All right. I think we're gonna get started. Good morning. Welcome back to day 3 of TD Cowen's 46th Annual Healthcare Conference. I'm Brendan Smith. I'm a Tools DX analyst here. It is my distinct pleasure to be joined on stage today by the team from 908 Devices with CEO and co-founder, Kevin Knopp, and CFO and Treasurer, Joe Griffith. It's great to see you guys.
Yeah. Thank you so much for having us.
Awesome. You guys have been busy. It was a busy day yesterday. Maybe Kevin, let's just start, you know, I'll kind of pass the floor to you just for a minute to kind of give us a rundown recap of how yesterday went, maybe some of the feedback to the print over the course of the day.
Yeah, absolutely. Again, thanks for having us here today. We did our earnings for Q4 and full year 2025 yesterday. We were pleased to report about an 18% year-over-year growth for our top line revenue. As you remember, 908 Devices has been going through a transformation, and we were also very pleased to report significant progress on that. As a reminder, 908's very much focused on handheld chemical detection tools for health, safety, and defense tech applications. These tools and this focus has allowed us to really transform the business over the last year. We were commenting that one year ago.
Yeah
...we were here, and we announced the divestment of our desktop business. That's really allowed us to radically change the cost structure. Yesterday, we were able to give some proof points to that, and it was great to be able to announce the growth, but it was also really great to be able to announce that we achieved a milestone of hitting an adjusted EBITDA positive of $0.7 million in Q4. We really view that as a just a significant waypoint, a milestone, a goal that we hit that really just demonstrates that we fundamentally changed the cost structure by having one sales channel going after these handheld tools. I think we are quite pleased with that.
Mm-hmm. Most definitely.
Yeah.
Yeah. Great. I think, as we kind of now look ahead to the rest of 2026, it's a new day, 908 2.0.
Yeah
...in a lot of ways, right? Help us think about and kind of contextualize, given a lot that's going on in kind of your, let's say, emerging space, right? What are some of the underlying assumptions, you all are kind of making about some of your core end markets? Help us kinda contextualize it within guidance for the year.
Well, maybe I can start with the end markets.
Sure
...and pass it to Joe in the guidance comment. From the end markets perspective, as I mentioned, we're really now fully focused on these fieldable, handheld, deployable devices, serving the health, safety, and defense technology space. Those applications are driven by basically 3 factors. One is the illicit drug crisis. We're continuing to see strong demand there and continue to forecast that for 2026. It's an evolving, it can be fentanyl, cocaine, a very long list, and we can get into those details. The second, I would say, is the proliferation of toxic industrial chemicals, that's causing a lot of concern, a lot of need for monitoring carcinogens and carcinogen exposure to first responders.
We'll talk a little bit in more detail about our XplorIR product that's really been doing well, helping and assisting in that space. The third is really the wrapper of those 2, but with the modifier that it's addressing global concerns. Global concerns are the defense side of things. Unfortunately, you see unrest across the globe, and whether it was the war in Ukraine and now Iran or others preparing for unrest across NATO and the eastern flank. We're seeing drivers of those 3 across all our segments, whether it be impacts of those 3 across all our segments.
We've really seen multiple paths to growth. We put out there 15% to 20% in our guide when we released earnings yesterday. You know, really the key drivers and how it would fall out, look at our products VipIR, XplorIR, you have AVCAD, and then don't forget about MX908, which is our first product. Maybe drilling down on each of those, you know, VipIR had a great first full quarter post-launch. It was launched in Q3, had over 40 devices, greater than $3 million of revenue contribution in the Q4, really helped us get to the high end of where we were at for the full year, exceeding $56 million.
XplorIR, we introduced a quant model first year of a quant-enabled XplorIR, which gets quantification on top of that gas detection device, shipped over 150 devices, really good traction across both state and local, international and some federal customers. AVCAD, we did put AVCAD in the guide, probably $2 million-$3 million. You know, as we progress the conversations and where it sits with Smiths Detection as the primary and we're a subcontractor on the components. You know, we'll in the back half, right? It'll be a good growth driver. MX908, just a lot of different secular tailwinds with the opioid funding and, you know, some of the international events, right? Create some opportunity for that to grow in 2026.
