On Thursday, Butterfly Network (NYSE:BFLY) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://events.q4inc.com/attendee/529365510
Summary
Butterfly Network reported a strong Q1 2026 with 25% revenue growth, a 69% gross margin, and the lowest net loss since going public.
The company achieved FDA clearance for its AI-powered gestational age tool, demonstrating its commitment to AI in healthcare.
Butterfly Embedded, rebranded from Octave Embedded, signed its ninth partner and anticipates additional partnerships, expanding its ultrasound technology into new markets.
The company is making significant strides in its home and community care initiative, aiming for a commercial agreement in H1 2026 and expansion in 2027.
Future guidance expects revenue growth between 20% to 24% for 2026, with adjusted EBITDA loss projected between $21 million and $25 million.
Operational highlights include a significant enterprise deal for Compass AI and the expansion of the Butterfly Garden platform.
Management emphasized the transformative potential of its Ultrasound on Chip technology and the strategic importance of its partnerships.
Full Transcript
Gabrielle (Moderator)
It. It's. Hello everyone and thank you for joining the Butterfly Network Inc. Q1 2026 earnings call. My name is Gabrielle and I will be coordinating your call today. During the presentation, you can register a question by pressing Star followed by one on your telephone keypad. If you change your mind, please press STAR followed by two. Your telephone keypad. I will now hand over to your host, John Doherty. Please go ahead.
John Doherty (Chief Financial Officer)
Good morning and thanks to all of you for joining our call today. Earlier, Butterfly released financial results for the first quarter ended March 31, 2026. We also provided a business update. The release, which includes a reconciliation of management's use of non GAAP financial measures compared to the most applicable GAAP measures, is currently available on the Investors section of the company's [email protected]. I, John Doherty, Chief Financial Officer of Butterfly along with Joseph DeVivo, Butterfly's chairman and chief Executive Officer, will host the call this morning. 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, revenue attributable to embedded partnerships through revenue share, ship purchases or otherwise, 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. To access the webcast, please visit the Events section of our investor website. A replay of the event will also be available on this page following the call. I would now like to turn the call over to Joe.
Joseph DeVivo (Chairman and Chief Executive Officer)
Thanks John. So before I begin, I want to take a moment to congratulate our board member, Dr. Erica Schwartz on her nomination to serve as this country's CDC Director. The entire Butterfly family is proud of her and we remain grateful to have her as a valued member of our Board. We've been so fortunate to benefit from her insight, leadership and friendship for the past five years. She has certainly contributed to where Butterfly is today. So with that I'm pleased to welcome you to our first quarter call this year and to share that we've been making real progress across every facet of our business. Our plan to become the leader in point of Care Ultrasound is firmly established and the market is moving towards a system wide understanding of the power Butterfly can bring. Butterfly opened 2026 with another strong financial performance, 25% revenue growth, 69% gross margin and the lowest first quarter net loss since going public, all while maintaining a very strong balance sheet to support future growth. This performance shows our momentum regardless of the environmental noise and it's an indicator of what's ahead as we continue to make meaningful progress across every phase of our business and I'm excited to walk you through our updates. Butterfly is in the middle of the digital transformation of imaging driven by the power of semiconductors and ultrasound, we are beginning to experience the convergence of massive computational power, artificial intelligence and the incredibly customizable digital visualization which can disrupt not only imaging and healthcare, but far beyond. We are living through a profound moment of technological acceleration, one that healthcare has been waiting for the merge of intelligence with the human body through smart ultrasound form factors that can live with every person everywhere. It starts with our core pocus business, empowering every doctor and nurse with a powerful digital imaging device connected to an ecosystem of AI applications, education and data to deliver immediate clinical care wherever the patient is in the world. We are excited to be the first company ever to earn FDA clearance of a blind sweep AI tool which in two minutes can determine the age of a fetus. You may have seen this circulating on either LinkedIn or Etc., but we were very proud that the FDA itself highlighted our clearance publicly on social media as a meaningful demonstration of their increased focus on AI enabled technologies and how to do it correctly in partnership with them. I've reposted it if you want to go to my account and find it. The gestational age (GA) tool is a true reflection of our mission. Each year, millions of women around the globe enter pregnancy without a reliable way to determine gestational age. In global, rural or emergency settings, patients often enter care not knowing key dates due to lack of prior prenatal care or are unable to verbalize them due to their condition. Without accurate gestational age, clinical decision making becomes more complex as each stage of pregnancy requires different