Q3 2023 Penumbra Inc Earnings Call

Good afternoon. My name is Adam and I will be your conference operator today at this time I would like to welcome everyone to Penumbra is third 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. If you'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 prestige. The excuse me the pound key again, thank you I'd 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 third quarter of 2023, a copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation can be viewed under the investors tab on our company website at Www Dot Penumbra, Inc. Dot 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 995, including statements regarding our financial performance commercialization clinical trials regulatory status quality compliance and business trends.

Actual 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.

Caution as a result, we caution you against placing undue reliance on these forward looking statements I'm 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 or the market price of our stock penumbra disclaims any duty to update or revise our forward looking statements as a.

Result of new information future events developments or otherwise.

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 push to press release.

Adam Elsesser, <unk>, chairman and CEO will provide a business update Maggie Yuen, our Chief Financial Officer will then discuss our financial results for the third quarter and Jason Mills, Our executive Vice President of strategy will discuss our 2023 guidance with that I would like to turn over the call to Adam Elsesser.

Thank you Chi.

Good afternoon. Thank you for joining <unk> third quarter 2023 conference call.

Our total revenues for the third quarter were $279 million a year over year increase of 26, 8% as reported and 25, 9% on a constant currency basis, our worldwide thrombectomy business achieved record revenue of $179.

$1 million growing 38% on a year over year basis, our worldwide embolization and other revenue was $91 9 million, increasing nine 5% over the same period a year ago.

Our global vascular thrombectomy business led our growth increasing 56, 9% year over year, while narrower thrombectomy grew 10, 3% year over year we.

We had another very strong quarter in the United States as revenue of $194 $8 million grew 39% year over year led by total U S thrombectomy, which increased 42, 1% year over year.

Our strong growth in thrombectomy this quarter during which we did not have new product launches as we've had in the first two quarters of the year shows how demand is building for our computer assisted vacuum thrombectomy and stroke product in fact, we expect our total thrombectomy growth both in the United States and glow.

Billy to accelerate slightly in the fourth quarter on a year over year basis.

We expect growth in embolization and access to be similar to the third quarter.

We expanded our gross margins in the third quarter to 65, 6% strong revenue growth and gross margin expansion, coupled with disciplined operating investments and commercial execution made the third quarter, the most profitable quarter in our company's history non.

non-GAAP operating income was a record $33 2 million.

Representing 12, 3% of revenue.

We posted record adjusted EBITDA of $51 5 million or 19% of total revenue compared to $14 6 million last quarter and eight 9% in the third quarter last year. We also grew our operating cash balance by 27 8 million.

Sequentially.

Looking forward, we expect to deliver strong revenue growth gross margin expansion, increasing profit margins and strong cash flow in 2020 for 2025 and beyond.

The number is the largest thrombectomy company in the world.

In developing proprietary technologies to take thrombus out of the body wherever it is from.

From head to toe has always been our mission.

Almost 20 years of incremental innovative successes.

Have led to this transformational moment in our company's history and the thrombectomy market.

We have now successfully developed a proprietary computer assisted vacuum thrombectomy products.

That optimize the three most important elements of clot removal.

Safety.

<unk> and simplicity.

Lightning flash and lightning bolt seven and Red 72 extended are currently driving our momentum.

Because of these products, we expect to achieve an extraordinary milestone during the fourth quarter.

We expect to treat more than 100000.

Patients in the United States during 2023 alone.

Thrombectomy products, we have.

Obviously, you still have a long way to go to help the $1 million 215000 patients each year in the U S that have significant clot burden.

But this is a notable achievement for our physician customers and our team.

In vascular thrombectomy, we had a strong third quarter lightning flashing lightning bolt <unk> delivered strong growth for our U S arterial and venous franchises.

This success was achieved with over 1200 total customer accounts, which we define as hospitals using either flash in bulk. So in some cases hospitals are counted twice if they're using both products.

As an update on the number of pending accounts, which are in addition to those I. Just mentioned we succeeded in obtaining well over 650, new vac approvals last quarter for flash or bolt and these accounts are now working through the typical supply chain process prior to placing their initial orders we.

Specced many of these customers to order and begin using flash or both this quarter.

In addition, we currently have at least 600 additional accounts that are still working through the initial back process and we expect most of those accounts to order in Q1 or Q2 of 2024.

Therefore, we expect the majority of our potential customer base will have flasher both on their shelves. During the first half of 2024. Once these products are available and starting to be used our work shifts to going deeper with training and increasing the use of <unk> T and K.

Is that currently use open surgery or lytic as the primary mechanism so far the reorder rates for both flash and bolt.

Hi, as any product, we've ever launched and thrombectomy.

In stroke thrombectomy, we're gaining share from our already majority position.

Red 72 extended technology is still early in its adoption curve is many hospitals worked through the submission process for this product as well.

We currently estimate that we have over 55% share of the U S stroke market for aspiration catheters.

<unk> to 'twenty eight other aspiration catheters that are competing against each other and the rest of the market.

