Good day and thank you for standing by. Welcome to the Butterfly Network 2020 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your first speaker today, Mike Cavanagh, Investor Relations. Thank you. Please go ahead.
Good afternoon and thank you for joining us today. Earlier this afternoon, Butterfly Network released financial results for the year ended December 31, 2020 and provided a business update. The release is currently available on the Investors section of the company's website at ir. Butterflynetwork .com. Doctor.
Todd Fruchterman, Butterfly Network's President and Chief Executive Officer and Stephanie Fielding, Butterfly Network's Chief Financial As a reminder, during today's call, we will be making certain forward looking statements. These statements may include statements regarding, among other things, expectations with respect to financial results, future performance, Development of products and services, potential regulatory approvals, anticipated financial impacts and other effects of the business combination on our business, The size and potential growth of current or future markets for our products and services and the potential impact of the COVID-nineteen pandemic on our business. These forward looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties That may cause actual results to differ materially from those contained in the forward looking statements. These and other risks are described in our filings made with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward looking statements, and the company disclaims any obligation to update such As a reminder, this call is being webcast live and recorded, and we will be referencing a slide presentation in conjunction with our remarks.
Because there is a short delay between the live telephone audio and the presentation being shown on the webcast, for the best experience, please use either the webcast for both the audio and Video content or if you dialed in by telephone, download the slides from our website and advance them yourselves. To access the webcast, please visit the Events section in the Investors section of our website. Additionally, a replay of the event will be available following the call. I would now like to turn the call over to Doctor. Fruchterman.
Thank you, Mike, And good afternoon, everyone. I'm excited to be hosting the 1st earnings call for Butterfly Network, and I am grateful for the opportunity to lead this incredible company and talented team. On today's call, I will provide an overview of our full year 2020 performance and the momentum we built last year before discussing the longer term outlook for the company. Then Stephanie will review our 2020 financial results and we will conclude with a question and answer session. With this being my first earnings call as CEO In our first such call as a public company, I'd like to say a few words about why I was attracted to Butterfley, What we do and why we're so excited about it.
For the last 25 years, I have been passionate about driving change and innovation in healthcare. I wake up every day wanting to make a difference in people's lives. And now more than ever, change is needed in healthcare on a global scale. And that's why I joined Butterfley because we have the technology and the platform that can enable change of that magnitude. Our universal handheld point of care ultrasound solution is powered by a proprietary technological breakthrough, Ultrasound on a chip.
Butterfley's core chip technology is the first fundamentally new sensor To come to the ultrasound market since the introduction of clinical ultrasound some 50 years ago, it breaks through the Crystal sealing limitations of traditional ultrasound and enables the next generation of imaging products that are affordable, portable, Connected and high performance. Butterfley has the ability to go to wherever the patient is. We have paired our handheld probe with cloud based software to create a true imaging solution, a solution that delivers vital information And with these clinical workflow improvements, clinicians can achieve better outcomes for the people in their care. The beauty of Butterfleye is that this can happen anywhere as long as the Butterfleye handheld is paired with a connected device. This ubiquity supports our mission to create access to advanced imaging solutions for healthcare applications all around the world, helping to democratize healthcare and support global health equity.
Now let's review our 2020 performance. Last year, we made great progress in getting Butterfley into the hands of many different types of healthcare professionals, Bringing our technology to new users and introducing new applications, important steps towards the achievement of our mission. And We are excited because as we listen to our customers, we are seeing many new use cases and opportunities emerge, guiding us as we work to rapidly develop new applications for our technology. And as a result of our team's great work, We reported a revenue increase of 68% year over year, demonstrating to both our initial IQ device as well as the 2nd generation IQ plus device that we launched In October 2020, this launch was a significant commercial milestone for our company, Creating many improvements we know are important to our customers, the IQ plus is less expensive to produce, Has a faster frame rate, longer battery life, smaller probe head and improved interoperability versus the 1st generation Butterfley IQ. The IQ plus is the result of our many years of R and D and our proprietary Chip based technology platform that allows us to rapidly deploy performance enhancements and capabilities into the market.
As one example, in December, just following the launch, we further enhanced IQ plus with the first biplane imaging capability in a portable ultrasound device. This allows our customers to more accurately place needles during vascular access and regional nerve blocks. But this is only the beginning as we expect to continue pushing the paradigm of what's possible at the point of care. In 2020, We established a number of partnerships to help us reliably produce our products and expand customer awareness, reach and clinical use cases For our differentiated Butterfleye technology, in October, we announced the collaboration with the American College of Cardiology or ACC to explore ways to transform cardiovascular care. ButterFLY and the ACC Plan to jointly conduct a clinical trial that leverages our innovative technology for scanning patients with cardiac disease, exploring the benefits of Butterfley in new patient care settings that are one of a kind device can serve.