treatment pathways. Now, clinicians can determine gestational age quickly and with a high degree of accuracy using our gestational age (GA) tool that's built on deep learning models from Dr. Jeffrey Stringer's team at the University of North Carolina and trained on over 21 million images. Butterfly is now in the process of launching this tool to those who need it most in the US and many global health settings that rely on FDA regulatory pathways. Moments like this demonstrate the strength of Butterfly's architecture. With a single cloud based software update similar to how a smartphone is updated, we can push this capability to existing users anywhere cleared in the world. The gestational age (GA) tool is expected to unlock new relationships with ministries of health across developing countries, moving beyond the idea of democratizing health care to actually delivering on it AI applications that give local caregivers access to advanced diagnostics will be the most powerful accelerator of handheld point of care ultrasound. Whether developed internally or through our partners in the Butterfly Garden, these applications can make the complex simple and expand access to patients in highly scalable and cost effective ways. This quarter two new partners joined to develop in the Butterfly Garden, bringing the portfolio total to 34 of our existing partners have received FDA clearance for versions of their software. Most recently, Deep Echo received Breakthrough Designation from the FDA and expects clearance of a robust prenatal AI application potentially by the end of this year. We anticipate Icardio going live with an FDA cleared model this year beginning of next year as well, and we are very pleased with the progress Heartfocus is making following its launch of a clinical app late last year. We believe all of these applications combined with Butterfly's internally developed capabilities will become the largest, most powerful AI powered ultrasound library in the industry over the next three years. We expect this to drive a meaningful inflection in probe utilization and overall system adoption. So Continuing with pocus, Our Compass AI launch last quarter is showing early success. Our pipeline of software deals measured in total contract value is up sharply from the first quarter of 2025, serving as an early indicator of meaningful enterprise adoption in 2026. We have already closed our first enterprise deal this quarter and are seeing strong momentum including a seven figure software TCP deal with a customer committing to the long term Compass AI roadmap. In addition, medical schools are accelerating one to one adoption with nearly 1,000 probes sold so far this year across six institutions and more programs coming online. These efforts are supported by continued advancement of our already robust enterprise security posture with recent milestones including Hitrust R2 certification and entry into the FedRAMP marketplace as in process with VA sponsorship, further enhancing our ability to support large health systems and expand into federal opportunities. Over the next few quarters we expect to further the global scale of our POCUS business, continuing to open multiple new markets across the Americas and Asia, including some of the largest and fastest growing POCUS markets like Brazil. At the same time, we've been working to expand iQ3 availability to over a dozen additional countries already in our regulatory pipeline. So moving to Home now officially named Butterfly Home and Community Care, we are making important progress. We expect now our first commercial agreement to be signed in the first half of this year and begin training nurses to support patient scanning across our full state in the third quarter. We believe this model can expand significantly across the United States in 2027 and represents a foundational shift in how care is delivered. It enables at risk providers to take control of patient outcomes with AI powered diagnostics, reducing unnecessary hospital visits and improving system efficiency. I am very proud of our team for maintaining their focus and skilled execution in building this business. So lastly, I'd like to briefly update you on our efforts regarding the ROHS lead exemption for handheld ultrasound. We filed an application to revoke this exemption last year which currently allows the continued use and disposal of toxic materials in lead based piezo crystal handheld ultrasound in the eu. The Commission engaged a third party named Okio to review the exemption request and make a recommendation and through this process they confirmed CMUT to be a technically viable alternative, meaning they have met or exceeded the capability of incumbent technologies. Okio ultimately recommended reapproval of the exemption, but only for two years. This is important because exemptions can typically span anywhere from 2 to 7 years and therefore Okio opted to recommend the lowest possible term for an exemption following its review of our request. We believe that during these two years the EU will gain the understanding they need to revoke the lead exemption for handhelds, including greater awareness, viable alternatives to piezoelectric crystals and handheld ultrasound devices, and clarity that replacing piezo handhelds will not present an impediment to healthcare delivery, but rather introduce a more digital and more effective delivery of medicine. We understand the complexity of disrupting established industry practices, but believe the EU has gained significant insights into the existing of a viable alternative and meaningful progress is being made. So I'll save our embedded update for after John's comments and would now like to turn it over to John John Thanks Joe.
