Good morning, ladies and gentlemen, and welcome to the 908 Devices Fourth Quarter 2022 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded today Tuesday March 07, 2023.

I would now like to turn the conference over to Kelly Gura, Investor Relations. Please go ahead..

Thank you. This morning, 908 Devices released financial results for the fourth quarter and full year ended December 31, 2022. If you've not received this news release or if you'd like to be added to the company's distribution list, please send an e-mail to ir@908devices.com.

Joining me today from 908 is Kevin Knopp, Chief Executive Officer and Co-Founder; and Joe Griffith, Chief Financial Officer. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Forward-Looking Statements in the press release 908 Devices issued today.

For a more complete list and discussion, please see the Risk Factors section of the company's annual report on Form 10-K for the year ended December 31, 2022, and in its other filings with the Securities and Exchange Commission.

Except as required by law, 908 Devices disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast, March 07, 2023.

And with that, I would like to turn the call over to Kevin..

Thanks, Kelly. Good morning and thank you for joining our fourth quarter 2022 earnings call. Throughout 2022 we continued on our mission to support the critical-to-life applications of our customers. I want to thank our team for their dedication and commitment to serving our customers throughout the year.

We ended the fourth quarter with $11.6 million in revenue, bringing our total revenue for 2022 to $46.9 million, up 11% from the prior year. For the full year, our desktop revenue grew by more than 2x our overall growth rate at 25%, in line with our expectations.

We also saw strong recurring revenue contributions more than 100% increase year-over-year. While the underlying need for our products remain strong as forecasted adverse macroeconomic factors impaired our progress in Q4.

As previously communicated, we began to see protracted capital purchasing cycles in mid-2022, and we continue to see them here in Q1. While we anticipate these industry headwinds to persist through the first half of 2023, I'm confident in our long-term trajectory and feel we are doing the groundwork needed for both near-term and long-term success.

We are keeping a tight rein on our operating expenses. Joe will provide more details shortly on some recent actions we have taken in that regard. We are developing and launching new products to meet the growing demand for robust analytics at the point of need.

We are pursuing diversified end markets, forensics, bioprocessing, and research, and importantly, we are retaining a solid cash position with multiple years of runway. We have made some encouraging progress throughout the year. Now I'd like to provide a brief update on our progress across the five focus areas we set for 2022.

Starting with our first objective of driving customer adoption. For our desktops, we grew our combined REBEL and ZipChip base to more than 350 devices, adding 80 devices over the year. Nearly one quarter of these placements are within top 20 pharmaceutical companies with 10 accounts now each having a half a dozen devices or more.

This larger combined footprint across top pharma is important as it strengthens our ability to serve these customers and allows us to broaden our conversations as we define, develop, and launch additional bio-analytic products.

We have also been seeding future REBEL opportunity through broadening our base of users with more REBEL orders from new customers than existing. When looking at the full year, roughly two thirds of devices were placed with new customers. Desktop consumable purchases and service revenues were up year-over-year by more than 55%.

In Q4, we also received our second highest number of scheduled consumable orders indicating our customers' intent to incorporate REBEL into their 2023 priorities.

While we have seen the bioprocessing industry and specifically the preclinical process development customers become under pressure in the second half of 2022, we are still seeing enthusiasm for our products and a strong underlying fundamental need for more analytics to enable more advanced therapeutics.

Our desktop devices today are being used in support of advanced therapies and the forecasted pipeline of cell therapies is a key driver of our expanding total addressable market in the coming years.

According to the Alliance for Regenerative Medicine, there are now 2,220 active clinical trials for advanced therapies, up slightly from mid-year 2022, and there has been an 11% year-over-year increase in the number of cell and gene therapy developers worldwide.

At the recent Advanced Therapies Week Conference in Miami this January, a main theme was the need to accelerate corporate investments in digitization and analytics. Our messaging for the need to transition analytics from disparate offline manual instruments good at-line and online automated and connected solutions ran clear.

For our handhelds, we grew our MX908 base past 2,000 devices adding 370 devices over the year. As mentioned in this year’s United States President State of the Union Address, tragically, the opioid crisis continues with deaths of more than 70,000 individuals annually. This crisis continues to be a major driver of customer adoption.

In December, The Washington Post ran a weeklong series on fentanyl deadly surge in the U.S. The first article profiled a seasoned Homeland Security investigations agent who uses our MX908 device at overdose seems to quickly determine when a lethal batch of fentanyl hits the street.

The article highlights the crucial time loss for investigative leads when samples are sent to a lab, which can take weeks to process, which is just untenable. The applications for trace fentanyl detection are pervasive. We received multiple orders for the MX last year from the Department of Corrections in New England, the Midwest and the West.

