Q2 2024 Pulmonx Corp Earnings Call

July 31, 2024

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Unknown Executive: Ladies and gentlemen, thank you for standing by. Welcome to Pulmonx's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

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Unknown Executive: Welcome to Pulmonx 2nd quarter, 2024 earnings conference call.

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Speaker Change: Welcome to Pulmonx's 2nd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.

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Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

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Elizabeth Sparicio: I would now like to turn the conference over to Elizabeth Sparicio, investor relations. Please go ahead.

Speaker Change: Please be advised that today's conference is being recorded.

Speaker Change: I would now like to turn the conference over to Elizabeth Sparicio, Investor Relations. Please go ahead.

Elizabeth Sparicio: Good afternoon, and thank you all for participating in today's call. Joining me from Pulmonx are Steve Williamson, President and Chief Executive Officer, and Mehul Joshi, Chief Financial Officer. Earlier today, Pulmonx issued a press release announcing its financial results for the quarter and its June 30th, 2024. A copy of the press release is available on Pulmonx's website.

Elizabeth Sparicio: Good afternoon and thank you all for participating in today's call. Joining me from Pulmonx are Steve Williamson, President and Chief Executive Officer, and Mehul Joshi, Chief Financial Officer.

Speaker Change: Earlier today, Pulmonx issued a press release announcing its financial results for the quarter ended June 30, 2024. A copy of the press release is available on Pulmonx's website.

Elizabeth Sparicio: 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 in 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, commercial strategies, and future financial performance, the timing and results of clinical trials, 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, growth margin, and operating expenses, commercial expansion, and product pipeline development, are based upon our current estimates and various assumptions.

Speaker Change: 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.

Speaker Change: Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

Elizabeth Sparicio: All forward-looking statements, including, without limitation, those relating to our operating trends, commercial strategies, and future financial performance, the timing and results of clinical trials, 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, These statements involve material risks and uncertainties that could cause actual results or events to material Accordingly, you should not place undue reliance on these statements.

Speaker Change: All forward-looking statements, including, without limitation, those relating to our operating trends, commercial strategies, and future financial performance,

Speaker Change: The Timing and Results of Clinical Trials.

Speaker Change: The Impact of COVID-19 on Our Business and Prospects for Recovery.

Speaker Change: Expense Management, Expectations for Hiring, Growth in our Organization, Market Opportunity,

Speaker Change: Guidance for Revenue, Gross Margin and Operating Expenses, Commercial Expansion, and Product Pipeline Development are based upon our current estimates and various assumptions.

Elizabeth Sparicio: These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or applied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

Speaker Change: These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or applied by these forward-looking statements.

Elizabeth Sparicio: For a list and description of the risks and uncertainties associated with our business, please refer to the risk factor section of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC on May 3rd, 2024.

Elizabeth Sparicio: For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC on May 3rd, 2025. Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the press release, which is posted on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for a gap.

Speaker Change: Accordingly, you should not place undue reliance on these statements.

Speaker Change: For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC on May 3, 2024.

Elizabeth Sparicio: Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the press release, which is posted on our investor relations website. These non-gap measures are not intended to be a substitute for our gap results.

Speaker Change: Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the press release, which is posted on our Investor Relations website.

Speaker Change: These non-GAAP measures are not intended to be a substitute for our GAAP results.

Elizabeth Sparicio: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, July 31st, 2024. Pulmonics disclaims any intention or obligation, except as required by law, to update or advise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise.

Elizabeth Sparicio: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, July 31st, 2024. Pulmonx 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.

Speaker Change: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, July 31, 2024.

Speaker Change: Pulmonx 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 Steve.

Steve Williamson: And with that, I will turn the call over to Steve. Thank you, Elizabeth, and good afternoon, everyone. Welcome to our second quarter 2024 earnings call. Here with me today is Mayhul Joshi, our Chief Financial Officer. Officer. Overall, I am pleased with our second quarter performance as we achieved a record quarter of 20.8 million worldwide sales, representing 21% growth over the same period of the prior year. We are encouraged by our team's continued execution of our commercial and clinical pipeline strategies as we seek to further expand patient access to Zephyr Vels and serve the 1.2 million patients with limited treatment options who stand a benefit from BLVR.

Steven S. Williamson: Welcome to our second quarter 2024 earnings call. Here with me today is Mehul Joshi, our Chief Financial Officer. Overall, I am pleased with our second quarter performance as we achieved a record quarter of $20.8 million in worldwide sales, representing 21% growth over the same period of the prior year. We are encouraged by our team's continued execution of our commercial and clinical pipeline strategies as we seek to further expand patient access to Zephyr Valves and serve the 1.2 million patients with limited treatment options who stand to benefit from BLVR.

Steven S. Williamson: Thank you, Elizabeth, and good afternoon, everyone. Welcome to our second quarter 2024 earnings call. Here with me today is Mehul Joshi, our Chief Financial Officer.

Steven S. Williamson: Overall I am pleased with our second quarter performance as we achieved a record quarter of 20.8 million worldwide sales representing 21% growth over the same period of the prior year.

Speaker Change: We are encouraged by our team's continued execution of our commercial and clinical pipeline strategies as we seek to further expand patient access to Zephyr valves and serve the 1.2 million patients with limited treatment options who stand to benefit from BLVR.

Steve Williamson: The momentum we built exiting the quarter leaves us increasingly confident in our ability to deliver on the previously communicated revenue guidance of 81 to 84 million dollars for the full year 2024. As expected, our second quarter results were driven by the continued traction of our commercial strategy in the United States, where we achieved sales growth of 26% compared to the second quarter of 2023.

Steven S. Williamson: The momentum we built exiting the quarter leaves us increasingly confident in our ability to deliver on the previously communicated revenue guidance of $81 to $84 million for the full year 2024. As expected, our second quarter results were driven by the continued traction of our commercial strategy in the United States, where we achieved sales growth of 26% compared to the second quarter of 2023. As a reminder, our U.S. commercial strategy is three-pronged.

Speaker Change: The momentum we built exiting the quarter leaves us increasingly confident in our ability to deliver on the previously communicated revenue guidance of $81 to $84 million for the full year 2024.

Speaker Change: As expected, our second quarter results were driven by the continued traction of our commercial strategy in the United States, where we achieved sales growth of 26% compared to the second quarter of 2023.

Steve Williamson: As a reminder, our US commercial strategy is repronged. The first is that training physicians at hospitals that have the potential to be high performing Zephyr Vels centers. The second is automating patient workflows and facilitating the sharing of best practices among existing centers to optimize their Zephyr Vels programs. And third, building local awareness of the benefits of our treatment among COPD physicians and patients. Throughout the quarter, we made substantial progress in each prong of our commercial strategy. In Q2, we added 17 new accounts in the United States and ended the quarter with 267 active accounts or centers that placed a revenue-generating order in the quarter.

Steven S. Williamson: The first is training physicians at hospitals that have the potential to be high-performance Zephyr Valve centers. The second is automating patient workflows and facilitating the sharing of best practices among existing centers to optimize their Zephyr Valve programs. And third, building local awareness of the benefits of our treatment among COPD physicians and patients. Throughout the quarter, we made substantial progress in each prong of our commercial strategy. In Q2, we added 17 new accounts in the United States and ended the quarter with 267 active accounts or centers that placed a revenue-generating order in the quarter.

Speaker Change: As a reminder, our U.S. commercial strategy is three-pronged. The first is that training physicians at hospitals that have the potential to be high-performing Zephyr valve centers.

Speaker Change: The second is automating patient workflows and facilitating the sharing of best practices among existing centers to optimize their Zephyr valve programs. And third, building local awareness of the benefits of our treatment among COPD physicians and patients.

Speaker Change: Throughout the quarter, we made substantial progress in each prong of our commercial strategy. In Q2, we added 17 new accounts in the United States and ended the quarter with 267 active accounts or centers that placed a revenue-generating order in the quarter.

Steve Williamson: As we continue to expand our US account base, we're engaging with the C-suite and hospital systems, which provide the opportunity to present the benefits of Zephyr Vels treatment program to hospital administration, but then have the ability to provide needed resources for clinical support and account development. We're excited by the opportunity to serve more patients in need of our life-changing treatment with our continuously growing base of US centers. While we continue to identify potentially high performing Zephyr Vels centers and expect to opportunistically establish new accounts, our primary focus remains on driving utilization in existing accounts. Within our existing base Zephyr Vels centers, the team continues to establish our treatment as a more routine procedure, particularly through the sharing of best practices of our higher utilization treatment centers and the development of workflow automation tools.

Steven S. Williamson: As we continue to expand our U.S. account base, we're engaging with the C-suite of hospital systems, which provides the opportunity to present the benefits of a Zephyr Val treatment program to hospital administration, but then have the ability to provide needed resources for clinical support and account development. We're excited by the opportunity to serve more patients in need of our life-changing treatment with our continuously growing base of U.S. centers. While we continue to identify potentially high-performing Zephyr Valve Centers and expect to opportunistically establish new accounts, our primary focus remains on driving utilization in existing accounts.

Speaker Change: As we continue to expand our U.S. account base, we're engaging with the C-suite of hospital systems, which provides the opportunity to present the benefits of a Zephyr Val treatment program to hospital administration, but then have the ability to provide needed resources for clinical support and account development.

Speaker Change: We're excited by the opportunity to serve more patients in need of our life-changing treatment with our continuously growing base of U.S. centers.

Speaker Change: While we continue to identify potentially high-performing Zephyr Valve Centers and expect to opportunistically establish new accounts, our primary focus remains on driving utilization in existing accounts.

Steven S. Williamson: Within our existing base of Zephyr Valve Centers, the team continues to establish our treatment as a more common procedure, particularly through the sharing of best practices of our higher utilization treatment centers and the development of workflow automation tools. In June, we hosted our second annual Advanced Clinical Summit, where we had 45 dedicated professionals from 24 hospitals, passionate about advancing patient care in the field of bronchoscopic lung volume reduction, gather together. Attendees participated in a comprehensive curriculum designed to identify patients most likely to benefit from Zephyr valves, build efficient patient pathways, and engage administration to secure necessary resources.

Speaker Change: Within our existing base of Zephyr valve centers, the team continues to establish our treatment as a more routine procedure, particularly through the sharing of best practices of our higher utilization treatment centers and the development of workflow automation tools.

Steve Williamson: In June, we hosted our second annual Advanced Clinical Summit, where we had 45 dedicated professionals from 24 hospitals, passionate about advancing patient care in the field of bronchoscopic lung volume reduction, gathered together. Attendees participated in a comprehensive curriculum designed to identify patients most likely to benefit from Zephyr Vels, build efficient patient pathways, and engage administration to secure necessary resources. We heard from one hospital in the Southeast who attended our inaugural summit last year about their experience implementing these best practices into their own workflows. As a result, the hospital saw increased efficiency and procedural capacity, allowing them to grow their Zephyr Vels volumes from a handful of cases last year to over 40 cases in the first half of this year.

Speaker Change: In June , we hosted our second annual Advanced Clinical Summit, where we had 45 dedicated professionals from 24 hospitals.

Speaker Change: Passionate about advancing patient care in the field of bronchoscopic lung volume reduction, gather together. Attendees participated in a comprehensive curriculum designed to identify patients most likely to benefit from Zephyr valves.

Speaker Change: Build efficient patient pathways and engage administration to secure necessary resources.

Steven S. Williamson: We heard from one hospital in the southeast who attended our inaugural summit last year about their experience implementing these best practices in their own workplace. As a result, the hospital saw increased efficiency and procedural capacity, allowing it to grow its zephyr valve volumes from a handful of cases last year to over 40 cases in the first half of this year.

Speaker Change: We heard from one hospital in the Southeast who attended our inaugural summit last year about their experience implementing these best practices into their own workflows.

Speaker Change: As a result, the hospital saw increased efficiency and procedural capacity, allowing them to grow their zephyr valve volumes from a handful of cases last year to over 40 cases in the first half of this year.

Steve Williamson: This remarkable anecdote is one of many and further validates our commercial strategy and the vast opportunity we have for continued growth. During a summit, I was inspired by our growing community of partnering physicians and staff who all share a common goal of helping patients with severe emphysema and COPD breathe ease.

Steven S. Williamson: This remarkable anecdote is one of many and further validates our commercial strategy and the vast opportunity we have for continued growth. During the summit, I was inspired by our growing community of partnering physicians and staff, who all share a common goal of helping patients with severe emphysema and COPD breathe easily. Over the last few months, I visited treatment centers across the U.S. and abroad to connect with physicians and gain field-based insights on the success of our commercial, and I was humbled by my experience witnessing the impact of our Zephyr valve treatment on patients.

Speaker Change: This remarkable anecdote is one of many and further validates our commercial strategy and the vast opportunity we have for continued growth.

Speaker Change: During the summit, I was inspired by our growing community of partnering physicians and staff who all share a common goal of helping patients with severe emphysema and COPD breathe easier.

Steve Williamson: here. Over the last few months, I visited treating centers across the U.S. and abroad to connect with physicians and gain field-based insights on the success of our commercial initiatives. I was humbled by my experience witnessing the impact of our Zepperval treatment on patients. My conversations with treating physicians on building efficient work streams and establishing Zepperval was a routine procedure that also helped to inform the region's specific strategies we're designing today to optimize the building blocks we have in place. For example, an account Colorado that averaged 10 cases per quarter took about six months to move patients through the treatment funnel from initial visit to implant.

Speaker Change: Over the last few months, I visited treating centers across the U.S. and abroad to connect with physicians and gain field-based insights on the success of our commercial initiatives.

Speaker Change: I was humbled by my experience witnessing the impact of our Zephyr valve treatment on patients.

Steven S. Williamson: My conversations with treating physicians on building efficient workstreams and establishing the Zephyr Valve as a routine procedure have also helped to inform the region-specific strategies we're designing today to optimize the building blocks we have in place. For example, an account in Colorado that averaged 10 cases per quarter took about 6 months to move patients through the treatment funnel from initial visit to implant. Together with all the key stakeholders, we helped identify bottlenecks in the process, which included a lack of procedure capacity and a clear program.

Speaker Change: My conversations with treating physicians on building efficient work streams and establishing Zephyr valve as a routine procedure have also helped to inform the region specific strategies we're designing today to optimize the building blocks we have in place.

Speaker Change: For example, an account in Colorado that averaged 10 cases per quarter took about 6 months to move patients through the treatment funnel from initial visit to implant. Together with all the key stakeholders, we helped identify bottlenecks in the process, which included a lack of procedure capacity and a clear program owner.

Steve Williamson: Together with all the key stakeholders, we helped identify bottlenecks in the process, which included a lack of procedure capacity and a clear program owner. As a result, the customer defined a new Zepperval program owner, an implemented process changes designed to improve workflow, such as setting up routine order sets and their EMR for all key action items. Today, the center is seeing time to treatment decrease as the number of cases per week increase. The interventional pulmonology team recently went to hospital administration and asked for and received two additional case slots per week, with plans to ask for more as they realize the benefit of their new workflow implementation.

Steven S. Williamson: As a result, the customer defined a new Zephyr valve program owner and implemented process changes designed to improve workflow, such as setting up routine order sets in their EMR for all key actions. Today, the Center is seeing time-to-treatment decrease as the number of cases per week increases.

Speaker Change: As a result, the customer defined a new Zephyr valve program owner and implemented process changes designed to improve workflow, such as setting up routine order sets in their EMR for all key action items.

Speaker Change: Today, the Center is seeing time-to-treatment decrease as the number of cases per week increase. The interventional pulmonology team recently went to hospital administration and asked for and received two additional case slots per week, with plans to ask for more as they realize the benefit of their new workflow implementation.

Steven S. Williamson: The interventional pulmonology team recently went to hospital administration and asked for and received two additional case slots per week, with plans to ask for more as they realize the benefit of their new workflow implementation. As part of our efforts to enable cost-effective workflow efficiencies more broadly, I'm pleased to announce the upcoming pilot launch of our LungTracks Connect program, an automation software that enables a streamlined, efficient, and collaborative workup process. Currently, users need to transfer CT scans onto a disk and then manually upload the scan to the Stratix platform to generate a report for physician evaluation.

Steve Williamson: As part of our efforts to enable cost-effective workflow efficiencies more broadly, I'm pleased to announce the upcoming pilot launch of our LongTracks Connect program, an automation software that enables a streamlined, efficient, and collaborative workup process. Currently, users need to transfer CT scans onto a disk and then manually upload the scan to the Stratx platform to generate a report for physician evaluation. Our new software eliminates this manual process by allowing the CT scan to be uploaded directly to the Stratx platform from the hospital's PACS system. Additionally, it enables the care team to track and share patient workup status, potentially reducing time to treatment for the patient.

Speaker Change: As part of our efforts to enable cost-effective workflow efficiencies more broadly, I'm pleased to announce the upcoming pilot launch of our LungTracks Connect program, an automation software that enables a streamlined, efficient, and collaborative workup process.

Speaker Change: Currently, users need to transfer CT scans onto a disk and then manually upload the scan to the Stratix platform to generate a report for physician evaluation.

Steven S. Williamson: Our new software eliminates this manual process by allowing the CT scan to be uploaded directly to the Stratix platform from the hospital's PAC system. Additionally, it enables the care team to track and share patient workup status, potentially reducing time to treatment for the patient. This stands to meaningfully reduce key friction points in patient workflow and allow centers to better manage the growing Zephyr valve caseload. We expect to initiate our pilot program in a handful of select centers in the back half of this year, and I look forward to providing further details on our progress on future calls.

Speaker Change: Our new software eliminates this manual process by allowing the CT scan to be uploaded directly to the Stratix platform from the hospital's PAC system.

Speaker Change: Additionally, it enables the care team to track and share patient workup status, potentially reducing time to treatment for the patient. This stands to meaningfully reduce key friction points in patient workflow and allow centers to better manage growing Zephyr valve caseloads.

Steve Williamson: This stands to meaningfully reduce key friction points in patient workflow and allows centers to better manage growing Zepperval case loads. We expect to initiate our pilot program in a handful of select centers in the back half of this year, and I look forward to providing further details on our progress on future calls. As we continue to share best practices, drive workflow automation, and help our customers build efficient programs that deliver a positive patient experience, we're also continuing to promote regional awareness programs for patients and community COPD physicians. These initiatives collectively enabled 20,000 patient engagements in the first half of 2024, provided peer-to-peer education to over 450 physicians, and drove broader awareness with another 6,000 physicians through digital channels like our CME program.

Speaker Change: We expect to initiate our pilot program in a handful of select centers in the back half of this year, and I look forward to providing further details on our progress on future calls.

Steven S. Williamson: As we continue to share best practices, drive workflow automation, and help our customers build efficient programs that deliver a positive patient experience, we're also continuing to promote regional awareness programs for patients and community COPD physicians. These initiatives collectively enabled 20,000 patient engagements in the first half of 2020, provided peer-to-peer education to over 450 physicians, and drove broader awareness with another 6,000 physicians through digital channels like our CME program.

Speaker Change: As we continue to share best practices, thrive workflow automation, and help our customers build efficient programs that deliver a positive patient experience, we're also continuing to promote regional awareness programs for patients and community COPD physicians.

Speaker Change: These initiatives collectively enabled 20,000 patient engagements in the first half of 2024, provided peer-to-peer education to over 450 physicians, and drove broader awareness with another 6,000 physicians through digital channels like our CME program.

Steve Williamson: While our primary commercial focus remains on growing our US business, we are pleased with our performance across our international markets in Q2, which resulted in OUS year-over-year revenue growth of 12%. We're continuing our work this year to adapt many of the sales tools we've developed for use in the US for use in European markets, such as operational best practice sharing, community physician engagement, and peer-to-peer education programs. The progress we've made on these initiatives was evident at our EMEA summer sales meeting in July, where I left increasingly confident in our team's ability to continue executing our commercial strategy.

Steven S. Williamson: While our primary commercial focus remains on growing our U.S. business, we are pleased with our performance across our international markets in Q2, which resulted in OUS year-over-year revenue growth of 12 percent. We're continuing our work this year to adapt many of the sales tools we've developed for use in the U.S. for use in European markets, such as operational best practice sharing, community physician engagement, and peer-to-peer education programs. The progress we've made on these initiatives was evident at our EMEA summer sales meeting in July, where I left increasingly confident in our team's ability to continue executing our commercial strategy.

