Butterfly Network, Inc. (BFLY) Q2 2021 Earnings Report, Transcript and Summary

Hi, there and thank you for standing by. Welcome to the Butterfly Network's Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised today's conference is being recorded. [Operator Instructions] I'll now hand the conference over to Agnes Lee, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today. Earlier this morning, Butterfly released financial results for the second quarter which ended June 30, 2021, and provided a business update. The release and earnings presentation, which include a reconciliation of management's use of non-GAAP financial measures compared to the most applicable GAAP measures, are currently available on the Investors section of the Company's website at ir.butterflynetwork.com. Dr. Todd Fruchterman, Butterfly's President and Chief Executive Officer, and Stephanie Fielding, Butterfly's Chief Financial Officer, will host this morning's call. 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 impact, 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 -19 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 statements. During this call, we will refer to non-GAAP financial measures including adjusted gross margin, adjusted gross profit, and adjusted EBITDA. These financial measures are not prepared in accordance with U.S. Generally Accepted Accounting Principles, or GAAP. These non-GAAP financial measures are not intended to be considered in isolation or to substitute the results prepared in accordance with GAAP. The definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, and the discussion of why we present these non-GAAP financial measures are included in today's press release and at the end of the slide presentation. 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 yourself. To access the webcast, please visit the Events section, in the Investors section of our website, and a replay of event will be available following the call. I would now like to turn the call over to Dr. Fruchterman.

