Butterfly Network, Inc. (BFLY) Q4 2021 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Butterfly Network Q4 2021 Earnings Conference Call. [Operator Instructions]. Thank you.

Good morning, and thank you for joining us today. Earlier this morning, Butterfly released financial results for the fourth quarter and the year ended December 31, 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.butterflynnetwork.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 impacts and other effects of the business combination on our business, the size and potential growth of current or future markets for our products and services and the 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 a 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 have 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 the 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 your taking the time to join us today. I'm excited to share with you the progress we've made in the fourth quarter and throughout 2021. I will give you an overview of our performance, and Stephanie will walk through the details of our financial results. We will end the call by taking your questions. I'd like to start by highlighting that it's been 1 year since Butterfly became a public company, a meaningful milestone and opportunity to reflect on the culmination of hard work and progress that our team has made. The past year has been one of evolution in how we operate our company, innovate our solutions and bring value into the health care ecosystem. In addition to sharing our fourth quarter and full year 2021 financial results, today, I'd also like to share how encouraged I personally am by the opportunities in our markets and by the strength and foundations of our company. I'm also grateful to be surrounded by a group of talented individuals and leaders across technology, clinical practice, commercial engagement and operational functions, who are unified by our shared mission to transform care with Butterfly. As I look back on 2021 and ahead into 2022, I am more confident than ever in our team's ability to execute across our priorities towards the realization of our vision. As you will hear in our dialogue today, we have gained incremental clarity, traction and insights into the strategic pathways to accelerate our clinical and commercial progress. Clinical awareness is building around Butterfly in the market. In the past 3 years, there have been more clinical publications about Butterfly than all of the handheld competitors combined. However, Butterfly is about so much more than just the device. It is about the practical application of ultrasound information into the clinical workflow and the value that this information creates across the care continuum. Whether unlocking new care models or enhancing existing ones, our team is passionately innovating to bring these valuable insights to all patients worldwide. This is our mission, one we can deliver by making our innovative solution a valuable clinical tool that is as ubiquitous as the stethoscope. We believe this is possible because Butterfly is not just about ultrasound. Butterfly is a transformational digital health company. It's our innovative device that allows for the acquisition of information. It's our software that makes the information usable and it's the availability of this real-time information that we enable at the bedside and in the workflow across care settings anywhere that leads to better decision-making and ultimately can lead to a new standard of care. We're innovating with a focus on information transformation at scale because with Butterfly, physicians now have a tool that can help them practice better medicine. That is why Butterfly is different. We are on a journey to change the paradigm of health care by bringing affordable, easy-to-use, high-quality imaging to the pockets of clinicians everywhere to inform care decisions anywhere. It's our unique combination of attributes, the Butterfly iQ+, our patented ultrasound on a chip technology, our education tools, our approach to AI, our enterprise workflow capabilities with Compass, our services and the way we connect these elements that enables us to move health care forward on the path from a clinical state of deducing and confirming to one of informing and knowing. This is who we are, and this is why Butterfly is well positioned to help transform health care around the globe. With that context, I'd like to now turn to our performance and business updates. In the fourth quarter, we continued to see momentum in our business. Despite the ongoing challenges in the health care system and external macroeconomic environment, we executed against key initiatives to support ongoing growth and innovation. Revenue grew 21% year-over-year for the fourth quarter and 35% year-over-year for the full year 2021. We also strengthened our foundations. We evolved our business model and go-to-market strategy. We added key leadership to the executive team and Board of Directors. We grew our employee base by 274 people. We expanded and strengthened our corporate infrastructure. And we spent time learning in the market and shaping our product road map to help ensure alignment and novel innovation, alignment with the current and future needs of hospitals and health systems and novel innovation to help usher in a new standard of care everywhere. On our business model and go-to-market strategy, we now have 4 strategic areas of focus: hospitals and health systems, international markets, home-based care, and select adjacent markets. Each of these pillars is grounded in 3 common core principles: easy, everywhere and economical. Easy is about redefining point-of-care ultrasound to make it effortless and adoptable at scale. This is our journey to enable users to do more with less effort. We plan to accomplish this with education, AI and additional technology that advances ease of use and user confidence. Today, we offer continual introduction of new just-in-time training clips, teleguidance and quality assurance tools and regular rollouts of robust technical and clinical courses found within Butterfly Academy, our learning management system. Additionally, we are thoughtfully leveraging AI across our network to incorporate insights from images, scans and associated practitioner behavior and clinical path into our workflows. Our commitment to easy is about instilling Butterfly as a core clinical tool for novices and experts alike, one that can be used by any practitioner anywhere to make bedside information accessible without the need for extensive training. As an example of this, Butterfly was recently spotlighted in a report in the National Library of Medicine. According to the report, with limited training, paramedics were able to use Butterfly to obtain and interpret cardiac images from patients during out-of-hospital cardiac arrest. This study is meaningful for a few reasons. One, Butterfly was used effectively with little training. In fact, 86% of the images were deemed adequate. 