BFLY 10-K & 10-Q changes, risk factors and insider trading

We have a limited operating history onof which to assess the prospects for our business, we have generated limitedgenerating revenue from sales of our products, and we have incurred significant losses since inception. We anticipate that we will continue to incur significant losses for at least the next several years as we continue to commercialize our existing products and services and seek to develop and commercialize new products and services.

Since inception, we have devoted substantially all of our financial resources to develop our products and related services. We have financed our operations primarily through the issuance of equity and convertible debt securities. We have generated limited revenue from the sale of our products and services to date and have incurred significant losses. The amount of our future net losses will depend, in part, on sales and on-going development of our products and related services, the rate of our future expenditures, and our ability to obtain funding through the issuance of our securities, strategic collaborations, or grants. We expect to continue to incur significant losses for at least the next several years as we continue to commercialize our existing products and services and seek to develop and commercialize new products and services.

We have developed, and we are engaged in the development of, ultrasound imaging solutions using our ultrasound-on-a-semiconductor-chipUltrasound-on-Chip™ technology. We are commercializing Butterfly iQ+ and Butterfly iQ3 point-of-care ultrasound imaging devices. Our business also includes licensing our Ultrasound-on-Chip™ technology to third parties. Our success will depend on the acceptance of our products and services in the U.S. and international healthcare markets. We are faced with the risk that the marketplace will not be receptive to our products and services over competing products, including traditional cart-based ultrasound devices used in hospitals, imaging centers, and physicians’ offices, and that we will be unable to compete effectively. Factors that could affect our ability to successfully commercialize our current products and services and to commercialize any potential future products and services include:

•challenges of developing (or acquiring externally-developed) technology solutions that are adequate and competitive in meeting the requirements of next-generation design challenges; and

Medical device development is costly and involves continual technological change, which may render our current or future productsmedical devices obsolete.

We may encounter significant competition across our existing and future planned products and services and in each market in which we sell or plan to sell our products and services from various companies, many of which have greater financial and marketing resources than we do. Our primary competitors for our point-of-care medical devices include the top five manufacturers of legacy cart-based incumbent ultrasound devices.

We will beare dependent upon the success of our sales and customer acquisition and retention strategies.

Our business is dependent upon the success of our sales and customer acquisition and retention strategies, and our marketing efforts are focused on developing a strong reputation with healthcare providers and increasing awareness of our products and services. If we fail to maintain a high quality of service or a high quality of device technology, we may fail to retain existing users or add new users. If we do not successfully continue our sales efforts and promotional activities, particularly to health systems and large institutions, or if existing users decrease their level of engagement, our revenue, financial results, and business may be significantly harmed. Our future success depends upon continued expansion of our commercial operations in the United States and internationally, as well as entering additional markets to commercialize our products and services. We believe that our growth will depend on the further development and commercialization of our current products and services, and marketing authorization of our future products and services. If we fail to expand the use of our products and services in a timely manner, we may not be able to expand our market share or to grow our revenue. Our financial performance will beis substantially dictated by our success in adding, retaining, and engaging active users of our products. If customers do not perceive our products or services to be useful, reliable, and trustworthy, we may not be able to attract or retain customers or otherwise maintain or increase the frequency and duration of their engagement. As our business model is predicated on sales of both hardware and software sales,and other services, there is risk that any decline in software renewal rates will adversely impact our business. To date, utilization of our software has varied across different medical specialties, but usage does not directly correlate to renewal of subscriptions, as different medical specialties interact with the device in different ways depending on their clinical focus and routine. A decrease in customer retention, growth or engagement with our products and services may have a material and adverse impact on our revenue, business, financial condition, and results of operations.

Any number of factors could negatively affect our sales to customers and customer retention, growth, and engagement, including:

Our technology on a microchip has the potential to allow us to monitor patients in various care settings due to its portability and cost. We expect our development path will primarily be directed at accessing and optimizing our technology for use in various care settings, potentially including home scanning and or wearable patient technology, subject to our receipt of appropriate regulatory authorization. We face risks associated with launching such new products. If we encounter development or manufacturing challenges or discover errors during our product development cycle, the product launch dates of new products may be delayed, which will cause delays in our ability to achieve our forecasted results. The expenses or losses associated with unsuccessful product development or launch activities or lack of market acceptance of our new products could adversely affect our business or financial condition.

