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spk06: Hello, everyone, and thank you for joining the Butterfly Network Q3 2022 earnings call. My name is Darius and I'll be the operator for today. Before handing over to your host, Heather Getz, I would like to remind you that if you would like to ask a question during the Q&A session at the end of the call, please press star followed by one on your telephone keypad. And I have the pleasure of handing you over to your host, Heather Getz. Please go ahead.
spk04: Good morning, and thank you for joining us today. Earlier this morning, Butterfly released financial results for the third quarter as of September 30, 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 Prockerman, Butterfly's President and Chief Executive Officer, will host this morning's call. During today's call, we will be making certain forward-looking statements. These statements may include, among other things, expectations with respect to financial results, future performance, development and commercialization of products and services, potential regulatory approvals, 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 known and unknown risks, uncertainties, and other factors 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. Your caution not to place under 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. There may be a short delay between the live telephone audio and the presentation being shown. To access the webcast, please visit the events section in the investor section of our website, and replay of events will be available following the call. I would now like to turn the call over to Dr. Parkerman. Todd?
spk01: Thank you, Heather, and good morning. I'd like to start the call off today a little bit differently than I have in the past. I thought it would be worth taking a step back and reminding everyone of the path we are on here at Butterfly and what makes us fundamentally different so you can better understand why Butterfly. This context will be important as we get further into our discussion because it will help you better understand how we view the results of this quarter, our growth in the near term, and how we are taking our learnings from the market to drive our future growth and care transformation with ultrasound information at scale. Many of you will remember that we entered the market as a truly remarkable and transformative device. By putting ultrasound on a semiconductor chip, we became a disruptor in the industry based on our innovation and hardware alone. We're proud to say we are leading in the handheld ultrasound segment today and we continue to invest in this area to maintain our edge. Our technology works and it keeps getting better. Some of our initial learnings in the market, however, made us recognize that we were not where we needed to be in order to realize the full value of our technology and the impact to healthcare. So we went to work on our enterprise level software and workflow solutions. We have spent the last year investing heavily in the development of our software solutions blueprint and compass significant progress and software development has created best in class image management and workflow software across ultrasound platforms both internal and external to butterfly. As a result. We have gone from software that was objectively lagging to software that is now highly valued, and we continue to innovate and push beyond the status quo based on what we're learning from our customers. We know that software is the enterprise enabler. We are proud that enterprise-level software development has now become a positive differentiator for Butterfly. a platform for our solution and a catalyst for providers to begin their journey of care transformation. But given the significant strains on practitioners throughout the healthcare system, we've learned that they need specialty applications that are highly focused, streamlined, easy to learn, and easy to use. The burden of learning ultrasound cannot be put on them. All practitioners don't want to learn, nor do they have time to become experts in ultrasound. So we have reorganized our product, clinical and commercial teams, around the coordinated pursuit of specialty applications that only Butterfly can enable. Providers want to quickly learn the applications that are most relevant to their practice and that will dramatically improve their ability to care for their patients and streamline their workflow. And at Butterfly, we are committed to delivering our technology in a way that accomplishes this. We are developing clinical partnerships that will provide clear evidence to support application-specific adoption and usage that is relevant and impactful. Our backlog of applications is deep, proprietary, and unique to Butterfly. Our strategy and roadmap are confidential for obvious reasons and will be revealed as we launch them. We realize this is challenging for the outside world to monitor our progress, but we believe long-term value is maximized by hitting the market with tailored solutions that are unique to Butterfly without competitive distractions. With the hardware and software now working complementary to one another, Butterfly has truly become the practical application of ultrasound information into the workflow. The experience with a butterfly is fundamentally different than any other ultrasound device that has come before us. With Butterfly, providers now have the ability to use ultrasound to guide their assessment instead of doing an ultrasound to confirm their decision. This is what separates us from the pack. This is what butterfly and semiconductor-based ultrasound makes possible. And it's this distinction that we believe will lead to a major shift in how medicine is practiced and how care is delivered across all settings. We expected this shift to take time because leading people through behavior change takes time, both in practice and implementation. But just as others are experiencing within the industry, the budgeting and workforce pressures have intensified, resulting in implementation delays. Some of our future partners are simply delaying implementation and commitments until they can catch up on people. We are prioritizing the appropriate coordination for successful launches and rollout over the speed of short-term revenue generation that doesn't meet our long-term objective. With that said, The signals we are