All right. Hi, everyone. Good morning. Thanks for joining us on the third and final day of the William Blair growth stock conference here in Chicago. If you do not know me, I am Andrew Brackmann. I am the Equity Research Analyst here at Blair that covers Butterfly. We are very pleased to have the company's CEO, Joe DeVivo, joining us today. I am required to tell you that for a full list of research disclosures, please visit blair.com. Just another couple of pieces of housekeeping. The formal presentation will be in this room. That will last about 30 minutes. Then we will go upstairs for the breakout after the presentation. With that, I will turn it over to Joe. Thanks, Joe.
Thank you, Andy. Thank you, William Blair, for having us here. Thank you for your support. We very much appreciate being part of the conference. Being a growth conference, there are some familiar faces out there. There are some who know the Butterfly story. I'm sure there are some new faces and those that are new to the story. I'm going to try to provide whatever new updates I can for those who are currently interested and those who are new to the story. Hopefully, I'll build out the vision and what Butterfly does. About nine months ago, my son had a medical issue, and his pediatrician said, "You need to send him to the emergency room right away." That's not a good thing, right? You don't want to have to go to the emergency room. We did.
We sat there for a bit. We got into the room. An emergency room doctor came in, inspected, and looked at my son and said, "I think I know what it is, but I need to have confirmation." That confirmation was they wanted to order an ultrasound. We sat there in the emergency room for three hours, waiting for the time when my son could be put into a wheelchair, wheeled to a different floor in radiology, have that ultrasound taken by a very skilled ultrasonographer who did a wonderful job, but then had to wait for the wheelchair to pick him back up, bring him back to the room to tell that doctor something that they already knew. Ultrasound, there are 82,000 ultrasonographers in the United States.
If anyone has an issue and needs an ultrasound, they typically go into a hospital and then have it done in radiology. Two-thirds of the world do not have access to medical imaging at all. Ultrasound is the least cost, the least invasive, without any radiation artifact out in the world. The concept of Butterfly believes that every doctor and every nurse has the ability to do their own ultrasound. If Butterfly was in that hospital when we went in, first of all, the doctor, when he wanted to confirm, could have confirmed under ultrasound, and we could have been out of ER in five minutes. Actually, his pediatrician should have had the ultrasound in the first place and saved us the trip to the emergency room.
Butterfly is a very innovative company that uses, and I'll show you, semiconductor technology to make ultrasound even more cost-effective, put it in the hands of more doctors, and to change access to care. We are a publicly traded business. Our guidance for the year is 20% growth to between $96 million and $100 million with the EBITDA loss, as you see here. We did 20% growth in the first quarter of 2025 and had improving gross margins and, on a quarter-by-quarter basis, have been reducing our cash consumption. We've been making major investments in semiconductor technology, cloud, AI, and it's all paying off. We are focused on our core business momentum, but we also have some new businesses that we're developing, and I'll show that to you more in a bit with new AI tools. Also, we have an ecosystem that new partners have been coming into.
We also, in our semiconductor, are developing a business to also out-license some of our technology as we believe we've solved some things foundationally. Lastly, just for updates for those who know Butterfly, the RoHS standards in Europe that focus on the environmental impact, the process has now started. An advisor had been identified, and dossiers are being reviewed. We can deal with that in the Q&A session if you'd like. How many of you have seen or are familiar with Noah Wyle, right? Big show about 10-15 years ago. He is back. Noah Wyle has a new show called The Pit. It is on Max. I just want to show you a little clip.
Butterfly ultrasound works off a cell phone. Ooh, that's cool. If you can't feel a pulse, check for Doppler flow with this. It's a mini ultrasound. Follow the screen prompts.
A yellow can change to a red if they go south. You got to stay on top of them, even if they seem stable.
Okay, Sylvia, I'm Dr. King. Oh, looks like closed tib-fib fractures. Strong pedal pulses, great flow with the Butterfly. Sylvia? What occurred? Sylvia. Sylvia, can you hear me? Sylvia, can you hear me? I lost a radial pulse.
