Q2 2023 Penumbra Inc Earnings Call
Good afternoon, My name is Brent and I will be your conference operator today.
At this time I would like to welcome everyone to Penumbra second quarter 2023 conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
We'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again press Star one thank you.
I would like to introduce MS Jee Hamlyn Harris Investor Relations for Penumbra, Ms. Hamlyn Harris you May begin your conference.
Thank you operator, and thank you all for joining us on today's call to discuss the numbers earnings release for the second quarter of 2023.
The press release and financial tables, which include the GAAP to non-GAAP reconciliation can be viewed under the investors tab on our company website at Www Dot Penumbra, Inc. Com.
During the course of this conference call. The company will make forward looking statements pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995, including statements regarding our financial performance commercialization clinical trials regulatory status quality compliance and business trends.
Results could differ materially from those stated or implied by our forward looking statements due to certain risks and uncertainties, including those referenced in our 10-K for the year ended December 31, 2022 filed with the SEC.
As a result, we caution you against placing undue reliance on these forward looking statements and we encourage you to review our periodic filings with the SEC, including the 10-K previously mentioned for a more complete discussion of these factors and other risks that may affect our future results for the market frankly desktop.
<unk> disclaims any duty to update or revise our forward looking statements as a result of new information future events developments or otherwise.
On this call certain financial measures are presented on a non-GAAP basis, the corresponding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release, Adam Elsesser the numbers Chairman and CEO will provide a business update Maggie Yuen, our Chief Financial Officer will then discuss our financial results for the quarter and Jason Mills, Our executive Vice President.
This strategy will discuss our 2023 guidance with that I would like to turn over the call to Adam Elsesser.
Thank you Keith good afternoon.
Thank you for joining the numbers second quarter 2023 conference call.
Our total revenues for the second quarter were $261 5 million.
Our year over year increase of 25, 5% as reported and on a constant currency basis.
Our revenue growth in the United States accelerated to 32% year over year, our fastest in half a decade, excluding the COVID-19 impacted second quarter of 2020.
U S growth was driven by our thrombectomy products in both vascular and neuro as total U S. Thrombectomy revenue increased more than 40% year over year.
U S vascular thrombectomy revenue accelerated to 50% year over year growth in U S. Neuro thrombectomy grew 20% year over year.
The fastest growth in our U S stroke business in five years.
We expanded gross margins in the second quarter, consistent with our expectations and we expect to make more progress in the second half of the year. We also increased our operating profitability in the second quarter non-GAAP operating income was $23 million, representing seven 8% of.
Revenue in the second quarter.
We grew our operating cash balance by $22 million sequentially as well.
Looking forward, we expect to deliver strong revenue growth gross margin expansion and increasing profitability and cash flow over the foreseeable future.
Pin number had a very successful quarter and we are still in the early stages of the journey to bring our proprietary thrombectomy technologies to patients in the United States and around the world.
Our momentum is being driven by the extraordinary outcomes. We are seeing in patients treated with lightning flash lightning bolt seven and <unk> 72, we extended technology.
Early days the launch for each of these products.
Starting with Lightning flash, we doubled the number of Venus thrombectomy cases, employing flash in the second quarter compared to the first quarter and we grew our total venous case volume double digit sequentially coming off a very strong Q1.
We had another extraordinary quarter with lightning flash and we have many more new customers just learning about and starting to try to flash in the next several quarters.
Lightning flashes transformative power.
<unk> safety and efficacy profile is the biggest dryer driver of the exceptional early adoption.
After product.
The other important factor resonating with physicians is our straightforward pricing.
Here's to the same simple value sharing pricing philosophy to which we have been committed throughout our history.
Moving to lightning bolt seven or U S. Arterial revenue grew double digit sequentially, representing the fastest growth in this franchise since the launch of lightning seven and early 2021.
We saw acceleration of lightning bolt seven cases in the last two months of the quarter as conversions from surgery political and other mechanical thrombectomy products gained momentum.
That said, we are even earlier in the launch process for Lightning bolt seven and we were with flash. This time last quarter as many prospective customers have waited to allow some time in the past before starting to back process for bolt after engaging in the same process for lightning flash last quarter.
Quickly, we think adoption of lightning bolt seven will build momentum as we move through this quarter and into the fourth quarter of 2023, and the first quarter of 2024.
Taken together.
<unk> flash and lightning bolts hasn't.
Have generated more pending and hospital customers.
During any other launch in our history.
We currently have well over a thousand active submission.
And hospitals for approval of either lightened flash or lightning bolt seven.
In order to be under submission for approval of specific physician or group of physicians must champion.
In the product into the hospitals.
Importantly, the majority of these physicians represent new customers to our thrombectomy products.
Even further we expect many additional hospital submissions over the next few quarters.
Historically once the submission process starts to the hospital, we have been extremely successful.
Getting our products through these approval processes.
We are just getting started with lightning flash and lightning bolt seven our commercial team execution of our strategy for Lightning Flash and lightning bolt seven is incredible.
We have a clear strategy to reach the majority of the 800000 annual venous and arterial patients in the United States over the next five plus years and we are convinced.
Peter aided thrombectomy is the way forward.
