Pulmonx Corp — Call Transcript 2025

Ladies and gentlemen, thank you for standing by and welcome to Pulmonx's second quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Jeremy Feffer of LifeSci Advisors Investor Relations. Please go ahead. Good afternoon, and thank you all for participating in today's call. Joining me from Pulmonx this afternoon are Steve Williamson, President and Chief Executive Officer, and Mehul Joshi, Chief Financial Officer. Earlier today, Pulmonx issued a press release announcing its financial results for the second quarter ended June 30th, 2025. A copy of the press release is available on Pulmonx's website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to the company's operating trends, commercial strategies, and future financial performance, the timing and results of clinical trials, expense management, market opportunity, guidance for revenue, gross margin, and operating expenses, commercial expansion, and product demand, adoption, and pipeline development are based on our current estimates and various assumptions. Forward-looking statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied. 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 Pulmonx's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-Q filed with the SEC on May 2nd, 2025. Also, during this call, management 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 Pulmonx's Investor Relations website. These non-GAAP measures are not intended to be a substitute for the company's GAAP results. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, July 30th, 2025. 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. Now, I'll turn the call over to Steve. Thank you, Jeremy. Good afternoon, everyone, and thank you for joining us today. We're pleased to report second quarter 2025 revenue of $23.9 million. Our international business excelled, delivering $9.1 million in revenue, well above expectations and a testament to the strength of our global footprint. Growth was robust across all key regions, reinforcing our conviction that the foundational investments we've made internationally, particularly in education, market development, and pathway creation, are scaling effectively. We continue to see momentum in these markets from repeatable initiatives such as peer-to-peer education, regional multidisciplinary emphysema boards, and targeted physician engagement. These are not isolated tactics, they are building blocks of long-term sustainable OUS growth, and the results are becoming increasingly evident. Shifting to the U.S., in the second quarter, U.S. revenue totaled $14.7 million, reflecting slower-than-expected growth in procedure volume. This trend has been driven by a combination of tough year-over-year comparisons, a decline in conventional StratX® Lung Analysis Report scans, and operational pressures at interventional pulmonology centers. We believe increasing attention on robotic bronchoscopy and lung cancer screening has, in many cases, temporarily constrained bronch suite availability and diverted IP focus. Now, it's important to note we view these dynamics not as threats, but as future tailwinds. The rise of lung cancer screening is a good thing. It's surfacing more disease earlier, expanding imaging volume, and enabling timely intervention. In fact, we're intentionally aligning with these trends. We believe that the very same infrastructure being built for early cancer diagnosis, including the hiring of clinicians and support staff, will create capacity to find and treat more patients with severe emphysema. That said, our original 2025 guidance assumed a second-half rebound in U.S. performance, fueled by the ramp-up of our new commercial initiatives. Based on current conversion trends, we now believe that this inflection will take more time to materialize than initially anticipated. As a result, we are revising our full-year 2025 revenue guidance from a range of $96-$98 million to a range of $90$92 million. This is a recalibration based on timing, not a shift in strategic direction or a change in our confidence in the opportunity. Importantly, this revision to guidance gives us the opportunity to exceed expectations if our initiatives ramp faster than expected, while also providing flexibility if conversion timelines continue to vary across programs or geographies. We believe this is a prudent and transparent adjustment based on current visibility while preserving meaningful upside. Let me walk you through what happened, what we're doing about it, and why we remain confident in our path forward. The softness in Q2 procedure volume was primarily due to a decline in StratX® Lung Analysis Report scans in prior quarters, a leading indicator for Zephyr® Endobronchial Valve bronchoscopic lung volume reduction procedures. We expected some of this softness, driven by capacity constraints and evolving priorities within interventional pulmonology centers. We also expected that our new commercial initiatives, direct-to-patient outreach, referring physician engagement, and the rollout of LungTraX™ Platform, would help overcome that decline by opening up alternative pathways to the funnel. These programs are gaining traction, but they're taking longer than traditional referral models to convert. These new pathways involve multiple stakeholders and more complex workflows, often requiring one or two additional quarters from identification to procedure. In response, we've taken deliberate, targeted steps to expand the funnel, improve conversion, accelerate adoption, and grow StratX® Lung Analysis Report scans across the U.S. market. First, our direct-to-patient campaigns continue to gain momentum. We expect to exceed 70,000 first-time patient engagements this year through a mix of digital quizzes, inbound calls, SMS-based support, and connected TV advertising. These efforts are driving measurable increases in website traffic and patient inquiries. Already, one-third of the patients treated in 2025 were engaged through these campaigns, a strong indicator that we're not just creating awareness, but driving action. We've also launched the Therapy Awareness Specialist, or TASS, role to bridge the gap between community pulmonologists and treating centers. Many referring physicians remain unclear on how to identify the right patient, where to send them, or whether the procedure is reimbursed. In territories where TASSes have been deployed, we've seen patient workups increase by an average of 19% compared to the four-quarter average. That's the type of early signal we look for when we're launching a new commercial model. We also continue to invest in clinical training and enablement across our IP customer base. This includes onboarding new physicians, providing procedural best practices, and supporting multidisciplinary teams in building sustainable workflows. Finally, we're making steady progress with LungTraX™ Platform, our AI-powered screening tool that passively identifies emphysema patients from routine CT scans. Several hospitals are already live, and early site data is encouraging. At one hospital, a patient flagged by LungTraX™ Platform was originally undergoing follow-up for a lung nodule and was successfully treated with Zephyr® Endobronchial Valve. At another, five patients were identified and moved into the diagnostic workup phase within 30 days of installation. The adoption of LungTraX™ Platform involves the engagement of a number of stakeholders, from identifying a clinical champion, to clearing IT and security reviews, to contracting, to integrating into clinical workflow. Each step takes time, but the payoff is clear. We continue to evolve our sales and implementation processes based on customer feedback, and we currently have a robust and growing pipeline of hospitals that are in line to adopt this technology. We've also expanded our capacity footprint. In Q2 alone, we opened 12 new screening centers and trained 26 new physicians. These actions don't just grow our network, they create new points of patient access and expand our capacity to treat. Why are we confident this strategy will work? First, StratX® Lung Analysis Report referrals rebounded to record levels in June and July, which we view as a direct response to the initiatives we've deployed. Second, lung cancer screening is scaling rapidly, nearly tripling since 2020, and generating millions of CT scans annually. Based on published data and our internal experience to date, we estimate that 15% of these CT scans will show valve-eligible radiographic emphysema, and about 25% of those patients will be eligible for further Zephyr® Endobronchial Valve evaluation. That's a massive and growing opportunity that we are now better equipped than ever to capture. Third, health systems continue to prioritize high-value, minimally invasive interventions. Zephyr® valves offer a strong clinical value proposition, a favorable reimbursement profile, and a scalable procedural workflow. We fit squarely within those strategic objectives. Physician enthusiasm remains high. Reimbursement remains stable, and an estimated 500,000 patients in the U.S. remain untreated despite being eligible. The unmet need is not in question. The challenge is matching the right patient with the right care, and that's exactly what our strategy is built to do. We're also continuing to invest in long-term value drivers. The Convert II trial evaluating aerosol and collateral ventilation positive patients is progressing well. This product was designed to unlock treatment for the 20% of patients who complete a StratX® Lung Analysis Report workup only to be ruled out for valves due to collateral ventilation. Enrollment is expected to complete in the back half of 2026. In Japan, we continue to enroll patients in our post-approval study. This study is required before full commercialization and will unlock access to a market with an estimated 100,000 BLVR eligible patients. We remain on track to complete enrollment in approximately 2026. We've launched a new collaboration with Jaeger, a global leader in pulmonary function testing, to embed BLVR screening logic into their diagnostic platforms. Over 16 million PFTs are conducted in the U.S. annually. Based on published data, roughly 35% to 40% of those tested have COPD, and within that group, up to 30% may have emphysema severe enough for Zephyr® consideration. This is what we mean when we say we're not just selling a product; we're building an ecosystem for long-term, sustainable 20% growth. We're also advancing our robust clinical evidence base. At the American Association of Bronchology and Interventional Pulmonology meeting in Austin this August, early results from LungTraX™ Platform (LungTraxDetect) will be presented, showing how AI-enabled detection of emphysema from routine low-dose CT scans can shorten the time from diagnosis to treatment. In September, the European Respiratory Society Congress will feature multiple presentations, from new screening techniques to combination therapies, that continue to broaden clinical validation and support practical adoption of Zephyr® valve treatment. While we are revising our full-year outlook, our conviction in our long-term growth trajectory is stronger than ever. We're investing behind a clear, scalable strategy. We're seeing positive signals across all major initiatives. We will continue to improve and drive focused execution of our strategy, and we remain confident that the work we're doing today will translate into sustainable, durable future growth. Finally, we're committed to transparency with our shareholders, our customers, our employees, and most importantly, the patients we serve. That's why we've taken the time today to walk you through not just the what, but the why behind this guidance revision and why we believe the underlying drivers are both sound and strengthening. Now, I'll turn the call over to Mehul Joshi to provide more detail on our financial performance. Thank you, Steve, and good afternoon, everyone. Total worldwide revenue for the three months ended June 30th, 2025 was $23.9 million, a 15% increase from $20.8 million in the same period of the prior year, and an increase of 13% on a constant currency basis. This performance reflects sustained adoption of Zephyr® Endobronchial Valve and continued execution across our organization. U.S. revenue in the second quarter reached $14.7 million, a 6% increase from $13.9 million in the prior year period. While this growth was below our expectations, it's important to note the challenging prior year comparison. International revenue for the second quarter of 2025 was a record $9.1 million, a 32% increase compared to $6.9 million in the same period last year, and a 27% increase on a constant currency basis. Growth was distributed across our core markets in Europe and Asia, underscoring the continued expansion of global demand for Zephyr® Endobronchial Valve and the strengthening of our commercial execution outside of the United States. International revenue performance aligned with our outlook, which anticipated outsized international growth in the first half of the year, followed by a more moderate trajectory in the second half of the year. We remain encouraged by the long-term potential of our international footprint and continue to invest in strategic markets to support sustainable growth over time. Gross margin for the second quarter of 2025 was 72%, compared to 74% in the same period last year, and consistent with our prior expectations. The year-over-year decline was primarily driven by an anticipated shift in geographic revenue mix with international markets, including distributor sales, accounting for a larger share of total revenue. Total operating expenses for the second quarter of 2025 were $32 million, a 3% increase over $30.9 million in the second quarter of 2024. Non-cash stock-based compensation expense was $5.6 million in the second quarter of 2025. Excluding stock-based compensation expense, total operating expenses in the second quarter of 2025 increased 4% from the same period of the prior year. Research and development expenses for the second quarter of 2025 were $5.3 million, compared to $5.6 million in the prior year period. The year-over-year decline was due primarily to the one-time non-cash impairment charge related to internally developed software recorded in Q2 2024. Excluding this item, R&D spending increased 36% year-over-year, reflecting higher clinical trial activity and ongoing investments in R&D programs. Sales, general, and administrative expenses for the second quarter of 2025 were $26.7 million, up 5% from $25.3 million in the second quarter of 2024. The increase was driven by continued investment in our commercial efforts, including enhanced direct-to-patient outreach and targeted initiatives aimed at increasing clinician awareness and adoption of Zephyr® Endobronchial Valve therapy. Net loss for the second quarter of 2025 was $15.2 million, or a loss of $0.38 per share, as compared to a net loss of $15.3 million, or a loss of $0.39 per share for the same period of the prior year. An average weighted share count of 40.4 million shares was used to determine loss per share for the second quarter of 2025. Adjusted EBIT loss for the second quarter of 2025 was $8.4 million, as compared to $7.6 million in the second quarter of 2024. We ended the quarter with $84.2 million in cash, cash equivalents, and marketable securities, down $4.5 million from March 31st, 2025. Total cash utilization for the first half of 2025 was $17.3 million, and in line with our 2025 operating plan. We remain laser-focused on disciplined capital allocation and cash burn, as we continue to fund key growth initiatives, including advancing our clinical programs. Turning to guidance, we are revising our full-year 2025 outlook for revenue and operating expenses to reflect updated expectations and current market dynamics. Gross margin expectations remain unchanged. We are updating our full-year 2025 revenue guidance to a range of $90-$92 million, representing year-over-year growth of approximately 7%-10%. As Steve Williamson mentioned, this revision reflects a shift in the expected timing of contributions from our growth initiatives in the U.S., which are ramping slower than originally anticipated. Our guidance continues to incorporate current full-year foreign exchange rate assumptions, though we acknowledge that future currency fluctuations may impact reported results. International performance was strong in the first half of 2025, as anticipated, driven by robust demand across both direct and distributor markets. Looking ahead, we expect a return to typical seasonality in the second half of the year. As previously communicated, our distributor channel, including China, is expected to moderate. However, we expect continued momentum in our