The 908 Devices Management presentation. My name is Matt Larew. I cover tools, including 908 here at Blair. Two quick announcements before we get to the presentation. Breakout session is in Burnham B on the second floor. And then for a complete list of disclosures, please visit williamblair.com. Very pleased to have one of the co-founder and CEO, Dr. Kevin Knopp, here, as well as CFO Joe Griffith, who've joined us for a number of years running now. But here to share kind of, as the slide says, launch v2.0 of the story. So thanks very much. I'll turn it over to Kevin.
Yeah, thanks, Matt. Thanks for having us and everyone joining us. We always enjoy this conference each year, and it's a great, great venue and avenue. We're especially excited this year, because we've got a lot to talk about, a lot to update everyone on, with a new focus that we're particularly excited about. I'll jump right in. First, just, oop, we're moving faster here. Can you reset it for me? It just skipped all the way to the end, essentially. There we go. There. If we could just take a quick moment there. We got our forward-looking statement and some of our non-GAAP financial measures. You know, we're really excited today to walk through what we're thinking of as really the next chapter of our journey at 908 Devices.
It really marks a pivotal shift in our overall trajectory. What we've done over the past several months really isn't just a restructuring, and we're viewing it more as a transformation of where we're going. We've really redefined the company around a singular focus now: purpose-built handheld chemical detection for public health, safety, and defense. We're calling this next phase 908 Devices 2.0. It comes with a truly sharper focus, stronger financials, and much clearer operational alignment. Today we're gonna touch on five key themes as we walk through the set of slides this afternoon. One is our strategic transformation is now complete. We've exited the desktop business and sharpened our focus. Execution is well underway. We're already seeing some results in the numbers, and we'll review some of our Q1 results. Profitability is within sight.
We're tracking towards a near-term adjusted EBITDA break-even in Q4. We feel we're positioned for growth. We've got a substantial opportunity ahead, for our handheld devices, and we're backed by global macro tailwinds, and we've got a pretty strong innovation pipeline that I'll talk a little bit more about. And a fortified investor's thesis. We've got a simpler, streamlined model, where we think creates greater value creation potential. Let's start for a moment on the, the transformation itself. We've really streamlined the business, and now we're entirely focused on handheld chemical detection, delivering rapid field-ready analysis for high-impact applications with demand accelerating across the opioid crisis, defense modernization, and cross-border security. We really feel we've got the right product set now aligned at the right time. A major enabler of this shift has been the sale of our desktop bioprocessing business, to Repligen for approximately $70 million.
That nearly doubled our cash reserves. It removed the NIH and academic distractions. It simplified our operations, and it represented a 1/5 of our revenues in 2024, but a lot of our costs, the majority of our costs. The result is that we're a company now that's much leaner, more focused, and yet more flexible. We're on track to achieve adjusted EBITDA profitability in Q4 of this year and full-year cash flow positivity in 2026. That shift is really powered by a few things. One is gross margin improvements, overall operational streamlining, including a manufacturing consolidation in Connecticut. While our handhelds are our core, you know, we really still have the ability to scale into broader life sciences, and that's via OEM and funded partnerships with efforts today in pharma and industrial QAQC.
We've really sharpened our focus, but we haven't narrowed our over-long-term potential. With the transformation complete, we now have a pretty powerful foundation and a clear runway for growth. First, the handheld market we serve is large and expanding with a projected $2.5 billion TAM by 2027. Our handheld revenue growth has grown at approximately two times the rate of our desktop since the IPO, and we believe it's still very much early innings in the penetration. Second, we've built a pretty comprehensive product portfolio. Just about a year ago, we offered only one handheld device, and now we have four devices. All are designed very much for use in the point of need and critical health and safety applications. They're all meant to be complementary in design, and they're based on mass spec and spectroscopy technology platforms.
These are lab-grade analytical instrumentation platforms, but we've moved them into a handheld form factor, and they serve a multitude of what we think of as critical-to-life use cases. That includes the fentanyl and the opioid crisis, used by frontline responders, law enforcement, interdiction teams, toxic industrial material detection that's identifying VOCs and carcinogens to help prevent acute exposure to emergency personnel. This includes the acquired RedWave portfolio, which brought key complementary capabilities, and it drove a 17% pro forma revenue growth in 2024. Third, our fortified balance sheet now gives us the capacity to pursue new opportunities, including strategic partnerships and continued investment and innovation. We are now a company that is much more focused, well-capitalized, and built to scale into these high-conviction growth markets.
