Q2 2021 908 Devices Inc. Earnings Call

August 4, 2021

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Hello, Thank you for standing by and welcome to the 908 devices second quarter 2021 financial results Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone.

Please be advised that today's conference maybe recorded.

Any further assistance. Please press star Zero I would now like turn the conference over to your Speaker today, Carrie Mendivil Investor Relations. Please go ahead.

Thank you.

This morning, Nathalie devices released financial results for the quarter ended June 32021.

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 900 devices Dot com.

Joining me today from <unk> is Kevin not Chief Executive Officer, and co 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 statements involve material risks and uncertainties that could cause actual results for events to materially differ from those anticipated.

Additional information regarding these risks and uncertainties appears in the section entitled forward looking statements from the press release 9 O 8 issued today.

For a more complete list and description. Please see the risk factors section of the company's annual report on form 10-K for the year ended December 31.2020.

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

Except as required by law 9 acre claims 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 is accurate only as of the live broadcast August for 2021 with that I would like to turn the call over to Kevin.

Thanks, Carrie good morning, and thank you for joining our second quarter 2021 earnings call I'm incredibly proud of our team's progress this quarter as we continued to expand our global presence and strength of our customer relationships. We ended the second quarter with $8.3 million in total revenue up 49% from the first quarter of 2000.

'twenty, 1 and down 26% year over year, we placed more than 100 devices during the quarter, bringing our installed base to over 500 devices across our 3 products I am pleased with our execution to date and encouraged by the momentum we have headed into the back half of the year to that end, we're increasing our revenue outlook.

We expect total revenue of $40 million to $43 million for 2021, representing growth of 54% at the midpoint of the range. As we look ahead, we remain focused on growing our sales and commercial teams driving adoption and expand the reach of our platform.

Starting with our sales channels and commercial team. We added 9 employees. During Q2 ended the quarter with 50 employees across sales marketing and product management I'm excited about the caliber of talent. We are continuing to attract to 9 O 8 and we are well on track towards our goal of reaching 60 commercial employees in Q1.2022.

To support our commercial activities, we continue to broaden our reach internationally by expanding our commercial team and adding new distribution partners. We've added field service support and sales employees in England, Scotland, France, Germany, Belgium, Denmark, Netherlands, Chile, and China. These key hires include subject matter experts in forensics.

2 expanding our team we have also brought on new distribution partners in Bolivia, Colombia, Poland Korea, Israel in China.

Our handheld and desktop devices are now available across 6 continents in more than 40 countries and configured in any of 6 languages last year, 20% of our revenue came from outside North America with these new investments, we will be well positioned to continue to support new growth from our international customers.

Moving on to customer traction adoption from existing and new customers across all product lines remained strong our products are being used globally across a variety of critical to life applications from responders on the front lines to biopharmaceutical scientist designing lifesaving medicines where per.

Route to provide tools to our customers and enable quick decision that ultimately make the world a better place.

With our handheld we're continuing to see traction with enterprise wide adoption by leading agencies battling the flow of illicit drugs, especially the fight against the opioid crisis.

Drug overdose deaths were on the rise and the CDC estimates that the U S saw a 17% increase in drug related deaths, which was in part accelerated by the COVID-19 pandemic and Hbo's recent documentary on the opioid crisis. The crime at the century, our MSA rate was highlighted in the opening scene showing its crews.

It'll impact for frontline workers in fighting this world Health crisis.

In a recent news press conference the Broward County Sheriff's office in Florida announced the impact that utilizing the M. Ex 9 weight is having on protecting their communities deputies and fire rescue personnel from petrol exposure, whether you're in the field for scanning incoming mail in Correctional facilities. Prior County currently has for Amex 9 weights and trusted.

Knowledge to protect the health and safety of the responders and the public adoption.

Adoption of our handheld devices is growing not only in the U S. But around the world from Canada to New Zealand. We are pleased to announce 2 multi unit international orders first the Correctional services, Canada responsible preventing illicit drugs from entering Canadian prisons through the mail purchased 12, Nx 90 day handheld devices. In addition.

Australia, and New Zealand Counterterrorism Committee recently added 8 M ex 9 O 8 devices to their toolkit to protect their citizens and law enforcement agencies against drug and other chemical hazards.

Turning now to our desktops, we continue to see growth in protein therapeutics cell and gene therapy and in synthetic biology, specifically in the emerging cultured meat market. We've previously stated our goal is to create a bio analytics platform that leverages, our versatile technologies from biotherapeutic development through production Fda's quality by.

Design initiative has emphasized the importance of understanding monitoring and controlling process parameters to ensure finished biopharmaceutical products meet proper critical quality attributes also known as <unk>.

Process understanding and control needs to improve yields and predictability.

A rebel device enables outline quantitative analysis of cell culture media using our Microfluidic chip based <unk> technology for simple easy and fast monitoring of amino acids, and vitamins, which are critical on both process and media development.

Our Zip chip device Leverages, the same microfluidic technology to address the growing need in the biologics market to measure multiple C. QA simultaneously for protein therapeutics as previously announced Amgen published the use of ZIP chip MFS to measure 15, CQ as for biotherapeutics, while increasing throughput by 20 ex and providing comparable.

To conventional you HPLC.

We're excited to see Glaxo Smith clients July publication in the journal of pharmaceutical and biomedical analysis on the identification and control of monoclonal antibody critical quality attributes in this study rapid peptide mapping and native intact charge Barrington analysis, we're used to comprehensively characterized and monitor.

Matt <unk> with their ZIP chip for ultrafast peptide mapping simultaneously analyze multiple <unk>, including protein primary structure and post translational modifications compared with conventional L. CMS chromatography based methods ZIP chip peptide mapping was shown to monitor the same number of peak <unk> and significantly shorter.

