Pulmonx Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 2, 2023

There are 10 speakers on the call.

Operator

Welcome to the Pulminex First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host, Lane Morgan at the Gilmartin Group. Lane, please go ahead.

Speaker 1

Thank you, operator. Good afternoon and thank you all for participating in today's call. Joining me from pulmonics are Glenn French, President and Chief Executive Officer and Derek Sung, Chief Financial Officer. Earlier today, pulmonics issued a press release announcing its financial results for the quarter ended March 31, 2023. A copy of the press release is available on pulmonics' website.

Speaker 1

Before we begin, I'd like to remind you that management will make Statements during this 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, including without limitation, those related to our operating commercial strategies and future financial performance, the timing and results of clinical trials, the impact of COVID-nineteen on our business and prospects for recovery, Expense management, expectations for hiring, growth in our organization, market opportunity, guidance for revenue, gross margin and operating expenses, commercial expansion and product pipeline development are based upon our current estimates and various assumptions. These estimates 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.

Speaker 1

For a listen description for 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 the annual report on Form 10 ks filed with the SEC on March 1, 2023. Also during this call, we will discuss certain non GAAP financial measures. Reconciliations of these non GAAP financial measures to the most directly comparable GAAP Financial measures are provided in the press release, which is 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, May 2, 2023.

Speaker 1

Helmonix 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. And with that, I'll turn the call over to Glenn.

Speaker 2

Thanks, Lane. Good afternoon, everyone, and welcome to our Q1 2023 earnings call. Here with me is Derek Sung, our Chief Financial Officer. I'm delighted we're off to a strong start in 2023 with our focused commercial Strategy on track to enable us to deliver on our near term revenue commitments while we continue to make consistent progress on our longer term geographic growth and clinical indication expansion initiatives. We achieved $14,500,000 in worldwide sales, benefiting particularly from relative strength in the U.

Speaker 2

S. Where we achieved 55% year over year sales growth. We expanded our base of treatment centers and saw relative stability in account activity despite typical Q1 seasonality. These trends along with our commercial momentum exiting the Q1 leave us confident that our 3 pronged strategy designed to build a Strong foundation for long term sustainable growth will enable us to achieve our previously communicated full year 2023 revenue guidance of $63,000,000 to $65,000,000 As a reminder, our focused commercial strategy is as follows: 1st, Training hospitals that we believe based on our comprehensive assessment criteria have the potential to be high performing Zephyr valve centers. 2nd, providing information and education on Zephyr valve program best practices to our physician and administrative champions, which facilitate increased efficiency and procedural capacity.

Speaker 2

And finally, increasing commercial activity by building local education and awareness of the substantial benefits of Zephyr valves for emphysema patients and the COPD physicians who manage them. While we continue to make progress on all three initiatives, our primary focus this year remains on educating existing U. S. Treating centers about Best practices for Zephyr valve programs to encourage greater efficiency and therefore procedural capacity and improve the patient experience. We are seeing an increasing number of our existing accounts investing in their Zephyr valve programs as a key component of their growing pulmonology service As our accounts seek to scale their programs, we are sharing best practices from our high volume accounts, both on the clinical front through expert case reviews and on the administrative side through clinical coordinator best practice training sessions.

Speaker 2

We are also taking the opportunity with sites trained virtually during the pandemic to provide in person Training and peer to peer education to accelerate their learning curves. As a result of these efforts, we are seeing a growing number of more efficient and more clinically experienced hospitals offering Zephyr valves. We continue to expect to see The results of these and similar activities translate to sales and increased productivity in the back half of this year. As a reminder, we measure account productivity based on the average number of cases conducted in a given quarter by our active established Zephyr valve treating hospitals, which are those that have been performing Zephyr valve procedures for at least 12 months and have placed a revenue generating order in the quarter. Average account productivity for the Q1 of 2023 was 4.1 cases in the U.

