Butterfly Network, Inc.

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Butterfly Network Q4 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. Thank you.

Good morning and thank you for joining us today. Earlier this morning, Butterfly released financial results for the fourth quarter and the year ended December 31, 2021, and provided a business update. The release and earnings presentation, which include a reconciliation of management's use of non-GAAP financial measures compared to the most applicable GAAP measures, are currently available on the investor section of the company's website at ir.butterflynetwork.com. Dr. Todd Proctorman, Butterfly's President and Chief Executive Officer, and Stephanie Fielding, Butterfly's Chief Financial Officer, will host this morning's call. 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 approval, anticipated financial impact, and other effects of a business combination on our business. The size and potential growth of current or future markets for our products and services and the 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. You are cautioned not to place undue reliance on these forward-looking statements and the company disclaims any obligation to update such statements. During this call, we will refer to non-GAAP financial measures, including adjusted gross margin, adjusted gross profit, and adjusted EBITDA. These financial measures are not prepared in accordance with U.S. generally accepted accounting principles, or GAAP. These non-GAAP financial measures are not intended to be considered in isolation or to substitute the results prepared in accordance with GAAP. The definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and the discussion of why we present these non-GAAP financial measures are included in today's press release and at the end of this slide presentation. 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 of both the audio and video content, or if you have dialed in by telephone, download the slides from our website and advance them yourself. to access the webcast, please visit the events section in the investor section of our website, and a replay of the event will be available following the call. I would now like to turn the call over to Dr. Frechtemann.

Thank you, Agnes, and good morning, everyone. We appreciate your taking the time to join us today. I'm excited to share with you the progress we've made in the fourth quarter and throughout 2021. I will give you an overview of our performance, and Stephanie will walk through the details of our financial results. We will end the call by taking your questions. I'd like to start by highlighting that it's been one year since Butterfly became a public company, a meaningful milestone and opportunity to reflect on the culmination of hard work and progress that our team has made. The past year has been one of evolution in how we operate our company, innovate our solution, and bring value into the healthcare ecosystem. In addition to sharing our fourth quarter and full year 2021 financial results, today I'd also like to share how encouraged I personally am by the opportunities in our markets and by the strength and foundations of our company. I'm also grateful to be surrounded by a group of talented individuals and leaders across technology, clinical practice, commercial engagement, and operational functions who are unified by our shared mission to transform care with Butterfly. As I look back on 2021 and ahead into 2022, I am more confident than ever in our team's ability to execute across our priorities towards the realization of our vision. As you will hear in our dialogue today, we have gained incremental clarity, traction, and insight into the strategic pathways to accelerate our clinical and commercial progress. Clinical awareness is building around butterfly in the market. In the past three years, there have been more clinical publications about butterfly than all of the handheld competitors combined. However, butterfly is about so much more than just a device. It is about the practical application of ultrasound information into the clinical workflow and the value that this information creates across the care continuum. Whether unlocking new care models or enhancing existing ones, our team is passionately innovating to bring these valuable insights to all patients worldwide. This is our mission, one we can deliver by making our innovative solution a valuable clinical tool that is as ubiquitous as the stethoscope. We believe this is possible because Butterfly is not just about ultrasound. Butterfly is a transformational digital health company. It's our innovative device that allows for the acquisition of information It's our software that makes the information usable, and it's the availability of this real-time information that we enable at the bedside and in the workflow across care settings anywhere that leads to better decision-making and ultimately can lead to a new standard of care. We're innovating with a focus on information transformation at scale. Because with Butterfly, physicians now have a tool that can help them practice better medicine. That is why Butterfly is different. We are on a journey to change the paradigm of healthcare by bringing affordable, easy-to-use, high-quality imaging to the pockets of clinicians everywhere to inform care decisions anywhere. It's our unique combination of attributes, the Butterfly IQ+, our patented ultrasound on-a-chip technology, our education tools, our approach to AI, our enterprise workflow capabilities with Compass, our services, and the way we connect these elements that enables us to move healthcare forward on the path from a clinical state of deducing and confirming to one of informing and knowing. This is who we are. And this is why Butterfly is well positioned to help transform healthcare around the globe. With that context, I'd like to now turn to our performance and business updates. In the fourth quarter, we continued to see momentum in our business. Despite the ongoing challenges in the healthcare system and external