During the years ended December 31, 2025, 2024, and 2023, andapproximately 2022, approximately21%, 23%, 21%, and 30%,21%, respectively, of our total revenue was generated from customers located outside of the United States. We believe that a substantial percentage of our future revenue will continue to come from international sources as we expand our sales and marketing opportunities internationally. We have limited experience operating internationally, and engaging in international business involves a number of difficulties and risks, including:

•political and economic instability and war or other military conflict, including the ongoing conflictconflicts occurring in Ukraine,Ukraine and the Middle East, which could have a material adverse impact on our sales in Europe and elsewhere; and

Furthermore, the new U.S. presidential administration has publicly expressed support for greater restrictions on free trade and the increase of tariffs on goods imported into the United States. If we dedicate significant resources to our international operations and are unable to manage these risks effectively, our business, operating results, and financial condition may be adversely affected.

We have chosen to engage a single supplier, TSMC, to supply and manufacture a key component of our products. If TSMC fails to fulfill its obligations under its existing contractual arrangements with us or does not perform satisfactorily, or if this relationship is terminated for other reasons, our ability to source our devices would be negatively and adversely affected. In addition, our obligation to purchase a minimum volume from TSMC may adversely affect our cash flows.

We have chosen to engage a single supplier, TSMC, a semiconductor manufacturer, to manufacture and supply all of the wafers used to create the semiconductor chips incorporating our Ultrasound-on-Chip™ technology used in our probes.medical devices. See “Item 1. Business — Manufacturing — Key Agreements — Foundry Service Agreement with Taiwan Semiconductor Manufacturing Company Limited”. Since our contracts with TSMC are non-exclusive and do not commit TSMC to supply or manufacture quantities beyond the amounts included in our forecasts, TSMC may give other customers’ needs higher priority than ours, and we may not be able to obtain adequate supplies in a timely manner or on commercially reasonable terms. If TSMC is unable to supply components or devices, our business would be harmed.

We entered into an FSA with TSMC, under which TSMC agreed to manufacture, and we committed to purchase, a minimum volume of the wafers used for the semiconductor chips in our probes. Our minimum purchase obligation could adversely affect our cash flows, such as in times when we have sufficient inventory and would otherwise be able to use our cash for other purposes. Pursuant to the FSA, we are required to buy back from TSMC any unused raw wafers. In 2025, we agreed to buy back certain unused raw wafers from TSMC that we did not expect to use in future manufacturing. If we are required to buy back from TSMC any additional unused raw wafers pursuant to the FSA, our cash flows may be adversely impacted.

Geopolitical tensions continue to exist between Taiwan and China have risen steadily in recent months.China. War or other military conflict in or near Taiwan, pandemics, and certain natural disasters, such as earthquakes which are commonplace in Taiwan, may result in the destruction or disruption of TSMC’s ability to supply wafers and have downstream implications for our Company.

DuePrior to 2025, due to supply constraints, we havesaw seenincreases to the costs of our costsraw increase in 2024,materials, but we were largely able to offset these costs through manufacturing efficiencies and pricing actions. However,We wemay expect there will continue to beface supply constraints; if our suppliers are continuing to raise prices and may continue to raise prices in the future, which we may not be able to offset through manufacturing efficiencies or pricing actions. Because we currently rely on TSMC to supply our custom components and on Benchmark to manufacture our finished products, such pricing pressures from either party could increase our costs and force us to increase the prices of our products if we are unable to enter into alternative arrangements with other suppliers or manufacturers, potentially leading to decreased customer demand.

We rely on limited or sole suppliers for some of the materials and components used in our products,products that may not be able to supply such materials and components in sufficient quantities, on a timely basis, or at acceptable costs, and we may not be able to find replacements or immediately transition to alternative suppliers, which could have a material adverse effect on our business, financial condition, results of operations, and reputation.

