Good day, and thank you for standing by. Welcome to the HeartFlow Inc. second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded. I would like to hand the conference over to your speaker today. Nick Ledeckle, please go ahead.

Good afternoon, everyone, and welcome to the HeartFlow Second Quarter 2026 Earnings Conference Call. Joining me today are John Farquhar, HeartFlow's President and Chief Executive Officer, and Vikram Virgis, our Chief Financial Officer. Today, we will walk you through our Q2 performance, share updates on our commercial momentum, innovation pipeline, and clinical programs, and provide financial guidance. A live Q&A session will follow. The earnings release accompanying today's discussion is available on our investor relations website at ir.heartflow.com. During this call, we will refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP figures can be found in today's earnings release. I'd like to remind everyone that certain statements made on this call are forward-looking within the meaning of federal securities laws. These statements are based on management's current expectations and beliefs, involve certain risks and uncertainties, and actual results may differ materially. Please note that both this live call and a digital replay will be available shortly after the call concludes. With that, I will now turn the call over to John Farquhar, R.C.

Thank you for joining us. Q2 is an outstanding quarter for HeartFlow and the momentum that we entered 2026 with is accelerating. Our year-over-year revenue growth accelerated for the second consecutive quarter and we finished ahead of our expectations. A credit to our expanding category leadership and the continued strong growth of the CCTA market. It's also a credit to the outstanding efforts of the HeartFlow team and their continued dedication to the patients we serve. Thank you all for your hard work and commitment. In the second quarter, revenue was $64.1 million, up 48% year-over-year, with U.S. revenue up 51%. This was our fastest revenue growth in eight quarters. Four factors drove this performance. First, PLAC accelerated across new activations and physician utilization. Second, FFRCT utilization remained durable across our existing accounts. Third, we had another strong quarter for new account additions, and the record cohort of 340 accounts we added in 2025 continued to ramp in line with our expectations. And finally, the underlying CCTA market continued to expand, supported by guidelines and strong on reimbursement and growing interest in CT as a frontline diagnostic test for suspected CAD. The strength of our second quarter performance gives us confidence to raise our full year outlook again. We're now expect to deliver total revenue of 246 million to 250 million, representing 40% to 42% year over year growth. We're also raising our full year 2026 PLAC revenue outlook to a range of $29 million to $31 million. We're also raising our full-year guidance for PLAC-activated accounts to approximately $1,250. Moving down the P&L, we're raising our non-GAAP gross margin guidance to approximately 82%, driven by ongoing AI efficiencies, volume leverage, and a higher mix of high-margin PLAC revenue. At the midpoint of of our revenue guidance, this implies year-over-year non-GAAP gross profit growth of nearly 50%. And finally, we remain committed to our midterm non-GAAP gross margin target of 85%. Now turning to our three strategic pillars, commercial adoption, innovation, and clinical evidence. I'll walk you through each, starting first with commercial adoption. Our installed base of accounts continues to grow rapidly. We had another very strong quarter of new account additions and we continue to win at a high rate, strengthening our growing category leadership and ability to drive broader platform utilization. Now turning to plaque, performance was again ahead of our expectations with accelerating activations and utilizations. Activations were ahead of plan, highlighting the leverage of our installed base and our ability to deploy new innovation rapidly. Trends in position utilization are very strong and give me high confidence in our continued momentum. Time and time again, we're winning at the point of sale with plaque, and there are many reasons for this, but none more important than accuracy and reproducibility. Heartflow plaque analysis has demonstrated in peer-reviewed prospective studies, market-leading accuracy and reproducibility across our research and independent clinical studies. ACC's scientific statement on industry standards for the use of quantitative plaque analysis underscores that independently validated accuracy and reproducibility are foundational for clinical use. These standards align directly with HeartFlow's differentiated evidence base and technology platform, and we believe the market appreciates this fact. Furthermore, we're proud to share that HeartFlow was recently selected as the exclusive plaque provider for the PREEMP study, an NIH-funded 1,500 patient study evaluating whether directly measuring coronary disease can improve prevention in younger asymptomatic patients. We believe this selection reflects the clinical community's confidence in our plaque technology's accuracy and reproducibility. Bottom line, our plaque performance in Q2 supports both our higher 2026 outlook and long-term conviction. Shifting now to FFRCT, performance in Q2 also exceeded our expectations. Utilization remains durable across our existing accounts, and the record 2025 cohort of 340 accounts continues to ramp in line with our expectations. So far this year, early utilization trends from our 2026 new account cohort is also encouraging. As is the case with PLAC, these results are also enabled by meaningful product differentiation. Not only is FFRCT the most accurate non-invasive test for CAD, it's also the only product with lesion-specific FFRCT values and the only test with published prospective validation against the invasive gold standard. Importantly, the recently updated expert consensus guidelines from SCCT and endorsed by ACC underscored the importance of lesion-specific FFRCT in identifying coronary lesions that may warn an intervention. Lastly, I'd be remiss if I didn't also recognize the power of our platform in these results. Our clinical evidence and technology differentiation is second to none. The breadth of our AI diagnostics platform across roadmap, plaque, FFRCT, and PC Navigator deepens our clinical relationships and makes HeartFlow increasingly important to their clinical workflows, creating a durable strategic advantage. In Q2, this dynamic is reflected in our strong results, and I'm confident it will continue in Q3 and beyond. Now turning to our second