A Minnesota Corrections official noted that the MX908 has been an integral tool to combat the introduction of narcotics into Minnesota State prisons. As a result of such impact, we are continuing to build a pipeline of opportunity through the progression of testing, trials, and pilot programs that turn into valuable enterprise accounts.

In 2022, we saw progression with 15 accounts in pilot programs representing approximately 100 units of opportunity up from 11 accounts at year-end 2021. In addition, we now have 17 enterprise accounts with more than 800 devices of additional combined opportunity, up 15% compared to year-end 2021.

Overall, we’re pleased with the adoption for new and existing customers across all our product lines in 2022 and believe that our handhelds provide diversification in 2023 amidst the more challenging bioprocessing macro environment. Turning to our second objective, accelerating commercialization.

We had targeted growing our commercial team to 80 team members by year-end. While we finished the year close to this target in the middle of 2022, we shifted to a more strategic investment approach given the macro market. This included bolstering our European presence through leveraging our acquisition of TRACE Analytics.

Now as 908 Devices GmbH, we have a legal entity and base of operations in Germany to better serve our European customers and to enable direct sales and support in the region. Turning to our third objective, developing and advancing our product portfolio.

We were thrilled to acquire TRACE Analytics last August, which strengthened our core microfluidics technology providing us with online aseptic sampling and biosensor technology.

In January, we launched MAVEN, our first online device that connects directly to the bioreactor, providing real-time monitoring and control of glucose and lactate in cell culture and fermentation processes. MAVEN enables cell free, sterile and safe sampling with no volume loss or prep required.

This approach reduces lab costs and saves operator time, thereby accelerating workflows. We think of MAVEN as the REBEL’s buddy, as the two devices work in concert. REBEL quantitates 33 additional cell culture media nutrients including amino acids in less than 10 minutes.

REBEL leverages our microscale Mass Spec technology while MAVEN incorporates discrete biosensors for glucose and lactate detection, which are two analytes difficult to detect using Mass Spec. Both devices are simple to use and measure key process parameters leading to improved bioprocess control.

We think the reduced lab cost and operator time savings of the online connecting MAVEN will resonate well with our customers in this market and we are excited to see things develop. It’s a great precursor to our REBEL online as well. We are seeing commercial contribution now for MAVEN.

In Q4, we shipped more than a half a million dollars of MAVEN and related sampling products to cell and gene mAb and fermentation customers as well as the OEM partners.

The key takeaway here is that we have a robust roadmap and strategy of process analytical technologies beyond any one product we are creating a full portfolio of complementary devices, ZipChip, REBEL, MAVEN, and another new product we’ll announce later this year, which will also be exciting and very differentiated.

For our handhelds, we expanded the capability of our MX908 device in 2022 to detect highly toxic and illegal pesticides.

We collaborated with the United States Forest Service, a division of the USDA to develop this capability that enables its field personnel to safely conduct pesticide testing at remote illegal marijuana growth sites rather than to wait weeks for lab results.

The results of this work are driving conversations now at the state level on how to better equip responders as an enterprise and create data awareness to enhance their safety. We value such collaborations with our customers as they can lead to impactful developments and expansion of our devices.

Our Aero module released in the spring of 2021 was informed by our customers, and we have worked closely with our customers on its validation. We have seen significant adoption of this accessory with 100 shipped in 2022, and we credit our close customer collaborations.

From time to time, we selectively work on customer funded development efforts towards the same commercial goal and outcome.

In 2022, projects included alternate MX configurations for longer runtime with enhanced communications for drone integration and in partnership with RADeCO for integration with Spot, Boston Dynamics’ nimble robot that climbed stairs and traverses through rough terrain with ease, yet is small enough to use indoors.

We saw an uptick in Q4 contract and license revenue due to the timing of such projects, which Joe will discuss. Our focus commercially last year was to build upon the capabilities of our existing products and we’re excited to start off 2023 with a new product launch and our R&D team has a lot in the hopper for both our handhelds and our desktops.

Turning to our fourth objective, broadening our bio analytics platform. Our goal is to become a key enabler of Biopharma 4.0 with a tech stack of connected process monitoring and critical product quality attribute analysis devices that inform models that support better real-time predictive outcomes.

Data from our at-line REBEL device enables biopharma researchers to identify and control key process parameters in bioprocessing workflows. Our online MAVEN device enables monitoring and importantly control of the base cell culture ingredient glucose.

Our ZipChip CMS is an offline but simple to use device that provides rapid characterization of multiple product quality attributes. Over 2022, we work with leading institutions focused on developing and implementing new biomanufacturing processes and connecting our devices to the needed workflows.

Our collaboration with UK-based CPI has demonstrated the value of at-line cell culture media analysis to inform feeding strategies for improved cell growth.

CPI process engineers use real-time data from the REBEL to optimize nutrients, resulting in increase in tighter by up to 40% and a reduction in toxic metabolite accumulation and a significant reduction in design of experiment times.

