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spk07: Hello and welcome to the 908 Devices Second Quarter 2024 Financial Results Conference Call. My name is Elliott and I'll be coordinating your call today. If you would like to register a question during today's event, please press star followed by one on your telephone keypad. I would now like to hand over to Kelly Gurra, Investor Relations. Please go ahead.
spk09: Thank you. This morning, 908 Devices released financial results for the second quarter ended June 30th, 2024. If you've not received this news release, or if you'd like to be added to the company's distribution list, please send an email to ir at 908devices.com. Joining me today from 908 is Kevin Knopf, 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 directly 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 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-K for the year ended December 31, 2023 and in its other filings with the Securities and Exchange Commission. Except as required by law, 908 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, August 6, 2024. With that, I would like to turn the call over to Kevin.
spk03: Thanks, Kelly. Good morning, and thank you for joining our second quarter 2024 earnings call. We delivered solid execution on a multitude of fronts in the quarter, and we ended the second quarter with revenue of $14 million, representing 16% growth year-over-year. This included $3.1 million of revenue from RedWave Technology, which we acquired on April 29th. We are excited to add RedWave's devices for bulk chemical identification to our commercial engine, complementing our handheld MX908 mass spec for trace chemical detection. We now have an expanded portfolio of handheld chemical analysis devices for forensics workflows. Our customers value our point-of-need offerings as demonstrated by consistent recurring revenue, which for the first half of the year represented 41% of our revenues. Our goal has always been to win point-of-need chemical analysis in life-altering applications, from forensics through to biopharma process control and characterization. Our progress towards that goal in the quarter is measurable. During the quarter, our team completed the commercial integration of RedWave technology, including product training for the sales teams, plus CRM and website integration. Also, we received our first multi-system order, 13 devices in total, from the same customer that included both our handheld MX908 and RedWave Explorer devices. Overall, we sold 153 devices total in the quarter. I want to thank our team for their enthusiasm and relentless work to quickly bring Red Wave into 908 devices and for the tremendous momentum they've created as a result. We also recently welcomed Michelle Leonhart, former administrator of the U.S. Drug Enforcement Administration, to our board of directors. Michelle is a determined leader in the fight against illegal drugs and a passionate advocate for substance abuse prevention in young adults. She brings extensive government knowledge and experience, which will support our efforts to further penetrate the forensics market. For our desktop portfolio that serves the life science instrumentation and bioprocessing markets, macro market pressures have persisted, and we continue to see an overall conservatism towards adopting innovative technologies and capex spending. Despite ongoing pressures, we continue to focus on building a foundation that will position us well for the future. We are aggressively pursuing partnerships with hardware innovators in the cell therapy space and I'll show more on our progress there shortly. As we launched two new desktop devices last year, we're focused on capability upgrades to our existing products this year. This includes developments to enable integrations and simplifying and hardening our technology with the ultimate goal to present as a simple process sensors. For our Rebel device introduced in 2019, we're optimizing the device's software and hardware that have begun initial testing with key pharma customers. Feedback has been positive, with one customer noting that they now plan to use Rebel for routine manufacturing support in addition to its current use in process development lab. We're truly appreciative of our customers' input and support in these product enhancements and improvements. Now I'd like to provide more detail on the progress we have made across our three focus areas during the second quarter. Starting with our first objective, market expansion, our focus is to expand our market outreach by engaging with new key accounts, fostering strategic partnerships, and extending our reach across global enterprise accounts. We are proud that first responders choose our handheld devices in their mission to protect the public and key infrastructure from chemical hazards. Of particular concern, especially at large public events, is the ability to detect and identify unknown gases, vapors, and aerosols. Our Explorer handheld FTIR device can quickly identify thousands of gases and vapors, including complex mixtures, and our MX-908 beacon complements this by providing remote detection and monitoring of vapors and aerosols at trace levels. Both devices were used by local response team at the