Butterfly Network Q1 2025 Earnings Report

Butterfly Network EPS Results

• Actual EPS: -$0.06
• Consensus EPS: -$0.09
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: N/A

Butterfly Network Revenue Results

• Actual Revenue: $21.23 million
• Expected Revenue: $21.16 million
• Beat/Miss: Beat by +$73.00 thousand
• YoY Revenue Growth: N/A

Butterfly Network Announcement Details

• Quarter: Q1 2025
• Date: 5/2/2025
• Time: Before Market Opens
• Conference Call Date: Friday, May 2, 2025
• Conference Call Time: 8:00AM ET

Butterfly Network (NYSE:BFLY) develops, manufactures, and commercializes ultrasound imaging solutions in the United States and internationally. It offers Butterfly iQ, a handheld and single-probe whole body ultrasound system; Butterfly iQ+ and iQ3 ultrasound devices that can perform whole-body imaging in a single handheld probe integrated with the clinical workflow, and accessible on a user's smartphone, tablet, and almost any hospital computer system; and Butterfly iQ+ Vet, a handheld ultrasound system designed for veterinarians. The company also provides Butterfly system, which includes probes, and related accessories and software subscriptions to healthcare systems, physicians, and healthcare providers through a direct sales force, distributors, and eCommerce channel. In addition, it offers cloud-based software solutions to healthcare systems, teleguidance, in-app educational tutorials, and formal education programs through its Butterfly Academy software, as well as professional services for large scale deployments; and ScanLab, an education-only app provides written walkthroughs and reference imagery to guide real-time educational scanning, enhancing the learning process. Butterfly Network, Inc. was founded in 2011 and is headquartered in Burlington, Massachusetts.

Butterfly Network Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, and welcome to the Butterfly Network First Quarter twenty twenty five Earnings Call. My name is Carla, and I will be coordinating your call today. During the presentation, you can register to ask questions by pressing star followed by one on your telephone keypad. I would now like to hand you over to the Chief Financial Officer, Heather Gatz, to begin. Heather, please go ahead when you're ready.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

Good morning and thank you for joining us. Earlier today, Butterfly released financial results for the first quarter ended 03/31/2025 and provided a business update. The release and earnings presentation, which include a reconciliation of management's use of non GAAP financial measures compared to the most applicable GAAP measures are currently available on the Investors section of the company's website at ir.butterflynetwork.com. I, Heather Goetz, Chief Financial and Operations Officer of Butterfly alongside Joseph DeVivo, Butterfly's Chairman and Chief Executive Officer, will host this morning's call. During today's call, we will make certain forward looking statements.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

These statements may include, among other things, expectations with respect to financial results, future performance, development and commercialization of products and services, potential regulatory approvals, uncertainties regarding the potential impact of healthcare funding and the size and potential growth of current or future markets for our products and services. These forward looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those contained in the forward looking statements. These and other risks are described in our filings made with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward looking statements and the company disclaims any obligation to update such statements. As a reminder, this call is being webcast live and recorded and we will be referencing a slide presentation in conjunction with our remarks.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

There may be a short delay between the live audio and the presentation being shown. To access the webcast, please visit the Events section of our Investor website. A replay will also be available on the page following the call. I would now like to turn the call over to Joe. Joe?

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Good morning, everyone, and thank you for being with us on our first quarter twenty twenty five call. We're pleased to deliver another quality quarter in line with our guidance of 20% growth and making meaningful profitability improvement with gross margins of 63% while improving adjusted EBITDA loss from $13,200,000 a year ago to $9,100,000 now. We accomplished this while delivering our strategic priorities and now a quarter into year two of our five year plan. When I joined two years ago, Butterfly was selling an IQ probe with a subscription software as well as an enterprise software program. Today, our portfolio includes two generations of probes with different price points, which allows us to bring in more value for premium technology while keeping a lower cost probe on the market for more price sensitive customers.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

We've added an AI marketplace called Butterfly Garden, a chip licensing program called Octave, and now Butterfly Home Care. You heard about progress setting up each of these programs over the last couple of years. And now in 2025, we expect them to make headway and begin contributing revenue. We've upheld our commitment to R and D, helping us maintain our leadership in focused technology and stay ahead of the first mover status in digital, cloud connected, open platform and EMR integrated systems. I'll share more on this, including the upcoming launch of Compass two point zero towards the end of the call.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

