This year and for next year, kind of just set the tone on the business?
Yeah, I'd be happy to. Happy to. So 908 Devices is working to introduce what I think of as a new class of products into chemical detection. We call it point-of-need chemical detection. That, to us, is very broadly applicable. So that's taking lab-grade capabilities and robust analytical tools out of those conventional, call it more central labs, into something that's more of a lab or a lower complexity environment of some kind. So we've built a franchise in the forensic space, which represents approximately three-quarters of our revenues this year and in the past year. And that's, to us, in counterfeit drugs, small molecule analysis, looking at trace residues of chemicals that could be in the air, on surfaces, all sorts of applications there. And we have 2,700 handheld devices serving that area.
We've been working over time since our IPO, now coming up on four years, to build a franchise in the bioprocessing biopharma space, which we call our desktop devices. Those desktop devices certainly experienced strong growth at that time in 2021 and 2022, but certainly have been hitting more of a macro headwinds. We've been focused on building out that portfolio and broadening that. Our intent here is to recognize that we've got five very strong growth drivers that we articulated on our Q3 call. We're really heads down focused on realizing those and, at the same time, lowering our cost structure and enjoying some benefits from an acquisition we did with RedWave Technology.
Yeah. Okay. Good setting of the stage. Maybe just to start with the handheld side, it is a business that sells into the government quite a bit. There are contracts involved. That seems to be a factor this year. There are budget delays and things going on that have some ups and downs taking place with the business. Can you just talk a little bit about how you sell into the government, how those contracts get negotiated and structured, and then the lumpiness that that introduces? Is there any way to sort of smooth that out as you broaden what you do across the government? Maybe not all contracts are signed and sealed at the same timeframe?
Yeah. Yeah, absolutely. I can talk to those pieces. I mean, selling, you're right, a lot of our handhelds for that application, fentanyl, synthetic opioids, a lot of uncertainty around the globe, NATO countries and the like, concerned about chemical threats of all sorts. So that drives us to a lot of government customers, everybody from a state and local government in the United States to a larger federal military account and to larger international government accounts. I mentioned NATO and even beyond into APAC and things. And so there's a lot of different governments we deal with. The U.S. federal government is the largest for our enterprise accounts as we think of them. This past year, there certainly was a headwind in Q3 with the delay of the U.S. federal budget.
So if I level set that for a moment, the U.S. federal budget expires on the end of September each year. And most years, there's continuing resolutions that are put in place. What we saw this past year was a further delay in passing the budget post that continuing resolution. And if I look back over four or out of five years, this was the longest delay we'd seen. This took all the way to the end of March. So what that resulted is a very compressed spending period for our customers. So that's where you have a customer, you've worked, you've created demand, but they're not able to execute the purchase order. We are selling commercial off-the-shelf goods, but there's purchase orders and there's contract vehicles to get those dollars to you.
What we saw was an inability in some cases for our customers to achieve the full amount they wanted to achieve. You spoke to lumpiness. Certainly, that can cause lumpiness. We experienced that in our past. We've certainly experienced that a bit here in Q3. I would point to the multi-year trajectory on those handhelds. We've grown at about 27% CAGR over a period from 2018 through 2023. That's the total period that we had our handhelds products on the market. Even if you look at just the last two years, we've grown greater than 14% CAGR for those handhelds. There's a lot of strong growth there that we expect to continue. You're right, at times you can experience a lump or two. To help combat that, a broadening of our portfolio certainly helps.
I mentioned RedWave recently, so we've gone from one to four products. So that certainly helps in that expansion. And then we're doing more internationally. We're doing more in state and local. So as those opportunities come up as well, they all start to stochastically balance.
Yeah. I want to hit on RedWave and then some of the newer products on the bioprocess side as well. But if I just think about the growth rate that you referenced for handhelds in the government, has that largely been a function of application expansion for the handhelds, or is it really more about a greater number of government organizations using the device maybe for one particular application?
Yeah, it's more the latter. It's a broad technology. It's mass spec. So it's electronically programmable to detect hundreds. And it can also run machine learning algorithms that can detect thousands of variants of synthetic opioids. So it's broadly capable. Every device that ships could measure a chemical weapon, a drug, a pesticide, all the way through. So you will see some customers adopting it for a particular set of analytes that they prefer most. But I would say it's largely the latter, to your point, so an expansion. So we penetrate these large federal military accounts, and then you see them coming back and expanding across their organization.
