Company Overview

HeartFlow Inc. (HEARTFLOW) is a medical technology company that deploys artificial intelligence (AI) models to diagnose and manage coronary artery disease (CAD). The company started as Cardiovascular Simulation Inc. in July 2007. It was renamed HeartFlow Inc. in 2009. The company listed its shares on NASDAQ in August 2025.

HEARTFLOW uses its platform to analyse the result of a test of CAD, known as Coronary Computed Tomography Angiography (CCTA), to provide additional information and data visualisation that will help healthcare providers manage and personalise treatments. CCTA, a non-invasive test, provides a 3D image of the heart and its blood vessels.

HEARTFLOW has three software products under its HeartFlow Platform, namely HeartFlow RoadMap Analysis, HeartFlow Plaque Analysis and HeartFlow FFR_CT Analysis. The fees charged when healthcare providers use its platform for diagnosing patients accounted for 98.8% of its revenue in 2024 (2023: 98.1%). The company also makes revenue from subscription fees from customers accessing its hosted software service.

William C. Weldon chairs the board of HEARTFLOW. He brings to bear on the board of HEARTFLOW his vast experience accumulated as a director of companies like Johnson & Johnson, Exxon Mobil Corporation, CVS Health Corporation and JPMorgan Chase & Co. John C.M. Farquhar is the president and chief executive officer of the company.

Investment Thesis

Cardiovascular disease, a disease of the heart and blood vessels, kills 17.9 million people every year, according to the World Health Organisation. CAD is the most common and fatal type of cardiovascular disease. CAD occurs when blood vessels supplying blood to the heart is narrowed or blocked; it can cause heart attack and cardiac arrest. The traditional CAD tests, such as stress tests, are unreliable because they may give misleading results, leading to wrong or unnecessary treatments. Healthcare providers are adopting the HeartFlow Platform because it provides extra data not provided by CCTA such as blood flow, stenosis, plaque volume and plaque composition.

HEARTFLOW has revolutionised the diagnosis and treatment of CAD by providing a more reliable analysis that cannot be obtained from using only CCTA. And its software products are beginning to gain traction among healthcare professionals and institutions in the US. More than 400,000 patients have been analysed through its platform as at the end of the first quarter of 2025. Over the years, the company has accumulated substantial amount of datasets to help improve its AI algorithms to deliver better and more accurate results to healthcare providers and other users of its services.

HEARTFLOW incurs huge cost to run its business and encourage the adoption of its platform. Increasing the usage of its products could result in cost savings and better profit margins. Research & Development (R&D) expense rose by 21.4% to $43.5 million in 2024 while selling, general and administrative expenses increased by 17.9% to $155.7 million. Losses rose marginally and formed a smaller proportion of revenue. However, HEARTFLOW is not cash-strapped and the good working capital management is a plus for the company.

At present, most of its revenue is from the United States, although it has some presence offshore. Granted, the United States has not been fully penetrated, but HEARTFLOW should explore more foreign markets. Penetrating more markets abroad could help the company turn the corner after years of accumulating losses and eroding shareholders’ wealth.

Valuation

HEARTFLOW is overpriced based on the analysis of the company’s fundamentals. Earnings Per Share, Earnings multiplier and book value per share are all negative.

Financial Overview

In the 2024 fiscal year, HEARTFLOW’s revenue gained $38.6 million or 44.3% year-on-year to close at $125.8 million. A slower rise in cost of revenue resulted in a 62.7% leap in gross profit from $58.1 million to $94.4 million. Expansion of sales helps spread cost and achieve cost efficiency, thereby improving profit margins. The gross profit margin increased from 66.6% in 2023 to 75.1% in 2024.

In spite of the 62.7% jump in gross profit, HEARTFLOW could not make any operating profit; rather, it posted an operating loss of $61.2 million in 2024, albeit 16% lower than the prior year’s figure. Total operating expenses rose by 18.9% to $155.7 million in 2024. However, the total operating expenses as a percentage of revenue dropped from 150.2% to 123.7%.

R & D expense alone was 34.6% of revenue in 2024, down from 41.1% in the year before. Selling, general and administrative expenses formed 72% of total operating expenses (2023: 72.6%).

There was a marginal increase of 1.3% in loss before tax to $96.4 million in the 2024 financial year. Nonetheless, the loss before tax as a percentage of revenue dropped from 109.1% in 2023 to 76.6% in 2024. Likewise, loss after tax added 0.8 percentage point year-on-year and amounted to 76.6% of the revenue for the year (2023:109.7%).

HEARTFLOW is cash-rich – cash and cash equivalents were $51.4 million in 2024, down by 58.2% year-on-year. Debt was more or less flat at $160.4 million. Operating cash flow and operating profit could not settle interest obligations because they were negative. Current ratio fell to 2.4 times in 2024, from 4.5 times in 2023.

Business Risk

The industry is characterised by fast-paced technological change. This requires HEARTFLOW to continuously spend on R & D in order not to be left behind by newer innovations. Huge R & D spending hurts profitability. In addition, HEARTFLOW currently relies on one product, FFR_CT Analysis which makes the company financially vulnerable.

Recommendation: Overpriced