Penumbra, Inc. Reports Second Quarter 2018 Financial Results
ALAMEDA, Calif., Aug. 7, 2018 /PRNewswire/ -- Penumbra, Inc. (NYSE: PEN), a global healthcare company focused on innovative therapies, today reported financial results for the second quarter ended June 30, 2018.
-- Revenue of $109.6 million in the second quarter of 2018, an increase of
36.0%, or 33.8% in constant currency(1), over the second quarter of
2017.
Second Quarter 2018 Financial Results
Total revenue grew to $109.6 million for the second quarter of 2018 compared to $80.6 million for the second quarter of 2017, an increase of 36.0%, or 33.8% on a constant currency basis. The United States represented 65% of total revenue and international represented 35% of total revenue for the second quarter of 2018. Revenue from sales of neuro products grew to $74.2 million for the second quarter of 2018, an increase of 32.0%, or 29.4% on a constant currency basis, from the second quarter of 2017. Revenue from sales of peripheral vascular products grew to $35.4 million for the second quarter of 2018, an increase of 45.3%, or 43.9% on a constant currency basis, from the second quarter of 2017.
Gross profit was $72.3 million, or 65.9% of total revenue, for the second quarter of 2018, compared to $50.9 million, or 63.2% of total revenue, for the second quarter of 2017.
Total operating expenses were $63.0 million, or 57.4% of total revenue, for the second quarter of 2018, compared to $52.3 million, or 64.8% of total revenue, for the second quarter of 2017. R&D expenses were $8.2 million for the second quarter of 2018, compared to $8.1 million for the second quarter of 2017. SG&A expenses were $54.8 million for the second quarter of 2018, compared to $44.2 million for the second quarter of 2017.
Operating income for the second quarter of 2018 was $9.3 million, compared to an operating loss of $1.3 million for the second quarter of 2017.
Full Year 2018 Financial Outlook
The Company is increasing its 2018 guidance for total revenue to be in the range of $420 million to $425 million. This new range compares to the previous range of $410 million to $415 million.
Webcast and Conference Call Information
Penumbra, Inc. will host a conference call to discuss the second quarter 2018 financial results after market close on Tuesday, August 7, 2018 at 4:30 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: 8249069), 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) constant currency and b) adjusted net income (loss).
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.
Adjusted net income (loss). The Company defines adjusted net income (loss) as net income (loss), excluding 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 the effects of the excess tax benefits associated with share-based compensation arrangements, net of any related valuation allowance.
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 net income (loss) a useful metric as it provides an alternative framework for assessing how our underlying business performed excluding the one-time effects of the transition tax from the Tax Reform Act and the 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 )Constant currency results are non-GAAP financial measures. Please refer to "Non-GAAP Financial Measures" herein for important information about our use of constant currency results (including reconciliations to the most comparable GAAP measures).
Penumbra, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
June 30, December 31,
2018 2017
---- ----
Assets
Current assets:
Cash and cash equivalents $59,705 $50,637
Marketable investments 147,185 163,954
Accounts receivable, net 74,059 58,007
Inventories 97,556 94,901
Prepaid expenses and other
current assets 13,994 14,735
Total current assets 392,499 382,234
Property and equipment, net 33,719 30,899
Intangible assets, net 27,344 23,778
Goodwill 7,977 8,178
Long-term investments 2,597 3,872
Deferred taxes 34,129 26,690
Other non-current assets 1,049 1,016
----- -----
Total assets $499,314 $476,667
======== ========
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable $7,432 $6,757
Accrued liabilities 42,255 44,825
------ ------
Total current liabilities 49,687 51,582
Deferred rent 7,430 6,199
Other non-current liabilities 16,998 18,478
------ ------
Total liabilities 74,115 76,259
Stockholders' equity:
Common stock 34 33
Additional paid-in capital 404,493 396,810
Accumulated other
comprehensive (loss) income (661) 1,569
Retained earnings 21,333 1,996
------ -----
Total stockholders' equity 425,199 400,408
------- -------
Total liabilities and
stockholders' equity $499,314 $476,667
======== ========
Penumbra, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except share and per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
---- ---- ---- ----
Revenue $109,638 $80,589 $212,339 $153,802
Cost of revenue 37,386 29,660 73,530 55,164
------ ------ ------ ------
Gross profit 72,252 50,929 138,809 98,638
------ ------ ------- ------
Operating expenses:
Research and development 8,193 8,094 16,206 15,128
Sales, general and
administrative 54,776 44,163 109,275 86,884
------ ------ ------- ------
Total operating expenses 62,969 52,257 125,481 102,012
------ ------ ------- -------
Income (loss) from operations 9,283 (1,328) 13,328 (3,374)
Interest income, net 720 624 1,469 1,268
Other expense, net (340) (214) (630) (563)
Income (loss) before income
taxes and equity in losses of
unconsolidated investee 9,663 (918) 14,167 (2,669)
(Benefit from) Provision for
income taxes (4,948) 482 (6,886) 1,837
------ -----
Income (loss) before equity in
losses of unconsolidated
investee 14,611 (1,400) 21,053 (4,506)
Equity in losses of
unconsolidated investee (1,230) (158) (2,181) (158)
Net income (loss) $13,381 $(1,558) $18,872 $(4,664)
======= ======= ======= =======
Net income (loss) per share:
Basic $0.39 $(0.05) $0.56 $(0.14)
===== ====== ===== ======
Diluted $0.37 $(0.05) $0.52 $(0.14)
===== ====== ===== ======
Weighted average shares used to
compute net income (loss) per
share:
Basic 34,072,223 33,219,487 33,959,997 32,420,105
========== ========== ========== ==========
Diluted 36,116,254 33,219,487 36,030,304 32,420,105
========== ========== ========== ==========
Penumbra, Inc.
