908 Devices Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2023

There are 9 speakers on the call.

Operator

Welcome to today's 908 Devices Third Quarter 2023 Financial Results Conference Call. My name is Jordan, and I'll be coordinating your call today. I'm now going to hand over to Kelly Gura of Investor Relations to begin. Kelly, please go ahead.

Speaker 1

Thank you. This morning, 908 Devices released financial results for the Q3 ended September 30, 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 ir908devices.com. Joining me today from 908 is Kevin Knopp, Chief Executive Officer and Co Founder and Joe Griffiths, 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.

Speaker 1

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 908 devices issued today. For a more complete list and description, please see the Risk Factors section of the company's annual report on Form 10 ks for the year ended December 31, 2022 and its other filings within the Securities and Exchange Commission. Except as required by law, 908 Devices disclaims any intention or obligation to update or revise This conference call contains time sensitive and is accurate only after the live broadcast, November 7, 2023. With that, I would like to turn the call over to Kevin.

Speaker 2

Thanks, Kelly. Good morning, and thank you for joining our Q3 2023 earnings call. We delivered solid execution during the Q3, I'd like to thank our committed team for their efforts in progressing our goals as we continue to navigate the headwinds of the life sciences instrumentation and bioprocessing market. Looking back on the 1st 9 months of 2023, challenges in the bioprocessing space were even more pronounced than we anticipated at the outset of the year. However, this impact has been significantly offset by the growth of our handheld devices serving the forensics market.

Speaker 2

Over the 1st 9 months of 2023, our top line revenue increased 2% year over year to 35,900,000 buoyed by the strength in our handheld devices, which have increased 19% year over year. We expect our handheld to continue to contribute meaningfully and drive our overall growth into the mid to high single digits for the year. For the Q3, revenue was $14,300,000 Revenue was again primarily driven by our handhelds, which increased 7% year over year. With rising geopolitical uncertainties, the ongoing fentanyl crisis in counterfeit pharmaceuticals, there has been continued demand for handheld trace analysis in forensics applications at the point of need. We continue to deliver on our commitment to provide a full portfolio of complementary desktop devices for bioprocessing.

Speaker 2

And in September, we launched Maverick, our first in line Raman based device. During the launch week, we hosted members of the investor community at our Bioprocessing Day in our Boston headquarters. It was great to see many of you in person provide an update on our roadmap and show you our MAVERICK device along with our new bioprocessing lab where we did live demos of how all our process analytical technology, Innovation is a core component of our mission at 908. I'm pleased to share that 908 Devices was named Analytical Solutions Provider of the Year for the introduction of our Maven and Maverick devices in the 3rd Annual Biotech Breakthrough Awards, which recognizes disruptive innovation in the global life sciences and biotechnology industry. This is a great validation of the uniqueness of our technology and the ultimate impact it can have as the industry progresses to biopharma 4.0.

Speaker 2

Now I'd like to provide a brief update on the progress we've made across our 3 focus areas for 2023. 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. At the start of the year, we said we were committed to making significant progress on enterprise adoption. During the Q3, we made some important advancements on that front.

Speaker 2

First, We recently announced an award from the U. S. Air Force and Air National Guard Fire and Emergency Services totaling of $10,400,000 We were pleased to see the continued expansion of this enterprise account. Our MX-nine zero eight device has been deployed within the Air National Guard for hazardous chemical response and approximately a third of these orders represent aero module upgrades along with training and support for their existing devices. Our aero module adds capability to the MX-nine zero eight, enabling response teams to quickly detect and identify aerosolized chemical hazards.

Speaker 2

With this award, The active reserve and Air National Guard components of the U. S. Air Force will now utilize the MX-nine zero eight device and the Aero module at more than 130 installations around the world for hazardous materials operations and pre emergency medical response. Joe will provide more details on this order and its revenue recognition in a moment. We are extremely proud that the U.

Speaker 2

S. Air Force has chosen our MX-nine zero eight device and aero module as their standard, paving the way for enhanced emergency medical response and hazardous material operations. In September, we announced exciting news on the next phase of a multiyear project with the U. S. Department of Defense.

Speaker 2

In conjunction with our partner on the project, Smiths Detection, we were selected to provide initial production of 122 portable aerosol and vapor chemical agent detectors, otherwise known as AvCat. Our high pressure mass spectrometry technology enables these next Generation chemical detector systems, which are designed to detect, identify, alarm and report the presence of traditional and advanced threat vapers and aerosols. The AvTAD, which can be mounted or portable, includes a wireless remote alarm capability, will support missions for the U. S. Military.

