Pulmonx (LUNG) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, March 4, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Glendon French
• Chief Operating Officer and Chief Financial Officer — Derrick Sung

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TAKEAWAYS

• Worldwide Revenue -- $22.6 million for the quarter, down 5% year over year and down 7% on a constant currency basis.
• Full-Year Revenue -- $90.5 million, up 8% year over year and up 7% on a constant currency basis.
• U.S. Revenue -- $14.1 million in the quarter, an 11% decline year over year; $57 million for the year, a 1% increase.
• International Revenue -- $8.5 million in the quarter, up 8% year over year and up 2% on a constant currency basis, with growth in Europe offset by no China sales.
• Gross Margin -- 77.6% for the quarter, compared to 74% in the prior year, primarily due to lower distributor sales mix internationally; 74% for the full year.
• Operating Expenses -- $27.4 million for the quarter, down 11% year over year; $120.8 million for the year, up 1%, including $19.3 million in non-cash stock-based compensation.
• Net Loss -- $10.4 million for the quarter ($0.25 per share), compared to $13.2 million ($0.33 per share) in the prior year.
• Adjusted EBITDA Loss -- $5.5 million for the quarter, down from $7.5 million in the prior year; $30.6 million for the full year.
• Cash Position -- $69.8 million in cash, cash equivalents, and marketable securities as of December 31, 2025.
• Expense Reduction -- Over 10% cut in ongoing operating expenses through cost restructuring.
• Debt Refinancing -- $60 million credit facility with five-year, interest-only structure, extending debt maturity to 2031 and providing access to an additional $20 million conditional on revenue milestones.
• Cash Burn -- Projected to decrease nearly 30% from $32 million in 2025 to $23 million in 2026.
• Headcount Turnover -- CEO French stated, "The magnitude was directionally on the order of half of the sales organization across the year."
• Strategic Priorities -- Reaccelerate U.S. sales growth, advance TAM-expanding clinical initiatives (notably AeriSeal/CONVERT2 trial), and align spending for operating leverage on profitability timeline.
• 2026 Revenue Outlook -- Guidance for $90 million to $92 million, with year-over-year growth in both U.S. and international sales expected to return in the second half.
• Operating Expense Guidance -- $113 million to $115 million, including $21 million in anticipated non-cash stock-based compensation; 7%-9% decrease expected excluding stock-based compensation.
• China and Japan -- Minimal China sales expected in the first half of 2026 due to certificate renewal delays, with sales resuming in the back half; Japan post-approval study enrollment continuing, though not a meaningful 2026 growth driver.
• R&D Expenses -- $4.6 million in the quarter, up from $4 million in the prior year, citing increased clinical trial activity.
• Sales Force Structure -- CEO French stated, "The majority of our territories in general, and certainly virtually every single one of our larger territories, has this combination."
• Full-Year International Revenue -- $33.5 million, up 23% year over year and 19% on a constant currency basis, but China accounted for less than 5% of total revenue.

SUMMARY

Pulmonx Corporation (NASDAQ:LUNG) reported a year-over-year decline in quarterly U.S. sales and significant turnover in its U.S. sales force, primarily attributed to internal structural and incentive issues. Management enacted over 10% in recurring cost reductions and restructured its debt with a new $60 million, five-year credit facility, enhancing liquidity and extending debt maturity to 2031. Guidance for 2026 projects $90 million to $92 million in revenue with a strategic focus on recovering U.S. growth, limiting operating expenses, and progressing the AeriSeal clinical pipeline.

• The company expects to achieve nearly 30% lower annual cash burn in 2026 compared to 2025.
• Guidance factors in a "linear-ish step up" in U.S. revenue, with high-single-digit growth targeted by the fourth quarter, despite early-year declines.
• International performance is forecast to be muted in the first half due to minimal China sales, with a resumption expected in the second half after certificate renewal.
• Management is "committed to demonstrating meaningful operating leverage," projecting a 7%-9% reduction in adjusted operating expenses for 2026.
• The AeriSeal CONVERT2 pivotal trial is expected to complete enrollment by 2027, with potential to expand the global addressable market by approximately 20%.
• Gross margin is forecast at approximately 75% for 2026, trending lower in the back half as distributor sales increase.
• CEO French stated, "our guidance implies that we will be growing double digits by the fourth quarter" on a global basis.

