Results

Pulmonx Corporation

11/12/2025 | Press release | Distributed by Public on 11/12/2025 15:26

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
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, 2024 filed with the Securities and Exchange Commission ("SEC") on February 25, 2025.
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") by the U.S. Food and Drug Administration ("FDA") for the Zephyr Valve as a result of our breakthrough technology 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 93% of our revenue generated in markets where we sell directly for the nine months ended September 30, 2025.
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
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 $21.5 million, with a gross margin of 74.7% and a net loss of $14.0 million, for the three months ended September 30, 2025 compared to revenue of $20.4 million, with a gross margin of 73.7% and a net loss of $14.1 million, for the three months ended September 30, 2024. For the nine months ended September 30, 2025, we generated revenue of $67.9 million, with a gross margin of 73.0% and a net loss of $43.6 million, compared to revenue of $60.0 million, with a gross margin of 74.0% and a net loss of $43.2 million, for the nine months ended September 30, 2024. As of September 30, 2025, we had an accumulated deficit of $511.1 million, cash and cash equivalents of $76.5 million, and $37.1 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
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 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 ("LVRS"), 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
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 identify patients potentially eligible for treatment with Zephyr Valves. No single customer accounted for more than 10% of our revenue during the nine months ended September 30, 2025 and September 30, 2024.
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
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.
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 Income (Expense), Net
Other income (expense), net primarily consists of foreign currency exchange gains and losses.
Results of Operations:
Comparison of the Three Months Ended September 30, 2025 and September 30, 2024
The following table summarizes our results of operations for the period indicated:
Three Months Ended September 30,
2025 2024 $ Change % Change
(in thousands)
Revenue $ 21,502 $ 20,387 $ 1,115 5.5 %
Costs of goods sold 5,450 5,361 89 1.7 %
Gross profit 16,052 15,026 1,026 6.8 %
Operating expenses:
Research and development 4,846 3,744 1,102 29.4 %
Selling, general and administrative 25,599 25,411 188 0.7 %
Total operating expenses 30,445 29,155 1,290 4.4 %
Loss from operations (14,393) (14,129) (264) 1.9 %
Interest income 611 1,269 (658) (51.9) %
Interest expense (805) (891) 86 (9.7) %
Other income (expense), net
758 (201) 959 (477.1) %
Net loss before tax (13,829) (13,952) 123 (0.9) %
Income tax expense 128 192 (64) (33.3) %
Net loss $ (13,957) $ (14,144) $ 187 (1.3) %
Revenue
Revenue increased by $1.1 million, or 5.5%, to $21.5 million during the three months ended September 30, 2025, compared to $20.4 million during the three months ended September 30, 2024. The sale of products in the United States increased by $0.2 million to $14.0 million during the three months ended September 30, 2025, compared to $13.8 million for the three months ended September 30, 2024. The sale of products in international markets increased by $0.9 million to $7.5 million during the three months ended September 30, 2025, compared to $6.6 million for the three months ended September 30, 2024. The increase in revenue was primarily attributable to the continued growth of Zephyr Valve procedure volumes.
Cost of Goods Sold and Gross Margin
Cost of goods sold increased by $0.1 million, or 1.7%, to $5.5 million during the three months ended September 30, 2025, compared to $5.4 million during the three months ended September 30, 2024. Gross margin was 74.7% during the three months ended September 30, 2025, compared to 73.7% during the three months ended September 30, 2024.
The increase in gross margin was primarily due to geographic mix during the three months ended September 30, 2025.
Research and Development Expenses
Research and development expenses increased by $1.1 million, or 29.4%, to $4.8 million during the three months ended September 30, 2025, compared to $3.7 million during the three months ended September 30, 2024. The increase in research and development expense was primarily due to an increase of $0.5 million in costs associated with our clinical trials, including fees paid to clinical research organizations, an increase of $0.3 million in payroll and personnel-related expenses, and an increase of $0.3 million in services and other expenses in support of product development.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $0.2 million, or 0.7%, to $25.6 million during the three months ended September 30, 2025, compared to $25.4 million during the three months ended September 30, 2024. The increase in selling, general and administrative expenses was primarily due to an increase of $1.0 million in advertising and marketing related expenses, offset by a decrease of $0.8 million in payroll and personnel-related expenses for our sales, marketing and administrative personnel.
