Q2 2026 Pulmonx Corp Earnings Call

July 29, 2026

Speaker #1: Procession. To ask a question during the session, you would need to press star 11 on your telephone, and you will then hear an automated message advising your hand is raised.

Speaker #1: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the call over to Webb Campbell.

Speaker #1: Investor Relations. Please go ahead.

Speaker #2: Good afternoon, and thank you for joining today's call. Joining me from Pulmonx are Glen French, president and chief executive officer, and Derrick Sung, chief operating officer and chief financial officer.

Speaker #2: Earlier today, Pulmonx issued a press release announcing its financial results for the quarter ended June 30, 2026. A copy of the press release is available on the Pulmonx website.

Speaker #1: Ladies and gentlemen, thank you for standing by. Welcome to the Pulmonx Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker #2: 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 #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you would need to press star 11 on your telephone and you will then hear an automated message advise in your hand is raised.

Speaker #2: 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 limitations, those related to our operating trends, commercial strategies, and future financial performance, including long-term outlook and full-year 2026 guidance, the timing and results of clinical trials, position engagement, expense management, market opportunity, guidance for revenue, gross margin, operating expense, cash usage, commercial expansion, and product demand, adoption and pipeline development, are based upon our current estimates and various assumptions.

Speaker #1: To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to turn the call over to Webb Campbell, Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Good afternoon, and thank you for joining today's call. Joining me from Pulmonx are Glendon French, President and Chief Executive Officer, and Derrick Sung, Chief Operating Officer and Chief Financial Officer.

Speaker #2: Earlier today, Pulmonx issued a press release announcing its financial results for the quarter ended June 30, 2026. A copy of the press release is available on the Pulmonx website.

Speaker #2: These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied, by these forward-looking statements.

Speaker #2: 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 related to our operating trends, commercial strategies, and future financial performance—including long-term outlook and full-year 2026 guidance; the timing and results of clinical trials; physician engagement; expense management; market opportunity; guidance for revenue, gross margin, operating expense, cash usage; commercial expansion; and product demand, adoption, and pipeline development—are based upon our current estimates and various assumptions.

Speaker #2: Accordingly, you should not place undue reliance on these statements. For a list and description of the risk 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 10Q filed with the SEC on May 4, 2026.

Speaker #2: 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, our provided in the press release, which is posted on our investor relations website.

Speaker #2: These non-GAAP measures are not intended to be a substitute for our GAAP results. This conference call contains time-sensitive information and is accurate only as of the live broadcast today July 29, 2026.

Speaker #2: These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

Speaker #2: 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 #2: Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the "Risk Factors" section of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC on May 4, 2026.

Speaker #2: And with that, I will turn the call over to Glen.

Speaker #3: Thank you, Webb. Good afternoon, everyone, and welcome to our second quarter 2026 earnings call here with me is Derrick Sung, our chief operating officer and chief financial officer.

Speaker #2: 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 #3: Overall, we are very pleased with the progress we are making against our three key priorities of re-accelerating sales growth, driving near-term operating leverage, and advancing our market expanding clinical initiatives.

Speaker #3: Pulmonx delivered total worldwide revenue of $22.8 million in the second quarter of 2026, consistent with our expectations as our efforts to regain commercial traction play out as anticipated.

Speaker #2: 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 #3: We remain confident in our ability to achieve our previously communicated revenue guidance of $90 to $92 million, for the full year 2026, and remain on track to return to global sales growth later in the year.

Speaker #2: And with that, I will turn the call over to Glenn.

Speaker #3: Thank you, Webb. Good afternoon, everyone, and welcome to our second quarter 2026 earnings call. Here with me is Derrick Sung, our Chief Operating Officer and Chief Financial Officer.

Speaker #3: We made a commitment at the start of this year to deliver meaningful operating leverage through our cost alignment initiatives, and I am pleased that the impact of our actions is now clearly evident in our results this quarter.

Speaker #3: Overall, we are very pleased with the progress we are making against our three key priorities: re-accelerating sales growth, driving near-term operating leverage, and advancing our market-expanding clinical initiatives.

Speaker #3: We effectively reduced our year-over-year adjusted EBITDA loss by nearly 40% to $5.1 million in the second quarter of 2026, and Derrick will provide further details later in the call.

Speaker #3: Today, I'm pleased to report progress across our remaining two priorities: re-accelerating sales growth and advancing our market expanding clinical initiatives. I will address each of these in turn, starting with our progress on driving U.S.

Speaker #3: sales growth. Our organization has made great strides in building and maintaining the right people and the right culture in the U.S., which we consider to be a foundational element of re-accelerating revenue growth in the region.

Speaker #3: I remain encouraged by our progress in this respect. We have now filled all of our sales leadership positions and those leaders are making rapid progress and rounding out our U.S.

Speaker #3: We effectively reduced our year-over-year adjusted EBITDA loss by nearly 40% to $5.1 million in the second quarter of 2026, and Derrick will provide further details later in the call.

Speaker #3: field sales team with top talent. We've also seen marked improvement in our commercial team culture as priorities have become clear and incentives are better aligned with our corporate objectives.

Speaker #3: Today, I'm pleased to report progress across our remaining two priorities. Re-accelerating sales growth and advancing our market expanding clinical initiatives. I will address each of these in turn, starting with our progress on driving U.S.

Speaker #3: Sales turnover has normalized, consistent with industry standards and we are thrilled with the team that we have in place. As the newer members of our team continue to ramp, we expect U.S.

Speaker #3: sales growth to build through the back half of the year. Our emphasis remains on disciplined execution of the highest impact selling activities, consistent with the near-to-far framework we've outlined previously.

Speaker #3: Sales growth. Our organization has made great strides in building and maintaining the right people and the right culture in the U.S., which we consider to be a foundational element of re-accelerating revenue growth in the region.