We rely on limited or sole suppliers for certain materials and components that are used in our products. While we periodically forecast our needs for such materials and enter into standard purchase orders with them, we do not have long-term contracts with some of these suppliers. If we were to lose such suppliers, or if such suppliers were unable to fulfill our orders or toorders, meet our manufacturing specifications, or provide such materials and components in sufficient quantities, on a timely basis, or at acceptable costs, there can be no assurance that we will be able to identify or enter into agreements with alternative suppliers on a timely basis or on acceptable terms, if at all. If we are able to find a replacement supplier, such replacement supplier would need to be qualified and may require additional regulatory inspection or approval, which could result in further delay.delay, or could charge higher prices for the underlying materials or components.

Acquisitions, joint ventures, or other strategic transactionstransactions, including in connection with our Butterfly Embedded™ program, could disrupt our business, cause dilution to our stockholders, and otherwise harm our business.

We may acquire other businesses, products, or technologies as well as pursue strategic alliances, co-development opportunities, joint ventures, technology licenses, investments in complementary businesses, or other strategic initiatives. ForAs example,part inof Novemberour 2024,strategy to expand the licensing of our Ultrasound-on-Chip™ semiconductor platform through Butterfly Embedded™, we announced our planexpect to form Octiv, LLC, a wholly-owned subsidiary dedicatedcontinue to bringingengage ourwith proprietarythird chipparties toon newlicensing non-competitiveand markets.co-development However, we may not be successful in achieving this objective.opportunities. Other than the Business Combination, we have not made any acquisitions to date, and our ability to do so successfully is unproven. Any of these transactions could be material to our financial condition and operating results and expose us to many risks, including:

•difficulties collaborating with third-party personnel, or integrating acquired personnel, working with third-party or acquired technologies, and integrating our products and technologies with and into a third party, or integrating operations into our existing business;

Foreign acquisitionstransactions involve unique risks in addition to those mentioned above, including those related to theour collaborations and integration of operations across different cultures and languages, currency risks, and the particular economic, political, and regulatory risks associated with specific countries.

In addition, the anticipated benefit of any acquisition or other strategic transaction may not materialize. Future acquisitions, dispositions, or other strategic initiatives could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses, or write-offs of goodwill, any of which could harm our financial condition. We cannot predict the number, timing, or size of future joint ventures, acquisitions, or other strategic transactions, if any, or the effect that any such transactions might have on our operating results.

If we are unable to establishcontinue establishing and maintainmaintaining adequate sales and marketing capabilities, or enterunable to continue entering into and maintainmaintaining arrangements with third parties to sell and market our products, our business may be harmed.

We cannot guarantee that we will be able to maintain our current volume of sales in the future. A substantial reduction in sales could have a material adverse effect on our operating performance. To the extent that we enter into additional arrangements with third parties to perform sales or marketing services in the United States, Europe, or other countries, our product margins could be lower than if we directly marketed and sold our products. To the extent that we enter into co-promotion or other marketing and sales arrangements with other companies, any revenue received will depend on the skills and efforts of others, and we cannot predict whether these efforts will be successful. In addition, the growth of market acceptance of our medical device products by healthcare practitioners outside of the United States will largely depend on our ability to continue to demonstrate the relative safety, effectiveness, reliability, cost-effectiveness, and ease of use of such products. If we are unable to do so, we may not be able to increase product revenue from our sales efforts in Europe or other countries. If we are unable to establish and maintain adequate sales, marketing, and distribution capabilities, independently or with others, our future revenue may be reduced and our business may be harmed.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including changes in inflation, interest rates, and overall economic conditions and uncertainties. We expect our costs of goods sold and other operating expenses to change in the future in line with periodic inflationary changes. To the extent inflation or other factors increase our business costs, it may not be feasible to pass price increases on to our customers or offset higher costs through manufacturing efficiencies. Inflation could also adversely affect the ability of our customers to purchase our products. An economic downturn could result in a variety of risks to our business, including weakened demand for our products and our inability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also result in further constraints on our suppliers or cause future customers to delay making payments for our products. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

