908 Devices Inc. (NASDAQ:MASS) Q3 2023 Earnings Call Transcript

908 Devices Inc. (NASDAQ:MASS) Q3 2023 Earnings Call Transcript November 7, 2023

908 Devices Inc. beats earnings expectations. Reported EPS is $-0.22, expectations were $-0.3.

Operator: Hello and welcome to today’s 908 Devices Third Quarter 2023 Financial Results Conference Call. My name is Jordan and I’ll be coordinating your call today. [Operator Instructions] I’m now going to hand over to Kelly Gura of Investor Relations to begin. Kelly, please go ahead.

Kelly Gura: Thank you. This morning, 908 Devices released financial results for the third quarter ended September 30, 2023. If you have not received this news release or if you’d like to be added to the company’s distribution list, please send an email 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 description, please see the Risk Factors section of the company’s annual report on Form 10-K for the year ended December 31, 2022, and 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, November 7th, 2023. With that, I would like to turn the call over to Kevin.

Kevin Knopp: Thanks, Kelly. Good morning, and thank you for joining our third quarter 2023 earnings call. We delivered solid execution during the third quarter, and I’d like to thank our committed team for their efforts in progressing our goals as we continue to navigate the headwinds of the life sciences instrumentation and bioprocessing market. Looking back on the first nine months of 2023, challenges in the bioprocessing space were even more pronounced than we anticipated at the outset of the year. However, this impact has been significantly offset by the growth of our handheld devices serving the forensics market. Over the first nine months of 2023, our top line revenue increased 2% year-over-year to $35.9 million, buoyed by the strength in our handheld devices which have increased 19% year-over-year.

We expect our handhelds to continue to contribute meaningfully and drive our overall growth into the mid to high single digits for the year. For the third quarter, revenue was $14.3 million. Revenue was again primarily driven by our handhelds, which increased 7% year-over-year. With rising geopolitical uncertainties, the ongoing fentanyl crisis in counterfeit pharmaceuticals, there has been continued demand for handheld trace analysis in forensics applications at the point of need. We continue to deliver on our commitment to provide a full portfolio of complementary desktop devices for bioprocessing. And in September, we launched MAVERICK, our first in-line [Raman] (ph) based device. During the launch week, we hosted members of the investor community at our bioprocessing day in our Boston headquarters.

It was great to see many of you in person, provide an update on our roadmap and show you our MAVERICK device along with our new bioprocessing lab where we did live demos of how all our process analytical technology, PAT, devices are used in concert. Innovation is a core component of our mission at 908. I’m pleased to share that 908 Devices was named Analytical Solutions Provider of the Year for the introduction of our MAVEN and MAVERICK devices in the third annual Biotech Breakthrough Awards, which recognizes disruptive innovation in the global life sciences and biotechnology industry. This is a great validation of the uniqueness of our technology and the ultimate impact it can have as the industry progresses to BioPharma 4.0. Now I’d like to provide a brief update on the progress we’ve made across our three focus areas for 2023.

Starting with our first objective, penetrate and radiate across key accounts. Our focus is to penetrate new accounts to create a foothold and then radiate across these accounts to drive broader enterprise adoption. At the start of the year, we said we were committed to making significant progress on enterprise adoption. During the third quarter, we made some important advancements on that front. First, we recently announced an award from the U.S. Air Force and Air National Guard Fire and Emergency Services totaling $10.4 million. We were pleased to see the continued expansion of this enterprise account. Our MX908 device has been deployed within the Air National Guard for hazardous chemical response and approximately a third of these orders represent aero module upgrades along with training and support for their existing devices.

Our aero module adds capability to the MX908, enabling response teams to quickly detect and identify aerosolized chemical hazards. With this award, the active reserve and Air National Guard components of the U.S. Air Force will now utilize the MX908 device and the aero module at more than 130 installations around the world for hazardous materials operations and for emergency medical response. Joe will provide more details on this order and its revenue recognition in a moment. We are extremely proud that the U.S. Air Force has chosen our MX908 device and aero module as their standard, paving the way for enhanced emergency medical response and hazardous material operations. In September, we announced exciting news on the next phase of a multi-year project with the U.S. Department of Defense.

