Q4 2024 Penumbra Inc Earnings Call
Good afternoon. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra's fourth quarter 2024 conference call.
All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session.
If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.
Speaker Change: If you would like to withdraw your question, again press star 1. Thank you. I would like to introduce Ms. Cecilia Furlong, Business Development and Investor Relations for Penumbra. Ms. Furlong, you may begin your conference.
Thank you.
Speaker Change: Thank you, operator, and thank you all for joining us on today's call to discuss Penumbra's earnings release.
for the fourth quarter and full year 2024.
Speaker Change: A copy of the press release and financial tables, which includes a gap to non-gap reconciliation, can be viewed under the Investors tab on our company website at www.penumbrainc.com.
Speaker Change: 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.
Speaker Change: 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 31st, 2024, which is scheduled to be filed with SEC on February 18, 2025.
Speaker Change: including the $10K 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.
Speaker Change: Penumbra disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments, or otherwise.
Speaker Change: On this call, Q4 2024 and full year 2024 financial results are on a non-gap basis.
Speaker Change: Non-Gap Revenue, Gross Profit, Gross Margin, Operating Income, and Operating Margin exclude a $5.8 million reserve pertaining to Italian payback legislation.
Speaker Change: Non-recurring litigation expenses of $4.8 million and amortization of finite lived and tangible assets of $4.8 million. The corresponding GAAP measures and reconciliation of GAAP to non-GAAP financial measures are provided and are posted press release.
Speaker Change: Adjusted EBITDA for Q4 2024 and full year 2024, respectively, excludes the Italian Payback Reserve.
One-time Immersive Healthcare Impairment Charges.
Speaker Change: Immersive healthcare wind-down expenses, non-recurring litigation-related expenses, stock compensation expense, depreciation and amortization, provision for income taxes, and interest income expenses.
Speaker Change: Adam Elsesser, Penobra's Chairman and CEO, will provide a business update. Maggie Yuen, our Chief Financial Officer, will then discuss our financial results for the fourth quarter and full year 2024. And Jason Mills, our Executive Vice President of Strategy, will discuss our 2025 guidance.
Adam Elsesser: With that, I would like to turn over the call to Adam Elsesser.
Thank you.
Thank you, Cecilia. Good afternoon.
Speaker Change: Thank you for joining Penumbra's fourth quarter and full year 2024 conference call.
Adam Elsesser: In the fourth quarter, we generated revenue of $321.3 million when excluding the Italian payback adjustment, representing underlying year-over-year growth of 12.9% on an adjusted basis and 13% on a constant currency basis.
Adam Elsesser: Our U.S. thrombectomy business continued to lead our growth, with our comprehensive and proprietary CAVT portfolio delivering another dominant performance, gaining momentum throughout the quarter and exiting the year in a strong position.
Adam Elsesser: Fourth quarter U.S. thrombectomy sales increased 27.3% year-over-year to $180.6 million with our U.S. VTE franchise delivering robust year-over-year revenue growth of 41%.
Adam Elsesser: The balance of our U.S. thrombectomy franchise continued to perform very well in line with our expectations.
Our fourth quarter capped it.
Adam Elsesser: An overall solid 2024 performance, with full-year revenue increasing 13.4% year-over-year to over $1.2 billion, and our U.S. thrombectomy business delivering revenue of $646.7 million.
26.8% increase versus 2023.
During the year, we evolved and expanded our commercial team.
Adam Elsesser: concentrated and enhanced our focus on our interventional business via our exit from immersive health care and invested in generating high quality clinical and health economic data to further support and highlight CABT's value, all while continuing to prioritize innovation.
Adam Elsesser: We introduced nine new products to the U.S. commercial market, including the new CAVT products, Flash 2.0, Lightning Bolt 6X with tracks, and Lightning Bolt 12.
Adam Elsesser: Internationally, we expanded CABT's footprint into Europe and additional OUS geographies and took steps to optimize our geographic presence to support long-term growth and profitability.
Adam Elsesser: At the same time, 2024 also demonstrated the strong profitability profile of our business.
Adam Elsesser: In the fourth quarter, gross margin of 67.4 percent expanded 170 basis points over the prior year period, while operating income of $48.6 million.
Adam Elsesser: or 15.1% of revenue increased 200 basis points over the prior year period. In the quarter, we generated $49.1 million in operating cash.
Looking forward.
Adam Elsesser: We are on track to achieve a gross margin profile over 70% by the end of 2026, which is consistent with the timeline we previously communicated, and we expect operating margin expansion to outpace gross margin expansion for the foreseeable future.
Adam Elsesser: In addition, we recently signed a contract to build a manufacturing facility in Costa Rica for efficiently expanding our manufacturing capacity.
Adam Elsesser: Therefore, we are well positioned, leveraging favorable product makeshift, operating efficiencies, and disciplined spend to continue to increase our profitability and operating cash flow going forward.
Turning to our U.S. peripheral business.
Adam Elsesser: Lightning Flash 2.0 continued to lead overall growth in the fourth quarter with its competitive benefits versus analog technologies.
Adam Elsesser: namely the speed and safety with which flash 2.0 removes blood clots in VTE patients.
Adam Elsesser: driving expanded position interest and adoption as well as broader and deeper account penetration.
