BFLY - Earnings call 4 2023 | Butterfly Network, Inc.

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Operator

Good afternoon. Thank you for attending today's Butterfly Network Q4 and Fiscal Year 2023 Earnings Call. [Operator Instructions] I would now like to hand the call over to Heather Getz with Butterfly Network.

You may proceed.

Heather Getz

Good afternoon, everyone, and thank you for joining us today. financial and the provided released December quarter Butterfly XXXX, XX, a today, results fourth for ended Earlier business update. earnings non-GAAP to company's website and management's on the measures release presentation, ir.butterflynetwork.com. of a available include The the section reconciliation are use currently of most financial the compared at Investors measures applicable GAAP which of Officer, I Butterfly's Chairman DeVivo, Heather alongside Butterfly, Joseph call. Chief Getz, afternoon's Chief Financial will Executive of this and Operations Officer host and

to statements. development statements we These things, on number services, our and call, be based our of the involve factors cause and that information, filings will potential risks, expectations of and and Commission. statements. described contained uncertainties, among the to certain forward-looking size and These unknown These made results products other and Exchange approvals, may materially current to today's other for growth statements products may risks other services. in During Securities our and are expectations change financial are making subject are in the include, results, and and respect assumptions differ or with of current regulatory that from markets forward-looking forward-looking and future and with those potential performance, known commercialization future a actual

obligation are update such undue to statements, reliance any place company cautioned disclaims to not and statements. You on these the forward-looking

earnings Investor videos. To slides, of the visit events click animated animated recorded, of today's with under being be slides live and the a As a and you call our the delay be will platform versions our reminder, may also in then within is and the presentation this the with There short we call an audio webcast and to a access live visible called the with remarks. slide webcast And referencing being presentation events, option see not presentation upcoming shown animations. conjunction between will section will play website. our

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Joseph DeVivo

Heather. at well XXXX for worldwide, expectations $XX afternoon, into million to as call, above headed the our finished of of pleased performing revenue report one pleased and million. Good Thank we that $XX.X at to you, our joining was everyone. our I see each XXXX. thanks channels least I'm

In fact, sale full-year and our QX year-over-year. grew direct XX% XX% revenues and

our we while have and growth XXXX, to forward, of digits grow all in investing across Moving efficiently. every realize channels company double opportunity the

less we the now market our company. months, as new of We've launched, operational a removed strategy. The and I can on continue less sales. $XXX of and business, over costs hospital our invest recently more growth Ultrasound-on-Chip online just year rely We resize transition XX our deliver. last can disruptions technology business to team. chose and for as and only our today company the cash on sales higher-end said products necessary focus opportunities the the building and and new was from existing roadmap on over to million XXXX Over in commercial matured a business, technology yet

pleased And POCUS Butterfly our into revenue, and foundation very services, ultrasound growth. two, for going and by education An drive core our and education what Counter This our Certified products the we've semiconductor delivered for offering offerings, to commitments. are Two, quickly. core competitive was embedded development received call providers we to a accelerate easy grow in very into full new key deliver certain and It ultrasound to of the AI top-line on introducing education in partnerships to accessible all use introduce increasing to shareholders these AI road was but We've markets Auto of technologies XXXX. to quotations more our for by in of solutions; bring operationalized AI seen quarter with certifying our FDA out new education identifying XXXX our first as four, proficiency availability types. Butterfly completed by B-line from Butterfly second year, three, healthcare us. value one, I for clearance new health we've we service helping FDA Butterfly expert-led was we I'm the will training systems set to each laid milestone customers investment. scan launched to that not users; Certified. It One, of forward. would last that offerings, create say master in point-of-care already map our XXXX. the offerings leveraging AI-powered During make the growth