Indianapolis 500 automobile race and Republican National Convention. And at both events, the Explorer was integrated onto Boston Dynamics spot robot. In addition, several beacons were deployed at large open air events in our nation's capital over the July 4th holiday. We value the confidence these response teams have in our first of its kind air monitoring technology and the partnership we have with these leading organizations. Turning to our desktop portfolio, I'm excited to announce that we have officially launched our MAVEN configuration for Terumo Blood and Cell Technologies Quantum Flex Cell Expansion System that enables real-time monitoring and control of glucose and lactate without the cost and risk of manual sampling. The Quantum Flex Cell Expansion System is used throughout the cell therapy process, from process development through clinical manufacturing. In a webinar in July, hosted by BioInsights, A Tarumo scientist noted that real-time automated glucose and lactate sampling allows more frequent data that can be used to maintain tight control over cell culture conditions. She further noted that automated systems like MAVEN ensure reproducibility and reduce the amount of hands-on time required from operators. Her respective teams are excited to offer cell therapy developers the ability to gain valuable process insights in order to reduce costs of goods and accelerate progress for these personalized treatments. Earlier this year, we announced a development collaboration with Solaris to integrate our Maverick inline analyzer into Solaris' cell shuttle system, a fully integrated, scalable cell therapy manufacturing platform. Maverick, a Raman-based TAT solution, provides real-time monitoring and control of critical bioprocess parameters. In addition to Solaris and Terumo, we are actively engaged with a handful of other hardware innovators and continue to seek other alliances as there is a need for simple, automated PAT tools, such as our novel devices, to enhance process understanding and ensure batch-to-batch reproducibility for these personalized treatments. It is critical to address cost and access for cell therapies, and our products directly contribute to this. Ultimately, we believe this integration strategy could create an inflection point for our desktops and an efficient path to market that complements our direct sales pursuits. To further the value of our desktop portfolio for cell therapy applications, we recently entered into a research collaboration with CTMC, a joint venture between National Resilience and MD Anderson Cancer Center. From process development to integrated regulatory support, CTMC aims to usher novel cell therapies seamlessly and efficiently through every step of the development journey. During cell therapy production, there are multiple points where sampling is required, which is a manual process that is labor-intensive and time-consuming. Our collaboration aims to demonstrate the benefit of continuous monitoring of glucose and lactate in GUX bioreactors, today's industry standard. MAVEN is an easy-to-implement solution for hands-off monitoring of cell therapy manufacturing, and we believe will ultimately lead to higher efficiency and more robust therapies. We've also expanded our partnership with the National Institute of Bioprocessing Research and Training, or NIBRT, based in Ireland. NIBRT's research focus is to make transformative discoveries that revolutionize the manufacturing of recombinant proteins, vaccines, and cell and gene therapies. Earlier this year, we began a collaboration that demonstrates how our desktop portfolio can add value in bioproduction and includes Maven, Maverick for real-time process analytics, with Rebel providing at-line cell culture analysis, and Zipchip for rapid product quality assessment. At the upcoming Bioprocessing Summit in Boston this month, Dr. Jonathan Bones, Principal Investigator at Maverick, will present findings on an integrated platform of Maverick, Rebel, and Zipchip that enables rapid generation of informative data on manufacturing process behavior for monoclonal antibodies. We believe these strategic partnerships and research collaborations lay a solid foundation for demonstrating and realizing the value of our innovative THC solutions. Turning to our second objective, portfolio engagement. We are leveraging our expanded product portfolios to maximize opportunities and strengthen engagements with our customers. In June, we launched an enhanced quantification software package for our Explorer handheld gas and vapor analyzer, enabling first responders to identify and quantify nearly 5,000 airborne chemicals. Explorer is the first handheld product of its kind that uses FTR spectroscopy to identify, quantify, track gases and vapors. The device is simple to use and can automatically and accurately identify multiple compounds simultaneously at the parts per million level. We believe Explorer is a game changer for firefighters. According to the National Fire Protection Agency, approximately 1.3% of all calls are for hazardous materials compared to 4% of calls for fire. Many calls are the result of unknown odors detected by civilians and fire departments need advanced technology in the field such as the Explorer, so that they can