Q1 2024 Butterfly Network Inc Earnings Call

Participants

Heather Getz

Joseph Devivo

Presentation

Operator

Good afternoon. Thank you for attending the butterfly network First Quarter 2024 earnings call.

Heather Getz

My name is Victoria, and I'll be your moderator today.

Operator

All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to your host, Heather Getz. You may proceed.

Joseph Devivo

Heather.

Heather Getz

Good afternoon, and thank you for joining us today. Earlier today, butterfly released financial results for the first quarter ended March 31st, 2024 and provided a business update the release and earnings presentation, which includes 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 dot butterfly networks.com.
Hi, Heather Getz, Chief Financial and Operations Officer at butterfly. Alongside Joseph, the depot butterflies Chairman and Chief Executive Officer, will host this afternoon's call.
During today's call, we will be making certain forward-looking statements. These statements may include, among other things, expectations with respect to financial results, future performance, development and commercialization of products and services, potential regulatory approvals and the size and potential growth of current or future markets for our products and services. These forward-looking statements are based on current information assumptions and expectations that are subject to change and involve a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our filings made with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, and the Company disclaims any obligation to update such statements. As a reminder, this call is being webcast live and recorded, and we will be referencing a slide presentation in conjunction with our remarks, there may be a short delay between the live audio and the presentation being shown on the same page, you will also be able to access the Webcast live and replay once the call has completed.
I would now like to turn the call over to Joe. Joe.

