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Item 2 — Management's Discussion and Analysis
Pulmonx Corporation · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions, that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections of this Quarterly Report entitled “Forward-Looking Statements” and “Risk Factors,” under Part II, Item 1A and those discussed in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) on March 10, 2026.
Overview
We are a commercial-stage medical technology company that provides a minimally invasive treatment for patients with severe emphysema, a form of chronic obstructive pulmonary disease. Our solution, which is comprised of the Zephyr Valve, the Chartis System and the LungTraX Platform, is designed to treat severe emphysema patients who, despite medical management, are still profoundly symptomatic and either do not want or are ineligible for surgical approaches.
In 2018, we received pre-market approval (“PMA”) from the U.S. Food and Drug Administration (“FDA”) for the Zephyr Valve following its Breakthrough Device designation. The Zephyr Valve is commercially available in numerous countries globally. We have established reimbursement in major markets in North America, Europe and Asia Pacific and the Zephyr Valve has been included in treatment guidelines for COPD worldwide.
We also manufacture the AeriSeal System, which is a synthetic polymer foam designed to occlude, or close, collateral air channels in a target lung lobe and convert the target lung lobe to having little to no collateral ventilation (CV-). The AeriSeal System has received a “Breakthrough Device” designation by the FDA and a Certificate of Conformity (“CE Mark”) in Europe. The AeriSeal System is not approved by the FDA or approved for commercial sale in the United States. It is in a global clinical trial called CONVERT II to support a PMA application.
We market and sell our products in the United States through a direct sales organization. Our sales territory managers are focused on promoting awareness and increasing adoption of our solution primarily among the pulmonologists performing interventional pulmonary procedures across approximately 500 high-volume hospitals in the United States. We are expanding our commercial operations in the United States while continuing to foster our international growth. We employ both direct and distributor-based sales models, with 99% of our revenue generated in markets where we sell directly for the six months ended June 30, 2026.
In the United States, our solution is reimbursed based on established Category I Current Procedural Terminology (“CPT”) and ICD-10 Procedure Coding System (“PCS”) codes and associated APC and MS-DRG payment groupings. Current reimbursement in the United States is believed to cover the hospital costs of the procedure and related inpatient care. Commercial payors such as Aetna, Humana, and many of the largest Blue Cross Blue Shield plans including Anthem, Health Care Service Corporation, BCBS Michigan, and Highmark have all issued positive coverage policies for the Zephyr Valve, and United Healthcare no longer considers the procedure unproven or experimental. Medicare covers our solution for patients when medically necessary, and other commercial insurers are approving prior authorization requests on a case-by-case basis. Outside the United States, our solution is covered by major health systems across much of Europe, Australia, South Korea and Japan.
We manufacture all our products at our headquarters located in Redwood City, California. This facility supports production and distribution operations, including manufacturing, quality control, raw material and finished goods storage. We have manufactured all our products at this facility for over ten years. We also store finished goods at
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secondary facilities. We seek to maintain higher levels of inventory to protect ourselves from supply interruptions and have an established distribution system for both U.S. and international customers.
To date, we have financed our operations primarily through the sale of our products, the sale of equity securities, and debt financing arrangements. We have devoted substantially all of our resources to research and development activities related to our solution, including clinical and regulatory initiatives to obtain marketing approval, sales and marketing activities, and investing in general and administrative infrastructure. We generated revenue of $22.8 million, with a gross margin of 78.0% and a net loss of $10.1 million, for the three months ended June 30, 2026 compared to revenue of $23.9 million, with a gross margin of 72.1% and a net loss of $15.2 million, for the three months ended June 30, 2025. For the six months ended June 30, 2026, we generated revenue of $43.3 million, with a gross margin of 78.0% and a net loss of $23.7 million, compared to revenue of $46.4 million, with a gross margin of 72.3% and a net loss of $29.6 million, for the six months ended June 30, 2025. As of June 30, 2026, we had an accumulated deficit of $545.3 million, cash and cash equivalents of $55.8 million, and $37.5 million of outstanding term loans and credit agreements, net of debt discount and debt issuance costs.
We have invested heavily in product development. Our research and development activities have been centered on driving continuous improvements to our solution. We have also made significant investments in clinical studies to demonstrate the safety and efficacy of the Zephyr Valve and to support regulatory submissions. We intend to continue to make significant investments in our sales and marketing organization throughout the United States, Europe and Asia Pacific. We have made, and intend to continue to make, investments in research and development efforts to develop our next generation products and support our future regulatory submissions to increase our addressable market and to expand indications and new markets. Because of these and other factors, we expect to continue to incur net losses for the next several years and we expect to require substantial additional funding, which may include future equity and debt financings.
