Q4 2021 Pulmonx Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to <unk> quarter for 'twenty to 'twenty, One earnings conference call.
This time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time and then once you deploy assistance during the conference. Please press Star then zero on your Touchtone telephone I would now like to turn the conference over to your host MS. Lynn Morgen Ma'am you may begin.
Yeah.
Thank you operator, good afternoon, and thank you all for participating in today's call joining me from Telematics, Glenn French President and Chief Executive Officer, and Derrick Samit Chief Financial Officer earlier today Harmonics released financial results for the quarter and year ended December 31st 2021, a copy of the press release is available on the company.
Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Any statements contained on this call that relate to expectations or predictions of future events results or performance are forward looking statements. All forward looking statements, including without limitation those relating to our operating trends and future financial performance the impact of COVID-19 on our business and prospects for recovery expense management.
Expectations for hiring growth in our organization market opportunity guidance for revenue gross margin and operating expenses commercial expansion and product pipeline development are based upon our current estimation and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by those forward looking statements.
Accordingly, you should not place undue reliance on these statements for a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our public filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the S. E. T. On November 9th in 2020 One this conference call.
Contains time sensitive information and is accurate only as of the live broadcast today February 'twenty through 2020 two.
Homeowners Corporation disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
And with that I will turn the call over to Glenn.
Thanks, Helane good afternoon, everyone and welcome to our fourth quarter and full year 2021 earnings call here with me as Derrick sung our Chief Financial Officer.
Today, I would like to share a few highlights and contextualize, our fourth quarter results before turning to our outlook and strategic priorities for 2022.
Looking back on 2021, I'm very proud of the progress our team has made in an unquestionably challenging and unpredictable environment for.
For the full year 2021 we delivered $48.4 million in worldwide sales grew our business, 48% over 'twenty 'twenty and achieved three consecutive quarters of record sales all while executing on each of our commercial and strategic goals, specifically we increased our.
Shall footprint in 2021 growing our base of U S. Treating centers, 45% to 214 centers, enabling us to exceed our target of opening at least 200 centers by the end of the year.
We met our sales force expansion targets building out our U S sales management team to nine region directors, adding nine new sales territories in the U S to bring our total to 54.
And adding six territories outside the U S, bringing our total international territories to 34, we secured 10 positive coverage policy.
Policies predominantly within the Blue Cross Blue Shield Association, including anthem, and thereby added coverage for over 15 million lives across the United States.
We submitted in December 'twenty, 'twenty, one our regulatory filings seeking approval for Zephyr valve in Japan.
And we initiated enrollment in our era seal convert trial, a multicenter multinational study in Europe .
Turning now to our performance in the fourth quarter, we delivered another quarter of record sales in the U S growing our business to $7.3 million in the fourth quarter, we saw strength in the southern parts of the United States, which were previously impacted by the Delta variant offset by a new increase in co.
<unk> cases in the Midwest outside the United States, we recorded $6 $4 million of sales despite being impacted by a mid to late quarter Delta variance surge across major regions of Europe .
As we entered 2022 the impact from the recent omicron surge was widespread and simultaneous affecting all of our major U S and European markets. We expect the first quarter of 2022 to be significantly impacted by Covid with a recovery in our business starting in Q2.
Two and with revenues continuing to accelerate in the back half of the year.
Taking this into account, we expect first quarter 2022 revenues to be similar to the first quarter of 2021 in the range of $9 million to $10 million and.
And full year 2022 revenues to be in the range of $55 million to $60 million disc.
Despite the omicron impact in the first quarter, we have conviction in the fundamentals of our business and the strength of our team all signs continue to point to strong underlying demand for our zephyr valve treatment physicians and hospitals remain eager to adopt our procedure as evidenced by 16 new hospitals.
Which treated their first zephyr valve patients in the fourth quarter.
Patient interest has never been stronger as indicated by a more than doubling of patient calls into treating centers through 2020 , one as compared to 2020 and a doubling of the number of social media followers.
And throughout the pandemic, we have proven that we've been able to adapt and grow our business demonstrating strong commercial momentum during periods less affected by Covid.
To best position ourselves for the recovery in procedure volumes, we will continue to focus on commercial initiatives in 2022 to expand our global footprint and drive awareness of our zipper Zephyr valve therapy.
