Earnings call transcript: 908 Devices Q2 2025 revenue rises, stock slides

908 Devices Inc. (NASDAQ:MASS) reported its financial results for the second quarter of 2025, revealing a mixed performance. The company posted a revenue of $13 million, surpassing the forecast of $12.17 million, with a year-over-year increase of 14%. However, the earnings per share (EPS) fell short of expectations, coming in at -$0.37 compared to the forecasted -$0.17. Following the earnings announcement, the stock price fell by 12.96% in pre-market trading, closing at $6.52. Despite recent volatility, the stock has shown remarkable strength with a 196% year-to-date return, though InvestingPro analysis suggests the stock is currently overvalued based on its Fair Value model.

Key Takeaways

• Revenue surpassed expectations, reaching $13 million, a 14% increase year-over-year.
• EPS was below forecast, at -$0.37 versus the expected -$0.17.
• Stock price declined by nearly 13% following the earnings release.
• Gross margin decreased to 49% from 54% in the previous year.
• The company launched a new product, Viper, targeting global customs organizations.

Company Performance

908 Devices experienced a robust revenue increase of 14% year-over-year, driven by strong sales of its handheld products, which accounted for $12.5 million of total revenue. The company shipped 164 devices this quarter, up from 143 in the same period last year. Despite these gains, the company reported a net loss from continuing operations of $12.9 million, reflecting ongoing investment in product development and market expansion. InvestingPro data reveals the company is quickly burning through cash, with negative free cash flow of $35.77 million in the last twelve months. The company maintains a strong financial position with a current ratio of 7.62, indicating ample liquidity to meet short-term obligations.

Financial Highlights

• Revenue: $13 million, up 14% YoY
• EPS: -$0.37, compared to the forecast of -$0.17
• Gross Margin: 49%, down from 54% YoY
• Recurring Revenue: $4.7 million, up 28% YoY
• Cash Position: $118.6 million, no debt

Earnings vs. Forecast

The company exceeded revenue expectations with a 6.82% surprise, achieving $13 million against the forecast of $12.17 million. However, EPS fell short by 117.65%, coming in at -$0.37 compared to the anticipated -$0.17. This significant miss in EPS, despite the revenue beat, highlights ongoing cost challenges and strategic investments impacting profitability.

Market Reaction

Following the earnings announcement, 908 Devices’ stock price dropped by 12.96%, trading at $6.52. This decline reflects investor concerns over the larger-than-expected EPS loss, despite the positive revenue performance. The stock has been volatile, moving closer to its 52-week low of $1.81, compared to a high of $8.06. According to InvestingPro, analyst consensus remains bullish with price targets ranging from $6 to $7. Get access to 10 additional exclusive ProTips and comprehensive financial analysis through InvestingPro’s detailed research reports, available for over 1,400 US stocks.

Outlook & Guidance

Looking ahead, 908 Devices projects 2025 revenue between $54 million and $56 million, representing a 13-17% growth. The company aims for adjusted EBITDA positivity by Q4 2025 and anticipates over 20% growth in 2026. With the upcoming launch of the next-generation MX908 in 2026, the company remains optimistic about its long-term growth prospects.

Executive Commentary

"We delivered strong growth ahead of internal expectations," said Kevin Knopp, CEO, emphasizing the company’s revenue achievements. CFO Joe Griffith added, "We are targeting adjusted EBITDA positivity in Q4 of this year," highlighting the company’s focus on improving profitability.

Risks and Challenges

• Profitability Concerns: The significant EPS miss indicates potential challenges in managing costs.
• Market Volatility: The stock’s sharp decline post-earnings reflects investor uncertainty.
• Competitive Pressure: Maintaining leadership in the handheld chemical detection market requires continuous innovation.
• Economic Conditions: Macroeconomic factors could impact spending in key markets.
• Regulatory Changes: Potential changes in regulations could affect product deployment and sales.

Q&A

During the earnings call, analysts inquired about the feedback on the newly launched Viper device and its acceptance among customs organizations. Executives reported positive responses and highlighted potential revenue acceleration from new legislative support and federal funding tailwinds.

