Penumbra, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results

February 26, 2019

ALAMEDA, Calif., Feb. 26, 2019 /PRNewswire/ -- Penumbra, Inc. (NYSE: PEN), a global healthcare company focused on innovative therapies, today reported financial results for the fourth quarter and full year ended December 31, 2018.

Penumbra, Inc. Logo (PRNewsFoto/Penumbra, Inc.)

Financial Highlights:

  • Revenue of $120.8 million for the fourth quarter of 2018, an increase of 25.8%, or 26.9% in constant currency1, over the fourth quarter of 2017.
  • Revenue of $444.9 million for the full year 2018, an increase of 33.3%, or 32.2% in constant currency1, over the prior year.

"Penumbra had a strong fourth quarter which capped a tremendous year of exceptional growth and patient impact," said Adam Elsesser, Penumbra's chairman, president and chief executive officer. "In the fourth quarter, we saw our strongest sequential revenue growth of the year, which resulted in strong year over year growth against difficult fourth quarter comparisons, particularly in our neuro and international markets. We made great progress across the business, including the launch of our peripheral embolization products into new international markets, which resulted in a shift of revenue from neuro to vascular in the fourth quarter."

Fourth Quarter 2018 Financial Results
Total revenue grew to $120.8 million for the fourth quarter of 2018 compared to $96.1 million for the fourth quarter of 2017, an increase of 25.8%, or 26.9% on a constant currency basis. The United States represented 67% of total revenue and international represented 33% of total revenue for the fourth quarter of 2018. Revenue from sales of neuro products grew to $74.0 million for the fourth quarter of 2018, an increase of 9.9%, or 11.2% on a constant currency basis. Revenue from sales of vascular products grew to $46.8 million for the fourth quarter of 2018, an increase of 62.8%, or 63.6% on a constant currency basis.

Gross profit was $78.7 million, or 65.2% of total revenue, for the fourth quarter of 2018, compared to $63.7 million, or 66.3% of total revenue, for the fourth quarter of 2017.

Total operating expenses were $72.0 million, or 59.6% of total revenue, for the fourth quarter of 2018, compared to $59.9 million, or 62.3% of total revenue, for the fourth quarter of 2017. The fourth quarter of 2018 is the first full quarter following the acquisition of a controlling interest in MVI Health Inc. and is included in our total operating expenses. R&D expenses were $10.9 million for the fourth quarter of 2018, compared to $8.4 million for the fourth quarter of 2017. SG&A expenses were $61.2 million for the fourth quarter of 2018, compared to $51.5 million for the fourth quarter of 2017.

Operating income was $6.7 million for the fourth quarter of 2018, compared to an operating income of $3.9 million for the fourth quarter of 2017.

As of December 31, 2018, cash and cash equivalents and marketable investments totaled $200.9 million.

Full Year 2018 Financial Results
Total revenue grew to $444.9 million for the year ended December 31, 2018, compared to $333.8 million for 2017, an increase of 33.3%, or 32.2% in constant currency. The United States represented 65% of total revenue and international represented 35% of total revenue for the year ended December 31, 2018. Revenue from sales of neuro products grew to $294.3 million for 2018, an increase of 26.6%, or 25.3% on a constant currency basis. Revenue from sales of vascular products grew to $150.6 million for 2018, an increase of 48.6%, or 48.0% on a constant currency basis.

Gross profit was $292.5 million, or 65.7% of total revenue, for the year ended December 31, 2018, compared to $217.1 million, or 65.1% of total revenue, for the year ended December 31, 2017.

For the year ended December 31, 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 year ended December 31, 2018 were $293.4 million, or 65.9% of total revenue. Excluding the IPR&D charge, total non-GAAP operating expenses1 were $262.6 million, or 59.0% of total revenue, for the year ended December 31, 2018. This compares to total operating expenses of $216.0 million, or 64.7% of total revenue, for the year ended December 31, 2017. R&D expenses were $36.2 million for the year ended December 31, 2018, compared to $31.7 million for the year ended December 31, 2017. SG&A expenses were $226.4 million for the year ended December 31, 2018, compared to $184.3 million for the year ended December 31, 2017.

Operating loss was $0.9 million for the year ended December 31, 2018. Excluding the IPR&D charge, non-GAAP operating income1 was $30.0 million for the year ended December 31, 2018. This compares to operating income of $1.2 million for the year ended December 31, 2017.

Full Year 2019 Financial Outlook
Penumbra projects total revenue for 2019 to be in the range of $525 million to $535 million.

Webcast and Conference Call Information
Penumbra, Inc. will host a conference call to discuss financial results for the fourth quarter and year ended December 31, 2018 after market close on Tuesday, February 26, 2019 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: 6696873), 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) non-GAAP operating expenses and non-GAAP operating income, b) non-GAAP net income (loss) and non-GAAP diluted earnings per share ("EPS"), and c) constant currency.

Non-GAAP operating expenses and non-GAAP operating income. The Company defines non-GAAP operating expenses as total operating expenses, excluding the IPR&D charge in connection with the MVI Health Inc. asset acquisition. Non-GAAP operating income is defined as income (loss) from operations, excluding the same IPR&D charge.