While we now have full geographic coverage in the U S. With our 54 sales territories, we will selectively and Opportunistically add additional sales territories throughout the year and expect to end the year with around 60 territories in the U S. We expect to continue our current pace of opening new centers in our top.
Getting to have approximately 280 U S. Treating centers opened by the end of the year.
On the international front, we will continue the expansion of our sales force and expect to add approximately three to five additional sales territories throughout the year, primarily within Europe . In addition, we will be making preparations for our geographic expansion into Japan as I mentioned earlier, we formally.
At our regulatory application for Zephyr valve to the Japanese authorities in December of 2021 .
Under the filing timeline, we anticipate regulatory approval by the end of this year.
Following the establishment of reimbursement, we expect to launch commercial efforts in the back half of 'twenty 'twenty three entering what we estimate to be a 1 billion dollar market with approximately 100000 patients in need of our zephyr valve treatment.
To prepare for commercialization, we expect to bring on a commercial leader and to start assembling a direct presence in Japan in the latter part of this year.
Finally, we are excited about the progress our Aerocele clinical development program has made last year, we initiated a multi center international clinical trial studying the use of arris seal to convert patients with collateral ventilation into zephyr valve eligible patients and expect to continue enroll.
Moment of this study through 'twenty 'twenty. Two we also continued to progress with preclinical studies required for an idea application with F. D. A to conduct a U S. Pivotal trial in summary, we are well positioned to accelerate growth in our business and to provide our life changing zephyr valve therapy to.
Patients as we move out of the Covid pandemic, the underlying demand for our treatment and the capabilities of our team have never been stronger and I am confident in our ability to execute on our initiatives and goals as we've done in the past.
I'll now turn the call over to Derrick to provide a more detailed review of our fourth quarter results.
Thank you Glenn and good afternoon, everyone.
Total worldwide revenue for the three months ended December 31, 2021 was $13.7 million, a 39% increase from $9 $8 million in the same period of the prior year and an increase of 40% on a constant currency basis.
U S revenue in the fourth quarter was $7.3 million, a 49% increase from $4 $9 million during the prior year period.
The record U S sales reflect strong procedure growth and commercial momentum of our business in regions less affected by Covid.
International revenue in the fourth quarter of 2021 was $6 $4 million, a 30% increase from $5 million. During the same period last year and an increase of 31% on a constant currency basis.
International procedure volumes were impacted by the Covid wave that swept through parts of Europe in the back half of the quarter and led to the regional hospital procedure restrictions.
Gross margin for the fourth quarter of 2021 was 74.8% compared to 72% in the prior year period.
The year over year expansion in gross margin was driven by improved production efficiencies.
Looking ahead, we expect gross margin to remain between 74 and 75% in 2022 as production efficiencies are partially offset by investments to add scale and redundancy to our supply chain as well as increases in material costs.
Over the longer term, we continue to expect margins to gradually move up into the high 70% range.
Total operating expenses for the fourth quarter of 2021 were $22.6 million, a 38% increase from $16 $4 million in the fourth quarter of 2020.
Stock based compensation expense was $2 $8 million in the fourth quarter of 2021 and $9 $9 million for the full year of 24.
For the full year 2021.
Looking ahead, we expect operating expenses for the full year 2022 to fall between 101 hundred $5 million inclusive of approximately $16 million of noncash stock based compensation expense as we continue to build out our commercial operations investing in our research and development programs and further scale our biz.
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R&D expenses for the fourth quarter of 'twenty, 'twenty, one were $3 $7 million compared to $2.5 million in the same period of the prior year.
The increase was primarily due to an increase in personnel clinical study regulatory and development related expenses needed to support our product development and clinical research activities.
Sales general and administrative expenses for the fourth quarter of 2021 or $18.9 million compared to $14 million in the fourth quarter of 2020.
The increase was attributable to an increase in sales and marketing expenses as we expanded our commercial team and increased commercial activities and an increase in public company expenses related to the scaling of our general and administrative infrastructure.
Net loss for the fourth quarter of 2021 was $13 million or a loss of 35 cents per share as compared to a net loss of $9 $3 million or a loss of 27 cents per share for the same period of the prior year.
And average weighted share count of $36 6 million shares was used to determine loss per share for the fourth quarter of 2021.
We ended December 31, 2021, with $191 million in cash cash equivalents and marketable securities a decrease of $11.7 million from September 30th 2021.