88% were deemed accurate, and in nearly 1/3 of the cases, these images were used to alter care management. Two, Butterfly was seamlessly incorporated into the workflow and was used without disrupting the resuscitation protocol. Despite the high stress backdrop of cardiac arrest, paramedics were able to effectively use Butterfly and do so without disruption or distraction from the other many critical tasks they needed to carry out. This study also illustrates the tremendous potential for Butterfly when used in clinical settings where ultrasound is not traditionally utilized and where ultrasound expertise is not traditionally found. Yet by adding Butterfly, a practitioner can gain access to valuable clinical insights and deliver better, more effective care. Everywhere is driven by this practical application of ultrasound information that Butterfly enables through its portability, usability and affordability that we believe can make this a clinical tool as ubiquitous as the stethoscope. We strive to have a Butterfly in every practitioner's pocket to be used on every patient every time. Finally, our third E centers on reinforcing Butterfly economic value. This is not just about the affordability of our solutions, but also centers around demonstrating the value it delivers, the health economic evidence that our system delivers better, more informed, lower-cost care. To do this, we are strengthening our portfolio of proof points that show the impact of Butterfly at the point of care, at scale and across the full spectrum of care. Reflective of such value, Butterfly is gaining adoption as a meaningful procedural assistance tool in emergency medical services, surgery, nursing and hospital in the home. Examples of this include nurses using Butterfly for bladder volume calculation and to ease IV access, anesthesiologists guiding central line placement and injections and care teams investigating patients at-home self-scanning to monitor things like COVID-19 or to inform better dialysis treatment outside of the hospital, which, subject to regulatory authorization, may lead to new indications. And emergency medical services who have not typically used ultrasound in their care settings are now using the Butterfly because for the first time, they have access to and the ability to use ultrasound information in the care for their patients. This is a paradigm shift. Let me provide an example. STARS is an air ambulance and shock trauma rescue team that brings emergency care and helicopter evacuation to rural communities and remote areas across Canada. Butterfly is helping the STARS team reimagine what's possible when assessing the critically ill and injured in pre-hospital settings and is now with this team assisting in a number of clinical conditions. As in the example, using the Butterfly, the STARS team was able to confirm a patient who was hemorrhaging internally information that guided the decision to provide blood products, then determine the critical need to stop at a facility mid-flight for 2 more units of blood and allowed the STARS team to communicate the clear need for the receiving trauma center to activate an operating room ahead of their arrival. With Butterfly, the STARS team was able to access valuable clinical insights that help guide their team to critical care decisions. It's stories like these that reaffirm Butterfly's vision and value, innovating to inform better decisions so people everywhere get the care they need. As we continue to position Butterfly as foundational to every clinical workflow, these targeted applications that leverage the unique attributes of Butterfly represent near-term opportunities for adoption and impact. These core principles are what we believe will help us drive utilization and adoption in our 4 strategic pillars. And now I would like to take a moment to provide some updates in each of these areas. Let's start with hospitals and health systems. Longer term, we are innovating for Butterfly to be as ubiquitous as a stethoscope and to serve in estimated $100 billion market comprised of 42 million health care practitioners around the globe, focusing on the full spectrum of care delivery from hospital to specialty, from acute to home based, from primary care to value-based care, to chronic care and more. We are confident that in time, we will prove our value across this ecosystem, reducing time to diagnosis, accelerating treatment, driving efficiency, enhancing patient experiences and enabling higher quality care. But to realize an expanded TAM, we understand we must first drive adoption in key markets. That is why we are very focused on health care systems and home-based care, where we have aligned and focused our R&D, sales and marketing efforts. Health care systems are the hub of care delivery and often where novel standards of care are born. They represent the greatest complexity of integration and have the potential to yield the greatest impact tutorial cost of care. They're where our physicians and clinicians are trained and thus, one of the greatest opportunities to systematically overcome the knowledge gap needed to maximize value. Given the complexity of the medical ecosystem, practitioners require a comprehensive solution that brings the value of ultrasound information into their workflow needs and improves clinical practice. Today, as mentioned in our press release, we officially bring that solution to market. Butterfly Blueprint represents our comprehensive offering that includes hardware, Compass software and services, specifically designed to support health care institutions to achieve enterprise-wide imaging from the bedside and encounter-based workflow across multiple care disciplines and settings. Blueprint's broad set of services includes AI-powered image capture and interpretation powered by Caption Health as well as Butterfly Academy courses and curricular. Caption Health is the creator of the first and only FDA-cleared AI-guided ultrasound software, which will now cover cardiac assessments within Blueprint. This reinforces Butterfly as a ready-to-use tool and will enable nontraditional health care providers to more quickly participate in the acquisition of certain cardiac ultrasound exams. It is worth noting that Caption is a recent recipient of CMS authorization for technology add-on payments and NTAP, the designation awarded to new medical technologies that are expected to substantially improve the diagnosis or treatment of Medicare beneficiaries as further evidence of our core health system progress. In January, we announced that The University of Rochester Medical Center, URMC, upstate New York's largest and most comprehensive health care system, will deploy Butterfly Blueprint across its enterprise and will partner with us to further validate and optimize Butterfly in the hospital setting. URMC's rollout will begin over the summer, first going to medical students, primary care providers and home care nurses. We will continue to share updates on our ongoing work with URMC. Additionally, earlier this month, we announced the partnership with Ambra Health, a leader in cloud-based medical imaging management that has a track record in bringing disparate imaging information together for some of the largest health systems. We believe our work with Ambra, in combination with the full Blueprint offering, will accelerate scale system deployment and integration. Next month, our team is looking forward to engaging stakeholders of the hospital health system audience at the annual HIMSS Conference, where our Blueprint will be prominently featured both within the Butterfly booth and as part of the interoperability showcase. Across the hospital and health system market, we believe the conversations we're having are reaffirming our strategy. At a time when health system leaders are looking to enable more informed clinical decisions, we uniquely provide access to improved clinical insights where and when they are needed to enhance clinical decision-making. Blueprint answers hospitals' and health systems' need to foundationally improve accuracy, speed, cost efficiency and care excellence, which we believe can lead to a paradigm shift in the standard of care for all patients everywhere. This is what Butterfly