908 Devices Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 11, 2026

Key Takeaways

  • Positive Sentiment: Second-quarter revenue rose 23% year over year to $16.1 million, while 198 devices were shipped and the installed base reached 4,101. U.S. state and local customers contributed more than half of quarterly revenue, supported by demand for modernized detection equipment.
  • Positive Sentiment: Profitability improved meaningfully, with adjusted EBITDA loss narrowing to $1.9 million from $3.9 million a year earlier and adjusted gross margin expanding to 57%. Management raised the low end of full-year 2026 revenue guidance to $68 million-$70 million, or 21%-25% growth.
  • Positive Sentiment: The NIRLab acquisition is gaining early traction, with more than 35 devices sold in roughly two months, each including a multiyear software subscription. Management sees cross-selling potential with MX908 and other products and aspires to increase recurring revenue from its current 31% of total revenue toward 40% over time.
  • Negative Sentiment: The AVCAD military program remains unresolved after its current contract ended, with the government evaluating both a continued development path and commercially available products. The company excluded AVCAD from 2026 guidance, although any contribution would be upside and management continues to view it as a potential $10 million-plus long-term opportunity.
  • Neutral Sentiment: The company ended the quarter with $101.5 million in cash and no debt, but consumed $10.2 million during the quarter, including $13.5 million for the NIRLab acquisition. Management continues to target a mid-single-digit-million adjusted EBITDA loss for 2026 rather than breakeven.
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Earnings Conference Call
908 Devices Q2 2026
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Operator

Hello, everyone. Thank you for joining us and welcome to the 908 Devices second quarter 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Barbara Russo in Investor Relations. Barbara, please go ahead.

Barbara Russo
Barbara Russo
VP of Investor Relations at 908 Devices

Thank you and good morning. On this call, we will be discussing our financial results for the second quarter ending June 30th, 2026, which were released earlier this morning. Joining me from 908 Devices is Kevin Knopp, Chief Executive Officer and Co-Founder, and Joe Griffith, Chief Financial Officer. During today's call, we will make 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. For a discussion of these risks and uncertainties, please review the forward-looking statement disclosure in the earnings news release, as well as in our most recent annual report on Form 10-K and other SEC filings. These forward-looking statements reflect management's beliefs and assumptions as of the date of this live broadcast, August 11, 2026.

Barbara Russo
Barbara Russo
VP of Investor Relations at 908 Devices

Except as required by law, we disclaim any obligation to update forward-looking statements to reflect future events or circumstances. Our commentary today will also include non-GAAP financial measures, which should be considered as a supplement to and not a substitute for GAAP financial measures. The non-GAAP reconciliations can be found in today's earnings press release, which is available in the Investor Relations section of our website. With that, I now turn the call over to Kevin.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Thanks, Barbara. Good morning and thank you for joining our second quarter 2026 earnings call. I am pleased to report that we delivered strong results this quarter, demonstrating the power of our strategy and dedication of our team. In the second quarter, we generated $16.1 million in revenue, representing 23% growth year-over-year. Our momentum with U.S. state and local customers remains particularly strong, with these customers representing more than half of our revenues in the second quarter. We are seeing continued funding support at the state and local level, driven by the urgent need to modernize detection capabilities in response to evolving threats, from the ongoing fentanyl crisis to emerging synthetic drugs and chemical hazards. This funding momentum, combined with strong customer demand, gives us confidence in the durability of this growth trajectory. From a profitability standpoint, we are making meaningful progress.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

The cost structure initiatives we implemented last year are delivering results. Our adjusted EBITDA loss was less than $2 million in the second quarter, which is a 50% improvement year-over-year. These improvements demonstrate our commitment to scale efficiently while investing in growth. As announced on May 6th, we acquired NIRLab, expanding our narcotics detection portfolio. We now have an AI-powered, subscription-based, cloud-connected near-infrared spectroscopy platform that enables point-and-click analysis of common drugs in seconds. Along with our VipIR and MX908 devices, we provide a comprehensive narcotics workflow for law enforcement, from fast screening to confirmatory analysis. Overall, I'm very pleased with our execution this quarter. We are delivering against our strategy on multiple fronts, expanding our market presence both organically and through strategic M&A, while building a stronger foundation for longer-term value creation.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

