Butterfly Network, Inc.

Good day and thank you for standing by. Welcome to Butterfly Network 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, Mike Cavanaugh, Investor Relations. Thank you. Please go ahead.

Good afternoon, and thank you for joining us today. Earlier this afternoon, Butterfly Network released financial results for the year-ended December 31, 2020, and provided a business update. The release is currently available on the investor section of the company's website at ir.butterflynetwork.com. Dr. Todd Fruchtermann, Butterfly Network's President and Chief Executive Officer, and Stephanie Fielding, Butterfly Network's Chief Financial Officer, will host this afternoon's call. As a reminder, during today's call, we will be making certain forward-looking statements. These statements may include statements regarding, among other things, expectations with respect to financial results, future performance, development of products and services, potential regulatory approvals, anticipated financial impacts and other effects of the business combination on our business, the size and potential growth of current or future markets for our products and services, and the potential impact of the COVID-19 pandemic on our business. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our filings made with the Securities and Exchange Commission. We will caution not to place undue reliance on these forward-looking statements, and the company disclaims any obligation to update such statements. As a reminder, this call is being webcast live and recorded, and we will be referencing a slide presentation in conjunction with our remarks. Because there is a short delay between the live telephone audio and the presentation being shown on the webcast, for the best experience, please use either the webcast with both the audio and video content, or if you dialed in by telephone, download the slides from our website and advance them yourselves. To access the webcast, please visit the Events section in the Investors section of our website. Additionally, a replay of the event will be available following the call. I would now like to turn the call over to Dr. Fruchterman. Thank you, Mike, and good afternoon, everyone. I'm excited to be hosting the first earnings call for Butterfly Network, and I am grateful for the opportunity to lead this incredible company and talented team. On today's call, I will provide an overview of our full-year 2020 performance and the momentum we built last year before discussing the longer-term outlook for the company. Then Stephanie will review our 2020 financial results, and we will conclude with a question-and-answer session. With this being my first earnings call as CEO, And at first such call as a public company, I'd like to say a few words about why I was attracted to Butterfly, what we do, and why we're so excited about it. For the last 25 years, I have been passionate about driving change and innovation in healthcare. I wake up every day wanting to make a difference in people's lives. And now, more than ever, change is needed in healthcare on a global scale. And that's why I joined Butterfly, because we have the technology and the platform that can enable change of that magnitude. Our universal, handheld, point-of-care ultrasound solution is powered by a proprietary technological breakthrough, ultrasound on a chip. Butterfly's core chip technology is the first fundamentally new sensor to come to the ultrasound market since the introduction of clinical ultrasound some 50 years ago. It breaks through the crystal ceiling limitations of traditional ultrasound and enables the next generation of imaging products that are affordable, portable, connected, and high performance. Butterfly has the ability to go to wherever the patient is. We have paired our handheld probe with cloud-based software to create a true imaging solution, a solution that delivers vital information in many use cases across multiple care settings. This information supports higher quality and more timely clinical decision-making. And with these clinical workflow improvements, clinicians can achieve better outcomes for the people in their care. The beauty of Butterfly is that this can happen anywhere, as long as the Butterfly handheld is paired with a connected device. This ubiquity supports our mission to create access to advanced imaging solutions for healthcare applications all around the world, helping to democratize healthcare and support global health equity. Now let's review our 2020 performance. Last year, we made great progress in getting Butterfly into the hands of many different types of healthcare professionals, bringing our technology to new users and introducing new applications. Important steps towards the achievement of our mission. And we are excited because as we listen to our customers, we are seeing many new use cases and opportunities emerge, guiding us as we work to rapidly develop new applications for our technology. And as a result of our team's great work, we reported a revenue increase of 68% year over year, demonstrating the excitement and demand for butterfly technology in the marketplace. This performance is a measure of the positive reception by users to both our initial IQ device as well as the second generation IQ Plus device that we launched in October 2020. this launch was a significant commercial milestone for our company creating many improvements we know are important to our customers the iq plus is less expensive to produce has a faster frame rate longer battery life smaller probe head and improved interoperability versus the first generation butterfly iq the iq plus is the result of our many years of r d and our proprietary chip-based technology platform that allows us to rapidly deploy performance enhancements and capabilities into the market. As one example, in December, just following the launch, we further enhanced IQ+, with the first biplane imaging capability in a portable ultrasound device. This allows our customers to more accurately place needles during vascular access and regional nerve blocks. But this is only the beginning, as we expect to continue pushing the paradigm of what's possible at the point of care. In 2020, we established a number of partnerships to help us reliably produce our products and expand customer awareness, reach, and clinical use cases for our differentiated butterfly technology. In October, we announced a collaboration with the American College of