Adam Elsesser: In the quarter, we also commence the commercial rollout of Lightning Bolt 12, introducing our proprietary modulated aspiration technology to the venous anatomy and larger arteries, offering the latest generation CAVT solution for these vessel sizes.
Adam Elsesser: Initial feedback has been very positive and we look forward to continuing to roll out the technology on a broader scale in 2025.
Adam Elsesser: Overall, our U.S. VTE franchise continued to gain momentum and market share throughout the fourth quarter, with December representing our highest month of VTE procedure volumes ever.
Adam Elsesser: In our U.S. arterial business, Lightning Bolt 7 delivered another strong performance.
supporting sequential growth acceleration in our arterial franchise.
Adam Elsesser: Lightning Bolt 6X provided initial contributions in the fourth quarter with Bolt 6X's commercial introduction expanding our arterial focused CAVT portfolios reach to smaller vessels including arteries that are below the knee.
Adam Elsesser: While early feedback on BOLT6x and our increasingly comprehensive arterial CABT portfolio is positive,
Adam Elsesser: And looking to 2025, we view a meaningful opportunity for the combination of BOLT 7 and BOLT 6X to accelerate physician conversion from open surgery or the use of lytics to CAVT.
Adam Elsesser: Similar to our venous business, in December, we treated more patients in the U.S. suffering from arterial clot than in any prior month.
Adam Elsesser: The proprietary mechanism of our CABT technology consistently removes blood clots faster and safer than analog technology.
Adam Elsesser: That said, we are in the early stages of reaching and treating the over 800,000 patients annually in the U.S. who suffer from VTE and arterial clot.
Adam Elsesser: as well as the even greater number of patients internationally with venous and arterial clot burden. To further expand CABT's reach and ability to treat a greater number of patients, we commenced what we refer to as our Market Access Initiatives.
Adam Elsesser: These initiatives are focused on increasing awareness, not only of CAVT's clinical benefits, but also of the economic benefit to hospital systems.
Adam Elsesser: This past November, during a late-breaking session at the VIVA conference in Las Vegas,
Speaker Change: Dr. Parag Patel presented the first public view of some of the results of our market access initiatives.
Speaker Change: The Retrospective Outcomes Analysis presented by Dr. Patel looked at intermediate-risk PE patients treated with either CABT or anticoagulation, catheter-directed lytics, or other forms of mechanical thrombectomy.
Speaker Change: The data demonstrated that compared to other treatment modalities, treatment with CAVT resulted in a reduction in composite complications, as well as a significant improvement in the economics.
for Hospitals.
Speaker Change: We intend to continue to update our analysis to reflect the benefits of our latest generation CAVT technologies and look forward to highlighting FLASH 2.0's outcomes in the future.
Speaker Change: Looking ahead, we are scheduled to present additional data sets focused on CAVT's utilization in DVT and arterial patients at a major medical conference in the next few months.
Shifting to our neurovascular business.
Speaker Change: Our U.S. stroke thrombectomy business once again posted strong results with revenue accelerating versus the third quarter.
For the full year, our market leading.
FDA-cleared aspiration portfolio.
Speaker Change: led by REDD-72 with our proprietary SEDA technology and REDD-43 alongside REDD-62, REDD-68 and REDD-72 grew nearly 20% versus 2023, well ahead of underlying U.S. stroke growth market growth.
Speaker Change: We enter 2025 as the dominant market leader, and looking forward, we are preparing to bring Thunderbolt.
Speaker Change: our proprietary CAVT technology to the neurovascular field. Follow-up in our Thunder trial completed as expected in late December, and we will provide additional future updates as appropriate.
Speaker Change: We have seen the benefits our proprietary BOLT technology delivers to patients with peripheral vascular clot, specifically the speed with which the technology can extract a range of clot morphologies in a safe and simple procedure.
Speaker Change: We are excited to bring this technology to the neurovascular field, ushering in a new chapter in the treatment of stroke and further enhancing our market-leading position in the field of stroke thrombectomy.
Speaker Change: We enter 2025 with significant momentum behind our CABT technology portfolio. With CABT, we're driving a shift from analog to digital.
Speaker Change: We are positioning our organization to be able to intensely focus on the meaningful thrombectomy opportunity ahead for CABT, while also augmenting our leadership position in both embolization and access through additional innovation and commercial focus.
Speaker Change: As we demonstrated in 2024, we will continue to drive gross margin expansion and operating efficiencies and deliver increasing profitability, while investing aggressively in innovation, clinical and health economic data, and our commercial team.
Speaker Change: to expand and strengthen our position as the world's leading thrombectomy company.
Speaker Change: I'll now turn the call over to Maggie to go over our financial results for the fourth quarter and full year 2024.
Maggie Yuen: Thank you, Adam. Good afternoon, everyone. Today, I will discuss the financial results for the fourth quarter and full year of 2024.
Financial results on this call are on a
which excludes the adjustment highlighted by Cecilia.
Maggie Yuen: including the $5.8 million reserve pertaining to the Italian government's legislation requiring medical device companies to contribute to any deficit created by Italian budget overspending on medical devices from 2015 to 2023.
which was recently upheld as constitutional by the Italian courts.
Maggie Yuen: Given that this amount related to prior years, we have normalized for this amount when calculating our anticipated revenue growth rates for 2025.