Run times with lower sample consumption.

The native impact analysis was shown to resolve mad charge varies with the comparable resolution is industry standard capillary isoelectric post you can say or see our yeah and importantly, with the addition of speciation information transcends our global Biotherapeutics company in Hangzhou, China confirm similar findings in their prepared reviewed paper in the <unk>.

<unk> of analytical biochemistry this July.

Delighted to have a growing number of customers using and validating our products in support of quality by design and <unk> analysis.

Bioprocess development for Therapeutics remains the key application area for rebel and we've added new customers in this space, including vertex Pharmaceuticals in June we hosted a round table panel discussion on the importance of cell media analysis in upstream bioprocess development with leading industrial panelists. The panel included Dr. Mike Burton Borg.

Rector of the advanced from a million bio manufacturing center and professor at Johns Hopkins University, Dr. Richard Rogers from Bristol Myers, Squibb, and our own CTO and co founder Dr. Chris about the panel as an example of our commitment to continue to invest in education to drive awareness of rebels impact on bioprocess development.

Beyond this market. We're also pleased to see rebel devices being adopted by leaders in synthetic biology, specifically in the cultured meat market.

The culture meat market as part of the growing alternative protein sector received approximately $3 billion of investment in 2020 more than 70 startups are focusing on cultured meat products with many life science companies already announcing that they will help supply and support the industry during the quarter, we added 2 customers blue <unk> and <unk>.

Most of the needs Luna, who specializes in cellular aqua culture to deliver sustainable healthy and safe seafood products. Most of the meat is a food technology pioneer that focus on culture beef, we look forward to working with both of these companies on fresh and spent media analysis to optimize their culture processes to ensure manufacturing consistency.

And productivity and this revolutionary product category.

Overall, we are pleased with the solid traction we are seeing in attracting new customers. We saw nearly a third of ZIP chip orders in the second quarter come from new customers and nearly half of rebel orders were from new customers. Additionally, we remain encouraged by the pull through consumable rates. We are seeing from active users as our installed base grows we continue.

I believe our focus on making measurements easy from sample prep to process data interpretation will drive utilization over the long term and.

And finally moving to expansion of our technology platform, we're continuing to unlock our platform's capability to increase the areas of use for our customers and open up our addressable markets to accomplish this we are continuing to invest in our platform through analyte panel extensions new software applications assay kits accessory models and <unk>.

Party hardware and software integrations.

During the quarter, we announced updates to our flagship handheld device Nx niobate, which include an aerosol module accessories to detect and identify aerosol chemical hazards added targets to allow responders to identify additional priority drug substances, and Bluetooth capability, which enables seamless data transfer and accelerate support in the field. These added.

Capabilities are aimed to address gaps in responders workflows increase engagement and drive utilization. The initial feedback on these new capabilities has been very favorable the arrow. Our aerosol module accessories has already generated significant interest from both new and existing customers the devices undergoing laboratory and field trials performing exceptionally well in both in.

Terms of measurable success of third party testing laboratory analyze the arrow's performance against several chemical hazards and bounded achieved a greater than 99% of alarm rate. Furthermore, the arrow alarmed at concentrations well blind are outlined goals, making incredibly sensitive tool for aerosol analysis.

The U S food and drug administration published an evaluation in Q2 in the journal of pharmaceutical and biomedical analysis of our handheld Amex 90 weights utility for the rapid screening of food and drug products for Mitra, gaining an alkaloid found in Cranston plant leaves, which poses risk of addiction abuse and.

Dependent much like other opioids.

The devices tested the FDA concluded our handheld to be potentially the most portable having the smallest footprint lowest weight and requires no supply of compressed gas while offering a true positive rate of detection of 94%. We remain confident that our handheld M. Ex 9 away is a broadly capable tool that can bring continued value to our users to expanding.

Like capability available accessories and connectivity.

Today, we are primarily focused on bio analytics as the application for desktops. However, we've shared previously we are excited about the opportunity for our products and technologies and proteomics and diagnostics earlier. This week, we announced the formation of a scientific advisory board focused on proteomics with world renowned expert to help guide and shape our.

<unk>.

We've also brought on Doctor will Thomas from Duke pretty Omics core facility to lead our efforts in proteomics as our principal scientist Dr. Thomas has dedicated his career to developing and applying new separations and mass spectrum metric methodologies for use in biological and biomedical research specifically in proteomics and metabolomics <unk>.

We've just peace tea and analytical chemistry from UNC Chapel Hill and has co authored over 120 peer reviewed publications 3 book chapters and hold several patents related to AUM ex biomarkers. His extensive experience makes him. The perfect addition to our team to lead our product development and roadmap activities in the proteomics space, we expect to.

The scientific community on our efforts in applications of our technology for proteomics and upcoming fall conferences.

In regard to diagnostics, we're encouraged to see Fudan University in Shanghai, China, a prestigious research University using our technology in their quest for New Biomarkers Fudan University recently published in the analytical Chemistry Journal, an investigation to Biomarkers of ovarian cancer, which leveraged our ZIP chip device as the enabling technology for the rapid.

Screening of clinical serum samples for glycogen fingerprints ZIP chip was shown to be rapid low labor high resolution analytical technique with importantly, a low sample volume requirement. We're also excited that in June Marcia Eisenberg CFO of Labcorp joined our board of directors. Dr. Eisenberg has extensive experience with forensics.

DNA testing biotechnology, molecular genetics and molecular oncology.

She has helped lead the development and validation of well over 1000 clinical assays used for patient care during her more than 30 year tenure at Labcorp her experience and guidance will be paramount as our customers increasingly employ our technology for diagnostic assay research.