Management believes that the Company’s existing cash and cash equivalents will allow the Company to continue its operations for at least the next 12 months from the date of the issuance of our condensed consolidated financial statements.
Factors Affecting our Business and Results of Operations
We believe there are several important factors that have impacted and that we expect will continue to impact our business and results of operations. These factors include:
Our Ability to Recruit, Train and Retain Our Sales Force and its Productivity
We have made, and intend to continue to make, significant investments in recruiting, training and retaining our direct sales force. This process requires significant education and training for our sales personnel to achieve the level of technical competency with our products that is expected by physicians and to gain experience building demand for our products. Upon completion of the training, our sales personnel typically require time in the field to grow their network of accounts and increase their productivity to the levels we expect. Successfully recruiting, training and retaining additional sales personnel will be required to achieve growth. In addition, inability to attract qualified sales personnel or the loss of any productive sales personnel would have a negative impact on our ability to grow our business.
We have in the past and expect in the future to enter into different compensation arrangements with our sales professionals, which include minimum guaranteed commissions. This has impacted our compensation expenses in the past and we expect it will do so in the future.
Physician, Patient and Hospital Awareness and Acceptance of Our Solution
We intend to continue to promote awareness of our solution through training and educating physicians, pulmonary rehabilitation centers, key opinion leaders and various medical societies on the proven clinical benefits of Zephyr Valves. In addition, we intend to continue to publish additional clinical data in various industry and scientific
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journals and online and to present at various industry conferences. We plan to continue building patient awareness through our direct-to-patient marketing initiatives, which include advertising, social media and online education. We also intend to continue helping physicians in their outreach to patients and other healthcare providers. These efforts require significant investment by our marketing and sales organization, and vary depending upon the physician’s practice specialization, and personal preferences and geographic location of physicians, pulmonary rehabilitation centers and patients. In order to grow our business, we will need to continue to make significant investments in training and educating hospitals, physicians and patients on the advantages of our solution for the treatment of severe emphysema. We are also working to improve the efficiency of our commercial initiatives for treating centers to accelerate patient identification and treatment conversion.
Third-Party Reimbursement
Since achieving regulatory approval in the United States in 2018, we have launched the Zephyr Valve treatment and have made progress securing third-party payor reimbursement. The majority of our patients are Medicare-eligible beneficiaries. We estimate that roughly 75% of the potential Zephyr Valve patient population are Medicare beneficiaries, 5% are Medicaid beneficiaries, and 20% of the potential Zephyr Valve patient population is under third-party commercial payor policies or other government programs. We continue to work to broaden our coverage by private third-party payor policies. Commercial payors such as Aetna, Humana, and many of the largest Blue Cross Blue Shield plans including Anthem, Health Care Service Corporation, BCBS Michigan, and Highmark have issued positive coverage policies for the Zephyr Valve, and United Healthcare no longer considers the procedure unproven or experimental. Some commercial payors do not yet consider our solution medically necessary, but these same plans are approving prior authorization requests on a case-by-case basis. Medicare, currently without a public coverage policy, covers our solution for patients when medically necessary on a case-by-case basis and other commercial insurers not described above are approving prior authorization requests on a case-by-case basis.
We have a dedicated patient reimbursement support team in the United States that works collaboratively with patients and providers to help secure the appropriate prior authorization approvals in advance of treatment. Through this program, we continue to educate private insurers in the United States on our clinical data and patient selection tools in an effort to continue to expand the number of positive coverage policies. Outside of the United States, our solution is covered by major health systems across much of Europe, Australia, South Korea and Japan.
Competition
Our industry is highly competitive and subject to rapid change from the introduction of new products and technologies and other activities of industry participants. Our goal is to establish our solution as a standard of care for severe emphysema. Existing treatments include medical management, lung volume reduction surgery, lung transplantation as well as other minimally invasive treatments. Some of our competitors have several competitive advantages, including established relationships with pulmonologists who commonly treat patients with emphysema, significantly greater name recognition and significantly greater sales and marketing resources. In addition to competing for market share, we also compete against these companies for personnel, including qualified sales and other personnel that are necessary to grow our business. Certain of our competitors may challenge our intellectual property, may develop additional competing or superior technologies and processes and compete more aggressively and sustain that competition over a longer period of time than we could. In addition to existing competitors, other companies may acquire or in-license competitive products and could directly compete with us. We must continue to successfully compete in light of our competitors’ existing and future products and related pricing and their resources to successfully market to the physicians who use our products.