Speaker Change: While our primary commercial focus remains on growing our U.S. business, we are pleased with our performance across our international markets in Q2, which resulted in OUS year-over-year revenue growth of 12%.

Speaker Change: We're continuing our work this year to adapt many of the sales tools we've developed for use in the U.S. for use in European markets, such as operational best practice sharing, community physician engagement, and peer-to-peer education programs.

Steve Williamson: We anticipate the impact of our international efforts to become increasingly evident in 2025, as we focus on foundation building this.

Speaker Change: We anticipate the impact of our international efforts to become increasingly evident in 2025 as we focus on foundation building this year.

Steve Williamson: Chair. Beyond Europe, we also continue to make progress with our expansion efforts in Asia. First, we entered into a new distribution agreement with an innovative medical supply distribution company in China. While this market represents a small portion of our business, we believe this transition to a new distributor will allow us to expand our market region, China, in a more cost-effective manner. Secondly, earlier this month, I attended the 47th Annual Meeting of the Japanese Society of Respiratory Endoscopy in Osaka, where I connected with thought leaders spearheading the launch of Zephyr Val's in Japan. I'm encouraged by the positive reception our technology is received from participating centers in the early days of the post-market study, and the progress our Japan team has made in driving increased awareness of Zephyr Val's.

Speaker Change: Beyond Europe , we also continue to make progress with our expansion efforts in Asia. First, we entered into a new distribution agreement with an innovative medical supply distribution company in China.

Steven S. Williamson: While this market represents a small portion of our business, we believe this transition to a new distributor will allow us to expand our market reach in China in a more cost-effective manner. Secondly, earlier this month, I attended the 47th Annual Meeting of the Japanese Society of Respiratory Endoscopy in Osaka, where I connected with thought leaders spearheading the launch of Zephyr valves in Japan. I'm encouraged by the positive reception our technology has received from participating centers in the early days of the post-market study and the progress our Japan team has made in driving increased awareness of Zephyr Valley.

Speaker Change: While this market represents a small portion of our business, we believe this transition to a new distributor will allow us to expand our market reach in China in a more cost-effective manner.

Speaker Change: Secondly, earlier this month I attended the 47th annual meeting of the Japanese Society of Respiratory Endoscopy in Osaka where I connected with thought leaders spearheading the launch of Zephyr valves in Japan.

Speaker Change: I'm encouraged by the positive reception our technology has received from participating centers in the early days of the post-market study, and the progress our Japan team has made in driving increased awareness of Zephyr valves.

Steve Williamson: That being said, we still anticipate it will take time to grow widespread awareness of this new treatment option, and we expect the bulk of enrollment to occur in the back half of the enrollment period, as we train additional sites and move the first patients through the treatment funnel. As we have said in the past, we do not expect a material revenue contribution from Japan until approximately 2026. This study marks an essential step toward broader commercialization in a new market, where we estimate approximately 100,000 patients stand to benefit from Zephyr Val's.

Steven S. Williamson: That being said, we still anticipate it will take time to grow widespread awareness of this new treatment option, and we expect the bulk of enrollment to occur in the back half of the enrollment period as we train additional sites and move the first patients through the treatment funnel. As we have said in the past, we do not expect material revenue contribution from Japan until approximately 2026. This study marks an essential step toward broader commercialization in a new market where we estimate that approximately 100,000 patients stand to benefit from Zephyrus.

Speaker Change: That being said, we still anticipate it will take time to grow widespread awareness of this new treatment option, and we expect the bulk of enrollment to occur in the back half of the enrollment period, as we train additional sites and move the first patients through the treatment funnel.

Speaker Change: As we have said in the past, we do not expect a material revenue contribution from Japan until approximately 2026.

Speaker Change: This study marks an essential step toward broader commercialization in a new market where we estimate approximately 100,000 patients stand to benefit from Zephyr Valves.

Steve Williamson: In addition to growing our global footprint, we remain committed to our goal of expanding the number of patients that can be treated with Zephyr Val's through our Aresio Clinical Development Program. We continue to make progress with our Convert2 Pivotal Trial, a multi-center global study designed to evaluate the safety and effectiveness of the Aresio system in limiting collateral ventilation in severe COPD and amphibian patients. I'm excited to announce that earlier in July, I attended the first US case in the Convert2 Pivotal Trial, where a patient was successfully treated with Aresio by Dr. Jerry Criner, the chair's Thoracic Medicine and Surgery at Temple University in Philadelphia, a leading Zephyr Val's center.

Steven S. Williamson: In addition to growing our global footprint, we remain committed to our goal of expanding the number of patients that can be treated with separate valves through our AeroSeal Clinical Development Program. We continue to make progress with our CONVERT2 Pivotal Trial, a multi-center global study designed to evaluate the safety and effectiveness of the AeroSeal system in limiting collateral ventilation in severe COPD and emphysema patients. I'm excited to announce that earlier in July, I attended the first U.S. case in the COVERT-2 Pivotal Trial, where a patient was successfully treated with Aeroseal by Dr. Jerry Kreiner, the Chair of Thoracic Medicine and Surgery at Temple University in Philadelphia, a leading Zephyr valve center.

Speaker Change: In addition to growing our global footprint, we remain committed to our goal of expanding the number of patients that can be treated with separate valves through our Aeroseal Clinical Development Program.

Speaker Change: We continue to make progress with our CONVERT2 Pivotal Trial, a multi-center global study designed to evaluate the safety and effectiveness of the aerosol system in limiting collateral ventilation in severe COPD and emphysema patients.

Speaker Change: I'm excited to announce that earlier in July , I attended the first U.S. case in the CONVERT-2 pivotal trial where a patient was successfully treated with aerocele by Dr. Jerry Kreiner, the Chair of Thoracic Medicine and Surgery at Temple University in Philadelphia, a leading Zephyr valve center.

Steve Williamson: We believe Aresio has the potential to expand our addressable market by approximately 20% globally. The US represents our largest share of that opportunity, and we see the first US case as a critical step forward in our journey to unlocking this important market segment. The US enrollment milestone follows the initiation of enrollment for Convert2 and select international centers in February of 2024. As it pertains to Convert1, our European study, we look forward to the presentation of the six-month follow-up data at the European Respiratory Society Congress in early September in Vienna. We expect the presentation will demonstrate a high conversion to CB negative status in the target lobe following Aresio and positive clinical outcomes following subsequent treatment with Zephyr Val's.

Steven S. Williamson: We believe Aeroseal has the potential to expand our addressable market by approximately 20% globally. The U.S. represents our largest share of that opportunity, and we see the first U.S. case as a critical step forward in our journey to unlocking this important market segment. The U.S. enrollment milestone follows the initiation of enrollment for CONVERT1 and select international centers in February of 2024. As it pertains to CONVERT1, our European study, we look forward to the presentation of the six-month follow-up data at the European Respiratory Society Congress in early September in Vienna.

Speaker Change: We believe Aeroseal has the potential to expand our addressable market by approximately 20% globally. The U.S. represents our largest share of that opportunity, and we see the first U.S. case as a critical step forward in our journey to unlocking this important market segment.

Speaker Change: The U.S. Enrollment Milestone follows the initiation of enrollment for Convert2 and Select International Centers in February of 2024.

Speaker Change: As it pertains to CONVERT1, our European study, we look forward to the presentation of the six-month follow-up data at the European Respiratory Society Congress in early September in Vienna.

Steven S. Williamson: We expect the presentation will demonstrate high conversion to CV-negative status in the target lobe following aeroseal and positive clinical outcomes following subsequent treatment with Zephyr. As we remain committed to further advancing long-term clinical research in our field, I'm pleased to announce eight abstracts have been accepted and an initial two abstracts have been submitted for presentation at upcoming key scientific meetings, including ERS, the American Association of Bronchology and Interventional Pulmonology meeting, the CHEST annual meeting, and the World Congress of Bronchology and Interventional Pulmonology.

Speaker Change: We expect the presentation will demonstrate high conversion to CB negative status in the target lobe following aeroseal and positive clinical outcomes following subsequent treatment with Zephyr valves.

Steve Williamson: As we remain committed to further advancing long-term clinical research in our field, I'm pleased to announce eight abstracts have been accepted and an initial two abstracts have been submitted for presentation at upcoming key scientific meetings, including ERS, the American Association of Bronchology and Interventional Pulmonology Meeting, the Chest Annual Meeting, and the World Congress of Bronchology and Interventional Pulmonology. These abstracts will cover a spectrum of new data, including the five-year follow-up data from the Liberate study. Reduction of severe exacerbations and patients with substantial volume reduction following Zephyr Val's placement and real-world results from our multi-center French registry.

Speaker Change: As we remain committed to further advancing long-term clinical research in our field, I'm pleased to announce eight abstracts have been accepted and an initial two abstracts have been submitted for presentation at upcoming key scientific meetings, including ERS,

Speaker Change: the American Association of Bronchology and Interventional Pulmonology meeting, the CHEST annual meeting, and the World Congress of Bronchology and Interventional Pulmonology.

Steven S. Williamson: These abstracts will cover a spectrum of new data, including the five-year follow-up data from the LIBERATE study, reduction of severe exacerbations in patients with substantial volume reduction following Zephyr valve placement, and real-world results from our multi-center French registry.

Speaker Change: These abstracts will cover a spectrum of new data, including the five-year follow-up data from the LIBERATE study, reduction of severe exacerbations in patients with substantial volume reduction following Zephyr valve placement.

Steve Williamson: We look forward to connecting with our clinical network at these global events, which we view as a crucial component of our strategy to drive increased awareness of Zephyr Val's in their clinical conference. We are confident that the strategies we've implemented, the automation tools we are developing, and the ongoing release of new long-term clinical data will continue to drive global growth in 2025. Further, the schedule completion of the Japanese post-approval surveillance study, and the commercial launch of Aresil in our OUS markets will provide growth catalysts in 2026.

Steven S. Williamson: We look forward to connecting with our clinical network at these global events, which we view as a crucial component of our strategy to drive increased awareness of Zephyr Valves and their clinical benefits. We are confident that the strategies we've implemented, the automation tools we are developing, and the ongoing release of new long-term clinical data will continue to drive global growth in 2025. Further, the scheduled completion of the Japanese Post-Approval Surveillance Study and the commercial launch of Aeroseal in our OUS markets will provide growth catalysts in 2020. Finally, the expected U.S. launch of Aeroseal in 2027 rounds out a cadence of significant, innovative, and market-expanding launches.

Speaker Change: and real-world results from our multi-center French registry. We look forward to connecting with our clinical network at these global events, which we view as a crucial component of our strategy to drive increased awareness of Zephyr valves and their clinical benefits.

Speaker Change: We are confident that the strategies we've implemented, the automation tools we are developing, and the ongoing release of new long-term clinical data will continue to drive global growth in 2025.

Speaker Change: Further, the scheduled completion of the Japanese post-approval surveillance study and the commercial launch of Aeroseal in our OUS markets will provide growth catalysts in 2026.

Steve Williamson: Finally, the expected U.S. launch of Aresil in 2027 rounds out a cadence of significant, innovative, and market-expanding launches. It is for these reasons that I believe Pulmonx is well positioned for continued, significant long-term growth.

Speaker Change: Finally, the expected U.S. launch of Aeroseal in 2027 rounds out a cadence of significant, innovative, and market-expanding launches. It is for these reasons that I believe Pulmonx is well-positioned for continued significant long-term growth.

Steven S. Williamson: It is for these reasons that I believe Pulmonx is well-positioned for continued, significant, long-term growth. Now, I'll turn the call over to Mehul to provide a more detailed review of our second quarter results. Thank you, Steve. And good afternoon, everyone.

Mehul Joshi: Now, turn the call over to Mehul to provide a more detailed review of our second quarter results. Thank you, Steve, and good afternoon, everyone. Total worldwide revenue for the three months ended June 30th, 2024, was $20.8 million, a 21% increase over the prior year period, and also an increase of 21% on a constant currency basis. Our strong performance was driven by continued commercial momentum and adoption of Zephyr Valve therapy.

Speaker Change: Now I'll turn the call over to Mehul to provide a more detailed review of our second quarter results.

Mehul Joshi: Total worldwide revenue for the three months ended June 30, 2024 was $20.8 million, a 21% increase over the prior year period and also an increase of 21% on a constant currency basis. Our strong performance was driven by continued commercial momentum and adoption of Zephyr valve therapy. U.S. revenue in the second quarter was $13.9 million, a 26% increase over the prior year period.

Mehul Joshi: Thank you, Steve, and good afternoon, everyone. Total worldwide revenue for the three months ended June 30, 2024, was $20.8 million, a 21% increase over the prior year period, and also an increase of 21% on a constant currency basis.

Mehul Joshi: Our strong performance was driven by continued commercial momentum and adoption of Zephyr valve therapy.

Mehul Joshi: U.S. Revenue in the second quarter was $13.9 million, a 26% increase over the prior year period. International revenue in the second quarter of 2024 was $6.9 million, an increase of 12% over the prior year period, and also an increase of 12% on a constant currency basis. Gross margin for the second quarter of 2024 was 74%, essentially flat versus the prior year period, reflecting lower utilization partially offset by favorable geographic mix. Total operating expenses for the second quarter of 2024 were $30.9 million, an increase of 6% over the prior year period. Operating expenses included a one-time non-cash charge in R&D of $1.7 million to impair internally developed software following a strategic decision to adopt a more efficient solution.

Mehul Joshi: U.S. revenue in the second quarter was $13.9 million, a 26 percent increase over the prior year period.

Mehul Joshi: International revenue in the second quarter of 2024 was $6.9 million, an increase of 12% over the prior year period and also an increase of 12% on a constant currency basis. Gross margin for the second quarter of 2024 was 74%, essentially flat versus the prior year period, reflecting lower utilization, partially offset by favorable geographic mix. Total operating expenses for the second quarter of 2024 were $30.9 million, an increase of 6% over the prior-year period.

Mehul Joshi: International revenue in the second quarter of 2024 was $6.9 million, an increase of 12% over the prior year period, and also an increase of 12% on a constant currency basis.

Mehul Joshi: Gross margin for the second quarter of 2024 was 74%, essentially flat versus the prior year period, reflecting lower utilization partially offset by favorable geographic mix.

Mehul Joshi: Total operating expenses for the second quarter of 2024 were $30.9 million, an increase of 6% over the prior year period.

Mehul Joshi: Operating expenses included a one-time non-cash charge in R&D of $1.7 million to impair internally developed software following a strategic decision to adopt a more efficient solution. This was a result of one of our gross margin improvement initiatives that will be gross margin accretive in the long term. Excluding the one-time charge, total operating expenses were flat over the prior year period.

Mehul Joshi: This was a result of one of our gross margin improvement initiatives that will be gross margin accretive in the long term. Excluding the one-time charge, total operating expenses were flat over the prior year period. Non-cash stock-based compensation was $5.5 million in the second quarter of 2024. Excluding stock-based compensation expense and the one-time impairment charge, total operating expenses in the second quarter of 2024 were flat over the prior year period. R&D expenses for the second quarter of 2024 were $5.6 million, a decrease of 2% over the prior year period. R&D expenses excluding the one-time software impairment charge were $3.9 million, down 32% versus the prior year period.

Mehul Joshi: This was a result of one of our gross margin improvement initiatives that will be gross margin accretive in the long term.

Mehul Joshi: Excluding the one-time charge, total operating expenses were flat over the prior year period.

Mehul Joshi: Non-cash stock-based compensation was $5.5 million in the second quarter of 2024. Excluding stock-based compensation expense and the one-time impairment charge, total operating expenses in the second quarter of 2024 were flat over the prior year period. R&D expenses for the second quarter of 2024 were $5.6 million, a decrease of 2% over the prior year period. R&D expenses, excluding the one-time software impairment charge, were $3.9 million, down 32% versus the prior year period.

Mehul Joshi: Non-cash, stock-based compensation was $5.5 million in the second quarter of 2024.

Mehul Joshi: Excluding stock-based compensation expense and the one-time impairment charge, total operating expenses in the second quarter of 2024 were flat over the prior year period.

Mehul Joshi: R&D expenses for the second quarter of 2024 were $5.6 million, a decrease of 2% over the prior year period.

Mehul Joshi: R&D expenses, excluding the one-time software impairment charge, were $3.9 million, down 32% versus the prior year period. The decrease was driven by lower clinical trial expenses and lower development costs.

Mehul Joshi: The decrease was driven by lower clinical trial expenses and lower development costs. We expect R&D expenses to increase from the second quarter as enrollment in our clinical trials continues to ramp. Sales, general and administrative expenses for the second quarter of 2024 were $25.3 million, an increase of 8% over the prior year period. The increase was primarily driven by additional investment in patient awareness programs. Net loss for the second quarter of 2024 was $15.3 million, or a loss of $0.39 per share, as compared to a net loss of $16.2 million, or a loss of $0.43 per share for the same period of the prior year.

Mehul Joshi: The decrease was driven by lower clinical trial expenses and lower development costs. We expect R&D expense to increase in the second quarter as enrollment in our clinical trials continues to ramp up. Sales, General, and Administrative Expenses for the second quarter of 2024 were $25.3 million, an increase of 8% over the prior year period. The increase was primarily driven by additional investment in patient awareness programs. The net loss for the second quarter of 2024 was $15.3 million, or a loss of 39 cents per share, as compared to a net loss of $16.2 million, or a loss of 43 cents per share, for the same period of the prior year. An average weighted share count of 38.9 million shares was used to determine the loss per share for the second quarter of 2024.

Mehul Joshi: We expect R&D expense to increase from the second quarter as enrollment in our clinical trials continues to ramp.

Mehul Joshi: Sales, general, and administrative expenses for the second quarter of 2024 were $25.3 million, an increase of 8% over the prior year period. The increase was primarily driven by additional investment in patient awareness programs.

Mehul Joshi: Net loss for the second quarter of 2024 was $15.3 million, or a loss of $0.39 per share, as compared to a net loss of $16.2 million, or a loss of $0.43 per share, for the same period of the prior year.

Mehul Joshi: An average weighted share count of 38.9 million shares was used to determine loss per share for the second quarter of 2024. Adjusted EBITDA loss for the second quarter of 2024 was $7.6 million as compared to $10.3 million in the second quarter of 2023. A 26% improvement on a year-over-year basis. Please refer to our reconciliation of net loss to non-GAAP adjusted EBITDA for further details. We ended June 30, 2024, with $114.5 million in cash, cash equivalent, and marketable securities. A decrease of $5.9 million from March 31, 2024. Our current cash position, combined with our demonstrated ability to drive revenue growth and operating leverage beyond our existing operating plan assumptions, continues to provide confidence in our ability to become cash flow break-even with the cash on hand.

Mehul Joshi: An average weighted share count of 38.9 million shares was used to determine loss per share for the second quarter of 2024.

Mehul Joshi: Adjusted EBITDA loss for the second quarter of 2024 was $7.6 million, as compared to $10.3 million in the second quarter of 2023, a 26% improvement on a year-over-year basis. Please refer to our Reconciliation of Net Loss to Non-Gap Adjusted EBITDA for further details. We ended June 30, 2024 with $114.5 million in cash, cash equivalents, and marketable securities, a decrease of $5.9 million from March 31, 2024. Our current cash position, combined with our demonstrated ability to drive revenue growth and operating leverage beyond our existing operating plan assumptions, continues to provide confidence in our ability to become cash flow break-even with the cash on hand.

Mehul Joshi: Adjusted EBITDA loss for the second quarter of 2024 was $7.6 million, as compared to $10.3 million in the second quarter of 2023, a 26% improvement on a year-over-year basis.

Mehul Joshi: Please refer to our Reconciliation of Net Loss to Non-Gap Adjusted EBITDA for further details.

Mehul Joshi: We ended June 30th, 2024 with $114.5 million in cash, cash equivalents, and marketable securities, a decrease of $5.9 million from March 31st, 2024.

Mehul Joshi: Our current cash position, combined with our demonstrated ability to drive revenue growth and operating leverage beyond our existing operating plan assumptions, continues to provide confidence in our ability to become cash flow break-even with the cash on hand.

