All right. Good morning, everybody. Welcome to day two of the Stephens conference. I'm Jacob Johnson, life science tools and pharma services analyst here at Stephens. Appreciate everybody joining this morning. Really appreciate the team from 908 Devices kicking things off this morning, CEO Kevin Knopp and CFO Joe Griffith. I'll run the Q&A as the fireside chat this morning, but if anybody in the room has questions, feel free to pop in. But maybe to kick things off, Kevin and Joe, I'll kick it over to you for any introductory comments you'd like to make, and then we'll launch into the Q&A.
Yeah. Thanks so much for having us here this morning. We appreciate it, and being attending at the conference. Maybe just a quick introduction on 908. So 908's a company that started in 2012, that's really working on revolutionizing chemical and biochemical detection. So how and where you do chemical detection, and we'll talk about it in detail, but we have two disruptive product categories, handheld devices and desktop devices, that we bring across a wide array of markets, from forensics to bioprocessing and life sciences, QA/QC.
All right. So Kevin, maybe to kick things off, it's been a quote-unquote "unique year," I guess, for the life science tool space.
Yeah.
And obviously, I think a lot of our focus is on kind of the bioprocessing applications of the portfolio. But maybe you know, the other side of the business, where you're selling to government agencies, has proven to be kind of a nice diversification this year. Can you just talk about what's driven the traction on the handheld side this year?
Yeah, absolutely. We're really pleased with the performance of our handheld portfolio. You're right, a lot of those are destined for the forensics applications. Big driver to the adoption is the opioid crisis, counterfeit pharmaceuticals, fentanyl, and all the adjacent applications involving them. And you're right, the core customers are often governments, both international, state and local, small municipalities, but then across to large federal kinda enterprise accounts. And so we've seen good growth in our handheld devices. Year to date, they've grown about 19% year to date, and we expect some further acceleration as we enter Q4. So they've been doing quite well for us.
The center of that handheld technology is a new way of doing mass spectrometry, and that's the same engine and same approach to mass spec that we use in our desktops for bioprocessing in our Rebel.
Maybe just on that last note, maybe can we just talk about, you know, mass specs, the variety of people play in that space? Can you just talk about what kind of is core to your technology on, on that side of things?
Yeah, happy to. I mean, what we're doing is quite differentiated from typical mass spectrometry, and we're making a mass spectrometer that runs at higher pressure. So, when we say that, it still requires a small amount of vacuum, so a bit below where we sit here today at atmospheric pressures. But it has a much smaller geometry because we can run closer to the atmosphere. So big mass specs, we think of them as supercomputers. They run at extreme vacuums, outer space level, microtorr vacuums. And the innovations that 908 Devices has is around making very small ion trap devices that can run at these higher pressures and support a much smaller configuration through advancements in electronics, through cell phone-like frequencies, and making a much more compact device.
And so we really approach it to say that we're trying to make devices rather than complicated instruments. We're trying to make things that are much more akin to a mobile device, a tablet, a desktop computer versus the high-end supercomputers. And, when we do that, we really believe we can kind of open up the access to it, we can expand the market, and, we spend also a lot of time on the technology, not just on the hardware that I was describing, but also on the back end, the machine learning, the algorithms. How do you take all the squiggly lines and give someone an answer that's not an expert at mass spectrometry?
Got it. So just going back to handhelds, you're, I think, on track to place 400+ handhelds this year. Or you did that last year, and you're on track to do that again this year. And I think there were some concerns earlier this year about how tough of a comp that might be. And you've delivered on it. I know it's a bit too early to talk about 2024, but could you just maybe talk about the pipeline of opportunities for that business and the TAM, and then, you know, is 400+ units on the handheld side a reasonable goal for you annually?
I think as you think about that 400 annually, I think we can, right? It's not an unreasonable goal. We've had over 2,300 devices that have been fielded from inception. A lot of that is each year, we're going out there, and we have to get multiple 20+ opportunities. And, you know, U.S. Army was 2 years ago. There was over a multiple period of time. We just had the U.S. Air Force win that we announced recently with the Q3 earnings. But a lot of that is building that pipeline, right? We have test trials with our customers. They move into pilots. The pilots can be 5-10 units, can be 20 units on the longer end, where the customers...