Interest Expense and Income
Interest expense decreased by $0.1 million to $0.8 million for the three months ended September 30, 2025 compared to $0.9 million for the three months ended September 30, 2024, primarily due to lower interest rates. Interest income decreased by $0.7 million to $0.6 million for the three months ended September 30, 2025 compared to $1.3 million for the three months ended September 30, 2024. 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 Income (Expense), Net
Other income (expense), net was $0.8 million during the three months ended September 30, 2025 and $(0.2) million during the three months ended September 30, 2024, primarily due to foreign currency exchange gains and losses.
Comparison of the Nine Months Ended September 30, 2025 and September 30, 2024
The following table summarizes our results of operations for the period indicated:
Nine Months Ended September 30,
2025 2024 $ Change % Change
(in thousands)
Revenue $ 67,899 $ 60,024 $ 7,875 13.1 %
Costs of goods sold 18,301 15,613 2,688 17.2 %
Gross profit 49,598 44,411 5,187 11.7 %
Operating expenses:
Research and development 14,908 13,569 1,339 9.9 %
Selling, general and administrative 78,450 75,129 3,321 4.4 %
Total operating expenses 93,358 88,698 4,660 5.3 %
Loss from operations (43,760) (44,287) 527 (1.2) %
Interest income 2,198 4,016 (1,818) (45.3) %
Interest expense (2,385) (2,665) 280 (10.5) %
Other income (expense), net
809 179 630 352.0 %
Net loss before tax (43,138) (42,757) (381) 0.9 %
Income tax expense 440 462 (22) (4.8) %
Net loss $ (43,578) $ (43,219) $ (359) 0.8 %
Revenue
Revenue increased by $7.9 million, or 13.1%, to $67.9 million during the nine months ended September 30, 2025, compared to $60.0 million during the nine months ended September 30, 2024. The sale of products in the United States increased by $2.3 million to $42.9 million during the nine months ended September 30, 2025, compared to $40.6 million during the nine months ended September 30, 2024. The sale of products in international markets increased by $5.6 million to $25.0 million during the nine months ended September 30, 2025, compared to $19.4 million for the nine months ended September 30, 2024. The increase in revenue reflects continued growth of Zephyr Valve procedure volumes.
Cost of Goods Sold and Gross Margin
Cost of goods sold increased by $2.7 million, or 17.2%, to $18.3 million during the nine months ended September 30, 2025, compared to $15.6 million during the nine months ended September 30, 2024. The increase was mainly due to an increase in the number of products sold and increased manufacturing costs as we invested to support anticipated growth. Gross margin was 73.0% during the nine months ended September 30, 2025, compared to 74.0% during the nine months ended September 30, 2024. The decrease in gross margin was primarily due to geographic mix during the nine months ended September 30, 2025.
Research and Development Expenses
Research and development expenses increased by $1.3 million, or 9.9%, to $14.9 million during the nine months ended September 30, 2025, compared to $13.6 million during the nine months ended September 30, 2024. The increase in research and development expense was primarily due to an increase of $1.5 million in costs associated with our clinical trials, including fees paid to clinical research organizations, an increase of $0.8 million in payroll and personnel-related expenses, and an increase of $0.7 million in services and other expenses in support of product development, offset by a non-cash impairment charge of $1.7 million related to certain previously capitalized software development costs recorded in the second quarter of 2024.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $3.3 million, or 4.4%, to $78.5 million during the nine months ended September 30, 2025, compared to $75.1 million during the nine months ended September 30, 2024. The increase in selling, general and administrative expenses was primarily due to an increase of $4.1 million in advertising and marketing related expenses, offset by a decrease of $0.4 million in professional services consulting expenses, and a decrease of $0.3 million in payroll and personnel-related expenses for our sales, marketing and administrative personnel.