partners and released by program the in We our strategy. week. We commercial XXXX new sell execution our These this Three, Heather? XXXX them. to program organization. more base detail also successfully customer XX Thus, Mendaera which entrance call to Echo, stayed together, new over Forest are XXXX newest will we've announced their to launches, in revenue core technology weathered to XXXX. now and over ahead I'll schedule in XXXX which partnerships to the product will leading point, goals introducing Butterfly in launched iQX, applications AI implementing Butterfly all We delivered storm, we've initial be we signed be Since by detail Butterfly turn we've marketplace. and build of can and our laser-focused to lastly, key launching Four, delivered and proud AI valuable our as Deep of date two Butterfly the this devices through investing review AI third-party employees that incredibly accomplishments Neurotech a Heather companies compatible probes. core into Garden, We XXXX, ourselves in a and very in returning users. At grown execution. priorities on up our ultrasound previously more construction partner, on Butterfly Powered our set just results AI delivered our we press on to while with tools, XXX,XXX And walk I on be ScanLab of and before the our partners. in just bit. will

Heather Getz

you, Thank Joe.

to as in the XXXX 'XX, the to quarter to to cover higher and noted, declined a we was company including compared market. in internal not driven reset by solid software large slightly the on due international decrease deployment to reoccur the XXXX the did across rightsize large our and lower Breaking a gates increased international to lesser driven results. than XXXX. Product believe path the in $XX $X.X international orders, $XX.X $XX.X distribution, not was distribution price. revenue and international down million. you by large lower due million, This by of offset was and predominantly from e-commerce, accomplished we well product as offsetting prior lower the a partially lower in revenue and XXXX direct and increase million, higher This was mostly versus in Total volumes, million and volume, offset e-commerce and to The let decline XX% mentioned. vet, This lot due occurred e-commerce. Health Revenue from and in sales, realized XXXX million, distributors by in repeat XX% software. in 'XX spread be year. we vet between of that Partially QX others first, XXXX. the XX% was decrease $XX but previously These the of As mentioned in deals orders down ASPs U.S., over did volume in Global was a are a Africa But in orders In market. I by sales, prior driven for large now partially for fourth year growth and XXXX. extent, me higher to and XXXX subscriptions, was beyond. revenue what revenue lower the the international largely

prior in services Software revenue was quarter, the fourth and million flat period. $X.X year to the

of and software the by of revenue during and X implementations the users, mix to prior completed XX% quarter. year, services This installed base due percentage to base approximately was software compared on and points increased increase a software subscription higher QX versus Software was existing XXXX. renewals of as

businesses, both the recurring was these led at revenue, This sales double-digit reported by as an now 'XX, versus of million and to and total due nonrecurrence XXXX revenue distribution XX% internationally. by ARR full were the from QX orders the which lower annual in in previously When the is our of to Our XXXX. part looking in X%. XXXX. grew $XX.X services, our while increases in mentioned direct software total of XX% versus large declines year other which offsetting in XX% increase channel is and XX% declined our e-commerce of Partially domestically software, enterprise total

Joe noted we new direct deals As made begun and end flat investments internationally. additional in excluding was markets year-over-year, At remarks, our increased new XXXX, direct have these essentially in our from teams, 'XX XX%. of revenue, distributors his we markets XXXX in and large the sales and revenue in signing existing

traction further XXXX. gain to in investments these expect We

excluding XXXX gross $XX.X to totaling a in period. was million the QX prior of $X.X million $XX.X Gross excess year million now profit, noncash to profit. Turning write-down compared inventory in

previous of was QX higher a inventory a To efficiencies. 'XX, the the On noncash than and basis of margin generation was This future by reflecting operating XXXX. excess our $XX.X of expand was the was sales of shift to our driven probe. higher XX% selling same and iQ+ of services we cost higher software reduced to for basis, charge forecast gross proportion quantities our XXX for of chips other updated by in QX average basis The of profit manufacturing the for prices, the write-off on the higher iQ+. that XXX our of million amortization mix, chips hand compared product margin in fourth a on points. took Higher demand write-off, higher-margin used of number points revenue XXXX, quarter are by which during

launched Our forecast of was the adjusted result down as newly iQX. a by

worldwide, to continue assumed XXX% the attributed our previous being sales iQ+ on of demand forecast our we to sell chips based of usage While IQ+.

