Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pulmonx Corp (LUNG, Financial) achieved a record quarter with $20.8 million in worldwide sales, representing 21% growth over the same period of the prior year.
- US revenue saw a significant increase of 26% compared to the second quarter of 2023.
- The company added 17 new accounts in the United States, ending the quarter with 267 active accounts.
- Pulmonx Corp (LUNG) is launching the Lung Tracked Connect program, an automation software to streamline patient workflows and reduce time to treatment.
- The company remains confident in its ability to deliver on the previously communicated revenue guidance of $81 million to $84 million for the full year 2024.
Negative Points
- Total operating expenses for the second quarter of 2024 were $30.9 million, an increase of 6% over the prior year period.
- Net loss for the second quarter of 2024 was $15.3 million, or a loss of $0.39 per share.
- International revenue growth was slower at 12% compared to the US growth rate.
- The company anticipates it will take time to grow widespread awareness of Zephyr Valves in Japan, with no material revenue contribution expected until approximately 2026.
- Gross margin for the second quarter of 2024 was flat at 74%, reflecting lower utilization.
Q & A Highlights
Q: I wanted to start with the assumptions underlying the reaffirmed guide, and just really ask on how you're thinking about the cadence of procedure volume and revenue performance here in the second half. Anything outside the typical seasonality you would anticipate for the business as you look at the typical sequential performance 2Q to 3Q, same question, 3Q to 4Q or maybe just ask more directly, are you comfortable with where the street is currently sitting for the back half of the year on revenue.
A: As we're looking at the back half guidance right now, obviously, we take a look at how we performed in the first half of the year, and we're happy with where we've landed in the first half of the year. I think we've shown good growth. And as we move into the back half, we haven't been through the seasonality cycle yet, Mehul and I haven't. And as we look at 2022, we saw seasonality in both the US and OUS. In 2023, it looks like we're able to muscle through that seasonality in the US, which gave us kind of a tough comp for Q3. So with the variability between 2022 and 2023 and using that as kind of predictors for the future, we just -- we don't want to get over our skis there. And so we feel comfortable with our performance so far, and that's why we're able to reaffirm the guide.
Q: Maybe along that same vein as we break out US versus international performance. I guess any differences in expectations on the mix that you're seeing? Is it playing out as you would have expected? And then maybe the follow-up to that is what's it going to take to get that international business back to maybe where the US is growing in that mid-20% plus range? Or should we just anticipate double digits is good enough for international? Just how you're thinking about that as we look over the next several quarters?
A: As we look at the OUS performance, it is really playing out how we expected it to play out. As you rightfully pointed out, obviously, they're not growing as quickly as they are in the US or as we are in the US. What we've gone and done is we've implemented the sales process tools in our European businesses. And I was actually over there for the European sales meeting. And I was really impressed. I think the team is really focused on executing that sales process. I left the meeting bullish about their plan. And really, as we look forward, they're building out patient screening, they're looking at developing practice efficiencies, physician education. We're seeing a lot of physician education coming from Europe as well. And so they've also built the sales plans around those tactics. And I was -- like I said, I was very impressed with the plans that they put together. And I think we'll start to see this play out a little bit more in 2025. So I would say that, the management and the team that are there are doing the right things to get that growth rate up over time.
Q: Just if I could squeeze in one more, just as a little bit of a check the box to your question. But seeing if there's anything we need to consider modeling wise on the new China distribution agreement you have in place on the new distributor you're bringing on. Any inventory load-in or any -- any accounting we need to think about as you go through that transition?
A: Well, I think no, nothing on the loading or accounting at all. It's a new distributor that we've brought into the mix here in our OUS strategy. I think what we believe is that going down the distributor route will enable revenue to grow significantly faster than if we were going out there and building a commercial infrastructure in China. And so as you would expect in a distributor arrangement, your gross margins are a little bit lower. But over the long term, we expect gross profit dollars and operating margins to be accretive relative to building a business there ourselves.
Q: My first question, the 170 new US centers, that was a pretty robust step-up from last quarter. What should we be expecting for the rest of the year? And was there any particular reason why it was so strong this quarter outside of normal course of business?
A: As we've been guiding, it's about 10 to 15 new accounts per quarter is what we expect to bring on. We were a little bit light in Q1. We were at 9, and here, we're at 17. So I think combined, we're actually a little bit above where we would expect to be right now. But it's -- there's nothing out of the ordinary there. We've had a couple of opportunities and opportunistically gone in and brought on new accounts in different areas. I will say that our focus remains on growing in the same-store sales as well. I think it's nice for us to bring on these new accounts, especially in areas where patients have to drive hours in order to get a treatment, but really, what we want to do is these centers that are set up. They've got physicians that are on board. They've got their COPD referring physicians are already referring to them. They've built in workflow. They have coordinators and there's patient awareness and marketing activities going on in these areas. That's really where we see growth over time. And so that's a big focus for us. But obviously, we will bring on new accounts opportunistically as we need to or as we see the opportunity to do so.
Q: Could you talk about the cadence of margins in the back half is 2023, sort of a good place to look at that. And then as we think about the slight step-up in OpEx, is that going -- it sounds like it's going to be more weighted towards R&D on a dollar basis. I just want to confirm that that's the correct way to think about it?
A: We guided to 74% to 75%. We've kind of -- are on average or at slightly over 74% in the first half. We do expect a tick up in the second half on gross margin. It's going to be driven by increased production in our factory, which will enable us to manage utilization better. And the other factor is that impacts gross margin is really geographical mix, right? So as geographical mix varies, that impacts gross margin significantly. And so we've had a little bit of that, both on a year-over-year and a quarter-over-quarter basis. But we do expect a slight tick up in gross margins in the second half of the year. On expenses, specifically on R&D, as I mentioned in the prepared remarks, as enrollment starts to tick up in our in clinical trials, we would expect some R&D dollars to increase. So as you know, there's usually a slow ramp up front when you start a clinical trial, and it will ramp much faster as you get through the various different time frames. But we do expect to pick up in the second half for R&D.
Q: Maybe
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