Maggie Yuen: The corresponding GAAP measures and our reconciliation of GAAP to non-GAAP financial measures are provided in our post-depress release.
Maggie Yuen: For the fourth quarter ended December 31st, 2024, our total revenues were $321.3 million, an increase of 12.9% adjusted and 13% in constant currency compared to the fourth quarter of 2023.
Maggie Yuen: Our geographic mix of sales for the fourth quarter 2024 was 77.2 percent U.S. and 22.8 percent international.
Maggie Yuen: Our U.S. region reported growth of 21.7%, driven by 27.3% growth in our thrombectomy franchise.
Maggie Yuen: Our international regions decreased 9.4% adjusted, and 9.1% in constant currency, primarily due to a decline in China revenue of $15.4 million, partially offset by an increase of $7.8 million in all other international regions.
Maggie Yuen: The sequential growth in our total revenue of 6.7% was primarily driven by an increase in U.S. thrombectomy revenue of $18.6 million and relatively flat revenue internationally.
Moving to Revenue by Products.
Maggie Yuen: Revenue from our global thrombectomy business grew to $222.7 million in the fourth quarter of 2024, an increase of 16.8% adjusted and 16.9% in constant currency compared to the same period last year.
Maggie Yuen: Our U.S. growth of 27.3% is primarily due to strong growth in both vascular and numeral thrombectomy.
Maggie Yuen: Our international business declined 13.9%, primarily driven by a decrease in China revenue of $15.8 million, partially offset by an increase in all other international regions as compared to the same period last year.
Maggie Yuen: Revenue from embolization and access business was $98.6 million in the fourth quarter of 2024, an increase of 5% adjusted and 5.1% in constant currency, which is in line with our expectation and primarily driven by an increase in the US.
Maggie Yuen: Gross margin for the fourth quarter of 2024 is 67.4%, compared to 65.7% for the fourth quarter of 2023, which represents a 170 basis point improvement driven by favorable thrombectomy product mix across all regions and strong productivity improvements.
Maggie Yuen: Sequentially, we had an 80 basis point improvement in our gross margin, which reflects higher thrombectomy product mix due to new product launches and favorable regional mix.
Maggie Yuen: Total operating expense for the quarter was $167.9 million or 52.3% of revenue compared to $149.6 million or 52.5% of revenue for the same quarter last year.
Maggie Yuen: Our research and development expenses for Q4 2024 were $20 million or 6.2% of revenue compared to $21.9 million or 7.7% of revenue for Q4 2023.
Maggie Yuen: SG&A expenses for Q4 2024 were $147.9 million or 46.1% of revenue compared to $127.7 million or 44.8% of revenue for Q4 2023.
Maggie Yuen: We recorded operating income of $48.6 million or 15.1% of revenue compared to an operating income of $37.4 million or 13.1% of revenue for the same period last year.
Maggie Yuen: We posted adjusted EBITDA of $63.7 million, or 19.8% of total revenue, compared to $53.4 million, or 18.8% in the fourth quarter last year.
Maggie Yuen: For the full year 2024, our total revenue was $1.2 billion, which represents an increase of 13.4% adjusted and in constant currency compared to full year 2023.
Maggie Yuen: Our geographic mix of sales in the year were 75.1% U.S. and 24.9% international.
Maggie Yuen: For the full year 2024, U.S. reported growth of 19.1% was primarily driven by growth from alveolar thrombectomy business.
Maggie Yuen: while our international regions decreased 1% adjusted and 1.1% in constant currency primarily due to a reduction in China revenue of 39.5 million dollars
partially offset by an increase in all
Maggie Yuen: Revenue from our global thrombectomy business for the full year of 2024 was $818.1 million, an increase of 20.8% adjusted and in constant currency.
Maggie Yuen: Revenue from our global ambulization and access business for the full year of 2024 was $382.3 million, an increase of 0.3% adjusted and 0.2% in constant currency.
Maggie Yuen: Our gross margin for the year was 63.4%, which includes a one-time $33.4 million immersive health care inventory write-off compared to 64.5% of revenue for the full year of 2023.
Maggie Yuen: In 2025, after removing this one-time item, which had a 280-basis point impact to our gross margin in 2024, we target at least 100-basis point expansion in gross margin to over 67% for full year 2025.
Maggie Yuen: This reflects continued favorable thrombectomy product mix, productivity improvements, and investment to support new product launches.
Maggie Yuen: We had operating income for the full year of $106.6 million, which includes a one-time $33.4 million immersive health care inventory write-off compared to operating income of $101.3 million for 2023.
Maggie Yuen: and to provide an update on impact of winding down the immersive health care business.
Maggie Yuen: We had GAAP operating expense savings for 2024 of approximately $16 million, and we are still on track to create GAAP operating expense annualized savings of approximately $40 million.
Maggie Yuen: Our adjusted EBITDA in 2024 was $171 million or 14.2% of total revenue compared to 16.1% last year.
Maggie Yuen: Looking forward to 2025, as Jason will discuss soon, we forecast operating margin to expand to a range of 13% to 14% of total revenue.
Thank you for joining us.
Maggie Yuen: Turning to cash flow and balance sheet, we ended the fourth quarter with cash, cash equivalents, and marketable securities balance of $340.1 million and no debt.