INDUSTRY GLOSSARY

• TAM (Total Addressable Market): The estimated total revenue opportunity available for a product or service, referenced here in connection to the company's expansion efforts via AeriSeal.
• Zephyr Endobronchial Valve: A minimally invasive device designed for treating severe emphysema by reducing lung hyperinflation, central to Pulmonx Corporation's product offerings.
• AeriSeal: An investigational pulmonary sealant evaluated in the CONVERT2 trial for treating severe emphysema patients with collateral ventilation, targeted at expanding Pulmonx Corporation’s market.
• CONVERT2 trial: Pivotal clinical study assessing safety and effectiveness of AeriSeal to enable treatment of previously excluded emphysema patients.
• LungTrax Detect: Image-based technology aimed at identifying candidates for Zephyr Valves, referenced as a selective but not universal sales focus.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, excluding certain non-cash and non-recurring items, stated as a measure of operating performance.

Full Conference Call Transcript

Glendon French, President and Chief Executive Officer, and Derrick Sung, Chief Operating Officer and Chief Financial Officer. Earlier today, Pulmonx Corporation issued a press release announcing its financial results for the quarter ended 12/31/2025. A copy of the press release is available on the Pulmonx Corporation website at investors.pulmonx.com. Before we begin, I would like to remind you that management will make statements during the 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, without limitation, those relating to our operating trends, commercial strategy, 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 expenses, cash usage, commercial expansion, 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 11/12/2025. Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the press release posted on our 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, 03/04/2026.

Pulmonx Corporation 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. I will now turn the call over to Glendon. Thank you, Laine.

Glendon French: Good afternoon, everyone, and welcome to our fourth quarter and full-year 2025 earnings call. Since returning as CEO, I have conducted a thorough review of our business, and I am both confident in the company's future and determined to accelerate its progress. During the past few months, Derrick and I have taken a deliberate bottom-up approach to assess the business, building on what is working, addressing what is not, and better aligning our spending with our strategic goals. We conducted a line-by-line review of all programs to identify and prioritize those with the highest returns on capital, with an emphasis on balancing growth with profitability.

We have already taken significant steps to realign our cost structure while preserving key commercial and clinical investments. Derrick will provide additional details on the impact of this prioritization along with our recently announced debt refinancing, which significantly strengthens our balance sheet and provides greater financial flexibility as we execute on our strategy. Our top three priorities are clear. First, reaccelerating U.S. sales growth; second, advancing our TAM-expanding clinical initiatives; and third, aligning our spending to deliver continued financial leverage as we move predictably toward profitability. With this backdrop, I would like to walk through our initial assessment of what drove our weaker-than-expected U.S. revenue performance last year.

At a high level, we believe the underperformance was largely due to internal operational and executional challenges. First, the U.S. sales organization was stretched across too many competing initiatives, some of which were not fully tested, distracting our sales team from critical activities. This diluted operational focus and challenged efficient execution. Second, at the beginning of 2025, U.S. Territory Manager roles and responsibilities were materially altered in a way that later proved disruptive to the sales organization. And third, the 2025 U.S. sales incentive structure proved to be suboptimal in effectively directing and motivating our U.S. sales organization. Altogether, these issues resulted in significant turnover in our U.S. sales organization during 2025, disrupting customer continuity and account management.

While our assessment is ongoing, these insights have meaningfully shaped the strategies we have already begun to implement. Our first area of focus has been on organizational alignment to optimize our resourcing and decision-making in critical areas. Derrick and I are leaning on talented leaders within the organization, allowing us each to have fewer direct reports so that we can dedicate substantial time and attention to the company's most important priorities. As a result, I have taken a more direct role in day-to-day operations of our U.S. sales organization and our two U.S. Area Vice Presidents now report directly to me.

We have also established new leadership of our Clinical Affairs organization in order to accelerate enrollment of our CONVERT2 trial of AeriSeal, a critical step towards significantly expanding our addressable market. A cornerstone of our refined sales strategy is returning our attention to our customers' clinical and operational excellence and refocusing on what we know drives results. In 2025, our sales team was asked to manage an increasingly broad and prescriptive set of initiatives, including multiple new call points and services like LungTrax Detect.

