Pulmonx Corporation (LUNG) Earnings

Management highlights

• Focus on three key priorities: re-accelerating U.S. sales growth, advancing market-expanding clinical initiatives, aligning cost structure to drive profitability. • Progress on U.S. sales growth: filled sales leadership and substantially all U.S. field sales roles, saw improvements in commercial team culture and stabilized sales turnover; using near to far approach with priorities like setting up high quality and efficient valve programs, engaging COPD-oriented clinicians, educating service line administrators, and concentrating direct-to-patient efforts. • Clinical initiatives: CONVERT II pivotal trial for ARISEAL program progressing well, confident in completing enrollment in 2027 to expand total addressable market by ~20% globally. • Cost alignment: executed broad cost reduction initiative in Q1, improved underlying expense trajectory, on track to deliver operating leverage and lower cash burn while maintaining investments in key growth drivers.

Guidance

• Reiterating full-year 2026 revenue guidance of $90 to $92 million, with sequential quarterly improvement in year-over-year revenue trend and return to year-over-year growth in U.S. and international businesses in back half. • In U.S., expect recently filled sales positions and refocused commercial strategy to gradually drive improving sales productivity. • Internationally, first half 2026 revenue growth negatively impacted by lack of sales to China distributor, but expect continued strength in remaining international markets and year-over-year sales growth in second half. • Expect full year 2026 operating expenses to fall between $113 and $115 million, inclusive of ~$19 million of non-cash stock-based compensation expense. • Expect to burn roughly $23 million of cash for full year 2026, a substantial decrease from $32 million burned in 2025.

Segment performance

Total worldwide revenue in the first quarter of 2026 was $20.6 million. U.S. revenue was $13.3 million, with 15 new U.S. treating centers added during the quarter. International revenue was $7.3 million, with decline due to absence of sales to China distributor; excluding China, international markets grew 22% year-over-year. Gross margin for Q1 2026 was 78% compared to 73% in prior year period. Full year 2026 gross margin expected to be approximately 75%, trending higher in first half and lower in second half based on distributor sales mix.

Risks & headwinds

• Risks and uncertainties associated with business include those related to operating trends, commercial strategies, future financial performance, clinical trial timing and results, position engagement, expense management, market opportunity, revenue, gross margin, operating expenses, cash issues, commercial expansion and product demand, adoption and pipeline development. These risks could cause actual results to materially differ from forward-looking statements. For detailed risks, refer to risk factors section of filings with SEC, including annual report on Form 10-K filed on March 10, 2026.

Analyst Q&A

• Q: Good afternoon. Hi, Glenn. How are you doing? Let me start off, if I could, I mean, obviously, getting the sales team in place, it sounds like it's largely in place, critical, and it seems like you're seeing some good, encouraging early progress here. Maybe talk to us about, in more detail, some of the points you made about going deeper in the accounts and some of the specific strategies you're using to see sales growth accelerate, and maybe just as part of that, help us, maybe it's a question for Derek, but help us understand what's dialed into the guidance in terms of productivity for these new people and, you know, today and what you're hoping for and what we might see.

  A: Hey, Rick. So we are, well, first and foremost, We've been focused on narrowing the items that we're asking our US sales force to do. I think one of the key things that we realized coming into this period was that last year there were just too many balls in the air. So we've narrowed that focus and it's in the areas that we commented on in the comments that just preceded. And we have as you had mentioned, substantially filled all of our open positions. Our average tenure, as you might imagine, is not what it was a year ago, but we are bringing people up to speed quite quickly. We are focusing our activity on setting up high quality and efficient valve programs, and we're doing that by engaging COPD physicians around these centers to be driving patients into those centers. We are looking to gain administrative service line level administrative support to ensure that we have the resources to execute on that plan. And we're seeing positive impact from those efforts, even in these early stages. But I think that one of the bigger issues for us is just getting our Salesforce up and running and trained and moving forward. And we are right where we expected to be at this point. So we feel good about the fact that we're full and that people are coming up the learning curve. And we certainly have some very bright spots with regard to the execution of the strategy that we've outlined.