And we're working alongside them with our team to help define those pilots and help them be successful, and they end up in a good situation, becoming enterprise accounts. And those enterprise accounts, you know, we can have repeat sales within. So it really feeds that funnel. And I think more recently, in post our IPO, we invested a lot internationally in the channel to be beyond just the U.S., where there's significant money available to fight, whether it's the opioid crisis or, you know, other forms of concern for our military and other folks. But internationally, we've invested a lot. We've seen that diversification, seeing growth within Europe, Middle East, and state and local.
You know, we have, you know, Ohio, Tennessee, are great pilot examples of pilots that have expanded, in some cases, 30+ devices. So being able to go after those multiple channels, to go after that 400+ and drive the 19% growth, to date, we feel like we have, you know, a strong sales team that goes after it. So it's work, but opportunities, they roll through the funnel.
... maybe, maybe just to highlight one of them that that's kind of emerged recently, this AVCAD. Joe, I think you mentioned on the call that this is something that could be a $10 million annual opportunity at some point. Kind of what needs to happen to realize that, and are there other potential relationships that could be of a similar magnitude?
Yeah. We're super excited to have announced that. We've been partnering with Smiths for a number of years, and to get into that initial production phase was a big milestone for us. And, you know, we had initial components that we shipped in Q3, will continue here in Q4. You know, probably go through, you know, hopefully, we get to the full rate production, which is the next phase, which would likely be the second half of 2025. But excited at up to—there's no firm commitment, but up to or in excess of $10 million a year. And I think there is opportunity beyond, but this is one that we've worked very closely. It's a next generation program where Smiths had something called JCAD, and that was really the, I think they had over 90,000 devices that were deployed.
So for them to pivot away from the technology and to pick HPMS and our high-pressure solution to partner with us, was exciting. Now to see it get to this phase. So I think lots of opportunity, but key area of growth for our handheld business going forward. So we're focused on executing on the initial.
Yeah, and I would further add, we announced yesterday a further abilities-
Mm-hmm
... to kind of access and get into to larger programs and integration, work with, with other partners to kind of expand, serve as a force multiplier for our efforts. We announced yesterday some of the integration, how we have a port on the back of our device that allows it to be now connected with robots or drones or mail sorting equipment, which unfortunately is also needed in the times of fentanyl scares that are out there with the elections and things. So, yeah, we're, we're really trying to open up that, and we believe we have a very sizable TAM, and we're just really at single digits of % penetration.
Maybe on those force multipliers, I mean.
Yeah
I think, can you just talk about, like, what you're doing in that AVCAD relationship? Because I think it's a little bit different than the, you know, a normal handheld sale. And then, two, I guess I'm curious, as well, like, opportunities like those, like, how long does it take for those to materialize?
Well, we started that, I suppose, with the press release that came out in about 2017. I think was when we-
Mm-hmm
... did the press release-
Okay
... with Smiths Detection. And this is-
Okay
... a very, very large, the largest, I would say, chemical detection program in the U.S. military. What's different about it is, what we do every day is we sell a COTS product, a product that's a vanilla product that we sell to state and local first responders in one configuration. What's different about this is we partnered with them to make a modification to it using our components, using our subsystems, but to serve true green army, big army type applications, where it will go into a extremely hardened box that has many different mounting configurations, and we selected the best partner, Smiths Detection, 'cause they have a long history of this. They can support all of these logistics.
They have the footprint around the globe, and are truly an army, DOD, I should say, integrator, where 908 is not. 908 is the technology innovator-
Yeah
... and we're helping power that solution.
Yeah, so it's a lot of those components, almost like an OEM, but partnership, much more so where it's IP protected. But we're providing those components. They're doing the assembly, manufacturing, deployment, and coordination. So it's a good partnership, and excited to be a part of it.
Got it. So we're 10 minutes in, and we haven't talked about the macro, so I guess we probably should get that out of the way. It's been a variety of headwinds this year. You guys are kind of at the crosscurrent of both bioprocessing and instruments, which have both seen their own headwinds. Maybe can you just talk about how demand on the desktop side has kind of played out throughout the year?
