Butterfly Network, Inc. (BFLY) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. Butterfly Network, Inc. is a digital health company providing portable, semiconductor-based ultrasound technology and cloud-connected software. The company operates as a single reportable segment, selling hardware, software subscriptions, and licensing its Ultrasound-on-Chip™ platform through its Embedded program.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenue | $26.53 million | $21.23 million |
| Gross Profit | $18.29 million | $13.38 million |
| Gross Margin | 68.9% | 63.0% |
| Net Loss | $(12.68) million | $(13.97) million |
| Loss Per Share (Diluted) | $(0.05) | $(0.06) |
| Cash and Cash Equivalents | $137.95 million | $150.49 million (Dec 31, 2025) |
| Net Cash Used in Operating Activities | $(13.89) million | $(11.68) million |
| Total Debt | None reported (No floating rate debt) | None reported |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 25.0% year-over-year. Product revenue grew 3.5% to $14.65 million, while Software and other services revenue surged 68.2% to $11.88 million, driven by Embedded partnerships.
- Margin Expansion: Gross margin improved to 68.9% from 63.0%, aided by a shift in revenue mix toward higher-margin software services.
- Expense Management: Operating expenses increased slightly to $32.16 million. Research and Development (R&D) decreased 3.9% due to cost reallocation and capitalization of software development. General and Administrative (G&A) expenses rose 12.7% due to increased headcount and professional fees.
- Unusual Items: The "Other" operating expense line decreased 45.3% to $0.39 million. This was primarily due to a $6.0 million insurance recovery asset recognized for litigation contingencies, partially offset by a $3.3 million increase in estimated litigation liabilities.
- Warrant Liabilities: All unexercised warrants expired on February 12, 2026, eliminating the warrant liability balance that existed at the end of 2025.
Guidance, Outlook, and Risks
- Liquidity: Management expects existing cash and operating cash flows to fund operations for at least the next 12 months. Cash balance decreased by $12.5 million during the quarter.
- Outlook: The company anticipates a continued shift in revenue mix toward software and services as device adoption grows. They plan to continue investing in product development and commercial capabilities.
- Risks and Contingencies:
- Litigation: The company is involved in multiple legal proceedings, including a putative class action (Rose v. Butterfly Network) and stockholder derivative actions. As of March 31, 2026, the company has accrued a $6.0 million liability for loss contingencies related to indemnification obligations, offset by a $6.0 million insurance recovery asset.
- Regulatory and Market: Risks include the ability to maintain regulatory authorizations, competition from larger entities, and reimbursement challenges for medical procedures.
Investor Verification Checklist
- Verify the sustainability of the 68.2% growth in Software and other services revenue, specifically regarding Embedded partnership contracts.
- Monitor the status of ongoing litigation (Rose, Koenig, Bhavsar, Sezonov) and the adequacy of the $6.0 million insurance recovery asset.
- Assess the impact of the $13.89 million operating cash burn rate against the $138 million cash balance to determine runway.
- Review the "Other" expense line item for future volatility related to legal settlements or insurance recoveries.
- Confirm the expiration of all warrant liabilities and the absence of new dilutive instruments.