In conjunction with our partner on the project, Smiths Detection, we were selected to provide initial production of 122 portable aerosol and vapor chemical agent detectors, otherwise known as AVCAD. Our high-pressure mass spectrometry technology enables these next generation chemical detector systems which are designed to detect, identify, alarm, and report the presence of traditional and advanced threat vapors and aerosols. The AVCAD, which can be mounted or portable, includes a wireless remote alarm capability, will support missions for the U.S. Military. Our project partner, Smith Detection, has provided the DoD with more than 91,000 joint chemical agent detector, JCAD units, over 16 years in the predecessor program to AVCAD. We believe that being selected for the next generation AVCAD validates our technology as a new standard for chemical detection.

This next phase of the program will include production verification and multiple service operation testing. A successful transition to full-rate production could having a meaningful impact on our revenue in later years. We’re pleased to be working with Smith Detection, a global leader in threat detection, and we are truly honored to help protect U.S. Military personnel in their worldwide mission. Turning to our desktops, we recently announced a collaboration with Terumo Blood and Cell Technologies to integrate our MAVEN online analyzer with their Quantum Flex cell expansion system for real-time monitoring and control of glucose and lactate without the risk of manual sampling and with less labor. Terumo BCT’s Quantum Flex cell expansion systems are used throughout the cell therapy process from process development through clinical manufacturing.

The addition of online analytics enhances process understanding critical in autologous applications such as CAR-T cell therapies, where patient-to-patient variability increases the difficulty of implementing robust and reproducible processes. For example, lactate concentrations must be carefully monitored during the manufacturing process as they can inhibit cell growth and induce toxicity. Manufacturing failure rates reported in CAR-T’s clinical trials can be significant without a spec cell viability being one of the failure causes. With MAVEN, lactate concentrations, which are a highly correlated indicator of cell viability, can be continuously monitored and feeding strategies can be adjusted to control cell growth. MAVEN, with its novel aseptic sampling probe, also enables cell therapy developers to reduce contamination risk and save operator time as scientists no longer need to enter the clean room to perform manual sampling.

We are excited to collaborate with Terumo BCT to enable cell therapy developers to gain valuable process insights that importantly help them reduce costs of goods and accelerate progress for these personalized lifesaving treatments. Turning to our second objective, advancing and broadening our product portfolio. Our product strategy is to develop devices that are simple to use and connected for improved process understanding in order to provide customers with robust answers at the point of need. We were thrilled to launch our second game-changing device this year for bioprocessing at the Bioprocessing International Conference and Exhibition in September. MAVERICK utilizes Raman spectroscopy for real-time in-line monitoring of multiple bioprocess parameters.

Multivariate optical sensing technologies such as Raman spectroscopy are well suited for inline continuous monitoring of a range of parameters. Yet many Raman-based systems require experts in chemometric modeling for setup which can take months at substantial expense. MAVERICK can be set up in minutes. The device utilizes purpose-built de novo models that automatically process Raman spectra from a wide variety of cell culture media types and cell lines, thereby delivering actionable process parameters. We are also providing open access to the raw spectral data that enables AI and machine learning experts to extend MAVERICK’s capability for more advanced predictive control of critical process parameters or quality attributes. Importantly, as a spectroscopic-based device, MAVERICK is extensible to other analytes and parameters through software updates.

One of our beta placements was at the University of Massachusetts in Lowell, where Dr. [Song-Q Yun] (ph) is the ward endowed professor in biomedical sciences. Dr. Yun previously held senior positions in manufacturing sciences at Biogen and Multivariate Data Analysis and Design at Sartorius. He noted that with MAVERICK all the hurdles of traditional Ramen have been overcome. Dr. Yun further noted that our device provides very good measurements independently of cell line, media, and scale. We’re also continuing to foster our pharma and academic analytical lab customer base. Our team recently facilitated successful early access evaluations for our improved ZipChip charge variance analysis kit with three key pharma accounts and one academic account.

Our mass-spec-based charge-variant analysis complements ICIEF workflows from our collaborator Biotech ME by providing more in-depth protein characterization. We’re pleased to report that the new kit demonstrated a two to 20-fold improvement in sensitivity and additional robustness. As the pharmaceutical industry continues to adopt process analytical technologies to drive the advancements of BioPharma 4.0, scientists need an array of simple tools that provide robust analytics to enable them to monitor and control their processes in real time. We are addressing this need with a full portfolio of devices centered around Rebel with our mass spec platform and complemented by MAVEN and MAVERICK for monitoring and control of critical process parameters plus ZipChip for the measurement of critical quality attributes.

