Good morning, and welcome to the Butterfly Network Fourth Quarter and Full Year 2024 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Heather Getz, Chief Financial and Operations Officer of Butterfly. Please go ahead.

Good morning, and thank you for joining us. Earlier today, Butterfly released financial results for fourth quarter ended December 31, 2024, 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 Investors section of the company's website at ir.butterflynetwork.com. I, Heather Getz, Chief Financial and Operations Officer of Butterfly, alongside Joseph DeVivo, Butterfly's Chairman 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, and the size and potential growth of current or future markets of 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 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 audio and the presentation being shown. On the same page, you'll also be able to access the webcast live and as a replay once the call has been completed. I would now like to turn the call over to Joe. Joe?

So thanks, Heather, and thank you all for joining us this morning. I'm very pleased to report that Butterfly's performing well in all areas of our business. In March of 2024, at our Investor Day, we laid-out our strategic five year-plan, outlining growth initiatives for our core and new businesses. I'm pleased to say that we've completed the first year of that five-year plan, and we're right on-track. In 2024, we delivered $82.1 million in revenue, which represented 25% top-line growth, while improving adjusted EBITDA by 42% to a loss of $38.9 million. What's just as important is we've built the foundations for key initiatives that we believe are essential to reach our overall goals. Butterfly is the leader in point of care ultrasound devices, powered by our proprietary semiconductor technology. Our digital journey that we're on is an exciting exponential growth opportunity to bring digital capabilities to the lowest cost and most accessible medical image modality ultrasound. Our vision is that every doctor and nurse in the world will have a personal butterfly imaging device, while we bring wearable ultrasound to qualifying chronic care patients who need more frequent real time care. They will use the most advanced AI tools to locate and identify abnormalities with a secure location for their data throughout their care journey. Butterfly's powerful digital ecosystem will increase access to care, help lower cost and empower all people to understand the care they need earlier. The building blocks of this opportunity are being set now, and several initiatives are in development that I'm excited to share with you later in '25. In 2024, it was a great year for Butterfly. We got our Mojo Back. The launch of iQ3 was nothing less than a resounding commercial success. iQ3 beat out 29 other products from healthcare…

Thank you. As Joe noted, in 2024, we accomplished everything we set out to do at the Investor Day in March of 2024. The initiatives we laid-out have been driving Butterflies' growth and will continue to do so in the future. So let's dig into the results. We saw continued strength in the fourth quarter of 2024 with revenue of $22.4 million the highest quarterly result in the company's history. This represents a 35% increase versus the prior year period. The increase was driven by both price and volume across all channels and was positively impacted by continued penetration of the iQ3 and global distribution. Breaking things down between the U.S. and international channels, during the fourth quarter, U.S. revenue was $14.5 million which was 32% higher than the prior year, driven by higher average selling price and strong demand. Total international revenue increased 19% over the prior year period to $5.5 million driven by higher probe volume. Breaking our revenue down between product and software and other services, product revenue was $14.7 million, an increase of 45% versus the fourth quarter of 2023. This increase was driven by higher average selling price and volume across all channels. Software and other services revenue was $7.6 million in the fourth quarter, up 20% versus the prior year period. Software and other services mix was 34% of revenue decreasing by approximately four percentage points versus Q4 2023. This decrease can be attributed to product revenue growth outpacing software revenue with the launch of our iQ3 in early '24, as well as our geographic expansion. Our total annual recurring revenue, which is reported as part of software and other services, grew slightly versus the prior year period. This was led by an increase in our enterprise software subscription ARR that grew 8%. When…

