908 Devices opened fiscal 2026 with first-quarter revenue of $13.4 million, up 14% year over year, and continued profitability progress as the adjusted EBITDA loss narrowed 45% to $2.5 million on a lower cost base and adjusted gross margin expansion of about 290 basis points to 57%. U.S. state and local customers were the standout, representing roughly half of revenue and exceeding internal targets for a third straight quarter, complemented by more than 25 VipIR shipments and a $3 million state department-of-corrections order closed in April. The quarter's centerpiece was the announced acquisition of Switzerland-based NIRLAB AG for $15 million upfront (plus up to $8 million in earnout equity), which extends 908's handheld franchise into an approximately $200 million sub-$40,000 near-infrared narcotics-detection segment and brings a high-retention (greater than 99%) software subscription model with about 50% recurring revenue, more than 1 million analyses performed, and what management calls the world's largest near-IR narcotics spectral database. Management raised full-year 2026 revenue guidance by $2.5 million to $67-$70 million (19%-25% growth) while noting NIRLAB adds roughly a $1 million adjusted-EBITDA headwind in 2026 before turning profitable in 2027. Softer spots included a 7% decline in recurring revenue to $4.0 million on lower mass spec service revenue and a wider net loss of $12.0 million driven by a $3.9 million non-cash contingent-consideration charge. Management also highlighted that RedWave exceeded its earn-out with more than $37 million of cumulative two-year revenue (versus $13.7 million pre-acquisition) as a proof point for its acquire-and-integrate model, and added Kola Otitoju as Chief Business and Strategy Officer, ending the quarter with $111.7 million in cash and no debt.
Thank you and good morning. On this call, we will be discussing our financial results for the first quarter ending March 31st, 2026, which were released earlier this morning. Joining me from 908 Devices is Kevin Knopp, Chief Executive Officer and Co-founder, and Joe 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 statements disclosure in the earnings 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, May 6th, 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, thank you for joining our first quarter 2026 earnings call. We entered 2026 from a position of strength with a streamlined cost structure, a solid balance sheet, and an expanding recurring revenue opportunity. In the first quarter, we continued to build on that momentum, delivering $13.4 million in revenue, up 14% year-over-year. Sales to U.S. state and local customers remained a key driver, representing approximately 50% of our first quarter revenues. This marks the third consecutive quarter that orders from these customers have exceeded our internal targets, and based on our current pipeline visibility, we believe we can continue this trend in the second quarter. Importantly, this channel is delivering consistent, high-quality run rate demand, helping to drive greater visibility and predictability while complementing larger international and U.S. federal enterprise opportunities.
Over the past 24 months, we have made deliberate investment to scale this segment alongside the successful integration of our RedWave FTIR portfolio, and we are now seeing those efforts translate into sustained, durable growth. FTIR products have become a meaningful contributor to this and represented 43% of our first quarter total revenues, while mass spec revenues represented the remaining 57%. Now, I want to highlight an example that captures both the real-world impact of our products and the positive demand environment we're seeing. In March, a New York Times investigation highlighted the growing threat of drug-laced papers entering correctional facilities by mail, substances that are invisible to the naked eye and increasingly linked to rising overdose fatalities. States are acting. In Virginia, leaders have implemented a comprehensive program called Operation Free that includes the use of our MX908 device for trace narcotics detection.
We were recently honored by Virginia officials with a state flag recognizing our role in supporting their initiative, an integrated model of enforcement, intelligence, and treatment that has reduced fatal overdoses in their correction system from 24 in 2024 to 0 in 2025. This need for advanced inspection and screening is not isolated. The leaders behind Operation Free are now expanding their approach nationally, reinforcing a broader and accelerating demand environment. In parallel, we anticipate that the passage last week of the Department of Homeland Security funding bill will provide additional support for our second-half objectives. To kick things off here in Q2, we closed a $3 million order in April with another state department of corrections. We are continuing to drive momentum as we execute our law enforcement narcotics strategy.
