908 Devices Inc. Q2 FY2024 earnings call

• Completed commercial integration of RedWave Technology, including product training for sales teams, CRM, and website integration; received first multi-system order. - Welcomed Michelle Lenhart to the Board of Directors. - Desktop portfolio faces macro market pressures but pursuing partnerships in cell therapy space; working on capability upgrades for existing products. - Launched enhanced quantification software for XplorIR and updated MX908 software; strong technical showing at ASMS. - Acquired RedWave, a profitable company, with $5 million+ annual cost synergies expected by 2026; cash on hand $77.4 million with no debt.

For the second quarter of 2024, revenue was $14 million. Handheld revenue serving the forensics market was $11.1 million, up 26% from the second quarter of 2023, representing 79.29% of total revenue. Desktop revenue serving life science instrumentation and bioprocessing markets was $2.9 million, down 9% from the prior year period, representing 20.71% of total revenue. Recurring revenue, consisting of consumables, accessories, and service revenue, was $5.3 million, 38% of total revenues, with $3.3 million from handhelds and $2 million from desktops.

• 2024 revenue guidance: $63M-$65M (25%-29% growth YOY). - RedWave expected to contribute $11M in 2024 (8 months of ownership). - Core 908 business guidance: $52M-$54M (4%-8% YOY growth). - Adjusted gross margins expected mid-50s in 2024, slight improvement from prior expectations. - Handhelds expected to have stronger contribution in second half, desktops slower due to longer sales cycles.

• Macro market pressures on desktop portfolio with conservatism in adopting innovative technologies and CapEx spending. - Longer sales cycles for newer desktop products as customers evaluate novel technology. - Uncertainties in bioprocessing CapEx spending and timing of biotech funding impacting desktop revenue contribution.

Q: So a question, you said you completed the commercial integration of Red way. So does that mean the sales reps on both sides are now completely cross-trained on all products? And then secondly, when should we expect to see potential revenue synergies from the combined commercial operation?

A: Yeah, sure. We're really happy with the pace of integration we've had with the RedWave team in Danbury, Connecticut. During the quarter, we were focusing on just that the commercial indication of the team, and that includes -- we did product training of the sales team. We integrated the CRM and the website. From a rep standpoint, we added four direct sales reps that came from the RedWave acquisition to our forensic team and a number of field applications professionals, which is so important on the customer success side. So if you think about it, that's kind of an incremental add to the about 70 people we had at the end of 2023 in our sales and marketing team. And again, very importantly, that includes sales application and support people. I think we are starting to see the initial benefits of that and having people cross-trained as you touched on, it certainly super excited that we saw our first multi-system order within the quarter. It was probably 60 days in. We saw that, and I know it was a single order with purchasing -- single customer, I should say, purchasing 13 handheld devices in total and included our MX908flagship but also RedWave Explorer devices. So I think it's a good testament of where we've come so far, but we're still going to take a few quarters here as we wrap our arms around the total potential and keep introducing the RedWave products into existing 908 accounts.

Q: Yeah. This is -- hey, good morning from Matt. Thanks for taking my questions. I just wanted to focus a little bit still on that desktop portfolio and maybe like a similar question, but we have seen biotech funding… A: Yeah. Happy to further elaborate as much as we can there, but yes, I think you hit it. I mean we're still seeing some of those macro pressures and that conservatism towards the innovative technology technologies. And there's the Bioprocessing recovery on the, call it, large manufacturing side of things and the destocking and perhaps the consumables are again a leading indicator there. We're more participating in the CapEx side of things for instrumentation. More modest price instrumentation I realize, but it's yet -- it is. So if you look across our portfolio, we're super excited that we now have multiple products participating in there, and we think that is a distinct advantage, because you're talking about a complete portfolio of products and across a various range of price points. So I think that helps us engage a bit broader and be there for when the demand is recurring, but you're just seeing people taking their time taking being a little more thoughtful. Maybe one example to give you a bit of color, but we have a customer that's quite interested in our new MAVERICK product. They have an existing Raman Product that could be a decade old or more. And it's broken. And it's a large Pharma Company. And their CapEx is very limited. So they're having to make that decision. I don't have the dollars for both, do I replace with a new innovative technology like MAVERICK, or do I repair? And again, I can't do both. So that really makes them think very hard, and we're seeing our products remain incredibly amount of interest and differentiated, but it's taking people to have some pause, some thoughtfulness more on the evaluation side, and we're kind of building up a pipeline of those evaluations, particularly for our novel products. So maybe that adds a little bit more color to the previous response for you.