Maggie Yuen: which is an increase of 49.1 million dollars sequentially driven by strong operating profitability and improvement in working capital management.
Maggie Yuen: We expect positive operating cash flow trends to continue in 2025 and beyond.
Maggie Yuen: And now I'd like to turn the call over to Jason to discuss our 2025 guidance.
Thank you, Maggie, and good afternoon, everyone.
Maggie Yuen: Consistent with our guidance philosophy communicated on our second quarter 2024 earnings call, our total revenue guidance for 2025 is a range of $1,340,000,000 dollars
Maggie Yuen: to $1,360,000,000, which represents year-over-year growth of 12% to 14% compared to 2024 GAAP total revenue.
Maggie Yuen: For our U.S. thrombectomy business, we expect growth in the range of 19% to 20% year-over-year.
Maggie Yuen: Moving down the income statement, we expect both gross margin and operating margin to expand in 2025.
Maggie Yuen: For gross margin, after excluding the one-time expense Maggie described earlier, we forecast at least 100 basis points of expansion in 2025 to more than 67% for the full year.
Maggie Yuen: On the operating margin line, we expect expansion to 13 to 14 percent of total revenue for full year 2025, compared to operating margin in 2024, which excludes the one-time expense previously described.
Adam Elsesser: Looking forward, as Adam said in his remarks, we are on track to achieve a gross margin profile over 70% by the end of 2026.
Adam Elsesser: which is consistent with the timeline we previously communicated, and we expect operating margin expansion to outpace gross margin expansion for the foreseeable future. This concludes our prepared remarks. Operator, we can now open the call to questions.
Speaker Change: At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.
Thank you for joining us.
Speaker Change: And your first question comes from the line of Larry Beagleson from Wells Fargo. Your line is open.
Larry Beagleson: Good afternoon. Thanks for taking the question and congrats on a strong finish to the year here. Adam, I had one on the guidance and one on Thunder. So I think you did 13.5% or 13.4% adjusted revenue growth in 2024. You're guiding to 12% to 14% in 2025.
Larry Beagleson: Why shouldn't we see an acceleration in 2025 given the one-time headwinds in 2024? Such as the delay, you know in the European launches some of the sales
Larry Beagleson: impact in China and Thunderbolt. So, how are you thinking about the guidance this year from a philosophical standpoint and getting back some of those headwinds we saw in 24? And I had one follow up.
Speaker Change: Yeah, Larry, thanks for the question, and I think it's an appropriate one.
Larry Beagleson: We tried to be pretty clear in giving that guidance that this was sort of in line with the philosophy that we talked about in the second quarter of not getting ahead of ourselves. So obviously there are a number of things that
Larry Beagleson: We don't yet totally control thunderbolt being your follow-up question one of them So we're not going to put that into the guidance until we have more information around that. So You're correct to
Larry Beagleson: acknowledge that we had a lot of headwinds last year that we got through and that we don't have most of them this year and we're going to, in our minds, guide appropriately so we don't get in the same trouble we got in last year.
That's helpful. And Adam, just my follow-up is on Thunder.
Speaker Change: How should we, it sounds like the follow-up is done, how should we think about the timeline for data readout, you know, filing and clearance, and as a follow-up, we did see three negative medium and distal vessel trials at ISC a couple weeks ago. What were the implications for Penumbra? Thank you.
Speaker Change: Yeah, so on Thunderbolt, we will definitely update you as appropriate when there's more information to update you on as to both, you know, when it gets
Speaker Change: and so on. It's just premature to do that and start to put
Speaker Change: As it relates to the distal trials, it was a little bit sort of deja vu, as you know those
Speaker Change: trials primarily used stent reavers and and the use of stent reavers in particularly distal vessels as a primary mechanism as opposed to an adjunct I for the most part not something that you know should be done primarily and and I don't think we were surprised
with that result. We've always talked about
Speaker Change: The opportunity really including just large vessel occlusions, which is the M1, not the more distal. I know people have had...
Speaker Change: great success using aspiration, particularly our smaller catheters, red 43 and 62 in some of those distal vessels. And I think, you know, that like everything particularly as we've watched
Speaker Change: Over 20 years in stroke, you know, this story is not written yet And and I think we'll see the constant move toward aspiration as the primary mechanism In part because it's just logical in part from studies like that
All right. Thanks so much.
Thank you.
Speaker Change: Your next question comes from a line of Robbie Marcus from J.P. Morgan. Your line is open.
Oh, great. I'll echo congratulations on a good quarter.
Robbie Marcus: I wanted to ask on the rest of the business, embolization and access, what you're seeing there. If I'm doing my math right, it implies flat to minus 5% sales growth in 2025.
Robbie Marcus: Just wanted to get a sense of what you're seeing there, U.S. vs. O.U.S., and how to think about what's driving the guide for 2025. Thanks a lot.
Robbie Marcus: That is an incredibly important part of our business. We're very proud of it.
I think you heard in my prepared remarks.
Robbie Marcus: that we're not done innovating in those areas and I think that will be something that we'll watch and focus on as the year progresses.
Robbie Marcus: And also, as we've gotten bigger and our interest in the CABT has expanded so dramatically, we need to make sure we have the ability to focus, and I use that term very particularly. So I think there are a lot of opportunities, particularly in the U.S.
