Group 1 - Butterfly Network Inc. (NYSE:BFLY) is recognized as a promising emerging technology stock due to its innovative handheld ultrasound device that connects to smartphones, utilizing patented ultrasound-on-a-chip technology [1][5] - The handheld ultrasound device is expected to make medical imaging more affordable, user-friendly, and accessible, particularly in clinics and developing countries, potentially disrupting traditional healthcare diagnostics [2][5] - TD Cowen analyst Josh Jennings has reaffirmed a Buy rating on Butterfly Network with a price target of $3.50, following positive results from the POCUS-CARE trial, which demonstrated the device's ability to reduce hospital costs and shorten patient stays [2][3] Group 2 - Jennings attributes the stock's nearly 30% decline since late July to temporary and cyclical headwinds identified during the Q2 2025 earnings call, suggesting that the pullback is excessive when considering Butterfly's long-term fundamentals [4] - With new clinical evidence supporting its technology, Butterfly Network is positioned to effectively implement its rollout strategy, reinforcing the Buy rating [5]

Company Announcement - Butterfly Network, Inc. has appointed Victor Ku as Senior Vice President and Chief Technology Officer (CTO) [1] - This appointment is seen as part of the company's efforts to improve its financial situation [1] Analyst Background - Gamu Dave Innocent Pasi is a financial professional with extensive experience in financial analysis and investment research [1] - He has a strong background in analyzing financial statements, capital markets, and macro-economics [1] - Pasi is recognized for providing actionable trading ideas and well-researched investment recommendations [1] - His insights have been featured in reputable publications, indicating a strong presence in the investment community [1] Investment Focus - Pasi is currently focused on building a new international investment portfolio [1] - He emphasizes the importance of innovative solutions that promote financial inclusion and sustainability [1] - Pasi advocates for Responsible Investment and actively incorporates Environmental, Social, and Governance (ESG) principles in investment decision-making [1]

Industry Overview - The global AI in healthcare market is projected to grow from $39.25 billion in 2025 to approximately $504.17 billion by 2032, at a CAGR of 44.0%, driven by demand for AI-enabled diagnostics, imaging, drug discovery, clinical workflow automation, and remote patient monitoring [1] Key Players and Innovations - Technology giants like NVIDIA are making significant moves in the healthcare space, collaborating with IQVIA to automate workflows in clinical research and life sciences, and partnering with GE HealthCare to enhance autonomous medical-device functions [3] - Palantir has partnered with TeleTracking to utilize its AI platform in hospitals for optimizing staffing workflows and improving patient care operations [4] - IonQ, AstraZeneca, AWS, and NVIDIA are collaborating on drug discovery, demonstrating a hybrid quantum-classical workflow that significantly speeds up pharmaceutical R&D [5] - IBM has introduced its advanced Quantum System Two, allowing research groups to utilize both classical and quantum computing for complex simulations [6] Investment Opportunities - Butterfly Network is advancing AI/ML in diagnostic imaging, reporting an AUROC of 0.94 in detecting aortic stenosis, and has launched an AI-powered training app for clinicians [8][10] - Omnicell is enhancing medication management with new products like MedTrack and MedVision, aimed at improving tracking, safety, and efficiency [14] - Both Butterfly Network and Omnicell are ranked as Buy stocks, with projected earnings growth of 29.4% and 12.9% respectively for 2025 and 2026 [9][15]

Core Insights - The study published in JAMA confirms that a Butterfly-enabled POCUS program focused on lung ultrasound significantly reduces hospital stay and costs associated with undifferentiated dyspnea, including acute heart-failure exacerbations [1][2][3]. Study Findings - The POCUS program led to a reduction of 246 hospital bed-days and resulted in direct cost savings of $751,537 during the evaluation period [3][4]. - The integration of a hospitalist POCUS workflow, which included lung ultrasound and AI assistance, was associated with a 30% reduction in expected hospital length of stay (8.3 days compared to 11.9 days, p = .01) [7]. - Clinical management was altered in 35% of cases due to the use of POCUS, highlighting its impact on patient care [7]. Economic Impact - The incremental cost-effectiveness ratio was calculated at $3,055 per hospital bed day saved, demonstrating the economic value of POCUS integration into inpatient care [7]. - The study emphasizes the potential for POCUS to improve hospital resource utilization and patient care through structured workflows [4][6]. Company Background - Butterfly Network, Inc. is a digital health company that specializes in portable ultrasound technology and software solutions, aiming to transform healthcare delivery [2][9]. - The company has developed a series of handheld ultrasound devices, including the Butterfly iQ, iQ+, and iQ3, which leverage advanced semiconductor technology [9][10].