Full transcript - 908 Devices Inc (MASS) Q2 2025:

Conference Operator: Ladies and gentlemen, thank you for joining us and welcome to the nine zero eight Devices Second Quarter twenty twenty five Financial Results Conference Call. After today’s prepared remarks, we will host a question and answer session. I will now hand the conference over to Kelly Gura, Investor Relations. Please go ahead.

Kelly Gura, Investor Relations, 908 Devices: Thank you. This morning, nine zero eight Devices released financial results for the second quarter ended 06/30/2025. 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 e mail to ir908devices dot com. Joining me today from nine zero eight is Kevin Knopp, 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 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 Annoyte 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 12/31/2024, and in its other filings with the Securities and Exchange Commission. Except as required by law, nine zero 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. This conference call contains time sensitive information and is accurate only as of the live broadcast, 08/05/2025. With that, I would like to turn the call over to Kevin.

Kevin Knopp, Chief Executive Officer and Co-Founder, 908 Devices: Thanks, Kelly. Good morning, and thank you for joining our second quarter twenty twenty five earnings call. I’m really proud of our team’s performance 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 EBITDA positive by Q4 of this year. Revenue from continuing operations was $13,000,000 an 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 FTIR products making up the other 40%. Our adjusted EBITDA loss was $3,900,000 for the quarter, an improvement of more than 45% year over year compared to our previously disclosed adjusted EBITDA for Q2 twenty twenty four prior to our transformation. And importantly, the adjusted EBITDA loss reduced by 15% quarter over quarter. We are advancing with urgency and discipline towards the nine zero eight Devices two point zero vision outlined earlier this year, positioning the company for sustained growth and impact. To realize this, we’ve established three strategic focus areas for 2025, targeting marketing expansion, advancing innovation and reinforcing financial discipline.

I’ll walk through the progress we’ve made across each 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 Explorer units.

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 are 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 U. S.

Budget FY 2026 reconciliation bill, dubbed the One Big Beautiful Bill. This bill and related appropriations include over $760,000,000 in combined funding for the COPS and Burn Jag grant programs to support local law enforcement in combating fentanyl and other illicit drugs. Additional funding includes $615,000,000 for the Urban Area Security Initiative, which addresses terrorism and other threats and $370,000,000 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 firefighters assistance grant. Combined, these grant funding levels exceed $1,700,000,000 representing an approximate 11% increase from twenty twenty four 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 $900,000,000 to secure large scale events like the twenty twenty six FIFA World Cup and the twenty twenty eight Los Angeles Olympics. Our devices have been used to secure public safety at several large sporting events such as the Super Bowl and more recently at the Indianapolis five hundred in May. Our interceptor device, which is a version of our Explorer gas detection product, specifically for unmanned systems, was coupled with the Acelon Robotics Drone Dog for remote and continuous air monitoring throughout the speedway, including the tunnels underneath the track. While we remain 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 One Big Beautiful Bill and other recent legislative action strengthened the foundation for deploying modern portable detection solutions like our MX908 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 Fentanyl Act reinforces the federal government’s aggressive posture on synthetic opioids by permanently scheduling fentanyl related substances as Schedule I drugs. This legislative action broadens enforcement capabilities and places added emphasis on detection technologies that can stay ahead of rapidly evolving analogs. The MX908 handheld mass spec device is uniquely positioned to support this mission. With its trace detection and machine learning capabilities, the MX908 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 the threat landscape grows more complex and detection tools with limited libraries struggle to keep pace. Taken together, we expect that The recent U. S. Legislative outcomes will institutionalize demand, support our addressable market and clarify a growth path across our core customer segments for 2026 and beyond. With a renewed focus on modernization, we are well positioned to benefit from sustained investments in fentanyl interdiction, border security and chemical threat preparedness.