I'm very pleased with how our company is maturing, diversifying to have many paths to growth. This will build upon our resilience and ability to consistently deliver our results. So let's jump in with our core POPUS business. The first half of our fiscal year is usually filled with medical school opportunities, and this quarter was no different. It's clear that students want to begin their medical training with a butterfly of their own.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

The transformation from schools having a few probes in the laboratory for many students to share to a personal probe being purchased for each four year student is well on its way. During the quarter, we saw more schools sign up for student probe programs. Among them was one of the country's largest colleges of osteopathic medicine who placed an order for one probe per student and committed to this model going forward. Schools are also lining up through the creation of their own campus stores for students to buy or just incorporating the device into the cost of tuition. We've been building our strategy for years to target medical schools, much like Apple has.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

So when students first got their Apple laptop, it opened the door to build a lifetime of brand loyalty. Similarly, when students start their ultrasound journey with Butterfly, it builds a path for loyal users for the future generations of our technology. So to remind you, there's about 25,000 incoming first year students a year that start medical school. And in 2025, we're going to see the first graduating class who's had four years of training on a butterfly. And when they go into residency, they'll be clearly distinguished and simply better residents than their peers without that training.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

This is how the flywheel turns. We are also making very good progress on our enterprise hospital selling program. We're on the verge of signing our second hospital enterprise customer who plans to integrate our Compass software throughout every department and hospital in their network. They've amassed about 600 probes in circulation and have committed to Butterfly as their focus probe of choice for the future. We do not yet have permission to share their name at this time, but I will say they're consistently voted one of the top five hospitals in the world.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

This will be another tailwind for our enterprise strategy. And as you know, hospitals learn from each other and even more from the most respected. I am very pleased with this accomplishment, and this will add momentum to the pipeline that we're working. On the international front, our focus remains on bringing IQ three to more areas while continuing our expansion in Asia and Latin America as well as high potential global health markets. I'd like to briefly comment here on some economic headwinds, first on the global health front.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

As you all know, Butterfly partners with over 800 NGOs worldwide to bring imaging to low- and middle income countries that historically had no access. This has been a growing part of our international revenue base. With USAID funding cuts, we've seen several opportunities get delayed this quarter while partners recalibrate. We're hopeful that this is a temporary disruption and that our growing ties with ministries of health and charitable organizations can help sustain the progress regardless. We're also closely monitoring discussions on broader economic pressures, which, if anything, can cause some deals to take longer to close.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Heather will provide additional context on this, along with her analysis of the tariff impacts. So before I get into updates on strategic initiatives, I'll turn it over to Heather to walk you through the numbers. Heather?

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

Thank you, Joe. We started 2025 with 20% growth or $21,200,000 of revenue for the first quarter. Our growth was primarily driven by higher sales volume in our U. S. Sales channels, the impact of the IT3 probe's higher selling price after its launch in 2024 and the delivery of semiconductor chips to one of our newly onboarded partners.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

Breaking things down between The U. S. And international channels, during the first quarter revenue was $16,600,000 which was 24% higher than the prior year driven by strong demand and total international revenue increased 9% over the prior year period to $4,600,000 largely driven by price. Breaking our revenue down between product and software and other services, product revenue was $14,200,000 an increase of 25 versus Q1 twenty twenty four. This increase was largely driven by the higher volume.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

Software and other services revenue was $7,100,000 in the first quarter, up 11% versus the prior year period due to the higher enterprise software revenue and increased licensing and services revenue from our partnerships, partially offset by lower renewals of individual subscriptions. Software and other services mix was 33% of revenue. The percentage of revenue from software and services has decreased as our product revenue growth outpaced software revenue with the launch of our iQ3 early in 2024 as well as our geographic expansion. Our total ARR, which is reported as part of software and other services grew slightly versus the prior year period led by an increase in our enterprise software subscription ARR. Turning now to gross profit.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

Gross profit was $13,400,000 in Q1 twenty twenty five, a 30% increase as compared to the prior year gross profit of $10,300,000 Gross margin percentage increased to 63% from 58% in the prior year. Gross margin percentage was positively impacted by higher average selling prices as well as improvements in our software and services margin due to a reduction in software amortization and lower hosting costs. Moving to adjusted EBITDA and capital resources. For the first quarter of twenty twenty five, adjusted EBITDA loss was $9,100,000 compared with a loss of $13,200,000 for the same period in 2024. The 31% improvement in adjusted EBITDA was driven by higher revenue, the previously mentioned improvement in gross profit and lower operating expenses year over year.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