Our neuro business also had a strong quarter and I saw firsthand this momentum at the society of Neuro Interventional surgery Conference yesterday.
San Diego.
The outstanding early results, we are seeing with Red 72, with the inner catheter centered technology foreshadow, an exciting period for our stroke franchise.
This early feedback suggests ended could prove to be the most important technology ever launched addressing the most challenging part of stroke intervention safe fast and repeatable track the ability around the ophthalmic artery.
The pace of the cloud.
We believe Red 72 extended represents the premium aspiration catheter and is as differentiated and innovation for the front end of the stroke intervention.
Thunderbolt could be for clat removal once the catheters track to the face of the cost.
We have seen positive share shift with this technology for the last two quarters and expect even more meaningful share shift in stroke in the quarters ahead.
Leading to dominant share of the U S market over the next three to four quarters.
Launching Red 72 has tended means we don't have to wait for Thunderbolt.
To see real share gain and market growth in stroke.
And this technology only furthers.
Our enthusiasm and confidence and Thunderbolt once it is cleared.
Internationally, we are seeing early success with the launch of our first generation computer aided products in Europe , and we have plans to expand access to our most advanced thrombectomy products to our international vascular teams over the next few years.
In addition, our international teams and partners all.
Also see enormous potential to further expand our leadership in stroke intervention outside the U S with Cendant and Thunderbolt over the coming years.
Turning to immersive healthcare I am excited about the additional progress we've made during the quarter working with the department of Veterans Affairs, and key private health care partners.
Hitting important milestones together as we monitor the clinical success of our VR platform across a myriad applications and physical rehabilitation mental and cognitive health.
Before I turn the call over to Maggie I want to say that we recognize expectations for our business are high in fact, we have very high expectations for ourselves we.
We have a lot of confidence in our ability to succeed in the near term, while we navigate agitated competitive reactions.
We also believe in expediting the inevitable and so we are laying the foundation to help all patients who can benefit from our thrombectomy products, our current year guidance as a guidepost to near term success.
But it is just the first year within the next five plus year journey.
We are paying a lot of attention to the guideposts to success over this longer period and I believe the visibility we have to the larger patient opportunity is clearer to us now than it has ever been.
Owing to the feedback we're getting on lightning flash lightning bolt seven and Red 72 centers.
That visibility gives us increasing confidence that we will continue to deliver strong revenue growth.
Gross margin expansion and significant profitability and cash flow over the foreseeable future.
I'll now turn the call over to Maggie to go over our financial results for the second quarter of 2023.
Adam Good afternoon, everyone today, I will discuss the financial results for the second quarter of 2023.
As a result on this call for revenue and gross margin on a GAAP basis operating expenses and operating income on a non-GAAP basis.
Funding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release.
For the second quarter ended June 32023, our total revenues were $261 $5 million, an increase of 25, 5% reported and 25, 5% in constant currency compared to the second quarter of 2022.
Our geographic mix of sales in the quarter was 71, 4% in U S and 28, 6% International.
You add to reported growth of 32% and our international regions increased 11, 7% reported and 11, 6% in constant currency.
<unk> growth of eight 8% was primarily driven by continued momentum in our U S vascular thrombectomy business as well as growth in neuro some back from the business across all regions.
Moving to revenue by franchise.
Revenue from our vascular business grew to $152 $7 million in the second quarter of 2023.
An increase of 23, 6% reported and 22, 7% in constant currency compared to the same period last year.
And by 50% year over year growth in U S thrombectomy, and a relatively flat year over year for the rest of our global vascular business.
Revenue from our neuro business was $108 $8 million in the second quarter of 2023.
Increase of 28, 3% reported and 28, 1% in constant currency compared to the same period, a year ago, driven by new products in the U S Europe and Asia Pacific.
Gross margin for the second quarter of 2023, and 63, 8% compared to 264, 8% for the second quarter of 2022, and 62, 6% last quarter.
The sequential improvement is in line with our expectations driven by higher thrombectomy mix and ramping up new product launches productivity offsetting inflation headwinds.
As our second quarter gross margin still reflects some lagging startup costs from the prior quarter. Our operation team continues to execute well to support the increasing demand and we expect further gross margin expansion in the second half of 2023.
Now on to our non-GAAP operating expenses, which exclude the amortization of acquired intangible assets of $2 4 million $1 $8 million and $2 $4 million for this quarter for the same quarter last year and last quarter respectively.
Total operating expense for the quarter with $146 $6 million, a $56, 1% of revenue compared to $132 $4 million of 63, 5% of revenue for the same quarter last year and $147 million or 58, 2% of revenue last quarter.
Our research and development expenses for Q2, 2023, or 21 $5 million compared to $19 6 million for Q2, 2022 and $20 million for last quarter.
SG&A expenses for Q2, 2023 were $125 1 million or <unk> 47, 8% of revenue compared to $112 8 million or 54, 2% of revenue for Q2, 2022, and $120 7 million or 50% of <unk>.
Revenue last quarter.
We reported operating income of $23 million or seven 8% of revenue in the second quarter of 2023 compared to operating income of $1 6 million for the same period last year and operating income of $10 $4 million or four 3% of revenue last quarter.
