Fiscal 2025 was a defining year for 908 Devices, capped by a fourth quarter in which revenue grew 21% year over year to $17.4 million and the company achieved its first-ever quarter of positive adjusted EBITDA at $0.7 million - a $4.7 million swing from the prior-year loss and the goal management set at the start of the year. For the full year, revenue rose 18% to $56.2 million, net loss from continuing operations narrowed to $33.3 million from $53.1 million, and the adjusted EBITDA loss improved 39% to $9.6 million, as the completed Danbury manufacturing consolidation and Burlington headquarters move drove Q4 adjusted gross margin up about 530 basis points to 57%. Growth was led by the FTIR franchise - VipIR shipped more than 40 units (over $3 million) in Q4 and XplorIR grew more than 40% for the year - alongside a 38% increase in state and local revenue to roughly $24 million (43% of the total) and 22% growth in recurring revenue to $19.5 million. The company strengthened predictability by consolidating four federal contracting partners into Mountain Horse Solutions and grew international revenue to 27% of the total on NATO eastern-flank demand. Ending the year with $113 million in cash, no debt, and a late-stage pipeline roughly double its start-of-2025 size, management guided FY2026 revenue to $64.5-$67.5 million (15%-20% growth) and committed to roughly halving the adjusted EBITDA loss to mid-single-digit millions, while continuing to invest in selling and marketing and awaiting the next phase of the Smiths Detection-led AVCAD program.
Thank you, and good morning. On this call, we will be discussing our financial results for the fourth quarter and full year ending December 31st, 2025, which were released earlier this morning. Joining me from 908 Devices is Kevin J. Knopp, Chief Executive Officer and Co-founder, and Joseph H. Griffith, Chief Financial Officer. During today's call, we will make 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. For a discussion of these risks and uncertainties, please review the forward-looking statement disclosure in the earning news release, as well as in our most recent annual report on Form 10-K and other SEC filings. These forward-looking statements reflect management's beliefs and assumptions as of the date of this live broadcast, March 3rd, 2026.
Except as required by law, we disclaim any obligation to update forward-looking statements to reflect future events or circumstances. Our commentary today will also include non-GAAP financial measures, which should be considered as a supplement to and not a substitute for GAAP financial measures. The non-GAAP reconciliations can be found in today's earnings press release, which is available in the investor relations section of our website. With that, I now turn the call over to Kevin.
Thanks, Barbara. Good morning, and thank you for joining our fourth quarter and full year 2025 earnings call. I want to start by expressing my sincere appreciation to our entire team for their exceptional execution and unwavering commitment to our strategic transformation throughout 2025. The momentum we've built and the progress we've achieved reflect our disciplined focus on delivering innovative chemical analysis devices that protect frontline responders worldwide. I'm pleased to report that we achieved $17.4 million in revenue from continuing operations in Q4, representing robust 21% year-over-year growth. This performance was driven primarily by three factors. One, continued demand for our XplorIR gas identification device by firefighters and hazmat response teams. Two, strong initial demand for VipIR, our new product that provides simple and fast chemical analysis of solids and liquids.
Three, continued strong adoption of all of our products by U.S. state and local customers. Most importantly, we achieved positive Adjusted EBITDA in the fourth quarter of $0.7 million, which is a remarkable improvement from the prior year's loss of $4 million. This achievement validates the structural initiatives we implemented as part of our transformation. For the full year 2025, I'm proud to report that we delivered $56.2 million in revenue from continuing operations, representing strong 18% year-over-year growth and in line with our five-year CAGR performance. This strong performance validates our focus on vital health, safety, and defense tech applications. A key highlight was our team's execution of replacing outdated FTIR equipment with modern devices, one of our growth catalysts.
In 2025, more than 50% of device placements came from FTIR, led by the full year impact of our XplorIR device. Another highlight is our achievement of 22% year-over-year growth in recurring revenue, which represents 35% of our 2025 revenues. This growth reflects our ongoing efforts to offer more value to our customers through service, support, software, and accessory offerings, strengthening revenue visibility and long-term predictability. I would now like to highlight our progress during 2025 across our three strategic focus areas. Our number one focus has been to increase adoption of our devices to address global threats to public health and safety. Our XplorIR device continues to be a standout performer, with its unique capability to detect, identify, and quantify over 5,000 unknown gas and vapor chemical threats in seconds.