These reductions and improvements led to a normalized cash burn of $6,700,000 during the quarter after adjusting for bonus payments. As we previously shared, in January, we completed a secondary public offering of 27,600,000.0 shares, which generated proceeds of $81,000,000 net of underwriting costs and related expenses. This capital will enable us to maintain our current level of investment to sustain our revenue growth as well as the option to opportunistically invest in strategic initiatives that can expand our market. The capital raise, along with our continued discipline in our cash use, resulted in cash and cash equivalents at the end of the quarter of $155,000,000 Before touching on guidance, I would like to provide some additional color about our risks and opportunities for 2025. Our direct exposure to tariffs is quite small.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

As many of you know, our chips are manufactured in Taiwan and our probes are assembled in Thailand. In The U. S, we have about six to nine months of inventory on hand. In order to meet the estimated demand for the remainder of 2025, if the 10% or 36% tariff were to be in effect, we would incur a few hundred thousand dollars of additional cost to import our probes to The U. S.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

On an annualized basis, had the tariffs been in effect for all of 2025, we estimate that at 10%, the impact would be under $1,000,000 and at 36%, just over 1,500,000.0 We are looking at different mitigation measures that include alternative assembly locations. Other changes the administration has made or is considering making are more challenging to precisely model. We know some of our customers face increased uncertainty on funding through the NIH, USAID or Medicaid programs. And while small, we did see an impact on our Global Health business in the first quarter. We believe the peak of uncertainty is likely to be in the second quarter of twenty twenty five as institutions seek clarity on funding plans going forward.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

As such, we have factored this uncertainty into our second quarter guidance. To the positive, both we and our customers are enthusiastic about Butterfly's medical and commercial value in home services and success in these initiatives may be quite impactful on an annualized basis. Furthermore, the pipeline of licensing opportunities at Optiv continues to build and while the timing of such transactions is difficult to pinpoint, this is a second source of potential upside. When we weigh these risks and opportunities together, we feel it is prudent to maintain our full year guidance of approximately 20 growth in revenue and adjusted EBITDA loss in the range of 37,000,000 to $42,000,000 while providing guidance for the second quarter of '20 '3 million dollars to $24,500,000 in revenue and 9,000,000 to $10,000,000 in adjusted EBITDA loss. We will continue to maintain our disciplined approach to expense control that has generated meaningful positive revisions to EBITDA, but we'll also invest appropriately behind our growth areas to enhance our delivery capabilities should upside revenue opportunities crystallize.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

To summarize, we delivered strong results in the first quarter and while uncertainties exist around the impact of policy decisions that the administration may make, we have the strength in diversification in our business and are excited about opportunities in front of us enabling us to reiterate our full year guidance. We certainly hope that healthcare providers receive appropriate funding going forward to best serve all patients. Nonetheless, should funding pressures come to fruition for domestic healthcare providers, Butterfly is extremely well positioned as our technology not only enables superior flexibility and strong image quality, but has allowed us to be a much more affordable solution at scale than the current car based ultrasound solutions. In addition, our semiconductor development path will continue to improve this price performance advantage with each subsequent generation. Simply put, we see Butterfly as the long term winner in Ultrasound in any macro environment.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

And thank you. With that, I will turn the call back to Joe.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Thanks, Heather. So I'll wrap up today's call talking through some of our strategic initiatives. So first, Octave. So we're continuing to make meaningful progress across growing our portfolio of partners and delivered strongly in the first quarter. We're gearing up to publicly announce the biggest partnership yet.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

This partner, who I mentioned on our year end call, and I can't yet identify their name, is in the generative AI space and is developing a groundbreaking technology that may not only have implications for ultrasound imaging but for all medical imaging in general. This partner has already purchased our Ultrasound on Chip technology and will likely consume much more. We are excited to share this game changing innovation with you soon. The Octave team is actively in discussion with over 25 other prospects, including some of the leading medical device, pharmaceutical, surgical robotics, implantable companies as well as a growing number of nonhealth care opportunities across generative AI, blue chip technology, defense, aerospace and even oil and gas. We remain extremely excited about the potential and the growth of Octave and see this as a material driver of value as we look to realize our long term growth plans and unlock the value of ultrasound on chip for investors.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

