Q2 2025 908 Devices Inc Earnings Call

Ladies and gentlemen, thank you for joining us and welcome to the 9008 devices. Second quarter, 2025 Financial results conference call.

After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press star 9, to raise your hand and start 6 to unmute. I will now hand the conference over to Kelly, gura investor relations. Please go ahead.

Thank you this morning, 988 devices released Financial results for the second quarter ended, June 30th 2025.

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 908 devices.com.

Joining me today from 9008 is Kevin kenop chief executive officer and co-founder and Joe Griffith Chief Financial Officer.

Before we begin, our commentary today will include the presentation of some non-gaap, my financial measures.

These measures should be considered as a supplement to and not a substitute for gaap financial measures.

Reconciliations to the most direct comparable. Gaap Financial measures can be found in today's earnings press release, which is available in the investor relations section of our website.

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.

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

Additional information regarding these risks and uncertainties appears in the section, entitled forward-looking statements in the press release and weight devices issued today.

For a more complete lift and description. Please see the risk factors section of the company's annual report on form 10K for the year. Ended December 31st 2024 and it is other stylings with the Securities and Exchange Commission.

Except as required, by law 98 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, sentences information, and is accurate. Only as of the live broadcast August 5th 2025.

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

Thanks Kelly. Good morning, and thank you for joining our second quarter 2025 earnings call. I'm really proud of our team's performance and the execution. In the second quarter. We delivered strong growth ahead of internal expectations while undertaking initiatives to meaningfully, reduce our Opex and spending to March towards profitability, with the goal of being adjusted. EBA positive by Q4 of this year.

Revenue from continuing operations, was 13 million and increase of 14% over the prior year period.

Growth was driven by strong device sales with our Mass Spec devices. Again, this quarter accounting for roughly 60% of Revenue and our FJR products making up the other 40%.

Our adjusted ibida loss was 3.9 million for the quarter and Improvement of more than 45% year-over-year compared to our previously, disclosed adjusted ibida for Q2 2024 prior to our transformation, an importantly, the adjusted ibida loss reduced by 15% quarter over quarter.

Area in the second quarter.

Our first focus is to increase adoption of our devices to address Global threats to public health and safety.

We equip Frontline responders with rapid reliable chemical identification, tools, that require minimal training and perform when it matters. Most, our aim is to Define The Benchmark for advanced chemical detection in the field.

We delivered another strong quarter in Q2 placing 164 devices, including a record number of explorers this marks. Our highest quarterly performance for Explorer and underscores, its impact in filling a critical Gap. In hazardous gas identification,

Our results in the first half and our pipeline give us confidence in meeting our full year targets.

As we look towards 2026, we encouraged by recent, legislative actions that strengthen the funding landscape, and will support customer procurement of our devices bolstering. Our ability to achieve our previously, articulated goal of 20% plus growth,

First is the newly passed us budget, fy2 reconciliation, Bill dubbed, the 1, big beautiful, bill, this bill and related. Appropriations include over 760 million in Combined funding for the cops and Byrne. Jag Grant programs to support local law enforcement in combating Fentanyl and other illicit, drugs

Additional funding include 615 million for the urban area security initiative, which addresses terrorism, and other threats, and 370 million for the assistant to Firefighters grant for critical equipment such as our Explorer device in Q2, the majority of Explorer.

orders were funded through this firefighter's assistance, grant

Combined, these grant funding levels exceed, 1.7 billion representing an approximate 11% increase from 2024 levels.

The bill also includes a 7% year-over-year, increase to the Department of Homeland Security Budget, which opens broader procurement opportunities across its many agencies and includes 900 million to secure. Large-scale events. Like the 2026 FIFA World Cup and the 2028 Los Angeles Olympics. Our devices have been used to Secure Public Safety at several large sporting events such as a Super Bowl and more recently at the Indianapolis 500, in May our Interceptor device which is a version of our Explorer, gas detection, product specifically for unmanned systems, was coupled with the athalon robotics drone, dog for remote, and continuous air monitoring throughout the speedway, including the tunnels underneath the track.