Joseph Devivo

So good afternoon, everyone, and thank you for joining us for our first quarter 2024 conference calls. We've had a really good quarter and a perfect start to what will be a great year for Vodafone. We delivered 14% revenue growth, which was above expectations and are now raising revenue and earnings guidance for the full year. Our IQ three launch proved everything we were hoping for and marks a major shift in competitiveness for the health system market with our building momentum from recent product launches, along with a robust lineup of new products and services coming, we feel confident will be able to sustain this growth for the foreseeable future. Our ongoing efforts to streamline and become more cash-efficient will continue through 2024, extending our cash runway well into 2026.
So elaborating further on the quarter, revenue came in at $17.7 million or 14% over the last year's first quarter with a 22% increase in pro volume in all channels contributed. These results come on the heels of us overachieving our Q4 23 expectations even more. Our first quarter 24 was the best first quarter in butterflies history, even beating 2020 two's of $15.6 million. We were able to achieve these results through improved execution and do it more efficiently. We actually used half the cash we did last year, so 14% revenue growth, highest first quarter ever using significantly less cash year over year. Now that's progress. We had a number of significant achievements in the quarter, the most notable of which was IQ three winning FDA clearance early in January, and we were ready. We launched IQ three ahead of schedule, delivering even more momentum. Our operations team did a marvelous job producing high-quality inventory. Our marketing team executed a flawless launch with so many online activations occurring through the quarter. I'm very proud of the team for delivering such high-quality launch ahead of schedule.
So as a reminder, as I laid out on our previous earnings call, our 2024 priorities for butterfly are one IQ, three driven growth, including going deeper into health systems, two global expansion and three, driving medical school adoption. In addition, we see further opportunities such as that.
So beginning in further to the launch on February 13th, 2020, for IQ three became available to all of our domestic channels. Each of our regions then proceeded to deliver and above plan performance.
U.s. revenue growth in the quarter was 19%, led by an increase in proved unit volume by 18% year over year. There were no large deals, just a groundswell of individual orders increasing on a daily basis throughout the quarter, which in my point of view, is very healthy. International grew 14%, and this was without IQ. three and prior to even receiving EU MDR certification for IQ plus. So in other words, the growth was purely based on improved execution from our distributors and strong performance from our international direct team despite no new product in years. Well, that's about the change for them now that we have EU MDR certification and we'll be rolling out a cadre of advanced features on our European IQ plus product later this month, international results should accelerate further.
So what's more of the new butterfly IQ. three international rollout is kicking off very soon. We plan to launch IQ. three in Canada this month, and then Europe will come next later in 2024. So why Q3 was available for a half a quarter. In the U.S. market. Sales and selling activity has been electric of over 1,200 IQ. three units sold about half were brand new users to butterfly and half were trade-in upgrades by existing users who wanted the new technology in every setting.
Iq three shines. We have held many private IQ three demos for KOLs in every clinical specialty relevant to ultrasound. We used to hear quote, butterfly is great, but unquote from several specialties, especially cardiology, but there's no more, but that is now a thing of the past at the most recent American College of Cardiology Conference, our little booth was swamped with cardiology. It was so gratifying because we heard them say, quote, I just had the combined CFIQ. three was as good as everyone says it is unquote. So that's really nice to hear. Our message is getting out. There is the viral buzz around our new product and customers are reaching for it time. And again, we've put IQ three up against the competitive devices and our image quality is just much better. We have advanced automated tools and our cost is still a fraction of the price of all competitive price. Remember, you need to buy for their approach between five and $7,000 each to get to a full body image together, that's a 20 to $28,000 purchase about the same cost as an entry-level car. We also published a white paper accessible at butterfly network.com/resources on the clinical utility of IQ slice and IQ seven detailing how these advanced tools can enable more efficient care by reducing the number of scans needed in an exam. Many ultrasound protocols are time-consuming and demanding on proved manipulations to get a series of views with IQ slice and van, we proposed new protocols that streamline the scanning process and enhance diagnostic efficiency. This was also the first quarter that we began selling two probes side-by-side by Q plus remains the best selling handheld in history and the product has a lot of life providers who are generalists or very price sensitive, may opt to purchase IQ plus at 26.9, while more specialized doctors, for example, puzzle cardiac MSK and vascular needs will likely opt for the IQ three at 38 99, no matter what butterfly wins because we have the lowest cost all in one probe and