HTFL 10-Q: IPO boosts liquidity but $1.0B accumulated deficit and high-cost debt remain
Filing Impact
Filing Sentiment
Form Type
10-Q
HeartFlow, Inc. (HTFL) reported interim financial and operational disclosures reflecting a recent reverse stock split, significant financing activity and continuing operating losses. The company completed an IPO that raised approximately $364.2 million gross proceeds (before underwriting discounts and estimated offering expenses). As of June 30, 2025, cash and cash equivalents were $80.2 million versus $51.4 million at December 31, 2024, and the company had an accumulated deficit of approximately $1.0 billion. The company issued 2025 Convertible Notes totaling $98.3 million with embedded derivative features and maintains a 2024 Term Loan with an effective interest rate of 15.2% as of June 30, 2025. The 2024 Credit Agreement contains collateral, liquidity and trailing net sales covenants, including a minimum liquidity requirement reduced to $15.0 million and a rising minimum twelve-month net sales covenant up to $110.0 million. Management states that, together with expected customer revenue and IPO proceeds, available liquidity is sufficient to fund planned operations for at least the next 12 months from the date the condensed consolidated financial statements were available to be issued.
Positive
- Completed IPO raising approximately $364.2 million gross proceeds before fees, improving financing flexibility
- Cash and cash equivalents increased to $80.2 million at June 30, 2025 from $51.4 million at December 31, 2024
- Management states available cash, expected revenue and IPO proceeds should fund operations for at least 12 months from the statement issue date
- Reverse Stock Split was retrospectively applied and equity instruments were adjusted in accordance with governing agreements
Negative
- Accumulated deficit of approximately $1.0 billion as of June 30, 2025, and ongoing operating losses and negative operating cash flows
- Significant indebtedness and high-cost financing: 2024 Term Loan with an effective interest rate of 15.2% and $98.3 million of 2025 Convertible Notes with embedded derivatives
- Restrictive covenants under the 2024 Credit Agreement including minimum liquidity and escalating trailing net sales requirements up to $110.0 million
- Potential dilution and complex accounting from convertible securities, warrants and embedded derivative liabilities that affect capital structure and earnings volatility
Insights
TL;DR: IPO proceeds materially bolster liquidity, but substantial accumulated losses and debt create continued pressure on cash flow.
The $364.2 million gross IPO proceeds and higher cash balance ($80.2 million at June 30, 2025) materially improve near-term liquidity. The company explicitly states funds plus expected revenues should cover planned operating and capital needs for at least 12 months from issuance date, which reduces immediate financing risk. However, an accumulated deficit near $1.0 billion and continued operating losses mean long-term profitability is not yet demonstrated. The capital structure includes $98.3 million of 2025 Convertible Notes with embedded derivatives and a 2024 Term Loan carrying a high effective interest rate (15.2%), which increases financing costs and complexity. Overall impact to investors: mixed; near-term liquidity improved but material execution and profitability milestones remain.
TL;DR: Covenants, high-cost debt and significant derivative features increase refinancing and covenant compliance risk despite IPO proceeds.
The 2024 Credit Agreement is collateralized by substantially all assets and imposes minimum liquidity and trailing net sales covenants that escalate to $110.0 million in twelve-month net sales. The minimum liquidity covenant was reduced to $15.0 million in January 2025 but remains a binding requirement. The Term Loan accrues high effective interest and events of default can accelerate repayment and increase interest by 3.0% per annum. The 2025 Convertible Notes contain automatic conversion mechanics and valuation caps that create potential dilution and embedded derivative accounting complexity. These factors increase the company’s exposure to covenant breaches, potential dilution on financing events, and refinancing risk if operating performance or cash generation falls short.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2025
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____ to ____
Commission File Number: 001-42790
_________________________
(Exact Name of Registrant as Specified in its Charter)
_________________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (650 ) 241-1221
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
The Nasdaq Stock Market LLC ( |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.Yes o No x
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | o | Accelerated filer | o | |
x | Smaller reporting company | |||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
As of August 31, 2025, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was
2
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Table of Contents
Page | ||||
Part I: Financial Information | 4 | |||
Item 1. | Condensed Consolidated Financial Statements | 4 | ||
Condensed Consolidated Balance Sheets | 4 | |||
Condensed Consolidated Statements of Operations and Comprehensive Loss | 5 | |||
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit | 6 | |||
Condensed Consolidated Statements of Cash Flows | 7 | |||
Notes to Condensed Consolidated Financial Statements | 8 | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 40 | ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 52 | ||
Item 4. | Controls and Procedures | 53 | ||
Part II: Other Information | 54 | |||
Item 1. | Legal Proceedings | 54 | ||
Item 1A. | Risk Factors | 54 | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 103 | ||
Item 3. | Defaults Upon Senior Securities | 104 | ||
Item 4. | Mine Safety Disclosures | 104 | ||
Item 5. | Other Information | 104 | ||
Item 6. | Exhibits | 105 | ||
SIGNATURES | 106 | |||
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains express or implied forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. We intend
such forward-looking statements contained in this Quarterly Report on Form 10-Q to be covered by the safe
harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our
strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of
management, and expected market growth, are forward-looking statements. In some cases, you can identify
forward-looking statements by words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,”
“could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “goal,”
“objective,” “seeks,” or “continue” or the negative of these words or other similar terms or expressions that
concern our expectations, strategy, plans, or intentions.
Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to,
statements regarding our future results of operations and financial positions, plans for our current and future
products, anticipated product launches, the impact of macroeconomic conditions, industry and business trends,
and our expectations regarding business strategy, plans, market growth, regulatory climate, competitive
landscape and our objectives for future operations.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-
looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations,
estimates, forecasts, and projections about future events and trends that we believe may affect our business,
financial condition, results of operations, and prospects. Although we believe that we have a reasonable basis for
each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the
future results, levels of activity, performance, or events and circumstances reflected in the forward-looking
statements will be achieved or occur at all. Forward-looking statements involve known and unknown risks and
uncertainties and are subject to other important factors that may cause our actual results, performance or
achievements to be materially different from any future results, performance or achievements expressed or
implied by the forward-looking statements, including, but not limited to, those factors discussed in Part II, Item 1A,
“Risk Factors” in this Quarterly Report on Form 10-Q, as such risks and uncertainties may be amended,
supplemented or superseded from time to time by our subsequent periodic reports on Form 10-Q and Form 10-K
we file with the United States Securities and Exchange Commission. We qualify all of our forward-looking
statements by these cautionary statements. Moreover, we operate in a very competitive and rapidly changing
environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks
and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report
on Form 10-Q.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date
on which the statements are made. We undertake no obligation to update any forward-looking statements made
in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on
Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We
may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and
you should not place undue reliance on our forward-looking statements.
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Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
HeartFlow Holding, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
June 30, | December 31, | ||
2025 | 2024 | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents ........................................................................................... | $ | $ | |
Accounts receivable, net ............................................................................................... | |||
Restricted cash, current ................................................................................................ | |||
Prepaid expenses and other current assets .............................................................. | |||
Total current assets .................................................................................................. | |||
Property and equipment, net .............................................................................................. | |||
Operating lease right-of-use assets .................................................................................. | |||
Restricted cash, non-current .............................................................................................. | |||
Other non-current assets .................................................................................................... | |||
Total assets ................................................................................................................ | $ | $ | |
Liabilities, redeemable convertible preferred stock and stockholders' deficit | |||
Current liabilities: | |||
Accounts payable ........................................................................................................... | $ | $ | |
Accrued expenses and other current liabilities .......................................................... | |||
Operating lease liabilities, current ................................................................................ | |||
Total current liabilities .............................................................................................. | |||
Convertible notes .................................................................................................................. | |||
Term loan ............................................................................................................................... | |||
Common stock warrant liability .......................................................................................... | |||
Derivative liability .................................................................................................................. | |||
Operating lease liabilities, non-current ............................................................................ | |||
Other non-current liabilities ................................................................................................. | |||
Total liabilities ............................................................................................................ | |||
Commitments and contingencies (Note 7) | |||
Redeemable convertible preferred stock issuable in series, $ December 31, 2024; aggregate liquidation value of $ and December 31, 2024 ...................................................................................................... | |||
Stockholders’ deficit: | |||
Common stock, $ 2025 and December 31, 2024; outstanding as of June 30, 2025 and December 31, 2024, respectively ..................... | |||
Additional paid-in capital ..................................................................................................... | |||
Accumulated other comprehensive loss ........................................................................... | ( | ( | |
Accumulated deficit .............................................................................................................. | ( | ( | |
Total stockholders’ deficit ........................................................................................ | ( | ( | |
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit .......................................................................................................................... | $ | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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HeartFlow Holding, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2025 | 2024 | 2025 | 2024 | ||||
Revenue ..................................................................................... | $ | $ | $ | $ | |||
Cost of revenue ......................................................................... | |||||||
Gross profit ........................................................................... | |||||||
Operating expenses: | |||||||
Research and development ................................................. | |||||||
Selling, general and administrative ..................................... | |||||||
Total operating expenses ................................................... | |||||||
Loss from operations .......................................................... | ( | ( | ( | ( | |||
Interest income .......................................................................... | |||||||
Interest expense ....................................................................... | ( | ( | ( | ( | |||
Change in fair value of common stock warrant liability ...... | ( | ( | ( | ( | |||
Change in fair value of derivative liability .............................. | ( | ( | |||||
Other income (expense), net .................................................. | ( | ( | ( | ||||
Loss before provision for income taxes ........................... | ( | ( | ( | ( | |||
Provision for income taxes ...................................................... | ( | ( | ( | ( | |||
Net loss ................................................................................. | $( | $( | $( | $( | |||
Comprehensive loss: | |||||||
Net loss ...................................................................................... | $( | $( | $( | $( | |||
Other comprehensive loss: | |||||||
Foreign currency translation gain (loss) ................................ | ( | ( | |||||
Total comprehensive loss ................................................... | $( | $( | $( | $( | |||
Net loss per share, basic and diluted .................................... | $( | $( | $( | $( | |||
Weighted-average shares used to compute net loss per share, basic and diluted ........................................................... | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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HeartFlow Holding, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except share and per share amounts)
(unaudited)
Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Balance at December 31, 2024 ................... | $ | $ | $ | $( | $( | $( | ||||||||||
Issuance of common stock upon exercise of stock options .......................... | — | — | — | — | — | |||||||||||
Stock-based compensation expense ..... | — | — | — | — | — | — | ||||||||||
Foreign currency translation loss ............ | — | — | — | — | — | ( | — | ( | ||||||||
Net loss ....................................................... | — | — | — | — | — | — | ( | ( | ||||||||
Balance at March 31, 2025 .......................... | ( | ( | ( | |||||||||||||
Issuance of common stock upon exercise of stock options .......................... | — | — | — | — | — | |||||||||||
Stock-based compensation expense ..... | — | — | — | — | — | — | ||||||||||
Foreign currency translation gain ........... | — | — | — | — | — | — | ||||||||||
Net loss ....................................................... | — | — | — | — | — | — | ( | ( | ||||||||
Balance at June 30, 2025 ............................. | $ | $ | $ | $( | $( | $( | ||||||||||
Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Balance at December 31, 2023 ................... | $ | $ | $ | $( | $( | $( | ||||||||||
Issuance of common stock upon exercise of stock options .......................... | — | — | — | — | — | |||||||||||
Stock-based compensation expense ..... | — | — | — | — | — | — | ||||||||||
Foreign currency translation gain ........... | — | — | — | — | — | — | ||||||||||
Net loss ....................................................... | — | — | — | — | — | — | ( | ( | ||||||||
Balance at March 31, 2024 .......................... | ( | ( | ( | |||||||||||||
Issuance of common stock upon exercise of stock options .......................... | — | — | — | — | ||||||||||||
Stock-based compensation expense ..... | — | — | — | — | — | — | ||||||||||
Foreign currency translation loss ............ | — | — | — | — | — | ( | — | ( | ||||||||
Net loss ....................................................... | — | — | — | — | — | — | ( | ( | ||||||||
Balance at June 30, 2024 ............................. | $ | $ | $ | $( | $( | $( | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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HeartFlow Holding, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended June 30, | ||||
2025 | 2024 | |||
Cash flows from operating activities: | ||||
Net loss ...................................................................................................................................................................................... | $( | $( | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Depreciation and amortization ......................................................................................................................................... | ||||
Stock-based compensation expense ............................................................................................................................. | ||||
Amortization of debt discount and debt issuance costs .............................................................................................. | ||||
Amortization of right-of-use asset ................................................................................................................................... | ||||
Change in fair value of common stock warrant liability ............................................................................................... | ||||
Change in fair value of derivative liability....................................................................................................................... | ( | |||
Non-cash interest charges ............................................................................................................................................... | ||||
Change in allowance for credit losses ............................................................................................................................ | ( | ( | ||
Changes in assets and liabilities: .................................................................................................................................... | ||||
Accounts receivable, net ........................................................................................................................................... | ( | ( | ||
Prepaid expenses and other current assets ........................................................................................................... | ( | ( | ||
Other non-current assets ........................................................................................................................................... | ( | ( | ||
Accounts payable ....................................................................................................................................................... | ( | ( | ||
Accrued expenses and other current liabilities ...................................................................................................... | ( | ( | ||
Operating lease liabilities ........................................................................................................................................... | ( | ( | ||
Other non-current liabilities ....................................................................................................................................... | ||||
Net cash used in operating activities ................................................................................................................ | ( | ( | ||
Cash flows from investing activities | ||||
Purchase of property and equipment ............................................................................................................................. | ( | ( | ||
Net cash used in investing activities ................................................................................................................ | ( | ( | ||
Cash flows from financing activities | ||||
Proceeds from convertible notes offering, net of issuance costs ............................................................................... | ||||
Proceeds from exercise of stock options ....................................................................................................................... | ||||
Payments of exit, prepayment penalty and lender fees .............................................................................................. | ( | ( | ||
Payments of deferred offering costs ............................................................................................................................... | ( | |||
Net cash provided by financing activities ........................................................................................................ | ||||
Effect of foreign exchange rates ............................................................................................................................................ | ( | |||
Net increase (decrease) in cash, cash equivalents and restricted cash .................................................................. | ( | |||
Balance, beginning of period ........................................................................................................................................... | ||||
Balance, end of period ...................................................................................................................................................... | $ | $ | ||
Supplemental disclosure of cash flow information: | ||||
Cash paid (refunded) for taxes ........................................................................................................................................ | $ | $( | ||
Cash paid for interest ........................................................................................................................................................ | $ | $ | ||
Supplemental disclosure of non-cash investing and financing activities: | ||||
Purchases of property and equipment included in accounts payable ....................................................................... | $ | $ | ||
Derecognition of derivative liability in connection with debt refinancing ................................................................... | $ | $ | ||
Right-of-use asset obtained in exchange for lease obligation .................................................................................... | $ | $ | ||
Conversion of term loan principal to convertible notes ................................................................................................ | $ | $ | ||
Issuance of convertible notes to certain employees in lieu of cash compensation ................................................. | $ | $ | ||
Reclassification of term loan debt discount to convertible notes debt discount ...................................................... | $ | $ | ||
Unpaid deferred offering costs included in accounts payable and accrued expenses and other current liabilities ............................................................................................................................................................................... | $ | $ | ||
Unpaid convertible notes issuance costs included in accounts payable and accrued expenses and other current liabilities ................................................................................................................................................................. | $ | $ | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Business Overview
Description of Business
HeartFlow Holding, Inc. (the “Company”) was incorporated in the state of Delaware in July 2007 as
Cardiovascular Simulation, Inc. and changed its name to HeartFlow, Inc. in May 2009. On March 1, 2021,
HeartFlow, Inc. completed an internal reorganization in which a newly formed parent holding company,
HeartFlow Holding, Inc., was established.
On July 17, 2025, HeartFlow Holding, Inc.’s stockholders and Board of Directors approved the
consolidation of HeartFlow Holding, Inc. with and into HeartFlow, Inc., with HeartFlow, Inc. continuing as
the surviving company. The previous holders of HeartFlow Holding, Inc.’s common stock and preferred
securities became holders of HeartFlow, Inc.’s common stock and preferred securities based on a 1-to-1
conversion ratio, and the equity incentive plan, outstanding equity awards, outstanding warrants and
certain other equity-related agreements of HeartFlow Holding, Inc. were assumed by HeartFlow, Inc. In
connection with this consolidation, HeartFlow, Inc. changed its name to Heartflow, Inc.
The Company is a commercial-stage medical technology company that has pioneered the use of software
and artificial intelligence (“AI”) to deliver a non-invasive solution for diagnosing and managing coronary
artery disease (“CAD”). The Company’s novel Heartflow Platform uses AI and advanced computational
fluid dynamics to create a personalized 3D model of a patient’s heart based off a single coronary
computed tomography angiography (“CCTA”). This results in actionable data on blood flow, stenosis,
plaque volume and plaque composition. The Company’s HeartFlow FFRCT Analysis and Plaque Analysis
software assists physicians in diagnosing, managing and delivering precision care to patients with CAD.
The Company was awarded Conformité Européene Mark for its HeartFlow FFRCT Analysis in July 2011.
The Company received clearance from the U.S. Food and Drug Administration (“FDA”) in November 2014
for its HeartFlow FFRCT Analysis and in October 2022 for its Plaque Analysis.
The Company’s headquarters is located in Mountain View, California, and the Company also has offices
in Santa Rosa, California, Austin, Texas, and Tokyo, Japan.
Entity Name | Country of Incorporation | |
HeartFlow, Inc. ............................................................... | United States | |
HeartFlow Japan G.K. .................................................. | Japan | |
HeartFlow U.K. Ltd ........................................................ | United Kingdom | |
HeartFlow Technology U.K. Limited ........................... | United Kingdom | |
Effective July 2024, HeartFlow International Sarl, a wholly-owned subsidiary in Switzerland, was
dissolved.
Reverse Stock Split
On July 31, 2025, the Company’s Board of Directors approved an amendment to the Company's
amended and restated certificate of incorporation to immediately effect a reverse stock split of the shares
of the Company’s outstanding common stock at a ratio of 1.0-for-2.92 (the “Reverse Stock Split”). The
number of authorized shares and par value per share were not adjusted as a result of the Reverse Stock
Split. All references to shares, options to purchase common stock, share amounts, per share amounts,
and related information contained in the condensed consolidated financial statements have been
retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. The
shares of common stock underlying outstanding stock options and other equity instruments were
proportionately reduced and the respective exercise prices, if applicable, were proportionately increased
in accordance with the terms of the agreements governing such securities. In addition, the conversion
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
ratios for each series of the Company’s redeemable convertible preferred stock, which automatically
converted into shares of common stock upon the closing of the Company’s initial public offering (“IPO”) of
common stock, were proportionally adjusted.
Initial Public Offering
On August 11, 2025, the Company completed its IPO of 19,166,667 shares of its common stock, which
included an additional 2,500,000 shares of common stock purchased by the underwriters pursuant to their
option to purchase additional shares, at a price to the public of $19.00 per share. The gross proceeds to
the Company from the IPO were approximately $364.2 million, before deducting underwriting discounts
and commissions and estimated offering expenses payable by the Company of $31.4 million. The shares
and proceeds from the Company’s IPO and the underwriters’ exercise of their option to purchase
additional shares are not reflected in the condensed consolidated financial statements as of and for the
three and six months ended June 30, 2025. Immediately prior to the closing of the Company’s IPO, all of
the outstanding shares of the Company’s redeemable convertible preferred stock converted into shares of
the Company’s common stock. Additionally, upon the closing of the Company’s IPO, the aggregate
outstanding principal balance under the 2025 Convertible Notes automatically converted into shares of
the Company’s common stock.
Liquidity
The Company has incurred operating losses and negative cash flows from operations since its inception
and has an accumulated deficit of approximately $1.0 billion and $971.0 million as of June 30, 2025 and
December 31, 2024, respectively. The Company expects to incur losses for the foreseeable future.
Historically, the Company’s activities have been financed through sales of shares of redeemable
convertible preferred stock, common stock and convertible promissory notes, borrowings under term
loans and revenue received from customers.
As of June 30, 2025 and December 31, 2024, the Company had $80.2 million and $51.4 million in cash
and cash equivalents, respectively.
On August 11, 2025, the Company completed its IPO and received gross proceeds of approximately
$364.2 million, before deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company.
Based on the Company’s current operating plan, the Company believes that the expected cash generated
from revenue transactions with customers and its existing cash and cash equivalents, together with the
net proceeds from the IPO, will be sufficient to fund the Company’s planned operating expenses and
capital expenditure requirements for at least the next 12 months from the date these condensed
consolidated financial statements were available to be issued.
However, the Company may experience lower than expected cash generated from operating activities or
greater than expected capital expenditures, cost of revenue, or operating expenses and may need to
raise additional capital to fund operations, further research and development activities, or acquire, invest
in, or license other businesses, assets, or technologies. The Company’s future capital needs will depend
upon many factors, including the market acceptance of the Company’s products, the cost and pace of
developing new products, and the costs of supporting sales growth.
2. Summary of Significant Accounting Policies
The accompanying condensed consolidated financial statements include the accounts of the Company as
well as its wholly owned subsidiaries and have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”). All significant intercompany balances
and transactions have been eliminated in consolidation.
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The unaudited interim condensed consolidated financial statements have been prepared on the same
basis as the annual consolidated financial statements and, in the opinion of management, reflect all
adjustments, which include only normal recurring adjustments, necessary to a fair statement of the
Company’s consolidated financial position as of June 30, 2025, and the results of its operations for the
three and six months ended June 30, 2025 and 2024 and cash flows for the six months ended June 30,
2025 and 2024. The condensed consolidated balance sheet at December 31, 2024, was derived from
audited annual consolidated financial statements but does not contain all of the footnote disclosures from
the annual financial statements. These interim financial results are not necessarily indicative of results
expected for the full fiscal year or for any subsequent interim period and should be read in conjunction
with the annual consolidated financial statements included in the Company’s registration statement on
Form S-1 (File No. 333-288733), which became effective on August 7, 2025.
The preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Management used significant judgement when making estimates in the
determination of the fair value of its common stock and stock options, deferred income tax valuation
allowance, capitalized internal-use software, depreciation of property and equipment, allowance for credit
losses, revenue recognition, valuation of operating lease right-of-use (“ROU”) assets and operating lease
liabilities, and the fair value of convertible debt, common stock warrant liability and derivative liability.
Management evaluates its estimates and assumptions on an ongoing basis using historical experience
and other factors and adjusts those estimates and assumptions as facts and circumstances dictate.
Actual results could materially differ from those estimates.
The Company operates and manages its business as one
business of non-invasive CAD detection solutions. The Company’s Chief Executive Officer, who is the
Chief Operating Decision Maker (“CODM”), reviews financial information, including revenue and net loss,
presented on a consolidated basis for purposes of making operating decisions, allocating resources and
evaluating financial performance.
The Company's measure of segment profit or loss is consolidated net loss, which is used by the CODM to
measure actual results versus expectations, set performance metrics, and develop the annual budget to
achieve the Company’s long-term objectives. Significant segment expenses within consolidated net loss
includes cost of revenue, research and development, and selling, general and administrative expenses,
which are each separately presented on the Company’s condensed consolidated statements of
operations and comprehensive loss. Other expense items that are presented on the condensed
consolidated statements of operations include interest income, interest expense, changes in fair value of
warrant liability, other income, net, and provision for income taxes.
when managing the Company’s single reporting segment and includes a reconciliation to the consolidated
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
net loss shown in the condensed consolidated statements of operations and comprehensive loss for the
three and six months ended June 30, 2025 and 2024 (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2025 | 2024 | 2025 | 2024 | ||||
Revenue ................................................................ | $ | $ | $ | $ | |||
Less(1): | |||||||
Cost of revenue ............................................... | |||||||
Research and development expenses: | |||||||
Research and development ..................... | |||||||
Regulatory and clinical .............................. | |||||||
Selling, general and administrative expenses: | |||||||
Sales ............................................................ | |||||||
Marketing ..................................................... | |||||||
General and administrative ....................... | |||||||
Loss from operations ........................................... | ( | ( | ( | ( | |||
Other income (expense), net(2) ..................... | ( | ( | ( | ||||
Provision for income taxes ............................ | ( | ( | ( | ( | |||
Segment net loss ................................................. | $( | $( | ( | $( | |||
(1)The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM.
(2)Other income (expense), net represents the consolidated amounts for interest income, interest expense, change in fair value of
common stock warrant liability, change in fair value of derivative liability and other income (expense), net as shown on the condensed
consolidated statements of operations and comprehensive loss.
The Company derives revenue and has long-lived assets primarily in the United States of America.
Revenue by geography is further described in Note 3.
The Company considers all highly liquid investments that are readily convertible to known amounts of
cash and purchased with an original maturity of three months or less to be cash equivalents. Cash
shown in the condensed consolidated statements of cash flows (in thousands):
June 30, | ||||
2025 | 2024 | |||
Cash and cash equivalents ............................................................................... | $ | $ | ||
Restricted cash .................................................................................................... | ||||
Total cash, cash equivalents and restricted cash .......................................... | $ | $ | ||
As of June 30, 2025 and December 31, 2024, restricted cash represents deposits held as security in
connection with the Company’s facility lease agreements.
The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value
is an exit price, representing the amount that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants. As such, fair value is a market-based
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
measurement that should be determined based on assumptions that market participants would use in
pricing an asset or a liability.
The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest
priority to valuations based upon unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs
that are significant to the valuation (Level 3 measurements). The accounting guidance establishes three
levels of the fair value hierarchy as follows:
Level 1 - Observable inputs, such as quoted prices in active markets for identical assets or liabilities;
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or
liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to
the fair value of the assets or liabilities.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement. The Company’s assessment of the significance of a
particular input to the fair value measurement in its entirety requires management to make judgments and
considers factors specific to the asset or liability.
As of June 30, 2025 and December 31, 2024, the carrying amounts of the Company’s financial
instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities,
approximate fair value due to their relatively short maturities and market interest rates, if applicable.
Management believes that the Company’s Term Loan and 2025 Convertible Notes bear interest at the
prevailing market rates for instruments with similar characteristics; accordingly, the carrying value of these
instruments approximate its fair value. Fair value accounting is applied to the common stock warrant
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash
equivalents, restricted cash and accounts receivable. The Company maintains bank deposits in federally
insured financial institutions and these deposits may at times exceed federally insured limits. To date, the
Company has not experienced any losses on its cash deposits. The Company currently has full control of
its cash and cash equivalents balance.
No single customer represented more than 10% of the Company’s revenue during the three and six
months ended June 30, 2025 and 2024.
No single customer represented more than 10% of the Company’s accounts receivable as of June 30,
2025 and December 31, 2024.
The Company capitalizes certain legal, accounting and other third-party fees that are directly associated
with in-process equity financings as deferred offering costs until such financings are consummated. After
consummation of the equity financing, these costs are recorded as a reduction of the proceeds from the
offering, either as a reduction of the carrying value of preferred stock or in stockholders’ deficit as a
reduction of additional paid-in capital generated as a result of the offering. Should the in-process equity
financing be abandoned, the deferred offering costs would be expensed immediately as a charge to
of June 30, 2025 and December 31, 2024, deferred offering costs of $4.2 million and $413,000 ,
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
respectively, were capitalized within other non-current assets in the condensed consolidated balance
sheets. The deferred offering costs were reclassified as a reduction to equity as a result of the closing of
the IPO in August 2025.
At the inception of a contractual arrangement, the Company determines whether the contract contains a
lease by assessing whether there is an identified asset and whether the contract conveys the right to
control the use of the identified asset in exchange for consideration over a period of time.
An ROU asset and corresponding lease liability are recorded on the condensed consolidated balance
sheets based on the present value of lease payments over the lease term. An ROU asset represents the
right to control the use of an identified asset over the lease term and a lease liability represents the
obligation to make lease payments arising from the lease. Leases with an initial term of 12 months or less
are not recorded in the condensed consolidated balance sheets. The Company uses its incremental
borrowing rate to determine the present value of lease payments, as the discount rate implicit in the lease
is not readily available. The lease terms used to calculate the ROU asset and related lease liabilities
include options to extend or terminate the lease when it is reasonably certain that the Company will
exercise that option. The Company elected to account for contracts that contain lease and non-lease
components as a single lease component. For the three and six months ended June 30, 2025 and 2024,
the Company’s only leases were for its facilities, which are classified as operating leases with lease
expense recognized on a straight-line basis over the lease term. Variable lease costs, which primarily
consist of common area maintenance, taxes, and utility charges are expensed as incurred. The Company
does not have any finance leases.
The Term Loan is accounted for at amortized cost. Original debt issuance costs are deferred and
presented as a reduction to the carrying value of the Term Loan. Debt discount and debt issuance costs
are amortized using the effective interest method and recorded in interest expense within the condensed
consolidated statements of operations and comprehensive loss. Refer to Note 8 for additional information.
2025 Convertible Notes
The Company issued convertible notes in January 2025 and March 2025 (the “2025 Convertible Notes”)
to various investors and certain employees (the “Requisite Holders”), which are accounted for at
amortized cost. Debt issuance costs are deferred and presented as a reduction to the carrying value of
the 2025 Convertible Notes. The Company determined that certain features of the 2025 Convertible
Notes contain embedded derivatives that provide the Requisite Holders with multiple settlement
alternatives and the embedded features that qualified as derivatives were accounted for separately. Debt
discount and debt issuance costs are amortized using the effective interest method and recorded to
interest expense within the condensed consolidated statements of operations and comprehensive loss.
The Company recognized the changes in fair value of the derivative liability as changes in fair value of
derivative liability within the condensed consolidated statements of operations and comprehensive loss.
Refer to Note 9 and Note 13 for additional information.
The Company’s warrants to purchase common stock that were issued in connection with the Term Loan
are classified as a liability. The warrants are recorded at fair value upon issuance and are subject to
remeasurement to fair value at each balance sheet date, with any changes in fair value recognized as a
change in fair value of common stock warrant within the condensed consolidated statements of
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Prior to its refinancing in June 2024, the Term Loan contained certain prepayment features, default put
option and default interest adjustment features that were determined to be embedded derivatives
requiring bifurcation and separate accounting as a single compound derivative, as discussed in Note 13.
The impact of bifurcation of the embedded derivative on the date of issuance was reflected as a debt
discount. The fair value of the derivative liability related to the Company’s Term Loan, as discussed in
Note 8, was estimated using a scenario-based analysis comparing the probability-weighted present value
of the Term Loan payoff at maturity with and without the bifurcated features. This method isolates the
value of the embedded derivative by measuring the difference in the host contract’s value with and
without the isolated features. The resulting cash flows are discounted at the Company’s borrowing rate,
as adjusted for fluctuations in the market interest rate from the inception of the Company’s comparative
borrowings to the reporting date, to measure the fair value of the embedded derivative. Until its
derecognition in June 2024, the derivative liability was remeasured to fair value at each reporting period
and the related change was reflected as change in fair value of derivative liability on the condensed
consolidated statements of operations and comprehensive loss.
The 2025 Convertible Notes contain certain settlement features and default put options that were
determined to be embedded derivatives requiring bifurcation and separate accounting as a single
compound derivative, as discussed in Note 13. The impact of bifurcation of the embedded derivatives on
the date of issuances in January and March 2025 was reflected as a debt discount. The fair value of the
derivative liability related to the Company’s 2025 Convertible Notes, as discussed in Note 9, were
estimated using a scenario-based analysis comparing the probability-weighted present value of the 2025
Convertible Notes with and without the bifurcated features. This method isolates the value of the
embedded derivatives by measuring the difference in the host contract’s value with and without the
isolated features. To measure the fair value of the embedded derivatives, the resulting cash flows were
discounted using appropriate discount rates that reflect the overall implied risk of the instruments based
on their purchase prices and adjusted for fluctuations in the market and Company interest rates when
necessary. The derivative liability was remeasured to fair value at each reporting period and the related
change was reflected as change in fair value of derivative liability on the condensed consolidated
statements of operations and comprehensive loss for the three and six months ended June 30, 2025.
The Company records redeemable convertible preferred stock at fair value on the dates of issuance, net
of issuance costs. The redeemable convertible preferred stock is recorded outside of stockholders’ deficit
because the preferred shares are contingently redeemable upon the occurrence of an event that is
outside of the Company’s control. The Company has elected not to adjust the carrying values of the
redeemable convertible preferred stock to the liquidation preferences of such shares because it is
uncertain whether or when an event would occur that would obligate the Company to pay the liquidation
preferences to holders of shares of redeemable convertible preferred stock. Subsequent adjustments to
the carrying values to the liquidation preferences will be made only when it becomes probable that such
liquidation event will occur. The redemption value of each series of redeemable convertible preferred
stock is equal to their respective original issue price plus accrued but unpaid dividends on Series C
redeemable convertible preferred shares and all declared but unpaid dividends (if any) for other series of
preferred stock financing, the cumulative dividends payable to holders of Series C redeemable convertible
preferred stock upon a liquidation event were capped from $6.66 to $8.25 per share depending on the
time of issuance, with an aggregate total of $88.5
Refer to Note 10 for additional information.
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company sells its Heartflow Platform to medical providers in the United States and in select
international markets. The Company determines revenue recognition through the following steps:
•Identification of the contract, or contracts, with a customer;
•Identification of the performance obligations in the contract;
•Determination of the transaction price;
•Allocation of the transaction price to the performance obligations in the contract; and
•Recognition of revenue when, or as, the Company satisfies a performance obligation.
The Company identified a single performance obligation, which is comprised of a highly interdependent
bundle of goods or services that are not distinct on their own but are as a group and consists of providing
implementation services and the requested analysis, including an image file and related licenses and
support. Revenue recognition commences only after completion of installation, implementation and
training for new customer accounts. The Company’s service consists of providing a visualization of the
patient’s coronary arteries and enables physicians to create more effective treatment plans. This service
is normally billable upon delivery of the analysis to the physician. Payment terms are generally net 30
days.
Substantially all of the Company’s revenue is from usage-driven fees and generated on a “pay-per-click”
basis each time a physician orders the Company’s HeartFlow FFRCT Analysis and Plaque Analysis.
Revenue is recognized when control of these services is transferred to the customer, at an amount that
reflects the consideration the Company expects to be entitled to receive in exchange for those services.
The Company recognizes usage-driven fee revenue upon delivery of the requested analysis to the
physician, which is when control of these services is transferred to the customer. The Company
recognizes revenue on a straight-line basis over the contract term for subscriptions where the customer
pays a fixed amount upfront for unlimited analyses. Contracts with customers typically include a fixed
amount of consideration and are generally cancellable with 30 days’ written notice.
The transaction price consists of fixed consideration and variable consideration related to utilization and
volume rebates for reimbursement claims from government and commercial payers which are known and
determinable based on the number of analyses delivered within each quarterly period. The transaction
price (inclusive of both fixed consideration and variable consideration that is not constrained) is
recognized as revenue when control transfers. The Company uses a portfolio approach to estimate
variable consideration using the expected value method.
Unbilled receivables generally represent revenue in which the Company has satisfied its performance
obligation prior to invoicing. The Company records unbilled receivables within accounts receivable, net on
the condensed consolidated balance sheets, based on the Company’s unconditional right to payment at
the end of the applicable period.
Costs associated with product revenue include a flat rate commission per analysis and new customer site
commissions as well as implementation and onboarding costs. The Company capitalizes new customer
site commissions and certain implementation and onboarding costs that are considered to be incremental
to the acquisition of new customer contracts. Capitalized implementation and onboarding costs are
amortized over an estimated period of benefit of two years and capitalized new site commission costs are
amortized over an estimated period of benefit of three years . The estimated period of benefit is
determined by evaluating average customer life, the nature of the related benefit, and the specific facts
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
and circumstances of its arrangements. The Company evaluates these assumptions at least annually and
periodically reviews whether events or changes in circumstances have occurred that could impact the
period of benefit.
The Company expenses flat rate commissions when incurred as commensurate with its usage-driven fee
revenue recognition and amortizes capitalized new customer site commissions to selling, general and
administrative expense in the condensed consolidated statements of operations and comprehensive loss.
The Company amortizes capitalized implementation and onboarding costs to cost of revenue in the
condensed consolidated statements of operations and comprehensive loss. Short-term capitalized
contract costs are included in prepaid expenses and other current assets, and the long-term portion is
included in other non-current assets in the condensed consolidated balance sheets.
