Q4 2020 908 Devices Inc. Earnings Call

March 30, 2021

[music].

Ladies and gentlemen, thank you for standing by and welcome to the nine a weight devices fourth quarter 2020 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation.

And there'll be a question and answer session to ask a question during the session on the day Crestar one on your telephone if you require any further assistance. Please press star Zero I would now like to be show series Congress comes current medical you may begin.

Thank you.

This morning, non OE devices released financial results for the quarter and for year ended December 31 2020.

If you have not received this news release for if you'd like to be added to the Companys distribution list. Please send an email to IR at nine O eight devices Dot com.

Joining me today from <unk> is Kevin Nash, Chief Executive Officer, and founder and Joe Griffith Chief Financial Officer.

Before we begin 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.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from debt was anticipated it.

Additional information regarding these risks and uncertainties appears in the section entitled forward looking statements in our press release non OE issued today.

For a more complete list and district description. Please see the risk factors section on the company's annual report on form 10-K for the year ended December 31 2020.

And in its other filings with the Securities and Exchange Commission.

Except as required by law nine weight 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 March 32021.

I'd like to turn the call over to Kevin. Thanks.

Thanks, Carrie and thank you all for joining US. This morning, I'm very pleased to welcome you to our first earnings call as a public company to review our results for the fourth quarter and the full year of 2020.

2020 was an extraordinarily difficult year on many levels, but despite all the macro challenges we made important progress across our business over the course of the year. We grew revenue, 50% and ended the year with $27 million in revenue, we placed 390 devices during 2020 and bringing our installed base to 1360.

One units. These new placements included 33 rebel units placed during its first full year of commercialization.

Our devices are now in use across 34 countries and we have devices placed at 19 of the top 20 pharmaceutical companies.

And at the end of 2020, we completed our initial public offering in December raising approximately $150 million for gross proceeds.

Like to take a moment and express my sincere thanks to our amazing team for their hard work and dedication all of the incredible progress. We have made is truly a testament to their collective efforts I would also like to thank our long standing investors for their continued support and welcome our new investors, we really look forward to develop meaningful long term relationships and working with you to grow the company.

Any together.

I want to start our call today by giving you a sense of the vision that is driving us at 900 devices history has shown us that making technology accessible to broader audiences opens doors for new users and applications, which in turn grows markets and even creates new market opportunities at night await our goal is to do exactly.

That with the analytical capabilities of mass spectrometry for using our broad technology platform to break mass spec out of the confines of a centralized laboratory and bring it to the point of need today.

Today mass spec is the gold standard of measurement and labs and serves customers in nearly all markets. It is highly regarded for its ability to provide an exquisite amount of detail across a wide variety of samples from small molecules to large complex proteins and while it is an extremely powerful analytical tool conventional mass spec instruments or <unk>.

Large expensive and highly complex at nine O eight we're seeking to re imagine where mass spec technology can be used if it's sufficiently small in size low and costs and simple to operate we see a world where the mass spec market really undergoes a transformation similar to what we've all seen happen in the computer industry from computing power.

Transitioning from the larger centralized supercomputers to distributed desktops laptops, and even to mobile devices by democratizing mass spec technology to the point of need we believe that would be able to dramatically accelerate workflows and create new classes of users and applications, we're extending access from a single centralized specialists to the.

Broadest set of customers those with the samples and the questions that want the answers faster.

We have three devices in the market today and that are driving us towards this future ZIP chip was our first microfluidics separations based product. We released in 2016. This solution is a plug and play high resolution separation platform that Optimizes mass spec sample analysis. We designed this technology being compatible with third party mass spec instruments.

In 2017, we launched Amex nine O eight it's become our flagship product and it's really the world's first commercial handheld mass spec is a truly remarkable device with its size and end to end simplicity and battery operation is designed for on <unk> high performance identification of variety of chemicals, such as drugs and explosives the does.

Rice has extraordinary sensitivity and is able to detect and identify these materials at trace amount well below their hazard levels.

In 2019, we launched our latest device rebel rebels a desktop device design for its initial use in bio processing. It's a first of its kind combining microfluidics and our micro scale mass spec technology rebel was specifically designed to characterize the extra seller environment across more than 30 different chemical species do it fast enough to enable near real time.

<unk> monitoring and control.

We estimate that the total addressable market for our products today is approximately $5 billion across forensics research in bio processing, reaching customers in pharma biotech and government and academia are first established market isn't forensics sizable and rapidly growing and our technology is now becoming an enabler for bio processing.

We enable the monitoring and control of the sales environment, which is so critical to keeping them alive and happy in all our use cases were really transforming the time to action, meaning we're working to get an answer faster to the person that has the question when and where they need it.

Over the next five years, we see this opportunity growing to $22 billion for handhelds desktops, as we extend into QA QC and expand our desktop capabilities in research in bioprocess with the emergence of cell therapies.

Looking ahead increased commercial traction will be driven by for key factors first growing our sales force.

Increasing the number of new customers third driving expansion within existing customers and finally, continuing to innovate across our platform star.

Starting with our sales force, we have direct sales staff in the U S and international distribution partners covering over 34 countries in February and we're excited to announce that the addition of Steve Davenport as our new Vice President of commercial sales, Steve is truly industry veteran with more than 30 years of experience scaling global sales organizations at multiple.

Life Science companies prior to joining nine away Steve led sales at Cytori has to record levels for the life Science Research Division, where he was responsible for our global organization over the course of his career, Steve has developed and managed multiple high performing global commercial organizations and has had multiple successful market introductions of innovative drug discovery protein.

Gene cell and genetic analysis technologies, we're really excited to have him on board as we work to build a best in class sales organization under his leadership.

Steve is based on the U K, which is we see as particularly valuable as we continue to expand our sales efforts internationally, especially in Europe last week in Europe, we participated in a key industry events bio processing summit, we contributed to the gene therapy process development session with our talk on smart data and improved media analytics.

Using a rebel desktop in addition, one of our customers and collaborators for Ing useful a scientist at the National Institute for Bioprocess Research and training gave a talk on how ZIP chip can be used for the rapid and in depth characterization of charge variance for a highly heterogeneous and complex antibody used for the treatment of <unk>.

Cancer.

The charge Berrien profile of an antibody therapeutic is a critical quality attributes because of the profound effect. These variants have on the therapeutic efficacy potency stability and regulatory clearance.

We finished the year with 30 employees across sales and marketing during our IPO, we shared our goal to more than double our sales and marketing organization over the next 12 to 18 months as we broaden and deepen our footprint as of today. This number has already grown to 40 employees and we're confident we'll be able to reach our goal of 60 employees by Q1.

'twenty 'twenty two.

Turning to customer traction in 2020, we made strong inroads with their handheld products and we generated some exciting momentum with our desktops as we continued to drive adoption of our devices, we see two key tailwind driving growth in our addressable market.

First the opioid crisis is unfortunately worsening new synthetic opioids have emerged that are thousands of times more potent than morphine and hundreds of times more potent than fentanyl further stressing our communities frontline workers and first responders. The CDC estimates that the U S suffered an almost 17% increase.

And drug related deaths from May 2019 to May 2020 in part accelerated by the pandemic.

It's frightening trend further drives the urgency for the point of need analysis that are <unk> nine O eight provides one.

One of our customers in Ohio is the Ohio Attorney General Bureau of criminal investigations and organized crime investigation Commission their executive director share that even just a speck of fentanyl can cause an overdose or death and equipping his task force officers with a device that can safely field tests to identify deadly.