While we continue to invest in long term growth and effectively allocate resources and investments to support new product launches I'm very pleased with our teams great execution and expect our operating margin expansion trend to continue in the second half of 2023 and beyond.
Turning to our cash flow and balance sheet. We ended the second quarter with a cash cash equivalence and marketable securities balance up $221 1 million.
And no debt.
He is an increase of $22 million from the last quarter.
The sequential increase in cash is driven by an increase in profitability and improvements in working capital terms.
And now I'd like to turn the call over to Jason to discuss our guidance.
Thank you Maggie and good afternoon, everyone. We increase our 2023 revenue guidance to a range of $1 $50 million to $1 billion $70 million, which represents 24% 26% growth over 2022 total revenue.
We continue to expect growth in our global vascular business to be slightly above this range and growth in our global narrow business to be below this range for the full year 2023.
From a quarterly perspective, we expect growth in the United States to accelerate modestly from the record 32% growth we posted in the second quarter, while we expect our international growth to be mid single digits in the third quarter due to seasonality and a challenging year over year comparison, and reaccelerate to double digit growth in the fourth.
Quarter.
<unk>.
We expect our global revenue to grow in the range of 23% to 25% in the third quarter on a year over year basis accelerating to 30% cost growth in the fourth quarter.
Moving down the income statement, we expect both gross margins and non-GAAP operating margins to expand further as we move through the second half of 2023, we continue to target over 70% gross margins within a few years and over 10% operating margins by the end of 2023 with further expansion expected.
In subsequent years I will now turn the call back to Adam for closing remarks.
Thank you, Jason Maggie and Chi I know I speak for the entire penumbra team when I say that we are at a defining moment in our company's history.
Ah moment, almost 20 years in the making.
Where we can see clearly know how our innovation with computer aided thrombectomy can help almost everyone with blood clots in their arteries and veins.
We fully understand how much work we have to do going forward. We have studied and learned from the best companies before us who have taken on market development and done it the right way.
I can promise the following <unk>.
Myself, our entire penumbra team the physicians, we will work with the hospital systems are ready to take on this challenge we are going to keep on trying to we reached our highest ground.
The next five plus years will be hard work, but the most exciting part of the penumbra journey.
Thank you operator, we can now open the call to questions for the next 40 minutes.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad will pause for a moment took mile our Q&A roster.
Your first question is from the line build Slavonic with Canaccord. Your line is open.
Great. Thanks, good evening.
It's an impressive quarter I'm trying to figure out where to start but I think you know in the in the U S. Neuro can you help us understand I mean, it sounds like the the.
The Red 72 with descended is really surprising easy even you internally just kind of what's really going on there in terms of that adoption and then an update on the Thunderbolt do you expect to have that trial enrolled by the end of the year or is that kind of still on track or.
Are you able to get that out ended the year and then watch it in 'twenty four.
Yes, great questions Bill Thank you.
Yes.
The good news.
I won't say that.
Red 72 incentive is surprising us.
We've been in neuro for a long long time, so we know it pretty well.
But it is obviously <unk>.
Very heartening for US as you know we have spent the better part of 20 years.
Tackling this issue the idea of trying to navigate.
<unk> is of the right size up too.
The intracranial circulation and up to <unk> and beyond when necessary and.
We've had some great products, we've had some struggles obviously a few years ago, but to have a product now that can track.
Better than anything we've launched even then still fated Xtra Flex is is really exciting for the team in hardening and frankly, the physicians have embraced it.
You can't get there.
If <unk> doesn't matter you have to be able to get there in a routine way.
A critical part of the procedure.
I am glad you asked about the Thunderbolt let.
Let me give you a little bit of an update.
As I've mentioned in the past the timeline for that has been pushed out a touch there are two reasons. The first is in.
And we've mentioned this that the first sort of roughly 100 patients enrolled took a little longer to enroll due to the required eight hour window.
We have seen enrollment accelerate now as the trial has progressed, that's a really good sign.
The second reason.
<unk> asked us to modify the safety endpoint from all serious adverse events of 24 hours to symptomatic ICA to 24 hours.
This request and change has not stopped enrollment in any way, but it does increase the sample size a little by about 75 patients.
This request was not related to anything specific to our trial or device, but seems to be made in order to make our trial consistent with other stroke trials that are currently being run and to our knowledge. Those trials have also been pushed out.
Potentially similar reasons.
We're finalizing the detailed with the FDA and assumes all that's done we'll formally update this but it might add another 12 months or so that said that allows us the time to really penetrate the market with 72 intended which again, we don't have to wait for Thunderbolt.
To do that and.
And we have the opportunity to take significant share, but equally importantly, or as importantly grow the market with this premium product. So I think it's set up for a really good.
Good run and you didn't ask this question Bill but.
I know you will have it is your first follow up so if you don't mind deliberately of answering it first.
That is this slightly new timing does not impact our projected numbers at all for 2023 2024 or 2025, so I wanted to make sure that pipe preempted good question.
Oh, you got it where you preempted half. The question is do you think of 'twenty three guidance and the raise it reflects the quarter.
Not much more I am kind of wondering how do we think about that.
What are you, including in that the bottom end of the range and the top end of the range given the outperformance in the quarter and at least our numbers it doesn't seem like you're adding much in for the back half of the year. Thanks for taking my question.