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents the transaction price allocated to
performance obligations that are unsatisfied, or partially unsatisfied. It includes contract liabilities and
amounts that will be invoiced and recognized as revenue in future periods and does not include contracts
where the customer is not committed. The customer is not considered committed when they are able to
terminate for convenience without payment of a substantive penalty under the contract. Additionally, as a
practical expedient, the Company has not disclosed the value of unsatisfied performance obligations for
contracts with an original expected length of one year or less.
Contract Liabilities
The Company records contract liabilities when billings or payments are received in advance of revenue
recognition from subscription services. The contract liabilities balance is reduced as the revenue
recognition criteria is met, generally within 12 months. Once services are available to customers, the
Company records amounts due in accounts receivable, net and contract liabilities within accrued
expenses and other current liabilities on the condensed consolidated balance sheets. To the extent the
Company bills customers in advance of the billing period commencement date, the accounts receivable
and corresponding contract liabilities amount are netted to zero on the condensed consolidated balance
sheets, unless such amounts have been paid as of the balance sheet date.
Cost of revenue includes, but is not limited to, personnel and related expenses, stock-based
compensation costs, third-party hosting fees, amortization of capitalized internal-use software,
amortization of contract fulfillment costs as well as royalties associated with technology licenses used in
connection with the delivery of the Company’s Heartflow Platform and allocated overhead, including rent,
equipment, depreciation, technology services and utilities, related to the Company’s production team. The
role of the production team is to support the Company’s patient case volume revenue by performing
defined quality-related activities on CCTA scans submitted by its customers for analysis. The production
team also supports activities in the Company’s clinical trials and research and development, which are
allocated as research and development expense.
The Company accounts for share-based payments at fair value. The grant date fair value of options
granted is measured using the Black-Scholes option pricing model. Option awards vest based on the
satisfaction of a service requirement and stock-based compensation expense is recorded on a straight-
line basis over the applicable service period, which is generally four years . For performance-based stock
options, the Company will assess the probability of performance conditions being achieved in each
reporting period. The amount of stock-based compensation expense recognized in any one period related
to performance-based stock options can vary based on the achievement or anticipated achievement of
the performance conditions. Forfeitures are recognized in the period in which the forfeiture occurs.
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company accounts for income taxes under the asset and liability method. Under this method,
deferred tax assets and liabilities are determined based on the temporary differences between the
financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. As a result of the history of net operating losses, the
Company has provided for a full valuation allowance against the deferred tax assets for assets that are
not more-likely-than-not to be realized.
The Company applies a comprehensive model for the recognition, measurement, presentation and
disclosure in the condensed consolidated financial statements of any uncertain tax positions that have
been taken or are expected to be taken on a tax return using a two-step approach. The first step is to
evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of
available evidence indicates that it is more likely than not that the tax position will be sustained upon
examination by the relevant taxing authorities, based on the technical merits of the position. For tax
positions that are more likely than not to be sustained upon audit, the second step is to measure the tax
benefit in the financial statements as the largest benefit that has a greater than 50% likelihood of being
sustained upon settlement. Significant judgment is required to evaluate uncertain tax positions. Changes
in facts and circumstances could have a material impact on the Company’s effective tax rate and results
of operations. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits
as a component of provision for income taxes in the condensed consolidated statements of operations
and comprehensive loss.
The functional currency of the Company’s foreign subsidiaries is the local currency except for HeartFlow
International Sarl, which was the U.S. Dollar. For all non-functional currency balances, the
remeasurement of such balances to the functional currency results in either a foreign exchange
transaction gain or loss, which is recorded within other income, net within the condensed consolidated
transaction (gain) loss of $(110,000 ) and $195,000 during the three months ended June 30, 2025 and
2024, respectively, and $247,000 and $58,000 during the six months ended June 30, 2025 and 2024,
respectively. During the three months ended June 30, 2025 and 2024, the Company recognized
$(291,000 ) and $100,000 , respectively, and $(55,000 ) and $99,000 during the six months ended June 30,
2025 and 2024, respectively, of foreign currency translation (gain) loss in the statements of
comprehensive loss related to foreign subsidiaries which have local functional currencies.
Basic net loss per common share is calculated by dividing the net loss by the weighted-average number
of shares of common stock outstanding during the period, without consideration of potentially dilutive
securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average
number of shares of common stock and potentially dilutive securities outstanding for the period. For
purposes of the diluted net loss per share calculation, the redeemable convertible preferred stock,
common stock warrants and stock options are considered to be potentially dilutive securities.
Basic and diluted net loss per share is presented in conformity with the two-class method required for
participating securities as the redeemable convertible preferred stock and common stock subject to
repurchase are considered participating securities. The Company’s participating securities do not have a
contractual obligation to share in the Company’s losses. As such, the net loss is attributed entirely to
common stockholders. Diluted net loss per share is the same as basic net loss per share because the
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
effects of potentially dilutive items were anti-dilutive given the Company’s net loss position during the
three and six months ended June 30, 2025 and 2024.
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards
Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified
effective date. The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our
Business Startups Act of 2012 and has elected not to “opt out” of the extended transition related to
complying with new or revised accounting standards, which means that when a standard is issued or
revised and it has different application dates for public and nonpublic companies, the Company will adopt
the new or revised standard at the time nonpublic companies adopt the new or revised standard and will
do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition
period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early
adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic
companies.
Recent Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income
Tax Disclosures, which requires enhanced income tax disclosures, including specific categories and
disaggregation of information in the effective tax rate reconciliation, disaggregated information related to
income taxes paid, income or loss from continuing operations before income tax expense or benefit, and
income tax expense or benefit from continuing operations. This guidance is effective for annual periods
beginning after December 15, 2024. The adoption of ASU 2023-09 is expected to have a disclosure only
impact on the Company’s consolidated financial statements for the year ended December 31, 2025.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive
Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement
Expenses, which requires more detailed disclosures about specified categories of expenses (including
employee compensation, depreciation, and amortization) included in certain expense captions presented
on the face of the income statement. This ASU is effective for fiscal years beginning after December 15,
2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption
permitted. The amendments may be applied either (i) prospectively to financial statements issued for
reporting periods after the effective date of this ASU or (ii) retrospectively to all prior periods presented in
the financial statements. The Company is currently evaluating the impact of this pronouncement on the
disclosures in its consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical
expedient related to the estimation of expected credit losses for current accounts receivable and current
contract assets that arise from transactions accounted for under Accounting Standards Codification Topic
606: Revenue from Contracts with Customers. The practical expedient permits an entity to assume that
current conditions as of the balance sheet date do not change for the remaining life of the current
accounts receivable and current contract assets. This ASU is effective for fiscal years beginning after
December 15, 2025 on a prospective basis, and for interim periods within fiscal years beginning after
December 15, 2025, with early adoption permitted. The Company is currently evaluating the impact of the
adoption of this pronouncement on its consolidated financial statements.
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
3. Revenue and Contract Balances
Disaggregation of Revenue
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2025 | 2024 | 2025 | 2024 | ||||
United States ............................................................... | $ | $ | $ | $ | |||
United Kingdom ........................................................... | |||||||
Japan............................................................................. | |||||||
Rest of Europe ............................................................. | |||||||
Total revenue ............................................................... | $ | $ | $ | $ | |||
Revenues by geography are determined based on the region of the Company's contracting entity, which
may be different than the region of the customer.
Contract Balances
Unbilled receivables included within accounts receivable on the condensed consolidated balance sheets
as of June 30, 2025 and December 31, 2024 was $820,000 and $574,000 , respectively.
balance sheets (in thousands):
Six Months Ended June 30, | Year Ended December 31, | ||
2025 | 2024 | ||
Balance at beginning of period .......................................................... | $ | $ | |
Contract costs capitalized .................................................................. | |||
Contract costs amortized .................................................................... | ( | ( | |
Balance at end of period ..................................................................... | $ | $ | |
other current liabilities on the condensed consolidated balance sheets (in thousands):
Six Months Ended June 30, | Year Ended December 31, | ||
2025 | 2024 | ||
Balance at beginning of period .......................................................... | $ | $ | |
Contract liabilities added .................................................................... | |||
Contract liabilities recognized as revenue ....................................... | ( | ( | |
Balance at end of period ..................................................................... | $ | $ | |
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
4. Fair Value Measurement
recurring basis by level within the fair value hierarchy (in thousands):
June 30, 2025 | |||||||
Level 1 | Level 2 | Level 3 | Total | ||||
Assets | |||||||
Money market funds included in cash and cash equivalents ............................................... | $ | $ | $ | $ | |||
Total .................................................................... | $ | $ | $ | $ | |||
Liabilities | |||||||
Common stock warrant liability ...................... | $ | $ | $ | $ | |||
Derivative liability .............................................. | |||||||
Total .................................................................... | $ | $ | $ | $ | |||
December 31, 2024 | |||||||
Level 1 | Level 2 | Level 3 | Total | ||||
Assets | |||||||
Money market funds included in cash and cash equivalents ............................................... | $ | $ | $ | $ | |||
Total .................................................................... | $ | $ | $ | $ | |||
Liabilities | |||||||
Common stock warrant liability ...................... | $ | $ | $ | $ | |||
Total .................................................................... | $ | $ | $ | $ | |||
as of June 30, 2025 and December 31, 2024 using significant unobservable inputs (Level 3), and the
change in fair value (in thousands):
Common Stock Warrant Liability | |
Fair value as of January 1, 2024 ..................................................................................................... | $ |
Change in fair value ........................................................................................................................... | |
Fair value as of December 31, 2024 ............................................................................................... | |
Change in fair value ........................................................................................................................... | |
Fair value as of June 30, 2025 ......................................................................................................... | $ |
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
In determining the fair value of the common stock warrant liability, the Company used the Black-Scholes
option pricing model to estimate the fair value using unobservable inputs including the expected term,
expected volatility, risk-free interest rate and dividend yield (see Note 12).
Term Loan Derivative Liability | |
Fair value as of January 1, 2024 ..................................................................................................... | |
Change in fair value ........................................................................................................................... | |
Derecognition in connection with debt refinancing ....................................................................... | ( |
Fair value as of December 31, 2024 ............................................................................................... | $ |
In determining the fair value of the term loan derivative liability, a two-step valuation approach was
employed, which included a probability-weighted scenario valuation method, the Black-Scholes-Merton
method, and the option pricing method, using unobservable inputs (see Note 13), which are classified as
Level 3 within the fair value hierarchy, and then comparing the instrument’s value with and without the
derivative features to estimate their combined fair value. The debt instrument is carried at amortized cost,
which approximates its fair value.
2025 Convertible Notes Derivative Liability | |
Fair value as of January 1, 2025 .................................................................................... | $ |
Recognition in connection with convertible notes offering .......................................... | |
Change in fair value .......................................................................................................... | ( |
Fair value as of June 30, 2025 ........................................................................................ | $ |
In determining the fair value of the convertible notes derivative liability, a two-step valuation approach was
employed, which included a probability-weighted scenario valuation method, the Monte Carlo Simulation
method, and the option pricing method, using unobservable inputs (see Note 13), which are classified as
Level 3 within the fair value hierarchy, and then comparing the instrument’s value with and without the
derivative features to estimate their combined fair value. The debt instrument is carried at amortized cost,
which approximates its fair value.
5. Balance Sheet Components
Allowance for Credit Losses
Six Months Ended June 30, | Year Ended December 31, | ||
2025 | 2024 | ||
Balance at beginning of period ......................................................... | $ | $ | |
Additions .............................................................................................. | |||
Write-offs .............................................................................................. | ( | ( | |
Balance at end of period ................................................................... | $ | $ | |
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Prepaid Expenses and Other Current Assets
Six Months Ended June 30, | Year Ended December 31, | ||
2025 | 2024 | ||
Prepaid expenses ............................................................................... | $ | $ | |
Contract costs, current ....................................................................... | |||
Other ..................................................................................................... | |||
Total prepaid expenses and other current assets ........................ | $ | $ | |
Property and equipment, net
Six Months Ended June 30, | Year Ended December 31, | ||
2025 | 2024 | ||
Property and equipment at cost: | |||
Computer equipment and software ................................................. | $ | $ | |
Furniture, fixtures and equipment .................................................... | |||
Capitalized internal-use software ..................................................... | |||
Leasehold improvements .................................................................. | |||
Construction in progress ................................................................... | |||
Total property and equipment ...................................................... | |||
Less: Accumulated depreciation and amortization ........................ | ( | ( | |
Property and equipment, net ........................................................... | $ | $ | |
The Company capitalized certain internal-use software costs totaling $591,000 and $1.3 million, including
stock-based compensation of $5,000 and $121,000 , related to internal-use software development efforts,
during the three months ended June 30, 2025 and 2024, respectively, and $1.5 million and $2.1 million,
including stock-based compensation of $11,000 and $198,000 , during the six months ended June 30,
2025 and 2024, respectively. Amortization of capitalized internal-use software totaled $1.0 million and
$761,000 for the three months ended June 30, 2025 and 2024, respectively, and $2.0 million and $1.5
million for the six months ended June 30, 2025 and 2024, respectively.
Depreciation and amortization expense related to property and equipment, excluding capitalized internal-
use software, was $389,000 and $413,000 for three months ended June 30, 2025 and 2024, respectively,
and $759,000 and $885,000 for the six months ended June 30, 2025 and 2024, respectively.
Other Non-Current Assets
Six Months Ended June 30, | Year Ended December 31, | ||
2025 | 2024 | ||
Contract costs, net ............................................................................. | $ | $ | |
Deferred offering costs ...................................................................... | |||
Other ..................................................................................................... | |||
Total other non-current assets ......................................................... | $ | $ | |
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Accrued Expenses and Other Current Liabilities
Six Months Ended June 30, | Year Ended December 31, | ||
2025 | 2024 | ||
Accrued payroll and related expenses ............................................ | $ | $ | |
Customer contract and rebate liabilities .......................................... | |||
Accrued royalty ................................................................................... | |||
Accrued professional fees ................................................................. | |||
Accrued clinical trial expenses ......................................................... | |||
Other ..................................................................................................... | |||
Total accrued expenses and other current liabilities .................... | $ | $ | |
6. Leases
The Company leases office space in Mountain View, California, Santa Rosa, California, Austin, Texas,
and Tokyo, Japan.
Mountain View, California
In August 2021, the Company entered into a facility lease agreement with MV Campus Owner, LLC (the
“Landlord”) for approximately 61,000 rentable square feet in Mountain View, California through August
2030. In connection with the lease, the Company established a standby letter of credit for the benefit of
the Landlord in the amount of $4.3 million in August 2021, which is classified as non-current restricted
cash on the condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024.
Santa Rosa, California
In October 2024, the Company entered into an agreement to sublease approximately 4,000 rentable
square feet of office space in Santa Rosa, California for 29 months commencing on November 1, 2024. In
connection with this sublease, the Company paid a security deposit of $8,000 and recorded an ROU
asset and lease liability of $169,000
Austin, Texas
In January 2023, the Company amended its facility lease agreement in Austin, Texas, which provides for
approximately 26,000 square feet of space, to extend the lease term which expired in November 2023
with a five-year renewal option to December 2025 with no renewal option. In June 2025, the Company
amended the lease for its Austin, Texas facility to extend the lease term an additional 12 months through
December 2026 and recorded an ROU asset and lease liability of $561,000
extension. A security deposit of $150,000
2025 and as current restricted cash as of December 31, 2024, on the condensed consolidated balance
sheets related to this lease.
Tokyo, Japan
The Company has one non-cancellable operating lease for its facility in Tokyo, Japan, which was set to
expire in November 2024. In April 2024, the Company entered into an agreement to extend the lease for
an additional three years through November 2027. In connection with the new lease agreement, the
Company recorded an ROU asset and lease liability of $420,000
24
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2025 | 2024 | 2025 | 2024 | ||||
Operating lease cost ......................................... | $ | $ | $ | $ | |||
Variable lease cost ............................................ | |||||||
Total lease cost .................................................. | $ | $ | $ | $ | |||
Cash paid for amounts included in the measurement of operating lease liabilities was $1.4 million and
$1.3 million during the three months ended June 30, 2025 and 2024, respectively, and $2.8 million and
$2.5 million, during the six months ended June 30, 2025 and 2024, respectively.
operating lease liabilities as of June 30, 2025 (in thousands):
June 30, | ||
2025 | ||
Operating Leases: | ||
2025 ................................................................................................................................................ | $ | |
2026 ................................................................................................................................................ | ||
2027 | ||
2028 ................................................................................................................................................ | ||
2029 ................................................................................................................................................ | ||
Thereafter ....................................................................................................................................... | ||
Total minimum lease payments .................................................................................................. | ||
Less: Amount of lease payments representing interest ..................................................... | ||
Present value of future minimum lease payments .................................................................. | $ | |
Less: current portion ................................................................................................................ | ||
Operating lease liabilities, net of current portion ...................................................................... | $ | |
thousands, except weighted-average data):
June 30, | December 31, | ||
2025 | 2024 | ||
Right-of-use assets ................................................................................. | $ | $ | |
Weighted-average remaining lease term (years) ............................... | |||
Weighted-average discount rate ........................................................... | |||
7. Commitments and Contingencies
Royalty Commitments
The Company has entered into various exclusive technology licensing agreements and other software
licensing agreements. The terms of the agreements require the Company to make annual royalty
payments in fixed amounts as well as certain milestone and revenue-based payments. The revenue-
based royalty percentage is in the low single digits, subject to reductions and offsets in certain
circumstances with a minimum royalty commitment of $50,000 annually. Future minimum royalty
25
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
commitments due under the terms of these exclusive agreements as of June 30, 2025 are as follows (in
thousands):
June 30, | ||
2025 | ||
Minimum Royalty Commitments: | ||
2025 ................................................................................................................................................. | $ | |
2026 ................................................................................................................................................. | ||
2027 ................................................................................................................................................. | ||
2028 ................................................................................................................................................. | ||
2029 ................................................................................................................................................. | ||
Thereafter ........................................................................................................................................ | ||
Total minimum royalty commitments ........................................................................................... | $ | |
The Company incurred royalty expense of $460,000 and $414,000 for the three months ended June 30,
2025 and 2024, respectively, and $874,000 and $750,000 for the six months ended June 30, 2025 and
2024, respectively.
Purchase Commitments
Open purchase commitments consist of agreements to purchase goods and services that are entered into
in the ordinary course of business. These amounts were not recorded as liabilities on the condensed
consolidated balance sheets as of June 30, 2025 and December 31, 2024 as the Company had not yet
received the related goods or services. As of June 30, 2025, the Company had estimated open purchase
commitments for goods and services of $4.0 million over the next three years .
Contingencies
The Company is not involved in any pending legal proceedings that it believes could have a material
adverse effect on its financial condition, results of operations or cash flows. The Company may pursue or
be subject to litigation and other legal actions from time to time arising in the ordinary course of business,
including intellectual property, products liability, breach of contract, commercial, employment, and other
similar claims which could have an adverse impact on its reputation, business and financial condition and
divert the attention of its management from the operation of its business. The Company discloses
information regarding each material claim where the likelihood of a loss contingency is probable or
reasonable possible and accrues a liability for such matters when it is probable that future expenditures
will be made, and such expenditures can be reasonably estimated. There were no
requiring accrual or disclosures as of June 30, 2025 and December 31, 2024.
Indemnifications
The Company provides general indemnifications to management and the members of the Company’s
board of directors (the “Board of Directors”) when they act, in good faith, in the best interest of the
Company. The Company is unable to develop an estimate of the maximum potential amount of future
payments that could potentially result from any hypothetical future claim, but expects the risk of having to
make any payments under these general business indemnifications to be remote. The Company also
maintains insurance coverage that would generally enable the Company to recover a portion of any future
amounts paid.
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Table of Contents
HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
8. Term Loan
Initial Term Loan
On January 19, 2021, the Company entered into a Credit Agreement with Hayfin Services, LLP (“Hayfin”)
for total borrowings of up to $70.0 million (the “Initial Term Loan”). The Company received net cash
proceeds of $68.1 million, after deducting $1.3 million of lender fees as a discount to the debt, and
$629,000 of debt issuance costs. The Company also issued a warrant to the lender to purchase a total of
date, which was accounted for as a debt discount. Refer to Note 12 for additional information.
New Money Term Loan
On March 17, 2022, the Company entered into Amendment No. 1 to the Credit Agreement with Hayfin for
an additional $50.0 million term loan (the “New Money Term Loan”), collectively with the Initial Term Loan,
(the “Term Loan”). Additionally, certain terms of the Initial Term Loan were amended. The Company
received net cash proceeds of $49.2 million, after deducting $820,000 of lender fees as a discount to the
debt. The Company also issued an additional warrant to the lender to purchase a total of 77,253 shares of
common stock. The fair value of the warrant was $3.5 million as of the issuance date, which was
accounted for as a debt discount. Refer to Note 12 for additional information.
Other Amendments
The Company entered into Amendments No. 2 and No. 3 to the Credit Agreement in September 2022 and
December 2022, respectively, which enabled the Company to issue Subordinated Convertible Promissory
Notes and to increase the aggregate principal of the Subordinated Convertible Promissory Notes that can
be issued to $42.0 million (see Note 9).
In the first quarter of 2023, the Company entered into three amendments to the Credit Agreement with
Hayfin. In March 2023, the Company entered into Amendment No. 4 and Waiver to Credit Agreement with
Hayfin to temporarily waive various covenant requirements that had not been met through the waiver date
and to enable the Company to amend certain terms of the Credit Agreement. Under Amendment No. 4, as
part of the Series F redeemable convertible preferred stock financing closing (see Note 10), the Company
issued to Hayfin 1,462,260 warrants for shares of common stock for no consideration and committed to
sell 921,018 and 1,201,423 shares of Series F-1 and Series F redeemable convertible preferred stock,
respectively. These shares were issued to Hayfin Heartflow UK Limited upon Convertible Note conversion
and upon the initial closing of Series F redeemable convertible preferred stock with the same terms as all
other investors. In March 2023, the Company entered into Amendment No. 5 to the Credit Agreement with
Hayfin, which required the Company’s securities at JPMorgan Chase Bank to become a “Controlled
Account”, as defined by the Credit Agreement. Also in March 2023, the Company entered into
Amendment No. 6 to the Credit Agreement with Hayfin, which permitted the reacquisition of 102,739
shares of common stock from an employee/founder of the Company. In connection with these
amendments, the Company paid $94,000 in lender fees, which were recorded as a debt discount.
Amendments No. 4 through No. 6 were accounted for as debt modifications for accounting purposes.
2024 Credit Agreement
On June 14, 2024, the Company entered into a Credit Agreement and Guaranty (the “2024 Credit
Agreement”) with Hayfin for a $138.1 million term loan (the “2024 Term Loan”) to refinance its outstanding
loan obligations under the 2021 Credit Agreement, as amended (the “2021 Credit Agreement”). In
addition, in connection with the 2024 Term Loan, the Company entered into several other adjoining
agreements with Hayfin. The 2024 Term Loan extended the maturity date from January 19, 2026 to
June 14, 2028. The 2024 Credit Agreement was accounted for as a debt modification for accounting
purposes.
27
Table of Contents
HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
On January 24, 2025, in connection with the issuance of the 2025 Convertible Notes, the Company
entered into Amendment No.1 to the 2024 Credit Agreement, in which Hayfin converted $23.0 million of
principal under the 2024 Term Loan to 2025 Convertible Notes under the same terms as the other
purchasers of the 2025 Convertible Notes. The principal balance outstanding under the 2024 Term Loan,
as amended, is $115.1 million as of June 30, 2025. The amendment was accounted for as a debt
modification for accounting purposes.
Prepayment Terms and Other Fees
Any prepayment or repayment of the principal balance of the 2024 Term Loan is subject to an exit fee.
The Company is accreting the exit fee over the loan term using the effective interest method. Under the
2024 Term Loan, the Company has the option to prepay the 2024 Term Loan subject to a prepayment fee
of 1.5 % for prepayments after the second anniversary but on or prior to the third anniversary of the 2024
Term Loan and a prepayment fee of 3 % for prepayments thereafter. The 2024 Credit Agreement requires
the Company to repay the loan in full immediately upon the occurrence of a change in control. In addition,
immediately upon the consummation of an IPO or SPAC transaction, as defined in the terms of the 2024
Credit Agreement, the Company shall repay the 2024 Term Loan in an amount equal to the lesser of (i)
the net cash proceeds of such IPO or SPAC transaction in excess of $150.0 million and (ii) $35.0 million.
In connection with Amendment No.1 to the 2024 Term Loan in January 2025, the amount immediately
payable upon the consummation of an IPO or SPAC transaction, as defined in the terms of the 2024
Credit Agreement, was amended where repayment of the 2024 Term Loan was required to be at an
amount equal to the lesser of (i) the net cash proceeds of such IPO or SPAC transaction in excess of
$150.0 million and (ii) $50.0 million (or $55.0 million if the underwriters exercise any portion of their option
to purchase additional shares).
On June 14, 2024, concurrently with entering the 2024 Credit Agreement, the Company signed a fee
letter agreement with Hayfin under which the Company agreed to pay $9.2 million in fees to Hayfin, which
consisted of a 3 % exit fee and 3 % early prepayment fee due under the 2021 Credit Agreement in the
amount of $8.3 million payable in sixteen equal quarterly installments of approximately $518,000 through
March 31, 2028, agent fees of $150,000 , due in annual installments of $30,000 through March 31, 2028
and an upfront fee of $721,000 . The Company paid the $721,000 upfront fee and $30,000 agent fee upon
the closing of the 2024 Term Loan. The exit fee and early prepayment fee was required to be repaid in full
immediately upon the occurrence of a financing event, including, but not limited to, any IPO, SPAC
transaction, or issuance of convertible notes or equity. The exit fee and early prepayment fee remaining
under the original terms of the 2024 Term Loan, which were immediately due and payable upon issuance
of the 2025 Convertible Notes, was amended in January 2025 to be immediately due and payable upon
the next occurrence of a financing event as described above.
See Note 18 for information about the $55.0 million repayment of principal under the 2024 Term Loan and
related exit and early prepayment fees paid in connection with the IPO.
Interest
During its term, the 2024 Term Loan bears interest at a floating per annum rate in an amount equal to the
sum of (i) 7.0 % (or 6.0 % if the alternative base rate (“ABR”) is in effect) plus (ii) the greater of (x) the
forward-looking term rate based on the Secured Overnight Financing Rate (“SOFR”) for a respective
tenor (or the alternative base rate, if applicable), and (y) 2.0 %. The ABR equals the sum of (i) 6.0 % plus
(ii) the greater of (1) the Wall Street Journal Prime Rate, plus 0.5 %, (2) the Federal Reserve Bank of New
York rate plus 0.5 % or (3) CBA Term SOFR for one month tenor plus 1.0 %. The Company had the option
to pay interest in-kind at the rate equal to the cash interest rate plus 1.0 %.
28
Table of Contents
HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Debt Issuance Costs and Debt Discount
Debt issuance costs include third-party costs incurred in connection with the original Credit Agreement.
Debt discount includes fees paid to the lender, warrants issued to the lender and the embedded derivative
liability as described below.
Prior to the refinancing of the 2021 Credit Agreement with the 2024 Term Loan (the “2024 Term Loan
Refinancing”), certain prepayment features of the Term Loan, default put option and default interest
adjustment features were determined to be embedded derivatives requiring bifurcation and separate
accounting for at fair value as a single compound derivative. The fair value of the derivative liability was
$2.1 million, as of the issuance date in January 2021, and is remeasured to fair value at each reporting
period. In connection with the 2024 Term Loan Refinancing, the associated current fair value of the
derivative liability of $1.1 million was remeasured at the date of refinancing and was derecognized and
recorded as a debt discount to the 2024 Term Loan. Refer to Note 13 for additional information.
In connection with the conversion of $23.0 million of principal under the 2024 Term Loan to 2025
Convertible Notes under Amendment No.1 to the 2024 Credit Agreement in January 2025, $239,000 of
pro-rata debt discount under the 2024 Term Loan was reclassified as a debt discount under the 2025
Convertible Notes.
The debt issuance costs and debt discount are classified as an offset to the Term Loan on the condensed
consolidated balance sheets, and is accreted over the loan term using the effective interest method.
As of June 30, 2025 and December 31, 2024, the effective interest rate of the 2024 Term Loan was 15.2 %
and 16.0 %, respectively.
Collateral and Covenants
During its term, the 2024 Term Loan is collateralized by substantially all of the Company’s assets. The
2024 Credit Agreement contains certain customary representations and warranties, covenants, events of
default, termination provisions and affirmative and negative covenants, including, among others,
covenants that limit or restrict the Company’s (and its subsidiaries) ability to incur additional
indebtedness, grant liens, merge or consolidate, make acquisitions, pay dividends or other distributions or
repurchase equity, make investments, dispose of assets and enter into certain transactions with affiliates,
in each case subject to certain exceptions. Events of default include, among others, non-payment of
principal, interest or fees, violation of covenants, inaccuracy of representations and warranties,
bankruptcy and insolvency events, material judgments, cross-defaults to material contracts and events
constituting a change of control. Upon the occurrence of an event of default, the interest rate applicable to
the 2024 Term Loan shall increase by 3.0 % per annum and the outstanding principal balance, along with
any accrued interest, shall become immediately due and payable. During its term, the Company is subject
to financial covenants which requires the Company to maintain a $25.0 million minimum liquidity balance
in cash and cash equivalents at all times and minimum net sales for twelve consecutive month periods
ending on the last day of a fiscal quarter, which is not tested as long as the Company maintains minimum
liquidity of at least $60.0 million and there has been no decline in net sales for two-consecutive fiscal
quarters at the end of such fiscal quarter. Under the terms of the 2024 Credit Agreement, the minimum
twelve months trailing net sales covenant increases each quarter and is $70.0 million for the quarter
ended June 30, 2024 up to a minimum net sales amount of $110.0 million for the quarter ended June 30,
2025 and each quarter thereafter. In connection with Amendment No.1 to the 2024 Term Loan in January
2025, the minimum liquidity cash balance covenant under the 2024 Term Loan was reduced to $15.0
million from the previous $25.0 million. Other non-financial covenants are outlined in the 2024 Credit
Agreement.
As of June 30, 2025 and December 31, 2024, the Company was in compliance with the 2024 Term Loan
covenants.
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Table of Contents
HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Debt Components
June 30, | December 31, | ||
2025 | 2024 | ||
Principal value of Term Loan ................................................................ | $ | $ | |
Accreted exit fee ..................................................................................... | |||
Debt discount .......................................................................................... | ( | ( | |
Debt issuance costs ............................................................................... | ( | ( | |
Total Term Loan ..................................................................................... | $ | $ | |
The 2024 Term Loan was classified as long-term on the condensed consolidated balance sheets as of
June 30, 2025 and December 31, 2024.
See Note 18 for information about repayment of the 2024 Term Loan and termination of the 2024 Credit
Agreement.
9. Convertible Notes
2025 Convertible Notes
In January and March 2025, the Company issued convertible promissory notes to Requisite Holders in
the aggregate amount of $98.3 million, which was comprised of $74.0 million in aggregate principal
amount of notes issued for cash consideration, $1.3 million in aggregate principal amount of notes issued
in lieu of cash compensation to certain employees and $23.0 million in aggregate principal amount of
notes issued from the conversion of principal under the 2024 Term Loan. Net cash proceeds was $72.7
million after deducting $1.2 million of debt issuance costs, of which $83,000 was unpaid as of June 30,
2025.
The 2025 Convertible Notes are due and payable in full 48 months from the issue date. Upon completion
of an IPO transaction, the 2025 Convertible Notes shall automatically convert into shares of the
Company’s common stock at the IPO price per share at the lower of a 20 % discount and a valuation cap
of $2.0 billion on a pre-money basis. In the event the Company completes a sale of shares of preferred
stock, the Requisite Holders may elect to convert the outstanding 2025 Convertible Notes into shares of
such series of preferred stock at the same terms. Further, upon a change of control transaction, the
Requisite Holders may elect to convert the outstanding 2025 Convertible Notes into shares of the
Company’s common stock at the lower of a 20 % discount to the implied price per share of common stock
in the change of control transaction and a valuation cap of $2.0 billion on a pre-money basis, or receive
payment of all principal and any accrued but unpaid PIK interest.
The 2025 Convertible Notes do not accrue interest for one year following the date of issuance. Following
the one-year anniversary of the issue date and for the remainder of the term, the 2025 Convertible Notes
interest will accrue on an annual basis at the rate of 7.0 % per annum (PIK Interest). All PIK Interest
accrued and payable will be paid by capitalizing such interest on an annual basis and adding it to the
outstanding principal amount of the 2025 Convertible Notes.
The 2025 Convertible Notes contain embedded derivative features, including conversion upon a change
in control and automatic conversion upon completion of a qualified IPO, that were required to be
bifurcated and accounted for separately as a single derivative instrument. The issuance date estimated
fair values of the derivative liability was $11.1 million and $20.8 million in January and March 2025,
respectively, which was accounted for as a debt discount. See Note 13 for additional information. The
debt issuance costs and debt discount are classified as an offset to the 2025 Convertible Notes on the
30
Table of Contents
HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
condensed consolidated balance sheets, and are accreted over the loan term using the effective interest
method.
As of June 30, 2025, the aggregate principal balance due under the 2025 Convertible Notes was $98.3
million and was classified as long-term on the condensed consolidated balance sheets. See Note 18 for
additional information.
June 30, | |
2025 | |
Principal value of Convertible Notes ............................................................................................ | $ |
Debt discount .................................................................................................................................. | ( |
Debt issuance costs ....................................................................................................................... | ( |
Total Convertible Notes .................................................................................................................. | $ |
10. Redeemable Convertible Preferred Stock
2024 (in thousands, except share amounts):
June 30, 2025 and December 31, 2024 | |||||||
Series | Number of Shares Authorized | Number of Shares Issued and Outstanding | Carrying Value | Liquidation Value | |||
Series A .................................................... | $ | $ | |||||
Series B-1 ................................................ | |||||||
Series B-2 ................................................ | |||||||
Series C ................................................... | |||||||
Series D ................................................... | |||||||
Series E ................................................... | |||||||
Series F .................................................... | |||||||
Series F-1 ................................................ | |||||||
Total ......................................................... | $ | $ | |||||
The significant rights and obligations of the Company’s redeemable convertible preferred stock are as
follows:
Dividends
The holders of Series A, Series B-1, Series B-2, Series C, Series D, Series E, Series F and Series F-1
redeemable convertible preferred stock are entitled, on a pro rata, pari passu basis, when and if declared
by the Board of Directors, to non-cumulative dividends out of the Company's assets legally available
therefore at the rate of $0.030 , $0.284 , $0.284 , $0.7384 , $1.24 , $2.0265 , $0.2281 and $0.1528 per share
per annum, respectively. No distributions will be made with respect to the common stock until all declared
but unpaid dividends on redeemable convertible preferred stock have been paid or set aside for payment
to the convertible preferred stockholders. Except with respect to the rights of the holders of Series C
redeemable convertible preferred stock upon a liquidation event, the right to receive dividends on shares
of redeemable convertible preferred stock are non-cumulative, and no right to such dividends accrues to
holders of redeemable convertible preferred stock by reason of the fact that dividends on such shares are
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
not declared or paid in any years. At June 30, 2025 and December 31, 2024, no dividends had been
declared or paid.
Dividends are payable to preferred stockholders in the order of: first, the Series F and Series F-1
redeemable convertible preferred stock, then the Series E redeemable convertible preferred stock, then
the Series D redeemable convertible preferred stock, then the Series C redeemable convertible preferred
stock, then the Series B-1 and B-2 redeemable convertible preferred stock, and then finally, the Series A
redeemable convertible preferred stock. After payment of the full amount of any dividends described
above, any additional dividends shall be distributed among all holders of common stock and all holders of
redeemable convertible preferred stock on an as-converted basis.
The holders of Series C redeemable convertible preferred stock are the only preferred stockholders
entitled to cumulative dividends upon a liquidation event. In connection with the Series F redeemable
convertible preferred stock financing, the cumulative dividends payable to holders of Series C redeemable
convertible preferred stock upon a liquidation event were capped from $6.66 to $8.25 per share
depending on the time of issuance, with an aggregate total of $88.5 million, provided, however, that the
Company shall be under no obligation to pay such Series C preferred accruing dividends until a
liquidation event; provided further, that a holder of shares of Series C redeemable convertible preferred
stock shall automatically forfeit any then accrued but unpaid Series C redeemable convertible preferred
accruing dividends with respect to such shares upon conversion of such shares into shares of common
stock. As of June 30, 2025 and December 31, 2024, the total accumulated, but not yet declared or paid,
dividends of $88.5
recorded in the condensed consolidated financial statements as an accrued dividend as such an event
was not considered probable to occur.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary,
the holders of Series F, Series F-1, Series E, Series D, Series C, Series B-1, Series B-2 and Series A
redeemable convertible preferred stock are entitled to liquidation preferences in the amount of $4.2758 ,
$2.8647 , $25.3317 , $15.50 , $9.23 , $3.55 , $3.55 , and $0.50 per share, respectively, for each outstanding
share plus all declared but unpaid dividends, if the shares are not converted to common stock.