This is setting up not only in The United States, but globally. In response to mounting global threats, allied nations agreed at the NATO Summit in June to significantly increase defense spending, committing to invest 5% of GDP annually by 02/1935. This historic shift, up from the previous 2% target, is favorable for nine zero eight devices, and our field deployable chemical detection solutions are directly aligned with NATO’s priorities of deterrence, defense readiness and civil preparedness. Our technology supports threat identification in critical scenarios such as Siberni 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 nine zero eight Devices’ strategic transformation with the successful launch of Viper, our new three in-one 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 FGIR and Raman spectroscopy into a single seamless workflow enabled by our 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 customs 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 FTR and Raman 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 disciplined model. As we look ahead, Viper strengthens our position in global security markets and sets the stage for future innovation, including the next generation MX908, 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 EBITDA 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 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 bioprocessing portfolio to Repligen. 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 Stamford, Connecticut for $2,750,000 KAF 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 $5,000,000 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 three year $6,600,000 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 nine zero eight devices and KAF customer.

We also believe this supply relationship enhances our visibility into industrial QA2C and pharma markets, creating new opportunities to expand our technology reach through strategic partnership. Importantly, it also supports and derisks our previously stated goal of generating $2,000,000 or more annually in OEM revenue. In summary, the alignment of policy, product and performance is propelling nine zero eight devices forward, enabling us to expand our impact, extend our market leadership and deliver on our commitment to profitability. I’ll now hand it over to Joe to review our second quarter financial performance.

Joe Griffith, Chief Financial Officer, 908 Devices: 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 gain on sale on one line item within discontinued operations in our financial statements. Total revenue was $13,000,000 for the second quarter twenty twenty five, up 14% from $11,500,000 in the prior year period, primarily driven by an increase in handheld product and service revenue. Handheld product and service revenue was $12,500,000 for the second quarter twenty twenty five, up 13% from $11,100,000 for the second quarter twenty twenty four. We shipped 164 devices in the second quarter compared to 143 devices shipped in the 2024, bringing our installed base to 3,336.

As expected, program product and service revenue was not material in both the second quarter twenty twenty five 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 twenty twenty four and are preparing for full rate production in 2026. OEM and funded partnership revenue was $500,000 for the second quarter twenty twenty five compared to $400,000 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 $4,700,000 a 28% or a $1,000,000 increase over the prior year period, largely driven by service revenues and accessories, including the software quantification module for EXPLORER and aero modules for MX908.

Looking ahead, we continue to expect recurring revenue for the full year to be approximately 30% of total revenue as device placements increase in the second half. Gross profit was $6,400,000 for the 2025 compared to $6,200,000 for the prior year period. Gross margin was 49% for the second quarter twenty twenty five compared to 54% for the prior year period, with the decrease primarily driven by intangible amortization from the RedWave acquisition, restructuring charges and an increase in warranty costs related to increasing installed base. Adjusted gross profit was $7,300,000 for the 2025 compared to $6,700,000 for the prior year period. Adjusted gross margin was 56%, a decrease of approximately two twenty basis points compared to the prior year period.

The decrease in adjusted gross margin was driven by an increase in warranty costs as mentioned. Total operating expenses for the 2025 were $21,500,000 compared to $14,700,000 in the prior year period. The increase in operating expenses was driven by a $6,800,000 non cash charge for the change in the fair value of the contingent consideration liability, 1,000,000 in facility shutdown and restructuring charges and an increase in operating expenses related to our RedWave Technology acquisition, where we have three months of expenses versus two months in the second quarter twenty twenty four. This was offset by $2,000,000 of RedWave related deal costs in the 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 2025 was $12,900,000 compared to $7,600,000 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 $1,200,000 of income net of expenses from our transition services agreement with Reslegen. Adjusted EBITDA for the second quarter of twenty twenty five was a loss of $3,900,000 compared to a loss of $3,600,000 in the prior year period. We benefited from favorable gross margin percentage in the 2024. We ended the 2025 with $118,600,000 in cash, cash equivalents and marketable securities with no debt outstanding.

