Butterfly Network, Inc. Q2 FY2024 Earnings Call

Good evening. Thank you for joining the Butterfly Network Second Quarter 2024 Earnings Call. My name is Megan, and I will be your moderator today. All lines will be muted during the presentation, and there will be an opportunity for questions at the end. Now, I would like to hand the conference over to Heather Getz from Butterfly Network. Please proceed.

Good afternoon and thank you for joining us. Earlier today, Butterfly released financial results for the second quarter ended June 30, 2024 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 investor section of the company's website at ir.butterflynetwork.com. I, Heather Getz, Chief Financial and Operations Officer of Butterfly alongside Joseph DeVivo, Butterfly's 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 as a replay once the call has been completed. I would now like to turn the call over to Joe. Joe?

Thank you, Heather, and good afternoon, everyone. 2024 has been a great year for Butterfly so far. During the quarter we continued to accelerate our revenue momentum, continued to become more efficient, and continued our investment in our future. Earlier this year, we held an Investor Day, where we gave a look under the hood at our most robust roadmap and introduced pillars for our strong path forward. These pillars include, one, accelerating growth in our core focus business. Two, expanding our market and becoming more accessible to new user bases and new care settings such as the home. Three, investing in R&D to maintain our differentiated technology, especially in our semiconductor innovation. And four, executing these pillars to drive our pathway to profitability, and we have a plan to get there. Throughout today's call, it should be clear that we are executing against these goals. Last quarter we raised our guidance to $75 million to $80 million or 15% to 20% growth year-over-year. As part of this, we mentioned that the second quarter would be our toughest comp for the year due to two non-recurring large medical school deals that happened the year prior. Regardless of this one-time event, we blew past our numbers. In Q2, we posted $21.5 million in revenue, representing a 16% year-over-year growth. The highest quarterly revenue in Butterfly's history. This outcome demonstrates that we're delivering, and our plan is working. So before I get into commercial progress, I'd like to discuss the cost side of the business. In July, we completed an initiative that achieved an additional annualized cost reduction of $10 million. Heather will go into more detail shortly. Over the past two years, we reduced our cash use to now under $50 million a year, while re-energizing our top line and extending our cash runway into 2027. All the while, we're continually identifying ways to become more efficient while investing in our commercial organization and maintaining the commitment to our technological advancements in chips, digital, and new form factors. This is not an easy task to balance growth investment and cost reduction. I am so proud of the team. They're maturing into an execution machine delivering increasing value to our shareholders every day. Now turning to sales. As I mentioned, we grew revenue 16%. This was driven by iQ3 sales and an ASP uplift in the U.S. as well as stellar performance from our international team, who launched iQ3 in Canada at the start of the quarter, added newly EU MDR cleared advanced features on our international iQ+ product, and opened new markets in Southeast Asia. On top of that, it was a quarter of strong enterprise software sales. I am very pleased with the quality of this quarter's revenue because we delivered sustainable and repeatable business across our channels. In Q2 iQ3 continued to be a complete success commercially and clinically. We are actively involved in several health system deals that we previously would not have been competitive in. Our online customers purchased iQ3 74% of the time. In Canada iQ3 represented 89% of sales across all channels. We've upgraded over a thousand probes this quarter to iQ3 and just launched a competitive device upgrade allowing customers to turn their old non-Butterfly product into Butterfly for a new iQ3. When we look at utilization data launching iQ3, we're pleased to see accelerated use of our cardiac and OB presets. We'll continue to analyze these trends, but we believe this to be a testament to our improved image quality that's critical for these advanced specialists. I mentioned that Q2 was our toughest comp due to last year's large medical school deals. We've had tremendous success over the years in placing our technology in medical school programs. Historically, Butterfly built the medical school segment primarily relying on a combination of smaller deals putting probes in the lab for students to share or large-scale one-to-one deployments that were typically made possible by medical school donor funding. We, of course, enjoy those large orders. It's just as a public company, big one-time events are hard to anniversary. So this quarter we saw a large number of medical schools purchasing probes directly, showing us the market is ever maturing. ScanLab has been huge for us. ScanLab has strengthened our position by proving to be a very valuable asset in helping medical schools be more confident in going to a one-to-one model since they often lack ultrasound educators. A student truly learns ultrasound when they have their own device because they can practice on their own. ScanLab gives them their own AI instructor on their iPad to help them hone their skills, making a one-to-one model even easier to implement. To expand on this like Apple did in the 80s and 90s, Butterfly is partnering with schools to create a seamless pathway for their students to purchase a Butterfly through a campus store discount. They get their textbooks, their pencils, and laptops and their Butterfly: all essentials for the next chapter of their careers. This quarter's campus store pilot program at a leading medical school offered 300 eligible students the opportunity to purchase their own Butterfly. Their choice of an iQ+ or an iQ3. 