Butterfly Network, Inc. Q2 FY2025 earnings call

• Joe highlighted the highest quarterly revenue, gross margin at 64%, and lowest cash use. - Closed a large enterprise-wide deal with a top health system. - Progress with Butterfly Garden: added 2 new partners, and partners received FDA clearance. HeartFocus to launch in Q3. - Launched MSK VUE educational app. - Added descending aorta scanning protocol to ScanLab. - Rutgers study accepted by a medical journal. - Compass AI software platform to launch in H2 2025 for improved documentation and workflow. - Octiv partnership with generative AI company, and HomeCare pilot concluded with negotiations for first commercial agreement.

The second quarter marked the first full quarter since the Butterfly iQ3 launch, with the company achieving its highest quarterly revenue in history at $23.4 million. Gross margins reached an all-time high of 64%, and cash use was the lowest at $7 million. Revenue breakdown: U.S. revenue was $17.2 million (essentially flat to prior year, driven by chip sales and higher average selling prices but offset by lower probe volume), international revenue increased 19% to $6.2 million (driven by iQ3 launch and geographic expansion). Product revenue was $16.6 million (13% increase vs Q2 2024, driven by higher average selling prices and chip sales), software and other services revenue was $6.8 million (flat to prior year, with higher enterprise software revenue offset by lower renewals of individual subscriptions). Software and other services mix was 29% of revenue.

• Revised full-year revenue guidance to $91 million to $95 million, with adjusted EBITDA loss revised to $32 million to $37 million. - Q3 revenue expected to be in the range of $20 million to $22 million, with adjusted EBITDA loss of $8 million to $9 million. - Guidance revision due to macro headwinds causing customer purchase delays and larger deals being delayed.

• Macro environment uncertainties affecting customer purchase decisions, with delays in U.S. hospital/enterprise channel and publicly funded global health deals. - Uncertainty around the duration of funding and policy changes impacting revenue projections.

Q: How is the competitive landscape affecting Butterfly?

A: Revisions are not due to competition. Larger deals are delayed as they are new and require budget calibration, not due to competitors. The company is blazing new trails in handheld ultrasound.

Q: Can you elaborate on the guidance revision and macro headwinds?

A: Guidance was revised due to global health deals being delayed as funding sources are uncertain, and enterprise/medical school deals being pushed out. Macro headwinds include customer purchase delays due to funding uncertainty.

Q: Provide color on the HomeCare pilot program?

A: The program fee is based on the number of patients/members enrolled. Revenue is from program fees and revenue per scan. The first commercial agreement is anticipated within the next few months and will scale with the number of patients/states.

Q: What about the P5 next-generation versions and form factors?

A: P5 will be a generational step-up in image quality, allowing Butterfly to access core budgets of health systems by competing with point-of-care ultrasound carts and displacing existing competitors with superior image quality.