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01/10 17:00
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals mixed signals: strong product revenue growth and improved EBITDA loss contrast with a negative gross margin due to inventory write-off. Optimistic guidance for Compass AI and Octiv initiatives is offset by delayed deals and flat software revenue. Q&A highlights confidence in the pipeline but acknowledges extended sales cycles and uncertain timelines for partnerships. Without a market cap, the impact is hard to gauge, but overall, the balanced positives and negatives suggest a neutral sentiment, indicating a stock price movement between -2% and 2%.
Revenue for Q3 2025 $21.5 million, reflecting 5% growth year-over-year. This growth was primarily driven by higher average selling prices from a larger percentage of iQ3 sales internationally and increased volume mainly in the U.S.
International Revenue for Q3 2025 $5.4 million, a 4% increase year-over-year. The increase was driven by price due to the international launch of iQ3 in Q3 2024.
U.S. Revenue for Q3 2025 $16.1 million, slightly up from the prior year. The increase was due to e-commerce sales and improved performance in the veterinary distribution channel.
Product Revenue for Q3 2025 $14.6 million, an 8% increase year-over-year. This was driven by higher average selling prices in international markets and increased volume in e-commerce and veterinary channels.
Software and Other Services Revenue for Q3 2025 $6.9 million, flat year-over-year. Increased licensing and services revenue from partnerships was offset by lower renewals of individual subscriptions and lower revenue from extended warranties due to longer standard warranties of iQ3 probes.
Gross Margin for Q3 2025 (including inventory write-off) Negative 17.5%, compared to 59.5% in the prior year. This decline was due to a noncash write-off of excess inventory of $17.4 million.
Adjusted Gross Margin for Q3 2025 (excluding inventory write-off) 63.9%, up from 60% in the prior year. The increase was driven by higher average selling prices and reduced software amortization costs.
Adjusted EBITDA Loss for Q3 2025 $8.1 million, compared to a loss of $8.4 million in Q3 2024. The improvement was driven by better adjusted gross profit.
Normalized Cash Burn for Q3 2025 $3.9 million. This reflects reductions and improvements in financial management.
Cash and Cash Equivalents at the End of Q3 2025 $148 million. The trailing 12-month use of cash was $31.5 million.
iQ3 adoption: Strong market adoption of iQ3 has outpaced expectations, accounting for approximately 85% of probe volume in Q3 2025.
HeartFocus launch: HeartFocus, an FDA-cleared Butterfly partner app, launched in Butterfly Garden, enabling faster cardiac scans and improving patient access to timely care.
AI-powered gestational age calculator: Deployed in Malawi and Uganda, this tool calculates gestational age using simple sweeps, improving accessibility and affordability in low-income regions.
P5.1 chip development: Completed development of the next-gen P5.1 chip, expected to debut in the second half of 2026, surpassing performance of piezo handhelds.
International revenue growth: International revenue increased 4% year-over-year to $5.4 million, driven by the international launch of iQ3.
Geographic expansion: Expansion efforts contributed to increased product revenue, particularly in international markets.
Gross margin improvement: Adjusted gross margin increased to 63.9% from 60% in the prior year, driven by higher average selling prices and reduced software amortization costs.
Cash burn reduction: Normalized cash burn reduced to $3.9 million in Q3 2025, reflecting improved financial discipline.
AI strategy: AI initiatives, including Compass AI and Butterfly Garden, are driving clinical and economic impact, improving healthcare access and efficiency.
Transition to solutions model: Shift from selling hardware alone to offering integrated solutions combining software, services, and support.
Octiv partnerships: Exploring partnerships to expand ultrasound-on-chip applications beyond POCUS, potentially transforming the business model.
Enterprise Sales Strategy: Encountered headwinds as hospitals focused on broader macro issues, impacting sales momentum in Q2 and Q3 of 2025.
Government Shutdown: Prolonged federal government shutdown could delay deal timing for deals relying on government funding and regulatory processing, potentially impacting sales pipeline and FDA submissions.