Robbie Marcus: in the short term to continue to see that grow. By definition, last year we did...
Robbie Marcus: a little bit of retrenching we specifically said in markets where we weren't successful and we're going to sort of go into the areas and double down on areas where we can be more successful internationally as well. There's a lot of demands and
with the ability to...
Robbie Marcus: particularly for non-U.S. markets, but you know, U.S. markets, if appropriate.
as we expand our manufacturing facility.
Robbie Marcus: into Costa Rica, there's an opportunity to to have a cost basis that that is also more appropriate for some of these markets as well.
Great. Thanks a lot, Adam.
Thank you.
Speaker Change: Your next question comes from a line of Margaret Kazor from William Blair. Your line is open.
Speaker Change: Hi, everyone. This is McCaulay on for Margaret tonight. Thanks for taking our questions. So wanted to follow up around the question on guidance and appreciate the comment on US throm specifically, but just given the 41% VTE growth in the US we saw this quarter, just wondering if you can help parse out, you know, what that includes either for vascular versus neuro and know that that that does not include thunderbolt.
Speaker Change: both launch, or just any commentary focusing on vascular in particular between PE, DBT and arterial in the U.S.
Thank you.
Yeah.
Speaker Change: Look, the guide is a holistic guide for all of the businesses. We don't break it out by, you know, each segment in the form of a guide.
But obviously, given...
how we exited 2024. We're feeling particularly confident.
Speaker Change: about the markets where CAVT is driving that growth. And that's the focus, obviously, that you saw the outsized number, the 41% in the VTE business.
You know it
Speaker Change: We also have a fairly tenacious competitor in that market and we still were able to have that kind of growth because
Speaker Change: the product gets the clot out faster and safer. We've said that for a bit. All products are not the same. You can't just have one and be part of the market. You have to have something that does it as well as the current.
best in class and I think that's
Speaker Change: pretty clear right now that CABT, you know, is making that mark.
Speaker Change: So, by definition, you know, as we look out, we're going to be careful not to get ahead of ourselves. We're not going to, you know, how much more share is there, how much...
Speaker Change: market growth is there you know and we're going to watch all of those things on a quarterly basis and we'll update them as appropriate but obviously we we want to be appropriate as we start the year with our current guide.
understand and then maybe just as a follow-up wanted to
Speaker Change: or saw there was an update to the REDD-72-510K status the other day, and Adam, can't help but notice you emphasize the FDA cleared aspect in your script. So, was there any modification made to the catheter there, I guess?
Speaker Change: bigger picture what should we expect from that pipeline of catheters moving forward.
Speaker Change: Yeah, I think it's a fair question. I'm glad that you picked that up.
Speaker Change: We are constantly improving our products. You know, that has been the hallmark of our success for the better part of 20 years. We've never sort of said we're done. And REDD 72 was launched, you know, now what?
Speaker Change: three, four years ago. I've lost track of time. And so it's natural that we would update that catheter with technology that we've developed as we've developed additional catheters.
Speaker Change: So this is just making the REDD-72 that much more trackable.
Speaker Change: We just got cleared at the end of last week. We've already done I think roughly half of our evaluation cases in the short period of time and we'll give more information as we go but
Speaker Change: obviously having a suite of catheters that contract to the clot.
faster and better than anything else on the market.
Speaker Change: When it gets cleared, it puts us in a position for being able to help the maximum number of patients.
Speaker Change: that we can help. And you combine that with the best in class sales team and I think we're gonna have a pretty good opportunity to have additional impact this year with our stroke business.
Speaker Change: Sounds good. Thanks for taking our questions and congrats on the quarter again.
Thank you.
Speaker Change: Your next question comes from a line of Peto Chickering from Deutsche Bank. Your line is open.
Hey guys, good afternoon. Thanks for my questions.
Speaker Change: Looking at the U.S. Threat Big Guide here, 19-20%, you know, end of the year, obviously, 27%. How should we think about the seasonality of that growth?
Speaker Change: you had in 2024. Your fourth quarter exit rate was such a high number that if we straight line that growth, it's almost flat sequentially, which we haven't really seen that since you launched and you talked about how strong December was.
Speaker Change: Yeah, let me start and Jason can speak to sort of the rhythm a little more. There's always a combination of seasonality based on
Thank you.
Speaker Change: I mean, we've always sort of seen the fourth quarter, maybe it's the stress of the holidays and so on. For example, the stroke business goes up and things like that. That being said, you know, we've also overlaid various launches, and obviously we haven't talked about launches in timing for 2025, but that changes
Speaker Change: Again, the ability to just straight line things out and run it out. And then you also add the thing I alluded to in the answer to the last question that
that as you are taking SHARE, whether it's in Stroke...
Speaker Change: or in VTE, that share doesn't come, you know, in an even way, you know, it sort of comes in.
Speaker Change: and then sort of, you know, pause, and then you take more, and we've seen that for many, many, many years. With that sort of as a baseline,
Speaker Change: can add some color to that. Yeah, Peter, thanks for the question. As you can see, the fourth quarter was the biggest quarter in terms of...
Peter: sequential growth in the U.S. thrombectomy business and on a year-over-year growth perspective, as you can also see, it was one of the fastest. It was an outstanding quarter from a U.S. thrombectomy, which sets up...
