Hello, and welcome to the next session of Oppenheimer's 35th Annual Healthcare MedTech & Services Conference. My name is Shaymus Contorno, and next up we have Joe DeVivo, President and CEO, and Heather Getz, Chief Financial and Operations Officer of Butterfly Network for a Fireside Chat. Before we get started, I just want to say, for those of you that are listening, if you have any questions that you want us to ask as well, please submit them in the chat, and I will try to get to them as we can. Joe, Heather, to start off, why don't you just give a brief background on Butterfly for those that maybe aren't up to speed? You know, what can you tell us about the latest and greatest about what happened in 2024, what we're looking for in 2025? Thank you, Shaymus, for having Heather and I. Thanks, you know, for your team, the Oppenheimer team. We appreciate the relationship and appreciate being invited. Thank you. First of all, Butterfly is a point-of-care ultrasound company that's powered by special semiconductor technology, semiconductor technology that allows us to digitally capture an ultrasound image. In many industries where you've seen, I'm trying to get away from the sunshine here, in many industries where you've seen digital take over analog, that's what Butterfly is doing to ultrasound. Ultrasound devices have analog capability using a crystal with a single array to capture an image for a certain part of the body. Butterfly has a semiconductor that can be programmed to tune to image the entire body. We're on this digital journey of evolution of making, as more and more powerful our semiconductors get, the more and more powerful our imaging capability gets, our image clarity, our ability to do subspecialty imaging. We're on that journey, and that journey is not stopping. For 2024, we launched our third generation device, which is iQ3, which had double the processing power of iQ+ our second generation. We've had a stellar year. We grew 25% in revenue. People were excited to see the power of the device coupled with the software we have from a cloud perspective, as well as from an enterprise software perspective. It's now, you know, the opportunity for us is to put a device in every pocket of every doctor and nurse in the world. You know, 40 years ago, you'd look at us as a stethoscope salesperson. Hey, doc, if you can just put this on your ear, you can listen to the heart. You can listen to the lungs. You can listen to bowel sounds. We are doing the same thing. It is just now you can see. We have advanced tools that make it portable, make it powerful with AI, and there is a great future. As we look into 2025, we are going to continue to market this new product. We are going to continue to penetrate health systems in all different areas where doctors and nurses treat patients, whether it is in their home or in a clinic. We are going to build some new businesses. We are going to monetize our semiconductor, and we are going to build a HomeCare business. Heather, why do I not turn it to you, and maybe you can add some of your color as well? Yeah, I think pointing out the fact that we are the only real mobile solution, full body handheld ultrasound on the ultrasound on a chip is what allows for us to have that feature. There is no other product that has the same features and functionality as us on the market. There are other handheld ultrasounds, but you will often need multiple probes and are still connected within the hospital via software that's on-prem versus cloud-based. The cloud-based ultrasound on a chip is really the secret sauce to who Butterfly is. Got it. That's a great overview to start. Now, I want to kind of backtrack for a little bit. You noted iQ3 launched last year. I believe it's the most powerful system you guys have at the moment. I believe that primarily drove U.S. growth in 2024. Like, looking worldwide, how should we think about iQ3 international expansion? Which markets have you guys already gained access to? What's kind of the plan for 2025 that you can detail? I guess, are you guys planning kind of go direct in these places, use distributors? You know, what can you tell us about that? Our go-to-market model is threefold. We have our online sales. And so, you know, every quarter, about 1,000 doctors around the world pull out a credit card and buy a Butterfly for themselves outside their clinic or health system. It's their device. We love that because that creates engagement for us directly with the user. We have inside sales, and those inside sales teams will then try to harvest the cart abandoners and those who didn't, you know, complete on the website. We have a direct sales force. In different countries, we either have a direct sales force or we have a distributor. Mostly, most of the international expansion today are through distribution partnerships because they're new markets and we haven't built enough of a foothold and enough scale to go direct. These partners are skilled in ultrasound and skilled in selling these types of devices. We have expanded. First of all, Europe went through a changing in their regulations and to an EU MDR over the last several years. We were able to get our second- generation device finally approved with EU MDR certifications. We were very excited about that, and we fast followed with our iQ3. As we open new markets, we've been opening them with our second- generation technology. We've been opening them. We've opened up a bunch of markets last year through Asia and some in Latin America and others. In 2025, there are a few more markets we're going to open in Asia, you know, like Japan and Taiwan and others and a few in South America. More importantly, we're going to be bringing our third generation to our entire footprint. That will certainly, you know, power some growth for us. We