While well-intentioned, this breadth of initiatives did not deliver the expected return on sales force time and came at the cost of focus on the foundational strategies that both built our U.S. and international markets and drove consistent growth over the years. We are now streamlining priorities of the U.S. sales team to a small set of high-impact mandates that we know drive results. Our commercial strategy follows a deliberate near-to-far approach where we are focused initially on those opportunities that are nearest to our critically important treating physician before shifting our attention to those opportunities which might be farther away.

This includes better supporting our treating physician, engaging Pulmonary Service Line Directors within hospitals, and prioritizing our COPD and patient education efforts in those areas closest to our well-established treating hospitals. That means three things. First, the strongest programs begin with clinical performance of our Zephyr Valves and the confidence of our physician champions. These champions are essential in establishing clinical protocols, bringing colleagues along, and ensuring that patients who need this therapy receive it in a timely manner. Our experience consistently shows that front-line clinical buy-in is the foundation of every high-performing center.

We are now empowering our sales team to reengage with the clinical champions at their treating centers rather than diverting time to what have proven to be lower-return activities away from these physicians. Second, when strong clinical leadership is matched with the right administrative support, it makes a significant difference in helping patients move through the funnel efficiently and scaling the program. With that in mind, we are prioritizing engagement with Pulmonary Service Line Administrators rather than initially trying to reach top-level C-suite administrators who are typically less accessible.

By focusing on administrators who are closest to the pulmonary and thoracic service lines, we ensure that our therapy is effectively protocolized into daily clinical workflows and that staffing is aligned to support them. Third, we must ensure that there is a steady flow of patients to our treating centers and that each patient is supported through every step on their path to treatment. To ensure that patients are aware that valves may be an option, we are first focusing on physician education efforts within hospital systems that already offer valves before expanding outreach to the broader community.

Similarly, we are concentrating our direct-to-patient efforts on geographies with established treating centers that have the capacity to accommodate interested patients rather than spreading those efforts broadly across the country. We expect this focus to meaningfully increase the return on invested time and resources. Taken together, these changes are designed to foster the right culture and consistency for a more stable, high-performing sales force with lower turnover. With the majority of our open U.S. sales positions now filled, we are encouraged by the early positive feedback from our team, which reinforces our confidence that these actions are resonating internally.

That said, it will take time for our newly filled territories to ramp up in productivity, leading to our expectation that U.S. sales growth will resume in the back half of this year. Turning to our pipeline. Our AeriSeal program remains a key focus and represents our nearest-term opportunity to expand our market. We continue to view AeriSeal as a way to reach a large number of severe COPD patients with collateral ventilation who are not candidates today for treatment with Zephyr Valves. Our CONVERT2 pivotal trial is an important step to bringing this novel technology to market.

The trial is designed to evaluate the safety and effectiveness of the AeriSeal system in limiting collateral ventilation in patients with severe emphysema. With our strengthened clinical leadership team now in place, we are pleased to see enrollment momentum accelerating. We continue to see strong potential for AeriSeal as both a revenue generator and a market expander for Zephyr Valves over the medium and long term. We expect enrollment in the trial to be completed in 2027, which would bring us one step closer to potentially growing our total addressable market by an estimated 20% globally. In conclusion, 2026 will be a year of focused execution at Pulmonx Corporation.

We remain confident in the business and are excited to rebuild momentum through a clear operating plan that targets our highest-impact initiatives. We have much greater visibility into what went wrong last year, and we have already begun taking decisive action to fix it. And we have the right strategy and the right people in place to execute. I returned to Pulmonx Corporation because I believe deeply in this technology and what it means for patients who have few treatment options. That conviction has only grown stronger over the past few months. We have work to do, and we are doing it, and we look forward to demonstrating that progress to you in the quarters ahead.

With that, I will turn the call to Derrick to briefly review our fourth quarter and full-year performance as well as our expectations for 2026.

Derrick Sung: Thank you, Glendon, and good afternoon, everyone. I would like to start off by commenting on two significant developments that meaningfully strengthen our financial outlook and balance sheet as we position the company for profitable growth. First, we recently executed a cost restructuring initiative that reduced our ongoing operating expenses by over 10%. With this action, we believe we have achieved an appropriate balance between expense management and continued investment in our key growth initiatives.

