something we've had success at, but we're heads down at the moment here executing.

Brendan Smith
Director & Senior Analyst at TD Cowen

Got you. Sounds good, guys. Thanks.

Operator

Thank you. We currently have no further questions. So I'll hand back to Kevin Knop for closing remarks.

Kevin Knopp
Kevin Knopp
Co-Founder, CEO & Director at 908 Devices

Great. Well, thank you. Thank you, everyone, for joining the call. We really appreciate it. We really appreciate, your time today and and going through an update, and we're truly excited for what lies ahead here with what we've, coined nine zero eight Devices two point o. So have a wonderful day. Thank you very much.

Operator

Thank you for joining today's call. You may now disconnect your lines.

Executives
Analysts
Powered by Quartr