pillar, innovation. Our investments in R&D continue to produce market-leading innovation. At SCCT in July, we launched HeartFlow plaque staging, the most clinically validated tool for patient risk stratification. Plaque staging translates the personalized disease burden itself into four clinically distinct stages that help physicians assess the severity and guide medical management. It's validated in more than 23,000 patients with up to 16 years follow-up, with significant separation and events by stage after adjusting for traditional risk factors and stenosis. We expect it to be another tailwind for plaque adoption in the second half of 2026 and into 2027. PCI Navigator launched earlier this year and is gaining strong traction and remains on track for a broader rollout in 2027. Interventional cardiologists are gaining a level of pre-procedural certainty they simply did not have before. With PCI Navigator, they can now enter the cath lab with a more informed procedural plan already in hand. Navigator is uniquely differentiated by heart flow's lesion-specific FFRCT and rich plaque information, bringing together the insights needed to plan a PCI with greater precision. Importantly, Navigator is also strengthening our position within new accounts. Interventional cardiologists are an influential constituency in health systems and their advocacy for a CT-first pathway into their cath lab helps accelerate heart flow adoption and new account acquisition. Now turning to our third pillar, clinical evidence. The breadth and quality of evidence supporting the HeartCode platform remains unmatched in the category. As I mentioned on last quarter's call, we have more than 625 peer-reviewed publications and over 200 clinical studies, and we continue to build on this foundation. Most recently at SCCT's annual meeting in July, we presented eight new data sets spanning more than 36,000 patients. further validating the accuracy, reproducibility, and clinical utility of the heart flow plaque analysis. Let me highlight just two. First, we demonstrated the precision and reproducibility of heart flow plaque analysis. In a blinded prospective study recently published in the Journal of American College of Cardiology, we demonstrated minimal variability in repeat scans. This data gives physicians further confidence that changes in plaque measured over time accurately reflects true changes in a patient's actual disease. Second, we demonstrated how heart flow plaque analysis provides a more complete assessment of disease burden than a calcium score alone. In a desired registry analysis of nearly 12,000 symptomatic patients, heart flow plaque staging reclassified half of patients with a calcium score at zero into a higher risk category by identifying non-calcified plaque that calcium scoring cannot detect. It gives physicians a more precise picture of their patient's actual disease burden to help optimize treatment. As excited we are about the progress we've made in the second quarter, we're even more enthusiastic about what the future holds. From a new product perspective, the development of Plaque Tracker remains on track to launch in 2027. Heartflow Plaque Tracker measures a patient's plaque changes over time using serial CTA scans and R-plaque analysis. Importantly, tracking change only works if you can separate real changes in disease from noise. To do this, it takes best-in-class accuracy and reproducibility, which we believe is what our category-leading plaque algorithm delivers. Our autonomous processing initiative, which we announced last quarter is a key driver underpinning our midterm 85% gross margin target, is also progressing well and remains on track for a broader rollout in 2027. Both Plaque Tracker and the Infonymous Processing Initiative are enabled by our proprietary data set of more than 200 million CCTA images, diverse and precisely annotated. From a CAM expansion perspective, our next major opportunity is applying our current plaque technology to the asymptomatic market, which is one of the biggest unmet needs in cardiovascular diagnostics. HeartFlow today primarily serves symptomatic patients, However, the vast majority of coronary disease develops silently, often for years, before symptoms emerge or a first cardiovascular event occurs. Our initial entry into this market will focus on asymptomatic patients with the highest risk. Expanding into this market will increase our U.S. TAM by roughly $6 billion to approximately $11 billion. We plan to develop this market the same way we've built every market of HeartFlow, by leading with strong clinical evidence. Accordingly, we now have three RCTs targeted at three distinct high-risk asymptomatic populations that we will initiate over the next three quarters. The first is for patients with coronary artery calcium. This is a $3 billion TAM. This trial is intended to prove that our plaque analysis can improve outcomes as measured by changes in LDL and soft plaque beyond just the calcium score alone. Enrollment in this trial begins in the fourth quarter of 2026. The second is for patients with a prior MI or PCI. This is a $1 billion TAM. This trial is intended to prove that plaque analysis in this population will help physicians optimize medical therapy post-PCI to improve outcomes, again, as measured by changes in LDL and soft plaque. This study is also enrolling in the fourth quarter. Lastly, for patients with prior plaque, this is a $2 billion TAM. This trial is intended to prove that serial plaque assessments will better track disease, measure treatment response, and optimize medical therapy. Enrollment in this trial will begin in the first quarter of 2027. Taken together, these RCTs will allow HeartFlow to take our plaque technology upstream to help even more patients. and we're confident we'll access these TAMs with reimbursed technology before the end of the decade. In closing, our second quarter results reflect the power of our platform and the most clinically validated diagnostic AI products in the industry. Plaque is accelerating, FFRCT is durable, and we're rapidly becoming the AI operating system of record for CAD. Our next wave of growth in the high-risk asymptomatic market is approaching, and we're confident in our plan to enter this market before 2030. These trends give us high confidence in our increased full-year revenue guidance and our multi-year growth trajectory. We remain focused on our mission to transform the detection, diagnosis, management, and treatment of coronary artery disease. The future is bright, and I'm grateful to the HeartFlow team for their continued dedication to the patients we serve and for all of their hard work. I now turn it over to Vikram for a review of our financial results and guidance.