John Doherty (Chief Financial Officer)
Butterfly continued its solid and focused execution in the first quarter of 2026 with an increase in revenue driven by double digit growth in both our core and embedded businesses, an increase in gross margin and continued improvement in operating performance with further reallocation of resources towards higher ROI opportunities and markets. Let me touch on a few highlights in the quarter that demonstrate this including revenue attainment that was above consensus, continued gross margin improvement, adjusted EBITDA that was above consensus and our guidance range with improvement driven by our revenue performance, higher gross margin and continued financial discipline. Growth improved sales of 5% and an increase in the mix of IQ3 devices driving an 11% improvement in ASP year over year. The expansion of the Butterfly Garden platform as well as the inclusion of the GA tool in our latest software update. Execution of a large 7 figure TCV Compass AI contract with a growing pipeline in this area that Joe mentioned up front and the expected commercial launch in an initial state with a major US Direct care provider to support in person, virtual and in home health care services. With that let me move on to our results. We started the year strong with revenue of 26.5 million, an increase of 25% year over year. Our growth was primarily driven by strength in our U.S. health International and Vet channels, a higher mix of sales of the IQ three year over year driving a higher ASP and from butterfly embedded, breaking things down between the US and international channels. During the first quarter US revenue was 21.4 million which was 25% higher year over year driven by revenue from Embedded as well as solid demand in the core business. With unit sales up 5% in what is typically a slower quarter due to seasonality. Total international revenue increased by 23% year over year to 5.2 million in the quarter while sales of the IQ3 in the quarter were up 39% year over year. Sales of the lower priced IQ plus were down 43% driving the increase in ASP with the increasing contribution from Embedded today and going forward, I'm going to provide you with a revenue split between our core business and Butterfly Embedded. We have also included this split in our 10Q. The core business includes Probe sales and related software, Compass AI, other services and in the future Home embedded revenue currently includes one time NRE payments, annual license fees, revenue from SOW driven development work and chip sales to embedded partners. With that core revenue for the first quarter was 20.8 million, an increase of 10% versus the first quarter of 2025. This increase was driven by growth in volume and price with a higher mix of IQ3 sales which strength in US Health International, E Com and Vet. Butterfly Embedded revenue was $5.7 million, an increase of 147% versus the first quarter of 2025. This increase was primarily driven by the midjourney partnership moving on to gross profit. Gross profit was 18.3 million in the first quarter, a 37% increase as compared to the prior year gross profit of $13.4 million. Gross profit margin percentage increased to 69% from 63% in the prior year period, an increase of 9%. Gross margin percentage was positively impacted by the higher margin Butterfly embedded revenue and the higher mix of IQ3 and its higher selling price along with lower software amortization Moving to EBITDA and cash for the first quarter of 2026, adjusted EBITDA loss was 6.1 million compared with a loss of 9.1 million for the same period in 2025, an improvement of 32%. The improvement in adjusted EBITDA loss in the first quarter was driven by contribution from higher margin revenue and continued financial discipline. Our cash and cash equivalent balance excluding restricted cash at the end of the first quarter was 138 million and the use of cash in the quarter was 12.5 million. This compares to a use of cash of 14.7 million in the prior year quarter and improvement of 2.2 million or 15%. These results continue to demonstrate that we are very well positioned as we move forward to continue to invest in the business in areas where we see significant opportunities for additional growth and disruption, including expanding our POCUS business and penetration of Compass AI as a core operating system for OR health systems Empowering third party development through Butterfly Garden to accelerate adoption of our platform expanding our home and community care business into its commercial phase, enabling a new wave of ultrasound on chip technologies through Butterfly Embedded and continuing AI and semiconductor innovation with the development of our fourth generation chip. Before turning to guidance, I want to update you on the global macroeconomic environment relative to Butterfly. We continue to monitor the war in the Middle east and the ripple effects on the global economy as well as tariffs in certain markets. While there are some impacts to our business, they have been minor and we continue to manage through it and make the appropriate adjustments. Our first quarter 2026 results are indicative of this and our second quarter and full year 2026 guidance include any expected impacts. I would now like to turn to our outlook for the second quarter of 2026 and for the calendar year ending December 31, 2026. In the second quarter we expect revenue in the range of 27 million to 31 million or a year over year increase of 24%. At the midpoint, we expect an adjusted EBITDA loss in the range of 6 million to 8 million. For the full year 2026, we are reaffirming our guidance for both revenue and adjusted EBITDA. We expect revenue to be between 117 million and 121 million, an increase of approximately 20% to 24% over 2025. We expect our adjusted EBITDA loss to be between 21 million and 25 million. As I mentioned previously, our guidance for adjusted EBITDA in the second quarter and full year includes increased investment in key areas to support continued innovation and revenue growth in our core business and our emerging embedded business for 2026 and beyond. In summary, we had a strong start to 2026. We came in above the midpoint of our revenue guidance and we beat our adjusted EBITDA guidance. We believe we are very well positioned for the balance of 2026. As our 2026 full year guidance indicates. We look forward to continued growth this year and beyond. Our overall outlook on the business is positive. With the first quarter reinforcing our view, we continue to be focused on gaining share in 2026 through deeper penetration of existing customers, new customers and applications. We also continue to be focused on enhancing our existing and developing new partnerships, leveraging our Ultrasound on chip platform. We continue to be excited about the potential of Butterfly Embedded and our licensing and related revenue opportunities. The business is getting stronger, the core focus generating new revenue opportunities in addition to probe sales through Compass Garden and Home and the potential of Butterfly Embedded. This is happening while we continue our intense focus on driving operating efficiency across the business and return on investment. I continue to be excited about what is ahead for the company in 2026 and beyond. Now let me hand it back to Joe for some closing comments.
