Q4 2023 908 Devices Inc Earnings Call

Operator: Hello, everyone, and welcome to the 908 Devices fourth quarter 2023 Financial Results Conference call. My name is Seb, and I will be the operator for your call today. If you would like to ask a question during the Q&A session, you can do so by pressing star 1 on your telephone keypad, or press star 2 if you would like to withdraw your question.

Hello, everyone and welcome to the nine eight devices fourth quarter 'twenty to 'twenty three financial results Conference call. My name is Sam and that'll be the operates a vehicle today. If you would like to ask a question during the Q&A session. You can do so by pressing star one.

One on your telephone keypad will press star two if he would like to withdraw your question.

Kelly Gura: I will now hand the floor over to Kelly Gura, Investor Relations, to begin. Please go ahead. Thank you. This morning, 908 Devices released financial results for the fourth quarter and full year ended December 31, 2023. If you've not received this news release or if you'd like to be added to the company's distribution list, please send an email to IR at 908Devices.com. Joining me today from 908 are Kevin Knopp, 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 or events to materially differ from those anticipated.

I'll now hand, the floor over to Kelly <unk> Investor Relations to begin. Please go ahead. Thank you. This morning, I know weight divisor released financial results for the fourth quarter and full year ended December 31, 2023, if you've 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 98 devices dotcom.

Yeah.

Joining me today from nine way, it's Kevin you cannot 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 to materially differ from those anticipated.

Kelly Gura: Additional information regarding these risks and uncertainties appears in the section entitled Forward-Looking Statements in the press release 908 Devices issued today. For a more complete list of risks and uncertainties, please see the Risk Factors section of the company's annual report on Form 10-K for the year ended December 31, 2022, and in its other filings with the Securities and Exchange Commission. Except as required by law, 908 Devices disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast on March 5th, 2024. With that said, I would like to turn the call over to Kevin.

Additional information regarding these risks and uncertainties appears in the section entitled forward looking statements in the press release.

Did I say it is at 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, 2022 candidates other filings with the Securities and Exchange Commission.

Except as required by law 900 devices disclaims any intention or obligation to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.

This conference call contains time sensitive information and is accurate only as of the live broadcast March five 2024, but that I would like to turn the call over to Kevin.

Kevin J. Knopp: Thanks, Kelly. Good morning, and thank you for joining our fourth quarter 2023 earnings call. We ended the fourth quarter with $14.4 million in revenue, up 23% from the prior year. Total revenue for 2023 was $50.2 million, up 7% from the prior year, with product and service revenue up $12 billion. I'm very pleased with how our team has continued to execute, stay focused on our customers, and deliver a solid close to the year. The variety in our product portfolio and our presence in multiple markets have been a strength and distinct advantage.

Thanks, Kelly good morning, and thank you for joining our fourth quarter 2023 earnings call.

We ended the fourth quarter with $14 4 million in revenue up 23% from the prior year.

Total revenue for 2023 was $50 2 million up 7% from the prior year with product and service revenue up 12%.

I am very pleased with how our team has continued to execute stay focused on our customers and deliver a solid closed the year.

The variety in our product portfolio and our presence in multiple markets had been a strength and distinct advantage revenue from our handheld devices that served the forensics market grew 28% in 2023 with consistent year over year growth each quarter.

Kevin J. Knopp: Revenue from our handheld devices that serve the forensics market grew 28% in 2023, with consistent year-over-year growth each quarter. This growth significantly offsets the macro headwinds that have pressured the life science instrumentation and bioprocessing markets, which includes revenue from our desktop devices. While we expect these headwinds to continue in the near term, particularly in the first half of 2024, we are encouraged by three indicators.

This growth significantly offset the macro headwinds that have pressured the life science instrumentation, and bio processing markets, which includes revenue from our desktop devices.

While we expect these headwinds to continue in the near term, particularly in the first half of 2024. We are encouraged by three indicators first we saw an uptick in fourth quarter bookings, resulting in our best desktop bookings quarter. Since Q4 2021 helped in part by contributions from our new products <unk> and <unk>.

Kevin J. Knopp: First, we saw an uptick in fourth-quarter bookings, resulting in our best desktop bookings quarter since Q4 2021, helped in part by contributions from our new products, Maven and Maverick. The second indicator is that we generated 25% more opportunities in the second half of 2023 for our desktop devices compared to the first half of the year, helped in part by our new product launch. And third, we generated 50% more leads in the second half of the year than in the first half, helping us fill the top of our funnel. We saw strong demand for our handheld devices throughout 2023 and expect demand to continue this year as applications for chemical detection and identification at the point of need continue to gain traction in the U.S. and internationally.

Yeah.

The second indicator is that we generated 25% more opportunities in the second half of 2000 2024, our desktop devices compared to the first half of the year helped in part by our new product launches and third we generated 50% more leads in the second half of the year and over the first half helping us.

Fill the top of our funnel.

We saw strong demand for our handheld devices throughout 2023 and expect demand will continue this year as applications for chemical detection and identification at the point of need continued to gain traction in the U S and internationally we.

Kevin J. Knopp: We ended the year with 16 pilot accounts, which have the potential for more than 100 unit placements, and 22 enterprise accounts, which have the potential for more than 1000 unit placements, an increase of 25% year over year. Key drivers of handheld adoption continue to be a significant level of ongoing geopolitical risk with conflicts in Europe and the Middle East, along with rising tensions in other areas such as in Southeast Asia with Taiwan. The ever-expanding fentanyl crisis is another key driver, including its unfortunate attempted use to disrupt elections with fentanyl being sent in the mail to election centers and officials.

We ended the year with 16 pilot accounts, which have potential for more than a 100 unit placements and 22 enterprise accounts, which have potential for more than 1000 unit placements and increase of 25% year over year.

Key drivers of handheld adoption continue to be significant level of ongoing geopolitical risks with conflicts in Europe, and the middle East along with rising pension and other areas such as in Southeast Asia with Taiwan, the ever expanding fentanyl crisis is another key driver, including its unfortunate attempted used to disrupt.

<unk> with <unk> <unk> being sent in the mail to election sensors and officials.

Kevin J. Knopp: Between 2020, the year of our IPO, and 2023, revenues from our handheld portfolio have grown at a 29% CAGR, serving as a consistent contributor to top-line growth. We finished 2023 with zero debt and a healthy cash balance of over $145 million. We remain laser focused on balancing prudent cash management with necessary spending to support our top-line growth objectives.

Between 2020, the year of our IPO in 2023 revenues for our handheld portfolio have grown at a 29% CAGR serving as a consistent contributor to top line growth.

We finished 2023 with zero debt and a healthy cash balance of over $145 million. We remain laser focused on balancing prudent cash management with necessary spending to support our topline growth objectives.

Kevin J. Knopp: As mentioned during our call a year ago, we set a target to ensure that our 2023 operating expense growth was paced with revenue growth, which I'm proud to say we achieved. Entering 2024, we intend to remain good stewards of our cash as we continue our push into underserved handheld and desktop market opportunities. Now I'd like to provide a bit more detail on the progress we have made across our three focus areas during the past year. Starting with our first objective, penetrate and radiate across key accounts.

As mentioned during our call a year ago, we set a target to ensure that our 2023 operating expense growth was paced with our revenue growth, which I'm proud to say we achieved entry.

Entering 2024, we intend to remain good stewards of our cash as we continue our push into underserved and held and desktop market opportunities.

Now I'd like to provide a bit more detail on the progress we have made across our three focus areas during the past year.

Starting with our first objective penetrate and radiate across key accounts, our focus is to penetrate new accounts to create a foothold and then radiate across these accounts to drive broader enterprise adoption.

Kevin J. Knopp: Our focus is to penetrate new accounts to create a foothold and then spread across these accounts to drive broader enterprise adoption. For our handhelds, we steadily expanded our international presence, and our MX908 device is now being deployed in 56 countries, up from 45 countries at the end of 2022. In 2023, 25% of our MX908 device sales were from outside North America, compared to 20% in 2022. We anticipate further growth in our international opportunities In the fourth quarter of 2023, we were awarded a contract from Drug Detect EU, an innovative procurement project co-funded by the European Union for Drug Detection in Correctional Institutions and Prisons. The project requires detection solutions be available 24-7 to prevent delays to internal processes, and it also mandates that solutions must be non-invasive and compliant with European data privacy laws. Our MX908 proudly meets these requirements. Our initial contract includes multiple devices for correctional facilities in Greece and Belgium. After personnel were trained on a unit at the Ghent prison, the Belgian Minister of Justice publicly noted that they could now use our device continuously to combat drug use in prison, removing the need to call in a police dog.