Leveraging Our Manufacturing Capacity is Critical to Improving Our Gross Margin
With our current operating model and infrastructure, we have the capacity to significantly increase our manufacturing production. If we grow our revenue and sell more units, our fixed manufacturing costs will be spread over more units, which we believe will reduce our manufacturing costs on a per-unit basis and in turn improve our gross margin. In addition, we intend to continue investing in manufacturing efficiencies in order to reduce our
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overall manufacturing costs. However, other factors will continue to impact our gross margins such as geographic mix, pricing and customer discounts, incentives, support services and potential seasonality.
Investing in Research and Development to Foster Innovation to Expand Our Addressable Market
We intend to continue investing in existing and next generation technologies to further improve our products and clinical outcomes, enhance patient selection and broaden the patient population that can be treated with our products. In addition, we are continuing to invest in the accuracy and features of our patient assessment tools. Moreover, we continue to make progress with our CONVERT II pivotal trial of the AeriSeal System, a potential product in development for the treatment of severe emphysema patients who are not qualified for Zephyr Valve treatment due to excessive collateral ventilation.
While research and development and clinical testing are time consuming and costly, we believe that a pipeline of new products and product enhancements that improve efficacy, safety and cost effectiveness is critical to increasing the adoption of our solution.
Seasonality
Historically, we have experienced seasonality, primarily in the first and third quarters and anticipate this trend to continue. In addition, as our sales grow, we may experience further seasonality based on holidays, vacations and other factors because this is an elective procedure.
Components of Our Results of Operations
Revenue
We currently derive substantially all of our revenue from the sale of our products to hospitals and distributors. We market and sell our products through a direct sales organization in the United States and through direct sales and several third-party distributors in select markets outside the United States. We currently generate most of our revenue from the sales of Zephyr Valves and delivery catheters. We also generate a smaller amount of our revenue from our Chartis System, which is comprised of sales of the balloon catheters, usage fees and sales of the Chartis console, and from our LungTraX Platform, which is used to help identify patients potentially eligible for treatment with Zephyr Valves. No customer accounted for more than 10% of our revenue for the three months ended June 30, 2026 and June 30, 2025.
Revenue from sales of our products fluctuates based on volume of cases (procedures performed), the average number of Zephyr Valves used for a patient, pricing, discounts, incentives and mix of U.S. and international sales. Our revenue also fluctuates and will continue to fluctuate from quarter-to-quarter due to a variety of factors, including the availability of reimbursement, the size and success of our sales force, the number of hospitals and physicians who are aware of and perform the procedures using our solution and seasonality. Our revenue from international sales may also be impacted by fluctuations in foreign currency exchange rates between the U.S. dollar (our reporting currency) and the local currency.
Cost of Goods Sold and Gross Margin
Cost of goods sold consists primarily of payroll and personnel-related expenses for our manufacturing and quality assurance employees, costs related to materials, components and subassemblies, third-party costs, manufacturing overhead, equipment depreciation, and charges for excess, obsolete and non-sellable inventories. Overhead costs include the cost of quality assurance, testing, material procurement, inventory control, operations supervision and management and an allocation of facilities overhead cost, including rent and utilities. Cost of goods sold also includes certain direct costs such as those incurred for shipping our products and costs related to providing analysis services for patient scans. We record adjustments to our inventory valuation for estimated excess, obsolete and non-sellable inventories based on assumptions about future demand, past usage, changes to manufacturing processes and
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overall market conditions. We expect cost of goods sold to increase in absolute dollars to the extent more of our products are sold.
We calculate gross margin as gross profit divided by revenue. Our gross margin has been and will continue to be affected by a variety of factors, primarily by our manufacturing costs, pricing pressures and, to a lesser extent, the percentage of products we sell in the United States versus internationally and the percentage of products we sell to distributors versus directly to hospitals. Our gross margin is typically higher on products we sell directly to hospitals as compared to products we sell through distributors.
Our gross margin may increase over the long term to the extent our production volume increases as our fixed manufacturing costs would be spread over a larger number of units, thereby reducing our per-unit manufacturing costs. We expect our gross margin to fluctuate from period to period, however, based upon the factors described above and seasonality.
Operating Expenses
Our operating expenses have consisted solely of research and development costs and selling, general and administrative costs.