On the Butterfly Garden front, we signed two more partners in the first quarter, bringing the portfolio to 23 total. As I mentioned last call, we expect our first partners to launch FDA cleared clinical applications this year, and we remain right on track for this. Our partner, Deske, just received FDA clearance for their Heart Focus app and aims to commercialize with Butterfly in Q3. Their app uses advanced AI that makes it simple for non specialists to perform cardiac echo studies. This will not only allow us to deliver yet another AI tool to Butterfly customers, it will provide a new capability to our home care business to more holistically help partners manage their congestive heart failure patients.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

So, for example, historically, patients in a skilled nursing facility had to get transported to a hospital via ambulance and wheeled into radiology suite or cardiology suite to receive a cardiac echo scan. That can be a multi thousand dollar event for transport alone. With Heart Focus and Butterfly, they will be able to get the Echoscan at their bedside, no transport, by a Butterfly trained nurse and have the scan read by a remote cardiologist for a fraction of cost. Moving more on Home Care. So in the first quarter, our pilot activity increased as the program shifted into clinical execution.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

So we've been scanning the identified pilot population that consists of heart failure patients and those discharged following an in hospital setting. So as you recall, it's reported that between twenty five percent and forty percent of patients that are hospitalized with congestive heart failure are readmitted within thirty days. So while it remains early, we're pleased to share that still none of the patients in this category have had to be readmitted. We are more encouraged than ever that this pilot demonstrates the opportunity for repeatable, meaningful clinical difference and economic impact. It is proving to be a real solution.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

And we're able to deploy our technology, train nurses without previous ultrasound skills to do pulmonary scans using proprietary techniques and AI tools and then monitor and remotely assist them with clinical diagnosis in a rapid, asynchronous fashion. Our confidence is building that we can move towards commercial terms this summer while targeting our first agreement in place by the end of the year. Once we sign our first commercial deal, we will prepare for expansion of this AI powered in home monitoring solution for congestive heart failure across the country. So to wrap up, I want to circle back to what I mentioned at the start of the call. In the second half of twenty twenty five, we plan on launching our Compass two point zero software, which will have many new features, expedited workflows and new capabilities.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

It will fill a major unmet need in focus and provide us a new revenue stream to help hospitals reduce costs as focus continues to mature and our software becomes more and more essential. I share this as a reminder that Butterfly is shepherding a whole new area of clinical care and excellence. We're not just a focused device. We have developed the most groundbreaking solution in imaging and continue to develop delivery mechanisms that help it proliferate through device sales and AI environment and service solutions at the point of care. Butterfly is in a league of its own.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

We continue to innovate for customers and deliver results for investors. Today, it's clearer than ever that the health care ecosystem is embracing Butterfly. We're seeing it being incorporated as the standard of care. Not only that, but it's becoming viral, and Butterfly is time and again emerging as the household name synonymous with POPUS. This quarter alone, we saw multiple viral moments from the unpaid placement of Butterfly in HBO's hit medical drama, The Pit, go watch episode twelve and thirteen and tell us what you think, to a social influencer posting her own real time gender reveal being scanned at home with a butterfly by a sonographer friend, which got over 13,000,000 views across Instagram and TikTok, the national coverage on CBS News featuring a butterfly trained Rutgers physician diagnosing a life threatening AAA at the bedside in minutes.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Butterfly's impact is showing up everywhere. The momentum is now, and we are crossing that chasm. With that, operator, please open the call for questions.

[Operator]

Thank you. We will now begin the question and answer Our first question comes from Andrew Bretman with William Blair.

[Andrew Brackmann, Equity Research Analyst at William Blair & Company, L.L.C]

Great. Hi, Joe. Hi, Heather. Good morning. Thanks for taking the question.

[Andrew Brackmann, Equity Research Analyst at William Blair & Company, L.L.C]

It sounds like you had some positive momentum with the second hospital enterprise contract in the quarter. Can you maybe just sort of talk about the process for securing that and some of the key learnings there from the process that can be applied to some of the additional opportunities that exist, in that area moving forward? Thanks.

[Operator]

It appears that we're having some difficulties with the audio. Please stand by while we solve the issue. Hello, everyone. We are back. The issue has been solved.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Alright. Andrew, can you hear me?

