BFLY - NYSE

Hello, everyone, and welcome to the Butterfly Network Second Quarter 2025 Earnings Call. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I would now like to hand you over to your host, Heather Getz, to begin. Heather, please go ahead when you're ready.

Good morning, and thank you for joining us. Earlier today, Butterfly released financial results for the second quarter ended June 30, 2025, and provided a business update. The release, which provides a reconciliation of management's use of GAAP and non-GAAP measures compared to the most applicable GAAP measures are currently available on the Investors section of the company's website at ir.butterflynetwork.com. I, Heather Getz, Chief Financial and Operations Officer of Butterfly, alongside with Joseph DeVivo, Butterfly's Chairman and Chief Executive Officer; and Megan Carlson, Senior Vice President of Finance and Accounting, will be hosting this morning's call. During today's call, we will be making certain forward-looking statements. These statements may include, among other things, expectations with respect to financial results, future performance, development and commercialization of products and services, potential regulatory approvals, uncertainties regarding the potential impact of health care funding and the size and potential growth of current or future markets for our products and services. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of known and unknown risks, uncertainties and other factors 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 statements. As a reminder, this call is being webcast live and recorded. To access the webcast, please visit the Events section of our Investor website. A replay of the event will also be available on the page following the call. I would now like to turn the call over to Joe. Joe?

Thanks, Heather, and good morning, everyone, and thanks for getting up early with us on a Friday. The second quarter marked the first full quarter to anniversary our Butterfly iQ3 launch in the prior year. And against this milestone, I'm pleased to share that we were able to deliver our highest quarterly revenue in company history, totaling $23.4 million. Our gross margins reached an all-time high at 64%, and our cash use was the lowest of any quarter at $7 million. Each quarter, we continue to deliver leverage as we march to breakeven. And I'm very pleased of our overall performance and continued discipline of our management team this quarter in the face of some macro headwinds we mentioned during last quarter's call. Earlier this year, we started seeing signs that certain macro environment decisions were having an effect on our core focus business. The guidance provided for Q2 reflected these dynamics, and we came in the range of that guidance. In the near term, we expect these conditions will persist through the end of the year. We believe in the long-term, Butterfly's inherent value proposition will actually thrive in the further cost-contained environment as the health care market adjusts. As a result, we are modifying our full year guidance to reflect this. Our previous guidance factored in the tough comparisons to last year given the boost we saw from iQ3 trade-ins and ASP lift. That said, we had expected to be further along in closing larger deals for additional growth. Those opportunities are still very much active, while the sales cycle is being lengthened. That said, we continue to diligently work on our significant pipeline of enterprise and medical school deals. I'm pleased to announce that we did close the large enterprise-wide deal we mentioned on the last call in the second quarter. They have not let us use their name publicly, but we will fully deploy in every department, every campus and one of the top 5 most recognized health systems in the world. It's clear evidence of the tipping point in interest we are seeing at the highest levels. Make no mistake, the momentum of Butterfly in the market is undeniable. I expect things will be back to normal after health care digests the changes it's going through. We continue to progress deals and grow market share with iQ3 still leading the way, driving participation and winning RFPs, integrating into medical school programs while proving to the marketplace that it's simply the best handheld ultrasound out there. Not just as a versatile digital pro, but a holistic ultrasound program. Compass, our cloud-based enterprise software, also leads the way in imaging workflow, QA, storage and interoperability, and it's about to get even better in the next era with our next-generation software platform launch. I'll share more details on that towards the end of the call. So during the quarter, we saw continued progress with Butterfly Garden. We added 2 new Butterfly Garden partners, and we are pleased to see that our partners, iCardio, HeartFocus by DESKi and Deep Echo received FDA clearance in the first half of '25 for their clinical use. We expect HeartFocus will be launched to Butterfly users sometime in the third quarter and the other applications shortly thereafter. Butterfly Garden is now entering its commercial phase, and we are excited for the customers to have these AI tools for their clinical use on a Butterfly. Once launched, they'll be able to download a specific app to their phone, plug in the Butterfly and scan. These advanced AI tools will allow cardiac and pulmonary scanning by health care professionals without prior ultrasound training. These apps over time will expand the market opportunity for POCUS, while enabling more and more clinicians to diagnose patients where they are. During the quarter, we also launched an educational app called MSK VUE. This is an app developed in the research facilities of the University of Rochester Medical Center, helping caregivers learn how to identify an important nerve while scanning the musculoskeletal. We are very proud of this collaboration with URMC and pleased that our Garden helps speed to market new AI applications developed in the clinical community. Butterfly Garden, I believe, will be growing each quarter and will become a significant accelerant for the POCUS market. So keeping on the AI front, Butterfly has added a new descending aorta scanning protocol to our ScanLab educational software. Aortic aneurysms often present as a deadly event impacting approximately 35,000 Americans each year. Most patients are asymptomatic until rupture or dissection. So helping clinicians master this view can be lifesaving. Improving access to valvular disease screening is another key focus for Butterfly. In the second quarter, research we conducted with Tufts University recently published in the European Heart Journal, Image Methods and Practice, showed that a machine learning model, especially trained on a Butterfly iQ can accurately detect aortic stenosis. Aortic stenosis affects 12% of adults over 75 and often goes undiagnosed in older and underserved communities. Demonstrating that handheld AI can pick up aortic stenosis is a big step towards earlier community-based screening. Butterfly's clinical team has been busy. The full Rutgers study we previewed earlier this year has now been accepted by a leading medical journal. The findings will remain under embargo until Q3, and they detail the financial and operational benefits of adding Butterfly to inpatient care. So the evidence just continues to build. Now I'll pause here on business updates and turn it over to Heather and Megan to review the financials. But before I do, I want to thank Heather for her work helping reinvent Butterfly and for setting us on a course of a strong financial footing. As you read in the release, Heather will be leaving Butterfly around August 15 and will transition to an adviser of Butterfly until early 2026. Megan Carlson, our Senior Vice President of Finance and Accounting and Chief Accounting Officer, has been appointed our Interim CFO until a permanent CFO is identified. One of Butterfly's great strengths is the expertise and depth of our finance organization. With Megan in place, I'm certain we will not skip a beat. We all at Butterfly wish Heather well for her life's next chapter. With that, I'll turn it to Heather to go into the second quarter in more detail. Heather?