Non-GAAP net income (loss) and non-GAAP diluted EPS. The Company defines non-GAAP net income (loss) as net income excluding a) the IPR&D charge in connection with the MVI Health Inc. asset acquisition, b) the income tax effects from the Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act"), and c) the effects of the excess tax benefits associated with share-based compensation arrangements, net of any related valuation allowance. The Company defines non-GAAP 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. 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.

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 non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income (loss), and non-GAAP 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 non-GAAP net income (loss) and non-GAAP diluted EPS, the income tax effects 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, which we expect to file with the SEC on or before March 1, 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.




1See "Non-GAAP Financial Measures" below for important information about our use of constant currency and other non-GAAP measures.

 

Penumbra, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands)




December 31,



2018


2017

Assets





Current assets:





     Cash and cash equivalents


$

67,850



$

50,637


     Marketable investments


133,039



163,954


     Accounts receivable, net


81,896



58,007


     Inventories


115,741



94,901


     Prepaid expenses and other current assets


12,200



14,735


          Total current assets


410,726



382,234


Property and equipment, net


35,407



30,899


Intangible assets, net


27,245



23,778


Goodwill


7,813



8,178


Long-term investments




3,872


Deferred taxes


32,940



26,690


Other non-current assets


875



1,016


          Total assets


$

515,006



$

476,667


Liabilities and Stockholders' Equity





Current liabilities:





     Accounts payable


$

8,176



$

6,757


     Accrued liabilities


57,886



44,825


          Total current liabilities


66,062



51,582


Deferred rent


7,586



6,199


Other non-current liabilities


18,943



18,478


          Total liabilities


92,591



76,259


Stockholders' equity:





Preferred stock





Common stock


34



33


Additional paid-in capital


415,084



396,810


Accumulated other comprehensive (loss) income


(1,942)



1,569


Retained earnings


9,064



1,996


Total Penumbra, Inc. stockholders' equity


422,240



400,408


Non-controlling interest


175




Total stockholders' equity


$

422,415



$

400,408


Total liabilities and stockholders' equity


$

515,006



$

476,667


 

Penumbra, Inc.

Co ndensed Consolidated Statements of Operations

(unaudited)

(in thousands, except share and per share amounts)




Three Months Ended December 31,


Year Ended December 31,



2018


2017


2018


2017

Revenue


$

120,793



$

96,051



$

444,938



$

333,764


Cost of revenue


42,081



32,324



152,405



116,622


     Gross profit


78,712



63,727



292,533



217,142


Operating expenses:









     Research and development


10,867



8,401



36,165



31,661


     Sales, general and administrative


61,176



51,470



226,385



184,316


     Acquired in-process research and development






30,835




          Total operating expenses


72,043



59,871



293,385



215,977


Income (loss) from operations


6,669



3,856



(852)



1,165


Interest income, net


724



727



2,964



2,653


Other expense, net


(44)



(677)



(504)



(1,342)


Income before income taxes and equity in losses of unconsolidated investee


7,349



3,906



1,608



2,476


Provision for (benefit from) income taxes


885



(5,904)



(4,403)



(3,611)


Income before equity in losses of unconsolidated investee


6,464



9,810



6,011



6,087


Equity in losses of unconsolidated investee




(727)



(3,101)



(1,430)


Consolidated net income


$

6,464



$

9,083



$

2,910



$

4,657


Net loss attributable to non-controlling interest


$

(195)



$



$

(3,691)



$


Net income attributable to Penumbra, Inc.


$

6,659



$

9,083



$

6,601



$

4,657


Net income attributable to Penumbra, Inc. per share:









Basic


$

0.19



$

0.27



$

0.19



$

0.14


Diluted


$

0.18



$

0.25



$

0.18



$

0.13


Weighted average shares outstanding:









Basic


34,378,415



33,606,943



34,138,176



32,978,065


Diluted


36,150,450



35,833,621



36,086,821



35,319,103


 

Penumbra, Inc.

Reconciliation of Revenue Growth by Geographic Regions to Constant Currency Revenue Growth1

(unaudited)

(in thousands)




Three Months Ended December 31,


Reported Change


 FX Impact


Constant Currency Change



2018


2017


$


%


$


$


%

United States


$

80,645



$

61,615



$

19,030



30.9

%


$



$

19,030



30.9

%

International


40,148



34,436



5,712



16.6

%


1,062



6,774



19.7

%

     Total


$

120,793



$

96,051



$

24,742



25.8

%


$

1,062



$

25,804



26.9

%

 

Penumbra, Inc.

Reconciliation of Revenue Growth by Product Categories to Constant Currency Revenue Growth1

(unaudited)

(in thousands)




Three Months Ended December 31,


Reported Change


 FX Impact


Constant Currency Change



2018


2017


$


%


$


$


%

Neuro


$

74,015



$

67,324



$

6,691



9.9

%


$

845



$

7,536



11.2

%

Vascular


46,778



28,727



18,051



62.8

%


217



18,268



63.6

%

     Total


$

120,793



$

96,051



$

24,742



25.8

%


$

1,062



$

25,804



26.9

%

 

Penumbra, Inc.