Joseph DeVivo (Chairman and Chief Executive Officer)
Thanks John Ultrasound has many use cases which are growing rapidly in both scientific and clinical importance. As I mentioned last quarter, if you scan publications in Nature over the past year, you'll find a body of literature growing around functional ultrasound. These applications are ranging from neuroimaging and brain computer interfaces, biosensing and targeted drug delivery, to wearable monitoring and autonomous robotic procedures, just to name a few. What was once a diagnostic modality is aspiring to become something far more powerful. It's becoming a dynamic interface with biology itself. As I mentioned at the start, what is driving this shift now is the convergence of massive computational power, artificial intelligence and a new class of digital imaging systems. For the first time, imaging is no longer static. It's becoming adaptive. It's becoming intelligent. It is beginning to learn. There is only one company in the world that has commercialized ultrasound at scale through a fully digital semiconductor based system that is infinitely programmable. That's Butterfly, a traditional piezoelectric crystal. Will their fit, they transmit and receive in a fixed way. But our digital ultrasound is fundamentally different. It can transmit and receive signal, interpret what it sees through powerful compute and AI and immediately adjust how it transmits and receives again, it creates a closed loop system where sensing, thinking and acting are happening continuously in real time. This is the beginning of imaging systems that do not just observe the human body, but will integrate into it. Over time, these systems will move from episodic use into continuous presence, embedded into workflows, into devices and eventually into everyday life. This is where imaging, computation and biology converge into something entirely new. Butterfly is at the center of this convergence, which is becoming increasingly evident in the brain computer interface space. Our chip is uniquely well suited for this application given their programmable architecture ability to both transmit and sense with precision and tight integration with software, compute and AI. This is exactly where our Apollo platform is headed. By extending this foundation, we are building a platform that combines the ability to image and stimulate through software and enable new classes of applications beyond traditional handheld imaging. We are investing strategically in the talent, the partnerships and the platform to lead in this new category. Through Butterfly Embedded, which we introduced last quarter as a rebrand of Octave Embedded, is being led by Dr. David Horsley, a proven innovator in MEMS and semiconductor systems, and we are furthering our engineering and commercial capabilities required to engage with the most important technology platforms in the world. Establishing the embedded business with intentions of building a team in San Francisco is a critical step in extending our platform into the broader technology ecosystem. The early traction in embedded is very promising. We signed our ninth partner this month and expect to add at least two more mid year. These are not just incremental relationships, they represent the early formation of a new market where ultrasound becomes a native capability inside other systems and we are just getting started. Speaking of transformative platforms, we are very excited about the progress we are making with MID Journey and look forward to them unveiling their solution when they are ready. It is clear to us today that the Apollo chip will be a major catalyst of revenue growth for Butterfly. Not only will it usher in the next wave of AI in image processing and enhancement as well as on device AI compute for PoCUS, our partners want the processing speed it will provide given the massive amount of data they intend to generate. As I mentioned, not only will Apollo have the more powerful MEMS elements that enable harmonic imaging, it'll be able to process 20 times the data of the chip that we will launch next year. P5 1 this new architecture is being designed into very sophisticated future systems that stream real time ultrasound data straight into the GPU memory, providing the ability to process a massive amount of image data far exceeding today's standards. We also have identified Versions of the Apollo architecture which can be modified to meet some of the largest future use cases known today. When you step back and look at Butterfly today, you see three engines of growth that are beginning to reinforce each other point of care. Ultrasound is scaling across health systems globally. Home and community care is expected to extend that capability directly into the patient environment, changing how care is delivered and paid for. And Embedded extends Butterfly beyond standalone devices by integrating ultrasound as an AI enabled sensing platform into entirely new applications across healthcare and adjacent markets. Together, these are not separate businesses. They are all playing a key role in leveraging our unique ultrasound on chip ecosystem. Over the next three years, we are not just expecting growth, we are entering a period of transformation. As these systems mature and converge, they will unlock new behaviors, new standards of care, and entirely new markets that do not exist today. What has historically been episodic, expensive and limited will become continuous, intelligent and broadly accessible. We believe this shift will fundamentally change how the world interacts with imaging, with health care, and ultimately with the human body itself. Over the next three years, we expect this convergence to to materially expand our addressable market and drive a step change in utilization, which we believe will be reflected directly in revenue growth and operating leverage. This is the moment where decades of scientific progress meet the scale of modern compute and the power of artificial intelligence. And when that happens, change does not move linearly, it moves exponentially. We believe Butterfly can become the default imaging and sensing layer for the human body. Butterfly is positioned at the center of this shift. Importantly, we are building this with discipline, maintaining the strength of our balance sheet so our investors can fully participate in the value creation ahead. So this call marks my third anniversary with Butterfly. The last three years were focused on building a framework for success and the foundation to execute. The next three years are about running fast, scaling revenue into the future, and being the company to enjoy the full potential of what we've built. We are in a new era where imaging becomes intelligent, adaptive and ever present. Where it moves closer to the patient, becomes part of everyday care, and ultimately becomes part of everyday life. We are incredibly excited about what lies ahead. This is only the beginning with that operator, please open it up for questions.
OPERATOR
Thank you. To ask a question, please press star followed by one on your telephone keypad. Now, if you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question is from Chase Knickerbocker from Craig Hallam Capital. Your line is now open. Please go ahead.
