Butterfly Network, Inc. (BFLY) Earnings

Management highlights

### Strategic Growth Flywheel & Core Business Updates - Three core growth pillars (POCUS, Butterfly Embedded, Home and Community Care) are now reinforcing each other, with the growth flywheel beginning to turn. Butterfly Embedded is democratizing chip-based ultrasound imaging through partnerships with aligned companies, enabling accessible imaging outside traditional hospital settings, with use cases spanning wearable devices, whole-body scanners, and neurotechnology. - Added two new Embedded partnerships in Q2, bringing the total to 11 active partners; new partners include a brain-computer interface (BCI) company and a women's health wearable developer. High-profile breakthroughs from existing partners (MidJourney's whole-body scanner announcement, Left Neuro's 3D transcranial ultrasound and speech-tracking breakthroughs) have generated widespread industry attention. ### Core POCUS Business Progress - Signed six new enterprise Compass AI (system-wide POCUS management software) deals, with the Compass AI pipeline growing 5x year-over-year. Received provisional authorization to sell to the full U.S. Department of Veterans Affairs (VA), with full FedRAMP certification expected in Q3 2026, opening the large U.S. federal government healthcare market. - Expanded medical school penetration: Butterfly already has a presence in over 80% of U.S. medical schools, with growing adoption of one-to-one student ultrasound curriculums. In Q2, more than doubled placed probes to 2,000 across 10 institutions. Announced a multi-year strategic partnership with VCOM, with total potential contract value exceeding $10 million over four years, that provides every incoming student a probe and includes a longitudinal usage tracking program. - Gained regulatory approval in Brazil, the largest medical device market in Latin America and one of the world's fastest growing ultrasound markets, opening a significant new long-term growth opportunity. - Butterfly Garden (third-party AI developer ecosystem) added a new precision needle guidance partner, with three existing partners on track to launch commercial AI tools by the end of 2026. All Garden tools will integrate directly into Butterfly's cloud and existing clinical workflows, evolving the platform from a developer ecosystem to a commercial AI marketplace. ### Home and Community Care - First commercial state launch is scheduled for October 1, 2026, with nurse training and infrastructure setup ongoing in Q3. Initial revenue is expected in Q4 2026, with plans to expand to additional states in the first half of 2027. ### Product Development Roadmap - The Apollo high-speed chip for large-scale AI processing has completed primary design and moved into the development phase, on track to deliver to MidJourney by late 2027 / early 2028. The next-generation P5.1 probe (first CMUT chip with harmonic imaging, targeted at cardiology) is on track for a Q1 2027 launch, with prototype image quality already exceeding competing handheld PZT devices. The IQStation cart system will launch later in 2027 to address the existing $1.6-$2 billion small cart POCUS market.

Guidance

- Q3 2026 revenue is expected to be in the range of $26 million to $30 million, representing 30% YoY growth at the midpoint. Adjusted EBITDA loss is projected between $6 million and $9 million. - Full year 2026 guidance has been raised from prior levels: revenue is now expected between $119 million and $123 million, representing 22% to 26% YoY growth over 2025. Adjusted EBITDA loss is projected between $19 million and $23 million. - Guidance includes expected impacts from ongoing macroeconomic headwinds, and incorporates small initial revenue from the Home and Community Care commercial launch in Q4 2026. The increased adjusted EBITDA loss guidance reflects planned increased investment to support innovation and growth across core POCUS, Embedded, and new product development.