and to capital Moving EBITDA resources.

consulting, driven the loss by For $XX.X EBITDA period loss cost to million of payroll, including XXXX, million the and a million. EBITDA which loss lower equivalents, adjusted compared of were services. December of previously resources announced in was quarter Capital improvement the $XXX cash for $XX.X other outside restricted in as of cash The reductions, XX, cash XXXX. with adjusted fourth was and same XXXX, led

and other nonrecurring of $XX was for total million quarter of expenses, our million. $X.X fourth Excluding cash the severance use

this, on XX have of the burn we with estimate annual out our million cost conservatively mentioned, a approximately months, have $XX million. and XXXX. the As Based have cash we business of our runway us over we past $XXX provides over taken reduced that balance into cash to

Moving to guidance.

completed As all Butterfly Seth August. reorganization the we in completing launched in laid launched XX against signed, early our launched into invested that teams map have iQX, Garden an and our education conservatively and extend with ScanLab. executing road at XXXX. sales received our deals been and our We discussed, we approval a out We while cash

we potentially While exciting in and tailwinds establishing or guidance, either any streams included have not forecast we revenue any our markets. many and new of iQX meaningful acceleration from the launch or have our material XXXX

respect benefit immediately. wide-scale Butterfly, who medium-term providers could of the of adoption We to buy also adoption large cycle can't from but greatly need

keeping introduced fully customers fact a or a iQ+ are not the for first market, who time, existing utilize and well product of segmentation crave capabilities iQX. the as the to in for position need creating As while those company that next-generation the affordability the in device has, thus yet the

and and to are with approach for prudent such, taking top-line million. conservative an to the EBITDA of year double-digit $XX $XX we As growth full loss a XXXX guiding low million

as to And upside clarification. we provide we will year progresses, the mentioned, and is there updates As believe further this plan.

to see as quarter ramp to looking cloth Specifically second year We tougher than for we speed. growth do tends into as we we resources to be iQX at hired this deals. sales and and the digits to to QX, the of hospital continue expect ended and newly half in expected, accelerate growth QX expect the a our higher mid-single come QX up

with forward and to in relative and look Garden, EBITDA we The higher expect EBITDA, to a is launching ScanLab, and laid investments we this related transition are the Butterfly iQX quarter of XXXX. and first expenses year. we payroll the launch year, reorganization and the of iQX. the the force adjusted To remainder in the completed, reset, sales as out QX For to XXX(k) summarize, all lower the including growth direct slightly expenses in as well and investing tax

we to growth runway double-digit maintained extended believe this and forecasting as position and there solid While business. efficiencies additional our a upside in mentioned, realize. we the continuing have plan invest XXXX, for Furthermore, have to is low cash while we XXXX, to are cash into revenue

continue that to a expand all Butterfly across Joe to and the continue Joe? to we its against iQX in a invest to opportunity. up adoption and of our attractive with who With goals strong is to will drive base call is We assets capitalize products execute our I uses plan, will will on market to back accomplish and team technological set XXXX. our of detail of that, this organizational turn channels. energized

Joseph DeVivo

with be systems driven team; alternative including guidance the space. school of further of expansion; vet double-digit further adoption; three, in top-line We in an for iQX our our for technology, growth of our will and upside. launch penetration opportunity with four, medical low you, health This investment by and global commercial two, the Thank XXXX uses Heather. discussed

for a allowed This first thousand us the we daily launched ultrasound So than the our around we hands we go-to-market quarter, world. more online all strategy. for sell physicians' to all-in-one probes had brand world. XX and Today, global X,XXX know directly just directly fixture building success quickly as a dollars, and doctors Butterfly the device time. Butterfly in Each relationships comprehensive online build have to ultrasound inexpensive making around with tremendous we countries of couple in doctors a the reliably

it handheld did So invent more we and POCUS, XXX,XXX since the countries, not by certainly over its selling in other world, XXXX. ultrasound than put adoption the in accelerated but on devices many map butterfly focus any company