We believe we are well positioned with this suite of devices to take advantage of the impending recovery in the bioprocessing market. And finally, turning to our third objective, laying an omics foundation, we see a clear and emerging need for accelerating mass spec-based workflows to address proteomics and metabolomics opportunities. In the area of multiomics, our collaborator, Professor Matthew Foster at Duke University, recently presented his NIH-funded research on multiomics analysis of sepsis at the U.S. Human Proteome 2023 and the American Thoracic Society 2023 meetings. In his presentation, Professor Foster noted how our ZipChip device enabled the analysis of metabolites and native peptides from the same extract, preserving precious sample, cutting sample preparation time in half, and speeding time to results.

We further expanded our collaborations in the area of multiomics with Dr. Luca Fornelli, assistant professor at biology at the University of Oklahoma. He is extending the boundaries of top-down proteoform sequencing and pursuing a tenfold improved throughput analysis using our ZipChip device. We are excited to see the outcome of Dr. Fornelli’s work. Overall I’m pleased with our progress this quarter as we broaden our bioprocessing portfolio with an exciting new product and progress penetration of our handhelds in enterprise accounts. With that, I will now turn the call over to Joe for more details on our financials.

Joseph Griffith: Thanks, Kevin. Revenue for the third quarter 2023 was $14.3 million, decreasing 9% compared to $15.8 million in the prior year period. Handheld revenue from our MX908 device was $11.7 million, an increase of 7% compared to $11 million in the prior year period. During the third quarter, we shipped 117 MX908 handheld devices. The increase in handheld revenue was primarily driven by $4.2 million in revenue from initial device shipments for the recently announced U.S. Air Force purchase orders, as well as revenue related to component shipments with our initial production phase under the U.S. Department of Defense AVCAD program. Desktop revenue from our products serving the life sciences, instrumentation, and bioprocessing markets was $2.5 million, decreasing from $4.4 million in the prior year period.

This year-over-year decline in desktop revenue was primarily due to a decrease in device placements as we continued to navigate a challenging funding environment. During the third quarter, we shipped seven desktop devices, including three Rebel and four ZipChip interfaces. As a reminder, we will continue to break out placements by device for the remainder of the year. Starting in 2024, we will focus more on overall revenue and combine desktop placements as the key metrics for growth for our broadened desktop portfolio. Recurring revenues, which consists of consumables, accessories, and service revenue, decreased 21% to $3.6 million compared to $4.5 million in the prior year period and represented 25% of total revenue in the quarter. The decrease was primarily driven by a decline in accessory and consumable revenue for our handheld devices, offset in part by growth in service revenue.

Regarding desktop recurring revenue, we continue to be running at about half a kit per month for our active Rebel customers. Looking ahead, we continue to expect recurring revenue to be around 30% for the full year 2023. Gross profit was $7.9 million for the third quarter of 2023, compared to $9.3 million for the prior year period. Gross margin was 55% for the third quarter 2023, as compared to 59% for the prior year period. The decline in gross margin year-over-year was due to several factors, including lower revenue, higher service costs with training obligations, charges for excess and obsolete inventory, and to a lesser extent, higher noncash charges for intangible amortization and stock compensation. We continue to expect our full year gross margin to be in the lower end of our target range of mid-50s when excluding noncash charges for intangible amortization and stock compensation.

Total operating expenses for the third quarter of 2023 were $17 million compared to $16.5 million in the prior year period. This was driven by an increase of $0.6 million in non-cash stock-based compensation. We’re committed to being very thoughtful on our cash spend, and we’ll continue to tightly manage our headcount throughout the remainder of the year and as we think about 2024 investments. Net loss for the third quarter of 2023 was $7.1 million compared to $6.3 million in the prior year period. We ended the third quarter of 2023 with approximately $148 million in cash, cash equivalents, and marketable securities and had no debt outstanding. Importantly, we efficiently managed the consumption of cash, cash equivalents, and marketable securities over the quarter to less than $5 million.

We expect to end the year with a strong cash balance to support our ongoing operations. Looking ahead to the remainder of 2023, we have narrowed our range. We now expect full year revenues to be in the range of $49 million to $51 million, representing growth of 4% to 9% over full year 2022. This compares to our previous range of $49 million to $52 million for the full year 2023. This guidance range contemplates two key factors. First, our progress with our handheld enterprise accounts. This includes the recently announced US Air Force purchase orders, which were anticipated and are supportive of our current guidance. We recognize $4.2 million in the third quarter and expect to recognize approximately $1 million in Q4 with the remainder of the revenue upon fulfillment of our training, upgrade, and support obligations.

