Penumbra, Inc. Reports Third Quarter 2018 Financial Results
ALAMEDA, Calif., Nov. 5, 2018 /PRNewswire/ -- Penumbra, Inc. (NYSE: PEN), a global healthcare company focused on innovative therapies, today reported financial results for the third quarter ended September 30, 2018.
-- Revenue of $111.8 million in the third quarter of 2018, an increase of
33.2% over the third quarter of 2017.
Third Quarter 2018 Financial Results
Total revenue grew to $111.8 million for the third quarter of 2018 compared to $83.9 million for the third quarter of 2017, an increase of 33.2%. The United States represented 65% of total revenue and international represented 35% of total revenue for the third quarter of 2018. Revenue from sales of neuro products grew to $74.7 million for the third quarter of 2018, an increase of 27.3%, from the third quarter of 2017. Revenue from sales of peripheral vascular products grew to $37.1 million for the third quarter of 2018, an increase of 47.1%, from the third quarter of 2017.
Gross profit was $75.0 million, or 67.1% of total revenue, for the third quarter of 2018, compared to $54.8 million, or 65.3% of total revenue, for the third quarter of 2017.
In the third quarter of 2018, total operating expenses include a $30.8 million acquired in-process research and development ("IPR&D") charge in connection with the acquisition of a controlling interest in MVI Health Inc. which was accounted for as an asset acquisition. Total operating expenses for the third quarter of 2018 were $95.9 million, or 85.7% of total revenue. Excluding the IPR&D charge, total adjusted operating expenses(1) (a non-GAAP measure) were $65.0 million, or 58.2% of total revenue, for the third quarter of 2018. This compares to total operating expenses of $54.1 million, or 64.5% of total revenue, for the third quarter of 2017. R&D expenses were $9.1 million for the third quarter of 2018, compared to $8.1 million for the third quarter of 2017. SG&A expenses were $55.9 million for the third quarter of 2018, compared to $46.0 million for the third quarter of 2017.
Operating loss for the third quarter of 2018 was $20.8 million. Excluding the IPR&D charge, adjusted operating income(1) (a non-GAAP measure) was $10.0 million for the third quarter of 2018. This compares to operating income of $0.7 million for the third quarter of 2017.
Full Year 2018 Financial Outlook
The Company is increasing its 2018 guidance for total revenue to be in the range of $437 million to $438 million. This new range compares to the previous range of $420 million to $425 million.
Webcast and Conference Call Information
Penumbra, Inc. will host a conference call to discuss the third quarter 2018 financial results after market close on Monday, November 5, 2018 at 5:00 PM Eastern Time. The conference call can be accessed live over the phone by dialing (866) 393-4306 for domestic callers or (734) 385-2616 for international callers (conference id: 8597766), or the webcast can be accessed on the "Events" section under the "Investors" tab of the Company's website at: www.penumbrainc.com. The webcast will be available on the Company's website for two weeks following the completion of the call.
About Penumbra
Penumbra, Inc., headquartered in Alameda, California, is a global healthcare company focused on innovative therapies. Penumbra designs, develops, manufactures and markets medical devices and has a broad portfolio of products that addresses challenging medical conditions and significant clinical needs. Penumbra sells its products to hospitals primarily through its direct sales organization in the United States, most of Europe, Canada and Australia, and through distributors in select international markets. The Penumbra logo is a trademark of Penumbra, Inc. For more information, visit www.penumbrainc.com.
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company uses the following non-GAAP financial measures in this press release: a) adjusted operating expenses and adjusted operating income (loss), b) adjusted net income (loss) and adjusted diluted earnings per share ("EPS"), and c) constant currency.
Constant Currency. The Company's constant currency revenue disclosures estimate the impact of changes in foreign currency rates on the translation of the Company's current period revenue as compared to the applicable comparable period in the prior year. This impact is derived by taking the current local currency revenue and translating it into U.S. dollars based upon the foreign currency exchange rates used to translate the local currency revenue for the applicable comparable period in the prior year, rather than the actual exchange rates in effect during the current period. It does not include any other effect of changes in foreign currency rates on the Company's results or business. Revenue growth was not reported on a constant currency basis for this period as the percentages were deemed not significant but revenue growth on a constant currency basis is included in the reconciliation below.
