Q3 2024 Butterfly Network Inc Earnings Call
Okay.
Carla: Hello, everyone and welcome to the Butterfly Network Q3, 2024 earnings call. My name is Carla and I will be coordinating your call today.
Carla: Oh it once the presentation is completed you can registered a question by pressing star followed by one point your telephone keypad and if you change your mind. Please supposed to talk further about you.
Speaker Change: I will now hand, you over to Heather.
Carla: <unk>.
Speaker Change: Key financial and Operation Officer at Butterfly network to begin Heather.
Speaker Change: Please go ahead.
Good morning, and thank you for joining us.
Heather: Earlier today Butterfly released financial results for the third quarter ended September 32024, and provided a business update.
Heather: The release and earnings presentation, which include a reconciliation of management's use of non-GAAP financial measures.
Heather: Paired to the most applicable GAAP measures are currently available on the investors section of the company's website at IR Dot butterfly network Dot com.
Speaker Change: Hi, Heather Getz, Chief financial and operations officer at Butterfly, alongside Joseph Devivo, butterflies, Chairman and Chief Executive Officer.
Speaker Change: This morning's call.
Speaker Change: 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.
<unk> and commercialization of products and services potential regulatory approvals and the size and potential growth of current or future markets for our products and services.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: On the same page you will also be able to access the webcast live and replay it once the call has been completed.
Speaker Change: I would now like to turn the call over to Joe Joe.
Joe Joe: Thank you Heather.
Good morning, everyone and thanks for joining us.
Joe Joe: You'll recall on March 18th of this year, the butterfly management team held an investor day.
Joe Joe: At the event, we introduced four key strategic pillars for butterfly and these were one accelerating growth in our core focus business.
Joe Joe: Two investing in R&D to maintain our tech leadership, especially in semiconductor innovation.
Joe Joe: Three expanding our market into established non focused markets like hospital carts and into new care settings like home.
Joe Joe: And four executing efficiently to drive double digit growth reach cash flow breakeven by 2027 and $500 million in revenue within five years.
Joe Joe: So with our third quarter results in hand, I'm pleased to say that we are executing in all phases.
Joe Joe: At various points throughout today's call I'll refer back to these growth pillars and the progress that we've made against them.
Joe Joe: First let's review this quarter's strong performance.
We told you in pillar, one that accelerating growth in our core business was a priority and we're doing just that.
Joe Joe: Butterflies team exceeded our operating plan this quarter and we delivered top line revenue growth of 33% year over year.
This is our fifth consecutive quarter, where we met or exceeded our expectations.
Joe Joe: We achieved this while simultaneously, reducing our cash use to our lowest level in history, delivering reduced opex, while investing in the key growth pillars outlined above.
Joe Joe: What's more satisfying is that every sales channel at their objectives in the quarter was not an anomaly.
Joe Joe: There was no one time big deal.
Joe Joe: Each channel delivered through execution.
Joe Joe: It was a beautiful revenue quarter, which was manifested through a collection of great products.
Joe Joe: Being consumed by happy customers and great people working together to meet our customers' needs.
Joe Joe: And this is just the beginning we.
Joe Joe: We are also moving ahead with the fuel behind our health system approach our message is resonating.
Joe Joe: Every doctor and nurse wants their own butterfly.
Joe Joe: Care should be delivered where the patient is digital is winning over analog.
Joe Joe: So I'd like to focus on a few notable highlights in our enterprise embedded expansion areas.
Joe Joe: Our partnership with the University of Rochester Medical Center UMC continues to flourish.
Joe Joe: Dr. Ricardo CEO Umc's Faculty group spoke at our Investor day, emphasizing his belief that providing every doctor with imaging access would enhance patient care boost physician satisfaction and drive financial gains.
Joe Joe: This vision is now becoming a reality.
Joe Joe: A paper by Dr. David Waldman, Umc's, Chief Medical <unk> Development Officer highlights these accomplishments.
Joe Joe: The success of their system wide deployment of butterfly, improving patient care clinical operations and financial outcomes.
Joe Joe: This paper is guided other institutions now towards similar focus deployments and I expect more health systems to follow Umc's lead in 2025.
Joe Joe: In September Dr. Steven Ericsson from Jefferson Health Care gave an award winning presentation at the American Academy of family Physicians FSM Conference.
Joe Joe: He concluded that not only does butterfly and make them a better doctor with greater ability to care for patients.
Joe Joe: But the butterfly device pays for itself quickly as an individual family medicine Doctor He collected about $15000 in reimbursement in just one year.
Joe Joe: Already making back to more than two X all in cost of our probe and software.
Joe Joe: And theres more supporting evidence to come.
Joe Joe: An important abstract from a major academic institution will reveal findings on a significant reduction in length of stay for in facility management of congestive heart failure patients when using butterfly I look forward to bringing that to you soon.
Joe Joe: I'd also like to briefly comment on our progress in medical education on.
Joe Joe: On October 8th Kansas City University Medical School announced.
<unk> announced its new focused curriculum using our skin lib AI training up.
Joe Joe: Traditionally ultrasound education requires dedicated instructors besides students to guide probe placement, making one to one instruction difficult costly and often not practical.
Joe Joe: Our scan lab App is a game changer. It provides the necessary personal guidance through AI, including probe placement walk throughs referenced images and real time anatomic labels. So students can learn independently.
Joe Joe: We offer it for free to all butterfly subscribers.