Research and Development Expenses
Our research and development activities primarily consist of engineering and research programs associated with our products under development and improvements to our existing products. Research and development expenses include payroll and personnel-related costs for our research and development employees, including expenses related to stock-based compensation, consulting services, clinical trial expenses, prototyping, testing, laboratory supplies, impairment charges associated with capitalized internally developed software, and an allocation of facility overhead costs. Our clinical trial expenses, such as those related to the AeriSeal System clinical development program, include costs associated with clinical trial design, clinical trial site development and study costs, data management costs, related travel expenses and the cost of products used for clinical activities. We expense research and development costs as they are incurred. We expect our research and development expenses, including related stock-based compensation expense, to increase in absolute dollars as we hire additional personnel to develop new product offerings and product enhancements.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses consist of payroll and personnel-related costs for our sales and marketing personnel, including variable sales compensation, travel expenses, consulting, public relations costs, direct marketing, customer training, trade show and promotional expenses, stock-based compensation and allocated facility overhead costs, and for administrative personnel that support our general operations such as information technology, executive management, finance and accounting, customer services and human resources personnel. We expense sales variable compensation at the time of the sale. Selling, general and administrative expenses also include costs attributable to professional fees for legal and accounting services, insurance, consulting fees, recruiting fees, travel expense, bad debt expense and depreciation.
We intend to continue to increase our sales and marketing spending to generate sales opportunities. We expect expenses to increase in absolute dollars as we increase our sales support infrastructure and add additional marketing programs in order to more fully penetrate the global opportunity. We also expect our administrative expenses, including stock-based compensation expense, to increase as we increase our headcount and expand our facilities and information technology to support our operations. Additionally, we incur expenses related to audit, legal, regulatory and tax-related services associated with being a public company, compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs. Our selling, general and administrative expenses may fluctuate from period to period due to the seasonality of our business and as we continue to add direct sales territory managers in new territories.
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Interest Expense and Income
Interest expense consists primarily of interest expense related to our term loan facilities, including amortization of debt discount and issuance costs. Interest income is predominantly derived from investing surplus cash in money market funds and marketable securities.
Other (Expense) Income, Net
Other (expense) income, net primarily consists of foreign currency exchange gains and losses and change in fair value of the Additional Warrants.
Results of Operations:
Comparison of the Three Months Ended June 30, 2026 and June 30, 2025
The following table summarizes our results of operations for the period indicated:
Three Months Ended June 30,
2026 2025 $ Change % Change
(in thousands)
Revenue $ 22,756 $ 23,859 $ (1,103) (4.6) %
Costs of goods sold 5,014 6,655 (1,641) (24.7) %
Gross profit 17,742 17,204 538 3.1 %
Operating expenses:
Research and development 5,034 5,306 (272) (5.1) %
Selling, general and administrative 21,765 26,702 (4,937) (18.5) %
Total operating expenses 26,799 32,008 (5,209) (16.3) %
Loss from operations (9,057) (14,804) 5,747 (38.8) %
Interest income 329 723 (394) (54.5) %
Interest expense (1,218) (799) (419) 52.4 %
Other (expense) income, net (1) (116) 115 (99.1) %
Net loss before tax (9,947) (14,996) 5,049 (33.7) %
Income tax expense 133 177 (44) (24.9) %
Net loss $ (10,080) $ (15,173) $ 5,093 (33.6) %
Revenue
Revenue decreased by $1.1 million, or 4.6%, to $22.8 million for the three months ended June 30, 2026, compared to $23.9 million for the three months ended June 30, 2025. The sale of products in the United States decreased by $0.5 million to $14.2 million for the three months ended June 30, 2026, compared to $14.7 million for the three months ended June 30, 2025. The sale of products in international markets decreased by $0.5 million to $8.6 million for the three months ended June 30, 2026, compared to $9.1 million for the three months ended June 30, 2025. The decrease in revenue in the United States was primarily attributable to a decrease in Zephyr Valve procedure volumes. The decrease in international revenue was primarily attributable to a lack of sales into China as we awaited the renewal of our registration certificate. In June 2026, we secured the renewal of our Chinese registration certificate. We are focused on restarting commercial activity in the region for the remainder of this year and anticipate resuming shipments to our Chinese distributor by early next year.
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Cost of Goods Sold and Gross Margin
Cost of goods sold decreased by $1.6 million, or 24.7%, to $5.0 million for the three months ended June 30, 2026, compared to $6.7 million for the three months ended June 30, 2025. The decrease was mainly due to a decrease in the number of products sold and as a result decreased manufacturing costs. Gross margin increased by 5.9% to 78.0% for the three months ended June 30, 2026, compared to 72.1% for the three months ended June 30, 2025. The increase in gross margin was primarily due to changes in geographic mix during the three months ended June 30, 2026.