Adjusted operating expenses and adjusted operating income (loss). The Company defines adjusted operating expenses as total operating expenses, excluding the IPR&D charge in connection with the MVI Health Inc. asset acquisition. Adjusted operating income (loss) is defined as operating income (loss), excluding the same IPR&D charge.
Adjusted net income (loss) and adjusted diluted EPS. The Company defines adjusted net income (loss) as net income (loss), excluding a) the IPR&D charge in connection with the MVI Health Inc. asset acquisition, b) the one-time effect of the transition tax from the Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act") in the first quarter of 2018, and c) the effects of the excess tax benefits associated with share-based compensation arrangements, net of any related valuation allowance. The Company defines adjusted diluted EPS as GAAP diluted EPS, excluding the effects of the same items above.
Full reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in the tables below.
Our management believes the non-GAAP financial measures disclosed in this press release are useful to investors in assessing the operating performance of our business and provide meaningful comparisons to prior periods and thus a more complete understanding of our business than could be obtained absent this disclosure. Specifically, we consider the change in constant currency revenue as a useful metric as it provides an alternative framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations. We consider adjusted operating expenses, adjusted operating income (loss), adjusted net income (loss), and adjusted diluted EPS useful metrics as they provide an alternative framework for assessing how our underlying business performed. These metrics exclude the effects of the IPR&D charge in connection with the MVI Health Inc. asset acquisition, and, in the case of adjusted net income (loss) and adjusted diluted EPS, the one-time effect of the transition tax from the Tax Reform Act, as well as the effects of excess tax benefits associated with share-based compensation arrangements, net of any related valuation allowance.
The non-GAAP financial measures included in this press release may be different from, and therefore may not be comparable to, similarly titled measures used by other companies. These non-GAAP measures should not be considered in isolation or as alternatives to GAAP measures. We urge investors to review the reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures included in this press release, and not to rely on any single financial measure to evaluate our business.
Forward-Looking Statements
Except for historical information, certain statements in this press release are forward-looking in nature and are subject to risks, uncertainties and assumptions about us. Our business and operations are subject to a variety of risks and uncertainties and, consequently, actual results may differ materially from those projected by any forward-looking statements. Factors that could cause actual results to differ from those projected include, but are not limited to: failure to sustain or grow profitability or generate positive cash flows; failure to effectively introduce and market new products; delays in product introductions; significant competition; inability to further penetrate our current customer base, expand our user base and increase the frequency of use of our products by our customers; inability to achieve or maintain satisfactory pricing and margins; manufacturing difficulties; permanent write-downs or write-offs of our inventory; product defects or failures; unfavorable outcomes in clinical trials; inability to maintain our culture as we grow; fluctuations in foreign currency exchange rates; potential adverse regulatory actions; and potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. These risks and uncertainties, as well as others, are discussed in greater detail in our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on February 27, 2018. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. Any forward-looking statements are based on our current expectations, estimates and assumptions regarding future events and are applicable only as of the dates of such statements. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change.
(1)See "Non-GAAP Financial
Measures" below for important
information about our use of
non-GAAP measures and
further information about our
adjusted operating expenses
and adjusted operating income
(loss) measures.