232 of them bought a probe before the semester started, and a third of those students even opted to buy the premium iQ3. Like Apple, when you engage them young, you develop a lifetime of familiarity and relationship. You cultivate a common language and maintain that belonging into the future. With several years building medical school programs behind us, it's exciting to see many graduating classes this year heading into residency with ultrasound skills. The Butterfly army is growing. Students trained on Butterfly are transforming healthcare by being the most sought-after candidates for residency programs and shepherding in the new era of point-of-care ultrasound when they get into clinical practice. Residents with ultrasound skills are invaluable. It's where the industry is headed. Ultrasound capability is being demanded at hospitals. Doctors without ultrasound skills need to learn them, or they will simply be marginalized by their juniors. There is a seismic shift happening in diagnostic imaging, and Butterfly is a catalyst. Our medical school strategy is shaping the future. In sum, we have a bright outlook with medical schools. Butterfly no longer needs to depend on large donation-based opportunities given that we've built a model that supports sustainable revenue growth. There are about 100,000 medical students at any given time and 25,000 new first-year students annually in the U.S. alone. Ten other programs have agreed to go live on our campus essentials program, and we're working on many more. This will deliver a more stable recurring revenue model for the company, allowing evergreen purchasing that is not based on hospital budget cycles as they are now. Let's now discuss our developments in AI. Butterfly posted more wins this quarter for Butterfly Garden powered by Butterfly and our internal AI developments. In-house, we are developing many AI tools that we'll have a series of releases scheduled for next year. We have the largest private ultrasound image repository in the world: 21 million images growing at about 30,000 a day, enabling us to quickly develop new tools. It also allows us to amplify other ultrasound AI companies and expose them to the largest handheld ultrasound marketplace in the world. In Q2, we increased our Butterfly Garden partners to a total of 15 and have also signed the term sheet for our third powered by Butterfly chip licensing deal. We announced that HeartFocus by DESKi, UltraSight, and SouthWood signed to the Butterfly Garden. We're excited to have them join our effort and are pleased with the number of new cardiac AI platforms choosing Butterfly Garden as the marketplace to bring their advanced technologies. While big ultrasound is buying a few AI companies for themselves, Butterfly is building a premier AI ecosystem for everyone. This makes Butterfly the only independent AI ultrasound marketplace, allowing Butterfly customers access to the best new AI tools available without needing multiple platforms. Butterfly customers will purchase new ultrasound AI products to advance their clinical care, and all independent developers will build with us to access the marketplace. This is a win-win-win, and it's happening now. Our partner ThinkSono was the first garden partner to commercially launch their deep vein thrombosis training tool. We launched it to all of our customers and are making progress getting the message out. Next year, they expect to launch their clinical DVT guidance tool upon winning regulatory clearance. In 2025, we also see a cohort of Butterfly Garden and Powered by Butterfly partners commercialize their offerings, providing a new and growing recurring revenue stream for Butterfly. So this quarter, we signed a term sheet for our third Powered by Butterfly partner. This company is already commercial, and the next version of their product will leverage our proprietary ultrasound on-chip. We are not announcing their name yet to avoid disrupting their current commercial activities. Of the three partners, we anticipate they will be the first to market next year. They will not only deliver some technical revenue this year for Butterfly, but we expect them to deliver revenue from commercial activities as soon as next year. We look forward to announcing this partnership when they're ready to launch commercially and are excited to share the continued success of our Powered by Butterfly program. I want to remind you that each of these Powered by Butterfly deals are complex, requiring research and development and a regulatory strategy yet have a very high opportunity ceiling for Butterfly. We have at least 15 other partners in our pipeline and are actively negotiating with five of them concurrently. The interest in Butterfly and accessing our proprietary and protected technology has been extraordinary. We are doing everything to keep up with demand. As I've stated in the past, this effort has the opportunity to deliver non-dilutive capital to the company, and at the right time, I'll update you on that. Before I turn it over to Heather, I'd like to touch on a few parallel momentum drivers in the clinical and regulatory space. First, on the clinical front, we told you at our investor day that heart failure management is an area of great opportunity for Butterfly, with a rising patient population and hospitals working hard to tackle readmission challenges. Recent research published in the academic emergency medicine journal further validates the clinical significance of Butterfly in this space. The studies demonstrated that not only was it easy for paramedics to master lung ultrasound with Butterfly devices, but the pre-hospital scanning reduced the time to acute heart failure treatment by over two hours compared to routine care. This early initiation of heart failure therapy is crucial and associated with lower mortality and hospital readmission rates. We also introduced bladder scanning as our second primary use case for home care. Progress is happening here too. The Christopher Reeve Foundation just launched a study of their own to validate that bladder self-scanning can revolutionize care management for patients with spinal cord injuries. Lastly, I'd like to update you on our efforts to overturn the exemption big ultrasound gets from the RoHS standards in Europe. We've been working closely with the European Commission this quarter on a petition to have Butterfly's request heard. For the last 20 years or so, the ultrasound industry has gained compliance with EU's restrictions on hazardous substances directive or RoHS only via an exemption. These incumbent ultrasound devices contain hazardous levels of lead in their piezoelectric crystals above the standards set for toxic materials and electronic devices; they are exempted now only because there has been no clean alternative presented to the Commission. These exemptions are time-limited and intended to bridge compliance until big ultrasound can produce cleaner products. But since they get this exemption, why should they invest in an alternative? Periodically, big ultrasound files for exemption renewals stating that there's no alternative and their toxic devices remain worthy of the exemption. In my view, that's about to change. Butterfly is demonstrating to the European Commission that there is now a clean alternative that doesn't rely on lead crystals or the exemption, and that the alternative is the CMUT technology utilized in our devices, including Butterfly iQ3. We filed for revocation. Revocation is a formal process to petition for cancellation of a prior exemption. After going through this process, it seems Butterfly may be one of, if not the first company filing such a request in the 20-year history of the RoHS directive. While the European Commission is currently reviewing previously filed applications by big ultrasound to renew their exemption, they will now consider whether it's warranted in the first place and whether they should be revoked for all piezo-based handheld devices altogether. Stay tuned because we believe an exemption renewal decision will be made one way or the other in the first half of '25. And now I'll turn it back over to Heather.