We are subject to income and other non-income taxes (including sales, excise, and value-added) in the United States and foreign jurisdictions. Thus, the tax treatment of transactions we execute is subject to changes in tax laws or regulations, tax treaties, or positions by the relevant authority regarding the application, administration, or interpretation of these tax laws and regulations. These factors, together with the ambiguity of tax laws and regulations, the subjectivity of factual interpretations, and uncertainties regarding the geographic mix of earnings in any period, can affect our estimates of our effective tax rate and income tax assets and liabilities, result in changes in our estimates and accruals, and have a material adverse effect on our business results, cash flows, or financial condition. We are unable to predict what tax reforms may be proposed or enacted in the future or what effect such changes would have on our business; however, such changes could potentially result in higher tax expense and payments, along with increasing the complexity, burden, and cost of compliance. For example, on July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (the “OBBBA”), which includes several changes to U.S. federal income tax law, including the temporary and permanent extension of expiring provisions of the Tax Cuts and Jobs Act of 2017. While we do not expect that the tax provisions of the OBBBA will have a significant impact on our tax position, similar tax reforms could adversely affect our business.

If we, our contract manufacturers or our component suppliers are unable to manufacture our products in sufficient quantities, on a timely basis, at acceptable costs, and in compliance with regulatory and quality requirements, the manufacturing and distribution of our devices could be interrupted, and our product sales and operating results could suffer.

The FDA (and comparable foreign regulatory authorities) has comprehensive and prescriptive guidelines for medical device component manufacturers, requiring these manufacturers to establish and maintain processes and procedures to adequately control environmental conditions that could adversely affect product quality and impact patient safety. We, our contract manufacturers, and our component suppliers are required to comply with the FDA’s Quality System Regulation (“QSR”), which is a complex regulatory framework that covers the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage, shipping, and servicing of our devices. Compliance with applicable regulatory requirements is subject to continual review and is monitored rigorously through periodic, sometimes unannounced, inspections by the FDA. We cannot assure investors that our facilities or our third-party manufacturers’ or suppliers’ facilities would pass any future quality system inspection. Failure of our or our third-party manufacturers and component suppliers to adhere to QSR requirements or take adequate and timely corrective action in response to an adverse quality system inspection finding could delay production of our products and lead to fines, difficulties in obtaining regulatory clearances, recalls, enforcement actions, including injunctive relief or consent decrees, or other consequences, which could have a material adverse effect on our financial condition or results of operations.

In addition, many countries such as Canada and Japan have very specific additional regulatory requirements for quality assurance and manufacturing. If we or our manufacturers fail to continue to comply with current good manufacturing requirements, as well as ISO or other regulatory standards, we may be required to cease all or part of our operations until we comply with these regulations. Maintaining compliance with multiple regulators adds complexity and cost to our manufacturing and compliance processes.

Our current or future productsmedical devices may be subject to product recalls even after receiving FDA clearance or approval. A recall of oursuch products, either voluntarily or at the direction of the FDA, or the discovery of serious safety issues with oursuch products, could have a significant adverse impact on us.

The FDA and similar governmental bodies in other countries have the authority to require the recall of our medical device products if we or our third-party manufacturers fail to comply with relevant regulations pertaining to, among other things, manufacturing practices, labeling, advertising, or promotional activities, or if new information is obtained concerning the safety or efficacy of these products. In February 2020, we initiated a voluntary recall of two software tools after being notified by the FDA that each of them required 510(k) clearance. The FDA evaluated the recall and subsequently terminated it in June 2020. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our reputation, results of operations, and financial condition, which could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands. We may also be subject to product liability claims, be required to bear other costs, or be required to take other actions that may have a negative impact on our future sales and our ability to generate profits.

We may be subject to enforcement action if we engage in improper or off-label marketing or promotion of our products,medical devices, including fines, penalties, and injunctions.

Our promotional materials and training methods for our medical devices must comply with the FDA and other applicable laws and regulations, including the prohibition of the promotion of unapproved, or off-label, uses. However, if the FDA determines that our promotional materials or training materials promote a 510(k)-cleared or approved medical device in a manner inconsistent with its labeling, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an Untitled Letter, a Warning Letter, injunction, seizure, civil fine, or criminal penalties. In addition to ensuring that the claims we make are consistent with our regulatory clearances or approvals, the FDA also ensures that promotional labeling for all regulated medical devices is neither false nor misleading.

In some instances in our advertising and promotion, we may make claims regarding our productmedical devices as compared to competing products, which may subject us to heightened regulatory scrutiny, enforcement risk, and litigation risks.

