Butterfly Network (NYSE:BFLY) FY Conference Summary Company Overview - **Company**: Butterfly Network - **Industry**: Medical Devices, specifically in handheld ultrasound technology Key Points and Arguments Company Progress and Technology - Butterfly Network has evolved from being solely a point-of-care ultrasound company to a broader technology company addressing healthcare challenges [6][10] - The company has made significant advancements in its technology, particularly with the introduction of the Butterfly Embedded initiative and the Octave project [6][7] - The handheld ultrasound market is experiencing growth, with the company emphasizing its unique semiconductor technology that allows for flexibility and programmability [9][11] Partnerships and Collaborations - Butterfly Network has a partnership with Midjourney, which is expected to be a significant revenue stream. Updates on this collaboration are anticipated but are currently limited [7][30] - The company is exploring additional partnerships, with ongoing R&D efforts to integrate its technology with other companies [29][30] - Other notable partnerships include Mendaera, a vascular robotics company, and Sonic Incytes, which focuses on fatty liver technology [29] Market Position and Growth Potential - The company is positioned for sustainable double-digit growth in the handheld point-of-care ultrasound market, with expectations of market inflection in the next 3-5 years [47][51] - Approximately 80% of medical students are being trained on Butterfly technology, indicating a strong foothold in medical education and future market penetration [49] - The company is developing new products, including the iQ Station, which aims to transform the user experience in hospitals by providing personalized, powerful ultrasound devices [53][55] Financial Guidance and Performance - For FY 2026, Butterfly Network projects revenue between $117 million and $121 million, representing a year-over-year increase of 20%-24% [57] - The core business is expected to grow at high single-digit to low double-digit rates, with gross margins projected to exceed 67% [57] - The company is in a strong cash position with over $150 million available, aiming to become cash flow positive by the end of 2027 [58][59] Competitive Landscape - Butterfly Network acknowledges competition from companies like EchoNous and Exo, which utilize different ultrasound technologies. The company respects their potential but believes its technology offers superior performance [41][42] - The company holds 600 patents and has a unique partnership with TSMC, which strengthens its competitive moat in semiconductor manufacturing [35][36] Additional Insights - The integration of AI and sound technology is seen as a transformative opportunity for Butterfly Network, with potential applications in various medical fields [18][21] - The company is focused on addressing the challenges of capturing and reimbursing ultrasound scans, which currently sees a significant percentage of scans going uncaptured [50] Conclusion Butterfly Network is positioned for significant growth in the handheld ultrasound market, driven by innovative technology, strategic partnerships, and a strong focus on education and market awareness. The company is optimistic about its future prospects and is actively working to enhance its product offerings and market presence.

Group 1 - TD Cowen raised the price target on Butterfly Network (BFLY) to $6 from $4.50, maintaining a Buy rating on the shares [1] - The firm highlighted strong Q4 results for Butterfly Network, indicating positive financial performance [1] - Butterfly Embedded is expected to become a more significant part of the company's narrative and stock price, as it supplements the core POCUS business with a new revenue stream [1]

Core Financial Performance - For full-year 2025, Butterfly reported total revenue of $97.6 million, up 19% from 2024, driven by growth in the core point-of-care ultrasound (POCUS) business and Butterfly Embedded [1] - Fourth-quarter revenue totaled $31.5 million, up 41% year-over-year, marking the first quarter in company history to generate positive operating cash flow [2][3] - Adjusted EBITDA loss narrowed to $3.2 million in Q4 from a $9.1 million loss a year earlier, and for full-year 2025, adjusted EBITDA loss was $26.5 million, improving from $38.9 million in 2024 [7] Growth Drivers - Growth in Butterfly Embedded was primarily attributed to the execution of the $74 million Midjourney contract, which contributed $6.8 million of Q4 revenue [5][11] - The core POCUS business saw a revenue increase of 15% year-over-year, building on a 35% growth in the prior-year fourth quarter [13] - The launch of Compass AI in Q4 was noted as a tailwind for enterprise adoption, driving over 50% growth in the enterprise pipeline since its launch [14] Future Guidance - For full-year 2026, Butterfly forecasts revenue of $117–121 million, representing approximately 20–24% growth, with an adjusted EBITDA loss of $21–25 million [4][18] - The company expects Q1 2026 revenue of $24 million to $28 million, citing seasonality, and an adjusted EBITDA loss of $8 million to $10 million [17] Strategic Initiatives - Butterfly's strategic growth plan focuses on accelerating its core POCUS business, expanding into new care settings, and extending its semiconductor ultrasound platform [8] - The company has consolidated its semiconductor platform strategy under "Butterfly Embedded," moving away from the previous "Octave" branding [12] - Butterfly aims to reach a first commercial agreement in home care in the first half of 2026, with potential revenue opportunities of $40 million to $50 million [21] Market Expansion - Management sees meaningful opportunities in 2026 as it opens markets in South America and expands across the Middle East and Asia [15] - The company has surpassed 1,000 NGO partners worldwide, indicating a strong international presence [15]

