Penumbra, Inc.

Harris, Investor Relations for Penumbra. Ms. Hanlon 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 fourth quarter and full year 2023. A copy of the press release and financial tables, which include the 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 for the year ended December 31, 2023, which is scheduled to be filed with the SEC on February 22, 2024. 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 or the market price of our stock. 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. Non-GAAP operating expenses exclude the amortization of acquired intangible assets and a one-time expense associated with the acquisition of IP, R&D, and adjusted EBITDA excludes a one-time expense associated with the acquisition of IP, R&D, and stock compensation. Adam Elsesser, Penumbra's Chairman and CEO, will provide a business update. Maggie Yuen, our Chief Financial Officer, will then discuss our financial results for the fourth quarter and full year 2023. And Jason Mills, our Executive Vice President of Strategy, will discuss our 2024 guidance. With that, I would like to turn over the call to Adam Elsesser.

Thank you, Chi. Good afternoon. Thank you for joining Penumbra's fourth quarter and full year 2023 conference call. Our total revenues for the fourth quarter were $284.7 million, a year-over-year increase of 28.7% as reported, and 27.9% on a constant currency basis. For the full year 2023, our total annual revenues were $1,058.5 million, representing growth of 25% as reported, and 24.7% in constant currency over full year 2022. During the fourth quarter, our global thrombectomy business achieved record revenue of $190.8 million, growing 42.4% as reported and 41.6% in constant currency on a year-over-year basis. Our global embolization and access revenue was $93.9 million, representing increasing 7.6% as reported and 6.7% in constant currency over the same period a year ago. Our U.S. thrombectomy business continued driving outsized growth, increasing 46.4% compared to the same quarter a year ago, driven by continued growth with our computer-assisted vacuum thrombectomy, or CAVT products, in U.S. vascular thrombectomy. We also delivered more than 20% year-over-year growth in stroke thrombectomy in the U.S., with Red 72 with Sended technology continuing to set the standard for the market in aspiration catheters and laying the groundwork for Thunderbolt. We expanded our gross margins in the fourth quarter to 65.7%. We expect to continue expanding gross margins in 2024 owing to favorable product mix and increasing productivity. While we are making important investments to sustain strong growth into the future, we're also delivering increasing profitability. We delivered another record quarter of profitability in the fourth quarter. Non-GAAP operating income was $37.4 million, representing 13.1% of revenue. We posted record-adjusted EBITDA of $53.4 million, or 18.8% of total revenue. And we grew our operating cash balance by $40.3 million sequentially. We expect to expand our operating profitability in 2024 and beyond, all while we pursue the significant opportunity ahead of us in thrombectomy. 2023 was a watershed year for thrombectomy technology. The defining characteristic about this moment in time in thrombectomy is a confluence of CAVT, true second generation thrombectomy technology, and physicians broadening recognition that this unique platform technology can now successfully treat the majority of both VTE and arterial clot patients. Over the past several months, our expanded base of customers have communicated to us a desire to work together with their hospital systems to expand the pathways of care for their thrombectomy patients. In other words, following 20 years of innovation in thrombectomy technology, now is the time for Penumbra to start doing the next phase of the important work with the healthcare community to help the vast majority of clot patients who are not yet getting this treatment. To fulfill the promise of this opportunity for our patients and physicians, we are focused on three areas of work, which I began laying out on our third quarter earnings call. They are innovation, internal readiness, and market access. These areas of interconnected work are critical to our mission to reach all of these patients. Starting with innovation, Lightning Flash and Lightning Bolt 7 changed the trajectory of treatment in VTE and arterial thrombectomy. in the United States during 2023. As many new customers work through the submission process for these transformational products late in the year, we saw the trajectory of our U.S. vascular thrombectomy business accelerate in late November. Coupled with the growth of our commercial team in the U.S., we see this new trajectory as sustainable, as reorder rates for both FLASH and BOLT remain as high as any product we've ever launched in thrombectomy. As we look into 2024 and beyond, the innovation that delivered FLASH and BOLT remains at the core of Penumbra. We recently received FDA clearance for FLASH 2.0, the first of our four new CAVT products expected over the next 15 months. FLASH 2.0 raises the already high bar