Q1 2025 908 Devices Inc Earnings Call
Becky: Hello and welcome everyone to the 908 Devices first quarter 2025 financial results conference call. My name is Becky and I'll be your operator today.
Becky: 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 Magnolia devices dotcom.
Speaker Change: Joining me today from nine away, if Kevin cannot Chief Executive Officer, and co founder and Joe Griffith Chief Financial Officer.
Speaker Change: Before we begin our commentary today will include a presentation of some non-GAAP financial measures.
Speaker Change: These measures should be considered as a supplement to and not a substitute for GAAP financial measures.
Speaker Change: I can tell you each and the most directly comparable GAAP financial measure it can be found in today's earnings press release, which is available in the Investor Relations section of our website.
Speaker Change: Additionally, 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.
Speaker Change: These statements involve material risks and uncertainties that could cause actual results whereabouts to materially differ from those anticipated.
Speaker Change: Additional information regarding these risks and uncertainties appears in the section entitled forward looking statements in the press release bantamweight devices issued today.
Speaker Change: 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 31st 2024.
Speaker Change: And in its other filings with the Securities and Exchange Commission.
Speaker Change: Except as required by law nine or eight 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.
Speaker Change: This conference call contains time sensitive information and is accurate only as of the live broadcast may 13th 2025.
Kevin: With that I would like to turn the call over to Kevin.
Speaker Change: Thanks, Kelly good morning, and thank you for joining our first quarter 2025 earnings call two months ago, We announced a strategic transformation of 90 wave devices today. Neither way device is to point out is concentrated on higher growth handheld markets aligned with powerful secular.
Speaker Change: Tailwind, including rising National Security funding International preparedness initiatives, an urgent public health response to the opioid crisis with.
Speaker Change: With the divestiture of our Biopharma desktop portfolio to replicate and complete we have fortified our cash position and meaningfully reduced our operating costs.
Speaker Change: I'm really proud of our team's performance and execution in the first quarter. We delivered strong growth ahead of internal expectations, while responsibly managing opex spending.
Speaker Change: Revenue from continuing operations was $11 8 million, an increase of 59% over the prior year period.
Speaker Change: <unk> was driven by strong device sales with our mass spec devices accounting for roughly 60% of revenue and FTIR products, making up the other 40%.
Speaker Change: Recurring revenue increased 54% from the previous year and represented 37% of total revenues.
Speaker Change: Importantly, our adjusted EBITDA loss improved nearly 50% year over year in Q1 2025 compared to our previously disclosed adjusted EBITDA for Q1 2024 prior to our transformation.
Speaker Change: We are truly energized by the massive opportunity ahead for our premier devices and vital health and safety applications. We are pleased with the continued momentum we're seeing in the second quarter and we remain well positioned against the reiterated full year revenue guidance.
Speaker Change: Since the new U S administration has taken office, there's been a heightened priority on drug interdiction, a clear signal that frontline chemical detection is now a national imperative.
Speaker Change: In April the White House office of National Drug control policy referred to as the O N. D. C. P released its statement of drug policy priorities setting the tone for a coordinated federal response to the proliferation of illicit fentanyl and other synthetic drugs.
Speaker Change: <unk> prevention in treatment the O N D. C. P calls for advanced technologies to detect smuggling routes and equip more enforcement and burst responders with tools to prevent overdose deaths. We see this as a major catalyst for future procurement opportunities.
Speaker Change: The increased emphasis on disrupting the global drug trafficking supply chain, particularly fentanyl flows from Asia through Mexico is also prompting cross border initiatives, we anticipate more foreign governments will invest in modernizing their chemical detection capabilities and we are working to pay really positioned our handheld devices.
Speaker Change: This is part of a broader global trend ongoing geopolitical tensions, particularly in Europe have amplified concerns around chemical threats in response EU member States and NATO countries are significantly increasing their defense and counterterrorism spending.
Speaker Change: We're seeing strong interest in modern detection equipment across military and security agencies, and our mass spec and FTR product portfolio is well positioned to meet these needs.
