Thank you everyone for joining. My name is Jon Young, I am one of Canaccord's senior med tech analysts, and we are thrilled to host Pulmonx for this fireside chat. With us today is President and CEO, Glen French, and Chief Operating Officer and Chief Financial Officer, Derrick Sung. The company reported second quarter 2026 results in late July, reiterating full-year guidance while raising its gross margin outlook and lowering its OpEx outlook. Let me please jump into some Q&A right now. Glen, you returned to Pulmonx as CEO nine months ago, and this year you have been largely finished rebuilding the sales system after turnover had spiked to what you described 2x- 3x normal levels. Stepping back, how would you characterize where the company stands today versus where you found it nine months ago, and what has been the biggest surprise along the way? Well, we have filled all of our sales leadership openings that we had. We had a significant amount of turnover last year in our sales organization, so that was the first level thing that we needed to do. We reorganized the U.S. sales situation such that we created two openings in that leadership team. We actually only had one that was sort of unanticipated. So we had two people that we promoted. We divided the country into half, and that duo reports directly into me. So that was a change over what the prior structure was. We have been focused on filling sales territories. Most of those have been filled. I would characterize turnover as return to sort of industry norms or sort of in that neighborhood. So, I feel like that is substantially the first- level objective that we were looking to accomplish, and the second was just to simplify the focus within the sales organization, which may be the subject of another question that you have. The thing that surprised me or the thing that I found most interesting on my return was sort of exogenous to the company. The interventional pulmonology space, I think since I do not know if anybody knows my background, but I was with the company for about a decade. I retired for 18 months, stayed on the Board, and then came back to the company about nine months ago. So that, with regard to what changed since I left, if you will was just the pulmonologist was really lower on the totem pole of priorities within hospitals when I left. I have to thank Intuitive Surgical and their Ion robot, which really brought, I think, pulmonology sort of to a higher level, requiring a $1 million investment or on that order. There has been a lot of cases and a lot of staffing that has strengthened as a result of that, and I think that is very good for the interventional pulmonology space in general. So that was probably the biggest change. Got it. You have really been pretty clear with investors on your three priorities since coming back. It was re-accelerating sales growth, driving near-term operating leverage, and the third one is really advancing clinical initiatives like AeriSeal. As the turnaround story continues and matures, how should investors think about the next chapter of Pulmonx once you have returned back to this consistent growth? Yeah. Well, we feel like as we talked about just a moment ago, that we are just getting started as it relates to the opportunity that exists to just focus our organization, to have folks, got to have the butts in the seats, get people trained up. Our tenure is substantially less than what it used to be, so we have got to get training as a central focus, and we will be executing on that plan, and realizing, we think, benefits from it well into next year. Late next year, we expect, or sometime next year, we are going to be finished with our AeriSeal trial. We have the CE mark on AeriSeal already. We have been holding off on launching outside the United States for two reasons. One, we wanted to make sure we had the study done, and there are some enrolling sites in Europe, and we did not want the commercialization to get in the way of the execution of this study because it is on the critical path to the U.S. marketplace. That has been something that we have been largely focused on. The other thing is we are waiting for the publication of the CONVERT I trial, which was essentially a predecessor trial that is largely a replica of CONVERT II, and that has been written up and submitted, and we are hoping to get that published. We need those two things to be done, and then we will commercialize in the back half of next year. AeriSeal provides us with an opportunity to both realize revenues from it unto itself, and also should be a nice TAM expander for our valve business. That is the sort of the next stage as we look into the future. And when you came back to the company, I remember asking you, the sales force execution, was it a people issue? Was it a focus issue? And I know that part of the turnaround now has been the rebuilding of the sales force. But to get investors comfortable, you've talked about this bench that you've built out in the sales force of these junior reps, essentially more or less, that could step into open territories as they come through. How big is this bench of junior reps do you have now today at Pulmonx, and how durable is this? And what gives you confidence that the sales force turnover now will just stay at industry levels that you've highlighted? Okay. There's a lot of different things. Sorry. No, no. We have the United States, every inch of the United States is divided up into 42 