This execution maps directly to our three focus areas for 2026, scaling proven platforms, extending platform leadership, and strengthening revenue durability. Let me walk through the progress we made in each. First, scale our proven platforms. Our objective is to accelerate growth by modernizing legacy detection equipment, especially FTIR, across global fire, law enforcement, and defense enterprise accounts. We've made tangible progress in these areas in 2026. Start with our scale. Over the past 24 months, we've shipped more than 750 FTIR devices, confirming this opportunity is real, substantial, and one we're capturing. VipIR, our newest FTIR device, is leading that modernization push. We shipped more than 35 units in Q2, and we believe we will achieve our goal of shipping more than 100 VipIR devices this year. Two wins this quarter show why.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

A major South Asian law enforcement agency displaced an incumbent competitive product after a trial, purchasing more than 15 units, and the Bureau of International Narcotics and Law Enforcement Affairs ordered its first VipIR unit to support Mexico's narcotic interdiction mission using U.S. State Department funding, a mechanism we believe can extend to other partner nations. Together, these show VipIR winning on two key fronts, capturing competitive share and capturing funding. Our flagship MX908 plays the same role for trace-level analysis, as it enables our customers to keep pace as the modern illicit drug landscape evolves from fentanyl to nitazenes and now to morphine. Clear evidence of the modernization cycle in motion is our Texas Department of Criminal Justice win.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

15 MX908 devices for corrections facilities statewide were purchased in Q2, converting from a successful two-device trial with the Texas Office of Inspector General. We expect more orders to follow as that program's success becomes visible across the state. That's our playbook working exactly as designed. Engage early, prove value, delight the customer, and expand. We also attained a high-visibility proof point this summer. MX908 Beacon, VipIR, and XplorIR devices were part of the security toolkit at several stadiums during the FIFA World Cup. Deployments at major international events are exactly the kind of field validation that builds confidence across the first responder community, raising awareness of our solution. Finally, this momentum is being carried into the third quarter. We are pleased to announce that in July, we secured a $6 million ProtectIR order for corrections agency in the Asia-Pacific region.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

This progress validates the three dynamics underpinning our platform scaling focus. Governments need better tools to identify unknown substances. We have the relationships and technical credibility to win competitive procurements, and every deployment builds an installed base that opens the door to further expansion, feeding a flywheel. Turning to our second focus area, extend platform leadership. Our objective here is to drive growth through greenfield placements, differentiated capabilities, and disciplined product introductions in markets our existing platforms don't yet reach. XplorIR is the clearest example of that strategy at work. XplorIR represents a genuine breakthrough in gas and vapor detection, and the market is responding. Placements grew nearly 70% over the 12 months ending June 30th. That growth is being pulled forward by two tailwinds, one HAZMAT incidents and the other CBRNE defense. Domestically, chemical incidents are rising.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

A recent Wall Street Journal article noted 131 serious chemical accidents in the U.S. in 2025, up 20% year-over-year. First responders are feeling that pressure directly. In May, a chemical tank at a jet part manufacturer in California overheated, forcing the evacuation of more than 40,000 residents near Los Angeles. Responders used XplorIR on entry to identify and quantify the hazardous vapors and relied on it throughout cleanup. As these incidents rise, so does the case for XplorIR. Internationally, we see the same demand from defense customers. The Danish Defence Acquisition and Logistics Organisation selected XplorIR to enhance long-range chemical detection for defense operations, an initial multi-unit procurement paired with a framework agreement for future purchases, a strong signal of the confidence in the platform's differentiated performance. XplorIR is exactly what extend platform leadership is supposed to look like.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