receiving and the conversations we are having in the market reassert that Butterfly's message is clearly resonating and that we have the ability to fundamentally change the care experience for providers and patients alike with how care is delivered across all settings. And with that context, I'd like to discuss our business performance and briefly comment on the third quarter high-level financials. From a revenue perspective, we ended Q3 with $19.6 million in quarterly revenues, a 34% increase versus the third quarter of 2021. While this was our highest quarterly revenue to date and an acceleration in our revenue growth over first half levels, it is lower than our internal expectations due to increased challenges at the macro level. Heather will speak to this more but the broader macro environment is waging a toll on health systems. The environment has placed additional demands on frontline healthcare workers and management that has pushed out their inevitable innovation in the very near term. The impact of this environment is causing a delay in our growth, and as a result, we are adjusting our guidance to $73 to $76 million. Because we have proactively and fully offset this lower revenue with expense reductions, there is no change to our adjusted EBITDA loss. While our top line revenues reflect the market dynamics we have discussed, we are also acutely aware of the opportunities it creates for Butterfly because we have a tool that quickly becomes part of the solution for hospitals and clinicians. We are confident that our business is foundationally strong and growing based upon these five things. First, the texture of our revenue shows that we are growing where it matters, in health systems and software and services. Hospitals realizing that they need to have the right infrastructure in place to manage and use our technology want oversight, device management, credentialing, and QA solutions. as critical first steps to technology leading to care transformation. Butterfly delivers here. Second, there is improved customer and client experience that is driving increasing usage and validity to our vision. Third, we are meeting our customers where they are with our Blueprint and Compass Enterprise software, as well as building a pipeline of applications and product introductions that fit the needs of enterprise customers, individual practitioners, and patients. Fourth, we have a building pipeline of leading institutions whom we have engaged with to drive specific applications with accelerating adoption in the coming periods. While we are not going to project large client deals in the near term, our backlog has clearly built in quality. And fifth, We are giving institutions and providers the foundation upon which they can build transformational programs that use ultrasound information to change the way care is delivered across the continuum. Everywhere we evaluate, the needs of patients and providers can only be best satisfied with Butterfly. To help address these market dynamics and further ensure Butterfly remains well positioned to capture this value, As we head into 2023 and beyond, today, I'd like to announce some changes to the executive leadership team. To start, Stacy Pugh, our chief commercial officer, has chosen to pursue another opportunity outside of the company and will leave Butterfly as of November 24th. I'd like to personally thank Stacy for her contributions to Butterfly and her commitment to this organization. She has helped lead Butterfly through this time of transformation and has expanded our reach in healthcare institutions around the globe. We wish her the best in her future endeavors. As Butterfly continues to grow and evolve, it is important that we continue to look at the business to make sure it is structured optimally. With Stacy's departure, we took an opportunity to assess the needs of our organization to ensure we have the right structure and leadership. As of November 1st, our commercial function is now broken up into two entities, commercial operations and commercial development. The commercial operations function will include all commercial operations and activities for North America in our core markets. The commercial development function will be responsible for all marketing operations, the veterinary business, and the international business and expansion. This new structure is intended to drive focus and tighter execution for our sales and marketing teams. With that said, I'm excited to announce two new additions to the executive leadership team to lead these respective functions. On November 1st, Mike DelVaggio joined Butterfly as Senior Vice President, Commercial Operations. And Nikki Montgomery joined as Senior Vice President, Commercial Development. Mike and Nikki are two highly accomplished leaders with deep, relevant experience and track records of success with the specific challenges Butterfly is facing right now. I look forward to their partnership and expertise to help us achieve our revenue goals and market adoptions. As I have said before, we are making steady progress in the market, and I would like to discuss some of our achievements in Q3. This past quarter, we introduced Butterfly's Cloud 2.0 software, a launch that included several new product features and a proficiency management solution for our Blueprint platform that makes it even easier to manage your workflows and analysis across an institution. After implementation, Dr. Ryan Gibbons, Director of Ultrasound Education at the Temple University School of Medicine said, the butterfly proficiency management system will lead to more recognition of the value that butterfly brings to clinical assessment at the bedside. We know the power that ultrasound information can bring when it is unlocked at scale. Our job is to make it as easy as possible for people to acquire that information. Our proficiency management tool does that system-wide, and we believe this will help institutions accelerate adoption and utilization of ultrasound information in patient assessment, diagnosis, and treatment. We continue to see milestone achievements in each of our four pillars that are built on our foundational principles of easy everywhere, and economical. If we take a look at hospitals and health systems, for example, the butterfly solution is showcasing its relevancy across the country, irrespective of geography. We close deals in major health systems, large