In our alliance with AMBIC, an industrial academic consortium, researchers are leveraging REBEL’s at-line informing power to develop predictive cell culture media feeding models for improved product quality and reliability.

We’ve also been working with key academic research institutions such as Emory University, where researchers are developing novel microbead libraries for CAR T-cell therapies and are using REBEL to inform feeding strategies to control and optimize T-cell activation.

And at our user meeting in September, MIT researchers underscored REBEL’s value in their ability to rapidly monitor and profile nutrient consumption of recombinant AAV producing cells in a perfusion process.

At conferences and in publications, customers such as Boehringer-Ingelheim, Bio-Techne, Fudan University and University of Connecticut highlighted ZipChip’s high resolution, high sensitivity that is comparable to LCMS method, but with much faster separations and minimal sample volumes.

Most recently, in a paper published in the Journal of Pharmaceutical and Biomedical Analysis, scientists from Regeneron Pharmaceuticals noted that our ZipChip CE-MS system is an alternative in complimentary method to more traditional chromatography and that ICEF methods to support the characterization of charge variants in different types of therapeutic antibodies.

Charge variant analysis is critical for understanding the structure of biotherapeutics during drug development and product release.

We are always delighted to hear our customers and collaborators tout the value of our desktop devices in characterizing process and product attributes as we focus on creating a complete portfolio of complimentary products.

And finally, turning to our fifth objective, laying an Omics Foundation, as scientists seek to understand how proteins and metabolites orchestrate a cells function, there’s a rising demand for accelerating mass spec based workflows, which is critical when working with large sample sets.

As we’ve shared previously, we partnered with the University of Washington and Thermo Fisher Scientific to evaluate the coupling of our prototype microfluidic chips with very fast ion trap mass specs for proteomics applications.

In December, in collaboration with our partners, we presented a poster at the World HUPO Conference that demonstrated the prototype chip’s ability to deliver increased sensitivity 10 times faster than traditional nanoscale liquid chromatography.

We are excited about the research progress we made in 2022 with these advanced microfluidic chips and look forward to continued scientific progress this year.

Overall, while Q4 2022 presented challenges, we progressed our full year objectives and we remain confident about the value of our technologies platform and the enthusiasm we see for real-time analytics at the point of need. With that, I’ll turn the call over to Joe for more detail on our financials..

Thanks, Kevin. Starting with our full year results, total revenue for the full year 2022 was $46.9 million, up 11% from $42.2 million in 2021. Product and service revenue from handhelds was approximately $29.5 million for the full year 2022 compared to $29.2 million in the prior year.

Product and service revenue from desktops was $14.9 million for the full year 2022, growing 25% year-over-year and in line with our expectations of 2 times our overall growth rate. Recurring revenue for the full year was $15.7 million compared to $7.8 million in the prior year period, representing growth of 101%.

Recurring revenue growth was driven primarily by handheld accessories and consumables, including the aero module. Service revenue across both handheld and desktops and desktop consumables mainly related to REBEL kits. License and contract revenue for the full year 2022 was $2.4 million compared to $1.1 million in the prior year period.

License and contract growth was driven by incremental funding secured in the fourth quarter of 2022. Related to exploratory commercial work, we were doing with partners, which you expect to conclude in 2023. Gross profit for the full year 2022 was $26 million as compared to $23.2 million in the prior year period.

Gross margin was 56% for the full year 2022 as compared to 55% for the prior year period of 50 basis point improvement. As we think ahead to 2023, we expect our gross margins excluding stock-based compensation and intangible amortization to be in the mid-50s, consistent with prior periods.

We continue to expect that with scale we’ll be able to expand our gross margin to the high 50s. Operating expenses for the full year 2022 were $61.4 million as compared to $45.3 million in the prior year period.

This increase was driven primarily by an increase in personnel related costs, including an increase in stock-based compensation of $4.5 million. Net loss for the full year 2022 was $33.6 million, compared to $22.2 million in the prior year. While we are pleased with our overall results for the year, as Kevin shared, we experienced a slowdown in Q4.

With that context, let’s look more closely at our fourth quarter results. Revenue for the fourth quarter 2022 was $11.6 million compared to $15.8 million in the prior year period. Recall that in Q4 of 2021, we had a large shipment of MX-908 devices to the U.S. Army, which totaled approximately 8 million, making this an unusual period to compare.

Handheld revenue from our MX-908 product for the fourth quarter 2022 was 7.1 million, which included 55 MX-908 handheld device shipments. Desktop revenue for the fourth quarter 2022 was $3.3 million. This included 10 ZipChip interfaces, three REBEL devices, and our first MAVEN shipments.

