Q4 2021 Butterfly Network Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by my name is Brent and I will be your conference operator today.
At this time I would like to welcome everyone to the Butterfly network Q4, 2021 earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Like to ask a question at that time simply press star followed by the number one on your telephone keypad.
Thank you.
Good morning, and thank you for joining us today earlier this morning, but as far as in the financial results for the fourth quarter and the year ended December 31, 2021, and provided a business update.
The release and earnings presentation, which include a reconciliation of non-GAAP financial measures.
Parents, you're the most applicable GAAP measures are currently available on the investors section of the company's website.
The R chop butterfly network Dot com.
Doctor tie procurement butterfly, President and Chief Executive Officer.
Stephanie Fielding butterflies, Chief financial Officer will host this morning's call.
During today's call, we will be making certain forward looking statements.
These statements May include statements regarding among other things.
Expectations with respect to financial results.
Future performance development of products and services.
Potential regulatory approval and.
Dissipated financial impacts and other effects.
It's a combination of business.
The size and potential growth of current or future markets for our products and services.
Impact of the COVID-19 pandemic on our business.
Each forward looking statements are based on current information assumptions.
Spectation, but are subject to change and involve a number of risks and uncertainties 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.
During this call we will refer to non-GAAP financial measures, including adjusted gross margin.
Adjusted gross profit and adjusted EBITDA.
Key financial measures are not prepared in accordance with U S generally accepted accounting principles or GAAP.
non-GAAP financial measures are not intended to be considered in isolation or substitute results prepared in accordance with GAAP.
Definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of why we present these non-GAAP financial measures.
Who did in today's press release and at the end of the slide presentation.
As a reminder, this call is being webcast live and recorded and we will be roughly flat.
Our presentation in conjunction with our remarks.
Because there was a short delay between the live telephone audio and the presentation being shown on the webcast for the bank experienced please you either go about possible for audio and video content.
Or if you have dialed in by telephone download the slides from our website and adopt them yourselves.
To access the webcast. Please visit the events section in the investors section from website and a replay of the event will be available following the call.
I would now like to turn the call over to talk to me.
Thank you Agnes and good morning, everyone. We appreciate your taking the time to join us today.
I'm excited to share with you the progress we've made in the fourth quarter and throughout 2021.
I will give you an overview of our performance and Stephanie will walk through the details of our financial results.
We will end the call by taking your questions.
I'd like to start by highlighting that it's been one year since butterfly became a public company.
For milestone and the opportunity to reflect on the culmination of hard work and progress that art.
<unk> has made.
The past year has been one of evolution and how we operate our company.
Innovate our solution and bring value into the health care ecosystem.
In addition to sharing our fourth quarter and full year 2021 financial results today I'd also like to share how encouraged I personally am by the opportunities in our markets and by the strength in foundations of our company.
I'm also grateful to be surrounded by a group of talented individuals and leaders across technology clinical practice commercial engagement and operational functions, who are unified by our shared mission to transform care with butterfly.
As I look back on 2021, and then head into 2022, I am more confident than ever in our team's ability to execute across our priorities towards the realization of our vision.
As you will hear in our dialog today, we have gained incremental clarity traction and insight into the strategic pathways to accelerate our clinical and commercial progress.
Clinical awareness is building around butterfly in the market in the past three years, there have been more clinical publications about butterfly, then all of the handhelds competitors combined.
However, butterfly is about so much more than just the device. It is about the practical application of ultrasound information into the clinical workflow and the value that this information creates across the care continuum.
Whether unlocking new care models or enhancing existing ones are team is passionately innovating to bring these valuable insights to all patients worldwide.
This is our mission one we can deliver by making our innovative solution.
Both clinical tool that is <unk>.
As ubiquitous as the status quo.
We believe this is possible because butterfly is not just about ultrasounds.
Fly is it transformational digital health company.
It's our innovative device that allows for the acquisition of information, it's our software that makes the information usable.
And it's the availability of this real time information that we enable at the bedside and in the workflow across care settings anywhere that leads to better decision, making and ultimately can lead to a new standard of care.
We're innovating with a focus on information transformation at scale.
Cause with butterfly physicians now have a tool that can help them practice better medicine that is why butterfly is different.
We are on a journey to change the paradigm of health care by bringing affordable easy to use high quality imaging to the pockets of clinicians everywhere to inform care decisions anywhere.
It's our unique combination of attributes the butterfly IQ plus our patented ultrasound on chip technology.
Education tools, our approach to AI, our enterprise workflow capabilities with compas, our services and the way we connect these elements that enables us to move health care forward on the path from a clinical stage of deducing and confirming to one of informing.
And knowing.
This is who we are and this is why butterfly is well positioned to help transform health care.
The globe.
