All right. Good afternoon, everyone. I'm Jason Bednar. I cover med tech here at Piper. Next fireside chat today is with Pulmonx. VeRy happy to have with us today CEO Glen French, Interim CFO, John McKune. Thanks a lot for making the trip across the country, guys. Really happy to have you here. Happy to be here. All right. So we'll get going into Q&A. So Glen, I'll start you. The execution this year has really been phenomenal. It's been an impressive turnaround, especially from where we were maybe sitting here at this conference a year ago. You know, I guess, what would you attribute that better commercial execution to? Well, so a year ago, we, for the first time, I think, had visibility to our business without the overhang or blanket of COVID that fell upon it. Mm-hmm. COVID was significantly impacted our business through essentially the first trimester of last year and then essentially went away. And the reason why we were so sensitive to COVID is that the patients that we're treating are super fragile and severe emphysema, and with our procedure, there's about a 5% chance they're gonna have to end up in an ICU bed. And during COVID, things were essentially shut down to us because there's a 1 in 20 chance that we needed an ICU bed, and there were none to be found. Mm-hmm. Hospital's direction was, unless it's, you know, 1 in 100,000 chance, and the patient's not gonna die tomorrow, then we want you to go ahead and move forward. When the COVID blanket lifted, we got much greater visibility as to where we were with our business. Anytime things weren't happening at a center, they were blaming it on COVID, and finally, that was not an excuse. As a consequence, we identified what good looked like, and we were able to begin to drive our accounts toward that definition of good, which we've broken down into a very specific six-step process. Mm-hmm ... that we take our accounts through. We've been executing against that over the last year and have made a lot of progress, and the results are a reflection of that progress. It really seems like a combination of, like, a normal operating environment, but that normal operating environment giving you better clarity to go execute commercially. Exactly. It's unbelievably important. I mean, it kind of goes without saying, but nobody saw COVID coming- Right ... that you, when we're introducing a new technology, that isn't simply taking the place of another technology, like going through a smaller hole or what have you. We're taking patients that are being managed in a distributed fashion by physicians that are out in the community, and we're taking those patients toward a procedure rather than a drug regimen, to take them to a substantially better place. Okay, great. So with 2023 being, you know, such a solid year, you know, and the recovery from what was a, you know, again, a disappointing close to the second half of 2022, how do you repeat the success that you've had in 2023 in 2024? We have a lot of additional runway. We're probably a third... You know, we're approaching a third of the way to goodness in the existing accounts. We've got 300 and some accounts on our way to 500 or so accounts, so we're gonna continue to execute in moving those accounts through that process. But in some ways, those are the early innings. If you think about the first three innings, if you will, if you use a baseball analogy, we're really trying to set up our treating accounts to be super efficient, to do a procedure that they've never done before, and to adopt best practices and make that a routine part of what they offer. Once we get there, then we're igniting the knowledge and interest of the COPD physicians, those, whether they be pulmonologists, about 50% of the patients are being managed by pulmonologists and the other by busy internal medicine specialists. We know where those patients are. We buy prescribing information. These patients have a pharmaceutical fingerprint, essentially, so we can identify where they are and know who the key referring physicians are. But we have to have well-established treating sites in a given geography before we ignite the COPD physicians. As we've talked about before, once we've got those COPD physicians in place, we've got 200,000 patients that have engaged with us through social media that we begin to push through the process. There's a 70%-80% chance that when a patient hears about our procedure, that they're gonna seek information on that procedure from the doctor that's managing them. So it's super important that we bring those COPD physicians up the learning curve before we ignite, you know, the patients and flow them towards. So we're literally not even halfway through that first step in that three-step process. Yeah. On that referral network and driving that patient flow, how much of that's incumbent upon... And we talk about this all the time, and I know you've gotten this question a bunch, but I'll ask it again anyway, sorry. How much of this is incumbent upon Pulmonx? Like, things that you can control, you can influence, be it through social media or, you