Healthcare reforms, changes in healthcare policies, and changes to third-party coverage and reimbursements, including legislation enacted reforming the U.S. healthcare system and both domestic and foreign healthcare cost containment legislation, and any future changes to such legislation, may affect demand for our products and services and may have a material adverse effect on our financial condition and results of operations. The ongoing implementationadministration and modification of the Affordable Care Act (the “ACA”) in the United States, as well as state-level healthcare reform proposals, could reduce medical procedure volumes and impact the demand for medical device products or the prices at which we can sell products. The impact of this healthcare reform legislation, and practices including price regulation, competitive pricing, comparative effectiveness of therapies, technology assessments, and managed care arrangements are uncertain. In addition, future federal or state legislative, regulatory, or judicial developments affecting ACA-related programs could change coverage, utilization, and payment dynamics in ways that adversely affect our business. There can be no assurance that current levels of reimbursement will not be decreased in the future, or that future legislation, regulation, or reimbursement policies of third parties will not adversely affect the demand for our products and services or our ability to sell products and provide services on a profitable basis. The adoption of significant changes to the healthcare system in the United States, the EEA, or other jurisdictions in which we may market our products and services, could limit the prices we are able to charge for our products and services or the amounts of reimbursement available for our products and services, could limit the acceptance and availability of our products and services, reduce medical procedure volumes, and increase operational and other costs.

Most of our customers rely on third-party payers, including government programs and private health insurance plans, to reimburse some or all of the cost of the procedures in which our products are used. The continuing efforts of governmental authorities, insurance companies, and other payers of healthcare costs to contain or reduce these costs could lead to patients being unable to obtain approval for payment from these third-party payers. If third-party payer payment approval cannot be obtained by patients for procedures that use our products, sales of our products may decline significantly and our customers may reduce or eliminate purchases of our products. The cost-containment measures that healthcare providers are instituting, both in the U.S. and outside of the U.S., could harm our ability to operate profitably. For example, GPOsgroup purchasing organizations and IDNsintegrated delivery networks have also concentrated purchasing decisions for some customers, which has led to downward pricing pressure for medical device companies.

We rely on patent protection as well as trademark, copyright, trade secret, and other intellectual property rights protection and contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. As of February 13,25, 2025,2026, we owned approximately 620665 issued patents and pending patent applications in the United States and foreign jurisdictions, including the European Union and the United Kingdom. These issued patents and pending patent applications (if they were to be issued as patents) have expected expiration dates ranging between approximately 2030 and 2045.2046. If we fail to protect our intellectual property, third parties may be able to compete more effectively against us, we may lose our technological or competitive advantage, or we may incur substantial litigation costs in our attempts to recover or restrict use of our intellectual property.

Butterfly developed ultrasound devices that can perform whole-body imaging in a single handheld probe because itthey isare powered by our proprietary semiconductor technology instead of piezoelectric crystals. Our Ultrasound-on-Chip™ makes ultrasound more accessible outside of large healthcare institutions, while our software is intended to make the product easy to use, fully integrated with the clinical workflow, and accessible on a user’s smartphone, tablet, and almost any hospital computer system connected to the Internet. We aim to enable the delivery of imaging information anywhere at point-of-care to drive earlier detection throughout the body and remote management of health conditions. We market and sell the Butterfly system, which includes probes, related accessories, and software subscriptions, to healthcare systems, physicians, and healthcare providers through a direct sales force, distributors, and our eCommerce channel. We also license our proprietary Ultrasound-on-Chip™ semiconductor platform for co-development of novel technologies in non-competitive markets through a program called Butterfly Embedded™.

We review the key performance measures discussed below to evaluate the business and measure performance, identify trends, formulate plans, and make strategic decisions. Our key performance measures may fluctuate over time as the adoption of our devices increases, which may shift the revenue mix more toward software and other services. The quarterly measures may be impacted by the timing of device sales.

Units fulfilled increased by 3,131,1,792, or 19.0%,9.1%, for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. The increase was leddriven by higher volume across all U.S.probe sales channels as we began selling our next-generation iQ3 probe alongside our existing iQ+ probe. We also saw increased probe salesvolume in our internationalUS distributorand channelveterinary aftersales onboarding several new distribution territories in the current year.channels.