Thank you, Agnes. And good morning, everyone. We appreciate you taking the time to join us today. Now in our third earnings call as a public company, we are happy to share with you the progress we've made this quarter. Following my overview of Butterfly's performance, Stephanie will walk through the details of our financial results. And as always, we will take your questions at the end. I'm very pleased with the progress that our company has made since we listed on the New York Stock Exchange earlier this year. Becoming a public company is a momentous event for all that get the chance but for a company such as ours, it is truly enabling since it provides us the opportunity to build, expand and grow the value proposition of our proprietary differentiated technology while ensuring that we have a strong operating foundation from which to execute. Being public also allows us to partner with you, our shareholders, and embark on this exciting journey together. Before we get into the quarter, I would like to share my enthusiasm for Butterfly and the impact I know we can make. In some of my earlier remarks, I have spoken about why I joined Butterfly. About six months into my journey as CEO, I want to share why I now believe to be the reason we are all excited about Butterfly. And simply stated, Butterfly makes it possible. But what does that mean? Butterfly is disruptive and unique. It has the capabilities to practically unlock the power of point-of-care ultrasound, in ways that inform clinical decision-making, that cannot only benefit patients, but also impact our healthcare system as a whole. And while we are just at the beginning of our journey, today's Butterfly is in fact the result of a decade of innovative work. Work that has resulted in a breakthrough comprehensive solution, consisting of a high-quality semiconductor base, whole-body, single-probe ultrasound device coupled with the three enabling elements of our software platform; mobile, AI and deep learning, and enterprise. With this, our solution has the power to transform. Butterfly is accessible, it is portable, it is easy to use, and it's affordable. Together, those qualities empower healthcare providers to leverage the value of ultrasound information in everyday decision-making in real-time at the point-of-care; because seeing is knowing, and that is the true power of ultrasound. The power of Butterfly is that this information can be unlocked in a practical, cost-effective way and become part of a clinician's everyday decision-making, regardless of their location or care setting. Butterfly empowers clinicians to think differently about care because Butterfly gives them the ability to make more informed decisions earlier, and anywhere. This is what's extraordinary about our solution And this is why we believe it is Butterfly that makes it possible. Not just point-of-care ultrasound. While there are others that might offer the prospect of unlocking this value, only Butterfly is actually doing it. That is why we are so passionate about our technology and our mission to both democratize medical imaging and transform care, all around the world. I joined this Company because Butterfly is not just about ultrasound. It is about something much bigger. It is about improving medicine in every care venue, small or large, rural or urban around the globe. Ultrasound on a chip is the enabling technology that unleashes the full potential of imaging information that leads to better decision making and better medicine. As more clinical knowledge is amassed, decision-making is becoming more complex, not less, and that is why clinicians need clarity so they can make accurate care decisions quickly with insights at their fingertips. Butterfly solution provides the direct information necessary to make more informed decisions because seeing is knowing and Butterfly makes it possible. Butterfly catalyzes behavior change by providing imaging information. This imaging information at the point-of-care, allows practitioners to think differently about clinical workflows. And when behaviors change, we can re-imagine care delivery. This is how the ultimate value of Butterfly will be realized, by improving patient experience, outcomes, and health economics, across a broad spectrum of clinical applications in almost any care setting. For example, we were thrilled to see Butterfly doing exactly that, at this year's Olympic Games in Japan. In a recent social media post, USA Swimming showed how Butterfly is being used at the Olympic Village for musculoskeletal evaluations ahead of competition. Butterfly is bringing information into a setting in which ultrasound did not routinely exist in turn helping and protecting our athletes. Pre-competition evaluations, like the one done by the U.S.A. swimming team, show how Butterfly can be used to screen and prevent injury, help to inform training, and optimize performance. And consider how the portability and ease-of-use of a Butterfly makes it possible to drive consistency of care. Now, practitioners can practice the same medicine regardless of care setting because Butterfly gives them the necessary information to make decisions no matter where they occur; at the hospital, in the doctor's office, in the home, or even on a sports field. We recently heard of a story that took place at a college baseball game. A pitcher on a pro-track was up to bat. He hit the ball in awkward way and reported pain in his hand. With a Butterfly in the dugout, the team physician was able to do an immediate ultrasound and identify an intermetacarpal strain. Instead of being told to tough it out and risk a more serious injury, the physician was able to pinpoint the problem area immediately with a Butterfly. The player went out of the game, avoiding further injury and prolonged rehab that could have created a serious issue for his career. Up until this point, it had not been practical for the physician, player, and his coach to have had this depth of real-time clinical information on the field. Butterfly's portable solution makes it possible to make an informed healthcare decision irrespective of the setting. And in this instance, the athlete was able to get the right care immediately, modify activity appropriately, and ultimately return to full performance faster and healthier. This is performance re-imagined. The future of medicine has arrived, and is being delivered right now. That is what Butterfly helps make possible. Part of making something possible is making it easy. And that is one of the real advantages of Butterfly. It is easy to use. In fact, Butterfly is even making it possible for patients to participate in their care by performing their own self-examination. In a recent study published in ESC Heart Failure, the Journal of the European Society of Cardiology, heart failure patients, with no medical training, we're taught to self-perform a lung ultrasound exam using Butterfly. The study found that after a brief training session, most patients were able to perform their own lung ultrasound self-exam, and that the information they provided through the Butterfly was usable by their physicians. Subject to Butterfly patient self-scanning receiving regulatory clearance for use, providers will be able to stay informed and manage disease more effectively by having the ability to see early signs of progression, thus providing the opportunity for quick interventions. This contrasts with in-person medical exams, which are so often motivated by late symptoms and morbid complications. This can become costly, less effective, and lead to poor outcomes. We believe this recent study provides an important early milestone on the road to more effective at-home care and patient empowerment. These innovations driven by Butterfly can help change behaviors and how we think about care and its delivery. This is how Butterfly will help to transform health and wellness. Butterfly removes the barrier to not having information to make more informed decisions regardless of setting. Our mission is to allow people to have access to valuable diagnostic information wherever and whenever it is needed. The time for better care is now, and Butterfly makes it possible. And now, having provided some context for our journey, I'd like to turn to our results and review our Q2 2021 performance. I will also speak to our progress related to our near-term foundational goals that we introduced earlier this year. Our performance in the second quarter was solid on many fronts. We continue to see strong revenue growth with total revenue for the quarter of $16.5 million, which is a 40% increase year-over-year. We are encouraged by the broad demand for our solution across a wide range of customers and saw continued adoption through our core sales channels including professional sales, direct-to-user, and distribution. This included the progress we made this quarter in medical school adoption and international commercial expansion as well as growing our presence in veterinary medicine. And while I'm happy with our performance and progress this quarter, we know that there is no version of success on our journey without our people and their tremendous efforts. That is why I would like to take a moment to recognize our outstanding team and all the hard work our growing organization has put in over the past several months managing through all the complexities of the external environment, while we expand our corporate foundation and execute upon the Butterfly journey to democratize imaging and transform healthcare. In fact, we were fortunate to recently gather the entire Company together to align on our plans to execute on the promise and value proposition of Butterfly. And while the pandemic has limited the potential of many companies, I was proud to see the spark, energy, and collaboration in this meeting that I know will give us even more momentum for the second half of the year, ensuring that we can amplify Butterfly's impact and deliver