Kevin Knopp: Yes. From the direct sales perspective, they do have some direct sales, but it’s a low percent, right? I don’t want to put exact percent on it. It’s higher than single digits, but it’s low double-digit type level. Really, just from where they are, you know, 39 people today have focused on leveraging smartly with distributors out of the box. We think we have an opportunity to go direct, which is part of our synergies as we think about the opportunity to expand our ASP going forward.
Steven Mah: Yes, that’s my next question. The potential revenue synergies, yes, it seems like very complementary. When do you think you’ll start seeing revenue synergies? I appreciate you said cost synergies would hit fully by 2026. But when you think revenue synergies will hit and I appreciate it takes time to cross train the sales forces across the different products?
Kevin Knopp: It does take time. We’re looking to hit the ground running, you know, today. But maybe to give you a little bit of additional details on both the costs and maybe thoughts on top line. You probably heard that we’re forecasting $5 million plus in potential cost synergies in 2026, and we expect roughly $2 million of those synergies to be realized for 2025, kind of in the shorter term. And those 2 million include savings anticipated from prioritization of personnel across organization, mainly, selling marketing R&D leverage together we need to hire less. It also contemplates an improvement in channel discounts that we were just talking about related to international distributor alignment and some opportunity for margin improvement in our direct sales.
And the remaining 3 million will probably be realized starting in 2026, related to the utilization of the 38,000 square foot Danbury facility, that we’re acquiring here today. And the manufacturing scale up of potential high-volume programs that we’ve talked about like AVCAD versus expanding space here in Boston for that. But a big part of the value in the transaction is what you’re asking about is the ability to plug RedWave products into our 908 sales channel and drive that sustainable, exciting growth. And we’re working to get going on that. I’d say immediately, expect there is the ability to drive cross selling certain forensics portfolio. And these trends will be easier to understand probably in a few quarters, but we see an operating improve our recurring revenue profile as well after the commercialization of the possible cloud-based enterprise management software, and potentially to increase the RedWave participation in our life science instrumentation and bio processing PAT space.
So, we expect near term cost synergies that I mentioned really to show up in OpEx and the log return synergies to be more balanced between OpEx and COGS. We’ll work to get those top line synergies as soon as we can.
Joe Griffith: Yes, and maybe just layering into that for a second, Steven, I hope it’s coming across on the call today, but we see so many synergies even beyond what we touched on and you can probably see the dimensions of that from how complimentary this is. So, we’re going to be working on that now that it’s under our ownership to quantify their timing and impact. We really don’t want to underestimate it because there is so many here, we’ve quantified some on the call today, but there’s a lot that have been qualified and more qualitative. But yes, we don’t want to underestimate the impact and we’ll certainly report as we progress.
Operator: Our next question comes from Dan Arias from Stifel. Please go ahead.
Dan Arias: Kevin, maybe on desktops. I know you said last quarter that you wouldn’t be breaking out system placements by instrument, but is there anything that you can say about the REBEL in order to put it in some context since that’s the product that we have a bit of install history with? And then, I think you said that the total for desktops was made up of REBEL, MAVEN and ZipChip, if I’m not mistaken. So, no MAVERICKs, anything we can use when it just comes to the mix across the year for these different systems, or is it at the end of the day just sort of up one quarter and down another for the various components of that mix?
Joe Griffith: Dan, this is Joe. A little bit of color on REBEL. It continues to tick along right where we’ve been kind of that low single digit range, as you mentioned, we’re not specifically breaking it out 78 placements. But it is continuing to see some of those pressures, and as I did talk to the placements within the specific quarter, our desktops included REBEL, ZipChip and MAVEN. Kevin, if you want to give a little bit more color on MAVERICK, excited by that opportunity.
Kevin Knopp: Yes, absolutely. I mean, we call that a little bit in a prepared remarks that the sales engagement we’re seeing here in Q1 is similar to what we saw in Q4 in terms that it is more weighted, more Q1 to weighted to our newer products in the pipeline as we’re momentum and excitement again, just from a sales engagement funnel perspective. I think it’s absolutely early days, but lots of engagement on MAVERICK. We mentioned briefly that in April we had a webinar with 250 some versus registrants, and that was centered around MAVERICK and how it impacts like pretty quality attributes and how it doesn’t take investments in modeling, so good engagements on that. And then further, we have a number of qualified evaluations ongoing right now being planned and then ongoing.
And this is where a biopharma customer, in some cases, will be purchasing consumables and like to support a demo across multiple bioreactors and kind of testing and qualifying that and the ability to connect across there. So, lots of encouraging parts to evaluate it, but as we’ve talked about, certainly, the CapEx spending for novel technologies has been muted, but we’re really excited that we’ve seen a lot of this engagement. And then, obviously, we’ve got diversified portfolio, and the handhelds have been performing to bolster our overall growth of 8% this quarter for products and servers.
Dan Arias: Okay. And, Joe, your point was that total desktop system placements, whatever that mix is, should sequentially March higher across the year, correct?