Software and other services mix decreasedincreased by 5.31.1 percentage points, to 33.9%35.0%, for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. AlthoughThis increase was primarily driven by increases in software subscription revenue from our softwareButterfly andEmbedded™ 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.partnerships.

Revenue consists of revenue from the sale of products, such as medical devicesdevices, accessories, and accessories,semiconductor chips, and the sale of software and related services, classified as software and other services revenue on our consolidated statements of operations and comprehensive loss.services. Our software and related service offerings include SaaS subscriptions, product support and maintenance (“Support”), and software development kits ("SDKs") which may be perpetual or term-based.term-based, and partnership support services. SaaS subscriptions include licenses for teams and individuals as well as enterprise-level subscriptions. For sales of products and perpetual SDKs, revenue is recognized at a point in time upon transfer of control to the customer. SaaS subscriptions, Support, and term-based SDKs are generally related to stand-ready obligations and are recognized ratably over time.

Over time, as adoption of our devices increases through further market penetration andpenetration, as practitioners in the Butterfly network continue to use our devices, and as our Butterfly Embedded™ collaborations continue to grow and develop, we expect our annual revenue mix to shift more toward software and other services. The quarterly revenue mix may be impacted by the timing of device sales. In 2024, due to the continued success of our next-generation iQ3 probe, our software and other services mix as a percentage of total revenue decreased.

Cost of product revenue consists of product costs including manufacturing costs, personnel costs and benefits, inbound freight, packaging, warranty replacement costs, royalty fees for licensed intellectual property, payment processing fees, and inventory obsolescence and write-offs. We expect our cost of product revenue to fluctuate over time due to the level of units fulfilled in any given period and fluctuate as a percentage of product revenue over time as our focus on operational efficiencies in our supply chain may be offset by increased prices of certain inventory components.

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 andforce, business transformation initiative,initiatives, litigation costs, and legal settlements.

Software and other services revenue increased by $2.0 million, or 7.7%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. This increase was primarily driven by higher enterprise software revenue and increased licensing revenue from our Butterfly Garden and Powered by ButterflyEmbedded™ 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.

Cost of subscriptionsoftware and other services revenue increased by $0.5 million, or 5.4%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. This increase was primarily driven by higher software amortization expenses but was partially offset by lower cloud hosting costs.

WeAs of December 31, 2025, we have restricted cash of $4.0 million as of December 31, 2024 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.

Our material cash requirements include contractual obligations with third parties for office leases, technology licensing agreements, and inventory supply agreements.agreements, and outsourced services. Our fixed office lease payment obligations were $28.0$24.3 million as of December 31, 2024,2025, with $3.7 million payable within the next 12 months. Our fixed technology license payment obligations were $14.0$10.5 million as of December 31, 2024,2025, with $3.5$1.5 million payable within the next 12 months. Our fixed purchase obligations for inventory supply agreements, net of vendor advances, were $3.8$4.2 million as of December 31, 2024,2025, all of which is payable within the next 12 months. Our fixed outsourced services payment obligations were $4.1 million as of December 31, 2025, with $1.4 million payable within the next 12 months.

CashNet flowscash used in operating activities

CashNet flowscash provided by (used in) investing activities

Net cash provided by (used in) investing activities decreased by $73.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was primarily due to the sale of our marketable securities in 2023.

CashNet flowscash provided by (used in) financing activities

Net cash provided by (used in) financing activities decreased by $1.7 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was primarily due to $2.0 million of payments made in connection with financing activities in 2024 that did not occur in 2023, partially offset by $0.5 million of proceeds from our employee stock purchase plan that began in 2024.

Transaction price is allocated to all identified performance obligations based on relative standalone selling prices of the underlying goods or services. Each sale of a hardware device, accessory, or perpetual SDK is a performance obligation satisfied at a point in time when control of the good transfers from us to the customer or when we provide the SDK to the customer. Our software subscriptions and extended warranties are stand-ready obligations that are satisfied over time, and our term-based SDKs are performance obligations satisfied over time through our continued provision of access to the customer. We use the time-elapsed (i.e., straight-line) measure of progress to recognize revenue for these services. Out-licensing arrangements and the related research and development services are performance obligations that are satisfied over time using an input method as progress is made towards key project milestones. Our implementation and integration services are a performance obligation satisfied over time, and we use costs incurred as inputs into the measure of progress to recognize revenue for these services.