With that context.
I'd like to now turn to our performance and business updates.
In the fourth quarter, we continued to see momentum in our business. Despite the ongoing challenges in the health care system and the external macroeconomic environment, we executed against key initiatives to support ongoing growth and innovation.
Revenue grew 21% year over year for the fourth quarter and 35% year over year for the full year 2021.
We also strengthened our foundations.
We evolved our business model and go to market strategy.
Added key leadership to the executive team and board of Directors. We grew our employee base by 274 people, we expanded and strengthened our corporate infrastructure.
And we spent time learning in the market and shaping our product roadmap to help ensure alignment and novel innovation.
Alignment with the current and future needs of hospitals and health systems and novel innovation to help Usher in a new standard of care everywhere.
On our business model and go to market strategy, we now have four strategic areas of focus.
Hospitals and health systems International markets.
Home based care.
And select adjacent markets.
Each of these pillars is grounded in three common core principles easy <unk>.
Everywhere and economical.
D. C is about redefining point of care ultrasound to make it effortless and adoptable at scale.
This is our journey to enable users to do more with less effort.
We plan to accomplish this with education, AI and additional technology that advances ease of views and use our confidence.
Today, we offer continual introduction of new just in time training clubs teller guidance and quality assurance tools and regular rollout of robust technical and clinical courses found within butterfly Academy, our learning management system.
Additionally, we are thoughtfully leveraging AI across our network to incorporate insights from images scanned and associated practitioner behavior and clinical path into our workflows.
Our commitment to easy is about instilling butterfly as a core clinical tool for novices and experts alike. One that can be used by any practitioner anywhere to make bedside information accessible without the need for extensive training.
As an example of this butterfly was recently spotlighted in the report and the National Library of Medicine. According to the report with limited train paramedics were able to use butterfly to obtain and interpret cardiac images from patients during the out of hospital cardiac arrest.
This study is meaningful for a few reasons one butterfly was used effectively with little training in fact, 86% of the images were deemed adequate.
88% were deemed accurate and in nearly one third of the cases. These images were use to alter care management.
Two butterfly was seamlessly incorporated into the workflow and was used without disrupting the resuscitation protocol.
Despite the high stress backdrop of cardiac arrest paramedics were able to effectively use butterfly and do so without disruption or distraction from the other many critical task they needed the carryout.
This study also illustrates the tremendous potential for butterfly when used in clinical settings, where ultrasound is not traditionally utilized and we're ultrasound expertise is not traditionally found yet by adding butterfly a practitioner can gain access to valuable clinical.
Sites and deliver a better more effective care.
Everywhere, it's driven by this practical application of ultrasound information that butterfly enables through its portability usability and affordability that we believe can make this a clinical tool as ubiquitous as the staff the scope.
We strive to have a butterfly and every practitioner pocket to be used on every patient every time.
Finally, our 30 centers on reinforcing butterflies economic values.
This is not just about the affordability of our solution, but also centers around demonstrating the value it delivers.
Health economic evidence that our system delivers better more informed lower cost care.
To do this we are strengthening our portfolio of proof points that show the impact of butterfly at the point of care at scale and across the full spectrum of care.
Reflective of such value butterfly is gaining adoption as a meaningful procedural assistance tool and emergency medical services surgery nursing and hospital in the home.
Examples of this include nurses using butterfly for bladder volume calculation.
And to ease IV access anesthesiologists guiding central line placement and injections and care teams investigating patient at home self scanning to.
To monitor things like Covid, 19, where do inform better dialysis treatment outside of the hospital, which subject to regulatory authorization may lead to new indications.
And emergency medical services, who have not typically used ultrasound and their care settings are now using the butterfly because for the first time they have access to.
And the ability to use ultrasound information and they care for their patients.
This is a paradigm shift.
Let me provide an example.
Sars as an air ambulance and shock trauma rescue team that brings emergency care and helicopter evacuation to rural communities in remote areas across Canada.
Butterfly is helping the starz team re imagine what's possible when assessing the critically ill and injured and pre hospital settings, and there's now with this team assisting in the number of clinical conditions.
As in the example, using the butterfly the Starz team was able to confirm a patient was hemorrhaging internally information that guided the decision to provide blood products.
Determined the critical need to stop at a facility in mid flight for two more units of blood and allow the starz team to communicate the clear need for the receiving trauma center to activate in the operating room ahead of their arrival.
With butterfly the Starz team was able to access valuable clinical insights that help guide their team to critical care decisions.
It's stories like these that reaffirmed butterflies vision and values.
Innovating to inform better decision.
So people everywhere get the care they need.
As we continue to position butterfly as foundational to every clinical workflow. These targeted applications that leverage the unique attributes of butterfly represent near term opportunities for adoption and impact.