While remained focused on the massive, handheld opportunities in front of us over time, autonomous robot and drone platforms. Can further expand use cases for our technology as they develop and become adopted.

Lastly, Provisions in the 1, big beautiful Bill and other recent legislative action, strengthened the foundation for deploying modern. Portable detection Solutions like our MX 908 device

While the detect Fentanyl and xylazine act passed in December. 2024 provides the statutory authority to support the use of commercial off-the-shelf solutions to improve drug detection. The funding priorities being planned, create a clear procurement pathway for these tools.

Further last month's passage of the halt Sentinel act reinforces the federal government's aggressive posture on synthetic opioids by permanently scheduling fentanyl related substances as schedule 1 drugs. This legislative action broadens enforcing capabilities and places added emphasis on detection technologies that can stay ahead of rapidly evolving analogs.

The MX 908 handheld, Mass Spec device is uniquely positioned to support this Mission with its Trace detection. And machine learning capabilities to MX. 908 can identify over 2,000 fentanyl analogs giving law enforcement and other First Responders unmatched confidence in real time. This differentiation is particularly important as a threat. Landscape grows, more complex and detection. Tools with limited libraries, struggle to keep pace.

Taken together. We expect that the recent us legislative outcomes will institutionalize demand support our addressable market and clarify a growth path across our core, customer segments for 2026 and Beyond.

With the renewed focus on modernization, we are well positioned to benefit from sustained investments in fentanyl, border security, and chemical threat preparedness.

Are directly aligned with NATO's, priorities of deterrence, defense Readiness and civil preparedness.

Our technology supports threat, identification and critical scenarios such as surni defense border security, and Special Operations areas, likely to see increased procurement activity, under the new funding framework.

Our second Focus area is advancing our next-gen 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.

July marked. A key milestone in 908 devices, strategic transformation with the successful launch of Viper our new 3-in-1 handheld chemical. Analyzer Viper was purpose. Built for high stakes environments, particularly Global Customs organizations that sit at the intersection of security and trade.

These agencies face, the Dual challenge of interdicting, dangerous materials like narcotics explosives, and toxic chemicals while also, ensuring the smooth flow of legitimate Commerce.

Viper addresses this critical need by combining FJR and Raman spectroscopy into a single seamless workflow enabled by proprietary smart spectral processing technology. The result is faster, more confident chemical identification in the field without repeated sampling or interpretation delays.

Strategically, Viper fits squarely within our handheld platform approach, extending our capabilities in chemical identification and deepening our relevance with core customers.

It broadens our reach within the existing addressable Market serving customers where we see strong alignment between capability and demand.

Viper supports. The long-term growth trajectory. We've outlined while the successful launch and positive early feedback increases our confidence.

We are actively engaged with multiple customers agencies for testing and evaluation and see a clear path to Future pilot and Enterprise opportunities.

Adoption is expected to benefit from widespread familiarity with FJR and ramen workflows, which lowers the barrier to entry and supports efficient scaling.

From a financial perspective. Viper is neutral to gross margin and fully aligned with our discipline model.

As we look ahead Viper, strengthens our position in Global Security markets and sets the stage for future Innovation, including them next Generation, MX 908, which remains on track for release in 2026.

And finally, our third Focus area is strengthening our financial position and accelerating profitability.

We are continuing to Target adjusted ibida positive by the fourth quarter of this year.

we achieved several key milestones in the second quarter in support of this goal,

first, we completed the transfer of all MX, 9008 manufacturing from Boston to our lower cost facility in Danbury, Connecticut, which also houses our FTR production to enable greater operational efficiency

Second, we completed the physical asset transfer of our bio processing for polio to replenishing.

And third, we completed the relocation of our corporate office from Boston, to a smaller, more cost-effective site in Burlington Massachusetts.