direct markets across Europe and Asia, where underlying demand and commercial execution remain strong. We are closely monitoring the global trade environment, including evolving tariff policies, and continue to assess potential implications for international revenue. At this time, we do not anticipate any material near-term impact. We are reaffirming our full-year gross margin outlook of approximately 74%. We continue to expect sequential improvement in the second half of the year, driven by a more favorable geographic revenue mix, increased production volumes, and the ongoing benefits of cost optimization initiatives. All our products are manufactured in the United States, using a blend of in-house processing and third-party suppliers for raw materials and components. The proportion of imported materials remains minimal, and with our current inventory position, we do not anticipate any material impact to gross margin from near-term fluctuations in global trade or tariff policy. We are revising our full-year 2025 operating expense guidance down from a range of $133 million-$135 million to a range of $128 million-$130 million, which includes approximately $22 million in non-cash stock-based compensation. This reduction reflects the impact of targeted cost efficiency initiatives implemented across the organization, aimed at enhancing operating leverage. Importantly, this revised operating expense outlook continues to support full investment in our acquired test and treat strategy, the cornerstone of our long-term growth and market expansion plans. We remain committed to scaling our platform with discipline, ensuring we balance strategic execution with prudent financial management. Our revised revenue and operating expense outlook remains aligned with our original cash utilization targets for 2025, and we currently expect cash burn to track at or below 2024 levels. With a strong balance sheet and a disciplined, execution-focused operating plan, we remain confident in our ability to meet near-term milestones while advancing our long-term growth strategy. With that, I'd like to turn the call back to Steve for his closing remarks. Thanks, Mehul. Before we wrap up, I want to reiterate a few key points. We're delivering strong international performance, expanding our reach, and laying the foundation for long-term sustainable growth. While we've adjusted our full-year revenue guidance to reflect the longer timelines associated with ramping our U.S. initiatives, the underlying signals, from physician training to patient engagement to ecosystem development, are all moving in the right direction. The conviction we have in our strategy is grounded in real-world traction and reinforced by the steps we're taking to broaden access, accelerate identification of workup, and support physicians and patients throughout the treatment journey while maintaining fiscal discipline. This is not a question of if, but when, and we believe the work we're doing now sets us up to unlock meaningful value over time. We appreciate your continued partnership and interest in Pulmonx, and we look forward to keeping you updated on our progress in the quarters ahead. With that, we'll now open the call for questions. Thank you. To ask a question, please press star one-one on your telephone and wait for your name to be announced. To withdraw your question, please press star one-one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Frank Takkinen with Lake Street Capital Markets. Your line is now open. Great. Thank you for taking the questions. I was hoping to first follow up on one related to the revised guidance. I was hoping you could help us kind of parse out Q3 versus Q4 expected contribution, and then underneath that, expectations on a U.S. versus OUS growth basis. Yeah. Hey, Frank. This is Mehul. Maybe I'll start by saying, you know, our initial guidance indicated international revenue growth would drive the first half growth in 2025. The U.S. would drive the second half growth. International growth is consistent with initial guidance. The first half was robust. The second half was slow, primarily from very low ordering from China, and we expect direct markets to be robust with typical seasonality in the second half. There has really been no change to international revenue expectations, but as I said, distributor revenue was high in the first half, and it'll be significantly lower in the second half. That's kind of a first half, second half dynamic. The U.S. will grow in the second half, but not to the extent we originally expected due to the slower ramp of our growth initiatives as Steve described. U.S. revenue in the first half was approximately 62% of total revenue, and in the second half, we expect it to be at least two-thirds, maybe a little bit higher in the second half of the year. That's kind of the U.S. international breakout. We do expect Q3 to probably be flat to Q3 of a year ago, and then you can figure out Q4 from there. The first half, second half guidance appears to be a little bit disproportionate, but if you normalize for some of the China revenue that we did get in the first half, it'll make more sense. Hopefully, that's helpful. Yep. That's great. Thank you. I appreciate that color. I was hoping to follow up on some of Steve's comments related to StratX® scanning trends. One, can you just help us understand a little bit better maybe what was, I don't know if distracting is the correct word, but what the IPs were up to instead of doing StratX® scans? Any metrics around the June-July record scanning, just how much larger were those than previous StratX® scanning months? Yeah. If you look back, hey, Frank, by the way, if you look back across from the beginning of the year, we saw a slight decline in StratX® Lung Analysis Reports as we went into the year, but we were expecting that that would pick up as we saw the pilot sites really start to engage and start putting more patients through. There have been two things in my mind that, as we look at where we're headed for the second half, made us find it prudent to change the guidance. The first is these pilot sites ramped up pretty quickly. They came on board quickly. They got through their contracting processes, their security reviews quicker than we're seeing after our broader launch. You'll recall that we launched this to the salesforce in Q1, got them trained up in Q1. They started launching in Q2 and selling then. As we're starting to go through these contracting processes, which we're doing more of now, our funnel is robust and is growing there, as I mentioned, but it's taking longer. I don't know that that's all bad. As I look at some of the accounts that we've gone into, they're part of larger organizations. Those larger organizations have to sign off on new software coming in. It's given us visibility at higher levels to talk about ways that we can help address this patient population that's not currently being addressed. Capacity constraints have come from the cancer screening and cancer procedures that are being done, the biopsies that are being done. With that capacity constraint comes a lot of low-dose CT scans. Those offer an opportunity to integrate both cancer and COPD detection in a single clinical pathway. That's what we're seeing in some of these accounts. I think that's what's really driving our June and July uptick in StratX® Lung Analysis Reports. We see that the work that we're doing in these accounts has really increased their StratX® Lung Analysis Report utilization and is putting more patients into the funnel. What it's also done, though, is it's shown us that there is a capacity constraint. These accounts now have these lists of patients that they need to follow up based on the software telling them that they've got patients that have radiographic emphysema. There's a follow-up process that needs to go through. Those patients need to be worked up. What we've been focused on is talking to these administrators that were instrumental in bringing in additional capacity to do these lung cancer screening programs and build up these nodule biopsy programs to show them that they have the opportunity to not only take care of these patients, but to take care of the incidental findings and early intervention that's capable for these severe emphysema patients. As we build out this ecosystem, I'll tell you, I've been in a number of these conversations. I've been on a number of these calls, and it's resonating. There's a positive response from hospitals that have made significant investments in building out lung cancer screening to take advantage of those patients that are coming through, but to broaden that out and say, "We've already made this investment. What else do we need to do to capture even a broader patient population and realize a bigger return? Okay. That's helpful. Appreciate the color. Thank you. Thank you. Our next question comes from the line of Rick Wise with Stifel. Your line is now open. Hi, Steve. Hi, Mehul. I want to follow up on some of these points you made, and thanks for all the detail. I just want to make sure I'm understanding clearly. As you said, you may regret saying it, but StratX® Lung Analysis Report trends at record levels in June and July. If those June-July trends continue, on whatever trend line they are, and you haven't quantified it, but feel free to however you want. If those trends continue through the end of the year in that direction, whatever that is, would that basically meet? Would that be the biggest factor causing you to meet the guidance you're giving us? It sounds like you would do better, all things. A lot of moving pieces here, but help me think that through. Yeah. The point of telling you about the StratX® Lung Analysis Reports is to show that we do see that we are making an impact. Now, the StratX® Lung Analysis Reports to treatment timelines vary depending on where the account is, which account it is, where those patients are in the process. In some instances, I talked about a new LungTraX™ Platform account that just came on board. They found five patients, put them right into workup immediately. They're moving very quickly. Others might not move as quickly. Depending on where those patients are in the process, there's just significant variability there. That's why I was talking about potential upside to the guidance, depending on how quickly they do convert. I think it's a little too early to tell right now, Rick, but it's a good kind of first-level sign for us and lets us see that there's some progress being made here. We're really focused on a rebound in the U.S., and we're expecting one in the back half of the United States here. We're expecting that growth rate to go up. It's just how much it does and how quickly is something that we're working through right now. Not to belabor this point, Steve, would you say, and I'm not trying to get you to say your numbers are too low. I appreciate your taking a hopefully, prudently, thoughtfully conservative approach to giving a second-half guidance. Would you say you've set the guidance or tried to frame the guidance in the most conservative terms possible? I'm sure you haven't given us your best case, but there's so many moving pieces, a lot of moving timelines, as you're saying. It's all evolving, but how do you think you frame this guidance? Yeah. It's a multivariate problem for us, right? There's a number of different issues or opportunities that come through, and we try to see what's the speed of which we will see the patient treatments go up from those. What we've looked at is we feel pretty confident with OUS, as Mehul said, for the year, and that hasn't changed at all. It's just in the U.S., we did see that we didn't rebound as quickly as we expected. Because of that, I don't think we want to get over our skis just yet. We know that it's taking time to get through the contracting process, security reviews. We have more of these accounts coming on. They seem excited. There is an overarching willingness to adopt the concept of lung health rather than just lung cancer screening. As we see more of these accounts come on board, it's how quickly we can set them up with the proper workflow to get those patients through. Our guidance is designed to say, "Look, if we continue to see the growth where we are right now, that would fall in our guidance." However, there is potential upside to this if these initiatives kick in faster than we expect. Okay. Just a last one from me, just to make sure I'm clear. I mean, this isn't about new competitive dynamics that are making clinicians pause and look at other approaches to emphysema, either detection or treatment. There's no other dynamic other than these complicated, multifaceted, multivariant approaches to driving change in how patients are identified and worked through the funnel, if I'm hearing you correctly. Thank you. Yeah. This isn't a direct competition situation at all. We remain the premier offering in valves. Our salesforce has done a great job of educating clinicians and training clinicians, and we continue to train more. We've done some work to make sure that we're training additional physicians in existing facilities so that they can expand their capacity in that manner. At the same time, it's making sure that they've got the ecosystem in place so that as these patients are identified, whether it's through these CT scans or through this PFT screening agreement that we're just inking now, we'll expect that to generate more patients as well. Theoretically, these patients should come through and already be in the workup process. If they've already had a CT scan, that checks one box that they needed to do for workup. If they've had a PFT, same thing. We get these patients hopefully a little bit later on in the process, and they can move in quicker. The capacity is one, though, that we really need the administration to look at and say, "Okay, we've built this lung cancer platform, and we do thousands and thousands of procedures in this space. We have the opportunity to treat a major underserved patient population, which has a very, very strong clinical value proposition with Zephyr® Endobronchial Valves, but also a strong economic one." It's also a very symbiotic procedure for the hospitals. These patients that come in can be symbiotic to thoracic surgery, cardiology, other areas of the hospital that are very intriguing and good revenue drivers for the hospital systems. By talking to the administrators about the ability to clinically take care of these patients, and again, there's hundreds of thousands of them in the United States that are just underserved, we've got a number of them coming into our direct-to-patient pipelines. We're working on getting the referrals up and making sure that the workflow is smoother for these hospitals. Once they get there, we need to make sure that they get treated. In order to get treated, oftentimes they need to have buy-in from the hospital system that they're willing to expand the capacity of that group. Thank you, Steve. Yep. Thank you. As a reminder, to ask a question at this time, please press star one-one on your touch-tone telephone. I'm currently showing no further questions at this time. I'd like to turn the call back over to Steve Williamson for closing remarks. Thanks, Janem. I'd like to thank you all for joining today and thank our employees worldwide that are focused on providing relief to the hundreds of thousands of patients that are suffering from emphysema right now. I believe our strategy is working. It's just taking more time to implement, as I mentioned. We're confident we're headed in the right direction, and I appreciate all your support. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker 3: Ladies and gentlemen, thank you for standing by and welcome to Pulmonx's second quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Jeremy Feffer of LifeSci Advisors Investor Relations. Please go ahead. Ladies and gentlemen, thank you for standing by and welcome to Pulmonx's second quarter 2025 financial results conference call. ladies and gentlemen thank you for standing by and welcome to pulmonx's second quarter 2025 financial results conference call At this time, all participants are in a listen-only mode. at this time all participants are in a listen-only mode After the speaker's presentation, there will be a question-and-answer session. after the speaker's presentation there will be a question-and-answer session Please be advised that today's conference is being recorded. please be advised that today's conference is being recorded I would now like to turn the conference over to Jeremy Feffer of LifeSci Advisors Investor Relations. i would now like to turn the conference over to jeremy feffer of lifesci advisors investor relations Please go ahead. please go ahead