Looking forward, we believe our new technology for both the front end of the stroke procedure, namely track ability with Red 72 send it coupled with our innovation for the back end of the procedure cloud extraction with Thunderbolt and drive our share to 70% plus over the next several years.

The two questions we get asked the most by investors are.

First are we ready to meet this moment of opportunity and thrombectomy and second one.

Specific work is penumbra doing to bring <unk> to the other 90% of patients who arent receiving thrombectomy today.

The answer to the first question is yes, I am confident that our team understands the serious work ahead and.

And is able to meet the moment and think bigger than.

Ever before now.

Now without sharing competitive information, let me outline the specific areas of work ahead.

Our work is focused on three areas.

Innovation.

Internal readiness and implementation of market access work modeled after the historical best companies work for long term sustainable growth.

First our innovation pipeline is robust we are hearing from our physician customers as well as hospital system.

The computer assisted vacuum thrombectomy is the future standard for thrombectomy.

Over the next 18 months, we plan to launch four new <unk> products in the United States Cup.

Coupled with flash and bolt seven we expect our <unk> portfolio will drive both market share and market growth and DVT p/e and arterial.

In addition to these new products coming in the near term we have made significant advancements with next generation technology that could expand both the scope and dominance of our <unk> platform over the long term we.

We will talk more about these developments in the future, but for now I will say that these technologies will be integrated.

Into our <unk> platform, and we will be able to provide unique benefits to our physician customers and their hospitals, including further optimizing patient outcomes and physician use.

The second area is.

Internal readiness, we have already started serious work on efficient manufacturing at scale, which includes raw material acquisition.

<unk> supply chain and efficient capacity utilization.

We have also started the work to bring even more efficiency and scale to our customer and sales field support teams, enabling faster order processing time, and all time zones and of course, we are focused on evolving our commercial team, particularly in vascular currently our team has a lot to focus on launching two new <unk>.

Transformative products and thrombectomy.

<unk> continuing to grow with our current coronary thrombectomy product and our market leading embolization portfolio.

Within appropriate investments that we believe marries well with our movement to stronger profitability, we will evolve the commercial team over the next two quarters, putting a team in an even stronger position to take advantage of the opportunity in 2024 and beyond and thrombectomy.

Third we are starting to implement a strong market access program based on best in class historical programs focused on our computer assisted vacuum thrombectomy platform.

Internally, we refer to this work as the <unk> initiative and it is being led by senior leaders across the organization, including Dr. Jim <unk>, Our Chief Medical Officer, and Dr. <unk> comp to Molla, our associate Chief Medical Officer, working closely with senior leaders and the clinical specialties.

Intervention radiology vascular surgery, interventional cardiology and neuro intervention.

Gather with leaders in our reimbursement clinical and commercial organizations and in concert with external partners.

We believe this initiative will substantiate the advantages of our <unk> platform over the long term.

With the important work we are doing in innovation internal readiness and market access we are well on our way to bringing computer assisted vacuum thrombectomy to all hospitals treating patients with blood clots.

Every vascular bed from head to toe in the United States now and internationally as these products become available in the years to come.

Indeed in the United States, where we have lightning flash, both and extended our thrombectomy business will comprise about 67% of our domestic revenue in 2023, and we expect it to grow to over 70% in 2024 by contrast, our thrombectomy franchise outside the U S will represent approximately.

55% of our international sales in both 2023 and 2024 after which we expect our new CBT portfolio products will influence our international growth as it is in the U S. Today.

Our growth potential over the next several years is significant with our commercial focus on thrombectomy globally.

Where there are opportunities for profitable growth and embolization and access.

And we are in the early stages of strong operating leverage while we still make the important investments focused on these three areas.

The road ahead won't be a straight line nor will it be free of challenges, but if we continue to do the right things bigger and we're purposefully we can help many more patients while stewarding a growing profitable business over the next several years.

I'll now turn the call over to Maggie to go over our financial results for the third quarter.

Thank you Adam good afternoon, everyone today, I will discuss the financial results for the third quarter of 2023.

Financial results on this call for revenue and gross margin on a GAAP basis.

Operating expenses and operating income on a non-GAAP basis.

Corresponding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures provided in our posted a press release.

For the third quarter ended September 32023, our total revenues were $279 million, an increase of 26, 8% reported and 25, 9% in constant currency compared to the third quarter of 2022.

Our geographic mix of sales in the quarter was 71, 9% in U S and $28, 1% International.

<unk> reported growth of 39% and our international region increased 17, 4% reported and 14, 3% in constant currency.

The sequential growth of three 6%.

Mainly driven by an increase in our global from back in the business of $16 6 million or 10, 2%.

A decline in our embolization and other businesses of $7 1 million or seven 2%, primarily driven by EMEA seasonality timing of the nurses healthcare milestone and our distributor customers mix.

Moving to revenue by franchise revenue from our vascular business grew to 171 $4 million in the third quarter of 2023.