Thanks, Sean, and good afternoon, everyone. Unless otherwise noted, my remarks reference the quarter ended June 30, 2026. All financial metrics other than revenue are presented on a non-GAAP basis, unless otherwise noted, and all growth rates are year over year. Reconciliations to the comparable GAAP measures included in today's earnings release. Our second quarter results demonstrated the increasing strength of the hot flow financial model. 48% revenue growth, 770 basis points of gross margin expansion, and a 600 basis point improvement in operating expenses as a percentage of revenue. Total revenue for the second quarter was $64.1 million, up 48%. U.S. revenue grew 51% to $59.6 million, including $7.8 million of FLAC revenue. OUS and other revenue increased to $4.5 million. Total global revenue increases for the quarter reached 84,491, up 74%. Performance was broad-based with continued strength in U.S. FFR-CT, FLAC adoption ahead of our expectations, and continued expansion of the CCTA market. We saw strong FFRCT utilization across both existing and new accounts, consistent with the historical ramp dynamics we have described previously. New accounts continue to take about a year to ramp to near full FFRCT utilization, while existing accounts demonstrate durable and consistent utilization patterns. The relevant denominator for assessing FFRCT utilization is the eligible CCTA population. FFRCT is applicable in approximately 33% of CCTAs, establishing a mature utilization opportunity of roughly one-third of an account's total CCTA volume. PLAC utilization also strengthened during the quarter, driven by both new account activations and expanding use within accounts already live. As clinicians gain experience with the product, we are seeing broader physician engagement, development, deepening utilization, and adoption across a larger share of eligible CCTAs. PLAC is applicable to approximately 60% of CCTAs, providing a substantially broader eligible utilization opportunity within each account. While PLAC remains early in its adoption curve, the breadth and progression of utilization during the quarter increased our confidence in its near- and long-term growth trajectory. Finally, we expanded our install base at a rapid pace during the second quarter, driven by strong execution from our commercial organization and plaque analysis adoption that was ahead of expectations. We are winning new accounts at a very high rate and remain confident in the durability of this momentum. As a reminder, we provide install-based metrics on an annual basis only. Turning to gross margin, second quarter gross margin reached 83.3%, compared to 75.6% in the second quarter of 2025. The year-over-year improvement reflects volume leverage, increased production efficiency, increased PLAC revenues, and continued progress in AI-enabled automation, supported by ongoing training on our proprietary CCTA image database. Operating expenses reflect disciplined investment behind our highest priority growth initiative. Second quarter SG&A expenses were $37.8 million, driven by targeted investments in our commercial team to further expand adoption of the hot flow platform. Beginning this quarter, non-GAAP SG&A expenses exclude the impact of certain litigation-related expenses associated with our ongoing IT litigation. We believe this presentation provides investors with greater visibility into the underlying operating performance of the business. We have also applied this adjustment retrospectively to prior period results in the non-GAAP financial tables included in today's earnings release. Research and development expenses were $23.5 million as we continue to fund the innovation cadence John described, together with the clinical evidence required to support new product adoption and expand our addressable markets. Non-GAAP operating expenses were 96% of revenue versus 102% a year ago. Non-GAAP operating loss was $7.9 million compared to $11.5 million last year, demonstrating greater operating efficiency as we invest behind durable growth. Non-GAAP net loss was $5.8 million, or $0.07 per share, compared to non-GAAP net loss of $17.6 million, or $2.79 per share, in the second quarter of 2025. This represents an approximately two-thirds reduction in net loss. On a GAAP basis, net loss was $15.7 million, or $0.18 per share. Weighted average, basic and diluted shares outstanding were $86.4 million in the quarter. Turning to the balance sheet, we ended the quarter with $246.8 million in cash, cash equivalents, and investments. We remain highly confident that our balance sheet provides capital to fund operations through profitability, while sustaining investment in R&D and commercial expansion. Turning to our updated outlook for 2026, the strength of our second quarter performance and the momentum across both FFRCT and FLAG support a meaningful increase in our full-year expectations. We now expect total revenue of $246 million to $250 million, representing 40% to 42% growth. We are increasing our FLAG-specific revenue outlook to $29 million to $31 million. We continue to expect more material adoption in the second half of the year as clinicians gain clinical experience and broaden adoption. Based on our 2Q performance, we're also raising our full-year non-GAAP gross margin guidance to approximately 82%, up 500 basis points year-over-year. The drivers of our gross margin outlook include continued volume efficiencies, increased AI-enabled automation, and a higher contribution from PLAC. From an operating expense perspective, we expect full-year non-GAAP operating expenses as a percentage of revenue to decline year-over-year. We remain disciplined in allocating incremental investment towards initiatives with a direct line of sight to revenue growth, product innovation, and addressable market expansion. The midpoint of our revenue guidance implies approximately 50% growth in gross profit in 2026. Finally, we remain committed to our midterm, non-GAAP gross margin target of 85%. We also remain on track to achieve cash flow profitability by mid-2028, consistent with our prior guidance of achieving profitability within three years of our IPO. The second quarter strengthened each of the core elements of our financial model, durable revenue growth, expanding growth margins, increasing operating leverage, and a well-capitalized balance sheet. We enter the second half with substantial momentum and a clear path towards sustained profitable growth. I would now like to turn it back to John for closing remarks.