simultaneously the best handheld and image quality capabilities and cost. Plus our probes are paired with enterprise software and educational tools to make deployments feasible at scale and now butterfly Garden will be constantly bringing them the best apps in the world. It's just simply an unbeatable offering. Health systems are now taking notice in our pipeline is growing. We have the Pro the mobile app, enterprise software and education portfolio. If a point-of-care ultrasound director is serious about building an enterprise program, they will now truly have only one choice. Butterfly is the most complete solution. In fact, we're thrilled by new data coming out of one of our largest one to one proven software installations at the University of Rochester Medical Center, which furthers the value story by demonstrating the economic benefits of butterfly. There's much more to come on this, but they allowed us to preview a highlight since putting butterfly in place system-wide URMC. observed significant revenue growth, a 115% increase in hospital revenue from point of care ultrasound in just a year and a half, and they also reduced capital expenditures when deploying our devices system-wide.
Looking at our software and services revenue in total, it was down slightly. This is temporary underneath that we had great enterprise software quarter with upsells in existing accounts, growing 25% from Q4 23 and overall ARR growth at 34% year over year.
On the individual side, we anniversaried the subscription promotion put in three years ago that was very successful. Much of that revenue rolled off this quarter. I'm not worried about this at all as we've reloaded the chamber with a bunch of new software from this quarter's all improved sales, which will roll forward nicely and set the stage for a lot of new software to amortize over the next three years.
I also explained last quarter that medical school programs would be an important growth driver for us. And we're seeing the momentum here, including upsell into over five schools in Q1, two of which were one to one model is deploying probes to all incoming 1st year students. Our pipeline in this area is also growing strong and schools are realizing the value of one to one models for each student wants their own probe. Just last month, we were at a com the largest gathering of osteoporotic medical school leadership in the country, more than 30 deals. School decision makers showed up for a private session to learn more about butterflies one to one Miles & More came for conversations at our booth. Scandlines launch in Q1 is a huge part of our success here is contribution to the quarter was also nothing short of amazing. Having an ultrasonic structure side by side with a student to practice is a resource, not all medical schools have prospects has cited. Scan lab has the reason they feel a one-to-one model is now feasible. Scan. Lab amplifies assumes coursework and hands-on training with a I guided practice tools strengthen our lead in medical education as a whole generation of students, learn ultrasound and do it with their butterfly, much like Apple built their Eimac market decades. Earlier when students learn on your platform loyalty for years and years, the impact of scale-up goes well beyond NetSchools. We have partners, distributors and customers hosting training programs using it since its launch in mid January. Thousands of downloads at multiple institutions are using it and clinical research schools are incorporating it into their curriculum. Customers realize there's now an AI tool, allowing students and clinicians practice their scanning skills on their own. And it's a proven game changer for us.
We also saw growth in butterfly garden, EA Partners. We launched these streams about eight months ago in August of 2023 and saw an immediate strong impact. Pipeline continues to grow. In Q1 2024, we added four partners and just last month on April 23rd, I think Sonal became our first partner to commercialize an education app for deep vein thrombosis assessment. It's exciting to see the rate of progress in this area so before turning it to Heather, I'd like to give a brief update on the European Commission's effort to be in hazardous substances from electronic devices called Roadhouse or restrictions of hazardous substances directive. I've mentioned that we've been in contact with the European Commission about our chip ultrasound as a cleaner alternative to incumbent lead based PCs, handhelds for fleets to have learned that they have not yet begun reviewing the lead pizza industry for Quest for the next exemption or contact that the commission shares. So most likely begin at the end of this calendar year and then decide some time in 2025. So that's terrific news for butterfly. First, we are not late in the game. Butterfly in our seamless technology will be fully evaluated and considered in this next round. Second, we believe it's possible that IQ three will be approved in Europe before this evaluation process concludes. While we're very confident that even with IQ plus we would prevail with IQ. three. We feel certain that any independent valuation against all other handheld will conclude the IQ three is that minimum equivalent period we have also further learn that the EU seriousness and upholding this directive is strong. The more energy we are putting into this process, the more we believe the other prevailing are in our favor and new sales of LED piece of handhelds may be banned from the EU as early as 2025. The facts are simply in our favor. There is still a lot of work to do, but our confidence has grown.
So with that, I'll turn it over to Heather to report more on the quarter. Heather?

