Good afternoon, and welcome to Pulmonx Second Quarter 2022 Earnings Conference Call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Laine Morgan from the Gilmartin Group for a few introductory comments.

Good afternoon, and thank you for participating in today's call. Joining me from Pulmonx are Glen French, President and Chief Executive Officer; and Derrick Sung, Chief Financial Officer. Earlier today, Pulmonx released financial results for the quarter ended June 30, 2022. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that Management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor position of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to the expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, the impact of COVID-19 on our business and prospects for recovery, expense management, expectations for hiring, growth and organization, market opportunities, guidance for revenue, gross margin and operating expenses, commercial expansion and product pipeline development are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our public filings with the Securities and Exchange Commission, including the quarterly report on Form 10-Q filed with the SEC on May 9, 2022. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 2, 2022. The Pulmonx Corporation disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. And with that, I will turn the call over to Glen.

Thanks, Laine. Good afternoon, everyone, and welcome to our second quarter 2022 earnings call. Here with me is Derrick Sung, our Chief Financial Officer. In the second quarter, we generated worldwide sales of $14 million, representing our highest quarterly revenue to date. We're pleased with our second quarter performance as we continue to see strong patient demand for our Zephyr Valves, improving end market dynamics and the ability of our team to execute and manage our business in a fluid environment. Our performance was driven by particularly strong results in the United States, where we achieved sales 18% higher than our previous record in the fourth quarter of last year as procedure volumes recovered from the winter COVID surge despite continued pressures from hospital staffing shortages. The momentum exiting the quarter leaves us confident in our ability to deliver on our full year 2022 revenue guidance of $55 million to $60 million even in the face of ongoing macro uncertainties and incremental foreign exchange headwinds. Throughout the second quarter, we continued to execute on our initiatives to expand our global commercial footprint. In the United States, we added 18 new treating centers, bringing our total number to 248 and keeping us on track to meet our objective of establishing at least 280 trained Zephyr Valve centers in the U.S. by year-end. We also added one additional sales territory in the U.S. and two additional international sales territories, bringing our total U.S. and international sales territories to 55 and 36, respectively. One of our primary goals is to educate both healthcare providers and patients about endobronchial valves being part of the standard of care for severe emphysema. In the second quarter, we launched joint education campaigns with two leading lung advocacy organizations, The American Lung Association and the COPD Foundation. These collaborations will extend through 2022 and include educational materials for patients, physicians, nurses and respiratory therapists including accredited courses, videos, webinars, podcasts and articles. We have also expanded our healthcare provider education outreach at the local level with a focus on a selection of community physicians who manage large populations of COPD patients. Together with our physician collaborators, we continue to build on the clinical evidence for Zephyr Valves. In June, the first prospective study to assess cardiac function following bronchoscopic lung volume reduction with Zephyr Valves was published in the American Journal of Respiratory and Critical Care Medicine. This study found that a reduction in lung hyperinflation using Zephyr Valves resulted in improvements in cardiac function, such as preload, cardiac output and heart muscle contractility, thus suggesting a role for Zephyr Valves in modifying the risk for heart failure in severe emphysema patients. Innovative clinical work such as this continues to advance the scientific evidence demonstrating the clinical value of endobronchial valves. Turning to our longer-term growth initiatives to expand our addressable market. We are excited about two upcoming data readouts associated with our AeriSeal clinical development program. As a reminder, we are developing AeriSeal to provide a solution for severe emphysema patients not currently eligible for Zephyr Valves due to the presence of a gap in the fissure separating lobes of the lungs, which results in collateral ventilation or airflow between the lobes. This collateral ventilation prevents a target lobe from deflating when Zephyr Valves are inserted. AeriSeal is a polymeric foam that is delivered via a bronchoscope to seal the airways leading to the fissure gaps between the lobes of the lung, potentially enabling treatment of patients who were previously ineligible for valves due to collateral ventilation. Thus, we see AeriSeal as a potential way to increase the number of patients who are candidates for Zephyr Valve therapy. We are looking forward to seeing the publication of data from a single-center proof-of-concept, investigator-led feasibility study from Australia that evaluated AeriSeal to eliminate collateral ventilation in the target lobe, and if successful, then follow up treatment of that lobe with Zephyr Valves. This manuscript was recently accepted and is expected to publish in the coming months. AeriSeal is also currently being studied in our CONVERT trial, a multicenter, multinational study, which we are conducting in Europe. We are also pleased that interim data from this trial has been accepted for a podium presentation at the upcoming European Respiratory Society International Congress in Barcelona, Spain on September 4. At this presentation, we expect to share data on an initial subset of CONVERT patients that will shed light on the preliminary conversion with AeriSeal of targeted patients with collateral ventilation. This information should provide additional insight and proof-of-concept around the use of AeriSeal to expand Zephyr Valves to severe emphysema patients with collateral ventilation in a larger multicenter study. Learning from the CONVERT trial continues to inform the design of our U.S. IDE study, which we are discussing with the FDA and expect to initiate sometime next year. Lastly, our initiative to expand geographically into the Japanese market remains on track. We recently hired an experienced leader in Japan to drive our commercial efforts and we are engaged in constructive dialogue with the Japanese authorities following the submission of our regulatory application late last year. We continue to expect regulatory approval in Japan by the end of this year, followed by the establishment of reimbursement and subsequent commercial launch in the back half of 2023. Again, we estimate Japan to be a $1 billion opportunity with approximately 100,000 patients in need of our Zephyr Valve treatment. In summary, I believe the record sales that we achieved in the second quarter along with the continued progress on our commercial and strategic initiatives positions us well for continued growth through the remainder of the year and well into the future. With that, I'll now turn the call over to Derrick to provide a more detailed review of our second quarter results.