Penumbra, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
September 30, December 31,
2018 2017
Assets
Current assets:
Cash and cash equivalents $
47,742 $
50,637
Marketable investments 146,176 163,954
Accounts receivable, net 80,435 58,007
Inventories 109,706 94,901
Prepaid expenses and other current assets 13,536 14,735
Total current assets 397,595 382,234
Property and equipment, net 34,133 30,899
Intangible assets, net 27,284 23,778
Goodwill 7,923 8,178
Long-term investments 3,872
Deferred taxes 32,985 26,690
Other non-current assets 1,085 1,016
Total assets $
501,005 $
476,667
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $
8,869 $
6,757
Accrued liabilities 56,183 44,825
Total current liabilities 65,052 51,582
Deferred rent 7,510 6,199
Other non-current liabilities 19,155 18,478
Total liabilities 91,717 76,259
Stockholders' equity:
Common stock 34 33
Additional paid-in capital 407,881 396,810
Accumulated other comprehensive (loss)
income (899) 1,569
Retained earnings 2,403 1,996
Total Penumbra, Inc. stockholders' equity 409,419 400,408
Non-controlling interest (131)
Total stockholders' equity $
409,288 $
400,408
Total liabilities and stockholders' equity $
501,005 $
476,667
Penumbra, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except share and per share amounts)
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Revenue $
111,806 $
83,911 $
324,145 $
237,713
Cost of revenue 36,794 29,134 110,324 84,298
Gross profit 75,012 54,777 213,821 153,415
Operating expenses:
Research and development 9,092 8,132 25,298 23,260
Sales, general and
administrative 55,934 45,962 165,209 132,846
Acquired in-process research
and development 30,835 30,835
Total operating expenses 95,861 54,094 221,342 156,106
(Loss) income from operations (20,849) 683 (7,521) (2,691)
Interest income, net 771 658 2,240 1,926
Other income (expense), net 170 (102) (460) (665)
(Loss) income before income
taxes and equity in losses of
unconsolidated investee (19,908) 1,239 (5,741) (1,430)
Provision for (benefit from)
income taxes 1,598 456 (5,288) 2,293
(Loss) income before equity in
losses of unconsolidated
investee (21,506) 783 (453) (3,723)
Equity in losses of
unconsolidated investee (920) (545) (3,101) (703)
Consolidated net (loss) income $
(22,426) $
238 $
(3,554) $
(4,426)
Net loss attributable to non-
controlling interest (3,496) (3,496)
Net (loss) income attributable
to Penumbra, Inc. $
(18,930) $
238 $
(58) $
(4,426)
Net (loss) income attributable
to Penumbra, Inc. per share:
Basic $
(0.55) $
0.01
$ $
(0.14)
Diluted $
(0.55) $
0.01
$ $
(0.14)
Weighted average shares
outstanding:
Basic 34,248,484 33,446,841 34,057,216 32,766,135
Diluted 34,248,484 35,664,272 34,057,216 32,766,135
Penumbra, Inc.
Reconciliation of GAAP Operating Expenses and Operating (Loss) Income to Adjusted Operating Expenses and Adjusted Operating Income (Loss)(1)
(unaudited)
(in thousands)
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
GAAP operating expenses $
95,861 $
54,094 $
221,342 $
156,106
GAAP total operating expenses and operating (loss) income from operations includes the effect of the following items:
Acquired IPR&D in connection with an asset acquisition(2) 30,835 30,835
Adjusted operating expenses $
65,026 $
54,094 $
190,507 $
156,106
GAAP operating (loss) income from operations $
(20,849) $
683 $
(7,521) $
(2,691)
Adjusted operating income (loss) from operations $
9,986 $
683 $
23,314 $
(2,691)
Penumbra, Inc.
Reconciliation of GAAP Net Income (Loss) and Diluted EPS to Adjusted Net Income (Loss) and Adjusted Diluted EPS(1)
(unaudited)
(in thousands, except share and per share amounts)
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
GAAP net (loss) income attributable to Penumbra, Inc. $
(18,930) $
238 $
(58) $
(4,426)
GAAP net (loss) income includes the effect of the following
items:
Acquired IPR&D in connection with an asset acquisition(2) 27,393 27,393
Effect of the transition tax under the Tax Reform Act(3) 88
Excess tax benefits related to stock compensation awards4 (2,156) (2,602) (13,610) (19,082)
Valuation allowance on excess tax benefit related to stock
compensation awards4 2,602 19,082
Adjusted net income (loss) $
6,307 $
238 $
13,813 $
(4,426)
GAAP diluted EPS $
(0.55) $
0.01
$ $
(0.14)
Adjusted diluted EPS $
0.17 $
0.01 $
0.38 $
(0.14)
Weighted average shares outstanding used to compute:
Adjusted diluted EPS5 36,125,198 35,664,272 36,064,996 32,766,135
(1)See "Non-GAAP Financial Measures"
above for important information about
our use of non-GAAP measures and
further information about our
adjusted operating expenses, adjusted
operating income (loss), adjusted net
income (loss) and adjusted diluted
EPS measures.