Core Insights - Tempus AI and Butterfly Network reported their Q2 2025 results, highlighting contrasting growth trajectories driven by AI [1] - Tempus AI is experiencing rapid revenue growth and nearing profitability, while Butterfly Network is in a turnaround phase with modest revenue gains [1] Tempus AI - Tempus AI's Q2 2025 revenues increased nearly 90% year over year, surpassing estimates by 5.12%, driven by a 115% rise in Genomics and a 35.7% increase in high-margin Data and Services [5][6] - Adjusted EBITDA loss narrowed to $5.6 million, with management raising revenue guidance to $1.26 billion for 2025 [6] - The company is building a competitive moat through innovation, with over 40 million patient records connected and strategic partnerships enhancing its data and AI capabilities [7] - Despite strong growth, Tempus AI is still operating at a loss, with rising costs of revenues increasing by 32.2% year over year [9] Butterfly Network - Butterfly Network is gaining traction with large-scale deployments, including a significant enterprise deal with a top health system, indicating confidence in its iQ3 handheld ultrasound platform [10] - The launch of Compass AI signals a shift towards a software-driven model, aiming for higher-margin recurring revenue [10] - HomeCare pilots have shown promise in reducing heart failure readmissions, with potential annual revenue of $40-$60 million from one customer [11] - Despite progress, Butterfly Network faces challenges such as elongated sales cycles and reliance on partner uptake for new initiatives [12] Valuation Comparison - Tempus AI has a forward price-to-sales (P/S) ratio of 9.59, above its one-year median of 8.05, while Butterfly Network's P/S ratio is 3.73, below its median of 5.46 [13] - Analysts suggest a potential decline of 8.1% for Tempus AI's stock, while Butterfly Network's average price target implies a 128% upside [14][15] Investment Outlook - Tempus AI's impressive growth and innovation are tempered by its high valuation and ongoing losses, suggesting a cautious investment approach [17][20] - Butterfly Network, despite modest growth and execution risks, presents a compelling opportunity for investors due to its distressed valuation and significant upside potential [20]

Core Viewpoint - Butterfly Network, Inc. (BFLY) has been upgraded to a Zacks Rank 2 (Buy), indicating an upward trend in earnings estimates which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in earnings estimates, which are closely correlated with near-term stock price movements [4][6]. - Rising earnings estimates for Butterfly Network suggest an improvement in the company's underlying business, likely leading to an increase in stock price [5][10]. Zacks Rating System - The Zacks Rank stock-rating system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly Zacks Rank 1 stocks averaging a +25% annual return since 1988 [7][9]. - The upgrade of Butterfly Network to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10]. Earnings Estimate Revisions - Analysts have raised their earnings estimates for Butterfly Network, with the Zacks Consensus Estimate increasing by 7.5% over the past three months [8]. - The company is expected to earn -$0.25 per share for the fiscal year ending December 2025, showing no year-over-year change [8].

Core Insights - Butterfly Network reported a record gross margin of 63.7% and a revenue growth of 9.0% year-over-year for Q2 2025, although revenue slightly missed analyst expectations at $23.4 million [1][2] - The company narrowed its losses with non-GAAP earnings per share of $(0.03), better than the expected $(0.05) [1] - Management revised its full-year revenue guidance down to $91 million to $95 million for FY2025, indicating a shift from earlier expectations of approximately 20% year-on-year growth [1][10] Financial Performance - Revenue for Q2 2025 was $23.4 million, up 8.8% from $21.5 million in Q2 2024 [2] - Gross margin improved by 5.1 percentage points from 58.6% in Q2 2024 to 63.7% in Q2 2025 [2][6] - Product revenue increased by 25% to $14.2 million, while software and services revenue remained flat at $6.8 million [5] Strategic Developments - Butterfly Network focuses on handheld ultrasound devices using Ultrasound-on-Chip technology, targeting a wide range of healthcare providers [3] - The company is expanding clinical partnerships and launching new AI-driven software, including the iQ3 device and upcoming P5 chip [4][7] - Recent pilot programs, such as Butterfly HomeCare, have shown promising results in reducing hospital readmissions [8] Future Outlook - The updated revenue guidance suggests approximately 13% growth for FY2025, down from previous estimates [10] - Despite the reduced revenue outlook, the company expects adjusted EBITDA losses to improve to between $32 million and $37 million for FY2025 [10] - Key areas to monitor include the uptake of new AI-driven software, international expansion, and progress in securing additional hospital contracts [11]

[Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) Outlines forward-looking statements, their reliance on management's beliefs, and inherent uncertainties - The report contains forward-looking statements based on management's beliefs and assumptions, relating to future events or financial performance, including plans, strategies, and prospects[9](index=9&type=chunk) - Key areas of forward-looking statements include product development, regulatory authorization, market competition, market size and growth, financial estimates, and the ability to attract and retain customers[12](index=12&type=chunk) - These statements are subject to inherent risks, uncertainties, and assumptions, detailed in the 'Risk Factors' section of the 2024 Annual Report on Form 10-K and this 10-Q[10](index=10&type=chunk)[11](index=11&type=chunk) [Part I — Financial Information](index=5&type=section&id=Part%20I%20Financial%20Information) Presents unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements, including balance sheets, operations, equity, and cash flows [Condensed Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | **Assets** | | | | | | Total current assets | $253,747 | $192,613 | $61,134 | 31.7% | | Total assets | $313,278 | $256,082 | $57,196 | 22.3% | | **Liabilities** | | | | | | Total current liabilities | $44,666 | $48,215 | $(3,549) | -7.4% | | Total liabilities | $80,472 | $87,250 | $(6,778) | -7.8% | | **Stockholders' Equity** | | | | | | Total stockholders' equity | $232,806 | $168,832 | $63,974 | 37.9% | - The increase in total current assets was primarily driven by a significant increase in cash and cash equivalents from **$88,800 thousand to $148,136 thousand**[15](index=15&type=chunk) - The increase in total stockholders' equity is largely due to an increase in additional paid-in capital from **$970,900 thousand to $1,062,700 thousand**, partially offset by an accumulated deficit[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20(Unaudited)) Details the company's financial performance, including revenue, gross profit, and net loss, for the reported periods | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change | % Change | | :---------------------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Total revenue | $23,383 | $21,487 | $1,896 | 8.8% | | Gross profit | $14,891 | $12,586 | $2,305 | 18.3% | | Loss from operations | $(16,100) | $(17,232) | $1,132 | -6.6% | | Net loss and comprehensive loss | $(13,834) | $(15,706) | $1,872 | -11.9% | | Net loss per common share (basic and diluted) | $(0.06) | $(0.07) | $0.01 | -14.3% | | Metric (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change | % Change | | :---------------------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Total revenue | $44,608 | $39,143 | $5,465 | 14.0% | | Gross profit | $28,272 | $22,863 | $5,409 | 23.7% | | Loss from operations | $(34,566) | $(39,852) | $5,286 | -13.3% | | Net loss and comprehensive loss | $(27,801) | $(37,467) | $9,666 | -25.8% | | Net loss per common share (basic and diluted) | $(0.12) | $(0.18) | $0.06 | -33.3% | - The company reported a reduced net loss for both the three and six months ended June 30, 2025, compared to the prior year periods, driven by increased revenue and improved gross profit[17](index=17&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Unaudited)) Outlines changes in stockholders' equity, reflecting share offerings, stock compensation, and net loss | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :---------------------------------- | :------------ | :---------------- | :----- | | Total Stockholders' Equity | $232,806 | $168,832 | $63,974 | - For the six months ended June 30, 2025, stockholders' equity increased significantly, primarily due to **$81,000 thousand in net proceeds** from a share offering and **$12,148 thousand in stock-based compensation expense**, partially offset by a net loss of **$27,801 thousand**[22](index=22&type=chunk) - The number of Class A common shares issued and outstanding increased from **188,626,154** at December 31, 2024, to **224,609,833** at June 30, 2025, largely due to the public share offering[15](index=15&type=chunk)[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Presents the company's cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net cash used in operating activities | $(18,844) | $(30,667) | $11,823 | | Net cash used in investing activities | $(1,249) | $(1,837) | $588 | | Net cash provided by financing activities | $79,454 | $0 | $79,454 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $59,361 | $(32,504) | $91,865 | | Cash, cash equivalents, and restricted cash, end of period | $152,151 | $106,146 | $46,005 | - Net cash used in operating activities decreased by **$11,823 thousand**, primarily due to an **$8,594 thousand improvement** in net loss adjusted for non-cash items and a **$3,229 thousand improvement** in net working capital cash usage[125](index=125&type=chunk) - Net cash provided by financing activities significantly increased by **$79,454 thousand**, mainly from **$81,000 thousand in net proceeds** from a public share offering in January 2025[127](index=127&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Provides detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1. Organization and Description of Business](index=10&type=section&id=Note%201.%20Organization%20and%20Description%20of%20Business) Describes the company's core business as a digital health entity and its global operational structure - Butterfly Network, Inc. is a digital health business focused on transforming care through portable, semiconductor-based ultrasound technology, intuitive software, and educational offerings[28](index=28&type=chunk) - The company operates wholly-owned subsidiaries in the United States, Australia, Germany, the Netherlands, Taiwan, and the United Kingdom[29](index=29&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=10&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the key accounting principles and methods used in preparing the financial statements - The financial statements are prepared in accordance with U.S. GAAP and SEC interim reporting rules, with certain disclosures condensed or omitted[30](index=30&type=chunk) - The company operates in one reportable segment, with the CEO reviewing consolidated net loss for performance evaluation and resource allocation[35](index=35&type=chunk) - Operating expenses classified as 'other' include costs related to business transformation, reductions in force, litigation, and legal settlements[40](index=40&type=chunk) Other Operating Expenses (in thousands) | Other Operating Expenses (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Employment-related expenses | $488 | $26 | $520 | $(30) | | Legal-related expenses | $1,499 | $580 | $2,171 | $1,994 | | Total other | $1,987 | $606 | $2,691 | $1,964 | [Note 3. Revenue Recognition](index=12&type=section&id=Note%203.