Larry, are we good? All right, welcome back. I'm Larry Biegelsen, the Medical Device Analyst at Wells Fargo, and it's my pleasure to host this session with Pulmonx. With us, we have Steve Williamson, President and CEO, and Mehul Joshi, the CFO. The format will be fireside chat. If anybody has a question, please raise your hand. Steve and Mehul, thanks so much for being here. Thanks for having us, Larry. It's been a great show. We had a great day today, and I appreciate the invite. Yeah. Glad to hear. Happy to have you here. Great. So both of you have been in your seats now for a couple of quarters now. So Steve, I'll start with you. What have you learned from being out in the field? Any particular areas of focus over the next six to 12 months? Sure. I have spent a lot of time in the field. I've been here for about five months, just about six, between five and six months. Spent a lot of time in the field and really tried to. One of the things that I wanted to figure out right out of the gates is how do we drive utilization in the accounts that we have? How do we get same store sales up? And what are the key factors that are keeping it where it is? And what I was able to do is I've spent time at some of our larger facilities, some of our larger customers, you know, the Henry Fords, these larger medical institutions that have really built up programs. And they're not just offering a product, they're offering a whole program for emphysema treatment. And you see those accounts are really, really driving volume for us. And then you have some smaller accounts that have not been as quick to build up. And I look at some of those doctors almost as hobbyists, and it's okay, what's the difference between a hobbyist and somebody that's really interested in driving an emphysema program? And what we found is that if you can get administration behind the program, if you can show them the economic value propositions, then it really helps them get the investment they need to smooth out workflows and to build systems where patients that come through have a really strong experience. If you've got a patient that comes in to get a treatment, that patient goes through an elongated process as they go through the testing, and it takes them a lot of time, they get frustrated. These patients can't breathe. So for them, if you're at Beth Israel Hospital and you've got somebody driving in from Connecticut, they're driving a couple hours, it's difficult to breathe, they got to go back and forth to do testing. It becomes frustrating for them, and it becomes frustrating for the referring physician. However, if you go to Beth Israel Hospital, you can go in there, and they will actually do all your testing in a rapid format. They've got everything set up. They've got coordinators. They've got nurse practitioners that can actually focus on this. So that patient comes in, they get the workup, they get scheduled for surgery, it moves quickly, they have a good experience. They go back and tell their primary care or their COPD physician about this, and you see that referral change just start to really moving. I think we've got a huge TAM here, Larry, and I talk about it a lot, I get a lot of questions about it. But how do we get that addressable TAM? I think we got to make sure that the patients that are coming through are having a really good experience, and then it just continues to build, and we see these programs get bigger and bigger and bigger. That's helpful. We'll definitely drill down at some of the utilization and what you're doing there- Sure ... to improve that. Just one question before then. So Steve, I saw, we all saw you purchased, you know, $100,000 in stock on August 20th. Talk about why you did that. I didn't know you saw that, but I'm glad you did. So I had an investment that in something else, and it had come through, and I took my money out of that, and I said, "Okay, where am I gonna put my money that I think is the most undervalued asset I can put it in?" So I bought stock in my company. You know, we've been here for. I've been here for five months. I've got a lot of my net worth is put into the company right now, and options and RSUs. So I've got a lot invested in this company right now. But I do believe that, and I think you've all seen that if you followed our stock, I think we're significantly undervalued right now. And if I'm gonna put money in something, I might as well take advantage of the undervaluation that we have right now. Okay, fair enough. Moving on to the business, you started off, you know, 2024 strong with 30% growth in the first quarter, 21% in the second quarter. What went well in the first half, and how are you feeling about the momentum in the business? Yeah, well, I think when we came in, I think there was a big question, what's gonna happen with guidance? You've got a new CEO, you've got a new CFO, are they gonna change guidance? There was a bit of an overhang. We came out, we reaffirmed the guidance, and we've been able to hit on that. We've executed the plan that was in place. We haven't had any major disruptions. Our turnover has been in line with where it's been in the past. So we're able to right the ship that would come typically with management turnover. So I think that was... That makes us feel good coming out of the first half. As we go into the second half, I think we've got positive momentum in not only U.S. sales, but OUS sales. I think our marketing efforts are really starting to show some benefit. We had 20,000 initial contacts with patients, 20,000 in the first half of the year. So an initial contact means they either came online and took a quiz and opted in to communicate with us, or they called into our