Penumbra, Inc. Reports Third Quarter 2019 Financial Results

ALAMEDA, Calif., Nov. 7, 2019 — Penumbra, Inc. (NYSE: PEN), a global healthcare company focused on innovative therapies, today reported financial results for the third quarter ended September 30, 2019.

Penumbra, Inc. Logo (PRNewsFoto/Penumbra, Inc.)

  • Revenue of $139.5 million in the third quarter of 2019, an increase of 24.8%, or 25.5% in constant currency1, over the third quarter of 2018.

Third Quarter 2019 Financial Results
Total revenue grew to $139.5 million for the third quarter of 2019 compared to $111.8 million for the third quarter of 2018, an increase of 24.8%, or 25.5% on a constant currency basis. The United States represented 65% of total revenue and international represented 35% of total revenue for the third quarter of 2019. Revenue from sales of neuro products grew to $83.2 million for the third quarter of 2019, an increase of 11.5%, or 12.4% on a constant currency basis. Revenue from sales of vascular products grew to $56.3 million for the third quarter of 2019, an increase of 51.6%, or 52.0% on a constant currency basis.

Gross profit was $96.0 million, or 68.8% of total revenue, for the third quarter of 2019, compared to $75.0 million, or 67.1% of total revenue, for the third quarter of 2018.

Total operating expenses for the third quarter of 2019 were $83.0 million, or 59.5% of total revenue. This compares to total operating expenses of $95.9 million, or 85.7% of total revenue, for the third quarter of 2018, which included a $30.8 million acquired in-process research and development (“IPR&D”) charge in connection with the acquisition of a controlling interest in MVI Health Inc. Excluding the IPR&D charge, total adjusted operating expenses2 (a non-GAAP measure) were $65.0 million, or 58.2% of total revenue, for the third quarter of 2018. R&D expenses were $13.7 million for the third quarter of 2019, compared to $9.1 million for the third quarter of 2018. SG&A expenses were $69.3 million for the third quarter of 2019, compared to $55.9 million for the third quarter of 2018.

Operating income for the third quarter of 2019 was $13.0 million. This compares to an operating loss of $20.8 million for the third quarter of 2018, including the IPR&D charge. Excluding the IPR&D charge, adjusted operating income2 (a non-GAAP measure) was $10.0 million for the third quarter of 2018.

Webcast and Conference Call Information
Penumbra, Inc. will host a conference call to discuss the third quarter 2019 financial results after market close on Thursday, November 7, 2019 at 4:30 PM Eastern Time. The conference call can be accessed live over the phone by dialing (833) 227-5837 for domestic callers or (647) 689-4064 for international callers (conference id: 4746448), or the webcast can be accessed on the “Events” section under the “Investors” tab of the Company’s website at: www.penumbrainc.com. The webcast will be available on the Company’s website for at least two weeks following the completion of the call.

About Penumbra
Penumbra, Inc., headquartered in Alameda, California, is a global healthcare company focused on innovative therapies. Penumbra designs, develops, manufactures and markets innovative products and has a broad portfolio that addresses challenging medical conditions and significant clinical needs across two major markets, neuro and vascular. Penumbra sells its products to hospitals primarily through its direct sales organization in the United States, most of Europe, Canada and Australia, and through distributors in select international markets. The Penumbra logo is a trademark of Penumbra, Inc. For more information, visit www.penumbrainc.com.

Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses the following non-GAAP financial measures in this press release: a) adjusted operating expenses and adjusted operating income and b) non-GAAP net income and non-GAAP diluted earnings per share (“EPS”) and b) constant currency.

Adjusted operating expenses and adjusted operating income. The Company defines adjusted operating expenses as total operating expenses, excluding the IPR&D charge in connection with the MVI Health Inc. asset acquisition. Adjusted operating income is defined as operating income (loss), excluding the same IPR&D charge.