Yeah. Thank you Bill for the question. It's a good question. So the first thing I'd say is that in our first two calls so far this year, we've raised our revenue guidance by about $60 million I think thats about three times the amount of our results exceeded consensus expectations cumulatively over these first two quarters.
But if you look forward I think it's worth noting a couple of things our updated guidance sort of what our updated guidance accounts for an anticipated as well as maybe what it doesn't fully factor in first we would expect our U S business will grow faster in the second half of the year compared to the first we didnt.
Mentioned that in our prepared remarks, that's largely driven obviously from flash bull and send it. It also reflects our expectation that growth in peripheral thrombectomy, both in the U S and globally will accelerate in the second half of the year.
The last thing I'd say is we're excited about what we're seeing in the hospital submission process with an unprecedented number of largely new accounts pending the timing. Obviously of these processes is variable can take anywhere from a few months to up to nine months, plus and I would say we have been appropriate about our.
Factoring this into our guidance at this stage and overall, we think we have a lot to look forward to the balance of this year and into the next year.
Thanks for taking my questions.
Thanks Bill.
Your next question is from the line of Robbie Marcus with Jpmorgan. Your line is open.
Oh, great. Thanks for taking the questions.
Maybe to start on peripheral vascular looks like U S was up 50% the rest of the business was flat.
Maybe you could just walk through what's going on there trend wise.
Is there a headwind or slowdown in coils anything outside the U S to point to you know the vascular business was a little bit below the street. So just trying to understand you know great U S growth, but but what happened to the rest of the vascular business.
Yes, thanks for the question Ravi.
Overall, we think the vascular business had a really strong quarter, obviously the U S. You mentioned the U S.
Peripheral thrombectomy business, which was up 50%.
Total thrombectomy business stroke was up 4% over 40%.
Nationally there obviously.
<unk> coils and thrombectomy is really generally fairly early we have lightning 12, and lightning serving just getting started internationally and there's a lot of work to do I wouldn't say, there's anything untoward going on we just don't have all of our premium products internationally.
And in the United States is really expected to drive that growth. So I think the guidance reflects what we expect from our vascular business really strong accelerating growth, especially driven from the U S market and to be honest with you as we look at that as the opportunity as we bring these products.
Particularly flash.
And lightning bolts have been in Red 72, ascending thunderbolt to those markets.
Because then we'll have the opportunity of a similar growth continue in the international market. So.
It's really driven by the innovation and the technology that has always defined us.
And then maybe just hit on some of the sequencing you you gave us I believe it was 23% to 25% growth in third quarter, correct me, if I'm wrong and greater than 30% in fourth quarter, that's lower and higher than what the street has.
For third and fourth quarter, So maybe just walk us through some of the puts and takes there and your confidence in that greater than 30% number in fourth quarter. Thanks, a lot. Yes. Thanks for the question Ravi and we did point that out as you know we don't typically guide quarterly, but we thought it was important to recognize the third quarter I think.
The way that the third quarter had been sort of modeled from a consensus consensus perspective underappreciated is the momentum in the United States.
International markets with just a little bit too high so that's the put and take in the third quarter, I think where we expect to get the growth not just next quarter, but for <unk>, while in the United States, Mark I think thats, where folks wanted to see our growth because thats where flash in bulk.
<unk> exclusively at this point and then in the fourth quarter.
Comps on a year over year basis internationally.
Just not the same as they are there.
And the third so as we mentioned expect double digit growth, but again, that's compounded with a U S business that we will still have plenty of momentum obviously as we've said coming out of the second and third quarters.
Great. Thanks for taking the questions. Thanks Ravi.
Your next question is from the line of Larry <unk> with Wells Fargo. Your line is open.
Good afternoon. Thanks for taking my question and congrats on a nice quarter here.
Just two clarification questions upfront.
Under delay of 12 months, what was the what's the basis. There so filing filing by the end of 'twenty three is that pushed out to filing now end of 'twenty four.
I will get all of the specifics timing of that out when I told you when finished up.
But generally.
Wanted to quantify it.
The extended.
About 12 months the most important thing again really really want to stress. This we are not.
The performance and you can see it in our numbers for the second quarter in a row.
<unk> of our neuro business is not waiting for Thunderbolt, we have this unbelievable premium product that is capturing share.
The talk of F&I apps that we were just at <unk>.
So we are in really really good shape and then on top of that wind under Bowl comes we get to deal with the other part of the procedure not just getting there, but making sure that in every case, we can get the clot out so.
I want everyone to be very very clear and I. Appreciate your question Larry that the setup for us the ability to go after both parts of this procedure now are critical and I think everyone knows how important track ability is.
It was a topic for quite a while around us and our schroeck others. So the fact that we have a product that is doing such an amazing job in taking such share leading to my comment that I think will will get the dominant share.
Is great and then Tad Thunderbolt on top and to see how that will continue the growth curve of our <unk>.
<unk> business is a great time, so thank you for the question.
I'm Adam I'm, just wondering to follow up on Robbie's question. You know embolization has been a good business for you growing mid teens at least what did it do this quarter and I'm wondering.
If the sales force is perhaps distracted.