Speaker 5: Good afternoon, and thank you all for participating in today's call. Joining me from Pulmonx this afternoon are Steve Williamson, President and Chief Executive Officer, and Mehul Joshi, Chief Financial Officer. Earlier today, Pulmonx issued a press release announcing its financial results for the second quarter ended June 30th, 2025. A copy of the press release is available on Pulmonx's website. Before we begin, I would 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. Good afternoon, and thank you all for participating in today's call. good afternoon and thank you all for participating in today's call Joining me from Pulmonx this afternoon are Steve Williamson, President and Chief Executive Officer, and Mehul Joshi, Chief Financial Officer. joining me from pulmonx this afternoon are steve williamson president and chief executive officer and mehul joshi chief financial officer Earlier today, Pulmonx issued a press release announcing its financial results for the second quarter ended June 30th, 2025. earlier today pulmonx issued a press release announcing its financial results for the second quarter ended june 30th 2025 A copy of the press release is available on Pulmonx's website. a copy of the press release is available on pulmonx's website Before we begin, I would 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. before we begin i would 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. any statements contained in this call that relate to expectations or predictions of future events results or performance are forward-looking statements All forward-looking statements, including, without limitation, those relating to the company's operating trends, commercial strategies, and future financial performance, the timing and results of clinical trials, expense management, market opportunity, guidance for revenue, gross margin, and operating expenses, commercial expansion, and product demand, adoption, and pipeline development are based on our current estimates and various assumptions. Forward-looking statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied. 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 Pulmonx's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-Q filed with the SEC on May 2nd, 2025. Also, during this call, management will discuss certain non-GAAP financial measures. All forward-looking statements, including, without limitation, those relating to the company's operating trends, commercial strategies, and future financial performance, the timing and results of clinical trials, expense management, market opportunity, guidance for revenue, gross margin, and operating expenses, commercial expansion, and product demand, adoption, and pipeline development are based on our current estimates and various assumptions. all forward-looking statements including without limitation those relating to the company's operating trends commercial strategies and future financial performance the timing and results of clinical trials expense management market opportunity guidance for revenue gross margin and operating expenses commercial expansion and product demand adoption and pipeline development are based on our current estimates and various assumptions Forward-looking statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied. forward-looking statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied Accordingly, you should not place undue reliance on these 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 Pulmonx's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-Q filed with the SEC on May 2nd, 2025. for a list and description of the risks and uncertainties associated with our business please refer to the risk factors section of pulmonx's filings with the securities and exchange commission including the company's annual report on form 10-q filed with the sec on may 2nd 2025 Also, during this call, management will discuss certain non-GAAP financial measures. also during this call management 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 Pulmonx's Investor Relations website. These non-GAAP measures are not intended to be a substitute for the company's GAAP results. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, July 30th, 2025. 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. Now, I'll turn the call over to Steve. 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 Pulmonx's Investor Relations website. 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 pulmonx's investor relations website These non-GAAP measures are not intended to be a substitute for the company's GAAP results. these non-gaap measures are not intended to be a substitute for the company's gaap results This conference call contains time-sensitive information and is accurate only as of the live broadcast today, July 30th, 2025. this conference call contains time-sensitive information and is accurate only as of the live broadcast today july 30th 2025 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. 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 Now, I'll turn the call over to Steve. now i'll turn the call over to steve

