Overview
BFLY reported 2Q21 revenue of $16.5M slightly ahead of the consensus (one estimate) of $14.5M and reiterated the guidance range for the year ($76M to $80M), which leaves $47M for 2H21. The ramp into the second half is steep to hit guidance and the Q&A session probed for proof points multiple times. We agree that the second half calls for a big sequential increase in units and subscriptions and so far the app download data is not providing a clear positive confirming signal (see below). Management did comment on the ramp in their new salesforce additions - the team doubled to 27 last quarter - citing a 30% increase in productivity, although that is a dimensionless data point. We continue to seek out conversations with providers and routinely hear positive commentary on the Butterfly iQ/iQ+, so the biggest threat to a 2H21 ramp appears to be less about clinical utility and individual provider interest and more about system wide issues of network access, image access and storage, and the institutional decision processes. From our checks, it sounds reasonable to expect some large enterprise wins and perhaps more university deals that can push BFLY over the top toward guidance, although the timing is less certain.
Recent News / Feedback From the Field & App Data
Recently one of our readers let us know that BFLY was mentioned in the 7/23 issue of The Fountain Report by Antelligence (subscription required, but it was an interview w/ Jenna Mutch, the head of veterinary commercial at Butterfly). We did some digging to follow up on our Black Book field work and think a widely read industry publication drawing attention to articles like Texas Tech University School of Veterinary Medicine to Empower All Incoming Students with Butterfly iQ Vet is helpful in the grand scheme. While our work on BFLY centered on the "human" opportunity, the value proposition is similar for veterinarians.
If the larger animal hospital groups test-and-learn and universities start buying iQs for incoming classes [like UC Irvine has for its medical students each of the last few years, and the Lewis Katz School of Medicine (Twitter) die a few days ago], then POCUS has a better shot at becoming a part of the average physical exam in animal health too. When these students graduate, they'll want a Butterfly iQ in their pockets. According to that article, Texas Tech bought 55 iQs this year, and if all goes well, you'd think they'll need at least 50 next year too. TX Tech is one of 33 US-based veterinary medical schools in the AAVMC database, and there are another 22 OUS. We'll have to see if the partnership with MWI on the distribution front and adoption by a tech-forward veterinary school lead to wider adoption.
On the human side of medicine:
We spoke with another contact trained in pulmonary and critical care who bought a Butterfly iQ for personal use, and his hospital is considering buying a bundle (not clear exactly how many, yet) so that doctors can use them when rounding as approved devices (vs. having personal devices go through approval with IT, a headwind of sorts). Putting it all together, it might be hard to tell if the salespeople are super-efficient because of inbound demand, but that's a good thing, in our opinion.
We reviewed two transcripts via Stream by Mosaic and found them to be largely supportive of our thesis and the overall trajectory:
- Doctor Likes BFLY and Sees Huge Demand for POC Ultrasound (https://app.streamrg.com/i/a2bdcc69) - The expert thinks POCUS becomes ubiquitous: "At some point everyone will have a handheld device like this. The enthusiasm for it among people in training is remarkable. POCUS is getting into guidelines and training programs. Not only is there a bottom-up "We really want to learn this," but we've now got top-down "You're going to have to learn this and you're going to have to be doing this." This is going to be a core competency that you're going to need to be competent to do your specialty."
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Doctor Sees Growth in Portable Ultrasound but Thinks BFLY Is Losing Its Innovation Lead vs. Competitors (https://app.streamrg.com/i/4a0afbab) - The expert cited a couple of competitors that he'll be trying (GE Vscan Air and Vave) and is interested in their models (cost/benefit) vs. Butterfly's subscription, but he also said, "I will be using Butterfly to that extent, where I'll be teaching and training other people..." and, "There's a push to train medical students across the U.S. to learn the basics of ultrasound, how to use ultrasound, so that no matter what field they go into they'll be using ultrasound, they'll be ultrasound-savvy. Each specialty has its own use, internal medicine picking it up is big. U/s use will dramatically, exponentially increase."
The app download data looks encouraging (caveat: small numbers, trending upward) - we'll be checking this regularly:
All data available upon request. Please reach out to with any inquiries.
Thomas Tobin
Managing Director
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