Penumbra Inc Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Thrombectomy Growth: U.S. thrombectomy grew 25% year-over-year, international thrombectomy up 26% year-over-year. Flash 2.0 gained share in VTE, Lightning Bolt performed well in arterial.
• Market Access Initiatives: Generated evidence from large hospital datasets showing CAVT outperforms other therapies in efficiency, cost, and safety. Engaged with large U.S. hospital systems to expand CAVT access.
• Immersive Healthcare: Explored alternative avenues, taking a $110.3 million impairment charge, expecting to reduce ongoing operating expenses by over $20 million in 12 months to focus resources on core business.

Segment Performance

• Thrombectomy: Total revenue was $203.5 million, growing 25% year-over-year. U.S. thrombectomy revenue was $153.7 million, up 25% year-over-year; international thrombectomy revenue was $49.8 million, up 26% year-over-year. Non-GAAP gross margins expanded to 65.5%, up 170 basis points year-over-year.
• Embolization and Access: Revenue was $95.9 million, down slightly year-over-year but up 5% sequentially. U.S. business grew 9% sequentially and 1% year-over-year to $64.5 million.
• Profitability: Non-GAAP operating income in the second quarter was $31.7 million, representing 10.6% of revenue, increasing 280 basis points over the same period a year ago.

Guidance

• Revenue: Updated guidance for 2024 is $1,180 million to $1,200 million, a $60 million reduction at midpoint. Components include $20 million impact from China's economic backdrop, $15 million delay in Europe launch of CAVT products, $5 million from Immersive Healthcare strategic move, and revised U.S. thrombectomy growth to 23%-25% year-over-year.
• Margins: Expect non-GAAP gross margin expansion of 100-150 basis points and non-GAAP operating margin expansion of 100-200 basis points in 2024, with Immersive Healthcare expense reduction driving margin trajectory.

Risks

• Competitive Dynamics: VTE faced competitive tactics, but feedback on Penumbra's products as best for patients is encouraging.
• Market and Economic Factors: China economic backdrop impacting medical device revenue, Europe launch delays for CAVT products affecting international growth.

Question and Answer

Q: Delve into new guidance philosophy and U.S. thrombectomy growth outlook A: Adam Elsesser discussed evolving guidance philosophy due to more variables, emphasizing innovation over guiding, and qualitative optimism for 2025 with new product launches and outpacing transient headwinds.

Q: U.S. thrombectomy sequential growth confidence A: Adam Elsesser cited momentum from Flash 2.0, Lightning Bolt success, and safety discussions driving confidence in achieving growth.

Q: OUS thrombectomy outlook and competitive dynamics A: Adam Elsesser and Jason Mills discussed China and Europe impacts, launch delays, and competitive tactics, but remained positive on future growth with new launches.

Q: Operating margin guidance and Immersive Healthcare A: Maggie Yuen explained operating margin range considering Immersive Healthcare savings and first-half expansion.

Q: Competitive dynamics in venous and market growth A: Adam Elsesser noted market growth and share gains, with continued momentum from Flash 2.0 and clinical data.

Q: Coronary performance and THUNDER study update A: Adam Elsesser discussed coronary product performance and excitement for THUNDER study, but refrained from timing details.

Q: Margins and competitive steps A: Maggie Yuen and Adam Elsesser discussed gross margin trajectory and competitive steps focusing on best products and clinical data engagement.