IDNs, and rural healthcare institutions like Monument Health, a community-based healthcare system in South Dakota that will now have blueprint system-wide coupled with a probe deployment. We are now providing blueprints at Yale New Haven Health and signed a new contract with Stanford that includes an expanded system footprint of our enterprise software and probes. And we continue to make progress embedding our overarching solution in major academic medical institutions across the US. This includes UC Irvine, who for the fourth year in a row is utilizing Butterfly for the next generation of doctors. Each new student gets his or her own Butterfly, a one-to-one model we are replicating across med schools. Because of this, the students are learning Butterfly-powered assessment from the beginning of their training, and they will now have this skill set as they become physicians and the ability to practice medicine differently. These are significant milestones in their own right, and we're just getting started. With that said, let's move on to our international pillar. This past quarter, Butterfly officially deployed 500 Butterfly IQ Plus devices to healthcare practitioners in Kenya at an event at Kenyatta University. This deployment is supported by a $5 million grant from the Bill and Melinda Gates Foundation announced earlier this year that will provide 1,000 healthcare workers, predominantly midwives, in Sub-Saharan Africa with the world's only handheld whole body ultrasound probe to advance maternal and fetal health. According to the World Health Organization Regional Office for Africa, About 830 women die from pregnancy or childbirth-related complications around the world every day, with more than half of these deaths occurring in sub-Saharan Africa. A total of 500 practitioners will be trained by the end of the year in partnership with the Global Ultrasound Institute, bringing ultrasound capabilities to over 50 facilities in rural, underserved communities facing maternal health challenges. This is just phase one of this deployment. Another 500 probes will be deployed to South Africa early next year. From a global health context, this is the largest deployment of medical imaging in history, and we are already hearing about the lifesaving impact it is having in this region for mothers and their unborn infants receiving ultrasound exams for the very first time. Moving on to our third pillar, home-based care. You've heard me say that as a digital health company, we are focused on unlocking information and helping make more informed medical decisions no matter where they take place, especially as care is moving outside of the hospital. By facilitating more advanced assessments in nontraditional settings, Butterfly is key to advancing care outside the hospital. where we see enormous potential for Butterfly to be an invaluable tool to help monitor and manage the health of those living with chronic conditions. This past quarter, we kicked off a clinical study for heart failure patients with the John Muir Cardiovascular Institute Research Department. This is a first of its kind feasibility study that will evaluate a novel tool developed by Butterfly and is designed to provide novice clinicians and patients with the ability to assess pulmonary congestion themselves, the most common reason for morbidity and mortality in congestive heart failure patients against an established implanted device. The value of butterfly, a non-invasive technology, providing similar data to an implanted device could be a tremendous opportunity for managing the care of a rapidly growing population of CHF patients. This type of work that is demonstrating the capabilities of Butterfly to transcend the lens of traditional ultrasound and its current market is what makes us confident in our strategy and confident in our ability to reach a non-consumption user as an advanced clinical assessment tool, a tool that is far more valuable to a lot more people and allows us to take advantage of our core semiconductor technology. Because it's about using information from ultrasound technology to guide care decisions and improve the lives of people. It's not about ultrasound machines or doing ultrasound. And finally, let's discuss our work in adjacent markets. As many of you know, we continue to find value in markets adjacent to healthcare, such as veterinary medicine. This past quarter, Purdue University College of Veterinary Medicine announced that it will integrate Butterfly IQ Plus Vet into the first year of their veterinary medicine programs. We're also excited to share that Texas Tech University will be expanding their partnership with us The School of Veterinary Medicine has acquired additional Butterfly IQ Plus Vet probes to assign every incoming student with a device for the duration of their education. We also added Penn Vet as a new distributor. They are a regional distributor for the Eastern United States, which is the largest market in terms of volume for both vets and vet hospitals in the country. Lastly, As we help veterinarians along their journey of care transformation through the use of ultrasound information, we announced the collaboration with We CU Solutions, which will provide real-time one-to-one veterinary ultrasound education and care support services to hospitals. We believe as strongly today as we ever have that Butterfly has the power to be as ubiquitous as the stethoscope. and its utility in patient assessment across all specialties, species, and care settings. Providers using Butterfly now have access to valuable information when and where they've never had it before. They now have the ability to use the information that ultrasound provides much earlier in the care of a patient and in care settings where it's never existed. Only Butterfly can make that possible because our hardware enables the acquisition of information and our software makes that information usable and valuable to providers of all skill sets in any setting across the entire continuum of care. Our path to transformation at scale is on the right track. And we are a young and agile company with fiscal discipline, organizational optimization, and learnings from in-market experiences, working to create every opportunity to accelerate growth and adoption. Heather will speak to this further and also take a deeper dive into the financials to give you a clearer picture of the results we are seeing.