[Andrew Brackmann, Equity Research Analyst at William Blair & Company, L.L.C]

I got you, Joe.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Alright. Great. So, hey, I apologize for that. I'm not sure where that glitch came from. But, Andrew, great question.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

We've spoken a lot about our work with the University of Rochester, and that was a deal very early on in Focus, where there was leadership at the top who believed in the ability of of this growing and made, you know, a top down decision to deploy technology. Since then, what's happened is thousands of doctors, tens of thousands of doctors have been purchasing Butterfly. And Butterfly's proliferation throughout health systems, whether they know it or not, has actually been extending it. So what's occurring is there's this a groundswell of activity. And what we've been doing is working with health systems to identify and show them not only what's happening in facility, but what's happening with their with their doctors throughout the facility.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

And as that scale grows, they realize that they're from compliance reasons, there's a need to compile that data. And from a responsiveness standpoint, they need to pull that data in for patient management, etcetera. So a lot of like, this second deal is because of a groundswell because doctors are selecting a butterfly. And we're seeing that in institution after institution after institution. It's very much a BlackBerry to iPhone business case where, you know, while institutions are are using a certain older technology, people are, you know, wanting to have the newest.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

And so we're seeing so this particular institution over the years has been seeing more and more Butterfly's growth rate. They made a decision to, hope to institutionalize it, to build the software throughout, the network, and then now make this prime vendor. And and that is the way, because of the proliferation of Butterfly, that we see ourselves. And we have a list of enterprise accounts that will go enterprise with our software, will continue or will then start buying more of our hardware, and we'll commit to the education of their physicians to build the competencies to have ultrasound at

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

the bedside. So I hope that's helpful.

[Andrew Brackmann, Equity Research Analyst at William Blair & Company, L.L.C]

Yeah. That's terrific. I think it's a great sort of case for the flywheel while we're working here. So I guess as I sort of think about the inputs to that flywheel, you caught out momentum in more one on one one to one models for student buy programs. Can you just sort of talk about the funnel there for additional opportunities with schools?

[Andrew Brackmann, Equity Research Analyst at William Blair & Company, L.L.C]

Any conversations that sort of have picked up over the last handful of quarters? Thanks.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Well, thank you. So we just had a conference a month ago, AACOM, which is a collection of osteopathic schools who you know, have their annual meeting. And at that meeting, it was standing room only as schools were talking about the one to one programs that they were building, whether it's being through a campus store program or whether being a a single purchase where they'll have it as a part of their tuition. You know, medical students go in to school with a list of things that they're required to have. And the the beautiful thing is it's not a one time capital purchase.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

This is a type of thing where every year, 25,000 new students come into medical education, and every every time we convert a a medical school to a one to one program, we didn't just sell it one time into the laboratory. We've locked in our program in perpetuity, creating a kind of annuity that's incredibly valuable. You know, continuing to sell hardware and and growing it off of a biz a base business, you know, sometimes you you you struggle to get that recursive revenue to make it easier, to go year over year. The medical school opportunity is going to create a recursive year after year and growing ability for us to improve our capital sales. And we're now seeing from the meetings that we've had with schools, it's not a matter of if, it's when.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

It's can we do one to one this year? Do we have the budget to do this this year? Do we do a campus store this year and build it in the budget for next? Those are the conversations. Whether or not they're building ultrasound into the program, that's now a foregone conclusion.

[Andrew Brackmann, Equity Research Analyst at William Blair & Company, L.L.C]

Okay. That's great color. I'll keep it there. Thank you.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

All right. Thank you.

[Operator]

Thank you. And the next question comes from Josh Jennings with TD Cowen.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Hey, Josh.

[Josh Jennings, Managing Director at TD Cowen]

Hi, good morning. Congratulations. Hopefully you

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

hear us.

[Josh Jennings, Managing Director at TD Cowen]

Thanks, Joe. We can. We can. No glitch. It's great to see the strong start to the year here.

[Josh Jennings, Managing Director at TD Cowen]

I wanted to follow-up on hospital channel. I mean, you there were publications by Rochester and Rutgers on the clinical benefits and economic benefits of adopting the Butterfly platform. Just how impactful has that been? And maybe tie that into just the hospital channel pipeline? And anything you can share on just conversion that you've seen to date and how that's kind of informing the guidance reiteration here for 2025?