bedside cost job While was way as it tool Early way, more there get a for ahead became carts can life-saving places ER. and a which led hospital. to if all-in-one adopt. were having Hospitals that individual immediate diagnosis rooms piezo-based be introduced device, together very first a even to the better be ultrasound the we penetrating with multiple POCUS as lose Butterfly, potentially showing were POCUS, quality for hospitals criticism around that handhelds, was Then the expensive needed in Emergency into to buy did for or embracing to the much there. doctors And Butterfly adopters in cart. of wheel the a handheld hospitals either originated patients. to focus image good to of slower

from iQX, launch true With per gigabytes gigabytes to the Law of proved Moore's Butterfly we doubled the per again. second. power X.X processing X.X second

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growth third will drive XXXX in be adoption school Our to programs. driver medical into

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questions. can And again. now you the operator, thank open So for call we

Operator

Instructions] from with question first Josh of line [Operator The Jennings TD the Cowen. is

Joshua Jennings

on how on the Good you question the to progress. with just thorough a was afternoon, Jon for iQ, Thanks Heather. congratulations do hoping it. start and update I

Just drive have low-hanging fruit already hoping was what within iQX as I any Sorry the that, that do assuming upgrade a enterprise clinical cycle within potential is software multipart generated acceleration And then in represent go could follow-up. moving the customers have I iQX. to your just customer that maybe with the comment iQX cycle within going launch? but hardware? buzz the an And adopted the customer back on community, on base? there's just question. generated We're you're the or to this the to replacement sales question in buzz opportunity your forward for you pipeline, those just but after one base. solution, then hospitals is iQX not And the

Joseph DeVivo

Sure.

and yes, yes, yes. So I guess,

of initial we're heard weeks and And So comment in of them has the we -- many normally and out gotten excited I impressed added not pipeline our But our don't demos specifically about very there. iQX. been been we've partners have excited. where reception clinical We've the the pipeline, the of situation pipeline. been first really -- very have a that into that since opportunity just in on couple launch, we lot one

talking like So settings, we're each on about And and hospital we're to know upgrades competitive to all We're -- very, of in of very and what now we excited in about this pipeline means. products. very, deals. conversions schools talking this medical work health larger systems

So a of lot very activity. good

we're excited. So

partners. our system health launched trade-in a for like have Regarding for we business. our -- path trade-ins, so just And today, actually, e-com trade-in a yes, have

do value are markets. we the iQs other We and iQ+s. think there So

to to that loyal if upgrade, wish then customers And allowing happen. so absolutely we're our

Joshua Jennings

how the last we then how compared and and some hoping and And States will on on the commercial on to year, of of it's will more United add just sales details team managers. continue hospitals, there, just get direct just sales -- in course reps to the follow reorganization build-out to how XXXX the the sales focused situated the

Joseph DeVivo

Yes.

the we've managers, them We but other getting we've won't people reps. off there ride-ons we in And or year They come and XX% They specific go now up channel. in were with out through guarantees. of the all bringing they're done one is they've have were then guarantees. to all going. January, eat were speed. to to also them. their We And I with an heater on up aggressively speed. training into getting the we -- on kill were and were They 'XX So And have e-com of size salespeople XXXX, XX%. numbers increased to things

hospital. been of all We channel X focuses a we hospital. the have that things work year have that one deals of together. channel with make to out-of-hospital our different sure is direct we've inside And them like this an an that sales that But then in

who a health So as affiliated -- in e-com, system. leads the U.S. buys product everyone a whether with part someone the some or come into online is

linked we of rep we've come that have we of amount now so the who's take the doctors that champion said, have at to doctor, sanction health our are "Hey, all bringing put sometimes we look document it That a to who when the all health product didn't has software to we okay, images past. and We've at can sudden, this all in interestingly, system to where inventory use you to well, them that creative the system the hospital place EMR. the sales And that system their product fold. their buying hospital. a And who many in e-com have how our integrate a ultrasound with -- say, that them times, which purchased let we seen individual or buy. individually, deployment typically so direct have the amalgamate manage looking led Butterflies, a seen health in affiliated they're was because of own we into guys us in doctors we now, purchased know can and were tipping let your want And in of institution they into but software at point. We major strategy another a we it. a EMR. strategically sudden the that We And saying, that help doctors these at