We're tackling some of what we think of as the world's most urgent and escalating threats to public health and safety, and demand for modern detection technologies is accelerating as a result. If we start first considering the opioid crisis, we're seeing a dramatic evolution in both the scale and complexity of that threat. It's no longer just fentanyl. It's nitazene, xylazine, pink cocaine, undetectable precursors. They're all fueling a synthetic drug crisis, with some of these drugs having a potency of 100 times that of morphine. Overdose deaths that in the U.S. have exceeded 100,000 per year have prompted a nationwide public health emergency.
In response, in April, the White House Office of National Drug Control Policy announced an aggressive federal strategy, explicitly calling for advanced technologies to detect smuggling routes and to equip first responders and other frontline workers to prevent overdose deaths. We really think that this is absolutely a priority. This isn't just a future priority. This is a now requirement. Our devices are aligned to this. Beyond drugs, toxic industrial materials represent a growing and underappreciated public health risk. Consumer goods, battery fires, industrial processes are releasing hazardous VOCs. Emergency professionals are increasingly exposed to these compounds. These are now the leading contributor to occupational cancer and firefighter fatalities. Our devices enable fast on-site identification of these hazardous gases and materials, and that's working to support faster decisions and better protection of these frontline workers.
You know, each of these issues, I hope you can see, is a pretty large-scale concern on their own. But when you combine them and you think about the access and availability of these materials, these dangerous substances, and you think about the global tensions that we're seeing, you can see the global security concerns that fall out of that. With evolving threats, there's concerns around AI, chemically driven synthesis, drone delivery-based methods. It's become an imperative to really modernize and have proper detection tools for chemical threats. This is already triggering an expanded preparedness effort across the EU and NATO. The common thread across all of this, it's that it's evolving, right? There is a need now to have adaptable, mobile, field-ready solutions for advanced chemical detection. That's exactly where we're setting up our portfolio. That's exactly now where 908's fully focused.
Public funding has been robust both in the U.S. and globally. We're seeing a long-term macro trend there of increasing investment. This is across police, fire, even correctional facilities and services. As this chart clearly shows, this happens over multiple decades. We believe that the unprecedented global security needs today will only accelerate that further. A couple of stats in that regard. 23 NATO allies are projected to meet or exceed the 2% GDP target for defense spending. That's up from nine back in 2022. We had three allies back in 2024 that met that objective. This reflects a major shift in collective investments. That's driven by countries like Poland, Estonia, Latvia, Lithuania, the U.K., Finland, as well as now Germany.
There is an earmark within, or a goal within NATO to have about 20% of this defense funding targeting equipment modernization. That is directly relevant in many cases to us. In many cases, it is also tied to the U.S. foreign policy stance and the decision and the allied procurements that accompany it. At the same time, in the U.S., the new administration is prioritizing domestic spending on border, customs, military, law enforcement, and drug interdiction. Budget proposals that you see out there in the news, DoD, DHS, those that are relevant to 908 Devices, are showing increases. Bottom line, you know, we think the funding environment is a favorable backdrop. We think we have the right fieldable technology and tools to deliver both in U.S. and international markets. Our first product to address this opportunity was our MX908.
That's shown in the bottom left there. That's our flagship device for trace-level analysis. It's introduced a completely new product class. It brings mass spectrometry, which is a gold standard of chemical detection, out of the lab and into the field for the first time. Truly a handheld, but with lab-grade results at that point of need. Since its full introduction in 2018 through 2024, the MX908 has delivered a 21% revenue CAGR. We now have over 2,800 of the MX908 handheld devices fielded across the globe. We haven't stopped there. As you can see, we've got three additional devices on this screen through a comprehensive proposal portfolio that we've added to, in conjunction with the acquisition of RedWave.
We now have a modern set of tools that span across hundreds of trace analytes, thousands of toxic gases, and tens of thousands of bulk compounds. They deliver collectively a pretty broad analytes panel, and they support detection and identification across air, aerosol, surface, piles, liquids. Together, they're part of a fast and comprehensive toolkit that our customers are using to work through a field workflow. Importantly, we're even doing more with the data. Each of these devices has a rich data set to them. We're working with our customers to enable them to identify trends of what's coming through their regions and communities and to better manage their fleets of devices and gain actionable insights in real time. I'm super excited about the roadmap we have and what we've been calling these connected services area.