Thank you. As Joe noted, we saw continued strength in the second quarter of 2024 with revenue of $21.5 million. The highest quarterly revenue in the company's history. This represents a 16% increase versus the prior year period. The increase was driven by price and volume positively impacted by the launch of iQ3 and higher software sales. Of note, in the second quarter of 2023, we had two large grant-based deals at medical schools that did not repeat in 2024. Excluding these deals, our volume grew 37%, demonstrating strong core demand for our products. Looking at the U.S. and international channels. During the quarter, U.S. revenue was $14.8 million, which was 3% higher than the prior year. Excluding the aforementioned medical school deals in 2023, U.S. revenue grew 25% versus Q2 '23 and 21% sequentially from Q1 2024. These results were driven by higher average selling price and strong demand. Total international revenue increased 57% over the prior year period to $5.2 million, driven by higher probe volume, partially offset by lower average selling price due to a higher mix of sales to distributors, which carry a lower selling price compared to our direct business as well as due to lower mix of software revenue and sales through the e-commerce channel. Breaking down our revenue between product and software and other services. Product revenue was $14.6 million, an increase of 19% versus Q2 '23. This increase was driven by higher average selling price and volume, mainly in international distribution and e-commerce, and approximately 50% of our total volume was from iQ3 and 75% domestically. Software and other services revenue was $6.9 million in the second quarter, up 10% versus the prior year period. Software and other services mix was 32% of revenue, decreasing by approximately 2 percentage points versus Q2 '23. This decrease can be attributed to product revenue growth outpacing software revenue with the launch of our iQ3 earlier this year. Our total annual recurring revenue, which is reported as part of software and other services, was flat versus the prior year period. This was due to an increase in our enterprise software subscription ARR that grew 24%, accounting for 43% of our total ARR. This increase in enterprise software revenue was offset by declines in our individual subscriptions. Turning now to gross profit. Gross profit was $12.6 million in Q2 2024, a 15% increase compared to $10.9 million in the prior year period. Gross margin percentage remains relatively flat at 59%. While gross margin percentage was positively impacted by the higher average selling prices, these benefits were offset by higher software amortization, a lower proportion of higher margin software and other services revenue, and inefficiencies associated with the launch of iQ3, including warranty costs. Moving to EBITDA and capital resources for the second quarter of 2024, adjusted EBITDA loss was $8.1 million, compared with a loss of $17 million for the same period in 2023. The $8.8 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. Cash and cash equivalents, including restricted cash as of June 30, 2024, was $106 million. Our total use of cash in the second quarter was $11 million. As we have previously discussed, we have taken significant costs out of the business and reduced our annual cash burn, but we are not done yet. We will continue to find ways to be more cost-efficient. In keeping with this principle, on July 1, we entered into an agreement with a third-party partner to optimize and lower the cost of certain non-specialized technical functions. With this agreement, we will have a tightly-knit team located across the globe with increased access to talent 24/7. As part of the transition into this new partnership, a portion of the company's workforce will be in lower-cost geographies, resulting in an estimated annual cost savings of $10 million. The cost of this program will be recognized as an expense in the second half of 2024, but the cash payment will be deferred and paid ratably starting in July of '25 through the end of 2028. With this program, we have further extended our cash runway into 2027 from our previous estimate of early ‘25. Moving now to guidance. In the first half of the year, we have made significant progress in delivering against our priorities. We launched iQ3 in the U.S., launched ScanLab and iQ+ Ladder, reached 15 Butterfly Garden Partners, and signed the term sheet for a third powered by Butterfly Partner. Internationally, we received EU MDR for advanced features of iQ+ and are applying for iQ3 while adding additional geographical footprints. We invested in our commercial teams and will continue to expand our sales footprint both domestically and internationally while reducing our cash consumption and conservatively extending our cash runway into 2027. Additionally, I am pleased to report that yesterday, we regained compliance with the New York Stock Exchange minimum bid price rule and received official notification from the exchange. As we look at the second half of 2024, our commercial organization is humming. We are adding additional commercial resources in the U.S. and internationally and we expect to open more countries and launch iQ3 in Europe. Our work is not done. We will continue to find efficiencies and explore opportunities for non-diluted financing, such as grants and licensing deals. This will provide us with maximum flexibility as we continue on the pathway to profitability. As always, we will keep you updated on this front. For 2024 guidance, we are reiterating our revenue guide in the range of $75 million to $80 million or about 15% to 20% growth and improving our adjusted EBITDA guide by $5 million for the full year to a loss of $45 million to $50 million. Specifically, looking at Q3, which tends to be the toughest quarter for demand in healthcare, we expect to see revenue growth of around 20% to 25%, bringing us to approximately $19 million of revenue. For Q3 adjusted EBITDA, we expect a loss of approximately $9 million to $10 million. To summarize, we had a strong second quarter and first half of 2024. We look forward to continued double-digit growth in 2024 and beyond with the realization of additional efficiencies that will further extend our cash runway into 2027. We have been delivering against our plan and will continue to do so with a strong base of technological and organizational assets and a team who is energized to capitalize on this attractive market opportunity over the long term. And with that, I will turn the call back to Joe.