Speaker Change: To capitalize on these developing tailwind and realize the vision for 98 devices to Plano, we've established three strategic focus areas for 2025 targeting market expansion advancing innovation and reinforcing financial discipline I'll walk through the progress we've made across each area in the first quarter.
Speaker Change: Our first focus area is increasing adoption of our devices to address global threat to public health and safety our devices deliver rapid and accurate answers at the point of need with minimal training, which is exactly what frontline responders need when lives are on the line. Our goal is to be the standard for advanced chemical detection in the field.
Speaker Change: Yeah.
Speaker Change: During the first quarter, we received a $2 million order from the Texas Department of public safety for our <unk> devices are mass spec devices for trace chemical identification will be deployed statewide to support frontline drug interdiction and narcotics enforcement. This follow on order builds upon our successful pilot last year and we are.
Speaker Change: Flex flooring urgency to modernize public safety tools amid rising fentanyl related deaths in Texas.
Speaker Change: To protect the public from chemical threats, the Washington Metro area Transit Authority purchased two threat I'd and to explore devices, adding to their existing <unk> units. The threat I'd provides chemical identification of over 28000 bulk solid liquid and gas substances.
Speaker Change: Explore can rapidly detect identify and quantify up to 5000 gasses in real time.
Speaker Change: Also in the same region the Metropolitan Washington Council of governments are regional planning organization that coordinates public safety across jurisdictions in the district of Columbia, Maryland, and Virginia purchased eight explore devices to support emergency response operations disorder builds under existing.
Speaker Change: <unk> 908 fleet further strengthening their frontline chemical detection capabilities.
Speaker Change: The U S federal level Homeland security investigations for HSI Premier Law enforcement agency within the U S Department of Homeland Security and the key enterprise accounts added a dozen <unk> devices during the quarter, bringing their total deployment to over 65 units. These devices support the trace detection.
Speaker Change: Identification of drugs explosives, and chemical warfare agents.
Speaker Change: Across Europe heightened geopolitical tensions, including the war in Ukraine are accelerating disaster preparedness investments through the use rescue initiative member States are building strategic stockpiles of response capabilities, our largest rescue order to date was with Finland in Q4 for 90 <unk>.
Speaker Change: Hector devices, which we completed the remaining fulfillment of in the first quarter. The Czech Republic Fire Brigade also received six threat I'd devices in Q1, expanding on our previous purchase six explore devices as European emergency response agencies continue expanding and modernizing their detection tool.
Speaker Change: We're proud to be a trusted partner in this important initiative.
Speaker Change: We are seeing a growing trend of customers returning to purchase additional devices overtime, highlighting strong satisfaction and demand across our product portfolio by cross deploy both handheld mass spec and FTIR technologies. They are building adaptable resilient toolkits for emergency response.
Speaker Change: Our second focus area is advancing our nextgen analytical tools portfolio at our core we are an innovation driven analytical instrumentation company. We are committed to the relentless pursuit of higher performance breakthrough capabilities and greater simplicity.
Speaker Change: We recently released a software update for protector, featuring a new search algorithm that significantly improves the identification of complex solid and liquid mixtures.
Speaker Change: Condensed phase mixture analysis offers detailed breakdowns with confidence ratings, providing clear faster decision support in the field.
Speaker Change: Looking ahead, we have new FTIR devices in development and remain on track for the 2026 launch of our next Gen handheld mass spec. Additionally, we expect to receive notice to proceed to full rate production and begin to ramp deliveries for the U S Department of Defense <unk> program by year end with our partner Smiths detection.
Speaker Change: We are working through a handful of incremental improvements and fixes requested during evaluation and are encouraged as we believe we are meeting the program's detection performance expectations.
Speaker Change: As a reminder, this program has the potential to generate over $10 million in annual revenue at full production I am excited to provide an update on all of these initiatives as we progress through the year.