Thank you for your kind words, Joe. My time at Butterfly has been a rewarding experience, and my choice to leave was not an easy one. The accomplishments we achieved as a team over my tenure are a great source of pride and put the company on solid financial footing for years to come. As Joe mentioned, in order to ensure a seamless transition, I will work closely in an advisory capacity with Megan and the rest of the team through March of 2026. I want to thank Joe, the Butterfly team and the Board of Directors for their partnership over the past 3 years. I expect that Butterfly will continue to thrive and achieve great things in the years to come. Now turning to the financials. Revenue for the second quarter of 2025 was a record $23.4 million. The 9% growth was primarily driven by higher average selling prices, the sale of semiconductor chips to partners in our Octiv business and volume in our international markets. This was partially offset by lower domestic volume. Breaking things down between U.S. and international channels. During the second quarter, U.S. revenue was $17.2 million, which was essentially flat to prior year, driven by the sale of chips to our Octiv partners, higher average selling prices, offset by lower probe volume. As you know, Q2 2024 was the first full quarter after the launch of the iQ3 in the U.S., and we saw about 700 trade-in/upgrades in the prior year that did not repeat this quarter. Total international revenue increased 19% over the prior year period to $6.2 million, largely driven by both price and volume due to the international launch of iQ3 and geographic expansion. Breaking our revenue down between product and software and other services. Product revenue was $16.6 million, an increase of 13% versus Q2 2024. This increase was largely driven by higher average selling prices and the chip sales. Software and other services revenue was $6.8 million in the second quarter, which was flat to prior year period due to the higher enterprise software revenue and increased licensing and services revenue from our partnerships, offset by lower renewals of individual subscriptions and implementation services revenue. Software and other services mix was 29% of revenue. The percentage of revenue from software and other services has decreased as our products revenue growth outpaced software revenue with the launch of our iQ3 in early 2024 as well as our geographic expansion. Our total ARR, which is reported as part of software and other services, grew slightly versus the prior year period. This was led by an increase in our enterprise software subscription ARR. Turning now to gross profit. Gross profit was $14.9 million in Q2 '25, an 18% increase as compared to prior year gross profit of $12.6 million. Gross margin percentage increased to 64% from 59% in the prior year. Our gross margin percentage was positively impacted by the higher average selling prices, the positive impact of the chip sales as well as improvements in our software and services margins due to a reduction in software amortization and lower hosting costs. Moving to adjusted EBITDA and capital resources. For the second quarter of 2025, adjusted EBITDA loss was $6.2 million compared with a loss of $8.1 million for the same period in '24. The 24% improvement in adjusted EBITDA was driven by higher revenue and the previously mentioned improvement in gross profit. These reductions and improvements led to a normalized cash burn of approximately $7 million during the quarter. Cash and cash equivalents at the end of the quarter were $152 million, and the trailing 12-month use of cash was $46 million. I will now turn the call over to Megan to touch on guidance. Megan?