We are making great progress expanding our enterprise accounts, but have more work to do. We have a handful of U.S. and international deals that we are working to deliver here in the fourth quarter. Second, we are expecting that ongoing pressures in the bioprocessing space will persist and have adjusted our expectations around availability of year-end funding. Overall, we have maintained positive growth during the first nine months of the year due to the strength and overperformance of our handhelds in the forensics market. As we look to 2024, we believe that our diversified and broad technology platform will continue to be an asset and a unique differentiator. At this point, I would like to turn the call back to Kevin for closing comments.

Kevin Knopp: Thanks, Joe. Overall, we made important progress this quarter across our core growth areas. Despite the macro climate impacting the life sciences instrumentation and bioprocessing markets for our desktops, our handheld revenues have grown 19% over the first nine months and further acceleration is expected in the fourth quarter. As the headwinds on our desktop subside, we believe we will be well positioned to capitalize on the opportunity with a full set of differentiated products in the bioprocessing [PAT] (ph) space to drive strong top-line growth. In the interim, as we’ve demonstrated this quarter, we remain good stewards of our cash and ensure we retain a healthy balance through a focus on strong operational execution. With that, we’ll now open it up for questions.

Operator: [Operator Instructions] Our first question comes from Steven Mah of TD Cowen. Steven, the line is yours.

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Q&A Session

Steven Mah: Oh, great. Thanks for taking the questions. So how should we think about the U.S. Air Force ordering cadence of the remaining $5 million or so orders beyond what you announced here in 2023.

Kevin Knopp: Yes, Steven, so on the U.S. Air Force purchase orders, these were contemplated as part of our guidance that we set earlier this year. Large purchase orders like this do take some time in nurturing with our team to come to fruition and become official. We’re really excited about this expansion within an existing enterprise account. I mentioned these purchase orders have multiple elements. There were new MX908 device placements, upgrades of previously deployed devices, which include the latest hardware and Arrow modules, some training for the new and existing users of the MX908, extended service for five years from shipment. For timing, we did recognize $4.2 million in the third quarter and expect to recognize approximately $1 million in the fourth quarter, which will account for all the new device placements under these purchase orders.

And think about the remainder of the revenue. It will be recognized as we fulfill the service obligations, specifically when the upgrades are completed and delivered, the trainings are completed, and the extent of service revenue will be over a five-year time frame. It’s really a reminder of — we sell a good portion of our handouts with an extended service arrangement up front and a great way to secure commitment and investment in technologies with our customers. We think about U.S. Air Force and U.S. Army even before that, both saw good uptick from this. And as we end our third quarter, we did have $20 million in deferred revenue. The majority related to service revenue like this, and we like this as it really helps us get cash upfront and predictably a recurring revenue over time and a great measure of customer commitment.

So net-net about $5 million here in 2023 and the rest over time.

Steven Mah: Yes. Okay. I appreciate the color. Maybe pivoting over to the MAVERICK and congrats on the launch in September. Can you give us a little color on the early MAVERICK traction with customers and how we should think about potential sales this quarter and next year?

Kevin Knopp: Yes. Sure, Steven, happy to do it. Yes we’re super excited that we got this launched at the bioprocessing show here recently and it adds to what we’re trying to do, right? We’re trying to build out a complimentary set of products in this PAT space. There’s certainly near-term challenges in that space, but we’re confident that we’ve got the right products to position there. So with any new product, it takes a bit of time to ramp up. There may be some contribution this year and we’re seeing some movement there, but really it’s about getting in people’s budgets right now and this was a good time to launch in September so that over this before you’re getting in people’s capital budgets and you’re really looking for it as a 2024 growth driver for it.

We think it, again, it really compliments what we’re doing with Rebel and MAVEN and super excited, I would say that we’ve been having a lot of strong conversations with it. And internally here, we talk about the we’re 30 for 30, meaning we’ve created a pipeline of 30 plus opportunities in the first 30 days. So we’re thrilled by that response. Obviously it takes time. There’s some conversion of it, but there’s some good global pharma groups that we’re having conversations with and we think we’re setting ourselves up well into 2024. So if MAVERICK is an overall barometer of 2024, I think it’s a good sign and we have some concrete measurement points there, but definitely early days.