%20Revenue%20Recognition) Details revenue streams by product type, geographical market, and remaining performance obligations Revenue by Product Type (in thousands) | Revenue by Product Type (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Hardware | $16,621 | $14,648 | $30,785 | $25,939 | | Software and other services | $6,762 | $6,839 | $13,823 | $13,204 | | Total revenue | $23,383 | $21,487 | $44,608 | $39,143 | Revenue by Geographical Market (in thousands) | Revenue by Geographical Market (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $17,540 | $17,039 | $34,579 | $30,775 | | International | $5,843 | $4,448 | $10,029 | $8,368 | | Total revenue | $23,383 | $21,487 | $44,608 | $39,143 | - As of June 30, 2025, the company had **$40,500 thousand in remaining performance obligations**, with **50% expected to be recognized as revenue** in the next twelve months[46](index=46&type=chunk) [Note 4. Fair Value of Financial Instruments](index=12&type=section&id=Note%204.%20Fair%20Value%20of%20Financial%20Instruments) Explains the fair value measurement hierarchy and presents the fair value of financial instruments - The company measures fair value using a three-tier hierarchy (Level 1: quoted prices in active markets, Level 2: observable inputs for similar assets/liabilities, Level 3: unobservable inputs)[48](index=48&type=chunk)[53](index=53&type=chunk) Warrants (in thousands) | Warrants (in thousands) | June 30, 2025 (Total) | June 30, 2025 (Level 1) | June 30, 2025 (Level 2) | December 31, 2024 (Total) | December 31, 2024 (Level 1) | December 31, 2024 (Level 2) | | :---------------------- | :-------------------- | :---------------------- | :---------------------- | :------------------------ | :-------------------------- | :-------------------------- | | Public Warrants | $828 | $828 | $— | $1,794 | $1,794 | $— | | Private Warrants | $411 | $— | $411 | $891 | $— | $891 | | Total liabilities at fair value | $1,239 | $828 | $411 | $2,685 | $1,794 | $891 | - No warrants were exercised during the three and six months ended June 30, 2025 and 2024[50](index=50&type=chunk) [Note 5. Inventories](index=14&type=section&id=Note%205.%20Inventories) Provides a breakdown of inventory by type and highlights changes in total inventory levels Inventory Type (in thousands) | Inventory Type (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Raw materials | $47,200 | $47,642 | | Work-in-progress | $4,940 | $4,736 | | Finished goods | $16,767 | $18,411 | | Total inventories | $68,907 | $70,789 | - Total inventories decreased slightly from **$70,789 thousand** at December 31, 2024, to **$68,907 thousand** at June 30, 2025[54](index=54&type=chunk) [Note 6. Property and Equipment, Net](index=14&type=section&id=Note%206.%20Property%20and%20Equipment,%20Net) Details the company's property and equipment, net of accumulated depreciation and amortization Property and Equipment (in thousands) | Property and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Property and equipment, gross | $47,918 | $46,415 | | Less: accumulated depreciation and amortization | $(30,589) | $(26,897) | | Property and equipment, net | $17,329 | $19,518 | - Net property and equipment decreased by **$2,189 thousand** from December 31, 2024, to June 30, 2025, primarily due to increased accumulated depreciation and amortization[55](index=55&type=chunk) [Note 7. Restricted Cash](index=14&type=section&id=Note%207.%20Restricted%20Cash) Presents the composition of cash, cash equivalents, and restricted cash, including collateral for leases Restricted Cash (in thousands) | Restricted Cash (in thousands) | June 30, 2025 | June 30, 2024 | | :----------------------------- | :------------ | :------------ | | Cash and cash equivalents | $148,136 | $102,051 | | Restricted cash (current) | $0 | $80 | | Restricted cash (non-current) | $4,015 | $4,015 | | Total cash, cash equivalents and restricted cash | $152,151 | $106,146 | - Restricted cash of **$4,015 thousand** is held as collateral for an office lease and is classified as a non-current asset[56](index=56&type=chunk) - Restrictions on cash related to an agreement with the Bill & Melinda Gates Foundation lapsed as of December 31, 2024[56](index=56&type=chunk) [Note 8. Accrued Expenses and Other Current Liabilities](index=15&type=section&id=Note%208.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Details the components of accrued expenses and other current liabilities, including warranty activity Accrued Expenses (in thousands) | Accrued Expenses (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Employee compensation | $5,485 | $11,192 | | Professional fees | $3,923 | $2,015 | | Total accrued expenses and other current liabilities | $24,334 | $27,695 | Warranty Expense Activity (in thousands) | Warranty Expense Activity (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance, beginning of period | $735 | $644 | $1,023 | $697 | | Warranty provision charged to operations | $495 | $387 | $462 | $483 | | Warranty claims | $(314) | $(219) | $(569) | $(368) | | Balance, end of period | $916 | $812 | $916 | $812 | [Note 9. Stockholders' Equity](index=15&type=section&id=Note%209.