Thanks, Heather. Butterfly today is undoubtedly leading the digital revolution in ultrasound. We're making it less expensive and easier to gain access to necessary medical imaging. We're helping low and middle-income countries, areas of conflict, medical students, nurses, veterinarians, and point-of-care doctors all gain access to tools and skills necessary to provide life-saving diagnostic technology where they need it most at the patient's side. I am very pleased with our success this quarter, and I'm just as eager to forge ahead on the exciting plan and roadmap that we've unveiled at our March Investor Day. There we spoke of our future, our technology roadmap, our semiconductor investment, and our pathway to profitability. We showed how our wearable technology will transform care for patients in the home and how they can do their own scans. It's all happening. So if you're interested in Butterfly, urge you to revisit those Investor Day materials. While we can't give you a thorough update on everything going on, just know that while we work to deliver great numbers each quarter, we are simultaneously dedicated to executing on our commitment over the long term with that North Star strategy. So I want to leave you today with this. There is no longer any doubt where point-of-care ultrasound is going. Butterfly is delivering at every level and is, in my view, in control of our destiny. Change is hard for healthcare. History has proven that. But we are drivers of change and our results demonstrate that we are succeeding. Butterfly is a great company with massive growth potential, and we will continue to deliver strong performance quarter after quarter. Just sit back and watch. We hope you join the ride with us. With that, Operator, let's open it up for questions.

Absolutely. Our first question goes to the line of Josh Jennings with TD Cowen. Your line is open.