When we see you or hear about you signing a deal with the government, does it make it easier to sign the next deal with the government? In other words, if the DOD decides they want 100 systems, does that now all of a sudden make it easier to sell to Homeland Security, or is the siloed nature of the U.S. government just something that kind of prevents that from actually?
I think it's more of a qualitative help in the fact that if you're getting a reference customer, a large Western customer, you might remember a few years ago we had a U.S. Army customer, and we certainly were able to parlay that and build people's confidence, which did expand our enterprise accounts and certainly helped as a strong reference.
And then maybe just can we touch on RedWave and just how that broadens your application? That's an IR, sorry, your offering that's an IR technology that you acquired earlier this year. Talk a little bit about why that deal was done and what that does for you.
Yeah, absolutely. So RedWave Technology is a company out of Danbury, Connecticut. A lot of revenue synergies. We see a lot of complementary nature of those products to the handhelds we were just speaking of. So you can think about it that our core MX908 handheld, which is a mass spec driven device with that analyte breadth I mentioned, it measures things at trace levels. So this is invisible amounts on surfaces, the back of a blister pack, a hand, a mail, a parcel. It can measure things at unseen amounts and detect those analytes. Now, there's a complementary technology that has a much broader set of analytes, 22,000 in the highest case, and that's using FTIR. And RedWave is a company that's really been innovative in the space of using this FTIR technology.
Again, a lab-grade technology that's now been packaged in a form factor that can be brought out to more of a field application, so to us, the two are very, very synergistic, very complementary. So now you can measure trace detection of a more focused set of analytes, and then you can do a very broad analytes panel, 22,000 in one run at a bulk level, so our customers use multiple tools in their toolbox, and they're very familiar with having such breadth of capability, and RedWave has really done a nice job creating an innovative set of products. They've got three products, and one is actually even set up for a gas detection we could get to, if you like, in a moment, but very, very complementary, so our sales team fits right into that. Our applications team fits right into that. Very natural.
I think when we surveyed our sales team, it was like eight out of ten of them knew how to already use FTIR products. So we really like it from that complementary nature. Great opportunity for all the trainings we do, which we do hundreds per year to now introduce the RedWave products into that. They haven't really done much on those larger enterprise accounts we were speaking to, and we feel we've got a strong commercial engine to unlock that. So we're super excited about getting that into the channel there. And then, yeah, it's obviously as well from a cost side, it unlocks some synergies as well. You want to run through that real quick?
Yeah. From an operational perspective, right, it gives us an opportunity for a lower cost opportunity. But being able to, they're challenged, right? Do I scale a commercial channel and go over after the revenue opportunity or someone like 908 where we can leverage that structure? So over the last six months, we've looked at the opportunity, and collectively now we've identified $7.5 million. Some of those are directly related to the acquisition and facility side, but also sales opportunity and leveraging the R&D expertise. So we'll look to continue to capitalize on that in the coming months and really accelerate the opportunity. The Fed government can take a bit, right, on the sales side. So that can be 2-3 years of runtime. So seeing good progress in feeding the pipeline, and now it's working through that pipeline to realize the orders and the growth.
Joe, just to make sure I understand what you said, the opportunities on the cost side are looking at what RedWave did on their own and porting your capabilities and what you think you can bring to the equation. Do I have that right, or is that off?
Yeah. From a revenue perspective, yes. From a cost perspective, the opportunity. They don't need to invest. So we're able to leverage our cost structure in a combined nature. They've really built out their state and local capabilities pretty well. They really hadn't done much, very nascent on the federal military side and even international. They were just getting going. So lots of opportunity.
Kevin, maybe you're alluding to this, but is there a cross-selling opportunity that you think is, I don't know if it would be a traditional bundle, so to speak, but are both of these products more compelling as an offering to a potential customer? Do you think one can bring the other into the picture? And ultimately, could you be selling both as sort of a package deal, I guess?
Yeah, absolutely. 100%. We definitely have seen that already where we've gotten POs that have both our products and the FTIR products on them. So absolutely. We've certainly seen cases where our core MX908 handheld customers, we've been able to introduce the FTIR, and now they're adopting that. So we've seen both. So certainly there can be that. And I think, as Joe touched on as well, that commercial engine that we have, the number of touch points we have with a customer, we're always engaging pre-sales, post-sales, training events, refresher trainings, conferences. As Joe said, we can now plug that into the same infrastructure and continue that conversation and have a broader portfolio. Because now we're going from one product in the handhelds, which have delivered that 27% CAGR, right, over that time, to now four.
