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. We also license our proprietary Ultrasound-on-Chip™ semiconductor platform for co-development of novel technologies in non-competitive markets through our Embedded program.

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 (which we refer to herein as our "core business"), 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

Software and other services mix increased by 11.5 percentage points, to 44.8%, 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.

Current wording

Software and other services mix increased by 22.9 percentage points, to 51.8%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. This increase was primarily driven by increases in software and other services revenue generated by our Embedded partnerships, including our co-development partnership with Midjourney, Inc.

Previous wording

Cost of product revenue increased by $0.5 million, or 9.1%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, driven by a $0.5 million increase in cost of devices sold as a result of our higher probe sales volume and a $0.5 million increase in adjustments to our product warranty reserve. These increases were partially offset by a $0.5 million decrease in costs for non-recurring semiconductor chip sales during the prior year period.

Current wording

Cost of product revenue increased by $0.7 million, or 10.5%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily driven by the increased cost of devices sold as a result of our higher probe sales volume.

Previous 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.

Current wording

Cost of software and other services revenue remained relatively flat for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, increasing by $0.1 million, or 7.2%. This increase was primarily driven by a $0.6 million increase in costs related to providing services to our Embedded partners, partially offset by a $0.4 million decrease in amortization expense for software development investments that we made in prior years.

Previous wording

Research and development expenses decreased by $0.4 million, or 3.9%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This decrease was driven by a $0.7 million reduction in personnel costs as we allocated more of our personnel costs to cost of software and other services revenue for our Embedded program and capitalized more of our personnel costs for the development of internal-use software. This reduction was partially offset by a $0.2 million increase in software costs as we leveraged more third-party AI tools to optimize our employee workflows during the period.

Current wording

Research and development expenses increased by $2.2 million, or 26.8%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. This increase was primarily driven by a $1.2 million increase in personnel costs as we invested in additional headcount for our product and software development projects, a $0.7 million increase in product engineering costs as we progressed along our product development roadmap, and a $0.3 million increase in software costs as we leveraged more third-party AI tools to optimize our employee workflows during the period.

Previous 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.

Current wording

Other increased by $1.6 million, or 80.6%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. This increase was driven by the recognition of $4.0 million of estimated liabilities for loss contingencies related to ongoing litigation and $2.0 million of higher legal costs due to litigation. These increases were partially offset by the recognition of a $4.0 million loss recovery for expected insurance recoveries related to our estimated liabilities for loss contingencies and a $0.4 million reduction in employment-related costs. We believe these costs are not representative of our ongoing operations.

Previous wording

Sales and marketing expenses remained relatively flat for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, decreasing by $0.2 million, or 1.7%, largely driven by optimization of our marketing investments while delivering higher sales volume and revenue.

Current wording

Sales and marketing expenses remained relatively flat for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, decreasing by $0.3 million, or 1.3%, largely driven by optimization of our marketing investments while delivering higher sales volume.

Previous 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.

Current wording

General and administrative expenses increased by $3.4 million, or 18.4%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. This increase was primarily driven by a $2.2 million increase in personnel and other employment-related costs, including stock-based compensation expenses; a $0.4 million increase in professional service costs for consulting, accounting, and auditing services; and the recognition of a $0.4 million provision for credit losses in the current period related to a prior sale to one international distributor.

Previous 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.

Current wording

During the three months ended June 30, 2026, we utilized $13.3 million of cash and cash equivalents for ongoing operations. As of June 30, 2026, our cash and cash equivalents balance was $124.7 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 $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.

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 $22.5 million as of June 30, 2026, with $3.8 million payable within the next 12 months. Our fixed technology license payment obligations were $10.5 million as of June 30, 2026, with $1.5 million payable within the next 12 months. Our fixed purchase obligations for inventory supply agreements, net of vendor advances, were $1.7 million as of June 30, 2026, all of which is payable within the next 12 months. Our fixed outsourced services payment obligations were $3.4 million as of June 30, 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 three months ended March 31, 2026 and 2025:

Current wording

The following table summarizes our sources and uses of cash for the six months ended June 30, 2026 and 2025:

Previous 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.

Current wording

Net cash used in operating activities increased by $11.3 million, or 60.1%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was comprised of a $14.5 million increase in net working capital cash usage, partially offset by a reduction of $3.2 million in net loss adjusted for certain non-cash items. The increase in net working capital cash usage was primarily driven by a $10.1 million increase in cash used for changes in deferred revenue, an $8.8 million increase in cash used for changes in prepaid expenses and other assets, and a $4.7 million increase in cash used for changes in accounts receivable. These increases in cash usage were partially offset by a $9.3 million decrease in cash used for changes in accounts payable and accrued expenses.

Previous wording

Net cash used in investing activities increased by $0.6 million, or 169.1%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by increased investment in the development of our internal-use software.

Current wording

Net cash used in investing activities increased by $0.7 million, or 54.0%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily driven by increased investment in the development of our internal-use software.

Previous wording

Net cash provided by financing activities decreased by $76.2 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This decrease was primarily due to the $81.1 million provided by the net proceeds from our public share offering during the prior year period.

Current wording

Net cash provided by financing activities decreased by $73.2 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. This decrease was primarily due to the $81.0 million provided by the net proceeds from our public share offering during the prior year period, partially offset by a $5.1 million increase in cash provided by exercises and purchases of our shares pursuant to our stock plans.

Previous wording

As of March 31, 2026, we concluded that a revision to our estimated liabilities for loss contingencies related to ongoing litigation and the recognition of a related insurance recovery asset were appropriate. As a result, we recognized an additional $3.3 million estimated loss and a $6.0 million loss recovery in our other operating expenses during the three months ended March 31, 2026. See the "Use of Estimates" subheading in Note 2 "Summary of Significant Accounting Policies" and see Note 12 "Commitments and Contingencies" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 "Financial Statements" of this Quarterly Report on Form 10-Q for additional information about our estimated liabilities for loss contingencies and the related insurance recovery asset.

Current wording

As of June 30, 2026, we concluded that revisions to our estimated liabilities for loss contingencies related to ongoing litigation and a related insurance recovery asset were appropriate. As a result, we recognized an additional $4.0 million estimated loss and a $4.0 million loss recovery in our other operating expenses during the three months ended June 30, 2026. See the "Use of Estimates" subheading in Note 2 "Summary of Significant Accounting Policies" and see Note 12 "Commitments and Contingencies" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 "Financial Statements" of this Quarterly Report on Form 10-Q for additional information about our estimated liabilities for loss contingencies and the related insurance recovery asset.