This represented decline in desktop revenue of 23% and was primarily due to a decrease of REBEL device placements, offset in part with growth and service and consumables mainly related to REBEL kits and product revenue from MAVEN and related sampling devices.

In fact, desktop service and consumables revenues were up more than 55% for the fourth quarter. License and contract revenue for the fourth quarter 2022 was $1.2 million compared to $0.3 million in the prior year period. Gross profit was $5.9 million for the fourth quarter of 2022 compared to $9.1 million for the prior year period.

Gross margin was 51% for the fourth quarter 2022 as compared to 58% for the prior year period. The decline in gross margin was largely due to fewer device shipments. Total operating expenses for the fourth quarter of 2022 were $16.3 million compared to $12.7 million in the prior year period.

Net loss for the fourth quarter of 2022 was $9.8 million compared to $3.5 million in the prior year period. We ended 2022 with $188 million in cash and cash equivalents. In addition, we have $15 million of debt outstanding. As Kevin mentioned, we are maintaining our disciplined approach to capital deployment.

We are being proactive and efficient in our investments as we focus on our product innovation, market penetration and commercialization efforts.

In line with these efforts here in 2023, we recently reduced our headcount by approximately 6% and expect our headcount to remain relatively flat for 2023, as we prioritize roles and responsibilities across the organization. We had 227 employees as of December 31, 2022.

We are targeting to keep operating expense growth below 10% in 2023, excluding expenses related to non-cash, stock-based compensation and intangible amortization. Cash consumed from operating activities, excluding working capital for the full year 2022, increased modestly to $24 million compared to $17 million in the prior year period.

The increase in cash used was primarily related to headcount expansion. A key focus for us is running our business with an eye towards profitability. We have multiple years of cash runway and are well capitalized to support our long-term growth objectives.

Looking ahead in 2023, we expect revenue to be in the range of $48 million to $52 million, representing growth of 2% to 11% over a full year 2022, 7% growth at the midpoint.

As Kevin discussed earlier, we are continuing to see protracted sales cycles and more conservative capital budgets, particularly in the bioprocessing market, which we expect to continue through the first half of 2023 and thus anticipate a similar seasonality trend to 2022.

At this point, I would like to turn the call back to Kevin for closing comments..

Thanks, Joe. For 2023, we continue to focus on our core growth objectives. First, grow revenue by penetrating new accounts and radiating across large biopharma accounts, as well as progressing handheld device pilots to enterprise scale.

Second, advanced and broaden our product portfolio with simple, smart and connected devices with an emphasis on bio analytics solutions. And finally, third, lay the Omics Foundation to address emerging proteomics and metabolomics opportunities. We believe 908 Devices is uniquely positioned to capture the opportunity in front of us.

We have multiple new product releases in the process analytical technology space, building a complementary device portfolio with the first already launched in January and a second later this year. We have a diverse offering with our handheld devices in the forensic space.

We believe these handhelds will continue to be critical with rising geopolitical uncertainties and the ongoing fentanyl crisis. And finally, we have a strong cash balance with the runway beyond 2025 as we have remained efficient and thoughtful on spend and headcount working to ensure expenses are not outpacing our revenue growth.

With that, we’ll open it up to questions..

Thank you, sir. Your first question will come from Matt Larew at William Blair. Please go ahead..

Hey, good morning. Thanks for taking my question. Kevin, could you maybe just go in a bit more detail on the challenges you’re seeing within bioprocess. And I think, company by company the certain season we’ve heard a different take and different levels of headwinds or not. We’ll just be curious what you are seeing specifically.

I think you called out maybe challenges in the process development side for small biopharma, but any additional detail as we move into 2023 would be helpful?.

Sure. Yes, happy to Matt. Yes, for sure. I don’t think our observations are too much different from what others are seeing out there. We’re obviously selling our products into the preclinical process development space, so not the GMP space here largely.

And yes, as we forecast it in our Q3 call, we’re seeing those customers just under more pressure and we’ve just overall seen deal velocity slower there.

And that’s starting in the second half of last year and things are just taking longer and we’re just seeing people being more thoughtful with the investments of their cash and that prolongs purchases and can add evaluations and steps.

And I don’t think we’ve seen a change in the underlying demand particularly as you think about advanced therapeutics and where the world’s going and the need for more process control to support those more advanced therapeutics. And we have a good foothold in top pharma. But you’re right.

We do have a substantial number that are small biotechs as well. So, we’ve seen some pressure with those customers across work..

Okay. On MAVEN specifically, they're not there for a couple of months.

Could you just maybe add any color around early conversations with potential customers? How they’re responding to the offering, whether they’re viewing glucose and lactic is enough to move the needle? And then even potentially what their – what the conversations are about sort of amplify and adding to that MAVEN offering over time?.