Over time, we believe we have a platform approach here that could be sticky and perhaps a driver of some increased pull-through and more customer value. We have on the desk here, I saw Matt and Joe showing it there, but we've got one of our products called the Protector FTIR. We'd be happy to show you after. These products fit into a bit of a broad landscape of detection and chemical awareness tools used by our customers. That's really two categories. First is on the low-tech sensor-based category. These are products that offer minimum selective responses, no identification capabilities, and are valid for a few analytes. You can think about like a test strip solution, colorimetric tubes, smoke alarm style, gas detection. The second is advanced chemical detection.
That's where life science tools, analytical instrument companies compete, and that's where we're playing and winning opportunity there. We've, our competitive positioning is these modern products in that advanced chemical detection space. We've got a comprehensive offering now, but we also now offer a single source to a customer for both the hardware, but they also really much value the support, the services. We have a 24/7 forensics call line where they can talk to us and develop more information about the scenario that they're undertaking. The edge from our side is absolutely our culture. It's really driven around innovation. Our competitive positioning isn't really just the product specs, but it's that support. It's being there. It's the partnership for those customers. It really does come back to our people. I'm very, very proud of that.
As an innovation leader, you know, we really have this broad portfolio and got continued integration work of these devices and innovation. We are really setting up to have accelerated growth. It is supported by three catalysts that are clearly defined. First is equipment modernization. We went through some of the macro drivers and trends that are causing demand across all our handheld devices. In particular, we estimate that there are about 15,000 outdated FTIR units that are in need of upgrade. That is a significant opportunity that we are underway at capturing. We are ready to capture that. We have got the right products for it. As of year-end, the FTIR products, shown in red there through an acquisition, are now fully integrated into our commercial operations. They are already contributing quite positively to our pilot and enterprise statistics.
Second is the next generation of that flagship handheld mass spec device. We anticipate to launch in 2026. It's a new product. We will deliver a step change in performance and simplicity. We're targeting about a 50% reduction in size and weight and lower costs of goods. I mentioned some of the connectivity that we're pursuing that can drive potential for higher consumable service, consumables and connected service. We've got 2,800 of the current generation MX908 devices that are fielded, and we feel this next generation can spawn a strategic upgrade cycle. The third is the next phase of AVCAD. For over a decade, we've partnered with Smith's Detection on the U.S. DoD AVCAD program. Over the last 18 months, we've delivered 100-plus component sets to support initial low-rate production.
Next, we expect to receive notice to proceed to full-rate production later this year with ramping deliveries to follow. At scale, this program could add greater than $10 million of annual revenue potential. The takeaway is that we've got three clear catalysts combined with some powerful secular tailwinds that are setting up across the fentanyl and opioid crisis, across the global rise in defense budgets, and the intensifying U.S. border crisis. We believe we're, we're positioned well for sustainable multi-year growth. Collectively, our technologies comprise a broad analytical instrumentation platform. Our primary focus remains on our core handheld applications where we're seeing the strongest demand and immediate impact. That said, we certainly recognize that there's sizable additional opportunity in the pharma and other applied markets that can be unlocked through partnerships.
Beyond the government programs and integration, we see tangential growth opportunities in our handhelds for GMP, QAQC, industrial hygiene, environmental monitoring, and other applied segments. We already have a presence in these markets through OEM and supplier relationships in industrial QAQC and pharma. Now we're a supplier and partner to Repligen as well post-divestiture. OEM and funded partnerships are estimated to be about 5% of our 2025 continuing operation revenues. Importantly, it's really a strategic foothold for us for the future for growth and market expansion. I want to walk you through in a little bit different of a manner of how this has really transformed, the multidimensional impacts of our business from a numbers perspective. I think it helps if you kind of look back at where we were when we ended in 2023.
At that point, we had one handheld product, and we had an installed base of about 2,400 devices. We had about $300 million in revenue from continuing operations. Our adjusted gross margin was 52%. Our adjusted EBITDA was negative $30 million and a cash balance of $146 million. We had a solid cash position, but we were consuming approximately $30 million in cash annually for operations. Now, if you fast forward to today and our 2025 expectations, we've gone from one product to four handheld products thanks to the acquisition of RedWave in 2024, which is now again fully integrated into our commercial engine. As of Q1, we now have over 3,100 device placements. That's about a 25% increase year over year. We expect a meaningful step up in 2025 revenue from continuing operations and our year-over-year growth percentage.