Heather Getz

Thank you and good afternoon. Everyone. As Jim noted, we started 2024 strong with revenue of $17.7 million in the first quarter, a historic high mark for butterfly, representing a 14% increase versus the prior year. This increase was driven by a 22% increase in pro volumes with the launch of IQ three and higher average selling prices, demonstrating strong demand for our products, both the US and international markets growth in the U.S., we realized $12.2 million in total sales, 19% higher than the prior year period, driven by increased volume, average selling prices and slightly higher revenue from software and subscriptions. Total international increased 14% over the prior year period to 4.2 million. This was due to higher pro volume, partially offset by lower average selling prices as a result of a higher mix of sales to distributors, which carry a lower average selling price as well as lower individual software sales through e-com.
Breaking our revenue down between product and software product revenue was $11.3 million, an increase of 28% versus Q1 2023. This increase was driven by higher volumes spread across all our channels and higher average selling prices. Software and services revenue was $6.4 million in the first quarter down slightly versus the prior year period. Software and services mix was 36% of revenue, decreasing by approximately seven percentage points versus Q1 2023. This decrease was due to lower individual subscription renewals that were largely offset by a higher installed base of subscription enterprise software as compared to prior year, as well as renewals on existing base of software users. Our total annual recurring revenue, which is reported as part of software and other services, grew by 4% versus the prior year period. This was led by an increase in our enterprise software, which increased to 42% of our total ARR.
Turning now to gross profit, gross profit was $10.2 million in Q1 2020 for a 12% increase as compared to $9.1 million in the prior year period, while gross margin percentage remained relatively flat at 58% versus 59%, slight downtick was driven by a negative impact of higher software amortization and lower proportion of higher-margin software and other services revenue, partially offset by higher average selling prices.
Moving to EBITDA and capital resources. For the first quarter of 2024, adjusted EBITDA loss was 13.2 million compared with a loss of 22.3 million for the same period in 2023. The 9.1 million improvement in adjusted EBITDA loss was driven by higher revenue, cost reductions and efficiencies, which led to lower payroll consulting and other outside services capital resources as of March 31st, 24 were cash and cash equivalents, including restricted cash of 117 million, excluding $6.5 million of bonus and other nonrecurring expenses. Our total use of cash in the first quarter was about 15 million. As we have previously discussed, over the last 18 months, we have taken over $170 million of cost out of the business and have reduced our annual cash burn to approximately 60 million. Based on this, we estimate that our cash balance conservatively provides us with a runway into 2026, and we have a plan to extend it further.
Before moving to guidance, I want to touch on the notification we received from the NYSE. As you may have read in our release, we received the notification that we are out of compliance with the NYSE standard that requires a 30 day stock price moving average of at least $1. We are viewing this strictly as an administrative issue and are confident we will maintain our listing. We have six months to regain compliance since we believe the market has undervalued the stock and is not factoring in our first quarter results or future growth. We believe we can regain compliance with the recovery in our stock price through continued business execution in the event that the market price does not recover in that time period, we will perform a reverse stock split during this time. Our stock will continue to trade on the New York Stock Exchange.
Now moving to guidance. As Jim discussed, we have been executing against the roadmap we laid out in August. We launched IQ three scan lab and butterfly garden with 13 deals. We added four new Garden partners in the first quarter. And in April, things Sterno became the first starting partner to commercialize an example of what we expect to be a meaningful contributor down the line. We've invested in our sales team, all while reducing our cash consumption and conservatively extending our cash on runway into 2026. As we look into 2024, our commercial organization is humming, and we are continuing to find further efficiencies to extend our cash runway even further. In addition, we are exploring a number of opportunities for non-dilutive financing, for example, grants and licensing deals to provide us with maximum flexibility and a pathway to profitability. We will keep you updated on this front for 2024 guidance. After launching IQ three and seeing its market acceptance, we can provide more concrete and higher revenue guidance in the range of 75 to 80 million or about 15% to 20% growth in adjusted EBITDA guide for the full year of a loss of 55 to 50 million. As the year progresses, we will provide updates and further clarification specifically looking at Q2, which is our toughest comp for the year due to a few large medical school deals that occurred in the prior year. We expect to see revenue growth around 10%, bringing us to approximately $20 million in revenue. For Q2 adjusted EBITDA, we expect a loss of approximately 12 to 13 million to summarize, we have started the year strong and we look forward to continued growth in 2024 as well as to realize additional efficiencies that will further extend our cash runway additionally, we did maintain a solid cash position while investing in the business. We will continue to execute against our plan, drive adoption of IQ. three and expand uses of our product across all of our channels, butterfly setup to accomplish its goals with a strong base of technological and organizational assets, and a team is energized to capitalize on this attractive opportunity and with that, I will turn the call back to Jeff.