Research and Development Expenses
Research and development expenses decreased by $0.3 million, or 5.1%, to $5.0 million for the three months ended June 30, 2026, compared to $5.3 million for the three months ended June 30, 2025. The decrease in research and development expense was primarily due to a decrease of $0.2 million in payroll and personnel-related expenses, and a decrease of $0.3 million in testing and other expenses in support of product development, offset by an increase of $0.2 million in costs associated with our clinical trials, including fees paid to clinical research organizations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $4.9 million, or 18.5%, to $21.8 million for the three months ended June 30, 2026, compared to $26.7 million for the three months ended June 30, 2025. The decrease in selling, general and administrative expenses was primarily due to a decrease of $2.5 million in payroll and personnel-related expenses for our sales, marketing and administrative personnel, a decrease of $1.4 million in advertising and marketing related expenses, a decrease of $0.8 million in consulting and other professional expenses, and a decrease of $0.2 million in travel and conference related expenses.
Interest Expense and Income
Interest expense increased by $0.4 million to $1.2 million for the three months ended June 30, 2026 compared to $0.8 million for the three months ended June 30, 2025, primarily due to higher interest rates under our Perceptive Loan compared to our CIBC Loan which was fully repaid in March 2026. Interest income decreased by $0.4 million to $0.3 million for the three months ended June 30, 2026 compared to $0.7 million for the three months ended June 30, 2025. The decrease was primarily due to a lower balance of cash, cash equivalents and marketable securities, which resulted in reduced returns on these assets.
Other (Expense) Income, Net
Other (expense) income, net was less than $(0.1) million for the three months ended June 30, 2026 and $(0.1) million for the three months ended June 30, 2025, primarily due to foreign currency exchange gains.
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Comparison of the Six Months Ended June 30, 2026 and June 30, 2025
The following table summarizes our results of operations for the period indicated:
Six Months Ended June 30,
2026 2025 $ Change % Change
(in thousands)
Revenue $ 43,342 $ 46,397 $ (3,055) (6.6) %
Costs of goods sold 9,556 12,851 (3,295) (25.6) %
Gross profit 33,786 33,546 240 0.7 %
Operating expenses:
Research and development 9,933 10,062 (129) (1.3) %
Selling, general and administrative 45,866 52,851 (6,985) (13.2) %
Total operating expenses 55,799 62,913 (7,114) (11.3) %
Loss from operations (22,013) (29,367) 7,354 (25.0) %
Interest income 679 1,587 (908) (57.2) %
Interest expense (2,194) (1,580) (614) 38.9 %
Other (expense) income, net 76 51 25 49.0 %
Net loss before tax (23,452) (29,309) 5,857 (20.0) %
Income tax expense 282 312 (30) (9.6) %
Net loss $ (23,734) $ (29,621) $ 5,887 (19.9) %
Revenue
Revenue decreased by $3.1 million, or 6.6%, to $43.3 million for the six months ended June 30, 2026, compared to $46.4 million for the six months ended June 30, 2025. The sale of products in the United States decreased by $1.6 million to $27.4 million for the six months ended June 30, 2026, compared to $29.0 million for the six months ended June 30, 2025. The sale of products in international markets decreased by $1.5 million to $15.9 million for the six months ended June 30, 2026, compared to $17.4 million for the six months ended June 30, 2025. The decrease in revenue in the United States was primarily attributable to a decrease in Zephyr Valve procedure volumes. The decrease in international revenue was primarily attributable to a lack of sales into China as we awaited the renewal of our registration certificate.
Cost of Goods Sold and Gross Margin
Cost of goods sold decreased by $3.3 million, or 25.6%, to $9.6 million for the six months ended June 30, 2026, compared to $12.9 million for the six months ended June 30, 2025. The decrease was mainly due to a decrease in the number of products sold and as a result decreased manufacturing costs. Gross margin increased by 5.7% to 78.0% for the six months ended June 30, 2026, compared to 72.3% for the six months ended June 30, 2025. The increase in gross margin was primarily due to a change in geographic mix during the six months ended June 30, 2026.
