HeartFlow : Quarterly Report for Quarter Ending March 31, (Form 10-Q)
HTFL
Published on 05/14/2026 at 04:42 pm EDT
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, 2025 included in our Annual Report on Form 10-K filed with the SEC on March 18, 2026. 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 I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K filed with the SEC on March 18, 2026. Please also see the section titled "Special Note Regarding Forward-looking Statements" in this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
We provide software and artificial intelligence ("AI") designed 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 March 31, 2026, our Heartflow Platform has been used to assess CAD in more than 650,000 patients, including 219,000 in 2025 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 four software products 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.
•Heartflow PCI Navigator, which we recently launched in April 2026, provides advanced visualization and clinical insights to optimize revascularization strategies, guide device selection, enhance procedural efficiency, and improve patient care. We provide Heartflow PCI Navigator to accounts as an integrated feature to enhance procedural efficiency, not as a stand-alone product.
We anticipate launching Plaque Tracker, our fifth product, in 2027. Plaque Tracker will enable longitudinal plaque analysis of sequential CCTAs to measure the efficacy of medical therapy based on plaque regression.
The Heartflow Platform has an existing commercial presence and regulatory approval in the United States, United Kingdom, European Union and Japan. Additionally, some or all of our platform has received medical device licensing or approvals in Canada, Australia, Israel, Saudi Arabia, United Arab Emirates and Bahrain. 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 March 31, 2026 and 2025, we recognized revenue of $52.6 million and $37.2 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 cumulative revenue as of March 31, 2026. In the second half of 2023, we initiated limited market education efforts for Heartflow Plaque Analysis, our second commercial product, and we expect to broaden our market education efforts as payor coverage for Heartflow Plaque Analysis increases. Heartflow Plaque Analysis is currently covered by five of the seven MACs with the remaining MACs providing coverage on a case-by-case basis and by a majority of commercial payors. 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 March 31, 2026, we had $254.9 million in cash, cash equivalents and investments.
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 our IPO were approximately $332.4 million, net of underwriting discounts and commissions and offering costs of $31.8 million.
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 now operating as a public company. Our net loss for the three months ended March 31, 2026 and 2025 was $27.4 million and $32.3 million, respectively.
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.
•Seasonality we experience throughout the year, including due to 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 a 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 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Revenue cases
28,803
33,039
34,970
37,805
40,336
48,423
51,805
57,776
67,443
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 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. New accounts typically ramp to FFRCT utilization close to full patient applicability in the first year and remain at this level consistently. 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. Revenue cases generated from clinic or office-based accounts typically carry a lower pricing than hospital-based accounts. 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 36% and 30% for the three months ended March 31, 2026 and 2025, respectively.
While a single customer may include multiple accounts, no single customer accounted for 10% or more of our revenue during the three months ended March 31, 2026 and 2025. 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. 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. These costs are partially offset by capitalized contract fulfillment costs. 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 the related capitalization of contract fulfillment costs, and the 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 team's 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 modulations in our gross margin as we hire and train additional personnel in our production team to support our increasing patient case volume. These expenses are offset by the varying levels of support provided by the production team in our clinical trials and research and development, which are allocated as research and development expense, and the capitalization of contract fulfillment costs.
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 or to expand the addressable market
populations for our products and to hire additional personnel to develop new product offerings and product enhancements. For example, in the second half of 2026, we expect to begin enrollment in three randomized clinical trials focused on high-risk asymptomatic sub populations to expand the addressable market for our products.
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 that, our revenue grows.
Interest income (expense), net
Interest income (expense), net consists primarily of interest income earned on our cash, cash equivalents and investments, offset by interest expense on our 2024 Term Loan and related amortization of debt discount and debt issuance costs prior to its full repayment in August 2025.
Other expense, net
Other 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 continued to record adjustments to the estimated fair value of the common stock warrant liability until the warrants were exercised, and we continued to record adjustments to the estimated fair value of the derivative liability until their conversion upon our IPO. All of our common stock warrants were net exercised in October 2025.
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. In the United States, we have recorded deferred tax assets for which we provide a full valuation allowance. Due to our history of net operating losses since inception, we expect to maintain a full U.S. valuation allowance in the foreseeable future due to uncertainties regarding our ability to realize these assets.