Mehul Joshi: We remain laser focused on prudent cash management and have extended the interest-only payment period for our $37 million term loan by one year. As a reminder, in October 2022, we refinanced the term loan to secure a more attractive rate and extend the maturity date to 2027, with the ability to extend the interest-only period for an additional 12 months, subject to certain conditions which were satisfied. The principal repayment will now begin in November 2025 with no changes to the loan interest rate or maturity date.

Mehul Joshi: We remain laser-focused on prudent cash management and have extended the interest-only payment period for our $37 million term loan by one year. As a reminder, in October 2022, we refinanced the term loan to secure a more attractive rate and extend the maturity date to 2027 with the ability to extend the interest-only period for an additional 12 months subject to certain conditions, which were satisfied. The principal repayment will now begin in November 2025 with no changes to the loan interest rate or maturity date.

Mehul Joshi: We remain laser-focused on prudent cash management and have extended the interest-only payment period for our $37 million term loan by one year.

Mehul Joshi: which were satisfied. The principal repayment will now begin in November 2025 with no changes to the loan interest rate or maturity date.

Mehul Joshi: Turning now to full year 2024 guidance. As we look ahead, we are reiterating our previously communicated fiscal year 2024 revenue, gross margin, and op-ex guidance. As a reminder, we expect to deliver a full year 2024 revenue in the range of $81 to $84 million, representing approximately 20% growth at the midpoint. We remain confident in our guidance as we continue executing our focus commercial strategy. Our guidance continues to assume a neutral to slightly negative impact on revenue from foreign currency exchange rates. Moving down the P&L, we expect gross margin for the full year 2024 to fall within the range of 74 to 75%.

Mehul Joshi: Turning now to full year 2024 guidance. As we look ahead, we are reiterating our previously communicated fiscal year 2024 revenue, gross margin, and OPEX guidance. As a reminder, we expect to deliver full year 2024 revenue in the range of $81 to $84 million, representing approximately 20% growth at the midpoint. We remain confident in our guidance as we continue executing our focused commercial strategy. Our guidance continues to assume a neutral to slightly negative impact on revenue from foreign currency exchanges.

Mehul Joshi: Turning now to full year 2024 guidance.

Mehul Joshi: As we look ahead, we are reiterating our previously communicated fiscal year 2024 revenue, gross margin, and OPEX guidance.

Mehul Joshi: As a reminder, we expect to deliver full year 2024 revenue in the range of $81 to $84 million, representing approximately 20% growth at the midpoint.

Mehul Joshi: We remain confident in our guidance as we continue executing our focused commercial strategy. Our guidance continues to assume a neutral to slightly negative impact on revenue from foreign currency exchange rates.

Mehul Joshi: Moving down the P&L, we expect gross margin for the full year 2024 to fall within the range of 74% to 75%. Lastly, we expect operating expenses for the full year 2024 to fall between $127 to $129 million, inclusive of approximately $25 million of non-cash stock-based compensation.

Mehul Joshi: Moving down the P&L, we expect gross margin for the full year 2024 to fall within the range of 74 to 75 percent.

Mehul Joshi: Lastly, we expect operating expenses for the full year 2024 to fall between $127 to $129 million, inclusive of approximately $25 million of non-cash stock-based compensation expense. In all, we are confident in our outlook for 2024 and look forward to executing on the next stage of growth.

Mehul Joshi: Lastly, we expect operating expenses for the full year 2024 to fall between $127 to $129 million, inclusive of approximately $25 million of non-cash, stock-based compensation expense.

Mehul Joshi: In all, we are confident in our outlook for 2024 and look forward to executing on the next stage of growth. With that, I'd like to thank you for your attention, and we will now open the call to questions. Operator.

Unknown Executive: With that, I'd like to thank you for your attention, and we will now open the call for questions.

Unknown Executive: Operator? Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by where we compile the Q&A roster.

Unknown Executive: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Mehul Joshi: Operator.

Speaker Change: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Unknown Executive: Please stand by while we compile the Q&A. Our first question is from Jason Bednar with Piper Sandler. Please proceed with your question. Hey, afternoon, guys.

Speaker Change: Please stand by while we compile the Q&A roster.

Jason Bednar: Our first question is from Jason Bednar with Piper Sandler. Please proceed with your question. Good afternoon, guys. Thanks for the questions here. Nice quarter.

Speaker Change: Our first question is from Jason Bednar with Piper Sandler. Please proceed with your question.

Jason M. Bednar: Thanks for the questions here. Nice quarter. I wanted to start with the assumptions underlying the reaffirmed guide and just really ask you how you're thinking about the cadence of procedure volume and revenue performance here in the second half, anything outside the typical seasonality you would anticipate for the business as we look at the typical sequential performance, 2Q to 3Q, same question, 3Q to 4Q, or maybe just ask more directly, are you comfortable with where the street's currently sitting for the Yeah, so I appreciate the question, Jason, and thanks for the kind words there.

Jason M. Bednar: Hey, afternoon, guys. Thanks for the questions here. Nice quarter. Wanted to start with

Jason Bednar: I wanted to start with the assumptions underlying the reaffirmed guide and just really ask on how you're thinking about the cadence of procedure volume and revenue performance here in the second half. Anything outside the typical season, Alan, you would anticipate for the business as we look at the typical sequential performance to Q to 3Q. Same question, 3Q to 4Q.

Jason M. Bednar: The assumptions underlying the reaffirmed guide and just really ask on how you're thinking about the cadences

Jason M. Bednar: Procedure volume and revenue performance here in the second half. Anything outside the typical seasonality you would anticipate for the business as we look at, you know, the typical sequential performance, 2Q to 3Q, same question, 3Q to 4Q, or, you know, maybe just ask more directly, are you comfortable with where the street's currently sitting for the back half of the year on revenue?

Jason Bednar: You know, maybe just ask more directly, are you comfortable with where the streets currently sitting for the back half of the year on revenue?

Steve Williamson: Yeah, so I appreciate the question, Jason, and thanks for the kind words there. As we're looking at the back half guidance right now, obviously we take a look at how we performed in the first half of the year, and we're happy with where we've landed in the first half of the year. I think we've shown good growth, and as we move into the back half, you know, we haven't been through this seasonality cycle yet, Mayhul and I haven't. And as we look at 2022, we saw seasonality in both the US and OUS in 23. It looks like we're able to muscle through that seasonality in the US, which gave us kind of a tough comp for Q3.

Steven S. Williamson: As we're looking at the back half guidance right now, obviously, we take a look at how we performed in the first half of the year, and we're happy with where we've landed in the first half of the year. I think we've shown good growth. And as we move into the back half, you know, Mehul and I haven't been through the seasonality cycle yet.

Speaker Change: Yeah, so I appreciate the question, Jason, and thanks for the kind words there. As we're looking at the back half guidance right now, obviously we take a look at how we performed in the first half of the year, and we're happy with where we've landed in the first half of the year. I think we've shown good growth, and as we move into the back half,

Speaker Change: You know, uh...

Speaker Change: We haven't been through this seasonality cycle yet, Mehul and I haven't.

Steven S. Williamson: And as we look at 2022, we saw seasonality in both the U.S. and the O.U.S. In 23, it looks like we're able to muscle through that seasonality in the U.S., which gave us kind of a tough comp for Q3. So with the variability between 22 and 23, and using that as kind of predictors for the future, we just don't want to get over our skis there. And so we feel comfortable with our performance so far, and that's why we're able to reaffirm the guide. Mehul, anything you want to add to that or not? No, I think you got it, Steve.

Speaker Change: And as we look at 2022, we saw seasonality in both the U.S. and O.U.S.

Speaker Change: In 23, it looks like we're able to muscle through that seasonality in the U.S., which gave us...

Steve Williamson: So with the variability between 22 and 23 and using that as kind of predictors for the future. We just, we don't want to get over our skis there. And so we feel comfortable with our performance so far, and that's why we're able to reaffirm the guide.

Speaker Change: Kind of a tough comp for Q3.

Speaker Change: So, with the variability between 22 and 23, and using that as kind of predictors for the future, we just, we don't want to get over our skis there. And so, we feel comfortable with our performance so far, and that's why we were able to reaffirm the guide. Mehul, anything you want to add to that?

Mehul Joshi: Mayhul, anything you want to edit out or, you know, I think you guys see. Okay, I appreciate that.

Steven S. Williamson: Okay, I appreciate that's helpful. Maybe along that same vein as us, breakout. U.S. versus international performance. Any differences in expectations in the mix that you're seeing? Is it playing out as you would have expected?

Mehul Joshi: No, I think you got it, Steve.

Mehul Joshi: That's helpful. Maybe along that same vein as we break out US versus international performance. I guess any differences and expectations on the mix that you're seeing as it is playing out as you would have expected.

Speaker Change: Okay, I appreciate that's helpful. Maybe along that same vein as we break out

Speaker Change: U.S. versus international performance.

Speaker Change: Any differences in expectations on the mix that you're seeing? Is it playing out as you would have expected? And then, you know, maybe the follow-up to that is, you know, what's it going to take to get that international business?

Mehul Joshi: And then, you know, maybe the follow up to that is what's it going to take to get that international business, you know, back to maybe where the US is growing in that mid 20% plus range or should be just in case they double digits is good enough for international. Just how you're thinking about that as we look over the next several quarters. Sure, as we look at the OUS performance, it is really playing out how we expected it to play out. As you rightly pointed out, obviously they're not growing as quickly as they are in the US or as we are in the US.

Steven S. Williamson: And then, you know, maybe the follow-up to that is, you know, what's it going to take to get that international business? You know, back to maybe where the US is growing in that mid 20% plus range, or should we just anticipate double digits is good enough for international? Just how you're thinking about that as we look over the next several quarters. Sure. As we look at the OUS performance, it is really playing out how we expected it to play out.

Speaker Change: You know, back to maybe where the U.S. is growing in that mid 20% plus range, or should we just anticipate double digits is good enough for international? Just how you're thinking about that as we look over the next several quarters.

Speaker Change: As we look at the OUS performance, it is really playing out how we expected it to play out.

Steven S. Williamson: As you rightfully pointed out, obviously, they're not growing as quickly as they are in the U.S. or as we are in the U.S. What we've gone and done is we've implemented sales process tools in our European businesses.

Speaker Change: As you rightfully pointed out, obviously, they're not growing as quickly as they are in the U.S., or as we are in the U.S.

Mehul Joshi: What we've gone and done is we've implemented the sales process tools in our European businesses. And I was actually over there for the European sales meeting. And I was really impressed. I think the teams really focused on executing that sales process. I left the meeting bullish about their plan. And really, as we look forward, they're building out patient screening. They're, they're looking at developing practice efficiencies, physician education. We're seeing a lot of physician education coming from Europe as well. And so they've also built these sales plans around those tactics. And I was like, I said, I was very impressed with the plans that they put together.

Speaker Change: What we've gone and done is we've implemented the sales process tools in our European businesses. And I was actually over there for the European sales meeting. And I was really impressed. I think the team's really focused on executing that sales process.

Steven S. Williamson: And I was actually over there for the European sales meeting, and I was really impressed. I think the team is really focused on executing that sales process. I left the meeting bullish about their plan.

Steven S. Williamson: And really, as we look forward, they're building out patient screening. They're looking at developing practice efficiencies, and physician education. We're seeing a lot of physician education coming from Europe as well.

Speaker Change: I left the meeting bullish about their plan, and really as we look forward...

Speaker Change: They're building out patient screening, they're looking at developing practice efficiencies.

Speaker Change: Physician education, we're seeing a lot of physician education coming from Europe as well.

Steven S. Williamson: And so they've also built these sales plans around those tactics. And I was, like I said, very impressed with the plans that they put together. And I think we'll start to see this play out a little bit more in 2025.

Speaker Change: And so they've also built these sales plans around those tactics. And I was, like I said, I was...

Mehul Joshi: And I think we'll start to see this play out a little bit more in 2025. So I would say that the management and the team that are there are doing the right things to get that growth rate up over time.

Steven S. Williamson: So I would say that the management and the team that are there are doing the right things to get that growth rate up over time. All right, excellent. If I can squeeze in one more, just as more of a, a little bit of a check the box question, but see if there's anything we need to consider modeling wise on the new China distribution agreement you have in place or the new distributor you're bringing on board, any inventory load-in, or any Mehul accounting we need to think about as you go through that transition. Yeah, great question, Jason. Well, I think, no, nothing on the loading or counting at all.

Speaker Change: Very impressed with the plans that they put together, and I think we'll start to see this play out a little bit more in 2025. So I would say that the management and the team that are there are doing the right things to get that growth rate up over time.

Unknown Executive: All right. Excellent.

Jason Bednar: If I can squeeze in one more just as more of a little bit of a check the box here question, but seeing if there's anything we need to consider modeling wise on the new China distribution agreement you have in place or the new distributor you're bringing on, any inventory load in or any Mehul, any accounting we need to think about as you go through that transition. Yeah. Great question. Jason. Well, I think no, nothing on the loading or accounting at all. It's a new distributor that we've brought into the mix here in our OUS strategy.

Speaker Change: All right, excellent. If I can squeeze in one more, just as more of a...

Speaker Change: A little bit of a check the box here question, but seeing if there's anything we need to consider modeling wise on the new China distribution agreement you have in place or the new distributor you're bringing on.

Speaker Change: Any inventory load in or Mehul, any accounting we need to think about as you go through that transition?

Steven S. Williamson: It's a new distributor that we've, you know, brought into the mix here in our OUS strategy. I think, you know, what we believe is that going down the distributor route will enable revenue to grow significantly faster than, you know, if we were going out there and building a commercial infrastructure in China. And so, you know, as you would expect in a distributor arrangement, your gross margins are a little bit lower, but over the long term, we expect gross profit dollars and operating margins to be, you know, accretive relative to, you know, building a business there ourselves.

Mehul Joshi: Yeah, great question, Jason.

Mehul Joshi: Well, I think, no, nothing on the loading or counting at all.

Mehul Joshi: It's a new distributor that we've brought into the mix here in our OUS strategy.

Mehul Joshi: I think what we believe is that going down the distributor route will enable revenue to grow significantly faster than if we were going out there and building a commercial infrastructure in China. And so, you know, as you would expect in the distributor arrangement, your gross margins are a little bit lower, but over the long term we expect gross profit dollars and operating margins to be, you know, a credo relative to, you know, building a business there ourselves.

Mehul Joshi: I think, you know, what we believe is that going down the distributor route will enable revenue to grow significantly faster than, you know, if we were...

Mehul Joshi: going out there and building a commercial infrastructure in China.

Mehul Joshi: And so, you know, as you would expect in a distributor arrangement, your gross margins are a little bit lower, but over the long term, we expect gross profit dollars and operating margins to be, you know, accretive relative to, you know, building a business there ourselves.

Steven S. Williamson: I think, this is Steve real quick, Jason, if I can add on to that, you know, as I think about that Chinese market, you've got a huge population; you've got a huge smoking population as well. So, it would naturally seem to be a place where we would be able to go, and we would want to launch our product. I think one of the issues you run into is that it's a self-pay population out there. And there's a large, large portion of the country that is self-pay, and because of that, it becomes cost prohibitive for procedures like ours.

Steve Williamson: As I think this is Steve, real quick, Jason, if I can add on to that, you know, as I think about that China market, you've got a huge population, you've got a huge smoking population as well. So it would naturally seem to be a place where we would be able to go, and we would want to launch our product. I think one of the issues you run into is it's a self-pay population out there, and there's a large, large portion of that country that is self-pay, and because of that, it becomes cost prohibitive for procedures like ours.

Mehul Joshi: I think, this is Steve real quick, Jason, if I can add on to that, you know, as I think about that China market, you've got a huge population, you've got a huge smoking population as well.

Steven S. Williamson: So, it would naturally seem to be a place where we would be able to go and we would want to launch our product. I think one of the issues you run into is it's a self-pay population out there and there's a large, large portion of that country is self-pay and because of that, it becomes cost prohibitive for procedures like ours. So, what we've done is aligned with a distribution partner and they'll be able to identify the proper areas and they actually have the bandwidth to go in and tactically take on that market. So, from our perspective, we see it as a small revenue.

Steven S. Williamson: So, what we've done is aligned ourselves with a distribution partner, and they'll be able to identify the proper areas, and they actually have the bandwidth to go in and tactically take on that market. So, from our perspective, we see it as a small revenue grower over the next couple of years, but hopefully, in the future, a couple of years out, we'll see that start to grow fast.

Jason Bednar: So what we've done is aligned with a distribution partner, and they'll be able to identify the proper areas, and they actually have the bandwidth to go in and tactically take on that market. So from our perspective, we see it as a small revenue, a grower over the next couple of years, but hopefully in the future, a couple of years out, we'll see that start to grow faster. Got it. Hope for color. Thank you.

Speaker Change: grower over the next couple years, but hopefully in the future, a couple years out, we'll see that start to grow faster.

Jason M. Bednar: Helpful caller. Thank you. Thank you.

Unknown Executive: Our next question... comes from the line of Larry Beagleson with Wells Fargo. Please proceed with your question. Larry Beagleson, your line is open; please check your mute button.

Speaker Change: Got it. Helpful caller. Thank you.

Larry Beigelson: Our next question comes from the line of Larry Beegelson with Wells Fargo. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Larry Beagleson with Wells Fargo. Please proceed with your question.

Larry Beigelson: Larry Beegelson, your line is open. Please check your mute button. Are you there, Larry?

Speaker Change: Larry Beagleson, your line is open, please check your mute button.

Unknown Executive: Are you there, Larry? Our next question comes from the line of Joanne Wuensch with Citi, with your questions. Hey, good afternoon, guys. This is Anthony Atford. I'm Joanne.

Anthony Occhiogrosso: Our next question comes from the line of Joanne Wush with City. Please proceed with your question. Hey, good afternoon, guys. This is Anthony out for Joanne. Congrats on the solid quarter. My first question: the 17 new US centers; that was a pretty robust step up from last quarter.

Speaker Change: Are you there, Larry?

Speaker Change: Our next question comes from the line of Joanne Wuensch with Citi. Please proceed with your question.

Unknown Executive: Congratulations on a solid quarter. My first question is, the 17 new US Centers, that was a pretty robust step up from last quarter. What should we be expecting through the rest of the year? And was there any particular reason why it was so strong this quarter, just outside of the normal course of business? Anthony, this is Steve.

Anthony Atford: Hey, good afternoon, guys. This is Anthony Atford. I'm Joanne. Congrats on the solid quarter. My first question, the 17 new U.S. Centers, that was a pretty robust step up from

Steve Williamson: What should we be expecting through the rest of the year, and was there any particular reason why it was so strong this quarter outside of normal course of business? Anthony, this is Steve. As we've been guiding, it's about 10 to 15 new accounts per quarter is what we expect to bring on. You know, we were a little bit light in 21; we were at 9, and here we're at 17. So I think combined, we're actually a little bit above where we would expect to be right now. But there's nothing out of the ordinary there. We've had a couple of opportunities and opportunistically gone in and brought on new accounts in different areas.

Speaker Change: Last quarter, what should we be expecting through the rest of the year and was there any particular reason why it was so strong this quarter just outside of normal course of business?

Steven S. Williamson: As we've been guiding, it's about 10 to 15 new accounts per quarter is what we expect to bring in. You know, we were a little bit light in Q1, we were at nine, and here we are at 17. So I think combined, we're actually a little bit above where we would expect to be right now. But there's nothing out of the ordinary there.

Speaker Change: Anthony, this is Steve. As we've been guiding, it's about 10 to 15 new accounts per quarter is what we expect to bring on. You know, we were a little bit light in Q1, we were at nine, and here we're at 17. So I think combined, we're actually a little bit above where we would expect to be right now.

Steven S. Williamson: We've had a couple of opportunities and have opportunistically gone in and brought on new accounts in different areas. I will say that our focus remains on growing same-store sales as well. I think it's nice for us to bring in these new accounts, especially in areas where patients have to drive hours in order to get treatment. But really, what we want to do is these centers that are set up, they've got physicians that are on board, and their COPD referring physicians are already referring patients to them.

