Q2 2024 Earnings Summary
- Pulmonx added 17 new U.S. centers in Q2, increasing the total active accounts to 267, demonstrating strong expansion in the U.S. market and potential for increased revenue growth.
- Advancement in clinical trials for AeriSeal, including the first U.S. case in the CONVERT II pivotal trial and anticipated commercial launches in the EU in 2026 and the U.S. in 2027, which could expand the addressable market by approximately 20%.
- Introduction of LungTraX Connect, an automation software to streamline patient workflows, expected to reduce friction points and improve efficiency in treatment centers, potentially driving higher utilization and revenue growth.
- Potential Impact of Seasonality on H2 Revenues: The company expressed uncertainty regarding the impact of seasonality on second-half revenues, particularly in the U.S. market. In previous years, there was variability—2022 saw a decrease in revenues due to seasonality, while 2023 managed to overcome it. However, with increased travel and vacations in 2024, there is concern that seasonality could negatively affect revenues in the upcoming quarters. ,
- Slower Growth in International Markets Compared to the U.S.: While the U.S. market continues to grow robustly, international markets are not growing as quickly. The company acknowledges that the strategies implemented in Europe may not yield significant growth until 2025, indicating potential lag in international performance.
- Challenges with Workflow Efficiency and Patient Throughput: The company identified workflow bottlenecks and inefficiencies as key obstacles to scaling the business. Although they are developing automation tools like LungTraX Connect to address these issues, the impact of these solutions may take time to materialize, potentially delaying expected growth. ,
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Revenue Guidance and Seasonality
Q: Are you comfortable with revenue expectations for the back half amid seasonality?
A: Management reaffirmed their guidance for the second half but expressed caution due to uncertainties with seasonality. In 2022, they saw seasonality impacts in both the U.S. and international markets. In 2023, they were able to "muscle through" in the U.S., leading to tough comparisons for Q3. Given the variability between years, they are cautious but comfortable reaffirming their guidance. -
Gross Margin Outlook and OpEx
Q: Can you discuss gross margin trends and OpEx expectations for H2?
A: They expect a slight uptick in gross margins in the second half, driven by increased production and better utilization. They guided to gross margins of 74% to 75%, averaging slightly over 74% in the first half. Geographical mix variations also impact margins. On OpEx, specifically R&D, they anticipate increased spending as clinical trial enrollment ramps up, leading to higher R&D expenses in H2. -
International Growth Outlook
Q: How will you accelerate international growth to match U.S. levels?
A: International performance is unfolding as expected but is not growing as rapidly as the U.S. They have implemented sales process tools in Europe and are focusing on patient screening, practice efficiencies, and physician education. Management is bullish on these plans and expects to see growth improvements beginning in 2025. -
China Market Strategy
Q: What impact will the new China distributor have on revenue and margins?
A: The new distributor in China is expected to enable revenue to grow significantly faster than building their own commercial infrastructure. While gross margins will be "a little bit lower" due to the distributor arrangement, they expect long-term gross profit dollars and operating margins to be accretive. They foresee China as a small revenue contributor over the next few years, with faster growth anticipated in the future. -
Clinical Trials and AeriSeal Approval
Q: What's the timeline for AeriSeal approval and commercial launch?
A: The CONVERT I six-month data will be presented at ERS. They already have CE mark approval for AeriSeal. CONVERT II data will be used for the U.S. PMA submission. They plan to commercially launch in the EU in 2026 and expect a U.S. launch in 2027 after PMA approval. -
Workflow Improvements and Growth Impact
Q: What workflow improvements are being made to drive growth?
A: They are focusing on automating workflows to efficiently move patients through the process. They launched LungTraX Connect, which eases uploading of CT scans and tracks patients' progress. Adding coordinators or navigators has significantly increased procedure volumes. By sharing best practices, improving patient tracking, and enhancing communication with referring physicians, they aim to increase efficiency and drive growth. -
New U.S. Centers and Growth Expectations
Q: Can you discuss the addition of new U.S. centers and expectations going forward?
A: They added 17 new U.S. centers this quarter, exceeding the expected 10 to 15 per quarter. This brings them slightly above their anticipated pace. The increase was opportunistic, and while they will continue to add new accounts, their focus remains on growing same-store sales in existing centers with established workflows and patient awareness programs. -
Seasonality Impact on Q3 Revenue
Q: How will seasonality affect Q3 revenue?
A: Management is uncertain about the impact of seasonality in Q3. In 2022, they saw a decrease in revenue due to seasonality, while in 2023, they overcame this in the U.S. They anticipate seasonal effects in Europe as physicians often take a month off, and increased travel this summer adds to the uncertainty. They are monitoring the situation before adjusting guidance. -
Operational Bottlenecks and Pilot Programs
Q: What bottlenecks have you identified, and how are you addressing them?
A: Bottlenecks vary by location, but centers with coordinators or navigators see significantly higher volumes. They are addressing this by implementing LungTraX Connect to automate workflows and patient tracking. By adding coordinators, educating local doctors, and improving communication with referring physicians, they aim to enhance efficiency and patient throughput.