These core principles are what we believe will help us drive utilization and adoption in our four strategic pillars, and now I would like to take a moment to provide some updates in each of these areas.
Let's start with hospitals and health systems.
Longer term, we are innovating for butterfly to be as ubiquitous as a stethoscope and to serve an estimated 100 billion dollar market.
Comprised of 42 million health care practitioners around the globe focusing now on the full spectrum of care delivery from hospital to specialty from acute to Homebase from primary care to value based care to chronic care and more.
We are confident that in time, we will prove our value across this ecosystem, reducing time to diagnosis accelerating treatment driving efficiency enhancing patient experiences and enabling higher quality care.
But to realize an expanded Tam we understand we must first drive adoption in key markets.
That is why we are very focused on health care systems and home based care, where we have aligned and focused our R&D sales and marketing efforts.
Health care systems are the hub of care delivery.
And often were novel standards of care are born.
They represent the greatest complexity of the integration and have the potential to yield the greatest impact to total cost of care.
They are aware of physicians and clinicians are trained.
And that's one of the greatest opportunities to systematically overcome the knowledge gap needed to maximize value.
Given the complexity of the medical ecosystem practitioners require a comprehensive solution that brings the value of ultrasound information into their workflow needs and improves clinical practice.
Today as mentioned in our press release, we officially bring that solution to market.
Butterfly blueprint represents our comprehensive offering that includes hardware comp is software and services specifically designed to support health care institutions to achieve enterprise wide imaging from the bedside and encounter based workflow across multiple care disciplines and settings.
Blueprints broad set of services includes AI powered image capture and interpretation powered by caption health as well as butterfly Academy courses and curriculum.
<unk> health is the creator of the first and only FDA cleared AI guided ultrasound software, which will now power cardiac assessment within blueprint. This reinforces butterfly as a ready to use tool and will enable non traditional health care providers to more quickly.
Participate and the acquisition of certain cardiac ultrasound exams.
It is worth noting that caption is a recent recipient of CMS authorization for technology add on payments and then tap it.
The designation awarded to new medical technologies that are expected to substantially improve the diagnosis or treatment of Medicare beneficiaries. As further evidence of our core health system progress in January we announced that the University of Rochester Medical Center you are M C.
State, New York's largest and most comprehensive health care system will deploy butterfly blueprint across its enterprise and will partner with us to further validate and optimize butterfly in the hospital setting.
You are M series rollout will begin over the summer first going to medical students primary care providers and home care nurses, we will continue to share updates on our ongoing work with U R. M C.
Additionally.
Earlier this month, we announced a partnership with Andre Health a leader in cloud based medical imaging management that has a track record in bringing desperate imaging information together for some of the largest health systems.
We believe our work with Abra in combination with the full blueprint offering will accelerate scale system deployment and integration.
Next month, our team is looking forward to engaging stakeholders of the hospital health system audience at the annual HIMSS Conference, where our blueprint will be prominently featured both within the butterfly booth and as part of the interoperability showcase.
Across the hospital and health system market, we believe the conversations we're having are reaffirming our strategy at a time when health system leaders are looking to enable more informed clinical decisions. We uniquely provide access to improved clinical insights where and when they are niche.
Added to enhance clinical decision, making.
We will print answers hospitals, and health systems need to foundational improve accuracy speed and cost efficiency in care excellence, which we believe can lead to a paradigm shift in the standard of care for all patients everywhere.
This is what butterfly makes possible and what butterfly makes practical.
Let's move on to our international markets pillar, we see tremendous opportunity across developed and developing markets and the growing need for butterfly and a range of geographies and care settings.
Our team continues to assess the size and entry path for each market and at various levels is either building go to market plans or executing to raise awareness nurture and build relationships and expand our global footprint.
In particular, we are excited with the ongoing momentum with our current and prospect distributor partners and.
And by early signs, we're seeing within the U K and Germany markets in 2022 international growth will be a key area for focused investment in longer term, we expect it will be a meaningful contributor to butterflies performance.
Given the vast international market opportunity I look forward to updating you on our progress throughout the year.
Our third pillar is home based care.
Butterfly in the home represents a meaningful market opportunity with millions suffering from chronic conditions.
Butterflies innovative device is designed to enable ultrasound information to be incorporated into the workflow of the hospital at home.
It is an invaluable tool to surface information to intercept disease through earlier detection and to manage the needs of patients living with chronic disease.
It's because of this reality that I'd like to call your attention to two groups of clinical studies that our team plans to launch in Q2 in preparation for ultimately seeking regulatory authorization for potential at home use by patients.
One well look at butterfly as a foundational tool for home based care for those affected by congestive heart failure.