Finally, turning to our revenue outlook for 2022.
We expect full year 2022 revenue to fall in the range of $55 million to $60 million, which represents 14% to 24% revenue growth over 2021 and approximately 17% to 27% growth on a constant currency basis, as we estimate foreign exchange to present about a 3% headwind to global sales growth.
As previously mentioned.
We've been seeing because things are significant widespread impact from the omicron surged since the start of this year, which has resulted in the delay and disruption of Zephyr valve procedures. Given this unique circumstance, we're providing quarterly guidance on a onetime basis for the first quarter of 2022 to be in the range of $9 million to $10 million.
Based on current trends, we expect to see a recovery in our business in the second quarter and a sequential improvement in sales throughout the remainder of the year as procedure volumes normalize.
With that I'd like to thank you all for your attention and we will now open the call up for questions operator.
Thank you ladies and gentlemen, if you have a question at this time. Please press the star and then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
The first question comes from the line of Joanne Wuensch from Citi. Your line is now open you may ask your question.
Hi, This is actually Anthony on for Ed.
Thank you for taking our question.
It's just starting.
With guidance at the midpoint.
Pretty materially below consensus.
Can you just.
Talk about some of these assumptions that went into that guidance and what you're seeing now that we're towards the end of February .
Sure I'll go ahead and start maybe Derek can you can Ah can join in on the discussion of guidance.
So.
Basically what I'm.
What happened in the is a or what's happening in 'twenty 'twenty. Two is a reflection of a weak first quarter start which.
Basically across all of our major geographies, we got impacted by omicron and unlike prior waves. It all hit at once.
And the good news I guess is that is going away quickly. The bad news is it came on quickly and it hit us in all different locations as it relates to how we look ahead, what we've seen is significant weakness in the first half of the or the first month certainly of the quarter and.
And and pretty significant strengthening as we've moved through the middle and as we project out to the back half of the quarter. So we feel very good about the fundamentals of the business. We've seen this show before so to speak as it relates to pulling out of these COVID-19 waves, we have never before seen.
Our COVID-19 wave that hit all of our markets are so intensively all at the same time, but it is a it is receding very quickly.
Yeah. Thanks.
Thanks, Anthony so.
I would add in so starting with Q1 guidance.
As Glenn mentioned, despite the fact that this is probably the hardest and most severe impact that we've seen from COVID-19 across all all of the waves that we've seen throughout the last couple of years you know.
Our Q1 guidance kind of implies.
A similar.
Revenue level as to what we did last quarter or last year or one year ago. Why didn't you know that winter weight that has last year did not hit us as simultaneously and as widespread as as on the funded so that's kind of what we're looking at for our Q1 guidance and as Glen said the good news there.
We do feel like we're coming off the back of this we're hearing.
Hospitals talk about opening procedures in the March time frame so that.
That timing of the reopening of two procedures, whether its early or late March that's going to.
Effect.
And impact Q1, a bit, but it's a matter of when and not if.
And for the remainder of the year, we're feeling really really good about our ability to quickly recover and regain momentum right. So we've been consistently seeing strength and momentum in our business during periods of of minimal COVID-19 impact throughout the year.
We're building our base of accounts and increasing customer and patient demand and if you overlay on top of all this and expectation that the worst of the pandemic seems to be behind US now I think we're very well set up for reacceleration through the remainder of the year you know.
That said if there if there is one thing that we've learned from last year. It's it's it's a you know to prepare for the unexpected and you know they're there does remain some uncertainty around things like.
At the time course of resolution for hospital staffing shortages and potential for additional possible variance that might come later on in the year. So we've tried our best to factor all that into the guidance that we provided and so from where we sit today, we feel really really good about that.
Our ability to.
To achieve the guidance that we set out.
Got it I appreciate the color.
Thank you we have the next question comes from the line of Larry <unk>.
Of Wells Fargo. Your line is now open you may ask your question.
Hi, This is Charles on for Larry.
Just maybe digging in a bit more on the on the Q1 guidance. So I'm just looking at the kind of year over year I mean.
2021 also has a step down in Q1 with the extra week impact there although like this one its look in your guidance is implying some 30% sequential step down over Q4. So I think you've kind of explained that it's all hitting geographies at once.
So that makes sense, but.
Is that implying that you might might think that there's.