Thank you, Heather. I first want to thank Heather for her leadership here at Butterfly. The finance and accounting teams as well as the entire company are stronger and better positioned for our future because of her contributions. I'm excited to serve as Interim Chief Financial Officer and look forward to continuing the progress the company has made. Before turning to guidance, I want to provide an update on some of the macro conditions we're seeing in 2025. We mentioned that there was uncertainty regarding the impact of changes in funding and other government programs that have been implemented or were being considered. We continue to see customers delay purchase decisions in the second quarter, as they sought clarity on how these changes would impact their capital and operating budgets. We saw these delays impact our U.S. hospital and enterprise channel as well as publicly funded global health deals, and we're unsure how long this uncertainty will last, as we had a number of large deals in our pipeline that we had anticipated would have already closed. Separately, as Joe will expand on momentarily, we're incredibly excited about the opportunities we see in both Octiv and HomeCare. When we weigh these risks and opportunities together, we feel it's prudent to adjust our full year guidance to a range of $91 million to $95 million in revenue. In order to get to the high end of the range, we need to close on some of the larger deals that have been delayed. If we're not able to do so, we believe our revenue will be closer to $91 million. As promised, we've continued our fiscal discipline. And as a result, even with the downward revision of revenue, we're able to make a $5 million positive revision in our adjusted EBITDA loss to a range of $32 million to $37 million. As evidenced by the EBITDA improvement, we have continued to maintain our disciplined approach to expense control, but we will also invest appropriately behind our growth areas to enhance delivery capabilities as additional revenue opportunities crystallize. For the third quarter specifically, we expect revenue in the range of $20 million to $22 million and an adjusted EBITDA loss of $8 million to $9 million. To summarize, we delivered strong results in the first half of the year. And while uncertainties continue to exist around the impact of policy decisions that the administration has made, we have strength in the diversification of our business and are excited about the opportunities in front of us. We certainly hope that health care providers receive appropriate funding going forward to best serve all patients. Nonetheless, should funding pressures come to fruition for domestic health care providers, Butterfly is extremely well positioned as our technology not only enables superior flexibility and strong image quality, but has allowed us to be a much more affordable solution at scale than the current cart-based ultrasound solutions. In addition, our semiconductor development path will continue to improve this price performance advantage with each subsequent generation. Simply put, we see Butterfly as the long-term winner in ultrasound in any macro environment. With that, I'll turn the call back to Joe.