Launching two products and just I just wanted to sneak one in on that.
It seems hard to get to how you know vascular is going to grow faster than neuro.
For the year, given the first half.
Neuro has grown so much faster.
Then vascular thanks for taking the questions.
Really good follow up questions. The first one on the toilet we're already in a majority market share with oil so by definition.
That is going to.
Slowdown compared to the beginning of the two most significant launches in our company's history. So I think the numbers are fairly obvious when you do that and don't get me wrong everyone's proud of our coils, we they do great work.
<unk> had a significant clinical benefit.
But just by definition.
That's going to happen the question around vascular I think we answered it in the script.
We have way more.
Hospitals coming onboard with lightning flashing lightning bolt than we already have we're closer to the beginning I made a specific comment that we have well over.
A thousand submissions in the U S alone for flash and bolt.
We are way and these are mostly new customers and that process as it plays out we will obviously drive and then so this is folks who have seen it used at once going through the submission process that their hospitals.
The scale of this is different than any other product we've ever launched in our company's history.
And I just wanted people to understand that and that means it's it might not happen in one day, but it's happening.
And I got to give.
Testament to this.
The sales team for doing the work to get that going but it also to just the extraordinary innovation that is driving that many new customers to want to use this product.
I think when you do the math around that.
The question around vascular growth takes care of itself, yes. The only thing I would add is just from a number of standpoint, Larry. Thanks vascular globally was about 58% of our total revenue that will climb in the third quarter, a little bit perhaps slightly below 60% and then we.
It will be over 60% of our business vascular globally in the fourth quarter.
Thanks, Jason.
Okay.
Your next question comes from the line of Margaret <unk> with William Blair. Your line is open.
Hey, good afternoon, everyone. Thanks for taking the question.
Wanted to really follow up on two pieces. So one.
A sense of the scale I guess is a thousand active hospital admission.
For approval for flash in bulk.
I'm not sure if you'll be willing to give us what number of hospitals I guess youre at today relative to the hospitals that you're targeting and that thousand plus.
So as we look out versus the potential accounts right.
Similar question on the adoption curve until maybe that have trialed.
Slash in Volte can you give us a sense of kind of their scale is it months.
One month, one and try a few cases kind of put it to the side bring it on or is it kind of inflection is reached relatively quickly.
As we go on throughout the year.
Thats a sensitive of growth.
Yes.
Really great question, let me do my best to try to answer it.
The the answer of how met what is well over 1000 submissions mean.
The best way to talk about it as it were closer to the beginning of this launch than we are to the end of this launch.
Okay.
That's the right way to sort of put it in a frame we have more to go then than has already been accomplished.
How fast somebody ramps up.
You can't really other than maybe one or two cases, you can't really use a product without it being formally brought on through this process. So that's the gating item.
And so we have a lot to go to get that going once somebody does bring it on so far our experience has been that it's pretty sticky business and I think thats, partly what is driving new customers that we havent had before to be so interested because word of mouth.
<unk> talking to physicians sharing their experiences that has been very sticky. So you tend to have a lot of.
A lot of physicians.
Wanting this to happen as fast as possible. So they can start to get.
Using this and that.
That is why you hear the confidence we have about not just the rest of this year, but.
Going into the.
The future years as well.
We just have not had an experience like this with where the innovative technology itself is driving.
The scale of the adoption or interest.
Like we have seen.
Okay.
And then you know you've.
Referenced yourself kind of a 30% plus growth as we get into Q4 I know the comps obviously this year easier than they will be in 2004.
But how.
How should we think about that because he's got the street at mid teens, all the commentary you're saying is so positive right both on vascular even on her out.
It just feels like it's a pretty rapid deceleration, which is not what the commentary suggested maybe just true up those two comments.
Comments versus others.
Yes.
It's still summertime.
So I hope you don't mind that I'm not going to give guidance for 2024 in the middle of.
Some are for 2023.
I think you can take our commentary.
And what we're sharing.
What we have in front of us.
As the best.
Sign of our confidence to quantify that down into percentages a touch premature at this point.
But thats not in any way to not be enthusiastic about.
All three of those products that were currently launching.
Yeah.
Hey, Thanks, I had to try.
I appreciate the effort.
Yes.
Yes.
Your next question is from the line of Julien Joanne Lynch from Citi. Your line is open.
Hey, good afternoon. This is happening out for Joanne thanks for taking our questions.
I think last quarter, you called out <unk>.
<unk> may be.
A headwind or gating factor to flash uptake just curious if that was the.
The case that the case this quarter again, and then just as a quick follow up can you just talk about adoption trends, you're seeing with flash.
P P cases versus DVT. Thank you.
Yes, great question. Thank you.
We did not.
Have to really focus on supply I mean don't get me wrong.
Operations team is working incredibly hard to ensure we don't have that issue.
And I.
Very particularly at the beginning of the quarter said, we didn't expect that.
To limit us.
<unk>.
And we're hoping to keep ahead of that curve going forward and the team is working diligently.
As it relates to P/e versus DVT.
Not really seeing a difference.
There are obviously.
Competitive reactions and physicians who are.
It's going to have different viewpoints to start but what we're seeing.
Is.