There's like a a quicker rebound when it when it is done if if it's not a long long process impacting all geographies at different times.
Might that come back a little bit faster than and what your what you saw last year at the same time and then another and another quick follow up to that.
Well with regard to with regard to rebound, we obviously look at a number of different measures and right now I think one of the things that we've reported on in the past has been the active accounts.
And active accounts for example in January were basically 31%, so 70% of our U S accounts were down in January which you basically have to go back to the beginning of the.
The pandemic ticket to be down at that sort of level late.
Late last year or I should say at the beginning of last year late 'twenty 'twenty, we we got hit pretty hard as well, but that's the starting point and we're seeing that build out in February more and more accounts are coming back.
And we're seeing our average daily sales sort of strengthen across the period. So we are anticipating continued acceleration exiting the first quarter and then moving through the second quarter.
And beyond.
Thank you I would add to that.
Charles or that the other biggest difference that we have between.
This year and where we were a year ago is that we have about 45% more.
Total treating centers in the U S than we did last year. So we have a much much greater base of accounts and so when we see the recovery in procedures and the recovery in activity of our accounts just by definition that base of accounts that we have is.
Is much greater and that's obviously going to be.
Be a significant tailwind for us this year versus last.
Okay. That's helpful and my quick follow up you answered on percentage of centers doing procedures.
Normally sometimes have a <unk>.
Leading indicators with Stridex scans.
How many procedures might be come in going forward.
When these when these facilities are shut down or or.
Our restricted like that do you still get that same leading indicator of strategy scans are they are they still scheduling procedures further out when they when it might be open again or is that really I wonder if you have any color there to share that's useful.
Yeah, No that's a great question.
It's actually.
Something that we talk about quite a bit which is that when when COVID-19 hits heavy and it's in a particular geography and of course, the omicron hit everywhere all at the same time, but typically.
What happens is the folks that are managing the patients in the ICU tend to be pulmonary and critical care specialists and our win when they get pulled away to do that service they're not.
Analyzing patient says possible candidates for for our procedure and as a consequence.
Much of the pipeline slows down and so the pent up demand. If you will the sort of the first procedures that are done moving out of one of these waves are almost always are largely composed of patients who are being rescheduled.
So that's really what our pent up demand is strat X was was lumpy in the fourth quarter.
In the Southeast for example, which got hit hard in the third quarter was was actually strengthening.
In the fourth quarter, and we saw strategy up there, whereas the upper Midwest and across to through Pennsylvania got hit hard in the fourth quarter and we saw strategy is down in that geography as well so.
We do see strategy soften during a heavy COVID-19 times so.
So it's not as though we were accumulating a lot of <unk> scans and heavy hit areas. During the omicron a wave that's that's now receding.
Alright Thats helpful. Thanks, Glenn Derrick.
Thank you next question, we have the line of Jason Bednar with Piper Sandler. Your line is now open you may ask your question.
Hey, good afternoon, everyone. So I'll just ask another one here on the guide you know totally understand the challenges here that away in early in the year, but.
Maybe hoping you can unpack a bit more why we shouldnt be thinking of account productivity, improving even a little bit more than what seems to be reflected in the guide.
I guess is the guy just a heavy dose of conservatism right now without yet seen that volume come back in the door January February or is there something else that you're balancing with additional waves or hospital staffing issues.
We think about the strength of that recovery coming back Neal maybe beginning of that March April timeframe.
Yeah, We're obviously Jason.
Wanting to be very thoughtful about what we commit to hear.
And I I we.
We did definitely see some strengthening in the productivity of accounts last year and in times when.
You know there was in certain regions of the country that weren't being directly impacted so that was really encouraging I know that we've been tracking this and reporting on it across our last year and the year before and it has been significantly impacted by Covid on on average, but when you break it down by region and look at the areas that that are less.
<unk> impacted by Covid, we did see strengthening so to the extent that we see.
As we expect some.
You know a reduction in the impact of Covid across the coming year, we would expect to be moving that productivity number up.
Okay.
Okay I guess.
That's helpful and maybe I'll follow up just a bit.
Just by my model, you know playing with playing with things here. It looks like you know productivity, maybe doesn't improve until we get to like <unk>.
<unk> this year and fourth quarter maybe.
Maybe we can handle some of those offline but.