Speaker Change: But there's nothing out of the ordinary there. We've had a couple of opportunities and opportunistically gone in and brought on new accounts in different areas.

Steve Williamson: I will say that our focus remains on growing in the same store sales as well. I think it's nice for us to bring on these new accounts, especially in areas where patients have to drive hours in order to get a treatment. But really what we want to do is these centers that are set up. They've got physicians that are on board. They've got their COPD referring physicians are already referring to them. They've built-in workflow. They have coordinators, and there's patient awareness and marketing activities going on in these areas. That's really where we see growth over time.

Speaker Change: I will say that our focus remains on growing in the same store sales as well.

Speaker Change: I think it's nice for us to bring on these new accounts, especially in areas where patients have to drive.

Speaker Change: hours in order to get a treatment.

Speaker Change: But, really what we want to do is the centers that are set up.

Speaker Change: They've got physicians that are on board, they've got their COPD referring physicians are already referring to them, they've built in workflow, they have coordinators, and there's patient awareness and marketing activities going on in these areas.

Steven S. Williamson: They've built in workflow, they have coordinators, and there are patient awareness and marketing activities going on in these areas. That's really where we see growth over time. And so that's a big, big focus for us. But obviously, we will bring on new accounts opportunistically as we need to, or as we see the opportunity to do so. Okay, that makes sense. And then Mehul, can you talk about the cadence and margins in the back half?

Steve Williamson: And so that's a big focus force. But obviously, we will bring on new accounts opportunistically as we need to. But here is we see the opportunity to do so.

Speaker Change: That's really where we see growth over time, and so that's a big, big focus for us, but obviously we will bring on new accounts opportunistically as we need to, or as we see the opportunity to do so.

Mehul Joshi: Okay, that makes sense. And then, Mehul, can you talk about the cadence of margins in the back half, just 2023, sort of a good place to look at that. And then, as we think about the slight step up in OpEx, it sounds like it's going to be more weighted towards R&D on a dollar basis, but just want to confirm that that's the correct way to think about it.

Mehul Joshi: Is 2023 sort of a good place to look at that? And then, as we think about the slight step up in OPEX, is that going to sound like it's going to be more weighted towards R&D on a dollar basis? I just want to confirm that that's the correct way to think about it. Yeah, Anthony.

Mehul Joshi: Okay, that makes sense. And then Mehul, just could you talk about the cadence and margins in the back half, 2023, sort of a good place to look at that. And then as we think about the slight step up in OPEX,

Speaker Change: It sounds like it's going to be more weighted towards R&D on a dollar basis, but just want to confirm that that's the correct way to think about it.

Mehul Joshi: Yeah, Anthony. So, we do, you know, we got it to 74% to 75%. You know, we’ve kind of are at an average or at slightly over 74% in the first half. We do expect a tick up in the second half on close margins. It's, you know, going to be driven by increased production in our factory, which will enable us to, you know, manage utilization better. And the other factor that impacts gross margin is, is really geographical mix, right? So as geographical mix varies, that impacts gross margin significantly. And so we've had a little bit of that, both on a year-over-year and a quarter-over-quarter basis.

Mehul Joshi: So we do, you know, we got it to 74 to 75%. You know, we're kind of average at slightly over 74%. In the first half, we do expect a tick up in the second half on gross margins. It's, you know, going to be driven by increased production in our factory, which will enable us to, you know, manage utilization better. And the other factor that impacts gross margin is really geographical mix, right? So as geographical mix varies, that impacts gross margins significantly.

Speaker Change: Yeah. Hey, Anthony. So we do, you know, we guide it to 74% to 75%.

Speaker Change: You know, we've kind of

Speaker Change: are at an average or at slightly over 74% in the first half.

Speaker Change: We do expect a tick up in the second half on gross margins.

Speaker Change: you know, going to be driven by

Speaker Change: increase production in our factory which will enable us to, you know, manage utilization better.

Mehul Joshi: And so we've had a little bit of that, both on a year over year and a quarter over quarter basis, but we, you know, we do expect a slight tick up in gross margins in the second half of the year. But we do expect a tick up in the second half for R&D. Great. Thanks, guys.

Speaker Change: And the other factor is...

Speaker Change: That impacts gross margin is really a geographical mix, right?

Speaker Change: As geographical mix varies, that impacts...

Speaker Change: cross-margin significantly.

Speaker Change: And so we've had a little bit of that, both on a year-over-year and a quarter-over-quarter basis, but we, you know, we do expect a slight tick-up in gross margins.

Mehul Joshi: But we, you know, we do expect a slight tick up in gross margins in the second half of the year on expenses, specifically on R&D. As I mentioned in the prepared remarks, you know, as enrollment starts to tick up in our clinical clinical trials, you know, we would expect some R&D dollars to, you know, increase. So, you know, you know, there's usually a slow ramp up front when you start a clinical trial, and it'll ramp much faster as you get through, you know, various different time frames. But we do expect a tick up in the second half for R&D.

Speaker Change: In the second half of the year, on expenses, specifically on R&D, as I mentioned in the prepared remarks, you know, as enrollment starts to tick up,

Speaker Change: In our clinical trials, you know, we would expect some R&D dollars to, you know, increase. So, you know, as you know,

Speaker Change: There's usually a slow ramp up front when you start a clinical trial, and it'll ramp much faster as you get through various different time frames. But we do expect a tick up in the second half for R&D.

Unknown Executive: Great.

Unknown Executive: Thanks, Chris. Thank you.

John Young: Our next question comes from the line of John Young with Can't Accord. Please proceed with your question.

Unknown Executive: Our next question comes from the line of John Young with Canaccord. Please proceed with your question. Good afternoon, guys. Thanks for taking the question and congrats on the quarter of two. Maybe just, you know, go and convert one.

Speaker Change: Great, thanks guys.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of John Young with Canaccord. Please proceed with your question.

John Young: Take it after you've got a safe statement question and can graph on the quarter to maybe just, you know, go and convert one. You may just find out from investors what you think is successful trial data would be. And will you go for the E mark for air seal using the data, or will you wait for convert to?

John Edward Young: Hey, good afternoon, guys. Thanks for taking the question, and congrats on the quarter of two. Maybe just, you know, going to convert one, you may just find out from investors what you think a successful trial data would be. And will you go for CE mark for error seal using this data, or will you wait for convert two?

John Edward Young: You may just run out of that. And will you go for the CE mark for the error seal using this data, or will you wait for conversion? Um, so. Hi John.

John Young: So, hi, John. So we already have the convert one. Data will be presented at ERS; the six month data will be presented then the convert to data. We would then plan to commercially launch into the EU, and we expect that to be in the 2026 time frame. And then we would expect 2027 to be when we would launch in the United States once we go through the PMA approval process. Okay.

Steven S. Williamson: So we, we already have the CONVERT-1 data, and it will be presented at ERS. The six-month data will be presented then. The CONVERT-2 data, we actually already have the CE mark for Aeroseal. So we're just, the CONVERT-2 data will be used for the PMA. It's the IDE trial in the U.S.

Speaker Change: Um, so.

Speaker Change: Hi John , so we

Speaker Change: Already have the Convert-1 data will be presented at ERS. The six-month data will be presented then. The Convert-2 data, we actually already have CE mark for AeroSeal.

Speaker Change: So, we're just, the Convert2 data will be used for the PMA, it's the IDE trial in the U.S. So, once we've completed our enrollment, we would then plan to commercially launch

Steven S. Williamson: So once we've completed our enrollment, we would then plan to commercially launch in the EU, and we expect that to be in the 2026 timeframe. And then we would expect 2027 to be when we launch in the United States once we go through the PMA approval process. Okay, thank you for that. And then, you know, it sounds like you've been really identifying friction points around just the commercial process itself, especially when you talk about the software upgrades to improve the Stratix workflows. What other friction points have you identified, and what internal are they?

Speaker Change: into the EU. And we expect that to be in the 2026 timeframe. And then we would expect 2027 to be when we would launch in the United States once we go through the PMA approval process.

Steve Williamson: Thank you for that. And then, you know, the company even really identifying friction points around the commercial process itself. Especially when we talk about the software upgrades to improve the strata workflows. What other friction points have you identified and what internal aren't? and D-Work is being done. Anything around chartered or anything else in the commercial procedure that you've identified, given your time in the field now? Not really. It's a good question. We did launch a new charter balloon that had some ease of use benefits for the physician, but those aren't really hold up to the overall growth and long-term scale of the business.

Speaker Change: Okay, thank you for that. And then, you know, it sounds like you've been really identifying friction points around just the commercial process itself, especially when you talk about the software upgrades to improve the strategy.

Speaker Change: Workflows. What other friction points have you identified and what internal R&D work is being done? Anything around charters or anything else in the commercial procedure that you've identified given your time in the field now?

Steven S. Williamson: Anything around Chardis or anything else in the commercial procedure that you've identified given your time in the field? Not really. It's a good question. We did launch a new Chartis balloon that had some ease of use benefits for the physician, but those aren't really holdups to the overall growth and long-term scale of the business. I think it really comes down to the workflow and what we can do to efficiently move patients through the process. One of the things that I'm most excited about, John, as I've gone out in the field, I think our sales process is working. It's working in both the U.S., and it's working outside the United States.

Speaker Change: Not really. It's a good question. We did launch a new chartus balloon that had some ease-of-use benefits for the physician, but those aren't really hold-ups to the overall growth and long term.

Steve Williamson: I think it really comes down to the workflow and what we can do to efficiently move patients through the process.

Speaker Change: scale of the business. I think it really comes down to the workflow and what we can do to efficiently move patients through the process. And one of the things that I'm most excited about, John , as I've gone out in the field.

Steve Williamson: One of the things that I'm most excited about, John, is I've gone out in the field. I think our sales process is working. It's working both the U.S. and it's working outside the United States. Our clinical trials are progressing well in both Japan as well as Convert to. Our clinical publications are strong. We've got eight different abstracts coming out. We've got two more that we're waiting to hear on, but that's significant new clinical data that speaks to the long-term efficacy of this process. If you look internally, I think the people are bought in. Our year-over-year employee turnover is slightly down year-to-date.

Speaker Change: I think our sales process is working. It's working in both the U.S. and it's working outside the United States.

Steven S. Williamson: Our clinical trials are progressing well in both Japan as well as Convert2. Our clinical publications are strong. We've got eight different abstracts coming out. We've got two more that we're waiting to hear on, but that's significant new clinical data that speaks to the long-term efficacy of this product. If you look internally, I think the people are bought in.

John Edward Young: Our clinical trials are progressing well in both Japan as well as Convert2.

John Edward Young: Our clinical publications are strong. We've got eight different abstracts coming out. We've got two more that we're waiting to hear on. But, I mean, that's significant new clinical data that speaks to the long-term efficacy of this product.

Steven S. Williamson: Our year-over-year employee turnover is slightly down year-to-date, so we're not seeing significant turnover, which I think people were originally concerned about. We've got good, strong, effective patient engagement, and that continues to grow for us. Now we have workflow automation software. You've got a big, untapped market.

John Edward Young: If you look internally, I think the people are bought in. Our year-over-year employee turnover is slightly down year-to-date. So we're not seeing significant turn, which I think people were originally concerned about.

Steve Williamson: We're not seeing significant turn, which I think people were originally concerned about. We've got good, strong, effective patient engagement, and that continues to grow for us.

John Edward Young: We've got good, strong, effective patient engagement, and that continues to grow for us.

Steve Williamson: Now we've got automation software. You've got a big, untapped market. You have eager physicians that want to do more. You've got motivated patients that benefit from the patient. We've got the procedure. We've got administrative buy-in.

Steven S. Williamson: You have eager physicians that want to do more. You've got motivated patients that benefit from the procedure. We've got administrative buy-in. That workflow is the key linchpin, in my mind, in order to unleash a much larger volume in some of these larger centers. Got it. Thank you.

Speaker Change: And now we've got workflow automation software. So you've got a big untapped market. You have eager physicians that want to do more. You've got motivated patients that benefit from the procedure.

Steve Williamson: It's really that workflow is the key, the key linchpan in my mind in order to really unleash a much larger volume in some of these larger centers. Thank you again.

Speaker Change: We've got administrative buy-in. It's really that that workflow is the key, the key linchpin in my mind, in order to really unleash a much, much larger volume in some of these larger centers.

Frank Takkinen: Thank you. As a reminder to ask a question at this time, please press star 11 or your touch-tone telephone. Our next question is from Frank Tekkenin with Lake Street Capital Markets. Please proceed with your question. Great. Thanks for taking the questions. Maybe I'll start with the first question that was asked related to guidance. I wanted to revisit that point you made about seasonality from Q2 to Q3, Steve. I know you said it's been a little volatile in 2022 versus 2023. What kind of help us with the exact read-through we should be thinking about. I know one went up, one went down, so maybe starting there and trying to understand how we should think about Q3 of this year from a sequential standpoint.

Unknown Executive: As a reminder, to ask a question at this time, please press star 11 on your touchtone telephone. Our next question is from Frank Tekinen with Lake Street Capital Markets. Please proceed with your question. Great, thanks for taking the questions.

Speaker Change: Got it. Thank you again.

Speaker Change: Thank you. As a reminder, to ask a question at this time, please press Star 1-1 on your touch-tone telephone.

Speaker Change: Our next question is from Frank Tekinen with Lake Street Capital Markets. Please proceed with your question.

Frank Tekinen: Maybe I'll start with the first question that was asked related to guidance. Wanted to revisit that point you made about seasonality from Q2 to Q3, Steve. I know you said it was a little volatile in 2022 versus 2023. What can help us with the exact read through we should be thinking about? I know one went up, and one went down.

Frank Tekinen: Great, thanks for taking the questions. Maybe I'll start with the first question that was asked related to guidance. Wanted to revisit that point you made about seasonality from Q2 to Q3, Steve. I know you said it's been a little volatile in 2022 versus 2023. What can help us with the exact read-through we should be thinking about? I know one went up, one went down, so maybe starting there and trying to understand how we should think about Q3 of this year from a sequential standpoint, if there were any one-time items in either of the previous two years that you were aware of that we can kind of glean some information from.

Steven S. Williamson: So maybe starting there and trying to understand how we should think about Q3 of this year from a sequential standpoint, if there were any one-time items in either of the previous two years that you were aware of, we can kind of glean some information. Yeah, Frank, thanks for the question. And good to have you on the call. As we looked at 2022, we saw a decrease in both the U.S. and the O.U.S. revenue. I think in both instances, we were pointed towards seasonality.

Steve Williamson: If there were any one-time items in either of the previous two years that you were aware of, that we can kind of clean some information from. Yeah, Frank, thanks for the question. Good to have you on the call. As we looked at 2022, we saw a decrease in both the US and OUS revenue. I think in both instances, we were pointed towards seasonality. And seasonality in this space is not only patients going on vacation, but perhaps you have doctors that go on vacation. If you have high volume physicians that take a couple of weeks, a month off, obviously that will affect the numbers.

Steven S. Williamson: And seasonality in this space is not only patients going on vacation, but perhaps you have doctors that go on vacation. If you have high volume physicians that take a couple of weeks or a month off, obviously, that will affect the numbers. And so I think in 2022, that seasonality, I wasn't here, but we did see seasonality in those revenue numbers. Moving to 23, we were able to muscle through in 23 in the United States, and we didn't see the fall off that we had seen in the prior year.

Speaker Change: Yeah, Frank, thanks for the question and good to have you on the call. As we looked at 2022, we saw a decrease in both the U.S. and O.U.S. revenue.

Speaker Change: I think in both instances, we were pointed towards seasonality. And seasonality in this space...

Speaker Change: is not only patients going on vacation, but perhaps you have doctors that go on vacation. If you have high-volume physicians that take...

Speaker Change: A couple of weeks, a month off.

Mehul Joshi: And so I think in 2022 that seasonality, I wasn't here, but we did see the seasonality in those revenue numbers. Moving to 23, we were able to muscle through in 23 in the United States. And we didn't see the fall-off that we had seen in the prior year. I think there was a lot of momentum coming in from a couple of different projects that we're going on. And they were able to push through in Q3 of 23. And now in 24, we don't know what U.S. sales we're going to get. We do know that we will see seasonality in Europe as the physicians take a month off in many instances.

Speaker Change: Obviously, that will affect the numbers, and so I think in 2022, that seasonality, I wasn't here, but we did see the seasonality in those revenue numbers.

Speaker Change: Moving to 23, we were able to muscle through in 23 in the United States, and we didn't see the fall-off that we had seen in the prior year. I think there was a lot of momentum coming in from a couple of different projects that were going on, and they were able to push through in Q3 of 23.

Steven S. Williamson: I think there was a lot of momentum coming in from a couple of different projects that were going on, and they were able to push through in Q3 of 23. And now, in 24, we don't know which U.S. sales we're going to get. We do know that we will see seasonality in Europe as physicians take a month off in many instances. And so those are just procedures that won't take place. As we look in the U.S., it's kind of a mixed bag.

Speaker Change: And now in 24, we don't know which U.S. sales we're going to get. We do know that we will see seasonality in Europe as the physicians take a month off in many instances.

Steve Williamson: And so those are just procedures that won't take place. As we look in the US, it's kind of a mixed bag. And as we brought on a lot of new accounts, that helps. So we dilute the impact of a small number of physicians going on vacation or not seeing patients. But overall, you also have patients that are saying, you know, maybe I'll wait till I come back for my vacation, or they're finding different reasons to push out their procedure. Make sure anything you want to add to that or no, I mean, I think the only external data point I think about is, you know, level of travel has increased substantially, right?

Speaker Change: And so those are just procedures that won't take place.

Speaker Change: As we look in the U.S., it's kind of a mixed bag, and as we brought on a lot of new accounts,

Speaker Change: That helps, right? So we dilute the impact of a small number of physicians going on vacation or not seeing patients. But overall, you also have patients that are saying, you know, maybe I'll wait till I come back from my vacation, or they're finding different reasons to push out their procedure.

Mehul Joshi: No, I mean, the only external data point I think about is, you know, the level of travel has increased substantially this summer versus last summer. And as Steve mentioned, there are, you know, vacation schedules and things like that. So we're just uncertain of, you know, what the impact of seasonality will be in the quarter, specifically in the U.S.

Speaker Change: Mehul, anything you want to add to that?

Mehul Joshi: No, I mean, I think the only external data point I think about is, you know, level of travel has increased substantially, right, this summer versus last summer. And as Steve mentioned, you know,

Mehul Joshi: This summer versus last summer and, as Steve mentioned, you know, there are, you know, vacation schedules and things like that. So, we're just uncertain of, you know, what the impact of seasonally will be in the quarter, specifically in the US. So, I think we're just kind of waiting to understand that a little bit better before we kind of think about what to do with guidance. Okay, that's helpful.

Mehul Joshi: There are, you know...

Mehul Joshi: vacation schedules, and things like that. So we're just uncertain of...

Speaker Change: You know, what the impact of seasonality will be in the quarter.

Steven S. Williamson: So I think we're just kind of waiting to understand that a little bit better before we kind of think about what to do with guidance. Okay, that's helpful. And then maybe a two-parter on the pilot programs.

Speaker Change: specifically in the U.S. So I think we're just kind of waiting to...

Speaker Change: understand that a little bit better.

Speaker Change: before we kind of think about what to do with guidance.

Unknown Executive: And then maybe kind of a two-parter on the pilot programs. Obviously, I heard a lot about efficiencies and workflow processes. But can you maybe call out a couple of those bottlenecks that you're seeing? Is it a consistent bottleneck that the patient is getting stopped by, or is it kind of case-by-case basis?

Speaker Change: Okay that's helpful and then maybe kind of a two-parter on the the pilot programs. Obviously I heard a lot about efficiencies and workflow processes but can you maybe call out a couple of those bottlenecks that you're seeing? Is it a consistent bottleneck that the patient is getting stopped by or is it kind of case-by-case, case-by-case basis? And then secondly also on the pilot programs, can you talk about maybe some of the channels you may use to enhance local awareness?