effectively manage and mitigate potential hazards. We continue to diligently monitor the evolving drug landscape and included new drug targets in version 3.5 software for our MX-908 handheld mass spectrometer, which was released electronically during the quarter, enabling all in-the-field devices to be easily updated. Drug target additions include three synthetic cannabinoids, one synthetic cathinone, and protonitazine, anitazine that has been identified in combination with other drugs of abuse. Concerningly, recent data has also shown that it is even more potent than fentanyl. Our MX908 is currently the only handheld device used by first responders that can identify protonitazine at trace level. In addition to MX908 analyte target updates released in software, our team of forensic chemists monitors new drug targets and concoctions that appear in the field through our reach-back data service, informing and educating our internal application team, and importantly, making customers aware of emerging trends. As an example, our team recently became aware of Tugeet, as known as pink cocaine, a drug cocktail that does not contain cocaine, but usually a mixture of ketamine, MDMA, methamphetamine, and other substances such as opioids. While pink cocaine has been seen mostly in Latin America and Europe to this point, it is gaining traction in the U.S., and in fact, our Reach Back team is now seeing it in U.S. field data. It remains hypercritical that law enforcement personnel and other first responders have advanced and upgradable technology in the field, such as the MX-908, along with the 24-7 support they need to stay current and to quickly and accurately identify illicit drugs. Turning to our desktops, we had a strong technical showing at the American Society for Mass Spectrometry, or ASMS, conference in June. At the launch of the thermoscientific stellar mass spectrometer, the pairing with our ZipChip C device was used to demonstrate fast metabolite acquisition speed and high-quality quantitative data. Results noted quantitative accuracy and precision for 124 compounds in less than two minutes, covering a wide concentration rate. It's great to see these newly launched mass specs that can exploit the full speed of our ZIP chip. Also at ASMS, our collaborators at NIBRT and the University of Wisconsin-Madison gave three oral presentations on their research using ZIP chips. Research applications included metabolomics, proteomics, and upstream production of monoclonal antibodies. Our team also presented 13 posters, which included collaborators from Biotechni, AstraZeneca, Thermo Fisher Scientific, and the University of North Carolina at Chapel Hill. Zip chip's ability to provide high resolution separations in minutes was also highlighted in several peer review articles published in the scientific journals in the quarter. In a publication in the journal Analytica Chemica Acta, Scientists from AstraZeneca highlighted Zipchip's high sensitivity and the short analysis time of less than eight minutes in the metabolite study of ATP, which serves as a primary energy source for living cells. In a publication in the Journal of Pharmaceutical and Biomedical Analysis, scientists from Pohl Pharma Biologics, NIBR, and the Center for Analytical Sciences in Amsterdam noted that charge variant analysis data from Zipchip enables rapid selection of the most promising cell lines during process development of a biosimilar. Finally, in a publication in the Journal of Pharmaceutical Sciences, scientists from Regeneron noted that Zipchip's high-resolution analysis enables identification of charge variant species under various stress conditions, thus supporting rapid process and formulation development of biotherapeutic. Overall, I'm pleased that we continue to strengthen customer engagement with our newly expanded handheld and desktop portfolio. Finally, our third objective, operational excellence. We are executing to a framework for sustained growth with a path to profitability. We've enhanced our financial profile significantly by acquiring Red Wave Technology, a profitable company that's accreted to both revenue growth and gross margins. And we have identified more than $5 million in forecasted annual cost synergies to be realized in 2026. Our integration is progressing smoothly, and our commercial team is effectively managing our broader portfolio of forensic solutions. We're pleased with RedWave's contributions to margins and revenues in Q2, which we view as an early evidence that our overlapping customer bases and call points will support improved scale and better leverage of sales and marketing investments. As we enter a seasonally strong second half for our forensics portfolio, we plan to leverage existing relationships with government accounts to further penetrate this opportunity with RedWave's complementary solutions, again creating efficiencies of scale. We believe these strategic efforts will accelerate our path to over $100 million in annualized revenues and accelerate our crossover to cash flow break even with a steeper profitability ramp thereafter. And importantly, we continue to expect that we'll be able to reach breakeven with our cash on hand. With that, I will now turn the call over to Joe for more details on our financials.
