Morning, everyone. Suraj Kalia, Senior Medical Device Analyst at Oppenheimer. Really pleased to have Joe DeVivo, CEO, and Heather Getz, CFO of Butterfly with us this morning. Butterfly, as you all know, is a very interesting small-cap name in the handheld ultrasound space. But without much further ado, let me get started. Joe, obviously, you know, the focus has been on you at the helm. Since the time you have joined, Joe, you know, how would you characterize stabilizing the ship? That was one of the things in the past about a lot of turnover, and then Heather came in, things stabilized. You came in, you're trying to stabilize. But just walk us through what was missing in the pic- what was the gap that you identified that is helping y'all stabilize the ship? Well, there's a lot of good to Butterfly. You know, when I look, you know, to the past, and I look, in coming in, I don't see that the prior leaders had the strategy wrong. I think there was tremendous, tremendous vision for the development of the market, the tremendous vision in the technology. I was pleasantly surprised to see how well the business was run from a systems standpoint, our financial systems, our ERM, our ERP, our CRM. There's a lot of good in the business. The company had grown 20% pretty consistently, but I think the... There was just a dichotomy between spending and revenue trajectory. I think having so much cash in the bank forces you to not be as focused. Not forces you, that's not true, allows you. You can, you can invest in this, you can invest in this, you can invest here, you can invest there. And I think simply taking the financial discipline and taking some medicine and saying, "No, here are our biggest opportunities. We are not going to do these other things now. We are gonna focus." I just think the organization got too big, too quick. And I think the desire to do so many things was so high. So, Butterfly has great people, and, you know, it's sad that we've had to... You know, we went from 200 to 500 to 200, and, you know, that's hard. It's hard to grow your organization and then contract it so quickly. But when it comes to the product, when it comes to the capabilities, when it comes to the market, when it comes to the vision, doctors want this. Medical schools are teaching on this. Patients benefit from this. And so I don't sit back and say, "Wow, you know, they got things so wrong." I go back and say, "It takes 10 years to become an overnight success." You have to play a long game. Regardless of how good your technology is in healthcare, it requires people to change their behavior, and in changing their behavior, it requires the workflow in the hospital to be different, and that just takes time, and there's a lot of change management. There's education. The biggest challenge for Butterfly, number one, is education. The people who benefit most from our technology weren't trained how to use it. There's only 80,000 ultrasonographers, you know, in the United States. And when we look at, you know, there's 1 million doctors, 4 million nurses who can benefit from using it, but they weren't classically trained on ultrasound. So not only do they have to have a vision for it, but they have to have a commitment to educate themselves. And so we've invested in education ourselves. We have our own University of Phoenix type of education, online course, tests, videos on all these different types of scan types. We launched Butterfly Certified Services, where we now have live training, whether it's in person or whether it's, you know, managing scan reviews remotely, but it's a live person there with you. And we just launched a new AI tool for education. It's called Scan Lab. So the market is only gonna grow as fast as our users get acclimated and more and more comfortable in performing it, and it's happening, and it's happening. Got it. So Joe, obviously, you and Heather, you know, in the last couple of calls, and I know your investor day is this Monday, y'all are pretty excited in terms of the next-generation platform, the iQ3. Help us, you know, just for the audience, help us understand the gap that iQ3 closes with iQ+. You know, and how should we think about the rollout, the adoption? At what point, you know, could there be a step change? Right, right. Well, you know, we have launched it, and we're excited to have it in the market now, and so we're getting new data every day. Just for the audience to know, so we have three generation of probes. We have iQ, we have iQ+, and we have iQ3. iQ and iQ+ were kind of close cousins. There was a, I would say, a moderate change in processing improvement and other characteristics on software that made iQ+ a better product than iQ. iQ3 is a step function. It's a step function where the processing power, everything with Butterfly is an ultrasound on a chip, and so we use semiconductors to be able to marry with a MEMS wafer to deliver sound. So we can tune, based upon 20 different use cases, the ultrasound waves precisely to what the user is trying to accomplish. The knock on Butterfly up to our second generation is not dissimilar to the early evolution of digital photography, where Kodak's first version of a digital camera didn't have the image quality that would capture the full market. And people had said, in order for me to get away from film, these digital images have to get clearer and clearer. But what that requires is an improvement in processing power. That requires that chip to be more powerful. And while Kodak jettisoned their program, Toshiba, Canon said they had a really good idea, but we need to keep making the processor more powerful so we can compress the image and get greater image quality. Well, that's exactly what we've done with iQ3. iQ, iQ+, our second generation, had processor speed of 4.8 gigahertz per second. iQ3 has 9.6 gigahertz per second. That means we can push and pull double the data, and that has allowed it to be a step function improvement in image quality. Today, you know, we compete against, you know, the best imaging companies