From a broken leg?
What have we missed?
I don't know. Heart attack, another injury from the car crash?
It's for pulses.
It has an eFAST mode.
Diagnosis made.
There are probably four other scenes in that show, too. It shows you how, in an emergency session, to have something mobile, to have something smart. This was not a product placement on The Pit. We did not pay for this. One of the advisors was a fan of Butterfly. They called us and asked us for a probe. We gave them a probe. We were probably in 16 of the 30 minutes of that show, it was all Butterfly. I would encourage you to look at episode 12 and 13. It shows real life, why this is so important. Our semiconductor, normal ultrasound devices have lenses or crystals in them. Those crystals are pre-tuned, pre-cut to a certain array. Different frequencies allow that array to see different parts of anatomy.
If you've ever seen an ultrasound machine, you need to have one probe to look at the abdomen, one probe to look at the chest, one for MSK, one for other. Butterfly, as you see in this screen on the left, has a MEMS semiconductor. You see those little vibrating drums. We have 9,000 vibrating drums on our chip, and we can control each drum independently. That allows us to dynamically create the sound and create the type of array. When you're in that situation, you don't have to go run for this machine, that machine. You just simply choose the abdominal preset. It tunes itself to exactly what it should be, and then you go. Supercomputers used to be huge. Now all of you have them in your pocket. Ultrasound used to be huge.
Butterfly is now on this Moore's Law semiconductor development journey to be able to miniaturize, cost-reduce, increase power to literally deliver almost like a Star Trek-type experience where you have a device that can scan the body. In the future, AI will be able to determine things to allow people to scan and also to make decisions. Butterfly is the company that is digitizing ultrasound. Because of our semiconductor, it's allowing us to be able to, in a low-cost way, just like a digital camera. Everyone knows about Kodak and what occurred in the early 1990s when they came out with the first digital camera. It was one megapixel. Image wasn't good enough. They shut the program down. All the other great imaging companies said, "No, wait a minute.
This is actually a great idea, but you have to stay the course and invest in semiconductors. Butterfly has done that. We've been investing in semiconductors now and have just launched our third generation. In the marketplace, our economics are strong. We are saving people money. Hospitals are able to bill and able to acquire these images. There's just a very strong economic standard set that Butterfly is setting out there. Because we have one device that works in most all use cases for the full body, we won one of the largest awards in 2024 in healthcare for having the best new technology. It has applicability in all these different use cases. If you're in a rural area or you're in a troubled area, I mean, for example, we have over 1,000 of these devices in Ukraine right now.
Every medic has a Butterfly. They don't have to worry about just triaging or just stabilizing them and sending them to a forward unit. They're able to diagnose them right away and take care of them. We have them in Israel and Gaza. We have them all throughout Africa. Not only that, but we have over 100,000-150,000 devices that have been sold around the world to doctors who have them personally for their individual practices. In order to make this work, Butterfly, over time, has not just developed the probe and the semiconductor. We've developed a software ecosystem to make it work. Today, if someone purchases, it's very similar to iPhone and iCloud. If someone purchases the device, they also then get a cloud account, and they pay an annual subscription to be able to store their data and have advanced tools.
We are constantly improving that software and pushing out new updates. When you buy a Butterfly, the device actually gets better and better, just like your iPhone. You have more capabilities. You have the opportunity to deal with bug fixes, the opportunity to make different improvements. All of those devices are networked into a cloud. We have over 25 million anonymized images that come in our Cloud, and that is growing by about 20,000-30,000 new images a day. That lets us do AI development, lets us do our own digital clinical trials to be able to develop the best software and the best use cases. This operating system, we now sell to hospitals because it will link—our software will link into their electronic health record. It will link to the hospital's DICOM and also their revenue cycle management system.