Thank you, Vikram, and thank you all for joining us today. We appreciate your continued interest and your support as we work to advance the HeartFlow AI platform as the new standard of care for detecting, diagnosing, managing, and treating coronary artery disease. We're excited about the remainder of 2026, and with that, I'll turn the call over to the operator for Q&A. Operator?

Thank you, ladies and gentlemen. And if you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered, you wish to move yourself from the queue, please press star one one again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Robert Marcus with J.P. Morgan. Your line is open.

Thank you. And congratulations on a great quarter here. Two for me. Maybe first, you talk about this a little bit in the prepared remarks, but you're doing a phenomenal job driving adoption in FLAC. You spoke to the clinical data as one key driver of differentiation, but would just love a little more, you know, word off the street of how you're winning, why you're winning, and what you think you're doing differently than some of the competitors out there who drive such a strong start. And then I have a follow-up.

Yeah, sure. Thanks, Robbie. I appreciate the question. So, yeah, I mean, relative to PLAC, and this came through in the prepared remarks, the launch is going very well. And I think as we moved through the quarter, the momentum build, and I would, you know, categorize it, you know, from a momentum standpoint as significant. So far this year, Q1 was a good first start, initial start. But coming out of Q2, these trends give me really higher confidence. So the metrics, you know, the things that we sort of manage internally, the new account activations are ahead of plan. You know, we're on track now for $1250 by the end of the year. And we've talked about, you know, historically it took us eight years to get to $1,000 with FFRCT. We'll get to $1250 in two with PLAC. The physician adoption metrics all look really good. The ordering physicians are at a record level, both new orders as well as repeat, so I feel great on that. Utilization is ramping really well and above our initial expectations. So this tells me that as physicians start to apply plaque, they're doing it to a broader range of patients as their clinical experience deepens. So I feel good on that front. And then, again, on coverage, you know, I think we're a little north of 78% or right around 78% coverage right now. So we're ahead of plan on that. So overall, I'm very bullish on the future of PLAC. You know, I'm pleased with the momentum heading into the second half of the year and beyond that. And I think all of these results are a signal that, you know, customers are voting, and they're voting for heart flow, you know, increasingly here. So, I feel really good about it.