in the world. We compete against, you know, GE, and Philips, and Sonosite, and Siemens, and also some of the really wonderful independent companies like Clarius. They do a great job, but they're using old technology. They're using piezo crystals, and they collect their image in an analog way. Now, there's no knock on Butterfly. iQ3 is as good on image quality as any of them. So if we can be as good as any of them, and only still do it with one probe... You see, like, the bottom carts that are sold by those companies are between $20,000 and $30,000 for a 2D cart. Well, they're handhelds, you need four of them, and they sell them between $5,000 and $7,000 each to do what one Butterfly can do. So to them, whether you buy a cart or you buy four handhelds, it's the same revenue. For us, we dramatically reduce the cost of image acquisition, and we make it easier for the doctor to not have to choose which probe they need, but they have one that does it all. So, Joe, now with iQ3, right? Another component of your business is just on the software side of the equation. GE also talked a lot about AI, you know, their future tied to AI. Obviously, in terms of price uplift, but also in terms of adoption, improvement, and outcomes, there was a very strong component, and so is for Butterfly. Help us understand, you know, how you all think about the embedded software, the embedded AI within, let's say, iQ3+, but then also the enterprise software that you all sell in terms of the sales process, the competitive environment. Walk us through how that works for Butterfly. So currently, when you purchase a Butterfly, you also purchase a subscription. And what that subscription gives you is every Butterfly is networked into the cloud. And so, first of all, for the individual user, their images can be saved, and they would then have their file, and we would either, you know, depending upon how we do an integration, we can push those images into their DICOM or their EMR. But what they do is they pay us an annual subscription fee. And some people renew after the second or third year, and some people don't. You can still use the probe without it. And we need to continue to increase our value prop of the software they get with subscription, so we get a higher and higher participation rate on that software. But then we do have a middleware. I was just instructed by my team, "Don't you dare call it a middleware." It's not some linkage between two systems. It's actually a full, capable platform that delivers proficiency management, which is a way for, you know, an experienced ultrasonographer to review the images taken of more novice and help them through their training process. So we have proficiency management, we have the ability to deliver, not only deliver data into the EMR, but to pull up the patient file, and they can see it in the phone and be able to then add to the file and push back. When you select what image you're taking, like you're taking a pulmonary image, the reimbursement codes come up, and they can literally just click on which code they wish to use, and then that gets pushed in the EMR, and it gets automatically filed for reimbursement. So we make the ability of data collection and also payment, much more easier. So, so the systems that we put into hospitals help them manage all the different types of ultrasound devices they have, capture that very important data, and then ensure that they claim that reimbursement. And we've seen most hospitals that we put our software into have, only a 35%, reimbursement, percentage of all scans taken, and customers have an increased amount of reimbursement collected when they use our software. I think the other component, and I don't know if you want to get into it now, is our AI tools. Mm. Well, you kind of started off with AI, I think. The number one best way beyond a trained person learning how to do basic ultrasound is to have an AI tool that just simply makes it easier for you. And these AI tools can help you capture images easier, because capturing images are really challenging. If you've seen ultrasound, it's very difficult to know where you are and then know what you're looking at. But having an AI tool that can mark anatomy or help you find how to position this, just simply makes it easier to capture the image and allows you to open the market quicker. So, Joe, on a side note, one of the things that quite frequently comes up, you know, during due diligence, during client conversations, you know, is everyone has their own enterprise software, right? And then not everyone is open source. So merging all of this, whether it's into PACS or, you know, an EMR, EHR system and then basically cross-modality imaging, I mean, there are different facets to this whole... And I know it's a different discussion for a different day. Where are we in this whole debate about, should I call it openness, in terms of the algorithms within these platforms? Well, I can't really speak- Is it a critical issue right now? Well, I think what's a critical issue is your software being very easy to use and very easy to integrate, and for the IT departments in the hospital to not toil over what it takes to link the two together. Having your own software open sourced, I have not, you know, been asked that, and I'm not aware of any customer who said, "You know, we need, yeah, your platform open sourced." Butterfly did address an unmet need. The large companies don't have enterprise software platforms that are focused on image capture. They just simply push an image into an individual DICOM, and it doesn't. It's not a way to manage proficiency, and it's not a way to manage the patient record. They have to go to an EMR terminal and do it manually. But what we did do with our Compass software that helps us with enterprise management is we made it in a way that would work for all ultrasound devices. We knew that if we just created a middleware for Butterfly, we wouldn't be solving the hospital's largest problem, and we knew we would limit our opportunity. So, our