macroeconomic environment, we executed against key initiatives to support ongoing growth and innovation. Revenue grew 21% year over year for the fourth quarter and 35% year over year for the full year 2021. We also strengthened our foundations. We evolved our business model and go-to-market strategy, We added key leadership to the executive team and board of directors. We grew our employee base by 274 people. We expanded and strengthened our corporate infrastructure. And we spent time learning in the market and shaping a product roadmap to help ensure alignment and novel innovation, alignment with the current and future needs of hospitals and health systems, and novel innovation to help usher in a new standard of care everywhere. On our business model and go-to-market strategy, we now have four strategic areas of focus, hospitals and health systems, international markets, home-based care, and select adjacent markets. Each of these pillars is grounded in three common core principles, easy, everywhere, and economical. EZ is about redefining point of care ultrasound to make it effortless and adoptable at scale. This is our journey to enable users to do more with less effort. We plan to accomplish this with education, AI, and additional technology that advances ease of use and user confidence. Today we offer continual introduction of new just-in-time training clips, teleguidance and quality assurance tools, and regular rollouts of robust technical and clinical courses found within Butterfly Academy, our learning management system. Additionally, we are thoughtfully leveraging AI across our network to incorporate insights from images, scans, and associated practitioner behavior and clinical paths into our workflows our commitment to easy is about instilling butterfly as a core clinical tool for novices and experts alike one that can be used by any practitioner anywhere to make bedside information accessible without the need for extensive training as an example of this butterfly was recently spotlighted in a report in the national library of medicine According to the report, with limited training, paramedics were able to use butterfly to obtain and interpret cardiac images from patients during out-of-hospital cardiac arrest. This study is meaningful for a few reasons. One, butterfly was used effectively with little training. In fact, 86% of the images were deemed adequate. 88% were deemed accurate and in nearly one-third of the cases, these images were used to alter care management. Two, butterfly was seamlessly incorporated into the workflow and was used without disrupting the resuscitation protocol. Despite the high stress backdrop of cardiac arrest, paramedics were able to effectively use butterfly and do so without disruption or distraction from the other many critical tasks they needed to carry out. This study also illustrates the tremendous potential for butterfly when used in clinical settings where ultrasound is not traditionally utilized. and where ultrasound expertise is not traditionally found. Yet, by adding Butterfly, a practitioner can gain access to valuable clinical insights and deliver better, more effective care. Everywhere is driven by this practical application of ultrasound information that Butterfly enables through its portability, usability, and affordability that we believe can make this a clinical tool as ubiquitous as the stethoscope. We strive to have a butterfly in every practitioner's pocket to be used on every patient, every time. Finally, our third E centers on reinforcing butterflies economic value. This is not just about the affordability of our solution, but also centers around demonstrating the value it delivers, the health economic evidence that our system delivers better, more informed, lower cost care. To do this, we are strengthening our portfolio of proof points that show the impact of butterfly at the point of care, at scale, and across the full spectrum of care. Reflective of such value, butterfly is gaining adoption as a meaningful procedural assistance tool in emergency medical services, surgery, nursing, and hospital in the home. Examples of this include nurses using butterfly for bladder volume calculations, and to ease IV access, anesthesiologists guiding central line placement and injections, and care teams investigating patient at-home self-scanning to monitor things like COVID-19 or to inform better dialysis treatment outside of the hospital, which, subject to regulatory authorization, may lead to new indications. And emergency medical services who have not typically used ultrasound in their care settings are now using the butterfly because for the first time they have access to and the ability to use ultrasound information in the care for their patients. This is a paradigm shift. Let me provide an example. SARS is an air ambulance and shock trauma rescue team that brings emergency care and helicopter evacuation to rural communities and remote areas across Canada. Butterfly is helping the STARS team reimagine what's possible when assessing the critically ill and injured in pre-hospital settings, and is now with this team assisting in a number of clinical conditions. As in the example, using the butterfly, the STARS team was able to confirm a patient was hemorrhaging internally, information that guided the decision to provide blood products, then determine the critical need to stop at a facility mid-flight for two more units of blood, and allow the STARS team to communicate the clear need for the receiving trauma center to activate an operating room ahead of their arrival. With Butterfly, the STARS team was able to access valuable clinical insights that helped guide their team to critical care decisions. It's stories like these that reaffirm Butterfly's vision and value, innovating to inform better decisions so people everywhere get the care they need. As we continue to position butterfly as foundational to every clinical workflow, these targeted applications that leverage the unique attributes of butterfly represent near-term opportunities for adoption and impact. These core