on our objectives. Earlier this year, we set five foundational goals to help focus our efforts to grow and develop Butterfly as a company. As a reminder, these goals are, to broaden and strengthen our team at Butterfly, to broaden our partnerships with clinical leaders, to align with the payer community to improve health outcomes and reduce the cost of care, to develop commercial partnerships across care settings, specialties, and geographies to deliver patient-centric, value-based healthcare, and to invest in our industry-leading innovation. Progress against these 5 goals is helping us to build our organization, drive societal impact, support commercial growth, and realize our vision of improving clinical care across a range of geographies, applications, and care settings. And now I will update you with regard to three of these. Given our aspirations and the complexity of the healthcare ecosystem, Butterfly cannot be successful without having the right leadership team in place. And we are pleased to share details of two recent key hires. The first is to the newly created role of Chief Technology Officer, an executive position that will report to me and lead technology innovation, product development, and information technology. Andrei Stoica, our new CTO, has extensive experience with software enterprise technology solutions including large Cloud platforms. He brings a nuanced understanding of managing complex systems and of innovative product development that contains both hardware and software elements. Andrei was most recently CTO at BioTelemetry, where he led the global technology and product development operations including hardware and software product development, product management, enterprise, and product information. Before that, he held various leadership positions at IQVIA including leading the development of the global data and machine learning cloud platform. Working directly with Andrei, will be David Ramsey, our newly hired Chief Information Officer, who will be responsible for continuing to ensure that we have a robust data privacy, and security program, as well as the information technology infrastructure build-out to support Butterfly's growth. David previously held CIO roles at Assurant Facility, which is now part of 3M, Diebold and PSS World Medical, which is now part of McKesson. Together with the team, Andrei and David will extend our strong history of leading-edge invention while enhancing our technology infrastructure to facilitate greater agility and targeted customer-centric innovation. More broadly across the organization, our significant progress fortifying the executive team in the first half of 2021 empowers us to accelerate execution and commercialization of the Butterfly solution. As commercial and clinical uptake of Butterfly grows in North America and around the world, we are witnessing how having Butterflys in more places makes new things possible. Earlier, I talked about how Butterfly increases access to information and informs care across all settings. And one of the best ways to see the future and catalyze change in healthcare is to help create it by being a part of the clinical education and training of new practitioners. Bringing Butterfly to medical schools is a major priority for us. Butterfly is now in over 100 medical schools. Our goal is to solidify Butterfly from the beginning. We're doing this to ensure that practitioners of the future have the ability to make more informed clinical decisions through the power of Butterfly, regardless of specialty or care setting. This quarter, Temple University purchase Butterfly's for all of their first-year medical students and distributed them as part of their White Coat Ceremony, making our disruptive technology part of the journey for these future doctors right from the beginning. Temple joins a group of medical schools that are investing in equipping their students with Butterfly's to ensure that these young professionals have access to valuable information and learn how to use it as they train for their future careers as clinicians. It is often nice to see some of the same momentum building around animal health care. This quarter, we announced our first veterinary school-wide deployment with the newly established Texas Tech University School of Veterinary Medicine. As I've shared in the past, we believe Butterfly is well-positioned to disrupt and help advance veterinary medicine. We see this market as an attractive area for growth beyond our core human efforts. Given the breadth of our value proposition and how Butterfly can be deployed in different systems and settings, we are excited about the opportunities that exist around the world for Butterfly's disruptive solution. Also this quarter, we established a partnership with Chindex Medical, a leading medical device distributor in Hong Kong, to commercialize our solution in this key market. Our partnership with Chindex creates our largest distributor relationship to date in Asia and helps solidify a substantial multi-year commercial commitment for the Hong Kong region. I'd like to end the discussion of our foundational principles today with our focus on innovation. Innovation is all about creating value; it is what we do. It is in our corporate DNA, and will always be core to what we do at Butterfly. I'd like to share some examples of the value we are creating at Butterfly. The value of ultrasound imaging to reduce maternal and fetal mortality is well established. Yet, it is not universally available to all, even in the most developed nations; even in the U.S.. A common restriction is the cost of the equipment and the need for advanced tools to make important calculations. Aligned with our mission of democratizing healthcare, we are particularly excited to be offering new impactful solutions in the OB maternity space that will be delivered through an upgrade to the Butterfly iQ+ platform because at Butterfly, seeing is knowing. These 3 new, recently introduced, advanced OB features provide critical insight into both maternal and fetal health and they include enhanced image quality, gestational age calculation tools, and in the U.S. and Canada, audible fetal heart tones. Practitioners can now use the Butterfly solution to calculate first trimester gestational age; measure second, third-trimester fetal growth; monitor fetal wellbeing throughout the pregnancy; and prepare for labor and delivery. To help understand why this is impactful, let's focus on just 1 of the new features; gestational age. Gestational age is the single most important determinant of fetal mortality. By giving care providers dependable access to this critical insight on a device that is both affordable and portable, Butterfly can improve the quality of care for all expectant mothers, regardless of whether our mother happens to live in a remote area or in an underserved community. Because with Butterfly, care can be enabled anywhere. With the launch of the OB Maternal Health Solution, and as part of Butterfly's global help initiative, Butterfly has partnered with Ilara Health to create a playbook for leveraging this new functionality in our solution in limited resource care settings. Having our powerful diagnostic tool at hand wherever the need might be creates new use cases and makes it possible to reach entirely new groups of people in need ranging from those who are distanced geographically from healthcare facilities to those who access is impaired by affordability, trust, or prior negative experiences. At Butterfly, we believe, equity starts with access. By empowering medical professionals to help patients see their health, Butterfly is helping to build trust, informed diagnoses, and empower patients. And now, with care enabled through Butterfly and our new features, the care experienced by many expectant mothers, images of a fetus and the sound of a heartbeat followed months later by the sound of a newborn cry can become the norm for more expectant mothers. As I described earlier, much of the power of Butterfly will be realized through its ability to drive change in care delivery through more informed decision-making, and one of the benefits of Butterfly in unlocking the power of ultrasound information is making the device easier to use. Our Butterfly solution allows healthcare practitioners to focus on patient care, rather than on performing the ultrasound itself. And future enhancements will continue to focus on improving the ease of image capture and providing assistance in image interpretation. A great example of this is the Q2 license and release in Canada of the new machine learning tool, Educational View Guidance. For both long and cardiac imaging precepts, the user can receive real-time feedback on the quality of the image they are viewing through our color-coded display using artificial intelligence, helping new users accelerate their educational journey to competency. Innovative features, like the OB Maternal Health Solution and Education View Guidance, can help make more informed care decisions lead to better patient outcomes and improved economics. And Butterfly's unique software platform, allows us to rapidly deploy features like these now and into the future. Taken together, we hope that these foundational steps are beginning to paint the picture of acceleration at Butterfly. Through enhancing our leadership, broadening our channels, and accelerating innovation, we are actively engaged in partnership with individual physicians, industry thought leaders, and large institutions in a collaborative fashion to improve clinical practice, deliver uniformly across sites of care, and dramatically improve patient health, trust, access and convenience. Our direction is clear, our capabilities are growing rapidly, and our team is unified behind the opportunities to improve health and wellness that Butterfly makes possible. I will now turn the call over to Stephanie for a review of our financial results. Stephanie?