spk04: Thank you, Todd, and good morning again. Revenue for the third quarter of 2022 was $19.6 million, a 34% increase versus the prior year period and our highest quarterly revenue to date. Growth accelerated from first half 2022 levels, albeit at less than our internal expectations. Product revenue was $13.2 million, an increase of 21% versus Q3 2021. This increase was driven by higher average selling prices in both our U.S. and international markets. In addition, total volume was up 3%, with health systems volume up significantly and global health volumes more than quadrupling due to our launch with the Gates Foundation in Africa. Partially offsetting these increases was a reduction in e-commerce. This trend of higher health system sales partially offset by lower e-commerce is consistent with our strategy of driving adoption and health systems and deemphasizing our individual sales through e-commerce. Software and services revenue was $6.5 million in the third quarter, flowing by approximately 71% over the prior year period. Software and services mix was 33% of revenue and increased by approximately 7 percentage points versus Q3 2021. This increase was due to implementations that occurred in the quarter, as well as a higher installed base of products with accompanying subscription software and increased renewals. We are encouraged by this momentum as we diversify our revenue from the aforementioned e-commerce channel to providing software and services to health systems that enable more informed clinical decisions. Overall, we believe our Q3 revenue was negatively impacted by quarterly softness as well as some intensifying macro trends, where we are seeing hospitals constrained, not just budgetarily, but also by the resources needed to implement. Internationally, revenue was also impacted by the weakening of the Euro, which made our products more expensive. I will touch more on these factors later when I discuss the four-year guidance. Turning now to adjusted gross profit. Adjusted gross profit was $12 million in Q3 2022, compared to $7.2 million in the prior year period. Adjusted gross profit margin was 61% for the third quarter, which compares to 49% in Q3 2021. This increase was primarily due to product mix reflecting a higher proportion of subscription revenues in addition to higher device prices. Also contributing to the increased margin was higher manufacturing productivity partially offset by the increased cost of manufacturing materials. We expect our gross margin percentage will fluctuate quarterly along with the change in mix between product and subscription sales. We believe the fourth quarter will have a slightly higher percentage of product revenue, and as such, we anticipate a lower gross margin percentage by a few hundred basis points. We do, however, expect that both our subscription sales as a percentage of revenue and gross margin percentage will increase for the full year 2022 versus 2021. For the third quarter of 2022, adjusted EBITDA was a loss of $32.9 million, compared with a loss of $33.5 million for the same period in 2021. The improvement in adjusted EBITDA loss was driven by increased adjusted gross margin dollars due to the aforementioned positive product mix in ASPs. partially offsetting these benefits for investments in our commercial and R&D functions as we build out our commercial operations and products. Moving to our capital resources. As of September 30, 2022, cash and cash equivalents, including restricted cash, were $273 million. Our monthly operating use of cash was $15 million in the third quarter, down from over $18 million in the first half. In addition to our year-to-date operating expenses, our September 30th cash submission was impacted by fiscal 21 annual bonus payouts, capital expenditures for the build-out of our headquarters, the annual renewal of insurance premiums, and inventory purchase obligations. In Q3, we implemented the previously announced plan to reduce cash expenses by approximately $36 million annualized when fully implemented by year-end. In addition to this plan, we continue to evaluate all spending to ensure it aligns to the strategic vision of Butterfly. Looking at our 2022 guidance, interest in Butterfly is strong and the long-term opportunity and available market for our products is clear. As many in our industry have noted, intensified labor constraints in the third quarter and associated budget pressures from temporary labor costs have limited client-side implementation capabilities. and cause deferrals in adoption of medical technology more broadly. As we do not have a good, safe basis to assume that this will immediately reverse in the fourth quarter, and as Todd discussed, along with our change in sales leadership, we believe it is prudent to revise our four-year guidance to $73 to $76 million. However, due to the actions taken in Q3 and additional control measures, we are able to reiterate our adjusted EBITDA guidance in the range of a loss of $155 to $145 million. We need to be realistic about the macro and micro environment, where it is at, its burden on health systems, and how it affects