Penumbra, Inc.

Good afternoon. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra's second quarter 2023 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, Again, press star 1. Thank you. I would like to introduce Ms. G. Hamlyn Harris, Investor Relations for Penumbra. Ms. Hamlyn Harris, you may begin your conference.

Thank you, Operator, and thank you all for joining us on today's call to discuss Penumbra's earnings release for the second quarter of 2023. A copy of the press release and financial tables which includes a gap to non-gap reconciliation, can be viewed under the Investors tab on our company website at www.penumbrainc.com. During the course of this conference call, the company will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, quality compliance, and business trends. Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those referenced in our 10-K that the year ended December 31, 2022, filed with the SEC. As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our periodic filings with the SEC, including the 10-K previously mentioned, for a more complete discussion of these factors and other risks that may affect our future results for the market price of our stocks. Penumbra disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments, or otherwise. On this call, certain financial measures are presented on a non-GAAP basis. The corresponding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release. Adam Elsasser, Penumbra's Chairman and CEO, will provide a business update. Maggie Ewan, our Chief Financial Officer, will then discuss our financial results for the quarter and Jason Mills, our Executive Vice President of Strategy, will discuss our 2023 guidance. With that, I would like to turn over the call to Adam Elsesser.

Thank you, Chief. Good afternoon. Thank you for joining the number second quarter 2023 conference call. Our total revenues for the second quarter were $261.5 million, a year-over-year increase of 25.5% as reported and on a constant currency basis. Our revenue growth in the United States accelerated to 32% year over year, our fastest in half a decade, excluding the COVID-impacted second quarter of 2020. U.S. growth was driven by our thrombectomy products in both vascular and neuro, as total U.S. thrombectomy revenue increased more than 40% year over year. U.S. vascular thrombectomy revenue accelerated to 50% year-over-year growth, and U.S. neurothrombectomy grew 20% year-over-year, the fastest growth in our U.S. stroke business in five years. We expanded growth margins in the second quarter consistent with our expectations, and we expect to make more progress in the second half of the year. We also increased our operating profitability in the second quarter. Non-GAAP operating income was $20.3 million, representing 7.8% of revenue in the second quarter. We grew our operating cash balance by $22 million sequentially as well. Looking forward, we expect to deliver strong revenue growth, gross margin expansion, and increasing profitability and cash flow over the foreseeable future. Penumbra had a very successful quarter. And we are still in the early stages of the journey to bring our proprietary thrombectomy technologies to patients in the United States and around the world. Our momentum is being driven by the extraordinary outcomes we are seeing in patients treated with Lightning Flash, Lightning Bolt 7, and Red 72 with Sended technology in the early days of launch for each of these products. Starting with Lightning Flash, we doubled the number of venous thrombectomy cases employing Flash in the second quarter compared to the first quarter. And we grew our total venous case volume double digits sequentially, coming off a very strong Q1. We had another extraordinary quarter with Lightning Flash, and we have many more new customers just learning about and starting to try Flash in the next several quarters. Lightning Flash's transformative power, speed, safety, and efficacy profile is the biggest driver of the exceptional early adoption of the product. The other important factor resonating with physicians is our straightforward pricing, which adheres to the same simple value sharing pricing philosophy to which we've been committed throughout our history. Moving to Lightning Bolt 7, our U.S. arterial revenue grew double-digit sequentially, representing the fastest growth in this franchise since the launch of Lightning 7 in early 2021. We saw acceleration of Lightning Bolt 7 cases in the last two months of the quarter as conversions from surgery, politics, and other mechanical thrombectomy products gained momentum. That said, we are even earlier in the launch process for Lightning Bolt 7, than we were with Flash this time last quarter, as many prospective customers have waited to allow some time to pass before starting the back process for Bolt after engaging in the same process for Lightning Flash last quarter. Consequently, we think adoption of Lightning Bolt 7 will build momentum as we move through this quarter and into the fourth quarter of 2023 and the first quarter of 2024. Taken together, Lightning Flash and Lightning Bolt 7 have generated more pending hospital customers than during any other launch in our history. We currently have well over a thousand active submissions in hospitals for approval of either Lightning Flash or Lightning Bolt 7. In order to be under submission for approval, a specific physician or group of physicians must champion bringing the product into the hospitals. Importantly, the majority of these physicians represent new customers to our thrombectomy products. Even further, we expect many additional hospital submissions over the next few quarters. Historically, once the submission process starts at a hospital, we have been extremely successful in getting our products through these approval processes. We are just getting started with Lightning Flash and Lightning Bolt 7. Our commercial team execution of our strategy for Lightning Flash and Lightning Bolt 7 is incredible. We have a clear strategy to reach the majority of the 800,000 annual venous and arterial patients in the United States over the next five plus years. And we are convinced computer aided thrombectomy is the way forward. Our neuro business also had a strong quarter, and I saw firsthand this momentum at the Society of Neurointerventional Surgery conference yesterday in San Diego. The outstanding early results we are seeing with REDD72 with the inner catheter SENDIT technology foreshadow an exciting period for our stroke franchise. This early feedback suggests SENDIT could prove to be the most important technology ever launched addressing the most challenging part of stroke intervention, safe, fast, and repeatable trackability around the ophthalmic artery to the face of the clot. We believe REDD72 with Sendit represents the premium aspiration catheter and is as differentiated in innovation for the front end of the stroke intervention as Thunderbolt could be for clot removal once the catheter is tracked to the face of the clot. We have seen positive share shift with this technology for the last two quarters, and expect even more meaningful share shift in stroke in the quarters ahead, leading to dominant share of the U.S. stroke market over the next three to four quarters. Launching REDD72 ascended means we don't have to wait for Thunderbolt to see real share gain and market growth in stroke, and this technology only furthers our enthusiasm and confidence in Thunderbolt once it is cleared. Internationally, we are seeing early success with the launch of our first-generation computer-aided products in Europe, and we have plans to expand access to our most advanced thrombectomy products to our international vascular teams over the next few years. In addition, our international teams and partners also see enormous potential to further expand our leadership in stroke intervention outside the U.S. with Sendit and Thunderbolt over the coming years. Turning to immersive healthcare, I am excited about the additional progress we've made during the quarter working with the Department of Veterans Affairs and key private healthcare partners. We're hitting important milestones together as we monitor the clinical success of our VR platform across myriad applications, mental and cognitive health. Before I turn the call over to Maggie, I want to say that we recognize expectations for our business are high. In fact, we have very high expectations for ourselves. We have a lot of confidence in our ability to succeed in the near term while we navigate agitated competitive reactions. We also believe in expediting the inevitable. And so we are laying the foundation to help all patients who can benefit from our thrombectomy products. Our current year guidance is a guidepost to near-term success, but it's just the first year within the next five-plus-year journey. We are paying a lot of attention to the guidepost to success over this longer period, and I believe the visibility we have to the larger patient opportunity is clearer to us now than it has ever been owing to the feedback we're getting on Lightning Flash, Lightning Bolt 7, and Red 72 Send It. That visibility gives us increasing confidence that we will continue to deliver strong revenue growth, gross margin expansion, and significant profitability and cash flow over the foreseeable future. I'll now turn the call over to Maggie to go over our financial results for the second quarter of 2023.