Also in 2020, we expanded our global health partnerships with a number of organizations focused on limited resource settings. We are particularly proud of our work with Alara Health to facilitate a large scale deployment of Butterfly IQ Devices and a teleguidance pilot in Kenya. By leveraging Butterfley's teleguidance, a sonographer is able to remain at a central hub location and remotely guide clinicians as they outline a lot of our clinics. We are making important progress toward breaking new frontiers and revolutionizing the way medical imaging is delivered in our mission to advance global health equity. And as you are aware, last month we completed our business combination with Longview Acquisition Corp.
So now, Butterfly Network Inc. Class A common stock and warrants trade on the New York Stock Exchange. This has enabled Butterfley to become a larger, well capitalized company that is primed for global growth and supports our robust investment in innovation. I could not be more excited for the longer term outlook for Butterfley Because we believe we have a groundbreaking solution and the team who knows how to realize its value. We know that great technologies Don't just make great businesses on their own.
Great technologies make great businesses when they are enabled through powerful, Scalable business models that create and capture customer value. It is still fair to say We are early in our journey and a lot has happened in the past 8 weeks with Butterfley going public in mid February, Me joining the company as CEO a few weeks before that and more recently, the exciting addition of Stacy Pierce as Chief Commercial Officer. Simultaneously, we have enhanced our capable and experienced Board of Directors with our latest addition of Doctor. Eleazar Adelman, Professor of Medical Engineering and Science at MIT. Doctor.
Adelman adds further clinical and technical dimension to our already powerful Board of Directors. Given this build in both the Board and leadership team, We are still defining our longer term commercial outlook for Butterfleye and the most appropriate metrics to inform our progress towards those goals. My near term goals and that of Butterfley are foundational and we look forward to reporting our progress in the coming months. I have five goals. My first goal is to broaden and strengthen our human capital, which will complement our technology and clinical teams and to enhance our innovation capability with additional commercial, regulatory, operational and developmental horsepower.
The second, It's to align with the payer community, which we believe is well incented to drive adoption of our products to improve both outcomes and cost of care. 4th is to commercially partner across care settings, specialty and geography, which we expect We'll accelerate adoption of Butterfley to deliver patient centric value based healthcare. And my final goal As we continue to invest in our industry leading innovation, we are only beginning to harness what is possible to ensure optimized implementation And coordination in healthcare, Butterfley has an important role to play here. Success along these 5 foundational goals, Team, clinical partnerships, payer alignment, commercial expansion and innovation, we believe will drive our societal impact, Our commercial growth and our ability to improve wellness one patient at a time, our work is not only urgent, it is Timely, especially as we emerge from the pandemic, there are rapid shifts in where and how care is being delivered and an increasing focus on value based care, outcomes and total cost of care. We are fortunate to be delivering technology to a global marketplace that we believe is ready and anxious to receive it.
Today, point of care ultrasound is incorporated into the curriculum of more than 2 thirds The U. S. Medical schools. Additionally, nearly all professional societies across clinical specialties now have a policy regarding point of care ultrasound and are developing standards. This strengthens the clinical foundation on which Butterfley operates and supports our advanced capabilities that enable meaningful utilization and value realization in a variety of settings.
At its core, Our strategy is to drive increased utilization and adoption of our solution. And this means getting the IQ plus into the hands Of the people who can benefit from it in a way that creates immediate long lasting value, it starts with getting the hardware In a customer's hand, it amplifies through our software that creates an engaging user experience and easily integrates with existing systems, providing additional value when using Butterfleye. As we broaden our footprint, we will seek to expand the use cases for ultrasound information and thereby increase applications and use in care settings that haven't traditionally been able to benefit from it. We expect Our technology will continue to make ultrasound more accessible to clinicians throughout the world and provide better information To make clinical decisions earlier in a patient's treatment, in the hospital, in the ER, in medical transport on the way to the hospital, in the clinic and ultimately subject to the appropriate regulatory authorization in the home. And this is an opportunity in both developed and developing healthcare systems.
Decision making at the point of care in many settings can be a game changer for improving a patient's care with the potential to help revolutionize and simplify care delivery, addressing delays in access to clinical information, reducing unnecessary costs and improving patient satisfaction. The Butterfley solution is designed to address key problems in modern healthcare and helps to get treatment on the right path earlier because more than 2 thirds of diagnostic dilemmas Can be answered with simple imaging. In the past, we used a stethoscope and listened with butterfly we can see and know. I look forward to sharing more information with you on our long term outlook as the year progresses. I will now turn the call over to Stephanie for a review of our financial results.
Stephanie?