spk01: Thanks, Kevin. Revenue for the second quarter of 2024 was $14 million, up 16% from $12.1 million in the prior year period, primarily driven by an increase in handheld device revenue. This included approximately $3.1 million of Red Wave revenue. Handheld revenue serving the forensics market was $11.1 million for the second quarter 2024, up 26% from $8.8 million for the second quarter 2023. This increase was driven primarily by revenue related to our recently acquired FTIR products and an increase in service revenue. We shipped 143 handheld devices in the second quarter, bringing our installed base to 2,618. Revenue from our desktop products serving the life science instrumentation and bioprocessing markets for the second quarter 2024 was 2.9 million, decreasing 9% from 3.1 million in the prior year period. Ten desktop devices were placed in the second quarter. Desktop revenues include a small contribution from Red Wave in line with our expectations, which drove an 11% increase sequentially from Q1 2024. We ended the second quarter 2024 with a cumulative handheld and desktop install base of 3,067 devices, up 18% from 2,590 at the end of the second quarter 2023. Recurring revenue, which consists of consumables, accessories, and service revenue, represented 38% of total revenues this quarter and was 5.3 million, a 1.3 million increase over the prior year period, largely driven by service. Recurring revenue in the second quarter consisted of 3.3 million related to handhelds and 2 million related to desktops. Rebel utilization remained at approximately half a kit per month for our active users, which has been a consistent run rate. Looking ahead, we continue to expect recurring revenue for our product portfolio to be around a third of product and service revenue for the full year 2024. Gross profit was 7.4 million for the second quarter of 2024, compared to 5.8 million for the prior year period. Gross margin was 53% for the second quarter 2024 compared to 48% for the prior year period. Adjusted gross profit was 8.2 million for the second quarter of 2024 compared to 6 million for the prior year period. Adjusted gross margin was 58% as compared to 50% for the prior year period. The increase in gross margin was partly due to favorable timing of production including preparation for strong back half seasonal demand for MX 908. In addition, we continue to build scale with higher handheld service revenues, which contributed to higher gross margin in the second quarter of 2024. Over the longer term, we continue to expect volume based improvements to our gross margins as we achieve better leverage over fixed costs. Additionally, we expect adjusted gross margin to be in the mid 50s in 2024, with further expansion in 2025 with the integration of Red Wave. Total operating expenses for the second quarter of 2024 were $21 million, compared to $16.7 million in the prior year period. This increase was driven by approximately $2 million in non-recurring acquisition and integration costs, as well as the inclusion of two months of operating expenses related to our Red Wave acquisition, and a $0.9 million increase in stock-based compensation. Net loss for the second quarter of 2024 was $12.5 million compared to $9.3 million in the prior year period. Adjusted EBITDA for the second quarter was a loss of $7.3 million compared to $7.7 million for the prior year period. We ended the second quarter of 2024 with $77.4 million in cash, cash equivalents, and marketable securities with no debt outstanding. We anticipate that our cash on hand continues to be sufficient to support our path to cash flow breakeven. Looking ahead in 2024, we continue to expect revenue to be in the range of 63 to 65 million, representing reported growth of 25% to 29% over full year 2023. Our updated revenue guidance includes the following assumptions. First, we continue to expect 11 million in 2024 reported revenue from Red Wave. which reflects eight months of ownership. Second, we are reiterating our 52 to 54 million revenue guidance for the core 908 business, representing 4% to 8% year-over-year growth. Compared to prior expectations, we now expect the mix to shift more toward our handhelds with slightly lower contribution from desktops in the second half of 2024. Consistent with our historical second half seasonality, We have a number of 20 plus unit handheld orders that we need to execute on with the closeout of the US government fiscal year. Additionally, while we are seeing interest with our newer desktop products launched last year, the sales cycle is taking longer than expected as customers desire to evaluate and trial our novel technology in this recovering market for preclinical instrumentation. Thus, we now anticipate less of an immediate contribution from new product placements than we did entering the year. On a pro forma basis, assuming Red Wave ownership for the full year 2023, our reiterated revenue guidance implies 6% to 9% year-over-year pro forma growth. Following our acquisition of Red Wave, we shifted our focus from GAAP to adjusted gross margins. We delivered a strong 56% adjusted gross margin in the first half of 2024 without performance, largely due to the timing of MX-908 production ahead of a seasonally strong second half. For the full year, we expect adjusted gross margins to be in the mid-50s range, a slight improvement from our prior expectations. At this point, I would like to turn the call back to Kevin.