Joe Joe: Two universities in California are already performing trials to study its effectiveness and now Casey you is ruled out this curriculum using scan lab as primary instruction for their first year students really cool.
Joe Joe: So moving on to international.
Joe Joe: The team overseas continues to deliver in this quarter, we opened new markets in Indonesia, Netherlands, Belgium, and we successfully launched IQ3 in Europe.
Joe Joe: Our well attended event at the Gerken in London was simply electric it was followed by several conferences in the U K and Austria, where booz, we're oversubscribed for our training and scanning events.
We are a global medical community, who heard about IQ3 months before launch and wanted to see it all for themselves.
Joe Joe: We look forward to our global distribution partners continuing to launch IQ3 through the end of the year and into 2025.
Joe Joe: We will benefit internationally from a higher ASP.
Speaker Change: And now to pros and distribution.
This should continue revenue growth in 2025.
Speaker Change: <unk> also saw strong growth with a 50% year over year revenue increase in the sector.
Speaker Change: We continue to advance the cattle opportunity that I've introduced on past calls and are now disseminating research showing that butterfly and focus is a worthy approach for monitoring bovine respiratory disease and can help cattle industry address its costly disease management crisis.
Speaker Change: Initial findings were presented by Kansas State University, and the beef cattle Institute at several national meetings in the third quarter and the final results are being submitted to peer reviewed journals.
Speaker Change: Which will be the basis of our go to market plan.
Speaker Change: Lastly, the butterfly Garden AI marketplace also continues to grow not only did we signed two more partners in Q3, bringing our garden portfolio of 17 companies.
Speaker Change: But just this week harp focused by desk. He became our second partner to launch an educational tool commercially.
Speaker Change: The training application provides AI powered guidance to learn 10 standard cardiac views and is available in Apple's App store now for purchase.
Speaker Change: <unk> intends to launch a clinical version of this AI tool for butterfly devices in 2025.
Speaker Change: Before I turn it over to Heather I would like to publicly welcome Steve Cashman, who joined butterfly as Chief business Officer in September.
Speaker Change: Which is great timing as we continue to accelerate growth.
Speaker Change: With a successful career in technology and healthcare, Steve is a dynamic executive and strategic thinker.
Speaker Change: We first worked together at Intouch health when I was CEO and he led the commercial business.
Speaker Change: Together, we achieved significant growth before selling to Teladoc health.
Speaker Change: Then he became CEO of caption health, where I served on his board during its successful sale to GE.
Speaker Change: At a valuation that's the envy of AI ultrasound developers.
Speaker Change: I look forward to having him lead our strategic and commercial efforts and we will gradually involved in conference calls with Heather and me as appropriate.
Speaker Change: So now I'd like to turn it over to Heather Heather.
Heather: Thank you as Joe noted we saw continued strength in the third quarter of 2024 with revenue of $26 million. The highest third quarter result in the Companys history.
Heather: This represents a 33% increase versus the prior year period, 23% of growth in volume and 10% from higher prices.
Heather: All channels were positively impacted by continued penetration of the IQ3.
Heather: Looking at the U S and international channels during the third quarter U S revenue was $13 $1 million, which was 27% higher than the prior year. These results were driven by higher average selling price and strong demand.
Heather: Total international revenue increased 36% over the prior year period to $5 $2 million driven by higher volume with geographic expansion, partially offset by a lower mix of software revenue and sales through the E Commerce channel.
Heather: Breaking our revenue down between product and software and other services.
Heather: <unk> revenue was $13 5 million, an increase of 55% versus Q3 2023.
This increase was driven by higher average selling price and volume across all channels.
Heather: Approximately 50% of our total volume with IQ, three and over 80% domestically.
Heather: Software and other services revenue was $7 million in the third quarter up 5% versus the prior year period.
Heather: Software and other services mix was 34% of revenue decreasing by approximately nine percentage points versus Q3 2023.
Heather: This decrease can be attributed to product revenue growth outpacing software revenue with the launch of our three earlier this year as well as our geographic expansion internationally.
Heather: Our total annual recurring revenue or IRR, which is reported as part of software and other services grew slightly when compared to the prior year period.
Heather: This was led by an increase in our enterprise software subscription.
Heather: Grew 19% and increased to 46% of our total IRR.
Heather: This increase in enterprise software revenue was offset by declines in our individual subscriptions.
Heather: It'll enterprise software IRR has now outpaced individual arif.
Heather: Turning now to gross profit.
Heather: Gross profit was $12 $2 million in Q3, 2024% to 30% increase as compared to $9 4 million in the prior year period.
Heather: Gross margin percentage was down slightly to 59, 5% as.
Heather: As projected gross margin percentage was positively impacted by higher average selling prices. These benefits were offset by a lower proportion of higher margin software and other services revenues.
Heather: Higher cost of IQ, three including extended warranty cost as well as the normal cost of starting up a new production line.
Heather: Moving to EBITDA and capital resources for the third quarter of 2024, adjusted EBITDA loss was $8 $4 million compared with a loss of $12 5 million for the same period in 2003.
Heather: 33% improvement in adjusted EBITDA loss was driven by higher revenue cost reductions and efficiencies, which led to lower payroll consulting and other outside services.
Heather: Cash and cash equivalents, including restricted cash as of September 32024, with $97 $8 million during the quarter, we used $8 3 million in cash, bringing our total trailing 12 months use of cash to $56 million and our normalized run rate to about $40 million.
Heather: As previously discussed we have taken significant costs out of the business to reduce our cash consumption, while continuing to invest in the business.