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Thanks. I really appreciate that. The publication of the Rochester data was actually a seminal moment for us. It's taken us from an individual doctor sale or an individual department sale to start having conversations in the C suite of hospitals. And I think it's opened their eyes to realize I think people are surprised.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Like, you know, we literally will sit with a hospital. You know, I wish I can just, you know, rattle them through to you, but it's just I don't have approval to mention hospital names. But, I mean, we sat with we sat with chief medical officers, and then we'll tell them, you know, did you know that, you know, 200 of your existing doctors affiliated with your system have butterflies? And they're blown away. They have they have no idea that this is proliferated like this.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

And then we show them the Rochester data, And we say, well, look at this institution, look at what's occurred with the captured scans, the economics. And then now also, Rochester is doing a wonderful job building all of their clinical impacts on how this changes the care pathways for patients to be getting diagnosed earlier and how how that affects costs. So having that paper and having that, you know, line in the sand, plus just the simple groundswell that doctors are doing this without the without the institution. If we walk into institutions, we say, look. You have an enterprise problem.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

You don't even know it. And and they can't believe how many of their doctors have Butterfly. And that kinda puts them a bit, you know, at risk if they're not compiling all that data. And then and also there's a lot of leakage because those scans they're getting is not something that they can be reimbursed, obviously, if if it's not aggregated. Now everything we have is in the cloud.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

And the moment we we do an integration to their systems, they have access to all of that data. And so it's a very, very powerful thing. I mean, we don't see health there's not a health system out there that says, okay. Well, what's my enterprise budget for next year? I mean, it's just not on their radar screens historically, but it's becoming on their radar screens now.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Then when the second deal becomes public, it's gonna raise eyebrows. It's gonna

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

be like,

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

wow, this is happening. The conversations that we have with individual institutions become more and more real. Now, again, these are not areas that that are in the core budget. They have to you know, just like the medical schools, they have to build room and figure it out. So our pipeline is very large, but it takes a long time to get them across the finish line.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

And, you know, as Heather mentioned, there are some new things out on the horizon as far as, you know, people really looking at their budgets that slow things down a bit. But we have, Josh, as much of a tailwind behind butterflies I've seen in a business in my career. The positive energy, the fact that we're on the right side of history, the fact that our data is so clean, and the fact that the economics point to all the favorable economics you need, and then of course, the most important thing, the impact to patients is just very clear. So we're going to win this battle, and we're just very excited to be doing what we're doing. So I appreciate the question, Josh.

[Josh Jennings, Managing Director at TD Cowen]

Thanks for that answer. And I wanted to follow-up on just how you guys are segmenting or what you're seeing in the market for IQ three versus IQ plus maybe a more affordable solution. I mean, assumption has been IQ three is more prominent in terms of how it's being adopted in, the hospital channel, maybe IQ plus a little more in the, e commerce channel. But wanted to hear about the mix and just the strategy for continuing to have both platforms available for clinicians and hospitals and institutions.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Do you want to start on mix and then I'll do the second part?

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

Yeah. So

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

Josh, we're actually seeing strong adoption of IQ three across the board, in all of our channels, obviously most significantly within the hospital channel. In in q one, it was the since we launched in q four of last year internationally, we actually saw a pickup in the overall mix in total of our of our IQ three versus IQ plus. IQ plus still does remain strong in in the med schools and somewhat on ecom, but overall, we're selling more IQ threes than pluses.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Is that helpful, Josh?

[Josh Jennings, Managing Director at TD Cowen]

Excellent. That is. And I appreciate that. And I'll just sneak one more in on. It's great to hear that the new tariff policies are manageable for Butterfly.

[Josh Jennings, Managing Director at TD Cowen]

But wanted to just ask about how maybe currency is with a stronger dollar is impacting guidance, if at all, and especially just any exposure to the Taiwan dollar, which is appreciating greatly over the last couple of weeks, including today. Thanks. Thanks for taking all the questions.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

Sure. Yeah. We have virtually no, foreign currency risk. So, so that's not an issue for us. And and, obviously, on the tariff side, while, if the tariffs were in effect for the full year, they would have had an impact.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

We are still, looking at ways of mitigating it, and, you know, we're what we're leaning more toward is seeing that 10% versus the 36% number.

[Josh Jennings, Managing Director at TD Cowen]

Great. Thanks so much.

[Operator]

Thank you. And the next question comes from Suraj Kalia with Oppenheimer.

[Suraj Kalia, Managing Director at Oppenheimer & Co. Inc.]

Morning, Joe. Heather, can you hear me all right?

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Yeah. We can.

[Suraj Kalia, Managing Director at Oppenheimer & Co. Inc.]

Hi, Josh.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Hopefully, you can hear us. Perfect.