our ability to grow quickly as we are changing the way healthcare is delivered. Having a strong go-to-market strategy that we can build on and optimize against is essential, but also having an environment where hospitals are able to invest in resources and grow their budgets is also important. Until then, we will remain laser-focused on extending our leadership position that clearly differentiates Butterfly while working against this headwind of a difficult macro environment. To close, In addition to seeing continued top-line growth in the third quarter, we tightly managed expenses and reduced cash consumption. Our plan will allow us to navigate the headwinds from the macro environment while still realizing the vision and mission of Butterfly. We have a solid cash position, and we plan to continue to invest in a targeted manner to maintain our momentum and continue to capitalize on this attractive market opportunity. With that, I will turn the call back over to Todd for closing remarks. Todd?
spk01: Thank you, Heather. Butterfly is a game-changing technology solution for the current state of healthcare. Our technology works and our value is real. It is my hope that you walk away from this call having a better understanding of our path and appreciation for how we are navigating the market with our innovative technology and our ability to manage, foundational elements of the business to weather external factors we understand the elements needed for the success of the butterfly solution hardware software and connectivity and we are meeting our customers where they are and providing a blueprint to using ultrasound information to catalyze care transformation fundamental to all of these achievements is our people I'd like to thank them for their incredible hard work and commitment to this organization and to each other. Our employees are dedicated to our mission and want to help realize our vision to impact the lives of people all around the globe. Our leadership and organization changes will help to ensure their success. In the challenging time for healthcare, with increasing demands and a workforce that is stretched thin, Butterfly is ultimately a solution that efficiently delivers better, more informed, lower-cost care. And while we continue to evolve our go-to-market and investment strategy to provide accelerated revenue growth and adoption, the achievements this past quarter still demonstrate that Butterfly's message is resonating broadly. As we finish out this year and move into 2023, our charge is to continue to walk this journey with physicians and care providers to get them to think about butterfly technology and solutions differently, to get them to understand that butterfly is the evolution of what they have previously known or been exposed to about ultrasound. And butterfly's accessibility is of use And broad utility is the only solution out there that makes the evolution possible in all settings and geography. It's why butterfly. And with that, we will open it up to questions.
spk06: Thank you. So if you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phones are muted locally. So that's star followed by one. Our first question comes from Josh Jennings from Cohen. Please go ahead, Josh. Your line is now open.
spk00: Hi, good morning. Thanks for taking the questions. I was hoping to just start, Todd and Heather, just to ask about the sales funnel. If anything, you can share quantitatively or qualitatively about how that's building out. It sounds like you are getting in front of more and more high-profile accounts, but maybe there's just with the macro environment, there's just some delays in finalizing contracts. But I wanted to just better understand how the sales funnel has been developing and what sort of visibility you have within that pipeline.
spk01: morning Josh so absolutely you know we see the we see our pipeline building we also you know see the retexturing of the revenue so if you look at you know where revenue is coming from as it looks from hardware software and our services you know we see positive momentum in each of those aspects we are lining up implementations and
spk04: see a continuing building sales funnel so i don't know heather if you want to comment yeah sure um good morning josh i i'd also like to just emphasize um as todd did in his script that uh the kind of delays that we're seeing um are causing a push out in our funnel not people opting out of our product so i think that's an important item to note as well thanks a lot and i wanted to
spk00: just think about 2023. I mean, I know entering 2022 butterflies foundation had evolved very nicely, um, behind the scenes, but then, you know, you guys revealed everything that was happening in 2021, just in terms of building out the blueprint, um, platform, uh, adding encompassing and you're continuing to, uh, uh, add, add to the, to the technology. But as we're entering 2023 in a couple of months, how would you have us think about butterflies positioning relative to the start of 2022 and any kind of drivers that we should be considering as we model our forecast out in our models?