platform, if you're an existing health system and you put our platform in place, it's not just for Butterfly, it actually links to and helps connect the data for the other ultrasound companies as well. So it makes it much more valuable to the hospital. They can be much more committed to the platform. You know, just in this past year of selling in 2023, we were able to sell 123 accounts, brand-new accounts, who put our software with our middleware, but put our software in place, and so we've seen a very nice uptick. And, Joe, before we move on to this topic of AI and the software component of the business, fast-forward three years, five years, Joe, do you envision the, let's say, iQ3 and some of these iterations in terms of processing power, do you envision them more in terms of... How would you gauge the success? Let's put it this way, besides the numbers, is it in image quality and diagnostics, or in workflow ease and, you know, helping clinicians? I think there's a third rail there. So there's two things. In three years, you're gonna see from Butterfly another major step in image quality, and it's actually something we'll talk about at our Investor Day. You know, our Investor Day, you know, we handle a lot of topics on our earnings call. Investor Day is gonna be much more about the future and much more about where our tech platform is going and what it means to the overall vision, but I'll share, I guess, a little bit of that now. And some of it, we've talked about, but the difference is we are operationalizing it now. So the first is, in three years and we will have another major leap. It will not be that we, it's not like, you know, we go from, you know, the first to the second, and then step up, and then step aside, and then go up. The next release will be a major change, and even a major improvement again in image quality. And now that we've already, in my mind, you know, surpassed handhelds, why would you be able to get to that image quality? Well, why do you want that image quality? Well, you know, enabled to continue to penetrate specialties like cardiac, and also in OB, I think, that is gonna be a product that'll be targeted at the lower-cost 2D carts. And we will be able to do all the calculations, and we'll have full capability of our next system for a cart. And so the hospitals just have to decide, do they want a big cart at that large cost, or do they want a single probe that can do basically everything? So that's one benefit. Plus, you know, don't forget, for the people in the field, they're carrying a cart now in their pocket, you know? And so, I mean, that's incredibly powerful, and there won't be a calculation or a capability that a cart has that our probe, our next-generation probe won't have for the first baseline 2D carts. The other place that we're innovating is... You know, when I tell this digital story in photography, you know, remind me, Suraj, what camera you carry around with you today? Just an iPhone. Just an iPhone. That's what I carry, too, and the iPhone has this thing here, which is a camera. The camera benefits from semiconductor technology, not just on image quality, but on miniaturization. So the next phase for us is we're going to get into the home, and we're gonna aggressively get into the home. In the next two to three years, we're gonna demonstrate how we get into the home, and it comes into user interfaces that make it easier for patients to interact with us, and it comes into devices that are small, that can be on the patient, that can see inside the patient, and remotely, a doctor can do a scan at any given time. That's where Butterfly separates itself. So the first phase of Butterfly is just proving we can be as good as a handheld. Done. Check. Now, our processor, with iQ3, is capable enough that we can start capturing the image differently. We can move the beam. We can scan inside, again, making it easier for a novice to capture an image. Instead of having to hunt for something, they just take a large series of pictures, and then they go through their iPhone like they're scanning their photos on their iPhone. And they choose which is the best one, and they make their decision. It makes it easier. So the second phase of Butterfly is changing how image acquisition occurs and changing the field in AI. And then, the third generation of Butterfly is creating new markets that, based upon our semiconductor technology. It's like if you're just gonna stay with film, and you're gonna stay with a film camera, you're never gonna be able to get to that next level of digital evolution, or that next level of product evolution. You still have to have a mechanical shutter. You still have to have film. It's really hard to miniaturize that. But it's been proven time and time again that in digital processing, for whatever use case you wanna identify, that digital becomes more capable, gets smaller, and it opens up, like, this myriad now of opportunities of feature development. We are in a class of our own. You know, we keep hearing that, "Oh, Butterfly, this tough past and those..." Look, you know, our leaders, our people in the past did a great job. They just grew too fast, and it's not something that other companies haven't done. You know, we've seen people get in love with their technology. They think it's gonna explode. They make all these investments, and then they realize they have actually a little bit more work to do, but they were not on the wrong path. Butterfly's the only company in the world who's on this path, who's successfully commercialized their product. We have the largest install base in the world, and our R&D path is now gonna start bifurcating from, "We wish to be like the others, other ultrasound companies," to where our, our R&D pathway takes us into places that only we can go. Because we've invested $500 million in this technology development, and that investment has not gone wasted. And we're leveraging all of that tech to build new markets, and it'll help with self-scanning for patients in home. It'll help with, you