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Penumbra, Inc. Reports Third Quarter 2019 Financial Results

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

  • 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
investors@penumbrainc.com

 

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SOURCE Penumbra, Inc.