So, we're excited that the RedWave trajectory, we should be able to get matching what we've seen historically.
Okay. Are there applications for either of these two handheld devices that you think are untapped, but also attainable in the sense that you in the next couple of years could make some headway? I mean, it's very clear that the MX system is being driven by drug testing. You mentioned blister packs and such product testing for IR. But to your point on mass spec and IR in general, those are broadly applicable technologies. Do you think we hear more about branching out into different segments of the overall market for those two handheld devices over the next couple of years?
Yeah. I mean, so first, you're absolutely right. FTIR, mass spec, gold standard platform technologies that can be used in a very broad set of applications, everything from diagnostics to food and air monitoring, water, all the way to what we're speaking of and tangibly working on today, forensics and bioprocessing. I would say from the here and now, one thing that gets me excited is the XplorIR product that came through the acquisition of RedWave. And that's a product that uses that same FTIR technology, same FTIR components and engine, but it's configured to detect 5,000 different gases. And it's very unique because it can detect and it can also identify what those are.
So if you think about VOCs, volatile organic compounds, you think about things, pollutants in the air, you think about a hazmat, a fire concern, a building that has a sick building call and they're trying to find the source of that, that really branches out a bit. It's the same core that we're going after customer-wise, but it does start to branch and broaden that application set into that gas detection side of things. We had some good wins for that product, including like the EPA and others in Q3. All of these have potential to become larger enterprise accounts. And yeah, we're super excited about, in fact, year to date, so for the first nine months of this year, we've already doubled the number that have been shipped compared to all of last year. So we're excited about that trajectory.
So I think that's a tangible, natural here and now extension that we're seeing to our portfolio.
Okay. Maybe just to finish the point on the handheld side or at least sum up what we're kind of talking about from a growth standpoint. Joe, in any given year, there's a mix of enterprise accounts and then the more onesies, twosies, or tens, fifteens, so to speak. How do you see 2025 as a year made up by those two types of things?
I think we've done a good job of beginning to diversify and see more in our state and local, which are the onesie, twosies, and the international is a lot of the lower opportunities as you get into individual countries or regions, but also starting to see some larger opportunities or enterprise accounts internationally. We just in October shipped our largest order into APAC, whereas 30-plus devices. We're starting to see some expansion where some of the enterprise accounts, whether in the Middle East or Europe and APAC, where there are some concerns where our technology can really make a difference. I think a piece of our business, especially on the handheld side, is the larger opportunities. Every year we are going to need multiple enterprise accounts to come to fruition. I call them 20-plus, 30-plus opportunities.
So that's a reality of the business, and it's about our experienced sales team securing, seeing the budgets, working through the contract mechanisms to realize that opportunity. And even though we had a few push out and not be realized at the end of the government fiscal year, they didn't go away. They're still in the pipeline. In one case, we had one that had identified budget for 70. There were two different vehicles. They were able to order 40. Those other 30 didn't go away. They'll happen. We just need to get through the current budget cycle, get the CR and approved.
But that is a full cycle that then needs to be gone through.
It is, right? They had to give back the money, right? Those 30 units they had to give back, right? And then it'll be in next year's budget, and then they have to work through and get identified, hopefully earlier in the year. It's not late March that the budget's being approved and then starting working through. So it is a piece of a reality of our handheld. But diversification helps multiple products in different channels to market.
What about specifically on the AVCAD deal, which is a DOD project or program? There was the initial wave of placements, and then there's the full production wave. Is business that you still have to win if I'm thinking about it correctly? What has to happen in order for you to win that business?
Yeah. So we're in the low rate initial production phase, and we've been working this contract for six, eight, maybe even 10 years. Yeah. But early days, it was kind of an engineering, manufacturing, design phase through contract revenue. We've had some product revenue. It's about $2.3 million in Q3 of 2023. We had about $1.6 million in the first half. So that sets the table. The next phase or the option within that contract would be full rate production. And we expect to hear at some point during the government cycle in the upcoming months, maybe mid-year next year, plus or minus, around full rate production. In my thoughts, the revenue really doesn't kick in until 2026. We need to win it, but we're in the program. We're partnered with Smiths Detection. It's exciting. It could be $10 million plus a year as you get into that over multiple years.
So, feel like it's going well and expect some news in 2025 on it.