Overall, I'm really encouraged for the growth of our commercial team the momentum we're seeing from customers in the technology platform progress, we're making with that I'll now turn the call to Joe for more details on our financials.

Thanks, Kevin.

Revenue for the second quarter, 2021 was $8.3 million compared to $5.5 million in the first quarter and $11.1 million in the prior year period.

Product and service revenue for the second quarter 2021 were $7.9 million compared to $5.4 million in the first quarter and $10.4 million in the prior year period, a decline of 24%.

In Q2, 2020, we had a onetime revenue event related to the shipment of 150, Amex 90 weighted handheld devices for a single customer.

Created an abnormal comp for Q2.2021 and was the primary driver for the year over year decline.

Desktop revenue from our rebel and zipped chip products grew 70% from the second quarter of 2021 and contributed to a third of product and service revenues.

Recurring revenues, consisting of consumables accessories and service revenue.

Grew over 250% in the second quarter of 2021 compared to the second quarter of 2020.

License and contract revenue for the second quarter 2021 was approximately zero point $4 million down zero point for $4 million from the prior year period.

As stated on our last earnings call, we do not expect license and contract revenues to be a significant contributor of revenue on a go forward basis.

Our installed base grew to 1530 units with 103 devices shipped during the second quarter, we shipped 80 for handheld devices and 19 desktop devices within the quarter.

Gross profit was $4.4 million for the second quarter of 2021 compared to $6.4 million for the prior year period.

The decreased gross profit was driven by a $1.8 million reduction in product and service gross profit, which was primarily due to reduced <unk> sales volume, which leveraged our fixed costs related to our manufacturing facility.

And for a lesser extent, our investments and operations and service personnel.

Gross margin was 53 per cent for the second quarter 2021, as compared to 58 per cent for the prior year period.

Total operating expenses for the second quarter of 2021 were $11.8 million compared to $4.3 million in the prior year period.

The increase was driven by head count expansion across our business primarily focused on commercial organization.

Resulting in $3.2 million of the increase.

Provision to increase our allowance for doubtful accounts by $1.7 million and increased expenses related to operating as a public company.

Net loss for the second quarter of 2021 were $7.4 million compared to net income of $2.1 million from the prior year period.

We ended the second quarter of 2021 was approximately $141 million in cash and cash equivalents.

In addition, we also had $15 million of debt outstanding.

Turning to our outlook for 2021, we are raising our revenue to be in the range of $40 million to $43 million representing growth of 54% at the midpoint over the prior year period.

This compares from a previous revenue outlook of $38 million to $40 million.

Provided this guidance range for the first quarter of this year, we share that we expected revenue to be more heavily weighted in the back half for this year.

We have now achieved approximately $14 million in revenue in the first half of the year.

We're seeing solid traction with new and existing customers on device placements and the contribution of recurring revenue from our installed base.

Momentum heading into the back half of the year has made us comfortable to raise our outlook.

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

Thanks, Joe this quarter, we made important strides across our business as we continue to execute on our growth strategy I'm really encouraged by the expansion of our global presence. The momentum we are seeing from customers and the progress we are making with our technology platform.

We look forward to accelerating this momentum into the second half of the year as we remain focused on growing our sales and commercial teams driving adoption and expanding the reach of our platform with that we'll now open it up to questions.

Yes.

Thank you.

Yeah. Good question, you'll need for press Star 1 on your telephone to withdraw your question press the pound key.

Please stand by we compile the Q&A roster.

Our first question comes from Danielle <unk> with Stifel. You May proceed with your question.

Good morning, guys. Thanks for the questions Kevin on the rental side can you just maybe talk a little bit to the momentum that you think youre seeing there and then where youre seeing the most traction when it comes to replacing.

Just an existing workflow 1 other questions that we get fairly frequency. It's just where this is a better mousetrap than so to speak. So can you maybe comment on the rebel just as an alternative to existing in house systems that have been around for a while versus outsourcing to a lab that might be doing LC Ms service work.

Kind of curious, where where youre kind of hitting your stride relative to what's been done previously or what's been done at this point.

Yes sure Dan.

Rebels are going as expected largely into the process development labs, that's where we're seeing the predominant number of placements in those lines as we've discussed before that day.

We're not rich on analytical capabilities. They have tools there that can measure a few the analytes, perhaps but the rebel can analyze.

And test measure for but largely that panel of analytes needs to be sent out and it could be sent out to to align within their building down the hall or.

Upper floor or something but also out to a to a third party service, so where we're seeing the uptake is in enabling that workflow that would normally be sent to their central lab or tour to an outside facility and enabling that on the spot and more frequent number of measurements for it.

No.

We are compared to HPLC or an LC mass spec technique when our.

Customers are adopting the technology, because thats really what they are looking at this as the alternatives for at the point of need to measure with more frequency.

Okay, you mentioned, both which we know to be true I guess does that mean that it's pretty balanced between replacing existing sort of legacy systems I think from some of the other providers in this space versus outsourcing or are you seeing I guess I'm just trying to understand a little bit more where customers are really kind of gravitating towards your solution.

I wouldn't say, it's really replacing the existing boxes. They are still using the existing boxes in their central analytical labs, or equivalently and outsourced labs.

For for.

A plethora of analysis, but the panel that the rebel does is is augmenting those technologies by doing it right. There at the point of need so we're not seeing a head to head competition with call. It an LC HPLC type of approach because those arent really appropriate for being done next to the bioreactor in a price.

This development.

Okay understood and then maybe just on the Bioprocess panel that you said you held I'm curious what you heard when it comes to just the capabilities that you or the market in general isn't delivering at this point or arent delivering at this point and when and how those things Jive with sort of the development trajectory that you have in the <unk>.