Thanks, Heather. Today, Butterfly is in complete control of our destiny. We have revenue momentum, a pipeline to empower growth for many years to come, a successful fundraise allowing us to continue to invest in our growth initiatives, as well as a runway to get the cash flow positive with our current balance sheet. Our core business growth will be powered by our efforts to increase health system opportunities, drive the one probe per student model in medical schools and continue global distribution to both iQ+ and iQ3. In our new business areas, we expect to progress more active opportunities and convert our HomeCare business from a pilot to commercial revenue. This is consistent with the road map that we laid out at last year's Investor Day. Butterfly has ended our first era, which had us fixating on image equivalency to other piezo based handheld probes. So now we're not looking back. We're looking forward to not just being equivalent, but surpassing the market to deliver a new digital experience only Butterfly can offer. While Butterfly is in the POCUS category, we are differentiated as the only company with a true mobility solution. Most POCUS devices are just one step extensions away from a cart workflow in a hospital. As we see it, Butterfly today is the only mobile solution because it is a single personal imaging device for every doctor, nurse and qualified chronic care patient in the world, powered by a plethora of new AI tools, cloud connectivity and processing, seamless integration with hospital systems, while working completely independent of them in the most remote places in the world. We will go anywhere a doctor, nurse or patient braves to go and will carry the best experience for them. So to understand this future, you don't need to look too far away. History does repeat itself, and the power of digital over analog technology has been proven time and again. Just as digital cameras replace traditional film, chip based ultrasound is set to dramatically expand the medical imaging world, and Butterfly is the platform to lead this change. Everything we do going forward will be to increase imaging power even further, make in hospital workflows easier, miniaturize the device to drive mobility further, make the device smarter and easier to use with AI tools and connected to a very powerful and safe cloud ecosystem. I look forward to updating you throughout the year on new developments and our accomplishments as there are many great things brewing. So with that operator, please open it up for questions.

[Operator Instructions] The first question comes from Josh Jennings with TD Cowen.

Hi, good morning, Joe and Heather. Thanks for taking the questions. It's been a remarkable path of progress since the Investor Day last year. And at that event, you laid-out kind of a long range target of $500 million in revenue. I mean, I think you already answered this question in your presentation here this morning, but would you love to just kind of get an update just on your confidence level and where you stand today almost one year out from that big investment event in 2024 in terms of the progress and confidence in getting to that $500 million revenue base in the out years?

Well, thank you, Josh. We put a plan together and the plan certainly wasn't guidance, but it was the shape of how we're organizing our investments and where we think our revenue can come. And as I said in the beginning of my prepared comments, we had a great year and we're right on plan. I'm really bullish about our growth initiatives. I'm bullish about the continuation of the growth rate of our core business and that's kind of where we're guiding towards right now. I'm also really bullish on the two areas that we've identified that will deliver meaningful growth in the future. I'm very bullish on Octiv. I look forward to letting you know about the new partners that we just signed and the pipeline is just increasing and it's not only increasing, but the names are getting bigger and bigger and it's really cool. And so we have our best people in that business, couple of our executives that we really admire and they're doing a hell of a job building out that business. And so I think first of all, Octiv as we get to the second half of the year, we're probably going to see some meaningful revenue and we may be forced to start pulling it out. Second, the HomeCare business, man, it is just such a delight because we're eating our own dog food. We're using -- we're getting our devices used with our training, with our software, and then when our wrapped around services to help, first time ultrasound users scan. And they're scanning in, one of the highest cost use cases in healthcare, which is readmissions for congestive heart failure patients. These patients are a revolving door from skilled nursing facility into a hospital and back, and it is a substantial…

I appreciate that Joe. And wanted to ask about the HomeCare channel as well. I mean, I think you provided a lot of intel here in that last answer and during your prepared remarks. But is there just maybe help us think through the steps required to go from pilot to a revenue generating franchise and any timelines you can share? I know it's you haven't baked any Care revenues into 2025 guidance, but maybe just helping us understand just the next steps and what it will take to turn that home care channel to a revenue generating franchise?

Well, the beautiful part about it is when we were initially looking at services, we thought we'd be hiring our own technicians, our own nurse practitioners. And then we'd be sending them into the home or sending them in the facilities and because we wanted to force the model. We wanted to show this could be done. And that, and if you were going to hire people that would take cost, that would take time, that would take learning curve, and especially, of course, the time to onboard those people. While our partner, didn't want, people just walking in and out of their facility, our partner was, like, train our people. And so, we've been able you know, by eating your own dog food, you realize how good your tools are. So, we and also your people. We have some of the best, trainers in ultrasound and people who understand our technology. And every time they encounter, our customers and they encounter, as someone who wishes to learn, it's just such a delightful experience because they're so incredible. So basically to train someone up was very quick, and then they have to go through a protocol with ScanLab, so they have to practice and complete this and complete that. And, and then once they get there, it's really the training of the on-site personnel, which is the time to execution and say that's a 90-day process. But everything else, for Butterfly is virtual. And that's the beautiful part about the scalability is that you have training of the on-site teams, but then you have this amazing scalability because we're using telemedicine, we're using our Compass software, we're using remote then follow-up, et cetera. And so it's a highly, highly scalable model, and we think we can take on, thousands of…