different sales territories. About 22 of those territories have a junior rep in them. Typically, that is because it is, revenue-wise, a very big territory and there's a lot going on, or geographically, and/or geographically, it's very big. And so we have these junior reps to help cover. This is something that we implemented, this junior rep concept, essentially, we started before I left. Over the years, we've had at least a dozen of them that have come in and have been promoted into territory management roles. But it wasn't the primary reason for the creation of this junior rep, if you will. It's kind of a really nice benefit that comes from it. With regard to turnover, I think that the turnover that we had in my first stint was quite a bit lower than what we experienced as of late. To be fair, the high turnover only really happened in 2025. I think that in retrospect, we created a bit of a perfect storm that caused some number of people to decide to leave. We have modified that significantly and don't expect to return to that level, because we've modified those things that we think were central to the decision for those folks to leave. Great. Derrick, I don't want to forget you. Maybe just talk a little bit about the guidance from Q2. You reiterated the revenue guidance, so it's $90 million-$92 million, but you increased gross margin guidance to roughly 76%, and OpEx, you lowered to about $109 million-$111 million. Maybe you could just walk us through the puts and takes of that guidance. What is driving these efficiencies, especially when there's so many levers that you guys could pull to really invest in this business as it continues to grow? Yeah, thanks for the question. I'll try and step through each one of those. Let me start by saying that we're really focused on delivering what we say we're going to deliver, and not getting out in front of our skis in terms of the commitments that we make, right? We understand that we're kind of a show-me story right now, so we really want to demonstrate progress in our results rather than our words. With that context on the top line, starting there, we did reiterate our guidance of $90 million-$92 million. We feel really good about the progress that we're making in terms of the commercial turnaround, specifically in the U.S., and re-accelerating or driving ourselves back to growth. I'd say we're on track, kind of right where we expect to be in terms of our plan, and that's reflected in our confidence in delivering the guidance that we set out. So that's the top line. On gross margin, we did raise our gross margin guidance last quarter. We've been seeing some very nice expansion of our underlying gross margin over the last couple of years due to production efficiencies as well as taking cost out of our supply chain. That is reflected in both the guidance and the results that we put up. Now certainly, the 78% gross margin that we put up over the last couple of quarters is benefiting from our mix of distributor sales, and that's impacted by a lack of sales into China. Even sort of excluding that, we do feel really good that our gross margins at scale and with a normalized distributor mix will be at or above around 75% or so. So that's how we think about gross margin. On OpEx, we've made really good progress in taking cost out of our cost structure. We implemented the cost restructuring initiative at the start of this year. That took out roughly 10% of ongoing recurring costs out of our cost structure. That's reflected in our Q2 numbers. In our Q2 numbers, we saw cash OpEx down roughly 11% year-over-year from prior quarter. So, we feel good about that. A lot of that's coming from areas like G&A. Our spend got in front of our revenues throughout last year, and so we've dialed that back. We were very careful not to impact areas around commercial, around our key investments in R&D when we did that. That operating leverage that you are seeing come through is a reflection of the cost restructuring that we did. Now, you did mention the guidance change that we made on OpEx. That primary change in guidance reflects a reduction in our stock-based compensation expense, which as you know is a non-cash charge. That came down because of the change in the fair value of our shares as a result of our lower stock price. So that is a non-cash charge, but we are making really good progress. We are right where we expect to be in terms of managing our cash OpEx, and that is driving the operating leverage that you are seeing. Great. Then maybe just on Q3 seasonality, you flagged typical sequential Q3 seasonality on the call. The sales force is still ramping. Is there anything about this year that can make the seasonal pattern that you see in Q3 either less or more pronounced than usual? Yeah, the best information that we have is based on our past experiences. Again, we do not want to set expectations based on speculation or anticipation of what is going to happen. When we look back, we have typically always seen that seasonal guidance or that seasonal variation that we talked about, where Q3 is flat to slightly down to Q2, and so that is where we are setting our expectations at this point. Great. Then maybe we could just go over the Q2 results. How should we think about the contribution to growth you're seeing so far during this turnaround from newer reps ramping, from the new center additions that you continue to have, or just deeper utilization at these high-volume accounts that