Steven Mah: Okay. Appreciate the color. Thanks for taking the questions.

Operator: Our next question comes from Matt Larew of William Blair. Matt, please go ahead.

Matthew Larew: Good morning. Maybe just following up on that. Kevin, you referenced good to get MAVERICK out ahead of the budgeting cycle for next year. Just curious as you’ve had conversations with customers, what you’re hearing about? How customers are thinking about 2024 budgets? I think throughout this earning season on the bioprocessing side, we’ve heard perhaps that the de-stocking phenomenon may be coming to a close, but that broader secular pressures are still in place. So just kind of curious what you’ve heard from customers as you’ve begun talking about potential product placement next year.

Kevin Knopp: Yes. Thanks Matt. I think you’re right. I mean there definitely is that backdrop of a challenging macro. And we think of it as both in the bioprocessing, but also that lifescience instrumentation customers and certainly consistent with what we’re hearing there. As you know, we’re trying to get new technologies into that preclinical early stage process development, so that the bar is hard there. You’re definitely seeing people still with the situation where capital has been reduced on hold, a bit more scrutinized, all of which is really kind of prolonging the sale cycle. We are staying tight with customers, monitoring, having good dialogue about individual situations there. That said, I think we’re confident there will be a recovery here and that we’ve got the right tools in place to take advantage of that to kind of build on the strength of our handhelds as we progress that and see that market recovery.

If you think about 2024, I would say it’s a bit early for us. We’re going to see how Q4 plays out, but we’re cautiously optimistic. We’ve had a series of productive conferences this fall, but how those budgets translate into the opportunities and closing time in, and whether that’s H1, H2, et cetera, of next year, a little bit remains to be seen there.

Matthew Larew: Okay, fair enough. And then on the opportunity, the AVCAD opportunity, did you maybe help us think about the economic opportunity per unit and how that might compare to a traditional placement? But that’d be the first part. And then the second part, and you referenced 60,000 placements with Smith’s sort of legacy opportunity. I guess over what time frame did that get placed? Did it get placed sort of on a typical quarterly cadence or are there a few large orders that comprise that? Just trying to think about how that might materialize if it does over time?

Kevin Knopp: We’re just going through some of the details. You can imagine we’re very excited to be moving into this initial production phase with AVCAD, which began in the third quarter and is likely to span into the first half of 2025 from a timing perspective. We delivered those initial product in Q3 for approximately $2.5 million and expect to deliver an additional million in Q4. And then there’s additional product and support in 2024, maybe about $1 million as currently contracted. And the deliverables are up front and loaded. Basically, to enable Smiths, our partner to complete their build and deliver it to the US government and will support those initial deployments and any services required. Ultimately, that goal is to get into the full rate production for 2025 and beyond.

Sort of the cost per unit, these are components, not a full MX908 and it varies based upon quantities, especially as you get into future full rate production phase. But it’s a great opportunity. And picking more broadly, right, for J-CAD, I think you alluded to it, it represented a full rate production and extended years of the initial commitment that Smith’s had on the previous J-CAD program. For AVCAD, right, the goal is a successful transition to full rate production and it would have a meaningful impact on our revenue in later years, by 2025 and beyond. And at this time, we’re really focused on that initial production phase and there are no firm commitments for full-rate production. The full-rate production could be or up to or even over $10 million plus a year in opportunity if we were to get to full rate production.

There’s a lot of potential for this to be an important driver as you can imagine for our handhelds and we’re excited to be a part of the program.

Matthew Larew: Okay. Great to hear. Thank you.

Operator: Our next question comes from Puneet Souda of Leerink Partners. Puneet, please go ahead.

Unidentified Analyst: Hi, guys. You have Michael on for Puneet. Thanks for taking my question. I was wondering if you could help bridge for us the change in the guide that you mentioned that the Air Force order was contemplated earlier. So, I just want to know what’s driving the Delta.

Kevin Knopp: Hi, Michael. Yes, thanks for the question. Yes, we narrowed the guidance a bit here in part that we didn’t see the recovery from the desktops in Q3 and we expect that to persist now into Q4. So we’re not really assuming any large capital flush at this time and certainly challenges in that overall bioprocessing space, maybe more pronounced than we anticipated at the outset of the year. However, as we’ve been discussing today, it really have been significantly offset by the strong growth of our handheld devices in the forensics market, which really has buoyed our overall growth. So we feel good on the handheld side, strong pipeline, some enterprise orders, we’ve been talking about some others that we’re working through.