That lands us in an estimated mid-high 50% adjusted gross margin range for the year. Most importantly, we're on track to be adjusted EBITDA positive by Q4 2025. This really represents a dramatic improvement in that path to profitability. We've also secured our cash balance and anticipate ending with greater than $110 million at year-end 2025. That's up from $70 million at year-end 2024. In short, we've done a lot of work to expand our portfolio, grow that installed base, and improve the margins. Now we're within striking distance of profitability from the actions we've taken. I think it gets even more exciting if you look ahead and think about 2026 and beyond. Then we'll have gone from one product to six products by 2026 in our handheld portfolio.
Massive opportunity ahead for device placements that we estimate to be in the tens of thousands, including those 15,000 outdated FTIR units that are all ripe for modernization. Our top-line growth is projected to accelerate to 20% plus, again, driven by those three clear catalysts: equipment modernization, launch of that next gen of our mass spec, and in full-rate production of the U.S. DoD AVCAD program. We also anticipate further adjusted gross margin expansion with continued year-over-year improvement and year-full-year benefit from our facility consolidation down in Connecticut. 2026 also will mark the first year that we anticipate being cash flow positive on a full-year basis, which is absolutely a critical milestone, allowing us to preserve our cash balance. Importantly, that then eliminates any financing overhead from the equation. We have taken a lot of steps here.
In our view, we're really not just evolving. We're really launching 908 Devices 2.0. In many dimensions of our business, we've solidified our position or created a step change for the better. We've moved from that one product to four with preparations underway for a six product portfolio. That expansion allows us to service more of our identified $2.5 billion TAM and reduce our customer concentration. We've gone from a majority of sales from a few large U.S. federal customers to a much more balanced base where about a third of our total device sales last year came from state and local, then another third from U.S. federal, and the remaining third from international equivalents and accounts. We're seeing the international expansion accelerate, especially across Europe, with strong momentum late Q4 and into Q1 and a pipeline continuing to build.
We're building a higher base of revenue and placements to leverage for accelerated growth. Our adjusted gross margin has already seen multi-years of stepwise improvement, and we expect additional expansion forecasted in 2025 and into 2026. That expansion is really being driven by three things. That's the product mix, that's scale, and just getting more efficiencies across our organization. Our OpEx has gotten more productive. That's been enabling us to achieve the adjusted EBITDA target this year, paving the way for the long-term profitability. Our cash on hand is now solid. It gives us an unlimited runway to execute. To us, it's really a transformative moment, a very exciting moment for us, in 908. We're off to the races. You know, we've already begun executing. We had a pretty strong start to the year.
Our Q1 results exceeded our internal expectations and provided some early validation of our focus strategy. Revenue came in at $11.8 million for continuing operation. That's a 59% year-over-year increase. This includes $11 million in handheld product and service revenue, which was an 86% year-over-year increase. That's a clear indicator in our minds from the demand that we're seeing for these products in the field and the value our customers are putting on the mass spec, but now also the FTIR products as a platform. Recurring revenue grew 54% year-over-year to $4.4 million. That was about 37% of our total revenues for Q1, meaningful percent. This growth reflects our expanded installed base, increasing demand for services, consumables, and that ongoing 24/7 reach-back support I mentioned. Adjusted gross margin reached 54%, which was an improvement of 75 basis points year-over-year.
Driven by scaling and product mix, it was partially offset by international channel dynamics. Adjusted EBITDA improved to negative $4.6 million. That's a nearly 50% improvement if you look back to Q1 last year and you consider prior to the divestiture. Installed base grew to over 3,000 devices, 3,172 devices. That's a 28% increase year-over-year. We shipped 157 devices in Q1, and that's about triple what we did in Q1 2024. We ended the quarter with approximately $124 million in cash and no debt, and that was strengthened by the $70 million inflow from the divestiture. Takeaway, we really were beginning to execute along this much more focused strategy. We are gaining traction with our customer base, and we're operating now from a much stronger position of financial strength than as we set up and move throughout the year.
To close, you know, I think it's now clear, you know, we really believe the actions taken set us on truly a new trajectory here for us. We really feel that that bolsters and fortifies the investor thesis behind 908 Devices. We walked through that we've completed that strategic transformation. We executed here now with discipline and are starting to deliver some good results in Q1. We have a clear set of targets and near-term path to profitability. We have positioned ourselves for long-term growth backed by some powerful macro trends. Importantly, you know, we really believe that we've created that step change in that financials operating model, that focus, and we've transitioned from the broader multi-segment platform to a much more focused high-impact company.