principles are what we believe will help us drive utilization and adoption in our four strategic pillars. And now I would like to take a moment to provide some updates in each of these areas. Let's start with hospitals and health systems. Longer term, we are innovating for Butterfly to be as ubiquitous as a stethoscope and to serve an estimated $100 billion market, comprised of 42 million healthcare practitioners around the globe, focusing on the full spectrum of care delivery. from hospital to specialty, from acute to home-based, from primary care to value-based care, to chronic care and more. We are confident that in time, we will prove our value across this ecosystem, reducing time to diagnosis, accelerating treatment, driving efficiency, enhancing patient experiences, and enabling higher quality care. But to realize an expanded TAM, we understand we must first drive adoption in key markets. That is why we are very focused on healthcare systems and home-based care, where we have aligned and focused our R&D, sales, and marketing efforts. Healthcare systems are the hub of care delivery and often where novel standards of care are born. They represent the greatest complexity of integration and have the potential to yield the greatest impact to total cost of care. They are where physicians and clinicians are trained, and thus one of the greatest opportunities to systematically overcome the knowledge gap needed to maximize value. Given the complexity of the medical ecosystem, practitioners require a comprehensive solution that brings the value of ultrasound information into their workflow needs and improves clinical practice. Today, as mentioned in our press release, we officially bring that solution to market. Butterfly Blueprint represents our comprehensive offering that includes hardware, compass software, and services specifically designed to support healthcare institutions to achieve enterprise-wide imaging from the bedside and encounter-based workflow across multiple care disciplines and settings. Blueprint's broad set of services includes AI-powered image capture and interpretation powered by CaptionHealth, as well as Butterfly Academy courses and curricula. Caption Health is the creator of the first and only FDA-cleared, AI-guided ultrasound software, which will now power cardiac assessment within Blueprint. This reinforces Butterfly as a ready-to-use tool and will enable nontraditional healthcare providers to more quickly participate in the acquisition of certain cardiac ultrasound exams. It is worth noting that CAPTION is a recent recipient of CMS authorization for technology add-on payments, an NTAP, a designation awarded to new medical technologies that are expected to substantially improve the diagnosis or treatment of Medicare beneficiaries as further evidence of our core health system progress. In January, we announced that the University of Rochester Medical Center, URMC, upstate New York's largest and most comprehensive healthcare system, will deploy Butterfly Blueprint across its enterprise and will partner with us to further validate and optimize Butterfly in the hospital setting. URMC's rollout will begin over the summer, first going to medical students, primary care providers, and home care nurses. We will continue to share updates on our ongoing work with URMC. Additionally, earlier this month, we announced a partnership with Ombra Health, a leader in cloud-based medical imaging management that has a track record in bringing disparate imaging information together for some of the largest health systems. We believe our work with Ombra, in combination with the full Blueprint offering, will accelerate scaled system deployment and integration. Next month, our team is looking forward to engaging stakeholders of the hospital health system audience at the annual HIMSS conference, where Blueprint will be prominently featured both within the butterfly booth and as part of the interoperability showcase. Across the hospital and health system market, we believe the conversations we're having are reaffirming our strategy. At a time when health system leaders are looking to enable more informed clinical decisions, we uniquely provide access to improved clinical insights where and when they are needed to enhance clinical decision making. Blueprint answers hospitals' and health systems' needs to foundationally improve accuracy, speed, cost efficiency, and care excellence, which we believe can lead to a paradigm shift in the standard of care for all patients everywhere. This is what Butterfly makes possible and what Butterfly makes practical. Let's move on to our international markets pillar. We see tremendous opportunity across developed and developing markets and a growing need for butterfly in a range of geographies and care settings. Our team continues to assess the size and entry path for each market and at various levels is either building go-to-market plans or executing to raise awareness, nurture and build relationships, and expand our global footprint. In particular, we are excited with the ongoing momentum with our current and prospect distributor partners and by early signs we're seeing within the UK and Germany markets. In 2022, international growth will be a key area for focused investment and longer term we expect it will be a meaningful contributor to Butterfly's performance. Given the vast international market opportunity, I look forward to updating you on our progress throughout the year. Our third pillar is home-based care. Butterfly in the home represents a meaningful market opportunity with millions suffering from chronic conditions. Butterfly's innovative device is designed to enable ultrasound information to be incorporated into the workflow of the hospital at home. It is an invaluable tool to surface information to intercept disease through earlier detection and to manage the needs of patients living with chronic disease. It's because of this reality that I'd like to call your attention to two groups of clinical studies that our team plans to launch in Q2 in preparation for ultimately seeking