We identified an unmet need, real-time gas and vapor identification and quantification in the field, built differentiated technology to solve it, and now we're capturing a market opportunity that's growing on its own as chemical incidents rise and customers see what modern detection technology can do. Finally, our third strategic focus area is strengthening revenue durability. Our objective is to build a more predictable revenue mix through recurring revenue from connected services, growth in OEM-based revenue, and longer-term programs. NIRLab is a key driver of the connected services vision we're building towards, and while OEM revenue and longer-term programs remain important parts of this focus area, I want to spend today's update on NIRLab and where we see its potential. For decades, presumptive drug identification in the field has relied on colorimetric test kits, cheap, single-use, and disposable with no data trail behind the result. That has created real problems.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Innocent substances can trigger false positives, leading to wrongful arrests and legal challenges, and it's becoming a legislative issue. Colorado's legislature voted unanimously this year to ban custodial arrests based solely on colorimetric results, and reform efforts are underway in at least seven other states. We see that as a durable tailwind, not a one-time event, and it points to where this category is headed, away from disposable chemistry and towards connected technology that produces a defensible, auditable result with the identification, the underlying data, and the chain of custody all captured and retained. That's the model NIRLab lets us build towards, the same kind of recurring subscription-based model that has transformed other public safety hardware categories, pairing durable hardware with a cloud-connected software layer that agencies rely on and return to every day.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Within the first 60 days post-close, our U.S. commercial team ran in-person and virtual demonstrations and secured field evaluations through our Try Before You Buy program, engaging 30 agencies and hundreds of prospects at the federal, state, and local levels. This includes seven HIDTA task force, the multi-agency teams on the front lines of drug trafficking enforcement that tend to set the procurement tone for their regions. Agencies evaluating the platform consistently cite four things: speed, ease of use, an intuitive interface, and accurate identification, exactly the attributes that make the case against colorimetric testing. That commercial motion is already converting. In the roughly two months since close, we sold more than 35 NIRLab devices, each with a multi-year software subscription, meeting our expectations for the initial post-acquisition period, with shipments to law enforcement agencies in Colorado and California and customs agencies in Morocco and Iceland.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Our overall pipeline is strong and growing, and we are starting to see enterprise-scale opportunities develop in that pipeline, both domestically and internationally, a meaningful early signal of NIRLab's longer-term potential. The real opportunity is bigger than any one product. NIRLab is an example of what our entire business has the potential to become, durable hardware paired with recurring connected software and the kind of real-time analytical reach-back support our customers consistently tell us they value most from 908 Devices. We believe that model, hardware, software, and expert support working together can guide how we build and monetize every product in our portfolio for years to come. With that, I will turn it over to Joe to walk through the detailed financial results for the quarter.

Joe Griffith
Joe Griffith
CFO at 908 Devices

Thanks, Kevin. Total revenue was $16.1 million for the second quarter 2026, increasing 23% from $13 million in the prior year period. Handheld product and service revenue was $15.5 million for the second quarter of 2026, up 24% from $12.5 million for the second quarter of 2025. The increase was primarily driven by our FTIR products, including more than 35 VipIR shipments and NIRLab law enforcement revenue. In total, we shipped 198 devices in the second quarter, bringing our install base to 4,101. Recurring revenue represented 31% of total revenues this quarter and was $4.9 million, a 4% increase over the prior year period, primarily related to software and accessories and FTIR service revenue, offset in part by the expected reduction in mass spec service revenue. Gross profit was $8.3 million for the second quarter of 2026, compared to $6.4 million for the prior year period.

Joe Griffith
Joe Griffith
CFO at 908 Devices

Gross margin was 52% for the second quarter of 2026, compared to 49% for the prior year period. The increase was driven by higher product revenue volume and decreased facility costs related to the move of our Boston facility in 2025. In addition, in the quarter, we benefited from a shift in channel mix with more U.S. state and local placements that have lower channel costs compared to international placements. These factors were offset in part by a lower service gross margin related to the decreased mass spec service revenue in the second quarter of 2026. Adjusted gross profit was $9.2 million for the second quarter of 2026, compared to $7.3 million for the prior year period. Adjusted gross margin was 57%, an increase of approximately 85 basis points compared to the prior year period.

Joe Griffith
Joe Griffith
CFO at 908 Devices

The increase in adjusted gross margin was driven by our improved 2026 operating structure, including higher revenues, channel mix, and the reduced facility costs, as mentioned above. Total operating expenses for the second quarter of 2026 were $21.2 million, compared to $21.5 million in the prior year period. The reduction was primarily due to decreases in the fair value of contingent consideration, lower facility costs, and a reduction in R&D program spending, offset by operating costs from NIRLab and transaction costs incurred with the acquisition. Net loss from continuing operations for the second quarter of 2026 was $11.9 million, compared to a net loss of $12.9 million for the prior year period. This decrease in loss was primarily driven by the $2 million in higher gross profit, net of a $1.2 million reduction in transition services agreement income, and a $0.3 million reduction in non-cash charges for revaluing contingent consideration.

Joe Griffith
Joe Griffith
CFO at 908 Devices

Adjusted EBITDA for the second quarter of 2026 was -$1.9 million, compared to a loss of $3.9 million in the prior year period, representing a $2 million improvement. In the second quarter, we cut our adjusted EBITDA loss by more than 50% due to improved margins and a lower operating cost base. We ended the quarter with $101.5 million in cash equivalents, and marketable securities with no debt outstanding. We consumed $10.2 million of cash in the quarter, which was primarily related to the $13.5 million used for the acquisition in NIRLab, net of the $3.5 million received from the release of the escrow from the desktop divestiture to Repligen. Looking ahead in 2026, we have raised the low end of our range and now expect revenue to be $68 million-$70 million, representing growth of 21%-25% over full year 2025.

