Pulmonx Corporation Common Stock 2026 Q3 Earnings Call

Please go ahead. Good afternoon, and thank you all for participating in today's call.

Joining me from Pulmonx are Glen French, President and Chief Executive Officer, and Derrick Sung, Chief Operating Officer and Chief Financial Officer. Earlier today, Pulmonx issued a press release announcing its financial results for the quarter ended September 30, 2026. A copy of the press release is available on the Pulmonx 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 provision of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

All forward-looking statements, including, without limitation, those relating to our operating trends, commercial strategies, and future financial performance, including long-term outlook and full year 2026 guidance, the timing and results of clinical trials, physician engagement, expense management, market opportunity, guidance for revenue, gross margin, operating expense, cash usage, commercial expansion, and product demand, adoption, and pipeline development are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC on August 4, 2026.

Also during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the press release, which is posted on the investor relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, October 27, 2026. Pulmonx disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. With that, I will turn the call over to Glenn.

Thank you, Webb. Good afternoon, everyone, and welcome to our third quarter 2026 earnings call. Here with me is Derrick Sung, our Chief Operating Officer and Chief Financial Officer. I am very pleased to report that Pulmonx delivered total worldwide revenue of $22.8 million in the third quarter of 2026, marking our organization's return to revenue growth with a 6% increase over the prior year period. This milestone is evidence of our strategy in action. Our continued progress, built on consistent execution, leaves us increasingly confident in our ability to achieve our previously communicated revenue guidance of $90 million-$92 million for the full year 2026. Beyond returning to growth, we continue to deliver on our commitment to significantly improve operating leverage by reducing our year-over-year adjusted EBITDA loss by nearly 60% to $3.5 million. Derrick will provide further details on this later in the call.

I will focus my remarks today on our priorities for re-accelerating sales growth and advancing our market-expanding clinical initiatives. Our organization-wide emphasis on disciplined execution of the highest impact selling activities, consistent with the near to far framework for market development we've outlined previously, continues to drive success for our commercial team and is responsible for the 7% year-over-year growth that we delivered this quarter in the U.S. To reiterate, this means setting up high quality and efficient valve programs, engaging with and educating physicians who treat COPD and who are aligned with hospital systems offering Zephyr Valves, concentrating our direct-to-patient efforts specifically on geographies with established treating centers that have the capacity to accommodate interested patients, and finally, continuing to work together with our champions to educate service line administrators, ensuring that their programs are properly resourced and can provide a high-quality patient experience.

We are seeing evidence that our sharper focus on fewer initiatives is accelerating growth by prioritizing what matters most. With the right people, focus, and culture now in place in the U.S., we are confident that we have rebuilt a foundation for continued revenue growth. At the start of the year, our focus was on rebuilding our sales leadership team and filling open territories. We have been finding great talent and have presently filled substantially all open U.S. sales positions. Since the start of the year, we have seen broad-based increases in activity within our accounts that are associated with long-term growth, such as regular reviews of patients being considered, dedicated valve program coordinators, and systematic reviews of pulmonary function test results to identify potential patients.

In our digital advertising, we have been able to reduce our cost per patient engagement and are seeing increased yield of those engagements to successful treatment. All of these are markers of progress on our near-to-far strategy that we believe are contributing to our improved growth trajectory in the U.S. We have seen strong engagement in recent specialty society meetings. At the European Respiratory Society Congress in Barcelona, there was significant scientific focus on bronchoscopic lung volume reduction, including a panel symposium and 19 poster presentations, with particular interest in the patient pathway, patient experience, and multidisciplinary approaches to severe COPD management. At the American Association for Bronchology and Interventional Pulmonology meeting in Denver, the five-year follow-up data from our LIBERATE pivotal trial was presented, and there were multiple sessions focused on emerging uses of endobronchial valves.

Shifting gears, we also remain centrally focused on expanding our addressable market through AeriSeal. Enrollment in our CONVERT II IDE trial continues to progress, and we remain on track to complete enrollment in the back half of next year. We believe that AeriSeal represents a TAM expansion tool and a further revenue contributor with the ability to expand our addressable market by roughly 20% globally. In closing, the third quarter marked an important milestone for Pulmonx as we return to year-over-year revenue growth in both our U.S. and international businesses. While 2026 remains a year of execution and transition, we're very pleased with our pace of progress, and we have greater conviction in our strategy to refine execution and further penetrate the substantial market opportunity for our products. The organization remains aligned and focused on our top priorities.

We're confident in the underlying strength of this business and the opportunity in front of us and in our ability to deliver growth and operating leverage as our year-over-year trends continue to strengthen. With that, I will turn the call over to Derrick Sung to provide more detailed review of our third quarter results.

Thank you, Glenn, and good afternoon, everyone. I'm very pleased to report results that reflect meaningful progress in improving our financial trajectory and advancing Pulmonx towards sustained revenue growth and profitability. Total worldwide revenue in the third quarter of 2026 was $22.8 million, a 6% increase from $21.5 million in the same period last year on both a reported and constant currency basis. This marks our first return to global year-over-year growth since Glenn and I rejoined the company last year. U.S. revenue in the third quarter was $14.9 million, a 7% increase from $14 million during the same period of the prior year. The return to year-over-year growth for our U.S. business gives us confidence that our effort to regain commercial momentum are starting to take hold. We added eight new U.S. treating centers during the quarter.

International revenue in the third quarter of 2026 was $7.9 million, a 5% increase from $7.5 million during the same period last year, and an increase of 6% on a constant currency basis. Excluding China, our international markets remained strong and grew approximately 9% on both a reported and constant currency basis as compared to the same period last year. With the renewal of our China registration certificate now secured, we have restarted commercial activity in the region and expect to resume shipments to our distributor by early next year. Gross margin for the third quarter of 2026 was 76%, compared to 75% in the prior year period. The year-over-year increase was driven by a lower mix of distributor sales in our international markets, as well as cost efficiencies across our supply chain.

Looking forward, we now expect gross margin for the full year 2026 to be approximately 77%, as we expect these benefits to persist through the remainder of the year. Total operating expenses for the third quarter of 2026 were $24.9 million, an 18% decrease from $30.4 million in the same period last year. Non-cash stock-based compensation expense was $3.2 million in the third quarter of 2026. Excluding stock-based compensation expense, operating expenses in the third quarter of 2026 decreased 16% from the same period of the prior year. The decrease in operating expenses reflects the cost reduction efforts that we initiated at the start of the year, and we remain on track to meaningfully reduce our expense trajectory in 2026 while maintaining investments in our key growth initiatives.