%20Stockholders'%20Equity) Discusses changes in stockholders' equity, including share offerings, stock option, RSU activity, and compensation - On January 31, 2025, the company completed a public offering of **27,600,000 Class A common shares**, generating net proceeds of **$81,000 thousand**[58](index=58&type=chunk) Stock Option Activity | Stock Option Activity | Number of Options | | :-------------------- | :---------------- | | Outstanding at December 31, 2024 | 6,560,736 | | Exercised | (179,503) | | Forfeited | (324,195) | | Outstanding at June 30, 2025 | 6,057,038 | Restricted Stock Unit Activity | Restricted Stock Unit Activity | Number of RSUs | | :----------------------------- | :------------- | | Outstanding at December 31, 2024 | 21,250,230 | | Granted | 8,581,432 | | Vested | (7,993,382) | | Forfeited | (1,386,789) | | Outstanding at June 30, 2025 | 20,451,491 | - During Q2 2025, **400,000 RSUs** of a departing employee had their vesting accelerated, resulting in **$500 thousand incremental stock-based compensation expense**[63](index=63&type=chunk) Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total stock-based compensation expense | $5,864 | $5,858 | $12,148 | $11,383 | [Note 10. Net Loss Per Share](index=18&type=section&id=Note%2010.%20Net%20Loss%20Per%20Share) Explains basic and diluted net loss per share calculation, noting anti-dilutive common equivalent shares - Basic and diluted net loss per share were the same for all periods presented, as the inclusion of potential common shares would have been anti-dilutive[67](index=67&type=chunk) Net Loss Per Share (Basic and Diluted) | Net Loss Per Share (Basic and Diluted) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Class A and B common stockholders | $(0.06) | $(0.07) | $(0.12) | $(0.18) | Anti-Dilutive Common Equivalent Shares | Anti-Dilutive Common Equivalent Shares | June 30, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------ | | Outstanding options to purchase common stock | 6,057,038 | 7,022,739 | | Outstanding restricted stock units | 20,451,491 | 21,944,400 | | Outstanding employee stock purchase plan options | 1,949,593 | — | | Outstanding warrants | 20,652,690 | 20,652,690 | | Total anti-dilutive common equivalent shares | 49,110,812 | 49,619,829 | [Note 11. 401(k) Retirement Plan](index=20&type=section&id=Note%2011.%20401(k)%20Retirement%20Plan) Reports the company's expenses related to matching 401(k) contributions for the specified periods 401(k) Contributions (in thousands) | 401(k) Contributions (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Expenses for matching 401(k) contributions | $0.1 | $0.2 | $0.3 | $0.3 | [Note 12. Commitments and Contingencies](index=21&type=section&id=Note%2012.%20Commitments%20and%20Contingencies) Details the company's lease costs, inventory purchase commitments, and ongoing legal proceedings - Total lease cost for the three and six months ended June 30, 2025, was **$700 thousand and $1,400 thousand**, respectively, primarily for operating leases[72](index=72&type=chunk) - As of June 30, 2025, the aggregate minimum inventory purchase commitments were **$4,500 thousand**, with a vendor advance asset of **$2,700 thousand**[73](index=73&type=chunk) - The company is involved in several legal proceedings, including a putative class action lawsuit and stockholder derivative actions, which it intends to vigorously defend against[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's perspective on financial condition, operations, key performance, revenue, expenses, and liquidity [Overview](index=23&type=section&id=Overview) Introduces Butterfly Network's business, strategic financial adjustments, and recent capital raise - Butterfly Network is a digital health company transforming care with portable, semiconductor-based ultrasound technology and cloud-connected software[81](index=81&type=chunk)[82](index=82&type=chunk) - Since 2022, the company has reduced annual cash requirements by approximately **$180,000 thousand to less than $50,000 thousand annually**, aiming to extend its cash runway[83](index=83&type=chunk) - On January 31, 2025, the company raised **$81,000 thousand in net proceeds** from a public offering of Class A common stock to support revenue growth[83](index=83&type=chunk) [Key Performance Measures](index=23&type=section&id=Key%20Performance%20Measures) Discusses changes in units fulfilled and the mix of software and other services revenue - Units fulfilled decreased by **5.1%** for the three months ended June 30, 2025, compared to the prior year, due to lower US probe sales volume partially offset by international and Vet channel growth[87](index=87&type=chunk) - Software and other services mix decreased by **2.9 percentage points to 28.9%** for the three months ended June 30, 2025, primarily reflecting increased product revenue[90](index=90&type=chunk) [Description of Certain Components of Financial Data](index=25&type=section&id=Description%20of%20Certain%20Components%20of%20Financial%20Data) Explains the recognition and classification of revenue, cost of revenue, and operating expenses - Revenue includes product sales (devices, accessories, chips) and software/services (SaaS, support, SDKs, partnerships); product revenue is recognized at a point in time, while software/services are recognized over time[91](index=91&type=chunk) - Cost of product revenue includes manufacturing, personnel, freight, warranty, and inventory costs; cost of software and other services revenue includes personnel, cloud hosting, and payment processing fees[94](index=94&type=chunk)[95](index=95&type=chunk) - Research and development expenses are primarily for new product/service development and improvements, expensed as incurred; sales and marketing expenses are for commercial capabilities, and general and administrative expenses cover personnel, insurance, patent fees, and professional services[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - Operating expenses classified as 'other' are non-recurring, such as employee severance, business transformation, and litigation costs[99](index=99&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, detailing revenue, gross profit, and operating expenses [Comparison of the three months ended June 30, 2025 and 