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spk04: 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, May 9th, 2023. With that, I would like to turn the call over to Kevin.
spk05: Thanks, Joe. Good morning, and thank you, everyone, for joining our first quarter 2023 earnings call. I'd like to start off by thanking our team for their hard work and dedication as we continue to demonstrate encouraging process across our business. First, quarter revenue increased 14% year-over-year to $9.5 million and replaced 78 devices, bringing our installed base to more than 2,400 devices. Notably, we saw continued strength in recurring revenue, which grew 67% over the prior year period. We are pleased to see this increasing need for accessories, consumables, and service as it demonstrates that our customers truly value analysis at the point of need. Overall, I'm pleased with our execution, given the continuing challenges within the bioprocessing space. Importantly, our technology is broadly extensible with applications across different end markets. Our handheld products are serving critical forensics market applications, including the devastating rise of counterfeit pharmaceuticals. We view the diversity of our end markets as a key advantage. I'm confident in our long-term trajectory and feel we are doing the groundwork needed for both near-term and long-term success. We are uniquely positioned to both capture the bioprocessing opportunity in front of us while executing with our handheld devices. In January, we started the year off with the launch of our first online device, Maven. that provides real-time monitoring and control of glucose and lactate in cell culture and fermentation processes. Maven is a complement to our Rebel device and a precursor to Rebel Online. We are encouraged by the feedback we have been receiving from prospective customers and the increasing opportunities we've seen in the funnel over the past few months, particularly in the cell therapy space. Maven adds to our growing portfolio of desktop products for process analytics. Now I'd like to provide you a brief update on the progress we have made across our three 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. For our handhelds, we continue to expand our international presence. Last year, we received our NATO stock number, which was a significant step in facilitating the procurement process for our MX-908 device. We now have a purchase vehicle in place, which is valid for up to five years and provides NATO member states and four additional countries with the ability to purchase up to approximately 80 units in a streamlined fashion. With this in place, we've already seen a handful of units purchased and look forward to growing international adoption. We are proud to receive this designation for the MX-908, which is becoming recognized as a standard bearer for handheld chemical detection and identification. We also received additional MX-908 orders for use in Europe and the Middle East during the quarter. The U.S. State Department and existing customer purchased several units intended for use in Ukraine. The Customs and Border Agency in Saudi Arabia purchased multiple units primarily for narcotic detection and identification. We are pleased with the traction we're gaining internationally, along with the broader adoption within our enterprise accounts. Closer to home, in January, the Ohio Attorney General's Office announced the expansion of the MX-908 program in Southeast Ohio. This is the final region in the statewide rollout, which began in October of 2021. In the announcement, Attorney General Dave Yost noted that MX-908 has the potential to revolutionize how drug testing is done in Ohio. We value our partnership with the Ohio Attorney General's Office, and we are working to replicate the success across other states as the need remains substantial. We believe programs like this would be impactful in every single state across the United States. In fact, today is National Fentanyl Awareness Day, a day dedicated to raising awareness about the dangers of fentanyl, most often found in counterfeit pharmaceuticals. According to the CDC, fentanyl is involved in more deaths of Americans under 50 than any other cause of death, including heart disease, cancer, and all other accidents. And just last month, the Biden administration declared fentanyl mixed with xylosine as an emerging threat in the U.S. Fortunately, as we work closely with first responders who identified xylosine as a growing concern early on, We added this analyte to our MX908 device software nearly three years ago, and our customers have fielded capability now to deal with this issue. This is a great example as how additional value is unlocked for our customers with our continuous service and support offerings. We'll continue to ensure our handheld device provides our customers with rapid, actionable answers and enables them to keep our communities safe as the federal crisis evolves. For our desktops, we've been working over the quarter to engage potential additional OEM partners in bioreactors, cell expansion systems, and integrated cell therapy platforms. The aim being to add online analytics to their systems for real-time monitoring and control of key process parameters such as glucose and lactate throughout the cell therapy process, from process development through clinical manufacturing. The value proposition is clear. Online analytics enhances process understanding as well as reduces the risk of contamination and saves operator time as technicians no longer need to enter the clean room to perform manual sampling. Turning to our second objective, advancing and broadening our product portfolio. Our core mission is to develop devices that are simple