Financial Data and Key Metrics Changes - The company reported fourth quarter revenues of $31.5 million, representing a 41% year-over-year growth, marking the highest quarterly result in its history [5][17][18] - Adjusted EBITDA loss improved to $3.2 million in Q4 2025 from a loss of $9.1 million in Q4 2024, reflecting a 65% improvement [23] - Full year 2025 total revenue increased by 19% to $97.6 million compared to 2024 [21] Business Line Data and Key Metrics Changes - Revenue from the core POCUS business grew 15% year-over-year, following a 35% growth in the previous year [9] - Butterfly Embedded revenue significantly contributed to the overall growth, particularly from the Midjourney partnership, which added $6.8 million in Q4 [13][18] - Product revenue was $18.1 million, up 23% year-over-year, while software and other services revenue reached $13.4 million, a 76% increase [20][21] Market Data and Key Metrics Changes - U.S. revenue was $26.8 million, a 55% increase year-over-year, driven by strong demand in the core business and Embedded revenue [19] - International revenue decreased by 6% year-over-year to $4.7 million, with iQ3 sales up 42% but iQ+ sales down 79% [19] Company Strategy and Development Direction - The company aims to strengthen its core franchise and expand its semiconductor ultrasound platform beyond handheld devices, focusing on digital solutions [5][8] - The strategic growth plan includes three core tenets: accelerating the core POCUS business, executing initiatives for new care settings, and delivering an R&D roadmap for next-generation chips [8][12] - The company is transitioning towards a semiconductor-based ultrasound model, emphasizing partnerships and embedded technology to enhance its market position [12][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in macro trends and deal cycles, expecting to carry momentum into 2026 [9] - The company anticipates nominal revenue from home care initiatives in 2026, with significant growth potential starting in 2027 [49][50] - The overall outlook for 2026 is positive, with expected revenue growth of 20%-24% and continued focus on operational efficiency [27][28] Other Important Information - The company achieved positive operating cash flow for the first time, driven by upfront payments from the Midjourney deal [5] - The company has surpassed 1,000 NGO partners worldwide, indicating strong international expansion opportunities [10] Q&A Session Summary Question: Can you provide details on the Midjourney partnership and its revenue contributions? - Management indicated that Midjourney is expected to provide significant revenue contributions throughout 2026 and into 2027, with a $74 million contract that includes various revenue components [41][42] Question: What is the status of the home care initiative? - Management is confident that a commercial agreement for home care will be finalized in 2026, with potential revenue opportunities estimated at $40 million-$50 million if successful [50][52] Question: How is the macro environment affecting the company? - Management noted that while there were challenges in 2025, they are seeing improvements and do not expect significant impacts moving forward, aside from some downward pressure from tariffs [56][58]

Financial Data and Key Metrics Changes - The fourth quarter revenues reached $31.5 million, representing a 41% year-over-year growth, marking the highest quarterly result in the company's history [5][18] - Positive operating cash flow was achieved for the first time, driven by upfront payments from the Midjourney deal [5] - Adjusted EBITDA loss improved to $3.2 million in Q4 2025 from a loss of $9.1 million in Q4 2024, reflecting a 65% improvement [24] - Full year 2025 total revenue increased by 19% to $97.6 million compared to 2024 [21] Business Line Data and Key Metrics Changes - Core POCUS revenue grew 15% year-over-year, building on a 35% growth in the previous year [9] - Butterfly Embedded revenue significantly contributed to the overall growth, particularly from the Midjourney partnership [19][22] - Product revenue was $18.1 million, a 23% increase year-over-year, while software and other services revenue surged 76% to $13.4 million [20][21] Market Data and Key Metrics Changes - U.S. revenue was $26.8 million, a 55% increase year-over-year, driven by strong demand in the core business [20] - International revenue decreased by 6% year-over-year to $4.7 million, with a notable 42% increase in iQ3 sales but a 79% decline in iQ+ sales [20] Company Strategy and Development Direction - The company aims to revolutionize imaging with digital ultrasound technology, focusing on expanding its core POCUS business and developing new applications in home care and Ultrasound-on-Chip co-development [7][8] - The strategic growth plan introduced in early 2024 emphasizes financial discipline and unlocking the full value of the semiconductor ultrasound platform [5][6] - The Midjourney partnership is seen as a foundational step towards transforming Butterfly into a platform company, with expectations of significant revenue opportunities in the future [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in macro trends and deal cycles, expecting to carry momentum into 2026 [9] - The company is well-positioned to leverage its core platform into new markets, with a focus on operational efficiency and ROI [17][26] - Guidance for Q1 2026 anticipates revenue between $24 million and $28 million, with full year 2026 revenue expected to be between $117 million and $121 million, reflecting a 20%-24% increase [27][28] Other Important Information - The company achieved significant milestones in cloud infrastructure security, including GovRAMP and TXRAMP certifications, with FedRAMP anticipated soon [10] - The proprietary beam steering API is set to be released, enhancing 3D imaging capabilities and expanding the AI ecosystem [11] Q&A Session Summary Question: Details on the Midjourney partnership and revenue contributions - Management indicated that Midjourney is expected to provide contributions in the near term, with a $74 million contract that includes various revenue components [41][42] Question: Progress on the home care franchise - Management is confident about reaching a commercial agreement in 2026, with potential revenue opportunities estimated at $40 million-$50 million if the use case becomes national [49][50] Question: Insights on the macro environment and medical school partnerships - Management noted improved confidence in the macro environment and highlighted the strong commitment from medical students to learn ultrasound, which is expected to positively impact sales [56][60]