<unk> is a lifesaver.

The Nx nine O eight devices doing just that and allowing his task force officers to stay one step ahead of the bad guys as they work to keep drugs out of their communities.

The second tailwind, we see is the shifting biologic therapeutic pipeline from traditional mad to more complex therapeutic modalities, including by try multi specifics or cell or gene therapies. This is driving an increase in need of characterization capabilities and an increase in the number of tests as global bio processing capacity.

Expands to accommodate our desktop devices are used extensively in bioprocess development and biotherapeutic characterization, we're proud that regeneron used our ZIP chip devices as part of their mad characterization in the rapidly development of their antibody cocktail therapy for COVID-19.

Chip offers customers the ability to radically reduce the required method development and analysis time overall, we were very encouraged by the level of new interest, we're seeing across our products and platform as we expect these market tailwind for continued to drive adoption of our products.

Turning to the expansion within our existing customers.

We focus on the building upon our track record of leveraging our customer success and testing trials and pilots into enterprise wide adoption of both devices and consumables for our handheld device is typical for a government organization to conduct a one week or longer trial prior to purchase to test our technology in their real world setting a trial.

Generally results in budgeting for a pilot that can range in size from 10 to more than 50 units. During the pilot we support our customers closely to ensure their success data is compiled throughout to assist our customer in making a larger enterprise wide justification purchase and deployment, it's our belief that investment pre and post sales with prospects that have.

The potential for enterprise adoption creates a predictable pipeline of opportunity for devices and enables their entrenchment as they become the organizational standard for our customers enterprise customers can be large government organizations with full building potential of more than a thousand handheld devices.

Today, we have approximately for accounts and 50 units and active pilot and an additional 11 accounts, representing 700 plus units that have begun full deployments across their enterprise.

We're pleased to have nearly doubled the number of accounts in this enterprise adoption stage over Q for.

Further the number of accounts at the top of the sales funnel that we are engaged with and tests and trials has continued to increase nicely in their progression to pilots with anticipated for many over the next nine to 12 months.

Today, we're excited to announce that we received a multi year $25 million order from the U S. Army under this purchase order, we will supply more than 350 additional M X nine O eight devices over the next two years, our technology will provide these users the ability to conduct chemical detection and identification.

Quickly and safely at the point of need for it.

Excited to be selected by such a large enterprise program focused on next Gen technology and look forward to enabling users to safely accomplish their mission.

With a rebel desktop we're starting to see the flywheel begin to turn with customers coming back to buy additional units today more than six organizations have purchased multiple units with the largest of these accounts, having six approximately <unk> 25 per cent of the rebel installed base. It outside North America, we expect such adoption trends to continue.

Units across multiple sites multiple units within a site and more units internationally.

And finally, we're also focused on continuing to innovate across our product portfolio. Our goal is to build market leading products that are easy to operate and our team is constantly working to make things even simpler for our customers over the next 12 to 18 months, we expect to see a continued cadence of new capabilities, including analyte panel extensions news.

Software apps additional assay kits accessory modules third party hardware and software integrations and other scientific demonstrations of the ultimate reach of the platform.

Looking ahead in 2021, we expect full year 2021 revenue to be in the range of 38 million to $40 million, representing 41% to 49% growth over full year 2020.

As we ramp our revenue over the course of the year. We're also focused in continuing to build out our incredible team at nine away people and culture, absolutely core to innovation and the addition of Steve Davenport as Vice President of commercial sales, we're really delighted to welcome more of Fitzpatrick as Vice President of product management and marketing, formerly with <unk> Corp.

Mike Turner, as Vice President and General Counsel, formerly with Goodwin Procter.

In the fall of 2020, we were thrilled to announce the appointment of Kevin for Softkey as our board Chairman. Kevin is currently the CEO of Quanta Ericsson has served on our board since 2013 as experienced as a biotech entrepreneur in health care visionary has been invaluable to us over the past eight years more recently, we also added Jeff George and then on <unk>.

Our board of directors.

I'm excited by the excellent industry leaders, we're bringing around the table and look forward to their continued guidance and partnership over the coming months, we're committed to adding additional board candidates for further strength their board and add increased diversity.

Overall, I'm really encouraged for the adoption, we're seeing from customers for talent, where you're adding to our team and the progress we're making to realize our vision.

With that I'll now turn the call over to Joe for more details of our financials in more details of our financial outlook.

Thanks, Kevin.

Revenue for the fourth quarter, 2020 was $5 7 million compared to $8 3 million in the prior year period.

Total revenue for the full year 2020 was $26 9 million up 50% from $18 million in 2019.

And service revenue for the year was $24 8 million up 61% from 2019.

This increase was largely due to progress on pilots and deployments with IMAX nine O eight resulting in an increase of 139 devices.

Long with revenue from rebels in its first full year since launch.

License and contract revenue for 2020 was $2 1 million down 19% over 2019, predominantly driven by timing of deliverables under our current contract with a government customer.

License and contract revenue has been helpful. In aligning commercially relevant developments. However, we do not expect revenues to be significant on a go forward basis.

Our installed base grew to 1361 units from 2020 with 390 devices placed during the year.

Moving to 248 devices placed in 2019.

This increase in placements was driven by continued adoption of our handhelds as well as by growing adoption of rebel and it's for full year of commercialization.

Gross profit was $2 6 million for the fourth quarter of 2020 or 40 per cent decrease from $4 3 million for the prior year period.

Gross profit for the full year of 2020 was $14 9 million on 83% increase from $8 1 million for the prior year.

Gross margin was 45 per cent for the fourth quarter 2020, compared to 52% for the prior year period gross margin for 2020 was 55 per cent compared to 45 per cent for the prior year. This increase was mainly due to scale and pacing of investments with the COVID-19 uncertainties in 2020.

Total operating expenses for the fourth quarter of 2020 for $6 5 million compared to $4 6 million in 2019.

The increase during the quarter was primarily driven by increase in selling and marketing head count as well as an increase in costs associated with becoming a publicly traded company.

Total operating expenses for 2020 or $20 7 million relatively in line was $20 2 million for operating expenses in 2019.

Net loss for the fourth quarter was $10 2 million compared to zero point $5 million in the fourth quarter of 2019.

Net loss attributable to common share stockholders for the full year was $12 9 million compared to $13 5 million in 2019.

The net loss in 2020 includes a noncash $6 1 million charge from the revaluation of the preferred stock warrants immediately prior to the closing of our initial public offering.

Discharge offset the increased gross profit in 2020.

We ended 2020 with approximately $159 million in cash cash equivalents in marketable securities.

This includes approximately 139 million in net proceeds from our IPO in December of 2020.

Also on its $15 million of debt outstanding as of December 31, 2020.

Looking ahead in 2021 as Kevin mentioned, we expect revenue to be in the range of $38 million to $40 million, representing 45% growth over full year 2020 at the midpoint of the range.

This outlook includes revenue that we expect to recognize from our multi year U S Army purchase order, which Kevin mentioned earlier in his remarks.

We expect revenue for 2021 to be more heavily weighted to the back half for the year as we progressed opportunities with handheld customers from pilots to enterprise deployments and ramp our commercial team focused on desktops.

We are also committed to continuing to invest across our business to realize the massive opportunity in front of us with the capital raised from our IPO, we are scaling our organization and investing in our technology platform to lay a strong foundation for long term growth.