Speaker 2

Our project partner, Smiths Detection, has provided the DoD with more than 91,000 Joint Chemical Agent Detector, JCAD units over 16 years in the predecessor program to AvCAD. We believe that being selected for the next generation AvCAD validates Our technology has a new standard for chemical detection. This next phase of the program will include production verification and multiple service operation testing. A successful transition to full rate production could have a meaningful impact on our revenue in later years. We're pleased to be working with Smith Detection, a global leader in threat protection, and we are truly honored to help protect U.

Speaker 2

S. Military personnel in their worldwide mission. Turning to our desktops, we recently announced a collaboration with Terumo Blood and Cell Technologies to integrate our Maven online analyzer with their QuantumFlex cell expansion system for real time monitoring and control of glucose and lactate without the risk of manual sampling and with less labor. Terumo BCT's QuantumFlex cell expansion systems are used throughout the cell therapy process from process development through clinical manufacturing. The addition of online analytics enhances process understanding critical in autologous applications such as CAR T cell therapies where patient to patient variability increases the difficulty of implementing robust and reproducible processes.

Speaker 2

For example, lactate Concentrations must be carefully monitored during the manufacturing process as they can inhibit cell growth and induce toxicity. Manufacturing failure rates reported in CAR T's clinical trials can be significant with out of spec cell viability being one of the failure causes. With Maven, lactate concentrations, which are highly correlated indicator of cell viability, can be continuously monitored and feeding strategies can be adjusted to control cell growth. Maven with its novel aseptic sampling probe also enables cell therapy developers To reduce contamination risk and save operator time, the scientists no longer need to enter the clean room to perform manual sampling. We are excited to collaborate with Terumo BCT to enable cell therapy developers to gain valuable process insights that importantly helped them reduce cost of goods and accelerate progress for these personalized life saving treatments.

Speaker 2

Turning to our second objective, advancing and broadening our product portfolio. Our product strategy is to develop devices that are simple to use and connected for improved process understanding in order to provide customers with robust answers at the point of need. We were thrilled to launch our 2nd game changing device this year for bioprocessing at the Bioprocessing International Conference and Exhibition in September. MAVERICK utilizes Raman spectroscopy for real time in line monitoring of multiple bioprocess parameters. Multivariate optical sensing technologies such as Raman spectroscopy are well suited for in line continuous monitoring of a range of parameters.

Speaker 2

Yet many Raman based systems require experts in geometric modeling for setup, which can take months at substantial expense. MAVERICK can be set up in minutes. The device utilizes purpose built de novo models that automatically process Raman spectra from a wide variety of cell culture media types and cell lines, thereby delivering actionable process parameters. We are also providing open access to the raw spectral data that enables AI and machine learning experts to extend Maverick's capability for more advanced predictive control of critical process parameters or quality attributes. Importantly, as a spectroscopic based device, Maverick is extensible to other analytes and parameters through software updates.

Speaker 2

1 of our beta placements was at the University of Massachusetts in law, where Doctor. Song Kyung Yoon is the Ward Endowed Professor in Biomedical Sciences. Doctor. Yun previously held senior positions in manufacturing sciences at Biogen and Multivariate Data Analysis and Design at Sartorius. He noted that with MAVERICK, all the hurdles of traditional ramen have been overcome.

Speaker 2

Doctor. Yun further noted that our device provides very good measurement independently of cell line, media and scale. We're also continuing to foster our pharma and academic analytical lab customer base. Our team recently facilitated Successful early access evaluations for our improved Zip Chip Charge Variance Analysis Kit with 3 key pharma accounts and 1 academic account. Our mass spec based charge variance analysis complements ICIEF workflows from our collaborator, Bio Techne by providing more in-depth protein characterization.

Speaker 2

We're pleased to report that the new kit demonstrated a 3 to 20 fold improvement in sensitivity and additional robustness. As the pharmaceutical industry continues to adopt process analytical technologies to drive the advancements of biopharma 4.0, Scientists need an array of simple tools that provide robust analytics to enable them to monitor and control their processes in real time. We are addressing this need with a full portfolio of devices centered around Rebel with our mass spec platform and complemented by Maven and Maverick for monitoring and control of critical process parameters, plus Zip Chip for the measurement of critical quality attributes. We believe we are well positioned with this suite of devices to take advantage of the impending recovery in the bioprocessing market. And finally, turning to our 3rd objective, laying an omics foundation.