Speaker Change: Our roadmap is rich with updates and releases through this year and next serving as key catalyst to support our long term growth trajectory.
Speaker Change: Supporting our growing U S government business more broadly we have shifted much of our supply chain to domestic sources over the past few years with all of our manufacturing now located in the U S. We are in a strong position to mitigate the potential impact of tariffs on our products as we develop new products, including next generation <unk>.
Speaker Change: Device, we will continue to prioritize U S manufactured components to strengthen this advantage.
Speaker Change: And finally, our third focus area strengthening our financial position and accelerating profitability.
Speaker Change: We are targeting positive adjusted EBITDA by the fourth quarter of this year and full year cash flow positivity in 2026.
Speaker Change: The $70 million cash sale of our bio processing portfolio to replicate has fortified our balance sheet and provides a meaningful margin of safety as we execute and drive towards cash flow breakeven.
Transition has been smooth and continues to progress on schedule with completion of the asset transfer expected by the end of the second quarter.
Speaker Change: We have also begun transitioning all of our production from Boston to Denver, Connecticut, and are preparing to relocate our corporate and R&D teams to a new cost efficient headquarters in the greater Boston area.
Speaker Change: We remain on track to complete the production consolidation in time to support our second half revenue ramp. This move is expected to significantly lower facility costs improve margins and further strengthen our path to profitability in.
Speaker Change: In summary demand is accelerating our pipelines delivering and our operations are scaling I'll now hand, it over to Joe to review, our first quarter financial performance.
Joe: Thanks, Kevin as a result of the sale of our desktop portfolio in the first quarter, our financials will be reported in continuing operations only with any current and past activity related towards desktops, including the gain on sale on one line item within discontinued operations in our financial statements.
Joe: As we shared on our last earnings call. We will now report revenue across three categories first handheld product and service revenue.
Joe: Program product and service revenue, which includes contribution from the U S Department of defense of kind of program.
Joe: Third OEM and funded partnership revenue, which includes contracts with them.
Joe: Full revenue from continuing operations in the first quarter 2025 was $11 8 million up 59% from $7 4 million in the prior year period, primarily driven by an increase in handheld product and service revenue and offset by an anticipated decrease in program product and service revenue.
Joe: Handheld product and service revenue was $11 million for the first quarter 2025 up 86% from $5 9 million for the first quarter 2024.
Joe: This increase was driven primarily by $4 million in revenue related to our recently acquired FTIR products.
Joe: We shipped 157 devices in the first quarter compared to 53 devices shipped in the first quarter of 2024 prior to the roadways technology acquisition, bringing our installed base to 3172.
Joe: Program product and service revenue was <unk> 1 million for the first quarter 2025, decreasing $1 4 million year over year.
Joe: As a reminder, in the first quarter 2024, we recognized $1 5 million of revenue from our initial low rate production delivery under the U S Department of Defense program.
Joe: We are not assuming any meaningful revenue contribution from the <unk> program in 2025.
Joe: We completed the initial low rate production deliveries in Q3, 2024 and are preparing for full rate production in 2026.
Joe: OEM and funded partnership revenue was <unk> 7 million for the first quarter 2025 with no comparable revenue recorded in the prior year period.
Joe: This revenue was primarily driven by pharma and industrial QA QC customers.
Joe: Recurring revenue, which consists of consumables accessories and service revenue represented 37% of total revenues this quarter and was $4 4 million or 54% or $1 5 million increase over the prior year period.
Joe: Largely driven by service and OEM revenues looking.
Joe: Looking ahead, we expect recurring revenue for the full year to be approximately 30% of total revenue.
Joe: Gross profit was $5 5 million for the first quarter of 2025 compared to $3 9 million for the prior year period.
Joe: Margin was 47% for the first quarter 2025, compared to 52% for the prior year period with the decrease primarily driven by intangible amortization from the <unk> acquisition.
Joe: Adjusted gross profit was $6 4 million for the first quarter of 2025 compared to 4 million for the prior year period.