Thank you, Glen, and good afternoon, everyone. Total worldwide revenue for the three months ended June 30, 2022, reached a new quarterly high of $14 million, a 14% increase from $12.2 million in the same period of the prior year, and an increase of 19% on a constant currency basis. U.S. revenue in the second quarter was $8.6 million, a 31% increase from $6.6 million during the prior year period. The record U.S. sales reflected a recovery in procedure volumes following the winter COVID surge as well as the benefit from the increasing number of treating centers that we have been opening every quarter. International revenue in the second quarter of 2022 was $5.3 million, a 5% decrease from $5.6 million during the same period last year and an increase of 4% on a constant currency basis. International revenue benefited from solid procedure growth in our major markets offset by a slower restart in some of our smaller markets, continued lockdowns in China, hospital staffing shortages and negative impact from foreign currency exchange rates. Gross margin for the second quarter of 2022 was 75% compared to 74% in the prior year period. The year-over-year expansion in gross margin was driven primarily by increasing production efficiencies. We expect gross margin to trend near 74% for the remainder of the year as negative foreign exchange impact partially offsets continued gains in production efficiencies. Total operating expenses for the second quarter of 2022 were $24.8 million, a 14% increase from $21.7 million in the second quarter of 2021. Non-cash stock-based compensation expense was $4.2 million in the second quarter of 2022 and accounted for 64% of the increase in operating expense from the prior year. We continue to prudently manage our operating expenses to remain within our previously communicated guidance of $100 million to $105 million for the full year 2022, inclusive of approximately $16 million of stock-based compensation expense. We remain committed to investing in growth while simultaneously managing towards cash flow breakeven within the confines of the capital that we currently have on hand. R&D expenses for the second quarter of 2022 were $3.6 million compared to $3.5 million in the same period of the prior year. The slight increase was primarily due to an increase in stock-based compensation expense. Sales, general and administrative expenses for the second quarter of 2022 were $21.2 million compared to $18.2 million in the second quarter of 2021. The increase was attributable to an increase in sales and marketing expenses as we expanded our commercial team and increased commercial activities as well as an increase in stock-based compensation expense. Net loss for the second quarter of 2022 was $14.6 million or a loss of $0.40 per share as compared to a net loss of $13 million or a loss of $0.36 per share for the same period of the prior year. An average weighted share count of 37 million shares was used to determine loss per share for the second quarter of 2022. We ended June 30, 2022, with $166.8 million in cash, cash equivalents and marketable securities, a decrease of $9.7 million from March 31, 2022. We expect to burn roughly $50 million in cash for the full year 2022 and expect to see our annual cash burn decrease in subsequent years as we continue to grow sales and see increasing leverage throughout our business. As I mentioned, we expect to reach cash flow breakeven in our current operations with the capital that we have on hand and are managing our business to maintain a cash runway of at least three years of forward cash burn until we turn cash flow positive. Finally, turning to our outlook for 2022. We now estimate foreign exchange rates will result in an approximate 5% headwind to global sales growth for the full year 2022. Despite this incremental headwind and continued macro uncertainties, we remain confident in our ability to achieve full year 2022 revenue within our previously communicated range of $55 million to $60 million, keeping in mind that we do expect some level of summer seasonality and continued sequential growth throughout the year. This represents 14% to 24% year-over-year growth on a reported basis and implies 19% to 29% growth on a constant currency basis, up 2% from our previously implied constant currency growth expectations. And with that, I'd like to thank you for your attention, and we will now open up the call for questions.

