Butterfly Network, Inc. SEC 10-Q Report
Nov 1, 202407:33 EDT
 BFLY-3.26%
Butterfly Network, Inc., a digital health company known for its innovative ultrasound imaging solutions, has released its Form 10-Q report for the quarter ended September 30, 2024. The report highlights significant financial growth, strategic initiatives aimed at long-term sustainability, and the challenges the company faces in the evolving healthcare market.
Financial Highlights
Butterfly Network, Inc. reported robust financial performance for the three and nine months ended September 30, 2024:
- Total Revenue: $20.6 million, a 33.3% increase for the three months ended September 30, 2024, compared to the same period in 2023.
- Total Revenue: $59.7 million, a 20.9% increase for the nine months ended September 30, 2024, compared to the same period in 2023.
- Gross Profit: $12.2 million, representing 59.5% of total revenue for the three months ended September 30, 2024.
- Gross Profit: $35.1 million, representing 58.8% of total revenue for the nine months ended September 30, 2024.
- Loss from Operations: $(17.2) million, representing (83.9)% of total revenue for the three months ended September 30, 2024.
- Loss from Operations: $(57.1) million, representing (95.6)% of total revenue for the nine months ended September 30, 2024.
- Net Loss and Comprehensive Loss: $(16.9) million, representing (82.3)% of total revenue for the three months ended September 30, 2024.
- Net Loss and Comprehensive Loss: $(54.4) million, representing (91.1)% of total revenue for the nine months ended September 30, 2024.
- Net Loss Per Common Share: $(0.08) for the three months ended September 30, 2024.
- Net Loss Per Common Share: $(0.26) for the nine months ended September 30, 2024.
Business Highlights
Butterfly Network, Inc. demonstrated strong operational performance and strategic business initiatives:
- Revenue Segments: Product revenue increased by 54.7% for the three months ended September 30, 2024, driven by higher product revenue across nearly all sales channels, including the impact of the iQ3 probe’s higher selling price and increased international sales.
- Revenue Segments: Software and other services revenue increased by 5.3% for the three months ended September 30, 2024, primarily due to higher enterprise software revenue and increased licensing revenue from Butterfly Garden and Powered by Butterfly partnerships.
- Geographical Performance: International revenue saw significant growth, with distributor volume more than quadrupling year-over-year due to the onboarding of several new distribution territories.
- Sales Units: Units fulfilled increased by 36.6% for the three months ended September 30, 2024, led by international sales and increased volume across all U.S. sales channels.
- New Product Launches: The company launched the next generation iQ3 device, which contributed to the higher selling price and increased product revenue.
- Future Outlook: The company expects its cash and cash equivalents of $93.8 million at September 30, 2024, to be sufficient to fund operations and capital requirements for at least the next twelve months. The company may need to raise additional capital before reaching profitability, potentially through nondilutive capital sources such as licensing, grants, or debt.
Strategic Initiatives
Butterfly Network, Inc. has undertaken several strategic initiatives to ensure long-term growth and financial stability:
- Cost Reduction: The company has taken significant actions to reduce its cost of operations and extend its cash runway, reducing annual cash requirements by approximately $180 million to less than $50 million annually.
- Partnerships: The company has entered into an agreement with a third-party global technology and business transformation partner to optimize and lower the cost of certain non-specialized technical functions, including transitioning a portion of the workforce to lower-cost geographies.
- Healthcare System Expansion: The company is focusing on expanding its healthcare system software offerings and developing relationships with larger healthcare systems to drive revenue growth.
- Capital Management: As of September 30, 2024, Butterfly Network, Inc. had cash and cash equivalents of $93.8 million. The company has restricted cash of $4.0 million to secure a letter of credit for one of its leases. The company did not repurchase any of its equity securities during the three months ended September 30, 2024.
- Future Outlook: Butterfly Network, Inc. expects its cash and cash equivalents to be sufficient to fund operations and capital requirements for at least the next twelve months. The company conservatively expects its cash to last into 2027 and may need to raise capital before reaching profitability. The company will first seek non-dilutive capital in the form of licensing, grants, or debt, and then potentially in the form of equity securities. The company plans to continue investing in its business to grow revenue and may need to raise additional capital to reach profitability.
Challenges and Risks
Butterfly Network, Inc. faces several challenges and risks that could impact its business operations and financial performance:
- Interest Rate Risk: The company does not have any floating rate debt as of September 30, 2024. However, declines in interest rates would reduce future investment income, which could impact the company's financial condition.
- Inflation Risk: Inflation has not had a material effect on the business, but general inflationary pressures could increase costs. The company may not be able to fully offset these higher costs through price increases or manufacturing efficiencies, potentially harming the business, financial condition, and results of operations.
- Foreign Exchange Risk: The company operates primarily within the United States and executes most transactions in U.S. dollars, limiting foreign currency translation risk. However, any exposure to foreign exchange risk is not expected to have a material impact on the financial statements.
- Operational Risks: The company has taken significant actions to reduce operational costs and extend its cash runway, reducing annual cash requirements by approximately $180 million to less than $50 million annually. Despite these measures, the company may need to raise capital before 2027 to reach profitability, potentially through licensing, grants, debt, or equity securities.
- Revenue Mix Shift: As the adoption of devices increases, the revenue mix may shift more towards software and other services. This shift could impact quarterly metrics and profitability, as software and other services generally have lower associated costs compared to product sales.
- Cost of Revenue: The cost of product revenue is expected to fluctuate due to the level of units fulfilled and operational efficiencies. Increased prices of certain inventory components could offset these efficiencies. The cost of software and other services revenue is expected to improve profitability over time as the revenue mix shifts towards these offerings.
- Research and Development: The company expects to continue making substantial investments in product and software development, clinical, and regulatory capabilities, which could impact financial performance if these investments do not yield expected returns.
- Sales and Marketing: Increased investments in sales capabilities are anticipated, which could impact short-term profitability but are aimed at driving long-term revenue growth.
- General and Administrative Expenses: The company has reduced general and administrative expenses, but ongoing costs related to personnel, insurance, patent fees, and professional services remain significant.
- Other Operating Expenses: Non-recurring expenses such as employee severance, litigation costs, and legal settlements are not representative of ongoing operations but could impact financial performance in the short term.
SEC Filing: Butterfly Network, Inc. [ BFLY ] - 10-Q - Nov. 01, 2024 |