For our handheld we steadily expanded our international presence and our <unk> <unk> device is now being deployed in 56 countries up from 45 countries at the end of 2022.

In 2023, 25% of our Amex <unk> device sales were from outside North America compared to 20% in 2022.

We anticipate further growth in our international opportunities.

In the fourth quarter of 2023, we were awarded a contract from drug detect EU innovative procurement project co funded by the European Union for drug detection in Correctional institutions in prisons.

Project requires detection solutions be available 24, 7% to prevent delays to internal processes and it also mandates that solutions must be noninvasive and compliant with European data privacy laws are <unk> proudly meets these requirements. Our initial contract includes multiple devices for correctional facilities in Greece.

In Belgium. After personnel were trained on a unit at against prison. The Belgian Ministry of Justice publicly noted that they now can use our device continuously to combat drug use in prison, removing the need to call in the police dog.

Kevin J. Knopp: We look forward to partnering with the Belgian ministry as they deploy our MX908, as well as supporting the DrugDetect project more broadly across the EU. Meanwhile, closer to home, the ongoing fentanyl crisis shows no signs of abating. The U.S. Drug Enforcement Administration, or DEA, seized more than 77 million fentanyl-laced fake prescription pills in 2023, up over 50 percent from 2021. VA laboratory testing also showed that 7 out of 10 pills tested contained a potential deadly dose of fentanyl, an increase from 6 out of 10 pills in 2022 and 4 out of 10 pills in 2021.

We look forward to partnering with the Belgian Ministry as they deploy our Amex night away as well as supporting that drug the PEC project more broadly across the EU.

Closer to home the ongoing fentanyl crisis shows no signs of abating.

Drug enforcement administration, or DEA sees more than 77 million fentanyl lay's baked prescription pills in 2023 up over 50% from 2021.

Laboratory testing also showed that seven out of 10 pills test that contained a potential deadly dose eventful an increase from six out of 10 pills in 2022 and four out of 10 pills in 2021.

Kevin J. Knopp: To meet this overwhelming need, we continue to partner with state and local law enforcement agencies as they grapple with identifying and removing lethal counterfeit pharmaceuticals, often missed with a pencil, from our community. In August of 2023, we announced a pilot program with several Tennessee law enforcement agencies and drug task forces to enhance the speed and efficiency of the state's drug identification process. The program's primary objective is to decrease the quantity of illicit drug samples sent to central labs for testing, similar to our successful multi-year program in Ohio, which has resulted in a significant reduction in the evidence testing backlog.

To meet this overwhelming need we continue to partner with state and local law enforcement agencies as they grapple with identifying and removing depot counterfeit pharmaceuticals often.

So from our communities in.

In August of 2023, we announced a pilot program with several Tennessee law enforcement agencies and drug task forces to enhance the speed and efficiency of the state's drug identification process.

The program's primary objective is to decrease the <unk>.

Quantity of illicit drug samples sent to central labs for testing similar to our successful multi year program in Ohio, which has resulted in significant reduction in evidenced testing backlogs.

Kevin J. Knopp: The Tennessee pilot program began with an initial seed of eight MX908 devices, and we recently received an order for three additional devices in January of 2024, with more being planned this year. In 2023, we also made significant progress with a multiyear project for the United States Department of Defense. In conjunction with our partner in the project, Smith Detection, we were selected to provide an initial production of 122 portable aerosol and vapor chemical agent detectors, otherwise known as AVCAP. Our high-pressure mass spectrometry technology enables these next-generation chemical detector systems, which will support worldwide missions for the U.S. military.

The Tennessee pilot program began with an initial set of <unk> devices and we recently received an order for three additional devices in January of 2024 with more being planned this year.

During 2023, we also made significant progress with our multi year project for the United States Department of defense in conjunction with our partner of the project Smiths detection. We were selected to provide an initial production of 122, affordable aerosol and vapor chemical agent detectors.

Otherwise known as <unk>.

Our high pressure mass spectrometry technology enables these next generation chemical detector systems, which will support worldwide missions for the U S military.

Kevin J. Knopp: This is also a precursor to a potential full-rate production award in 2025 that has the potential to provide over $10 million of revenue per year. Turning to our desktops, we are excited about our progress in cell therapy, as tools that provide real-time analytics are pivotal in helping manufacturers develop more robust and reproducible processes. In November, we announced a collaboration with Terumo Blood and Cell Technologies to integrate our MAVEN device with Terumo's QuantumFlex expansion system for real-time monitoring and control of glucose and lactate without the risk of manual sampling and with less labor. With MAVEN, lactate concentrations, which are a highly correlated indicator of cell viability, can be continuously monitored to inform feeding strategies and when to harvest, both critical as they can vary patient by patient.

This is also a precursor to a potential full rate production award in 2025 that has the potential of providing over $10 million of revenue per year.

Turning to our desktops, we are excited about our progress in cell therapies as tools that provide real time analytics, our pivotal and helping manufacturers develop more robust and reproducible processes.

In November we announced the collaboration with to remote blood and cell technologies to integrate our maven device with through most quantum flex expansion system for real time monitoring and control of glucose in lactate without the risk of manual sampling and with less labor.

With maven lactate concentrations, which are highly correlated indicator of cell viability can be continuously monitored to informed feeding strategies and when to harvest both critical as they can very patient by patient.

Kevin J. Knopp: Recently, we were thrilled to announce another collaboration with a leading cell therapy developer and manufacturer, Solaris, to integrate inline monitoring of key cell culture parameters. We are partnering with Solaris to make our Maverick inline optical analyzer compatible with Solaris' cell shuttle system, which is a fully integrated, scalable cell therapy manufacturing platform. The benefit of real-time monitoring allows for immediate corrective action while maintaining sample integrity and reducing contamination risk.

Recently, we were thrilled to announce another collaboration with a leading cell therapy developer and manufacturer Solaris to integrate inline monitoring of key cell culture parameters. We are partnering with soliris to adopt our maverick in line optical analyzer to be compatible with Solaris to sell shuttle system, which is a fully.

Integrated scalable cell therapy manufacturing platform the benefit of real time monitoring allows for immediate corrective action, while maintaining sample integrity and reducing contamination risks. This.

Kevin J. Knopp: This collaboration, along with Cherumo BCT, demonstrates the complementary nature of our new and existing capabilities when used alongside other cell therapy biomanufacturing enablers. Recently released data from the American Society of Gene and Cell Therapy shows that the number of Phase III trials increased for the first time in a year. As 2024 is shaping up to be a pivotal year, particularly for CAR-T therapies, we are proud to partner with Taruma BCT and Solaris to further advance the efficiency, safety, and cost-effectiveness of these life-saving cell therapies.

This collaboration along with your remote BCP demonstrates the complementary nature of our new and existing capabilities when used alongside other cell therapy bio manufacturing enablers.

According to recently released data from the American Society of gene and cell therapy. The number of phase III trials increase for the first time in a year as 2024 is shaping up to be a pivotal year, particularly for car T. Therapies. We are proud to partner with to Roomba, ECT and Soliris to further advance the efficiency safe.

And cost effectiveness of these life saving cell therapies.

Kevin J. Knopp: Turning to our second objective, advancing and broadening our product portfolio. Our product strategy is to develop devices that are simple to use and that provide customers with robust answers at the point of need. We continue to enhance the value of our flagship handheld device with software and hardware accessories that provide our customers with additional capabilities. Last year, we introduced the MX908 Beacon for remote area monitoring of toxic aerosol and vapor hazards. Beacon leverages our MX908 device and Aero module and adds a cloud-based solution that enables first responders to gather intelligence remotely and continuously while ensuring public safety at large events and key infrastructure. In November, our MX-908 Beacon was awarded a Gold Asters Homeland Security Award from American Security Today for Best CBR&E Detection Solution.

Turning to our second objective.

Anthony and broadening our product portfolio.

Our product strategy is to develop devices that are simple to use and that provide customers with robust answers at the point of need.

We continue to enhance the value of our flagship handheld device with software and hardware accessories that provide our customers with additional capabilities last year, we introduced the <unk> nine O a beacon for moat area monitoring of toxic aerosol and vapor hazards.

<unk> Leverages, our <unk> device and Aero module and adds a cloud based solution that enables first responders to gather intelligence remotely and continuously while ensuring public safety at large events and a key infrastructure.

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<unk> nine O a beacon was awarded a gold Astor's Homeland Security Award from the American security today for best CBR need detection solution.

Kevin J. Knopp: In 2023, we significantly advanced and broadened our bioprocess portfolio with the launch of two devices. In January, we launched MAVEN, our first online device that connects directly to the bioreactor, providing real-time monitoring and control of glucose and lactate in cell culture and fermentation processes. With its novel aseptic sampling probe, MAVEN enables cell-free, sterile, and safe sampling with no volume loss or prep required.

