Q4 2020 Butterfly Network Inc Earnings Call
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Good day, and thank you for standing by welcome.
And two butterfly network for 2020 earnings call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
I ask a question during the session you will need to press star one on your telephone.
Please be advised the today's conference is being recorded if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your first speaker today, Mike Cavanaugh Investor Relations. Thank you. Please go ahead.
Good afternoon, and thank you for joining us today earlier. This afternoon Butterfly network released financial results for the year ended December 31, and 2020 and provided a business update.
The release of currently available on the investors section of the company's website at IR Dot butterfly network Dot com.
Dr. Todd Fruchtman butterfly, and Networks', President and Chief Executive Officer, and Stefanie Fielding butterfly Networks' Chief Financial Officer will host this afternoon's call.
As a reminder, during today's call, we'll be making certain forward looking statements. These statements may include statements regarding among other things expectations with respect of financial results future performance development of products and services potential regulatory approvals and anticipated financial and tax.
And other effects of the business combination on our business and the size and potential growth of current or future markets for our products and services and.
And the potential impact of the COVID-19 pandemic on our business.
These forward looking statements are based on current information assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained and the forward looking statements. These and other risks are described in our filings made with the Securities and Exchange Commission you of course.
Cash and 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 the slide presentation in conjunction with our remarks.
Because there is a short delay between the live telephone audio and the presentation being shown on the webcast for the best experience. Please use either of the webcast for both the audio and video content or if you're dialed in by telephone download the slides from our website and.
The advance them yourselves.
To access the webcast. Please visit the events section and the investors section of our website. Additionally.
Additionally, a replay of the of that will be available following the call.
I would now like to turn the call over to Dr. Refractory.
Thank you, Mike and good afternoon, everyone I'm excited to be hosting and the first earnings call for butterfly network and I am grateful for the opportunity to lead this incredible company and talented team.
On today's call I'll provide an overview of our full year 2020 performance and the momentum we built last year before discussing the longer term outlook for the company.
And Stephanie will review, our 2020 financial results and we will conclude the question and answer session.
With this being my first earnings call as CEO.
And our first such call as a public company I'd like to say a few words about why I was attracted the butterfly, what we do and why we're so excited about it.
For the last 25 years I've been passionate about driving change and innovation and health care I wake up every day wanting to make a difference in People's lives.
And now more than ever changes needed and health care on a global scale and that's why I joined butterfly, because we have the technology and the platform that can enable change of that magnitude.
Our universal handheld point of care of ultrasound solution is powered by a proprietary technological breakthrough ultrasound on it yet.
Butterfly its core chip technology is the first fundamentally new sensor to come to the ultrasound market since the introduction of clinical ultrasound, some 50 years ago and.
Breakthrough of the crystal ceiling limitations of traditional ultrasound and enables the next generation of the imaging products that are affordable portable connected and high performance.
Butterfly has the ability to go to wherever the patient is.
We have paired our handheld probe with cloud based software to create a true imaging solution. That's the.
And that delivers vital information.
And many use cases across multiple care settings.
This information and support higher quality and more timely clinical decision, making and.
And with these clinical workflow improvements.
The nations can achieve better outcomes for the people and their care.
The beauty of butterfly is that this can happen anywhere.
As long as the butterfly handheld is paired with the connected device.
This ubiquity supports our mission to create access to advanced imaging solutions for health care applications, all around the world, helping to democratize health care and support global health equity.
Now, let's review, our 2020 performance.
Last year, we made great progress and getting butterfly into the hands of many different types of health care professionals, bringing our technology to new users and introducing new applications and important steps towards the achievement of our mission and we are excited because as we listen to our customers.
We are seeing many of new use cases and opportunities emerge guiding us as we work to rapidly develop new applications for our technology.
And as a result of our team's great work, we reported a revenue increase of 68% year over year debt.
Demonstrating the excitement and demand for butterfly technology and the marketplace.
This performance is a measure of the positive reception by users to both our initial IQ device as well as the second generation IQ plus device that will be launched in October 2020.