Steven S. Williamson: Obviously, I heard a lot about efficiencies and workflow processes, but can you maybe call out a couple of those bottlenecks that you're seeing? Is it a consistent bottleneck that the patient is getting stopped by? Or is it kind of case by case, case by case basis? And then secondly, also on the pilot programs, can you talk about maybe some of the channels you may use to enhance local So, on the first question, are the bottlenecks consistent across the board, or are they different in different places? I would say they are different in different places.

Unknown Executive: And then secondly, also on the pilot programs, can you talk about maybe some of the channels you may use to enhance local awareness? Sure. So, on the first, are your questions the bottlenecks consistent across the board, or is it different in different places? I would say it's different in different places. We find that when accounts will add a coordinator or a navigator that can actually manage that patient through the process. They do significantly more than accounts that do not have coordinators and navigators. The physicians will, if you have a physician that's left on their own to manage the workflow associated with bringing a patient through the process, they do fewer than if they have a navigator that is managing that process.

Speaker Change: So, on the first, your question is, are the bottlenecks consistent across the board or is it different in different places? I would say it's different in different places. We find that when accounts will add a coordinator or a navigator that can actually manage that patient through the process, they do significantly more than accounts that do not have coordinators and navigators.

Steven S. Williamson: We find that when accounts add a coordinator or a navigator that can actually manage that patient through the process, they do significantly more than accounts that do not have coordinators and navigators. The physicians will, if you have a physician that's left on their own to manage the workflow associated with bringing a patient through the process, they do fewer than if they have a navigator that is managing that process. If you think about the tools that we've launched, I talked about LungTracks Connect.

Speaker Change: The physicians will, if you have a physician that's left on their own to manage the workflow associated with bringing a patient through the process, they do fewer than if they have a navigator that is managing that process.

Steve Williamson: If you think about our tools that we've launched, I talked about LongTracks Connect. LongTracks Connect makes it easier for the facility for that navigator, coordinator, or physician, whoever's managing that patient, to upload the CT scans without having to put a burn a CD in radiology, go through, find a computer that actually takes CDs these days, plug it in, upload it to the cloud. Now they'll be able to pull these directly from the pack system. So, I think that's a good workflow improvement that will make it easier for patients to receive the treatment. I think, more importantly, on LongTracks Connect, is the ability to track the patient through the process.

Steven S. Williamson: LungTracks Connect makes it easier for the facility, for that navigator, coordinator, or physician, whoever's managing that patient, to upload the CT scans without having to burn a CD and go through radiology, find a computer that actually takes CDs these days, plug it in, and upload it to the cloud.

Speaker Change: If you think about our tools that we've launched, I talked about LungTracks Connect.

Speaker Change: Lung Tracts Connect makes it easier for the facility, for that navigator, coordinator, or physician, whoever's managing that patient.

Speaker Change: to upload the CT scans without having to burn a CD and radiology, go through, find a computer that actually takes CDs these days, plug it in, upload it to the cloud. Now they'll be able to pull these directly from the PAC system. So I think that's a good workflow improvement that will make it easier for patients to receive the treatment.

Steven S. Williamson: Now they'll be able to pull these records directly from the PAC system. So, I think that's a good workflow improvement that will make it easier for patients to receive treatment. I think more importantly on LungTracks Connect is the ability to track the patient through the process. So, there's a workflow component that will actually track whether that patient has gone through different areas and different levels of testing that are necessary in order to get that patient treated. Right now, you've got coordinators, you have physicians that are on Excel spreadsheets that are on sheets of paper. It's just not very efficient; it's not automated.

Speaker Change: I think more importantly on LungTracks Connect is the ability to track the patient through the process.

Steve Williamson: So, there's a workflow component that will actually track, has that patient gone through different areas and different levels of testing that are necessary in order to get that patient treated. Right now, you've got coordinators, you have physicians that are on Excel spreadsheets, that are on sheets of paper. It's not automated. And so, we have the ability; we've put together this software that allows them to track that patient through the process. The coordinator wakes up in the morning, they log in, they can see exactly which patients are wearing the process, and then go up their day with an action items that come from that.

Speaker Change: So there's a workflow component that will actually track.

Speaker Change: Has that patient gone through different areas and different levels of testing that are necessary in order to get that patient treated?

Speaker Change: Right now, you've got coordinators, you have physicians that are on Excel spreadsheets that are on sheets of paper. It's just not very, it's not automated. And so we have the ability, we've put together the software that allows them to track that patient through the process.

Steven S. Williamson: And so we have the ability, and we've put together the software that allows them to track that patient through the process. The coordinator wakes up in the morning, they log in, they can see exactly which patients are where in the process, and then go about their day with action items that come from that. So, we'll continue to work on automation here. It's really, as I've been looking at the workflow, I think it's three different things.

Speaker Change: The coordinator wakes up in the morning, they log in, they can see exactly which patients are where in the process.

Steve Williamson: So, we'll continue to work on automation here.

Speaker Change: and then go about their day with action items that come from that.

Steve Williamson: It's really, as I've been looking at the workflow, I think it's three different things. We talk about sharing best practices. Those best practices are adding coordinators, educating local doctors, and screening programs. And then finally, communication back to those referring physicians. If you have a physician that refers patients into an interventional pulmonologist, and that doctor treats the patient or doesn't treat the patient, something happens, but they don't get back to that referring physician. That physician is less likely to send more patients to that interventional pulmonologist. If the pulmonologist gets back to him and says, "Hey, this is what we found."

Speaker Change: So, we'll continue to work on automation here. It's really, as I've been looking at the workflow, I think it's three different things. We talk about sharing best practices. Those best practices are adding coordinators, educating local doctors, and...

Steven S. Williamson: We talk about sharing best practices. Those best practices are adding coordinators, educating local doctors, and screening programs, and then finally communicating back to those referring physicians. If you have a physician that refers patients to an interventional pulmonologist, and that doctor treats the patient or doesn't treat the patient, something happens, but they don't get back to that referring physician, that physician is less likely to send more patients to that interventional pul

Speaker Change: Screening Programs, and then finally, communication back to those referring physicians.

Speaker Change: If you have a physician that refers patients into an interventional pulmonologist,

Speaker Change: and that doctor treats the patient or doesn't treat the patient, something happens, but they don't get back to that referring physician. That physician is less likely to send more patients to that interventional pulmonologist.

Steven S. Williamson: If the pulmonologist gets back to them and says, hey, this is what we found, this is what happened, your patient did great, this is where we are, I'm sending your patient back to you, you'll see referrals increase. So, when we talk about sharing of best practices, there are a number of different things that fall under that. The second step for us in terms of workflow is this LungTracks Connect and our ability to automate the workflow, and then we'll work on the third step in future quarters to continue to make it more efficient for patients to get through the process. Okay, thanks for taking the question. Thank you. I have no further questions at this time.

Steve Williamson: This is what happened. Your patient did great. This is where we are. I'm sending your patient back to you. You'll see referrals increase more. So, when we talk about sharing of best practices, there's a number of different things that fall under that.

Speaker Change: If the pulmonologist gets back to them and says, hey, this is what we found, this is what happened, your patient did great, this is where we are, I'm sending your patient back to you, you'll see referrals increase more. So when we talk about sharing of best practices, there's a number of different things that fall under that.

Unknown Executive: The second step for us from workflow is this Lundtrax Connect and our ability to automate the workflow, and then we'll work on the third step in future reporters. to continue to make it more efficient for patients to get through the process. Thanks for taking the questions. Thank you.

Speaker Change: The second step for us from workflow is this LungTracks Connect and our ability to automate the workflow. And then we'll work on the third step in future quarters.

Speaker Change: to continue to make it.

Speaker Change: more efficient for patients to get

Steven S. Williamson: I would now like to turn the call back to Steve Williamson for closing. Thank you, Operator. To conclude, I'd like to take a moment to thank Pulmonx employees worldwide for delivering a strong second quarter and their continued dedication to fighting every day for every breath so our patients don't have to. Thank you all for your time. I appreciate it.

Unknown Executive: I show no further questions at this time.

Speaker Change: Okay, thanks for taking the questions.

Steve Williamson: I would now like to turn the call back to Steve Williamson for closing remarks. Thank you, operator.

Speaker Change: Thank you. I show no further questions at this time. I would now like to turn the call back to Steve Williamson for closing remarks.

Steve Williamson: To conclude, I'd like to take a moment to thank Pulmonx employees worldwide for delivering a strong second quarter and their continued dedication to fighting every day for every breath so our patients don't have to. Thank you all for your time. I appreciate it.

Steven S. Williamson: Thank you, operator. To conclude, I'd like to take a moment to thank Pulmonx employees worldwide for delivering a strong second quarter and their continued dedication to fighting every day for every breath so our patients don't have to. Thank you all for your time. I appreciate it.

Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect. Thank you.

Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.

John McDonough: . . .

Speaker Change: See you next time.

Unknown Executive: [inaudible] Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Ladies and gentlemen, thank you for standing by. Welcome to Pulmonx's second quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode.

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Speaker Change: Mississippi Blueimp.

Speaker Change: [inaudible]

Elizabeth Sparicio: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your handler... Withdraw your question, please press star 11. Please be advised that today's conference is. I would now like to turn the conference over to Elizabeth Sparicio, Investor Relations. Please go ahead.

Unknown Executive: Welcome to Pulmonx 2nd quarter, 2024, earnings conference call. At this time, all participants on the listnally mode.

Speaker Change: Ladies and gentlemen, thank you for standing by.

Speaker Change: Welcome to Pulmonx Second Quarter 2024 Earnings Conference 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 will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.

Unknown Executive: After the speeches presentation, there will be a question and a session. To ask a question during the session, you will need to press star 1-1 on your telephs. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again.

Unknown Executive: Please be advised that today's conference is being recorded.

Speaker Change: To withdraw your question, please press star 11 again.

Elizabeth Sparicio: I would now like to turn the conference over to Elizabeth Sparicio, Investor Relations. Please go ahead.

Speaker Change: Please be advised that today's conference is being recorded.

Speaker Change: I would now like to turn the conference over to Elizabeth Sparicio, Investor Relations. Please go ahead.

Speaker Change: Earlier today, Pulmonx issued a press release announcing its financial results for the quarter ended June 30, 2024. A copy of the press release is available on Pulmonx's website.

Elizabeth Sparicio: A copy of the press release is available on Pulmonx's website. 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 in 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, commercial strategies, and future financial performance, the timing and results of clinical trials, 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, growth margin, and operating expenses, commercial expansion, and product pipeline development, are based upon our current estimates and various assumptions.

Speaker Change: Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

Elizabeth Sparicio: All forward-looking statements, including, without limitation, those relating to our operating trends, commercial strategies, and future financial performance, the timing and results of clinical trials, 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 estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or applied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

Speaker Change: All forward-looking statements, including, without limitation, those relating to our operating trends, commercial strategies, and future financial performance.

Speaker Change: The Timing and Results of Clinical Trials.

Speaker Change: The Impact of COVID-19 on Our Business and Prospects for Recovery.

Speaker Change: 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 estimates and various assumptions.

Elizabeth Sparicio: For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC on May 3, 2021. Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the press release, which is posted on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for GAAP.

Speaker Change: Accordingly, you should not place undue reliance on these statements.

Elizabeth Sparicio: Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided in the press release, which is posted on our Investor Relations website. These non-gap measures are not intended to be a substitute for our gap results.

Elizabeth Sparicio: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, July 31st, 2024. Pomonix disclaims any intention or obligation, except as required by law, to update or advise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise.

Speaker Change: These non-GAAP measures are not intended to be a substitute for our GAAP results.

Speaker Change: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, July 31, 2024.

Steven S. Williamson: Pulmonx 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 Steve.

Steve Williamson: And with that, I will turn the call over to Steve. Thank you, Elizabeth, and good afternoon, everyone. Welcome to our second quarter 2024 earnings call. Here with me today is Mayhul Joshi, our Chief Financial Officer. Overall, I am pleased with our second quarter performance as we achieved a record quarter of 20.8 million worldwide sales, representing 21% growth over the same period of the prior year. We are encouraged by our team's continued execution of our commercial and clinical pipeline strategies as we seek to further expand patient access to Zeppervels and serve the 1.2 million patients with limited treatment options who stand to benefit from BLVR.

Steven S. Williamson: Welcome to our second quarter 2024 earnings call. Here with me today is Mehul Joshi, our Chief Financial Officer. Overall, I am pleased with our second quarter performance as we achieved a record quarter of $20.8 million in worldwide sales, representing 21% growth over the same period of the prior year. We are encouraged by our team's continued execution of our commercial and clinical pipeline strategies as we seek to further expand patient access to Zephyr valves and serve the 1.2 million patients with limited treatment options who stand to benefit from BLVR.

Steven S. Williamson: Thank you, Elizabeth, and good afternoon, everyone. Welcome to our second quarter 2024 earnings call. Here with me today is Mehul Joshi, our Chief Financial Officer.

Steven S. Williamson: Overall, I am pleased with our second quarter performance as we achieved a record quarter of 20.8 million worldwide sales, representing 21% growth over the same period of the prior year.

Steven S. Williamson: We are encouraged by our team's continued execution of our commercial and clinical pipeline strategies as we seek to further expand patient access to Zephyr valves and serve the 1.2 million patients with limited treatment options who stand to benefit from BLVR.

Steve Williamson: The momentum we built exiting the quarter leaves us increasingly confident in our ability to deliver on the previously communicated revenue guidance of $81 to $84 million for the full year 2024. As expected, our second quarter results were driven by the continued traction of our commercial strategy in the United States, where we achieved sales growth of 26% compared to the second quarter of 2023.

Steve Williamson: As a reminder, our US commercial strategy is repronged. The first is that training physicians have hospitals that have the potential to be high performing Zephyr Valve centers. The second is automating patient workflows and facilitating the sharing of best practices among existing centers to optimize their Zephyr valve programs. And third, building local awareness of the benefits of our treatment among COPD physicians and patients throughout the quarter. We made substantial progress in each prong of our commercial strategy in Q2. We added 17 new accounts in the United States and ended the quarter with 267 active accounts or centers that placed a revenue-generating order in the quarter.

Speaker Change: As a reminder, our U.S. commercial strategy is three-pronged. The first is that training physicians at hospitals that have the potential to be high-performing Zephyr Valve Centers

Steve Williamson: As we continue to expand our US account base, we're engaging with the C-suite at hospital systems, which provides the opportunity to present the benefits of a Zephyr valve treatment program to hospital administration, but then have the ability to provide needed resources for clinical support and account development. We're excited by the opportunity to serve more patients in need of our life-changing treatment with our continuously growing base of US centers. While we continue to identify potentially high performing Zephyr valve centers and expect to opportunistically establish new accounts, our primary focus remains on driving utilization in existing accounts.

Steven S. Williamson: As we continue to expand our U.S. account base, we're engaging with the C-suite of hospital systems, which provides the opportunity to present the benefits of a Zephyr Val treatment program to hospital administration, who then have the ability to provide needed resources for clinical support and account development. We're excited by the opportunity to serve more patients in need of our life-changing treatment with our continuously growing base of U.S. centers. While we continue to identify potentially high-performing Zephyr Valve Centers and expect to opportunistically establish new accounts, our primary focus remains on driving utilization in existing accounts.

Speaker Change: We're excited by the opportunity to serve more patients in need of our life-changing treatment with our continuously growing base of U.S. centers.

Steve Williamson: Within our existing base of Zephyr valve centers, the team continues to establish our treatment as a more routine procedure, particularly through the sharing of best practices of our higher utilization treatment centers and the development of workflow automation tools. In June, we hosted our second annual advanced clinical summit where we had 45 dedicated professionals from 24 hospitals, passionate about advancing patient care in the field of bronchoscopic lung volume reduction, gathered together. Attendees participated in a comprehensive curriculum designed to identify patients most likely to benefit from Zephyr valves, build efficient patient pathways, and engage administration to secure necessary resources.

Speaker Change: Within our existing base of Zephyr Valve Centers, the team continues to establish our treatment as a more routine procedure, particularly through the sharing of best practices of our higher utilization treatment centers and the development of workflow automation tools.

Speaker Change: In June , we hosted our second annual Advanced Clinical Summit where we had 45 dedicated professionals from 24 hospitals.

Steve Williamson: We heard from one hospital in the Southeast who attended our inaugural summit last year about their experience implementing these best practices into their own workflows. As a result, the hospital saw increased efficiency and procedural capacity, allowing them to grow their Zephyr valve volumes from a handful of cases last year to over 40 cases in the first half of this year. This remarkable anecdote is one of many and further validates our commercial strategy and the vast opportunity we have for continued growth. During a summit, I was inspired by our growing community of partnering physicians and staff who all share a common goal of helping patients with severe emphysema and COPD breathe easier.

Steven S. Williamson: We heard from one hospital in the Southeast who attended our inaugural summit last year about their experience implementing these best practices into their own work. As a result, the hospital saw increased efficiency and procedural capacity, allowing it to grow its Zephyr valve volumes from a handful of cases last year to over 40 cases in the first half of this year. This remarkable anecdote is one of many and further validates our commercial strategy and the vast opportunity we have for continued growth.

Speaker Change: We heard from one hospital in the Southeast who attended our inaugural summit last year about their experience implementing these best practices into their own workflows.

Speaker Change: As a result, the hospital saw increased efficiency and procedural capacity, allowing them to grow their Zephyr valve volumes from a handful of cases last year to over 40 cases in the first half of this year.

Speaker Change: This remarkable anecdote is one of many and further validates our commercial strategy and the vast opportunity we have for continued growth.

Steven S. Williamson: During the summit, I was inspired by our growing community of partnering physicians and staff who all share a common goal of helping patients with severe emphysema and COPD breathe easier. Over the last few months, I visited treatment centers across the U.S. and abroad to connect with physicians and gain field-based insights on the success of our commercial, and I was humbled by my experience witnessing the impact of our Zephyr valve treatment on patients.

Steve Williamson: Over the last few months, I visited treating centers across the US and abroad to connect with physicians and gain field-based insights on the success of our commercial initiatives. I was humbled by my experience witnessing the impact of our Zephyr Valve treatment on patients. My conversations with treating physicians on building efficient work streams and establishing Zephyr valve as a routine procedure have also helped to inform the region-specific strategies we're designing today to optimize the building blocks we have in place. Davis, for example, an account in Colorado that averaged 10 cases per quarter, took about six months to move patients through the treatment funnel from initial visit to M-Plan.

Speaker Change: I was humbled by my experience witnessing the impact of our Zephyr valve treatment on patients.

Steven S. Williamson: My conversations with treating physicians on building efficient work streams and establishing Zephyr Valve as a routine procedure have also helped to inform the region-specific strategies we're designing today to optimize the building blocks we have in place. For example, an account in Colorado that averaged 10 cases per quarter took about six months to move patients through the treatment funnel from initial visit to implant. Together with all the key stakeholders, we helped identify bottlenecks in the process, which included a lack of procedure capacity and a clear program.

Steve Williamson: Together with all the key stakeholders, we helped identify bottlenecks in the process, which included a lack of procedure capacity and a clear program owner. As a result, the customer defined a new Zepperville program owner, an implemented process changes designed to improve workflow, such as setting up routine order sets in their EMR for all key action items. Today, the center is seeing time to treatment decrease as the number of cases per week increase. The interventional pulmonology team recently went to hospital administration and asked for and received two additional case slots per week, with plans to ask for more as they realize the benefit of their new workflow implementation.

Steven S. Williamson: The interventional pulmonology team recently went to hospital administration and asked for and received two additional case slots per week with plans to ask for more as they realize the benefit of their new workflow implementation. As part of our efforts to enable cost-effective workflow efficiencies more broadly, I'm pleased to announce the upcoming pilot launch of our LungTracks Connect program, an automation software that enables a streamlined, efficient, and collaborative workup process. Currently, users need to transfer CT scans onto a disk and then manually upload the scan to the Stratix platform to generate a report for physician evaluation.

Steve Williamson: As part of our efforts to enable cost-effective workflow efficiencies more broadly, I'm pleased to announce the upcoming pilot launch of our Long Tracks Connect program, an automation software that enables a streamlined, efficient, and collaborative workup process. Currently, users need to transfer CT scans onto a disc and then manually upload the scan to the Stratx platform to generate a report for physician evaluation. Our new software eliminates this manual process by allowing the CT scan to be uploaded directly to the Stratx platform from the hospital's PACS system. Additionally, it enables the care team to track and share patient workup status, potentially reducing time to treatment for the patient.