spk03: Thanks, Joe. We are building a solid foundation for growth this year with our expanded hand-hooked portfolio for forensics workflows and believe we are well-differentiated and well-positioned to take advantage of the sizable opportunity for bioprocessing analytics as momentum in space returns. As mentioned at the outset of our call today, our goal has always been to win point-of-need chemical analysis in life-altering applications broadly, from forensics through to biopharma process control and characterization and beyond. We are pleased with our progress towards this goal this quarter and the trajectory where we are on for the full year. Lastly, I'd like to again thank our team for their hard work towards our first half performance. the successful integration of RedWave into our commercial structure and ensuring RedWave is an integral part of 908 devices. With that, we'll now open it up to questions.
spk07: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Steven Ma with TD Cohen. Your line is open. Please go ahead.
spk02: Great. Thank you. Congrats on the quarter, and thanks for taking the questions. Yeah, thanks. One question. Yeah, sorry. So a question. You said you completed the commercial integration of RedWave. So does that mean the sales reps on both sides are now completely cross-trained on all products? And then secondly, when should we expect to see potential revenue synergies from the combined commercial operation?
spk03: Yeah, sure. We're really happy with the pace of integration we've had with the RedBerry team in Danbury, Connecticut. During the quarter, we were focusing on just that, the commercial integration of the team, and that includes we did product training of the sales team. We integrated the CRM and the website and From a rep standpoint, we added four direct sales reps that came from the Red Wave acquisition to our forensics team and a number of field applications professionals, which is so important on the customer success side. So if you think about it, that's kind of an incremental add to the about 70 people we had at the end of 2023 in our sales and marketing. team. And again, very importantly, that includes sales application and support people. I think we are starting to see the initial benefits of that and having people cross trained as you touched on, you know, certainly super excited that we saw our first multi system order within the quarter, it was probably 60 days in, we saw that and that was a single order with purchasing 13 single customer, I should say purchasing 13 handheld devices in total and included our Mx-908 flagship, but also RedWave Explorer devices. So I think it's a good testament of where we've come so far, but we're still going to take a few quarters here as we wrap our arms around the total potential and keep introducing the RedWave products into existing 908 accounts.
spk02: Okay, great. Thanks. And then maybe pivoting to bioprocessing. I know you said the sales cycle is taking a little bit longer for your desktop instruments. How do you square that away with some companies have stated there's a sign of improvement in bioprocessing? And a second part of the question, are you seeing the sales cycle taking longer from early stage customers versus large stage customers? And any color you can provide would be great. Thank you.
spk03: Yeah, sure. Happy to touch on those points. Absolutely, the macro side continues to be a bit of a headwind for us. We're still largely driven by placements versus recurring consumables. Recurring has been a meaningful part of our business, about two-thirds of our H1 revenues, but really we need to drive more device placements, the hardware for that long-term growth. And we had about 10 in Q2 desktop placements. And Definitely encouraged by those in the bioprocessing space seeing some order growth recovery, particularly those large tool players. And that's particularly in our view been around the consumable side of things. And I think that is a good positive leading indicator of some normalization that's happening. But maybe not a perfect read-through given our reliance on placements and our reliance on the CAPEX side of things and And we're for sure seeing whether it's the large biopharma being more thoughtful on their instrumentation spend is really how I would look at where we're participating there with their CapEx and particularly for novel technologies. And then for the smaller biotechs, you know, we certainly see many of those call it waiting for some corporate level funding. And I do have one example of of a unit here in July that did close once a corporate funding event happened. So we do have a handful of those in our pipeline. So I think the biotech funding will help, but it's probably over more of that six to nine month period, perhaps. So yeah, in short, sales life cycles really have been prolonged. But I would say the customer interest has really been as strong as it's ever been. And we did see a quarter to quarter step up in our total desktop device placements. And really, that next milestone is seeing if we can get on a cadence more at the levels of 21 and the beginning of 22.
spk02: Great. Thank you. Super helpful.
spk07: We now turn to Matt LaRue with William Blair. Your line is open. Please go ahead.