Joseph Devivo

Just going further.
So I've been here about a unit that looking back, I'm proud of what we've accomplished. It was easy to recognize the enormous potential and opportunities for butterfly. What was hard was not trying to do everything all at once and instead focusing on opportunities with the greatest impact. But that's what we've done for those of you following closely. You know, now that the butterfly team is delivering at all levels. Our R&D team and product teams just flushed it by hitting the mark on our new product launches this quarter, our regulatory team delivers constantly with clearance after clearance worldwide. Our operations team consistently delivers quality products ahead of time with the reinvestment in our commercial engine and some new talent combined into the organization. Our sales and marketing teams are delivering globally and exceeded plan by a wide margin in corporate development. We created the successful butterfly garden and powered by butterfly programs. We did all this with a streamlined organization that used half the cash had been the prior year, and we're just getting started. As we look ahead, we will next launch IQ three in Canada. Now is we've received our certificate just a few days ago. And then with EU MDR certification this quarter, as well, we will add pulse rate Doppler and other advanced features to IQ plus in all CE Mark countries, followed by IT. three in those countries before the end of 2024.
On a global front, we also remain dedicated to our mission to democratize health care and continue to be the device of choice in all global health context. Just last month, we initiated Phase two of our 1,000 proved deployment to Sub-Saharan Africa under the Gates grant we received in March 2022, and this phase 500 probes are being distributed to improve maternal care in South Africa.
Our vet business also continues to strengthen with new partnerships. In Q1 two, we became the latest corporate partner who leverage Butterfleye in their first ever veterinary hospitals. We've now partnered with the biggest names in pet retail, namely Petco, PetSmart and Chewy, who all view butterfly as a key part of their toolkit as they move into the veterinary services space. We also continue to see positive findings from Kansas State beef cattle Institute, researching the use of IQ plus that pursuit side, respiratory disease management data will be presented at the American College of Veterinary Internal Medicine Conference in June.
Now as a part of our continued efforts to best serve the specific needs of our customers. We will also soon introduce our first specialty product IQ plus bladder. It will launch this quarter in the USIQ. plus bladder is a small card based Flutter scanner with purpose-built software to make it quick and easy for nurses to get bladder volume in a hospital using our proprietary tool with our new IQ plus platter in the US coming soon and all the momentum already discussed today, we are increasing guidance for the year. As Heather mentioned, instead of our previous guidance of low double digit revenue growth, we are guiding to about 15% to 20% revenue growth, which we believe is sustainable in the future. With that increased growth, we will continue to reduce our cash needs.
I would also like to touch on our stock price. So as you're all aware, it's been a challenging market and in particular for small medtech, as Heather mentioned earlier, we do not believe our current price accurately reflects our businesses value what we have accomplished for the opportunities ahead with the work we put into rightsizing the business last year and this quarter's strong results, we hope that the market acknowledges our return to growth and the great future of this business as we have reignited growth and became more efficient, Heather and are committed to continue to optimize the organization. As mentioned, we have several initiatives underway for further cost efficiencies and are looking at creative opportunities for non-dilutive financing, both of which will extend our runway even further and deliver upside to our current plan.
So now I'd like to end with a brief review of our Investor Day, which was held March 18th. I'm very proud of the team and the delivery of our plans for the next several years. At Investor Day, we showcased new technology, provided real-time demonstrations, communicated new business opportunities and heard from KOLs on their deployment of Butterfleye for the growing point-of-care ultrasound market. I encourage you to visit the replay on the Events page of our investor website. Url rail can be seen on the current slide there were three takeaways I'd like to reinforce from the day First, we are winning the race to digital and ultrasound. We have the largest handheld user base and device deployment in the world. We now have double the processing power in a very successful IQ. three launch, and we're continuing to invest in higher power semiconductors. We showed the new capabilities of our next P. five chip significantly increasing the mechanical impedance while showing the Apollo chip, which will produce 10 times the processing power of high cube three. Each chip has an exponential leap in capabilities and each dramatically expands our market by offering more currently capabilities in the palm of a doctor's hand, remember, supercomputers used to be huge. Now each one of you curious one around in your pocket. Every doctor every nurse in the world will carry a super imaging device from butterfly with capabilities of the most sophisticated cards in the world today, second butterfly garden and powered by butterfly our two programs with over 15 countries and partners, which will generate meaningful revenue for the Company over the next five years. Butterfly as the largest data repository with over 20 million images drilling at over 30,000 new image uploads a day ultrasound AI developers will want to partner with butterfly for development as well as commercialization. Our Garden will become the epicenter of independent global ultrasound. Ai development are powered by butterfly program, which licenses our chip technology also has a major pipeline of partners interested if we're successful in closing these deals, whether FLY's balance sheet will improve by adding nondilutive capital through licensing through our powered by butterfly program can bring us capital while generating revenue from markets never contemplated as core to Vodafone in the past. So third, Spotify will soon be helping patients in the home by introducing butterfly home care certified home care will focus on helping at-risk providers manage congestive heart failure patients by empowering in home nurses to test for pulmonary congestion. We also intend to help people with bladder insufficiency, manage their catheterization at the right time through calculating their bladder volume in the home. Also, these present large new revenue opportunities for butterfly starting in 2025.
In conclusion, over the past year, we extended the cash runway of the business and have plans to do so even further, we've reignited top-line revenue growth and will continue to drive commercial success as we begin to harvest new market opportunities to grow even faster new product and market launches will continue to power growth. So this is the investment thesis I believe investors want, and we're excited to deliver on it.
So with that, operator, let's open it up for questions.

Question and Answer Session

Operator

Of course, we will now begin the question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. For any reason you would like to remove your question, please press star followed by two again to ask a question, press star one as a reminder, if you're using a speakerphone, please remember to pick up your handset before asking a question.
Our first question comes from the line of Suraj Kalia with Oppenheimer & Co.
Your line is now open.

Joseph Devivo

Art, Joe?

Heather Getz

Heather, can you hear me?

Joseph Devivo

Alright?

Yes, political noise, hopefully you can hear me.
Okay.
Now you're dead or whether background noise?

Operator

Okay.

So up first and foremost. So congrats on a on a really nice start to the year. I've been a long time coming, and I wish you guys continued success. Joe, a lot of metrics were thrown out. And yes, let me let me kind of hone in on a few. The 1,200 or so IQ. threes sold in the quarter. I hope I got the number right, Joe, the data you see here, if I if I draw a graph of the adoption curve of I. two IQ. plus IQ three, do we have an idea how for the same time period, how is the adoption curve looking that's on a relative basis?
Yes, that's a hard one to calculate because they're different times and it's also different from the first launch that we have, where we're actually launching it on top of an existing product that's on the market. So I don't know that there's I mean I can ask, Heather, if you see any correlation from from what was experienced in the past. But what we are doing is a we're selling a new product at 30% 40% know, higher price. We are we are still offering another product at a lower price on and it's been very, very, very well received.
So Heather, is there any anything that you can glean from the past?