Macroeconomic Factors: Customers delaying purchase decisions due to macroeconomic uncertainties, affecting U.S. hospital and enterprise channels.
Inventory Write-Off: Noncash charge of $17.4 million for excess inventory write-off due to lower-than-expected demand for iQ+ probes, impacting gross margins.
Revenue Mix Shift: Decreased percentage of revenue from software and services as product revenue growth outpaced software revenue, potentially impacting long-term revenue diversification.
Regulatory Delays: FDA's pause on fee-based submissions during the government shutdown could delay regulatory approvals for new products.
Customer Cash Flow Timing: Potential systemic impacts of prolonged government shutdown on customer cash flow timing, indirectly affecting sales.
Purchase Delays: Several large deals in the pipeline delayed, contributing to uncertainties in revenue realization.
Revenue Guidance: The company reaffirmed its full-year revenue guidance in the range of $91 million to $95 million, implying $25 million to $29 million in revenue for Q4. Achieving the higher end of this range depends on closing several large deals currently in the pipeline.
Adjusted EBITDA Loss Guidance: The company tightened its full-year adjusted EBITDA loss guidance to a range of $32 million to $35 million, or $9 million to $12 million for Q4.
Pipeline Opportunities: Several large deals in the pipeline are expected to close, including agreements with a large insurance company to reduce readmissions and other deals within the Octiv business. Timing remains uncertain, but these opportunities are active.
AI and Product Development: The next-gen enterprise software, Compass AI, is on track to launch before year-end. The P5.1 chip has entered fab production and is expected to debut in the second half of next year, offering significant advancements in imaging capabilities. Development of the sixth-generation Apollo AI chip has begun, aiming to deliver enhanced ultrasound processing and AI capabilities.
Market Trends and Challenges: The company is monitoring the impact of the federal government shutdown, which could delay deal timing and regulatory processing if prolonged. Additionally, macroeconomic factors are causing some customers to delay purchase decisions, particularly in the U.S. hospital and enterprise channels.
Strategic Shifts: The company is transitioning from selling hardware alone to offering integrated solutions that include software, services, and hands-on support. This approach is expected to drive future revenue growth.
The selected topic was not discussed during the call.
The earnings call reveals mixed signals: strong product revenue growth and improved EBITDA loss contrast with a negative gross margin due to inventory write-off. Optimistic guidance for Compass AI and Octiv initiatives is offset by delayed deals and flat software revenue. Q&A highlights confidence in the pipeline but acknowledges extended sales cycles and uncertain timelines for partnerships. Without a market cap, the impact is hard to gauge, but overall, the balanced positives and negatives suggest a neutral sentiment, indicating a stock price movement between -2% and 2%.
The earnings call presents a mixed picture: while there is growth in international and product revenue, U.S. revenue remains flat, and software revenue is stagnant. The Q&A highlights delays in deals, but management remains optimistic about future prospects. The company's strategic initiatives and disciplined cash use are positive, but uncertainties in global health funding and competitive pressures temper enthusiasm. Overall, the sentiment is neutral, reflecting balanced positive and negative elements.
The earnings call highlights strong financial performance with 20% revenue growth and improved gross margins. Despite a secondary offering potentially affecting stock price, the substantial cash position and optimistic guidance, along with strategic partnerships and product success, indicate positive sentiment. The Q&A session further emphasized strong adoption and interest in their products, suggesting potential for continued growth. However, concerns about regulatory issues and economic factors pose risks. Overall, the positive factors outweigh the negatives, suggesting a likely stock price increase in the short term.
The earnings call presents a mixed outlook. Positive aspects include strong revenue growth, improved gross margins, and successful product launches. However, concerns arise from funding uncertainties, competitive pressures, and a secondary offering which typically dilutes share value. The Q&A section reveals positive sentiment towards strategic partnerships and product adoption but lacks clarity on competitive positioning. Despite optimistic guidance, potential tariff impacts and supply chain issues pose risks. Overall, the stock price is likely to remain stable, with a neutral movement expected over the next two weeks.
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