Pulmonx Corporation (LUNG) Q2 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Pulmonx' Second Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. I would like now to turn the call over to Webb Campbell, Investor Relations. Please go ahead.

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. 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. 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 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, 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. 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. 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. 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 our GAAP results. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, July 29, 2026. 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 Glen.

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. Overall, we are very pleased with the progress we are making against our 3 key priorities of reaccelerating sales growth, driving near-term operating leverage and advancing our market expanding clinical initiatives. 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. We remain confident in our ability to achieve our previously communicated revenue guidance of $90 million to $92 million for the full year 2026 and remain on track to return to global sales growth later in the year. 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. We have 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. Today, I'm pleased to report progress across our remaining 2 priorities, reaccelerating 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. 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 reaccelerating revenue growth in the region. 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. 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. 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. 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. To reiterate, this means: one, setting up high quality and efficient valve programs; two, engaging with and educating physicians who treat COPD and who are aligned with hospital systems offering Zephyr Valves; three, concentrating on direct-to-patient efforts specifically on geographies with established treating centers that have the capacity to accommodate interested patients; and finally, four, continuing to work together with our champions to educate service line administrators to ensure appropriate resourcing of their programs. In my interactions with our sales managers and members of our field team, I see a reenergized unit intensely focused on impacting the lives of patients. 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. 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. 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. 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 AeriSeal remains a central focus. Enrollment in our CONVERT II pivotal trial is progressing, and we continue to expect to complete enrollment in 2027. We believe that AeriSeal 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. 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. 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. With that, I will turn the call over to Derrick to provide more detailed review of our second quarter results.

Thank you, Glen, 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. 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. 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. 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. 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 reaccelerate sales growth. 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. 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. 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. 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. 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. 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. As Glen 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. 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. Looking forward, we now expect gross margin for the full year of 2026 to be approximately 76% as we expect to continue to realize some of these benefits throughout the remainder of the year. 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. 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. 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. 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. 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 million to $92 million. 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. 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 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. We will 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. With that, I'd like to thank you all for your attention, and we will now open the call for questions. Operator?

Good to see the progress here. Maybe just to start off, maybe you could dig a little deeper into the sales force's positive evolution here, 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?

Rick, this is Glen. So we are filling the sales positions. We have a normal sort of amount of turnover that happens in medical device companies. I think the average is nontrivial. That happens as a backdrop. What we faced last year was a doubling or a tripling of what would be considered normal. 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.

Great. And Glen, 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. It takes 6 to 9 months for sort of the average sales guy to sort of get up and running and start to contribute to [ you ]. Where are you -- 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? Or maybe just give us a little more color when we should really start to expect to see much more visible impact from the team.

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. 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. 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 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. The -- we have territory account managers who -- 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, into these territory manager openings and do a really great job. 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 claim a win on that front until we have some amount of history in the rear view.

No, I appreciate that. And Glen, on China, the registration is accepted. That's sound encouraging. Maybe just talk to us a little about the steps you're taking. Just help us better understand the cadence of activities that'll happen now and when -- just when we're going to start to see that revenue more visible. I think you said first quarter. But what has to happen between now and then?

So we had a situation -- 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. But the 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. We saw this coming and I think we've talked about this in the past and when -- 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. 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. 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, and we're anticipating that we probably won't see material revenues until next year, early next year.

And one last question and I'll wait to see whether there's room for more questions as a follow-up but -- and Glen, I apologize to you. I even apologize to Derrick. I hate to bring up '27 but we have numbers we got to print. And maybe just at a high level, you could help us think about it and reflect on current consensus still has you sort of in the mid-90s, but I think to myself China coming back, a repurposed, rebuilt, reconfigured sales force, stronger leadership, more accounts open. I mean, current consensus numbers, my number is in the mid-90s, seems to be 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, but help us think about that potential. It seems like there's room, if all goes well and as planned, to be actually a very strong year.