Heather: The heavy lifting on this front and behind us.
Heather: We continue to look for ways to be more and more efficient. This will be something we will remain focused on into the future.
Heather: Moving to guidance.
Heather: In the first nine months of the year, we have delivered against our priorities set out on our Investor day back in March we launched <unk> three in the U S and internationally launched scan lab and <unk> plus bladder reached 17 butterfly Garden partners and signed the term sheets for the third and fourth powered by butterfly partners.
Heather: We are on track to sign our first pilot to enter home services and internationally. We received EU MBR for our advanced features of <unk>, plus and <unk>, three while adding additional geographic footprint.
Heather: We have invested in our commercial teams and we will continue to expand our sales footprint, both domestically and internationally, all while reducing our cash use and conservatively extending our cash runway into 2027.
Heather: As we look to the fourth quarter of 2020 for our organization is humming and we have delivered against our goals.
Heather: As such we are raising our 2024 guide to a range of $79 million to $81 million or about 20% growth and also improving our adjusted EBITDA guide for the full year to a loss of $40 million to $42 million versus <unk> 23 loss of $67 5 million.
Specifically looking at Q4, we expect to see revenue growth of around 25%, bringing us to approximately $20 million to $22 million in revenue.
Heather: For Q4, adjusted EBITDA, we expect a loss of approximately $10 million to $12 million.
Heather: Looking into 2025 now we believe that we will see at least 15% to 20% topline growth and be able to close on non dilutive capital through power by butterfly. This capital will allow us to accelerate the top line through further investments in our initiatives and provide a bridge to cash flow breakeven.
Heather: Well, Joe will provide some additional color later on the call. We will keep you posted separately as we make progress on this front.
Heather: To summarize we had excellent results for the first nine months of 2024, we look forward to a strong finish to 2024 and continued growth in 'twenty five.
Heather: We have been delivering against our plan and we will continue to do so with a strong base of technological and organizational assets and a team position to capitalize on this attractive market opportunity both over the near and long term with that I will turn the call back to Joe.
Heather: No.
Joe Joe: Thank you Heather.
Joe Joe: I am very pleased we're able to deliver an increase in guidance on the top and bottom line again.
Joe Joe: Butterflies executing on its vision to re imagine imaging digitally and delivering disruptive technology every day and expect to continue to take market share from our competitors.
Joe Joe: As each day goes by the World realizes our firm belief that butterfly is the future.
Joe Joe: Now, let's look more into the future as outlined during Investor day.
Joe Joe: So as I mentioned at the top of the call we laid out our growth initiatives for the next five years. During the March event, we showed our priorities and overview of our roadmap and our plan to get to 35% CAGR over the next five years.
Joe Joe: As we are delivering our numbers and our core business today, we're about to start layering in new revenue on top of that performance.
Joe Joe: Pillar number two is continuing to invest in R&D.
Joe Joe: Particularly semiconductor innovation.
Joe Joe: To drive our technology beyond a handheld probe for focus.
Joe Joe: <unk> all heard me speak about our digital journey, and how we strive to and succeeded in achieving image parity with pizza based crystal devices.
Joe Joe: At Investor Day, we showed you the performance characteristics of our second and third generation chips.
Joe Joe: Demonstrating that IQ3 proved Moore's law true again by doubling the processing power of our prior chip.
Joe Joe: We affirmed that our investment in cutting edge semiconductor development would continue and we previewed our intended performance characteristics of our fourth generation <unk> chip as well as our fifth generation Apollo chip.
Joe Joe: You all know have witness firsthand, how the market's accepted our third generation of Q3.
Joe Joe: Like in 2003, when image quality of digital cameras met the capabilities of film the market quickly replaced film with digital.
Joe Joe: That is happening now for traditional handheld ultrasound.
Joe Joe: Well two weeks ago, my team and I saw the first images produced by our fourth generation semiconductor P. Five.
Joe Joe: We were all blown away with this next revolution.
Joe Joe: P five dramatically increases mechanical pressure and for the first time in history achieved harmonics and digital imaging.
Joe Joe: This is the Holy Grail for digital imaging.
Joe Joe: Until now no one thought was possible.
Joe Joe: We're IQ3 builds equivalents to handhelds <unk>.
Joe Joe: Five clears the path for butterfly to enter the ultrasound cart business in the future.
Joe Joe: In fact, we are developing our own card.
Joe Joe: The butterfly IQ station.
In early January I intend to share some P. Five images with you.
Joe Joe: And discuss our vision for taking market share with the in hospital IQ station in the future.
Joe Joe: <unk> will not only help replace many of our competitors card offerings. It will be added into our current handheld probe to deliver the most powerful handheld image in the world.
Joe Joe: Since we're talking about the power of our Cmos chip versus Piso crystals, Let me take a moment to update you on rojas or actually what I've learned is actually pronounced Ross.
Joe Joe: In early September I met with EU officials, who administer the Ross exemption revisions.
Joe Joe: I communicated with them that butterfly as the first commercial ultrasound product in history to meet the intended Ross environmental standards without exemption, we discussed the regulations its implementation in a process where in butterflies view the commission would no longer need to grant exemptions to led.
Speaker Change: Please oh crystal ultrasound handhelds.
Our Green technology was highly welcomed by the commission officials, who noted that the information we brought to them was very important for innovation in the Eu's Green vision overall.
Speaker Change: According to European Commission, President Ursula von der land, the EU wants to become a global leader and circular economy, and reducing harmful substances and products is a vital part of that.