to use, smart by providing customers with robot answers at the point of need, and connected for improved process understanding. First responders need to be equipped with devices that provide them with answers where and when they need it. To that end, we continually add analytes to our MX908 software. In the first quarter, we released version 3.4 that added four additional analyte targets. We also released the core clear and charge station, a maintenance accessory that improves the device's usability and maximizes its uptime. As previously mentioned, we have created an interface control protocol to make it easy for our handhelds to be integrated into new ecosystems, such as robots, drones, and other related workflow equipment. We recently supported DualDraw's integration of MX908's aerosol and vapor detection capabilities with their downdraft technology to enable a mail-speeding platform that protects operators and allows them to safely perform inspection and packages. This is a great example of how the MX-908 can help expand the reach of critical chemical detection and connect to a broader set of users. For our desktops, we released a data analysis tool for our Rebel device that is built on the Jump statistical software package. Raw data from the Rebel can quickly and easily be visualized in just one click, leveraging a statistical software many of our customers already use. Users can now more easily access the tremendous amount of information the Rebel provides for improved process understanding by easily visualizing amino acid depletion or accumulation trends over the course of time within a bioreactor and facilitating adjustments to the feed strategy. To that end, as previously noted, we are collaborating with UK-based Center for Process Innovation, or CPI, to optimize cell culture media and feeding strategies in small volume bed batch bioreactors through process scale-up using a Rebel and now Maven devices. Using Rebel, daily detailed amino acid data was generated for both AMBER15 and 250 runs, and the data was analyzed using Rebel's new data analysis software tool. By adding in depleted essential amino acids along with low levels of feed media, CBI scientists achieved a meaningful titer increase while keeping toxic metabolites low and maintaining a high cell viability. With MAVEN, scientists were able to implement a continuous control strategy for glucose, which is highly desirable to achieve healthy growing conditions. Taken together, REBEL and MAVEN enable process development scientists to optimize titer and cell growth while preventing the accumulation of toxic metabolites that can negatively impact protein CQAs. Biopharma manufacturing company Resilience has adopted the REBEL analyzer to inform and optimize cell culture feed strategies in perfusion bioreactors. In a monoclonal antibody-expressing cell line, resilience process engineers demonstrated a 50% increase in titer while reducing costs of goods by adding back only the nutrients the cells depleted. Cell culture media and feed costs are significant in the perfusion process, while at-line media analysis Resilience can now optimize and accelerate biotherapeutic development to reduce cost of goods and time to submission. Our ZipChip CE mass spec, which is a complement of our Maven and Rebel devices, is an offline device used for monitoring key process parameters and for rapid characterization of multiple product critical quality attributes, or CQAs. This fast separation method was highlighted in a new paper published in Analyst, a Royal Society of Chemistry publication. In this paper, Amgen researchers used our zip chip device to separate and characterize bispecific antigen-binding biotherapeutic fragments within 12 minutes or less, and with higher resolution and better sensitivity than traditional LC-MS methods. Similarly, in a webinar hosted by LCGC, scientists from Ireland's National Institute for Bioprocessing Research and Training, or NIBRT, presented on how our Zipchip TEMS device accelerates peptide mapping workflows for analysis of MAD critical quality attributes. Vibrant scientists noted that Zipchip provides robust determination of important quality attributes in less than 20 minutes, which provides a faster alternative to more standard LC-MS approaches that can take hours. As these examples illustrate, our devices are providing our customers with robust and real-time analytics that enable them to improve product quality and process efficiency. And finally, turning to our third objective, Langenomics Foundation, we see a clear and emerging need for accelerating mass spec-based workflows to address proteomics and metabolomics opportunities. At the U.S. Hoopoe Conference in March, Drs. Will Thompson and Scott Mellers from 908 Devices presented a poster and lightning talk titled, Double Your Funds. high-throughput multiomics using microchip capillary electrophoresis, which utilize ZIP chip for metabolomics and our prototype SPE-enabled chips for proteomics on thermoscientifics-explorers mass spectrometers. Dr. Thompson, in collaboration with Duke University researchers, will expand on the investigation into multiomics in his oral at the American Society for Mass Spectrometry Conference, or ASMS, in June. His talk will show how our prototype microfluidic chips enabled independent metabolomic, peptidomic, plus top-down and bottom-up proteomics from a single sample containing 20 microliters of dry blood. Also at ASMS, we are presenting a record 19 posters with collaborators from key research institutions, biopharmaceutical companies, and mass spec vendors. We look forward to discussing these highlights and takeaways on our next earnings call. With that, I'll turn it back over to Joe for more details on our financials.