In 2023, we significantly advanced and broadened our bioprocess portfolio with the launch of two devices in January we launched Maven. Our first online device that connects directly to the bioreactor, providing real time monitoring and control of glucose in lactate in cell culture and <unk>.

Orientation processes with its novel Ace epic sampling probe may even enabled cell free sterile and safe sampling with no volume loss or prep required.

Kevin J. Knopp: Later in September, we launched Maverick, the first turnkey device that utilizes Raman spectroscopy for real-time inline monitoring and control of multiple bioprocess parameters, with no modeling or development required. As an inline device, Maverick is directly connected to the bioreactor, enabling scientists to take immediate corrective actions that improve product quality and process efficiency. We were honored that Analytical Scientist named Maverick one of the top 15 innovations in 2023. Maven, Maverick, and our Rebel Atline Cell Culture Analyzer enable process scientists to monitor and control critical process parameters.

Later in September we launched Maverick the first turnkey device that utilizes Raman spectroscopy for real time in line monitoring and control of multiple bioprocess parameters with no modeling or development required.

Inline device Maverick is directly connected to the bioreactor, enabling scientists to take immediate corrective actions that improve product quality and process efficiency.

We were honored that the analytical scientist named Maverick one of the top 15 innovations in 2023.

Maven Maverick and our rebel outlines cell culture analyzer enabled process scientists to monitoring control critical process parameters and ZIP chip interface enables scientists to measure critical quality attributes.

Kevin J. Knopp: And our Zipchip interface enables scientists to measure critical quality directly. Taken together, we now have a complementary suite of PAT desktop devices, which we plan to use to deepen our engagement with biopharma customers this year and position us advantageously to seize opportunities as the current macro headwinds subside. And finally, turning to our third objective, laying an omics foundation, there is a clear need for accelerating mass spectrometry-based workflows to address proteomic and metabolomics opportunities.

Together, we now have a complementary suites of desktop devices, which we plan to use to deepen our engagement with biopharma customers this year and position us advantageously to seize opportunities as the current macro headwinds subside.

And finally, turning to our third objective laying in Ohmic Foundation.

There is a clear need for accelerating mass spec based workflows to address proteomics and metabolomics opportunities. We believe our ZIP chip device, along with our prototype Microfluidic chips and ultimately meet this need for speed.

Kevin J. Knopp: We believe our Zipchip device, along with our prototype microfluidic chips, can ultimately meet this need for speed. During the fourth quarter, there were several peer-reviewed articles published in scientific journals that noted the speed of our Zipchip device for high-resolution separations, and here are the highlights from two articles. In a publication in the Journal of Analytical and Bioanalytical Chemistry, scientists from Ireland's National Institute for Bioprocessing Research and Trading, or NIBRT, highlighted the use of ZipChip for rapid characterization of AAV capsid proteins, with runs performed in as little as five minutes. Researchers concluded that Zipchip's rapid characterization illustrates its strength in monitoring product quality during AAV production. In a publication in the Journal of the American Society for Mass Spectrometry, scientists from Amgen employed our ZIP chip technology to enable rapid intact mass analysis of oligonucleotide single strands. Baseline separation of equal-length oligos was achieved in less than 4 minutes compared to run times of 15 minutes with LC-MS analysis. In addition, with the ZIP chip, no method development nor ion pairing reagents are required.

During the fourth quarter there were several peer reviewed articles published in scientific journals that noted the speed of our ZIP chip device for high resolution separations and here I highlight from two articles in a publication in the journal of analytical and Bioanalytical chemistry scientists from Ireland's National Institute for Bioprocess from research.

Trading or Niobrara highlighted the use of ZIP chip for rapid characterization of AAV capsid proteins with runs performed in as little as five minutes.

Researchers concluded that ZIP chips rapid characterization illustrates the strength and monitoring product quality during AAV production.

In a publication in the journal of American Society for mass spectrometry scientists from Amgen employed our chip technology to enable rapid intact mass analysis of oligonucleotide single strengths.

<unk> separation of equal length, Oligos was achieved in less than four minutes compared to run times of 15 minutes with LC Ms analysis and.

In addition, with ZIP chip no method development, nor ion pairing reagents are required.

Kevin J. Knopp: Overall, I'm pleased with the progress we made on our stated objectives in 2023, including the launch of two devices in the process analytical technology space and the continued penetration of our handheld in enterprise. With that, I'll now turn the call over to Joe for more details on our financial... Thanks, Kevin.

Overall Im pleased with the progress we've made on our stated objectives in 2023, including the launch of two devices in the process analytical technology space and the continued penetration of our handheld and enterprise accounts with that I'll now turn the call over to Joe for more details on our financials.

Thanks, Kevin starting with our fourth quarter results revenue for the fourth quarter 2023 was $14 4 million up 23% from $11 6 million in the prior year period.

Joseph H. Griffith: Starting with our fourth quarter results, revenue for the fourth quarter 2023 was $14.4 million, up 23% from $11.6 million in the prior year period, primarily driven by an increase in handheld device revenue. Handheld revenue was $11.1 million for the fourth quarter 2023, up 57% from $7.1 million for the fourth quarter 2022, primarily related to an increase in device sales, with 116 MX908 handheld device shipments in the fourth quarter. Desktop revenue from our products serving the life science, instrumentation, and bioprocessing markets for the fourth quarter 2023 was $3.2 million, down 2% from $3.3 million in the prior year period. This included five ZipChip interfaces, three Rebol, ten Maven, and five Maverick devices.

Primarily driven by an increase in handheld device revenue.

Handheld revenue was $11 1 million for the fourth quarter 2023 up 57% from $7 1 million for the fourth quarter 2022, primarily related to an increase in device sales with 116, IMAX ninoy handheld device shipments in the fourth quarter.

Desktop revenue from our products, serving the life science instrumentation on bioprocess markets for the fourth quarter 2023 was $3 2 million down 2% from $3 3 million in the prior year period.

This included five chip interfaces, three rebel 10, Nathan and five Maverick device shipments.

Joseph H. Griffith: As a reminder, starting next quarter, we will no longer break out placements by device; we'll focus more on overall revenue, and combined desktop placements is the key metric for growth for a broadening desktop portfolio. We exited 2023 with a cumulative handheld and desktop install base of 2,853 devices, up from 2,385 at the end of 2022. Recurring revenue, which consists of consumables, accessories, and service revenue, represented a third of total revenue in the quarter and was $4.7 million, a $1.2 million decrease over the prior year period. This decrease was driven by a decline in handheld accessory and consumable revenue, offset in part by growth in service revenue.

As a reminder, starting next quarter, we will no longer breakout placements by device, we will focus more on overall revenue and combined desktop placements as the key metrics for growth for our broadening desktop portfolio.

We exited 2023 with accumulative handheld and desktop installed base of 2853 devices up from 2000 and 385 exiting 2022.

Recurring revenue, which consists of consumables accessories and service revenue represented a third of total revenue in the quarter was $4 7 million or $1 $2 million decrease over the prior year period.

This decrease was driven by a decline in handheld accessory and consumable revenue offset in part by growth in service revenue.

Joseph H. Griffith: As a reminder, in the prior year period, we had $2.2 million in recurring revenue from a large enterprise order with the U.S. Gross profit was $7.3 million for the fourth quarter of 2023, compared to $5.9 million for the prior year period. Gross margin was 51% for the fourth quarter of 2023, consistent with the prior year period. For the fourth quarter of 2023, product and service gross margin improved to 51% compared to 46% for the prior year period, which helped to offset $1.2 million of favorable gross margin from contract revenue in the prior year period. Total operating expenses for the fourth quarter of 2023 were $17 million, compared to $16.3 million in the prior year period. This increase was driven by stock-based compensation and an increase in commission expenses related to handheld revenues, all set in part by a reduction in G&A expenses. The net loss for the fourth quarter of 2023 was $7.4 million, compared to $9.8 million in the prior year period.

As a reminder, in the prior year period, we had $2 2 million in recurring revenue from a large enterprise order with the U S Army.

Gross profit was $7 3 million for the fourth quarter of 2023 compared to $5 9 million for the prior year period.

Gross margin was 51% for the fourth quarter 2023, consistent with the prior year period.

For the fourth quarter of 2023 product and service gross margin improved to 51% compared to 46% for the prior year period, which helped to offset $1 2 million of favorable gross margin from contract revenue in the prior year period.

Total operating expenses for the fourth quarter of 2023 were $17 million compared to $16 3 million in the prior year period.

This increase was driven by stock based compensation and an increase in commission expenses related to handheld revenues.

In part by a reduction in G&A expenses.