Yeah, that's great. I think, I want to kind of double-click into each of these. First maybe at kind of a little bit of a macro level. Help us understand the latest outlook on U.S. state and kind of local sales channels and how this is emerging. I mean, there's obviously a lot happening in Washington, but it feels like, to your point, Kevin, I think there's a lot of ways to actually thread this needle that you all are kind of addressing that in many ways feels a little bit insulated from some of the back and forth coming out of Washington.
Hmm
just given the end markets you're actually targeting.
In many ways, I feel that this is a bit of a tailwind to our customers in terms of funding and funding availability, and if you think in particular about state and local customers. Those are all the towns, municipalities, state organizations across the United States, and we're serving law enforcement, we're serving HAZMAT teams, other first responders, public safety professionals in each of these towns and regions. I really felt we've built a very strong commercial engine that can now service those customers and has been doing quite well. We had overperformance from that segment and that sales channel throughout the year, all year last year, compared to our internal expectations. Very pleased with that. I think it's coming from good commercial execution.
I think it's coming from that we've got a very compelling now full portfolio of products, both the mass spectrometry and then the optical spectroscopy products, and then that we're able to go and offer things that are very compelling to law enforcement also, but to the fire safety side of things. XplorIR for gas detection, and our mass spectrometry is focused on the illicit drug crisis. You look at it from a tailwind perspective and there is maybe a change that's continuous right out of the Washington side. One thing that's been consistent is a focus on border crisis, illicit drugs, concern over the safety of those, and the impact.
You know, I think to our customers, they're seeing there's about roughly $2 billion annually that's available, and we've been seeing that from grant programs out of the Department of Justice, out of the Department of Homeland Security. We are continuing to see those funds flow and continue to see other avenues for some of it, in particular like the drug crisis. There's some areas where now it's been deemed a Weapon of Mass Destruction, fentanyl, in December by an Executive Order, and that opens other channels of funding for our customers. Yeah, in many ways we're orthogonal to some of the maybe more traditional tools companies because I think we're taking it more aligned to some of these health safety sides.
Gotcha. Yeah. I did wanna ask also, you know, you mentioned some of the unrest abroad, right? I think this is a conversation that, you know, without kind of actually even needing to dive into the specifics of it, help us understand kind of the context of the impact to 90 8, right? It feels like is it kind of just a lot of folks kind of turn to and take a harder look at some of their defense spending and that inevitably then lends itself to, "Okay, maybe we actually needed this," or, "Maybe we weren't investing enough in this." Is that kind of the right way to think about that?
At the top level, I think it does start there. You're seeing a lot of news about NATO countries increasing their defense spend as a % of GDP. You're seeing that there was one step up earlier last year, and then there was another significant target of about 5% of GDP for NATO countries over the next many years. I believe it's around a 10-year period for that goal. That kind of sets the sentiment of what you just stated, that it's a kind of an overall lift of spending across the board. I think it gets down to other layers more specific.
If you start to look at the crisis in Ukraine and the war that's had there, we had seen last year about $2 million worth of equipment going in post the, maybe, post the initial phase of that war, for monitoring, and monitoring devices, air, environments, aerosols, things of that nature is what our products can do and across a very broad spectrum of threats and safety concerns. I think that's very specific. We also saw across the eastern flank of NATO, Poland, Czech Republic, Finland, we saw those countries probably taking that macro, but into immediate action because those countries maybe felt more exposed being on the border there, and concerned that the crisis could extend into their territory. We did see some good pickup and sizable orders.
The general backdrop, though, is I think how you framed it, that there's a rising tide of funding being spent there, across Europe, and that's causing people to modernize their fleets of devices.
Gotcha. Okay. All right. Maybe now let's kind of dig into some of the individual products here. So you mentioned VipIR. Obviously, the launch is going very, very well, right? I think, you mentioned over 40 placements in Q4. Maybe can you speak to some of the trends in the U.S. and internationally and what maybe what some of the different dynamics that you have at your disposal to kind of navigate the respective markets accordingly?