Peter: the fourth quarter of 2025, just in those terms to be the most, you know, challenging cop, which...
Peter: you can probably start in the beginning of the year at the midpoint or better and then the fourth quarter can reflect the fact that we don't have thunderbolt in our guidance and can be you know sort of at the midpoint or lower so more of a front-end loaded year from the standpoint of the growth guidance we gave.
Okay, and then sticking with that 27% growth this quarter.
Peter: in the quarter, and we'll be reading about 2025 in terms of...
Peter: U.S. thrombectomy in terms of pricing versus volume within the guidance range. Thank you. Yeah, at this stage, we're several years into this, it's almost all, it's volume. It's volume. There's not a pricing element now.
Speaker Change: Great, thanks so much. And that's why I went out of my way to say this, you know, that we ended the year with the strongest case volume we've ever seen both in VTE and in arterial.
Thank you.
Speaker Change: Your next question comes from a line of Bill Plebenek from Canaccord. Your line is open.
Great, thanks. Good evening and thanks for taking my questions.
Bill Plebenek: Just first up on Thunder, I just wanted to clarify, one, have you submitted to the FDA, two, have you had discussions with them yet, and three, are they asking for any additional information, including any additional clinical studies? Just trying to figure out where we're in the process. Then I have a follow-up.
Bill Plebenek: Those are a good series of questions. I'll make it easy. We have not yet submitted.
So therefore, we have not had any of those conversations.
Okay. Again, again, you know, just...
Bill Plebenek: Less than a month plus ago, we finished the trial and got all the data, and obviously it takes a little bit of time to get that organized and adjudicated, and you know, there's a process there, so the fact that it could be ready earlier than that would mean you were obviously skipping a step along the way, which we obviously don't do.
No, thank you. And then just on R&D...
Bill Plebenek: kind of the R&D spend nominally and, you know, should we use this as a base point going forward and expect most of the leverage off of this in terms of operating margin expansion? Thanks for taking my question. Yeah, I mean, I think it was pretty clear that we're, I think I used the term we're going to aggressively invest in innovation. So R&D
spend changes quarter by quarter depending on what
Bill Plebenek: on the docket, whether we have certain types of testing or certain, you know, this and that. And so you're going to see that move around.
Bill Plebenek: based on the work that's in front of us, not by some kind of sort of organized or sort of artificial.
Bill Plebenek: Spend Budget. So I wouldn't read anything into the quarter per se. Our general spend has been a pretty accurate way to read it and
Bill Plebenek: I think everyone would agree we, launching nine products last year, you know, we have a pretty efficient R&D department and a team that can continue to innovate incredibly effectively and at a decent amount of
Bill Plebenek: But we are not going to back away from that. There is a lot of innovation ahead. I think we have years of continued innovation ahead of us. We won't get into the specifics, but we're going to not stop innovating for quite a while.
Bill Plebenek: And Bill, the only thing I would add to that is Maggie and her remarks mentioned the savings to date so far with the immersive health care exit and a very good
Speaker Change: and they are in R&D. We don't break out the investments on the interventional side vis-à-vis the investments we were once making in R&D and immersive health care. But suffice it to say, as Adam said in his prepared remarks,
Bill Plebenek: We continue to aggressively invest in innovation, obviously on the interventional side.
Thank you.
Speaker Change: Your next question comes from the line of Richard Newitor from Truist Securities. Your line is open.
Richard Newitor: Hi, thanks for taking the questions, congrats on the performance and the solid finish to the year.
Maybe, uh, I think, Adam, you had mentioned...
Speaker Change: Several new product launches and the ebbs and flows of when those hit can dictate quarterly performance. Can you just remind us?
Richard Newitor: You said nine launches in 24. How many are you thinking about in 25 and any direction on where those, you know, where those could could be value-add and fill the bag where there's an unmet need that you don't have today?
Yeah, I mean, I'm not going to.
Richard Newitor: Last year, you know, no one, we didn't start the year saying we're going to have nine launches.
Richard Newitor: And we don't even announce them. I think the three that were CAVT related, everyone knows, but the
The others
Richard Newitor: The other six, I don't think most people have focused on. They have had, you know, a very positive impact.
Richard Newitor: on our overall business as well. So we're not gonna go through that. The only one that obviously is possible on that list, we've talked about a couple of times already today, Thunderbolt of course, but the rest, we're gonna wait till we get those things, products cleared and then we'll be happy to talk about them.
Speaker Change: Okay, and just to be clear though, Thunderbolt is not needed to hit your guidance range. In other words, it's not explicitly... Thunderbolt, yeah.
Yeah, revenue for Thunderbolt is not currently in our guide
Thank you.
Speaker Change: I think it's a great product, not because we're not incredibly confident about
Speaker Change: where we stand on it, but because we don't totally control that process and because of that we're going to be careful so we don't have to change our guide based on something we don't control.
Speaker Change: Okay, thank you. And just one last one on Thunderbolt. Do we do we expect you to have this presented at a, you know, at a conference or just something that we could, you know, we could get press-released mid-year? Just how are you thinking about that?
Speaker Change: Clarence happened in a time when no one, you know, it's not right around that time. We would obviously not wait to present the data to launch the product, which means, you know, obviously there's a possibility of hearing about it before the formal presentation of the data.