[Suraj Kalia, Managing Director at Oppenheimer & Co. Inc.]

Yep. So I'll I'll throw in both my questions here, guys. What is the split between price and volume, specifically in The U. S. And product sales?

[Suraj Kalia, Managing Director at Oppenheimer & Co. Inc.]

And also, Joe, maybe if you could shed some light on how should we think about competitive displacements, if any, with IQ three? You mentioned the five top five hospital partner. Was that sort of a de novo get? Was that a competitive get? Any additional color to help us assess the landscape would be appreciated.

[Suraj Kalia, Managing Director at Oppenheimer & Co. Inc.]

You for taking my questions.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

So let let me answer let me answer that first. So these this is it is a very new market to to build a focus program. And so I don't believe it is a displacement because that would that would denote there was a program to begin with. I think it's a it's a choice of a winner. So they'll have a bunch of vendors or a bunch of technologies in the hospital.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

They decide to build a program, and then they choose Butterfly. So on the hardware side, I believe that's more the selection of the winner than taking an incumbent out because, again, having an incumbent for enterprise program you know, denotes that there was one to begin with and there wasn't. But there is a winner, that's Butterfly. Now on the software front, there are smaller companies who have, you know, certain products that are focusing on data aggregation that have been around a while. And so typically in an enterprise win, we first win the software deal.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

We win software to go throughout the enterprise, and then we win the hardware. And that's kind of a two step process because remember that our software works with other platforms. So if you have point of care ultrasound and you have a bunch of different products, when you put our software in place, it now can can pull all the data from all the devices and then help you to bridge to data management, the bridge to packs, and the bridge to revenue cycle management. So that is very competitive and that is very contested. But we win well more than the majority, and we're displacing a lot of older, let's say, more limited technology.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

So that that is when we look at the dynamic. It starts there. And then when they decide to go throughout the hospital, you know, they choose, you know, who's the best and most fungible, and that's where we win.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

Then Suraj, on the price volume when we look at the curves, it's about 80% volume, 20% price. Where we really saw the pickup on the price was in the international market. If you recall, we launched I q three in q one of last year. So we didn't have the pickup in domestically, but we did internationally.

[Suraj Kalia, Managing Director at Oppenheimer & Co. Inc.]

Thank

[Suraj Kalia, Managing Director at Oppenheimer & Co. Inc.]

you.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

Yes.

[Operator]

The next question comes from Ben Hiner with Lake Street Capital.

[Ben Haynor, Managing Director at Lake Street Capital Markets, LLC]

Good day folks. Thanks for taking the questions. Just first for me on the active partnerships that you have signed, it sounds like we're going to hear a lot more on one of them in relatively short order. But I was wondering if there's any more color on the ones that maybe haven't been talked about more prominently like the Force Neurotech one, where you can maybe share a little bit more about the applications, potential launch timing, any any anything else that you can share on that front?

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

You know, if if if you humor me, I'll I'll I'll I'll just tell you an anecdote. I'll I'll tell an anecdote from Forrest. So, again, this is a five year research project for brain computer interface, very similar to Neuralink, but it's not using wires to go in different parts of the brain. It's using ultrasound to see and then ultimately potentially intervene. There was this one use case just a month ago where they've been searching for patients who actually have an open skull due to some other injury.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

There's access to the brain. And so they were able to place the technology directly onto the brain for someone in a coma, and you would be able to see the brain activity. And in this particular in in this particular setting, the brain was dark. And then when they would ask the patient a question, a specific question, they would see brain activity through ultrasound. Think about that.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

That's a that's a patient who's in a coma, and the family doesn't know if that patient can hear them. The family doesn't know if they're awake or not. But with having the ability of using FORUS advanced algorithms and on top of our core technology, they found out that that patient was actually present in that coma. And those are the types of things that they're doing. And that's why when we talk about Octave, our technology is foundational.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

It's not point of care ultrasound. That's just the first application of our technology. But the ability to tune it, the ability to program it, the ability to miniaturize it, and then the ability to learn from it and for it to dynamically cycle on its learning through AI makes it probably one of the most important imaging innovations. And our partners are all developing on this platform. And I believe one of our partners, Mendera, will be commercial in the near term.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

We're going to see another partner be commercial. So this is going to this Octave creates an exponential flywheel because every time our partner succeeds, we succeed. You know, we do everything to help them, and as they succeed in the marketplace in the future, that amplifies our technology through and through. So that it literally, you know, Octave, I think I've mentioned this, you know, could be bigger than Butterfly. Butterfly could be a division of Octave in the future because the technology is so core, is so fungible, and has such an incredible TAM.