Joe Griffith
Joe Griffith
CFO at 908 Devices

Our guidance range includes the following assumptions. First, we now expect handheld product and service revenue to grow 23%-27% year-over-year, which equates to a range of $65 million-$67 million. This increase is supported by our performance to date and the recent $6 million ProtectIR order. Second, we continue to expect OEM and funded partnerships, including contract revenue, to be approximately $3 million. Third, given that the AVCAD program is still working through next steps, as Kevin will discuss more in a moment, we're excluding it from our core 2026 guidance. Any AVCAD contribution would represent upside to our stated range. Moving down the P&L, we continue to expect adjusted gross margins to be in the mid to high 50% range for full year 2026.

Joe Griffith
Joe Griffith
CFO at 908 Devices

On the bottom line, we continue to expect to reduce our adjusted EBITDA loss to the mid-single digit millions, closing the gap on achieving breakeven while balancing investments to enable the growth opportunity. At this point, I would like to turn the call back to Kevin.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Thanks, Joe. As Joe mentioned, the U.S. military AVCAD program is continuing to work through next steps, and we fully support that process. The current contract has run its course, and as part of the next steps, the government is also considering our commercially available product due to a broader procurement reform at the Department of War that's prioritizing speed and program flexibility. We expect more clarity soon as the government's fiscal year closes and FY 2027 begins on October 1st. Overall, we believe we have the best-in-class aerosol and vapor detection technology, which has been extensively government tested and validated and can win this opportunity regardless of the chosen path, either in partnership with Smiths Detection or directly with our commercial MX908. We remain excited about the long-term potential of this program.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Now, stepping back, as I reflect on our second quarter performance and look ahead to the remainder of 2026 and beyond, I'm energized by what we've accomplished and confident in the trajectory we're on. Let me be clear about how I characterize this quarter. Strong execution across the board. We delivered 23% revenue growth, placed 198 devices, and expanded our adjusted gross margin by 85 basis points and cut our adjusted EBITDA loss by more than half, all while successfully integrating a strategic acquisition and continuing to invest in our growth initiatives. This demonstrates the fundamental strength of our business model, and I believe in our ability to meet our near-term and longer-term objectives. Before I close, I want to express my gratitude to those who have supported us through our strategic transformation over the past year and a half.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

To our customers who trust us to protect their communities, to our employees who execute with excellence every day, to our partners and distributors who extend our reach into markets worldwide, and to our shareholders who continue to back our vision as we build a category-defying company in handheld detection. We're executing our strategy, we're delivering on results, and we're building momentum. I look forward to updating you on our continued progress when we report third-quarter results later this year. With that, let's open it up for questions.

Operator

We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Dan Arias with Stifel. Your line is open. Please go ahead.

Dan Arias
Dan Arias
Analyst at Stifel

Yeah. Good morning, guys. Thanks for the questions here. Kevin, as we think about this broader portfolio that you now have, can you maybe just talk to the extent that you see bundling opportunities as being higher than they were and more meaningful? Is there an appetite for multi-system orders across applications when you target these customer groups? Or is it still sort of siloed from an application standpoint? I am just trying to make sure that I fully appreciate the benefit of just the different product lines that you have and what that might mean when you target some of these government agencies and law enforcement agencies.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Yeah. Sure thing, Dan. Happy to touch on that. I think that is one of the big advantages we have been having as we scale here, with the FTIR portfolio now coupled with Mass Spec, and now we have NIRLab thrown in here. We are absolutely seeing and have many examples of bundled orders, where they may order a couple of FTIR products or a couple of MX products. Not yet with the NIRLab, because that is very new to us, but we absolutely see that pairing well with our MX. I think if you look at it from a high level, right, we think about law enforcement, we think about their workflow.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

We think about what they need to do from screening to confirmation, and, if you take in total our MX, our NIRLab, as well as the VipIR, it creates kind of a complete workflow for those customers, so absolutely multi-unit, multi-system across there. Then similar on the hazmat side, so more on the fire services side, with our XplorIR, with our FTIR, our ThreatID device, absolutely those can be bundled offerings, and we have seen that.