At this point I would like to turn the call back to Kevin for closing comments.

Thanks, Joe We started 90 weight with the vision of democratizing mass spec by breaking it out of the confines of the central lab and bringing its power to the point of need.

This vision remains clear today, our team is focused on executing in 2021 and driving a drumbeat like cadence of momentum across our customer sales channel and platform. We look forward to updating you on our future progress and with that we'll now open it up for questions.

Ladies and gentlemen, if you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered or you wish to move yourself from the queue. Please press the pound key.

Our first question comes from Puneet <unk> with SBB Leerink.

Alright, great. Thanks.

Kevin and.

Congrats on the first quarter our first.

First question on the U S. Army released this morning could you elaborate a bit more on the $25 million contract how should we think about the placements here in 2020 one.

What sort of cadence, we should expect for the <unk> devices and.

How should we be viewing this in the light of the full year guide, which is 38 to 40 consensus is at 39, none of that has changed so I think you said that this contract is new but is and and is reflected in the guide. So I'm wondering you know if there is some conservatism in the guide or anything else that we need to be accounting.

For because if we look at the rebels side of the business clearly a very innovative instrument and a really strong ramp.

<unk> there.

On the commercial sales force too. So just wondering on on the army contract like how should we think about the cadence and the end of the guide itself.

Yeah. Thanks Puneet for the question Yeah, we're super excited that the army has chosen to adopt the M accident in a in a big way and start to roll. It out. The next Gen technology solution for them for for trace detection and <unk>.

And as we've talked in the past, we really view the sales progression of our handheld devices is going through a test and trials for pilot and then for full enterprise Rollouts and you should use view the day U S. Army News. This morning is as one of those larger enterprise accounts that's now.

Pushing it out through their organization.

As of the end of last year, we've got about for accounts that are in that pilot stage and we've got about 11 accounts that are in that enterprise level stage of which there's about 700 units there about that are represented.

I would say that are on our guidance that we've provided really anticipates the timing of this purchase order because as we've said before that that sales process of tests and trials to pilot for enterprise gives us very good visibility into the progression because we're working with the customers hand in hand to ensure their success and ensure they've got justification for an enterprise.

This level rollout.

With that said really at this time, we were anticipating the first shipments to go here as part of our 2021 guidance with the majority of it to come over the course of 2022.

Okay.

Got it.

Yeah, so maybe.

I was just going to add there on the.

U S Army opportunity.

Competitive dynamics, we won't be providing sensitivity and privacy any specifics on the timing. We are excited to have it in hand and to realize the shipments over the next two years pushing on that $25 million is service revenue. So if you think about that 25 million about 75 per cent is really.

The product revenue to be realized in our existing guidance for 2021, and then spillover into 2022.

Okay. That's very helpful and then on rebel Kevin This is such an important.

Important growth driver for you in a very large bio processing market and truly when we look at it I mean this is a groundbreaking innovation.

Sales, having seen them you know purchase and operating many of these mass specs on my own last day as I can say that you know that this surely doesn't look like a mass spec does on operated like a mass spec, but it it it delivers more than a mass spec and the PD lab. So you.

Given the powerful innovation that you have here and I. Appreciate this is you know you had the first day of launch, though that was Covid impacted you know, maybe just walk us through the expectations for rebel placements.

This year that you were expecting in terms of the commercial front youre expanding marketing efforts that you're expanding how should we think about the placements this year and the potential.

<unk> on pull through and on those two points, Joe if you could provide that.

Current placements and the rebel placements in the quarter and current pull through where you're at with the rebels.

Yes, sure I'll start there puneet, yeah rebel is absolutely very exciting product for us and it's not your father's mass spectrometer, how would you describe their innovative little desktop device and it is exciting for us because we really kind of watch that flywheel effect begin to turn here as we get those customers that are coming back for.

For multiple units at year end, we had six organizations they've got multiple units with the largest accounts having six that's up from about three that we reported three accounts having multiple units in September at the end of September So that's exciting for us and and we see that we were just scratching the surface.

Internationally, you've got about 25 per cent of those that are outside North America now and we're really working to drive that adoption broadly as you said really we are investing heavily in the commercial organization. We've reported about seed Davenport, joining the team, but then expanding across geographies and and that's driving.

On units across multiple sites and in many units within sites and then.

Definitely more internationally as we as we push through that.

Okay.

And on placements. So we need to we had 15 on new placements from Q4.

Brings us to 33 for the year and 46 from inception, our launch in Q4 2019.

On utilization or pull through on a rebel we are still early stages, but we are seeing that approximately one per month for active users and works.

Continuing to monitor and learn from our customer use cases, as we get units being utilized up and running in the customer hands. So no change in utilization to where we'd been thinking at least over the short term, which is about that one case per month that we communicated around the IPO.

Okay.

Okay, great and the last one if I could squeeze on in terms of the commercial organization at 40 today, that's great to see the progress there, but how should we think about further expansion you know through the year I think you pointed to a second quarter next year, you would expect to reach 60, but if there if you know as the organization.

On a ready to expand beyond that if if if needed maybe just help us understand and then it's great to see the addition of <unk>.

Steve to the team.

Yeah for sure.

It's absolutely a top priority for us with the use of proceeds as we've discussed before we do see very large market opportunity and are having this great early success with the with the rebel placements so investing in the commercial channels from the U S and internationally. It is so critically important for our handhelds, but in particular for our desktop product.

So yeah at the end of the year, we had about 30 people in sales and marketing and today, we've got about 40 people in sales and market marketing, 50% of those are really quota carrying field sales staff that are out.

Selling and interacting with the customer on each day, yes, we are working to grow that in debt to our goal of 60 employees about this time next year that are in the sales and marketing side. As you know you have to work across the top of the funnel and building it from the marketing perspective, and getting our name out there and then driving it all the way.

Through and until till closing that goes with those field field teams. So it's something we're continuing to monitor that right level of investment the right numbers and we will certainly invest more heavily there <unk>, but right now where we really are on track and confident that we'll hit by Covid 60 by this time next year.

Okay. That's great. Thank you and congrats on the strong first quarter.

Thank you.

Our next question comes from Doug Schenkel with Cowen.

Oh, Hey, good morning, Mike.

My first couple of questions are on guidance on in terms of components of guidance.

And any chance you'd be willing to share anything in terms of placement expectations on maybe.

Maybe delineating bi specific products or growth on pull through anything like that and if not you know, meaning if you don't want to get that granular could you at least speak qualitatively on expected growth by byproduct line you know meeting yeah, if if if.

You're guiding overall revenue growth in 2020, one to other mid to high Forty's, yet do you expect that to be more weighted towards instruments or consumables. However, you want to frame it would be helpful. Thank you.

Sure.

Just some color in income you can fill in some of the pieces.

Yeah at this point, we won't be guiding to a number for our annual installed base.

That said I think if if we kind of work through the math and the.

The revenue range that we provided you chi that we begin to approach for about 2000 units by year end.

From a consideration of handheld and desktop perspective, we.

We see both as key growth drivers.

Here in 2021.

Handhelds with deployments like the U S Army that we just talked to you and others.

The pipeline, but also rebel with it.

<unk> opportunity not only for new device placements, but the building recurring revenue opportunity as we build the installed base and cause an increase in our active user base.