<unk> that you have for rebel.

Yes. It was a good panel with the Johns Hopkins Professor Michael <unk> volume and Rich Rogers from Bristol Myers Squibb, as well as 1 of our own experts in cell culture media and our CTO and the dialogue was around cell culture media the complexities of it the evolution of the media.

And then the need for measuring it throughout the process and particularly the impact with some of these more complex modalities.

I think we're seeing today that debt rebel is hitting the mark there that rebel is addressing the analytes that are required but it is a complex problem, where theres lots of analytical technologies being brought to bear on it.

We are excited for some other publications that we announced here in this earnings call, but also in the past.

In areas of the culture analysis.

But yeah. So there was other income.

A call it a great way for us to really engage with some of the experts in the space and yes, we want to stay close to it. So that we can evolve our panels of all of our technologies over time to make sure we are addressing.

Yeah.

Okay and last 1 for me and then I'll hop off just on the U S Army contract and apologies if you've mentioned this but I can catch it but any change to the recognition timelines there did anything get pulled forward this quarter.

No no no changes will start shipping in the back half we did not have any shipments under that contract here in Q2, so they'll start here over the second half of 2021 and the majority of the opportunity to be realized in 2022, So no change from comprise.

Customers.

Okay very good excited by the opportunity.

Yes.

Thank you for our next question comes from Brian Weinstein with William Blair. You May proceed with your question.

Thanks, guys. Good morning, Thanks for taking the question.

You, obviously highlighted a lot of the more.

More recent additions on the <unk> side.

You talk about your expectation for for O U S growth, specifically I think you talked about 20 per cent or something in revenue right now, but can you talk more specifically about what you think that contribution can be kind of going forward and is there any country where countries. In particular, you would highlight and maybe even highlight how the products might be used differently in markets outside the U S.

Sure Yes.

Thanks, Brian.

We really are investing outside the United States as you know when we started up the IPO most of our sales force was centered on market and commercial teams really in the United States.

A lot of opportunity that we see of course in the in North America, but as we broaden out the team we have been expanding across a number of countries. We see Europe is an important region for both our handhelds and their desktops, we see APAC as an important region for both handheld from desktops, and we're getting a growing number of placement.

And each of those areas last year. It was about 20% of our revenues, we do see that being in the 2025% in the near term, but we do expect it to grow and we are investing in China, specifically, we are investing there with the number of hires and across the UK and Europe.

So from.

In terms of use cases, I would say in things like our handheld devices.

Are largely used the same abroad versus the United States, but there will be a different set of analytes of interest in a particular local regions. If you think about the drug epidemic that we often talk about the served by our handhelds and that's an example that can change by by region. So we do engage with customers with our dish.

<unk> partner.

To address that that locally in case of our desktops were seeing very analogous applications.

Interest for the for the panels that we have and I would say the use cases, there seem to be very very much parallel to what's happening.

The United States transcend so maybe it's a good example of that where we have highlighted some of the success with them, but it's very much parallels that uses that we see across U S. Users.

Great. Thank you for that.

And synthetic biology, you talked about the culture of meat market can you just talk a little more about the opportunity there and specifically how those.

Relationships that you highlighted actually manifested themselves and I'm curious about kind of the sales and marketing effort that youre pursuing there and how you are kind of driving awareness in the in the uptake there.

Yes, it's a good question I mean did today.

It's really a bio processing application and when we think about our total addressable market.

Certainly a piece of what we've shared in the past, but it is rapidly growing and it is looking exciting to us but it is very much bioprocess. So they're optimizing our cell culture media that they are trying to get the highest titer and production of proteins out of that so very analogous to what happens with our biopharma customers and so.

So really we've been marketing to the bioprocess industry of which many of the life science.

Companies, we see out there are also beginning to serve this this adjacent space of the cultured meat market. So we are beginning to target some areas of marketing and our channels and outreach of course to that it is a relatively small field still at this moment in time there has been.

Insignificant investment investments billions of dollars that have gone into it and there is there is there.

Tens and tens of startups, there that are working and that are pretty well funded and are looking for new ways to measure and be efficient in their process. They don't have a standard in house laboratory in many cases and they are looking for things that can be used sufficiently outlined. So we are excited about that opportunity we are seeing that.

The handful of examples we have thus far are moving through our funnel quite quickly from initial contact to opportunity to close.

Great. Thank you for the answers guys.

Thank you and as a reminder, that the big question you will need to press star 1 on your telephone. Our next question comes from Doug Schenkel with Cowen You May proceed with your question.

Good morning.

First 1 on guidance you increased full year 'twenty, 1 revenue guidance I think it's 40% to 43 million from 40, sorry from 38 to 40. So it was a good Q2 you'd be expectations, but you increased by more than the magnitude of the Q2 beat so I'm just wondering.

A year that was always expected to be pretty back end loaded you got some nice momentum heading into the second half, but again you essentially increased full year guide by more than the magnitude of the debt.

For Q2 beat.

Could you just maybe bridge us to what's driving the increase and what are the key things that could.

Essentially drive you higher or lower than that target essentially kind of how are you thinking about the arrow bars.

Absolutely nowhere too pleased with the way we finished up the first half and about $14 million and we are feeling good about the business and expect that higher growth over the second half reflected in that outlook.

Yes.

As we were seeing and are seeing good traction customers progressing through kind of tests and trials and pilots and into what we refer to as enterprise wide adoptions. So as we looked at the back half for the year and seeing that traction along with the typical seasonality and year end budget cycles, we're feeling it was.

Prudent.

To put the guidance, where we have our philosophy is to try to put out guidance that we can meet and achieve and we're getting more confident in clarity as we move through the year. So as we sit here in midstream.