• Q: Our next question is from the line of John Young with Canaccord. Please proceed. Hey, Glenn and Derek. Appreciate giving the progress that they provided today. I want to go to the U.S. accounts, 15 added in Q1. I think that was higher than any number that was added last year, according to our model. I would love to know, is this due to the refocused sales team ramping quickly? And maybe how should we think about just the pace of account additions to the remainder of the U.S. for the year? And if I could ask my second question, too, related to the sales forces, just what metrics are you guys focused on in monitoring the success of the revamped sales force?

  A: So 15 is, as you noted, a strong number relative to what we saw on a quarterly basis across last year. It's difficult to say whether that's anywhere close to the new normal. I think we're going to stand with the 10 per quarter expectation, which we laid out. But I'll let Derek... talk about that guidance if he wishes to, but that feels like the right sort of number. Some of these new accounts I think were lining up perhaps to happen late last year, maybe fell into this quarter. I think time will tell as to whether the mean is above 10, but I would keep that. With regard to metrics, at this point, we feel really good about the plan. We are focused on moving things in a fairly simplified, basic way. And we're just trying to bring our people up to speed as quickly as we possibly can. We have some territories that did very, very well last year. They continue to be doing well this year, continuing to take advantage of the momentum that they established. you know, we see that in an array of different indicators. We've talked before about the importance of Stratex and seeing that, you know, sort of coming through as a leading indicator for our performance, and we feel good about where we sit at this point.

• Q: It comes from Fran Taniken with Lake Street Capital Markets. Please proceed. Great. Thank you for taking the questions. I know this has come up on, I think it was the previous call as well, but wondering if you can speak to kind of bigger picture growth aspirations. I know you're only a few quarters into this, and I think last time the context provided was substantially better, which obviously aligns with the cadence of revenue growth throughout 2026, but now that you've had a little bit more time with the organization, are you comfortable providing any type of, we expect to be a double-digit grower commentary or something similar in nature to that as you think about a longer-term business?

  A: Yeah, Frank, you want to take that, Derek? I mean, I'll go ahead. I'll start. You can add to it, Derek, if you wish. we, we fully expect, I fully, I will speak for myself. Um, I think everybody on the team expects us to be a double digit grower. Um, I think we're trying to figure out, you know, when you look about, you look across the period, um, where we weren't meeting that expectation or we were moving, you know, sort of rapidly in the direction of not meeting that expectation, most particularly in the United States. Um, you know, we're, we're, we're trying to get to the bottom of that. We think we were doing too many things and we think we lost too many sales reps and we think we can, we can get back into a double digit range where exactly in that range is still to be determined. I believe, um, you know, obviously outside the United States, we've thrown up a couple 20% in a row, roughly in terms of our growth in 2025 over 2024 and 2024 over 2023. And, You know, absent the matters that Derek outlined, we're in that same sort of neighborhood in the first quarter as well. And some of our key markets, all of our major European markets are double digit growers in the first quarter. We don't report that, but that's that's the case. So we feel good about that. They're executing on a plan that looks very much like the U.S. plan, which is no coincidence. And we've got TAM expanders on the horizon that we're working very, very hard to push forward. We're excited about AeroSeal and look forward to talking more about that as we move in deeper into the year. Derek, did you want to add something to that? Yeah, I would simply add that also it contemplated in our guidance, even for 2025, as I just mentioned, is that we will exit the year growing double digits in both our international and U.S. markets. So I don't want to get ahead of ourselves and provide any more guidance than that beyond 25, or 26, I'm sorry, in 2026. I meant to say our guidance contemplates double-digit growth as we exit the year, and I don't want to provide any more guidance beyond 26, but I just did want to add that additional commentary.

• Q: Maybe just for my follow-up on the Chinese registration renewal, is there a reliance on that to hit the second half expectations for OUS growth and then related to that, what needs to happen for that renewal? Is this more administrative in nature or is there some risk to this renewal maybe not occurring on time with your guided timelines?