Butterfly developed ultrasound devices that can perform whole-body imaging in a single handheld probe because they are powered by our proprietary semiconductor technology instead of piezoelectric crystals. Our Ultrasound-on-Chip™ makes ultrasound more accessible outside of large healthcare institutions, while our software is intended to make the product easy to use, fully integrated with the clinical workflow, and accessible on a user’s smartphone, tablet, and almost any hospital computer system connected to the Internet. We aim to enable the delivery of imaging information anywhere at point-of-care to drive earlier detection throughout the body and remote management of health conditions. We market and sell the Butterfly system, which includes probes, related accessories, and software subscriptions,subscriptions (which we refer to herein as our "core business"), to healthcare systems, physicians, and healthcare providers through a direct sales force, distributors, and our eCommerce channel. We also license our proprietary Ultrasound-on-Chip™ semiconductor platform for co-development of novel technologies in non-competitive markets through our Embedded program.

Units fulfilled increased by 2341,176 units, or 4.9%,22.5%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. The increase was largely driven by higher probe sales volume in ourthe internationalU.S. distributorthrough direct sales to health systems and veterinarymedical schools as well as our eCommerce sales channels, with veterinary sales positively impacted by the launch of our iQ3 Vet probe in the United States and some international markets in the fourth quarter of 2025.channel.

Software and other services mix increased by 11.522.9 percentage points, to 44.8%,51.8%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. This increase was primarily driven by increases in software and other services revenue generated by our Embedded partnerships.partnerships, including our co-development partnership with Midjourney, Inc.

Comparison of the three months ended MarchJune 31,30, 2026 and 2025

Software and other servicesProduct revenue increaseddecreased by $4.8$0.9 million, or 68.2%,5.4%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. ThisThe increaseoverall decrease was primarily driven by increasesthe innon-recurrence softwareof andprior-year othersales servicesof semiconductor chips to our Embedded partners, reducing current-year product revenue by $1.3 million. This decrease was partially offset by $0.4 million of higher product revenue generated byfrom the increase in probe sales volume within our Embeddedcore partnerships.business.

Cost of product revenue increased by $0.5$0.7 million, or 9.1%,10.5%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, primarily driven by athe $0.5 million increase inincreased cost of devices sold as a result of our higher probe sales volume and a $0.5 million increase in adjustments to our product warranty reserve. These increases were partially offset by a $0.5 million decrease in costs for non-recurring semiconductor chip sales during the prior year period.volume.

Cost of software and other services revenue remained relatively flat for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, decreasingincreasing by $0.1 million, or 6.5%.7.2%. This decreaseincrease was primarily driven by a $0.6 million increase in costs related to providing services to our Embedded partners, partially offset by a $0.4 million decrease in amortization expense for software development investments that we made in prior years, partially offset by a $0.5 million increase in costs related to providing services to our Embedded partners.years.

Research and development expenses decreasedincreased by $0.4$2.2 million, or 3.9%,26.8%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. This decreaseincrease was primarily driven by a $0.7$1.2 million reductionincrease in personnel costs as we allocatedinvested morein ofadditional our personnel costs to cost of software and other services revenueheadcount for our Embedded programproduct and capitalizedsoftware moredevelopment ofprojects, a $0.7 million increase in product engineering costs as we progressed along our personnel costs for theproduct development ofroadmap, internal-use software. This reduction was partially offset byand a $0.2$0.3 million increase in software costs as we leveraged more third-party AI tools to optimize our employee workflows during the period.

Sales and marketing expenses remained relatively flat for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, decreasing by $0.2$0.1 million, or 1.7%, largely driven by optimization of our marketing investments while delivering higher sales volume and revenue.0.8%.

General and administrative expenses increased by $1.2$2.2 million, or 12.7%,24.4%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. This increase was primarily driven by a $0.7$1.5 million increase in personnel costsand dueother employment-related costs, including stock-based compensation expenses, and the recognition of a $0.4 million provision for credit losses in the current period related to increased headcount and a $0.3prior millionsale increaseto inone professionalinternational service costs for consulting, accounting, and auditing services.distributor.