Speaker 2: Thank you, Jeremy. Good afternoon, everyone, and thank you for joining us today. We're pleased to report second quarter 2025 revenue of $23.9 million. Our international business excelled, delivering $9.1 million in revenue, well above expectations and a testament to the strength of our global footprint. Thank you, Jeremy. thank you jeremy Good afternoon, everyone, and thank you for joining us today. good afternoon everyone and thank you for joining us today We're pleased to report second quarter 2025 revenue of $23.9 million. we're pleased to report second quarter 2025 revenue of $23.9 million Our international business excelled, delivering $9.1 million in revenue, well above expectations and a testament to the strength of our global footprint. our international business excelled delivering $9.1 million in revenue well above expectations and a testament to the strength of our global footprint Growth was robust across all key regions, reinforcing our conviction that the foundational investments we've made internationally, particularly in education, market development, and pathway creation, are scaling effectively. We continue to see momentum in these markets from repeatable initiatives such as peer-to-peer education, regional multidisciplinary emphysema boards, and targeted physician engagement. These are not isolated tactics, they are building blocks of long-term sustainable OUS growth, and the results are becoming increasingly evident. Shifting to the U.S., in the second quarter, U.S. revenue totaled $14.7 million, reflecting slower-than-expected growth in procedure volume. This trend has been driven by a combination of tough year-over-year comparisons, a decline in conventional StratX® Lung Analysis Report scans, and operational pressures at interventional pulmonology centers. We believe increasing attention on robotic bronchoscopy and lung cancer screening has, in many cases, temporarily constrained bronch suite availability and diverted IP focus. Growth was robust across all key regions, reinforcing our conviction that the foundational investments we've made internationally, particularly in education, market development, and pathway creation, are scaling effectively. growth was robust across all key regions reinforcing our conviction that the foundational investments we've made internationally particularly in education market development and pathway creation are scaling effectively We continue to see momentum in these markets from repeatable initiatives such as peer-to-peer education, regional multidisciplinary emphysema boards, and targeted physician engagement. we continue to see momentum in these markets from repeatable initiatives such as peer-to-peer education regional multidisciplinary emphysema boards and targeted physician engagement These are not isolated tactics, they are building blocks of long-term sustainable OUS growth, and the results are becoming increasingly evident. these are not isolated tactics they are building blocks of long-term sustainable ous growth and the results are becoming increasingly evident Shifting to the U.S., in the second quarter, U.S. revenue totaled $14.7 million, reflecting slower-than-expected growth in procedure volume. shifting to the u.s in the second quarter u.s revenue totaled $14.7 million reflecting slower-than-expected growth in procedure volume This trend has been driven by a combination of tough year-over-year comparisons, a decline in conventional StratX® Lung Analysis Report scans, and operational pressures at interventional pulmonology centers. this trend has been driven by a combination of tough year-over-year comparisons a decline in conventional stratx® lung analysis report scans and operational pressures at interventional pulmonology centers We believe increasing attention on robotic bronchoscopy and lung cancer screening has, in many cases, temporarily constrained bronch suite availability and diverted IP focus. we believe increasing attention on robotic bronchoscopy and lung cancer screening has in many cases temporarily constrained bronch suite availability and diverted ip focus Now, it's important to note we view these dynamics not as threats, but as future tailwinds. The rise of lung cancer screening is a good thing. It's surfacing more disease earlier, expanding imaging volume, and enabling timely intervention. In fact, we're intentionally aligning with these trends. We believe that the very same infrastructure being built for early cancer diagnosis, including the hiring of clinicians and support staff, will create capacity to find and treat more patients with severe emphysema. That said, our original 2025 guidance assumed a second-half rebound in U.S. performance, fueled by the ramp-up of our new commercial initiatives. Based on current conversion trends, we now believe that this inflection will take more time to materialize than initially anticipated. As a result, we are revising our full-year 2025 revenue guidance from a range of $96-$98 million to a range of $90$92 million. Now, it's important to note we view these dynamics not as threats, but as future tailwinds. now it's important to note we view these dynamics not as threats but as future tailwinds The rise of lung cancer screening is a good thing. the rise of lung cancer screening is a good thing It's surfacing more disease earlier, expanding imaging volume, and enabling timely intervention. it's surfacing more disease earlier expanding imaging volume and enabling timely intervention In fact, we're intentionally aligning with these trends. in fact we're intentionally aligning with these trends We believe that the very same infrastructure being built for early cancer diagnosis, including the hiring of clinicians and support staff, will create capacity to find and treat more patients with severe emphysema. we believe that the very same infrastructure being built for early cancer diagnosis including the hiring of clinicians and support staff will create capacity to find and treat more patients with severe emphysema That said, our original 2025 guidance assumed a second-half rebound in U.S. performance, fueled by the ramp-up of our new commercial initiatives. that said our original 2025 guidance assumed a second-half rebound in u.s performance fueled by the ramp-up of our new commercial initiatives Based on current conversion trends, we now believe that this inflection will take more time to materialize than initially anticipated. based on current conversion trends we now believe that this inflection will take more time to materialize than initially anticipated As a result, we are revising our full-year 2025 revenue guidance from a range of $96- $98 million to a range of $90 $92 million. as a result we are revising our full-year 2025 revenue guidance from a range of $96- $98 million to a range of $90 $92 million This is a recalibration based on timing, not a shift in strategic direction or a change in our confidence in the opportunity. Importantly, this revision to guidance gives us the opportunity to exceed expectations if our initiatives ramp faster than expected, while also providing flexibility if conversion timelines continue to vary across programs or geographies. We believe this is a prudent and transparent adjustment based on current visibility while preserving meaningful upside. Let me walk you through what happened, what we're doing about it, and why we remain confident in our path forward. The softness in Q2 procedure volume was primarily due to a decline in StratX® Lung Analysis Report scans in prior quarters, a leading indicator for Zephyr® Endobronchial Valve bronchoscopic lung volume reduction procedures. We expected some of this softness, driven by capacity constraints and evolving priorities within interventional pulmonology centers. This is a recalibration based on timing, not a shift in strategic direction or a change in our confidence in the opportunity. this is a recalibration based on timing not a shift in strategic direction or a change in our confidence in the opportunity Importantly, this revision to guidance gives us the opportunity to exceed expectations if our initiatives ramp faster than expected, while also providing flexibility if conversion timelines continue to vary across programs or geographies. importantly this revision to guidance gives us the opportunity to exceed expectations if our initiatives ramp faster than expected while also providing flexibility if conversion timelines continue to vary across programs or geographies We believe this is a prudent and transparent adjustment based on current visibility while preserving meaningful upside. we believe this is a prudent and transparent adjustment based on current visibility while preserving meaningful upside Let me walk you through what happened, what we're doing about it, and why we remain confident in our path forward. let me walk you through what happened what we're doing about it and why we remain confident in our path forward The softness in Q2 procedure volume was primarily due to a decline in StratX® Lung Analysis Report scans in prior quarters, a leading indicator for Zephyr® Endobronchial Valve bronchoscopic lung volume reduction procedures. the softness in q2 procedure volume was primarily due to a decline in stratx® lung analysis report scans in prior quarters a leading indicator for zephyr® endobronchial valve bronchoscopic lung volume reduction procedures We expected some of this softness, driven by capacity constraints and evolving priorities within interventional pulmonology centers. we expected some of this softness driven by capacity constraints and evolving priorities within interventional pulmonology centers We also expected that our new commercial initiatives, direct-to-patient outreach, referring physician engagement, and the rollout of LungTraX™ Platform, would help overcome that decline by opening up alternative pathways to the funnel. These programs are gaining traction, but they're taking longer than traditional referral models to convert. These new pathways involve multiple stakeholders and more complex workflows, often requiring one or two additional quarters from identification to procedure. In response, we've taken deliberate, targeted steps to expand the funnel, improve conversion, accelerate adoption, and grow StratX® Lung Analysis Report scans across the U.S. market. First, our direct-to-patient campaigns continue to gain momentum. We expect to exceed 70,000 first-time patient engagements this year through a mix of digital quizzes, inbound calls, SMS-based support, and connected TV advertising. These efforts are driving measurable increases in website traffic and patient inquiries. We also expected that our new commercial initiatives, direct-to-patient outreach, referring physician engagement, and the rollout of LungTraX™ Platform, would help overcome that decline by opening up alternative pathways to the funnel. we also expected that our new commercial initiatives direct-to-patient outreach referring physician engagement and the rollout of lungtrax™ platform would help overcome that decline by opening up alternative pathways to the funnel These programs are gaining traction, but they're taking longer than traditional referral models to convert. these programs are gaining traction but they're taking longer than traditional referral models to convert These new pathways involve multiple stakeholders and more complex workflows, often requiring one or two additional quarters from identification to procedure. these new pathways involve multiple stakeholders and more complex workflows often requiring one or two additional quarters from identification to procedure In response, we've taken deliberate, targeted steps to expand the funnel, improve conversion, accelerate adoption, and grow StratX® Lung Analysis Report scans across the U.S. market. in response we've taken deliberate targeted steps to expand the funnel improve conversion accelerate adoption and grow stratx® lung analysis report scans across the u.s market First, our direct-to-patient campaigns continue to gain momentum. first our direct-to-patient campaigns continue to gain momentum We expect to exceed 70,000 first-time patient engagements this year through a mix of digital quizzes, inbound calls, SMS-based support, and connected TV advertising. we expect to exceed 70,000 first-time patient engagements this year through a mix of digital quizzes inbound calls sms-based support and connected tv advertising These efforts are driving measurable increases in website traffic and patient inquiries. these efforts are driving measurable increases in website traffic and patient inquiries Already, one-third of the patients treated in 2025 were engaged through these campaigns, a strong indicator that we're not just creating awareness, but driving action. We've also launched the Therapy Awareness Specialist, or TASS, role to bridge the gap between community pulmonologists and treating centers. Many referring physicians remain unclear on how to identify the right patient, where to send them, or whether the procedure is reimbursed. In territories where TASSes have been deployed, we've seen patient workups increase by an average of 19% compared to the four-quarter average. That's the type of early signal we look for when we're launching a new commercial model. We also continue to invest in clinical training and enablement across our IP customer base. This includes onboarding new physicians, providing procedural best practices, and supporting multidisciplinary teams in building sustainable workflows. Already, one-third of the patients treated in 2025 were engaged through these campaigns, a strong indicator that we're not just creating awareness, but driving action. already one-third of the patients treated in 2025 were engaged through these campaigns a strong indicator that we're not just creating awareness but driving action We've also launched the Therapy Awareness Specialist, or TASS, role to bridge the gap between community pulmonologists and treating centers. we've also launched the therapy awareness specialist or tass role to bridge the gap between community pulmonologists and treating centers Many referring physicians remain unclear on how to identify the right patient, where to send them, or whether the procedure is reimbursed. many referring physicians remain unclear on how to identify the right patient where to send them or whether the procedure is reimbursed In territories where TASSes have been deployed, we've seen patient workups increase by an average of 19% compared to the four-quarter average. in territories where tasses have been deployed we've seen patient workups increase by an average of 19% compared to the four-quarter average That's the type of early signal we look for when we're launching a new commercial model. that's the type of early signal we look for when we're launching a new commercial model We also continue to invest in clinical training and enablement across our IP customer base. we also continue to invest in clinical training and enablement across our ip customer base This includes onboarding new physicians, providing procedural best practices, and supporting multidisciplinary teams in building sustainable workflows. this includes onboarding new physicians providing procedural best practices and supporting multidisciplinary teams in building sustainable workflows Finally, we're making steady progress with LungTraX™ Platform, our AI-powered screening tool that passively identifies emphysema patients from routine CT scans. Several hospitals are already live, and early site data is encouraging. At one hospital, a patient flagged by LungTraX™ Platform was originally undergoing follow-up for a lung nodule and was successfully treated with Zephyr® Endobronchial Valve. At another, five patients were identified and moved into the diagnostic workup phase within 30 days of installation. The adoption of LungTraX™ Platform involves the engagement of a number of stakeholders, from identifying a clinical champion, to clearing IT and security reviews, to contracting, to integrating into clinical workflow. Each step takes time, but the payoff is clear. We continue to evolve our sales and implementation processes based on customer feedback, and we currently have a robust and growing pipeline of hospitals that are in line to adopt this technology. Finally, we're making steady progress with LungTraX™ Platform, our AI-powered screening tool that passively identifies emphysema patients from routine CT scans. finally we're making steady progress with lungtrax™ platform our ai-powered screening tool that passively identifies emphysema patients from routine ct scans Several hospitals are already live, and early site data is encouraging. several hospitals are already live and early site data is encouraging At one hospital, a patient flagged by LungTraX™ Platform was originally undergoing follow-up for a lung nodule and was successfully treated with Zephyr® Endobronchial Valve. at one hospital a patient flagged by lungtrax™ platform was originally undergoing follow-up for a lung nodule and was successfully treated with zephyr® endobronchial valve At another, five patients were identified and moved into the diagnostic workup phase within 30 days of installation. at another five patients were identified and moved into the diagnostic workup phase within 30 days of installation The adoption of LungTraX™ Platform involves the engagement of a number of stakeholders, from identifying a clinical champion, to clearing IT and security reviews, to contracting, to integrating into clinical workflow. the adoption of lungtrax™ platform involves the engagement of a number of stakeholders from identifying a clinical champion to clearing it and security reviews to contracting to integrating into clinical workflow Each step takes time, but the payoff is clear. each step takes time but the payoff is clear We continue to evolve our sales and implementation processes based on customer feedback, and we currently have a robust and growing pipeline of hospitals that are in line to adopt this technology. we continue to evolve our sales and implementation processes based on customer feedback and we currently have a robust and growing pipeline of hospitals that are in line to adopt this technology We've also expanded our capacity footprint. In Q2 alone, we opened 12 new screening centers and trained 26 new physicians. These actions don't just grow our network, they create new points of patient access and expand our capacity to treat. Why are we confident this strategy will work? First, StratX® Lung Analysis Report referrals rebounded to record levels in June and July, which we view as a direct response to the initiatives we've deployed. Second, lung cancer screening is scaling rapidly, nearly tripling since 2020, and generating millions of CT scans annually. Based on published data and our internal experience to date, we estimate that 15% of these CT scans will show valve-eligible radiographic emphysema, and about 25% of those patients will be eligible for further Zephyr® Endobronchial Valve evaluation. That's a massive and growing opportunity that we are now better equipped than ever to capture. We've also expanded our capacity footprint. we've also expanded our capacity footprint In Q2 alone, we opened 12 new screening centers and trained 26 new physicians. in q2 alone we opened 12 new screening centers and trained 26 new physicians These actions don't just grow our network, they create new points of patient access and expand our capacity to treat. these actions don't just grow our network they create new points of patient access and expand our capacity to treat Why are we confident this strategy will work? why are we confident this strategy will work First, StratX® Lung Analysis Report referrals rebounded to record levels in June and July, which we view as a direct response to the initiatives we've deployed. first, stratx® lung analysis report referrals rebounded to record levels in june and july which we view as a direct response to the initiatives we've deployed Second, lung cancer screening is scaling rapidly, nearly tripling since 2020, and generating millions of CT scans annually. second lung cancer screening is scaling rapidly nearly tripling since 2020 and generating millions of ct scans annually Based on published data and our internal experience to date, we estimate that 15% of these CT scans will show valve-eligible radiographic emphysema, and about 25% of those patients will be eligible for further Zephyr® Endobronchial Valve evaluation. based on published data and our internal experience to date we estimate that 15% of these ct scans will show valve-eligible radiographic emphysema and about 25% of those patients will be eligible for further zephyr® endobronchial valve evaluation That's a massive and growing opportunity that we are now better equipped than ever to capture. that's a massive and growing opportunity that we are now better equipped than ever to capture Third, health systems continue to prioritize high-value, minimally invasive interventions. Zephyr® valves offer a strong clinical value proposition, a favorable reimbursement profile, and a scalable procedural workflow. We fit squarely within those strategic objectives. Physician enthusiasm remains high. Reimbursement remains stable, and an estimated 500,000 patients in the U.S. remain untreated despite being eligible. The unmet need is not in question. The challenge is matching the right patient with the right care, and that's exactly what our strategy is built to do. We're also continuing to invest in long-term value drivers. The Convert II trial evaluating aerosol and collateral ventilation positive patients is progressing well. This product was designed to unlock treatment for the 20% of patients who complete a StratX® Lung Analysis Report workup only to be ruled out for valves due to collateral ventilation. Enrollment is expected to complete in the back half of 2026. Third, health systems continue to prioritize high-value, minimally invasive interventions. third health systems continue to prioritize high-value minimally invasive interventions Zephyr® valves offer a strong clinical value proposition, a favorable reimbursement profile, and a scalable procedural workflow. zephyr® valves offer a strong clinical value proposition a favorable reimbursement profile and a scalable procedural workflow We fit squarely within those strategic objectives. we fit squarely within those strategic objectives Physician enthusiasm remains high. physician enthusiasm remains high Reimbursement remains stable, and an estimated 500,000 patients in the U.S. remain untreated despite being eligible. reimbursement remains stable and an estimated 500,000 patients in the u.s remain untreated despite being eligible The unmet need is not in question. the unmet need is not in question The challenge is matching the right patient with the right care, and that's exactly what our strategy is built to do. the challenge is matching the right patient with the right care and that's exactly what our strategy is built to do We're also continuing to invest in long-term value drivers. we're also continuing to invest in long-term value drivers The Convert II trial evaluating aerosol and collateral ventilation positive patients is progressing well. the convert ii trial evaluating aerosol and collateral ventilation positive patients is progressing well This product was designed to unlock treatment for the 20% of patients who complete a StratX® Lung Analysis Report workup only to be ruled out for valves due to collateral ventilation. this product was designed to unlock treatment for the 20% of patients who complete a stratx® lung analysis report workup only to be ruled out for valves due to collateral ventilation Enrollment is expected to complete in the back half of 2026. enrollment is expected to complete in the back half of 2026 In Japan, we continue to enroll patients in our post-approval study. This study is required before full commercialization and will unlock access to a market with an estimated 100,000 BLVR eligible patients. We remain on track to complete enrollment in approximately 2026. We've launched a new collaboration with Jaeger, a global leader in pulmonary function testing, to embed BLVR screening logic into their diagnostic platforms. Over 16 million PFTs are conducted in the U.S. annually. Based on published data, roughly 35% to 40% of those tested have COPD, and within that group, up to 30% may have emphysema severe enough for Zephyr® consideration. This is what we mean when we say we're not just selling a product; we're building an ecosystem for long-term, sustainable 20% growth. We're also advancing our robust clinical evidence base. In Japan, we continue to enroll patients in our post-approval study. in japan we continue to enroll patients in our post-approval study This study is required before full commercialization and will unlock access to a market with an estimated 100,000 BLVR eligible patients. this study is required before full commercialization and will unlock access to a market with an estimated 100,000 blvr eligible patients We remain on track to complete enrollment in approximately 2026. we remain on track to complete enrollment in approximately 2026 We've launched a new collaboration with Jaeger, a global leader in pulmonary function testing, to embed BLVR screening logic into their diagnostic platforms. we've launched a new collaboration with jaeger a global leader in pulmonary function testing to embed blvr screening logic into their diagnostic platforms Over 16 million PFTs are conducted in the U.S. annually. over 16 million pfts are conducted in the u.s annually Based on published data, roughly 35% to 40% of those tested have COPD, and within that group, up to 30% may have emphysema severe enough for Zephyr® consideration. based on published data roughly 35% to 40% of those tested have copd and within that group up to 30% may have emphysema severe enough for zephyr® consideration This is what we mean when we say we're not just selling a product; we're building an ecosystem for long-term, sustainable 20% growth. this is what we mean when we say we're not just selling a product we're building an ecosystem for long-term sustainable 20% growth We're also advancing our robust clinical evidence base. we're also advancing our robust clinical evidence base At the American Association of Bronchology and Interventional Pulmonology meeting in Austin this August, early results from LungTraX™ Platform (LungTraxDetect) will be presented, showing how AI-enabled detection of emphysema from routine low-dose CT scans can shorten the time from diagnosis to treatment. In September, the European Respiratory Society Congress will feature multiple presentations, from new screening techniques to combination therapies, that continue to broaden clinical validation and support practical adoption of Zephyr® valve treatment. While we are revising our full-year outlook, our conviction in our long-term growth trajectory is stronger than ever. We're investing behind a clear, scalable strategy. We're seeing positive signals across all major initiatives. We will continue to improve and drive focused execution of our strategy, and we remain confident that the work we're doing today will translate into sustainable, durable future growth. At the American Association of Bronchology and Interventional Pulmonology meeting in Austin this August, early results from LungTraX™ Platform (LungTraxDetect) will be presented, showing how AI-enabled detection of emphysema from routine low-dose CT scans can shorten the time from diagnosis to treatment. at the american association of bronchology and interventional pulmonology meeting in austin this august early results from lungtrax™ platform (lungtraxdetect) will be presented showing how ai-enabled detection of emphysema from routine low-dose ct scans can shorten the time from diagnosis to treatment In September, the European Respiratory Society Congress will feature multiple presentations, from new screening techniques to combination therapies, that continue to broaden clinical validation and support practical adoption of Zephyr® valve treatment. in september the european respiratory society congress will feature multiple presentations from new screening techniques to combination therapies that continue to broaden clinical validation and support practical adoption of zephyr® valve treatment While we are revising our full-year outlook, our conviction in our long-term growth trajectory is stronger than ever. while we are revising our full-year outlook our conviction in our long-term growth trajectory is stronger than ever We're investing behind a clear, scalable strategy. we're investing behind a clear scalable strategy We're seeing positive signals across all major initiatives. we're seeing positive signals across all major initiatives We will continue to improve and drive focused execution of our strategy, and we remain confident that the work we're doing today will translate into sustainable, durable future growth. we will continue to improve and drive focused execution of our strategy and we remain confident that the work we're doing today will translate into sustainable durable future growth Finally, we're committed to transparency with our shareholders, our customers, our employees, and most importantly, the patients we serve. That's why we've taken the time today to walk you through not just the what, but the why behind this guidance revision and why we believe the underlying drivers are both sound and strengthening. Now, I'll turn the call over to Mehul Joshi to provide more detail on our financial performance. Finally, we're committed to transparency with our shareholders, our customers, our employees, and most importantly, the patients we serve. finally we're committed to transparency with our shareholders our customers our employees and most importantly the patients we serve That's why we've taken the time today to walk you through not just the what, but the why behind this guidance revision and why we believe the underlying drivers are both sound and strengthening. that's why we've taken the time today to walk you through not just the what but the why behind this guidance revision and why we believe the underlying drivers are both sound and strengthening Now, I'll turn the call over to Mehul Joshi to provide more detail on our financial performance. now i'll turn the call over to mehul joshi to provide more detail on our financial performance