makes possible and what Butterfly makes practical. Let's move on to our international markets pillar. We see tremendous opportunity across developed and developing markets and a growing need for Butterfly in a range of geographies and care settings. Our team continues to assess the size and entry path for each market and at various levels is either building go-to-market plans or executing to raise awareness, nurture and build relationships and expand our global footprint. In particular, we are excited with the ongoing momentum with our current and prospect distributor partners and by early signs we're seeing within the U.K. and Germany markets. In 2022, international growth will be a key area for focused investment and longer term, we expect it will be a meaningful contributor to Butterfly's performance. Given the vast international market opportunity, I look forward to updating you on our progress throughout the year. Our third pillar is home-based care. Butterfly in the home represents a meaningful market opportunity with millions suffering from chronic conditions. Butterfly's innovative device is designed to enable ultrasound information to be incorporated into the workflow of the hospital at home. It is an invaluable tool to surface information, to intercept disease through earlier detection and to manage the needs of patients living with chronic disease. It's because of this reality that I'd like to call your attention to 2 groups of clinical studies that our team plans to launch in Q2 in preparation for ultimately seeking regulatory authorization for potential at-home use by patients. One, we'll look at Butterfly as a foundational tool for home-based care for those affected by congestive heart failure. Our clinical team is working with multiple clinicians, including academic medical centers, and will shortly begin pivotal studies to measure the effectiveness of Butterfly for patient cell scanning of the lungs. Previous studies have demonstrated that the identification of excessive B-Lines by lung ultrasound when performed by experts can be used to reduce ED visits in this patient population. Building on this, doctors at UCLA recently published a study demonstrating that heart failure patients can rapidly learn how to perform the same lung scan using Butterfly with excellent results. Our team will leverage these sentinel insights to further study the use of Butterfly to enable a dramatic new way to manage patients in the home. Our work will investigate Butterfly's role in guiding clinical management of heart failure with the objective of reducing emergency room visits and hospitalizations while improving the quality of life for millions of patients affected with this growing chronic condition. We expect to complete enrollment before the end of the year of at least one of these key studies, and we will update you on progress to the extent that we can as the year goes on. The second group of clinical studies, I'll speak about addresses a growing patient population with a chronic condition that is prime for better care models: renal failure patients on hemodialysis. There is mounting pressure to deliver care in the home for this group due to the many virtues it provides, not the least of which is better quality of life and reduce complications. We are actively instituting studies that will demonstrate the value Butterfly can bring to hemodialysis, specifically by supporting the ability to both more accurately needle the graft or fistula and to monitor volume status. We look forward to sharing results with you as studies complete enrollment, which we expect to occur this year. We are excited about the potential value that Butterfly can bring to this clinical workflow. Our studies will begin in treatment centers and will rapidly expand to home-based environments. These research areas are just 2 examples of the broad applicability of Butterfly across clinical use cases, care settings and user types. We are confident they will help to demonstrate new care delivery models that Butterfly makes possible. As a digital health company, our aim is to enhance information capture, use and flow, act from and to the home. This is in service to patients and we believe will alleviate burden from hospitals, care teams and the health care system overall. We also believe it will support the rationale for our wearable on our development road map to collect information that can be easily incorporated into the workflow and enable the interception or management of disease. We will update you on our development road maps later in the year. Finally, part of Butterfly's strategy is to ignite adjacent markets where there's opportunity to bring the value of Butterfly beyond the traditional health care market and drive growth. One such market we've innovated for and continue to gain traction in is the veterinary space, where in the past year alone, we launched iQ+ Vet ultrasound, our second-generation veterinary device, which is now available in 21 international markets; announced a large-scale partnership with Rarebreed, bringing Butterfly to their veterinary hospitals to transform care delivery as part of the physical exam; supported BetterVet to supply all staff veterinarians with Butterfly iQ+ Vet across all of their mobile veterinary units. And more recently, we added Purdue University and Australia's University of Melbourne to our list of veterinary colleges that have incorporated Butterfly into their curriculum and equipped their students with a Butterfly iQ+ Vet probe. We believe this continued adoption is demonstrative of more momentum to come and are proud that Butterfly in 2021 driven by a small focused team reached the typical first year sales of an animal health pharmaceutical launch, one traditionally backed by a fully established, much larger commercial effort and team. With nearly 2 million veterinarians and vet techs globally who could benefit from having the power of Butterfly in their pocket, our teams are ingraining themselves within the space to optimize Butterfly awareness and penetration. I'm excited about the continued progress we will make this year and beyond. I hope this recap illustrates the progress of our journey and conveys my personal excitement regarding Butterfly's future. I am encouraged by all of the progress our team has made across our strategic pillars and energized by the opportunity for us to accelerate even more. Looking ahead in 2022, we expect full year revenue in the range of $83 million to $88 million, representing growth of 33% to 41% driven by continued progress with health systems, medical education, international expansion and our vet business. We have made important headway in 2021, and we are using our in-market learnings to enable care transformation and establish a path to becoming as ubiquitous as a stethoscope. We believe health care around the world needs it, that the demand for this will continue to accelerate and that we are well positioned to meet it. To advance our journey and long-term growth in 2022, we will invest heavier across our 4 strategic areas of focus. We believe this increased investment will accelerate our ability to innovate to meet market needs, prove Butterfly's value through a wide range of clinical studies and position us well to not only sustain our competitive advantages and innovation, but also to set a new threshold for medical imaging across all care settings and environments by instilling Butterfly as the practical application of ultrasound information in all clinical workflows. I will now turn the call over to Stephanie for a review of our financial results. Stephanie?