Thank you very much.
Thank you.
Speaker Change: Your next question comes from the line of Matthew O'Brien from Piper Sandler. Your line is open.
Speaker Change: This is Samantha on format. Thank you for taking our question. There's a handful of clinical trials going on for aspiration-based thrombectomy devices, kind of both on the peripheral and the neuro side. You know, how are you thinking about enrollment in these trials potentially impacting sales growth in the near term or potentially, you know, helping grow the market in the longer term?
Yeah, um...
Speaker Change: They're not, there's a handful of them. I think you described it the right way.
It's not really an impact.
Speaker Change: on our sales, obviously. I think that was pretty obvious this quarter.
Speaker Change: I think, you know, when you actually speak to the physicians using a lot of those products, it sort of gives you the real story. And I think we'll focus, you know, we don't think that changes our strategy, changes our momentum or anything like that.
Thank you.
Thank you.
Thank you.
Speaker Change: Your next question comes from a line of Michael Sarkone from Jeffries. Your line is open.
Good afternoon and thanks for taking my question.
Speaker Change: I guess just to start, you know, China was a pretty big headwind in 2024, maybe 300 or 350 basis points. Could you just talk about, you know, what kind of assumptions you've got for China baked into the 2025 guide? Is it kind of stabilized from here? How are you thinking about that?
Speaker Change: Yeah, there's no question China, you know, as everyone's talking about it
Speaker Change: the market and what it means for U.S.-based medical device companies. Our deal that we outlined had a number of different
Speaker Change: elements to it but the the element that that mattered at this phase would have been sort of for the US-based or manufactured product.
Speaker Change: and that market you know really isn't isn't available for a while. There's a little bit of headwind at the beginning of the year but more than that I think we're we're sort of have that behind us and and again
I think if you think about...
what we've said and the opportunity we have.
Speaker Change: There are international markets that will matter a lot, and we've talked about those markets.
What Matters.
Speaker Change: you know, in terms of scale and growth that changes, you know, from.
Speaker Change: from year to year. And I think we've, to just remind everyone, we've been selling internationally for 18 plus years, and we have a pretty good knowledge of the international markets and what's viable and not. It's also why you're gonna see a continued outsized growth in the U.S.
Speaker Change: with the scale of patients. Again, 800,000 patients in the U.S. alone, more than, you know, 90% of the market available to us.
if we do the work that we outlined, which is...
Speaker Change: continued taking share and continued the market access work so we can grow the market through the hospitals doing the work necessary to make sure they're treating everyone that they can treat. When you add that together, I think, you know, we're in a really, really strong position for a number of years. And then the international markets.
Speaker Change: have been flowed based on sort of their own economies and all that as we go forward.
Speaker Change: Yeah, Michael, just to add to that, you're right. The headwinds just from China alone in 2024 were actually slightly greater than what you posed in your answer, and as Adam mentioned, we're going to see sort of the last headwinds of that in 2025, such that next year the headwinds will be de minimis to nothing.
Speaker Change: It won't be quite as much of a headwind in 2025 as 2024, but some some headwind especially in the first
Speaker Change: across businesses and the headwind from China again will land in the first half of the year so as it relates to the 12 to 14 percent guidance you'll see that hit in the first half of the year in terms of the year-over-year growth because of China.
Speaker Change: Got it. That's helpful. Thanks Adam and Jason. And maybe just for the follow-up.
You know, we've seen some M&A activity.
Speaker Change: in the space earlier this year, just wanted to get your sense on whether or not, you know, you're bracing for any change in competitive dynamics or if there's any potential disruption coming down the pike that you may be able to capitalize on. Thank you.
You know, I'm not going to sort of get into...
Speaker Change: particular tactics and things like that, you know, competitively on at this stage, I can tell you that generally overall
Speaker Change: We certainly welcome new ownership into the field, but it really doesn't have any change on our strategy or we believe our momentum in the field right now.
Great. Thank you, Adam.
Thank you.
Speaker Change: Your next question comes from a line of Ryan Zimmerman from BTIG. Your line is open.
Ryan Zimmerman: Hey, thanks for taking my questions. I want to ask about gross margins for a bit, just because, you know, doing the math, it does imply a pretty significant step up in 26 and gross margins to hit that 70% exit in 26.
Ryan Zimmerman: You know, help me understand, I mean, is that, is that just a...
Go ahead, or Maggie.
Maggie Yuen: Thanks for the question. Well basically there's no fundamental changes in our underlying drivers that you have seen this year. I mean majority of our margin expansion drivers came from product mix, from Bactimi product mix, and also regional mix.
Maggie Yuen: If you look back at 24, I mean, you have seen pretty good momentum in our sequential quarterly growth. We expect similar trend continue in 2025, and if you continue that momentum, I think you can see us reaching exactly at our target of 70% sometime in 2026.
Speaker Change: Okay but just to be clear Maggie that that is just a function of product mix that is not a function of any pricing strategies or anything else that you're contemplating to kind of you know get you that extra effort in margin in 26.
Maggie Yuen: No, not nothing. It is primarily product makes and of course I mean our operation team is has been very focused on leveraging our overhead spend and scaling our capacity so all those drivers will all together.