Speaker 6: Thank you, Steve, and good afternoon, everyone. Total worldwide revenue for the three months ended June 30th, 2025 was $23.9 million, a 15% increase from $20.8 million in the same period of the prior year, and an increase of 13% on a constant currency basis. This performance reflects sustained adoption of Zephyr® Endobronchial Valve and continued execution across our organization. U.S. revenue in the second quarter reached $14.7 million, a 6% increase from $13.9 million in the prior year period. While this growth was below our expectations, it's important to note the challenging prior year comparison. International revenue for the second quarter of 2025 was a record $9.1 million, a 32% increase compared to $6.9 million in the same period last year, and a 27% increase on a constant currency basis. Thank you, Steve, and good afternoon, everyone. thank you steve and good afternoon everyone Total worldwide revenue for the three months ended June 30th, 2025 was $23.9 million, a 15% increase from $20.8 million in the same period of the prior year, and an increase of 13% on a constant currency basis. total worldwide revenue for the three months ended june 30th 2025 was $23.9 million a 15% increase from $20.8 million in the same period of the prior year and an increase of 13% on a constant currency basis This performance reflects sustained adoption of Zephyr® Endobronchial Valve and continued execution across our organization. this performance reflects sustained adoption of zephyr® endobronchial valve and continued execution across our organization U.S. revenue in the second quarter reached $14.7 million, a 6% increase from $13.9 million in the prior year period. u.s revenue in the second quarter reached $14.7 million a 6% increase from $13.9 million in the prior year period While this growth was below our expectations, it's important to note the challenging prior year comparison. while this growth was below our expectations it's important to note the challenging prior year comparison International revenue for the second quarter of 2025 was a record $9.1 million, a 32% increase compared to $6.9 million in the same period last year, and a 27% increase on a constant currency basis. international revenue for the second quarter of 2025 was a record $9.1 million a 32% increase compared to $6.9 million in the same period last year and a 27% increase on a constant currency basis Growth was distributed across our core markets in Europe and Asia, underscoring the continued expansion of global demand for Zephyr® Endobronchial Valve and the strengthening of our commercial execution outside of the United States. International revenue performance aligned with our outlook, which anticipated outsized international growth in the first half of the year, followed by a more moderate trajectory in the second half of the year. We remain encouraged by the long-term potential of our international footprint and continue to invest in strategic markets to support sustainable growth over time. Gross margin for the second quarter of 2025 was 72%, compared to 74% in the same period last year, and consistent with our prior expectations. The year-over-year decline was primarily driven by an anticipated shift in geographic revenue mix with international markets, including distributor sales, accounting for a larger share of total revenue. Growth was distributed across our core markets in Europe and Asia, underscoring the continued expansion of global demand for Zephyr® Endobronchial Valve and the strengthening of our commercial execution outside of the United States. growth was distributed across our core markets in europe and asia underscoring the continued expansion of global demand for zephyr® endobronchial valve and the strengthening of our commercial execution outside of the united states International revenue performance aligned with our outlook, which anticipated outsized international growth in the first half of the year, followed by a more moderate trajectory in the second half of the year. international revenue performance aligned with our outlook which anticipated outsized international growth in the first half of the year followed by a more moderate trajectory in the second half of the year We remain encouraged by the long-term potential of our international footprint and continue to invest in strategic markets to support sustainable growth over time. we remain encouraged by the long-term potential of our international footprint and continue to invest in strategic markets to support sustainable growth over time Gross margin for the second quarter of 2025 was 72%, compared to 74% in the same period last year, and consistent with our prior expectations. gross margin for the second quarter of 2025 was 72% compared to 74% in the same period last year and consistent with our prior expectations The year-over-year decline was primarily driven by an anticipated shift in geographic revenue mix with international markets, including distributor sales, accounting for a larger share of total revenue. the year-over-year decline was primarily driven by an anticipated shift in geographic revenue mix with international markets including distributor sales accounting for a larger share of total revenue Total operating expenses for the second quarter of 2025 were $32 million, a 3% increase over $30.9 million in the second quarter of 2024. Non-cash stock-based compensation expense was $5.6 million in the second quarter of 2025. Excluding stock-based compensation expense, total operating expenses in the second quarter of 2025 increased 4% from the same period of the prior year. Research and development expenses for the second quarter of 2025 were $5.3 million, compared to $5.6 million in the prior year period. The year-over-year decline was due primarily to the one-time non-cash impairment charge related to internally developed software recorded in Q2 2024. Excluding this item, R&D spending increased 36% year-over-year, reflecting higher clinical trial activity and ongoing investments in R&D programs. Sales, general, and administrative expenses for the second quarter of 2025 were $26.7 million, up 5% from $25.3 million in the second quarter of 2024. Total operating expenses for the second quarter of 2025 were $32 million, a 3% increase over $30.9 million in the second quarter of 2024. total operating expenses for the second quarter of 2025 were $32 million a 3% increase over $30.9 million in the second quarter of 2024 Non-cash stock-based compensation expense was $5.6 million in the second quarter of 2025. non-cash stock-based compensation expense was $5.6 million in the second quarter of 2025 Excluding stock-based compensation expense, total operating expenses in the second quarter of 2025 increased 4% from the same period of the prior year. excluding stock-based compensation expense total operating expenses in the second quarter of 2025 increased 4% from the same period of the prior year Research and development expenses for the second quarter of 2025 were $5.3 million, compared to $5.6 million in the prior year period. research and development expenses for the second quarter of 2025 were $5.3 million compared to $5.6 million in the prior year period The year-over-year decline was due primarily to the one-time non-cash impairment charge related to internally developed software recorded in Q2 2024. the year-over-year decline was due primarily to the one-time non-cash impairment charge related to internally developed software recorded in q2 2024 Excluding this item, R&D spending increased 36% year-over-year, reflecting higher clinical trial activity and ongoing investments in R&D programs. excluding this item r&d spending increased 36% year-over-year reflecting higher clinical trial activity and ongoing investments in r&d programs Sales, general, and administrative expenses for the second quarter of 2025 were $26.7 million, up 5% from $25.3 million in the second quarter of 2024. sales general and administrative expenses for the second quarter of 2025 were $26.7 million up 5% from $25.3 million in the second quarter of 2024 The increase was driven by continued investment in our commercial efforts, including enhanced direct-to-patient outreach and targeted initiatives aimed at increasing clinician awareness and adoption of Zephyr® Endobronchial Valve therapy. Net loss for the second quarter of 2025 was $15.2 million, or a loss of $0.38 per share, as compared to a net loss of $15.3 million, or a loss of $0.39 per share for the same period of the prior year. An average weighted share count of 40.4 million shares was used to determine loss per share for the second quarter of 2025. Adjusted EBIT loss for the second quarter of 2025 was $8.4 million, as compared to $7.6 million in the second quarter of 2024. We ended the quarter with $84.2 million in cash, cash equivalents, and marketable securities, down $4.5 million from March 31st, 2025. The increase was driven by continued investment in our commercial efforts, including enhanced direct-to-patient outreach and targeted initiatives aimed at increasing clinician awareness and adoption of Zephyr® Endobronchial Valve therapy. the increase was driven by continued investment in our commercial efforts including enhanced direct-to-patient outreach and targeted initiatives aimed at increasing clinician awareness and adoption of zephyr® endobronchial valve therapy Net loss for the second quarter of 2025 was $15.2 million, or a loss of $0.38 per share, as compared to a net loss of $15.3 million, or a loss of $0.39 per share for the same period of the prior year. net loss for the second quarter of 2025 was $15.2 million or a loss of $0.38 per share as compared to a net loss of $15.3 million or a loss of $0.39 per share for the same period of the prior year An average weighted share count of 40.4 million shares was used to determine loss per share for the second quarter of 2025. an average weighted share count of 40.4 million shares was used to determine loss per share for the second quarter of 2025 Adjusted EBIT loss for the second quarter of 2025 was $8.4 million, as compared to $7.6 million in the second quarter of 2024. adjusted ebit loss for the second quarter of 2025 was $8.4 million as compared to $7.6 million in the second quarter of 2024 We ended the quarter with $84.2 million in cash, cash equivalents, and marketable securities, down $4.5 million from March 31st, 2025. we ended the quarter with $84.2 million in cash cash equivalents and marketable securities down $4.5 million from march 31st 2025 Total cash utilization for the first half of 2025 was $17.3 million, and in line with our 2025 operating plan. We remain laser-focused on disciplined capital allocation and cash burn, as we continue to fund key growth initiatives, including advancing our clinical programs. Turning to guidance, we are revising our full-year 2025 outlook for revenue and operating expenses to reflect updated expectations and current market dynamics. Gross margin expectations remain unchanged. We are updating our full-year 2025 revenue guidance to a range of $90-$92 million, representing year-over-year growth of approximately 7%-10%. As Steve Williamson mentioned, this revision reflects a shift in the expected timing of contributions from our growth initiatives in the U.S., which are ramping slower than originally anticipated. Our guidance continues to incorporate current full-year foreign exchange rate assumptions, though we acknowledge that future currency fluctuations may impact reported results. Total cash utilization for the first half of 2025 was $17.3 million, and in line with our 2025 operating plan. total cash utilization for the first half of 2025 was $17.3 million and in line with our 2025 operating plan We remain laser-focused on disciplined capital allocation and cash burn, as we continue to fund key growth initiatives, including advancing our clinical programs. we remain laser-focused on disciplined capital allocation and cash burn as we continue to fund key growth initiatives including advancing our clinical programs Turning to guidance, we are revising our full-year 2025 outlook for revenue and operating expenses to reflect updated expectations and current market dynamics. turning to guidance we are revising our full-year 2025 outlook for revenue and operating expenses to reflect updated expectations and current market dynamics Gross margin expectations remain unchanged. gross margin expectations remain unchanged We are updating our full-year 2025 revenue guidance to a range of $90- $92 million, representing year-over-year growth of approximately 7%- 10%. we are updating our full-year 2025 revenue guidance to a range of $90- $92 million representing year-over-year growth of approximately 7%- 10% As Steve Williamson mentioned, this revision reflects a shift in the expected timing of contributions from our growth initiatives in the U.S., which are ramping slower than originally anticipated. as steve williamson mentioned this revision reflects a shift in the expected timing of contributions from our growth initiatives in the u.s which are ramping slower than originally anticipated Our guidance continues to incorporate current full-year foreign exchange rate assumptions, though we acknowledge that future currency fluctuations may impact reported results. our guidance continues to incorporate current full-year foreign exchange rate assumptions though we acknowledge that future currency fluctuations may impact reported results International performance was strong in the first half of 2025, as anticipated, driven by robust demand across both direct and distributor markets. Looking ahead, we expect a return to typical seasonality in the second half of the year. As previously communicated, our distributor channel, including China, is expected to moderate. However, we expect continued momentum in our direct markets across Europe and Asia, where underlying demand and commercial execution remain strong. We are closely monitoring the global trade environment, including evolving tariff policies, and continue to assess potential implications for international revenue. At this time, we do not anticipate any material near-term impact. We are reaffirming our full-year gross margin outlook of approximately 74%. We continue to expect sequential improvement in the second half of the year, driven by a more favorable geographic revenue mix, increased production volumes, and the ongoing benefits of cost optimization initiatives. International performance was strong in the first half of 2025, as anticipated, driven by robust demand across both direct and distributor markets. international performance was strong in the first half of 2025 as anticipated driven by robust demand across both direct and distributor markets Looking ahead, we expect a return to typical seasonality in the second half of the year. looking ahead we expect a return to typical seasonality in the second half of the year As previously communicated, our distributor channel, including China, is expected to moderate. as previously communicated our distributor channel including china is expected to moderate However, we expect continued momentum in our direct markets across Europe and Asia, where underlying demand and commercial execution remain strong. however we expect continued momentum in our direct markets across europe and asia where underlying demand and commercial execution remain strong We are closely monitoring the global trade environment, including evolving tariff policies, and continue to assess potential implications for international revenue. we are closely monitoring the global trade environment including evolving tariff policies and continue to assess potential implications for international revenue At this time, we do not anticipate any material near-term impact. at this time we do not anticipate any material near-term impact We are reaffirming our full-year gross margin outlook of approximately 74%. we are reaffirming our full-year gross margin outlook of approximately 74% We continue to expect sequential improvement in the second half of the year, driven by a more favorable geographic revenue mix, increased production volumes, and the ongoing benefits of cost optimization initiatives. we continue to expect sequential improvement in the second half of the year driven by a more favorable geographic revenue mix increased production volumes and the ongoing benefits of cost optimization initiatives All our products are manufactured in the United States, using a blend of in-house processing and third-party suppliers for raw materials and components. The proportion of imported materials remains minimal, and with our current inventory position, we do not anticipate any material impact to gross margin from near-term fluctuations in global trade or tariff policy. We are revising our full-year 2025 operating expense guidance down from a range of $133 million-$135 million to a range of $128 million-$130 million, which includes approximately $22 million in non-cash stock-based compensation. This reduction reflects the impact of targeted cost efficiency initiatives implemented across the organization, aimed at enhancing operating leverage. Importantly, this revised operating expense outlook continues to support full investment in our acquired test and treat strategy, the cornerstone of our long-term growth and market expansion plans. All our products are manufactured in the United States, using a blend of in-house processing and third-party suppliers for raw materials and components. all our products are manufactured in the united states using a blend of in-house processing and third-party suppliers for raw materials and components The proportion of imported materials remains minimal, and with our current inventory position, we do not anticipate any material impact to gross margin from near-term fluctuations in global trade or tariff policy. the proportion of imported materials remains minimal and with our current inventory position we do not anticipate any material impact to gross margin from near-term fluctuations in global trade or tariff policy We are revising our full-year 2025 operating expense guidance down from a range of $133 million- $135 million to a range of $128 million- $130 million, which includes approximately $22 million in non-cash stock-based compensation. we are revising our full-year 2025 operating expense guidance down from a range of $133 million- $135 million to a range of $128 million- $130 million which includes approximately $22 million in non-cash stock-based compensation This reduction reflects the impact of targeted cost efficiency initiatives implemented across the organization, aimed at enhancing operating leverage. this reduction reflects the impact of targeted cost efficiency initiatives implemented across the organization aimed at enhancing operating leverage Importantly, this revised operating expense outlook continues to support full investment in our acquired test and treat strategy, the cornerstone of our long-term growth and market expansion plans. importantly this revised operating expense outlook continues to support full investment in our acquired test and treat strategy the cornerstone of our long-term growth and market expansion plans We remain committed to scaling our platform with discipline, ensuring we balance strategic execution with prudent financial management. Our revised revenue and operating expense outlook remains aligned with our original cash utilization targets for 2025, and we currently expect cash burn to track at or below 2024 levels. With a strong balance sheet and a disciplined, execution-focused operating plan, we remain confident in our ability to meet near-term milestones while advancing our long-term growth strategy. With that, I'd like to turn the call back to Steve for his closing remarks. We remain committed to scaling our platform with discipline, ensuring we balance strategic execution with prudent financial management. we remain committed to scaling our platform with discipline ensuring we balance strategic execution with prudent financial management Our revised revenue and operating expense outlook remains aligned with our original cash utilization targets for 2025, and we currently expect cash burn to track at or below 2024 levels. our revised revenue and operating expense outlook remains aligned with our original cash utilization targets for 2025 and we currently expect cash burn to track at or below 2024 levels With a strong balance sheet and a disciplined, execution-focused operating plan, we remain confident in our ability to meet near-term milestones while advancing our long-term growth strategy. with a strong balance sheet and a disciplined execution-focused operating plan we remain confident in our ability to meet near-term milestones while advancing our long-term growth strategy With that, I'd like to turn the call back to Steve for his closing remarks. with that i'd like to turn the call back to steve for his closing remarks