Both of those areas, whether it's pks, our DB tk's are incredibly successful and.
And physicians are responding to that some might start with one and then navigate to the other and vice versa.
Is not a trend that I would point out.
One is better or different than the other at this point and I don't expect that to be the case, given the sheer volume of cases and the success we're seeing.
Great. Thank you.
Yes.
Thank you.
Your next question is from the line of Matthew O'brien with Piper Sandler Your line is open.
Great. Thanks for taking the question, maybe just to tease out. This this back half acceleration because as I look at the stock down about 5% in the aftermarket as I'm sure some of it's Thunderbolt, but probably more.
On the vascular business, even though the U S was awesome, so because they have a bigger second half ramp and Jason you know all about.
Second half ramps and concerns around those what's assumed as far as hitting Q3 acceleration Q4 acceleration.
With the vascular business in terms of these active submissions and converting them.
To users or existing.
Hospitals bulking up their utilization.
Yeah, I'll, maybe take the front end of that Matt. Thanks for the question and then Adam can can clean up after me.
The third quarter growth.
Pretty strong range the guidance, obviously in the third quarter.
<unk>, 25% off those.
Pretty strong third quarter of last year or so.
We think that will be driven by the United States are it's hard to accelerate off of the growth in the United States that we put up in the second quarter. We think we can that we see that growth and maybe show some acceleration in the third.
We also commented and you asked about it and then I'll turn it to Adam to answer more thoroughly about this submission process, but.
When I say, we've been appropriate with respect to what we factor then I think that you can read that to mean that we're being appropriate we're not factoring in things that we don't have control over timing or other things notwithstanding that when the submission process starts we have a history of having a high degree of success getting through a positive.
Okay.
Yes.
I think you answered that really well I don't have anything specific to answered.
Other than the.
We've always looked at our guidance and done it is very realistic.
Making sure that we're giving the complete information around this that's why we are sharing you the <unk>.
<unk> submissions in hospitals for both slashing and bolt in some of the commentary around send it because it also is going to be.
Pretty significant part of.
Our neuro growth for quite a while.
And just lastly, I'll just add on to those comments, usually as you probably know Matt the fourth quarter or the third quarter internationally tends to be a bit seasonal in in the fourth quarter. The strongest quarter. That's reflected in this guidance, we as a matter of fact put our expectations for growth internationally for both the third.
And the fourth quarters Thats reflective of that.
Sort of normal seasonal trends and what we know about our business internationally.
Concomitant with what we expect in the United States from those three products, we've talked so much about it on this call.
Got it I appreciate that feedback Walmart quick one just in everybody's talking about looking ahead is in terms of all these new active.
Centers that are that are.
Reviewing.
The new products, but what about ones that have adopted have gone through the vacs why are you seeing in terms of utilization trends and then specifically reorder rates are you seeing 90, plus reorder rates from these.
From these accounts.
Yes.
Great question, Let me, let me try to answer that the answer is the reorder rates for this product are obviously extraordinarily strong.
Without that you wouldn't have.
All of these new customers that otherwise never wanted to ever use our thrombectomy products thats being driven by the excitement that people who are using the product today and talking about it. So so the two are linked.
There is still room and this is I think you all know this having Washington.
<unk> been in this field for a long time.
You have multiple physicians and in our particular area you have multiple.
Sub specialties of physicians up to three different ones in every hospital. So when a hospital gets the product and it doesn't mean that.
In some cases, it does but not always every single physician and all three groups.
<unk> are now starting to use it. So there is still room. In addition to the new place is coming for a significant opportunity over the next period of time to do.
Drive additional usage within the hospitals that have already been approved.
Got it thanks.
Thank you thanks, Matt.
Your next question comes from the line of pedal Chickering with Deutsche Bank. Your line is open.
Hey, good afternoon, a nice quarter that you quantified how much the U S a vascular.
Gross or 50% year over year, how much that grow sequentially in the first quarter and then he guided to U S growth accelerated modestly in the third quarter again from a sequential perspective, how much we consider katharine looker growing from <unk>.
Yes, so we didn't quantify.
The sequential growth will be.
It said was.
Actually we did it in such that we said U S. Venus in total.
<unk> grew sequentially strong double digits.
U S arterial also grew.
Double digit so.
That's the vast majority of it.
Yes.
Another strong quarter.
In coronary as well it didn't grow quite as fast, but on a year over year basis was double digits as well.
Okay, Great and then on margins the.
EBIT margins Bill Macy store this quarter with the strong revenue growth.
He brought it provide any updated guidance on how would you think about exit rates in the fourth quarter of this year.
Yeah, I'll start and then maybe with respect to your latter part of your question.
Indeed, as I said in my prepared remarks expect.
To be above 10%.
Pro forma operating margins as we exit this year.
I think importantly.
That is not a place we see it stopping we see continued expansion subsequent to that in 2024 and beyond.
How do you what would you add to that.
No I think you summed it up well I mean with continuing favorable mix and volume elaboration continued to scale out and the trend will continue to see throughout the year.
Great. Thanks, so much.
Okay.
Your next question comes from the line of shopping <unk> with RBC capital. Your line is open.