know, an automated scanning and telemedicine. So we will go up into the hospital's acuity, and we will be better than a cart on the next iteration, and we will miniaturize and go downstream into the home to make it easier and easier. All at the same time, we've opened ourselves up a Butterfly Garden, and we will have more and more and more and more and more AI capabilities that make our platform easier and applicable to our users. ... Interesting. Very interesting. So Joe, I know on the last quarterly call, you know, you all spent some time explaining RoHS. You know, for the audience, again, you know, and for people who are gonna listen to this, why is this a big issue right now? Why, you know, is this... You know, I remember a client asking me, "Is this a red herring?" And, you know, maybe you can, in your own words, articulate as to why-what the law is, and why it is critical at this time. Well, it's a red herring if you wanna just get ahead of stuff and buy the stock purely based on it, because, you know, we're not in control. There's a regulation called Restriction of Hazardous Substances, and it's a European Commission regulation that states that electronics have to be they can only have a certain threshold of hazardous materials. Very simple. It's for... And it's not just for healthcare, it's for the entire electronics industry. Your iPhones, your computers, your, you know, name every, every, you know, electronic that's out there. I think what Europe realized, that there's a lot of hazardous waste in these electronics, and these companies have to be more responsible, not only in the manufacture of these devices, and then the disposal at those local sites, but then the disposal of these devices. So I've learned that the ultrasound industry is afoul of these regulations. They use a lot of lead, and they use piezo crystal lead to create the camera lens in their devices. So in effect, every ultrasound device purchased in Europe, it runs afoul of the standards that were set 20 years ago. Now, the European Commission's been very patient, and very gracious. They realize that they put this marker down, but it takes a while for these technology companies to then make changes in their supply chain, changes in their design, to be able to bring out the product. So they gave the ultrasound industry, in particular, an exemption. It was a 10-year exemption. That exemption allowed them to say they were RoHS compliant. They were just compliant based upon receiving an exemption. Mm-hmm. So now it's 20 years. It's 20 years since that, that's been, and the ultrasound industry has made no progress because they've, they've, in my mind, believed that, "Well, there's no alternative, and as long as there's no alternative, we're just gonna continue to get an exemption. And, and it's too hard to do this, and, the EU will continue to, you know, to be gracious." Well, Butterfly doesn't run afoul of RoHS. Our semiconductors don't have the level of lead in them that run afoul of the restrictions, or run afoul of the threshold. And so we're saying, "Hey, wait a minute, we've done the right thing. We've walked down the right path. Our devices don't have this level of toxicity. You passed this regulation, not us." And we are now making the experts in the EU Commission aware that for all handhelds, yes, there is an alternative. We, you're not going to impair clinical care, based upon using a Butterfly versus any of our competitors' handhelds. So now what? What are you gonna do? Do you have the courage and the conviction on your regulation to not grant the piezo, the piezo ultrasound part of the ultrasound of the industry, do you have the conviction to not grant them an exemption? And I have no idea where it'll go. I have no inside track, no relationship, don't see... You know, it's purely, we are an alternative. You gave them an exemption. They don't deserve that exemption anymore. Got it. What'll happen? I don't know. Got it. Fair point. Heather, we are coming up on time, and I guess I'll pose you a question on your FY 2024 guide. As Joe mentioned a few minutes ago, Heather, obviously, Butterfly was growing 20%, and now, you know, there is a certain slowdown. Heather, if you could help us understand, what is the company throttling, voluntarily, involuntarily? And when should we... How much of- is there any conservatism built into the guide, especially as we come towards the second half of the year? What are the different moving parts- Mm-hmm ... that could help us understand what you all decided and why you all decided on the guide? Sure. So when we looked at how we were gonna guide for 2024, we needed to look at a number of things. One was, 2023 was a transition year, and as Joe mentioned, we did a lot of refocusing and, frankly, reinvestment in the commercial team, and allowing them an opportunity to ramp going into 2024, along with the introduction of our new product. We looked at it and said, "We do wanna have a little bit of conservatism in there," right? So, we need an opportunity to see how quickly they're able to ramp up as we continue to invest, as well as how the uptake on our new product will come into play. From an intentional perspective, obviously, the reinvestment allows us to grow again, and we do believe that that growth will accelerate as we go through the year, and then also the introduction of our new product. Got it. Fair point. Mm-hmm. Um- One other thing I'd add in there. I apologize, but it's also OUS. We also reset OUS, and we straightened out some challenges that we had with our distributors. We also signed up some new ones in the same markets, but then expanded into additional markets. We had not had a strong presence in Asia, and that is a focus of ours in 2024, and that would be upside to our existing plan. Perfect. Joe, Heather, always a pleasure to talk to you guys, and it's a fascinating story, fascinating landscape ahead. We do appreciate your time this morning, and you know, congrats on all the progress. Thank you so much. Okay. Thanks for your support, Suraj.