Our first question comes from Cecilia Furlong with Morgan Stanley.

I wanted to start just on the quarter, but Glen or Derrick, if you could just talk through what you saw from an active account standpoint as the quarter progressed in the U.S.? And then any commentary you could talk to just in terms of looking at single centers, some of your centers that adopted Zephyr earlier pre-COVID or non-COVID, but what you saw from just a volume ramp through the quarter? And any color you could provide to just on the exit rates as you think about especially entering the summer months.

Sure. So a few different things that you brought up there. With regard to active accounts, June was stronger than May and April. But the average across the period was 76%, which was right where we had expected it to be. So that was good. You had asked about some of the accounts that were up and running around when COVID hit, some of our stronger accounts. Is that where you were going? You wanted to know how they were doing?

Correct. Does it had more experience have been in the field.

Yes. What we observed was that accounts with more experience and engagement were the first to recover. These accounts had a consistent year before COVID hit. In contrast, accounts established since early 2020 experienced disruptions due to the pandemic. The most resilient ones were those with greater experience, and they returned to performance sooner. This trend was evident in our international numbers as well. While 60% of our business is in the United States, 40% is distributed across other countries, mainly in Germany, France, the U.K., and Austria, which account for 90% of our international sales. In the U.S., we saw a 31% increase in constant currency compared to the previous year, and a 20% increase in our major markets. Overall, we grew by 27.3%, but the small 10% of our business accounted for most of our shortfall, as smaller accounts recovered more slowly than larger ones. This trend was noted in the U.S. and across our top five markets, which performed better than expected. Regarding summer, we are optimistic. While we lack perfect information, the circumstances have been complicated by COVID and our ongoing growth from previous years. We are confident about the summer, especially in the U.S., though we typically see a slowdown in Europe. Australia, our fifth-largest market, won’t experience this seasonal effect, as its peak occurs around Christmas. Overall, while there may be a slight slowdown in Europe, we expect a strong September and a rebound in late August, and we anticipate continued strength in the U.S.

Great. And if I could follow up, too, just in terms of what you're seeing in the field today, just from a capacity standpoint, staffing constraints and how that factored into your back half guidance as we think about both the U.S. and OUS, but sequential ramp and the ability to really be operating across the health care system closer to full capacity? And again, just really how you're thinking about contributions from some of your older sites versus more recent additions, especially as you think about the 3Q to 4Q sequential dynamic.