That's great Joe. Thank you for that and then on just very quick on pacing I know you talked in your prepared remarks about this being a pretty back end loaded year I think the street's assuming like 10% to 11% of sales in Q1 70 per cent of sales in the second half.

That's obviously consistent with your qualitative remarks is that too much or is that is that about right at least as we sit here at the end of Q1.

But I think that's about right.

Especially related to you know kind of for the first step back half split.

We do expect the revenues as we've discussed heavily related to the back half of the year, which would align with some of those historical trends on a government year end spending in pharma and for your push for.

If you look back at 2020 that was the exception with the deployment of some handhelds in Q2, 2019, or 2020, where we accelerated the shipment to the COVID-19 uncertainties.

And we would expect to return to more traditional trends switches from those percentage that you described.

Okay, and then and obviously given its weighted March if it was gonna be drastically different from that.

That would be a good opportunity to clean that up and you have pretty good visibility. So that's helpful.

I guess my last one is just a follow up on some other comments on the sales force expansion plans for further expansion in terms of incentive structure are there any changes contemplated in I guess really specifically what I'm trying to get at is are are for new hires.

Prioritizing rebel for example, or you know is the incentive structure on the motivation of structure you are much the same as it's always fun.

Yeah, Yeah. So we really think of sales and in both government sales to government customers and into our commercial customers and we do have a sales team that focuses on our government customers, which is primarily of course are our handheld devices and then they have the sales.

That's focused more on our desktop devices and so in that way, we see that we can maintain focus and build and realize the potential of both product lines. If you will from the handhelds and the desktops in the case of our desktop or our commercial reps out there they're compensated on the ZIP chip as.

Well as the rebel and then on the recurring and they have they have bookings targets for both devices and that recurring revenue.

As you know rebel it is our most exciting desktop that we've got out there and it's very critical for us in the bio processing area, but we loved zip chip too because of its strategic importance and it's really it gives us that purview into future market potentials, and then as you might recall the ZIP chip application is what for.

On our product called rebel, but so we do have two teams focused appropriately on handhelds and desktops.

And presumably.

The hiring given.

Again, you are enthused about all your products, but in terms of just building off of what you described on on the.

On the rebel side in flip chip for.

Presumably a lot of the hiring is tilted to that side is that a fair or something that that is absolutely fair on our handheld devices were launched a couple of years earlier than our rebel and it has a more mature and that was the second generation devices and so there's a more mature sales organization on that side. So that's why we've been investing more.

On the commercial sales organization with Steve Davenport, and the rest are there.

Okay understood. Thank you.

Sure.

The next question comes from Brian Weinstein with William Blair.

Hey, guys. Good morning, Thanks for taking the question for Tomorrow right.

So.

Recognizing that we're still a bit early in the development around rebel I I still would like to kind of dig in a little bit here because you know the biggest question that we get.

Is around that Tam expansion and everything that you guys are looking out there and what you've outlined so can you be a little bit more specific about that Tam expansion in what specifically you need to add to the system in terms of analytic capabilities in order to unlock that and how should we be thinking about the timing of some of those additions in keeping tab.

On that.

Yeah for sure yeah. The the rebel is very exciting for us, it's it's largely going into the process development labs today, which we see as a sizable opportunity and we really see that that grows further as we as we take the device and connected more intimately to the bioreactors on particularly in these labs.

The smaller volume Bioreactors and that comes through on.

Online connection of the of the rebel two a bioreactor and we are working on that as we mentioned in the past.

That's plumbing, but its sophisticated plumbing.

And it will take take us through for years to be getting to that point, but we see a lot of opportunity within <unk>.

Our hands today as well as more incremental improvement so I would say over the next 12 to 18 months you should see really a continued progression of the rebels product, including analyte panel expansion and new software applications that come out new assay kits that go with it and we've talked before that.

We've been really focused on mammalian cell culture processes, but we also see opportunity in synthetic biology and other cell based products.

Products, they're clean markets and the like so I think that you shouldn't expect to see from US is really a while we work on that larger online connectivity that will take a number of years to get there in full relation in connection to the to the bioreactor as we've talked you should see that kind of continued cadence of these kits.

And chips and software assays to go with it and build out.

Dan.

Great. Thank you for that.

And you know we spent a lot of time on the call talking about sales force and the numbers there, but I'm wondering if we can spend a little bit of time, just on the marketing side. So.

What are some of the specific initiatives that you guys are deploying this year to really drive awareness of the product. So it's more than just putting feet on the ground right. So so what are the specific.

Programs that you have in place and the things that you're doing to really drive awareness of the products more so on the.

For the commercial side than on the.

And then on the handheld side.

Yeah, absolutely you are right there is feet on the street, but then there's also getting your name out there and getting the product are understood and valued and realized that it's in the marketplace and we did announce that we added more Fitzpatrick, who is now running our marketing product management side, formerly with water. So she is adding a lot of horsepower and really driving that.

Top of the funnel activities. So in that regard, yes, we are working on really amping up our activities with key opinion leaders and working with people on on various publications trade Journal publications, we announce that just last week in Europe. We had some good publications on our talks I should say at the Euro.

P bio processing summit on one of our staff is also doing on the West Coast Bio processing conference. This week. So a lot of activity I'd say at that top of the funnel a lot of initiatives in getting the word out working with customers, increasing the publications and trade journals and the like so on I think you can continue to see that.

We move forward.

Great and then last one for me with the New administration now or are you seeing any changes or expecting any changes either positive or negative to the funding environment.

As it relates to your handheld capabilities and opportunities.

On the handheld side is as you mentioned in the in the some of the remarks earlier. Unfortunately, a major driver for that is the fentanyl crisis Sentinel epidemic and that continues to grow.

Particularly I'm here as everyone's been in lockdown for for over a year, so while state budgets and federal budget certainly you have to deal with the priorities of Covid. There. There is there still remains a focus that we see in fighting that but no.

In crisis, and so we're not anticipating any significant change on that side to the negative and as you know there has been motions out of the administration to further invest in technologies and in science to get at some of our health care needs and should we expect that to be a favorable one.

Time.

Okay. Thanks, guys.

Thanks.

The next question comes from Dan Arias with Stifel.

Good morning, guys. Thanks, Kevin maybe just a couple of questions on the rebel.

Are there are there any trends that you're seeing amongst users there that sort of have one type of therapeutic category likely to drive a higher level of pull through than the others.

Trying to get a sense for whether when you look at what's going on at least from the first year anyways.

You could think about the consumables opportunity being higher if we stumble upon a car T lab versus a monoclonal lab that might be putting instruments work.

Yeah, Yeah, yeah. So today, that's a great question I mean today, our technology. The rebel is being adopted across labs that are handing handling a lot of different modalities of therapeutics.

As you know the pipeline is really shifting our biologics pipeline is really shifting towards a cell therapies.

And and or more complex monoclonal antibodies.

Specifics tractors have etcetera, and so as as we see that those folks and the process development labs are having to kind of put all their horsepower on developing those processes. So we do see that as an early trend on that.

People are adopting for some of those more novel modalities, where they're definitely looking for insight. So over time that may prove out to be a differentiated I'd say today. It's early days. So we're kind of seeing that pull through that shows when talking about the kind of kid a month I'm really across the board and I don't think we can slice and dice it very accurately.

For you at this time to the therapeutic modality.

Okay, but maybe along those lines if I think about the customer that has the six rebel units is there anything that's going on there that is beyond one kid per month per instrument.