Yes, Rick, thanks for the question. This is Derrick. I'll refocus your attention to our guidance this year and what we expect this year. 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, probably 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, both in the U.S. 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. 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 sales force, 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. We're really right where we expect to be in terms of reaccelerating our growth and flipping from negative to positive growth this year.

It's great to see the progress and congratulations and all. I know it's a lot of hard work involved.

This is Nelson Cox on for Frank. 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?

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. I mean, if you want, we could start with the sales reps. We know that the territories that have reps in them do better than territories that don't, 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 and in the sales organization a couple of years ago was something like 2.5 years, and today it's about a year. 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. 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. 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 will need to come together that will contribute to the growth that we envision on the horizon.

Fair enough. And then just for my 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 and the full year guide 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?

Yes, 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, I'll point out. So I do -- we would expect to see our gross margin come in a little lower once we do resume shipments into China. 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. 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 efficiency. 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. And we'll continue to push hard to, over time, move that number higher as we continue to drive overall efficiencies.

This is Andrea on for Jason. 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. Can you just take us through what you're seeing in the U.S. and international markets on StratX? Are you like seeing the numbers of scans improve sequentially? And would that match with your revenue guidance?

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. 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.

So my first question is on seasonality. If you look at the U.S., last year, it was down 5% Q2 to Q3, 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 these new reps are becoming productive? 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? 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. Can you help us out with that?

Yes, absolutely. Thanks for bringing that up. Thanks for bringing that up, Bill. Appreciate the question. We do typically see seasonality between Q2 and Q3. Typically, we are sequentially down for sure outside the U.S., and even within the U.S., we are typically flat to down by a few percent. 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. 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.

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. Should we still think about 10 a quarter as we move forward?

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

Okay. And then 2 more for me. Just on the CONVERT II, you mentioned that enrollment's progressing and will complete next year. Any updates on where AeriSeal will be commercially available or launched in the CE Mark nations?

We haven't provided an update as you, as I think, but we have talked about our bigger markets. I mean, Germany is -- Germany, the U.K. and France are our biggest markets. And then Spain and Benelux and Italy and Switzerland, these are all larger European markets. And as just for anybody who's not as familiar with our distribution, about 2/3 of our businesses in the U.S. 1/3 is international 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 AeriSeal. And the reason why you asked the question, Bill, is that we have the CE Mark on AeriSeal, so we don't have the same regulatory path to market in those countries that we do in the United States.

Yes, are you going to be launching it in those countries anytime soon? Is that -- that's the real question.

I know and the answer is that we will be launching sooner than we will be in the U.S. We will -- we need to get on the other -- those -- so this -- the CONVERT II trial is an international trial, 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 and in Australia, and so we will not be launching AeriSeal into -- 2 things are going to happen. One, the CONVERT I 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. And then the second thing is that we need -- we will not be launching into any markets until we are done enrolling CONVERT II patients in those markets. So those are the -- those are sort of the rate limiters. So 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, but that would give you a sense of the rough timeline when we would be considering commercializing in some number of European markets.

Okay. But if you complete enrollment in a given country next year, you could commercialize in that country if the trial's enrollment has been completed, even though it's not completed in other CE Marked countries. Is that fair to assume?

Yes, 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 U.S. and OUS. We do not have a specific target in France or a specific target in the U.K. 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 the commercialization questions. And it's not going to be a switch that will be thrown. There will be training that will happen, at least normal launch activities, which would typically take 90 to 180 days or something before you'd start seeing folks up and running and adopting and buying.

Okay. All right. I'll stop on that. And 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. How are you thinking about the path to cash flow breakeven with your current cash and that debt facility access?

Yes, thanks, Bill. Yes, no, we feel good about our path to cash flow breakeven. 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. So with the capital that we have access to today, we feel like we can clearly get the cash flow break even over the next few years.

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 are making. We remain focused on the well-defined work ahead strengthening in 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. 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. Thank you.

This concludes today's conference call. Thank you for participating, and you may now disconnect.