Butterfly Network, Inc.

Previous wording

Butterfly developed ultrasound devices that can perform whole-body imaging in a single handheld probe because they are powered by our proprietary semiconductor technology instead of piezoelectric crystals. Our Ultrasound-on-Chip™ makes ultrasound more accessible outside of large healthcare institutions, while our software is intended to make the product easy to use, fully integrated with the clinical workflow, and accessible on a user’s smartphone, tablet, and almost any hospital computer system connected to the Internet. We aim to enable the delivery of imaging information anywhere at point-of-care to drive earlier detection throughout the body and remote management of health conditions. We market and sell the Butterfly system, which includes probes, related accessories, and software subscriptions, to healthcare systems, physicians, and healthcare providers through a direct sales force, distributors, and our eCommerce channel.

Current wording

Butterfly developed ultrasound devices that can perform whole-body imaging in a single handheld probe because they are powered by our proprietary semiconductor technology instead of piezoelectric crystals. Our Ultrasound-on-Chip™ makes ultrasound more accessible outside of large healthcare institutions, while our software is intended to make the product easy to use, fully integrated with the clinical workflow, and accessible on a user’s smartphone, tablet, and almost any hospital computer system connected to the Internet. We aim to enable the delivery of imaging information anywhere at point-of-care to drive earlier detection throughout the body and remote management of health conditions. We market and sell the Butterfly system, which includes probes, related accessories, and software subscriptions, to healthcare systems, physicians, and healthcare providers through a direct sales force, distributors, and our eCommerce channel. We also license our proprietary Ultrasound-on-Chip™ semiconductor platform for co-development of novel technologies in non-competitive markets through our Embedded program.

Previous wording

Units fulfilled increased by 221 units, or 4.7%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was driven by higher probe sales volume in our US sales channels.

Current wording

Units fulfilled increased by 234 units, or 4.9%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was driven by higher probe sales volume in our international distributor and veterinary sales channels, with veterinary sales positively impacted by the launch of our iQ3 Vet probe in the United States and some international markets in the fourth quarter of 2025.

Previous wording

We define software and other services mix as a percentage of our total revenue recognized in a reporting period that is based on software subscriptions and other services, consisting primarily of our software as a service (“SaaS”) offering. We view software and other services mix as a key indicator of the profitability of our business, and thus we believe that this measure is useful to investors.

Current wording

We define software and other services mix as a percentage of our total revenue recognized in a reporting period that is based on software subscriptions and other related services, consisting primarily of our software as a service ("SaaS") offering. We view software and other services mix as a key indicator of the profitability of our business, and thus we believe that this measure is useful to investors.

Previous wording

Revenue consists of revenue from the sale of products, such as medical devices, accessories, and semiconductor chips, and the sale of software and other services. Our software and related service offerings include SaaS subscriptions, product support and maintenance (“Support”), software development kits ("SDKs") which may be perpetual or term-based, and partnership support services. SaaS subscriptions include licenses for teams and individuals as well as enterprise-level subscriptions. For sales of products and perpetual SDKs, revenue is recognized at a point in time upon transfer of control to the customer. SaaS subscriptions, Support, and term-based SDKs are generally related to stand-ready obligations and are recognized ratably over time.

Current wording

Product revenue consists of revenue from the sale of products, such as medical devices, accessories, and semiconductor chips. Our software and other services revenue consists of revenue from the sale of SaaS subscriptions, extended warranties, services related to our Embedded partnerships, implementation and integration services, and software development kits ("SDKs"), which may be perpetual or term-based. SaaS subscriptions include licenses for teams and individuals as well as enterprise-level subscriptions. Services related to our Embedded partnerships include out-licensing arrangements and related research and development services.

Previous wording

Over time, as adoption of our devices increases through further market penetration and as practitioners in the Butterfly network continue to use our devices, we expect our annual revenue mix to shift more toward software and other services. The quarterly revenue mix may be impacted by the timing of device sales. Recently, due in part to the continued success of our next-generation iQ3 probe and the delivery of semiconductor chips to one of our partners, our software and other services mix as a percentage of total revenue has been decreasing in comparison to comparative periods in prior years.