We've got clear target markets, stronger margins, a much more simplified operating model, and a clear path to near-term profitability. Thank you very much and appreciate your time for learning about 908 2.0.
I think time, take time for a couple of questions. Maybe I'll start to allude to the kind of 1/3, 1/3, 1/3 breakdown. No longer have exposure within bioprocessing where they're, you know, biotech funding dynamics, downstream of NIH, et cetera. Obviously the government's just, this is all government-related to government funding. Just as you bucket each of those, what's the typical sales cycle? How did the funnel work? Do most of them start as pilot and move to enterprise? Just, you know, as we're now more focused on that piece, getting a sense for how those funnels evolve. Yeah. Yeah.
The sales cycle can vary based upon those channels you just talked about. Our state and local channel, mainly direct here in the U.S., you can see some orders turn around relatively quickly at times, right? Where you might have seizure funds or short-term budget availability, repurposing of budgeted funds across devices to be focused on our technology. Others might take a year, call it 18-24 months, and that's usually when you're getting it written into grant funding. Some of that might be federal, some of it might be local. We work with our customers pretty closely on that. On the other extreme is our Fed military channel. You can have these pilot and enterprise accounts in state and local, and there may be five-10, maybe 20 plus.
Ohio's one of our biggest adopters, from a state and local perspective. On the Fed military, that could be in the hundreds, and that can take years, right? It can be two, three, sometimes five years to work through, get the allocated funding. We have quite an experienced sales team that's been working with Kevin, myself, and others for years and prior, companies that work closely with the customer to understand the needs, the programs, the programs or records. It's a multi-year journey. Internationally, we use distributors, distribution channels, and that can be everything from local, you know, civilian to more border patrol. It kind of crosses over both of those. We start to manage a pipeline with multiple timelines to getting a purchase order.
Of the catalysts you mentioned, you know, one is the replacement cycle for that MX908.
You have a good feel of what you'll be replacing and the advancements you're making on the technology. The other is replacing outdated FTIRs. Kevin, of course, you've been in this space a very long time, but the portfolio you'll be doing it with is new to 908 to some extent. Many of those devices, I think, are not RedWave devices or maybe competitive devices. As you look at that opportunity, which is maybe the biggest unit potential, when does that start? What is different about the products you're offering today vis-à-vis relative to the legacy ones? How do you attack that opportunity?
Yeah, that's a great question. I mean, I think what we've done now is create a pretty compelling portfolio across FTIR and mass spec to bring to the customer to make a comprehensive toolkit.
When a customer is making a decision about upgrading an FTIR from a legacy or a product that may be in the market for some time, you know, we're able to offer a multitude of selections to that customer, including modern FTIR approaches that've got fleet management capabilities, application software, modern communication options, just been upgraded and updated. The other part in their selection is they also truly want partners that will be there 24/7, are very much focused on this market, and they really like a comprehensive service approach, not just for a break fix, but for that guidance of a, of a scene or a response. How do you put everything in context that's in front of them? They're dealing with some stressful situation.
They're experts at what they do, but they may not be expert at mass spec or chromatography or anything related to spectroscopy, of course. I think we compete into those legacies by certainly modern equipment, modern approaches, but then also some of these advanced software and communication features that are continuing to develop and also that support partnership.
Okay. And for Joe, you know, the P&L transformations, I mean, 2024, the adjusted EBITDA loss of something like $34 million. You've done the divestiture. You're moving consolidated manufacturing in Connecticut. There are a number of moving parts going on in the back half of this year. It sounds like there's quite a bit of line of sight to adjusted EBITDA positive and free cash break even.
What maybe are variables that could add risk to that on the early side or, or later side?
Absolutely. Yeah. It's been something that, you know, as we were in the fourth quarter, you know, kind of making sure the right people in place, you know, looking at, you know, kind of moving our operations from Boston, manufacturing operations down to Danbury, Connecticut in motion. We then made the bold move to divest, you know, the desktop business and focus on forensics, which was key to that crossover. It was really subscale and burning a lot of money. If I think forward to what Q4 can bring and getting to adjusted EBITDA positive starts with the top line, top line growth, you know, to drive. It seasonally is a stronger quarter.
As the pipeline develops and some of the opportunities that Kevin described, I think it starts with top line, attractive gross margin with scale. You would expect there to be a step up in gross margin, controlled OpEx, you know, pretty solid control of costs in Q1. We expect that to continue, to deliver on and set us up really for 2026 on a full year basis.
Okay. That is our time.
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