An increase of 38, 9% reported and 38, 5% in constant currency compared to the same period last year, driven by 52% year over year increase in U S. <unk> career from back to me.

Revenue from our neuro business was $99 $5 million in the third quarter of 2023, an increase of 10, 2%. We recorded an eight 5% in constant currency compared to the same period, a year ago, driven by strong performances in Europe and U S.

Turning to gross margin.

Gross margin for the third quarter of 2023, a 65, 6% compared to 63, 3% for the third quarter of 2022, and 63, 8% last quarter.

The sequential improvement is driven by high and come back to the product mix improvement in labor efficiency, and a stabilized supply chain environment.

Our operations team continued to execute to some point Freddie Mac, while focusing on these production initiatives that will result in future production.

While we will accelerate our productivity and scalability investment in the next few quarters. We expect these investment costs will be offset by product mix and continued productivity improvement in the near term, which will enable further margin expansion in 2024 compared to 2023 overall.

Now on to our non-GAAP operating expenses, which exclude a one time expense associated with the acquisition of IP R&D of $18 $2 million for this quarter and the amortization of acquired intangible assets of $2 4 million for this quarter, the same quarter last year and last quarter.

Total operating expense for the quarter was $144 5 million or 53, 3% of revenue.

<unk> to $127 $5 million or 59, 7% of revenue for the same quarter last year, and $146 $6 million or 56, 1% of revenue for last quarter.

Our research and development expenses for Q3, 2023 were $21 million compared to $21 3 million from Q3, 2022, and $21 5 million from last quarter.

SG&A expenses for Q3, 2023 were $122 5 million or 45, 6% of revenue compared to $106 $2 million of 49, 7% of revenue for Q3 2022.

$125 1 million or <unk> 47, 8% of revenue last quarter.

We recorded operating income of $33 2 million or 12, 3% of revenue in the third quarter of 2023.

Compared to an operating income of $7 8 million or three 7% of revenue for the same period last year and operating income of $20 million or seven 8% of revenue in last quarter.

We continue to invest to support volume growth and long term projects that allow us to continue to scale the organization into the future, while creating a balanced and disciplined spend in depression.

We believe it is worthwhile to highlight our adjusted EBITDA, which excludes a one time expense associated with the acquisition of IP R&D up $18 2 million and stock compensation of $14 1 million $12 8 million and $9 7 million for this quarter last quarter and the same period.

Last year at least accurately.

We posted record adjusted EBITDA of $51 5 million.

Our 19% of total revenue compared to 14, 6% last quarter and eight 9% in the third quarter last year.

Turning to our cash flow and balance sheet.

Ended the third quarter with a cash cash equivalence and marketable securities balance of $248 9 million and no debt.

Richard from increase of $27 8 million from the last quarter. The sequential increase in cash is driven by an increase in profitability and improvements in working capital times.

And now I would like to turn the call over to Jason to discuss our guidance.

Thank you Maggie and good afternoon, everyone for the fourth quarter of 2023, we expect total company revenue growth to accelerate to 28% to 31% year over year, which correlates to the midpoint of our annual guidance range of $1 $50 million to $1 billion and $70 million for full year two.

'twenty three we expect global thrombectomy revenue growth to accelerate sequentially from the third quarter and expect our geographic mix of sales between the United States and international markets to be similar to the third quarter levels.

I'll now turn the call back to Adam for closing remarks.

Thank you, Jason Meg game changer.

<unk> becomes recognized as the future of thrombectomy, our team appreciates the serious and important work ahead.

Outline the initial phase of that work during my earlier remarks with this opportunity in front of US. We are all in as we proudly accept the challenge to meaningfully change the number of people who benefit from our innovative technology.

Thank you.

And thank you operator, we can now open the call to questions.

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.

Pause for just a moment to compile the Q&A roster.

And your first question comes from Robbie Marcus with JP Morgan.

Your line is open hi, this is Mike.

Hi, This is actually really on for Robbie Thanks for taking the question.

Two quick ones I'll ask them together.

Why not raise the guide by at least to be is.

Is that just conservatism or are there other dynamics, we should be keeping in line for the rest of the year and related to that.

Reiterating the guide implies a softer fourth quarter than what the street was thinking so what's the driver of that and how should we be thinking about.

Thanks, so much.

Yeah. Thank you for the question I'll take that as Jason and then Adam can jump in if he likes.

First I would say the expectation that our business will accelerate.

Its fastest pace of the year, 28% to 31% year, where growth is really a positive reflection of the momentum we have right now.

This guidance takes into account many things the progress and timing with the new customers getting approvals and placing their first orders timing of the new products and market development initiatives.

Let me give you just a little bit more context on our guidance our thrombectomy business worldwide. As you saw grew 38% in the third quarter, our guidance anticipates global thrombectomy to accelerated to 40% plus growth in the fourth quarter. It also intest anticipates, our U S thrombectomy business will go.

So even faster than that it's in the high 40% range that said, while our embolization and access business as our market leading franchises. They are more and more established markets. So we expect growth here will be in the high single digits, which is similar to the third quarter.