I want to thank our team for their focus and resourcefulness as we executed these critical projects to lower facility costs, improve margin and gain efficiency.

Last month we took steps to strengthen and secure. Our supply chain of critical, FTR components by acquiring. The assets of kaf manufacturing company, a Precision, Machining manufacturer based in Stanford Connecticut. For 2.75 million KF is a longtime supplier of key components of our FJR devices.

This acquisition provides us with the ability to scale faster and improve quality control. Lessening our dependence on external vendors. Last year, we spent approximately 5 million dollars with external precision machine shops and insourcing enhances protection from tariffs and contributes, meaningfully to our margin Improvement and profitability goals.

Concurrently, we signed a 3-year, $6.6 million agreement with an upfront cash payment of $750,000 to supply precision optical components and assemblies to a large analytical instrumentation company. That is an existing 908 Devices and KF customer. We also believe this supply relationship enhances our visibility into industrial QA/QC and pharma markets, creating new opportunities to expand our technology reach through strategic partnerships. Importantly, it also supports and drifts our previously stated goal of generating $2 million or more annually in OEM revenues.

I'll hand it over to Joe to review our second quarter financial performance.

Thanks. Kevin. As a result of the sale of our desktop portfolio. In the first quarter, our financials will be reporting continuing operations, only with any current and past activity related to our desktops, including the gate on sale on 1 line item within discontinued operations in our financial statements.

Total revenue was 13 million for the second quarter, 2025 up 14% from 11.5 million in the prior year period primarily driven by an increase in handheld product and service Revenue.

And held product and service Revenue was 12.5 million for the second quarter. 2025 up, 13% from 11.1 million for the second quarter 2024.

We ship to 164 devices in the second quarter compared to 143 devices shipped in the second quarter of 2024 bringing our installed base to 3,336.

As expected program product and service Revenue was not Material in both. The second quarter, 2025 and 2024, we are not assuming any meaningful Revenue contribution from the afcad program in 2025. As we completed the initial low rate production deliveries in Q3 2024 and are preparing for full rate production in 2026.

OEM and funded partnership. Revenue was 0.5 million for the second quarter 2025 compared to 0.4 million in the prior year period.

This Revenue was primarily driven by Pharma and Industrial qaqc customers.

Recurring revenue, which consists of consumables, accessories, and service revenue, represented 36% of total revenues this quarter and was $4.7 million. This is a 28% increase, or $1 million, over the prior year period, largely driven by service revenues and accessories, including the software quantification module for Explorer and Arrow modules for MX 9008.

Looking ahead, we continue to expect recurring revenue for the full year to be approximately 30% of total revenue as the device. Placements, increase, and the second half.

Growth profit was 6.4 million for the second quarter of 2025 compared to 6.2 million for the prior year period.

Gross margin was 49% for the second quarter 2025 compared to 54% for the prior year period. With the decrease primarily driven by intangible amortization from the, Redway acquisition restructuring charges and an increase in warranty costs related to increasing install base.

Adjusted gross profit was 7.3 million for the second quarter of 2025 compared to 6.7 million for the prior year period.

Adjusted gross margin was 56%. A decrease of approximately 220 basis points compared to the prior year period.

The decrease in adjusted gross margin was driven by an increase of warranty costs as mentioned.

Total operating expenses for the second quarter of 2025 were 21.5 million compared to 14.7 million in the prior year period.

The increase in operating expenses was driven by a 6.8 million non-cash charge for the change in the fair value of the contingent consideration. Liability 1 million in facility, shut down and restructuring charges, and an increase in operating expenses related to our Red Wave technology acquisition where we have 3 months of expenses versus 2 months in the second quarter of 2024.

This was offset by 2 million of Red Wave, related deal costs in the second quarter of 2024.

Over the last few months, we have taken definitive steps to lowering our operating expenses. Going forward, including a 44% reduction in square footage related to our facilities and a 39% reduction in headcount compared to Prior year.