Great. Maybe as a follow-up question, and I imagine you probably as one of the larger, you know, MedTech software service providers had discussions with the FDA about this. But I think we all saw the MedTech as a Service reimbursement proposal come out last month, a couple weeks ago. I'm losing it. You know, would love your thoughts on this. It's not something that's probably going to start for another two years, but, you know, any thoughts you have around this and how it might evolve from the CPT-1 codes that you're currently sliding into? Thanks a lot.

Yeah, sure. So this wasn't a surprise. This direction is consistent with what CMS has signaled for years. I would say in the near term, we view this as a positive. In the hospital setting, as you know, the majority of our business is in the hospital setting. We really like the 2027 proposal. FFRCT and FLAC are stable. CCTA is up nearly 12%. So the economics of the heart flow pathway are very strong. So we like that. In the physician fee schedule, it's also in line with expectations. FFRCT and FLAC are relatively stable there. So in the near term, this is certainly a positive. Longer term, as you know, CMS proposed a new framework for AI-enabled software in the hospital setting, and we think this is constructive, okay? We think CMS is acknowledging something obvious, which is AI services are different than a traditional medical device, and we agree with them on that. They've stated they want to better align payments with clinical outcomes, and we We think these goals align very well with our value proposition, and we certainly have the clinical evidence to substantiate that. So we look forward to collaborating with CMS, and I think, as you mentioned, this is going to be a multiyear process, very much more likely in 29.

Thanks a lot.

One moment for our next question. Our next question comes from Matthew O'Brien with Piper Sandler. Your line is open.

Good afternoon. Thanks for taking the question. You know, looking at the Q2 results, you beat our model by about $8 million, and it doesn't sound like the lion's share of that beat was plaque.

I guess, first of all, is that allocation correct, that more of the beat was on the FFRCT side versus the plaque side? And then if that is the case, it would signal that, you know, you had your biggest incremental improvement in FFRCT we've seen in quite a while. So I know there is a lot of momentum there, you know, bigger sales force and et cetera. But what drove that uptick in FFRCT specifically? And then I do have a follow-up.

Yeah, Matt, this is Vikram. Thanks for the question. You know, PLAC did handedly beat our expectations as well. PLAC revenues were 7.8 million, which was more close to 4 million beat against expectations. I'd say it was broad-based momentum across both FFRCT and PLAC. We did see Q2 tends to be seasonally strong a quarter. That certainly played out across both segments of the business. For FFRCT, we continue to see strong volume growth driven by improving utilization in our existing sites. The new sites that we onboarded in the prior quarter were ramping at scale as well. And PLAC was certainly a standout for us. We continue to see strong utilization trends in our accounts. John touched on some of the key metrics relative to utilization, the number of new ordering physicians improving, existing physicians utilizing the service more. So, it was a culmination of factors that led to the broad-based outpacing that we saw in the quarter.

Understood.

Appreciate that, Vikram. I mean, kind of following up on that, the second question is, you know, when I look at the guide for the year, it doesn't assume in the back half much improvement in terms of revenue versus Q2. If you just annualize Q2, you kind of get the same numbers for Q3 and Q4. Given that momentum, especially in PLAC, and it's kind of a similar kind of question, not much in terms of improvement in PLAC revenue in Q3, Q4, is there anything to call out there? I don't know if there's anything on the pricing side that we need to be aware of or anything else outside of just traditional, you know, kind of conservatism on your part.

Thanks so much.

Yeah, Matt, I think you touched on it there. This is, again, consistent with our guidance philosophy. We want to leave enough room to outperform in the second half. You know, relative to phasing, what we'd say is we've assumed a steady sequential growth in both Q3 and Q4 of, you know, a relatively strong base that's in Q2. The progression in the second half is really underpinned by those factors we talked about, continued growth from existing accounts, ongoing contributions from these new accounts that have come live and we had a record quarter in new onboards in Q2 and then continued expansion that we're seeing in plaque utilization. We've factored in normal seasonality in second half and that's typical in the underlying CCTA market and we have incorporated that into the FFR CT outlook.

One moment for our next question. Our next question comes from Larry Beagelson with Wells Fargo. Your light is open.

Good afternoon. thanks for taking the question congrats on the good quarter here uh john two for me i wanted to start with the the decide one year outcomes um have you uh you know determined which conference that's going to be at i assume tct and you know with which endpoints uh you know do you think will you know actually change uh you know pay or physician behavior and add one follow-up yeah hey Larry.

It'll be in Q4. Beyond that, probably nothing to share. It'll be one-year outcomes on change in LDL. That's what we're looking for. Obviously, we have very good results on that at the 90-day, and we'll see what the data says at one year. How this impacts physician behavior, I think, as we're in the early innings of the plaque launch, certainly clinical data and educating physicians is an important piece of it, but probably the most important piece of that is physicians are starting to get their patients to come back after they've, you know, given their initial plaque analysis and they're seeing how whether or not their LDLs are changing in their clinical practice. So the more that snowball rolls downhill, I think the more plaque will be supported as we go through the launch here.