Other decreasedincreased by $0.3$1.6 million, or 45.3%,80.6%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. This decreaseincrease was driven by the recognition of $4.0 million of estimated liabilities for loss contingencies related to ongoing litigation and $2.0 million of higher legal costs due to litigation. These increases were partially offset by the recognition of a $6.0$4.0 million loss recovery for expected insurance recoveries related to our estimated liabilities for loss contingencies.contingencies Thisand decreasea was partially offset by the recognition of $3.3$0.4 million ofreduction estimated liabilities for loss contingencies related to ongoing litigation, $2.2 million of higher legal costs due to litigation, and $0.3 million of higherin employment-related costs. We believe these costs are not representative of our ongoing operations.

During the three months ended MarchJune 31,30, 2026, the Companywe utilized $12.5$13.3 million of cash and cash equivalents for ongoing operations and the payment of our annual employee and management bonuses.operations. As of MarchJune 31,30, 2026, our cash and cash equivalents balance was $138.0$124.7 million. Our future spending will depend on various factors, including our rate of revenue growth and the timing and extent of spending on strategic business initiatives. We expect that our existing cash and cash flows from operations will be sufficient to meet our anticipated liquidity, working capital, and capital expenditure requirements and fund our operations for at least the next 12 months.

As of MarchJune 31,30, 2026, 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.

Our material cash requirements include contractual obligations with third parties for office leases, technology licensing agreements, inventory supply agreements, and outsourced services. Our fixed office lease payment obligations were $23.4$22.5 million as of MarchJune 31,30, 2026, with $3.8 million payable within the next 12 months. Our fixed technology license payment obligations were $10.5 million as of MarchJune 31,30, 2026, with $1.5 million payable within the next 12 months. Our fixed purchase obligations for inventory supply agreements, net of vendor advances, were $2.3$1.7 million as of MarchJune 31,30, 2026, all of which is payable within the next 12 months. Our fixed outsourced services payment obligations were $3.8$3.4 million as of MarchJune 31,30, 2026, with $1.4 million payable within the next 12 months.

As of MarchJune 31,30, 2026, we had no obligations, assets or liabilities, which would be considered off-balance sheet arrangements.

Comparison of the threesix months ended MarchJune 31,30, 2026 and 2025

The following table summarizes our sources and uses of cash for the threesix months ended MarchJune 31,30, 2026 and 2025:

Net cash used in operating activities increased by $2.2$11.3 million, or 19.0%,60.1%, for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025. The increase was comprised of a $2.6$14.5 million increase in net working capital cash usageusage, partially offset by a reduction of $0.4$3.2 million in net loss adjusted for certain non-cash items. The increase in net working capital cash usage was primarily driven by a $5.4$10.1 million increase in cash used for changes in deferred revenue, an $8.8 million increase in cash used for changes in prepaid expenses and other assetsassets, and a $3.5$4.7 million increase in cash used for changes in deferredaccounts revenue.receivable. These increases in cash usage were partially offset by a $6.0$9.3 million decrease in cash used for changes in accounts payable and accrued expenses and a $0.6 million increase in cash provided by changes in accounts receivable.expenses.

Net cash used in investing activities increased by $0.6$0.7 million, or 169.1%,54.0%, for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025, primarily driven by increased investment in the development of our internal-use software.

Net cash provided by financing activities decreased by $76.2$73.2 million for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025. This decrease was primarily due to the $81.1$81.0 million provided by the net proceeds from our public share offering during the prior year period.period, partially offset by a $5.1 million increase in cash provided by exercises and purchases of our shares pursuant to our stock plans.

As of MarchJune 31,30, 2026, we concluded that a revisionrevisions to our estimated liabilities for loss contingencies related to ongoing litigation and the recognition of a related insurance recovery asset were appropriate. As a result, we recognized an additional $3.3$4.0 million estimated loss and a $6.0$4.0 million loss recovery in our other operating expenses during the three months ended MarchJune 31,30, 2026. See the "Use of Estimates" subheading in Note 2 "Summary of Significant Accounting Policies" and see Note 12 "Commitments and Contingencies" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 "Financial Statements" of this Quarterly Report on Form 10-Q for additional information about our estimated liabilities for loss contingencies and the related insurance recovery asset.