Payment of liquidation rights to preferred stockholders are in the order of: first, the Series F and Series
F-1 redeemable convertible preferred stock, then the Series E redeemable convertible preferred stock,
then the Series D redeemable convertible preferred stock, then the Series C redeemable convertible
preferred stock, then the Series B-1 and B-2 redeemable convertible preferred stock, and then finally the
Series A redeemable convertible preferred stock. The remaining assets, if any, shall be distributed to the
holders of common stock.
If upon the liquidation, dissolution or winding up of the Company, the assets of the Company legally
available for distribution to the holders of the Series F, Series F-1, Series E, Series D, Series C, Series
B-1, Series B-2 and Series A redeemable convertible preferred stock are insufficient to permit the
payment to such holders of the full liquidation preferences to which they are entitled, then the holders of
the Company’s common stock will receive nothing in respect of their equity holdings in the Company.
Upon such an event, the assets of the Company legally available for distribution shall satisfy the
respective liquidation preferences of the preferred stockholders with equal pro rata priority in the same
preferential order as described above.
Conversion Rights
Each share of Series A, Series B-1, Series B-2, Series C, Series D, Series E, Series F and Series F-1
redeemable convertible preferred stock shall automatically be converted into fully-paid, nonassessable
shares of common stock at the then effective conversion rate per share for such share prior to the closing
of a firm commitment underwritten IPO pursuant to an effective registration statement filed under the
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Securities Act of 1933, as amended, or SPAC transaction covering the offer and sale of the Company’s
common stock, provided that (i) the aggregate gross proceeds to the Company are not less than
$100,000,000 and (ii) the per share price of the shares sold in the public offering shall be no less than
$4.9884 per share or $5.7010 per share (subject to adjustment from time to time for Recapitalizations and
as otherwise set forth elsewhere herein). In addition, and so long as a certain investor holds at least
such shares shall automatically be converted into fully-paid, nonassessable shares of common stock at
the then effective conversion rate for such share upon the written consent of the holders of a majority of
the Series F and F-1 redeemable convertible preferred stock (voting as a single class and on an as-
converted basis). The conversion rates per share for previously issued preferred stock were amended as
a result of the Series F redeemable convertible preferred stock financing from the original conversion
rates per share for Series B-1, Series B-2, Series C, Series D and Series E redeemable convertible
preferred stock. Upon a Qualified Public Offering, shares of each series of the outstanding redeemable
convertible preferred stock are convertible into the number of shares of common stock determined by
dividing the original issue price for the relevant series of redeemable convertible preferred stock by the
conversion price for such series. As of June 30, 2025 and December 31, 2024, shares of Series A, Series
B-1, Series B-2, Series C, Series D, Series E, Series F and Series F-1 outstanding redeemable
convertible preferred stock are convertible into shares of common stock on a 0.342466 0.403088
Reverse Stock Split, respectively.
Voting Rights
The holder of each share of Series A, Series B-1, Series B-2, Series C, Series D, Series E, Series F and
Series F-1 redeemable convertible preferred stock that is outstanding is entitled to one vote for each
share of common stock into which it could be converted.
11. Common Stock
Under the Company’s Amended and Restated Certificate of Incorporation, the Company is authorized to
issue 210,300,000 shares of $0.001 par value common stock.
June 30, | December 31, | ||
2025 | 2024 | ||
Redeemable convertible preferred stock ................................................ | |||
Options to purchase common stock ......................................................... | |||
Common stock warrants ............................................................................ | |||
Total .............................................................................................................. | |||
12. Common Stock Warrant Liability
On January 19, 2021, in connection with entering into the Credit Agreement, the Company issued Hayfin
a warrant to purchase 108,154 shares of common stock at an exercise price of $0.03 per share. On
March 17, 2022, upon amendment to the Credit Agreement, the Company issued Hayfin a warrant to
purchase 77,253 shares of common stock at an exercise price of $0.03 per share. On March 3, 2023,
upon Amendment No. 4 to the Credit Agreement and as a result of antidilution adjustment provisions in
connection with the Series F redeemable convertible preferred stock financing, the Company issued
Hayfin a warrant to purchase 1,462,260 shares of common stock at an exercise price of $0.03 per share
(collectively, the “Warrants”). As of June 30, 2025 and December 31, 2024, all warrants remained
outstanding.
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Warrants have a net exercise provision under which their holders may, in lieu of payment of the
exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market
value of the Company’s stock at the time of exercise of the Warrants after deduction of the aggregate
exercise price. The Warrants also have customary antidilution protection provisions. The Warrants will
terminate on the ten-year anniversary of the issuance date, however, the Warrants will automatically net
exercise immediately prior to termination if the fair market value of one share of common stock exceeds
the then current exercise price per share of common stock. In connection with certain change of control
transactions, which include SPAC combinations, mergers, consolidations and the sale or lease of
substantially all of the assets of the Company, the Warrants will also automatically net exercise if the fair
market value of one share of common stock exceeds the then current exercise price per share of
common stock. The Warrants do not automatically net exercise in connection with an IPO.
The aggregate fair value of the Warrants issued in connection with the initial Credit Agreement and the
amended Credit Agreement was $4.3 million and $3.5 million, respectively, at issuance and was
recognized as a debt discount and recorded as a warrant liability.
The warrant liabilities were remeasured to fair value, resulting in a loss of $863,000 and $3.9 million
during the three months ended June 30, 2025 and 2024, respectively, and a loss of $2.5 million and $3.9
million during the six months ended June 30, 2025 and 2024, respectively, within the condensed
consolidated statements of operations and comprehensive loss.
Black-Scholes option pricing model based on the following weighted average assumptions:
December 31, | |
2024 | |
Stock price ................................................................................................................................... | $ |
Exercise price .............................................................................................................................. | $ |
Contractual term (in years) ....................................................................................................... | |
Expected volatility ....................................................................................................................... | |
Weighted-average risk-free interest rate ................................................................................ | |
Dividend yield .............................................................................................................................. | |
At June 30, 2025, due to the proximity of the Company’s IPO, the fair value of the common stock warrant
liability was based on the estimated fair value of the Company’s common stock.
13. Derivative Liability
Term Loan
Prior to the 2024 Term Loan Refinancing in June 2024, the Term Loan contained certain prepayment
features, default put option and default interest adjustment features that were determined to be
embedded derivatives requiring bifurcation and separate accounting as a single compound derivative, as
discussed in Note 8. The fair value of the derivative liability was recorded at the issuance date as debt
discounts and reductions to the carrying value of long-term debt on the condensed consolidated balance
sheets. The derivative liability is remeasured to fair value at each reporting period and the related
changes in fair value are recorded on the condensed consolidated statements of operations and
comprehensive loss. Through the time of the 2024 Term Loan Refinancing in June 2024, the Company
continued to adjust the derivative liability for changes in fair value of the Term Loan.
Estimating fair values of the derivative liability requires the development of significant and subjective
estimates that may, and are likely to, change over the duration of the instrument with related changes in
internal and external market factors. Since the derivative financial instrument is initially and subsequently
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
carried at fair value, the Company’s income will reflect the volatility in these estimate and assumption
changes.
The derivative liability was remeasured to fair value as of June 14, 2024, resulting in a loss of $222,000
within the condensed consolidated statements of operations and comprehensive loss. In connection with
the 2024 Term Loan Refinancing on June 14, 2024, the associated current fair value of the derivative
liability of $1.1 million as remeasured at the date of refinancing was derecognized and recorded as a debt
discount to the 2024 Term Loan.
The fair value of the derivative liability was estimated using a scenario-based analysis comparing the
probability-weighted present value of the Term Loan payoff at maturity with and without the bifurcated
features. The Company used both the Black-Scholes-Merton and option pricing method to estimate the
fair value of the derivative liability because it believes these techniques are reflective of all significant
assumption types and ranges of assumption inputs that market participants would likely consider in
transactions involving compound embedded derivatives. The option pricing method was employed as part
of a back-solve analysis to the Company’s Series F Preferred round of financing. The Company’s
assumptions used in determining the fair value of the derivative liability is as follows:
June 14, | ||
2024 | ||
Debt yield ..................................................................................................................................... | ||
Probability of business combination or IPO (with feature) ................................................... | ||
Event date of business combination or IPO (with feature) ................................................... | 6/30/2025 | |
Probability of Default .................................................................................................................. | ||
Event date of Default ................................................................................................................. | 9/30/2025 | |
Probability to incur new debt .................................................................................................... | ||
Event date to incur new debt .................................................................................................... | n/a | |
Probability of change of control ................................................................................................ | ||
Event date of change of control ............................................................................................... | 6/30/2025 | |
Event date (without feature) ...................................................................................................... | 1/19/2026 | |
Debt yield — Discount rate that reconciles the total fair value of the Warrants and 2021 Credit Agreement
with the transaction value. Debt yield reflects a change in the credit benchmark for a “CCC” rated
obligation.
2025 Convertible Notes
The 2025 Convertible Notes were determined to contain certain settlement features and conversion put
options which require bifurcation and separate accounting as a single compound embedded derivative, as
discussed in Note 9. The fair value of the derivative liability was recorded at the issuance dates as a debt
discount and reduction to the carrying value of the 2025 Convertible Notes on the condensed
consolidated balance sheets. The derivative liability is remeasured to fair value at each reporting period
and the related changes in fair value are recorded on the condensed consolidated statements of
operations and comprehensive loss.
The fair value of the derivative liability was estimated using a scenario-based analysis comparing the
probability-weighted present value of the 2025 Convertible Notes with and without the bifurcated features.
The Company used the Monte Carlo Simulation method to estimate the fair value of the derivative liability
because it believes this technique is reflective of all significant assumption types and ranges of
assumption inputs that market participants would likely consider in transactions involving compound
embedded derivatives. The option pricing method was employed as part of a back-solve analysis for
scenarios in which the Company was expected to raise another financing round. The Company also
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
employed a waterfall analysis that allocated certain exit proceeds to its outstanding share classes for
scenarios in which the Company was assumed to exit via change of control or IPO. The Company’s
assumptions used in determining the issuance date fair value of the derivative liability is as follows:
January 31, | March 26, | ||
2025 | 2025 | ||
Debt yield ................................................................................................................. | |||
Probability of IPO .................................................................................................... | |||
Event date of IPO .................................................................................................... | 5/5/2025 | 5/9/2025 | |
Probability of change of control ............................................................................ | |||
Event date of change of control ............................................................................ | 1/31/2026 | 3/26/2026 | |
Discount rate ............................................................................................................ | |||
The issuance date estimated fair values of the derivative liability was $11.1 million and $20.8 million in
January and March 2025, respectively, which were recorded as debt discounts. The derivative liability was
remeasured to fair value at the end of each reporting period, resulting in a gain of $11.5 million and $2.5
million for the three and six months ended June 30, 2025, respectively, within the condensed consolidated
statements of operations and comprehensive loss. The aggregate fair value of the derivative liability as of
June 30, 2025 was $29.4 million.
14. Equity Incentive Plan
In 2009, the Company adopted its 2009 Equity Incentive Plan (the “Plan”) which provides for the grant of
stock options to the Company’s employees, members of the Board of Directors and consultants. Options
granted under the Plan may be either incentive stock options (“ISOs”) or nonqualified stock options
(“NSOs”). ISOs may be granted only to employees. NSOs, Stock Appreciation Rights, Restricted Stock,
and Restricted Stock Units may be granted to employees, members of the Board of Directors and
consultants. As of June 30, 2025, the Company reserved 10,885,987 shares for issuance under the Plan.
Options under the Plan have a term of ten years from the grant date. The option exercise price will be
determined by the Board of Directors, but will be no less than 100 % of the fair market value per share on
the date of grant. In addition, in the case of an ISO granted to an employee who owns stock representing
more than 10 % of the voting power of all classes of stock of the Company, the per share exercise price
will be no less than 110 % of the fair market value per share on the date of grant. Through June 30, 2025
and December 31, 2024, options granted generally vest over (i) four years 25
anniversary of the issuance date and 1/48th per month thereafter or (ii) vesting monthly in equal
installments over four years
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
except share and per share amounts):
Shares Available for Grant | Number of Options | Awards Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | ||||||
Balance at December 31, 2024 ... | $ | $ | ||||||||
Authorized ....................................... | — | $— | ||||||||
Options granted .............................. | ( | $ | ||||||||
Options exercised ........................... | ( | $ | ||||||||
Options canceled ............................ | ( | $ | ||||||||
Balance at June 30, 2025 ............. | $ | $ | ||||||||
Vested and exercisable, June 30, 2025 .............................................. | $ | $ | ||||||||
Vested and expected to vest, June 30, 2025 .............................. | $ | $ | ||||||||
The weighted-average grant date fair value of options granted during the three and six months ended
June 30, 2025 was $7.78 and $7.40 per share, respectively.
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying
stock options and the fair value of the Company’s common stock for stock options that were in-the-money
at each reporting period. The aggregate intrinsic value of stock options exercised during the three and six
months ended June 30, 2025 was $1.0 million and $2.1 million, respectively.
Stock-Based Compensation
based on the following assumptions:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2025 | 2024 | 2025 | 2024 | |||||
Expected life (in years) ........................ | ||||||||
Expected volatility ................................. | ||||||||
Risk-free interest rate ........................... | ||||||||
Dividend yield ........................................ | n/a | |||||||
The significant assumptions used in these calculations are summarized as follows:
Fair value of common stock. Because there has been no public market for the Company’s common stock,
the fair value of common stock shares underlying stock options has historically been determined by the
Board of Directors at the time of option grant by considering independent valuation performed by third-
party valuation firm as well as a number of objective and subjective factors, including valuation of
comparable companies, sales of convertible preferred stock to unrelated third parties, operating and
financial performance, the lack of liquidity of capital stock and general and industry specific economic
outlook, among other factors. The fair value of common stock was determined in accordance with
applicable elements of the American Institute of Certified Public Accountants Practice Aid, Valuation of
Privately-Held-Company Equity Securities Issued as Compensation.
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Expected term. The expected term of stock options represents the weighted-average period the stock
options are expected to remain outstanding. The Company does not have sufficient historical exercise
and post-vesting termination activity to provide accurate data for estimating the expected term of options
and has opted to use the “simplified method,” whereby the expected term equals the arithmetic average
of the vesting term and the original contractual term of the option.
Expected volatility. As the Company is not publicly traded, the expected volatility for the Company’s stock
options was determined by using an average of historical volatilities of selected industry peers deemed to
be comparable to the Company’s business corresponding to the expected term of the awards.
Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the
time of grant for zero-coupon U.S. Treasury notes with maturities corresponding to the expected term of
the awards.
Expected dividend yield. The expected dividend rate is zero as the Company currently has no history or
expectation of declaring dividends on its common stock.
The Company also issues stock options with vesting based upon completion of performance goals. The
fair value for these performance-based awards is recognized over the period during which the goals are
to be achieved. Stock-based compensation expense recognized at fair value includes the impact of
estimated probability that the goals would be achieved, which is assessed prior to the requisite service
period for the specific goals.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2025 | 2024 | 2025 | 2024 | |||||
Cost of revenue ............................................... | $ | $ | $ | $ | ||||
Research and development .......................... | ||||||||
Selling, general and administrative .............. | ||||||||
Total stock-based compensation expense . | $ | $ | $ | $ | ||||
As of June 30, 2025, total unrecognized stock-based compensation costs related to unvested stock
options was $14.8 million, which is expected to be recognized over a remaining weighted-average period
of 2.49 years.
15. Employee Retirement Plan
The Company has a qualified retirement plan under section 401(k) of the Internal Revenue Code (“IRC”)
under which participants may contribute up to 100 % of their eligible compensation, subject to maximum
deferral limits specified by the IRC. The Company may make matching contributions of up to 4.0 % of an
employee’s eligible compensation, subject to conditions specified by the IRC. The Company’s matching
contributions totaled $786,000 and $664,000 during the three months ended June 30, 2025 and 2024,
respectively, and $1.5 million and $1.0 million during the six months ended June 30, 2025 and 2024,
respectively.
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
16. Net Loss Per Share
except share and per share amounts):
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2025 | 2024 | 2025 | 2024 | ||||
Numerator: | |||||||
Net loss ............................................................................ | $( | $( | $( | $( | |||
Denominator: | |||||||
Weighted-average shares used to compute net loss per share, basic and diluted ................................. | |||||||
Net loss per share, basic and diluted .......................... | $( | $( | $( | $( | |||
diluted net loss per share for the period presented because including them would have been antidilutive:
June 30, | |||
2025 | 2024 | ||
Redeemable convertible preferred stock ............................................................ | |||
Outstanding options to purchase common stock ............................................... | |||
Common stock warrants ........................................................................................ | |||
Total ........................................................................................................................... | |||
17. Income Taxes
The Company had an effective tax rate of 0
2024. The Company continues to incur operating losses.
During the three and six months ended June 30, 2025 and 2024, the Company has evaluated all available
evidence, both positive and negative, including historical levels of income, expectations and risks
associated with estimates of future taxable income and has determined that it is more likely than not that
its net deferred tax assets will not be realized. Due to uncertainties surrounding the realization of the
deferred tax assets, the Company continues to maintain a full valuation allowance against its net deferred
tax assets.
On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the United States which contains a
broad range of tax reform provisions affecting businesses. The Company is currently assessing the
impact on its condensed consolidated financial statements.
18. Subsequent Events
For the interim condensed consolidated financial statements as of June 30, 2025, and for the three and
six months then ended, the Company has evaluated events through September 18, 2025, which is the
date the unaudited interim condensed consolidated financial statements were available to be issued.
2025 Facility Lease
On July 2, 2025, the Company entered into a facility lease agreement for approximately 8,100 rentable
square feet of office space in San Francisco, California for 39 months through November 30, 2028, with
the option to extend for one additional three-year period. In connection with the lease, the Company paid
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HeartFlow Holding, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
a security deposit of $90,000 . The average monthly lease payments are approximately $40,000 per
month during the lease term.
Amended and Restated Certificate of Incorporation
Effective August 11, 2025, the Company filed an amended and restated certificate of incorporation that
authorizes 250,000,000 shares of common stock, $0.001 par value per share, and 50,000,000 shares of
preferred stock, $0.001 par value per share.
Grant of Options and Restricted Stock Units
Subsequent to June 30, 2025, the Company granted options for 1,826,899 shares of common stock,
subject to service-based vesting conditions, with an exercise price equal to the IPO price of $19.00 per
share to employees and the Board of Directors and awarded 814,209 restricted stock units subject to
service-based vesting conditions to employees under the 2025 Performance Incentive Plan.
2009 Equity Incentive Plan
Effective upon its IPO, the Company terminated the 2009 Equity Incentive Plan and adopted the 2025
Performance Incentive Plan and 2025 Employee Stock Purchase Plan.
Repayment of 2024 Term Loan and Termination of 2024 Credit Agreement
On August 18, 2025, the Company repaid $55.0 million of indebtedness outstanding under the 2024
Credit Agreement obligated in connection with the completion of the Company’s IPO and approximately
$5.8 million in fees consisting of a 3 % exit fee and a 3 % early prepayment fee due under the 2021 Credit
Agreement, as amended.
On August 22, 2025, the Company prepaid in full all outstanding amounts under, and terminated, the
2024 Credit Agreement, in the aggregate principal amount of $60.1 million plus accrued interest of $1.0
million. The Company did not incur exit or prepayment fees in connection with the termination of the 2024
Credit Agreement.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations
in conjunction with our condensed consolidated financial statements and the related notes and other
financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited
consolidated financial statements and the related notes and the discussion under the heading
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year
ended December 31, 2024 included in our registration statement on Form S-1 (File No. 333-288733),
which became effective on August 7, 2025. This discussion and analysis and other parts of this Quarterly
Report on Form 10-Q contain forward-looking statements based upon our current plans and expectations
that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives,
expectations, intentions and beliefs. Our actual results and the timing of events could differ materially
from those anticipated in these forward-looking statements as a result of various factors, including those
set forth under Part II, Item 1A, “Risk factors” and elsewhere in this Quarterly Report on Form 10-Q.
Please also see the section titled “Special Note Regarding Forward-looking Statements.” Our historical
results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
We have pioneered the use of software and artificial intelligence (“AI”) to deliver a more accurate and
clinically effective non-invasive solution for diagnosing and managing coronary artery disease (“CAD”), a
leading cause of death worldwide. As of June 30, 2025, our Heartflow Platform has been used to assess
CAD in almost 500,000 patients, including 132,000 in 2024 alone. We believe that we are the most widely
adopted AI-powered test for CAD. Our novel platform leverages AI and advanced computational fluid
dynamics to create a personalized 3D model of a patient’s heart from a single coronary computed
tomography angiography (“CCTA”), a specialized type of scan that provides detailed images of the heart’s
arteries. Our Heartflow Platform delivers actionable insights on blood flow, stenosis, plaque volume and
plaque composition thereby overcoming the limitations of traditional non-invasive imaging tests which rely
on indirect measures of coronary disease and lead to higher false negative and false positive rates as
demonstrated by our PRECISE trial. We believe the differentiated accuracy and clinical utility of our
Heartflow Platform, along with its ability to enhance workflows, will continue to support our growth and
advance the “CCTA + Heartflow” pathway as the definitive standard for the non-invasive diagnosis and
management of CAD.
To date, we have developed three software products (with a fourth product expected to launch in 2026)
under the Heartflow Platform that provide physicians with the critical insights needed to effectively
diagnose and manage CAD:
•Heartflow RoadMap Analysis offers a highly intuitive anatomic visualization of the coronary arteries,
helping physicians quickly identify clinically relevant areas to focus their review. We provide Heartflow
RoadMap Analysis to accounts as an integrated feature to enhance the efficiency of their CCTA
program, and it is not a stand-alone product.
•Heartflow FFRCT Analysis calculates blood flow and pinpoints clinically significant CAD, which is CAD
with a fractional flow reserve (“FFR”) value of 0.80 or below, at every point in the major coronary
arteries. FFR measures the severity of blood flow restriction in the coronary arteries on a scale of 1.0
(no restriction) to 0.0 (complete blockage) by assessing pressure differences across a stenosis during
induced stress, guiding decisions on whether a patient requires invasive revascularization.
•Heartflow Plaque Analysis provides a comprehensive assessment of coronary plaque, enabling
optimized medical treatment strategies.
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•Heartflow PCI Planner, which we expect to launch in 2026, will provide advanced visualization and
clinical insights to optimize revascularization strategies, guide device selection, enhance procedural
efficiency, and improve patient care. We plan to provide Heartflow PCI Planner to accounts as an
integrated feature to enhance procedural efficiency, not as a stand-alone product.
The Heartflow Platform has an existing commercial presence and regulatory approval in the United
States, United Kingdom, European Union, Australia, Canada and Japan. We have developed a highly
scalable, capital efficient commercial model that combines Territory Sales Managers who drive new
account adoption with Territory Account Managers who focus on increasing utilization by educating
referring physicians. Our commercial team does not cover cases or otherwise spend time in an operating
room or lab setting, which enables them to focus solely on driving commercial adoption and educational
activities. We also have small, direct commercial teams in our international markets. In the future, we may
expand our international presence beyond these markets.
Our technology is simple and intuitive and does not require the purchase of any capital equipment. Our
onboarding process seamlessly integrates the Heartflow Platform into the customer’s daily workflow.
These unique attributes of our business model afford our commercial organization a differentiated level of
efficiency and scalability.
We have experienced considerable revenue growth since we began commercializing the Heartflow
Platform in 2015, driven primarily by growth in our account base and increasing test volumes at accounts
in our installed base. For the three months ended June 30, 2025 and 2024, we recognized revenue of
$43.4 million and $31.1 million, respectively, and for the six months ended June 30, 2025 and 2024, we
recognized revenue of $80.6 million and $57.9 million, respectively. Substantially all of our revenue is
generated on a “pay-per-click” basis each time a physician chooses to review either our Heartflow FFRCT
Analysis, Heartflow Plaque Analysis, or both and we recognize usage-driven fee revenue upon delivery of
the requested analysis to the physician. Heartflow FFRCT Analysis has served as our commercial
foundation, representing 98% of our total revenue as of June 30, 2025. In the second half of 2023, we
initiated limited market education efforts for Heartflow Plaque Analysis, our second commercial product.
Our Heartflow RoadMap Analysis is generally provided as a workflow efficiency tool to drive customer
retention and loyalty and is not a stand-alone product.
Prior to our initial public offering (“IPO”), we primarily funded our operations with proceeds from sales of
shares of our redeemable convertible preferred stock, common stock and convertible promissory notes,
borrowings under our term loans and revenue received from our customers. As of June 30, 2025, we had
$80.2 million in cash and cash equivalents. In January and March 2025, we issued $98.3 million in
aggregate principal amount of the 2025 Convertible Notes to investors, including related parties, with
original maturity dates of 48 months from the dates of issuance. The consideration for the issuance of the
2025 Convertible Notes was comprised of $74.0 million in cash, $1.3 million in aggregate principal
amount of notes issued in lieu of cash compensation to certain employees, and the exchange of $23.0
million of outstanding indebtedness under the 2024 Credit Agreement (as defined below).
On August 11, 2025, we completed our IPO, in which we issued and sold 19,166,667 shares of our
common stock, which includes an additional 2,500,000 shares of common stock purchased by the
underwriters pursuant to their option to purchase additional shares, at a price to the public of $19.00 per
share. The cash proceeds from the IPO were approximately $332.8 million, net of underwriting discounts
and commissions and estimated offering costs of $31.4 million. Additionally, upon the closing of our IPO,
the aggregate outstanding principal balance of $98.3 million under the 2025 Convertible Notes
automatically converted into 6,470,743 shares of our common stock at $15.20 per share, a 20% discount
from our IPO price.
We have incurred significant operating losses and negative cash flows since our inception and we expect
to continue to incur losses as we grow and transition to operating as a public company. As of June 30,
2025, we had an accumulated deficit of $1.0 billion.
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Based on our current operating plan, we believe that the expected cash generated from revenue
transactions with customers, our existing cash and cash equivalents together with the net proceeds from
our August 2025 IPO, will be sufficient to fund our planned operating expenses and capital expenditure
requirements for at least the next 12 months.
Key Factors Affecting Our Results of Operations and Performance
We believe there are several important factors that have impacted and that we expect will continue to
impact our operating performance and results of operations for the foreseeable future. These factors
include, among others:
•Rate of adoption of CCTA in the market and our ability to increase adoption of the CCTA+ Heartflow
pathway among both referring and reading physicians.
•Ability to successfully introduce our Heartflow Plaque Analysis and other new products and the rate at
which they are adopted by physicians.
•Ability to automate an increasing number of the manual components of our production process and
the rate at which we hire and train analysts to full productivity.
•We experience seasonality throughout the year based on a number of factors, including staff
availability, vacations, weather and other macro economic events.
•Publications of clinical results by us and third parties.
Heartflow Revenue Cases
We regularly review a number of operating and financial metrics to evaluate our business, measure our
performance, identify trends affecting our business, formulate our business plan and make strategic
decisions. Substantially all of our revenue is generated on a “pay-per-click” basis each time a physician
chooses to review either our Heartflow FFRCT Analysis, Heartflow Plaque Analysis, or both, and we
recognize usage-driven fee revenue upon delivery of the requested analysis to the physician. We define a
“Heartflow revenue case” as each time an account orders and we deliver the requested analysis to the
physician. For example, the ordering of both an Heartflow FFRCT Analysis and a Heartflow Plaque
Analysis from a single CCTA counts as two revenue cases. We define an “account” as any individual
facility that orders a Heartflow FFRCT Analysis, Heartflow Plaque Analysis, or both. Accounts may have
more than one reading physician or CT machine. The following table lists these revenue cases in each of
the three month periods as indicated:
Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | ||||||||||
Revenue cases ............................... | 19,537 | 21,769 | 23,195 | 24,897 | 28,803 | 33,039 | 34,970 | 37,805 | 40,336 | 48,423 | |||||||||
The period-to-period change in Heartflow revenue cases is an indicator of our ability to drive adoption and
generate sales revenue, and is helpful in tracking the progress of our business. We believe that Heartflow
revenue cases are representative of our current business; however, we anticipate this metric may be
substituted for additional or different metrics as our business grows.
Components of Our Results of Operations
Revenue
Substantially all of our revenue comprises usage-driven fees from accounts who order either our
Heartflow FFRCT Analysis or our Heartflow Plaque Analysis, or both. We recognize usage-driven fee
revenue upon delivery of the requested analysis to the physician. Key factors that drive our revenue
include revenue case growth from our installed base and the success of our sales force in expanding
adoption of the Heartflow Platform to new accounts and expanding the utilization of our system by
accounts in our installed base. We consider an account that has our Heartflow solution deployed with the
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ability to send us CCTA images for processing as being part of our installed base. New accounts
generally take 12 months to reach steady state revenue case volumes. We consider steady state case
volumes to be attained once the account reaches FFRCT utilization rates approaching 33% of CCTAs
occurring at the account—a level that is generally sustained over time based on historical trends. Our
Heartflow FFRCT Analysis is indicated for patients with stenosis levels between 40% and 90%, and we
believe approximately 33% of patients have this level of stenosis. For purposes of managing our
business, we do not separately track increases in revenue solely attributable to new accounts. Revenue
cases generated from clinic or office-based accounts typically carry a lower pricing than hospital-based
accounts, commensurate with their lower reimbursement levels. We expect the percentage of our
revenue cases generated from clinic or office-based accounts to continue to increase over time. The
percentage of our U.S. revenue cases attributable to office and clinic-based accounts was 31% and 28%
for the three months ended June 30, 2025 and 2024, respectively, and 31% and 30% for the six months
ended June 30, 2025 and 2024, respectively.
While a single customer may include multiple accounts, no single customer accounted for 10% or more of
our revenue during the three and six months ended June 30, 2025 and 2024. However, the decision-
making function for some of these accounts is concentrated in a relatively small number of customers,
such that the loss of one customer could result in a disproportionate loss across our accounts. For
example, for the year ended December 31, 2024, our top two largest customers, both large health
systems with multiple accounts, collectively represented approximately 8% of our revenue. As we expand
the adoption of the Heartflow Platform, we expect a majority of new accounts to come from new
customers, decreasing our customer concentration risk.
Our revenue has fluctuated, and we expect it to continue to fluctuate from quarter-to-quarter due to a
variety of factors including the number of accounts in our installed base, the volume of Heartflow Platform
usage by accounts in our installed base, customer pricing contracts that include utilization and volume
rebates, changes in the mix of customer accounts and seasonality. We may experience fluctuations in the
volume of Heartflow Platform usage by our customers based on seasonal factors that impact the number
of radiologists and support staff available to conduct CCTAs at customer accounts.
Cost of revenue and gross margin
Cost of revenue consists of personnel and related expenses, including stock-based compensation costs,
primarily related to our production team. Additional costs include third-party hosting fees, amortization of
capitalized internal-use software, amortization of contract fulfillment costs as well as royalties associated
with technology licenses used in connection with the delivery of our product and allocated overhead,
which includes facilities expenses, equipment, depreciation and technology services. The role of the
production team is to support our patient case volume revenue by performing defined quality-related
activities on CCTA scans submitted by our customers for analysis. The portion of these costs that
supports patient case volume revenue is recorded as cost of revenue. The production team also supports
activities in our clinical trials and research and development, which are allocated as research and
development expense. We expect cost of revenue to increase as we hire additional personnel in our
production team to support our increasing patient case volume.
We calculate gross margin as gross profit divided by revenue. Our gross margin has been and will
continue to be affected by a variety of factors, primarily by our production team costs, the timing of hiring
new production team members and training them to full productivity, the timing of our acquisition of new
customers and pricing and commercialization of Heartflow Plaque Analysis and other new products.
Although, we expect our gross margin to fluctuate from period to period, based upon the factors described
above, we believe our gross margin will increase over the long term as we leverage the AI-based nature
of our software platform to automate an increasing number of the manual components of our production
teams’ process, thereby lowering the cost of revenue per analysis. We also expect increased revenues
from our Heartflow Plaque Analysis to positively impact our gross margin, as it runs on the same CCTA
scan as Heartflow FFRCT Analysis. In the short term, we expect gross margin to decrease as we hire and
train additional personnel in our production team to support our increasing patient case volume.
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Operating expenses
Research and development
Research and development expenses are incurred in connection with the advancement of the Heartflow
Platform with the goal to introduce products, features and improvements aimed at increasing the value
proposition for our customers by expanding its applicability to additional disease states and patient
populations. Research and development expenses consist primarily of engineering, product development,
consulting services, clinical studies to develop and support our products, regulatory activities, medical
affairs, and other costs associated with products and technologies that are in development. Research and
development expenses consist of personnel and related expenses, including stock-based compensation
costs, clinical trials, third-party consulting costs, the portion of the costs incurred by our production team
to support clinical trials and research and development efforts, and allocated overhead, including facilities
expenses, equipment and depreciation. Our research and development team is comprised of PhD
research scientists with expertise in AI-based algorithms and medical imaging, alongside software
engineers skilled in cloud architecture, AI algorithms, machine and deep learning and 3D visualization, as
well as product managers and designers who ensure optimal customer experience and design. We record
research and development expenses in the periods in which they are incurred. We expect our research
and development expenses to increase as we conduct clinical studies for expanded indications for use
and to hire additional personnel to develop new product offerings and product enhancements.
Selling, general and administrative
Selling, general and administrative expenses consist of personnel and related expenses, including stock-
based compensation costs, related to selling and marketing, commercial operations, reimbursement,
finance, legal, information technology and human resources functions. Other expenses include sales
commission, marketing initiatives, professional service fees (including legal, audit, accounting and tax
fees), market access work to secure reimbursement for our technologies, travel expenses, conferences
and trade shows, and allocated overhead, which includes facilities expenses, software licenses,
depreciation and other miscellaneous expenses.
We expect that our selling, general and administrative expenses will increase in the future as a result of
expanding our operations, including hiring personnel, to both drive and support anticipated growth as well
as various incremental costs associated with operating as a public company. We expect that our costs will
increase related to legal, audit, accounting fees, consulting fees, regulatory and tax-related services
associated with maintaining compliance with exchange listing and SEC requirements, director and officer
insurance costs, investor and public relations costs and other expenses that we did not incur as a private
company. However, we expect selling, general and administrative expenses to decrease as a percentage
of revenue primarily as, and to the extent, our revenue grows.
Interest expense, net
Interest expense, net consists primarily of interest expense on our 2024 Term Loan and related
amortization of debt discount and debt issuance costs. Interest income is primarily interest earned on our
cash and cash equivalents.
Other income (expense), net
Other income (expense), net consists primarily of changes in fair value related to our common stock
warrant and derivative liability as well as foreign exchange transaction gains or losses from transactions
and asset and liability balances denominated in currencies other than the U.S. dollar. We will continue to
record adjustments to the estimated fair value of the common stock warrant liability until the warrants are
exercised or expire and to the estimated fair value of the derivative liability until the convertible notes are
repaid or converted.
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Provision for income taxes
Provision for income taxes consists of income tax expense in foreign jurisdictions. To date, we have not
recorded any U.S. federal or state income tax expense. We have net deferred tax assets for U.S. federal
income taxes for which we provide a full valuation allowance. Due to our history of net operating losses
since inception, we expect to maintain a full valuation allowance in the foreseeable future due to
uncertainties regarding our ability to realize these assets.