spk04: Yeah, so Josh, I think when we look at 2023, The items that are impacting us this year with the budgetary constraints and the macro environment we believe are mainly transitory. So we do expect to be able to enter 2023 strong, and as the year progresses, see improvement. The focus for next year in driving our product will be medical education, a continuation on the build of our software, as well as global health. And I think we're well positioned to take advantage of those areas. Todd, do you want to add anything?
spk01: You know, Josh, I would just say that, you know, I think every minute, every day that we're in the market, we make progress, and our customers' understanding to where they can benefit and use the technology makes progress. I think as we look at the headwinds, I mean, Everybody's seen this. I think as you look at the headlines, at the end of the day, hospitals have to figure out how to take care of patients. And as care continues to evolve itself as to what the next evolution of care is, I don't think it's going back to where it was, but as it continues to evolve, they're going to be looking to technologies that help them do that better. Butterfly clearly comes out. part of the solution as you start looking into more cost-effective efficient care that helps drive better quality so you know we see very positive trends moving into 23 if you look at our fundamental elements of our technology we continue to advance it and its performance we continue to understand how it's being absorbed by our customers and helping them get on the journey faster where we're looking and segmenting as we we get to the areas that we're making the greatest impact. I think Heather mentioned, you know, we'll focus on med ed, global health, software enablement of the workflow, and the adoption and utilization of the technology. So, I think with the activities we're seeing in the market as we finish 22, with where we see the macro evolving, in 23, you know, we're optimistic, continue progress in 23 moving forward.
spk00: Understood. Thank you. Just one last question. Just on the sales leadership change, can you help us better understand just how the sales strategy, the commercial strategy has evolved over the past six to 12 months and how do you think new leaders could, what type of direction you're going to take it from here? I know that that may be TBD as they're just getting on board, but any high-level thoughts would be appreciated. Thanks for taking all the questions.
spk01: Sure, absolutely. Thanks, Josh. Look, if you think about what we're trying to do, if you just take a step back, right, we didn't invent ultrasound, right? Our technology is enabling others to reimagine how they use ultrasound and what that means in the healthcare environment. So we have elements of our solution that make it a complex, multilevel cell. So we've understood as we've been out in the marketplace that what we need to do with our customers in order to get them on the journey is complex. Part of what we're doing here is bringing in the leadership that understands how to work through these complex conversations in the market, reduce that to simplicity, and help our organization be successful. We're doing that both with our leadership and with our organizational structure to help our people and help our customers drive to efficiency and effectiveness more rapidly, more efficiently, and more enjoyably. So we are breaking that forward. So the commercial operations is really getting around the ultimate solution and helping our customers to implement that and realize the value of it sooner across the entire continuum of care. We have a heavy focus on North America. We also understand that we need to continue to develop our technology to that we need to understand how to deliver that through our technology across hardware and software and across geographies. So our commercial development organization will have a greater focus on how we do that, how we support our commercial and selling activities. and how we incorporate new and novel things into our platforms to help people get on their journeys faster. So this comes from, and this is what I talk about with us being out in the market, this comes from a lot of learning by not just talking about it, by being out there. And we're really trying to learn, be nimble and agile, and help enable success of the company and our customers. And part of that is through the organizational change and the leadership change.
spk00: Thanks again, Todd. Thanks, Heather.
spk06: The next question comes from Neil Chatterjee from B Reilly. Please go ahead, Neil. Your line is now open.
spk02: Great. Thanks for taking the question, Kenz. I guess first off, just wondering if you could maybe just talk more about the Yale and Stanford Blueprint deals and then just more broadly with the sales funnel. You know, I guess how much are the mix of opportunities more software-based to start versus, say, you know, a hardware deployment and software?