Cardiology, or ACC, to explore ways to transform cardiovascular care. Butterfly and the ACC plan to jointly conduct a clinical trial that leverages our innovative technology for scanning patients with cardiac disease, exploring the benefits of Butterfly in new patient care settings that our one-of-a-kind device can serve. Also in 2020, we expanded our global health partnerships with a number of organizations focused on limited resource settings. We are particularly proud of our work with Alara Health to facilitate a large-scale deployment of butterfly IQ devices and a teleguidance pilot in Kenya. By leveraging butterfly teleguidance, a sonographer is able to remain at a central hub location and remotely guide clinicians at the Outline Alara clinics. We are making important progress toward breaking new frontiers and revolutionizing the way medical imaging is delivered in our mission to advance global health equity. And as you are aware, last month we completed our business combination with Longview Acquisition Corp. So now Butterfly Network Inc.' 's Class A common stock and warrants trade on the New York Stock Exchange. This has enabled Butterfly to become a larger, well-capitalized company that is primed for global growth and supports our robust investment in innovation. I could not be more excited for the longer-term outlook for Butterfly because we believe we have a groundbreaking solution and a team who knows how to realize its value. we know that great technologies don't just make great businesses on their own great technologies make great businesses when they are enabled through powerful scalable business models that create and capture customer value it is still fair to say we are early in our journey and a lot has happened in the past eight weeks with butterfly going public in mid-february me joining the company as CEO a few weeks before that, and more recently, the exciting addition of Stacey Peer as Chief Commercial Officer. Simultaneously, we have enhanced our capable and experienced board of directors with our latest addition of Dr. Elzar Edelman, Professor of Medical Engineering and Science at MIT. Dr. Edelman adds further clinical and technical dimension to our already powerful board of directors. Given this build in both the board and leadership team, we are still defining our longer-term commercial outlook for Butterfly and the most appropriate metrics to inform our progress towards those goals. My near-term goals and that of Butterfly are foundational, and we look forward to reporting our progress in the coming months. I have five goals. My first goal is to broaden and strengthen our human capital, which will complement our technology and clinical teams, and to enhance our innovation capability with additional commercial, regulatory, operational, and developmental horsepower. The second is to broaden our partnerships with clinical leaders and unleash the full potential of Butterfly. The third is to align with the payer community, which we believe is well-incented to drive adoption of our products to improve both outcomes and cost of care. Fourth is to commercially partner across care settings, specialty, and geography, which we expect will accelerate adoption of Butterfly to deliver patient-centric, value-based healthcare. And my final goal is to continue to invest in our industry-leading innovation, We are only beginning to harness what is possible to ensure optimized implementation and coordination in healthcare. Butterfly has an important role to play here. Success along these five foundational goals, team, clinical partnerships, payer alignment, commercial expansion, and innovation, we believe will drive our societal impact, our commercial growth, and our ability to improve wellness one patient at a time. Our work is not only urgent, it is timely, especially as we emerge from the pandemic. There are rapid shifts in where and how care is being delivered and an increasing focus on value-based care outcomes and total cost of care. We are fortunate to be delivering technology to a global marketplace that we believe is ready and anxious to receive it. Today, point-of-care ultrasound is incorporated into the curriculum of more than two-thirds of the U.S. medical schools. Additionally, nearly all professional societies across clinical specialties now have a policy regarding point-of-care ultrasound and are developing standards. This strengthens the clinical foundation on which Butterfly operates and supports our advanced capabilities that enable meaningful utilization and value realization in a variety of settings. At its core, Our strategy is to drive increased utilization and adoption of our solution. And this means getting the IQ Plus into the hands of the people who can benefit from it in a way that creates immediate, long-lasting value. It starts with getting the hardware in a customer's hand and amplifies through our software that creates an engaging user experience and easily integrates with existing systems, providing additional value when using Butterfly. As we broaden our footprint, we will seek to expand the use cases for ultrasound information and thereby increase applications and use in care settings that haven't traditionally been able to benefit from it. We expect our technology will continue to make ultrasound more accessible to clinicians throughout the world and provide better information to make clinical decisions earlier in a patient's treatment, in the hospital, in the ER, in medical transport on the way to the hospital, in the clinic, and ultimately subject to the appropriate regulatory authorization in the home. And this is an opportunity in both developed and developing healthcare systems. Decision-making at the point of care in many settings can be a game changer for improving a patient's care with the potential to help revolutionize and simplify care delivery, addressing delays in access to clinical information, reducing unnecessary costs, and improving patient satisfaction. The Butterfly solution is designed to address key problems in modern healthcare and helps to get treatment on the right path earlier because more than two-thirds of diagnostic dilemmas can be answered with simple imaging. In the past, we used a stethoscope and listened. With Butterfly, we can see and know. I look forward to sharing more information with you on our long-term outlook as the year progresses. I will now turn the call over to Stephanie for a review of our financial results. Stephanie?