Net loss for the fourth quarter of 2023 was $7 4 million compared to $9 8 million in the prior year period.

Joseph H. Griffith: Now, moving on to our full year of results. Total revenue for the full year 2023 was $50.2 million, up 7% from $46.9 million in 2022. This was primarily driven by an $8.3 million increase in handheld revenues, offset by a $3 million decrease in desktop revenues, and a $2 million decrease in contract.

Now moving on to our full year results.

Total revenue for the full year 2023 was $50 2 million up 7% from $46 9 million in 2022.

This was primarily driven by an $8 3 million increase in handheld revenues offset by a $3 million decrease in desktop revenues and a $2 million decrease in contract revenues.

Joseph H. Griffith: Total 2023 product and service revenues were $49.9 million, up 12% from $44.5 million in 2020. Handheld revenue was approximately $37.9 million for the full year 2023, compared to $29.5 million in the prior year period, representing growth of 28% year-over-year, primarily driven by an increase in devices. Desktop revenue is expected to be $12 million for the full year 2023, a 20% decline compared to $14.9 million in the prior year period, as customers remain cautious in their capital expenditures.

Total 2023 product and service revenues were $49 9 million up 12% from $44 5 million in 2022.

Handheld revenue was approximately $37 9 million for the full year 2023, compared to $29 5 million in the prior year period, representing growth of 28% year over year, primarily driven by an increase in device sales.

Desktop revenue was $12 million for the full year of 2023% to 20% decline compared to $14 9 million in the prior year period as customers remain cautious in their capital expenditures.

Joseph H. Griffith: Recurring revenue for the full year was a third of product and service revenue and was $16.5 million compared to $15.7 million in the prior year period, representing growth of 5% year over year. Recurring revenue growth was driven primarily by strong service revenue, which grew to 38% year-over-year, offset in part by $3.5 million in recurring revenue from a large enterprise order with the U.S. Army in the prior year period. Looking ahead, we expect recurring revenue for our product portfolio to continue to be around a third of product and service revenue for the full year 2024. Gross profit for the full year 2023 was $25.3 million, as compared to $26 million in the prior year period.

Recurring revenue for the full year was a third of product and service revenue was $16 5 million compared to $15 7 million in the prior year period.

Representing growth of 5% year over year.

Recurring revenue growth was driven primarily by strong service revenue, which grew to 38% year over year offset in part by $3 5 million in recurring revenue from a large enterprise order with the U S Army in the prior year period.

Looking ahead, we expect recurring revenue for our product portfolio to continue to be around.

Third of product and service revenue for the full year of 2024.

Gross profit for the full year 2023 was $25 3 million as compared to $26 million in the prior year period.

Joseph H. Griffith: Gross margin was 50% for the full year 2023, as compared to 56% for the full year 2022. Product and service gross margin was 50% for the full year 2023, as compared to 54% for the prior year period. The decrease in product and service gross margin was driven primarily by an increase in spending to reach scale within our operations and services, A Temporary Increase in the Use of Third-Party Contractors to Train Customers on Our MX-908, and a $0.6 million increase in non-cash stock-based compensation and intangible amortization. As we look ahead to 2024, we expect our gross margins to continue to be in the low 50s due to the impact of pricing, higher material costs, and overall product, service, and channel costs. Operating expenses for the full year 2023 were $68.1 million as compared to $61.4 million in the prior year. This increase was driven primarily by a $3.3 million increase in salaries and related costs and a $2.3 million increase in stock-based compensation, partially offset by a reduction in G&A expenses. The net loss for the full year 2023 was $36.4 million compared to $33.6 million in the prior year period.

Gross margin was 50% for the full year 2023, as compared to 56% for the full year 2022.

Product and service gross margin was 50% for the full year 2023, as compared to 54% for the prior year period.

The decrease in product and service gross margin was driven primarily by an increase in spending to reach scale within our operations and service functions.

Temporary increase in the use of third party contractors to train customers on our <unk>.

And is there a <unk> 6 million increase in non cash stock based compensation and intangible amortization.

As we look ahead to 2024, we expect our gross margins to continue to be in the low $50 due to the impact of pricing higher material costs, and overall product service and channel mix.

Operating expenses for the full year 2023 were $68 1 million as compared to $61 4 million in the prior year period.

This increase was driven primarily by a $3 3 million increase in salaries and related costs and a $2 3 million increase in stock based compensation, partially offset by a reduction in G&A expenses.

Net loss for the full year 2023 was $36 4 million compared to $33 6 million in the prior year period.

Joseph H. Griffith: We ended 2023 with $145.7 million in cash, cash equivalents, and marketable securities with no debt outstanding. In 2023, we consumed $43 million, which included $15 million used to pay off debt and $1 million used to pay contingent consideration for our prior acquisition. We enter 2024 with a strong cash position and zero debt, which we believe provides a multi-year runway to support our long-term growth. Looking ahead, we expect revenue to be in the range of $52 to $54 million, representing growth of 4% to 8% over a full year 2020. This range presents a balanced view of several factors.

We ended 2023 with $145 7 million in cash cash equivalents and marketable securities with no debt outstanding.

In 2023, we consumed $43 million, which includes $15 million used to pay off debt and $1 million used to pay contingent consideration for a prior acquisition.

We entered 2024 with a strong cash position and zero debt, which we believe provides a multiyear runway to support our long term growth objectives.

Looking ahead in 2024, we expect revenue to be in the range of $52 million to $54 million representing growth of 4% to 8% over full year 2023.

This range presents a balanced view of several factors.

Joseph H. Griffith: First, while Q4 had some indicators of positivity for the life science, instrumentation and bioprocessing markets, we're assuming the pressures we saw throughout the year will persist through at least the first half of 2024. Second, despite these headwinds, we anticipate a step up in total desktop device placements during 2024, with rising contributions from newer products throughout the year as they progress through customer evaluation. And finally, we expect continued strength in our handheld devices, which serve the forensics market to bolster our overall growth as we continue to navigate a challenging macro environment for our, As a result of these factors, taken together with the delay in passing a fiscal year 2024 U.S. federal budget, We expect revenue for 2024 to be slightly more weighted to the second half compared to prior years, with an expected split of roughly 40% in the first half and 60% in the second.

First while Q4 had some indicators of positivity for the life science instrumentation and bioprocess markets. We're assuming the pressures we saw throughout the year will persist through at least the first half of 2024.

Second despite these headwinds we anticipate a step up in total desktop device placements during 2024 with rising contributions from newer products throughout the year as they progress through customer evaluations and finally, we expect continued strength in our handheld devices, which served the forensics market to bolster our overall growth.

As we continue to navigate a challenging macro environment for our desktops.

As a result of these factors taken together with the delay in passing of fiscal year 2020 for U S Federal budget.

We expect revenue for 2024 to be slightly more weighted to the second half compared to prior years with an expected split roughly 40% in the first half and 60% in the second half.

Joseph H. Griffith: Each year we typically see a step down from Q4 to Q1 due to the seasonality of year-end budget cycles. This year, we expect that to be even more pronounced, largely due to the delay in the passing of the federal budget and the strong performance of handouts in the fourth quarter of 2023. At this point, I would like to turn the call back to Kevin.

Each year, we typically see a step down from Q4 to Q1 due to the seasonality of your own budget cycles.

This year, we expect that to be even more pronounced largely due to the delay in the passing of the federal budget and the strong performance of handhelds and the fourth quarter of 2023.

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

Kevin J. Knopp: Thanks, Joe. We view 2024 as a transitional year for 908 Devices. We expect solid growth from our products serving the forensics market and overall revenue growth to accelerate throughout the year as the headwinds in the life science instrumentation and bioprocessing market begin to subside. With this anticipated improvement, we are well positioned to capture the opportunity in this market with an expanded product portfolio. We are confident that with an improved macro environment, we'll be able to return to robust double-digit growth in 2025, which will solidify a path to profitability with our existing cash reserve. To get there, we are laser focused on three key areas in 2024. First, there is market expansion.

Thanks, Joe.

<unk> 2024, as a transitional year for 900 devices, we expect solid growth from our products, serving the forensics market and overall revenue growth to accelerate throughout the year as the headwinds in the life science instrumentation and bio processing market begins to subside.

With this anticipated improvement, we are well positioned to capture the opportunity in this market with an expanded product portfolio.

We are confident that with an improved macro environment will be able to return to robust double digit growth in 2025, which will solidify our path to profitability with our existing cash reserves to.

To get there we are laser focused on three key areas for 2024.

First is market expansion, our focus here will be on broadening our market presence by actively engaging with new key accounts and developing strategic partnerships, while also expanding our reach across global enterprise accounts.