Second, we are very pleased to have recently closed on a $60,000,000 credit facility with a five-year, interest-only structure that meaningfully strengthens our balance sheet by extending the maturity of our existing debt out to 2031 and by providing us with access to additional undrawn capital. The initial $40,000,000 term loan drawn at closing refinances our previously existing loan, and we now have an option to draw an incremental $20,000,000 through 2027 subject to the achievement of certain revenue milestones. Taken together, these two developments provide us with increased balance sheet flexibility and cash runway over the next few years as we focus on rebuilding momentum in our core business and advancing our clinical priorities.

We are committed to demonstrating meaningful operating leverage and reducing our cash burn starting in 2026. As a case in point, we expect to significantly decrease our annual cash burn from $32,000,000 in 2025 to $23,000,000 in 2026, representing a reduction of nearly 30%. Now turning to our recent performance. Total worldwide revenue in the fourth quarter of 2025 was $22,600,000, a 5% decrease from $23,800,000 in the same period last year and a decrease of 7% on a constant currency basis. Worldwide revenue for the full year ended 12/31/2025 was $90,500,000, an 8% increase over the prior year and a 7% increase on a constant currency basis.

U.S. revenue in the fourth quarter was $14,100,000, an 11% decrease from $15,900,000 during the same period of the prior year. We added 10 new U.S. treating centers during the quarter. U.S. revenue for the full year 2025 was $57,000,000, a 1% increase over the prior year. International revenue in the fourth quarter of 2025 was $8,500,000, an 8% increase from $7,900,000 during the same period last year and an increase of 2% on a constant currency basis. International growth was driven by continued strength in our major European markets, offset by a lack of sales to our distributor in China.

Our distributor continues to work through inventory from large orders placed in 2025 as we await the renewal of our Chinese registration certificate, which we expect in 2026. International revenue for the full year 2025 was $33,500,000, an increase of 23% over the prior year and a 19% increase on a constant currency basis. Gross margin for the fourth quarter of 2025 was 77.6% compared to 74% in the prior year. The year-over-year increase was driven primarily by the lower mix of distributor sales in our international markets. Gross margin for the full year 2025 was 74%. Total operating expenses for the fourth quarter of 2025 were $27,400,000, an 11% decrease from the same period last year.

Non-cash stock-based compensation expense was $3,900,000 in the fourth quarter of 2025. Excluding stock-based compensation expense, total operating expenses in the fourth quarter of 2025 decreased 10% from the same period of the prior year. Total operating expenses for the full year 2025 were $120,800,000, a 1% increase over the prior year. Non-cash stock-based compensation expense was $19,300,000 for the full year 2025. Excluding stock-based compensation expense, total operating expenses for the full year 2025 increased 3% over the prior year. R&D expenses for the fourth quarter of 2025 were $4,600,000 compared to $4,000,000 in 2024, reflecting increased clinical trial activity.

Sales, general, and administrative expenses for the fourth quarter of 2025 were $22,900,000 compared to $27,000,000 in 2024 as we began to implement cost controls during the quarter. Net loss for the fourth quarter of 2025 was $10,400,000, or a loss of $0.25 per share, as compared to a net loss of $13,200,000, or a loss of $0.33 per share for the same period of the prior year. An average weighted share count of 41,400,000 shares was used to determine loss per share for the fourth quarter of 2025. Net loss for the full year 2025 was $54,000,000, or $1.33 per share. Adjusted EBITDA loss for the fourth quarter of 2025 was $5,500,000, as compared to $7,500,000 in 2024.

Adjusted EBITDA loss for the full year 2025 was $30,600,000. We ended 12/31/2025 with $69,800,000 in cash, cash equivalents, and marketable securities, a decrease of $31,700,000 from 12/31/2024. Now turning to our outlook for 2026. We expect to deliver full-year 2026 revenue in the range of $90,000,000 to $92,000,000. Our revenue guidance contemplates a return to year-over-year growth in both our U.S. and international businesses starting in the back half of the year. In the U.S., we expect our recently filled sales positions and our refocused commercial strategy to gradually drive improving sales productivity as the year progresses. Internationally, we expect revenue growth in 2026 to be negatively impacted by minimal sales to our distributor in China.

