908 Devices Inc. ((MASS)) has held its Q3 earnings call. Read on for the main highlights of the call.
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In the latest earnings call, 908 Devices Inc. presented a mixed outlook, highlighting strong sequential growth and improvements in profitability metrics, alongside a robust cash position. However, these positives were tempered by a year-over-year revenue decline, potential impacts from a U.S. Government shutdown, and challenges in maintaining gross margins.
Sequential Revenue Growth
Despite a 4% year-over-year decline, 908 Devices Inc. reported an 8% sequential growth in revenue from continuing operations. This growth was driven by strong demand for FTIR devices and significant sales to the U.S. Coast Guard, showcasing the company’s ability to capture market opportunities.
Recurring Revenue Increase
The company saw a 10% increase in recurring revenue over the prior year period, which now represents 36% of total revenue. This indicates a more stable and predictable revenue stream, providing a cushion against market volatility.
Adjusted EBITDA Improvement
908 Devices Inc. achieved a significant milestone by reducing its adjusted EBITDA loss by 53% quarter over quarter. This marks the lowest adjusted EBITDA loss in the company’s history, demonstrating progress towards achieving profitability.
Gross Margin Improvement
The company’s gross margin increased quarter over quarter, reaching 58% on an adjusted basis. This improvement reflects the benefits of facility consolidation and operational scale-up, contributing positively to the company’s financial health.
Strong Cash Position
Ending the quarter with $112.1 million in cash and marketable securities and no debt, 908 Devices Inc. is in a strong financial position. This provides the company with the flexibility to invest in growth opportunities and weather potential market challenges.
Year-over-Year Revenue Decline
Revenue from continuing operations was $14 million, down 4% year over year. This decline was primarily due to fewer multi-unit MX908 device orders from U.S. Federal and defense customers, highlighting a key area of concern for the company.
Potential Impact from Government Shutdown
The company estimated that approximately $4 million of Q4 revenue could be impacted by delays due to the U.S. Government shutdown. This is particularly concerning for larger federal and defense orders, which could affect future financial performance.
Adjusted Gross Margin Decrease
The adjusted gross margin decreased by approximately 60 basis points year over year. This was due to a less favorable product mix and unabsorbed costs from new precision machining operations, posing a challenge to maintaining profitability.
Service Coverage Headwind
A funding-related pause in service coverage by a U.S. Defense customer is expected to result in a quarterly headwind of approximately $500,000 beginning in the fourth quarter. This presents a potential challenge for the company’s service revenue stream.
Forward-Looking Guidance
Looking ahead, 908 Devices Inc. maintained its full-year revenue guidance of $54-$56 million, expecting a 13%-17% growth over 2024. Despite potential impacts from a U.S. government shutdown, management remains confident in achieving positive adjusted EBITDA in the fourth quarter, supported by a healthy pipeline and strategic focus areas in device adoption, analytical tools, and financial strengthening.
In summary, 908 Devices Inc.’s earnings call reflected a mixed sentiment, with strong sequential growth and profitability improvements being overshadowed by year-over-year revenue declines and potential challenges from external factors. The company’s strong cash position and strategic focus provide a foundation for future growth, but careful navigation of market challenges will be crucial.