We consumed approximately $5,700,000 of cash in the 2025. As we shared last quarter, the net proceeds from the sale of our desktop portfolio, combined with the streamlined cost structures we implemented in Q4 and our growth drivers for 2025 and beyond, give us confidence we will cross over to breakeven in 2026 with a healthy cash balance. Looking ahead in 2025, we now expect revenue from continuing operations to be in the range of 54,000,000 to $56,000,000 representing growth of 13% to 17% over full year 2024 revenue from continuing operations. This compares to our prior range of 53,000,000 to 55,000,000 Our updated guidance range includes the following assumptions. First, we expect handheld product and service revenue to grow 17% to 21% year over year, which equates to a range of 52,000,000 to 54,000,000 The $1,000,000 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 2,000,000 Third, as mentioned, we are not assuming any meaningful revenue contribution from U. S. Department of Defense AvCAD program in 2025 as we completed the initial low rate production deliveries in Q3 twenty twenty four and are preparing for potential full rate production in 2026. And fourth, 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 three growth catalysts: expanding handheld adoption, launching next generation products and scaling our U. S. Government programs. Moving down the P and 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 KAF, which contributes to our ongoing margin improvement in 2026. And we are continuing to target adjusted EBITDA positivity in Q4 of this year, supported by our Q4 revenue projection of approximately $17,000,000 anticipated gross margin expansion and lower operating costs following our portfolio divestiture and facility consolidation. At this point, I would like to turn the call back to Kevin.

Kevin Knopp, Chief Executive Officer and Co-Founder, 908 Devices: Thanks, Joe. To wrap up, Q2 was a strong step forward in our transformation. We delivered top line 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 U. S.

And internationally, we’re confident in meeting our 2025 targets and building sustained momentum into 2026 and beyond. We’re also excited to welcome Doctor. Brandi Vann to our Board of Directors. Doctor. Vann brings decades of leadership in defense and biodefense, most recently serving as the Principal Deputy Assistant Secretary for the Defense for Nuclear Chemical and Biological Defense Programs.

Her background aligns 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 nine zero eight devices. We look forward to updating you on our progress next quarter. With that, let’s open it up to questions.

Conference Operator: We will now begin the question and answer session. Your first question comes from the line of Dan Arias with Stifel. Please go ahead. Dan, a reminder to unmute yourself. Alright.

Oh.

Dan Arias, Analyst, Stifel: How’d we do that?

Conference Operator: Please go ahead.

Dan Arias, Analyst, Stifel: Okay. Sorry about that. Kevin, it it does sound like there are some good high level tailwinds that you have when it comes to just federal funding items, some of the international priorities on security. You mentioned you mentioned some pretty major sporting events. Are those things showing up in the order book or the sales funnel in a way that has some confidence 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?

Kevin Knopp, Chief Executive Officer and Co-Founder, 908 Devices: Yeah. Thanks, Stan, 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 and and homeland security, just The US federal budget that’s a continuing resolution. 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. I think the good thing that we’re trying to call out in the prepared remarks here is that the new administration 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, 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. Yeah, we called out some legislation priorities around the Detect Fentanyl Act, the HALT Fentanyl Act, and even just last week, if you saw in the news, there were some efforts to crack down on a roadside opioid product called seven zero h, that’s out there. So a lot happening in these areas from the legislative slide side, but then if you look at, the efforts with the the one big beautiful bill, and and there’s definitely, we see sources of strength developing to support our customers and drive us next year towards that 20% plus top line.

So a lot of good things perhaps coming. We called out some of the increases in spending, that are being forecasted for, the grant programs, which our customers rely on. So, yeah, I think it’s a little bit more towards the latter as you framed it.

Dan Arias, Analyst, Stifel: Yep. Makes sense. Okay. Okay. And then, Joe, on the crossover to positivity of the EBITDA line as you exit the year, do you think you can stay there, or is it more likely to move around a little bit on seasonality and other factors?

I know we’ll talk about 26 in a couple of quarters, but just sort of interested in how things might progress once you hit the milestone, so to speak.

Joe Griffith, Chief Financial Officer, 908 Devices: Yeah. We we did reiterate, you know, the q four adjusted EBITDA target and and see a path to getting there. I think as you think about it crossing over to ’26, 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, recovers a bit in the second half. So I’d anticipate that to be to be similar, but we’re we’re definitely off to a great start, you know, in the first five months since we announced the desktop portfolio divestiture and remain confident in our ability to get to that positive adjusted EBITDA in q four. I think to achieve that, you know, we need to hit our q four revenue projection about 17,000,000, you know, combined with expanding gross margins and lower operating costs. And, then we’ll be working hard, on the full year 2026.