Speaker 2

S. Remaining in the range of 4 to 5 cases per account that we have experienced since exiting the pandemic. As expected, the lower account productivity in the Q1 compared to the Q4 of 2022 largely reflected typical seasonal dynamics. Encouragingly, we saw the total number of active established accounts grow nicely, which thereby increased the denominator in our productivity calculation. We continue to expect a meaningful ramp in account productivity in the back half of the year, exiting 2023 above 5 cases per active established account.

Speaker 2

Meanwhile, U. S. Account activity in the first Quarter of 2023 was 74%, slightly higher than what we saw in the Q4 of 2022. As a reminder, we define account activity as the percentage of treating centers that place a revenue generating order in a given quarter. We continue to expect account activity to remain in the 75% range as we benefit from a more normalized operating environment and grow our denominator of treating centers.

Speaker 2

To that end, in the U. S, we added 15 new treating centers in the Q1 of 2023, bringing our total number of U. S. Centers to 293. We continue to expect to identify and establish A total of 40 to 50 new accounts throughout the year.

Speaker 2

Beyond our near term commercial strategy, we are also looking to further tap into the more than 1,000,000 patients around the world who suffer from severe emphysema and are profoundly short of breath despite high dose medications. Following regulatory approval of our Zephyr valve in Japan last year, we continue to expect the establishment of reimbursement and the initiation of Sales through our post market study in late 2023. As a reminder, we estimate Japan to have approximately 100,000 patients who stand to benefit from our treatment. In our clinical development pipeline, we remain on track With our ARISTEAL program to meaningfully expand the addressable market for our Zephyr valve solution, we continue to Back to complete enrollment this year of our CONVERT-one trial with final data presented next year. We are also taking final steps to enable the launch of our next multinational clinical trial, which we call CONVERT-two in the back half of this year.

Speaker 2

Results from convert to will form the basis for our Aeroseal PMA submission. In summary, we are very pleased with our progress And increasing engagement with top centers and expanding best practices with our emerging centers. We have been delighted to see Strong early traction and receptivity across our team and with our customers. As awareness around the unmatched benefits of ZEPRA valve procedure build, We believe we are well positioned to address the substantial unmet needs of the largely untapped global population of patients with severe emphysema. Again, we expect to build on this early commercial momentum to drive continued growth in the back half of the year.

Speaker 2

With that, I now turn the call over to Derek to provide a more detailed review of our Q1 results.

Speaker 3

Thank you, Glenn, and good afternoon, everyone. Total worldwide revenue for the 3 months ended March 31, 2023 was $14,500,000 a 35% increase from $10,800,000 in the same period of the prior year and an increase of 37% on a constant currency basis. U. S. Revenue in the Q1 was $9,300,000 a 55% increase from $6,000,000 during the prior year period.

Speaker 3

The growth in U. S. Sales reflected continued commercial momentum and adoption of our Zephyr valve therapy and also benefited from depressed sales in the Q1 of 2022 due to the COVID pandemic. International revenue in the Q1 of 2023 was $5,200,000 a 9% increase from $4,800,000 during the same period last year and an increase of 15% on a constant currency basis. The increase in international sales was driven by growth of Zephyr valve procedure volumes in our European geographies.

Speaker 3

Gross margin for the Q1 of 2023 was 73% compared to 75% in the prior year period, reflecting slightly lower capacity utilization. We continue to expect gross margin for the full year 2023 to fall within the range of 73% to 74%, remaining near 73% in the first half of the year and trending towards 74% in the back half of the year. Total operating expenses for the Q1 of 2023 were $27,000,000 a 13% increase from $23,800,000 in the Q1 of 2022. Non cash stock based compensation expense was $4,400,000 in the Q1 of 2023. Excluding stock based compensation expense, Total operating expenses in the Q1 of 2023 increased 11% from the same period of the prior year.

Speaker 3

Looking ahead, we continue to expect operating expenses for the full year 2023 to fall between 112,000,000 to $114,000,000 inclusive of approximately $22,000,000 of non cash stock based compensation expense as we take a disciplined and prudent approach to managing expenses, while continuing to invest to drive growth. R and D expenses for the Q1 of 2023 were $4,300,000 compared to $3,500,000 in the same period of the prior year. The increase was attributable to an increase in clinical and development costs related to our Aeroseal program as well as an increase in stock based compensation expense. Sales, general and administrative expenses for the Q1 of 2023 were $22,700,000 compared to $20,200,000 in the Q1 of 2022. The increase was attributable to sales and marketing expenses as we ramped commercial activities as well as an increase in legal and stock based compensation expenses.