Segment performance

Total Q2 2026 revenue was a record $32.6 million, a 39% increase year-over-year (YoY). U.S. revenue was $27.6 million (57% YoY growth, 84.7% of total revenue), while international revenue was $5 million (14% YoY decrease, 15.3% of total revenue). - Core POCUS segment: Revenue was $21.9 million, a 2% YoY increase, accounting for 67.2% of total Q2 2026 revenue. Growth was driven by volume increases in U.S. health systems and medical schools. IQ3 sales rose 17% YoY and IQ Plus sales rose 33% YoY; lower ASP (down 12% YoY) reflected a higher mix of subsidized IQ Plus units for the VCOM partnership. - Butterfly Embedded segment: Revenue was $10.8 million, a 439% YoY increase, accounting for 32.8% of total Q2 2026 revenue. Growth was primarily driven by milestone revenue recognition from the MidJourney partnership. Gross profit was a record $23.3 million (56% YoY increase), with gross margin expanding to 71% from 64% YoY, boosted by the higher-mix Embedded revenue. Adjusted EBITDA loss improved 78% YoY to $1.4 million, from a $6.2 million loss in Q2 2025. Cash and cash equivalents (excluding restricted cash) totaled $125 million at quarter-end, with $13.3 million of cash used in operations during the quarter.

Risks & headwinds

- Forward-looking statements (including product development timelines, partnership commercialization, and revenue growth) are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from expectations, as detailed in the company's SEC filings. - Global macro risks include ongoing conflict in the Middle East, tariff pressures in certain international markets, and AI-driven supply chain component shortages. While impacts have been minor to date, these factors could affect future operations and results. - Early-stage development programs (particularly for neurotechnology and BCI applications) have extended timelines and longer regulatory paths, with uncertain commercialization potential. - Home and Community Care expansion depends on meeting targeted readmission reduction milestones; failure to achieve these results will slow broader market adoption. Product launch timelines and performance claims for next-generation probes and chips are dependent on successful development and manufacturing execution.

Analyst Q&A

• Q: What is the expected cadence of embedded revenue over the next 12-24 months, how many additional embedded partnerships can Butterfly support simultaneously, and is inbound interest growing after the MidJourney announcement?

  A: Management expects embedded revenue to average ~$7-$8 million per quarter, with fluctuations of +/- $1-2 million as milestone revenue is recognized. There is effectively no limit to the number of partnerships, because all partners use the same standardized semiconductor and software platform, with no custom chip development required. Development work for partners is fully compensated, and a dedicated embedded team has been separated from core POCUS development to support scaling. The MidJourney announcement has spurred significant new inbound interest, and commercialization milestones from existing new partners will layer on top of current revenue over time.

• Q: How does revenue recognition work for the VCOM partnership, and is more deals of this type expected going forward?

  A: The VCOM partnership is entirely part of the core POCUS segment, not embedded. The four-year deal includes subsidized IQ Plus sales for upperclassmen and ongoing IQ3 sales for new incoming students, with revenue recognized over the contract term as devices and software are delivered. The partnership reflects a growing market demand for one-to-one student ultrasound access, and serves as a template for future medical school partnerships, with additional deals expected to be announced in the future. The lower ASP in Q2 reflects the intentional subsidized investment to capture this long-term growth opportunity.

• Q: What is the scope of the first Home and Community Care commercial launch, how scalable is training for national expansion, and what is the revenue model?

  A: The first state launch will train 15-30 nurses currently working in skilled nursing facilities, with patient volume not disclosed at this early stage. Training is streamlined for the single initial congestive heart failure use case, and Butterfly has existing partnerships with national and regional medical education organizations to support rapid scaling. The revenue model includes a fixed population-based fee and a variable per-scan fee, plus performance-based incentives tied to achieving readmission reduction targets. Butterfly shares risk with provider partners: it earns a share of cost savings if targets are met, and absorbs more cost if they are not.

• Q: What is the market opportunity and pricing for the 2027 next-generation probe and IQStation cart entry?

  A: The current handheld POCUS market is $300-$350 million, while the existing small compact POCUS cart market is a much larger $1.6-$2 billion. The next-generation P5.1 probe delivers better cardiac image quality than competing handheld PZT devices, with integrated networking and AI capabilities that competitors lack. Management believes this product will capture meaningful share from existing incumbent offerings. IQStation will enter the existing cart market with a better, more fully integrated product, leveraging existing hospital capital budgets rather than requiring new market development, creating significant upside revenue opportunity.