Yeah, and absolutely one of the five growth drivers that we laid out that we think is going to be pivotal to acceleration of a top line.
Yeah. Okay. Let's switch over to the desktop side. Bioprocess market's been tough. I don't think there are too many life science investors who are just waking up to that as an idea. And the REBEL device seems like it has a very good use case to it, but is also an early product in its life cycle. Can you talk a little bit about traction there, the sales funnel, what you think about 2025 as an improvement year for the bioprocess market and then your product in that market?
Yeah. I mean, broadly speaking, absolutely continued in Q3 to see very similar headwinds in that, call it life science instrumentation domain with REBEL and also with the other three desktop devices we've had. And that to us really just looks like elongated sales cycles. So these are sales cycles where you're having a lot of engagement, but the availability of CapEx dollars to purchase a REBEL or one of our other desktops is a bit limited. We really do spend a lot of time, particularly with our new products, with customers doing evaluations, trials. We think that's going to be the right foundation that we're doing that now. We do a lot of bioreactor runs, which take time because we're doing control experiments with these customers. And these are customers that are, these aren't customers that we're saying here, please use it.
These are customers that are often paying for that evaluation, either in consumables or rental of devices, etc. So we work very hard to kind of bridge it across. So I do believe we're developing a funnel there. It is gated by the availability of CapEx. That said, we do expect a step up here in Q4 from Q3. So we do expect that. And partly driven by the initiative we started formally in Q1 for partnerships. And the partnership angle is really working directly with the hardware innovator companies, whether it be with bioreactor companies, integrated cell therapy manufacturing platforms. We announced working with groups like Solaris and Terumo, and there's a handful of others that are beginning traction. And those we expect some initial placement traction to help us here in Q4. So that to me is exciting because it's kind of a bit of a force multiplier.
Also, one of the five growth drivers that I mentioned in our Q3 call that we really do see as those get success that can help us in 2025, as you asked about, and even beyond that as those tractions and those platforms really start to roll out.
Yeah. Joe, is there? I realize we have to still work through the 2025 forecast, but just conceptually, the signals in the market right now, for as tough as it's been, are that the bioprocess market is slowly healing and that 2025 should be a better year than 2024 was. Do you have confidence in at least underwriting a higher placement total next year than what you saw today, than what you've seen this year?
I believe so. It needs to be right, and I think part of it is the life cycle in our product launches with MAVEN and MAVERICK and starting to get the traction, some of what Kevin talked about, and working with the customers, getting in their budget cycles, understanding that technology that might be different or might be similar, but can do it better and more effectively. Feeding that pipeline sets us up for success in 2025, so I don't think that's unreasonable. We're continuing to evaluate every quarter and as we move through the year, but I think the opportunity is there because of the expanded portfolio to drive additional placements and some of those strategic partnerships balancing our direct and indirect channel efforts should set us up for success in 2025.
And then maybe Kevin just a minute on MAVEN and MAVERICK, MAVERICK and MAVEN, how that expands your offering and makes it more attractive. And then whether that causes a purchasing decision to be more complicated for a customer. Because dollars are precious and sometimes in one part of the workflow, you only have so much to deploy to it. So how much of what you see is a function of not really sure whether Rebel or MAVERICK or MAVEN is the right device and so some of these purchasing decisions get elongated because of that?
Yeah. I mean, they're all new devices, very early in their life cycle adoption, which means there has to be a lot of tests and trials and evaluation. That's usually done in a preclinical setting, early stage process development. We work with those customers. We are working with those customers to get their confidence in that the technology is accurate, robust, reliable, making sure that it doesn't cause any sort of contamination when you think about some of our online devices. So specifically product by product. So REBEL is really set to measure amino acids. It's got a great utility in a full panel in process development to figure out when you should be feeding and what should be the proper amino acid concentration within your feed, which is absolutely critical.
You can't get things too high or too low or you create toxic metabolites or impact your titer and other CQAs. We launched Maven and Maverick last year, so relatively recently in this market and the pace of new technology. Both of those are online techniques, which means they directly connect to the bioreactor. REBEL sits next to the bioreactor. You take samples from the bioreactor and put it in 96-well plates to run that panel assay. But Maven and Maverick are online connected. If you think of Maven, it's our lowest price point desktop device. So we do have a span now of approximately $25,000-$150,000 purchase price of our product. So it does help as well from some of these conversations.