Speaker #3: To reiterate this means (1) setting up high-quality and efficient valve programs, (2) engaging with and educating physicians who treat COPD and who are aligned with hospital systems offering Zephyr valves, (3) concentrating on direct-to-patient efforts specifically on geographies with established treating centers that have the capacity to accommodate interested patients, and finally, (4) continuing champions to educate service line administrators to ensure appropriate resourcing of their programs.

Speaker #3: I remain encouraged by our progress in this respect. We have now filled all of our sales leadership positions, and those leaders are making rapid progress and rounding out our U.S.

Speaker #3: field sales team with top talent. We've also seen marked improvement in our commercial team culture, as priorities have become clear and incentives are better aligned with our corporate objectives.

Speaker #3: Sales turnover has normalized, consistent with industry standards, and we are thrilled with the team that we have in place. As the newer members of our team continue to ramp, we expect U.S.

Speaker #3: Sales growth is expected to build through the back half of the year. Our emphasis remains on disciplined execution of the highest-impact selling activities, consistent with the near-to-far framework we've outlined previously.

Speaker #3: In my interactions with our sales managers and members of our field team, I see a re-energized unit intensely focused on impacting the lives of patients.

Speaker #3: During meetings with treating physicians and administrators, I hear about hospitals-focused on driving value for patients and their systems by aligning resources and processes to scale and expand referral networks.

Speaker #3: To reiterate this means (1) setting up high-quality and efficient valve programs, (2) engaging with and educating physicians who treat COPD and who are aligned with hospital systems offering Zephyr valves, (3) concentrating on direct-to-patient efforts specifically on geographies with established treating centers that have the capacity to accommodate interested patients, and finally, y, (4) continuing to work together with our champions to educate service line administrators to ensure appropriate resourcing of their programs.

Speaker #3: These meetings have validated my conviction that sharper focus on fewer initiatives is helping accelerate growth by focusing on what matters most. With respect to our international business, we continue to see strength and stability across international markets, which delivered 9% year-over-year constant currency revenue growth, excluding China.

Speaker #3: Related to China, we are pleased to share that in mid-June we secured the renewal of our Chinese registration certificate. With this hurdle behind us, we look forward to resuming shipments to our Chinese distributor by early next year.

Speaker #3: In my interactions with our sales managers and members of our field team, I see a re-energized unit intensely focused on impacting the lives of patients.

Speaker #3: During meetings with treating physicians and administrators, I hear about hospitals focused on driving value for patients and their systems by aligning resources and processes to scale and expand referral networks.

Speaker #3: For the balance of this year, we will be focused on restarting commercial activity in this region. Turning to our second priority, expanding our addressable market through AeroSeal remains a central focus.

Speaker #3: These meetings have validated my conviction that a sharper focus on fewer initiatives is helping accelerate growth by concentrating on what matters most. With respect to our international business, we continue to see strength and stability across international markets, which delivered 9% year-over-year constant currency revenue growth, excluding China.

Speaker #3: Enrollments in our convert-to pivotal trial has progressing, and we continue to expect to complete enrollment in 2027. We believe that AeroSeal represents a TAM expansion tool for our Zephyr valves, and a future revenue contributor with the ability to expand our addressable market by roughly 20% globally.

Speaker #3: In closing, while 2026 is a year of execution and transition, we're very pleased with our pace of progress, and we have strong conviction in our strategy to refine execution and further penetrate the substantial remaining market opportunity for our products.

Speaker #3: Related to China, we are pleased to share that in mid-June, we secured the renewal of our Chinese registration certificate. With this hurdle behind us, we look forward to resuming shipments to our Chinese distributor by early next year.

Speaker #3: The organization remains aligned and focused on the priorities that matter most. We're confident in our underlying strength of this business, and the opportunity in front of us, and in our ability to deliver sustainable, profitable growth as our year-over-year trends continue to strengthen.

Speaker #3: Enrollment in our CONVERT pivotal trial is progressing, and we continue to expect to complete enrollment in 2027. We believe that AeroSeal represents a TAM expansion tool for our Zephyr valves and a future revenue contributor, with the ability to expand our addressable market by roughly 20% globally.

Speaker #3: With that, I will turn the call over to Derrick to provide more detailed review of our second quarter results.

Speaker #2: Thank you, Glenn, and good afternoon, everyone. I'd like to start by highlighting the significant progress that we've achieved in driving operating leverage through our P&L.

Speaker #2: This was a commitment that we had made at the start of the year when we implemented our cost alignment initiative to reduce recurring operating expenses by over 10% while still maintaining investments in our key growth initiatives.

Speaker #2: As a result of these initiatives, I'm pleased to report that net loss for the second quarter of 2026 was $10.1 million, a reduction of 34% as compared to a net loss of $15.2 million, in the same period of the prior year.

Speaker #3: The organization remains aligned and focused on the priorities that matter most. We're confident in the underlying strength of this business, in the opportunity in front of us, and in our ability to deliver sustainable, profitable growth as our year-over-year trends continue to strengthen.

Speaker #2: Net loss per share was $24 cents, down from a loss of $38 cents per share in the prior year period. And most importantly, adjusted EBITDA loss which excludes non-cash stock-based compensation expense for the second quarter of 2026 was $5.1 million, compared to $8.4 million in the same period of the prior year.

Speaker #3: With that, I will turn the call over to Derrick to provide a more detailed review of our second quarter results.

Speaker #2: Thank you, Glenn, and good afternoon, everyone. I'd like to start by highlighting the significant progress that we've achieved in driving operating leverage through our P&L.

Speaker #2: This nearly 40% reduction in adjusted EBITDA loss clearly demonstrates the progress we've made in realizing near-term operating leverage as we work to re-accelerate sales growth.

Speaker #2: This was a commitment that we had made at the start of the year when we implemented our cost alignment initiative to reduce recurring operating expenses by over 10%, while still maintaining investments in our key growth initiatives.

Speaker #2: This operating leverage, combined with the recent restructuring of our credit facility, which extends the maturity of our debt to 2031 and provides us with access to an additional $20 million in undrawn capital subject to certain revenue milestones, has meaningfully strengthened our balance sheet.