Just some quick back of the envelope it looks like you're targeting maybe something in the range of 30% growth in U S separate procedures for the second half of 'twenty, two and not asking you to necessarily blessed that I know theres assumptions in there on you know what I'm, assuming there for a second quarter and how you are and how your international markets play out, but you've got some easy comps there from Delta and omicron in third quarter and fourth quarter.
<unk>.
Maybe the follow up here is just why wouldnt procedure volumes being better than that 30% growth with the bigger customer footprint you have out there now.
Now, we're going to be where we will focus on getting the engine going in and obviously in the back half of this quarter and accelerate tap I think pretty significantly on a quarter over quarter basis in the second quarter and then from the second quarter onto the third quarter. So.
I think we're you know we're we're looking at this a number of different ways, including the way that you're describing from a productivity perspective, but also when.
When you begin to talk about increasing quarter over quarter.
You know by the magnitude that we're talking about across the year. It's.
We want to be thoughtful about what we're going to commit to.
Okay, maybe if I could squeeze one more in is there any limitation you have.
Operationally, our with your commercial infrastructure that would prevent like maybe a faster acceleration.
Again, whether that's anything on the end customer level or again with your own sales force or production.
No is the short answer we this the business is fundamentally sound.
By our assessment I mean, where were looking at metrics that are suggesting are providing us with great confidence as we talked about there. The calls that are going into hospitals are up 100% year over year. The social media is up over 100% and these are big numbers you know we're into six figures now.
In terms of followers we initiated.
In the latter part of 2020 patient a patient opt in option, where we can engage with patients and really cultivate.
And nurture their journey towards treatment and we've seen just a spectacular growth going from five figures to nearly six figures in that regard. So we've got a lot of things that really seem to be lining up in addition to having as Derrick said, you know 45% more accounts than we did the year before we've got more reps.
Referring docs are clearly focused on what we're doing and we're focused on them and so.
So I don't think there's anything in our supply our ability to supply is there.
So we're just we're just trying to get the engine because sort of restarted we hadn't experienced this before the only other time, where we were down at this level really was at the start of the pandemic and that was really about the reservation of capacity what I'm, saying is like for example in California, you'd have 600 bed hospitals that were larger.
Closing their doors to just about everything and then none of the patients showed up here in California. So there's a tremendous amount of reservation, whereas with with this omicron and the sort of infection rate in the U S estimated at about 10 times.
Even though the follow through to the ICU was way less on a proportional basis. It still drove a ton of patients into the ICU across the U S and and across all of our major O U S markets. So are the.
The good news is it came on or I guess, the bad news is it came on Super fast, but the good news is it's we're way down the curve and we are seeing and we're hearing the engine start.
And where you know where were seeing our you know this week last week revenues strengthened significantly in looking at our scheduled.
Procedures going forward, we're quite encouraged by what we see and then also what we hear from our customers. So.
No no constraints here the fundamentals are solid.
Yeah, and if I could just jump in going back to your question on growth rates Jason.
Our our our guidance, while you're correct in that.
On average in the back three quarters of the year may imply approximately 30% growth in the U S.
Our guidance implies well over 30% growth exiting the U S right and so that.
That average really incorporates the sort of restart coming off the omicron wave that we're hitting and and frankly you know some of that uncertainty is around how quickly.
The accounts can bounce back and how quickly restart but.
We expect to be exiting the year.
Year over year growth rate in the U S and globally.
Well over 30%.
Thanks, guys.
Thank you. The next question comes from the line of Rick Wise from Stifel. Your line is now open you may ask your question.
Good afternoon, Glenn Hi, Derrick.
I was hoping you could break down the road.
Coverage discussion.
And in a more granular way.
I feel like we've been sort of talking about them holistically.
Little more leaning toward the U S. Maybe Glenn can talk more about what's happening internationally I mean.
The truth is when I look at my numbers the U S held up better than I might have thought sort of.
Sequentially flattish.
For Q versus <unk>, the U S. O U S was a lot weaker than I expected or in your modeling.
So yeah no that's it.
I'm sorry, I was just asked.
Squeezes last little bit and so.
So.
It was worse was O U S worse than you expected is the recovery happening equally in each geography. How are you. How are you thinking about the unfolding of the year and that way. Thank you.
Boy Theres a lot in that question. So let me let me just try to so starting at the beginning of that.