Thank you, Todd. Total revenue for the full year 2020 was $46.3 million, which, as Todd noted earlier, is a 68% year-over-year increase from $27.6 million in 2019. Product revenues for the full year 2020 were $38.3 million, an increase of 53% from 25.1 million in 2019. Units fulfilled, which is the primary driver of product revenue, were 20,208 in 2020, compared with 12,941 in 2019, which is an increase of 56%, reflecting continued excitement and demand in the market, international expansion, and a positive reception for our new probe, the IQ+, which was introduced in October 2020. Subscription revenues were $7.9 million in 2020, growing 216% from $2.5 million in 2019. Our subscription mix, which we define as the percentage of our total revenue recognized in a reporting period that is subscription-based, was 17.1% in 2020, compared with 9.1% in 2019, an 8 percentage point increase. Subscription revenues increased with device sales, as well as with renewals on prior year sales. Turning to expenses, the cost of revenue for 2020 was $107.5 million, an increase of 122% from $48.5 million in 2019. Cost of product revenues was $106.4 million, a 122% increase from $47.9 million in 2019. And the cost of subscription revenue was $1.1 million, increasing 72% from $621,000 in 2019. The increase in costs of revenue included non-recurring charges totaling $62.7 million this year. As we shifted production from the IQ to the IQ Plus device in the second half of 2020, we renegotiated some inventory commitments with certain third-party vendors, recognizing a $7 million loss on purchase commitments and a $2.6 million loss on inventory write-downs. Additionally, in the third quarter, we commenced production with a long-term strategic development partner, TSMC. The economics of this partnership were negotiated early in the development of Butterfly IQ+, and the successful production shift represents a tremendous accomplishment for the teams of both Butterfly and TSMC. Concurrent with this transition and the generation of revenue forecast shared at the time of our Longview merger announcement in November, we undertook an inventory analysis. This review process resulted in the establishment of a $53.1 million non-cash inventory reserve against board purchase commitments. We believe our inventory position fairly represents a reasonable range of sales outcomes consistent with our merger forecast and provides Butterfly with the ability to meet material excess demand should it materialize through future periods. Importantly, in an environment where there are widespread chip shortages, we are pleased to enjoy clear supply lines. Inclusive of these one-time charges, reported gross profit for 2020 was negative 61.2 million, compared to 2019 gross profit of negative 20.9 million. Operating expenses in 2020 were 100.4 million, an increase of 19 million, or 23%, compared to 2019. The increase was primarily due to costs incurred in growing the business and completing our SPAC business combination, including increased spending in research and development, sales and marketing, and general and administrative costs. I would note that we were deliberately conservative with operational spending during the year, conserving cash as we worked to secure longer-term financing. Loss from operations was $161.6 million, a 58% increase from $102.3 million in 2019, while net loss for 2020 was $162.7 million, as compared to a net loss of $99.7 million during 2019. Adjusted EBITDA was negative $85.2 million in 2020, compared with negative $86 million in 2019. Adjusted EBITDA reconciliation calculations to gap net loss can be found in today's press release and filings. Moving to the balance sheet. Throughout much of 2020, we focused on having adequate capital resources and liquidity to support the business over the near and long term. As of December 31st, cash and cash equivalents were $60.2 million. Although it occurred subsequent to the end of 2020, as you know, our balance sheet was significantly strengthened following the business combination with Longview Acquisition Corp. On February 12th, upon the closing of the business combination with Longview, we added over $540 million in cash to the balance sheet. We believe Butterfly is well capitalized at this point in time to support the next stage of development, and we are in a position to invest aggressively to expand Butterfly's headcount, adoption, and utility. I would now like to turn the call back over to Todd.