Speaker Change #101: As part of our efforts to enable cost-effective workflow efficiencies more broadly, I'm pleased to announce the upcoming pilot launch of our LungTracks Connect program, an automation software that enables a streamlined, efficient, and collaborative workup process.

Speaker Change: Currently, users need to transfer CT scans onto a disk and then manually upload the scan to the Stratix platform to generate a report for physician evaluation.

Speaker Change: Our new software eliminates this manual process by allowing the CT scan to be uploaded directly to the Stratix platform from the hospital's PAC system.

Steve Williamson: This stands to meaningfully reduce key friction points in patient workflow and allows centers to better manage growing Zepperville case loads. We expect to initiate our pilot program in a handful of select centers in the back half of this year, and I look forward to providing further details on our progress on future calls. As we continue to share best practices, drive workflow automation, and help our customers build efficient programs that deliver a positive patient experience, we're also continuing to promote regional awareness programs for patients and community COPD physicians. These initiatives collectively enabled 20,000 patient engagements in the first half of 2024, provided peer-to-peer education to over 450 physicians, and drove broader awareness with another 6,000 physicians through digital channels like our CME program.

Speaker Change: We expect to initiate our pilot program in a handful of select centers in the back half of this year. And I look forward to providing further details on our progress on future calls.

Steven S. Williamson: While our primary commercial focus remains on growing our U.S. business, we are pleased with our performance across our international markets in Q2, which resulted in OUS year-over-year revenue growth of 12%. We're continuing our work this year to adapt many of the sales tools we've developed for use in the U.S. for use in European markets, such as operational best practice sharing, community physician engagement, and peer-to-peer education programs. The progress we've made on these initiatives was evident at our EMEA summer sales meeting in July, where I left increasingly confident in our team's ability to continue executing our commercial strategy.

Speaker Change: The progress we've made on these initiatives was evident at our EMEA summer sales meeting in July , where I left increasingly confident in our team's ability to continue executing our commercial strategy. We anticipate the impact of our international efforts to become increasingly evident in 2025 as we focus on foundation building this year.

Steve Williamson: We anticipate the impact of our international efforts to become increasingly evident in 2025 as we focus on foundation building this year. Beyond Europe, we also continue to make progress with our expansion efforts in Asia. First, we entered into a new distribution agreement with an innovative medical supply distribution company in China. While this market represents a small portion of our business, we believe this transition to a new distributor will allow us to expand our market region, China, in a more cost-effective manner.

Steven S. Williamson: We anticipate the impact of our international efforts to become increasingly evident in 2025 as we focus on foundation building this year. Beyond Europe, we also continue to make progress with our expansion efforts in Asia. First, we entered into a new distribution agreement with an innovative medical supply distribution company. While this market represents a small portion of our business, we believe this transition to a new distributor will allow us to expand our market reach in China in a more cost-effective manner. Secondly, earlier this month, I attended the 47th Annual Meeting of the Japanese Society of Respiratory Endoscopy in Osaka, where I connected with thought leaders spearheading the launch of Zephyr valves in Japan.

Steve Williamson: Carter. Secondly, earlier this month, I attended the 47th Annual Meeting of the Japanese Society of Respiratory and DOSC, and Osaka, where I connected with thought leaders spearheading the launch of Zephyr Vals in Japan. I'm encouraged by the positive reception our technology is received from participating centers in the early days of the post-market study, and the progress our Japan team has made in driving increased awareness of Zephyr Vals. That being said, we still anticipate it will take time to grow widespread awareness of this new treatment option, and we expect the bulk of enrollment to occur in the back half of the enrollment period, as we train additional sites and move the first patients through the treatment funnel.

Speaker Change: Secondly, earlier this month, I attended the 47th Annual Meeting of the Japanese Society of Respiratory Endoscopy in Osaka, where I connected with thought leaders spearheading the launch of Zephyr valves in Japan.

Steven S. Williamson: I'm encouraged by the positive reception our technology has received from participating centers in the early days of the post-market study and the progress our Japan team has made in driving increased awareness of Zephyr Valley. That being said, we still anticipate it will take time to grow widespread awareness of this new treatment option, and we expect the bulk of enrollment to occur in the back half of the enrollment period as we train additional sites and move the first patients through the treatment funnel.

Speaker Change: I'm encouraged by the positive reception our technology has received from participating centers in the early days of the post-market study and the progress our Japan team has made in driving increased awareness of Zephyr valves.

Speaker Change: That being said, we still anticipate it will take time to grow widespread awareness of this new treatment option, and we expect the bulk of enrollment to occur in the back half of the enrollment period as we train additional sites and move the first patients through the treatment funnel.

Steve Williamson: As we have said in the past, we do not expect a material revenue contribution from Japan until approximately 2026. This study marks an essential step toward broader commercialization in a new market, where we estimate approximately 100,000 patients stand to benefit from Zephyr Vals.

Steven S. Williamson: As we have said in the past, we do not expect a material revenue contribution from Japan until approximately 2020. This study marks an essential step toward broader commercialization in a new market, where we estimate approximately 100,000 patients stand to benefit from Zephyrus.

Speaker Change: As we have said in the past, we do not expect a material revenue contribution from Japan until approximately 2026.

Speaker Change: This study marks an essential step toward broader commercialization in a new market where we estimate approximately 100,000 patients stand to benefit from Zephyr Valves.

Steve Williamson: In addition to growing our global footprint, we remain committed to our goal of expanding the number of patients that can be treated with Zephyr Vals through our Aerosio Clinical Development Program. We continue to make progress with our Convert2 Pivotal Trial, a multi-center global study designed to evaluate the safety and effectiveness of the Aerosio System in limiting collateral ventilation in severe COPD and emphysema patients. I'm excited to announce that earlier in July, I attended the first U.S. case in the Convert2 Pivotal Trial, where a patient was successfully treated with Aerosio by Dr. Jerry Criner, the Chair of Therassic Medicine and Surgery at Temple University in Philadelphia, a leading Zephyr Vals center.

Steven S. Williamson: In addition to growing our global footprint, we remain committed to our goal of expanding the number of patients that can be treated with separate valves through our AeroSeal Clinical Development Program. We continue to make progress with our CONVERT2 Pivotal Trial, a multi-center global study designed to evaluate the safety and effectiveness of the AeroSeal system in limiting collateral ventilation in severe COPD and emphysema patients. I'm excited to announce that earlier in July, I attended the first U.S. case in the COVERT-2 pivotal trial, where a patient was successfully treated with Arasil by Dr. Jerry Kreiner, the chair of Thoracic Medicine and Surgery at Temple University in Philadelphia, a leading Zephyr valve center.

Speaker Change: In addition to growing our global footprint, we remain committed to our goal of expanding the number of patients that can be treated with Zephyr valves through our Aeroseal Clinical Development Program.

Speaker Change: I'm excited to announce that earlier in July , I attended the first U.S. case in the CONVERT-2 pivotal trial, where a patient was successfully treated with Arasil by Dr. Jerry Kreiner, the Chair of Thoracic Medicine and Surgery at Temple University in Philadelphia, a leading Zephyr valve center.

Steve Williamson: We believe Aerosio has the potential to expand our addressable market by approximately 20 percent globally. The U.S. represents our largest share of that opportunity, and we see the first U.S. case as a critical step forward in our journey to unlocking this important market segment. The U.S. Enrollment milestone follows the initiation of enrollment for Convert2 and select international centers in February of 2024.

Steven S. Williamson: We believe Aerosteel has the potential to expand our addressable market by approximately 20% globally. The U.S. represents our largest share of that opportunity, and we see the first U.S. case as a critical step forward in our journey to unlocking this important market segment. The U.S. enrollment milestone follows the initiation of enrollment for CONVERT1 and select international centers in February of 2024. As it pertains to CONVERT1, our European study, we look forward to the presentation of the six-month follow-up data at the European Respiratory Society Congress in early September in Vienna.

Speaker Change: We believe Aeroseal has the potential to expand our addressable market by approximately 20% globally. The U.S. represents our largest share of that opportunity and we see the first U.S. case as a critical step forward in our journey to unlocking this important market segment.

Speaker Change: The U.S. Enrollment Milestone follows the initiation of enrollment for Convert2 and Select International Centers in February of 2024.

Steve Williamson: As it pertains to Convert1, our European study, we look forward to the presentation of the six-month follow-up data at the European Respiratory Society Congress in early September and Vienna. We expect the presentation will demonstrate a high conversion to CB negative status in the target load following Aerosio and positive clinical outcomes following subsequent treatment with Zephyr Vals.

Steven S. Williamson: We expect the presentation will demonstrate high conversion to CV-negative status in the target lobe following aeroseal and positive clinical outcomes following subsequent treatment with Zephyr. As we remain committed to further advancing long-term clinical research in our field, I'm pleased to announce eight abstracts have been accepted, and an initial two abstracts have been submitted for presentation at upcoming key scientific meetings, including ERS, the American Association of Bronchology and Interventional Pulmonology meeting, the CHEST annual meeting, and the World Congress of Bronchology and Interventional Pulmonology.

Speaker Change: We expect the presentation will demonstrate high conversion to CB-negative status in the target lobe following aerosil and positive clinical outcomes following subsequent treatment with Zephyr valves.

Steve Williamson: As we remain committed to further advancing long-term clinical research in our field, I'm pleased to announce eight abstracts have been accepted and an initial two abstracts have been submitted for presentation of upcoming key scientific meetings, including ERS, the American Association of Bronchology and Interventional Pulmonology Meeting, the Chest Annual Meeting, and the World Congress of Bronchology and Interventional Pulmonology. These abstracts will cover a spectrum of new data, including the five-year follow-up data from the Liberate study, reduction of severe exacerbations, and patients with substantial volume reduction following Zephyr Vals placement and real-world results from our multi-center French registry.

Speaker Change: the American Association of Bronchology and Interventional Pulmonology meeting, the CHEST annual meeting, and the World Congress of Bronchology and Interventional Pulmonology.

Steven S. Williamson: These abstracts will cover a spectrum of new data, including the five-year follow-up data from the LIBRAID study, reduction of severe exacerbations in patients with substantial volume reduction following Zephyr valve placement, and real-world results from our multi-center French registry.

Steve Williamson: We look forward to connecting with our clinical network at these global events, which we view as a crucial component of our strategy to drive increased awareness of Zephyr Vals and their clinical benefits. We are confident that the strategies we've implemented, the automation tools we are developing, and the ongoing release of new long-term clinical data will continue to drive global growth in 2025. Further, the schedule completion of the Japanese post-approval surveillance study and the commercial launch of ARICIL in our OUS markets will provide growth catalysts in 2020. Finally, the expected U.S. launch of Araciel in 2027 rounds out a cadence of significant, innovative, and market expanding launches.

Steven S. Williamson: We look forward to connecting with our clinical network at these global events, which we view as a crucial component of our strategy to drive increased awareness of Zephyr valves and their clinical benefits. We are confident that the strategies we've implemented, the automation tools we are developing, and the ongoing release of new long-term clinical data will continue to drive global growth in 2025. Further, the scheduled completion of the Japanese Post-Approval Surveillance Study and the commercial launch of Aeroseal in our OUS markets will provide growth catalysts in 2020. Finally, the expected U.S. launch of Aeroseal in 2027 rounds out a cadence of significant, innovative, and market-expanding launches.

Speaker Change: Further, the scheduled completion of the Japanese Post-Approval Surveillance Study and the commercial launch of Aeroseal in our OUS markets will provide growth catalysts in 2026.

Steve Williamson: It is for these reasons that I believe Pulmonx is well positioned for continued significant long-term growth.

Mehul Joshi: Now turn the call over to Mehul to provide a more detailed review of our second quarter results. Thank you, Steve, and good afternoon, everyone. Total worldwide revenue for the three months ended June 30th, 2024, was 20.8 million dollars, a 21% increase over the prior year period, and also an increase of 21% on a constant currency basis. Our strong performance was driven by continued commercial momentum and adoption of Zephyr Valfe Therapy.

Mehul Joshi: Now I'll turn the call over to Mehul to provide a more detailed review of our second quarter results.

Mehul Joshi: Our strong performance was driven by continued commercial momentum and adoption of Zephyr valve therapy.

Mehul Joshi: U.S. Revenue in the second quarter was 13.9 million dollars, a 26% increase over the prior year period. International revenue in the second quarter of 2024 was 6.9 million dollars, an increase of 12% over the prior year period, and also an increase of 12% on a constant currency basis. Gross margin for the second quarter of 2024 was 74%, essentially flat versus the prior year period, reflecting lower utilization partially offset by favorable geographic mix. Total operating expenses for the second quarter of 2024 were 30.9 million dollars, an increase of 6% over the prior year period. Operating expenses included a one-time non-cash charge in R&D of 1.7 million dollars to impair internally developed software following a strategic decision to adopt a more efficient solution.

Mehul Joshi: U.S. revenue in the second quarter was $13.9 million, a 26 percent increase over the prior year period.

Speaker Change: International revenue in the second quarter of 2024 was $6.9 million, an increase of 12% over the prior year period, and also an increase of 12% on a constant currency basis.

Speaker Change: Gross margin for the second quarter of 2024 was 74%, essentially flat versus the prior year period, reflecting lower utilization partially offset by favorable geographic mix.

Speaker Change: Total operating expenses for the second quarter of 2024 were $30.9 million, an increase of 6% over the prior year period.

Speaker Change: Operating expenses included a one-time, non-cash charge in R&D of $1.7 million to impair internally developed software following a strategic decision to adopt a more efficient solution.

Mehul Joshi: This was a result of one of our gross margin improvement initiatives that will be gross margin accretive in the long term. Excluding the one-time charge, total operating expenses were flat over the prior year period. Non-cash stock-based compensation was 5.5 million dollars in the second quarter of 2024. Excluding stock-based compensation expense and the one-time impairment charge, total operating expenses in the second quarter of 2024 were flat over the prior year period. R&D expenses for the second quarter of 2024 were 5.6 million dollars, a decrease of 2% over the prior year period. R&D expenses excluding the one-time software impairment charge were 3.9 million dollars, down 32% versus the prior year period.

Speaker Change: This was a result of one of our gross margin improvement initiatives that will be gross margin accretive in the long term.

Speaker Change: Excluding the one-time charge, total operating expenses were flat over the prior year period.

Speaker Change: Non-cash, stock-based compensation was $5.5 million in the second quarter of 2024.

Speaker Change: Excluding stock-based compensation expense and the one-time impairment charge, total operating expenses in the second quarter of 2024 were flat over the prior year period.

Speaker Change: R&D expenses for the second quarter of 2024 were $5.6 million, a decrease of 2% over the prior year period.

Speaker Change: R&D expenses, excluding the one-time software impairment charge, were $3.9 million, down 32% versus the prior year period. The decrease was driven by lower clinical trial expenses and lower development costs.

Mehul Joshi: The decrease was driven by lower clinical trial expenses and lower development costs. We expect R&D expenses to increase from the second quarter as enrollment in our clinical trials continues to ramp. Sales, general and administrative expenses for the second quarter of 2024 were 25.3 million dollars, an increase of 8% over the prior year period. The increase was primarily driven by additional investment in patient awareness programs. Net loss for the second quarter of 2024 was 15.3 million dollars, or a loss of 39 cents per share, as compared to a net loss of 16.2 million dollars, or a loss of 43 cents per share, for the same period of the prior year.

Mehul Joshi: The decrease was driven by lower clinical trial expenses and lower development costs. We expect R&D expense to increase in the second quarter as enrollment in our clinical trials continues to ramp up. Sales, General, and Administrative expenses for the second quarter of 2024 were $25.3 million, an increase of 8% over the prior year period. The increase was primarily driven by additional investment in patient awareness programs. The net loss for the second quarter of 2024 was $15.3 million, or a loss of $0.39 per share, as compared to a net loss of $16.2 million, or a loss of $0.43 per share, for the same period of the prior year. An average weighted share count of 38.9 million shares was used to determine the loss per share for the second quarter of 2024.

Speaker Change: We expect R&D expense to increase from the second quarter as enrollment in our clinical trials continues to ramp.

Speaker Change: Sales, general, and administrative expenses for the second quarter of 2024 were $25.3 million, an increase of 8% over the prior year period. The increase was primarily driven by additional investment in patient awareness programs.

Speaker Change: Net loss for the second quarter of 2024 was $15.3 million, or a loss of $0.39 per share, as compared to a net loss of $16.2 million, or a loss of $0.43 per share, for the same period of the prior year.

Mehul Joshi: and Average Weighted Share Count of 38.9 million shares was used to determine loss per share for the second quarter of 2024. Adjusted EBITDA loss for the second quarter of 2024 of $7.6 million as compared to $10.3 million in the second quarter of 2023. A 26% improvement on a year-over-year basis. Please refer to our reconciliation of net loss to non-GAAP adjusted EBITDA for further details. We ended June 30, 2024, with $114.5 million in cash equivalents and marketable securities, a decrease of $5.9 million from March 31, 2024. Our current cash position, combined with our demonstrated ability to drive revenue growth and operating leverage beyond our existing operating plan assumptions, continues to provide confidence in our ability to become cash flow break-even with the cash on hand.

Speaker Change: An average weighted share count of 38.9 million shares was used to determine loss per share for the second quarter of 2024.

Speaker Change: Adjusted EBITDA loss for the second quarter of 2024 was $7.6 million, as compared to $10.3 million in the second quarter of 2023, a 26% improvement on a year-over-year basis.

Speaker Change: Please refer to our Reconciliation of Net Loss to Non-Gap Adjusted EBITDA for further details.

Speaker Change: We ended June 30th, 2024 with $114.5 million in cash, cash equivalents, and marketable securities, a decrease of $5.9 million from March 31st, 2024.

Speaker Change: Our current cash position, combined with our demonstrated ability to drive revenue growth and operating leverage beyond our existing operating plan assumptions, continues to provide confidence in our ability to become cash flow break-even with the cash on hand.

Mehul Joshi: We remain laser-focused on prudent cash management and have extended the interest-only payment period for our $37 million term loan by one year. As a reminder, in October 2022, we refinanced the term loan to secure a more attractive rate and extend the maturity date to 2027, with the ability to extend the interest-only period for an additional 12 months, subject to certain conditions which were satisfied. The principal repayment will now begin in November 2025 with no changes to the loan interest rate or maturity date.

Speaker Change: We remain laser-focused on prudent cash management and have extended the interest-only payment period for our $37 million term loan by one year.

Mehul Joshi: As a reminder, in October 2022, we refinanced the term loan to secure a more attractive rate and extend the maturity date to 2027, with the ability to extend the interest-only period for an additional 12 months subject to certain conditions, which were satisfied. The principal of repayment will now begin in November 2025, with no changes to the loan interest rate or maturity date. Turning now to full year 2024 guidance. As we look ahead, we are reiterating our previously communicated fiscal year 2024 revenue, gross margin, and OPEX guidance.

Speaker Change: As a reminder, in October 2022, we refinanced the term loan to secure a more attractive rate and extend the maturity date to 2027, with the ability to extend the interest-only period for an additional 12 months subject to certain conditions.

Speaker Change: which were satisfied. The principal repayment will now begin in November 2025 with no changes to the loan interest rate or maturity date.

Mehul Joshi: Turning now to full year 2024 guidance. As we look ahead, we are reiterating our previously communicated fiscal year 2024 revenue, gross margin, and op-ex guidance. As a reminder, we expect to deliver a full year 2024 revenue in the range of $81 million to $84 million, representing approximately 20% growth at the midpoint. We remain confident in our guidance as we continue executing our focus commercial strategy. Our guidance continues to assume a neutral to slightly negative impact on revenue from foreign currency exchange rates. Moving down the P&L, we expect gross margin for the full year 2024 to fall within the range of 74 to 75%.