Speaker #2: We ended June 30, 2026, with $55.8 million in cash and cash equivalents, a decrease of 5.8 million from March 31, 2026. We continue to expect to burn roughly $23 million of cash for the full year 2026, which would be nearly a 30% reduction from our cash burn in 2025.

Speaker #2: Net loss per share was $0.24, down from a loss of $0.38 per share in the prior year period. And most importantly, adjusted EBITDA loss, which excludes non-cash stock-based compensation expense for the second quarter of 2026, was $5.1 million compared to $8.4 million in the same period of the prior year.

Speaker #2: Turning back to the top line, total worldwide revenue in the second quarter of 2026 was $22.8 million, a 5% decrease from 23.9 million in the same period last year, and a decrease of 6% on a constant currency basis.

Speaker #2: This nearly 40% reduction in adjusted EBITDA loss clearly demonstrates the progress we've made in realizing near-term operating leverage as we've worked to re-accelerate sales growth.

Speaker #2: This operating leverage, combined with the recent restructuring of our credit facility—which extends the maturity of our debt to 2031 and provides us with access to an additional $20 million in undrawn capital, subject to certain revenue milestones—has meaningfully strengthened our balance sheet.

Speaker #2: U.S. revenue in the second quarter was $14.2 million, a 4% decrease from $14.7 million during the same period of the prior year, and a 7% sequential increase from the first quarter of 2026.

Speaker #2: We ended June 30, 2026, with $55.8 million in cash and cash equivalents, a decrease of $5.8 million from March 31, 2026. We continue to expect to burn roughly $23 million of cash for the full year 2026, which would be nearly a 30% reduction from our cash burn in 2025.

Speaker #2: We added $12 new U.S. treating centers during the quarter. International revenue in the second quarter of 2026 was $8.6 million, a 6% decrease from $9.1 million during the same period last year, and a decrease of 9% on a constant currency basis.

Speaker #2: The decline in international revenue was fully attributable to the lack of sales to our distributor in China, excluding China we continued to see solid performance across our other international markets, which grew 12% as compared to the same period last year, and 9% on a constant currency basis.

Speaker #2: Turning back to the top line, total worldwide revenue in the second quarter of 2026 was $22.8 million, a 5% decrease from $23.9 million in the same period last year, and a decrease of 6% on a constant currency basis.

Speaker #2: As Glenn mentioned, we are pleased to have now received renewal of our Chinese registration certificate and look forward to ramping our commercial activities in the region and resuming distributor shipments by early next year.

Speaker #2: Gross margin for the second quarter of 2026 was $78% compared to $72% in the prior year period. The year-over-year increase was driven by a lower mix of distributor sales in our international markets, as well as greater overhead absorption and cost efficiencies across our supply chain.

Speaker #2: We added 12 new U.S. treating centers during the quarter. International revenue in the second quarter of 2026 was $8.6 million, a 6% decrease from $9.1 million during the same period last year, and a decrease of 9% on a constant currency basis.

Speaker #2: Looking forward, we now expect gross margin for the full year 2026 to be approximately $76%, as we expect to continue to realize some of these benefits throughout the remainder of the year.

Speaker #2: The decline in international revenue was fully attributable to the lack of sales to our distributor in China, excluding China, we continue to see solid performance across our other international markets, which grew 12% as compared to the same period last year, and 9% on a constant currency basis.

Speaker #2: Total operating expenses for the second quarter of 2026 were $26.8 million. A 16% decrease from $32 million in the same period last year. Non-cash stock-based compensation expense was $3.7 million, in the second quarter of 2026.

Speaker #2: As Glenn mentioned, we are pleased to have now received renewal of our Chinese registration certificate and look forward to ramping up our commercial activities in the region and resuming distributor shipments by early next year.

Speaker #2: Excluding stock-based compensation expense, operating expenses in the second quarter of 2026 decreased 11% from the same period of the prior year. The decrease in operating expenses reflects the cost reduction efforts that we initiated at the start of the year and we remain on track to meaningfully reduce our expense trajectory in 2026 while maintaining investments in our key growth initiatives.

Speaker #2: Gross margin for the second quarter of 2026 was 78%, compared to 72% in the prior-year period. The year-over-year increase was driven by a lower mix of distributor sales in our international markets, as well as greater overhead absorption and cost efficiencies across our supply chain.

Speaker #2: Looking forward, we now expect gross margin for the full year 2026 to be approximately 76%, as we expect to continue to realize some of these benefits throughout the remainder of the year.

Speaker #2: To that end, we now expect full year 2026 operating expenses to fall between $109 and $111 million, inclusive of approximately $15 million of non-cash stock-based compensation expense.

Speaker #2: Total operating expenses for the second quarter of 2026 were $26.8 million, a 16% decrease from $32 million in the same period last year. Non-cash stock-based compensation expense was $3.7 million in the second quarter of 2026.

Speaker #2: The reduction in our operating expense guidance primarily reflects a reduction in stock-based compensation expense due to the fair value of our shares. R&D expenses for the second quarter of 2026 were $5 million compared to $5.3 million in the second quarter of 2025.

Speaker #2: Selling general and administrative expenses for the second quarter of 2026 were $21.8 million, compared to $26.7 million in the second quarter of 2025. Finally, turning to our revenue outlook for 2026, we are reiterating our expectation of full year 2026 revenue in the range of $90 to $92 million.

Speaker #2: To that end, we now expect full-year 2026 operating expenses to fall between $109 million and $111 million, inclusive of approximately $15 million of non-cash stock-based compensation expense.

Speaker #2: As a reminder, our business typically experiences seasonality that results in a sequential decrease in sales in the third quarter of the year as compared to the second quarter.

Speaker #2: Despite this seasonality, we continue to expect to return to year-over-year growth later this year, as we anniversary the impact of the suspension of China shipments in our international business and as we see improvements to our U.S.