Speaker Change: We are delighted that our technology can lead the way towards such important ambitions.
Last week butterfly, formerly refiled with the European Commission for the exemptions to be revoked.
Speaker Change: By incorporating their supportive feedback into a dossier to make our case.
Speaker Change: From the timeline they gave us we should know their decision by this time next year.
Speaker Change: And if positive C enforcement plans begin a year following that.
Speaker Change: For those who want to learn more you can find a link on the slide here, where you can read the applications made by big ultrasound and the reasons why after 17 years of Grace from the European Commission, they continue to fail to meet standards.
Speaker Change: In their own words.
Speaker Change: I'd like to bring something to light.
Speaker Change: I've learned that in the ultrasound industry companies can legally label themselves Ross compliant.
Speaker Change: Even if it's under an exemption.
Speaker Change: This means the ultrasound industry in effect are telling consumers that their products meet standards when they in truth don't.
Speaker Change: The only achieve compliance to loss due to an exemption.
Speaker Change: The ultrasound probe theyre selling still has led.
Speaker Change: Imagine buying food labeled organic that's not really organic but they can say its organic because the government lets them.
Speaker Change: It's completely legal.
Speaker Change: But in my view it is misleading to call yourself Ross compliant.
Speaker Change: And really a deceptive marketing practice beneath the caliber of the great companies, who are lowering themselves by doing it.
Speaker Change: Consumers need to know when they are buying our led based product and indirectly contributing to lead mining and led disposal in their environment.
Speaker Change: I plan to educate clinicians of this practice and call on these companies to cease labeling their devices Ross compliant until we actually meet the environmental test.
Speaker Change: The raw standards.
Speaker Change: So now moving to pillar III.
Speaker Change: At the Investor Day, we introduced you to butterfly homecare.
Butterfly home care as a service business, that's powered by all our technology and strive to support caregivers, helping patients outside the hospital deal with aging and living a better life with chronic conditions.
Speaker Change: Having a sophisticated imaging capability convenient to where the patient is butterfly strives to use advanced hardware education, and AI to make diagnostic imaging easy cost effective and available to everyone.
Speaker Change: Butterfly home care will be a substantial service business, which over the next five years as our technology evolves will be powered even further by wearable ultrasound as we have always envisioned.
Speaker Change: After introducing this concept in March I'm pleased to update you that butterfly homecare will be starting in the fourth quarter of 'twenty for its first pilot for our virtual chronic care management services with a major at risk Medicare advantage provider in the U S.
Speaker Change: The goal will be to reduce readmissions of their congestive heart failure patient population through frequent AI powered imaging.
Speaker Change: If successful it will be our first foray into a services business model, where butterfly participates in the service revenue on a <unk> basis.
Speaker Change: Based on the applicable at home patient populations. This new revenue stream has the potential to rival butterflies current revenues in the future.
Speaker Change: Next quarter I intend to update you on the pilot the.
Speaker Change: Our strategy in more detail and its meaning for 2025.
Speaker Change: My last update involves the next step for our powered by Butterfly initiative, which enables us to license so and develop our powerful semiconductor technology to noncompetitive companies and new industries.
Speaker Change: When I joined butterfly in April of last year I asked this question.
Speaker Change: Our ultrasound on ship, a pocus only technology or did we solve a universal problem, making foundational.
Speaker Change: Well the answer is now clear.
Speaker Change: It's foundational.
We've learned so much over the past year and have been amazed by the demand to develop cutting edge noncompetitive applications. All built on our foundational ultrasound on chip platform.
Speaker Change: The market opportunity outside of butterflies use of the chip.
It may actually be far greater than butterflies opportunity alone.
Speaker Change: So we've begun to explore different vehicles to commercialize and monetize the value of the chip.
Speaker Change: So I am announcing today that butterfly is forming a wholly owned subsidiary called octave.
Speaker Change: Spelled Oc T IV.
Speaker Change: Okta will be run by two of our best executives butterfly co founder, Nevada, Sanchez and <unk>, our current Chief strategy Officer.
Speaker Change: There will be unique opportunities in health care.
Speaker Change: That are not on the butterfly roadmap as well as new sectors, such as consumer electronics nautical military security Aeronautics and other industries, using ultrasound and their products and processes today.
Speaker Change: To fully capitalize on the opportunity Darius in Nevada will be building, a team, which will remain 100% focused on the opportunity.
Speaker Change: <unk> will have exclusive license to all butterfly IP and we'll have the freedom to modify and develop new technology.
To help with this endeavor butterflies decided to sell a minority stake in that business.
Speaker Change: Bringing in new investors will increase access to capital increased focus while rewarding butterflies shareholders for some of the over $300 million and investment they made in the development of ultrasound on chip since inception.
Speaker Change: With the discussions I've had personally with investors to date.
Speaker Change: Confident in our ability to successfully raise the capital through October.
Speaker Change: When successful I believe it can bridge butterfly to cash flow independents.
Speaker Change: As we will still be an owner of octave, we will continue to layer the growing revenue stream on top of the other revenue opportunities previously mentioned.
Speaker Change: So that brings us back to pillar number four.
Speaker Change: Executing to return the company to double digit growth get.
Speaker Change: Get to cash flow breakeven by or perhaps before 2027, and achieving $500 million in topline revenue in five years.
Speaker Change: I hope it goes without saying after today's call that we are well positioned to deliver on those goals.
Speaker Change: I'm very proud of our team.