Yeah, absolutely. VipIR is our newest product. We launched it in July. It's a combination product that takes 2 technologies. It takes Raman spectroscopy and FTIR spectroscopy and fuses it with some proprietary algorithm. Why? You do that so that you can identify unknown solids and liquids. You take a drop or a tiny amount of a powder. Importantly, the system automatically manages the workflow for the customer. You place that sample, it will use the best of the available technologies, and it will fuse answers from the 2 technologies to give you one coherent result.
Customers across customs agencies and HAZMAT teams really like that kind of multiple technology lens into their sample and not having to do the, this device says X, this device says Y, how do I bring those 2 answers together? We're looking at the same spot of the sample, so you don't have to worry about mixing of the sample, homogeneities to the sample, and we're providing one answer. I think it has a very compelling, differentiated set of capabilities. We have launched it in July, and we reported yesterday that we shipped about $43 million of revenue in our Q4. We were very pleased with the uptick of that.
Can I maybe just ask as kind of a follow-up to some of this too?
Yeah. Mm-hmm.
Because it's, you know, I've seen the device. It is really cool to kind of look at in person and, you know, you mentioned kind of combining the liquid versus the gas. When you kind of think about the growth trajectory for VipIR specifically, is this kind of replacing some of the earlier separate devices? Do you think it's kind of there is a market for all 3 kind of separately? How does that kind of more mature market look like based on kind of early feedback?
Well, first I would say that our customers really appreciate a toolbox approach, and they really do appreciate having kind of the best of class technology for the problem. The VipIR is being focused on solids and liquids in that use case, and our XplorIR is being focused on gases, for example, and our mass spectrometry being absolute ultra sensitive for things like trace invisible amounts of illicit drugs. They kind of appreciate having a full portfolio of products there. It's not really about a cannibalization of one of our products. There are elements that are replacement markets where we're offering something that's maybe more modern than what's out there in the competitive landscape. There are other areas like XplorIR that's just opening up totally new capabilities that just aren't served today in a practical way.
Okay. Now, I fully appreciate it's early days, but do you have any kind of sense of like the bolus of instrument sales just within VipIR and how we should kind of extrapolate that over the course of 2026? Was there like a palpable sitting market ready and hungry for it, and maybe it'll kind of start to pan out?
I think a bit on what Kevin was saying, there is a market out there. It's a product, an alternative, more up-to-date, you know, capable, you know, especially with TeamLeader capabilities and the one sample approach. Yes, out of the gate, a lot of good interest from end customers also getting, you know, demo equipment, paid demos into our distributor network throughout the world. We're placing that to then accelerate end customer trials and testing and to drive 2026 opportunities. A big piece of, I think, the 2026 opportunity is international driven, whether it's custom borders, other, you know, first responders, with the VipIR. Also state and local, you know, there's real need there. Fed and military takes a little bit longer, right? More robust testing cycles and longer term pipeline opportunities.
A lot of what we'll see in 2026 is the pickup, and we've seen some initial traction, and it's actually putting a little bit of. It's a good pressure, but we shipped almost everything in the Q4. We're working to build up, and I talked about yesterday on seasonality, just in Q1, we're kind of replenishing the stock and it's not a demand issue. It's a, it's a build plan and getting units out the door in time. It's. Yeah, we're really excited at what it can do. Can it be 2, maybe even 3 times, you know, the level of 25.
Awesome. Great. I know, Kevin, you also spoke to kind of the operational efficiency now that's really built in increasingly in, into 908 Devices. I know adjusted gross margins were kind of guided to, I think, mid to high 50% range...
Mm-hmm
... really being driven by kind of the product mix and first full year manufacturing in Danbury. I guess when we think about evolution of the margins there, what are some of maybe the easier sources of potential upside and how we should kind of think about that as a priority over the kind of next 12 to 18 months?