Joe Griffith: Yes. That’s our expectation. And ultimately, by the end of the year to see an increase in placements driven mainly by MAVERICK and MAVEN, but it’ll progress throughout the year.
Dan Arias: Maybe just on the handheld side, you had mentioned last quarter that the budget delays were a factor when you were thinking about the beginning of the year and 1Q. I’m curious if once the federal budget was released, you saw some loosening when it comes to spending and deals? Did late March, early April, show any pickup in activity in any way? And I think it’s relatedly, is there anything you could say that would help us with the modeling exercise when it comes to MX systems across the year?
Joe Griffith: Yes. From a timing perspective, it was good to see it finally get over the line. I think it was March 22nd, the funding was released. Of course, that’s in many ways just the start of the process with our customers. So, lots of conversations with our sales team to tee up the funding mechanisms and the timing and understand the procurement cycle, which is likely pushing a lot of those Fed government opportunities more into the back half in Q3 versus Q2 opportunities where it really didn’t start to free up until March. So, I would say we’re seeing a pickup in the conversations, but the timing is working against us a bit where it’d be more, I’d say, back half, Q3, Q4, even more so than we initially thought back in March.
Operator: Our next question is from Puneet Souda from Leerink Partners. Please go ahead.
Puneet Souda: So, Kevin, it’s good to see the acquisition, but on the flipside of it, I’m getting a number of questions here on what brought about this acquisition at this point and sort of why now? And can you talk to us about the level of investments that you might have to do in order to drive the RedWave Technology into some of the other applications and make, I know you pointed out to some of the cost synergies, but just I think the big question here is given your cash balance and sort of the dilution you’re taking on for this deal. How should we be thinking about the overall sort of cash burn this year and next?
Kevin Knopp: Yes, sure. Absolutely. Great questions. I’ll start and I’ll pass to Joe. But yes, we’re super excited about the RedWave acquisition. As you know, we have done an acquisition in our past and that helped grow us a nice portfolio of products in the bioprocessing. So, we’ve got really and life science instrumentation. So, we’ve got a really nice foundation there in a portfolio. But looking to drive scale and benefit from our investments in sales and marketing with our handheld devices, which have been durable in their success and their growth and serving the market to point of need chemical analysis, and we absolutely want to keep winning there. So, when we go out and search from inorganic perspective and look, this asset was very unique to us.
It’s profitable, it’s highly growing. Many, many synergies that directly plugged into our sales channels. So, we think it’s a creative in many different directions. It’s a strong fit for us, and again, it fits well into our drive to win across point of need chemical detection. And that can be in forensics, that can be in bioprocessing. And there’s just a lot of opportunity that we see in that space.
Joe Griffith: And maybe to touch on some of the cash concept and path to cash flow breakeven. In 2023, we used approximately 25 million in operating cash flows to support the business. And in Q1, typically our largest quarter for cash flows here in Q1 2024, cash use for operating purposes was about $10 million. But we’d expect to be in the 30 million range on a full year basis here in 2024. We do expect to finish 2024 with multiple years of cash available to support operations. And the key factor to our path to profitability is the cash burn, is the top line growth. And we’re continuing to see the path to double digit top line growth for the core 908 business once the buying processing recovery plays out and the structure of our RedWave acquisition rewards strong and 22% plus growth over the two-year consideration period.
We expect to improve lowering our earn with scale in 2025 and beyond. And to think about that as it translates over to a possible path to cash flow break even, we believe that this acquisition does pull forward our cash flow break even timeline, given that we’re adding scale with RedWave revenues bolstering our top line growth profile and adding an accretive gross margin and cash flow positive business. And we previously had indicated it would probably need to be a low three-digit revenue number to cross into profitability. We’re likely that somewhere less than $150 million in revenue we can get there. And with the additional RedWave we can reach this level faster than before, so definitely excited about that.
Puneet Souda: And my follow-up is on, what are you seeing from the cell therapy accounts, those have been some of the early adopters, but obviously impacted during the biotech impact over the last couple of months and the impact last year? Can you talk a little bit about sort of adoption you’re seeing in those accounts? And I’m wondering, Kevin, how should we think about the closed loops or automated systems? How do your products position into bioprocessing applications there? And just lastly, if I could squeeze in one more on is there anything that we ought to think about in terms of biosecure or impact from biosecure.
Kevin Knopp: Happy to touch on those. So, first on the cell therapy side, our focus has been — that ladder as you mentioned, we do have a dedicated BD professional under our commercial leader that’s engaging, the innovative hardware equipment companies in the cell therapy space. As we announced a relationship with Terumo and then in February relates to relationship with Solaris. And those efforts, Solaris in particular is really around creating a fully integrated device that automates the whole process and increases the number of dosage available and lowering the cost of goods while doing so. That efficiency in our mind is very synergistic with our products and very much aligned to how we’re positioning our MAVEN and MAVERICK products to actually help control processes, help control and determine when you harvest, help improve yields and other quality attributes along the way.