Any period that kind of says alright, one for you embedded further into a lab or a process that leads to higher utilization.

No. It's early maybe it's too early to make that call, but I'm just curious about how usage ramp might evolve there.

Great Great question on I think we will continue to learn as we deployed not only on single units at sites, but two units, so decided or across different organizations.

We are seeing some other usage cases think through whether they're we call them continuous mode or.

They're utilizing it on a routine basis for more of an on demand or project basis. So we get excited up more of those continuous opportunities and we're continuing to monitor and then you.

Our customers are our best advocates in that area. So it's a little early stage to try to make a specific assessment on that one customer that's just kind of coming up to speed and getting active we consider our customers, especially on the desktop side is once they are active in up and running so we're starting to see that and should learn.

Over the coming months and especially here in 2021 on the opportunity on the pull through for that customer and others. They have one in multiple units.

Yeah, Okay, and then Joe apologies, if I missed it in your prepared remarks, but what kind of gross margin assumption are you, making for 2021, given where you're finishing the year here.

And is there a pacing consideration that we should think about over the course of the quarters.

Sure.

So from a gross margin perspective for 2020, we were at 55% which was up.

With volume and as we think about going forward kind of being in that mid fifties is probably reasonable.

As I look back over the trends for the year really volume within individual quarters drove a range in 2020 anywhere from the mid forties to low 60, so a big piece is being able to scale and drive the opportunity, but as we look to continue to invest in our infrastructure and our operations as a whole.

I think being in that mid fifties for 2021, that's not unreasonable.

Okay. Thank you very much for us.

Okay.

Ladies and gentlemen, there are no further questions at this time, but since there are no. Further questions. This also does conclude today's presentation. You may now disconnect and have a wonderful day.

Yeah.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the non await devices for quarter 2020 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session will need to press star one on your telephone if you require any further assistance. Please press Star then zero I would now like to do.

Aerospace Congress comes current medical you may begin.

Thank you.

No no way devices released financial results for the quarter and for year ended December 31 2020.

You have not received this news release or if you'd like to be added to the Companys distribution list. Please send an email to IR at nine O eight devices dotcom.

Joining me today from nine on weight, it's Kevin Nash, Chief Executive Officer, and founder Joe Griffith Chief Financial Officer.

Before we begin 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.

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 our press release nine away issue today.

For a more complete Western district description. Please see the risk factors section on the company's annual report on form 10-K for the year ended December 31, 2020 and.

And in its other filings with the Securities and Exchange Commission.

Except as required by law nine always disclaims any intention or obligation to update or revise any financial projections or forward looking statements other because of new information future events or otherwise.

This conference call contains time sensitive information and is accurate only as of the live broadcast March area for 2021.

I'd like to turn the call over to Kevin. Thanks.

2020 was an extraordinarily difficult year on many levels, but despite all the macro challenges we made important progress across our business over the course of the year. We grew revenue, 50% and ended the year with 27 million in revenue, we placed 390 devices during 2020 and bringing our installed base to 1360.

Units. These new placements included 33 rebel units placed during its first full year of commercialization.

Our devices are now in use across 34 countries and we have devices placed at 19 of the top 20 pharmaceutical companies.

And at the end of 'twenty 'twenty, we completed our initial public offering in December raising approximately $150 million for gross proceeds.

Together.

I wanted to start our call today by giving you a sense of the vision that it's driving us at 900 devices history has shown us that theyre, making technology accessible to broader audiences opens doors for new users and applications, which in turn grows markets and even creates new market opportunities at night weight. Our goal is to do exactly.

That with the analytical capabilities of mass spectrometry, where using our broad technology platform to break mass spec out of the confines of a centralized laboratory and bring it to the point of need today.

Good day mass spec is the gold standard of measurement and labs and serves customers in nearly all markets. It's highly regarded for its ability to provide an exquisite amount of detail across a wide variety of samples from small molecules to large complex proteins and while it is an extremely powerful analytical tool conventional mass spec instruments are <unk>.

Large expensive and highly complex at nine O eight we're seeking to re imagine where mass spec technology can be used if it's sufficiently small in size low on costs and simple to operate we see a world where the mass spec market really undergoes a transformation similar to what we've all seen happened in the computer industry from computer can powered.

Transitioning from the larger centralized supercomputers to distributed desktops laptops, and even to mobile devices by day.

<unk> mass spec technology to the point of need we believe that we'll be able to dramatically accelerate workflows and create new classes of users and applications. We're extending access from the single centralized specialists to the broadest set of customers those with the samples and the question that want the answers faster.

We have three devices in the market today and that are driving us towards this future ZIP chip was our first microfluidics separations based product. We released in 2016. This solution is a plug and play high resolution separation platform that Optimizes mass spec sample analysis. We designed this technology would be compatible with third party mass spec instruments.

In 2017, we launched Amex nine away, it's become our flagship product and it's really the world's first commercial handheld mass spec is a truly remarkable device with its size and end to end simplicity and battery operation is designed for on <unk> high performance identification of a variety of chemicals, such drugs and explosives the debt.

Rice has extraordinary sensitivity and is able to detect and identify these materials that trace amount well below their hazard levels.

In 2019, we launched our latest device rebel rebels, a desktop device design for initial Houston bio processing. It's a first of its kind, combining microfluidics and or Microscale mass spec technology rebel was specifically designed to characterize the extra seller environment across more than 30 different chemical species and do it fast enough to enable near real time.

Monitoring and control.

We estimate that the total addressable market for our products today, it's approximately $5 billion across forensics research in bio processing, reaching customers in pharma biotech and government and academia are first established market isn't forensics sizable and rapidly growing and our technology is now becoming an enabler for bio processing.

Where we enable the monitoring and control of the sales environment, which is so critical to keeping them alive and happy in.

On all our use cases for really transforming the time to action, meaning we're working to get an answer faster to the person that has the question when and where they need it over.

Over the next five years, we see this opportunity growing to $22 billion for handhelds desktops, as we extend into QA QC and expand our desk type capabilities in research in bioprocess with the emergence of cell therapies.

Looking ahead increased commercial traction will be driven by for key factors first growing our sales force.

Increasing the number of new customers third driving expansion within existing customers and finally, continuing to innovate across our platform.

Life Science companies prior to joining nine away, Steve led sales that Cytori is to record levels for the life Science Research Division, where he was responsible for our global organization over the course of his career, Steve has developed and managed multiple high performing global commercial organizations and has had multiple successful market introductions of innovative drug discovery approach.

T cell and genetic analysis technologies, we're really excited to have him on board as we work to build a best in class sales organization under his leadership.

Using a rebel desktop in addition, one of our customers and collaborators boring you saw the scientists at the National Institute for Bioprocess Research and training gave a talk on how ZIP chip can be used for the rapid and in depth characterization of charge variance for a highly heterogeneous and complex antibody used for the treatment of.

Cancer the.

The charge varying profile of an antibody therapeutic is the critical quality attributes because of the profound effect. These variants have on the therapeutic efficacy potency stability and regulatory clearance.

We finished the year with 30 employees across sales and marketing during our IPO, we shared our goals for more than double our sales and marketing organization over the next 12 to 18 months as we broaden and deepen our footprint as of today. This number has already grown to 40 employees and we're confident we'll be able to reach our goal of 60 employees by Q1 two.

'twenty 'twenty two.

Turning to customer traction.