The market response has been exceptional across fire and hazmat teams worldwide who recognize the device's value in filling a critical gap in on-site gas identification to better inform decision-making and accelerate action. In its first full year of commercial sales of the quantification-enabled XplorIR, we delivered over 150 units to high-quality accounts, including the Council of Governments serving the broader Washington, D.C., area and the U.S. Marine Corps CBRNE Installation and Protection Program. These wins underscore the growing adoption of XplorIR among premier federal and regional response organizations. As a result, XplorIR achieved standout growth of more than 40% year-over-year, reflecting both the strength of demand and the impact of introducing quantification capability into the field. To help drive procurement efficiency and predictability in our U.S. federal government business, we consolidated contracting partners in the fourth quarter from four to one.
For 2026, we are now working with Mountain Horse Solutions, who specializes in supplying mission-critical equipment, such as our portfolio of devices, to all levels of the U.S. government and military. By leveraging their strong procurement relationships, contracting expertise, and integrated logistics and kitting capabilities, we improve forecasting accuracy and level load production as a supplier while enabling government customers to receive fully configured mission-ready solutions more quickly and reliably. We look forward to the benefits of coupling our demand generation with their procurement expertise. Outside the U.S., we saw traction for our devices accelerate, especially in Europe, as NATO countries have begun increasing their defense budgets due to the ongoing war in Ukraine and other global concerns. For the full year of 2025, 27% of revenues came from outside the United States.
This is an increase from 25% in 2024, with an even stronger increase in sales along NATO's eastern flank. We ship chemical detection devices to Poland, Czech Republic, Finland, Ukraine, and others in the region. This international expansion, we believe, is just beginning. Our progress in 2025 validates the need for our technology in protecting frontline responders and the public globally from unintentional disasters or intentional attacks. Our combination of advanced technology and our product's operational simplicity is what sets us apart and drives the demand we're experiencing across all customer segments. Moving to our second objective, advancing our next-gen analytical tools portfolio. Our newest device, VipIR, which we launched in July 2025, represents a breakthrough in simple, field-based chemical identification of unknown bulk substances by combining FTIR and Raman spectroscopy technologies with our proprietary Smart Spectral Processing capability.
The device's simple and smart workflow is a game-changing capability for customs and border personnel, as well as hazardous response teams. When connected with our Team Leader app, VipIR allows field teams to instantly share results with command centers and subject matter experts, dramatically improving response coordination and decision-making speed. Overall, we are excited about the positive market reception for VipIR, with early deployments across state and local HAZMAT teams and international customers. In the fourth quarter, we shipped more than 40 VipIR units, over $3 million in revenue. We are encouraged by the ultimate potential of this new product and the full year impact that VipIR will have in 2026. We also enhanced our flagship MX908 platform in 2025 and recently released several usability improvements, including the new Tick Hunter mission mode that provides first responders with a more guided and purpose-built tool for hazardous vapor detection.
Additionally, we expanded the device's drug detection capabilities by adding five new priority targets, including medetomidine, a veterinary sedative estimated to be 200x more potent than xylazine and which is increasingly being mixed with fentanyl. As the illicit drug landscape continues to evolve, our software updatable platform enables us to rapidly deploy new target libraries and capability enhancements, ensuring law enforcement remains current and equipped to address emerging threats in real time. Finally, our third focus has been to strengthen our financial position and accelerate profitability. The operational improvements we implemented throughout 2025 have solidified our financial position. Our manufacturing consolidation into Danbury, Connecticut, and our move to a cost-efficient headquarters in Burlington, Massachusetts, have created meaningful efficiencies across our operations.
These initiatives, combined with our disciplined cost management approach, enabled us to achieve our goal of positive Adjusted EBITDA, which was $0.7 million in the fourth quarter. This achievement demonstrates that our cost structure is now right-sized, disciplined, and fully within our control. Compared to our year-end 2024 position, we also strengthened our balance sheet materially, exiting 2025 with $113 million in cash. With this solid financial foundation, we now have the flexibility to invest in the expanding growth opportunities ahead, driven by developing secular tailwinds, such as increased funding to combat the fentanyl and illicit drug crisis and increased global defense budgets. To that end, we've established three strategic focus areas for 2026. First, scale proven platforms. We will sustain growth by continuing to modernize legacy detection equipment, especially FTIR, across global fire, law enforcement, and defense enterprise accounts.