2024](index=26&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030,%202025%20and%202024) Compares financial performance, including revenue and operating expenses, for the three-month periods | Metric (in thousands) | 2025 | 2024 | Change | % Change | | :-------------------- | :--- | :--- | :----- | :------- | | Product revenue | $16,621 | $14,648 | $1,973 | 13.5% | | Software and other services revenue | $6,762 | $6,839 | $(77) | -1.1% | | Total revenue | $23,383 | $21,487 | $1,896 | 8.8% | - Product revenue increased by **13.5%** due to higher selling prices of the iQ3 probe and semiconductor chip deliveries, partially offset by lower US probe sales volume[102](index=102&type=chunk)[103](index=103&type=chunk) - Cost of revenue as a percentage of revenue decreased from **41.4% to 36.3%**, driven by a decrease in software amortization expense and manufacturing efficiency improvements[105](index=105&type=chunk) Operating Expense (in thousands) | Operating Expense (in thousands) | 2025 | 2024 | Change | % Change | | :------------------------------- | :--- | :--- | :----- | :------- | | Research and development | $8,315 | $9,411 | $(1,096) | -11.6% | | Sales and marketing | $11,559 | $9,728 | $1,831 | 18.8% | | General and administrative | $9,130 | $10,073 | $(943) | -9.4% | | Other | $1,987 | $606 | $1,381 | 227.9% | - Sales and marketing expenses increased by **18.8%** due to investments in the sales force and marketing functions[107](index=107&type=chunk) - Other operating expenses increased significantly by **227.9%** due to higher legal costs from litigation and employment-related costs[109](index=109&type=chunk) [Comparison of the six months ended June 30, 2025 and 2024](index=29&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030,%202025%20and%202024) Compares financial performance, including revenue and operating expenses, for the six-month periods | Metric (in thousands) | 2025 | 2024 | Change | % Change | | :-------------------- | :--- | :--- | :----- | :------- | | Product revenue | $30,785 | $25,939 | $4,846 | 18.7% | | Software and other services revenue | $13,823 | $13,204 | $619 | 4.7% | | Total revenue | $44,608 | $39,143 | $5,465 | 14.0% | - Product revenue increased by **18.7%** due to higher iQ3 probe selling prices, increased international volume, and semiconductor chip deliveries[110](index=110&type=chunk) - Software and other services revenue increased by **4.7%** driven by software subscription revenue and partnership revenues[111](index=111&type=chunk) - Cost of revenue as a percentage of revenue decreased from **41.6% to 36.6%**, primarily due to decreased software amortization and manufacturing efficiencies[113](index=113&type=chunk) Operating Expense (in thousands) | Operating Expense (in thousands) | 2025 | 2024 | Change | % Change | | :------------------------------- | :--- | :--- | :----- | :------- | | Research and development | $18,239 | $20,131 | $(1,892) | -9.4% | | Sales and marketing | $23,179 | $20,106 | $3,073 | 15.3% | | General and administrative | $18,729 | $20,514 | $(1,785) | -8.7% | | Other | $2,691 | $1,964 | $727 | 37.0% | - Sales and marketing expenses increased by **15.3%** due to higher personnel costs from investments in sales and marketing functions[115](index=115&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses cash position, capital raising activities, and ability to meet future financial obligations - As of June 30, 2025, cash and cash equivalents totaled **$148,136 thousand**, with **$81,000 thousand raised** from a public share offering in January 2025[119](index=119&type=chunk) - The company expects existing cash and cash flows from operations to be sufficient to meet liquidity, capital expenditure, and working capital requirements for at least the next 12 months[119](index=119&type=chunk) Material Cash Requirements (as of June 30, 2025, in millions) | Material Cash Requirements (as of June 30, 2025, in millions) | Total Obligation | Payable within 12 months | | :------------------------------------------------ | :--------------- | :----------------------- | | Fixed office lease payment obligations | $26.2 | $3.7 | | Fixed technology license payment obligations | $14.0 | $3.5 | | Fixed purchase obligations for inventory supply agreements (net of vendor advances) | $1.8 | $1.8 | | Fixed outsourced services payment obligations | $4.2 | $1.4 | [Cash flows](index=32&type=section&id=Cash%20flows) Analyzes the company's cash movements from operating, investing, and financing activities Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net cash used in operating activities | $(18,844) | $(30,667) | $11,823 | | Net cash used in investing activities | $(1,249) | $(1,837) | $588 | | Net cash provided by financing activities | $79,454 | $0 | $79,454 | - Net cash used in operating activities decreased by **$11,823 thousand**, driven by improvements in net loss (adjusted for non-cash items) and net working capital cash usage[125](index=125&type=chunk) - Net cash provided by financing activities increased by **$79,454 thousand**, primarily due to **$81,000 thousand** from the public share offering in January 2025[127](index=127&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=33&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) States no material changes to critical accounting policies and estimates - There have been no material changes to the critical accounting policies and estimates disclosed in the 2024 Annual Report on Form 10-K[129](index=129&type=chunk) [Recently Adopted Accounting Pronouncements](index=33&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) Indicates no significant impact from recently issued accounting pronouncements on the company's financials - The company did not identify any significant recently issued accounting pronouncements that may potentially impact its financial position and results of