Great. Thanks for taking the questions. I wanted to start on the iQ3 launch. It sounds like you're having significant early success. I apologize if I'm making you repeat some things from your prepared remarks. I jumped in late. But I just wanted to hear about the launch in the U.S., where you're having the most success, either on the hospital enterprise channel or e-commerce channel or other. And then also, sorry for the multi-tiered one here, but just the international launch coming up and any expectations there in terms of just high-level color and contributions in the second half?

Awesome. Thanks, Josh. Appreciate the question. What's really exciting about the revenue and the progress right now is it's very broad-based. It's not lumpy. It's not one or the other. We're not sweating this or that. We're seeing a lot of traffic to the website. We're seeing our e-commerce up. We're seeing our inside sales team really crushing it, doing a great job. We're seeing our direct team build out the pipeline. Our software is selling. We're seeing a lot of health system deals. So I think what's good is that our commercial team at all phases is delivering. We're seeing a strong clinical acceptance for multiple specialties. We're seeing the emergency room grow, we're seeing new cardiology grow with new interest. We’re seeing our EMS business grow with our inside sales team. So I can't point to one particular thing saying, hey, this is happening that's outside. We're seeing the business pay strong. We're seeing ourselves delight new users and reinvigorate existing users. It's a pretty broad-based type of success. I think in the U.S., about 75% of our sales were iQ3 on a unit basis this quarter. It's just showing the acceptance of the product, but also it's been fun having two products to sell. We have pricing when we need it and we have premium when we need it, and the strategy is working.

Excellent. And I guess my follow-ups, sorry, I've got two. First is just anything, just want to pipes the sales funnel and the sales pipeline. I mean, I think your answers and your prepared remarks suggest that that is building nicely, but any way to quantify the pipeline relative to where things stood last year?

Well, first of all, I realized I didn't answer the second part of your first question, which was international. So let me do that because I wrote that down. I apologize for that. So internationally, our first market to see iQ3 was Canada. It was nice because Canada is not a massive market for us, and we didn't know how in tune they would be for this. Our distributor had great success, and our online sales had great success. One thing we're finding is while we are, it's approved in the U.S. today, ultrasound, radiology, imaging is actually a small community, and it's a global community. We've had trade shows in different markets where we're not cleared yet, but we have people coming up to the booth saying, 'Can I see iQ3? When are you going to bring iQ3 out?'. We're excited about what happened in Canada, and we were actually surprised. We have a launch event in London on September 8th, where we have thought leaders from various markets who will be there in the room, and we'll be launching in Europe at the end of this third quarter. I'm very excited about the global reach, the acceptance, and how this is going to roll market by market, as people are talking. Some people follow us as a public company and hear these calls. I get feedback that we've told investors. As far as the pipeline is concerned, I cannot give specific pipeline numbers, but the best way is, any pipeline wants to cover your forecast. Our coverage hasn't been higher. Our pipeline coverage is at a place with great confidence because everything doesn't have to come in for us to be successful.

It's great to hear. Last question is just wanted to, you know, we've spoken about this before and you addressed it at the investor, but just to think about Butterfly Garden and Powered by Butterfly opportunities. We are updating our models for 2025; just maybe talk about revenue contributions from those two channels. I know you're not going to quantify them, but should they start flowing in here before the end of the year or into 2025. Also, totally off base, possibly, just thinking about the intracardiac ultrasound market, left atrial appendage occlusion, pulse field ablation, cardiac ablation—all these structural heart procedures. Intracardiac ultrasound is much more important, but also it's taking off. Are there any partnerships in the works, and is that a channel that excites you guys? Thanks.

So, Josh, cardiac certainly excites us. I'm not aware of specific partnerships yet in that space. If anyone's listening, give us a call. I will say that ultrasound AI companies are flocking to Garden. We'll have 13 or 15 different partners live on Garden. For us, that's providing 15 different AI tools to our customers. If we're a big ultrasound company, we must buy 15 companies to offer them to customers. We create these partnerships and share success together. I think that's going to accelerate. Where the rubber meets the road will be when they turn commercial. This year, we've had one partner, ThinkSono, with an education app. It will take time before these companies stack up, and we start seeing that revenue build from software sales. It's hard to really predict, but I think we'll start to feel it in '25. Now, for powered partners, there's R&D expense and some revenue there. I just don't know how to quantify it. You can decide if you want to quantify it, Heather, but I think by the end of '25, the contributions from both of those will be felt. Heather, do you want to jump in?