Thank you, Todd. I will take you through the details of our Q2 financial performance shortly. As Todd stated, Q2 was a solid quarter with top line, year-over-year growth of 40%, and gross margin and adjusted gross margin of approximately 50%. Now, I would like to go into more detail on our second-quarter performance. Total revenue for the second quarter of 2021 was $16.5 million, which is a 40% increase year-over-year from $11.8 million in the second quarter of 2020. Product revenue for the quarter was $13 million. An increase of 30% from $10 million in the same period in 2020. Units fulfilled, the main driver of product revenue were 6,485 in the quarter, compared with 4,997 in Q2 2020, an increase of 30% reflecting a strong Q2 performance from a broad array of customers. We saw revenue generated by our sales team, direct-to-user channel, international growth led by the Chindex distributor partnership, and new business areas like that. We are particularly proud of the solid year-over-year growth in product revenue, given a tougher comparable in Q2 2020. Last year, we saw sales accelerate for COVID -related use cases during the second quarter. Subscription revenue was $3.5 million in the second quarter, growing approximately 94% from $1.8 million in Q2 2020. Our subscription mix, which we define as the percentage of total revenue recognized in a reporting period that is subscription-based, was 21% compared with 15% in the second quarter of 2020, a 6% point increase. I would like to give some additional color on short-term trends in revenue mix, specifically, subscription mix. At this point in our early evolution, accelerated product sales actually reduces the subscription revenues as a percentage of total revenues. We recognize product revenues immediately, whereas subscription revenues are amortized over the life of the contract. As such, the more successful we are at ramping product sales in the near term, the more subscription revenue percentage may decline temporarily. However, we would expect the impact to re-accelerate later in our maturity curve.

