Butterfly Network, Inc.

Hello and welcome to the Butterfly Network second quarter 2022 earnings conference call. My name is Alex, I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star one on your telephone keypad. If you'd like to withdraw your question, you may press star two. I will now hand over to your host, Heather Goetz, Chief Financial Officer. Heather, over to you.

Good morning and thank you for joining us today. Earlier this morning, Butterfly released financial results for the second quarter ended June 30th, 2022 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. I, Heather Goetz, Executive Vice President and Chief Financial Officer of Butterfly, alongside Dr. Todd Fruchterman, Butterfly's President and Chief Executive Officer, will be hosting 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 the financial results, future performance, development and commercialization of products and services, potential regulatory approval, 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 filing, 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. I would now like to turn the call over to Dr. Fechterman. Todd?

Thank you, Heather, and good morning, everyone. This past quarter has been an important one for Butterfly, as we have seen continued growth in the market and excitement about our solution. delivering our largest revenue quarter ever. We know what Butterfly makes possible and practical, and our message is resonating with our customers. What was once just a transformative device that brought unprecedented access to imaging is now a truly transformative digital healthcare company that is showcasing before the world the value that ultrasound information brings when it becomes part of the everyday assessment and standard of care for patients everywhere. As I've said before, there's a real difference between doing ultrasound and using ultrasound, and it's butterflies charged to bring the medical community with us on this journey, where they can see for themselves that by using ultrasound and the information it provides earlier in care, they can make more informed decisions and they can deliver better experiences and outcomes. This is what Butterfly makes possible. Butterfly is the practical application of ultrasound information into the clinical workflow across all care settings. As I said, this past quarter has been an important one for our progress and trajectory as an organization. Not only are we piloting the growth of a truly disruptive technology, we're also at the heart of our evolution as a young public company, continuing to build off the changes we have made last year in how we operate, innovate, and bring value to the healthcare ecosystem. We are shifting the paradigm of care, and we know this work will take time because we are changing how ultrasound has traditionally been used and where it's traditionally been found. But we are confident, based on the signals from those in our commercial pipeline, based on the results by our current users and enterprise customers, and based on our in-the-market learning that have shaped our product roadmap and innovation to meet the current and future needs of hospitals and healthcare providers everywhere, that we will become as ubiquitous as the stethoscope. We understand the problem we are solving and have a well-defined strategy to help us deliver our value to the global marketplace. This has enabled us to understand our priorities that will lead us to success. With this focus, we were able to improve the operational efficiency of the business and to take actions regarding our spending that will help us ensure our long-term success. Our refined investing strategy is exactly aligned with our strategic priorities. It's shaped by customer feedback and the collaborative efforts we are making with current and future customers. It's enabled by our enhanced senior management team and is reflective of the macro environment. The result is a meaningful reduction in our aggregate cash spend that extends our cash runway and provides better flexibility for the company to support the realization of Butterfly's vision and mission. This led to a plan for targeted investment through reduced operating expenses and a modestly streamlined workforce. while we continue to invest aggressively behind our technology, our clinical studies, and our commercial partnerships. The talent and mission-driven dedication of our team has made these decisions challenging on a personal level, but I am confident these changes strengthen our position to capture the value of our market-leading innovation and set us up for a future where Butterfly is the standard of care everywhere. With that said, I'd like to briefly comment on the second quarter high-level financials and shift to our business update. From a revenue perspective, we ended Q2 with $19.2 million in quarterly revenues, a 16% increase versus the second quarter of 2021 and our highest quarter to date, representing continued progress as we remain on track to achieve our objectives for the year. In addition, we continue to see improvements in our maturing operational performance and organizational efficiency. Therefore, we are reaffirming our revenue guidance of $83 to $88 million and improving our adjusted EBITDA guidance. Heather will go into further detail in her remarks, but knowing the progress we are making, the pipeline we have built for the remaining quarters of the year, and the strong progress we have started Q3 with, all add to our confidence in revenue acceleration as we enter the back half of the year. I'd like to now shift to the business update. Throughout the call, I will share details on the growth in each of our four strategic pillars, including Butterfly's increased presence in renowned hospitals and medical education institutions around the world. the growing evidence in clinical research, and our continued momentum in low-resource countries and adjacent markets. Our team is laser-focused on making Butterfly easy, everywhere, and economical. These three core principles are how we will drive adoption and realize our vision. They are ingrained in our people and guide our innovation and clinical research. These four principles encapsulate the journey we are on to redefine point-of-care ultrasound in a way that only butterflies can make possible. We are transforming point-of-care ultrasound into an advanced assessment tool by making it intuitive, adaptable at scale, extremely portable, and economically appealing. not just from the affordability of our solution, but because of the economic value it brings to the healthcare system at large. I fundamentally believe Butterfly is the single most relevant platform from which healthcare can be transformed at scale. We enable ease of use across all levels of practitioners, from novice to expert, and across care settings everywhere. Decreased time to treatment, increased access to diagnostic imaging, and economic benefits that challenge healthcare's traditional toolkit and demonstrate that our solution delivers better, more informed, lower-cost care. I will now provide some updates in line with each of our four strategic pillars. Let's start with hospitals and health systems. As we continue on our journey to partner with hospitals and health systems to drive more informed, better medicine at scale, we are pleased to share Q2 year-over-year growth in the space, which benefited from momentum in software sales and from deeper penetration with current customers. We began this quarter with a number