Sure, yeah. In 2024, we've had—I apologize. Can you hear me?

Yes.

In 2024, we are recognizing some licensing revenue, but that's done over the course of the arrangement, and we expect that to build into '25. As Joe mentioned, with the commercialization of some of our partners, we will see that accelerate, in addition to signing additional partners. Right now, it's not material enough to speak of in '24, but we will see that build in '25.

Thanks for taking all those questions. Appreciate it.

Thanks, Josh.

Thanks, Josh.

Thank you, Josh. Our next question goes to the line of Suraj Kalia with Oppenheimer. Your line is open.

Good afternoon, Joe, Heather. Congrats on a nice quarter.

Thanks, Suraj.

A couple of questions for you and a couple for Heather. Joe, let me start out with AI and ultrasound. More macro level, Joe, are there any specific structural shifts happening in ultrasound? All the key players are now talking about pushing AI and ultrasound, obviously, GE with Caption Health. I'm curious about the more recent drivers for which everyone has started talking about AI integration, whether it's using Fax to EMR, and more so just kind of putting it into assistance. Any color there would be great.

Thank you for the question. I think there is a broad realization that AI is a major accelerant to ultrasound usage and ultrasound in the home, especially in the hands of less trained users. We've trained more midwives in South Africa this quarter, and we had deployment in Kenya. These are midwives now using ultrasound for childbirth and understanding fetal position. Companies realize that handheld ultrasound is an accessible, low-cost way to provide advanced imaging for clinicians to assist patients. The Gates Foundation has invested over $100 million into various ultrasound companies to develop applications for third-world countries. Big players in the space, such as cloud and software companies, are realizing the potential here. The AI ultrasound field is going to explode.

Fair enough. Joe, regarding the RoHS revocation letter, you guys are going against the three big dogs in the field. What would you consider a mission accomplished?

Well, obviously, I'd love to see a date associated with when there would be no more purchases of piezoelectric handheld devices. I'd like to see a date established when these products can't be sold anymore. That's what I'd like to see because our iQ3 can do everything that competitors can do today. We cannot point to something that we can't do. In fact, I could point to things that we can do that they can't. What would the argument be to keep them on the market other than political discomfort? Technically and clinically, we could do it all. Why have a directive if we're not going to allow it to meet its original intent? I understand politically that it's going to be uncomfortable for big companies, but handhelds are such a small part of their business that it won't really affect them. Success for me is a date being established for those products to no longer be sold. It doesn't have to come off the market, but why offer technology that doesn't meet the standard when there is a complete green alternative? We are in uncharted territory, and who knows what will happen. Still, I believe this is a significant potential event. I've decided that it's hard not to talk about and educate investors that there is a possibility.

Got it. Heather, I have a couple of questions. Maybe I read this wrong, but units were up 37% year-over-year, but sales were only up 4%. Obviously, I'm not understanding somewhere. Could you clarify that? I'm trying to understand the price versus volume split. Secondly, could you talk about the iQ3 contribution in the quarter?

Sure, of course. So as to your first question, regarding the price and volume: we backed out two large deals that occurred in 2023, which were grant-based medical school deals. That’s where the volume layer contributed. If you look at the domestic number, the revenue grew 25%. The 37% was the volume, excluding those deals. What I was trying to demonstrate there was the high core demand for the product outside those large grant-based deals. Your second question?

We had 1,300 probes, those large probes to account for. We went into the quarter not expecting to overcome that through basic consumption. But we did. We're thrilled with the broad-based, high-quality type of consumption. We overcame that big one-timer, and additionally, we benefited from the ASP uplift. Sorry, Heather, to interrupt you. I wanted to clarify that.

No, you're fine. What was your second question?

Just about the iQ3 contribution in the quarter. Any additional metrics, penetration rates, or what percent of your base now has an iQ3? Any additional metrics that we can slice and dice?

The volume in the quarter was just shy of 50% iQ3. Domestically, it was about 75%.

Thank you. There are currently no other questions registered. I will now turn the conference back over to you, Mr. DeVivo, for your closing remarks.

Everyone, thank you so much for joining us. There's a lot of content, a lot of things happening. This turnaround for Butterfly continues. We see the balance of the year being very strong. We see that we're building momentum, broad-based, repeatable business. We're very excited about how our team has delivered, and we appreciate all your time and attention. So thanks, everybody.

That concludes today's earnings call. Thank you for your participation. I hope you have a wonderful rest of your day.