Thank you, Heather and Megan. As I mentioned earlier, we will begin launching a new software platform in the second half of '25 called Compass AI. Compass AI is our next-generation software aimed at reducing the steps in documentation through new advanced AI tools and other enhancements. When documentation is made easier, more people will use it and subsequently, more records and reimbursement will be captured. Simplifying documentation and enabling faster record completion are necessary steps for scaled Compass deployment inside a health system. Compass AI is designed with automated tools to help determine scan completeness and quality, automated voice control to capture the doctor's notes and auto populate fields in just seconds. We anticipate Compass AI will be a game changer, allowing us to increase penetration within existing customers and making it even more compelling for new enterprise customers to come on board. We look forward to unpacking the technology for you and delivering it to customers before the end of the year. So I'll wrap up with some brief comments on our strategic initiatives, Octiv and HomeCare. You heard earlier of the growing positive impact Octiv is having to our top and bottom line. As we disclosed last quarter, we are partnering with a generative AI company to pioneer a new imaging technology, which I believe can have a major impact on individual's health care and health awareness. Our partner will announce this effort when they are ready, which we hope should be sometime in the third quarter, but it's really up to them. The awareness of Octiv is increasing in technology circles and the inbounds we are receiving are incredible. Octiv will continue to be an area of investment, and I expect will become a meaningful part of the business in the future. I can't wait to share more when it's the right time. So switching to HomeCare care. We've now concluded our pilot with our partner, and we are actively negotiating our first commercial agreement, anticipated within the next few months. In our pilot, we proved that with Butterfly's proprietary training and AI tools, a medical professional without prior ultrasound training can be instructed to use ultrasound at the bedside to acquire the necessary images to allow a remote cardiologist to make a medically impactful diagnosis. This resulted in meaningful financial and clinical reduction in readmissions and helped caregivers on site manage and impact the course of care. Like any early diagnosis, the sooner you know and can monitor a patient's condition, the better the care and the better the potential for significant cost savings. This is a big opportunity for Butterfly. Our partner has tens of thousands of congestive heart failure patients being managed at risk. So if our solution were to be deployed over this one population nationwide, it could represent $40 million to $60 million of new revenue to Butterfly for this one service line in this one customer. That being said, we are currently working on commercial terms to bring the first state live before the end of the year. We believe this success will lead to further penetration in this customer and, of course, allow us to get new customer prospects as well. As we look forward, growing our core business, while leveraging our assets and capabilities to deliver new revenue streams is core to our 5-year plan. We are on the right side of history as handheld POCUS becomes a larger part of medical care. We will continue to innovate with our P5 chip and our fourth-generation technology, bringing health care digital ultrasound to every doctor and nurse in the world to provide better care at the point of care. There won't be only one handheld in the future, and it will be a Butterfly. We will continue to develop software to make POCUS easier as it marches to the mainstream. We will develop new revenue streams, which leverage the investments in technology that we've already made, bringing greater leverage to our P&L. While we have adjusted our 2025 guidance to reflect some of the near-term headwinds, it's highly possible we are being overly conservative as I believe the market in the near term is adjusting to change. We remain bullish about the long-term growth potential for Butterfly, and our ability to drive worldwide adoption of chip-based technology and leverage the technology beyond our core ultrasound business. So with that, operator, please open the call to questions.

[Operator Instructions] And our first question comes from the line of Josh Jennings with TD Cowen.

Thanks, Joe, and thanks, Heather, for all the help over the last couple of years during your CFO tenure. Good luck in your next chapter, and congratulations to Megan on the interim role. I was hoping to just start off, I think you laid out the drivers of the guidance revision and some of the macro headwinds that are in place and that Butterfly is facing. Just wanted to make sure we touched on the competitive landscape. There may be a read-through that competition is intensifying too. Are you seeing any competitive headwinds springing up from other handheld platforms in the U.S. specifically or internationally?

So first of all, and also, we read your report. So that really helped us. No. I mean, anything to do with the revisions have nothing to do with competition. Are we in a competitive market? Yes. Are there good competitors out there? Yes. But what we've seen, we think, more is just a function of a big part of our strategy going forward is doing larger deals. And we think we -- there's -- for handheld ultrasound, there's not a hospital budget that says, okay, here's my annual Butterfly purchases. So we are -- every deal we do is new, is -- it gets carved into a new part of a budget and is something that has to do with us blazing really a new trail. Our -- we are specifically citing the larger deals just getting delayed. Those larger deals, no one else is doing. No one. We're the first ones engaging hospitals at this scale, first one engaging medical schools at this scale, and we're blazing trails. There's a bunch of handheld companies who sell online like we do. But that is -- and that will always be competitive. But in general, no. In the environments where we are moving, we are building a market for the first time. We are creating users for the first time. We're building workflow into institutions on one-to-one for the first time. And when anyone is going through a change or they're calibrating, it's easy to delay something that's brand new versus reordering or existing businesses, et cetera. So no, the revision is simply -- we're being cautious because we saw signs. We moderated when we gave guidance in the second quarter to include that because at the end of the first was a little lighter than we would have expected, and that perpetuated into the end of the second. And so, we're just being cautious. We have not missed guidance yet since Heather and I have been here. And we're not going to miss it in the future. We're going to give our investors a very clear line of sight, and we want to continue to earn the confidence.