Dan Arias, Analyst, Stifel: Okay. Very good. Thank you, guys. Very good. Thank you, guys.

Conference Operator: Next question comes from the line of Matt Larue with William Blair. Please go ahead.

Jacob Cranbeel, Analyst, William Blair: Yeah. Good questions. This is, Jacob Cranbeel on for Matt. I wanted to ask just about the new launch product, Viper. Just launched that last month.

Just me opportunity to talk about the early uptake or any early contribution from that product. How does it fit into, you know, the existing sales team’s bag? Are there any incremental training or expenses associated with that launch? And, you know, the guide was raised proportionately to the beat at least relative to our model about $1,000,000 at the midpoint. 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 in the fourth quarter or back half of the year?

Kevin Knopp, Chief Executive Officer and Co-Founder, 908 Devices: Yeah. Thank thank you. I’ll start with the first part of it. I mean, we acquired RedWave in in early twenty twenty four, and and to us, it’s a it’s a great platform technology, and and we’re really proud to have launched Viper here recently in in early June sorry, July. You know, Viper is a three in one handheld chemical analyzer, and it’s really being built specifically for groups that are more like a global customs organization, people that are concerned with that intersection of security and trade.

So it it absolutely addresses the the challenge of of interjecting 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 the product fits well and is differentiated with what we have in the bag, as you put it from our from our product set of our handhelds, including what we do for bulk solid and liquid detection, because it integrates two technologies, FTR Raman, and then takes a third technologies and strings it all together, which we call this smart spectral processing. And what that does is it it makes a confirmatory workflow, so it’s less operator involvement. It’s faster, more of 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 fits very, very well into that. In terms of the financial profile, I’ll pass it to you, John.

Joe Griffith, Chief Financial Officer, 908 Devices: Yeah. We I I think, Jacob, we see some potential sources of upside that could flow through, you know, here in the second half. One of those is, Viper and Viper revenue growth inflection. You know, 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.

Beyond Viper, there are some other, you know, potential opportunities on the upside side. Now the realization of some of the macros that Kevin walked through are developing his tail tailwinds. 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, and similar trends internationally. So we see some of those priorities, come together. You know, it’s probably more of a 2026 thing, but we do flip to f y twenty six, October 1.

So if we can see some of those realized sooner. Also, there’s always a better than expected conversion of large kinda enterprise opportunities for both our MX and our FTIR devices, with our combined portfolio that could gain traction under the United Salesforce. So we’ve mentioned that there’s an opportunity for that to grow. So really those combined, you know, you know, the Viper is just one of those opportunities.

Kevin Knopp, Chief Executive Officer and Co-Founder, 908 Devices: Yeah. And and to hit your last point, which, included in there was around the early feedback. So we are engaged with multiple customs organizations across the globe, and we are getting good initial early feedback. That that is that seed, first Joe described it, to the pilot, to then to the enterprise accounts likely in that, call it, 2026 time frame. One 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, or of the fleet of the potential Viper rollouts in a particular organization.

Jacob Cranbeel, Analyst, William Blair: Got it. Got it. Yeah. That all makes sense and sounds good. On Explore, you know, record device sales in the quarter, I think you you noted, maybe I misheard, but you noted, you know, the majority of the orders in the quarter were funded through this new US legislation bill that was passed.

Just kind of wondering what the runway for this level of sustained device placement growth looks like, 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 outsized benefit from some legislation.