  A: Yeah, thanks Frank for that question. I'll take that. This is Derek. So we do continue to expect the renewal of our registration certificate to come in the back half of this year. It is, I believe, an administrative process that we're simply working through, so it will simply take some time. But at this point we don't have any reason to believe that we won't get that registration certificate renewed in the back half of the year. When we do get that, when that renewal comes, I would say that our expectation is that the resumption of sales into China will be very gradual. Accounts will need to be restarted, et cetera. So we're not expecting a bolus of sales to come in. It will take some time. And to that end, our current guidance doesn't contemplate a significant contribution from China even in our back half. However, as I mentioned, we will be anniversarying those tough comps from our China sales in the first half of 2025. And so I think that'll, you know, we'll expect to flip back to positive international growth. And as Glenn and I just mentioned, you'll see our international growth rates just really be much more reflective of the strong underlying growth in our direct international businesses that we're currently experiencing.

• Q: It comes from Joseph Downing with PSC. Please proceed. Hey, Glenn and Derek. Thanks for taking the question. Yes, I guess as you kind of reprioritize existing base of trading positions, can you just help to quantify same store productivity, say, in your top quartile accounts versus, say, the bottom couple quartiles? And in this vein, how much of the 2026 U.S. revenue plan depends on listing the bottom two quartiles versus this, you know, top 25%?

  A: Yeah, we're... I would say that we are focused on, to the extent that we have some, we've got a mix of things going on here, Joe. We've got uncovered territories that are now covered, so we need to reestablish those connections and get those moving. We tend to have a bias toward the accounts that are performing best and trying to move them along and take full advantage of the near-to-far strategy in relation to them, make sure that they're you know, leveraging all the best practices that we've talked about in prior calls. And so I would say the top quartile would be more of the area of focus as opposed to the lowest quartile. We are, however, bringing in some number of new accounts that, and where our standards for bringing our accounts online have changed considerably. quite a bit. We've really raised the bar and expect those accounts to invest pretty heavily in terms of their time and efforts to get up and running and have patients that are ready to go. So there's far fewer people who are recently trained who are not doing procedures. So we actually are quite optimistic about the newer accounts that are coming online and are doing procedures right out of the blocks. So Um, those probably, those would be what I would, I would consider outside the first or the first quartile or the top quartile or lower quartile, but rather just new accounts on top of that. But first and foremost, we're getting our team up and running, uh, back up and running and just trying to support the strongest of our accounts most, uh, predominantly. And some of our newer accounts will also make some good contributions.

• Q: Just for my follow-up on the long-tracks real quick. I know it's kind of being refocused or de-emphasized a little bit, whichever way, you know, you prefer to frame it. But I'm just curious, like, what percent of U.S. accounts right now, I think it's the larger ones you said are still, you know, it's more effectively used in those kind of accounts. What percent of the accounts are using it? And then kind of what, like, ROI thresholds would lead you to kind of selectively expand it again versus keeping it kind of at this narrow scope?

  A: We pulled back our, uh, we, we were spending what in retrospect looked like a disproportionate amount of our time pursuing, uh, detect what we call lung tracts detect. Um, and so we, I think we brought that to a level of time and attention that it deserves, uh, We learned a great deal during the period of time where we were heavily promoting Detect in that it really fits into a specific subset of our accounts. We did some pilots across the last year or so, and it revealed that the technology works well in certain types of accounts. And so we're tending to target Detect. I wouldn't call it a de-emphasis at all. I think it's just a more focused approach to detect in situations where we have determined that there could be a sort of a great return for the hospital that invests in detect in terms of patient flow and so forth. As far as what percent of accounts, I don't think we report that, but You know, everything you've heard before, which is in certain accounts, it can be great. We definitely have data that suggests that. It takes longer to get set up than we, I think, anticipated last year that it would. And those that are up and running, it took a little time to get them up and running. But there seems to be all indications are that when that technology is up and running and being used, it's a pretty solid contributor to our efforts in that account