And we really expect it to drive our revenue for Q4 and expect the handheld to continue to contribute meaningfully and really drive that overall growth into the mid to high single digits for the year. So really good booking progress here as well in the first 30 days of the quarter. There’s certainly more left to do, but we’re encouraged. But maybe, Joe, do you want to add some other color?

Joseph Griffith: Yeah, I think just to hit on your point, the narrowing of the guide is mainly from the desktop’s perspective for both Q3 and as we looked at Q4 and the budget flush estimates at the time back in August.

Unidentified Analyst: Okay. Yeah, that makes sense. And I wonder if you could get a bit more color on the Terumo deal, if you have any ideas about, I guess, how that can translate to the P&L if it gives you exposure to a new customer set, or if I could offer any color on that.

Kevin Knopp: Yes, happy to. Yes, we’re super excited to be able to talk about now. It’s a great collaboration with Terumo and their Quantum Flex cell expansion system used throughout the whole cell therapy workflow from process development through clinical manufacturing and across a wide range of cell types from stem cells and lentiviral vector and all the way to CAR-T processes. So we talked earlier in the year about a driver for us is to get MAVEN into and connected to some of these integrated cell therapy platforms. And I think this is one example in a non-exclusive array that we’ve got a great collaboration with Terumo and really think about it as us we’re really kind of kidding up our MAVEN and the consumable and the single use perfusion module to mate directly into their system.

And we think there’s a lot of value there for the end customer, because if you look at what we’re able to do, we’re really reducing the risk of manual sampling. So reducing cost of good, taking labor out of it. But importantly, we’re using it to be able to help determine when the end point of the process is, really using it as a surrogate for cell viability. So these are the types and areas and applications that we think MAVEN can contribute in their cell therapy space. And so, I think it’s a great example of how we can kind of work with partners out there to bring complete solutions to this customer space. And this is in that cell therapy area. And you might recall, we have a relationship with Sertorius that we’re continuing to foster to do very similar with the technology that’s in our MAVEN and related products into their ecosystem of bioreactors and customers.

Unidentified Analyst: Great. Thanks.

Operator: Our next question comes from Jacob Johnson of Stephens. Jacob, the line is yours.

Jacob Johnson: Hey, thanks. Good morning. Maybe just Kevin to follow-up on the Terumo partnership. I heard you mentioned it was non-exclusive. Is this something that we should expect to see you kind of expand — maybe expand on this with other providers? And is that that kind of the go-to-market strategy for MAVEN where it’s good to partner with the — for lack of a better term, kind of bioreactor type offerings for cell therapy?

Kevin Knopp: Yeah I think you’re right on all accounts. I mean, we really see MAVEN as being a strong contributor to online analytics and giving these process development teams these kind of, call it, actionable insights. And MAVEN with the streaming out glucose and lactate, and then actually being able to also control, we think it makes a lot of sense to be partnered in various forms in various ways, whether it’s an OEM, whether it’s being friendly, whether it’s co-marketing agreements, collaboration agreements, really trying to have a full spectrum there to extend the reach of our sales team and really look to provide customers with more of a solution rather than just a device, if you will. So yes, I think we hope to show more examples of that as we go forward. And super excited to be working with Terumo, and as I mentioned already, working with Sartorius as well in the biologic space.

Jacob Johnson: Got it. That’s helpful. And then maybe Kevin, a kind of bigger picture capital allocation type question. Obviously a lot of effort on the desktop side the last couple years in terms of sales and marketing, but also kind of new product development. I’m just curious in the current macro environment where that business is a little more challenged and you’re seeing these opportunities on the handheld side. Are you focusing more of your time in the company’s resources on the handheld side of the business?

Kevin Knopp: Yeah, I think we’re doing two things. I mean, one, in this desktop space, we’re absolutely trying to use this time to build out that foundation, build out a really compelling set of complementary technologies and devices that can bring a holistic set of products to the PET space and really kind of marching towards that tri-quarter scanner-like device that’s just providing process and quality attributes. So we are absolutely doubling down in that, and we’re spending a lot of time making sure that we’ve got customers successful with all our product, and they’re really experiencing the benefits. And we’re showcasing Terumo today, but we work every day with each and every one of our customers out there for Rebel and all of our devices.