Joe: Adjusted gross margin was 54% an increase of approximately 75 basis points compared to the prior year period.
Joe: The increase in adjusted gross margin was driven by an increase in revenue offset by a higher percentage of sales through the international distributors.
Joe: Total operating expenses for the first quarter of 2025 were $16 6 million compared to $11 5 million in the prior year period.
Joe: Increase in operating expenses was driven by a $2 5 million noncash charge for the change in the fair value of the contingent consideration liability and an increase in operating expenses, primarily related to our red wave acquisition in the second quarter 2024.
Joe: Net loss from continuing operations for the first quarter of 2025 was $9 8 million compared to $5 9 million in the prior year period.
Joe: This increase was largely due to the $2 5 million noncash charge that I, just mentioned intangible amortization with the Red wave acquisition higher deal related costs and lower interest income.
Joe: Our focus is managing adjusted EBITDA towards profitability adjusted EBITDA for the first quarter of 2025 was a loss of $4 6 million an improvement from a loss of $5 3 million in the prior year period.
Speaker Change: And as Kevin pointed out earlier this is a major improvement compared to our adjusted EBITDA prior to our strategic transformation.
Speaker Change: We ended the first quarter of 2025 with a $124 3 million in cash cash equivalents and marketable securities with no debt outstanding.
Speaker Change: The increase of $54 7 million in cash in the first quarter, which primarily related to the net proceeds from the sale of our desktop portfolio.
Excluding the sale proceeds we consumed approximately $10 million of cash in the first quarter of 2025 related to our loss from continuing operations and working capital changes.
Speaker Change: One is typically our largest cash consuming quarter.
Speaker Change: The net proceeds from the sale of our desktop portfolio combined with the streamline cost structures, we implemented in Q4 and our growth drivers for 2025 and beyond gives us confidence we will cross over to cash flow breakeven on a full year basis in 2026 with a healthy cash balance.
Speaker Change: Looking ahead in 2025, we continue to expect revenue from continuing operations to be in the range of $53 million to $55 million representing growth of 11% to 15% over full year 2020 for revenue from continuing operations.
Speaker Change: Our guidance range includes the following assumptions.
Speaker Change: First we expect handheld product and service revenue to grow 11% to 15% year over year, which equates to a range of $51 million to $53 million.
Speaker Change: Second, we expect OEM and funded partnerships, including contract revenue to be approximately $2 million.
Speaker Change: And third as mentioned, we are not assuming any meaningful revenue contribution from the U S Department of defense and I've kept program in 2025 as we completed the initial low rate production deliveries in Q3, 2024 and are preparing for potential full rate production in 2026.
Speaker Change: We expect total revenue growth to accelerate above 20% from 2026, driven by our three growth catalysts.
Speaker Change: Banding handheld adoption launching next generation products and scaling our U S government programs.
Speaker Change: Moving down the P&L, we continue to expect adjusted gross margins to increase to the mid to high 50% range for full year 2025 with further expansion in 2026, following our manufacturing consolidation in Connecticut, which is currently underway.
Speaker Change: And we continue to expect to become adjusted EBITDA positive by Q4 of this year and cash flow positive on a full year basis in 2026 supported by accelerated revenue growth and cost savings from our facility consolidation and desktop portfolio divestiture.
Speaker Change: Our guidance does not assume any significant impacts from tariffs based upon current economic policies in place historically about 75% of our revenue comes from North America and on the cost side as Kevin mentioned earlier, our products our U S manufactured with our materials and components substantially sourced from domestic suppliers.
As a result, we expect minimal impact in 2025 supported by our healthy component inventory and proactive supply chain management.
Speaker Change: We will continue to monitor this evolving environment.
Speaker Change: We delivered strong top line performance in the first quarter and believe this momentum can continue throughout the year that said, it's still early in the year and given our typical second half weighted seasonality, we believe its appropriate to reiterate our guidance at this time.
Speaker Change: At this point I would like to turn the call back to Kevin.
Thanks, Joe.