Our clinical team is working with multiple clinicians, including academic medical centers and we will shortly begin pivotal studies to measure the effectiveness of butterfly for patient self scanning of the lungs previous studies have demonstrated that the identification of excessive D lives by lung ultrasound when performed by experts can be used.
To reduce E visit in this patient population building.
Building on this doctors at UCLA recently published a study demonstrating that heart failure patients can rapidly learn how to perform the same lung scan using butterfly with excellent results are.
Our team will leverage these sentinel insights to further study the use of butterflies to enable a dramatic new way to manage patients in the home.
Our work will investigate butterflies role in guiding clinical management of heart failure with the objective of reducing emergency room visits and hospitalizations, while improving the quality of life for millions of patients affected with this growing chronic condition.
We expect to complete enrollment before the end of the year of at least one of these key studies and we will update you on progress to the extent that we can as the year goes on.
The second group of clinical studies I'll speak about addresses a growing patient population with a chronic condition that is prime for better care models.
Renal failure patients on hemodialysis.
There is mounting pressure to deliver care in the home for this group due to the many virtues it provides.
Not the least of which is better quality of life and reduce complications.
We are actively instituting studies that will demonstrate the value of butterfly can bring to hemodialysis, specifically by supporting the ability to both more accurately needle the graft fistula.
Monitor volume status, we look forward to sharing results with you I studies complete enrollment, which we expect to occur this year.
We're excited about the potential value that butterfly can bring to this clinical workflow. Our studies will begin in treatment centers and will rapidly expand to home based environments.
These research areas are just two examples of the broad applicability of butterfly across clinical use cases care settings and user types. We are confident they will help to demonstrate new care delivery models that butterfly makes possible.
As a digital health company. Our aim is to enhance information capture use inflow at from and two the home. This is in service to patients and we believe will alleviate burden from hospitals care teams and the health care system. Overall, we also believe it will support the rationale for.
Wearable on our development roadmap to collect information that can be easily incorporated into the workflow and enable the interception or management of disease.
We will update you on our development Roadmaps later in the year.
Finally, part of butterfly strategy is to ignite adjacent markets, where there is opportunity to bring the value of butterfly beyond the traditional health care market and drive growth.
One such market we've innovated for.
And continue to gain traction in the veterinary space, where in the past year alone, we launched IQ plus about ultrasound or second generation veterinary device, which is now available in 21 international markets.
Now, it's a large scale partnerships with rare breed, bringing butterfly to their veterinary hospitals to transform care delivery as part of the physical exam.
Supported better vet to supply all staff veterinarians with butterfly IQ plus that across all of their mobile veterinary units and more recently, we added Purdue University and Australia's University of Melbourne to our list of veterinary colleges that have incorporated butterfly into there.
Curriculum and equipped their students with a butterfly IQ plus of that probe.
We believe this continued adoption is demonstrative of more momentum to come.
And are proud that butterfly in 2021 driven by a small focus team reached the typical first yourselves of an animal health pharmaceutical launch.
One traditionally backed by a fully established much larger commercial effort and team.
With nearly 2 million veterinarians and VAT tax globally, who could benefit from having the power of butterfly in their pocket.
Our teams are in granting themselves within the space to optimize butterfly awareness and penetration.
I'm excited about the continued progress we will make this year and beyond.
I hope this recap illustrates the progress of our journey and conveys my personal excitement regarding butterflies future.
I am encouraged by all of the progress our team has made across our strategic pillars and energized by the opportunity for us to accelerate even more.
Looking ahead in 2022 we expect full year revenue in the range of 83 to 88 million representing growth of 33% to 41% driven by continued progress with health systems Medical education International expansion and our vet business.
Yes.
We have made important headway in 2021 and we are using our in market learnings to enable care transformation and establish a path to becoming as ubiquitous as a stethoscope.
We believe health care around the world needs it that.
The demand for this will continue to accelerate and that we are well positioned to meet it.
To advance our journey and long term growth in 2022, we will invest heavier across our four strategic areas of focus.
We believe this increased investment will accelerate our ability to innovate to meet market needs.
Proved butterflies value through a wide range of clinical studies and position us well to not only sustain our competitive advantages and innovation.
But also to set a new threshold for medical imaging across all care settings and environments by instilling butterfly as the practical application of ultrasound information in all clinical workflows.
I will now turn the call over to Stephanie for a review of our financial results.
Okay.
Thank you Todd and good morning, everyone.
Corner revenues grew 21% year over year to $19 million.
For the full year revenues grew 35% year over year to $62 $6 million.
Revenue came in slightly above the high end of the preliminary range of $61.5 million to $62.5 million that we provided on January 11th.
Product revenue for the quarter was $14 4 million an increase of 15%.
<unk> 5 million in the same period in 2020.
