Pulmonx CorpLUNG
Pulmonx Corp Leases Disclosure
Leases, Lease Commitments and Contingencies
The Company has a lease for its headquarters location in Redwood City, California, which consists of approximately 24,591 square feet of office space (the “existing premises”) and was scheduled to expire on July 31, 2025 (the “Office Lease”). The Company leases additional facilities in Redwood City, California, under a sublease agreement, which consist of approximately 25,254 square feet of office space (the “expansion premises”) and was scheduled to expire on September 30, 2024 (the “Sublease”).
In May 2024, the Company entered into a third amendment to Sublease (the “Third Amendment to Sublease”) to extend the lease term of the expansion premises through May 31, 2028. The Third Amendment to Sublease contains a rent-free period between November 1, 2024 and February 28, 2025, after which rent is approximately $0.1 million per month and is subject to an annual increase of approximately 3%.
The Company also entered into a third amendment to Office Lease (the “Third Amendment to Office Lease”) to extend the lease term of the existing premises through July 31, 2035. The Third Amendment to Office Lease contains a rent-free period between August 1, 2025 and November 30, 2025, after which rent is approximately $0.1 million per month and is subject to an annual increase of approximately 3.5%. Additionally, under the Third
Amendment to Office Lease, the Company and the landlord have agreed to expand the existing premises to include the expansion premises, effective as of June 1, 2028, through July 31, 2035 (conterminous with the existing premises as referenced above). Commencing on June 1, 2028, the monthly base rent for the expansion premises will be $0.1 million per month and is subject to an annual increase of approximately 3.5%.
Under the Third Amendment to Office Lease, the Company has two options to extend the lease term on the leased premises for a period of five years, respectively. The Company did not include the renewal options in the lease terms for calculating lease liability, as it was not reasonably certain that the Company will exercise these renewal options. The amendments were accounted for as modifications that resulted in additional right of use assets in exchange for lease liabilities of $16.3 million.
In the fourth quarter of 2024, the Company entered into an amendment to the Third Amendment to Office Lease, which modified the rent-free period from the original dates of August 1, 2025 through November 30, 2025, to a new period from October 1, 2024 through December 31, 2024. There was no change to the other terms of the lease agreement that would materially impact the consolidated financial statements. The amendment was accounted for as a modification that resulted in additional right of use assets in exchange for lease liabilities of $0.4 million.
In 2013, the Company entered into a five-year lease for office facilities in Switzerland. The Company had an option to extend the lease through January 2022, which was not exercised by the Company. Per the lease terms, in the event the option to extend is not exercised, the lease remains in force and can be terminated with 12-months’ notice. In June 2024, with the intention of seeking other premises, the Company provided notice to the landlord to terminate the lease, effective June 30, 2025. In October 2024, the Company entered into a five-year lease for a new office facility. The new lease will commence in the first quarter of 2025, with future total minimum rent payments of approximately $0.5 million.
As of December 31, 2024, the Company has leases on 20 vehicles with an average lease term of 3.0 years.
Operating lease cost consists of the following (in thousands):
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Operating lease cost | $ | 3,111 | $ | 2,884 | |||||||
Short-term lease cost | 40 | 38 | |||||||||
Variable lease cost | 714 | 652 | |||||||||
Total lease cost | $ | 3,865 | $ | 3,574 | |||||||
The following table summarizes a maturity analysis of the Company’s lease liabilities showing the aggregate lease payments as of December 31, 2024 (in thousands):
| Fiscal Year Ending December 31, | Amount | ||||
| 2025 | $ | 2,568 | |||
| 2026 | 2,671 | ||||
| 2027 | 2,698 | ||||
| 2028 | 2,729 | ||||
| 2029 | 2,841 | ||||
Thereafter | 17,783 | ||||
Total minimum lease payments | $ | 31,290 | |||
Less: Amount of lease payments representing interest | 11,997 | ||||
Present value of future minimum lease payments | $ | 19,293 | |||
| Reported as: | |||||
Current lease liabilities | $ | 778 | |||
Long-term lease liabilities | 18,515 | ||||
| Total lease liabilities | $ | 19,293 | |||
The following table summarizes additional information related to the Company’s operating leases (in thousands, except weighted average data):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Right of use asset | $ | 18,545 | $ | 3,406 | |||||||
| Weighted average remaining lease term (years) | 10.46 | 1.35 | |||||||||
| Weighted average discount rate | 9.9 | % | 6.7 | % | |||||||
The following table summarizes other supplemental information related to the Company’s operating leases (in thousands):
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Cash paid for amounts included in the measurement of lease liabilities included in cash flows used in operating activities | $ | 3,133 | $ | 3,563 | |||||||
Right-of-use assets obtained in exchange for lease liabilities | $ | 17,016 | $ | 284 | |||||||
Service Agreement
In April 2022, the Company entered into an agreement with a service provider which required total minimum purchases of $0.6 million, $0.4 million, and $0.4 million over a three-year period. In June 2024, the Company amended the agreement with the service provider, which eliminated the minimum purchase obligations. From April 2022 through June 2024, the Company fulfilled the minimum purchase obligations and recorded $1.2 million of expense for services related to this agreement in cost of goods sold.
Contingencies
From time to time, the Company may be a party to various litigation claims in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses, in conjunction with legal counsel, the need to record a liability for litigation and contingencies. Accrual estimates are recorded when and if it is determinable that such a liability for litigation and contingencies are both probable and reasonably estimable.
In December 2022, the Company received a civil investigative demand (“CID”) from the U.S. Department of Justice, Civil Division in connection with an investigation under the Anti-Kickback Statute and False Claims Act (the “Investigation”). The CID requests information and documents regarding the Company’s relationships with certain health care providers, medical practices, and hospitals in connection with the sales and marketing of the Zephyr Valves and related products and services. The Company is fully cooperating with the Investigation. The Company is unable to express a view at this time regarding the ultimate outcome of the Investigation or estimate an amount or range of reasonably possible loss. Depending on the outcome of the Investigation, there could be a material impact on the Company’s business, results of operations and financial condition.
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.