Interest Expense and Income
Interest expense decreased by $0.3 million to $2.4 million during the nine months ended September 30, 2025 compared to $2.7 million during the nine months ended September 30, 2024 due to lower interest rates. Interest income decreased by $1.8 million to $2.2 million during the nine months ended September 30, 2025 compared to $4.0 million during the nine months ended September 30, 2024. 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 Income (Expense), Net
Other income (expense), net was $0.8 million during the nine months ended September 30, 2025 and $0.2 million during the nine months ended September 30, 2024, 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 September 30, 2025, we had cash and cash equivalents of $76.5 million, an accumulated deficit of $511.1 million, and $37.1 million outstanding under the CIBC Loan and Credit Agreement, net of debt discount and debt issuance costs.
CIBC Loan
In February 2020, we executed a Loan and Security Agreement with Canadian Imperial Bank of Commerce ("CIBC"), which we subsequently amended in April 2020 and December 2020 (as amended, the "CIBC Agreement"). The CIBC Agreement originally provided us with the ability to borrow up to $32.0 million in debt financing ("CIBC Loan") consisting of $17.0 million advanced at the closing of the agreement ("Tranche A"), with the option to draw up to an additional $8.0 million ("Tranche B") and an additional financing tranche ("Tranche C") of up to $7.0 million on or prior to February 20, 2022. Neither Tranche B nor Tranche C was drawn before the option expired.
In March 2021, we entered into an Amended and Restated Loan and Security Agreement with CIBC (as amended, the "Amended and Restated CIBC Agreement") which, among other things, extended the loan maturity date of the CIBC Loan from March 15, 2022 to February 20, 2025, and modified certain financial covenants.
In October 2021, we entered into a Second Amendment to the Amended and Restated CIBC Agreement, which extended the interest only period of the loan from 24 months to 36 months. Under the amended terms, principal repayment would begin in February 2023.
In October 2022, we entered into a Third Amendment to the Amended and Restated CIBC Agreement (the "Third Amendment"), which, among other things, extended the maturity date to October 31, 2027; provided a commitment for a new $20.0 million tranche of term loans that may be drawn at our option through October 31, 2023, subject to the satisfaction of certain conditions; and provided for a new interest only period of 24 months from the signing date of the Third Amendment, with the possibility of an additional extension of such interest only period of up to 12 months, subject to satisfaction of certain conditions.
In February 2023, we drew $20.0 million of the Amended Tranche B which has the same interest rate and repayment terms as Tranche A of the CIBC Loan.
In May 2024, as a result of satisfying certain conditions set forth in the Third Amendment, we extended the interest-only period of the CIBC Loan from 24 months to 36 months. Principal repayment will begin in November 2025. There was no change to the loan interest rate, maturity date, or other terms of the loan.
In April 2025, we further amended the terms of the CIBC Loan to extend the interest-only period through maturity, with full principal repayment due in October 2027. There was no change to the interest rate or the maturity date of the loan.
The loans provided under the Amended and Restated CIBC Agreement bear interest at a floating rate equal to 1.0% above the Wall Street Journal Prime Rate at any time. The loans are collateralized by substantially all of our assets, including cash and cash equivalents, accounts receivable, intellectual property and equipment. We may prepay the loans, subject to certain conditions. The Amended and Restated CIBC Agreement contains financial covenants that require us to maintain minimum cash and minimum revenue amounts, and the Amended and Restated CIBC Agreement contains other customary restrictive covenants, representations and warranties, events of default and other customary terms and conditions.
We paid $0.5 million fees to the lender and third parties which is reflected as a discount on the loans provided under the Amended and Restated CIBC Agreement and is being accreted over the life of the loan using the effective interest method. During the three months ended September 30, 2025 and September 30, 2024, we recorded interest expense related to debt discount and debt issuance costs of the CIBC Loan of less than $0.1 million and less than $0.1 million, respectively. During the nine months ended September 30, 2025 and September 30, 2024, we recorded interest expense related to debt discount and debt issuance costs of the CIBC Loan of less than $0.1 million and less than $0.1 million, respectively.
Interest expense on the CIBC Loan was $0.8 million and $0.9 million during the three months ended September 30, 2025 and September 30, 2024, respectively. Interest expense on the CIBC Loan was $2.4 million and $2.7 million during the nine months ended September 30, 2025 and September 30, 2024, respectively.