Reconciliation of Revenue Growth by Geographic Regions to Constant Currency Revenue Growth1

(unaudited)

(in thousands)




Year Ended December 31,


Reported Change


 FX Impact


Constant Currency Change



2018


2017


$


%


$


$


%

United States


$

290,716



$

219,173



$

71,543



32.6

%


$



$

71,543



32.6

%

International


154,222



114,591



39,631



34.6

%


(3,749)



35,882



31.3

%

     Total


$

444,938



$

333,764



$

111,174



33.3

%


$

(3,749)



$

107,425



32.2

%

 

Penumbra, Inc.

Reconciliation of Revenue Growth by Product Categories to Constant Currency Revenue Growth1

(unaudited)

(in thousands)




Year Ended December 31,


Reported Change


 FX Impact


Constant Currency Change



2018


2017


$


%


$


$


%

Neuro


$

294,333



$

232,446



$

61,887



26.6

%


$

(3,076)



$

58,811



25.3

%

Vascular


150,605



101,318



49,287



48.6

%


(673)



48,614



48.0

%

     Total


$

444,938



$

333,764



$

111,174



33.3

%


$

(3,749)



$

107,425



32.2

%





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 Operating Expenses and Income (Loss) from Operations to Non-GAAP Operating Expenses and Non-GAAP Operating Income1

(unaudited)

(in thousands)




Three Months Ended December 31,


Year Ended December 31,



2018


2017


2018


2017

GAAP total operating expenses


$

72,043



$

59,871



$

293,385



$

215,977


GAAP operating expenses includes the effect of the following items:









IPR&D charge in connection with an asset acquisition2






30,835




Non-GAAP operating expenses


$

72,043



$

59,871



$

262,550



$

215,977











GAAP income (loss) from operations


$

6,669



$

3,856



$

(852)



$

1,165


GAAP income (loss) from operations includes the effect of the following items:









IPR&D charge in connection with an asset acquisition2






30,835




Non-GAAP operating income


$

6,669



$

3,856



$

29,983



$

1,165


 

Penumbra, Inc.

Reconciliation of GAAP Net Income and Diluted EPS to Non-GAAP Net Income (Loss) and Non-GAAP Diluted EPS1

(unaudited)

(in thousands, except per share amounts)




Three Months Ended
December 31, 2018


Three Months Ended
December 31, 2017


Year Ended
December 31, 2018


Year Ended
December 31, 2017



Net income
(loss)


Diluted
EPS


Net income
(loss)


Diluted
EPS


Net income
(loss)


Diluted
EPS


Net income
(loss)


Diluted
EPS

GAAP measures


$

6,659



$

0.18



$

9,083



$

0.25



$

6,601



$

0.18



$

4,657



$

0.13


Items reconciling GAAP net income and EPS to non-GAAP net income (loss) and EPS:

















Acquired IPR&D in connection with an asset acquisition2










27,393



0.76






Effects of the transition tax and the rate change on the net deferred tax assets resulting from the Tax Reform Act3


(13)





15,414



0.43



75





15,414



0.47


Excess tax benefits related to stock compensation awards4


(1,965)



(0.05)



(3,597)



(0.10)



(15,575)



(0.43)



(22,679)



(0.69)


Net valuation allowance5






(17,356)



(0.48)







2,409



0.07


Effect of dilutive shares on EPS6
















0.01


Non-GAAP measures


$

4,681



$

0.13



$

3,544



$

0.10



$

18,494



$

0.51



$

(199)



$

(0.01)







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 (loss) 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 year ended December 31, 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 benefit from income taxes for the year ended December 31, 2018 related to the IPR&D charge.


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 three months and year ended December 31, 2017, the Company recorded a one-time income tax expense adjustment related to the revaluation of its deferred taxes due to a reduction of the U.S. federal statutory corporate income tax rate. During 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. During the three months and year ended December 31, 2018, the Company completed its accounting for the tax effect of the transition tax under ASC 740 and adjusted the previously recorded provisional tax charge. The adjustment was deemed immaterial to the consolidated financial statements.


4 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 is recognized as an income tax benefit, instead of in stockholders' equity.


5  During the three months and year ended December 31, 2017, the Company recorded a tax benefit of $19.8 million related to the release of a valuation allowance, partially offset by a tax expense of $2.4 million related to a valuation allowance established against our federal research and development credit deferred tax assets.


6 For the purposes of calculating Non-GAAP diluted EPS for the year ended December 31, 2017, diluted weighted average shares outstanding of 32,978,065 was used, which is the same as basic weighted average shares outstanding for that period, as a non-GAAP net loss was incurred in the period.


Investor Relations
Penumbra, Inc.
510-995-2461
investors@penumbrainc.com

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/penumbra-inc-reports-fourth-quarter-and-full-year-2018-financial-results-300802553.html

SOURCE Penumbra, Inc.

IR Contact

investors@penumbrainc.com

Penumbra, Inc. Headquarters One Penumbra Place
Alameda, CA 94502
USA