Units to fill the main driver product revenue were 6714 in the quarter compared with 7553 in Q4 of 2020.
The decrease in units was primarily due to the butterfly IQ plus product launch in the fourth quarter of 2020 and.
And holiday season promotions that were not repeated in Q4 2021 .
This decrease was partially offset by higher average selling price and increased hardware sales from our veterinary distributor and sales to health systems as well as medical education through our direct sales force.
For the full year product revenue was $47 $9 million, an increase of 25% from $38 3 million in the same period in 2020.
Subscription revenue was $4 $6 million in the fourth quarter growing approximately 46%.
From $3 $1 million in Q4 of 2020.
The increase in subscription revenue is due to revenue from contracts booked in prior periods renewals of existing software contracts and the sounds of additional licenses across all channels.
On an annual basis, our subscription mix, which we define as a percentage of our total revenue recognized in a reporting period subscription.
Subscription based.
<unk> 23 per cent compared with 17% for the full year 2020.
A six percentage point increase.
For the full year 2021 subscription revenue was $14 $7 million growing approximately 86% from seven $9 million in the same period in 2020.
Turning now to adjusted gross profit and adjusted gross margin. Please.
Please note that reconciliation calculations to GAAP can be found in today's press release and at the end of the slide presentation.
Adjusted gross profit was $10 $1 million in Q4, 2021 .
Compared to adjusted gross profit at $4 $9 million in Q4 and 2020.
Excluded from the adjusted gross profit in Q4 of 2021 .
The nonrecurring $2 $3 million loss on a purchase commitment.
Third party manufacturing sector, primarily due to a sub consultant that was not in line with product specification.
Isn't that different situation than the purchase commitment that we discussed in Q3.
Adjusted gross margin was 53% for the fourth quarter and approximately 50% for the full year 2021 .
This compares to an adjusted gross margin was 31% in Q4 2020.
<unk> three per cent for the full year of 2020.
Adjusted gross margin reflect inconsistent performance in 2021.
A significant improvement over the prior year.
Primarily due to the shift of our production to TSMC in 2020, and a growing mix of revenue from subscriptions.
Operating expenses were $52 8 million for Q4, 2021 an increase of $21 $9 million or 71% compared to Q4 and 2020.
For the full year operating expenses were $209 $8 million, an increase of $109 $4 million or 109% compared to full year 2020.
This increase was primarily due to the build out of our team in 2021 investments innovation and public company expenses.
The growth in operating expenditures is a reflection of both the investments we are making to capitalize on opportunities we seek to transform care as.
As well as the constrained environment in which the company was operating in the prior year.
In 2021 operating expenses were lower than the guidance we provided in November due.
Due to the timing of expenses, including compensation.
For the fourth quarter, adjusted EBITDA was a loss of $33.3 million compared with a loss of $21 million in the same period in 2020.
Full year 2021 adjusted EBITA was a loss of 121 $8 million compared to a loss of $85 $2 million for the full year 2020.
Adjusted EBIDTA reconciliation calculation to GAAP net loss can be found in today's press release.
Yeah.
Moving to our capital resources.
As of December 31, 'twenty, 'twenty, one cash and cash equivalents were $422 $8 million, we have a solid cash position.
To invest aggressively to capitalize on the attractive market opportunity.
I would now like to move to our annual guidance for the full year 2022.
For the full year 2022 total revenue is projected to be approximately 83 to 88 million or 33% to 41% year over year.
This revenue guidance assumes growth across our existing strategic initiatives, including health systems Medical education institutions.
Mary International and distributor relationships.
We are focused on leveraging care capabilities across a variety of customers, who are starting to adopt butterfly benefit more real time information delivered at the point of care in.
In 2022, we anticipate subscription revenue growth and we also anticipate that subscription revenue will increase as a percentage of revenue, but not as significantly as what we saw in 2021.
As a reminder, subscription mix as a percentage of revenue is impacted by the timing of sales revenue recognition differences between subscription and product and by mix.
As a result of these factors, we continue to expect quarter to quarter variability of course subscription revenue.
But overtime, we believe that recurring revenues such as subscription mix will continue to grow.
Moving to adjusted EBITDA guidance.
During the fourth quarter, we have seen consistent performance and adjusted gross margin.
As we move forward, we will focus on adjusted EBITDA as a metric for Bottomline performance for 2022.
With that for the full year 2022, net loss is expected to be 225 million to 245 million assuming no change in the fair value of our warrants.
Adjusted EBITDA is expected to be negative 175 million to negative $195 million.
We are assuming an adjusted gross margin that is slightly better than 2021.
We are investing in line with our strategic focus and corporate principles that Todd described earlier in the call.
More specifically, we expect our operating expenditures will be impacted by the annualized nation and the investments we need in 2020 one.