Adjusted net income (loss) and adjusted diluted EPS. The Company defines adjusted net income (loss) as net income (loss), excluding a) the IPR&D charge in connection with the MVI Health Inc. asset acquisition in the third quarter of 2018, b) the one-time effect of the transition tax from the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”) in the first quarter of 2018, and c) the effects of the excess tax benefits associated with share-based compensation arrangements, net of any related valuation allowance. The Company defines adjusted diluted EPS as GAAP diluted EPS, excluding the effects of the same items above.

Constant Currency. The Company’s constant currency revenue disclosures estimate the impact of changes in foreign currency rates on the translation of the Company’s current period revenue as compared to the applicable comparable period in the prior year. This impact is derived by taking the current local currency revenue and translating it into U.S. dollars based upon the foreign currency exchange rates used to translate the local currency revenue for the applicable comparable period in the prior year, rather than the actual exchange rates in effect during the current period. It does not include any other effect of changes in foreign currency rates on the Company’s results or business.

Full reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in the tables below.

Our management believes the non-GAAP financial measures disclosed in this press release are useful to investors in assessing the operating performance of our business and provide meaningful comparisons to prior periods and thus a more complete understanding of our business than could be obtained absent this disclosure. Specifically, we consider the change in constant currency revenue as a useful metric as it provides an alternative framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations. We consider adjusted operating expenses, adjusted operating income, adjusted net income (loss), and adjusted diluted EPS useful metrics as they provide an alternative framework for assessing how our underlying business performed. These metrics exclude the effects of the IPR&D charge in connection with the MVI Health Inc. asset acquisition, and, in the case of adjusted net income (loss) and adjusted diluted EPS, the one-time effect of the transition tax from the Tax Reform Act, as well as the effects of excess tax benefits associated with share-based compensation arrangements, net of any related valuation allowance.

The non-GAAP financial measures included in this press release may be different from, and therefore may not be comparable to, similarly titled measures used by other companies. These non-GAAP measures should not be considered in isolation or as alternatives to GAAP measures. We urge investors to review the reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures included in this press release, and not to rely on any single financial measure to evaluate our business.

Forward-Looking Statements
Except for historical information, certain statements in this press release are forward-looking in nature and are subject to risks, uncertainties and assumptions about us. Our business and operations are subject to a variety of risks and uncertainties and, consequently, actual results may differ materially from those projected by any forward-looking statements. Factors that could cause actual results to differ from those projected include, but are not limited to: failure to sustain or grow profitability or generate positive cash flows; failure to effectively introduce and market new products; delays in product introductions; significant competition; inability to further penetrate our current customer base, expand our user base and increase the frequency of use of our products by our customers; inability to achieve or maintain satisfactory pricing and margins; manufacturing difficulties; permanent write-downs or write-offs of our inventory; product defects or failures; unfavorable outcomes in clinical trials; inability to maintain our culture as we grow; fluctuations in foreign currency exchange rates; potential adverse regulatory actions; and potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. These risks and uncertainties, as well as others, are discussed in greater detail in our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 26, 2019. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. Any forward-looking statements are based on our current expectations, estimates and assumptions regarding future events and are applicable only as of the dates of such statements. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change.

1See “Non-GAAP Financial Measures” for important information about our use of constant currency and other non-GAAP measures.
2See “Non-GAAP Financial Measures” below for important information about our use of non-GAAP measures and further information about our adjusted operating expenses and adjusted operating income measures.