[Ben Haynor, Managing Director at Lake Street Capital Markets, LLC]

Excellent. Thanks for the color there and

[Ben Haynor, Managing Director at Lake Street Capital Markets, LLC]

the

[Ben Haynor, Managing Director at Lake Street Capital Markets, LLC]

anecdotes. Just following up on kind of the foundational aspect of the technology, any more updates you can kind of provide on future chips, the IQ station, form factors, it's wearable, anything of that nature?

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

It's all moving. We have the flywheel is continuing to turn. I think, the end of 'twenty five. Sometime by the end of 'twenty five, we'll be in production on the P5 version of our technology and and able to then, you know, start the regulatory process and validations, you know, for us to be ready, you know, by the end of, you know, '26. So we're you know, everything there is proceeding exactly the plan.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

We are in development of all the other items that you've mentioned. And I think there's gonna be a few surprises, you know, around that time frame as well. But we're trying to show our roadmap without completely showing our hand.

[Ben Haynor, Managing Director at Lake Street Capital Markets, LLC]

Thanks, Don. And then lastly for me, following up on an earlier question. These medical schools kind of making the decision to adopt Focus and go potentially one pro per student, is there kind of a general cutoff in terms of when they would need to make that decision for a given school year?

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Yeah. Actually, great question. So their fiscal year ends June 30, and then they have new budgets going forward. And so typically, whenever whenever they are making a decision for the next school year, it it occurs either at the end of our first calendar quarter or mostly in the second calendar quarter. And that's why, you know, if you look at our historic phasing quarter to quarter, our first quarter is usually kind of the slowest.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Our second quarter is usually up there as either the highest or equal to our third or our fourth quarter. And our third quarter is usually like the first. So we go we're we're kind of at baseline. We go up and then down and then up, and and that's just because the medical school business pulses in that second quarter. So that activity, like, literally our team is very active with customers right now.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

And literally, all the conversations are, you know, how do we get there? Can we do it now? Or, you know, do we budget it for next year? How do we get this in? You know, another interesting anecdote is several of the most progressive medical schools with POCUS are graduating their first four year class in 2025.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Rochester being one of them, but there are several other schools that those kids are graduating now. When they go into residency, they're gonna have a com they have a completely different, incredibly valuable skill set that their colleagues and their mentors on average don't have. And they're going to be distinguishing themselves in the ability to do better diagnosis and deliver care. That again is going to be just one more step in the flywheel of mass adoption of Butterfly's ultrasound.

[Ben Haynor, Managing Director at Lake Street Capital Markets, LLC]

And make all the other residents jealous.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

And get and get them into butterfly and get them into our training courses, and we will get them there as fast as possible.

[Ben Haynor, Managing Director at Lake Street Capital Markets, LLC]

Excellent. Well, thanks a lot. Thanks a lot for taking the questions, guys. That's that's it for me.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

Appreciate it, Ben.

[Heather Getz, Executive VP, CFO & COO at Butterfly Network]

Thanks, Ben.

[Operator]

As we currently have no further questions in the queue, I will hand back over to Joe DeVivo for any final comments.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

So first of all, you for joining us this morning. We continue to make progress on all the fronts. As we mentioned, we continue to believe that we have core market tailwinds in our adoption and we're building the right businesses that are going to get us to the right place. We know that we are entering in some uncertain times and we have a lot of shots on goal. And if one thing slows down, another thing will speed up.

[Joseph Devivo, President, CEO & Chair at Butterfly Network]

But we are focused on hitting our objectives and delivering for our investors. So we appreciate your support and look forward to continued success this quarter and then our next update. So thank you very much for joining the call.

[Operator]

This concludes today's call. Thank you everyone for joining. You may now disconnect.

Participants

Executives

• Heather Getz, Executive VP, CFO & COO
• Joseph Devivo, President, CEO & Chair

Analysts

• Andrew Brackmann, Equity Research Analyst at William Blair & Company, L.L.C
• Josh Jennings, Managing Director at TD Cowen
• Suraj Kalia, Managing Director at Oppenheimer & Co. Inc.
• Ben Haynor, Managing Director at Lake Street Capital Markets, LLC