Pulmonx Corp Q4 FY2022 Earnings Call

Good day and thank you for standing by. Welcome to Pulmonx Q4 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would like to hand the conference over to your speaker today, Laine Morgan at Gilmartin Group.

Thank you operator. Good afternoon and thank you all 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 a press release announcing its financial results for the fourth quarter and year ended December 31, 2022. A copy of the press release is available on the Pulmonx website. Before I begin, I’d like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends, commercial strategies and future financial performance, the timing and results of clinical trials, the impact of COVID-19 on our business and prospects for recovery, expense management, expectations for hiring, growth in our organization, market opportunity, guidance for revenue, gross margin and operating expenses, commercial expansion and product pipeline development are based upon our current estimates and various assumptions. These 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 of description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q filed with the SEC on November 8, 2022. Also during this call we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the press release which is posted in our investor relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, February 22, 2023. Pulmonx 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 fourth quarter and full year 2022 earnings call. Here with me is Derrick Sung, our Chief Financial Officer. I'll begin with a few highlights to contextualize our fourth quarter and full year 2022 results before turning to our outlook and strategic priorities for 2023. 2022 was a foundational year for Pulmonx, in which we finally emerged after more than two years of intermittent disruptions into a more normalized environment that allows us to resume building the basis for long-term sustainable growth with a focus on developing our accounts to establish our Zephyr Valve procedure as a standard-of-care for the treatment of patients with severe COPD. For the full year 2022, we achieved $53.7 million in worldwide sales growing our business 11% as reported and 16% on a constant currency basis over 2021. Further, we delivered full year 2022 revenue in the U.S. of $32.5 million, representing growth of 30% over 2021. On top of this, we also made substantial progress on our commercial and clinical initiatives. Specifically, we increased our U.S. commercial footprint in 2022, adding 64 new training centers, and thereby taking our total to 278 centers. And this provides a solid base as we focus increasingly on account development and penetration. We saw two encouraging clinical data readouts on our AeriSeal technology, our ongoing convert multicenter multinational trial in Europe, and a single center feasibility study in Australia both revealed early signs that AeriSeal can successfully close air channels between lobes of the lungs, thereby allowing patients with collateral ventilation to be treated successfully with Zephyr Valves. And lastly, we received regulatory approval for our Zephyr Valve procedure in Japan and are presently working to establish reimbursement there later this year. To cap off the year, we ended the fourth quarter with global sales of $15.4 million, our highest quarterly revenue to date, driven by another record U.S. performance of $9.5 million in sales representing 30% growth over the same period last year. Looking ahead, we are focused on continuing to ensure our procedure is done efficiently and routinely in our target hospitals. While we expect some of the macro headwinds seen in 2022 to continue into this year, we are confident in our ability to push through these headwinds. We've made good initial progress, increasing efficiency in our high potential accounts and intend to continue to ramp these efforts, maintaining our expectation that these will translate directly and substantially to revenue growth in the back half of this year. Taking this into account, we anticipate full year 2023 revenue to be in the range of $63 million to $65 million. As a reminder, our strategy is three pronged; first, selecting, training and launching accounts that we believe based on our comprehensive assessment criteria have the potential to be strong Zephyr Valve centers. Second, increasing the efficiency and procedural capacity of our accounts by encouraging best practices with our physician and administrative champions. And finally, increasing center volumes by building local awareness of the substantial benefits of Zephyr Valves with both emphysema patients and the