So absolutely a major focus, major resource area of effort and deployment for us. But with that said, handhelds has been impressive to us and has been overperforming to us in our plans to date. And we don’t see that stopping. We really see a lot of opportunity. The fentanyl crisis, opioid crisis, counterfeit pharmaceuticals, a lot of drivers out there that our team’s able to help with our customers and a solution. So we absolutely want to win that space and we’re investing in that space and we want to own that space. So we are continuing to make investments there and work on both R&D roadmaps, sales investments, market development.

Jacob Johnson: Thanks for that perspective and taking the questions.

Operator: [Operator Instructions] Our next question comes from Dan Arias of Stifel. Dan, please go ahead.

Daniel Arias: Hi, good morning, guys. Thanks. Kevin, maybe to your last point there, you have done a nice job this year backfilling the handheld order book post the army contract roll off. Obviously, we’re getting to the point of the year where we’re starting to look ahead. So I know we’ll need to wait for a little bit to get details on the outlook, but you both, you and Joe made comments on the things that you’re working here — working on here in 4Q. Can you just maybe touch on the way in which you see the sales funnel heading into 2024 for handhelds and then how you might compare the strength of that funnel to this time last year?

Kevin Knopp: Yes, sure, sure, sure, absolutely. I mean, we always are working to build up that pilot to enterprise conversion and have opportunities on deck here to expand within enterprise accounts. And we are pleased that over the first nine months, we did get that 19% growth out of the handhelds there, which certainly has buoyed our overall performance. We have big enterprise orders each year that promote that growth that we’re always working to navigate, but we certainly have a number of enterprise and pilots being transitioned and always have a lot reliance on those. We feel we’ve got plenty of TAM to work with here, plenty of sockets and really just paced by budget priority and are working through the pipeline and how it’s really broadened with our offerings over the last 18 months, whether it be the accessories and Arrow’s and beacons and other elements.

So we think there’s a lot there. If we think about 2024, we think kind of holistically about our offerings at 908 here and we’re really diversified and got a broad technology platform that we think [indiscernible] a unique differentiator and we’re cautiously optimistic. We’re seeing for 2024 here at these early moments, but we’re hearing some positive indicator and anecdotes and things seem to be moving in the right direction. We can’t really predict when the recovery in the in the bioprocessing headwinds really subside, but I would say that we’re very confident in our product portfolio and working towards getting back to being a 20-plus percent grower as soon as we can and got a lot of good momentum there with our handheld devices serving forensics.

We’re going to keep investing, keep that going and we think we’ve been doing a decent job managing our cash and so we’ve got a long runway of growth. And importantly now, we really do have many more shots on goal without foundation in process analytical technology tools. So look, I mean if you think about 2024 in these early days, if you combine the durability of our flagship handhelds here and that have demonstrated some good growth and you think about the macros lessening a bit and our expanded desktop portfolio we hope things will get exciting here in the not too distant future.

Daniel Arias: Yes, that would be great. Okay, and then maybe just on Rebel usage and where that tends to be higher or lower, cell and gene therapy and new modality customers, those seem to be the areas where the intensity, the workflow is a good thing for you, but that has been a choppy market this year. So as we — again, as we look to next year, do you see that bucket as additive to the utilization average because of that intensity or are you not ready to say that that will be the case just given the ups and downs that we’re talking about there? Thanks.

Kevin Knopp: Yes, I think it’s hard for us to slice and dice it. I mean, we’re continuing to see about a half a kit per month on average for our active users. Ultimate goals we’ve discussed in the past, kind of getting to more one kit per month. Half a kit a month is on average is about $24,000 worth of consumables and we’re working to, of course, get that to increase. And you’re right, some of the dynamics and some of the modalities could be strong drivers there. We do think it’s a good sign that during these macro times it has been hanging in there at the half a kit. Obviously, I’d like it to increase from there and are working to drive that. But yes, I don’t think we can slice and dice by modality just yet.

Daniel Arias: Got it. Okay. Thank you.

Operator: With that, I’ll hand back for any closing remarks.

Kevin Knopp: Well, thank you. Thank you very much and we appreciate your time today. And with that, we’ll end the call.

Operator: Thank you for joining. Ladies and gentlemen, you may now disconnect your lines.