MAVEN is a much more focused analyzer that's designed to do two things, glucose and lactate, and it's designed as well that it can be used to control a bioreactor at those levels, which have great benefits for the outcome of these critical quality attributes, low glycation acceleration, other metrics like that. So we're doing a lot of engagement with customers to prove that out and show it. In fact, we're doing a lot of work now with customers in PD with an eye for GMP production. And I would say that we already have some customers in that space using it in a production environment. And I would say that that's a really interesting angle for that product because its focused nature, its online ability, and its intimate connection to the bioreactor to do control and able to do that in a large manufacturing, large volume bioreactor setting.
That product I think is very exciting there. We're starting to see, so that was launched in about approximately January of last year. We're starting to see a pipeline develop where we're talking to customers, well, I'll need 12, I'll need 10, I need four, six. I'm starting to talk about multi-unit orders there. Because of that price point, it's conducive to that. If you think about it, it's a one-for-one relationship for bioreactors because it's connected versus a REBEL that sits in a lab and supports a host of PD-sized reactors. MAVERICK follows MAVEN. It is an online technique, but a bit broader analyte capability. It's an optical technique. We only launched it in September of last year, so it's very, very fresh.
So it takes time to get through these trials and evaluations, but brings a lot of value because it can measure glucose and lactate, but it doesn't stop there. It can measure biomass. It's much like our other products. We can expand it and put other analytes on it. And then the whole back end is open for a customer's own modeling or AI efforts where they actually want to harness all the data and do their own work on the other side. So very complementary now for different products across that desktop space.
Yeah. Okay. That's great. Joe, maybe just with the last couple of minutes here, touching on some operational items. You guys are making some manufacturing changes. You're taking production to two new sites. It sounds like there's a good rationale for that. The analyst alarm bell always goes off when small-cap companies do major operational switchovers. So can you talk about, A, the benefit that you think you're going to derive by doing that, particularly on the gross margin line, and then B, the risk that you think is still associated? How far into that process are you and then what would you say the risk is?
Sure. Yeah. I think operationally, I mean, it's an opportunity, right? And it's thinking about the long-term capabilities. We're moving the manufacturing sites to two existing locations where we have a strong presence of existing folks from a receiving perspective. Specifically with North Carolina and our desktops, we transferred over the last 12 to 18 months our consumable manufacturing. And it was a successful, and there's some good learnings, but that's already transferred. So it's really just the hardware, the devices moving down North Carolina. And our founder was from UNC, so we've hired a lot of good core talent into the lab and location down there. So we feel confident in that. From an acquisition perspective, when we did RedWave in Danbury, strong manufacturing footprint, folks that have done large manufacturing in the past. They'd signed a 10-year lease commitment. It was about 70% of the value in Boston.
early days, I was always asked, why are you manufacturing in Boston? Well, we had to make the tough decision, but to move manufacturing down to Danbury makes a lot of sense, whether it's AVCAD production, future handheld products to be able to scale in that lower footprint. From a dollar perspective, it'll start benefiting 2026, probably about $2.3 million overall. About half of that is on the gross margin side. So a few hundred basis points of improvement. And over the longer term, lower cost labor, that 75% reduction in infrastructure. We just look at it as a scalable opportunity for the business as a whole. And you don't get many opportunities. It didn't make sense for us to enter into another multi-year long-term lease.
Yeah. Okay. Fair enough.
We'll still have a footprint in Boston, but more kind of R&D expertise, kind of G&A, not the manufacturing that hits the margin line.
Obviously, corporate headquarters still staying put. Yeah. Okay. And then quickly on the op margins, it feels like a lot of the cost structure that you're working with this year will still be around next year. I know we'll get into what a real forecast looks like in a couple of months, but just simplistically, if I think about the $20 million per quarter that you're working with, is that a good starting point for just thinking about what could be in place next year as well?
It probably is, at least from a starting point and a conversation. The $20 million this quarter was the first time with all of RedWave in there for a full quarter. We did make a decision, 11% reduction in workforce to set us up for 2025 on some strategic costs to cover inflation and otherwise. So it's probably a good starting point. We'll always look to balance our investments with our revenue growth and we're really focused on driving the revenue starting in 2020, well, we always are, but especially in 2025 to drive revenue growth and pacing any future investments. But yeah, it's a good starting point.
Okay. I'm going to leave it there. Thank you, guys.
All right. Thanks for having us.
Thank you.
Happy early Thanksgiving wishes to you both, and we'll talk to you soon.
All right. Thanks a lot.
Thank you.