spk01: You know, I think, Neil, I would take a step back and say, if you think about how we need to and where the market is, you know, we've talked about meeting our customers where they are. And if you think about where our customers are, right, there are people in institutions that are charged with managing and teaching and disseminating point-of-care ultrasound, right? And when they think about how do you do that, it's kind of been put on them because they have some expertise and then people realize there's value of that. What we're doing with our software is helping experts both be expert, teach, and be able to help monitor the progress of how they disseminate that technology and then help institutions architect how they want to use the technology to deliver better care and then to help novices utilize elements of that information into delivering better care. So fundamentally, in order to bring this to life, you need a backbone to make that happen. That's what we learned. That's what we're implementing. So our software really helps institutions, experts, and users go down their journey. And that comes back to fundamentally that our technology is revolutionary because it allows you to use ultrasound information and acquire it differently. But our hardware acquires the information. Our software makes it usable both in the device and in the application. And then we have an element of the connectivity that makes the information valuable in the context that you have it, which allows the information to travel across the continuum, which then brings it into your ability to deliver care transformation. It's really important that we're not selling a widget and a device, right? Like this isn't like you back it up and sell an ultrasound machine and let people use it. We are giving people the opportunity to reimagine and benefit from ultrasound information. In order to do that, our in-market learnings have helped us see how we need to create some of the lines across the dots to help our customers cross these things to think about how they can imagine care differently. So it's important for us to put the software in, partner with them, help them understand how they're currently using ultrasound, how they can evolve in the future to use ultrasound, and how Butterfly can help them use ultrasound information differently. So it's a software. hardware enterprise solution sell. And so that's what's happening at Stanford, that's what's happening at Yale, and that's our approach to helping people move forward with the journey.
spk05: So if you have any further questions, that is staff followed by one in your telephone keypad.
spk02: it appears we have no questions at this stage so i'm just gonna oh there's one question from neil again i'm just gonna open his lineup again hey guys sorry yeah i had some follow-ups um yeah just in terms of the speed the you know the healthcare spending environment just curious from like you know at the customer level are you seeing you know any nuances there you know say uh you know are those labor and budget pressures more you know Is it widely spread, or are you seeing it more on the community health system side versus, say, the academic medical center side? And, you know, have you seen any kind of new mitigation strategies?
spk04: It's really hospital to hospital. Some folks have managed their finances well, you know, through the pandemic and post-pandemic, and others have not. And then, you know, I think it's a pretty consistent theme across most of the health systems with the burnouts. of the clinicians and hospital staff. So even the folks who have the budgets often don't have the resources because they're not going to put another burden on their staff. So we are seeing it fairly widespread. Obviously, we still did have nice revenue in Q3, so it's not everywhere, but it's definitely more prevalent and became more prevalent in Q3.
spk01: No, I think we see it, Neil, as it's definitely a macro trend, right? But I think in general, you know, healthcare is institution by institution different. So the conversations that we're in, and I think that's why we say we meet our customers where they are, both with what their economic challenges are, what their workflow challenges are. what their technology challenges are. We see it as an opportunity because there's a lot of flexibility in the butterfly solution. It really can help you solve the problem that you want to solve. And that's a blessing and a curse for us in the sense that we're getting people to understand that. It also brings some complexity to itself. At the end of the day, it's far more an opportunity than it is a challenge. And we're early in the journey. um we see positive signs across every aspect of the journey and um you know we definitely believe that at the end of the day regardless of where you are as a health institution butterfly will be part of your solution moving forward got it thanks just one one more follow-up in terms of the the adjusted top line guidance um you know so is that reflective mostly of the macro environment or you know are you expecting
spk02: you know, some disruptive impact that commercial leadership, you know, change over and organizational restructuring?
spk01: Look, I think it's just a combination of all. I think we're trying to be good partners. We're trying to be prudent about how we go about doing this. We're really optimistic. We have lots of good signals, you know, and I think we're early, right? So we... You know, when we look at something, you know, every action kind of has an opposite reaction, right? We're building, we're growing, and so we want to be prudent about the impact of the macro environment, the complexity of the cell, the changes that we're making organizationally, and we just want to be cautious moving forward. We're very optimistic about how things are going. We're getting very positive signals, but we also want to be realistic and good partners in the marketplace.
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