Net loss from continuing operations for the second quarter of 2025 was 12.9 Million compared to 7.6 million in the prior year period.

This increase was largely driven by the non-cash charge and other factors I just discussed and was additionally, offset in part by 1.2 million of income, net of expenses from our transition Services agreement with religion.

Adjusted debe for the second quarter of 2025 was a loss of 3.9 million compared to a loss of 3.6 million in the prior period.

We benefited from favorable gross margin percentage in the second quarter of 2024.

We entered the second quarter of 2025 with 118.6 million in cash, cash, cash, equivalents and marketable securities with no debt outstanding.

We consumed approximately 5.7 million of cash in the second quarter of 2025?

As we shared last quarter, the net proceeds from the sale of our desktop portfolio combined with streamline cost structures. We implemented in Q4 and our growth drivers for 2025 and Beyond. Give us confidence we will cross over to break even in 2026 with a healthy cash balance.

Looking ahead in 2025, we now expect revenue from continuing operations to be in the range of 54 to 56 million representing. Growth of 13 to 17% over a full year, 2024 revenue from continuing operations.

This compares to our prior range of 53 to 55 million.

Our updated guidance range. Includes the following assumptions first. We expect to handheld product and service Revenue to grow 17 to 21% year-over-year, which equates to a range of 52 to 54 million

the 1 million increase is driven by second quarter performance and our continued confidence in our second, half Outlook,

Second, we continue to expect OEM and funded Partnerships including contract Revenue to be approximately 2 million.

Third, we are not assuming any meaningful revenue contribution from the U.S. Department of Defense ABCAP program in 2025, as we completed the initial low-rate production and deliveries in Q3 2024 and are preparing for potential full-rate production in 2026 and forth. Last year, our second half revenue was equally split between Q3 and Q4.

Based on our current visibility into the timing and Logistics around a few large orders. We expect second half Revenue to be closer to a 45% versus, 55% split between, Q3 and Q4.

We continue to expect total revenue growth to accelerate above 20% in 2026 driven by our 3 growth catalysts expanding handheld adoption launching Next Generation products and scaling our US government programs.

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 with our manufacturing consolidation in Connecticut, which we have now completed.

And as Kevin discussed, we recently acquired the assets of KF which contributes to our ongoing margin Improvement in 2026.

And we are continuing to Target. Adjusted ebida positivity in Q4 this year.

Supported by our Q4 Revenue projection of approximately 17 million anticipated, gross margin expansion and lower operating costs. Following our portfolio Devastator and facility consolidation.

at this point, I would like to turn the call back to Kevin

Thanks, Joe to wrap up Q2 was a strong step forward in our transformation. We delivered Topline growth ahead of expectations executed key. Structural initiatives to improve our financial profile and made Solid progress on our path to profitability with record placements of Explorer. The successful launch of Viper and a funding environment. That's improving, both in the US and internationally, we're confident in meeting our 2025 targets, and building sustained momentum into 2026 and Beyond

We're also excited to welcome Dr. Brandy van to our board of directors Dr. Van brings Decades of leadership in defense and bio defense, most recently serving as the principal. Deputy assistant secretary for the defense for nuclear chemical and biological defense programs.

Her background aligned squarely with our mission and her insights will be a strategic asset as we grow our presence across National Security and Global preparedness markets.

Thanks again for your continued interest in 908 Devices. We look forward to updating you on our progress next quarter with that. Let's open it up to questions.

We will now begin the question and answer session. If you would like to ask a question, please raise your hand. Now, if you have dialed in to today's call, please press star 9, to raise your hand, and star 6 to unmute please stand by while we compile the Q&A roster.

Your first question comes from the line of Dan Arias with stifel please go ahead.

Dan a reminder to unmute yourself.

All right. Oh, how do we do that? Go ahead.

Okay, sorry about that.