Various pipeline of opportunity.

The growth drivers are across both our handhelds and our desktops.

The momentum on the recurring aspects of our product portfolio that helps with providing incremental.

Incremental guidance for increase in guidance. So as we think about it going forward, it's probably seen if we see continued progression even at an accelerated level.

Might take a further look but kind of wanted to take the midyear per view.

Okay.

Thanks for that Joe and then.

Okay.

Sort of related.

But kind of longer term you've talked about.

This effort at the company to expand platform capabilities to actually move into adjacent applications for customers.

And Theres a number of things you've talked about in terms of what youre targeting for the next 12 months to 18 months in terms of panel expansion new software applications.

Additional assay kits, just just going down the line.

I just wanted to make sure at this point our platform expansion capability initiatives still tracking to plan.

And are you still feeling the same as always in terms of how these enhancements are going to expand your market opportunity.

Yes, we do we do feel theyre going well I think we've been able to show some evidence of that.

Accessory module for our handheld, which we view as important.

Our Aero module for Amex handheld, it's been going well.

<unk> received by the market in a positive way and through third party testing as we highlighted.

Those types of things and the analyte panel expansions, which we've announced.

For our handheld and we'll have some more coming over the time here with our desktops and kits as well for both handhelds for desktops coming all of those things for us really help future proof the purchase for our customers and help our customers get more and more value out of the products and we see that driving utilization.

Overtime. So yes, we feel good that we're unlocking those capabilities in the existing boxes and are launching needs capabilities that can be deployed on those boxes and they are adding good value to the customers. So yes, we feel were tracking on our progress there and you should continue to see.

Our stride of such releases.

Okay, Alright, thanks, guys appreciate it.

Welcome.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Kevin can opt for any further remarks.

Thank you. This concludes our call. We appreciate your time and have a wonderful day.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

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Hello, Thank you for standing by and welcome to the 908 devices second quarter 2021 financial results Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During this session you will need to press star 1 on your telephone please.

Be advised that today's conference maybe recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Carrie Mendivil Investor Relations. Please go ahead.

Thank you this.

This morning, no other way devices released financial results for the quarter ended June 32021.

If 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 not always devices dotcom.

Joining me today from 9 away as Kevin not Chief Executive Officer, and co 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.

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

Additional information regarding these risks and uncertainties appears in the section entitled forward looking statements for the press release 9 O 8 issued today.

For a more complete list and description. Please see the risk factors section of the company's annual report on form 10-K for the year ended December 31.2020.

And then just the other filings with the Securities and Exchange Commission.

Except as required by law 9 away 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 is accurate only as of the live broadcast August 4.2021 and.

With that I would like to turn the call over to Kevin.

Thanks, Carrie good morning, and thank you for joining our second quarter 2021 earnings call I'm incredibly proud of our team's progress this quarter as we continue to expand our global presence and strength of our customer relationships.

We ended the second quarter with $8.3 million in total revenue up 49% from the first quarter of 2021 and down 26 per cent year over year, we placed more than 100 devices during the quarter, bringing our installed base to over 1500 devices across our 3 products I am pleased with our execution to date and encouraged by that.

Momentum, we have headed into the back half of the year to that end, we are increasing our revenue outlook and now expect total revenue of $40 million to $43 million for 2021, representing growth of 54% at the midpoint of the range. As we look ahead, we remain focused on growing our sales and commercial teams driving adoption.

And expand the reach of our platform.

Biopharma and bio processing, who will serve as critical resources for our growing customer base. We have also added a seasoned sales leader to drive the commercial efforts for our desktops across APAC. In addition to expanding our team. We have also brought on new distribution partners in Bolivia, Colombia, Poland Korea.

Israel and China.

Our handheld and desktop devices are now available across 6 continents in more than 40 countries and can fit in any of 6 languages last year, 20% of our revenue came from outside North America with these new investments, we will be well positioned to continue to support new growth from our international customers.

Yeah.

Proud to provide tools to our customers and enable quick decision that ultimately make the world a better place.

With our handhelds were continuing to see traction with enterprise wide adoption by leading agencies battling the flow of illicit drugs, especially the fight against the opioid crisis.

Drug overdose death were on the rise and the CDC estimates that the U S saw a 17% increase in drug related deaths, which was in part accelerated by the COVID-19 pandemic in Hbo's recent documentary on the opioid crisis. The crime is a century, our MSA rate was highlighted in the opening scene showing its crew.

Shall impact for frontline workers in fighting this world Health crisis.

In a recent news press conference the Broward County Sheriff's office in Florida announced the impact that utilizing the M. Ex 9 O 8 is having on protecting their communities deputies and fire rescue personnel from federal exposure, whether you're in the field for scanning incoming mail in Correctional facilities. Prior to County currently has for Amex 9 O H and trusted.

Technology protect the health and safety other responders in the public.

Adoption of our handheld devices is growing not only in the U S. But around the world from Canada to New Zealand. We are pleased to announce 2 Multiunit International orders first the Correctional services, Canada responsible preventing illicit drugs from entering Canadian prisons through the mail purchased 12 and ex 90 day handheld devices. In addition.

Fta's quality by design initiative has emphasized the importance of understanding monitoring and controlling process parameters to ensure finished biopharmaceutical products meet proper critical quality attributes also known as <unk>.

Process understanding and control needs to improve yields and predictability.

Our Zip chip device Leverages sustained microfluidic technology to address the growing need in the biologics market to measure multiple C. QA simultaneously for protein therapeutics as previously announced Amgen published use of ZIP chip en masse to measure 15, CQ as for biotherapeutics, while increasing throughput by 20 ex and providing comparable was.