Turning to cost of revenue. The cost of revenue for Q2 2021 was $8.3 million, a decrease of approximately 29% from $11.6 million in the second quarter of 2020. Cost of product revenues was $7.9 million in Q2 2021, a 31% decrease from $11.4 million in the same period in 2020. And the cost of subscription revenue was $435,000, increasing 80% from $242,000 year-over-year. In line with our expectations, our gross margins turned positive over the course of the past 3 quarters. And in Q2, gross margin was 49.8% while adjusted gross margin was 50.2%. Gross profit was $8.2 million for Q2 2021 compared to Q2 2020 gross profit of $165,000. Adjusted gross profit was $8.3 million. Adjusted gross margin and adjusted gross profit reconciliation calculations to GAAP net loss can be found in today's press release and at the end of the slide presentation. Operating expenses were $44.9 million for Q2 2021, an increase of $23.2 million, or 93%, compared to Q2 2020 due primarily to the build-out of our team in 2021 and expenses associated with being a public Company. Loss from operations was $36.7 million, an increase from $23.1 million in Q2 of 2020, primarily driven by higher operating expenses offset by the increase in gross margin. Net loss was $2.9 million as compared to a net loss of $23.2 million during the second quarter of 2020. Adjusted EBITDA was a loss of $28.5 million compared with a loss of $20.1 million in the same period in 2020. Adjusted EBITDA reconciliation calculation to GAAP net loss can be found in today's press release. Moving to our capital resources, we have a strong cash position that allows us to continue investing in our journey. As of June 30th, 2021, cash and cash equivalents, and marketable securities were $509.5 million. Of note, inventory in the second quarter was $46.9 million, a $10.8 million increase over $36.1 million reported in the first quarter of 2021. This increase was primarily related to our contractual way for commitment, ensuring that we have access to product as we scale and innovate over the next couple of years, offset by a lower inventory of finished goods. And while we have secured supply of semiconductor chips, we are impacted by the cost pressures and lead time increases that are challenging supply chains across all industries, including MedTech. Our team has been proactive in managing the situation. We do not see near-term delivery challenges and we'll continue to work aggressively to secure supply on behalf of our customers. And we are actively implementing new operating efficiencies to help offset the cost increases in component parts for our device. Despite some of these challenges, we remain on track with important momentum and interest from a wide range of customers. As we continue to execute our commercial strategies, there may still be some variability in the timing of deals in our pipeline over the next quarters. That said, we believe we have a strong pipeline and demand for our solution across the breadth of use cases afforded by our team, and still see our annual performance shaping up to be in the guidance range we've provided in Q1 and referenced on the slide. And with that, I will pass it back to Todd for summary comments.