Speaker #2: The reduction in our operating expense guidance primarily reflects a reduction in stock-based compensation expense due to the fair value of our shares. R&D expenses for the second quarter of 2026 were $5.0 million compared to $5.3 million in the second quarter of 2025.

Speaker #2: business from our recently filled sales positions and our refocused commercial strategy. To conclude, we entered 2026 with a clear plan to improve the trajectory of our business, and we are pleased with the progress that we have made as reflected in our second quarter results.

Speaker #2: We remain focused on the work ahead, ramping our sales organization, advancing our clinical programs, and delivering the financial leverage we've committed to. We are confident in the ability to execute.

Speaker #2: With that, I'd like to thank you all for your attention and we will now open the call for questions. Operator?

Speaker #2: As a reminder, our business typically experiences seasonality that results in a sequential decrease in sales in the third quarter of the year, as compared to the second quarter.

Speaker #1: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 11 again.

Speaker #2: Despite this seasonality, we continue to expect to return to year-over-year growth later this year as we anniversary the impact of the suspension of China shipments in our international business, and as we see improvements to our U.S. business.

Speaker #1: The first question will come from Rick Wise with Seafold. Your line is now open.

Speaker #2: Business from our recently filled sales positions and our refocused commercial strategy. To conclude, we entered 2026 with a clear plan to improve the trajectory of our business, and we are pleased with the progress that we have made as reflected in our second quarter results.

Speaker #3: Thank you and hi, Glenn. Hi, Derrick. Good to see the progress here. Maybe just to start off, maybe you could dig a little deeper into the Salesforce positive evolution here.

Speaker #2: We remain focused on the work ahead: ramping our sales organization, advancing our clinical programs, and delivering the financial leverage we've committed to. We are confident in the strength of our business and in our team's ability to execute.

Speaker #3: All the leadership positions filled, I just wanted to be sure I'm understanding: have you filled all the sales positions you want, or that's still something in progress?

Speaker #3: And just how much more to go on that front?

Speaker #2: With that, I'd like to thank you all for your attention and we will now open the call for questions. Operator?

Speaker #4: Hi, Rick. This is Glenn. So we are filling the sales positions. We have a normal sort of amount of turnover. That happens in medical device companies.

Speaker #1: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 11 again.

Speaker #1: The first question will come from Rick Wise with Seafold. Your line is now open.

Speaker #4: I think the average is non-trivial that happens as a backdrop. What we face last year was a doubling or a tripling of what would be considered normal.

Speaker #3: Thank you, and hi, Glenn. Hi, Derrick. Good to see the progress here. Maybe just to start off, maybe you could dig a little deeper into the Salesforce positive evolution here.

Speaker #4: So we're back on a normal trajectory. We are in the process of the positions that were open when we got here have were filled, and in the normal course of things, either due to departures based on the rep's decision or based on our decision, there's a normal process that happens and we're back to normal again as it relates to that.

Speaker #3: All the leadership positions filled, I just wanted to be sure I'm understanding: have you filled all the sales positions you want, or that's still something in progress, and just how much more to go on that front?

Speaker #4: Hey, Rick. This is Glenn. So we are filling the sales positions. We have a normal sort of amount of turnover that happens in medical device companies.

Speaker #3: Great. And Glenn, I know you've talked in the past about it takes 6 to 9 months, if I'm remembering correctly. Please correct me if I'm wrong.

Speaker #3: It takes 6 to 9 months for sort of the average sales guy to sort of get up and running and start to contribute. Katrina, where are you?

Speaker #4: I think the average is non-trivial; that happens as a backdrop. What we faced last year was a doubling or a tripling of what would be considered normal.

Speaker #3: I don't know how to ask it on average now with the folks you've hired since you and Derrick returned to Pulmonx. Do you get to that sort of more optimal 9-month range this year on average for the group, the new group?

Speaker #4: So we're back on a normal trajectory. We are in the process of filling the positions that were open when we got here, and in the normal course of things, either due to departures based on the rep's decision or based on our decision, there's a normal process that happens.

Speaker #3: Or maybe you could just give us a little more color when we should really start to expect to see much more visible impact from the team.

Speaker #4: Well, I think we're starting to see visible impact from the team. Let me just start there. Whether it be the step up from the first quarter, the second quarter, on a sequential basis, or whether perhaps more importantly, the step up we see in some of the other indicators that we look at across the board, frankly, we see folks coming up to speed.

Speaker #4: And we're back to normal again as it relates to that.

Speaker #3: Great. And Glenn, I know you've talked in the past about it taking six to nine months, if I'm remembering correctly. Please correct me if I'm wrong.

Speaker #3: It takes 6 to 9 months for sort of the average sales guy to sort of get up and running and start to contribute. Katrina, where are you?

Speaker #4: The 6 to 9 months is what is correct in terms of what we've seen historically. We've made some very I think constructive changes to our sales training process, which I think will that may modify that 6 to 9 months.

Speaker #3: I don't know how to ask it—on average now, with the folks you've hired since you and Derrick returned to Pulmonx, do you get to that sort of more optimal 9-month range this year on average for the group, the new group?

Speaker #4: I'm not going to claim that it'll happen, but I'm very excited about the combination of levering leveraging some of the field sales trainers, bringing in new resources to kind of take our sales training to another level.

Speaker #3: Or maybe you could just give us a little more color on when we should really start to expect to see much more visible impact from the team.

Speaker #4: And as a result, perhaps bring people up more quickly. The other thing that we have in place today that we didn't, frankly, have in place in the same way when I was last here, roughly 2 years ago, is a bench.

Speaker #4: Well, I think we're starting to see visible impact from the team. Let me just start there. Whether it be the step-up from the first quarter to the second quarter on a sequential basis, or whether, perhaps more importantly, the step-up we see in some of the other indicators that we look at across the board, frankly, we see folks coming up to speed.