All she conventional you HPLC, we're excited to see Glaxo Smith clients July publication in the journal of pharmaceutical and biomedical analysis on the identification and control of monoclonal antibody critical quality attributes in this study rapid peptide mapping and native intact charged Barrington analysis, we're used to comprehensively characterized.

Monitor.

CQ as with our ZIP chip for ultrafast peptide mapping simultaneously analyze multiple <unk>, including protein primary structure and post translational modifications compared with conventional L. P. M. S. Chromatography based methods ZIP chip peptide mapping was shown to monitor the same number of peak <unk> and significantly shorter run.

Times with lower sample consumption. The native impact analysis was shown to resolve mad charge variance with a comparable resolution as industry standard capillary isoelectric post you can say or yeah, Yeah, and importantly, with the addition of speciation information train Center, a global Biotherapeutics company in Hangzhou, China confirmed similar.

Findings in their prepared reviewed paper in the journal of analytical Biochemistry. This July we're delighted to have a growing number of customers using and validating our products in support of quality by design and C. QA analysis.

For the advanced mammalian bio manufacturing center and professor at Johns Hopkins University, Dr. Richard Rogers from Bristol Myers, Squibb, and our own CTO and co founder Dr. Trish bound the panel as an example of our commitment to continue to invest in education to drive awareness of rebels impact on bioprocess development.

This market. We're also pleased to see rebel devices being adopted by leaders in synthetic biology, specifically in the cultured meat market.

The cultured meat market as part of the growing alternative protein sector received approximately $3 billion of investment in 2020 more than 70 startups are focusing on cultured meat products with many life science companies already announcing that they will help supply and support the industry during the quarter, we added 2 customers Blue <unk> and.

<unk> and productivity and this revolutionary product category.

Overall, we are pleased with the solid traction we are seeing in attracting new customers. We saw near the third a ZIP chip orders in the second quarter come from new customers and nearly half of rebel orders were from new customers. Additionally, we remain encouraged by the pull through consumer where rates. We are seeing from active users as our installed base grows we continue to be.

Leave our focus on making measurements easy from sample prep to process data interpretation will drive utilization over the long term.

And finally moving to expansion of our technology platform, we're continuing to unlock our platform's capability to increase the areas of use for our customers and open up our addressable markets to accomplish this we are continuing to invest in our platform through analyte panel extension, new software applications assay kits accessory models and <unk>.

Third party hardware and software integration during the quarter, we announced updates to our flagship handheld device Nx niobate, which include an aerosol module accessories to detect and identify aerosol chemical hazards added targets to allow responders to identify additional priority drug substances, and Bluetooth capability, which enables seamless day to.

For an accelerated support in the field. These added capabilities are aimed to address gaps in responders workflows increase engagement and drive utilization day initial feedback on these new capabilities has been very favorable the arrow. Our aerosol module accessories has already generated significant interest from both new and existing customers the devices undergoing laboratory and field try.

Mills performing exceptionally well in both in terms of measurable success of third party testing laboratory analyze the arrow's performance against several chemical hazards and bounded achieved a greater than 99% alarm rate. Furthermore, the arrow alarmed at concentrations well blind are outlined goals, making incredibly sensitive tool for aerosol analysis.

The U S food and drug administration published an evaluation in Q2 in the journal of pharmaceutical and biomedical analysis of our handheld Amex 90 eights utility for the rapid screening of food and drug products for Mitch for gaining an alkaloid found in cramped from plant leaves, which poses risk of addiction.

Abuse independents much like other opioids.

The devices tested the FDA concluded our handheld to be potentially the most portable having the smallest footprint lowest weight and requires no supply of compressed gas while operating a true positive rate of detection of 94%. We remain confident that our handheld M. Ex anyway is a broadly capable tool that can bring continued value to our users to expanding.

Analyte capability available accessories and connectivity today, we are primarily focused on bio analytics as the application for desktops. However, we've shared previously we are excited about the opportunity for our products and technologies and proteomics and diagnostics earlier. This week, we announced the formation of a scientific advisory Board.

We're focused on proteomics with world renowned experts to help guide and shape our efforts.

We've also brought on Doctor will Thomas from Duke Proteomics core facility to lead our efforts in proteomics as our principal scientist Dr. Thomas has dedicated his career to developing and applying new separations and mass spectrum metric methodologies for use in biological and biomedical research specifically in proteomics and metabolomics <unk>.

Steve just peace tea and analytical chemistry from UNC Chapel Hill and has co authored over 120 peer reviewed publications 3 book chapters and hold several patents related to AUM ex biomarkers. His extensive experience makes him. The perfect addition to our team to lead our product development and roadmap activities in the proteomics space, we expect to ups.

The scientific community on our efforts in applications of our technology for proteomics and upcoming fall conferences.

In regards to diagnostics, we're encouraged to see Fudan University in Shanghai, China, a prestigious research University using our technology in their quest for New Biomarkers Fudan University recently published in the analytical Chemistry Journal, an investigation to Biomarkers of ovarian cancer, which leveraged our ZIP chip device as the enabling technology for the rapid.

Screening of clinical serum samples for glycogen fingerprints.

Chip was shown to be rapid low labor high resolution analytical technique with importantly, a low sample volume requirement.

We're also excited that in June Marcia Eisenberg CFO of Labcorp joined our board of directors. Dr. Eisenberg has extensive experience with forensics DNA testing biotechnology molecular genetics and molecular oncology.

Thanks, Kevin.

Revenue for the second quarter, 2021 was $8.3 million compared to $5.5 million in the first quarter and $11.1 million in the prior year period.

Product and service revenue for the second quarter, 2021 was $7.9 million compared to $5.4 million in the first quarter and $10.4 million in the prior year period, a decline of 24%.