like having our second and third generation on the market. We, you know, our ASP is about, you know, $2,700 for our second generation and $3,900 for our third generation plus software. In certain situations, our second generation meets all the needs of the user and is much less expensive. In certain situations, they want the higher-end product with the better image quality, and they pay the higher price. We don't see the low-price alternative part of the market. A good part of our business is global health and in being in markets that are definitely not as, don't have ultrasound as available. Having both products is positive for us. Throughout 2025, we'll see market-by-market iQ3 being launched. Got it. I want to just mention, I know you've previously mentioned EU expansion and MDR. I want to harp on not necessarily that, but you previously discussed, you know, your petition to the EU to revoke the current exemption regarding RoHS for piezoelectric, you know, ultrasound. I believe you previously stated you expected a decision somewhere late 2025, early 2026. You know, in the case of a positive, you know, decision, what do you kind of envision it more so stating, as well as how are you potentially gearing up for this, you know? Just for those who do not know what RoHS are actually, Shaymus, I went to the EU and met with the RoHS administrator, and he corrected me. He says it is RoHS. I have to slowly undo my mispronunciation that I have educated you and others on. The RoHS standards have been in place for 18 years. These standards are for all electronic devices. You buy a toaster, you buy an iPhone, a TV, or an ultrasound device, the EU wants toxic materials out of those devices. They have been amazingly tolerant. They will allow people to have an exemption if they can justify that there is no other alternative. The ultrasound industry in particular, every 3-4 years has been submitting a dossier through a third party, a trade association, saying that they're not able to meet these environmental standards because there's no alternative to the toxic materials they put into those devices. What we've noticed, and you know, Butterfly is not made with a piezoelectric crystal that has electricity pumped through it. We're made with a clean green semiconductor. We've met with the EU, and the EU agrees that they should investigate whether or not we have equivalency to standard handheld ultrasound devices. We've submitted a dossier. That dossier has been accepted. The industry, I believe, is submitting or has submitted a counter dossier. A third party will review that information. We're hoping that the review will end at the end of 2025. They will make a decision, and then the market can react to that decision. There will be 12-18 months to implement the decision. No matter which way you cut it, it is inevitable that we will be on the market. It is inevitable that the devices that are compatible to ours that are toxic will at some point in time come off the market. What does that mean? Does that mean that other companies will try to develop their own? Does that mean we will work with those other companies? I do not know exactly the formation of that, but the way we are preparing is we are just focusing on telling the truth and letting the data speak for itself. We are making sure that we have distribution partners in all the EU participating countries. If there was a positive decision, and we, you know, we'd have to, you know, show to the EU that we were capable of filling all the demand necessary to fulfill this requirement. We have basically, we have a highly scalable supply chain. You know, we could 5x, 10x our revenues within, you know, a very reasonable period of time. Our supply chain will not be the issue. It's how do you train and how do you deploy and how do you get people converted? I think it's a little too early to say that, you know, we have a conversion plan because that would be pretty assumptive and it's two years away. Right now, we are focusing our energy to make the argument and to win. Got it. Appreciate that color. I'll have to remember how to pronounce that from now on going forward. I know my first go-to is RoHS. That's my bad. Moving on, we have a client question that I'm going to interject with, and I'm just going to read this verbatim. We understand the value add of iQ3 to doctors and nurses, etc. Are there any liability issues, you know, with this medical device has to deal with? Again, I'm just trying to interpret this. I'm guessing in terms of potentially, I guess, nurses and some other non-doctors, non-physicians that are using this, but. We do not sell it to non-doctors. We do not sell it to non-healthcare professionals. This is sold, and maybe Heather can go through this, but we sell to healthcare professionals. And healthcare professionals, you know, our liability is based upon the quality of our manufacturer, the quality and making sure that we live up to our claims and, you know, we do not mislead, et cetera. And so that our device, you know, does what it says. It is like, you know, we make a car and that car has to operate within the standards of safety, etc. If someone drives it into a tree, unless it has been shown that something is wrong with the car that made it drive into a tree, our liability is based upon the development and our claims of our product. But Heather, do you want to comment at all about that? Sure. Yeah. I think that's exactly correct. I think the other thing to point out is we're not offering a diagnosis, right? We're showing an image, and it's up to the person who is interpreting that image to diagnose the patient. They have their own professional liability. It's no different than a technician taking an X-ray and a doctor looking at the X-ray and making a diagnosis. That's not Butterfly's