Speaker Change: We are very bullish on our near term opportunity and excited about the progress being made towards our long term plans.
Speaker Change: Butterfly is proving to be the disruptor in digital imaging that you all thought and hoped it would be.
Speaker Change: We are rewriting the rules and will be the clear winner in this space.
So with that operator, please open it up for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: If you'd like to ask a question. Please press star followed by one on your telephone keypad and if you change your mind. Please press star followed by T.
Speaker Change: When do you think asked your question. Please ensure your devices on mute locally.
Speaker Change: And our first question comes from Suraj Kalia from Oppenheimer. Your line is now open.
Suraj Kalia: Good morning, Joe Heather Congrats on a nice quarter.
Speaker Change: Thank you.
Suraj Kalia: Joe can you hear me alright.
Joe: Yes, just fine thanks.
Speaker Change: Perfect. So.
Speaker Change: Let me a bunch of questions.
Speaker Change: Heather let me start out with you.
Speaker Change: 23% units, 10% price overall.
Speaker Change: How did that.
Speaker Change: Split up U S versus O U S.
Speaker Change: Yeah. So the 23, so for the quarter.
Speaker Change: It was pretty much.
Speaker Change: Half and half.
Speaker Change: So we did see some price.
Speaker Change: Internationally, but most of that increase on price was coming domestically, but they both contributed.
Speaker Change: Got it and how would you characterize heather.
Speaker Change: Penetration of IQ3.
Speaker Change: Versus.
Speaker Change: The previous Gen in the quarter.
So.
Speaker Change: We.
Speaker Change: Alright.
Speaker Change: Total.
Speaker Change: <unk> for the quarter was just over 50%.
Speaker Change: Domestically it was over 80, so we saw continued penetration.
Speaker Change: In the domestic channel and then with the launch of IQ3 internationally in September we saw some pick up but it still was not to the extent that weekly.
Speaker Change: Domestically as you would expect.
Speaker Change: Got it fair enough.
Speaker Change: So your commentary about harmonics and <unk> five that caught my attention I mean, its pretty intriguing.
Speaker Change: I guess I'm more so curious.
As I understand it Joe.
Speaker Change: For harmonics, you will need multiple frequencies.
Speaker Change: Insulate the region of interest.
Speaker Change: Maybe you can talk about.
Speaker Change: The potential for heat generation.
Speaker Change: And the life span of the device how do you balance.
Speaker Change: Introducing harmonics of the ultrasound of the chip.
Speaker Change: So the key to to getting harmonics and I'm not a complete expert I'll do my best to answer this and then I'll get our experts if you need further information, but the key to harmonics is increasing the mechanical pressure.
Speaker Change: And historically the ability to get that increased pressure is not something that is inherent.
In a in a processing chip, but given the Mems.
Given the ability to increase the voltage through the Mems.
Speaker Change: Significantly increases mechanical pressure and when do you increase mechanical pressure.
Speaker Change: Then.
Speaker Change: It allows for this harmonica effect and the harmonic effect allows for a.
Speaker Change: A more specific in a different frequency wavelength, which allows a much higher quality image to come back to the processor. So.
Speaker Change:
Speaker Change: That is something that are.
Speaker Change: We're in early days of semiconductors people said, Oh, they can't do that Theyre never going to get to the image quality. They don't have the right.
Speaker Change: Pressure in the Brent mechanical index and a lot of what happens with digital has the ability to actually process. The image to there's a lot of digital processing that goes on after the image is brought in to continue to enhance it and so and that's allowed us to even be that much more specific than that stronger, but now entering harmonics.
Speaker Change: And interest in a place where I think no. One thought we can get to and can get to 10 to get image quality at levels that would rival the piece of electric crystals.
Speaker Change: Now the heat the heat artifact is a function of the friction more through the piece of electric crystals than our semiconductor chips are semiconductor chips do not produce the <unk>.
Speaker Change: Same kind of heat and don't have the same signature and the same and the same.
Speaker Change: Artifact. They do there is a certain level of warm as you push energy through but as the processors become more and more powerful and more and more efficient we don't get that type of proportionate artifact.
Speaker Change: The piece of electric it's analog if you want it if you want to have a greater image you have to just throw more power.
Speaker Change: And you're throwing it through a dumb crystal and there is friction and so the higher end carts deal with feet by literally having a radiator.
Speaker Change: Circulation, we went through.
Speaker Change: The pro in order to carry the heat away because regardless of how expensive. These devices are there is no way to get through the physics of electricity through our crystal, but as you're increasing your processor strength and you're increasing your compute power and you're improving your voltage on your Mems technology.
Speaker Change: Itself is does not have the same type of one to one relationship with with electricity through the device and the heat artifact. So that allows us as processes get more and more powerful the ability to transmit a much higher quality dimensions. So we've been working on this and this has been probably.
Speaker Change: One of the things that as we are thinking about.
Speaker Change: The growth of our market and we're building the focus market with other companies, we are creating opportunities to democratize.
Speaker Change: Care by having our devices in practice and ambulances in clinics in rural sites in third world countries, but there is a.
Speaker Change: $10 billion to $13 billion market in the hospital and as more and more doctors actually have their own individual probes. They are going to want to have a workstation and that workstation can allow them to do more of their and facility work and so we have a vision on how we are going to craft that that whole strategy.
Speaker Change: <unk>.
Speaker Change: And I don't think the processing power and I don't think our semiconductors are limited I think it's a continuous innovation cycle.