helpline. So that's a large number. If you think about, we'll do between 7,000 and 8,000 procedures a year to have this 20,000 patients that are looking for some kind of help, and that's with limited marketing spend. We're not really peppering the market with any kind of DTC or DTP. What we do is we go into these areas where we know that there are programs in place with good workflow, and we advertise in those areas because we know those patients will come through and get a better treatment. So we've got good marketing momentum. From a clinical trial perspective, we've got two clinical trials going on. Our Japanese post-approval study, which we'll stop enrollment in the beginning of 2026, and then we'll have a full launch in Japan. Japan's got about 100,000 patients with severe emphysema. There's about 500,000 in the United States. That's out of a patient population of about 3.6 million with COPD. So we've got a big TAM there. We're gonna tap into that Japanese market. Our clinical data for CONVERT-2, we'll show that CONVERT data this weekend. You already put a note out on it. You beat everybody on it, Larry, but it's our results in our CONVERT-1 trial look good right now. We've got a nice conversion rate, so patients that normally wouldn't be able to get the procedure were able to convert over, receive valves, and those patients that got valves actually did very well. If you look at the reduction in residual volume was significantly over a liter. So we had good results there. So sales, marketing, clinical seem to really be moving nicely for us. We're also making some progress in calling on the IDNs and the administration of hospitals. This is a new thing that we brought on. We've talked about it at the bus tour, where we're addressing the C-suite of the organization to get them to invest in what needs to go into a coordinator, and an investment in a coordinator is $60,000-$70,000. But once you bring that coordinator in, we can get these patients through at a rapid rate through doctors that the procedure itself is the easiest part about the procedure. It takes 30 minutes to do the procedure. It's a bronchoscopy where they go in, they look at the report, they do a Chartis, they pop a couple valves in, and they're done. It's just getting that patient through the workflow and the workup in order to get them going. You talked about international doing well. So far, U.S. has been growing faster than international. Do you expect that to continue? I think U.S. will continue to grow faster than OUS in the near future. We've got really good momentum in a couple areas outside the United States, and I think we'll start to see some of the fruit of our efforts that we did in 2024, which is taking our sales processes from the United States, putting them into the international markets. I think we'll start to see those start to pay off here in 2025. We've got a couple of large markets that are really doing well with Germany, the U.K. France is a big market for us. Spain is doing really well. So, we're in 25 different countries. We'll have this Japanese launch coming out in 2026. That should help as well. We're doing a little bit more in China now as well. I think that'll start to pay off in like 2025, 2026. That's helpful. And last time we talked, you mentioned an elongation in the time-to-treatment curve. Remind us how long it typically takes from diagnosis to procedure and where you're at now. Yeah, so the elongation in the treatment curve was quite misconstrued, actually. The reason I was bringing that up was as part of our workflow discussion. We have patients that can take a long time to get the treatment once they go through and have their initial scan to actually getting the valves. That number can be several months in some of the smaller organizations, but then some of these bigger organizations are able to turn these patients around in a month. I mean, they can get them through quickly. So it's not a metric that I'm necessarily concerned about. What the whole point was, is we need to help from a workflow perspective, get these patients through and make sure they don't get- They don't fall through the cracks. We've done that with our LungTrax Connect pilot that we've just launched. This actually helps the staff upload the CT scan that's been done through the PACS, rather than having to burn a CD and go put it in a find a machine that takes CDs and then upload it. This actually allows them to pull it from the PACS, upload it, comes down to the physician with the patient information on it, so it's easier for them to track. Plus, it builds out the workflow that they need to go through so that they can check the boxes and make sure that patient doesn't fall through the cracks. Every day, that patient navigator comes and sits down at their desk. They've got their to-do list for the day is right in front of them, and they can get through it. So it's a pilot product, and I say it's pilot because it's IT-related. I mean, to get into a PACS, to get into an EMR, we have to work through hospital security and all that, so it takes a little time to get going. But that was really kind of in anticipation of the launch of this, that we were talking about, this elongation of cycles. And one of the first things you mentioned today was increasing utilization. Yep. And the way we measure it, and we may measure it a little differently than you do, but it was flat to slightly down, I think, in the second quarter of this year. But well, is that gonna be an important metric, utilization? Is that something you're gonna talk more about with investors? Yeah, I'll take that, Larry. No, we're not gonna talk about it because as we came in and looked at that