Speaker Change: Credibly proud of how our team has embraced this transformation and delivered meaningful progress against each of our strategic priorities in just a few short months, we've reshaped our business strengthened our foundation and begun realizing the promise of 900 devices to point out.
Speaker Change: We are leaning in to high growth markets with urgency and focus advancing chemical analysis innovation with a strong pipeline and making disciplined boost to that accelerate our path to profitability.
Speaker Change: As we said last quarter. This was more than a restructuring it's a relaunch the strong start we've made in Q1 reinforces our conviction that we have the right team the right products and the right strategies to lead.
Speaker Change: We have clear momentum in our fortified balance sheet unlocking value and positioning the company to deliver strong financial performance and sustainable growth.
Speaker Change: With that let's open it up to questions.
Speaker Change: Thank you.
Speaker Change: Wish to ask a question. Please press star followed by one on no telephone keypad now.
Speaker Change: If any reason you want to remove your question from the queue. Please press star followed by sea.
Speaker Change: When preparing to ask a question. Please ensure your device is Amit <unk>.
Speaker Change: Our first question is from Matt Larew from William Blair. Your line is now open. Please go ahead.
Matt Larew: Thanks for taking my question I wanted to ask on the commercial side now had red.
Speaker Change: <unk>.
Speaker Change: Here about a year and you completed the commercial integration last year, just trying to get a sense for any additional benefits youre seeing from cross selling and then Kevin you spoke to accelerating demand really globally.
Speaker Change: Just wanted to get a sense for whether you think you have the infrastructure in place too to really realize and tackle that demand or if there are any target investments that you might want to make.
Kevin: Yeah, absolutely. Thanks, Matt for the question, Yes, we're super excited about how the integration with Red wave has gone. We're just kind of about that year anniversary point and it's really been a foundation for the transformation that we've been working on here right. Because we went from one product to now four so we've got a much larger.
Kevin: <unk>, which has been helping us diversify our revenue streams. There I would say that yes. The sales team has really been hitting stride with these products and really getting it out there we have about 40 people in our in our combined sales and marketing team. We think we do have the right investments in the team in place to keep driving growth.
Kevin: The cross selling opportunities are many we had some in our prepared remarks, we did see some some good wins in that regard from follow on orders, whether it would be part of the rescue program or the Washington Metropolitan area Transit Authority and several others were resolved people picking up one or more of our products in the portfolio.
Kevin: After starting with with the previous one with follow on order from the demand acceleration side I think youre right I mean, we're seeing certainly some of the.
Kevin: Tailwind develop out there with some of the macro pressures.
Kevin: Okay Fair enough and then.
Kevin: Joe just wanted to check on that transition to Danbury, I think you've talked about maybe that seem like a third quarter.
Kevin: Element <unk> and just any kind of update on the progress that you've made and some of the data points you've given around.
Kevin: Annual savings targets, just as you get closer to realizing it if those have moved around at all.
Kevin: Yeah, we're mid stride on the move some of the initial trucks have made their way from Boston down to Danbury. So I think it's going well so far we've been fortunate to have a strong team down there in Danbury to receive it in some key employees that are transferring so we're looking to try to completed by midyear, So we'll be up and running for manufacturing.
Kevin: In the back half and the ramp with the second half.
Kevin: Yeah from a facility perspective, it's a lower cost footprint.
Kevin: Savings overall on the facility side will approach $2 million a year. So we'll start to see some of the benefits in the back half maybe in the neighborhood of 40% of those savings are through the gross margin line. So.
Kevin: Excited on the progress to date and pleased if anything it's ticking a bit ahead of plan compared to where we were two months ago.
Kevin: Alright, thank you.
Kevin: <unk>.
Kevin: Thank you.
Speaker Change: Our next question comes from Dan Arias from Stifel. Your line is now open. Please go ahead.
Speaker Change: Hi, Good morning, guys. Thanks for the questions.