Capacity has become a complex issue. Previously, it was straightforward—COVID would arise and halt operations. Currently, the effect of COVID on our business isn't just about the number of cases, as cases are still high, but rather how many of those patients require intensive care. We're noticing a reduced number of COVID patients being admitted to the ICU, which changes the constraints we previously faced. This shift reveals that the major limitations have lessened. For the first time, we are encountering the staffing challenges that many other companies have mentioned. Hospitals are navigating their capacity issues, and I am optimistic about how we've managed this due to our diverse business presence in various markets, both in the U.S. and internationally. That's my perspective on capacity. Derrick, do you have any additional insights on this?

I think you said we factored in a bit. I'm sorry, I was on mute. I apologize. So I was just going to say that we have incorporated the thinking around hospital staffing shortages into our guidance. And so that is incorporated into our forward-looking thinking for the remainder of the year.

Our next question comes from Travis Steed with BofA Securities.

Derrick, to add more detail to the Q3 comment, you mentioned typical seasonality, but still anticipate quarter-over-quarter growth. I believe the Street projected around $16 million. I want to confirm if that's the right expectation for Q3. I'm interested in your perspective on the lower end compared to the higher end of the guidance for 2022, considering the various factors influencing that.

Yes, it's a great question, Travis. So I would continue to think about modeling to the midpoint of our guidance as kind of how we think about it moving forward. And if you do think about the midpoint of our guidance, our guidance implies $33 million in the back half of the year. I would weight that a bit more to Q4 than to Q3 because of that summer seasonality impact that we talked about. We would expect to see some modest sequential increase in sales on a quarter-over-quarter basis between 2Q to 3Q, but I would weight more heavily the bulk of that $33 million if you're modeling to the midpoint of our guidance towards the back half of the year.

That's helpful. We can follow up on what modest means post-call. But I did look at like the 2023 Street numbers, and then I realize you can't comment on it, but 2021, you grew revenue by $16 million. This year, the high end of the guide is $60 million or $12 million of growth. And obviously, those are two macro challenged years. But when you look at 2023, the Street's at $30 million of revenue growth. So I don't know if that's a reasonable way to think about the step-up in growth as the hospital environment and some of these challenges ease? Or if revenue dollars are more likely to be closer to historical levels kind of without giving specifics, I'd love to kind of hear how you're thinking about the business on a little bit of a longer-term basis?

Yes, that's a reasonable question. While we don't want to delve into guidance for 2023, there are a couple of key points to consider. Firstly, foreign exchange is a challenge for us since 40% of our business is international, and the strengthening dollar creates uncertainty regarding currency fluctuations. We're experiencing a growing negative impact from foreign exchange. Currently, we estimate a 2% larger adverse effect on sales compared to last year, which equates to about $1 million. We won’t attempt to forecast exchange rate movements, but the current dollar value will affect our future sales next year if conditions remain unchanged. Additionally, we’re still facing residual impacts from COVID-19. We’re pleased to see a strong recovery in procedure volumes across our key markets, and we hope that the days of completely halting procedures due to ICU capacity are over. However, we continue to grapple with hospital staffing shortages and their effect on productivity, which influences hospital capacity going forward. These are important factors we will consider as we look to the future.

Okay. No, that's all fair. And one quick follow-up on the cash flow breakeven. You said enough capital in hand for three years forward. But I'm curious what revenue level that will happen out or kind of when you're expecting to hit breakeven?

Sure, sure. So again, I don’t want to get too specific on this. But at a high level, I would say we would expect to get to cash flow breakeven sometime in the next few years, in the next three to five years. And again, rough numbers, I would say somewhere at an annualized run rate, I would say, north of $150 million is where we expect to reach cash flow breakeven within our current operations that we have.

Our next question comes from David Ko with Canaccord Genuity.