On our last earnings call, we outlined three focus areas for 2026, scaling our proven platforms, extending our handheld leadership through differentiated capabilities and disciplined innovation, and strengthening revenue durability through recurring and program-based opportunities. This morning, we are excited to announce the acquisition of NIRLAB AG. We believe this acquisition is additive to each of our existing initiatives for the year and will be a very strong strategic fit over the short and long term. This acquisition brings together highly complementary drug detection capabilities, increases our international revenue mix, and provides a high retention recurring software subscription model. Just as important as strategic fit is the cultural alignment. NIRLAB is a founder-led, highly technical organization with deep expertise in spectroscopy, data science, and cloud-based AI analytics.
Their mission-driven focus on enabling safer, faster decision-making in the field closely aligns with our purpose of protecting frontline responders and addressing critical public health challenges. Prior to reviewing our first quarter financial results, I wanted to walk you through a handful of slides about this acquisition and how it aligns to our focus areas and with our broader law enforcement narcotics strategy. Very simply, this acquisition does four things for 908. First, it expands our handheld franchise into a high volume, widely deployable sub $40,000 segment, unlocking about a $200 million market. This is a solution purpose-built for frontline narcotics detection, increasing accessibility and driving unit volumes in markets we know well and already serve. While not yet at scale, it's already validated with 100+ active customers and approximately $2 million of law enforcement revenue.
It strengthens and extends our leadership in narcotics for law enforcement. It builds directly on the momentum we're seeing with MX908 and complements VipIR, expanding a market-leading portfolio that's driving growth at the state and local level. It completes our end-to-end coverage with near-infrared-based optical spectroscopy, which we have core expertise. We now span from everyday screening to confirmatory analysis, driving higher customer value and deeper adoption. It accelerates our software and recurring revenue strategy. This is a proven high-retention subscription model, about 50% recurring revenue with a demonstrated annual retention of greater than 99%. It fits directly into our connected services vision with Team Leader and NIRLAB's live cloud-connected AI-driven analysis. This gives us a faster path to scaling recurring revenue, increasing lifetime customer value, and improving visibility. This is a highly-levered growth opportunity.
The business today is largely international. We see a clear path to accelerate U.S. adoption using our commercial infrastructure, while also benefiting from the technical know-how to further advance our platform. Taken together, we believe this deal expands our market, strengthens our portfolio, completes our workflow, and accelerates our software strategy, all tightly aligned to where we're taking 908. From a financial standpoint, NIRLAB's growth and recurring revenue mix are accretive and support our long-term margin targets as high-margin software subscription scale. For the remaining eight months of 2026, we expect approximately 2.5 million in revenue, growing under our model to more than 5 million in 2027. We do expect a modest, roughly $1 million adjusted EBITDA headwind in 2026, with the business plan to be profitable and contributing positively in 2027.
The upfront transaction value is $15 million, $13 million in cash and $2 million in equity, with up to $8 million in additional equity tied to recurring revenue and customer capture performance milestones over the next 20 months. As we step back and look at what we're acquiring, it's important to recognize that this is not just a single product or point solution, but a fully integrated platform that is ready to scale. At its core, NIRLAB combines purpose-built hardware with a cloud-connected software ecosystem and a subscription model, enabling rapid, field-based chemical analysis with a simple, scalable workflow. This platform approach is what drives both adoption and long-term customer value. A key component of that value is the underlying data, know-how, and IP.
NIRLAB has built what we believe is the world's largest near IR spectral database for narcotics, supported by proprietary AI and machine learning models informed by tens of thousands of laboratory-characterized seed drug samples. This creates a meaningful and defensible data moat that strengthens over time as more data is collected in the field. As part of the acquisition, we're also integrating a highly specialized and mission-driven team of 15 people based in Switzerland with deep expertise across spectroscopy, software, cloud infrastructure, and machine learning. Their scientific foundation, anchored through their relationship with the University of Lausanne, brings both credibility and continued innovation to the platform. The NIRLAB experience is designed to be simple, fast, and highly accessible for frontline users.