Research and Development Expenses
Research and development expenses decreased by $0.1 million, or 1.3%, to $9.9 million for the six months ended June 30, 2026, compared to $10.1 million for the six months ended June 30, 2025. The decrease in research and development expense was primarily due to a decrease of $0.4 million in testing and other expenses in support of product development, offset by an increase of $0.3 million in costs associated with our clinical trials, including fees paid to clinical research organizations.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $7.0 million, or 13.2%, to $45.9 million for the six months ended June 30, 2026, compared to $52.9 million for the six months ended June 30, 2025. The decrease in selling, general and administrative expenses was primarily due to a decrease of $2.8 million in advertising and marketing related expenses, a decrease of $2.7 million in payroll and personnel-related expenses for our sales, marketing and administrative personnel, a decrease of $0.8 million in travel and conference related expenses, and a decrease of $0.7 million in consulting and other professional expenses.
Interest Expense and Income
Interest expense increased by $0.6 million to $2.2 million for the six months ended June 30, 2026 compared to $1.6 million for the six months ended June 30, 2025, primarily due to higher interest rates under our Perceptive Loan compared to our CIBC Loan which was fully repaid in March 2026. Interest income decreased by $0.9 million to $0.7 million for the six months ended June 30, 2026 compared to $1.6 million for the six months ended June 30, 2025. The decrease was primarily due to a lower balance of cash, cash equivalents and marketable securities, which resulted in reduced returns on these assets.
Other (Expense) Income, Net
Other (expense) income, net was $0.1 million for the six months ended June 30, 2026 and $0.1 million for the six months ended June 30, 2025, primarily due to foreign currency exchange gains.
Liquidity and Capital Resources; Plan of Operation
To date, we have financed our operations primarily through our initial public offering, private placements of equity securities, debt financing arrangements and sales of our products. As of June 30, 2026, we had cash and cash equivalents of $55.8 million, an accumulated deficit of $545.3 million, and $37.5 million outstanding under the Perceptive Agreement and Swiss COVID-19 Credit Agreement, net of debt discount and debt issuance costs.
Perceptive Loan
On March 2, 2026 (the “Closing Date”), we entered into a Credit Agreement and Guaranty (the “Perceptive Agreement”) and a Security Agreement (the “Security Agreement”), with Perceptive Credit Holdings V, LP (“Perceptive”), as the initial lender, administrative agent and collateral agent. The Perceptive Agreement provides for a senior secured term loan facility in an aggregate principal amount of up to $60.0 million (the “Loan Facility”).
On the Closing Date, we borrowed an initial loan under the Perceptive Agreement in an aggregate principal amount of $40.0 million (the “Perceptive Loan”). The Loan Facility permits us to borrow up to an additional $20.0 million, in two additional equal tranches (the “Additional Loan Draws”). The first $10.0 million Additional Loan Draw becomes available if we reach at least $92.5 million in revenue for any trailing twelve-month period ending as of the end of the last day of any fiscal quarter through, and including, the fiscal quarter ending September 30, 2027, and the second $10.0 million Additional Loan Draw becomes available if we reach at least $100.0 million in revenue for any trailing twelve-month period ending as of the end of the last day of any fiscal quarter through, and including, the fiscal quarter ending December 31, 2027.
The Loan Facility has a maturity date of March 2, 2031 (the “Maturity Date”). The Loan Facility accrues interest, payable monthly in arrears, at an annual rate equal to the sum of (a) an applicable margin of 7.00% (the “Applicable Margin”) plus (b) the greater of (i) one-month term SOFR and (ii) 3.75%. Upon the occurrence and during the continuance of an event of default under the Perceptive Agreement, the Applicable Margin will increase by an additional 3.00% per annum at Perceptive’s election (retroactive to the date of such event of default), or automatically in the case of a payment or bankruptcy event of default.
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On each interest payment date occurring on or prior to March 2, 2029, we have the option to pay interest as follows: 2.0% per annum paid-in-kind (“PIK”) by increasing the principal of the Perceptive Loan and the remaining interest payable paid in cash. For each payment date through June 30, 2026, we elected the PIK option, increasing the principal of the Perceptive Loan by $0.3 million.
The Perceptive Agreement contains certain representations and warranties, affirmative covenants, negative covenants, and events of default that are customarily required for similar financings. In addition, the Perceptive Agreement contains financial covenants requiring us to (i) at all times prior to the Maturity Date, maintain minimum unrestricted cash and certain types of marketable securities of at least $4.0 million and (ii) maintain our annual trailing consolidated revenue determined in accordance with U.S. GAAP, tested on a quarterly basis, starting from $85.0 million over a trailing 12-month period ending March 31, 2026, and increasing to $107.5 million for the trailing 12-month period ending December 31, 2030. The occurrence of an event of default under the Perceptive Agreement could result in, among other things, the declaration that all outstanding principal and interest thereunder are immediately due and payable in whole or in part. As of June 30, 2026, we were in compliance with the covenants contained in the Perceptive Agreement.