Results of Operations
Comparison of Three Months Ended June 30, 2025 and 2024
The following table summarizes our results of operations for the three months ended June 30, 2025 and
2024:
Three Months Ended June 30, | Change | ||||||
(dollars in thousands) | 2025 | 2024 | $ | % | |||
Revenue ............................................................. | $43,424 | $31,054 | $12,370 | 40% | |||
Cost of revenue ................................................ | 10,646 | 7,215 | 3,431 | 48% | |||
Gross profit ................................................... | 32,778 | 23,839 | 8,939 | 37% | |||
Operating expenses: | |||||||
Research and development ......................... | 15,032 | 9,932 | 5,100 | 51% | |||
Selling, general and administrative ............. | 31,461 | 28,084 | 3,377 | 12% | |||
Total operating expenses ........................... | 46,493 | 38,016 | 8,477 | 22% | |||
Loss from operations .................................. | (13,715) | (14,177) | 462 | -3% | |||
Interest expense, net ....................................... | (5,986) | (4,933) | (1,053) | 21% | |||
Other income (expense), net .......................... | 10,564 | (4,149) | 14,713 | * | |||
Loss before provision for income taxes ... | (9,137) | (23,259) | 14,122 | -61% | |||
Provision for income taxes .............................. | (59) | (120) | 61 | -51% | |||
Net loss ......................................................... | $(9,196) | $(23,379) | $14,183 | -61% | |||
*: Not Meaningful
Revenue
Revenue increased $12.4 million, or 40%, to $43.4 million during the three months ended June 30, 2025,
compared to $31.1 million during the three months ended June 30, 2024. The increase in revenue was
primarily attributable to a 47% increase in revenue case volume, partially offset by a reduction in average
sales price due to a higher percentage of revenue cases generated from clinic and office-based accounts
and an increase in utilization and volume rebates.
Cost of revenue and gross margin
Cost of revenue increased $3.4 million, or 48%, to $10.6 million during the three months ended June 30,
2025, compared to $7.2 million during the three months ended June 30, 2024. This increase was primarily
attributable to an increase of $1.9 million in personnel and related expenses, $0.8 million in allocated
overhead, $0.3 million in equipment expenses, $0.2 million in amortization of capitalized internal-use
software, and $0.2 million in third-party hosting fees, partially offset by a net decrease of $0.2 million in
capitalized and amortized contract fulfillment costs. Personnel and related expenses included $45,000
and $78,000 of stock-based compensation costs during the three months ended June 30, 2025 and 2024,
respectively. Gross margin for the three months ended June 30, 2025 decreased to 75% as compared to
77% for the three months ended June 30, 2024. The decrease in our gross margin for the three months
ended June 30, 2025 was primarily attributable to our investment in the hiring and training of additional
personnel in our production team to support our increasing revenue case volume. Although we expect to
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continue to invest in the hiring and training of additional personnel in our production team, we expect our
gross margin will increase over the longer term.
Research and development expenses
Research and development expenses increased $5.1 million, or 51%, to $15.0 million during the three
months ended June 30, 2025, compared to $9.9 million during the three months ended June 30, 2024.
The increase in research and development expenses was primarily attributable to an increase of
$2.8 million in personnel and related expenses directly associated with an increase in headcount, $0.7
million in capitalized internal-use software costs, $0.4 million in consulting and professional fees,
$0.2 million in software-related costs and $1.0 million in clinical trial expenses. Personnel and related
expenses included $0.4 million and $0.5 million of stock-based compensation costs during the three
months ended June 30, 2025 and 2024, respectively.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $3.4 million, or 12%, to $31.5 million during the
three months ended June 30, 2025, compared to $28.1 million during the three months ended June 30,
2024. The increase in selling, general and administrative expenses was primarily attributable to an
increase of $2.6 million in personnel and related expenses directly associated with an increase in
headcount, $0.7 million in software-related costs, $0.4 million in travel expenses, $0.3 million in
advertising and other promotional expenses, and $0.1 million in professional fees, including legal, audit
and consulting fees, partially offset by a decrease of $0.6 million in allocated overhead and $0.5 million in
capitalized commissions and implementation costs. Personnel and related expenses included $1.8 million
and $2.1 million of stock-based compensation costs for the three months ended June 30, 2025 and 2024,
respectively.
Interest expense, net
Interest expense, net increased to an expense of $6.0 million during the three months ended June 30,
2025, compared to an expense of $4.9 million during the three months ended June 30, 2024. This
increased expense was attributable to amortization of debt issuance costs and debt discount related to
our 2024 Term Loan and 2025 Convertible Notes, offset by a lower aggregate outstanding principal
balance under our 2024 Term Loan related to the conversion of $23.0 million in principal to convertible
notes in January 2025. In addition, during the three months ended June 30, 2025, lower cash balances
and interest rates earned on money market funds resulted in a lower offset against interest expense in
comparison to the three months ended June 30, 2024. As of June 30, 2025 and 2024, the aggregate
outstanding principal balance (including interest paid-in-kind) under our 2024 Term Loan was $115.1
million and $138.1 million, respectively.
Other income (expense), net
Other income (expense), net decreased to income of $10.6 million during the three months ended
June 30, 2025, compared to an expense of $4.1 million during the three months ended June 30, 2024.
The decrease was primarily attributable to the $11.5 million benefit from the remeasurement and
recognition of the change in fair value related to our derivative liability offset by $0.9 million charge from
the remeasurement and recognition of our common stock warrant liability during the three months ended
June 30, 2025.
Provision for income taxes
Provision for income taxes was $59,000 for the three months ended June 30, 2025, compared to
$120,000 for the three months ended June 30, 2024 related to our state and foreign taxes.
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Comparison of Six Months Ended June 30, 2025 and 2024
The following table summarizes our results of operations for the six months ended June 30, 2025 and
2024:
Six Months Ended June 30, | Change | ||||||
(dollars in thousands) | 2025 | 2024 | $ | % | |||
Revenue ............................................................. | $80,629 | $57,897 | $22,732 | 39% | |||
Cost of revenue ................................................ | 19,910 | 14,635 | 5,275 | 36% | |||
Gross profit ................................................... | 60,719 | 43,262 | 17,457 | 40% | |||
Operating expenses: | |||||||
Research and development ......................... | 28,956 | 19,375 | 9,581 | 49% | |||
Selling, general and administrative ............. | 62,980 | 54,122 | 8,858 | 16% | |||
Total operating expenses ........................... | 91,936 | 73,497 | 18,439 | 25% | |||
Loss from operations .................................. | (31,217) | (30,235) | (982) | 3% | |||
Interest expense, net ....................................... | (10,536) | (9,664) | (872) | 9% | |||
Other income (expense), net .......................... | 271 | (4,364) | 4,635 | * | |||
Loss before provision for income taxes ... | (41,482) | (44,263) | 2,781 | -6% | |||
Provision for income taxes .............................. | (59) | (48) | (11) | 23% | |||
Net loss ......................................................... | $(41,541) | $(44,311) | $2,770 | -6% | |||
*: Not Meaningful
Revenue
Revenue increased $22.7 million, or 39%, to $80.6 million during the six months ended June 30, 2025,
compared to $57.9 million during the six months ended June 30, 2024. The increase in revenue was
primarily attributable to a 44% increase in revenue case volume, partially offset by a reduction in average
sales price due to a higher percentage of revenue cases generated from clinic and office-based accounts
and an increase in utilization and volume rebates.
Cost of revenue and gross margin
Cost of revenue increased $5.3 million, or 36%, to $19.9 million during the six months ended June 30,
2024, compared to $14.6 million during the six months ended June 30, 2024. This increase was primarily
attributable to $2.6 million in personnel and related expenses, $1.1 million in allocated overhead,
$0.5 million in amortization of capitalized internal-use software, $0.3 million in third-party hosting fees,
$0.4 million in equipment expenses and $0.1 million in royalties. Personnel and related expenses
included $0.1 million and $0.2 million of stock-based compensation costs during the six months ended
June 30, 2025 and 2024, respectively. Gross margin for the six months ended June 30, 2025 and 2024
was 75%.
Research and development expenses
Research and development expenses increased $9.6 million, or 49%, to $29.0 million during the six
months ended June 30, 2025, compared to $19.4 million during the six months ended June 30, 2024. The
increase in research and development expenses was primarily attributable to an increase of $5.7 million
in personnel and related expenses directly associated with an increase in headcount, $1.7 million in
clinical trial expenses, $0.9 million in consulting and professional fees, $0.5 million of capitalized internal-
use software costs and $0.3 million in software-related costs. Personnel and related expenses included
$0.9 million and $1.0 million of stock-based compensation costs during the six months ended June 30,
2025 and 2024, respectively.
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Selling, general and administrative expenses
Selling, general and administrative expenses increased $8.9 million, or 16%, to $63.0 million during the
six months ended June 30, 2025, compared to $54.1 million during the six months ended June 30, 2024.
The increase in selling, general and administrative expenses was primarily attributable to an increase of
$5.4 million in personnel and related expenses directly associated with an increase in headcount,
$2.7 million in professional fees, including legal, audit and consulting fees, $1.2 million in marketing
expenses, $0.6 million in software-related costs and $0.3 million in travel costs, partially offset by a
decrease of $1.1 million of capitalized commission costs and $0.9 million in allocated overhead.
Personnel and related expenses included $3.7 million and $4.2 million of stock-based compensation
costs for the six months ended June 30, 2025 and 2024, respectively.
Interest expense, net
Interest expense, net increased to an expense of $10.5 million during the six months ended June 30,
2025, compared to an expense of $9.7 million during the six months ended June 30, 2024. This increased
expense was attributable to amortization of debt issuance costs and debt discount related to our 2024
Term Loan and 2025 Convertible Notes, partially offset by a lower aggregate outstanding principal
balance under our 2024 Term Loan related to the conversion of $23.0 million in principal to convertible
notes in January 2025 . As of June 30, 2025 and 2024, the aggregate outstanding principal balance
(including interest paid-in-kind) under our 2024 Term Loan was $115.1 million and $138.1 million,
respectively.
Other income (expense), net
Other income (expense), net decreased to income of $271,000 during the six months ended June 30,
2025, compared to an expense of $4.4 million during the six months ended June 30, 2024. The decrease
was primarily attributable to the remeasurement and recognition of the change in fair value related to our
common stock warrant liability charge of $2.5 million, partially offset by a benefit on the remeasurement
and recognition of the change in fair value related to our derivative liability of $2.5 million and foreign
exchange transaction gains of $0.2 million.
Provision for income taxes
Provision for income taxes was $59,000 and $48,000 for the six months ended June 30, 2025 and 2024,
respectively, related to our state and foreign taxes.
Liquidity and Capital Resources
Sources of liquidity
As of June 30, 2025, we had $80.2 million in cash and cash equivalents and an accumulated deficit of
$1.0 billion. Prior to our IPO, we primarily funded our operations with proceeds from sales of shares of our
redeemable convertible preferred stock, common stock and convertible promissory notes, borrowings
under our term loans and revenue received from our customers, which we expect to be our primary
source of future liquidity.
We expect to continue to incur losses and to expend significant amounts of cash in the foreseeable future
as we continue to scale our business, invest in research and development activities, increase sales and
marketing efforts to support commercial expansion, and increase general and administrative expenses to
support being a publicly-traded company.
Based on our current operating plan, we believe that the net proceeds from our IPO, together with the
expected cash generated from revenue transactions with customers and our existing cash and cash
equivalents, will be sufficient to meet our capital requirements and fund our operations for at least the
next 12 months.
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Hayfin credit agreement
On June 14, 2024, we entered into a Credit Agreement and Guaranty for a $138.1 million term loan to
refinance the outstanding obligations under the initial credit agreement we entered into with Hayfin on
January 19, 2021 and the additional term loans entered into with Hayfin on March 17, 2022 in exchange
for the payment of exit fees and early prepayment fees in the aggregate amount of $8.3 million payable in
sixteen equal quarterly installments, or immediately upon the occurrence of our IPO. On January 24,
2025, in connection with the issuance of the 2025 Convertible Notes as further described below, we
entered into Amendment No. 1 to the Credit Agreement and Guaranty (as amended, the “2024 Credit
Agreement”) to amend the terms and conditions governing the term loan outstanding thereunder (as
amended, the “2024 Term Loan”). Under this amendment, Hayfin also converted $23.0 million of principal
under the 2024 Term Loan to 2025 Convertible Notes under the same terms as the other purchasers of
the 2025 Convertible Notes.
The 2024 Term Loan was scheduled to mature on June 14, 2028 and bore interest equal to the sum of (i)
7.0% (or 6.0% if the alternative base rate (“ABR”) is in effect) plus (ii) the greater of (x) the forward-looking
term rate based on the Secured Overnight Financing Rate (“SOFR”) for a respective tenor in effect on
such day (or the alternative base rate, if applicable), and (y) 2.0%. The ABR equaled the sum of (i) 6.0%
plus (ii) the greater of (1) the Wall Street Journal Prime Rate, plus 0.5%, (2) the Federal Reserve Bank of
New York rate plus 0.5% or (3) CBA Term SOFR for one month tenor plus 1.0%. We had an option to pay
interest in-kind at the rate equal to the cash interest rate plus 1.0% through the last interest period ending
before the 18th month anniversary of the 2024 Credit Agreement. We had an option to prepay the 2024
Term Loan subject to a prepayment fee of 1.5% for prepayments after the second anniversary but on or
prior to the third anniversary of the 2024 Term Loan and a prepayment fee of 3% for prepayments
thereafter.
As of June 30, 2025, the aggregate outstanding principal balance under the 2024 Term Loan was $115.1
million and the effective interest rate was 15.2%. As of June 30, 2025, we were in compliance with the
2024 Credit Agreement covenants.
On August 18, 2025, we repaid $55.0 million of indebtedness outstanding under the 2024 Credit
Agreement for which we were obligated to pay in connection with the completion of our IPO and
approximately $5.8 million in fees consisting of a 3.0% exit fee and a 3.0% early prepayment fee due
under the 2021 Credit Agreement, as amended.
On August 22, 2025, we prepaid in full all outstanding amounts under, and terminated, the 2024 Credit
Agreement, in the aggregate principal amount of $60.1 million plus accrued interest of $1.0 million. We
did not incur exit or prepayment fees in connection with the termination of the 2024 Credit Agreement.
Convertible notes
In January and March 2025, we issued convertible promissory notes to various investors and certain
employees (the “Requisite Holders”) in the aggregate amount of $98.3 million, which was comprised of
$74.0 million in aggregate principal amount of notes issued for cash consideration, $1.3 million in
aggregate principal amount of notes issued in lieu of cash compensation to certain employees and $23.0
million in aggregate principal amount of notes issued in the 2024 Term Loan Conversion (collectively, the
“2025 Convertible Notes”). The 2025 Convertible Notes did not accrue interest for one year following the
date of issuance and were due and payable in full 48 months from the issue date. Upon the completion of
our IPO, the aggregate outstanding principal balance under the 2025 Convertible Notes automatically
converted into shares of our common stock at a 20% discount to the IPO price.
The 2025 Convertible Notes contained embedded derivative features, including conversion upon a
change in control and automatic conversion upon completion of a qualified IPO, that were required to be
bifurcated and accounted for separately as a single derivative instrument. The issuance date estimated
fair values of the derivative liability was $11.1 million and $20.8 million in January and March 2025,
respectively, which were recorded as debt discounts. The derivative liability was remeasured to an
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aggregate fair value of $29.4 million as of June 30, 2025, resulting in a gain of $2.5 million recorded within
the condensed consolidated statements of operations and comprehensive loss for the three months
ended June 30, 2025.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
Six Months Ended June 30, | |||
(in thousands) | 2025 | 2024 | |
Net cash used in operating activities ............................................................ | $(40,470) | $(44,696) | |
Net cash used in investing activities ............................................................. | (1,891) | (3,005) | |
Net cash provided by financing activities ..................................................... | 71,149 | 403 | |
Net cash used in operating activities
Net cash used in operating activities during the six months ended June 30, 2025 was $40.5 million,
attributable to a net loss of $41.5 million and a net change in operating assets and liabilities of
$12.6 million, partially offset by non-cash charges of $13.7 million. The non-cash charges primarily
consisted of $4.7 million in stock-based compensation expense, $2.5 million of change in fair value of
derivative liability, $2.5 million of change in fair value of common stock warrant liability, $2.8 million of
depreciation and amortization, $1.5 million of amortization of right-of-use asset, $1.1 million of non-cash
interest charges, $3.8 million of amortization of debt discount and debt issuance costs and $0.2 million
change in allowance for credit losses. The increase in net operating assets was primarily due to an
increase of $4.9 million in accounts receivable, a $2.4 million increase in prepaid expenses and other
current assets, a $1.9 million increase in other non-current assets, a $1.4 million decrease in accounts
payable, a $0.3 million decrease in accrued expenses and other current liabilities, and a $1.8 million
decrease in operating lease liabilities.
Net cash used in operating activities during the six months ended June 30, 2024 was $44.7 million,
attributable to a net loss of $44.3 million and a net change in operating assets and liabilities of
$15.3 million, partially offset by non-cash charges of $14.9 million. The non-cash charges primarily
consisted of $5.4 million in stock-based compensation expense, $2.4 million of depreciation and
amortization, $1.3 million of amortization of right-of-use asset, $1.3 million of amortization of debt discount
and debt issuance costs, $0.4 million of non-cash interest charges and $0.2 million of change in fair value
of derivative liability. The increase in net operating assets was primarily due to a $3.6 million increase in
accounts receivable, a $0.9 million increase in prepaid expenses and other current assets, a $0.9 million
increase in other non-current assets, a $1.5 million decrease in accounts payable, a decrease of $6.9
million in accrued expenses and other current liabilities, and a $1.6 million decrease in operating lease
liabilities.
Net cash used in investing activities
Net cash used in investing activities for the six months ended June 30, 2025 was $1.9 million consisting
of purchases of property and equipment.
Net cash used in investing activities for the six months ended June 30, 2024 was $3.0 million consisting
of purchases of property and equipment.
Net cash provided by financing activities
Net cash provided by financing activities during the six months ended June 30, 2025 was $71.1 million,
consisting primarily of $72.8 million in net proceeds from the issuance of our 2025 Convertible Notes and
$1.4 million in proceeds from the exercise of stock options, offset by $1.1 million in exit and prepayment
penalty fees related to our 2024 Term Loan and $2.0 million in payments of deferred IPO offering costs.
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Net cash provided by financing activities during the six months ended June 30, 2024 was $403,000,
consisting primarily of $1.7 million in proceeds from the exercise of stock options, offset by $1.3 million in
exit and prepayment penalty fees related to our 2024 Term Loan.
Contractual Obligations and Commitments
Our contractual commitments will have an impact on our future liquidity. These commitments include
future payments on non-cancellable facility leases, purchase obligations related to research and
development and professional services under non-cancellable contracts and royalty obligations for
exclusive technology licensing agreements. Upon the closing of our IPO in August 2025, the aggregate
outstanding principal balance under the 2025 Convertible Notes automatically converted into shares of
our common stock. In August 2025, we repaid $55.0 million of indebtedness outstanding under the 2024
Term Loan for which we were obligated to pay in connection with the completion of our IPO and
subsequently prepaid in full the remaining outstanding principal balance of $60.1 million. There have been
no other material changes to our contractual obligations from those described in our registration
statement on Form S-1 (File No. 333-288733), which became effective on August 7, 2025.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial
position, results of operations or cash flows is disclosed in Note 2 to our condensed consolidated financial
statements included elsewhere in this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based
on our condensed consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The preparation of these
condensed consolidated financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are
based on our historical experience and various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions and any such differences may be material.
See Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly
Report on Form 10-Q for information about our significant accounting policies and estimates used in the
preparation of our condensed consolidated financial statements. There have been no significant and
material changes in our critical accounting policies during the three and six months ended June 30, 2025,
as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” for the year ended December 31, 2024 included in our registration statement on
Form S-1 (File No. 333-288733), which became effective on August 7, 2025.
Off-balance Sheet Arrangements
During the periods presented we did not have, nor do we currently have, any off-balance sheet
arrangements as defined in the rules and regulations of the SEC.
Emerging Growth Company Status
We are an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the
“JOBS Act”), which permits us to take advantage of an extended transition period to comply with new or
revised accounting standards applicable to public companies. We have elected to use this extended
transition period until we are no longer an emerging growth company or until we affirmatively and
irrevocably opt out of the extended transition period. As a result, our condensed consolidated financial
statements may not be comparable to companies that comply with new or revised accounting
pronouncements applicable to public companies. The JOBS Act also exempts us from having to provide
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an attestation and report from our independent registered public accounting firm on the assessment of our
internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002.
We will remain an emerging growth company until the earliest of: (i) the last day of the fiscal year
following the fifth anniversary of the completion of our IPO; (ii) the last day of the fiscal year in which we
have total annual gross revenue of at least $1.235 billion; (iii) the last day of the fiscal year in which we
are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which
would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of
the last business day of the second fiscal quarter of such year; or (iv) the date on which we have issued
more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. These risks primarily include risk
related to interest rate sensitivities, credit risk, foreign currency exchange rate sensitivity and inflation risk.
Interest rate risk
As of June 30, 2025, we had cash and cash equivalents of $80.2 million. Our cash and cash equivalents
are held for working capital purposes. We do not enter into investments for trading or speculative
purposes. Due to the short-term nature of our cash equivalents, we have not been exposed to, nor do we
anticipate being exposed to, material risks due to changes in interest rates.
Our exposures to market risk for changes in interest rates related primarily to our 2024 Term Loan
(described above) which bore floating interest rates and a rising interest rate environment would increase
the amount of interest paid on these loans. Each 100 basis point increase in these initial rates would
increase annual interest expense by approximately $1.2 million assuming the 2024 Term Loan remained
outstanding for the annual period. On August 22, 2025, we prepaid in full all outstanding amounts under
the 2024 Term Loan and terminated the 2024 Credit Agreement.
Credit risk
Our cash and cash equivalents, which at times may exceed federally insured limits, is maintained with
large financial institutions. As of the issuance date of the financial statements included in this report, we
have not experienced any losses on our deposits and all of our cash deposits have been accessible to us.
Our accounts receivable primarily relate to revenue from the sale of our products to medical providers. No
customer represented 10% or more of our accounts receivable as of June 30, 2025 and December 31,
2024.
Foreign currency exchange risk
The vast majority of our cash generated from revenue is denominated in U.S. dollars, with a small amount
denominated in other foreign currencies. Our expenses are generally denominated in the currencies of
the jurisdictions in which we conduct our operations, which are primarily in the United States, United
Kingdom and Japan. Our results of operations and cash flows are, therefore, subject to fluctuations due to
changes in foreign currency exchange rates. The effect of a hypothetical 10% change in foreign currency
exchange rates applicable to our business would not have had a material impact on our condensed
consolidated financial statements during any of the periods presented. As the impact of foreign currency
exchange rates has not been material to our historical operating results, we have not entered into
derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency
becomes more significant.
Effects of inflation
Inflation generally affects us by increasing our cost of labor and overhead costs. We do not believe that
inflation has had a material impact on our business, results of operations, or financial condition, or on our
condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer,
have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the
period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive
Officer and our Chief Financial Officer have concluded that, as of June 30, 2025, our disclosure controls
and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
Due to a transition period established by SEC rules applicable to newly public companies, our
management is not required to evaluate the effectiveness of our internal control over financial reporting
until the filing of our Annual Report on Form 10-K for the year ended December 31, 2026. As a result, this
Quarterly Report on Form 10-Q does not address whether there have been any changes in our internal
control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, our management recognizes that any
controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives. In addition, the design of disclosure controls and
procedures must reflect the fact that there are resource constraints and that our management is required
to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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Part II. Other Information
Item 1. Legal Proceedings
We have become, and we may become in the future, involved in various legal proceedings arising from
the normal course of business activities. We are not presently a party to any litigation for which the
outcome, based on our reasonable belief, if determined adversely to us, would individually or taken
together, materially and adversely affect our business, financial condition, or results of operations.
However, we may from time to time be involved in various claims and legal proceedings of a nature we
believe are normal and incidental to a business such as ours. These matters may include employment,
contract, intellectual property, product liability and other general claims. Regardless of outcome, litigation
can have an adverse impact on us because of defense and settlement costs, diversion of management
resources and other factors.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the risks
described below, as well as the other information in this Quarterly Report on Form 10-Q, including our
condensed consolidated financial statements and the related notes and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.” The risks described below are not the only
ones facing us. Additional risks and uncertainties not presently known to us or that we currently believe
are not material may also impair our business, financial condition, results of operations and prospects.
Please also see the sections titled “Special Note Regarding Forward-looking Statements.”
Risk Factors Summary
The following risks and uncertainties included in this subsection are among the most significant we face
and are qualified in their entirety by reference to all of the risk factors as further described in this Item 1A.
•We have incurred significant net losses since our inception, we expect to incur additional substantial
losses in the foreseeable future and we may not be able to achieve or sustain profitability.
•Our revenue is currently generated almost entirely from the sales of only one product, Heartflow
FFRCT Analysis, and we are therefore highly dependent on the success of this product, which makes
it difficult to evaluate our current business, predict our future prospects and forecast our financial
performance and any growth.
•If healthcare providers are unwilling to change their standard practice regarding the evaluation of
CAD, our business, financial condition, results of operations and prospects will be adversely affected.
•If third-party payors, including government payors, do not cover and provide adequate reimbursement
for the Heartflow Platform, or if existing payment amounts are reduced or coding policies change,
adoption of the Heartflow Platform by healthcare providers may be negatively impacted, and our
business, financial condition, results of operations and prospects will be adversely affected.
•We face risks associated with a concentrated customer base.
•We face significant competition in an environment of rapid technological change, and there is a
possibility that our competitors may develop products that are more effective, accurate, reliable, cost-
effective or more advanced than ours, which may harm our financial condition. If we are unable to
compete successfully or our potential market share is reduced, we may be unable to increase or
sustain our revenue or achieve profitability.
•The commercialization of Heartflow Plaque Analysis is nascent, and we may not be able to achieve or
maintain sufficient market acceptance or the levels of utilization we expect from Heartflow Plaque
Analysis or any other future product.
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•We face risks associated with our use and development of AI models, which may result in operational
challenges, legal liability, reputational concerns and competitive risks.
•If we fail to properly manage our future growth, our business could suffer.
•Our business could be disrupted by catastrophic events.
•We depend on our information technology systems, and any failure of these systems could harm our
business and adversely affect our business and operating results.
•Our networks and those of our third-party service providers may become the target of bad actors or
security breaches that we cannot anticipate or successfully defend, which could have an adverse
impact on our business.
•We face extensive regulatory requirements to bring our products to market, and our failure to receive
and maintain regulatory clearances or approvals of our current and future products in the United
States or abroad or to comply with medical device regulatory requirements could adversely affect our
business.
•If we are unable to obtain and maintain sufficient intellectual property rights, or the scope of our rights
is not sufficiently broad, third parties could develop and commercialize technology and products
similar or identical to ours, and our ability to successfully commercialize our technology and products
may be adversely affected.
Risks Related to our Business and Industry
We have incurred significant net losses since our inception, we expect to incur additional
substantial losses in the foreseeable future and we may not be able to achieve or sustain
profitability.
We have incurred significant net losses since our inception in 2007, and we expect to incur additional
substantial losses in the foreseeable future. For the three and six months ended June 30, 2025, we
incurred net losses of $9.2 million and $41.5 million, respectively. As of June 30, 2025, we had an
accumulated deficit of approximately $1.0 billion. Since inception, we have spent significant amounts of
cash to develop the Heartflow Platform, to fund research and development, including our preclinical
research and development activities and clinical trials related to our products, to scale our commercial
operations and to recruit and retain key talent.
The net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a
period-to-period comparison of our results of operations may not be a good indication of our future
performance. We expect to continue to incur significant research and development, sales and marketing,
regulatory and other expenses as we expand our marketing efforts to increase adoption of our products,
expand existing relationships with our customers, obtain regulatory clearances or approvals for our
planned or future products, conduct clinical trials to extend applicability of our platform into new
indications or to develop new products or add new features to our existing products. The investments in
our business may be more costly than we expect, and if we do not achieve the benefits anticipated from
these investments, or if the realization of these benefits is delayed, they may not result in increased
revenue or growth in our business. In addition to the anticipated costs of growing our business, we expect
our general and administrative expenses to increase due to the additional costs of being a public
company. If our revenue growth does not increase to more than offset the anticipated increases in our
operating expenses, we may not be able to achieve or sustain profitability and our business, financial
condition, results of operations and prospects will be harmed.
In addition, our revenue may decline or our revenue growth, if any, may be constrained. Our ability to
increase sales is uncertain, and we may never be able to achieve or sustain profitability for many
reasons, including that: our Heartflow FFRCT Analysis may not achieve widespread adoption among
healthcare providers and we may be unable to increase revenue generated from sales of our Heartflow
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FFRCT Analysis; our Heartflow Plaque Analysis may not achieve widespread adoption among healthcare
providers and we may be unable to generate sufficient revenue from sales of our Heartflow Plaque
Analysis; payors, such as insurance companies and government insurance programs, may decide not to
reimburse for our products, may set the amount of such reimbursement too low or may reduce the
amount of such reimbursement; healthcare industry trends, including growth in CCTA usage, may move in
directions that do not allow for adoption of our products or that do not provide adequate incentives for the
adoption of our products; competitors may develop or acquire a product that successfully competes with
ours; manufacturers of CT scanners may partner with our competitors or develop or acquire a competing
product and integrate one or more products that successfully competes with ours; we may not be able to
obtain regulatory approval for future versions of our products (including improved versions of our AI
algorithms), new indications for use of our products or other future products; and there may be changes in
existing or anticipated clinical guidelines, including the current American College of Cardiology (“ACC”)
and American Heart Association (“AHA”) Class 1, Level A guidelines for CCTA and Class 2a, Level B
guidelines for Heartflow FFRCT Analysis for certain patients with stable or acute chest pain and no known
CAD, or the timing of adoption of positive clinical guidelines that support the use of the Heartflow FFRCT
Analysis.
Because of these and the other risks and uncertainties described in this Quarterly Report on Form 10-Q,
we are unable to predict the extent to which we will be able to increase sales, if at all, or the timing for
when or the extent to which we will become profitable, if ever. We will need to generate significant
additional revenue to achieve and sustain profitability, and even if we do achieve profitability, we may not
be able to sustain or increase profitability. Our failure to become and remain profitable would depress the
value of our company and our stock price and could impair our ability to raise capital, fund our research
and development efforts, expand our business, diversify our product offerings or continue our operations.
A decline in the value of our company could cause you to lose all or part of your investment.
Our revenue is currently generated almost entirely from the sales of only one product, Heartflow
FFRCT Analysis, and we are therefore highly dependent on the success of this product, which
makes it difficult to evaluate our current business, predict our future prospects and forecast our
financial performance and any growth.
As of June 30, 2025, our Heartflow FFRCT Analysis represented 98% of our total revenue. In the second
half of 2023, we began limited market education efforts of our second product, Heartflow Plaque Analysis.
Over the next several years, we expect to continue to devote a substantial amount of resources to
increase sales of our Heartflow FFRCT Analysis and also expand our commercialization efforts and drive
increased adoption of our Heartflow Plaque Analysis. However, we may not succeed in increasing sales
of our Heartflow FFRCT Analysis or in increasing adoption of our Heartflow Plaque Analysis. We expect to
continue to derive almost all of our revenue from sales of Heartflow FFRCT Analysis for the foreseeable
future, so we are highly dependent on its success.
In addition, because we plan to devote substantial resources to increase sales of Heartflow FFRCT
Analysis and rely on it as our main source of revenue, any factors that negatively impact these efforts, our
Heartflow Plaque Analysis commercialization efforts or our ability to diversify our products would have a
material adverse effect on our business, financial condition, results of operations and prospects.
Therefore, it is difficult to predict our future prospects and forecast our financial performance and any
growth, and any such forecasts are inherently limited and subject to a number of uncertainties. If our
assumptions regarding the risks and uncertainties we face, which we use to plan our business, are
incorrect or change due to circumstances in our business or our markets, or if we do not address these
risks successfully, our operating and financial results could differ materially from our expectations and our
business, financial condition, results of operations and prospects could suffer.
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If healthcare providers are unwilling to change their standard practice regarding the evaluation of
CAD, our business, financial condition, results of operations and prospects will be adversely
affected.
Our success depends on physicians, hospitals and other healthcare providers adopting and using the
Heartflow Platform to aid in the evaluation of CAD. While we have had some recent success in achieving
broader adoption of the Heartflow Platform, we have in the past faced, and may in the future face,
challenges in achieving higher rates of adoption. Many healthcare providers have extensive experience
with existing non-invasive tests for CAD and have established relationships with the companies that
provide these tests or in some instances own or manage the equipment for these tests in their offices.
Existing tests are performed in a high enough volume that healthcare providers generate sufficient
revenue from their use and are well versed in their use, reimbursement and outcomes. The outcomes and
workflow efficiencies that we believe our Heartflow Platform provides may not be valued by healthcare
providers as highly as we expect or at all. In addition, healthcare providers have been, and may continue
to be, slower to adopt or recommend our products because we have a more limited commercial track
record and healthcare providers may feel they can generate more revenue from existing tests. Healthcare
providers also may not find our clinical data compelling and may not recommend or use our products until
they receive additional recommendations from other healthcare providers that our products have a clinical
benefit, or at all.
In addition, the Heartflow Platform relies on healthcare providers following the ACC and AHA guidelines
by referring certain patients with stable or acute chest pain and no known CAD to undergo a CCTA, with
the CCTA images to be analyzed by our Heartflow FFRCT Analysis. Although the ACC and AHA guidelines
support CCTA plus our Heartflow FFRCT Analysis as the preferred pathway for diagnosing and managing
CAD in certain patients with stable or acute chest pain and no known CAD, these guidelines may not be
widely adopted by healthcare providers. Moreover, healthcare providers may choose not to adopt the
Heartflow Platform if they are not able to obtain an adequate CCTA. Further, if future studies and trials or
other events, including reimbursement rates of CCTA, adversely impact the rate of use of CCTAs in
practice, then healthcare providers may be less willing to adopt a technology that uses CCTAs.
Also, the Heartflow Platform may be more difficult than we expect to integrate into standard practice
because a provider may be resistant to introduce our embedded information technology and workflow
infrastructure. Due to different laws, policies and preferences of healthcare providers regarding patient
privacy both in the United States and abroad, they may be averse to sending data externally (outside of
their facility) or abroad. Furthermore, if healthcare providers using the Heartflow Platform experience what
they perceive to be false negative result or imprecise readings, including due to user error, they may
determine not to continue using our platform going forward.
We expect that addressing these and similar issues will require a significant amount of our time and
resources, and if we are unsuccessful, we would be unable to achieve broader adoption of the Heartflow
Platform by healthcare providers. If our products do not gain broader acceptance by healthcare providers,
our business, financial condition, results of operations and prospects will be adversely affected.
If third-party payors, including government payors, do not cover and provide adequate
reimbursement for the Heartflow Platform, or if existing payment amounts are reduced or coding
policies change, adoption of the Heartflow Platform by healthcare providers may be negatively
impacted, and our business, financial condition, results of operations and prospects will be
adversely affected.
Our ability to grow sales and revenue from our Heartflow FFRCT Analysis and to successfully
commercialize our Heartflow Plaque Analysis depend, in large part, on whether third-party payors,
including private health insurers, managed care plans and government healthcare programs, such as
Medicare and Medicaid, cover and adequately reimburse for the use of the Heartflow Platform and the
underlying CCTA. Patients generally rely on payors to reimburse all or a significant part of the costs
associated with their treatment. As a result, appropriate coding, coverage determinations, and
reimbursement levels are critical to the commercial success of the Heartflow Platform. Reimbursement is
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obtained from a variety of sources, including government sponsored and private health insurance plans,
and varies by country and by region within some countries. These payors determine whether to provide
coverage and payment for specific products and procedures.
In addition, payors continually review new technologies and can, without notice, change coverage
parameters, deny coverage, bundle services, or reduce payment amounts. As a result, the coverage
determination process is often time consuming and costly, with no assurance that coverage and adequate
reimbursement will be obtained or maintained if obtained. If payors change their reimbursement policies,
or if the current Category I CPT codes related to our Heartflow FFRCT Analysis or future Category I CPT
codes related to our Heartflow Plaque Analysis are not favorably categorized or priced, reimbursement for
the Heartflow Platform could be reduced to an amount that would make adoption of our Heartflow
Platform challenging.
Moreover, physicians, hospitals and other healthcare providers may decline to adopt or reduce usage of
the Heartflow Platform due to the economic impact a negative change in reimbursement may have on
their business and, as a result, we may experience a significant loss of revenue, which would have a
material adverse effect on our business, financial condition, results of operations and prospects.