Speaker 3

Net loss for the 1st period of 2023 was $15,900,000 or a loss of $0.42 per share as compared to a net loss of $15,800,000 or a loss of $0.43 per share for the same period of the prior year. An average weighted share count of 37,600,000 shares was used to determine loss per share for the Q1 of 2023. Adjusted EBITDA loss for the Q1 of 2023 was $11,200,000 as compared to $11,800,000 in the Q1 of 2022. The year over year improvement demonstrates our ability to drive operating leverage, a trend that we expect to continue for the full year 2023. We ended March 31, 2023 with $155,500,000 in cash, cash equivalents and marketable securities, an increase of $8,400,000 from December 31, 2022.

Speaker 3

The increase in cash reflects our February drawdown of the remaining $20,000,000 provided by our existing term loan that we discussed on our last call. Excluding that drawdown, Our cash equivalents and marketable securities would have decreased by $11,600,000 during the Q1 of 2023. With our strengthened balance sheet, we continue to feel very good about our pathway to cash flow breakeven as we grow our top line and deliver operating leverage. Finally, turning to our revenue outlook for 2023. We continue to expect to deliver Full year 2023 revenue in the range of $63,000,000 to $65,000,000 Our guidance continues to assume foreign currency exchange rates will be relatively neutral to growth on an annual basis as FX headwinds begin to ease through the remainder of 2023.

Speaker 3

And with that, I'd like to thank you for your attention, and we will now open up the call for questions. Operator?

Operator

Thank you very much. At this time, we will conduct a question and answer session. Please standby. And our first caller is Larry Biegelsen with Wells Fargo. Larry, your line is open.

Operator

Please go ahead.

Speaker 4

Hey, good afternoon. This is Vik in for Larry. A couple of questions for me, please. So first, you beat consensus by about $1,000,000 but you kept guidance intact. Can you potentially provide some insight as to why you decided not to raise guidance after the beat and how to think about quarterly cadence from here?

Speaker 4

And then I had a follow-up. Thank you.

Speaker 3

Sure, Vic. So we're very happy with our performance in the Q1. We're Clearly, operating in a much more stable and predictable environment now, and the momentum and the early traction that we saw in Q1 certainly gives us a lot of confidence around our ability to achieve the guidance of $63,000,000 to $65,000,000 that we set out just 10 weeks ago. And we do feel good about Trending towards the higher end of that range given what we've seen in that Q1. That said, it is still early in the year, and we talked previously about how our efforts To drive same store sales and account productivity will take some time to yield results that will be more visible in the back half of the year.

Speaker 3

So At this point, we just don't want to get out over our skis on guidance, but we do feel really good about the direction that we're headed.

Speaker 4

That's helpful. And then my follow-up. So Regeneron released top line data on Dupixent for COPD in Q1. We'd love to get your thoughts on how you're thinking about the potential impact on Zephyr from Dupixent. And thank you for taking the questions.

Speaker 2

Yes, I'll try to handle that. There's a number of pharmaceuticals that are out there that are being used None of them are targeting trapped gas in the lungs. So that's what we're targeting. There's no drug out there that can solve a leader of trapped gas in the lung. There's a surgical procedure that isn't well adopted because of the Morbidity and mortality associated with it.

Speaker 2

Last year, I think we did about 5 times as many of our procedures as the surgical procedure was done. We're able to treat A much wider array of patients as a result of the approach that we take. So, Dupixent, we are happy for COPD patients. We don't see that impacting our opportunity.

Operator

Okay. Our next caller is Joanne Wuensch from Citibank. Joanne, your line is open. Please go ahead.

Speaker 5

Hey, guys. This is Ashleigh Anthony on for Joanne. Thank you for taking our questions. I guess the first, could you just maybe talk about what you saw in the quarter in terms of the operating environment? What are you seeing on staffing?