Speaker 2

We see a clear and emerging need for accelerating mass spec based workflows to address proteomics and metabolomics opportunities. In the area of multiomics, our collaborator, Professor Matthew Foster at Duke University, recently presented his NIH funded research on multiomics analysis of sepsis at the U. S. Human Proteome 2023 and the American Thoracic Society 2023 meetings. In his presentation, Professor Foster noted how our Zip Chip device enabled the analysis of metabolites and native peptides from the same extract, preserving precious sample, cutting sample preparation time in half and speeding time to results.

Speaker 2

We further and our collaborations in the area of multiomics with Doctor. Luca Fornaylo, Assistant Professor at Biology at the University of Oklahoma. He is extending the boundaries of top down proteoform sequencing and pursuing a tenfold improved throughput analysis using our Zip Chip device. Overall, I'm pleased with our progress this quarter as we broaden our bioprocessing portfolio with an exciting new product and progress penetration of our handhelds in enterprise accounts. With that, I will now turn the call over to Joe for more details on our financials.

Speaker 3

Thanks, Kevin. Revenue for the Q3 2023 was $14,300,000 decreasing 9% compared to $15,800,000 in the prior year period. Handheld revenue from our MX-nine zero eight device was $11,700,000 an increase of 7% compared to $11,000,000 in the prior year period. During the Q3, we shipped 117 MX908 handheld devices. The increase in handheld revenue was primarily driven by $4,200,000 in revenue from initial device shipments for the recently announced U.

Speaker 3

S. Air Force purchase orders, as well as revenue related to component shipments with our initial production phase under the U. S. Department of Defense AvCAD program. Desktop revenue from our products serving the life sciences, instrumentation and bioprocessing markets was CAD 2,500,000 decreasing from $4,400,000 in the prior year period.

Speaker 3

This year over year decline in desktop revenue was primarily due to a decrease in device placements as we continued to navigate a challenging funding environment. During the Q3, we shipped 7 desktop devices, including 3 rebill and 4 Zip Chip interfaces. As a reminder, we will continue to break out placements by device the remainder of the year. Starting in 2024, we will focus more on overall revenue and combine desktop placements as the key metrics for growth for our broadened desktop portfolio. Recurring revenues, which consists of consumables, accessories and service revenue, decreased 21 percent to $3,600,000 compared to $4,500,000 in the prior year period and represented 25% of total revenue in the quarter.

Speaker 3

The decrease was primarily driven by a decline in accessory and consumable revenue for our handheld devices, offset in part by growth in service revenue. Regarding desktop recurring revenue, we continue to be running at about 0.5 kip per month for our active Rebel customers. Looking ahead, we continue to expect recurring revenue to be around 30% for the full year 2023. Gross profit was $7,900,000 for the Q3 of 2023 compared to $9,300,000 for the prior year period. Gross margin was 55% for the Q3 of 2023 as compared to 59% for the prior year period.

Speaker 3

The decline in gross margin year over year was due to several factors, including lower revenue, higher service costs with training obligations, Charges for excess and obsolete inventory and to a lesser extent, higher non cash charges for intangible amortization and stock compensation. We continue to expect our full year gross margin to be in the lower end of our target range of mid-50s when excluding non cash charges for intangible amortization and stock compensation. Total operating expenses for the Q3 of 2023 were CAD17 1,000,000 compared to $16,500,000 in the prior year period. This was driven by an increase of $600,000 in non cash stock based compensation. We're committed to being very thoughtful on our cash spend and we'll continue to tightly manage our headcount throughout the remainder of the year and as we think about 2024 investments.

Speaker 3

Net loss for the Q3 of 2023 was CAD7,100,000 compared to CAD6,300,000 in the prior year period. We ended the Q3 of 2023 with approximately $148,000,000 in cash, cash equivalents and marketable securities and had no debt outstanding. Importantly, we efficiently manage the consumption of cash, cash equivalents and marketable securities over the quarter to less than 5,000,000 We expect to end the year with a strong cash balance to support our ongoing operations. Looking ahead to the remainder of 2023, we have narrowed our range. We now expect full year revenues to be in the range of €49,000,000 to €51,000,000 representing growth of 4% to 9% over full year 2022.