Results of Operations
Comparison of Three Months Ended March 31, 2026 and 2025
The following table summarizes our results of operations for the three months ended March 31, 2026 and 2025:
Three Months Ended
March 31,
Change
2026
2025
$
%
Revenue
$
52,587
$
37,205
$
15,382
41%
Cost of revenue
10,423
9,264
1,159
13%
Gross profit
42,164
27,941
14,223
51%
Operating expenses:
Research and development
21,620
13,924
7,696
55%
Selling, general and administrative
42,566
31,519
11,047
35%
Asset impairment charge
7,482
-
8,691
*
Total operating expenses
71,668
45,443
27,434
60%
Loss from operations
(29,504)
(17,502)
(12,002)
69%
Interest income (expense), net
2,461
(4,550)
7,011
(154)%
Other expense, net
(314)
(10,293)
9,979
(97)%
Loss before provision for income taxes
(27,357)
(32,345)
4,988
(15)%
Provision for income taxes
(23)
-
(23)
*
Net loss
$
(27,380)
$
(32,345)
$
4,965
(15)%
*: Not Meaningful
Revenue
Revenue increased $15.4 million, or 41%, to $52.6 million during the three months ended March 31, 2026, compared to $37.2 million during the three months ended March 31, 2025. The increase in revenue was primarily attributable to a 67% 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 volume rebates.
Cost of revenue and gross margin
Cost of revenue increased $1.1 million, or 13%, to $10.4 million during the three months ended March 31, 2026, compared to $9.3 million during the three months ended March 31, 2025. This increase was attributable to an increase of $2.0 million in personnel and related expenses, $0.3 million in third-party hosting fees, $0.2 million in royalties, and $0.1 million in computer hardware expenses, partially offset by a net increase of $1.5 million in capitalized and amortized contract fulfillment costs. Personnel and related expenses included $0.1 million of stock-based compensation costs during each of the three months ended March 31, 2026 and 2025. Gross margin for the three months ended March 31, 2026 increased to 80% as compared to 75% for the three months ended March 31, 2025. The gross margin increase during the three months ended March 31, 2026 was primarily attributable to our increase in revenue case volume and improved production team productivity driven by AI efficiency initiatives, partially offset by our continued investment in the hiring and training of additional personnel in our production team to support our increasing revenue case volume. Although we expect to continue to invest in the hiring and training of additional personnel in our production team, we expect our gross margin will continue to increase over the long term.
Research and development expenses
Research and development expenses increased $7.7 million, or 55%, to $21.6 million during the three months ended March 31, 2026, compared to $13.9 million during the three months ended March 31, 2025. The increase in research and development expenses was primarily attributable to an increase of $6.1 million in personnel and related expenses directly associated with an increase in headcount, $0.8 million in consulting and professional fees, $0.3 million in allocated overhead, $0.2 million in allocated production team costs to support clinical trials and research and development efforts, $0.2 million in software-related costs and $0.2 million in third-party hosting fees,
partially offset by a decrease of $0.2 million in clinical trial expenses and a net increase of $0.2 million of capitalized internal-use software costs. Personnel and related expenses included $2.1 million and $0.5 million of stock-based compensation costs during the three months ended March 31, 2026 and 2025, respectively.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $11.1 million, or 35%, to $42.6 million during the three months ended March 31, 2026, compared to $31.5 million during the three months ended March 31, 2025. The increase in selling, general and administrative expenses was primarily attributable to an increase of $8.4 million in personnel and related expenses directly associated with an increase in headcount, $0.7 million in professional fees, including legal, audit and consulting fees, $0.7 million in computer hardware and software-related costs, $0.7 million in travel expenses and $0.4 million in advertising and other promotional expenses, partially offset by a decrease of $0.4 million in allocated overhead. Personnel and related expenses included $4.3 million and $1.9 million of stock-based compensation costs for the three months ended March 31, 2026 and 2025, respectively.
Asset impairment charge
Asset impairment charge consists of a non-cash impairment charge related to the right-of-use asset and leasehold improvements for our Mountain View, California facility. In March 2026, we entered into a sublease agreement with a third-party subtenant to sublease this facility. We evaluated the associated right-of-use asset and leasehold improvements for impairment as the substantially lower sublease income indicated that the carrying amount of such assets may not be recoverable. We compared the carrying value of the impacted assets to the fair value to determine the impairment amount and recognized an asset impairment charge of $7.5 million during the three months ended March 31, 2026.
Interest income (expense), net
Interest income (expense), net increased to income of $2.5 million during the three months ended March 31, 2026, compared to an expense of $4.6 million during the three months ended March 31, 2025. This change was mainly attributable to the repayment in full of our 2024 Term Loan in August 2025 and the conversion of our 2025 Convertible Notes to common stock upon our IPO in August 2025.
Other expense, net
Other expense, net decreased to an expense of $0.3 million during the three months ended March 31, 2026, compared to an expense of $10.3 million during the three months ended March 31, 2025. The three months ended March 31, 2025 included a $1.6 million charge from the remeasurement and recognition of the change in fair value related to our common stock warrant liability and a $9.0 million charge from the remeasurement and recognition of the change in fair value related to our derivative liability.