Joseph DeVivo (Chairman and Chief Executive Officer)
Good morning, this is Jake Susheray. On for Chase. Thanks for taking the questions. Good morning, Jake. It seems like the morning. It seems like the one to one partnerships are going well. Can you speak to any progress made with, with the med schools so far in the second quarter and how that compares to prior years? Well, the second quarter is happening right now. Usually the second quarter is our biggest medical school quarter given that their fiscal year ends on June 30th. And so yeah, I mean this is, you know, we had a good first quarter with medical schools. We'll have a very good quarter in the second quarter with medical schools. And the key for us is continuing the momentum to convince them that every student when they come in should have their own probe. There are a hundred thousand medical students in the United States. 25,000 enroll every year. And that is an opportunity, if it extended to every school, of doubling the amount of probes we sell every year. We are, we have very good relationships. We just had weeks ago the E Comm meeting with, you know, a lot of people participating in our luncheon and, or A-Com, I mean meeting and the relationships. The momentum is all growing. So I'd expect our medical school activity to be very positive in the second quarter.
Jake Susheray
Thanks for that color. And then I'd like to hear some more color on the Compass AI Enterprise deal. How did that process go? Can we expect more of these partnerships materially contributing to revenue in the rest of the year?
Joseph DeVivo (Chairman and Chief Executive Officer)
Yeah, as I said in the prepared remarks, our pipeline has clicked up. I think the word in the script was it was up sharp, a sharp increase. Seen a lot of activity, a lot of receptivity in the innovation that we brought to the platform, plus just the general market building. So our pipeline's up pretty big. And if the pipeline's up pretty big, then that's an indicator the enterprise sales will follow. So I'd expect this to be a very good enterprise year. I'd expect this to be a very good Compass AI year. I think we hit the mark with making this easier for clinicians faster to document with a lot of other tools that we're building. So very, very good start.
OPERATOR
Thanks for taking the questions. No problem. Thanks for asking. Thank you. Our next question is from Josh Jennings from TD Cowan. Your line is now open. Please go ahead.
Josh Jennings
Good morning, Joe and John. Thanks for the questions and congratulations on the strong start to the year, exciting times. Appreciate the download. And Joe, you sharing your enthusiasm on all the progress and the future. Wanted to ask about Butterfly Embedded and nine companies in the portfolio. It sounds like there may be other Partnerships on tap. I don't know if there's any way to, to help us think about the pipeline and any qualitative or quantitative help thinking about it just in terms of, I mean, should we be thinking that there are more mid journey type deals on tap, A mix, any, any more color on, on that embedded partnership portfolio and pipeline would be great to hear.
Joseph DeVivo (Chairman and Chief Executive Officer)
That's a great question, Josh. It's good to hear from you. Thank you. So I guess the way I'd put it is every time we add a partner, we're adding the opportunity of developing an entirely new market segment. An entirely new market segment where we are embedding our technology and their technology and they have a vision to be able to go and grow and invest. And so each new partner is an opportunity to create significant leverage for Butterfly. And it really depends upon where the stage of the idea is and where the stage of the company is. These companies are developing these new technologies and they also want to keep it secret. They're not looking to, they're not looking to give breadcrumbs to their competitors and they're looking to do their development. So it is a very delicate balance for us where, you know, we're a public company. We need to be able to communicate our progress and we try to do the best we can, you know, to frame the progress, to give you the understanding of what's happening without getting any trust, you know, from our partners. I mean, even, even the Mid journey deal, as we discussed, was never announced or press release. We had to do an AK because it was a material deal. But you know, they want to be able to announce and communicate when they're ready. What I will say, because I know what you're getting at is you're asking if any one of these deals that we are working on could potentially have the financial impact in the near term that a mid journey deal could have. And I would say yes, you know, we are working on opportunities that could present similar type of near term. I think, you know, each one of these are different. Each of them are different companies, different markets and different phases. But sometimes a company comes in and they, you know, they don't want to invest this type of work unless they, you know, have the opportunity to be exclusive in their area. And it's the exclusivity is what they're paying for. And I would say yes, there are conversations that we are having that could replicate a Mid Journey type of transaction.
Josh Jennings
Appreciate that. And maybe a follow up just on the update on the home and Community care channel commercial agreement, first half, initial statewide deployment in 3Q. I was hoping to better understand, you know, your vision of or. Or how you envision this playing out. I mean, is the initial statewide deployment have a commercial pilot and then build from there, or how do you. How should we be thinking about the. The contributions from that home and community care channel state by state, state, over the next 6, 12, 24 months? Thanks again for taking on the question.