We believe we have only made a dent in the overall potential and expect 2026 to benefit from a full year of growth of our newest product, VipIR. Second, extend platform leadership. We will also drive growth with greenfield placements, differentiated capabilities, and disciplined product introductions. New capabilities drive new opportunities. Our XplorIR product is a great example of this. With its differentiated gas quantification and identification capabilities, it's quickly penetrating the broader gas detection market. Similarly, our MX908 is now the proven device for trace chemical identification, and our law enforcement customers continue to rely on its unique capabilities. We expect to build on this and raise the bar further with our next gen mass spec platform. Our third focus is to strengthen revenue durability. We are building a predictable revenue mix by pursuing recurring revenue opportunities with connected services, expanding OEM-based revenue, and through long-term programs.
To that end, our DoD AVCAD program, in partnership with Smiths Detection, is nearing its next phase. As of today, we believe all material issues have been deemed addressed. Smiths Detection has responded to an RFP for a next phase and is awaiting feedback from the government. This next phase quoted is for an initial production run of approximately a few hundred systems, with component and subsystem contributions from 908 Devices being potentially delivered throughout the second half of this year. We remain committed to support Smiths Detection and DoD on this important national defense effort. We look forward to updating you on our progress in each of these focus areas on future calls. Now I'll turn it over to Joe to review our financial performance.
Thanks, Kevin. As a result of the sale of our desktop portfolio in the first quarter of 2025, the financials we are reporting today are for continuing operations only. All current and historical activity related to our desktops, including the gain on sale, are captured in a single discontinued operations line in our financial statements. Total revenue was $17.4 million for the fourth quarter 2025, increasing 21% from $14.3 million in the prior year period. Handheld product and service revenue was $16 million for the fourth quarter 2025, up 18% from $13.6 million for the fourth quarter 2024. The increase was primarily driven by our FTIR products, including more than 40 VipIR shipments and XplorIR, which more than doubled its placements in the fourth quarter versus the prior year period.
MX908 product and service revenue was relatively flat, with an increase in U.S. orders that offset fewer international device shipments. In total, we shipped 224 devices in the fourth quarter, bringing our installed base to 3,736. Program product and service revenue was $0.3 million in the fourth quarter of 2025, as we received funding for AVCAD program services performed in 2025, and it was $17,000 in the fourth quarter of 2024. OEM and funded partnership revenue was $1 million for the fourth quarter 2025, compared to $0.7 million in the prior year period. Revenue growth was led by component sales to pharma and industrial QA/QC customers, leveraging our new precision machining capabilities as well as component deliveries to Repligen under our supply agreement.
Recurring revenue, which consists of consumables, accessories, software, and service revenue, represented 32% of total revenues this quarter and was $5.5 million, an 11% increase over the prior year period. Gross profit was $9.2 million for the fourth quarter of 2025, compared to $6.7 million for the prior year period. Gross margin was 53% for the fourth quarter 2025, compared to 47% for the prior year period. The increase was driven primarily by higher volume along with a shift in channel mix to state and local and defense sales during the fourth quarter 2025, compared to international sales in the fourth quarter of 2024 that have a lower average selling price. Adjusted gross profit was $10 million for the fourth quarter of 2025, compared to $7.5 million for the prior year period.
Adjusted gross margin was 57%, an increase of approximately 530 basis points compared to the prior year period. The increase in adjusted gross margin was driven by the channel mix and leverage, as mentioned above. Total operating expenses for the fourth quarter of 2025 were $6.1 million, compared to $23.4 million in the prior year period. The decrease was largely a result of a $5.1 million reduction in the fair value of contingent consideration and a $10.1 million goodwill impairment charge in the fourth quarter of 2024. Excluding the impact of these two non-cash items, operating expenses for the fourth quarter decreased year-over-year by $2 million due to a reduction in headcount and facility expenses.
Net income from continuing operations for the fourth quarter of 2025 was $4.4 million, compared to a net loss of $16 million in the prior year period. This increase was primarily driven by the $15.2 million decrease in non-cash goodwill and contingent consideration, and was additionally due to improved gross margins and reduced operating expenses. Adjusted EBITDA for the fourth quarter of 2025 was a positive $0.7 million, compared to a loss of $4 million in the prior year period, representing a $4.7 million improvement and achievement of the goal we set at the beginning of 2025. This significant improvement was related to our aggressive cost initiatives, resulting in reduced operating expenses across the board, including headcount, facilities, R&D costs, and professional fees. We structurally changed our cost basis and expect to see the benefits of these efficiencies continue.
