Business Wire | Nov 15, 2021 08:00AM EST

Butterfly Network Reports Third Quarter 2021 Financial Results

Nov. 15, 2021

GUILFORD, Conn. & NEW YORK--(BUSINESS WIRE)--Nov. 15, 2021--Butterfly Network, Inc. (NYSE: BFLY) ("Butterfly"), an innovative digital health company that is working to democratize medical imaging and improve global health equity, today announced financial results for the quarter ended September 30, 2021, and provided a business update.

Third Quarter 2021 Highlights:

* Reported revenue of $14.6 million for the quarter ended September 30, 2021, representing a 44.3% increase from $10.1 million in the third quarter of 2020. * Reported gross profit of negative $5.1 million and gross margin of negative 35%. In the third quarter, adjusted gross margin which excludes a non-recurring loss on purchase commitments, was 49.3%. * Appointed a new member to the Board of Directors and a Senior Vice President, Regulatory and Quality to support Butterfly's growth strategy. * Added distributor partnerships in the Middle East, India, Pakistan, and Chile. The distributor partnership in Pakistan will focus on improving health outcomes for expectant mothers. * Announced an exclusive strategic partnership with Caption Health to enable earlier disease detection and management with AI-based guidance and diagnostics for enhanced cardiac assessment. * Launched Butterfly iQ+ Vet, expanded to 19 new vet markets, and added a large-scale partnership.

"Our journey to make Butterfly an indispensable, advanced assessment tool for better clinical decision making is well underway," said Dr. Todd Fruchterman, Butterfly's President and Chief Executive Officer. "As a young public company we continue to generate substantial year over year growth, demonstrate mounting market momentum, and are assured by consistent industry signals that our strategy is the right one. As we continue to invest in our foundation, bring new innovative solutions to market, and prove the differentiated clinical and economic value of Butterfly, we expect accelerated growth in 2022 and beyond."

Third Quarter 2021 Financial Results

Third quarter revenue increased 44.3% to $14.6 million from $10.1 million in the third quarter of 2020. Product revenue increased 25.8% to $10.8 million from $8.6 million in the third quarter of 2020. Subscription revenue increased 149.2% to $3.8 million from $1.5 million in the third quarter of 2020.

Gross profit for the third quarter of 2021 was negative $5.1 million, compared to gross profit of a negative $69.3 million in the third quarter of 2020. Adjusted gross profit was $7.2 million for the third quarter of 2021, compared to an adjusted gross profit of negative $2.7 million in the third quarter of 2020.

Total gross margin for the quarter was negative 35%, compared to negative 683.3% in the third quarter of 2020. Adjusted gross margin was 49.3%, compared to a negative 26.3% in the third quarter of 2020. Adjusted gross margin excluded a $11.6 million non-recurring loss on purchase commitment related to an inventory supply agreement where the expected losses exceed the benefit of the contracts.

Operating expenses were $51.9 million, compared to $22.6 million in the third quarter of 2020, representing an increase of 129.7% primarily due to the build out of personnel and services to support growth initiatives and incremental expenses related to being a publicly traded company.

Net loss was approximately $13.6 million, compared to a net loss of $92.2 million during the third quarter of 2020. Adjusted EBITDA was a loss of $33.5 million during the third quarter of 2021, compared to a loss of $22.6 million in the third quarter of 2020.

Cash and cash equivalents and marketable securities were $468.4 million as of September 30, 2021.

A reconciliation of Adjusted EBITDA to net loss, Adjusted gross profit to gross profit, and Adjusted gross margin to gross margin for the three and nine months ended September 30, 2021 and 2020, is provided in the financial schedules that are part of this press release. An explanation of these non-GAAP financial measures is also included below under the heading "Non-GAAP Financial Measures."