established just a year ago by Lightning FLASH in VTE thrombectomy. As 2.0 further optimizes the advantages of CAVT in PE and DVT procedures. Further, the next three products will expand the breadth of CAVT's utility to more areas of the body and will enhance the safety, speed, and simplicity with which CAVT tackles the variety of clot morphology. In addition, Thunderbolt is progressing very well in the Thunder study, and we are excited to bring the advantages of CAVT to stroke thrombectomy as well, especially with our increasing market share in stroke aspiration catheters. Further on the innovation front, we are advancing our strategy to leverage the fact that we have a computer chip in every case dedicated to each individual procedure. Through this important work, we will integrate new technology into the platform that can seamlessly collect valuable information, both procedural and patient-specific. This information will be utilized by physicians in real time and in reflection to further enhance treatment and produce efficiencies in patient care that could pay dividends for patients, physicians, and hospital systems for many years to come. Moving to internal readiness, the fourth quarter was a very important moment in time for Penumbra. The momentum in CAVT with Flash and Bolt in 2023 gave us the opportunity to bring more focus on thrombectomy as well as more scale and efficiency to our vascular sales team. We augmented the capabilities of the team in some areas and increased the size of the team overall. Much of this hiring was accomplished during the fourth quarter, with continued hiring and significant training taking place throughout the current quarter. In addition to our commercial team in the U.S., we continued to make significant progress on efficient manufacturing at scale, which would benefit our gross margins going forward. Given how early we are in the penetration curve for CAVT and thrombectomy, This internal readiness work is timely, important, and will continue to evolve. The third area of work for us is market access, through which we are developing additional evidence to validate the clinical benefit of our CAVT platform and health economic data with which hospital systems can make more informed decisions on treatment paradigms. We believe there are at least 800,000 arterial and VTE thrombectomy patients in the U.S. each year. In order to reach the majority of these patients over the next five plus years, our market access work with large hospital systems is critical. With hospital systems partners, we are collecting and analyzing real world data on an increasing number of CABT procedures compared to traditional therapies. These initiatives will focus on DBT, PE, arterial, and stroke. We believe this work will validate that getting the clot out by optimizing safety, speed, and simplicity with CAVT is advantageous to the patient, physician, and the hospital system in terms of both clinical outcomes and health economics. The benefits from the work we are doing in these three areas in 2024 will accrue primarily to our US thrombectomy business. Given that FLASH and BOLT7 have already built momentum, the new products in TAVT are coming first to the U.S., and reimbursement is in place for these procedures. In 2024, we project our U.S. thrombectomy business will deliver 27% to 30% year-over-year growth. While displacing traditional therapies and first-generation mechanical products will drive part of our growth, We believe the work I just described across these three areas will move more patients into the system to receive CAVT therapy in 2024 and build even more momentum in the U.S. over the next few years. Outside the U.S., our opportunity with CAVT is also compelling for future years, and we are well into the work with regulatory and reimbursement bodies in Europe, Asia, Pacific, and Latin America to bring the entire CAVT portfolio to patients outside the U.S. as well. We think we will begin to see the positive impact to our international thrombectomy business in 2025. This strategy and the timing associated with it allows us to not only focus on sustaining long-term revenue growth, but also increase in profitability. For the last 20 years, the Penumbra team has worked very hard to continuously innovate and in so doing has built what has become the largest thrombectomy company in the world, removing blood clot from head to toe. This innovation has led to the CAVT platform. Now is the time to start the next phase of the strategy, which we have outlined in detail again today. Our successful execution of this strategy will make our technology available to everyone who can benefit. This work will be hard and will not always be a straight line. However, it will be profound and extremely motivating. The company is in the best position we've ever been. The Penumbra team is stronger than at any point in our history. And over the next few years, our CABT products can positively impact the vast untreated patient population in ways no other technology platform has been able to before. I'll now turn the call over to Maggie to go over financial results for the fourth quarter and full year 2023.