That's helpful. And a little bit of a similar question, just geared towards the software subscription revenue line item and Compass AI sounds like you're bolstering your enterprise software offering. I would love to just hear more about -- and any help you can give to help us to think through forecasting that those revenues on a go-forward basis just from an enterprise software positioning here with Compass AI coming on board, any trends in the enterprise software channel in the first half that could improve in the second half? And then just also on the individual subscription revenues, what's happening there? And how can Butterfly drive higher subscription levels?

No problem, Josh. So first of all, the software line is kind of like a tale of 2 stories. So on one side, on the individual subscriptions, when we get to renewals, we do have a pretty good churn from an individual subscription. And that is a quarter-to-quarter headwind for us. It is harder for us to get people to re-up after 3 years or after 5 years or if they're on year-to-year. That's just something we're trying to get better, make our software more sticky to those individual users. The enterprise software is growing. And that's where we are not only growing new accounts, but Compass AI is going to give us the opportunity to also take a little more price because of the impact the software has, the capabilities of the software. And so, while the line itself doesn't look like it's growing as fast, it's dealing with that type of shift in product. I think the enterprise software will become and continue to become a more and more meaningful part of our overall revenue. And it's absolutely key to our enterprise strategy because as we've been selling into the hospitals, we've been selling department to department. And then as we stitch together multiple departments, we start talking enterprise. And when you talk enterprise and you talk scaling over a lot of people, efficiency, ease of use, integration to their workflow is literally life or death for software. And it has to be easy. It has to be easy to document. It has to have a few steps. And now with all of the incredible AI tools that are out there, we are able to stitch steps together for one step, and we are able to do things in an automated fashion that makes it quick. So for example, getting this one large top health system to just go system-wide, it wouldn't happen if it wasn't for the improvements to Compass AI, where we showed them how this can be automated, how this could be faster. And we've pioneered this whole market with Compass with really our first-generation software. We've learned a ton. We've done a bunch of revs to improve it, but this is a generational shift in the platform, which is, I think, key to crossing the chasm and getting the not enthusiasts into using it every day because it's just easy to use. So I think it's going to be not only a catalyst for our software sales, but our enterprise sales, as we show -- how it gets easier and easier and more and more automated, and you capture that enterprise, then the pull-through on hardware is just natural. And that one large customer that I mentioned before that we had closed today has upwards of 700 probes. And that was organically sold. That wasn't one order. That was just as it's getting more and more penetrated and the software is getting more and more used, they buy more and more hardware. And I think that's the enterprise sale of the future, and we're very excited about our future.

The next question comes from Chuck Knickerbocker with Craig-Hallum.

Maybe just to dig in a little bit more on guidance again, sorry. Can you talk kind of a little bit more about kind of the change in assumptions between prior guidance and this as far as was it kind of impact through Q2, and now it's kind of impact through the rest of the year? And then can you talk about kind of the mix of -- kind of impact on the enterprise side, med schools and then DTC as far as kind of where you're seeing a little bit of a difference relative to previous expectations?