spk05: Hey, guys. This is Jacob on for Matt. Thanks for taking the questions. I just wanted to focus a little bit still on that desktop portfolio and maybe like a similar question. We have seen biotech funding has had strong improvements in the first half of the year, which is clearly a positive indicator, but recognize it takes time to be reflected in revenue growth. And, you know, other companies have referenced two to four quarters. And, you know, you just noted that macro pressures really at CapEx have persisted. And, you know, you're now expecting less contribution from desktops in the back half of the year or so. Just kind of wanted to maybe get you to elaborate more on what you're seeing in the market and what sort of a lag you anticipate before you start seeing improved ordering activity and, you know, just any visibility into 2025 and if you see demand returning or anything like that.
spk03: Yeah, happy to further elaborate as much as we can there. But yes, I think you hit it. I mean, we're still seeing some of those macro pressures and that conservatism towards the innovative technology technologies, and there's the bioprocessing recovery on the, call it, large manufacturing side of things, and the destocking, and perhaps the consumables are, again, a leading indicator there. We're more participating in the CapEx side of things for instrumentation. More modest priced instrumentation, I realize, but it's yet it is. So if you look across our portfolio, we're super excited that we now have multiple products participating in there. And we think that is a distinct advantage because you're talking about a complete portfolio of products and across a various range of price points. So I think that helps us engage a bit broader and be there for when the demand is recurring, but you're just seeing people taking their time, being a little more thoughtful. Maybe one example to give you a bit of color, but we have a customer that's quite interested in our new Maverick product. They have an existing Raman product that could be a decade old or more, and it's broken. And it's a large pharma company, and their capex is very limited. So they're having to make that decision of, I don't have the dollars for both. Do I replace with a new innovative technology like Maverick or do I repair? And again, I can't do both. So that really makes them think very hard and we're seeing our products remain incredibly amount of interest and differentiated, but it's taking people to have some pause, some thoughtfulness, more on the evaluation side. And we're kind of building up a pipeline of those evaluations, particularly for our novel products. So maybe that adds a little bit more color to the previous response for you.
spk05: Got it. Yeah, that's helpful. And then maybe switching to the handhelds. I think you said you got into Zoom's 20 plus orders or so that you still need to close out in the back half of the year. Can you just you know, kind of speak to your confidence and be able to close those out. And, you know, are those for sure going to be able to be delivered or just, yeah, some color there would be helpful.
spk03: Yeah, maybe I'll start and pass it to Joe here. But yeah, to hit our second half revenue target, we absolutely need to continue to deliver with our large enterprise accounts. And we've been making great progress on that over the first half of the year. It's always a little bit challenging on the timing of exactly pinpointing those down, but we do feel pretty good at this moment in time here about the guidance we're provided. Probably a little bit more on the error bars for our desktops that we've been speaking to, but let me pass it to Joe.
spk01: Yeah, so I think specifically on handhelds, you know, consistent with our historical, you know, second half seasonality, as you mentioned, we have a number of 20 plus unit handheld placement opportunities that we'll need to execute on ahead of the closeout of the U.S. government fiscal year, and we've done a I'd say a great job capitalizing on these opportunities in the past, and our sales team is hard at work to continue this trend here in 2024. So similar past years, we'll have better visibility around some of these larger, I call it needle-moving, handheld orders at the time of our Q3 call, and we'll definitely keep you updated as we progress.
spk05: Got it. Thanks for the questions, guys.
spk07: As a reminder, if you'd like to ask a question, please press Star 1 on your telephone keypad now. We now turn to Daniel Arias with Stifel. Your line is open. Please go ahead.
spk06: Good morning. It's Paul on for Dan. I just want to touch on the outlook first. So you mentioned some seasonality assumptions for the back half. Can you just touch on, is that assuming a return to kind of, you know, historically normal budget flush, or is that attenuated a little bit? What are the assumptions there? What kind of scenarios would get you to the top end of the range versus the bottom end of the range for the full year?