Yeah. From an adjusted gross margin perspective, we're at 56.7%. We're looking to target at least 100 basis points improvement. A piece of that is the full year manufacturing in Danbury. Having completed that, mid 2025, seeing some of that and with volume, right? A big piece is mix and channel volume. We also did a small acquisition midyear last year on machining capabilities to be able to insource. A big initiative for us is to insource capabilities to drive the BOM cost down to improve margins. In 2026, we hope to see some of that benefit. We have a few offsetting elements that we're working through, including VipIR. It's great on the top line, but it's early days, right? It's gonna take some time.
It's our lower margin product, but we have opportunity to have cost out as we move forward, but that might not kick in till 2027. In our Q3 earnings, we talked about service, and we had a customer that was not funded in the current government cycle. That'll be a headwind as we go into, but with volume, with scale, you know, we see an opportunity to get that at least 100 basis points improvement and, you know, longer term, you know, continue, you know, to escalate. Will it ever get to 60? We hope someday, but it'll take a few years to scale to that level.
Got it. Okay. Okay, great to level set. oh, great. let's talk AVCAD, right?
Yeah.
It's nice to see, you know, that partnership now guiding to, I think, $2 million-$3 million in 2026. Sounds like could be, you know, $10 million annually at full rate productions over time. I guess what kind of visibility do you have these days? I know this is a question we regularly ask you guys as it does kind of perpetually kind of rotate back. What kind of visibility do you have at this point, and really what are some of your expectations internally in kind of hitting that, you know, closer to $10 million over time?
Absolutely. For everyone's benefit, we started the AVCAD program, could be about 10 years ago, in partnership with Smiths Detection. Smiths Detection is the prime contractor, and we're supplying components and subsystems. Those components and subsystems are largely based on our mass spectrometry, our MX908 product. They're being packaged into a particular configuration for the Department of Defense, or now the Department of War, for monitoring aerosols. Think of it as a device to monitor the air quality, the concerns around the base perimeter. It's a device that can be deployed in many, and to ring-fence a location, for example, and lots of great communication options, shipboard options, things like this.
It's a, it's a development effort that's been going on for some time to really co-customize it, and Smiths Detection being the leader in that space and logistics that's required for that, such a green army program, if you will, has been a great partner on that. We've worked through and completed a initial production phase, and we're now at the point of fall that they completed the last testing on that and asked for an RFP. Smiths now is working on that RFP and negotiating with the government for the award of that RFP and the quantities and timelines on it. We remain very encouraged that we should see an award here in the spring based upon all our conversations.
We've pegged it at about a few hundred systems likely, to the production side probably in the H2 of this year.
Mm-hmm. Mm-hmm.
In Joe's, the guide that we mentioned earlier, there's $2 million-$3 million in that on its way to the $10 million+ when we get to the full rate production.
Great. I, and I know earlier you mentioned, kind of tied into the defense spending conversation as well. I mean, I think a lot of folks are super familiar with kind of 908's indexing towards kind of the drug trafficking side of the business too.
Mm.
You know, you're increasingly talking about some of these other use cases, right? These emerging markets you all can kind of address increasingly more directly, right? I guess extrapolating now 5... Pick a number of years realistically, how do you kind of strategize and maybe prioritize where you go and what a slightly more mature 908 ultimately looks like in terms of the end markets that you're targeting?
Yeah, sure. 908 is really has if you think about at our core, it's innovative analytical instrumentation, but in smaller, portable, handheld form factors. We really like best-in-class robust platforms, so things like FTIR or mass spec, you know, these are the pinnacles of analytical technologies, but shrinking them down into something that can be both manageable in size and maintenance, but also simple to use. We spend a lot of time and effort on user interface and that user interaction, the algorithms, all of that side of it. That's a pretty broad mandate. Today we really see that there's just an immediacy and urgency across these public safety, health, defense, monitoring type applications, drug, carcinogens that we've been talking about, global concerns.