Thank you, Todd. Total revenue Full year 2020 was $46,300,000 which as Todd noted earlier is a 68% year over year increase from $27,600,000 in 20 19. Product revenues for the full year 2020 were $38,300,000 an increase of 53% from 25,100,000 In 2019, units fulfilled, which is the primary driver of product revenue, were 20,208 in 2020 compared with 12,941 in 2019, which is an increase of 56%, reflecting continued excitement and demand in the market, International expansion and a positive reception for our new Pro, the Accuplus, which was introduced in October 2020. Subscription revenues were $7,900,000 in 2020, growing 216% from 2,500,000 In 2019, our subscription mix, which we define as the percentage of our total revenue recognized in a reporting period That is subscription based was 17.1% in 2020 compared with 9.1% in 2019, an 8 percentage point increase. Subscription revenues increased with device sales as well as with renewals on prior year sales.
Turning to expenses. The cost of revenue for 2020 was $107,500,000 an increase of 122 percent from $48,500,000 in 20 19. Cost of product revenues was $106,400,000 a 122% increase from $47,900,000 in 20.19 And the cost of subscription revenue was $1,100,000 increasing 72% from $621,000 in 20 19. The increase And cost of revenue included non recurring charges totaling $62,700,000 this year. As we shifted production from the IQ to the IQ Plus device in the second half of twenty twenty, we renegotiated some inventory commitments with certain third party vendors, Recognizing a $7,000,000 loss on purchase commitments and a $2,600,000 loss on inventory write downs.
Additionally, in the Q3, we commenced production with a long term strategic development partner, TSMC. The economics of this partnership were negotiated early in the development of Butterfly IQ Plus and the successful production shift Represent a tremendous accomplishment for the teams of both Butterfley and TSMC. Concurrent with this transition and the generation of revenue forecast Shared at the time of our Longview merger announcement in November, we undertook an inventory analysis. This review process We believe our inventory position fairly represents a reasonable range of sales outcomes consistent with our merger forecast and provides Butterfley with the ability to meet material excess demand should it materialize through future periods. Importantly, in an environment where there are widespread For 2020 was negative $61,200,000 compared to 2019 gross profit of negative 20,900,000 Operating expenses in 2020 were $100,400,000 an increase of $19,000,000 or 23 compared to 2019.
The increase was primarily due to costs incurred in growing the business and completing our SAC business combination, including increased spending in research and development, sales and marketing and general and administrative costs. I would note that we were deliberately conservative with operational spending during the year, conserving cash as we work to secure longer term financing. Loss from operations was $161,600,000 a 58% increase from $102,300,000 in 20 19, While net loss for 2020 was $162,700,000 as compared to a net loss of $99,700,000 during 2019. Adjusted EBITDA was negative $85,200,000 in 2020 compared with negative $86,000,000 in 2019. Adjusted EBITDA reconciliation calculation GAAP net loss can be found in today's press release and filings.
Moving to the balance sheet. Throughout much of 2020, We focus on having adequate capital resources and liquidity to support the business over the near and long term. As of December 31, cash and cash equivalents for $60,200,000 Although it occurred subsequent to the end of 2020, as you know, our balance sheet was significantly Following the business combination with Longview Acquisition Corp. On February 12, upon the closing of the business combination with Longview, We added over $540,000,000 in cash to the balance sheet. We believe Butterfleye is well capitalized at this point in time to support the next stage of development, and we are in a position to invest aggressively to expand Butterfley's headcount, adoption and utility.
I would now like to turn the call back over to Todd.
Thank you, Stephanie, and thank you all for participating in Butterfley's first earnings call as a public We hope you have come away with a better understanding of our company, a sense for the accomplishments of our team in 2020 and excitement about the opportunity for Butterfly Network. We have the foundation in place for the next stage of our growth and evolution supported by tailwinds for our sector as well as broader healthcare and societal trends. We believe that our technology is unique, disruptive and able to drive a fundamental change in the way healthcare is practiced By delivering the information necessary to make more informed clinical decisions earlier, truly affordable and accessible point of care ultrasound information can provide real value to healthcare providers. And we believe that Butterfley solution will result in many new use cases for ultrasound information, unlimited by physical location. Our organization is vibrant, growing and in an excellent position to this stage of Butterflies' life as a public company.
I look forward to our next update with you. And I will now turn the call over for questions.
Please standby while we compile the Q and A roster. Your first question comes from Matt Taylor from UBS. Matt Taylor, your line is open.
Sorry, I was on mute. Thanks for taking the question. I was hoping you could give us some perspective on the Plus launch and how long you're going to be able And is this the kind of thing we should expect from you in the future, kind of a regular cadence of New handpieces, new features and add ons, maybe you could talk a little bit about that.