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 September 30, 2025, Pulmonx International Sàrl has repaid $0.4 million to the lender.
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:
Nine Months Ended September 30,
2025 2024
(in thousands)
Net cash (used in) provided by:
Operating activities $ (25,292) $ (24,807)
Investing activities 30,495 3,409
Financing activities 778 1,301
Effect of exchange rate changes on cash and cash equivalents (333) (117)
Net increase (decrease) in cash and cash equivalents $ 5,648 $ (20,214)
Cash Flows from Operating Activities
Net cash used in operating activities was $25.3 million for the nine months ended September 30, 2025. Cash used in operating activities was primarily a result of the net loss of $43.6 million, a decrease in accrued liabilities of $1.8 million primarily due to payment of incentive compensation in the first quarter of fiscal year 2025, associated with the achievement of performance objectives under the fiscal year 2024 incentive plan, a decrease in lease liabilities of $0.7 million due to lease payments, an increase in accounts receivable of $0.5 million primarily due to the timing of payments from our customers, amortization of premiums and discounts on marketable securities of $0.4 million, and an increase in other assets of $0.2 million primarily due to capitalized implementation costs of a hosting arrangement. This is partially offset by stock-based compensation expense of $17.0 million, an increase in accounts payable of $2.8 million due to timing of payments to our vendors, non-cash lease expense of $1.1 million, depreciation and amortization expense of $0.8 million, and a decrease in prepaid expenses and other current assets of $0.2 million primarily due to the timing of payments to our vendors.
Net cash used in operating activities was $24.8 million for the nine months ended September 30, 2024. Cash used in operating activities was primarily a result of the net loss of $43.2 million, a decrease in accrued liabilities of $3.5 million primarily due to payment of incentive compensation expense associated with the achievement of performance objectives, a decrease in lease liabilities of $1.9 million due to lease payments, amortization of premiums and discounts on marketable securities of $1.3 million, and an increase in prepaid expenses and other current assets of $0.3 million. This is partially offset by stock-based compensation expense of $17.4 million, an increase in accounts payable of $3.0 million due to timing of payments to our vendors, a non-cash impairment charge of $1.7 million related to certain previously capitalized software development costs recorded in the second quarter of 2024, non-cash lease expense of $1.5 million, depreciation and amortization expense of $1.2 million, and a decrease in accounts receivable of $0.4 million due to the timing of payments from our customers.
Cash Flows from Investing Activities
Net cash provided by investing activities in the nine months ended September 30, 2025 was $30.5 million, consisting of proceeds from maturities of marketable securities of $36.6 million, offset by purchases of marketable securities of $5.7 million and purchases of property and equipment of $0.4 million.
Net cash provided by investing activities in the nine months ended September 30, 2024 was $3.4 million, consisting of proceeds from maturities of marketable securities of $31.2 million, offset by purchases of marketable securities of $26.4 million and purchases of property and equipment of $1.3 million.
Cash Flows from Financing Activities
Net cash provided by financing activities in the nine months ended September 30, 2025 was $0.8 million, consisting of proceeds from the issuance of common stock under the employee stock purchase plan of $0.8 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 $0.1 million.
Net cash provided by financing activities in the nine months ended September 30, 2024 was $1.3 million, consisting of proceeds from the issuance of common stock under the employee stock purchase plan of $1.2 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.
Material Cash Requirements
Our net cash operating expenditures were $25.3 million in the nine months ended September 30, 2025 and $24.8 million in the nine months ended September 30, 2024. 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 $0.4 million and $1.3 million in the nine months ended September 30, 2025 and September 30, 2024, 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 $30.3 million as of September 30, 2025, with $2.9 million expected to be paid within the next 12 months, and amounts related to future short-term and long-term debt which totaled $37.1 million, with $3.2 million due 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 September 30, 2025, we had cash and cash equivalents of $76.5 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 nine months ended September 30, 2025. 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;
•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, 2024, filed with the SEC on February 25, 2025, 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 nine months ended September 30, 2025, 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, 2024, filed with the SEC on February 25, 2025.
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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