In 2020, we made strong inroads with their handheld products and we generated some exciting momentum with our desktops as we continued to drive adoption of our devices, we see two key tailwind driving growth in our addressable markets.

Related deaths from May 2019 to May 2020 in part accelerated by the pandemic.

Frightening trend for the drives the urgency for the point of need analysis that our amex neither way it provides.

<unk> is a lifesaver.

The Nx nine O eight devices doing just that and allowing its task force officers to stay one step ahead of the bad guys as they work to keep drugs out of their communities.

The second tailwind, we see is the shifting biologic therapeutic pipeline from traditional babs to more complex therapeutic modalities, including by try multi specifics or cell or gene therapies. This is driving an increase in need of characterization capabilities and an increase in the number of tests as global bio processing capacity.

[noise] spans to accommodate our desktop devices are used extensively in bioprocess development and biotherapeutic characterization, we're proud that regeneron used our ZIP chip devices as part of their mab characterization in the rapidly development of their antibody cocktail therapy for COVID-19, ZIP chip offers customers the ability to radically.

We reduced the required method development and analysis time overall, we were very encouraged by the level of new interest we're seeing across our product platform. As we expect these market tailwind for continued to drive adoption of our products.

Turning to the expansion within our existing customers.

We focus on the building upon our track record of leveraging our customer success and testing trials and pilots into enterprise wide adoption of both devices and consumables for our handheld device. It is typical for a government organization to conduct a one week or longer trial prior to purchase to test our technology in their real world setting a try.

Generally results in budgeting for a pilot that can range in size from 10 to more than 50 unit. During the pilot we support our customers closely to ensure their success data is compiled throughout to assist our customer in making a larger enterprise wide justification purchase and deployment, it's our belief that the investment pre and post sales with prospects that have.

Have the potential for enterprise adoption creates a predictable pipeline of opportunity for devices and enables their entrenchment as they become the organizational standard for our customers enterprise customers can be large government organizations with full fielding potential of more than a thousand handheld devices.

Today, we have approximately for accounts and 50 units and active pilot an additional 11 accounts, representing 700 plus units that have begun full deployments across their enterprise.

We're pleased to have nearly doubled the number of accounts in this enterprise adoption stage over Q for.

Further the number of accounts at the top of the sales funnel that we are engaged with in tests and trials has continued to increase nicely in their progression for pilots is anticipated for many over the next nine to 12 months.

Today, we're excited to announce that we received a multi year 25 million dollar order from the U S. Army under this purchase order, we will supply more than 350, additional amex and Iot devices over the next two years, our technology will provide these users the ability to conduct chemical detection and identification.

Quickly and safely at the point of need.

We're excited to be selected by such a large enterprise program focused on Nextgen technology and look forward to enabling users to safely accomplish their mission.

With our rebel desktop we're starting to see the flywheel begin to turn with customers coming back to buy additional units today more than six organizations have purchased multiple units with the largest of these accounts, having six approximately 25 per cent of the rebel installed base. It outside North America, we expect such adoption trends to continue.

Your units across multiple sites multiple units within a site and more units internationally.

For apps additional assay kits accessory modules third party hardware and software integrations and other scientific demonstrations of the ultimate reach of the platform.

Looking ahead in 2020, one we expect full year 2021 revenue to be in the range of 38 million to $40 million, representing 41% to 49% growth over full year 2020.

As we ramp our revenue over the course of the year. We're also focused on continuing to build out our incredible team at nine away people and culture, absolutely core to innovation and the addition of Steve Davenport as Vice President of commercial sales, we're really delighted to welcome more of Fitzpatrick as Vice President of product management and marketing, formerly with <unk> Corp.

And Mike Turner, as Vice President and General Counsel, formerly with Goodwin Procter.

In the fall of 2020, we were thrilled to announce the appointment of Kevin Rosas Ski Other board Chairman Kevin is currently the CEO of Quanta Ericsson has served on our board since 2013 as experienced as a biotech entrepreneur in health care, a visionary has been invaluable to us over the past eight years more recently, we also added Jeff George and then on loyal to our.

Our board of directors.

I'm excited by the excellent industry leaders, we are bringing around the table and look forward to their continued guidance and partnership over the coming months, we're committed to adding additional board candidates for further strength their board and add increased diversity.

Overall, I'm really encouraged by the adoption, we're seeing from customers the talent, where you're adding to our team and the progress we're making to realize our vision with that I'll now turn the call over to Joe for more details of our financials in more details of our financial outlook.

Thanks, Kevin.

Revenue for the fourth quarter, 2020 was $5 7 million compared to $8 3 million in the prior year period.

Total revenue for the full year 2020 was $26 9 million up 50% from $18 million in 2019.

And service revenue for the year was $24 8 million up 61% from 2019.

This increase was largely due to progress on pilots and deployments with IMAX nine on weight, resulting in an increase of 139 devices.

Along with revenue from Russell in its first full year since launch.

License and contract revenue for 2020 was $2 1 million down 19% over 2019, predominantly driven by timing of deliverables under our current contract with a government customer.

License and contract revenue has been helpful. In aligning commercially relevant developments. However, we do not expect revenues to be significant on a go forward basis.

Our installed base grew to 1361 units from 2020 with 390 devices placed during the year.

Average of 248 devices placed in 2019.

This increase in placements was driven by continued adoption of our handhelds as well as by growing adoption of rebel and its first full year of commercialization.

Gross profit was $2 6 million for the fourth quarter of 2020 or 40 per cent decrease from $4 3 million for the prior year period for.

Profit for the full year of 2020 was $14 9 million on a.

83% increase from $8 1 million for the prior year.

Gross margin was 45 per cent for the fourth quarter 2020, compared to 52% for the prior year period gross.

Gross margin for 2020 was 55 per cent compared to 45 per cent for the prior year. This increase was mainly due to scale and pacing of investments with the COVID-19 uncertainties in 2020.

Total operating expenses for the fourth quarter of 2020 for $6 5 million compared to $4 6 million in 2019.

The increase during the quarter was primarily driven by increase in selling and marketing head count as well as an increase in costs associated with becoming a publicly traded company.

Total operating expenses for 2020 or $20 7 million relatively in line was $20 2 million for operating expenses in 2019.

Net loss for the fourth quarter was $10 2 million compared to zero point $5 million in the fourth quarter of 2019.

Net loss attributable to common share stockholders for the full year was $12 9 million compared to $13 5 million in 2019.

The net loss in 2020 includes a noncash $6 1 million charge from the revaluation of the preferred stock warrants immediately prior to the closing of our initial public offering.

Discharge offset the increased gross profit in 2020.

We ended 2020 with approximately $159 million in cash cash equivalents from marketable securities.

This includes approximately 139 million in net proceeds from our IPO in December of 2020.

Also on its $15 million of debt outstanding as of December 31, 2020.

Looking ahead in 2020, one as Kevin mentioned, we expect revenue to be in the range of $38 million to $40 million, representing 45% growth over full year 2020 at the midpoint of the range.

This outlook includes revenue that we expect to recognize from our multiyear U S Army purchase order, which Kevin mentioned earlier in his remarks.

At this point I would like to turn the call back to Kevin for closing comments.

Thanks, Joe we started nine of weight with the vision of democratizing mass backed by breaking it out of the confines of the central lab and bringing its power to the point of need.

Our first question comes from Puneet <unk> with SBB Leerink.

Alright, great. Thanks.

Kevin and.

That's on the first quarter.