As we move forward more and more emphasis as you can probably hear across the organization will be on thrombectomy, where markets are underpenetrated and where we have a platform technology with <unk> that we believe will be the future standards. So overall, we're excited about where we're going.

Okay.

Your next question comes from the line of Larry <unk> with Wells Fargo. Your line is open.

Hi, its lei, calling in for Larry Thanks for taking the question.

And one for Adam Adam recently talked about.

20% plus sales outlet.

Outlook for 2024 can you just comment on your confidence on that outlook and what are the key driver on the back of your strong Q3 report and if I may have a follow up on that.

You previously expected to exit this year with mid 60% gross margin low double digit operating margin you obviously already got there in Q3. So if you can comment on how to think about that exiting the year and into 2024. Thank you.

Yes. Thank you.

Let me start with the Tony for guidance.

We are very confident in what I said.

Julia Your conference.

As at least 20%.

Our plan is to give formal guidance on our fourth quarter call, which is our typical pattern.

At that point, we can give the nuance around that specific guidance, but.

Obviously, if you hear what we're saying about the business and how it's setting up.

We're obviously very confident.

And that at least 20% number.

As it relates to the profitability margin.

I will comment briefly and then Maggie.

Can comment more specifically.

It is really important for us.

To run a profitable business and to increase that profitability that.

That has been.

<unk>, we've prided yourself in the long time.

And Matt and now more than ever.

I think.

The World is it is agreeing with that.

Profitability is a very important measure.

You heard it in the prepared remarks, we're setting ourselves up to.

To run this to be more and more profitable, but a magnet can be more specific.

Hey, Thank you very good about our profitability trend I think it's more important to know is we are reaching a sustainable level of profitability with gross margin and overall operating margin.

We will continue to invest in and that's maybe in a number of initiatives, but as Mike mentioned earlier, we've been trend of increasing from back to meet product mix, we continue to scale and leverage the overhead.

We expect to continue to see gross margin and overall margin expansion moving forward for next quarter.

And in the longer term.

Thank you.

Okay.

Okay.

Your next question comes from the line of Margaret Kaiser from William Blair. Your line is open.

Hey, everyone. This is mccoy on for Margaret.

Thanks for taking the question so kind of another one on in terms of the Q4 guidance.

Obviously, you mentioned that 30% plus heading into the quarter and the 28% to 31% guidance today. So.

I'm just wondering if anything has changed or maybe that implies any rate of seasonality and then.

Just what that assumes in terms of the rate of vac approvals in Q4 relative to last quarter.

Yes, well. Thank you for the question nothing has changed as you can here at the beginning of the year we've talked about.

Our guidance being $1 billion. So it's come up quite a bit through the year and last quarter, we gave it.

Current assessment of how we thought the second half of the year was going to play out and nothing has changed from that.

If anything I think <unk> seen the growth and we are starting to talk a little bit more I think give you a little bit more specifics around our business from a thrombectomy versus embolization perspective, which gives you a sense I think that the strength is.

Coming perhaps even more from the thrombectomy business globally, and then obviously in the United States and it's even stronger so if anything I think thats the change in disclosure that shows the strength in the business and the momentum.

Awesome very helpful. And then just as a follow up in terms of.

The progress on the Thunder trial, So I know I mentioned last quarter kind of a requirement to change the safety endpoint, there and adding approximately 75 more patients.

Noticed that.

There were a bit more patients added to the clinical trials website. So just wondering if there were any additional modifications to the trial design there or.

Just maybe if you could speak to Thunderbolt performance on some of the patients enrolled.

Thus far thanks.

Yes.

Great question.

And thank you for the specifics of that.

The trial.

Number than our.

Generally in the same ballpark that that I was talking to.

275 patients if I'm not mistaken.

And we updated clinical trials dot Gov with the timing, which is generally consistent.

With with what I had expected.

<unk>.

We're on that trial, we're seeing some nice enrollment right now we're pretty excited about.

What we're seeing I will tell you.

That.

The most important thing as you know.

We're very happy with the performance of the product.

And that is obviously the best part of it but we also have validation and separate from that product as you know we have lightning bolt and we have done a huge number of.

Cases with that similar technology different catheter side.

It is.

And as everyone in <unk> no.

Performing incredibly well so again, we can't wait to bring that to the market we have to run the trial.

And we can't.

We can only do so much to speed up the enrollment, but so far so good.

And as we've said we're going to be.

Bringing this technology the <unk> technology.

Every part of the body head to toe.

So that we can modernize.

Thrombus removal.

Really to start taking a huge dent at the number of patients that are suffering and so those are both going to be big part of that and our optimism is as strong as ever.

Good to hear thanks, again and congrats on the core.

<unk>.

The next question comes from the line of Bill Pogonic. Your line is open.

Great. Thanks, Good evening and thanks for taking my questions.

First up is just Maggie can you help me understand so phenomenal quarter on the operating margin of 12, 3% how should we think about Q4 at.