As well as incremental investment in our product pipeline and hardware software and AI to support our sales marketing and clinical efforts and.
And to build tools and processes to support future growth of the business.
In addition, we are expecting expenses like travel to return as business activities begin to normalize.
To help with modeling we are also providing additional color on balance sheet and other financial line items.
We haven't assumed any investment.
Of 20 to 30 million in capital expenditures, a large component of their capital expenditures represent capitalized software costs related to a larger innovation software investment that the company is making.
Working capital, we expect continued investment of $20 million to $30 million primarily inventory.
Finally, we are expecting stock based compensation expense of $40 million to $50 million.
As Todd mentioned, our financial plan for 2022.
Flex or desire to accelerate our market position.
I aggressively investing across our commercial business and continued innovation and R&D efforts as well as establishing additional infrastructure to support our long term ambition as a public company.
And with that I will now turn it back over to Todd for summary comments.
Thank you Stephanie.
I am excited about what we've learned in 2020 one the progress we made in.
Our continued commercial evolution.
Providing a solution to help practitioners make more informed decisions where and when they need to is how butterfly will help transform care delivery around the world.
This is a big aspiration.
One we are all proud of that butterfly and one that we are working to realize.
I look forward to 2022, and our ongoing work towards this goal.
Before we move to Q&A I would like to acknowledge the hard work and efforts of Stephanie fielding.
As most of you already know Stephanie is resigning from the company effective April 30th.
On behalf of myself the board of directors and the entire executive team I would like to thank Stephanie for her contributions.
<unk> and her work to transition butterfly to the public company. It is today.
As we transition I have the utmost confidence in our ability to execute our business strategy with our current finance team and to advance performance against our innovation and market priorities.
We wish Stephanie the best in her next endeavors and I look forward to announcing our new Chief financial officer appointment in the near future.
I would also like to thank the butterfly team for their dedication to our mission and the excellent progress we continue to make as a transformational digital health company.
And to end the call I thought I would turn it over to Stephanie to say a few words.
Nate.
Thank you Todd I would like to thank the team the board and the many stakeholders, including those of you on this call.
With whom I've had the pleasure of working either directly or indirectly.
My time with the company has represented a critical growth period at a time of transformation. It is a privilege to have contributed to a better place journey I.
I continue to believe in our mission and promise of butterfly and I'm excited to see what comes next.
With that we'll open it up for questions.
At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad. Your first question comes from the line of Josh Jennings with Cowen Your line is open.
Hi, good morning, Thanks for taking the questions and I appreciate that.
Download on the <unk> update.
Okay.
Look in your next chapter.
I was hoping to just start off.
On the health system.
Todd.
And maybe you could just give us a.
An update on where you feel butterflies positioned to kind of attack. This channel scaled beginning of 2022 versus the beginning of 2021, and just would like to better understand the evolution of a blueprint and now the collaboration with Hospira.
And how this.
Evolution of the software capabilities.
Position you better to.
I have success in the enterprise channel.
Thanks, Josh.
Good morning.
You know as we are.
You know as we've said and we tried to give you a lot of color. This morning on kind of the progress that we made but yes. We went into 'twenty. One yeah were really absorbing the impact of the capabilities of the device itself.
And I think our evolution through 'twenty, one really was understanding that it's not about doing an ultrasound with butterfly, it's about using the information from ultrasound that's butterfly can provide and that's really fundamentally what we made possible. So our pivot in 'twenty, one with a lot of.
Investment and capabilities and scale and the utilization of the information and the practical application of that information that came together with a lot of our learnings from the from being in the market already and I think that was one of our advantages, whereas we were working with a lot of customers and.
We were absorbing both how they were trying to do ultrasound with butterfly, but what they were trying to do with butterfly as we were getting our head around what that would take and so we made a lot of investment and aggregated a lot of the components.
What we put together in butterfly I butterfly blueprint.
In 'twenty, one so butterfly blueprint is really the road map for US moving forward in health systems, and it's really that ability to understand how to deploy the hardware so to get the butterfly into the health system. The training that it requires to get people to competency for the use cases that they need.
In a seamless and not high burden way and then the software pieces with blueprint.
With our comp is software really to look at the things that we need with quality assurance credentialing documentation. The throughput of information. These are all a lot of learnings when you go in and you're not just doing ultrasound, what youre using ultrasound and putting it in counter based workflows and that's really what our.
Learning, our investment and the evolution of our vision of wherever you go in our partnership with Andre was kind of an innovative approach to helping us move blueprint and comp is on top of.
And and architecture and some I guess, you could think about it as digital plumbing and a way for us to accelerate to move up and to thank for graphically about how to get more relevance and scale faster. So we were able to work with them collaborate and then kind of but.