you're surrounding with resources so far? Yeah. We are very much just focused on the basics here and filling these. We still have some number of open territories. We're bringing people up to speed quickly. We've made changes to our sales training process to enable that. The redundancy that we have in more than half of our territories where we have these junior reps facilitates that coming up to speed much quicker as well. Depending on whether these are larger or smaller territories, the larger territories, it's easier to come up to speed quickly because you just have more things going on that you sort of drink from the fire hose and come up quickly. So we feel good about sort of the direction that we're in and our ability to come forward and haven't allocated, if you will. We're not counting on new accounts to drive this. I think what we absolutely know is that territories that have reps in them do better than territories that don't, that we need to have a champion who is there doing the procedure, and that we need administrative, some degree, a fractional person, a clinical coordinator to help with the efficient execution at those sites. So the reps are engaged with those folks, meeting with them on a weekly or every other week basis, planning cases and just executing. So we're counting on driving that business through existing accounts. But we anticipate on a quarterly basis on the order of 10 new accounts that will present themselves as well. Maybe just an update on direct- to- physician and direct- to- patient marketing. I know it's been a big part of the Pulmonx story. How are you utilizing that and what's the return that you're seeing today on that so far? Yeah, that was one of the things that I think from a 30,000 ft view basis, we changed fairly significantly when we came back in. I think as part of the cost restructuring, we were wondering whether we had the right approach to direct-to-patient activity. We spend a pretty good amount of money on that on an annual basis, and we were taking what I would describe as a shotgun approach. There's a certain amount of benefit from a cost perspective that you get from doing that activity on a national basis. But the fact is that we just have a few hundred accounts that are doing this procedure by design. We have these Centers of Excellence, and so we, Derrick and I, and others hypothesized that it could be more efficient to focus our energies on geographies where we actually have all this trio of things that I just mentioned in place in some number of accounts in that geography. We've undertaken a much more focused direct-to-patient activity. It's a little bit more expensive on a per-patient basis, but we get a much greater yield on that investment, and we've been very pleased with that change. As we sit here mid-August, you guys always have a pretty good viewpoint through StratX of the pipeline and how it's looking. Are you guys willing to share any incremental details of what the StratX activity has been recently, how it's lining up with your projections, anything along those lines? Well, we appreciate the StratX question. We typically don't answer it very directly. But what I will say is StratX is a quantitative CT analysis software that helps us understand whether a patient is likely to be a candidate for our procedure. If they are, we call those a StratX green light, and then there's a certain percentage of those patients on a macro basis that will make it to the procedure. There's a number of tests that have to happen from that point forward, and there's some amount of fallout along the way. One of the reasons why we don't talk about the specifics is it's very geographic- specific. It's very site- specific on the yield of a StratX green light, and there is a high degree of variability on the timeframe. In some ways, we have a very good sense of what's the probability that a StratX green light ultimately gets treated, and not nearly as good a resolution on when exactly they're going to get treated. Things are lining up. They are looking strong. We are, as Derrick had said, where we expect to be given the guidance we've provided. Then China, you got your registration renewal in mid-June, so congratulations on that pretty important de-risking event. You are now expecting revenue early 2027, but I know China revenue has been historically a bit lumpy. How should we think about that revenue cadence for next year if you guys are willing to share that yet? Yeah. We're very pleased to have gotten the renewal of our registration certificate in June. There is now some work that we need to do, and we're closely partnered with our distributor there to restart commercial activities in the region. We're getting accounts back up. There were some accounts that may have paused in treating patients over the last six months or so. We're getting those back up, reregistered, et cetera. We expect to go through those activities through the remainder of the year. Right now what I can tell you is we're expecting our first shipment into our distributor at the latest in the first part of next year, early next year. We do expect to get back to a cadence of shipments there. I can tell you that our last full year of China revenue, which was in 2024, we did roughly $2 million-$2.5 million in sales. We would expect to, over time, get back to that and exceed that. I'm not going to give a timeframe, though, in terms of sort of how long it'll take at this point. Yeah. We were