As they are collecting, ultrasound is notorious for not getting the records for reimbursement because it's so easy to pick the device up, do a scan, and not walk through the documentation. In the workflow of the Butterfly, we make it very easy. When you turn on the Butterfly, you have to log in. It knows who you are. If it knows who you are, it knows who your patients are. You select your patient. When you choose your preset, you say, "I want to do an abdominal scan." When you choose your preset, then all the CPT codes come up. You say, "Okay, well, which one of the five abdominal codes are you going to do?" You select which code it is, and it actually walks you through the workflow to ensure you get all the images necessary to qualify for that code. It's all dynamic.
It's all within the system. We've built this now ready to become a real part of the future of healthcare. One of the biggest challenges with ultrasound is it's hard. Anyone ever go get a CT or an MRI here? Right. That technician, when you go in for that scan, what do they tell you? Lie on the bed, keep your head down, don't move, right? They go in another room, and they initiate a standard protocol. As you're lying there, the machine automatically is collecting your images. With ultrasound, ultrasound is like a flashlight. You have to contort it. You have to know where in the body to put it. You have to know where that anatomy is. When you see it, you have to then, of course, know what you're looking at. The images are not necessarily as intuitive.
How do you get every doctor and every nurse in the world to be able to do ultrasound? Are they going to go through the same type of classic training that an ultrasonographer goes through? Kind of hard. A, we have been able to teach people individual scans and start developing them. We have tools online like Butterfly Certified. We have Butterfly University. We have some tools I'll show you in a moment. The ultimate way to unlock this market is through AI tools. Today, we have two FDA AI tools that can automatically scan the bladder and give a bladder volume. We can automatically scan the lung and tell you how wet it is for congestive heart failure patients. Now what Butterfly has done is opened its ecosystem up to third-party developers.
If they now develop an echo, they can develop an automated AI tool for echocardiography . Now, with a new software development kit that we've published, they can launch that AI tool into the App Store. Our customers literally download the app onto their phone. They get the ID and password from the company that they'll pay for. Now they plug their Butterfly into that app. All the data from Butterfly comes into that application. We have our partners now. Five of our partners have applications into the FDA. Two of them have received FDA clearance. One is iCardio. The other is DESCI or HeartFocus. Those apps will be launched in this calendar year. Customers will now have the opportunity. Everyone in the Butterfly ecosystem will have the opportunity just to download the app, buy the keys from the company.
Within the ecosystem, Butterfly enjoys a percentage of that software revenue. As more and more apps come into the ecosystem, not only does our device get more capable and our users have the ability to do more and more things easily, but we now see a revenue stream from that. Partners want to come in to Butterfly because we have the largest install base in the world for handheld devices, larger than GE, larger than Philips, larger than any other company because we are affordable and we are all-in-one and we have created this fungible technology. We are really excited about our new partners coming in. We have 23 different companies today that are developing apps to come into the Butterfly ecosystem. I think that is just going to grow over the next several years.
Now, we are in the point-of-care ultrasound market or the handheld market. As you see in the left, it is the fastest-growing space in ultrasound, but it is also the smallest. As our semiconductors get better and better and our image quality gets more and more powerful, we believe we have access to start moving right on this chart. There are some developments that we have that will help us get into the compact ultrasound cart market and then also into the low ultrasound market over the next several years. I will show you some of that evolution. We have been basically blazing a new trail because within the last 10 years, the handheld market has been developed. That is a brand new market. A lot of the energy on the handheld side has been propagated by Butterfly's efforts.
As our semiconductor gets more and more powerful, we open up access to a lot of the existing market. We are a semiconductor company. We have a semiconductor with a MEMS wafer. It is made by TSMC. They are our partner. They are very fascinated with the MEMS technology and have done an amazing job. You can see here five different generations of semiconductors with the different performance characteristics. We launched Butterfly with the iQ. About a year later, we followed it up with the iQ+ with our 4.1 chip. Recently, last February, we launched iQ3, our third-generation device. You see the data rate. It has double the processing power. You will see in a moment what that does for the image. We are now also one of the biggest knocks against digital ultrasound has been mechanical pressure.