Kevin on <unk>, it sounds like that's progressing well what the what is the timing that you expect at this point anyways when it comes to getting the thumbs up to move into full production mode from Smith, there and when that is when that does step up to revenue generation mode at the higher level of the $10 million that you referenced is that.
Speaker Change: A gradual ramp in recognition or do you think that you sort of reach a steady state of revenue generation during that phase.
Speaker Change: Yeah. Thanks, Dan for the question Yeah, we remain very excited about the <unk> program. It's been a developed and we've been working on for nearly a 10 year period.
Speaker Change: Driven in partnership with Smiths detection, who is our lead.
Speaker Change: Partner, there, we're a subcontractor to Smith who's the prime on this program.
Speaker Change: And impactful program.
Speaker Change: We're working through call. It a handful of improvements and fixes that have come up during the evaluation and we're most encouraged that the kind of fundamental detection performance appears to be meeting program expectations. So, meaning we're able to detect the analytes of interest at the levels that they're interested in so we're excited for that.
Speaker Change: <unk> now.
Speaker Change: Now we're working through as you know last year, we delivered on the on the low rate initial production and we're waiting for a potential decision to move forward for full rate production. The FRP phase of it we do expect that decision by the end of the government fiscal year.
Speaker Change: Some risks that it moves into the later half of our calendar year here. So by calendar year end, but I think we're really looking for it by the end of the government fiscal year. So a lot of to be determined I mean, certainly there is a new administration in place anything is possible, it's certainly a delay as possible, but equally possible.
Speaker Change: Our mind is an acceleration so we're seeing.
Speaker Change: Good engagement as we work through the final phases and they approach their decision on the timing of revenues I'll pass to you Joe from a rent perspective, we'll learn a lot.
Speaker Change: Please see the full rate production contract come into place that kind of five to seven year window of deliveries.
We do see that more ramping as far as our foster being turned on or turned off.
Speaker Change: But we'll learn a lot more about the quantities and how that goes it is kind of year by year.
Speaker Change: Think theres, an opportunity that could ramp quickly to $10 million a year, possibly in 2026.
Speaker Change: See that spanned over 26% to 27 before it gets to full rates.
Speaker Change: Level so.
Speaker Change: So it is with the way it's progressed.
Speaker Change: But looking forward to learning some of the dynamics on the exact step up and ramp in that opportunity.
Speaker Change: Yes for sure Okay, and then Joe as we as we think about the opportunity for installed base expansion and then conversion on a next gen system can you maybe just true us up on what percentage of the mix systems better in the field are active.
Speaker Change: And then on the next Gen system itself apologies if recovery this last quarter I'm not remembering but is there a gross margin benefit.
Speaker Change: To be had there can you just remind us how that comparison would look from a profitability standpoint, thanks, a bunch of them.
Speaker Change: Sure I can give a little bit of color and then Kevin you might have some additional details but.
Speaker Change: Yeah from a gross margin benefit we do see an opportunity with any next generation launch to find more efficiencies in the materials the components learnings as we move from one generation to the next so we'd expect some level of gross margin benefit.
Speaker Change: As we move into Nextgen and the biggest piece is the top line, which we think from an ASP perspective could be comparable even with those cost savings.
Speaker Change: <unk> itself.
Speaker Change: Greater than 2800 out in the field good.
Speaker Change: A good chunk of those kind of 40%, 50% greater or under service contract. We see some good attachments and renewal rates related to staying on service contracts and a lot of that is because you get the latest and greatest software updates.
Speaker Change: <unk> enhancements as we develop new analogues to be built into the library and we have a top notch service and application support team, that's very responsive to the customer and we often get.
Speaker Change: Rave reviews from our customers in the period performance, but it makes us a great opportunity as we move into 2026.
Speaker Change: Yes, we're super excited about that one Dan because it's a kind of a step change in simplicity in size and weight and we believe it can drive that upgrade cycle and it's pretty consistent we've talked about our goal is to have a major product release every 24 months or so we've got a pretty rich pipeline of things that we're working on including FTIR devices, including <unk>.