This is David on for Bill Plovanic. Congrats on your quarter. My first question is, what do you think has been the impact from the payers that were added in 2022 and the first half of this year? And if you don't see an impact, how long does it take to flow through the system and see the benefits?

Yes. We have nearly all of our patients covered, with 75% of them receiving government support. I'm referring to the U.S. Are you asking about private payers or reimbursement processes outside the U.S.?

Private.

Twenty-five percent of our business is with private payers, and we receive payment from them more than 90% of the time, even when they initially make a negative coverage decision. All major payers, except for Blue Cross Blue Shield, either have a positive or neutral stance towards us, meaning they generally cover our services. Within the Blue Cross Blue Shield network, over two-thirds of individual plans have switched to a positive coverage decision despite the overall negative stance of the association. We are making steady progress on this front, addressing it one step at a time. When we encounter a negative policy, we can appeal and submit data for review by an independent physician not affiliated with Blue Cross Blue Shield. We have been nearly successful in these reviews because the data from our four published randomized controlled trials clearly demonstrate that our approach is the standard of care, and we tend to win these appeals consistently. The reason we focus on the status of private payers is due to the significant delays in the process; it can take around three months to navigate the appeal process compared to just two to three weeks for a positive coverage decision. We aim to minimize this resistance. Remarkably, our patients are very patient themselves; they are not in urgent situations, and they are committed to advocating for their procedures throughout this extended process. There’s minimal fallout during these delays. However, it would certainly be more efficient to expedite these appeals. To reiterate, private payers account for only 25% of our business, with half of that linked to Blue Cross Blue Shield. Importantly, two-thirds of the covered lives under the Blue Cross Blue Shield Association have already shifted to a positive outlook, meaning we're moving ahead steadily within those accounts, even though this segment represents a small part of our overall operations.

Thank you for the clarification. And I have one more question, if that's all right. So how does the traction in utilization in your oldest accounts measure versus the newer ones? And what is the time frame for an account to reach maximum capacity?

Yes. Thanks for the question. It's an element that we've been commenting on for some period of time now. Really, the only pure group that we have was a relatively small group of accounts that were up and running for a year prior to COVID. Remember, we were on the market for 18 months from FDA approval to when COVID hit. The first things that our sales reps did when we got approval was to go introduce themselves to these hospitals because we don't sell a single thing to these hospitals until we showed up with the valves. We had to go through a process of negotiating terms and conditions and getting those hospitals up and running through the various committees and so forth. We didn't have a ton of hospitals that had a year of experience at the time that COVID hit. It was a double-digit number, like 40 to 60 accounts or something like that. So in that small group of established accounts that didn’t get the light switch turned off in the first year, we had a certain rate of productivity, which was something on the order of six or seven cases per quarter. We’ve been through the COVID phase working in an environment where folks were coming in and going out based on the waves of COVID hitting and have been as low as in the threes on a quarterly basis, up into the fours and so forth, and we’re sort of digging our way out of that. But as I mentioned before, it’s the most established accounts that have got the strongest history that are the first ones to come back. Everyone was down just a few months ago in the first quarter. Those that popped back up were the more established accounts, many of which were the ones that were uninterrupted in the pre-COVID phase.

Our next question comes from Larry Biegelsen with Wells Fargo.

Glen, just a two-part question on AeriSeal. I'm going to ask them both upfront. So the CONVERT interim results we're going to get at ERS in September, how many patients are going to be presented? What would you consider a good result? You said you were excited about presenting the data. What makes you optimistic? What changes have you made since earlier studies like the ASPIRE trial? AeriSeal has been around for a long time. So what makes you think you have something here?