Speaker 3

This compares to our previous range of €49,000,000 to €52,000,000 for the full year of 2023. This guidance range contemplates 2 key factors. First, our progress with our handheld enterprise accounts. This includes the recently announced U. S.

Speaker 3

Air Force purchase orders, which were anticipated and are supportive of our current guidance. We recognized $4,200,000 in the 3rd quarter and expect to recognize approximately $1,000,000 in Q4 with the remainder of the revenue upon fulfillment of our training, upgrade and support obligations. We are making great progress expanding our enterprise accounts, but have more work to do. We have a handful of U. S.

Speaker 3

And international deals that we are working to deliver here in the Q4. 2nd, we are expecting that ongoing pressures in the bioprocessing And have adjusted our expectations around availability of year end funding. Overall, we have maintained positive growth during the 1st 9 months of the year due to the strength and over performance of our handhelds in the forensics market. As we look to 2024, we believe that our diversified and broad technology platform will continue to be an asset and a unique differentiator. At this point, I would like to turn the call back to Kevin for closing comments.

Speaker 2

Thanks, Joe. Overall, we made important progress this quarter across our core growth areas. Despite the macro climate impacting the life sciences instrumentation and biocrossing markets for our desktops, our handheld revenues have grown 19% over the 1st 9 months and further acceleration is expected in the Q4. As the headwinds on our desktop subside, we believe we will be well positioned to capitalize on the opportunity with a full set of differentiated products in the bioprocessing PAT space to drive strong top line growth. In the interim, as we've demonstrated this quarter, we remain good stewards of our cash and ensure we retain a healthy balance through a focus on strong operational execution.

Speaker 2

With that, we'll now open it up for questions.

Operator

Our first question comes from Stephen Maher of TD Cohen, Stephen, the line is

Speaker 4

yours. Great. Thanks for taking the questions. So how should we think about the U. S.

Speaker 4

Air Force ordering cadence of the remaining $5,000,000 or so orders Beyond what you announced here in 2023.

Speaker 3

Yes, Stephen, this is on the Air Force purchase orders. These were contemplated as part of our guidance that we said earlier this year. Large purchase orders like this do take some time and nurturing with our team to come to fruition and become official. We're really excited about this expansion within an existing Enterprise accounts, I mentioned these purchase orders have multiple elements, new MX-nine zero eight device placements, Upgrades of previously deployed devices, which include the latest hardware and aero modules, some training for the new and existing users of the MX-nine zero eight extended service for 5 years from shipment. For timing, we did recognize $4,200,000 in the 3rd quarter and expect to recognize approximately $1,000,000 in the 4th quarter, which will account for all the new device placements under these purchase orders.

Speaker 3

And Think about the remainder of the revenue, it will be recognized as we fulfill the service obligations, specifically when the upgrades are completed and delivered, The trainings are completed and the extent service revenue will be over a 5 year timeframe. It's really a reminder of we A good portion of our handouts with an extended service arrangement upfront and a great way to secure commitment and investment in technologies with our Think about U. S. Air Force and U. S.

Speaker 3

Army even before that, both saw a good uptick from this. And as we end the Q3, we did have $20,000,000 in deferred revenue, the majority related to service revenue like this. And we like this as it really helps us get cash upfront and predictability of returning revenue over time and a great measure of customer commitment. So Net net about $5,000,000 here in 2023 and the rest over time.

Speaker 4

Yes. Okay. I appreciate the color. Maybe pivoting over to the Maverick and congrats on the launch in September. Can you give us a little color on the early Maverick traction with customers and how we should think about potential sales this quarter and next year?

Speaker 2

Yes. Sure, Stephen. Happy to do it. Yes, we're super excited that we got this launched at the bioprocessing Joe here recently and it adds to what we're trying to do, right? We're trying to build out a complementary set of products in this PAT space.

Speaker 2

There's certainly near term challenges in that space, but we're confident that we've got the right products positioned there. So with any new It takes a bit of time to ramp up. There may be some contribution this year and we're seeing some movement there. But really, It's about getting in people's budgets right now, and this was a good time to launch in September. So that over this You're getting in people's capital budgets and you're really looking for it as a 2024 growth driver for it.