Thank you, Stephanie. And thank you all for participating in Butterfly's Second Quarter 2021 Earnings Call. It is exciting to see that our team is driving growth and innovation across a range of critical areas for our Company. Our product offerings, our market footprint, and our partnerships continue to expand everyday. I am proud of our progress this quarter across diverse use cases and settings and I am very excited about our future and our journey to transform care globally. I hope that you all agree that seeing is knowing and that Butterfly makes it possible. I would like to thank the Butterfly team once more for their dedication to our mission and the excellent progress we made in Q2. Thank you for your participation and I hope that you share my excitement about everything that Butterfly is making possible. I look forward to our next update with you. And we will now turn the call over for questions.

[Operator instructions] You have a question from the line of Josh Jennings with Cowen.

Hi, good morning. Thanks for taking the questions and congratulations on the strong sequential growth in Q2. I was hoping, Todd and Stephanie to just ask about -- see if there's any incremental color you can provide? And, clearly, momentum was experienced in the second quarter, but thinking about how [Indiscernible] of revenue guidance and the -- what gets you there? Any help just thinking through the enterprise channel and the successes you had in 2Q? And any details you can provide on the sales funnel? I think you mentioned certainly about the strong pipeline, but just what's given you guys confidence in this reiteration of guidance and the strong sequential growth that's implied in the back half of '21?

Yes. Good morning, Josh. Thanks for the question. As we've stated, we're seeing strong sales approach and as time goes on here, we're seeing and anticipating an increasing ramp in our software revenue. As it relates to the market segments, there's a lot of opportunity for us in where we can add value. And so we see it in different market segment channels, and we're continuing to [Indiscernible] to those in enterprise, we’re deployed in a number of large academic medical centers. We're in conversations with institutions, and we're starting to work towards what real scale would mean. Because in the enterprise channel, particularly, it's not just about [Indiscernible] approach. It's about changing that behavior, advancing practice, and that's much more about, one, what we believe we are with Butterfly, because it requires a more comprehensive solution to be able to implement that and change those behaviors and so we're going to continue to work on those. Those are going to take a little bit longer but they will be of greater magnitude. So, we see that momentum building. We have really strong conversations. We see [product sales] (ph) building across all the segments. And we see a lot of broad opportunity and I hope we've described some of that to you today because it's a really different way of thinking about ultrasound delivery and ultrasound information utilization in practice. Stephanie, do you have anything to add to that?

No, I think, Todd, you covered it.

Great. Thank you for that. Wanted to ask about the heart failure study that you highlighted. Great proof of concept that patients can get trained to self-scan. But can you talk about the remaining steps in developing the home ultrasound scanning, the heart failure opportunity? Any update on the collaboration with American College of Cardiology? And maybe just help us understand better just the current level of utilization of Butterfly in the home and -- and how that that's occurring currently.