2021 Financial Guidance

* Revenue is expected to be approximately $60 million to $62 million, or approximately 30% to 34% growth year-over-year. * Gross margin is expected to be approximately 28% to 30%. Adjusted gross margin is expected to be approximately 48% to 50%. * Net loss is expected to be approximately $(65) million to $(75) million. Adjusted EBITDA loss is expected to be approximately $(125) million to $(135) million.

Butterfly may incur charges, realize gains or losses, incur financing costs, or interest expense, or experience other events in 2021 that could cause actual results to vary materially from this guidance.

Conference Call

A conference call to review the third quarter 2021 financial results and provide a business update is scheduled for November 15, 2021, at 8:30 am Eastern Time. Interested parties may access the conference call by dialing (888) 440-4052 (U.S.) or (646) 960-0827 (Outside U.S.) and referencing Conference ID 9393576. Additionally, a link to a live webcast of the call will be available in the Investor Relations section of Butterfly's website at Butterfly Network, Inc. - Events & Presentations - Events.

About Butterfly Network, Inc.

Founded by Dr. Jonathan Rothberg in 2011, Butterfly Network has created the world's first handheld, single-probe whole-body ultrasound system using its patented Ultrasound-on-Chip(tm) semiconductor technology. Butterfly's mission is to democratize medical imaging and contribute to the aspiration of global health equity, including for the 4.7 billion people around the world lacking access to ultrasound. Butterfly is paving the way for earlier detection and remote management of health conditions around the world. The Butterfly iQ+ and Butterfly iQ+ Vet can be purchased today by healthcare practitioners and veterinarians, respectively, in the United States, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Butterfly iQ+ is a prescription device intended for trained and qualified healthcare professionals only.

Non-GAAP Financial Measures

In addition to providing financial measurements based on generally accepted accounting principles in the United States of America ("GAAP"), the Company provides additional financial metrics that are not prepared in accordance with GAAP ("non-GAAP"). The non-GAAP financial measures included in this press release are Adjusted EBITDA, Adjusted gross profit and Adjusted gross margin. The Company presents non-GAAP financial measures in order to assist readers of its consolidated financial statements in understanding the core operating results that its management uses to evaluate the business and for financial planning purposes. The Company's non-GAAP financial measures, Adjusted EBITDA, Adjusted gross profit and Adjusted gross margin, provide an additional tool for investors to use in comparing our financial performance over multiple periods.

Adjusted EBITDA, Adjusted gross profit and Adjusted gross margin are key performance measures that the Company's management uses to assess our operating performance. These non-GAAP measures facilitate internal comparisons of the Company's operating performance on a more consistent basis. The Company uses these performance measures for business planning purposes and forecasting. The Company believes that Adjusted EBITDA, Adjusted gross profit and Adjusted gross margin enhance an investor's understanding of the Company's financial performance as they are useful in assessing its operating performance from period-to-period by excluding certain items that the Company believes are not representative of its core business.

Adjusted EBITDA, Adjusted gross profit and Adjusted gross margin may not be comparable to similarly titled measures of other companies because they may not calculate these measures in the same manner. Adjusted EBITDA, Adjusted gross profit and Adjusted gross margin are not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. When evaluating the Company's performance, you should consider Adjusted EBITDA, Adjusted gross profit and Adjusted gross margin alongside other financial performance measures prepared in accordance with GAAP, including net loss, gross profit, and gross margin.

The non-GAAP financial measures do not replace the presentation of the Company's GAAP financial results and should only be used as a supplement to, not as a substitute for, the Company's financial results presented in accordance with GAAP. In this press release, the Company has provided a reconciliation of Adjusted EBITDA to net loss, Adjusted gross profit to gross profit, and Adjusted gross margin to gross margin, the most directly comparable GAAP financial measures. A reconciliation of Adjusted EBITDA, Adjusted gross profit and Adjusted gross margin to corresponding GAAP measures is not available on a forward-looking basis because the Company is unable to predict with reasonable certainty the non-cash component of employee compensation expense, changes in its working capital needs, variances in its supply chain, the impact of earnings or charges resulting from matters the Company considers not to be reflective, on a recurring basis, of its ongoing operations, and other such items without unreasonable effort. These items are uncertain, depend on various factors, and could be material to the Company's results computed in accordance with GAAP. Management strongly encourages investors to review the Company's financial statements and publicly filed reports in their entirety and not rely on any single financial measure.