Speaker 2: Thanks, Mehul. Before we wrap up, I want to reiterate a few key points. We're delivering strong international performance, expanding our reach, and laying the foundation for long-term sustainable growth. While we've adjusted our full-year revenue guidance to reflect the longer timelines associated with ramping our U.S. initiatives, the underlying signals, from physician training to patient engagement to ecosystem development, are all moving in the right direction. The conviction we have in our strategy is grounded in real-world traction and reinforced by the steps we're taking to broaden access, accelerate identification of workup, and support physicians and patients throughout the treatment journey while maintaining fiscal discipline. This is not a question of if, but when, and we believe the work we're doing now sets us up to unlock meaningful value over time. Thanks, Mehul. thanks mehul Before we wrap up, I want to reiterate a few key points. before we wrap up i want to reiterate a few key points We're delivering strong international performance, expanding our reach, and laying the foundation for long-term sustainable growth. we're delivering strong international performance expanding our reach and laying the foundation for long-term sustainable growth While we've adjusted our full-year revenue guidance to reflect the longer timelines associated with ramping our U.S. initiatives, the underlying signals, from physician training to patient engagement to ecosystem development, are all moving in the right direction. while we've adjusted our full-year revenue guidance to reflect the longer timelines associated with ramping our u.s initiatives the underlying signals from physician training to patient engagement to ecosystem development are all moving in the right direction The conviction we have in our strategy is grounded in real-world traction and reinforced by the steps we're taking to broaden access, accelerate identification of workup, and support physicians and patients throughout the treatment journey while maintaining fiscal discipline. the conviction we have in our strategy is grounded in real-world traction and reinforced by the steps we're taking to broaden access accelerate identification of workup and support physicians and patients throughout the treatment journey while maintaining fiscal discipline This is not a question of if, but when, and we believe the work we're doing now sets us up to unlock meaningful value over time. this is not a question of if but when and we believe the work we're doing now sets us up to unlock meaningful value over time We appreciate your continued partnership and interest in Pulmonx, and we look forward to keeping you updated on our progress in the quarters ahead. With that, we'll now open the call for questions. We appreciate your continued partnership and interest in Pulmonx, and we look forward to keeping you updated on our progress in the quarters ahead. we appreciate your continued partnership and interest in pulmonx and we look forward to keeping you updated on our progress in the quarters ahead With that, we'll now open the call for questions. with that we'll now open the call for questions

Speaker 3: Thank you. To ask a question, please press star one-one on your telephone and wait for your name to be announced. To withdraw your question, please press star one-one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Frank Takkinen with Lake Street Capital Markets. Your line is now open. Thank you. thank you To ask a question, please press star one-one on your telephone and wait for your name to be announced. to ask a question please press star one-one on your telephone and wait for your name to be announced To withdraw your question, please press star one-one again. to withdraw your question please press star one-one again Please stand by while we compile the Q&A roster. please stand by while we compile the q&a roster Our first question comes from the line of Frank Takkinen with Lake Street Capital Markets. our first question comes from the line of frank takkinen with lake street capital markets Your line is now open. your line is now open

Speaker 1: Great. Thank you for taking the questions. I was hoping to first follow up on one related to the revised guidance. I was hoping you could help us kind of parse out Q3 versus Q4 expected contribution, and then underneath that, expectations on a U.S. versus OUS growth basis. Great. great Thank you for taking the questions. thank you for taking the questions I was hoping to first follow up on one related to the revised guidance. i was hoping to first follow up on one related to the revised guidance I was hoping you could help us kind of parse out Q3 versus Q4 expected contribution, and then underneath that, expectations on a U.S. versus OUS growth basis. i was hoping you could help us kind of parse out q3 versus q4 expected contribution and then underneath that expectations on a u.s versus ous growth basis

Speaker 6: Yeah. Hey, Frank. This is Mehul. Maybe I'll start by saying, you know, our initial guidance indicated international revenue growth would drive the first half growth in 2025. The U.S. would drive the second half growth. International growth is consistent with initial guidance. The first half was robust. The second half was slow, primarily from very low ordering from China, and we expect direct markets to be robust with typical seasonality in the second half. There has really been no change to international revenue expectations, but as I said, distributor revenue was high in the first half, and it'll be significantly lower in the second half. That's kind of a first half, second half dynamic. The U.S. will grow in the second half, but not to the extent we originally expected due to the slower ramp of our growth initiatives as Steve described. U.S. Yeah. yeah Hey, Frank. hey frank This is Mehul. this is mehul Maybe I'll start by saying, you know, our initial guidance indicated international revenue growth would drive the first half growth in 2025. maybe i'll start by saying you know our initial guidance indicated international revenue growth would drive the first half growth in 2025 The U.S. would drive the second half growth. the u.s would drive the second half growth International growth is consistent with initial guidance. international growth is consistent with initial guidance The first half was robust. the first half was robust The second half was slow, primarily from very low ordering from China, and we expect direct markets to be robust with typical seasonality in the second half. the second half was slow primarily from very low ordering from china and we expect direct markets to be robust with typical seasonality in the second half There has really been no change to international revenue expectations, but as I said, distributor revenue was high in the first half, and it'll be significantly lower in the second half. there has really been no change to international revenue expectations but as i said distributor revenue was high in the first half and it'll be significantly lower in the second half That's kind of a first half, second half dynamic. that's kind of a first half second half dynamic The U.S. will grow in the second half, but not to the extent we originally expected due to the slower ramp of our growth initiatives as Steve described. the u.s will grow in the second half but not to the extent we originally expected due to the slower ramp of our growth initiatives as steve described U.S. u.s revenue in the first half was approximately 62% of total revenue, and in the second half, we expect it to be at least two-thirds, maybe a little bit higher in the second half of the year. That's kind of the U.S. international breakout. We do expect Q3 to probably be flat to Q3 of a year ago, and then you can figure out Q4 from there. The first half, second half guidance appears to be a little bit disproportionate, but if you normalize for some of the China revenue that we did get in the first half, it'll make more sense. Hopefully, that's helpful. revenue in the first half was approximately 62% of total revenue, and in the second half, we expect it to be at least two-thirds, maybe a little bit higher in the second half of the year. revenue in the first half was approximately 62% of total revenue and in the second half we expect it to be at least two-thirds maybe a little bit higher in the second half of the year That's kind of the U.S. international breakout. that's kind of the u.s international breakout We do expect Q3 to probably be flat to Q3 of a year ago, and then you can figure out Q4 from there. we do expect q3 to probably be flat to q3 of a year ago and then you can figure out q4 from there The first half, second half guidance appears to be a little bit disproportionate, but if you normalize for some of the China revenue that we did get in the first half, it'll make more sense. the first half second half guidance appears to be a little bit disproportionate but if you normalize for some of the china revenue that we did get in the first half it'll make more sense Hopefully, that's helpful. hopefully that's helpful