operations[130](index=130&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses exposure to market risks, including interest rate, inflation, and foreign exchange risks - The company has no floating rate debt and its cash and cash equivalents are primarily in bank deposits and money market accounts, with low exposure to interest rate fluctuations[131](index=131&type=chunk) - Inflation has not had a material effect on the business, but the company acknowledges potential harm if higher costs from inflationary pressures cannot be offset[132](index=132&type=chunk) - Operating primarily in the U.S. with transactions in U.S. dollars, the company has limited foreign currency translation risk and has not utilized hedging strategies[133](index=133&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Details evaluation of disclosure controls and procedures and reports on internal control changes - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[136](index=136&type=chunk) - No changes in internal control over financial reporting occurred during the three months ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[137](index=137&type=chunk) [Part II — Other Information](index=34&type=section&id=Part%20II%20Other%20Information) Provides additional information on legal proceedings, risk factors, equity sales, and other disclosures [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Refers to the detailed discussion of legal proceedings and claims within the financial statement notes - The company is involved in litigation and legal matters arising in the normal course of business, with outcomes inherently uncertain[139](index=139&type=chunk) - Further information on legal proceedings is incorporated by reference from Note 12 'Commitments and Contingencies' in Part I, Item 1[140](index=140&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) States no material changes to risk factors previously disclosed in the 2024 Annual Report on Form 10-K - There have been no material changes to the risk factors described in the 2024 Annual Report on Form 10-K[141](index=141&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered sales or issuer repurchases of equity securities during the period - No unregistered sales of equity securities occurred during the period[142](index=142&type=chunk) - The company did not repurchase any of its equity securities during the three months ended June 30, 2025[143](index=143&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) Provides information on Rule 10b5-1 trading arrangements and new indemnification agreements - None of the company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[144](index=144&type=chunk) - On July 30, 2025, the board approved a new form of indemnification agreement for directors and certain officers, superseding previous agreements[146](index=146&type=chunk) - The new Indemnification Agreement provides for indemnification and expense advancement to the fullest extent permitted by law for losses incurred in connection with their status as a director or officer[147](index=147&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, plans, and certifications - The exhibit index includes corporate governance documents (Certificate of Incorporation, Bylaws), executive compensation plans (Executive Severance Plan, Director Compensation Policy), and a new Form of Indemnification Agreement[151](index=151&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included[151](index=151&type=chunk) - Inline XBRL documents for financial data are also part of the exhibits[151](index=151&type=chunk)[152](index=152&type=chunk) [Signatures](index=39&type=section&id=Signatures) Confirms the report's official signing by the Executive Vice President and Chief Financial & Operations Officer - The report was signed on behalf of Butterfly Network, Inc. by Heather C. Getz, CPA, Executive Vice President and Chief Financial & Operations Officer, on August 1, 2025[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)

Financial Data and Key Metrics Changes - The company reported record revenue of $23.4 million for Q2 2025, representing a 9% increase year-over-year, driven by higher average selling prices and sales of semiconductor chips [16][20] - Gross margins reached an all-time high of 64%, up from 59% in the prior year, attributed to higher average selling prices and improved software and services margins [20] - Adjusted EBITDA loss improved to $6.2 million from $8.1 million in the same period last year, reflecting a 24% improvement [20][24] Business Line Data and Key Metrics Changes - Product revenue was $16.6 million, a 13% increase compared to Q2 2024, primarily due to higher average selling prices and chip sales [18] - Software and other services revenue remained flat at $6.8 million, impacted by lower renewals of individual subscriptions and implementation services revenue [19] - Total annual recurring revenue (ARR) grew slightly, led by an increase in enterprise software subscription ARR [19] Market Data and Key Metrics Changes - U.S. revenue was $17.2 million, essentially flat year-over-year, affected by lower probe volume despite chip sales [17] - International revenue increased by 19% to $6.2 million, driven by price and volume growth from the international launch of iQ3 [18] Company Strategy and Development Direction - The company is focusing on larger deals and expanding its enterprise and medical school pipeline, with a recent large enterprise deal closed in Q2 [7][8] - The launch of the next-generation software platform, Compass AI, is expected to enhance documentation processes and increase penetration within existing customers [27][28] - The company is optimistic about the long-term growth potential of handheld ultrasound technology and aims to leverage its core competencies to deliver new revenue streams [32][33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic headwinds affecting purchase decisions and delayed large deals, but remains confident in the long-term value proposition of its products [5][24] - The company adjusted its full-year revenue guidance to a range of $91 million to $95 million, emphasizing fiscal discipline while investing in growth areas [24][25] - Management believes that the current uncertainties are temporary and expects a return to normalcy as healthcare providers adapt to changes [60][61] Other Important Information - The company announced the departure of its CFO, Heather Getz, with Megan Carlson appointed as interim CFO [13][14] - The Butterfly Garden initiative is entering its commercial phase, with new AI tools expected to enhance clinical use [9][11] Q&A Session Summary Question: Competitive landscape and its impact - Management clarified that the guidance revision was not due to competitive pressures but rather delays in larger deals, emphasizing that they are pioneering new market segments [36][38] Question: Software subscription revenue trends - The software revenue is experiencing a mixed performance, with individual subscriptions facing churn while enterprise software is growing, aided by the upcoming Compass AI [41][42] Question: Guidance assumptions and enterprise side impact - Management noted that delays in global health deals and enterprise sales have led to a conservative guidance revision, but they remain optimistic about future opportunities [55][56] Question: Home care program details - The home care program is expected to generate revenue through a program fee based on enrolled patients and revenue per scan, with significant potential for scaling [67][69] Question: Readmission reduction in heart failure - Management indicated a significant reduction in readmissions, with plans to demonstrate the scalability of pilot results to secure broader agreements [84][85] Question: IQ Station and P5 updates - The IQ Station is expected to compete with existing ultrasound carts, while the P5 technology is anticipated to significantly enhance image quality, positioning the company favorably in the market [90][92]

Financial Data and Key Metrics Changes - The company reported record revenue of $23.4 million for Q2 2025, representing a 9% increase compared to the previous year, driven by higher average selling prices and sales of semiconductor chips [16][20] - Gross margins reached an all-time high of 64%, up from 59% in the prior year, attributed to higher average selling prices and improved software and services margins [20] - Adjusted EBITDA loss improved to $6.2 million from $8.1 million in the same period last year, reflecting a 24% improvement [20][24] Business Line Data and Key Metrics Changes - Product revenue was $16.6 million, a 13% increase year-over-year, primarily due to higher average selling prices and chip sales [18] - Software and other services revenue remained flat at $6.8 million, impacted by lower renewals of individual subscriptions and implementation services revenue [19] - Total Annual Recurring Revenue (ARR) grew slightly, led by an increase in enterprise software subscription ARR [19] Market Data and Key Metrics Changes - U.S. revenue was $17.2 million, essentially flat year-over-year, affected by lower probe volume despite higher average selling prices [17] - International revenue increased by 19% to $6.2 million, driven by the international launch of iQ3 and geographic expansion [17] Company Strategy and Development Direction - The company is focusing on larger deals and expanding its enterprise and medical school pipeline, despite delays in closing some larger deals [6][22] - The launch of the next-generation software platform, Compass AI, is expected to enhance documentation processes and improve enterprise sales [27][28] - The company is optimistic about the long-term growth potential of handheld ultrasound technology and its ability to drive worldwide adoption [34] Management's Comments on Operating Environment and Future Outlook - Management noted macroeconomic headwinds affecting purchase decisions, particularly in the U.S. hospital and enterprise channels [22][60] - The company has adjusted its full-year revenue guidance to a range of $91 million to $95 million, reflecting the need to close delayed larger deals [23][24] - Management remains confident in the company's value proposition and believes it will thrive in a cost-contained healthcare environment [5][34] Other Important Information - The company announced the departure of its CFO, Heather Gatz, who will transition to an advisory role until early 2026 [13][15] - The Butterfly Garden initiative is entering its commercial phase, with new AI tools expected to enhance clinical use [9][11] Q&A Session Summary Question: Competitive landscape and headwinds - Management clarified that the guidance revision was not due to competition but rather delays in larger deals, emphasizing that they are pioneering new market segments [36][38] Question: Software subscription revenue trends - Management indicated that individual subscription renewals face challenges, while enterprise software is growing, aided by the upcoming Compass AI [42][44] Question: Guidance assumptions and enterprise side impact - Management noted that delays in global health deals and enterprise sales have led to a conservative guidance adjustment, but they remain optimistic about future opportunities [54][56] Question: Home care pilot program details - Management shared that the home care program has shown significant reductions in readmissions, and they are working to finalize commercial agreements [65][67] Question: IQ Station and P5 updates - Management confirmed that IQ Station will compete with existing ultrasound carts, and the P5 technology is expected to significantly enhance image quality [91][93]