Yeah. I think, like, you've heard from many others, I mean, we're really seeing sales cycles prolonged. We're seeing capital budgets more scrutinized. We're seeing things shift right. I wouldn't say we're losing opportunities. I wouldn't say there's a change in any competitive dynamic. There's really just a stagnation, a slowing of it. So we've seen that. It certainly played out more significantly in the year than we had anticipated coming into the year. However, we've been able to really offset that with the over-performance of our handheld devices, largely. So we're pleased about that.
As we roll forward and think about our desktops, we've been spending a good amount of time really trying building out a broader portfolio of devices in the PAT space, which we believe will serve us well. As some of the headwinds subside, coupled with the handheld growth, our overall growth could get exciting for us. We're cautiously optimistic for 2024. I think our measures there, our most recent engagements with our newest product in the desktop space, our MAVERICK. We've seen really strong indicators there, very positive feedback from that launch, both in engagements at talks and conferences, post-engagements, opportunity creation. But now, how long does it take those to close? You know, we're still really, we're still measuring.
We're early innings at that, and as we go through Q4, I think we'll have a better understanding of whether that's first half next year or it's more of a second half recovery.
Got it. I mean, just one... kind of tackling it a different way, I guess, you know, you mentioned Bioprocessing 4.0.
Mm-hmm.
I think if you go to a bioprocessing conference, you hear a lot about continuous manufacturing. They have entire tracks dedicated to process analytics, and so seems to me like that industry wants to move in the direction of more process analytics, and I think they're asking for more of them. So that's my editorial comment. I guess my question is, you know, are you still seeing a good amount of interest, and is this just kind of it takes longer to close, people are managing their budgets, or have you seen any change in the demand, or interest in process analytics?
Yeah, I would say the long-term sentiment-
Yeah
- is there. The long-term opportunity is absolutely there. We haven't seen a change on that, and I think that's fundamental. I mean, you really need more analytics. You really need more predictability in your processes, and that's coupled with the more advancements of the pipelines going to more complex therapeutics. Continuous processes, as you mentioned, cell therapies in gene therapies that really require more analytics. And if you couple that with the long-term drivers of all the work that's going on in modeling and machine learning and then AI to try to automate these things, you need sensors, you need analytics. We think we're doing a just time here to make out that portfolio, and really make a differentiated set of tools.
So I don't think there's been any change to the long term. You're right, the near term is-
Mm
... is obviously under pressure. Where we play and where a lot of these technologies get adopted are upstream in the process development labs. That's preclinical work.
Yeah.
So as these process development labs are under staffing pressure, as the pipelines have been rationalized, that really depresses the appetite to try something new. That said, as you know, we work with Sartorius, they're we have an OEM product available for them that we power, that does glucose and lactate, and together, there's an offering that's a turnkey solution for a benchtop bioreactor for glucose control in an automated way. So there's a feedback loop that controls the glucose pump, that's able to automate this process, and that can be scaled, and we've seen some evidence of that scaling into pilots and some interest in manufacturing. So I think it's there.
I think the near term is a little more paced than we'd like, but it's absolutely coming.
Maybe just one more kind of follow-up on, you know, the last couple years. You know, in, I think, 2020, 2021, you were placing double-digit Rebels, you know, quarterly. That slowed, I think, down to kind of mid-single digits-ish more recently. Do you think... Is there some element where maybe like you kind of... The macro environment certainly was a benefit back then, but where you maybe were over-placing, and now, like, as we're in this, you know, hangover, whatever you wanna call it, you're kind of under-placing right now, and, like, the real demand's somewhere in between? I don't know if it's possible to quantify it, but.
Yeah, I mean, it could be underrepresentative. I think the need is there in all the conversations.
Yeah
... Tagging on to that last question, the need is there, it's fundamental. The Rebel is really around optimizing that extracellular environment, changing the amino acids to get the best growth profile, the best critical quality attributes. And we've seen customers like Resilience announce some great benefits in titer while reducing some cost of goods and of their media and their feeding components. So, I think it's really, as we said, it, the preclinical work is under pressure-
Yeah
... both staffing and the pipeline, and that really reduces it. And we're not just seeing it for Rebel, we're seeing it as well, for ZipChip and MAVEN. And Rebel really, we'll probably still continue to see at the same rate as we have earlier this year as we go into Q4. We're not really anticipating much of a budget flush. MAVEN, we've had some timing issues there 'cause it's a new product, but we expect Q4 to be about a handful of devices in Q4, similar to the first half. So I think there's definitely real pressures out there, but the need is true.