Reimbursement for our Heartflow Platform, which includes the separately billable services, Heartflow
FFRCT Analysis and Heartflow Plaque Analysis, is subject to periodic changes to reimbursement levels by
government payors and private health insurers. For example, the Centers for Medicare and Medicaid
Services (“CMS”) adopts changes to reimbursement policies during the annual Medicare rulemaking
process, which includes updates to Medicare payment levels to hospitals under the Medicare Hospital
Outpatient Prospective Payment System (“OPPS”) rule, and updates to Medicare payment rates to
physician offices, independent diagnostic testing facilities, and freestanding imaging centers under the
Medicare Physician Fee Schedule (“MPFS”) rule. In addition to risks associated with government
reimbursement, our Heartflow FFRCT Analysis and Heartflow Plaque Analysis technologies face
reimbursement uncertainty from commercial payors, such as UnitedHealthcare, Aetna, Cigna, Anthem,
and regional Blue Cross Blue Shield plans. Such commercial payors routinely reassess their medical
policies, coverage criteria and payment policies and rates, and may choose to deny coverage or payment,
impose restrictive utilization management protocols (such as prior authorization), or reduce or bundle
payment amounts based on internal cost-effectiveness assessments or evolving clinical guidelines. Even
if Medicare maintains favorable reimbursement, commercial payors may independently determine
whether Heartflow FFRCT Analysis or Heartflow Plaque Analysis meets their plans’ medical necessity
standards, which may vary among commercial payors.
As part of their participation in the Medicare program and in support of the annual rulemaking process,
hospitals submit Medicare cost reports and report their charges for specific services provided in the
hospital setting. These cost and charge data reported from hospitals can impact reimbursement rates
because CMS uses that data to determine future Medicare reimbursement levels on an annual basis. In
the aggregate, when costs associated with a specific service reported by the hospitals decrease, there is
a risk that CMS will reduce the reimbursement rate proportionately. These lower reported costs can be a
result of coding errors or erroneous denials of claims, the inclusion of lower-cost services within the APC,
reductions in costs for services within the APC, or other similar issues. For example, in July 2025, CMS
issued the proposed 2026 OPPS rule, which, if finalized as proposed, could result in a reduction of up to
15% in the Medicare reimbursement rate for the clinical APC that includes our Heartflow FFRCT Analysis,
along with other hospital services. CMS publishes final OPPS and MPFS rules in the fourth quarter each
year. We cannot be sure at this time whether the proposed hospital reimbursement rate for Heartflow
FFRCT Analysis for 2026 will be finalized, modified, or if CMS will increase the rate back to 2025 levels.
There is a risk that similar or other coding or claims issues may occur and lead CMS to lower the
reimbursement rate for the Heartflow Platform for 2027 or in future years. In addition, we may not become
aware of any such issues early enough to prevent any adverse impacts to the reimbursement for our
products, and our ability to remedy any such issues may be limited by applicable laws, regulations or
policies.
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Given the evolving nature of the healthcare industry and ongoing healthcare cost reforms, we are and will
continue to be subject to effects of changes in the level of reimbursement for our products. We cannot be
sure that third-party payors will maintain the current level of coverage and payment to our customers for
use of our existing products. A reduction in coverage or payment or change in policy by the Medicare
program could cause some commercial third-party payors to implement similar reductions in their
coverage or payment amounts for the Heartflow Platform. Unfavorable coverage or payment
determinations at the national or local level could adversely affect our business, financial condition,
results of operations and prospects.
We face risks associated with a concentrated customer base.
Our Heartflow Platform had an installed base of more than 1,100 accounts in the United States as of
December 31, 2024. We define an “account” as any individual facility that orders a Heartflow FFRCT
Analysis, Heartflow Plaque Analysis, or both. We define an account as “new” if a unique facility begins
generating revenue cases for our FFRCT Analysis, Plaque Analysis, or both. Accounts may have more
than one reading physician or CT machine. Conversely, a “customer” can be either an individual account
or a health or hospital system with multiple accounts. While a single customer may include multiple
accounts, no single customer accounted for 10% or more of our revenue during the three and six months
ended June 30, 2025 and 2024. However, the decision-making function for some of these accounts is
concentrated in a relatively small number of customers, such that the loss of one customer could result in
a disproportionate loss across our accounts. For example, for the year ended December 31, 2024, our top
two largest customers, both large health systems with multiple accounts, collectively represented
approximately 8% of our revenue.
We cannot guarantee that we will continue to generate revenue from these customers, whether due to an
increase in competition, new technologies, our customers’ ability to terminate their contracts with us or
reduce order volumes, or other factors outside of our control. If we do not increase the number of our
customers and drive increased use of the Heartflow Platform as the preferred non-invasive testing
method for assessing CAD, we will continue to face risks associated with a more concentrated customer
base.
Revenue from these customers may fluctuate from time to time due to demand for the Heartflow Platform,
the timing of which may be affected by seasonality or other factors outside of our control such as CT
scanner capacity, contrast availability and staffing availability. These customers could also potentially
pressure us to reduce the prices we charge for the Heartflow Platform, which could have a material
adverse effect on our margins and business. For example, during the year ended December 31, 2024,
our average sales price was impacted by customer pricing contracts that included utilization and volume
rebates and by changes in the mix of customer accounts, which is a trend we expect to continue in the
near term, and it is possible that similar trends in customer pricing contracts may continue to have a
negative impact on our average sales price in the future. In addition, if any of our largest customers
terminates its relationship with us or otherwise reduces its FFRCT Analysis volumes for any reason, we
may be unable to replace them with a customer who refers a similar number of patients for the Heartflow
Platform, and such termination or reduction in volume could have a material adverse effect on our
business, financial condition, results of operations and prospects.
We face significant competition in an environment of rapid technological change, and there is a
possibility that our competitors may develop products that are more effective, accurate, reliable,
cost-effective or more advanced than ours, which may harm our financial condition. If we are
unable to compete successfully or our potential market share is reduced, we may be unable to
increase or sustain our revenue or achieve profitability.
The medical technology industry is highly competitive, subject to rapid change and significantly affected
by the introduction of new products and technologies and other activities of industry participants. Because
of the size of the market opportunity for the treatment of CAD, we believe current and potential future
competitors will dedicate significant resources to aggressively promote their products or develop new
products or treatments. Our principal competition comes from companies that provide traditional non-
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invasive tests that aid physicians in the evaluation of CAD, such as SPECT, stress echocardiography and
PET. Established, traditional non-invasive tests for CAD have been used for many years and are therefore
difficult to change or supplement. Many of the companies that sell these traditional non-invasive tests or
the equipment they require have established relationships with healthcare providers. One of the major
hurdles to adoption of our products is overcoming established testing patterns, which requires education
of physicians and supportive clinical data.
The companies that sell the traditional non-invasive tests for CAD include companies that offer: (i) cardiac
specific tests to primary care and cardiology offices, such as manufacturers of capital equipment for
stress echocardiography and SPECT, including GE Healthcare, Siemens Healthineers AG and Koninklijke
Philips N.V.; and (ii) products used for the invasive FFR testing market.
With the greater resources of some of these competitors and their more diversified product offerings, it is
possible that they or other entrants into the market may develop competing products or technologies that
could be more effective, accurate, reliable, cost-effective, more advanced or otherwise improved relative
to the Heartflow Platform, which could render our products obsolete or less competitive. In addition, one
or more competitors could develop and market an on-premise solution, which may be more appealing
than our cloud-based offering. Moreover, new treatments, such as GLP-1s, may indirectly reduce stenosis
or plaque build-up, which could reduce the market opportunity for non-invasive CAD tests and, as a
result, our Heartflow Platform. In addition, we currently target our Heartflow Platform for use only on
symptomatic patients and expanding the Heartflow Platform for asymptomatic patients may take years,
with potential delays due to the high-risk nature of the effort. Our competitors who offer traditional non-
invasive tests offer those tests to both symptomatic and asymptomatic patients, and this increased market
penetration could create additional price pressure for our products.
In addition, the field of cardiovascular genomics is subject to rapidly changing technology, and others may
invent and commercialize technology platforms such as next generation sequencing approaches that
could compete with our products or could make our products or any product we may sell in the future
obsolete. We also face competition and price pressure from companies that have developed or are
developing AI-based platforms that leverage CCTA to diagnose CAD, including earlier-stage companies
such as Cleerly, Inc., Elucid Bioimaging Inc. and Keya Medical Technology Co., Ltd. We may also face
competition from companies developing AI-based platforms, even if they are not currently in the CAD
market and recent and future advances in AI may allow other companies to quickly create competing
products, and they may be able to create such products less expensively and benefit from FDA and
reimbursement approvals we and others have obtained. For us to remain competitive, we must
continuously work on our products’ design and features, improve our algorithms, and invest in and
develop new technologies, including in the rapidly evolving area of AI. If we are unable to introduce
products, features and improvements aimed at increasing the value proposition of the Heartflow Platform
for our customers, or if the products, features and improvements we introduce are viewed less favorably
than our competitors’ products, we may be unable to compete successfully. If we are unable to compete
successfully against our current or future competitors, we may be unable to increase market acceptance
for our products, which could prevent us from increasing or sustaining our revenue or achieving
profitability and could cause the market price of our common stock to decline.
In addition, the Heartflow Platform relies on a CCTA first being performed, as the Heartflow Platform
requires a CT image from a CT scanner to perform its analysis. A number of companies manufacture CT
scanners, including, among others, GE Healthcare, Hitachi, Ltd., Koninklijke Philips N.V., Samsung
Electronics Co., Ltd., Siemens Healthineers AG and Canon Medical Systems Corporation. These
companies are more diversified than we are and have substantial financial, manufacturing, sales and
marketing distribution and other resources. Any of these companies or others could determine to develop,
partner with or acquire and offer a product that competes with ours or manufacture CT scanners that are
no longer compatible with our Heartflow Platform. Further, these larger companies have market
penetration in the CT scanner market and understand the market for CAD and, if they are able to develop,
partner with or acquire a competing product, they may offer it as a bundle with the purchase of a CT
scanner, which could prevent us from increasing or sustaining our revenue or achieving profitability. In the
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past, three of these companies, Siemens Healthineers AG, Koninklijke Philips N.V. and Canon Medical
Systems Corporation, considered development of a local workstation-based technology prototype aimed
at deriving CT-based blood flow data without an invasive procedure. If these companies decide to further
pursue this technology and obtain regulatory approval or clinical validation, it may become competitive
with our products. In addition, we are reliant on these third-party CCTAs and CT scanners continuing to
support standard output file formats that our Heartflow Platform supports. If a CT manufacturer were to
change to a proprietary format or develop a novel method of performing CT scans, we would need to
further develop our existing technology to accommodate the images its scanners output, which could
materially affect the ability of physicians to use the Heartflow Platform, increase our R&D expenses, and
could adversely affect our business, financial condition, results of operations and prospects.
The size and expected growth of our addressable market may be smaller than we estimate.
Our estimate of the addressable market for our current products and any future products is subject to
significant uncertainty and is based on assumptions and estimates, including our internal analysis and
industry experience. While we believe our assumptions and the data underlying our estimates are
reasonable, these assumptions and estimates may not be correct. As a result, our estimates of the
addressable market for our current or future products may prove to be incorrect. Moreover, our ability to
serve a significant portion of this estimated market is subject to many factors, including our success in
promoting the use of CCTA as a non-invasive diagnostic test that can be combined with the Heartflow
Platform, which is subject to many risks and uncertainties, and relies on the availability and proximity of
healthcare facilities with active CCTA programs to the patients in our estimated market. Accordingly, if we
are unable to increase the use of CCTA at the rates we estimate, if the actual number of patients who
would benefit from our products is less than we estimate, or if the price at which we can sell future
products or the reimbursement rate received by healthcare providers is less than we estimate, the size
and expected growth of our addressable market would be smaller than our estimates, which could have a
material adverse effect on our business, financial condition, results of operations and prospects.
We may not be successful in updating or otherwise enhancing the Heartflow Platform.
A part of our strategy is bringing new enhancements to our customers through updates to the Heartflow
Platform, which may include offering new products, additional features, applications and improvements to
our technology. We expect to make significant investments to advance these efforts, and enhancing the
Heartflow Platform is a complex and time-consuming endeavor. New products, additional features,
applications and improvements to our technology that initially show promise may fail to achieve the
desired results or may not achieve acceptable levels of analytical accuracy, utility or user friendliness.
Product development and improvement is expensive, may take months or years to complete and can
have uncertain outcomes. Failure can occur at any stage of the development or improvement process
and may occur only after substantial work has been completed, or after completion.
Even if, after development, an updated product appears successful, we may, depending on the nature of
the update, need to obtain regulatory clearances, authorizations or approvals before we can market the
updated product. Such regulatory clearances, authorizations or approvals are likely to require significant
time and expenditures and the applicable regulatory authority may not clear, authorize or approve any
product, update or new product we develop. Obtaining such clearances, authorizations or approvals may
require data from clinical trials, which can be costly and time-consuming to obtain. In certain jurisdictions
or in certain cases, clinical data may also be required in order to obtain reimbursement coverage, and this
clinical data may be in addition to data required to obtain regulatory clearances, authorizations or
approvals. Some clinical studies may fail to meet their endpoints, introducing risk or delay in the ability to
commercialize a new feature or product. In light of these requirements, we may choose to limit the scope
of any new products, additional features, applications and improvements we seek to develop.
Even if we develop a product update or new product that receives regulatory clearance, authorization or
approval, and for which we obtain sufficient commercial third party and government reimbursement
coverage, we would need to commit substantial resources to commercialize and market the updated
product, new product or new application of our existing product, which may never achieve market
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acceptance among various stakeholders or be commercially successful. Further, the applicable
regulations or the application of those regulations could change in ways that would impact the Heartflow
Platform and our ability to successfully manufacture or market our products. The expenses or losses
associated with unsuccessful updates to or expansion of the Heartflow Platform could adversely affect our
business, financial condition, results of operations and prospects.
The commercialization of Heartflow Plaque Analysis is nascent, and we may not be able to
achieve or maintain sufficient market acceptance or the levels of utilization we expect from
Heartflow Plaque Analysis or any other future product.
We began limited market education efforts for our Heartflow Plaque Analysis in the second half of 2023,
and we have generated very minimal revenue from this product. Heartflow Plaque Analysis has taken
time and significant resources to develop, and we may not be able to achieve customer acceptance or
broad commercial reimbursement coverage, which could limit its adoption.
The market for alternative plaque analysis products is competitive in terms of development, availability,
pricing, product quality and time-to-market. We face competition from companies that provide or are
developing similar plaque analysis products, which may distinguish themselves from us through, among
other things, perceived product quality, style and visuals, sleek design, enhanced user-friendliness and
innovative features. In addition, some of these competitors are agile, early-stage companies that may be
able to respond more quickly and effectively than we can to new or changing opportunities, technologies,
standards or customer requirements in the plaque analysis category. Some of these competitors
commercially launched competing plaque analysis products prior to our launch of Heartflow Plaque
Analysis and may have a first-mover advantage as a result. For more information on risks related to our
competition, see the risk factor titled “We face significant competition in an environment of rapid
technological change, and there is a possibility that our competitors may develop products that are more
effective, accurate, reliable, cost-effective or more advanced than ours, which may harm our financial
condition. If we are unable to compete successfully or our potential market share is reduced, we may be
unable to increase or sustain our revenue or achieve profitability.”
Our competitors may also be able to offer plaque analysis products similar or superior to ours at a more
attractive price than we can or may be better positioned to serve certain segments of our market, which
could create additional price pressure. For example, our competitors have in the past, and may in the
future, offer plaque analysis and other products at a more attractive price than we can such that current or
potential customers may select our competitors’ products in lieu of purchasing and using our Heartflow
Plaque Analysis. Moreover, our competitors have in the past, and may in the future, suggest that their
plaque analysis and other products could replace both our Heartflow Plaque Analysis and our Heartflow
FFRCT Analysis, which would adversely affect our ability to achieve sufficient market acceptance for our
Heartflow Plaque Analysis, could affect sales of our Heartflow FFRCT Analysis and could cause our
Heartflow FFRCT Analysis to lose market share. While we believe Heartflow Plaque Analysis represents a
significant long-term opportunity for us, there can be no assurances that we will successfully compete in
such market and our business, financial condition, results of operations and prospects could be materially
and adversely affected.
We face risks associated with our use and development of AI models, which may result in
operational challenges, legal liability, reputational concerns and competitive risks.
We use and develop AI and automated analysis and decision-making technologies, including proprietary
AI algorithms and models and computational fluid dynamics (collectively, “AI Technologies”) to power the
Heartflow Platform. In addition, we use AI Technologies to drive improvements in the performance of the
Heartflow Platform. We expect that significant increased investment will be required in the future to
improve our use and development of AI Technologies.
As with many technological innovations, there are significant risks involved in developing, maintaining and
deploying these technologies. In particular, if the AI Technologies underlying our Heartflow Platform are
incorrectly designed or implemented; trained or reliant on incomplete, inadequate, inaccurate or otherwise
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poor quality data; used without sufficient oversight and quality control; misused or used outside of scope
of applicable regulatory authorizations; and/or adversely impacted by unforeseen bugs, defects, technical
challenges, cybersecurity threats or material performance issues, the performance of our Heartflow
Platform and business, as well as our reputation and the reputations of our customers, could suffer or we
could incur liability resulting from the violation of laws or contracts to which we are a party, regulatory
enforcement actions or civil claims. This could result in fines, penalties and damage awards and
disgorgement of any output, development or technology developed as a result of such violations.
In addition, we leverage a human-in-the-loop AI system that combines advanced algorithms with an
analyst-based quality inspection and monitoring process to create patient-specific reports based on CCTA
images. While we constantly work to improve our Heartflow Platform and algorithms, the AI Technologies
we work with are novel and complex, and we cannot assure you that our AI Technologies will be able to
perform as intended under all circumstances, or that our analyst-based review process will identify and
correct any errors in the outputs of our AI Technologies.
The regulatory framework for AI Technologies is rapidly evolving as many federal, state and foreign
government bodies and agencies have introduced or are currently considering additional laws, regulations
and guidance. For example, the FDA has issued guidance documents relating to the incorporation of AI
Technologies into medical devices and marketing submissions for AI-enabled devices. Specifically, draft
guidance issued on January 7, 2025, titled Artificial Intelligence-Enabled Device Software Functions:
Lifecycle Management and Marketing Submission Recommendations, proposes recommendations for the
design, development and implementation of AI-enabled devices that the FDA encourages manufacturers
consider using throughout the total product lifecycle. In addition, the California Privacy Protection Agency
has approved for rulemaking regulations under the CCPA regarding the use of automated decision-
making that may require risks and to provide notice and rights to opt-out and access to information
underlying the logic and outputs. Colorado passed the Colorado AI Act, which will go into effect in
February 2026. This law creates duties for developers and deployers to use reasonable care to protect
consumers from any known or reasonably foreseeable risks of “algorithmic discrimination” arising from
the intended and contracted uses of “high-risk AI systems,” including those that impact healthcare
services. Such additional laws, regulations and guidance may impact our ability to develop, use and
commercialize AI Technologies in the future.
It is possible that further new laws and regulations will be adopted in the United States and in other non-
U.S. jurisdictions, or that existing laws and regulations, including competition and antitrust laws, may be
interpreted in ways that would limit our ability to use AI Technologies for our business, or require us to
change the way we use AI Technologies in a manner that negatively affects the performance of our
Heartflow Platform and the way in which we use AI Technologies. We may need to expend resources to
adjust our Heartflow Platform in certain jurisdictions if the laws, regulations or decisions are not consistent
across jurisdictions. Further, the cost to comply with such laws, regulations or decisions and/or guidance
interpreting existing laws, could be significant and would increase our operating expenses (such as by
imposing additional reporting obligations regarding our use of AI Technologies). Such an increase in
operating expenses, as well as any actual or perceived failure to comply with such laws and regulations,
could materially and adversely affect our business, financial condition, results of operations and
prospects.
Our Heartflow Platform and the data and models it generates could have bugs, defects or errors,
including human quality control errors, or otherwise fail to meet the expectations of patients,
physicians and third-party payors, which could adversely affect our reputation, business and
operating results.
We cannot provide assurance that the proprietary technology and algorithms used in our Heartflow
Platform do not contain undetected bugs, defects or errors or that our analyst-based review process will
identify and correct any errors in the outputs of our AI Technologies. We cannot provide assurance that
the inbound CCTA images and image quality will always allow a true representation of the patient
anatomy, and any such limitations in CCTA images could affect the results of our analyses. We have in
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the past, and may in the future, experience defects or errors in our Heartflow Platform or the data and
models it generates that remain undetected by our analyst-based review process, and our reputation,
business and operating results could be adversely affected.
Furthermore, the success of the Heartflow Platform depends in part on patients’, physicians’ and third-
party payors’ confidence that our platform can provide reliable, high-quality actionable data and analysis
that will improve clinical decision making. We believe that patients, physicians and third-party payors are
likely to be sensitive to product defects and errors in the use of our products, including if the defects and
errors affect a physician’s ability to use the CCTA imaging results or result in a misdiagnosis. In the past,
we have experienced software code defects and software release process defects that have resulted in
intermittent interruptions to the physician’s ability to use our Heartflow Platform, and we may experience
such defects in the future. A subset of these defects were reported as part of the FDA’s Manufacturer and
User Facility Device Experience (“MAUDE”) disclosure. For more information, see the risk factor titled
“The Heartflow Platform may be subject to recalls, which could be costly and could harm our reputation
and business.” As a result, the failure of our Heartflow Platform to perform as expected, including to
reduce unnecessary invasive testing or fail to enable physicians to optimize treatment planning or provide
more efficient care, could significantly impact a physician’s willingness to use and rely on the Heartflow
Platform, which would impair our operating results and our reputation. In addition, we may be subject to
legal claims arising from any such failures.
Bugs, defects or errors in the Heartflow Platform or the failure of third-party service providers we rely on,
such as Amazon Web Services (“AWS”) or other cloud storage and telecommunications services
providers, to block a virus or prevent a security breach could harm our reputation and adversely impact
our results of operations. Defects may cause our products to be vulnerable to security attacks, cause
them to fail to produce accurate results or temporarily interrupt our commercial operations. Because the
techniques used by computer hackers to access or sabotage networks change frequently and generally
are not recognized until launched against a target, we or our third-party services providers may be unable
to anticipate these techniques and provide a corrective measure in time to protect the Heartflow Platform
and our networks. Potential defects may further cause the platform to be unavailable for a period of time,
affect ability of a customer to access information, result in a slow or suboptimal user experience, impact
turnaround time of an analysis, or provide other forms of degradation to the overall service.
We depend on our talent to grow and operate our business, and if we are unable to hire, integrate,
develop, motivate and retain our personnel, including highly qualified, technical personnel, we
may not be able to grow effectively and this could adversely affect our business.
To execute our growth plan, we must attract and retain highly qualified, technical personnel. Competition
for these personnel is intense, especially for engineers with high levels of expertise in AI, cloud
architecture, 3D visualization, research scientists and senior sales executives with experience in the
cardiology industry. We may experience difficulty in hiring and retaining employees with appropriate
qualifications. Many of the companies with which we compete for experienced personnel have greater
resources than we have. We also compete with companies that are believed to have high potential growth
opportunities or that have experienced rapid recent growth.
Our future success depends in part on our ability to continue to retain our executive officers and other key
employees and to recruit and hire new employees, including engineers, research scientists, case analysts
and production team members. We do not maintain “key person” insurance for any of our executives or
other employees. The loss of the services of any of these persons could impede the achievement of our
development, research and commercialization objectives. Any of our executive officers and other
employees may terminate employment with us at any time with no advance notice. The replacement of
any of our key personnel likely would involve significant time and costs, may significantly delay or prevent
the achievement of our business objectives and may harm our business.
In addition, job candidates and existing employees often consider the value of the stock awards they
receive in connection with their employment. If the perceived value of our stock awards declines or is
perceived to be less valuable than stock awards of other competing employers, it may adversely affect
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our ability to recruit and retain highly skilled employees. In addition, many of our employees have become
or will soon become vested in a substantial amount of stock or number of stock options. Our employees
may be more likely to leave us if the shares they own or the shares underlying their vested options have
significantly appreciated in value relative to the original purchase prices of the shares or the exercise
prices of the options, or if the exercise prices of the options that they hold are significantly below the
market price of our common stock. If we fail to attract new personnel, or fail to retain and motivate our
current personnel, our business and prospects could be adversely affected.
If we fail to properly manage our future growth, our business could suffer.
We intend to continue to grow and may experience periods of rapid growth and expansion, which could
place a significant additional strain on our limited personnel, information technology systems and other
resources. Our future growth will impose significant added responsibilities on management, including the
need to identify, recruit, train and integrate additional employees. In order to manage our operations and
growth we will need to continue to improve our operational and management controls, administrative and
operational infrastructure, reporting and information technology systems and financial internal control
procedures. Due to our limited financial resources and the limited experience of our management team in
managing a company with such future growth expectations, we may not be able to effectively manage the
expected expansion of our operations or recruit and train additional qualified personnel. Moreover, the
expected expansion of our operations may lead to significant costs and may divert our management and
business development resources. Any inability to manage growth could delay the execution of our
business plans or disrupt our operations.
In addition, as demand for the Heartflow Platform increases, we will need to scale our capacity, expand
customer service and enhance our internal quality assurance program. We may fail to implement any
increases in scale, related improvements and quality assurance, and we may fail to find appropriate
personnel to facilitate the growth of our business. Due to our limited resources, we may not be able to
effectively manage this simultaneous execution and expansion of our operations. This may result in
weaknesses in our infrastructure, give rise to operational mistakes, legal or regulatory compliance
failures, loss of business opportunities, loss of employees and reduced productivity among remaining
employees. The expansion of our operations may lead to significant costs and may divert financial
resources from other projects, such as the development of any new products. If our management is
unable to effectively manage our expected development and expansion, our expenses may increase
more than expected, our ability to generate or increase our revenue could be reduced and we may not be
able to implement our business strategy. Our future financial performance and our ability to compete
effectively and commercialize our Heartflow Plaque Analysis or any of our future products will depend in
part on our ability to effectively manage the future growth and expansion of our company. If we are unable
to manage our growth effectively, it may be difficult for us to execute our business strategy and our
business, financial condition, results of operations and prospects may be adversely affected.
Our business could be disrupted by catastrophic events.
The occurrence of any catastrophic event, including earthquake, fire, flood, tsunami or other weather
event, power loss, telecommunications failure, software or hardware malfunctions, pandemics, political
unrest, geopolitical instability, severe or prolonged economic downturn, cyberattack (including a
ransomware attack), war or terrorist attack, could result in lengthy interruptions in our ability to serve our
customers. In addition, acts of terrorism could cause disruptions to the internet or the economy as a
whole and could disproportionately affect us given our reliance on the internet and cloud-based services.
Specifically, our corporate headquarters are located in Mountain View, California and our production-
related computers are currently located in our Mountain View office and in Austin, Texas. California is
considered to be an active earthquake zone, is prone to catastrophic fires, severe weather events and the
follow-on effects thereof, including tsunamis, mudslides, flooding, power outages and other events that
could disrupt our business. Texas is also subject to severe weather events, power outages and other
events that could disrupt our business. Any event that prevents our access to such facilities, physically or
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virtually, would prevent us from operating our business and have an adverse effect on our business,
financial condition, results of operations and prospects.
In addition, we rely on our network and third-party infrastructure, including our cloud-based infrastructure
which we outsource to AWS, enterprise applications, internal technology systems and our website, for our
development, marketing, operational support-hosted services and sales activities. In the event of a
catastrophic event, we may be unable to continue our operations and may endure system interruptions,
delays in our ability to generate reports and output them to physicians, reputational harm, delays in our
product development, breaches of data security and loss of critical data, all of which could have an
adverse effect on our future operating results. If we are unable to develop adequate plans to ensure that
our business functions continue to operate during and after a disaster and to execute successfully on
those plans in the event of a disaster or emergency, our business would be harmed. Even with our
disaster recovery arrangements and insurance coverage, the ability of our customers to access and utilize
our Heartflow Platform could be interrupted, or we could lose critical data, which would have a negative
impact on our business.
In addition, the occurrence of a catastrophic event could impact providers of CCTAs, contrast agents for
CCTAs or suppliers of iodinated contrast media or similar supplies that are necessary to perform CCTAs.
For example, in 2022, the shutdown of an iodinated contrast media manufacturing facility led to a
significant shortage of iodinated contrast media, which resulted in the cancellation or rescheduling of non-
urgent contrast-requiring cardiac procedures and imaging. Any of these events could affect demand for
the Heartflow Platform, which could have a material adverse effect on our business, financial condition,
results of operations and prospects.
Consolidation among healthcare providers could have an adverse effect on our business,
financial condition, results of operations and prospects.
In the United States, there has been a trend of consolidation among healthcare providers and purchasers
of medical technology devices, often to gain greater market power. As healthcare providers consolidate,
they may try to use their market power to negotiate price concessions or reductions for the products and
services they purchase and use, including our Heartflow Platform. As a result, it is unknown whether such
purchasers will decide to stop purchasing our Heartflow Platform or demand discounts on our prices. If we
reduce our prices in response to these industry trends, our revenue would decrease, which could have a
material adverse effect on our business, financial condition, results of operations and prospects.
We may acquire other companies, solutions or technologies, which could divert our
management’s attention, result in additional dilution to our stockholders and otherwise disrupt
our operations and adversely affect our operating results.
We may in the future seek to acquire or invest in companies, solutions or technologies that we believe
could complement or expand our products, enhance our technical capabilities or otherwise offer growth
opportunities. The pursuit of potential acquisitions or other investment opportunities may divert the
attention of management and cause us to incur various expenses in identifying, investigating and
pursuing suitable transactions, whether or not they are consummated.
If we acquire any businesses, we may not be able to integrate the acquired personnel, operations and
technologies successfully, or effectively manage the combined business following the acquisition. We also
may not achieve the anticipated benefits from the acquired business due to a number of factors,
including: inability to integrate or benefit from acquired technologies or services in a profitable manner;
unanticipated costs or liabilities associated with the acquisition; incurrence of acquisition-related costs;
difficulty integrating the accounting systems, operations and personnel of the acquired business;
difficulties and additional expenses associated with supporting legacy products and hosting infrastructure
of the acquired business; diversion of management’s attention from other business concerns; use of
resources that are needed in other parts of our business; adverse effects to our existing business
relationships with business partners and customers as a result of the acquisition; the potential loss of key
employees; and use of substantial portions of our available cash to consummate the acquisition.
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In addition, a significant portion of the purchase price of any companies, solutions or technologies that we
may acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed
for impairment at least annually. If our acquisitions do not yield expected returns, we may be required to
take charges to our operating results based on this impairment assessment process, which could
adversely affect our results of operations.
Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which
could adversely affect our operating results and cause the market price of our common stock to decline. If
an acquired company, solution or technology fails to meet our expectations and does not complement or
expand our products, enhance our technical capabilities or otherwise offer growth opportunities, our
business, financial condition, results of operations and prospects may suffer.
Sales to customers outside the United States or with international operations expose us to risks
inherent in international sales.
In the three months ended June 30, 2025 and 2024, sales to customers outside the United States
accounted for approximately 8% and 9%, respectively, and accounted for approximately 8% and 9% of
our revenue in the six months ended June 30, 2025 and 2024, respectively. One element of our growth
strategy is to further expand our international operations and worldwide customer base. Operating in
international markets requires significant resources and management attention and subjects us to
regulatory, economic and political risks that are different from those in the United States.
We have limited operating experience in international markets, and we cannot assure you that our
existing presence in the United Kingdom, Europe and Japan or any expansion efforts into other
international markets will be successful. Our experience in the United States and international markets
may not be relevant to our ability to expand in other markets. Our international expansion efforts may not
be successful in creating further demand for our products outside of the United States or in effectively
selling our products in the international markets we enter. In addition, expansion into other international
markets will be costly and will impose additional burdens on our executive and administrative personnel,
finance and legal teams, sales and marketing teams and general managerial resources. If our efforts to
introduce our products into other international markets are not successful, we may have expended
significant resources without realizing the expected benefit. Ultimately, the investment required for
international expansion could exceed the results of operations generated from this expansion.
In addition, we operate in an industry which is subject to significant enforcement scrutiny by both U.S. and
non-U.S. government authorities. Our international business requires us to comply with U.S. and foreign
laws and regulations, such as various anti-bribery and anti-corruption laws, including the U.S. Foreign
Corrupt Practices Act (“FCPA”), the U.S. Fraud Act and in certain cases the U.K. Bribery Act of 2010.
Compliance with these is costly and exposes us to significant civil and criminal penalties for non-
compliance. Any failure to comply with applicable legal and regulatory obligations could impact us in a
variety of ways that include, but are not limited to, significant criminal, civil and administrative fines,
penalties and disgorgement of profits, including imprisonment of individuals, denial of export privileges,
seizure of shipments, restrictions on certain business activities and exclusion or debarment from
government contracting. Our international operations expose us to risks inherent in operating in foreign
jurisdictions that could adversely affect our business.
If we do not obtain and maintain international regulatory registrations, clearances or approvals for
our Heartflow Platform, we will be unable to market and sell our products outside of the United
States.
Any future sales of our products outside of the United States are subject to foreign regulatory
requirements that vary widely from country to country. While the regulations of some countries may not
impose barriers to marketing and selling our products or only require notification, others require that we
obtain the clearance or approval of a specified regulatory authority or a Certificate of Conformity of a
notified body. Complying with foreign regulatory requirements, including obtaining registrations,
clearances or approvals, can be expensive and time consuming and we may not receive regulatory
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clearances or approvals in each country in which we plan to market our products or we may be unable to
do so on a timely basis. The time required to obtain registrations, clearances or approvals, if required by
other countries, may be longer than that required for FDA clearance or approval, and requirements for
such registrations, clearances or approvals may significantly differ from FDA requirements. If we modify
our products, we may need to apply for regulatory clearances or approvals before we are permitted to sell
the modified product.
In addition, AI governing regulations around medical devices evolve rapidly, and we may not continue to
meet the quality and safety standards required to maintain the authorizations that we have received. If we
are unable to maintain our authorizations in a particular country, we will no longer be able to sell the
applicable product in that country.
Regulatory registration, clearance, marketing authorization, or approval by the FDA does not ensure
registration, clearance, marketing authorization, or approval by foreign regulatory authorities or authorized
representatives in other countries. Registration, clearance, marketing authorization, or approval by one or
more foreign regulatory authorities or authorized representatives do not ensure registration, clearance,
marketing authorization, or approval by regulatory authorities in other foreign countries or by the FDA.
Nevertheless, a failure or delay in obtaining registration or regulatory clearance or approval in one country
may have a negative effect on the regulatory process in others.
Risks Related to Data Privacy and Information Technology
Failure to comply with laws and regulations affecting the transmission, security and privacy of
personal information (including health information) could result in significant penalties.
Federal, state and foreign government bodies and authorities have adopted, are considering adopting, or
may adopt laws and regulations regarding the collection, use, processing, storage and disclosure of
personal information obtained from consumers and individuals. In the United States, federal, state, and
local governments have enacted numerous data privacy and security laws, including data breach
notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal
Trade Commission Act), and other similar laws (e.g., wiretapping laws). Under these laws we may be
required to obtain certain consents to process personal data. For example, some of our data processing
practices have been, and may in the future continue to be, subject to challenges or lawsuits under
privacy, security, and communications laws, including, for example, challenges based on wiretapping laws
for sharing consumer information with third parties through various methods, such as via third-party
marketing pixels or software development kits. Our inability or failure to obtain consent for these practices
could result in adverse consequences, including class action litigation and mass arbitration demands. In
addition, numerous federal and state laws and regulations, including the Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic
and Clinical Health Act of 2009 (“HITECH”), govern the collection, dissemination, security, use and
confidentiality of patient identifiable health information. HIPAA and the HITECH Act require us to comply
with standards for the use and disclosure of health information within our company and with third parties.
The Standards for Privacy of Individually Identifiable Health Information (“Privacy Standards”), and the
Security Standards for the Protection of Electronic Protected Health Information (“Security Standards”),
under HIPAA establish a set of basic national privacy and security standards for the protection of
individually identifiable health information by health plans, healthcare clearinghouses and certain
healthcare providers, referred to as covered entities, and the business associates with whom such
covered entities contract for services. As a result, both covered entities and business associates can be
subject to significant civil and criminal penalties for failure to comply with the Privacy Standards or the
Security Standards.
