Butterfly Network Inc

Previous wording

Since 2022, we have taken significant actions to reduce our cost of operations and extend our cash runway and have reduced our annual cash requirements by approximately $180 million, to less than $50 million annually. As such, we conservatively expect our cash to last into 2027. As we look forward, we expect to continue to invest in our business in order to grow revenue. Before we reach 2027, we expect to raise capital in order to reach profitability. We expect to first seek nondilutive capital in the form of grants or debt and then potentially in the form of equity securities.

Current wording

Since 2022, we have taken significant actions to reduce our cost of operations and extend our cash runway and have reduced our annual cash requirements by approximately $180 million, to less than $50 million annually. As such, we conservatively expect our cash to last into 2027. As we look forward, we expect to continue to invest in our business in order to grow revenue. Before we reach 2027, we may need to raise capital in order to reach profitability. We will first seek nondilutive capital in the form of licensing, grants, or debt and then potentially in the form of equity securities.

Previous wording

Units fulfilled increased by 192 units, or 3.6%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was led by international where volume more than doubled from the onboarding of several new distribution territories. In the U.S., volume was lower due to two large medical school deployments that occurred in the prior year and did not repeat in 2024, partially offset by higher volume from the launch of the iQ3. Excluding the prior-year larger medical school deployments, volume increased 37%.

Current wording

Units fulfilled increased by 1,249 units, or 36.6%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was led by international where distributor volume more than quadrupled year-over-year from the onboarding of several new distribution territories in the current year. In the U.S., volume increased across all sales channels.

Previous wording

Software and other services mix decreased by 1.8 percentage points, to 31.8% for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Although our software and other services revenue increased in the

Current wording

Software and other services mix decreased by 9.0 percentage points, to 34.2% for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Although our software and other services revenue increased in the current year, our software and other services mix decreased due to the even larger increase in product revenue realized in the current year.

Previous wording

Sales and marketing expenses primarily consist of personnel costs and benefits, advertising, conferences and events, facilities-related expenses, and software costs. We expect to continue to make substantial investments in our sales capabilities.

Current wording

Sales and marketing expenses primarily consist of personnel costs and benefits, advertising, conferences and events, facilities-related expenses, and software costs. We expect to increase our investments in our sales capabilities.

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 our reductions in force, 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 our reductions in force, global workforce optimization, litigation costs, and legal settlements.

Previous wording

Product revenue increased by $2.4 million, or 19.4%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This increase was primarily driven by higher product revenue across all sales channels, including the impact of our recently launched next-generation iQ3 probe’s higher selling price as well as an increase in

Current wording

Product revenue increased by $4.8 million, or 54.7%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was primarily driven by higher product revenue across nearly all of our sales channels, including the impact of the iQ3 probe’s higher selling price as well as an increase in probe sales internationally.

Previous wording

Software and other services revenue increased by $0.6 million, or 10.1%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This increase was primarily driven by higher enterprise software and implementation revenue and increased licensing revenue from ourButterfly Garden andPowered by Butterfly partnerships, partially offset by lower renewals of individual subscriptions. Enterprise as a percentage of software revenue increased by approximately 6 percentage points year-over-year.

Current wording

Software and other services revenue increased by $0.4 million, or 5.3%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was primarily driven by higher enterprise software revenue and increased licensing revenue from ourButterfly Garden andPowered by Butterfly partnerships, partially offset by lower renewals of individual subscriptions. Enterprise as a percentage of software revenue increased by approximately 5 percentage points year-over-year.

Previous wording

Cost of product revenue increased by $1.1 million, or 19.9%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This increase was primarily driven by higher devices sales in the current year and a higher warranty accrual with the launch of our iQ3 probe. Cost of software and other services revenue increased by $0.2 million, or 11.7%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This was largely due to increased software amortization of $0.2 million.

Current wording

Cost of product revenue increased by $2.1 million, or 54.4%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was primarily driven by higher devices sales in the current year. This increase was further driven by a higher warranty accrual and related expenses and increased royalties and payment processing fees all associated with higher device sales. Cost of software and other services revenue increased by $0.2 million, or 7.3%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, largely due to increased software amortization expense.

Previous wording

Research and development expenses decreased by $6.2 million, or 39.8%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This decrease was primarily driven by reductions of $4.8 million in personnel costs resulting from our reduction in force in July 2023 and $1.2 million in engineering, facilities, and software costs related to reduced headcount.

Current wording

Research and development expenses decreased by $3.3 million, or 27.1%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This decrease was primarily driven by reductions of $1.4 million in personnel costs due to our reductions in force in the prior year. Additionally, there was a reduction of $1.3 million in facilities and software costs related to reduced headcount and efficiencies.

Previous wording

General and administrative expenses decreased by $5.2 million, or 20.1%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This decrease was primarily driven by reductions of $4.2 million in personnel costs resulting from our reduction in force in July 2023 and $0.8 million in professional service fees for legal services.