So if you think about Butterfly in general, right, one of the major opportunities that we have with Butterfly is bringing this information into all different settings and not where it has typically been available. The home is we're seeing that as one of them. Right now, in the home we have -- we're working with different entities to bring ultrasound scanning as part of exams and as part of home care. So we see these things as building in steps and evolution. And we're already there with that. So we've been able to bring now Butterfly into homes, part of exams, part of bringing that care to patients where care has been delivered in the home. Our evolution is, as I talked about with, in general with our strategy with Butterfly, which is all about how we acquire information, interpret it, and utilize it and make it easier. As we are on that journey to make it easier, we are continuing down that path with patients self scanning. Because Butterfly is an easy way to get ultrasound information and bring that into the decision-making process. So the study that I referenced in the ESC Heart Failure, talked about the ability of the patients to do that, we're working right now in developing the rest of the clinical plan to support further clearance and further indications around that. But what we're really excited about is the proof of concept that patients can do these scans. They can do it in a useful way and we can bring that into the clinical decision-making process we feel is already well on its way and now we're working through with ACC and others to develop the right studies to work that into the clinical workflows, and we're in all those discussions right now.

Excellent. Maybe one last question. Just thinking about the pipeline, Todd, and just how you see that evolving. It's clear from your update today that we're going to see a consistent flow of innovation and -- as you introduced today and update us today. But how would you have investors think about the pipeline, maybe into the out years, and then what we should be expecting in terms of the evolution of the platform and advancements of imaging capabilities, image quality, and on the software side? Thanks for taking the questions.

Absolutely. I think the pipeline, as we've described it before, and hopefully as you all get to know us better, you're starting to see that materialize, we're going to continue to be able to bring out software and the software enhancements as it deals with the overall utilization of the technology. The software will help us acquire images. It will help us interpret images. It will help us utilize it. it really takes it into a usable assessments tool. And that's where Butterfly is very powerful in the sense that we're a comprehensive solution, we have the ability to do that. I think as you've seen today, as we evolve our roadmap, we're making this more application-specific. We're pointing into different things. And I think that also helping us inform and guide our business model as we move forward, and we look at the software components of our business models. So, our innovation pipeline is deriving the ability to capture value and we're looking at how that's all coming together in the marketplace. And I think that informs the future walk. You see that and we've talked about that, one of the advantages of the Butterfly platform that coming in a month, the quarter's type of timeframe, and you'll see releases from us that will both enhance the utilization across application and the performance of the device. And then we will continue our journey in making the hardware the enabling piece of that. You'll see hardware updates from us on a timeframe that we've talked about being in the years in that year's timeframe. And we'll be on our roadmap to fit for purpose and having our hardware enable the things that we are trying to accomplish as we look at how to deploy ultrasound information to drive transformation in healthcare. And I feel really good about where we're going both on the software piece of it and where we will be going on the hardware piece of it, all the way of the walk to covering our ability to provide that information across all care settings in all geographies.

Thanks again. Appreciate it.

All right Josh. Thank you.

Your next question comes from the line of Matt Taylor with UBS.

Thanks for taking the question. Can you hear me okay?

Hi. Good morning, Matt.

Good morning. So my first question was I wanted to ask you about the enterprise selling. How that's going? Maybe you could give us some more specifics on guideposts or things to look out for there, and what percentage of your sales do you expect to be in these kind of enterprise agreements by the end of the year?

Sure. So I won't repeat what I've already said on the enterprise piece. I'll let Stephanie answer that.

Thanks for the question Matt. We're not -- while we're not disclosing the specific mix in channels, you want to give additional color in terms of how we see that building. So, last quarter, we had noted that we had 27 sales reps on board. We have continued to add some heads and create some additional bandwidth to go after opportunities. As Todd mentioned, we do see a breadth of ways that our solution can be used. And in addition, we've seen productivity increase of over 30% quarter-over-quarter.