In Q2, 2020, we had a onetime revenue event related to the shipment of 150, IMAX 90 weighted handheld devices for a single customer.

Created an abnormal comp for Q2.2021 and was the primary driver for the year over year decline.

Desktop revenue from our rebel and ZIP chip products grew 70% from the second quarter of 2021 and contributed to a third of product and service revenues.

Recurring revenues, consisting of consumables accessories and service revenue.

Grew over 250% in the second quarter of 2021 compared to the second quarter of 2020.

License and contract revenue for the second quarter 2021 was approximately zero point for million down zero point for $4 million from the prior year period.

As stated on our last earnings call, we do not expect license and contract revenues to be a significant contributor of revenue on a go forward basis.

Our installed base grew to 1530 units with 103 devices shipped during the second quarter, we shipped 80 for handheld devices and 19 desktop devices within the quarter.

Gross profit was $4.4 million for the second quarter of 2021 compared to $6.4 million for the prior year period.

And for a lesser extent, our investments and operations and service personnel.

Gross margin was 53 per cent for the second quarter 2021, as compared to 58 per cent for the prior year period.

Total operating expenses for the second quarter of 2021 were $11.8 million compared to $4.3 million in the prior year period.

The increase was driven by head count expansion across our business primarily focused on commercial organization.

Resulting in $3.2 million of the increase.

Provision to increase our allowance for doubtful accounts by $1.7 million and increased expenses related to operating as a public company.

Net loss for the second quarter 2021 were $7.4 million compared to a net income of $2.1 million from the prior year period.

We ended the second quarter of 2021 was approximately $141 million in cash and cash equivalents.

In addition, we also had $15 million of debt outstanding.

Turning to our outlook for 2021, we are raising our revenue to be in the range of $40 million to $43 million representing growth of 54% at the midpoint over the prior year period.

This compares to our previous revenue outlook of $38 million to $40 million.

Provided this guidance range in the first quarter of this year, we share that we expected revenue to be more heavily weighted in the back half of this year.

We have now achieved approximately $14 million in revenue in the first half of the year.

We're seeing solid traction with new and existing customers on device placements and the contribution of recurring revenue from our installed base.

Momentum heading into the back half of the year has made us comfortable to raise our outlook.

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

Okay.

Thank you.

To ask a question you'll need for press star 1 on your telephone to withdraw your question press the pound key please stand by while we compile the Q&A roster.

Our first question comes from Dan areas with Stifel. You May proceed with your question.

And existing workflow 1 other questions that we get fairly frequency. It's just where this is a better mousetrap than so to speak. So can you maybe comment on that.

The rebel just as an alternative to existing in house systems that have been around for a while versus outsourcing to a lab that might be doing LCM net service work.

Kind of curious is where where youre kind of hitting your stride relative to what's been done previously or what's been done at this point.

Yes sure Dan.

Rebels are going as expected largely into the process development labs, that's where we're seeing the predominant number of placements in those lives as we've discussed before that day.

We're not rich on analytical capabilities. They have tools there that can measure a few the analytes, perhaps that the rebel can analyze.

And test measure for but largely that panel of analytes needs to be sent out and it could be sent out to a lab within their building down the hall or.

Upper floor or something but also out to a to a third party service so where we're seeing the uptake is is in enabling that workflow that would normally be sent to their central lab or tour to an outside facility and enabling that on the spot and more frequent number of measurements for it.

So.

We are compared to HPLC or an LC mass spec technique when our customers are adopting the technology because thats really what they are looking at this as the alternative for at the point of need to measure with more frequency.

I wouldn't say, it's really replacing the existing boxes. They are still using the existing boxes in their central analytical labs, or equivalently and outsourced labs.

For for.

A plethora of analysis, but the panel that the rebel does is is augmenting those technologies by doing it right. There at the point of need so we're not seeing a head to head competition with call. It an LTE HPLC type of approach because those arent really appropriate for being done next to the bioreactor in <unk>.

This development lab.

Okay understood and then maybe just on the Bioprocess panel that you you said you held I'm curious what you heard when it comes to just the capabilities that you or the market in general isn't delivering at this point or arent delivering at this point and when and how those things Jive with sort of the development trajectory that you have and the timelines.

You have for rebel.

Yes. It was it was a good panel with the Johns Hopkins Professor there might bog and enrich Rogers from Bristol Myers Squibb, as well as 1 of our own experts and cell culture media and our CTO and the dialogue was around cell culture media the complexities of it the evolution of the media.

And then the need for measuring it throughout the process and particularly the impact with some of these more complex modalities.

I think we're seeing today that debt rebel is hitting the mark there that rebel is addressing the analytes that are required but it is a complex problem, where there's lots of analytical technologies being brought to bear on it.

We are excited for some of the publications that we announced here in this earnings call, but also in the past.

In areas of the culture analysis.

But yeah so.

For needs.

Okay and last 1 for me and then I'll hop off just on the U S Army contract and apologies if you've mentioned this but you can catch it but any change for the recognition timelines there did anything get pulled forward this quarter.

Good morning, Dan No no no changes will start shipping in the back half, we do not have any shipments under that contract here in Q2, so they'll start here over the second half of 2021 and the majority of the opportunity to be realized in 2022, So no change from comprise.

<unk>.

Okay very good thank you by the opportunity.

Thank you. Our next question comes from Brian Weinstein with William Blair. You May proceed with your question.

Thanks, guys. Good morning, Thanks for taking the question.

You, obviously highlighted a lot of the.

More recent additions on the O U S side.