Uh, Kevin it, it does sound like there are some good high-level Tailwind that you have when it comes to just Federal funding items, some of the international priorities on security. You mentioned, um, you mentioned some pretty major sporting events.

Behind it or is it sort of best to just think about the wind blowing in your direction right now? But you still need some time to see acceleration that sort of reflects those things.

Yeah. Thanks Dan. For the, for the question. I, I think it's a little more towards the latter, as, you know, we're working in a, in a defense, uh, and and Homeland Security just US federal budget. That's a continuing resolution. Uh, it is a full year continuing resolution. We've talked in the past that that's not ideal, but it definitely provides better visibility to our customers. Um, I think the good thing that we're trying to call out in the prepared remarks here is that the new Administration is, is clearly prioritizing the areas that we're working most in National Security Law Enforcement, unlike call it NIH facing Cuts defense and DHS are are seeing proposed, uh, meaningful budget increases and and we think that is a long-term driver particularly as we get into FY 26, the government's next fiscal year there. Um yeah, we called out some some legislation priorities around the detect fentanyl act, the halt fentanyl act. And, and even just last week, if you saw in the news, there was some, some efforts to crack down on a, on a roadside. Um, um, uh, opioid,

Product called 700 H. Uh, that's out there. So lot happening in these areas from the legislative slide side. But then, if you look at the efforts with the the 1, big, beautiful Bill and and there's definitely we see, uh, sources of strength developing to support our customers and drive us next year towards that 20% plus Topline. So a lot of good things. Uh, perhaps, uh, coming, we we called out some of the increases in in spending, um, that are being forecasted for, uh, the grant programs which are customers rely on. So, yeah, I think it's a little bit more towards the latter as you framed it.

Yep, makes sense. Okay.

Okay. Okay. And then Joe on the crossover to positivity at the IBA line. If you exit the year, do you think you can stay there? Um, or is it more likely to move around a little bit on seasonality and other factors? I know we'll talk about Q2 in a couple of quarters, but just sort of interested in how things might progress once you hit the milestone, so to speak. Yeah, we did reiterate, you know, the Q4 just to deepen the target and see a path to getting there. I think, as you think about it, crossing over to Q2, we do have seasonality within the business. Usually, in the first half, it's cash consuming, right? And then with volume and traction, you know, it recovers a bit in the second half, so I anticipate that to be similar. But we definitely got off to a great start; you know, in the first five months since we announced the desktop portfolio, the vesture remained confident in our ability to get to that positive adjust.

Just a Deepa in Q4. Um, I think to achieve that, you know, we need to hit our Q4 Revenue, projection about 17 million, you know, combined with expanding gross margins and lower operating costs. And uh, then we'll be working hard uh, on the full year 2026.

Okay, very good. Thank you guys. Very good. Thank you guys.

Your next question comes from the line of Matt LaRue with.

William Blair, please go ahead.

Yeah, for the question. This is, uh, Jacob cranial on 4, Matt. Uh, wanted to ask just about the new launch product Viper. Um, just launched that last month just, um, giving the opportunity to talk about the early uptake or any early contribution from that product. How does it fit into, you know, the existing sales teams bag. Are there any incremental training or expenses associated with that launched? Um and you know the guide was raised proportionately to the B at least relative to our model about 1 million at the midpoint. I I know you noted that reflected the outperformance from q1 but is there any incremental contribution from Viper? We should be expecting. That could be upside to the model um in the fourth quarter or back half of the year.

Yeah. Thank. Thank you. I'll start with the first part of it. I mean, we acquired Red Wave in early 2024 and, and to us. It's a, it's a great platform technology. And, and we're really proud to have launched wiper here recently in early June, sorry July. Um, you know, Viper is a 3 in 1, handheld chemical analyzer. And it's really being built, uh, specifically for, uh, groups that are more like a, a global Customs organization. Uh, people that are are concerned with that intersection of security and, and trade. Um, so it it absolutely addresses, the, the challenge of of, interacting narcotics explosives and toxic chemicals, but it's also trying to be quick and and Speedy and help with the flow of legitimate Commerce. So, um, the product fits well, and it's differentiated with what we have in the bag, as you put it from our from our product, set of our handhelds, um, including what we do for bulk solid, and liquid detection, because as integrates 2 Technologies, FTR, and ramen, and then takes a third Technologies, and strings it all together, which we call this smart, spectral processing.