Heather Getz

Yes, I think it's to your point having the two products out there and we really only have a half a quarter under our belt a little bit difficult to say other than you know, the reception has been tremendous, as Joe talked about. So we'll probably have a little bit more information as we start to see some other trends in launch internationally and in Canada. But for right now. And I don't think I can draw any conclusions yet.
Yes.
The other thing I'll say about the Raj is the other thing I'd say is on most of the revenue was a very big chunk of it was through online sales were through new orders from customers, new customers or trade-ins for existing customers. Our pipeline for our hospital business, he's really Tom has really filled and filled big time. But as you know, there's a longer shelf life. So you know, we're very excited about how this changes, the competitive dynamic for us in the health system side and that that portfolio is picking bringing nicely. So for just the six weeks at the end of the quarter to see the sales come in the way they have in a very healthy drumbeat. It has been encouraging, right?

I mean, by our math, Joe, it's almost looks like a little over 25% or IQ. three pluses and you know, had a very rapid clip to win in your view at what point in time and what all needs to be done to basically make IQ three or IT. four or the next generation, I'm going to basically make an objective evaluation head-to-head against cart based system. I guess what I'm trying to understand is how you know how how would wish you all are planning for the next generation interims, card-based systems.
So I think we're going to learn a lot over the next six months because now we have a handheld that can be used in all specialties across the hospital. And I think the question really is when we talk to some really hard-core ultrasound people. The question is if you had a device that was as powerful as a cart and it was in your pocket, would you need a card, would you use the card?
I think a lot of people say they still would because the workflow of the hospital is a patient go for an inpatient going into a room to a specialized ultrasound order for I think this is not putting also for us out of business. This is deliberating also Schneider first to be mobile and to go don't have to be contained to room, but will hospitals just immediately change their workflow. I think that'll that'll take some time. But having the ability of doctors wherever they are to get any image. They want have any part of the body and then be able to refer and quickly make clinical decisions. We're seeing that time and time again at our customers that doctors are making decisions and right at the point of care, that's changing the pathway and that's better for health care on Now the big question is also some aggregators who rely on specialized imaging and carts if they had a card in their pocket, would they remain there room?
I don't think I know the answer to that question and I think we ask ourselves often what would happen from. And so we're just delighted to be a part of this have this big revolutionary change.
That's fair enough.

Joseph Devivo

Joe.

I'll throw three quick your way, and I'll hop back in queue. One is for IQ three would have been the initial key areas of uptake, i. e cardiology, OB/GYN. Just kind of give us a lay of the land there.
Second question you talked about and you have been emphasizing for some time from your Investor Day about home care on Europe. Obviously you guys are seeing something that maybe The Street hasn't caught on, too, if you can, if you can walk us through what makes you believe strongly about TAM expansion until the final thing is Roadhouse. I didn't catch that commentary completely. Sorry, I threw in a lot of things.
Hopefully, you're cautious.
Thank you for taking my questions.
I did my friend. So curious of uptake. So right now, we're seeing a lot of cardiology, and that's where a lot of our new orders are coming from is that we're seeing cardiologists and All right. I've I've wanted to have a high quality image Pro, but I don't want to be eliminated and now they don't have to be. So that's an area that we've seen a lot of uptake of we are seeing more uptake in the emergency room where we've always been strong and then we're seeing uptake in critical care. And so in those areas, we're doing really well, and we're doing really well in the specialized areas that we hadn't served us well in the past on an amazingly in our IQ plus sales are still quite vibrant. So we're we're meeting more needs of more customers, which is very high around home care.