This launch was the significant commercial milestone for our company, creating many improvements we know are important to our customers. The IQ plus is less expensive to produce has a faster frame rate longer battery life smaller probe head and improved interoperability versus the first.
Generation butterfly I Q.
The IQ plus is the result of our many years of R&D and.
And our proprietary chip based technology platform that allows us to rapidly deploy performance enhancements and capabilities into the market.
And as one example, and December just following the launch we further enhanced the IQ plus with the first five plane imaging capability and the portable ultrasound device. This allows our customers to more accurately placed needles dirty and vascular access and regional nerve blocks, but this is the only the begin.
We expect to continue pushing the paradigm of what's possible at the point of care.
And 2020, we established a number of partnerships to help us reliably produce our products and expand customer awareness reach and clinical use cases for our differentiated butterfly technology and October we announced the collaboration with the American College of cardiology or ACC.
To explore ways to transform cardiovascular care.
Butterfly and the ACC and plan to jointly conduct of clinical trials that leverages, our innovative technology for scanning patients with cardiac disease and exploring the benefits of butterfly and new patient care settings that are one of the kind device cancer.
Also in 2020, we expanded our global health partnerships with the number of organizations focused on limited resource settings, we are particularly proud of our work with the Lora health to facilitate a large scale the appointment of butterfly IQ devices, and the tele guidance pilot and Kenya.
By leveraging and butterfly tell of guidance of Sonographer is able to remain are the central hub location and remotely guy of clinicians at the outline of lot of our clinics.
We are making important progress towards breaking new frontiers, and revolutionizing the way of medical imaging is delivered and our mission to advance global health equity.
And as you are aware last month, we completed our business combination with Longview acquisition Corp.
So now butterfly and that work inks class a common stock and warrants trade on the New York Stock Exchange. This has enabled butterfly to become a larger well capitalized company that is primed for global growth and supports our robust investment and innovation.
I cannot be more excited for the longer term outlook for butterfly, because we believe we have of groundbreaking solution and the team who knows how to realize its value.
We know that great technologies don't judge made great businesses on their own great technologies made great businesses. When they are enabled through powerful scalable business model that create and capture customer value.
It is still fair to say, we are early and our journey.
And a lot of this happened in the past eight weeks with butterfly going public and mid February me, joining the company as CEO a few weeks before that and more recently the exciting addition of Stacy Pugh as Chief commercial officer.
Simultaneously, we have enhanced our capable and experienced board of directors with our latest edition of Doctor Elazar Edelman Professor of medical Engineering, and science and M. I T.
Dr. Rather than adds further clinical and technical dimension to our already powerful board of directors.
Given this build and both of the board and leadership team, we are still defining our longer term commercial outlets for butterfly and the most appropriate metrics to inform our progress towards those goals.
My near term goals and that of butterfly are foundational and we look forward to reported and our progress and they come and months I have five goals my.
My first goal is to broaden and strengthen our human capital, which will complement our technology and clinical teams and to enhance our innovation capability with additional commercial regulatory and operational and developmental of horsepower.
The second is to broaden our partnerships with clinical leaders and unleash the full potential of butterfly.
The third is to align with the payer community, which we believe as well and sensitive to drive adoption of our products to improve both outcomes and cost of care.
Fourth is the commercial partner across care settings, and specialty and geography, which we expect will accelerate adoption of butterfly to deliver patient centric value based health care.
And my final goal is to continue to invest and our industry leading innovation.
We are only beginning to harness what is possible to ensure optimized implementation and coordination and health care.
Butterfly has an important role to play here.
Success, along these five foundational goals team clinical partnerships payer of alignment and commercial expansion and the innovation, we believe will drive our societal and impact our commercial growth and our ability to improve wellness one patient at a time.
Our work is not only urgent it is timely, especially as we emerge from the pandemic there of rapid shifts and where and how care is being delivered and an increasing focus on value based care outcomes and total cost of care.
We are fortunate to be delivering technology to a global marketplace that we believe is ready and anxious to receive it.
Day point of care of ultrasound is incorporated into the curriculum of more than two thirds of the U S. Medical schools. Additionally, nearly all professional societies across clinical specialties now have of policy regarding point of care of ultrasound and are developing standards.