Speaker 2

We think it again, it really complements what we're doing with Revel and Maven and super excited. I would say that we've been having a lot of strong conversations with it. And internally here we talk about that we're 30 for 30, meaning we've created a pipeline of 30 plus opportunities in the 1st 30 days. So we're thrilled by that response. Obviously, it takes time.

Speaker 2

There's some conversion of it, but there's some good global pharma groups that we're having conversations with and we think we're setting ourselves up well into 2020 for. So if Maverick is an overall barometer of 2024, I think it's a good sign and we have some concrete measurement points there, but definitely early days.

Speaker 4

Okay. No, I appreciate the color. Thanks for taking the questions.

Operator

Our next question comes from Matt Larew of William Blair. Matt, please go ahead.

Speaker 5

Hey, good morning. Maybe just following up on that. Kevin, you referenced good to get Maverick out ahead of the budgeting cycle for next year. Just curious as you've had conversations with customers, what you're hearing about how customers are thinking about 2024 budgets. I think Throughout this earnings season on the bioprocessing side, we've heard perhaps that the destocking phenomenon may be coming to a close, but that Broader secular pressures are still in place.

Speaker 5

So just kind of curious what you've heard from customers as you've begun talking about potential product placements next year?

Speaker 2

Yes. Thanks, Matt. I think you're right. I mean, there definitely is that backdrop of a challenging macro, and we think of it as both in the bioprocessing, but also that life science instrumentation customers and certainly consistent with What we're hearing there, as you know, we're trying to get new technologies into that preclinical early stage process development, right? So that the bar It's hard there.

Speaker 2

You're definitely seeing people still with the situation where capital has been reduced monitoring having good dialogue about individual situations there. That said, I think we're confident there will be a recovery here and that we've got the right tools in place to take advantage of that to kind of build on the strength of our handhelds as we progress that and see that market recovery. If you think about 2024, I would say it's a bit early for us. We're going to see how Q4 plays out, but we're cautiously optimistic. We've had a series of productive conferences this fall, but how those budgets translate into the And closing timing and whether that's H1, H2, etcetera of next year, a little bit remains to be seen there.

Speaker 5

Okay. Fair enough. And then on the opportunity, the AvCat opportunity, could you maybe help us think about for the economic opportunity per unit and how that might compare to a traditional placement? That would be the first part. And then the second part, I think you referenced 60,000 placements with Smith's sort of legacy opportunity.

Speaker 5

Or I guess over what time frame Did that get placed? Did it get placed sort of on a typical quarterly cadence? Or are there a few large orders that comprise that? Just Trying to think about how that might materialize if it does over time.

Speaker 3

Going through some of the details, as you can imagine, we're very excited to be moving into this initial production phase with Cab, which began in the Q3 and is likely to span into the first half of twenty twenty five from a timing perspective. We delivered those initial product in Q3 Approximately $2,500,000 and expect to deliver an additional $1,000,000 in Q4. And then there's additional product and support in 2024, maybe about $1,000,000 as currently contracted. And the deliverables are up front end loaded, basically to enable Smiths, our partner to complete their build and delivery to the U. S.

Speaker 3

Government and we'll support those initial deployments and any services required. Ultimately, that goal is to get into the full rate production for 2025 and beyond. Sort of the cost per unit, these are components, not a full MX-nine zero eight and it varies based upon quantities, especially as we get into future full rate production phase. But it's a great opportunity. And thinking more broadly, right, for JACAD, I think you alluded to it, it represented a Full rate production and extended years on the initial commitment that us must have on the previous JACAD program.

Speaker 3

For AvCat, right, the goal is a successful transition to full rate production and it would have a meaningful impact on our revenue in later years by 2025 and beyond. And at this time, we're really focused on that initial production phase and there are no firm commitments for full rate production. The full rate production could be up to or even over €10,000,000 plus a year an opportunity If we were to get to full rate production, there's a lot of potential for this to be an important driver, as you can imagine, for our handhelds, and we're excited to be a part of the program.

Speaker 5

Okay, great to hear. Thank you.

Operator

Our next question comes from Puneet Souda of Leerink Partners. Puneet, please go ahead.

Speaker 6

Hi, guys. You have Michael on for Puneet. Thanks for taking my question. I was wondering if you could help bridge for us The change in the guide that you mentioned that the Air Force order was contemplated earlier, so I just want to know what's driving the delta?