Speaker #4: We have territory account managers who I think you can think of as sort of junior reps who are able to come up to speed quite quickly because they're working under a territory manager and those folks in some cases actually, in a lot of cases over the last couple of years, have been able to step into some of these openings along the way.

Speaker #4: The 6 to 9 months is what is correct in terms of what we've seen historically. We've made some very, I think, constructive changes to our sales training process, which I think may modify that 6 to 9 months.

Speaker #4: I'm not going to claim that it'll happen, but I'm very excited about the combination of leveraging some of the field sales trainers, bringing in new resources to kind of take our sales training to another level.

Speaker #4: Into these territory manager openings and do a really great job. So anyway, there's a lot of things that are happening that may tighten that up, but I think you know me well enough, I'm not going to I'm not going to claim a win on that front until we have some amount of history in the rearview.

Speaker #4: And as a result, perhaps bring people up more quickly. The other thing that we have in place today that we didn’t, frankly, have in place in the same way when I was last here—roughly two years ago—is a bench.

Speaker #3: No. I appreciate that. And Glenn, on China, the registration is accepted. That sounds encouraging. Maybe just talk to us a little about the steps you're taking and just help us better understand the cadence of activities that will happen now and when just when we're going to start to see that revenue more visible.

Speaker #4: We have territory account managers, who I think you can think of as sort of junior reps, who are able to come up to speed quite quickly because they're working under a territory manager.

Speaker #3: I think you said first quarter, but what has to happen between now and then?

Speaker #4: And those folks, in some cases—actually, in a lot of cases over the last couple of years—have been able to step into some of these openings along the way.

Speaker #4: So we had a and let me first say that I'm going to I'll talk a little bit here. Derrick's been very much involved in this process, so I will invite him to share his views if I miss anything here.

Speaker #4: But registration was a big step. It was a binary proposition. And so getting on the other side of that is wonderful news. We're very excited about that.

Speaker #4: We saw this coming and I think we've talked about this in the past. And we saw that we were that this registration was going to sunset and that we were going to have some downtime in China as a result of it.

Speaker #3: No, I appreciate that. And, Glenn, on China—the registration is accepted. That sounds encouraging. Maybe just talk to us a little bit about the steps you're taking, and just help us better understand the cadence of activities that will happen now, and when we're going to start to see that revenue become more visible.

Speaker #4: And so we obviously stocked up some inventory, tried to keep accounts going. As long as we could and some number of accounts have a process at this point to restart them.

Speaker #3: I think you said first quarter, but what has to happen between now and then?

Speaker #4: In particular, some of our larger accounts in China have a process to restart them and get underway. So as we look at the back half of the year, we're reigniting those accounts, get those engines up and running.

Speaker #4: So we had a—and let me first say that I'm going to—I'll talk a little bit here. Derrick's been very much involved in this process, so I will invite him to share his views if I miss anything here.

Speaker #4: And we're anticipating that we probably won't see material revenues until next year, early next year.

Speaker #4: But registration was a big step. It was a binary proposition, and so getting on the other side of that is wonderful news. We're very excited about that.

Speaker #3: And one last question, and I'll wait to see whether there's room for more questions as a follow-up. But and Glenn, I apologize to you I even apologize to Derrick.

Speaker #4: We saw this coming, and I think we've talked about this in the past. We saw that this registration was going to sunset and that we were going to have some downtime in China as a result of it.

Speaker #3: I hate to bring up 27, but we have numbers. We got a print. And maybe just at a high level, you could help us think about it and reflect on current consensus.

Speaker #4: And so we obviously stocked up some inventory, tried to keep accounts going as long as we could. And some number of accounts have a process at this point to restart them.

Speaker #3: Still has you sort of in the mid-90s, but I think to myself, China coming back, a repurposed rebuilt reconfigured Salesforce stronger leadership, more accounts open.

Speaker #3: I mean, current consensus number is my number in the mid-90s. It seems very conservative. I realize there's a lot that you've got to do before you get there and you're not going to give guidance today, I suspect.

Speaker #4: And we're anticipating that we probably won't see material revenues until next year—early next year.

Speaker #3: And one last question, and I'll wait to see whether there's room for more questions as a follow-up. But, and Glenn, I apologize to you—I even apologize to Derrick.

Speaker #3: But help us think about that potential. It seems like there's room with all goes well. And as planned, to be actually a very strong year.

Speaker #3: I hate to bring up '27, but we have numbers. We got a print. And maybe just at a high level, you could help us think about it and reflect on current consensus.

Speaker #4: Yeah. Rick, thanks. Thanks for the question. This is Derrick. And I'll refocus your attention to our guidance this year and what we expect this year.

Speaker #3: Still has you sort of in the mid-90s, but I think to myself, China coming back—a repurposed, rebuilt, reconfigured Salesforce, stronger leadership, more accounts open.

Speaker #4: I don't want to get out in front of our skis and comment on 2027 guidance right now. We'll certainly do that in due course.

Speaker #4: Probably on our Q4 call. But this quarter, we have said even within or this year, we have said that we are really focused on returning our company back to global sales growth.

Speaker #3: I mean, the current consensus number is my number in the mid-90s. It seems very conservative. I realize there's a lot that you've got to do before you get there, and you're not going to give guidance today, I suspect.

Speaker #4: Both in the US and internationally this year. And we do expect that contemplated in our guidance, as we exit the year, that we'll exit the year growing at or close to double digits by the end of even this year.

Speaker #3: But help us think about that potential. It seems like there's room, if all goes well and as planned, for this to actually be a very strong year.

Speaker #4: So I think we're going to have some very good and strong momentum going into next year. And we are really focused right now on reinvigorating our Salesforce and putting the places putting the pieces in place to get ourselves back to sales growth this year and we feel really good about where we are.

Speaker #4: Yeah, Rick, thanks. Thanks for the question. This is Derrick. I'll refocus your attention to our guidance this year and what we expect this year.

