Butterfly Network, Inc. Q3 FY2024 earnings call

• Accelerating growth in core focus business: Exceeded operating plan with 33% year-over-year revenue growth, fifth consecutive quarter of meeting or exceeding expectations, and all sales channels hitting objectives.
• R&D and tech leadership: Investing in R&D, especially semiconductor innovation; P5 chip achieves harmonics, opening path to ultrasound cart business like Butterfly iQ Station.
• Market expansion: Expanding into established non-focused markets (hospital carts) and new care settings (home); international expansion with new markets in Indonesia, Netherlands, Belgium, and successful launch of iQ3 in Europe; vet team saw 50% year-over-year revenue increase; Butterfly Garden AI marketplace growth with new partners and commercial launch of educational tools.
• Medical education: Kansas City University's Medical School rolled out new focus curriculum using ScanLab AI training app, providing AI-powered guidance for ultrasound education.
• Leadership changes: Steve Cashman joined as Chief Business Officer in September.

In the third quarter of 2024, Butterfly Network achieved top line revenue growth of 33% year-over-year, with revenue reaching $20.6 million, the highest third quarter result in the company's history. Product revenue was $13.5 million, an increase of 55% versus Q3 2023, driven by higher average selling price and volume across all channels. Software and other services revenue was $7 million in the third quarter, up 5% versus the prior year period. U.S. revenue was $13.1 million, 27% higher than the prior year, driven by higher average selling price and strong demand. Total international revenue increased 36% over the prior year period to $5.2 million. Gross profit was $12.2 million in Q3 2024, a 30% increase as compared to $9.4 million in the prior year period, but gross margin percentage was down slightly to 59.5%. Adjusted EBITDA loss was $8.4 million compared with a loss of $12.5 million for the same period in 2023.

• 2024 guide raised to a range of $79 million to $81 million, about 20% growth, and adjusted EBITDA guide for full year improved to a loss of $40 million to $42 million.
• Q4 expected to see revenue growth of around 25%, bringing revenue to approximately $20 million to $22 million, and adjusted EBITDA loss of approximately $10 million to $12 million.
• 2025 expects at least 15% to 20% top line growth and closing on non-dilutive capital through powered by Butterfly, which will allow acceleration of top line through further investments.

Forward-looking statements are based on current information, assumptions and expectations subject to change, involving known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those in forward-looking statements. These and other risks are described in filings with the Securities and Exchange Commission.

Q: Suraj Kalia from Oppenheimer asked about the split of 23% units and 10% price increase between U.S. versus O-U.S. and the penetration of iQ3 versus the previous gen in the quarter.

A: Heather Getz responded that it was pretty much half and half, with most price increase coming domestically but both contributing; the total iQ3 mix for the quarter was just over 50%, over 80% domestically.

Q: Josh Jennings from TD Cowen inquired about details on the U.S. iQ3 launch, EU's RoHS update, and iQ Station.

A: Joseph DeVivo and Heather Getz answered that all U.S. channels are working with great people executing and product in demand; on EU's RoHS, they submitted dossier and process involves public comment, due diligence, etc.; iQ Station is a method to amplify point-of-care ultrasound with new workflow.

Q: Ben Haynor from Lake Street Capital Markets asked about the home care pilot, EU RoHS-related, and Octiv.

A: Joseph DeVivo explained that the home care pilot involves educating teams on using technology, aims to reduce readmissions; on EU RoHS, discussed the process and positive reception; on Octiv, it's a wholly-owned subsidiary to commercialize ultrasound on chip platform with potential for new revenue streams from various industries