Penumbra, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands)

September 30, 2019

December 31, 2018

Assets

Current assets:

Cash and cash equivalents

$

111,581

$

67,850

Marketable investments

82,864

133,039

Accounts receivable, net

101,828

81,896

Inventories

140,359

115,741

Prepaid expenses and other current assets

14,702

12,200

Total current assets

451,334

410,726

Property and equipment, net

45,625

35,407

Operating lease right-of-use assets

41,817

Intangible assets, net

25,494

27,245

Goodwill

7,452

7,813

Deferred taxes

32,818

32,940

Other non-current assets

9,630

875

Total assets

$

614,170

$

515,006

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

11,962

$

8,176

Accrued liabilities

70,163

57,886

Current operating lease liabilities

4,042

Total current liabilities

86,167

66,062

Deferred rent

7,586

Non-current operating lease liabilities

45,400

Other non-current liabilities

15,662

18,943

Total liabilities

147,229

92,591

Stockholders’ equity:

Common stock

35

34

Additional paid-in capital

423,474

415,084

Accumulated other comprehensive loss

(4,010)

(1,942)

Retained earnings

47,833

9,064

Total Penumbra, Inc. stockholders’ equity

467,332

422,240

Non-controlling interest

(391)

175

Total stockholders’ equity

466,941

422,415

Total liabilities and stockholders’ equity

$

614,170

$

515,006

Penumbra, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Revenue

$

139,502

$

111,806

$

402,142

$

324,145

Cost of revenue

43,504

36,794

128,306

110,324

Gross profit

95,998

75,012

273,836

213,821

Operating expenses:

Research and development

13,733

9,092

38,862

25,298

Sales, general and administrative

69,289

55,934

198,045

165,209

Acquired in-process research and development

30,835

30,835

Total operating expenses

83,022

95,861

236,907

221,342

Income (loss) from operations

12,976

(20,849)

36,929

(7,521)

Interest income, net

759

771

2,276

2,240

Other (expense) income, net

(772)

170

(819)

(460)

Income (loss) before income taxes and equity in losses of unconsolidated investee

12,963

(19,908)

38,386

(5,741)

Provision for (benefit from) income taxes

1,963

1,598

683

(5,288)

Income (loss) before equity in losses of unconsolidated investee

11,000

(21,506)

37,703

(453)

Equity in losses of unconsolidated investee

(920)

(3,101)

Consolidated net income (loss)

$

11,000

$

(22,426)

$

37,703

$

(3,554)

Net loss attributable to non-controlling interest

(483)

(3,496)

(1,066)

(3,496)

Net income (loss) attributable to Penumbra, Inc.

$

11,483

$

(18,930)

$

38,769

$

(58)

Net income (loss) attributable to Penumbra, Inc. per share:

Basic

$

0.33

$

(0.55)

$

1.12

$

Diluted

$

0.32

$

(0.55)

$

1.07

$

Weighted average shares outstanding:

Basic

34,840,370

34,248,484

34,681,846

34,057,216

Diluted

36,271,394

34,248,484

36,243,222

34,057,216

Penumbra, Inc.

Reconciliation of GAAP Operating Expenses and Operating Income (Loss) to Adjusted Operating Expenses and Adjusted Operating Income1

(unaudited)

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

GAAP operating expenses

$

83,022

$

95,861

$

236,907

$

221,342

GAAP total operating expenses and operating income (loss) from operations includes the effect of the following items:

Acquired IPR&D in connection with an asset acquisition2

30,835

30,835

Adjusted operating expenses

$

83,022

$

65,026

$

236,907

$

190,507

GAAP operating income (loss)

$

12,976

$

(20,849)

$

36,929

$

(7,521)

Adjusted operating income

$

12,976

$

9,986

$

36,929

$

23,314

Penumbra, Inc.
Reconciliation of GAAP Net Income (Loss) and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS1
(unaudited)
(in thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

GAAP net income (loss) attributable to Penumbra, Inc.

$

11,483

$

(18,930)

$

38,769

$

(58)

GAAP net income (loss) includes the effect of the following items:

Acquired IPR&D in connection with an asset acquisition2

27,393

27,393

Effect of the transition tax under the Tax Reform Act3

88

Excess tax benefits related to stock compensation awards4

(2,285)

(2,156)

(11,274)

(13,610)

Adjusted net income

$

9,198

$

6,307

$

27,495

$

13,813

GAAP diluted EPS

$

0.32

$

(0.55)

$

1.07

$

Adjusted diluted EPS

$

0.25

$

0.17

$

0.76

$

0.38

Weighted average shares outstanding used to compute:

Adjusted diluted EPS

36,271,394

36,125,198

36,243,222

36,064,996

1See “Non-GAAP Financial Measures” above for important information about our use of non-GAAP measures and further information about our non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income and non-GAAP diluted EPS measures.