metric, we found that it was an incomplete metric because not all cases are reported. As the number of customers grow, our sales reps are not able to attend every case, so it's an incomplete metric, so we're not going to report it any longer. We do track utilization on a longitudinal basis, but we think that revenue growth is the best metric to look at productivity and utilization. So when you say you're not gonna track it anymore, you give us... Well, you give us the dollar revenue. We give it U.S., OUS. We know the ASP per procedure, roughly $10,000, I think. So we can back into procedure number. So you're saying you're not gonna give us the number of centers anymore, so we can't calculate utilization? We will give you the number of centers that quarter every quarter, and last quarter, we gave you the number of new centers that were added. Yeah. But we won't give you- But so we'll be able to calculate some utilization metric? Yeah. That's on an assumption that every valve that was purchased that quarter is used that quarter. Right? Right. So there might be some buying patterns that are different as the number of customers grow. I think one of the questions you had was around sequential growth in Q2 in 2024 versus 2023. And looking at that question and even getting ready for the earnings call, I realized that, as you add- ... more customers and the number of ordering customers change, ordering patterns change, and so you'll see some variation in sequential growth as different customers order different quantities, and at different periods of time in the quarter, because not all customers are just buying the equipment or the valve on the day of the case. Okay. All right, understood. So moving on, Mehul, to guidance. The guidance implies a deceleration in the second half. You know, things sound like they're going well, based on your earlier comments today. Are there any headwinds that you're concerned about, or is it just new management team, a little bit of conservatism here? Yeah, I think what Steve talked about in terms of momentum is it's outstanding. It's the best set of metrics that we've seen from a patient and a commercial point of view. So we believe momentum is very, very strong. We were not clear on what was going to happen in terms of Q3 seasonality, specifically in the U.S. Last year, sequential growth was 7%. The year before, it was around 2%, - 2%. So we weren't sure how the market and the procedure level, the vacation schedules were all gonna work in the current quarter. So we were conservative, conservative about it when we set guidance on our Q2 call. And the Street's about down, you know, flat to slightly down Q3 sequentially, 2% quarter- over- quarter for people- Yeah, I mean, as you know, we don't guide on a quarterly basis, but it's directionally correct. Okay. Got it. And then, maybe shifting gears, to AeriSeal. So you're going to ERS, I think you said? I will be. Are you going? I'm not. You're not gonna be in Vienna this weekend? If you host an analyst meeting, maybe we'll consider it. But well, you know, the data we saw, the abstract showed 77% conversion rate, pretty similar to the 78% we saw in the preliminary data, so that's good. What else? Maybe just anything else you can say about the data that's in the public domain. Yeah, I think the next. And I think you called this out. Well, so first, 77.6%, which I would round to 78%, just for prior comps there. But, so I think we're right in line with the data that has come out in the past. I think the important thing here is these patients are actually converting, and if you think about what that means for our TAM over time, we talk about, well, it's gonna be a 20% expansion of the TAM. I think it's more a step function than that. You've got a patient that's actually on the table that came in for a procedure. They're gonna have AeriSeal. They will be consented for both AeriSeal as well as valves. So they're gonna be on that procedure table. They're gonna get one of those two procedures. If they get AeriSeal, they're likely to come back in 45 days and have a valve procedure afterwards. So that's... Obviously, we don't have an approval yet, so but, but that would be the plan. When we look at the CONVERT-1 data, we saw that those patients that came back, 89% of them saw a significant benefit over 350 mL, with the mean being over a liter of residual volume that was removed from their bodies. I mean, it's a significant, significant benefit for these patients, and I think it opens up this TAM in a step function way, where I don't have to just go out. I don't have another 100,000 patients to go after. I've got patients that are actually have gone through the workup, that are on the table, that will now get treated. So I know you're waiting, you want to use the international sites to enroll in CONVERT-2. Yeah. When is that? Remind me of when you think that will be complete? Yeah. We think we'll end the enrollment for CONVERT-2 in the beginning of 2026, and then once that happens, we've got a six-month follow-up period. Then obviously, we'll prepare the PMA, and we'll submit- Right ... the PMA. Once we've completed enrollment, though, we already have E.U. MDR approval for AeriSeal, so there would be nothing from precluding us from launching AeriSeal outside the United States in 2026. Got it. And then inside the United States, once we get PMA approval in. Right, so what about the centers that are not in the clinical trial that are international? Yep. I can't imagine every international center- Yep ... is in the trial. Right. Why can't you go to other centers now? I get it. There's a couple reasons. First off, we don't have the training in place. They haven't been trained