Kevin J. Knopp: Our focus here will be on broadening our market presence by actively engaging with new key accounts and developing strategic partnerships while also expanding our reach across global enterprise accounts. In 2023, we saw an increase in the pipeline of opportunities for handheld devices with a 25% increase in enterprise potential. Given the strong growth of our handhelds in forensics, we will invest in areas where we believe we can drive higher growth, both domestically and internationally, and explore ways to further leverage our sales and marketing channels. Additionally, planned increases in NATO defense spending and spending in the Middle East are expected to have a positive impact.

2023, we saw an increase in the pipeline of opportunities for our handheld devices with a 25% increase in enterprise potential.

Given the strong growth of our handhelds and forensics, we will invest in areas, where we believe we can drive higher growth, both domestically and internationally and explore ways to further leverage our sales and marketing channel.

Additionally, planned increases in NATO defense spending and spending in the middle East are expected to have a positive impact.

Kevin J. Knopp: For our desktop products, we are working to introduce Maven and Maverick into advanced therapeutic modalities, establishing a presence with design wins and strategic relationships with innovators in the cell therapy space. A second area of focus will be to leverage our expanded product portfolios to maximize opportunities and strengthen customer engagement. Our PHE portfolio now includes at-line, online, and in-line analysis capabilities, providing real-time analytics for our customers. This has led us to being increasingly viewed as partners in cell culture analysis for biologics and cell and gene therapy applications, enabling broader conversations and ultimately larger potential.

For our desktop products, we are working to introduce maven and maverick into advanced therapeutic modalities, establishing a presence with design wins and strategic relationships with innovators in the cell therapy space.

Our second area of focus will be to leverage our expanded product portfolios to maximize opportunities and strengthen customer engagement. Our Phd portfolio. Now includes outline online and in line analysis capabilities, providing real time analytics for our customers. This has led us to being increasingly.

<unk> partners in the cell culture analysis for biologics and cell and gene therapy applications, enabling broader conversations and ultimately larger potential.

Kevin J. Knopp: With all the necessary desktop products in place to address near-term opportunities, we're being selective with our R&D investments, focusing on incremental, rather than next-generation advancements in 2024. And finally, we will execute a framework for sustained growth with a path to profitability. Our year-over-year operating expenses, excluding stock compensation, are projected to remain flat in 2024, with R&D spend tempering now that major product launches in 2023 are complete.

With all the necessary desktop products in place to address near term opportunities, we're being selective with our R&D investments focusing on incremental rather than next generation advancements in 2024.

And finally, we will execute a framework for sustained growth with the path to profitability our year over year operating expenses, excluding stock compensation are projected to remain flat in 2024 with R&D spend tempering now that the major product launches of 2023 are complete.

Kevin J. Knopp: We are committed to reaching profitability with our existing cash reserves, and this path will be solidified as we return to robust double-digit growth rates in 2025. I look forward to updating you on our progress across each of these initiatives throughout the year. With that, we'll now open it up to questions. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. The first question comes from Puneet Souda from Learink Partners. Please go ahead.

We are committed to reaching profitability with our existing cash reserves and this path will be solidified as we returned to robust double digit growth rates in 2025.

I look forward to updating you on our progress across each of these initiatives throughout the year with that we'll now open it up to questions.

Thank you.

Like to ask a question. Please press star one on your telephone keypad. If you would like to withdraw your question. Please press star two.

The first question comes from Puneet <unk> from Leerink partners. Please go ahead.

Puneet Souda: Hi Kevin and Joe, thanks for taking my questions. So the first one is a demand question and tied to the guide, actually. You know, you have more products than ever before as a company with a number of launches and PAT. So just help us understand, you know, as we look at 2024, when you look at the funnel, what gives you more opportunities. What gives you more excitement in terms of the adoption of these products?

Yes, Hi, Kevin Joe Thanks for taking my questions. So first one is.

A demand question tied to the guide actually.

Yeah.

You have more products than ever before as a company with a number of launches in <unk>.

So just help us understand.

As we look at 2024.

When you look at the funnel what gives you more.

Opportunity what gives you more excitement.

In terms of adoption of these products.

Kevin J. Knopp: And what are you hearing from the field today in terms of Rebel, Maven, and Maverick products gaining more adoption and sort of, you know, contributing? And I'm simply asking that because when we look at the bioprocessing industry, we are seeing some signs of recovery, but your products are very nascent in this marketplace. So just want to get a more nuanced view there, if I could. Yeah, absolutely. Thanks. Thanks, Puneet. You're right.

And what are you hearing from the field today in terms of rebel maven and Maverick products, gaining more adoption and sort of contributing just and I'm simply asking that because when we look at the bio processing industry. We are seeing some signs of recovery, but your products are very nascent still in this marketplace.

I just wanted to get a more.

A nuanced view there if I could.

Yes, absolutely. Thanks, Thanks, Tony Youre right I mean, we feel very happy that we've been able to expand our set of products and kind of go from a one product one product to a complete strategy.

Kevin J. Knopp: I mean, we feel very happy that we've been able to expand our set of products and kind of go from a one product, one service to a complete strategy of PAT products, spanning outline, online, and inline capabilities. And with that, it gives us a range of price points that are accessible to a customer, a range of capabilities from, what we call more the bread and butter analytes, so glucose and lactate, you know, all the way through to a very comprehensive panel with our rebel outline analyzer. So I think one of the things we've been seeing from that is, across the board, despite this environment, we're engaged now and being viewed more as a bit of a partner in cell culture analysis and really driving conversations, perhaps at more of a senior strategic level within these accounts, which I think ultimately is going to lead to more potential for it. More specifically, you know, I think we're seeing Maven and Maverick get some keen interest in biologics, but also some cell therapy areas. And then rebel as well as in the biologics space predominantly, but with interest there as well in the cell therapy space, www. LRCgenerator.com. Okay, that's helpful.

<unk> spanning outline online and in line capabilities and with that it gives us a range of price points that are accessible to a customer a range of.

Capabilities from call it more of the bread and butter analytes glucose and lactate all the way through to a very comprehensive panel with our with our rebel <unk> analyzer.

Think one of the things we've been seeing from that is across the board. Despite this environment.

We are engaged now and being viewed more as a bit of a.

As a partner and cell culture analysis, and really driving conversations perhaps at more of a senior strategic level within these accounts, which I think ultimately is going to lead to.

More potential on it.

More specifically I think we're seeing maven and Maverick get some some keen interest in biologics, but also some cell therapy areas.

Rebel as well as in the in the biologics space predominantly but interest there as well in the cell therapy space.

Yeah.

Okay. That's helpful.

If I can follow up on <unk>.

Kevin J. Knopp: And on, if I can follow up on MX 908, could you talk about the sort of puts and takes here? It seems like there is a significant interest, just given the political uncertainties, war, and other situations, and as well as the fentanyl crisis. It seems like the need for such a product is strong. But can you maybe take us through sort of the puts and takes, what we need to consider, what could drive expectations towards the higher end of your expectations versus towards the lower end? What are some of the puts and takes there?

Could you talk about the sort of the puts and takes here. It seems like there is a <unk>.

If I could interest just given the political uncertainties or in other situations and as well as fentanyl crisis. It seems like the need for such a product is a strong.

But can you maybe take us through sort of the puts and takes and what we need to consider what could drive.

Expectations.

Towards the higher end of your.

Expectations versus towards the lower end what are some of the puts and takes there I appreciate it. Thank you.

Kevin J. Knopp: I appreciate it. Thank you. Sure, you're right. I mean, we definitely saw a strong demand for handhelds in 2023. And we do expect that to continue through this year. And you're right, that application of trace chemical detection and identification, distributed at the point of need, continues to get traction for us in the US and international robust need drivers that we did point out in the script, but significant levels, as you read in the news every day of geopolitical risk across Europe and the Middle East. And, and then, of course, the fentanyl crisis is not abating, unfortunately, there, and it just continues to rear its head in a broader way.

Sure you're right I mean, we definitely saw a strong demand for our handhelds over 2023, and we do expect that to continue through this year and you're right that application of trace chemical detection identification distributed at the point of need.

To get traction for us in the U S and international.

Robust need drivers that we did point out in the script, but significant levels as you read in the news every day of geopolitical risk across Europe and Middle East.

And then of course, the fentanyl crisis is not abating. Unfortunately, there and it just continues to rear its head in a broader way so we.

Kevin J. Knopp: So we had some items in the script and in the prepared remarks there, but around, you know, seeing more and more adoption internationally; we're seeing larger deals developed internationally. We've seen good growth overall since the IPO. So really, a 29% CAGR we've seen over the time between 2020 and 2023, and likely not the same growth level of 28% we saw here, but meaningful opportunity.