Speaker 5

Is there Still maybe any lingering COVID-nineteen disruption and then how are things looking so far here in the second quarter?

Speaker 2

Yes. I think the short answer is that we did not see what I would call material Staffing issues in the Q1 and we thus far in the Q2, we're not seeing what I would call material Staffing issues. I think that's a bit of a reflection of just being a procedure based technology, One that's paid for under a surgical DRG. I mean, these are the kinds of procedures that I think Something like 90% plus of hospital revenue comes from these types of patients, these surgical patients, Procedure based patients and so we kind of fall into that category and as a consequence I think there may be staffing issues in other parts of the hospital, But therapeutic procedures, I think are the first ones to get covered as it relates to staff and so forth.

Speaker 5

Got it. That's helpful.

Speaker 2

Not to suggest that we haven't faced it. I wouldn't, but I just don't across the 300 accounts that we're in, it's I would say it's immaterial.

Speaker 5

Got it. Okay. And then the 15 accounts you added in the U. S, should we expect similar cadence of account adds throughout the rest of the year?

Speaker 2

Yes. So I think we're projecting $10,000,000 to $12,000,000 a quarter or something on that order. I think I said 40 to 50 this year. So, we're in that neighborhood. So 15 is a nice number to start with, But that the total is the one that I mentioned in the script.

Speaker 5

Great. Thank you.

Operator

Okay. Thank you very much. And standby for our next question. And our next question comes from Cecilia Furlong with Morgan Stanley. Cecilia, your line is open.

Operator

Please go ahead.

Speaker 6

Good afternoon and thank you for taking the questions. I wanted to ask if you could just speak a bit to what you're seeing in the U. S. Versus Some of the OUS markets specifically around recovery and stabilization. And then as we think about just the breakup of 2023 guidance, If anything has shifted as you think about contributions from U.

Speaker 6

S. Versus OUS.

Speaker 2

I'm going to let Derek take the second question about whether We see any difference in terms of the shift between U. S. And OUS guidance. As it relates to U. S.

Speaker 2

And OUS performance, obviously, we highlighted that we had A really great quarter in the U. S. I would say that we had some other markets that Also had strong sort of increases over prior years. Specifically, if you look at our top 4 markets, 3 out of the top 4 Actually, 4 out of the top 5 all had good increases, specifically the UK, France and Switzerland. They had real strong performance versus prior period.

Speaker 2

And I think the magnitude Of that, particularly in the bigger markets, France and the UK, was on the order of what we saw in the United States. They're executing against a plan that's remarkably similar and the results are remarkably similar as well. So That's where we saw things strengthening.

Speaker 3

Yes. And Cecilia, regarding guidance, In Q1, the U. S. Accounted for about 64% of our total sales in the quarter. I would expect That ratio to remain around the same for the remainder of the year.

Speaker 3

So I would expect for the remainder of the year, the U. S. Is somewhere between 60% to 65% of total sales and OUS is somewhere in the 35% to 40% range. Now over time, we continue to expect the U. S.

Speaker 3

To grow meaningfully faster than our international business. Even this year, our guidance implies the U. S. Grows 20% to 30% in that range and Our international business grows more in the 15% to 20% range. So we do expect U.

Speaker 3

S. To continue over time to become a significantly greater portion of our mix of sales.

Speaker 6

Great. And if I could follow-up as well, just the 15 account adds In the quarter, I know you talked about previously some of your specific initiatives in terms of engaging, going deeper into new accounts, getting them trained. Can you just speak to the profile of some of these accounts driving interest and how it fits into your broader

Speaker 2

So we're in most of the major metro areas. I think a lot of Ads are incremental ads in those geographies. What we're finding is that patients would prefer to drive Wes Farr had to get the procedure done. The going deeper with these accounts is we've just increased the hurdle that They need to clear in order to come in for training and to become an account that we adopt essentially and that involves bringing profiles of patients in before they come to training such that when they exit training, And so we they hit the ground running. We also have a follow-up on those first three patients where an expert will sit down with the physicians, talk about lessons learned and ways that they could have made that a stronger exercise.

