Butterfly Network, Inc.

Previous wording

Units fulfilled increased by 1,176 units, or 22.5%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was largely driven by higher probe sales volume in the U.S. through direct sales to health systems and medical schools as well as our eCommerce sales channel.

Current wording

Units fulfilled increased by 264 units, or 5.4%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. This increase was largely driven by higher probe sales volume in the U.S. through direct sales to health systems, sales to our distribution partners, and sales through our eCommerce channel.

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 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.

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 Embedded program and 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

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.

Current wording

Software and other services mix increased by 19.8 percentage points, to 52.1%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. This increase was primarily driven by software and other services revenue generated from our various Embedded partnerships, including our co-development partnership with Midjourney, Inc.

Previous 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.

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 partnerships 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 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.

Current wording

Cost of product revenue includes manufacturing costs, 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 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.

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 toward 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, litigation costs, loss contingencies and related loss recoveries related to ongoing litigation, and legal settlements.

Current wording

Operating expenses classified as other are expenses that 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

Research and development expenses increased by $1.8 million, or 10.1%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. This increase was primarily driven by a $0.7 million increase in product engineering costs as we progressed along our product development roadmap, a $0.4 million increase in personnel costs as we invested in additional headcount for our product and software development projects, and a $0.4 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 $1.5 million, or 16.9%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. This increase was primarily driven by a $1.5 million increase in personnel costs as we invested in additional headcount for our product and software development projects and a $0.3 million increase in software costs as we leveraged more third-party artificial intelligence ("AI") and design tools to optimize our employee workflows during the period. These increases were partially offset by a $0.3 million decrease in product engineering costs as we optimized our engineering processes while continuing to progress along our product development roadmap.

Previous wording

General and administrative expenses increased by $2.2 million, or 24.4%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. This increase was primarily driven by a $1.5 million increase in personnel and other employment-related costs, including stock-based compensation expenses, 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.

Current wording

General and administrative expenses increased by $2.3 million, or 24.5%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. This increase was primarily driven by a $1.7 million increase in personnel and other employment-related costs, including stock-based compensation expenses, as we increased headcount in our back office support functions to better support our growing business.

Previous 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.

Current wording

Other increased by $1.3 million, or 46.6%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. This increase was driven by the recognition of $4.3 million of estimated liabilities for loss contingencies related to ongoing litigation and $0.9 million of higher legal costs due to litigation. These increases were partially offset by the recognition of a $3.7 million loss recovery for expected insurance recoveries related to our estimated liabilities for loss contingencies and a $0.1 million reduction in employment-related costs. We believe these costs are not representative of our ongoing operations.

Previous wording

Product revenue decreased by $0.4 million, or 1.3%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The overall decrease was driven by the non-recurrence of prior-year sales of semiconductor chips to our Embedded partners, reducing current-year product revenue by $2.8 million. This decrease was partially offset by $2.4 million of higher product revenue generated from the increase in probe sales volume within our core business.

Current wording

Product revenue increased by $0.7 million, or 1.5%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. This increase was primarily driven by $3.6 million of higher product revenue generated from the increase in probe sales volume across multiple sales channels. This increase was partially offset by the non-recurrence of prior-year sales of semiconductor chips to one of our Embedded partners, reducing current-year product revenue by $2.8 million.

Previous 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.

Current wording

Cost of product revenue decreased by $15.5 million, or 43.0%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, primarily driven by a non-recurring $17.4 million charge during the nine months ended September 30, 2025 for excess and obsolete inventory due to technological advancements in the underlying components of our devices and changes in our product portfolio. This decrease was partially offset by a $1.5 million increase in the cost of devices sold as a result of our higher probe sales volume and a $0.9 million increase in costs for our warranty reserve and replacements.

Previous 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.

Current wording

Cost of software and other services revenue increased by $0.3 million, or 4.9%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. This increase was primarily driven by a $1.4 million increase in costs related to providing services to our Embedded partners, partially offset by a $1.2 million decrease in amortization expense for software development investments that we made in prior years.

Previous 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.

Current wording

Research and development expenses increased by $3.3 million, or 12.3%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. This increase was primarily driven by a $1.9 million increase in personnel costs as we invested in additional headcount for our product and software development projects, a $0.7 million increase in software costs as we leveraged more third-party AI and design tools to optimize our employee workflows during the period, and a $0.5 million increase in product engineering costs as we progressed along our product development roadmap.