Got it. So you've mentioned some of these newer products, MAVEN and MAVERICK. So, you know, it's obviously the macro is what it is, and you can only control what you can control, and so what you've done is launch a couple new products this year. So maybe just first, you know, what are MAVEN? What is MAVERICK? How do they compare to Rebel? We'll start there.
Yeah, absolutely. I mean, we're really been focused during these times to make a complete set, a complementary set of devices in the process analytical technology space. And really, we're working towards having a multi-parameter scanner, a tricorder of sorts, that can attach to each and every bioreactor and stream out process and quality attributes for it. And Rebel does a great thing, panel of about 30 different analytes. But there's other analytes to measure. There's other quality attributes, and so we're tagging along and building out a portfolio. And MAVEN is a, it's a device that the technology came through an acquisition of Trace Analytics, which we're super excited how that's been playing out and contributing, that we did last August.
That's an aseptic sampling technology that allows us to directly connect to a bioreactor, a cell therapy integrated platform, perfusion reactors. It's able to then essentially take fluid out in a zero-volume way that move the analytes across, and we can bring them to enzymatic sensors. So with MAVEN, we're measuring glucose and lactate, and then we can do feedback control on those reactors and control the feed pump with it. That technology is of high interest for us as well to get out there and a stepping stone for us for our Rebel and our Rebel Online as we move to connect that as we go. The MAVERICK product, which we launched just in September, very complementary to the others.
It's a broader-based platform that's designed to measure process attributes, but also some quality attributes, things including biomass and potentially titer and other analytes as we go. It's Raman-based, so it's a spectroscopy-based. It's very differentiated in the market because out of the box, it contains de novo models, which means that process development labs can implement it immediately without the costly investment and delay of having a pretty significant modeling and machine learning group on the back end trying to understand those spectral details to gain information. So MAVERICK is really well positioned, and we're very excited about the opportunity in front of us there and a bit of a broader platform.
Collectively, our strategy is to focus on that PAT upstream space with this set of tools.
... maybe on MAVERICK and MAVEN, just curious, like, is it the same kind of customer who's interested in them? Are they different? You know, I'm just curious, like, if you're selling to different people within the groups.
Yeah, yeah, very complementary, and we've seen instances where people ask for, you know, a quote of 2, 2 MAVENs and 1 MAVERICK on it-
Yeah
... and we've had those discussions ongoing. A lot still in the process development groups. Certainly, the PAT teams are incredibly interested when they hear Raman and a new way of doing that that takes away cost and labor and makes it more accessible. So same call point, I would say. MAVEN is a unique device that also we think is really beneficial for cell therapy platforms. So we are positioning it towards those integrated cell therapy platforms. Simplicity measures two critical components that are useful for that process.
So on that note, I think you just announced a partnership with Terumo, where MAVENs, I guess, are going to be integrated in or work with their cell processing technology. Maybe just talk about the genesis of that relationship, and then, you know, there's a number of players in that space, and it seems like it grows by the day. So are you talking to others? Could we see additional partnerships like that?
Yeah, absolutely. It's a non-exclusive relationship, but it's a collaboration with Terumo, a leader in the industry, with their cell expansion system, where they employ it from process development to clinical manufacturing. And we're really working with them to collaborate and bring the MAVEN analytics to be right next to and connected to their system. It addresses a pain point that they hear from their customers, and it allows MAVEN to reduce the risk of sampling that their customers endure, and it also allows them to more frequently understand where the viability is at, which is a little painful to measure in a manual fashion, where people are gowning up and going into clean rooms.
It's so critical because the metabolism of each patient, for some of these cell therapies, CAR T processes, changes versus the donor cells. So to know where it's at, you need some analytics. And so having lactate is a surrogate for the viability. So coupling with the reduced risk can reduce the risk of failures of the batches, because now you can sit at a desk, at a lab bench, and connect, much like your home router, to an IP address, and it will tell you where the process is at. So, you're right, there's many players in the space, and each can be leaders in their particular area, and we're quite keen to work with others, and we have some of those discussions and projects underway.