Yeah. We were we were pleased with the way that we we we last reported in early November and we were looking ahead and a lot of things, where we're going on at that time. If you look at the curves they all seem to bend pretty dramatically upward.
Within a day or so of that time point, but we were pleased with with how we how things ended up in the U S. All things considered.
We were getting impacted pretty significantly in the fourth quarter in the upper Midwest in fact are in a place like Michigan.
The Delta variant actually.
Impacted upper Michigan. It was omicron was a bit of a reliever for them because they were getting hit so hard late in the year and the upper Midwest and so but at the at the end of the day, we have a lot of accounts in the United States and so we were able to perform reasonably well in the fourth quarter and came in at.
Fairly solid way I think where the.
Where we didn't expect things to play out exactly the way. They did was the acceleration of the Delta variant most particularly in German speaking parts of Europe .
And in those German speaking parts of Europe sort of in southern Germany Sac.
Yes.
Bavaria, and Saxony, where particularly heavily hit and so I think that we we got impacted in in a subset of Europe , a big part of our business.
To a degree that we did not anticipate so I think that's that really explained the shortfall to what our expectations were.
The last time, we reported so that's that's where we're coming out at this point and then in those geographies. If you look Michigan that the shape of the curve in Michigan is very much like the shape of the curve in a place like Germany, where it looks like Delta just hand, it off to omicron. So they went from a really bad situation to an even worse situation.
And then omicron hit another all other geographies and as and as essentially undermined.
To some extent they'll want that as sort of a leaping off point that we had anticipated and we were anticipating a much more solid first quarter, which which aman omicron as is going to get in the way of and so that largely explains.
The shortfall that you see.
Totaling across the year.
As Derrick had mentioned, though I think that is.
If you look at if we're not providing specific guidance, but I suppose if you if you're if you're doing the math on the back of the envelope the velocity at which we're exiting 'twenty this year 2022 .
Is is in the neighborhood of where I think we were thinking about or many of the models are at the time of the IPO. We're having is in that kind of neighborhood exiting 'twenty 'twenty. Two so we're making up a lot of ground I think we feel really good about the foundation that we've put in place and how we're going to.
Leverage that across the year.
That's great color.
And maybe just last for me on gross margin.
Here too relative to my expectations gross margins were better than we look for in the fourth quarter. Despite these headwinds and challenges maybe just maybe I just didnt take it and maybe you could.
Talk about that again and I'd be curious.
You you've emphasized today and as you have in the past.
Long term potential for high seventies.
It's like what's required what kind of revenue base is required to get to that territory is it just revenues or is it something else. Thanks, so much.
Yeah. Thanks for that question Rick So so we're feeling really good about our gross margin rate this quarter.
We delivered just under 75% that's the highest that we've ever delivered in in the history of the company. So clearly we're seeing the benefits of our production efficiencies and overhead absorption that I talked about are materializing as we expected.
We're always going to see some fluctuations in margin from quarter to quarter, depending on in period costs and product mix and things like that but over time.
We do expect our gross margins to continue to move higher as we've seen over the over that over the last couple of years.
Now that said in the near term.
We are going to be making some investments in scaling our overall production infrastructure and adding some redundancy to our supply chain, which I think is ever important in the current environment.
And we're also cognizant of some of these.
Supply chain pricing pressures, we're seeing some very modest pricing pressure all very manageable, but.
We are seeing some hints of modest pricing pressure.
A lot of what's being felt across the industry. So.
It's why we are guiding.
Guiding to stay kind of within the 74% to 75% range for the year right now hopefully, we'll be able to do a little better than that.
But that's where we're comfortable kind of starting the year at a but we do expect as I mentioned that that over time, we will as you mentioned too that will will continue to creep that that gross margin up.
And I think we can get to kind of the high 70% range over the next few years and I think I think that's still was primarily driven by.
Production volume increases that drives production efficiencies.
So I think when we get to that revenue range.
With a nine digit number starting with one Ah yeah somewhere in that in that range.
That's when I would expect that we would get to that high 70%.
<unk> percent gross margin range and we.
We feel very good about getting there.
I appreciate that there thank you.
Yeah.
Thank you.
Question at this time I would now like to turn.
Turn the call over to Mr. Glenn French.
Alright, well. Thank you all very much for your time and attention today. We also thank you for your continued interest in pulmonic.
Good afternoon, and good evening.
Sure.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you all for participating you may now disconnect.
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