Mehul Joshi: As a reminder, we expect to deliver full-year 2024 revenue in the range of $81 to $84 million, representing approximately 20% growth at. We remain confident in our guidance as we continue executing our focused commercial strategy. Our guidance continues to assume a neutral to slightly negative impact on revenue from foreign currency exchanges. Moving down the P&L, we expect gross margin for the full year 2024 to fall within the range of 74 to 75%. Lastly, we expect operating expenses for the full year 2024 to fall between $127 to $129 million, inclusive of approximately $25 million of non-cash stock-based compensation.

Speaker Change: Turning now to full year 2024 guidance.

Speaker Change: As we look ahead, we are reiterating our previously communicated fiscal year 2024 revenue, gross margin, and OPEX guidance.

Speaker Change: As a reminder, we expect to deliver full year 2024 revenue in the range of $81 to $84 million, representing approximately 20% growth at the midpoint.

Speaker Change: We remain confident in our guidance as we continue executing our focused commercial strategy. Our guidance continues to assume a neutral to slightly negative impact on revenue from foreign currency exchange rates.

Speaker Change: Moving down the P&L, we expect gross margin for the full year 2024 to fall within the range of 74 to 75 percent.

Speaker Change: Lastly, we expect operating expenses for the full year 2024 to fall between $127 to $129 million, inclusive of approximately $25 million of non-cash, stock-based compensation expense.

Speaker Change: In all, we are confident in our outlook for 2024 and look forward to executing on the next stage of growth. With that, I'd like to thank you for your attention, and we will now open the call for questions.

Unknown Executive: With that, I'd like to thank you for your attention, and we will now open the call for questions.

Unknown Executive: Operator? Thank you. As a reminder to ask a question, please press star 111 on your telephone and wait for your name to be announced. To withdraw your question, please press star 111 again. Please stand by where we compile the Q&A roster.

Speaker Change: Operator.

Speaker Change: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Unknown Executive: Please stand by while we compile the Q&A room. Our first question is from Jason Bednar with Piper Sandler. Please proceed with your question. Hey, afternoon, guys.

Speaker Change #108: Please stand by while we compile the Q&A roster.

Jason Bednar: Our first question is from Jason Bedner with Piper Sandler. Please proceed with your question. Thank you. Good afternoon, guys. Thanks for the questions here. Nice quarter.

Speaker Change: Our first question is from Jason Bednar with Piper Sandler. Please proceed with your question.

Jason M. Bednar: Thanks for the questions here. Nice quarter. I wanted to start with the assumptions underlying the reaffirmed guide and just really ask how you're thinking about the cadence of procedure volume and revenue performance here in the second half. Anything outside the typical seasonality you would anticipate for the business as we look at the typical sequential performance, 2Q to 3Q, same question, 3Q to 4Q, or maybe just ask more directly, are you comfortable with where the street's currently sitting for the back half of the year on revenue? Yeah, so I appreciate the question, Jason. And thanks for the kind words there.

Jason Bednar: Wanted to start with...

Speaker Change: Good afternoon, guys. Thanks for the questions here. Nice quarter. I wanted to start with

Jason Bednar: The assumptions underlying, the reaffirmed guide, and just really ask on how you're thinking about the cadence of procedure volume and revenue performance here in the second half.

Jason M. Bednar: The assumptions underlying the reaffirmed guide and just really ask on how you're thinking about the cadences

Jason Bednar: Anything outside the typical season now, and you would anticipate for the business as we look at the typical sequential performance to Q to 3Q? Same question 3Q to 4Q, or maybe just ask more directly: are you comfortable with where the streets currently sitting for the back half of the year on revenue? Yeah, so I appreciate the question, Jason, and thanks for the kind words there. As we're looking at the back half guidance right now, obviously we take a look at how we performed in the first half of the year, and we're happy with where we've landed in the first half of the year.

Speaker Change #104: Procedure Volume and Revenue Performance here in the second half, anything outside the typical seasonality you would anticipate for the business as we look at

Speaker Change #100: You know, the typical sequential performance, 2Q to 3Q, same question, 3Q to 4Q, or maybe just ask more directly, are you comfortable with where the street's currently sitting for the back half of the year on revenue?

Steven S. Williamson: As we're looking at the back half guidance right now, obviously, we take a look at how we performed in the first half of the year. And we're happy with where we've landed in the first half of the year. I think we've shown good growth. And, and as we move into the back half, you know, Mehul and I haven't been through this seasonality cycle yet.

Speaker Change: Yeah, so I appreciate the question, Jason. And thanks for the kind words there. As we're looking at the back half guidance right now, obviously, we take a look at how we performed in the first half of the year, and we're happy with where we've landed in the first half of the year. I think we've shown good growth. And as we move into the back half,

Steve Williamson: I think we've shown good growth, and as we move into the back half, you know, we haven't been through this seasonality cycle yet, Mehul and I haven't. And as we look at 2022, we saw seasonality in both the US and OUS in 23. It looks like we're able to muscle through that seasonality in the US, which gave us kind of a tough comp for Q3. So, with the variability between 22 and 23, and using that as kind of predictors for the future. We just we don't want to get over our skis there. And so we feel comfortable with our performance so far.

Steven S. Williamson: And as we look at 2022, we saw seasonality in both the US and OUS. In 23, it looks like we're able to muscle through that seasonality in the US, which gave us kind of a tough comp for Q3. So with the variability between 22 and 23, and using that as kind of predictors for the future, we just don't want to get over our skis there.

Speaker Change: In 23, it looks like we're able to muscle through that seasonality in the U.S., which gave us...

Steve Williamson: And that's why we're able to reaffirm the guide.

Mehul Joshi: Maybe well, anything you want to edit out or. No, I think you guys see.

Mehul Joshi: Okay, I appreciate that's helpful.

Speaker Change: No, I think you got it, Steve.

Mehul Joshi: Maybe along that same vein as we break out US versus international performance, because any differences and expectations on the mix that you're seeing as it is playing out as you would have expected. And then, you know, maybe the follow-up to that is what's it going to take to get that international business, you know, back to maybe where the US is growing in that mid 20% plus range or should we just anticipate double digits is good enough for international. Just how you're thinking about that as we look over the next several quarters. Sure, as we look at the OUS performance, it is really playing out how we expected it to play out.

Steven S. Williamson: Okay, I appreciate that's helpful. Maybe along that same vein as we break out

Speaker Change: U.S. vs. international performance. Any differences in expectations on the mix that you're seeing? Is it playing out as you would have expected? And then, you know, maybe the follow-up to that is, you know, what's it going to take to get that international business?

Speaker Change #105: You know, back to maybe where the U.S. is growing in that mid-20% plus range, or should we just anticipate, you know, double digits is good enough for international? Just how you're thinking about that as we look over, you know, the next several quarters.

Steven S. Williamson: And so we feel comfortable with our performance so far. And that's why we're able to reaffirm the guide. Mehul, anything you want to add to that or not? No, I think you got it, Steve.

Speaker Change #112: As we look at the OUS performance, it is really playing out how we expected it to play out.

Steven S. Williamson: Okay, I appreciate that's helpful. Maybe along that same vein as we, breakout. U.S. vs. international performance. Any differences in expectations in the mix that you're seeing? Is it playing out as you would have expected?

Mehul Joshi: As you rightly pointed out, obviously they're not growing as quickly as they are in the US or as we are in the US. What we've gone and done is we've implemented the sales process tools in our European businesses. And I was actually over there for the European sales meeting, and I was really impressed. I think the teams really focused on executing that sales process. I left the meeting bullish about their plan, and really, as we look forward, they're building out patient screening. They're, they're looking at developing practice efficiencies, physician education. We're seeing a lot of physician education coming from Europe as well.

Speaker Change #109: As you rightfully pointed out, obviously, they're not growing as quickly as they are in the U.S., or as we are in the U.S.

Speaker Change #123: What we've gone and done is we've implemented the sales process tools in our European businesses. And I was actually over there for the European sales meeting. And I was really impressed. I think the team's really focused on executing that sales process.

Speaker Change: I left the meeting bullish about their plan, and really as we look forward...

Speaker Change #103: They're building out patient screening, they're looking at developing practice efficiencies.

Speaker Change #103: Physician education, we're seeing a lot of physician education coming from Europe as well.

Mehul Joshi: And so they've also built these sales plans around those tactics. And I was like, I said, I was very impressed with the plans that they put together. And I think we'll start to see this play out a little bit more in 2025. So I would say that the management and the team that are there are doing the right things to get that growth rate up over time.

Speaker Change #103: And so they've also built these sales plans around those tactics. And I was, like I said, I was...

Speaker Change #140: Very impressed with the plans that they put together, and I think we'll start to see this play out a little bit more in 2025. So I would say that the management and the team that are there are doing the right things to get that growth rate up over time.

Unknown Executive: All right, excellent. If I can squeeze in one more, just as more of a little bit of a check the box here question.

Steven S. Williamson: And then, you know, maybe the follow-up to that is, you know, what's it going to take to get that international business? You know, back to maybe where the US is growing in that mid 20% plus range, or should we just anticipate double digits is good enough for international? Just how you're thinking about that as we look over the next several quarters. Sure, as we look at the OUS performance, it is really playing out how we expected it to play out. As you rightfully pointed out, obviously, they're not growing as quickly as they are in the US or as we are in the US.

Jason Bednar: But seeing if there's anything we need to consider modeling wise on the new China distribution agreement you have in place or the new distributor you're bringing on, any inventory load in, or any may hold any accounting we need to think about as you go through that transition. Yeah, great question, Jason. Well, I think no, nothing on the loading or accounting at all. It's a new distributor that we've brought into the mix here in our OUS strategy. I think what we believe is that going down to distributor route will enable revenue to grow significantly faster than, you know, if we were going out there and building a commercial infrastructure in China.

Steven S. Williamson: What we've gone and done is we've implemented the sales process tools in our European businesses. And I was actually over there for the European sales meeting, and I was really impressed.

Steven S. Williamson: I think the team's really focused on executing that sales process. I left the meeting bullish about their plan. And really, as we look forward, they're building out patient screening. They're looking at developing practice efficiencies, and physician education. We're seeing a lot of physician education coming from Europe as well, and so they've also built these sales plans around those tactics. And, like I said, I was very impressed with the plans that they put together. And I think we'll start to see this play out a little bit more in 2025.

Steven S. Williamson: So I would say that the management and the team that are there are doing the right things to get that growth rate up over time. Alright, excellent. If I can squeeze in one more, just as more of a, a little bit of a check the box question, but see if there's anything we need to consider modeling wise on the new China distribution agreement you have in place or the new distributor you're bringing on, any inventory load in or any Mehul, any accounting we need to think about as you go through that transition. Yeah, great question, Jason. Well, I think, no, nothing on the loading or counting at all.

Jason: Yeah, great question, Jason.

Speaker Change #106: Well, I think, no, nothing on the loading or counting at all. It's, it's a new distributor that we've, you know, brought into the mix here in our OUS strategy. I think, you know, what we believe is that

Speaker Change #106: Going down the distributor route will enable revenue to grow significantly faster than, you know, if we were...

Mehul Joshi: It's a new distributor that we've, you know, brought into the mix here in our OUS strategy. I think, you know, what we believe is that going down the distributor route will enable revenue to grow significantly faster than, you know, if we were going out there and building a commercial infrastructure in China. And so, you know, as you would expect in a distributor arrangement, your gross margins are a little bit lower, but over the long term, we expect gross profit dollars and operating margins to be, you know, accretive relative to, you know, building a business there ourselves. This is Steve real quick.

Mehul Joshi: And so, you know, as you would expect in a distributor arrangement, your gross margins are a little bit lower. But over the long term, we expect gross profit dollars and operating margins to be, you know, a credo relative to a building of business there or ourselves.

Speaker Change #106: going out there and building a commercial infrastructure in China.

Speaker Change #106: And so, you know, as you would expect in a distributor arrangement, your gross margins are a little bit lower, but over the long term, we expect gross profit dollars and operating margins to be, you know, accretive relative to, you know, building a business there ourselves.

Steven S. Williamson: Jason, if I can add on to that. You know, as I think about that Chinese market, you've got a huge population; you've got a huge smoking population as well. So it would naturally seem to be a place where we would be able to go, and we would want to launch our product. I think one of the issues you run into is that it's a self-pay population out there. And a large, large portion of that country is self-pay.

Steve Williamson: As I think, this is Steve real quick. Jason, if I can add on to that, you know, as I think about that China market, you've got a huge population; you've got a huge smoking population as well. So it would naturally seem to be a place where we would be able to go and we would want to launch our product. I think one of the issues you run into is it's a self-pay population out there. And there's a large, large portion of that country that is self-pay, and because of that, it becomes cost prohibitive for procedures like ours.

Speaker Change #103: I think, this is Steve real quick, Jason, if I can add on to that, you know, as I think about that China market, you've got a huge population, you've got a huge smoking population as well.

Steven S. Williamson: And because of that, it becomes cost prohibitive for procedures like ours. So what we've done is aligned with a distribution partner, and they'll be able to identify the proper areas, and they actually have the bandwidth to go in and tactically take on that market. So from our perspective, we see it as a small revenue grower over the next couple of years. But hopefully, in the future, a couple of years out, we'll see that start to grow fast. I got it.

Jason Bednar: So what we've done is aligned with a distribution partner, and they'll be able to identify the proper areas, and they actually have the bandwidth to go in and tactically take on that market. So, from our perspective, we see it as a small revenue grower over the next couple of years. But hopefully in the future, a couple of years out, we'll see that start to grow faster. Got it. Hope for color. Thank you.

Speaker Change #113: a grower over the next couple years but but hopefully in the future a couple years out we'll see that start to grow faster.

Jason M. Bednar: Helpful caller. Thank you. Thank you.

Unknown Executive: Our next question... comes from the line of Larry Beagleson with Wells Fargo. Please proceed with your question. Larry Beagleson, your line is open. Please check your mute button. Are you there, Larry?

Larry Beigelson: Our next question comes from the line of Larry Beagelson with Wolf Fargo. Please proceed with your question.

Speaker Change #110: Got it. Helpful caller. Thank you.

Speaker Change #125: Thank you. Our next question comes from the line of Larry Beagleson with Wells Fargo. Please proceed with your question.

Larry Beigelson: Larry Beagelson, your line is open. Please check your mute button.

Speaker Change #114: Larry Beagleson, your line is open, please check your mute button.

Anthony Occhiogrosso: Our next question comes from the line of Joanne Warshwood City. Please proceed with your question. Hey, good afternoon, guys.

Unknown Executive: Our next question comes from the line of Joanne Wuensch with Citi, with your questions. Hey, good afternoon, guys. This is Anthony Atford. I'm Joanne.

Speaker Change #117: Are you there, Larry?

Speaker Change #107: Our next question comes from the line of Joanne Wuensch with Citi. Please proceed with your question.

Anthony Atford: Congratulations on the solid quarter. My first question is, the 17 new US Centers, that was a pretty robust step up from last quarter. What should we be expecting through the rest of the year? And was there any particular reason why it was so strong this quarter, just outside of the normal course of business? Anthony, this is Steve.

Anthony Occhiogrosso: This is Anthony out for Joanne. Congrats on the solid quarter. My first question: those 17 new US centers; that was a pretty robust step up from last quarter. What should we be expecting through the rest of the year? And was there any particular reason why it was so strong this quarter, just outside of normal course of business?

Speaker Change: Hey, good afternoon, guys. This is Anthony Atford. I'm Joanne. Congrats on the solid quarter.

Joanne Karen Wuensch: My first question, the 17 new U.S. centers, that was a pretty robust step up from

Speaker Change #102: Last quarter, what should we be expecting through the rest of the year and was there any particular reason why it was so strong this quarter just outside of normal course of business?

Steve Williamson: Anthony, this is Steve. As we've been guiding, it's about 10 to 15 new accounts per quarter is what we expect to bring on. You know, we were a little bit light in Q1; we were at 9, and here we're at 17. So I think combined, we're actually a little bit above where we would expect to be right now. But there's nothing out of the ordinary there. We've had a couple of opportunities and opportunistically gone in and brought on new accounts in different areas.

Steven S. Williamson: Anthony, this is Steve. As we've been guiding, it's about 10 to 15 new accounts per quarter is what we expect to bring on. You know, we were a little bit light in Q1. We were at 9, and here we're at 17. So I think combined, we're actually a little bit above where we would expect to be right now.

Speaker Change #102: But there's nothing out of the ordinary there. We've had a couple of opportunities and opportunistically gone in and brought on new accounts in different areas.

Steve Williamson: I will say that our focus remains on growing in the same store sales as well. I think it's nice for us to bring on these new accounts, especially in areas where patients have to drive hours in order to get a treatment. But really what we want to do is the centers that are set up, they've got physicians that are on board, they've got their COPD, referring physicians are already referring to them. They've built in workflow; they have coordinators, and there's patient awareness and marketing activities going on in these areas. That's really where we see growth over time.

Speaker Change #139: I will say that our focus remains on growing in the same store sales as well.

Speaker Change #131: I think it's nice for us to bring on these new accounts, especially in areas where patients have to drive.

Speaker Change #102: hours in order to get a treatment.

Speaker Change #102: But really what we want to do is these centers that are set up, they've got physicians that are on board, they've got their COPD referring physicians are already referring to them, they've built in workflow, they have coordinators, and there's patient awareness and marketing activities going on in these areas.

Steve Williamson: And so that's a big focus for us, but obviously we will bring on new accounts opportunistically as we need to. Because we see the opportunity to do so.

Speaker Change #102: That's really where we see growth over time, and so that's a big, big focus for us, but obviously we will bring on new accounts opportunistically as we need to, or as we see the opportunity to do so.

Mehul Joshi: Okay, that makes sense. And then, Mehul, can you talk about the cadence of margins in the back half? It's 2023, sort of a good place to look at that.

Speaker Change #136: Okay, that makes sense. And then Mehul, just could you talk about the cadence and margins in the back half? Is 2023 sort of a good place to look at that? And then as we think about the slight step up in OPEX,

Mehul Joshi: And then, as we think about the slight step up in Opex, is that going to sound like it's going to be more weighted towards R&D on a dollar basis? Just want to confirm that that's the correct way to think about it. Yeah.

Speaker Change #137: It sounds like it's going to be more weighted towards R&D on a dollar basis, but just want to confirm that that's the correct way to think about it.

Mehul Joshi: Hey, Anthony. So, we do, you know, we got it to 74% to 75%. You know, we’ve kind of are at an average or at slightly over 74% in the first half. We do expect a tick-up in the second half on close margins. It's, you know, going to be driven by increased production in our factory, which will enable us to, you know, manage utilization better. And the other factor is that impacts gross margin is really geographical mix, right? So as geographical mix varies, that impacts gross margin significantly. And so we've had a little bit of that, both on a year-over-year and a quarter-over-quarter basis.

Speaker Change #118: Yeah. Hey, Anthony. So we do, you know, we guide it to 74 to 75%.

Speaker Change #118: You know, we we've kind of

Speaker Change #128: are at an average or at slightly over 74% in the first half.

Speaker Change #133: We do expect a tick up in the second half on gross margins.

Speaker Change #132: It's, you know, going to be driven by...

Speaker Change #118: increase production in our factory which will enable us to you know manage utilization better.

Speaker Change #118: And the other factor is...

Speaker Change #118: That impacts gross margin is really geographical mix, right? So as geographical mix varies, that impacts...

Speaker Change #118: We've had a little bit of that both on a year-over-year and a quarter-over-quarter basis, but we do expect a slight tick-up in gross margins.

Mehul Joshi: But we, you know, we do expect a slight tick-up in gross margins in the second half of the year on expenses, specifically on R&D. As I mentioned in the prepared remarks, you know, as enrollment starts to tick up in our clinical trials, you know, we would expect some R&D dollars to, you know, increase. So, you know, you know, there's usually a slow ramp up front when you start a clinical trial, and it'll ramp much faster as you get through, you know, various different time frames. But we do expect a tick-up in the second half for R&D.

Speaker Change #102: In the second half of the year, on expenses, specifically on R&D, as I mentioned in the prepared remarks, you know, as enrollment starts to tick up,

Speaker Change #102: In our clinical trials, you know, we would expect some R&D dollars to, you know, increase. So, you know, as you know,

Speaker Change #102: There's usually a slow ramp up front when you start a clinical trial and it'll ramp much faster as you get through various different time frames, but we do expect a tick up in the second half for R&D.