Forward Looking Statements

This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. The Company's actual results may differ from its expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believes," "predicts," "potential," "continue," and similar expressions (or the negative versions of such words or expressions) are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, the Company's expectations with respect to financial results, future performance, development of products and services, and the size and potential growth of current or future markets for its products and services. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from those discussed in the forward-looking statements. Most of these factors are outside the Company's control and are difficult to predict. Factors that may cause such differences include, but are not limited to: the impact of COVID-19 on the Company's business; the ability to recognize the anticipated benefits of the business combination; the Company's ability to grow and manage growth profitably; the success, cost and timing of the Company's product and service development activities; the potential attributes and benefits of the Company's products and services; the degree to which our products and services are accepted by healthcare practitioners and patients for their approved uses; the Company's ability to obtain and maintain regulatory approval for its products, and any related restrictions and limitations of any approved product; the Company's ability to identify, in-license or acquire additional technology; the Company's ability to maintain its existing license, manufacture, supply and distribution agreements; manufacturing and supply of the Company's products; the Company's ability to compete with other companies currently marketing or engaged in the development of products and services that the Company is currently marketing or developing; changes in applicable laws or regulations; the size and growth potential of the markets for the Company's products and services, and its ability to serve those markets, either alone or in partnership with others; the pricing of the Company's products and services and reimbursement for medical procedures conducted using its products and services; the Company's estimates regarding expenses, revenue, capital requirements and needs for additional financing; the Company's financial performance; the Company's ability to raise financing in the future; and other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. The Company cautions that the foregoing list of factors is not exclusive. The Company cautions you not to place undue reliance upon any forward-looking statements, which speak only as of the date of this press release. The Company does not undertake or accept any obligation or undertake to release publicly any updates or revisions to any forward-looking statements to reflect any change in the Company's expectations or any change in events, conditions or circumstances on which any such statement is based.

BUTTERFLY NETWORK, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(In thousands, except share and per share amounts)(Unaudited) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Revenue: 10,848 33,455 25,820Product $ $ 8,621 $ $

10,123 Subscription 3,773 1,514 4,777

Total revenue $ 14,621 $ 10,135 $ 43,578 $ 30,597

Cost of revenue: Loss on product 11,623 63,993 11,623 63,993purchasecommitments 14,619 21,090 35,266Product 7,584

Subscription 536 774 1,351 1,260

Total cost of $ 19,743 $ 79,386 $ 34,064 $ 100,519revenue (69,251) (69,922)Gross profit $ (5,122) $ $ 9,514 $

Operatingexpenses:Research and $ 21,654 $ 11,971 54,459 36,427developmentSales and 14,203 34,550 17,408marketing 5,538

General and 16,008 67,928 15,651administrative 5,068

Total operating 51,865 22,577 156,937 69,486expenses Loss from $ (56,987) $ (91,828) $ (147,423) $ (139,408)operations Interest income $ 893 $ 16 1,739 238

Interest expense - (300) (645) (418)

Change in fair 42,958 130,528 value of warrant - -liabilitiesOther income (expense), net (428) (84) (1,320) (183)

Loss before (13,564) (92,196) (17,121) (139,771)provision for $ $ $ $income taxesProvision for income taxes (3) 12 72 32

Net loss and (13,561) (92,208) (17,193) (139,803)comprehensive $ $ $ $lossNet loss percommon shareattributable to Class A and B $ (0.07) $ (15.20) $ (0.10) $ (23.20)commonstockholders,basic anddilutedWeighted-averageshares used tocompute net losspershare 196,095,192 6,066,117 165,656,408 6,026,658attributable to Class A and Bcommonstockholders,basic anddilutedBUTTERFLY NETWORK, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share amounts)(Unaudited)September 30,December 31,2021