Speaker Change: It is between product mix and manufacturing efficiency that is driving it. It is definitely not price.
Okay, very clear.
Speaker Change: And then the second question, Adam, I guess I should directly say you.
Speaker Change: And similarly, that same question, you know, on market access, which is, you know, arguably underappreciated in how you're attacking kind of the market with the market access initiatives, but when do you expect the impacts of both of those dynamics to be felt from your efforts?
Thank you.
Speaker Change: Well, if you competed with us in VTE, you certainly felt it in the fourth quarter. I think that's pretty obvious. I think we've started that process.
Speaker Change: I've always said it's not linear and nothing in this field is. So I want to be very clear that it is not linear. That being said...
Speaker Change: We have done a great job hiring an incredible team right now. I really, really mean this. We have the best.
commercial team.
Speaker Change: ever assembled in MedTech. And I know a lot of people say that about their teams and I appreciate it and I'm glad they do, but it really is true. Our team is extraordinary.
Speaker Change: And when you add the data that we now have, and that we're talking to hospitals about directly, and opening their eyes to what they could be doing to help more and more patients.
Speaker Change: you're in a really good spot. Again, it's not a linear process, it never has been, but I think we have started that process.
Speaker Change: A lot of that is because we now have technology with CAVT that is worth doing that for. It is.
You can get the cloud out faster and safer.
Speaker Change: quantity of data that says the same thing and I think that's just crystal clear. So I think that will continue and again it will be a multi-multi-year effort because we're only 10% penetrated with this market and we're going to keep going until we get them all and help all these patients.
Speaker Change: I will, if you will indulge me with a short story, we had our national sales meeting several weeks ago.
A patient came to discuss
Speaker Change: and share with the entire Valshviller team what happened. She had a big massive P, if I'm not mistaken from her story, she had coded, she was revived, and turned out to have a great recovery.
Speaker Change: And at the end of her telling her story, she asked the entire commercial team that was assembled to do one thing, and she said, I have one request.
of everyone in this room, and that is...
Don't stop.
Speaker Change: until everyone that can benefit from this technology gets this technology. We didn't ask her to say that. We didn't set her up for it. She said it from the bottom of her heart as somebody who received the best technology available. And that's going to motivate us. It certainly did in the room, and that's what we're going to do for many, many years.
Speaker Change: Great, thank you so much. Just a quick one for me, for your U.S. venus thrombectomy business, 41% year-over-year growth, how should we think about the durability of that? And given that we've seen that growth rate accelerate sequentially in the past few quarters, I'm just wondering if there is anything else going on, you know, is it just, you know, your commercial team expansion, are you seeing greater acceptance, you know, given the benefits you talked about, you know, greater ability to get into the door, just anything?
Speaker Change: incremental to what you've shared that you may be able to share with us. Thank you.
Yeah, again, I want to stress...
Speaker Change: No growth rates in a situation where there's market growth and share shift.
is linear.
Speaker Change: So, it just can't be seen that way, and it's not. That being said...
obviously both are happening.
and that is...
Not so much
a direct impact on, we have
More people, therefore, we can sell more.
Speaker Change: and what they can do to do that, I think you're gonna see continued strong growth. Not in a linear fashion, quarter by quarter, but over the course of the next number of years, you're gonna see particularly strong growth continue.
Thank you.
Thank you.
Speaker Change: And your final question comes from a line of Mike Cracke from Leering Partners. Your line is open.
Mike Cracke: Hi everyone, thanks for taking our question. So obviously great acceleration in U.S. thrombectomy growth.
Speaker Change: 41% U.S. VTE growth. Sorry to bother you with another one on guidance, but without providing specifics, can you help frame where you're expecting your different verticals between VTE, arterial, stroke, and coronary to land relative to that 19% to 20% overall U.S. growth?
Speaker Change: Yeah, I think it's premature to be that, to give you that kind of detail at this stage. Obviously all of those have
drivers.
Speaker Change: We have Flash 2.0 that's continuing to attract a lot more customers together with the market access work. We have the Arterial, which has new products as well.
Speaker Change: And then, of course, whatever happens ultimately with Thunderbolt, which isn't technically in our guide, so we can't include it, but obviously is going to have an impact.
Speaker Change: that's not even talking about the new red 72 catheter which
Speaker Change: If it continues to do what the first three days of cases show, it's going to be a significant benefit as well. So, I think we have a lot of drivers, so the exact numbers within that, let's wait and see and we'll give you more updates when we have more information.
Speaker Change: Understood. And maybe just as one follow-up, you know, can you comment on some of the early adoption trends for Lightning Flash and Bolt 7 in Europe following the recent launches?
Yeah, there, again, the limitation is...
Speaker Change: There's some countries that aren't yet at a place where they're fully reimbursable, and so it's not in every single country, you know, in a big way, but where it is,
We're seeing the same
Speaker Change: benefit that we're seeing in the U.S. Again, the clot is taken out faster and safer, and obviously I've yet to meet a physician who says that's not a positive goal.
Understood. Thanks very much.
Speaker Change: Thank you. And this concludes the Q&A portion of today's conference call. Ms. Furlong, I turn the call back over to you.
Furlong: 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 first quarter call.
This concludes today's conference call. You may now disconnect.
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