Our guidance contemplates continued strength throughout the year from our European markets, and we expect year-over-year sales growth in our international business to resume in the second half of the year. We expect gross margin for the full year 2026 to be approximately 75%, trending slightly higher in the first half of the year and lower toward the second half of the year as we increase our mix of distributor sales. We are committed to demonstrating meaningful operating leverage this year. We expect full-year 2026 operating expenses to fall between $113,000,000 and $115,000,000 inclusive of approximately $21,000,000 of non-cash stock-based compensation expense.

Excluding stock-based compensation expense, our guidance implies a 7% to 9% decrease in operating expenses from 2025, reflecting our cost realignment efforts while maintaining investments in key growth initiatives. To conclude, we remain confident in the fundamentals of our business. We are operating with financial discipline and focus, and we are taking decisive actions to refine our strategy, regain sales momentum, and position the company to deliver sustainable and profitable growth over time. With that, I would like to thank you for your attention. We will now open up the call for questions. Operator?

Operator: Thank you. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for a name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of John Young from Canaccord. Your line is open. How is it going, Derrick? Thanks for taking the question this evening.

John Young: It is nice to see the operating leverage you are starting to demonstrate here. I want to ask on your comments on the Salesforce, particularly the comment that you filled all the new positions. Could you tell us the percentage of the sales force overall that turned over in Q4? And when did you start hiring and complete that hiring of the new reps? Thank you.

Glendon French: John, nice to hear your voice. The turnover was really across the entire year, so it was not in the fourth quarter. The magnitude was directionally on the order of half of the sales organization across the year. When we got here some number of those territories had been filled, so we have some folks who joined in the middle to back part of the year, and we have been about the task of filling additional openings since then. And we find ourselves now with nearly all of those openings filled.

John Young: And just as a follow-up too. You spoke a bit about the incentives not being aligned with the sales force last year. Can you talk about maybe some color on how you are incentivizing sales now? And what are the focus sales strategies now in the U.S. that you are really focused on with these new reps to get them up to speed.

Glendon French: The incentives that we have in place are not fundamentally different. I think the way that we had set things up at the beginning of last year was a bit of a challenge for many of our folks. One of the big questions—there are essentially two elements. One is the design of a compensation plan, and the second is the allocation of quota to each of the territories, and then how you do that is important.

And we embraced a new approach to the allocation of quotas, which involved a couple things that—both the amount of the quota that we allocated out and how we allocated it out across our sales organization—together conspired to create a situation where there were some number of reps who felt like it was going to be difficult for them to make the kind of money they were looking to make. And by the time we realized that this new system was not being constructive, we had started some movement that impacted us across the year.

As it relates to this year, we have been very careful both on the design of the sales incentive plan and with the allocation of those quotas and the amount of the quota that we are allocating at the initial point. So we basically looked at where we stubbed our toe in 2025 and simply made the changes, went back to those things that we knew had worked in the past, that were well received and well understood, and embraced many of those elements. So we are quite confident that we have in place a plan that is both viewed as quite reasonable as well as a design that I think people can get their heads around and get behind.

So it has been tested over time. Last year was the anomaly in terms of the construct, and, frankly, we paid a price for that.

John Young: Great. Thanks again.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Jason Bednar from Piper Sandler. Your line is open.

Jason Bednar: Hey, good afternoon, Glendon and Derrick. Thanks for taking the questions. I want to start here in U.S. business, if I could. Totally appreciate there is not a silver bullet in reversing the slide that the business has been through, but you have already taken a lot of action. You talked about applying a lot of initiatives that are underway. You talked about the sales force just in the prior question. That has been a big one. I guess my question here is why would the growth not come back sooner now that the sales force is fully in place and addressed? You had captive accounts that lost their covering rep or saw their rep change.

I would think there should not be new education with physicians that is necessary. You should not need to really prime the referral pump with patients into those treating accounts. So I guess why, again very simply, why would that not come back quicker in the U.S.?