It sounds like that's going to continue to go up in Q4 and sequentially as we go into 2024, and then secondly, I don't know if this especially with gross margin going up but you also mentioned just on the sales force changes I forget how you phrased it but basically you're going to make some changes I'm wondering if you could give us some granule.

Larry.

Kind of what Youre doing and is it a new different sales force for different indications is that splitting territories, just any anything you're willing to share to help us out on that thanks. So much.

Okay. Thanks, Bill maybe I'll touch on the margin first and then Adam can talk about in contrast with Salesforce.

I think overall as I mentioned earlier, the gross margin trend that we see.

It's already.

A few quarters of sequential improvement is primarily driven by continued thrombectomy product mix and we definitely see that trend to continue.

I also mentioned overall.

Continued leveraging our our overall capacity I think Vince to answer at the time that we may accelerate some of the investment in our.

Manufacturing area, so gross margin definitely reaching a stable likeliest level by then but we will continue to see more margin improvement in 2024.

In terms of.

<unk> leverage and overall operating margin.

We continue to leverage a lot of the overhead and infrastructure investment that we put in a couple of years ago and I think we will continue to see more leverage going forward.

And Bill this is Adam to follow up on the specific sales force question I want to thank you.

I think you all might know I love talking about our amazing sales team and what they've been able to accomplish.

One of my favorite topics.

As I laid out on the call our team in the field, particularly in vascular now have so much to do.

With our embolization business, which is.

Is the majority.

Our coil business in the market together with launching two transformative products together with Kantar.

Continuing to.

Get cat Rx, our coronary thrombectomy tool out there on this.

Linda.

Basis of the strong cheated study.

A few years ago. So then they're just busy and now we're facing.

More than doubling the number of customers. We've typically had on our thrombectomy business and getting through all that process. So the point is we are going to evolve that sales force we are not splitting the sales force.

That's not our.

Our plan.

We are going to evolve it with.

People, who can make some of this work more efficient.

Without fundamentally changing the core structure of the sales team so I'm.

I'm not going to be too much more specific for competitive reasons.

I don't typically share the number of sales reps and how we think about that because thats not how we have managed our team and our team has performed so well over the last many many years.

But we can do that within the context of our growing profitability and that's the most important part this isn't going to change that trajectory.

And I think it will be a significant evolution of the team, but one that will allow us to do more but not impact that important part of profitability.

Great. Thanks for taking my questions. Thank you.

Yeah.

Your next question comes from the line of Michael Sarcone with Jefferies. Your line is open.

Good afternoon, and thanks for taking the question.

Just first want to start you had mentioned over the next 18 months, we plan to launch four new CBD products in the U S. It.

I was wondering if you can give us any color there whatsoever.

New Tam new indications would just love to get some more color there.

Yes.

Great question.

I'm very hesitant to Vince for obviously competitive reasons to give too many specifics needless to say.

I will say the following though and that is.

This is the beginning not the end of what we think we can offer with our <unk> platform.

Those four products are going to be significant.

Theyre not tangential or are on the sidelines.

And that's not the end of it we alluded to.

Technology that is in development that would.

Be part of an attached to.

And be integrated into the whole platform that will continue to move this field forward and making these procedures easier, making both the physicians and the hospitals.

Feel.

Much better about the flow in and the treatment of these patients so.

We're really at the beginning of this next phase.

And we will give you more update to obviously as those products get cleared.

Again pretty excited about what the next tier.

Next month next year.

It looks like and I got to tell you our our R&D team is.

It's just evolving they've always been amazing they brought us this far but they are extraordinary.

We do a quick shout out to them.

For getting us to this stage.

Great. Thank you.

I believe you also disclose I think you said 55 zero percent U S vascular thrombectomy sales growth year over year.

Can you just talk about any kind of competitive.

And then maybe what was the similar category growth.

National for your thrombectomy business on the vascular side.

Yes, I'll start.

Nearly 50%.

S growth and thrombectomy as multiples.

Faster than we've seen.

From anywhere else.

Internationally is a much smaller base so the growth percentages.

It can be higher quarter to quarter.

And it was slightly higher than that this quarter, but it is because a distributor. So you had a good quarter.

Marginally so and it's a smaller number so the percentages are bigger, but both regions did well.

Okay. Thank you.

Thank you.

Your next question comes from the line of Richard and Order. Your line is open.

Okay.

Questions guys.

I think Adam you had made a comment about.

There you are exiting the year with those.

Thousand Vac committees working their way through the process.

You expect to be through them all in the first half 'twenty four I guess could you flesh that out a little bit about what exactly that means is there any kind of quantification or directional color, we should be thinking about in terms of growth first half second half.

Next year, just I'm trying to understand you're pretty thoughtful about those kinds of comments. So I'm, just making sure. We're hearing the message incorrectly around that yes.

Yeah, No I think it's.

Really appropriate and great question.

Let me, maybe sort of walk through a little bit about.

What I said, but also sort of the.

What does it mean.

More specifically so we.

What I've said is that there is over.

