Penumbra, Inc.

I would like to introduce Ms. Cecilia Furlong, Business Development and Investor Relations for Penumbra. Ms. Furlong, 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 2024. 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 for the year ended December 31, 2023, 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 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, financial results for revenue are presented on a GAAP basis, while gross margin, operating expenses, operating income, and adjusted EBITDA 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 gross margin, operating expenses, and operating income exclude amortization of acquired intangible assets in the second quarter of 2024 and 2023 and an impairment of our immersive healthcare business in the second quarter of 2024. Adjusted EBITDA excludes impairment expenses, stock compensation expense, depreciation and amortization, benefit from income taxes, and interest income expenses. 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 second quarter of 2024. And Jason Mills, our Executive Vice President of Strategy, will discuss our updated 2024 guidance. With that, I would like to turn the call over to Adam Elsesser.

Thank you, Cecilia. Good afternoon. Thank you for joining Penumbra's second quarter 2024 conference call. Our total revenue for the second quarter was $299.4 million. A year-over-year increase of 14.5% is reported and 14.7% on a constant currency basis. Our U.S. thrombectomy revenue grew 25% compared to the same quarter a year ago to $153.7 million and 29.8% year-over-year in the first half of 2024. driven by our CAVT products in VTE and arterial. Our international thrombectomy revenue was $49.8 million, growing 26% year over year. On a worldwide basis, total thrombectomy revenue was $203.5 million, growing 25% year over year. Our global embolization and access revenue declined slightly year over year, to $95.9 million, but improved sequentially by 5%, driven by our U.S. business, which grew 9% sequentially and 1% year over year to $64.5 million. This strong sequential growth in the U.S. was due to our sales team responding to the first quarter competitive launches. Non-GAAP gross margins expanded to 65.5%, up 170 basis points year over year. Non-GAAP operating income in the second quarter was $31.7 million, representing 10.6% of revenue, increasing 280 basis points over the same period a year ago and 370 basis points improvement sequentially. We continue to see a path to gross margins over 70% over the next 21 to 27 months, and we expect operating margin expansion to outpace gross margin expansion for the foreseeable future. Clinically significant clot burden in the arteries and veins of the body and the brain is still one of the most undertreated acute issues in healthcare today. For 20 years, Penumbra has innovated and innovated our thrombectomy products to make them effective in removing clot in the safest, fastest, and simplest way possible. With the launch of CAVT last year, we can now say that our products are the safest and most effective in removing blood clots compared to other mechanical systems and other modalities. Therefore, Penumbra is in a period of transformation. from a company solely innovating and treating the patients that were deemed treatable to a company that has a genuine responsibility over the next five plus years to reach the majority of the 125 million annual thrombectomy patients in the United States. Meanwhile, we are multiple years into the process of building toward a similarly unique opportunity in international markets. with the work we are doing in reimbursement, clinical evidence, and commercial expansion. Now let's focus on what specifically happened in the second quarter and how we see the next several quarters. Starting with our vascular business, we had our first available FLASH 2.0 units in late April, which was later than we had hoped, but the initial cases showed that it was worth waiting for. For experienced users of FLASH 1.0, The reaction to Flash 2.0 has been positive, but more that it is a very good iterative product. For new first-time users of Flash, Flash 2.0 generated an extremely positive reaction. The feedback starts with excitement that the speed of the cases was much faster than their current cases with a much safer profile. less worry about cardiac decompensation because of the smaller catheter used, no need to deal with returning potentially compromised blood, and clinically very acceptable blood loss that had the benefit of being contained in our pump canister and not uncontained in the room. This feedback particularly on the issue of returning compromised blood, was highlighted at a recent San Diego VTE summit, citing data from extensive testing, the growing body of evidence, and existing guidelines. Physicians are starting to become aware of this issue, and not surprisingly, this issue is likely going to be discussed at upcoming medical conferences where experts will continue to educate on the known risks of returning potentially compromised blood. Given the feedback we are getting from FLASH 2.0, we have seen particularly competitive tactics in the second half of the quarter in VTE. I want to stress that we are no strangers to competition and we are motivated to compete, particularly when the feedback on our products is that they are the best for patients. Our experience of competing over 17 years against some of the best companies in MedTech has shown that physicians ultimately choose the best product. This work is important and exciting. However, it takes time and does not happen in a straight line quarter to quarter. We saw the same dynamic in the stroke market years ago when that market was equally underpenetrated and growing at a similar pace. Penumbra emerged as the clear leader and we continue to expand our position today. With Flash 2.0, we gained significant share in VTE and Q2, growing within our stated guidance range, and we expect