Excellent. And just one last follow-up on that home channel. We saw the prototype for wearable, I think at the Investor Day last year and we talked earlier this year about that pipeline development effort, but maybe just give us an update on where that program stands and when you may see approval and then utilization in the field. Thanks for taking all the questions.

No problem, Josh. So this is all progress. If we if we came out with a wearable today, there wouldn't be a market for it, because what we have to do is build the use case first. And then as the use case develops, then you build, the technology to meet the use case. And that's as we had laid-out, in our strategy last year is that this is a multimodal approach. So the first step is to create the use case and the demand, in the Home with nurses, teaching them how to do this type of ultrasound. And then once we get this and once this now has some velocity, then the second phase is how do you automate it? How do you do it where now instead of having to go and just do the scan, you can now place the wearable? So we are actively in development of a wearable. It is something that is not far away, but we're also not rushing it because we're developing the market. And so as we succeed in this HomeCare business and as we now convert it into commercial and we're active, the next phase after that would then be to start easing in the wearable into that use case. And that's how we're building a business. It's not building the business is not about launching just launching a device. It's about preparing the market, preparing the users, preparing the need for the opportunity and then moving forward with that wearable. So everything is like literally right on plan and actually the results that are coming back are much better than we expected.

The next question comes from Benjamin Haynor with Lake Street Capital.

Good morning, guys. Thanks for taking the questions. I appreciate all the commentary that you had so far on the HomeCare opportunity. But I was wondering if you could share maybe a little bit more on maybe how many residents were involved in these long-term care facilities, how many days they've been kind of followed, if you will how many readmissions might you have anticipated, things of that nature, anything else that you can provide there?

Yeah. So, we trained, 18 nurses, at two skilled nursing facilities in Wisconsin. That's so far. And then we've done the initial training. We've done a scan lab follow-up training. And then what's also a wonderful part of this virtual service is as, our cardiologists are reading the scans, they're not just diagnosing the patient, but they're also letting the scanner, know, hey, what they could have done better. Hey, you got a little bit too much of this. So this is a constant process of evolution. So first of all, that's the scale so far with the people that we've trained, and, we're very pleased with that progress. Now as far as I don't have data to share with you as far as number of like absolute number of patients, et cetera. We've now started the pilot is designed for 200 patients, and they are now scanning all kinds of patients. And we have, of course, early anecdotal information like the one case I shared. But so far of all the patients that have scanned, no one has been readmitted, but it's a very small sample size so far.

Sure. Got it. And then, congrats on the capital raise by the way. And I was wondering, you've mentioned some of the software things that you're working on, any hardware kind of developments that you might intend to accelerate it, didn't necessarily sound like it. And then if we could give an update on kind of where you're at on the cart based iQ station?