That's helpful. And secondly, you know, can you please talk about what you're seeing from a competitive standpoint in SFR, CT, and PLAC. Any estimates you could provide on your respective shares and how you're thinking about competition going forward? Thank you.

Yeah, sure. So, first thing I'll say, and I've said this before, you know, we view our competition as the standard of care. So, when we wake up and, you know, get going every morning, it is to create a new standard of care, And the way we're going to win moving forward is by sourcing volume from traditional non-invasive tests. And we really think we're on the right side of history in doing this. CCTA has only penetrated about 11% against the total non-invasive testing market. And all signs point towards continued strong category growth. Now, obviously, we're not the only player that recognizes this. This is an attractive space. But that being said, I feel better than ever about our competitive position and our market leadership. Competition in this space is not a new dynamic. Some of these other vendors have been around for going on 10 years now. And none of this is slowing us down. So bottom line, I think we're winning in the field. I think we're winning every day, both with PLAC and with FFRCT. All of those metrics are trending in the right direction. They're extremely strong. And, ultimately, the results that we put out, you know, I think today speaks for themselves, and I think the guidance speaks towards the confidence that we have for the remainder All right.

One moment for our next question. Our next question comes from Brandon Vasquez with William Blair. Your line is open.

Thanks for taking the question. First, I wanted to ask on, you gave a little bit more timelines around the asymptomatic populations and those RCTs. Maybe just, if you can, spend a minute on any other details like expectations for time of enrollment. What are kind of the next steps after this? Remind us if you need to get FDA approval after the RCTs for asymptomatic patients, or is this really just RCTs going after the payers and what timelines might look like Yeah, sure.

Thank you for the question. So, yeah, I mean, the asymptomatic opportunity is arguably the biggest opportunity in all of cardiovascular diagnostics, okay? And we are very excited about what this could mean for our business, but equally importantly, what this could mean for patients. So we're going to approach this in a very similar fashion to how we've approached the symptomatic market. We're going to start with patients at the most risk, okay? So with that, we're targeting three high-risk subpopulations that we can access with the right clinical studies and this will use our existing technology. So to your question, no FDA clearance required. The three populations, the first is secondary prevention, so this is prior MIs or prior PCIs. The second is patients with calcium, and then the third is patients with plaque, okay? In all of these trials, the endpoints will be change in physician management and change in outcomes as measured by change in LDL and soft plaque. We really like this approach. We think this is a very capital-efficient trial structure. It's only between, you know, call it 300 and 500 patients in each trial. And also, this is going to be very synergistic to our revenue. Okay, it leverages the same call points that we're already calling on, the same sales channel, the same technology stack. So we're really excited on what the future holds, and we think we can be in these markets with reimbursed technology before 2030.

Great. And interestingly, on a similar note, the NIH study that you had mentioned, can you just talk a little bit about the genesis of that program? I mean, correct me if I'm wrong, I don't think you have great market access in the U.K. yet, And so just curious if you can talk a little bit about the genesis of that program and what the next steps are there.

Yeah, just to be clear, it's a U.S. study, National Institutes of Health. It will study lipid lowering and anti-inflammatory therapy to see what slows plaque progression, or if any do, slow plaque progression in lower-risk adults that already have some form of coronary artery disease. So it's younger patients in plaque. The primary endpoint will be a two-year change in non-calcified plaque volume on a CTA versus the baseline.

Thanks, guys. Sorry about that. I mistook that.

No, good question.

One moment for our next question. Our next question comes from Rick Wise of Stiefel. Your line is open.

Good afternoon. everybody. I thought it would be interesting to hear a little bit more just maybe your updated thinking about the operating leverage that we saw in the quarter and how you're thinking going forward or how we should be thinking about it going forward. I mean, you had an outstanding quarter, sales up 12 million sequentially, and SG&A is down. How do we, you know, and maybe as part of answering that question, you can talk about the importance of this AI efficiency and the role it's going to play going forward. So just any additional perspectives, and particularly as we start trying to think about the second half and into 2007.