Can you talk about your expectation for for O U S growth, specifically I think you've talked about 20% or something in revenue right now, but can you talk more specifically about what you think that contribution can be kind of going forward and is there any country where countries. In particular, you would highlight and maybe even highlight how the products might be used differently in markets outside the U S.

Sure Yes.

Thanks, Brian.

We really are investing outside the United States as you know when we started up the IPO most of our sales force was centered on marketing commercial teams really in the United States a lot of opportunity. We see of course in the in North America, but as we broaden out the team we have been expanding across a number of countries, we see Europe as an important.

Region for both our handhelds and their desktops, we see APAC as an important region for both handheld from desktops, and we're getting a growing number of placements in each of those areas last year. It was about 20% of our revenues, we do see that being in the 20% to 25% in the near term, but we do.

We expect it to grow and we are investing in China, specifically, we are investing there with a number of hires and across the UK and Europe.

So from.

In terms of use cases, I would say in things like our handheld devices.

Are largely used the same abroad versus the United States, but there will be a different set of analytes of interest in a particular local regions. If you think about the drug epidemic that we often talk about the served by a handheld debt and that's an example that can change by by region. So we do engage with customers with our dish.

<unk> partner.

To address that that locally in case of our desktops were seeing very analogous applications and interest for the for the panels that we have and I would say the use cases, there seem to be very very much parallel to what's happening.

The United States transcend so maybe it's a good example of that where we have highlighted some of the success with them, but it's very much parallels that uses that we see across U S. Users.

Great. Thank you for that.

Synthetic biology, you talked about the culture of meat market can you just talk a little more about the opportunity there and specifically how those.

Yes.

Relationships that you highlighted actually manifested themselves.

I'm curious about kind of the sales and marketing effort that youre pursuing there and how you are kind of driving awareness in the in the uptake there.

Yes, it's a good question I mean today.

It's really a bio processing application and when we think about our total addressable market.

So really we have been marketing to the bioprocess industry of which many of the life science companies.

Companies, we see out there are also beginning to serve this this adjacent space of the cultured meat market.

So we are beginning to target some areas of marketing and our channels and outreach of course to that it is a relatively small field still at this moment in time, there has been significant investment investments billions of dollars that have gone into it and there is there is there.

Tens and tens of startups, there that are working and that are pretty well funded and are looking for new ways to measure and be efficient in their process. They don't have a standard in house laboratory in many cases and they are looking for things that can be used sufficiently outlined. So so we are excited about that opportunity we are seeing that day.

The handful of examples we have thus far are moving through our funnel quite quickly from initial contact to 2 opportunities to close.

Great. Thank you for the answers guys.

Okay.

Thank you and as a reminder to ask a question you will need to press star 1 on your telephone. Our next question comes from Doug Schenkel with Cowen You May proceed with your question.

Good morning.

First 1 on guidance you increased full year 'twenty, 1 revenue guidance I think it's $40 to 43 million from 40, sorry from 38 to 40. So it was a good Q2 you'd be expectations, but you increased by more than the magnitude of the Q2 beat so I'm just wondering.

And a year that was always expected to be pretty back end loaded you got some nice momentum heading into the second half, but again you essentially increased full year guide by more than the magnitude of the debt.

For Q2 beat.

Could you just maybe bridge us to what's driving the increase and what are the key things that could.

Essentially drive you higher or lower than that target essentially kind of how are you thinking about the <unk>.

Absolutely nowhere.

He used with the way we finished up the first half at about $14 million and we are feeling good about the business.

The higher growth over the second half reflected in that outlook.

Yes.

As we were seeing and are seeing good traction customers progressing through kind of tests and trials and pilots into what we refer to as enterprise wide adoptions. So as we looked at the back half for the year and seeing that traction along with the typical seasonality and year end budget cycles, we're feeling it was.

Prudent.

Good to put the guidance, where we have our philosophy is to try to put out guidance that we can meet.

Chief and we're getting more confident in clarity as we move through the year. So as we sit here in midstream.

Various pipeline of opportunity.

The growth drivers are across both our handhelds and our desktops.

Positive momentum on the recurring aspects.

Our product portfolio.

With providing debt.

Incremental guidance or increase in guidance. So as we think about it going forward, it's probably seen if we see continued progression even at an accelerated level.

Might take a further look but kind of wanted to take them mid year per view.

Okay.

Thanks for that Joe and then.

Okay.

Sort of related.

What kind of longer term you've talked about.

This effort at the company to expand.

Platform capabilities to actually move into adjacent applications for customers.

And Theres a number of things you've talked about in terms of what you're targeting for the next 12 months to 18 months in terms of panel expansion new software applications.

Additional assay kits just going down the line.

I just wanted to make sure at this point our platform expansion capability initiatives still tracking to plan.

And are you still feeling the same as always in terms of how these enhancements are going to expand your market opportunity.

Yes, we do we do feel theyre going well I think we've been able to show some evidence of that.

For a module for our handheld, which we view as important.

Our Aero module for Amex handheld, it's been going well.

<unk> received by the market in a positive way and been through third party testing as we highlighted.

Those types of things and the analyte panel expansions, which we've announced.

For handheld and we will have some more coming over the time here with our desktops and kits as well for both handheld for desktops coming all of those things for us really help future proof the purchase for our customers and help our customers get more and more value out of the products and we see that driving utilization.

Overtime. So yes, we feel good that we're unlocking those capabilities in the existing boxes and are launching these capabilities that can be deployed on those boxes and they are adding good value to the customers. So yes, we feel were tracking on our progress there and you should continue to see.

Our stride of such releases.

Okay, Alright, thanks, guys appreciate it.

Welcome.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Kevin can opt for any further remarks.

Thank you. This concludes our call. We appreciate your time and have a wonderful day.

Yeah.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

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