Reconciliation of Revenue Growth by Geographic Regions to Constant Currency Revenue Growth(1)
(unaudited)
(in thousands)
Three Months Ended June 30, Reported Change FX Impact Constant Currency Change
---------
2018 2017 $ % $ $ %
---- ---- --- --- --- --- ---
United States $71,279 $53,420 $17,859 33.4% $ - $17,859 33.4%
International 38,359 27,169 11,190 41.2% (1,846) 9,344 34.4%
------ ------ ------
Total $109,638 $80,589 $29,049 36.0% $(1,846) $27,203 33.8%
======== ======= ======= ======= =======
Penumbra, Inc.
Reconciliation of Revenue Growth by Product Categories to Constant Currency Revenue Growth(1)
(unaudited)
(in thousands)
Three Months Ended June 30, Reported Change FX Impact Constant Currency Change
---------
2018 2017 $ % $ $ %
---- ---- --- --- --- --- ---
Neuro $74,196 $56,203 $17,993 32.0% $(1,497) $16,496 29.4%
Peripheral Vascular 35,442 24,386 11,056 45.3% (349) 10,707 43.9%
------ ------ ---- ------
Total $109,638 $80,589 $29,049 36.0% $(1,846) $27,203 33.8%
======== ======= ======= ======= =======
Penumbra, Inc.
Reconciliation of Revenue Growth by Geographic Regions to Constant Currency Revenue Growth(1)
(unaudited)
(in thousands)
Six Months Ended June 30, Reported Change FX Impact Constant Currency Change
---------
2018 2017 $ % $ $ %
---- ---- --- --- --- --- ---
United States $137,080 $101,907 $35,173 34.5% $ - $35,173 34.5%
International 75,259 51,895 23,364 45.0% (4,882) 18,482 35.6%
------ ------ ------
Total $212,339 $153,802 $58,537 38.1% $(4,882) $53,655 34.9%
======== ======== ======= ======= =======
Penumbra, Inc.
Reconciliation of Revenue Growth by Product Categories to Constant Currency Revenue Growth(1)
(unaudited)
(in thousands)
Six Months Ended June 30, Reported Change FX Impact Constant Currency Change
---------
2018 2017 $ % $ $ %
---- ---- --- --- --- --- ---
Neuro $145,624 $106,452 $39,172 36.8% $(3,961) $35,211 33.1%
Peripheral Vascular 66,715 47,350 19,365 40.9% (921) 18,444 39.0%
------ ------ ---- ------
Total $212,339 $153,802 $58,537 38.1% $(4,882) $53,655 34.9%
======== ======== ======= ======= =======
________________________________
1See "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.
Penumbra, Inc.
Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income (Loss)(1)
(unaudited)
(in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
---- ---- ---- ----
GAAP net income (loss) $13,381 $(1,558) $18,872 $(4,664)
GAAP net income (loss) includes the
effect of the following items:
Effect of the transition tax under
the Tax Reform Act(2) - - 88 -
Excess tax benefits related to stock
compensation awards(3) (8,090) (6,969) (11,454) (16,480)
Valuation allowance on excess tax
benefit related to stock
compensation awards(3) - 6,969 - 16,480
--- ----- --- ------
Adjusted net income (loss) $5,291 $(1,558) $7,506 $(4,664)
====== ======= ====== =======
_____________________________
1See "Non-GAAP Financial Measures" above for important information
about our use of non-GAAP measures and further information about
our adjusted net income (loss).
(2)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.
(3)In 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 six months ended June 30, 2017, the
Company determined that it was not more-likely-than-not that
sufficient taxable income would be generated to realize all of the
domestic deferred tax assets as of June 30, 2017. Accordingly, the
Company recorded a partial valuation allowance against its
domestic deferred tax assets generated during the three and six
months ended June 30, 2017, which was primarily driven by the
significant excess stock compensation tax benefit.
Investor Relations
Penumbra, Inc.
510-995-2461
investors@penumbrainc.com
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