Now moving on to our full year results. Revenue for the full year 2025 was $56.2 million, increasing 18% from $47.7 million for the full year 2024. This was primarily driven by an increase in revenues from our FTIR products, led by our recently launched VipIR and our XplorIR device, but also partly due to the impact of ownership for the full year period in 2025 compared to 8 months in 2024. An element of our growth in 2025 was driven by our state and local sales channel, which grew 38% to approximately $24 million, representing 43% of revenues for the full year 2025, compared to 37% for the full year 2024.
State and local deals are generally smaller in size and more frequent, which is a more predictable balance to large, potentially lumpy federal and military enterprise sales. Recurring revenue, which consists of consumables, accessories, software, and service revenue, represent 35% of total revenues this year and was $19.5 million, a 22% or $3.5 million increase over the prior year period, largely driven by FTIR service and OEM revenues. Gross profit was $28.4 million for the full year 2025, compared to $24.5 million for the full year 2024. Gross margin was 51% for both the full year 2025 and 2024. Adjusted gross profit was $31.9 million for the full year 2025, compared to $26.7 million for the full year 2024.
Adjusted gross margin was 57% as compared to 56% for the full year 2024. The increase in gross margin was primarily due to improved service and contract gross margins. Total operating expenses for the full year 2025 were $67.8 million, compared to $81.9 million in full year 2024. The decrease in operating expenses was driven primarily by a $40.7 million non-cash goodwill impairment charge, offset in part by a $27 million change in the fair value of the contingent consideration liability, where it was a charge in 2025 and a credit in 2024. Net loss from continuing operations for the full year 2025 was $33.3 million, compared to $53.1 million in the full year 2024.
This increase was largely due to the non-cash charge for the impairment of goodwill and change in valuation of the contingent consideration just mentioned. Adjusted EBITDA for the full year 2025 was a loss of $9.6 million, marking a meaningful 39% reduction compared to full year 2024. We ended the year with $113 million in cash equivalents, and marketable securities, with no debt outstanding. We generated approximately $0.9 million in cash in the fourth quarter of 2025. The increase was primarily related to collection efforts and timing of working capital. Looking ahead in 2026, we expect revenue to be in the range of $64.5 million-$67.5 million, representing growth of 15%-20% over full year 2025. Our guidance range includes the following assumptions.
First, we expect handheld product and service revenue to grow 13%-17% year-over-year, which equates to a range of $59.5 million-$61.5 million. The increase reflects expectations around the full year impact of VipIR and growth of our MX908. Second, we expect OEM and funded partnerships, including contract revenue, to be approximately $3 million. Third, we expect revenue contribution from the AVCAD program to be in the range of $2 million-$3 million, likely in the second half of 2026. Moving down the P&L, we expect adjusted gross margins to be in the mid-to-high 50% range for full year 2026 and are targeting margin expansion of at least 100 basis points with our increased volume.
Channel and product mix play a key part in our adjusted gross margin. We'll look to balance this with our first full year of manufacturing in Danbury and insourcing initiatives with our precision machining capabilities. During 2025, we were able to streamline our research and development and selling general and administrative costs. We will continue to be thoughtful on investments in 2026, likely we'll see an increase in selling and marketing expenses as we look to drive revenue growth with targeted headcount investments. On the bottom line, we expect to cut our 2025 Adjusted EBITDA loss in half for 2026, reducing it to the $mid-single digit millions, making another significant step down year-over-year while we go after the growth opportunity. At this point, I would like to turn the call back to Kevin Knopp.
Thanks, Joe. As we wrap up today's call, I want to emphasize that 2025 was a defining year for 908 Devices. The results we've delivered demonstrate that our strategic transformation is working. With our lower cost structure and healthy balance sheet, our trajectory is firmly within our control as we balance disciplined growth investments with profitability. I'm confident in our ability to capitalize on the significant and growing opportunity in front of us. We have entered 2026 with a late-stage pipeline that is double the size it was at the start of 2025, which is a tangible reflection of stronger customer demand. With funding momentum building and favorable U.S. policy decisions reinforcing the priorities of our end markets, we believe we are well positioned to translate this demand into sustained growth in the year ahead.
Lastly, perhaps most importantly, we're executing a mission that matters. Every device we deploy helps protect frontline responders who put their lives on the line to keep our communities safe. This purpose-driven focus, combined with our technology leadership and operational excellence, creates a powerful foundation for continued success. Thank you for your continued support and confidence in 908 Devices. We look forward to updating you on our progress as we continue executing this transformation strategy. With that, let's open it up for questions.