The strengthened the clinical foundation on which butterfly operates and supports our advanced capabilities that enable meaningful utilization and value realization and a variety of settings.
And its core our strategy is to drive increased utilization and adoption of our solution and this means getting the IQ plus into the hands of the people who can benefit from it and a way that creates immediate and long lasting value. It starts with getting the hardware and a customer's hand and ample.
Suffice through our software that creates and engaging user experience and easily integrate with existing systems, providing additional value when using butterfly and.
As we broaden our footprint.
We will seek to expand the use cases for ultrasound information and thereby increase applications and use and care settings that haven't traditionally been able to benefit from it. We expect our technology will continue to make ultrasound more accessible to clinicians throughout the world and provide better information to make clinical.
Decisions earlier in the patient's treatment and the hospital and the E R.
And medical transport on the weight of the hospital and the clinic and ultimately subject to the appropriate regulatory authorization and the home and this is an opportunity and both developed and developing and health care systems.
The decision, making at the point of care and many settings can be a game changer for improving the patient's care with the potential to help revolutionize and simplified care delivery, the dressing delays and access to clinical information, reducing unnecessary costs and improving patient satisfaction.
The butterfly solution is designed to address key problems and modern health care and it helps to get treatment on the right path earlier, because more than two thirds of diagnostic dilemmas can be answered with simple imaging in the past, we used a stethoscope and listened with butterfly, we can see and know.
I look forward to sharing more information with you on our long term outlook as the year of Progressive I will now turn the call over to Stephanie for a review of our financial results Stephanie.
Thank you Todd.
Total revenue for the full year, 2020 was $46 3 million, which as Todd noted earlier is the 68 per cent year over year increase from $27 6.002 million 19.
Product revenue for the full year, 2020, or $38 3 million, an increase of 53% from $25 1.002 million 19.
Units for sale, which is the primary driver of product revenue were 20208 in 2020, compared with 12941, and 2019, which is an increase of 56%, reflecting continued excitement and demand and the market international expansion and a positive reception for our new probe Jackie.
Which was introduced in October 2020.
Subscription revenues were $7 9.002 million 20, growing 216% from $2 5.002 million 19.
Our subscription mix, which we define as the percentage of our total revenue recognized in a reporting period and is subscription base was $17 one per cent in 2020 compared with $9 one per cent and 2019 and.
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Subscription revenues increased with device sales as well as with renewables on prior of yourselves.
Turning to expenses.
Cost of revenue for 2020 was $107 5 million and increase of 122 per cent from $48 5.002 million 19.
Cost of product revenues was $106 4 million, a 122% increase from $47 9.002 million 19, and the cost of subscription revenue was $1 1 million, increasing 72 per cent from 621000 and 2019.
The increase and cost of revenue included nonrecurring charges totaling $62 $7 million this year.
As we shifted production from the IQ to the IQ plus device and the second half of 2020, we renegotiated some inventory commitments with certain third party vendors, recognizing a $7 million loss and purchase commitments and a $2 $6 million losses on inventory write downs.
Additionally, in the third quarter, we commence production with a long term strategic development partner TSMC.
The economics of this partnership for negotiated early and the development of a butterfly I coupons and the successful production shaft represents a tremendous accomplishment for the teams of both butterfly and TSMC.
Current with this transition and the generation of revenue forecast share. It at the time of our Longview merger announcement in November we undertook and inventory analysis.
This review process resulted in the establishment of $53 $1 million noncash inventory reserve against for purchase commitments.
We believe our inventory position fairly represents a reasonable range of sales outcomes consistent with our merger forecast.
And provides butterfly with the ability to meet and material excess demand didn't materialize for future periods.
Importantly, and an environment, where there are widespread chip shortages, we are pleased to enjoy clear supply lines.
Inclusive of these one time charges reported gross profit for 2020 was negative $61 2 million compared to 2019 gross profit of negative $20 9 million.
Operating expenses and 2020 for $100 4 million, an increase of $19 million or 23 per cent compared to 2019 the.