(2)On August 31, 2018, the Company
acquired a controlling interest in
MVI Health Inc. which was accounted
for as an asset acquisition. In
connection with the transaction, the
Company recorded a $30.8 million
IPR&D charge during the three and
nine months ended September 30, 2018,
in the consolidated statements of
operations related to the acquired
technology under development from MVI
(3)On December 22, 2017, the Tax
Reform Act was enacted into law. This
new tax law, among other changes,
reduces the Company's U.S. federal
statutory corporate income tax rate
from 34% to 21% effective January 1,
2018. In the first quarter of 2018,
the Company recorded a provisional
tax charge for the one-time
transition tax on the undistributed
earnings of its foreign subsidiaries.
4In accordance with Accounting
Standards Update No. 2016-09,
Improvements to Employee Share-Based
Payment Accounting, all excess tax
benefits related to share-based
compensation be recognized as an
income tax benefit, instead of in
stockholders' equity. For the three
and nine months ended September 30,
2017, the Company determined that it
was not more-likely-than-not that
5GAAP diluted EPS for the three and
nine months ended September 30, 2018,
is calculated using diluted weighted
average shares of approximately 34.2
million and 34.1 million,
respectively, which is the same as
basic weighted average shares, due to
the GAAP net losses incurred in each
period. Adjusted diluted EPS for the
three and nine months ended September
30, 2018, is calculated using diluted
Penumbra, Inc.
Reconciliation of Revenue Growth by Geographic Regions to Constant Currency Revenue Growth(1)
(unaudited)
(in thousands)
Three Months Ended September 30, Reported Change FX Impact Constant Currency Change
2018 2017
$ %
$
$ %
United States $
72,991 $
55,652 $
17,339 31.2
$ $
17,339 31.2
% %
International 38,815 28,259 10,556 37.4 118 10,674 37.8
% %
Total $
111,806 $
83,911 $
27,895 33.2 $
118 $
28,013 33.4
% %
Penumbra, Inc.
Reconciliation of Revenue Growth by Product Categories to Constant Currency Revenue Growth(1)
(unaudited)
(in thousands)
Three Months Ended September 30, Reported Change FX Impact Constant Currency Change
2018 2017
$ %
$
$ %
Neuro $
74,689 $
58,670 $
16,019 27.3 $
76 $
16,095 27.4
% %
Peripheral Vascular 37,117 25,241 11,876 47.1 42 11,918 47.2
% %
Total $
111,806 $
83,911 $
27,895 33.2 $
118 $
28,013 33.4
% %
Penumbra, Inc.
Reconciliation of Revenue Growth by Geographic Regions to Constant Currency Revenue Growth(1)
(unaudited)
(in thousands)
Nine Months Ended September 30, Reported Change FX Impact Constant Currency Change
2018 2017
$ %
$
$ %
United States $
210,070 $
157,559 $
52,511 33.3
$ $
52,511 33.3
% %
International 114,075 80,154 33,921 42.3 (4,732) 29,189 36.4
% %
Total $
324,145 $
237,713 $
86,432 36.4 $
(4,732) $
81,700 34.4
% %
Penumbra, Inc.
Reconciliation of Revenue Growth by Product Categories to Constant Currency Revenue Growth(1)
(unaudited)
(in thousands)
Nine Months Ended September 30, Reported Change FX Impact Constant Currency Change
2018 2017
$ %
$
$ %
Neuro $
220,318 $
165,122 $
55,196 33.4 $
(3,857) $
51,339 31.1
% %
Peripheral Vascular 103,827 72,591 31,236 43.0 (875) 30,361 41.8
% %
Total $
324,145 $
237,713 $
86,432 36.4 $
(4,732) $
81,700 34.4
% %
(1)See "Non-GAAP Financial Measures"
above for important information about
our use of this non-GAAP measure and
further information about our
calculation of constant currency
results.
Investor Relations
Penumbra, Inc.
510-995-2461
investors@penumbrainc.com
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