Thank you so much I just wanted to ask the 2024 question, perhaps in a different way I'm just trying to figure out what <unk> looks like versus your one.
You have talked about this being a multiyear launch you've talked about at least a five year runway. So as we think about <unk>.
And it does also seem that there's a process to get the product onboard. So as you think about <unk> do you expect growth to be stronger similar.
Below 23, just anything that can help us handicap the opportunity better would be helpful.
Well first of all.
Thanks for the question then and as importantly, thank you for giving me. The ads update you were going to ask that question in credit.
Frame in a different way.
I'll repeat the answer it's still summertime.
2023.
So so we're not going to obviously answer that in the kind of specifics.
What I really want.
So sort of Trump maybe summarize that.
The comments, we've made this quarter around what's ahead of us.
Is not to sort of differentiate between whats behind us and what's ahead of us, but just to explain the level of interest deep into our sub specialties at a place in a way that we have not ever seen before in any product we've ever launched.
And that.
Pretty exciting because it means that the products are working they're doing work.
When you go to for example, a vascular surgeon who has done open surgery on the arterial side for years and years and has never wanted to even listen to our prior generations and now is intrigued when they see both and does one case.
And then tells us that they are going to convert over to everything that's not.
Not happening that's not normal.
Means that there's a lot ahead of us and Thats, an exciting moment for us how do we quantify that between 2023 2020 for 2025 and going forward. It means we have a lot of work ahead.
Have to do the work we have to get into hospitals, we have to make sure.
We have that all of that is positive and it puts us in a really good shape. So I apologize for not being able to quantify it for 2020 for yet.
Obviously, we will at the appropriate time, but.
We're in a really good spot.
And we're pretty excited about it we know we have work to do.
But this is in these launches are different all three of them and things we've had before.
Got it and then just a question on margins.
Just wondering how you're thinking about getting to be on the plus 10%. So maybe plus 20% then perhaps you can help us think through.
Margin expansion this year and into future years do you expect it to be more linear or should we think about it differently.
Just any directional color would be helpful. Thank you for taking the questions.
Yes, no. Thanks for the question.
In terms of margin I think in in Jason portion.
Confirm are continuing to target that 70%.
Gross margin in a few years, so I think between 23% to 24 and beyond we are on a pretty good pace.
<unk> to treat our actions will continue to see the same expansion.
And that's also translates into operating margin trend as we continue to scale pretty well and have infrastructure in place to allow us to scale that and allocate resources effectively so I think.
What we have seen so far I am in terms of margin expansion training. We can continue to expect that going forward in the next year.
Thank you.
Thank you.
Good.
Your next question is from the line of Sam Bergman Journal with <unk>. Your line is open.
Hey can you hear me, Okay, it's actually Ryan on Sam's line at F&I asked I was calling in on his line Beacon areas. Yes, we can hear you good alright.
Hey, guys. So a couple of questions on I'm here listening to all the clinical sessions and.
It's clear you're competing for patients in these trials with Thunderbolt.
And just Adam I wanted to understand kind of your view on the cyclic aspiration today versus maybe what it was.
A year ago or kind of as you embarked on this endeavor.
Has it changed.
It has not changed in terms of.
The opportunity in the market.
For cyclic aspiration.
Relative to maybe things like large bore aspiration and kind of what do you think that can do when thunderbolt does eventually come to market.
Yes, it's a.
Great question.
Great one given that you're right in the middle of.
F&I asked right now.
Let me just a couple of terminology is to make sure. We're all on the same page and then.
I really really want to.
It seems like the third or fourth question.
That is being asked.
And I'm not I'm not sure why what I'm, saying is not registered cyclic aspiration is something different we don't do cyclic aspiration, that's turning a bump on and off it it means nothing.
Doesn't have any real effect modulator aspiration is very different and that's what Thunderbolt does it's also with lightning bolt obviously, we've treated.
Like a 1000 patients now with lightning bolt and as I just said it's extraordinary.
It's amazing technology that is changing people's thoughts about treating patients after years of doing something else. So there cannot be any misunderstanding about my level of enthusiasm and excitement about modulator aspiration to get cloud out of the body I want that to be.
Crystal clear.
Now there's a question.
Neuro of.
Wonderful.
Large bore aspiration Laurie for aspiration catheters had been around for a while none of them are in my understanding are actually cleaner, they're either in a trial or they have a guide catheter and indication are being used off label because they are in a trial. There is a bunch of those trials going on those are typically guide catheter sizes, where they are.
Trying to push them up to the M. One you can ask around whether thats.
Currently.
In fat or not I think the answer is fairly obvious.
Let's focus on the most important thing to start for sure. Okay, you got to get there.
You got to get there, we now have a technology that brings.
Appropriate sized catheter up to the cloud.
Faster and easier than any other product, we've ever had or anyone else has ever had that.
That should be something we're excited about at the same time. We're also excited about thunderbolt and the results of that and we can't wait for that to come out because we already know both in the trial and.
Obviously with Thunderbolt lightning bolt being used so much how it works.
That's like process. It doesn't happen immediately it will take a little longer for Thunderbolt, but in that time period, we don't have to wait to do what we're doing which is taking significant share and.
Likely growing the market at the same time and I was just there yesterday I apologize for missing you.