Speaker Change: Square, including more on the recurring revenue continued connected services and through our team leader applications. So a lot of exciting things happening on the NPI side.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you our.
puneet: Our next question comes from Puneet <unk> from Leerink Partners. Your line is now open. Please go ahead.
Speaker Change: Yes, hi, guys.
Speaker Change: So just wondering for the.
Speaker Change: Full year guide how are you thinking about first half versus second half in terms of the installs.
Speaker Change: Into the second half obviously, you don't have CAD there.
Speaker Change: But just.
Speaker Change: Given.
Speaker Change: The opportunity you're seeing.
Speaker Change: Maybe also talk about the Texas Department of public safety order should that be all into Q4.
Speaker Change: Could that.
Speaker Change: Slipped some.
Speaker Change: Some into the second half as well.
Speaker Change: We are excited with the way Q1 kind of getting out of the gate being $11 8 million.
Speaker Change: See opportunity in early stages pipeline developments for Q2 and really the back half.
Speaker Change: Specifically on Texas that is a Q2 opportunity it was great to get the the order over the line and delivery here in Q2, So we were anticipating.
Speaker Change: Each one to be carried primarily by state and local and international opportunities and that's played out and I would say that the team collectively whether it's on the <unk> mill, which has a few more challenges this year, but on the international side State and local continued development of the pipeline to support that back half.
Speaker Change: We did ramp up in that seasonality that we typically see and really looking towards a really strong Q4.
Speaker Change: We get beyond the U S government fiscal year.
Speaker Change: Yes, maybe puneet if it helps I can add a little more color on sort of the to the U S. Federal military side here I mean, I think we are really set up with our transformation around.
Speaker Change: Some of them. We think is tailwind that are really developing there. So we're not involved with the groups like NIH and academic right, where more prioritized around the national security and law enforcement that we're seeing the new administration prioritize so as Joe mentioned, it's certainly a turbulent time, there, but I think what we're seeing is largely aligning in our favor whether it's.
Speaker Change: Plus ups that are happening on the Dod side or proposed for 2026 or the department of Homeland security, both of which much like NIH grant funding flow down to our to our customers through DHS grants that local law enforcement and fire and emergency services use. So I think that is setting us up to support what Joe mentioned in this in the second half.
Speaker Change: And then on that point of the government contracts of what sort of visibility that you have obviously there is.
Speaker Change: Quite a few moving pieces right now.
Speaker Change: Within the government does well with changes and other impacts that we've seen so far but there are opportunities as well. So just wondering sort of where you're getting the visibility where the visibility is more stronger versus less and then I have follow up on the gross margin inside of me. Thank you.
Speaker Change: Sure Yeah, absolutely, yes from a visibility perspective, especially on the fed Gov side, but also international more and more we kind of see those multiple 20 plus unit opportunities that we may be touched on in the past and the importance of those creating visibility and as we get enhance kind of the confidence around.
Speaker Change: Around the numbers, so yeah, I'd say, a good pipeline development there.
Speaker Change: Shaping up.
Speaker Change: We've tried to develop.
Speaker Change: Cadence of announcing some of those opportunities as they do come to fruition to show that traction and you probably saw some of that whether it was with <unk>.
Speaker Change: Ukraine, or the Texas, Dps opportunity and it's really that progression that we've talked about over the last few years of moving people from those first initial placements of pilots and then moving them into these larger enterprise accounts and maybe one last final point on this is that with the Red way of acquisition now under our belts, we are certainly diversified.
Speaker Change: Our sales and revenue channels there so as a point in time in 2024 that we've called out in the past it's about a third of our device sales have come from international customers and another third coming from the state and local that we just gave you a couple of examples and then the last third from those larger U S. Federal call at DHS Department of Defense type accounts. So I.
Speaker Change: I think we're pleased with seeing how that has diversified over time and we're also pleased in that the larger number of installed base is 3000 or more.
Speaker Change: And the support and service, which is helping drive that 37% recurring revenue.