Current wording

Over time, as adoption of our devices increases through further market penetration, as practitioners in the Butterfly network continue to use our devices, and as our Embedded collaborations continue to grow and develop, we expect our annual revenue mix to shift more toward software and other services. The quarterly revenue mix may be impacted by the timing of device sales.

Previous wording

Cost of product revenue consists of product costs including manufacturing costs, personnel costs and benefits, inbound freight, packaging, warranty replacement costs, payment processing fees, and inventory obsolescence and write-offs. We expect our cost of product revenue to fluctuate over time due to the level of units fulfilled in any given period and fluctuate as a percentage of product revenue over time as our focus on operational efficiencies in our supply chain may be offset by increased prices of certain inventory components.

Current wording

Cost of product revenue includes manufacturing costs, personnel costs and benefits, inbound freight, packaging, warranty replacement costs, royalty fees for licensed intellectual property, payment processing fees, and inventory obsolescence and write-offs. We expect our cost of product revenue to fluctuate over time due to the level of units fulfilled in any given period and to fluctuate as a percentage of product revenue over time as our focus on operational efficiencies in our supply chain may be offset by increased prices of certain inventory components.

Previous wording

Cost of software and other services revenue consists of personnel costs, cloud hosting costs and payment processing fees. Because the costs and associated expenses to deliver our SaaS offerings are less than the costs and associated expenses of manufacturing and selling our devices, we anticipate an improvement in profitability and margin expansion over time as our revenue mix shifts increasingly towards software and other services. We plan to continue to invest additional resources to expand and further develop our SaaS and other service offerings which will be reflected in cost of revenue as amortization expense.

Current wording

Cost of software and other services revenue includes personnel costs, cloud hosting costs, and payment processing fees. Because the costs and associated expenses to deliver our software and other service offerings are less than the costs and associated expenses of manufacturing and selling our products, we anticipate an improvement in profitability and margin expansion over time as our revenue mix shifts increasingly towards software and other services. We plan to continue to invest additional resources to expand and further develop our SaaS and other service offerings which will be reflected in cost of revenue as amortization expense.

Previous wording

Operating expenses classified as other are expenses which we do not consider representative of our ongoing operations. These other expenses primarily consist of employee severance and benefits costs related to reductions in force, business transformation initiatives, litigation costs, and legal settlements.

Current wording

Operating expenses classified as other are expenses which we do not consider representative of our ongoing operations. These other expenses primarily consist of employee severance and benefits costs related to reductions in force, litigation costs, loss contingencies and related loss recoveries related to ongoing litigation, and legal settlements.

Previous wording

Software and other services revenue increased by $0.5 million, or 2.6%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. This increase was primarily driven by increases in licensing and services revenue from our partnerships and licensing revenue from our US sales channels, partially offset by a decrease in software and other services revenue from our international sales channels.

Current wording

Software and other services revenue increased by $4.8 million, or 68.2%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily driven by increases in software and other services revenue generated by our Embedded partnerships.

Previous wording

Cost of software and other services revenue decreased by $0.6 million, or 25.1%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily driven by a $0.7 million decrease in amortization expense for software development investments that we made in prior years.

Current wording

Cost of software and other services revenue remained relatively flat for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, decreasing by $0.1 million, or 6.5%. This decrease was primarily driven by a $0.6 million decrease in amortization expense for software development investments that we made in prior years, partially offset by a $0.5 million increase in costs related to providing services to our Embedded partners.

Previous wording

General and administrative expenses remained relatively flat for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, decreasing by $0.1 million, or 0.7%. This decrease was primarily driven by reduced insurance costs, largely offset by higher personnel costs due to increased headcount.

Current wording

General and administrative expenses increased by $1.2 million, or 12.7%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily driven by a $0.7 million increase in personnel costs due to increased headcount and a $0.3 million increase in professional service costs for consulting, accounting, and auditing services.

Previous wording

Other increased by $1.1 million, or 64.7%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. This increase was driven by $1.9 million of higher legal costs due to litigation, partially offset by $0.8 million of lower employment-related costs. These costs are not representative of our ongoing operations.

Current wording

Other decreased by $0.3 million, or 45.3%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This decrease was driven by the recognition of a $6.0 million loss recovery for expected insurance recoveries related to our estimated liabilities for loss contingencies. This decrease was partially offset by the recognition of $3.3 million of estimated liabilities for loss contingencies related to ongoing litigation, $2.2 million of higher legal costs due to litigation, and $0.3 million of higher employment-related costs. We believe these costs are not representative of our ongoing operations.