The level of enthusiasm is at an all time high is back pre pandemic levels of enthusiasm we had meetings with physicians, who are talking about growing into the community and doing the work necessary to drive this and in large part is around the idea of that.
Access getting to the cloud with an appropriate sized catheter like Red 72 ascended.
That is the answer so.
I want there.
There is a terrible misunderstanding if anyone thinks I'm.
What I am saying about Thunderbolt is a negative thunder.
Thunderbolt is great.
It's also nice to have something equally great that does something else, which is red 72 incentive.
Crystal clear Adam Thank you for saying that.
Last question for me.
You talked about pricing and the benefit youre getting in vascular.
For lighting or you talked about the benefit you're getting on Sunday with Red 72.
Can you give us any color in terms of the pricing benefit relative to say a volume mix assumed in your guidance given that you are getting some premium on price for these technologies. When we think about guidance for the remainder of the year.
Yeah.
Really really good question and I'm glad you asked it I mentioned pricing.
Really for a slightly different reason.
We just have a simple system, we've got a price it's easy everyone knows that.
And we're hearing that that is a valuable.
A valuable way to conduct business that being said.
We always have been priced fairly.
And thats been our reputation out there in that phase our reputation.
And I think that's important because you are in business for a long time.
Your reputation and how you conduct yourself and what price you charge is fair that being said obviously there is a small premium for our products. We've talked about this for the new products.
A little bit mitigated because like with flash you don't need a separator and so the vast majority of our guidance.
And success in the past.
A quarters is being driven off increased usage of the products not pure price and the reason that's important to say that one it's true, but more importantly, if it's sustainable.
<unk> price has a short shelf life to it.
And it's not something that we've ever.
We'll take an appropriate price when necessary, but we want to grow our business with sustainable share gain and market growth, which is very different than a short term one year bump for price.
Okay.
Thanks.
Thank you.
Okay.
Given the time your final question on today's call is from the line of David <unk> with Baird. Your line is open.
Oh, great. Thanks for taking the questions and congrats on the strong quarter.
Maybe I'll start off Adam on your comments around.
An expectation for a dominant share in the U S stroke space within the next three to four quarters I guess, one more basic question, but should we assume that this implies that you expect to have a majority share in the U S stroke market within the next three to four quarters and I guess, given the longer timeline to Thunderbolt.
You know imply that that is generally what is getting each that dominant share position rather than more or less be depend on thunderbolt.
Yes.
Yeah.
Yes.
So you want me to expand on that.
Yes, the answer is yes and.
And that's what I meant by we don't have to wait when a member of our governance there'll be more front, we'll have more growth it will add to our benefit in the future, but we don't have to wait for that benefit.
Now we have.
When we first started talking about Thunderbolt, which is a few years ago. We didn't have attended.
We didn't know that we would not have to wait.
And the fact that we don't have to wait and we all thought we did and now we don't want is a positive it's really kind of exciting and to see we had a tax suite.
<unk>, we had positioned who were trying.
The products without attended and they were getting stock around the curve. They then try to send it in sales right up over and over again and the reactions like Whoa that's amazing.
That's about patient safety, it's about getting the cloud out fast because again, if you take if the car. If you had available to get the clot out and it takes a minute or two but its up to 45 minutes to get there.
There is still room for improvement in that case, but if you can get there in a minute or two and you can get the clot out in a minute or two then you've really done the work so.
Doing the work now to get the first part of the case the most important getting there and then we will add to that with Thunderbolt when it comes.
Frankly that feels like a pretty good setup for success for many years.
Okay now that's helpful. Thank.
Thank you for the longer answer there I guess my second question just on the.
The margin gross margin operating margin longer term goals of I think you said, maybe the above 70% of our gross margins within a few years wondering if you'd be able to qualify that as you know maybe closer to the two to three year timeframe or something thats within it within a five year view and then just wondering more or less on the operating margin side.
Just based on you are with the launches with Salesforce today should there be any thought about.
Accelerating or any incremental spend maybe on the salesforce side in the back half of this year and into 2024, you kind of sat with where the business is today. Thank you.
Yeah no. Thanks for your question.
I think in terms of.
<unk>.
The gross margin, yes, I think we previously mentioned two to three years out.
Is that the right title to look at and we'll continue to see other favorable factor that we've been seeing both Mike and I, both mix and volume and scalability.
And on the Salesforce side.
It's a good question.
We really.
We have an incredible team and we cover the whole U S.
Effectively.
We may have to add one person to person here in their territory.
But for the most part we're not going to we're going to be able to get some real leverage there.
I think we'll need.
This is sort of the busiest there'll be launching these products are going through the process and all of these hospitals and they are doing.
This coverage somebody raised the coil business.
I think it will get.
Overtime more normalized and our team is amazing.
Called them out in the prepared remarks, where just the sheer volume of work that people have done in the first half of the year.
I think we will get a lot of leverage out of that because I do not think we need to fundamentally change the size of the team.
Thank you.
Okay.
At this time I will turn the call back to MS Hamlyn Harris.
Thank you operator on behalf of our management team. Thank you all again for joining us today and for your interest in Penumbra, we look forward to updating you on our third quarter call.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
Sure.
Sure.
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