We had some items in the in the script in the prepared remarks, there, but around that youre seeing more and more adoption internationally, we're seeing larger deals developed internationally.

We've seen good growth overall for since the IPO, So really a 29% CAGR we've seen over the time between 2020 in 2023.

Likely not the same growth level of 28% we saw this meaningful opportunity.

Kevin J. Knopp: And as we put out today in the guide, and maybe to tie together, you know, both on the desktop side and the handheld side, as we think about 2024, our desktop growth is expected to be more volatile than the handheld growth, you know, for reasons we called out in the remarks. With rising contributions from those new product launches, we are expecting desktop growth to rebound into positive territory in 24. So we're encouraged, you know, seeing some of those positive indicators and signs that things are moving in the right direction. With Q4 and product adoption, it was solid. Our base case, you know, assumes that desktop spending shows gradual improvement during 2024. So on the whole, this year, we expect 2024 to be better than 2023.

We put out today and in the <unk>.

In the guidance.

Maybe if you could tie together both on the desktop side and the handheld side as we think about 2024, our desktop growth that is expected to be more variable than the handheld growth for reasons, we called out in the remarks.

Rising contributions from those new product launches, we are expecting desktop growth to rebound into positive territory in 'twenty four.

We're encouraged.

Seeing some of those positive indicators and antidotes that things are moving in the right direction.

With the Q4 and product adoption was solid our base case does assume that the desktop spending show shows gradual improvement during 2024. So on the whole. This year, we expect 24 to be better than 2003 likely not a material step change, but steady market improvement if recovery trends are better than expected and we see it.

Kevin J. Knopp: Likely not a material step change, but steady market improvement. And if recovery trends are better than expected, and we see a case for accelerating desktop growth in the second half of the year, maybe towards the double digit range. But as a reminder, desktop revenues really are about 24% of our total 23 revenues. And over the years, this number should rise.

For accelerating desktop growth in the second half of the year, maybe towards the double digit range, but as a reminder, desktop revenues really is about 24% of our total 23 revenues.

Over the years this number should rise and then over the next two years, but today handheld really remains a meaningful contributor.

Kevin J. Knopp: And then over the next 2 years, but today, handheld really remains our meaningful contributor. And on that handheld side, you know, we have delivered consistent growth above levels in the traditional lab mass tech market and grown 14% CAGR over the last 2 years. Maybe a few factors in play for 2024 relate to that growth, or a 2 million year-over-year step down in APCAD LREP revenues anticipated in the guide, which translates to roughly a 5% drag on our handheld growth. And we await the potential full rate production award as early as 2025 for APCAD. There's a bit of a gap between them in 2024.

And on that handheld side, we have delivered consistent growth above levels in the traditional lab lab mass spec market.

<unk> grown at 14% CAGR over the last two years.

Maybe a few factors in play for 2024 relate to that growth or $2 million year over year step down in that CAD <unk> revenues anticipated in the guide, which translates to roughly a 5% drag on our handheld growth and we await the potential full rate production award as early as 2025 for <unk>, there's a bit of a gap in 'twenty four.

Kevin J. Knopp: For 2024, the delays in the U.S. federal budget, you know, will remain pressuring our handheld revenue growth. We see an opportunity to recapture maybe Q1 weakness throughout the remainder of the year. So we do expect our 2020-2024 handheld revenues to be in the kind of mid-single digits in the guidance range that we shared today.

For 2020 for the delays in the U S Federal budget will remain.

Pressuring our handheld revenue growth, we see an opportunity to recapture the maybe Q1 weakness throughout the remainder of the year.

So we do expect our joy to work for a handheld revenues to be in the kind of the mid single digits in the guidance range that we shared today.

Got it that's helpful guys. Thank you.

Puneet Souda: That's helpful, guys. Thank you. Welcome. Our next question comes from Dan Arias from Stiefel. Please go ahead.

Okay.

Yeah.

Our next question comes from Dan Arias from Stifel. Please go ahead.

Daniel Anthony Arias: Good morning, guys. Thanks for the questions. Joe, maybe just digging into Kevin's comment there and your comment there on bioprocess. When we look at the guide for the year, the 52 to 55 that you're talking about, and we try to sort of impute some placement trend across the year for Rebel, can you maybe just talk about how the year might start versus finish on Rebels if we were to sort of get to the middle of that range? And then, did I hear you right when you said desktops might step up this year? Kevin, the rebound that you mentioned, does that refer to instrument revenues for Rebel, Maven, and Maverick relative to 2023? I just want to make sure I clarify the way in which you're thinking about 24 over 23.

Hi, Good morning, guys. Thanks for the questions Joe maybe just digging into Kevin's comments there on your comment there on bioprocess from when we look at the guide for the year, the 52% to 55 that Youre talking about and we try to sort of impute some placement trend across the year for rebel can you maybe just talk about how the year might start versus finished on rebels.

If we were to sort of get to the middle of that range and then did I hear you right. When you said desktops might step up this year.

Kevin the rebound that you mentioned does that refer to instrument revenues for rebel made in Maverick relative to 2023, I just want to make sure I clarify the way in which you're thinking about 'twenty for over 23.

Joseph H. Griffith: Yeah, I think there are a few different pieces here, Dan. Yes, with the reference to stepping up throughout the year, you know, we see some continued pressures here in Q1 and Q2 on placements on the device side, both with, you know, kind of our zip chip and rebel devices, but also the timing of some of the new product adoption and placements on Maverick and Maven, especially with Maverick as we start to get the evaluations out there with the customers, which may take a few weeks We're excited by some of the conversations we're having. With Maverick, but the timing is probably Q3 and the back half. So seeing some of that accelerated growth as we go throughout the year, more in the back half on the processing of products is assumed in the 52 to 54 range, www.mooji.org. Okay, and then just on the handheld side and the funnel that you highlighted, what are you looking at in terms of a mix of bigger enterprise deals versus smaller ones, 10 to 20 system deals? Just trying to think about how the order book could build if we put it in sort of a baseball context and think about cripples and home runs versus singles.

Yes, I think a few different pieces there Dan.

Yes, with you referenced just stepping up throughout the year.

See some continued pressures here in Q1 and Q2 on on placements on the device side, both with kind of our.

Chip and rebel devices, but also the timing of some of the new product.

Adoption and placements on Maverick and May even especially with Maverick, because we start to get the eval valuations out there with the customers.

A few weeks, we're excited by some of the conversations we're having.

With Maverick, but the timing is probably Q3 and back half so seeing some of that accelerated growth as we go throughout the year are more in the back half on the acquired processing products is assumed in the 52 to 54 range.

Yeah.

Okay, and then just on the handheld side in the funnel that you highlighted what are you looking at in terms of a mix of bigger enterprise deals versus smaller ones 10 to 20 system deals just trying to think about how the order book could build if we if we put it in sort of baseball context, and think about triples and home runs.

<unk> singles.

Kevin J. Knopp: Yeah, I think it's a good mix. I mean, when we think of our funnel, we think of it as the smaller opportunities called pilots. We've got 100 plus units in that stage of the funnel. And that's crossed 16 accounts, up a bit from 2022. And then our enterprise accounts have expanded about 25%. So those are the larger deal opportunities that you spoke of that could be those 50 units large or an addition to a previous large opportunity. What I think it's been really great to see is that while we're always going to be dependent on some larger opportunities for a given year, we're also seeing more diversity in the pipeline develop. That's across the state and local accounts where you might see opportunities now that aren't just a single unit but could be a high handful or a bit more in some unique cases. But then, internationally, we've seen us progress from about 20% of sales last year outside of North America to, sorry, 22. And then for 23, about 25% of sales.

Yes, I think Dan.

It's a good mix I mean, when we think of our funnel, we think of as the smaller opportunities causes. The pilots. We've got 100 plus units in that stage of the funnel in the end.

Across 16 accounts up a bit from 2022, and then our enterprise accounts has expanded about 25%. So those are the larger deal opportunities that you spoke of that could be those 50 unit large or in addition to our previous large opportunity.

I think it's been really great to see is that while we're always going to be dependent on some larger opportunities for a given year. We're also seeing more diversity in the pipeline develop that's across the state and local accounts, where you might see opportunities now that arent just a single unit, but could be a high a handful or a bit more in.

Some unique cases, but then the internationally we've seen us progress from about 20% of sales last year outside of North America, and sorry for 'twenty, two and then for 'twenty three about 25% of sales and importantly, if you dig into that a little bit more we're just seeing that diversity in the south.

Daniel Anthony Arias: And importantly, if you dig into that a little bit more, we're just seeing that diversity in the size of those opportunities, seeing more larger opportunities develop outside North America as well. So I think we've got a healthy mix there. But we are dependent on large deals as well. Transcribed by https://otter.ai. Okay, thanks so much. Our next question is from Jacob Johnson from Stephens. Please go ahead.