Our first question on the U S. Army released this morning could you elaborate a bit more on the $25 million contract how.

How should we think about the placements here in 2021 what sort of cadence we should expect for the net it makes ninoy devices and you know how should we be viewing this in the light of the full year guide, which is 38 to 40 consensus thirty-nine none of that has changed so I think you said that.

This contract is as new but it's and is reflected in the guide. So I'm wondering if there is some conservatism in the guide or anything else that we need to be accounting for them because if we look at the rebel side of the business clearly a very innovative instrument and their really strong ramp.

Emerging there are with the commercial sales force too. So just wondering on on the army contract like how should we think about the cadence and on the guide itself.

Yeah. Thanks Puneet for the question Yeah, we're super excited that the army has chosen to adopt an accident in a in a big way and start to roll it out as the next Gen technology solution for them for for trace detection and as we've talked in the past, we really view the sales progression of our handheld devices is going.

Through our tests and trials to pilot and then a full enterprise Rollouts and you should use view the day U S. Army News. This morning is as one of those larger enterprise accounts that's now.

Pushing it out through their organization and as of the end of last year. We've got about four accounts that are in that pilot stage and we've got about 11 accounts that are in that enterprise level stage of which there's about 700 units thereabout that are represented.

I would say that our guidance that we've provided really anticipates the timing of this purchase order because as we said before that that sales process of tests and trials to pilot for enterprise gives us very good visibility into the progression because we're working with the customers hand in hand to ensure their success and ensure they've got justification for another.

Price level rollout.

With that said really at this time, we were anticipating the first shipment to go here as part of our 2021 guidance with the majority of it to come over the course of 2022.

Okay.

Got it.

Yeah, so maybe.

I was just going to add there on the U S Army opportunity.

With competitive dynamics, we won't be providing sensitivity and privacy any specifics on the timing. We are excited to have it in hand and to realize the shipments over the next two years you know a portion of that $25 million is service revenue. So.

If you think about that 25 million about 75 per cent is related to product revenue to be realized in our existing guidance for 2021 and then spillover into 2022.

Okay, that's very helpful.

And then on rebel Kevin this as.

Such an important growth driver for you in a very large bio processing market and truly when we look at it I mean this is a groundbreaking innovation.

Sales, having seen them you know purchase and operating many of these aspects in my own last day as I can say that you know this surely doesn't look like a mass spec doesn't operate like a mass spec, but it delivers more than a mass spec and the PD lab. So you know given the powerful innovation that you have here and I. Appreciate this is you know you had for <unk>.

Lunch, though that was COVID-19 impacted you know, maybe just walk us through the expectations for rebel placements. This.

This year that you were expecting in terms of the commercial front youre expanding marketing efforts that youre expanding how should we think about the placements this year and the potential improvements on pull through and on those two points. Joe If you could provide the current placements and the rebel placements in the quarter and current pull through where you're at.

Led the rebels.

Yes, sure I'll start there puneet, yeah rebel is absolutely very exciting product for us and it's not your father's mass spectrometer has you describe there it's our innovative little desktop device and it is exciting for us because we really have watched that flywheel effect begin to turn here as we get those customers that are coming back for from <unk>.

People units at year end, we had six organizations they've got multiple units with the largest accounts having six that's up from about three that we reported a three accounts having multiple units in September at the end of September So that's exciting for us and we see that we were just scratching the surface.

He's got about 25 per cent of those that are that are outside North America now and we're really working to drive that adoption broadly as you said really we are investing heavily in the commercial organization, we've reported about Steve Davenport, joining the team, but then expanding across geographies and and that's driving.

Units across multiple sites and in many units within sites and then.

Definitely more internationally as we as we push through that.

Okay.

And on placements. So can you too we had 15 new placements from Q4.

Brings us to 33 for the year and 46 from inception or launch in Q4 2019.

On utilization or pull through you know a rebel.

So early stages, but we are seeing that approximately one per month for active users.

Continuing to monitor and learn from our customer use cases as we can.

Units being utilized up and running in the customer hands. So no change in utilization to where we'd been thinking at least over the short term, which is about that one kit per month that we communicated around the IPO.

Okay, great and the last one if I can squeeze on and in terms of the commercial organization at 40 today, that's great to see the progress there but.

How should we think about further expansion you know through the year I think you pointed to a second quarter next year, you would expect to reach 60, but if there is the.

<unk> ready to expand beyond that if if if needed maybe you can just help us understand and it's great to see the addition of the <unk>.

Steve to the team.

Yeah for sure on it is absolutely a top priority for us with the use of proceeds as we've discussed before we do see very large market opportunity and are having this great early success with the with the rebel placements. So investing in the commercial channels from the U S and internationally is so critically important for us.

Handhelds, but in particular for our desktop products. So yeah at the end of the year, we had about 30 people in sales and marketing and today. We've got about 40 people in sales and market marketing 50 per cent of those really quota carrying field sales staff that are out selling.

And interacting with the customer on each day, yes, we are working to grow that in debt to our goal of 60 employees about this time next year that are in the sales and marketing side. As you know you have to work across the top of the funnel and building it from the marketing perspective, and getting our name out there and then driving it all the way through it.

Until closing with those with those field field teams. So it's something we're continuing to monitor that right level of investment the right numbers and we will certainly invest more heavily there if deemed but right now we're really on track and confident that we'll hit by Covid 60 by this time next year.

Okay. That's great. Thank you and congrats on the strong first quarter.

Thanks for that.

Thank you.

Our next question comes from Doug Schenkel with Cowen.

Yeah.

Hey, good morning.

My first couple of questions are on guidance on in terms of components of guidance.

And any chance you'd be willing to share anything in terms of placement expectations on.

Maybe delineating bi specific products or growth and pull through anything like that in and if not you know, meaning if you don't want to get that granular could you at least speak qualitatively on expected growth by byproduct line you know meeting yeah, if if you're guiding overall revenue growth in 2020 one to other.

Mid to high Forty's do you expect that to be more weighted towards instruments or consumables. However, you want to frame it would be helpful. Thank you.

Sure.

Just some color and Kevin can fill in some of the pieces.

Yes at this point, we won't be guiding to a number for our annual installed base.

That said I think if if we kind of work through the math and the <unk>.

Revenue range that we provided you choose that we begin to approach for about 2000 units by year end.

From a consideration of handheld and desktop perspective.

We see both as key growth drivers here in 2021 on.

Handhelds with deployments like the U S Army that we just talked to you and others.

The pipeline, but also rebel with its opportunity not only for new device placements, but the building recurring revenue opportunity as we build the installed base and cause an increase in our active user base.

Yeah.

That's obviously consistent with your qualitative remarks is that too much or is that is that about right at least as we sit here at the end of Q1.

But I think that's about right.

Especially related to you know kind of for the first half back half split.

If you look back at 2020, if it was the exception with the deployment of some handhelds in Q2, a 2019 or 2020, where we accelerated the shipment to the COVID-19 uncertainties.

We would expect to return to more traditional trends, which isn't the percentage that you described.

Okay.

Given its late March if it was gonna be drastically different from that.

Probably be a good opportunity to clean that up and you have pretty good visibility. So that's helpful.

I guess my last one is just a follow up on some of the comments on the sales force expansion plans for further expansion in terms of incentive structure are there any changes contemplated in that I guess really specifically what I'm trying to get out is or are the new hires.

Prioritizing rebel for example, or you know is the incentive structure on the motivation of structure are much the same as it's always fun.