to continue to do so in the second half of the year and beyond. Our arterial business, led by Lightning Bolt in the U.S., also continues to perform extremely well. The technology we call modulated aspiration and lightning bolt continues to remove blood clot very easily compared to prior modalities. In Q2, our U.S. arterial business grew year over year significantly above our stated guidance range. The 12-month stride study results were also recently published in the Journal of Vascular Surgery showing higher target limb salvage rates at one year of 88.5% versus historical literature rates for CDT and open surgery, which are as low as 57% and 65% respectively. This continues to make the case for an endovascular first approach to arterial thrombus removal and is reflected in the strength of our growing arterial business. Moving to our neurovascular business, we saw another good quarter with our U.S. stroke business growing 19% year over year. Our neuro access business also saw good momentum, including the launch of our midway access catheters. Just last week at the Society of Neurointerventional Surgery meeting in Colorado Springs, Dr. David Fiorella, one of the principal investigators of the THUNDER study, highlighted Thunderbolt in a late breaking session, showing a few case examples of how easily Thunderbolt removes clot. This success puts us in a strong position as we focus on completing the Thunder study and prepare to bring Thunderbolt to the market. Finally, we are encouraged to hear a lot of conversations among physicians regarding making sure that the right size catheters are used for stroke cases so as not to stretch an artery with an oversized catheter. Now I'd like to spend a few minutes discussing our comprehensive market access initiatives, which I think are very important to both near-term and long-term as we develop these underpenetrated thrombectomy markets. Over the past 12 months, we have spent significant time and effort, both internally and with an excellent team of third-party analytical partners, engaged in generating evidence from large third-party hospital datasets to better understand how CABT performs versus other therapies, including anticoagulation alone, across a wide range of metrics. Our rigor has resulted in the completion of studies in PE and DVT that we believe set a high bar for data quality and independence. As we hoped and expected, CAVT outperforms other advanced therapies across a wide range of parameters related to hospital efficiency and cost, but most importantly, procedural effectiveness and safety. Because of our persistent and rapid innovation cycles, we expect this growing relative outperformance to be reflected in the evidence that we will generate continuously from this point forward. We also plan to generate similar high quality data sets across every vascular bed and patient population we serve with CAVT. We've recently started the process of discussing the results of these high quality studies with some of the largest hospital systems in the US and supporting these partners in whatever ways are appropriate to offer CAVT to a growing number of patients that could benefit from access to this technology. We very much look forward to communicating these results to our partners and the physician community at large in the months and years ahead. Now, I'd like to give an update on our immersive healthcare business. We have developed an extraordinary set of products that have shown to greatly benefit patients. I could not be prouder of our amazing immersive healthcare team. Even with this confidence in the long-term benefit and likely success of our immersive healthcare platform and technology, our current focus needs to be on helping as many patients as possible in our interventional business. particularly in this critical moment where we believe our CAVT technology can help most patients who need thrombectomy. Therefore, we have begun to explore alternative avenues for the immersive healthcare business. Because of that decision, we are taking a one-time non-cash accounting charge. As we explore these alternatives, we expect to reduce our ongoing operating expenses, thereby further increasing our operating margin and cash flow trajectory going forward. This strategic move allows us to focus 100% of our time, energy, and resources to help as many patients as possible while increasing our company's profitability. I know many of you have come to expect me to be very confident about the future of our business. But my confidence is grounded in what I and our team are seeing every day in the field. The three new CAVT products that we expect to launch over the next nine months should augment our strong position as we enter and move through 2025. We're also confident about both market growth and our market share trends in VTE, arterial, and stroke in the United States next year. Obviously, having the best products is a key factor. but our confidence is further buoyed by our expansive market access work and our strong commercial footprint. We also will not have the same difficult year-over-year growth challenges in 2025 in key international markets, namely China and Europe, that we are facing throughout 2024. And we expect the launch of Flash 2.0 and Lightning Bolt 7 in Europe late this year to have a more pronounced impact on our international growth next year. That being said, we have traditionally set revenue guidance in line with our best assessment of what we can achieve. Going forward, our guidance will reflect a comfortable level of conservatism. Jason will discuss this updated guidance at the end of our prepared remarks. For now, I will say that we see very favorable prospects for our business for the remainder of this year, And in 2025, we have the benefit of new product launches, continued share gains, and the abatement of the transient headwinds impacting 2024. And I'll turn the call over to Maggie to go over our financial results for the second quarter of 2024.