Joseph Devivo

We've gotten really good at teaching people how to do ultrasound.
We have the tools and Academy we have the tools with our certified program and we have the tools with Scanlan. And about 80% of hospitals were some were penalized last year due to congestive heart failure readmission. And we believe that there's a lower cost way to manage a discharges and to keep patients in their home by checking their their pulmonary congestion. We've done a study at a major health center that is being concluded this year, and it will show that using our pulmonary application, which is in a high-powered B-line counter that makes it very easy for a health care professional, use our PRO to manage those patients in the home that will have the opportunity to help providers at risk providers to keep congestive heart failure patients in the home and is there and manage the progression or this or subsiding of their congestive heart failure symptoms based upon diabetics in the home. So there's there is a pathway where a nurse in the home can do it. There's a pathway where through telemedicine, the patient can do it themselves. And then there's a pathway, of course, to wearables. As we've discussed which is I know in our future and a good part of it. So sometimes in order to move the market, you got to you got to know you got to wipe yourself off stand up and go do it yourself. And we've been able to train people in the past and we're very confident that we can provide some services help take on some risks. And Dr. <unk>, a key part of the health care economy and healthcare market on the third on Roadhouse is basically this Suraj. We've had much more dialogue with the European Commission this quarter. We've gotten feedback from them and the feedback is this one. They haven't even taken up the on the exemption, the refreshing of the existing exemption for the LED piece losses on the industry. So what that means is that we are in the game, we didn't miss it. They're not at the tail end of it. And then we're just putting in or they haven't started. So that's great news for us for us because it means that we are now in the game and we will be fully evaluated. We were not fully evaluated during the last at time. We were not as a company aware of it. Some of this exemption process now that we are we've already submitted data that we refute any claim that we are not equivalent. And so we feel very good because we're a part of the process that the probability of success is much higher.
Second, because they're going to be evaluating at the end of 24. And that means like if everything goes the way we expect it to go.
Regarding CE Marking clearance or EU MDR clearance of IQ three, then IQ three will actually be the technology that we'll be comparing against the older lead piezo handheld ultrasound devices. So given the fact that A., they have even started and B when they do, but it's a good possibility that IQ three will be a part of the evaluation we've gone from being kind of, hey, this is some possible upside, but we don't know where it is. And we've also learned, but they're very committed to this directive. And they've made tough decisions in the past, and they're not afraid to make making tough decisions in this area in the future. It's given us the confidence to feel you know what we actually think based upon an appropriate independent review and their conviction on this law that is more probable that we'll see them suspending sales of handheld LED piezo devices, then not. And they had said that they would start the evaluation process in the end of 24, and they would hopefully conclude some time in 25. So I mean, just looking at those, if you're willing to be positive in the future, I think the probability is a little bit more in our favor that they may take those off the market with our measure of equivalency.

Great stuff.

Joseph Devivo

Congrats on the progress.

Heather Getz

Thank you.

Joseph Devivo

Thank you. Appreciate you.

Operator

Thank you for your questions.
Our next question comes from the line of Josh Jennings with Cowen. Your line is now open.

Joseph Devivo

Good evening.

Thanks for taking the questions and congratulations on the nice start to the year and the strong early demand for IQ three.
Wanted to just start with a follow-up question to Suraj is inquiry on the homecare initiative and only making permanent and thinking about 2025, where revenues may start to flow from that home home channel, what you're hoping, Joe, you could help us understand, I guess the business model a little bit better. Just how what butterfly generate revenues? Is it going to be neutrally sales of Kroger IQ plus or IQ. threes to home care service business? Or could there be a recurring revenue model or click model? Just wanted to get a better sense of that initiatives kicking in next year already?

Joseph Devivo

Terrific.
Thank you, Josh, and thanks for.
Thanks for the question.
And yes, we're focusing not on device sales on. We are focusing on service revenue and some potential taking of risk or success based upon the delivery of the clinical on the clinical objectives. So again, hospitals are penalized to these readmissions. There's a very finite cost to those readmissions, and we envision everything from either there being a service revenue that we would charge for the delivery of that service or from a combination of service revenue and success based upon minimizing the risk in keeping those patients out of ours.