Thank you, Todd, and good morning, everyone. Fourth quarter revenues grew 21% year-over-year to $19 million. For the full year, revenues grew 35% year-over-year to $62.6 million. Revenue came slightly above the high end of the preliminary range of $61.5 million to $62.5 million that we provided on January 11. Product revenue for the quarter was $14.4 million, an increase of 15% from $12.5 million in the same period in 2020. Units fulfilled, the main driver of product revenue, were 6,714 in the quarter compared with 7,553 in Q4 2020. The decrease in units fulfilled was primarily due to the Butterfly iQ+ product launch in the fourth quarter of 2020 and holiday season promotions that were not repeated in Q4 2021. This decrease was partially offset by higher average selling price and increased hardware sales from our veterinary, distributor and sales to health systems as well as medical education through our direct sales force. For the full year, product revenue was $47.9 million, an increase of 25% from $38.3 million in the same period in 2020. Subscription revenue was $4.6 million in the fourth quarter, growing approximately 46% from $3.1 million in Q4 2020. The increase in subscription revenue is due to revenue from contracts booked in prior periods, renewals of existing software contracts and the sales of additional licenses across all channels. On an annual basis, our subscription mix, which we define as a percentage of our total revenue recognized in a reporting period that is subscription-based, was 23% compared with 17% for the full year 2020, a 6 percentage point increase. For the full year 2021, subscription revenue was $14.7 million, growing approximately 86% from $7.9 million in the same period in 2020. Turning now to adjusted gross profit and adjusted gross margin. Please note that reconciliation calculations to GAAP can be found in today's press release and at the end of the slide presentation. Adjusted gross profit was $10.1 million in Q4 2021 compared to adjusted gross profit of $4.9 million in Q4 2020. Excluded from the adjusted gross profit in Q4 2021 is a nonrecurring $2.3 million loss on our purchase commitment with a third-party manufacturing vendor, primarily due to a subcomponent that was not in line with product specifications. This is a different situation than the purchase commitment that we discussed in Q3. Adjusted gross margin was 53% for the fourth quarter and approximately 50% for the full year of 2021, which compares to an adjusted gross margin of 31% in Q4 2020 and approximately 3% for the full year 2020. Adjusted gross margin reflected consistent performance in 2021 and a significant improvement over the prior year, primarily due to the shift of our production to TSMC in 2020 and a growing mix of revenue from subscriptions. Operating expenses were $52.8 million for Q4 2021, an increase of $21.9 million or 71% compared to Q4 2020. For the full year, operating expenses were $209.8 million, an increase of $109.4 million or 109% compared to full year 2020. This increase was primarily due to the buildout of our team in 2021, investments in innovation and public company expenses. The growth in operating expenditures is a reflection of both the investments we are making to capitalize on opportunities we see to transform care as well as the constrained spend environment in which the company was operating in the prior year. In 2021, operating expenses were lower than the guidance we provided in November due to the timing of expenses, including compensation. For the fourth quarter, adjusted EBITDA with a loss of $33.3 million compared with a loss of $21 million in the same period in 2020. Full year 2021 adjusted EBITDA with a loss of $121.8 million compared to a loss of $85.2 million for the full year 2020. Adjusted EBITDA reconciliation calculation to GAAP net loss can be found in today's press release. Moving to our capital resources. As of December 31, 2021, cash and cash equivalents were $422.8 million. We have a solid cash position, and we plan to invest aggressively to capitalize upon the attractive market opportunity. I would now like to move to our annual guidance for the full year 2022. For the full year 2022, total revenue is projected to be approximately $83 million to $88 million or 33% to 41% growth year-over-year. This revenue guidance assumes growth across our existing strategic initiatives, including health systems, medical education institutions, veterinary, international and distributor relationships. We are focused on leveraging care capabilities across a variety of customers who are starting to adopt Butterfly to benefit from more real-time information delivered at the point of care. In 2022, we anticipate subscription revenue growth. And we also anticipate that subscription revenue will increase as a percentage of revenue, but not as significantly as what we saw in 2021. As a reminder, subscription mix as a percentage of revenue is impacted by the timing of sales, revenue recognition differences between subscription and products and by mix. As a result of these factors, we continue to expect quarter-to-quarter variability for subscription revenue. But over time, we believe that recurring revenues such as subscription mix will continue to grow. Moving to adjusted EBITDA guidance. Through the fourth quarter, we have seen consistent performance in adjusted gross margin. As we move forward, we will focus on adjusted EBITDA as a metric for bottom line performance for 2022. With that, for the full year 2022, net loss is expected to be $225 million to $245 million, assuming no change in the fair value of our warrants. Adjusted EBITDA is expected to be negative $175 million to negative $195 million. We are assuming an adjusted gross margin that is slightly better than 2021. We are investing in line with the strategic focus and corporate principles that Todd described earlier in the call. More specifically, we expect our operating expenditures will be impacted by the annualization of the investments we made in 2021 as well as incremental investments in our product pipeline in hardware, software and AI to support our sales, marketing and clinical efforts and to build tools and processes to support future growth for the business. In addition, we are expecting expenses like travel to return as business activities begin to normalize. To help with modeling, we are also providing additional color on balance sheet and other financial line items. We have assumed an investment of $20 million to $30 million in capital expenditures. A large component of these capital expenditures represents capitalized software costs related to the larger innovation software investments that the company is making. For working capital, we expect continued investment of $20 million to $30 million, primarily in inventory. Finally, we are expecting stock-based compensation expense of $40 million to $50 million. As Todd mentioned, our financial plan for 2022 reflects our desire to accelerate our market position by aggressively investing across our commercial business and continued innovation and R&D efforts, as well as establishing additional infrastructure to support our long-term ambitions as a public company. And with that, I will now turn it back over to Todd for summary comments.