Speaker Change: We have a decade has started off.
Speaker Change: Got it and Joe Heather I'll, let either of you handle the last question and I'll hop back in queue. After this.
Speaker Change: Your Q4.
Speaker Change: Numbers or the implied guide us through roughly sequentially flat.
Speaker Change: Joe Heather maybe you can help us reconcile your commentary about a strong finish.
Speaker Change: Is there conservatism built in there.
Speaker Change: Other mitigating factors, we should be aware of any additional color would be greatly appreciated and once again congrats on a great quarter.
Speaker Change: Thanks Raj you want to go Heather you want me to do it.
Speaker Change: Either one.
Speaker Change: Yeah, Yeah, so I mean, it's.
Speaker Change: It's we're basically calling for a <unk>.
Speaker Change: 2025% growth quarter so.
Speaker Change: We don't look at things that are sequential we'd look at year over year, because our quarters are different in each quarter paces differently different things happen in different quarters that affect our business and so.
Speaker Change: We think everything that we have we don't.
Speaker Change: We do think that we do build in a little bit of conservatism as I think anyone would.
Speaker Change: As you are putting numbers out there, but I don't think 25% growth rate is kind of in to sneeze at.
Speaker Change: There's a lot more to come in 'twenty five.
Speaker Change: And I would I would echo that.
Speaker Change: As usual, we do build in some conservatism, we had a very strong third quarter.
Speaker Change: 33% growth.
Speaker Change: And we do expect we do.
Speaker Change: Typically you have a strong fourth quarter with the holiday season.
Speaker Change: But we do feel bad for 'twenty type of phone critical definite thoughtfulness to the year.
Thank you.
Speaker Change: The next question comes from Josh Jennings from TD Cowen Josh Your line is now open.
Josh Jennings: Hi, good morning. Thanks.
Josh Jennings: So suraj is congratulations great to see the momentum on all the progress I was hoping to just.
Josh Jennings: To give more details on the USA Q3 launch it was a really strong quarter.
Josh Jennings: Can you just help us think about the different channels seems like <unk>.
Josh Jennings: Generated growth in all the U S channels.
Josh Jennings: And then also.
Josh Jennings: <unk>.
Josh Jennings: Just with.
Josh Jennings: With a pipeline sits it seems like it's filling nicely. According to your high level commentary on 2025.
Speaker Change: Sure. So I think what's exciting about all of the channels delivering so we have an E comm channel where people can buy online we have an inside sales channel that deals with the out of hospital ambulance companies clinics et cetera, and then we have a direct sales force that goes and build a pipeline around working with harsh.
Josh Jennings: <unk> and <unk>.
Josh Jennings: Which is a much.
Josh Jennings: Higher.
Josh Jennings: Level of sales, but also something that has.
Josh Jennings: A longer time to close.
Josh Jennings: I think the.
Josh Jennings: The underlying thought around why things are going so well as a just like I said, we have great people and they're executing on all levels. They believe in the mission.
Josh Jennings: And we have a product that basically all our customers want and so when you have when you go into a bit viral and when things are going well.
Josh Jennings: People want to buy your product they buy it wherever it is convenient for them and we make they don't have to bump into a sales rep to buy the product. They can go online they have an easy online store, where they can purchase a product. They can choose what it is they want they can choose the accessories they want.
Josh Jennings: And they go forward and if they have any questions. They have an inside sales team to speak too. So so we really kind of have a bit of a surround sound capability to meet our customers' needs and I think the general theme is there are many customers who want to buy our product and all of our channels are working.
Josh Jennings: Rather have a lot of little orders all day long than that.
Speaker Change: Darrin, It's crickets and then boom you get one big order than is cricket's again.
Darrin: Trust Me I Love I Love Big orders, and our direct sales team with hospitals or building, a big pipeline, especially given this new UMC data everyone's sitting there, saying Oh my gosh. They want system wide. They went to 64 departments across the health system, everyone has a probe their mind is blown instead of <unk>.
Darrin: The ultrasound fanatics getting their own probe now theyre. Realizing that this is a new standard of care and so our direct team is now working with all the focus directors around the United States to start identifying how we can build out a mirror.
Darrin: For a system wide program to U R. M C, but the general theme, Josh as you know.
Darrin: Product is doing great. They love it we've met their needs.
Digital can do all the use cases, there is no sacrifice and image quality that was a perception in the past.
Darrin: And our roadmap in the future is pretty exciting.
Josh Jennings: Excellent I wanted to also just follow up on the <unk>.
Josh Jennings: European Union Ross update and just.
Speaker Change: It sounds like you had a productive discussion with some of the representatives of the European Commission.
Speaker Change: Maybe help us understand any more color you can share on those discussions.
Speaker Change: And just what are next steps you guys are going to submit.
Speaker Change: We submitted the relocation request and what happens from here and are there any big milestones that we should be keeping looking out for.
Speaker Change: Well thanks for that so first we were pleased they met with US in the first place I mean, these standards go across all electronics, and consumer and industrial health care and other and other market. So the fact that even met with US we were excited and truthfully they've been giving exemptions.
And there was.
Speaker Change: <unk>.
Speaker Change: Let's just say that when people scheduled meetings with them they're usually.
Speaker Change: We're usually complaining about how the standard can't be hit and why they need an exemption.
Speaker Change: I think they were delighted to pretty much have the first being in health care.
Speaker Change: Where we were asking not only do we not need an exemption.