Speaker 2

And those are all invariably, those are super positive kinds of experiences. So anyway, that's how we're going deeper or getting deeper with our initial new accounts.

Speaker 6

Great. Thank you.

Operator

Our next question comes from Travis Steed with BofA Securities, Travis, your line is open. Please go ahead.

Speaker 7

Hey, thanks for taking the questions. Maybe put some numbers on the progress with account productivity over the course of the year. I think you said 4.1 for Q1 and I think the prior plan was to exit the year 5 to 6. So just kind of want to go through some of the numbers and how you expect Account productivity to ramp over the course of the year and maybe some color on kind of the top 10% of your accounts, kind of the procedures that those accounts are doing and how Those accounts look at this point.

Speaker 3

Sure. Thanks, Travis. Thanks for that question. So Just as a reminder to kind of ground everybody, when we look at account productivity metrics, we are looking at The productivity of the cases on average per account for accounts that were active or put in a revenue generating order in a given Order and had been up and running for approximately 12 months, because it does take a while. There is clearly a ramp up, That productivity ramp and so we look at what we call our established accounts or those that are active and up and running for at least 12 months.

Speaker 3

It was around 4.1 cases on average Per account in the Q1, over the last three quarters or so, it's kind of bounced around between 4.5 cases, so on average about 4.5 cases per quarter. And with some of the focused Efforts that Glenn recently just talked about, we do expect and are focusing on driving same store sales that we believe will result in And increase in productivity. So exiting the year, we do expect to be above 5%, between that 5% and 6% range, and that's In the U. S. Specifically, and that is what is implied in our U.

Speaker 3

S. Guidance. Relating to your Second question around kind of our top 10% of accounts or so. We do continue

Speaker 8

to see

Speaker 3

strong Performance in our top 10% of our accounts, I would say, on average, our top 10% or 20% of accounts On average are doing say nearly 10 cases per quarter on average. So there is a wide range And what we're really focusing on this year is taking those accounts that have So lower productivity, again, focusing on same store sales. And I think that's the biggest driver that we see to our U. S. Growth this year.

Speaker 7

No, that's helpful. And put some finer points on the Q2. And the last year you expected Q2 to be flat Sequential to Q1, I imagine Q2 could step up this year to Q1 in terms of total revenue?

Speaker 3

We do. Exactly, exactly. In fact, specifically, I would say I would expect a sequential growth of about 10% between Q2 and what we reported in Q1. And again, some of that reflects the typical seasonal softness that we In the January timeframe, starting the year that we did see in the Q1. So I'd say it will be a meaningful step up of around 10% or so Sequentially is what we would expect in Q2 versus Q1.

Speaker 7

Great. That's helpful. I'll drop there. Thanks a lot.

Operator

Thank you very much and standby while I bring the next question to the stage. Next, we have Rick Wise joining us from Stifel. Rick, your line is open. Please go ahead.

Speaker 8

Good afternoon, everybody. Glenn, maybe just if you could dig a little deeper on the give us a little more color on Your best practices for procedural efficiency programs clearly is having a positive impact. I'm curious, how many accounts have you brought this? Where are you in the process of Bringing these best practices maybe to accounts performing less optimally if that's the right way to phrase it. And I'm also sort of fascinated with the number of clinical coordinators you're training in person.

Speaker 8

That sounds important. Any color on those things?

Speaker 2

Sure. So we're focusing on best practices across the clinicians, who are Doing the procedure, ensuring the patient selection is optimized and the execution of the procedure is optimized. We're focused on sort of the Straight up side of things and that's where the clinical coordinators come in. These programs, the larger programs Are allowed to be large because of the great work that's being done by these clinical coordinators. And they really keep Everything running on time and so forth, but there are mechanisms by which there's been a lot of manufacturing analogies where you Increase your cycle or decrease cycle time and increase throughput and so forth.