Yes, yes, for sure. I mean, we’re excited about MAVEN. We just launched it in early January. We did have some first sales of about $0.5 million, a little bit more of MAVEN and related products in Q4 as we were preparing for that launch and getting it fully out there publicly at the Advanced Therapies Conference in Miami.

It’s – so we’re just developing the funnel now, right? And we’re working through that and having these conversations. I think it is a very interesting product for us. It goes again – it goes for two of the – call it bread and butter, analytes, glucose and lactate, very complementary to REBEL. We think of it as REBEL’s buddy.

And we also think of it as a prelude to REBEL online. So while REBEL is leveraging our microscale mass spec technology, MAVEN is using discrete biosensors for glucose and lactate, again, which are two analytes that are difficult to detect using our mass spec technology.

And the MAVEN is bringing the aseptic sampling technology, which is a critical enabler for online connectivity. And we do get that feedback that online connections of devices is where the future is going.

It just reduces lab costs operator time and that resonates well in these markets, especially where we talked about some of the pressure, some being labor and some being just a tighter spend overall. So we think it’s a great precursor to REBEL online and the initial conversations have been strong..

Okay. Now if I could just squeeze one more either for Joe or for Kevin, just as we’re thinking about the build for the year.

Maybe what are you hearing from customers about what they’re looking for gaining factors to make purchasing decisions? I think for some of the larger bioprocessing companies are sort of the issue of destocking and there’s maybe an end date relative to when they’re lapping tough comps.

When it comes to extending purchasing cycles, moving up the executive chain to make decisions.

What are kind of the key swing factors that might help get people to start moving and make the purchases again?.

Yes. We may be a different dynamic than the destocking world there because again, we’re being used in that pre-clinical process development side as you know. And in our conversations, it’s still, I think is causing just some conservatism there.

And I’d say that during these times, we’ve really just been focused with the customers to make them successful and to have them show better outcomes, because again, this is a new technology kind of changing the way they do things. And so I think that’s been going well.

And in fact, we got some recent commentary that in some cases we’ve – our customers have been seeing significant tighter increases by employing a REBEL. So we’re looking to really amplify that and really looking to use that as a leverage point to why adopt REBEL now.

And there is also a couple of other interesting points that that we look towards as we think about 2023. The consumables and service revenue for the desktops were up about 55% for Q4 and the quarter also contained the highest – the second highest number of orders we've ever received before scheduled consumable orders.

So these are orders that are meant to ship over 2023 and that to us means that people are getting back to work and incorporating REBEL into their priorities. So we see those as positive indicators..

Okay, great. Thanks, Kevin..

Sure..

Your next question comes from Puneet Souda at SVB Securities. Please go ahead..

Yes. Hi, guys. Thanks for taking the question. So, maybe just a clarification one for Joe maybe.

Can you quantify what was the Army contribution here in the quarter? I mean, I appreciate the tough comps from last year, but just wondering what was the Army growth and maybe sort of the ex-Army growth that you're seeing, and what does that mean for MX908 ramp in 2023?.

Absolutely. Thanks, Puneet. So, you're right. There were no U.S. Army device shipments in Q4. We concluded those in Q3. There was that $8 million headwind for Q4 related to the device revenue in Q4 2021. During Q4 2022 what was in there was approximately $2 million in consumables and accessories shipped to the U.S. Army, mainly the U.S.

the aero module, and that PO that we mentioned that we secured in Q3. So we continue to see shipments there. We're working to continue to work on this enterprise account that we think there are future opportunities.

We'll recognize service revenue over time on the devices that have been deployed over the last 18, 24 months and there could be other branches within the U.S. Army that may need those handheld devices in the future.

So as we turn the page, we did about 370 MX908 placements for 2022 and see the opportunity to build on that despite the approximately 100 units with the Army in 2022.

And I think if you add to that Joe and think about the contributions outside of the Army, right? That – out of that 15.8, we saw growth of about 50% in Q4 year-over-year if you, Sam's Army, if you will, Sam's Army devices..

Got it. That's very helpful. And then historically speaking heading here into 2023, I mean, you have more products than you have had before with MAVEN and TRACE too as well.

So can you maybe just talk to us about sort of how should we think about the growth on the life sciences side of the business especially REBEL? And you talked about the strong order book here as well on consumables. So sort of how should we think about that within the context of the guide.

And then, Kevin, just wondering where the 6% reduction in the workforce was, does that change anything on the commercial and the sales aspect for REBEL and MAVEN?.

Sure. Maybe I'll start and pass it to Joe and then talk a little bit about the 6% reduction. But over the quarter, we placed 13 desktops over the quarter, and that included about $0.5 million of new products, MAVEN and related, so 80 devices over the year not including MAVEN in that number.

So we're really focused on expanding that product portfolio, as you mentioned. And we have that strategy to really focus on the process analytical technologies.