HIPAA, the HITECH Act and the Affordable Care Act (“ACA”) also include standards for common
healthcare electronic transactions and code sets, such as claims information, plan eligibility, payment
information and the use of electronic signatures, unique identifiers, operating rules. Companies that bill
payors for healthcare-related services and device use are required to conform to the transaction
standards. CMS, on behalf of HHS, has the authority to investigate complaints and audit for compliance
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with the HIPAA standards for transactions, code sets, unique identifiers and operating rules, including the
Administrative Simplification provisions of HIPAA and the ACA. Failure to comply with these standards,
and any investigation or audit and penalties imposed may have an adverse impact on our business.
HIPAA requires covered entities and business associates to develop and maintain policies and
procedures with respect to protected health information that is used or disclosed, including the adoption of
administrative, physical and technical safeguards to protect such information. The HITECH Act expands
the notification requirement for breaches of patient identifiable health information, restricts certain
disclosures and sales of patient identifiable health information and provides a tiered system for civil
monetary penalties for HIPAA violations. The Final HIPAA Omnibus Rule modifies the breach reporting
standard in a manner that will likely make more data security incidents qualify as reportable breaches.
The HITECH Act also increased the civil and criminal penalties that may be imposed against covered
entities, business associates and possibly other persons and gave state attorneys general new authority
to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek
attorney fees and costs associated with pursuing federal civil actions. Additionally, states have adopted
comparable privacy and security laws and regulations that differ somewhat from federal and other states’
laws, and that govern where more stringent than federal law.
As a business associate under HIPAA, if we do not comply with the requirements of HIPAA, the HITECH
Act or applicable state privacy and security laws, we could be subject to criminal or civil sanctions that
could adversely affect our financial condition. The costs of complying with privacy and security related
legal and regulatory requirements are substantial and could have an adverse effect on our business. In
addition, we are unable to predict what changes to the HIPAA Privacy Standards and Security Standards
might be made in the future or how those changes could affect our business. Any new legislation or
regulation in the area of privacy and security of personal information, including personal health
information, could also adversely affect our business operations. In addition, a security breach could
require reporting to federal and state government entities, notification to affected individuals, expensive
investigation and remediation and mitigation. Government agencies could, in their discretion, impose fines
and penalties relating to the breach, that would have an adverse effect on our business.
Foreign data privacy regulations, such as the General Data Protection Regulation (E.U.) 2016/679, the
European Union’s Data Protection Directive (“Directive 95/46/EC”), and the country specific regulations
that implement Directive 95/46/EC, also govern the processing of personally identifiable data, and a
number of these regulations are stricter than U.S. laws.
In addition, many states have laws, regulations and other authorities that govern data privacy, security
and breach notification. While some of these laws exempt protected health information subject to HIPAA,
they may apply to other personal information we collect, including personal information collected from
employees or from visitors to our website. Failure to comply with these authorities may have an adverse
impact on our business.
We expect to expend significant resources to comply with these laws and regulations. The functional and
operational requirements and costs of compliance with such laws and regulations may adversely impact
our business, and failure to enable our solutions to comply with such laws and regulations could lead to
significant fines and penalties imposed by regulators, as well as claims, lawsuits and contractual
indemnification obligations by or for our customers or third parties and significant reputational harm.
We depend on our information technology systems, and any failure of these systems could harm
our business and adversely affect our business and operating results.
Information technology and telecommunications systems are vulnerable to damage from a variety of
sources, including telecommunications or network failures, failures during the processes of upgrading or
replacing software, power outages, hardware failures, user or human errors and natural disasters.
Moreover, despite network security and back up measures, some of our servers are potentially vulnerable
to cybersecurity incidents, including phishing attacks by computer hackers or other malicious human acts,
computer viruses, ransomware, malware and similar disruptive problems or other methods of
compromising employee or customer administrator credentials to access protected health information and
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our internal data. Failures or significant downtime of our information technology or telecommunications
systems could prevent us from operating our business. Any disruption or loss of information technology or
telecommunications systems on which critical aspects of our operations depend could have an adverse
effect on our business and our operating results may suffer.
In addition, our brand, reputation and ability to attract, retain and serve our customers are dependent
upon the reliable performance of our Heartflow Platform, including our underlying information technology
systems and infrastructure. Our technical infrastructure may not be adequately designed with sufficient
reliability and redundancy to avoid performance delays or outages that could be harmful to our business.
If our Heartflow Platform is unavailable when physicians attempt to access it, or if it does not load as
quickly as they expect, physicians may not use our Heartflow Platform as often in the future, or at all. As
our customer base continues to grow, we will need an increasing amount of technical infrastructure,
including network capacity and computing power, to continue to satisfy the needs of our users.
We rely upon AWS to operate our cloud offering; any disruption of or interference with our use of
AWS would adversely affect our business, results of operations and financial condition.
We outsource all of our cloud-based infrastructure to AWS. Our customers need to be able to access our
cloud-based infrastructure at any time, without interruption or degradation of performance. AWS runs its
own platform that we access, and we are, therefore, vulnerable to service interruptions at AWS. We may
experience interruptions, delays and outages in service and availability from time to time as a result of
problems with our AWS provided infrastructure. For example, in September 2015, AWS suffered a
significant outage that had a widespread impact on cloud-based software and services companies.
Although our customers were not affected by that outage, a similar outage could render our cloud offering
inaccessible to customers. Additionally, AWS has suffered outages at specific customer locations in the
past, rendering the customer unable to access our offering for periods of time. Lack of availability of our
AWS infrastructure could be due to a number of potential causes including technical failures, natural
disasters, fraud or security attacks that we cannot predict or prevent.
In addition, if the security of the AWS infrastructure is compromised or believed to have been
compromised, our business, results of operations and financial condition could be adversely affected. It is
possible that our customers and potential customers would hold us accountable for any breach of security
affecting the AWS infrastructure and we may incur significant liability from those customers and from third
parties with respect to any breach affecting AWS systems. For more information, see the risk factor titled
“Failure to comply with laws and regulations affecting the transmission, security and privacy of personal
information (including health information) could result in significant penalties.” Because our agreement
with AWS limits AWS’ liability for damages, we may not be able to recover a material portion of our
liabilities to our customers and third parties from AWS. Customers and potential customers may refuse to
do business with us because of the perceived or actual failure of our cloud offering as hosted by AWS and
our operating results could be harmed.
Our agreement with AWS allows AWS to terminate the agreement by providing 30 days’ advance notice,
and allows AWS to terminate in case of a material breach of contract if such breach is uncured for 30
days following receipt of notice of such breach, or to terminate immediately upon notice to us (i) if AWS
has the right to suspend our account; (ii) if AWS’ relationship with a third-party software or technology
provider terminates, expires or requires AWS to change the way it provides its services; or (iii) in order to
comply with the law or requests of governmental entities. Although we expect that we could receive
similar services from other third parties, if any of our arrangements with AWS are terminated, we could
experience interruptions on our platform and in our ability to make our platform available to customers, as
well as delays and additional expenses in arranging alternative cloud infrastructure services.
If we fail to offer high quality customer support, our business and reputation could suffer.
Our customers rely on our customer support teams to resolve technical and operational issues if and
when they arise. We may be unable to respond quickly enough to accommodate short-term increases in
customer demand for customer support. We also may be unable to modify the nature, scope and delivery
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of our customer support to compete with changes in customer support services provided by our
competitors or to adapt to product and industry developments. Increased customer demand for customer
support, without corresponding revenue, could increase costs and harm our results of operations. In
addition, as we continue to grow our operations and reach a large global customer base, we need to be
able to provide efficient customer support that meets our customers’ needs globally at scale. The number
of our customers has grown significantly, and that growth has and will continue to put additional pressure
on our support organization. As our business scales, we may need to engage third-party customer
support service providers, which could negatively impact the quality of our customer support if such third
parties are unable to provide customer support that is as effective as that we provide ourselves. Our sales
are highly dependent on our business reputation and on positive recommendations from our existing
customers. Accordingly, high quality customer support is important for the renewal and expansion of our
agreements with existing customers and any failure to maintain such standards of customer support, or a
market perception that we do not maintain high quality customer support, could harm our reputation, our
ability to sell product to existing and prospective customers and our business, financial condition, results
of operations and prospects.
We invest significantly in research and development, and to the extent our research and
development investments do not translate into new products, features or improvements to our
current products, or if we do not use those investments efficiently, our business, financial
condition, results of operations and prospects would be harmed.
A key element of our strategy is to invest significantly in our research and development efforts to
introduce new products, features and improvements aimed at increasing the value proposition of the
Heartflow Platform for our customers. For the three months ended June 30, 2025 and 2024, our research
and development expenses were 35% and 32% of our revenue, respectively, and 36% and 33% of our
revenue for the six months ended June 30, 2025 and 2024, respectively. If we do not spend our research
and development budget efficiently or effectively on compelling innovation and technologies, our business
may be harmed and we may not realize the expected benefits of our strategy. Moreover, research and
development projects can be technically challenging and expensive. The nature of these research and
development cycles may cause us to experience delays between the time we incur expenses associated
with research and development and the time we are able to offer compelling solutions and generate
revenue, if any, from such investment. For example, investments made to expand the Heartflow Platform
to asymptomatic patients may be expensive, technically challenging, experience delays and may not be
successful. Additionally, anticipated customer demand for a product or feature we are developing could
decrease after the development cycle has commenced, and we would nonetheless be unable to avoid
substantial costs associated with the development of any such product or features. If we expend a
significant amount of resources on research and development and our efforts do not lead to the
successful introduction or improvement of products or features that are competitive in our current or future
markets, it would harm our business, financial condition, results of operations and prospects.
Our networks and those of our third-party service providers may become the target of bad actors
or security breaches that we cannot anticipate or successfully defend, which could have an
adverse impact on our business.
The Heartflow Platform involves the storage and transmission of our customers’ personal information or
identifying information of their patients. Increasingly, we and other companies are subject to a wide variety
of attacks on their networks on an ongoing basis. In addition to attacks from traditional computer
“hackers,” malicious code (such as viruses and worms), employee theft or misuse, ransomware attacks
and denial of service attacks, sophisticated nation state and nation state supported actors now engage in
intrusions and attacks (including advanced persistent threat intrusions), and add to the risks to our
internal networks and the information they store and process. Additionally, such bad actors frequently
attempt to fraudulently induce employees or customers into disclosing sensitive information such as user
names, passwords or other information in order to gain access to our customers’ data, their patient’s data
or our data, including our intellectual property and other confidential business information, or our
information technology systems. Because techniques used to obtain unauthorized access or to sabotage
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systems change frequently and generally are not recognized until successfully launched against a target,
we may be unable to anticipate these techniques or to implement adequate preventative measures.
Despite significant efforts to create process and security barriers to such threats, it is virtually impossible
for us to entirely mitigate these risks. Any such breach could compromise our networks, creating system
disruptions or slowdowns and exploiting security vulnerabilities of our products, and the information stored
on our networks could be accessed, publicly disclosed, lost or stolen, which could subject us to liability
and cause us significant financial harm. Such breaches often result in reputational damage, negative
publicity, loss of industry data security certifications, customers and sales, increased costs to remedy any
problem, costly litigation and contractual indemnification obligations by or for impacted customers or third
parties any of which could adversely affect our business. In addition, although we have, and intend to
maintain, insurance with respect to any such indemnification obligations, the coverage limits of our
insurance policies may not be adequate and one or more successful claims brought against us may have
an adverse effect on our business, financial condition, results of operations and prospects.
We also rely on third-party service providers, such as cloud storage and telecommunications services
providers. Such service providers are also potentially vulnerable to cybersecurity incidents that could
result in the interruption of their services to us or unauthorized access, use or disclosure of our
confidential information and confidential information of our customers and protected health information of
their patients.
Our products are also targets for malicious cybersecurity acts. While some of our products contain
encryption or security algorithms to protect third-party content or patient information or other data stored
in our products, these products could still be hacked or targeted by malicious software programs or other
attacks or the encryption schemes could be compromised, breached or circumvented by motivated or
sophisticated hackers, which could harm our business and our reputation. In addition, see the risk factor
titled “Our Heartflow Platform and the data and models it generates could have bugs, defects or errors,
including human quality control errors, or otherwise fail to meet the expectations of patients, physicians
and third-party payors, which could adversely affect our reputation, business and operating results” for
more information on bugs, defects or errors in the Heartflow Platform.
Risks Related to Legal and Regulatory Matters
We face extensive regulatory requirements to bring our products to market, and our failure to
receive and maintain regulatory clearances or approvals of our current and future products in the
United States or abroad or to comply with medical device regulatory requirements could
adversely affect our business.
In order to market any product, we must establish and comply with numerous and varying regulatory
requirements that differ by country and by region within certain countries. Approval, clearance or
marketing authorization in the United States by the FDA or by a regulatory authority or other body in
another country does not ensure approval by the regulatory authorities in other countries or jurisdictions
or ensure approval, clearance or other marketing authorization for the same conditions of use. Approval
processes vary among countries and can involve additional product testing and validation and additional
administrative review periods. In general, unless an exemption applies, in the United States, current and
future versions of our products must receive pre-market notification (“510(k)”), de novo classification (“de
novo”) or pre-market approval (“PMA”) from the FDA before they can be marketed in the United States.
We cannot provide assurance that any of our future products, to the extent required, will be cleared,
approved or otherwise authorized by the FDA through any of its pre-market review processes or that the
FDA will provide export certificates that are necessary to export certain products to certain countries. In
addition, the national health or social security organizations of certain foreign countries, including those
outside Europe, require our products to be qualified before they can be marketed in those countries.
Failure to receive, or delays in the receipt of, relevant foreign qualifications in the European Economic
Area or other foreign countries could have an adverse effect on our business.
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Pre-market notification, de novo classification request or PMA applications may require support by data
from clinical trials. We are subject to requirements to publicly register and report the results of our clinical
trials. We must also abide by good clinical practice (“GCP”) requirements in the conduct and
documentation of our clinical trials and report to the FDA significant financial interests of investigators in
any clinical trials we submit to support marketing applications for our products. We, the FDA or an
institutional review board (“IRB”), may suspend or terminate clinical trials at any time on various grounds,
including a finding that patients are being exposed to an unacceptable health risk or that the treatment
does not have any effect. If the FDA considers data from our clinical trials to be actually or potentially
biased due to investigators’ financial interests, or unreliable due to GCP noncompliance, it can require us
to implement extensive data analyses or other corrective actions, or exclude data from consideration in
support of our marketing applications. These outcomes could result in delay or denial of FDA clearance or
approval and could result in the need to conduct additional, costly and time-consuming clinical trials.
Additionally, we are required to obtain pre-market clearance or approval to market significantly modified
versions of our currently cleared Heartflow Platform, as well as to market the existing product for new
indications. The FDA requires us to make and document a determination as to whether or not a
modification requires a new 510(k) clearance, de novo classification or PMA approval; however, the FDA
can review and disagree with our decision. Although we have received 510(k) clearance from the FDA for
the current version of the Heartflow Platform, we may not be successful in receiving clearances, de novo
classification or approvals in the future or the FDA may not agree with our decisions not to seek
clearances, de novo classifications or approvals for any new products or particular product modifications
or updates. The FDA may require us to obtain a new 510(k) clearance, de novo classifications or approval
for any past or future modification or a new indication for our existing products. Such submissions may
require the development and submission of additional data, may be time consuming and costly, and
ultimately may not be cleared or approved by the FDA.
If the FDA requires us to obtain pre-market clearances, de novo classifications or approvals for any
marketed modification to a previously cleared version of the Heartflow Platform, we may be required to
cease manufacturing and marketing of the modified product or to recall the modified product until we
obtain such FDA marketing authorization. The FDA may not clear, grant or approve such submissions in a
timely manner, if at all. The FDA also may change its policies, adopt additional regulations, or revise
existing regulations, each of which could prevent or delay pre-market clearance, de novo classification or
approval of our devices, or could impact our ability to market a device that was previously cleared. Any of
the foregoing could adversely impact our business and financial condition.
In addition, the FDA and other comparable foreign regulatory authorities may delay, limit or deny
clearance, de novo classification or approval of future versions of or future indications for our products or
any other potential product for many reasons, including, among others:
•the results of our clinical trials may not meet the level of statistically significant and clinically
meaningful efficacy with an acceptable safety profile as required by FDA, or other comparable
regulatory authorities in other countries, for marketing approval;
•the FDA or other comparable regulatory authorities in other countries may disagree with the number,
design, size, conduct or implementation of our clinical trials;
•the FDA or other comparable regulatory authorities in other countries may disagree with our
interpretation of data from our clinical trials;
•the FDA or other comparable regulatory authorities in other countries may not accept data generated
at one or more of our clinical trial sites;
•if our 510(k) notifications, de novo classification requests, PMA applications, or similar notifications or
applications, if and when submitted, are reviewed by the FDA or other comparable regulatory
authorities, as applicable, the regulatory authorities may have difficulties scheduling the necessary
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review meetings in a timely manner, or may recommend against clearance or approval of our
application; or
•the FDA may determine that our 510(k) notifications for new indications, if and when submitted, must
follow a different regulatory pathway than we have attempted, and there may be potentially extended
standards, timelines, reviews (such as by an FDA Advisory Committee) and costs in order to pursue
approval.
Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain
regulatory clearance, de novo classification or approval for current or future versions of the Heartflow
Platform and could result in difficulties and costs for us. If we fail to comply with regulatory requirements in
international markets or to obtain and maintain required marketing authorizations, or if marketing
authorizations in international markets are delayed, our ability to realize the full market potential of our
new potential products will be limited.
Healthcare policy changes, including recently enacted legislation reforming the U.S. healthcare
system could have an adverse effect on our business, financial condition, results of operations
and prospects.
In the United States, there have been and continue to be a number of legislative and regulatory initiatives
to contain healthcare costs. Federal and state lawmakers regularly propose and, at times, enact
legislation that would result in significant changes to the U.S. healthcare system, some of which are
intended to contain or reduce the costs of medical products and services, including our own products. For
example, on July 4, 2025, the annual reconciliation bill, the “One Big Beautiful Bill Act,” or OBBBA, was
signed into law which is expected to reduce Medicaid spending and enrollment by implementing work
requirements for some beneficiaries, capping state-directed payments, reducing federal funding, and
limiting provider taxes used to fund the program. OBBBA also narrows access to ACA marketplace
exchange enrollment and declines to extend the ACA enhanced advanced premium tax credits, set to
expire in 2025, which, among other provisions in the law, are anticipated to reduce the number of
Americans with health insurance. These changes may decrease patient access to advanced
cardiovascular diagnostics, including Heartflow's FFRCT and Plaque Analysis products, particularly
among lower-income and high-risk populations. In addition, reduced federal and state funding, caps on
supplemental payments, and limits on provider revenue sources may constrain hospital and health
system budgets, potentially slowing adoption of innovative diagnostics despite demonstrated clinical
value.
Current and future legislative proposals to further reform healthcare or reduce healthcare costs may limit
coverage of or lower reimbursement for the diagnostic tests associated with the use of our products. The
cost containment measures that payors and providers are instituting and the effect of any healthcare
reform initiative implemented in the future could impact our revenue from the sale of our products.
We expect additional state and federal healthcare policies and reform measures to be adopted in the
future, particularly in light of the recent administration changes in the White House and Congress, any of
which could limit reimbursement for healthcare products and services or otherwise result in reduced
demand for our products or additional pricing pressure and have a material adverse effect on our industry
generally and on our customers. We cannot predict what other healthcare programs and regulations will
ultimately be implemented at the federal or state level or whether any future legislation or regulation in the
United States may negatively affect our business, financial condition, results of operations and prospects.
The continuing efforts of the government, insurance companies, managed care organizations and other
payors of healthcare services to contain or reduce costs of healthcare may adversely affect our ability to
set a price that we believe is fair for our products, our ability to generate revenue and achieve or maintain
profitability and the availability of capital.
Any changes of, or uncertainty with respect to, future coverage or reimbursement rates could affect
demand for our products, which may prevent us from being able to generate additional revenue or attain
profitability.
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We are subject to many laws and governmental regulations affecting our marketed products, both
domestically and internationally, and any adverse regulatory action may adversely affect our
business, financial condition, results of operations and prospects.
The Heartflow Platform is subject to regulation by numerous government authorities, including the FDA
and comparable foreign authorities, after clearance or approval of current and future versions of the
product. To varying degrees, each of these authorities requires us to comply with laws and regulations
governing the development, design, testing, manufacture, labeling, advertising, promotion, distribution,
import and export of our products. The Heartflow Platform (also referred to as Heartflow Analysis, which
consists of four main functions, the Heartflow FFRCT Analysis, the Heartflow Plaque Analysis, the
Heartflow RoadMap Analysis and the Heartflow PCI Planner (which we expect to launch in 2026)) has
been cleared by the FDA (K213857), and only the Heartflow FFRCT Analysis function of the Heartflow
Platform is Conformité Européene Marked (“CE Marked”) in the European Economic Area, the United
Kingdom and Australia, received medical device licensing in Canada and has been approved for
marketing authorization in Japan by the Pharmaceuticals and Medical Devices Agency (“PMDA”), all for
specific indications for use. The Heartflow Platform has also been cleared by the equivalent regulatory
authorities in Israel, Saudi Arabia and United Arab Emirates and licensed in Bahrain.
We currently have ongoing responsibilities under U.S., U.K., European Economic Area, Switzerland,
Canada, Australia, Japan, Saudi Arabia, United Arab Emirates, Bahrain and Israel (registered or licensed
regions) regulations, including requirements related to product and facility registration, device listing,
adverse event reporting, reporting of recalls and field corrective actions, manufacturing, advertising,
promotion, distribution, import, and export. In certain jurisdictions outside of the United States, we
contract with third parties (i.e., notified bodies, authorized representatives, and manufacturing
authorization holders) who either oversee regulatory compliance or assume regulatory responsibilities for
our products distributed by those third parties. We are subject to periodic inspections and audits by the
FDA, notified bodies, authorized representatives and comparable foreign authorities to determine
compliance with regulatory requirements, including GMP such as the Quality System Regulation of the
FDA, Medical Device Single Auditing Program, ISO 13485:2016, and EN ISO 13485:2021 concerning the
EU, establishment registration and device listing, medical device reporting, vigilance reporting of adverse
events, notification of corrections, recalls, field safety corrective actions and product labeling and
marketing. These inspections and audits can result in inspectional observations or reports, warning letters
or other forms of enforcement action. If the FDA or comparable foreign authorities conclude, as a result of
these inspections or audits or from any other source of information, that we are not in compliance with
applicable laws or regulations, or that our products are ineffective or pose an unreasonable health risk,
such authorities could ban these products, suspend or cancel our marketing authorizations, impose “stop
sale” and “stop import” orders, refuse to issue export certificates, detain or seize adulterated or
misbranded products, order a recall, repair, replacement, correction or refund of such products, require us
to conduct post-market surveillance studies or change the labeling for our products, or require us to notify
health professionals and others that the products present unreasonable risks of substantial harm to the
public health. Failure to comply with regulatory requirements may also subject us to additional
administrative and judicially imposed sanctions, warning letters, civil and criminal penalties, injunctions,
interruption of manufacturing or clinical trials, total or partial suspension of production and resulting
adverse publicity.
Discovery of previously unknown problems with our products’ design or manufacture may result in
restrictions on the use of the Heartflow Platform, restrictions placed on us or our suppliers or withdrawal
of the existing regulatory clearance of the Heartflow Platform. The FDA or comparable foreign authorities
may also impose operating restrictions, enjoin and restrain violations of applicable law pertaining to
medical devices, assess civil or criminal penalties against our officers, employees or us or recommend
criminal prosecution of our company. Adverse regulatory action of a certain magnitude may restrict us
from effectively marketing and selling our products. In addition, negative publicity or product liability
claims resulting from any adverse regulatory action could have an adverse effect on our business,
financial condition, results of operations and prospects.
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In many of the foreign countries in which we market our products, we are subject to extensive medical
device regulations that are similar to those of the FDA, including those in Europe. The regulation of our
products in Europe falls within the European Economic Area, which consists of the 27 member states of
the European Union, as well as Iceland, Liechtenstein and Norway. Only medical devices that comply with
certain conformity requirements of the Medical Devices Regulation (E.U.) 2017/745 concerning Medical
Devices, or the E.U. Medical Devices Directive, Directive 2006/114/EC are allowed to be marketed within
the European Economic Area.
Foreign governmental regulations have become increasingly stringent and more extensive, and we may
become subject to even more rigorous regulation by foreign governmental authorities in the future.
Penalties for a company’s noncompliance with foreign governmental regulation could be severe, including
revocation or suspension of a company’s business license and civil or criminal sanctions. In some
jurisdictions, such as Germany, any violation of a law related to medical devices is also considered to be
a violation of unfair competition law. In such cases, governmental authorities, our competitors and
business or consumer associations may then file lawsuits to prohibit us from commercializing the
Heartflow Platform in such jurisdictions. Our competitors may also sue us for damages. Any domestic or
foreign governmental law or regulation imposed in the future may have an adverse effect on our business,
financial condition, results of operations and prospects.
Delays in the commencement or completion of future or ongoing clinical testing could result in
increased costs to us and delay our ability to market the Heartflow Platform for additional
indications.
We are currently enrolling patients for our DECIDE clinical trial to evaluate our Heartflow Plaque Analysis
in a real-world setting. We do not know whether our DECIDE clinical trial will be completed on schedule,
or at all. The commencement or completion of clinical trials can be disrupted for a variety of reasons,
including difficulties in:
•recruiting and enrolling patients to participate in, and investigators to conduct, a clinical trial;
•reaching agreements on acceptable terms with prospective clinical research organizations and trial
sites;
•obtaining approval of an investigational device exemption, application from the FDA or equivalent
authorization from foreign regulatory authorities, if required; or
•obtaining IRB approval to conduct a clinical trial at a prospective site.
A clinical trial may also be suspended or terminated by us, an IRB, the FDA or other regulatory authorities
due to a number of factors, including:
•failure to conduct the clinical trial in accordance with regulatory requirements or in accordance with
our clinical protocols;
•inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting
in the imposition of a clinical hold;
•safety or effectiveness issues; or
•lack of adequate funding to continue the clinical trial.
In addition, changes in regulatory requirements and guidance may occur, and we may need to amend
clinical trial protocols to respond to such changes, which could impact the cost, timing or successful
completion of a clinical trial. If we experience delays in the commencement or completion of our clinical
trials, the commercial prospects for additional indications for our products will be harmed.
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Interim, “top-line” and preliminary data from our clinical trials that we announce or publish from
time to time may change as more patient data become available and are subject to audit and
verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose interim, top-line or preliminary data from our clinical trials,
including our DECIDE clinical trial, which is based on a preliminary analysis of then-available data, and
the results and related findings and conclusions are subject to change following a more comprehensive
review of the data related to the particular trial or additional data collected at a later time. We also make
assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not
have received or had the opportunity to fully and carefully evaluate all data. As a result, the interim, top-
line or preliminary results that we report may differ from future results of the same trial, or different
conclusions or considerations may qualify such results, once additional data have been received and fully
evaluated. Interim, top-line or preliminary data also remain subject to audit and verification procedures
that may result in the final data being materially different from the interim, top-line or preliminary data we
previously announced. As a result, interim, top-line and preliminary data should be viewed with caution
until the final data are available. Adverse differences between interim data and final data could
significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors
could result in volatility in our share price.
Further, others, including the FDA and other regulatory authorities or other bodies, may not accept or
agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh
the importance of data differently, which could impact the value of the particular trial, or the approvability
or potential for commercialization of the particular medical device. In addition, the information we choose
to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive
information, and others may not agree with what we determine is material or otherwise appropriate
information to include in our disclosure. The interim, top-line or preliminary data that we report may differ
from final results, and regulatory authorities and other bodies may disagree with the conclusions reached,
which may harm our ability to obtain marketing authorization for, and commercialize, our future products,
which could harm our business, financial condition, results of operations and prospects.
We may face product liability claims that could result in costly litigation and significant liabilities.
We may not be able to maintain adequate product liability insurance.
Development, marketing and clinical testing of our products may expose us to product liability and other
tort claims. Although we have, and intend to maintain, liability insurance, the coverage limits of our
insurance policies may not be adequate and one or more successful claims brought against us may have
an adverse effect on our business, financial condition, results of operations and prospects. For example,
the U.S. Supreme Court declined to hear an appeal where the U.S. Court of Appeals for the Ninth Circuit
ruled that the 1976 Medical Device Amendments to the Federal Food, Drug and Cosmetic Act did not
preempt state laws in a product liability case involving a medical device company. If other courts in the
United States adopt similar rulings, we may be subject to increased litigation risk in connection with our
products. Product liability claims could negatively affect our reputation, product sales, and our ability to
obtain and maintain regulatory approval for our products.
In addition, although we have product liability and clinical study liability insurance, this insurance is
subject to deductibles and coverage limitations. Our current product liability insurance may not continue to
be available to us on acceptable terms, if at all, and, if available, coverage may not be adequate to protect
us against any future product liability claims. If we are unable to obtain insurance at an acceptable cost,
on acceptable terms with adequate coverage, or at all, or otherwise protect against potential product
liability claims, we will be exposed to significant liabilities, which may harm our business. A product liability
claim, recall or other claim with respect to uninsured liabilities or for amounts in excess of insured
liabilities could have an adverse effect on our reputation, business, financial condition, results of
operations and prospects.
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The Heartflow Platform may be subject to recalls, which could be costly and could harm our
reputation and business.
We are subject to ongoing medical device reporting regulations that require us to report to the FDA or
similar governmental authorities in other countries if our products cause, or contribute to, death or serious
injury, or if they malfunction and would be likely to cause, or contribute to, death or serious injury if the
malfunction were to recur. We could voluntarily elect to, or the FDA and similar governmental authorities
in other countries could require us to, perform a correction, field safety corrective action, removal or other
recall of our products in the event of material deficiencies or defects in design, manufacturing or labeling
that could cause harm. Our products have been in the past, and may in the future, be the subject of
medical device reports of adverse events with the MAUDE database, including reports of false negative
results and incorrect or imprecise results or readings. Between 2017 and August 31, 2025, 124 Heartflow
Platform MAUDE reports were made, with 108 of those reports due to false negative results, 14 reports
due to incorrect, inadequate or imprecise results or readings, and two reports due to an adverse event
without an identified device or use problem. While none of these MAUDE reports resulted in a mandated
or voluntary correction, field safety action, removal or a recall, a government mandated or voluntary
correction, field safety corrective action, removal or other recall could occur as a result of manufacturing
errors or design defects, including defects in labeling. Any correction, field safety corrective action,
removal or other recall would divert managerial and financial resources and could lead to a substantial
loss of physician and patient confidence in our products and, consequently, have an adverse effect on our
growth prospects or operating results. A correction, field safety corrective action, removal or other recall
could also result in substantial litigation, including product liability claims, with liabilities well in excess of
our insurance coverage limits. Any of these events could have an adverse effect on our reputation,
business, financial condition, results of operations and prospects.
Off-label or other unlawful promotion of our products could result in costly investigations and
sanctions from the FDA and other regulatory bodies.
The Heartflow Platform (also referred to as Heartflow Analysis, which consists of four main functions, the
Heartflow FFRCT Analysis, the Heartflow Plaque Analysis, the Heartflow RoadMap Analysis and the
Heartflow PCI Planner (which we expect to launch in 2026)) has been cleared by the FDA (K213857), and
only the Heartflow FFRCT Analysis function of the Heartflow Platform is CE Marked in the European
Economic Area, the United Kingdom and Australia, received medical device licensing in Canada and has
been approved for marketing authorization in Japan by the PMDA, all for specific indications for use. The
Heartflow Platform has also been cleared by the equivalent regulatory authorities in Israel, Saudi Arabia
and United Arab Emirates and licensed in Bahrain. We may only promote or market our products for their
specifically cleared or approved indications. We train our marketing and sales force against promoting our
products for uses outside of the cleared or approved indications for use (“off-label use”).
If the FDA determines that our promotional materials or training constitute promotion of an off-label use,
or if there are claims that are not adequately substantiated or that are otherwise false or misleading, it
could request that we modify our training or promotional materials or subject us to regulatory or
enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil
fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities,
including the Federal Trade Commission or Department of Justice, might take action if they consider our
business activities to constitute promotion of an off-label use or other unlawful promotion, which could
result in significant penalties, including criminal, civil and administrative penalties, damages, fines,
disgorgement, exclusion from participation in government healthcare programs and the curtailment of our
operations. Any of these events could significantly harm our business, results of operations, financial
condition and prospects.
Further, the advertising and promotion of our products are subject to European Economic Area Member
States laws implementing the Medical Devices Directive concerning misleading and comparative
advertising, and Directive 2005/29/EC on unfair commercial practices, as well as other European
Economic Area Member State legislation governing the advertising and promotion of medical devices.
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European Economic Area Member State legislation may also restrict or impose limitations on our ability to
advertise our products directly to the general public. In addition, voluntary E.U. and national codes of
conduct provide guidelines on the advertising and promotion of our products to the general public and
may impose limitations on our promotional activities with healthcare professionals harming our business,
financial condition, results of operations and prospects.
We are subject to numerous federal, state and foreign healthcare fraud and abuse, compliance,
transparency and privacy laws and regulations, and a failure to comply with such laws and
regulations could have an adverse effect on our business; similarly, an investigation, inquiry or
audit by a government agency that alleges violations of law or regulation may have an adverse
effect on our business.
Our operations are, and will continue to be, directly and indirectly affected by various federal, state and/or
foreign healthcare laws, including those described below. In particular, because the use of our products
are directly or indirectly reimbursed by U.S. federal health care programs, for example Medicare, we are
subject to the federal Anti-Kickback Statute, a criminal law that prohibits, among other things, any person
or entity from knowingly and willfully offering, paying, soliciting or receiving any remuneration in cash or
in-kind (including any kickback or bribe, but also common forms of remuneration, such as service or
consulting fees, service fees, meals, travel expenses, discounts or rebates), directly or indirectly, overtly
or covertly, in cash or in-kind, in return for or to induce the referring, ordering, leasing, purchasing or
arranging for or recommending the referring, ordering, purchasing or leasing of any good, facility, item or
service, for which payment may be made, in whole or in part, under federal healthcare programs, such as
the Medicare and Medicaid programs. The term “remuneration” has been broadly interpreted to include
anything of value. Although there are a number of statutory exceptions and regulatory safe harbors
protecting certain common activities, the exceptions and safe harbors are drawn narrowly. Failure to meet
all of the requirements of a statutory exception or regulatory safe harbor does not make the conduct per
se illegal under the Anti-Kickback Statute. Instead, the arrangement will be evaluated on a case-by-case
basis based on a cumulative review of all of its facts and circumstances. Several courts have interpreted
the statute’s intent requirement to mean that if any one purpose of an arrangement involving
remuneration is to induce referrals of (or purchases, uses or recommendations of prescriptions, uses or
purchases related to) federal healthcare program covered business, the Anti-Kickback Statute has been
implicated and potentially violated. Our practices may not in all cases meet all of the criteria for safe
harbor protection from Anti-Kickback Statute liability. Further, the ACA, amends the intent requirement of
the federal Anti-Kickback Statute and certain criminal healthcare fraud statutes. A person or entity no
longer needs to have actual knowledge of the statute or specific intent to violate it. In addition, the
government may assert that a claim for payment by a government health care program including items or
services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulent claim for
purposes of the false claims laws.
The U.S. civil False Claims Act prohibits, among other things, any person or entity from knowingly
presenting, or causing to be presented, a false or fraudulent claim for payment or approval to the federal
government or knowingly making, using, or causing to be made or used a false record or statement
material to a false or fraudulent claim to the federal government. A claim includes “any request or
demand” for money or property presented to the U.S. government. The civil False Claims Act also applies
to false submissions that cause the government to not receive a benefit to which it is entitled, such as a
discounted sales price for products covered by federal healthcare programs. Intent to deceive is not
required to establish liability under the civil False Claims Act. In addition, the civil False Claims Act
includes a whistleblower provision that allows private citizens to bring claims on behalf of the U.S.
government alleging violations of the law. Whistleblowers may be entitled to up to as much as thirty
percent (30%) of the government’s financial recovery resulting from such claims. This incentivizes
potential whistleblowers to file complaints in federal court, which complaints are relied upon heavily by the
government to investigate and prosecute allegations of violations of both the civil False Claims Act and
the Anti-Kickback Statute. U.S. enforcement authorities or private whistleblowers acting on behalf of the
U.S. government may file complaints under the civil False Claims Act alleging that we have caused one or
more of our customers to submit false submissions for reimbursement from federal health care programs,
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including Medicare, Medicaid, or the Veterans Affairs program due to alleged kickbacks, the sale of
adulterated or misbranded products, or the provision of false or misleading information to our customers
or other third parties.