Dan Arias
Dan Arias
Analyst at Stifel

Okay. Then maybe just one on AVCAD. It sounds like there are some alternative courses of action that could come out of the evolution of that opportunity. If something more direct were to be the way that you go, how do you see that impacting a ramp and just the revenue potential that could come out of that in 2027 and 2028? You have kind of laid out some initial thoughts there. I am just curious how that would change. Thanks a bunch.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Yeah, absolutely. On AVCAD, taking a little bit longer than we in the market expected, but our confidence in winning hasn't moved. The current contract run its course, and the government's working through those next steps, which we're fully supportive of. We believe we've got the best-in-class vetted, validated technology in the aerosol vapor detection category and can win this opportunity, either way it plays out. That can be in partnership with Smiths Detection, but it also can be through our commercial MX908. As we mentioned, and as you probably know, there is a shift underway within the Department of War that's making sure that they take their moment in time and look at commercial off-the-shelf products, and using that in a preferential way to speed up deployments and speed up getting solutions to the war fighter.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

At the moment, the government's working through that process. They're looking at both COTS solutions like our MX908, these commercial off-the-shelf solutions, and then, of course, continuing with the program we've been working with Smiths on the custom development. From an economic side, yeah, I think it's clear that the more product content we provide, whichever path they choose, is better on the economics for us.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

From a ramp, as Joe mentioned, we have taken it out of the guide for today and taking it to upside, and we're pleased we're able to do that with the strength of our core business. As we mentioned, we see this as a $10 million+ opportunity into the future, and I don't think our confidence there has changed. How to ramp to that point is TBD here as we sit today. But I think the program is going to be good for us over the long term.

Operator

Your next question comes from the line of Brendan Smith with TD Cowen. Your line is open. Please go ahead.

Brendan Smith
Brendan Smith
Analyst at TD Cowen

Great. Thanks for taking the questions, guys. Maybe just first on NIRLab, I was hoping, can you speak a little bit more to what kind of potential cross-selling opportunities you're now seeing in these first 60 days and maybe even broadly, more qualitatively, how conversations with new customers are going now that you've got this arguably broader portfolio of products? I guess, are they coming to you with one in mind? Are they looking for a more comprehensive set of tools? Just trying to understand how demand here is evolving across these different end markets as your catalog grows.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Yeah, sure thing, Brendan. Thanks for the question. We're very happy with how the NIRLab integration is going. We've really been working hard to get out there fast. Part of the thesis was bringing this product into the U.S. markets, where they've had very little to none penetration. To your point, we can bring that right to the customers of our core flagship MX908, so those law enforcement customers. We closed here in early May, but the team's been moving fast, and we really hit that ground running. We've engaged about 30 agencies, hundreds of prospects across about 20 states in those first 60 days. That includes these seven HIDTA regions. These are multi-agency task force. These are the ones that really are on the front lines of the illicit drug crisis. They really set the tone for what gets adopted in their regions.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

We've been doing a lot of engagement with those groups there, and we're pleased with where we're at. Absolutely, as you mentioned, there can be a bundling as we move forward, and there's an analyte compatibility, complementary compatibility there. If you think on the THC side and cannabis, the NIRLab is the product in our portfolio that can quantify that. We can't do that with our MX. So those you can imagine being paired very well. The subscription side we think is very exciting for the NIRLab products. We think that's also a great model that we should work to get our other products in over time and making sure that we really provide that excellent service support and doing so on an ongoing recurring basis.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Then I'd say the last point on NIRLab is really excited about a tailwind in the regulations that are changing, and that's really been going away from colorimetric kits, which have expiration dates, have usage issues, and have been causing some false positives and wrongful arrests and starting to get banned in different states. We're excited to see where that will play out by having a, call it a lower price point offering with our NIRLab that can help us there. Colorado is one of the first states to ban such things, and in the quarter, we did receive orders from Colorado and California. So I think overall we're pleased with it and do see a portfolio effect developing.

Brendan Smith
Brendan Smith
Analyst at TD Cowen

Got it. That's great. Maybe if I could just a quick follow-up. On your point about the recurring revenues here, I appreciate all the color on growing that as a proportional part—

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Yeah.

Brendan Smith
Brendan Smith
Analyst at TD Cowen

—of the total revs. I guess as we look at our model for maybe the next, I don't know, couple of years, how should we think about that relative proportion of total revenues coming from that recurring bucket, just as some of the more recent launches scale up? You're talking about NIRLab here. I guess is there an ideal ratio between core and recurring you guys have in mind that's feasible over the medium term? Just any color there would be great.