spk04: Thanks, Kevin. Revenue for the first quarter of 2023 was $9.5 million compared to $8.3 million in the prior year period, representing an increase of 14% over the prior year period. Handheld revenue from our MX908 product for the first quarter of 2023 was $6.2 million, an increase of $1.7 million compared to $4.5 million in the prior year period. We shipped 62 MX908 handheld devices during the first quarter. The increase in handheld revenue was primarily driven by an increase in the recurring revenue for our MX908 devices, both service and accessories. Desktop revenue, primarily from our Rebel, Zip Chip interface, and Maven products for the first quarter of 2023 was $3.1 million, a 13% decrease from $3.6 million in the prior year period. We shipped four Rebel, six Zip Chip interfaces, and six Maven devices during the quarter. We'll continue to break out placements by device in the near term. However, as our portfolio broadens, we will focus more on overall revenue and combine desktop placements as the key metrics for growth. The decline in desktop revenue was primarily due to a decrease of device placements year over year. We were encouraged to see the uptick in recurring revenues, demonstrating the value that our devices bring to our customers. Recurring revenues consisting of consumables, accessories, and service revenue for the first quarter of 2023 increased 67% to $4.2 million compared to $2.5 million in the prior year period. The increase in recurring revenue was primarily related to higher service revenue and higher handheld accessory and consumable revenue, including the Arrow module. Notably, recurring revenue as a percent of total product and service revenue has increased from 31% in Q1 2022 to 45% in Q1 2023. Gross profit was $4.4 million for the first quarter of 2023 compared to $4.1 million for the prior year period. Gross margin was 46% for the first quarter of 2023 as compared to 50% for the prior year period. The decline in gross margin was largely due to lower device production bills and higher non-cash charges for stock-based compensation and intangible amortization during the first quarter of 2023. Total operating expenses for the first quarter of 2023 were 17.4 million compared to 13.7 million in the prior year period. This was driven by an increase in personnel-related costs from the impact of headcount added throughout 2022, as well as a 0.8 million increase in stock-based compensation and a 0.3 million increase in acquisition-related costs for intangible amortization and valuation of contingent milestones. Net loss for the first quarter of 2023 was $12.5 million compared to $9.4 million in the prior year period. We ended the first quarter of 2023 with approximately $161 million in cash and cash equivalents. During the quarter, we paid down $15 million of debt and ended the first quarter with no debt outstanding. Looking ahead for 2023, as of today, we are not seeing meaningful improvement in the capital purchasing cycles within bioprocessing. particularly affecting our rebel placements. We expect these pressures to persist into at least the third quarter of the year. Our team is working hard to educate existing and potential customers on the value of the technology and broaden adoption across sites. So as funding becomes available, we are a high priority for our customers. Notably, we are seeing strong adoption of our handheld devices that serve the forensics market. In this challenging macro environment, we view it as a competitive advantage that our extensible technology serves a diversity of users and end markets. So that being said, we anticipate second quarter revenue growth to be centered around our handheld device revenue in recurring revenues, similar to what we experienced in the first quarter. While ongoing pressure in the bioprocessing environment is likely to continue longer than we had previously anticipated, we are seeing very strong adoption of our handheld devices, which we believe will offset this impact. Taken together, we still expect full-year revenues to be in the range of $48 to $52 million, representing growth of 2 to 11% over full-year 2022. At this point, I would like to turn the call back to Kevin for some closing comments. Thanks, Joe.