Well, sure. So I don't know if I have anything incredibly novel to add. But the -- when we initially looked at the second quarter guidance based upon how things had closed in the first, we started to see our -- first of all, our global health business, our public global health business, those that work with NGOs that then do work in countries with us, we definitely saw that pause. We saw -- and there were deals that there was a material impact in our second quarter based upon things that we thought would close. Now those things didn't go away. We didn't lose them to a competitor. It was a delay to just ensure that sources of funding in the future would persist. And so I don't think there's a need for anything to be too permanent. And I think things are adjusting. And we just think that, that over the near term is something that we have to keep an eye on because we believe, especially with global health, that if the changes weren't made, our revenue in the second quarter just would have been higher. And we think that would have persisted through the year. When it comes to enterprise and medical school, we have -- I wish I could just share with you the numbers, but we have a pretty good pipeline, and a smaller part of the pipeline closed on those deals. And we didn't lose the deals. They didn't go anywhere. They're pushed out into an out quarter. But now our line of sight and our ability to predict them are just not as certain as they were from a timing perspective in the past. So we are taking a very conservative -- the original guidance had contemplated a continuing of the momentum that we felt at the end of the year. And we definitely felt within the enterprise, within the medical schools and within global health that things have changed. And again, I don't think it's permanent because when we do get into a competitive environment, we have cost as our advantage. We have cloud and AI as our advantage. We have all-in as our advantage. We're not losing the competitors. But we clearly felt that we wanted to be cautious going into the second half of the year, and that's what we've expressed.

And Joe, anything you're hearing from your customers as far as kind of the visibility they need to maybe move time lines along as normal or just faster in general from kind of how they are today? Is it just a little bit -- do you think they just need a couple more quarters kind of in the current environment to kind of get comfortable that things are stable, or a little bit more visibility like on the international side, obviously, just maybe a little bit more visibility into how funding is stabilizing. Just a little bit more thought as far as kind of the driver to things returning to normal?

Yes. So on the global health side, that's -- that will take time to see. I think the needs are out there. People have big hearts, and there's a lot of opportunity to make a significant impact on people's lives where imaging is not readily available. So I think that will recover, but I think that is something where real funding was cut and now those projects that wish to be funded are in the process of looking for different funding. And the private sector still has hearts of gold and are still funding and who knows, maybe they'll step into a bit of a short-term void. But again, I think that will all correct. On the medical school and the health system side, it's just timing. It's just timing. It's -- we save cost. We are a cost saver in imaging. We make outcomes better. So on any analysis, like those dynamics haven't changed. It's just people are like, okay, well, this might take a little longer or we're going to prioritize this or that or it's -- the hospitals have just -- have made their funding decisions -- and I think it's purely temporary. So no, I don't think there is a structural permanent change for hospitals and health systems and medical schools. I just think there's a calibration. And we had expected to go hot through '25 like we did '24, and we've just seen a bit of a change. So again, as I mentioned in the prepared remarks, we might be overly conservative. I don't know. But I think we would rather deal with it, communicate it and give investors a great lens than just hit a wall or something, or guide you in the wrong direction.

That's helpful, Joe. Heather, sorry to see you go out here. Wish you the best.

Thank you.

[Operator Instructions] The next question comes from Andrew Brackmann with William Blair.

Joe, your commentary on the pilot program for CHS, it sounds like that's going very well. Any additional color you can maybe provide with respect to the timing, size or structure for expectations for how an agreement like that might shape up? Should it be sort of per click? How to probe sales fit into that? Any color around that might be -- would be appreciated.