know, really pumping that referral network, versus, like, how much of it is, you know, how much of that responsibility lies with the pulmonologist, the end treating physician that needs to say, "Hey, referral network, I'm here. Send your severe emphysema patients to me to get the Zephyr procedure? So, you know, we, we don't follow around treating physicians and help introduce them to all of the referring physicians in a given geography. So I just want to be clear on that. Mm-hmm. That would be practice building, and that's not considered appropriate in our business. But what we do do is we try to make sure that the treating centers that obviously contain the treating physicians understand what best practices are and bring things up to speed. And we typically will establish a few of them in a specific geography. So any major city is. It's unheard of for there to be just a single hospital that's doing the procedure. And once we get to that point, we can begin to ignite and engage with the surrounding physicians, who can then choose once they understand. So there's two elements to the process for the referring physician. One is to make sure they understand the procedure. If we go to a referring physician, we ask them: "Do you know about Zephyr valves?" In most cases, they'll say, "Yes, I've heard of these valves." And you'll say, "Have you referred anybody?" If they say no, the question, the next question, of course, is why. Mm-hmm. Of the top five reasons why, they're non-issues. So, for example, they'll say, "Well, I'm waiting for the data to be published." Well, we got 4 randomized controlled trials. "I'm waiting for this to be in the guidelines." Well, we're in the GOLD guidelines, you know, evidence level A. Waiting for this to be covered by Medicare. Well, we've been covered by Medicare for a while. Blue Cross Blue Shield, whatever, you know, all these questions, and we're just like, "These are fine. And oh, by the way, do you understand what the magnitude of benefit is that you can deliver to your patients? And it's a multiple of what they can get by using their current drugs. Right. That gets people's attention. Mm-hmm. So that's the first part- Mm-hmm. is just making sure that they're up the learning curve. The second element, of course, is that connection. So we might talk about, you know, this center, this center, and this center are doing this procedure in this area. They may ask us a couple questions, but they'll ultimately make that connection with the treating physician and take it from there. And in some cases, these relationships are getting so strong that there's a distribution of some of the workload out to the referring physicians, who can then deliver, you know, nearly or fully worked-up patients to the treating centers. Okay. So maybe to focus on some of these treating centers, I think you've characterized about a quarter of them as high volume, and the other 75% as maybe low to mid volume. I'm not sure what, you know, kind of where you delineate high volume, low volume. But, you know, of that, if we focus on those low to mid volume, that seems to be, at least to me, like, the biggest opportunity to, you know, turn those centers into higher volume centers. How many of them can realistically turn into high volume centers? So, like, of that 75%, is there a certain percentage that are just gonna stay low to mid volume versus those that actually have that opportunity to take a big step forward? You're referring to, you know, as I said, we're in the early innings. Yep. We're at about 25%-30% of our accounts are substantially through that six-step process. Yep. So they're to the right, if you will, typically kind of in the five or six range in the six-step process. We know that. So we don't refer to them as high volume accounts or low volume accounts or whatever. It happens that they are. I mean, a stage level six account. If you take the average volume that's generated by a six account, it's double what a stage five account would be, which is roughly double what a stage four account would be. So it does follow. So clearly, as we try to grow our business, we're trying to move accounts toward that side of things, and we've been quite successful in doing that, and we will continue to do that. With regard to capacity, essentially, you know, I mean, is it reasonable to think that the smaller accounts can become bigger accounts, and the bigger accounts can become even bigger accounts? You know, my view is absolutely yes. I mean, this is a, this is a non-sterile procedure. You don't need an operating room to perform it. You could perform it in this room if you had the equipment that was in there. Mm-hmm. So you could just roll the equipment into a large closet, essentially, and have a place to execute the procedure. They're typically done in sort of the outpatient parts of hospitals, you know, the kind of place if you've ever gone for a GI procedure, those kinds of areas of the hospital. And they're done pretty routinely. These accounts that we talk about being our higher volume accounts, they might be doing today 100 