2020

AssetsCurrent assets:Cash and cash equivalents$153,326

$60,206

Marketable securities315,099

-

Accounts receivable, net9,538

5,752

Inventories23,820

25,805

Current portion of vendor advances24,975

2,571

Prepaid expenses and other current assets16,753

2,998

Total current assets$543,511

$97,332

Property and equipment, net9,368

6,870

Non-current portion of vendor advances20,601

37,390

Other non-current assets6,838

5,599

Total assets$580,318

$147,191

Liabilities, convertible preferred stock and stockholders' equity (deficit)Current liabilities:Accounts payable$5,017

$16,400

Deferred revenue, current12,015

8,443

Accrued purchase commitments, current5,329

22,890

Accrued expenses and other current liabilities22,809

21,962

Total current liabilities$45,170

$69,695

Deferred revenue, non-current4,878

2,790

Convertible debt-

49,528

Loan payable-

4,366

Warrant liabilities56,796

-

Accrued purchase commitments, non-current14,200

19,660

Other non-current liabilities8,013

2,146

Total liabilities$129,057

$148,185

Commitments and contingencies (Note 16)Convertible preferred stock:Convertible preferred stock (Series A, B, C and D) $.0001 par value with an aggregateliquidation preference of $0 and $383,829 at September 30, 2021 and December 31, 2020,respectively; 0 and 107,197,118 shares authorized, issued and outstanding at September 30,2021 and December 31, 2020, respectively-

360,937

Stockholders' equity (deficit):Class A common stock $.0001 par value; 600,000,000 and 116,289,600 shares authorized at September 30, 2021 and December 31, 2020, respectively; 170,573,310 and 6,593,291 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

17

1

Class B common stock $.0001 par value; 27,000,000 and 26,946,089 shares authorized atSeptember 30, 2021 and December 31, 2020, respectively; 26,426,937 and 0 shares issuedand outstanding at September 30, 2021 and December 31, 2020, respectively3

-

Additional paid-in capital863,240

32,874

Accumulated deficit(411,999)

(394,806)

Total stockholders' equity (deficit)$451,261

$(361,931)

Total liabilities, convertible preferred stock and stockholders' equity (deficit)$580,318

$147,191

BUTTERFLY NETWORK, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share amounts)(Unaudited) September 30, December 31, 2021 2020

Assets Current assets: 153,326 Cash and cash equivalents $ $ 60,206

315,099 Marketable securities -

9,538 Accounts receivable, net 5,752

23,820 Inventories 25,805

24,975 Current portion of vendor advances 2,571

Prepaid expenses and other current 16,753 assets 2,998

543,511 Total current assets $ $ 97,332

9,368 Property and equipment, net 6,870

20,601 Non-current portion of vendor advances 37,390

6,838 Other non-current assets 5,599

Total assets $ 580,318 $ 147,191

Liabilities, convertible preferredstock and stockholders' equity (deficit)Current liabilities: 5,017 Accounts payable $ $ 16,400

12,015 Deferred revenue, current 8,443

5,329 Accrued purchase commitments, current 22,890

Accrued expenses and other current 22,809 liabilities 21,962

45,170 Total current liabilities $ $ 69,695

4,878 Deferred revenue, non-current 2,790

- Convertible debt 49,528

- Loan payable 4,366

56,796 Warrant liabilities -

Accrued purchase commitments, 14,200 non-current 19,660

8,013 Other non-current liabilities 2,146

Total liabilities $ 129,057 $ 148,185

Commitments and contingencies (Note 16)Convertible preferred stock:Convertible preferred stock (Series A,B, C and D) $.0001 par value with anaggregateliquidation preference of $0 and$383,829 at September 30, 2021 and - 360,937December 31, 2020,respectively; 0 and 107,197,118 sharesauthorized, issued and outstanding atSeptember 30,2021 and December 31, 2020,respectivelyStockholders' equity (deficit):Class A common stock $.0001 par value;600,000,000 and 116,289,600 sharesauthorizedat September 30, 2021 and December 31,2020, respectively; 170,573,310 and 17 16,593,291shares issued and outstanding atSeptember 30, 2021 and December 31,2020, respectively