Speaker #4: I don't want to get out in front of our skis and comment on 2027 guidance right now. We'll certainly do that in due course.

Speaker #4: We're really right where we expect to be in terms of re-accelerating our growth and flipping from negative to positive growth this year.

Speaker #4: Probably on our Q4 call. But this quarter, we have said—even within this year—we have said that we are really focused on returning our company back to global sales growth.

Speaker #3: It's great to see the progress and congratulations on all. I know it's a lot of hard work involved. Thanks for the answers. Appreciate it.

Speaker #2: Thank you. And our next question is going to come from Frank Takkinen, with Lake Street Capital. You're lines open.

Speaker #5: Hey, this is Nelson Cox on for Frank. Thanks for taking the questions and congrats on the progress. Maybe just first to start, as we think about the path to double digit growth, exiting the year that you've talked about, maybe just can you help us with the relative contribution you expect from newer reps ramping versus kind of new centers versus deeper utilization at your established programs?

Speaker #4: So I think we're going to have some very good and strong momentum going into next year. And we are really focused right now on reinvigorating our Salesforce and putting the pieces in place to get ourselves back to sales growth this year, and we feel really good about where we are.

Speaker #4: We're really right where we expect to be, in terms of re-accelerating our growth and flipping from negative to positive growth this year.

Speaker #4: We anticipate that we're going to get some positive contribution across the board there. We've already talked I mean, we've talked about each of these elements.

Speaker #3: It's great to see the progress and congratulations on all. I know it's a lot of hard work involved. Thanks for the answers. Appreciate it.

Speaker #4: I mean, if you want to we could start with the sales reps. We know that territories that have reps in them do better than territories that don't.

Speaker #2: Thank you. And our next question is going to come from Frank Takkanen with Lake Street Capital. Your line's open.

Speaker #4: And we know that there is a ramp-up time for the reps when they're new in the territory. Our average 10-year in the company in the sales organization a couple of years ago was something like two and a half years and today it's about a year.

Speaker #5: Hey, this is Nelson Cox on for Frank. Thanks for taking the questions and congrats on the progress. Maybe just first to start, as we think about the path to double-digit growth exiting the year that you've talked about, maybe just—can you help us with the relative contribution you expect from newer reps ramping versus kind of new centers versus deeper utilization at your established programs?

Speaker #4: And I'm sure you could have done that math given what you know the turnover was over across last year. But in any case, we've got to get those folks up and running.

Speaker #4: We expect them to be more productive. That will show itself greater rep productivity shows itself in an increase in same-store sales. I would expect.

Speaker #4: We anticipate that we're going to get some positive contribution across the board there. We've already talked—I mean, we've talked about each of these elements.

Speaker #4: So we should see that and we should continue to see new centers come on and so forth. So there's a number of things that we'll need to come together that will contribute to the growth that we envision on the horizon.

Speaker #4: I mean, if you want, we could start with the sales reps. We know that territories that have reps in them do better than territories that don't.

Speaker #5: Yep. Fair enough. And then just from our last one, you had gross margin running at 78% the last couple of quarters here. And you cited a couple of drivers, absorption, supply chain efficiencies, and with China shipments now resuming early next year, you have 76% now in the full-year guide.

Speaker #4: And we know that there is a ramp-up time for the reps when they're new in the territory. Our average tenure in the company in the sales organization a couple of years ago was something like two and a half years, and today it's about a year.

Speaker #4: And I'm sure you could have done that math, given what you know the turnover was over across last year. But in any case, we've got to get those folks up and running.

Speaker #5: Which implies some second half moderation. Anything specific we should be modeling there? Is that just conservatism and maybe how do you think about the long-term kind of gross margin steady state?

Speaker #4: We expect them to be more productive. That will show itself—greater rep productivity shows itself—in an increase in same-store sales, I would expect.

Speaker #4: Yeah. That's a great question. So China or the absence of sales into China clearly help our gross margin. China does come at a lower gross margin, but still a very attractive operating margin.

Speaker #4: So we should see that, and we should continue to see new centers come on and so forth. So there are a number of things that will need to come together that will contribute to the growth that we envision on the horizon.

Speaker #4: I'll point out. So I do so we would expect to see our gross margin come in a little lower once we do resume shipments into China.

Speaker #5: Yep, fair enough. And then just from our last one—you had gross margin running at 78% the last couple of quarters here. You cited a couple of drivers: absorption, supply chain efficiencies, and with China shipments now resuming early next year, you have 76% now in the full-year guide.

Speaker #4: I think there is some variability around timing of that resumption of shipments into China. So I think we've left a little bit of room for ourselves in terms of our guidance to accommodate that timing and but I do think that over that we have over time, excluding China, made some real progress in terms of taking cost out of our supply chain, driving production efficiencies.

Speaker #5: Which implies some second-half moderation. Anything specific we should be modeling there? Is that just conservatism, and maybe, how do you think about the long-term, kind of, gross margin steady state?

Speaker #4: So I feel very comfortable that even when China comes back online, that as a company, we will be comfortably at or above 75% in terms of gross margin.

Speaker #4: Yeah, that's a great question. So China, or the absence of sales into China, clearly helps our gross margin. China does come at a lower gross margin, but still a very attractive operating margin.

Speaker #4: And we'll continue to push hard to overtime move that number higher as we continue to drive overall efficiencies.

Speaker #4: I'll point out—so I do—so we would expect to see our gross margin come in a little lower once we do resume shipments into China.

Speaker #5: Great. Thank you, guys.

Speaker #2: Thank you. And our next question will come from Andrea Irwin with Piper Sandler. Your lines open.

Speaker #6: Hi. This is Andrea on for Jason. Thanks for taking the question. And congrats on the EBITDA progress. I know a lot of us over the years focus on StratX scans as a leading indicator for future Zephyr volumes.

Speaker #6: Can you just take us through what you're seeing in the US and international markets on StratX? Are you seeing the numbers of scans improve sequentially?