spk05: In summary, we're pleased with the progress we made towards our goal in the first quarter. Looking ahead, we believe we are uniquely positioned to capture the opportunity in front of us for three reasons. First, we have a robust roadmap and strategy of process analytical technologies beyond any one product. We're creating a full portfolio of complementary devices from our current portfolio, including Rebel, Zip Chip Interface, and Maven, plus our exciting and differentiated roadmap products to come, including one that will be announced later this year. Second, we have a diverse offering with our handheld devices in the forensic space. We believe these handhelds will continue to be critical with the rising geopolitical uncertainties and the ongoing fentanyl crisis. And third, we have a strong cash balance with the runway through 2025 as we've remained efficient and thoughtful on spend and headcount, working to ensure expenses are not outpacing our revenue growth. With that, I'd like to first thank you for bearing with us through our technical challenges here in the operator call today, but we would like to open it up for questions.
spk01: Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the number one on your touchstone phone. If you would like to withdraw your request, please press star, followed by the number two. Your first question comes from the line of Dan Arias from Steeple. Please go ahead.
spk02: Good morning, guys. Thanks for the questions. Kevin or Joe, maybe just to start on the rebel question. Obviously, a lot going on in the bioprocess market right now. So, on system placements, is the idea that we really shouldn't expect acceleration in install numbers until 4Q, just given Joe's comment on not seeing any improvement? And then on utilization amongst those that do have a REPL, can you kind of just talk about the larger versus the smaller company user trends? And are you expecting any improvement there just in terms of utilization for the folks you know, have gotten over the hump and do have the system and presumably are trying to use it.
spk05: Yeah, sure. Thanks, Dan. Maybe I'll start off and pass to Joe for some additional details on it. But yeah, as we stated in Q4, we do expect rebel placements to be muted with some of the bioprocessing pressures that are being seen out there for CAPEX in particular and And while our expectations are modest, we are experiencing what others are experiencing in the industry, and it's clearly an industry phenomenon, not specific to 908. We're just seeing CapEx sales cycles extended and life cycles of existing and people just even pausing purchase outright or needing more authority to sign off. But we do look at the fact that we have a growing portfolio of desktops. We actually replaced 16 desktop devices as a whole for the quarter, and we're really kind of using this time to expand that product portfolio and continue the strategy to build out a set of process analytical technologies that are all interconnected We're really focused today on that utilization, if you will, and really focused on showing the value of our products to our customers. And that's demonstrating tighter improvements, quality improvements. We were fortunate to be able to announce some of these recently. And to us, it's really a strategy. It's not around a single product called Rebel, but really the portfolio process analytics technologies. Regarding utilization, specifically, the utilization for our Rebel pull-through has largely been unchanged from Q4. So Q4 is really tracking at a similar amount, around a half a kit per month that we're seeing on average, a bit higher perhaps, but about that versus our nominal goal of around one kit. We have been asked by you and others in the past, like, can we dice it out, as you're suggesting, by smaller companies or maybe by therapeutic modality? We're working on that. We do really just have small numbers, so it does make it challenging to slice and have meaningful statistical data there. But we can say, you know, we are becoming aware of more MSAT customers using our products, and some of those customers are using it for more, like, process monitoring applications and And we had examples of where those customers are consuming kind of three to four times our average. So right now we've really been focused on driving that utilization.