Current wording

General and administrative expenses decreased by $2.2 million, or 19.1%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This decrease was primarily driven by reductions of $1.6 million in stock-based compensation expense and $0.4 million in professional service fees for legal services.

Previous wording

Other decreased by $6.6 million, or 77.2%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This decrease was primarily driven by the nonrecurrence of $3.9 million of employee severance and benefits costs related to our January 2023 reduction in force that were incurred in the prior year and a reduction of $2.7 million in legal costs due to litigation and other legal matters. These costs are not representative of our ongoing operations.

Current wording

Other decreased by $7.6 million, or 81.9%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This decrease was primarily driven by reductions of $4.1 million in legal costs due to litigation and other legal matters and $3.5 million in employee severance and benefits costs resulting from our reduction in force in July 2023. These costs are not representative of our ongoing operations.

Previous wording

Product revenue increased by $4.8 million, or 22.8%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This increase was primarily driven by higher product revenue across nearly all sales channels, including the impact of our recently launched next-generation iQ3 probe’s higher selling price as well as an increase in iQ+ probe sales internationally. The increase in product revenue was negatively impacted by two large grant-based deployments to medical schools that occurred in the prior year and did not repeat in 2024. Excluding the prior-year large medical school deployments, product revenue increased 39.2% for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

Product revenue increased by $9.6 million, or 32.1%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase was primarily driven by higher product revenue across nearly all sales channels, including the impact of our iQ3 probe’s higher selling price as well as an increase in probe sales internationally. The increase in product revenue was negatively impacted by two large grant-based deployments to medical schools that occurred in the prior year and did not repeat in 2024. Excluding the prior-year large medical school deployments, product revenue increased 44.2% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Previous wording

Software and other services revenue increased by $0.4 million, or 2.8%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This increase was primarily driven by higher enterprise software and implementation revenue, higher revenue from medical school subscriptions, and increased licensing revenue from ourButterfly Garden andPowered by Butterfly partnerships, partially offset by lower renewals of individual subscriptions. Enterprise as a percentage of software revenue increased by approximately 8 percentage points year-over-year.

Current wording

Software and other services revenue increased by $0.7 million, or 3.7%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase was primarily driven by higher enterprise software revenue, higher revenue from medical school subscriptions, and increased licensing revenue from ourButterfly Garden andPowered by Butterfly partnerships, partially offset by lower renewals of individual subscriptions. Enterprise as a percentage of software revenue increased by approximately 7 percentage points year-over-year.

Previous wording

Cost of product revenue increased by $1.8 million, or 18.7%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This increase was primarily driven by higher devices sales in the current year. Cost of software and other services revenue increased by $0.5 million, or 11.9%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This was largely due to increased software amortization of $0.4 million.

Current wording

Cost of product revenue increased by $4.0 million, or 28.9%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase was primarily driven by higher devices sales in the current year. This increase was further driven by a higher warranty accrual and related expenses and increased royalties and payment processing fees all associated with higher device sales and the release of the iQ3 probe. Cost of software and other services revenue increased by $0.6 million, or 10.3%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, largely due to increased software amortization expense.

Previous wording

Research and development expenses decreased by $12.1 million, or 37.6%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This decrease was primarily driven by reductions of $9.2 million in personnel costs resulting from our reduction in force in July 2023; $2.4 million in engineering, facilities, and software costs related to reduced headcount; and $0.4 million in consulting fees resulting from continued execution of our plan announced to better align our commercial objectives and prioritization with our existing strengths and offerings.

Current wording

Research and development expenses decreased by $15.4 million, or 34.8%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This decrease was primarily driven by reductions of $10.6 million in personnel costs resulting from our reductions in force in the prior year, $4.2 million in engineering, facilities and software costs related to reduced headcount, and $0.5 million in consulting fees resulting from continued execution of our plan to better align our commercial objectives and prioritization with our existing strengths and offerings.

Previous wording

Sales and marketing expenses increased by $0.3 million, or 1.7%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This increase was primarily driven by a $0.6 million increase in marketing expenses related to the recent launches of our iQ3 probe in February 2024 and iQ+ Bladder probe in May 2024. This was partially offset by a $0.2 million reduction in software expenses.

Current wording

Sales and marketing expenses increased by $0.9 million, or 3.3%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This increase was primarily driven by a $0.9 million increase in marketing and event expenses related to the iQ3 and iQ+ Bladder launches in 2024.

Previous wording

General and administrative expenses decreased by $4.6 million, or 31.3%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This decrease was primarily driven by reductions of $2.7 million in stock-based compensation expense, $1.1 million in other personnel costs resulting from our reduction in force in July 2023, and $0.9 million in professional service fees for legal and other administrative services.

Current wording

General and administrative expenses decreased by $7.4 million, or 19.8%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This decrease was primarily driven by reductions of $3.2 million in stock-based compensation expense, $2.7 million in other personnel costs resulting from our reductions in force in the prior year, and $1.3 million in professional service fees for legal services.