Class B common stock $.0001 par value;27,000,000 and 26,946,089 sharesauthorized at September 30, 2021 and December 31, 3 -2020, respectively; 26,426,937 and 0shares issuedand outstanding at September 30, 2021and December 31, 2020, respectively 863,240 Additional paid-in capital 32,874

(411,999) Accumulated deficit (394,806)

451,261 Total stockholders' equity (deficit) $ $ (361,931)

Total liabilities, convertible 580,318 147,191preferred stock and stockholders' $ $equity (deficit)BUTTERFLY NETWORK, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)Nine months ended September 30,2021

2020

Cash flows from operating activities:Net loss$(17,193)

$(139,803)

Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization 1,420

904

Non-cash interest expense on convertible debt389

418

Write-down of inventories582

6,923

Stock-based compensation expense38,769

7,727

Change in fair value of warrant liabilities(130,528)

-

Other665

731

Changes in operating assets and liabilities:Accounts receivable(3,674)

(1,475)

Inventories1,432

(12,426)

Prepaid expenses and other assets(8,896)

(340)

Vendor advances(5,615)

5,003

Accounts payable(11,276)

3,236

Deferred revenue5,660

2,662

Accrued purchase commitments(23,021)

63,376

Accrued expenses and other liabilities4,876

1,987

Net cash used in operating activities$(146,410)

$(61,077)

Cash flows from investing activities:Purchases of marketable securities(1,018,095)

-

Sales of marketable securities702,152

-

Purchases of property and equipment(3,826)

(2,597)

Net cash used in investing activities$(319,769)

$(2,597)

Cash flows from financing activities:Proceeds from exercise of stock options and warrants19,314

391

Net proceeds from equity infusion from the Business Combination548,403

-

Proceeds from loan payable-

4,317

Proceeds from issuance of convertible debt-

20,650

Payment of loan payable(4,366)

-

Payments of debt issuance costs(52)

-

Net cash provided by financing activities$563,299

$25,358

Net (decrease) increase in cash, cash equivalents and restricted cash$97,120

$(38,316)

Cash, cash equivalents and restricted cash, beginning of period60,206

90,002

Cash, cash equivalents and restricted cash, end of period$157,326

$51,686

Reconciliation of cash, cash equivalents and restricted cash reported within thecondensed consolidated balance sheetsCash and cash equivalents$153,326

$51,686

Restricted cash4,000

-

Total cash, cash equivalents and restricted cash shown in the statement of cash flows$157,326

$51,686

BUTTERFLY NETWORK, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited) Nine months ended September 30, 2021 2020

Cash flows from operatingactivities: (139,803)Net loss $ (17,193) $

Adjustments to reconcilenet loss to net cash used in operating activities:Depreciation and amortization 1,420 904

Non-cash interest expense on convertible debt 389 418

Write-down of inventories 582 6,923

Stock-based compensation expense 38,769 7,727

Change in fair value of (130,528) warrant liabilities -

Other 665 731

Changes in operating assets and liabilities: Accounts receivable (3,674) (1,475)

Inventories 1,432 (12,426)

Prepaid expenses and other assets (8,896) (340)

Vendor advances (5,615) 5,003

Accounts payable (11,276) 3,236

Deferred revenue 5,660 2,662

Accrued purchase commitments (23,021) 63,376

Accrued expenses and other liabilities 4,876 1,987

Net cash used in operating (146,410) activities $ $ (61,077)

Cash flows from investing activities:Purchases of marketable (1,018,095) securities -

Sales of marketable 702,152 securities -

Purchases of property and equipment (3,826) (2,597)