Got it. Maybe I'll pause there, see if anybody has any questions. All right, maybe, maybe just on... You've launched two new products this year. You mentioned Rebel Online. Is there any way to think about, like, new product pacing? Like, you know, should we expect you to launch two new products the next couple of years-
Yeah
... or is that, you know, way heavier lift than yahoos like me think ... any way to think about that?
Well, yeah, our R&D team has been very prolific. If I look over the past 18 months, we've launched new accessories for our handheld devices, our Aero module that's expanded the opportunity there, a Beacon device that extends its operation, and then on our desktops, things like MAVERICK and MAVEN, and then a host of software and other improvements on our Rebel device we've been launching. So they've been extremely busy. From a cadence, I think it's probably more of an 18-24 months for any major release to come out, and we certainly have several queued up. But a lot of smaller releases, particularly on software or protocol-type releases, kit modifications, things to just kind of break down barriers with our customers, we've got planned.
Okay, maybe just on kind of cross-selling, as you, you kind of mentioned it earlier, obviously, you have some customers interested in MAVEN and the MAVERICK, kind of, you know, as you have this growing portfolio, you know, are you finding opportunities from, you know, customers who maybe are interested in MAVEN but didn't know about Rebel, and maybe, you know, Rebel customers who are interested in MAVEN or MAVERICK, et cetera?
Yeah, maybe I can start, you can add-
Yeah
... add to it.
Sure.
But I would say that, yes, we’ve certainly seen all examples of those. We’ve seen MAVEN customers, that’s their first product for 908 Devices. We’ve seen Rebel customers adopt others. And MAVERICK is obviously very new, but it’s driving conversations both with new and existing and large pharma, CDMOs, smaller biotechs interested in that. And some of those that just couldn’t access Raman before are having those conversations with us.
And I think it's been great for our commercial sales channel. We do have a separate commercial sales channel that's focused on the desktops to have two new products in their bags, a reason to pick up the phone, reconnect with their customer base, chase new opportunities. We've pushed to go direct in Europe this past year, so I think that ability to reach out, and you see some overlap. So it... And we invested a lot post-IPO, and, and as the market and macro hopefully turns around, love to know if you know when. But yeah, hopefully, you know, maybe second half of next year, whenever it might be, that we have the right team in place with the right product portfolio to execute in that channel.
Got it.
Yeah, it's really that portfolio to us. It's not any one product. We think having that very differentiated portfolio-
Mm-hmm
... can drive all these conversations.
Got it. Maybe, I don't know, a couple kind of random follow-ups from things you guys have mentioned. Maybe first, just, you know, there's the technology of, you know, the device itself, but you also mentioned software-
Mm-hmm
... and those capabilities. What is— How important is that piece of technology of your offering and R&D efforts?
Incredibly important. Both from the handheld through to Rebel and on to, to MAVEN. Incredibly, incredibly important. If you, if you think of our handheld device, if it just presented a bunch of squiggly lines and, and had a bunch of steps that a user had to do, we wouldn't be able to reach 2,400 handhelds that are out there, and-
I wouldn't know how to use it.
Just beginning. That's right. You know, it's quite complex on what you have to do in a lab environment, and if we're able to bring lab-grade answers now out with the push of a button, and literally having a frontline worker, law enforcement professional, people that are not focused on the mechanics of mass spec and chromatography. So that software is incredibly important, and it rolls through. If you think about what we're doing in the process development lab with the biologists, expert at what they do, they don't have the time or the patience to be doing calibration curves and be understanding-
Mm
... and setting up methods that a large mass spec might require. And we're able to automate that. So that, that element, we have a very strong team on the chemometrics, machine learning, the algorithm side. Our CTO and Chief of Products is expert there, brings a lot of experience, both from Thermo Fisher and with Steve Jobs at Apple, doing sensors on watches and things. So, really, really, game-changing team there. So it is fundamental to the offerings we have.
And then you mentioned, you know, a lot of what you, the customers you're selling to today are in process development. You know, to get more into the clinic, and that piece of things, you know, what products do you think lead the way of getting there? Or what future products lead the way to get there?