Thank you, Stephanie. I am excited about what we learned in 2021, the progress we made and our continued commercial evolution. Providing the solution to help practitioners make more informed decisions where and when they need to is how Butterfly will help transform care delivery around the world. This is a big aspiration, one we are all proud of at Butterfly and one that we are working to realize. I look forward to 2022 and our ongoing work towards this goal. Before we move to Q&A, I would like to acknowledge the hard work and efforts of Stephanie Fielding. As most of you already know, Stephanie is resigning from the company effective April 30. On behalf of myself, the Board of Directors and the entire executive team, I would like to thank Stephanie for her contributions, including her work to transition Butterfly to the public company it is today. As we transition, I have the utmost confidence in our ability to execute our business strategy with our current finance team and to advance performance against our innovation and market priorities. We wish Stephanie the best in her next endeavors, and I look forward to announcing a new Chief Financial Officer appointment in the near future. I would also like to thank the Butterfly team for their dedication to our mission and the excellent progress we continue to make as a transformational digital health company. And to end the call, I thought I would turn it over to Stephanie to say a few words. Stephanie?

Thank you, Todd. I would like to thank the team, the Board and the many stakeholders, including those of you on this call, with whom I've had the pleasure of working either directly or indirectly. My time with the company has represented a critical growth period and a time of transformation. It is a privilege to have contributed to Butterfly's journey. I continue to believe in the mission and promise of Butterfly, and I'm excited to see what comes next. With that, we'll open it up for questions.