procedures. That's about a $1 million account. Mm-hmm. A little bit over $10,000 per patient in the United States in terms of our revenue. That's only a couple per week. The procedure takes about 40 minutes. The physicians have the capacity, the hospitals have the capacity. So this idea of, you know, does it take a lot to take an account from small, say, $200,000 a year of revenue, 20 patients per year, and make them get them to 100? No, it doesn't take a lot of capacity, and to get an account up to some multiple of what is today a large account is also not, you know, requiring the creation of new operating room spaces or anything like that. Is there a missing piece? And, say, if we're using your numbers, like the 20-100, is it really that, like, market local market development, that referral network? Is that the missing piece, or is there something else that, you know, is that, that key kind of lift? Yeah, it's different everywhere. Okay. We've had a bunch of conversations with folks in one-on-ones and two-on-ones and three-on-ones today. Yeah, yeah. This comes up all the time, and it's just, you know, in the major metro areas, it's a classic case of referring- Okay ... into treating centers. But we're seeing more and more centers that are off the beaten path, where physicians are like: I can do this procedure. I'm gonna open up, you know, this... I'm gonna open up my own account here in northeastern Arkansas or Billings, Montana, or whatever, because I know how to drive and navigate a scope, and this procedure is done under direct visualization. I can do this. Anybody in this room could do it if you knew how to drive and navigate a scope. So, it's very straightforward, and the profile of what are our most productive accounts is fairly diverse. Okay. Okay. New center additions, sell side, myself included, probably make too big of a deal about this. Maybe not, but I think we probably do. But I guess when we look at the kind of the 500 target accounts that you've thrown out there, you're already, what? Two-thirds of the way to that 500. But I think you've said in the past that that 500 is not the end-all, be-all. Like, you can go above that 500. Those are just, like, the initial target that you had. Yeah. So I guess, you could, and I ask this question because you're not too far away from hitting that 500. You could reasonably get there, I don't know, in what? A couple of years, if you have another couple of good years of new center adds. So what, what happens after 500? I guess, where, where does that number go, or where could it go? Are those centers beyond 500 lower volume centers? Just help me out with, like, like, what lies beyond that 500 number. Yeah, well, maybe we start with where do we come up with the 500 number? Sure, that'd be a good place. Yeah, I'll try to end up at where you did as well. But the, you know, five years ago, when we were looking at the U.S. marketplace, we knew we wanted to take a centers of excellence approach. We knew we didn't want the average center to be doing super low volume. We didn't see the upside to that. We knew that, hospitals would probably engage to a greater extent if they knew that the average patient was driving by five or 10 hospitals on the way to their hospital. There are, you know, 65-year-old patients with a lot of comorbidities. There's a lot of value that gets created, not only through the DRG specific to our procedure, but also, you know, that which these folks bring in with them. So we identified an array of sort of key lung centers and key geographies and ended up coming up with 500, which represents somewhere between 8%-10% of sort of U.S. hospitals. If I had to bet the over-under on 500 today, it'd probably be over. You know, we have about 75% of our accounts are active or in a given quarter. If you looked across the last, say, 180 days, it'd be 85%. We have about 15% of our accounts that either are down as a result of you know, physicians moving from one hospital to another. We just recently had the head of interventional pulmonology leave Duke and go to Northwestern, and Duke is slowly coming up to speed. Northwestern, which had lost somebody to another hospital, is now coming up to speed as well. You have these kind of dipping in and out periods, and then there's some number of folks who just kind of fooled us right out of the block, 'cause I would say a low single-digit%. So I think, you know, we're looking right now as we move forward at the value of maybe just talking about active accounts and what kind of productivity we're generating out of the active accounts, as opposed to the broader group. Sure. Okay. Okay. We'll bring John in the conversation, too, and but, Glen, feel free to respond here because I'm sure you have an opinion. But when we take a longer-term view of the business, like, what's the right long-term growth profiles? We went through the COVID choppiness, but and now we have a really good year here in 2023. You know, there are a few pillars to the growth strategy. So could you unpack just, you know, what's supporting that long-term growth that