Yeah, I think what we were just speaking of around Terumo and-
Yeah
... and, MAVEN, and thinking of these integrated cell therapy platforms, I mean, their cell expansion system is used in process development, but it's also used in clinical manufacturing. And that, of course, is more of one batch per patient type processes that they go after. So it's a very interesting mushrooming effect as you start to think about the analytics that go with that scale, where you could have rows and rows of their expansion systems and MAVENs next to each and integrated with each. So I think that is certainly very interesting to us. We do have some evidence of people using the glucose control products that we have with our partner, Sartorius, being used in not just process development, but now pilot and being thought of for large-scale manufacturing of biologics.
So that's also quite interesting to us. But Rebel as well, we have some of our highest volume consumers of our kits being MSAT teams. So supporting manufacturing right now with initiatives really to do data collection for future data mining, future development of software, algorithms, predictive models, AI, if you dare. But really, they're working to use those sensors to collect that complete set of information. So I think all of our products have that potential. Probably MAVEN is closest to it.
Okay, that's helpful. And then just, you know, Rebel Online, I think you've mentioned that's maybe going to be more of an iterative process than a single event. Can you just talk about some of the steps you're taking there towards bringing online and when that could happen?
Yeah, absolutely. Rebel Online is really a discussion around utilization. So today, we're running at about a half a kit a month, so about $24,000 a year of consumables for each of our active Rebel devices. We think there's more to do there just in the offering that we have today, and breaking down any barriers, any friction in that whole process. So you see us doing things like announcing a JMP software add-in that just takes away friction and data analysis. We've done a lot to take the squiggly lines and give an answer, but there's more you can do to just work out with the customers a streamlined workflow solution that again allows them to handle more and more numbers of samples.
There's more you can do just thinking through your sample prep and how do you prepare your sample. So we do some things now on robotic handlers and scripts for that to help our customers there. So we've been really focused on all friction along the whole chain of the user experience for Rebel. Simultaneously, the way that you connect Rebel Online will be through an aseptic sampling probe, the one that we acquired through Trace Analytics, and the one that is now in the market with MAVEN. So we're taking a great step there to actually have that major component of Rebel Online already available in the market and getting that understood, getting that accepted in the market.
Yes, it's a priority project for us, but as we mentioned, our R&D team has been very busy getting a collection of devices out there. We've mentioned we have prototype operations, but we are focused on the streamlining of and driving utilization, and that's why we call it not a discrete event, because I think there's a lot of things we can do and get released in a rolling manner.
Yeah, that, that's helpful. And then maybe, Joe, just circling back on international, you mentioned, that's been an opportunity on the handheld side, and then I think you just mentioned kind of direct strategy in Europe.
Mm-hmm.
Can you just talk maybe the international opportunity on both sides of the business?
Yeah, it has been a focus as we've expanded, originally right out of Boston, North America focus. But the Trace acquisition, getting an office in Germany, you know, it's a small manufacturing we're using as our center hub. You know, taking on back in the back half this year, some direct business for our desktops, which enables us to be closer to the customer, both from a service consumable perspective, and take advantage of working with them directly. You know, Asia hasn't been as much of a focus for us. We use a distribution model for both, you know, our handheld and our desktop business. We have a few applications engineers in the field, folks in the field supporting the installed base, but it's mainly, I'd say, Europe, Middle East.
Seeing a lot of demand on the handheld side in Middle East, where we've expanded and put some folks on the, you know, feet on the pavement, you know, to help support our distributors as there's a need there.... around some of the concerns that the MX addresses. So we see that as an area of growth across the full business, probably more so on the handheld side as we roll into 2024, but also on the desktop side as funding becomes available.
Got it. And then, Kevin, you mentioned, I think, half a kit per month is kind of where Rebel demand is trending. Can you just talk about, I guess, one, like, how much that may be improving is related to maybe the funding environment, and maybe two, how much of it is related to kind of customers better understanding how to use it or finding applications? I'll start there on that.
Yeah. Yeah. Take it off, John.