Additionally, under the federal Civil Money Penalty Statute, the Department of Health and Human
Services (“HHS”) may impose civil money penalties against entities that make offers to transfer or transfer
remuneration, including gifts, payments or routine waivers of co-payments or deductibles, to any
Medicare beneficiary in order to influence such individual to order or receive any item or service for which
payment may be made, in whole or in part, under Medicare and/or a State health care program.
Violations of these laws and regulations may result in significant criminal and/or civil fines and penalties,
as well as potential exclusion from participation in federal health care programs, that could significantly
impact our business and operations.
We are also subject to other federal and state fraud and abuse laws, including HIPAA’s fraud provisions,
which among other things, are criminal laws that prohibit, among other actions, knowingly and willfully
executing, or attempting to execute, a scheme or artifice to defraud any healthcare benefit program,
including private payors, knowingly and willfully embezzling or stealing from a healthcare benefit program,
willfully preventing, obstructing, misleading, delaying or attempting to delay a criminal investigation of a
healthcare offense and knowingly and willfully falsifying, concealing or covering up a material fact or
making any materially false, fictitious or fraudulent statement or representation in connection with the
delivery of or payment for healthcare benefits, items or services. Many of these state laws closely mirror
the federal Anti-Kickback Statute or civil False Claims Act but apply more broadly to products and
services that are paid for in any way, whereas the federal law pertains only to those reimbursed by federal
health care programs. In addition, many states have also adopted laws prohibiting fee-splitting (the
sharing of professional fees with non-state licensed persons or entities), restricting marketing activities
with physicians and/or prohibiting the practice of medicine (or the direction of the practice of medicine) by
corporations or others that are not specifically licensed to practice medicine within the state. While under
our model, licensed practitioners independently are providing any and all medical treatment and
diagnostic services for which a state license is required, these state laws still may apply to us.
We also are subject to foreign fraud and abuse laws and regulations, which vary by country, and can
prohibit many of the same activities addressed by U.S. laws.
We are also subject to the federal and state transparency reporting laws and regulations, gift bans and
compliance reporting provisions. The Physician Payments Sunshine Act (also known as Open Payments)
requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available
under Medicare, Medicaid or the State Children’s Health Insurance Program to report annually to the
Centers for Medicare and Medicaid Services information related to payments and other transfers of value
provided directly or indirectly to physicians (defined to include doctors, dentists, optometrists, podiatrists
and chiropractors), other healthcare providers (such as physician assistants and nurse practitioners) and
teaching hospitals. Such manufacturers are also required to annually report certain ownership and
investment interests held by such U.S. physicians and their immediate family members. Certain states,
like Massachusetts and Vermont, have similar reporting requirements. Some states, like Vermont, prohibit
gifts and certain benefits from being provided to physicians licensed within that state. Other states, such
as California and Nevada, mandate implementation of compliance programs to ensure compliance with
fraud and abuse laws and regulations, as well as with industry codes of conduct, such as the AdvaMed
Code of Ethics on Interactions with Health Care Professionals. Our business is subject to these many
requirements, which can be nuanced and lacking in clear guidance. Our failure to comply with these laws
or regulations could result in substantial fines or penalties. Further, our reports made pursuant to these
laws may be used by enforcement authorities or whistleblowers to raise or substantiate allegations
against us.
We are also subject to the federal physician self-referral prohibitions, commonly known as the Stark Law,
which prohibits, among other things, physicians who have a financial relationship, including an
investment, ownership or compensation relationship with an entity that submits claims for payment to the
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Medicare or Medicaid programs, from referring Medicare or Medicaid patients for certain “designated
health services,” which include diagnostic imaging services related to our products, unless an exception
applies. Similarly, entities may not bill Medicare or any other party for services furnished pursuant to a
prohibited referral. Many states have their own self-referral laws as well, which in some cases apply to all
payors, not just Medicare and Medicaid.
If our operations are found to be in violation of any of the laws described above or any other
governmental regulations that apply to us now or in the future, we may be subject to significant penalties,
including civil and criminal penalties, damages, fines, disgorgement, exclusion from governmental
healthcare programs and the curtailment or restructuring of our operations, any of which could adversely
affect our ability to operate our business and our financial results.
We also note that there is risk of our being found in violation of these laws by the fact that many of them
have not been fully, clearly or consistently interpreted by the regulatory authorities or the courts, and their
provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if
we successfully defend against it, could cause us to incur significant legal expenses and divert our
management’s attention from the operation of our business. Moreover, to achieve compliance with
applicable federal and state privacy, security and electronic transaction laws, we may be required to
modify our operations with respect to the handling of patient information. Similarly, to achieve compliance
with other applicable federal and state anti-fraud, open payments or other healthcare regulations, we may
be required to modify our operations. Implementing any of these modifications may prove costly. At this
time, we are not able to determine the full consequences to us, including the total cost of compliance, of
these various federal and state laws.
We are subject to U.S. and foreign anti-corruption and anti-money laundering laws with respect to
our operations and non-compliance with such laws can subject us to criminal and/or civil liability
and harm our business.
We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the
U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act of 2010 and Proceeds of Crime Act 2002 and
possibly other state and national anti-bribery and anti-money laundering laws in countries in which we
conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their
employees and third-party intermediaries from authorizing, promising, offering or providing, directly or
indirectly, improper payments or benefits to recipients in the public or private sector. We use third-party
representatives to support sales of our products abroad. In addition, as we increase our international
sales and business, we may engage with additional business partners and third-party intermediaries to
sell our products abroad and to obtain necessary permits, licenses and other regulatory approvals. We or
our third-party intermediaries may have direct or indirect interactions with officials and employees of
government agencies or state owned or affiliated entities. We can be held liable for the corrupt or other
illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners
and agents, even if we do not explicitly authorize or have actual knowledge of such activities.
Noncompliance with anti-corruption and anti-money laundering laws could subject us to whistleblower
complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement
of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension or
debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse
media coverage and other collateral consequences. If any subpoenas or investigations are launched, or
governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal
litigation, our business, results of operations and financial condition could be materially harmed. In
addition, responding to any action will likely result in a materially significant diversion of management’s
attention and resources and significant defense and compliance costs and other professional fees. In
certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor,
which can result in added costs and administrative burdens. As a general matter, enforcement actions
and sanctions could harm our business, financial condition, results of operations and prospects.
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We are subject to governmental export and import controls that could impair our ability to
compete in international markets due to licensing requirements and subject us to liability if we are
not in compliance with applicable laws.
Our products are subject to export control and import laws and regulations, including the U.S. Export
Administration Regulations, U.S. Customs regulations and various economic and trade sanctions
regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. Exports of
our products must be made in compliance with these laws and regulations. If we fail to comply with these
laws and regulations, we and certain of our employees could be subject to substantial civil or criminal
penalties, including: the possible loss of export or import privileges; fines, which may be imposed on us
and responsible employees or managers; and, in extreme cases, the incarceration of responsible
employees or managers. Obtaining the necessary authorizations, including any required license, for a
particular sale may be time consuming, is not guaranteed and may result in the delay or loss of sales
opportunities. In addition, changes in our products or changes in applicable export or import regulations
may create delays in the introduction and sale of our products in international markets, prevent our
customers with international operations from deploying our products or, in some cases, prevent the export
or import of our products to certain countries, governments or persons altogether. Any change in export or
import regulations, shift in the enforcement or scope of existing regulations or change in the countries,
governments, persons or technologies targeted by such regulations, could also result in decreased use of
our products, or in our decreased ability to export or sell our products to existing or potential customers
with international operations. Any decreased use of our products or limitation on our ability to export or
sell our products would likely adversely affect our business.
Furthermore, we incorporate encryption technology into certain of our products. Various countries
regulate the import of certain encryption technology, including through import permitting and licensing
requirements, and have enacted laws that could limit our ability to distribute our products or could limit our
customers’ ability to implement our products in those countries. Encrypted products and the underlying
technology may also be subject to export control restrictions. Governmental regulation of encryption
technology and regulation of imports or exports of encryption products, or our failure to obtain required
import or export approval for our products, when applicable, could harm our international sales and
adversely affect our revenue. Compliance with applicable regulatory requirements regarding the export of
our products, including with respect to new releases of our products, may create delays in the introduction
of our products in international markets, prevent our customers with international operations from
deploying our products throughout their globally distributed systems or, in some cases, prevent the export
of our products to some countries altogether.
Moreover, U.S. export control laws and economic sanctions programs prohibit the shipment of certain
products and services to countries, governments and persons that are subject to U.S. economic
embargoes and trade sanctions. Any violations of such economic embargoes and trade sanction
regulations could have negative consequences, including government investigations, penalties and
reputational harm.
Any future litigation against us could be costly and time-consuming to defend.
We have been in the past, and we may become in the future, subject to legal proceedings and claims that
arise in the ordinary course of business, such as claims brought by our third-party vendors, our customers
or their patients in connection with contractual disputes or the use of our Heartflow Platform, claims
brought by us or by competitors related to intellectual property or employment claims made by our current
or former employees. Litigation might result in substantial costs and may divert management’s attention
and resources, which might seriously harm our business, financial condition, results of operations and
prospects. Insurance might not cover such claims, might not provide sufficient payments to cover all the
costs to resolve one or more such claims, and might not continue to be available at all or on terms
acceptable to us (including premium increases or the imposition of large deductible or co-insurance
requirements). A claim brought against us that is uninsured or underinsured could result in unanticipated
costs, potentially harming our business, financial condition, results of operations and prospects. In
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addition, we cannot be sure that our existing insurance coverage will continue to be available on
acceptable terms or at all or that our insurers will not deny coverage as to any future claim.
Risks Related to our Intellectual Property
If we are unable to obtain and maintain sufficient intellectual property rights, or the scope of our
rights is not sufficiently broad, third parties could develop and commercialize technology and
products similar or identical to ours, and our ability to successfully commercialize our technology
and products may be adversely affected.
Our commercial success will depend, in part, on our ability to continue obtaining and maintaining
intellectual property protection for our technology and products, in both the United States and certain
other countries, successfully defending this intellectual property against third-party challenges and
successfully enforcing this intellectual property to prevent third-party infringement. We rely upon a
combination of patents, trade secrets, know-how, copyrights, trademarks, license agreements and
contractual provisions to establish our intellectual property rights and protect our products.
Our ability to protect our technologies and products from unauthorized or infringing use by third parties
depends in substantial part on our ability to obtain and maintain valid and enforceable patents in both the
United States and certain other countries. The patent positions of medical technology and software
companies can be highly uncertain and involve complex legal, scientific and factual questions for which
important legal principles remain unresolved. In addition, the patent prosecution process is expensive,
time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce, defend or
license all necessary or desirable patents or patent applications at a reasonable cost or in a timely
manner, or in all jurisdictions.
We cannot guarantee that any patents will issue from any pending or future patent applications owned by
or licensed to us, or if issued, the breadth of such patent coverage. In particular, during prosecution of any
patent application, the issuance of any patents based on the application may depend upon our ability to
generate additional preclinical or clinical data that support the patentability of our proposed claims. We
may not be able to generate sufficient additional data on a timely basis, or at all. It is also possible that we
may fail to identify patentable aspects of inventions made in the course of our development and
commercial activities before it is too late to obtain patent protection on such inventions. If we fail to timely
file for patent protection in any jurisdiction, we may be precluded from doing so at a later date.
The issuance of a patent is not conclusive as to its inventorship, ownership, scope, validity or
enforceability, and our owned or licensed patents may be challenged in the courts or the patent offices of
the United States or abroad. Such challenges may result in a loss of exclusivity or in the patent’s claims
being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop
third parties from using or commercializing similar or identical products, or limit the duration of patent
protection for our technology and products. In addition, changes in either the patent laws, implementing
regulations or interpretations of patent laws in the United States or foreign countries may diminish the
value of our patent rights.
Even if unchallenged, our owned or licensed patents may not provide us with exclusivity or commercial
value for our products or any significant protection against competitive products or prevent others from
designing around our claims. Our competitors might conduct research and development activities in
countries where we do not have patent rights (or in those countries where we do, under safe harbor
provisions) and then use the information learned from such activities to develop competitive products for
sale in our major commercial markets. Further, if we encounter delays in regulatory approvals, the period
of time during which we could market our products under patent protection could be reduced. Any of
these outcomes could impair our ability to prevent competition from third parties, which may have an
adverse impact on our business.
Patent applications are generally maintained in confidence until publication. In the United States, for
example, patent applications are maintained in secrecy for up to 18 months after their filing. Similarly,
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publication of discoveries in scientific or patent literature often lag behind actual discoveries.
Consequently, we cannot be certain that we or our licensors were the first to invent, or the first to file
patent applications on our products. There is also no assurance that all of the potentially relevant prior art
relating to our patents and patent applications has been found, which could be used by a third party to
challenge validity of our patents or prevent a patent from issuing from a pending patent application.
In addition to patents, proprietary trade secrets and unpatented know-how are important to our business.
For information about risks related to these intellectual property rights, see the risk factor titled “If we are
unable to protect the disclosure and use of our confidential information and trade secrets, the value of our
products and technologies and our business and competitive position could be harmed” below. We also
rely on the trademarks we own to distinguish our products from the products of our competitors. We
cannot guarantee that any trademark applications filed by us will be approved. Third parties may also
oppose or attempt to cancel our trademark applications or trademarks, or otherwise challenge our use of
the trademarks. In the event that the trademarks we use are successfully challenged, we could be forced
to rebrand our products, which could result in loss of brand recognition, and could require us to devote
resources to advertising and marketing new brands. Competitors or other parties may adopt trade names
or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to
market confusion.
Further, we cannot provide assurance that competitors will not infringe the trademarks we use, or that we
will have adequate resources to enforce these trademarks. If we attempt to enforce our trademarks and
assert trademark infringement claims, a court may determine that the marks we have asserted are invalid
or unenforceable, or that the party against whom we have asserted trademark infringement has superior
rights to the marks in question. In this case, we could ultimately be forced to cease use of such
trademarks. We may license our trademarks and trade names to third parties, such as distributors.
Though these license agreements may provide guidelines for how our trademarks and trade names may
be used, a breach of these agreements or misuse of our trademarks and trade names by our licensees
may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names.
Over the long term, if we are unable to establish name recognition based on our trademarks and trade
names, then we may not be able to compete effectively and our business may be adversely affected.
For information about risks related to our inability to protect our intellectual property rights outside the
United States, see the risk factor titled “We may not be able to adequately protect our intellectual property
rights throughout the world” below.
If we are unable to protect the disclosure and use of our confidential information and trade
secrets, the value of our products and technologies and our business and competitive position
could be harmed.
In addition to patent protection, we also rely on other intellectual property rights, including trade secrets,
know-how, and/or other proprietary information that is not patentable or that we elect not to patent.
However, trade secrets can be difficult to protect, and some courts are less willing or unwilling to protect
trade secrets. Although we have taken steps to protect our trade secrets and unpatented know-how,
including by entering into confidentiality agreements with third parties, and proprietary information and
invention agreements with our employees, consultants and advisors, third parties may still obtain this
information or we may be unable to protect our rights. There can be no assurance that binding
agreements will not be breached, that we would have adequate remedies for any breach, or that our trade
secrets and unpatented know-how will not otherwise become known or be independently discovered by
our competitors. We also seek to preserve the integrity and confidentiality of our data and trade secrets
by maintaining physical security of our premises and physical and electronic security of our information
technology systems. While we have confidence in these individuals, organizations and systems, our
security measures may be breached, and we may not have adequate remedies for any such breach.
If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we
would have no right to prevent them, or those to whom they communicate it, from using that information to
compete with us. Any exposure of our trade secrets and other proprietary information would impair our
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competitive advantages and could have a material adverse effect on our business, financial condition,
results of operations and prospects. In particular, a failure to protect our proprietary rights may allow
competitors to copy our products or technologies, which could adversely affect our pricing and market
share. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our products
or technologies that we consider proprietary.
Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade
secret rights and related confidentiality, non-disclosure and non-use provisions, and outcomes of such
litigation are unpredictable. Enforcing a claim that a party illegally disclosed, used or misappropriated a
trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. While we
use commonly accepted security measures, trade secret claims are often based on a combination of
federal and state law in the United States, and the criteria for protection of trade secrets can vary among
different jurisdictions. If the steps we have taken to maintain our trade secrets are deemed inadequate,
we may have insufficient recourse against third parties for misappropriating the trade secret. In addition,
agreement terms that address non-competition are difficult to enforce in many jurisdictions and might not
be enforceable in certain cases. Even if we were to be successful in the enforcement of our claims, we
may not be able to obtain adequate remedies.
Reliance on third parties requires us to share our trade secrets, which increases the possibility
that a competitor will discover them or that our trade secrets will be misappropriated or disclosed
to others.
Any collaboration or other engagement with third parties for the development of our products may require
us, at times, to share trade secrets with them. We may also conduct joint research and development
programs that may require us to share trade secrets under the terms of our research and development
partnerships or similar agreements. We seek to protect our trade secrets and other proprietary technology
in part by entering into confidentiality agreements with third parties prior to beginning research or
disclosing proprietary information. These agreements typically limit the rights of the third parties to use or
disclose our confidential information, including our trade secrets. Despite the contractual provisions
employed when working with third parties, the need to share trade secrets and other confidential
information increases the risk that such trade secrets become known by our competitors, are
inadvertently incorporated into the technology of others, or are disclosed or used in violation of these
agreements. Given that our proprietary Heartflow Platform is based, in part, on our know-how and trade
secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure could have
an adverse effect on our business, financial condition, results of operations and prospects.
In addition, these agreements typically restrict the ability of our advisors, employees, third-party
contractors and consultants to publish data potentially relating to our trade secrets. Despite our efforts to
protect our trade secrets, we may not be able to prevent the unauthorized disclosure or use of our
technical know-how or other trade secrets by the parties to these agreements. Moreover, we cannot
guarantee that we have entered into such agreements with each party that may have or have had access
to our confidential information or proprietary technology and processes. Monitoring unauthorized uses
and disclosures is difficult, and we do not know whether the steps we have taken to protect our
proprietary technologies will be effective. If any of the collaborators, scientific advisors, employees,
contractors and consultants who are parties to these agreements breaches or violates the terms of any of
these agreements, we may not have adequate remedies for any such breach or violation, and we could
lose our trade secrets as a result. Moreover, if confidential information that is licensed or disclosed to us
by our partners, collaborators, or others is inadvertently disclosed or subject to a breach or violation, we
may be exposed to liability to the owner of that confidential information. Enforcing a claim that a third
party illegally obtained and is using our trade secrets, like patent litigation, is expensive and time
consuming, and the outcome is unpredictable. In addition, courts outside the United States are
sometimes less willing to protect trade secrets, and we may need to share our trade secrets and
proprietary know-how with current or future partners, collaborators, contractors and others located in
countries at heightened risk of theft of trade secrets, including through direct intrusion by private parties or
foreign actors, and those affiliated with or controlled by state actors.
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Obtaining and maintaining our patent protection depends on compliance with various procedural,
document submission, fee payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated for noncompliance with these
requirements.
The U.S. Patent and Trademark Office (“USPTO”) and various foreign governmental patent agencies
require compliance with a number of procedural, documentary, fee payment and other similar provisions
during the patent application process. In addition, periodic maintenance fees, renewal fees, annuity fees,
and various other government fees on patents and/or applications will be due to be paid to the USPTO
and various governmental patent agencies outside of the United States over the lifetime of our patents
and/or applications and any patent rights we may obtain in the future. We have systems in place to
remind us to pay these fees, and we employ outside firms to remind us to pay annuity fees due to patent
agencies on our patents and pending patent applications. In many cases, an inadvertent lapse can be
cured by payment of a late fee or by other means in accordance with the applicable rules. However, there
are situations in which noncompliance can result in abandonment or lapse of the patent or patent
application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an
event, our competitors might be able to enter the relevant market, which would have an adverse effect on
our business. Noncompliance events that could result in abandonment or lapse of a patent or patent
application include failure to respond to official actions within prescribed time limits, non-payment of fees
and failure to properly legalize and submit formal documents.
Changes in patent law, precedents and policies in the United States and other jurisdictions could
diminish the value of patents in general, thereby impairing our ability to protect our products.
Our ability to obtain patents is highly uncertain because, to date, some legal principles remain unresolved,
and there has not been a consistent policy regarding the breadth or interpretation of claims allowed in
patents in the United States. Furthermore, the specific content of patents and patent applications that are
necessary to support and interpret patent claims is highly uncertain due to the complex nature of the
relevant legal, scientific, and factual issues. The United States Supreme Court has ruled on several
patent cases in recent years, either narrowing the scope of patent protection available in certain
circumstances or weakening the rights of patent owners in certain situations. Changes in either the patent
laws or interpretations of patent laws in the United States or other jurisdictions may diminish the value of
our intellectual property. In the United States, in certain circumstances, court rulings may narrow the
scope of patent protection and weaken the rights of patent owners. We cannot predict how decisions by
the courts, the U.S. Congress, the USPTO or changes in the patent laws of other jurisdictions may impact
the value of our patents. Changes in the laws, regulations, precedents and procedures governing patents
could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce
our intellectual property in the future, which could have a material adverse effect on our business,
financial condition, results of operations and prospects.
Further, patent coverage in medical devices and technologies is a subject of evolution and differences
between countries. This is especially true of the definition of patentable subject matter which affects both
computer-related inventions and biological inventions. This evolution may cause current granted patents
to be considered non-patent eligible or prevent us from protecting future inventions. U.S. Supreme Court
and Federal Circuit Court decisions interpreting and/or limiting the scope of patentable subject matter
under 35 U.S.C. § 101, in addition to examination guidelines from the USPTO, have made it more difficult
for patentees to obtain and/or maintain patent claims in the United States that are directed to medical
technologies involving computer-implemented applications. Several precedential decisions regarding
patentable subject matter are of particular relevance to patents in the computer-implemented applications
space. Our efforts to seek patent protection for our technologies and products may be impacted by the
evolving case law and guidance or procedures issued by the USPTO or authorities in other jurisdictions
based on such evolving case law.
Similarly, changes in patent laws and regulations in other countries or jurisdictions, changes in the
governmental bodies that enforce them or changes in how the relevant governmental authority enforces
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patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we may
obtain in the future. For example, the complexity and uncertainty of European patent laws have also
increased in recent years. In Europe, a new unitary patent system took effect June 1, 2023, which
significantly impacts European patents, including those granted before the introduction of the new unitary
patent system. Under the unitary patent system, European applications have the option, upon grant of a
patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court
(“UPC”). As the UPC is a new court system, there is limited precedent for the court, increasing the
uncertainty of any litigation. Patents granted before the implementation of the UPC have the ability to opt
out of the jurisdiction of the UPC and remain as national patents in the UPC countries. The UPC will
provide our competitors with a new forum to centrally revoke European patents and allow for the
possibility of a competitor to obtain pan-European injunctions since patents that remain under the
jurisdiction of the UPC will be potentially vulnerable to a single UPC-based revocation challenge that, if
successful, could invalidate the patent in all countries who are signatories to the UPC. We cannot predict
with certainty the long-term effects of any potential changes.
Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the
same manner as the laws of the United States and Europe. As a result, we may encounter significant
problems in protecting and defending our intellectual property both in the United States and abroad. For
example, if the issuance in a given country of a patent covering an invention is not followed by the
issuance in other countries of patents covering the same invention, or if any judicial interpretation of the
validity, enforceability or scope of the claims or the written description or enablement, in a patent issued in
one country is not similar to the interpretation given to the corresponding patent issued in another country,
our ability to protect our intellectual property in those countries may be limited. Changes in either patent
laws or in interpretations of patent laws in the United States and other countries may materially diminish
the value of our intellectual property or narrow the scope of our patent protection.
In addition, on September 16, 2011, the Leahy-Smith America Invents Act (the “Leahy-Smith Act”) was
signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law.
Assuming that other requirements for patentability are met, prior to March 16, 2013, in the United States,
the first to invent the claimed invention was entitled to the patent, while outside the United States, the first
to file a patent application was entitled to the patent. On or after March 16, 2013, under the Leahy-Smith
Act, the United States transitioned to a first inventor to file system in which, assuming that other
requirements for patentability are met, the first inventor to file a patent application will be entitled to the
patent on an invention regardless of whether a third party was the first to invent the claimed invention.
Under this system, a third party that files a patent application in the USPTO before us could be awarded a
patent covering an invention of ours even if we had made the invention before it was made by such third
party. Since patent applications in the United States and most other countries are confidential for a period
of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either (i)
file any patent application related to our products or (ii) invent any of the inventions claimed in our or our
licensors’ patents or patent applications.
The Leahy-Smith Act also changed the way patent applications are prosecuted, including by allowing
third-party submission of prior art to the USPTO during patent prosecution and additional procedures to
challenge the validity of a patent by USPTO administered post-grant proceedings to attack the validity of
a patent. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary
standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially
provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the
same evidence might not be sufficient to invalidate the claim if presented in a federal court action.
Accordingly, third parties may use USPTO proceedings to invalidate our patent claims that would not have
been invalidated if first challenged in a district court action. Therefore, the Leahy-Smith Act and its
implementation could increase the uncertainties and costs surrounding the prosecution of our patent
applications and the enforcement or defense of our issued patents, which could have a material adverse
effect on our business, financial condition, results of operations and prospects.
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We may not be able to adequately protect our intellectual property rights throughout the world.
Our patent portfolio includes patents and patent applications in countries outside of the United States,
including Japan, Korea, China, Canada, Australia, Israel, India and countries in Europe. The requirements
for patentability differ from country to country, the breadth of allowed patent claims can be inconsistent,
the scope of coverage provided by these patents varies and the laws of some foreign countries may not
protect our intellectual property rights to the same extent as laws in the United States. In addition, filing,
prosecuting and defending patents on our products in all countries throughout the world would be
prohibitively expensive. For those countries where we do not have granted patents, we may not have any
ability to prevent the unauthorized sale of our products.
In addition, we may decide to abandon national and regional patent applications before they are granted.
The examination of each national or regional patent application is an independent proceeding. As a result,
patent applications in the same family may issue as patents in some jurisdictions, such as in the United
States, but may issue as patents with claims of different scope or may even be refused in other
jurisdictions. It is also quite common that depending on the country, the scope of patent protection may
vary for the same product or technology. For example, certain jurisdictions do not allow for patent
protection with respect to methods of treatment.
Consequently, we may not be able to prevent third parties from practicing our inventions in all countries
outside the United States. Competitors may use our technologies in jurisdictions where we have not
obtained patent protection to develop their own products and, further, may export otherwise infringing
products to territories in which we have patent protection that may not be sufficient to terminate infringing
activities. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the
world may be inadequate to obtain a significant commercial advantage from the intellectual property that
we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant
licenses to third parties, government agencies or government contractors. In these countries, the patent
owner may have limited remedies, which could materially diminish the value of such patent. If we or any
of our licensors is forced to grant a license to third parties with respect to any patents relevant to our
business, our competitive position may be impaired, and our business, financial condition, results of
operations and prospects may be adversely affected.
We do not seek or have patent rights in certain foreign countries in which a market may exist. Accordingly,
our efforts to protect our intellectual property rights in such countries may be inadequate, which may have
an adverse effect on our ability to successfully commercialize our products in all of our expected
significant foreign markets. Moreover, in foreign jurisdictions where we do have patent rights, proceedings
to enforce such rights could result in substantial costs and divert our efforts and attention from other
aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, and
could put our patent applications at risk of not issuing. Additionally, such proceedings could provoke third
parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or
other remedies awarded, if any, may not be commercially meaningful. Thus, we may not be able to stop a
competitor from marketing and selling in foreign countries products that are the same as or similar to our
products, and our competitive position in the international market would be harmed.
We may be involved in lawsuits to protect or enforce our patents or other intellectual property, or
the patents of our licensors, which could be expensive, time consuming and unsuccessful.
Competitors or other third parties may infringe, misappropriate or otherwise violate our owned or licensed
patents, trade secrets or other intellectual property. To counter infringement or unauthorized use, we may
be compelled to file infringement or misappropriation claims, which can be expensive and time
consuming. We do not carry intellectual property insurance that would cover such claims. In certain
circumstances it may not be practicable or cost effective for us to enforce our intellectual property rights
fully, particularly in certain developing countries or where the initiation of a claim might harm our business
relationships. If we initiate legal proceedings against a third party to enforce a patent covering our
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products, the defendant could counterclaim that our patent(s) are invalid and/or unenforceable. In patent
litigation in the United States, counterclaims alleging invalidity and/or unenforceability are common, and
there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent.
In an infringement proceeding, a court may decide that a patent we own or license is not valid, is
unenforceable or is not infringed, or may refuse to stop the other party from using the technology at issue
on the grounds that our patents do not cover the technology in question. The outcome following legal
assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for
example, we cannot be certain that there is no invalidating prior art. If a defendant were to prevail on a
legal assertion of invalidity and/or unenforceability, we may lose some, and perhaps all, of the patent
protection covering our products. An adverse result in any litigation or defense proceeding could put one
or more of our patents at risk of being invalidated or interpreted narrowly, could put our patent
applications at risk of not issuing and could have a material adverse impact on our business.
Our defense of litigation may fail and, even if successful, may result in substantial costs and distract our
management and other employees. Even if we establish infringement, the court may decide not to grant
an injunction against further infringing activity and instead award only monetary damages, which may or
may not be an adequate remedy. For example, the amount of any monetary damages may be inadequate
to compensate us for damage as a result of the infringement and the proceedings. We may not be able to
prevent, alone or with our suppliers, misappropriation of intellectual property rights important to our
business, particularly in countries where the laws may not protect those rights as fully as in the United
States.
Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by
disclosure during this type of litigation. There could also be public announcements of the results of
hearings, motions or other interim proceedings or developments. If securities analysts or investors
perceive these results to be negative, it could have an adverse effect on the price of our common stock.
Third-party defendants may challenge any patent we own or in-license through adversarial proceedings in
the issuing offices, which could result in the invalidation or unenforceability of some or all of the relevant
patent claims. If a third party asserts a substantial new question of patentability against any claim of a
U.S. patent we own or license, the USPTO may grant a request for reexamination, which may result in a
loss of scope of some claims or a loss of the entire patent. The adoption of the Leahy-Smith Act has
established additional opportunities for third parties to invalidate U.S. patent claims, including inter partes
review and post grant review, on the basis of lower legal standards than reexamination and additional
grounds. Outside of the United States, patents we own or license may become subject to patent
opposition or similar proceedings, which may result in loss of scope of some claims or loss of the entire
patent. Participation in adversarial proceedings is very complex, expensive and may divert our
management’s attention from our core business and may result in unfavorable outcomes that could
adversely affect our ability to prevent third parties from competing with us.
We may be subject to claims challenging the inventorship or ownership of our patents and other
intellectual property rights or alleging that we have violated the intellectual property rights or
other proprietary rights of third parties.
Our commercial success depends, in part, upon our ability to develop, manufacture, market and sell our
products and use our proprietary technologies without infringing the proprietary rights and intellectual
property of third parties. The medical device industry is characterized by extensive and complex litigation
regarding patents and other intellectual property rights. We may be exposed to, or threatened with, future
litigation by third parties having patent or other intellectual property rights alleging that our products or
proprietary technologies infringe on their intellectual property rights. There is a risk that third parties may
choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us. Even
if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-
party patents are valid, enforceable and infringed, which could have a negative impact on our ability to
commercialize our products. This includes litigation, or threatened litigation, with non-practicing entities
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that have no relevant product revenue and against whom our own patent portfolio may have no deterrent
effect. The legal threshold for initiating litigation or contested proceedings is low, so that even lawsuits or
proceedings with a low probability of success might be initiated and require significant resources to
defend.
We may also be subject to claims that former employees, collaborators or other third parties have an
ownership interest in our patent rights or other intellectual property, for example, based on conflicting
obligations of consultants or others who are involved in developing our products. Although it is our policy
to require our employees and contractors who may be involved in the conception or development of
intellectual property to execute agreements assigning such intellectual property to us, we may be
unsuccessful in executing such an agreement with each party who, in fact, conceives or develops
intellectual property that we regard as our own, and we cannot be certain that our agreements with such
parties will be upheld in the face of a potential challenge, or that they will not be breached, for which we
may not have an adequate remedy. The assignment of intellectual property rights may not be self-
executing or the assignment agreements may be breached, and litigation may be necessary to defend
against these and other claims challenging inventorship or ownership. If we fail in defending any such
claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such
as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a
material adverse effect on our business. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management and other employees.
We employ individuals who were previously employed at other medical technology companies. In
addition, we use publications that are subject to copyright, as well as proprietary information and
materials from third parties in our research. Some of the information and materials we use from third
parties may be subject to agreements that include restrictions on use or disclosure. Although we strive to
ensure proper safeguards, we cannot guarantee strict compliance with such agreements, nor can we be
sure that our employees, consultants and advisors do not use proprietary information, materials or know-
how of others in their work for us. In addition, we may be subject to claims that we or our employees,
consultants or independent contractors have inadvertently or otherwise used or disclosed alleged trade
secrets or other proprietary information of former employers or other third parties. Although we have
procedures in place that seek to prevent our employees and consultants from using the intellectual
property, proprietary information, know how or trade secrets of others in their work for us, we may in the
future be subject to claims that we caused an employee to breach the terms of his or her non-competition
or non-solicitation agreement, or that we or these individuals have, inadvertently or otherwise, used or
disclosed the alleged trade secrets or other proprietary information of a former employer or competitor.
We may also be subject to claims that former employers or other third parties have an ownership interest
in our future patents. In addition, we may be subject to claims that we are infringing other intellectual
property rights, such as trademarks or copyrights, and to the extent that our employees, consultants or
contractors use intellectual property or proprietary information owned by others in their work for us,
disputes may arise as to the rights in related or resulting know-how and inventions. Litigation may be
necessary to defend against these claims. There is no guarantee of success in defending these claims,
and even if we are successful, litigation could result in substantial cost and be a distraction to our
management and other employees.
An unfavorable outcome for any such claim could require us to cease using the related technology or to
attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing
party does not offer us a license on commercially reasonable terms.
If a third party claims that we infringe its intellectual property rights, we may face a number of issues,
including:
•infringement and other intellectual property claims which, regardless of merit, may be expensive and
time consuming to litigate and may divert our management’s attention from our core business;
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•substantial damages for infringement, which we may have to pay if a court decides that the product at
issue infringes or violates the third party’s rights, and if the court finds that the infringement was
willful, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees;
•a court prohibiting us from selling or licensing the product unless the third-party licenses its product
rights to us, which it is not required to do;
•if a license is available from a third party, we may have to pay substantial royalties, upfront fees or
grant cross licenses to intellectual property rights for our products; and
•redesigning our products or processes so they do not infringe, which may not be possible or may
require substantial monetary expenditures and time.
In order to successfully challenge the validity of a U.S. patent in federal court, we would need to
overcome a presumption of validity. As this burden is a high one requiring us to present clear and
convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court
of competent jurisdiction would invalidate the claims of any such U.S. patent. Foreign courts will have
similar burdens to overcome in order to successfully challenge a third-party claim of patent infringement.
Some of our competitors may be able to sustain the costs of complex patent litigation more effectively
than we can because they have substantially greater resources. In addition, any uncertainties resulting
from the initiation and continuation of any litigation could have an adverse effect on our ability to raise
additional funds or on our business, financial condition, results of operations and prospects.
The terms of our patents may not be sufficiently long to effectively protect our products and
business.
Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20
years after its first effective non-provisional filing date, but can be shorter due to terminal disclaimers or
similar term reductions in other jurisdictions. Although various extensions may be available, the term of a
patent, and the protection it affords, is limited. Even if patents covering our technologies or products are
obtained, once the patent term has expired, we may be open to competition. In addition, although upon
issuance in the United States, a patent’s term can be increased based on certain delays caused by the
USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent
applicant during patent prosecution. Given the amount of time required for the development, testing and
regulatory review of products, patents protecting such potential products might expire before or shortly
after such products are commercialized. If we do not have sufficient patent life to protect our technologies
and products, our business, financial condition, results of operations and prospects will be adversely
affected.
If we do not obtain additional protection under the Hatch-Waxman Amendments or similar foreign
legislation, our business may be materially affected.