Previous 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.

Current wording

General and administrative expenses increased by $5.7 million, or 20.4%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. This increase was primarily driven by a $3.9 million increase in personnel and other employment-related costs, including stock-based compensation expenses, as we increased headcount in our back office support functions to better support our growing business as well as a $0.5 million increase in professional service costs for legal, accounting, and auditing services.

Previous wording

Other increased by $1.3 million, or 47.6%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. This increase was driven by the recognition of $7.3 million of estimated liabilities for loss contingencies related to ongoing litigation and $4.3 million of higher legal costs due to litigation. These increases were partially offset by the recognition of a $10.0 million loss recovery for expected insurance recoveries related to our estimated liabilities for loss contingencies and a $0.2 million reduction in employment-related costs. We believe these costs are not representative of our ongoing operations.

Current wording

Other increased by $2.6 million, or 47.1%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. This increase was driven by the recognition of $11.5 million of estimated liabilities for loss contingencies related to ongoing litigation and $5.3 million of higher legal costs due to litigation. These increases were partially offset by the recognition of a $13.7 million loss recovery for expected insurance recoveries related to our estimated liabilities for loss contingencies and a $0.3 million reduction in employment-related costs. We believe these costs are not representative of our ongoing operations.

Previous wording

Since our inception, our primary sources of liquidity are cash flows from operations and proceeds from stock issuances and the Business Combination. Our primary uses of liquidity are operating expenses, working capital requirements, and capital expenditures.

Current wording

Since our inception, our primary sources of liquidity have been cash flows from operations and proceeds from stock issuances and the Business Combination. Our primary uses of liquidity are operating expenses, working capital requirements, and capital expenditures.

Previous 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.

Current wording

During the three months ended September 30, 2026, we utilized $2.4 million of cash and cash equivalents for ongoing operations. As of September 30, 2026, our cash and cash equivalents balance was $122.3 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 $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.

Current wording

Our material cash requirements include contractual obligations with third parties for office leases, technology licensing agreements, and outsourced services. Our fixed office lease payment obligations were $21.5 million as of September 30, 2026, with $3.8 million payable within the next 12 months. Our fixed technology license payment obligations were $10.5 million as of September 30, 2026, with $1.5 million payable within the next 12 months. Our fixed outsourced services payment obligations were $3.1 million as of September 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 six months ended June 30, 2026 and 2025:

Current wording

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

Previous wording

Net cash used in operating activities represents the cash receipts and disbursements related to our activities other than investing and financing activities. We expect cash provided by historical financing activities will continue to be our primary source of funds to support operating and capital expenditure needs for the foreseeable future.

Current wording

Net cash used in operating activities represents the cash receipts and disbursements related to our activities other than investing and financing activities.

Previous 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.

Current wording

Net cash used in operating activities increased by $10.7 million, or 49.2%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was comprised of a $19.5 million increase in net working capital cash usage, partially offset by an improvement of $8.8 million in net loss adjusted for certain non-cash items. The $19.5 million increase in net working capital cash usage was driven by a $12.1 million increase in cash used for changes in prepaid expenses and other assets, a $10.1 million increase in cash used for changes in deferred revenue, an $8.0 million increase in cash used for changes in accounts receivable, and a $2.8 million reduction in cash provided by changes in inventory and its related vendor advances. These increases in cash usage were partially offset by a $13.5 million increase in cash provided by changes in accounts payable and accrued expenses. The $8.8 million improvement in net loss adjusted for certain non-cash items was driven by a $23.4 million improvement in net loss, partially offset by the non-recurrence of the $17.6 million of adjustments for write-downs of inventories and vendor advances.

Previous 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.

Current wording

Net cash used in investing activities increased by $0.8 million, or 35.5%, for the nine months ended September 30, 2026 compared to the nine months ended September 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 $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.

Current wording

Net cash provided by financing activities decreased by $72.1 million, or 90.8% for the nine months ended September 30, 2026 compared to the nine months ended September 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 $6.1 million increase in cash provided by exercises and purchases of our shares pursuant to our stock plans.

Previous 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.

Current wording

As of September 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 $4.3 million estimated loss and a $3.7 million loss recovery in our other operating expenses during the three months ended September 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.