physicians who manage them thereby developing a strong referral network. Relative to assessing and launching new accounts, we were pleased to add 17 new U.S. trading centers in the fourth quarter, bringing our total number to 278. While our focus will remain throughout 2023 on developing this cohort into high volume accounts, we expect to selectively identify and establish an additional 40 to 50 new accounts through the year. These will be accounts that are committed to developing a comprehensive Zephyr Valve program to deliver clinical efficiency and excellence. Looking forward, we believe that account activity and account productivity will be the best metrics to measure our progress and increasing efficiency and sales across our existing base of U.S. treating centers. We define account activity as the percentage of trained treating centers that place a revenue generating order in a given quarter. In the fourth quarter of 2022, U.S. account activity was 73%, which represents a resumption of activity to a more normalized level in a post-pandemic environment. We expect that account activity will remain in the 75% range as we continue to grow our denominator of treating centers. We define account productivity as the average number of cases conducted in a given quarter by our active and established Zephyr Valve treating centers, which are those that have been performing Zephyr Valve procedures for at least three quarters and have placed a revenue generating order in the subject quarter. After emerging from the most recent wave of COVID, the average productivity in our active established accounts across the last three quarters of 2022 ranged between four and five cases per quarter. More specifically, active established account productivity was approximately 4.8 cases in the fourth quarter of 2022. We see this as the most critical metric by which to measure the success of our account development and strategy and expect to see the average account productivity in our active established accounts increase in the second half of the year, as we realize the initial benefits from our refocus strategy. Importantly, we feel strongly that we can accomplish our commercial goals this year with our existing footprint of sales territories, which at year end consisted of 55 in the U.S. and 36 internationally. While we expect to continue to operate and opportunistically add sales resources in select geographies, we are confident that this team can effectively cover and grow our target markets. Part of our initiative to expand productivity focuses on building awareness of the benefits of the Zephyr Valve procedure among COPD physicians. To this end, we are pleased to have partnered with Medscape and the American College of Chest Physicians to launch physician education programs on Zephyr Valves and are already seeing strong physician engagement in these programs. We expect these partnerships to continue to facilitate our efforts to increase awareness with COPD physicians on how Zephyr Valves may substantially improve the lives of their patients with COPD and emphysema and we intend to look for incremental opportunities to advance these collaborations. Beyond these initiatives within existing markets, we are continuing to pursue ways to further tap into and expand what we believe to be a $12 billion global market opportunity. For this end, we received regulatory approval in Japan for our Zephyr Valve treatment late last year. Our team is now working diligently toward the establishment of reimbursement and the subsequent commercial market introduction in Japan, which we expect late this year. Also, as a reminder, we estimate Japan to be a billion dollar market opportunity with approximately 100,000 patients who stand to benefit from our treatment. Further, and with regard to expanding our addressable market, we continue to view AeriSeal as a possible way to leverage the large number of severe COPD patients with collateral ventilation who are not candidates today for treatment with Zephyr Valves. Last year interim findings from our ongoing multicenter multinational CONVERT trial showed AeriSeal successfully converted 78% of the first 40 patients in the study to having little to no collateral ventilation. These patients were then successfully treated with Zephyr Valves. We expect to complete trial enrollment this year, with final data presented next year. Also, learnings from the CONVERT trial contribute to our dialogue with the FDA regarding an IDE and related clinical protocol that we expect to initiate before the end of this year. With that, I'll now turn the call over to Derrick to provide a more detailed review of our fourth quarter results.