Joe Griffith
Joe Griffith
CFO at 908 Devices

I can give a little bit of color and feel free to chime in, Kevin. Brendan, we were about 30% for the current quarter. We were a little over 30% last year. That's our current baseline. As we drive initial devices, example, the ProtectIR order that we talked about doesn't have recurring revenue. So in any given quarter or year, there can be a shift. So you might end up in the low high 20s, low 30s. But over time, I think that's where it gets exciting, especially with NIRLab and the subscription model, more and more of a, it carries 50% of recurring revenue opportunity with those subscriptions. You have the snowball effect of the install base. So I think starting to creep up into the 30s, approaching that 40% is what we aspire to.

Joe Griffith
Joe Griffith
CFO at 908 Devices

It is good to sell those devices and build the opportunity, which we're focused on today.

Operator

Your next question comes from the line of Matt Larew with William Blair. Your line is open. Please go ahead.

Matt Larew
Matt Larew
Analyst at William Blair

Hi, good morning. Just wanted to circle back on AVCAD. If indeed a different path is chosen by Department of War, would there be another pilot phase where they trial a variety of different technologies? In other words, would it reopen a different RFP or based on the success of the first project where you were a sub, and it's the same technology from your standpoint, would it be the immediate opportunity? Just wanted to be curious a little bit more on how you expect things to play out and I guess how that informs your perspective on timing. Thanks.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Yeah, absolutely, Matt. Great question. So you're right, we've been performing for a long time now under the AVCAD program in partnership with Smiths. We've done a lot of testing of the base HPMS, a lot of analytical testing, a lot of rigorous testing of that. But similarly, if you think about our commercial product, our MX908, we have more than 3,000 of those devices out there. We estimate that about 1,200 are within the U.S. federal military. We have quite an extensive test a record for that also parallels what's been done in the AVCAD program.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

So I think it's a bifurcated path. I think they can choose to continue with the path we're on, and/or a hybrid path, where potentially they continue with the program and the development or some custom modifications there along the same lines, and then use COTS products such as our MX908 to fill the gap. Again, their desire is to move the program faster here. So I know that you see a timing delay from this lens, but their desire is to ultimately move the program faster.

Matt Larew
Matt Larew
Analyst at William Blair

Okay, Joe, just thinking about the guide implies, I think, sort of high teens or $20 million of revenue per quarter in the back half. You did $16 million in Q2. It sounds like AVCAD has moved out of the guide. Could you just talk to us a little bit about what the progression will look like? I guess, in particular, I'm thinking of the large order, $6 million order you got in July. I don't know if all of that or some of that might be coming in 2026—

Joe Griffith
Joe Griffith
CFO at 908 Devices

Yeah.

Matt Larew
Matt Larew
Analyst at William Blair

—versus perhaps more in 2027. Thanks.

Joe Griffith
Joe Griffith
CFO at 908 Devices

Absolutely. You can give a few different data points there. Last year in H2, we were 45% in Q3, 55% in Q4, a little bit more heavy-weighted in Q4, with the VipIR ramp up and a little bit of AVCAD revenue. As I think about this year, it's probably a little bit more in Q3 on a percent basis, maybe a few hundred basis points, in Q3 versus Q4. Specifically on the $6 million ProtectIR order, we do anticipate that to be split over Q3 and Q4, so we'll see some revenues here in Q3 as we build the number of devices, and some go out in the fourth quarter.

Joe Griffith
Joe Griffith
CFO at 908 Devices

I think more broadly, as we think about the guide and our confidence is high and growth levers we feel are performing, this year for H1, as you mentioned, our growth was 19%, 23% in Q2, and we expect that to ramp here in the second half and potentially get to the higher end of 25% for the full year growth. It would imply about 29% at the high end for H2, and we think our growth to date has been impressive and see our key growth areas in enabling that high 20% growth. We've talked about some of these, I think over the past two quarters. We expect VipIR to be a key contributor to the full year post-launch.

Joe Griffith
Joe Griffith
CFO at 908 Devices

We had 60+ in H1 and see a path where device placements can exceed 100 and maybe approach 150 for the full year, doubling or tripling our 2025 levels. XplorIR to drive growth, similar to 2025. As a reminder, we opened a broader fire gas detection market with XplorIR, which is exciting, and we shipped over 150 devices in 2025, and over the last 12 months, it's grown nearly 70%. We talked about ProtectIR, getting that $6 million order. It gained us confidence having that order in hand to ship over Q3, Q4. In May, with the close of NIRLab, we expect approximately $1 million a quarter in H2, contributing to the growth. Hopefully that's helpful as you think about the multiple levers and our path to achieving the guidance range that we tightened this quarter.

Matt Larew
Matt Larew
Analyst at William Blair

Yeah, very helpful. Thanks, Joe. Thanks, Kevin.