Is it it makes a confirmatory workflow so it's less operator, involvement, it's faster more of a confirmatory confident, chemical identification, less sampling and the like so strategically it. It absolutely fits in the bag as you put it, strategically it very much fits into the, what I like to think is the flywheel that we go from the early engagements with people and workshops and conferences through to our training events and then, obviously the, the post sales support and reach back that that our team is respected for by our customer base. So I think it's very, very well into that. Um, in terms of the financial profile, I'll pass it to you, John. Yeah, we I think Jacob, we see some potential sources of website that could flow through. You know, here in the second half, 1 of those is Viper and Viper Revenue growth and flexion, uh, we think it's more of a 2026 story. As we sit here today, we have a few Ops that are developing in our pipeline, uh, Beyond Viper. There are some other, you know, potential opportunities on the upside side and the realization of some of the macros that Kevin walked through.

Are developing his tail Tailwind. You know if we begin to see some acceleration to demand and funding ability to support related to the new administration's focus on defense spending, you know, border security and combating the fentanyl crisis in the US you know, similar Trends internationally. So we see some of those priorities uh come together. You know it's probably more of a 2026 thing but we do flip to FY 26, October 1st. So if we can see some of those realized sooner um

Also, there's always a better than expected conversion of large, kind of Enterprise opportunities for both our MX, and our ftir devices, um, with our combined portfolio, that could gain traction under the United Sales force. So, we've mentioned that this is an opportunity for that to grow. So really those combined, you know, Viper is just 1 of those opportunities. Yeah. And and to hit your last point, which, uh, included in there was around the early feedback. So we are engaged with uh, multiple Customs organizations across the globe. And we are getting good initial early feedback that that is that seed for as Joe described it to the pilot. So then to the Enterprise accounts likely in that call at 2026 time frame 1 of the positive feedbacks. We're getting is around the connected Services element, the team leader connection to be able to do Fleet Management across that portfolio of uh, or the fleet of the potential Viper rollouts in a particular organization.

Got it, got it. Yeah, that, that all makes sense and sounds good, um, on Explorer, um, you know, record device sales in the quarter, I think you, you know, and maybe I misheard. But, you know that, you know, the majority of the orders in the quarter were funded through this, new US legislation bill that was passed. Um just kind of wondering what the runway for this level sustained device. Placement growth looks like um related to, you know, this this new funding. And and whether there are any other areas within the portfolio you you kind of expect to see in a similar outside benefit from legislation.

Yeah, absolutely. I mean, the Explorer is our call. It second newest product next to to Viper and and we did highlight another strong, uh, quarter and and really that first half now, uh, Q2 was 164 new devices, but 45 of those were our explorers in Q2 and and and I think that's really happening because gas detection and are monitoring is very topical. You can see that in some of the other competitors reports as well that that there's some good drivers to that. Uh, it's detecting and identifying and filling a gap that doesn't exist out there in the world of gas detection, and that's unknown identification. So that builds a gap for for the capability for firefighters in particular, you know, you're right. We did call out. The majority were funded on the assistant to Firefighters grant program for critical equipment. And that is a, a program that has been going for a number of years. And, and there is now being mentioned in the, in the legislation, for FY, 26 around, keeping that commitment and having around 370 million dollars for firefighter Grant.

Going forward. So we're excited about that that that's that's continued in the whole as we called out. There's about 1.7 billion dollars of grant funding that our customer base usually is is targeting and then that's now in the 1, big beautiful Bill. We'll see what transpires as it moves through Appropriations. But that's a, that's a meaningful increase. That's about an 11% increase in in total, uh, that that's there. So we're seeing good diversity in orders. We haven't seen just uh, 1 large order to make up those 45. We've seen a lot.