job. Butterfly's job is to provide the image. Got it. Yeah. Does it really matter in terms of liability? It's their interpretation, right? You're just providing that media, so to speak. Now, if there's AI tools that we have, then, you know, we have to make sure that the AI tools, like we have two today, one that counts the B-lines in a lung, in a wet lung, and another, which is a bladder scanner. We, again, have to live by the claims of those and the quality standards that we're representing those AI tools correctly. That's our burden. That's, as a medical company, you know, what we always pledge to do. Yeah. Got it. As you guys start moving into special, I believe you've noted you're starting to move into specialties with iQ3. Kind of, is there any roadmap that you can provide, you know, and I guess how are you planning on, I guess, targeting specific specialties? Are you going from a top- down at a maybe an enterprise level or bottom up? You know, I know you noted about 1,000 clinicians are ordering probes per quarter. You know, I know you've previously noted as well that you've kind of used that to get into an enterprise kind of system. I guess, can you break down, you know, on a bigger level, and apologies for rambling on here, but where a lot of specialties have bought iQ probes and, you know, what's kind of the first that you'll start tackling? You know, you're right. You know, individual doctors have kind of self-selected, you know. We have primary care doctors, cardiologists, podiatrists, pediatricians, OB/GYNs. We have, you know, all different types of doctors and with clinical specialties, nurses who will purchase the device, you know, vascular access doctors that will all purchase the device for their use. As we target a hospital, you know, we have done it historically department by department. The emergency room has been, it's actually the emergency room is where point-of-care ultrasound was created. The emergency room doctors at Hennepin Healthcare were really curious with ultrasound and wondered if it could be used in a trauma application. They begged the hospital that as they were upgrading their equipment, not to throw away the old equipment. They just brought it into the ED and just started scanning. They found, I think, a particular use case around pleural, the fluid in the pleural cavity, which, and it was an indicator of a cardiac, a pre-indication of a cardiac event that they found. It was literally 100% if they found this, there was going to be a cardiac event. That began the emergency room's desire to now have ultrasound in it as a part of their diagnosis. Today, it's a pretty mature market. Most emergency rooms have ultrasound and most, a lot of the emergency rooms have point-of-care ultrasound or portable devices. You go into emergency rooms first, then you go into anesthesiology where they're placing lines and they use ultrasound to place those lines. You go into the intensive care unit where ultrasound is used, whether it's ordered by radiology or then you try to train the intensivists and hospitalists to be able to use it real time. It's being used actively in cardiology. Whether it's used in cardiology, the cath lab, you know, they'll have very sophisticated ultrasound devices in the cath lab. They will rarely have a portable device. When the doctors do, you know, work outside the hospital, they will have a version of a portable device, especially when they're rounding. The cardiac application is very important because a lot of the cardiac scans are done by intensivists and are done in the emergency room also. That's a pretty frequent scanning of the heart and lung function. Of course, OB is a very big ultrasound consumer. Again, they have a lot of different types of, you know, cart-based ultrasounds for OB, but the concept of them becoming more mobile and having their own device. And then, you know, PICC lines that are being placed all over the hospital, even out of the hospital, are areas where we target. And then primary care is probably one of the biggest growth opportunities is the GPs to be able to just simply have that as an additional diagnostic tool and start reducing, you know, the chest X-rays and others that take time and a lot of money where you can do a quick pulmonary scan with higher sensitivity. As you package this up, you sell one department, you sell another department, you sell another department. When you start building this kind of foothold and build some penetration, you then start talking to administrators about capturing that data and selling software. You start talking to them about building a program throughout the hospital and going enterprise. That's kind of our progression and how we sell. Got it. Kind of to follow up on that, these large hospital enterprise deals, you know, I know you said you try to go to, you know, sometimes department by department, other times it can be all more all at once. What's the status on some of these larger enterprise deals? If you could characterize any numbers that are potentially in the works, where kind of are they, you know, when might we see something that you guys can, you know, put out to the public? I think we're going to start seeing some this year. I think we have to define what enterprise is. You know, we had a thought leader at the University of Rochester who made a decision to deploy upwards of 900 probes at one time throughout the department, put software in place. I think those types of deals will be fewer and far between simply because point-of-care ultrasound is already being more and more prevalent through the hospital. You know, an enterprise deal is having your software throughout all the departments. You link everyone together in your enterprise software. Then you become a prime vendor. You are their handheld of choice. We