Yeah, Yeah. So we we really think of sales and in both government sales to government customers and into our commercial customers and we do have a sales team that focuses on our government customers, which is primarily of course are our handheld devices and then they have the sales that's focused more on our desktop devices and so in that way.

We see that we can maintain focus and build and realize the potential of both product lines. If you will of the handhelds and the desktops in the case of our desktop or our commercial reps out there, they're they're compensated on the ZIP chip as well as the rebel and then on the recurring and they have.

Bookings targets for both devices and that recurring revenue.

On a product called rebel, but so we do have two teams focused appropriately on handhelds and desktops.

And presumably.

The hiring given.

Again, you are enthused about all your products, but in terms of just building off of what you described on on.

On on the rebel side Zip trip for.

Presumably a lot of the hiring is tilted to that side is that a fair assumption that that is absolutely fair on our handheld devices were launched a couple of years earlier than our rebel and it has a more mature and that was the second generation devices and so there's a more mature sales organization on that side. So that's why we've been investing more.

Heavily on the commercial sales organization with Steve Davenport.

They're.

Okay understood. Thank you.

Sure.

The next question comes from Brian Weinstein with William Blair.

Hey, guys. Good morning, Thanks for taking the questions. Good morning, Greg I always come on.

So.

Recognizing that we're still a bit early in the development around rebel I I still would like to kind of dig in a little bit here because you know the biggest question that we get.

Is around that Tam expansion in everything that you guys are working out there and what you've outlined so can you be little bit more specific about that Tam expansion and what specifically you need to add to the system in terms of analytics capabilities in order to unlock that and how should we be thinking about the timing of some of those additions in keeping cash.

On that.

The smaller volume Bioreactors and that comes through on online connection of the of the rebel two a bioreactor and we are working on that as we mentioned in the past.

That's plumbing, but its sophisticated plumbing.

It will take take us through for years to be getting to that point, but we see a lot of opportunity within <unk>.

Our hands today as well as more incremental improvement so I would say over the next 12 to 18 months you should see really a continued progression of the rebel product, including analyte panel expansion and new software applications that they've come out new assay kits that go with it and we've talked before that.

We've been really focused on mammalian cell culture processes, but we also see opportunity in synthetic biology and other cell based <unk>.

Products, they're clean markets and the like so I think that you shouldn't expect to see from US is really a.

While we work on that larger online connectivity that will take a number of years to get there in full relation in connection to the to the buyer reactor as we've talked you should see that kind of continued cadence of these kits and chips and software assays to go with it and build out.

Dan.

Great. Thank you for that.

And you know we spent a lot of time on the call talking about sales force and the numbers there, but I'm wondering if we can spend a little bit of time, just on the marketing side. So.

Programs that you have in place and the things that youre doing to really drive awareness of the products more so on the.

For the commercial side than on the other than.

On the handheld side.

Yeah, absolutely you're right there is feet on the street, but then there's also getting your name out there and getting the product are understood and valued and realized that it's in the marketplace and we did announce that we added more Fitzpatrick, who is now running our marketing product management side, formerly with water. So she's adding a lot of horsepower and really drives.

On that top of the funnel activities. So in that regard, yes, we are working on really amping up our activities with key opinion leaders and working with people on on various publications trade Journal publication, we announce that just last week in Europe. We had some good publications on our talks I should say.

The European Bio processing summit on one of our staff is also doing on the West Coast Bio processing conference. This week. So a lot of activity I'd say at that top of the funnel a lot of initiatives in getting the word out working with customers increasing the publications on trade journals and the like so on I think you can continue to see that.

As we move forward.

Great and then last one for me with the New administration now or are you seeing any changes or expecting any changes either positive or negative to the funding environment as it relates to your handheld capabilities and opportunities.

On the handheld side is as you mentioned in the in the some of the remarks earlier. Unfortunately.

Major driver for that is the fentanyl crisis Sentinel epidemic and that continues to grow.

Particularly I'm here as everyone's been in lockdown for for over a year.

So while our state budgets and federal budget, certainly you have to deal with the priorities of Covid. There. There is there still remains a focus that we see in fighting that but no.

In crisis, and so we're not anticipating any significant change on that side to the negative and.

As you know there has been motions out of the administration to further invest in technologies and in science to get at some of our health care needs and should we expect that to be a favorable overtime.

Okay. Thanks, guys.

Thanks.

The next question comes from Dan Arias with Stifel.

Good morning, guys. Thanks, Kevin maybe just a couple of questions on the rebel.

Are there are there any trends that you're seeing amongst users there that sort of have one type of therapeutic category likely to drive a higher level of pull through than the others.

Just trying to get a sense for whether when you look at what's going on at least from the first year anyways.

You should think about the consumables opportunity being higher if we stumble upon a car T lab versus a monoclonal lab that might be putting instruments work.

Yeah, Yeah, yeah. So today, that's a great question I mean today, our technology. The rebel is being adopted across labs that are hinting handling a lot of different modalities of therapeutics.

As you know the pipeline is really shifting our biologics pipeline is really shifting towards a cell therapies.

And and or more complex monoclonal antibodies.

Specifics tranches have etcetera, and so as as we see that those folks and the process development labs are having to kind of put all their horsepower on developing those processes. So you do see that as an early trend.

People are adopting for some of those more novel modalities, where they're definitely looking for any insight. So over time that may prove out to be a differentiated I'd say today. It's early days. So we're kind of seeing that pull through that shows when talking about the kind of kid a month I'm really across the board and I don't think we can slice and dice it very accurately.

For you at this time to the therapeutic modality.

Okay, but maybe along those lines if I think about the customer that has the six rebel units is there anything that's going on there that is beyond one kid per month per instrument.

Any period that kind of says alright, one for you embedded further into a lab or a process that leads to higher utilization.

I know, it's early maybe it's too early to make that call, but I'm just curious about how usage ramp might evolve there.

Great Great question on I think we will continue to learn as we deployed on only a single units at sites, but two units, so decided or across different organizations.

We are seeing some other usage cases think through whether they're we call them continuous mode or.

They're utilizing it on a routine basis for more of an on demand or project basis. So we get excited up more of those continuous opportunities and we're continuing to monitor and then you.

Our customers are our best advocates in that area. So it's a little early stage to try to make a specific assessment on that that one customer that's just kind of coming up to speed and getting active we consider our customers, especially on the desktop side is once they are active in up and running so we're starting to see that and should learn.

Over the coming months and especially here in 2021 on the opportunity on the pull through for that customer and others. They have won multiple units.

Yeah, Okay, and then Joe apologies, if I missed it in your prepared remarks, but what kind of gross margin assumption are you, making for 2021, given where you're finishing the year here.

And is there a pacing consideration that we should think about over the course of the quarters.

Sure.

So from a gross margin perspective for 2020, we were at 55% which was up.

With volume and as we think about going forward, what kind of being in that mid fifties is probably reasonable.

As I look back over the trends for the year really volume within individual quarters drove a range in 2020 anywhere from the mid <unk> to low 60, so a big piece is being able to scale and drive the opportunity, but as we look to continue to invest in our infrastructure and our operations as a whole.

I think being in that mid fifties for 2021, that's not unreasonable.

Okay. Thank you very much for us.

Okay.

Q4 2020 908 Devices Inc. Earnings Call

Request a DemoDemo

MASS

908 Devices

Earnings