spk04: And maybe to add a few different pieces, Dan, you know, as of today, as I mentioned, we're not seeing meaningful improvement in the capital purchasing cycles within bioprocessing, particularly affecting those rebel placements. And we do see that expectation that we did set in our Q4 earnings call. We will likely see the pressures persist into at least Q3, as I mentioned. We already did three in Q4 of last year, four in Q1. We see continued improvement there, but probably not to the levels that we saw in the first nine months of 2022 until possibly Q4. So our team is working hard really to educate the existing and potential customers on the value of the technology. And right now we're notably really seeing that strong demand for our handout devices that helps to offset some of those current market concerns.
spk02: Yeah, okay. Okay, and then maybe just on the handheld side and the sales funnel that you have here, Kevin, you've talked about these enterprise opportunities that you've been working on. I think you've kind of called them 25 to 100 systems or so. How is that group of potential customers tracking just in terms of, you know, confidence in orders that can sort of serve to backfill the Army contract that was rolled off? And ultimately, where do you think the desktop, sorry, the handheld business and placement total can go to this year? I know you're not going to be too specific, but just some help on the year-over-year given the Army contract would be helpful.
spk05: Yeah, absolutely. I'll start off and pass it to Joe again here. But we're excited for the pipeline that where we're at today. And as we know, we're progressing things from these testing and trials onto pilot programs and then turn to enterprise accounts. And We're seeing that we've got plenty of funnel to work with and great conversations for this early year in particular with existing customers looking to roll out more devices. And we have factored in the status of these enterprise accounts into our guidance that we reiterated today. And we highlighted things like Ohio, which has been going quite well for us and seeing continued success there and value being demonstrated with that program. And we're looking to get pilot programs going in other areas. state and local areas, including Tennessee, we've made some good progress on. And so I'd say we've got great progress and pipeline progression across the board for our handhelds. And that's across all our areas, federal, military, call it the outside the Army, but then also large opportunities within state and local and international.
spk04: That's right. U.S. Army is definitely one of our examples, great example of a large enterprise adoption historically and There are other customers in the pipeline for 20 to 100 plus devices. Kevin was alluding to some of those opportunities. You know, working with each as they get budget allocation and funding for purchase, you know, seeing very positive momentum on this front. You know, we have over 2,000 devices in the field, but plenty more sockets out there. So we don't really feel limited today. And we do see path to positive unit growth in 2023 for our handhelds, despite the fulfillment of that U.S. Army device order, which Your call is approximately 100 devices over the first nine months of 2022. Okay.
spk00: Thank you very much, guys.
spk01: Thank you. Your next question comes from the line of Pruneet Sudha from FDB Securities. Please go ahead.
spk03: Yeah. Hi, Kevin. Thanks for the question. So with, you know, with the rebel and Maven, you know, you're building here, you know, set of process analytical technologies. I mean, I appreciate the market environment that you're in, but these instruments are on the sort of the smaller side of our lower side of capital equipment. So wondering, you know, what you can do from your end to drive adoption of these in this, what appears to be a more you know, tougher environment and wondering what you're seeing on cell therapy side customers. Are you seeing some, you know, are you seeing more interest on the cell therapy side versus the MAP side? Just maybe help us dissect that a little bit and what you can do from your side in terms of data collaborations, partnerships, and whatnot to potentially, you know, drive growth here for Rebel and Maven products in the process analytical technologies.