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

I appreciate the thorough download on the 4Q update, and Stephanie, good luck on your next chapter. I was hoping to just start off on the health system or enterprise channel, Todd, and maybe you could just give us an update on where you feel Butterfly is positioned to kind of attack this channel scale beginning of 2022 versus the beginning of 2021. I just would like to better understand the evolution of Blueprint and now the collaboration with Ambra and how this -- the evolution of the software capabilities is positioning you better to have success in the enterprise channel?

Thanks, Josh. As we've said, and we tried to give you a lot of color this morning on kind of the progress that we made. But as we went into '21, we're really absorbing the impact of the capabilities of the device itself. And I think our evolution through '21 really was understanding that it's not about doing ultrasound with Butterfly, it's about using the information from ultrasound that Butterfly can provide. And that's really fundamentally what we make possible. So our pivot in '21 was a lot of investment and capabilities and scale in the utilization of the information and the practical application of that information. That came together with a lot of our learnings from being in the market already. And I think that was one of our advantages, was we were working with a lot of customers and we were absorbing both how they were trying to do ultrasound with Butterfly but what they were trying to do with Butterfly as we were getting our head around what that would take. And so we made a lot of investment and aggregated a lot of the components of what we put together in Butterfly and Butterfly Blueprint in '21. So Butterfly Blueprint is really the road map for us moving forward in health systems. And it's really that ability to understand how to deploy the hardware so to get the Butterfly into the health system, the training that it requires to get people their competency for the use cases that they need in a seamless and not high-burdened way. And then the software pieces with Blueprint, with our Compass software really to look at the things that we need with quality assurance, credentialing, documentation, the throughput of information, these are all a lot of learnings when you go in and you're not just doing ultrasound, but you're using ultrasound and putting it in counter-based workflows. And that's really what our learning, our investment and the evolution of our vision of where we're going. Our partnership with Ambra was kind of an innovative approach to helping us move Blueprint and Compass on top of an architecture and some, I guess, you think about it as digital plumbing as a way for us to accelerate to move up and to think progressively about how to get more relevant and scale faster. So we were able to work with them, collaborate and then kind of put Compass and essentially the Blueprint solution on top of some of their infrastructure that they have established being one of the leaders in cloud-based medical imaging management.

