Butterfly Network, Inc.

Excuse me, everyone. Please remain holding and the conference will begin momentarily. Again, please remain holding. The conference will begin momentarily. Good afternoon. Thank you for attending the Butterfly Network first quarter 2024 earnings call. My name is Victoria and I'll be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to your host, Heather Goetz. Thank you. You may proceed, Heather.

Good afternoon and thank you for joining us today. Earlier today, Butterfly released financial results for the first quarter ended March 31, 2024, and provided a business update. The release and earnings presentation, which includes 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, Chief Financial and Operations Officer at Butterfly, alongside Joseph DeVivo, Butterfly's Chairman and Chief Executive Officer, will host this afternoon'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, and the size and potential growth of current or future markets for our products and services. 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 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. As a reminder, this call is being web-tasked 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 audio and the presentation being shown. On the same page, you will also be able to access the webcast live and replay once the call has completed. I would now like to turn the call over to Joe. Joe?

So good afternoon, everyone, and thank you for joining us for our first quarter 2024 conference call. We've had a really good quarter and a perfect start to what will be a great year for Butterfly. We delivered 14% revenue growth which was above expectations and are now raising revenue and earnings guidance for the full year. Our IQ3 launch proved everything we were hoping for and marks a major shift in competitiveness for the health system market. With our building momentum from recent product launches along with a robust line of new products and services coming, we feel confident we will be able to sustain this growth for the foreseeable future. Our ongoing efforts to streamline and become more cash efficient will continue through 2024, extending our cash runway well into 2026. So, elaborating further on the quarter, revenue came in at $17.7 million, or 14% over the last year's first quarter, with a 22% increase in probe volume and all channels contributing. come on the heels of us overachieving our fourth quarter 2020 expectations. Even more, our first quarter of 2024 was the best first quarter in Butterfly's history, even beating 2022's of $15.6 million. We were able to achieve these results through improved execution and do it more efficiently. We actually used half the cash we did last year. So 14% revenue growth, highest first quarter ever, using significantly less cash year over year. Now, that's progress. We had a number of significant achievements in the quarter, the most notable of which was IQ3 winning FDA clearance early in January, and we were ready. We launched IQ3 ahead of schedule, delivering even more momentum. Our operations team did a marvelous job producing high-quality inventory. Our marketing team executed a flawless launch, with so many online activations occurring through the quarter. I'm very proud of the team for delivering such high-quality launch ahead of schedule. So as a reminder, as I laid out on our previous earnings call, our 2024 priorities for Butterfly are, one, IQ3-driven growth, including going deeper into health systems, two, global expansion, and three, driving medical school adoption. In addition, we see further opportunities such as VET. So digging in further to the launch, on February 13th, 2024, IQ3 became available to all of our domestic channels. Each of our regions then proceeded to deliver an above-plan performance. U.S. revenue growth in the quarter was 19%, led by an increase in probe unit volume of 18% year over year. There were no large deals, just a groundswell of individual orders increasing on a daily basis throughout the quarter, which in my point of view is very healthy. Now, international grew 14%, and this was without IQ3 and prior to even receiving EU MDR certification for IQ+. So in other words, the growth was purely based on approved execution from our distributors and strong performance from our international direct team, despite no new product in years. Well, that's about the change for them. Now that we have EUMDR certification, we'll be rolling out a cadre of advanced features on our European IQ Plus product later this month. International results should accelerate further. So what's more, the new Butterfly IQ3 international rollout is kicking off very soon. We plan to launch IQ3 in Canada this month, and then Europe will come next later in 2024. So IQ3 was available for a half a quarter in the U.S. market. Sales and selling activity has been electric. Of over 1,200 IQ3 units sold, about half were brand new users to Butterfly and half were trade-in upgrades by existing users who wanted the new technology. In every setting, IQ3 shined. We have held many private IQ3 demos for KOLs in every clinical specialty relevant to ultrasound. We used to hear, quote, Butterfly is great, but, unquote, from several specialties, especially cardiology. But there's no more but. That is now a thing of the past. At the most recent American College of Cardiology conference, our little booth was swamped with cardiologists. It was so gratifying because we heard them say, quote, I just had to come by and see if IQ3 was as good as everyone says it is, unquote. Now, that's really nice to hear. Our message is getting out. There's a viral buzz around our new product and customers are reaching for it. Time and again we put IQ3 up against the competitive devices and our image quality is just much better. We have advanced automated tools and our cost is still a fraction of the price of all competitive probes. Remember, you need to buy four of their probes between $5,000 and $7,000 each to get to a full body image. Together, that's a $20,000 to $28,000 purchase, about the same cost as an entry-level cart. We also published a white paper accessible at ButterflyNetwork.com resources on the clinical utility of IQ Slice and IQ Fan, detailing how these advanced tools can enable more efficient care by reducing the number of scans needed in an exam. Many ultrasound protocols