spk01: Sure. Happy to give some color on that. So I'd say, you know, similar to overall, similar to 23, you know, our product diversification, you know, we feel continues to support our positive top-line growth trajectory with solid handheld growth you touched on. helping to offset the slower recovery with our desktop products. And we were pleased to be reiterating today our 24 revenue guidance, despite some unique challenges related to the US government budget delay until March and slower than expected recovery spending for the life sciences instrumentation. And importantly, we are reiterating our 24 revenue guidance for Red Wave, which we view as a key driver of long-term sustainable growth in the handheld portfolio. But drilling down a bit more on the desktops, you know, maybe elaborating another layer, related to 24 you know we now expect our core desktops to be down on a full year basis and relatively flat in h2 24 with a similar trend as prior years where we realized a certain level of year end kind of capital funding being available you know we previously communicated our expectations on desktops to rebound to the double digit um top line growth you know if and when that instrument market recovery occurs and the growth recovery has taken i'd say a longer to play out with our visibility here in 24 We see the pace of growth in 25 to likely be more muted, maybe not snapping back. But I'd say while the instrumentation macro recovery will be the key determining factor, I believe the instrumentation portfolio is positioned even better coming out of the challenge macro period than it was going into it. So definitely some year-end budget for us assumed in our baseline guide, and I feel like it gives you some color on our thought as we turn the corner into next year as well.
spk06: Yeah, that's really helpful. Thank you. And just a quick follow up. In terms of sort of you mentioned the gross margin, you know, what the kind of trend has been in the outlook. But can you touch on OpEx just in terms of this lower assumption for desktop? Is there an opportunity for a little bit of savings on the OpEx line as you kind of scale back the the business on that side, given the lower revenue expectations? Or, you know, does that, do those resources just sort of get get put into the handheld side and ends up netting out?
spk01: Yeah, I think a few factors in play who are excited to layer on, you know, the resources and OpEx, you know, innovative R&D team, and Kevin mentioned some of the selling team from the Red Wave acquisition. So that'll be incremental to our overall spend. But Yes, I think there is the opportunity to continue to look, and it's something that we're ongoing looking to optimize our OPEX efforts. With the red weight of acquisition, we highlighted some cost synergy opportunities as much as $5 million starting in 2026 as we look to prioritize whether it's the R&D or selling and marketing spend. And I think specifically on the commercial and desktop side, we'll continue to take a look at that growth trajectory and look to align the resources with that.
spk06: Okay, appreciate the color. Thanks for the question.
spk07: You're welcome. Our next question comes from Jacob Johnson with Stevens. Your line is open. Please go ahead.
spk08: Good morning. This is Hannah on for Jacob. Thanks for taking my question. Just to start, 153 placements in the quarter is impressive. It's better than we expected, but perhaps it didn't translate to quite the same revenue outperformance that we would have expected. Did this placement number include Red Wave, or were there some of these placements OEM?
spk01: Yeah, it does include Red Wave placements. You know, the three FDIR products that we got through the acquisition sort of two months of placements within the handheld. So that 143 not only included our MX, but also our new Explorer, Protector, and Red ID products.
spk08: Great, thank you. And then you've talked about some of the cell and gene therapy partnerships, and you said there's some other opportunities that you're looking at. What about more traditional bioprocessing players, things like monoclonal antibodies and biosimilars like Trace's work with Sartorius? Are you doing partnerships there as well, or is this more on the cell and gene therapy side?
spk03: Yeah, no, great question. I mean, I think across the board there, we really see that these strategic collaborations and partnerships with these hardware innovators could be very impactful. We've definitely been highlighting the work we're doing with the cell therapy innovators. Yes, we do have some in our pipeline, which would be more, call it traditional monoclonal antibodies as well. And you pointed out, we already do have a relationship with Sartorius with one of our products there. And I think we see opportunity in both as you look at the next generation hardware platforms that people are launching out there. If you think about the cell therapy area and you think about the automation that's required to meet the access and lower cost goals, yield is a part of that. Being able to do that with process sensors is incredibly important to help meet those goals. And we think there's just a very ripe opportunity as that really develops and as there's a Patrick Corbett- A ton of efforts out there by some leaders in in these areas that are just doubling down and trying to make that a reality and. Patrick Corbett- We really want to seek design wins in there and then succeed as as they succeed, so a bit across the board of in those six but definitely weighted towards the cell therapy side.
spk08: Great thanks i'll leave it there.
spk07: Our next question comes from Puneet Sudha with Lee Rink Partners. Your line is open. Please go ahead.
