What Management Said
Read the full Q3 2025 transcript ↗Reconciliations to the most directly comparable GAAP financial measures can be found in today's earnings press release, which is available in the Investor Relations section of our website. Revenue from continuing operations was $14 million, down 4% year over year and up 8% sequentially. Growth was driven this quarter by our FTIR devices, which accounted for 42% of revenue, as we continue to see very strong demand for our Explorer Gas Identification device. Considering our year-to-date progress, revenues from continuing operations for the first nine months totaled $38.8 million, representing an increase of 16% year over year.
Growth in this channel and in our recurring revenues are key parts of our strategy to enhance predictability, as this is more run-rate business versus large enterprise device deals, which can be lumpy. We also made excellent progress towards our adjusted EBITDA target for 2025. Overall, I'm pleased with our execution this quarter as we continue to build momentum towards our growth and profitability goals. While our transform strategy is taking hold and our Q4 pipeline remains healthy, we continue to gauge the effects from the protracted U.S.
First, demand from state and local customers remains strong, supported by multi-year federal grant programs that remain active. Third, while smaller federal and defense orders have continued to move forward, larger awards have experienced delays due to constrained staffing and contracting authorities. We estimate that approximately $4 million of our Q4 revenue could be potentially impacted by delays in these areas. However, our base case remains that we are on track to achieve our full-year guidance, and we view any near-term impact as a timing issue as our strategic alignment remains strong.
- Nine-month revenue from continuing operations reached $38.8 million, up 16% year over year, and third-quarter revenue of $14.0 million rose 8% sequentially.
- Installed base grew 27% year over year to more than 3,500 devices (over 4,200 including approximately 700 legacy FTIR units placed before the RedWave acquisition).
- Adjusted EBITDA loss narrowed to just $1.8 million - the company's lowest since its IPO - down 53% sequentially and 32% year over year, keeping the Q4 adjusted-EBITDA-positive goal in reach.
- Record XplorIR quarter with placements up 30% sequentially; the U.S. Coast Guard purchased 23 MX908 devices and the U.S. Marine Corps CBRNE program purchased 17 XplorIR units.
- Adjusted gross margin improved sequentially to 58%, an early benefit of the Danbury manufacturing consolidation.
- Shipped the first VipIR unit to a Southeast Asian government intelligence agency (a competitor displacement) and secured more than 35 VipIR units for Q4 shipment.
- U.S. state and local channel represented 47% of nine-month revenue, improving predictability versus lumpy federal enterprise deals; Team Leader software surpassed 700 users.
- Ended the quarter with $112.1 million in cash and marketable securities and no debt.
- Third-quarter revenue fell 4% year over year, driven by fewer multi-unit MX908 orders from U.S. federal and defense customers.
- The protracted U.S. government shutdown put an estimated $4 million of Q4 revenue potentially at risk, with larger federal awards slowed by constrained contracting authorities and some international deliveries subject to export-license timing.
- Gross margin was 53% (down from 54%) and adjusted gross margin declined about 60 basis points to 58%, on less favorable product mix and unabsorbed costs from the new in-house precision-machining operation.
- The company consumed approximately $6.5 million of cash, including $2 million for the KAF asset acquisition.
- Handheld revenue guidance was trimmed by $0.5 million to reflect a funding-related pause in service coverage by a U.S. defense customer (about a $500,000 quarterly headwind beginning in Q4).
- AVCAD still contributed no meaningful 2025 revenue, with next-phase clarity pending completion of a final field-validation event.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| FY2025 revenue from continuing operations | FY2025 | maintained at $54-$56 million (13%-17% growth) |
| FY2025 handheld product & service revenue | FY2025 | grow 16%-20% ($51.5-$53.5M); trimmed ~$0.5M on a defense service-coverage funding pause |
| FY2025 OEM & funded partnerships (incl. contract revenue) | FY2025 | ~$2.5 million (+$0.5M, incl. KAF contribution) |
| FY2025 adjusted gross margin | FY2025 | mid-to-high 50% range (56% for the nine months) |
| Q4 adjusted EBITDA | Q4 FY2025 | still targeting positive, assuming the government resumes normal contracting; ~$4M of Q4 revenue at risk from the shutdown |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue (continuing ops) | -4% to $14.0 million (+8% sequentially) | Fewer large multi-unit MX908 federal/defense orders, offset by state and local momentum |
| Handheld product & service revenue | -5% to $13.2 million | Lower federal MX908 orders (176 devices shipped vs. 178) |
| OEM & funded partnership revenue | +$0.3M to $0.8 million | Pharma and industrial QA/QC customers plus KAF component sales |
| Recurring revenue | +10% to $4.8 million (~35% of revenue) | Consumables, accessories and service growth |
| Adjusted EBITDA | loss of $1.8 million (-32% YoY, -53% sequentially) | Aggressive cost initiatives across facilities, R&D and professional fees |
| Adjusted gross margin | 58%, down ~60 bps | Product mix and unabsorbed new-machining costs |
| Installed base | +27% to 3,512 (>4,200 incl. legacy FTIR) | 176 devices placed |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| 908 Devices 2.0 transformation | Executing three focus areas | Best adjusted EBITDA since IPO; portfolio expanded from one to five handheld products; customer concentration reduced | — |
| U.S. government shutdown | Not a factor last quarter | ~$4M of Q4 revenue potentially delayed; state/local and international more insulated than large federal awards | — |
| VipIR ramp | Launched in July | First unit shipped to a Southeast Asian intelligence agency; >35 units secured for Q4; a rising 2026 contributor | — |
| Autonomous / unmanned platforms | Early interceptor use at events | Thales Group UGV collaboration; extending analytical platforms to ground robots and drones | — |
| Recurring revenue and state/local mix | Building predictability | State/local = 47% of nine-month revenue; Team Leader >700 users as a future recurring contributor | — |
Q&A Summary
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