of installations in top hospitals across the country. We're proud to share that Baylor Scott & White began a scaled deployment of Butterfly Compass software, an initiative that has started with the Critical Care and Emergency Department at Baylor Scott & White Medical Center Temple, Baylor University Medical Center in Dallas, and Baylor Scott & White Medical Center Hillcrest in Waco. We will work to enhance the way their traditional ultrasound suite is managed and used. The initial focus will be on workflow best practices, device tracking, and image quality assurance. Let's move on to our international filter. We continue to make progress in markets outside of the U.S. I'm happy to share that in Q2, we added Zebra Medical as a distribution partner, a leading medical device manufacturer and distributor, largely serving the fields of oncology, pain management, and dialysis. Working with Zebra will enable us to bring Butterfly to healthcare professionals in South Africa, those within human health and those serving animal health. Beyond this new market, our teams are seeing traction with distribution partners who we've worked to onboard over the past six to nine months. We're very pleased with the momentum of Novalog in Israel and separately with Abdul Latif Jamal, who is helping us broaden the availability of butterflies in the Middle East, North Africa, Turkey, and India. Both relationships have yielded first-of-its-kind tender deals bringing us closer to putting Butterfly in enterprise-wide deployments abroad. Additionally, I'll share that Butterfly is continually being recognized for its value as part of medical education and also within the emergency medical services space. In the UK, we've added Brightman Sussex Medical School and Brunel Medical School to our medical education customer list. And in Q2, we saw in Canada for butterfly as a proven assessment tool to aid in urgent and pre-hospital care settings. Finally, our work to bring butterfly to Sub-Saharan Africa to improve maternal and fetal health, as supported by the Bill and Melinda Gates Foundation, is on track. I'm happy to share that in Q2, we deployed our product to Nairobi, and training will begin in mid-September. The remaining probes are on schedule to be shipped in the second half of the year to South Africa. I look forward to sharing more progress on this exciting and important project. We are proud and confident that our work in this region will serve as a prototype for improving access to imaging in other low-resource countries. We see this work as a critical unlock to our continued global health growth and impact related to maternal and fetal health and beyond. Our third pillar is home-based care. We know that care is moving outside the home and that we need to meet patients where they are. We continue to see a path for Butterfly to be meaningfully used for home health assessment. Butterfly is in the home today being used by caregivers. Our clinical, technology, and regulatory teams continue to assess the use of Butterfly by at-home users for bladder scanning, heart failure, lung assessment, and dialysis. Driving our development and research initiatives in this space is the belief that by capturing the same information at the same quality level, regardless of care setting, Butterfly can help to further care management and coordination into the home helping to reduce hospital visits, improve patient outcomes, and in some instances, replace a more complex workflow or expensive device. Our clinical research team has many active clinical studies underway to support this belief with objective data and to further quantify the magnitude of the improvement in clinical, economic, and patient satisfaction outcomes. Our path to home is a journey, and we're encouraged by concepts such as volume sweep imaging, or VSI, that demonstrate that novices can use butterflies to sweep over a target region to acquire valuable information. In one recent study published in the Journal of Ultrasound and Medicine, medical students at the University of Rochester Medical Center, our first enterprise-wide partner, tested butterfly for evaluation of breast lumps and found that after scanning 170 palpable lumps with the DSI protocol, that butterfly performed in line with the standard of care 97.6% of the time and had a detection rate of 100% for all cancer presenting as a sonographic mass when read by a radiologist. The machines used to represent the standard of care reported in the study are approximately 50 to 75 times more expensive than butterflies. The results of this study provide another marker in our Path to Home highlighting butterflies' clinical and economic benefits, all the while being easy to use and accessible to the masses. As many of you know, our Path to Home also includes patient self-scanning Working with Yale University, patients at home are using butterfly to scan their own bladder for bladder volume. This is particularly useful for those patients that require regular catheterization. Self-scanning the bladder means more accurate monitoring and offers the potential for less frequent catheterization, reduced infection, and most importantly, improved quality of life. We are confident this study will add another proof point to our growing pool of evidence that demonstrates the value of butterflies in the home. I look forward to providing more updates as these studies advance. Finally, as I've covered on past calls, we are exploring values in adjacent markets to healthcare, such as veterinary medicine. Last call, I shared that we welcome Petco as a partner and will bring Butterfly IQ Plus Vets across their more than 200 veterinary hospital locations at Petco pet care centers across the United States. In Q2, this work began as we implemented onboarding and launched our first enterprise veterinary solution. I'm also pleased to share that in Q2, we expanded our work with Texas Tech University School of Veterinary Medicine. Together, we've entered into a four-year partnership in which they'll embed butterfly IQ Plus vets more deeply into their curriculum and clinical training models. with a one-student to one-probe approach that will allow PTU to reinforce elements of anatomy and the physical exam by empowering students to not only read and learn, but to see and learn. Students will also leverage the butterfly probe in surrounding rural and regional communities during their clinical year and outside of school semesters. This will bring value to the community which, because of its world backdrop, struggles to have access to timely veterinary care and imaging for animals. Finally, I'm also pleased to share that the University of Pennsylvania's School of Veterinary Medicine has joined our student program customer list. I look forward to sharing more as we continue to expand the veterinary markets we are in. As I said earlier in my remarks, I believe Butterfly is the single most relevant platform from which healthcare can be transformed at scale. I continue to be encouraged by all the progress our team has made in the market. Despite some of the challenges, we are seeing that the overall economic environment, we are running the business more effectively. Our customers are realizing the elements of our solution and how Butterfly unlocks the value of real-time imaging information across care settings and arms practitioners with more complete information because they can now see what they need to know. And with that, I will now turn the call over to Heather for the financial results. Heather?