you see for the business? You want me to start? You go. Okay. Well, we're, you know, we're 1% penetrated into our prevalent opportunity, about 10% into the incident population opportunity. So there's a lot of upside. We're, as I said before, kind of in the early innings, if you will, with regard to executing on our strategy. We are building out a foundation with these treating accounts and the COPD physicians, which we think should be the basis for acceleration. We've tried to be very thoughtful and not get out over our skis as it relates to our expectations for the future. Mm-hmm. I think, you know, and as a result, we've, you know, tried to set things out there that we think we have a high degree of confidence that we can deliver or beat. Okay. I'm glad we're. Do Do you have anything you want to add? No. Okay. I mean, we're. Glen excited about, you know, what we've been able to accomplish so far and. Okay. Keep the momentum going. Okay. Glen said it well. I'm glad we got a chair sitting between us right now, because I'm going to ask one that I'm sure he would have kicked me under the desk if I was sitting right next to you. So the street's only modeling mid-teens revenue growth for 2024. You know, but the business is humming. You know, we're talking all today about all the different, you know, account productivity levers you have and, you know, taking more steps forward next year. So I guess, do you feel good with where consensus is currently at for next year? Anything we should keep in mind, you know, that could influence the growth profile for next year? I feel good about it. We've gotten this question before, and in fact, we've answered it in a public forum. Derrick, our CFO- Mm-hmm ... answered it in a weak moment, and he said, "Yes, yes," to the question: Do we feel okay about sort of where consensus is? I think the upper teens, isn't it? But in any case, It might have been off of like, you know, before you put up another monster- Okay quarter or so. All right. But- Hey, listen, we're gonna provide far better resolution when we talk about 2024 in February. Okay. So we're, you know... I mean, I feel great about where we are. I think we've made a tremendous amount of progress over the last year. The progress we're making is reflected in our numbers, and it is foundational in nature. Yeah. So I believe that broader and increasingly solid foundation is something on which, you know, that would support acceleration. But we're... Well, we, you know, we disappointed one quarter some time ago. Yep. We don't wanna do that again. So we're, you know- I don't want you to do that. We'll be super careful. Good. I don't want you to disappoint either, so- Okay. We're aligned there. So you sounded, I think, pretty good recently on the China business. You know, China's kind of all over the place for every single med tech company, and I know it's a small piece for what your business is today, but maybe if you could help, you know, with what you're specifically seeing out of China. You know, if we were to go back to, you know, kind of pre-COVID type China, like, what does that look like for Pulmonx? Yeah. Any comments that we've made that— Well, first of all, China's a big opportunity. The problem with China is it's hard to get at. There is no reimbursement, so it's private pay, and frankly, the patients and their families hold the doctors pretty accountable for what the outcomes are. So there's a lot of anxiety around the way that plays out. So reimbursement's key. If, you know, if and how we get there, and we're thinking about that as a substantial question, i.e., you know, how is it that... Who do we partner with? How do we get there from here? The performance in China, to the extent that we've talked about it, first of all, it's like on the order of 1%-2% of our business. It's not even 2%. So I don't even know. I think it probably rounds to 1%, but so it's small. And where we are today is growing, but it is, as you had identified, returning to where it was pre-COVID, 'cause they basically just went behind the moon- Mm-hmm ... for a while. And so, that recapturing is happening, and we just need to think about how we proceed to the next level. I don't anticipate, in the foreseeable future, China as a percent of our overall business, you know, going above 2% or something like that. Okay. Okay. Means the rest of the business is growing really well, right? Yeah. Well, we got two-thirds of our business- I know ... in the United States now. Yeah. It wasn't too long ago that 100% was outside the United States. It's true. So- That's true ... we're really happy with the way we're executing in the United States. And the interesting twist is that when we started out in the United States, we were taking best practices from outside the United States and bringing them in, and now we've really figured out something that seems to be working. There's no other place in the world where we're able to leverage all the... You know, we can go direct to patient, we can go direct to physicians, we can buy ad space. We can do all kinds of things in the United