Glendon French: Well, I think we have got a couple reactions to your question. One is that, as you saw across the year relative to prior year, we were in fairly steep decline. I think we had 11% growth year over year in the first quarter, 6% growth in the second quarter, 1% growth in the third quarter, and we just announced on the order of a negative 10% year-over-year situation. So we are springing off of somewhat spongy ground to begin with if you look at the shape of that curve. And we have, in many cases, some folks that are just coming up to speed. We feel great about the team that we have in place.

We have a construct where most of our sales folks are doubled up in geographies with a senior-junior rep alignment. So that is a design that allows people to come up to speed very quickly, but we want to be careful given the soft ground that we are springing off of here coming off of the fourth quarter and that the average tenure of the sales force being quite a bit different at this point this year as it was last year. So with that integrated in, that explains our back-half projection.

Jason Bednar: Okay. Alright. Fair enough. Appreciate that. And Derrick, I know you said you reduced the cost structure by 10%, something on the order of that number. Can you expand upon what changed? Where did you source those savings from? Is that a gross number? Or is the net savings lower since you have had to add back some spending on the sales force side? And then, sorry, the multi-partner, but with these changes that you made, can you give us a sense of what your fixed versus variable cost structure looks like now? Just so we can have an idea of how much torque you have in the P&L once that top line starts to accelerate later this year.

Derrick Sung: Hey, Jason. Thanks for the question. So we clearly got out in front of our skis over the last couple of years in terms of spending in anticipation of sales growth that just did not materialize in the time frame that we thought it would. So we did take the difficult, necessary steps to realign our cost structure to our current growth profile. The kind of the 10% reduction that I spoke of is roughly 10% of recurring costs across the board that we took out. There are some puts and takes. There are obviously some restructuring costs that we incur and that we are actually incurring this year.

And so when you look at the numbers, the guide that we are providing is a seven to 9% guide that incorporates some of that relative to what we were last year. The majority of the costs that we took out, and we were very careful to ensure that we kept our sights on continuing to invest in our key growth initiatives—namely, on the sales side, as Glendon mentioned, we are continuing to invest there. The sales force was not directly impacted by the cost restructuring. And on the R&D side, we are continuing to invest in our long-term future growth drivers, namely AeriSeal this year and into future years.

So most of the expense reduction came from G&A and marketing, and we believe that, with those expense reductions that we have made, which are recurring, we are in a strong position now to demonstrate operating leverage, not only this year, but as we move forward.

Jason Bednar: Alright. Helpful. Thank you.

Operator: Thank you. One moment for our next question. Next question will come from the line of Frederick Allen Wise from Stifel. Your line is open.

Annie (for Rick Wise): Hi. This is Annie on for Rick. Thanks for taking our questions. So I heard you call out AeriSeal in the CONVERT2 trial as a key priority here for 2026. Obviously, there is some investment required to ramp up enrollment and move toward a commercial eventually. So I am hoping you can talk about how you plan to balance that out with your U.S. sales organization investment and your plans to extend the cash runway?

Glendon French: Yeah. The CONVERT2 trial, we came in. We spent—I looked around, made sure we had the right people in the right places. And one of the key things that we looked at was ensuring that we had the proper alignment within our U.S. sales organization, and the other area I looked at immediately was making sure that we had the best possible alignment within our clinical function given the role of AeriSeal in our future. And the CONVERT2 trial, we were not enrolling in the CONVERT2 trial as fast as I felt we should be, and so we made some realignments.

We brought in a number of people who had been involved directly in the execution of our pivotal trial, our LIBERATE trial. One individual was here running another function and took over once again, had formerly run Clinical and is now running it again. I am thankful that he agreed to do that. And we brought in two folks underneath him who were very much involved in the execution of that trial. So in some ways, from a burn perspective, as you think about the execution of that trial, first of all, it is not all that spectacular a proportional amount of our annual burn.

And number two, we are trying to get things optimized and aligned to deliver on, I think, what we had hoped we would be doing from a rate of clinical enrollment. So I also do not think that is going to have a meaningful impact on the overall spend of the company and certainly will not touch or pressure in any way the appropriate spending on our commercial operations.

Annie (for Rick Wise): And then just one more for me. Thinking about longer term, appreciating that 2026 is more of a transition year for Pulmonx Corporation as your new commercial focus takes hold. I am curious how you are thinking about the company's longer-term growth potential. How would you frame your longer-term growth aspirations now based on your time back into your respective roles?