Sure, no problem. So the way it works is -- and I can't give specific numbers yet because the commercial agreement is not finalized. But the way it works is there'll be a program fee. And that program fee will be based upon the number of patients or members enrolled in the program. And that gives us the ability to train the nurses on site. That gives us the ability to provide all the technology needed in that scalable fee based upon the number of people who are enrolled in the program. And so that then provides kind of the consistent revenue and the consistent coverage of the cost that it takes to get the program going. And then there's going to be revenue per scan. So as each scan is done, we will then have it professionally read by a clinician, we will route it, we will quality check it and manage that. So the revenue stream is based upon how large is the population, and then how active is the scanning activity. And we -- when we get to the first agreement, I'll try to give a little bit more color on it, and it's something that will just scale with the number of patients, the number of states that come on. So we do believe it's highly probable that before the end of the year. Butterfly will have its first state signed up. I mean we'll be managing with the teams on site, these patients. And what's beautiful about this model is that this isn't about Butterfly getting into some new business. HomeCare care is about us accelerating adoption. It's about eating our own dog food. It's about using our tech and putting our money where our mouth is, which is we can help you improve. If you use this technology at the bedside, outcomes will improve. Instead of patients being put into an ambulance and sent to a hospital to have an echo or to being dealt with a recurring or continuing progression of congestive heart failure. We're going to empower a nurse at a skilled nursing facility to take a scan right then and there, and then within 24 hours, get the type of information they need for the attending on-site to make a clinical decision to improve the outcome of that patient. It's a significant reduction in the cost of care, especially for at-risk providers. It's a significant reduction in their cost of care, and it's an immediate ability to improve the clinical outcome of that patient. So by -- for us getting into HomeCare, instead of waiting 10 years for organizations to finally get it that every nurse should have a probe and they should be doing this on site by just stepping up and showing how immediately we can provide these types of clinical and financial benefits, it opens the eyes to those at-risk providers that this can be done. And Butterfly is very uniquely positioned with this because it allows us -- it uses our cloud capabilities. It uses our AI capabilities. It uses our education capabilities, our hardware capabilities and our systemic software capabilities and managing data, it takes the entire offering of Butterfly, and it allows us to deploy it in a very powerful way. So -- and not only that, but you can -- we can turn around and we can sell a doctor a probe for, say, $3,000 or $4,000, and then we won't see that doctor's revenue for another 3 to 5 years, or we can take that probe, and have it used and get revenue for every single patient it touches. And the comparison on the revenue opportunity and scale to the core business is incomparable. And the magnitude of this opportunity, even for this one customer, it can make a significant improvement to Butterfly's overall financial. If we were able to get anywhere near to going nationwide with this program, I think we'd be cash flow neutral pretty quick. So we are placing -- in our 5-year plan, we are placing big bets to leverage our core competencies. And we're also doing things to use our basic principles of point of care, helping patients where they're at and making this a major catalyst for cost reduction. So I am extremely bullish about the future of Butterfly. Don't take our caution this year with the environment as anything, but just good, disciplined shepherding of a business in the short term. Butterfly is going to fly.

That's great color. Maybe a similar question on sort of the pipeline and where you're going with the entity. You mentioned Butterfly Garden's getting into the commercial phase here and recognizing the crosswinds here and now for the business. If we just zoom out a bit and more and more of these are added, can you just remind us about your confidence that Garden can sort of help drive the flywheel effect, which you just talked about for HomeCare as well?

Well, sure. So that's -- I mean, I wish I had time to explain to you how good that question that you just asked is because, again, it is the flywheel. So for example, we now with HeartFocus from DESKi, we're going to have a tool that's going to allow a historically uneducated health care professional to be able to get an echo. So that can be now a whole new service that we provide. So we not only help manage the congestive heart failure patient through our current AI tools, but if they want to have an echo done on site instead of having to send them to the hospital for that echo, we can, with HeartFocus, have them do the echo at the bedside for the patient. Or the same thing with iCardio, or the same thing with Deep Breathe, whereas these new or think [ Sono ], for example, who has a beautiful application for deep vein thrombosis, we could help these nurses also check for DVTs for patients that are bedridden, et cetera. So as each Garden partner comes in, it does so many things for Butterfly; a, it creates a new revenue stream for Butterfly as Butterfly users purchase the software; b, it gives us a new capability in HomeCare that allows us to provide additional services; and c, it allows for an acceleration of adoption of point-of-care ultrasound in the core population, especially in rural areas, in third world countries where the education component of ultrasonography is a major barrier. So -- and that's what's going to make Butterfly go completely mainstream. And by us not choosing winners or losers but allowing the marketplace to come into the Butterfly platform and we will have 20 and 30 and 50 and 100 different applications, people are going to choose the winners, and they're going to make great clinical decisions. We are marching down a path of allowing ultrasound to be ubiquitous. We've dramatically reduced the cost of ultrasound. We are now dramatically improving the access. We've dramatically improved the education tools. And now we're dramatically improving AI or access to AI tools that are going to allow this to accelerate just so much faster. So again, it's a part of our 5-year plan of creating a flywheel, and it's exactly how you formed your question.

The next question comes from Ben Haynor with Lake Street Capital Markets.

First off for me on HomeCare, can you maybe share a little bit more on how meaningful the heart failure reduction or readmission reduction was? Any kind of anecdotal commentary there? And then what does the partner want to see in terms of going from 1 state to 2 states? Is that a function of you guys being able to train? Is it something that potentially can go in parallel? What's the right way for investors to think about that?