Speaker Change: I don't think its right for others to have it going forward because of the equivalent so that was I don't think a meeting they expected.
Speaker Change: I think they're a bit fatigued with the <unk>.
Speaker Change: Exemption process I think they feel they've given the ultrasound industry 17 years, and if you read the public documents on why they explain they can't do it. It's basically they don't have in my view the appropriate respect for the standards are not investing in new technology, and then take them for granted.
Speaker Change: And so I think it was a bit of a breath of fresh air for them.
Speaker Change: But of course, there is a process we can have a meeting, but there's a process that they hold or not biased or they wanted to do the right thing for the consumer and companies.
Speaker Change: And the process is going to allow for that so that basically there are steps.
Speaker Change: We just submitted the dossier that will be.
A couple of months for public comment and then like 10 months for them to do their due diligence with advisors and then they'll make a decision and allow that.
Speaker Change: Two exists for a couple of months.
Speaker Change: And then once that decision is made and after that couple of months. So that's not what 14 months. So around this time of the end of next year. Ultimately we will have made a decision.
And they're supposed to.
Speaker Change: Reapproved or reexam cause the exemption expires in June or July of 'twenty, five, but they will allow us to go until this decision is made they won't go and Reapprove an exemption until nowadays we have reviewed this.
Speaker Change: But then once they've made a decision that will give the industry 12 months to 18 months to adjust and then it'll be enforced but.
Speaker Change: They were very receptive they believe they want there.
Speaker Change: The environment to be improved.
Speaker Change: They want this standard to be upheld and I think their patience with industries and certain industries.
Speaker Change: Is being tested and when they see a company like ourselves that are innovative that are completely digital that have now the ability to meet these needs without having to affect the environment I think they want companies like butterfly to succeed which is the essence of the standard.
I appreciate all those details I mean, let's just lastly.
Speaker Change: Very intriguing update on <unk> five but wanted to just ask if you could share some more details on the IQ station.
Speaker Change: Should we be thinking about this as well.
The IQ3 and next generation probes that are attached to a workstation or is it going to is it going to be more complex until the build out of here of your car unit.
Speaker Change: Thanks for taking the questions.
Speaker Change: Yes, Josh. Thank you. So we are certainly going to unveil overtime the capabilities of the workstation.
Speaker Change: The IQ station itself.
Speaker Change: As a method to amplify.
Speaker Change: Carol just out.
Speaker Change: And to allow for greater in facility imaging, but with a new workflow and a new way of providing.
Speaker Change: Providing yes, and so the closer we get.
Speaker Change: This is.
Speaker Change: The <unk> chip is a 2026 chip it is.
Speaker Change: Hoping to get that in the beginning of 'twenty six and so we would hope that the hardware associated with <unk>.
Is following in that timeframe. So we are unveiling that we've had this major breakthrough and harmonics and that we now see that this is a huge opportunity for our upside growth.
Speaker Change: And over time, we will give greater and greater transparency and we will show you. How this thing works, but a completely re imagined the workflow of the imaging it puts at center stage.
Speaker Change: The ability for clinicians to with their patients to the appropriate diagnosis and we think this is tremendously liberating for ultra Sonographer. We're also sonographer I'm not going to have to be subject to a particular room that have patients come in book with them, they're going to be able to be mobile and to be able to be even more productive in excess.
Speaker Change: So.
Speaker Change: It's a complete re imagining of M facility imaging.
Speaker Change: Outstanding Thanks again.
Josh Jennings: Thank you Josh.
Speaker Change: As a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad. Our next question comes from Ben Hayner from Lake Street Capital markets. Your line is now open.
Ben Hayner: Good morning, guys. Thanks for taking the questions.
Ben Hayner: First off just wanted to dig in a little bit on the homecare pilot.
Ben Hayner: I think you mentioned a per man per member per month structure. There is it going to be your people doing all the scans.
Ben Hayner: Is it going to be cannot only the folks that are considered at risk for heart failure or is it going to be kind of all the members within <unk>.
Ben Hayner: Whether it's an MSA or counties or however, that's being structured.
Speaker Change: That's a great question. So what we're doing first of all is we're gonna be.
Speaker Change: Educating their teams on how to provide share using our technology and our software.
This is a way of amplifying and accelerating the adoption of ultrasound using our AI tools and using a lot of our different products and so.
Speaker Change: We are bundling all of our capabilities and the ability of allowing them to build this capability, but it also has to do with with the the read of the images and the kind of telehealth virtual care wrap around so what we'll do is as we get through the pilot.
Speaker Change: We will walk through the product of services that we're providing.
Speaker Change: It is a very virtual care telehealth, but it wraps around some other things that we're doing for them to make it really easy for the caregivers who are at the bed side to have the information to take care of the patient today a patient for example in a skilled nursing facility who needs an image goes into an Ami.
Speaker Change: And the ambulance brings them to the hospital and then they go into.
Speaker Change: Into an ultrasound suite in order to have an image taken it's a massively but it's a huge amount of friction a huge amount of cost and they only do this probably when it's too late.
Speaker Change: But the ability to have bedside diagnostics and a frequent basis.
Speaker Change: It's easy where they can get the decision where they can then course correct that patient we believe has the opportunity to reduce.
Speaker Change: Massive amounts of costs in the health care system and this is going to be a big catalyst for those who are being penalised.
Speaker Change: Have other types of cost to go Readmissions.
Speaker Change: This is gonna be potentially significantly liberating for the health care environment and via an entirely new revenue stream for butterflies.
