8-K: Butterfly Network Exceeds Expectations with 14% Revenue Growth and Reduced Losses in Q1 2024, But Faces NYSE Delisting Notice

Butterfly Network reported a strong first quarter with 14% revenue growth and significant reductions in net loss and cash usage, but also received a notice from the NYSE regarding its stock price falling below the minimum listing requirement.

Summary

• Butterfly Network announced its first quarter 2024 financial results, showing a 14% increase in revenue to $17.7 million compared to $15.5 million in the same period last year.
• The company's U.S. revenue grew by 19% to $12.2 million, driven by the launch of the Butterfly iQ3, while international sales increased by 14% to $4.2 million.
• Product revenue saw a significant 28% increase, reaching $11.3 million, due to a 22% rise in units fulfilled.
• Software and other services revenue decreased by 4% year-over-year to $6.4 million.
• Gross profit was $10.3 million, with a gross margin of 58.2%, slightly down from 58.7% in the prior year.
• Operating expenses decreased by 25% to $32.9 million, primarily due to reductions in force and non-payroll spending.
• Net loss was reduced by 35% to $21.8 million, compared to $33.5 million in the first quarter of 2023.
• Adjusted EBITDA loss improved to $13.2 million, compared to $22.3 million in the prior year period.
• The company's cash, cash equivalents, and restricted cash stood at $116.8 million as of March 31, 2024.
• Butterfly Network has increased its full-year 2024 revenue guidance to $75 million to $80 million, representing approximately 15-20% growth, and expects an adjusted EBITDA loss between $50 million and $55 million.
• The company received a notice from the NYSE on April 26, 2024, stating that it is not in compliance with listing standards due to its stock price falling below $1.00 for a consecutive 30 trading-day period.
• Butterfly Network has six months to regain compliance with the minimum price criteria, and intends to consider all available alternatives, including a potential reverse stock split.

Sentiment

Score: 7

Explanation: The document presents a mixed picture. While the company shows strong revenue growth, reduced losses, and successful product launches, the NYSE delisting notice is a significant concern. The increased guidance and positive management comments are encouraging, but the stock price issue tempers the overall sentiment.

Positives

• Revenue increased by 14% year-over-year, reaching $17.7 million.
• U.S. revenue grew by 19%, driven by the launch of iQ3.
• Product revenue increased by 28% due to higher unit sales.
• Net loss was reduced by 35% compared to the same quarter last year.
• Net cash used in operations decreased by 52%.
• Operating expenses decreased by 25% due to cost-cutting measures.
• The company successfully launched the Butterfly iQ3 and ScanLab.
• Butterfly received EU MDR certification for Butterfly iQ+.
• Full-year revenue guidance was increased to $75 million to $80 million.
• The company achieved its strongest first quarter in its history.

Negatives

• Software and other services revenue decreased by 4% year-over-year.
• Gross margin decreased slightly to 58.2% from 58.7% due to product mix and higher amortization.
• The company received a notice from the NYSE for not meeting the minimum stock price requirement.
• The company is facing potential delisting from the NYSE if the stock price does not recover.

Risks

• The company's ability to regain compliance with the NYSE listing standards within the six-month cure period is uncertain.
• The company may need to implement a reverse stock split if the stock price does not recover.
• The company's future performance is subject to various risks and uncertainties, including market acceptance of its products and regulatory approvals.
• The company's ability to raise financing in the future is uncertain.

Future Outlook

Butterfly Network increased its full-year 2024 revenue guidance to $75 million to $80 million, representing approximately 15-20% growth, and expects an adjusted EBITDA loss between $50 million and $55 million. The company also plans to regain compliance with NYSE listing standards, potentially through a reverse stock split.

Management Comments

• Joseph DeVivo, Butterfly's Chairman and CEO, stated that the company achieved its strongest first quarter in its history with all channels contributing.
• DeVivo noted a 22% increase in probe volume following the successful commercial launch of Butterfly iQ3.
• DeVivo mentioned that the company is confidently increasing its guidance for 2024 due to the strong first quarter results.
• DeVivo highlighted the EU MDR certification, which will enable Butterfly to roll-out advanced features in the European market.
• DeVivo emphasized the importance of the new AI-powered educational application ScanLab in driving adoption and growth.

Industry Context

This announcement highlights Butterfly Network's continued efforts to disrupt the point-of-care ultrasound market with its innovative handheld devices and software. The company's focus on expanding its product offerings and geographic reach aligns with the broader trend of increasing adoption of portable medical imaging technologies. The company is competing with traditional ultrasound manufacturers as well as other point-of-care ultrasound companies.

Comparison to Industry Standards

• Butterfly Network's 14% revenue growth in Q1 2024 is a positive sign, especially when compared to some traditional medical device companies that have seen slower growth in recent quarters. For example, companies like GE Healthcare and Philips have reported single-digit growth in their healthcare segments.
• The 22% increase in probe volume is a strong indicator of market adoption for the Butterfly iQ3, which is a key differentiator for the company. This is in contrast to some competitors who rely on more traditional, larger ultrasound systems.
• The reduction in net loss by 35% and cash used in operations by 52% demonstrates improved operational efficiency, which is a critical factor for a growth-stage company like Butterfly. This is a significant improvement compared to some other medical device companies that are still struggling with profitability.
• The EU MDR certification for Butterfly iQ+ is a significant milestone, allowing the company to expand its presence in the European market. This is a key competitive advantage as it allows the company to offer advanced features to its European customers.
• The launch of ScanLab and the first commercialization from Butterfly Garden highlight the company's focus on innovation and ecosystem development, which is a key differentiator in the competitive medical device market. This is a unique approach compared to many traditional medical device companies.

Stakeholder Impact

• Shareholders are impacted by the potential delisting from the NYSE and the need for a potential reverse stock split.
• Employees are impacted by the previous reductions in force, but the company's improved financial performance may provide more stability.
• Customers will benefit from the new Butterfly iQ3 device and the advanced features of Butterfly iQ+.
• Suppliers may see increased demand due to the company's revenue growth.
• Creditors may view the company more favorably due to its improved financial performance.

Next Steps

• The company will focus on regaining compliance with NYSE listing standards within the six-month cure period.
• Butterfly plans to roll-out advanced features on Butterfly iQ+ in the European market.
• The company will continue to progress towards launching the iQ3 in Canada and Europe in 2024.
• Butterfly will continue to develop its partnership ecosystem through Butterfly Garden.

Key Dates

Keywords

ultrasound, medical imaging, digital health, point-of-care, Butterfly iQ3, Butterfly iQ+, ScanLab, revenue growth, EBITDA, NYSE, delisting, financial results