650 of those centers got Vac approval, this past quarter, but have not yet ordered because theyre going through what we.

For lack of a better term, we're calling the typical supply chain process, where you work with the supply chain the hospital to get the product ordered and on the shelf and all of that and so that that's going to happen for the most part most of those.

During this quarter semi drag attached but most will happen this quarter. So once you get an order now we don't do large stocking orders some some.

Companies have done that over the years, we do very basic you order one maybe two and get started and then with that you have success in the reorder the product. So we can make it pretty straightforward so without a question of.

Stocking order revenue its really getting going what I also said.

There are two other points. One is there is another 600 over 600 hospitals that are still in the beginning of that that process that haven't yet had the vac approval. Once that happens then they move to that second category that we have to get through the supply chain part and get onto the shelf. Once we're there once were ordered.

And able to be used.

And then our efforts switches and those hospitals to not only having it being used in sort of the cases that.

Our obvious but if you look at and we track this billing data's at every hospital pretty carefully how many patients are being treated with mechanical thrombectomy versus how many are still being treated with literature open surgery, depending on the vascular bed and that's where the work really starts and that's what I was talking about.

That were geared up to do that work.

Not only on the sales team side, but.

But also through our market access work so that we can bring this technology deeper into the hospital and so once you get approved we don't expect you to be at the normalized run rate of using our product right away. We think that will continue to grow for a while.

That's what that's what I was articulating. So this is a this is a journey. This is a process again not to diminish that.

The success, we've had this quarter that suggests we expect to have next quarter or into 'twenty. Four we're going to have a lot of success in a lot of growth. We're just going to see the work continue to build.

And sort of year over year for quite a while.

I guess, the best way to say it is as we look at.

The space that has.

Thrombus in People's bodies, whether it's in the head all the way through the body or in the.

Toe.

We're going to continue to be committed to this space. We are this is our focus this is our our mission and we are going to continue to develop those markets to focus on that.

And it's going to take some time, but in the short term we're going to have a lot of success. That's why I laid out those numbers those are not insignificant opportunities this quarter and next.

But but in the long run I think it's going to be much more significant.

Okay. Thank you for that thorough answer just just just lastly anything.

With respect to the the the vascular and threat thrombectomy launches.

That is going better or worse in line with your expectations.

At this point at this point in the largest.

Yes, that's a great question, it's hard to.

Answer that question I am a tough critics out on our own products.

So but at the same time I'm also a.

The lever in our technology and the engineers that have developed it so better or worse is hard to necessarily judge what I will say and I really bring it back to the things that matter the most to two positions, but most patients.

The three things that I highlighted.

Safety is first the product has to be safe.

Without that.

Ran into all kinds of topics and issues and so on so safety.

The safety profile of these products has been extraordinary.

And that that I think is one of the things that that shows up in our data, but also shows up in.

And talking to physicians about it the second is speed.

No one everyone in interventional business knows the longer Youre doing something the worst hit.

The best thing is it works really quickly and Youre done.

And the speed profile of these is really unparalleled.

Of anything we've ever done or anything that's ever been on the market and then the final point is simplicity.

It has to just be easy simple to use.

You put the one product and you don't have multiple things or tool and thats been something that people have really responded to so again that is sort of our mantra that's our guide.

We want to make it safe we want to make have speed and we have it simple.

And.

Having that baseline now with our current CVT products and knowing that we can even build on that.

Given us extraordinary <unk>.

Confidence, but also.

A lot of energy that the next period of time, it's going to be.

Really rewarding for us.

Okay.

Okay.

And our next question comes from the line of Mike Matson. Your line is open.

Yes. Thanks.

Wanted to follow up on that question about the 200 customer accounts.

How many of those were not previously a number of customers.

Yes, that's actually a great question.

<unk>.

I don't I cant with the exact specificity.

Give you that number I can tell you.

That I I know that way more than half.

The majority of those 650 accounts in the majority of the following 600.

Our new customers there might be a handful of existing customers in there.

But the vast majority are new customers.

Okay. Thanks, and then.

The one thing that surprised us in 'twenty three was just the strength on the neuro side I mean, clearly Bachelor it looked like it was going to do well given the product cycle, but.

Thunderbolt been delayed so what I'm wondering is looking into next year.

Do you have anything new coming in neuro to kind of help.

What drives the growth there in 'twenty four.

Yes.

I'll start with we always have new products and in both fields narrow as well I'm not going to comment on them the core technology.

Is right now read 72 ascended.

Scott a long way to go to continue to drive that.

Growth.

We're continuing to.

Just this week I heard of a physician who had tried it.

Typically hadn't been using our aspiration catheters.

<unk> was particularly blown away.

By how well tracked so I think we won yet another customer over so that's going to drive our success for a while because again if you can't get the catheter. There then thunder.

<unk> doesn't matter you have to have it be so easy to get there that you're excited to use thunderbolt. So I think the timing on Thunderbolt.

Is is really sets us up so that we can use.