Speaker #6: And would that match with your revenue guidance? Thanks.

Speaker #4: So I feel very comfortable that even when China comes back online, that as a company, we will be comfortably at or above 75% in terms of gross margin.

Speaker #3: Yes. StratX scans, we do keep a close eye on that as a good indicator of what we might expect in the future. We don't tend to get too specific about it.

Speaker #4: And we'll continue to push hard to over time move that number higher as we continue to drive overall efficiencies.

Speaker #3: But internally, we look at it. And you would expect that as we project strengthening of revenue in the back part of this year and frankly into next year, that we would see an increase in StratX.

Speaker #5: Great. Thank you, guys.

Speaker #2: Thank you. And our next question will come from Andrea Irwin with Piper Sandler. Your line is open.

Speaker #6: Hi. This is Andrea on for Jason. Thanks for taking the question and congrats on the EBITDA progress. I know a lot of us over the years focus on StratX scans as a leading indicator for future Zephyr volumes.

Speaker #6: Appreciate it. Thank you.

Speaker #2: Thank you. And our next question is going to come from William Plevanic with Canaccord. Your line is now open.

Speaker #6: Can you just take us through what you're seeing in the U.S. and international markets on StratX? Are you seeing the number of scans improve sequentially?

Speaker #3: Great. Thanks. Good evening. Thanks for taking my question. So my first question is on seasonality. If you look at the US last year, it was down 5% Q2 to Q3.

Speaker #6: And would that match with your revenue guidance? Thanks.

Speaker #3: And the year before, it was flat. Given the ramping sales force, how should we think about that? Is it the typical 5% down or should it be flatter just because of these new reps are becoming kind of as we think about international with China in and out of the picture, how do we think about that?

Speaker #3: Yes, StratX scans—we do keep a close eye on that as a good indicator of what we might expect in the future. We don't tend to get too specific about it, but internally, we look at it.

Speaker #3: And you would expect that, as we project strengthening of revenue in the back part of this year and, frankly, into next year, that we would see an increase in StratX.

Speaker #3: You have easy comps really going into the back half of this year. Without China, so it should be a solidly year over year, but also should be probably flat is my guess.

Speaker #6: Appreciate it. Thank you.

Speaker #2: Thank you. And our next question is going to come from William Plevanic with Canaccord. Your line is now open.

Speaker #3: Can you help us out with that?

Speaker #4: Yeah. Absolutely. Thanks for bringing that up. Thanks for bringing that up, Bill. Appreciate the question. We do typically see seasonality between Q2 and Q3.

Speaker #3: Great. Thanks. Good evening. Thanks for taking my question. So my first question is on seasonality. If you look at the US last year, it was down 5% Q2 to Q3.

Speaker #4: Typically, we are sequentially down. For sure, outside the US and even within the US, we are typically flat to down by a few percent.

Speaker #4: I would expect to see that same level of seasonality this year as well. While we do have folks coming up to speed, I do think that our folks that we have are still new and at this point, I don't expect to see anything different than we have in the past from a seasonality perspective.

Speaker #3: And then also same question kind of as we think about international with China in and out of the picture, how do we think about that?

Speaker #3: You have easy comps really going into the back half of this year. Without China, so it should be a solidly year over year, but also should be probably flat is my guess.

Speaker #4: I do think that that's something that isn't yet modeled when I look into the consensus numbers into the consensus model. So I think there's probably a shifting from Q3 into Q4 in terms of revenue models to reflect that seasonality.

Speaker #3: Can you help us with that?

Speaker #4: Yeah, absolutely. Thanks for bringing that up. Thanks for bringing that up, Bill. Appreciate the question. We do typically see seasonality between Q2 and Q3.

Speaker #3: Okay. Great. And then on the convert on new accounts, you added 12, I think the original guidance was about 10 a quarter. You did a little better than that in the first quarter.

Speaker #4: Typically, we are sequentially down for sure. Outside the US and even within the US, we are typically flat to down by a few percent.

Speaker #3: Should we still think about 10 a quarter as we move forward?

Speaker #5: Yes. That's the way we think about it. Sometimes we're going to hit above. Sometimes we'll hit a below. But 40 a year.

Speaker #3: Okay. And then two more for me. Just on the convert two, you mentioned that enrollments progressing and will complete next year. Any update somewhere?

Speaker #3: ARCO will be commercially available or launched in the CE market nations?

Speaker #4: We haven't provided an update. As I think, but we have talked about our bigger markets. I mean, Germany is the UK and France are our biggest markets.

Speaker #3: Okay. Great. And then on the convert on new accounts, you added 12. I think the original guidance was about 10 a quarter. You did a little better than that in the first quarter.

Speaker #4: And then Spain and Benelux and Italy and Switzerland. These are all larger European markets. And just for anybody who's not as familiar with our distribution about two-thirds of our business is in the US, one-third is international.

Speaker #3: Should we still think about 10 a quarter as we move forward?

Speaker #4: Yes, that's the way we think about it. Sometimes we're going to hit above, sometimes we'll hit below, but 40 a year.

Speaker #4: And probably 80% of our international business, maybe more than that actually, probably 90% of our international business comes from Europe. So those bigger markets are the ones that some number of those would be the first ones to come online first with ARCO and the reason why you asked the question, Bill, is that we have the CE mark.

Speaker #3: Okay. And then two more from me, just on the convert, too. You mentioned that enrollment's progressing and will complete next year. Any update there?

Speaker #3: Will AirSeal be commercially available or launched in the CE market nations?

Speaker #4: On ARCO, so we don't have the same regulatory path to market in those countries that we do in the United States.

Speaker #4: We haven't provided an update as I think, but we have talked about our bigger markets. I mean, Germany is the UK and France are our biggest markets.

Speaker #3: Yeah. Are you going to be launching it in those countries anytime soon? Is that the real question?

Speaker #4: I know. And the answer is that we will be launching sooner than we will be in the US. We will we need to get on the other those so the convert two trial is an international trial.