We see that as that's a great market that needs actionable answers very quickly. It's sizable. It's growing. We're getting efficiencies now post our transformation by having what we consider a pretty best-in-class sales channel now developing for that. You're right that the underlying technologies are quite broad. We do see applications in QA/QC. We do see applications in industrial applied, call it, small molecule PAT, things of that nature. Today we have about 5% of our revenues come from those types of categories, but we're doing it through OEM, and we think that's a great efficient way to expand the access of our platform without taking on the full burden of the sales and marketing commitment to do that.
Today with, at 5%, as you know with the divestiture, we sell now components to Repligen. We announced last June a $6.6 million 3-year supply contract with a large cap analytical tools company we're providing some of these precision components to. We think we can keep taking our platform over time and expanding the areas in that OEM and partnership side, maybe without taking on the full burden of all the channel costs. I'd say that's maybe more near or medium term to kind of drive that. In our core markets, we also think there's great opportunity to work on integrations of those robust technologies. Robots, drones, quadrupods. We have various seeds of those out there today in different collaborations.
Our device was used on the back of a robot in the Indy 500 going through tunnels, looking for toxic chemicals that could make someone sick or hazardous under the raceway. Our device has been used by the Thales French Defense Group to demonstrate a capability on one of their new platforms. We have a few of these seeds there and we've done various flying fixed-wing aircraft mapping plume models and things like that for safety reasons. I think that's gonna be a very interesting area that we can kinda keep building out and accessing. Yeah, fundamentally, these are very robust, broad analytical techniques that we're just bringing and making more accessible, and we're gonna keep leveraging the channel that we've developed and now become efficient.
We'll use OEMs to serve some of these other areas, and over the long term, you can expect more call it integrations.
Got it. Okay, great. An embarrassment of riches in many, in many respects. Maybe can I. You mentioned FTIR, I know we talked about it a little bit earlier, but sounds like the replacement cycle for FTIR devices, and I think it's about 15,000.
Yeah.
Kinda turned into a pretty, what seems to be a pretty strong growth driver now. You've mentioned really only a small portion of them have ultimately been replaced to date. Help us kind of unpack, how durable that is kind of as a driver moving forward and what just some of the dynamics are of selling kind of the replacement instruments for FTIR?
Yeah, for sure. As we mentioned, there are robust techniques that customers are used to in the field and they need every day with the more complexities of our world, more modern solutions. They are always ripe to upgrade and get a new capability. FTIR is a classic technique that these folks have adopted. Yes, we've pegged it at approximately $15,000. About 50% of our placements last year were FTIR containing optical technologies. You know, I think there's a tremendous runway there. It's really also as Joe mentioned earlier, there's a service component, there's accessories, there's consumables. About 35% of our revenues last year were in our recurring definition. We briefly TeamLeader as an attribute connected to our VipIR.
That's also an area that we think we can grow out the recurring. I think we can build out a pretty durable franchise serving those customers on the replacement side, but then things like XplorIR are giving them great new capability that they just don't have today. We're just immediately going in, and it's a new tool in their toolbox.
Gotcha. Yeah, I mean, you TeamLeader, which is kind of one of.
Yeah.
my favorite aspects of the platform, I think. It's kind of an interesting, I think underappreciated side of where this realistically could go. Maybe just help us kinda contextualize where TeamLeader today, and how should we think about it as You know, when it comes to as a growth driver for where a lot of these devices could ultimately be implemented and how? 'Cause I think there's a component here of oversight over kind of a broader swath of where they could realistically be implemented. Help us understand what the strategy is for TeamLeader.
TeamLeader is part of an overall strategy to have more predictability and more of a, call it, recurring nature to our business, right? Let me walk through that, and then I'll get into the specifics TeamLeader. to make things much more predictable, make things more recurring, if you will, we're focused on a number of areas. One, the state and local performance that I mentioned earlier, hugely helpful. It's single unit orders, double unit orders, many, many transactions that are smaller in size, much more predictable, maybe less, call it, lumpy than, call it, those large federal and military enterprise sales that we love, but there can be a predictability element there. We were super happy to have 43% of our revenues last year being driven by this type of state and local sales.