With a straightforward workflow of just downloading the app from the App Store, pairing the device, analyzing a sample, and then receiving results in seconds, users can detect, identify, and quantify the most common illicit drugs directly in the field, approximately 400 substances, including THC and CBD in cannabis, which are important analytes not covered by our Mass Spec or other optical products. For reference, the initial device will be roughly $10,000, and its required subscription will be roughly half that again per year. Note, these are approximate as pricing varies by market and is still being established. We believe near-infrared's ease of use, low training requirements, and safer operating profile versus Raman are critical competitor differentiators in this product segment. This platform is purpose-built for broad deployment across generalist users, enabling everyday use cases at scale.
What further differentiates this platform, however, is what happens beyond the handheld device. Each measurement taken in the field is captured and aggregated into a centralized cloud-based ecosystem, transforming what would otherwise be isolated data points into a continuously expanding intelligence layer. This allows agencies and organizations to identify patterns across locations, users, and time, turning decentralized field activity into actionable insights that can inform both real-time decisions and longer-term strategy. On top of that, the platform leverages AI and advanced compute to continuously improve performance. As more data is collected, the system becomes more accurate, more robust, and more valuable to the end user. This creates a powerful flywheel effect with increased usage driving more data, more data driving better insights, and better insights driving further adoption. From a strategic perspective, this is also highly aligned with our broader Team Leader software vision.
It strengthens our ability to deliver connected data-driven solutions, expands our recurring revenue opportunities, and enhances the overall value of our ecosystem to customers. NIRLAB is embedded in the day-to-day workflows of customers with over 1 million analyses performed to date. This level of usage demonstrates both reliability of the technology and the value it delivers in operational settings. NIRLAB's customer base spans across continents from the Australian Federal Police in Oceania to state police forces in Switzerland and Germany, local police forces in the Netherlands, Italy, and Spain, and more broadly across Europe, to a forensics laboratory in Malaysia, customs authorities in Mauritius, and anti-narcotics units in Nigeria, among many others. These are not pilot programs or limited trials. This is an active recurring use by frontline personnel who rely on the platform to make fast, informed decisions in the field.
Thanks, Kevin. Total revenue was $13.4 million for the first quarter 2026, increasing 14% from $11.8 million in the prior year period. Handheld product and service revenue was $12.8 million for the first quarter 2026, up 16% from $11 million for the first quarter 2025. The increase was primarily driven by our FTIR products, including more than 25 VipIR shipments, which offset a reduction in ProtectIR shipments. MX908 product and service revenue was up overall, driven by an increase in device placements, but was offset by a $0.7 million decrease in service revenue. In total, we shipped 167 devices in the first quarter, bringing our installed base to 3,903.
As anticipated, program product and service revenues was zero in the first quarter of 2026, as we await funding for the next phase of the AVCAD program, and it was $0.1 million in the first quarter of 2025. OEM and funded partnership revenue was $0.6 million for the first quarter 2026, compared to $0.7 million in the prior year period. Recurring revenue, which consists of consumables, accessories, software, and service revenue represented 30% of total revenues this quarter and was $4 million. A 7% decrease over the prior year period, primarily related to the expected reduction in MassSpec service revenue. Gross profit was $6.9 million for the first quarter of 2026, compared to $5.5 million for the prior year period.
Gross margin was 51% for the first quarter of 2026, compared to 47% for the prior year period. The increase was driven by several factors. One, higher product revenue volume. Two, a shift in channel mix with fewer international placements that are at a lower gross margin. Three, the decreased facility costs related to the move of our Boston facility in 2025. This was offset in part by a lower service gross margin related to the decreased service contract revenue in the first quarter of 2026. Adjusted gross profit was $7.7 million for the first quarter of 2026, compared to $6.4 million for the prior year period. Adjusted gross margin was 57%, an increase of approximately 290 basis points compared to the prior year period.