Yeah, thanks for the question, Rick. You know, I'll start by saying in Q2, we outperformed on the top line and we suddenly reinvested that with discipline back into R&D. Even with the higher OPEX, EBIT was roughly cut in half, quarter over quarter. And that really speaks to the strength and the efficiency of the underlying business model. The notion of durable, predictable revenue growth paired with strong margin expansion. And we're really leveraging this dynamic to invest across both R&D and commercial at a disciplined pace. A few areas worth mentioning, you know, R&D carries the largest increase for us as we advance the innovation pipeline that John had outlined. Flag Tracker, to your question on margin expansion, Autonomous Processing Initiative is an example of where we are removing or reducing the human touch and thereby expanding gross margins. We've got the TAM expansion clinical trials as well, which will start later this year. Of note, medical education is also recorded within R&D, and that is pivotal as we think of expanding the reach of plaque. On the commercial side, given the strength in the plaque ramp, we plan to expand field capacity in a measured and disciplined way. Despite these investments, we expect OPEX as a percentage of revenue for the full year to improve by at least five points year on year. And EBIT, which is also an important metric we track, should meaningfully improve year over year. Ultimately, it's the combination, the durability of the growth profile, the plaque proof points, and the midterm gross margin targets of 85 that reinforce a conviction of getting the company to profitability in that 2028 timeframe.

Thank you, Vikram. And just as a follow-up, maybe you can just sort of update us to the extent that you want to on the call about how price per case, how pricing dynamics fare this quarter. I think you were down, I'm saying this from memory, I don't know if I'm right, down 10% last quarter. And I know pricing is complicated because of the, I'm sorry, revenue per case. I'm sorry, I misspoke. But I know with greater price pressure, perhaps on the FFR side, more positive contribution from PLAC, but now FFR outperforming is a long question, but just how do we think about that mix of dynamics, if you could help us? I'd appreciate it.

Yeah, thanks again, Rick. I'll unpack that across FFRCT and PLAC. On the FFRCT side at a high level, volumes came in significantly about plan, while ASPs finished modestly ahead of expectations. And this was really driven by more favorable customer mix, given the visibility we have to these customers, their volumes, and the predictable utilization rate that we have with FFR, that mix looks durable. Therefore, net-net consensus is in the right ballpark on full-year ASP for FFR CT. Now, looking ahead, these pricing trends certainly reinforce our view that year-over-year ASP shifts will moderate beginning in 2027. Now, shifting gears to PLAC, two factors drove ASP favorability in the quarter. First, some of those contractual step-ups that we had highlighted previously, they went into effect in the quarter. And then second, we did see benefit of mix as well. Volume skewed a bit higher towards higher-priced accounts. Now, looking ahead on PLAC, ASPs, Given what we see in the contractual schedules, we're not baking in a change in pricing for the rest of 26. That said, we do expect pricing to step up more meaningfully in early 27.

Great. Thanks again. One moment for our next question. Our next question comes from Jacob Dodd with Morgan Stanley. Your line is open.

Good afternoon. Thanks for taking the question. Maybe a two-parter, both related to black utilization. I'll ask them both up front. I heard you reiterate the, you know, the approximate expectation for 60% case applicability for PLAC. Could you maybe speak to the pace of adoption at key accounts where you onboarded PLAC at the beginning of this year on their way to that long-term level? And then related to that, could you quantify for us in any way the degree of overlap or any halo effect you're seeing in these real-world cases between FFRCT and PLAC used on the same DCTA cases? Thank you very much.

Yeah, sure. Thanks, Jacob. So, yeah, you're right. The maximum utilization rates or applicability is 60%. We're seeing, you know, in our accounts, the ramp towards that is ahead of expectation. It's still nowhere near 60%. It takes a while to get there, but it's performing very well, and it's ramping very well. Your second question is around the overlap. Initially, we saw more of an overlap on FFRCT patients also getting plaque, but we're very pleased that's starting to broaden as adoption takes place.

One moment for our next question.

Our next question comes from David Rescott with Barrett. Your line is open.

Great. Thanks for taking the question, and congrats on the really strong results here. I want to follow up a little bit on some of the commentary around price and gross margins. If you look at the guide for the year versus what you just delivered in the quarter, it doesn't seem to be baking in any type of sequential or flattish type quarter over quarter gross margin number for the year. And it sounds like a lot of the drivers on the gross margin front are continuing to, you know, progress through the year. So just trying to get a sense for on the gross margin side, you know, why or why not should we assume that gross margins, at least on a sequential basis, you know, should or shouldn't improve through the rest of the year. And then I follow up as well.