Thank you, Glen, and good afternoon everyone. Total worldwide revenue for the three months ended December 31, 2022, was a record $15.4 million, a 13% increase from $13.7 million in the same period of the prior year, and an increase of 18% on a constant currency basis. U.S. revenue in the fourth quarter reached a new high of $9.5 million, a 30% increase from $7.3 million during the prior year period. The growth in U.S. sales reflected continued commercial momentum and adoption of our Zephyr Valve therapy as we move into a more stabilized environment. International revenue in the fourth quarter of 2022 was $6 million, a 7% decrease from $6.4 million during the same period last year, and an increase of 5% on a constant currency basis, as international sales growth was negatively impacted by foreign currency exchange rates. Notably, our fourth quarter international performance reflected a rebound from the more pronounced summer seasonality that we experienced during the third quarter in certain markets. Gross margin for the fourth quarter of 2022 was 73% compared to 75% in the prior year period, reflecting slightly lower capacity utilization. In 2023, we expect gross margins to fall within the range of 73% to 74% remaining near 73% in the first half of the year, and then trending towards 74% in the back half of the year. Total operating expenses for the fourth quarter of 2022 were $25.8 million, a 14% increase from $22.6 million in the fourth quarter of 2021. Noncash stock-based compensation expense was $4.1 million in the fourth quarter of 2022. Excluding stock-based compensation expense, total operating expenses in the fourth quarter of 2022 increased 10% from the same period of the prior year. Looking ahead, we expect operating expenses for the full year 2023 to fall between $112 million to $114 million, inclusive of approximately $22 million of noncash stock-based compensation expense as we take a disciplined and prudent approach to managing expenses while continuing to invest to drive growth. Excluding noncash stock-based compensation expense, our operating expense guidance implies an increase in operating expense of 9% to 11% in 2023 over the prior year, demonstrating operating leverage as we expect to increase our cash operating expenses at a meaningfully lower rate than we expect to grow revenue. R&D expenses for the fourth quarter of 2022 were $3.9 million, compared to $3.7 million in the same period of the prior year. The increase was primarily attributable to an increase in stock-based compensation expense. Sales, General and administrative expenses for the fourth quarter of 2022 were $21.9 million, compared to $18.9 million in the fourth quarter of 2021. The increase was primarily 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 fourth quarter of 2022 was $14.3 million or loss of $0.38 per share, as compared to a net loss of $13 million, or loss of $0.35 per share for the same period of the prior year. An average witness share count of 37.4 million shares was used to determine loss per share for the fourth quarter 2022. Beginning this quarter, we will be reporting on adjusted EBITDA, which we believe is representative of the ongoing operating performance of our business. Adjusted EBITDA reflects our net loss before interest, taxes, depreciation and amortization expense, and also excludes noncash stock-based compensation expense. Adjusted EBITDA loss for the fourth quarter of 2022 was $9.8 million, as compared to $9.4 million in the fourth quarter of 2021. We ended December 31, 2022, with $147.1 million in cash, cash equivalents and marketable securities, a decrease of $9.8 million from September 30, 2022. Earlier this week, we further strengthened our balance sheet by drawing down the remaining $20 million provided by our existing term loan, bringing the total amount drawn on this credit facility to $37 million. Including this recent drawdown, our cash position at the end of 2022 would have been approximately $167 million. We felt it prudent to take advantage of the favorable terms of the loan to provide ourselves with the greatest degree of financial flexibility to invest in our business. As a reminder, we recently refinanced this credit facility in October of last year at an attractive rate of prime plus 1% and extended the maturity date out another 5 years, with at least 2 additional years of interest-only payments. We remain confident that we can reach cash flow breakeven in our existing current operations with the capital that we have on hand and continue to expect our annual cash burn to decrease as we grow our top line and drive operating leverage. Now turning to our revenue outlook for 2023. We expect to deliver full year 2023 revenue in the range of $63 million to $65 million. Our guidance assumes foreign currency exchange rates will be relatively neutral to growth on an annual basis, with foreign exchange remaining a headwind to growth in the first half of the year and then transitioning to a tailwind in the back half of 2023. We expect sales in the first quarter of 2023 to be sequentially lower than the fourth quarter of last year, as we've typically seen in the past. Lastly, I'd like to mention that in December 2022, we received a civil investigative demand from the U.S. Department of Justice in connection with a request for information under the False Claims Act and the anti-kickback statute. The CID request information in connection with the sales and marketing of Zephyr Valves and related products and services. We maintain policies and procedures to promote compliance with the anti-kickback statute, False Claims Act and other applicable laws and regulations and are fully cooperating with this investigation. While we cannot, at this time, reasonably predict the duration or outcome of this matter, I would emphasize that at this time, we do not view this as a barrier to growth or a hindrance to the implementation of our commercial strategy. And with that, I will now turn the call back to Glen for closing comments.