Eyes of those opportunities seeing more larger opportunities develop outside North America as well. So I think we've got a healthy mix there, but we are dependent on large deals as well.

Okay. Thanks, so much.

Our next question is from Jacob Johnson from Stephens. Please go ahead.

Okay.

Jacob K. Johnson: Hey, thanks. Good morning, guys. Maybe starting with a question on the cell and gene therapy side, I'm just curious. You've got two partnerships; TRUMA is using Maven, and Solaris is using Maverick. I'm just curious why they're using different instruments. Maybe it's different unit operations, but I'm curious about that.

Hey, Thanks, Good morning, guys, maybe starting with a question on the cell and gene therapy side I'm. Just curious you've got two partnerships trim is easing may events or is this easing Maverick I'm just curious why why they are using different instruments, maybe it's different unit operations, but I'm curious about that and then maybe too as we think about that market.

Kevin J. Knopp: And then maybe two, as we think about that market, how do you think of the opportunity for Maven versus Maverick, the greater opportunity in cell and gene therapy? Yeah, I'd be happy to cover that. I was super excited to announce another collaboration there with the leading cell therapy developer in manufacturing, Solaris, being very integrated, and bringing them inline monitoring of some of these key cell culture parameters and lots of potential, we believe, in that space and getting designed in and partnered with or co-marketed or otherwise connected to these leading innovators in the space, including Solaris and Terumo and others we're working on, but we haven't yet announced, and As you know, there's a lot happening in the field at this time, and we believe we're bringing a strong value proposition across our set of products, including for our online and inline connected products, where you're doing real-time monitoring without the risk of sampling and with reduced labor, and that benefit allows for immediate corrective action and maintains sample integrity and reduces risk of contamination, so lots of value there.

How do you think of the opportunity for <unk> versus Maverick kind of the greater opportunity in cell and gene therapy.

Yes.

The cover that we are super excited to announce another collaboration there with a leading cell therapy developer manufacturing soliris being very integrated and bringing them in line monitoring and some of these key cell culture parameters lots of potential we believe in that space and getting designed in and partnered or co marketed or otherwise connector.

To these leading innovators in the space, including Soliris and <unk> and others, we're working on but we haven't yet announced and we're super excited about that.

There's a lot happening in the field at this time and we believe we are bringing a strong value proposition across our set of products, including for our online and in line connected where youre doing real time monitoring without the risk of sampling and with reduced labor and that benefit allows for immediate corrective action and maintain sampling.

Gritty and reduce risk contamination, so lots and lots of value there.

Kevin J. Knopp: In the case of Maverick, I'm really looking for it to be compatible with their cell shuttle system and be fully integrated, and be a scalable platform for them. Obviously, it's quite an automation product that they're developing there, and Maverick, with its scalability of today, a couple of key process analytes, but also some attributes, and then the open backend for people to do their own modeling and machine learning and other algorithm development on it, it's a broad set of capabilities. But the price point is different than Maven. The price point is more in the $100,000 versus the $25,000, $30,000 range for our Maven. So Maven brings a glucose and lactate measure, maybe more direct and applicable to a lower capex deployment, where this could be more mated with that. So I think it also brings those same attributes, but it's more enzymatic-based, and it's a complement across that portfolio.

The case of Maverick really looking to be compatible with their cell shuttle system and be fully integrated and scalable platform for them. Obviously, it's quite a quite an automation products that they are developing there and maverick with its scalability of today a couple of key process analytes, but also some attribute.

And then the open backend for people to do their own modeling and machine learning another algorithm development on it it's a broad set of capabilities, but the price point is different than may have been.

That price point is more in the $100000 versus in the $25 $30000 range for our maven.

Megan brings a glucose and lactate measure, maybe more direct and applicable to a lower capex deployment.

This could be more made with that so so I think it also brings those same attributes, but it's more enzymatic based and it's just it's a complement across that portfolio. So I think there's a lot of good things. There that are being developed we're also of course, continuing our efforts on our on our rebel development.

Kevin J. Knopp: So I think there are a lot of good things there that are being developed. We're also, of course, continuing our efforts with our Rebel development. We are continuing to make sure that we're throttling and managing our R&D expenses, but we've also made great progress there over the last few years as part of that portfolio build-out. And Rebel and its future versions, including the online version, are very important to us. We're not currently planning to launch our online-capable Rebel this year or in the year 2024 because we really want to meet the market where it's at. We do have online capabilities of Rebel connected to our in-house fire reactors and fermenters, and we've been selectively showcasing that to customers, and some of those customers are seeking to engage and put it in their labs for 2024.

We're continuing to make sure that we're throttling in managing our R&D expenses, but we've also made great progress there over the last year or is it part of that portfolio build out.

Rebel and its future versions, including the online version are very important to us we're not currently planning to launch our online capable.

Rebel this year in the year 2020 for it because we really want to meet the market where it's at.

Do have online capabilities of rebel connected in our in house Bioreactors and for mentors and we've been selectively showcasing that to customers and some of those customers are seeking to engage and put it in their labs for 2024.

Kevin J. Knopp: But we really do feel that with Maven and Maverick and that broader set of products, we have everything we need in place with near-term opportunities, and we are being selective with our R&D, and we're a little more focused on the incremental rather than next-generation advancements for 2024. But lots of continuous progress across the products, we, Rebel included, and the 2024 model of the Rebel is definitely a more capable and broader machine that addresses just analytics and data analysis more than our first incarnation, so we'll keep that up. Thanks for that, Kevin.

But we really do feel that we've made and maverick and that broader set of products. We have everything we need in place with near term opportunities and we arent being selective with our R&D and recruit more focused on the incremental rather than next generation advancements for 'twenty for us.

Lots of continuous progress across the product suite rebel included in the 2024 model of the rebel is definitely a more capable and broader machine that address since just analytics data analysis more than our first incarnation. So we'll keep that up.

Thanks for that Kevin you managed to to answer my plane follow ups, maybe go in a different direction then.

Jacob K. Johnson: You managed to answer my plain follow-up, so maybe go in a different direction then. Joe, when you talked about the gross margin outlook this year, I heard you mention some kind of pricing as part of that. Maybe here's kind of your thoughts on how you're thinking about pricing this year. All right, I'm going to touch on a few different things about gross margin, but specifically on pricing. You know, each year, we look at the market, and we have implemented, you know, price increases here in 24 to try to offset some of the inflationary impacts. But, you know, as we kind of look back on gross margin, we had some pressure on gross margin in the fourth quarter and 23 as a whole, and a piece of that was an increase in spending, you know, to reach scale within our operations and service functions.

Joe when you talked about the gross margin outlook. This year I heard you mentioned kind of pricing as part of that maybe curious kind of your thoughts on how youre thinking about pricing this year.

Sure I can touch on a few different things on gross margin, but specifically on pricing each year, we look at the market.

We have implemented price increases here in 'twenty four to try to offset some of the inflationary impacts but.

We kind of look back on gross margin, we had some pressure on gross margin in the fourth quarter and 23 as a whole.

Piece of that was an increase in spending treat scale within our operations and service functions.

Jacob K. Johnson: And that was really despite some higher revenues and the cost to deliver the revenue; service personnel, contract trainers, materials, you know, they all increased. We also saw a temporary need for and increase in our third-party contractors to train our customers on the MX-908. As we saw the increased demand for the use of the device, we're working to reduce the number of contract trainers we use going forward.

Was it really despite some higher revenues.

The cost to deliver the revenue service personnel contract trainers materials, they will increase.

Also saw a temporary need an increase in our third party contractors to train our customers on the Amex 90 weight as we saw the increased demand for the use of the device are working to reduce the number of contract trainers. We use going forward I mentioned zero point $6 million in noncash stock based compensation intangible amortization as a driver in that at least.

Joseph H. Griffith: I mentioned $0.6 million in non-cash stock-based compensation and tangible amortization as a driver, and that'll at least the non-cash stock will increase a bit in 24. So we get to our fourth year of being public. There are probably two other elements within our product gross margins, about a half million in higher materials and supplies on warranty obligations during 2023 and about $300,000 in higher provisions for excess and obsolete materials as our products progress and iterate through the years. Pricing is definitely helping, but we also have some headwinds across the board. I got it.

Noncash stock comp will increase a bit in 2004, so we get to our fourth year of being public there are probably two other elements within our product gross margins about a <unk> 5 million and higher materials and supplies on warranty obligations during 2023, and about 300000 and higher provisions for excess and obsolete materials are.

Products progressed and iterate through the years.

So pricing is definitely helping that.

We have some headwinds across the board.