The time next year to really continue to get in to more and more accounts, which as you said, we have done pretty well. This year, we've taken back significant share as I said in my prepared remarks, we're now.

And our estimate over 55% of the stroke aspiration catheter market and it's kind of a notable thing that we're competing with 28 other catheters.

So usually when you have that many products all competing.

You don't have a dominant player if you will and the fact that we are as a testament to the success. We've had this year with Red 72 incentive and I don't think that will stop and I think we will continue with that.

Mike Good question, the only thing I would add this is Jason as you saw with the U S stroke business had another really strong quarter double digit growth this quarter of 20%.

As you know, we don't have yet that product launching anywhere outside the U S.

Other thing I would I would just note as you're hearing us talk about.

Thrombectomy.

Globally, which include stroke, obviously would be thrombectomy head to toe.

These are we the embolization and access businesses. So I think what youre going to see continue to see us thrombectomy, including stroke, but obviously vascular thrombectomy as well lead our growth. So just pointing that out as youre asking about neuro versus vascular I think while we're talking about more is is thrombectomy.

This vision embolization and access.

Okay got it thank you.

Yeah.

Okay.

Your next question comes from the line of Matthew O'brien. Your line is open.

Hi. Thank you. This is the name of that one for Matt.

A couple from us.

First.

Okay.

On the expected robust growth for Dropbox Humana at 40% how.

How much could you attribute that Q, maybe an easier pre slash comp versus expectations for sequential growth.

Yeah. So very good question. Thank you for it we continue to expect.

Very good sequential growth as well.

The comps.

Comps aside we're growing significantly faster regardless.

And then then I think folks expected in thrombectomy generally and of course relative to the market.

That's happening both year over year and sequentially.

Okay. Thank you. So a question about the backs then thank you for all the detail there.

Just wondering.

Can you provide any more detail on maybe how many of those back Sir.

Kind of double counting for both blacks ample birthdays at Ingalls flash or different think golf ball.

So that's a really good question and I apologize for maybe not clarifying the way we talked about him is each one is a separate.

Accounts. So it's possible for example that in the 650 accounted I said have gotten vac approval, but have not yet ordered because theyre going through the supply chain process and will soon.

All of those you might have one hospital.

But two I counted twice, because it's bolt and flash.

Sometimes this.

Same physician is using both products, but in other times, they're not because as you know there is interventional cardiologists vascular surgeons interventional radiologists.

Who share this in some specialized in certain parts of the body and others don't so.

Many of those.

One hospital, but to submission.

<unk> separate people.

Who are advocating for those products. It's just a different process. So it's not all lumped in as one that's why we count them separately.

Again, if you'd like to ask a question press Star then the number one on your telephone keypad. Our next question comes from the line of.

Covid risk Scott Your line is open.

Hey, guys.

For taking the questions I just wanted to start maybe on the narrow thrombectomy segment I think maybe the comps there were a little bit.

Tougher year over year and the numbers came in a little bit below maybe what we were expecting obviously higher on the peripheral vascular side, but just wondering if theres anything.

You'd want to call out just on the neuro thrombectomy surround that you talked about then that getting into position of extending the market taking share maybe having a little pricing benefit there, but just wondering on a cadence basis.

Year over year sequentially.

And if there's any color you can provide there.

Yeah. Thanks, David This is Jason.

Our neuro business achieved our expectations during the quarter and the team really executed quite well, especially in the United States. So.

In the United States, the neuro franchise grew 17% year over year.

I think we've been articulating for them at the beginning of the year that we expected our vascular business to grow above our total company guidance range, which of course has come up from a $1 billion to where it is today throughout the year and we said neuro would grow below this range since we don't give specific guidance by franchise.

Generally models may have not accounted for this guidance, perhaps because the neuro growth was higher in the first half of the year, but we fully anticipated neuro growth internationally in the second half of the year would face more seasonality and lower growth in some distributor markets, which is why we do.

And with the guidance context at the beginning of the year that we did so overall, we are quite proud of the progress in our neuro business and continue to expect the new products, we have with Sandy and Thunderbolt eventually will fuel our future growth.

Okay, Great helpful. And then maybe just sticking on that point, taking a step.

Backlog as you may know that newer products put you in the share gain position. When we think about just the overall, maybe either U S or worldwide neuro thrombectomy market I know maybe earlier in the year, we saw kind of some of these trials reading out and turn it back to me specifically about you know maybe expanding the market towards some of the large core embark sized patient more distill occlusions.

Wondering from a higher level, you know more macro perspective, if the neuro thrombectomy market itself outside of Penumbra is re accelerating re expanding or if those are opportunities to drive further growth.

Going forward.

Yeah.

Adam I think that's a really important question. So I appreciate you raising it I think that opportunity.

Particularly on the trials, whether they're looking at.

The core impact parked in saying we could treat.

A lot more of the patients that we thought we could treat.

Is a really huge development.

We haven't called that out.

Specifically, because we want to wait and see that that's what behaviors happening in sustainable form before we sort of get too excited about it.