for We to reimbursement. file tools have automated help

can automate educated and the allow tools so have to proficiency they can properly. help be that manage We

those XXXX. systems would iQX So done It hardware of weren't different XXX, and now critical kind it's market, while subspecialists. because have a the type but have been now the health there We've cardiology. the really course, room. And well of I in We've there. butterflies software X-X in about They lot in throughout software. of were recreative of really the well very of specialties, XXX with done put other really needs very to to that bundled was and is to how that accounts care, a we're deal emergency allowing in the all that manage seen meets so excited software of the many have punch liked

of capture that now standardize. Why scans. doctor, have should And sure different do. of they sudden reimbursement. walk walk can that's so counterintuitive? not handheld all We X now with a in to have the Capture desire those we could probes make that hospital a so a probes The what XX% handheld to with

got to handheld amount cost handhelds makes they've sense. go to and on cart. Now those multipurpose same get another just as no X a all the It

the they reimbursement. ultrasound probe to that's everything of the of perform take XX% way because true they devices are advocating to being brings Butterfly for middleware many And individual have that point claimed the and believe see in of it's are so scans make XX% it doctor all a around getting for are is that actually point think we of to that Compass and EMR in hospitals Butterfly, our their middleware not care. integrated for their it middleware, gets We've captured into that our care. data implement tied probe order other you documented. in one only only works need the our actively properly as when devices on implement efficiency So just the into people are and force not well. seen all and now, is And middleware in right or sales get we We private tour -- average every gets to going then and

for the So up. it's grow just image into hospitals whole our allows in the go amount process for the where feel they're thing they phone a to their of When They the we go go reimbursement file They they up more scans integrated because it's and Butterfly. the middleware hospital, not comfortable. put revenue. up It's we because proprietary easy. looking see at that

all as probe this now quality we saying the into this to But talking this 'XX, has that have talk hospital. deals. sales all-in-one go So image we force killer now have let's is inside our out about live middleware, accounts, can these larger that awesome we

standardization. about talk Let's

converting products the true your is talk because ultrasound. point-of-care existing Let's to out way about this new

Heather Getz

Josh's question. add that I to just can to Joe, And

people So mostly Josh, added second -- around half of the we year. in the

these that we're XX% systems. ones and that data XX%, in about and we've place for to invested sales increase points saw and So the force, hospitals the fourth both we when full in related the one our respectively, nice year, direct a the we and they're those around that's bump and quarter on the areas. directly talked of the was And who calling revenue

from and of So each expect at stops see as that. plan year efficient these benefit efficient appropriate. investing. resources areas into where ramped, we XXXX don't to we're the of and ourselves want we and ahead add to We become go get to fully as of our a just look we we And territories and to those progresses, use be capital with wanted and as

Operator

of with The is Cantone line Seamus Oppenheimer. from next the question

Suraj Kalia

me having Suraj. difficulties. technical hear Sorry, Can you Joe, I Heather, all right? was it's

the do road to I Can devices So various comparative goalpost RoHS, of the map you digital now changed about how when would require eventually more looking assessments puristic versus a analog guess between How with And the phase nonlead, lead outcomes? on probability gauge out Joe, know various on and having are some analog, the would be than to you at what's the now you view changed? goalpost rather we of be all can outcomes? the horizon? next think