Thanks, Derrick. In summary, we look forward to delivering strong growth in 2023, particularly in the back half of the year as we build on our momentum with a refocused team and strategy. We remain confident in our commercial efforts to scale accounts, while also selectively adding new ones in addition to our efforts to start selling product in Japan before the end of the year. We also look forward to progressing the development of AeriSeal, which offers an opportunity to significantly expand our target market by possibly offering the benefits of Zephyr Valves to patients who are not currently candidates for the procedure. Taken together, we expect to execute on both commercial and clinical development objectives and thereby deliver strong growth in 2023 and beyond. With that, I'd like to thank you all for your attention, and we will now open up the call for questions.

Thank you. Our first question comes from the line of Rick Wise of Stifel. Your line is now open.

Hi good afternoon everybody. Nice to see the solid fourth quarter performance. Maybe Glen, just to start off in the big picture front. You talked about the macro environment improving, and the strong fourth quarter supports that idea, that notion. Just help us understand what's changed, what you're able to do now that you weren't able to do obviously or more challenged by over the last year or so? And why you're confident or why you're feeling good that, that macro environment improvement is going to set you up well to have another good year in 2023?

Thanks, Rick. I appreciate the question. The situation has changed significantly since 2022 when we faced major challenges due to COVID impacting all our markets almost simultaneously. This had a serious negative effect, particularly outside the United States, where our recovery was slower than in the U.S. However, as the year progressed, we began to overcome these issues at varying rates globally. Additionally, we encountered some staffing difficulties, which we mentioned in our previous call. Some of these were due to the normalization process and getting staff back to work, while others stemmed from the unique circumstances that allowed employees to take time off after three years without a vacation, which we felt during the third quarter. Looking ahead, we do not expect such extraordinary impacts to continue. Lastly, during the six months we had without COVID in the United States, we gained valuable insights into our accounts. We realized that some challenges were not solely due to COVID but were tied to how regularly procedures were incorporated into their offerings. We implemented a process to classify our accounts and set specific goals to help them establish routines and execute procedures more effectively. All these improvements position us better as we enter this year, lessening the headwinds we faced, especially in the first half of last year.

Got you. On your account productivity, obviously, you're doing well. If I wrote it down correctly, and I think I am saying it correctly, 45K is a quarter on average. And did I hear you correctly that the average for all accounts was 4.8 in the fourth quarter? Or was that your top performing? Anyway, just maybe you'll clarify that. But as we think about 2023, can we get into the 5% to 6% range? And maybe talk about your training and your efforts to support drive better account productivity that could get you there if that's the right way to think about it.

Throughout 2022, we saw our account productivity start at 3.9 in the first quarter, gradually improving to the mid-range of about 4.5 in the next two quarters, and ending the year at 4.8. Overall, we maintained a range between 4 and 5 for the year. We expect to finish this year in the 5 to 6 range, as mentioned. We plan to achieve this by executing our previously discussed strategies, with training playing a crucial role. This includes on-site training to share best practices, which helps centers efficiently transition patients from arrival to procedures while minimizing the time involved—a key factor in productivity. Moreover, we've adjusted our training approach. Compared to a couple of years back, the physicians entering our training are now more committed and engaged. We require them to present data and information regarding three patients before the training, which they then apply immediately after face-to-face sessions with experts. During the pandemic, we relied on virtual training, which is less effective than in-person interactions that allow for comprehensive learning during procedures. Now, we ask these physicians to return and perform three procedures that are reviewed by experts, helping us assess patient outcomes. These discussions are invaluable for quickly bringing physicians up to speed. In the earlier COVID period, they would finish training and then delay patient treatment for up to nine months. Now, we’re getting them engaged much more rapidly, which is crucial for our progress.

And Rick, this is Derrick. Let me clarify the definition of account productivity that we’re using. It takes a few quarters for an account to become fully operational after their first case. So when we measure our account productivity, we focus on accounts that have been active for at least 3 quarters and are in their fourth quarter of implementing our Zephyr Valve. Additionally, we only consider accounts that have actually conducted a case in that specific quarter, ensuring our numbers aren't skewed by inactive accounts. The figures Glen mentioned, which are in the 4 to 5 range of established active account productivity, refer to those accounts that have been operational for at least 3 quarters or are active in a given quarter. We do expect that number to increase to the 5 to 6 range as we move into the latter half of the year and approach the end.

Got you. And just, Derrick, last from me, if I could. Could you expand on your gross margin comment? Gross margins were a little lighter than I looked for, and your guidance is a little lighter and yet you had record volumes. Just maybe I missed it, a little more color on why gross margins are a little lower than they were earlier in the year and ditto for the look ahead to 2023? Thank you.

Sure. The slight reduction in gross margin that we observed in the fourth quarter of last year, and as we look toward the first half of 2023, reflects a slightly lower capacity utilization or production output. We feel that our inventory levels and safety stock are now where we want them to be, given our current demand outlook in the near term. We anticipate maintaining around a 73% range in the first half of the year. Then, as we ramp up our production output in the second half of the year and into next year, we expect this to increase to approximately 74%. We also believe that our gross margins will continue to improve as we increase our production output to meet demand, and we expect to reach a stable long-term gross margin in the high 70% range as we scale.