Speaker 2

So we're making sure that we're sharing those best practices from an administrative perspective. And then on the hospital level, when you think about the ultimate movement of these accounts across the Six stages that we've identified and talked about in prior calls that once you get up into sort of stage 5, those accounts Are looking inside themselves to try to identify the patients that exist in within their own network And Stage 6 is really that outbound look at things. And I think what so we actually there are Gatherings where best practices are talked about across the hospital, in terms of the learning, and so forth. And That 6th step is really an external focus. And so marketing gets involved, not our marketing, The hospital marketing team and they learn from what other hospitals are doing to get better and stronger and look to expand their position in the given area.

Speaker 8

And I don't know if Derek, it's for you or Glenn. Maybe give us a little more color about your expectations for the OUS business for the rest of the year. Obviously, Dramatic recovery, rebound, reacceleration in the U. S, OUS respectable 9%, 15% ex FX. Is this the kind of pace that we should expect or what are the drivers for the rest of the year?

Speaker 8

Thanks so much.

Speaker 2

Yes, I expect, Derek, you can add on to this, but I expect that things will strengthen outside the United States. I think we had a A little softer than Q1. I think it's kind of getting things back up and running was a little slower to happen outside the United States. Having said that, as I said earlier in this call, We have great success stories. We're in 25 different countries.

Speaker 2

So I can give you a little story about all the different countries, but the big ones represent 90% of our business, the top five accounts. So, I expect Germany is going to strengthen relative to the first I think as we look ahead and across the year, both that's our 2nd largest market behind the United States. I expect France and the UK, which are our 3rd and 4th largest markets to continue. They're very strong performance to this point. I expect the Netherlands to strengthen, Switzerland to continue to perform great, Spain to continue to perform really well.

Speaker 2

So I think We expect, certainly from a revenue perspective for those Countries to perform very well relative to the Q1. I think the Q2 was a pretty solid quarter for us outside the United States last So I'm not I don't think the percentage growth may not fully reflect the Sort of strengthening of that business, if you look at on a sequential basis, it will look, I think, very strong.

Speaker 3

Yes. I think on average, Rick, that 15% growth that We saw this year or somewhere in that 15 between 15% 20% growth is what we'd expect out of our international business moving forward.

Speaker 5

Thanks so much, Derek. Thank you, both.

Operator

Thank you very much and standby While I promote the next caller. Jason Bednar for the lines of Piper Sandler. Jason, your line is open. Please go ahead.

Speaker 9

Hey, guys. Good afternoon. Thanks for the questions. Really a couple of follow ups on some prior questions that were asked. Maybe to first follow-up on the international conversation here.

Speaker 9

Totally understand the U. K. And France performance Just pretty strong, from what you're alluding to there and just being similar to the U. S. In terms of growth.

Speaker 9

I think the implication there, Maybe not some of those markets you were just mentioning, Glenn, but maybe some of those smaller international markets, maybe a bit more challenged or below the growth we saw that you put up in the Q1 here. I think they've been under pressure for a few quarters now. So I guess the question I have here just after that preamble is, Do you have visibility on those markets bottoming out and or starting to show a recovery in growth?

Speaker 2

So I don't really there's not really there's a couple of markets outside the United States that I think we're looking for a return to growth in. But other than that, I think most of our markets, even China is starting to reemerge. I think it's important to note that that's 1% of our global business, But they're starting to get active. But we've got a couple of situations where top 10 accounts are not yet growing this year. But so we've got 88 out of 10 that are growing.

Speaker 2

And I think I mentioned which markets those are. They're primarily in Europe, where the bulk of our OUS business is. So Is there a specific aspect to your question you'd like me to try to address? No, I guess I was just trying to I think you addressed

Speaker 9

For a while and then also reconciling the fact that you're looking for growth to remain similar in the range of where we were in Q1. So again, just trying to put all the pieces together here, but I think you answered it.

Speaker 2

Yes, the little markets in the scheme

Speaker 5

Go ahead.

Speaker 2

Yes, the little markets, Jason, just They don't amount to much. We got 20 markets that represent something like 5% of our business. So any one of them, whether it's coming up or down isn't going to move the needle. But those big European markets do move the needle. And Although, we're continuing to grow faster in the U.

Speaker 2

S. Than we are on the international front, so maybe less so each year. But Anyway, we're very happy with how those things are proceeding.