We paid $1.6 million in fees to Perceptive and third parties which is reflected as a discount on the Perceptive Loan and is being accreted over the life of the loan using the effective interest method. Also, on the Closing Date, we issued to Perceptive a warrant to purchase up to 1,000,000 shares of our common stock (the “Initial Warrants”), and will issue warrants to purchase up to 500,000 shares of our common stock (which number of shares will be adjusted for any stock splits, stock combinations and the like that take place after the Closing Date and prior to the applicable funding date) if we borrow additional tranches of loan under the Perceptive Agreement (the “Additional Warrants” and together with the “Initial Warrants”, the “Warrants”). The Warrants had a fair value of $1.4 million as of the issuance date, which was accounted for as debt discount. The Warrants, regardless of issuance date, have an expiration date of March 2, 2033, may be exercised on a cashless or “net” basis, and will be automatically exercised, on a cashless basis, prior to their expiration if the value of the shares underlying the Warrants is greater than the then-applicable exercise price.
As of June 30, 2026, the Perceptive Loan had an annual effective interest rate of 13.9% per year.
Interest expense on the Perceptive Loan was $1.2 million and $1.6 million during the three and six months ended June 30, 2026, respectively, including interest expense related to debt discount and debt issuance costs of the Perceptive Loan of $0.1 million and $0.1 million, respectively.
In connection with our entry into the Loan Facility, on March 2, 2026, we repaid all outstanding indebtedness under the Amended and Restated Loan and Security Agreement, dated March 29, 2021, as amended (the “Amended and Restated CIBC Agreement”), among us and the Canadian Imperial Bank of Commerce, as lender, and terminated all our obligations and commitments thereunder.
Swiss COVID-19 Credit Agreement
In May 2020, Pulmonx International Sàrl, our wholly owned subsidiary, received 0.5 million Swiss Francs ($0.5 million U.S. dollar equivalent) from a COVID-19 Credit Agreement under a Swiss Federal Government program. The COVID-19 Credit Agreement currently bears interest at a rate of 1.5% per year, payable at the end of each calendar quarter. The loan principal is being repaid in twelve equal installments, paid semi-annually, which began in March of 2022. As of June 30, 2026, Pulmonx International Sàrl has repaid 0.4 million Swiss Francs to the lender.
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Summary Statement of Cash Flows
The following table sets forth the primary sources and uses of cash and cash equivalents for the period presented below:
Six Months Ended June 30,
2026 2025
(in thousands)
Net cash (used in) provided by:
Operating activities $ (15,311) $ (17,130)
Investing activities (10) 21,784
Financing activities 1,513 597
Effect of exchange rate changes on cash and cash equivalents (99) (688)
Net (decrease) increase in cash, cash equivalents, and restricted cash $ (13,907) $ 4,563
Cash Flows from Operating Activities
Net cash used in operating activities was $15.3 million for the six months ended June 30, 2026. Cash used in operating activities was primarily a result of the net loss of $23.7 million, an increase in inventory of $1.2 million mainly due to an increase in finished goods, a decrease in accrued liabilities of $0.4 million primarily due to payment of incentive compensation expense associated with the achievement of performance objectives, a decrease in lease liabilities of $0.6 million due to lease payments, and an increase in accounts receivable of $0.3 million due to the timing of payments from our customers. This is partially offset by stock-based compensation expense of $7.8 million, non-cash lease expense of $0.8 million, an increase in accounts payable of $0.8 million due to timing of payments to our vendors, depreciation and amortization expense of $0.4 million, a decrease in prepaid expenses and other current assets of $0.5 million primarily due to the timing of payments to our vendors, and $0.3 million of interest incurred but paid-in-kind.
Net cash used in operating activities was $17.1 million for the six months ended June 30, 2025. Cash used in operating activities was primarily a result of the net loss of $29.6 million, a decrease in accrued liabilities of $2.4 million primarily due to payment of incentive compensation expense associated with the achievement of performance objectives, an increase in accounts receivable of $1.9 million primarily due to the timing of payments from our customers, an increase in other assets of $0.4 million primarily due to capitalized implementation costs of a hosting arrangement, amortization of premiums and discounts on marketable securities of $0.3 million, and a decrease in lease liabilities of $0.3 million due to lease payments. This is partially offset by stock-based compensation expense of $11.8 million, an increase in accounts payable of $2.6 million due to timing of payments to our vendors, a decrease in inventory of $1.1 million due to shipment of products, a decrease in prepaid expenses and other current assets of $1.1 million primarily due to the timing of payments to our vendors, non-cash lease expense of $0.6 million, and depreciation and amortization expense of $0.6 million.