Yeah, I mean, the fact that we've been at a half a kit a month and kinda held, you know, this year—Yeah, we look as a good thing. We aspire to be closer to that one kit a month—Yeah, for our active users, and continuously working on ways for them to, you know, get there and to support them in multiple fashions. So it's, you know, recurring revenue as a whole is a focus, right? Whether it's the service or it's the consumable side. So we're pretty healthy service base, almost $20 million in deferred service revenue. A lot of that's handheld, but it's also on our Rebel install base that, you know, they're committing to the technology, and updates, and software, and support.
So we think on the consumable side, Rebel can lead the way as the markets pick up. I do think there's an element, which is funding. It's great to see it hang in there, but how to accelerate and have more folks in the lab using the device, I think is important. And then you look at some of the newer technologies on MAVERICK and MAVEN, even MAVERICK, we see an opportunity of 15%-13% annual pull-through. 30%. Thirty percent, sorry. 15%-30% annual pull-through. Yeah ... thank you, Kevin, on that MAVERICK.
You know, you don't always see, you know, recurring revenue on Raman-based, but based upon the probes, and they can be used for 10, 10 use cases, the software and the importance of that along with it, and then the consumable kits.
I mean, I think, maybe a third of revenue this year-
Mm
... will come from recurring revenue. You know, is that a number that you know strategically wanna drive higher or just naturally should? Like, how should we think about the outlook for that mix?
It's a balance. I always like recurring to be higher, right?
Yeah.
But in that 30, maybe mid- low to mid-30s probably makes sense, because as we drive additional devices, new opportunities, we grow-
Yeah
... on the top line there, it obviously takes more of a percent of the pie. So a lot of different dynamics on how many devices versus the consumables. You know, I mentioned Rebel and, and MAVERICK, and as those pick up and the funding environment, hopefully improves, and macro, turns around, hopefully, we'll see more on the recurring, but also on the device side. So it is that balance, and we're trying to drive the devices first, and then the adoption and that recurring revenue stream. But we'd anticipate that snowball effect to keep us in that mid-thirties and, and maybe higher as we move forward.
And then, you know, we've talked about devices, consumables, and services. Can you just talk about the margins across those businesses or maybe across instrument platforms, however, whatever the best way to tackle that?
Yeah, on the margins, you know, for 2023, we see ourselves probably in the, at the low end of the mid-50s, when you exclude the non-cash, you know, stock comp and intangibles. You know, there's different players in there as far as whether you're selling direct or through distribution. Do you have more of an OEM relationship, which might have a lower margin? Consumables, when we're at scale, we're not at scale today, but as you have more consumables, the opportunity to have higher margin is there, as we move forward. But I think as you think about the shorter term, probably in that low- to mid-50s is the right thought. But for us, it really is about scale.
How to drive from the midpoint of $50 million to get to, you know, closer to $100 million, really drives the margin, and that becomes the mix.
May I just pause again and see if anybody has any questions? All right, on the balance sheet, maybe they matter right now, so just maybe talk about-
Do matter
... where your balance sheet state-
It's important.
Yeah. Yeah. They always matter. Sometimes they matter more, I guess. But, where does cash kinda currently stand, and, and how do you kind of approach organic investments?
Yeah, we exit the third quarter with $148 million in cash. Q3 is usually a low cash burning quarter, but we had less than $5 million that we burned, probably in the neighborhood of $30 million, low $30s million for the year, you know, when we wrap up the year on cash. So we've been very thoughtful about those investments. We made a small reduction in force at the beginning of the year to prioritize investments, and to shift some of that spend around. We're trying to modulate as our revenue grows, what is that OpEx growth? We invest a lot in R&D, as you saw with the new products, and we look to continue to be innovative, but being thoughtful on our organic growth. But also think, are there inorganic opportunities?
You know, with the healthy balance sheet and cash to go well beyond 2025 from a burn perspective, opens up the door that if we found the right opportunity and it made sense, you know, we'd be open to those conversations. Whether it's on the forensic side of the business or within bioprocessing to add to the portfolio there. So I'd say we're always, you know, ears open and eyes open as far as looking for opportunities, but very thoughtful on the cash side to preserve, you know, what we do have.
Maybe on the inorganic side, you know, the Trace acquisition was relatively small in the scheme of things, and kind of, I think, brought you a crucial technology. Is that, are those the kinds of things you're looking for, or you know?
Yeah.
What are you keeping your eyes and ears open-
Yeah.