on it. We could train them, but then if they have any kind of results or events that occur, it could mess up our clinical trial, and we would rather have the clinical trial done in line with the protocol so that we've got clean data to present to the FDA. Got it. Okay. Those other centers, though, we've actually talked to them and said, "Hey, you've got referring physicians in these areas that are doing this AeriSeal trial right now. Right. If you can- Right ... if you can refer them to those centers, it will just speed up the time with which we can get you the product. Okay. And enrollment so far in CONVERT-2, I know it's very early, but it's going well? Yeah, we're on track for both CONVERT-2, as well as our Japanese post-approval study to be completed in approximately the beginning of 2026. Okay, and the pharmaceuticals in development last year predated Dupixent, you know, got some attention. That's only 20% of the patient population for the-- for that drug. There's another one coming out, my understanding from, also from, Regeneron, that has a broader, you know, label, if you will, or indication. What's your, you know, reaction to that? Yeah. I think that's an IL-33. Yeah. So, I guess it's twofold. First off, if you think about these patients that have COPD, their airways are collapsed, and can inhalers help them? I think it can help them a little bit. It can knock down their inflammation, but the ability to hold an airway open for an extended period of time is something that needs to be done mechanically. And I believe that in these severe emphysema patients, that the mechanical solution we provide is gonna be much more durable over time for these patients, and I think they'll do well. If you look at what this means for the market, though, I think it's great for the market. You've got more marketing dollars going in. You've got more awareness to COPD. You've got more of these patients that are suffering, that didn't know there was a treatment, going in to talk to these referral physicians, these COPD physicians that are out in the community, and then, as they go through their workups and they get their pulmonary function tests, and they get their CT scans, and they start to understand what this patient's true health profile looks like, then we'll start to see probably more referrals into the people that are treating physicians. Got it. Jumping around for a second back to CONVERT-2. Yep. Is there any reason that the results in CONVERT-2 might look different than what we saw in CONVERT-1? Obviously, there's gonna be slight differences in the patients and all that, but are they pretty, the entry criteria, pretty similar? Everything's pretty similar. We've got a different patient or a physician population now that we're in the U.S. as well, so it's not just European physicians in CONVERT-2. But I don't see that posing a problem. I think my expectation or my hope would be that they are similar. Got it. That's helpful. Mehul, we'll get you back involved. The 2025 question. What are some of the kind of puts and takes for next year we should think about? Yeah, I think, Larry, we'll guide on 2025 on the Q4 call. We're not gonna talk about 2025 at this point. All right, no reaction to consensus? No reaction. Okay. All right. If I can take the bait a little bit there? Yeah. So, I think if you look at it from a U.S. perspective, some of the things that we're doing, I would expect to see those start to pay out in 2025. We'd like to see some results from that. OUS, as I mentioned, I think that will become a bigger growth driver for us over time. So, I think that will provide some benefit to us in 2025. I think there's a number of different factors that we've gotten from our sales force, our sales force processes that we've put in place. And then as we continue to speak to some of these larger administration organizations, I think we'll be in a good position for 2025. A couple follow-ups. The international, those that you described earlier, most of the international initiatives sounded like they were 26, not 25, like Japan, maybe- Yeah, I just mean our- Yeah ... our standard international business. Yeah. Our core international business, which has been significantly slower growing. Right. We would like to see that pick up and not be as dilutive to growth in the future. In China, you Yeah ... talked about a change there- Yeah On the Q2 call. Yeah. What's the latest there? So we signed a distributor in China. It's... I'd actually, I'm familiar with them through my past life. They, when we look at that, I think we'll take a little bit of a margin pressure from that, but from an operating margin perspective, it makes sense to do this. It allows us to ramp that up, and I would see China as probably a more a larger growth lever for us in 2026. Okay. And the U.S. initiatives you're talking about, it's just the workflow, the pilot program you mentioned earlier, that you think will drive, perhaps bear some fruit? Yep. Yeah. The workflow initiative is not small, right? I mean, we've got a product, this LungTrax Connect, that we've launched, and I think that'll be helpful. And then, obviously, we've done some work with the sales force to make sure that we're focused on our tier four, five, and six accounts. We're driving patients to tier four, five, and six, where they start doing marketing, where they start reaching out to their referral population. Did you wanna take the bait on the consensus sales number for next year, too? That's his department. How are you guys feeling about cash and profitability? Yeah, we still stand by the statement that we made earlier, that we believe we have an operating plan which has a set of assumptions on revenue