Speaker Change: We are seeing.
Speaker Change: Got it and then just briefly on gross margins can you provide your view on pricing and.
Speaker Change: If there are any levers you can pull there and then with respect to.
Speaker Change: The move to Denver, just trying to understand the capacity utilization of that facility.
Speaker Change: Do you think the cost benefits would be immediate or would there be sort of under utilization.
Speaker Change: <unk> for some time before we start to see those benefits.
Speaker Change: Yes, sure different pieces, there I think on on pricing, we'll look to hold our pricing as set for 2025, and we're continuing to monitor potentially on the tariff side.
Speaker Change: We'll see if we need to consider any surcharges, but not at this time and a big piece of that is we just don't see.
Speaker Change: At least today much of an impact.
Speaker Change: Sure.
Speaker Change: As our supply and our components, we have a lot of the goods in hand.
Speaker Change: I'd say, we're in a bit of wait and see but we haven't triggered anything at this point, but that is a lever that we can introduce on the pricing side on.
Speaker Change: On the move to Dan Barry I think the impact can be.
Speaker Change: Fairly immediate where we've picked up and moved our whole Boston facility and it will be moving it.
Speaker Change: Send that standup the Nx nine away that's a similar sized facility, but now having all of our FTIR in our handhelds Pemex nine weight all under one roof. We run one shift down there there's definitely capacity to increase our production that we're doing today on a weekly basis.
Speaker Change: Some some initial square footage, it's not going to be used but I think within the next 12 months future product launches will fill that up pretty quickly and one.
Speaker Change: When and if ever needed.
Speaker Change: Could go to a second shift or continue other alternatives, but I do see that very little under utilization out of the box.
Speaker Change: Got it thanks guys.
Speaker Change: As a reminder to ask a question. Please press star followed by one.
Speaker Change: Our next question comes from Brendan Smith from TD Cowen. Your line is now open. Please go ahead.
Brendan Smith: Alright, thanks for taking the questions guys. Congrats on all the progress maybe just a quick one from us.
Speaker Change: Given all the different rollouts ongoing and planned in the months ahead.
Speaker Change: As youre kind of approaching cash flow breakeven just kind of wondering how you're thinking about any potential M&A or additional BD and it really I guess, what the strategy our criteria for that would be as you kind of settle into this new era for nine away and take stock of where you see the company going over the next few years.
Speaker Change: Yeah. Thanks, Thanks for that question Brendan I mean, M&A has certainly been part of our strategy over the past few years and.
Speaker Change: The Red wave acquisition to US has really been a great success, it's becoming a very quick meaningful contributor right. So we announced today. It was about 40% of our revenues in the first quarter came from our FTIR products.
Speaker Change: 50% from our mass spec based products, so the team's really hitting stride.
Speaker Change: It has allowed us to greatly gain efficiency of that sales force and putting more products into their bag. So we're super Super pleased about that we will continue to be opportunistic and look at things and that we believe that are very synergistic and aligned with our financial profile Theres definitely opportunities out there, but we've got pretty tight filters and <unk>.
Speaker Change: But all that said we are incredibly focused right now tax to hand really executing on those targets. We put out there today and we have the catalyst we need to drive that 20% plus growth in 2026 and beyond we have those well within our control here today and such a great one way that we see for that organic opportunity. So.
Speaker Change: And we touched on already the secular tailwind here, we see them.
Speaker Change: Unfolding in our in our favor so we see a lot a lot there to execute on so something we'll be mindful of something we've had success at but we're heads down at the moment here executing.
Speaker Change: Gotcha. Thanks.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: We currently have no further questions.
Speaker Change: Kevin <unk> for closing remarks.
Speaker Change: Great well. Thank you. Thank you everyone for joining the call. We really appreciate it we really appreciate your time today and going through and update and we're truly excited for what lies ahead here with what we've coined nine to eight devices to point out. So I have a wonderful day. Thank you very much.
Speaker Change: Thank you for joining today's call you may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.