Increase was primarily due to costs incurred and growing the business and completing our stock business combination.
<unk> increased spending and research and development.
And marketing and general and administrative costs.
I would note that we were deliberately conservative with operational spending during the year conserving cash as we work to secure longer term financing.
Loss from operations was 161 6 million, a 58% increase from $102 3.002 million 19, well net loss for 2020 was $162 7 million as compared to a net loss of $99 7 million during 2019.
Adjusted EBITDA was negative $85 2 million and 2020 compared with negative $86 million and 2019 adjusted.
Adjusted EBITDA reconciliation and calculation to GAAP net loss can be found in today's press release and filings moving.
Moving to the balance sheet.
Throughout much of 2020, we focus on having adequate capital resources and liquidity to support the business over the near and long term.
As of December 31, cash and cash equivalents for $60 2 million.
Although what occurred subsequent to the end of 2020 as you know our balance sheet was significantly strengthened following the business combination with Longview acquisition Corp.
On February 12th upon the closing of the business combination with Longview, we added over $540 million of cash to the balance sheet.
We believe butterfly is well capitalized at this point and time to support the next stage of development and we are in a position to invest aggressively to expand butterfly as head count adoption and utility.
I would now like to turn the call back over to Todd.
Thank you Stephanie and thank you all for participating and butterflies first earnings call as a public company. We hope you have come away with a better understanding of our company.
For the accomplishment of our team and 2020 and excitement about the opportunity for butterfly network.
We have the foundation in place for the next stage of our growth and evolution supported by tailwind for our sector as well as broader health care and societal trends.
We believe that our technology is unique.
Disruptive and able to drive a fundamental change and the way health care of his practice by delivery and the information necessary to make more informed clinical decisions earlier.
Truly affordable and accessible point of care of ultrasound. The information can provide real value to health care providers, and we believe that butterfly solution will result, and many new use cases for ultrasound information unlimited by physical location.
Our organization is vibrant and growing and in an excellent position for this stage of butterfly life as the public company.
Look forward to our next update with you and I will now turn the call over for questions.
As a reminder to ask a question you will need to press star one on your telephone.
You withdraw your question press the pound key please standby, while we compile the Q&A roster.
Your first question comes from Matt Taylor from UBS.
Matt Taylor your line is open.
Sorry, I was on mute.
Thanks for taking the question I was hoping you could give us some perspective on the plus launch and how long youre going to be able to kind of ride that new product launch for and is this the kind of thing we should expect from you and the future of kind of a regular cadence of new new hand pieces of new features and and add ons and maybe you could talk a little bit about that.
Yeah.
So Matt Thanks, Thanks for the question so.
Well one of the things one of the core fundamentals that we have and having ultrasound on a chip is our ability to bring new features and benefits to the product. So.
You can think about the cadence that we have introducing new technology over the appropriate period.
And that we would oh for a lifecycle of.
You know every couple of years or so right. We would do major technology upgrades and then within those time periods, and we wouldn't be able to add functionality and capability to it and that's really the benefit that we have of our fundamental platform of having an.
Ultrasound.
Off of the semiconductor based technology.
Technology and so that's really I think the cadence that you would have and you've seen that with IQ plus so we were able to bring the IQ plus out we were out of it we added some benefits and features to it you saw us add by playing and which was a really.
And the.
Nice addition to the product and gave more capabilities to our users and as we work closely with our users and understand what problems the customers have and we aligned to them and that's really going to be the approach to our roadmap and its really the advantage of our technology platform.
Great. Thanks, Thanks for that.
And I just wanted to ask the follow up on the the ACC partnership. The study that you talked about it sounds pretty exciting can you give us some color on just the size of that the enrollment and what some of the and points or anything to help us understand that a little bit better.
The the ATT and collaborations and its early stages, and we're and the planning.
And we're in the planning part of that with them right now so.
And as that develops we will inform you.
And as the study materializes and one of the areas that we're focusing on is gonna be and congestive heart failure, which I think is you know.
A N of.
A large chronic condition and if you see now having point of care ultrasound and starting to be used and some of the.