Sure. So, consistent with the presentation that we made at JPMorgan a few weeks ago, we have, we first of all are active with, the P5 chip. We showed the image on that, and that P5 chip is really, the essence of the next-generation. We have some hardware, we have some hardware probes and some things that we're working on for the next-generation. And it might not just be as simple as the next probe. We are working on some things that are a little different and would continue to build the market for us. And we're also working on absolutely, as you said, the iQ station, which would really start moving us more into the lower-end cart business. So those are all things that as there's nothing that's changed since our JPMorgan presentation. I think the thing that has changed is by bringing in the money, we can just keep doing what we're doing. If we didn't bring in the additional capital, we'd be in a mode of continued, let's say, cost reduction and it would have extended into opportunity reduction because we wouldn't be able to fund the programs that we're currently funding. So we're not in a mode of saying, okay, now that we have the money, we're going to fund all these additional things because we're very intent on solid cash management. We're very intent on making -- maintaining and getting leverage in our operation because we want to see our revenue grow and we want to contain our costs. So we march along that path towards cash flow independence. But if we didn't bring the capital in, we'd be cutting programs like the ones or we'd be pushing off or choosing one over the other. And now we don't have to do that. So all those exciting things around the next-generation of semiconductor, as well as, the cart based focus as well as the wearable. We're going to go upstream into the hospital and we're going to go downstream into the home. We're going to expand the market opportunity of ultrasound and we're going to now, as I mentioned, this is a new era for us. We've been playing catch-up in the beginning. We've been trying to create our camera that would show that it's as good as film. Now it says, our wearables as good as anybody's. People might like this one feature of one company, one feature of another, but our image quality is there with anybody's. And so now we're just focused on how do we improve the experience for the physician, the nurses, and for the patient? How do we now become even better and change the entire world, iPhone-esque. How do we make this a universal device that captures data easily that that lives with doctors, nurses, and patients and allows us to capture a massive market opportunity? And that's where we're going.

It makes sense. And I'll show the color on that. And lastly for me, just maybe a point of clarification on what the revenue guidance includes. That does not include any new revenue streams. It doesn't include Octiv, Butterfly Garden, HomeCare, anything like that. It's just traditional iQ+, iQ3 and software and services that are existing, correct?

Right. So it includes current Octiv contracts. It does not include any new Octiv contracts or home care or additional add in businesses. So just that clarification on Octiv. So for example, we have Forest Neurotech. That's already in our in our numbers. That's in our guidance, but a new a new partner that we might sign would not be in there

So the ones that were detailed from the press release and earlier in the prepared remarks, those are or are not included?

The ones from 2024 are included. Any new ones signed in 2025 are not.

Got it. Excellent. Well, congrats on all the progress status and thanks for taking the questions.

The next question comes from Suraj Kalia with Oppenheimer & Company.

Joe, couple of questions from my side and I'll pose them upfront. So in your FY 2025 guide, how should we think about the same-store new store dynamic as iQ3 contribution picks up? And the second part or the second question, Joe, you just made comments about your image quality as good as anyone's. Help us understand what is the most objective evidence that we should take as interpreting the image quality is as good as anyone? Thank you for taking my question.

Great. So the same-store, new store, as we can -- Heather can talk more about the guide specifically. But we are now -- we are anniversarying the first year of selling iQ3 where there's a lot of upgrades, there's a lot of new business, etcetera. The market's so big and the market's growing, we see a constant new business channel. Our eComm channel is a marvelous way to engage customers and we're seeing continued business. But also, we've unlocked the hospital channel. And the hospital channel is a channel where we were not as, as present just because of what we had just mentioned. We're seen as more of a wellness or a personal device, but now getting in and establishing ourselves in the intensive care units, establishing ourselves in the emergency rooms, establishing ourselves in anesthesiology and cardiology, these are now places that are opening opportunities for us. And that helps us now with our enterprise software where we are now going into hospitals and selling a full bundle. And we feel that we're much more capable today, with that full product offering than we were in the past. Regarding image quality, when I talk about image quality, I'm talking about image quality of handheld devices. So other devices out there, whether it's GE or Philips or Clarus or other devices, these are devices that benefit from 40 years of development of piezoelectric crystals and, of course, are the ones that are people that are the most comfortable with. Historically, our Version 2 is a great product, a great universal product, and the only all in probe in the market, but it was not seen especially in cardiac imaging and others that we had a level of equivalence. And imaging is, you when you talk about empirical evidence, imaging…

Was there a follow-up, Suraj?

No. Thank you. Got it.

This concludes our question-and-answer session. I would like to turn the conference back over to Joseph DeVivo for any closing remarks.

So everyone, thank you so much for being with us. We like this Friday morning format to give our analysts time to be able to digest our information and not have to conflict with all the stuff in the -- like last night and whatnot. So I hope this works for you. We're very pleased about our progress. We're excited about '25. We're excited about our core business and we're also excited about all the new initiatives that we have. We appreciate the support with this most recent fundraise and we are now just excited to continue all of the different things that we're working on. So thank you everyone for the support and look forward to giving you more updates in the future. Thanks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.