We will report on the CONVERT study at ERS. The CONVERT method was initially presented as a case study from Australia involving a single patient who was CV positive. The physician used AeriSeal to convert the patient, after which they behaved like someone who was born CV negative, which was promising. This led to efforts to demonstrate similar outcomes in a larger group of patients at the site, resulting in a small single-center study that has also been documented and is set to be published soon. This publication is currently under embargo. In the CONVERT trial, we have several patients, though I won't specify the exact number, but it is in the tens. At ERS, we will primarily discuss whether AeriSeal can effectively convert CV-positive patients to CV-negative. The initial question must be answered before considering patient behavior with valved approaches. We asked leading experts what would be a meaningful result, and they indicated that converting 30% to 50% of good candidates among CV-positive patients would be excellent, with 50% being outstanding and 30% being acceptable. So, anything above 30% is good, and at least 50% is exceptional. The timing of the publication is uncertain; if it appears before ERS, it will be available for review. In addition to this, the details from the larger group will also be presented at ERS, focusing on the central question regarding conversion. Another point of discussion will be the tolerability of AeriSeal. Regarding ASPIRE, which was a trial initiated by Aeris Therapeutics, they did not complete it due to financial constraints. After acquiring the technology, we moved forward with development. One major observation from that trial, conducted over a decade ago, was the question of patient tolerance to AeriSeal, as a larger volume was used then compared to our current approach. At ERS, we might learn how patients respond when given a lower volume of AeriSeal, addressing safety or tolerability concerns.

Our next question comes from Rick Wise with Stifel.

This is Priya Mallick speaking on behalf of Rick Wise. I will ask both of my questions now. In the early weeks of earnings, we've observed several companies noting increased seasonal pressure due to hospital staff shortages and their ability to perform procedures. How has this affected your productivity per account? Additionally, how should we anticipate this influencing the third quarter, the second half of 2022, and moving into 2023?

Got it. Yes. Has it impacted our productivity? Yes. It certainly has. It's just a reality. I mean we have folks that are coming in and they've got to go through pulmonary rehabilitation. They have to go through pulmonary function testing that has to be run into other tests around the hospital; then the procedure gets executed by a team of people. If a significant number of people are, in some cases, not even a terribly significant number of people call in sick, then certain things get delayed, or they get pushed off into the future. So we are definitely feeling that. We muscled our way through that. We didn't anticipate it, but our goal, our hope was that if everything went well, we were going to deliver in the second quarter roughly what we did in the fourth quarter. Everything seemed to go pretty well. Well, things didn't go as well as we had anticipated, and we were able to muscle our way into that zone that we had targeted. So we're definitely seeing that right now. Hospitals make money off of these procedures, whether they be surgical procedures or interventional procedures, and they're going to do whatever they can to ensure that they have the capacity to do the procedures that are necessary. It's going to take a little time. We're seeing in certain situations the situation improving, and we expected that to strengthen as we move across the year and certainly into 2023.

Our next question comes from Joseph Downing with PSC.

Congrats on a solid quarter. This is Joe on for Jason Bednar today. The first one I have was on pricing. So while it hasn't been a traditional lever we've discussed in the past through business, are you able to comment on whether you have or plan to take pricing on defer to offset any manufacturing operating inflationary pressures? And then I got one more.

We have implemented small price increases in the past. Moving forward, we expect to introduce larger price increases. Our supply chain has been performing well, and we have a skilled team managing it. We’ve proactively ensured we have the right inventory levels and have a good amount of product available. This has helped us navigate the current environment effectively. We anticipate some price increases and typically apply larger increases to new products. When we introduce line extensions or new versions, you can expect a significant increase in pricing. Therefore, we do plan to exercise some of these price changes as we progress.

Great. And then one more on competition. What are you seeing out there competitively with aspiration? Are you seeing Olympus helping develop the valve market in any meaningful way? And then relatedly, are there any other earlier-stage technologies that you would consider evaluating that, like AeriSeal, could help expand the addressable patient population you can treat?