Previous wording

Other decreased by $1.6 million, or 72.1%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This decrease was primarily driven by a reduction of $1.3 million in legal costs due to litigation and other legal matters and a reduction of $0.2 million of employee severance and benefits costs related to reductions in force that were incurred in the prior year. These costs are not representative of our ongoing operations.

Current wording

Other decreased by $14.2 million, or 79.6%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This decrease was primarily driven by reductions of $7.4 million of employee severance and benefits costs related to our reduction in forces in the prior year and $6.8 million in legal costs due to litigation and other legal matters. These costs are not representative of our ongoing operations.

Previous wording

During the three months ended June 30, 2024, the Company utilized $10.6 million of cash and cash equivalents. In the second quarter, we paid $0.6 million of legal payments due to litigation and other legal matters. As of June 30, 2024, our cash and cash equivalents balance was $102.1 million. Our future spending on capital resources may vary from those currently planned and will depend on various factors, including our rate of revenue growth and the timing and extent of spending on strategic business initiatives.

Current wording

During the three months ended September 30, 2024, the Company utilized $8.3 million of cash and cash equivalents. In the third quarter, we paid $0.4 million of legal payments due to litigation and other legal matters. As of September 30, 2024, our cash and cash equivalents balance was $93.8 million. Our future spending on capital resources may vary from those currently planned and will depend on various factors, including our rate of revenue growth and the timing and extent of spending on strategic business initiatives.

Previous wording

As of June 30, 2024, we have restricted cash of $4.0 million to secure a letter of credit for one of our leases, which is expected to be maintained as a security deposit for the duration of the lease. In addition, we have restricted cash of $0.1 million for an agreement with the Gates Foundation. The restriction is expected to lapse as we fulfill our obligations in the agreement with the Gates Foundation.

Current wording

As of September 30, 2024, we have restricted cash of $4.0 million to secure a letter of credit for one of our leases, which is expected to be maintained as a security deposit for the duration of the lease.

Previous wording

Our material cash requirements include contractual obligations with third parties for office leases, technology licensing agreements, and inventory supply agreements. Our fixed office lease payment obligations were $29.8 million as of June 30, 2024, with $3.6 million payable within the next 12 months. Our fixed technology license payment obligations were $15.5 million as of June 30, 2024, with $1.5 million payable within the next 12 months. Our fixed purchase obligations for inventory supply agreements were $10.3 million as of June 30, 2024, with $9.0 million payable within the next 12 months. We expect to pay for approximately 20% of the amount payable within the next 12 months using vendor advances.

Current wording

Our material cash requirements include contractual obligations with third parties for office leases, technology licensing agreements, and inventory supply agreements. Our fixed office lease payment obligations were $28.9 million as of September 30, 2024, with $3.6 million payable within the next 12 months. Our fixed technology license payment obligations were $15.5 million as of September 30, 2024, with $1.5 million payable within the next 12 months. Our fixed purchase obligations for inventory supply agreements were $8.6 million as of September 30, 2024, all of which is payable within the next 12 months and approximately 20% of which we expect to pay using vendor advances.

Previous wording

The following table summarizes our sources and uses of cash for the six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes our sources and uses of cash for the nine months ended September 30, 2024 and 2023:

Previous wording

Net cash used in operating activities decreased by $39.1 million, or 56.0%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was driven by reductions of $24.5 million in net loss adjusted for certain non-cash items and $14.6 million in net working capital cash usage. The decrease in net loss adjusted for certain non-cash items was primarily driven by a reduction of $24.7 million in net loss. The decrease in net working capital cash usage was primarily driven by a reduction of $16.5 million in cash used for changes in our inventory and the related vendor advances and accrued purchase commitments, partially offset by increases of $2.5 million in cash used for changes in accounts payable and accrued expenses and $0.8 million in cash used for changes in our prepaid expenses and other assets.

Current wording

Net cash used in operating activities decreased by $47.1 million, or 55.0%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was driven by reductions of $36.9 million in net loss adjusted for certain non-cash items and $10.2 million in net working capital cash usage. The decrease in net loss adjusted for certain non-cash items was primarily driven by a reduction of $35.2 million in net loss. The decrease in net working capital cash usage was primarily driven by reductions of $18.7 million in cash used for changes in our inventory and the related vendor advances and accrued purchase commitments, $1.1 million in cash used for changes in accounts payable and accrued expenses, and $0.9 million in cash used for changes in deferred revenue. These reductions were partially offset by an $8.9 million increase in cash used for changes in accounts receivable and a $1.7 million decrease in cash provided by changes in our prepaid expenses and other assets.

Previous wording

Net cash provided by investing activities decreased by $75.8 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was primarily due to the sale of our marketable securities in 2023.

Current wording

Net cash provided by investing activities decreased by $75.2 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was primarily due to the sale of our marketable securities in 2023.

Previous wording

Net cash provided by financing activities decreased by $0.1 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. We did not have any significant financing activities during the six months ended June 30, 2024.

Current wording

Net cash provided by financing activities decreased by $0.2 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. We did not have any significant financing activities during the nine months ended September 30, 2024.