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Butterfly Network Reports Fourth Quarter 2022 Financial Results

2023-02-28 08:00 ET - News Release

Progress on key initiatives sets the stage for 2023


BURLINGTON, Mass. & NEW YORK -- (Business Wire)

Butterfly Network, Inc. (NYSE: BFLY) (“Butterfly”), a digital health company transforming care with handheld, whole-body ultrasound, today announced financial results for the quarter ended December 31, 2022, and provided a business update.

Highlights

  • Reported total revenue of $19.0 million for the fourth quarter ended December 31, 2022, flat to the fourth quarter ended December 31, 2021. Total Revenue of $73.4 million for the full year ended December 31, 2022, which represented 17.3% growth compared to the full year ended December 31, 2021.
  • This year we introduced Butterfly’s “Cloud 2.0” software, a launch that included several new product features and a Proficiency Management Solution for our Blueprint platform, that makes it even easier to manage your workflows and analysis across an institution.
  • We added nearly a dozen new Blueprint accounts in Q4, including large systems like Hennepin County, Indiana and University Hospital Bonn in addition to established users (e.g., University of Rochester Medical Center, Mayo, Stanford, UCLA, Denver Health and many more).
  • During the year, we successfully rolled out thousands of Butterfly iQ+ devices and our Butterfly Blueprint enterprise platform at the University of Rochester Medical Center, and we were also able to deploy the comprehensive system-wide Butterfly Blueprint solution in only 14 days at the University of Maryland.
  • In Q4, we continued to make progress on a first-of-its-kind clinical study, with the John Muir Cardiovascular Institution Research department, to evaluate a novel tool developed by Butterfly to provide novice clinicians—and patients—with the ability to assess pulmonary congestion themselves.
  • We completed the largest Global Health deployment of handheld imaging in the world with the Gates Foundation in Sub-Saharan Africa. Within 10 weeks we trained a cohort of 500 midwives in Kenya to perform life-saving obstetric scans and will train another 500 midwives in S. Africa.
  • During the year, we launched and announced distribution partnerships in a number of new and compelling international markets; including the UAE, India, Israel, and South Africa, among other geographies - unlocking millions of additional customers that we can target and sell to going forward.
  • This quarter, our Veterinary teams not only expanded our previously announced partnerships with Texas Tech University and Petco, but also started new educational and commercial partnerships in Australia and Canada. In less than 2 years since launching our Veterinary business, Butterfly is already becoming part of the standard physical exam in Veterinary Medicine.
  • We tightly managed our expenses during the quarter leading to a monthly cash use of approximately $10 million in the fourth quarter – down from over $18 million in the first half.

Dr. Jonathan Rothberg, Butterfly’s Founder, Chairman and Interim CEO of Butterfly Network. “Since launching Butterfly commercially several years ago, our solution has touched the lives of millions of patients and is being used by tens of thousands of practitioners across the globe each and every day. From the most sophisticated health systems in the US and Europe, to the most remote conflict areas like Ukraine and acute crises, like the recent earthquake in Turkey and Syria, practitioners are embracing the power of Butterfly and using it to transform the way they deliver care.” Rothberg continued “It is therefore no surprise that the broader industry and competitors alike are taking note of the progress Butterfly is making, and our winning strategy. Just last month, The New Yorker published an article entitled “Could Ultrasound Replace the Stethoscope?”, in which the author cited how recent advances in “chip-based” technology and AI have finally made it a powerful diagnostic tool capable of transforming healthcare globally.”

Guidance

We are expecting full year 2023 revenue growth in the high teens to low 20 percent range with the expectation that the second half of the year will be stronger than the first half. More specifically, for the first quarter we are expecting flat to slightly higher revenue compared to 2022. However, due to the savings actions taken in Q3 and additional cost reduction initiative in January 2023, we will reduce our cash outlay by approximately $60 million in 2023. As a result, we expect full year adjusted EBITDA loss in the range of $95 million - $85 million compared to the adjusted EBITDA loss of $140.0 million in 2022.

Fourth Quarter 2022 Financial Results

Fourth quarter total revenue of $19.0 million was flat from $19.0 million in the fourth quarter of 2021. Product revenue decreased 12.2% to $12.7 million from $14.4 million in the fourth quarter of 2021. Software and other services revenue increased 38.3% to $6.3 million from $4.6 million in the fourth quarter of 2021.

Gross profit for the fourth quarter of 2022 was $9.6 million, compared to gross profit of $7.5 million in the fourth quarter of 2021. Adjusted gross profit was $10.3 million for the fourth quarter of 2022, compared to an adjusted gross profit of $7.5 million in the fourth quarter of 2021.

Total gross margin for the quarter was 50.3%, compared to 39.7% in the fourth quarter of 2021. Adjusted gross margin was 54.5%, compared to 39.7% in the fourth quarter of 2021.

Total operating expenses for the quarter were $58.6 million, compared to $52.8 million in the fourth quarter of 2021, representing an increase of 10.8% primarily due to higher stock-based compensation and CEO transition costs compared to the fourth quarter of 2022.

