908 Devices Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The company develops handheld and desktop devices for point-of-need chemical and biochemical analysis. Figures below are in U.S. dollars; financial statement amounts are converted from thousands to millions where appropriate.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $10.0 million | $9.5 million |
| Gross profit and margin | $5.0 million; 50.1% | $4.4 million; 46.2% |
| Operating loss | $(12.7) million | $(13.0) million |
| Net loss | $(10.9) million | $(12.5) million |
| Net loss per share, basic and diluted | $(0.33) | $(0.39) |
| Cash used in operating activities | $(9.4) million | $(10.6) million |
- Revenue increased 5%. Product revenue was $7.2 million, service revenue $2.8 million, and contract revenue was zero, versus $0.2 million in the prior-year quarter.
- Product and service revenue included $5.5 million from device sales and $4.5 million from recurring revenue. Recurring revenue was 45% of product and service revenue in both periods.
- Product gross margin improved to 56% from 46%, mainly due to production timing, lower material costs and favorable mix. Service margin fell to 36% from 43%, primarily due to greater use of contract trainers.
- Research and development expense rose 7% to $5.8 million; selling, general and administrative expense was nearly flat at $11.9 million. Higher interest income and the absence of prior-year interest expense helped reduce the net loss.
- At March 31, cash and cash equivalents were $104.6 million and marketable securities were $29.6 million, totaling $134.2 million. Total current assets were $161.9 million versus current liabilities of $19.3 million.
- Total liabilities were $32.9 million; there were no borrowings outstanding under the amended $10 million revolving credit facility. The facility has a November 2025 maturity and includes a requirement to maintain $20 million on account at or through the lender, as well as a cash covenant.
- Cash, cash equivalents and restricted cash declined $16.4 million during the quarter. Investing activities used $5.8 million, including net purchases of marketable securities; financing activities used $1.3 million, including taxes withheld on vested awards and contingent-consideration payments.
Material changes and business developments
- Handheld revenue increased to $7.4 million from $6.2 million, while desktop revenue declined to $2.6 million from $3.1 million. Government product and service revenue increased to $7.4 million from $6.2 million; pharmaceutical and biotechnology revenue declined to $2.5 million from $3.1 million.
- Device placements decreased: handheld placements were 53 versus 62, and desktop placements were 8 versus 16. The company attributed the modest increase in product revenue in part to component shipments under a subcontract agreement.
- Accumulated deficit was $181.5 million at quarter-end. Shares outstanding were 32.9 million at March 31, compared with 32.5 million at December 31, 2023.
- After quarter-end, on April 29, 2024, the company acquired RedWave Technology for an initial payment of $45.0 million in cash and 1,497,171 shares, subject to adjustments. Up to 4.0 million additional shares may be issued based on specified revenue milestones through April 30, 2026. The company said purchase accounting was preliminary and pro forma information would be filed later.
Outlook, risks and contingencies
- Management expects continued operating losses in the foreseeable future, but believes existing cash, cash equivalents and marketable securities, together with product and service revenue, will fund operating expenses, capital spending and debt service for at least 12 months from issuance of the financial statements. This estimate depends on assumptions and capital could be exhausted sooner.
- Management expects investment in research and development to increase and anticipates higher selling and administrative costs as it expands commercial operations and supports new products. Profitability timing is uncertain; additional financing may be needed and may not be available on acceptable terms.
- Risks include uneven government purchasing cycles and customer concentration, cautious customer spending, inflation and interest-rate pressures, dependence on sole- or limited-source suppliers, competition, and the need to successfully develop and commercialize products. Two customers accounted for 16% and 10% of Q1 revenue; one customer represented 15% of gross receivables at quarter-end.
- The RedWave acquisition is a significant post-quarter cash and equity commitment; the filing does not provide a final purchase-price allocation or pro forma financial impact. Acquisition-related costs of approximately $0.3 million were recorded in Q1 SG&A.
- The company reported no material legal proceedings and no material changes to the risk factors in its 2023 Form 10-K. Management concluded disclosure controls were effective at a reasonable assurance level.
Key facts for investors to verify
- RedWave’s final purchase accounting, pro forma contribution, cash impact and potential contingent-share issuance.
- Quarterly operating cash burn and the cash runway following the acquisition.
- Whether product placements and desktop sales recover, and whether recurring revenue grows with the installed base.
- Whether product-margin improvement persists and service costs remain elevated.
- Compliance with the revolver’s lender-account and cash covenants, and the effect of customer and supplier concentration.