Penumbra, Inc. Reports Third Quarter 2019 Financial Results
ALAMEDA, Calif., Nov. 7, 2019 /PRNewswire/ -- Penumbra, Inc. (NYSE: PEN), a global healthcare company focused on innovative therapies, today reported financial results for the third quarter ended September 30, 2019.
-- Revenue of $139.5 million in the third quarter of 2019, an increase of
24.8%, or 25.5% in constant currency(1), over the third quarter of 2018.
Third Quarter 2019 Financial Results
Total revenue grew to $139.5 million for the third quarter of 2019 compared to $111.8 million for the third quarter of 2018, an increase of 24.8%, or 25.5% on a constant currency basis. The United States represented 65% of total revenue and international represented 35% of total revenue for the third quarter of 2019. Revenue from sales of neuro products grew to $83.2 million for the third quarter of 2019, an increase of 11.5%, or 12.4% on a constant currency basis. Revenue from sales of vascular products grew to $56.3 million for the third quarter of 2019, an increase of 51.6%, or 52.0% on a constant currency basis.
Gross profit was $96.0 million, or 68.8% of total revenue, for the third quarter of 2019, compared to $75.0 million, or 67.1% of total revenue, for the third quarter of 2018.
Total operating expenses for the third quarter of 2019 were $83.0 million, or 59.5% of total revenue. This compares to total operating expenses of $95.9 million, or 85.7% of total revenue, for the third quarter of 2018, which included 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. Excluding the IPR&D charge, total adjusted operating expenses(2) (a non-GAAP measure) were $65.0 million, or 58.2% of total revenue, for the third quarter of 2018. R&D expenses were $13.7 million for the third quarter of 2019, compared to $9.1 million for the third quarter of 2018. SG&A expenses were $69.3 million for the third quarter of 2019, compared to $55.9 million for the third quarter of 2018.
Operating income for the third quarter of 2019 was $13.0 million. This compares to an operating loss of $20.8 million for the third quarter of 2018, including the IPR&D charge. Excluding the IPR&D charge, adjusted operating income(2) (a non-GAAP measure) was $10.0 million for the third quarter of 2018.
Webcast and Conference Call Information
Penumbra, Inc. will host a conference call to discuss the third quarter 2019 financial results after market close on Thursday, November 7, 2019 at 4:30 PM Eastern Time. The conference call can be accessed live over the phone by dialing (833) 227-5837 for domestic callers or (647) 689-4064 for international callers (conference id: 4746448), 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 at least 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 innovative products and has a broad portfolio that addresses challenging medical conditions and significant clinical needs across two major markets, neuro and vascular. 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 and b) non-GAAP net income and non-GAAP diluted earnings per share ("EPS") and b) constant currency.
Adjusted operating expenses and adjusted operating income. 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 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 in the third quarter of 2018, 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.
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.
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, 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, 2018 filed with the SEC on February 26, 2019. 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" for important information about our use of constant currency and other non-GAAP measures.
(2)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 measures.
Penumbra, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
September 30, 2019 December 31, 2018
Assets
Current assets:
Cash and cash equivalents $
111,581 $
67,850
Marketable investments 82,864 133,039
Accounts receivable, net 101,828 81,896
Inventories 140,359 115,741
Prepaid expenses and other current assets 14,702 12,200
Total current assets 451,334 410,726
Property and equipment, net 45,625 35,407
Operating lease right-of-use assets 41,817
Intangible assets, net 25,494 27,245
Goodwill 7,452 7,813
Deferred taxes 32,818 32,940
Other non-current assets 9,630 875
Total assets $
614,170 $
515,006
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $
11,962 $
8,176
Accrued liabilities 70,163 57,886
Current operating lease liabilities 4,042
Total current liabilities 86,167 66,062
Deferred rent 7,586
Non-current operating lease liabilities 45,400
Other non-current liabilities 15,662 18,943
Total liabilities 147,229 92,591
Stockholders' equity:
Common stock 35 34
Additional paid-in capital 423,474 415,084
Accumulated other comprehensive loss (4,010) (1,942)
Retained earnings 47,833 9,064
Total Penumbra, Inc. stockholders' equity 467,332 422,240
Non-controlling interest (391) 175
Total stockholders' equity 466,941 422,415
Total liabilities and stockholders' equity $
614,170 $
515,006
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,
2019 2018 2019 2018
Revenue $
139,502 $
111,806 $
402,142 $
324,145
Cost of revenue 43,504 36,794 128,306 110,324
Gross profit 95,998 75,012 273,836 213,821
Operating expenses:
Research and development 13,733 9,092 38,862 25,298
Sales, general and administrative 69,289 55,934 198,045 165,209
Acquired in-process research and
development 30,835 30,835
Total operating expenses 83,022 95,861 236,907 221,342
Income (loss) from operations 12,976 (20,849) 36,929 (7,521)
Interest income, net 759 771 2,276 2,240
Other (expense) income, net (772) 170 (819) (460)
Income (loss) before income taxes
and equity in losses of
unconsolidated investee 12,963 (19,908) 38,386 (5,741)
Provision for (benefit from) income
taxes 1,963 1,598 683 (5,288)
Income (loss) before equity in
losses of unconsolidated investee 11,000 (21,506) 37,703 (453)
Equity in losses of unconsolidated
investee (920) (3,101)
Consolidated net income (loss) $
11,000 $
(22,426) $
37,703 $
(3,554)
Net loss attributable to non-
controlling interest (483) (3,496) (1,066) (3,496)
Net income (loss) attributable to
Penumbra, Inc. $
11,483 $
(18,930) $
38,769 $
(58)
Net income (loss) attributable to
Penumbra, Inc. per share:
Basic $
0.33 $
(0.55) $
1.12
$
Diluted $
0.32 $
(0.55) $
1.07
$
Weighted average shares
outstanding:
Basic 34,840,370 34,248,484 34,681,846 34,057,216
Diluted 36,271,394 34,248,484 36,243,222 34,057,216
Penumbra, Inc.