Thanks for the question, David. You know, zooming out, the architecture of our gross margin expansion is quite clear. You know, it'll be principally driven by three levers. One is that AI-driven automation of our algorithm. Second is the emergence of PLAC revenues. And third is economies of scale or volume leverage. Relative to our performance in Q2, about 75% of that beat was driven by revenue outperformance specifically on the PLAC side. And the rest was headcount favorability and less R&D amortization, which hits cost of revenue. Now, looking at 2026, there's puts and takes. Our 82% guide takes into account our increased plaque numbers should be outperformed on plaque. You would see upside to the gross margin forecast as well. This will be offset by some additional hiring on both the production side as well as parts of customer success, which hit cost of revenue. Longer term Autonomous processing is certainly an initiative we're very excited about and underpins our mid-term gross margin target of 85%, but that is more of a 2027 driver.

Okay, that's helpful. And then maybe on plaque staging, I think some of the prepared remarks talked about additional tailwinds to plaque adoption from plaque staging in the second half of 2026 and the 2027. So, wondering if you could expand on that a little bit, as well as any incremental color on, you know, what, if at all, is contemplated in the plaque guide for the year as it relates to some of these, you know, tailwinds on the plaque staging side.

Yeah, I'll let Vikram speak to some of what's contemplated. Staging, you know, we're excited about it. It's a strong differentiator for us. We released that just recently at FCCT. We're the only plaque product with staging in it. This is a staging system that's validated in over 23,000 patients with up to 16 years follow-up, which marries very well with our DECIDE registry. That's the largest prospective registry of its kind. So with the two, as physicians look to learn how to use plaque, we feel like we have tools that are not only differentiated but align very well with how we're helping to educate the market on using plaque to take care of their patients. Relative to your question on what's in the guide, I don't know, Vikram, if you have anything to add.

I'd probably reiterate what I stated earlier, David. You know, no deviation from our guidance philosophy. We want to take a high conviction baseline. shows steady sequential growth, and that gives us room to outperform. We've assumed continued growth in plaque utilization. We're not assuming a step change, but if history is any guide, they'll likely be upside.

One moment for our next question. Our next question comes from William Plavani with Canaccord. Your line is open. William, your line is open. You can ask your question. One moment. Your line is now open, William.

Can you hear me?

We can hear you now.

Okay, great. Great. Thanks for taking the question. So, the first question is on the FFRCT and one of the comments that, you know, typically a little more seasonality in that business. So, as we think of the guide with the increase from Q3, from Q2, is that more of a plaque-based comment that that would be the driver for that sequential increase?

Yeah, that's a fair assumption, Bill. Obviously, with the raise, which is greater than 2x the beat, we wanted to anchor the guide appropriately and setting a high-conviction baseline that leaves room for quarterly progression was important. And given the scale of the business on plaque, those seasonality comments, which we've seen historically in the underlying CCT market, are much more relevant to FFRCT.

Okay. And then given that basically all the financial questions given asked at this point, I guess any update on the DOJ or the patent litigation that we should think about? Just updates, milestones, key events coming up, anything of that nature. And thanks for taking my questions.

Yeah, I'll take that. Appreciate the question. On the patent side, you know, I think, as you know, this type of litigation typically follows a multi-year path. You know, we're very confident in our claims. The complaint's public. I'm sure you've read it. If not, it's out there. I think it speaks for itself. We've got high confidence in our legal position, but we'll let the process play out, and obviously we're staying focused on running the business, as we do that. On the other topic, on the CID, we don't have any update beyond what's already been shared. When we do have something material to share, we'll share it. We think this matter, again, is going to play out over years, not months. We don't find it to be a distraction. It's not slowing us down in any way. And it goes without saying, we're fully cooperating and we'll let the process play out.

One moment for us. One moment for our next question. The next question comes from Gene Manheimer with Freedom Holdings. Your line is open.

Good afternoon, and congrats as well on the great numbers. Most of my questions have been answered, but I did want to ask about PCI Navigator. That seems like a very strong value proposition for the interventional radiologist. Is that a product you charge for currently, and you anticipate a moment when you will begin to charge for that product. Thank you.

Yeah, thanks for the question. And you're right, we're very excited about Navigator. Currently, we don't charge currently. We currently, there's no plan to pursue reimbursement for it. Our thinking, you know, coming into this year is the value proposition is so strong relative to building out our platform. The right thing to to do is get it in the market as a differentiator, and we can engage interventional cardiologists as champions for the CT plus heart flow pathway. So that's what we're doing right now. Early feedback has been very, very strong. I will say this is a rollout and a phased approach this year. And again, that's by design. Our number one focus is plaque, and we don't want to take away from the team's focus on this. So we're taking this mostly to high-volume PCI hospitals first. But the early trends and what we're hearing is really strong. So they certainly like it, and we look forward to taking this technology to more customers throughout the year and in a greater degree next year as well. Thank you.

And I'm not showing any further questions at this time. And as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.