growth, gross margin, improvement initiatives, and OpEx, both on the R&D side and the SG&A side, to be able to reach break even with the cash on hand. And that's continuing investment in our clinical trials, as well as supporting revenue growth initiatives. And have you said what revenue you need to break even on an EBITDA and operating income basis? We haven't provided any revenue levels or timing at this point in time, Larry. Steve, how are you spending your time now? How has that changed since you, you know, first took over? You know, I spent a lot of time working with the commercial team right now. I spent a lot of time in the field with customers. There are people that, as we look to build programs and not sell products, that's a higher-level sale, and so it's helpful for me to be involved in those. I was telling a story earlier today where we had a CEO of a hospital I had dinner with on Thursday of last week. He brought in the director of pulmonology, brought in the director of business development, brought in an interventional pulmonologist as well, and we sat there and discussed how do we build a program here so I don't have a hobbyist, right? I've got a full program, and they've committed to bringing in not only the coordinator but a nurse practitioner and doing marketing, and they've committed to a lot because they see the value in the long-term growth of a program... a lung health program for that hospital. So I've been getting involved with that quite a bit. We obviously, our operations team does a great job. They're located in Redwood City as well, so I get to spend time with them. We've talked about LungTrax Connect and what's next after LungTrax Connect? What does that next generation look like? I think what we start looking at is there ability to get more into patient screening. So these hospitals have large databases of data, and they're sitting on a ton of patients that they don't even know. Is there a way that I can get in and look at the PFTs, the pulmonary function tests that were done, and identify patients that might be good candidates? How do we work in conjunction with the hospital to identify patients that are currently in their system? I've been spending a lot of time on that. There's third-party vendors that do that. Are you working with any of them? We hear a lot about that on the cardiology side. So I think they're primarily doing CT scans, right? Or- Yes. Yeah. So we do- Echoes and CT scans. Yeah, yeah. We work with... We've talked to some third parties. We have some partnerships with third parties right now for our StratX product, as well as our LungTrax Connect product. So, I think the scanning and our ability to go in and mine these patients for customers is something that we've got some experience with. But to your point, yeah, there are other parties that we would look at and work with. Are there other, companies like, that you could partner with, that are in interventional pulmonology that, you know, there might be some synergies with? There are. Will you say any more? You know, and we talk to them. I mean, there's a lot of companies in this space. I think one of the things that you see is with all the AI that's coming out right now, and these companies that are all doing different things, with CT scans and with all sorts of different testing that's coming out, and even standard chest X-rays. There's a lot of companies out there that have technology that can go in and identify different things than what that patient came in for. I've joked in the past about this, you know, you have to trick a cigarette smoker to come in and get a CT scan. It happens when they get in a car accident, or it happens when something else happens to them. You end up with that CT scan. How do you work with the hospital to identify those patients that are prime targets for valves, when they might just pass through the emergency room department and never get noticed? And so we are looking at different ways to do that. Interesting. You know, I'm sure you met with a lot of investors today. What are some of the things that you feel are underappreciated about Pulmonx? What are people not asking? Well, you know, it's interesting. A lot of the questions are the same. They're very similar to what you ask, and we get asked them often. My point today with investors was we've got momentum across the board, where the company is doing really well. And it feels like we're just undervalued for it. Since I've come in, we talked right out of the gates, I think, right when I started, and I said, "Larry, what's the overhang here on the stock?" And you said, "Well, you're what happened to the prior management? You've got an interim CFO. We don't know what you're gonna do with guidance. We don't know what you're gonna do with the strategy. Yeah. I think we checked all those boxes. The next question is: What's your cash flow position? We reiterated that we have enough cash to get the cash flow break even. So, it's a lot of the similar questions, and really what it comes down to me is, it's like, okay, so we're gonna go out there and we'll. Since then, we've had two quarters where we've hit the number. We've checked all the boxes that we said we were gonna check. We haven't let anybody down on anything, and it's, and the stock is where it is, and I can't control that. I think there's macro factors involved, but it's, at the end of the day, like to your first question, I think we're undervalued, and so I think people should invest. Perfect. Well, look, I guess that, that's probably a great place to end. Steve, Mehul, thank you so much for being here. Thanks. Look forward to, you know, watching your progress. Appreciate it. Thank you. Thank you.