Joseph DeVivo

of ultrasound retaining if going very the to those Well, we has trying who are are received lobbyists. real else, we why or debate they and The in now, -- numbers, standard what's truthfully, thank piezo But for a be What don't do be If you meets is just a I allow overall I they of are we up the a in an is blowback to device, the low The place. they European purpose do in Suraj. Commission, base for if to that -- question, have standard? believe, actively that only revenue. but RoHS we are said handhelds the -- can the on are it I know political there's fraction exemption and and we look market, overall be know. standards would you to a standard, in equivalents at I and handheld know taking first Europe for ultrasound sets exemptions. there What the X market of off having meet intervene. have then is the

there should. I We ultrasound. are to But to device argument on very to be clinical big that's scientific our they hand-held not is resources quite going -- to the why think good we compatible a piezo-based reason not don't a be good a There's going or have device. why

stays don't won't upheld it I a whatever with would be our I it favor. mean, and If the it will course, standards go in consistent political. honestly, evaluation So if it assessment. on, But of have to see love the that -- through politics. we on, based upon it's I purely it's we'll what believe. read But be stays And on

manufacturing earth regulations, read toxicity. if all if of meet intention If or the types you who disposal proven read who toxicity you to crystals, The raw that legacy threshold the the materials We have read or hold scientifically piezo preserve environment, of to either director. you they not to the use the have do. electronics desire

is on serious we how position. directive. to educating advocating them are really question our the the forward and And look they guess I So

Heather Getz

thing, And Saraj the they a season. do say let's other is too,

market, potentially or absolute a right? of have device be willing remove If you're now? meet an doesn't you're you and that buying to that they a standards you phase-in benefits if are going that to a the the the exemption buy -- if to of do So regardless from if and going the are to Or buy buying I devices, standards think do device removal Butterfly. want meets they to

Suraj Kalia

the points. Fair on survey you iQX. results you prepared -- of mentioned your highlighted Joe, remarks, a in

since X it's Joe, it. admittedly, launched weeks commercially just all you So been have

sales, would we would or have line, how go to of enough the iQX, want this at what per sold quantitatively seeing what we also. qualitatively say in good down in how accounts idea it's about in time, quantify velocity seeing quarters account. whatnot. many give don't Joe I this So real to we are the us thinking point would you now of terms a you systems How into and whether point that visibility are are iQX, many --

Joseph DeVivo

the convert I it quarter, deals good the those to actually will our by very Personally, we end Yes. we cycle. of when much question. Thank how revenue. to give pipeline will there's us many And the have of how takes opportunity a see In able of second be it it noise full obviously full and were a you. quarter grown, a It's time. the beginning, lot also into has believe, a

is iQX we're pricing I $XX.XX. difference think with the it at

still And so had I the it as that, is more is that product mentioned, it's less far are handheld it But point. product, a the of is platforms hospital crystals. in today higher expensive and a with than a piezo hospitals any price of

sales in sale, a those the So how will we there it sale is are. quarter, second long is we -- see hospital through -- how cycles can one a sale robust online hopeful that out. and don't an believe I'm know robust very fairs that that that be as we but

very pipeline, have about lot we're our grow the we excited the lot. before, into a have We've and -- come already a didn't We lot seen deals that seen of of a that. so opportunities pipeline

by But have. we'll the people how I as is numbers, we convert? see more and time quickly midyear, into there's as larger what going to and getting make we're you're so know And larger happen. What they over know, who And have do off to process? sign that you think

Operator

to Instructions] are to Thank turn remarks. DeVivo [Operator no back for further the in over queue. waiting There concluding queue. you. Joe questions There further no questions I'd call in are like

Joseph DeVivo

in now very much, And went now. was a such right accomplishments a joining. we're very We're of and in having 'XX. lot place a about through year where lot -- everybody, we of lot good you for thank And had restructuring. we So a changes of 'XX just excited a

We a leading have team.

amount are our and conversations restructuring, of effort. things significant execution revenue basis opportunity, all a are of have daily We strategy, that not and a a types clear the on really very

product we're a excited about and market our allows a have a wonderful growing that be And XX, future. strategy, a then great We that's great March on team, very us to our map. exciting We're about together. unpack longer-term bit strategy, and to little get a talk to road to more of just a going it's going very more time. We're the going

So to thank all your hope for you Day. Investor and our come I attention, you

So thank you everybody. so much,

Operator

Thank for That you joining. concludes today's call. conference

now your lines. You may disconnect

Butterfly Network (BFLY) 28 Feb 242023 Q4 Earnings call transcript