Reconciliation of GAAP Operating Expenses and Operating Income (Loss) to Adjusted Operating Expenses and Adjusted Operating Income(1)
(unaudited)
(in thousands)
Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
GAAP operating expenses $
83,022 $
95,861 $
236,907 $
221,342
GAAP total operating expenses and
operating income (loss) 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 $
83,022 $
65,026 $
236,907 $
190,507
GAAP operating income (loss) $
12,976 $
(20,849) $
36,929 $
(7,521)
Adjusted operating income $
12,976 $
9,986 $
36,929 $
23,314
Penumbra, Inc.
Reconciliation of GAAP Net Income (Loss) and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS1
(unaudited)
(in thousands, except share and per share amounts)
Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
GAAP net income (loss) attributable to
Penumbra, Inc. $
11,483 $
(18,930) $
38,769 $
(58)
GAAP net income (loss) 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 (2,285) (2,156) (11,274) (13,610)
Adjusted net income $
9,198 $
6,307 $
27,495 $
13,813
GAAP diluted EPS $
0.32 $
(0.55) $
1.07
$
Adjusted diluted EPS $
0.25 $
0.17 $
0.76 $
0.38
Weighted average shares outstanding
used to compute:
Adjusted diluted EPS 36,271,394 36,125,198 36,243,222 36,064,996
(1)See "Non-GAAP Financial Measures" above for important information about our use of non-
GAAP measures and further information about our non-GAAP operating expenses, non-GAAP
operating income, non-GAAP net income and non-GAAP 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 Health Inc. Of the total IPR&D charge, $27.4 million was attributable
to the net loss of Penumbra, Inc. There was no effect on the provision for (benefit from)
income taxes related to the IPR&D charge for the three and nine months ended September 30,
2018, respectively.
(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.
During the nine
months ended
September 30, 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.
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
2019 2018
$ %
$
$ %
United States $
90,272 $
72,991 $
17,281 23.7
$ $
17,281 23.7
% %
International 49,230 38,815 10,415 26.8 860 11,275 29.0
% %
Total $
139,502 $
111,806 $
27,696 24.8 $
860 $
28,556 25.5
% %
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
2019 2018
$ %
$
$ %
Neuro $
83,247 $
74,689 $
8,558 11.5 $
704 $
9,262 12.4
% %
Vascular 56,255 37,117 19,138 51.6 156 19,294 52.0
% %
Total $
139,502 $
111,806 $
27,696 24.8 $
860 $
28,556 25.5
% %
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
2019 2018
$ %
$
$ %
United States $
259,157 $
210,070 $
49,087 23.4
$ $
49,087 23.4
% %
International 142,985 114,075 28,910 25.3 4,608 33,518 29.4
% %
Total $
402,142 $
324,145 $
77,997 24.1 $
4,608 $
82,605 25.5
% %
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
2019 2018
$ %
$
$ %
Neuro $
246,265 $
220,318 $
25,947 11.8 $
3,624 $
29,571 13.4
% %
Peripheral 155,877 103,827 52,050 50.1 984 53,034 51.1
% %
Total $
402,142 $
324,145 $
77,997 24.1 $
4,608 $
82,605 25.5
% %
(1)See "Non-GAAP Financial Measures" for important information about
our use of constant currency and other non-GAAP measures.
Investor Relations
Penumbra, Inc.
510-995-2461
investors@penumbrainc.com
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SOURCE Penumbra, Inc.