think that those types of deals where we go from having a couple of departments to now going throughout the enterprise, and if they already have 200 or 300, then you're prime vendor and they will then continue to buy more. I think those are the kind of deals that we're starting to stack up. The ability to say, "Oh, well, we don't, we've never done it system-wide. We're just going to press a button and buy 2,000 probes tomorrow." I don't know how many of those deals will be out there, but the ability of building out software and then having ourselves make our probe of choice and having that be a part of their procurement pattern. Actually, as we get into iQ4 and our next generation probe and the image quality starts to rival that of the low-end carts, we think a lot of the hospitals' budget that they currently have to refresh their current capital equipment will be allocated towards this and will start eating into that part of the business as well. iQ3 has now made it possible to have these conversations. When I came here in 2023, I was very frustrated to see my sales force basically, you know, who had, we had just launched an enterprise software package and we launched it in the end of 2022. It is the first really powerful way to amalgamate all the ultrasound images and port data into the EMR and PACS. Our sales force is so excited selling it. They were selling it without selling as many probes. They were just going hospital to hospital and selling software. Half of it was because our second generation was not really there for hospital ultrasound. I am like, how is it we are spending all this time selling software and we are not selling a complete bundle? I learned it was, we were not ready. We are ready with iQ3. That is happening now. A lot of the conversations in our pipeline are filling with opportunities. A lot of these hospitals do not like you to, you know, put their name out there with a vendor's purchase. As we sign these deals, even if we cannot mention their name, we will certainly be educating our investors of our success. Got it. Got it. To turn away, you know, just switch gears a little bit, you know, Butterfly Garden. I know you guys noted some AI applications as well that you have. I guess thinking on a different level, are you seeing any potential companies within there that you might want to actually bring them in-house within Butterfly and integrate them into the system? Or, you know, I guess is that a potential possibility or is kind of everything just let these other companies operate and utilize Butterfly as a, just utilize Butterfly to the imaging capabilities and whatnot? The answer is yes. We have a three-pronged strategy. You know, the first part of our strategy is we have the largest private image database in the world of 25 million and growing by 20,000 a day. That gives us tremendous power to run AI algorithms through that type of data. Typically, ultrasound AI companies will develop algorithms and then spend a lot of money and time trying to get that algorithm over a lot of data and a lot of experiences. We can do that very quickly. The development, but we're focusing on developing AI that only we can develop, that are a function that benefits from our ultrasound on a chip. A lot of that would have to do with how we scan and how we can do things that normal ultrasound cannot. Second, we do not want to compete with the market. We want to amplify the market. We want to be the place where those garden partners can come. We want to amplify their abilities and whatnot. If there is one that becomes core, we would certainly consider acquiring. Actually, there is one that we consider core right now. We are actively bringing it into our platform. That is a gestational age calculator that we are working on with the University of North Carolina and the Gates Foundation. The Gates Foundation has funded the early work of this calculator. We have done a lot of work with Gates and we have done a lot of work in Kenya and in South Africa teaching midwives how to do fetal positioning for childbirth. One of the major challenges is they do not know the age of the fetus. They do not know when the, you know, when the due date will be for that child. And that is, you know, it is not very easy to get to a medical clinic and it is, and there has to be a lot of planning and timing and whatnot. Where we have an application based upon this that you simply can place it onto the uterus, the pregnant uterus, and you can paint it up and down. Then it will tell you how old the child is. It is pretty wicked. We are taking that AI application and we are embedding it into our core software. It will be, you know, you can pick bladder scanning, you can pick, you know, B-line, pulmonary scanning, you can pick gestational age, and that will be in the platform. When we see AI applications that have a large, you know, global implications, we'll either develop it or acquire it. We want our, you know, we want our garden partners to have a great, they all want exits, right? They all want the ability to monetize and have an exit. We certainly can be an avenue for that. Got it. That's good to note and appreciate that. Any timeline you can give on that integration if I'm not pushing too hard? I think before the end of 2025, you know, we're actually, it's actually integrated. It's actually more doing the regulatory work to receive the FDA clearance. Got it. Got it. Heather, just a few ones for you. From a gross margin perspective, kind of how has optimization worked with running both iQ+ and iQ3 lines? You know, when you, and thinking through when you guys bring iQ4 on as well, will you just run two platforms? Will you run three? Just trying to think through how you guys can potentially optimize kind of gross margin and some of those other costs