Speaker #4: And we have centers in most of the countries that I just mentioned. It's a global trial. So it's in the United States. It's across Europe.

Speaker #4: And probably 80% of our international business, maybe more than that 90% of our international business comes from Europe. So those bigger markets are the ones that some number of those would be the first ones to come online first with AirSeal and the reason why you asked the question, Bill, is that we have the CE mark.

Speaker #4: And in Australia. And so we will not be launching ARCO into two things are going to happen. One, the convert one publication has been submitted for publication.

Speaker #4: So we're going to get that out before we're going to launch because we need to have some documentation of what people can expect when they use it.

Speaker #4: On AirSeal, so we don't have the same regulatory path to market in those countries that we do in the United States.

Speaker #4: And then the second thing is that we need we will not be launching into any markets until we are done enrolling convert two patients in those markets.

Speaker #3: Yeah. Are you going to be launching it in those countries anytime soon? Is that the real question?

Speaker #4: So those are sort of the rate limiters. So and I'm not going to answer the follow-on question, which is when specifically do we expect to enroll the last patients into convert two in Europe.

Speaker #4: I know. And the answer is that we will be launching sooner than we will be in the US. We will we need to get on the other so the convert two trial is an international trial.

Speaker #4: But that would give you a sense of the rough timeline when we would be considering commercializing in some number of European markets.

Speaker #4: And we have centers in most of the countries that I just mentioned. It's a global trial, so it's in the United States and across Europe.

Speaker #3: Okay. But if you complete enrollment given country next year, you could commercialize in that country if the trials or enrollment has been completed. Even though it's not completed in other CE mark countries.

Speaker #4: And in Australia. And so we will not be launching AirSeal until two things are going to happen. One, the convert, one publication has been submitted for publication, so we're going to get that out before we're going to launch because we need to have some documentation of what people can expect when they use it.

Speaker #3: Is that fair to assume?

Speaker #4: Yeah. But we don't have a specific target the specific targets we have in the trial is we're trying to establish a ratio of the distribution between the US and OUS.

Speaker #4: And then the second thing is that we need we will not be launching into any markets until we are done enrolling convert two patients in those markets.

Speaker #4: We do not have a specific target in France or a specific target in the UK. So it's really a question of when are we done enrolling OUS patients in convert, at which point we'll move down the path.

Speaker #4: So those are sort of the rate limiters. And I'm not going to answer the follow-on question, which is when specifically do we expect to enroll the last patients into CONVERT II in Europe?

Speaker #4: The commercialization questions. And it's not going to be a switch that will be thrown. There will be training that will happen. It'll be normal launch activities which would typically take 90 to 180 days or something.

Speaker #4: But that would give you a sense of the rough timeline when we would be considering commercializing in some number of European markets.

Speaker #4: Before you'd start seeing folks up and running and adopting and buying.

Speaker #3: Okay. But if you complete enrollment given country next year, you could commercialize in that country if the trials or enrollment has been completed even though it's not completed in other CE mark countries.

Speaker #3: Okay. All right. I'll stop on that. Last question for me. I'll give you an easy one. You got the debt facility in place. With milestones, you'll be able to access that.

Speaker #3: Is that fair to assume?

Speaker #3: How are you thinking about the past cash flow break even with your current cash and that debt facility access? Thanks for taking the questions.

Speaker #4: Yeah, but we don't have a specific target. The specific targets we have in the trial are that we're trying to establish a ratio of the distribution between the US and OUS.

Speaker #4: Yeah. Thanks, Bill. Yeah. No. We feel good about our path to cash flow break even. We believe that we have a clear path with the cash that we have on hand and an additional buffer with the access from the debt facility.

Speaker #4: We do not have a specific target in France or a specific target in the UK. So it's really a question of when are we done enrolling OUS patients in convert at which point we'll move down the path.

Speaker #4: The commercialization questions—it’s not going to be a switch that will be thrown. There will be training that will happen. There will be normal launch activities, which would typically take 90 to 180 days or something.

Speaker #4: So with the capital that we have access to today, we feel like we can clearly get to cash flow break even over the next few years.

Speaker #4: Before you'd start seeing folks up and running and adopting and buying.

Speaker #3: Thanks.

Speaker #2: That does conclude the Q&A session for today. I would now like to turn the call back to Glenn French for closing remarks.

Speaker #3: Okay. All right. I'll stop on that. Last question for me. I'll give you an easy one. You got the debt facility in place. With milestones, you'll be able to access that.

Speaker #4: Thank you, operator. In closing, I'd just like to say that we're focused and executing on the priorities that matter most. I'm pleased with the team we have, the path we are on to improve the trajectory of our business and the progress we're making.

Speaker #3: How are you thinking about the past cash flow break even with your current cash and that debt facility access?

Speaker #4: Thanks for taking the questions.

Speaker #2: Yeah, thanks, Bill. Yeah, no, we feel good about our path to cash flow break even. We believe that we have a clear path with the cash that we have on hand and an additional buffer with the access from the debt facility.

Speaker #4: We remain focused on the well-defined work ahead, strengthening our sales organization, advancing our clinical programs, and continuing to improve our financial leverage. We are both confident in the strength of the business and in our team's ability to continue to effectively execute.

Speaker #2: So with the capital that we have access to today, we feel like we can clearly get to cash flow break even over the next few years.

Speaker #4: Thank you all for your time and interest in Pulmonx. And to all Pulmonx employees around the world who work every day to improve the lives of patients with severe emphysema.

Speaker #4: Thank you.

Speaker #3: Thanks.

Speaker #1: That does conclude the Q&A session for today. I would now like to turn the call back to Glenn French for closing remarks.

Speaker #4: Thank you all for your time and interest in Pulmonx, and to all Pulmonx employees around the world who work every day to improve the lives of patients with severe emphysema.

Speaker #4: Thank you.

Q2 2026 Pulmonx Corp Earnings Call

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