Cash Flows from Investing Activities
Net cash used in investing activities in the six months ended June 30, 2026 was less than $0.1 million, consisting of purchases of property and equipment.
Net cash provided by investing activities in the six months ended June 30, 2025 was $21.8 million, consisting of proceeds from maturities of marketable securities of $27.8 million, offset by purchases of marketable securities of $5.7 million and purchases of property and equipment of $0.4 million.
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Cash Flows from Financing Activities
Net cash provided by financing activities in the six months ended June 30, 2026 was $1.5 million, consisting of proceeds from our Perceptive Loan of $38.8 million, and proceeds from the issuance of common stock under the employee stock purchase plan of $0.2 million, partially offset by repayment of our CIBC Loan of $37.0 million.
Net cash provided by financing activities in the six months ended June 30, 2025 was $0.6 million, consisting of proceeds from the issuance of common stock under the employee stock purchase plan of $0.6 million and proceeds from the exercise of common stock options of $0.1 million, offset by repayment of debt under the Credit Agreement of less than $0.1 million and payment of debt issuance cost of less than $0.1 million.
Material Cash Requirements
Our net cash operating expenditures were $15.3 million in the six months ended June 30, 2026 and $17.1 million in the six months ended June 30, 2025. We intend to continue to make investments in the development of our products, including ongoing research and development programs. Our cash outflows for capital expenditures were less than $0.1 million and $0.4 million in the six months ended June 30, 2026 and June 30, 2025, respectively, and we expect to maintain the level of expenditures in the future to support our commercial infrastructure, sales force and other commercialization efforts. Recent and expected working and other capital requirements include amounts related to future lease payments for operating lease obligations, which totaled $28.2 million as of June 30, 2026, with $3.0 million expected to be paid within the next 12 months, and amounts related to future short-term and long-term debt which totaled $62.3 million, with $3.7 million expected to be paid within the next 12 months. Lastly, we may undertake additional expenses to further expand our commercial organization and efforts, enhance our research and development efforts and pursue product expansion opportunities.
As of June 30, 2026, we had cash and cash equivalents of $55.8 million. Based on our current planned operations, we expect that our cash and cash equivalents will enable us to fund our operating expenses for at least 12 months from the issuance of our condensed consolidated financial statements as of and for the six months ended June 30, 2026. We believe we will meet longer-term expected future cash requirements and obligations through a combination of available cash and cash equivalents, sales of our products, debt financings, and access to other public or private equity offerings. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
Because of the numerous risks and uncertainties associated with research, development and commercialization of medical devices, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on many factors, including:
•the costs of commercialization activities related to commercializing our products in the United States and elsewhere, including expanding territories, increasing sales and marketing personnel, actual and anticipated product sales, marketing programs, manufacturing and distribution costs;
•the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
•the research and development activities we intend to undertake, product enhancements that we intend to pursue;
•whether or not we pursue acquisitions or investments in businesses, products or technologies that are complementary to our current business;
•the degree and rate of market acceptance of our products in the United States and elsewhere;
•changes or fluctuations in our inventory supply needs and forecasts of our supply needs;
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•our need to implement additional infrastructure and internal systems;
•our ability to hire additional personnel to support our operations as a public company;
•the emergence of competing technologies or other adverse market developments; and
•the impact of any public health crises on our business, financial condition and results of operations.
Until such time, if ever, as we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings and collaborations or licensing arrangements. There can be no assurance that our efforts to procure additional financing will be successful or that, if they are successful, the terms and conditions of such financing will be favorable to us or our stockholders. If we do raise additional capital through public or private equity or convertible debt offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional capital through collaborations agreements, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses that may not be favorable to us. If we are unable to raise capital when needed, we will need to delay, limit, reduce or terminate planned commercialization or product development activities, or grant rights to develop and commercialize products or product candidates that we would otherwise prefer to develop and market ourselves in order to reduce costs.
Critical Accounting Estimates
Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses incurred during the reporting periods. Our estimates are based on our knowledge of current events and actions we may undertake in the future and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 10, 2026, and the notes to the unaudited condensed consolidated financial statements included in “Part I, Item 1 — Financial Statements” of this Quarterly Report on Form 10-Q. During the six months ended June 30, 2026, except as described in Note 2 to the unaudited interim condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, there were no material changes to our critical accounting estimates from those discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 10, 2026.
Recent Accounting Pronouncements
See “Recent Accounting Pronouncements” in Note 3 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
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