Net loss for the fourth quarter of 2022 was $33.7 million, compared to a net loss of $15.2 million during the fourth quarter of 2021. Adjusted EBITDA was a loss of $29.3 million during the fourth quarter of 2022, compared to a loss of $35.6 million in the fourth quarter of 2021.

Cash, cash equivalents, restricted cash and marketable securities were $242 million as of December 31, 2022.

A reconciliation of Adjusted EBITDA to net loss, Adjusted gross profit to gross profit, and Adjusted gross margin to gross margin for the three months ended December 31, 2022 and 2021, 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.”

Conference Call

A conference call to review the fourth quarter 2022 financial results and provide a business update is scheduled for February 28, 2023, at 8:30 am Eastern Time. Interested parties may access the conference call by dialing +1(844) 200-6205 (U.S.) or +1 (929) 526-1599 (Outside U.S.) and referencing Access Code: 741669. Additionally, a link to a live webcast of the call will be available in the Investors section of Butterfly's website.

About Butterfly Network, Inc.

Founded by Dr. Jonathan Rothberg in 2011 and listed on the New York Stock Exchange through a business combination with Longview Acquisition Corp., Butterfly created the world's first handheld, single probe whole-body ultrasound system using semiconductor technology, the Butterfly iQ+. Butterfly's mission is to democratize medical imaging and contribute to the aspiration of global health equity, making high-quality ultrasound affordable, easy-to-use, globally accessible, and intelligently connected, including for the 4.7 billion people around the world lacking access to ultrasound. Through its proprietary Ultrasound-on-Chip™ technology, Butterfly is paving the way for earlier detection and remote management of health conditions around the world. The Butterfly iQ+ can be purchased online today by healthcare practitioners 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 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 condensed 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, commercialization and plans to deploy our products and services, development of products and services, and the size and potential growth of current or future markets for its products and services. Forward-looking statements are based on the Company’s current beliefs and assumptions and on information currently available to the Company. These forward-looking statements involve significant known and unknown risks and uncertainties and other factors 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 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 most recent Annual Report on Form 10-K, as amended, or in subsequent filings that it makes 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 December 31,Year ended December 31,

2022

2021

2022

2021

Revenue:
Product$

12,656

$

14,413

$

50,263

$

47,868

Software and other services

6,327

4,574

23,127

14,697

Total revenue

18,983

18,987

73,390

62,565

Cost of revenue:
Product

7,323

8,218

26,804

29,308

Software and other services

2,104

887

7,126

2,238

Loss on product purchase commitments

2,342

13,965

Total cost of revenue

9,427

11,447

33,930

45,511

Gross profit (loss)

9,556

7,540

39,460

17,054

Operating expenses:
Research and development

19,124

20,002

89,121

74,461

Sales and marketing

12,437

15,054

59,888

49,604

General and administrative

26,997

17,789

83,471

85,717

Total operating expenses

58,558

52,845

232,480

209,782

Loss from operations

(49,002)

(45,305)

(193,020)

(192,728)

Interest income

1,810

834

3,384

2,573

Interest expense

(6)

(2)

(651)

Change in fair value of warrant liabilities

11,979

30,567

20,859

161,095

Other income (expense), net

1,484

(1,257)

98

(2,577)

Loss before provision for income taxes

(33,729)

(15,167)

(168,681)

(32,288)

Provision for income taxes

(26)

49

42

121

Net loss and comprehensive loss$

(33,703)

$

(15,216)

$

(168,723)

$

(32,409)

Net loss per common share attributable to Class A and B
common stockholders, basic and diluted
$

(0.17)

$

(0.08)

$

(0.84)

$

(0.19)

Weighted-average shares used to compute net loss per share
attributable to Class A and B common stockholders, basic and diluted

200,797,928

198,004,664

199,848,386

173,810,053

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

2022

2021

Assets
Current assets:
Cash and cash equivalents$

162,561

$

422,841

Marketable securities

75,250

Accounts receivable, net

14,685

11,936

Inventories

59,970

36,243

Current portion of vendor advances

35,182

27,500

Prepaid expenses and other current assets

9,489

13,384

Total current assets

357,137

511,904

Property and equipment, net

31,331

14,703

Non-current portion of vendor advances

12,782

Operating lease assets

21,567

24,083

Other non-current assets

7,535

8,493

Total assets$

417,570

$

571,965

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$

7,211

$

5,798

Deferred revenue, current

15,856

13,071

Accrued purchase commitments, current

2,146

5,329

Accrued expenses and other current liabilities

26,116

25,631

Total current liabilities

51,329

49,829

Deferred revenue, non-current

4,957

5,476

Warrant liabilities

5,370

26,229

Accrued purchase commitments, non-current

14,200

Operating lease liabilities

29,966

27,690

Other non-current liabilities

588

850

Total liabilities

92,210

124,274

Commitments and contingencies
Stockholders’ equity:
Class A common stock $.0001 par value; 600,000,000 shares authorized at December 31, 2022 and 2021;
174,459,956 and 171,613,049 shares issued and outstanding at December 31, 2022 and 2021, respectively