Operator

Your next question comes from the line of Puneet Souda with Leerink. Your line is open. Please go ahead.

Puneet Souda
Puneet Souda
Analyst at Leerink

Yeah, hi guys. Just wanted to clarify on the ProtectIR order, the $6 million, was that something that you were contemplating in the guide before, or is that new? Maybe just give us some color on that.

Joe Griffith
Joe Griffith
CFO at 908 Devices

Yeah, we did have a level of ProtectIR anticipating the second half and the opportunity, but it was good to see that the specific opportunity was upsized a bit from the initial thinking in the first half. I would say it was in our purview, it was in our pipeline, but to be able to get it in hand early and be able to ship it all here in 2026, was a positive, that it definitely gave us confidence in tightening and pushing the AVCAD opportunity to upside as we've continued to learn more on that opportunity. We like these big orders, on the ProtectIR side, and it's been a steady product early days from RedWave and continued under our purview from a commercial perspective.

Puneet Souda
Puneet Souda
Analyst at Leerink

Okay. On the cloud attach side, Kevin, could you talk about where your cloud attach rates for devices is today, where you would like that to be, what is the incremental revenue that you think you can achieve by integrating these devices into the cloud platform? Clearly, there's a subscription model there. I just wanted to understand the approach you're taking here and where you would like to be.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Yeah, absolutely. Thanks for that question. Yeah, so we're very excited about the more connectivity we can have on our products and the more we can connect it to an ecosystem for our customers to add value, to allow them to share results, manage their fleet, do in-depth analysis, reach AI tools for support, all of those types of features we're working on. We have a product called Team Leader that's out there today, that connects to our FTIR products and will connect in the future to our next generation of our Mass Spec products. That product has hundreds of users. It's really provided, with service and support today. But where we're really going is looking at the model for NIRLab, and part of the strategic decision around that M&A was to leverage that model much more broadly across our portfolio over time.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

If we zoom into the NIRLab model for a moment, NIRLab is a purchase where 50% is recurring, so nominally list price around $10,000 for the device and nominally around $5,000 per year for the subscription, and being able to support that customer with upgrades, new threat assessments, new drugs, new analytes that can be added over time.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

That's a 50% target. They've shown and demonstrated that we're able to achieve annual recurring revenues that are quite high, and obviously early days, but greater than the 90% level. That comes from the stickiness of the product, right? It really gets designed in with those customers for drug screening applications across a set of very common illicit substances, and people will sign up for one-year subscriptions, two-year, three-year, five-year, and even as many as, say, seven years up front of subscription. We really like that. That's visibility. That's very much a complementary way to what we're selling our MX908. So 50% is an aspiration there on that single product. If you look where Joe mentioned today, we're call it more in the 30%, and that ebbs and flows a little bit with the size of a number of new placements that are done in a particular quarter.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

That's the direction we're going. I think NIRLab is a great example, great model, and if you start looking across the industry of public safety companies, you'll see many of the best-in-class companies have been quite successful across state and local customers using such a model. All that said, it's going to take a little bit of time as we work through and get all that into our product portfolio, but we're super happy to have the NIRLab team in place. We're super happy to have those software development resources that are coupling with our Team Leader group, and I think good things to come there that we'll keep reporting on.

Puneet Souda
Puneet Souda
Analyst at Leerink

Got it. Then one final one on NIRLab. It seems like it helps you get into accounts that maybe you've gotten those accounts before, but maybe some of those accounts were inaccessible just given the price point. Just trying to understand sort of what's the upgrade opportunity to more higher priced devices. How are you thinking about that, just given the access that you have in the account list there from NIRLab? Thank you.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Yeah, that's also a great question. I think it goes in a few different directions. Absolutely, there are cases, and that's our first job one today, call it 60 days in at the end of the quarter, is to get the NIRLab device introduced to all of our MX customers that we've got strong partnerships with. It has complementary analyte capabilities. It also has a different price point, different complexity that can be used to kind of expand the number of sockets that you can reach. So job one is focused on that today. But the flip side is also true. They've got a great presence internationally. They've really been doing some good development there over the last two years. A lot of good validation with the University of Lausanne in Switzerland, the forensics university.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

We are looking to do more in that direction internationally, using them as a platform to help us into the reach and validation of our products there, too. I think it has got kind of a bi-directional benefit to us, and as the first question of the day from Dan, as that portfolio grows and we can serve more of the workflow, we see great efficiencies both for our customers to have one number for support and service and training contacts, but also from us, from a feet on the street, a really zoomed-in, subject matter expert-led organization on the sales side for law enforcement, and then similarly on the hazmat fire side. I think a lot of benefits as we scale with this broader complementary portfolio across the board.