And so to us that that's really now allowing us to drive conversations at a different level because now they're – these are not disparate products as you know these are all interconnected, very complementary to one another, and it's allowing us to raise up that conversation as a partner to our customers.

So to us, REBEL is one thing and – but the strategy is a point. So having multiple products serving that market segment, we think is very – going to be very positive over the long haul..

So as we think about kind of MAVEN, TRACE, maybe expand it more broadly across our portfolio, we set the guidance and comfortable with that guidance of 7% and think about the levers to achieve that. We consider the low end, of course, but many things would – wouldn't be going our favor in that case.

So we spend a lot of time ensuring the mid-point is set appropriately and how can we achieve that high-end as we march through the year. So we've line of sight into what we contemplated as we set that guide and done a lot of analysis on the run rate assumptions for each of our channels.

And today, we're seeing customers working through their contracting and procurement process. You can take a few quarters including some of these opportunities in the guide.

But we have diversification, not just REBEL and MAVEN with our handhelds in the forensic space and it gives us options to navigate as we see some near-term pressure in the bio-pressing space. So you can see some product mix shifts.

But I would say as we think about q1, we've seen some continuing slowness, but good rep activity and conversations, and it's still taking some time to close, but directionally we are likely to see our growth rate in Q1 similar to our full year range, still some good ground to cover for the quarter..

Maybe I can hit for a moment, Puneet, the 6% reduction. So yes, we announced the 6% reduction of our head count and really that's nothing more than maintaining our disciplined approach to how we deploy capital. We've always been quite thoughtful in that regard.

And if you look at our cash burn numbers, we hope it tells you that story, and we want to continue to drive efficiency and being a lean organization.

So we're being proactive to focus on what manners the product innovation, market penetration and our commercial efforts, but we did reduce headcount by about 6% and now expect the headcount to remain approximately flat for the year 2023 as we prioritize roles and responsibilities across the org.

And we spread that impact across the company a handful in the commercial organization, more focused within the marketing and BD side of things. And keep in mind, right, we grew very quickly post the IPO and now we're two years in and we just see areas to optimize and our organization.

So we've been very careful to consider impacts on our commercial objectives and believe we're in a good, good position. And we really – as you know again being good stewards of cash. We just absolutely don't want our expenses to be outpacing our revenues in the short-term..

Got it. Helpful guys. Thanks. That's it for me..

Your next question comes from Dan Arias at Stifel. Please go ahead..

Hi, guys. This is Evan Stampler on for Dan. Thanks for the questions. Maybe we can start with – so these macro headwinds that you're seeing in biopharma, it sounds like you had pretty good confidence that things will get better in the back half of the year.

Is there something in your conversations with customers that gives you confidence in that outlook? Or is it kind of just a feeling at this point and you hope that things get better? But – or do – or are you seeing actually some green shoots currently within your conversations? That's my first question..

Yes. Yes, I am absolutely happy to discuss that, Evan. Yes, we're of course not the only company talking about some macro impacts. And many of the bioprocessing companies in the space have these book-to-bill ratios that, that are going to be less than 1 that, that they’ve announced for the first half in 2023.

And I think we see that similar conservatism across the customer base. And obviously we don’t have that level of backlog. So you see things more directly with us.

I would say we are seeing some positivities and some positive early signs out of these customers, as we said, a couple of Q4 indicators there that we do have our second highest number of consumable orders on the books, which indicates they’re planning to get to work here in 2023 and prioritize our REBEL.

So we are seeing that, but we are just in thinking of the context of the guide and our confidence there, we’re confident – cognizant, I should say, that we changed our guide in Q3 with the ebbs and flows of the timing of the U.S. government and macro impact overall. And we had to get out it in front of it at that time.

But so we’re now taking a very thoughtful stance for sure to make things to the upside, if you will. And we’re not guiding to recovery. We have not seen, so we don’t want another situation like in Q3 where we had to take down that guide. We’re giving that best view.

We can that’s possible what we believe is achievable here in 2023 with some room to the upside and improvement as we progress through 2023 and see those customers getting back to work and adopting.

And I would point out that beyond the bioprocessing headwinds, we’ve seen things lessen a bit compared to Q3 in our handhelds and uniqueness about 908 is that we do have diversification of markets with our handhelds.

And then also of course the new products we mentioned, one of which is out and another coming and frankly, some geographies we’ve been investing in the EMEA area and we’re starting to see that pay off and having more conversations with NATO member countries given the geopolitical landscape.

So good amount of confidence, I would say for us here as we sit here today and we’ll keep again we don’t want to be forecasting a recovery that, that we haven’t seen..

Got you. No, that’s super helpful. And then I mean you did talk a lot about consumables and how it sounds like utilization is improving and you – sounds like you also have a nice kind of order book there. We’ve talked about there is a bunch and at the time of the IPO, you guys talked about, one kit per month for users.