But I don't disagree with you I think from everything I've heard and all the conversations I've had with neuro physicians that is a real likely possibility is relatively new.

Certain summertime.

So to talk about it as a clear.

Happening trend touch early but I think all the conversations that led to believe that that could grow the market. Obviously, so far given the timing of those.

The gains we've seen had been share based but yeah, I mean, I would be delighted for patients. If we can treat more and more patients and they can get better.

Obviously that would have a very very positive impact on the neuro part of our thrombectomy business.

Okay, great, Thanks, and congrats on the quarter.

Thank you.

Yeah.

And your next question comes from the line of shifting insane. Your line is open.

Oh, great. Thank you so much Adam I was hoping you could provide your views on <unk> one just related.

Related to <unk> clinical data that is studying <unk> in fact with <unk> disease.

<unk> and study completion date.

Until mid 2024, but we have seen.

And in fact on stocks in the Med Tech World just on top line Readouts that have come out before so just anything you can you can share with us a hurdle to instill confidence.

<unk> space.

Yeah. Thank you for that question obviously it is.

Been a topic.

In the investment World less obviously in the physician community directly.

Look there is.

We're at a health care company, we obviously are applied any innovation of whatever form that it can.

People.

Healthier and feel better.

That being said if you look at just the sort of factual statement obesity. For example is not a direct causation of thrombus formation.

It is a risk factor there are lots of risk factors.

Agent.

<unk> 'twenty.

20, plus risk factors.

It is not one of the top risk factors EBIT.

But that being said.

You were to look at that I can say.

Maybe you could have.

A several percentage point impact in the long long run in the number of patients that have clot, which I'm not willing to necessarily continue but that if it did happen it.

It wouldn't be a material question as it relates to our numbers because we are less than 10% penetrated in our market.

And by the time, we were experiencing that.

Would be many many years, if not decades away the other analogy.

And I think for folks who are in stroke or cardiovascular disease of any kind.

Is really looking at statin.

Eight plus years ago.

Held a huge promise and obviously they've been.

Valuable.

Dave.

There they become widely adopted.

Use of them.

Very commonplace the prices come way way down to very very affordable.

Hasn't in any form is helped in certain things, but it hasnt changed.

At all the number of patients who have clot in their body. It just hasn't.

So notwithstanding the other benefits that it has broad it hasn't lowered the number of patients with partner body at all so I think from a.

Are we going to be necessary.

As a company.

Our innovative products continue to be used at the scale.

We have the ambition around I think the answer is pretty clear.

We'll be.

Got it that's really helpful and just as a follow up I wanted to get some color on the plus 20% growth that you've called out in 'twenty four should we think of that as a base case.

We Havent entered 2024 and then also.

Oh, so you're exiting the year at 28% to 31% growth in Q4, so what does that imply for 'twenty four and.

The plus 20% being being obese Keith let's take just any color there would be helpful. Thank you for taking my questions.

Yes look I don't want anyone to misinterpret, what I've said, what I said at the Investor Conference in September was that 20% plus growth was achievable and then reiterated that I strongly believe that today.

I also said please give us that.

Courtesy in time again, not trying to hide anything not trying to this is all of that.

Get through this year and do what we traditionally do is give formal guidance with the exact numbers.

On our next quarterly call again.

Again, please don't read into that that that somehow anything other than than commenting of reiterating what I've already said.

No fair enough. Thank you so much.

Thank you.

Your next question comes from Citigroup. Your line is open.

Thank you very much Joanne winch and I apologize if you've addressed this at work.

Was there any stocking in the quarter and can you comment a little bit on what youre seeing in terms of it looks like there is some euro weakness.

And how that happened U S versus O U S.

Yes, let me address the stocking.

Correct.

Quickly address that earlier, so I'll do it quickly we don't typically do stocking.

Our initial orders are.

One or two units at the most.

Just to get people started.

So that was that's not part of our business model.

And it Hasnt been Jason can address yes, neuro question, which Julian has already asked as well, yes, it was but I'm happy to go through it.

As I mentioned, just a little earlier and I apologize for the rest of the people on the call just for going over this again, but.

Our neuro business actually achieved.

Achieved what we expected it to in the quarter. It executed very well so just to give you a bit more context to the neuro franchise grew 17% year over year and if you remember we articulated earlier in the year and in fact at the outset of guidance that we expected vascular growth writ large to be higher than <unk>.

Average growth in neuro would be lower and we sort of I think we got some pushback to that after the first half of the year, because neuro was stronger, but we understood. The cadence of our business. We understood that we were going to see more seasonality and distributor variances in our <unk>.

Narrow business internationally in the second half of the year, which is why we stuck with that.

And of course, since we don't guide to.

Specifically to neuro grows this in vascular grows that I.

I think models just didn't maybe account for that but in our view.

Neuro business in neuro team is doing exceptionally well.

Yes.

Okay.

And there are no further questions at this time Ms Hamlyn Harris I turn the call back over to you.

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 fourth quarter results.

Okay.

This concludes today's conference call you may now disconnect.

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