as you are running multiple platforms. Sure. The production of iQ+ was optimized leading into the iQ3. Basically, we will run the full line for a period of time producing one product or the other, right? We are not running them simultaneously. We have a dedicated line. We have all the kinks worked out of the iQ+. With iQ3, right now that is primarily what we are producing. We still have some efficiencies to be able to gain from the ongoing production of that product. When it comes to iQ4, you know, we will need to evaluate the market and make a determination of what makes sense overall based on our customer demand. I think that we can agree that right now we do see iQ+ as a strong workhorse in the market and expect to be able to continue to sell that into the market for the near term. Got it. Appreciate that. I know at your investor day, about a year ago almost to the day, I think, you noted about $500 million. It is probably almost to the day. I'm sorry? It is probably almost to the day. Yeah. On the $500 million revenue by 2030 goal, I think you had noted a five-year organic revenue CAGR of about 35%. You know, the guidance you guys gave for 2025 is about 20% growth. I guess as we stand here today, should we think, you know, is this going to be a more back half loaded kind of goal, so to speak, or just when should we anticipate, you know, I guess a step change in growth potentially kicking in? Just to level set on that projection. Yes, it was a goal by 2030 to hit $500 million. What that actually did contemplate was a 20% growth rate on the core business, and then layering in the additional growth initiatives, including both HomeCare and Octiv. They are both underway and both on track based on what our assumptions were in that overall forecast. Joe, did you want to add anything to that? I could, but you pretty much nailed it. I mean, you saw the sediment chart, Shaymus. It was pretty back and loaded. What was at the first layer of the sediment was a 20% straight line. You know, we think we can deliver 20% growth. I mean, the concept that we're going to go from 14- 16 to 33- 35 to what? 45, 60, 80? You know, we're anniversaring, you know, a pretty weak year. Now we're anniversaring a really strong year. We think 20% is the right way to guide investors. We certainly, Heather was very clear in her guidance that this is a baseline. We have two opportunities we're developing that we're not forecasting, that we're not guiding, that can be completely incremental to that forecast. We, and that sediment chart built opportunities on top of that 20%. We are delivering exactly what we said we would do exactly a year ago today. Got it. I appreciate that. We are, I believe, up on time. Just one last quick one for you guys. You noted it earlier, the home bladder program. Any updates that you can provide? You know, when should we expect some potential more, you know, a little bit more info on that? So, the home bladder, right now we are focusing our energy on our HomeCare business. Because, you know, we have the, we do have an AI tool that can get a 3D bladder. There is, we have done some studies around self-scanning. The Christopher & Dana Reeve Foundation is actually doing a study to identify can their members use ultrasound in a wheelchair to be able to determine their bladder since they have to self-catheterize. They can't feel if their bladder is full. And there's, you know, there's medical issues if you either over-catheterize or wait too long. That's happening. What we've pivoted to is to focus on how we can build a use case initially with partners who are managing patients at risk. We do have a partner. We are doing a 200-patient study in skilled nursing facilities to help keep congestive heart failure patients from readmitting in the hospital. We're doing 200 patients over six months, which should end sometime in June. That home care work is really important because we're teaching nurses who didn't have prior ultrasound experience or ultrasound capability how to use an AI tool to do a pulmonary scan. To do a pulmonary scan when the patients come back from the hospital. We've already found some pretty amazing things, you know, and they're on both ends of the spectrum. You know, one patient came in, did very well in the hospital. The lungs were dry. The prescription that they had was for a very high dose of diuretic. Now, a diuretic is basically will dehydrate you. It takes fluid out of the body. Had that prescription been given that patient, they would have not only experienced systemic dehydration, they would have had renal failure, they'd be readmitted for a different reason in the hospital. That all was avoided because the nurses were able to do an ultrasound scan. Butterfly was able to train them, help bring that scan into our cloud, and then have a remote physician give them an expert consultation. The exact opposite had happened where someone was discharged from the hospital with a lot of B-lines, still very wet pulmonary-wise, and had a very low diuretic prescription. The cardiologist found that after they did the scan and they modified them. You know, we're helping them make better decisions. We're helping them get real-time data and input. We hope that then translates into a model where they institutionalize nurses using ultrasound. If it's institutionalized that ultrasound becomes this way of doing this diagnosis, then we will have other use cases, bladder, and then we will start creating devices specifically for those applications. The tip of the spear for us is this pilot and the work that we're doing in this application. Got it. Appreciate that. Thank you both for a very exciting conversation. There is a lot to come, to say the least. Appreciate all you online tuning in as well. Thank you again. Appreciate you. Thanks, Shaymus.