Speaker 2

Yes. Hi, Michael. Yes, thanks for the question. Yes, we narrowed the guidance a bit here in part that we didn't see the recovery from the desktops in Q3 and we expect that to persist now to Q4. So we're not really assuming any large capital flush at this time and certainly challenges in that overall bioprocessing space may be more pronounced than we anticipated at the outset of the year.

Speaker 2

However, as we've been discussing today, you really have been significantly We offset by the strong growth of our handheld devices in the forensics market, which really has buoyed our overall growth. So we feel good on the handheld side, strong pipeline, some enterprise orders we've been talking about, some others that we're working through. And we really expect it to drive our revenue for Q4 and expect the handheld to continue to contribute meaningful Lee, and really drive that overall growth into the mid to high single digits for the year. So really good booking progress here as well in the 30 days in the quarter, there's certainly more left to do, but we're encouraged. But maybe Joe, you want to add some other color?

Speaker 3

Yes. I think just to hit on points, The narrowing of the guide is mainly from the desktop's perspective of Q3 and as we looked at Q4 and the budget flush estimates at the time Back in

Speaker 6

August. Okay. Yes, that makes sense. And then I wonder if you could get a bit more Color on the Terumo deal, if you have any ideas about, I guess, how that can translate to the P and L, if it Give you exposure to a new customer set or if I could offer any color on that?

Speaker 2

Yes, happy to. Yes, we're super excited to be able to talk about now. It's a great collaboration with TruMo and their QuantumFlex cell expansion system used throughout the whole cell therapy workflow from process development through clinical manufacturing and across a wide range of of cell types from stem cells and lentiviral vector and all the way to CAR T processes. So we talked Earlier in the year about a driver for us is to get Maven into and connected to some of these integrated cell therapy platforms. And I think this is one example in a non exclusive way that we've got a great collaboration with Terumo.

Speaker 2

And really think about it as us, we're really kind of hitting for our Maven and the consumable and the single use perfusion module to meet directly into their system. And We think there's a lot of value there for the end customer, because if you look at what we're able to do, we're really reducing the risk of manual sampling, so reducing cost of goods, taking labor out of it. But importantly, we're using it to be able to help determine when the endpoint of the process Really using it as a surrogate for cell viability. So these are the types and areas and applications that we think Maven Contribute in the cell therapy space. And so I think it's a great example of how we can kind of work with partners out there to bring complete solutions to this customer space and this is in that cell therapy area.

Speaker 2

And you might recall, we have a relationship with Sartorius that we're continuing to foster to be very similar with the technology that's in our Maven and related products into their ecosystem of bioreactors and customers.

Speaker 6

Great. Thanks.

Operator

Our next question comes from Jacob Johnson of Stephens. Jacob, the line is yours.

Speaker 7

Hey, thanks. Good morning. Maybe just Kevin to follow-up on the Terumeb partnership, I heard you mentioned it was non So is this something that we should expect to see you kind of maybe expand on this with other providers? And is Is that kind of the go to market strategy for Maven where it's good to partner with, for lack of a better term, kind of bioreactor type offerings for cell therapy?

Speaker 2

Yes. I think you're right on all accounts. I mean, we really see Maven as Being a strong contributor to online analytics and giving these process development teams these kind of, call it, actionable insights. And Maven with the streaming out glucose and lactate and then actually being able to also control, we think it makes a lot of sense to be partnered in various forms and various ways, whether it's an OEM, whether it's being friendly, whether it's co marketing agreements, collaboration agreements, really trying to have a full From there to extend the reach of our sales team and really look to provide customers with more of a solution rather than just a device, if you will. So yes, I think we hope to show more examples of that as we go forward and super excited to be working with Terumo and as we mentioned already working with Sartorius as well, the biologics space.

Speaker 7

Got it. That's helpful. And then maybe Kevin, a kind of bigger picture capital allocation Obviously, a lot of effort on the desktop side, the last couple of years to In terms of sales and marketing, but also kind of new product development. I'm just curious in the current macro environment where that business It's a little more challenging. You're seeing these opportunities on the handheld side.

Speaker 7

Are you focusing more of your time in the company's resources on the handheld side of the business?

Speaker 2

I think we're doing 2 things. I mean, 1, in this desktop space, we are absolutely trying to use this time to build out that foundation, build out a really compelling set of complementary technologies and devices that can bring a holistic set of products to the PET space and really kind of marching towards that tricorder scanner like device that's just providing process and quality attributes. So we are absolutely doubling down in that and we're spending a lot of time making sure that we've got customers successful with all our products and they're really Experiencing the benefits and we're showcasing Terumo today, but we work every day with each and every one of our customers out there for Revel and all of our devices. So absolutely a major focus, major resource area of effort and deployment for us. But with that said, handhelds has been impressive to us and it's been over performing to us in our plans to date And we don't see that stopping.