Thank you so much Derrick.

Thank you. Please stand by while we wait for our next caller. Our next question comes from the line of Bill Plovanik of Canaccord. Your line is now open.

Hey Glen and Derrick, it's John on for Bill tonight. Thanks for taking our questions. Can you just talk a bit a little bit more on the number of accounts that are efficient today with the patient flow process? In the past, you’ve highlighted 40 to 50 accounts that do as well. Where does that number stand today? And can you just give us a little bit more details on how you’re going to help with those struggling accounts? Are you going to hire more reps this year? Or just how do you work through those workflow processes? Thanks.

Derrick, I don't know if you heard all of that. It was a little choppy for me. Did you get that whole question?

Yes. John, you’re asking what percentage of our accounts are where we want them to be and how we plan to improve those accounts that aren’t performing at the volume we desire.

Yes.

To paraphrase your question, I think that as we exit the year, approximately a quarter of our accounts are performing well and meeting our expectations. These are considered high-volume accounts. Additionally, there are other accounts we believe can reach that level, and we are concentrating on them. Our focus aligns with what Glen mentioned during his prepared remarks about improving site efficiency and making our new procedure routine within the hospitals where we are establishing this service line. We are coordinating across various functions to drive training and ensure our physicians adopt our procedure as a standard practice. This is what we will concentrate on, especially in the first half of this year, and we expect to achieve this with our current sales force. We do not anticipate a significant increase in our sales team through 2023. Our goal is to enhance efficiency and foster acceptance of this procedure among the hospitals we've already opened.

Thanks, Derrick. Yes. And if you could hear this question, too, just on Japan and the launch preparation, what’s the team size there today? And what infrastructure do you still need to add to be ready for launch end of this year? Thank you for taking our questions.

We're in a good position in Japan. We have a general manager, a former senior executive from Medtronic, who has been with us for about six months. Additionally, we've brought on a clinical marketing person and have made offers to several sales representatives to establish our accounts. We're utilizing experienced consultants for regulatory and clinical guidance. A post-approval clinical trial will be necessary, and our personnel are already engaging with identified partners. Overall, we're well-equipped with the necessary expertise and personnel, either currently with us or in the process of onboarding.

Thanks.

Thank you. Please standby for our next caller, our next question comes from the line of Travis Steed of BofA Securities. Your line is now open.

Hi. This is Ian on for Travis. Just hoping to get a bit more detail on the guide here, if possible. What is the $63 million to $65 million implied for U.S. versus OUS? I think you had previously said 25% growth, U.S.; 15%, OUS. It looks like U.S. was a little faster in Q4, OUS a little slower. And then any additional detail around expectations for Q1 here given that almost through February and then last year, you had the COVID impact. I think the Street is at around $13.5 million. Is that in the right ballpark for Q1 here?

Yes, this is Derrick. I’ll take those questions. Regarding our sales guidance of $63 million to $65 million, it suggests a year-over-year growth of approximately 20% at the midpoint compared to 2022, which aligns with what we mentioned at the end of last year. In terms of our revenue distribution between the U.S. and international markets, we expect to maintain a 60-40 split, with 60% of our business originating from the U.S. and 40% from international. We anticipate that the U.S. will grow significantly faster than international, projecting a growth rate of 25% to 30% for the U.S. and 15% to 20% for international. Does that cover the first part of your question? Could you please restate the second part?

Yes, just any additional detail around Q1. I think the Street is around $13.5 million.

We expect to see typical sequential seasonality in Q1. Historically, Q1 sales are usually 10% to 15% lower compared to Q4. This is often due to hospitals, especially outside the U.S., using up their budgets at the end of the year. Globally, including the U.S., there’s typically a gradual increase in activity as people return from holidays at the start of the year. While this seasonal trend was more noticeable during COVID, looking back at the pre-COVID period, we generally see this sequential decline. I anticipate that we will observe something in that historical range again in Q1. I expect the international market to reflect this seasonality more than the U.S. market, but both are likely to experience a level of sequential decline, as we have seen in the past.

Okay. Perfect. And then maybe one on international. Just Japan, any early expectations around revenue numbers later this year? How fast could that potentially ramp next year? And then in terms of China, just how large of a business is that for you? Any expectations around a rebound there this year?