The increase in adjusted gross margin was driven by the higher revenues, channel mix, and the reduced facility costs, as mentioned above. Total operating expenses for the first quarter of 2026 were $19.8 million, compared to $16.6 million in the prior year period. The increase was due to a non-cash $3.9 million increase in the fair value of contingent consideration. All other operating expenses for the first quarter decreased year-over-year by $0.7 million, driven by a reduction in facility expenses and a $0.2 million decrease in acquisition and integration costs. Net loss from continuing operations for the first quarter of 2026 was $12 million, compared to a net loss of $9.8 million in the prior year period.
This increase was primarily driven by the $3.9 million non-cash charge for revaluing contingent consideration, offset in part by the improved gross margins and reduced operating expenses. Adjusted EBITDA for the first quarter of 2026 was a negative $2.5 million, compared to a loss of $4.6 million in the prior year period, representing a $2.1 million improvement. In the first quarter, we cut our adjusted EBITDA loss by 45% due to realizing growth and improved margins with a lower operating cost base. We ended the quarter with $111.7 million in cash equivalents, and marketable securities with no debt outstanding. Operationally, we are executing with discipline, using only $1.2 million of cash in the quarter.
Looking ahead in 2026, we now expect revenue to be in the range of $67 million-$70 million, representing growth of 19%-25% over full year 2025. Our guidance range has increased $2.5 million and includes the following assumptions. First, we now expect handheld product and service revenue to grow 18%-21% year-over-year, which equates to a range of $62 million-$64 million. The increase in guidance reflects initial expectations around our acquisition of NIRLAB as we integrate it into our commercial model. Second, we continue to expect OEM and funded partnerships, including contract revenue, to be approximately $3 million. Third, we continue to expect revenue contribution from the AVCAD program to be in the range of $2 million-$3 million, likely in the second half of 2026.
As previously stated, Smiths Detection has responded to a request for proposal and are negotiating for an anticipated spring award for an initial production run of approximately a few hundred systems, with component and subsystem contributions from 908 Devices. This timing and quantities are validated by the Department of Defense's Fiscal Year 2027 Chemical and Biological Defense Program public request to Congress just last week. Moving down the P&L, we continue to expect adjusted gross margins to be in the mid to high 50% range for full year 2026. On the bottom line, we expect to reduce our adjusted EBITDA loss to the mid-single-digit millions, making another significant step down year-over-year while we go after the growth opportunity. We expect that NIRLAB will represent approximately $1 million of the adjusted EBITDA loss in 2026.
However, as Kevin mentioned, we anticipated to be adjusted EBITDA positive in 2027. At this point, I would like to turn the call back to Kevin.
Thanks, Joe. The progress we're seeing is a direct result of disciplined execution and a strategy that is working. Only four months into the year, we're encouraged by the trajectory of the business. We're executing well, building momentum, and expanding from a position of strength. Our end goal is clear, to be the number one provider of handheld detection solutions globally. Every move we're making from organic investments to tuck-in M&A is reinforcing that leadership. We're broadening the portfolio with purpose, extending beyond MX, and assembling what we believe is the strongest and most comprehensive suite of handhelds in this market. In parallel, we're scaling our commercial organization to match the opportunity and drive consistent execution.
Every piece ties back to our narcotics and chemical detection strategy, addressing real pain points across performance and price points, expanding the market while taking share as we solve more of the problem.
RedWave is a clear proof point. We identified a unique asset, moved early, integrated successfully, and we're now scaling the business through our sales model. As of March 31st, 2026, RedWave exceeded its earn-out threshold, delivering more than $37 million in cumulative revenue over the past two years, compared to $13.7 million for the full year prior to our acquisition. This demonstrates our ability to create value through integration and execution under our model. We're also adding depth to our leadership team with the addition of Kola Otitoju as Chief Business and Strategy Officer, bringing proven execution across both organic and inorganic initiatives following six successful years at Repligen, including growing the analytics technology business and executing more than 15 M&A transactions and strategic partnerships for the company.
The takeaway is we're building a scaled, category-defining handheld platform with greater recurring opportunity, positioned to deliver a higher quality, more predictable, and more durable growth profile. With that, let's open it up for questions.