Speaker 8

Okay. We can talk in

Speaker 9

some of the moving parts around some of those markets. Maybe I've got the Yes, some of my math and whatnot, not totally squared away, but maybe a follow-up related to the retraining topic, I think that Rick was hitting on a little bit, But maybe a different angle. Glenn, you mentioned some activity about retraining some of those accounts that went through the virtual training process during the pandemic. I'm just curious if you're willing to share the delta on the account productivity between those that have gone through in person training versus those that were trained virtually during the pandemic. What does that look like today?

Speaker 9

It sounds like it's a decent gap. I'm just wondering if how much of an opportunity this could present for pulmonics?

Speaker 2

I think we're just pulling people back into we feel like there's it's a better experience and a better degree of engagement. Pending, so often they'll be from multiple institutions and the folks that are leading those sessions. So Yes. I'm not in a position to share statistics on what kind of return we get on bringing somebody back. But Suffice it to say that it's we determine that we believe it's worthwhile to get people on to sort of a consistent footing as it relates to The foundation of experience and training that they have and we felt in retrospect though virtual training was the best we could do when people were grounded And folks weren't being allowed into other people's hospitals and so forth.

Speaker 2

The virtual training was the best we could do. It was Better than nothing, but not nearly as good as face to face training. So we're putting everybody trying to get everybody back on to sort of this equal footing.

Speaker 9

Okay. All right. Thanks so much.

Operator

Thank you very much. Stand by for our last question. This will be our last question this evening and it comes from Bill Plavonic from Canaccord Genuity. Bill, your line is open. Please go right ahead.

Speaker 5

Hi, Zachary Dae on for Bill Plavonic. Thank you for taking the question. Regarding operating leverage, how should we think about investment in the commercial organization going forward? Thank you very much.

Speaker 3

Thanks for that question. So we do expect to Continued operating leverage. We were very happy this quarter to demonstrate a year over year EBITDA loss, which was Favorable to what we did last year. And we expect the full year, our total EBITDA loss to be adjusted EBITDA loss to be Favorable to what we lost in 2022. So and that as you would expect is primarily driven by Continued and increased growth of our top line.

Speaker 3

We do expect to invest in our commercial activities and our Commercial organization moving forward. Through this year, I think the investment will be relatively modest. But certainly, as we continue to expand and grow in out years, I certainly would expect investment in our commercial Activities to increase, but not nearly as much as or at the same rate as our revenue. So even this year, right, we're looking at Roughly 20 percent -ish top line growth and a total of 11 percent -ish 10% to 11% Increase in our operating expenses once you exclude stock based comp. So I think we continue to demonstrate we'll continue to demonstrate that leverage and that's what's going to get us to cash flow breakeven over the next few

Speaker 5

years. Got it. And just as a follow-up with that, sort of when you think about the and this has Been a little bit touched on. With the GoDE strategy, was there anything you learned from that on top of the Account based growth that's impacting how you're going

Speaker 3

to think about operating leverage? Like is

Speaker 5

there any connection between those two things? Thank you.

Speaker 2

I didn't hear the first what strategy?

Speaker 5

When you're just talking about going deeper.

Speaker 2

Our going deep strategy. Going deeper in existing accounts as it relates to operating leverage, we should realize operating leveraging. We're not Adding incremental resources to drive that, we're and these hospitals are sharing information with each other. So We're supporting the efforts and desires of these accounts to learn from each other. So I think it's favorable to leverage.

Speaker 2

Thank you very much. Thank you.

Operator

That does conclude our Q and A. I would like to now turn it back to Glenn French, President and CEO for closing remarks.

Speaker 2

Thank you very much. So again, we are very pleased with the strong start to an important year for us. We remain confident in our strategy and its And we very much like the momentum that we're seeing building in our business. I'd like to thank you all for your interest and your time today. Have a good evening.

Operator

Thank you for your participation in today's conference. This does conclude the program and you may now disconnect.

Powered by Quartr
Earnings Conference Call
Pulmonx Q1 2023
00:00 / 00:00