Yes. Regarding Japan, we expect to receive approval or reimbursement later this year. However, it will take time to set things in motion, so I do not anticipate that we will treat our first patient immediately after receiving approval. If all goes well, we might see a few patients this year, but I do not expect any significant revenue contributions from Japan this year. Additionally, we believe that the first 100 to 150 patients in Japan will likely participate in a clinical trial, so we will probably start with 5 to 10 specific centers. While I expect revenue next year to be substantially stronger than this year, I do not anticipate it will dramatically impact our overall international revenues. I foresee revenues really taking off in 2025, once we've had the chance to enroll those initial patients and expand our presence. Overall, I believe this market has the potential to rank among our top five markets.

I believe the second part of your question was about China, and currently, our revenue there is less than $1 million.

Okay, thanks for taking the questions.

We standby for our next question. Our next question comes from the line of Jason Bednar of Piper Sandler. Your line is now open.

Good afternoon. Thank you for addressing the questions. Glen or Derrick, the number of new accounts you plan to onboard this year is likely somewhat below what we’ve experienced in previous years. This may be due to your focus on onboarding many of your target accounts. As your representatives concentrate on enhancing account productivity, this strategy seems logical. What does the balance look like here as priorities shift? Are you anticipating that the returns on your representatives' time will increase by focusing on existing accounts rather than acquiring new ones? Additionally, could you explain what the decreased new account additions indicate regarding how your representatives allocate their time throughout the day?

Yes, adding new accounts has not been a primary focus for our representatives. The growth of new accounts has been quite organic. What is new is that we have communicated to the sales team the necessity to get these accounts to a point where they are following the procedures more regularly. The revenue figures from those accounts that have reached that level of routine and efficiency show significant increases. Everyone is aligned on this approach. We are not discouraging the opening of new accounts; our representatives will still pursue that when opportunities arise. However, our main focus, especially now that we have penetrated more than halfway into our targeted hospitals in the United States, is on same-store sales. This is where we believe the real opportunity lies. We are not imposing anything on anyone; instead, we are working to make this technology accessible to as many people as possible. This is the strategy that makes the most sense for everyone involved, and that’s where our efforts are currently concentrated.

Okay. That’s helpful. And then maybe could you talk about the trends you’re seeing in Europe, notably Germany and France, which accounts for this proportion and part of your international franchise? It sounds like there’s still maybe some capacity constraints in those markets. Do you see those markets maybe accelerating throughout 2023, almost mimicking the U.S., but on a lagged basis? Or are there other effects in Germany and France, in particular, we should have in mind that can make that more of a 2024 recovery dynamic? Thank you.

Our main international markets are Germany, France, and the U.K., which together account for two-thirds of our international business. The U.K. is setting a strong example globally regarding the strategy we plan to implement in the U.S. They experienced a 31% growth last year and we expect continued high growth for them this year. France had a slower year after an initial adoption phase that mirrored the U.S. trend, but we anticipate a return to stronger growth this year, possibly even challenging Germany for the top spot as our largest market outside the U.S. In Germany, we are focused on executing our fundamental strategies, with effective marketing and sales activities. While I believe the U.K. and France may outpace Germany in growth percentages, I expect all three markets to make significant contributions throughout the year.

Thank you.

Okay. Thank you. I would now like to turn it back to Glen French for closing remarks.

Thank you everyone for your questions. We truly appreciate them. We remain very confident in both the opportunity and our ability to capitalize on it. This opportunity is significant, and patients are actively seeking information and access to the procedure. We believe we have a solid plan in place that we are executing effectively. Our data is robust, consistent, and compelling. We are included in global guidelines, and we have secured reimbursement in all of our key markets. Our treating doctors regard our reversible procedure as the standard of care for patients with collateral ventilation issues. These professionals are the ones performing the procedures. We are also working to broaden our total addressable market through geographic expansion into Japan and by expanding our indication with AeriSeal, which will enable us to treat a larger population of severe emphysema patients who currently are not eligible for the procedure. In summary, we remain very optimistic about the future. We appreciate everyone’s interest, and unless there are any additional questions, I believe we have reached the conclusion of the call.

Okay. Well, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.