Joseph DeVivo (Chairman and Chief Executive Officer)
No problem. It's a very good question. Again, so as we had communicated in the past, we had conducted a pilot and it was, let's call it more of a feasibility pilot, where our partner wanted to see if this would work. And as we communicated in the past, I think there's about 100 patients that went through the protocol and we saw a meaningful reduction of admissions and readmissions into the hospital. So we were able to, in that feasibility work, show that this conceptually could be very valuable. So now we're on to the next phase, which is our first commercial agreement. And if we get everything done, which we expect will now, with the activity in place, be done by the first half of the year, that'll then have us now operating with the teams commercially. And instead of just into a control pilot, it would be into a real world setting where there would be education, there would be daily interaction through our platform, and then there would be, you know, the, the ability to measure outcomes and, you know, if the, if that commercial. The initial commercial stage continues to show the type of economic benefit that the initial pilot stage. And it's only logical to believe that we would expand through more states and we would expand throughout the entire country. And so that's what our goal is for 2027. So for 2026, we want to get the first state up and running. We want to show this is operational. We want to show this is incremental. We want to show this is profitable. We want to show it is better for patients. And, you know, the overlying narrative here, by teaching nurses who are at the bedside caring for these patients every day how to use AI to help do a scan that they were not classically trained to do, but to do a scan that now allows for a specialist to give expert opinion to that patient where they are is a completely disruptive new model. The alternative is just simply waiting until they get sick enough where you have to send an ambulance to the skilled nursing facility, transport them to the hospital, wheelchair them up to radiology, do a cardiac echo, check them into the hospital, give them diuretics, monitor them, and then send them back home. So we're send them back to the facility via that same ambulance that brought them there. That is not an inexpensive, that is not efficient and that is not welcoming to our healthcare system or what is best patient care. Being able to have that expert cardiology cardiologist opinion to happen real time, to have the data extracted real time, to allow a lower cost care professional to capture that image and be able to get that opinion within 24 hours and change the care for that patient and dial them in better, faster is a significant reduction in the overall cost of health care. And it's just the beginning because we're talking now about managing congestive heart failure patients. But what about patients with bladder infections? Well, we can do 3D bladder scans right then and there. They can do one after the other while they're with the patient. With all these new AI tools we're talking about, there's a flywheel here. You know, there could be now, for example, they can test for a deep vein thrombosis, they can test for a pleural effusion. There's all different types of things. Now this is not just about creating a single revenue line in these facilities. It's about accelerating the evolution of handheld ultrasound at the patient bedside. And not just selling a probe, but by teaching them how to perform the application and being there with them and creating the linkages between them and expert clinical care and then being there to also measure those outcomes. This is a very, very big deal because what this will do is help accelerate the flywheel of adoption and in its core. So I'd expect to see some revenue contribution in the second half of 2026 and then I'd expect us to be successful and I expect us to go more and more states and it will start build revenue, very positive growth in 2027.
Josh Jennings
Thanks, Joe.
OPERATOR
Thank you, Josh. Our next question is from Andrew Brackman, from William Blair. Your line is now open. Please go ahead.
Andrew Brackman
Hey guys, good morning. Thanks for taking the question. Maybe just to follow up to Josh's first question. Hey Joe, just want to follow up to Josh's first question. So can you maybe just sort of talk to us about the life cycle for the embedded partnerships? Just how do these typically start? When's that aha moment. And I guess from your vantage point, what's your visibility look like throughout all these phases? Visibility into sort of their ultimate use case and how big these could potentially be for you longer term?
Joseph DeVivo (Chairman and Chief Executive Officer)
I'll do the best I can for that one. So right now, up until three months ago, we have been simply getting inbounds. We have people who are looking for solutions. They understand that we have a chip, they bump into our intellectual property. They call us and they ask us, you know, consider working with them. And I think I mentioned before, but we have over, you know, 40 companies that we are actively speaking to and they're in a bunch of different markets. You know, it's in pharma, it's in BCI and neuromodulation, it's in robotics, in surgical robotics, it's in hifu, it's in organ preservation, it's in these different markets where, you know, they're already working with some level of ultrasound, but kind of have a closed loose, a closed loop system. They want a system that can learn. And also wearables and monitoring in a lot of different clinical variations are being investigated. Some of these are startup companies who just got their funding. Some of them are larger companies who are looking to add this into their product portfolio. So each of them have their different timelines. And so they come to us and then they want to understand, integrate with computational systems, how fast can they get the data? How fast can they process the data? Where could they process the AI? Because a lot of this has to do with pulling data out of the body, processing that data and then making clinical decisions, or even using the ultrasound to continue to get data, to continue to refine it, and then even provide therapy through the