Kevin Knopp, Chief Executive Officer and Co-Founder, 908 Devices: Yeah. Absolutely. I mean, the Explorer is our, call it, second newest product next to to Viper, and and we did highlight another strong, quarter and and really that first half now. Q two was a 164 new devices, but 45 of those were our Explorers in q two. And and and I think that’s really happening because gas detection and air 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. It’s detecting and identifying and and filling a gap that doesn’t exist out there in the world of gas detection, and that’s unknown identification. So that fills a gap for for a capability for firefighters in particular. Yeah. 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 program that has been going for a number of years. And and there is now, being mentioned in the in the legislation for f y twenty six around keeping that commitment and having around $370,000,000 for firefighter grants going forward. So we’re excited about that that that’s continued. In the whole, as we called out, there’s about $1,700,000,000 of grant funding that our customer base usually is targeting, and and that’s now in the one 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 that that’s there. So we’re seeing good diversity in orders. We haven’t seen just one large order to make up those 45. We’ve seen a lot of one, two, or or five 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.

So we’re we’re pleased about that progress.

Jacob Cranbeel, Analyst, William Blair: Okay. Thanks. I’ll leave it there and jump back in the queue.

Conference Operator: Your next question comes from the line of Puneet Souda with Leerink Partners. Please go ahead.

Puneet Souda, Analyst, Leerink Partners: Yeah. Hi, guys. Thanks for the questions here. So maybe first on, TwentySix, you’re expecting 20 plus growth there. Could you maybe elaborate, 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 firefighters, other programs that are part of the, you know, maybe the one big beautiful bill, you know, how should we think about, you know, the overall upside and your confidence in the current portfolio to grab a portion of of those those grants?

Kevin Knopp, Chief Executive Officer and Co-Founder, 908 Devices: Yeah. No. Great question. I mean, we’ve highlighted in the past and and and again today around three growth catalysts that we see. One is equipment modernization.

So that’s taking that existing portfolio and executing. That does take in count the grant programs, which historically have funded our customers, particularly against state and local. So it’s great to see that those are continuing. We see a lot of greenfield opportunities there. We are working, as you know, to replace some, going call it, older and aging variants of these technologies out there.

So there’s about 15,000 or so, as we estimate, FTIRs out there that that we are targeting with that. Our MX908 has over 2,800 devices out there. That’s really been a class leader, product. And as you know, we’re working on the next generation. So Catalyst One is really that execution and and driving.

The contract vehicles that I mentioned are a way to to continue that momentum. It’s great to see that they’ve increased 11% year over year in total. And then the new products, we talked about Viper. We’re excited about its contributions upcoming for largely 2026. And then we have talked about that next generation MX.

And then the last third catalyst that we’ve called out driving for the 20% plus, if we’re executing on all three of those, the plus would be emphasized, and that’s really around the AvCAD. And that we are again looking forward to a decision and a path forward with that program. We’re still targeting the end of Q3 for such a decision. It’s possible that it extends a bit into later this year, but certainly by the 2025, we’re looking for clarity on how that program is moving forward. And so we’re working now with that manufacturing transition complete to be able to hit the ground running and be able to ramp as that comes into to clarity for us.

So all those three.

Joe Griffith, Chief Financial Officer, 908 Devices: And maybe, Prini, touching on the state and local, channel, kind of The US state and local, it’s been a steady growth driver. And, you for the first half, it was a little over 12,000,000 of our revenues. And, you know, having that run rate, it takes work. Right? One, two, five unit opportunities, but we have a top notch sales team that delivers on that and is a good baseline.

And with our expanded portfolio, continue to win, especially post the Red Wave acquisition. So Kevin hit on the the catalyst and the growth drivers. Excited to have Viper launched as a key growth driver in FTIR for all for 2026. Some optionality on AvCAD as we get additional visibility and timing. So, yes, we’re targeting that 20% plus as we move into 2026.

Puneet Souda, Analyst, Leerink Partners: Got it. That’s that’s helpful. And then on just following up on AvCAD, how should we think about the phasing of that? And if you could remind us, you know, what’s the revenue opportunity? I think it was 10,000,000, but if you can remind us how how should we layer that in in into ’26.

And then on the pricing and gross margin side, I just wanted to get your view on your ability to price with within these grants and the the programs that are coming up for ’26. And now with the facility moves, are you could you maybe just elaborate on the capacity utilization, and and how should we think about the gross margin ramp going ahead?