Great. And then just wanted to ask just a couple of questions on the Rochester win. And maybe just to be helpful to better understand the sales process your team experienced in the account, how long did it take from getting the door open to getting into the backstage and how this big win informs your enterprise strategy going forward? And then I'll just have one last follow-up.

Sure. I think Rochester was a great example of the evolution of what we learned in '21. And not to repeat myself on the pivot to getting back to the application of the information. Our approach to Rochester was, I think, an evolution of our learning what we have going on with a lot of our other accounts, which is we approached Rochester from the clinical perspective of the application of ultrasound in the clinical workflow. So we were able to start those conversations with a lot of clinical advocacy and senior leadership around practice management along with what they were trying to do with imaging and how they were trying to manage imaging throughout the institution. And so I think what was different about Rochester and what's informing our approach moving forward is really it's going about with the value proposition of how do you want to transform care? How can this information be valuable to you? And how can we partner with you to get to those objectives and where you want to go? And I think that's really the value of Butterfly in the sense of it's really a clinical tool that institutions can deploy to achieve objectives and how they want to evolve and transform care. We were ready and took a lot of our learnings into the Rochester conversation. And we're really excited about how they're thinking about it and what we were able to do in the partnership as that sales cycle took us a good portion, about half of the year, which was a big improvement over some of our previous sales cycles. And I think that's what we're really trying to do is figure out how do we continuously package the information we have, the learnings we have and that's the advantage that Butterfly has by being out in the market and then continuing to make that scalable and reproducible. And so we see -- we hope to see improvement each time we go about doing these large implementations.

Great. And just how should we think about Butterfly using Rochester as a reference for either future enterprise or health system customers to become comfortable and confident in the Butterfly iQ value proposition? And as part of the Rochester experience going to include the accumulation of accrual of cost effect in this data, I'm not sure how you can go about that. But I think one of the intuitive benefits of handheld ultrasound, particularly Butterfly's platform, as you said on the call, just the potential for cost effectiveness, streamlining care, reducing inappropriate -- level of inappropriate diagnostic tests outside of ultrasound and coming to a clinic diagnosis earlier in the process? But just -- sorry, a multipart question again, but that's my last one.

No problem. So one of the things that we're excited about with Rochester is it's a true partnership. They're very excited about the incorporation of digital information in forming care, advancing care and the utilization of technology to improve care. So they're very excited about how they look at AI across systems. They're looking at data aggregation and how do they take information and improve care with that. So Butterfly was very exciting to them as a way to acquire information as I've spoken to you about before. Really, if you think about Butterfly as a clinical tool, it's really about using Butterfly to acquire information, the software to use the information and then take that useful information, inform decision-making and evolve and transform care. That fit right really well into where they were thinking. So they very much want to partner with us. And so part of this whole deployment was both looking at how do we measure and how do we learn together on what it takes to get people confident? How do you deploy this into workflows? What is best practice to learn and evolve to do that? How do we get information around that? How do we look at evolving, improving the clinical care pathways and then the returns and the economic benefits of doing that? So we went into this in partnership with them. They're dedicating resources, we are dedicating resources, and this is a true partnership. And I think it really also stems from the tremendous progressive leadership of Rochester in the sense that they want to transform care. And when we've had conversations with them, they've come out and said, "Look, there were challenges before we went into the pandemic with how care is being delivered. We want to come out of the pandemic not thinking about how do we get back to how we were practicing medicine before. We want to take these opportunities to deploy and move forward and evolve care." And I think they're thinking aggressively around how do you take something like a Butterfly, that information and use that to truly transform care. So it's a partnership. And we're going to learn a lot, and we're going to study a lot. And I think it will become a very important referenceable institution, not just for Butterfly but how you should think about incorporating digital information to help inform and transform care.

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

So the first question I wanted to ask was, I guess, around Rochester and other enterprise-wide deployments. So you mentioned the sales cycle took about half the year. I know in the release that you put for Rochester before, you talked about that really starting to ramp up in the second half of the year. So first question I have is just on Rochester, how should we think about that ramp and the ultimate size of that specific agreement? And how does that impact the phasing of your revenue through the year?