Can you get harmonics to really get the higher-level image? We've solved that problem. In our fourth generation, the image quality is off the charts. I'm going to show you in a moment. We have our fifth generation that's also in development. We believe that by the end of 2026, beginning of 2027, we should have our fourth-generation device out. A couple of years later, our fifth generation. The fifth generation, look at that data rate. It's actually 20x the power of the current device. A lot of excitement on the development. This is kind of our visual journey. I don't know if anyone's an ultrasonographer here. I'm a layperson. I've looked at these images a lot. You can see from left to right that evolution.
That 2015 is kind of the Kodak giving up on the digital camera market time. We didn't give up. We kept on going. And we've invested over $300 million in the development of this semiconductor. It's unique and special. The iQ is where we are today. P5 is our fourth generation. On this chart, we are big admirers of Mindray. They do a wonderful job in the M8 cart. This is a list price, $32,995 cart image on the right. We have it in our lab. We use it as kind of a gold standard. Our fourth-generation chip is pretty amazing. You can see the image clarity. You can even see the platelet cloud in the ventricle. You see all the anatomy clearly. We have a wide field of view. This isn't a device. I can't price our fourth-generation device.
We sell our current device for $3,899. I do not know what our fourth-generation price will be, but it is roughly one-ninth, one-tenth of what a cart is. It is in your pocket. It walks with you. Doctors bring it into their practice. They bring it to a clinic they work on. They bring it on missionary trips. They bring it into the hospital. We get yelled at by hospitals at times because we have had these problems. It is almost a little bit of the iPhone BlackBerry scenario where you all probably had a BlackBerry a while ago working for financial institutions. They said, "This is what you are going to use for your—this is locked down and secure, and this has," etc. What did you do? You went out and all these apps were coming out. It was cool.
There were all these things you could do on it. You bought your own iPhone, even though you had a BlackBerry. When there were a lot of iPhones out there, IT directors started to realize, "Well, I can't govern this." We can lock down the iPhone. We can manage our data and move forward. There are hundreds of doctors in any particular medical institution that has their own Butterfly today. About 1,000- 1,500 a quarter just go online, use their credit card, and buy their own device outside the realm of the hospital. What that does is it kind of creates this tipping point for us.
We'll sit down with administration and say, "Do you know that about 100 of your doctors own Butterflies?" We get yelled at when they bring them in the hospital because it's not integrated, of course, into their system. They're not getting that data. That's why that software package I showed you earlier is so important. We go, "So sorry. But if you buy now our software, we can port all that data in." It's sitting in the cloud. We didn't lose it. We can now put it in and then integrate it into your system. That's why Butterfly is so cool. That's why Butterfly is so impactful. That's why Butterfly is so disruptive. That's why a lot of the other big companies don't like Butterfly because we're moving their cheese, and we're moving it pretty big.
When we look at just the core focus market, it's projected to be a $600 million market in a few years. We say, "Okay, well, that's not huge." That is the market we're crafting out for ourselves. As our imaging gets better and better, like you saw in P5, we believe the core $8 billion market is our own oyster now to go after. That is something that we're going to see in the next two to three years. We have a cart concept that is true to our one-to-one mission. I look forward to, in the future, showing you what that cart looks like. Here's the cool part. I told you that a regular ultrasound device is like a flashlight, right? You have a beam coming out, and you have to kind of contort and steer it.
We have the ability to actually move the beam without moving the device. I could put the device over the kidney, for example, press a button, and it will move the beam and just scan it. I do not need a lot of skill in order to do that. I do not have to be an ultrasonographer to capture an image. Because everything is cloud-based and everything is in our software, we can pull that image out. We can send it to a specialist, and then they can read it. Think now about the millions of patients in the home dealing with all different types of congenital or congenital diseases and look at congestive heart failure, look at diabetes, etc. Imagine you have a device. We are making a device now. This is my AirPod. We are making a device this size that ultimately will go on a patient.