Okay. Great. And just a follow-up on the cadence of sales through the year, could you talk about the kind of seasonality that we should expect? And how backend loaded you expect the sales to be for the remainder of the year.

So, I'll let -- so, Matt, I'll let Stephanie fill in some color on that but I would just caution right now as we're coming into a stride with Butterfly and it's really a lot about thinking differently about how to use this valuable information. Other than that, there's still much around seasonality as it relates to use. So, we're still building. I think there are dynamics in institutional acquisition of technology. And so I think there's elements to that as we're going through the year. But it just -- as we're still building that you want to frame up that our devices are valuable across traditional -- like seasonality of use of consumables. Our devices are valuable across the indication set as it relates to patterns on -- particularly, institutional pieces. I'll let Stephanie comment.

Sure, I think, as we look through the back-half of the year and which we cited would certainly be heavier in terms of sales than the first half of the year, there are a couple of dynamics at play. First, we have the sales force and the ramp aspect. And that's something that we've talked about in terms of them gaining productivity and ramping into some of the larger deals that we've been thinking about, as well as building on some of the new areas that we've been going into around the mid-market and transform physician practices. The second aspect is we continue to see some of these opportunities. We noted the Chindex relationship this quarter. Those have some variability as we look forward in the rest of the year. But we are seeing pipeline for relationships that we are building. And then the last area, of course, is we've got some of the direct-to-users which Todd referred to you. There is a little bit of the consumables aspect to the timing of that. And it's not a significant part of the business, but it does change and vary the patterns a little bit which makes it a little bit more Q4 - weighted for that part of our business. And, of course, we continue to look opportunistically for relationships because we do think there's such a range of ways that this can be used. We have the Sientra partnership. There are opportunities in global health. We're excited by just how many ways that we can engage and that's part of the variability that we referred to you in the back half of the year.

[Indiscernible] last one for med. Just wanted to ask about the Canada approval and the OB-GYN applications. Maybe you could just comment on whether we should view either of those as material commercially, or how you expect those to ramp?

I think that if you think about -- certainly with -- the candidate clearance was a big opportunity for us. And commercially, I think having the ability to make the device easier helps us with our value proposition of helping to bring ultrasound into a different light, into clinical decision-making and utilization. So, we see that as a valuable driver for us to continue on our journey, and I think that's -- that adds to our value proposition in those markets. I think, similarly, the OB as our other elements. I think what it does is it helps people see the true value of Butterfly and it helps people think differently about Butterfly. And it, I think, makes it more attractive for us to Providing these opportunities allows us connect to user basis and more tailored feature set with a more tailored experience. And I think it helps us have more directed conversations. As we roll each of these indications out, I think it's a very good opportunity for us to address those segments and to help us drive adoption specifically towards the mission of Butterfly, which is thinking differently about information and driving clinical behavior and advancing the practice of care. And so I think each and every one of these that come to that is an opportunity for us to build the value proposition of Butterfly and then have more specific conversations with purchase -- with particular segments of users and around our value propositions which differentiates us with a comprehensive solution, which is, we created a tailored experience for users, and deliver more valuable information. So I'd see that as an opportunity each and every time this comes out. Stephanie, if you had something to add?

Yes, just two things. I wanted to call your attention to the fact that over 30% of our revenue comes from outside the U.S. And Canada is a contributing part of that. We are in, as we said, over 20 different countries. But that isn't material aspect of our revenue. The second thing that I wanted to note was on the OB. This really does go to a problem that we see globally, and we talked about the Global Health equity, but it also goes to an issue in the U.S. If you look there, over 50% of the counties in the U.S. do not have -- nearly 50% of the counties in the U.S. do not have an obstetrician. And there are 3.75 million births every year in the U.S. So, there are opportunities for this solution to really continue to drive part of our mission in health equity both in the U.S. and globally.

Thank you.

That is all the time we have for questions today. We thank you for your participation. This will conclude today's conference call. You may now disconnect.