spk05: Yeah, sure. Thanks, Puneet. I think you're right. I mean, we are focused on building out a platform. I think you're also right in that our CapEx prices are perhaps a little more reasonable than some other tools, but they're still not inexpensive in that our Rebel, the list price is approximately $150,000. So it still takes groups to budget, and it's still considered a CapEx purchase for our growing portfolio here. They would all be in that definition. And as we've talked about at length, right, we've just seen customers just be more interested cautious and be more discerning in moving forward with the CapEx commitment at this time. And we've seen people that believe they were budgeted and had it be pushed right on them. I believe that the process analytical technologies, the need is growing of importance. I don't think there's much debate about that. I think it's really a matter of that timing with how people are looking at the recovery and call it a bit of a reset in the pharma, biopharma area and then bioprocessing in particular, autonomy can do during this time. And we are taking advantage of that time to be able to have more intimate engagement with these customers and showcase the values that the whole portfolio can provide. Maven, in terms of its control of glucose at low levels. Rebel, enabled to inform feeding strategies. And Zipchip, looking at critical quality attributes and a new product we're working and engaging with key opinion leaders now to get out later this year. I think there is a lot we can do there. We were happy to see that Resilience was publicly out there with some successes they've had and mirroring what we've been seeing with CPI and working closely with them. So I think there's a lot we can do there. Maybe one bit of data or factoid that also might be helpful to triangulate. The sales process often involves people sending in demos. And when people ask for a demo, generally you need a material transfer agreement. So According to date, we've done more material transfer agreements than we have in all of Q1. So, we are seeing some engagement and activity. I think it's really around, you know, how fast do those close and how fast does that segment issue will recover.
spk03: Okay, got it. That's super helpful. Then, on the guide itself, and maybe, you know, sort of for Joe, obviously you're moderating, you know, desktop instruments and install base potentially for that. But what gets you potentially on the sort of the higher end of the guide if things were to recover sort of in the second half? And what are you contemplating and what gets you to the lower end of the guide if things were to get worse? So maybe just talk about those dynamics, where you feel that where you think you will have the strength as it or on the MX-908 side and maybe just where things can potentially be weaker if the environment was to continue. Thank you.
spk04: Sure. We're definitely spending most of our time looking to the midpoint and the high end of that range and making sure we have a path to get there led by strength to the MX-908 in our handhelds. There are a few levers that will take us to that high end. First would be stronger adoption of new products than anticipated. know we get excited when thinking about where ultimately our new products can go we need to crawl and walk and then run you know with those products you know we're trying to balance that enthusiasm with the fact that we're in the early stages uh with both maven and the to be launched product in the second half you know second uh conversation of handheld enterprise accounts that we touched on we have a number of big swing items uh in our pipeline uh but they do take time to develop as you know and get through their procurement processes You know, sometimes it takes years, but we're continuing to build that pipeline for the opportunity, and we've had some great conversations with our handheld customers and seen some encouraging early signals for the year to be able to see that path to the top line, the top of the range.
spk03: Got it. Okay. All right, guys. Thank you.
spk01: Thank you. Your next question comes from the line of Stephen Ma from TD Cowan. Please go ahead.
spk07: Great. Thanks for taking the questions. You spent some time talking about the macro challenges and extended capital purchasing cycles. Are there any plans to do a reagent rental or a lease structure on the Rebel so that customers don't have to pay up front or capitalize the equipment?
spk04: That's a great question and something that we have talked about through the years and are looking at that as a potential option and talking to a few customers that we have confirmed that they don't have the capital spending here in 2023. So we are looking at it as a tool in the tool bag to be able to present to specific customers, but ultimately want to ensure we see the value of the technology in getting the device placed. But in those unique situations, we will entertain with customers the ability for them to pay a certain amount, make an investment upfront, and then have access to the technology and see the value within their workflows. So yes, we are working through that.
spk05: Yeah, and I'd add to that that we're trying to be responsive to our customers' needs right now, and we know they're constrained. And as we talked at length, we really I want to show them the value our product is and is a CapEx. But if we can create an on-ramp to the adoption of that unit by mechanisms like Joe described, that'd be great. It's not a wholesale change of our business model. We're not doing anything like that at this time. It's still a CapEx sale, and we think that's the right way to go. But as Joe said, we're listening to our customers and just trying to be responsive in the short term.
spk07: Okay. And so if you did decide to go in that direction, I guess, could that be what, like, back half of this year or just something not really on the radar?
spk04: Yeah, I think to be determined. As Ken said, mostly just being responsive to our customers.
spk07: Okay, got it. And then one more. You talked about penetration into new customers as a key strategy. Of the 78 devices placed in the quarter, could you give us a sense of the percentage of sales as a new customers versus existing customers?