Speaker Change: Okay. That's helpful. And then you mentioned the folks that are getting penalized I know a couple a few years ago looks like.
Speaker Change: 75% or 80% of its still running that high.
Speaker Change: Deno.
Speaker Change: The last number I had heard where health systems were like 82% of U S. Health systems had some level of penalty to such Readmissions, because and I think the payers are getting kind of tired of it because there was a there was basically payment for someone coming into a nursing home getting set going into the hospital.
Speaker Change: Getting better go into the nursing home getting sick coming back to the hospital and the payers are just paying for that revolving door.
Speaker Change: And they're all focused on solving this problem. They don't want the revolving door. This is they don't want that to occur and many companies are trying to help the health care system in order to deal with that revolving door, we have a solution.
Speaker Change: That solution was just validated at a major medical center.
Speaker Change: Paper had just been accepted and will be presented and I look forward to after its publication sharing with you that data, but the tenants of that paper kind of build the foundation of how this care can be delivered using advanced AI tools, and allowing a less ultrasound skilled person on a very frequent basis to be able to extract.
Speaker Change: This data.
Speaker Change: Then haven't read by a professional and then make the appropriate decisions that are going to improve care. So.
Speaker Change: In order to build a new market instead of just creating a product and sitting back and waiting for people to adopt and accept et cetera. Sometimes you have to create this catalyst impetus to say look we're just going to do it ourselves we're going to take what we do better than anyone else in the world and we're going to train people how to do it and we're gonna be right there for them.
Speaker Change: As Dave and build this competency and this is the beginning of ultrasound getting into nursing and getting into all different.
Speaker Change: Walks of healthcare life, using advanced AI tools that butterfly house. So we're.
Speaker Change: We're very excited and then now as our garden partners become more and more commercial those garden applications just to answer. Your other question will allow us to not only help congestive heart failure patients, but patients who have false patients who have <unk>.
Speaker Change: Bladder infections patients who have other conditions that deal with the same type of revolving door through the hospital and ultimately is going to allow people to live better.
Speaker Change: Better lives and the.
Speaker Change: Final days of of their care.
Speaker Change: Sure.
Speaker Change: Okay very helpful. There.
Speaker Change: Yes.
Speaker Change: I guess, just lastly for me with octave.
Speaker Change: Or do you envision the economics work in there.
Speaker Change: For example, I want to use you guys with technology.
Speaker Change: Modify the rheology cheese varieties.
Speaker Change: Build something like Universal Nacho cheese sauce.
Speaker Change: The thing I.
Speaker Change: I could be confident we can do.
Speaker Change: Great.
Speaker Change: Nevada.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Uh huh.
Speaker Change: The areas, but they get that deal done.
Well, we're pretty much the way it works is that Nacho cheese company.
Speaker Change: Could come in and say look we want to deliver this kind of frequency, we want to be able to deliver it in this manner.
Speaker Change: Energy that's array. This this they will give us a spec and what's beautiful.
Speaker Change: About the semiconductor is it's basically programming in order to deliver its almost like putting a television show on a television screen all the pixels can be programmed and as you modify the pixels you get these different images, so whereas with the analog ultrasound. It's literally you got to put a cap.
Speaker Change: So to that it's you have to cut the crystal to a certain wavelength and then you put it in and you can monitor the energy in and out of that wavelength, but you can't monitor the wavelength the cat market the breadth you can't.
Speaker Change: Move et cetera, so someone would just come to us and say look we want this frequency we want this step we want this.
Speaker Change: Alright, et cetera, et cetera, et cetera, and then Nevada simply.
Speaker Change: Through software.
<unk> program the device to do it and if we then we can get it to a lab within a week or two.
Speaker Change: And then show them that we can deliver that energy and we've done this multiple times now and then when they see that they say Oh, okay. Great. You can do it and then we get into a discussion on software licensing on what development they would need in order to do it hopefully they can do it all on their own if they can and need us than we have in <unk>.
Speaker Change: <unk>.
Speaker Change: Then depending upon the market and exclusivity there could be a license fee and then of course, there is a transfer of the individual chips when they purchase it for their products and so this is not a one time job shop is that for each one of these new customers.
Speaker Change: Each one of these new opportunities provides.
Speaker Change: A product life long revenue stream for us in the future.
And we think octave could be huge it's a fungible semiconductors that can be programmed it's almost like we are.
Speaker Change: Of Gpus, and the video where we have U P use with ultrasound and these can be used for all different types of applications.
Speaker Change: That are out there.
Speaker Change: Okay, great well I'll get those provisional patents filed will take the rest of my questions offline.
Speaker Change: Yes.
Speaker Change: Awesome. Thank you.
Speaker Change: Just as a final reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: And that way.
Speaker Change: Last question in the queue, so I'll hand back over to Joe Devivo for any final remarks.
Joe DeVivo: I just wanted to thank you all for your attention butterflies continuing its progress the momentum is real the team is awesome the opportunities understood and our customers are responding and great ways.
Joe DeVivo: The Investor day that we talked about was the roadmap if you haven't seen the Investor day.
Joe DeVivo: The presentation I would encourage you to do so because that's what we're guiding to and we are executing too. So I appreciate all the attention and we look forward to more updates in the future. So thank you.
Speaker Change: That does conclude the butterfly network Q3, 2024 earnings call.
Speaker Change: Appreciate your presence.
Speaker Change: And participation have a nice day and you may now disconnect.
Speaker Change: [music].