So Matt, thanks for the question. So one of the things one of the core fundamentals that we have in having Time on a chip is our ability to bring new features and benefits to the product. So, you can think about a cadence that we have Introducing new technology over the appropriate period that we would over our life cycle of Every couple of years or so, right, we would do major technology upgrades. And then within those time periods, we would be able to add functionality and capability to it. That's really the benefit that we have of our fundamental platform of having ultrasound off of a semiconductor based Technology.
And so that's really, I think, the cadence that you would have and you've seen that with IQ Plus. So we were able to bring IQ Plus out. We added some benefits and features to it. You saw us add Bioplane in, which was really A nice addition to the product and gave more capabilities to our users. And as we work closely with our users and understand What problems the customers have and we align to them, that's really going to be the approach to our road map and it's really the advantage of our technology
Great. Thanks for that. And I just wanted to ask a follow-up on The ACC partnership, the study that you talked about, it sounds pretty exciting. Can you give us some color on just the size of that, the enrollment, what Some of the endpoints are, anything to help us understand that a little bit better?
So the ACC collaboration is in its early stages and we're We're in the planning part of that with them right now. So as that develops, we will inform you as this study One of the areas that we're focusing on is going to be in congestive heart failure, which I think is You know, a large chronic condition and as you see now having point of care ultrasound Starting to be used in some of these more chronic conditions in different care settings, the opportunity becomes really exciting to have an impact in how we start managing the health of broad populations of people in a variety of And those are the types of things that we're looking at. And that's the type of studies that we're looking Right now to create with ACC.
Great. Thank you.
Your next question comes from Josh Jennings from Cowen.
Hi, good afternoon. Congratulations on the strong growth in 2020. I wanted to just ask about your go to market I think you guys are talking about rapidly scaling up. And anything you can provide in terms of how you're thinking about building out the enterprise Sales force and emphasizing that channel versus the historic e commerce channel will
Thanks for the question. We absolutely One of the things in me coming in right now as a new CEO and taking a look at The next question comes from the line of Sutterfly. Please go ahead. Hi, good morning. I'm going to turn the call over to Steve.
Hi, good morning. I'm going to turn the call over to Steve. Hi, good morning, everyone. I'm going to turn the call over to Steve. Hi, good morning.
Thanks for taking my questions. An area that we're definitely excited about. There's strong demand in enterprise right now for Butterfley, Not only as a unique ultrasound device, but for our total solution to our sales force expansion is on track There we continue to drive that expansion to help us take advantage of the opportunity in enterprise. We're focused also on customer success to help usability and deployment of the solution. And we're lining up the enterprise that we see A lot of opportunity in the enterprise channel, not just using point of care ultrasound, But also the ability to deploy our Butterfley solution across the enterprise and get maximal value
Excellent. Well, thanks for that those details. And I hate to ask this question, realizing you just launched Butterfly Q plus but our checks have with some Butterfly Q adopters I've been very positive around image quality. And I was just curious about the roadmap And where you go from here, just strictly thinking about image quality, where it sits today and where it can go? And is it essential for Butterfley To improve on image quality from here, I mean, clearly, you're having very strong early adoption trends in the last 2 years.
Just wanted to bounce that question off you. And then sorry to sneak in one last one, but just wanted to follow-up with Stephanie's comment about the global ship shortage and you have a clear line of supply, but anything you can share there
So I'll take the first one. I'll let Stephanie take the second one. One of the advantages of our technology is that we We can enhance the performance of the device, as we're able in a technology a semiconductor based Our image quality, right now, I think we have a very solid device that allows For the binary decision, oftentimes the binary decision making that's required at point of care And to enable that decision making, so if you think about point of care, right, it starts to move the decision making Earlier with where the patient is and so point of care ultrasound enables you to do that. I think where we are right now with our technology More than adequately allows someone to do that, and we have the ability to increase our image quality and our capabilities on a fairly regular Cadence here in that gives the advantage of semiconductor based technology along with continuing to improve our cost basis, which Obviously, it becomes important in the overall economics of care. And then Stephanie, I'll let you take the second one.
Sure. Thanks for the question, Josh. As you know, we have a very strong partnership with TSMC, and that's both an engineering partnership that has been going for the last Here as we look to develop the IQ plus as well as a manufacturing partnership. As part of that, we do have a committed supply agreement with them. And so we feel very confident both in their ability to deliver the semiconductor wafers that we need for our current production as well as to help us meet additional demand should it materialize.
We think this partnership is a competitive strength and the availability of wafers in the midst of a global shortage is just one example
That's all the time we have allotted for Q and A today. I will turn the call back over to Doctor. Todd Preckman for closing remarks.
I just want to thank all of you for participating in Butterfly Network's first ever earnings call. I can't tell you how excited we are about the