Lot of 1 2 or 5 unit orders which we, which we really like. So again, we think what's driving? The adoption is customers really prioritizing the air monitoring for HazMat response and identifying quantifying unknown, odors leaks gases. And so we're we're pleased about that progress.

Okay, thanks. I'll I'll leave it there and jump back into you.

Please go ahead.

Hi, guys. Um, thanks for the questions here. So, maybe first on 26, you're expecting 20% plus growth there. Um, could you maybe elaborate um, how much of that is more of the run rate business that you were expecting from state and local agencies versus the upside that you are now expecting from the JAG program, the Urban Area Security Initiative, firefighters, and other programs that are part of the, you know, maybe the "1 big, beautiful bill." Um, you know, how should we think about, uh, you know, the overall upside and your confidence in the current portfolio to grab a portion of those grants?

Yeah, no, great question. I mean we've highlighted in the past and and, and again today around 3 growth catalysts that we see 1 is equipment monitorization. So, that's taking that existing portfolio and executing. Uh, that does take in count the the grant programs which historically have funded our, our customers, particularly against a state and local. Um so it's great to see that those are continuing. We see a lot of Green Field opportunities there. Uh, we we are working as, you know, to replace some of the call it older and aging variants of these Technologies out there. Um so there's about 15,000 or so as we estimate um FTS out there that that we are targeting with that. Um our MX 9008 has over 2,800

Devices out there. That's really been a class leader. Uh, product. And as you know, we're working on the Next Generation. So Catalyst 1 is really that execution and and driving the contract vehicles that I mentioned, are a way to, to continue that momentum. It's a great to see that they've increased 11% year-over-year in total. Uh, and then the new products. And we talked about Viper. Um, we're excited about its contributions upcoming for for largely 2026, um, and then we have talked about that next generation and MX and then the last third Catalyst that we've called out driving for the 20%. Plus if we're executing on all 3 of those, the plus would be emphasized and that's really around the avat and that we are again. Looking forward to a decision and a path forward with that program. Uh, we're still targeting the end of Q3 for sub decision. It's possible, uh, that it extends a bit into, uh, later this year. But certainly by the end of 2025, we're looking for Clarity on how that program is.

Is moving forward. Um, and so, we're working now, with that manufacturing transition complete, uh, to be able to hit the ground running, and be able to, uh, ramp as that comes into to Clarity for us. So all those 3 and may, can you touch me on the state and local uh Channel kind of US state and local? It's been a steady growth driver and you know for the first half was a little over 12 million of our revenues. And you know having that run rate. It takes work, write 1 125 unit opportunities but we have a top-notch.

Sales team that delivers on that is a good Baseline. And with our expanded portfolio it continued to win especially post the Red Wave acquisition. So Kevin hit on the The Catalyst and the growth drivers excited to have vipre launched as a key growth driver in an ftir oh for all for 20126, some optionality on adad as we get additional visibility and timing. Um so yes I'm targeting that 20% plus as we move into 2026

Got it. That's that's helpful. And then on this following up on avat, how should we think about the phasing of that? Uh, and if you could remind us, um, you know, what's the revenue opportunity? I think it was 10 million. But if you can remind us, how how, how should we layer that in and, and to, uh, 26 and then on the pricing and gross margin side. I just wanted to get your view on your ability to price with, um, Within These grants and the, the programs that are coming up for 26. And, um, now with the facility moves, um, are you could you maybe just elaborate on the capacity utilization and and how should we think about the gross margin? Uh, ramp going ahead?