ultrasound sound or additional diagnostics. This is very, very complicated systems and it's unbelievably exciting. It's all being based upon this new, you know, mass computation and also the intelligence of AI. You know, classic ultrasound systems not, cannot modify and modulate in real time. You know, if you have a, if you have a lens that is cut to see near on a camera, say, no matter what you do with your digital, no matter what you do with your energy, when you push it through that glass lens, it's going to only see near. With butterfly, you can, you can look, you can learn. And then it's almost like you're asking another question through ultrasound. And you can change how you ask that question. You can change how you modulate it, you can change the array, you can toggle from 2D to 3D, you can scan, you can slice. And so what we do is when partners come to us and say, well, we're really interested, the first thing they do is they give us a set of parameters. They say, look, we're trying to get this frequency, this array in this location. Can you do it and we say, depending upon those parameters, we will answer that question. And if the question is favorable, we then go into a laboratory setting and we show them how, you know, we can tune the ultrasound. We show them how we can get close to their use case or, or, or get to their use case with tuning the chip. It's kind of like just putting a program on a TV screen. You know, it's just, we just reprogram it and then, and then, and then it goes. And then when we prove to them that we're either there or close to there, then that the next determines the next phase, which is, you know, what does it take to get the product and the software to be exactly the way they'd want it, and what would the integration be in their systems? And then we map out a roadmap and it's, it's, you know, here's the work that they would do, here's the work that we would do that turns into, you know, depending upon the stage of the business, a, you know, a development agreement. That development agreement would mean that, you know, they pay us a licensing fee for our software. Just like with Nvidia, you're paying for a license for their cuda, and then they'll buy chips and they'll do labs and they'll do development. If they ask us to help them refine certain things, then they'll pay us engineering fees to be able to help them do that. And then there's some point in time where they realize, well, okay, I have a line of sight to what this means to us commercially, you know, and they will either who, like with Nvidia, will just purchase their product and use it, or they will be someone to say, well, gosh, if I could be the only one in the world to use it for this use case, would you be willing to license it specifically? And that's where those conversations go. So, you know, these are multiple steps. But what this means is shareholders are now tapping into entirely new markets that are well beyond point of care Ultrasound, with opportunities to have very vibrant and profitable recurring revenue streams without having to do the market development that we're doing in point of Ultrasound, without having to hire the sales force and supporting a public company in back office costs. It's simply we get license fees and we were able to sell our chips and we now have an option to grow revenue in entirely new markets that would take us a lot more capital than we've had to deploy so far in order to build. So it is an exponential flywheel. And so we've been developing and fortunately for Butterfly, you know, from day one, we've built our architecture to support this. We are cloud based, we are app based, iOS, Android, we integrate with SAS, we have our hardware, and so a lot of these components turn into the application that our partners are looking for. So they're not just licensing our chip, but some of them want to use our cloud, some of them want to use our SAS based Compass platform for data aggregation. And so these partnerships are very viable, but it does take time to onboard. There is diligence, there is lab work, but, you know, and so when we say a new partner comes on, that's a big check because that is a wonderful opportunity for us to increase the TAM of Butterfly and to bring more revenue and market opportunity for our investors. Great. Appreciate all that. Keller. John, maybe one for you. Just on Guidance here, you know, it seems like there's a lot of tailwinds here between the Garden expansion, the Compass AI contract, you know, moving into home care in the second half of the year. Can you maybe just sort of unpack for us the underlying assumptions? What's in Guidance now from a revenue perspective and what's a potential upside lever? Thanks.
John Doherty (Chief Financial Officer)
What's in Guidance now is everything that we have, you know, a line of sight of including, you know, across our core business with probe sales. You know, Joe, talk to home. We have some of that in there as well. You know, in the second half of the year we talked about Compass AI. So the things that we have a very good line of sight on are in our guidance, other things that we might be in the process of negotiating. You know, for example, like if you, if you look at that could be potential upside down the road. It's early in the year, as you know, we just printed the first quarter. So ultimately, you know, I'd say our posture is going to be a little bit more on the conservative side. But we reaffirmed guidance. We're very confident in where we're going for 2026. And in addition, if you look at adjusted EBITDA, obviously we had a beat in the quarter, but ultimately we are investing in certain areas of business. So with the launch of Home, it does require some investment to get it off the ground. And ultimately it will be a positive. You know, it has a very strong ROI for us, but that takes time. We're not in this to just, you know, have a really, really solid 2026. We're also in this to continue to grow at the rates we're growing at for the foreseeable future. You Know, we're talking about years here, not just quarters.
Andrew Brackman
Great, thanks guys. Thank you.
OPERATOR
Thank you, Andrew. Our next question is from Ben Halar from Lake Street Capital Markets. Your line is now open. Please go ahead.
Ben Halar
Good morning, guys.