Speaker 1: Yep. That's great. Thank you. I appreciate that color. I was hoping to follow up on some of Steve's comments related to StratX® scanning trends. One, can you just help us understand a little bit better maybe what was, I don't know if distracting is the correct word, but what the IPs were up to instead of doing StratX® scans? Any metrics around the June-July record scanning, just how much larger were those than previous StratX® scanning months? Yep. yep That's great. that's great Thank you. thank you I appreciate that color. i appreciate that color I was hoping to follow up on some of Steve's comments related to StratX® scanning trends. i was hoping to follow up on some of steve's comments related to stratx® scanning trends One, can you just help us understand a little bit better maybe what was, I don't know if distracting is the correct word, but what the IPs were up to instead of doing StratX® scans? one can you just help us understand a little bit better maybe what was i don't know if distracting is the correct word but what the ips were up to instead of doing stratx® scans Any metrics around the June-July record scanning, just how much larger were those than previous StratX® scanning months? any metrics around the june-july record scanning just how much larger were those than previous stratx® scanning months

Speaker 2: Yeah. If you look back, hey, Frank, by the way, if you look back across from the beginning of the year, we saw a slight decline in StratX® Lung Analysis Reports as we went into the year, but we were expecting that that would pick up as we saw the pilot sites really start to engage and start putting more patients through. There have been two things in my mind that, as we look at where we're headed for the second half, made us find it prudent to change the guidance. The first is these pilot sites ramped up pretty quickly. They came on board quickly. They got through their contracting processes, their security reviews quicker than we're seeing after our broader launch. You'll recall that we launched this to the salesforce in Q1, got them trained up in Q1. They started launching in Q2 and selling then. Yeah. yeah If you look back, hey, Frank, by the way, if you look back across from the beginning of the year, we saw a slight decline in StratX® Lung Analysis Reports as we went into the year, but we were expecting that that would pick up as we saw the pilot sites really start to engage and start putting more patients through. if you look back hey frank by the way if you look back across from the beginning of the year we saw a slight decline in stratx® lung analysis reports as we went into the year but we were expecting that that would pick up as we saw the pilot sites really start to engage and start putting more patients through There have been two things in my mind that, as we look at where we're headed for the second half, made us find it prudent to change the guidance. there have been two things in my mind that as we look at where we're headed for the second half made us find it prudent to change the guidance The first is these pilot sites ramped up pretty quickly. the first is these pilot sites ramped up pretty quickly They came on board quickly. they came on board quickly They got through their contracting processes, their security reviews quicker than we're seeing after our broader launch. they got through their contracting processes their security reviews quicker than we're seeing after our broader launch You'll recall that we launched this to the salesforce in Q1, got them trained up in Q1. you'll recall that we launched this to the salesforce in q1 got them trained up in q1 They started launching in Q2 and selling then. they started launching in q2 and selling then As we're starting to go through these contracting processes, which we're doing more of now, our funnel is robust and is growing there, as I mentioned, but it's taking longer. I don't know that that's all bad. As I look at some of the accounts that we've gone into, they're part of larger organizations. Those larger organizations have to sign off on new software coming in. It's given us visibility at higher levels to talk about ways that we can help address this patient population that's not currently being addressed. Capacity constraints have come from the cancer screening and cancer procedures that are being done, the biopsies that are being done. With that capacity constraint comes a lot of low-dose CT scans. Those offer an opportunity to integrate both cancer and COPD detection in a single clinical pathway. That's what we're seeing in some of these accounts. As we're starting to go through these contracting processes, which we're doing more of now, our funnel is robust and is growing there, as I mentioned, but it's taking longer. as we're starting to go through these contracting processes which we're doing more of now our funnel is robust and is growing there as i mentioned but it's taking longer I don't know that that's all bad. i don't know that that's all bad As I look at some of the accounts that we've gone into, they're part of larger organizations. as i look at some of the accounts that we've gone into they're part of larger organizations Those larger organizations have to sign off on new software coming in. those larger organizations have to sign off on new software coming in It's given us visibility at higher levels to talk about ways that we can help address this patient population that's not currently being addressed. it's given us visibility at higher levels to talk about ways that we can help address this patient population that's not currently being addressed Capacity constraints have come from the cancer screening and cancer procedures that are being done, the biopsies that are being done. capacity constraints have come from the cancer screening and cancer procedures that are being done the biopsies that are being done With that capacity constraint comes a lot of low-dose CT scans. with that capacity constraint comes a lot of low-dose ct scans Those offer an opportunity to integrate both cancer and COPD detection in a single clinical pathway. those offer an opportunity to integrate both cancer and copd detection in a single clinical pathway That's what we're seeing in some of these accounts. that's what we're seeing in some of these accounts I think that's what's really driving our June and July uptick in StratX® Lung Analysis Reports. We see that the work that we're doing in these accounts has really increased their StratX® Lung Analysis Report utilization and is putting more patients into the funnel. What it's also done, though, is it's shown us that there is a capacity constraint. These accounts now have these lists of patients that they need to follow up based on the software telling them that they've got patients that have radiographic emphysema. There's a follow-up process that needs to go through. Those patients need to be worked up. I think that's what's really driving our June and July uptick in StratX® Lung Analysis Reports. i think that's what's really driving our june and july uptick in stratx® lung analysis reports We see that the work that we're doing in these accounts has really increased their StratX® Lung Analysis Report utilization and is putting more patients into the funnel. we see that the work that we're doing in these accounts has really increased their stratx® lung analysis report utilization and is putting more patients into the funnel What it's also done, though, is it's shown us that there is a capacity constraint. what it's also done though is it's shown us that there is a capacity constraint These accounts now have these lists of patients that they need to follow up based on the software telling them that they've got patients that have radiographic emphysema. these accounts now have these lists of patients that they need to follow up based on the software telling them that they've got patients that have radiographic emphysema There's a follow-up process that needs to go through. there's a follow-up process that needs to go through Those patients need to be worked up. those patients need to be worked up What we've been focused on is talking to these administrators that were instrumental in bringing in additional capacity to do these lung cancer screening programs and build up these nodule biopsy programs to show them that they have the opportunity to not only take care of these patients, but to take care of the incidental findings and early intervention that's capable for these severe emphysema patients. As we build out this ecosystem, I'll tell you, I've been in a number of these conversations. I've been on a number of these calls, and it's resonating. There's a positive response from hospitals that have made significant investments in building out lung cancer screening to take advantage of those patients that are coming through, but to broaden that out and say, "We've already made this investment. What we've been focused on is talking to these administrators that were instrumental in bringing in additional capacity to do these lung cancer screening programs and build up these nodule biopsy programs to show them that they have the opportunity to not only take care of these patients, but to take care of the incidental findings and early intervention that's capable for these severe emphysema patients. what we've been focused on is talking to these administrators that were instrumental in bringing in additional capacity to do these lung cancer screening programs and build up these nodule biopsy programs to show them that they have the opportunity to not only take care of these patients but to take care of the incidental findings and early intervention that's capable for these severe emphysema patients As we build out this ecosystem, I'll tell you, I've been in a number of these conversations. as we build out this ecosystem i'll tell you i've been in a number of these conversations I've been on a number of these calls, and it's resonating. i've been on a number of these calls and it's resonating There's a positive response from hospitals that have made significant investments in building out lung cancer screening to take advantage of those patients that are coming through, but to broaden that out and say, "We've already made this investment. there's a positive response from hospitals that have made significant investments in building out lung cancer screening to take advantage of those patients that are coming through but to broaden that out and say "we've already made this investment What else do we need to do to capture even a broader patient population and realize a bigger return? What else do we need to do to capture even a broader patient population and realize a bigger return? what else do we need to do to capture even a broader patient population and realize a bigger return

Speaker 1: Okay. That's helpful. Appreciate the color. Thank you. Okay. okay That's helpful. that's helpful Appreciate the color. appreciate the color Thank you. thank you

Speaker 3: Thank you. Our next question comes from the line of Rick Wise with Stifel. Your line is now open. Thank you. thank you Our next question comes from the line of Rick Wise with Stifel. our next question comes from the line of rick wise with stifel Your line is now open. your line is now open

Speaker 4: Hi, Steve. Hi, Mehul. I want to follow up on some of these points you made, and thanks for all the detail. I just want to make sure I'm understanding clearly. As you said, you may regret saying it, but StratX® Lung Analysis Report trends at record levels in June and July. If those June-July trends continue, on whatever trend line they are, and you haven't quantified it, but feel free to however you want. If those trends continue through the end of the year in that direction, whatever that is, would that basically meet? Would that be the biggest factor causing you to meet the guidance you're giving us? It sounds like you would do better, all things. A lot of moving pieces here, but help me think that through. Hi, Steve. hi steve Hi, Mehul. hi mehul I want to follow up on some of these points you made, and thanks for all the detail. i want to follow up on some of these points you made and thanks for all the detail I just want to make sure I'm understanding clearly. i just want to make sure i'm understanding clearly As you said, you may regret saying it, but StratX® Lung Analysis Report trends at record levels in June and July. as you said you may regret saying it but stratx® lung analysis report trends at record levels in june and july If those June-July trends continue, on whatever trend line they are, and you haven't quantified it, but feel free to however you want. if those june-july trends continue on whatever trend line they are and you haven't quantified it but feel free to however you want If those trends continue through the end of the year in that direction, whatever that is, would that basically meet? if those trends continue through the end of the year in that direction whatever that is would that basically meet Would that be the biggest factor causing you to meet the guidance you're giving us? would that be the biggest factor causing you to meet the guidance you're giving us It sounds like you would do better, all things. it sounds like you would do better all things A lot of moving pieces here, but help me think that through. a lot of moving pieces here but help me think that through