regulatory authorization for potential at-home use by patients. One will look at Butterfly as a foundational tool for home-based care for those affected by congestive heart failure. Our clinical team is working with multiple clinicians, including academic medical centers, and will shortly begin pivotal studies to measure the effectiveness of butterfly for patient self-scanning of the lungs. Previous studies have demonstrated that the identification of excessive B-lines by lung ultrasound when performed by experts can be used to reduce ED visits in this patient population. Building on this, doctors at UCLA recently published a study demonstrating that heart failure patients can rapidly learn how to perform this same lung scan using butterfly with excellent results. Our team will leverage these sentinel insights to further study the use of butterfly to enable a dramatic new way to manage patients in the home. Our work will investigate Butterfly's role in guiding clinical management of heart failure with the objective of reducing emergency room visits and hospitalizations, while improving the quality of life for millions of patients affected with this growing chronic condition. We expect to complete enrollment before the end of the year of at least one of these key studies, and we will update you on progress to the extent that we can as the year goes on. The second group of clinical studies I'll speak about addresses a growing patient population with a chronic condition that is primed for better care models, renal failure patients on hemodialysis. There is mounting pressure to deliver care in the home for this group due to the many virtues it provides, not the least of which is better quality of life and reduced complications. We are actively instituting studies that will demonstrate the value butterfly can bring to hemodialysis, specifically by supporting the ability to both more accurately needle the graft or fistula and to monitor volume status. We look forward to sharing results with you as studies complete enrollment, which we expect to occur this year. We are excited about the potential value that butterfly can bring to this clinical workflow. Our studies will begin in treatment centers and will rapidly expand to home-based environments. These research areas are just two examples of the broad applicability of butterfly across clinical use cases, care settings, and user types. We are confident they will help to demonstrate new care delivery models that butterfly makes possible. As a digital health company, our aim is to enhance information capture use and flow at, from, and to the home. This is in service to patients and we believe will alleviate burden from hospitals, care teams, and the healthcare system overall. We also believe it will support the rationale for a wearable on our development roadmap to collect information that can be easily incorporated into the workflow and enable the interception or management of disease. We will update you on our development roadmaps later in the year. Finally, part of Butterfly's strategy is to ignite adjacent markets where there is opportunity to bring the value of Butterfly beyond the traditional healthcare market and drive growth. One such market we've innovated for and continue to gain traction in is the veterinary space where, in the past year alone, we launched IQ Plus Vet Ultrasound, our second-generation veterinary device, which is now available in 21 international markets, announced a large-scale partnership with Rare Breed, bringing Butterfly to their veterinary hospitals to transform care delivery as part of the physical exam, supported BetterVet to supply all staff veterinarians with Butterfly IQ Plus Vets across all of their mobile veterinary units. And more recently, we added Purdue University and Australia's University of Melbourne to our list of veterinary colleges that have incorporated Butterfly into their curriculum and equipped their students with a Butterfly IQ Plus Vet program. We believe this continued adoption is demonstrative of more momentum to come and are proud that Butterfly, in 2021, driven by a small, focused team, reached the typical first-year sales of an animal health pharmaceutical launch, one traditionally backed by a fully established, much larger commercial effort and team. With nearly 2 million veterinarians and vet techs globally who could benefit from having the power of butterfly in their pocket, our teams are ingraining themselves within the space to optimize butterfly awareness and penetration. I'm excited about the continued progress we will make this year and beyond. I hope this recap illustrates the progress of our journey and conveys my personal excitement regarding butterflies' future. I am encouraged by all of the progress our team has made across our strategic pillars and energized by the opportunity for us to accelerate even more. Looking ahead in 2022, we expect full year revenue in the range of 83 to 88 million, representing growth of 33 to 41%, driven by continued progress with health systems, medical education, international expansion, and our vet business. We have made important headway in 2021, and we are using our in-market learnings to enable care transformation and establish a path to becoming as ubiquitous as a stethoscope. We believe healthcare around the world needs it, that the demand for this will continue to accelerate, and that we are well positioned to meet it. To advance our journey and long-term growth in 2022, we will invest heavier across our four strategic areas of focus. We believe this increased investment will accelerate our ability to innovate to meet market needs, prove Butterfly's value through a wide range of clinical studies, and position us well to not only sustain our competitive advantages in innovation, but also to set a new threshold for medical imaging across all care settings and environments by instilling butterfly as the practical application of ultrasound information in all clinical workflows. I will now turn the call over to Stephanie for a review of our financial results. Stephanie?