Butterfly Network - UBS Global Healthcare Conference - BUTTERFLY NETWORK INC

Explicit Guidance:

• No specific financial guidance (revenue, earnings, margins, capex, or cash flow) provided for upcoming fiscal quarters or full years.
• No formal guidance on share count, dividends, or buybacks; however, management indicated an intent to "return that capital to shareholders" once investment capital is recovered and the balance sheet remains strong, though no specific buyback program or timeline was announced.

Business-Segment Outlook:

• Embedded Semiconductors: Management projects that revenue from the semiconductor licensing business will "start to dwarf our point-of-care ultrasound business" over the "next couple of years," driven by the volume of customer applications and royalty streams.
• Point-of-Care Ultrasound (POCUS): Anticipated to continue growing, with a focus on compressing adoption cycles by training medical students (currently ~80% of schools teach on Butterfly) to create a future standard of care where ultrasound is as ubiquitous as a stethoscope.
• Home & Community Care: Currently piloting and expanding a "home business" model at nursing homes and with at-risk providers; the goal is to become a "big business" by scaling to other large payer providers, leveraging a per-patient/per-scan revenue model to reduce readmissions (estimated savings of $10,000 per avoided incident).
• Enterprise Software: Moving from departmental to multi-departmental sales; deal structures are shifting toward 3-5 year software agreements with "six, seven figures" Total Contract Value (TCV), creating a recurring revenue annuity through monthly recognition of implementation contracts.
• Device Deployment: Health system deployments are scaling rapidly (e.g., one system deployed >800 devices), indicating a trend toward large-scale, multi-departmental hardware and software bundling.

Market and Competitive Outlook:

• Product Evolution: Next quarter, Butterfly will launch its fourth-generation semiconductor, which will offer "better image quality than a normal handheld POCUS device," aiming to render legacy analog crystal-based devices obsolete.
• Market Expansion: The market is evolving from a niche medical tool to a standard of care in emergency medicine and ICUs; demand is being accelerated by AI tools that assist novice users in image acquisition and interpretation.
• Competitive Landscape: Management acknowledges future competition will emerge as the market grows; the primary defense is the "evolution" of the technology (moving from Gen 1 to Gen 4) and the "lead" established through 15 years of R&D and 700 patents.
• Non-Healthcare Expansion: Transitioning from exclusive healthcare focus to industrial and consumer sectors; currently in "final discussions" for a non-healthcare deal regarding material stress testing (airplanes, bridges) and exploring opportunities in underwater drones (oil discovery) and military security.

Macro / Industry Outlook:

• Healthcare System Trends: Alignment with the broader industry shift toward "capitated care," where upstream diagnostics (like Butterfly) are critical for reducing downstream costs (readmissions, hospital stays) and avoiding high-cost facility-based care.
• Technology Convergence: The market is benefiting from the convergence of improving semiconductor technology (Moore's Law), Large Language Models (LLMs), and AI compute, which are collectively lowering the barrier to entry for non-expert ultrasound use.
• Regulatory/Clinical Adoption: Anticipated regulatory and cultural shift where all physicians and nurses will eventually be "required to have ultrasound skills," similar to current stethoscope standards.

Strategic Initiatives:

• Semiconductor Licensing Platform: Scaling a "CUDA-like" software ecosystem for partners; currently has 12–14 partners licensing the chip and software, including an exclusive partner for whole-body ultrasound.
• Sales Force Restructuring: Transitioning from inbound partner inquiries to an outbound sales motion; salespeople dedicated to the embedded segment will begin "cold calling" over the next year to secure new industrial and consumer deals.
• Product Roadmap: Launching the 4th-generation semiconductor next quarter; continuing to push software updates (monthly/quarterly) to all deployed devices to improve imaging presets remotely.
• Ecosystem "Garden": Managing ~33 AI partner companies building tools for the Butterfly ecosystem; potential for "insourcing" extraordinary tools to integrate directly into the platform.
• M&A/Strategic Capital: Maintaining a "shelf" registration to retain optionality; open to M&A to accelerate growth in adjacent technologies or capabilities that fit the "flywheel," particularly in digital tools and AI.

Risks and Headwinds to Outlook:

• Partner Secrecy: A significant constraint on growth visibility; many partners (e.g., mid-journey) are "mortified" by public disclosure of their business models, limiting the ability to validate the scale of the embedded revenue opportunity to the market.
• Implementation Complexity: Enterprise adoption is not immediate; revenue recognition is linear over multi-year software contracts, delaying the financial impact of large TCV deals.
• Adoption Friction: Overcoming the "learning curve" of ultrasound and the integration hurdles of EMR/DICOM data flows within hospital IT departments.
• Competition: While currently protected by a significant lead, new entrants will emerge as the market value increases, requiring continuous innovation to maintain the "first-mover" advantage.
• Long-Term Payoff: The embedded revenue stream relies on partner commercialization success; "commercial revenue will be larger and will happen quicker" only if partners successfully integrate the chip into their products, a process that may vary by partner.

Management Tone on the Future:

• Confidence Level: Highly optimistic ("opportunities are bright," "awesome mousetrap") regarding the strategic pivot to embedded semiconductors, viewing the current phase as a "huge multiplier" for revenue.
• Strategic Confidence: Management expresses strong confidence in the "infinitely programmable" nature of the chip and the 4th-gen launch as a definitive competitive moat.
• Historical Context: Shift from a high-burn, high-risk profile ($160M burn/year, <1 year cash) to a "very strong balance sheet," enabling a more aggressive strategic posture.
• Communication Stance: Acknowledges the difficulty of communicating "long-term TAM" vs. "short-term 90-day revenue," noting that the "show me" story will evolve as partners begin rolling out commercial products.

Miscellaneous:

• Partnership Nature: Relationships are described as "win-win," scaling with customer volume; partners benefit from not reinventing the platform, while Butterfly gains "forever hardware revenue streams" and royalty streams without incurring development or clinical trial costs for new applications.
• Geographic Reach: Expansion beyond US hospitals into ambulances, cruise lines, helicopter transport, and nursing homes globally.
• Financial Health: Transition from "burning capital" to a position where returning capital to shareholders is a viable option, contingent on continued organic growth and strategic investments.