Depending upon the timing, duration and specifics of FDA marketing approval for our future products, one
or more of our U.S. patents may be eligible for limited patent term restoration under the Drug Price
Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Amendments”). The Hatch-
Waxman Amendments permit a patent term extension of up to five years beyond the normal expiration of
the patent as compensation for patent term lost during product development and the FDA regulatory
review process, which is limited to the approved indication (or any additional indications approved during
the period of extension). This extension is limited to one patent that covers the approved product, the
approved use of the product, or a method of manufacturing the product. A patent term extension cannot
extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and
only those claims covering such approved product, a method for using it or a method for manufacturing it
may be extended. However, the applicable authorities, including the FDA and the USPTO in the United
States, and any equivalent regulatory authority in other countries or areas, may not agree with our
assessment of whether such extensions are available and may refuse to grant extensions to our patents,
or may grant more limited extensions than we request. We may not be granted an extension because of,
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for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant
patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or
scope of patent protection afforded could be less than we request. If we are unable to obtain patent term
extension or restoration of the term of any such extension is less than we request, our competitors may
obtain approval for competing products following our patent expiration, and our ability to generate
revenues may be adversely affected.
Open-source software licenses often impose unanticipated or unclear restrictions on us or could
expose us to litigation, and using open-source software has inherent risks, any of which could
impair our ability to successfully commercialize the Heartflow Platform.
Our technology platform implements software modules licensed to us by third parties under “open source”
licenses. The terms of many open source licenses have not been interpreted by U.S. courts, and there is
a risk that these licenses could be construed in ways that could impose unanticipated conditions or
restrictions on our ability to commercialize our products. Moreover, we cannot be certain that our
processes for controlling our use of open-source software in connection with our products will be
effective. From time to time, we may face claims from third parties asserting ownership of, or demanding
release of, the open-source software or derivative works that we developed using such software (which
could include our proprietary source code), or otherwise seeking to enforce the terms of the applicable
open source license. These claims could result in litigation. If we are held to have breached the terms of
an open source software license, we could be required to seek licenses from third parties to continue
offering our products on terms that are not economically feasible, to re-engineer our proprietary code, to
discontinue the sale of our products if re-engineering could not be accomplished on a timely or cost
effective basis, or to make generally available, in source code form, our proprietary code, any of which
could adversely affect our business, financial condition, results of operations and prospects.
The use of open-source software may entail greater risks than the use of third-party commercial software,
as open source licensors generally do not provide warranties or other contractual protections regarding
infringement or the quality or ownership of the code. Many of these risks cannot be eliminated, and could,
if not properly addressed, negatively affect our business. We cannot be sure that all open source software
is submitted for approval prior to use in connection with our products.
In addition, some open-source licenses contain requirements that we make available source code for
modifications or derivative works we create based upon the type of open-source software we use. If we
combine our proprietary software with open-source software in a certain manner, we could, under certain
open-source licenses, be required to release portions of the source code of our proprietary software to the
public. This would allow our competitors to create similar products with less development effort and time
and ultimately could result in a loss of sales for us.
Intellectual property rights do not necessarily address all potential threats to our competitive
advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because
intellectual property rights have limitations and may not adequately protect our business or permit us to
maintain our competitive advantage. The following examples are illustrative:
•others may be able to make products that are similar to or otherwise competitive with our potential
products but that are not covered by the claims of our current or future patents;
•an in-license necessary for the manufacture, use, sale, offer for sale or importation of one or more of
our potential products may be terminated by the licensor;
•we or future collaborators might not have been the first to make the inventions covered by our issued
or future issued patents or our pending patent applications;
•we or future collaborators might not have been the first to file patent applications covering certain of
our inventions;
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•others may independently develop similar or alternative technologies or duplicate any of our
technologies without infringing our intellectual property rights;
•it is possible that our pending patent applications will not lead to issued patents;
•issued patents that we own or in-license may be held invalid or unenforceable as a result of legal
challenges by our competitors;
•issued patents that we own or in-license may not provide coverage for all aspects of our new potential
products in all countries;
•our competitors might conduct research and development activities in countries where we do not
have patent rights and then use the information learned from such activities to develop competitive
products for sale in our major commercial markets;
•we may not develop additional proprietary technologies that are patentable; and
•the patents of others may have an adverse effect on our business.
Should any of these events occur, they could significantly harm our business, results of operations and
prospects.
Risks Related to Financing and Tax Matters
We may require additional capital to support business growth, and this capital might not be
available on terms favorable to us, or at all, and may dilute ownership of our common stock for
our stockholders, including purchasers of common stock.
We intend to continue to make investments to support our business growth and may require additional
funds to respond to business challenges and opportunities, including the need to develop new products,
enhance our existing products, enhance our operating infrastructure, potentially expand internationally
and potentially acquire complementary businesses and technologies. In order to achieve these objectives,
we may make future commitments of capital resources. Accordingly, we may need to engage in equity or
debt financings to secure additional funds. If we raise additional funds through further issuances of equity
or convertible debt securities, our stockholders, including any purchasers of common stock, could suffer
significant dilution, and any new equity securities we issue could have rights, preferences and privileges
superior to those of holders of our common stock. Further, if additional financing is needed, we may not
be able to obtain additional financing on terms favorable to us or at all. Our inability to obtain adequate
financing or financing on terms satisfactory to us, when we require it, could significantly limit our ability to
continue supporting our business growth and responding to business challenges and opportunities.
Our operating results may fluctuate significantly, which makes our future operating results
difficult to predict and could cause our operating results to fall below expectations or any
guidance we may provide.
Our quarterly revenue and results of operations may fluctuate from quarter to quarter due to, among
others, the following reasons:
•the level of physicians’ acceptance and adoption of our products, and changes in the rates at which
physicians order our Heartflow FFRCT Analysis or the percentage of CCTA scans for which our
Heartflow FFRCT Analysis is ordered;
•determinations, including the timing of determinations, by payors concerning coverage and
reimbursement of our products;
•changes in coverage amounts or government and payors’ reimbursement policies;
•the timing, expense and results of research and development activities, clinical trials and any
additional regulatory approvals;
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•changes in AHA or ACC guidelines, or guidelines in other countries, that lower support for our
products or elevate alternative products as the preferred pathway for diagnosis and management of
CAD;
•fluctuations in our expenses associated with expanding our commercial operations and operating as
a public company;
•patients meeting their annual health insurance deductible later in the calendar year;
•the introduction of new products and technologies by our competitors;
•changes in our pricing policies or in the pricing policies of our competitors;
•the productivity of our sales and marketing teams, and their ability to identify physicians who
consistently refer appropriate patients for CCTAs in accordance with AHA and ACC guidelines;
•quality problems with our products or the Heartflow Platform; and
•the impact of catastrophic events such as a pandemic.
Because of these and other factors, it is likely that in some future period our operating results will not
meet investor expectations or those of public market analysts. Any unanticipated change in revenue or
operating results is likely to cause our stock price to fluctuate. New information may cause investors and
analysts to revalue our business, which could cause a decline in our stock price.
We are subject to risks associated with currency fluctuations, and changes in foreign currency
exchange rates could impact our results of operations.
The vast majority of our revenue and the majority of our expense and capital purchasing activities through
the six months ended June 30, 2025 were transacted in U.S. dollars. Approximately 8% and 9% of our
revenue for the three months ended June 30, 2025 and 2024, respectively, and approximately 8% and
9% of our revenue for the six months ended June 30, 2025 and 2024, respectively, was generated from
customers outside the United States. Because a portion of our operations consists of business activities
outside of the United States, we have foreign currency operating expenses as well as asset and liability
balances. During the six months ended June 30, 2025, we were exposed to foreign currency risks in
connection with our non-U.S. operations, and we anticipate that, over time, an increasing portion of our
international agreements may provide for payment denominated in foreign currencies. Changes in the
exchange rates between such foreign currencies and the U.S. dollar could therefore materially impact our
reported results of operations and distort period-to-period comparisons. Fluctuations in foreign currency
exchange rates also impact the reporting of our receivables and payables in non-U.S. currencies. As a
result of such foreign currency fluctuations, it could be more difficult to detect underlying trends in our
business and results of operations. In addition, to the extent that fluctuations in currency exchange rates
cause our results of operations to differ from our expectations or the expectations of our investors, the
trading price of our common stock could be adversely affected.
We do not currently engage in currency hedging activities to limit the risk of exchange rate fluctuations. In
the future, we may engage in exchange rate hedging activities in an effort to mitigate the impact of
exchange rate fluctuations but we may not be successful in doing so. If our hedging activities are not
effective, changes in currency exchange rates may have a more significant impact on our results of
operations.
Our ability to use our net operating losses and tax credits to offset future taxable income and
taxes may be subject to certain limitations.
As of December 31, 2024, we had net operating loss (“NOL”) carryforwards of approximately $542.9
million and $435.5 million for federal and state income tax purposes, respectively, which may be utilized
against future federal and state income taxes. Federal NOL carryforwards we generated in tax years
through December 31, 2017 generally may be carried forward for 20 years and may fully offset taxable
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income in the year utilized, and federal NOLs we generated in tax years beginning after December 31,
2017 generally may be carried forward indefinitely but may only be used to offset 80% of our taxable
income annually for tax years beginning after December 31, 2017.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a
corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-
change NOLs, carryforwards and other tax attributes, such as research and development tax credits, to
offset future taxable income and taxes. In general, an ownership change occurs if the aggregate stock
ownership of certain stockholders, generally stockholders beneficially owning five percent or more of our
common stock, applying certain look through and aggregation rules, increases by more than 50% over
such stockholders’ lowest percentage ownership during the testing period, generally three years.
Purchases of our common stock in amounts greater than specified levels, which will be beyond our
control, could create a limitation on our ability to utilize our NOLs for tax purposes in the future. We
completed a Section 382 study of our historic ownership changes through December 31, 2024 and no
significant limitations were identified. In addition, future issuances or sales of our stock, including certain
transactions involving our stock that are outside of our control, could result in future “ownership changes.”
“Ownership changes” that have occurred in the past or that may occur in the future could result in the
imposition of an annual limit on the amount of pre-ownership change NOLs and other tax attributes we
can use to reduce our taxable income, potentially increasing and accelerating our liability for income
taxes, and also potentially causing those tax attributes to expire unused.
If we are limited in our ability to use our NOLs and tax credits in future years in which we have taxable
income, we will pay more taxes than if we were able to fully utilize our NOLs and tax credits, and we could
be required to pay taxes earlier than we would otherwise be required, which could cause such NOLs to
expire unused. This could adversely affect our results of operations. Furthermore, we may not be able to
generate sufficient taxable income to utilize our pre-2018 NOLs before they expire beginning in 2030. If
any of these events occur, we may not derive some or all of the expected benefits from our NOLs, and
our business, financial condition, results of operations and prospects may be adversely affected as a
result.
Our international operations subject us to potentially adverse tax consequences.
We currently report our taxable income in various jurisdictions based upon our business operations in
those jurisdictions, including in the United States, United Kingdom, and Japan. We may in the future be
subject to reporting requirements in other foreign jurisdictions. The international nature and organization
of our business activities are subject to complex transfer pricing regulations administered by taxing
authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations
as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur,
and our position were not sustained, we could be required to pay additional taxes, interest and penalties,
which could result in one time tax charges, higher effective tax rates, reduced cash flows and lower
overall profitability of our operations. We believe that our consolidated financial statements reflect
adequate reserves to cover such a contingency, but there can be no assurances in that regard.
Our effective tax rate may vary significantly from period to period.
Various internal and external factors may have favorable or unfavorable effects on our future effective tax
rate. These factors include, but are not limited to, changes in tax laws, regulations or rates, both within
and outside the United States, structural changes in our business, new accounting pronouncements or
changes to existing accounting pronouncements, non-deductible goodwill impairments, changing
interpretations of existing tax laws or regulations, changes in the relative proportions of revenue and
income before taxes in the various jurisdictions in which we operate that have different statutory tax rates,
the future levels of tax benefits of equity-based compensation, changes in overall levels of pretax
earnings or changes in the valuation of our deferred tax assets and liabilities. Additionally, we could be
challenged by state and local tax authorities as to the propriety of our sales tax compliance, and our
results could be materially impacted by these compliance determinations.
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In addition, our effective tax rate may vary significantly depending on the market price of our common
stock. The tax effects of the accounting for share-based compensation may significantly impact our
effective tax rate from period to period. In periods in which the market price of our common stock is higher
than the grant price of the share-based compensation vesting in that period, we will recognize excess tax
benefits that will decrease our effective tax rate. In future periods in which our stock price is lower than
the grant price of the share-based compensation vesting in that period, our effective tax rate may
increase. The amount and value of share-based compensation issued relative to our earnings in a
particular period will also affect the magnitude of the impact of share-based compensation on our effective
tax rate. These tax effects are dependent on the market price of our common stock, which we do not
control, and a decline in our stock price could significantly increase our effective tax rate and adversely
affect our financial condition.
Taxing authorities may successfully assert that we should have collected or in the future should
collect sales and use, value added or similar taxes, and we could be subject to tax liabilities with
respect to past or future sales, which could adversely affect our results of operations.
We do not collect sales and use, value added and similar taxes in all jurisdictions in which we have sales,
based on our belief that such taxes are not applicable or that we are not required to collect such taxes
with respect to the jurisdiction. Sales and use, value added and similar tax laws and rates vary greatly by
jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are
applicable, which could result in tax assessments, penalties and interest, and we may be required to
collect such taxes in the future. Such tax assessments, penalties and interest or future requirements may
adversely affect our results of operations.
Risks related to our common stock
There may not be a sustainable trading market for our common stock.
Prior to our IPO, there was no public market for our common stock. It is possible that after our IPO, an
active trading market will not develop or, if developed, that any market will not be sustained, which would
make it difficult for you to sell your shares of common stock at an attractive price or at all. An inactive
market may also impair our ability to raise capital, to attract and motivate our employees through equity
incentive awards and our ability to acquire businesses, brands, assets or technologies by using shares of
our common stock as consideration.
The market price of our common stock may be volatile, which could cause substantial losses for
investors.
The market price of our common stock may be highly volatile and could be subject to wide fluctuations,
some of which may be beyond our control, including:
•Changes in analysts’ estimates, investors’ perceptions, recommendations by securities analysts or
our failure to achieve analysts’ estimates;
•Quarterly variations in our or our competitors results of operations;
•Periodic fluctuations in our revenue, which could be due in part to the way in which we recognize
revenue;
•The financial projections we may provide to the public, any changes in these projections or our failure
to meet these projections;
•Future sales of our common stock or other securities, by us or our stockholders, as well as the
expiration of lock-up agreements;
•The trading volume of our common stock;
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•General market conditions and other factors unrelated to our operating performance or the operating
performance of our competitors;
•Changes in reimbursement by current or potential payors;
•Changes in operating performance and stock market valuations of other technology companies
generally, or those in the medical device industry in particular;
•Actual or anticipated changes in regulatory oversight of our products;
•The results of our clinical trials;
•The loss of key personnel, including changes in our board of directors and management;
•Legislation or regulation of our market;
•Lawsuits threatened or filed against us, including litigation by current or former employees alleging
wrongful termination, whistleblower or other claims;
•The announcement of new products or product enhancements by us or our competitors;
•Announced or completed acquisitions of businesses or technologies by us or our competitors;
•Developments in our industry; and
•Other factors described in this “Risk Factors” section and elsewhere in this Quarterly Report on Form
10-Q.
In recent years, the stock markets generally have experienced extreme price and volume fluctuations that
have often been unrelated or disproportionate to the operating performance of listed companies. Broad
market and industry factors may significantly affect the market price of our common stock, regardless of
our actual operating performance.
In addition, in the past, stockholders have instituted securities class action litigation following periods of
market volatility. If we were to become involved in securities, it could subject us to substantial costs, divert
resources and the attention of management from our business and harm our business, results of
operations, financial condition and reputation. These factors may materially and adversely affect the
market price of our common stock.
We are an emerging growth company, and the reduced reporting requirements applicable to
emerging growth companies could make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act. We will remain an “emerging growth
company” until the earliest to occur of:
•the last day of the fiscal year during which our total annual revenue equals or exceeds $1.235 billion
(subject to adjustment for inflation);
•the last day of the fiscal year following the fifth anniversary of our IPO;
•the date on which we have, during the previous three-year period, issued more than $1 billion in non-
convertible debt; or
•the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.
As a result of our “emerging growth company” status, we may take advantage of exemptions from various
reporting requirements that would otherwise be applicable to public companies including, but not limited
to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy
statements and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
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Investors may find our common stock less attractive because we may rely on these exemptions. If some
investors find our common stock less attractive as a result, there may be a less active trading market for
our common stock and the market price of our common stock may be adversely affected and more
volatile.
We will incur increased costs and become subject to additional regulations and requirements as a
result of becoming a public company, which could lower our profits or make it more difficult to
run our business.
As a public company, we incur significant legal, accounting and other expenses that we have not incurred
as a private company, including costs associated with public company reporting requirements. We have
also incurred and will continue to incur costs associated with the Sarbanes-Oxley Act and related rules
implemented by the SEC and the listing requirements of the Nasdaq Global Select Market. The expenses
generally incurred by public companies for reporting and corporate governance purposes have been
increasing. We expect these rules and regulations to increase our legal and financial compliance costs
and to make some activities more time-consuming and costly, although we are currently unable to
estimate these costs with any degree of certainty. These laws and regulations also could make it more
difficult or costly for us to obtain certain types of insurance, including director and officer liability
insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. These laws and regulations could also make it more
difficult for us to attract and retain qualified persons to serve on our board of directors, on our board
committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a
public company, we could be subject to delisting of our common stock, fines, sanctions, other regulatory
action and potentially civil litigation.
If we are unable to design, implement and maintain effective internal control over financial
reporting in the future, investors may lose confidence in the accuracy and completeness of our
financial reports and the market price of our common stock may decline.
As a public company, we will be required to maintain internal control over financial reporting and to report
any material weaknesses in such internal controls. In addition, beginning with our second annual report
on Form 10-K, we will be required to furnish a report by management on the effectiveness of our internal
control over financial reporting, pursuant to the rules and regulations of the SEC regarding compliance
with Section 404 of the Sarbanes-Oxley Act. The process of designing, implementing and testing the
internal control over financial reporting required to comply with this obligation is time consuming, costly
and complicated. We have in the past and may in the future identify control deficiencies, including
material weaknesses in our internal control over financial reporting. In connection with the preparation of
our consolidated financial statements, material weaknesses in our internal control over financial reporting
were identified as of and prior to December 31, 2023, which were remediated in connection with the
preparation of our consolidated financial statements as of and for the year ended December 31, 2024.
Any failure to maintain effective internal control over financial reporting could severely inhibit our ability to
accurately report our financial condition, results of operations or cash flows. Further, if we identify one or
more material weaknesses in our internal control over financial reporting, if we are unable to comply with
the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or if we and, if required,
our auditors, are unable to assert that our internal control over financial reporting is effective, investors
may lose confidence in the accuracy and completeness of our financial reports and the market price of
our common stock could decline, and we could also become subject to investigations by the stock
exchange on which our common stock is listed, the SEC or other regulatory authorities, which could
require additional financial and management resources. Failure to remedy any material weakness in our
internal control over financial reporting, or to implement or maintain other effective control systems
required of public companies, could also restrict our future access to the capital markets.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We are subject to the periodic reporting requirements of the Exchange Act. Our disclosure controls and
procedures are designed to reasonably ensure that information required to be disclosed by us in reports
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we file or submit under the Exchange Act is accumulated and communicated to management and
recorded, processed, summarized and reported within the time periods specified in the rules and forms of
the SEC. We believe that our disclosure controls and procedures as well as internal control over financial
reporting, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are and will be met. These inherent limitations include
the realities that judgments in decision making can be faulty and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons,
by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of
the inherent limitations in our control system, misstatements due to error or fraud may occur and not be
detected.
If our estimates or judgments relating to our critical accounting policies are based on
assumptions that change or prove to be incorrect, our operating results could fall below our
publicly announced guidance or the expectations of securities analysts and investors, resulting in
a decline in the market price of our common stock.
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates
on historical experience and various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions and any such differences may be material. If our
assumptions change or if actual circumstances differ from our assumptions, our operating results may be
adversely affected and could fall below our publicly announced guidance or the expectations of analysts
and investors, resulting in a decline in the market price of our common stock.
Our principal stockholders and management own a significant percentage of our stock and will be
able to exert significant control over matters subject to stockholder approval.
As of August 31, 2025, our executive officers, directors, owners of more than 5% of our capital stock and
their respective affiliates beneficially owned approximately 41.8% of our outstanding shares. Therefore,
these stockholders will have the ability to influence us through this ownership position. These
stockholders may be able to determine all matters requiring stockholder approval. For example, these
stockholders may be able to control elections of directors, amendments of our organizational documents,
or approval of any merger, sale of assets or other major corporate transaction. This may prevent or
discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your
best interest as one of our stockholders.
Sales of a substantial portion of our total outstanding shares is restricted from immediate resale
but may be sold into the market in the near future, and any sales of a substantial number of
shares of our common stock could cause our stock price to decline significantly.
As of August 31, 2025, we had outstanding a total of 83,396,102 shares of common stock. Of these
shares, all of the shares of our common stock sold in our IPO, were freely tradable, without restriction, in
the public market immediately following our IPO, other than shares purchased by our “affiliates” (as such
term is defined in Rule 144 under the Securities Act).
We and each of our directors, our executive officers and substantially all of our other securityholders have
entered into lock-up agreements with the underwriters prior to the completion of our IPO or are subject to
market standoff arrangements for a period of 180 days commencing on the date of our IPO. After the
expiration of the lock-up agreements and market standoff arrangements, as of August 31, 2025, up to
approximately 64.2 million additional shares of common stock will be eligible for sale in the public market,
approximately 48.9% of which shares are owned by directors, executive officers and other owners of
more than 5% of our outstanding common stock, stock options, warrants and securities convertible into
our common stock and will be subject to Rule 144 under the Securities Act. If our existing stockholders
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sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after
the lock-up agreements, market standoff and other legal restrictions on resale in place at the time of the
IPO lapse, the trading price of our common stock could decline and such decline may be significant.
Based upon the number of shares outstanding as of August 31, 2025, the holders of approximately 55.8
million shares of our common stock, or approximately 67% of our total outstanding common stock, will be
entitled to rights with respect to the registration of their shares under the Securities Act, subject to the
lock-up agreements and market standoff restrictions described above. Registration of these shares under
the Securities Act would result in the shares becoming freely tradable without restriction under the
Securities Act, except for shares purchased by affiliates. Any sales of securities by these stockholders or
any perception that these shares may be sold could reduce the market price of our common stock, which
price decline may be significant. In addition, a security holder who is not subject to market standoff
restrictions with us nor a lock-up agreement with the underwriters may be able to sell, short sell, transfer,
pledge or otherwise dispose of their equity interests at any time.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the
State of Delaware (or, if such court does not have jurisdiction, Delaware federal district court) is
the exclusive forum for certain disputes between us and our stockholders, which could limit our
stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors,
officers or employees.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the
selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that the
Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) is the
exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a
claim of breach of fiduciary duty owed by any of our current or former directors, officers, employees or
stockholders to us or to our stockholders, any action asserting a claim against us arising pursuant to the
Delaware General Corporation Law, our amended and restated certificate of incorporation, or our
amended and restated bylaws (as either may be amended from time to time) or as to which the Delaware
General Corporation Law confers jurisdiction on the Delaware Court of Chancery, or any action asserting
a claim against us that is governed by the internal affairs doctrine of the State of Delaware. Our amended
and restated certificate of incorporation also provides that the federal district courts of the United States
will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under
the Securities Act. Further, our amended and restated certificate of incorporation provides that the
foregoing choice of forum provisions do not apply to suits brought to enforce any liability or duty created
by the Exchange Act, or any other claim for which the federal courts of the United States have exclusive
jurisdiction.
Our amended and restated certificate of incorporation also provides that any person or entity purchasing
or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of
and consented to the foregoing provisions of the amended and restated certificate of incorporation.
Although our amended and restated certificate of incorporation contains the choice of forum provision
described above, it is possible that a court could find that such a provision is inapplicable for a particular
claim or action or that such provision is unenforceable.
We believe these provisions may benefit us by providing increased consistency in the application of
Delaware law and federal securities laws by chancellors and judges, as applicable, particularly
experienced in resolving corporate disputes, efficient administration of cases on a more expedited
schedule relative to other forums, and protection against the burdens of multi-forum litigation. However,
this choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it
finds favorable for disputes with us or any of our directors, officers, other employees or stockholders,
which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed
to have waived our compliance with federal securities laws and the rules and regulations thereunder.
Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of
incorporation has been challenged in legal proceedings, and it is possible that a court could find these
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types of provisions to be inapplicable or unenforceable. While Delaware courts have determined that such
choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a
venue other than those designated in the exclusive forum provisions, and there can be no assurance that
such provisions will be enforced by a court in those other jurisdictions. If a court were to find the choice of
forum provision that will be contained in our amended and restated certificate of incorporation to be
inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such
action in other jurisdictions, which could adversely affect our business, financial condition, results of
operations and prospects.
General Risk Factors
We have broad discretion in the use of net proceeds to us from our IPO and may not use them
effectively.
In connection with the completion of our IPO, we were obligated to use certain of the net proceeds from
our IPO to repay $55.0 million of the indebtedness outstanding under the 2024 Credit Agreement and to
pay approximately $5.8 million of fees in connection therewith. In addition, in August 2025, we prepaid in
full all remaining outstanding indebtedness, comprising an aggregate principal amount of $60.1 million
plus accrued interest of $1.0 million, under the 2024 Credit Agreement. We expect to use the remainder
to fund our sales and marketing efforts, fund research and product development activities and for other
general corporate purposes, including working capital, operating expenses, and capital expenditures. We
may also use a portion of the net proceeds from our IPO to acquire complementary businesses, products,
services, or technologies. See the section titled “Use of proceeds” for additional information.
We periodically evaluate strategic opportunities; however, we have no current understandings or
commitments to enter into any such acquisitions or make any such investments. The expected use of our
IPO net proceeds represents our intentions based upon our present plans and business conditions. We
cannot predict with certainty all of the particular uses for the proceeds from our IPO or the amounts that
we will actually spend on the uses set forth above. The timing and amount of our actual expenditures will
be based on many factors, including cash flows from operations and the anticipated growth of our
business.
If we do not use the net proceeds that we receive from our IPO effectively, our business, financial
condition, results of operations and prospects could be harmed, and the market price of our common
stock could decline. Pending their use, we intend to invest the IPO net proceeds in a variety of capital-
preservation investments, including government securities and money market funds. These investments
may not yield a favorable return to our investors.
We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a
return on your investment will depend on appreciation in the market price of our common stock.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all
available funds and any future earnings, if any, to fund the development and expansion of our business,
and we do not anticipate paying any cash dividends in the foreseeable future. Any future determinations
regarding the declaration and payment of dividends, if any, will be at the discretion of our board of
directors, subject to applicable law, and will depend upon then-existing conditions, including our financial
condition, results of operations, contractual restrictions, general business conditions, capital
requirements, and other factors our board of directors may deem relevant. Our ability to pay cash
dividends on our capital stock in the future may also be limited by the terms of any preferred securities we
may issue or agreements governing any additional indebtedness we may incur.
If our operating and financial performance in any given period does not meet any guidance that
we provide to the public, the market price of our common stock may decline.
We may, but are not obligated to, provide public guidance on our expected operating and financial results
for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks
and uncertainties described in this Quarterly Report on Form 10-Q, including in the section titled “Risk
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Factors” and in our future public filings and public statements. Our actual results may not always be in line
with or exceed any guidance we have provided, especially in times of economic uncertainty. If actual
circumstances differ from those in our assumptions, our operating and financial results could fall below
our publicly announced guidance or the expectations of investors. If, in the future, our operating or
financial results for a particular period do not meet any guidance we provide or the expectations of
investment analysts or investors generally, or if we reduce our guidance for future periods, the market
price of our common stock may decline. Even if we do issue public guidance, there can be no assurance
that we will continue to do so in the future.
If securities or industry analysts do not publish research or reports about our business, or if they
issue an adverse or misleading opinion regarding our stock, our stock price and trading volume
could decline.
The trading market for our common stock will be influenced by the research and reports that industry or
securities analysts publish about us or our business. We do not currently have and may never obtain
research coverage by securities and industry analysts. If no or few securities or industry analysts
commence coverage of us, the market price for our stock would be negatively impacted. In the event we
obtain securities or industry analyst coverage, if any of the analysts who cover us downgrade their
evaluations of our stock or issue an adverse opinion regarding us, our business model, our intellectual
property or our stock performance, or if our results of operations fail to meet the expectations of analysts,
our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to
publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline.
We may be subject to securities litigation, which is expensive and could divert management
attention.
In the past, following periods of volatility in the overall market and the market price of a company’s
securities, securities class action litigation has often been instituted against these companies. Because of
the potential volatility of our stock price, we may become the target of securities litigation in the future.
These events may also result in or be concurrent with investigations by the SEC. We may be exposed to
such litigation or investigation even if no wrongdoing occurred. Such litigation, if instituted against us,
could result in substantial costs and a diversion of our management’s attention and resources, which
could seriously harm our business.
Provisions in our charter documents and under Delaware law could discourage a takeover that
stockholders may consider favorable and may lead to entrenchment of management.
Our amended and restated certificate of incorporation and our amended and restated bylaws contain
provisions that could delay or prevent changes in control or changes in our management without the
consent of our board of directors. These provisions include the following:
•a classified board of directors with three-year staggered terms, which may delay the ability of
stockholders to change the membership of a majority of our board of directors;
•our directors may be removed by our stockholders only for cause;
•no cumulative voting in the election of directors, which limits the ability of minority stockholders to
elect director candidates;
•the exclusive right of our board of directors to change the size of the board of directors and to elect a
director to fill a new directorship created by the expansion of the board of directors or a vacancy
created by the resignation, death or removal of a director, which prevents stockholders from being
able to change the board’s size or fill new directorships and vacancies on our board of directors;
•the ability of our board of directors to authorize the issuance of shares of preferred stock and to
determine the price and other terms of those shares, including preferences and voting rights, without
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stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror or
adopt a stockholder rights plan;
•the ability of our board of directors to alter our amended and restated bylaws without obtaining
stockholder approval;
•the required approval of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all
then-outstanding shares of capital stock entitled to vote generally in the election of directors to
remove directors or to adopt, amend, alter or repeal our amended and restated bylaws and certain
provisions of our amended and restated certificate of incorporation;
•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at
an annual or special meeting of our stockholders;
•the requirement that a special meeting of stockholders may be called only by our secretary at the
request of our board of directors, the chairman of our board of directors, or our chief executive officer,
which may delay the ability of our stockholders to force consideration of a proposal or to take action,
including the removal of directors; and
•advance notice procedures that stockholders must comply with in order to nominate candidates to our
board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may
discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s
own slate of directors or otherwise attempting to obtain control of us.
We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General
Corporation Law (“Section 203”). Under Section 203, a corporation may not, in general, engage in a
business combination (as defined in Section 203) with any interested stockholder (generally defined by
Section 203 to include holders of 15% or more of our capital stock) unless the interested stockholder has
held the stock for three years or, among other exceptions and exclusions, the board of directors has
approved the business combination transaction or the transaction that resulted in the stockholder
becoming an interested stockholder.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sale of Equity Securities
None.
Use of Proceeds
On August 11, 2025, we completed our initial public offering, in which we issued and sold 19,166,667
shares of our common stock, which includes an additional 2,500,000 shares of common stock purchased
by the underwriters pursuant to their option to purchase additional shares, at a price to the public of
$19.00 per share. The proceeds to the Company from the IPO were approximately $332.8 million, net of
underwriting discounts and commissions and estimated offering costs of $31.4 million.
The net proceeds from our initial public offering have been used and will be used, together with our
existing cash and cash equivalents: (i) to repay $55.0 million of our indebtedness outstanding under the
2024 Credit Agreement obligated in connection with the completion of our IPO and approximately
$5.8 million of fees in connection therewith; (ii) to repay our remaining outstanding indebtedness under
the 2024 Credit Agreement; (iii) to fund sales and marketing efforts; (iv) to fund research and product
development activities; and (v) for other general corporate purposes, including working capital, operating
expenses, and capital expenditures.
There has been no material change in the intended use of proceeds from our IPO as described in our
Registration Statement on Form S-1 (File No. 333-288733), which became effective on August 7, 2025.
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Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Insider Trading Arrangements
During the quarter ended June 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f)
under the Securities Exchange Act of 1934, as amended) adopted terminated
(c) trading arrangement” or a “non-Rule 10b5-1 trading arrangement”, as each term is defined in Item
408(a) of Regulation S-K.
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Item 6. Exhibit Index
The exhibits listed in the accompanying index to exhibits are filed as part of, or incorporated by reference, into this
Quarterly Report on Form 10-Q.
Incorporated by Reference | ||||||
Exhibit number | Exhibit description | Form | File No. | Exhibit | Filing Date | |
3.1 | Amended and Restated Certificate of Incorporation. | 8-K | 333-288733 | 3.1 | 8/11/2025 | |
3.2 | Amended and Restated Bylaws. | 8-K | 333-288733 | 3.2 | 8/11/2025 | |
10.1+ | Underwriting Agreement, dated August 7, 2025, between Heartflow, Inc. as the Issuer, and J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Piper Sandler. | |||||
10.2# | Heartflow, Inc. 2025 Performance Incentive Plan. | S-1 | 333-288733 | 10.2 | 7/17/2025 | |
10.3#+ | Heartflow, Inc. 2025 Performance Incentive Plan Form of Option Agreement (Employee). | |||||
10.4#+ | Heartflow, Inc. 2025 Performance Incentive Plan Form of Option Agreement (Director). | |||||
10.5#+ | Heartflow, Inc. 2025 Performance Incentive Plan Form of Restricted Stock Unit Agreement. | |||||
10.6# | Heartflow, Inc. 2025 Employee Stock Purchase Plan. | S-1 | 333-288733 | 10.3 | 7/17/2025 | |
10.7# | Heartflow, Inc. Senior Leadership Severance Policy. | S-1 | 333-288733 | 10.4 | 7/17/2025 | |
10.8#+ | Heartflow, Inc. Director Compensation Policy. | |||||
31.1+ | Certification of Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
31.2+ | Certification of Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
32.1* | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||
32.2* | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||
101.INS+ | Inline XBRL Instance Document – the instance document does not appear in the | |||||
101.SCH+ | Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents. | |||||
104+ | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||
#Indicates management contract or compensatory plan.
+Filed herewith.
*The certification attached as Exhibit 32.1 and Exhibit 32.2 that accompanies this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is not deemed “filed” by the Registrant for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
HEARTFLOW, INC. | |||
Date: September 19, 2025 | By: | /s/ John C.M. Farquhar | |
John C.M. Farquhar | |||
President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: September 19, 2025 | By: | /s/ Vikram Verghese | |
Vikram Verghese | |||
Chief Financial Officer | |||
(Principal Financial Officer) | |||
Date: September 19, 2025 | By: | /s/ Mhairi L. Jones | |
Mhairi L. Jones | |||
Chief Accounting Officer and VP | |||
(Principal Accounting Officer) | |||
FAQ
How much cash did HeartFlow (HTFL) have as of June 30, 2025?
The company reported $80.2 million in cash and cash equivalents as of June 30, 2025.
What were the gross IPO proceeds reported by HeartFlow (HTFL)?
HeartFlow reported gross proceeds of approximately $364.2 million from its IPO, before underwriting discounts and estimated offering expenses.
What is HeartFlow’s accumulated deficit as of June 30, 2025?
The accumulated deficit was approximately $1.0 billion as of June 30, 2025.
What debt obligations does HeartFlow have and what are their costs?
HeartFlow has a 2024 Term Loan with an effective interest rate of 15.2% as of June 30, 2025 and issued $98.3 million of 2025 Convertible Notes with embedded derivative features.
Does HeartFlow believe it has enough liquidity for the next 12 months?
Management states that expected customer revenue, existing cash and cash equivalents and the net IPO proceeds will be sufficient to fund planned operating expenses and capital requirements for at least the next 12 months from the date the condensed consolidated financial statements were available to be issued.
Are there financial covenants that could constrain HeartFlow (HTFL)?
Yes. The 2024 Credit Agreement requires the company to maintain minimum liquidity (reduced to $15.0 million) and escalating minimum trailing twelve-month net sales up to $110.0 million, among other covenants.