That's an element of predictability. Recurring revenue, I mentioned 35% of our total revenues last year were recurring. That's an element of predictability. That's, think swabs, accessories, some of the OEM components. We also like to think about areas that we talked about, some of these partnerships, integrations, further OEM capabilities, and then also the software side. What can we do across each of these vectors to give us a broader amount of recurring? If we peg that today for 2026, maybe that's in the 40%+ range, if you think about the programs and the AVCAD and those expectations as it gets rolling. We do think that element of it can be significant over time.
TeamLeader specifically is a software platform that we're working to develop that enables connectivity across ultimately all of our products, today our FTIR products, and then soon our mass spec products. It's an app that's downloadable on the app stores. Today, it's a free version. As of Q3, we had about 700 users of that. It's really to share data, to enable fleet management, to enable things like custom libraries for your enterprise organization for things of your concern, trend analysis, looking at what's being measured, looking at efficiencies of the device.
What we're finding is that the management of the organizations that maybe purchase these multi-million dollars worth of investments really appreciate getting that communication, but also the end user does because they're able to instantly share results with others in the field, their leadership, their command chain, others even including 908, where we offer a reach back service where we can help them interpret their results. We TeamLeader as a, just a very exciting area for us to help in the predictability of our overall business. Today it's a free app. Where we're working towards is having it have enough compelling features that we can charge for that. There are some very interesting things in terms of trying to unlock.
Right now we're shipping devices that have a cell phone capability in TeamLeader, the paid version, would unlock that and enable people to use that to have an online, instantly connected device, particularly important across the state and local. Yeah, it's very exciting for us. I think our chief sales guy, if he was here, would say it's the most exciting product we got going on in development, right? Because it's just such a very compelling differentiation than what's out there in the market.
I mean, when you showed it to me in January, I kind of walked away thinking like, is this something that could enable much larger scale of orders from customers too? I mean, if we're thinking about Border Patrol, for example, if you can kind of give them this add-in on top of the actual device itself, and they can monitor not just individual devices, but really kind of the flow of some of these chemicals.
Mm.
for a broader geography. Is that kind of how we should think about the kind of medium to longer term value add for something like TeamLeader?
I mean, I think it's got great value add in those situations. I think it also has great value add even in those one-off sales to a state and local organization. If you think of just, again, like if a small town has a device, they can and it was connected over an LTE connection TeamLeader, people on different shifts that may be not at scene, may be the person that's got the most experience but is not on call at that moment, instantly can share results. I think it has value in that, call it, one-off individual case. You're right, the enterprise level connectivity to be able to look at trends. Postal Service is a great user of it. Today, Postal Service has over.
200.
200 devices that they have out there today for postal inspections. A big user of it, able to see where their devices are. They're able to manage those devices, see the productivity, see where the trends. Yeah, I think it has that enterprise impact. What we're really finding is it's just, it's a great conversation in the sales process, 'cause now no longer are you just talking about a device, you're talking about an ecosystem of how to connect these investments.
All right. Maybe in the last minute, I wanted to make sure we also touch a little bit on 2.0. MX908 2.0.
Mm.
What's kind of now the expected cadence for you guys over maybe 2026 plus? Where are you anticipating some of those improvements to come from? Really ultimately the replacement cycle should look like.
Yeah. Our mantra is to continue to innovate and disrupt ourselves, right? That's the case for our next gen mass spec platform. We really are not feeling competitive pressure on our existing MX, we just have advanced so much on the technology side that we can make significant improvements in size, simplicity, that use case connectivity to TeamLeader, for example. We're working hard on that. Because of that competitive dynamic, we haven't put an exact date of when things would come out. We are on track and we do expect to have more information as we march through 2026 here to share. Super excited about it because we have 3,100 of our, of our existing MXs out in the world.
Obviously, if we can make a step change in performance and do our job right, it could be a big driver for us as we go into a full year situation in 2027.
Awesome, guys. Thanks so much. I think with that, we are at time. Appreciate everybody paying attention, listening in. Always great to see you guys. Thanks for joining.
Thank you.
Thanks for having us.