States. There's no other country in the world where you can use all of the tools that you can in the United States, but there are certain tools that you can use outside the United States. Now we're beginning to bring best practices from the United States into places like Germany and France and some of our other larger international markets. And, so it is interesting to see how now, now these markets are following the US. Yeah. Having said that, we're also taking best practices from some of our international markets and leveraging those in the United States. For example, certain site efficiency benefits that we realized in one of our larger accounts in Groningen, in the Netherlands, is probably the most efficient account in the world, and taking those learnings and best practices and bringing them into our U.S. operations as well. Okay. Okay. I wanted to talk, you know, a few minutes left here. I did wanna talk about AeriSeal. You know, we're getting close to being able to talk about a commercial launch of AeriSeal in Europe. I know it's kind of balancing with the CONVERT-II trial- Yeah ... and whatnot, but, you know, I think you're keeping some of the, maybe some of the details pretty close to the vest right now. But are you able to give us a sense, you know, the price premium that you're looking at with respect to AeriSeal when you do commercially launch it in Europe? And then as well, you know, can you talk about whether or not this will be gross margin accretive or, you know, more in line with where you're currently at in, like, the mid-seventies gross margins? The short answer is no. We're, we're not, we're not talking specifically about that. But let me just—for those of you who don't know what AeriSeal is, we go in, we identify our patients using a quantitative CT analysis software, which stacks the deck in our favor when we bring patients into the operating room or into the procedure space. We use our Chartis catheter. We go into the target area that we're looking to bring down with our valves, and we do what's called a Chartis procedure. And 20% of the time, we identify that the patient is not a good candidate for the procedure because they have collateral ventilation from the adjacent lobe, which doesn't work, in terms of putting in valves into the feeding airways and hoping to bring down that, that trapped gas that's back behind it. So we have been testing AeriSeal and have demonstrated and reported early out of our primary or our initial study, that we have an 80% success rate in going into those patients who, in the past, were woken up and incredibly disappointed. I mean, these patients are short of breath, like breathing through a straw, you know, having to live their life. And they're they hear about all this hope and turning back the clock and being able to spend time with their grandkids the way that they used to be able to and all this kind of stuff, and they get woken up 20% of the time, and there's nothing that can be done for them other than surgery, and 1 out of 100 of them might be a candidate for surgery. And so, as a consequence, we take this AeriSeal, and we go in, and it's like a tire patch kit. We got a leak up there, let's go ahead. We identify the area in advance that we need to treat, and 80% of the time, we try to seal that incomplete fissure or division, we're successful. So it's a 20% TAM expander. We've reported on not only that we're able to do it 80% of the time, but when you go in and put valves into those patients, then later, that wouldn't have otherwise been candidates, then we have the benefit that gets yielded that we saw across our 4 randomized controlled trials. So there's 2 issues here. One... Or opportunities. One, we get a 20% TAM expander, like shooting fish in a barrel, right? Because the patients have already decided to have the procedure. We're gonna charge more for AeriSeal, and then we're gonna put in valves later. And rather than 20% of patients round-tripping back to the referring doctor in tears, saying that they weren't able to help me, it's only gonna be 4%, 'cause we're gonna get 80%. So we're gonna go from 80% of the patients addressed to 96% of the patients addressed. And we've commenced or we're in the process of commencing an IDE trial called CONVERT-II, which will support U.S. commercialization. CONVERT-I will support OUS commercialization in CE mark countries, but we are, we're gonna. As you had started by saying, we're gonna be careful to open up those or European markets to commercialization after we're done enrolling in CONVERT-II, because that's the path to the US marketplace, and the US marketplace is today 6-10 times bigger than any other country. So we gotta get to the US as fast as possible. Got it. Makes sense. Well, very, very well said. A lot of catalysts to look forward to that we talked about here today. So we're really looking forward to seeing how 2024 comes together. But we are out of time. Thanks to both of you for joining us. Thanks, everyone, and please thank me, and/or join me in thanking, Glen and John here today. Thank you very much.