Craig, I wanted to follow up on the University of Rochester report about seeing the significant increase in the revenue capture for for Focus exams. It sounds like this may be a stake in the ground. I know there's there's been a theoretical or potential revenue capture channel with butterfly Campos. When does it put the former stake in the ground and allow you to mark this more heavily or just a well understood from metric that it's already been in play. But I guess then the second layer to the question is just are there even more revenue capture potential if hospitals are using, like like Rochester using butterfly probes along with accomplished software?
Yes, that's a great question. I think I think it has to do where this is a view and the things to come. When we sell COMPASS, we learned that that hospitals are not capturing all of their and all of their ultrasound revenue. And what we see pretty consistently is of all the ultrasound scans they do, especially in point-of-care, are there only capturing about 35% a year from to a full reimbursement. And it's just based upon either not having a process or a software in place to capture that revenue training, et cetera, when when hospitals deploy campus, they capture a significant amount more of the revenue well above the 35%. And if we don't have any things that what I'm telling you is more anecdotal and experiential, but we're getting the 60, 70 or 80%. And so we're seeing a very quick ROI of our software deployment, and that's been very positive.
What's unique about Rochester is they've actually deployed a one to one model where they've stayed probably deployed and our or I think it's between seven or 800 probes throughout their health system. And then they have the campus software out. That's that is actively capturing a the proficiency of all the new users coming on and a process of education that they are very well putting in place. But P, you're seeing the classic standard point-of-care ultrasound departments having a similar uptick in revenue based upon the capture. But now because of the all in one to one model, we're seeing nontraditional focus departments who are deploying ultrasound doing so and capturing additional ultrasound revenue. So it's in the 1st year, it's a significant increase in revenue. And interestingly, people in the past who have been critical of this saying of point-of-care ultrasound and ROI would say, hey, you're doing these scans that you're taking scans away from radiology. I can't quote you numbers because they haven't given me the clearance to do that. But radiology as an individual spot subspecialty revenue was up very healthily on its own point-of-care ultrasound didn't take anything from radiology for point-of-care ultrasound did for URMC. is help them make better clinical decision sooner. I've heard time and time again recently a young child who had some chest pain. They did a scan immediately identified that there's an aortic stricture downstream and they go right into surgery because the doctor had a butterfly or someone who had a difficulty evacuating their bladder and they and the doctor right then and there use it to scan the bladder and they find a tumor and they go right in the surgery. That is what point-of-care ultrasound does it makes it and the doctors at URMC. are absolutely thrilled. It's been a tough learning curve to go through a whole new process to go through a whole new deployment.

Joseph Devivo

But now all of a sudden, they can see things they never saw before they can help their patients sooner.
And there is just I've asked them for the anecdotal. And then, of course, the more specific, you know, larger trends, but time and time again, empowering a doctor to be able to do an earlier diagnosis is more fun and gratifying for the doctor and it's much better for the patients.

Heather Getz

Excellent.

And we will ask the questions. Just thinking about or just hearing about the non dilutive financing options at both you and Heather mentioned. Maybe you could elaborate on both of those. And then just to tie in, you talked at the investor meeting about company reaching profitability by 2027 but requiring financing they get there, it would just include in your answer just how maybe remind us of that path to profitability and just how the non-dilutive financing that could impact that pathway.
Thanks for taking all the questions.
Austin, Josh, thank you. So the premise of our powered by program is we've invested over upwards of $0.5 billion in our semiconductor program. And we've focused that that primary market in point-of-care ultrasound, and we're making the products that you all know about and also the chip technology that is delivering exponential improvement over time. What we've learned is our semiconductors with our memory technology has real applicability in other markets. You know, you've seen the market with brain computer interface with start with four US Neuro tech, and we're seeing that them and that deal contribute nicely.
What we're also seeing is that there are other markets and one of them that is very interesting is in drug activation using Vault. We're using ultrasound. And if we prove that we can do and what's also fascinating is a lot of the researchers we are breaking apart ultrasound carts and trying to go through all of this work to tune it to a different place and a different attenuation for these the different types of therapies they're studying because our Ultrasound is chip-based. We have a tremendous flexibility in just making software changes. We've changed frequencies, power settings to be able to do many different clinical applications. So it's not entirely on Farfetch that we did get 3 million of license revenue in our four US Neuro tech deal. If there's a large market and there's a big appetite to have the technology, we may be able to extract more license revenue and by monetizing our Power BI and the current investment and creating new markets for new for these new applications.
If we set out to if we accomplish what we set out to do some of that balance sheet needs to get us to profitability can be done in a non-dilutive way. So we are really focused on that. We have great people with great energy and talking to great partners. And um, and that's something that I think investors need or should appreciate this whole concept that there is finite cash and we're running out of cash. And what's going to happen with the company is a bunch of Geberit. We are growing our revenue. We are reducing our cash burn. We have a lot of opportunities to be able to monetize things. And we are really focused on preserving shareholder value. We don't just want to dilute everybody and and be at these prices. We're focusing really hard on getting ourselves to extend our cash runway as best as possible and creating shareholder value during this difficult time. But our R&D team has delivered. We've recapture momentum and we think our ability to control our destiny. He's in our hands.

Joseph Devivo

Appreciate that. Thanks, Joe.
Thanks, Jeff.

Operator

Thank you for your question. There are no additional questions waiting at this time. I would now like to pass the conference back to Joe to be the CFO for any closing remarks.
All right, everyone, thank you for being with us on this call. We continue to be very excited. As I mentioned to you many times, this is going to be a great year for butterfly and we're off to a good start. So thank you for your support.
That concludes today's call. Thank you for your participation and enjoy the rest of your day.