Speaker 2

We really see a lot of opportunity. The fentanyl crisis is the opioid crisis, counterfeit pharmaceuticals, A lot of drivers out there that our team is able to help with our customers and the solution. So we absolutely want to win that space and we're investing in that space and We want to own that space. So we are continuing to make investments there and work on both R and D roadmaps, sales investments, market development.

Operator

Our next question comes from Dan Arias of Stifel. Dan, please go ahead.

Speaker 8

Good morning, guys. Thanks. Kevin, maybe to your last point there, you have done a nice job this year backfilling the handheld Order book post the Army contract roll off. Obviously, we're getting to the point in the year where we're starting to look ahead. So I know we'll need to wait for a little bit To get details on the outlook, but you both you and Joe made comments on the things that you're working here working on here in 4Q.

Speaker 8

Can you just maybe touch on the way in which you see the sales funnel heading into 2024 for handhelds and then how you might compare the strength of that funnel to this time last year?

Speaker 2

Yes. Sure, sure, sure. Absolutely. I mean, we always are working Build up that pilot to enterprise conversion and have opportunities on deck here to expand within enterprise accounts. And We are pleased that over the 1st 9 months, we did get that 19% growth out of the handhelds there, which certainly has buoyed our overall performance.

Speaker 2

We have big enterprise orders each year that promote that growth that we're always working to navigate, but we certainly have a number of enterprise and pilots being transitioned and Always have a lot of reliance on those. We feel we've got plenty of TAM to work with here, plenty of sockets and really just pace Over the last 18 months, whether it be the accessories and arrows and beacons and other elements. So we think there's a lot there. If we think about 2020 for. We think kind of holistically about our offerings at 908 here and we're really diversified and got a broad technology platform that we think is an asset and a unique differentiator.

Speaker 2

And we're cautiously optimistic where we're seeing for 2024 here At these early moments, but we're hearing some positive indicator and anecdotes and things seem to be moving in the right direction. We can't really predict when the recovery in the bioprocessing headwinds really subside, but I would say that we're very confident in our product And working towards getting back to being a 20 plus percent grower as soon as we can and got a lot of good momentum there with our handheld devices serving forensics. We're going to keep investing, keep that going. And we think we've been doing a decent job managing our cash. And so we've got a long runway of growth.

Speaker 2

And Importantly, now we really do have many more shots on goal with that foundation in process analytical technology tool. So Look, I mean, if you think about 2024 in these early days, if you combine the durability of our flagship handhelds here and that have demonstrated some good growth And you think about the macros lessening a bit and our expanded desktop portfolio, we hope things will get exciting here in the not too distant future.

Speaker 8

Yes, that would be great. Okay. And then maybe just on a Reville usage and where that tends to be higher or lower, cell and gene therapy and new modality customers, Those seem to be the areas where the intensity, the workflow is a good thing for you, but that has been a choppy market this year. So as we again, as we look to next year, Do you see that bucket as additive to the utilization average because of that intensity? Or are you not ready to say that that will be the case just given the ups and downs that we're talking about there?

Speaker 8

Thanks.

Speaker 2

Yes. I'd say it's hard for us to slice and dice it.

Speaker 5

I mean, we're continuing

Speaker 2

to see about a half a kit per month on average for our active users. Ultimate goal as we've discussed in the past kind of getting to more one kit per month. Half A month is on average is about $24,000 worth of consumables and we're working to of course get to increase. And you're right, some of the dynamics and some of the modalities could be strong drivers there. We do think it's a good sign that during These macro times, it has been hanging in there at the half a kit.

Speaker 2

Obviously, we'd like it to increase from there and are working to drive that. But yes, I don't think we can slice and dice by modality just yet.

Speaker 8

Got it. Okay. Thank you.

Operator

With that, I'll hand back for any closing remarks.

Speaker 2

Well, thank you. Thank you very much and we appreciate your time today. And with that, we'll end the call.

Operator

Thank you for joining. Ladies and gentlemen, you may now disconnect your lines.

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Earnings Conference Call
908 Devices Q3 2023
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