Glendon French: Yeah. I will maybe start, and if Derrick wants to add to that, I will encourage him to do so. We came back—when I departed, we had put up five quarters of 40% growth in the U.S., and as a company, we were growing 30%, and then things slipped and they slipped quite a bit. And it got a lot of people's attention and had everything to do with my coming back. I think without question, our intention is to take our growth profile to a much better place.

Exactly where that is, I think we will learn a lot about that as we go through the year, and we see the kind of traction that we get from the programs that we are initiating and the types of things that we will continue to refine and adopt as we go forward. So I do not really think we are in a position to be telling you much more than we expect us to get substantially better, and we are about that task, and I am very confident we are headed in the right direction.

Derrick Sung: Yeah. And, Annie, this is Derrick. I will just add. Even within full-year 2026, our guidance implies, obviously, that we will step up in growth through the year, and we expect that, by the end of this year, we will be moving on a global basis to double-digit growth. So again, I do not want to give guidance beyond 2026, but even within this year, by the end of this year, our guidance implies that we will be growing double digits by the fourth quarter.

Annie (for Rick Wise): Got it. That is super helpful. Thank you both.

Operator: And as a reminder, to ask a question, that is star 11, star 11. The next question comes from the line of Frank James Takkinen from Lake Street Capital Markets. Your line is open.

Nelson (for Frank Takkinen): Hey. This is Nelson on for Frank. Thank you for taking the questions and the comprehensive overview. I guess maybe just—you know, you have described 2025 underperformance as largely internal—wrong role structure, wrong incentives, maybe too many incentives. But anything out there, maybe fundamental from a market perspective, market penetration perspective, that surprised you that is maybe more challenging? Or just anything there that could be interesting?

Glendon French: You know, the market is becoming increasingly active, which is, I think, a net positive. There are broader investments in the pulmonary space. Intuitive has a nice and growing business in the cancer side of our business. So these Service Line Directors in hospitals are managing many more procedures and a lot more—the economics, I think, have gotten them moved up the hierarchy within hospitals. So I think that is a net positive. Again, in the short term, there have been moments along the way where there have been certain pressure on resources, but that is fairly easy to respond to.

These procedures are not done in operating rooms, so the procedure rooms are much more plentiful around the hospital, so we would be able to flex in that regard and pick up the resources necessary to set up and execute these programs. So I think in general, the macro elements, whether you are talking about reimbursement, whether you are talking about places to do the procedure, people to execute the procedure—we just have to have the fundamentals in place. And as folks become increasingly invested in pulmonary, be that cancer or emphysema or COPD, those are good things for us. So I think, from a macro perspective, that feels like a net positive over time.

Nelson (for Frank Takkinen): Got it. And then you had mentioned—you specifically called out LungTrax Detect being a lower-return activity that pulled sales force attention away. And maybe I missed it, but is that program being shelved or deprioritized, handed off? Or how are you thinking about just that in general?

Glendon French: We set off at the beginning of last year with the hypothesis that was a technology that would be useful potentially in most of our accounts. It is a great technology. It does all that we have said it does. One of the challenges, though, is that it is really optimal for a certain subset of some of our larger systems at sites where all the elements are in place. And, in any case, it is something that does not fit well in every single hospital. It took us some time to figure that out.

I think that my review of prior updates indicated that there was a lot of discussion about it taking more time than we had thought it might take to set up. In properly selected hospitals that have an appropriate profile, there is an absolute place for LungTrax Detect. So it is not being deemphasized. I think it is being focused in certain types of situations as a real potential positive. We have a number of accounts that are underway, and we are keeping a close eye on them. But the initial feedback is that it is being helpful in terms of identifying patients that otherwise would not have gotten picked up.

Nelson (for Frank Takkinen): Helpful. Thank you, guys.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Larry Biegelsen from Wells Fargo. Your line is open.

Simran (for Larry Biegelsen): Hi. Good afternoon. This is Simran on for Larry. Thanks for taking the questions here. Maybe just another follow-up question on the U.S. sales force. I would be curious to understand how you are thinking about the ramp in terms of months to productivity and what early indicators should we be watching for to confirm that the ramp is tracking to plan?