And then having that kind of move up over the course of a year or two up to maybe 1.5, 2 kits a month.

Can you kind of tell us where you’re kind of on average you are with customers there in terms of that ramp?.

Yes. Yes, absolutely. So you’re right, we’ve been focusing on that call it target of roughly one kit per month for active users on average. We certainly do have users that are at a higher number of kits than that. We’re focused on those users. We’re focused on understanding their message, their use case, and how to trumpet that to the world.

We reported in Q3 that we were tracking at that time closer to about a half a kit per month for these active users. I don’t think we have anything material to report here as a difference to that. But maybe we’re seeing some slight improvement and we’ll keep you posted on that.

But our focus really is on those initiatives to drive it over to long-term and we’re working with experts in the space. We talked about some of those in our prepared remarks in including CPI, including users that that that spoke publicly at our critical mass user meeting in September.

And we’re really working to be engaged with our installed base with the regular cadence application and service. And we’ve been layering on in 2023 now a key account aspect to that. And we’re really implementing programs to work with customers to share their success, to help drive that utilization as they see the benefits.

And I just heard the other day in fact, that one customer was saying a 50% increase in tighter of their process was attributable to REBEL.

And so we’re still trying to understand that and work with these customers, which is just the example of the conversations that we think are important to be having now that will help drive that, that number of utilization to one kits and beyond over time..

And Evan, maybe to build on that too, and the REBEL kit is just one element of our recurring revenue. But we did see significant growth approximately 100% in our recurring revenue for the full year. 35% of our product and service revenue is in recurring up 19%.

And the primary drivers were our service revenue for both handhelds and desktop contributed about 45% of that 100% pie and the handheld Aero accessories and consumables contributed about 40% and the rest what – the remainder was from growth on our desktop consumables and overall we’re encouraged by the building desktop recurring revenue in 2022, which grew quarter-over-quarter each quarter in 2022 in REBEL kits a big piece of that story even with that approximately half utilization today..

Got you. No, that’s super helpful. And then maybe just one last one, if I can sneak it in on the handhelds. Obviously, now you have the army contract rolling off. And I think you did spend a little bit of time talking about your sales funnel and the mix of existing and new customers, which all sounds really great.

And I think at the end of your commentary, you talked about I think being able to grow placements of instruments in 2023 year-over-year.

So maybe you can just talk about how much of what’s embedded in guidance reflects, I guess firm purchase orders versus things that you might just kind of be expecting from the sales funnel and how that sales funnel looks today gives you confidence in the outlook..

Yes. I think we’ve recall before a lot of times we’re kind of working through, you don’t have a lot of backlog and focus on kind of the opportunity ahead of us in utilization of our sales force to close on deals.

So contemplated within the guidance range includes moderate unit growth across all our devices with stronger growth in the back half of the year, especially with our desktops, we’re focusing on that broadening of the portfolio products as a whole with one sales force driving our desktops, one touch to the customer and we’re thinking through what the right metrics are to focus on as we evolve here in 2023.

But we’re finding that as we broaden our product portfolio, especially on the desktop side with a variety of products and ASPs the placements is not always maybe the best metric.

In 2022, I mentioned approximately a third of our revenue was not from placements, but from recurring elements, so right now we think the best way to think about it is growth of overall dollars instead of placements.

But we are still thinking this through and we do see a path just to stress, to growth on a unit basis, even with the army devices in 2022, we see growth on unit basis, but you took our products both handhelds and desktops, and we’ll see how the year plays out..

And maybe Evan, I can add a little bit on the enterprise account funnel. You’re right, we talked about some in the prepared remarks there, but we saw an increase to 15 accounts that are in the pilot program that are representing about 100 units of opportunity. That’s up from 11 accounts we had in 2021.

And we have now 17 enterprise accounts that represent as we estimate about 800 devices of additional opportunity. And that’s up about 15% compared to year-end 2021. So we have plenty of funnels to work with and are having great conversations with their handheld prospects and existing customers who are looking to roll out devices. U.S.

Army, as you know, is a large example of enterprise account, but there are other customers in that pipeline with 20 to 100 plus devices. And the status is we’re really working with each of these customers to get budget allocation and funding for purchase.

We’re seeing some activity on the contracting procurement side, which is very good for some of these opportunities. And we do think, as Joe mentioned, we can have positive unit growth and we have really considered the status that we just mentioned between Joe and I in our guidance that we provided today..

Great. Thank you so much for the help. Appreciate it..

Thank you..

Your final question will come from Jacob Johnson at Stephens. Please go ahead..

Hey, good morning, everybody. Maybe just first to go back to MAVEN, $0.5 million of sales in 4Q, is that a good proxy for kind of how we should think about 2023? And then the other question on MAVEN is just, I’m curious as we think about mAbs versus cell and gene therapies.