spk05: Sure. Yeah, you're right. We do like to have both new sales. We have, as we said on the Q4 call, we've got 10 accounts now with six or more units. We've been adding to that. We have a couple of accounts now with Maven added into Mix that now have actually all our products, Zip, Chip, Rebel, Maven, all our desktop products there. So we're seeing a good mix, I would say. And if you think of just in our Q1 in particular here, we saw about a 75-25 split with our 16 desktop placements to larger versus smaller biopharma companies. Some of those new, some of those existing.
spk07: Okay, great. Thanks for the color. And if I can sneak one more in. So could you give us some color on the European sales traction? I know you previously said on a prior earnings call, you know, you're putting additional sales and support efforts in Germany via the trace acquisition. Just any color, if possible, on how that's going in Europe. Thank you.
spk05: Yeah, absolutely. We've been investing across the board in our international assets. And as we reported through last year, I think we're pretty pleased with the progress that's now happening. showing up and we're seeing measurably in the case of our handhelds in particular there. And we've seen great progress of that pipeline across the board in Q1 for the handhelds and the federal, state, and local, but certainly on the international side of things, which gives us confidence in our ability to execute here in 2023. And we have hired sales leaders in the Middle East. We moved a channel manager from the U.S., And we've made other personnel investments there. And all have really been centered around driving growth international. And we're seeing some return on those investments now. And we highlighted the NATO contract vehicle as one example there. And for handhelds, the biggest budgets are in the U.S. And that hasn't changed. But there are sizable opportunities international. And they share similar concerns with the U.S. counterparts here for the use of the technology. And we do see it as a growth opportunity, especially here in 2023.
spk07: Okay, great. Thank you.
spk01: Thank you. Your next question comes from the line of Jacob Johnson from Stevens. Please go ahead.
spk06: Hey, good morning. Maybe just one more on the macro. Like you said, I think everybody's seeing these elongated sales processes right now given the macro environment, but I'm just curious if we go kind of a level higher in terms of like the funnel of of interest, the inbounds you're getting in general, kind of how is that trending? I think you talked about it a little bit in Puneet's answer, but I figured I'd give you an opportunity to flesh that out some more.
spk05: Yeah, absolutely. I mean, I think as we discussed in the Q4 call, we anticipated that it was going to be muted over the first half, and now we're seeing signs that that likely is extending into Q3 of this year. We're very excited that we've got a broad portfolio of discussions now going on with customers at a, to Puneet's point, have a variation of CapEx prices and utility from bread and butter analytes that are Maven provides with glucose and lactate to more forward-leaning optimization tools like our Rebel device. So we are excited to have that. I would say that we've been working to make sure we're engaging prospects, customers, conferences, existing fielded base, et cetera. So we're really good getting out there, including at the more senior levels and having the leadership team out there and engaging the key folks in these organizations and our customer base and making sure we can support them there. I wouldn't say that we're seeing a concentrated step up in activity here in our Q1 activities or Q2 to date. And I think that's why it's anticipated that we still see things needed here for a bit in the case of our desktops. But you're right. We did put a little tidbit out there that the very forward portion of that demo cycle are those material transfer agreements, which we saw more executed here quarter to date than we did in all of Q1. So, we take that as a good sign. We think that will take some time to close, but we also, in terms of the utilization, we're trying to get these customers, and we are seeing them being active. We also reported in Q4 that it was the second highest quarter on record of consumable orders, blanket orders that are nominally at one kit per month. So we're working with customers to drive that utilization and drive that value and benefit out of it. But we're also very pleased, Jacob, that we've got our handhelds and that we've got that diversified position with our handhelds in the forensics market during these times.
spk06: Got it. Thanks for that, Kevin. And then maybe just for Joe, On the outlook for FY23, it seems like the mix of revenues may be going to be more handheld this year than previously thought. I know you don't guide the margins, but I think we were targeting kind of mid-50s gross margin this year. Any change in that expectation?