Sure. I'll touch on ABC and definitely can jump in on the other topics. So, yes, on abcande, we continue to work through. You know, anticipate the, you know, full rate production, uh, award, you know, working through the timing there, but it can be roughly 10 million, uh, per year, or greater, you know, over a 5 to 7, uh, year period, likely ramping, right? So I think there's the opportunity to start seeing some shipments in 26. Um, timing will be determined, you know, upon receiving the award. Uh but as you know we're a subcontractor. So we do providing dismiss and then Smith's on to the End customer. So it continues to be a great opportunity for our massc technology in the expansion there.

Singing ghost margin in 2026. You know, each year, we take a look at the market and the ability to increase the pricing at the Top Line to offset any, you know, related costs, Etc. But I think from a pure cost perspective, you know, pretty heavy efforts here in the first half to move facilities, get manufacturing down, the Danbury about a quarter ahead ahead of time. You know, we brought in some of the production of our MX to facilitate that move in Q2, but I think that sets us up, you know, for a lower cost footprint. There is plenty of capacity today, you know, it's a little almost 40,000 square feet. Mainly, uh, able to be ramped up for manufacturing. We Run 1 shift today. So a great acquisition that set that platform. Amazing team that enabled the transition here in Q2. And I think it sets us up as we ramp, uh, into 2026.

Got it, helpful guys. Thank you.

Okay.

You are a final question. Comes from the line of Chad Weky with TD Cowen. Please go ahead.

Hey guys, Chad on for uh Brandon Smith. Um, just want to double click on through the manufacturing base. We'll all of the new products including the MX 908 2.0, be manufactured in Danbury as well. And with that require any additional capex or is this space there today?

Yeah, is it? That's right, is Joe just highlighted we really have uh worked aggressively to consolidate our Manufacturing in Danbury Connecticut. Uh, and that facility there is is a great modern uh, but yet cost effective a facility for us and we were able to get a lot of Leverage. If you're doing all of your production lines in 1 place, we also called out on the call a small asset acquisition that we did, uh, with KF manufacturing, which is a an ability for us also to to work on those gross margins. And secure our, our supply chain. We spend something around 5 million dollars per year on external machine shops. Now, we're able to in-house that a bit and it helps us control the quality, but it also helps us drive the margin side. Yeah. And specific capital for MX kind of NextGen. Um, I'd say it's it's minimal, right? It's leveraging. Our core technology. Um, so it's probably a rounding error and it would be just around tooling and setup. Um, but nothing, you know, with a facility move and the ramp up of the people in transition.

From MX to MX. Next gen, we should be in good shape there.

Got it. Thanks. And then, in terms of all the federal budget tools that you called out on the call, is that more of a Tailwind to ignite some of these upcoming replacement Cycles or does this bolster your ability to, uh, sign new customers, uh, and increase the sales Channel? How do you sort of prioritize and how do you plan on juggling the 2?

Yeah, I I think it's absolutely supports both, you know, we do see a lot of Greenfield opportunity for for new customers adopting. Uh, maybe Explorer with some good evidence of that in in this quarter. Uh, but the replacement cycle, if you will of of servicing, uh, maybe more outdated Technologies, and and getting in there with the modern solutions, you know, we think that is also well served in this. We called out some of the, um, US Federal, uh, developing, um, uh, call it Tailwind for FY, 26 and beyond that are part of the 1. Big beautiful bill, but I'd also point out that this isn't just the United States. We're ALS, seeing activity across the NATO countries, you've probably seen in June and we called out and prepared remarks. That some of the Allied Nations now are increasing uh their spend. So from our perspective us and international policy makers are responding to the instability out their security risk. And and we do see it creating a sustained Tailwind for advanced detection technology. Whether it be a replacement whether it be a new Adoption whether it be an MX or whether it be an F,

R. We really want to be the leader across that whole space from gas detection to trace the Box on liquid. And we can do so pretty efficiently with the sales platform that we've created.

Thanks for the questions, guys.

There are no further questions at this time. I will now turn the call back to Kevin cannot for closing remarks.

Well, thank you all. Thank you all for your attendance today and, and support and interest in 9008, have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.