spk04: Hi, guys. Thanks for the question. So maybe just on forensics, I mean, ahead of the elections and just wondering, are you seeing any effect on the ordering on the forensic side? What are you hearing from the different state agencies and you know, overall the U.S. agencies and internationally as well?
spk03: Yeah, happy to touch on that. I mean, I think as Q2 showed, you know, we had pretty strong demand for our handhelds across the board. Big drivers there are that need for trace and point-of-need chemical analysis and identification, as it probably feels to all of us on the call. You know, the global insecurity and uncertainty is quite high at this time, and then you layer that on with the federal crisis that we explained our last Q1 call is really now expanding internationally. A lot of big drivers there as we see it in the near end, the longer term. And then if you think about now we can access more with our FTIR products. And then the fact that the international pipelines are growing out. So I think all of those are helping to the Q2 success and helping towards the ramp that we're envisioning here as we go through the second half. But the election in particular, I don't think there's going to be a material impact on our business in either outcomes, if you will, if you do look back through history, DEA and military spending lines, just as two examples of areas that funds come to 908 devices from. I mean, those have trends consistently higher, really, regardless of administration and If you look back over the last 20 years or so, those budgets have grown in the call it low mid single digits range in the US and And in that global perspective, there's really been positive additions out there, and more of the NATO member countries are pushing to spend more of their GDP on technology. And in some cases, they have goals of 20% of their budgets to be invested in new major technologies and to support modernization, which we think is a positive from our innovative handheld tools there.
spk04: Okay, that's helpful. And then on the, you know, on the PAT side with the desktop and cell therapies, I'm just wondering, you know, I think you're calling out for, you know, lesser desktop in the second half. I just wanted to understand, I mean, now that you have multiple products, shouldn't we expect some more cross-selling opportunities Maybe just as we look at recovery in the markets, you know, what's the conservatism in terms of lower second half? Is it just more seasonality? Is there a pull forward? Is there any other things that you're baking in with respect to the Rebel boxes and other cross-sell opportunities that you have with Maven and products?
spk03: yeah um sure absolutely can get some color to that to that point um we really do as you said we do have a broader desktop portfolio now right we've got four products serving that pat space really spanning the that line online and the inline analysis capability so that to us really does as you as you alluded to really kind of strengthens your ability to have a customer engagement there and and and maybe improves our ability to cap that spending you know capture those dollars as the recovery happens and if you think of all of them together they can provide a pretty complex view but that said they are uh new uh technologies uh in the quarter we did see placements across all of our products in the second quarter about about 10 in total for our desktops. But each and every one, especially our newer products in that preclinical space, and I gave a couple examples earlier where customers are just being conservative with that. And so there's definitely more of a prolonged evaluation cycle, which we do have goals to do 10 plus of those double digits, I would say, in the second half here of our new products. But it just takes a little bit of time. So I think we're factoring that in and the environment.
spk04: And Kevin, lastly, just quickly, is there any, obviously, these are new products in the marketplace, but just wanted to see if there are any impact that you would assume from a biosecure or facilities changing hands that might be utilizing your instruments?
spk03: Well, I certainly can touch on the facility side. I mean, we've certainly seen consolidation across the space and some of our customers consolidating facilities and labs. We've certainly had our share of purchase orders to move equipment from one lab to another, where people contract you, our service team, to come out and move it from one lab to another. So I think that has certainly not progressed things quickly because these companies are still going through that digestion phase. The BioSecure Act, you know, I don't think we've seen anything we can tag directly to that at this point. If we see the construction of new process development labs, probably more on the up upfront side, right, process development versus call it late stage or in the manufacturing side. I think that would be a benefit to us over time. But today, we haven't seen that. And then, as you know, our position in APAC is quite small. It's less than 5% from across all of our revenue perspective.
spk04: Got it. Okay. Helpful, guys. Thank you.
spk07: This concludes our Q&A. I'll now hand back to Kevin Knopf for closing remarks.
spk03: Yes, thank you. Thank you very much. We're pleased to have you all on the call with us today and happy to answer other questions. Please reach out to the company if we can provide any additional information. Thank you.
spk07: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
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