So Matt, we've talked about this, and I think my last answer to the question is really, first and foremost, we're looking at Rochester to really prove the embodiment of our strategy, which is the practical application of ultrasound information into the clinical workflow. So we're also learning how to package this and move it out and make it more digestible for other institutions. We've talked about -- and so we've talked about the pieces. And we really want to understand the deployment of the IT backbone and the improvements that we have with the elements of Blueprint and Compass. We're going to -- we're taking a little bit of time here, and we're going to, as the middle of the year comes, really start deploying the probes and really getting things into workflow. So we're going to do some implementation and training. And then we would see that the back half of the year being around the true utilization and then the ramp going forward. We've talked about this as a multiyear journey with them and with thousands of probes over time being deployed. But right now, what we're focused on, most importantly, is evolving Compass to make sure that it can be scalable and deployed across other institutions, the efforts that it takes and the efficiencies that we can drive in getting people up to scale for the deployment and then seeing the incorporation into the workflows and then starting to measure the benefits. So we see this first year as a growing and learning and deploying year. And then we see -- we'll hopefully see even more expansion over time in Rochester and then deployment with other accounts.

Okay. And I just wanted to know for your guidance for the year, does that assume any other enterprise conversion? Could you talk about any of the assumptions by channel or any important wins that underpin your expectation for this growth?

Yes. So as we look at the year, it wasn't really an overview, it's really what our approach to the larger enterprise institutions are this year, right? The -- we're not at the place where we're seeing that we have these packaged, and we just do multiple, multiple deployments. So I would see maybe another 1 to 2 large-scale institutional deployments this year to help us really refine what a scalable enterprise strategy looks like. The way that we will texture revenue over the course of the year is in working within the institutions within departments around targeted workflows, the capabilities of the device, segments and elements at Compass. And so it's going to always be working both sides of the spectrum across the entire continuum of care that we will be working to package and deploy so that we can top-down deploy enterprises at scale and that we can build up from what's in with specific capabilities and targeted applications in departments and settings so that we can continue to deploy the capabilities of ultrasound information into the workflow. And that's the balance that we have this year, Matt, of leveraging the capabilities of the device versus changing the fundamental thinking of the paradigm of how care is delivered in institutions. And at some point, those 2 shall meet and cross, but that's kind of where we are in the journey and in the spectrum. So we're working both sides of them.

Okay. And then you went through a few investments that you're making in software and CapEx. I was wondering if you could help us with like a bridge year-over-year in terms of understanding the increase in spending. What are kind of the key elements that are new and inverse, and the ones that are into life last year?

So Matt, I think that we talked about the kind of core elements, and many of them are things that we've learned over the course of 2021. And we'll -- some are areas we're continuing to build on next year. So certainly, there's a focus on R&D, both from a software, which Todd has clearly described the importance of as well as the continued investment in our hardware pipeline. Certainly, we'll be continuing to invest in our commercialization and go-to-market strategies, both the kind of direct sales but also the supporting aspects of it. And I think there is the ongoing investment in us as a public company and the tools and processes that enable us to scale for the longer term. So it really is a combination of the components that we described in the call earlier.

And could you give us any thoughts on longer term how you expect profitability to evolve? Do you have an expectation for a revenue level where you'll be profitable? Or like when would you start to get more [Technical Difficulty] from on these investments?

So Matt, like I -- this has been a big shift for us. And I tried to be really transparent about it. And it's an evolution for us and to be honest, we've never been more excited about an opportunity that we have. And so we are really trying to pull the elements together of the revenue and how that pieces together as we -- I just gave you that overview or insight as to how we're thinking about the deployment. We're also piecing together how we capture the value of using the ultrasound information and the workflow, how do we deploy at an institutional level, where do we look across the continuum. And some of that is still coming together. And so while we see clearly the opportunity that we have, the market moving position that we have, the learnings that we have, we know that we have to bring this all together and piece it together. And I would say over time -- and we're clearly making that investment. It is absolutely clear that this has value and that we have the ability to be part of care transformation, and we are aggressively investing in that. We know that with time here, we need to get our revenue growing faster than our investment, and we see that occurring. And we know we need to get you a better longer-term view. So I'm hoping that as this year evolves, we'll be able to bring the pieces together so that we can better articulate that and put that in a longer-term plan so we can help you see some of the outer years. So I just -- we need a little bit more time to let things evolve as the course of the year goes here, but we will definitely be working towards both of those understandings sometime a little bit later in the year. Thank you so much. Thanks, everybody.

This concludes today's conference call. You may now disconnect.