Well, as Joe said, I mean, we're certainly not an invented here situation. I mean, if there is a, if there's a technology, a product really-
Yeah
... focused, that brings us some that we can then put into one of the channels we've been investing heavily in, we'd be quite keen to do that. Obviously, we're gonna be very cautious if there was anything that hits our balance sheet from an ongoing-
Yeah
... I really would want something to be accretive there. We believe we have a ton of opportunity just organic with that roadmap, with that innovation, and that set of products and portfolios. But as Joe said, we're always thinking. We want to win in both spaces. I mean, we see good growth out of the forensics, as we've been talking about, and we see a ton of opportunity remaining there and are continuing to invest in our inorganic roadmap, R&D, but also you know, thinking through the inorganic side and yeah. So I think it would be something that's not just a technology for technology's sake. It'd be something that's complementary probably to one of our commercial channels.
Okay. That's helpful. Maybe a last question from me, kind of wrapping things up. To something Joe mentioned of kind of agnostic between handheld and desktop, but you know, obviously, a lot of R&D investment seemingly on the desktop side of things. But, you know, given what's played out in the macro, where handheld's holding up relatively better, desktops facing some of the pressures that everybody's seeing, has that changed your-
Mm-hmm
... your capital allocation strategy between the two segments?
Yeah, I mean, I think we're always considering that balance, as Joe mentioned, where we put our resources with the funds we have to bring to bear. We have introduced two accessories for it. We have talked about that we will be making a new version of our handheld that will come out in the coming years, that drives what our customers care about: size, weight, simplicity, and maybe opens up additional opportunities and applications for it. And remember, everything we do for a handheld mass spec, it's directly applicable to what we're doing in the desktops, right? It's a common technology platform.
Yeah.
But yes, we certainly wanna make sure that that channel that's been really running hard and doing quite well, and a lot of opportunity is fed with innovative products, and we'll be looking to do that in multiple ways.
Got it. I think on that note, Kevin and Joe, thanks, so much for joining us here in Nashville.
Yeah. Thank you.
Thank you.
Appreciate it.
Appreciate the time.
I'm just gonna take it one at a time. Thank you guys for coming.
Yeah.
It's great to see you guys, and so, I guess I'll see you in San Francisco in January. We're like,
Try to keep track.
I know. I don't like to keep track. So yeah-
Well, Miami in January, then?
Yeah, I don't know.
That one-
We have a sales meeting the second week of-
Okay
... in North Carolina. There's a couple of sales staff, an interesting conference.
I-
I like attending it-
Yeah
... but from a booth and a vendor, it's-
I feel like-
Really, the people that we sell to, there's a lot of it-
It is, it does-
It's like short marketing. It's not even-
You're kinda right. It's almost like it's just-
Yeah
... a bunch of vendors talking to each other.
It's kind of vendors-
Like, there's no cu-
Which is great for me-
Yeah
... because I'm like, I don't mind. I'll talk to all you.
Yeah, that's right.
But to your point, the customers.
Yeah.
I'm gonna go see there.
There's some stuff, but there's more factors, but there's a couple other shows we're gonna try this year.
I know you have an alright staff. I don't know what just got-
Yeah, I know.
Yeah, we're here. Today is heavier than yesterday.
Yeah, last year, so like...
Well, yeah, yeah.
I think that's, like, Mark comes down from London both times, and so, that's marked up on my calendar of like-
Okay
... I'm going this year.
Yeah.
So.
Yeah, you gotta go to that one.
I know. That's a good one.
That one-
I've been multiple times in just the last year.
It's better than that summit one.
Do you know where we're going next, Travis?
I have no idea.
Yeah.
Cube something?
Yeah.
All right.
A cube.
All right.
Well, I can tell you right now-
Get out here-
I was gonna say, guys, the meeting's at 9:00 A.M., but-
Okay
... we can start now. I can give you your time back later, or-
Sure, whatever works.
Whatever works for you.
Well-
We're cube one.
That's right. Let's get a coffee along the way, and we're good to go.
Next year, I'll-
We'll all get to see you.
... a cube 908.
Yeah!
Do you really just get a cube?
Yeah, it's like those little bundles.
Partitions.
Yeah.