growing nicely when these things happened. As you said, the business was lumpy to begin with. Yeah. When you had tariffs and the registration thing, it got even lumpier. But I think the last part that Derrick just outlined is really the key as to what the magnitude is that we expect, and we do expect that to continue to grow. Maybe we can turn to AeriSeal and CONVERT. We started with it, but maybe just a little bit more on that one. It will be a 20% TAM expansion opportunity for the company, and there is a lot of benefits to it. Maybe we just walk through it. Obviously, you will be able to sell the product first. Yeah. I don't think you have really talked yet about ASPs or revenue benefit from it. Yeah. Is there anything we could think about today as you guys contemplate as you get closer to having the CE mark on the product— Yeah. —And maybe getting some commercial revenues from that? Well, we're not going to talk about the ASP today. No, no. For those of you who don't know what AeriSeal is, our treatment, this StratX that we had talked about, the quantitative CT analysis software, identifies patients who are likely to benefit from our treatment. We schedule them for the procedure, and right before we put in valves, we do a test with what we call our Chartis catheter, where we go in, blow up a balloon, and effectively simulate the procedure to see whether the patients, if we were to block off that region of the lung, are going to receive the benefits of our treatment. About 20% of the time we do that, it ends up that the patients are CV positive, which means that the valves won't work in them. 20% of the time, the physician wakes up the patient and gives them the terrible news that they didn't get valves, and there's nothing else that can be done. That's an incredibly negative thing for the patient. It's a negative thing for the physician who does the procedure. The physician who referred the patient normally has a tear-filled patient who shows up at their office saying, "I went all the way down this path, and they put me under and they woke me up, and I couldn't benefit from the procedure." AeriSeal is an injectable polymer which is designed to close off the air channels, essentially like a tire patch kit, if you will, in an effort to try to take patients who are objectively CV positive and make them CV negative. We've done and completed one trial that we've already reported on. It is in the process of being published right now, but it has been disclosed broadly in scientific forum, that 75% of the time we seek to make somebody CV negative, we are successful in doing so. Which to us, in rough terms, means we could go from having something for, say, 80% of patients that we put under anesthesia to close to 95% of patients that we put under anesthesia. That's the way AeriSeal, this injectable polymer will be sold, so it will be a revenue generator. The TAM expansion that you talked about was the opportunity to now place valves in roughly 20% more patients than we had in the past. Do you think the benefit is those physicians not having that experience of a patient coming back to them saying, "I want this therapy. I couldn't get it," then perhaps they stop recommending it to other patients? Is that a big friction point that you've identified today? Maybe can you just walk through how you think that AeriSeal will help with the revenue model overall as you— Yeah. —Continue to expand this therapy? I think any physician who refers somebody to another physician for a procedure is trying to get to a certain end. It's a disappointing feedback loop, and undoubtedly a negative feedback loop when one out of five patients comes looping back in tears into their office saying that they couldn't help me out. So yes, I think that's an issue. It's not a measurable thing. It's very difficult to measure. But it's certainly not positive. We want to reduce that, so that's great. The other thing that I'm excited about, and I know a lot of physicians are excited about, is that every time we do place valves, we go into that procedure with a primary target and a secondary target, meaning that we have a primary lobe that we're trying to treat, and if we find that that lobe is CV positive, we'll go to a secondary target. The difference between the two might be the primary target's got 1 L of trapped gas, the secondary target's got half as much trapped gas and isn't nearly as destructed. They'll go to the secondary target rather than waking the patient up and saying, "We did nothing." So AeriSeal also provides the opportunity for the doctor to make the decision as to whether they want to place valves in the secondary target when that presents as the only option, or whether they want to try to go after the primary target by placing AeriSeal today. Okay, great. We're running out of time, so just maybe our closing one. Just as you look out for the next 12 - 18 months, what is the one thing you want this room of investors to take away about where Pulmonx is headed? We're headed up. We're committed to returning to growth. I think we've done a great job with our cost structure. It's fundamentally reduced. We basically cut our burn by a substantial amount. Nearly half in the last quarter. We think we're going to try to be careful with regard to the commitments that we make and be certain that we do everything possible to deliver on those. Great. Thanks, Glen. Thanks, Derrick, for being here today. Appreciate it. Thanks, Jon. Thank you.