Unknown Executive: Great.

Unknown Executive: Thanks, Chris. Thank you.

John Young: Our next question comes from the line of John Young with Canaccord. Please proceed with your question. Thank you. I think I said you had a question, then can graph on the quarter two. Maybe just, you know, go and convert one. You may be trying out for investors what you think is successful trial data would be.

Unknown Executive: Thanks, guys. Thank you. Our next question comes from the line of John Young with Canaccord. Please proceed with your question. Good afternoon, guys. Thanks for taking the question and congrats on the quarter two. Maybe just, you know, go and convert one.

Speaker Change #120: Great. Thanks, guys.

Speaker Change #121: Thank you.

Speaker Change #119: Our next question comes from the line of John Young with Canaccord. Please proceed with your question.

John Edward Young: Hey, good afternoon, guys. Thanks for taking my question and congrats on the quarter of two. Maybe just, you know, going to convert one, you may have just ran out from investors, what do you think a successful trial data would be? And will you go for CE mark for error seal using this data, or will you wait for convert two?

John Edward Young: You may just run out of that. And will you go for the CE mark for the error seal using this data, or will you wait for conversion? So... Hi John.

John Young: And will you go for the E mark for air seal using the data, or will you wait for convert to jail?

John Young: So, hi, John. So, we already have the convert one data. Will be presented at ERS. The six month data will be presented then the convert two data. We actually already have CE mark for air seal. So, we're just the convert two data will be used for the PMA, it's the IDE trial in the US. So, once we've completed our enrollment, we would then plan to commercially launch into the EU, and we expect that to be in the 2026 timeframe. And then we would expect 2027 to be when we would launch in the United States once we go through the PMA approval process.

John Edward Young: So

Speaker Change #141: Hi John , so we

Speaker Change #129: Already have the Convert-1 data will be presented at ERS. The six-month data will be presented then. The Convert-2 data, we actually already have CE mark for AeroSeal.

Speaker Change #134: So we're just, the CONVERT2 data will be used for the PMA, it's the IDE trial in the U.S. So once we've completed our enrollment, we would then plan to commercially launch

Steven S. Williamson: So once we've completed our enrollment, we would then plan to commercially launch in the EU, and we expect that to be in the 2026 timeframe. And then we would expect 2027 to be when we launch in the United States once we go through the PMA approval process. Okay, thank you for that. And then, you know, it sounds like you've been really identifying friction points around just the commercial process itself, especially when we talk about the software upgrades to improve the Stratix workflows. What other friction points have you identified and what internal R&D, Anything around Chardis or anything else in the commercial procedure that you've identified given your time in the field? Not really.

John Edward Young: into the EU and we expect that to be in the 2026 time frame and then we would expect 2027 to be when we would launch in the United States once we go through the PMA approval process.

Unknown Executive: Okay.

Unknown Executive: Thank you for that. And then, you know, it sounds like you've been really identifying friction points around just the commercial process itself, especially when we talked about the software upgrades improve the strategy workflows. What are the friction points that we identified and what internal are? and D-Work is being done.

Speaker Change #122: Okay, thank you for that. And then, you know, it sounds like you've been really identifying friction points around just the commercial process itself, especially when you talk about the software upgrades to improve the strata.

Speaker Change #126: workflows. What other friction points have you identified and what internal R&D work is being done? Anything around Chardis or anything else in the commercial procedure that you've identified given your time in the field now?

Steve Williamson: Anything around charred us or anything else in the commercial procedure that you've identified given your time in the field now? Not really. It's a good question. We did launch a new charred us balloon that had some ease of use benefits for the physician, but those aren't really hold ups to the overall growth and long-term scale of the business. I think it really comes down to the workflow and what we can do to efficiently move patients through the process. One of the things that I'm most excited about, John, is I've gone out in the field. I think our sales process is working.

Steven S. Williamson: It's a good question. We did launch a new Chartis balloon that had some ease of use benefits for the physician, but those aren't really holdups to the overall growth and long-term scale of the business. I think it really comes down to the workflow and what we can do to efficiently move patients through the process. One of the things that I'm most excited about, John, as I've gone out in the field, I think our sales process is working. It's working in both the U.S., and it's working outside the United States.

Speaker Change #116: Not really. It's a good question. We did launch a new chartus balloon that had some ease-of-use benefits for the physician, but those aren't really hold-ups to the overall growth and long-term.

Speaker Change #116: scale of the business. I think it really comes down to the workflow and what we can do to efficiently move patients through the process. And one of the things that I'm most excited about, John , as I've gone out in the field.

Steve Williamson: It's working both the U.S. and it's working outside the United States. Our clinical trials are progressing well in both Japan as well as Convert to. Our clinical publications are strong. We've got eight different abstracts coming out. We've got two more that they're waiting to hear on, but I mean, that's significant new clinical data that it speaks to the long-term efficacy of this product. If you look internally, I think the people are bought in. Our year-over-year employee turnover is slightly down year-to-date. We're not seeing significant turn, which I think people were originally concerned about. We've got good, strong, effective patient engagement, and that continues to grow for us.

Speaker Change #116: I think our sales process is working. It's working in both the U.S. and it's working outside the United States.

Speaker Change #144: Our clinical trials are progressing well in both Japan as well as Convert2. Our clinical publications are strong. We've got eight different abstracts coming out. We've got two more that we're waiting to hear on. But, I mean, that's significant new clinical data that speaks to the long-term efficacy of this product.

Speaker Change #116: If you look internally, I think the people are bought in. Our year-over-year employee turnover is slightly down year-to-date, so we're not seeing significant turn, which I think people were originally concerned about. We've got good, strong, effective patient engagement, and that continues to grow for us.

Steve Williamson: Now we've got work automation software. You've got a big, untapped market. You have eager physicians that want to do more. You've got motivated patients that benefit from the patient. We've got administrative buy-in.

Speaker Change #116: And now we've got workflow automation software. So we've got, you've got a big untapped market. You have eager physicians that want to do more. You've got motivated patients that benefit from the procedure. We've got administrative buy-in. It's really.

Steve Williamson: It's really that workflow is the key, the key linchpin in my mind in order to really unleash a much larger volume in some of these larger centers.

Speaker Change #116: That workflow is the key linchpin, in my mind, in order to really unleash a much larger volume in some of these larger centers.

Unknown Executive: Thank you again.

Unknown Executive: Thank you.

Unknown Executive: As a reminder to ask a question at this time, please press star 11 or you touched on telephone.

Speaker Change #138: Got it. Thank you again.

Speaker Change #124: Thank you. As a reminder, to ask a question at this time, please press star 11 on your touchtone telephone.

Frank Takkinen: Our next question is from Frank Tech.

Frank Takkinen: With Lake Street Capital Markets, please proceed with your question. Great. Thanks for taking the questions. Maybe I'll start with the first question that was asked related to guidance. I wanted to revisit that point you made about seasonality from Q2 to Q3. Steve, I know you said it's been a little volatile in 2022 versus 2023, but kind of help us with the exact read-through we should be thinking about. I know one went up, one went down, so maybe starting there, trying to understand how we should think about Q3 of this year from a sequential standpoint, if there were any one-time items in either of the previous two years that you were aware of that we can kind of clean some information from.

Speaker Change #124: Our next question is from Frank Tekinen with Lake Street Capital Markets. Please proceed with your question.

Steve Williamson: Yeah, Frank, thanks for the question, and good to have you on the call. As we looked at 2022, we saw a decrease in both the US and OUS revenue. I think in both instances we were pointed towards seasonality, and seasonality in this space is not only patients going on vacation, but perhaps you have doctors that go on vacation. If you have high volume physicians that take a couple of weeks, a month off, obviously that will affect the numbers. I think in 2022 that seasonality, I wasn't here, but we did see the seasonality in those revenue numbers.

Steven S. Williamson: I think in both instances, we were pointed towards seasonality. And seasonality in this space is not only patients going on vacation, but perhaps you have doctors that go on vacation. If you have high-volume physicians that take a couple of weeks or a month off, obviously, that will affect the numbers. And so I think in 2022, that seasonality, I wasn't here, but we did see seasonality in those revenue numbers. Moving to 23.

Frank Tekinen: Yeah, Frank, thanks for the question and good to have you on the call. As we looked at 2022, we saw a decrease in both the U.S. and O.U.S. revenue.

Speaker Change #130: I think in both instances, we were pointed towards seasonality. And seasonality in this space...

Frank Tekinen: is not only patients going on vacation, but perhaps you have doctors that go on vacation. If you have high-volume physicians that take...

Steven S. Williamson: We were able to muscle through in 23 in the United States, and we didn't see the fall-off that we had seen in the prior year. I think there was a lot of momentum coming from from a couple of different projects that were going on. And they were able to push through in Q3 of 23. And now, in 24, we don't know which US sales we're going to get.

Speaker Change #142: A couple of weeks, a month off.

Speaker Change #135: Obviously, that will affect the numbers, and so I think in 2022, that seasonally, I wasn't here, but we did see the seasonally in those revenue numbers.

Mehul Joshi: Moving to 23, we were able to muscle through in 23 in the United States. We didn't see the fall-off that we had seen in the prior year. I think there was a lot of momentum coming in from a couple of different projects that were going on, and they were able to push through in Q3 of '23. Now in 24, we don't know what U.S. sales we're going to get. We do know that we will see seasonality in Europe as the physicians take a month off in many instances. Those are just procedures that won't take place.

Frank Tekinen: Moving to 23, we were able to muscle through in 23 in the United States, and we didn't see the fall-off that we had seen in the prior year. I think there was a lot of momentum coming in from a couple of different projects that were going on, and they were able to push through in Q3 of 23.

Steven S. Williamson: We do know that we will see seasonality in Europe as physicians take a month off in many instances, and so those are just procedures that won't take place. As we look in the US, it's kind of a mixed bag.

Frank Tekinen: And now in 24, we don't know which U.S. sales we're going to get. We do know that we will see seasonality in Europe as the physicians take a month off in many instances.

Mehul Joshi: As we look in the US, it's kind of a mixed bag. As we brought on a lot of new accounts, that helps. We dilute the impact of a small number of physicians going on vacation, or not seeing patients, but overall you also have patients that are saying, maybe I'll wait till I come back from my vacation, or they're finding different reasons to push out their procedure. No, I mean, I think the only external data point I think about is, you know, level of travel has increased substantially, right? This summer versus last summer and as Steve mentioned, you know, there are, you know, vacation schedules and things like that.

Frank Tekinen: And so those are just procedures that won't take place.

Frank Tekinen: As we look in the U.S., it's kind of a mixed bag, and as we brought on a lot of new accounts,

Frank Tekinen: That helps, right? So we dilute the impact of a small number of physicians going on vacation or not seeing patients, but overall, you also have patients that are saying, you know, maybe I'll wait till I come back from my vacation, or they're finding different reasons to push out their procedure.

Steven S. Williamson: And as we brought on a lot of new accounts, that helps, right? So we dilute the impact of a small number of physicians going on vacation or not seeing patients. But overall, you also have patients that are saying, you know, maybe I'll wait till I come back from my vacation, or they're finding different reasons to push out their procedure. Mehul, anything you want to add to that? No, I mean, the only external data point I think about is, you know, the level of substantially, right, this summer versus last summer. There are, you know, vacation schedules and things like that. So we're just uncertain of, you know, what the impact of seasonality will be in the quarter, specifically in the U.S.

Frank Tekinen: Mehul, anything you want to add to that?

Mehul Joshi: So we're just uncertain of, you know, what the impact of seasonally will be in the quarter, specifically in the U.S. So I think we're just kind of waiting to understand that a little bit better before we kind of think about what to do with guidance.

Mehul Joshi: There are you know

Mehul Joshi: vacation schedules and things like that. So we're just uncertain of, you know, what the impact of seasonality will be in the quarter, specifically in the U.S. So I think we're just kind of waiting to understand that a little bit better before we kind of think about what to do with guidance.

Mehul Joshi: So I think we're just kind of waiting to understand that a little bit better before we kind of think about what to do with guidance. Okay, that's helpful. And then maybe a two-parter on the pilot programs.

Unknown Executive: Okay, that's helpful. And then maybe kind of a two-parter on the pilot programs. Obviously, I heard a lot about efficiencies and workflow processes. But can you maybe call out a couple of those bottlenecks that you're seeing? Is it a consistent bottleneck that the patient is getting stopped by, or is it kind of case-by-case? Case-by-case basis. And then secondly, also on the pilot programs, can you talk about maybe some of the channels you may use to enhance local awareness? Sure. So on the first, is it your question is, are the bottlenecks consistent across the board, or is it different in different places?

Steven S. Williamson: Obviously, I heard a lot about efficiencies and workflow processes, but can you maybe call out a couple of those bottlenecks that you're seeing? Is it a consistent bottleneck that the patient is getting stopped by? Or is it kind of case by case, case by case basis? And then secondly, also on the pilot programs, can you talk about maybe some of the channels you may use to enhance local awareness? Sure. So on the first question, your question is, are the bottlenecks consistent across the board, or is it different in different places? I would say it's different in different places.

Speaker Change #145: Okay, that's helpful. And then maybe kind of a two parter on the pilot programs. Obviously, I heard a lot about efficiencies and workflow processes. But can you maybe call out a couple of those bottlenecks that you're seeing? Is it a consistent bottleneck that the patient is getting stopped by? Or is it kind of case by case, case by case basis? And then secondly, also on the pilot programs, can you talk about maybe some of the channels you may use to enhance local awareness?

Speaker Change #146: So, on the first, your question is, are the bottlenecks consistent across the board or is it different in different places? I would say it's different in different places. We find that when accounts will add a coordinator or a navigator that can actually manage that patient through the process, they do significantly more than accounts that do not have coordinators and navigators.

Unknown Executive: I would say it's different in different places.

Steve Williamson: We find that when accounts will add a coordinator or a navigator that can actually manage that patient through the process, they do significantly more than accounts that do not have coordinators and navigators. The physicians will, if you have a physician that's left on their own to manage the workflow associated with bringing a patient through the process, they do fewer than if they have a navigator that is managing that process. If you think about our tools that we've launched, I talked about LongTracks Connect. LongTracks Connect makes it easier for the facility for that navigator, coordinator, or physician, whoever's managing that patient, to upload the CT scans without having to put a burnous CD in radiology, go through, find a computer that actually takes CDs these days, plug it in, upload it to the cloud.

Speaker Change #116: The physicians will, if you have a physician that's left on their own to manage the workflow associated with bringing a patient through the process, they do fewer than if they have a navigator that is managing that process.

Speaker Change #116: If you think about our tools that we've launched, I talked about LungTracks Connect.

Speaker Change #116: Lung Tracts Connect makes it easier for the facility, for that navigator, coordinator, or physician, whoever's managing that patient.

Speaker Change #143: to upload the CT scans without having to burn a CD and radiology, go through, find a computer that actually takes CDs these days, plug it in, upload it to the cloud. Now they'll be able to pull these directly from the PAC system. So I think that's a good workflow improvement that will make it easier for patients to receive the treatment.

Steven S. Williamson: So I think that's a good workflow improvement that will make it easier for patients to receive the treatment. But I think more importantly on LungTracks Connect is the ability to track the patient through the process. So there's a workflow component that will actually track whether that patient has gone through different areas and different levels of testing that are necessary in order to get that patient treated. Right now, you've got coordinators, you have physicians that are on Excel spreadsheets that are on sheets of paper. It's just not very easy; it's not automated.

Steve Williamson: Now they'll be able to pull these directly from the pack system. So I think that's a good workflow improvement that will make it easier for patients to receive the treatment. I think, more importantly, on LongTracks Connect, is the ability to track the patient through the process. So there's a workflow component that will actually track, has that patient gone through different areas and different levels of testing that are necessary in order to get that patient treated. Right now you've got coordinators, you have physicians that are on Excel spreadsheets that are on sheets of paper. It's just not very automated.

Speaker Change #143: I think more importantly on LungTracks Connect is the ability to track the patient through the process.

Speaker Change #116: So, there's a workflow component that will actually track, has that patient gone through different areas and different levels of testing that are necessary in order to get that patient treated.

Speaker Change #147: Right now, you've got coordinators, you have physicians that are on Excel spreadsheets that are on sheets of paper. It's just not very...

Steven S. Williamson: And so we have the ability, and we've put together the software that allows them to track that patient through the process. The coordinator wakes up in the morning, they log in, they can see exactly which patients are where in the process, and then go about their day with action items that come from that. So we'll continue to work on automation here. It's really, as I've been looking at the workflow, I think it's three different things. We talk about sharing best practices. Those best practices are adding coordinators, educating local doctors, and screening programs.

Steve Williamson: And so we have the ability; we've put together this software that allows them to track that patient through the process. The coordinator wakes up in the morning, they log in, they can see exactly which patients are wearing the process, and then go up their day with action items that come from that. So we'll continue to work on automation here.

Speaker Change #116: It's not automated, and so we have the ability, we've put together the software that allows

Speaker Change #116: them to track that patient through the process.

Speaker Change #116: The coordinator wakes up in the morning, they log in, they can see exactly which patients are where in the process.

Speaker Change #116: and then go about their day with action items that come from that.

Speaker Change #116: So, we'll continue to work on automation here. It's really, as I've been looking at the workflow, I think it's three different things. We talk about sharing best practices. Those best practices are adding coordinators, educating local doctors, and...

Steven S. Williamson: And then finally, communication back to those referring physicians. If you have a physician that refers patients to an interventional pulmonologist, and that doctor treats the patient or doesn't treat the patient, something happens, but they don't get back to that referring physician. That physician is less likely to send more patients to that interventional pulmonologist.

Speaker Change #116: Screening Programs, and then finally, communication back to those referring physicians.

Speaker Change #116: If you have a physician that refers patients into an interventional pulmonologist...

Speaker Change #116: and that doctor treats the patient or doesn't treat the patient, something happens, but they don't get back to that referring physician. That physician is less likely to send more patients to that interventional pulmonologist.

Steve Williamson: This is what happened. Your patient did great. This is where we are. I'm sending your patient back to you. You'll see referrals increase more. So when we talk about sharing of best practices, there's a number of different things that fall under that. The second step for us from workflow is this lung tracks connect and our ability to automate the workflow. And then we'll work on the third step in future quarters. to continue to make it more efficient for patients to get through the process.

Speaker Change #148: If the pulmonologist gets back to them and says, hey, this is what we found, this is what happened, your patient did great, this is where we are, I'm sending your patient back to you, you'll see referrals increase more. So when we talk about sharing of best practices, there's a number of different things that fall under that.

Steven S. Williamson: And then we'll work on the third step in future quarters to continue to make it more efficient for patients to get through the process. Okay, thanks for taking the question. Thank you. I have no further questions at this time.

Speaker Change #116: The second step for us from workflow is this LungTracks Connect and our ability to automate the workflow, and then we'll work on the third step in future quarters.

Speaker Change #116: to continue to make it more efficient for patients to get through the process.

Unknown Executive: Okay, thanks for taking the questions. Thank you.

Steven S. Williamson: I would now like to turn the call back to Steve Williamson for closing remarks. Thank you, Operator. To conclude, I'd like to take a moment to thank Pulmonx employees worldwide for delivering a strong second quarter and their continued dedication to fighting every day for every breath so our patients don't have to. Thank you all for your time. I appreciate it. This concludes today's conference call. Thank you for participating. You may now disconnect.

Unknown Executive: I show no further questions at this time.

Speaker Change #116: Okay, thanks for taking the questions.

Steve Williamson: I would now like to turn the call back to Steve Williamson for closing remarks. Thank you, operator.

Speaker Change #116: Thank you. I show no further questions at this time. I would now like to turn the call back to Steve Williamson for closing remarks.

Steve Williamson: To conclude, I'd like to take a moment to thank Pulmonx employees worldwide for delivering a strong second quarter and their continued dedication defining every day for every breath so our patients don't have to. Thank you all for your time. I appreciate it.

Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change #127: This concludes today's conference call. Thank you for participating. You may now disconnect.

Q2 2024 Pulmonx Corp Earnings Call

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