Joseph DeVivo (Chairman and Chief Executive Officer)
Thanks for taking the questions. First off for me, you know, obviously great to hear the FDA enthusiasm on the gestational age AI tool. You know, presumably this de risks kind of the future blind sweep AI like tools from you guys. But I would imagine that it also does so for folks that might be looking to develop something similar for butterfly garden or butterfly embedded. You know, any more color you can kind of share there has it piqued more interest? You know, what, what has that done for you guys? Well, I think, I think what is important and I think what the FDA is pointing to is, you know, there are a lot of people imagine right now, and I don't have access to the data, but I would imagine there are thousands of applications in the FDA for clearances of AI tools. And I would imagine that, you know, a very high percentage of those are, you know, are probably not doing it in the manner of treating it like a device or treating it like something with consequence. Because, you know, people at times just think software is software and, but when, when you have to, when you're going to inform a patient and that, and that information is going to change their clinical pathway. Right. And so, you know, we have taken a longer path with, with the gestational AI tool. We have done is, you know, we've done a lot of clinical work, we've done a lot of work with the University of North Carolina and Jeff Stringer. We've done a lot of work making sure that the, because remember this blind sweep, there's no image that anyone's looking at. Blind sweep the pregnant abdomen, it spits out an age. And so it's got to be right and you're not doing it based upon, you know, looking at an image. So I think what the FDA saw was that here's a company who took this seriously, understood the consequence, the incredible upside value proposition and did the work to validate the AI just like you would do the work to valuate any type of device that was going to intervene into the body. And so I'm proud of our regulatory and quality teams for holding such a high standard, proud of our management team for not being short minded. You know, a lot of times people get in and they argue with fda, they try to convince them that, you know, it shouldn't be this way, shouldn't be that way. And you Know, sometimes FDA is wrong. They're not perfect, and sometimes they need persuading or educating or. And whatnot. So I'm certainly on that, on that front. But after my 30 years of putting products through FDA, I have. I think the world is better because we have fda. FDA keeps us safe. I think FDA keeps us on our toes. And there's always someone who's wrong or someone who might overdo it or underdo it. But the process, I think, leaves the world in making sure that this technology works. And when you get through that gauntlet, then you now have. You have a moat, and you have, because you've earned that moat. And we have that over every ultrasound company in the world. So we are now actively working with partners, ministries of health, that have been waiting for this for years. If you've heard of some of the visionary statements from the Gates foundation, they've always believed that AI and ultrasound is probably the biggest catalyst to improvement of overall care for these developing countries because of the power of these diagnostics in these remote areas. And I think this is a tool that is going to now, excuse me, translate into revenue by there being large deployments of probes and systems in all these different places. You know, we accomplished something a year and a half ago, two years ago, that was extraordinary. We trained 1,000 midwives in Africa who are. Who are managing over 80,000, you know, women who are having childbirth, and they're doing, I think, about 80,000 scans a month to make sure that they identify the fetal position of a baby. Because 20,000 women a year die in childbirth just because they were not able to get the baby out, which is horrible. Like, you can't even imagine that. But, you know, with the Gates foundation, we train those thousand midwives, and they're now improving care every single day. With the architecture that Butterfly has. We can just push this new tool to all thousand of their probes and get them now being able to identify the age earlier. These are significant flywheels in the acceleration of patient care. And that's being done on the architecture of Butterfly. So we're proud. And for the FDA to go to their social media and their social media part to specifically call out Butterfly, you know, I think it makes us proud and it makes us feel like we're doing something right and that we're a real company who really cares, with terrific technology, who has profound respect, regulators, and I think they've returned that respect.
Ben Halar
FDA communique is definitely a feather in your cap. You know, overall, just a fantastic update here this morning. The One thing that maybe I missed and I apologize if I did any updates on kind of additional form factors. I know historically we talked about the IQ station and things like that. Anything else on that front, that's it for me.
Joseph DeVivo (Chairman and Chief Executive Officer)
Yeah. So thank you, Ben. We appreciate the questions. So we didn't call it out in this particular call. But as an update early next year, we will have a new probe and we will detail, you know, the capabilities and the branding and the cost and everything. I think probably closer to the end of this year, beginning of next. So that is online that and that will bring to market, you know, not only the bring our ultrasound on chip technology, but it will be the first ultrasound on chip that has, you know, harmonics with cmu. So thrilled with that innovation and we are actively working on our station and that is also an early to mid, you know, 2027 time frame. So we didn't chronicle it, but it is, it is very much still in our work. And also, you know, we've talked about wearables for a very long time and we have a wearable today. But if we went and launched that wearable, I don't know what that market would be for it yet. What we are doing is building out applications at home and then quite frankly, several of the embedded partners are wearable partners where they not only want the ultrasound on chip, but they're developing a wearable form factor around what we've created and then they are developing applications for clinical application of that wearable. So I would think that the first wearable that comes to market would be through one of our embedded partners into some extraordinary use cases that they're developing. So, you know, we are, you know, we do have a lot of resource focus on new technology development and software and AI hardware. But we are able to accelerate our market opportunity as we partner with other companies with visions and novel ideas for them to be able to create whole new markets. And so those are probably the devices that you'll be seeing from us over the next several years.
Ben Halar
Great. Can't wait to see what's next. Thanks a lot, guys.
OPERATOR
All right, my friend. Thank you. Thank you, Ben. We currently have no further questions, so I will hand back to Joe for closing remarks.
Joseph DeVivo (Chairman and Chief Executive Officer)
Hello, everyone. Thank you so much for the interest. You know, I know that, you know, the macro environment has a bunch of ups and downs, but I think we're going to be swimming upstream of those. We have a lot of tailwinds. You know, we had tremendous growth last year, tremendous pro growth. We have tremendous new product launches. We are coiling up opportunities for garden and embedded. We are coiling up opportunities for more one to one medical schools and enterprise. This is a time when we are our foot's on the accelerator, we're stretching our legs and we're making things happen. And we appreciate your support and the unbelievable energy of all of the employees of Butterfly who are actively changing the world. So thank you all.
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