Speaker 2: Yeah. The point of telling you about the StratX® Lung Analysis Reports is to show that we do see that we are making an impact. Now, the StratX® Lung Analysis Reports to treatment timelines vary depending on where the account is, which account it is, where those patients are in the process. In some instances, I talked about a new LungTraX™ Platform account that just came on board. They found five patients, put them right into workup immediately. They're moving very quickly. Others might not move as quickly. Depending on where those patients are in the process, there's just significant variability there. That's why I was talking about potential upside to the guidance, depending on how quickly they do convert. Yeah. yeah The point of telling you about the StratX® Lung Analysis Reports is to show that we do see that we are making an impact. Now, the StratX® Lung Analysis Reports to treatment timelines vary depending on where the account is, which account it is, where those patients are in the process. the point of telling you about the stratx® lung analysis reports is to show that we do see that we are making an impact. now the stratx® lung analysis reports to treatment timelines vary depending on where the account is which account it is where those patients are in the process In some instances, I talked about a new LungTraX™ Platform account that just came on board. in some instances i talked about a new lungtrax™ platform account that just came on board They found five patients, put them right into workup immediately. they found five patients put them right into workup immediately They're moving very quickly. they're moving very quickly Others might not move as quickly. others might not move as quickly Depending on where those patients are in the process, there's just significant variability there. depending on where those patients are in the process there's just significant variability there That's why I was talking about potential upside to the guidance, depending on how quickly they do convert. that's why i was talking about potential upside to the guidance depending on how quickly they do convert I think it's a little too early to tell right now, Rick, but it's a good kind of first-level sign for us and lets us see that there's some progress being made here. We're really focused on a rebound in the U.S., and we're expecting one in the back half of the United States here. We're expecting that growth rate to go up. It's just how much it does and how quickly is something that we're working through right now. I think it's a little too early to tell right now, Rick, but it's a good kind of first-level sign for us and lets us see that there's some progress being made here. i think it's a little too early to tell right now rick but it's a good kind of first-level sign for us and lets us see that there's some progress being made here We're really focused on a rebound in the U.S., and we're expecting one in the back half of the United States here. we're really focused on a rebound in the u.s and we're expecting one in the back half of the united states here We're expecting that growth rate to go up. we're expecting that growth rate to go up It's just how much it does and how quickly is something that we're working through right now. it's just how much it does and how quickly is something that we're working through right now

Speaker 4: Not to belabor this point, Steve, would you say, and I'm not trying to get you to say your numbers are too low. I appreciate your taking a hopefully, prudently, thoughtfully conservative approach to giving a second-half guidance. Would you say you've set the guidance or tried to frame the guidance in the most conservative terms possible? I'm sure you haven't given us your best case, but there's so many moving pieces, a lot of moving timelines, as you're saying. It's all evolving, but how do you think you frame this guidance? Not to belabor this point, Steve, would you say, and I'm not trying to get you to say your numbers are too low. not to belabor this point steve would you say and i'm not trying to get you to say your numbers are too low I appreciate your taking a hopefully, prudently, thoughtfully conservative approach to giving a second-half guidance. i appreciate your taking a hopefully prudently thoughtfully conservative approach to giving a second-half guidance Would you say you've set the guidance or tried to frame the guidance in the most conservative terms possible? would you say you've set the guidance or tried to frame the guidance in the most conservative terms possible I'm sure you haven't given us your best case, but there's so many moving pieces, a lot of moving timelines, as you're saying. i'm sure you haven't given us your best case but there's so many moving pieces a lot of moving timelines as you're saying It's all evolving, but how do you think you frame this guidance? it's all evolving but how do you think you frame this guidance

Speaker 2: Yeah. It's a multivariate problem for us, right? There's a number of different issues or opportunities that come through, and we try to see what's the speed of which we will see the patient treatments go up from those. What we've looked at is we feel pretty confident with OUS, as Mehul said, for the year, and that hasn't changed at all. It's just in the U.S., we did see that we didn't rebound as quickly as we expected. Because of that, I don't think we want to get over our skis just yet. We know that it's taking time to get through the contracting process, security reviews. We have more of these accounts coming on. They seem excited. There is an overarching willingness to adopt the concept of lung health rather than just lung cancer screening. Yeah. yeah It's a multivariate problem for us, right? it's a multivariate problem for us right There's a number of different issues or opportunities that come through, and we try to see what's the speed of which we will see the patient treatments go up from those. there's a number of different issues or opportunities that come through and we try to see what's the speed of which we will see the patient treatments go up from those What we've looked at is we feel pretty confident with OUS, as Mehul said, for the year, and that hasn't changed at all. what we've looked at is we feel pretty confident with ous as mehul said for the year and that hasn't changed at all It's just in the U.S., we did see that we didn't rebound as quickly as we expected. it's just in the u.s we did see that we didn't rebound as quickly as we expected Because of that, I don't think we want to get over our skis just yet. because of that i don't think we want to get over our skis just yet We know that it's taking time to get through the contracting process, security reviews. we know that it's taking time to get through the contracting process security reviews We have more of these accounts coming on. we have more of these accounts coming on They seem excited. they seem excited There is an overarching willingness to adopt the concept of lung health rather than just lung cancer screening. there is an overarching willingness to adopt the concept of lung health rather than just lung cancer screening As we see more of these accounts come on board, it's how quickly we can set them up with the proper workflow to get those patients through. Our guidance is designed to say, "Look, if we continue to see the growth where we are right now, that would fall in our guidance." However, there is potential upside to this if these initiatives kick in faster than we expect. As we see more of these accounts come on board, it's how quickly we can set them up with the proper workflow to get those patients through. as we see more of these accounts come on board it's how quickly we can set them up with the proper workflow to get those patients through Our guidance is designed to say, "Look, if we continue to see the growth where we are right now, that would fall in our guidance." However, there is potential upside to this if these initiatives kick in faster than we expect. our guidance is designed to say "look if we continue to see the growth where we are right now that would fall in our guidance." however there is potential upside to this if these initiatives kick in faster than we expect

Speaker 4: Okay. Just a last one from me, just to make sure I'm clear. I mean, this isn't about new competitive dynamics that are making clinicians pause and look at other approaches to emphysema, either detection or treatment. There's no other dynamic other than these complicated, multifaceted, multivariant approaches to driving change in how patients are identified and worked through the funnel, if I'm hearing you correctly. Thank you. Okay. okay Just a last one from me, just to make sure I'm clear. just a last one from me just to make sure i'm clear I mean, this isn't about new competitive dynamics that are making clinicians pause and look at other approaches to emphysema, either detection or treatment. i mean this isn't about new competitive dynamics that are making clinicians pause and look at other approaches to emphysema either detection or treatment There's no other dynamic other than these complicated, multifaceted, multivariant approaches to driving change in how patients are identified and worked through the funnel, if I'm hearing you correctly. there's no other dynamic other than these complicated multifaceted multivariant approaches to driving change in how patients are identified and worked through the funnel if i'm hearing you correctly Thank you. thank you

Speaker 2: Yeah. This isn't a direct competition situation at all. We remain the premier offering in valves. Our salesforce has done a great job of educating clinicians and training clinicians, and we continue to train more. We've done some work to make sure that we're training additional physicians in existing facilities so that they can expand their capacity in that manner. At the same time, it's making sure that they've got the ecosystem in place so that as these patients are identified, whether it's through these CT scans or through this PFT screening agreement that we're just inking now, we'll expect that to generate more patients as well. Theoretically, these patients should come through and already be in the workup process. If they've already had a CT scan, that checks one box that they needed to do for workup. If they've had a PFT, same thing. Yeah. yeah This isn't a direct competition situation at all. this isn't a direct competition situation at all We remain the premier offering in valves. we remain the premier offering in valves Our salesforce has done a great job of educating clinicians and training clinicians, and we continue to train more. our salesforce has done a great job of educating clinicians and training clinicians and we continue to train more We've done some work to make sure that we're training additional physicians in existing facilities so that they can expand their capacity in that manner. we've done some work to make sure that we're training additional physicians in existing facilities so that they can expand their capacity in that manner At the same time, it's making sure that they've got the ecosystem in place so that as these patients are identified, whether it's through these CT scans or through this PFT screening agreement that we're just inking now, we'll expect that to generate more patients as well. at the same time it's making sure that they've got the ecosystem in place so that as these patients are identified whether it's through these ct scans or through this pft screening agreement that we're just inking now we'll expect that to generate more patients as well Theoretically, these patients should come through and already be in the workup process. theoretically these patients should come through and already be in the workup process If they've already had a CT scan, that checks one box that they needed to do for workup. if they've already had a ct scan that checks one box that they needed to do for workup If they've had a PFT, same thing. if they've had a pft same thing We get these patients hopefully a little bit later on in the process, and they can move in quicker. The capacity is one, though, that we really need the administration to look at and say, "Okay, we've built this lung cancer platform, and we do thousands and thousands of procedures in this space. We have the opportunity to treat a major underserved patient population, which has a very, very strong clinical value proposition with Zephyr® Endobronchial Valves, but also a strong economic one." It's also a very symbiotic procedure for the hospitals. These patients that come in can be symbiotic to thoracic surgery, cardiology, other areas of the hospital that are very intriguing and good revenue drivers for the hospital systems. We get these patients hopefully a little bit later on in the process, and they can move in quicker. we get these patients hopefully a little bit later on in the process and they can move in quicker The capacity is one, though, that we really need the administration to look at and say, "Okay, we've built this lung cancer platform, and we do thousands and thousands of procedures in this space. the capacity is one though that we really need the administration to look at and say "okay we've built this lung cancer platform and we do thousands and thousands of procedures in this space We have the opportunity to treat a major underserved patient population, which has a very, very strong clinical value proposition with Zephyr® Endobronchial Valves, but also a strong economic one." It's also a very symbiotic procedure for the hospitals. we have the opportunity to treat a major underserved patient population which has a very very strong clinical value proposition with zephyr® endobronchial valves but also a strong economic one." it's also a very symbiotic procedure for the hospitals These patients that come in can be symbiotic to thoracic surgery, cardiology, other areas of the hospital that are very intriguing and good revenue drivers for the hospital systems. these patients that come in can be symbiotic to thoracic surgery cardiology other areas of the hospital that are very intriguing and good revenue drivers for the hospital systems By talking to the administrators about the ability to clinically take care of these patients, and again, there's hundreds of thousands of them in the United States that are just underserved, we've got a number of them coming into our direct-to-patient pipelines. We're working on getting the referrals up and making sure that the workflow is smoother for these hospitals. Once they get there, we need to make sure that they get treated. In order to get treated, oftentimes they need to have buy-in from the hospital system that they're willing to expand the capacity of that group. By talking to the administrators about the ability to clinically take care of these patients, and again, there's hundreds of thousands of them in the United States that are just underserved, we've got a number of them coming into our direct-to-patient pipelines. by talking to the administrators about the ability to clinically take care of these patients and again there's hundreds of thousands of them in the united states that are just underserved we've got a number of them coming into our direct-to-patient pipelines We're working on getting the referrals up and making sure that the workflow is smoother for these hospitals. we're working on getting the referrals up and making sure that the workflow is smoother for these hospitals Once they get there, we need to make sure that they get treated. once they get there we need to make sure that they get treated In order to get treated, oftentimes they need to have buy-in from the hospital system that they're willing to expand the capacity of that group. in order to get treated oftentimes they need to have buy-in from the hospital system that they're willing to expand the capacity of that group

Speaker 4: Thank you, Steve. Thank you, Steve. thank you steve

Speaker 2: Yep. Yep. yep

Speaker 3: Thank you. As a reminder, to ask a question at this time, please press star one-one on your touch-tone telephone. I'm currently showing no further questions at this time. I'd like to turn the call back over to Steve Williamson for closing remarks. Thank you. thank you As a reminder, to ask a question at this time, please press star one-one on your touch-tone telephone. as a reminder to ask a question at this time please press star one-one on your touch-tone telephone I'm currently showing no further questions at this time. i'm currently showing no further questions at this time I'd like to turn the call back over to Steve Williamson for closing remarks. i'd like to turn the call back over to steve williamson for closing remarks

Speaker 2: Thanks, Janem. I'd like to thank you all for joining today and thank our employees worldwide that are focused on providing relief to the hundreds of thousands of patients that are suffering from emphysema right now. I believe our strategy is working. It's just taking more time to implement, as I mentioned. We're confident we're headed in the right direction, and I appreciate all your support. Thank you. Thanks, Janem. thanks janem I'd like to thank you all for joining today and thank our employees worldwide that are focused on providing relief to the hundreds of thousands of patients that are suffering from emphysema right now. i'd like to thank you all for joining today and thank our employees worldwide that are focused on providing relief to the hundreds of thousands of patients that are suffering from emphysema right now I believe our strategy is working. i believe our strategy is working It's just taking more time to implement, as I mentioned. it's just taking more time to implement as i mentioned We're confident we're headed in the right direction, and I appreciate all your support. we're confident we're headed in the right direction and i appreciate all your support Thank you. thank you

Speaker 3: This concludes today's conference call. Thank you for your participation. You may now disconnect. This concludes today's conference call. this concludes today's conference call Thank you for your participation. thank you for your participation You may now disconnect. you may now disconnect