Previous wording

On January 31, 2025, we raised $81.0 million, net of underwriting costs and related expenses, through the issuance and sale in a public offering of 27.6 million shares of our Class A common stock. During the three months ended September 30, 2025, the Company utilized $3.9 million of cash and cash equivalents for ongoing operations. As of September 30, 2025, our cash and cash equivalents balance was $144.2 million. Our future spending will depend on various factors, including our rate of revenue growth and the timing and extent of spending on strategic business initiatives. We expect that our existing cash and cash flows from operations will be sufficient to meet our liquidity, capital expenditure, and anticipated working capital requirements and fund our operations for at least the next 12 months.

Current wording

During the three months ended March 31, 2026, the Company utilized $12.5 million of cash and cash equivalents for ongoing operations and the payment of our annual employee and management bonuses. As of March 31, 2026, our cash and cash equivalents balance was $138.0 million. Our future spending will depend on various factors, including our rate of revenue growth and the timing and extent of spending on strategic business initiatives. We expect that our existing cash and cash flows from operations will be sufficient to meet our anticipated liquidity, working capital, and capital expenditure requirements and fund our operations for at least the next 12 months.

Previous wording

Our material cash requirements include contractual obligations with third parties for office leases, technology licensing agreements, inventory supply agreements, and outsourced services. Our fixed office lease payment obligations were $25.2 million as of September 30, 2025, with $3.7 million payable within the next 12 months. Our fixed technology license payment obligations were $14.0 million as of September 30, 2025, with $3.5 million payable within the next 12 months. Our fixed purchase obligations for inventory supply agreements, net of vendor advances, were $3.6 million as of September 30, 2025, all of which is payable within the next 12 months. Our fixed outsourced services payment obligations were $4.5 million as of September 30, 2025, with $1.4 million payable within the next 12 months.

Current wording

Our material cash requirements include contractual obligations with third parties for office leases, technology licensing agreements, inventory supply agreements, and outsourced services. Our fixed office lease payment obligations were $23.4 million as of March 31, 2026, with $3.8 million payable within the next 12 months. Our fixed technology license payment obligations were $10.5 million as of March 31, 2026, with $1.5 million payable within the next 12 months. Our fixed purchase obligations for inventory supply agreements, net of vendor advances, were $2.3 million as of March 31, 2026, all of which is payable within the next 12 months. Our fixed outsourced services payment obligations were $3.8 million as of March 31, 2026, with $1.4 million payable within the next 12 months.

Previous wording

The following table summarizes our sources and uses of cash for the nine months ended September 30, 2025 and 2024:

Current wording

The following table summarizes our sources and uses of cash for the three months ended March 31, 2026 and 2025:

Previous wording

Net cash used in operating activities decreased by $16.9 million, or 43.7%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was comprised of improvements of $7.0 million in net loss adjusted for certain non-cash items and $9.9 million in net working capital cash usage. The improvement in net working capital cash usage was primarily driven by a $5.5 million improvement in cash provided by changes in our inventory and the related vendor advances, a $4.2 million improvement in cash used for changes in accounts receivable, and a $1.7 million improvement in cash provided by changes in accounts payable and accrued expenses. These improvements were partially offset by a $1.8 million increase in cash used for changes in prepaid expenses and other assets.

Current wording

Net cash used in operating activities increased by $2.2 million, or 19.0%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was comprised of a $2.6 million increase in net working capital cash usage partially offset by a reduction of $0.4 million in net loss adjusted for certain non-cash items. The increase in net working capital cash usage was primarily driven by a $5.4 million increase in cash used for changes in prepaid expenses and other assets and a $3.5 million increase in cash used for changes in deferred revenue. These increases in cash usage were partially offset by a $6.0 million decrease in cash used for changes in accounts payable and accrued expenses and a $0.6 million increase in cash provided by changes in accounts receivable.

Previous wording

The Company did not identify any significant recently issued accounting pronouncements that may potentially impact our financial position and results of operations.

Current wording

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is set forth in Note 2 "Summary of Significant Accounting Policies" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 "Financial Statements" of this Quarterly Report on Form 10-Q.