Competition and essentially the blueprint solution.
On top of some of their infrastructure that they have established being one of the leaders in cloud based medical imaging management.
Great. Thanks for that and then just wanted to ask just a couple of questions on the Rochester win.
Maybe just to be helpful to better understand the sales process. Your team experience in the account how long does it take from getting the door open to getting into the current stage.
I'll just speak when informs your enterprise strategy going forward.
Just have one last follow up.
Sure I think Rochester was a great example of the evolution of what we learned in 'twenty, one and not to not to repeat myself on the pivot to getting back to the application of the information our approach to Rochester, whereas it was I think an evolution of our learning that'd be havent going on with a lot of.
Other accounts, which as we approached Rochester from the clinical perspective of the.
Of the application of ultrasound in the clinical workflow.
We were able to start those conversations.
With with a lot of clinical efficacy and senior leadership around practice management, along with what they were trying to do with imaging.
And how they were trying to.
How they were trying to manage imaging drought the institution and so I think what was different about Rochester, and what's informing our approach moving forward is really it's going about what's the value proposition of how do you want to transform care. How can this information would be valuable to you and how can we partner with you to get to those objectives.
Do you want to go and I think that's really the value of butterfly and this and it's really a clinical tool that institutions can deploy to achieve objectives and how they want to evolve and transform care, we were ready and took a lot of our learnings into the Rochester.
Conversation and we're really excited about how they're thinking about it and.
What we were able to do in the partnership.
Yeah.
You know that sales cycle took us you know.
A good portion of that about half of the year, which was a big improvement over some of our previous sales cycle and I think that's what we're really trying to do is figure out how do we continuously package. The information we have the learnings we have and that's the advantage that butterfly has by being out in the market and then continuing to make that sky.
Hello, Paul and reproducible and so we see we hope to see improvement each time, we go about doing these larger these large implementations.
Alright.
How should we be thinking about butterfly using Rochester as a reference.
For either future enterprise your health system customers to.
To become comfortable and confident in the butterfly IQ value proposition.
And as part of the Rochester experience is going to include the accumulation of accrual of cost effectiveness data I'm not sure. How you can go about that but I think one of the intuitive benefits of ultrasound, particularly butterflies platform as you've said on the call just the potential for cost effectiveness streamlining care reducing.
Inappropriate level of inappropriate diagnostic tests.
Outside of ultrasound and coming to a clinical diagnosis earlier in the process.
But just sorry multipart question again, but that's my last one and thanks for taking the questions.
No problem.
Uh huh.
One of the things that we're excited about what Rochester.
As a true partnership Theyre very excited about the incorporation of digital information informing cure is.
Advancing care and.
The utilization of technology to improve care. So they are very excited about how they look at AI across systems, they're looking at data aggregation and how do they take information and improved care with that so a butterfly was very exciting to them as a way to acquire information.
<unk> spoken to you about before really if you think think about butterflies as a clinical tool, it's really about using butterfly to acquire information that software to use the information and then take that useful information informed decision, making and evolve and transform care that fit right really well into where they were thinking so they vary.
Much want to partner with us and so part of part of this whole deployment what is both looking at how.
How do we measure and how do we learn together on what it takes to get people confident how do you deploy that into workflows. What is best practice to learn and evolve to do that how do we get information around that how do we look at evolving and improving the clinical care pathways and then.
The return and the economic benefits of doing that so we went into this in partnership with them they've they're dedicating resources, we're dedicating resources and this is a true partnership and I think it really also stems from the tremendous progressive leadership.
Of Rochester in the sense that you know.
They want to transform care and when we've had conversations with them they've.
They've come out and said look there were challenges before we went into the pandemic with how care is being delivered we wanted to come out of the pandemic not thinking about how do we get back to how we were practicing medicine before we wanted to take these opportunities to deploy and move forward and evolve care and I think they're thinking aggressively.
Around how do you take something like a butterfly that information and use that to truly transform care. So it's a it's a P.
Partnership and we're going to learn a lot and we're going to study a lot and I think it will become a very.
Important reference of ball institution, not just for butterfly, but how you should think about incorporating digital information to help inform and transform care.
Great. Thanks.
Your next question comes from the line of Matt Taylor with UBS. Your line is open.
Good morning, Thank you for taking the question.
So the first question I wanted to ask was I guess around around Rochester, and other enterprise wide deployment. So you mentioned the sales cycle took about half of the year you know I know.
In the release that you put for Rochester before you talked about that you're really starting to ramp up in the second half of the year. So.
First question I have is just on Rochester, how should we think about that ramp and the ultimate size of that specific agreement.
How does that impact the phasing of your revenue through the year.
So good morning, Matt.