Joe Griffith, Chief Financial Officer, 908 Devices: Sure. You know, touch on AvCAD and definitely can jump in on the other topics. So, yes, on AvCAD, we continue to work through, you know, anticipate the, you know, full rate production award, you know, working through the timing there, but it can be roughly 10,000,000 per year or greater, you know, over a five to seven year period, likely ramping. Right? So I think there’s the opportunity to start seeing some shipments in ’26.

Timing will be determined, you know, upon receiving the award. But as you know, we’re a subcontractor, so we’d be providing to Smiths and then Smiths on to the end customer. So it continues to be a great opportunity for our mass spec technology and the expansion there. As as we think about, you know, kind of pricing and gross 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, etcetera. But I think from a pure cost perspective, you know, pretty heavy effort here in the first half to move facilities, get manufacturing down to 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 q two, 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, able to be ramped up for manufacturing. We run one shift today. So a great acquisition that set that platform, amazing team that enabled the transition here in q two, and I think it sets us up as we ramp, into 2026.

Puneet Souda, Analyst, Leerink Partners: Got it. Helpful, guys. Thank you.

Joe Griffith, Chief Financial Officer, 908 Devices: Mhmm.

Conference Operator: Your final question comes from the line of Chad Wiotrowski with TD Cowen. Please go ahead.

Chad Wiotrowski, Analyst, TD Cowen: Hey, guys. Chad on for, Brendan Smith. Just wanna double click on sort of manufacturing base. Will all of the new products, including the MX nine zero eight two point o be manufactured in Danbury as well? And would that require any additional CapEx, Where is the space there today?

Kevin Knopp, Chief Executive Officer and Co-Founder, 908 Devices: Yeah. That’s right. As Joe just highlighted, we really have worked aggressively to consolidate our manufacturing in Danbury, Connecticut, and that facility there is is a great modern but yet cost effective facility for us. And we were able to get a lot of leverage if you’re doing all of your production lines in one place. We also called out on the call a small asset acquisition that we did with KAF Manufacturing, which is an ability for us also to to work on those gross margins and secure our our supply chain.

We spend something around $5,000,000 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.

Joe Griffith, Chief Financial Officer, 908 Devices: Yeah. And specific capital for MX kind of next gen, I’d say it’s it’s minimal. Right? It’s leveraging our core technology. So it’s probably a rounding error, and it’d be just around tooling and setup.

But nothing you know, with the facility move and the ramp up of the people in transitioning from MX to MX NextGen, we should be in good shape there.

Chad Wiotrowski, Analyst, TD Cowen: Got it. Thanks. And then in terms of all the federal budget tailwinds 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 sign new customers, and increase the sales channel? How do you sort of prioritize, and how do you plan on juggling the two?

Kevin Knopp, Chief Executive Officer and Co-Founder, 908 Devices: Yeah. I I think it it absolutely supports both. You know, we do see a lot of greenfield opportunity for for new customers adopting. Maybe Explorer was some good evidence of that in in this quarter. But the replacement cycle, if you will, of of servicing, some maybe more outdated technologies and and getting in there with modern solutions.

You know, we think that is also well served in this. We called out some of the, US federal, developing, call it tailwinds for f y twenty six and beyond that are part of the one big beautiful bill, but I’d also point out that this isn’t just The United States. We’re also seeing activity across, the NATO countries. You’ve probably seen in in June, and we called out in prepared remarks that some of the allied nations now are increasing, their spend. So from our perspective, US and international policymakers are responding to the instability instability out out there, there, 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 FTR.

We really wanna be the leader across that whole space from gas detection to trace the box, solid, liquid, and we can do so pretty efficiently with the sales platform that we’ve created.

Chad Wiotrowski, Analyst, TD Cowen: Thanks for the questions, guys.

Conference Operator: There are no further questions at this time. I will now turn the call back to Kevin Knop for closing remarks.

Kevin Knopp, Chief Executive Officer and Co-Founder, 908 Devices: Well, thank you all. Thank you all for your attendance today and and support and interest in nine zero eight. Have a great day.

Conference Operator: This concludes today’s call. Thank you for attending. You may now disconnect.

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