Provision for income taxes
Provision for income taxes was $23,000 for the three months ended March 31, 2026, compared to $0 for the three months ended March 31, 2025, which was related to our foreign taxes.
Liquidity and Capital Resources
Sources of Liquidity
As of March 31, 2026, we had $254.9 million in cash, cash equivalents and investments and an accumulated deficit of $1.1 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 continue 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 our existing cash, cash equivalents and investments, together with the expected cash generated from revenue transactions with customers, will be sufficient to meet our capital requirements and fund our operations for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. We 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 in-license other businesses, assets, or technologies.
Hayfin Credit Agreement
On June 14, 2024, we entered into a Credit Agreement and Guaranty with Hayfin Services, LLP ("Hayfin") for a $138.1 million term loan to refinance the outstanding loan 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.
During its term, the 2024 Term Loan was scheduled to mature on June 14, 2028 and bore interest at a floating rate per annum equal to the sum of (i) 7.0% (or 6.0% if the alternative base rate ("ABR") was 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) the 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.
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 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 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 aggregate fair value of $24.6 million immediately before the conversion of the 2025 Convertible Notes to common stock upon the IPO, resulting in a gain of $7.3 million.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
Three Months Ended
March 31,
(in thousands)
2026
2025
Net cash used in operating activities
$
(30,104)
$
(13,166)
Net cash used in investing activities
(1,427)
(1,101)
Net cash provided by financing activities
6,157
72,922
Net cash used in operating activities
Net cash used in operating activities during the three months ended March 31, 2026 was $30.1 million, attributable to a net loss of $27.4 million and a net change in operating assets and liabilities of $18.3 million, partially offset by non-cash charges of $15.6 million. The non-cash charges primarily consisted of an asset impairment charge of $7.5 million, $6.6 million in stock-based compensation expense, $1.4 million of depreciation and amortization, $1.0 million of amortization of right-of-use asset and $0.8 million amortization of discounts on investments. The increase in net operating assets was primarily due to an increase of $6.2 million in accounts receivable, a $3.9 million increase in prepaid expenses and other current assets, a $1.6 million increase in other non-current assets, and an increase of $1.7 million in accounts payable, partially offset by a $7.4 million decrease in accrued expenses and other current liabilities and a $1.0 million decrease in operating lease liabilities.
Net cash used in operating activities during the three months ended March 31, 2025 was $13.2 million, attributable to a net loss of $32.3 million and a net change in operating assets and liabilities of $2.5 million, partially offset by non-cash charges of $16.7 million. The non-cash charges primarily consisted of $2.5 million in stock-based compensation expense, $9.0 million of change in fair value of derivative liability, $1.6 million of change in fair value of common stock warrant, $1.4 million of depreciation and amortization, $0.7 million of amortization of right-of-use asset, $0.5 million of non-cash interest charges and $1.0 million of amortization of debt discount and debt issuance costs. The increase in net operating assets was primarily due to an increase of $3.6 million in accounts receivable, a $0.4 million increase in prepaid expenses and other current assets, a $0.3 million increase in other non-current assets, a $9.3 million increase in accrued expenses and other current liabilities, a $1.6 million decrease in accounts payable and a $0.9 million decrease in operating lease liabilities.
Net cash used in investing activities
Net cash used in investing activities for the three months ended March 31, 2026 was $1.4 million, which consisted of $29.5 million in purchases of investments and $1.9 million in purchases of property and equipment, offset by $30.0 million in maturities of investments.
Net cash used in investing activities for the three months ended March 31, 2025 was $1.1 million consisting of purchases of property and equipment.
Net cash provided by financing activities
Net cash provided by financing activities during the three months ended March 31, 2026 was $6.2 million, which consisted primarily of proceeds from the exercise of stock options and purchases under our employee stock purchase plan.
Net cash provided by financing activities during the three months ended March 31, 2025 consisted primarily of $73.9 million in net proceeds from the issuance of our 2025 Convertible Notes, $0.6 million in proceeds from the exercise of stock options, offset by $0.5 million in exit and prepayment penalty fees related to our 2024 Term Loan and $1.0 million in payments of deferred IPO offering costs.
Contractual Obligations and Commitments
Our contractual commitments will have an impact on our future liquidity. Our material commitments include future payments on non-cancellable facility leases and the sublease of our Mountain View, California facility lease as disclosed in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, and our royalty obligations for exclusive technology licensing agreements. There have been no other material changes to our contractual obligations from those described in our Annual Report on Form 10-K filed with the SEC on March 18, 2026.
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 months ended March 31, 2026, as compared to those disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2025 included in our Annual Report on Form 10-K filed with the SEC on March 18, 2026.
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 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) December 31, 2030; (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.
Disclaimer
Heartflow Inc. published this content on May 14, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 14, 2026 at 20:40 UTC.