Full Press Release Details
Butterfly Network Reports Fourth Quarter 2022 Financial Results
Progress on key initiatives sets the stage for 2023
Burlington, MA., and New York, NY, February 28, 2023 -- 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.
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."
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."
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)
| 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)
| 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
| 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
| 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.
| Included on the condensed consolidated statements of operations and comprehensive loss as: | Three months ended December 31, | Year ended December 31, | |||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| Net loss | Net loss | $ | (33,703) | $ | (15,216) | $ | (168,723) | $ | (32,409) | ||||
| Interest income | Interest income | (1,810) | (834) | (3,384) | (2,573) | ||||||||
| Interest expense | Interest expense | - | 6 | 2 | 651 | ||||||||
| Change in fair value of warrant liabilities | Change in fair value of warrant liabilities | (11,979) | (30,567) | (20,859) | (161,095) | ||||||||
| Other expense (income), net | Other income (expense), net | (1,484) | 1,257 | (98) | 2,577 | ||||||||
| Provision for income taxes | Provision for income taxes | (26) | 49 | 42 | 121 | ||||||||
| Stock-based compensation | Cost of revenue, R&D, S&M and G&A | 15,102 | 9,029 | 42,531 | 47,798 | ||||||||
| Depreciation and amortization | Cost of revenue, R&D, S&M and G&A | 1,869 | 670 | 5,935 | 2,090 | ||||||||
| Write-down of inventories | Cost of revenue | 783 | - | 783 | 582 | ||||||||
| CEO transition costs | G&A | 1,769 | - | 1,769 | 5,398 | ||||||||
| Reduction in force related severance and benefits | R&D, S&M and G&A | 151 | - | 1,980 | - | ||||||||
| Warranty liability policy change | Cost of revenue | - | - | - | (560) | ||||||||
| Transaction bonus and fees | R&D, S&M and G&A | - | - | - | 1,653 | ||||||||
| Adjusted EBITDA | $ | (29,328) | $ | (35,606) | $ | (140,022) | $ | (135,767) | |||||
| Loss on product purchase commitments | Cost of revenue | $ | - | $ | 2,342 | $ | - | $ | 13,965 |