We've talked about this and I think you know my last answer to the question is really a first and foremost we're looking at Rochester to really prove the embodiment of our strategy, which is you know.
The practical application of ultrasound information into the clinical workflow.
We're also learning how to package that and move it out and make it more digestible for other institutions.
We've talked about and and so we've talked about the pieces and we really want to understand how the deployment of the <unk>.
It backbone and the improvements that we have with the element of Blueprinting campus, we're going to we're taking a little bit of time here and we're going to you know as the middle of the year comps really start deploying the probes and the and really getting things into a workflow. So we're gonna do.
Do some implementation and training and then we would see that the back half of the European around the true.
Utilization and then and then the ramp going forward, we've talked about this is a multiyear.
Journey with that and do you know.
With thousands of probes over time being deployed right now what we're focused on it. Most importantly is evolving compas to make sure that it can be scalable and deployed across other institution. The efforts that it takes and the efficiencies that we can drive.
And getting people up to scale for the deployment and then seeing the incorporation into the workflows and then starting to measure the benefits. So we see this first year is it growing and learning and deploying gear and then.
We see well hopefully see even more expansion over time in Rochester, and then deployment with other accounts.
Okay. Thanks, Thanks for that overview.
And then I just wanted to know for your your guidance for the year does that assume any other enterprise conversion.
I'll get that.
Any of your assumptions by channel or any important wins that underpin your expectation for for this growth.
Yeah. So.
You know as we look at the year. So I wasn't really an overview, it's really what our approach to the larger enterprise institutions are this year right. There we're not we're not at a place where we're saying that we have these.
Packaged embroidered do multiple multiple deployment, so I would say maybe another one to two large scale institutional deployments. This year to help us really refine what a scalable enterprise strategy looks like the way that we will tax to revenue over the course of the year.
Is in working within the institutions within departments around targeted workflows capabilities of the device.
Segment and elements of campus and so it's going to always be working both sides of the spectrum across the entire continuum of care that we will be working to package and deploy so that we can top down deploy enterprises at scale and that we can build up from within with specific.
It is and targeted application in departments and sat in so that we can continue to deploy the capabilities of ultrasound information into the workflow and that's the balance that we have this year, Matt of leveraging the capabilities of the device versus.
Changing the fundamental thinking of the paradigm of how care is delivered an institution and at some point those two xiaomi and cross, but that's kind of where we are in the journey and in the spectrum. So we're working both sides of that.
Okay. Thank you for the color there.
And then.
You went through with you.
Investments that youre, making in software and Capex I was wondering if you could help us with.
Like a bridge year over year in terms of understanding the increase in spending what are kind of the key elements that are new and in versus the ones that are annualized.
Last year.
Yeah.
Yeah.
Sure.
Okay.
And I think that we talked about the kind of core elements and many of them are.
Things that we've learned over the course of 2021.
Well some of them are areas, we're continuing to build on next year. So certainly there is a focus on R&D for me software, which Todd is clearly describe the importance of that as well as continued investment in our hardware pipeline.
Certainly we'll be continuing to invest in our commercialization and go to market strategy.
Both the kind of direct sales, but also the supporting aspects of it.
I think there is the ongoing investment in us as a public company and <unk>.
Tools and processes that enable us to scale.
The longer term it really is a combination of the components that we described.
In the in the call earlier.
And could you could you give us any thoughts longer term, how you expect profitability to evolve do you have an expectation for a revenue level, where youll be profitable or.
When would you start to get more leverage these investments.
So how about you.
This has been a big shift for us.
Try to be really transparent about it.
And it's an evolution for us and to be honest as I've never been more excited about an opportunity that we have and so we are really trying to pull the elements together of the revenue.
And how that pieces together as we.
Just gave you that overview or insight as to how we're thinking about the deployment of our ASO piecing together, how we capture the value of.
Using the ultrasound information in the workflow how do we deploy it institutional level, where do we look across the continuum and some of that is still coming together and so.
While we while we see clearly the opportunity that we have the the.
Market moving position that we have the learnings that we have we know that we have to bring this all together and piece it together and I would say over time, and we're clearly making that investment. It is absolutely clear that this has value and that you know we have the ability to be part of care transformation and we are.
<unk> investing in that we know that with time here, we need to get our revenue growing faster than our investment and we see that that occurring and we know we need to get you a better longer term view, so I'm, hoping that as this year evolves, we will be able to bring the pieces together so that we can better articulate.
And put that in a longer term plan. So we can help you see some of the outer years. So I just need a little bit more time to let things evolve as the course of the year ago. This year, but we will definitely be working towards.
Are those understanding.
Some time, a little bit later in the year.
Okay, great well, thanks for all the color and the feedback and I'll leave it there.
Alright, thank you so much.
Thanks, everybody.
Yeah.
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