Puneet Souda
Puneet Souda
Analyst at Leerink

Got it.

Operator

Your next question comes from the line of Max Masucci with Roth Capital Partners. Your line is open. Please go ahead.

Max Masucci
Max Masucci
Analyst at Roth Capital Partners

Hi. Good morning. Nice quarter. First question on VipIR. As you look across the first 110 VipIR placements, what trends have you seen in terms of single versus multi-device orders? What percentage of the VipIR placements have been to existing FTIR customers versus your customers that are new to 908 Devices? More generally, how is the pipeline shaping up ahead of the second half, and is that factoring into the slightly raised expectations on product revenues?

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Yeah. Thanks, Max, for the question. I think VipIR is a really successful launch for us. It is the first launch under the RedWave with 908 Devices as one here, calling it our VipIR product together launch to the market. Super successful thus far. Very pleased with those, call it, passing 100 units to date. I think we are seeing this take advantage of the modernization cycle that is setting up across the globe, whether it is funded from the state and local and the increase of funding that is available to responders or across NATO entities. We have certainly seen singles, doubles, 10-unit to even 15-unit type orders coming in one go. Joe, you want to—

Joe Griffith
Joe Griffith
CFO at 908 Devices

Yeah, that makes a lot of sense as you think about the different sales channels that we are focused in for the VipIR, whether it is state and local, kind of one-off agencies, and then more broader potential custom opportunities both domestically, but really internationally see a decent opportunity as we highlighted the win in Kevin's prepared remarks. As we think about the back half, it is one of the key growth drivers that I mentioned earlier. We see that continuing, and at times you might see a big order pop up, but definitely building pipeline.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Yeah. Max, if you look over the last 24 months, we have shipped more than 750 FTIR devices, which includes the VipIR. That is really a clear proof point to us that this modernization cycle is really real and that we can capture it, and the FTIR is essentially riding three cycles at once. That equipment modernization, hazmat response, and then defense demand. They are all kind of compounding together.

Max Masucci
Max Masucci
Analyst at Roth Capital Partners

Great. Second question on gross margins. It looks like product gross margins expanded nicely in the quarter about 700 basis points. How much of the Q2 product gross margin expansion is structural versus volume and mix? I am just curious how the VipIR placement ramp and NIRLab are factoring into your expectations for gross margins for the year.

Joe Griffith
Joe Griffith
CFO at 908 Devices

Yeah. A lot of different factors you can imagine, whether it's channel, product mix, et cetera. I'd say our margins do remain healthy, and the drivers are well understood. Different factors there. For reference, in 2025, our Adjusted Gross Margin was 56.7%, and for the second quarter and first half, our Adjusted Gross Margin was 57% overall. A favorable result based upon channel and product mix. Product gross margin has improved a bit as some of our service revenue, you might recall that federal government contract that had some funding lapse this year that we'll go after for next year, took down our service margins. As we think about the full year 2026, we see it as a similar level, maybe closer to 56% on a full year basis. The higher product volume in each one, lower cost structure are positive drivers, as you touched on.

Joe Griffith
Joe Griffith
CFO at 908 Devices

There are a few H2 factors, including NIRLab, which isn't at scale today. It's at a lower gross margin, especially on the device. The ProtectIR order, that $6 million order, is at a lower gross margin. It's an international and high-volume discounting opportunity. VipIR, which is, beyond NIRLab, our lowest product gross margin contributor in timing of build plan, et cetera. So a lot of different factors. I think volume helps. We have some other things that may temper our adjusted margin expansion, but being in that mid to high 50s, kind of 56%-57%, is pretty attractive.

Max Masucci
Max Masucci
Analyst at Roth Capital Partners

Great. Thanks for taking the questions.

Joe Griffith
Joe Griffith
CFO at 908 Devices

Welcome.

Operator

There are no further questions at this time. I will now turn the call back to Kevin Knopp for closing remarks.

Kevin Knopp
Kevin Knopp
CEO and Co-Founder at 908 Devices

Well, thank you. Thank you very much for your time this morning. We appreciate your being on the line and for us to give you an update, and look forward to the next one. Take care.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.

Executives
    • Barbara Russo
      Barbara Russo
      VP of Investor Relations
    • Kevin Knopp
      Kevin Knopp
      CEO and Co-Founder
    • Joe Griffith
      Joe Griffith
      CFO
Analysts
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