More chronic conditions and different care settings, and the opportunity becomes really exciting to have an impact.
And how we start managing cash how do we start managing the health of broad populations of people and a variety of care settings and those of the types of things that we're looking at and that's the type of studies that we're looking at.
And right now to create with ATC.
Great. Thank you.
Your next question comes from Josh Jennings from Cowen.
Hi, good afternoon, congratulations on the <unk>.
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And.
I wanted to just ask you about your go to market strategies here and then you guys are talking about rapidly scaling up and.
And.
And anything you can provide in terms of how youre thinking of building out and be the enterprise sales force.
And emphasizing that channel versus the historic ecommerce channel would be helpful.
And so thanks for the question.
Absolutely.
One of the things in the coming and right now.
As a new CEO and taking a look at the opportunities that we have as butterfly.
The challenge of all the opportunities that we have and our business model and the enterprises and area of that.
You know, we're we're definitely excited about.
And there's strong demand and enterprise right now for butterfly, not only as the unique ultrasound device, but for our total solution to our.
And our sales force expansion is on track there where you continue.
Hugh.
And we're continuing to drive that expansion.
To help us take advantage of the opportunity and enterprise. We're focused also on customer success to help ease the ability and deployment of the solution and you know we're lining up the enterprise. So we see a lot of opportunity.
And the enterprise channel.
Not just for us.
All of point of care of ultrasound, but also of the ability to.
And the ability to deploy our butterfly solution across the enterprise and.
And get maximum value out of the information.
Excellent thanks, and thanks for that and those details.
And I hate to ask this question I realize you just launch butterfly plus for you my checks have with some of them.
Adopters and I've been very positive around the image quality and I was just curious about the road map and.
And where you go from here and just strictly thinking about and.
Image quality and where it sits today and where it can go and is it of essential for butterfly to improve on image quality from here.
You are having a very strong early adoption trends of the last two years.
Just wanted to bounce that question all for you and then just sorry to sneak in one last one but just wanted to and published studies coming about this day.
The global shifts shortage and.
And you have a clear line of supply, but anything you can share there and as well.
And where you can butterfly sits.
And the minutes of the school, which absorbs thanks, so much for taking the question.
So I'll take the first of all and all that stuff and you take the second one.
One of the advantages of our technology is that we can continue to improve our capabilities on it so not only can we enhance usability and the capabilities of the device we can enhance the performance of the device.
As for April and the technology semiconductor based technology platform. So we absolutely with time will continue to enhance our image capabilities and our image quality and right now I think we have.
A very solid device that allows for the binary decision often oftentimes the binary decision, making and that is required at point of care and to enable that decision, making and so if you think about point of care right and it starts to move the decision, making earlier with where the patient is.
And so point of care ultrasound enables you to do that I think where we are right now with our technology.
More than adequately allows somebody to do that and we have the ability to increase our image quality and our capabilities on a on a fairly regular cadence here and that is the advantage of semiconductor based technology, along with continuing to improve our cost basis, which obviously becomes important and the overall economics of it.
Sure and then.
And I'll, let you take the second one.
Sure. Thanks for the question, Josh and as you know we have a very strong partnership with TSMC and that's both and engineering partnership and it's been going for the last.
Yeah, and we look to develop the IQ price as well as the manufacturing partnership as part of that we do have a committed supply agreement with them and so we feel very confident both and their ability to deliver the semiconductor wafers that we need for our current production as well as to the help us meet and additional demand and she didn't materialize and.
We think this partnership is a competitive strength and N V and.
And the availability of wafers and the niche kind of global shortage of just one example of the value of that partnership.
Yeah.
Excellent. Thank you.
And that's all the time, we have allotted for Q&A today, I will turn the call back over to Dr. Todd for Kimi for closing remarks.
This is one of the thank all of you for participating and butterfly network's first ever earnings call.
Can't tell you how excited we are about the future of of the company our technology and the solution and we really do look for it to embarking on this exciting journey with all of you and thank you again for your time today.
This concludes today's conference call. Thank you for participating you may now disconnect.
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