spk04: There's not any changes in that expectation. And as we, you know, kind of looked at the Q1 margins, I would say the main factors with gross margin variations will continue to be mix and scale. In Q1, it was primarily driven by lower device production builds, where we didn't initiate as many builds in Q1 2023, especially on the desktop side compared to the prior year period, and also that higher non-cast charges that I mentioned, both stock-based comp and intangibles, so about 200 basis points each impact. So we do see that opportunity to improve gross margin with our new products and our consumables, and we're not at scale today, and our margins overall, as you mentioned,
spk08: know being in the mid 50s and we expect this to continue on a go-forward basis for the full year 2023. got it thanks for taking the questions guys thank you your next question comes from the line of matt leroux from william blair please go ahead hey good morning um one of the fault maybe kevin just on the new product side uh obviously some market weakness temporarily on the bioprocessing side, but just want to check in on your plans still for additional product launches in the back half of the year and if any customer pressures or maybe even customer feedback as they're examining their own budget to influence the way you're thinking about new product development.
spk05: Yep. Thanks, Matt. We certainly view innovation and new products as a key component to 908 and our heritage here and our growth strategy. We're really pleased with the acquisition we did of Trace Analytics in August of last year and how things are going there and how that's integrating and combining into a roadmap in our product development effort. Great group of talented individuals that got added there and really some awesome technology. We've We got one new product out here in January that integrates the trace technology with our Maven product, which is a prelude to our Rebel Online, which we've discussed the aseptic sampling approaches is key. I wouldn't say anything has changed in the priority of building out that portfolio of process analytical technologies and tools and the appetite of customers when we engage select customers on what those new products are going to be. including discussing what the Rebel Online will be and working to engage them as we work through our stage gate process for Rebel Online. So I don't think there's a change in sentiment with the needs that these customers have. I think there's just a bit of a near-term delay in their adoption. But we're trying to take advantage of that time to have this great engagement and build out that complete portfolio and engaging more of a partner discussion we're finding now because we can talk about that whole portfolio.
spk08: That's good to hear. And then final one, maybe just around the sales funnel, and it's been asked a couple of times, but you referenced MSAT maybe being a new opportunity, and obviously I presume the conversations and process development continue to happen. Maybe just you referenced the material transfers today. Is there anything in terms of the mix of the funnel within bioprocessing by sort of location, customer type, that Steve shared with us.
spk05: Yeah, I would say that as we look at the funnel for our desktops, we're trying to develop things in the US and internationally for that. We're seeing both examples there. Again, I would say one great thing is that we were able to take Maven out to Rebel customers, and we're picking up new customers with Maven that don't have any of our desktop products. Well, we certainly now have a couple of examples and proof points of customers having all of our desktop products. We now have customers that only have our Maven, and that gives us an opportunity. It's also interesting to us that some of those areas quite of interest would be in that cell and gene therapy application area, some of these integrated technologies that are interested in adding analytics. So we think that opens up possibilities for us here. We had 16 desktop devices, as I previously mentioned, in Q1 that we placed, and they were roughly split between 75-25 between larger and smaller biopharma companies. And we have about a third of our desktop devices overall in top 20 biopharma companies. So it's a meaningful percentage, but we do have a number of units in early-stage biotech. So if we look at what has closed and what's in our pipeline, it's a mix between existing customers, some small biotechs, and some large biotechs coming back or large biopharma coming back. So I don't think I have one specific trend in there, but hopefully a bit of color that's useful.
spk08: All right. Thank you.
spk01: Thank you. There are no further questions at this time. I'd now like to turn the call back over to Mr. Kevin Knopf for any closing remarks.
spk05: Yes, thank you. First, I'd like to thank you for bearing with us on our plethora of operator call logistics errors, but we're very excited for how the quarter went, and we're pleased to be able to reiterate the guide today and march forward and make progress. So thank you for your time.
spk01: Thank you, sir. Thank you so much, presenters. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.
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