Yes. Well, I'm always happy to have a competitor in the marketplace to sort of help you grow. It's great to grow the size of a pie when you control a disproportionate share of that pie. We've been out in the market now, albeit during a challenging time, but we've been out for a while and not only in the U.S., but in Europe. We're a difficult competitor for somebody else who's got a valve that's got a different design. We've got a lot of data. All of our data, we have four studies; all the data are consistent. We hit on all three endpoints across all four studies. So 12 shots on goal, and 12 goals. Olympus doesn't have that same data set, and we’re continuing to do additional work. I'm not aware of them doing significant additional work either. They've got a good product. It works in certain patients, but we continue to have what I believe is our share of the market, which, depending on what country you're talking about, is somewhere between 70% and 100% market share. So how are we doing? They're still in the game. I don't expect that to change. There's a place for them in the marketplace. I'm happy they're making noise. In terms of other technologies, there's nothing that I see on the horizon that I think is going to be significantly competitive in the valve space. Valves are reversible, which is great. These patients are all 90-plus percent of the time, they’re former smokers. It’s not uncommon at three years after you place a valve that something, some spot shows up on a future x-ray, and you want to go in and get at it. You can go in with our valve, and you can pull it out three, five years later and go back behind it and do what you want to do. I think valves are always going to be first-line therapy. There are other technologies in development with a possible application in CV-positive patients. Some have been studied before and have a very spotty record. We like the approach we're taking with AeriSeal, where you're not permanently taking down massive chunks of geography the way that some of the other technologies would be. You’d also referred to whether there be anything complementary. In the interventional space, there are a number of technologies being developed, some are further along than others. We're continuing to keep a close eye on those technologies. What we have that is really hard to have is we have a global sales organization, 98% of our business is direct. We sell into 25 differentplus markets. We’ve built this commercial front end. It's very difficult to get to where we are right now, where our global commercial team is paying for itself. Certainly, all of our sales reps around the world. It’s incredibly challenging for any younger company or smaller company, a single product company, to do what we've done. We see that as a leverageable asset. So we keep a close eye on the other things that are coming that could be potentially complementary.

Our next question comes from Joanne Wuensch with Citi.

Actually, the previous one just flowed straight into this. When I look at the OUS growth, it was up against a particularly tough comp. But I suspect that it masks certain pockets that are doing quite well and others that may not be so much. Could you maybe pull that apart a little bit? And then my second question has to do with your global sales force. Can you talk about the seniority or the tenure of the individuals and the stability of that sales force?

Looking beyond the United States, our largest market represents 60% of our business, while 40% is generated internationally. Three-quarters of that international revenue comes from four countries: Germany, France, the U.K., and Australia. Each of these markets has annualized figures between two million to ten million. All five of our top markets performed well this quarter, with the U.S. increasing by 31% compared to the second quarter of 2021 on a constant basis. On a constant currency basis, Germany, France, the U.K., and Australia grew by 20%. This means that 90% of our business experienced a 27.3% increase over the previous period. Our strongest presence is in areas where we have the highest number of accounts, as we continue to invest in marketing and sales teams to expand our operations. The remaining 10% of our business declined by about 20%, with half of that decline occurring in Asia, predominantly in China. The other half is attributed to smaller countries that haven't implemented stringent shutdown measures like certain Asian nations. These smaller markets that underperformed in the second quarter are slowly recovering, but progress is hindered as there isn't a dedicated team on the ground to stimulate growth. However, I am optimistic that they will recover, likely in the second half of the year. It's important to note that this segment only represents 5% of our business, or half of the last 10%. I don't anticipate significant recovery from Asia this year, especially in China, for clear reasons.

Does that answer your question, Joanne?

There are no further questions. I'd like to turn the call back over to Glen French for any closing remarks.

Great. Well, thank you all for your questions and your interest in Pulmonx. We feel really good about the quarter that we just finished up and the foundation that we have to move ahead. I also wanted to take just a moment to express my deep appreciation for the extraordinarily dedicated customers and employees who work every day to significantly improve the lives of patients with severe emphysema and COPD. So thank you all.

You may now disconnect. Enjoy the rest of your day.