Could you maybe compare and contrast the opportunity for MAVEN versus REBEL in terms of end market especially considering you launched MAVEN at a cell and gene therapy conference?.

Yes. I’d be happy Jacob, to talk through some of that and I’ll pass it then to Joe for specific expectations for 2023 that you asked for. Yes, I think MAVEN has brought applicability certainly interest from a lot of the customers doing cell and gene therapy, particularly folks like looking at these closed blue systems, if you will.

So good traction and conversations and building the pipeline with them certainly with mAb customers that are measuring glucose and lactate in a veg back reactors daily and would prefer to not be drawing samples and taking it out from their PD lab and having this as a probe that’s just in there continuously streaming up to every two minutes glucose and lactate and in some cases lot interest there to actually control based on the glucose concentration.

And the last thing I would say is also we’re seeing conversations in the fermentation market with the related sampling products and probes, because there’s also values to measure these parameters there..

And for MAVEN, we did ship our first handful of MAVEN in Q4 and before the official launch and total revenue for the MAVEN and related sampling devices. So it’s not just MAVEN was approximately $600,000 in Q4. We have consumables, but also related sampling devices through our sale with OEM partners that we’re looking to build on going forward.

So we see MAVEN as a 2023 growth driver, as we will have a full year sales opportunity, but it was based upon the technology through our Trace acquisition and for the full year, pro forma basis, Trace was about $1.8 million, $1.9 million, and we see growth on that overall business as we go through 2023..

Got it. Thanks for that Joe and Kevin. And then maybe just a higher level question for you Kevin. You’re not alone and I think seeing some weakness and instruments including kind of the process analytics piece. But it seems like the long-term opportunity is coming at some point.

I’m just curious kind of what you think the inflection point for you and maybe the broader like process analytics, Bio 4.0 industry will be.

And maybe along those lines, how much of this is going to be driven by things you can control, like new product launches and kind of the technology catching up to what your customers need versus kind of customer demand to move towards continuous manufacturing and this 4.0 theme?.

Yes. I think, you’re right. I mean, the future to us looks bright. It’s a timing I think in the near-term and where we see it, it’s really a couple of quarters.

There’s no change in strategy here, and in fact we’re very excited around having these new products coming to have that more complete offering and that strategy of beyond REBEL, the whole suite of products that’s talking in that process analytical space. Yes, the need to us has not changed.

I think those customers are requiring such devices, particularly as the pipeline at therapeutics skews to more advanced modalities. So from an inflection point, we’ll see where we’re at as we get through the year and look as we get some traction with these new products. But we’re excited for where we’re going over the long-term..

Got it. And just if I could take one last one in, just three REBEL placements in the quarter, I think you said in that prior answer that maybe placements aren’t the right way to think about this year.

But just anything to call out on the three placements in 4Q and maybe how we should think of – is that the right way to think about the first half of the year or anything kind of specific to the fourth quarter?.

Yes. You’re right. I mean, we certainly did not place the number of REBELs in Q4 that we would’ve expected. And I know some of you might track the pure biotech layoff tracker and the customers of course we show up there. I think you might also want to look for the bioprocessing equipment showing up on auction sites as a gauge.

I know our team is looking to buy gear from that in the aftermarket in house. And as a CFO I like that we are saving dollars personally, but keep in mind that was not possible 12 months ago. The outlet just wasn’t there.

But I don’t like seeing our customers having the auctions, but some are I certainly do not like seeing REBEL included in an auction, and I did see that in one situation. So I really think this is an industry phenomenon more than a 908 phenomenon. But yes, Q3 – I’m sorry, Q4 REBELs were short of expectations mainly market driven..

Yes. And I think again, where we’re looking at it is just that complete set of desktop devices which we did place 13 in the quarter and including that $0.5 million of the new MAVENs and 80 devices over the year. And we’re really looking this as a strategy and not beyond REBEL.

So really expanding that portfolio and building off of the REBEL and driving those conversations and complimenting REBEL with the case of MAVEN and looking towards things like online sampling.

So yes, I think right now in these leaner times, we just have to be working on the fundamentals, which is getting these customers successful, getting these customers demonstrating such tighter improvements, quality improvements, time savings, cost savings.

And I think all that will help lead towards that inflection point that that’ll be all desire..

Makes sense. Thanks for taking the questions, Kevin and Joe..

Welcome..

Ladies and gentlemen, this concludes your question-and-answer session. At this time, I will turn the call back to Kevin Knopp for any closing remarks..

Thank you. Thank you all for your time. We appreciate your attendance and the thoughtful questions and we’ll look forward to keeping you updated. Have a great day..

Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank you all for participating and ask you to please disconnect your lines..