2On August 31, 2018, the Company acquired a controlling interest in MVI Health Inc. which was accounted for as an asset acquisition. In connection with the transaction, the Company recorded a $30.8 million IPR&D charge during the three and nine months ended September 30, 2018, in the consolidated statements of operations related to the acquired technology under development from MVI Health Inc. Of the total IPR&D charge, $27.4 million was attributable to the net loss of Penumbra, Inc. There was no effect on the provision for (benefit from) income taxes related to the IPR&D charge for the three and nine months ended September 30, 2018, respectively.

3On December 22, 2017, the Tax Reform Act was enacted into law. This new tax law, among other changes, reduces the Company’s U.S. federal statutory corporate income tax rate from 34% to 21% effective January 1, 2018. During the nine months ended September 30, 2018, the Company recorded a provisional tax charge for the one-time transition tax on the undistributed earnings of its foreign subsidiaries.

4In accordance with Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting, all excess tax benefits related to share-based compensation be recognized as an income tax benefit, instead of in stockholders’ equity.

Penumbra, Inc.

Reconciliation of Revenue Growth by Geographic Regions to Constant Currency Revenue Growth1

(unaudited)

(in thousands)

Three Months Ended September 30,

Reported Change

FX Impact

Constant Currency Change

2019

2018

$

%

$

$

%

United States

$

90,272

$

72,991

$

17,281

23.7

%

$

$

17,281

23.7

%

International

49,230

38,815

10,415

26.8

%

860

11,275

29.0

%

Total

$

139,502

$

111,806

$

27,696

24.8

%

$

860

$

28,556

25.5

%

Penumbra, Inc.

Reconciliation of Revenue Growth by Product Categories to Constant Currency Revenue Growth1

(unaudited)

(in thousands)

Three Months Ended September 30,

Reported Change

FX Impact

Constant Currency Change

2019

2018

$

%

$

$

%

Neuro

$

83,247

$

74,689

$

8,558

11.5

%

$

704

$

9,262

12.4

%

Vascular

56,255

37,117

19,138

51.6

%

156

19,294

52.0

%

Total

$

139,502

$

111,806

$

27,696

24.8

%

$

860

$

28,556

25.5

%

Penumbra, Inc.

Reconciliation of Revenue Growth by Geographic Regions to Constant Currency Revenue Growth1

(unaudited)

(in thousands)

Nine Months Ended September 30,

Reported Change

FX Impact

Constant Currency Change

2019

2018

$

%

$

$

%

United States

$

259,157

$

210,070

$

49,087

23.4

%

$

$

49,087

23.4

%

International

142,985

114,075

28,910

25.3

%

4,608

33,518

29.4

%

Total

$

402,142

$

324,145

$

77,997

24.1

%

$

4,608

$

82,605

25.5

%

Penumbra, Inc.

Reconciliation of Revenue Growth by Product Categories to Constant Currency Revenue Growth1

(unaudited)

(in thousands)

Nine Months Ended September 30,

Reported Change

FX Impact

Constant Currency Change

2019

2018

$

%

$

$

%

Neuro

$

246,265

$

220,318

$

25,947

11.8

%

$

3,624

$

29,571

13.4

%

Peripheral

155,877

103,827

52,050

50.1

%

984

53,034

51.1

%

Total

$

402,142

$

324,145

$

77,997

24.1

%

$

4,608

$

82,605

25.5

%

1See “Non-GAAP Financial Measures” for important information about our use of constant currency and other non-GAAP measures.

Investor Relations
Penumbra, Inc.
510-995-2461
[email protected]

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SOURCE Penumbra, Inc.

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