That can do a scan of that patient, send that image into a cloud, direct it to a cardiac nurse safe, for example. They can determine whether they should intervene. That is world-changing. The first evolution of Butterfly has been we have been in this race to show that our image can be good enough. People thought we were just this wellness device, and they would just do this because it is cool. Now our image is so good, we can do clinical diagnosis, and we are as good as everybody else. Now we are going to be better. The next phase of Butterfly is not trying to get to equivalency. The next phase of Butterfly is showing we can change the world, change how we get these images, and change. That is where the massive opportunity over the next three to five years comes to fore.
About 70% of medical schools in the United States actually are teaching kids on Butterfly today. So there's a whole generation that are learning ultrasound skills that in the next 10- 20 years and actually this year, 2025, is the first class from several schools that are graduating with four years of being trained in ultrasound. And now many of these schools are going from having 10 of these in their lab to giving one to every student when they come in. People get their own stethoscope when they come in. That's pretty standard. It's almost like a college kid getting their laptop. In the next several years, all these schools are going to be giving a Butterfly to all their students. We give them a discounted rate on the device just like Apple did. We establish our brand. We establish our relationship.
We establish their know-how into our ecosystem. Then when they graduate, we take them from an education to a clinical user. That is a big part of our second quarter, which is usually our medical school quarter because their fiscal year ends at the end of the second quarter. We now are seeing hospitals go from having a few in the lab to now going to these one-to-one models. AI is the way that helps accelerate because we have now come up with an AI tool that can identify when you scan it what organ you are looking at. We can show the kids, "Hey, just like you see on the left, we have just launched an aorta protocol into ScanLab." That is a new piece of news for us.
You see that when on the left, it'll tell the student, "Put the probe right here under the subxiphoid." As they're looking, it'll show them that's the spine in orange, that's the aorta in red, and that's the inferior vena cava. By literally labeling it for them, you're demystifying the image, and you're helping them learn. All they want to do is scan, scan, scan. We have this type of thing for cardiac, for pulmonary, for abdominal, and now specifically for aorta. We're ultimately going to have a protocol that's going to scan down the aorta. Why is that important? Because if there's an aneurysm and there's any type of diameter changes, we're going to be able to see it before the naked eye would see it. Pretty damn cool.
There is actually Kansas City University, which is the first medical school that has made the first-year curriculum all based on ScanLab. They have to go through all of the different views. Every time they do a scan, it comes up into the software, and their instructors are able to view the scans, the quality of the scans, etc. Medical education is very important. I will end on two quick things. Home care. In order to get into the home, we have to be able to empower nurses and healthcare practitioners in the home to be able to do ultrasound. We are working on a pilot right now where we are eating our own dog food. We are committing to an at-risk provider that we will train nurses to be able to do a scan.
We will take that scan and direct it to a cardiologist and help them get real-time diagnoses for congestive heart failure patients. We will take risk on this. We have a pilot, 200 patients. The pilot's going to end now July 21st. After that, if it goes well, we may be able to sell our services to this at-risk provider to help them manage tens of thousand patients in the United States. If that works, it's a brand new revenue stream for Butterfly. We also, as I mentioned to you, are developing a licensing business for our chip because we learned that our chip is not just a point-of-care ultrasound chip. It's actually a chip that would help anyone who wants ultrasound.
We've created five deals now with five different companies who are licensing our chip and purchasing our chip and paying for our software to be able to tune it to the specific application they want to embed it into their device. We think there's a very big market opportunity in wearables and planables, interventional therapeutics, but also in non-healthcare verticals. We think the Oil and Gas industry is interested in this, military for security because there's a lot of things that these MEMS sensors can do with delivering sound, looking at fingerprints, etc., etc. We are going to return value to our shareholders by monetizing that $300 million investment in any way that we possibly can. Our core pillars for growth is to strengthen our core to drive our user base, to create and maintain our differentiation, and then generate as much new business as possible.
That kind of guides us. We are very, very excited about where we are as a business. I want to thank you all for your time. We will have Q&A in a different room, Andrew. Right? ,
That's right. [audio distortion] Thanks, Joe. All right.
Thank you, everybody.
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