Derrick Sung: Hi, Simran. This is Derrick. I will jump in and Glendon can add some color here. In general, it obviously differs territory to territory depending on what state the territory is in when it was filled and how long it was open. But we normally look at six to nine months for a new rep or new territory to get up the productivity curve. Now as Glendon mentioned, it was not like everybody left all at once and everybody came in all at once. So there is a time frame here for the new territories to ramp up to productivity, and that is embedded in our guidance.

Specifically, when we think about U.S. sales growth, we look at it as a gradual ramp from mid- to high-single-digit declines in the first quarter moving towards high-single-digit growth in Q4. I would think of it as a linear-ish step up. And I think the best metric to look at, honestly, is us being able to deliver on those sales, because in aggregate it will obviously be reflected in our U.S. sales performance.

Glendon French: I would absolutely agree with what Derrick said. I would, however—I hesitated when you asked the question because I thought it was a little bit of a smart-aleck response to say, look at the revenue number. But I do agree with Derrick that is really what is going to be reflective of these folks coming up to speed. I will say that one of the most meaningful, positive changes within our sales organization since I departed was the adoption of this senior-rep, junior-rep combination. The majority of our territories in general, and certainly virtually every single one of our larger territories, has this combination.

And one of the real benefits of the combination is not only the ongoing ability to have one plus one equal something greater than two, but also it facilitates, I believe—and I can see with the number of combinations of more tenured and newer folks together—it really facilitates the training and bringing new people up to speed when they can be working with somebody who has a little bit more tenure, a little bit more ability to bring them up to speed. So, anyway, that is a real positive about the newer construct—the new as defined since I left a couple of years ago.

Simran (for Larry Biegelsen): Got it. That is very helpful. And maybe just on the OUS side, and apologies if I missed this. But Japan—how do we think about contribution from that geography? I know the previous management team talked about enrollment in that post-approval study really occurring in 2025, I believe, or maybe early 2026. So is that a contributor to 2026 international sales? And what is the status in that geography?

Glendon French: Well, it is a contributor because these are revenue-generating patients that are going into that trial. So it is essentially a post-approval study. We are continuing to enroll the patients, and the enrollment is accelerating. So cases are increasing.

Derrick Sung: That is about all I am prepared to say about that part. It is not a meaningful growth driver in 2026 as we contemplate within our guidance versus 2025. As Glendon said, we expect to continue through the post-market study in 2026, and broader commercialization, I think, comes the following year. So it is not a huge piece to our guidance for 2026.

Simran (for Larry Biegelsen): Got it. That is helpful. And, sorry, for China as well, is that also the case? I know you talked about awaiting the renewal certificate in the second half. So should we assume China sales are relatively flattish to the prior year, or are they depressed? Help me understand the China piece.

Derrick Sung: Yeah, and thank you for asking, because the China piece is a bit nuanced and does impact the year-over-year growth rates from an optics perspective. So I think it is important to clarify that. Just to put this in context, China sales were less than 5% of our global revenue last year. But the majority of those sales into our China distributor last year we realized in the fourth quarter of 2025. In our guidance, we do not contemplate much of a meaningful contribution from China at all in the first half of the year, and we do expect shipments and sales to resume into China in the back half of the year.

So there is this mismatch in timing with tough comps, if you will, from the fourth quarter of 2025 relative to 2026 where we are contemplating minimal sales in the first half and then the back half of 2026 where we expect our China sales to resume. That results, from a year-over-year growth perspective, in double-digit declines year over year in the first half, and then that will flip to double-digit growth in the back half of the year. So we do get a bit of this mismatch in timing that will result in some funky optical year-over-year growth dynamics that you should be aware of.

Simran (for Larry Biegelsen): Great. Thank you so much.

Operator: Thank you. This concludes the question-and-answer session. I would now like to turn it back over to Glendon French for any closing remarks.

Glendon French: Thank you very much. I just want to summarize by reinforcing that we remain confident in the business, and we are really excited to rebuild momentum through a clear operating plan that targets our highest-impact initiatives. I am confident that we have the right strategy and the right people in place to execute, and we look forward to demonstrating our progress to you in the quarters ahead. Thank you very much for your time and your questions, and thank you very much to all the Pulmonx Corporation employees who work every day so hard on behalf of our patients. Have a good day.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

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