17

17

Class B common stock $.0001 par value; 27,000,000 shares authorized at December 31, 2022 and 2021;
26,426,937 shares issued and outstanding at December 31, 2022 and 2021

3

3

Additional paid-in capital

921,278

874,886

Accumulated deficit

(595,938)

(427,215)

Total stockholders’ equity

325,360

447,691

Total liabilities and stockholders’ equity$

417,570

$

571,965

 
BUTTERFLY NETWORK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Year ended December 31,

2022

2021

Cash flows from operating activities:
Net loss$

(168,723)

$

(32,409)

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

5,935

2,090

Write-down of vendor advance

2,300

Non-cash interest expense on convertible debt

389

Write-down of inventories

783

889

Stock-based compensation expense

42,531

47,798

Change in fair value of warrant liabilities

(20,859)

(161,095)

Other

615

1,900

Changes in operating assets and liabilities:
Accounts receivable

(3,063)

(6,127)

Inventories

(24,510)

(11,285)

Prepaid expenses and other assets

3,819

(10,669)

Vendor advances

5,100

(2,621)

Accounts payable

1,216

(10,521)

Deferred revenue

2,266

7,314

Accrued purchase commitments

(17,383)

(23,063)

Change in operating lease assets and liabilities

2,257

1,901

Accrued expenses and other liabilities

901

4,022

Net cash used in operating activities

(169,115)

(189,187)

 
Cash flows from investing activities:
Purchases of marketable securities

(75,534)

(1,019,003)

Sales of marketable securities

1,017,010

Purchases of property and equipment, including capitalized software

(18,302)

(7,877)

Sales of property and equipment

57

Net cash used in investing activities

(93,779)

(9,870)

 
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants

2,982

21,707

Net proceeds from equity infusion from the Business Combination

548,403

Payment of loan payable

(4,366)

Other financing activities

(101)

(52)

Net cash provided by financing activities

2,881

565,692

Net (decrease) increase in cash, cash equivalents and restricted cash

(260,013)

366,635

Cash, cash equivalents and restricted cash, beginning of period

426,841

60,206

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

166,828

$

426,841

 
BUTTERFLY NETWORK, INC.
ADJUSTED GROSS PROFIT AND ADJUSTED GROSS MARGIN
(In thousands)
(Unaudited)
 
Three months ended December 31,Year ended December 31,

2022

2021

2022

2021

Revenue$

18,983

$

18,987

$

73,390

$

62,565

Cost of revenue

9,427

11,447

33,930

45,511

Gross profit (loss)

9,556

7,540

39,460

17,054

 
Gross margin

50.3%

39.7%

53.8%

27.3%

 
Add:
Write-down of inventories

783

783

582

Warranty liability policy change

(560)

Adjusted gross profit$

10,339

$

7,540

$

40,243

$

17,076

 
Adjusted gross margin

54.5%

39.7%

54.8%

27.3%

 
Depreciation and amortization$

1,207

$

245

$

3,328

$

536

% of revenue

6.4%

1.3%

4.5%

0.9%

Loss on product purchase commitments

2,342

13,965

% of revenue

0.0%

12.3%

0.0%

22.3%

 
BUTTERFLY NETWORK, INC.
ADJUSTED EBITDA
(In thousands)
(Unaudited)
 
Three months ended December 31,Year ended December 31,

2022

2021

2022

2021

Net lossIncluded on the condensed consolidated
statements of operations and comprehensive loss as:
$

(33,703)

$

(15,216)

$

(168,723)

$

(32,409)

Interest incomeInterest income

(1,810)

(834)

(3,384)

(2,573)

Interest expenseInterest expense

6

2

651

Change in fair value of warrant liabilitiesChange in fair value of warrant liabilities

(11,979)

(30,567)

(20,859)

(161,095)

Other expense (income), netOther income (expense), net

(1,484)

1,257

(98)

2,577

Provision for income taxesProvision for income taxes

(26)

49

42

121

Stock-based compensationCost of revenue, R&D, S&M and G&A

15,102

9,029

42,531

47,798

Depreciation and amortizationCost of revenue, R&D, S&M and G&A

1,869

670

5,935

2,090

Write-down of inventoriesCost of revenue

783

783

582

CEO transition costsG&A

1,769

1,769

5,398

Reduction in force related severance and benefitsR&D, S&M and G&A

151

1,980

Warranty liability policy changeCost of revenue

(560)

Transaction bonus and feesR&D, S&M and G&A

1,653

Adjusted EBITDA$

(29,328)

$

(35,606)

$

(140,022)

$

(135,767)

 
Loss on product purchase commitmentsCost of revenue$

$

2,342

$

$

13,965

 

Contacts:

Investors
Heather Getz
hgetz@butterflynetinc.com

Source: Butterfly Network, Inc.

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