are time-consuming and demanding on probe manipulation to get a series of views. With IQ Slice and FAN, we proposed new protocols that streamline the scanning process and enhance diagnostic efficiency. This was also the first quarter that we began selling two probes side by side. IQ Plus remains the best-selling handheld in history, and the product has a lot of life. Providers who are generalists or very price sensitive may opt to purchase IQ Plus at $26.99. While more specialized doctors, for example, those with cardiac, MSK, and vascular needs will likely opt for the IQ3 at $38.99. No matter what, Butterfly wins because we have the lowest cost, all-in-one probe, and simultaneously the best handheld in image quality capabilities and cost. Plus our probes are paired with enterprise software and educational tools to make deployment feasible at scale. And now Butterfly Garden will be constantly bringing them the best AI apps in the world. It's just simply an unbeatable offering. Health systems are now taking notice and our pipeline is growing. We have the probe, the mobile app, enterprise software, and education portfolio. If a point of care ultrasound director is serious about building an enterprise program, they will now truly have only one choice, Butterfly, the most complete solution. In fact, we're thrilled by new data coming out of one of our largest one-to-one probe and software installations at the University of Rochester Medical Center. which furthers the value story by demonstrating the economic benefits of butterfly. There's much more to come on this, but they allowed us to preview a highlight. Since putting butterfly in place system-wide, URMC observed significant revenue growth, a 115% increase in hospital revenue from point-of-care ultrasound in just a year and a half And they also reduced capital expenditures when deploying our devices system-wide. Looking at our software and services revenue, in total, it was down slightly. This is temporary. Underneath that, we had great enterprise software quarter with upsells in existing accounts from 25% from Q4-23 and overall ARR growth at 34% year-over-year. On the individual side, we anniversary the subscription promotion put in three years ago that was very successful. Much of that revenue rolled off this quarter. I'm not worried about this at all as we've reloaded the chamber with a bunch of new software from this quarter's all-in probe sales, which will roll forward nicely and set the stage for a lot of new software to amortize over the next three years. I also explained last quarter that medical school programs would be an important growth driver for us and we're seeing the momentum here, including upsell into over five schools in Q1, two of which were one-to-one models deploying probes to all incoming first-year students. Our pipeline in this area is also growing strong and schools are realizing the value of one-to-one models. Look, each student wants their own probe. Just last month we were at a calm, the largest gathering of osteopathic medical school leadership in the country. More than 30 do school decision makers showed up for a private session to learn more about butterflies one to one models and more came for conversations that are booth. scan labs launching Q1 is a huge part of our success here it's contribution to the quarter was also nothing short of amazing. Having an ultrasound instructor side-by-side with a student to practice is a resource not all medical schools have. Prospects have cited ScanLab as the reason they feel a one-to-one model is now feasible. ScanLab amplifies a student's coursework and hands-on training with AI-guided practice tools. It has strengthened our lead in medical education as a whole generation of students learn ultrasound and do it with their butterflies. Much like Apple built their iMac market decades earlier, when students learn on your platform, loyalty for years ensues. The impact of ScanLab goes well beyond med schools. We have partners, distributors, and customers hosting training programs using it. Since its launch in mid-January, thousands have downloaded it. Multiple institutions are using it in clinical research. Schools are incorporating it into their curriculum. Customers realize There's now an AI tool allowing students and clinicians to practice their scanning skills on their own, and it's a proven game changer for us. We also saw growth in Butterfly Garden AI partners. We launched these streams about eight months ago in August of 2023 and saw an immediate strong inbound. This pipeline continues to grow. In Q1 2024, we added four partners. And just last month on April 23 think so no became our first partner to commercialize an education APP for deep vein thrombosis assessment it's exciting to see the rate of progress in this area. So before turning it to heather i'd like to give a brief update on the European Commission's effort to ban hazardous substances from electronic devices called Rojas or restrictions of hazardous substances directive. I've mentioned that we've been in contact with the European Commission about our chip ultrasound as a cleaner alternative to incumbent lead-based piezo handhelds. We're pleased to have learned that they've not yet begun reviewing the lead piezo industry's request for the next exemption. Our contact that the Commission shared will most likely begin at the end of this calendar year and then decide sometime in 2025. So that's terrific news for Butterfly. First, we are not late in the game. Butterfly and our SEMA technology will be fully evaluated and considered in this next round. Second, we believe it's possible that IQ3 will be approved in Europe before this evaluation process concludes. While we're very confident that even with IQ+, we would prevail, with IQ3, we feel certain that any independent valuation against all other handhelds will conclude that IQ3 is at minimum equivalent, period. We have also further learned that the EU's seriousness in upholding this directive is strong. The more energy we are putting into this process, the more we believe the odds of prevailing are in our favor, and new sales of lead piezo handhelds may be banned from the EU as early as 2025. The facts are simply in our favor. There is still a lot of work to do, but our confidence is growing. So with that, I'll turn it over to Heather to report more on the quarter. Heather.