Net cash used in investing (319,769) activities $ $ (2,597)

Cash flows from financing activities:Proceeds from exercise of stock options and warrants 19,314 391

Net proceeds from equity 548,403 infusion from the Business -Combination Proceeds from loan payable - 4,317

Proceeds from issuance of convertible debt - 20,650

Payment of loan payable (4,366) -

Payments of debt issuance costs (52) -

Net cash provided by 563,299 financing activities $ $ 25,358

Net (decrease) increase in cash, cash equivalents and $ 97,120 $ (38,316)restricted cashCash, cash equivalents and restricted cash, beginning 60,206 90,002of periodCash, cash equivalents and 157,326 restricted cash, end of $ $ 51,686period Reconciliation of cash,cash equivalents andrestricted cash reportedwithin thecondensed consolidatedbalance sheets 153,326 Cash and cash equivalents $ $ 51,686

Restricted cash 4,000 -

Total cash, cash equivalents and restricted $ 157,326 $ 51,686cash shown in the statementof cash flowsBUTTERFLY NETWORK, INC.ADJUSTED GROSS PROFIT AND ADJUSTED GROSS MARGIN(In thousands)(Unaudited)Three months ended September 30,Nine months ended September 30,2021

2020

2021

2020

Revenue$14,621

$10,135

$43,578

$30,597

Cost of revenue19,743

79,386

34,064

100,519

Gross profit$(5,122)

$(69,251)

$9,514

$(69,922)

Gross margin(35.0)%

(683.3)%

21.8%

(228.5)%

Add:Depreciation and amortization131

23

291

69

Warranty liability policy change-

-

(560)

-

Loss on purchase commitments11,623

63,993

11,623

63,993

Inventory write-downs582

2,570

582

2,570

Adjusted gross profit$7,214

$(2,665)

$21,450

$(3,290)

Adjusted gross margin49.3%

(26.3)%

49.2%

(10.8)%

BUTTERFLY NETWORK, INC.ADJUSTED GROSS PROFIT AND ADJUSTED GROSS MARGIN(In thousands)(Unaudited) Three months ended September 30, Nine months ended September 30, 2021 2020 2021 2020

14,621 10,135 30,597Revenue $ $ $ 43,578 $

Cost of 19,743 79,386 100,519revenue 34,064

(69,251) (69,922)Gross profit $ (5,122) $ $ 9,514 $

Gross margin (35.0)% (683.3)% 21.8% (228.5)%

Add: Depreciation and 131 23 291 69amortizationWarranty liability - - (560) -policychangeLoss on 11,623 63,993 63,993purchase 11,623 commitmentsInventory write-downs 582 2,570 582 2,570

Adjusted gross profit $ 7,214 $ (2,665) $ 21,450 $ (3,290)

Adjusted 49.3% (26.3)% 49.2% (10.8)%gross marginBUTTERFLY NETWORK, INC.ADJUSTED EBITDA(In thousands)(Unaudited)Three months ended September 30,Nine months ended September 30,(In thousands)2021

2020

2021

2020

Net loss$(13,561)

$(92,208)

$(17,193)

$(139,803)

Interest income(893)

(16)

(1,739)

(238)

Interest expense-

300

645

418

Change in fair value of warrant liabilities(42,958)

-

(130,528)

-

Other expense, net428

84

1,320

183

Provision for income taxes(3)

12

72

32

Stock based compensation10,734

2,382

38,769

7,727

Depreciation and amortization505

311

1,420

904

CEO transition costs-

-

5,398

-

Warranty liability policy change-

-

(560)

-

Transaction bonus-

-

1,653

-

Loss on purchase commitments11,623

63,993

11,623

63,993

Inventory write-downs582

2,570

582

2,570

Adjusted EBITDA$(33,543)

$(22,572)

$(88,538)

$(64,214)

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CONTACT: Investors Agnes Lee 650.677.9138 alee@butterflynetinc.com Media Holly Spring media@butterflynetwork.com