So as usual, very good questions, Ben. So first of all, I can't share with you the specifics because it's the partner's data. But I can say there was a significant reduction in readmissions. Let's say -- I don't know if I can give you a number, but it definitely -- let's put it this way, it cut the readmission number at least by half. And if you look at those numbers, those numbers scale very quickly. And so of course, going to the first state is to make sure that the pilot results are transferable at scale. And so -- and I think when we show the ability to transfer those results at scale, I think that just opens up the opportunity. And I think that, that would happen quickly. So there's a difference between monitoring, doing a pilot at 2 sites versus a full state. And so it's purely -- we're going to work really hard to show that those results can continue. And I think when we do, the opportunity just continues to open for us, Ben.

Makes sense. I mean it sounds like with what they saw, there's not really any question that they'll be duplicatable elsewhere?

No. It's -- I mean the results are great. So it's just -- but as you know, when you scale stuff, you have to -- sometimes the littlest things get you. So you just have to prove that, hey, you can go to these different sites, you can train -- everyone -- it wasn't just an anomaly, blah, blah, blah. So we're going to do that now in -- hopefully, as we get this first day closed.

Okay. Got it. That's very helpful. And then you mentioned hospitals not having specific handheld ultrasound budgets. Is that something that you think iQ station could potentially help you with, whether it falls into a broader imaging bucket or traditional ultrasound cart budget? And then any updates on kind of the P5 next-generation versions and form factors?

So again, another very good question. And actually, you're kind of dead on. Right now, hospitals have budgets to refresh their ultrasound every 3 to 5 years. They have budgets to refresh their point-of-care ultrasound carts every 3 to 5 years. Because iQ3 is only a year out, we're still getting penetrated in the hospitals, and we haven't established it enough for it to become like a routine reorder. But iQ Station will compete with point-of-care ultrasound carts, and that's exactly correct. And again, this is all tying into our evolution because we rewind the tape a year ago, prior to iQ3, the narrative on Butterfly was it's a great device, but it will never be used in hospitals because the image quality doesn't match up. That's what we dealt with 12 months ago. Now over the last year, we proved that we not only are equivalent, but being an all-in pro, being cost effective, having all of our tools, we are the solution going forward. And so we are building that momentum and a way to get into the core $2 billion, let's say, POCUS cart business or the cart business at the lower level, having a device like an iQ station will access existing market dollars and existing budgets and will allow us to displace existing competitors as we move upstream with our image quality. And then, of course, P5 is going to be a generational step-up in image quality. You're going to start asking yourself a question, when you see how good the image quality of our fourth generation is over the existing devices out there, you're going to have to ask yourself, why am I using these devices? Why? They're not going to be as good as P5. We've seen there be a certain limitation on a technology that's been out there for 30 or 40 years doesn't have the type of generational leaps that a semiconductor that we have has. And our fourth generation is going to be so good. I do believe people will be like, okay, well, this is it. And then you add that to a current environment. It creates the workflow when we talk about every doctor and every nurse having their own probe, stepping up to a station and having a sit-down type of quality experience, that's exactly why we've designed this concept. And I think it will allow us to get into the core budgets of the health system. So that's exactly right, Ben.

Heather, sorry, I didn't have one for you, but it's been a pleasure working with you over the years and best of luck to you.

Thanks, Ben.

Thanks, Ben.

[Operator Instructions] And as we have no further questions in the queue, that concludes the Q&A portion of today's call. So I will hand back over to you, Joe, for any final comments.

All right. Well, everyone, thank you so much for joining us this morning. We remain extremely bullish on Butterfly's future, and we will navigate us through whatever changes. I'm very pleased in our expense management and our ability to continue to grow the business, while being good shepherds of capital. We're making great, great progress. And so I just appreciate all of your support as we navigate some change here. And also, I'd just reiterate thanking Heather for all the great work, and she'll go off and do great things and her legacy will continue with a perfect team that we have assembled here in finance. So thank you guys for all your support, and we'll talk to you soon. Thanks.