Joseph H. Griffith: Thanks for taking the question. Real quick, www.mooji.org. The next question is from Matt Larew at William Blair. Please go ahead.

Got it thanks for that thanks.

Thanks for taking the questions.

Welcome.

Yeah.

The next question is from William.

William Blair. Please go ahead.

Yeah.

Matt Larew: Hi, good morning. Kevin, I wanted to ask you, you have a reference to Rumeau and Solaris, but you've had a partnership with Sartorius here for some time selling Maven, so just want to get a sense for how that has progressed for us to gain from these newer partners. Yeah, absolutely.

Yeah, Hi, good morning.

Kevin I wanted to ask you governance reference to remote and Soliris, but you've had a partnership with Victoria here for some time selling Nathan So I just wanted to get sense for how that has progressed practice as a way for us to gauge.

These newer partnerships might progress as well.

Yes, absolutely.

Kevin J. Knopp: We do very much enjoy our partnership with Sertorius. We do have a previous generation of the Maven product that's for sale through that channel, and that's been a good relationship.

We do very much enjoy our partnership with Sartorius, we do have a previous generation of the <unk> product thats for sale through that channel.

And that's been a good relationship we're continuing to see that for glucose control and really how part of their system to allow a full offering to our customer to large pharma for biologics in particular.

Kevin J. Knopp: We're continuing to see that for glucose control and it's really kind of part of their system to allow a full offering to a customer, to a large farmer for biologics in particular. And the need there is across from the small volume of benchtop bioreactors all the way up to pilot scale and beyond. So we're very much engaged in working with them and developing a successful partnership there. And as you know, we do have Sertorius Korea as part of our distribution channel. For that defined unique territory, we've got a very, very strong footprint.

I mean, there is across from the small vol.

Volume of bench top Bioreactors, all the way up through pilot scale and beyond so we're very much engaged working with them in developing a successful partnership there and as you know we do have Sartorius Korea as part of our distribution channel.

For that define unique territory, where they've got a very very strong footprint in that case to representing as a distribution partner for us.

Kevin J. Knopp: In that case, they're representing as a distribution partner for us, our Maven, our Maverick, and our Rebel products. Yeah, I just maybe add that on the Sartoria side, you know, they've been a great, great OEM partner, kind of collaborator, and proof point for the technology. And we look for those not only on the desktop side but also on the handheld side, too, as far as different ways to get our product in the market. Avcat is an example of that on the handheld side, and we'll look for ways to enable that in the future.

Sure, David our Maverick and our rebel products.

Yes, I would just maybe add.

<unk> been a great.

Great OEM partner.

Collaborator in <unk>.

Proof point for the technology in.

When you look for those not only on the desktop side, but across on the handheld side too as far as different ways to get our product in the market out Canada. As an example of that on the handheld side and we'll look for ways to enable that in the future even really talented sales team across the board, especially on the government side and we will look to utilize where we see technology to be able to plug it in and.

Kevin J. Knopp: We have a really talented sales team across the board, especially on the government side, and we'll look to utilize where we see technology to be able to plug it in and get more top-line contribution. Okay, and then, Kevin, you gave some data points, paired marks around booking, lead generated, second half, here.

More topline contribution.

Okay, and then Kevin you gave some data point in the prepared remarks around.

Bookings and leads generated in the second half versus the first half of the year.

Matt Larew: Any additional comments you can give on what the composition of those leads is, both from a product perspective and from a customer perspective, existing 908 customers, either it's Rebel or another product tool you now have an opportunity to build the Desktop Ecosystem with versus perhaps new customers who were particularly attracted to one of the products. Yeah, yeah, yeah, absolutely.

Any additional commentary you can give on.

What the composition of those leads are both from a product perspective in terms of the importance of new products, but perhaps also from a customer perspective.

Center exists.

Existing customers either with rebel or another product to are now have an opportunity to build.

The desktop ecosystem with versus perhaps new customers, who were particularly attracted to which one of the products that you launched last year.

Kevin J. Knopp: I can give you some more color on that. I'd be happy to. You know, if you think first of all about the bookings and where we landed for Q4 shipments of the new desktop devices, Maven and Maverick were absolutely key drivers to that uptick that we spoke of there in the Q4 desktop bookings and took it to be the largest booking quarter we had since Q4 2021. Maven, of course, was really just launched in January of 23, and Q4 did represent its best quarter since launch. That being said, we had some favorable timing there, right?

Yeah, Yeah, Yeah, absolutely I can give you some more color on that happy too.

If you think first from kind of the bookings and where we landed for Q4 shipments of the new desktop devices, maybe than Maverick, we're absolutely key drivers to that uptick that we spoke of there in the queue for desktop bookings and took it to be the largest booking quarter. We've had since Q4 2021, maybe and of course was real.

We just launched in January of 'twenty three in Q4 did represent its best quarter since launch.

<unk> said, we had some favorable timing there right because as Joe had mentioned previously in an answer that you really see as you launch a new product you get some additional placements you worked through customer evaluations and then you'll see that revenue uptick and we saw some of that happening with our <unk> and then and then we also had our maverick our first shipments of.

Kevin J. Knopp: Because, as Joe had mentioned previously in an answer, you really see as you launch a new product, you get some initial placements, you work through customer evaluations, and then you see that revenue uptick. And we saw some of that happening with our Maven. And then we also had our Maverick, our first shipments of Maverick occurred in Q4 to customers and partners, distributors there, those adoptions. And then recurring revenue was also strong. We saw across the board, both in large pharma accounts that have been established with users for, say, a Rebel product there as a big driver, but also in some newer customer adoptions there. So we had at least a couple of, call it, $50,000 to $100,000 consumable kit orders by large pharma customers, and that's kind of in those 12 to 24 kits to be delivered throughout the year. So we do expect that, as we've seen in previous years, but we would like to see that again.

Maverick occur in Q4 to customers and partners distributors there those those adoptions.

And then recurring revenue was also strong we saw across the board both in large pharma accounts.

<unk> been established users.

Our rebel product there is a big driver, but also in some newer customer adoptions. There. So we had at least a couple of call. It 50 to $100000 consumable orders by large pharma customers and thats kind of in that 12% to 2004 kits to be delivered throughout the.

For the year. So we do expect that to as we've seen in past years, but we did like to see that again.

Kevin J. Knopp: And our install base really just continues to build across the board there, and we are gaining some visibility into service and desktop consumable sales here. But with the launch of Maven and Maverick and now with the Rebel Analyzer, device replacements are still our priority, but it is nice to see some of those consumables or service recurring elements contributing to our Q4 bookings. From a distribution of customers, if I look back at our desktop sales for the 22 and 23, the bulk of it is into the biopharma, biotech customer space. We have less penetration in the academic, government, and CDMO, and CRO space. So I would say we've got about 50 to 70% in the biopharma and biotech space and maybe only 15, 20% in the academics.

Yes.

Installed base really just continues to build across the board there and gaining some visibility into service and desktop consumable sales here, but with the launch of <unk> and <unk> now with the rebel analyzer device play.

Placements are still our priority, but it is nice to see some of those consumables service recurring elements contributing to our to our Q4 <unk>.

Looking from a distribution of customers if I look back at our desktop sales over the 22% and 23 the bulk of it is into the Biopharma pharma biotech customer space, we have less penetration in the academic government and <unk> aerospace. So I would say, we've got about 50% to 70.

Percent in that Biopharma, biotech space, and maybe only 15%, 20% and the academics and where we have seen some increases would be really more in the life science suppliers media providers and importantly, some of the things we touched on the sartorius relationship the innovators in the bio processing equipment for biologics and <unk>.

Kevin J. Knopp: And where we have seen some increases would be really more in the life science suppliers, media providers, and importantly, some of the things we touched on, the Sartorius relationship, the innovators in the bioprocessing equipment for biologics and cell and gene. So as we become part of other systems or do more of these partnerships, it is likely that will continue. Okay, thank you. For any further questions, please press star 1 on your telephone keypad now. We have no further questions on the call, so I will hand the floor back to Kevin to wrap up. All right, well, thank you all for your time. And we appreciate you tuning in today and look forward to giving you further updates as we progress through 2024. Thank you. This concludes today's conference call. Thank you all very much for joining us. You may now disconnect your line.

All in cell and gene so as we become part of other systems or do more of these partnerships likely that will continue.

Okay. Thank you.

Any further questions. Please press star one on your telephone keypad now.

So we have no further questions on the call. So I will hand, they flow back to Kevin to wrap up.

Yes.

Alright, well. Thank you all for your time and we appreciate you tuning in today and look forward to giving you further updates as we progress across 2024. Thank you.

This concludes today's conference call. Thank you all very much for joining you may now disconnect your lines.

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